Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court for the County of Los Angeles, Los Angeles County Super. Ct. No. BC329335, Ralph W. Dau, Judge. Affirmed.
Law Offices of Robert J. Reamer and Robert J. Reamer for Plaintiff and Appellant.
Levinson Arshonsky & Kurtz, LLP, Robert A. Levinson and James S. Cooper for Defendant and Respondent.
PERLUSS, P. J.
Jean Mizrahi appeals the judgment entered in this action to quiet title to property claimed to be owned by her adult son, Allen Mizrahi. Jean contends the transfer to Allen of title to her home was induced by fraud or mistake and the trial court’s conclusion otherwise is not supported by substantial evidence. We affirm.
Because Allen, Jean and Jean’s late husband, Victor, share the same last name, we refer to them by their first names, not out of disrespect but for convenience and clarity. (Cruz v. Superior Court (2004) 120 Cal.App.4th 175, 188, fn. 13.)
Nobles v. Hutton (1907) 7 Cal.App. 14.
FACTUAL AND PROCEDURAL HISTORY
Jean and her late husband, Victor, owned and resided for nearly 30 years in a home located at 820 Hauser Boulevard in Los Angeles. In the 1980’s the couple opened a delicatessen financed in substantial part by a Small Business Association (SBA) loan, secured by their home. Ultimately the business failed. After Victor became ill with cancer, Jean and Victor had difficulty making payments on the SBA loan. In 2001 Jean and Victor were notified by a third party who had been assigned the loan that their home would be sold in a foreclosure sale within 30 days unless they satisfied the approximately $90,000 outstanding balance. Apparently unable to refinance their home themselves, Jean and Victor enlisted the aid of their three adult children and their adult nieces and nephews, all of whom agreed a new loan had to be obtained to satisfy the SBA debt. Following a family meeting, Allen agreed he would look into obtaining a loan in his name. Later, after consulting with a loan officer, Allen told Jean and Victor he would only be able to qualify for a loan if he held title to the house. Jean and Victor agreed to transfer the property to Allen so that he could obtain a new loan to pay off their existing SBA obligation.
On May 31, 2001 Jean and Victor signed an individual grant deed transferring the property to Allen. The new deed listing Allen as the sole owner was recorded in the Los Angeles County Recorder’s office on June 15, 2001. At the time of the transfer, the home was nearly debt and lien free except for the $90,000 SBA encumbrance. Following the transfer of the property, Allen obtained a new loan secured by a deed of trust on the house in his own name and used part of the new loan proceeds to pay in full and thereby extinguish the SBA lien. Jean and Victor continued to live in the home. After Victor died, Allen told other family members that, although Jean was living in the home, it belonged to him alone and suggested she was only living there out of his “kindness and good graces.”
On February 4, 2005 Jean brought the instant action to quiet title to the property. Jean’s complaint asserted she did not intend to transfer title to Allen and, to the extent a transfer occurred, it had been induced by fraud or mistake. Alternatively, she alleged Allen had induced her to transfer legal title to the property with a false promise he would return title to her upon her request. Jean sought declaratory relief and imposition of a constructive trust, alleging Allen had wrongfully obtained the property and should be deemed to have held it in trust for her benefit.
A one-day court trial was held. Jean, her three children, Diane Mizrahi Harris, Linda Mizrahi and Allen, testified, as did Jean’s niece, Jessica Mizrahi, and her two nephews, Alan Chemtob and Patrick Betito. Except for Jean, each witness testified Allen had agreed to save the house from foreclosure by obtaining title and securing a loan against the house to pay off his parents’ debt. Jean, on the other hand, testified she believed Allen was helping her refinance her property and never intended to actually transfer legal title to him. Allen admitted the only consideration he paid for the house was satisfaction of his parents’ $90,000 SBA debt. Harris, Linda Mizrahi, Jessica Mizrahi, Betito and Chemtob testified on cross-examination that, although they firmly believed Allen would transfer the property back to Jean upon satisfaction of the SBA debt, they did not expressly hear Allen agree to those terms. Harris explained the transfer of the property to Allen was a short-term solution to address the imminent foreclosure threat and a long-term solution was not really discussed among the family members. Nonetheless, considering Jean (and not Allen) to be the true owner of the property, Harris, Linda Mizrahi, Chemtob and Betito assisted Allen in repaying the new loan, believing it unfair for Allen to assume full responsibility for his parents’ financial situation. There was no evidence, apart from an assertion by Jean’s counsel, as to the fair market value of the home.
