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 Post subject: FT - Mahmood and Chaudhry v. Sharif (7/20/2005)
PostPosted: Thu Feb 26, 2009 6:57 pm 

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Erik Christopher v. Omar J. Gonzalez et al.,
No. B175483 (Cal.App. 07/20/2005)

B175483

COURT OF APPEAL OF CALIFORNIA, SECOND APPELLATE DISTRICT,
DIVISION FOUR

2005 Cal. App. Unpub. LEXIS 6317

July 20, 2005, Filed

NOTICE: [*1] NOT TO BE PUBLISHED IN OFFICIAL REPORTS. CALIFORNIA RULES OF COURT, RULE 977(a), PROHIBIT COURTS AND PARTIES FROM CITING OR RELYING ON OPINIONS NOT CERTIFIED FOR PUBLICATION OR ORDERED PUBLISHED, EXCEPT AS SPECIFIED BY RULE 977(B). THIS OPINION HAS NOT BEEN CERTIFIED FOR PUBLICATION OR ORDERED PUBLISHED FOR THE PURPOSES OF RULE 977.

PRIOR HISTORY: APPEAL from a judgment of the Superior Court of Los Angeles County, No. VC031670. Chris R. Conway, Judge.

COUNSEL: Paoli & Paoli and Sylvia L. Paoli for Plaintiffs and Appellants.

Mary Jean Pedneau for Defendants and Respondents.

JUDGES: WILLHITE, JR.; J. EPSTEIN, P.J., HASTINGS, J. concurred.

OPINIONBY: WILLHITE

OPINION: Iqbal Mahmood ("Mahmood") and Maqbool Chaudhry ("Chaudhry") appeal from a judgment entered following a non-jury trial on Mahmood's complaint, Chaudhry's first-amended cross-complaint, and the cross-complaint of Mohammad Sharif, Rukhsana Sharif, and M. Sharif, Inc. (collectively, "the Sharifs"). The case involves competing claims to certain real property located in Cerritos, California, and related claims for damages and other relief. The trial court bifurcated the trial. The first phase involved two claims from the Sharifs' cross-complaint: [*2] quiet title, and declaratory relief. On those claims, the court found in favor of the Sharifs, and quieted title in M. Sharif, Inc., which had purchased the property in a foreclosure sale. In the second phase, the court considered the remaining claims of all parties. On Mahmood and Chaudhry's remaining claims, the court found in favor of the Sharifs, and against Mahmood and Chaudhry. On the Shairfs' claims relevant to this appeal, the court also found for the Sharifs, and against Mahmood and Chaudhry. The court awarded the Sharifs damages of $ 20,000, and attorney fees of $ 85,965.30.

On appeal, Mahmood and Chaudhry contend: (1) the trial court erred in finding they had no standing to challenge the foreclosure sale in which M. Sharif, Inc. obtained title to the Cerritos property; (2) "sufficient credible evidence" existed to prove the parties formed a partnership or joint venture, and a finding of either requires reversal of the judgment; and, (3) the trial court erred in awarding attorney fees to the Sharifs. For the reasons we explain below, we affirm the judgment. Understanding the complex series of events that led to this litigation is necessary to frame the current appeal, and [*3] to explain our holdings. Therefore, we first summarize the background. We then discuss the issues raised on appeal, adding to that discussion a summary of any additional relevant evidence.

BACKGROUND n1

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n1 We base this summary on the testimony presented at the second phase of the trial, together with documents judicially noticed by the trial court in the first phase, and additional documents we have judicially noticed on appeal at the request of Mahmood and Chaudhry. We note that there are significant gaps in the record on appeal. For instance, the record does not include all documents judicially noticed below or introduced in evidence, on which the parties now rely. Of course, to the extent the record on appeal is inadequate to address the appellate issues, those issues are resolved against Mahmood and Chaudhry. (Maria P. v. Riles (1987) 43 Cal.3d 1281, 1295, 240 Cal. Rptr. 872.)

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The Purchase of the Cerritos Property

In 1983 Mahmood, Chaudhry, and Mohammad Sharif ("Sharif") [*4] purchased certain real property located at 20122 and 20126 Pioneer Boulevard in Cerritos, California ("the Cerritos property"). Mahmood and Chaudhry are brothers. Mahmood lived next door to the Cerritos property, and operated a veterinary clinic on his parcel. Chaudhry was a real estate broker and salesperson in Southern California, and orchestrated the purchase of the Cerritos property. Chaudhry was married to Sharif's sister. Sharif was a surgeon who lived in British Columbia, Canada.

The three men recorded title to the Cerritos property in their names and those of their respective wives: Mahmood's wife, Fehmida Mahmood ("Fehmida"); Chaudhry's wife, Nasreen Chaudhry ("Nasreen"); and Sharif's wife, and Rukhsana Sharif ("Rukhsana"). Each couple took an undivided one-third interest in the property as joint tenants. They assumed the existing first deed of trust on the property, and also executed an interest-only promissory note to the sellers, Samuel and Diana Ramos. The principal amount of the Ramos note was $ 239,235.78. The note was secured by a second deed of trust on the property.

The Khatib Litigation

In 1988 Adnan Khatib ("Khatib") filed a lawsuit in Orange County [*5] Superior Court against Mahmood and Chaudhry, alleging a cause of action for slander. In April 1991, while that lawsuit was still pending, Mahmood quitclaimed his interest in the Cerritos property to his wife, Fehmida, and Chaudhry quitclaimed his interest to his wife, Nasreen.

