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Aghayan v. Aghakhabian

California Court of Appeals, Second District, Fourth Division
Dec 17, 2009
No. B209986 (Cal. Ct. App. Dec. 17, 2009)



APPEAL from a judgment of the Superior Court of Los Angeles County No. LC076781, Richard A. Adler, Judge.

Escandari & Michon and Alexander H. Escandari for Defendants and Appellants.

Albert Aghayan, in pro. per., Zepyoor Aghayan, in pro. per.; and Alex Gilanians for Plaintiffs and Respondents.


This appeal is from a judgment quieting title to a house in favor of respondents, who lived in the house for over a decade, made the down payment, paid the mortgage, taxes, and insurance, and made significant improvements to the property while appellants had legal title. We conclude the record supports the judgment and, accordingly, affirm.


Plaintiffs and respondents are Albert and Zepyoor Aghayan, husband and wife. Defendants and appellants are Zepyoor’s brother, Hartoun Aghakhabian, and his wife Jemma Aghakhabian (also known as Djemma Babaian). The disputed property is located at 18475 Miranda Avenue, Tarzana, California (property or house).

Because of their common last names, we use the parties’ first names.

1. Pretrial Proceedings

The trial court sustained demurrers to respondents’ initial complaint, first amended complaint, second amended complaint, and third amended complaint. Respondents’ counsel failed to appear at the hearing on the demurrer to the third amended complaint. Subsequently, respondents substituted counsel and moved to vacate the order sustaining the demurrer to the third amended complaint. Respondents argued that the order sustaining the demurrer was the result of their former counsel’s mistake, inadvertence, and excusable neglect.

On February 6, 2008, the trial court denied respondents’ motion based on attorney neglect, but granted its own motion for reconsideration. It allowed respondents to file a fourth amended complaint, the operative pleading. In the operative pleading, respondents alleged causes of action for quiet title, breach of contract, constructive fraud, unjust enrichment, and declaratory relief.

We previously denied appellants’ petition for writ of mandate seeking to vacate the trial court’s order requiring appellants to answer the fourth amended complaint.

2. Court Trial

We interpret the record from the court trial in the light most favorable to the judgment. (Johnson v. Johnson (1987) 192 Cal.App.3d 551, 553.)

Respondent Albert had been a successful businessman, but he lost his business and home and declared bankruptcy. Around 1995, Albert’s wife Zepyoor began looking for a new place to live and located the property, which she and Albert visited. Respondents borrowed money from family members for the down payment and closing costs on the property.

The parties refer to the time of purchase as 1995 but are not specific. The court found the purchase took place in October 1995 and appellants do not dispute the date.

The testimony indicated that Hartoun loaned Albert approximately $10,000 of the $32,000 down payment. Albert testified he had repaid the debt.

Respondents’ then-recent bankruptcy made it impossible for them to purchase the house in their name. Albert’s cousin, Yervand Mikaelian, offered to take legal title to the property in his name in order to assist respondents with the property purchase. Albert declined Mikaelian’s offer because Zepyoor preferred to place title in appellants’ names. Zepyoor was closer to her brother Hartoun than to Mikaelian, and she believed the transaction would help Hartoun. Specifically, Zepyoor understood that Hartoun would be able to deduct the interest payments from his tax obligations. Zepyoor told Albert that Hartoun was “her brother and she ha[d] no one closer to her.” Albert testified that he and Zepyoor trusted Hartoun.

According to Albert, prior to the purchase of the property, he spoke to Hartoun, who agreed to put the house in his (Hartoun’s) name. Hartoun also agreed that he would reconvey the property to respondents at their request. The parties spoke in Armenian and did not use the word “title,” but nevertheless agreed that the house would be under Hartoun’s name and that he would receive the benefit of the interest and property tax deductions on his personal income taxes.

