JOHN GRECO v. 1010 CRENSHAW PROPERTIES LLC

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Court of Appeal, Second District, California.

JOHN S. GRECO, Plaintiff and Appellant, v. 1010 CRENSHAW PROPERTIES LLC et al., Defendants and Respondents.

B229483

Decided: October 28, 2011

Buxbaum & Chakmak and John Chakmak for Plaintiff and Appellant. Fidelity National Law Group, Judith E. Deming and Drew M. Taylor for Defendants and Respondents 1010 Crenshaw Properties LLC and Kaiser Federal Bank. Law Offices of Glenn H. Johnson and Glenn H. Johnson for Defendant and Respondent Keirco, Inc.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

John S. Greco appeals from a judgment entered after the trial court granted the motion for summary judgment of 1010 Crenshaw Properties LLC (Crenshaw) and Kaiser Federal Bank. This appeal arises out of Greco's loan of $200,000 from his retirement funds to Asset Administrators (Asset), as trustee of the JWC Trust (JWC), in return for a promissory note and a second trust deed encumbering commercial real property located at 425 South Flower Street in Burbank (the real property), at the direction of his longtime friend and financial advisor, Mark P. Colasuonno.   Colasuonno recorded the second trust deed.   Asset subsequently sold the real property to Crenshaw, and Colasuonno forged Greco's name on a reconveyance of the second trust deed.   Greco sued for breach of fiduciary duty and fraud against Colasuonno, Asset, JWC, and for quiet title, cancellation of instrument and declaratory relief against Crenshaw and Kaiser Federal Bank. The trial court granted Crenshaw and Kaiser Federal Bank's motion for summary judgment on the basis that the second trust deed was not validly delivered to Greco before Crenshaw and Kaiser Federal Bank paid for and took title to the real property, and therefore Greco's interest in the real property was junior to Crenshaw and Kaiser Federal Bank's interest.   The trial court also granted the summary judgment motion on the basis that Greco's claims against Crenshaw and Kaiser Federal Bank are barred by the statute of limitations of Code of Civil Procedure section 338.1

Greco contends that the trial court erred in granting the motion for summary judgment because the second trust deed was validly delivered to Greco in that Colasuonno received it as Greco's agent;  the reconveyance of the second trust deed to Crenshaw was void because Colasuonno forged Greco's name on the reconveyance;  and the statute of limitations of section 338, subdivision (d) does not bar Greco's claim against Crenshaw and Kaiser Federal Bank. We conclude Crenshaw and Kaiser Federal Bank have not shown as a matter of law that the second trust deed had not been delivered because the actions of Colasuonno show an intent to deliver the second trust deed;  the forged reconveyance was void;  and Crenshaw and Kaiser Federal Bank have not shown that Greco's claims against them are barred as a matter of law by the statute of limitations of section 338, subdivision (d).  Accordingly, we reverse the judgment.

BACKGROUND

On our de novo review of the trial court's grant of a motion for summary judgment, we view the evidence in the light most favorable to the nonmoving party.  (Hypertouch, Inc. v. ValueClick, Inc. (2011) 192 Cal.App.4th 805, 817–818, fn. omitted.)   Greco met Colasuonno approximately 25 years ago when they both worked at Hughes Aircraft Company, which is now Raytheon.   Colasuonno began preparing Greco's income tax returns shortly after they met.   Later, he prepared a trust for Greco and gave him legal advice.   Greco and his wife socialized with Colasuonno and his wife.   Greco and Colasuonno share a common Italian heritage, which made Greco even more trusting of Colasuonno.   Greco considered Colasuonno his trusted financial advisor, consultant, accountant, and close personal friend.

After retiring in 1999 from Raytheon, on the advice of Colasuonno, Greco withdrew $239,917.94 on February 7, 2000, from his retirement savings account.   Colasuonno told Greco that he could make 12 percent interest per year by investing with him.   Greco, who had graduated from high school in 1955 but had no other formal education, did not have an interest or background in finance or investments and completely trusted the management of his financial affairs to Colasuonno, who he believed had always given him good advice.   Greco did not know or ask Colasuonno how he intended to invest the money.   Colasuonno did not discuss his plans for Greco's investment and Greco “didn't have time to deal with it.”   Greco “signed whatever documents Colasuonno directed [him] to sign.”   Raytheon issued a check in the amount of $239,917.94 to First Trust Corporation, an independent third party administrator for retirement accounts (First Trust), for the benefit of Greco.   Greco gave the check to Colasuonno for the purpose of opening an IRA account for Greco at First Trust.   Colasuonno always reassured Greco that he would take care of him and that everything was fine.