In July 1991 Khatib obtained a judgment of $ 542,159 in his slander lawsuit against Mahmood and Chaudhry. He recorded the judgment in August 1991. In September 1991, in the District Court of Clark County, Nevada, Mahmood and Chaudhry obtained divorce decrees from their wives. Each divorce decree incorporated a written agreement for division of marital property executed by the respective spouses. The agreements made no mention of the April 1991 quitclaim deeds transferring Mahmood and Chaudhry's interests in the Cerritos property to their wives. Rather, in his property settlement agreement with Fehmida, Mahmood purported to transfer his share of the couple's one-third interest in the Cerritos property to Fehmida. In his similar agreement with Nasreen, Chaudhry likewise purported to transfer his interest to Nasreen. In May 1992, Fehmida and Nasreen transferred their interests in the Cerritos property to separate [*6] third party corporations, thereby beginning a chain of subsequent conveyances to additional third party corporations.

Meanwhile, Khatib continued to pursue legal proceedings against Mahmood and Chaudhry. On September 14, 1992, following the alleged breach of a settlement agreement to satisfy the 1991 slander judgment, Khatib filed suit in Los Angeles Superior Court against Mahmood, Chaudhry, Fehmida, and Nasreen (Khatib v. Mahmood, et. al, LASC No. VC009450). Elsewhere in our opinion, we will refer to this suit as the "fraudulent conveyance case." Khatib alleged that in April 1991 Mahmood and Chaudhry had quitclaimed their interests in the Cerritos property to their wives, who then deeded the property to third parties, all to avoid satisfaction of the 1991 slander judgment. Khatib's pleading made no mention of the September 1991 Nevada divorce decrees. Khatib sought damages, and an order setting aside the April 1991 conveyances as fraudulent.

M. Sharif, Inc.'s Purchase of the Ramos Note

As we have noted, Sharif was a surgeon in Canada. He also owned a Canadian professional corporation, M. Sharif, Inc., of which he was president and Rukhsana was secretary. On November 5, 1992, less [*7] than one month after Khatib filed his lawsuit seeking to set aside Mahmood and Chaudhry's April 1991 conveyances to their then-wives, M. Sharif, Inc. paid off the Ramos promissory note, and received an assignment of the Ramos second trust deed. The corporation thereby acquired the power, on the face of the trust deed, to foreclose on the Cerritos property.

Khatib's Default Judgment, and the Related Appeal

Khatib pressed ahead with his fraudulent conveyance case. In July 1994, after the answers of all defendants were stricken for discovery violations, Khatib obtained a default judgment against Mahmood, Chaudhry, Fehmida, and Nasreen. In part, the judgment set aside all "transfers, conveyances, hypothecations, and encumbrances which occurred and were recorded after January 27, 1988" concerning the Cerritos property. The judgment declared that legal title to an undivided one-third interest in the Cerritos property shall be deemed held by Mahmood and Fehmida as community property, and by Chaudhry and Nasreen as community property. Mahmood, Chaudhry, Fehmida, and Nasreen appealed, challenging certain portions of the judgment. However, they did not attack the portion that set aside [*8] the fraudulent conveyances.

While the appeal was pending, Mahmood filed a voluntary Chapter 13 bankruptcy petition in January 1995. In the petition, under penalty of perjury, he declared that he owned no interest in any real property.

On October 9, 1996, in the appeal of the default judgment in Khatib's fraudulent conveyance action, the Court of Appeal reversed certain portions of the judgment. (Khatib v. Mahmood, B087836 (2d Dist., filed Oct. 9, 1996.) However, it affirmed the portion setting aside the fraudulent conveyances because "the parties do not on appeal contest the setting aside of the purported fraudulent conveyances." The opinion did not expressly mention the September 1991 Nevada divorce decrees. However, as discussed in the opinion, Fehmida and Nasreen contended that they were no longer married to their husbands, and that therefore the trial court did not have jurisdiction to impose title as community property rather than as tenancies in common. The court of appeal disagreed, stating: "The first amended complaint characterized the parties as married. To the extent that it can now be established that the parties are divorced, the default judgment of course does [*9] not restore divorced parties to a married state for any purpose. However, any necessary change or clarification as to the ownership of real property merely regarding correct marital status can be addressed administratively to the appropriate county office which records the ownership and status of real property."

M. Sharif, Inc.'s Foreclosure

Against this backdrop, on December 20, 1999, M. Sharif, Inc. gave notice of default and election to sell the Cerritos property under the Ramos deed of trust. The notice stated that the amount due under the Ramos note was $ 454,733.14. At the foreclosure sale held on April 27, 2000, M. Sharif, Inc. was the sole bidder. It purchased the Cerritos property for the amount stated to be due on the Ramos note, $ 454,733.14, and received title to the property through a trustee's deed upon sale.

The Present Litigation

M. Sharif, Inc.'s purchase of the Cerritos property prompted the present litigation. The litigation began with Mahmood filing suit against Sharif, Rukhsana, and M. Sharif, Inc. (collectively, "the Sharifs"), alleging that the foreclosure sale improperly erased Mahmood's interest in the property. n2 Mahmood's complaint alleged [*10] causes of action for fraud, breach of fiduciary duty, conversion, imposition of a constructive trust, declaratory relief, and injunctive relief.

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n2 The complaint also named Samuel D. Ramos and Diana Ramos. Because the Ramoses were never served, the trial court dismissed them.

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The Sharifs filed a cross-complaint against Mahmood, Chaudhry, Fehmida, Nasreen, and other named cross-defendants, including Khatib. n3 The Sharifs alleged 15 causes of action, among them a quiet title claim relating to the Cerritos property, and a declaratory relief claim seeking a declaration that the foreclosure sale was valid.

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n3 The Sharifs' cross-complaint named several other cross- defendants, none of whom is a party to this appeal: Mohammad Aman, I.L.U., Inc., Safeway Properties, Inc., Centurion Union Trust, Five Stars of Northern Sky Trust, Professional Skagit, Valley Trust as Trustee of 800 Greenbase Trust, and the SHA Shine Trust as Trustee of HMB Growth Trust.

