nacif v white-sorenson
TRANSCRIPT
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secure the loan with property he owned). A third party then purchased the property at the
court-ordered sheriff's sale.
The trial court thereafter vacated the default and default judgment, based solely on
claims by White-Sorensen's lender (Accredited Home Lenders, Inc. (Accredited)) that its
rights were improperly extinguished upon the sale. Nacif appealed. In our prior
unpublished opinion, we upheld the portion of the court's order vacating the default
judgment and remanded for the court to consider the unresolved claims between
Accredited and Nacif. (Accredited Home Lenders, Inc. v. Nacif(July 26, 2007, D048938)
(Nacif I).) But we expressly held the court erredin vacating the entry of default as to
White-Sorensen, concluding there "was no legal or factual basis to vacate the entry of
default as to [this party]." (Ibid.) This court then remanded for the trial court "to resolve
claims between Nacif and Accredited, andto enter a new default judgment as to White-
Sorenson . . . after the resolution ofthose claims." (Ibid.,italics added.)
On remand, the trial court disregarded this order and once again vacated the entry
of defaultagainst White-Sorensen. After permitting White-Sorensen to file a cross-
complaint against Nacif, the court ultimately found in favor ofWhite-Sorensen on each of
Nacif's claims against him and in favorof White-Sorensen on each of his affirmative
claims against Nacif. The trial court also granted summary judgment in favor of two
parties who had intervened or had been brought into the action: the trustee (First
American Title Company (First American)) and a nominee/beneficiary (Mortgage
Electronic Registration Systems, Inc. (MERS)) on the deeds of trust that secured
Accredited's loan to White-Sorensen. The court also permitted these parties to amend the
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pleadings to be substituted in Accredited's place after Accredited was dismissed from the
action upon filing for bankruptcy. The court awarded First American and MERS
$675,000 against Nacif.
The court also granted the anti-SLAPP motion filed by White-Sorensen, MERS,
and First American. The court awarded these parties $300,000 in attorney fees as
prevailing parties on their contract claims and on their anti-SLAPP motion.
Nacif appeals. Respondents are White-Sorensen, MERS, and First American. We
determine the court erred in several ways. We reverse and remand with directions.1
FACTUAL AND PROCEDURAL BACKGROUND
We summarize the facts in the light most favorable to Nacif, the party opposing
the summary judgment and anti-SLAPP motions. (See Garcia v. W&W Community
Development, Inc. (2010) 186 Cal.App.4th 1038, 1041.)
I. Background
Linda Nacif loaned $258,000 to White-Sorensen, who promised to repay the
money and agreed to secure the loan with property he owned (the White-Sorensen
property). White-Sorensen then failed to pay the amounts owed.
1 The third party purchaser, Scott Jacoby, was brought into this action by Accreditedand related parties. The court had earlier granted Jacoby summary judgment. In acompanion appellate opinion filed today, we uphold this summary judgment. (Mortgage
Electronic Registration Systems, Inc. v. Jacoby (August 8, 2011, D054010) (Jacoby.) Wediscuss facts relevant to Jacoby in this opinion only to the extent they are relevant to theissues raised in this appeal.
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approved and merely required a payoff demand letter. Nacif's counsel told White-
Sorensen's counsel and a mortgage broker he would record a lis pendens release at the
close of the settlement, but because he was concerned with the lack of disclosure of the
identity of the lender and escrow company, he would exchange the release document only
when the $115,000 funds were available. When the escrow closed, neither the escrow
company nor the lender requested the withdrawal of the lis pendens as a condition to the
payoff demand. Accredited recorded its two deeds of trust on the White-Sorensen
property in September 2004.
After Nacif was paid the $115,000 and before releasing the lis pendens and
dismissing her lawsuit against White-Sorensen, Nacif's counsel discovered information
leading him to believe that White-Sorensen had not been honest regarding his assets.
Nacif then filed a first amended complaint, realleging her claims against White-Sorensen
for breach of the loan agreement and adding allegations of fraud, claiming she would not
have agreed to the settlement if she had known these facts. Nacif did not return the
$115,000, but sought to recover only the balance of the loan principal plus interest.
Although White-Sorensen was served with, and had notice of, the amended complaint, he
elected not to defend the action, and the court entered his default.
On June 30, 2005, after Nacif submitted a declaration supporting her claims, the
court entered a default judgment against White-Sorensen in the amount of $209,187
(consisting of the remaining loan balance of $153,750 plus interest, costs, and attorney
fees). The court also imposed an equitable mortgage on the White-Sorensen property and
ordered the property sold at a foreclosure sale. The amended final judgment stated that
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all interests in the property recorded "subsequent to the filing of notice of the pendency of
this action" would be extinguished after the sale of the property. (Italics added.)
Several weeks later, on July 22, 2005, First American, Accredited's trustee on its
deeds of trust, recorded a Notice of Trustee's Sale, based on Accredited's claims that
White-Sorensen had failed to make required payments on his $675,000 refinance loan.
Three weeks later, Nacif recorded an Abstract of Judgment, which reflected that
her judgment lien was superior to Accredited's deeds of trust. Nacif advised Accredited
and/or its agents of her priority lien and asserted a right to proceed with the sale.
Accredited objected to Nacif's claim of priority. After attempting to negotiate a
resolution of its dispute with Nacif, Accredited filed a separate lawsuit in November 2005
against Nacif seeking to protect its priority interest in the White-Sorensen property. The
action was assigned to a different department of the superior court.
Two months later, in January 2006, Accredited filed a motion in the Nacif/White-
Sorensen case to vacate the entry of default and default judgment and for leave to
intervene in this action. Accredited was represented by the same counsel who had
previously represented White-Sorensen (S. Todd Neal). White-Sorensen did not join in
the motion to vacate the default or default judgment.
In its proposed intervention complaint, Accredited sought to protect its security
interest in the White-Sorensen property. Accredited claimed it had a lienhold interest
totaling $675,000 and the default judgment extinguishing this interest would materially
affect its rights. (Nacif I, supra, D048938.) Accredited asserted a right to intervene
because it was not named in the underlying matter and therefore it had no opportunity to
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protect its interests. (Ibid.) Accredited requested various remedies, including a judicial
determination that its secured equitable interest should be given first priority over Nacif's
equitable mortgage. (Ibid.) Accredited also asserted a breach of contract claim against
Nacif. (Ibid.) Nacif did not oppose the motion for intervention, but objected to the
motion to vacate the entry of default and default judgment against White-Sorensen.
(Ibid.)
While Accredited's motions were pending, the White-Sorensen property was sold
at a February 23, 2006 sheriff's sale. Accredited (and/or its agents) had actual notice of a
pending foreclosure sale more than 90 days before the sale, but took no steps to delay or
prevent the sale, other than to file its declaratory relief and intervention actions. A third
party (Scott Jacoby) purchased the property for $222,524 (the approximate amount of
Nacif's judgment against White-Sorensen) and these funds (minus administrative costs)
were paid to Nacif.
In thereafter opposing Accredited's motions to set aside White-Sorensen's default,
Nacif's counsel argued that Accredited's remedies were now limited to a damage action
against Nacif because the property had been sold to a third party (after notice to
Accredited), and these claims should have no effect on White-Sorensen's default in the
action.
In March 2006, the trial court granted Accredited's motion for intervention and
vacated the entry of default and judgment against White-Sorensen. The parties then
entered into a stipulation that Accredited would dismiss its second lawsuit against Nacif
(which was pending in another superior court department) because all of the claims
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asserted in this second lawsuit were now contained in Accredited's complaint-in-
intervention. (Nacif I, supra, D048938.)
Nacif then filed her notice of appeal. Nacif appealed only from the portion of the
court order vacating the default and default judgment, and did not challenge the court's
order granting Accredited's motion to intervene in the action. (Nacif I, supra, D048938.)
In July 2007, this court affirmed the portion of the order vacating the default
judgment. (Nacif I, supra, D048938.) We held the court properly vacated the judgment
because the judgment affected Accredited's rights, and the court would be required to
determine the appropriate remedies (if any) as between Accredited and Nacif. (Ibid.)