In response to an observation by the court that there had been no evidence introduced as to the fair market value of the home, Jean’s counsel asserted he believed Allen had testified the market value was $300,000. Jean’s counsel also asked the court to take judicial notice of the fact the market value was much more than $90,000. The reporter’s transcript reveals that Allen did not testify to the market value of the house, and the court did not rule on the informal judicial notice request.
Nobles v. Hutton, supra, 7 Cal.App. at pages 20-21, italics added.
At the close of Jean’s case, Allen moved for a judgment pursuant to Code of Civil Procedure section 631.8 (section 631.8), claiming Jean had provided no evidence he had fraudulently induced her to transfer the property to him or that he ever agreed to deed the property back to Jean upon her request. The court expressed sympathy for Jean’s circumstances but agreed with Allen there was “no evidence that [Allen] had promised and agreed that he would go on title only as an accommodation to assist [Jean] in refinancing the property and deed the property back to [Jean] upon request.” The court explained, “This is a very sad situation. Although I find it repugnant to do so, I believe that I am required to grant the motion.”
DISCUSSION
1. Governing Law and Standard of Review
Section 631.8, subdivision (a), authorizes a party in a nonjury trial to move for judgment in his or her favor after the opposing party has completed his or her presentation of evidence. Although similar to a motion for nonsuit in a jury trial, a section 631.8 motion differs in one critical respect: Sitting as fact finder, a trial court presented with a section 631.8 motion may weigh the evidence presented and resolve issues of credibility and other conflicts in the evidence in determining whether the plaintiff has sustained his or her burden of proof. (§ 631.8, subd. (a); Heap v. General Motors Corp. (1977) 66 Cal.App.3d 824, 829 [“[t]he purpose of . . . section 631.8 is to enable a trial court which, after weighing the evidence at the close of the plaintiff’s case, is persuaded that the plaintiff has failed to sustain his burden of proof, to dispense with the need for the defendant to produce evidence”]; National Farm Workers Service Center, Inc. v. M. Caratan, Inc. (1983) 146 Cal.App.3d 796, 807.)
Section 631.8, subdivision (a), provides, “After a party has completed his presentation of evidence in a trial by the court, the other party, without waiving his right to offer evidence in support of his defense or in rebuttal in the event the motion is not granted, may move for a judgment. The court as trier of the facts shall weigh the evidence and may render a judgment in favor of the moving party, in which case the court shall make a statement of decision as provided in Sections 632 and 634, or may decline to render any judgment until the close of all the evidence. The court may consider all evidence received, provided, however, that the party against whom the motion for judgment has been made shall have had an opportunity to present additional evidence to rebut evidence received during the presentation of evidence deemed by the presenting party to have been adverse to him, and to rehabilitate the testimony of a witness whose credibility has been attacked by the moving party. Such motion may also be made and granted as to any cross-complaint.”
Comstock v. Comstock (N.Y. 1866) 57 Barb. 453, 469, italics added, quoted in Pleasants v. Hanson (1920) 48 Cal.App. 626, 631; see also, Nobles v. Hutton, supra, 7 Cal.App. at page 21.
On appeal the findings of a trial court made in connection with a section 631.8 motion are reviewed for substantial evidence. (See Canales v. City of Alviso (1970) 3 Cal.3d 118, 126 [“[r]eview of judgments entered with findings of fact on a motion for judgment under Code of Civil Procedure section 631.8 is governed by the same rules which apply on appeal following any other findings”]; San Diego Metropolitan Transit Development Bd. v. Handlery Hotel, Inc. (1999) 73 Cal.App.4th 517, 528 [trial court’s findings relating to § 631.8 motion “‘are entitled to the same respect on appeal as are any other findings of a trial court and are not erroneous if supported by substantial evidence’”], quoting Charles C. Chapman Building Co. v. California Mart (1969) 2 Cal.App.3d 846, 853.) “‘Evidence is substantial if any reasonable trier of fact could have considered it reasonable, credible and of solid value.’ [Citation.]” (Lam v. Bureau of Security & Investigative Services (1995) 34 Cal.App.4th 29, 36.)