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Having been brought into the case as a cross-defendant named in the Sharifs' cross-complaint, Chaudhry filed a cross-complaint of his own against the Sharifs, Fehmida, and Nasreen. His operative pleading was his first amended cross-complaint, though for ease of reference we will hereafter refer to it his "cross-complaint." n4 Like Mahmood, Chaudhry challenged the validity of the foreclosure sale. He alleged causes of action for fraud, breach of fiduciary duty, imposition of a constructive trust, declaratory relief, breach of the implied covenant of good faith and fair dealing, and breach of contract.

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n4 Chaudhry's cross-complaint also named Samuel and Diana Ramos as cross-defendants. At the same time the trial court dismissed the Ramoses from the Mahmood complaint, it also dismissed them from the Chaudhry cross-complaint.

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The Trial Proceedings

As here relevant, only Chaudhry, Mahmood, and the Sharifs participated in the trial court proceedings, and they are the sole parties in the instant appeal. n5 [*12] After they waived their right to a jury trial, the trial court held the trial in two, bifurcated phases. The first phase considered only the quiet title and declaratory relief claims of the Sharifs' cross-complaint. On those claims, the court ruled that Mahmood and Chaudhry lacked standing to challenge the foreclosure sale in which M. Sharif, Inc. acquired title to the Cerritos property. Therefore, the court found in favor of M. Sharif Inc., and against Mahmood and Chaudhry, on the quiet title and declaratory relief claims of the Sharifs' cross-complaint.

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n5 So far as the record reveals, the Sharifs apparently served their cross-complaint on Fehmida and Nasreen, and later took their default. Chaudhry apparently failed to serve his cross-complaint on Fehmida and Nasreen. The record is unclear as to precisely what became of Khatib. In any event, he is not a party to the appeal.

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In the second phase of the trial, the court considered the parties' remaining claims for damages and other relief. As here relevant, these [*13] claims included: (1) from Mahmood's complaint against the Sharifs, Mahmood's claims for fraud and breach of fiduciary duty; (2) from Chaudhry's cross-complaint against the Sharifs, Chaudhry's claims for fraud, breach of fiduciary duty, breach of the implied covenant of good faith and fair dealing, and breach of contract; and, (3) from the Sharifs' cross-complaint against Mahmood and Chaudhry, the Sharifs claims for damage to real property, breach of contract, and breach of fiduciary duty. n6

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n6 At the second phase, the court also considered various tort and other claims made by the Sharifs against Mahmood and Chaudhry. Those claims are not pertinent, because the court rendered judgment on them in favor of Mahmood and Chaudhry. Further, the court considered certain claims against cross-defendant Tanveer Kahalid, who did not participate in the trial and is not a party to this appeal.

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Following evidence and argument on the second phase, the court issued a tentative decision in which it resolved all of Mahmood and [*14] Chaudhry's remaining claims in favor of the Sharifs, and against Mahmood and Chaudhry. On the Sharifs' claims against Mahmood and Chaudhry for damage to real property, breach of contract, and breach of fiduciary duty, the court found for the Sharifs, and against Mahmood and Chaudhry. The court awarded the Sharifs damages of $ 20,000.

The court entered judgment in accord with the results of the first and second phases. Subsequently, the court granted the Sharifs' motion for attorney fees, and awarded $ 85,965.30. This appeal by Mahmood and Chaudhry followed.

DISCUSSION

I. The Trial Court Properly Entered Judgment
for the Sharifs on Their Quiet Title and Declaratory Relief Claims

Mahmood and Chaudhry contend that the trial court erred in finding that they lacked standing to challenge the validity of the foreclosure sale in which M. Sharif, Inc. purchased the Cerritos property. We disagree. The court's decision in favor of the Sharifs was a proper exercise of its equitable power. We begin by summarizing the relevant proceedings in the first phase of the bifurcated trial.

The First Phase Proceedings

Trial began on October 2, 2001. Initially, the court [*15] severed certain defendants and cross-defendants. n7 Next, following a discussion of Mahmood and Chaudhry's 1991 Nevada divorce decrees and the appeal of the default judgment in Khatib's fraudulent conveyance case, the court bifurcated the quiet title and declaratory relief claims of the Sharif cross-complaint, and elected to try them first. The court concluded that title to the property could be litigated through these two claims, and if necessary the court could hold a second phase of the trial on all remaining claims in Mahmood's complaint, and in Sharifs' and Chaudhry's cross-complaints.

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n7 The Sharifs had only recently been able to serve their cross-complaint on Khatib, and his period to file a responsive pleading had not yet expired. Further, the Sharifs were in the process of serving several corporate cross-defendants by publication. The Sharifs moved to sever Khatib and the corporate cross-defendants. The trial court granted the motion. The court reasoned, in substance, that the corporate defendants' chain of title to the Cerritos property derived from Mahmood and Chaudhry. Therefore, the court could litigate Mahmood and Chaudhry's claims first, and in a later phase, if necessary, determine the rights of the corporate cross-defendants. The court also reasoned that Khatib's claims could be litigated after determining the respective rights of Mahmood, Chaudhry, and the Sharifs.

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The court then began the first phase of the trial. The Sharifs quiet title and declaratory relief claims sought a finding that M. Sharif, Inc. validly acquired title to the Cerritos property through the April 2000 foreclosure sale. Based on the 1991 Nevada divorce decrees, the Sharifs contended that Mahmood and Chaudhry lacked standing to contest the 2000 foreclosure sale. They also contended that Mahmood and Chaudhry's failure to tender the amount claimed to be due on the Ramos note was fatal to any challenge to the foreclosure sale.

