Raeisi Group v. Velocity Commercial Capital CA2/7

Filed 3/22/21 Raeisi Group v. Velocity Commercial Capital CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
RAEISI GROUP, INC., B293744
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC683117)
v.
VELOCITY COMMERCIAL
CAPITAL, et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Barbara A. Meiers, Judge. Reversed and
remanded with directions.
Law Offices of Lee E. Burrows and Lee E. Burrows for
Plaintiff and Appellant.
Songstad Randall Coffee & Humphrey, William D. Coffee,
Attlesey Storm, John P. Ward, McGlinchey Stafford, Dhruv M.
Sharma for Defendants and Respondents.
___________________
INTRODUCTION
Raeisi Group, Inc. appeals from a judgment of dismissal
entered after the trial court sustained without leave to amend
demurrers to Raeisi’s first amended complaint filed by
defendants Velocity Commercial Capital, U.S. Bank National
Association as trustee for Velocity Commercial Capital Loan
1
Trust 2014-1, and Ocwen Loan Servicing. Raeisi also appeals
the trial court’s order granting the court’s motion for judgment on
the pleadings and motion to strike the first amended complaint
against defendants Assured Lender Services and Erik Hovsepian.
Raeisi argues its first amended complaint alleges sufficient
facts to state causes of action for cancellation of instruments,
quiet title, declaratory relief, and unjust enrichment. Raeisi also
argues the trial court should not have granted its own motion for
judgment on the pleadings and motion to strike the first amended
complaint against Assured, which had not appeared in the action,
and Hovsepian, who was in bankruptcy. We reverse the
judgment and the order, and remand the case for further
proceedings.
2
FACTUAL AND PROCEDURAL HISTORY
A. Raeisi, Hovsepian, and the Covina Property
In August 2011 Elyas Raeisi-Nafchi formed Raeisi. Raeisi-
Nafchi was Raeisi’s president, sole director, and sole shareholder.
1
We refer to Velocity, U.S. Bank, and Ocwen together as the
“lender defendants.”
2
“In considering whether a demurrer should have been
sustained, ‘we accept as true the well-pleaded facts in the
operative complaint.’” (Beacon Residential Community Assn. v.
Skidmore, Owings, & Merrill LLP (2014) 59 Cal.4th 568, 571.)
2
Raeisi-Nafchi appointed Hovsepian as Raeisi’s chief financial
officer.
In August 2012 Hovsepian purchased a property in Covina,
California on Raeisi’s behalf. In October 2012 $750,000 was
withdrawn from Raeisi’s bank accounts to pay for the property.
The purchase closed on or about October 12, 2012; title to the
Covina property was recorded in Raeisi’s name. Raeisi-Nafchi
did not learn about the purchase of the property until November
2012.
In September 2013, without Raeisi’s or Raeisi-Nafchi’s
knowledge or permission, Hovsepian transferred title to the
property from Raeisi to himself. The September 24, 2013 grant
deed by which Hovsepian transferred title to himself (the “2013
grant deed”) states: “This is a transfer out of a corporation.” The
2013 grant deed also states: “The grantor and grantee in this
conveyance is [sic] comprised of the same party and continue[ ] to
hold the same proportionate interest in the property R & T
11923(d).” Raeisi alleges that the grantor and grantee of the
Covina property were not the same party because Hovsepian
“was not and never was” a Raeisi owner or shareholder. Raeisi
also alleges Revenue and Taxation Code section 11923 does not
contain a subdivision (d). The 2013 grant deed was recorded on
3
November 21, 2013. Raeisi did not receive any benefit or
consideration for the transfer of the Covina property from Raeisi
to Hovsepian.
3
Raeisi alleges that Hovsepian transferred title to the
Covina property to himself in September 2013, by means of the
2013 grant deed, and in November 2013, when the 2013 grant
deed was recorded. This apparent inconsistency is not material
to the issues before us.
3
In April 2014, without Raeisi’s or Raeisi-Nafchi’s
knowledge or permission, Hovsepian obtained a $656,250 loan
from Velocity secured by the Covina property (the “2014 Velocity
loan”). Although the 2013 grant deed “was clear” that the
property had been transferred to a Raeisi corporate officer,
Velocity did not verify before making the 2014 Velocity loan that
Raeisi had approved the title transfer from Raeisi to Hovsepian.
Without Raeisi’s knowledge or approval, a deed of trust in
Velocity’s favor was recorded against the Covina property (the
“2014 Velocity deed of trust”). Hovsepian used the 2014 Velocity
loan proceeds for his personal benefit and that of third parties.
From a title search initiated by Raeisi-Nafchi, Raeisi
discovered in September 2014 that Hovsepian had transferred
the Covina property title to himself. At an unidentified time in
2014 or 2015, Raeisi-Nafchi learned about the loan Hovsepian
4
had obtained against the property. Raeisi-Nafchi demanded
Hovsepian transfer title back to Raeisi and provide an accounting
of the loan funds; Hovsepian refused. Raeisi terminated
Hovsepian on November 3, 2015.
B. Raeisi Sues Hovsepian
Shortly after terminating Hovsepian, Raeisi sued him in
Los Angeles County Superior Court. Raeisi alleged causes of
action for breach of fiduciary duty, fraud, conversion, and quiet
title. The case culminated in a bench trial from June 19 through
June 23, 2017. During the trial, Hovsepian agreed to return title
4 Raeisi alleges that, before obtaining the 2014 Velocity loan,
Hovsepian obtained another loan secured by the Covina property.
