It is currently Sun Jul 23, 2017 7:42 pm

All times are UTC - 8 hours [ DST ]

Post new topic Reply to topic  [ 1 post ] 
Author Message
 Post subject: FT - Reynolds v. Bates (4/12/2002)
PostPosted: Tue Feb 24, 2009 12:19 pm 

Joined: Mon Dec 15, 2008 11:29 am
Posts: 112
Reynolds v. Bates,
2002.CA.0003378 (Cal.App. Dist.3 04/12/2002)


No. C038239


April 12, 2002




(Super. Ct. No. 47871)

The opinion of the court was delivered by: Robie, J.


California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

After a court trial, the trial court entered judgment canceling two deeds executed by Luana Reynolds to real property located in Corning, California. In addition, the judgment declared: (1) plaintiffs James and Luana Reynolds were the legal owners of that property; and (2) defendant Carson A. Bates had no right, title or interest in the property. The judgment also awarded possession of the property to James and Luana. *fn1

On appeal, Carson argues: (1) James's and Luana's "equitable remedies to cancel the deed[s] . . . were time barred under the doctrines of laches, estoppel and waiver"; (2) James and Luana "were barred from any equitable relief in the trial court under the `clean hands' doctrine"; (3) the judgment must be reversed due to the "absence of indispensable parties"; and (4) "[t]he evidence was insufficient to support the judgment." We shall affirm.


The property at issue in this lawsuit is located at 1003 6th Avenue in Corning, California. James and Luana purchased the property in 1972. The property is improved with a 4,200 square-foot, two-story, five-bedroom home.

Four years after they purchased the property, James quitclaimed his interest in the property to Luana. James testified he was instructed to transfer the property to Luana for purposes of setting up the J.L. and R. Trust. James could not recall who told him to do this.

Following James's transfer, Luana deeded the property to the J.L. and R. Trust by a 1976 deed executed by Luana to herself as the trustee of the J.L. and R. Trust. This deed was recorded in 1977. Luana testified that at the time the 1976 deed was executed, there was no legal entity known as the J.L. and R. Trust that was capable of holding title to real property, although she believed there was.

In 1981, Luana, as trustee of the J.L. and R. Trust, executed a second deed transferring the property to the Virginia Realty Company. At the time she executed the second deed, there was no legal entity in existence known as the Virginia Realty Company that was capable of holding title to real property.

James consulted with Bob Chappel in connection with Luana's execution of the second deed. At that time, Chappel was affiliated with a company Chappel "held out as Nassau Life Company." As consideration for the transfer of the property to Virginia Realty Company, James and Luana received "units" or "shares" in a trust called Virginia Realty and Nassau Life from Chappel. *fn2 Luana testified the shares were valueless, but that Chappel defrauded her into believing they had value. As of the time of trial, Chappel was in prison for fraud and his involvement in the Nassau Life entity.

In 1989, the Internal Revenue Service (IRS) seized all of James's and Luana's records concerning the J.L. and R. Trust and the Virginia Realty Company. The IRS confiscated the shares of Virginia Realty and determined they had no value. The IRS made a formal determination the J.L. and R. Trust and the Virginia Realty Company were nothing more than Luana's alter egos. *fn3 The IRS also determined Nassau Life never existed.

Carson met James in 1982 and the two became good friends. James introduced Carson to Chappel. Carson went to work for Chappel as an information officer for Nassau Life from 1982 to 1987. In that capacity, he put on seminars explaining "the off-shore trust business, banking throughout the United States." He delivered documents, handled questions and helped clients. Carson testified Nassau Life paid him a commission when clients purchased trust documents drafted by lawyers from the Bahamas. Carson testified he was the "go-between" for James, Luana, Nassau Life and Chappel. As a result, he claimed he kept no documents concerning their dealings, but sent them all back to Nassau, Bahamas.

Despite having executed the two deeds, Luana lived on the property until 1984. Then she surrendered possession of the property to Chappel.

Chappel subsequently gave Carson permission to take possession of the property. Carson and his wife moved into the property about 15 years prior to the trial. The utilities were in their names. Carson and his wife paid the property taxes for the property for the prior 13 years, although they fell behind from time to time. In 1999, Carson paid $9,757.33 to stop a tax sale of the property. In 1996 or 1997, there was a fire in the house, but Carson did not receive any financial help from James and Luana to repair the damages.

Carson testified Chappel told him Chappel had traded shares in Nassau Life for Virginia Realty Company. Chappel told Carson he was being given a bonus for his work for Nassau Life. Carson suggested the bonus was the house. These statements, however, were not admitted for the truth of the matters asserted, but only to prove Carson's state of mind. In his pretrial discovery, however, Carson admitted he took possession of the property in 1984 with permission of an owner or agent of Virginia Realty Company and that he was an agent of Virginia Realty Company.

