Ridec LLC v. Hinkle

Filed 6/29/23
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
RIDEC LLC, B317420
Defendant, Cross- (Los Angeles County
complainant and Appellant, Super. Ct. No. BC560228)
v.
OCY HINKLE et al.,
Defendants, Cross-
defendants and Respondents.
APPEALS from a judgment and order of the Superior Court
of Los Angeles County, Barbara Ann Meiers, Judge. Reversed
and remanded with directions.
Steyer Lowenthal Boodrookas Alvarez & Smith, Carlos A.
Alvarez and Jill K. Cohoe for Defendant, Cross-complainant and
Appellant.
No appearance for Defendants, Cross-defendants and
Respondents.
******
In Tsasu LLC v. U.S. Bank Trust, N.A. (2021) 62
Cal.App.5th 704 (Tsasu), this court construed one section of
California’s Quiet Title Act (the Act) (Code Civ. Proc., § 760.010
et seq.). 1 Specifically, Tsasu confirmed that section 764.060
provides that a party acquiring title to property “in reliance” on a
quiet title judgment retains its rights in that property—even if
that judgment is subsequently invalidated as void—as long as the
party is a “purchaser or encumbrancer for value” who lacked
“knowledge of any defects or irregularities in [the earlier quiet
title] judgment or the proceedings.” (§ 764.060; Tsasu, at p. 710.)
Here, the trial court declined to follow the plain text of section
764.060 and Tsasu, and instead followed the pre-Act, common
law rule that deems invalid any and all rights deriving from a
judgment later invalidated as void. These appeals present three
questions: Was the trial court’s refusal to apply binding
statutory and decisional law warranted by the court’s views that
(1) the common law rule better accorded with the trial court’s
public policy preferences, (2) the common law rule applicable to
non-quiet title actions cannot coexist with the Act’s rule for quiet
title judgments, or (3) section 764.060 is unconstitutional? The
answer to all questions is “no.” A trial court may not disregard
the plain text of a statute or binding precedent in favor of its own
view of what the law should be, and section 764.060 does not
violate due process or deny equal protection of the law. Because
1 All further statutory references are to the Code of Civil
Procedure unless otherwise indicated.
2
the trial court also erred when, in the alternative, it applied
section 764.060 to deprive a lender of its rights to property based
on a later-invalidated quiet title judgment, we reverse the trial
court’s judgment and order that judgment be entered for the
lender.
FACTS AND PROCEDURAL BACKGROUND
I. Facts
A. Ocie Payne Hinkle suffers elder abuse when her
acquaintance deeds her property to others
In 2010, Ocie Payne Hinkle (Ocie) 2 was an 89-year-old
woman who owned several parcels of property in Los Angeles,
California. Ocie has an adult son, Ocy.
A few years earlier, Ocie had started a relationship with
Roi Wilson (Wilson). In the fall of 2010, Ocie was hospitalized
and medicated; while in that state, Wilson prevailed upon Ocie to
grant him power of attorney over her affairs.
Wilson then used that power of attorney to deed away
much of Ocie’s real property. As pertinent to this case, while
acting as Ocie’s “attorney-in-fact,” Wilson, on October 22, 2010,
signed a grant deed giving Ocie’s property at 1723 Buckingham
Road (the Buckingham property or the property) to Edmound
Daire (Daire) (the October 2010 grant deed). Integral to his
frauds, Daire is a professional “document preparer.”
In January 2011, after Ocy learned of Wilson’s conduct
against his mother, Ocie was placed in a conservatorship.
2 Because some of the parties have the same last name, we
will use first names for clarity’s sake. We mean no disrespect.
3
B. Ocy’s claim to the Buckingham property
On November 10, 2010, Daire signed a grant deed giving
the property back to Ocie (the November 2010 grant deed). 3
After Ocie passed away in May 2014, Ocy became the
administrator of her estate, and, as her sole heir, entitled to title
to the Buckingham property.
C. Daire’s claim to the Buckingham property
1. Daire obtains a quiet title judgment
On October 8, 2014, Daire filed a verified complaint to quiet
title to the Buckingham property in his name. As defendants,
and as pertinent to this case, he named (1) Ocie, (2) Wilson, and
(3) “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.” In his complaint, Daire alleged that he
had title pursuant to the October 2010 grant deed and that the
subsequent November 2010 grant deed purporting to reverse the
transfer was a forgery; thus, he sought to cancel the November
2010 grant deed and quiet title to the Buckingham property in
himself. On January 23, 2015, Daire recorded a lis pendens
regarding his pending quiet title lawsuit. According to a proof of
service later filed with the court, Daire’s process server
personally served Ocie with the complaint on March 28, 2015.
On June 11, 2015, Daire requested—and the court clerk
entered—a default against Ocie.
3 Around the same time, Wilson used the power of attorney
to purport to deed the Buckingham property and six other parcels
owned by Ocie to Julie Goddard (Goddard). All of those transfers
were later reversed by the probate court in January 2012.
4
On November 6, 2015, the trial court held a hearing on
whether to enter judgment against Ocie in Daire’s quiet title
action. At that hearing, the court heard evidence (chiefly, Daire’s
testimony) and took judicial notice of the record chain of title. At
the conclusion of the hearing, the court entered judgment
quieting title to the Buckingham property in Daire and
expunging the November 2010 grant deed. 4 In its judgment, the
court also found that Ocie had been “regularly served with lawful
process, via personal service.”
Daire recorded the quiet title judgment in the County
Recorder’s Office a week later, on November 13, 2015.