After the parties waived opening statements, the trial court took judicial notice of 31 documents offered by the Sharifs. n8 Among the documents presented to the court were copies of: (1) Mahmood and Chaudhry's 1991 Nevada divorce decrees, which incorporated the property settlement agreements in which Mahmood purported to transfer his interest in the Cerritos property to Fehmida, and Chaudhry purported to transfer his interest to Nasreen; (2) Chaudhry's bankruptcy petition dated January 11, 1995, in which Chaudhry listed Khatib's judgments, and also claimed no interest in any real property; and (3) the trustee's deed from the foreclosure sale, which [*17] stated that the M. Sharif, Inc. acquired title to the Cerritos property. Also, without objection, the court considered the parties' references to the judgment in Khatib's fraudulent conveyance action, and the Court of Appeal's opinion affirming that judgment.

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n8 As far as we can tell, only some of the documents are included in the record on appeal. Nonetheless, because we find the available record sufficient to decide the Mahmood and Chaudhry's contention, we will address the claim on its merits.

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At the first phase, the Sharifs called Mahmood as a witness. He testified briefly on matters relevant to the Sharifs' argument that Chaudhry and Mahmood lacked standing because they did not tender the amount due on the Ramos note. n9 Following this testimony, the parties argued whether the failure to tender precluded Mahmood and Chaudhry from contesting the validity of the foreclosure sale. Before taking the evening recess, the court invited the parties to provide case authority to the court concerning whether the failure [*18] of Mahmood and Chaudhry to tender could be excused.

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n9 Mahmood testified that he received a copy of the notice of default on the Ramos note. However, he did not tender any amount. Mahmood explained that the notice came from M. Sharif, Inc., and Mahmood did not know what the corporation was or what connection it had to the Cerritos property. Also, he considered the amount due to be inflated, because he and Chaudhry had paid more than $ 200,000 in expenses.

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The next morning, October 3, 2001, the Sharifs filed a supplemental brief discussing the tender issue. They argued that there is no exception from the tender requirement. Mahmood and Chaudhry did not file a brief, but argued orally that the court had the equitable power to excuse their failure to tender. Following the parties' arguments on the tender issue, the court returned to the issue whether, because of the 1991 divorce decrees, Mahmood and Chaudhry lacked standing to contest the foreclosure sale. In response to questioning by the court, Mahmood and Chaudhry's [*19] attorney stated that the judgment in Khatib's fraudulent conveyance case set aside the transfers to Fehmida and Nasreen, and ordered that Mahmood and Chaudhry's interests be held as community property. He further stated that the Court of Appeal affirmed the judgment. Therefore, he contended, as of the date of the court of appeal's opinion (Oct. 9, 1996), Mahmood and Chaudhry's interests in the Cerritos property were restored, giving them standing to contest the foreclosure sale.

Following argument, the court ruled that Mahmood and Chaudhry lacked standing to challenge the foreclosure proceedings. Therefore, the court found in favor of the Sharifs on their quiet title and declaratory relief claims. The court quieted title in accordance with the foreclosure sale in which M. Sharif, Inc. purchased the property. The court expressly based its decision on the effect of the 1991 Nevada divorce decrees, and did not rule on the tender issue.

Later, after an in-chambers conference with all counsel, the court continued trial of the parties' remaining claims. The court ruled that it would permit the parties to file various motions, among them a "motion for reconsideration" by Chaudhry and Mahmood [*20] addressing the court's ruling that they lacked standing to challenge the foreclosure sale. Subsequently, Chaudhry and Mahmood filed a written motion for reconsideration. Their arguments tracked those already asserted. They argued that a transfer of a real property interest may be deemed fraudulent even if contained in a divorce decree. They further argued that the 1991 Nevada divorce decrees "provided a grossly unequal division of Marital Property without adequate consideration," were designed to avoid payment of Khatib's slander judgment, and were therefore fraudulent within the meaning of the Uniform Fraudulent Transfer Act (Civ. Code § 3439, et. seq.). Again, they asserted that the judgment in Khatib's fraudulent conveyance case restored their interests in the Cerritos property, and gave them standing to challenge the foreclosure sale. In addition, they stated that even after their fraudulent transfers, they continued to manage the property and made financial contributions. Therefore, in their view, they had a beneficial interest in the property. Accompanying the motion was a chronology setting forth in very summary form the relevant events we have discussed in our summary of the [*21] background to the instant litigation.

The Sharifs opposed the motion for reconsideration primarily on procedural grounds. In their reply, Mahmood and Chaudhry argued that their motion was procedurally proper. They also asked for judicial notice of Chaudhry's entire bankruptcy file, and Mahmood and Chaudhry's entire divorce files. They specifically listed certain documents apparently contained in the files. However, the files referred to are not included in the record, and we cannot locate the specific items listed.

After continuing the motion for reconsideration (as well as other motions), the court heard the motion on November 15, 2001. The court noted that Mahmood and Chaudhry had consented to the property distribution in the 1991 Nevada divorce decrees. The court asked their attorney whether they were therefore "almost estopped" from now contending that they recovered an interest in the property so as to be able to challenge the foreclosure sale, because their prior attempts to divest themselves were fraudulent. The court found "a real problem" in applying findings in Khatib's case to the Sharifs' claims to the Cerritos property as against Mahmood and Chaudhry. Mahmood and Chaudhry's [*22] attorney reiterated the arguments already made.

After hearing argument, the court denied the motion for reconsideration, simply finding that there was no basis on which to grant reconsideration.

The Trial Court Properly Exercised its Equitable Power

On appeal, Mahmood and Chaudhry contend that the judgment in Khatib's fraudulent conveyance case, affirmed on appeal, reestablished their interest in the Cerritos property, and gave them the right to challenge the validity of the foreclosure sale in which M. Sharif, Inc. acquired title. Therefore, they contend that the trial court erred in concluding that they had no standing to oppose the quiet title and declaratory relief claims in the Sharifs' cross-complaint. We find that the trial court did not abuse its equitable discretion in finding for the Sharifs, and against Mahmood and Chaudhry. n10

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n10 We note that this appeal concerns only the title of M. Sharif, Inc. to the property as against the claims of Mahmood, and Chaudhry. We express no opinion on the rights -- legal or equitable -- Khatib might have to the property as a judgment creditor of Mahmood and Chaudhry.