Carson testified that because James and Luana were moving into a new house in Oregon, they appeared happy Carson's family would be living on the disputed property. James told Carson he could have a piano, a table and a desk that remained in the house when James and Luana moved to Oregon. Later, James demanded the desk, piano, and table and ultimately came and took them.

Carson testified he believed James and Luana turned the house over to him "voluntarily . . . through the agreements they had made with Nassau Life." Carson, however, had no deed, no receipt, and no documents to prove he was the owner of the property. Carson claimed several documents established he owned the property. He suggested a trust document, which was not admitted into evidence, demonstrated he was the owner of the property because the document stated Carson and his wife were the "agent/president and agent/secretary." Carson also testified James and Luana gave him a "Nassau Life document that [James] and Luana had signed off as agent/secretary, agent/president." Carson submitted a number of other documents to support his claim of ownership, but the court admitted none of them into evidence. Because these documents were not admitted into evidence, we are unable to ascertain what these were or anything about their contents.

James testified Carson never paid him any money after Carson took possession of the property. Luana did not remember Carson bringing her any money. Contrary to James's and Luana's testimony, Carson testified he delivered $50,000 to $70,000 to James and Luana. Carson, however, did not testify he gave this money to James and Luana for the purchase price of the property.

In 1999, Luana learned for the first time Virginia Realty Company never existed. At this point in time, Luana had a title search done on the property. A copy of the title search was admitted as an exhibit without objection. That title report stated Luana was still an owner of the property.

Luana then gave Carson a 30-day notice to quit the premises. She was unsuccessful in her attempt to evict Carson through a separate unlawful detainer action.

James and Luana filed a verified complaint against Carson for ejectment and damages. In their complaint, they sought declaratory relief they owned real property and a judgment ejecting Carson from the property. James and Luana also sought to have the court cancel the two deeds executed by Luana.

Carson answered the complaint but pleaded no affirmative defenses. In his answer, Carson admitted he claimed the right to possess the property through Virginia Realty Company and continues to occupy the property despite James's and Luana's request he vacate.

The day before trial, Carson filed a motion entitled "Motion to Extinguish Cause of Action" citing Civil Code sections 3439.04 and 3439.05. These two Civil Code sections are provisions of the Uniform Fraudulent Transfers Act (UFTA). Under these sections, Carson claimed James and Luana had "four years to seven years to complain [about] a fraudulent transfer." The court denied the motion because it was untimely and was based upon law irrelevant to the causes of action pleaded.

At the conclusion of the trial, the court found James and Luana were the legal owners of the real property. It concluded the evidence demonstrated the J.L. and R. Trust and the Virginia Realty Company, were both "nonexistent entit[ies], which [were] merely . . . alter ego[s] for" James and Luana. Further, the court ordered the two deeds executed by Luana canceled. Finally, the court found Carson had "no right, title or interest in the Subject Property" and awarded possession of the premises to James and Luana. In its March 30, 2001 judgment, the court denied James's and Luana's request for damages of $500 per month commencing December 1999, but awarded damages of $700 per month for every month Carson did not vacate the property after March 15, 2001. Carson appeals.


A. Laches, Estoppel, Waiver and Unclean Hands

Carson first argues the trial court's judgment must be set aside based on the doctrines of laches, estoppel, waiver, and unclean hands. Carson waived these arguments by failing to advance them in the trial court.

The reviewing court "presumes the judgment of the trial court is correct and indulges all presumptions to support a judgment on matters as to which the record is silent. [Citation.]" (Baker v. Children's Hospital Medical Center (1989) 209 Cal.App.3d 1057, 1060.) "As a general rule an appellate court will consider only such points as were raised in the trial court, and this rule precludes a party from asserting, on appeal, claims to relief not asserted or asked for in the court below." (Hennefer v. Butcher (1986) 182 Cal.App.3d 492, 505.) The reasons behind this rule are twofold: "`"To permit [a party to raise points on appeal, not raised below] would not only be unfair to the trial court, but manifestly unjust to the opposing litigant." [Citations.]' [Citations.]" (Mattco Forge, Inc. v. Arthur Young & Co. (1997) 52 Cal.App.4th 820, 847.) "Only when the issue presented involves purely a legal question, on an uncontroverted record and requires no factual determinations, is it appropriate to address new theories." (Ibid.)

Carson suggests we should treat him more leniently because he represented himself at trial. We disagree. "When an appellant decides to represent himself in propria persona, `he is entitled to the same, but no greater, consideration than other litigants and attorneys. [Citations.]' [Citation.] . . . A pro. per. litigant is held to the same restrictive procedural rules as an attorney." (Bistawros v. Greenberg (1987) 189 Cal.App.3d 189, 193.)