Albert told his realtor and lender that he could not qualify for a loan. Respondents purchased the property for $159,000, paying the down payment ($32,000) and all closing costs ($5,000). Respondents immediately took possession of the house and continued to live there. Respondents regularly paid the mortgage, taxes, and insurance. Respondents made substantial repairs and improvements to the property, spending approximately $110,000. At Albert’s request, Hartoun refinanced the property twice to lower the mortgage payments and to provide respondents with needed cash.

Initially, respondents paid the mortgage and taxes to Hartoun, who, in turn, paid the bank. Beginning in 2004, respondents paid the bank directly. A few months before trial, at Hartoun’s request, the bank stopped accepting mortgage payments from respondents. Hartoun made approximately five mortgage payments.

On cross-examination, Albert was shown a form from the Social Security Administration in which he indicated that he rented the property. The trial court found this form unpersuasive when considered in the context of the other evidence.

Testimony from family members indicated that appellants viewed respondents as the owners of the property. For example, Hartoun’s mother testified that Hartoun always said the property belonged to respondents. Chris Hatamian, Zepyoor’s and Hartoun’s cousin, testified that Hartoun acknowledged he helped respondents purchase the house. Hartoun told Galstan Sepanossian, a relative of Albert’s, “I’m just the title holder. I’m not the owner.” Hartoun’s wife Jemma acknowledged on several occasions that the house belonged to respondents.

Hartoun’s version of events differed. According to Hartoun, he never told Albert he would merely hold title in his name. Rather, Hartoun claimed to have owned the property and to have collected rent from respondents in an amount corresponding to the loan payments. Hartoun conceded that since the close of escrow, he had spent no money on the property. He also acknowledged reporting no rental income from the property on his tax returns.

3. Court Findings

The court found that in October 1995, respondents desired to purchase the property as their principal residence but could not qualify for a mortgage. Appellants and respondents entered into a joint venture to purchase the property for $159,000. The parties agreed that the loan and title would be placed in appellants’ names. Respondents made the down payment and paid the closing costs. The parties agreed that respondents would be the sole occupants and would have exclusive possession of the property. They paid appellants the mortgage and taxes. Appellants agreed to transfer title to respondents. In consideration for their promise, appellants were permitted to deduct the mortgage interest and property taxes from their personal income taxes. In the 12 years following the purchase, respondents paid over $100,000 for improvements to the property.

The trial court concluded the doctrine of equitable estoppel precluded appellants from asserting the statute of frauds. It found appellants’ 42 affirmative defenses unproven. The trial court granted quiet title in favor of respondents on condition that they remove any obligation of appellants on the property. The court did not rule on the remaining causes of action, finding them duplicative.

This appeal followed.


Appellants argue that the court erred in granting its own motion for reconsideration of the order sustaining the demurrer to the third amended complaint. They also maintain that the record lacks substantial evidence to support several findings. As we explain, we find no error in granting reconsideration and conclude the judgment was supported by substantial evidence.

1. The Trial Court Properly Reconsidered its Order

Appellants’ contention that the court erred in reconsidering its order sustaining a demurrer to the third amended complaint lacks merit. “Until entry of judgment a ruling upon a demurrer is not res judicata and may be changed in the discretion of the trial court.” (Collins v. Marvel Land Co. (1970) 13 Cal.App.3d 34, 45; Vertex Inv. Co. v. Schwabacher (1943) 57 Cal.App.2d 406, 410 [“A ruling on demurrer, unlike many other types of judicial determinations, may be changed for no other reason than that the judge is of the view that his first ruling was erroneous.”].) Even where no request to amend has been made, a trial court may reconsider its ruling on demurrer. (Bank of America v. Superior Court (1942) 20 Cal.2d 697, 702.) Thus, we find no impropriety in the trial court’s decision to reconsider its order sustaining the demurrer to the third amended complaint.

