Summary Judgment Project Gregory Kent Print

DASKEVICH LAW OFFICES
1 JENNIFER A. DASKEVICH (SBN 075997)

STUDENT NO.
2 Michael E. Teplinsky
9201 Oakdale Avenue, #201
3 Chatsworth, CA 91311
Telephone: (818) 380-6880
4 Facsimile: (818) 784-1482
5 Attorneys for Defendant and Cross-Complainant
Gregory Kent
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8 SUPERIOR COURT OF THE STATE OF CALIFORNIA
9 FOR THE COUNTY OF LOS ANGELES, CENTRAL DIVISION
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DANIEL TRAURIG, an individual, ) Case No. ZX 654321
11 ) [Complaint Filed on 1/27/10
Plaintiff, ) Honorable Felix Frankfurter
12 ) Department 182
vs. )
13 )
)
14 GREGORY KENT, an individual; and ) Hearing Date: April 29, 2010
DOES 1 through 50, inclusive, ) Time: 8:30 a.m.
15 ) Courtroom: 901
Defendants ) Department: 182
16 __________________________________ )
) Trial Date: n/a
17 ) Time: n/a
AND RELATED CROSS-ACTION ) Dept.: 182
18 _____________________________
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20 GREGORY KENT’S (1) NOTICE OF MOTION AND MOTION FOR SUMMARY
ADJUDICATION AND PARTIAL SUMMARY JUDGMENT,
21 (2) MEMORANDUM OF POINTS AND AUTHORITIES,
(3) DECLARATION OF GREGORY KENT IN SUPPORT OF MOTION, AND
22 (4) DECLARATION OF SUSAN LONGHOLME IN SUPPORT OF MOTION
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TO: DANIEL TRAURIG, PLAINTIFF AND CROSS-DEFENDANT, AND ALL OTHER
24 PARTIES IN INTEREST HEREIN:
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26 NOTICE IS HEREBY GIVEN that, on Tuesday, April 29, 2010, at 8:30 a.m., or as soon
27 thereafter as the matter may be heard, in Department 182, Courtroom 901 of the Stanley Mosk
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KENT’S MOTION FOR SUMMARY ADJUDICATION, MEMORANDUM OF POINTS
AND AUTHORITIES, DECLARATIONS OF KENT AND LONGHOLME Page 1 of 23
1 Courthouse, Los Angeles Superior Court, located at 111 North Hill Street, Los Angeles, California
2 90012, Gregory Kent, Defendant and Cross-Complainant herein ("Kent"), will and hereby does
3 move this Court for an Order Granting Summary adjudication.
4 By this Motion, Kent seeks the following relief:
5 Defendant moves for summary adjudication that we are entitled to declaratory relief, quiet
6 title, and cancelation of the three trust deeds recorded in favor of Improvident Bank (“I-Bank”) as
7 a matter of law. We ask for relief on grounds that the conveyance was unduly recorded because I-
8 Bank failed to qualify as a good faith encumbrancer when their trust deeds were recorded to secure
9 $150K in additionally borrowed net refinance proceeds. I-Bank should be charged with
10 constructive notice of Gregory’s beneficial interest where I-Bank had inquiry knowledge of the
11 existence of Gregory’s unrecorded valid deeds at the time of their conveyance. Gregory is a bona
12 fide purchaser with superior beneficial and legal title who paid good consideration and who lacked
13 the requisite notice of Daniel Traurig’s secretly borrowed net refinance proceeds.
14 In the alternative, we ask the court for equitable relief to impose a resulting trust as a
15 remedy to recover the secretly borrowed $150K in net refinance proceeds. The court should
16 conclude Gregory is the beneficial title holder based on the undisputed facts that it was the party’s
17 intent for Gregory to retain beneficial interest. Gregory contributed 100% of the capital
18 investment on all three properties which were later encumbered without Gregory’s consent or
19 knowledge. And the parties intended for the title deeds to remain in Daniel’s name solely for the
20 purpose of avoiding inheritance tax and probate.
21 This Motion is based upon this Notice; the following Memorandum of Points and
22 Authorities and Declarations of Gregory Kent and Susan Longholme; all of the files and records in
23 this action pending before this Court; the statements, arguments and representations of counsel to
24 be made at the hearing on the Motion, and all other evidence properly presented to the Court at or
25 prior to the hearing on the Motion.
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Dated: April 14, 2010 Respectfully submitted,
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DASKEVICH LAW OFFICES
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By: ___________________________
7 Michael E. Teplinsky
Attorneys for Defendant and Cross-
8 Complainant Gregory Kent
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1 TABLE OF CONTENTS
2
I. INTRODUCTION ............................................................................................................... 5
3
II. SUMMARY JUDGMENT STANDARD ........................................................................... 6
4
III. ARGUMENT FOR CANCELING THE TRUST DEEDS AGAINST
5 IMPROVIDENT BANK (“I-Bank”) ................................................................................... 6
6 A. Overview ................................................................................................................. 6
7 B. An Agency Relationship Exists between Longholme and I-Bank .......................... 7
8 C. Agent’s Knowledge Imputed to the Principal, I-Bank. ........................................... 7
9 D. Improvident Bank is charged with Constructive Notice and a Duty
to Inquire ................................................................................................................. 8
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1. Inquiry Notice is Triggered by Reasonable Warning Signs ........................ 9
11
2. Inquiry Notice is Triggered Where Apparent Possession
12 differs from Record Title........................................................................... 10
13 E. Gregory’s Unrecorded Deeds are Valid as to Notice ........................................... 10
14 F. Improvident Bank Is Not a “Good Faith Encumbrancer” ..................................... 11
15 G. Gregory Is A Bona Fide Purchaser With Valid Unrecorded Deeds ...................... 11
16 H. Improvident Bank’s Trust Deeds Are Void .......................................................... 13
17 IV. ARGUMENT FOR IMPOSING A RESULTING TRUST TO RECOVER
THE $150K NET PROCEEDS AGAINST DANIEL....................................................... 13
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A. Resulting Trust ...................................................................................................... 14
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B. Beneficial Interest ................................................................................................. 14
