209. Quiet Title Research

 Quiet Title - California Law

Deutsche Bank National Trust Company et al v. Mary Mcgurk, No. B231591 (Cal.App. Dist.2 05/22/2012)

DEUTSCHE BANK NATIONAL TRUST COMPANY ET AL., PLAINTIFF AND APPELLANT,

v.

MARY MCGURK, DEFENDANT AND RESPONDENT.

(Los Angeles County Super. Ct. No. BC419796) APPEAL from a judgment of the Superior Court of Los Angeles County, Rolf M. Treu, Judge. Judgment is reversed and remanded.

Knapp, Petersen & Clarke and Steven Ray Garcia for Plaintiff and Appellant. Kaye Scholer, Daniel Grunfeld, Jonathan Rotter and Amanda Myers; Greines, Martin, Stein & Richland and Alana H. Rotter for Defendant and Respondent.

CERTIFIED FOR PUBLICATION

We are here concerned with the effect of a quiet title judgment on the assignee of the interest of an entity whose interest was not litigated in the quiettitle action. The quiet title plaintiff, Mary McGurk, had named New Century Mortgage Corporation (New Century) in her quiet title action, as New Century held a deed of trust on McGurk's property. McGurk had also recorded a lis pendens shortly after filing her quiet title complaint. During the course of the action, New Century assigned the deed of trust to Deutsche Bank National Trust Company, as Indenture Trustee for New Century Home Equity Loan Trust 2005-4 (Deutsche Bank), but the assignment was not recorded, and McGurk was unaware of it. Thereafter, McGurk dismissed New Century from her quiet title action, as New Century was then in bankruptcy, and McGurk chose to pursue New Century in that forum, rather than seek relief from the automatic stay. McGurk thereafter obtained a judgment purporting to quiet title in her in fee simple. Subsequently, Deutsche Bank recorded its assignment, and brought the instant declaratory relief action, seeking a determination of the validity of the assigned deed of trust.

Given these factual circumstances, we hold that, as the interest of New Century was not resolved in the quiet title action, its assignee, Deutsche Bank, is not bound by the quiet title judgment. We reject McGurk's argument that Deutsche Bank is bound by the judgment because it obtained the deed of trust after her lis pendens was recorded. As a matter of law, her judgment simply did not (and could not) address the validity of the New Century deed of trust. We will therefore reverse the trial court's judgment in favor of McGurk, and remand for an actual determination of the validity of the assigned trust deed interest.

FACTUAL AND PROCEDURAL BACKGROUND

The complex factual and procedural background which led to the instant appeal is best understood in chronological order. We will ultimately be concerned with the validity of a deed of trust against a piece of real property on which Mary McGurk lives. The deed of trust is currently held by Deutsche Bank. As will become clear, Deutsche Bank's interest arises as the assignee of New Century.

In 2005, McGurk, who had lost her job, had fallen behind on her mortgage payments (to a third party not a party to this action), and faced foreclosure. Unfortunately, McGurk fell victim to a fraud ring which preyed on individuals who faced foreclosure while nonetheless possessing substantial equity in their homes. Relying on the faulty advice of these individuals,*fn1 McGurk was convinced to deed her property to a man named Jonathan Kim, who would then lease the property back to McGurk, with an option to buy it back after one year. On July 13, 2005, Kim, who had better credit than McGurk, obtained a loan on the property from New Century, secured by a deed of trust, in the amount of $369,000. Of that amount, $162,896.25 was used to satisfy McGurk's then-existing mortgage. The remaining proceeds of the loan (amounting to McGurk's equity in her home) were to be used as a fund from which McGurk could pay the lease payments to Kim (which were equal to Kim's monthly obligation on the New Century note), while she attempted to improve her financial situation. However, the individuals who organized the transaction took the bulk of the excess loan proceeds for themselves. Thus, although McGurk's original mortgage was paid off, she ended up: (1) losing title to her home; (2) losing all of the equity in her home; and (3) being left with monthly lease payments to Kim much higher than her original mortgage payments, with no means of making the payments.*fn2

On May 16, 2006, McGurk brought suit against Kim, the individuals and companies who had defrauded her, and New Century.*fn3 The parties refer to this action as McGurk I. Although McGurk alleged numerous causes of action, key for our purposes is her quiet title action against all defendants, including New Century, who claimed any interest in her home as of July 12, 2005.*fn4 McGurk recorded a lis pendens on the property on May 23, 2006.