2. Substantial Evidence Supported the Judgment

To prevail on an action to quiet title, the plaintiff must prove it owns the property or has some other title or interest in the property, and that the defendant has no right or title in the property adverse to the plaintiff’s rights. (Code Civ. Proc., § 761.020.) “‘“The object of the action is to finally settle and determine, as between the parties, all conflicting claims to the property in controversy, and to decree to each such interest or estate therein as [it] may be entitled to.”’ [Citations.]” (Western Aggregates, Inc. v. County of Yuba (2002) 101 Cal.App.4th 278, 305.)

In general, where the legal title holder paid for the property, an equitable owner cannot state a cause of action against a legal title holder. (G.R. Holcomb Estate Co. v. Burke (1935) 4 Cal.2d 289, 297-299.) “The owner of the legal title to property is presumed to be the owner of the full beneficial title.” (Evid. Code, § 662.) However, where the equitable owner paid for the property, a court sitting in equity may quiet title in favor of the equitable owner and prevent the unjust enrichment of the legal title holder. (Martin v. Kehl (1983) 145 Cal.App.3d 228, 237-239.) Where it is undisputed the defendant holds title, the plaintiff has the burden to show by clear and convincing evidence that the owner of legal title does not own the full beneficial title. (Evid. Code, § 662 [presumption that owner of legal title owns full beneficial title may be rebutted only by clear and convincing proof]; Toney v. Nolder (1985) 173 Cal.App.3d 791, 796 [same].)

The substantial evidence rule applies on appeal. (In re Marriage of Ruelas (2007) 154 Cal.App.4th 339, 345.) “When faced with a challenge to the sufficiency of the evidence to support a judgment, an appellate court, ‘indulge[s] in every reasonable inference to uphold the verdict if possible and defer[s] to the [trier of fact’s] assessment of the credibility of the witnesses. [Citation.] “[T]he power of the appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, which will support the conclusion reached by the [trier of fact].” [Citation.]’” (Warren v. Merrill (2006) 143 Cal.App.4th 96, 109.)

In Viner v. Untrecht (1945) 26 Cal.2d 261 (Viner), the plaintiff negotiated for the purchase of a house but could not purchase the property due to its credit standing. (Id. at pp. 265, 268.) The defendant loaned money to the plaintiff, and title to the house vested in the defendant. (Id. at pp. 265, 266.) Despite the fact that the defendant held legal title, the trial court found the parties had reached an oral agreement giving the plaintiff equitable ownership and awarded judgment in favor of the plaintiff. Our Supreme Court affirmed. (Id. at p. 271.) Similarly, in Novak v. Novak (1967) 249 Cal.App.2d 438 (Novak), the trial court quieted title in favor of a father who had resided in the disputed house and made all payments, including those on the deed, taxes, insurance, and improvements. (Id. at pp. 440, 443.) The father testified he understood that when he repaid the loan on the property, his son would reconvey title to him. (Id. at p. 440.) The trial court found that the father was able to obtain a loan by placing the property in his son’s name and that the parties understood that when the loan was repaid, the property would be reconveyed to the father. (Id. at p. 441.) The court quieted title in favor of the father, despite the fact that the son and daughter-in-law held legal title. The appellate court affirmed. (Id. at pp. 440, 443.) (See also In reMarriage of Ruelas, supra, 154 Cal.App.4th at pp. 344-345 [title quieted in favor of parents with poor credit rating who purchased property in daughter’s name]; Stone v. Lobsien (1952) 112 Cal.App.2d 750, 755 [title quieted in favor of plaintiff who made down payment and installment payments on deed of trust, and paid insurance and taxes].)

As in Viner and Novak, here substantial evidence supported the judgment quieting title in favor of respondents. They negotiated the purchase of the property, made the down payment, took possession of the property, and lived there for over a decade, regularly paying the mortgage, the insurance and the taxes. Respondents also paid for significant repairs and improvements to the house. Additionally, ample evidence supported the finding that the parties agreed respondents equitably owned the property and that appellants would reconvey it to them.