We review the record as a whole, resolving all conflicts and indulging all legitimate and reasonable inferences in favor of the prevailing party. (Western State Petroleum Assn. v. Superior Court (1995) 9 Cal.4th 559, 571.) If there is substantial evidence, contradicted or uncontradicted, that will support the finding, it must be upheld even if the evidence is subject to more than one interpretation. (Ibid. [“‘[w]hen two or more inferences can be reasonably deduced from the facts, the reviewing court is without power to substitute its deductions for those of the trial court’”]; Von Beltz v. Stuntman, Inc. (1989) 207 Cal.App.3d 1467, 1481 [reviewing court may not reweigh the evidence].)
2. Substantial Evidence Supports the Judgment
Jean contends no reasonable trier of fact could find she intended to transfer the property to Allen without a reciprocal promise he would return the property to her upon payment of the SBA loan. Although the evidence indisputably proves Allen holds legal title to the property, Jean insists the evidence “overwhelmingly established” transfer of legal title was accomplished solely to assist her in paying the SBA loan and was not intended to be permanent. She asserts Allen’s testimony no agreement was made to retransfer the property is so inherently improbable it does not constitute substantial evidence. (See People v. Young (2005) 34 Cal.4th 1149, 1181 [evidence is not substantial if it is “physically impossible” or “inherently improbable”].)
Although the evidence is certainly susceptible to the interpretation Jean advances, our task on appeal is simply to determine whether the trial court’s findings are supported by substantial evidence. To this end, we find Allen’s testimony sufficient to support the judgment. (See, e.g., In re Marriage of Mix (1975) 14 Cal.3d 604, 614 [testimony of a single witness can be sufficient to support judgment].) Jean contends it is nonsensical to believe she and Victor would have effectively sold the house to Allen for $90,000 when their substantially greater equity interest in the house could have been realized by selling it on the open market. However, undermining this assertion (quite apart from the absence of any evidence as to the actual market value of the house) is the testimony from Jean and each of her family members that Jean wanted to continue to live in the home she and Victor had shared for 30 years and refused to consider selling it. Indeed, transferring title to Allen was intended to save the house from sale and, in fact, accomplished that objective. Unfortunately for Jean, whether Allen would remain as titleholder after the transfer and satisfaction of the SBA debt was not, as Harris intimated, as clearly understood. Jean may have assumed Allen would transfer the property back to her after the SBA loan was paid, but she did not testify Allen had expressly agreed to those terms. In her deposition testimony she admitted she had never actually heard Allen make such a promise to her or to anyone else. Chemtob, Harris and Linda Mizrahi also conceded on cross-examination that none of them heard or were told the terms of Allen’s agreement with his parents.
Allen’s agreement to save the house from foreclosure by obtaining title and securing a loan to pay off his parents’ debt -- a commitment none of his siblings appeared willing or able to undertake -- constitutes “valuable” or “good consideration.” (See Civil Code § 1605 [“[a]ny benefit conferred, or agreed to be conferred, upon the promisor, by any other person, to which the promisor is not lawfully entitled, or any prejudice suffered, or agreed to be suffered, by such person, other than such as he is at the time of consent lawfully bound to suffer, as an inducement to the promisor, is a good consideration for a promise”]; Horton v. Kyburz (1959) 53 Cal.2d 59, 65-66.)
Comstock v. Comstock, supra, 57 Barb. at page 469. Notably, this principle was enunciated in the context of a case where the fiduciary was an adult son and the beneficiary, his elderly parent, and in which the court invalidated a title transfer from the beneficiary to the fiduciary.