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C. Parties Only Intended Daniel to be a Future Interest Holder ................................ 15
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D. Gregory Was Legal Title Holder ........................................................................... 16
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V. CONCLUSION ................................................................................................................. 17
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DECLARATION OF GREGORY KENT IN SUPPORT OF MOTION FOR
24 SUMMARY ADJUDICATION ........................................................................................ 19
25 DECLARATION OF SUSAN LONGHOLME IN SUPPORT OF MOTION FOR
SUMMARY ADJUDICATION ........................................................................................ 22
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1 MEMORANDUM OF POINTS AND AUTHORITIES
2
3 I. INTRODUCTION
4 In June 2009, Gregory Kent (“Gregory”) and Daniel Traurig (“Daniel”) decided to
5 refinance three rental properties. Gregory was the sole capital investor on all three properties that
6 were purchased over a three year period from 2002 to 2004 (Larchmont, Beverly Hills, and
7 Beachwood). Both Gregory and Daniel agreed to use Susan Longholme (“Longholme”), a loan
8 broker, whom they both had a prior friendship. Unbeknownst to Gregory during the refinance,
9 Daniel borrowed an additional $150K from Improvident Bank (“I-Bank”) secured by three new
10 trust deeds on each aforementioned rental property (collectively “I-Bank Mortgages”). The
11 $150K, in secretly net refinance proceeds (“NRP”), was over and above the required refinance
12 amount, and the money remains unaccounted for. In short, Daniel and I-Bank effectively created
13 encumbrances on all three properties that Gregory held sole and legal title. The additional
14 encumbrances occurred without Gregory’s knowledge or consent.
15 Gregory moves for summary adjudication that he is entitled to declaratory relief, quiet title,
16 and cancelation of the three trust deeds recorded in favor of I-Bank as a matter of law. We ask for
17 relief on grounds that the conveyance was unduly recorded because I-Bank failed to qualify as a
18 good faith encumbrancer. An encumbrance recorded in bad faith becomes void as against
19 subsequent bona fide purchasers. Gregory was a bona fide purchaser and legal title holder at the
20 time of the encumbrance. Gregory validated his interest in September 2009 when he recorded title
21 deeds to all three properties that Daniel has previously legally conveyed to him in 2007.
22 In the alternative, the court should impose a resulting trust as a remedy for Gregory to
23 recover the secretly borrowed NRP funds. The court should conclude Gregory is the beneficial
24 title holder based on the undisputed facts that it was the party’s intent for Gregory to retain
25 beneficial interest. Gregory contributed 100% of the capital investment on all three properties
26 which were later encumbered without Gregory’s consent or knowledge. The uncontroverted facts
27 show that the parties intended for the title deeds to remain in Daniel’s name solely for the purpose
28 of avoiding inheritance tax and probate.
1
2 II. SUMMARY JUDGMENT STANDARD
3 Summary judgment is appropriate when the pleadings, depositions, answers to
4 interrogatories, admissions on file, and affidavits or declarations show that there is no genuine
5 issue of material fact in dispute and that the moving party is entitled to judgment as a matter of
6 law. CAL. CIV. PROC. CODE § 437c (2009); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
7 Only those facts “that might affect the outcome of the suit under the governing law” are material;
8 the Court should grant summary judgment if it finds “that the evidence favoring the nonmoving
9 party is insufficient to enable a reasonable jury to return a verdict in her favor.” Anderson v.
10 Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). But a nonmoving party’s opposition must be
11 supported by competent evidence setting forth specific facts to show that there is a genuine issue
12 for trial; it cannot consist of mere unsupported allegations or denials. § 437c, op.cit.; Celotex
13 Corp. v. Catrett, 477 U.S. 317, 324 (1986). “A party may move for summary adjudication as to
14 one or more causes of action within an action . . . if that party contends that the cause of action has
15 no merit or that there is no affirmative defense thereto. . .” § 437c, id..
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17 III. ARGUMENT FOR CANCELING THE TRUST DEEDS AGAINST IMPROVIDENT
18 BANK (“I-Bank”)
19 A. Overview
20 “Every conveyance of real property ... is void as against any subsequent purchaser or
21 mortgagee of the same property ... in good faith and for valuable consideration, unless the
22 conveyance shall have been duly recorded prior to the record of notice of action.” CAL. CIV. CODE
23 § 1214 (2009). Daniel borrowed $150K in secretly net refinance proceeds (“NRP”) which caused
24 Improvident Bank (“I-Bank”) to create three deeds of trust securing Gregory’s properties in June
25 2009. This transaction occurred without Gregory’s knowledge or consent. (Kent Decl., ¶¶ 5, 10,
26 Longholme Decl. ¶ 6). Gregory is the beneficial and legal title holder who paid good
27 consideration for the three properties. (Kent, id.). Therefore, Gregory is entitled by law to have
28 the trust deeds canceled because they were not duly recorded by a good faith encumbrancer.
1
2 B. An Agency Relationship Exists between Longholme and I-Bank
3 “An agency may be created, and an authority may be conferred, by a precedent
4 authorization or a subsequent ratification.” CAL. CIV. CODE § 2307 (2009). Susan Longholme
5 (“Longholme”) stipulates she represented I-Bank as their loan broker for this transaction.
6 (Longholme Decl., ¶ 3). The required elements for the existence of an implied agency include: (1)
7 Agency is the fiduciary relation which results from the manifestation of consent by one person to
8 another that the other shall act on his behalf and subject to his control, (2) The one for whom
9 action is to be taken is the principal, (3) The one who is to act is the agent. Restatement (Second)
10 of Agency § 1 (1979). Longholme successfully brokered the loans in June 2009 on behalf of I-
