Cortez v. Wilkes

Filed 4/6/06 Cortez v. Wilkes CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from a judgment of the Superior Court of San Diego County, Ronald S. Prager, Judge. Reversed in part and affirmed in part.

Marina Cortez, Inc. (Marina Cortez) sued Robert Wilkes and his company, Golden State Management Services (Golden State), alleging defendants wrongfully deprived Marina Cortez of its secured position after a nonjudicial foreclosure sale of property on which Marina Cortez held judgment liens of $129,208.39. Marina Cortez asserted negligence, fraud and declaratory relief claims. The court granted summary judgment in defendants' favor, finding the undisputed facts showed Martina Cortez did not suffer damages caused by defendants' alleged wrongful conduct because there was insufficient equity in the property for Marina Cortez to have collected on the judgment liens. We reverse on the negligence claim, concluding there are triable issues of fact on the breach, causation and damage elements. We affirm on the fraud and declaratory relief claims.

FACTUAL SUMMARY^[1]

Under familiar appellate rules, we state the relevant facts in the light most favorable to Marina Cortez, the party opposing the summary judgment.

Marina Cortez subleased commercial property to Lionel and Mary Ann Medina. After the Medinas failed to pay rent and other expenses, Marina Cortez sued the Medinas. At that time, the Medinas owned a home that was encumbered by two bank deeds of trust and property tax liens (the Senior liens). During the Medina/Marina Cortez litigation, a company wholly owned by the Medinas' attorney (Golden State) recorded three additional deeds of trust on the Medina home: (1) securing a $15,000 promissory note and recorded on January 17, 2001; (2) securing a $110,000 promissory note and recorded on January 30, 2001; and (3) securing a $40,000 promissory note and recorded on September 18, 2001 (collectively the Golden State liens.)

Eight days after Golden State recorded the third ($40,000) deed of trust, on September 26, 2001, Golden State recorded a default on the $110,000 note and noticed a foreclosure sale for January 25, 2002. In November 2001, two other entities recorded liens on the Medina home (a Franchise Tax Board tax lien of $10,710.96 and a Union Bank abstract of judgment of $53,404.90), and in early December, a third entity (Young's Market) recorded an abstract of judgment (collectively Junior liens). At about this same time, the Medinas entered into a contract to sell their home to Brian and Viola Kiyohara for $610,000, and a preliminary title report was prepared showing the Senior liens, Golden State liens, Junior liens, and a $75,000 homestead.

Marina Cortez ultimately prevailed in the litigation against the Medinas, and on December 6, 2001, Marina Cortez recorded three abstracts of judgment totaling $129,208.39 (collectively Marina Cortez judgments). Three weeks later, one of the Senior lienholders (Wells Fargo) recorded a default on its loan. Less than one month later, on January 25, 2002, the Medinas' attorney (Wilkes) recorded a trustee's deed reflecting that on that day he had conducted a foreclosure sale of the Medinas' home and the property was purchased by his wholly owned company (Golden State) on a credit bid of $125,139.81, the amount owing on the underlying $110,000 note plus foreclosure costs. Within several days, Wilkes executed an amendment to the Medina-Kiyohara escrow stating that Golden State was "now substituted in as the Seller." Shortly thereafter, Golden State sold the property to the Kiyoharas for the $610,000, which is the same price agreed to by the Medinas and Kiyoharas two months earlier.

Two years later, in December 2003, the Medinas filed for bankruptcy, and were represented by Wilkes. As part of the bankruptcy proceeding, the Medinas testified under penalty of perjury that they had never entered into any loan transactions with Wilkes or his company (Golden State), and they did not execute any promissory notes or deeds of trust in Golden State's favor.^[2]

Marina Cortez then filed suit against Wilkes and Golden State, alleging these defendants wrongfully deprived Marina Cortez of its judgment liens totaling $129,208.39. The amended complaint asserted negligence, fraud, and declaratory relief causes of action. With respect to the negligence claims, Marina Cortez alleged defendants breached duties of care owed to Marina Cortez and wrongfully "refused to acknowledge the liens of [Marina Cortez] and refused to honor the priority status of said liens and, instead, proceeded to process and close the escrow to the complete deprivation and damage of plaintiff." On the fraud claim, Marina Cortez alleged defendants "fraudulently reported a sham foreclosure sale to liquidate and acquire the ownership interest in the [Medina property] . . . as part of a design . . . to damage, injure, and deprive [Marina Cortez] of its just entitlements and financial recovery." Marina Cortez's declaratory relief claim sought recognition of its "priority interest" in the Medina property. Marina Cortez alleged Wilkes was liable for Golden State's acts on an alter ego theory.^[3]

Defendants moved for summary judgment on numerous grounds, including: (1) Marina Cortez could not recover on its negligence claim because Wilkes, as attorney for the Medinas, owed no duty to Marina Cortez; (2) Marina Cortez could not recover on its fraud claim because Marina Cortez lacks standing to bring the claim and Marina Cortez did not detrimentally rely on any alleged misrepresentation made by Wilkes or Golden State; (3) Marina Cortez suffered no damages because there was insufficient equity in the Medina home to have satisfied Marina Cortez's judgment liens; and (4) the declaratory relief claim was no longer ripe.

