W.G. Realty v. Alden

Filed 6/5/06 W.G. Realty v. Alden CA2/6

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

Nick A. Alden appeals from a judgment quieting title on two parcels of land on which he claimed to have an enforceable judgment lien. Following a bench trial, the court ruled that title had passed from the judgment debtor before the lien became effective, and was thus unenforceable against the properties. The court also rejected Alden's claim that the quiet title action was barred by the statute of limitations and by principles of res judicata, collateral estoppel and equity. We affirm.

FACTUAL AND PROCEDURAL HISTORY

In the mid-1980's, Donald Henry created a project known as Ventura 450 for the stated purpose of developing 450 acres of vacant land in Ventura County. He induced a number of people to invest over $2.5 million in this scheme, representing that they would receive trust deeds on the property in return. Unknown to the investors, the property was purchased for only half a million dollars and no work was ever undertaken by the companies that ostensibly were borrowing the money. Henry held trust deeds on the properties in his name alone or in the names of his largest investors, Paul and Margaret Vogelsang. The borrowing companies defaulted on the loans and ceased doing business.

Henry retained Alden, an attorney, to provide legal services. Alden assisted Henry in foreclosing on the Ventura 450 properties, for which Henry and Vogelsang held the trust deeds. Alden invested money in HAV Enterprises, Inc. (HAV), an entity formed to market the property and finance any litigation concerning its recovery. The FBI began investigating Henry, who appeared to be running a classic Ponzi scheme. When Alden began having doubts about Henry's honesty, he withdrew as counsel.

Threatened with a lawsuit by the investors, Henry transferred his interest in the Ventura 450 properties to certain investors. On January 24, 1995, the Chatsworth Investor's Trust (Chatsworth Trust) was formed by trustors Henry and plaintiff Margaret Vogelsang (who had succeeded to her husband's interest in the property after his death in 1991). Plaintiff W.G. Realty was named as trustee. The trust document named the original investors and successors in interest as beneficiaries and included a list of parties that had advanced money to the enterprise and were to be treated as beneficiaries. HAV was named as an advancing party; Alden personally was listed as holding a 4.93 percent share of the trust. On February 1, 1995, a deed was recorded which transferred Henry's remaining interest in the properties to W.G. Realty as trustee of the Chatsworth Trust.

Alden filed a lawsuit against Henry and Margaret Vogelsang in the Los Angeles County Superior Court (Alden v. Henry, No. BC116830) to recover legal fees and money he had invested in HAV. The parties reached a settlement and on November 25, 1996, the court approved and entered a stipulated judgment calling for Henry to pay Alden $350,000 plus interest, for a total of $512,750. The judgment stated that Henry and Vogelsang authorized Alden to execute on the Ventura 450 properties, which had been transferred to the Chatsworth Trust. Alden filed a second lawsuit to set aside the formation of the Chatsworth Trust, but he allowed it to be dismissed because he believed his judgment in the earlier case was enforceable against the Ventura 450 properties. Henry fled the country without satisfying the judgment in Alden's favor.

Plaintiff Mike Joncich, who was a successor in interest to an original investor and who managed trustee W.G. Realty, formulated a plan to clear the numerous liens on the properties, purchase one of the two remaining parcels, and use that money to market the other parcel and obtain at least a partial recovery for the investors. He purchased the trust shares of several investors who wanted to remove themselves from the enterprise. With the approval of the trustee and the other investors who still held an interest in the trust, and over Alden's objection, Joncich's plan was accepted and he purchased one parcel of property.

On July 22, 1999, Alden recorded a judgment lien against the Ventura 450 properties. Plaintiffs, as persons or entities with an ownership or beneficial interest in the properties, filed this action against Alden to quiet title.^[1] Alden opposed the quiet title action and filed a cross-complaint seeking a determination that he was a beneficiary of the Chatsworth Trust. His position at trial was that he held an interest in the property by virtue of the judgment against Henry. The plaintiffs argued that Henry had already transferred his interest in the property when that judgment was entered; therefore, he had no interest to convey to Alden. After a bench trial, the court ruled in plaintiffs' favor on the quiet title action and denied Alden relief on his cross-complaint.

DISCUSSION

Statute of Limitations

Alden argues that plaintiffs' action for quiet title was effectively one for slander of title and was barred by the three-year limitations period of Code of Civil Procedure section 338, subdivision (g). We disagree that the lawsuit was untimely.

