nacif v white-sorenson

8/6/2019 Nacif v White-sorenson

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secure the loan with property he owned). A third party then purchased the property at the

court-ordered sheriff's sale.

The trial court thereafter vacated the default and default judgment, based solely on

claims by White-Sorensen's lender (Accredited Home Lenders, Inc. (Accredited)) that its

rights were improperly extinguished upon the sale. Nacif appealed. In our prior

unpublished opinion, we upheld the portion of the court's order vacating the default

judgment and remanded for the court to consider the unresolved claims between

Accredited and Nacif. (Accredited Home Lenders, Inc. v. Nacif(July 26, 2007, D048938)

(Nacif I).) But we expressly held the court erredin vacating the entry of default as to

White-Sorensen, concluding there "was no legal or factual basis to vacate the entry of

default as to [this party]." (Ibid.) This court then remanded for the trial court "to resolve

claims between Nacif and Accredited, andto enter a new default judgment as to White-

Sorenson . . . after the resolution ofthose claims." (Ibid.,italics added.)

On remand, the trial court disregarded this order and once again vacated the entry

of defaultagainst White-Sorensen. After permitting White-Sorensen to file a cross-

complaint against Nacif, the court ultimately found in favor ofWhite-Sorensen on each of

Nacif's claims against him and in favorof White-Sorensen on each of his affirmative

claims against Nacif. The trial court also granted summary judgment in favor of two

parties who had intervened or had been brought into the action: the trustee (First

American Title Company (First American)) and a nominee/beneficiary (Mortgage

Electronic Registration Systems, Inc. (MERS)) on the deeds of trust that secured

Accredited's loan to White-Sorensen. The court also permitted these parties to amend the


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pleadings to be substituted in Accredited's place after Accredited was dismissed from the

action upon filing for bankruptcy. The court awarded First American and MERS

$675,000 against Nacif.

The court also granted the anti-SLAPP motion filed by White-Sorensen, MERS,

and First American. The court awarded these parties $300,000 in attorney fees as

prevailing parties on their contract claims and on their anti-SLAPP motion.

Nacif appeals. Respondents are White-Sorensen, MERS, and First American. We

determine the court erred in several ways. We reverse and remand with directions.1

FACTUAL AND PROCEDURAL BACKGROUND

We summarize the facts in the light most favorable to Nacif, the party opposing

the summary judgment and anti-SLAPP motions. (See Garcia v. W&W Community

Development, Inc. (2010) 186 Cal.App.4th 1038, 1041.)

I. Background

Linda Nacif loaned $258,000 to White-Sorensen, who promised to repay the

money and agreed to secure the loan with property he owned (the White-Sorensen

property). White-Sorensen then failed to pay the amounts owed.

1 The third party purchaser, Scott Jacoby, was brought into this action by Accreditedand related parties. The court had earlier granted Jacoby summary judgment. In acompanion appellate opinion filed today, we uphold this summary judgment. (Mortgage

Electronic Registration Systems, Inc. v. Jacoby (August 8, 2011, D054010) (Jacoby.) Wediscuss facts relevant to Jacoby in this opinion only to the extent they are relevant to theissues raised in this appeal.


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approved and merely required a payoff demand letter. Nacif's counsel told White-

Sorensen's counsel and a mortgage broker he would record a lis pendens release at the

close of the settlement, but because he was concerned with the lack of disclosure of the

identity of the lender and escrow company, he would exchange the release document only

when the $115,000 funds were available. When the escrow closed, neither the escrow

company nor the lender requested the withdrawal of the lis pendens as a condition to the

payoff demand. Accredited recorded its two deeds of trust on the White-Sorensen

property in September 2004.

After Nacif was paid the $115,000 and before releasing the lis pendens and

dismissing her lawsuit against White-Sorensen, Nacif's counsel discovered information

leading him to believe that White-Sorensen had not been honest regarding his assets.

Nacif then filed a first amended complaint, realleging her claims against White-Sorensen

for breach of the loan agreement and adding allegations of fraud, claiming she would not

have agreed to the settlement if she had known these facts. Nacif did not return the

$115,000, but sought to recover only the balance of the loan principal plus interest.

Although White-Sorensen was served with, and had notice of, the amended complaint, he

elected not to defend the action, and the court entered his default.

On June 30, 2005, after Nacif submitted a declaration supporting her claims, the

court entered a default judgment against White-Sorensen in the amount of $209,187

(consisting of the remaining loan balance of $153,750 plus interest, costs, and attorney

fees). The court also imposed an equitable mortgage on the White-Sorensen property and

ordered the property sold at a foreclosure sale. The amended final judgment stated that


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all interests in the property recorded "subsequent to the filing of notice of the pendency of

this action" would be extinguished after the sale of the property. (Italics added.)

Several weeks later, on July 22, 2005, First American, Accredited's trustee on its

deeds of trust, recorded a Notice of Trustee's Sale, based on Accredited's claims that

White-Sorensen had failed to make required payments on his $675,000 refinance loan.

Three weeks later, Nacif recorded an Abstract of Judgment, which reflected that

her judgment lien was superior to Accredited's deeds of trust. Nacif advised Accredited

and/or its agents of her priority lien and asserted a right to proceed with the sale.

Accredited objected to Nacif's claim of priority. After attempting to negotiate a

resolution of its dispute with Nacif, Accredited filed a separate lawsuit in November 2005

against Nacif seeking to protect its priority interest in the White-Sorensen property. The

action was assigned to a different department of the superior court.

Two months later, in January 2006, Accredited filed a motion in the Nacif/White-

Sorensen case to vacate the entry of default and default judgment and for leave to

intervene in this action. Accredited was represented by the same counsel who had

previously represented White-Sorensen (S. Todd Neal). White-Sorensen did not join in

the motion to vacate the default or default judgment.

In its proposed intervention complaint, Accredited sought to protect its security

interest in the White-Sorensen property. Accredited claimed it had a lienhold interest

totaling $675,000 and the default judgment extinguishing this interest would materially

affect its rights. (Nacif I, supra, D048938.) Accredited asserted a right to intervene

because it was not named in the underlying matter and therefore it had no opportunity to


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protect its interests. (Ibid.) Accredited requested various remedies, including a judicial

determination that its secured equitable interest should be given first priority over Nacif's

equitable mortgage. (Ibid.) Accredited also asserted a breach of contract claim against

Nacif. (Ibid.) Nacif did not oppose the motion for intervention, but objected to the

motion to vacate the entry of default and default judgment against White-Sorensen.

(Ibid.)

While Accredited's motions were pending, the White-Sorensen property was sold

at a February 23, 2006 sheriff's sale. Accredited (and/or its agents) had actual notice of a

pending foreclosure sale more than 90 days before the sale, but took no steps to delay or

prevent the sale, other than to file its declaratory relief and intervention actions. A third

party (Scott Jacoby) purchased the property for $222,524 (the approximate amount of

Nacif's judgment against White-Sorensen) and these funds (minus administrative costs)

were paid to Nacif.

In thereafter opposing Accredited's motions to set aside White-Sorensen's default,

Nacif's counsel argued that Accredited's remedies were now limited to a damage action

against Nacif because the property had been sold to a third party (after notice to

Accredited), and these claims should have no effect on White-Sorensen's default in the

action.

In March 2006, the trial court granted Accredited's motion for intervention and

vacated the entry of default and judgment against White-Sorensen. The parties then

entered into a stipulation that Accredited would dismiss its second lawsuit against Nacif

(which was pending in another superior court department) because all of the claims


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asserted in this second lawsuit were now contained in Accredited's complaint-in-

intervention. (Nacif I, supra, D048938.)

Nacif then filed her notice of appeal. Nacif appealed only from the portion of the

court order vacating the default and default judgment, and did not challenge the court's

order granting Accredited's motion to intervene in the action. (Nacif I, supra, D048938.)

In July 2007, this court affirmed the portion of the order vacating the default

judgment. (Nacif I, supra, D048938.) We held the court properly vacated the judgment

because the judgment affected Accredited's rights, and the court would be required to

determine the appropriate remedies (if any) as between Accredited and Nacif. (Ibid.)