2. On the basis of the quiet title judgment, Daire
obtains two loans using the Buckingham property as collateral
Within a few months of recording the quiet title judgment
in his favor, Daire applied for two loans.
a. The Ridec loan
Around December 2015, Daire applied to Ridec LLC (Ridec)
for a $650,000 loan and offered up the Buckingham property as
collateral. Ridec retained a title insurer. The title insurer ran a
title report on the Buckingham property on December 29, 2015;
that report reflected the following:
● The October 2010 grant deed;
4 Interestingly, Daire tried the same maneuver on a different
property owned by Ocie and deeded to Daire by Wilson. When
Daire sought to quiet title in that other property, however, the
trial court (with a different judge presiding in that separate case)
found Daire not to be “credible” at the evidentiary hearing and
rejected his claim to quiet title. To evade that unfavorable
ruling, Daire filed another quiet title action as to that other
property, and prevailed in obtaining a default quiet title
judgment; that judgment was later vacated.
5
● The November 2010 grant deed;
● A February 3, 2011, notice of the conservatorship
action over Ocie, which specified that the action “may affect” the
Buckingham property; and
● The 2015 judgment quieting title to the Buckingham
property in Daire and the order expunging the November 2010
grant deed.
Because the time to appeal the November 6, 2015, quiet
title judgment did not expire for 180 days (that is, until early
May 2016), Ridec’s title insurer insisted that Ridec wait for the
end of that appeal period to ensure that there were no appellate
challenges to that judgment. On May 13, 2016, the title insurer
ran a second title report on the Buckingham property, which
reflected the following additional information:
● A notice of lis pendens, recorded on February 25,
2016, reflecting the commencement of the probate of Ocie’s
estate, which specified that it “affect[ed] title” to the Buckingham
property (the February 2016 lis pendens); and
● A notice of withdrawal of the February 2016 lis
pendens, recorded on April 25, 2016 (the April 2016 notice of
withdrawal).
In light of the expiration of the time to appeal the quiet
title judgment, the withdrawal of the lis pendens filed during
that appeal period, and the absence of any other reason to
question the validity of Daire’s title, the title insurer informed
Ridec that title to the Buckingham property was vested in Daire;
thus, on May 16, 2016, escrow on the loan closed, Ridec recorded
a deed of trust on the Buckingham property for $650,000, and
Ridec wired $568,711.35 to Daire’s account at Citibank, N.A.
(Citibank).
6
b. The PSG Capital Partners, Inc. (PSG)
loan
Daire also borrowed $400,000 from PSG, which was also
secured by a deed of trust on the Buckingham property. Daire
falsely told PSG that PSG had the “first” deed of trust on the
property, as Ridec had recorded its deed of trust against the
Buckingham property one day earlier. After recording its deed of
trust on June 17, 2016, PSG subsequently transferred it to
Fortunato Capital Partners, LLC, who then transferred it to Title
Resources Guaranty Company (Title Resources).
3. The trial court subsequently sets aside the quiet
title judgment
On May 20, 2016, just days after escrow closed on the Ridec
loan, Ridec’s title insurer sent a letter and small escrow refund
check to Daire at the Buckingham property, but Ocy was living
there at the time. This alerted Ocy to Daire’s fraud, and Ocy’s
lawyer immediately sent a letter to the title insurer.
Upon further investigation, Ocy learned that (1) Daire had
filed a fraudulent proof of service in conjunction with his quiet
title action, which reported that Ocie had been personally served
with Daire’s complaint on March 28, 2015, although she had died
nearly a year before (on May 9, 2014); and (2) Daire had filed a
fraudulent notice of withdrawal of the February 2016 lis pendens
in April 2016, on which he had forged the signature of Ocy’s
lawyer.
For whatever reason, Ocy (acting as administrator of Ocie’s
estate) waited a year, until June 15, 2017, to file a motion to
vacate the quiet title judgment on the ground that neither Ocie
nor her estate were ever served in the quiet title action.
7
On August 2, 2017, the trial court granted Ocy’s motion
and set aside the quiet title judgment.
II. Procedural Background
A. The various complaints
Once Daire’s deceptions came to light, the litigation frenzy
began. On May 31, 2016, Ridec’s title insurer sued Daire and
Citibank, seeking—and obtaining—court orders freezing the
disbursed loan funds still in Daire’s Citibank account. Ridec
joined that lawsuit via a cross-complaint against Daire, Ocy, and
PSG, in which it sought to establish the validity of its deed of
trust. On June 1, 2016, Daire sued Citibank. Ridec also joined
that lawsuit via a cross-complaint. Ridec then filed a “complaint
in intervention” in Daire’s underlying quiet title action (which
was reactivated when Ocie’s estate filed the motion to vacate the
judgment in that action). The trial court subsequently
consolidated these actions. 5
B. Litigation
The trial court litigated the consolidated case in two phases
relevant to these appeals. 6
1. The first phase
The first phase was meant to answer the question: As
between Daire and Ocy (in his capacity as administrator of Ocie’s
5 The consolidation order also folded in Daire’s lawsuit
involving Ocie’s other property in which Daire had fraudulently
quieted title in himself.
6 The trial court also had planned for a third phase—
regarding whether the two defrauded lenders could obtain
punitive damages against Daire. The court ultimately
determined that they could not, but that ruling is not challenged
on appeal.
8
estate), who has title to the Buckingham property? 7 After a one-
day bench trial in November 2018, the trial court issued a
January 2019 order quieting title to the Buckingham property in
Ocy and declaring that Daire had no valid interest in the
property.
2. The second phase
The second phase was meant to answer the question: As
between Ridec and PSG (collectively, the lenders) and Ocy (again,
in his capacity as administrator of Ocie’s estate), were the
lenders’ deeds of trust valid encumbrances on the Buckingham
property? 8
The court held a three-day bench trial in April 2021. On
the very first day of trial and in closing arguments, the parties
brought Tsasu (which was decided on April 1, 2021) to the trial
court’s attention.
a. The tentative rulings
The trial court issued a tentative ruling in June 2021,
invited further briefing in which the parties again discussed
Tsasu, and then issued a further tentative ruling in August 2021.