However, we reversed the portion of the order vacating the entry of default as to White-
Sorensen, explaining that an entry of default has independent significance and is not void
merely because the default judgment is later vacated. (Ibid.) We reasoned that although
vacating the judgment was necessary to allow Nacif and Accredited to litigate their
claims, it was not a proper basis to allow White-Sorensen to avoid the effect of his
default, particularly because he had never moved to reopen the default. (Ibid.) In
concluding there was no legal or factual basis to vacate the entry of default as to White-
Sorensen, we rejected Accredited's arguments that: (1) White-Sorensen was not properly
served in the underlying action; (2) Nacif's first amended complaint was a "nullity"
because Nacif did not receive specific permission to file it; and (3) the default was void
because Nacif allegedly committed fraud in refusing to adhere to the terms of her
settlement with White-Sorensen. (Ibid.)
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In so concluding, we emphasized that we were not ruling on any of the issues
arising from the dispute between Nacif and Accredited, including whether Nacif's lis
pendens was a proper basis to subordinate Accredited's trust deeds. (Nacif I, supra,
D048938.) We stated that "[b]ecause the parties have yet to litigate these issues before
the trial court and it may depend on the resolution of disputed facts, it would be
premature for us to address these issues here," and we refused to consider the merits of
amended intervention pleadings filed by Accredited and White-Sorensen while the appeal
was pending. (Ibid.) We thus "remand[ed] for the court to resolve claims between Nacif
and Accredited, and to enter a new default judgment as to White-Sorenson and [his
company] after the resolution of those claims." (Ibid., italics added.)
II. Proceedings on Remand
Unfortunately, as respondents acknowledge in their appellate brief, on remand the
trial court "did not consider" our appellate opinion. Instead, the court allowed White-
Sorensen to relitigate the entry of default, which was not only contrary to our specific
instructions but inconsistent with the law of the case doctrine. The court also erroneously
required Nacif to name MERS and First American in amended pleadings. These errors
led to a flurry of additional pleadings and motions, and ultimately to the court
erroneously granting respondents' summary judgment and anti-SLAPP motions without a
proper showing they were entitled to this relief. To explain these conclusions, we first
summarize the three pleadings that were before the court on remand and then briefly
describe the motion proceedings and the court's rulings on respondents' motions. In the
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Discussion section, we shall more fully discuss the facts and arguments before the court
when it made the rulings.
A. The Three Pleadings Before the Court on Remand
1. First Amended Intervention Complaint Against Nacif and Jacoby
While theNacif Iappeal was pending, Accredited, White-Sorensen, and MERS
filed a first amended complaint in intervention. The named defendants were Nacif and
Scott Jacoby, the individual who purchased the White-Sorensen property at the court-
ordered foreclosure sale.
This first amended intervention complaint asserted six causes of action against
Nacif, each based primarily on allegations that Nacif breached the 2004 Settlement
Agreement with White-Sorensen by failing to adhere to her promise to remove the lis
pendens once she was paid the $115,000 in settlement funds. The first cause of action
sought a judicial declaration that Nacif "was not entitled to a default, a default judgment,
or any equitable mortgage on the Property" and Accredited's deeds of trust have priority
over Nacif's "right to an equitable mortgage." The second through fourth causes of action
alleged breach of contract and fraud against Nacif. The fifth cause of action alleged
equitable subrogation and subordination. The sixth cause of action sought to quiet title.
2. Nacif's Second Amended Complaint
Nacif's first amended complaint against White-Sorensen (alone) was also before
the trial court after the remand. This was the same complaint upon which this court held
the trial court had erred in vacating the entry of default against White-Sorensen. (Nacif I,
supra, D048938.) Shortly after the remand, four parties (White-Sorensen, Accredited,
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MERS, and First American) moved for judgment on this complaint, arguing that Nacif's
failure to name these additional parties rendered the complaint defective as a matter of
law because these other parties were "indispensible parties" on a foreclosure action.
Nacif vigorously opposed the motion, raising several arguments, including that: (1) there
was no need for her to name these other parties because they had already raised all of the
issues in their amended intervention complaint; and (2) it would be improper to grant a
judgment on the pleadings in favor of White-Sorensen because it was on this pleading
that theNacif Icourtexplicitly held White-Sorensen had defaulted and that the default
could not be vacated.
After a hearing, the trial court rejected these arguments, and granted the motion.
The court's written order stated: "The motion of Plaintiffs-in-Intervention Accredited
Home Lenders, Inc., [MERS] and . . . White-Sorensen for Judgment on the Pleadings is
GRANTED. The court finds [these]moving parties are indispensible to the
determination of plaintiff [Nacif]'s first amended complaint." (Italics added.) The court
provided Nacif 10 days' leave to amend to add the necessary parties. Nacif later
unsuccessfully challenged this ruling in a writ petition in this court.
In Nacif's second amended complaint (filed in response to the court's order
granting judgment on the pleadings), Nacif named White-Sorensen, Accredited, MERS,
and First American. As discussed more fully below, Nacif's allegations against White-
Sorensen were virtually identical to the allegations alleged in her first amended
complaint. To avoid any argument that she reopened White-Sorensen's default, Nacif
included a paragraph in the new pleading stating she "specifically denies any intention to
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allege any new or different causes of action against [White-Sorensen]" and "intends to
preserve [his] status as [a] defaulted [party] . . . ." With respect to the other named
defendants, Nacif added a fraud cause of action against Accredited and sought
declaratory relief against Accredited, MERS, and First American.2
3. Cross-Complaint Against Nacif
The third pleading before the court was respondents' cross-complaint against
Nacif, filed after Nacif filed her second amended complaint. The plaintiffs on this
pleadingAccredited, MERS, White-Sorensen, and First Americanalleged essentially
the same six causes of action as were alleged in the first amended intervention complaint.
B. Summary Judgment and Anti-SLAPP Motions
White-Sorensen, Accredited, MERS, and First American then sought summary
judgment on each of the three pleadings before the court (Nacif's second amended
complaint, the first amended intervention complaint, and respondents' cross-complaint).
These parties also filed an anti-SLAPP motion to strike Nacif's second amended
complaint. We summarize the evidence and argument presented by respondents with
respect to these pleadings.3
2 Nacif also named the mortgage broker and several other entities, but the court latergranted a motion to strike these parties from the complaint and Nacif does not challengethis ruling on appeal.
3 Because we have concluded respondents did not meet their summary judgmentand anti-SLAPP burdens with respect to their affirmative pleadings, we focus primarilyon their evidence and do not detail Nacif's opposition.
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1. Summary Judgment Motion on Respondents' Pleadings Against Nacif
On their own affirmative pleadings (cross-complaint and first amended
intervention complaint), White-Sorensen, Accredited, MERS and First American argued
they were entitled to recover as a matter of law on their contract, fraud, and equitable
relief claims because the undisputed evidence showed: Nacif is bound by her settlement
with White-Sorensen because he paid her the $115,000; Nacif breached the 2004
Settlement Agreement by failing to release her lis pendens; and Nacif's failure to release
the lis pendens shows she made a material misrepresentation of fact without an intention
to perform and misrepresented to White-Sorensen and Accredited that she would
withdraw the lis pendens.
These parties argued they were entitled to damages of $675,000 as a matter of law
based on: (1) a declaration filed by the mortgage broker involved in the Accredited
refinance loan, who stated that a July 2004 appraisal valued the White-Sorensen property
at $690,000; (2) Accredited's deeds of trust showing it loaned $675,000 to White-
Sorensen; and (3) evidence that the property had been sold to a third party.