However, we reversed the portion of the order vacating the entry of default as to White-

Sorensen, explaining that an entry of default has independent significance and is not void

merely because the default judgment is later vacated. (Ibid.) We reasoned that although

vacating the judgment was necessary to allow Nacif and Accredited to litigate their

claims, it was not a proper basis to allow White-Sorensen to avoid the effect of his

default, particularly because he had never moved to reopen the default. (Ibid.) In

concluding there was no legal or factual basis to vacate the entry of default as to White-

Sorensen, we rejected Accredited's arguments that: (1) White-Sorensen was not properly

served in the underlying action; (2) Nacif's first amended complaint was a "nullity"

because Nacif did not receive specific permission to file it; and (3) the default was void

because Nacif allegedly committed fraud in refusing to adhere to the terms of her

settlement with White-Sorensen. (Ibid.)


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In so concluding, we emphasized that we were not ruling on any of the issues

arising from the dispute between Nacif and Accredited, including whether Nacif's lis

pendens was a proper basis to subordinate Accredited's trust deeds. (Nacif I, supra,

D048938.) We stated that "[b]ecause the parties have yet to litigate these issues before

the trial court and it may depend on the resolution of disputed facts, it would be

premature for us to address these issues here," and we refused to consider the merits of

amended intervention pleadings filed by Accredited and White-Sorensen while the appeal

was pending. (Ibid.) We thus "remand[ed] for the court to resolve claims between Nacif

and Accredited, and to enter a new default judgment as to White-Sorenson and [his

company] after the resolution of those claims." (Ibid., italics added.)

II. Proceedings on Remand

Unfortunately, as respondents acknowledge in their appellate brief, on remand the

trial court "did not consider" our appellate opinion. Instead, the court allowed White-

Sorensen to relitigate the entry of default, which was not only contrary to our specific

instructions but inconsistent with the law of the case doctrine. The court also erroneously

required Nacif to name MERS and First American in amended pleadings. These errors

led to a flurry of additional pleadings and motions, and ultimately to the court

erroneously granting respondents' summary judgment and anti-SLAPP motions without a

proper showing they were entitled to this relief. To explain these conclusions, we first

summarize the three pleadings that were before the court on remand and then briefly

describe the motion proceedings and the court's rulings on respondents' motions. In the


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Discussion section, we shall more fully discuss the facts and arguments before the court

when it made the rulings.

A. The Three Pleadings Before the Court on Remand

1. First Amended Intervention Complaint Against Nacif and Jacoby

While theNacif Iappeal was pending, Accredited, White-Sorensen, and MERS

filed a first amended complaint in intervention. The named defendants were Nacif and

Scott Jacoby, the individual who purchased the White-Sorensen property at the court-

ordered foreclosure sale.

This first amended intervention complaint asserted six causes of action against

Nacif, each based primarily on allegations that Nacif breached the 2004 Settlement

Agreement with White-Sorensen by failing to adhere to her promise to remove the lis

pendens once she was paid the $115,000 in settlement funds. The first cause of action

sought a judicial declaration that Nacif "was not entitled to a default, a default judgment,

or any equitable mortgage on the Property" and Accredited's deeds of trust have priority

over Nacif's "right to an equitable mortgage." The second through fourth causes of action

alleged breach of contract and fraud against Nacif. The fifth cause of action alleged

equitable subrogation and subordination. The sixth cause of action sought to quiet title.

2. Nacif's Second Amended Complaint

Nacif's first amended complaint against White-Sorensen (alone) was also before

the trial court after the remand. This was the same complaint upon which this court held

the trial court had erred in vacating the entry of default against White-Sorensen. (Nacif I,

supra, D048938.) Shortly after the remand, four parties (White-Sorensen, Accredited,


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MERS, and First American) moved for judgment on this complaint, arguing that Nacif's

failure to name these additional parties rendered the complaint defective as a matter of

law because these other parties were "indispensible parties" on a foreclosure action.

Nacif vigorously opposed the motion, raising several arguments, including that: (1) there

was no need for her to name these other parties because they had already raised all of the

issues in their amended intervention complaint; and (2) it would be improper to grant a

judgment on the pleadings in favor of White-Sorensen because it was on this pleading

that theNacif Icourtexplicitly held White-Sorensen had defaulted and that the default

could not be vacated.

After a hearing, the trial court rejected these arguments, and granted the motion.

The court's written order stated: "The motion of Plaintiffs-in-Intervention Accredited

Home Lenders, Inc., [MERS] and . . . White-Sorensen for Judgment on the Pleadings is

GRANTED. The court finds [these]moving parties are indispensible to the

determination of plaintiff [Nacif]'s first amended complaint." (Italics added.) The court

provided Nacif 10 days' leave to amend to add the necessary parties. Nacif later

unsuccessfully challenged this ruling in a writ petition in this court.

In Nacif's second amended complaint (filed in response to the court's order

granting judgment on the pleadings), Nacif named White-Sorensen, Accredited, MERS,

and First American. As discussed more fully below, Nacif's allegations against White-

Sorensen were virtually identical to the allegations alleged in her first amended

complaint. To avoid any argument that she reopened White-Sorensen's default, Nacif

included a paragraph in the new pleading stating she "specifically denies any intention to


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allege any new or different causes of action against [White-Sorensen]" and "intends to

preserve [his] status as [a] defaulted [party] . . . ." With respect to the other named

defendants, Nacif added a fraud cause of action against Accredited and sought

declaratory relief against Accredited, MERS, and First American.2

3. Cross-Complaint Against Nacif

The third pleading before the court was respondents' cross-complaint against

Nacif, filed after Nacif filed her second amended complaint. The plaintiffs on this

pleadingAccredited, MERS, White-Sorensen, and First Americanalleged essentially

the same six causes of action as were alleged in the first amended intervention complaint.

B. Summary Judgment and Anti-SLAPP Motions

White-Sorensen, Accredited, MERS, and First American then sought summary

judgment on each of the three pleadings before the court (Nacif's second amended

complaint, the first amended intervention complaint, and respondents' cross-complaint).

These parties also filed an anti-SLAPP motion to strike Nacif's second amended

complaint. We summarize the evidence and argument presented by respondents with

respect to these pleadings.3

2 Nacif also named the mortgage broker and several other entities, but the court latergranted a motion to strike these parties from the complaint and Nacif does not challengethis ruling on appeal.

3 Because we have concluded respondents did not meet their summary judgmentand anti-SLAPP burdens with respect to their affirmative pleadings, we focus primarilyon their evidence and do not detail Nacif's opposition.


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1. Summary Judgment Motion on Respondents' Pleadings Against Nacif

On their own affirmative pleadings (cross-complaint and first amended

intervention complaint), White-Sorensen, Accredited, MERS and First American argued

they were entitled to recover as a matter of law on their contract, fraud, and equitable

relief claims because the undisputed evidence showed: Nacif is bound by her settlement

with White-Sorensen because he paid her the $115,000; Nacif breached the 2004

Settlement Agreement by failing to release her lis pendens; and Nacif's failure to release

the lis pendens shows she made a material misrepresentation of fact without an intention

to perform and misrepresented to White-Sorensen and Accredited that she would

withdraw the lis pendens.

These parties argued they were entitled to damages of $675,000 as a matter of law

based on: (1) a declaration filed by the mortgage broker involved in the Accredited

refinance loan, who stated that a July 2004 appraisal valued the White-Sorensen property

at $690,000; (2) Accredited's deeds of trust showing it loaned $675,000 to White-

Sorensen; and (3) evidence that the property had been sold to a third party.