11 Bank. (Longholme Decl., id.) The engagement of this act inherently represents the authority
12 granted by I-Bank to perform such duties and to act on behalf of the lender.
13 Furthermore, “An agent may be authorized to carry forward any ordinary business
14 transaction, and the agent's act becomes the act of his principal.” Whittaker v. Otto, 10 Cal. Rptr.
15 689 (Ct. App. 1961). Therefore, if Longholme’s acts in procuring the loan from I-Bank and
16 securing interest in the properties are acts of the principal, then we may conclude that Longholme
17 was authorized to carry forward ordinary business as I-Bank’s representing and fiduciary agent.
18 Therefore, Longholme and I-Bank entered into an agency relationship by express and implied
19 agreement.
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21 C. Agent’s Knowledge Imputed to the Principal, I-Bank.
22 “If an agent acting within the course and scope of his or her agency duties acquires specific
23 material information pertinent to matters . . . that could have a substantial adverse effect on the
24 principal, such knowledge will be imputed to the principal.” In re Marriage of Cloney, 110 Cal.
25 Rptr. 2d 615 (Ct. App. 2001). It is uncontroverted that Longholme had a friendship with both
26 Gregory and Daniel prior to brokering the three loans. (Longholme Decl., ¶ 9, Kent Decl., ¶ 8) In
27 addition, Longholme knew that Gregory had some interest in the three properties prior to securing
28 the loans for Daniel. (Longholme Decl., ¶¶ 5, 7). Regarding the three encumbered properties,
1 Longholme knew that both “had purchased the properties together” and that they “were going to
2 use the proceeds for remodeling on the same properties.” (Longholme, id.).
3 “Notice given to or possessed by an agent within the scope of his employment and in
4 connection with and during his agency, is notice to the principal.” Cloney, op.cit.. The rule rests
5 on the assumption that the agent will communicate to his or her principal all information acquired
6 in the course of his or her agency, and when the knowledge of the agent is ascertained the
7 constructive notice to the principal is conclusive. Cloney, op. cit.. Regardless of the degree of
8 interest that Gregory did or did not possess in the properties, mere knowledge of such involvement
9 produces information which the principal may be charged with. I-Bank is presumed to have
10 obtained this knowledge through communication in the course of the agency relationship with
11 Longholme. Therefore as a matter of law, I-Bank is charged with notice of Gregory’s interest
12 because Longholme’s knowledge is imputed to the principal.
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14 D. Improvident Bank is charged with Constructive Notice and a Duty to Inquire
15 Mere knowledge of Gregory’s existence is generally not enough to put I-Bank on actual
16 notice of a valid interest holder outside the chain of title. However, Longholme’s actual
17 knowledge creates significant inferences. “Every person who has actual notice of circumstances
18 sufficient to put a prudent man upon inquiry as to a particular fact, has constructive notice of the
19 fact itself in all cases in which, by prosecuting such inquiry, he might have learned such fact.”
20 CAL. CIV. CODE § 19 (2009). Longholme had enough information regarding Gregory and Daniel’s
21 investment activity which would give a prudent person a reason to look further into what
22 Gregory’s interest may entail. Were she to have properly prosecuted such inquiry with Gregory,
23 she would have learned that Gregory, in fact, had a material interest in the properties. This inquiry
24 is necessary in order for her to satisfy her fiduciary duty as I-Bank’s loan agent. The duty arises
25 by way of risk aversion; to protect the lender from engagements that might have a negative impact
26 on I-Bank’s future interests. Therefore, I-Bank is charged by law with constructive notice because
27 their agent, Longholme, had a duty to inquire further based on her prior knowledge that Gregory
28 had potential interest in the property.
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2 1. Inquiry Notice is Triggered by Reasonable Warning Signs
3 “A subsequent encumbrancer is not entitled to ignore reasonable warning signs appearing
4 in recorded documents or information coming from sources outside the recorded chain of title.”
5 Triple A Mgt. Co. v. Frisone, 81 Cal. Rptr. 2d 669 (Ct. App. 1999). Longholme’s knowledge of
6 Gregory and Daniel’s prior joint investment in the three properties raises enough of an inference to
7 establish the duty look further. While Longholme knew that Gregory and Daniel jointly invested
8 in the three properties, she also maintained a friendship with Gregory and Daniel. (Longholme
9 Decl., ¶ 5). Furthermore, she knew that Daniel was depositing the NRP funds into his own
10 separate bank account at Union Bank. (Longholme Decl., ¶ 8). As previously established,
11 Longholme was aware that only Daniel’s name appeared on recorded title. In addition, Longholme
12 gave the lending instructions to escrow. (Longholme, id.) Longholme possessed enough facts that
13 a reasonable loan broker would have known that Daniel’s name appeared solely on the recorded
14 title deeds.
15 “Information that reasonably brings into question the state of the title triggers “a limited
16 duty of inquiry.” Triple A Mgt. Co., op.cit.. Moreover, “a subsequent encumbrancer is charged
17 with constructive knowledge of what a reasonable investigation would have revealed.” Triple A
18 Mgt. Co., op.cit.. Longholme knew that Daniel deposited the money into his own separate account,
19 not a joint account. And Longholme admits to having had no prior conversation with Gregory
20 before executing the transaction. (Longholme Decl., ¶ 7). Further investigation with Gregory
21 would have quickly revealed that Gregory was the legal title holder in possession of valid
22 unrecorded deeds. This investigation is a reasonable one in light of the surrounding facts and
23 circumstances. Longholme’s imputed constructive knowledge of Gregory’s unrecorded title deeds
24 prior to I-Bank’s encumbrance, puts a cloud over the recorded deeds that are only in Daniel’s
25 name.
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1 2. Inquiry Notice is Triggered Where Apparent Possession differs from Record
2 Title
3 Furthermore, “In such instances when apparent possession is not consistent with title
4 appearing of record, an encumbrancer does have a duty to inquire as to unrecorded agreements