On June 27, 2006, New Century filed a cross-complaint against McGurk, alleging that it was a bona fide encumbrancer for value, and its deed of trust was valid. In the alternative, New Century argued that it was entitled to an equitable lien in the amount of the portion of its loan which was used to pay off McGurk's initial mortgage.

On April 2, 2007, New Century filed a voluntary petition for bankruptcy under Chapter 11. On April 11, 2007, New Century filed a notice of automatic stay in McGurk I. On February 13, 2008, New Century dismissed its cross-complaint against McGurk without prejudice.

On March 4, 2008, New Century assigned the note and deed of trust to Deutsche Bank.*fn5 However, neither New Century nor Deutsche Bank informed McGurk of the change in ownership of the deed of trust.*fn6 Nor did Deutsche Bank immediately record the assignment of the deed of trust in its favor.

McGurk continued proceeding against the McGurk I defendants who had defrauded her. By mid-May 2008, McGurk had obtained defaults against these defendants. She had also obtained a stipulation from Kim, in which he agreed that judgment could be entered against him in the amount of $45,000, and the grant deed in his favor would be declared void ab initio. New Century was the only remaining defendant, and McGurk was prohibited from pursuing New Century because of the automatic stay. McGurk had no knowledge, at this time, that New Century no longer possessed any interest in the deed of trust.

Because of the automatic stay, and for no other reason, McGurk voluntarily dismissed New Century without prejudice, intending to pursue New Century in bankruptcy court.*fn7 McGurk did not, instead, seek relief from the automatic stay. The dismissal was entered on May 9, 2008.

On May 12, 2008, McGurk filed a notice of case status indicating that she had obtained the defaults of five defendants, obtained stipulations for judgment from two more, and requested dismissal of the final two (including New Century). McGurk stated, "what remains is for the court to enter judgment on the defaults that have been entered, and to quiet title in" McGurk.

On May 15, 2008, the court entered judgment in favor of McGurk on the stipulation she had entered into with Kim; this had the effect of canceling McGurk's grant deed in favor of Kim as void ab initio. On May 19, 2008, the court entered default judgment against the individuals and companies which had defrauded McGurk, in the amount of $705,000, plus interest, costs, and attorney fees. On May 19, 2008, the court entered judgment, following a hearing, quieting title in McGurk's favor. The judgment simply stated, "Title is quieted in Mary McGurk, the sole owner of title in fee simple of [the property]." McGurk recorded the judgment on May 22, 2008.

On August 1, 2008, a liquidating trust was created in New Century's bankruptcy, and all of New Century's assets were distributed to the liquidating trust. On August 19, 2008, Deutsche Bank recorded the March 4, 2008 assignment of the deed of trust in its

In April 2009, McGurk reached a settlement with the liquidating trust in New Century's bankruptcy. Pursuant to the agreement, it was stipulated that McGurk's claim was to be allowed as a $10,000 unsecured claim, and disallowed in every other respect. It was also agreed that neither New Century nor the liquidating trust had any title or interest in the loan or the deed of trust.*fn8 The agreement, however, went on to state, "This Stipulation, however, does not void, affect, impair or otherwise limit any right, title or interest of any investor, successor-in-interest or purchaser of the Loan from Debtors, or any claim, defense, or remedy by Claimant against any such entity." As noted above, by the time of this agreement, the assignment in favor of Deutsche Bank had been recorded.