2. Summary Judgment Motion on Nacif's Second Amended Complaint

In moving for summary judgment on Nacif's second amended complaint, the

defendants named in this pleading (White-Sorensen, Accredited, MERS and First

American) argued that Nacif could not recover as a matter of law because the basis of her

claims against White-Sorensen was legally flawed as she did not return the $115,000 she

received as part of the settlement. (SeeMyerchin v. Family Benefits, Inc. (2008) 162

Cal.App.4th 1526, 1529 ["a party offered a monetary settlement of a lawsuit may accept


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the money or reject it, but may not take the money andcontinue the lawsuit"].) These

defendants also argued Nacif would be unable to prove her claims against White-

Sorensen or the other defendants based on Nacif's deposition testimony in which she was

unable to identify a factual basis for many of her claims.

White-Sorensen, Accredited, MERS, and First American alternatively moved to

strike Nacif's second amended complaint under the anti-SLAPP statute. They argued that

Nacif's "entire suit" is based on White-Sorensen's false statements made to induce Nacif

to settle the action, and is thus subject to the anti-SLAPP statute. They further argued

Nacif would not prevail on any of her affirmative claims against them.

3. Accredited's Bankruptcy and Dismissal and Substitution of Parties

While these summary judgment and anti-SLAPP motions were pending,

Accredited moved to stay the proceedings because it had filed for bankruptcy. However,

at a hearing conducted shortly thereafter, the counsel who was jointly representing

Accredited, MERS, First American, and White-Sorensen stated that a stay was

unnecessary because he would be submitting a motion to dismiss Accredited from the

action. He explained that Accredited had previously sold its interests in the White-

Sorensen loan to other entities (not parties to this litigation), and these other entities are

"comfortable that their interests are adequately protected by First American and MERS."

In response, Nacif's counsel strenuously objected, arguing in part that counsel has

"just confirmed what I've been saying for three years, that he doesn't have a client. He

has . . . three parties, none of whom own the right . . . which is the basis for being in this


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action." The trial judge dismissed these concerns, saying she was "not worried about"

these issues.

The court thereafter provided Nacif's counsel additional time to file responses to

the summary judgment motion to cure procedural deficiencies in the initial opposition.

On the same day that Nacif filed the supplemental opposition, respondents moved to

dismiss Accredited from the action and asked that they be permitted to amend their

affirmative pleadings to substitute First American and MERS in place of Accredited as

real parties in interest. They argued that MERS could be substituted for Accredited

because MERS was a named beneficiary on the White-Sorensen deeds of trust. They

sought First American's substitution based on their counsel's declaration and letters from

a senior counsel of Wells Fargo and a vice president of Solace Financial, LLC, who

claimed that these entities had current rights in the White-Sorensen notes and deeds of

trust and that First American (as title insurer) was an subrogee/assignee for "collection"

purposes to Accredited's rights on White-Sorensen's notes.

Based on these papers, the court granted the substitution request. The court thus

dismissed Accredited from the action and permitted First American and MERS to be

"substituted in ACCREDITED's stead" as plaintiffs on the first amended intervention

complaint and on the cross-complaint.


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4. Court's Rulings on Summary Judgment and Anti-SLAPP Motions

The court then ruled against Nacif on respondents' summary judgment and anti-

SLAPP motions.

With respect to the summary judgment motion on Nacif's second amended

complaint, the court found in favor of White-Sorensen, MERS, and First American. The

court reasoned that the 2004 Settlement Agreement was valid and binding and thus

constituted a "complete defense to [Nacif's] second amended complaint." The court

further found that Nacif's retention of the $115,000 in settlement funds barred her from

recovering the balance of the debt owed to her, relying onMyerchin, supra, 162

Cal.App.4th 1526. The court alternatively granted these parties' anti-SLAPP motion.

The court found the anti-SLAPP statute applied because the second amended complaint

arose from the settlement agreement with White-Sorensen, and as "demonstrated in the

summary judgment motion, plaintiff has not and cannot establish a probability of success

on the merits."

On the affirmative pleadings filed by White-Sorensen, MERS, and First American,

the court found the undisputed facts showed these parties proved each of their claims

against Nacif, including breach of contract, fraud, and equitable subrogation. The

primary basis for this ruling was the evidence showing Nacif failed to comply with the

2004 Settlement Agreement provision requiring her to release the lis pendens and that her

attorney provided assurances to Accredited's agent that she would withdraw the lis

pendens once she received the settlement money. The court further found that First

American and MERS met their summary judgment burden to prove they were damaged


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in the amount of $675,000 and were entitled to recover this amount from Nacif plus

prejudgment interest.

The court additionally granted White-Sorensen, MERS, and First American their

requested equitable relief, including that: (1) Nacif "was never entitled to a default or a

default judgment against any Defendant," including White-Sorensen; (2) Nacif was not

"entitled to an equitable mortgage or other interest" on White-Sorensen's property; and

(3) the White-Sorensen property was and remains "clear of any equitable mortgage or

other interest claimed by . . . [Nacif]."

The court later awarded attorney fees of $300,000 to White-Sorensen, MERS, and

First American on their anti-SLAPP motion and as prevailing parties on the breach of

contract action.

DISCUSSION

I. Summary Judgment Motion

A. Standard of Review

The court granted summary judgment against Nacif on respondents' claims

asserted against her and on Nacif's affirmative pleadings.

When a defendantmoves for summary judgment, the defendant "bears the burden

of persuasion that there is no triable issue of material fact and that [the party] is entitled

to judgment as a matter of law." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826,

850 (Aguilar).) A defendant satisfies this burden by showing one or more elements of the

cause of action cannot be established, or that there is a complete defense to that cause of

action. (Ibid.) This burden can be met by relying on the opposing party's factually


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inadequate discovery responses if these responses show the plaintiff "will be unable to

prove its case by any means." (Weber v. John Crane, Inc. (2006) 143 Cal.App.4th 1433,

1439; see Scheiding v. Dinwiddie Construction Co. (1999)69 Cal.App.4th 64, 78-81;

Union Bank v. Superior Court(1995) 31 Cal.App.4th 573, 589-590.)

When aplaintiff or cross-complainantmoves for summary judgment on its claims,

the party bears the burden of proving each elementof the cause of action entitling the

party to judgment on that cause of action. "[I]f a plaintiff who would bear the burden of

proof by a preponderance of evidence at trial moves for summary judgment, [the

plaintiff] must present evidence that would require a reasonable trier of fact to find any

underlying material fact more likely than nototherwise, he would not be entitled to

judgment as a matter of law, but would have to present his evidence to a trier of fact."

(Aguilar, supra, 25 Cal.4th at p. 851.)

If the moving party fails to present sufficient, admissible evidence to meet its

initial burden, the court must deny the summary judgment motion. This rule applies even

if the opposing party does not object to the moving party's evidence, presents defective

declarations, or fails to present sufficient counter showing. (Rincon v. Burbank Unified

School Dist. (1986) 178 Cal.App.3d 949, 954-956.) However, once a party meets its

initial summary judgment burden, " 'the burden shifts to the [opposing party] . . . to show

that a triable issue of one or more material facts exists as to that cause of action or a

defense thereto.' " (Aguilar,supra, 25 Cal.4th at p. 849.) The opposing party may not

rely upon the mere allegations or denials of its pleading to show a triable issue of material

fact exists. (Ibid.)


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We review a summary judgment de novo. (Buss v. Superior Court(1997) 16

Cal.4th 35, 60.) We assume the role of the trial court and redetermine the merits of the

motion. In doing so, we strictly scrutinize the moving party's papers so that all doubts as

to the existence of any material, triable issues of fact are resolved in favor of the party

opposing summary judgment. (Barber v. Marina Sailing, Inc. (1995) 36 Cal.App.4th

558, 562.) "Because a summary judgment denies the adversary party a trial, [the motion]

should be granted with caution." (Colores v. Board of Trustees (2003) 105 Cal.App.4th

1293, 1305.)

In applying these principles to this case, we first consider the propriety of the

summary judgment granted in favor of White-Sorensen on Nacif's second amended

complaint and on White-Sorensen's affirmative pleadings against Nacif. We then

examine the summary judgment granted in favor of MERS and First American on these

parties' affirmative pleadings (cross-complaint and complaint in intervention) and on

Nacif's second amended complaint against these respondents.