Together, these 35 pages of tentative rulings conclude that the
lenders’ deeds of trust are invalid and do not encumber Ocy’s title
to the Buckingham property. 9
7 The pleading at issue in this first phase was Daire’s
complaint in the quiet title action.
8 The pleadings at issue in this second phase were Ridec’s
and PSG’s cross-complaints filed in the title company’s lawsuit;
the lenders abandoned the remainder of their complaints.
9 However, the trial court did conclude that the lenders are
entitled to recover the amounts of their loans, plus interest,
9
In coming to this conclusion, the trial court acknowledged
the Act—and section 764.060, specifically—“stand for the . . .
proposition . . . that even if a quiet title judgment is completely
void due to a failure to give notice to the owner, a [bona fide
encumbrancer who makes a loan in reliance on that judgment]
will be entitled to prevail.” The court also acknowledged that two
appellate decisions—specifically, OC Interior Services, LLC v.
Nationstar Mortgage, LLC (2017) 7 Cal.App.5th 1318 (OC
Interior) and Deutsche Bank Nat. Trust Co. v. Pyle (2017) 13
Cal.App.5th 513 (Deutsche Bank)—had, in dicta, suggested that
the very same proposition was correct.
But the trial court rejected that proposition. In the trial
court’s view, it was preferable to use the pre-Act, common law
rule, which provided that any rights in property deriving from a
void judgment were invalid, even if the party acquiring those
rights had acted in good faith and without knowledge of any
defect in the judgment. 10 The trial court cited what boils down to
three reasons for favoring the common law rule over the Act.
against Daire, and the lenders stipulated as to how to divide
between them the interpleaded funds Citibank deposited with the
court from Daire’s account.
10 The court also devoted some of its ruling to explaining
when a party may challenge a judgment as being void—namely,
when the judgment is “void on its face,” which the court defined
as being true when the judgment’s voidness is apparent from the
“judgment roll,” which the court further defined as including “all
of the public courthouse records relating to the parties and/or
property.” The trial court’s explication of this aspect of the
common law rule is both irrelevant and incorrect. It is irrelevant
because the issue before the court in the second phase of the
proceedings was not when a party may challenge a judgment as
10
First, the court reasoned that applying the common law
rule to quiet title judgments is better public policy: The common
law rule tends to favor the original owners of property over
subsequent lenders (since the lenders will usually be the ones to
base their rights on earlier quiet title judgments), and the court
reasoned that this outcome was a better one because (a) it is
easier for lenders to run retrospective title searches when they
make loans than it is for owners to periodically run title searches
after they have acquired the property, (b) equity favors having
the lenders lose because lenders know that buying property at
foreclosure auctions is a “high risk investment[,]” (c) lenders are
in a “far better position” to absorb losses because they have title
insurance, and (d) the amount of loss lenders face will likely be
small in the grand scheme of things because void judgments are
“few” in number.
Second, the court reasoned that applying the Act to quiet
title judgments while applying the common law rule to other
void, but the effect of such a successful challenge on the rights of
parties who relied on that now-invalid judgment. It is incorrect
because (1) whether a judgment is void on its face determines
whether it may be attacked collaterally (as a judgment may be
directly attacked even if it is not void on its face) (OC Interior,
supra, 7 Cal.App.5th at pp. 1327-1331; Kremerman v. White
(2021) 71 Cal.App.5th 358, 370 (Kremerman)); and (2) the trial
court’s expansive definition of what constitutes the “judgment
roll” is flatly inconsistent with the governing statutory and
decisional law (§ 670 [where an answer is not filed, the “judgment
roll” consists only of the complaint, summons, affidavit or proof of
service, the request for entry of default, and a copy of the
judgment]; OC Interior, at pp. 1327-1328 [no “extrinsic evidence”
beyond this “record” of the proceedings identified in section 670 is
part of the “judgment roll”]).
11
judgments (such as those based on cancellation of instruments)
means that “incompatible and irreconcilable standards” will be
applied to nearly identical claims based solely on the “label”
attached to those claims.
Third, the court reasoned that applying the Act violates
due process because the Act sometimes enforces rights pursuant
to judgments that were themselves obtained in violation of due
process.
Applying the common law rule, the court found that the
quiet title judgment was void due to the lack of valid service on
Ocie or her estate, such that Ridec and PSG’s deeds of trust—
which were derived from that void judgment—were invalid.
b. The final ruling
After Ridec filed a request for a statement of decision
enumerating 13 specific issues, the trial court issued a five-page
supplemental and final order. In that order, the court reaffirmed
its tentative rulings that it would apply the common law rule
instead of the Act, and proclaimed that its rulings were not
“inconsistent” with Tsasu but offered no explanation for its
proclamation. The court also offered a new, alternative rationale
for ruling in Ocy’s favor: Even if the Act applied, Ridec did not
qualify as an “encumbrancer without notice” of defects in the
quiet title judgment under Code of Civil Procedure section
764.060 because Ridec had “constructive knowledge and as to
some matters ‘actual knowledge’ of facts which Ridec chose to
disregard.” The court alluded to a “great deal” of examples of
Ridec’s knowledge, but chose only to articulate a “small[er] part”
of those examples—namely, (1) Ocy testified that he saw “picture
takers . . . at the property” in early 2016 who said “they were
there in connection with” a “lender’s” “investigation,” and that
12
Ocy told them “they were being defrauded”; (2) the April 2016
notice of withdrawal was “most suspicious,” yet Ridec did not
make a “reasonable inquiry” by calling the attorney who signed
that withdrawal; and (3) Ridec did not conduct a physical
inspection of the property, which the court implied was required
by Civil Code section 2079.5.