Raeisi’s allegations regarding the earlier loan do not bear on the
issues on appeal.
4
to the Covina property to Raeisi. Hovsepian executed a grant
deed for the property in Raeisi’s favor on June 22, 2017 (the
“2017 grant deed”). On June 23, 2017, the court issued a minute
order finding in Raeisi’s favor on the remaining trial issues,
followed by a statement of decision and judgment in Raeisi’s
5
favor in September 2017.
C. Velocity Moves To Foreclose on the Covina Property
Unbeknownst to Raeisi, Hovsepian had stopped making
payments on the 2014 Velocity loan in April 2017. Raeisi also did
not know that Hovsepian had received delinquency notices for the
2014 Velocity loan before Hovsepian signed the 2017 grant deed.
In July 2017 Velocity recorded and served a notice of
default on the 2014 Velocity loan. Velocity also recorded and
served a substitution of trustee appointing Assured as trustee for
the foreclosure and sale of the Covina property.
In August 2017 Raeisi demanded that Hovsepian comply
with his Velocity loan obligations; Hovsepian did not. Raeisi
notified Velocity that it had prevailed in its lawsuit against
Hovsepian, and asked Velocity to withdraw the notice of default
or otherwise agree to a forbearance of the foreclosure process.
Velocity responded that it intended to foreclose on the Covina
5
The trial court found that Hovsepian and his spouse
converted money from Raeisi’s accounts, and that Hovsepian
breached fiduciary duties and committed fraud in connection
with the purchase, use, and title transfer of the Covina property.
The court ordered Hovsepian to pay Raeisi $298,735 in damages
for breach of fiduciary duty, conversion, constructive fraud,
intentional fraud, and fraud by concealment, and $150,000 in
punitive damages. The court ordered Hovsepian’s spouse to pay
Raeisi $36,500 in damages for conversion.
5
property, and that “Velocity wanted its money and was not
willing to wait.”
In October 2017 Assured, on Velocity’s behalf and at its
direction, recorded and served a notice of trustee’s sale of the
Covina property. The sale was scheduled for November 20, 2017.
D. The Trial Court Proceedings
On November 13, 2017 Raeisi sued Velocity, U.S. Bank,
6
Ocwen, Assured, and Hovsepian. Raeisi’s verified complaint
alleged causes of action for cancellation of instruments, quiet
title, declaratory relief, and unjust enrichment against the lender
defendants and Assured. Raeisi sued Hovsepian for fraud and
7
negligent misrepresentation.
Raeisi alleges that it could not join the lender defendants in
its prior case because Hovsepian did not sign the 2017 grant deed
until after the trial in the earlier case had started. By that time,
the court had required Raeisi to dismiss the Doe defendants in
that case and would not have permitted Raeisi to add new
parties. Raeisi also alleges that before Hovsepian executed the
2017 grant deed, Raeisi lacked standing to sue the lender
defendants.
6
Raeisi alleges that Velocity assigned the 2014 Velocity deed
of trust to U.S. Bank in January 2015, and that Ocwen serviced
the 2014 Velocity loan for Velocity and U.S. Bank.
7
Raeisi also named as defendants “all persons unknown
claiming any legal or equitable right, title, estate, lien, or interest
in the property described in the complaint adverse to plaintiff’s
title, or any cloud on plaintiff’s title thereto, named as Does 1-50,
and Does 51-70.”
6
1. The temporary restraining order and the preliminary
injunction
On January 30, 2018 Raeisi obtained a temporary
restraining order enjoining the foreclosure sale of the Covina
8
property. On February 21, 2018 the trial court issued a
preliminary injunction preventing the lender defendants from
foreclosing on the Covina property pending the resolution of
Raeisi’s lawsuit. The court found that Raeisi had demonstrated a
“reasonable” likelihood of success on the merits of its cancellation
of instruments cause of action, and “has arguably raised triable
issues as to whether Velocity . . . knew or should have known
Hovsepian [had] defrauded [Raeisi].” The court also found Raeisi
did not have an adequate legal remedy because real property was
at issue, and that the balance of harms favored issuance of a
preliminary injunction because a foreclosure would moot Raeisi’s
claims. The court required Raeisi to post a $236,500 bond as a
condition for issuance of the preliminary injunction.
Raeisi filed for Chapter 11 bankruptcy protection on
February 28, 2018, and did not post the injunction bond. Raeisi
and the lender defendants stipulated to relief from the
bankruptcy stay to allow this action to proceed to judgment.
2. The demurrers to the complaint and the trial court’s
ruling
Velocity and U.S. Bank filed demurrers to Raeisi’s
9
complaint, which the trial court sustained with leave to amend.
The court ruled that Velocity “holds no interest in the note or in
8
Judge Amy D. Hogue.
9
Judge Barbara A. Meiers.
7
the document which [Raeisi] seeks to cancel and has no ability to
enforce any rights set forth therein.” The court found that Raeisi
“was not damaged” by the 2014 Velocity loan or the 2014 Velocity
deed of trust because the Velocity loan proceeds “all went to
[Raeisi] and were to its benefit, which means that [Raeisi] is now
seeking to leave Hovsepian liable for the $600,000 remaining
balance on the note given for the loan while keeping the benefits
of those funds and stripping [Velocity] and its successor of any
security by which it [sic] might hope to recoup what it paid out,
now in ‘plaintiff’s pocket.’”