B. Summary Judgment in Favor ofWhite-Sorensen

1. Nacif's Claims Against White-Sorensen

Nacif contends the court erred in granting summary judgment to White-Sorensen

on Nacif's second amended complaint. We agree.

In August 2004, Nacif filed a first amended complaint against White-Sorensen.

White-Sorensen defaulted on those claims, and the court entered White-Sorensen's

default. Although the trial court later vacated the entry of default, this court found the


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court erred and ordered the court to reinstate the entry of default. (Nacif I, supra,

D048938.) This ruling constitutes law of the case.

The law of the case doctrine provides that " 'the decision of an appellate court,

stating a rule of law necessary to the decision of the case, conclusively establishes that

rule and makes it determinative of the rights of the same parties in any subsequent retrial

or appeal in the same case.' " (Nally v. Grace Community Church (1988) 47 Cal.3d 278,

301.) Under this doctrine, the holding inNacif Ithat there was no legal or factual basis to

set aside White-Sorensen's entry of default was binding on the trial court on remand with

respect to White-Sorensen. Thus, the trial court erred in vacating White-Sorensen's

default after the remand and requiring Nacif to file a second amended complaint against

this defendant.

White-Sorensen contends the court properly vacated the entry of default because

Nacif voluntarily reopenedthe default by filing her second amended complaint. The

argument is unavailing because Nacif's filing of the second amended complaint was not a

voluntary act on the part of Nacif.

Nacif strongly opposed respondents' motion for judgment on the pleadings on her

first amended complaint, and specifically asserted that a court order requiring her to file a

second amended complaint would be inconsistent with theNacif Icourt's decision

affirming the entry of default against White-Sorensen. For reasons that are not entirely

clear, the trial court rejected these arguments and granted the motion, providing Nacif

with 10 days to file a second amended complaint against White-Sorensen and the other

moving parties. Had Nacif failed to file a new pleading against White-Sorensen in


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response to the court's directive, the court would have dismissed her action and she would

have lost her rights in the default. Under these circumstances, Nacif's filing of the second

amended complaint was in response to an erroneous ruling by the trial court and does not

constitute an intention to reopen the default.

White-Sorensen argues the court's ruling was proper because the other moving

parties (Accredited and MERS) were indispensable parties. However, even if the court

was required to grant the motion of these parties, it was not required to grant the motion

on the pleadings as to White-Sorensen. Because White-Sorensen's default had already

been affirmed on appeal, the court was required to adhere to that ruling.

White-Sorensen alternatively contends Nacif reopened the default by adding new

allegations in the second amended complaint. (See Ostling v. Loring (1994) 27

Cal.App.4th 1731, 1744.) The argument is not factually supported.

In the second amended complaint, only the first, second, and third causes of action

name White-Sorensen as a defendant. They are titled exactly the same as the causes of

action in the first amended complaint, and contain identical factual allegations.

Moreover, at the outset of the second amended complaint, Nacif included a paragraph

expressly stating that she was not intending "to allege any new or different cause of

action against [White-Sorensen]" and intends to preserve the entry of default against

White-Sorensen, and that she was filing the second amended complaint pursuant to the

court's ruling that she must do so.

White-Sorensen argues Nacif nonetheless reopened the default because she added

two paragraphs in the "General Allegations" section of the complaint. However, these


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paragraphs merely add brief background information regarding Nacif's original loan to

White-Sorensen and are not material to Nacif's substantive claims against White-

Sorensen. White-Sorensen also contends Nacif reopened the default because she named

other parties in the second amended complaint. However, there is no authority that

allegations against other parties reopens an entry of default, particularly where, as here,

the court ordered the plaintiff to amend the complaint to add these parties. Further,

contrary to White-Sorensen's assertions, the fact that Nacif mentioned White-Sorensen in

the causes of action against other parties does not support a different result. Because the

joinder of these parties derive from White-Sorensen's actions, it was reasonable for Nacif

to identify White-Sorensen when alleging the claims against the other parties and does

not suggest she was intending to reopen the lawsuit against him.

2. White-Sorensen's Affirmative Claims Against Nacif

Nacif also contends the court erred in granting summary judgment on White-

Sorensen's affirmative claims against her, including breach of contract, two types of

fraud, declaratory relief, and equitable subrogation/subordination. Each of these claims

was based on White-Sorensen's allegations that Nacif committed fraud and breached the

2004 Settlement Agreement by failing to withdraw the lis pendens and by filing the

amended complaint seeking to rescind the settlement agreement.

We agree that the court erred in granting summary judgment to White-Sorensen on

these claims. White-Sorensen was barred from recovering on these affirmative claims by

the prior entry of default. Under the compulsory counterclaim rule, a defendant must

assert all claims that arise "out of the same transaction, occurrence, or series of


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transactions or occurrences as the cause of action which the plaintiff alleges in his

complaint." (Code Civ. Proc., 426.10, subd. (c), 426.30, subd. (a); seeAlign

Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 959-960; Carroll v. Import

Motors, Inc. (1995) 33 Cal.App.4th 1429, 1435-1436.) "[I]f a party against whom a

complaint has been filed and served fails to allege in a cross-complaint any related cause

of action which (at the time of serving his answer to the complaint) he has against the

plaintiff, such party may not thereafter in any other action assert against the plaintiff the

related cause of action not pleaded." (Code Civ. Proc., 426.30, subd. (a).)

In this case, White-Sorensen's affirmative pleadings against Nacif arose from the

same circumstances as those alleged by Nacif in her first amended compliant. White-

Sorensen failed to answer those allegations, and the court entered his default. Although

the trial court previously vacated the default, we reversed, holding there was no legal or

factual basis for the court's order setting aside the default. (Nacif I,supra, D048938.)

We explained that once a court has entered a default, the defaulting party is precluded

from reasserting claims or defenses that could have been raised in that action: "Severe

consequences attach to the entry of a default. 'A default cuts off the defendant from

making any further opposition or objection to the relief which plaintiff's complaint shows

he is entitled to demand.' . . . Unless the default is set aside in a proper proceeding, the

party may not thereafter file pleadings, move for a new trial, or demand notice of

subsequent proceedings." (Ibid.)

Thus, once the trial court entered default on Nacif's complaint against White-

Sorensen, and this court reversed the vacation of that default, White-Sorensen was


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precluded from asserting affirmative claims that related to Nacif's causes of action. By

failing to prosecute the causes of action on a cross-complaint in response to Nacif's first

amended complaint, White-Sorensen forfeited his right to assert related claims and

cannot revive them merely because Accredited was given the opportunity to litigate its

claims against Nacif.

To avoid this result, White-Sorensen argues that Nacif voluntarily reopened the

default when she filed her second amended complaint. However, as explained above, this

argument is not supported by the record.

C. Summary Judgment on Affirmative Claims Asserted by First American and MERS

MERS and First American asserted affirmative claims against Nacif in the cross-

complaint and the first amended intervention complaint. These claims included breach of

contract, fraud, and equitable relief. The court awarded these parties summary judgment

based on their own claims and on their assertions they were entitled to recover for

Accredited's losses. We preliminarily discuss the issue of these parties' right to recover

for Accredited's losses because this issue is foundational with respect to their right to

recover on their affirmative pleadings. We then discuss the summary judgment with

respect to each cause of action asserted by these parties. In engaging in this analysis, we

agree with respondents that they are not necessarily bound by White-Sorensen's default

with respect to their rights to recover for their own alleged losses.

1. MERS's and First American's Rights to Recover for Accredited's Losses

Generally, a civil action must be prosecuted by the real party in interest, "except as

otherwise provided by statute." (Code Civ. Proc., 367.) A party claiming to have


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standing must assert his or her own legal rights and interests, and cannot rest any claim to

recover upon the legal rights or interests of a third party. (Property Owners of

Whispering Palms, Inc. v. Newport Pacific, Inc. (2005) 132 Cal.App.4th 666, 672.)