C. Judgment and appeals
Ridec timely appealed the judgment and the denial of its
posttrial motion to set aside that judgment. 11
DISCUSSION
Ridec challenges the trial court’s ruling declaring its deed
of trust invalid.
I. Pertinent Law
Enacted in 1980, the Act creates a special mechanism for
obtaining quiet title judgments that operate in rem—and hence
are binding not only against the parties to the quiet title
proceeding, but also “‘against all the world.’” (Nickell v. Matlock
(2012) 206 Cal.App.4th 934, 944 (Nickell); Tsasu, supra, 62
Cal.App.5th at p. 715.) Indeed, our Legislature’s chief aim in
adopting the Act was to empower courts to issue in rem decrees
because in rem decrees have greater permanence compared to the
in personam decrees that bind only the parties to the lawsuit; in
rem decrees accordingly “enhance the marketability of property
as to which a[] . . . quiet title decree has been rendered.” (Assem.
11 PSG did not appeal, so we have no jurisdiction to modify
the trial court’s judgment vis-à-vis PSG.
Although Ridec served its opening brief on Ocy’s attorney
(who represents Ocy in his individual capacity and in his capacity
as administrator of Ocie’s estate), Ocie elected not to file a
Respondent’s Brief in either capacity.
13
Com. on Judiciary, Analysis of Assem. Bill No. 1676 (1979-1980
Reg. Sess.) Jan. 16, 1980, pp. 1-2; Cal. Law Revision Com.,
Analysis of Assem. Bill 1676 (1979-1980 Reg. Sess.) Feb. 21,
1980, p. 1; Recommendation Relating to Quiet Title Actions (Sept.
1979) 15 Cal. Law Revision Com. Rep. (1980) pp. 1207-1208.)
Mindful of the need to provide due process protections for
those persons who would be bound by the in rem quiet title
judgment even though they did not participate in the litigation
producing it, the Act’s “requirements for obtaining a[n in rem]
quiet title judgment . . . are more stringent than the
requirements for obtaining judgments resolving adverse claims to
property under other [in personam] causes of action.” (Tsasu,
supra, 62 Cal.App.5th at pp. 715-716.) To obtain a quiet title
judgment under the Act, the plaintiff must (1) file a verified
complaint that names, as defendants, (a) “[all] persons having
adverse claims” to the plaintiff’s title, and that includes persons
whose claims are “of record,” whose claims are “known to the
plaintiff,” or whose claims are “reasonably apparent from an
inspection of the property,” and (b) “‘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 upon plaintiff’s title thereto’” (§§ 762.060,
subds. (a) & (b), 761.020); (2) record a lis pendens regarding the
pendency of the quiet title action in the county recorder’s office
where the property is located (§ 761.010, subd. (b)); and (3)
establish entitlement to a quiet title judgment with “evidence of
[the] plaintiff’s title” rather than “by default” (§ 764.010),
although the courts are split as to whether this requires an
evidentiary hearing at which a defaulted defendant may
participate (Nickell, supra, 206 Cal.App.4th at p. 947; Harbour
14
Vista, LLC v. HSBC Mortgage Services Inc. (2011) 201
Cal.App.4th 1496, 1502-1504, 1507 (Harbour Vista)) or merely a
prove-up hearing at which a higher quantum of evidence must be
produced (Yeung v. Soos (2004) 119 Cal.App.4th 576, 580-581
(Yeung)). (See generally Tsasu, at p. 716; Deutsche Bank, supra,
13 Cal.App.5th at pp. 523-525.)
Once the Act’s more stringent requirements are met, the
resulting quiet title judgment is “more resilient to subsequent
challenges.” (Tsasu, supra, 62 Cal.App.5th at p. 716.)
As to persons who had “claim[s]” to the property at issue in
the quiet title judgment at the time that judgment was rendered,
the resilience of that judgment to subsequent attack turns on
whether those persons were a party to the quiet title action: If a
person seeking to attack the quiet title judgment was a party to
the quiet title action, the quiet title judgment is “binding and
conclusive” (§ 764.030, subd. (a)); if the person seeking to attack
the quiet title judgment was not a party to the quiet title action,
then the quiet title judgment is “binding and conclusive” unless
(1) “at the time the lis pendens [for the action] was filed or, if
none was filed, at the time the [quiet title] judgment was
recorded,” the nonparty’s claim was “of record” (§§764.045, subd.
(a), 764.030, subd. (b)); or (2) the nonparty’s claim was “actually
known to the plaintiff or would have been reasonably apparent
from an inspection of the property” (§ 764.045, subd. (b)). 12
12 Ocy, acting as administrator of his mother’s estate,
effectively took advantage of this basis for challenging the quiet
title judgment: Ocie’s estate had a claim to the Buckingham
property at the time of the quiet title judgment; Ocie’s estate was
not a party to that action due to the absence of any service; and
Ocie’s estate’s claim was “of record.” As a result, the judgment
was not “binding and conclusive” as to Ocy.
15
As to persons who did not have claims in the property at
the time of the quiet title judgment and who instead “reli[ed] on
the [quiet title] judgment” when subsequently acquiring rights in
the property, those persons shall retain those “rights” in the
property pursuant to Code of Civil Procedure section 764.060—
even if the quiet title judgment is later invalidated “based on lack
of actual notice to a party or otherwise”—as long as that person
was a “purchaser or encumbrancer for value . . . without
knowledge of any defects or irregularities in the [quiet title]
judgment or the proceedings.” (Code Civ. Proc., § 764.060.) In
Tsasu, we held that “without knowledge” of any defects or
irregularities means without any “actual or constructive
knowledge” of them. (Tsasu, supra, 62 Cal.App.5th at p. 710.)