2. Summary Judgment Motion on Nacif's Second Amended Complaint
In moving for summary judgment on Nacif's second amended complaint, the
defendants named in this pleading (White-Sorensen, Accredited, MERS and First
American) argued that Nacif could not recover as a matter of law because the basis of her
claims against White-Sorensen was legally flawed as she did not return the $115,000 she
received as part of the settlement. (SeeMyerchin v. Family Benefits, Inc. (2008) 162
Cal.App.4th 1526, 1529 ["a party offered a monetary settlement of a lawsuit may accept
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the money or reject it, but may not take the money andcontinue the lawsuit"].) These
defendants also argued Nacif would be unable to prove her claims against White-
Sorensen or the other defendants based on Nacif's deposition testimony in which she was
unable to identify a factual basis for many of her claims.
White-Sorensen, Accredited, MERS, and First American alternatively moved to
strike Nacif's second amended complaint under the anti-SLAPP statute. They argued that
Nacif's "entire suit" is based on White-Sorensen's false statements made to induce Nacif
to settle the action, and is thus subject to the anti-SLAPP statute. They further argued
Nacif would not prevail on any of her affirmative claims against them.
3. Accredited's Bankruptcy and Dismissal and Substitution of Parties
While these summary judgment and anti-SLAPP motions were pending,
Accredited moved to stay the proceedings because it had filed for bankruptcy. However,
at a hearing conducted shortly thereafter, the counsel who was jointly representing
Accredited, MERS, First American, and White-Sorensen stated that a stay was
unnecessary because he would be submitting a motion to dismiss Accredited from the
action. He explained that Accredited had previously sold its interests in the White-
Sorensen loan to other entities (not parties to this litigation), and these other entities are
"comfortable that their interests are adequately protected by First American and MERS."
In response, Nacif's counsel strenuously objected, arguing in part that counsel has
"just confirmed what I've been saying for three years, that he doesn't have a client. He
has . . . three parties, none of whom own the right . . . which is the basis for being in this
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action." The trial judge dismissed these concerns, saying she was "not worried about"
these issues.
The court thereafter provided Nacif's counsel additional time to file responses to
the summary judgment motion to cure procedural deficiencies in the initial opposition.
On the same day that Nacif filed the supplemental opposition, respondents moved to
dismiss Accredited from the action and asked that they be permitted to amend their
affirmative pleadings to substitute First American and MERS in place of Accredited as
real parties in interest. They argued that MERS could be substituted for Accredited
because MERS was a named beneficiary on the White-Sorensen deeds of trust. They
sought First American's substitution based on their counsel's declaration and letters from
a senior counsel of Wells Fargo and a vice president of Solace Financial, LLC, who
claimed that these entities had current rights in the White-Sorensen notes and deeds of
trust and that First American (as title insurer) was an subrogee/assignee for "collection"
purposes to Accredited's rights on White-Sorensen's notes.
Based on these papers, the court granted the substitution request. The court thus
dismissed Accredited from the action and permitted First American and MERS to be
"substituted in ACCREDITED's stead" as plaintiffs on the first amended intervention
complaint and on the cross-complaint.
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4. Court's Rulings on Summary Judgment and Anti-SLAPP Motions
The court then ruled against Nacif on respondents' summary judgment and anti-
SLAPP motions.
With respect to the summary judgment motion on Nacif's second amended
complaint, the court found in favor of White-Sorensen, MERS, and First American. The
court reasoned that the 2004 Settlement Agreement was valid and binding and thus
constituted a "complete defense to [Nacif's] second amended complaint." The court
further found that Nacif's retention of the $115,000 in settlement funds barred her from
recovering the balance of the debt owed to her, relying onMyerchin, supra, 162
Cal.App.4th 1526. The court alternatively granted these parties' anti-SLAPP motion.
The court found the anti-SLAPP statute applied because the second amended complaint
arose from the settlement agreement with White-Sorensen, and as "demonstrated in the
summary judgment motion, plaintiff has not and cannot establish a probability of success
on the merits."
On the affirmative pleadings filed by White-Sorensen, MERS, and First American,
the court found the undisputed facts showed these parties proved each of their claims
against Nacif, including breach of contract, fraud, and equitable subrogation. The
primary basis for this ruling was the evidence showing Nacif failed to comply with the
2004 Settlement Agreement provision requiring her to release the lis pendens and that her
attorney provided assurances to Accredited's agent that she would withdraw the lis
pendens once she received the settlement money. The court further found that First
American and MERS met their summary judgment burden to prove they were damaged
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in the amount of $675,000 and were entitled to recover this amount from Nacif plus
prejudgment interest.
The court additionally granted White-Sorensen, MERS, and First American their
requested equitable relief, including that: (1) Nacif "was never entitled to a default or a
default judgment against any Defendant," including White-Sorensen; (2) Nacif was not
"entitled to an equitable mortgage or other interest" on White-Sorensen's property; and
(3) the White-Sorensen property was and remains "clear of any equitable mortgage or
other interest claimed by . . . [Nacif]."
The court later awarded attorney fees of $300,000 to White-Sorensen, MERS, and
First American on their anti-SLAPP motion and as prevailing parties on the breach of
contract action.
DISCUSSION
I. Summary Judgment Motion
A. Standard of Review
The court granted summary judgment against Nacif on respondents' claims
asserted against her and on Nacif's affirmative pleadings.
When a defendantmoves for summary judgment, the defendant "bears the burden
of persuasion that there is no triable issue of material fact and that [the party] is entitled
to judgment as a matter of law." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826,
850 (Aguilar).) A defendant satisfies this burden by showing one or more elements of the
cause of action cannot be established, or that there is a complete defense to that cause of
action. (Ibid.) This burden can be met by relying on the opposing party's factually
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inadequate discovery responses if these responses show the plaintiff "will be unable to
prove its case by any means." (Weber v. John Crane, Inc. (2006) 143 Cal.App.4th 1433,
1439; see Scheiding v. Dinwiddie Construction Co. (1999)69 Cal.App.4th 64, 78-81;
Union Bank v. Superior Court(1995) 31 Cal.App.4th 573, 589-590.)
When aplaintiff or cross-complainantmoves for summary judgment on its claims,
the party bears the burden of proving each elementof the cause of action entitling the
party to judgment on that cause of action. "[I]f a plaintiff who would bear the burden of
proof by a preponderance of evidence at trial moves for summary judgment, [the
plaintiff] must present evidence that would require a reasonable trier of fact to find any
underlying material fact more likely than nototherwise, he would not be entitled to
judgment as a matter of law, but would have to present his evidence to a trier of fact."
(Aguilar, supra, 25 Cal.4th at p. 851.)
If the moving party fails to present sufficient, admissible evidence to meet its
initial burden, the court must deny the summary judgment motion. This rule applies even
if the opposing party does not object to the moving party's evidence, presents defective
declarations, or fails to present sufficient counter showing. (Rincon v. Burbank Unified
School Dist. (1986) 178 Cal.App.3d 949, 954-956.) However, once a party meets its
initial summary judgment burden, " 'the burden shifts to the [opposing party] . . . to show
that a triable issue of one or more material facts exists as to that cause of action or a
defense thereto.' " (Aguilar,supra, 25 Cal.4th at p. 849.) The opposing party may not
rely upon the mere allegations or denials of its pleading to show a triable issue of material
fact exists. (Ibid.)
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We review a summary judgment de novo. (Buss v. Superior Court(1997) 16
Cal.4th 35, 60.) We assume the role of the trial court and redetermine the merits of the
motion. In doing so, we strictly scrutinize the moving party's papers so that all doubts as
to the existence of any material, triable issues of fact are resolved in favor of the party
opposing summary judgment. (Barber v. Marina Sailing, Inc. (1995) 36 Cal.App.4th
558, 562.) "Because a summary judgment denies the adversary party a trial, [the motion]
should be granted with caution." (Colores v. Board of Trustees (2003) 105 Cal.App.4th
1293, 1305.)
In applying these principles to this case, we first consider the propriety of the
summary judgment granted in favor of White-Sorensen on Nacif's second amended
complaint and on White-Sorensen's affirmative pleadings against Nacif. We then
examine the summary judgment granted in favor of MERS and First American on these
parties' affirmative pleadings (cross-complaint and complaint in intervention) and on
Nacif's second amended complaint against these respondents.