Generally, the person possessing the right sued upon by reason of substantive law is the

real party in interest. (SeeDel Mar Beach Club Owners Assn. v. Imperial Contracting

Co. (1981) 123 Cal.App.3d 898, 906.)

Based on their motion to amend the pleadings after Accredited filed for

bankruptcy, the court permitted MERS and First American to substitute as real parties in

interest for Accredited in their affirmative pleadings. The court also found these parties

were entitled to recover for Accredited's losses as a matter of law. We conclude the court

erred in this latter ruling. As explained below, these parties did not meet their summary

judgment burden to show they were real parties in interest as a matter of law with respect

toAccredited's claimed losses.

MERS

In moving to substitute for Accredited and recover for Accredited's losses, MERS

relied solely on evidence that it was identified on the White-Sorensen deeds of trust as

Accredited's "nominee" and a "beneficiary." The deeds of trust state that MERS is a

beneficiary "solely as nominee for Lender and Lender's successors and assigns . . . ."

MERS is a private corporation providing a national electronic registration service

that " 'tracks the transfer of ownership interests and servicing rights in mortgage loans.' "

(Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1151 (Gomes);

see Ferguson v. Avelo Mortgage, LLC(2011) 195 Cal.App.4th 1618, 1625; Peterson,


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Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration

System (2010) 78 U. Cin. L.Rev. 1359 (hereafter Peterson).) MERS's purpose is to

streamline the mortgage process by serving as the nominee and as mortgagee of record

for its members, thereby eliminating the need to record mortgage transfers. (Gomes,

supra, 192 Cal.App.4th at p. 1151.) MERS thus remains nominal mortgagee of record

even if the loan is transferred numerous times to different creditors. (Ibid.) In providing

this service, MERS generally has no financial interest in the mortgage loan; its revenue

comes not from repayment of the loan, but from fees the lenders pay to MERS. (Ibid.;

Peterson, supra, 78 U. Cin. L.Rev. at p. 1371.)

Under California law, MERS's status as a "nominee" on a deed of trust means that

it has the right to initiate foreclosure proceedings as the lender's agent. (See Gomes,

supra,192 Cal.App.4th at pp. 1157-1158; see also Ferguson, supra, 195 Cal.App.4th at

pp. 1625-1627.) Although California courts have not yet determined the precise scope of

MERS's rights to act beyond this limited role (see Gomes, supra, at p. 1157, fn. 9), most

federal courts have held that MERS's identification as a beneficiary on a deed of trust

does notconfer full "beneficiary" (lender) status with respect to all matters relating to the

note and the mortgage lending process. (Ibid.; see Weingartner v. Chase Home Finance,

LLC(D.Nev. 2010) 702 F.Supp.2d 1276, 1280.)

But regardless of the extent of MERS's rights as a named nominal beneficiary

under California law, MERS's status as a beneficiary on the deeds of trust in this case did

not support a finding it was entitled to recover for Accredited's claimed losses. As we

conclude in the companionJacoby appeal, at the time of the summary judgment motion,


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the deed of tru st had been extinguished by the third party sale. (Jacoby, supra,

D054010; see Code Civ. Proc., 701.630.) Thus, the only remaining legal instrument

was White-Sorensen's promissory note owed to Accredited (or its successors in interest).

There was no showing MERS had any financial interest in Accredited's loan or that it

received an assignment of the loan or claim. Without more, MERS's mere identification

as a nominee or beneficiary on a deed of trust that had been extinguished did not confer

real party in interest status on MERS with respect to the lender's affirmative breach of

contract and tort claims against a third party. There is no factual or legal basis in the

summary judgment record for the court to have permitted MERS to recover for injuries

suffered by Accredited based on Accredited's contract and fraud claims against Nacif.

First American

First American brought the claims against Nacif solely in its role as the trustee on

the two deeds of trust executed by White-Sorensen. This status did not give First

American standing to recover on a breach of contract claim on behalf of Accredited (the

creditor/trustor). Although a trustee of a trust is the real party in interest in litigation

involving trust property (Nicholson v. Fazeli (2003) 113 Cal.App.4th 1091, 1102), a

trustee on a deed of trust"is not a "trustee in the strict sense of the word" (Lupertino v.

Carbahal (1973) 35 Cal.App.3d 742, 747). It owes no fiduciary obligations, and is not a

general agent of the trustor (debtor) or the beneficiary (creditor). (Id. at pp. 747-748.)

Instead, the trustee has the authority to act "only so far as may be necessary to the

execution of the trust." (Id. at p. 748.) The trustee's " 'only duties are: (1) upon default

to undertake the steps necessary to foreclose the deed of trust; or (2) upon satisfaction of


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the secured debt to reconvey the deed of trust.' " (Heritage Oaks Partners v. First

American Title Ins. Co. (2007) 155 Cal.App.4th 339, 345.)

In taking judicial notice of the relevant superior court files, we are aware that in

moving to amend the pleadings, First American submitted its counsel's declaration (with

attached letters) asserting that, in addition to its role as trustee, First American served as

the title insurer on White-Sorensen's refinancing loan and that, as the title insurer, First

American was subrogated to certain successor lenders' rights. However, the trial court's

decision to permit an amendment of the pleadings based on these claims did not relieve

the parties of presenting admissible evidence in the context of moving for summary

judgment that it was a proper party to recover on Accredited's behalf. Because a

summary judgment deprives a party of a fundamental trial right, a summary judgment

may be granted only if the moving party presents supporting facts showing it is entitled to

a judgment in its favor as a matter of law. (Code Civ. Proc., 437c, subd. (c).) Absent

admissible, competent evidence in the summary judgment proceedings showing First

American had a valid assignment or was subrogated to Accredited's rights and that the

scope of any such subrogation/assignment entitled First American to recover for

Accredited's losses, the court had no basis to grant summary judgment to First American

based on claims that Nacif damaged Accredited's rights.

Respondents' Additional Real Party in Interest Arguments Are Without Merit

First American and MERS contend a trustee, nominee, and beneficiary on a deed

of trust are indispensible parties in an action involving a foreclosure of the particular deed

of trust. (See Washington Mutual Bank v. Blechman (2007) 157 Cal.App.4th 662, 668.)


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We agree with this principle, but it is inapplicable to establish real party in interest status

in this case. The judicial foreclosure had already taken place, and the Accredited deeds

of trust extinguished. (SeeJacoby, supra, D054010.) The fact that a trustee on

Accredited's deeds of trust may be an indispensible party in an action involving the

foreclosure ofthatdeed of trust does not establish First American or MERS were real

parties in interest on contract and fraud claims asserted by the lender/creditor against a

third party.

We also reject respondents' arguments that Nacif waived her right to assert the

standing issue because she did not "object to MERS and First American being substituted

into Accredited's place." The record makes clear that Nacif's counsel objected to the

substitution, and repeatedly argued that neither First American nor MERS were proper

parties in the action. Moreover, a party moving for summary judgment must establish all

of the facts necessary to support a judgment in its favor even if the opposing party makes

no objections to the moving party's evidence and produces no evidence of its own.

(Rincon v. Burbank Unified School Dist., supra , 178 Cal.App.3d at pp. 954, 956.)

Because MERS and First American had no direct relationship with Nacif, it was

incumbent on them to submit facts showing they had a right to recover for the lender's

claimed losses.

We now turn to examine the summary judgment with respect to each cause of

action asserted by MERS and First American against Nacif.


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2. Breach of Contract Claim Asserted by First American and MERS

In their contract claims, First American and MERS alleged Nacif breached the

2004 Settlement Agreement by: (1) refusing to withdraw the lis pendens after receiving

the settlement funds; (2) refusing to acknowledge that the payment of $115,000

constituted payment of the settlement; and (3) filing the amended complaint after she had

agreed to dismiss the claims with prejudice.4 They alleged that as "a proximate cause of

Nacif's breach of the [Settlement] Agreement," they were "damaged in an amount of at

least the value oftheir[$675,000] loans which had previously been secured by [the] real

property . . . ." (Italics added.)