For these purposes, “‘actual’ knowledge exists when a person is
[actually,] subjectively aware of a fact,” while “‘constructive’
knowledge exists when a person is deemed in the eyes of the law
to be aware of a fact, either because (1) the person has
“‘“knowledge of circumstances which, upon reasonable inquiry,
would lead to that particular fact [citations]”’”; or (2) the fact is
contained in a document that has been “‘“recorded as prescribed
by law.”’” (Id. at p. 719.) A person obtains constructive
knowledge through recorded documents only if those documents
have been properly indexed in the “chain of title” for the property
at issue (Stearns v. Title Ins. & Trust Co. (1971) 18 Cal.App.3d
162, 169; Far West Savings & Loan Assn. v. McLaughlin (1988)
201 Cal.App.3d 67, 73; Diel v. Security Title Ins. Co. (1956) 142
Cal.App.2d 808, 810; Civ. Code, § 1170); thus, the trial court’s
suggestion that constructive knowledge is imputed as to “all of
the public courthouse records relating to the parties and/or
property” is incorrect. What is more, the two branches of
16
constructive knowledge interact: If a properly recorded document
refers to further recorded documents, the person has constructive
knowledge of what a reasonable inquiry into those further
documents would reveal. (Triple A Management Co. v. Frisone
(1999) 69 Cal.App.4th 520, 532-533.)
II. Analysis
When examining a trial court’s ruling that rights in
property are valid or invalid under the Act in any particular case,
our standard of review turns on whether the facts were disputed.
To the extent the facts were undisputed, and the trial court
merely applied the undisputed facts to the law, our review is de
novo. (Tsasu, supra, 62 Cal.App.5th at p. 715; Union of Medical
Marijuana Patients, Inc. v. City of San Diego (2019) 7 Cal.5th
1171, 1183; Martinez v. Brownco Construction Co. (2013) 56
Cal.4th 1014, 1018.) To the extent the facts were disputed, we
review the trial court’s factual findings for substantial evidence.
(People v. Sledge (2017) 7 Cal.App.5th 1089, 1095-1096;
Thorstrom v. Thorstrom (2011) 196 Cal.App.4th 1406, 1417.) And
where, as here, the party asserting error on appeal had the
burden of proof below, we may reverse only if the record compels
a finding in that party’s favor as a matter of law. (Dreyer’s Grand
Ice Cream, Inc. v. County of Kern (2013) 218 Cal.App.4th 828,
838.)
We conclude that the trial court erred when it invalidated
Ridec’s deed of trust in the Buckingham property and thereby
impaired Ridec’s rights in that property.
Because Ridec acquired its rights in that property after the
quiet title judgment, and did so “in reliance on th[at] judgment,”
section 764.060 supplies the pertinent rule. Under section
764.060, Ridec’s rights in the property may not be impaired as
17
long as Ridec (1) was “a purchaser or encumbrancer for value,”
and (2) “act[ed] . . . without knowledge of any defects or
irregularities in the judgment or the proceedings.” (§ 764.060.)
It is undisputed that Ridec was an encumbrancer for value
because its deed of trust was in exchange for loaning Daire
$650,000.
The record also compels a finding, as a matter of law, that
Ridec acted “without knowledge of any defects or irregularities”
in the quiet title judgment or the proceedings that produced it.
There is no evidence that Ridec (and, necessarily, its officers or
employees) had any actual, subjective knowledge regarding the
two chief defects with the quiet title judgment or the validity of
Daire’s title at the time of its loan—namely, that (1) despite
Daire’s service of process form purporting to have served Ocie,
Ocie was dead at the time Daire filed the quiet title action and, as
a result, Ocie’s estate was neither named nor served; and (2)
Ocy’s lawyer had not signed the 2016 notice of withdrawal. Ridec
also had no constructive knowledge of these defects or any
invalidity of Daire’s title. The quiet title judgment appeared to
be in compliance with the Act: That proceeding was initiated by
a verified complaint that named Ocie, Wilson, and the others
with a claim to the property 13 as well as “All Persons Unknown
Claiming Any Legal or Equitable Right, Title, Estate, Lien, or
13 Although the title report listed that Ocie had also deeded
the Buckingham property to Goddard in December 2010, that
report also indicated that the conservatorship action was
initiated in 2011, which led to a January 2012 court order
invalidating the transfer to Goddard; as a result, Ridec’s
investigation of the title report entries showed that Goddard no
longer had a claim to the Buckingham property at the time Daire
filed the quiet title action in 2014.
18
Interest in the Property . . .”; Daire recorded a lis pendens
regarding the action; the proof of service on Ocie appeared valid
on its face; and the trial court entered the quiet title judgment
only after conducting an evidentiary hearing, and in that
judgment found that Daire’s service on Ocie was valid and that
Daire had established his entitlement to quiet title. What is
more, nothing in the chain of title otherwise called the validity of
the quiet title judgment into question: The 2011 lis pendens
predated the quiet title judgment and involved Ocie, whom the
record showed to be a party to the subsequent quiet title
proceeding and hence bound by it; and the February 2016 lis
pendens was subsequently withdrawn by the April 2016 notice of
withdrawal, thereby eliminating any cloud on the title. Although
the February 2016 lis pendens related to the probate action of
Ocie’s estate, that fact would not impute knowledge to Ridec that
Ocie had been dead (and therefore could not have been served) at
the time of Daire’s 2015 quiet title judgment.
