Fallon v. Triangle Management Services, Inc.

California Court of Appeal Jul 9, 1985 No. B006845Published

Before: Abbe

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Holding. The court held that a deed obtained through undue influence or fraud is voidable rather than void, and therefore remains valid and enforceable by a bona fide encumbrancer for value who acquired an interest before the deed was rescinded.

Issues

Whether a deed procured by undue influence is void or voidable.
Whether a bona fide encumbrancer for value can enforce a security interest in property conveyed by a voidable deed.

Disposition. affirmed

Quotations verified verbatim against the opinion

“If a grantor is aware that the instrument he is executing is a deed and that it will convey his title, but is induced to sign and deliver by fraudulent misrepresentations or undue influence, the deed is voidable”

“A deed obtained by fraud, though voidable, is generally not void.”

“The deed from Register to Tolbert was not void when executed and recorded.”

Opinion

ABBE, J.

Appeal from summary judgment ordered in favor of respondents quieting their title to real property as against appellants. The summary judgment was granted on admitted facts and on court records. We affirm.

On February 19, 1982, a grant deed was recorded in which Ernest Register (Register) conveyed title to the property in question to Steve Tolbert (Tolbert). On the face of the deed were the words “[g]ift no consideration. ” At the time of the conveyance Register was in default on both a first and second deed of trust. A water bond lien and a tax payment on the property were also due and unpaid.

Tolbert and his wife moved onto the property after he acquired it by deed from Register. They then applied for a loan from Statewide Home Loan (Statewide) a mortgage brokerage company. Statewide is in the business of bringing borrowers and lenders together to arrange loans secured by real property. After inspecting the property, Statewide agreed to fund Tolbert’s

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loan with the understanding the net proceeds of the loan would be used to pay the arrearages on the first deed of trust, pay off the delinquent second deed of trust, pay the liens, and the balance to be used by Tolbert for repairs and home improvements. The loan was funded by the lenders Cecilia Herschman, Gordon D. Howe and Fil Howe, who were represented in this transaction by respondent Triangle Management Services, Inc. (Triangle), a loan servicing company. The loan was made and the deed of trust, which became a second deed of trust, securing the loan was recorded on April 7, 1982.

On April 29, 1982, Register filed a complaint for cancellation of the deed to Tolbert on the ground that the deed had been procured by undue influence. We take judicial notice of that case, Ventura County Superior Court action number 76606.

Tolbert failed to make either the May 15, 1982, payment on the note to Triangle or any payments thereafter. Apparently, he made no improvements on or repairs to the property. Notice of default was given and on November 29, 1982, at the trustee’s sale, the respondents successfully purchased the property by bidding the amount due on the notes. A trustee’s deed to respondents was recorded on December 22, 1982.

Fallon v. Triangle Management Services, Inc.

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ABBE, J.

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