Estebo v. Gonzalez

Filed 3/19/07 Estebo v. Gonzalez CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from an order of the Superior Court of Orange County, Gregory H. Lewis, Judge. Affirmed.

Timothy P. Peabody for Plaintiff and Appellant.

Raymond Gaitan for Defendant and Respondent.

Paul C. Estebo appeals from an order that set aside a stipulated judgment in this rescission and quiet title action against Erla Navil Gonzalez and Maria Trinidad. The stipulation, between Estebo and Trinidad, purported to cut off Gonzalezs title. Estebo argues no grounds were shown to set aside the judgment. We disagree and affirm.

* * *

Early in 2002, Estebo entered into an oral agreement to sell a residence in Stanton to Maria Trinidad.[1] Trinidad was to pay $25,000 down and obtain a new loan to retire Estebos $197,000 mortgage. Gonzalez loaned Trinidad the funds to make the down payment. The sale closed on April 15, 2002, and a deed from Estebo to Trinidad was recorded that day.

When Trinidad was unable to refinance the mortgage, she sold the property to Gonzalez. After this, the stipulated facts become sketchy, and at one point contradictory. We are told Gonzalez paid Trinidad $15,000, but they set the price at $270,000 to enable Gonzalez to obtain a loan for that amount. On April 25, 2002, Trinidad executed a deed and delivered it to Gonzalez. An escrow was opened, and Trinidad deposited a second deed in favor of Gonzalez. While Gonzalez was seeking financing, Trinidad canceled the escrow and the escrow company returned the second deed to Trinidad. Then comes the contradiction: Escrow officially close[d] on . . . September 10, 2002. The following day, Gonzalez recorded the April 25, 2002 deed.

The instant action was commenced in October 2003. Gonzalez and Trinidad were named as defendants. According to the complaint, Estebo first learned that Trinidad had not paid off the mortgage when he received a foreclosure notice in September 2003. He responded by writing to advise Trinidad that he rescinded the sale to her for failure of consideration. Estebo only discovered Trinidad had sold the residence to Gonzalez in the course of an unlawful detainer action, commenced to recover possession of the residence. The remaining facts alleged are, in substance, those set out above in the parties pretrial stipulation. Five causes of action are set out. They are rescission of the sale (against Trinidad), an accounting for rents (Trinidad), quiet title (both defendants), lis pendens (both defendants the claim seeks a declaration that Estebo was entitled to record a lis pendens against the residence), and an injunction against interfering with Estebos rights (both defendants).

Gonzalezs answer averred she was a bona fide purchaser for value from Trinidad, and the legal owner of the property. The answer denied the material allegations of the complaint, set out various affirmative defenses, and concluded with a prayer that plaintiff take nothing by the complaint.[2]

The case was set for trial on January 17, 2006. On January 13, 2006, the parties signed the stipulation of facts and a joint statement of controverted issues. Both were filed with the trial court. Estebo and Trinidad alone signed another document that day the stipulation for judgment.

In relevant part, the stipulation for judgment said Estebo and Trinidad agreed that Trinidad breached the oral contract of sale. Trinidad acknowledges that she did not have legal title to the property to convey [to] Gonzalez[,] [] . . . [] . . . Gonzalez was fully aware of the purchase agreement and related transaction between Trinidad and Estebo[,] [] . . . Estebo is entitled to rescission[,] [] . . . Estebo is entitled to cancel the deed granted to . . . Maria Trinidad [,] [and] [] . . . Estebo is also entitled to a judgment for quiet title as against . . . Maria Trinidad. The stipulation went on to dismiss the remaining causes of action against Trinidad, and said the parties would bear their own costs and fees. An accompanying judgment provided the deed from Estebo to Trinidad was canceled, [t]itle in the Property 12161 Santa Rosalia Street, Stanton, CA 92841 is restored in Paul C. Estebo and Aiko Estebo, and [a]ny purported transfers of title of the Property from Defendant Maria Trinidad to any third parties are void. (Emphasis added.)

The stipulation, judgment, and a request to dismiss the action against Gonzalez were submitted to the trial court the same day, January 13, 2006. The judgment was signed that day and the dismissal entered a few days later.

It appears there was a hearing regarding the stipulated judgment when the case was called for trial on January 17, 2006. We say appears because there is no transcript of the hearing in the record, and we know of it only from what the parties told us at oral argument. According to Gonzalez, the trial judge would not set aside the judgment without supporting authority, and her counsel did not have any at hand.

Gonzalez responded with a formal motion to set aside the judgment. She argued the judgment had been entered through negligence, misrepresentation, or excusable neglect that denied her a trial (Code Civ. Proc.,  473, subd. (b))[3], and pointed out that a quiet title judgment cannot be entered without an evidentiary hearing. ( 764.010.)