Thus, under section 764.060, as construed in Tsasu, Ridec
was an encumbrancer for value who acted without knowledge of
any defects or irregularities with the quiet title judgment; as a
result, its “rights” could not be “impair[ed]” and its deed of trust
remained valid.
III. The Trial Court’s Contrary Analysis
The trial court invalidated Ridec’s claim to the Buckingham
property for essentially two categories of reasons. First, the court
reasoned that section 764.060 and Tsasu did not apply. Second,
and alternatively, the court reasoned that, even if they did,
Ridec’s rights could be impaired because Ridec had actual and
constructive knowledge of defects with the quiet title judgment.
19
A. Refusal to apply section 764.060 and Tsasu
Although the trial court, at the outset of the first of its two
tentative rulings, readily acknowledged that the Act—and section
764.060 in particular—“st[ood] for the proposition” that Ridec
was “entitled to prevail,” the court refused to apply section
764.060. And although the court was repeatedly pointed to Tsasu
and even given a copy of Tsasu, the court, in its 35 pages of
tentative rulings, never cited or applied Tsasu and, going a step
further, affirmatively disclaimed the very existence of Tsasu when
the court stated that “no Second District case . . . has discussed
the[] holdings [of OC Interior and Deutsche Bank] in connection
with the matters now in issue, much less distinguished them or
declined to follow them”—even though that is precisely what
Tsasu did. To be sure, the court in its final ruling proclaimed in
one sentence that its ruling was not “inconsistent” with Tsasu,
but the court made no effort to explain how its decision rejecting
the Act was “[]consistent” with the Tsasu decision applying the
Act.
Thus, the question we confront is: Was the trial court
justified in ignoring the plain text of section 764.060 or in
disregarding binding precedent when it declined to apply that
section and the Tsasu decision interpreting it, and instead chose
to apply the pre-Act, common law rule? This question turns on
questions of statutory and constitutional interpretation, which
are questions of law subject to de novo review. (Weatherford v.
City of San Rafael (2017) 2 Cal.5th 1241, 1247 [statutory
interpretation]; People v. Cromer (2001) 24 Cal.4th 889, 894
[constitutional interpretation].)
The trial court offered three potential justifications. We
examine each.
20
First, the trial court detailed why, in its view, public policy
is better served by applying the common law rule, which
invalidates rights in real property that derive from any judgment
(including a quiet title judgment) later determined to be void
(Marlenee v. Brown (1943) 21 Cal.2d 668, 677; Hunt v. Loucks
(1869) 38 Cal. 372, 376; Gray v. Hawes (1857) 8 Cal. 562, 568; cf.
Newport v. Hatton (1929) 207 Cal. 515, 519), rather than section
764.060, which allows persons who purchase or encumber
property in reliance on a subsequently voided quiet title
judgment to retain their rights as long as they do not have any
actual or constructive knowledge of defects with that judgment.
This reasoning steps outside the lines of proper judicial analysis.
Determining what best serves public policy is the job of our
Legislature, not individual judges. This is especially true where,
as here, the Legislature has already come to a different public
policy determination on precisely the same issue—that is, that a
person shall retain its rights in property that derive from a quiet
title judgment, even if that judgment is declared void “based on
[a] lack of actual notice to a party” to that judgment. (§ 764.060)
By effectively rewriting section 764.060, the trial court not only
transgressed the fundamental maxim that courts may not
“rewrite statutes” (State Dept. of Public Health v. Superior Court
(2015) 60 Cal.4th 940, 956), but also anointed itself a super-
legislature imbued with the power to second-guess the public
policy determinations of our Legislature. The trial court
suggested that its otherwise impermissible act of judicial
policymaking was authorized by the Act because section 760.040
provides that “[n]othing in this chapter limits any authority the
court may have to grant such equitable relief as may be proper
under the circumstances of the case.” (§ 760.040, subd. (c).) But
21
this provision serves a far more modest function: It authorizes
courts to issue supplemental, equitable relief when implementing
the Act (e.g., Vanderkous v. Conley (2010) 188 Cal.App.4th 111,
119 [this provision authorizes trial courts to issue ancillary relief
“‘to do complete justice’”]); nothing in section 760.040 empowers
courts to ignore the plain text of other sections of the Act in the
name of “equity” and public policy. (Accord, Pacific Palisades
Bowl Mobile Estates, LLC v. City of Los Angeles (2012) 55 Cal.4th
783, 805 [“‘A court must, where reasonably possible, harmonize
statutes, reconcile seeming inconsistencies in them, and construe
them to give force and effect to all of their provisions’”]; Horwich
v. Superior Court (1999) 21 Cal.4th 272, 276 [courts must read
statutes “‘“with reference to the entire scheme of law of which
[they are a] part so that the whole may be harmonized and retain
effectiveness”’”]; Williams v. Superior Court (1993) 5 Cal.4th 337,
357 [“An interpretation that renders statutory language a nullity
is obviously to be avoided”].)
Second, the trial court reasoned that applying the Act’s
provisions to give effect to rights in property derived from void
quiet title judgments—while continuing to apply the contrary
common law rule to judgments resting on claims other than quiet
title—results in “incompatible and irreconcilable standards”
based merely on the label of the claim and which will lead to
gameplaying by litigants. As a threshold matter, this reason does
little more than impermissibly second-guess the Legislature’s
wisdom of erecting a separate rule for quiet title judgments
obtained under the Act. More to the point, the trial court’s
analysis is wrong. To be sure, litigants asking a court to decide
their rights in property may do so through a panoply of different
causes of action—quiet title, cancellation of instruments, and
22
declaratory relief, to name a few. (Yeung, supra, 119 Cal.App.4th
at p. 580, fn. 2; Deutsche Bank, supra, 13 Cal.App.5th at p. 523.)