In opposing the section 631.8 motion in the trial court, Jean never asserted Allen’s status as a fiduciary or a presumption of undue influence invalidated the transfer (see, e.g., Munro v. Regents of University of California (1989) 215 Cal.App.3d 977, 988-989 [party may not change theory of a cause of action on appeal and raise issue not presented to trial court]) nor did she, apart from passing references to a “confidential” or “fiduciary relationship,” assert that argument on appeal or include appropriate citations to the record or to legal authority (see Sunset Drive Corp. v. City of Redlands (1999) 73 Cal.App.4th 215, 226 [absent sufficient showing of justification for failure to raise issue in a timely fashion, appellate court need not consider any issue not adequately presented in the parties’ briefs]; Locke v. Warner Bros., Inc. (1997) 57 Cal.App.4th 354, 368 [appellant’s failure to raise issue in opening brief ordinarily waives issue on appeal]). Accordingly, while there may be, as the dissent asserts, a time-honored presumption against upholding title transfers from elderly parents to adult children effected “without adequate or any consideration” (Nobles v. Hutton (1907) 7 Cal.App. 14, 21), we do not consider it in this case in which the consideration was adequate (see fn. 4, above) and the fiduciary duty/undue influence presumption was not argued in the trial court. (Kolani v. Gluska (1998) 64 Cal.App.4th 402, 412 [failure to raise an issue or argument in the trial court results in a forfeiture of the point on appeal]; see also Ernst v. Searle (1933) 218 Cal. 233, 240-241 [“A party is not permitted to change his or her position and adopt a new and different theory on appeal. To permit him or her to do so would not only be unfair to the trial court, but manifestly unjust to the opposing litigant”]; In re Marriage of Eben-King (2000) 80 Cal.App.4th 92, 117.)
Current Probate Code section 16004, subdivision (c) restates the presumption of former Civil Code section 2235 (repealed by Stats. 1986, ch. 820, § 7) which was phrased in terms of a presumption of insufficient consideration and undue influence rather than breach of fiduciary duty. (See Cal. Law Revision Com. com., West’s Ann. Prob. Code (1991) foll. § 16004, p. 14.)
Jean also argues Allen’s testimony is inherently improbable because her other children, nieces and nephews assisted Allen in paying the loan he obtained because of a common understanding that Jean could not afford to pay it herself and thus had to rely on them for assistance. According to Jean, they would have never assisted Allen in repaying the loan had they known Allen would claim title to the home. Whatever merit there may be to the claim Allen took money from his siblings and cousins under false pretenses, the evidence supporting that assertion does not incontrovertibly establish either that Jean’s transfer of title to Allen was accomplished by fraud or mutual mistake or that Allen had agreed with Jean he would transfer legal title back to her upon her request. Jean and Victor knew they were transferring title to Allen. Allen paid the SBA loan and became the sole legal obligor on the note. Jean (and Victor, until his death) continued to live in the home, which would not have been possible had the home been sold to a third party. Jean continues to reside there. The other family members’ contributions to the repayment of the new loan notwithstanding, we cannot say the evidence supporting the verdict is so “inherently improbable” as to have no value. Although Allen’s actions may be interpreted by his family as less than honorable, the trial court’s conclusions they were not fraudulent and do not form the basis for imposing a constructive trust are not subject to reversal on this record. (See Campbell v. Superior Court (2005) 132 Cal.App.4th 904, 920 [remedy of constructive trust properly imposed only upon proof of wrongful acquisition or detention of property by another who is not entitled to it]; Civ. Code, § 2223 [“one who wrongfully detains a thing is an involuntary trustee thereof for the benefit of the owner”].)
Our affirmance of the trial court’s judgment, constrained by the governing law and the applicable standard of review, is by no means intended as an expression of approval of Allen’s conduct. Rather, it simply exemplifies the unfortunate truth that “[i]t does not lie within the power of any judicial system . . . to remedy all human wrongs.” (Stephen K. v. Roni L. (1980) 105 Cal.App.3d 640, 642.)
DISPOSITION
The judgment is affirmed. Allen Mizrahi is to recover his costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
I concur: WOODS, J.
JOHNSON, J., Dissenting.
JOHNSON, J.
I respectfully dissent.
I begin with an observation. These transactions were not the result of arms’ length negotiations among strangers owing duties only to their individual selves. To the contrary, this was a family trying to solve a family problem—an elderly mother and father, their adult children, and even two nephews and a niece. These relationships and duties colored all of what was said and what remained unsaid—indeed need not to be said—while these financial arrangements were being made.