The statute of limitations for an action to quiet title depends on the theory of recovery. (Muktarian v. Barmby (1965) 63 Cal.2d 558, 560.) Plaintiffs' theory of recovery against Alden is not based on slander of title, which is a tort requiring the publication of an injurious falsehood relating to another's land. (Appel v. Burman (1984) 159 Cal.App.3d 1209, 1214.) But we will assume that a three-year period is appropriate, because the essence of their claim is that Alden made a mistake in attempting to enforce a judgment lien against property that did not belong to the judgment debtor. Code of Civil Procedure section 338, subdivision (d) establishes a three-year limitations period for an action based on mistake.

This suit was timely under the three-year statute. The stipulated judgment against Donald Henry was entered on November 25, 1996, but Alden did not record an abstract of judgment until July 22, 1999. The current action was filed on March 5, 2002, within three years of the recordation. The trial court concluded that plaintiffs' cause of action for quiet title accrued when Alden recorded the abstract of judgment that placed a cloud on the title. Plaintiffs were not parties to the underlying lawsuit that purported to give Alden a lien on the property and substantial evidence supports the trial court's finding that they had no notice of that lien before the abstract was recorded. (Institoris v. City of Los Angeles (1989) 210 Cal.App.3d 10, 17.) The court did not err in rejecting Alden's statute of limitations defense.

Laches

The doctrine of laches is an equitable principle that bars relief to persons who have neglected their rights, regardless of whether the statute of limitations has run. (Bono v. Clark (2002) 103 Cal.App.4th 1409, 1418; 11 Witkin, Summary of Cal. Law (9th ed., 1990) Equity, § 14, p. 690.) It applies when there is an unreasonable delay or acquiescence in the act about which the plaintiff complains, or prejudice to the defendant resulting from the delay. (Johnson v. City of Loma Linda (2000) 24 Cal.4th 61, 68.) Alden contends the action for quiet title is barred by laches because the plaintiffs unreasonably delayed in bringing a challenge to his lien on the properties.

We review the trial court's rejection of this argument for substantial evidence. (Miller v. Eisenhower Medical Center (1980) 27 Cal.3d 614, 624.) In its statement of decision, the court concluded that plaintiffs proceeded in a reasonably prompt manner where no lien on the property was recorded until 1999, three years after Alden obtained his judgment against Henry, and plaintiffs filed their quiet title action within three years of that recordation. This was a reasonable interpretation of the evidence which we will not disturb on appeal.

Res Judicata and Collateral Estoppel

Alden argues that the current quiet title action is an attempt to relitigate issues already resolved in his lawsuit against Henry and that it is barred by principles of res judicata and collateral estoppel. Plaintiffs were not parties to the prior lawsuit and these doctrines do not apply to their claims. (Nathanson v. Hecker (2002) 99 Cal.App.4th 1158, 1162.)

Collateral Attack on Prior Judgment

Alden argues that plaintiffs' action to quiet title amounts to an impermissible collateral attack on the validity of his 1996 judgment against Henry in Los Angeles County Superior Court. He contends that relief from a prior judgment must be obtained from the court rendering that judgment and that the procedures for doing so are limited to the statutory grounds listed in Code of Civil Procedure sections 473 and 663. Alden argues that plaintiffs have sought relief in the wrong court and have not complied with the applicable statutes.

The statutes cited by Alden do not apply to plaintiffs. Code of Civil Procedure section 473, subdivision (b), which allows the court to grant relief from a judgment taken through mistake, inadvertence, surprise or excusable neglect, applies only to a "party or his or her legal representative." Code of Civil Procedure section 663 similarly authorizes the court to set aside a judgment on certain grounds "upon motion of the party aggrieved." Plaintiffs were not parties to Alden's lawsuit against Henry and are not representatives of Alden or Henry. They cannot be faulted for failing to comply with those provisions.

Moreover, we reject the premise that this quiet title action is an improper collateral attack on the 1996 judgment. That judgment awarded Alden money damages against Henry, and the quiet title action does not challenge Henry's liability to Alden. Although the judgment in the earlier case states that Henry is authorizing Alden to execute on the Ventura 450 properties, and purports to grant a lien on those properties, Henry could not grant a lien on properties he no longer owned. The owners of those properties are entitled to seek relief from the terms of a stipulated judgment between two other parties that purports to affect their properties.

Attachment of Lien to the Properties

Alden argues that the trial court erred when it ruled that he had no effective lien on the properties arising out of the 1996 settlement with Donald Henry. He acknowledges that the stipulated judgment against Henry was not entered until more than a year after Henry transferred his interest in the properties, but he claims that an equitable lien arose when he actually performed legal work for Henry. Alden cites Code of Civil Procedure section 1908, subdivision (a)(2) for the proposition that a person who acquires an interest in a piece of property takes it subject to any judgment that may be rendered therein.