The trial court also ruled that equitable estoppel and laches
barred Raeisi’s causes of action against Velocity and U.S. Bank
because Raeisi did not sue them in its prior lawsuit. The court
further concluded that collateral estoppel barred Raeisi’s causes
of action because “another court has already adjudicated . . . that
although Hovsepian did act improperly in connection with the
Covina loan or loans in issue, [Raeisi] was not damaged thereby.”
The court stated that “[i]t is clear” the prior court did not award
Raeisi damages “to compensate [Raeisi] for hundreds of
thousands of dollars[’] worth of ‘wrongful loans’ taken out by
[Hovsepian],” and that therefore “the ‘bank/lender defendants’ in
this case cannot be the subject of any finding or decision that
would hold them [liable] for any damages or to eliminate the
loans and [deeds of trust] in issue based upon any acts by
Hovsepian as a co-joint tortfeasor when the prior court did not
see fit to find any huge damage incurred by [Raeisi] in this
regard . . . .”
The trial court found that Velocity and U.S. Bank “owed no
duty” to investigate Hovsepian’s conduct, and that Velocity “and
any successor note holder or [trust deed] defendant was a mere
8
lender entitled to a bona fide ‘purchaser without notice’ status
and the protections provided to it as a matter of law in the
absence of any facts pled by plaintiff . . . that the defendants in
this case actually knew or were ‘on notice’ of any Hovsepian
defalcation.”
The court ruled that an unspecified statute of limitations
had “run on [Raeisi’s] ‘negligence’ claims and/or causes of action,”
and that “a two-year statute of limitations ha[d] also run” on
Raeisi’s unjust enrichment cause of action. The court further
ruled that Raeisi could not allege facts sufficient to state an
unjust enrichment cause of action because “the defendants . . .
hav[e] without dispute . . . provided substantial funds in return
for . . . the security interests . . . [Velocity] was given.”
The trial court granted Raeisi leave to amend “despite the
court’s view that it seems impossible, not only improbable, that
[Raeisi] can amend to add any allegations supported by statute or
case law which would save its Complaint.”
3. Raeisi’s first amended complaint, the demurrers to the
first amended complaint, and the trial court’s ruling
Raeisi filed a verified first amended complaint alleging the
same causes of action against the lender defendants, Assured,
and Hovsepian. Raeisi expressly disclaimed any negligence
claims against the lender defendants and Assured.
Raeisi also added allegations that Velocity had a
“continuing pattern and practice of making so-called liars loans”
without performing due diligence, including making loans to
borrowers “whose title to the property used to secure the loans
was fraudulent and deficient.” Raeisi alleged that Velocity
“issued a ‘liar’s loan’ to Hovsepian with the actual and/or
constructive knowledge that Hovsepian was unqualified and had
9
acquired title to the Covina Property wrongfully and
fraudulently, [and] thereby aided and abetted in Hovsepian’s
fraud upon [Raeisi].” Raeisi also alleged that because Velocity
made its loan to Hovsepian with knowledge of Hovsepian’s fraud,
“Velocity was not and has never been, a bona fide encumbrancer”
of the Covina property.
Velocity, U.S. Bank, and Ocwen filed demurrers to the
first amended complaint. On September 1, 2018, the day before
the hearing on the demurrers, Hovsepian filed for Chapter 13
bankruptcy protection. The following day, the trial court issued
an order staying the case against Hovsepian because of his
bankruptcy filing, and sustaining Velocity, U.S. Bank, and
Ocwen’s demurrers to the first amended complaint without leave
to amend. The court sustained the demurrers “on all of the
grounds, cases and arguments set forth in the Defendants’
demurring and reply papers plus those points made by the court
in its ruling of July 12, 2018” sustaining the lender defendants’
demurrers to Raeisi’s original complaint. The trial court entered
a judgment of dismissal in favor of Velocity, U.S. Bank, and
Ocwen on September 28, 2018.
4. The trial court’s motion for judgment on the pleadings
and motion to strike
In its order sustaining Velocity’s and U.S. Bank’s
demurrers to Raeisi’s original complaint, the trial court “set[ ] on
its own motion” a hearing on “a Code of Civil Procedure . . . 438
Motion to Dismiss” the case as to the remaining defendants “for a
failure to state a cause of Action [sic] under C.C.P. 438 on all of
the same grounds as are set forth herein and in the demurring
papers incorporated herein.” The court scheduled the hearing on
its motion for October 3, 2018.
10
Raeisi opposed the court’s motion, arguing that its first
amended complaint rendered the court’s motion moot. The court
subsequently issued another notice of its “own motions to strike
and/or for a judgment on the pleadings” against “all remaining
10
defendants” in the first amended complaint. The court’s
notice stated its “tentative view and concern” that Raeisi’s
first amended complaint “is a sham pleading which is frivolous
and . . . possibly, the sole purpose of the complaint . . . is to hinder
and delay the defendants (other than defendant Hovsepian) from
executing their very clear right to proceed with a foreclosure
action” on the Covina property. The court also stated that
because it had dismissed Raeisi’s causes of action against the
lender defendants, Raeisi could not maintain any cause of action
against Assured, and the defendants were “free to proceed with
their foreclosure action.”