A supporting declaration was submitted by Gonzalezs counsel. He declared he had met with counsel for Estebo and Trinidad shortly before noon on January 13, 2006, to sign the stipulation of facts and joint statement of controverted issues. Counsel for Estebo signed. Trinidads lawyer said he wanted to speak to his client first, but assured Gonzalezs lawyer he would sign and file the documents. With that, Gonzalezs lawyer left the meeting. Then he received the signed judgment and request for dismissal around 4:15 that afternoon. In an accompanying letter, Estebos lawyer said he expected Gonzalez to argue to the court that this judgment is too overreaching in its effect upon your client. If the court agrees. . . , this judgment will have to be modified to reflect the courts opinion after trial regarding your clients title claim.

Eventually, the trial court found the judgment was inappropriate because the court had failed to consider Gonzalezs claim to the property or hold an evidentiary hearing as required by the quiet title statutes. The judgment (already recorded by Estebo) was vacated, and Estebo appealed.

I

Gonzalez argues the appeal must be dismissed for lack of an appealable order. Her theory is Estebo never prepared a formal judgment and none was entered, so the order vacating the judgment is not appealable as a postjudgment order. ( 904.1, subd. (a)(2).) She is mistaken on the facts.

The document signed by the trial court is sufficient as a judgment. It effectively disposed of the case against one party, Trinidad. A formal order is not required unless a minute order so directs (Cal. Rules of Court, rule 8.104 (d)(2)), and Gonzalez does not contend that was the case here. The request to dismiss the appeal is denied.

II

Estebo first argues Gonzalez had no standing to set aside the judgment after the case against her was dismissed. That is not the law. Following a voluntary dismissal, the trial court retains jurisdiction to vacate a judgment under section 473. (Maxwell v. Cooltech, Inc. (1997) 57 Cal.App.4th 629, 631-632.) So the trial court acted within its jurisdiction when it set aside the judgment.

III

Estebo argues there was insufficient evidence to set aside the judgment because the requirements of section 473 were not met. He contends Gonzalez could have kept the case alive had she filed a cross-complaint, but she chose not to do so.[4] We disagree. A judgment may be set aside for excusable neglect, judicial error, or a partys extrinsic mistake, all of which are shown here.

Under section 473, subdivision (b), [t]he court may, upon any terms as may be just, relieve a party . . . from a judgment, dismissal, order, or other proceeding

taken against him or her through his or her mistake, inadvertence, surprise, or excusable neglect. Reliance on a representation by opposing counsel that is not carried out amounts to excusable neglect. (8 Witkin, Cal. Procedure (4d ed. 1997) Attack on Judgment in Trial Court,  168, pp. 673-674 [collecting cases].) Under section 663, subdivision (1) a judgment may be vacated where there is an incorrect or erroneous legal basis for the decision, not consistent with or not supported by the facts . . . .

There was evidence of excusable neglect by Gonzalezs lawyer in relying on opposing counsels implicit representation that the case would be tried as scheduled. One view of what transpired is that Estebo pulled a fast one on Gonzalez. While we cannot speculate to its accuracy, it is a fair inference from the evidence that Gonzalez was lulled into inaction so that Estebo could obtain concessions from Trinidad that go to the heart of Gonzalezs case, and then enter a judgment purporting to bind Gonzalez to those concessions. Among other things, Trinidad stipulated that she did not have title to convey to Gonzalez, and Gonzalez was aware of the terms of the Estebo/Trinidad agreement (which might deny Gonzalez the status of a good faith purchaser). Whats more, the judgment provided that any transfer of the property by Trinidad to a third party was void. The net effect if the judgment were to stand would be a determination of Gonzalezs title claim without allowing her to put on a case. On this record, we cannot say the trial court abused its discretion in setting aside the stipulated judgment.

Estebo argues relief was unavailable under section 473, subdivision (b) because Gonzalez did not file an affidavit of attorney fault or a proposed pleading with the motion. These points are wide of the mark. Gonzalez sought discretionary relief under section 473, subdivision (b), not mandatory relief for which an attorneys affidavit of fault is required. So the failure to provide an affidavit of fault was not fatal. Likewise, this was not a motion for relief from a default judgment, nor a motion for leave to file a cross-complaint, so a proposed pleading was not necessary. Relief was available under section 473, subdivision (b).

Alternatively, there are sufficient grounds for the trial judge to have vacated the judgment under section 663. Without a transcript of the January 17, 2006 hearing on Gonzalezs oral motion to set aside the judgment, we do not know what was argued or why the motion was denied. But we do know that after Gonzalezs formal motion (denominated one under section 473), the judge found he had made a mistake, saying it was inappropriate to have entered the stipulated judgment because a hearing was required on the quiet title claim. That is sufficient to set aside the judgment as resting on an incorrect or erroneous legal basis under section 663. If we view the motion as a section 663 motion incorrectly denominated as a section 473 motion, we can only conclude the trial judge acted within his discretion in vacating the stipulated judgment as erroneously granted.