3. Appellants’ Remaining Challenges to the Sufficiency of the Evidence Either Lack Merit or are Irrelevant

Appellants attack several specific findings made by the trial court. Many of their arguments ignore the standard of review and focus on the evidence in the light most favorable to them. As we discuss, their arguments either lack merit or are irrelevant to the quiet title cause of action.

a. Substantial Evidence Supported the Trial Court’s Conclusion that the Parties Entered an Oral Agreement Supported by Consideration

Substantial evidence supported the trial court’s finding of an oral agreement. Albert testified that he discussed with Hartoun the idea of the latter’s taking title to the property. According to Albert, Hartoun “gladly” agreed to take title to the property in his name and to later reconvey it to respondents at their request. Because the parties conducted the conversation in Armenian, the term “title” was not used, but the concept was conveyed. Albert and Hartoun discussed that property taxes and interest on the mortgage would be claimed by Hartoun. While Hartoun’s testimony differed from Albert’s, the trial court evidently rejected Hartoun’s version of events.

During questioning by the court, Hartoun acknowledged that Albert had contributed to the down payment, but denied that Albert held any interest in the property. Despite repeated questioning by the court, Hartoun could provide no explanation for why Albert, who had just gone through bankruptcy, would “make [Hartoun] a gift....”

There was also evidence that the parties’ agreement was supported by consideration. (US Ecology, Inc. v. State of California (2001) 92 Cal.App.4th 113, 128 [consideration is essential element of contract]; Civ. Code, § 1550 [same].) Appellants benefitted from the deduction of interest on their taxes -- a benefit derived directly from the parties’ agreement to put the property in appellants’ names, rather than respondents’. (Civ. Code, § 1605 [consideration defined as “[a]ny benefit conferred, or agreed to be conferred, upon the promisor, by any other person, to which the promisor is not lawfully entitled....”].) “There being some consideration, the law will not attempt to measure the amount thereof.” (Poggetto v. Bowen (1936) 18 Cal.App.2d 173, 175.)

Although they asserted a failure of consideration as an affirmative defense, appellants do not challenge the trial court’s statement that they “offered no evidence or insufficient evidence, and made no arguments” regarding the failure of consideration.

b. Substantial Evidence Supported the Trial Court’s Conclusion that Appellants were Equitably Estopped from Claiming the Statute of Frauds

The trial court found that appellants were equitably estopped from asserting the statute of frauds to bar enforcement of the parties’ oral agreement. “‘The doctrine of estoppel to assert the statute of frauds has been consistently applied by the courts of this state to prevent fraud that would result from refusal to enforce oral contracts in certain circumstances. Such fraud may inhere in the unconscionable injury that would result from denying enforcement of the contract after one party has been induced by the other seriously to change his position in reliance on the contract....’” Warren v. Merrill, supra, 143 Cal.App.4th at p. 113, quoting Monarco v. Lo Greco (1950) 35 Cal.2d 621, 623.) “A contract for the transfer of an interest in land may be specifically enforced notwithstanding failure to comply with the Statute of Frauds if it is established that the party seeking enforcement, in reasonable reliance on the contract and on the continuing assent of the party against whom enforcement is sought, has so changed his position that injustice can be avoided only by specific enforcement.” (Rest.2d Contracts, § 129.)

The record amply supported the trial court’s finding that appellants were equitably estopped from asserting the statute of frauds. The evidence showed that respondents took possession of the home and lived there continuously in reliance on the promise that they owned it. Albert rejected his cousin’s offer to put title in his name, relying instead on the promise of his brother-in-law, Hartoun. Respondents not only made the down payment, made the mortgage payments, and paid the taxes on the property, they contributed over $100,000 to repairs and improvements. This constituted a sufficient change in circumstance to warrant specific enforcement of the contract. (See Green v. Brown (1951) 37 Cal.2d 391, 399 [plaintiff estopped to assert statute of frauds where defendants expended significant sums in improving property deeded to them and paid portion of taxes and debt]; Monarco v. Lo Greco, supra, 35 Cal.2d 621 [plaintiff estopped from relying on statute of frauds where defendant changed position in reliance on promise by giving up opportunity to purchase property and devoting time to making family venture a success]; Quan Shew Yung v. Woods (1963) 218 Cal.App.2d 506, 513 [statute of frauds inapplicable where person acting under oral contract took possession and retained possession and paid a portion or all of purchase price].)