Raeisi opposed the court’s motions. On November 9, 2018
the court granted its motions, having “concluded that the
Plaintiff has failed to state a viable cause of action against
anyone in this case.” With respect to Hovsepian, the court ruled
that “bankruptcy law does not prohibit the ordering of a
dismissal or similar ruling with regard to a state court action
against a Defendant during the pendency of that party’s
bankruptcy.”
10
The court also vacated “any preliminary injunction or other
form of outstanding order or injunctive relief which would serve
to impede or prevent the maintaining of a foreclosure action as to
real property as to which the Plaintiff in this case holds title by
any and all Defendants in this action.”
11
5. Raeisi’s appeals
Raeisi filed timely appeals of the judgment of dismissal of
its claims against Velocity, U.S. Bank, and Ocwen, and the order
dismissing its claims against Assured and Hovsepian. This court
11
consolidated the appeals.
DISCUSSION
A. The Lender Defendants’ Demurrers to Raeisi’s First
Amended Complaint
1. Applicable law and standard of review
“In reviewing an order sustaining a demurrer, we examine
the operative complaint de novo to determine whether it alleges
facts sufficient to state a cause of action under any legal theory.
[Citation.] Where the demurrer was sustained without leave to
amend, we consider whether the plaintiff could cure the defect by
an amendment.” (T.H. v. Novartis Pharmaceuticals Corp. (2017)
4 Cal.5th 145, 162; accord, Loeffler v. Target Corp. (2014) 58
Cal.4th 1081, 1100 [trial court abuses its discretion by sustaining
a demurrer without leave to amend where “‘there is a reasonable
possibility that the defect can be cured by amendment’”].) “A
judgment of dismissal after a demurrer has been sustained
without leave to amend will be affirmed if proper on any grounds
stated in the demurrer, whether or not the court acted on that
ground.” (Carman v. Alvord (1982) 31 Cal.3d 318, 324; accord,
Summers v. Colette (2019) 34 Cal.App.5th 361, 367.)
11
The trial court also dismissed the first amended complaint
against “all [other] remaining Defendants,” including “all Doe
Defendants.” Raeisi also appeals the dismissal of these
defendants.
12
We assume the truth of the properly pleaded factual
allegations, facts that reasonably can be inferred from those
expressly pleaded, and matters of which judicial notice has been
taken. (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 20.) We are
not required to accept the truth of legal conclusions pleaded in
the complaint. (Zelig v. County of Los Angeles (2002) 27 Cal.4th
1112, 1126; Yhudai v. IMPAC Funding Corp. (2016) 1
Cal.App.5th 1252, 1257.)
2. The trial court erred in sustaining the lender
defendants’ demurrers to Raeisi’s cancellation of
instruments cause of action
Civil Code section 3412 states that a written instrument
may be cancelled if “there is a reasonable apprehension that if
left outstanding it may cause serious injury to a person against
whom it is void or voidable.” “To prevail on a claim to cancel an
instrument, a plaintiff must prove (1) the instrument is void or
voidable due to, for example, fraud; and (2) there is a reasonable
apprehension of serious injury including pecuniary loss or the
prejudicial alternation of one’s position.” (Thompson v. Ioane
(2017) 11 Cal.App.5th 1180, 1193-1194.)
Raeisi seeks to cancel the 2014 Velocity deed of trust, and
the July 2017 notice of default and October 2017 notice of
trustee’s sale that rely on the 2014 Velocity deed of trust.
Assuming, as we must, the truth of Raeisi’s factual allegations,
Raeisi alleges sufficient facts to state a cause of action to cancel
those instruments.
Raeisi alleges the 2014 Velocity deed of trust is void or
voidable because Velocity obtained it through Hovsepian’s fraud
and Velocity’s business practice of knowingly making loans to
borrowers with fraudulent or deficient title to the properties
13
securing the loans. Raeisi alleges Velocity made the 2014
Velocity loan to Hovsepian with actual and/or constructive
knowledge that Hovsepian was “unqualified” and had acquired
title to the Covina property wrongfully and fraudulently. Raeisi
alleges that Velocity had actual and/or constructive knowledge of
Hovsepian’s deficient title because the 2013 grant deed states
that the property had been transferred out of a corporation, but
also inconsistently and falsely states that the grantor and
grantee were the same party. In addition, the 2013 grant deed
allegedly contains a citation to a nonexistent subdivision of the
Revenue and Taxation Code. These allegations are sufficient
support for the first element of a cancellation of instruments
cause of action, i.e., that the 2014 Velocity deed of trust, and the
July 2017 notice of default and October 2017 notice of trustee’s
sale that resulted from the 2014 Velocity deed of trust, are void or
voidable due to fraud.
Raeisi also alleges sufficient facts supporting the second
element of a cancellation of instruments cause of action. Raeisi
alleges that Hovsepian purchased the Covina property with
$750,000 drawn from Raeisi’s bank accounts, fraudulently
transferred title to himself, obtained the 2014 Velocity loan by
means of the improper title, and used the 2014 Velocity loan
proceeds for his personal benefit and that of third parties. Raeisi
further alleges that, despite the fraud and Hovsepian’s
relinquishment of title, Velocity intends to foreclose on the
property. These allegations describe a reasonable apprehension
of serious injury to Raeisi, “including pecuniary loss or the
prejudicial alteration” of Raeisi’s position with respect to the
Covina property, sufficient to satisfy the second element of a
cancellation of instruments cause of action.