B. Summary Judgment in Favor ofWhite-Sorensen
1. Nacif's Claims Against White-Sorensen
Nacif contends the court erred in granting summary judgment to White-Sorensen
on Nacif's second amended complaint. We agree.
In August 2004, Nacif filed a first amended complaint against White-Sorensen.
White-Sorensen defaulted on those claims, and the court entered White-Sorensen's
default. Although the trial court later vacated the entry of default, this court found the
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court erred and ordered the court to reinstate the entry of default. (Nacif I, supra,
D048938.) This ruling constitutes law of the case.
The law of the case doctrine provides that " 'the decision of an appellate court,
stating a rule of law necessary to the decision of the case, conclusively establishes that
rule and makes it determinative of the rights of the same parties in any subsequent retrial
or appeal in the same case.' " (Nally v. Grace Community Church (1988) 47 Cal.3d 278,
301.) Under this doctrine, the holding inNacif Ithat there was no legal or factual basis to
set aside White-Sorensen's entry of default was binding on the trial court on remand with
respect to White-Sorensen. Thus, the trial court erred in vacating White-Sorensen's
default after the remand and requiring Nacif to file a second amended complaint against
this defendant.
White-Sorensen contends the court properly vacated the entry of default because
Nacif voluntarily reopenedthe default by filing her second amended complaint. The
argument is unavailing because Nacif's filing of the second amended complaint was not a
voluntary act on the part of Nacif.
Nacif strongly opposed respondents' motion for judgment on the pleadings on her
first amended complaint, and specifically asserted that a court order requiring her to file a
second amended complaint would be inconsistent with theNacif Icourt's decision
affirming the entry of default against White-Sorensen. For reasons that are not entirely
clear, the trial court rejected these arguments and granted the motion, providing Nacif
with 10 days to file a second amended complaint against White-Sorensen and the other
moving parties. Had Nacif failed to file a new pleading against White-Sorensen in
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response to the court's directive, the court would have dismissed her action and she would
have lost her rights in the default. Under these circumstances, Nacif's filing of the second
amended complaint was in response to an erroneous ruling by the trial court and does not
constitute an intention to reopen the default.
White-Sorensen argues the court's ruling was proper because the other moving
parties (Accredited and MERS) were indispensable parties. However, even if the court
was required to grant the motion of these parties, it was not required to grant the motion
on the pleadings as to White-Sorensen. Because White-Sorensen's default had already
been affirmed on appeal, the court was required to adhere to that ruling.
White-Sorensen alternatively contends Nacif reopened the default by adding new
allegations in the second amended complaint. (See Ostling v. Loring (1994) 27
Cal.App.4th 1731, 1744.) The argument is not factually supported.
In the second amended complaint, only the first, second, and third causes of action
name White-Sorensen as a defendant. They are titled exactly the same as the causes of
action in the first amended complaint, and contain identical factual allegations.
Moreover, at the outset of the second amended complaint, Nacif included a paragraph
expressly stating that she was not intending "to allege any new or different cause of
action against [White-Sorensen]" and intends to preserve the entry of default against
White-Sorensen, and that she was filing the second amended complaint pursuant to the
court's ruling that she must do so.
White-Sorensen argues Nacif nonetheless reopened the default because she added
two paragraphs in the "General Allegations" section of the complaint. However, these
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paragraphs merely add brief background information regarding Nacif's original loan to
White-Sorensen and are not material to Nacif's substantive claims against White-
Sorensen. White-Sorensen also contends Nacif reopened the default because she named
other parties in the second amended complaint. However, there is no authority that
allegations against other parties reopens an entry of default, particularly where, as here,
the court ordered the plaintiff to amend the complaint to add these parties. Further,
contrary to White-Sorensen's assertions, the fact that Nacif mentioned White-Sorensen in
the causes of action against other parties does not support a different result. Because the
joinder of these parties derive from White-Sorensen's actions, it was reasonable for Nacif
to identify White-Sorensen when alleging the claims against the other parties and does
not suggest she was intending to reopen the lawsuit against him.
2. White-Sorensen's Affirmative Claims Against Nacif
Nacif also contends the court erred in granting summary judgment on White-
Sorensen's affirmative claims against her, including breach of contract, two types of
fraud, declaratory relief, and equitable subrogation/subordination. Each of these claims
was based on White-Sorensen's allegations that Nacif committed fraud and breached the
2004 Settlement Agreement by failing to withdraw the lis pendens and by filing the
amended complaint seeking to rescind the settlement agreement.
We agree that the court erred in granting summary judgment to White-Sorensen on
these claims. White-Sorensen was barred from recovering on these affirmative claims by
the prior entry of default. Under the compulsory counterclaim rule, a defendant must
assert all claims that arise "out of the same transaction, occurrence, or series of
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transactions or occurrences as the cause of action which the plaintiff alleges in his
complaint." (Code Civ. Proc., 426.10, subd. (c), 426.30, subd. (a); seeAlign
Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 959-960; Carroll v. Import
Motors, Inc. (1995) 33 Cal.App.4th 1429, 1435-1436.) "[I]f a party against whom a
complaint has been filed and served fails to allege in a cross-complaint any related cause
of action which (at the time of serving his answer to the complaint) he has against the
plaintiff, such party may not thereafter in any other action assert against the plaintiff the
related cause of action not pleaded." (Code Civ. Proc., 426.30, subd. (a).)
In this case, White-Sorensen's affirmative pleadings against Nacif arose from the
same circumstances as those alleged by Nacif in her first amended compliant. White-
Sorensen failed to answer those allegations, and the court entered his default. Although
the trial court previously vacated the default, we reversed, holding there was no legal or
factual basis for the court's order setting aside the default. (Nacif I,supra, D048938.)
We explained that once a court has entered a default, the defaulting party is precluded
from reasserting claims or defenses that could have been raised in that action: "Severe
consequences attach to the entry of a default. 'A default cuts off the defendant from
making any further opposition or objection to the relief which plaintiff's complaint shows
he is entitled to demand.' . . . Unless the default is set aside in a proper proceeding, the
party may not thereafter file pleadings, move for a new trial, or demand notice of
subsequent proceedings." (Ibid.)
Thus, once the trial court entered default on Nacif's complaint against White-
Sorensen, and this court reversed the vacation of that default, White-Sorensen was
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precluded from asserting affirmative claims that related to Nacif's causes of action. By
failing to prosecute the causes of action on a cross-complaint in response to Nacif's first
amended complaint, White-Sorensen forfeited his right to assert related claims and
cannot revive them merely because Accredited was given the opportunity to litigate its
claims against Nacif.
To avoid this result, White-Sorensen argues that Nacif voluntarily reopened the
default when she filed her second amended complaint. However, as explained above, this
argument is not supported by the record.
C. Summary Judgment on Affirmative Claims Asserted by First American and MERS
MERS and First American asserted affirmative claims against Nacif in the cross-
complaint and the first amended intervention complaint. These claims included breach of
contract, fraud, and equitable relief. The court awarded these parties summary judgment
based on their own claims and on their assertions they were entitled to recover for
Accredited's losses. We preliminarily discuss the issue of these parties' right to recover
for Accredited's losses because this issue is foundational with respect to their right to
recover on their affirmative pleadings. We then discuss the summary judgment with
respect to each cause of action asserted by these parties. In engaging in this analysis, we
agree with respondents that they are not necessarily bound by White-Sorensen's default
with respect to their rights to recover for their own alleged losses.
1. MERS's and First American's Rights to Recover for Accredited's Losses
Generally, a civil action must be prosecuted by the real party in interest, "except as
otherwise provided by statute." (Code Civ. Proc., 367.) A party claiming to have
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standing must assert his or her own legal rights and interests, and cannot rest any claim to
recover upon the legal rights or interests of a third party. (Property Owners of
Whispering Palms, Inc. v. Newport Pacific, Inc. (2005) 132 Cal.App.4th 666, 672.)
