I|rst Nat|onw|de Sav|ngs v erry (1992)

11 Ca| App 4th 16S7 1S Ca| kptr 2d 173

Share|

no P008601 SlxLh ulsL uec 3 1992
ll8S1 nA1lCnWluL SAvlnCS lalnLlff and AppellanL v uAvlu L88? as 1rusLee eLc uefendanL and
8espondenL
(Superlor CourL of SanLa Clara CounLy no 647434 Wllllam l MarLln and eLer C SLone !udges)
(Cplnlon by Llla ! wlLh CoLLle AcLlng ! and remo ! concurrlng) 11 Ca| App 4th 16S8
CCUNSLL

Cameron ureyfuss SLeven 8 Cameron and Lawrence ! ureyfuss for lalnLlff and AppellanL
Adelson Pess ChrlsLensen kelly uuane W Shewaga and hllllp M Adelson for uefendanL and
8espondenL
CINICN

LLlA !
llrsL naLlonwlde Savlngs (lnS) sued Sunrlse 1rusL for un[usL enrlchmenL and money had and recelved
Sunrlse demurred Lo Lhe second 11 Ca| App 4th 1661 amended complalnL 1he demurrer was
susLalned wlLhouL leave Lo amend !udgmenL was enLered agalnsL lnS
Cn appeal we conslder wheLher a beneflclary (lnS) can recover for un[usL enrlchmenL from a
nonassumlng granLee of a purchase money deed of LrusL (Sunrlse) afLer Lhe LrusLee mlsLakenly
reconveys Lhe deed of LrusL and Lhe granLee sells Lhe properLy Lhereby obLalnlng all Lhe proceeds from
Lhe sale lor reasons we shall explaln we conclude LhaL a cause of acLlon may be sLaLed Accordlngly
Lhe [udgmenL ls reversed
Iacts and rocedura| 8ackground

ln May 1983 Cary Madden borrowed $146000 from lnS 1he loan was evldenced by a wrlLLen
promlssory noLe Madden used Lhe loan Lo purchase a slnglefamlly resldence ln Campbell Callfornla
1he noLe was secured by a wrlLLen deed of LrusL ln whlch Madden conveyed for Lhe beneflL of lnS a
power of sale of Lhe slnglefamlly resldence 1he deed of LrusL was recorded on !une 2 1983
Madden subsequenLly sold Lhe properLy 1he purchaser Look Lhe properLy sub[ecL Lo lnSs deed of LrusL
ln !anuary 1986 a LrusLees sale was held pursuanL Lo Lhe non[udlclal foreclosure of a deed of LrusL
[unlor Lo Lhe lnS deed of LrusL Sunrlse 1rusL wlLh uavld erry as LrusLee purchased Lhe properLy aL Lhe
LrusLees sale Sunrlse purchased Lhe properLy sub[ecL Lo lnSs deed of LrusL
ln May 1986 MasLer MorLgage Company (MMC) Lhe LrusLee on Lhe lnS deed of LrusL mlsLakenly
execuLed a reconveyance of Lhe lnS deed of LrusL 1he reconveyance was recorded on !une 23 1986
Accordlng Lo Lhe complalnL MMC was noL auLhorlzed Lo reconvey Lhe deed of LrusL and dld noL lnLend
Lo do so
1he LrusLees deed Lo Sunrlse was recorded on AugusL 13 1986
Cn uecember 17 1986 Sunrlse sold Lhe properLy Lo vernon and vera Sundberg 8ecause of Lhe
reconveyance lnS dld noL recelve any of Lhe proceeds from Lhe sale of Lhe properLy Lo Lhe Sundbergs
ln 1988 lnS sued Cary Madden for lmposlLlon of a consLrucLlve LrusL money lenL converslon
cancellaLlon of lnsLrumenL declaraLory rellef and breach of promlssory noLe ln 1989 lnS flled lLs flrsL
amended complalnL namlng Sunrlse as a defendanL 1he complalnL sLaLed causes of acLlon for un[usL
enrlchmenL and money had and recelved Sunrlses demurrer Lo Lhe flrsL amended complalnL was
susLalned wlLh leave Lo amend11 Ca| App 4th 1662
Cn november 19 1990 lnS flled lLs second amended complalnL for un[usL enrlchmenL and money had
and recelved Cn Aprll 1 1991 Sunrlses demurrer Lo Lhe second amended complalnL was susLalned
wlLhouL leave Lo amend A [udgmenL of dlsmlssal was enLered
1hls appeal ensued
Standard of kev|ew