On February 28, 2000, Asset, as trustee for JWC (a trust allegedly controlled by Colasuonno), acquired title to the real property.   Colasuonno arranged for $200,000 of Greco's funds to be loaned to Asset, as trustee for JWC, in return for a promissory note and a second trust deed encumbering the real property, which was junior to an existing first trust deed with Bank of America dated February 29, 2000.   Greco signed loan escrow instructions on behalf of First Trust, trustee for the benefit of Greco, which required Asset to execute a promissory note in favor of First Trust, trustee for the benefit of Greco, in the amount of $200,000 secured by a second trust deed.   The loan escrow instructions also required interest to accrue from close of escrow at the rate of 12 percent per annum and “[i]nterest only payable in monthly installments on the same day of each calendar month of $2000.00, or more, ․ until [two] years after close of escrow at which time the entire unpaid balance of principal and accrued interest shall be due and payable in full.”   Greco also signed an acknowledgment that he had “read and approved” a draft of the promissory note dated March 8, 2000.   And Greco signed an acknowledgment that he had “read and approved” a draft of a deed of trust securing the promissory note dated March 8, 2000.   In March 2000, MacFinancial Network, Inc. (a corporation allegedly owned and controlled by Colasuonno and hereafter referred to as MacFinancial), and The Tax Doctor, a tax preparation business owned by Colasuonno, sent facsimiles of documents, including the promissory note and second trust deed to First Trust.

The second trust deed was recorded on March 23, 2000, and indicated that the beneficiary was First Trust, trustee, for the benefit of Greco.   The second trust deed directed that after it was recorded it was to be mailed to “First Trust Corporation TTEE FBO John Greco” at Colasuonno's address in Monrovia.   On March 23, 2000, First Trust sent a letter to MacFinancial and Colasuonno at Colasuonno's address and to Greco at his home address stating that on March 22, 2000, $200,000 was issued to “JWC Trust DOT 5/31/05 12%.”   In 2002, First Trust sent at least five letters requesting copies of the recorded second trust deed to MacFinancial at Colasuonno's address.

Greco received a First Trust account statement for the quarter ending March 31, 2000, which indicated that his cash balance was $39,999.84 and his “illiquid” account holding of $200,000 was held in “JWC trust DOT 5/31/05 12%.”   In the ensuing years, when periodically asked by Colasuonno if he needed any money from his investment with Colasuonno, Greco replied that he did not.   Colasuonno continuously assured Greco that his investment was fine.   Greco's wife questioned whether they were receiving interest on the $200,000 investment, but Greco believed the investment was returning 12 percent interest when he read the quarterly statements.   Greco did not know what a deed of trust was and thought all his money was in the First Trust account.

On November 5, 2003, Crenshaw and Asset entered into an escrow for the sale of the real property for the sum of $769,000.   The escrow instructions dated November 12, 2003, required Crenshaw to deposit in escrow the sum of $25,000, to hand Asset the sum of $205,700, and to record a first trust deed securing a note for $538,300 in favor of a lender of Crenshaw's choice.   Colasuonno signed all documents on behalf of Asset.   On December 22, 2003, Colasuonno forged Greco's name on a reconveyance of the second trust deed by First Trust, trustee for the benefit of Greco, which was dated December 18, 2003.   Colasuonno was the notary on the reconveyance and acknowledged Greco's signature.   On December 22, 2003, Bernadette Boyer signed an acknowledgment that Greco had personally appeared before her and executed the reconveyance on December 18, 2003.   On January 30, 2004, escrow closed on the real property and the grant deed vesting title to the real property in favor of Crenshaw was recorded, together with a first deed of trust in favor of Kaiser Federal Bank as security for the sum of $538,300.   The loan secured by the first deed of trust in favor of Bank of America was satisfied and the loan secured by the second deed of trust was paid off in the Crenshaw purchase escrow pursuant to the forged reconveyance.   The reconveyance of the second trust deed was recorded on January 30, 2004, and was directed to be mailed after recording to Colasuonno's address in Monrovia.