In making this argument, Alden assumes that the rendering of legal services was sufficient to create a lien against the subject property which was then enforceable as a judgment. He is mistaken. Under California law, an attorney's lien on a prospective judgment is created only by contract--either by an express provision or by implication in the retainer agreement. (Carroll v. Interstate Brands Corp. (2002) 99 Cal.App.4th 1168, 1172.) Alden produced no evidence of a contractual agreement that either explicitly or implicitly entitled him to a lien on the Ventura 450 properties. Moreover, an attorney's lien attaches to the proceeds of a judgment in the particular case in which services were rendered and requires a separate action to determine the amount of the lien and enforce it. (Id. at pp. 1172-1173.) No such action was pursued.

Even if we view Alden's Los Angeles County lawsuit against Henry as an action to establish and enforce a lien for legal services rendered in connection with the recovery of that property, the determination of that lien through the stipulated judgment did not occur until after the Henry had transferred his interest in the property. Alden cites no authority for the proposition that a lien can attach to property the debtor does not own. The trial court in this case did not err when it concluded that Alden did not have an enforceable lien against the Ventura 450 properties.

Sufficiency of Complaint and Denial of Nonsuit

Alden argues that the complaint did not state a cause of action because the facts establish a valid lien against the Ventura 450 properties. He also claims that the facts alleged show the quiet title action is barred by the statute of limitations issues. We reject these arguments for reasons already stated. We also reject Alden's claim that the court should have granted nonsuit on similar grounds.

Equitable Considerations

The trial court concluded that Alden and the plaintiffs had all been defrauded by Henry, but that appellant, as an experienced attorney, was a less "innocent" victim. It rejected Alden's argument that he was entitled to relief on equitable grounds. Alden claims this was error.

Although Alden cites the principle that "[a] party seeking relief in an equitable proceeding must do equity and satisfy all equitable claims," he does not establish that plaintiffs acted in any way that would defeat their quiet title claim. The court concluded that both plaintiffs and Alden were victimized by Henry. Plaintiffs do not have unclean hands relative to Alden and will not be unjustly enriched by the judgment quieting title by removing his lien. Plaintiffs took title to the Ventura 450 properties in an attempt to recover some of the money they had lost to Henry's investment schemes. Equity does not demand that Alden's claim for attorney fees take precedence over plaintiffs' investment losses.

Alden's Interest in the Chatsworth Trust

In his cross-complaint for declaratory relief, Alden sought a determination that he was a beneficiary of the Chatsworth Trust. The trial court rejected this claim and entered judgment in favor of cross-defendants, explaining in its statement of decision that Alden was not a beneficiary because he had not invested money in the Ventura 450 properties. We conclude the court's ruling was proper, albeit not for the reasons articulated in the statement of decision.

The Chatsworth Trust documents presented to the trial court state that Alden holds a percentage interest in the shares of that trust. Although he was not an original investor, the trust purports to treat as beneficiaries certain parties who had advanced money for the benefit of the Ventura 450 properties. According to the terms of the written instrument, which are not contradicted or modified elsewhere in the record, Alden has a share in the trust.

This does not mean that the court erred in denying declaratory relief. Declaratory relief is proper when there exists an actual, present controversy over the legal rights and duties of the parties under a written instrument. (Code Civ. Proc., § 1060.) In this case, however, there was no such controversy. Plaintiff Michael Joncich, the manager of trustee W.G. Realty, testified at his deposition that he did not contest Alden's entitlement to a share in the trust instrument. What was at issue in this case was Alden's judgment lien on the properties themselves, which, for the reasons already discussed, was not enforceable. Alden's interest in the trust is a separate issue, one that is not apparently contested by the interested parties. The judgment denying declaratory relief is correct and will not be reversed simply because it appears to have been based on the wrong reason. (Mayer v. C.W. Driver (2002) 98 Cal.App.4th 48, 64.)

To the extent the statement of decision might be given collateral estoppel effect against Alden in subsequent actions involving the trust, our opinion is binding over the opinion of the lower court. (Mayer v. C.W. Driver, supra, 98 Cal.App.4th at p. 64.) We do not purport to make any affirmative determination regarding Alden's share of the trust. We merely conclude that on the record before the trial court, there was no basis for determining that Alden did not have a share in the trust, and that the parties are free to litigate that issue on another day should it be necessary to do so.