As will be explained in more detail below, in support of their claim that Marina Cortez suffered no damage, defendants produced a copy of the preliminary title report on the Medina property, which showed the property was encumbered by the Senior liens, a $75,000 homestead exemption, the three Golden State liens, the Junior liens, and the Marina Cortez judgment liens. Defendants also produced the Medinas' declarations in which they stated that the title report accurately reflects the liens recorded against the property on the date of the foreclosure sale and accurately reflected the amounts owed (with two minor exceptions reflected below). Contrary to their sworn testimony in the

bankruptcy proceeding, the Medinas stated they executed the three secured promissory notes in favor of Golden State, and said these amounts were due and owing except that they had fully paid the $40,000 note. They also stated that at the time of the Golden State foreclosure, they were delinquent on the most senior bank note (Wells Fargo) and they had "no intention of curing [this] default."

Wilkes also submitted his own declaration. In the declaration, he did not address the issue whether the three Golden State notes were supported by consideration, or deny Marina Cortez's allegations that the foreclosure sale was a "sham" designed to deprive Marina Cortez of its financial recovery. Instead, he stated that "[a]fter foreclosing on the deed of trust[,] [Golden State] sold the property to [the Kiyoharas] for $610,000" and that after the sale there was "only $74,592 remaining to partially satisfy the [Golden State] $110,000 deed of trust." Wilkes attached the escrow closing statement for the sale, showing that the Senior liens and the Golden State $15,000 lien were paid from the escrow account. Wilkes also stated that Marina Cortez was never his client or an intended beneficiary of his legal services on behalf of the Medinas.

In opposition to the motion, Marina Cortez presented evidence showing a foreclosure sale never took place. This evidence consisted of the declaration and deposition testimony of James Marinos (Marina Cortez's former attorney) and the deposition testimony of third party witness Peter Winn. According to this evidence, Marinos and Winn each appeared at the time and place designated in the foreclosure notice, waited at least 30 minutes, and found that no foreclosure sale took place. Winn (a third party unconnected with the underlying litigation) testified that he had intended to bid on the Medinas' property and he had $300,000 in certified checks available to make a bid.

Marina Cortez also challenged the validity of the three Golden State deeds of trust. In support Marina Cortez presented the transcript of the Medina bankruptcy hearing on January 12, 2004, during which the Medinas (while Wilkes was present and representing them) testified under penalty of perjury that they never received any funds from Golden State or signed a note with Golden State, and denied that they had "any business dealings" with Wilkes or that Wilkes's business entity loaned them money. Marina Cortez also presented facts showing Wilkes charged his clients 18 percent interest on one or more of the promissory notes.

Based on this evidence, Marina Cortez argued "the conclusion is inescapable that [Wilkes] masterminded all of these steps and documents as elements of his scheme to divest the net equity proceeds to [Golden State] for the obvious benefit of [Wilkes]."

The court ultimately granted summary judgment in defendants' favor. The court

found the undisputed evidence established that even assuming Golden State had not recorded the three Golden State liens on the property, Marina Cortez would not have received any funds from a foreclosure because the liens senior to Marina Cortez (the Senior Liens, Junior Liens, and Homestead lien) were worth more than the total amount received from Golden State's sale of the property to the Kiyoharas.

The court later denied Marina Cortez's new trial motion.

DISCUSSION

I. Summary Judgment Principles

A "party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) A defendant meets this burden if it conclusively negates a necessary element of the plaintiff's case or shows that the plaintiff does not possess, and cannot reasonably obtain, the evidence to support its claims. (1231 Euclid Homeowners Assn. v. State Farm Fire & Casualty Co. (2006) 135 Cal.App.4th 1008, 1017; Tibor v. Superior Court (1997) 52 Cal.App.4th 1359, 1368.) Under the first element, the moving party must demonstrate that under no hypothesis is there a material factual issue requiring a trial. (1231 Euclid Homeowners Assn., supra, 135 Cal.App.4th at p. 1017; Flowmaster, Inc. v. Superior Court (1993) 16 Cal.App.4th 1019, 1026.) If this burden is met, the burden of production shifts to the opposing party to make a prima facie showing of a triable issue of material fact. (123 Euclid Homeowners Assn., supra, 135 Cal.App.4th at p. 1017.)