It is true the 80-year-old mother, Jean, cannot testify her son, Allen, specifically told her or her husband he would reconvey the house to them, because neither she nor the father had any reason to ask that question. Indeed, it would have been extraordinary if they had—given the context and the close family relationships involved. The evidence is overwhelming and virtually unchallenged. These family members came together with a single mission—to save their elderly mother and seriously ill father’s home from foreclosure. Everyone’s testimony—including Allen’s—was to this effect.
From this testimony it is undisputed everyone in the family group, except evidently Allen, went into the ultimate transaction—a transfer of title to Allen purportedly essential to obtaining the loan needed to avoid foreclosure—with the understanding they were saving the house for the parents not for Allen. Not only the other family members’ testimony supported this conclusion, but their conduct in making contributions to the payments owed on the mortgage which collectively nearly met the monthly obligations on that mortgage. Only when Allen announced he was keeping the house for himself did Allen’s siblings and cousins cease making those contributions.
While the mother, Jean, cannot testify Allen expressly informed the parents he would reconvey the title to them once the emergency passed, it is also true Allen did not testify he expressly informed his mother and father at the time this title transfer took place he intended to keep the property as his own. Nor did he testify he expressly informed them at that point he would allow them to stay in the house only for so long as he wanted to out of his “kindness and good graces.”
Strangers who are putting together a contract or other financial arrangement have reason to write out or at least verbally communicate every term of the deal—to dot every “i” and cross every “t.” Families, on the other hand, often communicate their understandings through non-verbal means—expectations and assumptions about how family members will treat each other and gestures or other signals only they comprehend. Therefore, given the purpose and context of this transaction, it is perfectly understandable the parents would expect this title transfer to their trusted son would not deprive them permanently of their ownership of their home—and thus their considerable equity in that home. And thus, it is perfectly understandable they would have no reason to affirmatively seek reassurances from their son he would reconvey title when the crisis was over. And it was equally reasonable to have expected the son to have made it perfectly clear to his parents if instead he intended to do the opposite, that is, to retain title himself, if the parents signed the house over to him.
In my view, the trial court erred by evaluating the evidence as if this were a transaction between strangers, not within a family, and thus insisted the parents have obtained explicit guarantees from their trusted son. The court thus drew unwarranted inferences from the absence of those explicit written or verbal guarantees. For this reason alone, I would dissent in this case.
But there is yet another reason in the law which supports reversal. The trial court relied heavily on presumptions favoring the sanctity of the title document. But those presumptions yield to contrary presumptions when the title transfer is from an elderly parent to an adult child. Families are held together by mutual trust and rely on that trust when transacting business with one another. Except in unusual circumstances, adult children owe a debt and thus a special fiduciary duty toward their elderly parents, in this instance only more so because one of those parents, the father, was seriously ill. A longstanding principle holds the fiduciary duty parents ordinarily owe their minor children is reversed when the parents become elderly and the children are old enough to have become the responsible adults involved in business transactions with those parents. This longstanding rule was explained in an early California appellate opinion, Nobles v. Hutton.1
“[T]he relation of parent and child, where business transactions are carried on between them, is the source of the very highest considerations of confidence and trust. Confidence in such a case originates in and proceeds from natural laws, and, generally speaking, is innate and an essential part of the nature of both, for in whom could a parent repose a greater degree of confidence than in him to whom has been directly transmitted his own blood, and over whom he has exercised parental dominion and discipline from infancy to matured manhood. So, when a son, dealing with his parent with regard to the latter’s property, gains an advantage or obtains title to such property without adequate or any consideration, the transaction should, upon principles of equity and fair dealing, be scanned with the strictest scrutiny. . . . The books are full of cases illustrating the application of the principle as thus stated. . . .”2
In my view, Allen violated this fiduciary duty by taking advantage of his parents’ plight to surreptitiously seize ownership of their home, the home in which they had raised him along with his siblings. I find particularly relevant to the case before our court the language of a New York opinion which a California court adopted and applied in negating a transfer of property a son claimed a parent had “gifted” to him, as Allen claims his parents did in this case.