Further, courts continue to apply the common law rule that
invalidates any rights in property derived from an earlier
judgment later found to be void when that judgment is based on
any non-quiet title cause of action (e.g., Deutsche Bank, at pp.
516, 521-523 [cancellation of instruments]; OC Interior, supra, 7
Cal.App.5th at pp. 1322, 1331-1332, 1335 [same]; Wutzke v. Bill
Reid Painting Service, Inc. (1984) 151 Cal.App.3d 36, 44-45)
[same]), while still applying section 764.060 that validates some
rights in property derived from a quiet title judgment that
complies with the Act (cf. Tsasu, supra, 62 Cal.App.5th 704). 14
But this dichotomy does not erect “incompatible [or]
irreconcilable standards.” The Act’s purpose was to replace the
common law version of a quiet title action—which was not in rem
and hence typically only valid against the parties to that action
(Perkins v. Wakeham (1890) 86 Cal. 580, 583 [“a decree quieting
title is not in rem”]; Park v. Powers (1935) 2 Cal.2d 590, 598 [“not
strictly in rem”]; Harbour Vista, supra, 201 Cal. App.4th at pp.
1505-1506; Deutsche Bank, at p. 526)—with an in rem quiet title
14 We have come across two decisions that involve quiet title
judgments entered after 1980, but which still apply the common
law rule. (WFG National Title Ins. Co. v. Wells Fargo Bank, N.A.
(2020) 51 Cal.App.5th 881, 885-886, 889-890; Lin v. Coronado
(2014) 232 Cal.App.4th 696, 702.) However, these decisions do
not discuss the Act at all, and hence do not stand for the
proposition that the Act is inapplicable. (Riverside County
Sheriff’s Dept. v. Stiglitz (2014) 60 Cal.4th 624, 641.) To the
extent these cases are read for the proposition that it is
appropriate to disregard the Act’s plain language, we respectfully
disagree with that reading.
23
action that was “‘“good against all the world”’” and hence had
more resilience when later attacked. (Tsasu, at p. 715; Assem.
Com. on Judiciary, Analysis of Assem. Bill No. 1676 (1979-1980
Reg. Sess.) Jan. 16, 1980, pp. 1-2; Cal. Law Revision Com.,
Analysis of Assem. Bill 1676 (1979-1980 Reg. Sess.) Feb. 21,
1980, p. 1; Recommendation Relating to Quiet Title Actions (Sept.
1979) 15 Cal. Law Revision Com. Rep. (1980) pp. 1207-1208.)
The Act is careful to accord its greater resilience only to those
quiet title judgments obtained under the Act’s more stringent
procedures. Thus, a trial court may logically apply the Act’s rule
regarding the effect of void judgments only to Act-compliant quiet
title judgments, while still applying the common law rule to all
other judgments. The two standards are neither incompatible
nor irreconcilable, and are not readily subject to manipulation
because a party that wishes to avail itself of the Act’s greater
protections for quiet title judgments must take all the extra steps
to obtain a quiet title judgment under the Act.
Third, the trial court suggested that it was justified in
ignoring section 764.060 because that section is unconstitutional.
Unlike a trial court’s preference for a different rule as a matter of
public policy, a trial court’s conclusion that a statute is
unconstitutional can justify ignoring a statute. (People v. Willis
(2002) 28 Cal.4th 22, 33; see generally Marbury v. Madison
(1803) 5 U.S. 137.) But section 764.060 is not unconstitutional.
The trial court alluded to two possible constitutional defects with
section 764.060—namely, that (1) due process mandates that a
judgment obtained without notice to the property owner is void
and has no effect; and (2) having different rules for whether
rights in property made in reliance on a judgment that is later
vacated as void, depending on whether that judgment is a quiet
24
title judgment, is irrational and thereby violates substantive due
process and denies equal protection of the law.
The first “defect” does not render section 764.060
unconstitutional. To be sure, due process guarantees notice and
the opportunity to be heard. (Today’s Fresh Start, Inc. v. Los
Angeles County Off. of Education (2013) 57 Cal.4th 197, 211-212.)
Thus, a judgment against a party who was not properly served
violates that party’s procedural due process rights and the
appropriate remedy is to set aside that judgment as void
(Kremerman, supra, 71 Cal.App.5th at p. 370; OC Interior, supra,
7 Cal.App.5th at pp. 1330-1331). Ocy obtained that remedy—and
redressed the constitutional wrong inflicted upon his mother’s
estate—when the trial court set aside the quiet title judgment as
void. What is at issue now, however, is the separate question of
what effect to give to the invalidation of the void quiet title
judgment as between two claimants who have competing rights
in the property and who were not involved in the fraud that
ultimately invalidated the judgment. Ocy has actively
participated in the litigation of this latter question, so there is no
procedural due process violation here; the trial court erred to the
extent it imported the earlier due process violation from the prior
quiet title proceeding into this separate, subsequent proceeding.
The second “defect” also does not render section 764.060
unconstitutional. Whether our Legislature’s decision to enact
section 764.060 and thereby create an exception to the common
law rule that invalidates all rights based on later-voided
judgments violates due process or equal protection turns on
largely the same question: Does the creation of this special
exception “rationally further[] legitimate ends”? (Kavanau v.
Santa Monica Rent Control Bd. (1997) 16 Cal.4th 761, 770-771
25
[due process standard]; People v. Turnage (2012) 55 Cal.4th 62,
74-75 [rational basis equal protection standard].) As we have
discussed above, it most certainly did. The common law rule
invaliding the rights of an encumbrancer who relied on a
judgment later invalidated as void, even if the encumbrancer
acted in good faith and without knowledge of the possible
voidness, rested on the courts’ balancing of the equities as
between the original owner and the encumbrancer. (Wright &
Co. v. Levy (1859) 12 Cal. 257, 263-264 [looking to the “relative
equities” in assessing how to resolve competing claims when one
claimant innocently relied upon a later-voided deed]; Caira v.