In 2007, Michael Dipietro purchased The Tax Doctor from Colasuonno.   Brian Vosberg, a certified financial planner, licensed real estate broker, and licensed securities broker, worked with Dipietro on Colasuonno's files from May 2008 to May 2009.   Vosberg became aware that Colasuonno had been arrested for theft and embezzlement in 2008.   He discovered that several of Colasuonno's clients had been defrauded by Colasuonno, who had promised good returns on investments involving real estate transactions.   Vosberg also became aware that Colasuonno had used First Trust for the purpose of creating fraudulent investments in real property secured by trust deeds.   In preparation for a meeting with Greco and his wife in February 2009, Vosberg reviewed Greco's tax returns and IRA account statements from First Trust.   He found the forged reconveyance of the second trust deed in Greco's file, which was stored at the offices of The Tax Doctor.   Vosberg examined records at the Los Angeles County Recorder's Office and obtained documents relating to the promissory note secured by the second trust deed.   Vosberg determined that the promissory note for $200,000 had not been repaid to Greco or First Trust when the real property secured by the second trust deed was sold to Crenshaw.   He concluded that Colasuonno had defrauded Greco of his $200,000 investment and so informed Greco and his wife at their meeting.   Vosberg advised Greco to contact the Monrovia Police Department and to hire an attorney.   When Vosberg gave Greco a copy of his file, it was the first time Greco saw the executed second trust deed and promissory note.   Greco and his wife were in shock when they received the news, and it took them several days to comprehend that Colasuonno had defrauded them.

Greco filed a complaint on May 15, 2009, and a first amended complaint on September 17, 2009, alleging causes of action for breach of fiduciary duty (against Colasuonno, MacFinancial, Asset, and JWC);  fraud (against Colasuonno, MacFinancial, Asset, JWC, and Boyer);  quiet title (against Crenshaw, Kaiser Federal Bank, TD Service Company, and Keirco, Inc.);   cancellation of instrument (against Crenshaw, Kaiser Federal Bank, TD Service Company, and Keirco, Inc.);   and declaratory relief (against Crenshaw, Kaiser Federal Bank, TD Service Company, and Keirco, Inc.).2

On July 23, 2010, Crenshaw and Kaiser Federal Bank filed a motion for summary judgment against Greco on the basis that each of Greco's causes of action against them “has life only if the court determines that the $200,000.00 promissory note and the second deed of trust were validly delivered to GRECO”;  that even if the delivery to Greco was sufficient, Crenshaw was a bona fide purchaser for value;  and that the three-year statute of limitations applicable to the causes of action for cancellation of an instrument and to quiet title based on the underlying fraud barred Greco's claims.   The trial court granted Crenshaw and Kaiser Federal Bank's motion for summary judgment, and this appeal followed.

DISCUSSION

A. Crenshaw and Kaiser Federal Bank have not established as a matter of law that the second trust deed was not delivered to Greco

Greco contends that the trial court erred in granting the motion for summary judgment because the second trust deed was validly delivered to Greco in that Colasuonno received it as Greco's agent;  the promissory note and second trust deed were delivered in March 2000 to Greco's trustee, First Trust;  and Colasuonno recorded the second trust deed on March 23, 2000.   We conclude that Crenshaw and Kaiser Federal Bank have not established as a matter of law that the second trust deed was not delivered to Greco because the actions of Colasuonno show an intent to deliver the second trust deed.

“ ‘The standard for deciding a summary judgment motion is well-established, as is the standard of review on appeal.’  [Citation.]  ‘A defendant moving for summary judgment has the burden of producing evidence showing that one or more elements of the plaintiff's cause of action cannot be established, or that there is a complete defense to that cause of action.  [Citations.]  The burden then shifts to the plaintiff to produce specific facts showing a triable issue as to the cause of action or the defense.  [Citations.]  Despite the shifting burdens of production, the defendant, as the moving party, always bears the ultimate burden of persuasion as to whether summary judgment is warranted.   [Citations.]’  [Citation.]  [¶] On appeal, we review de novo an order granting summary judgment.  [Citation.]  The trial court must grant a summary judgment motion when the evidence shows that there is no triable issue of material fact and the moving party is entitled to judgment as a matter of law.  [Citations.]  In making this determination, courts view the evidence, including all reasonable inferences supported by that evidence, in the light most favorable to the nonmoving party.  [Citations.]'  [Citation.]”  (Hypertouch, Inc. v. ValueClick, Inc., supra, 192 Cal.App.4th at pp.   817–818, fn. omitted.)