On August 14, 2009, Deutsche Bank brought the instant declaratory relief action against McGurk. Deutsche Bank sought a declaration that its deed of trust was valid; or, in the alternative, a declaration that it had a valid equitable claim to the extent the loan proceeds paid off McGurk's original mortgage.

This case was deemed related to McGurk I. McGurk demurred, on the basis that this action was barred by McGurk I. McGurk's theory was that, as Deutsche Bank did not obtain its assignment of the deed of trust until after she had filed her quiet title action, and recorded her lis pendens, Deutsche Bank took the assignment subject to the resolution of McGurk I. As the judgment in McGurk I quieted title in McGurk alone, McGurk argued that Deutsche Bank's interest was defeated. The demurrer was overruled, as was McGurk's subsequent motion for judgment on the pleadings on the same basis.

The case proceeded to a bench trial on October 25, 2010. Numerous documents were admitted into evidence, and Deutsche Bank introduced the testimony of several witnesses. At the close of Deutsche Bank's case, McGurk moved for judgment in her favor under Code of Civil Procedure section 631.8. The trial court heard argument on the motion, and ultimately took the matter under submission. The court then directed McGurk to proceed with her case. McGurk chose not to present any live testimony, but submitted deposition excerpts from a single witness. Deutsche Bank's counsel indicated that Deutsche Bank might wish to counter-designate excerpts from the same deposition; the court indicated that Deutsche Bank could do so in its written closing brief. The court set a briefing schedule for written closing briefs. McGurk then requested a statement of decision, and identified the issues on which she sought a statement of decision. The trial court indicated that this request should be repeated in McGurk's written brief. In response to Deutsche's Bank's joinder in McGurk's request for a statement of decision, the court indicated that Deutsche Bank should identify the issues on which it sought a statement of decision in its written briefing, as well.

A few days later, prior to the receipt of any briefing, the trial granted McGurk's motion for judgment under Code of Civil Procedure section 631.8, which it had taken under submission. The court explained its rationale as follows: "Based on stipulated facts, the Court finds the assignment to [Deutsche Bank] of its alleged interest in the property was not recorded prior to the notice of pending action recorded in [McGurk I]."*fn9 The court vacated all briefing dates. Judgment was entered in favor of McGurk on January 3, 2011.

Deutsche Bank then moved to set aside the judgment, arguing that, as New Century had been voluntarily dismissed from McGurk I, the judgment quieting title in that action did not impact New Century's interest, which was ultimately conveyed to Deutsche Bank. After the motion was fully briefed and the matter was heard, the trial court denied Deutsche Bank's motion. The court's written statement of decision regarding the denial of the motion to set aside was somewhat more detailed than its initial statement of decision, and specifically included certain findings of fact.*fn10 The court concluded that the dismissal of New Century from McGurk I took place after New Century had assigned its interest to Deutsche Bank, so the dismissal affected only New Century. As to Deutsche Bank, the court concluded that McGurk's timely recordation of a lis pendens bound to the subsequent quiet title judgment anyone who acquired an interest in the property subsequent to its recordation. As Deutsche Bank obtained its interest long after McGurk's lis pendens was recorded, Deutsche Bank was bound by the quiet title judgment.

Deutsche Bank filed a timely notice of appeal.

ISSUES ON APPEAL

The main issue on this appeal is whether the judgment quieting title in McGurk defeated Deutsche Bank's deed of trust. As we explain, we conclude that it did not. This raises a second issue: the appropriate disposition of the case on appeal.

STANDARD OF REVIEW

Code of Civil Procedure section 631.8, subdivision (a), provides, in pertinent part: "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 weighing the evidence, the trial judge may exercise the prerogatives of a fact trier by refusing to believe witnesses . . . . If the motion is granted, his [or her] findings are entitled to the same respect on appeal as any other findings and are not reversible if supported by substantial evidence." ' " (Ford v. Miller Meat Co. (1994) 28 Cal.App.4th 1196, 1200, citations omitted.) The main issue in this case, however, is one of law.