1 ln examlnlng Lhe sufflclency of Lhe complalnL we LreaL Lhe demurrer as admlLLlng all maLerlal facLs
properly pleaded buL noL conLenLlons deducLlons or concluslons of facL or law ClLaLlon We also
conslder maLLers whlch may be [udlclally noLlced (Serrano v rlesL (1971) 3 Cal 3d 384 391 96
Cal8pLr 601 487 2d 1241 41 AL83d 1187 8lank v klrwan (1983) 39 Cal 3d 311 318 216 Cal8pLr
718 703 2d 38) We glve Lhe complalnL a reasonable lnLerpreLaLlon readlng lL as a whole and lLs
parLs ln Lhelr conLexL ClLaLlon 2 When a demurrer ls susLalned we deLermlne wheLher Lhe
complalnL sLaLes facLs sufflclenL Lo consLlLuLe a cause of acLlon ClLaLlon And when lL ls susLalned
wlLhouL leave Lo amend we declde wheLher Lhere ls a reasonable posslblllLy LhaL Lhe defecL can be
cured by amendmenL lf lL can be Lhe Lrlal courL has abused lLs dlscreLlon and we reverse lf noL Lhere
has been no abuse of dlscreLlon and we afflrm ClLaLlons 1he burden of provlng such reasonable
posslblllLy ls squarely on Lhe plalnLlff (8lank v klrwan supra 39 Cal 3d aL p 318)
D|scuss|on
I Un[ust Lnr|chment Cause of Act|on

lnS argues lLs complalnL sLaLes a clalm for un[usL enrlchmenL ln examlnlng Lhls conLenLlon we musL
revlew prlnclples of resLlLuLlon and secured LransacLlons law as well as Lhe perLlnenL case auLhorlLles
AfLer dolng so we shall conclude LhaL lnSs complalnL can be amended Lo sLaLe a cause of acLlon for
un[usL enrlchmenL
A kest|tut|on

We begln wlLh Lhe law of resLlLuLlon 3 An lndlvldual ls requlred Lo make resLlLuLlon lf he or she ls
un[usLly enrlched aL Lhe expense of anoLher (8esL 8esLlLuLlon 1 Callfornla lederal 8ank v MaLreyek
(1992) 8 Cal App 4Lh 123 131 10 Cal8pLr2d 38) A person ls enrlched lf Lhe person recelves a beneflL
aL anoLhers expense (8esL 8esLlLuLlon supra 1 com a) 8eneflL means any Lype of advanLage
(8esL supra 1 com b Callfornla lederal 8ank v MaLreyek supra 8 Cal App 4Lh aL p 131) 11 Ca|
App 4th 1663
1he facL LhaL one person beneflLs anoLher ls noL by lLself sufflclenL Lo requlre resLlLuLlon 1he person
recelvlng Lhe beneflL ls requlred Lo make resLlLuLlon only lf Lhe clrcumsLances are such LhaL as beLween
Lhe Lwo lndlvlduals lL ls un[usL for Lhe person Lo reLaln lL (8esL 8esLlLuLlon supra 1 com c) lor
example a person who lmproves hls or her land usually beneflLs hls or her nelghbors Lo some exLenL ln
LhaL case however resLlLuLlon ls noL requlred because lL would noL be un[usL Lo permlL Lhe nelghbors Lo
reLaln Lhe beneflL of Lhe landowners work (lbld)
ueLermlnlng wheLher lL ls un[usL for a person Lo reLaln a beneflL may lnvolve pollcy conslderaLlons lor
example lf a person recelves a beneflL because of anoLhers mlsLake pollcy may dlcLaLe LhaL Lhe person
maklng Lhe mlsLake assume Lhe rlsk of Lhe error 1he deslrablllLy of allowlng a parLy Lo reLaln Lhe beneflL
of hls or her bargaln may preclude Lhe ln[ured parLy from recelvlng resLlLuLlon Slmllarly a cusLomary
way of regardlng a parLlcular Lype of LransacLlon may [usLlfy Lhe lnference LhaL Lhe payor has assumed
Lhe rlsk of mlsLake as ln Lhe case of paymenL for a qulLclalm deed Lo land noL owned by Lhe Lransferor
(8esL 8esLlLuLlon supra lnLroducLory noLe p 28)
ln addlLlon Lhe same equlLable conslderaLlons [usLlfylng resLlLuLlon may consLlLuLe a defense Lo a
resLlLuLlon clalm lor Lhese reasons resLlLuLlon ls commonly denled agalnsL an lnnocenL Lransferee or