And the law provides a third basis for relief for acts such as this, wholly apart from the two statutory bases just enumerated. A judgment also may be vacated for extrinsic mistake or fraud, apart from section 473. (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 981.) To set aside a judgment for extrinsic mistake, the moving party must show a meritorious case, a satisfactory excuse for not presenting its defense, and diligence in moving to set aside the judgment. (Id. at p. 982.) A party . . . who has been prevented from obtaining a fair adversary hearing through extrinsic fraud or mistake may bring an equitable action to vacate the judgment. . . . . [Citation.] (Villarruel v. Arreola (1977) 66 Cal.App.3d 309, 318.)

The evidence is sufficient to show extrinsic mistake. The parties stipulated that the Trinidad/Gonzalez deed is recorded, which shows Gonzalez has a colorable, and possibly meritorious, claim to the residence. Gonzalez has a satisfactory excuse for not presenting a defense, since she was maneuvered out of the case by Estebo and Trinidad. And the motion was timely, having been filed four days after the judgment was entered.

Estebo argues the order must be reversed because Gonzalez never sought equitable relief from the judgment below, and in any event, it is barred by the unclean hands defense. We disagree.

An order or judgment of the lower court must be affirmed if correct, even if the trial court relied on incorrect grounds for the decision. (See, e.g., Mayflower Ins. Co. v. Pellegrino (1989) 212 Cal.App.3d 1326, 1332.) A new legal theory raised for the first time on appeal may be considered in the courts discretion. (In re Marriage of Moschetta (1994) 25 Cal.App.4th 1218, 1227.) Here, both parties briefed the equitable relief issue on appeal, there is no claim of prejudice, and it provides a cogent rationale to support the order. We conclude the failure to raise the issue below is not an obstacle to our applying the rule now.

As for unclean hands, Estebo claims deposition testimony shows Gonzalez engaged in inequitable conduct sufficient to bar relief, but he does not set out the testimony. Without that, we have no way of evaluating the contention, and it must be rejected. The upshot is the order vacating the judgment must be affirmed.

IV

Finally, Estebo contends the requirement for a hearing in quiet title actions precludes only a default judgment, and none was entered here. We find that too narrow a reading of the applicable statute.

Quiet title actions are subject to special requirements. ( 760.010-765.060.) The one at issue provides as follows. The court shall examine into and determine the plaintiffs title against the claims of all the defendants. The court shall not enter judgment by default but shall in all cases require evidence of plaintiffs title and hear such evidence as may be offered respecting the claims of any of the defendants, other than claims the validity of which is admitted by the plaintiff in the complaint. The court shall render judgment in accordance with the evidence and the law. ( 764.010.)

As we read the statute, its sweep is broader than default judgments. The first sentence of section 764.010 says the court shall examine into and determine the plaintiffs claim against the claims of all defendants. Examining a claim requires consideration of the evidence supporting it, and determining a claim among competing parties means deciding whose version of the evidence is right. The second sentence of the statute, after saying judgment cannot be entered by default, goes on to say that in all cases (emphasis added) the court must hear evidence of the claims on both sides. To us, this means there must be an evidentiary hearing in quiet title actions before the court may enter judgment in a disputed case.

We do not say there cannot be a stipulation for judgment among consenting parties such as Estebo and Trinidad. But the effect of their overbroad stipulation and the overbroad judgment entered upon it was to determine Estebos claim against Gonzalez, thereby denying her the statutorily guaranteed hearing. That is impermissible. The trial court was correct in determining the stipulated judgment violated section 760.010.

Since excusable neglect, judicial mistake, or extrinsic mistake led to the stipulated judgment that purported to cut off Gonzalezs title to the disputed property, the order vacating the judgment is affirmed. Respondent is entitled to costs on appeal.

BEDSWORTH, ACTING P. J.

WE CONCUR:

ARONSON, J.

IKOLA, J.

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[1] The facts are based on the pleadings, a pretrial stipulation of facts signed by all the parties, and the papers filed on the motion to vacate the stipulated judgment.

[2] Trinidad also answered the complaint. She is not a party to this appeal, and her answer is not germane to the issues raised, so we need not set out the contents of that pleading.

[3] All statutory references are to the Code of Civil Procedure.

[4] Gonzalez argues a quiet title defendant may have affirmative relief declaring the rights raised in an answer, without the need to file a cross-complaint. (See, e.g., Jay v. Dollarhide (1970) 3 Cal.App.3d 1001, 1032.) That rule has been questioned (Saum v. Reppert (1995) 35 Cal.App.4th 1766, 1771-1772). Even if the rule remains valid, another question is whether it helps Gonzalez, since her answer did not seek affirmative relief by way of quieting title in her name, but only prayed that Estebo take nothing by the complaint. We need not address these questions, since we conclude the judgment was properly set aside.