STATUTORY FRAMEWORK

Actions to quiet title proceed under Chapter 4 of Title 10 of Part 2 of the Code of Civil Procedure. Code of Civil Procedure section 760.020, subdivision (a) permits a party to bring an action "to establish title against adverse claims" to real property. The plaintiff is to file a verified complaint, which includes, among other things, "[t]he adverse claims to the title of the plaintiff against which a determination is sought." (Code Civ. Proc., § 761.020, subd. (c).) The plaintiff "shall" name as defendants "the persons having adverse claims that are of record or known to the plaintiff or reasonably apparent from an inspection of the property." (Code Civ. Proc., § 762.060, subd. (b).) When a plaintiff files an action to quiet title, the plaintiff is required to "[i]mmediately" record a lis pendens.*fn11 (Code Civ. Proc., § 761.010, subd. (b).)

Any person who has a claim to the property may appear as a defendant, whether or not they are named in the complaint. (Code Civ. Proc., § 762.050.) The court is then required to "examine into and determine the plaintiff's title against the claims of all the defendants." (Code Civ. Proc., § 764.010.)

Two statutes set forth the breadth of a quiet title judgment. The first, Code of Civil Procedure section 764.030, provides as follows: "The judgment in the [quiet title] action is binding and conclusive on all of the following persons, regardless of any legal disability: [¶] (a) All persons known and unknown who were parties to the action and who have any claim to the property, whether present or future, vested or contingent, legal or equitable, several or undivided. [¶] (b) Except as provided in Section 764.045, all persons who were not parties to the action and who have any claim to the property which was not of record at the time the lis pendens was filed or, if none was filed, at the time the judgment was recorded."

The second, Code of Civil Procedure section 764.045, provides in pertinent part as follows: "Except to the extent provided in Section 1908,[*fn12] the judgment does not affect a claim in the property . . . of any person who was not a party to the action if any of the following conditions is satisfied: [¶] (a) The claim was of record at the time the lis pendens was filed or, if none was filed, at the time the judgment was recorded. [¶] (b) The claim was actually known to the plaintiff or would have been reasonably apparent from an inspection of the property at the time the lis pendens was filed or, if none was filed, at the time the judgment was entered."

3. The Effect of the Quiet Title Judgment in McGurk I.

McGurk was aware of New Century's interest in the property, and, at the time she filed her quiet title action, she properly named New Century as a defendant. However, she subsequently voluntarily dismissed New Century as a defendant. Although New Century did not, as a factual matter, still possess any interest in the property at the time it was dismissed, McGurk did not know that. She dismissed New Century believing that New Century still possessed an interest in the property, and intending to resolve the issue in New Century's bankruptcy proceedings.

Had McGurk's belief been correct - that is to say, had New Century not assigned its interest in the deed of trust to Deutsche Bank prior to its dismissal - the effect of the ultimate judgment quieting title in McGurk on New Century would be easy to determine. "A plaintiff's voluntary dismissal of his action has the effect of an absolute withdrawal of his claim and leaves the defendant as though he had never been a party. [Citations.] When an action is wilfully dismissed by the plaintiff against one or more of several defendants the effect is the same as if the action had been originally brought against the remaining defendants." (Cook v. Stewart McKee & Co. (1945) 68 Cal.App.2d 758, 761.) "After such dismissal the defendant is a stranger to the action." (Ibid.) The quiet title statutes are clear that a quiet title judgment does not bind a non-party whose interest was of record prior to the filing of the lis pendens (Code Civ. Proc., § 764.045, subd. (a)), nor does it bind a non-party whose interest was actually known to the plaintiff at the time of the lis pendens (Code Civ. Proc., § 764.045, subd. (b)). As the result of its voluntary dismissal, New Century became a non-party to the quiet title action. New Century's interest was both of record and known to McGurk prior to filing her lis pendens. Thus, under both subdivisions of Code of Civil Procedure section 764.045, the quiet title judgment could not have bound it.