Here, each of the affirmative defenses raised by Carson on appeal -- laches, estoppel, waiver, and unclean hands -- are fact-intensive inquiries requiring the trial court to hear and sift through contradictory evidence and make factual findings. We reject Carson's repeated requests that we make factual findings on these affirmative defenses based upon the conflicting evidence in this record.

"[L]aches is defined as an unreasonable delay in asserting an equitable right, causing prejudice to an adverse party such as to render the granting of relief to the other party inequitable. [Citation.]" (In re Marriage of Dancy (2000) 82 Cal.App.4th 1142, 1148.) To resolve this claim, the trial court would have been required to determine whether the delay between the execution of the deeds and the filing of this lawsuit was reasonable. The court also would have had to examine the prejudice Carson suffered from the delay. Carson's failure to plead or raise this defense in the trial court bars our review on appeal. (Medical Bd. of California v. Superior Court (1991) 227 Cal.App.3d 1458, 1462.)

Carson argues he "made the functional equivalent of a laches defense" when he brought his untimely "Motion to Extinguish Cause of Action." This argument borders on the frivolous. This motion was based upon the theory that the four-year statute of limitations *fn4 contained in the UFTA was applicable to this case. The UFTA is wholly irrelevant to the relief sought by James and Luana. They did not seek to avoid a fraudulent transfer. *fn5 Rather, James and Luana sought to cancel a deed *fn6 Luana transferred to herself as her alter ego. Carson's assertion of this UFTA defense had nothing whatsoever to do with the facts and this law before the trial court. *fn7

Turning to the defense of equitable estoppel, "[t]he required elements for an equitable estoppel are: (1) the party to be estopped must be apprised of the facts; (2) the party to be estopped must intend his or her conduct shall be acted upon, or must so act that the party asserting the estoppel had a right to believe it was so intended; (3) the other party must be ignorant of the true state of facts; and (4) the other party must rely upon the conduct to his or her injury. [Citation.]" (Munoz v. State of California (1995) 33 Cal.App.4th 1767, 1785.) In ruling on equitable estoppel, the trial court would have had to evaluate the evidence and make findings on James's and Luana's knowledge of the facts, their intent, the representations they made, Carson's ignorance and Carson's injuries. Carson's failure to plead or raise this issue in the trial court bars us from examining it here. (Ibid.; Green v. Travelers Indemnity Co. (1986) 185 Cal.App.3d 544, 555.)

The next defense raised by Carson is waiver. Waiver is the intentional relinquishment of a known right after knowledge of the facts. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 31.) In assessing this defense, the trial court would have had to make factual findings as to whether James and Luana knew their rights and intentionally relinquished them. Carson's failure to plead or raise this defense bars our review. (Mission Housing Development Co. v. City and County of San Francisco (1997) 59 Cal.App.4th 55, 75.)

Carson also asks us to address the defense of unclean hands. "The defense of unclean hands arises from the equitable maxim, `"He who comes into Equity must come with clean hands."' [Citation.] . . . Equity will grant relief when a plaintiff's conduct `"prejudicially affect[s] the rights of the person against whom the relief is sought so that it would be inequitable to grant such relief."' [Citation.]" (Mattco Forge, Inc. v. Arthur Young & Co, supra, 52 Cal.App.4th at p. 846.) Under this defense, the court would have been required to ascertain whether James and Luana engaged in inequitable conduct, whether that conduct was related to the transactions here, and whether it would have been inequitable under the circumstances to deny the relief sought. Once again, Carson's failure to plead or raise this defense in the trial court bars our review. (Id., at p. 847; Fibreboard Paper Products Corp. v. East Bay Union of Machinists (1964) 227 Cal.App.2d 675, 726.)

Citing Katz v. Karlsson (1948) 84 Cal.App.2d 469, Carson argues we may apply the unclean hands doctrine even though Carson did not raise it in his pleadings or at trial. When the claim of unclean hands is raised for the first time on appeal, we will apply the doctrine only in cases involving "flagrantly unconscionable" conduct and when it is necessary to protect the court's integrity. (Cf. Behm v. Fireside Thrift Co. (1969) 272 Cal.App.2d 15, 21 [trial court may sua sponte raise unclean hands to protect its integrity in light of flagrantly unconscionable misconduct].) Carson raises no flagrantly unconscionable conduct here, nor does he explain how the court's integrity was threatened by the judgment. Rather, Carson argues we should draw certain inferences from the evidence to make findings of fact as to James's and Luana's bad faith and unclean hands. We decline Carson's invitation.

B. Joinder

Carson argues "the trial [court] proceeded in the absence of indispensable parties in violation of compulsory joinder rules." He asserts the failure of James and Luana to join the J.L. and R. Trust and the Virginia Realty Company left the court unable to accord complete relief and left parties subject to the risk of further litigation and inconsistent obligations. Again, Carson waived this claim by failing to raise it below.

Code of Civil Procedure section 389, subdivision (a) provides, in pertinent part: "A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest. . . ."

