(This post was originally published on November 7, 2010.)
In a 2010 ruling addressing various issues raised in a lawsuit filed by apparent victims of an alleged deed ripoff (whether conveyances were void vs. voidable, effects on a bona fide purchaser, etc.),(1) a California appeals court said, among other things, that there was nothing disqualifying, as one Defendant asserted, for the Plaintiffs to plead alternative facts in an attempt to undo both the deed ripoff itself, and the mortgage that was placed on the subject properties subsequent thereto. (This appeal involved a reversal of a trial court's judgment of dismissal after sustaining one defendant's demurrer. The ruling, although unpublished, may nevertheless be instructive for those in the legal profession looking to unwind or undo a wide variety of deed ripoffs, particularly, as in this case, one of the defendants attempts to have the plaintiff's complaint the attorney dismissed on procedural/pleading technicalities.)
In addressing what the court referred to as one defendant's mischaracterization of the rules of pleading, the court stated that "where the exact nature of the facts is in doubt, or where the exact legal nature of plaintiff's right and defendant's liability depend on facts not well known to the plaintiff, the pleading may properly set forth alternative theories in varied and inconsistent counts." It went on to make this observation (all citations, internal quotations, etc. omitted for ease of reading, bold text is my emphasis, not in the original text):
- In such situations, the facts are inconsistently alleged because the plaintiff does not know which of the alternatives is true or can be established by the evidence. Tolerance for such pleading rests on the principle that uncertainty as to factual details or their legal significance should not force a pleader to gamble on a single formulation of his claim if the facts ultimately found by the court, though diverging from those the pleader might have considered most likely, still entitle him to relief.
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- At this early stage of the proceedings, Plaintiffs cannot be faulted for failing to know exactly what occurred in this case.
In addition to the foregoing point, the balance of the ruling may contain some valuable insight to anyone (primarily those in the legal profession or real estate business) seeking a starting point in commencing the arduous process of undoing or unwinding a deed ripoff (ie. whether it be through forged deeds & other land documents, forged or improper use of powers of attorney, sale leaseback foreclosure rescue scams, or the otherwise duping of a property owner into signing over deeds and other land documents), including the voiding of any mortgage or other encumbrance placed on the property simultaneously with, or subsequent to, the deed ripoff.(2)
For the ruling, see Casonhua v. Wash. Mut. Bank, B218606, B218608, 2010 Cal. App. Unpub. LEXIS 8486 (Cal. App. 2nd Dist. Div. 7, October 26, 2010) (if link expires, TRY HERE).
(1) Some of the court's discussion of void vs. voidable conveyances follows:
- Although a bona fide encumbrancer is entitled to rely on a deed that is voidable, it will not retain title if the deed is found to be void. (Schiavon v. Arnaudo Brothers (2000) 84 Cal.App.4th 374, 378 (Schiavon); Wutzke v. Bill Reid Painting Service, Inc. (1984) 151 Cal.App.3d 36, 41 (Wutzke); Firato v. Tuttle (1957) 48 Cal.2d 136, 139 (Firato).) More specifically, our courts have explained that "[i]f [a] reconveyance [i]s voidable, . . . it may be subject to cancellation and rescission as against [the grantee], but could be relied upon by a subsequent bona fide [encumbrancer]. . . ." (Schiavon, supra, 84 Cal.App.4th at p. 378.) In contrast, "[i]nstruments which are wholly void cannot ordinarily provide the foundation for good title even in the hands of an innocent purchaser." (Firato, supra, 48 Cal.2d at p. 139.) Therefore, the Plaintiffs may only assert superior title against Washington Mutual if Berry's deed is found to be wholly void, but not if it is voidable.[6]
Generally, "[a] deed is void if the grantor's signature is forged or if the grantor is unaware of the nature of what he or she is signing. [Citation.] A voidable deed, on the other hand, is one where the grantor is aware of what he or she is executing, but has been induced to do so through fraudulent misrepresentations. [Citation.]. The same rules apply to the reconveyance of the property interest under a deed of trust as to the conveyance of property by grant deed." (Schiavon, supra, 84 Cal.App.4th at p. 378.)
Numerous holdings illustrate this legal distinction. For example, in Wutzke v. Bill Reid Painting Service, Inc., supra, 151 Cal.App.3d 36, the court held that "a forged document is void ab initio and constitutes a nullity; as such it cannot provide the basis for a superior title as against the original grantor." (Id. at p. 43.) Wutzke further explained that "[s]ince a trust deed obtained by means of forgery is void, it follows that any claim of title flowing from such a deed is void . . . [which includes] the title of a subsequent purchaser or encumbrancer." (Id. at p. 44.) Similarly, in Erickson v. Bohne (1955) 130 Cal.App.2d 553 (Bohne), the court ruled that a deed conveyed by an individual who alleged to be "mentally ill and wholly incapable of transacting business" was void and could not provide good title to a subsequent good faith purchaser. Other cases have recognized that documents procured through "`fraud in the factum-that is, the sort of fraud that procures a party's signature to an instrument without knowledge of its true nature or contents . . . render [an] instrument entirely void.'" (Wurzl v. Holloway (1996) 46 Cal.App.4th 1740, 1751; see also Bohne, supra, 130 Cal.App.2d at p. 556 ["`An illustration of a void transaction is afforded where one . . . is induced to sign a deed when in fact, he believes, because of fraudulent misrepresentations, that he is merely signing a letter addressed to a third person'"].)