Indeed, when the trial court entered the quiet title judgment in McGurk I, it was believed by both McGurk and the trial court that New Century still possessed its deed of trust, and that the court was not resolving the validity of that deed of trust in the quiet title matter; McGurk instead planned to resolve the issue in New Century's bankruptcy. In this respect, this understanding of McGurk and the trial court was consistent with the law: the McGurk I quiet title judgment might have been effective against everyone else in the world, but it was not effective against New Century (at least to the extent of its deed of trust). The trial court would not have been remiss had it indicated, in its original quiet title judgment that title was quieted in McGurk except as against New Century's deed of trust. It therefore follows that if the assignment from New Century to Deutsche Bank had occurred after New Century's dismissal, rather than before it, the quiet title judgment would have no effect on Deutsche Bank. McGurk argues, however, that since the assignment occurred prior to New Century's dismissal, even though she was unaware of it, the result must be different.

We return to the statutes. Deutsche Bank was not a party to the quiet title action and its interest was not recorded prior to the lis pendens (indeed, its interest was recorded subsequent to the quiet title judgment). Code of Civil Procedure section 764.030, subdivision (b) provides that the judgment is conclusive against "all persons who were not parties to the action and who have any claim to the property which was not of record at the time the lis pendens was filed or, if none was filed, at the time the judgment was recorded." This would appear to describe Deutsche Bank. Deutsche Bank argues that it does not, as Deutsche Bank's "claim to the property" was New Century's claim, which was, in fact, of record at the time the lis pendens was recorded. In other words, Deutsche Bank argues that the relevant fact for the purposes of Code of Civil Procedure section 764.030 is whether the claim itself was of record, not whether the particular party currently asserting the claim was of record.

Deutsche Bank's argument is not without merit. Code of Civil Procedure section 760.010, subdivision (a) defines "claim" for the purposes of thequiet title statutes as including "a legal or equitable right, title, estate, lien or interest in property or cloud upon title." There is no indication as to whether a "claim" remains the same "claim" when its ownership is transferred. Certainly, a reasonable argument can be made that it does. When a plaintiff in a quiet title action seeks to quiet title against a specifically identified adverse claim to its property, it should make no difference to the plaintiff whether that claim is held by the defendant it initially named, or a subsequent transferee.*fn13 Nonetheless, we find it unnecessary to construe "claim" in this manner, as the quiet title statutes already provide for this situation, through the means of a lis pendens, and the date of a quiettitle determination.

As noted above (see footnote 4, ante), a quiet title plaintiff must identify the "date as of which the determination" of title is sought. (Code Civ. Proc., § 761.020, subd. (d).) The date is to be the date of filing the complaint or, if the plaintiff so chooses, an earlier date. (Cal. Law Revision Com. com., Deering's Ann. Code Civ. Proc. (1996 ed.) foll. § 761.020, p. 66.) Thus, in a quiet title action, the trial court's judgment adjudicates title as of a date prior to the judgment; the court determination establishes title as of the date of the complaint (or some earlier date). This is as it should be; the trial court takes evidence of the state of title at a particular point in the past. The court does not, and cannot, take evidence of every act which may affect the title up until the moment of judgment. Thus, a quiet title plaintiff may encumber the property while the action is pending; if the plaintiff succeeds in quieting title as of the date of the complaint, the encumbrance is valid. Similarly, a tax or assessment lien may be placed on the property during the quiet title action. The trial court is in no position to adjudicate the validity of such liens; the court will simply adjudicate title as of the date of the complaint.