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As against Mahmood and Chaudhry, the Sharifs' quiet title claim did not involve any claim relating to possession of the Cerritos property. Nor did Mahmood and Chaudhry's answers to the Sharifs' cross-complaint raise any defense relating to possession. Further, in the first phase of the trial, the parties mentioned no claim or defense that referred to the issue of rightful possession, and the court did not resolve any such issue. Hence, the bifurcated trial of the Sharifs' quiet title claim was purely equitable. (Thomson v. Thomson (1936) 7 Cal.2d 671, 681 [quiet title claim is equitable when right to possession not involved]; Campbell v. Rustigian (1943) 60 Cal. App. 2d 500, 503 [same].) So, too, was the trial of the Sharifs' declaratory relief claim. (Porter v. Superior Court (1977) 73 Cal. App. 3d 793, 801, 141 Cal. Rptr. 59 [where underlying claim is equitable in nature, cause of action for declaratory relief is also equitable].)

Because the trial court exercised equitable jurisdiction in resolving the quiet title and declaratory relief claims, "we review the judgment under the abuse of discretion standard. [Citations. [*24] ] Under that standard, we resolve all evidentiary conflicts in favor of the judgment and determine whether the court's decision '"falls within the permissible range of options set by the legal criteria."' [Citations.]" (Hirshfield v. Schwartz (2001) 91 Cal.App.4th 749, 771.)

To the extent the court and parties believed that the 1991 Nevada divorce decrees directly affected legal title to the Cerritos property, they were mistaken. A court of one state with personal jurisdiction over the marital parties may determine those parties' interests in land located in another state; but the divorce judgment does not directly affect legal title to the property. (Rozan v. Rozan (1957) 49 Cal.2d 322, 330 (Rozan); see Fall v. Eastin (1909) 215 U.S. 1, 11-12, 54 L. Ed. 65.) Rather, a change in title can be effected only by bringing a later action on the judgment in the state in which the land is located. (Rozan, supra, 49 Cal.2d at pp. 331-332.) In the instant case, there is no evidence that any actions on the Nevada divorce decrees were brought in California. Thus, the divorce decrees were ineffectual in transferring [*25] legal title to Fehmida and Nasreen.

Even though it appears that the trial court (like the parties) misapprehended the legal effect of the Nevada divorce decrees, that mistake does not affect the validity of the court's determination, sitting as a court of equity, that Mahmood and Chaudhry could not challenge M. Sharif, Inc.'s title acquired in the foreclosure sale. The court's oral statements as to the reasons for its first-phase decision, having not been specifically incorporated into a final statement of decision (see Cal. Rules of Court, rule 232(a)), are not a basis for challenging the validity of the judgment. (Taormino v. Denny (1970) 1 Cal.3d 679, 684, 83 Cal. Rptr. 359; In re Marriage of Ditto (1988) 206 Cal. App. 3d 643, 646, 253 Cal. Rptr. 770.) Moreover, "'No rule of decision is better or more firmly established by authority, nor one resting upon a sounder basis of reason and propriety, than that a ruling or decision, itself correct in law, will not be disturbed on appeal merely because given for a wrong reason. If right upon any theory of the law applicable to the case, it must be sustained regardless of the considerations [*26] which may have moved the trial court to its conclusion.' [Citation.]" (D'Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 19, 112 Cal. Rptr. 786.) If there is a sound basis for affirming the court's decision on appeal, there can be no prejudicial error from the court's erroneous logic or reasoning. (Mike Davidov Co. v. Issod (2000) 78 Cal.App.4th 597, 610.)

In the instant case, the trustee's deed from the foreclosure sale showed that M. Sharif, Inc. owned full title to the Cerritos property. From the parties' arguments and the documentary evidence (including the appellate opinion in the appeal from Khatib's fraudulent conveyance action), it was undisputed that in April 1991 Mahmood quitclaimed his interest in the Cerritos property to Fehmida, and that Chaudhry quitclaimed his interest to Nasreen. The motive was to avoid enforcement of any judgment Khatib might obtain against them in his slander suit. After Khatib received a large monetary judgment, Mahmood and Chaudhry obtained the 1991 Nevada divorce decrees, in which they purported to transfer their interests in the Cerritos property to their respective wives. Moreover, in his bankruptcy [*27] petition of January 1995, Mahmood listed Khatib's judgments against him, and declared under penalty of perjury that he did not own an interest in any real property.

Thus, as recognized by the trial court, the documentary evidence contained clear evidence (some of it arising from prior legal proceedings) that Mahmood and Chaudhry professed to have no interest in the Cerritos property. Further, in argument Mahmood and Chaudhry's attorney conceded that their purported transfers of their interests in the property constituted fraudulent conveyances. Thus, having previously disclaimed any interest in the property in order to perpetrate a fraud on Khatib, Mahmood and Chaudhry had no right in equity to contest the validity of the title M. Sharif, Inc. obtained in the foreclosure sale.

