Vasquez v. LBS Financial Credit Union (Cal. App.)

The following is a case update written by Kit James Gardner analyzing a recent case of interest:

Summary

In Vasquez v. LBS Financial Credit Union, 52 Cal. App. 5th 97, 265 Cal. Rptr. 3d 78 (2020), the California Court of Appeal held that a purchaser of real estate does not have constructive notice of a seller’s alias that does not appear in the chain of title. 

Facts

A judgment creditor, LBS Financial Credit Union (“LBS”), recorded abstracts of judgment in Los Angeles County naming “Wilbert G. Guerrero” as the judgment debtor.  Seven years later, “Guillermo Wilbert Guerrero” and his wife sold property owned by them in Los Angeles County to Carlos Vasquez and his wife. 

The residential purchase agreement with the Vasquezes was signed by “Guillermo Guerrero” or “Guillermo Guerrero W.”  The name “Wilbert Guillermo Guerrero” was handwritten below Guerrero’s signature on the purchase agreement, where the form specifies to “[p]rint name,” but was otherwise not used on any other documents in the transaction.

At some point, Guerrero provided the escrow and title insurance companies with a “Statement of Information” that included his name as “Guillermo Guerrero,” as well as his Social Security number, California driver’s license number, and his date and place of birth.  The preliminary title report issued by the title company did not detect LBS’s abstracts of judgment.  Neither the Vasquezes nor their mortgage lender had actual knowledge of the abstracts.

LBS apparently found out about the sale and caused enough disturbance for the Vasquezes and their mortgage lender to sue LBS to quiet title to the property and for declaratory and injunctive relief.  In response, LBS contended that: (1) the Vasquezes had actual knowledge or inquiry notice that Guerrero used the name “Wilbert Guillermo Guerrero” and were therefore not bona fide purchasers, and/or (2) the Vasquezes had constructive notice of the abstracts because the name “Wilbert G. Guerrero” was merely a variation of “Guillermo Guerrero” and matched the Social Security number and California driver’s license number that were on the abstracts of judgment.

After a bench trial, the Superior Court ruled that: (1) there was insufficient evidence to place the Vasquezes and their agents on notice of LBS’s abstracts of judgment or, for that matter, that Guerrero was also known as “Wilbert Guillermo Guerrero,” and (2) the abstracts of judgment naming “Wilbert Guillermo Guerrero” as the judgment debtor were not properly indexed and could not have been found in a title search of the property.  Guerrero’s Social Security and driver’s license numbers were immaterial.  The Court of Appeal affirmed.

Reasoning

The Court recited the “black-letter law” that a bona fide purchaser for value who acquires his or her interest in real property without knowledge or notice of another’s prior rights or interest in the property takes the property free of such unknown interests.

Here, the undisputed evidence showed that neither the Vasquezes nor their agents had actual knowledge of Guerrero’s use of the name “Wilbert” as his first name.  Nor were they on inquiry notice because every document relating to the sale and in the chain of title used the typewritten first name “Guillermo” or “Guilleromo” and last name “Guerrero.”  Also, Guerrero consistently signed his own name as “Guillermo Guerrero” or “Guillermo Guerrero W”, except for the single handwritten reference to the first name “Wilbert” on the purchase agreement.

Moreover, neither the Vasquezes nor their agents received constructive notice that Guerrero used “Wilbert” as his first name because the abstracts of judgment indexed under the name “Wilbert G. Guerrero” were not in the chain of title for the property.  Therefore, a diligent search of the grantor-grantee index of property records would not (and did not) reveal the abstracts.  The Court stated: “It is not the purchasers’ obligation to search the index of property records for documents recorded incorrectly using the seller’s middle name as a first name.”

It did not matter that the title company had possession of Guerrero’s Social Security number and driver’s license number.  The Vasquezes’ expert testified that the purpose of such information was to rule out false matches, not to aid in finding positive matches, and the Court adopted that view. 

The Court cited the analogous case of Orr v. Byers, 198 Cal. App. 3d 666 (1988) (“Orr”), which held that a title searcher could not be charged with knowledge of alternative spellings.  In Orr, an abstract of judgment was recorded listing the names “Elliot” and “Eliot.”  When property belonging to the judgment debtor titled under the name “Elliott” was sold, the purchaser’s title search failed to uncover the abstract of judgment.  The Court in Orr stated: “The burden is properly on the judgment creditor to take appropriate action to ensure the judgment lien will be satisfied.” 

Author’s Comments

This case adds another arrow to the quiver of a bankruptcy Trustee’s strong-arm powers, reinforcing the holding in Orr that an abstract of judgment must be recorded using the specific name under which property belonging to the judgment debtor is titled in order to impart constructive notice, even if that name is different from the judgment debtor’s legal name.  Trustees should therefore carefully scrutinize abstracts of judgment (and other liens) for discrepancies and, if in doubt, obtain a title report to determine if the abstract appears.  If it does not, then the Trustee cannot be said to have had constructive notice, and the lien may be avoided and preserved for the benefit of the estate.

From a non-bankruptcy standpoint, it is surprising that the escrow and title companies evidently did not require a copy of Guerrero’s driver’s license (though they did require him to list his driver’s license number in the “Statement of Information” that he provided).  The Court indicated that Guerrero’s driver’s license listed his name as “Wilbert Guillermo Guerrero” based on a notary’s journal entry which was not admitted into evidence.  If the escrow company had that piece of information, the case may have turned out differently, because the knowledge of an escrow agent—as a dual agent for the parties to the transaction—is imputed to the principals.  Vasquez v. LBS Financial Credit Union, 52 Cal. App. 5^th at 109.  There was some testimony that, while the publicly available grantor-grantee index cannot be searched using a driver’s license or Social Security number, title companies have more sophisticated databases that allow them to search by that method.  However, this search was not conducted in this case, and even if it was, the Court cited case law holding that the knowledge of the title insurer is not imputed to the purchaser.  Id. at 113, citing In re Marriage of Cloney, 91 Cal. App. 4th 429, 439 (2001).

Since LBS’s abstracts of judgment showed Guerrero’s name as it was listed in his driver’s license, what more could LBS have done?  Perhaps it could have conducted a judgment debtor’s examination from time to time to determine Guerrero’s real property interests or asked what aliases he used in the past (and hope that Guerrero told the truth).  One might think LBS could sue the title company for its evident failure to detect LBS’ abstracts of judgment, but extant case law holds that a title company does not have a duty to anyone but the purchaser who relies on the title company’s report.  Stagen v. Stewart-West Coast Title Co., 149 Cal. App. 3d 114, 122 (1983).

These materials were written by Kit James Gardner of the Law Offices of Kit J. Gardner in San Diego (kgardner@gardnerlegal.com).  Editorial contributions were provided by Christopher D. Hughes of Nossaman LLP.