14
3. The trial court erred in sustaining the lender
defendants’ demurrers to Raeisi’s quiet title cause of
action
“In an ordinary action to quiet title it is sufficient to allege
in simple language that the plaintiff is the owner and in
possession of the land and that the defendant claims an interest
therein adverse to him.” (South Shore Land Co. v. Petersen
(1964) 226 Cal.App.2d 725, 740; accord, Ephraim v. Metropolitan
Trust Co. (1946) 28 Cal.2d 824, 833-834 (Ephraim).) Where the
complaint alleges counts to both quiet title and to cancel a deed,
however, “if the count to quiet title depends upon the cancellation
count, the complaint must stand or fall on the cancellation
count.” (Leeper v. Beltrami (1959) 53 Cal.2d 195, 214; accord,
Bank of New York Mellon v. Citibank, N.A. (2017) 8 Cal.App.5th
935, 943 [“Ephraim held that where quiet title depends upon
another claim, it must stand or fall on that claim”] (Mellon).)
Raeisi bases its quiet title cause of action on the same
allegations as its cancellation of instruments cause of action.
Raeisi alleges the 2014 Velocity deed of trust “is invalid or void
ab initio based upon” Hovsepian’s fraudulent conduct, Velocity’s
knowledge of the invalidity of Hovsepian’s title to the Covina
property, and Velocity’s decision to make a “liar’s loan” to
Hovsepian. Because Raeisi’s cancellation of instruments claim
alleges sufficient facts to state a cause of action, Raeisi’s quiet
title claim also states a cause of action.
15
4. The trial court erred in sustaining the lender
defendants’ demurrers to Raeisi’s declaratory relief
cause of action
To state a claim for declaratory relief under Code of Civil
12
Procedure section 1060, a plaintiff must allege “two essential
elements: ‘(1) a proper subject of declaratory relief, and (2) an
actual controversy involving justiciable questions relating to the
rights or obligations of a party.’” (Lee v. Silveira (2016) 6
Cal.App.5th 527, 546.) “Declaratory relief is available to ‘[a]ny
person interested under a written instrument[,] . . . [or] who
desires a declaration of his or her rights or duties with respect to
another, or in respect to, in, over or upon property . . . in cases of
actual controversy relating to the legal rights and duties of the
respective parties.’” (Graham v. Bank of America, N.A. (2014)
226 Cal.App.4th 594, 615 [quoting section 1060].)
Raeisi’s declaratory relief cause of action rests on the same
allegations of wrongdoing as Raeisi’s cancellation of instruments
and quiet title causes of action. Raeisi alleges the existence of a
controversy as to the parties’ respective rights and interests in
the Covina property. Raeisi seeks judicial declarations that it
owns the Covina property, that the lender defendants and
Assured have no interest in the property, and that the 2014
Velocity deed of trust and any documents the lender defendants
or Assured subsequently recorded against the property are void
and unenforceable. These allegations state a cause of action for
13
declaratory relief.
12
All further references are to the Code of Civil Procedure
unless otherwise indicated.
16
5. The trial court did not err in sustaining the lender
defendants’ demurrers to Raeisi’s unjust enrichment
cause of action without leave to amend
California courts have reached different conclusions about
whether unjust enrichment is a cause of action. (Compare
Lectrodryer v. SeoulBank (2000) 77 Cal.App.4th 723, 726-728
[affirming judgment for plaintiff on unjust enrichment cause of
action] with Rutherford Holdings, LLC v. Plaza Del Rey (2014)
223 Cal.App.4th 221, 231 [unjust enrichment is not a cause of
action, but rather a “general principle . . . synonymous with
restitution”]; Hill v. Roll Internat. Corp. (2011) 195 Cal.App.4th
1295, 1307.) The Supreme Court has observed that a “common
law claim for unjust enrichment . . . is essentially an action for
restitution.” (Cruz v. PacifiCare Health Systems, Inc. (2003) 30
Cal.4th 303, 320.) Many courts construe unjust enrichment
causes of action as “quasi-contract claim[s] seeking restitution”
(Rutherford Holdings, at p. 231) or as “a basis for obtaining
restitution based on . . . imposition of a constructive trust.”
(McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457,
1490.) “Under the law of restitution, an individual may be
required to make restitution if he is unjustly enriched at the
expense of another. [Citation.] A person is enriched if he
receives a benefit at another’s expense.” (Ghirardo v. Antonioli
(1996) 14 Cal.4th 39, 51.)
13
The trial court dismissed Raeisi’s cancellation of
instruments, quiet title, and declaratory relief causes of action
against Assured and the Doe defendants for the same reasons it
dismissed those causes of action against the lender defendants.
We reverse the dismissal of those claims against Assured and the
Doe defendants for the same reasons we reverse the dismissal of
those claims against the lender defendants.
17
Raeisi’s unjust enrichment cause of action does not allege
sufficient facts to obtain restitution under any theory. Raeisi
generally asserts the lender defendants have been “unjustly
enriched by attaching” the Covina property, “caus[ing] them to
receive benefits that they otherwise would not have achieved.”