Encumbrances, liens, transfers, and other acts affecting title to the property pending the quiet title action are affected by means of the lis pendens. "The purpose of a lis pendens is merely to furnish a means of notifying all persons of the pendency of an action, and thereby to bind any person who may acquire an interest in property, subsequent to the institution of the action, by any judgment which may be secured in the action affecting the property." (Lee v. Silva (1925) 197 Cal. 364, 373.) Thus, any person who obtains an interest in the property subsequent to the filing of the lis pendens takes that interest with constructive knowledge of the quiet title action, and will be bound by the judgment in the quiet title action. (Code Civ. Proc., § 764.030, subd. (b).) The lis pendens gives persons who may obtain an interest in the property notice that the state of title as of the date of the complaint (or an earlier date set forth in the complaint) is at issue, and will be adjudicated. Should such a person nonetheless obtain an interest, with such constructive knowledge, that person's interest will be taken subject to the quiet title judgment. To take an example, if a third party obtains a partial assignment from a quiet title defendant while the action is pending, and the quiet title plaintiff ultimately wins, securing an adjudication of title dating back to the filing of the complaint, the third party's assignment would be invalid, as the quiet title defendant had no interest to assign as of the date of the complaint. If, however, the quiet title defendant prevailed in the quiet title action, the third party's assignment would be valid, as the quiet title defendant's interest, as of the date of the complaint, was unaffected.

The latter situation is, in effect, what occurred in the instant case. Deutsche Bank took the assignment while McGurk's quiet title action was pending; Deutsche Bank therefore took the assignment subject to the possibility that it would be determined, in McGurk I, that New Century did not, in fact, have an interest to assign, as of the date of the complaint (or an earlier date). Had the trial court invalidated New Century's interest in McGurk I, Deutsche Bank's assignment would have been rendered worthless. However, the trial court did not invalidate New Century's interest. McGurk dismissed New Century from the action, and the McGurk I judgment did not adjudicate New Century's interest. Thus, although Deutsche Bank took the assignment subject to the risk that its assignor's interest would be proven to have been invalid, that risk never came to fruition. Put another way, Deutsche Bank took subject to the quiet title judgment, and the quiet title judgment impliedly exempted New Century from its terms.*fn14

4. Case Authority is in Accord

The great bulk of the authority on which both parties rely predates the current statutory scheme. Prior to the enactment of the current quiet titlestatutes, a quiet title action was not an action in rem, and a quiet title plaintiff could only quiet title against specific interests. In contrast, the currentquiet title statutes, enacted in 1980, were designed to create a purely in rem quiet title action, which would enable a quiet title plaintiff to obtain clear title against the world. (Harbour Vista, LLC v. HSBC Mortgage Services Inc. (2011) 201 Cal.App.4th 1496, 1505-1506.)*fn15 Indeed, the quiettitle statutes permit a quiet title plaintiff to name as defendants " 'all persons unknown, claiming any legal or equitable right, title, estate, lien, or interest in the property described in the complaint adverse to plaintiff's title, or any cloud upon plaintiff's title thereto.' "*fn16 (Code Civ. Proc., § 762.060, subd. (a).) The instant action, however, is not concerned with the effect of a quiet title judgment on a wholly unknown entity claiming an interest in the property; we are instead concerned with the effect of a quiet title judgment on the assignee of a known entity claiming an interest, who was first named, and then dismissed, from the quiet title action. Thus, the fact that the quiet title laws now provide for an in rem action is irrelevant to the instant dispute.

Indeed, while the current quiet title statutory scheme was enacted in 1980, California law has been consistent, for many years, on the effect of aquiet title judgment on the successor in interest of a known entity who was nonetheless unnamed in the quiet title action.*fn17 That determination was made by the California Supreme Court in Lee v. Silva, supra, 197 Cal. 364.