5 between joint owners. Caito v. United California Bank, 576 P.2d 466 (Cal. 1978). Longholme’s
6 basic knowledge alone that Gregory and Daniel had previously purchased the properties together
7 is enough to trigger the duty to inquire as to the party’s interest and intent. This is especially true
8 when the conveyance of the unrecorded deeds was granted and signed by Daniel, but where
9 recorded title only shows Daniel as the sole title holder. (Kent Decl. ¶ 11). A simple conversation
10 between Longholme and Gregory prior to close would have certainly caused Gregory to reveal the
11 existence of the unrecorded deeds, his interest in the properties, and his desire to halt the loan
12 transaction. Thus, Longholme’s constructive knowledge of Gregory unrecorded title deeds and
13 joint interest runs in contradiction to the state of record title where only Daniel’s name appears.
14 As Longholme’s principal, and because its agent failed to inquire, I-Bank is charged with inquiry
15 notice because there is sufficient knowledge of an unrecorded agreement between joint owners.
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17 E. Gregory’s Unrecorded Deeds are Valid as to Notice
18 “An unrecorded instrument is valid if a subsequent encumbrancer has notice of it, i.e., if
19 that person has knowledge of circumstances that, upon reasonable inquiry, would lead to that
20 particular fact.” First Fidelity Thrift & Loan Ass'n v. Alliance Bank, 71 Cal. Rptr. 2d 295 (Ct. App.
21 1998). Furthermore, “an unrecorded deed is effective as against a subsequent creditor who levies
22 on the property…” Casey v. Gray, 16 Cal. Rptr. 2d 538 (Ct. App. 1993). Gregory had unrecorded
23 deeds to all three properties sitting in his safe deposit box at the time of the NRP transaction in
24 June 2009. (Kent Decl., ¶ 11). Daniel voluntarily deeded the three properties back to Gregory in
25 2007. (Kent, id.) As a matter of law Gregory’s deeds, while unrecorded, are still valid in regards
26 to whether their existence alone is sufficient to put I-Bank on notice of another bona fide interest
27 holder. There are no disputed facts as to the validity of the three deeds which Gregory
28 subsequently recorded in September 2009. (Kent Decl., ¶ 11) It has been established that
1 reasonable inquiry would have led to the discovery of the unrecorded deeds. And since there are
2 no facts in dispute as to their validity, I-Bank is charged with constructive notice of Gregory’s
3 valid unrecorded deeds.
4
5 F. Improvident Bank Is Not a “Good Faith Encumbrancer”
6 “A Good Faith Encumbrancer (“GFE”) within meaning of recording statutes, is one who
7 acts without knowledge or notice of competing liens on the subject property.” CAL. CIV. CODE §
8 1107 (2009). It has been established that I-Bank is imputed with constructive knowledge of
9 Gregory’s unrecorded deeds prior to I-Bank’s execution of their three trust deeds securing interest
10 in Gregory’s properties. It has also been established that Gregory’s deeds are valid, though
11 unrecorded. I-Bank’s trust deeds therefore are said to be competing with Gregory’s interest on the
12 subject property. As such, I-Bank did not act without knowledge of the competing interest.
13 Therefore, I-Bank cannot be classified as a good faith encumbrancer.
14 Furthermore, “the elements to determine whether a party who takes or purchases a lien is a
15 “bona fide encumbrancer” are (1) payment of value, (2) in good faith, and (3) without actual or
16 constructive notice of another's rights. Melendrez v. D & I Investment, Inc., 26 Cal. Rptr. 3d 413
17 (Ct. App. 2005). I-Bank failed to act in good faith when they recorded liens on properties in which
18 they had constructive notice of another’s rights. The properties belonged to someone other than
19 who they were lending the money to. It has already been established that Gregory’s unrecorded
20 deeds are valid as to subsequent creditors. Therefore, since I-Bank is charged with prior
21 constructive notice of the existence of Gregory’s unrecorded deeds when they levied on the
22 properties, I-Bank did not act in good faith. And since I-Bank did not act in good faith, then they
23 cannot be classified as a good faith encumbrancer within the meaning of the recording statutes.
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25 G. Gregory Is A Bona Fide Purchaser With Valid Unrecorded Deeds
26 “The test for determining whether a buyer of real property is a ‘bona fide purchaser’
27 (“BFP”) is whether the buyer (1) purchased the property for value, and (2) had no knowledge or
28 notice of the asserted rights of another.” CAL. CIV. CODE § 2924 (2009). Gregory had no
1 knowledge of the transaction executed by Daniel and Longholme in June 2009. (Longholme
2 Decl., ¶ 6, and Kent Decl., ¶ 10). Gregory did not learn of the existence of the borrowed NRP
3 funds until Longholme made an unsolicited call to Gregory in September 2009. (Kent Decl., ¶ 11).
4 Gregory and Daniel deeded the three properties back into Gregory’s name two years earlier, back
5 in 2007. (Kent, id.). I-Bank’s asserted rights began in June 2009 when the trust deeds were
6 recorded against Gregory’s properties two years after Gregory obtained legal title. Therefore,
7 Gregory’s interest in the properties preceded both the notice and the creation of the I-Bank trust
8 deeds.
9 “An unrecorded instrument is valid as between the parties thereto and those who have
10 notice thereof.” CAL. CIV. CODE § 1217 (2009). Though Gregory’s deeds were unrecorded at the
11 time I-Bank’s trust deeds were created, Daniel was a party to their execution and he was the
12 signatory. Therefore Daniel possessed actual notice, ab initio, at the time he voluntarily deeded the
13 properties back to Gregory regardless of whether Gregory later recorded the deeds.