“It is a well-settled rule of equity jurisprudence, that all gifts, contracts, or benefits, from a principal to one occupying a fiduciary or confidential relation to him, are constructively fraudulent and void. The court, in such cases, acts upon the principle ‘that if confidence is reposed, it must be faithfully acted upon; if influence is acquired, it must be kept free from the taint of selfish interest, and cunning and overreaching bargains.’ ‘In this class of cases, there is often found some intermixture of deceit, imposition or overreaching advantage or other mark of positive or direct fraud. But the principle upon which courts of equity act in regard thereto stands independent of any such ingredient, upon a motive of general public policy.’
“Among the relations subject to the foregoing rule are those of parent and child, attorney and client, and principal and agent. (Story’s Eq. Juris. §§ 309 to 315.)”3
The majority opinion argues Allen did not violate his fiduciary duty to his parents because he saved their home from foreclosure by obtaining a loan to pay off their business debt. This constituted “valuable” or “good consideration,” it is argued, for the transaction shifting title permanently from the beneficiaries, the parents, to their son, the fiduciary. (Maj. opn., ante, at p. 7, fn. 4.) In my view, this is a narrow reading of the opinions establishing a fiduciary duty running from adult children to their elderly parents. As those cases articulate the duty it is the same as the duty a trustee owes a beneficiary, an agent owes a principal, or a lawyer owes a client.
With that duty flows many limitations and consequences, among them, “all gifts, contracts, or benefits, from a principal to one occupying a fiduciary or confidential relation to him, are constructively fraudulent and void.”4 At a minimum, those transactions are subject to the closest scrutiny by the courts, and the fiduciaries involved are to be denied any advantage they may have obtained at the expense of the beneficiaries. In such cases, the court begins its examination with a presumption the consideration was inadequate and the transaction void. Only if satisfied the fiduciary gained no advantage that diminished the beneficiary’s position in any way does the court properly allow the transaction to stand. In this case, the court deviated dramatically from this course, in fact applying the opposite presumption. Because a deed was involved—and ignoring the fiduciary relationship between son and elderly parents—the court erroneously invoked the presumptions of regularity and finality which typically apply in upholding this transaction.
In those terms, to be “adequate consideration,” it is not enough what the fiduciary provided to his beneficiary would be adequate if the transaction were between strangers—or more accurately between two parties neither of whom owed the other a fiduciary duty. Imagine if this were not an adult son and his elderly parents involved in this transaction, but another pair of parties in a relationship carrying like fiduciary responsibilities on the part of the one occupying Allen’s position in the relationship—a lawyer and his client or a trustee and his beneficiary. If a lawyer or trustee did what Allen did in this case—transfer the title to the clients’ or beneficiaries’ home from them to himself in order to obtain a loan and stave off foreclosure, but then retain permanent title himself—would the courts truly validate the transaction on grounds the lawyer or trustee had furnished “adequate consideration?” Or, would the courts closely scrutinize the arrangement and not allow the lawyer or trustee to retain title against a claim from the clients or beneficiaries that title was to return to them in the absence of persuasive affirmative evidence establishing the clients and beneficiaries understood and agreed their lawyer or trustee was to gain this major benefit at their expense? The cases suggest transactions such as this between lawyers and clients and trustees and beneficiaries are subjected to the closest scrutiny and upheld only in the rarest circumstances. In my view, there is no reason to apply less scrutiny to transactions between adult children and their elderly parents.
And what does that “close scrutiny” require in this context? Probate Code section 16004, subdivision (c) sets forth the presumption Allen should have been compelled to overcome, but was not and did not in this case. “A transaction between the trustee and a beneficiary which occurs during the existence of the trust or while the trustee’s influence with the beneficiary remains and by which the trustee obtains an advantage from the beneficiary is presumed to be a violation of the trustee’s fiduciary duties. . . .”5 This section is not limited to professional or formal “trustees” and “beneficiaries,” but has been held to apply to other confidential relationships, including those involving transactions among family members.
See, e.g., De Vrahnos v. George (1962) 203 Cal.App.2d 210, 213, 222-223 [former Civil Code section 2235 (now Probate Code section 16004, subdivision (c)) applied to transaction involving step-uncle owing fiduciary duty to 21-year-old step-niece and her parents].