On appeal from a summary judgment, we review the record de novo. (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476.) We are not bound by the court's stated reasons for its summary judgment ruling; rather, we examine the facts before the trial court and then independently determine their effect as a matter of law. (Rubenstein v. Rubenstein (2000) 81 Cal.App.4th 1131, 1143.) We view the evidence in the light most favorable to the opposing party, liberally construing the opposing party's evidentiary showing while strictly scrutinizing the moving party's showing. (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768.) Because summary judgment is a drastic procedure, we resolve all doubts as to the propriety of granting the motion in favor of the opposing party. (Yanowitz v. L'Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1037; Kolodge v. Boyd (2001) 88 Cal.App.4th 349, 359.)

II. Relevant Principles Governing Nonjudicial Foreclosure Sales

Because the parties' briefs reflect confusion as to the basic principles regarding the legal effect of a nonjudicial foreclosure sale on senior and junior lienholders, we begin by summarizing those principles here. (See generally Civ. Code, §§ 2924-2924k.) Whenever property is subject to two or more liens or claims, the liens are generally ranked according to the time of the recording. (2 Bernhardt, Cal. Mortgage and Deed of Trust Practice (Cont.Ed.Bar 3d ed. 2006) § 9.41, pp. 684-686.) The earlier liens are "senior" to the later recorded "junior" liens.

A beneficiary of a senior and junior deed of trust each have the right to declare a default and notice a foreclosure sale, and the junior lienholder may elect to institute a foreclosure even if the senior lien is also in default. (Id., § 9.56 at p. 697.) But the consequences of the sale are different. A foreclosure sale by the senior eliminates all junior liens (R-Ranch Markets #2, Inc. v. Old Stone Bank (1993) 16 Cal.App.4th 1323, 1328; Pacific Trust Co. TTEE v. Fidelity Fed. Sav. & Loan Assn. (1986) 184 Cal.App.3d 817, 825), but a foreclosure of the junior deed of trust conveys title subject to the senior liens. (See Kolodge v. Boyd, supra, 88 Cal.App.4th at p. 356.) The purchaser at a foreclosure sale takes the same priority as the foreclosed lien. (R-Ranch Markets, supra, 16 Cal.App.4th at p. 1327; see 2 Bernhardt, Cal. Mortgage and Deed of Trust Practice, supra, § 9.41 at p. 685.) Thus, when property is sold at a foreclosure sale, "the purchasers acquire title free and clear of all encumbrances subsequent to the deed of trust," but subject to the prior deeds of trust. (R-Ranch Markets, supra, 16 Cal.App.4th at p. 1328; Dover Mobile Estates v. Fiber Form Products, Inc. (1990) 220 Cal.App.3d 1494, 1498.)

These rules apply to judgment liens. A judgment lien on real property is created by recording an abstract of judgment with the county recorder where the real property is located. (Code Civ. Proc., § 697.310, subd. (a).) Once an abstract of judgment is recorded, the judgment becomes a lien on all real property owned by the judgment debtor in the county of recordation. (Ibid.) If the judgment debtor thereafter transfers the property, the property remains subject to the judgment lien. (Code Civ. Proc., § 697.390; see Dieden v. Schmidt (2002) 104 Cal.App.4th 645, 651.) But a nonjudicial foreclosure sale of the property extinguishes all junior judgment liens, and the purchaser at the foreclosure sale takes the property free of these liens. (Code Civ. Proc., § 697.390; see Cal. Law Revision Com. com., 17 West's Ann. Code Civ. Proc. (1987 ed.) foll. § 697.390, p. 167.)

Although a junior lien is eliminated by a foreclosure of a senior deed of trust, the senior must pay junior lienholders in their order of priority if there are any excess proceeds after the senior debt and foreclosure costs are paid. (Civ. Code, § 2924j; see 1 Bernhardt, Cal. Mortgage and Deed of Trust Practice, supra, § 2.79 at pp. 118-120.) Under Civil Code section 2924j(a), the trustee must notify the juniors of the remaining proceeds from the sale within 30 days after executing the trustee's deed. The junior then has 30 days to request payment, or the right to payment is waived. A judgment creditor who recorded an abstract of judgment has a right to notice of a default and foreclosure sale if the creditor records a prior request for notice. (Civ. Code § 2924b, subd. (b)(2); see Little v. CFS Service Corp. (1987) 188 Cal.App.3d 1354.)

A credit bid is a noncash bid at a foreclosure sale for the amount of the debt that is the subject of the foreclosure plus foreclosure costs. (Cornelison v. Kornbluth (1975) 15 Cal.3d 590, 606, fn. 10; Kolodge v. Boyd, supra, 88 Cal.App.4th at p. 356.) Only the foreclosing lienholder (beneficiary) may make a credit bid; other successful bidders must pay cash. (See Civ. Code, § 2924h, subd. (b).) If the credit bid is the successful bid at the foreclosure sale, there will be no excess to pay the junior lienholders, and their security interests will be extinguished.

With these principles in mind, we analyze the summary judgment record to determine whether defendants met their burden to present evidence showing they were entitled to judgment as a matter of law, and if so, if Marina Cortez met its burden to show a triable issue of fact on each of its causes of action.