14 “A written instrument is presumptive evidence of a consideration.” CAL. CIV. CODE § 1614
15 (2009). A deed, as a written instrument, is presumptive evidence of a consideration; and under the
16 rule applicable to contracts generally, the burden of showing a want of consideration is on the
17 party seeking to invalidate or avoid the instrument. Nonetheless, Gregory’s beneficial interest in
18 the properties began many years earlier when the properties were originally purchased by Gregory
19 and Daniel.
20 “Extrinsic evidence may always be received to show the consideration of the instrument.”
21 Hays v. Clark, 346 P.2d 448 (Cal. 1959). “Thus, the existence of consideration not expressed in
22 the agreement may be shown by parol.” Hays, id. Gregory supplied all the capital as down
23 payments for all three properties when they were originally purchased and without any financial
24 assistance from Daniel. (Kent Decl., ¶ 5). Evidence of Gregory’s down payments include tracing
25 documentation such as: (1) bank statements showing the transfer of money, (2) canceled checks
26 evidencing the same, and (3) escrow documents evidencing the same. (Kent Decl., ¶¶ 13-15).
27 This documentation validates not only Gregory’s prior beneficial interest in the three properties,
28 but also serve as validation of the good consideration paid in exchange for present legal title.
1 Daniel, on the other hand provided no capital investment for the properties when purchased, yet
2 retained symbolic legal title. Daniel’s deeding of the properties back into Gregory’s name merely
3 validated the consideration paid earlier and validated Gregory’s existing beneficial interest.
4 Therefore, because the properties were purchased for value by Gregory, and that he had no
5 knowledge of the later encumbrance by I-Bank, Gregory is a bona fide purchaser within the
6 meaning of the recording statutes.
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8 H. Improvident Bank’s Trust Deeds Are Void
9 In conclusion of our argument, we return to the basic premise. “Every conveyance of real
10 property ... is void as against any subsequent purchaser or mortgagee of the same property ... in
11 good faith and for valuable consideration, unless the conveyance shall have been duly recorded
12 prior to the record of notice of action.” CAL. CIV. CODE § 1214 (2009). It was previously
13 established that Gregory is a bona fide purchaser. It was also previously established that I-Bank
14 failed to qualify as a good faith encumbrancer because they are charged with prior constructive
15 notice of Gregory’s unrecorded deeds.
16 A grant of an estate is inconclusive where an encumbrancer records it’s conveyance in bad
17 faith; the result is a conveyance that is not duly recorded. CAL. CIV. CODE § 1107 (2009). Since
18 the conveyance of the trust deeds was not performed in good faith, they cannot be said to be duly
19 recorded. As a result, I-Bank’s interest subordinates to the interest held by Gregory. I-Bank’s
20 trust deeds are therefore void because Gregory is a subsequent bona fide purchaser whose
21 recordation of his valid title deeds supersedes I-Bank’s prior unduly recorded trust deeds.
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23 IV. ARGUMENT FOR IMPOSING A RESULTING TRUST TO RECOVER THE
24 $150K NET PROCEEDS AGAINST DANIEL
25 In the alternative, we ask the court for equitable relief to impose a resulting trust as a
26 remedy to recover the secretly borrowed $150K in net refinance proceeds. The court should
27 conclude Gregory is the beneficial title holder based on the undisputed facts that the party’s
28 intended for Gregory to retain beneficial interest. Gregory contributed 100% of the capital
1 investment on all three properties which were later encumbered without Gregory’s consent or
2 knowledge. And the parties intended for the title deeds to remain in Daniel’s name solely for the
3 purpose of avoiding inheritance tax, probate court and shielding the properties from potential
4 medical creditors.
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6 A. Resulting Trust
7 “The trust that is presumed to result when a transfer of real property is made to one person,
8 and the consideration therefore is paid by or for another, is termed a “resulting trust”; its purpose
9 is to enforce the intentions of the parties.” In re Marriage of Ruelas, 64 Cal. Rptr. 3d 600 (Ct.
10 App. 2007). Furthermore, “A resulting trust is . . . founded on the fact . . . one has advanced the
11 consideration wherewith to make a purchase in the name of the other. The trust arises because it is
12 the natural presumption in such a case that it was their intention that the ostensible purchaser
13 should acquire and hold the property for the one with whose means it was acquired.” Majewsky v.
14 Empire Constr. Co., Ltd., 467 P.2d 547 (Cal. 1970). This natural presumption exists based on the
15 undisputed facts from our declarants. Gregory provided the means as down payments, while
16 Daniel was to hold title for Gregory’s benefit.
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18 B. Beneficial Interest
19 As previously mentioned, Gregory stipulates to having purchased all three properties by
20 providing all of the capital investment as down payments. (Kent Decl. ¶ 5). Gregory can prove
21 with undisputed documentation that the down payments came from his separate source of funds.
22 (Kent Decl., ¶¶ 13-15). In addition, it is also undisputed that Daniel made no capital investment
23 into these three properties. The source of capital investment supports the inference that it was the
24 party’s original intent for Daniel to hold title merely for Gregory’s beneficial interest.
25 In In Re Marriage of Ruelas, substantially similar circumstances supported the disposition
26 of a resulting trust. The court held:

27 “Substantial evidence supported the finding that a resulting trust was created in
28 favor of parents with regard to condominium that was paid for by parents, while
1 title was held in the name of parents' adult daughter; parents, daughter, and seller
2 of the condominium all testified that, at the time of the purchase, it was intended
3 that daughter would take title for the benefit of her parents in order to effect the
4 sale that would not otherwise have transpired because parents could not qualify
5 for mortgage financing.” In re Marriage of Ruelas, 64 Cal. Rptr. 3d 600 (Ct. App.
6 2007).
7 In our case at bar, Gregory had similar reasons for not taking title to the properties. Gregory
8 feared he might be exposed to medical creditors which may later put the properties at risk. (Kent
9 Decl. ¶ 17). Additionally, Gregory believed he only had a short time to live. (Kent, id.) Gregory
10 and Daniel benefited from having avoided Gregory’s name from appearing on any of the
11 properties or loans. This benefit mirrors Ruelas wherein both parties benefited from acquiring the
12 property based on the decision to place title solely in the daughter’s name. Ruelas establishes as a
13 matter of law, that the imposition of a resulting trust is an appropriate remedy where the parties
14 clearly intended Daniel to be merely a title holder for Gregory’s beneficial interest.
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16 C. Parties Only Intended Daniel to be a Future Interest Holder
17 Gregory’s beneficial interest was that of present interest; the parties only intended Daniel
18 to be a future interest holder. Transfers are prompted by the thought of death when: (1) made with
19 the purpose of avoiding death taxes, (2) made as a substitute for a testamentary disposition of the
20 property, or (3) made for any other motive associated with death. 26 C.F.R. § 20.2035-1 (2009).
21 When transfers are prompted by the thought of death, an inference is raised that the transfer was
22 only intended to become effective at death. This results in a present intent to transfer a future
23 interest. Such transfers are generally void unless the grantor intended to transfer a present interest.
24 CAL. PROB. CODE § 21114 (2009). Gregory and Daniel agreed that Daniel’s name would be used
25 instead of Gregory’s in order to help shield the properties from Gregory’s medical creditors. It
26 also made it easier to avoid probate court and inheritance tax if and when Gregory eventually died.
27 (Kent Decl., ¶ 17).
28
1 Conversely, we may therefore presume Gregory’s capital investments were never intended
2 to be intervivos gifts to Daniel. “Property given {as a gift} by a transferor during his or her
3 lifetime to a person is treated as a satisfaction of an at-death transfer to that person in whole or in
4 part only if (1) the transferor declares in a contemporaneous writing that the gift is in satisfaction
5 of the at-death transfer, (2) the property given is the same property that is the subject of a specific
6 gift to that person. (3) the Grantor subsequently dies.” Cal. Prob. Code § 21135 (2009). There are
7 no facts in dispute to suggest the existence of any writings demonstrating that it was Gregory’s
8 intent to make such a gift. Since the facts are clear regarding Gregory’s down payments, Daniel’s
9 argument implies the assertion that Gregory must have gifted the properties to him despite clear
10 intention to the contrary. Lastly, Gregory is still alive and is no longer expected to die anytime
11 soon. Therefore, the purchase of three properties with Daniel’s name on title must have been
12 intended as testamentary transfers and not as intervivos gifts.
13 In 2001, Gregory and Daniel had wills drawn up to establish each other as a beneficiary of
14 their respective estates. (Kent Decl., ¶¶ 18). This further evidences the party’s intent to establish
15 Daniel’s interest in the properties as future interest, not present interest. Additionally, Daniel later
16 deeded all the properties back to Gregory when they both learned Gregory’s health was
17 improving. (Kent Decl., ¶¶ 11). The fact that Daniel voluntarily deeded the properties back to
18 Gregory further evidences Daniel’s intent with regard to his state of mind in 2007. It can be
19 inferred that Daniel had little concern with the nature of title because he knew that he was the
20 beneficiary of Gregory’s estate, vis-à-vis the will. This time frame also coincides with the news
21 that Gregory’s health was improving, and death was no longer imminent. (Kent Decl., ¶¶ 19).
22 From the totality of the circumstances, the facts clearly indicate that the parties only
23 intended for Daniel to be a future interest holder of the properties at Gregory’s death.
24
25 D. Gregory Was Legal Title Holder
26 Despite the favorable argument that Gregory had beneficial title from the time the
27 properties were purchased, the undisputed fact remains that Gregory was the legal title holder at
28 the time Daniel secretly borrowed the NRP funds. “An unrecorded instrument is valid as between
1 the parties thereto and those who have notice thereof.” CAL. CIV. CODE § 1217 (2009). Daniel
2 deeded the properties to Gregory in 2007 and the deeds were kept in Gregory’s safe deposit box
3 for two years. There are no facts in dispute with regard to the validity of those deeds. “The owner
4 of the legal title to property is presumed to be the owner of the full beneficial title. This
5 presumption may be rebutted only by clear and convincing proof.” CAL. EVID. CODE § 662
6 (2009). Therefore as a matter of law, a strong presumption exists that Daniel encumbered
7 properties to which he held no legal title, and knew that he held no legal title. Though the deeds
8 were unrecorded, Daniel had actual notice of them because he was the grantor and signatory.
9 Nonetheless, two years later he took out loans which were secured against properties in which he
10 had no legal interest, and without consent from Gregory, the legal title holder.
11 . Under this alternative theory, the result is the same. Gregory is entitled to a
12 reimbursement of the $150K in order to retire the trust deeds which were recorded on Gregory’s
13 properties without his knowledge or consent. The court should alternative order a resulting trust
14 be created.
15
16 V. CONCLUSION
17 Under either theory of recovery, Gregory is entitled to be unburdened by the three trust
18 deeds securing his property for a total of $150K. Gregory has always been the beneficial title
19 holder, and is now the legal title holder of the three properties. Gregory was the legal title holder
20 at the time the encumbrances were created. Gregory had no knowledge that these encumbrances
21 were being created by I-Bank or Daniel. We move for the court to invalidate I-Bank’s trust deeds
22 on the theory that I-Bank failed to qualify as a good faith encumbrancer, and therefore unduly
23 recorded their trust deeds in June 2009. I-Bank’s failure to qualify in good faith, results from
24 being charged with constructive notice of the existence of Gregory’s unrecorded and undisputed
25 2007 grant deeds on all three properties. Therefore, the trust deeds are void as to Gregory’s legal
26 title.
27 In the alternative, we move for the court to impose a resulting trust validating the party’s
28 original intent for Gregory to retain beneficial interest and beneficial title. The trust should be
1 imposed on grounds that title being placed in Daniel’s name was merely testamentary in nature,
2 and that the parties clearly intended for Daniel to only hold title for Gregory’s benefit.
3 Furthermore, Gregory’s actual status as legal title holder creates an overwhelming presumption in
4 lieu of the undisputed facts that Daniel borrowed money from properties which he knew he held
5 no interest at the time.
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9 Dated: April 14, 2010 Respectfully submitted,
10 DASKEVICH LAW OFFICES