Crenshaw and Kaiser Federal Bank argue that because the second trust deed was not physically delivered to Greco before Crenshaw and Kaiser Federal Bank paid for and took title to the real property, Greco's interest in the real property was junior to Crenshaw and Kaiser Federal Bank's interest, citing Civil Code section 1054, which provides that “[a] grant takes effect, so as to vest the interest intended to be transferred, only upon its delivery by the grantor.”   Crenshaw and Kaiser Federal Bank argue that there was no delivery because the evidence showed that Greco did not learn of the existence of the note and deed of trust until February 2009, when he met with Vosberg, and that “Greco testified in his deposition that he had never seen, nor possessed the note and deed of trust and believed that his funds were on deposit, all cash, in a First Trust Fiserv account.”

But a deed need not be formally transferred or manually passed from the grantor to the grantee to constitute an effective conveyance.  (Chaffee v. Sorensen (1951) 107 Cal.App.2d 284, 291.)  “ ‘A valid delivery of a deed depends upon whether the grantor intended that it should be presently operative, and a manual transfer is not conclusive evidence of such intention.’  [Citation.]”  (Luna v. Brownell (2010) 185 Cal.App.4th 668, 673.)   Intent may be inferred from words spoken or acts done or both.  (Hill v. Donnelly (1942) 56 Cal.App.2d 387, 392;  Chaffee v. Sorensen, at p. 291 [where attorney inadvertently redelivered deed to grantor, presumption of nondelivery was overcome by evidence that grantor intended to pass property to grantee, including grantor's remarks and will bequests].)  “Thus, delivery or nondelivery of a deed is a question of fact to be determined by the surrounding circumstances of the transaction.   Where there is substantial evidence, or where an inference or presumption may be drawn from the evidence to sustain the court's finding of delivery or nondelivery, the finding will not be disturbed on appeal.  [Citation.]”  (Perry v. Wallner (1962) 206 Cal.App.2d 218, 221–222.)

Our review of the evidence supports the inference that Colasuonno intended to deliver the second trust deed to Greco when he caused the second trust deed to be recorded on March 23, 2000, because recordation of a deed is prima facie proof of delivery.  (Owens v. Ring (1953) 117 Cal.App.2d 672, 675.)   Colasuonno engineered Greco's loan of $200,000 in return for a promissory note secured by the second trust deed.   Colasuonno also signed the promissory note and second trust deed on behalf of Asset on March 8, 2000, in favor of First Trust, for the benefit of Greco and recorded the second trust deed which was mailed to Colasuonno's address.   What is more, through The Tax Doctor and MacFinancial, Colasuonno faxed a copy of the promissory note and second trust deed to First Trust, Greco's trustee.   Thus, although Colasuonno did not deliver the second trust deed physically to Greco, the evidence supports the inference that Colasuonno intended to grant the second trust deed in favor of First Trust, for the benefit of Greco.   While Colasuonno subsequently may have decided to sell the real property to Crenshaw employing a fraudulent reconveyance, a reasonable inference that can be drawn from the evidence is that Colasuonno intended delivery of the second trust deed because he signed the promissory note and deed of trust on behalf of Asset in favor of First Trust, for the benefit of Greco, faxed a copy of the documents to Greco's trustee, and recorded the second trust deed.  (Wilcox v. Hardisty (1922) 60 Cal.App. 206, 211 [“The intention of the grantor which is controlling is that existing at the very time of the delivery to the depository.   Prior and subsequent acts and statements by the grantor are important only as throwing light upon his intention at the time of such delivery.”].)

We conclude that Crenshaw and Kaiser Federal Bank failed to prove, as a matter of law, that the second trust deed was not delivered to Greco for purposes of Civil Code section 1054.