Offner (2005) 126 Cal.App.4th 12, 25 [pre-Act quiet title claims
“are generally equitable in nature”]; Mix v. Sodd (1981) 126
Cal.App.3d 386, 390 [same]; Gavina v. Smith (1944) 25 Cal.2d
501, 505 [same]; Thomson v. Thomson (1936) 7 Cal.2d 671, 679
[same]; Gonzalez v. Hirose (1948) 33 Cal.2d 213, 217 [same].)
Section 764.060 strikes a different balance of the equities that
favors the encumbrancer, at least as to quiet title judgments that
comply with the Act’s more stringent requirements and when the
encumbrancer acts without knowledge of any defects in the
judgment. Because this reassessment of the balance rationally
furthers our Legislature’s goal of increasing the marketability of
title, it is sufficiently rational to withstand constitutional
scrutiny.
Because none of the trial court’s reasons for disregarding
section 764.060 and Tsasu are valid, the court erred in refusing to
apply the governing statute and binding precedent interpreting
that statute.
26
B. Finding that Ridec had actual and constructive
knowledge of defects with the quiet title judgment
As explained above, the record in this case compels a
finding as a matter of law that Ridec lacked actual as well as
constructive knowledge of any defect with the quiet title
judgment and the underlying proceedings that produced it. We
now explain why the trial court’s findings to the contrary are
unsupported either by the law or by the record. In so doing, we
focus on the “small[er] part” of reasons the court actually
articulated rather than the “great deal” of additional nascent
reasons to which the court alluded but opted not to articulate.
The court found that Ridec had actual knowledge of defects
with the quiet title judgment because Ocy told “picture takers” he
found on the Buckingham property in early 2016 that “‘it’s all [a]
fraud.’” Yet there is nothing in the record to support the trial
court’s implicit finding that those photographers were associated
with Ridec. Indeed, Ridec’s owner testified that the company
does not ordinarily send any appraisers to the property serving as
collateral for the loan. Given the absence of any evidence of
association and the undisputed fact that Daire was seeking
multiple loans at that time, the association the trial court
inferred was speculative. Although we must draw all reasonable
inferences in favor of the trial court’s ruling (Tribeca Companies
LLC v. First American Title Ins. Co. (2015) 239 Cal.App.4th 1088,
1102), that deference does not extend to giving effect to
speculation.
Combining the reasons the trial court articulated regarding
constructive knowledge as well as the reasons the court
articulated for why the “judgment roll” in the quiet title action
imparted knowledge, the court seemed to find that Ridec had
27
constructive knowledge of defects in the quiet title judgment
because (1) the April 2016 notice of withdrawal was inherently
suspicious, yet Ridec did not call the persons listed in the notice
to verify its legitimacy; (2) Ridec knew about the 2011
conservatorship over Ocie, yet did not investigate it further; (3)
Ridec did not physically inspect the property; and (4) Ridec did
not independently investigate whether the proof of service
showing personal service on Ocie was valid.
None of these charge Ridec with constructive knowledge.
Applying the definition adopted in Tsasu, Ridec is charged with
constructive knowledge of a fact if it had (1) “‘“knowledge of
circumstances which, upon reasonable inquiry, would lead to that
particular fact”’”; or (2) the fact is contained in a properly
recorded document. (Tsasu, supra, 62 Cal.App.5th at p. 719.) A
party is not otherwise obligated to “‘go behind’” the judgment and
independently verify its validity. (Id. at p. 723; Elliott v.
Wohlfrom (1880) 55 Cal. 384, 388 [subsequent encumbrancer is
“chargeable with what the record [in the chain of title] discloses,
and with nothing beyond what it discloses, unless it be shown
that he had actual notice of something outside [the record]”].)
The April 2016 notice of withdrawal is not a circumstance that
called for additional investigation, as such notices are the
statutory mechanism by which a lis pendens is removed (Code
Civ. Proc., § 405.50 [procedure for notice of withdrawals]; see also
Garcia v. Pinhero (1937) 22 Cal.App.2d 194, 196; Federal Deposit
Ins. Corp. v. Charlton (1993) 17 Cal.App.4th 1066, 1069-1070)
and is in no way suspicious. Nor is the notice of the 2011
conservatorship proceeding, which resulted in an order
invalidating various transfers to Goddard and predated the quiet
title judgment by several years. Ridec was not obligated to
28
physically inspect the property, and Civil Code section 2079.5
cited by the trial court deals with “buyer[s] or prospective
buyer[s]”—not lenders—and obligates them only to “exercise
reasonable care,” and does not obligate them to conduct an in-
person visitation. (Civ. Code, § 2079.5.) Lastly, Ridec was not
required to investigate the validity of the proof of service in the
quiet title action; the quiet title judgment recited the court’s
finding that service was proper, and the law does not require a
subsequent lender to second-guess such a finding.
* * *
In light of our disposition, we have no occasion to reach
Ridec’s alternative argument that Ocy’s claim is barred by laches
or that the trial court did not comply with the statutes and rules
governing statements of decision.
29
DISPOSITION
The judgment is reversed and remanded with directions to
enter a judgment finding that Ridec’s deed of trust is valid.
Ridec’s appeal from the posttrial order denying its motion to set
aside the judgment is therefore moot. Ridec is entitled to its costs
on appeal.
CERTIFIED FOR PUBLICATION.
______________________, J.
HOFFSTADT
We concur:
_________________________, P. J.
LUI
_________________________, J.
CHAVEZ
30