Of course, Mahmood and Chaudhry argued in the trial court, as they do on appeal, that the judgment in Khatib's fraudulent conveyance case restored their interests, and that therefore they had a right to challenge the foreclosure sale. However, as between the Sharifs on the one hand, and Mahmood and Chaudhry on the other, the judgment in Khatib's fraudulent conveyance action was of no import in determining [*28] the Sharifs' quiet title and declaratory relief claims. By relying on the judgment in Khatib's fraudulent conveyance action as a reason to allow them to challenge the foreclosure sale, Mahmood and Chaudhry sought to derive a benefit in the instant case from the fraud they perpetrated on Khatib. Accepting that defense would violate a fundamental principle of equity: "no one can take advantage of his own wrong." (Civ. Code § 3517; see Wilkins v. City of San Bernardino (1946) 29 Cal.2d 332, 342; Gipson v. Spears (1955) 134 Cal. App. 2d 370, 376.) Thus, on the record presented to the trial court in the first phase, the trial court's finding that Mahmood and Chaudhry lacked standing was clearly a proper exercise of the court's equitable power. n11

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

n11 We note that Mahmood and Chaudhry are also mistaken in asserting that the Khatib judgment had anything to do with the Nevada divorce decrees. A default judgment may not grant relief in excess of that demanded in the complaint. (Code Civ. Proc., § 580, subd. (a); see Greenup v. Rodman (1986) 42 Cal.3d 822, 829, 231 Cal. Rptr. 220; Burtnett v. King (1949) 33 Cal.2d 805, 807.) Insofar as the appellate record shows, Khatib's action challenged only Mahmood and Chaudhry's April 1991 conveyances to Fehmida and Nasreen, respectively. It did not allege any facts regarding the 1991 Nevada divorce decrees, and hence its prayer for relief did not include a request that the purported transfers in those decrees be set aside. Thus, on the evidence presented to the trial court, Khatib's judgment as affirmed on appeal had nothing to do with the Nevada divorce decrees.

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [*29]

Mahmood and Chaudhry raise various other theories under which they contend they have standing to challenge the foreclosure. However, these theories were not raised during the first phase. Moreover, in support of the theories Mahmood and Chaudhry rely on evidence not presented until the second phase. Hence, these theories are not properly presented in support of a contention that the trial court erred in the first phase. In any event, Mahmood and Chaudhry's additional claims do not affect the determination that substantial evidence supports the trial court's ruling.

Finally, it is not entirely clear that Mahmood and Chaudhry's "motion for reconsideration" was a procedurally proper device to challenge the trial court's initial ruling. However, the proceedings on the motion (even if properly considered) have no effect on our decision. We have not been presented with the purportedly "new evidence" on which Mahmood and Chaudhry relied in the trial court. Further, the arguments raised were simply cumulative to those made when the court made its initial ruling. They add nothing to the determination that the trial court did not abuse its discretion in resolving the Sharifs' quiet title [*30] and declaratory relief claims in favor of M. Sharif, Inc., and against Mahmood and Chaudhry.

II. Substantial Evidence Supports the Trial Court's Finding
that the Sharifs Did Not Violate Any Fiduciary Duty

Mahmood and Chaudhry contend that "sufficient credible evidence" proved that they entered a joint venture or partnership with Sharif, Rukhsana, Fehmida, and Nasreen with respect to the Cerritos property. They argue, in substance, that because the trial court concluded that the parties were, at best, members of a joint venture, it should have found that the Sharifs breached their fiduciary duties to Mahmood and Chaudhry. They further argue that this purported error requires reversal of the entire judgment.

We note that Mahmood and Chaudhry fail to explain precisely how the trial court's purported error requires us to set aside the trial court's decision on all of their claims, and all of the Sharifs' claims. However, there is a more fundamental flaw: the argument fails to interpret the trial court's findings properly, and fails to present any error by the court at all. We begin by summarizing the relevant testimony at the second phase. n12

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

n12 For reasons not apparent from the record, the second phase was not held until January 2004.

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [*31]

Testimony In Support of Mahmood and Chaudhry n13

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

n13 Technically speaking, all witnesses in the second phase were called by Mahmood and Chaudhry, including Sharif and Rukhsana. The Sharifs then questioned the witnesses for the combined purposes of cross-examination and eliciting evidence in support of their own case-in-chief.

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

Mahmood and Chaudhry testified in support of their claims.

In 1983 Chaudhry, who was a licensed real estate broker, had the real estate listing for the Cerritos property. The property included a commercial building (then used as a hair salon), a house, and a back cottage. Samuel and Diana Ramos, who operated the hair salon, owned the property, subject to a first trust deed. Initially, Chaudhry made an offer on the property solely for Mahmood, who owned a building on adjacent property, where he operated a veterinary hospital. The Ramoses accepted the offer. Escrow opened on January 7, 1983.

While the property was in escrow, Mahmood, Chaudhry, and Sharif discussed becoming joint [*32] purchasers of the property, along with their respective wives. At the time, Chaudhry was involved in an oral "family partnership" with Sharif through which they had purchased property in Canada. Chaudhry believed that the arrangements for the purchase of the Cerritos property would be relatively the same.

According to Chaudhry, he agreed with Mahmood and Sharif that each married couple would be responsible for one-third of the down payment. The couples would take title to the property in their names, subject to the first trust deed, and subject to a second trust deed to be held by the sellers, Samuel and Diana Ramos. Because the property had a negative cash flow, each couple would contribute equally every month to pay the mortgages and expenses. Each couple would also share equally in the profits, if any. Chaudhry and his wife would collect rent, see that necessary payments were made, and solicit tenants. Depending on who was available, all the parties would help in maintaining the property.

Escrow closed on March 17, 1983. The purchase price was $ 355,000. The down payment was $ 60,000. Chaudhry paid $ 40,000 of the down payment -- his and Sharif's respective one-third shares [*33] -- while Mahmood contributed his one-third share of $ 20,000. Sharif contributed nothing. The couples assumed the debt of $ 55,777, reflected in the first trust deed. The couples executed a promissory note to the Ramoses, secured by a second deed of trust, in the sum of $ 239,223.

