Richardson v. Total Lender Sols.

1

ROBERT RICHARDSON, Individually and as Representative, etc., Interveners and Appellants, v. TOTAL LENDER SOLUTIONS, INC., et al., Defendants and Respondents.

CAROL GARRARD, et al., Plaintiffs and Appellants, v. TOTAL LENDER SOLUTIONS, INC., et al., Defendants and Respondents.

H050729

California Court of Appeals, Sixth District

March 29, 2024

NOT TO BE PUBLISHED

(Monterey County Super. Ct. Nos. 16CV002776, 16CV002776)

Greenwood, P. J.

This is the sixth in a series of lawsuits filed in Monterey County involving the subject property: a single-family dwelling in Seaside, California (the Property). The Property was previously owned by Alice Richardson, who died intestate in November 2003. The appellants are Carol Garrard (Alice's daughter, heir, and the administrator of her estate), Kenneth Garrard (Carol's husband), and Robert Richardson (Carol's brother who was also Alice's heir). We shall refer to Carol Kenneth, and Robert jointly as "Plaintiffs."

In this appeal, we review the trial court's order denying Plaintiffs' second motion to vacate a default judgment entered against Carol and Kenneth Garrard in 2015 (Default Judgment) in an action in which some of the respondents sought specific performance of a settlement agreement they entered into with the Garrards in 2011 to settle an action the Garrards had filed against them in 2008 alleging wrongful foreclosure. All of this litigation relates back to a loan that Carol, as administrator of her mother's estate obtained from some of the respondents in 2006, which was secured by a deed of trust on the Property. In this action (Monterey County Superior Court case No. 16CV002776), Plaintiffs seek, among other things, to set aside the Default Judgment.

Plaintiffs contend that the trial court erred when it denied their second motion to vacate, which asserted that the Default Judgment was void for lack of jurisdiction because the nonprobate court that held the prove-up hearing and entered the Default Judgment did not have jurisdiction over the specific performance action (Monterey County Superior Court case No. M128920). They assert that the specific performance action was subject to the "exclusive jurisdiction" of the "probate court" and should have been filed in the probate division of the Monterey County Superior Court because the loan was entered into as part of the proceedings to probate Alice's estate.

We disagree and will affirm the order denying the motion to vacate. We rely on the probate court's order for final distribution of the estate entered in December 2006, which transferred title to the Property to Carol as her sole and separate property subject to all encumbrances associated with the Property, which included respondents' loan. That order was not appealed and when it became final in June 2007, the probate division lost jurisdiction over the Property. The fact that Carol never obtained an order discharging her as administrator of the estate does not change our analysis. Many reasons support the conclusion that the trial court did not err when it determined that the nonprobate, civil division of the court had jurisdiction over the specific performance action and denied the motion to vacate.

I. Facts and Procedural History

A. The Probate Action

Alice's husband and two of her seven children had predeceased her. At the time of her death, Alice's heirs included her five surviving children (plaintiff and appellant Carol Garrard, intervener and appellant Robert Richardson, Clarence Richardson, Lynda Richardson, and Renee Richardson) and two granddaughters (Cherrie Richardson and Valencia Whittington, the children of Alice's deceased daughter, Terry Cotton). (We will refer to Alice's heirs and her son-in-law (plaintiff and appellant Kenneth Garrard) by their first names, and to Carol and Kenneth jointly as the Garrards.)

In April 2004, Carol petitioned for letters of administration and for authorization to administer her mother's estate under the Independent Administration of Estates Act in Monterey County Superior Court case No. MP17109 (Probate Action).^[1] Each of the heirs consented to Carol's appointment as administrator, and the court sitting in probate granted the petition. The only assets of the estate were the Property-which was valued at $325,000 in 2004-and $1,000 worth of furniture.

The Property was red-tagged after Alice's death, apparently due to a fire. In October 2006, Carol, as administrator of her mother's estate, obtained a loan for $265,000 secured by a first deed of trust against the Property. The loan was funded by six individual investors (Investors)^[2] and brokered by David Shapiro and USA Mortgage. The loan documents included a promissory note executed by Carol as administrator of the estate and a first deed of trust. The loan was interest-only for 12 months; the note bore an interest rate of 12.5 percent, included a penalty rate of 17.5 percent in the event of default, and provided for a balloon payment (the entire principal plus any unpaid interest) that was due on October 16, 2007. (We shall hereafter refer to this loan as the Investors' Loan.) The promissory note for the Investors' Loan was secured by a first deed of trust that was recorded on October 30, 2006.