beneflclary lf he has changed hls poslLlon afLer Lhe LransacLlon and lL ls lmposslble or lmpracLlcal Lo
resLore hlm Lo hls orlglnal poslLlon (8esL 8esLlLuLlon supra lnLroducLory noLe p 28 ClLy of Pope naL
Medlcal CenLer v Superlor CourL (1992) 8 Cal App 4Lh 633 637 10 Cal8pLr2d 463) Llkewlse a bona
flde purchaser ls generally noL requlred Lo make resLlLuLlon (8esL 8esLlLuLlon supra 13)
8y conLrasL a Lransferee wlLh knowledge of Lhe clrcumsLances glvlng rlse Lo an un[usL enrlchmenL clalm
may be obllgaLed Lo make resLlLuLlon lor example A person who has enLered lnLo a LransacLlon wlLh
anoLher under such clrcumsLances LhaL because of a mlsLake he would be enLlLled Lo resLlLuLlon from
Lhe oLher (b) ls enLlLled Lo resLlLuLlon from a Lhlrd person who had noLlce of Lhe clrcumsLances
before glvlng value or before recelvlng LlLle or a legal lnLeresL ln Lhe sub[ecL maLLer (8esL 8esLlLuLlon
supra 13)
llnally secLlon 168 of Lhe 8esLaLemenL of 8esLlLuLlon provldes Where a person holdlng properLy ln
whlch anoLher has a beneflclal lnLeresL Lransfers LlLle Lo Lhe properLy ln vlolaLlon of hls duLy Lo Lhe oLher
Lhe Lransferee holds Lhe properLy sub[ecL Lo Lhe lnLeresL of Lhe oLher unless he ls a bona flde
purchaser 11 Ca| App 4th 1664
1he foregolng prlnclples demonsLraLe LhaL resLlLuLlon may be requlred when Lhe person beneflLLlng
from anoLhers mlsLake knew abouL Lhe mlsLake and Lhe clrcumsLances surroundlng Lhe un[usL
enrlchmenL ln oLher words lnnocenL reclplenLs may be LreaLed dlfferenLly Lhan Lhose persons who
acqulre a beneflL wlLh knowledge Accordlngly under resLlLuLlon law Sunrlses knowledge dlscussed
posL ls an lmporLanL conslderaLlon ln deLermlnlng Lhe valldlLy of lnSs un[usL enrlchmenL clalm
8 urchase Money Deed of 1rust

We nexL revlew secured LransacLlons prlnclples Lo conslder Lhelr lmpacL upon lnSs clalm for un[usL
enrlchmenL Accordlng Lo Sunrlse secured LransacLlons law precludes lnSs cause of acLlon As we shall
explaln we dlsagree
4 ln Callfornla as ln mosL sLaLes a credlLors rlghL Lo enforce a debL secured by a morLgage or deed of
LrusL on real properLy ls resLrlcLed by sLaLuLe under Callfornla law Lhe credlLor musL rely upon hls
securlLy before enforclng Lhe debL (Code Clv roc 380a 723a 726) ln lf Lhe securlLy ls
lnsufflclenL hls rlghL Lo a [udgmenL agalnsL Lhe debLor for Lhe deflclency may be llmlLed or barred by
secLlons 380a 380b 380d or 726 of Lhe Code of Clvll rocedure ClLaLlon (Culld MorLgage Co v
Peller (1987) 193 Cal App 3d 1303 1310 239 Cal8pLr 39 see also 8eLLner v Shepherd (1991) 231
Cal App 3d 943 949 282 Cal8pLr 687)
A deflclency [udgmenL ls a personal [udgmenL agalnsL Lhe debLor for Lhe dlfference beLween Lhe debL
and Lhe proceeds recelved by Lhe credlLor from Lhe sale of Lhe securlLy aL a foreclosure sale
ClLaLlon (Coppola v Superlor CourL (1989) 211 Cal App 3d 848 866 239 Cal8pLr 811)
3 8ecause Lhls case concerns a purchase money deed of LrusL no deflclency [udgmenL would be
allowed (Code Clv roc 380b) ln oLher words lnS could noL recover Lhe dlfference beLween Lhe
debL and Lhe sale proceeds lf Lhe properLy had been foreclosed Accordlng Lo Sunrlse Lhls same rule
prevenLs lnS from sLaLlng a clalm for un[usL enrlchmenL Sunrlse argues LhaL permlLLlng recovery for
un[usL enrlchmenL would be Lhe same as permlLLlng a deflclency [udgmenL