Raeisi alleges it is “entitled to the disgorgement of all interest
and/or amounts by which the Defendants have been unjustly
enriched.”
Raeisi does not identify any “benefits” or “interest and/or
amounts” it contends the lender defendants have obtained and
should restore to Raeisi. The paragraphs of the first amended
complaint Raeisi identifies as allegedly providing a factual basis
for restitution do not identify interests or amounts to be restored
to Raeisi. Those paragraphs allege the factual basis on which
Raeisi seeks to cancel the 2014 Velocity deed of trust, not to
14
restore unjustly obtained “benefits” to Raeisi.
“The plaintiff has the burden of proving that an
amendment would cure the legal defect, and may [even] meet this
burden [for the first time] on appeal.” (Sierra Palms Homeowners
Assn. v. Metro Gold Line Foothill Extension Construction
Authority (2018) 19 Cal.App.5th 1127, 1132; accord, Aubry v. Tri-
City Hospital Dist. (1992) 2 Cal.4th 962, 971.) Raeisi does not
propose on appeal any amendments that could provide a basis for
14
Raeisi also alleges in its unjust enrichment claim that “it
has suffered damage” as a result of the defendants’ conduct,
including an “inability to perfect enforcement of a judgment
against an insolvent debtor, e.g., Erik Hovsepian, as well as costs
of collection, costs of bringing additional actions to enforce and
protect [Raeisi’s] rights, and attorneys[’] fees.” These allegations
do not describe a restitution theory.
18
restitution, and thus has not demonstrated that it could amend
its complaint to cure the defect in its unjust enrichment claim.
The trial court did not err in sustaining the lender defendants’
demurrers to the unjust enrichment cause of action without leave
15
to amend.
15
The trial court dismissed Raeisi’s identical unjust
enrichment claim against Assured and the Doe defendants on its
own motion for judgment on the pleadings and motion to strike,
finding the claim time-barred and insufficiently alleged. Sections
436 and 438 permit the trial court, on its own motion, to strike all
or part of a pleading and to grant judgment on the pleadings,
respectively. (§§ 436, 438, subds. (b)(2), (c)(3)(B)(ii).) We
construe the court’s order dismissing Raeisi’s unjust enrichment
claim to grant judgment on the pleadings. (Pierson v. Sharp
Memorial Hospital (1989) 216 Cal.App.3d 340, 343 [construing
order granting motion to strike that challenged claim on ground
it did not state facts sufficient facts to constitute cause of action
as granting judgment on the pleadings].)
Assured had not appeared and thus had not answered
when the court granted its motion. Raeisi contends that section
438, subdivision (f), requires an answer to be filed before a
motion for judgment on the pleadings may be made. Section 438,
subdivision (f), refers to motions made by parties, not by the
court. Even if section 438 requires an answer before a court’s
motion for judgment on the pleadings, any error with respect to
the procedure here was harmless because, as discussed above,
Raeisi does not allege sufficient facts to state an unjust
enrichment cause of action and has not demonstrated that an
amendment could cure the deficiency.
19
6. None of the lender defendants’ fact-intensive
arguments provides a proper basis to sustain the
demurrers to the cancellation of instruments, quiet
title, and declaratory relief causes of action
The lender defendants present an array of fact-intensive
arguments they contend bar some or all of Raeisi’s cancellation of
instruments, quiet title, and declaratory relief causes of action.
“A demurrer is ‘simply not the appropriate procedure for
determining the truth of disputed facts.’” (Intengan v. BAC Home
Loans Servicing LP (2013) 214 Cal.App.4th 1047, 1058.)
Furthermore, many of the lender defendants’ arguments are
unsupported by citations to the record, much less citations to
record material properly considered on demurrer. None of the
arguments supports dismissal of Raeisi’s cancellation of
instruments, quiet title, and declaratory relief claims at the
pleadings stage.
The lender defendants first argue that Raeisi’s allegations
do not state a claim for cancellation of the 2014 Velocity deed of
trust because Raeisi has not sought to invalidate the 2013 grant
deed. The lender defendants contend Raeisi must successfully
invalidate the 2013 grant deed to cancel the 2014 Velocity deed of
trust. They assert that Raeisi cannot invalidate the 2013 grant
deed, however, because Raeisi ratified that deed by accepting the
2017 grant deed.
The only legal support the lender defendants cite for this
proposition, Rakestraw v. Rodrigues (1972) 8 Cal.3d 67, does not
apply here. In Rakestraw, the plaintiff’s former husband forged
the plaintiff’s signature on a promissory note and deed of trust.
Despite learning of the forgeries shortly after the husband
executed them, the plaintiff did not seek to invalidate the forged
documents for three years, during which time she benefited from
20
loan proceeds obtained with the forged documents. The Supreme
Court held that the plaintiff had ratified the forgeries and thus
could not recover damages from an auditor who had participated
in the forgery scheme because “a principal may ratify the forgery
of his signature by his agent.” (Rakestraw, at pp. 74-75.)
Rakestraw does not support the lender defendants’ contention
that Raeisi’s acceptance of the 2017 grant deed prevents Raeisi
from ever invalidating the 2013 grant deed.
Moreover, even if ratification might ultimately apply,
“[r]atification generally is an affirmative defense.” (Reina v.