B. The reconveyance of the second trust deed to Crenshaw and Kaiser Federal Bank was void because Colasuonno forged Greco's signature

Greco contends that the reconveyance of the second trust deed to Crenshaw and Kaiser Federal Bank was void because the undisputed evidence establishes that Colasuonno forged Greco's signature, and therefore the second trust deed is superior to the title of Crenshaw and Kaiser Federal Bank. We agree.

Where an instrument is wholly void, it cannot provide the foundation for good title even in the hands of an innocent purchaser.  (Wutzke v. Bill Reid Painting Service, Inc. (1984) 151 Cal.App.3d 36, 39.)   A forged deed of reconveyance is wholly void and therefore any claim of title flowing from such a deed is void.  (Id. at pp.   43–44.)   In Wutzke, Wutzke sold real property to the Millers and took back a promissory note secured by a deed of trust.   Unbeknownst to Wutzke, the Millers owned the escrow company that was the designated trustee.   The Millers executed and recorded a deed of reconveyance, falsely representing that the trustee had received a written request from Wutzke to reconvey the trust deed to the Millers and that all sums secured by the deed of trust had been paid.  (Id. at p. 39.)   The Millers signed the reconveyance with the fictitious names of an executive officer of the escrow company and a notary.   The Millers then borrowed money from Reid and gave Reid a promissory note secured by a new first deed of trust on the property.   The court held that because “a trust deed obtained by means of forgery is void, it follows that any claim of title flowing from such a deed is void.”  (Id. at p. 44.)   Therefore, the purported first deed of trust given to Reid was subordinate to Wutzke's prior and valid deed of trust.   (Ibid.;  Schiavon v. Arnaudo Brothers (2000) 84 Cal.App.4th 374, 378 [a void reconveyance has no effect even against a subsequent bona fide purchaser].)

Here, Colasuonno forged Greco's name on the reconveyance of the second trust deed, rendering the instrument wholly void.   Thus, Greco's claim is senior to Crenshaw and Kaiser Federal Bank's interest in the real property.   We are not convinced by Crenshaw and Kaiser Federal Bank's argument that Greco cannot both claim the benefit of Colasuonno's agency in order to validate the creation of the deed of trust and disavow that agency in order to invalidate the forged reconveyance.   In our view, agency is not the issue.   Rather, as previously discussed, the intentions of the parties are essential in determining whether the deed was delivered, and we concluded that Crenshaw and Kaiser Federal Bank failed to show that delivery had not been effected as a matter of law.

We conclude that the reconveyance of the second trust deed to Crenshaw and Kaiser Federal Bank was void because Colasuonno forged Greco's signature.

C. Crenshaw and Kaiser Federal Bank have not shown as a matter of law that Greco's claims are barred by the three-year statute of limitations for fraud

Greco contends Crenshaw and Kaiser Federal Bank have not shown as a matter of law that Greco's claims are barred by the three-year statute of limitations for fraud.   We agree.

Crenshaw and Kaiser Federal Bank maintain that the three-year statute of limitations for fraud set forth in section 338, subdivision (d) applies.   (Welsher v. Glickman (1969) 272 Cal.App.2d 134, 140 [where an action to quiet title and to cancel instrument rests on fraud, the three-year statue limitations of section 338, subdivision (d) applies].)   Crenshaw and Kaiser Federal Bank argue that Greco learned or should have learned the facts essential to his claims as early as February 24, 2000, when he received escrow instructions authorizing the making of a note and deed of trust securing $200,000 due and payable two years after the close of escrow.   They also point to the account statements Greco received from First Trust beginning in March 2000, noting funds issued to “JWC Trust DOT 5/31/05 12% $200,000.00” in support of their argument that Greco should have learned of the fraud before meeting with Vosberg.

But section 338, subdivision (d) provides that “[t]he cause of action ․ is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.”  “Where the facts adequately allege breach of fiduciary duty or undue influence, the courts will allow a date-of-discovery rule to be applied, ‘ “when strict adherence to the date of injury rule would result in unfairness to the plaintiff and would encourage wrongdoers to mislead their fiduciary to delay bringing suit.   It is particularly appropriate when the defendant maintains custody and control of a plaintiff's property or interests.”  [Citation.]’  [Citation.]”  (Estate of Young (2008) 160 Cal.App.4th 62, 77.)