III. Negligence

A. Duty

In moving for summary judgment on the negligence claim, defendants argued they owed no duty of care to Marina Cortez because Marina Cortez was never Wilkes's client nor an intended beneficiary of Wilkes's attorney-client relationship with the Medinas. The flaw in this argument is that Marina Cortez's claims against defendants were not based solely on Wilkes's actions as attorney for the Medinas. Marina Cortez's negligence claims also concerned defendants' role as purported secured creditors of the Medinas and senior lienholders on the Medina property. In alleging negligence, Marina Cortez asserted that defendants breached a duty of care by wrongfully using their position as a purported senior lienholder to obtain title to the property without holding a foreclosure sale. In opposing summary judgment Marina Cortez presented supporting evidence that showed defendants' underlying promissory notes were not supported by valid consideration and that defendants filed a trustee's deed without holding a foreclosure sale, thereby extinguishing Marina Cortez's rights in the property.

These facts support the existence of a duty owed by defendants, as senior lienholders, to Marina Cortez, a junior lienholder on the foreclosed property. (See South Bay Building Enterprises, Inc. v. Riviera Lend-Lease, Inc. (1999) 72 Cal.App.4th 1111 (South Bay).) In South Bay, the court held a trustee and senior lienholder owe a duty of care to a junior lienholder to conduct a foreclosure sale in a manner consistent with statutory requirements designed to protect a junior lienholder's interests. In that case, the senior lienholder (Riviera) noticed a nonjudicial foreclosure sale after a default. (Id. at p. 1114.) However, Riviera postponed the foreclosure sale several times to preclude others from bidding against it. (Id. at pp. 1114-1115.) At one scheduled sale, a potential buyer was present with a check and Riviera falsely represented that its security interest was larger than it was to deter the bidder. (Id. at pp. 1116-1118.) Eventually, Riviera obtained the property at the amount of a credit bid, extinguishing the junior lien held by South Bay. (Id. at pp. 1116-1117.) South Bay thereafter sued the homeowner and Riviera, alleging defendants engineered a fraudulent scheme to acquire the homeowner's property without having to pay South Bay the excess proceeds from the foreclosure sale. (Id. at pp. 1114-1115.) Despite the evidence of Riviera's conduct in delaying the foreclosure sale to benefit itself and the trustor, the trial court directed a verdict in defendants' favor. (Id. at pp. 1119-1120.)

The appellate court reversed. The court first noted that South Bay had alleged only fraud claims and agreed there was no evidence to show the defendants made a misrepresentation to the junior lienholder. (South Bay, supra, 72 Cal.App.4th at p. 1123.) The court stated, however, that the trial court should have permitted South Bay to amend the complaint to add a theory of tort liability based on a violation of Civil Code section 2924h, subdivision (g) which makes it "unlawful . . . to fix or restrain bidding in any manner, at a sale of property conducted pursuant to a power of sale in a deed of trust or

mortgage."^[4] (South Bay, supra, at pp. 1123-1124.) The court explained that "'[a] tort in essence is the breach of a nonconsensual duty owed another. Violation of a statutory duty to another may therefore be a tort and violation of a statute embodying a public policy is generally actionable even though no specific civil remedy is provided in the statute itself. Any injured member of the public for whose benefit the statute was enacted may bring the action.' . . . [¶] South Bay, as a junior lienholder, clearly falls with[in] the class for whose benefit the statute was enacted and therefore may use defendants' violation of the statute to establish civil liability." (Id. at pp. 1123-1124.)

Similarly, in this case, Marina Cortez presented facts showing defendants' conduct violated Civil Code section 2924h, subdivision (g), and deprived Marina Cortez of its statutory rights. Civil Code section 2924h, subdivision (g) prohibits a party from "restrain[ing] bidding in any manner" at a foreclosure sale, and imposes criminal penalties for conduct violating this rule. Marina Cortez was within the class protected by this statute. A judgment lien on property owned by the debtor is extinguished at a foreclosure sale unless a successful bidder purchases at a sufficient price to pay off both the foreclosed lien and the junior lien. A trustee and senior lienholder thus owe a duty to a junior judgment lienholder to permit full and fair bidding at a foreclosure sale. (South Bay, supra, 72 Cal.App.4th at p. 1121.) A senior lienholder who obtains the property by way of a credit bid without ever holding a foreclosure sale breaches this duty of care.