In moving for summary judgment on this claim, MERS and First American

presented evidence showing the 2004 Settlement Agreement required Nacif to withdraw

her lis pendens, she did not do this or return the settlement funds, and this conduct caused

Accredited to lose its security interest in the property after Jacoby purchased the property

at the foreclosure sale. They further presented the declaration of a mortgage broker

involved in the refinance who stated that the White-Sorensen property was appraised at

approximately $690,000 when White-Sorensen's loan was refinanced in July 2004.

This evidence did not meet respondents' summary judgment burden to prove their

contract claims as a matter of law.

4 First American and MERS also alleged Nacif was liable because she "proceed[ed]with a sheriff's sale of the property without proper notice to Accredited, MERS or FirstAmerican." However, because these parties did not move for summary judgment basedon this allegation, we omit it from our discussion of the propriety of the summary

judgment on the contract claims.


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First, neither party (nor Accredited) was a party to the contract (the 2004

Settlement Agreement) they claimed was breached. Thus, to recover on a breach of

contract claim, MERS and First American were required to establish they were third

party beneficiaries of the contract. (See Civ. Code, 1559.)

To prove third party beneficiary status, the party must show the contracting parties

intendedto benefit the third party; it is not enough the third party would incidentally

benefit from the party's performance. (Spinks v. Equity Residential Briarwood

Apartments (2009) 171 Cal.App.4th 1004, 1022; Souza v. Westlands Water Dist. (2006)

135 Cal.App.4th 879, 891;Neverkovec v. Fredericks (1999) 74 Cal.App.4th 337, 348.)

" 'The fact that . . . the contract, if carried out to its terms, would inure to the third party's

benefit[,] is insufficient to entitle him or her to demand enforcement.' " (Neverkovec,

supra, 74 Cal.App.4th at p. 349.) "On the other hand, 'the third person need not be

named or identified individually to be an express beneficiary.' [Citations.] 'A third party

may enforce a contract where he shows that he is a member of a class of persons for

whose benefit it was made.' [Citations.]" (Spinks, supra, 171 Cal.App.4th at p. 1023.)

"Whether a third party is an intended beneficiary . . . to the contract involves construction

of the parties' intent, gleaned from reading the contract as a whole in light of the

circumstances under which it was entered." (Jones v. Aetna Casualty & Surety Co.

(1994) 26 Cal.App.4th 1717, 1725.)

"Generally, it is a question of fact whether a particular third person is an intended

beneficiary of a contract." (Prouty v. Gores Technology Group (2004) 121 Cal.App.4th


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1225, 1233.) The burden of proof is on the nonsignatory party to establish third party

beneficiary status. (See Neverkovec v. Fredericks, supra, 74 Cal.App.4th at p. 349.)

In moving for summary judgment, MERS and First American relied on the terms

of the 2004 Settlement Agreement as well as communications between Nacif's counsel

and a mortgage broker (Neal Melton) to establish they were third party beneficiaries of

the contract. This evidence was insufficient to meet their summary judgment burden.

First, the 2004 Settlement Agreement does not identify the refinancing lender

(Accredited), and instead pertains exclusively to the settlement between Nacif and White-

Sorensen. The only portion of the agreement that relates to the refinancing loan is a

sentence that states that Nacif's counsel shall deliver a release of the lis pendens to the

escrow officer "[i]f the release is required as a condition to funding a refinance . . . ."

(Italics added.) However, the evidence showed that Accredited did not require the

release as a precondition to funding the refinance and the escrow company did not require

the release before paying the funds to Nacif.

With respect to the communications between Nacif's counsel and mortgage broker

Melton, respondents submitted Melton's declaration who said he was Accredited's agent

during the refinancing process. Melton said that because Accredited was "concerned

about the lis pendens," Melton requested written confirmation from Nacif's counsel that

the lis pendens would be removed. According to Melton, Nacif's attorney provided a

copy of the 2004 Settlement Agreement to Melton, and "confirmed both orally, and in

writing, that the lis pendens would be removed upon payment of the $115,000" to Nacif.


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Melton said Accredited relied on these assurances in agreeing to refinance the loan and

Accredited would not have refinanced the property without these assurances.

To meet its summary judgment burden, a moving party must present evidence that

"would require a reasonable trier of fact" to find in its favor. (Aguilar, supra, 25 Cal.4th

at p. 851.) Under the terms of the 2004 Settlement Agreement, a reasonable trier of fact

could conclude the purpose of the agreement was to resolve the parties' dispute and that

the lis pendens withdrawal requirement was intended to benefit White-Sorensen (to

remove the cloud on his title) and to assist him to obtain funds, and not to directly benefit

his refinancing lender. The facts that the refinance loan was mentioned in the settlement

agreement and that Nacif knew the lender would receive a benefit from Nacif's promise

to remove the lis pendens do not require a finding that Accredited was a third party

beneficiary. Viewing the 2004 Settlement Agreement in light of the totality of the

circumstances, a trier of fact could find Accredited was not an intended beneficiary. (See

Sheppard v. Banner Food Products (1947) 78 Cal.App.2d 808, 812 [lender not a third

party beneficiary of contract between buyer and seller even though lender relied on

parties' express assurances that sale would be completed].)5

5 At oral argument, respondents' counsel complained that Nacif had not specificallyraised the third party beneficiary issue in the proceedings below. However, it wasrespondents' burden to show each element of their contract cause of action to prevail onsummary judgment, and this burden obviously includes a third party beneficiary showingwhere, as here, there is no evidence MERS or First American had a contractualrelationship with Nacif. In any event, we have concluded the court erred in grantingsummary judgment in favor of these parties on numerous grounds, and our discussion ofthe third party beneficiary issue is also intended to assist the parties and court on remand.


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Moreover, even assuming the evidence established the lender (Accredited) was an

intended third party beneficiary, this does not confer third party beneficiary status on

MERS or First American. These parties presented no evidence to show that Nacif had

any intent to benefit these parties, who were suing in their role as trustee of Accredited's

deeds of trust and as nominee and beneficiary on the deeds of trust. Although a party

may establish third party beneficiary status if the party was a member of a class of

entities " 'for whose benefit [the contract] was made' " (Spinks, supra, 171 Cal.App.4th at

p. 1023), the parties presented no evidence that Nacif intended to benefit a class of

trustees or a nominee/beneficiary on a deed of trust. In fact, at the time Nacif and White-

Sorensen entered into the 2004 Settlement Agreement, the deeds of trust were not yet in

existence.

We additionally conclude MERS and First American failed to meet their summary

judgment burden on their contract claim because their submitted evidence would not

require a trier of fact to find Nacif's alleged breach of the 2004 Settlement Agreement

caused them to suffer damages and the amount of those damages. To recover on a breach

of contract claim, each plaintiff moving for summary judgment must show "damages to

plaintiffas a result of the breach." (CDF Firefighters v. Maldonado (2008) 158

Cal.App.4th 1226, 1239, italics added;Emerald Bay Community Assn. v. Golden Eagle

Ins. Corp. (2005) 130 Cal.App.4th 1078, 1088.) " 'Contractual damages are "the amount

which will compensate the party aggrieved for all the detriment proximately caused

thereby, or which, in the ordinary course of things, would be likely to result therefrom."

[Citations.]' " (Emerald Bay Community Assn., supra, 130 Cal.App.4th at p. 1088.)


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MERS and First American alleged they suffered damages in the form of the

impairment/loss of the security for the two loans to White-Sorensen, totaling $675,000,

plus interest and attorney fees. In support, they proffered the two deeds of trust securing

the two loans (totaling $675,000) from Accredited to White-Sorensen. They also relied

on their counsel's declaration, who summarily stated: "Accredited, MERS and First

American have accrued damages of $675,000 . . . by [Nacif's] refus[al] to release the lis

pendens and reactivating this action . . . ." Respondents additionally presented mortgage

broker Melton's declaration, in which he stated that Accredited refinanced the White-

Sorensen property by paying off two deeds of trust totaling $481,765.20 and then loaning

White-Sorensen $675,000 secured by the two deeds of trust. Melton further stated that

"[a]n appraisal obtained in conjunction with the refinance of the property [in 2004]

valued the property at approximately $690,000."