In Estate of Young, Young was a successful entrepreneur and businesswoman who had established an estate plan to benefit equally her four children.   (Estate of Young, supra, 160 Cal.App.4th at p. 69.)   In 1993, one of her children, Charles, convinced her that she could protect her estate by investing in land trusts.   Young's other son, Stephen, attended land trust seminars with Charles and Young in 1993.   Young's attorney, Burns, advised her that he did not believe the land trusts were legitimate tax avoidance devices.   But Charles subsequently set up elaborate multi-level trusts which transferred Young's real property into land trusts and Young's personal property into business trusts.   (Id. at pp.   70–72.)   In 1995, he caused the beneficial interest of the land trusts to be changed in his favor.   In 1995, Young told Burns, who was no longer her attorney, that she feared she might have lost control of her property through the land trusts.  (Id. at p. 72.)   In 2000, Young called her four children to her hospital bed, where she told them that her plan was that each should share equally in her estate, to which Charles agreed.   Upon Young's death shortly thereafter, Stephen, the administrator of her estate, discovered that Charles had misappropriated Young's assets, income, and real property.   As administrator of the estate, Stephen filed a petition against Charles in 2001 alleging, among other things, breach of fiduciary duty and fraud.   On appeal, Charles's argument that the petition was not timely filed because Stephen and Young had been put on notice of potential problems with the trust in 1993 and Young had been put on notice in 1995 when she spoke to Burns about the land trusts was rejected.   The court held that the delayed discovery rule of section 338, subdivision (d) was properly asserted and supported based on Charles's misrepresentations, assurance to Young that all four children would inherit her property, and concealment in designing elaborate multi-level trusts, which made it almost impossible to trace the changes in the beneficial interests, so that neither Young nor Stephen could reasonably have been expected to understand precisely what was happening at the time.  (Id. at pp.   78–79.)

Crenshaw and Kaiser Federal Bank have not shown as a matter of law that Greco's claims are barred by the three-year statute of limitations for fraud.   Colasuonno apparently devised a sophisticated scheme to defraud many of his clients by using First Trust for the purpose of creating fraudulent investments in real property secured by trust deeds.   Vosberg, who was a financial planner, realtor, and securities broker, discovered the fraud on Greco by conducting an investigation of Greco's files stored at Colasuonno's office and examining records at the Los Angeles County Recorder's Office.   Greco, on the other hand, was not a sophisticated businessman and had no further education than a high school degree.   Greco reposed absolute trust in Colasuonno, whom he regarded as a close personal friend and who had acted as his financial advisor, legal advisor, and tax preparer for 25 years.   Greco, who believed Colasuonno had always given him good advice, signed every document presented to him by Colasuonno.   Greco had no reason to suspect Colasuonno's deception because he had never needed to withdraw any money from the First Trust account.   And Greco relied to his detriment on Colasuonno's assurances that his accounts were doing fine and that he would take care of him.

The fraud underlying Greco's quiet title and cancellation of instrument action occurred when Colasuonno fraudulently reconveyed the second trust deed in 2004.   But Greco did not discover Colasuonno's perfidy until informed by Vosberg of Colasuonno's actions in February 2009.   Greco filed his complaint in May 2009 within a few months of his discovery of Colasuonno's fraud.

Accordingly, Crenshaw and Kaiser Federal Bank have not shown as a matter of law that Greco's claims are barred by the three-year statute of limitations for fraud.

DISPOSITION

The judgment is reversed.   Greco is entitled to costs on appeal.

NOT TO BE PUBLISHED.

We concur:

FOOTNOTES

FN1. Undesignated statutory references are to the Code of Civil Procedure..  FN1. Undesignated statutory references are to the Code of Civil Procedure.

FN2. Colasuonno, MacFinancial, Asset, JWC, Boyer, and TD Service Company are not parties to this appeal.   Keirco, Inc., a tenant of the real property, joined Crenshaw and Kaiser Federal Bank's respondents' brief on June 15, 2011..  FN2. Colasuonno, MacFinancial, Asset, JWC, Boyer, and TD Service Company are not parties to this appeal.   Keirco, Inc., a tenant of the real property, joined Crenshaw and Kaiser Federal Bank's respondents' brief on June 15, 2011.

ROTHSCHILD, J. JOHNSON, J.