In South Bay, the court remanded for the plaintiff to amend the complaint to allege a breach of the statutory duty because the plaintiff's complaint alleged only fraud claims. In this case, an amendment is not necessary because Marina Cortez alleged negligence claims in its complaint. Civil Code section 2924h, subdivision (g) establishes a duty of care on the part of a foreclosing trustor/senior lienholder. Although Marina Cortez did not specifically identify this statute in its pleadings, this was not fatal to its cause of action because the statute was merely a basis for upholding a duty of care. (See Elsner v. Uveges (2004) 34 Cal.4th 915, 927, fn. 8 ["[s]tatutes may be borrowed in the negligence context . . . to establish a duty of care"].)^[5]

In their supplemental briefs, defendants attempt to distinguish South Bay on the ground that the plaintiff in South Bay held a junior deed of trust, whereas here Marina Cortez is a junior lienholder through recorded abstracts of judgment. This is a distinction without a difference. Because a foreclosure sale on a deed of trust extinguishes a later recorded judgment lien, the trustee/beneficiary owes the judgment creditor the same duty to hold a fair and competitive foreclosure sale to ensure the lienholder has the opportunity to obtain any excess bid amount. At oral argument, defense counsel suggested that a foreclosure sale does not have the same effect on a judgment lienholder's rights because the lienholder still has secured rights in other real property owned by the judgment debtor in the same county. This argument is unpersuasive. In this case, there was no showing that the Medinas owned any other real property. Moreover, as with the holder of a judgment lien, a beneficiary of a junior deed of trust does not necessarily lose his or her rights to collect on the debt; instead the lienholder loses the right to obtain proceeds from the specific real property. In both cases, although the right against the debtor may not be completely eliminated, the secured interest on the specific property is extinguished and therefore there is substantial potential harm to the lienholder if the trustee/beneficiary of a senior lien restrains or prevents fair bidding at the foreclosure sale.

We reject defendants' reliance on Monolith Portland Cement Co. v. Tendler (1962) 206 Cal.App.2d 800 to support their argument that Marina Cortez had no standing to bring an action for their failure to hold a foreclosure sale. In Monolith Portland, a judgment creditor who held a junior secured position on the property brought an action to invalidate a foreclosure sale based on the failure to provide proper notice of the sale to the property owner. The court held the creditor had no standing to do so because the creditor did not acquire an interest in the title to the property by virtue of its status as a lienholder. (Id. at pp. 805-806.) The court rejected the creditor's argument that it should be permitted to bring the action in the name of the property owner as the real party in interest. (Ibid.)

This case is distinguishable because Marina Cortez did not bring the action to invalidate the sale or to enforce the rights of the Medinas as the debtor/homeowner, but instead brought the action to recover for its own injuries suffered because defendants breached duties owed to Marina Cortez. "Traditionally when there is a claim of irregularities in a foreclosure sale, the remedy is to move to set aside the sale. . . . However, that is not the exclusive remedy. Fraudulent actions taken by the beneficiary can give rise to liability in tort. 'When the property has been sold to a bona fide purchaser, even though the sale cannot be avoided, the trustor or a junior lienor . . . retain[s] the right to recover damages from the trustee and the beneficiary of the foreclosing lien if there have been material irregularities in the conduct of the foreclosure.'" (South Bay, supra, 72 Cal.App.4th at p. 1121.)

B. Damages

Defendants additionally moved for summary judgment on the basis that their alleged wrongful conduct did not cause Marina Cortez any damages because there was insufficient equity in the property to show Marina Cortez would have recovered any money from a properly held foreclosure sale.

In support of this argument, defendants produced a preliminary title report showing the liens on the property and the Medinas' declarations in which the Medinas affirmed that on the date of the Golden State-Kiyohara sale they still owed the amounts stated on the report with certain exceptions reflected below. Based on the preliminary title report and the Medinas' declarations, the Medina property was subject to the following unpaid liens at the time of the foreclosure:

This chart shows that the Senior Liens totaled $469,967.96; the two remaining Golden State liens totaled $125,000; the Junior liens totaled $68,792.35, and the Marina Cortez judgment liens totaled $129,208.39. Defendants also relied on facts showing: (1) Golden State sold the Medina property to the Kiyoharas for $610,000; and (2) the escrow closing statement on the Golden State-Kiyohara sale showed that after payment of the Senior liens ($469,967) and the $15,000 Golden State lien, plus sale, commission, and escrow costs, only $74,592 of the $610,000 remained and these remaining funds went to reimburse Golden State for its $110,000 loan and foreclosure costs.

Based on the escrow closing statement, the preliminary title report, and the Medinas' declarations, defendants argued that even assuming they engaged in wrongful conduct in obtaining a secured position on the property and in filing a Trustee's Deed without a foreclosure sale, Marina Cortez would not have been entitled to any funds because Golden State's sale of the Medina property to the Kiyoharas did not net sufficient money to pay the liens that were senior to Marina Cortez judgment liens but junior to the Golden State liens. Defendants argued that "upon the closing of the [Kiyohara-Golden State] sale . . . , after payment of property taxes, transactional costs, and all liens and encumbrances senior to that of the foreclosed [Golden State] deed of trust, . . . there was only $74,592 remaining to partially satisfy the . . . $110,000 . . . . [Thus] there was [likewise] insufficient equity to satisfy any portion of [the] liens that were junior to the deed of trust that [Golden State] foreclosed upon, but senior to [Marina Cortez's] 3 judgment liens." The trial court essentially accepted this argument in granting summary judgment.