Though not essential to our holding, the trial court’s finding of a confidential relationship was also amply supported. The parties shared a longtime close relationship, and Albert’s wife Zepyoor was exceptionally close to her brother Hartoun. Although Albert was once a successful businessman, at the time the property was purchased, respondents were in dire financial straits. Albert repeatedly testified that he and Zepyoor placed confidence and trust in appellants, and the record contains sufficient evidence that respondents placed trust and confidence in the integrity and fidelity of appellants. (Estate of Sanders (1985) 40 Cal.3d 607, 615 [a confidential relationship was “‘particularly likely to exist when there [was] a family relationship or one of friendship’”].)

c. The Record Supported the Rejection of Appellants’ Unclean Hands Defense

Appellants argue the trial court erroneously rejected their unclean hands defense because the record shows respondents used appellants as “straw borrowers” to qualify for a loan they would not otherwise have received. The trial court concluded that appellants had failed to show respondents violated any law or government regulation by engaging in the agreement: “[N]o testimony offered as to what applications were filed with the lender or that any representations were made concerning which parties would reside at the Property. Consequently, the record does not support a finding that any misrepresentations were made or that any misconduct occurred.”

The trial court’s findings were supported by substantial evidence. Albert testified that he told the loan officer that the loan would not be under his name, and no contrary evidence was introduced. Even assuming the loan transaction was illegal, the trial court was not required to find respondents’ conduct prevented them from obtaining equitable relief. (Warren v. Merrill, supra, 143 Cal.App.4th at p. 115 [declining to apply unclean hands doctrine against plaintiff where defendant’s daughter secured loan for plaintiff]; Johnson v. Johnson, supra, 192 Cal.App.3d at pp. 556-557 [declining to apply unclean hands doctrine against parents in favor of son where son illegally obtained loan for parents].)

d. Appellants’ Arguments that the Record Lacks Substantial Evidence of Ratification and of a Joint Venture are Irrelevant

In its judgment, the trial court found both that appellants ratified the agreement and that they entered a joint venture with respondents. Appellants challenge these findings. They argue that the evidence relied upon by the trial court to show ratification was instead evidence of settlement negotiations. Additionally, they argue that there was no joint venture because they did not engage in a profit sharing arrangement. (Kaljian v. Menezes (1995) 36 Cal.App.4th 573, 586 [“‘An essential element of a partnership or joint venture is the right of joint participation in the management and control of the business. [Citation.]’”].)

Even were we to assume the record lacks substantial evidence of ratification and of a joint venture, reversal would not be required. (Wolff v. Wolff (1958) 157 Cal.App.2d 276, 280 [fact that findings on irrelevant matters are not supported by evidence does not show reversal was required].) Appellants do not show these findings are necessary to support the court’s judgment in favor of respondents. While appellants argue the finding of a joint venture was relevant to the statute of frauds, in fact, the trial court relied on the doctrine of equitable estoppel to conclude the statute of frauds was not a bar to relief. Accordingly, we need not determine whether the record supports the trial court’s findings of ratification and joint venture.


The judgment is affirmed. Respondents shall have their costs on appeal.

We concur: EPSTEIN, P. J., SUZUKAWA, J.

Summaries of

Aghayan v. Aghakhabian

California Court of Appeals, Second District, Fourth Division
Dec 17, 2009
No. B209986 (Cal. Ct. App. Dec. 17, 2009)
Case details for

Aghayan v. Aghakhabian

Case Details

Full title:ALBERT AGHAYAN et al., Plaintiffs and Respondents, v. JEMMA AGHAKHABIAN et…

Court:California Court of Appeals, Second District, Fourth Division

Date published: Dec 17, 2009


No. B209986 (Cal. Ct. App. Dec. 17, 2009)