This evidence does not establish these parties suffered damages resulting from

Nacif's breach of contract. First, although they seek to be compensated for the loss of the

security for the two loans totaling $675,000, there is no evidence that either owned the

rights to the proceeds of the loan. Essentially, the court awarded each of these parties

$675,000 without any evidence they lost this amount or, more importantly, that they

would have received this amount if Nacif had fulfilled the claimed contractual

obligations.

Additionally, even if these parties could assert Accredited's alleged loss as a basis

for their claim, the record does not show Accredited was entitled to recover $675,000 as a

matter of law. Melton's assertion that the property was appraised at $690,000 at the time


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of the refinancing (August 2004) does not necessarily mean it had this same value at the

time of the foreclosure sale 18 months later (February 2006). There was no competent

evidence before the court showing the value of the property was at least $675,000 at the

time it was sold, and thus that Nacif's actions were a substantial factor in causing this

amount of lost security.

Additionally, there was evidence showing Accredited had notice of a pending

foreclosure sale and failed to take appropriate actions to prevent the sale and/or to timely

assert its rights in the security. Thus, a factual question exists as to the amount of

damages caused by Nacif's alleged breach of contract (as opposed to losses caused by

Accredited's conduct). Although a moving party plaintiff does not have the burden to

disprove the defendants' affirmative defenses to prevail on a summary judgment motion

(see Santa Ana Unified School Dist. v. Orange County Development Agency (2001) 90

Cal.App.4th 404, 411), Accredited's conduct contributing to its losses is relevant to the

causation element, and not merely to affirmative defenses such as mitigation of damages.

Because the amount of damages caused by Nacif's conduct raises factual questions, it was

not appropriate to grant summary judgment. (See CDF Firefighters v. Maldonado,

supra, 158 Cal.App.4th at p. 1239;Department of Industrial Relations v. UI Video

Stores, Inc. (1997) 55 Cal.App.4th 1084, 1097.)

3. Fraud ClaimsAsserted byFirst American and MERS

We similarly conclude the court erred in granting summary judgment on the fraud

claims brought by First American and MERS.


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MERS and First American asserted two fraud claims against Nacif. First, they

alleged Nacif falsely represented she would withdraw the lis pendens and dismiss her

claims against White-Sorensen upon receipt of the settlement funds. Second, they

alleged promissory fraud, i.e., that Nacif made a promise to withdraw the lis pendens and

dismiss the action without an intent to perform these promises. With respect to both, they

alleged the false promises induced White-Sorensen to pay her $115,000 and caused

MERS to be nominated as the beneficiary under the deeds of trust. They alleged that this

fraud resulted in Nacif obtaining a fraudulent equitable mortgage and judgment of

subordination and that she was unjustly enriched from the proceeds of the sheriff's sale.

In moving for summary judgment on these claims, MERS and First American

relied primarily on the evidence showing that during the escrow process, mortgage broker

Melton spoke with Nacif's attorney, and Nacif's attorney confirmed that the lis pendens

would be withdrawn upon payment of the $115,000 to Nacif. Based on these assurances,

Accredited funded the $115,000 settlement payment and paid it to Nacif's attorney

directly from escrow. Melton said Accredited relied on Nacif's attorney's assurances and

would not have refinanced the property without Nacif's statements that the lis pendens

would be released upon payment of the $115,000.

To prove a fraud cause of action, the plaintiff must show the defendant made a

false representation or a nondisclosure of material fact to the plaintiff; the plaintiff had no

knowledge of the falsity; the defendant had the intent to defraud; and the plaintiff

justifiably relied on the representation (or nondisclosure). (Alliance Mortgage Co. v.

Rothwell (1995) 10 Cal.4th 1226, 1239.) Additionally, the plaintiff must show the


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"plaintiff has been damaged as a result of the defendant's misrepresentation or

concealment of fact." (Saunders v. Taylor(1996) 42 Cal.App.4th 1538, 1542.) Without

damages an alleged fraud is not actionable. (Building Permit Consultants, Inc. v. Mazur

(2004) 122 Cal.App.4th 1400, 1415.)

MERS and First American did not satisfy their summary judgment burden to

establish that there were no triable issues of fact on these elements and that they were

entitled to judgment as a matter of law. First, there was no showing that Nacif made any

misrepresentations to them. At most, Nacif's counsel made a false statement to

Accredited's agent (Melton). The evidence did not show Melton was acting on behalf of

the trustee or nominee/beneficiary on the deeds of trust. Moreover, there was no

evidence that Nacif owed any duty to these parties to disclose material information.

Further, there was no showing the parties suffered a loss from the alleged fraud. Neither

First American nor MERS presented any evidence that they suffered damages.

Additionally, even if these parties could recover for misrepresentations made to

Accredited's agent, the evidence did not compel a finding that Accredited justifiably

relied on Nacif's representations to its detriment. The evidence showed that the lis

pendens remained recorded at all times and the parties knew about (or were on inquiry

notice of) the ongoing superior court action and the fact that the court-ordered sheriff's

sale had been scheduled. The evidence also showed that Accredited did not require the

lis pendens withdrawal as a condition of the refinancing, and that White-Sorensen

represented on the loan application that he earned $34,000 per month.


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On this record, a factfinder could reasonably infer that the promise to withdraw the

lis pendens was not the primary (or even a relevant) factor in Accredited's decision to

lend money to White-Sorensen. A jury could find that it was just as likely that

Accredited agreed to loan White-Sorensen the funds because White-Sorensen's income

provided an adequate source of funds for loan repayment and/or Accredited understood it

could immediately bundle the secured notes with other notes and sell the loan to other

entities, regardless of the value of the security. Further, a jury could reasonably find that

Accredited knew about the pending judicial foreclosure and could have taken steps to

prevent the sale, and thus Nacif's representation about her intention to remove the lis

pendens was not the sole or primary cause of Accredited's loss.

Additionally, as with the breach of contract claim, the evidence on the summary

judgment motion did not show as a matter of law that $675,000 was the amount of

damages suffered by Accredited and/or MERS and First American. Thus, they did not

establish their right to recover on the fraud claim as a matter of law. (SeeDepartment of

Industrial Relations v. UI Video Stores, Inc., supra, 55 Cal.App.4th at p. 1097.)

4. Equitable Claims Brought by First American and MERS

Nacif also challenges the court's summary judgment in favor of First American

and MERS on their equitable subrogation and declaratory relief claims. We agree the

court erred in these rulings.

To the extent the equitable relief was based on the court's findings on the breach of

contract and fraud claims, we have concluded the court erred in granting summary

judgment on these claims. Further, to the extent the equitable relief pertains to priority of


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the deeds of trust and/or equitable mortgage, there was no basis to award this relief

because these parties' rights to assert priority issues based on the Accredited deeds of

trust had been extinguished after the sale of the property to a third party. (See Jacoby,

supra, D054010.) On the summary judgment record before us (and viewing the facts in

the light most favorable to Nacif), Accredited had notice of the foreclosure sale, but took

no timely action to prevent the sale or to offer a bid at the sale to preserve its rights.

Because Accredited no longer had an interest in the property at the time of the summary

judgment motion, First American and MERS could not assert priority issues based on

Accredited's former deeds of trust.

D. Nacif's Second Amended Complaint Against First American and MERS

Nacif's only cause of action against First American and MERS in her second

amended complaint is a claim for declaratory relief, essentially seeking a declaration that

the court should find in her favor on respondents' claims against her. For example, she

sought a declaration that "none of the Defendants has standing to make the claims each

has asserted because none of them any longer owns an interest in or otherwise has a legal

claim related to the Deeds of Trust."

On appeal, Nacif does not directly challenge the court's grant of summary

judgment in favor of these parties on these claims. We thus affirm the court's judgment

with respect to these parties. Because the same issues are raised in the intervention

complaint and the cross-complaint, there is no need for these claims to be litigated in this

pleading.