Defendants' evidence does not negate Marina Cortez's claim that it suffered damages as a result of defendants' alleged wrongful conduct. First, because there is a triable issue of fact as to the fair market value of the Medina home (see infra at pp. 20-21), defendants' argument that the home was over-encumbered is unsupported for purposes of summary judgment. As defendants' counsel acknowledged at oral argument, the $610,000 was the price agreed between the Medinas and the Kiyoharas before the foreclosure sale in November 2001, and was not binding on Golden State when it later sold the property to the Kiyoharas after the foreclosure sale.

More fundamentally, the logic of defendants' analysis is faulty because the comparison between the later sale of the Medina property to the Kiyoharas and the amount of liens on the property at the time of the foreclosure is not the relevant issue. The conduct alleged to be tortious is the defendants' failure to hold a foreclosure sale to allow competitive bidding. Without conducting a competitive auction, Wilkes/Golden State was able to (with no competition) purchase the property on a credit bid (the amount of the foreclosed note plus costs ($125,139.81)), and thereby immediately extinguish all of the junior liens, including those held by Marina Cortez. Marina Cortez established that at least one party (Peter Winn) was ready, willing, and able to bid for the property and he had $300,000 in cashier's checks enabling him to do so. If that bid had been made, there would have been sufficient funds to pay the $125,139.81 amount owed on the foreclosed $110,000 note,^[6] the three Junior liens ($68,792.35), the protected homestead ($75,000), and at least a portion of Marina Cortez's judgments ($129,208.39). The fact that the party purchasing at a foreclosure sale would take the property subject to the Senior liens (and the Golden State $15,000 lien) would not affect Marina Cortez's right to obtain the excess funds from the foreclosure sale.

To the extent defendants argue it would be unreasonable to infer Winn would have bid the $300,000 amount given that the fair market value of the property was only $610,000, this argument raises factual issues that are not appropriate to resolve on summary judgment. Moreover, defendants did not meet their burden to establish this valuation of the property. To establish the fair market value, defendants rely on the price at which they sold the home to the Kiyoharas. However, while a sales price can be a factor in determining its fair market value, a single sale, by itself, does not provide sufficient, reliable data to establish the true value, where as here, there are external factors that would reduce the expected price. (See Dennis v. County of Santa Clara (1989) 215 Cal.App.3d 1019, 1025-1031; Guild Wineries & Distilleries v. County of Fresno (1975) 51 Cal.App.3d 182, 187.) Although the Kiyoharas purchased the property for $610,000, this price was agreed upon when the secured notes on the property were in default and a foreclosure sale had already been noticed. Given the circumstances and the urgency of a sale, it is reasonable to infer that the price was substantially lower than the fair market value without the exigencies of the foreclosure sale. California courts have recognized that even an arm's length, open market transaction may involve factors that skew the purchase price and make it an unreliable indicator of the fair market value. (See Dennis, supra, 215 Cal.App.3d at pp. 1015-1031.) Moreover, as defendants' counsel conceded at oral argument, defendants were not bound to sell the property to the Kiyoharas at the $610,000 price after the foreclosure sale since defendants were not parties to the earlier purchase contract.

On the record before us, defendants did not meet their burden to show that if a fair and competitive foreclosure sale had been held, that there would be no remaining proceeds to pay at least a portion of the Marina Cortez judgment liens after paying the $125,139.81 debt, the $68,792 on the Junior liens, and the $75,000 Homestead.^[7]

IV. Fraud

To prove fraud, the plaintiff must show the defendant made a material misrepresentation to the plaintiff or failed to disclose material facts that it had a duty to disclose, and the plaintiff actually and justifiably relied on the misrepresentation or omission. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) Additionally, the representation must be made with the intent to induce reliance by the particular plaintiff. (See Civ. Code, § 1709.) Fraud causes of actions must be pled with specificity to give notice to the defendant and to furnish him or her with definite charges. (Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.)

In its fraud cause of action, Marina Cortez alleged: (1) Wilkes conducted himself "in a conflict of interest" while "acting as an "attorney, creditor, advisor, consultant . . . ," and thus violated "standards of care and duties owed to the plaintiff"; (2) Wilkes "falsely and fraudulently reported a sham foreclosure sale to liquidate and acquire the ownership interest in the residential real property . . . as part of a design, scheme and plan to damage, injure and deprive Marina Cortez of its just entitlements and financial recovery"; and (3) Wilkes controlled and manipulated Golden State.