In the following years, Sharif was frequently late in contributing money to pay the mortgages and expenses. By 1992, Sharif had made no contribution to pay down the principal of the Ramos note. However, Mahmood and Chaudhry had contributed funds to pay down the principle to $ 78,429.58, an amount approximately equal to Sharif's remaining share of the principal. Yet, because of Sharif's delinquencies, Chaudhry was unable to make timely payments each month to the Ramoses. Samuel Ramos insisted that the note be paid off as soon as possible, at times making demands in person on Mahmood. Therefore, Chaudhry suggested to Sharif that Sharif pay off the remaining debt. Sharif agreed to do so through an escrow account. Chaudhry opened an escrow account, into which Sharif contributed $ 58,000 and Chaudhry contributed $ 20,000. Chaudhry made the contribution because Sharif did not have enough funds to pay off the [*34] note.

The Ramos note was paid off through escrow. The Ramoses executed a reconveyance of their deed of trust, but it was not recorded. Because Chaudhry had paid $ 20,000 of Sharif's portion of the remaining balance of the Ramos note, Sharif owed Chaudhry that sum. Apparently because he believed it would be to his economic advantage, Sharif suggested that the Ramoses assign their deed of trust to Sharif's corporation, M. Sharif Inc. Chaudhry agreed. To implement this plan, the Ramoses executed an assignment of their deed of trust to M. Sharif, Inc. Chaudhry believed that Sharif would pay off his debt to Chaudhry, and then Chaudhry or Sharif would record the Ramoses' reconveyance of the deed of trust. Chaudhry took possession of the Ramos note. Sharif received the assignment of the deed of trust to M. Sharif, Inc.

Chaudhry and Mahmood did not contemplate the possibility of a foreclosure sale, because nothing more was owed on the Ramos second trust deed.

Testimony in Support of the Sharifs

Sharif and Rukhsana testified in support of their claims.

When the Cerritos property was purchased in 1983, Chaudhry assured Sharif that he and Mahmood, both of whom lived locally, would [*35] handle the management and maintenance of the property. However, there were no discussions assigning specific duties, and no specific agreement, written or oral. The wives were included as joint tenants because Chaudhry told Sharif that California law required it.

When the Cerritos property was purchased, Sharif paid his one-third portion of the down payment, $ 20,000, by check sent to Chaudhry. Thereafter, occasionally Chaudhry would ask Sharif to contribute funds for expenses, and Sharif would do so.

In 1992 Chaudhry told Sharif that he and Mahmood could not make payments on the Ramos note, and suggested that Sharif purchase it through his professional corporation in Canada, M. Sharif, Inc. Though not enthusiastic about the plan, Sharif agreed. Sharif did not know the current balance due on the note, because Chaudhry had not kept him informed. Further, neither Chaudhry nor Mahmood ever informed Sharif that they had paid off a portion of the principal, and Sharif never received any financial statements reflecting such a pay off.

On behalf of M. Sharif, Inc., Sharif paid $ 65,000 into escrow to purchase the Ramos note. Chaudhry paid $ 20,000. Sharif believed that Chaudhry's contributions [*36] reflected Sharif's share of the insurance proceeds for fire damage that had occurred on the property. Through the escrow, M. Sharif, Inc. bought the Ramos note, and received an assignment of the Ramos deed of trust.

In the months before Chaudhry's bankruptcy filing of January 1995, Chaudhry asked Sharif to foreclose on the Cerritos property in order to resolve Chaudhry's legal problems, apparently referring to the July 1994 judgment in Khatib's fraudulent conveyance action. Chaudhry told Sharif that without the foreclosure, he would be forced to declare bankruptcy. Because Sharif was in Canada and his surgical practice was very busy, he was unable to find the documents necessary to commence foreclosure proceedings until months later. By that time, Chaudhry had already filed for bankruptcy. Therefore, foreclosure proceedings were not commenced. The delay in finding the documents caused a rift between Chaudhry and Sharif, because Chaudhry blamed Sharif for having to file for bankruptcy.

Unbeknownst to Sharif, Chaudhry and Mahmood had not paid the property taxes on the subject property since 1997. Also, Khatib had been seeking to perfect his judgment lien against the Cerritos property. [*37] Sometime around 1999 Mahmood told Sharif that unless he foreclosed on the property through M. Sharif, Inc, the property might well be lost in a tax sale or through the efforts of Khatib. It was at Mahmood's request that Sharif accomplished the foreclosure.

According to Rukhsana, in 1999 Mahmood called her to urge that Sharif foreclose on the property. Mahmood was desperate, because Chaudhry and Sharif were not talking, and Mahmood believed that the property would be lost in a tax sale. Mahmood guided Rukhsana through the foreclosure process. Rukhsana calculated the amount due on the Ramos note to be $ 442,905.28. She based this calculation based on the principal, and accrued interest. Mahmood never told her that any portion of the principal had been paid off. Rukhsana believed that only interest had been paid. Mahmood's assistance with the foreclosure ended when Mahmood asked Sharif to give him two-thirds of the foreclosure proceeds, and Sharif refused. At the foreclosure sale in April 2000, M. Sharif, Inc. bought the property.

Substantial Evidence Supports the Trial Court's Finding that the Sharifs Did Not Breach Any Fiduciary Duty

As pertinent to this appeal, in its second-phase [*38] tentative decision, the court found that "at best, all of the parties entered into a kind of a co-joint venture or were simply co-owners of the subject property." The court further found that Mahmood and Chaudhry failed to prove "what [fiduciary] duty, if any," the Sharifs breached. As the court observed, "the only instance of any alleged 'wrongful' conduct by the [Shairfs] concerned the facts and circumstances surrounding the foreclosure of the subject property under the terms and conditions of [the Ramos note and second deed of trust]." However, the evidence showed that Mahmood and Chaudhry "actively encouraged" the Sharifs to foreclose on the Cerritos property. Moreover, according to the court, Mahmood and Chaudhry had failed to prove that the Ramos note held by M. Sharif, Inc. had been paid in full, and that M. Sharif, Inc. did not have the right to institute foreclosure proceedings and purchase the property outright. They also failed to prove that they had any agreement with the Sharifs requiring that the property be held in trust for the benefit of all the original parties, or that the M. Sharif, Inc. was to convey an interest in the property back to the original parties. [*39] Finally, the court noted that Mahmood and Chaudhry had earlier attempted to transfer their interests in the Cerritos property to avoid paying their creditors.