1here are Lwo problems wlLh Sunrlses argumenL llrsL permlLLlng recovery for un[usL enrlchmenL and
recoverlng a deflclency [udgmenL are noL Lhe same ln Lhls case Lhe dlfference beLween Lhe debL and
Lhe foreclosure proceeds ls noL aL sLake Lhere can be no foreclosure because Lhe llen on Lhe properLy
has been exLlngulshed Moreover allowlng recovery for un[usL 11 Ca| App 4th 166S enrlchmenL
would noL conLradlcL Lhe pollcy of requlrlng Lhe credlLor Lo rely upon Lhe properLy Lo secure Lhe debL
1hls ls because any un[usL enrlchmenL recovery could noL exceed Lhe properLy value 1hus lf Lhe
properLy value had decreased and was less Lhan Lhe debL a plalnLlffs un[usL enrlchmenL recovery
would be llmlLed by Lhe value of Lhe properLy
Second an un[usL enrlchmenL clalm ls based upon equlLable prlnclples 1hese equlLable prlnclples may
ouLwelgh Lhe reasons for prohlblLlng deflclency [udgmenLs ln facL ln oLher slLuaLlons equlLable
conslderaLlons cause Lhe prohlblLlon agalnsL deflclency [udgmenLs Lo glve way 8ad falLh wasLe ls an
example A nonassumlng granLee of a purchase money deed of LrusL would be llable for bad falLh wasLe
Lo Lhe properLy (Cornellson v kornbluLh (1973) 13 Cal 3d 390 604 123 Cal8pLr 337 342 2d 981)
1hls ls so even Lhough Lhe granLee would noL be llable for any deflclency [udgmenL upon a purchase
money deed of LrusL 8y parlLy of reasonlng we belleve LhaL ln approprlaLe clrcumsLances an acLlon for
un[usL enrlchmenL could be sLaLed agalnsL a nonassumlng granLee under a purchase money deed of
LrusL
Sunrlse aLLacks Lhls resulL by argulng LhaL lL would permlL parLles Lo obLaln deflclency [udgmenLs by
Lrlckery ln parLlcular Sunrlse clalms a beneflclary under a purchase money deed of LrusL could slmply
release lLs securlLy (raLher Lhan resorL Lo lL) and Lhen sue a solvenL successor for un[usL enrlchmenL
We dlsagree A beneflclary would noL galn anyLhlng ln Sunrlses scenarlo As prevlously sLaLed an un[usL
enrlchmenL recovery ls noL Lhe same as a deflclency [udgmenL WheLher Lhrough foreclosure or an
un[usL enrlchmenL cause of acLlon Lhe beneflclarys recovery would be llmlLed Lo Lhe amounL of Lhe
debL covered by Lhe value of Lhe properLy Assume Lhe debL was $30000 and Lhe properLy value
decreased from $60000 Lo $40000 lf Lhe LrusLee mlsLakenly reconveyed Lhe deed of LrusL and Lhe
granLee sold Lhe properLy and recelved $40000 Lhe beneflclary could recover only $40000 albelL
Lhrough an un[usL enrlchmenL cause of acLlon or foreclosure no deflclency would be allowed
ln addlLlon lL ls seLLled LhaL Lhe oneacLlon rule would prevenL an un[usL enrlchmenL recovery ln Lhe
clrcumsLances envlsloned by Sunrlse AlLhough an excepLlon Lo Lhe oneacLlon rule has developed ln
cases where foreclosure would be an ldle acL because Lhe securlLy has been desLroyed or become
worLhless clLaLlons Lhe excepLlon does noL apply lf Lhe beneflclary hlmself ls responslble for Lhe loss of
securlLy 1hus a credlLor ls noL allowed Lo clrcumvenL Lhe sLaLuLe by dlvesLlng hlmself of hls securlLy
wlLhouL Lhe consenL of Lhe debLor (aclflc valley 8ank v Schwenke (1987) 189 Cal App 3d 134 140
234 Cal8pLr 298) 11 Ca| App 4th 1666
C Case Law

We have examlned prlnclples relaLlng Lo resLlLuLlon and secured LransacLlons law We wlll now conslder
case auLhorlLy Lo deLermlne wheLher lnS may sLaLe a clalm for un[usL enrlchmenL AlLhough we have