In contrast, a deed is voidable, rather than void, when "the agreement was induced by fraudulent misrepresentation or concealments which in no degree make the instrument anything other than it purports to be." (Bohne, supra, 130 Cal.App.2d at p. 556.) For example, in Fallon v. Triangle Management Service, Inc. (1985) 169 Cal.App.3d 1103, the plaintiff sought to void a deed that he had signed while under duress. (Id. at p. 1106.) The court ruled that because the plaintiff was aware that the instrument he executed was a deed, the deed was merely voidable and could be relied on by a bona fide purchaser. Likewise, in Schiavon v. Arnaudo Brothers, supra, 84 Cal.App.4th 374, the court concluded that a reconveyance that was initiated after the trustee received a forged request for reconveyance was voidable, rather than void. The court explained that although the request for reconveyance had been forged, the actual reconveyance was signed by the trustee, who was entitled to convey the property and understood the nature of the instrument that he had executed. The court differentiated decisions in which the deed itself had been forged, explaining that, in the case before it, "the reconveyance was executed by the designated trustee . . . who was aware of the consequences of the act but was [induced by fraudulent misrepresentation]." (Schiavon, supra, 84 Cal.App.4th at p. 381.)
(2) The portion of the court's ruling on a Plaintiff's entitlement to plead alternative facts follows (omitting the court's footnote 7; bold text is my emphasis, not in the original text):
- 2. The Plaintiffs Were Entitled to Plead Alternative Facts
Washington Mutual argues that, even if the trial court's ruling was erroneous, the demurrers should be sustained on the ground that the Plaintiffs' verified complaints contain inconsistent factual assertions that preclude them from alleging that Berry procured her deed through fraud. Specifically, Washington Mutual contends that because the fourth cause of action in the Florence Sims Complaint (which is pleaded against Berry only) alleges that Berry induced Florence to sign the grant deed through undue influence, Plaintiffs may not allege in the alternative that the deed was forged or that Florence lacked the mental capacity to sign the deed.7 Stated more simply, Washington Mutual argues that because Plaintiffs assert in one claim that the deed was procured through undue influence, which would render the deed voidable, we must ignore Plaintiffs' alternative claim that the deed was procured through fraud, which would render the deed wholly void.
Washington Mutual's argument mischaracterizes the rules of pleading. The traditional rule is that "[w]here the exact nature of the facts is in doubt, or where the exact legal nature of plaintiff's right and defendant's liability depend on facts not well known to the plaintiff, the pleading may properly set forth alternative theories in varied and inconsistent counts." (Rader Co. v. Stone (1986) 178 Cal.App.3d 10, 29.) In such situations, "[t]he facts are inconsistently alleged because the plaintiff does not know which of the alternatives is true or can be established by the evidence." (4 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 364, p. 467.) "Tolerance for such pleading rests on the principle that uncertainty as to factual details or their legal significance should not force a pleader to gamble on a single formulation of his claim if the facts ultimately found by the court, though diverging from those the pleader might have considered most likely, still entitle him to relief." (Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 886.)
In this case, the complaints plainly acknowledge that Plaintiffs pleaded alternative factual theories because they were not present when Berry's grant deed was executed, and, as a result, are uncertain what occurred. The Plaintiffs' first claim alleges that Berry forged the deed and describes circumstantial evidence that, in Plaintiffs' view, support their contention.8 Plaintiffs' additional claims, which allege that Berry procured the deed through other fraudulent means or undue influence, were pleaded "in the event the Court determines that Florence signed the [grant deeds."]. At this early stage of the proceedings, Plaintiffs cannot be faulted for failing to know exactly what occurred in this case. It would therefore be improper to limit Plaintiffs' factual allegations in the manner Washington Mutual proposes.
Washington Mutual correctly asserts that if a party verifies a specific factual allegation in a complaint, it cannot simultaneously plead an inconsistent fact in the same pleading. (Alfaro v. Community Housing Imp. System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1381 (Alfaro) ["[a] plaintiff may plead inconsistent counts or causes of action in a verified complaint, but this rule does not entitle a party to describe the same transaction as including contradictory or antagonistic facts"]; see also Beatty v. Pacific States S. & L. Co. (1935) 4 Cal.App.2d 692, 697 (Beatty).) The rules of pleading do "not permit the pleader to blow both hot and cold in the same complaint on the subject of facts of which he purports to speak with knowledge under oath." (Beatty, supra, 4 Cal.App.2d at p. 697; see also Manti v. Gunari (1970) 5 Cal.App.3d 442, 449["[t]o verify inconsistent facts alleged in a complaint indicates perjury in the matter"].) In this case, however, the operative complaints are verified only on information and belief. Therefore, although the Plaintiffs have verified that they believe the alleged information to be true, they have not claimed personal knowledge of the truth of the matters asserted. (See Black's Law Dictionary 795 (8th ed. 2004) [defining information and belief allegations as being "based on secondhand information that the declarant believes to be true"].) Moreover, as discussed above, the complaints repeatedly emphasize that because the Plaintiffs are unsure exactly what occurred when the deed was executed, they have pleaded alternative facts to encompass all possible theories of liability. As a result, the rule barring plaintiffs from pleading inconsistent facts that are based personal knowledge is inapplicable here.
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footnote 8: The complaints contend that there is "strong circumstantial evidence" indicating that Berry forged the deeds, including the fact that: (1) Berry recorded the deeds two years after Florence purportedly signed them and seven months after Florence died; (2) the notary's journal does not contain Florence's thumbprint, as required under California law; (3) the notary's journal has an entry dated January 2, 2002, for a "Power of Attorney for Decedent," which is crossed out and interlineated with "Grant Deed" in a different type of ink; (4) during deposition testimony, the notary stated that he notarized a power of attorney and the two grant deeds on January 2, 2002, but his journal only shows that one document was notarized on that date.
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