In moving for a summary judgment, Wilkes argued these allegations did not establish a viable fraud cause of action. We agree. The only false statement identified in the complaint is Golden State's filing a false report (the trustee's deed) of a foreclosure sale that never occurred. However, even if this fact was true, there was no allegation or evidence that Marina Cortez relied on this filing to its detriment. As to the additional allegations, Wilkes's breach of duties to his clients and his control over his business entity do not reflect that Marina Cortez has an actionable fraud claim against defendants. Although Marina Cortez submitted facts showing defendants may have obtained the Golden State notes and deeds of trust from his clients by fraudulent means, Marina Cortez has not asserted a legal basis to rely on these facts as a basis for its own recovery. It is undisputed Marina Cortez did not rely on any fraudulent statement that Wilkes made to his clients, and there are no allegations that it relied to its detriment on the recordings of the Golden State deeds of trust. Under these circumstances, there was no reliance by Marina Cortez.

In its appellate briefs, Marina Cortez makes no attempt to show that defendants made a material misrepresentation or failed to disclose material facts, or that Marina Cortez relied on a false representation made by defendants. Instead, it argues the court erred in granting summary judgment on the fraud claim because there are triable issues of fact that defendants' receipt of the promissory notes and deeds of trust from the Medinas constituted a wrongful fraudulent conveyance prohibited by the Uniform Fraudulent Transfer Act. (Civ. Code, § 3439 et seq.) A fraudulent conveyance under this Act involves "'"a transfer by the debtor of property to a third person undertaken with the intent to prevent a creditor from reaching that interest to satisfy its claim."''' (Filip v. Bucurenciu (2005) 129 Cal.App.4th 825, 829.) A transferee who knowingly receives assets or notes from a debtor in violation of the statute is liable to the creditor. (Id. at p. 830; see Pedro v. Soares (1937) 18 Cal.App.2d 600, 605.) A money judgment "against the transferee may be had when [the transferee] knowingly participates in the fraudulent conveyance with the intention of defrauding creditors." (Flowers & Sons Development Corp. v. Municipal Court (1978) 86 Cal.App.3d 818, 825.)

Defendants argue the fraudulent conveyance cause of action is beyond the scope of the amended complaint because Marina Cortez did not allege this legal theory in its complaint. In resisting a summary judgment motion, a "'plaintiff cannot bring up new, unpleaded issues in his or her opposing papers. . . . 'A summary judgment . . . motion that is otherwise sufficient 'cannot be successfully resisted by counterdeclarations which create immaterial factual conflicts outside the scope of the pleadings . . . .' Thus, a plaintiff wishing 'to rely upon unpleaded theories to defeat summary judgment' must move to amend the complaint before the hearing." (Oakland Raiders v. National Football League (2005) 131 Cal.App.4th 621, 648; Distefano v. Forester (2001) 85 Cal.App.4th 1249, 1264-1265.) "[A] plaintiff opposing summary judgment may not advance a new unpleaded legal theory to defeat the motion." (City of Hope Nat. Medical Center v. Superior Court (1992) 8 Cal.App.4th 633, 639.)

On our review of Marina Cortez's amended complaint, we conclude the pleading cannot be fairly read to allege the factual and legal theories underlying a fraudulent conveyance claim. The fraud cause of action is expressly limited to asserting misrepresentations and Wilkes's breaches of duties, and does not fairly include a claim for fraudulent conveyance against defendants as the transferees of the Golden State notes and deeds of trust. The pleadings set the boundaries of the issues to be resolved on a summary judgment motion. (Oakland Raiders v. National Football League, supra, 131 Cal.App.4th at p. 648.) When Marina Cortez raised the fraudulent conveyance in its summary judgment opposition papers, defendants asserted that this theory was not pled in the complaint. At that point, Marina Cortez had the opportunity to seek to amend its complaint. By failing to do so, Marina Cortez waived its right to argue the theory on appeal.

We thus affirm the summary judgment on the fraud claim as alleged. This conclusion, however, should not be read as a conclusion that defendants' alleged conduct reflects only negligence, rather than an intentional tort. We agree with counsel for Marina Cortez that, viewing the evidence in the light most favorable to Marina Cortez, it has presented evidence showing defendants engaged in an elaborate fraudulent scheme to wrongfully eliminate the junior lienholders' secured positions on the Medinas' property for the purpose of obtaining financial benefits at the expense of Marina Cortez and the other junior lienholders. Although this conduct certainly describes an intentional tort, we are bound by the pleadings, which did not allege a viable fraud-based theory upon which Marina Cortez is entitled to recover. The fraud allegations in the complaint require a showing of justifiable reliance by Marina Cortez, which Marina Cortez did not allege and does not attempt to satisfy on appeal. Particularly in civil cases, courts must defer to the tactics and strategies of counsel in deciding which legal and factual theories to raise, and must rely on the knowledge and creativity of counsel to assert the appropriate theories and to support those theories with citations to relevant authority. (See Mesecher v. County of San Diego (1992) 9 Cal.App.4th 1677, 1686.) It is not this court's role to act as backup counsel for an appellant, or to construct legal theories that potentially support an appellants' factual allegations.