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II. Anti-SLAPP Motion

Nacif contends the court erred in granting respondents' motion under Code of Civil

Procedure section 425.16 (section 425.16) to strike Nacif's second amended complaint

against White-Sorensen, MERS, and First American.6

Section 425.16 authorizes a defendant to file a special motion to strike any cause

of action arising from an act in furtherance of the defendant's constitutional rights of free

speech or petition for redress of grievances. (Flatley v. Mauro (2006) 39 Cal.4th 299,

311-312.) This anti-SLAPP statute seeks to encourage participation in matters of public

significance and prevent chilling the exercise of constitutional rights through "abuse of

the judicial process." ( 425.16, subd. (a); Flatley v. Mauro, supra, at pp. 312-313.)

Courts must broadly construe the statute. ( 425.16, subd. (a).)

The analysis of an anti-SLAPP motion involves two steps. "First, the court

decides whether the defendant has made a threshold showing that the challenged cause of

action is one 'arising from' protected activity. ( 425.16, subd. (b)(1).) If the court finds

such a showing has been made, it then must consider whether the plaintiff has

demonstrated a probability of prevailing on the claim." (City of Cotati v. Cashman

(2002) 29 Cal.4th 69, 76.) "Only a cause of action that satisfies both prongs of the anti-

SLAPP statutei.e., that arises from protected speech or petitioning andlacks even

6 We reject respondents' argument that Nacif's appeal from the anti-SLAPP orderwas untimely. Additionally, we are required to address the anti-SLAPP ruling regardlessof our conclusions on the summary judgment motions because the court awardedrespondents attorney fees for prevailing on the anti-SLAPP motion. (See 425.16, subd.(c)(1).)


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minimal meritis a SLAPP, subject to being stricken under the statute." (Navellier v.

Sletten (2002) 29 Cal.4th 82, 89.) We review de novo an order granting a motion to

strike. (Soukup v. Law Offices of Herbert Hafif(2006) 39 Cal.4th 260, 269, fn. 3.)

Under these principles, we conclude the court erred in granting respondents' anti-

SLAPP motion.

First, with respect to Nacif's claims against White-Sorensen, the record showed

Nacif had a probability of prevailing on those claims. In fact, this court had already

determined that Nacif had prevailed because of White-Sorensen's default. This ruling

was law of the case. (Nally, supra, 47 Cal.3d at p. 301.) Thus, even if Nacif's claims

against White-Sorensen were subject to the anti-SLAPP statute, the court erred in

granting the motion because Nacif met her burden to show a probability of prevailing on

her claims.

Second, with respect to Nacif's claim against MERS and First American (a single

declaratory relief claim), this claim is not subject to the anti-SLAPP statute. Nacif

brought the declaratory relief claim against MERS and First American solely in response

to arguments brought by these parties that they were indispensible parties. In adding

these parties in the second amended complaint, Nacif did not allege any wrongful

conduct on the part of MERS or First American. Instead, she merely sought declaratory

relief that her actions in foreclosing on the equitable mortgage (that had been previously

approved by the trial court) were proper and that neither MERS nor First American had a

legal basis to challenge these actions. This cause of action essentially mirrored the

claims brought against her by First American and MERS. On this record, Nacif's claim


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did not arise from protected petitioning or free speech activity by MERS or First

American.

III. Judicial Notice

Nacif requested that this court take judicial notice of: (1) the record, court docket,

and Court of Appeal opinion in theNacif Icase; (2) the record on appeal, court docket,

and court file in theJacoby case; and (3) the petition, record, court docket, court file and

disposition in Nacif's earlier writ petition to this court in this case. We grant the request

with respect to our priorNacif Iopinion. We deny the remainder of the request because

the documents are either already contained in the existing appellate record or are not

relevant to the specific appellate issues raised in this case.7

On our own motion, we have also taken judicial notice of documents contained in

the superior court files in this case. (Evid. Code, 459, subd. (a), 452, subd. (d); see

Litmon v. Superior Court(2004) 123 Cal.App.4th 1156, 1162, fn. 3;Becker v. McMillin

Construction Co. (1991) 226 Cal.App.3d 1493, 1496, fn. 3.) We have relied on those

records only to the extent they are relevant to the appellate issues and discussed in this

opinion.

7 Although the court initially issued an order signed by the presiding justice denyingthe motion in its entirety, we later notified the parties that the merits panel wouldreconsider the order after a full review of the record and arguments. (SeeDelmonico v.

Laidlaw Waste Systems, Inc. (1992) 5 Cal.App.4th 81, 83, fn. 1 [a ruling on a motion by asingle appellate justice may be reconsidered by merits panel].) We deny respondents'motion to strike Nacif's reply brief based on our earlier ruling.


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IV. Summary of Conclusions

Based on the law of the case doctrine and the compulsory counterclaim rules, the

court erred in granting White-Sorensen's summary judgment motion on Nacif's second

amended complaint and on White-Sorensen's affirmative pleadings against Nacif. The

court further erred in granting White-Sorensen's anti-SLAPP motion. We thus reverse

these rulings and instruct the court to find in favor of Nacif and against White-Sorensen

on these motions. The court is further ordered to reenter White-Sorensen's entry of

default as it was directed to do inNacif I(seeNacif I, supra, D048938), and to enter a

default judgment against White-Sorensen.

With respect to the affirmative claims brought by MERS and First American

against Nacif, the court erred in granting summary judgment. In reaching this

conclusion, we have not intended to opine on whether these parties will ultimately prevail

on their claims at trial. Our conclusions are based solely on the summary judgment

record before us. Because a summary judgment in favor of a plaintiff is a particularly

drastic procedure that eliminates a defendant's right to defend itself at a trial, a moving

party plaintiff must establish each element of the cause of action and show there are no

triable factual issues with respect to each element. (SeeAguilar, supra, 25 Cal.4th at p.

851.) Although MERS and First American produced some evidence supporting their

claims, they did not meet their burden to show that each element has been established and

thus that there was no defense to the claims.


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With respect to Nacif's second amended complaint against MERS and First

American, Nacif did not challenge the summary judgment on this pleading. We thus

conclude the court properly granted summary judgment on this pleading.

DISPOSITION

The court is ordered to vacate the judgment entered on September 17, 2009 and

enter new orders as follows:

(1) The court shall vacate the summary judgment in favor of White-Sorensen on

Nacif's second amended complaint, and enter a new order denying White-Sorensen's

summary judgment motion with respect to this pleading. The court shall also vacate its

order granting the motion for judgment on the pleadings with respect to White-Sorensen,

and enter a new order denying the motion for judgment on the pleadings with respect to

White-Sorensen. Thus, on remand Nacif's first amended complaint is the operative

pleading against White-Sorensen. The court shall withdraw its order vacating the entry

of default with respect to this pleading, and shall enter a new order reinstating the entry

of default as to White-Sorensen on Nacif's first amended complaint and enter judgment in

Nacif's favor.

(2) The court shall enter a new order denying the summary judgment motion by

White-Sorensen, MERS, First American on their cross-complaint filed on March 27,

2009.

(3) The court shall enter a new order denying the summary judgment motion by

White-Sorensen and MERS on their first amended intervention complaint filed on May

24, 2006.


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(4) The court shall enter an order granting the summary judgment motion filed by

First American and MERS on Nacif's second amended complaint. The court shall

dismiss Nacif's claims against these parties, and dismiss Nacif's second amended

complaint.

(5) The court shall vacate its order granting respondents' anti-SLAPP motion and

enter a new order denying this motion.

(6) The court shall reinstate its order dismissing Accredited from the case.

(7) The court shall vacate its attorney fees award in favor of respondents.

(8) On remand, any further rulings in this case shall be consistent with the

holdings in this opinion and inNacif I.

Respondents are ordered to pay appellant's costs on appeal.

HALLER, Acting P. J.

WE CONCUR:

MCINTYRE, J.

AARON, J.

nacif v white-sorenson

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