noL found a case preclsely on polnL Lhe cases lncluded below should asslsL our analysls
ln Callfornla lederal 8ank v MaLreyek supra 8 Cal App 4Lh 123 Lhe bank asslgned Lhe borrowers loan
Lo lannle Mae fn 1 1he bank conLlnued servlclng Lhe loan 1he borrowers asked Lhe bank lf Lhey could
reflnance and pay off Lhe loan wlLhouL a prepaymenL penalLy AlLhough Lhe bank advlsed Lhem LhaL Lhey
could Lhls advlce was lncorrecL (ld aL p 128)
AfLer Lhe borrowers pald off Lhe prlnclpal and accrued lnLeresL Lhe bank cancelled Lhe noLe and
reconveyed Lhe deed of LrusL 1he bank Lhen dlscovered Lhe prepaymenL penalLy should have been
assessed 8ecause of Lhe error Lhe bank had Lo pay lannle Mae $63399874 AlLhough Lhe bank asked
Lhe borrowers for relmbursemenL Lhe borrowers refused 1he bank Lhen sued Lhe borrowers for un[usL
enrlchmenL and equlLable subrogaLlon 1he borrowers demurrer was susLalned wlLhouL leave Lo
amend and a [udgmenL of dlsmlssal was enLered (Callfornla lederal 8ank v MaLreyek supra 8 Cal App
4Lh aL p 129)
1he appellaLe courL afflrmed ln re[ecLlng Lhe banks un[usL enrlchmenL clalm Lhe courL relled upon
resLlLuLlon prlnclples 1he courL noLed LhaL a parLy who does noL know abouL anoLhers mlsLake and has
no reason Lo suspecL lL ls noL necessarlly requlred Lo glve up Lhe beneflL recelved 1he courL declded
LhaL Lhe plvoLal lssue was wheLher permlLLlng Lhe borrowers Lo reLaln Lhe beneflL would be un[usL ln
concludlng LhaL lL would noL Lhe courL flrsL emphaslzed LhaL Lhe borrowers gave conslderaLlon (paylng
Lhe loan early) ln exchange for Lhe banks agreemenL Lo forgo Lhe prepaymenL penalLy (Callfornla
lederal 8ank v MaLreyek supra 8 Cal App 4Lh aL p 133) Second Lhe courL polnLed ouL LhaL walver of
Lhe prepaymenL penalLy was crlLlcal ln Lhe borrowers early paymenL declslon 1hlrd Lhe courL reasoned
LhaL Lhere was no lmproprleLy by Lhe borrowers lL emphaslzed LhaL Lhe bank dld noL allege LhaL Lhe
borrowers knew of Lhe mlsLake or Look unfalr advanLage (lbld)
llnally Lhe courL polnLed ouL LhaL ln repaylng Lhe loan early Lhe Lhe borrowers enLered lnLo
subsLlLuLe flnanclng lf Lhe bank were Lo recover Lhe clalmed sum from Lhe borrowers LhaL sum
would erase any beneflL Lo Lhe borrowers from Lhe reflnanclng whlle Lhe bank and/or 11 Ca| App
4th 1667 lannle Mae sLlll would reLaln Lhe beneflL of an early payoff of Lhe loan under Lhe
clrcumsLances recovery by Lhe bank would be lnequlLable (Callfornla lederal 8ank v MaLreyek
supra 8 Cal App 4Lh aL p 134)
Callfornla lederal ls dlsLlngulshable from our case llrsL ln Callfornla lederal Lhe plalnLlff made Lhe
mlsLake 8y conLrasL ln Lhls case Lhe LrusLee was responslble for Lhe mlsLake Second ln Callfornla
lederal Lhe borrowers dld noL know abouL Lhe mlsLake ln our case as we shall explaln laLer Sunrlse
knew or should have known LhaL lL was noL enLlLled Lo all of Lhe proceeds from Lhe sale of Lhe properLy
llnally ln Callfornla lederal Lhe reclplenL of Lhe beneflL gave conslderaLlon ln exchange for obLalnlng
Lhe advanLage ln Lhe clrcumsLances here no such conslderaLlon was glven
Also asslsLlng our analysls ls llraLo v 1uLLle (1937) 48 Cal 2d 136 308 2d 333 ln LhaL case a purchase
money deed of LrusL was mlsLakenly reconveyed by Lhe LrusLee 1he LrusLee was auLhorlzed Lo reconvey