On remand, Marina Cortez will have the opportunity to move to amend the complaint if it believes it can add the necessary factual and legal allegations to state a fraudulent conveyance claim or any other fraud-based claim such as an intentional breach of a statutory duty or a constructive trust cause of action. We express no opinion as to whether such motion should be granted. We note only that trial courts are required to liberally grant motions to amend. In exercising its discretion, the trial court is to consider such factors as prejudice to the other party and why the new claim was not raised earlier. (See Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 486.)

V. Declaratory Relief

In its declaratory relief cause of action, Marina Cortez alleged that defendants wrongfully deny its "priority liens" against the property and that a "genuine dispute and controversy exists between [Marina Cortez] and defendants in that [Marina Cortez] claims its priority interest in the [Medina property] and its right to liquidate said property to accomplish and effect collection while defendants dispute, disagree and oppose such a claim and such action thereby completing the adversarial position of the parties constituting a true and genuine controversy requiring resolution by a court of law."

Marina Cortez has waived the right to challenge the court's summary judgment on this cause of action by failing to argue the point with citations to authority. (See Dills v. Redwoods Associates, Ltd. (1994) 28 Cal.App.4th 888, 890, fn. 1.) In any event, we conclude the court's summary judgment on this claim was proper. The issue of Marina Cortez's priority lien status is no longer ripe because the foreclosure has occurred and the property has been sold. Thus, there was no basis for equitable relief.^[8]

DISPOSITION

The court is ordered to vacate the summary judgment, and enter the following orders. First, the court shall enter an order denying defendants' summary judgment motion as to the third cause of action ("Negligence") and fourth cause of action ("Breach of Duties and Standards of Care Owed Plaintiff") in Marina Cortez's amended complaint. Second, the court shall enter an order granting summary adjudication on the first cause of action ("Declaratory Relief"), second cause of action ("Quiet Title"), and fifth cause of action ("Deceit, Misrepresentation, and Fraud"). Each party to bear its own costs on appeal.

HALLER, Acting P. J.

WE CONCUR:

McDONALD, J.

McINTYRE, J.

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^[1] In their appellate briefs, Marina Cortez violate well established appellate rules requiring citations to the factual record and prohibiting discussion of facts outside the record. (See Cal. Rules of Court, rule 14.) Although these violations support our striking the brief and dismissing the appeal, we shall exercise our discretion to reach the merits of the appeal. We caution counsel to strictly abide by appellate rules in any future appellate filings.

^[2] Although at one point, Mr. Medina indicated that he did sign a deed of trust, he later denied this during this same proceeding.

^[3] The complaint also asserted a quiet title claim, but Marina Cortez has since dismissed that claim. Marina Cortez also named other parties in the complaint including the Kiyoharas and the real estate agents and other professionals involved in the sales transaction. These parties have since been dismissed.

^[4] Civil Code section 2924h, subdivision (g) provides: "It shall be unlawful for any person, acting alone or in concert with others, (1) to offer to accept or accept from another, any consideration of any type not to bid, or (2) to fix or restrain bidding in any manner, at a sale of property conducted pursuant to a power of sale in a deed of trust or mortgage. However, it shall not be unlawful for any person, including a trustee, to state that a property subject to a recorded notice of default or subject to a sale conducted pursuant to this chapter is being sold in an "as-is" condition. [¶] In addition to any other remedies, any person committing any act declared unlawful by this subdivision or any act which would operate as a fraud or deceit upon any beneficiary, trustor, or junior lienor shall, upon conviction, be fined not more than ten thousand dollars ($10,000) or imprisoned in the county jail for not more than one year, or be punished by both that fine and imprisonment."

^[5] Because the parties did not specifically brief the issue of the statutory duty and whether it was incorporated in Marina Cortez's pleadings, we provided the parties the opportunity to brief these issues before oral argument.

^[6] This amount reflected an 18 percent interest that Wilkes charged to his clients for the loan, and the foreclosure costs.

^[7] By including in this calculation the homestead amount and the value of Golden State's deeds of trust, we do not intend to suggest these amounts would necessarily be subtracted from the amount that the junior lienholders would have been entitled to collect after a foreclosure sale. Neither party has briefed the issue of the effect of the recorded homestead on the foreclosure, and we thus do not reach the issue here. Likewise, assuming Marina Cortez is permitted to amend its complaint and can plead and prove that defendants obtained the three secured promissory notes through a fraudulent conveyance, defendants would obviously not be entitled to collect on these obligations to the detriment of the more junior liens.

^[8] In the court below, Marina Cortez produced evidence that on September 8, 2004, Union Bank assigned its "right, title and interest" in the Union Bank judgment (which was one of the Junior liens that had been recorded in November 2001). The court found this evidence was inadmissible because it was not properly authenticated. Marina Cortez does not challenge this evidentiary ruling on appeal, and it is therefore waived. To the extent Marina Cortez believes it can produce admissible evidence of this assignment and that it seeks to add a timely cause of action on Union Bank's behalf, Marina Cortez would be required to amend the complaint to seek such relief. We express no opinion as to whether any such amendment should be granted.