Generally, the person possessing the right sued upon by reason of substantive law is the
real party in interest. (SeeDel Mar Beach Club Owners Assn. v. Imperial Contracting
Co. (1981) 123 Cal.App.3d 898, 906.)
Based on their motion to amend the pleadings after Accredited filed for
bankruptcy, the court permitted MERS and First American to substitute as real parties in
interest for Accredited in their affirmative pleadings. The court also found these parties
were entitled to recover for Accredited's losses as a matter of law. We conclude the court
erred in this latter ruling. As explained below, these parties did not meet their summary
judgment burden to show they were real parties in interest as a matter of law with respect
toAccredited's claimed losses.
MERS
In moving to substitute for Accredited and recover for Accredited's losses, MERS
relied solely on evidence that it was identified on the White-Sorensen deeds of trust as
Accredited's "nominee" and a "beneficiary." The deeds of trust state that MERS is a
beneficiary "solely as nominee for Lender and Lender's successors and assigns . . . ."
MERS is a private corporation providing a national electronic registration service
that " 'tracks the transfer of ownership interests and servicing rights in mortgage loans.' "
(Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1151 (Gomes);
see Ferguson v. Avelo Mortgage, LLC(2011) 195 Cal.App.4th 1618, 1625; Peterson,
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Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration
System (2010) 78 U. Cin. L.Rev. 1359 (hereafter Peterson).) MERS's purpose is to
streamline the mortgage process by serving as the nominee and as mortgagee of record
for its members, thereby eliminating the need to record mortgage transfers. (Gomes,
supra, 192 Cal.App.4th at p. 1151.) MERS thus remains nominal mortgagee of record
even if the loan is transferred numerous times to different creditors. (Ibid.) In providing
this service, MERS generally has no financial interest in the mortgage loan; its revenue
comes not from repayment of the loan, but from fees the lenders pay to MERS. (Ibid.;
Peterson, supra, 78 U. Cin. L.Rev. at p. 1371.)
Under California law, MERS's status as a "nominee" on a deed of trust means that
it has the right to initiate foreclosure proceedings as the lender's agent. (See Gomes,
supra,192 Cal.App.4th at pp. 1157-1158; see also Ferguson, supra, 195 Cal.App.4th at
pp. 1625-1627.) Although California courts have not yet determined the precise scope of
MERS's rights to act beyond this limited role (see Gomes, supra, at p. 1157, fn. 9), most
federal courts have held that MERS's identification as a beneficiary on a deed of trust
does notconfer full "beneficiary" (lender) status with respect to all matters relating to the
note and the mortgage lending process. (Ibid.; see Weingartner v. Chase Home Finance,
LLC(D.Nev. 2010) 702 F.Supp.2d 1276, 1280.)
But regardless of the extent of MERS's rights as a named nominal beneficiary
under California law, MERS's status as a beneficiary on the deeds of trust in this case did
not support a finding it was entitled to recover for Accredited's claimed losses. As we
conclude in the companionJacoby appeal, at the time of the summary judgment motion,
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the deed of tru st had been extinguished by the third party sale. (Jacoby, supra,
D054010; see Code Civ. Proc., 701.630.) Thus, the only remaining legal instrument
was White-Sorensen's promissory note owed to Accredited (or its successors in interest).
There was no showing MERS had any financial interest in Accredited's loan or that it
received an assignment of the loan or claim. Without more, MERS's mere identification
as a nominee or beneficiary on a deed of trust that had been extinguished did not confer
real party in interest status on MERS with respect to the lender's affirmative breach of
contract and tort claims against a third party. There is no factual or legal basis in the
summary judgment record for the court to have permitted MERS to recover for injuries
suffered by Accredited based on Accredited's contract and fraud claims against Nacif.
First American
First American brought the claims against Nacif solely in its role as the trustee on
the two deeds of trust executed by White-Sorensen. This status did not give First
American standing to recover on a breach of contract claim on behalf of Accredited (the
creditor/trustor). Although a trustee of a trust is the real party in interest in litigation
involving trust property (Nicholson v. Fazeli (2003) 113 Cal.App.4th 1091, 1102), a
trustee on a deed of trust"is not a "trustee in the strict sense of the word" (Lupertino v.
Carbahal (1973) 35 Cal.App.3d 742, 747). It owes no fiduciary obligations, and is not a
general agent of the trustor (debtor) or the beneficiary (creditor). (Id. at pp. 747-748.)
Instead, the trustee has the authority to act "only so far as may be necessary to the
execution of the trust." (Id. at p. 748.) The trustee's " 'only duties are: (1) upon default
to undertake the steps necessary to foreclose the deed of trust; or (2) upon satisfaction of
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the secured debt to reconvey the deed of trust.' " (Heritage Oaks Partners v. First
American Title Ins. Co. (2007) 155 Cal.App.4th 339, 345.)
In taking judicial notice of the relevant superior court files, we are aware that in
moving to amend the pleadings, First American submitted its counsel's declaration (with
attached letters) asserting that, in addition to its role as trustee, First American served as
the title insurer on White-Sorensen's refinancing loan and that, as the title insurer, First
American was subrogated to certain successor lenders' rights. However, the trial court's
decision to permit an amendment of the pleadings based on these claims did not relieve
the parties of presenting admissible evidence in the context of moving for summary
judgment that it was a proper party to recover on Accredited's behalf. Because a
summary judgment deprives a party of a fundamental trial right, a summary judgment
may be granted only if the moving party presents supporting facts showing it is entitled to
a judgment in its favor as a matter of law. (Code Civ. Proc., 437c, subd. (c).) Absent
admissible, competent evidence in the summary judgment proceedings showing First
American had a valid assignment or was subrogated to Accredited's rights and that the
scope of any such subrogation/assignment entitled First American to recover for
Accredited's losses, the court had no basis to grant summary judgment to First American
based on claims that Nacif damaged Accredited's rights.
Respondents' Additional Real Party in Interest Arguments Are Without Merit
First American and MERS contend a trustee, nominee, and beneficiary on a deed
of trust are indispensible parties in an action involving a foreclosure of the particular deed
of trust. (See Washington Mutual Bank v. Blechman (2007) 157 Cal.App.4th 662, 668.)
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We agree with this principle, but it is inapplicable to establish real party in interest status
in this case. The judicial foreclosure had already taken place, and the Accredited deeds
of trust extinguished. (SeeJacoby, supra, D054010.) The fact that a trustee on
Accredited's deeds of trust may be an indispensible party in an action involving the
foreclosure ofthatdeed of trust does not establish First American or MERS were real
parties in interest on contract and fraud claims asserted by the lender/creditor against a
third party.
We also reject respondents' arguments that Nacif waived her right to assert the
standing issue because she did not "object to MERS and First American being substituted
into Accredited's place." The record makes clear that Nacif's counsel objected to the
substitution, and repeatedly argued that neither First American nor MERS were proper
parties in the action. Moreover, a party moving for summary judgment must establish all
of the facts necessary to support a judgment in its favor even if the opposing party makes
no objections to the moving party's evidence and produces no evidence of its own.
(Rincon v. Burbank Unified School Dist., supra , 178 Cal.App.3d at pp. 954, 956.)
Because MERS and First American had no direct relationship with Nacif, it was
incumbent on them to submit facts showing they had a right to recover for the lender's
claimed losses.
We now turn to examine the summary judgment with respect to each cause of
action asserted by MERS and First American against Nacif.
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2. Breach of Contract Claim Asserted by First American and MERS
In their contract claims, First American and MERS alleged Nacif breached the
2004 Settlement Agreement by: (1) refusing to withdraw the lis pendens after receiving
the settlement funds; (2) refusing to acknowledge that the payment of $115,000
constituted payment of the settlement; and (3) filing the amended complaint after she had
agreed to dismiss the claims with prejudice.4 They alleged that as "a proximate cause of
Nacif's breach of the [Settlement] Agreement," they were "damaged in an amount of at
least the value oftheir[$675,000] loans which had previously been secured by [the] real
property . . . ." (Italics added.)