On November 14, 2006, Carol filed a verified first and final report as administrator of her mother's estate. Carol advised the probate court that she had used approximately $150,000 of the proceeds from the Investors' Loan to repair the Property to make it habitable again and increase its value in the event it was ever sold. The remainder of the Investors' Loan was used to pay the costs of obtaining the loan, for estate administration (up to $9,520 in attorney fees, up to $2,000 for closing expenses, and $9,520 to Carol as administrator), and to pay Alice's granddaughters $20,000 each as their inheritance.

Carol told the probate court that the heirs wanted to keep the Property in the family and stated that the only one who had the ability to purchase the Property from the estate was Carol. To that end, Carol proposed executing a second promissory note in favor of her siblings (Clarence, Lynda, Robert, and Renee) in the amount of $180,000 with an interest rate of 6.5 percent as their distributions ($45,000 each) in the Probate Action. The note was to be secured by a second deed of trust on the Property. (We shall hereafter refer to this promissory note as the Siblings' Note.)

On December 15, 2006, the probate court held a hearing on Carol's first and final report, approved the plan for distribution, and entered its order for final distribution. Carol executed the Siblings' Note that same day. The court's order for final distribution provided that "Title to [the Property] shall be held by Carol . . . as her sole and separate property. She shall assume the property subject to all encumbrances associated with it as of the date of this Order," and that the Siblings' Note was to be secured by a second deed of trust against the Property.

On December 19, 2006, Carol filed two receipts on distribution executed by Alice's granddaughters Cherrie and Valencia, acknowledging receipt of $20,000 each as their shares of the estate. There has been no further activity in the Probate Action since that date.

On June 11, 2007, a deed of trust related to the Siblings' Note was recorded against the Property. No one appealed the probate court's order "for final distribution," and that order became final no later than June 13, 2007, which was 180 days after entry of the order. (Cal. Rules of Court, rule 8.104(a)(1)(C).) Two days later, on June 15, 2007, Carol recorded a grant deed in which she added her spouse Kenneth to the title.

B. First Nonjudicial Foreclosure and Unlawful Detainer Action

Carol defaulted on the Investors' Loan. The Investors initiated a nonjudicial foreclosure, purchased the Property at the trustee's sale in November 2007, and title passed to the Investors pursuant to a trustee's deed upon sale. The Garrards continued to reside at the Property after the sale. In February 2008, the Investors filed an unlawful detainer action (Monterey County Superior Court case No. M89010) against Carol.

C. Wrongful Foreclosure Action and 2011 Settlement

In response, in March 2008, the Garrards filed an action for wrongful foreclosure (Monterey County Superior Court case No. M90047, hereafter Wrongful Foreclosure Action) against the Investors and others based on alleged illegalities and usury in the loan process. They alleged, among other things, that just under $115,000 of the loan was for wrongful or unlawful fees, commissions, or impound interest and that Shapiro and USA Mortgage were not licensed to do business in California. The Investors subsequently dismissed the unlawful detainer action.

The parties settled the Wrongful Foreclosure Action in June 2011. The recitals in the settlement agreement stated that the original Investors' Loan was wrongfully brokered and unenforceable. As part of the settlement, the parties agreed to new loan terms, including lowering the principal amount from $265,000 to $200,000 and lowering the interest rate from 12.5 to 5 percent. The written settlement agreement provided that the parties "shall execute and record a new note and trust deed" and required the parties to open a new escrow, prepare a new promissory note, and record certain documents required to restore title to Carol, including a rescission of the trustee's deed upon sale. The parties agreed that the new loan would have a 12-month term that commenced upon Carol's execution of the new promissory note. The Garrards filed a notice of settlement in the trial court and dismissed the Wrongful Foreclosure Action with prejudice on July 1, 2011, before the acts required by the...