I am not contending Allen had the burden of demonstrating his parents received “independent advice” from a knowledgeable and neutral third party about the full meaning and significance of the transaction and the fact they would be losing the title to their home permanently. Although proof of such “independent advice” generally is enough to uphold the validity of a transaction between the parties which benefits the fiduciary, and would have been preferable here, such a requirement is not essential to the position urged in this dissent. What is required, however, is proof the fiduciary’s elderly parents fully understood the terms and all the ramifications of the transaction. This is the bare minimum when fiduciaries transact business with those dependent on them and walk away with a personal benefit. In this case that would include most especially a full understanding they would be losing title permanently to the home they had lived in for decades and would remain there only at their son’s sufferance and for so long as he was willing to allow them to do so.
But see, Tidwell v. Richman (S.D. Cal. 1953) 127 F.Supp. 526, 531 [requiring a brother who was his sister’s trustee and attorney to have insisted the sister-beneficiary have independent legal counsel before extending the term of the trust and his role as attorney].
De Vrahnos v. George, supra, 203 Cal.App 2d 210, 221-223 [step-uncle found to be in confidential relationship with 21-year-old daughter of restaurant owners and those owners in transaction where he provided guarantees and loans to save restaurant in return for receiving major interest in property, but transaction upheld because daughter and owners had full knowledge of terms and independent advice from their own lawyer].
See, e.g., Marsiglia v. Marsiglia (1947) 78 Cal.App.2d 701, 704-705 [husband must make full and fair disclosure of all that wife should know regarding how transactions between them affect her interests]; Stevens v. Hutton (1945) 71 Cal.App.2d 676, 683 [agent’s purchase from principal will be upheld only if it is proved principal was given a “clear understanding of the material facts” before giving consent to the purchase]; In re Brimhall’s Estate (1943) 62 Cal.App.2d 30, 34 [to same effect as Marsiglia v. Marsiglia, supra, 78 Cal.App.2d 701]; Norris v. Norris (1942) 50 Cal.App.2d 726, 733 [husband has burden of demonstrating the transaction with his spouse was fair and just and fully understood by that party].
I share the trial judge’s distaste for what he felt compelled to do in granting Allen’s motion to quiet title, when he said: “Although I find it repugnant to do so, I believe that I am required to grant the motion.” I only disagree the court was “required” to grant Allen’s motion. At a minimum, if Allen was going to retain permanent title to the home—rather than keeping it only so long as necessary to accomplish the family’s purpose of saving the parents’ house from foreclosure—he owed a duty to expressly and affirmatively warn his elderly and desperate parents this was his intent. Had he so testified and the trial court credited that testimony there would remain the question whether he nonetheless violated his fiduciary duty to his parents by taking undue and unfair advantage of their desperate financial situation. But if he had made this clear to his parents at least they would have known the true price of signing the title documents. Moreover, if so advised they could have considered the option of selling the house to pay off the loan and thus recover a part of their substantial equity in their home as opposed to permanently losing both their home and their equity in that home.
The majority points out the parents and other family members had considered the option of selling the house and recovering the equity but chose instead the alternative of seeking a loan to prevent foreclosure so the parents could remain in their home of some 30 years. But, in the absence of proof the parents fully understood the consequences of this alternative—that is, they would lose title permanently to their son, and with it their hard-earned equity as well—it cannot be said they necessarily would have chosen to sign the title documents over to Allen. The trial court and the majority are correct in finding a lack of proof the market value of this house exceeded the $90,000 borrowed to pay off the loan and avoid foreclosure. But given real estate values in Los Angeles as a whole and the neighborhood in which the house was located coupled with the undisputed evidence this house was otherwise nearly paid off, there can be little doubt—with only a $90,000 loan, Allen acquired and his parents lost hundreds of thousands of dollars in this transaction, and quite possibly more.
But we need not consider whether Allen would have breached his fiduciary responsibilities to his parents even if he had told them at the last moment he intended to retain title to their house. There simply is no testimony in this record, not even from Allen, suggesting he told them of his intent to retain permanent title to the house. For that reason, as well, he has not overcome the presumption against honoring title transfers from elderly parents to adult children. Thus, I would find there was insufficient evidence to support the decision to grant the motion and reverse. On this record, in fact, I would be tempted to vacate the judgment and order the trial court to grant a motion to quiet title in favor of appellant.