In moving for summary judgment on this claim, MERS and First American
presented evidence showing the 2004 Settlement Agreement required Nacif to withdraw
her lis pendens, she did not do this or return the settlement funds, and this conduct caused
Accredited to lose its security interest in the property after Jacoby purchased the property
at the foreclosure sale. They further presented the declaration of a mortgage broker
involved in the refinance who stated that the White-Sorensen property was appraised at
approximately $690,000 when White-Sorensen's loan was refinanced in July 2004.
This evidence did not meet respondents' summary judgment burden to prove their
contract claims as a matter of law.
4 First American and MERS also alleged Nacif was liable because she "proceed[ed]with a sheriff's sale of the property without proper notice to Accredited, MERS or FirstAmerican." However, because these parties did not move for summary judgment basedon this allegation, we omit it from our discussion of the propriety of the summary
judgment on the contract claims.
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First, neither party (nor Accredited) was a party to the contract (the 2004
Settlement Agreement) they claimed was breached. Thus, to recover on a breach of
contract claim, MERS and First American were required to establish they were third
party beneficiaries of the contract. (See Civ. Code, 1559.)
To prove third party beneficiary status, the party must show the contracting parties
intendedto benefit the third party; it is not enough the third party would incidentally
benefit from the party's performance. (Spinks v. Equity Residential Briarwood
Apartments (2009) 171 Cal.App.4th 1004, 1022; Souza v. Westlands Water Dist. (2006)
135 Cal.App.4th 879, 891;Neverkovec v. Fredericks (1999) 74 Cal.App.4th 337, 348.)
" 'The fact that . . . the contract, if carried out to its terms, would inure to the third party's
benefit[,] is insufficient to entitle him or her to demand enforcement.' " (Neverkovec,
supra, 74 Cal.App.4th at p. 349.) "On the other hand, 'the third person need not be
named or identified individually to be an express beneficiary.' [Citations.] 'A third party
may enforce a contract where he shows that he is a member of a class of persons for
whose benefit it was made.' [Citations.]" (Spinks, supra, 171 Cal.App.4th at p. 1023.)
"Whether a third party is an intended beneficiary . . . to the contract involves construction
of the parties' intent, gleaned from reading the contract as a whole in light of the
circumstances under which it was entered." (Jones v. Aetna Casualty & Surety Co.
(1994) 26 Cal.App.4th 1717, 1725.)
"Generally, it is a question of fact whether a particular third person is an intended
beneficiary of a contract." (Prouty v. Gores Technology Group (2004) 121 Cal.App.4th
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1225, 1233.) The burden of proof is on the nonsignatory party to establish third party
beneficiary status. (See Neverkovec v. Fredericks, supra, 74 Cal.App.4th at p. 349.)
In moving for summary judgment, MERS and First American relied on the terms
of the 2004 Settlement Agreement as well as communications between Nacif's counsel
and a mortgage broker (Neal Melton) to establish they were third party beneficiaries of
the contract. This evidence was insufficient to meet their summary judgment burden.
First, the 2004 Settlement Agreement does not identify the refinancing lender
(Accredited), and instead pertains exclusively to the settlement between Nacif and White-
Sorensen. The only portion of the agreement that relates to the refinancing loan is a
sentence that states that Nacif's counsel shall deliver a release of the lis pendens to the
escrow officer "[i]f the release is required as a condition to funding a refinance . . . ."
(Italics added.) However, the evidence showed that Accredited did not require the
release as a precondition to funding the refinance and the escrow company did not require
the release before paying the funds to Nacif.
With respect to the communications between Nacif's counsel and mortgage broker
Melton, respondents submitted Melton's declaration who said he was Accredited's agent
during the refinancing process. Melton said that because Accredited was "concerned
about the lis pendens," Melton requested written confirmation from Nacif's counsel that
the lis pendens would be removed. According to Melton, Nacif's attorney provided a
copy of the 2004 Settlement Agreement to Melton, and "confirmed both orally, and in
writing, that the lis pendens would be removed upon payment of the $115,000" to Nacif.
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Melton said Accredited relied on these assurances in agreeing to refinance the loan and
Accredited would not have refinanced the property without these assurances.
To meet its summary judgment burden, a moving party must present evidence that
"would require a reasonable trier of fact" to find in its favor. (Aguilar, supra, 25 Cal.4th
at p. 851.) Under the terms of the 2004 Settlement Agreement, a reasonable trier of fact
could conclude the purpose of the agreement was to resolve the parties' dispute and that
the lis pendens withdrawal requirement was intended to benefit White-Sorensen (to
remove the cloud on his title) and to assist him to obtain funds, and not to directly benefit
his refinancing lender. The facts that the refinance loan was mentioned in the settlement
agreement and that Nacif knew the lender would receive a benefit from Nacif's promise
to remove the lis pendens do not require a finding that Accredited was a third party
beneficiary. Viewing the 2004 Settlement Agreement in light of the totality of the
circumstances, a trier of fact could find Accredited was not an intended beneficiary. (See
Sheppard v. Banner Food Products (1947) 78 Cal.App.2d 808, 812 [lender not a third
party beneficiary of contract between buyer and seller even though lender relied on
parties' express assurances that sale would be completed].)5
5 At oral argument, respondents' counsel complained that Nacif had not specificallyraised the third party beneficiary issue in the proceedings below. However, it wasrespondents' burden to show each element of their contract cause of action to prevail onsummary judgment, and this burden obviously includes a third party beneficiary showingwhere, as here, there is no evidence MERS or First American had a contractualrelationship with Nacif. In any event, we have concluded the court erred in grantingsummary judgment in favor of these parties on numerous grounds, and our discussion ofthe third party beneficiary issue is also intended to assist the parties and court on remand.
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Moreover, even assuming the evidence established the lender (Accredited) was an
intended third party beneficiary, this does not confer third party beneficiary status on
MERS or First American. These parties presented no evidence to show that Nacif had
any intent to benefit these parties, who were suing in their role as trustee of Accredited's
deeds of trust and as nominee and beneficiary on the deeds of trust. Although a party
may establish third party beneficiary status if the party was a member of a class of
entities " 'for whose benefit [the contract] was made' " (Spinks, supra, 171 Cal.App.4th at
p. 1023), the parties presented no evidence that Nacif intended to benefit a class of
trustees or a nominee/beneficiary on a deed of trust. In fact, at the time Nacif and White-
Sorensen entered into the 2004 Settlement Agreement, the deeds of trust were not yet in
existence.
We additionally conclude MERS and First American failed to meet their summary
judgment burden on their contract claim because their submitted evidence would not
require a trier of fact to find Nacif's alleged breach of the 2004 Settlement Agreement
caused them to suffer damages and the amount of those damages. To recover on a breach
of contract claim, each plaintiff moving for summary judgment must show "damages to
plaintiffas a result of the breach." (CDF Firefighters v. Maldonado (2008) 158
Cal.App.4th 1226, 1239, italics added;Emerald Bay Community Assn. v. Golden Eagle
Ins. Corp. (2005) 130 Cal.App.4th 1078, 1088.) " 'Contractual damages are "the amount
which will compensate the party aggrieved for all the detriment proximately caused
thereby, or which, in the ordinary course of things, would be likely to result therefrom."
[Citations.]' " (Emerald Bay Community Assn., supra, 130 Cal.App.4th at p. 1088.)
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MERS and First American alleged they suffered damages in the form of the
impairment/loss of the security for the two loans to White-Sorensen, totaling $675,000,
plus interest and attorney fees. In support, they proffered the two deeds of trust securing
the two loans (totaling $675,000) from Accredited to White-Sorensen. They also relied
on their counsel's declaration, who summarily stated: "Accredited, MERS and First
American have accrued damages of $675,000 . . . by [Nacif's] refus[al] to release the lis
pendens and reactivating this action . . . ." Respondents additionally presented mortgage
broker Melton's declaration, in which he stated that Accredited refinanced the White-
Sorensen property by paying off two deeds of trust totaling $481,765.20 and then loaning
White-Sorensen $675,000 secured by the two deeds of trust. Melton further stated that
"[a]n appraisal obtained in conjunction with the refinance of the property [in 2004]
valued the property at approximately $690,000."