11
12 By: ___________________________
Student No. 34569
13 Attorneys for Defendant and Cross-
Complainant Gregory Kent
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1 DECLARATION OF GREGORY KENT IN SUPPORT OF MOTION FOR SUMMARY
2 ADJUDICATION
3
4 I, GREGORY KENT, HEREBY DECLARE AS FOLLOWS:
5 1. I am above the age of 18 years, and am a resident of the City and County of Los
6 Angeles, California. I am the Defendant and Cross-Complainant in the present action. Except as
7 stated herein, I have personal knowledge of the facts contained in this Declaration. If called upon
8 as a sworn witness, I could and would competently testify as to the veracity of the facts contained
9 herein.
10 2. I make this declaration in support of my Motion for Partial Summary Judgment, filed
11 concurrently herewith.
12 3. I am a licensed Realtor in the state of California. I opened my own Realtor firm in
13 2001.
14 4. I met Daniel Traurig in 1992. In 1997, we began living together and remained
15 cohabitants until October 2008.

16 5. I made the down payments on all three properties which are secured by the
17 Improvident Bank Trust deeds. Daniel did not invest any capital into these properties. Daniel’s
18 name was used as the title holder only so that it would be easier for Daniel to inherit the properties
19 upon my death and to avoid inheritance tax and probate.
20 6. In August 2008, I confronted Daniel about $200k borrowed from our Hollywood Hills
21 home equity line in 2005. I was not aware of this at the time. Daniel assured me that the money
22 had been used properly, though he could not account for it. Daniel promised that he would not
23 borrow again without my permission.
24 7. In June 2009, we agreed to refinance some properties to lock in better interest rates;
25 these are the same three properties which are secured by the Improvident Bank trust deeds.
26 Unbeknownst to me, Daniel arranged with Susan Longholme to borrow an additional 150K over
27 and above the amount required for refinancing. He had those funds transferred into his own
28
1 separate account. Shortly thereafter, Daniel then took off on a personal vacation to Europe with
2 another friend. I do not presently know where the money is or whether it was all spent.
3 8. Susan Longholme was the loan broker whom we used for the refinancing. We both
4 knew Susan as friends prior to refinancing. Susan was aware of our social relationship, and she
5 knew that we had both worked together to invest in these properties before the refinance. Susan
6 was aware that I had made the down payments originally.
7 9. During Daniel’s European trip, I received a phone call from Susan. On this call, Susan
8 revealed to me that Daniel had borrowed the money. Susan had asked me, “how are you enjoying
9 all of your newly-found money?” This was when I first learned of the $150K in secretly borrowed
10 net refinance proceeds. On this call, I also learned that the money was dispersed into Daniel’s
11 personal account. I strongly believe that Daniel is using that money to finance his life apart from
12 mine. I believe he used this money to help finance his personal vacation. I had no knowledge that
13 Daniel was going to borrow this money, in fact, he specifically promised me that he would never
14 borrow from our business investments without first consulting with me.
15 10. I did not know that Daniel had arranged for an additional $150K during this refinance.
16 11. On September 11, 2009, I went to my safe deposit box to retrieve grant deeds in my
17 name to be recorded. Two years earlier (in 2007), Daniel and I deeded the properties back into my
18 name because we learned that I was no longer dying from AIDS. I was concerned what other
19 actions Daniel might take without my knowledge; therefore I had the deeds recorded the same day.
20 12. In June 1999 I transferred $100k into Daniels account in order to help Daniel qualify
21 for loans. Daniel never returned that money.