In a footnote (maj. opn., ante, at p. 7, fn. 5) the majority opinion argues this second alternative ground for reversing the trial court’s decision should not be considered. This is based on a claim appellant’s counsel failed to raise the fiduciary duty issue in his briefing. There are several possible responses to this contention.
First, in my view, the legal theories appellant argued in her brief did embrace the position discussed in this dissent. True, appellant’s brief does not cite the same cases as are included in this dissent. Nor did it focus as precisely as does the dissent on this particular reason for finding this transaction to have been inequitable, that is, an adult child taking advantage of elderly parents. But appellant’s brief devotes many pages and cites over a dozen decisions explaining why this was an inequitable transaction warranting imposition of a constructive trust, and emphasizing many of the same factual elements as the dissent. This included more than one reference to violations “of a confidential or fiduciary relationship” and a defendant obtaining an “unconscionable advantage” as justifications for a constructive trust, which are at the heart of the argument in this dissent. Furthermore, appellant built a record in the trial court establishing all the facts necessary to fully support the argument propounded in this dissent—the advanced age of the parents and the father’s debilitating illness, their desperate financial straits, and the “unconscionable advantage” their adult son took away from this transaction. In fact, appellant’s brief and her testimony repeatedly emphasized these critical facts as reasons for negating Allen’s attempt to retain title to his aged parents’ home.
Second, assuming for the sake of argument appellant’s briefing somehow is insufficient to raise the precise theory argued in this dissent, the remedy is not only simple but essential if equity is to be served. California appellate courts, including this division, commonly detect issues not raised by the parties and decide the appeal based on those unbriefed grounds. This practice is so common the Legislature enacted a law two decades ago requiring a court to afford the parties an opportunity to argue such issues. Under Government Code section 68081, if a court fails to do so, any party is entitled to demand an automatic rehearing of the appeal. Although I do not regard it as compelled by this section, if in the majority I would have no problem affording the parties an opportunity to brief (or further brief) the precise issue discussed in this dissent as forming the alternative grounds for reversing the trial court’s judgment.
“Before . . . a court of appeal . . . renders a decision in a proceeding other than a summary denial of a petition for an extraordinary writ, based upon an issue which was not proposed or briefed by any party to the proceeding, the court shall afford the parties an opportunity to present their views on the matter through supplemental briefing. If the court fails to afford that opportunity, a rehearing shall be ordered upon timely petition of any party.” (Gov. Code, § 68081 [added by Stats. 1986, ch. 1098, § 1].)
The final reason is more of a jurisprudential matter. Assuming once again appellant’s counsel failed to adequately raise Allen’s fiduciary duty to his elderly parents, what is the role of an appellate court? Do we merely say, “Tough luck, appellant, admittedly Allen did have such a duty and breached it, but you failed to point that out clearly enough and the trial court overlooked it, so you have to live with an unjust and illegal result.” Or, is it the appellate court’s proper role to attempt to cure obvious legal errors which led to erroneous judgments? Our division, as well as other California appellate courts, certainly have done so many times in the past. This particular case, I submit, cries out for just such an approach.
Consequently, I would reverse the judgment below for two independent reasons. First, the trial court’s misplaced insistence on affirmative testimony Allen misled his parents by expressly advising them he intended to return title to them after the foreclosure crisis subsided if the parents were to counter his claim the title documents alone invested him with permanent title to their home. This position completely disregards the fact this transaction occurred in the special context of an intra-family transaction aimed at saving the elderly parents’ home from foreclosure, not an arrangement between strangers where such express statements of intent would be expected. Second, the trial court failed to recognize the fiduciary duty this adult son owed his elderly parents and the consequence—this transaction had to be scrutinized with the greatest of care and with the fiduciary bearing the burden of overcoming the presumption he gained his personal advantage in violation of his fiduciary duties. For either of these reasons, or both, this judgment should not stand. Like the trial judge, I find the present outcome “repugnant.” Unlike the trial judge, I also find it contrary to law and equity.