Erassarret (1949) 90 Cal.App.2d 418, 424.) “‘[A] demurrer based
on an affirmative defense will be sustained only where the face of
the complaint discloses that the action is necessarily barred by
the defense.’” (Stella v. Asset Management Consultants, Inc.
(2017) 8 Cal.App.5th 181, 191.) Raeisi’s first amended complaint
does not on its face demonstrate that the 2017 grant deed
“necessarily” bars Raeisi from proving Velocity knew the 2013
grant deed was deficient when Velocity made the 2014 Velocity
loan to Hovsepian, or that a ratification defense otherwise
16
“necessarily” bars Raeisi’s claims.
16
The lender defendants also argue Raeisi cannot state a
cancellation of instruments cause of action because Raeisi
obtained a judgment against Hovsepian “in excess of $600,000”
and thus “has been made whole” with respect to the Covina
property. The source of this figure is unclear, as the judgment
against Hovsepian in the prior case is for $448,735.
Furthermore, the trial court did not apportion the damages to
specific causes of action, and found that in addition to breaching
fiduciary duties and committing fraud with respect to the Covina
property, Hovsepian also improperly withdrew money from
21
The lender defendants’ claim that either the two-year
statute of limitations for negligence claims (§ 335.1) or the three-
year statute of limitations for fraud claims (§ 338, subd. (d)) bars
Raeisi’s cancellation of instruments, quiet title, and declaratory
17
relief causes of action lacks merit. “A demurrer based on
a statute of limitations will not lie where the action may be, but
is not necessarily, barred. In order for the bar . . . to be raised
by demurrer, the defect must clearly and affirmatively appear on
the face of the complaint; it is not enough that the complaint
shows that the action may be barred.” (Lee v. Hanley (2015) 61
Cal.4th 1225, 1232.)
The lender defendants advance various factual arguments
about information Raeisi allegedly should have learned sooner
Raeisi’s accounts for other “unexplained and certainly
unauthorized transactions.”
17
The two-year statute of limitations for negligence claims in
section 335.1 does not apply to Raeisi’s cancellation of
instruments, quiet title, or declaratory relief causes of action.
“Ordinarily a suit to set aside and cancel a void instrument is
governed by [the four-year statute of limitations in] section 343 of
the Code of Civil Procedure. [Citation.] However when the
gravamen of the cause of action stated involves fraud or a
mistake, Code of Civil Procedure, section 338[, subd. (d)] is the
statute of limitations applicable and the cause of action is not
deemed to have accrued until the discovery of the facts
constituting the mistake.” (Zakaessian v. Zakaessian (1945) 70
Cal.App.2d 721, 725; see also Mellon, supra, 8 Cal.App.5th at
p. 944 [“[T]he statute of limitations on a quiet title action is
determined with reference to the underlying theory of relief.”];
id. at p. 943 [“A claim for declaratory relief is subject to the same
statute of limitations as the legal or equitable claim on which it is
based.”].)
22
and actions Raeisi allegedly should have taken earlier. They
contend that because Raeisi could have discovered the facts
underlying its claims sooner and could have pursued its claims
earlier, the claims are time-barred. It is not enough, however,
that some or all of Raeisi’s causes of action “may be” barred. The
face of Raeisi’s first amended complaint must “clearly and
affirmatively” show that Raeisi’s causes of action are barred. It
does not. The first amended complaint does not specifically
allege when Raeisi learned about the 2014 Velocity loan and 2014
Velocity deed of trust. As a result, even if a three-year statute of
limitations applies, Raeisi’s causes of action cannot be dismissed
on statute of limitations grounds on demurrer.
The lender defendants next argue that none of Raeisi’s
claims states a cause of action because the lender defendants are
bona fide encumbrancers. The lender defendants assert that
Velocity loaned Hovsepian $656,250 “in good faith, and without
actual or constructive notice” of Raeisi’s claim to the Covina
property. Whatever the ultimate merit of these factual claims,
they fall far outside the appropriate scope of a demurrer. (See
Mellon, supra, 8 Cal.App.5th at p. 950 [“factual issues . . . may
not be resolved on demurrer”].)
The lender defendants also argue that laches and estoppel
bar Raeisi’s causes of action because Raeisi did not sue them in
Raeisi’s prior lawsuit. They argue Raeisi’s alleged delay was
“neither reasonable nor excusable” and “obviously prejudice[s]”
them. Laches and estoppel are generally factual questions
inappropriate for resolution on demurrer. (City of Oakland v.
Public Employees’ Retirement System (2002) 95 Cal.App.4th 29,
52 [“Laches in almost all cases raises factual issues regarding the
cause of an asserted delay and the prejudice, vel non,
23
therefrom.”]; Feduniak v. California Coastal Com. (2007) 148
Cal.App.4th 1346, 1360 [“The existence of an estoppel is
generally a factual question.”].) The lender defendants’ disputed
arguments that Raeisi waited too long to sue them, and that
equitable estoppel should otherwise bar Raeisi’s claims, cannot be
18
settled on demurrer.
B. The Trial Court Lacked Jurisdiction To Dismiss the First
Amended Complaint against Hovsepian
“A petition in bankruptcy creates an automatic stay of all
judicial proceedings against the debtor. (11 U.S.C. § 362(a).)
Judicial proceedings in violation of the automatic stay are void.”