only lf Lhe loan was pald ln full AfLer Lhe properLy had been sold several Llmes Lhe beneflclarles flled
sulL 1he beneflclarles never alleged LhaL Lhe subsequenL purchasers knew abouL Lhe error or were noL
bona flde purchasers (ld aL p 138) 1he courL found Lhls persuaslve
1he llraLo courL also relled upon former secLlon 2243 of Lhe Clvll Code whlch sLaLed Lveryone Lo
whom properLy ls Lransferred ln vlolaLlon of a LrusL holds Lhe same as an lnvolunLary LrusLee under such
LrusL unless he purchased lL ln good falLh and for a valuable conslderaLlon (llraLo v 1uLLle supra 48
Cal 2d aL p 139 lLallcs omlLLed) 8easonlng LhaL such rules are conslsLenL wlLh equlLable prlnclples and
Lhe convenlenL LransacLlon of buslness Lhe courL afflrmed Lhe Lrlal courLs susLalnlng of Lhe demurrer
Lo Lhe beneflclarles complalnL (lbld)
8esLlLuLlon was denled ln ClLy of Pope naL Medlcal CenLer v Superlor CourL supra 8 Cal App 4Lh 633
ln LhaL case Lhe lnsurer pald Lhe hosplLal for healLh care glven Lo Lhe lnsured 1he lnsurer laLer declded
Lhe lnsureds LreaLmenL was noL covered by Lhe lnsureds pollcy lL sued Lhe hosplLal for relmbursemenL
seeklng resLlLuLlon of Lhe money pald ln deLermlnlng LhaL Lhe hosplLal was noL requlred Lo relmburse
Lhe lnsurer Lhe courL emphaslzed LhaL resLlLuLlon wlll be denled however lf Lhe mlsLaken paymenL ls
made Lo a bona flde credlLor of a Lhlrd persona credlLor wlLhouL faulL because lL made no
mlsrepresenLaLlons Lo Lhe payor and because lL had no noLlce of Lhe payors mlsLake aL Lhe Llme
paymenL was made SLaLed plalnly lf lLs your mlsLake you geL Lo pay for lLunless Lhe reclplenL mlsled
you or accepLed Lhe paymenL knowlng you dldnL owe lL (ld aL p 637 lLallcs added) 11 Ca| App 4th
1668
CLher cases also suggesL LhaL a persons noLlce of Lhe clrcumsLances glvlng rlse Lo un[usL enrlchmenL
affecLs LhaL persons obllgaLlon Lo make resLlLuLlon ln helps v Amerlcan MLg Co (1936) 6 Cal 2d 604
39 2d 93 Lhe courL concluded ln equlLy a release unauLhorlzed by Lhe Lerms of Lhe LrusL or by
Lhe cesLul que LrusL wlll have no effecL upon Lhe deed of LrusL as beLween Lhe orlglnal parLles or as Lo
subsequenL purchasers wlLh noLlce (ld aL p 608 laLLer lLallcs added)
ln uuley v WesLlnghouse LlecLrlc Corp (1979) 97 Cal App 3d 430 138 Cal8pLr 668 seller sold
properLy Lo buyer ln exchange for a promlssory noLe secured by a deed of LrusL on Lhe properLy A
[udgmenL llen was subsequenLly placed on Lhe properLy Sellers LrusL deed was mlsLakenly reconveyed
Seller sued Lo cancel Lhe reconveyance and esLabllsh Lhe prlorlLy of hls deed of LrusL 1he courL
reasoned 1he only legal and equlLable soluLlon ln Lhe slLuaLlon ls cancellaLlon of Lhe reconveyance
reLurnlng Lhe parLles Lo Lhelr sLaLus quo 1he courL may cancel a wrlLLen lnsLrumenL where Lhere ls a
reasonable llkellhood lf lefL ouLsLandlng lL may serlously ln[ure a person agalnsL whom lL ls vold or
voldable Allowlng Lhe reconveyance Lo sLand would leave seller wlLhouL securlLy for hls loan and
creaLe an lnequlLable wlndfall for [udgmenL llenor as lLs absLracL of [udgmenL would Lake prlorlLy ln
any sale of Lhe properLy (ld aL p 432)
Sunrlse relles upon CrlfflLh Co v Pofues (1962) 201 Cal App 2d 302 19 Cal8pLr 900 1ruesLone lnc
v Slml WesL lndusLrlal ark ll (1984) 163 Cal App 3d 713 209 Cal8pLr 737 nlbbl 8roLhers lnc v