Dissolution of Trust

Alden's cross-complaint also asked the court to dissolve the Chatsworth Trust. The court did not err in denying this request because Alden stated no cognizable grounds for such relief.

Alden's Request to Set Aside Sale to Joncich

Alden's cross-complaint asked the court to set aside the sale of one of the Ventura 450 parcels to Mike Joncich, who formulated the plan to clear the liens from the two parcels and sell the remaining parcel (the one he did not purchase) to a third party. The court denied this claim, finding that the Chatsworth Trust beneficiaries had approved the transfer and that it was reasonably necessary to save the property. Alden presented no evidence that this transfer was fraudulent or that Joncich purchased the property for less than fair market value considering all of the liens against it. Alden claims that he offered to purchase the property for more money than did Joncich, but this is only arguably true if one considers the waiver of Alden's "judgment lien" of over $500,000 as part of his offered purchase price. Since the lien was not valid, its waiver did not contribute to the amount of Alden's offer, which was otherwise considerably less than Joncich's. Alden did not carry his burden of proving that the sale was fraudulent or that it should be set aside.

Motion to Disqualify Opposing Counsel

Alden moved to disqualify attorney Mark Neiswender, who represented all of the plaintiffs in this action. He argued that Neiswender had a conflict of interest because: (1) plaintiffs W.G. Realty and Mark Joncich have adverse claims that preclude Neiswender from representing both of them; (2) Neiswender's complaint named Margaret Vogelsang as a defendant in the quite title action, but he is also representing her as a cross-defendant named in Alden's cross-complaint; and (3) plaintiff Joncich gave Neiswender a $200,000 interest in the trust in exchange for his legal services. We reject his claim that the trial court abused its discretion in denying the motion. (Cho v. Superior Court (1995) 39 Cal.App.4th 113, 119.)

Disqualification was unnecessary because Neiswender's clients executed written waivers of any conflict of interest that might arise from his representation of all of them in this lawsuit. (In re Lee G. (1991) 1 Cal.App.4th 17, 27.) Alden claims that no one executed a waiver on behalf of the Chatsworth Trust, but Mike Joncich was the manager of the Trust and executed a waiver. Additionally, the court did not abuse its discretion in denying the motion for disqualification where Alden did not bring it until more than a year after the cross-complaint was filed and the court could reasonably conclude that its main purpose was to delay the litigation. (Metro-Goldwyn-Mayer, Inc. v. Tracinda Corp. (1995) 36 Cal.App.4th 1832, 1847.)

Motion to Dismiss Complaint Based on W.G. Realty's

Corporate Status

Corporations Code section 2105, subdivision (a) provides that no foreign corporation may transact intrastate business in California unless it first obtains a certificate of qualification from the Secretary of State. Corporations Code section 2203, subdivision (c) provides that a corporation which transacts intrastate business without obtaining a certificate may not maintain an action in state court. Alden contends the trial court should have granted his motion to dismiss the quiet title action on the ground that plaintiff W.G. Realty had been doing intrastate business in California since 1995 but did not register to do business in California until two months after the suit was filed.

The evidence did not demonstrate that W.G. Realty was transacting intrastate business within the meaning of these provisions. "'[T]ransact intrastate business' means entering into repeated and successive transactions of its business in this state, other than interstate or foreign commerce." (Corp. Code, § 191.) A foreign corporation does not transact intrastate business solely by maintaining or defending a lawsuit, holding meetings, maintaining bank accounts or effecting sales through independent contractors. (Corp. Code, § 191, subd. (c)(1), (2), (3) & (5).) Alden did not establish that W.G. Realty's land sales (which was its only external activity) rose to the level of transacting intrastate business as defined by this section.

The judgment is affirmed. Costs on appeal are awarded to plaintiffs.

NOT TO BE PUBLISHED.

COFFEE, J.

We concur:

GILBERT, P.J.

PERREN, J.

Kent M. Kellegrew, Judge

Frederick H. Bysshe, Judge

Superior Court County of Ventura

______________________________

Nick A. Alden, in pro. per., for Defendant and Appellant.

Mark S. Neiswender for Plaintiffs and Respondents.

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^[1] The plaintiffs in this action are W.G. Realty, LLC; Michael and Mildred Joncich, Individually and as Trustees of the Trust of Michael and Mildred Joncich, Husband and Wife; the Catarina Grace-Hardy Revocable Trust by and through its Trustee, Catarina Grace-Hardy; Margaret Vogelsang; The Chatsworth Investors Trust; The Chatsworth Investors Trust II; and the Estate and Intestate Successors of Paul Vogelsang.