This evidence does not establish these parties suffered damages resulting from
Nacif's breach of contract. First, although they seek to be compensated for the loss of the
security for the two loans totaling $675,000, there is no evidence that either owned the
rights to the proceeds of the loan. Essentially, the court awarded each of these parties
$675,000 without any evidence they lost this amount or, more importantly, that they
would have received this amount if Nacif had fulfilled the claimed contractual
obligations.
Additionally, even if these parties could assert Accredited's alleged loss as a basis
for their claim, the record does not show Accredited was entitled to recover $675,000 as a
matter of law. Melton's assertion that the property was appraised at $690,000 at the time
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of the refinancing (August 2004) does not necessarily mean it had this same value at the
time of the foreclosure sale 18 months later (February 2006). There was no competent
evidence before the court showing the value of the property was at least $675,000 at the
time it was sold, and thus that Nacif's actions were a substantial factor in causing this
amount of lost security.
Additionally, there was evidence showing Accredited had notice of a pending
foreclosure sale and failed to take appropriate actions to prevent the sale and/or to timely
assert its rights in the security. Thus, a factual question exists as to the amount of
damages caused by Nacif's alleged breach of contract (as opposed to losses caused by
Accredited's conduct). Although a moving party plaintiff does not have the burden to
disprove the defendants' affirmative defenses to prevail on a summary judgment motion
(see Santa Ana Unified School Dist. v. Orange County Development Agency (2001) 90
Cal.App.4th 404, 411), Accredited's conduct contributing to its losses is relevant to the
causation element, and not merely to affirmative defenses such as mitigation of damages.
Because the amount of damages caused by Nacif's conduct raises factual questions, it was
not appropriate to grant summary judgment. (See CDF Firefighters v. Maldonado,
supra, 158 Cal.App.4th at p. 1239;Department of Industrial Relations v. UI Video
Stores, Inc. (1997) 55 Cal.App.4th 1084, 1097.)
3. Fraud ClaimsAsserted byFirst American and MERS
We similarly conclude the court erred in granting summary judgment on the fraud
claims brought by First American and MERS.
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MERS and First American asserted two fraud claims against Nacif. First, they
alleged Nacif falsely represented she would withdraw the lis pendens and dismiss her
claims against White-Sorensen upon receipt of the settlement funds. Second, they
alleged promissory fraud, i.e., that Nacif made a promise to withdraw the lis pendens and
dismiss the action without an intent to perform these promises. With respect to both, they
alleged the false promises induced White-Sorensen to pay her $115,000 and caused
MERS to be nominated as the beneficiary under the deeds of trust. They alleged that this
fraud resulted in Nacif obtaining a fraudulent equitable mortgage and judgment of
subordination and that she was unjustly enriched from the proceeds of the sheriff's sale.
In moving for summary judgment on these claims, MERS and First American
relied primarily on the evidence showing that during the escrow process, mortgage broker
Melton spoke with Nacif's attorney, and Nacif's attorney confirmed that the lis pendens
would be withdrawn upon payment of the $115,000 to Nacif. Based on these assurances,
Accredited funded the $115,000 settlement payment and paid it to Nacif's attorney
directly from escrow. Melton said Accredited relied on Nacif's attorney's assurances and
would not have refinanced the property without Nacif's statements that the lis pendens
would be released upon payment of the $115,000.
To prove a fraud cause of action, the plaintiff must show the defendant made a
false representation or a nondisclosure of material fact to the plaintiff; the plaintiff had no
knowledge of the falsity; the defendant had the intent to defraud; and the plaintiff
justifiably relied on the representation (or nondisclosure). (Alliance Mortgage Co. v.
Rothwell (1995) 10 Cal.4th 1226, 1239.) Additionally, the plaintiff must show the
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"plaintiff has been damaged as a result of the defendant's misrepresentation or
concealment of fact." (Saunders v. Taylor(1996) 42 Cal.App.4th 1538, 1542.) Without
damages an alleged fraud is not actionable. (Building Permit Consultants, Inc. v. Mazur
(2004) 122 Cal.App.4th 1400, 1415.)
MERS and First American did not satisfy their summary judgment burden to
establish that there were no triable issues of fact on these elements and that they were
entitled to judgment as a matter of law. First, there was no showing that Nacif made any
misrepresentations to them. At most, Nacif's counsel made a false statement to
Accredited's agent (Melton). The evidence did not show Melton was acting on behalf of
the trustee or nominee/beneficiary on the deeds of trust. Moreover, there was no
evidence that Nacif owed any duty to these parties to disclose material information.
Further, there was no showing the parties suffered a loss from the alleged fraud. Neither
First American nor MERS presented any evidence that they suffered damages.
Additionally, even if these parties could recover for misrepresentations made to
Accredited's agent, the evidence did not compel a finding that Accredited justifiably
relied on Nacif's representations to its detriment. The evidence showed that the lis
pendens remained recorded at all times and the parties knew about (or were on inquiry
notice of) the ongoing superior court action and the fact that the court-ordered sheriff's
sale had been scheduled. The evidence also showed that Accredited did not require the
lis pendens withdrawal as a condition of the refinancing, and that White-Sorensen
represented on the loan application that he earned $34,000 per month.
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On this record, a factfinder could reasonably infer that the promise to withdraw the
lis pendens was not the primary (or even a relevant) factor in Accredited's decision to
lend money to White-Sorensen. A jury could find that it was just as likely that
Accredited agreed to loan White-Sorensen the funds because White-Sorensen's income
provided an adequate source of funds for loan repayment and/or Accredited understood it
could immediately bundle the secured notes with other notes and sell the loan to other
entities, regardless of the value of the security. Further, a jury could reasonably find that
Accredited knew about the pending judicial foreclosure and could have taken steps to
prevent the sale, and thus Nacif's representation about her intention to remove the lis
pendens was not the sole or primary cause of Accredited's loss.
Additionally, as with the breach of contract claim, the evidence on the summary
judgment motion did not show as a matter of law that $675,000 was the amount of
damages suffered by Accredited and/or MERS and First American. Thus, they did not
establish their right to recover on the fraud claim as a matter of law. (SeeDepartment of
Industrial Relations v. UI Video Stores, Inc., supra, 55 Cal.App.4th at p. 1097.)
4. Equitable Claims Brought by First American and MERS
Nacif also challenges the court's summary judgment in favor of First American
and MERS on their equitable subrogation and declaratory relief claims. We agree the
court erred in these rulings.
To the extent the equitable relief was based on the court's findings on the breach of
contract and fraud claims, we have concluded the court erred in granting summary
judgment on these claims. Further, to the extent the equitable relief pertains to priority of
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the deeds of trust and/or equitable mortgage, there was no basis to award this relief
because these parties' rights to assert priority issues based on the Accredited deeds of
trust had been extinguished after the sale of the property to a third party. (See Jacoby,
supra, D054010.) On the summary judgment record before us (and viewing the facts in
the light most favorable to Nacif), Accredited had notice of the foreclosure sale, but took
no timely action to prevent the sale or to offer a bid at the sale to preserve its rights.
Because Accredited no longer had an interest in the property at the time of the summary
judgment motion, First American and MERS could not assert priority issues based on
Accredited's former deeds of trust.
D. Nacif's Second Amended Complaint Against First American and MERS
Nacif's only cause of action against First American and MERS in her second
amended complaint is a claim for declaratory relief, essentially seeking a declaration that
the court should find in her favor on respondents' claims against her. For example, she
sought a declaration that "none of the Defendants has standing to make the claims each
has asserted because none of them any longer owns an interest in or otherwise has a legal
claim related to the Deeds of Trust."
On appeal, Nacif does not directly challenge the court's grant of summary
judgment in favor of these parties on these claims. We thus affirm the court's judgment
with respect to these parties. Because the same issues are raised in the intervention
complaint and the cross-complaint, there is no need for these claims to be litigated in this
pleading.