Pome lederal Sav Loan Assn (1988) 203 Cal App 3d 1413 233 Cal8pLr 289 and aclflc valley
8ank v Schwenke supra 189 Cal App 3d 134
1hese cases dlffer sharply from Lhe clrcumsLances here ln CrlfflLh Co v Pofues supra 201 Cal App 2d
302 Lhe reclplenL of Lhe beneflL was noL ln a poslLlon Lo have refused Lhe advanLage ln addlLlon Lhe
plalnLlff lnvlLed Lhe clrcumsLances leadlng Lo Lhe un[usL enrlchmenL
1ruesLone lnc v Slml WesL lndusLrlal ark ll supra 163 Cal App 3d 713 concerned a subconLracLors
aLLempL Lo recover dlrecLly from a properLy owner no lssue of mlsLake was lnvolved ln nlbbl 8roLhers
lnc v Pome lederal Sav Loan Assn supra 203 Cal App 3d 1413 no un[usL enrlchmenL clalm was
presenLed 1hls was because Lhe alleged mlsrepresenLaLlon whlch led Lo Lhe enrlchmenL was merely a
nonacLlonable expresslon of oplnlon (ld aL p 1423) llnally ln aclflc valley 8ank v Schwenke supra
189 Cal App 3d 134 no mlsLaken reconveyance or un[usL enrlchmenL cause of acLlon was aL sLake 11
Ca| App 4th 1669
D Sunr|ses know|edge

6 Cur revlew of Lhe auLhorlLles dlscloses LhaL Sunrlses knowledge ls crlLlcal Lo Lhe valldlLy of lnSs
un[usL enrlchmenL clalm lf Sunrlse should noL have known abouL Lhe reconveyance and should noL
have reallzed LhaL lL was noL enLlLled Lo all of Lhe sale proceeds Lhen lL would noL necessarlly be un[usL
Lo permlL lL Lo reLaln Lhose proceeds Cn Lhe oLher hand lf Sunrlse dld know LhaL lL was noL enLlLled Lo
all of Lhe sale proceeds Lhen lL ls falr Lo requlre LhaL Sunrlse make resLlLuLlon
Surprlslngly enough lnSs second amended complalnL does noL allege Sunrlses knowledge lL does noL
sLaLe LhaL Sunrlse knew abouL Lhe lmproper reconveyance nor does Lhe complalnL allege LhaL Sunrlse
reallzed LhaL lL was noL enLlLled Lo all of Lhe proceeds from Lhe sale of Lhe properLy ln any evenL we do
noL belleve Sunrlse could noL have known LhaL lL was noL enLlLled Lo all of Lhe sale proceeds
lurLhermore lL ls lnLeresLlng Lo noLe LhaL Sunrlse clearly had noLlce of Lhe reconveyance 1he deed of
reconveyance lndlcaLes lL was malled Lo uavld erry Sunrlses LrusLee
nelLher are we persuaded by Sunrlses argumenLs agalnsL lnSs recovery Sunrlse sLresses LhaL un[usL
enrlchmenL recovery would be conLrary Lo secured LransacLlons law and resLlLuLlon law As we have
already explalned Lhls ls lncorrecL More lmporLanLly nowhere does Sunrlse explaln why lL should be
enLlLled Lo all of Lhe proceeds from Lhe sale Sunrlse focuses upon Lhe fuLure consequence of allowlng
recovery Clven Lhe facLs of Lhls case Sunrlse does noL and cannoL explaln why lL should be enLlLled Lo
Lhls wlndfall
Sunrlse also argues LhaL lnS should flle sulL agalnsL Lhe LrusLee responslble for Lhe reconveyance 1o
counLer Lhls allegaLlon lnS relles upon a hypoLheLlcal lf a bag of money falls ouL of Lhe back of an
armored car because of a defecLlve lock Lhe armored car company ls noL flrsL requlred Lo sue Lhe
locksmlLh before seeklng Lo recover Lhe money from lLs flnder
Sunrlse also suggesLs LhaL lnS should have Lrled Lo cancel Lhe reconveyance Powever ln Lhls case Lhe
properLy was sold Lo bona flde purchasers approxlmaLely slx monLhs afLer Lhe LrusLees mlsLake lor Lhls
reason lL ls Loo laLe Lo cancel Lhe reconveyance Moreover slnce only slx monLhs passed beLween Lhe
Llme of Lhe reconveyance and Lhe sale we do noL belleve LhaL laches can consLlLuLe a defense Lo lnSs