22 13. I have cancelled checks for the down payments of three properties purchased in 2004
23 and 2005 from my individual account.

24 14. I have loan papers for three properties that correspond to the three checks for which I
25 provided the down payment.

26 15. I have refinancing documents for three properties that correspond to the three
27 properties for which I made the down payments.

28
1 16. I have a bank statement corresponding to the close of the refinancing showing the
2 deposit of $150K into Daniel’s individual account.

3 17. Prior to the first purchase in 1999, Daniel and I agreed to deed properties in Daniel’s
4 name based on three reasons: (1) We were concerned with how to protect my assets should my
5 medical expenses continue to mount and my physical condition continue to deteriorate, (2) We
6 assumed that I might not live all that much longer and we wanted Daniel to enjoy the properties
7 when death separated them, (3) Daniel would not have to deal with probate or inheritance tax upon
8 my death, and (4) my creditors could not pursue the equity in the house should Gregory die with
9 substantial unpaid medical bills.
10 18. In 2001, we had gone to a mutual friend, an attorney, and had wills drawn up to make
11 each other a beneficiary of our respective estates. Under my will, I designated Daniel as the
12 primary devisee of his estate upon his death; Daniel’s will contained a comparable provision in my
13 favor.
14 19. By 2002, new medications were improving my life considerably, and I no longer feared
15 imminent demise.
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18 I declare under penalty of perjury under the laws of the State of California that the
19 foregoing is true and correct. Executed this 14th day of April, 2010, at Los Angeles, California.
20 Dated: April 14, 2010.
21
22 ___________________________
23 Gregory Kent
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1 DECLARATION OF SUSAN LONGHOLME IN SUPPORT OF MOTION FOR
2 SUMMARY ADJUDICATION
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4 I, SUSAN LONGHOLME, HEREBY DECLARE AS FOLLOWS:
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6 1. I am above the age of 18 years, and am a resident of the City and County of Los
7 Angeles, California. I am not a party to the present action. Except as stated herein, I have
8 personal knowledge of the facts contained in this Declaration. If called upon as a sworn witness, I
9 could and would competently testify as to the veracity of the facts contained herein.
10 2. I make this declaration in support of the Motion for Partial Summary Judgment, filed
11 concurrently herewith by Defendant and Cross-Complainant Gregory Kent.

12 3. I obtain my license in California to act as a loan broker in 1995. I have been
13 performing in this job since that time. In that period of time, I have brokered hundreds of loans
14 funded by Improvident Bank. Prior to 1998, I received an undergraduate bachelor’s degree in
15 finance from UCLA in 1994.
16 4. I was acting as agent for Improvident Bank in connection with the three loans which
17 were created to borrow the $150K in dispute. I helped secure these loans from Improvident Bank
18 at Daniel’s request only. These loans are secured by trust deeds which are in dispute.
19 5. Because of my prior friendship with Daniel and Gregory, I was aware that Daniel and
20 Gregory had bought the three properties together even though title stood only in Daniel’s name. I
21 did not share this information with Improvident Bank.
22 6. I had no discussion with Gregory about the loans prior to the close of escrow.
23 7. I understood from Daniel that he and Gregory were going to use the $150K to do some
24 remodeling on the three properties in question, as well as to do some traveling together. I did not
25 confirm this with Gregory prior to close of escrow.
26 8. Daniel directed me to have the escrow company deposit the $150K net proceeds into an
27 account, in his name alone, at Union Bank. I provided those instructions to the escrow company.
28 9. I knew Gregory and Daniel as friends prior to securing the trust deeds.
1
2 I declare under penalty of perjury under the laws of the State of California that the
3 foregoing is true and correct. Executed this 14th day of April, 2010, at Los Angeles, California.
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6 Dated: April 14, 2010 ___________________________
7 Susan Longholme
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DASKEVICH LAW OFFICES

1 JENNIFER A. DASKEVICH (SBN 075997)

3 Summary judgment is appropriate when the pleadings, depositions, answers to

3 “An agency may be created, and an authority may be conferred, by a precedent

3 “A subsequent encumbrancer is not entitled to ignore reasonable warning signs appearing

4 appearing of record, an encumbrancer does have a duty to inquire as to unrecorded agreements

24 $150K NET PROCEEDS AGAINST DANIEL

19 As previously mentioned, Gregory stipulates to having purchased all three properties by

26 of a resulting trust. The court held:

10 DASKEVICH LAW OFFICES

15 cohabitants until October 2008.

21 for loans. Daniel never returned that money.

23 and 2005 from my individual account.

25 provided the down payment.

27 properties for which I made the down payments.

2 deposit of $150K into Daniel’s individual account.

11 concurrently herewith by Defendant and Cross-Complainant Gregory Kent.

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