In McKeon v. Hastings College (1986) 185 Cal.App.3d 877, 889, the defendant failed to raise the objection of indispensable party in his answer or in his demurrer. Further, the defendant failed to raise the issue at trial. (Ibid.) The appellate court concluded the defendant's failure to raise this objection in the trial court waived the objection on appeal. (Ibid.) The court noted: "`[T]he failure to join an "indispensable" party is not "a jurisdictional defect" in the fundamental sense; even in the absence of an "indispensable" party, the court still has the power to render a decision as to the parties before it which will stand. [Citations.] It is for reasons of equity and convenience, and not because it is without the power to proceed, that the court should not proceed with a case where it determines that an "indispensable party" is absent and cannot be joined.'" (Id. at p. 890.) "While in an appropriate case a trial court may, for reasons of equity and convenience, decline to proceed in the absence of an indispensable party, it is not without the jurisdiction to do so. [Citation.]" (People v. Parmar (2001) 86 Cal.App.4th 781, 792.) The reason for this is: "Although the court has no jurisdiction of the absent party, and its judgment cannot bind him, the court does have jurisdiction of the existing parties and it has the power to make a judgment affecting their interests." (Kraus v. Willow Park Public Golf Course (1977) 73 Cal.App.3d 354, 368.)

Here, Carson failed to raise this defense in the trial court, and thus waived it. Carson has not explained to us how the court has subjected anyone to the risk of double, multiple or inconsistent obligations, or how the judgment failed to adjudicate the rights of the parties between themselves. To the contrary, the trial court fully adjudicated the rights of James, Luana and Carson in the disputed property. Moreover, as between these parties, the court concluded these potentially "indispensable parties" did not exist. The court acknowledged on the record the obvious truism its judgment would not affect parties not named in the complaint.

C. Substantial Evidence

Carson argues the court could not rely on the title report listing Luana as the owner of the property because it was hearsay and admitted into evidence without foundation. Carson also argues sufficient evidence fails to support the trial court's finding James and Luana "established that they did not sell their property, that it has always been theirs, . . ." We disagree.

As to the first contention, Carson's failure to object to the evidence in the trial court waives this argument on appeal. (People v. Bolin (1998) 18 Cal.4th 297, 320; Evid. Code, § 353.) Further, hearsay evidence that is admitted without objection becomes competent evidence of the statements contained therein. (Smith v. Smith (1955) 135 Cal.App.2d 100, 105.)

As to the second point, substantial evidence in the record supported the court's finding. "[W]hen a finding is attacked on the ground there is lack of substantial evidence to sustain it, `the power of an appellate court begins and ends with the determination as to whether there is any substantial evidence contradicted or uncontradicted which will support the finding of fact' [citation]." (Burke v. Bloom (1960) 187 Cal.App.2d 155, 158.)

Here, Luana testified she owned the home before she executed deeds for the house to two separate entities that had no legal existence at the time of the transfers. The consideration she received for the second transfer was worthless units or shares in nonexistent companies. Moreover, James and Luana lived in the house for three years after the second deed was executed and recorded. This is substantial evidence James and Luana did not sell their property. In a substantial evidence inquiry, we disregard the contradictory evidence in the record.


The judgment is affirmed. Respondents shall recover their costs on appeal. (Cal. Rules of Court, rule 26(a).)

We concur:



Opinion Footnotes

*fn1 We intend no disrespect, but we shall refer to the parties by their first names for simplicity and clarity.

*fn2 Luana testified she and James received "shares in the Nassau Life Insurance Company."

*fn3 The IRS imposed tax liens against the property in the sum of $80,000. Luana submitted those tax liens as exhibits. Luana paid the tax liens and had the liens released.

*fn4 Civil Code section 3439.09.

*fn5 A fraudulent transfer is statutorily defined as: "A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, . . . if the debtor made the transfer or incurred the obligation as follows: [] (a) With actual intent to hinder, delay, or defraud any creditor of the debtor. [] (b) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor: [] (1) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or [] (2) Intended to incur, or believed or reasonably should have believed that he or she would incur, debts beyond his or her ability to pay as they became due." (Civ. Code, § 3439.04.)

*fn6 Civil Code section 3412.

*fn7 By its own terms, the four- year statute of limitations contained in Civil Code section 3439.09 does not apply here. That section applies to a cause of action "under this chapter," i.e., under Chapter 1 of the UFTA, not to a cause of action for cancellation of a deed under Civil Code section 3412.

Offline Profile  
Display posts from previous:  Sort by  
Post new topic Reply to topic  [ 1 post ] 

All times are UTC - 8 hours [ DST ]

Who is online

Users browsing this forum: No registered users and 1 guest

You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum

Search for:
Jump to:  
Powered by phpBB © 2000, 2002, 2005, 2007 phpBB Group
Theme created