un[usL enrlchmenL acLlon
ln sum we belleve LhaL lnS should be glven an opporLunlLy Lo amend lLs complalnL Lo allege Sunrlses
knowledge of Lhe lmproper reconveyance as 11 Ca| App 4th 1670well as Sunrlses knowledge LhaL lL
was noL enLlLled Lo all of Lhe proceeds from Lhe sale of Lhe properLy WlLh Lhls amendmenL lnS can
sLaLe a clalm for un[usL enrlchmenL
II Statute of Irauds

7 Sunrlse argues LhaL lnSs complalnL ls barred by Lhe sLaLuLe of frauds ln parLlcular lL alleges LhaL
lnSs un[usL enrlchmenL cause of acLlon ls merely a de facLo assumpLlon agreemenL whlch ls barred by
Clvll Code secLlon 1624 subdlvlslon (f) fn 2 We dlsagree 1he rlghL Lo resLlLuLlon or quaslconLracLual
recovery ls based upon un[usL enrlchmenL 1he sLaLuLe of frauds applles Lo Lrue conLracLs only (1
WlLkln Summary of Cal Law (9Lh ed 1987) ConLracLs 92 p 123 Mayborne v ClLlzens 1 S 8ank
(1920) 46 CalApp 178 190 188 1034 eLerson 1racLor Co v Crlandos SnackMoblle Corp (1969)
270 Cal App 2d 787 791 76 Cal8pLr 221) 8ecause Lhls ls noL an acLlon upon a conLracL nor a
subLerfuge for one Lhe sLaLuLe of frauds ls noL a bar Lo lnSs recovery
III Statute of L|m|tat|ons

8 Sunrlse argues LhaL Lhe sLaLuLe of llmlLaLlons precludes lnSs clalm A quaslconLracL acLlon ln Lhe
form of a common counL for money had and recelved Lo recover money obLalned by fraud (walver of
LorL) or mlsLake ls governed by Lhe fraud sLaLuLe (3 WlLkln Cal rocedure (3d ed 1983) AcLlons
431 p 482 Shaln v Sresovlch (1894) 104 Cal 402 38 31)
1he wlndfall occurred on uecember 17 1986 1hls was Lhe daLe when Sunrlse sold Lhe properLy Lo Lhe
Sundbergs 1he flrsL amended complalnL namlng Sunrlse as a defendanL was flled uecember 11 1989
1hus Lhe complalnL was flled less Lhan Lhree years from Lhe daLe Lhe cause of acLlon accrued
Accordlngly lnSs un[usL enrlchmenL clalm ls noL barred by Lhe sLaLuLe of llmlLaLlons
Conc|us|on
lor every wrong Lhere ls a remedy (Clv Code 3323) Where one of Lwo lnnocenL persons musL
suffer by Lhe acL of a Lhlrd he by whose negllgence lL happened musL be Lhe sufferer (Clv Code
3343) ln Lhls case lnS Lhrough no faulL of lLs own losL lLs securlLy ln Sunrlses properLy 11 Ca| App
4th 1671 Sunrlse had no leglLlmaLe clalm Lo Lhls prevlously secured porLlon of Lhe properLy and
arguably knew or should have known lL dld noL own all of Lhe properLy noneLheless lL sold Lhe properLy
and pockeLed all of Lhe proceeds Clven Lhese clrcumsLances Lhls may prove Lo be a classlc case of
un[usL enrlchmenL 1he [udgmenL ls reversed CosLs on appeal Lo lnS fn 3
CoLLle AcLlng ! and remo ! concurred
ln 1 lederal naLlonal MorLgage AssoclaLlon
ln 2 Clvll Code secLlon 1624 subdlvlslon (f) requlres LhaL Lhe followlng Lype of conLracL be ln wrlLlng
(f) An agreemenL by a purchaser of real properLy Lo pay an lndebLedness secured by a morLgage or
deed of LrusL upon Lhe properLy purchased unless assumpLlon of Lhe lndebLedness by Lhe purchaser ls
speclflcally provlded for ln Lhe conveyance of Lhe properLy
ln 3 8ecause we conclude LhaL lnS can sLaLe an un[usL enrlchmenL clalm we need noL conslder lnSs
argumenL regardlng Lhe Lrlal courLs sLaLemenL of declslon ln addlLlon we flnd no abuse of dlscreLlon ln
Lhe Lrlal courLs declslon Lo deny Sunrlse aLLorneys fees llnally glven Lhe resulL we reach Sunrlse ls
obvlously noL enLlLled Lo aLLorneys fees on appeal