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II. Anti-SLAPP Motion
Nacif contends the court erred in granting respondents' motion under Code of Civil
Procedure section 425.16 (section 425.16) to strike Nacif's second amended complaint
against White-Sorensen, MERS, and First American.6
Section 425.16 authorizes a defendant to file a special motion to strike any cause
of action arising from an act in furtherance of the defendant's constitutional rights of free
speech or petition for redress of grievances. (Flatley v. Mauro (2006) 39 Cal.4th 299,
311-312.) This anti-SLAPP statute seeks to encourage participation in matters of public
significance and prevent chilling the exercise of constitutional rights through "abuse of
the judicial process." ( 425.16, subd. (a); Flatley v. Mauro, supra, at pp. 312-313.)
Courts must broadly construe the statute. ( 425.16, subd. (a).)
The analysis of an anti-SLAPP motion involves two steps. "First, the court
decides whether the defendant has made a threshold showing that the challenged cause of
action is one 'arising from' protected activity. ( 425.16, subd. (b)(1).) If the court finds
such a showing has been made, it then must consider whether the plaintiff has
demonstrated a probability of prevailing on the claim." (City of Cotati v. Cashman
(2002) 29 Cal.4th 69, 76.) "Only a cause of action that satisfies both prongs of the anti-
SLAPP statutei.e., that arises from protected speech or petitioning andlacks even
6 We reject respondents' argument that Nacif's appeal from the anti-SLAPP orderwas untimely. Additionally, we are required to address the anti-SLAPP ruling regardlessof our conclusions on the summary judgment motions because the court awardedrespondents attorney fees for prevailing on the anti-SLAPP motion. (See 425.16, subd.(c)(1).)
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minimal meritis a SLAPP, subject to being stricken under the statute." (Navellier v.
Sletten (2002) 29 Cal.4th 82, 89.) We review de novo an order granting a motion to
strike. (Soukup v. Law Offices of Herbert Hafif(2006) 39 Cal.4th 260, 269, fn. 3.)
Under these principles, we conclude the court erred in granting respondents' anti-
SLAPP motion.
First, with respect to Nacif's claims against White-Sorensen, the record showed
Nacif had a probability of prevailing on those claims. In fact, this court had already
determined that Nacif had prevailed because of White-Sorensen's default. This ruling
was law of the case. (Nally, supra, 47 Cal.3d at p. 301.) Thus, even if Nacif's claims
against White-Sorensen were subject to the anti-SLAPP statute, the court erred in
granting the motion because Nacif met her burden to show a probability of prevailing on
her claims.
Second, with respect to Nacif's claim against MERS and First American (a single
declaratory relief claim), this claim is not subject to the anti-SLAPP statute. Nacif
brought the declaratory relief claim against MERS and First American solely in response
to arguments brought by these parties that they were indispensible parties. In adding
these parties in the second amended complaint, Nacif did not allege any wrongful
conduct on the part of MERS or First American. Instead, she merely sought declaratory
relief that her actions in foreclosing on the equitable mortgage (that had been previously
approved by the trial court) were proper and that neither MERS nor First American had a
legal basis to challenge these actions. This cause of action essentially mirrored the
claims brought against her by First American and MERS. On this record, Nacif's claim
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did not arise from protected petitioning or free speech activity by MERS or First
American.
III. Judicial Notice
Nacif requested that this court take judicial notice of: (1) the record, court docket,
and Court of Appeal opinion in theNacif Icase; (2) the record on appeal, court docket,
and court file in theJacoby case; and (3) the petition, record, court docket, court file and
disposition in Nacif's earlier writ petition to this court in this case. We grant the request
with respect to our priorNacif Iopinion. We deny the remainder of the request because
the documents are either already contained in the existing appellate record or are not
relevant to the specific appellate issues raised in this case.7
On our own motion, we have also taken judicial notice of documents contained in
the superior court files in this case. (Evid. Code, 459, subd. (a), 452, subd. (d); see
Litmon v. Superior Court(2004) 123 Cal.App.4th 1156, 1162, fn. 3;Becker v. McMillin
Construction Co. (1991) 226 Cal.App.3d 1493, 1496, fn. 3.) We have relied on those
records only to the extent they are relevant to the appellate issues and discussed in this
opinion.
7 Although the court initially issued an order signed by the presiding justice denyingthe motion in its entirety, we later notified the parties that the merits panel wouldreconsider the order after a full review of the record and arguments. (SeeDelmonico v.
Laidlaw Waste Systems, Inc. (1992) 5 Cal.App.4th 81, 83, fn. 1 [a ruling on a motion by asingle appellate justice may be reconsidered by merits panel].) We deny respondents'motion to strike Nacif's reply brief based on our earlier ruling.
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IV. Summary of Conclusions
Based on the law of the case doctrine and the compulsory counterclaim rules, the
court erred in granting White-Sorensen's summary judgment motion on Nacif's second
amended complaint and on White-Sorensen's affirmative pleadings against Nacif. The
court further erred in granting White-Sorensen's anti-SLAPP motion. We thus reverse
these rulings and instruct the court to find in favor of Nacif and against White-Sorensen
on these motions. The court is further ordered to reenter White-Sorensen's entry of
default as it was directed to do inNacif I(seeNacif I, supra, D048938), and to enter a
default judgment against White-Sorensen.
With respect to the affirmative claims brought by MERS and First American
against Nacif, the court erred in granting summary judgment. In reaching this
conclusion, we have not intended to opine on whether these parties will ultimately prevail
on their claims at trial. Our conclusions are based solely on the summary judgment
record before us. Because a summary judgment in favor of a plaintiff is a particularly
drastic procedure that eliminates a defendant's right to defend itself at a trial, a moving
party plaintiff must establish each element of the cause of action and show there are no
triable factual issues with respect to each element. (SeeAguilar, supra, 25 Cal.4th at p.
851.) Although MERS and First American produced some evidence supporting their
claims, they did not meet their burden to show that each element has been established and
thus that there was no defense to the claims.
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With respect to Nacif's second amended complaint against MERS and First
American, Nacif did not challenge the summary judgment on this pleading. We thus
conclude the court properly granted summary judgment on this pleading.
DISPOSITION
The court is ordered to vacate the judgment entered on September 17, 2009 and
enter new orders as follows:
(1) The court shall vacate the summary judgment in favor of White-Sorensen on
Nacif's second amended complaint, and enter a new order denying White-Sorensen's
summary judgment motion with respect to this pleading. The court shall also vacate its
order granting the motion for judgment on the pleadings with respect to White-Sorensen,
and enter a new order denying the motion for judgment on the pleadings with respect to
White-Sorensen. Thus, on remand Nacif's first amended complaint is the operative
pleading against White-Sorensen. The court shall withdraw its order vacating the entry
of default with respect to this pleading, and shall enter a new order reinstating the entry
of default as to White-Sorensen on Nacif's first amended complaint and enter judgment in
Nacif's favor.
(2) The court shall enter a new order denying the summary judgment motion by
White-Sorensen, MERS, First American on their cross-complaint filed on March 27,
2009.
(3) The court shall enter a new order denying the summary judgment motion by
White-Sorensen and MERS on their first amended intervention complaint filed on May
24, 2006.
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(4) The court shall enter an order granting the summary judgment motion filed by
First American and MERS on Nacif's second amended complaint. The court shall
dismiss Nacif's claims against these parties, and dismiss Nacif's second amended
complaint.
(5) The court shall vacate its order granting respondents' anti-SLAPP motion and
enter a new order denying this motion.
(6) The court shall reinstate its order dismissing Accredited from the case.
(7) The court shall vacate its attorney fees award in favor of respondents.
(8) On remand, any further rulings in this case shall be consistent with the
holdings in this opinion and inNacif I.
Respondents are ordered to pay appellant's costs on appeal.
HALLER, Acting P. J.
WE CONCUR:
MCINTYRE, J.
AARON, J.