We understand Mahmood and Chaudhry to argue that because the trial court concluded that the parties were, at best, members of a joint venture, the court should have found that the Sharifs breached their fiduciary duties to Mahmood and Chaudhry. As Mahmood and Chaudhry note, the existence of a joint venture gives rise to a fiduciary relationship among the members of the joint venture. (See Weiner v. Fleischman (1991) 54 Cal.3d 476, 482, 286 Cal. Rptr. 40.) However, that Mahmood and Chaudhry may have proved the existence of a fiduciary relationship does not necessarily mean that they proved the Sharifs breached any fiduciary duties. The trial court specifically found to the contrary, and substantial evidence supports the finding.

Of course, we resolve all conflicts of the evidence in favor of the judgment, and presume in support of the judgment all facts that may reasonably be inferred. (Kuhn v. Department of General Services (1994) 22 Cal.App.4th 1627, 1632-1633.) Under this standard, although [*40] the evidence was conflicting, it was sufficient to prove that in 1992 Chaudhry asked Sharif to purchase the Ramos note in the name of M. Sharif, Inc. The purchase was accomplished in November 1992, less than one month after Khatib filed his lawsuit seeking to set aside Mahmood and Chaudhry's April 1991 conveyances to their then-wives. Given Mahmood and Chaudhry's desire to shield their interests in the Cerritos property from Khatib's legal proceedings, it may reasonably be inferred that Mahmood and Chaudhry wanted M. Sharif, Inc. to acquire the ability to foreclose on the property. Indeed, in January of 1995 Chaudhry asked Sharif to institute foreclosure proceedings for the precise purpose of concealing the property from Khatib. When Sharif delayed, Chaudhry sought the protection of bankruptcy instead, and filed his petition professing to have no interest in any real property. Later, in 1999, Mahmood urged Sharif to foreclose, in order to save all the parties' interest in the property from loss at a tax sale, or from Khatib's continuing legal proceedings. Only at Mahmood's request, and with his assistance, did Sharif and Rukhsana take the actions necessary to have M. Sharif, Inc. foreclose [*41] on the property. Further, the foreclosure was accomplished to benefit both Mahmood and Chaudhry: unless M. Sharif, Inc. took full title, Mahmood and Chaudhry would still have interests in the property that could be reached by Khatib.

As the trial court concluded, there was no evidence of any agreement that Mahmood and Chaudhry would somehow be entitled to have the property held in trust, or to receive a reconveyance of an interest in the property. That Mahmood and Chaudhry may have assumed they would receive some undescribed, sub rosa benefit from the foreclosure sale does not mean the Sharifs violated a fiduciary duty by not providing it. Clearly, a reasonable trier of fact, viewing the entire record, could conclude that by arranging M. Sharif, Inc.'s purchase of the property at foreclosure, the Sharifs acted in accordance with the wishes of Mahmood and Chaudhry, and violated no fiduciary duty.

To the extent Mahmood and Chaudhry challenge the trial court's findings, they rely on an incomplete, one-sided version of the evidence unsupported by any citations to the record. (See City of Lincoln v. Barringer (2002) 102 Cal.App.4th 1211, 1239, fn. 16 [citations to [*42] the record in a factual summary does not satisfy the requirement of providing citations in the argument portion of the brief].) Nonetheless, even considered on the merits, their arguments fail to show that there was insufficient evidence to support the judgment.

III. Mahmood and Chaudhry Fail to Demonstrate
Any Error in the Grant of Attorney Fees

Mahmood and Chaudhry contend that the trial court erred in awarding attorney fees to the Sharifs. In particular, they contend that none of the causes of action on which the Sharifs prevailed fall within the attorney fees clause of the Ramos note and deed of trust.

While the record on appeal includes the parties' briefing in the trial court on the motion for attorney fees and the court's minute order granting the motion, Mahmood and Chaudhry have failed to include a copy of the note or deed of trust containing the relevant attorney fees language. They also fail to include a reporter's transcript of the hearing of April 9, 2004, at which the motion was argued and taken under submission. Because of these serious deficiencies, Mahmood and Chaudhry have failed to present an adequate record demonstrating the alleged error. We therefore [*43] affirm the trial court's ruling. (Maria P. v. Riles, supra, 43 Cal.3d at p. 1295 [failure to augment record to provide adequate basis for review of trial court's grant of attorney fees motion required affirmance of the ruling].)

As a second, independent basis for affirming the trial court, we note that in their argument challenging the attorney fees ruling, Mahmood and Chaudhry fail to include citations to relevant items that are included in the record -- the parties' trial court briefs, the parties' operative pleadings, the testimony or other evidence supporting their argument that no claim was "instituted on this note." Their failure to support their argument by appropriate citations to the record constitutes a forfeiture of their appellate challenge to the trial court's ruling. (Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1246-1247; Regents of the Univ. of Cal. v. Sheily (2004) 122 Cal.App.4th 824, 826-827, fn. 1.)

DISPOSITION

The judgment is affirmed. Respondents Mohammad Sharif, Rukhsana Sharif, and M. Sharif, Inc. shall recover their costs on appeal.

WILLHITE, JR., J.

We concur:

EPSTEIN, P.J.

HASTINGS, J. [*44]


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