(Sindler v. Brennan (2003) 105 Cal.App.4th 1350, 1353-1354
(Sindler).) “A judgment void on its face because rendered when
the court lacked personal or subject matter jurisdiction or
exceeded its jurisdiction in granting relief which the court had no
power to grant, is subject to collateral attack at any time.”
(Id. at p. 1354.)
In Sindler, the trial court dismissed the plaintiff’s case
against a defendant in bankruptcy, and denied the plaintiff’s
subsequent motion to set aside the dismissal. The appellate
18
Velocity and Ocwen also argue that each should not have
been sued. Velocity claims it assigned the 2014 Velocity loan to
Velocity Commercial Capital Loan Trust 2014-1, and thus cannot
be liable to Raeisi. Ocwen claims it did not receive any interest
in the Covina property, and had no role with respect to the July
2017 Velocity notice of default and October 2017 notice of
trustee’s sale. Raeisi alleges specific facts describing Velocity’s
and Ocwen’s alleged roles in the loan and foreclosure events. The
parties’ factual disputes about Velocity’s and Ocwen’s
participation exceed the proper bounds of a demurrer.
24
court reversed, explaining that the automatic stay that attaches
upon a defendant’s bankruptcy filing precluded the trial court
from dismissing the case. Because “the trial court had no power
to dismiss the case, . . . the dismissal was void.” (Sindler, supra,
105 Cal.App.4th at p. 1353.) “The court lacked jurisdiction to
dismiss the case, and the dismissal must be set aside.” (Id. at
p. 1354.)
Hovsepian filed for bankruptcy protection on September 1,
2018. The trial court issued an order staying the case against
Hovsepian the following day. On November 9, 2018, despite
Hovsepian’s bankruptcy and the stay, the trial court granted its
own motion for judgment on the pleadings and motion to strike
the first amended complaint against Hovsepian, and dismissed
Raeisi’s case against him. The trial court lacked jurisdiction to
dismiss Raeisi’s case against Hovsepian while Hovsepian was in
bankruptcy. The dismissal must be set aside.
C. The Lender Defendants’ Request for Judicial Notice
In May 2020 the lender defendants filed a request for
judicial notice of two documents they state were recorded against
19
the Covina property. Each document was recorded before the
lender defendants filed their respondents’ brief. The lender
defendants do not address either document in their brief. Raeisi
opposes the request for judicial notice.
The lender defendants state that one document
demonstrates that in September 2019 Raeisi conveyed title to the
Covina property to Raeisi-Nafchi. The lender defendants argue
19
No declaration accompanies the request for judicial notice.
25
Raeisi thus can no longer maintain its causes of action against
them.
The lender defendants state that the other document shows
that in March 2020 the 2014 Velocity deed of trust was
reconveyed. The lender defendants do not state, and the
document does not purport to show, to whom the deed of trust
was reconveyed. The lender defendants argue that the document
demonstrates that the 2014 Velocity deed of trust “has been
eliminated from record title” and that Raeisi’s causes of action
therefore are moot.
“Reviewing courts generally do not take judicial notice of
evidence not presented to the trial court. Rather, normally ‘when
reviewing the correctness of a trial court’s judgment, an appellate
court will consider only matters which were part of the record at
the time the judgment was entered.’” (Vons Companies, Inc. v.
Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444, fn. 3.) Moreover,
while courts may take judicial notice of public records, “they do
not take notice of the truth of the matters stated therein.”
(Herrera v. Deutsche Bank National Trust Co. (2011) 196
Cal.App.4th 1366, 1375.)
These documents may or may not raise issues regarding
Raeisi’s standing and its efforts to cancel the 2014 Velocity deed
of trust. We cannot resolve these factual questions initially on
appeal, much less on an appeal from rulings the trial court issued
based on the pleadings. The effect, if any, these documents may
have on the case are properly addressed in the first instance in
the trial court. The lender defendants’ request for judicial notice
is denied.
26
DISPOSITION
The judgment dismissing Raeisi’s causes of action against
the lender defendants for cancellation of instruments, quiet title,
declaratory relief, and unjust enrichment is reversed. The trial
court is directed to vacate its order sustaining the lender
defendants’ demurrers, and to enter a new order sustaining
without leave to amend the lender defendants’ demurrers to
Raeisi’s unjust enrichment cause of action and otherwise
overruling the demurrers, and ordering the lender defendants to
answer the first amended complaint.
The trial court’s order granting its motion for judgment on
the pleadings and motion to strike Raeisi’s causes of action
against Assured and the Doe defendants for cancellation of
instruments, quiet title, declaratory relief, and unjust enrichment
is reversed. The trial court is directed to vacate its order
granting its motion for judgment on the pleadings and motion to
strike against Assured and the Doe defendants, and to enter a
new order granting its motion for judgment on the pleadings on
Raeisi’s unjust enrichment cause of action against Assured and
the Doe defendants without leave to amend and otherwise
denying the motion for judgment on the pleadings and motion to
strike, and ordering Raeisi to serve Assured within 60 days of the
trial court’s order.
27
The trial court’s order granting its motion for judgment on
the pleadings and motion to strike the first amended complaint
against Hovsepian is set aside as void.
Raeisi shall recover its costs on appeal.
MCCORMICK, J.*
We concur:
PERLUSS, P. J.
FEUER, J.
* Judge of the Orange County Superior Court, assigned by
the Chief Justice pursuant to article VI, section 6 of the
California Constitution.
28