The case involved the following chronological scenario: (1) C, the owner of some land, entered into a conditional sales contract to sell the land to the L's. The contract was recorded. (Lee v. Silva, supra, 197 Cal. at pp. 366-367.) (2) Thereafter, the land was assessed for street improvements. (Id. at p. 367.) (3) C then died, and an executor was appointed. (Ibid.) (4) Some time later, O brought an action against C's executor to foreclose on the street assessment lien, but failed to name the L's, even though their conditional sales contract was of record. O recorded a lis pendens. (Ibid.) (5) Thereafter, one of the L's assigned its interest to the other. Then, the conditional sales contract was paid off, and C's executor conveyed the land to the remaining L on July 1, 1916, pursuant to the conditional contract of sale. The deed was recorded. (Ibid.) (6) Several months later, L conveyed the property to the plaintiff. After the conveyance, but before it was recorded, O obtained a foreclosure judgment against C's executor. (Ibid.) The plaintiff brought suit to quiet title against O, and those who claimed under O. The plaintiff won and the California Supreme Court affirmed.

While the factual scenario of Lee v. Silva is somewhat complex, the case turned on the fact that when O brought its foreclosure action, it did not sue the L's, even though the claim of the L's (through their conditional sales contract) was of record. As the L's were therefore not bound by O's foreclosure judgment, plaintiff, their ultimate assignee, was likewise not bound by it. (Id. at p. 375.) The fact that the plaintiff herself did not obtain her interest (and, indeed, plaintiff's predecessor didn't obtain actual title) until after the lis pendens had been recorded in the foreclosure action did not matter. (Id. at pp. 372-373.) The conditional sales contract was recorded prior to the foreclosure lis pendens, so the chain of title arising from the conditional sales contract was not affected by the foreclosure action which did not name as defendants the owner of the interest represented by that contract.

Lee v. Silva confirms our result in this case. Just as O did not name the L's, even though their interest was of record, McGurk voluntarily dismissed New Century, even though its interest was of record. As a result, just as the ultimate assignee of the L's was not bound by the foreclosure judgment (even though she did not obtain title until after the foreclosure lis pendens), the assignee of New Century was not bound by the quiet title judgment (even though it did not obtain title until after the quiet title lis pendens).*fn18

Other case authority on which McGurk relies is distinguishable. While it is well-established that a person who obtains an interest in property from a party to a quiet title action after a lis pendens is recorded is bound by the judgment in the quiet title action (e.g., Torrez v. Gough (1955) 137 Cal.App.2d 62, 71; Swartfager v. Wells (1942) 53 Cal.App.2d 522, 528-529), McGurk overlooks the fact that her quiet title judgment did not, in fact, invalidate New Century's interest, as she dismissed New Century prior to judgment. (Cf. Page v. W.W. Chase Co. (1904) 145 Cal. 578, 583-584 [a party who was served as a Doe defendant in a foreclosure action and is then dismissed prior to judgment is not bound by the judgment].) Thus, although Deutsche Bank would have been bound by the judgment in McGurk I (due to having obtained its interest after the lis pendens), the judgment did not impact New Century's interest, and therefore could not impact Deutsche Bank's interest either.

Remand for Further Proceedings is Necessary

As the trial court erred in granting McGurk's motion for judgment under Code of Civil Procedure section 631.8, the matter needs to be remanded to permit the trial court to conclude the remainder of the bench trial and rule on Deutsche Bank's declaratory relief complaint. We have concluded that the judgment in McGurk I does not bar Deutsche Bank's action; it is now time for resolution of the issue left unresolved in McGurk I: was New Century's deed of trust a valid encumbrance on McGurk's property?*fn19

The record indicates that Deutsche Bank completed presentation of its case in chief, and McGurk completed her defense case (with the submission of deposition excerpts). Deutsche Bank was granted permission to counter-designate deposition excerpts, but was precluded from doing so by the trial court's order granting the Code of Civil Procedure section 631.8 motion. Thus, the bench trial was not completed. Additionally, the trial court's ruling prevented the parties from filing written closing briefs and identifying the issues on which they requested a statement of decision. The matter must therefore be remanded for completion of the bench trial.

DISPOSITION

The judgment is reversed. The matter is remanded for further proceedings consistent with the views expressed in this opinion. Deutsche Bank shall recover its costs on appeal.

CERTIFIED FOR PUBLICATION

We Concur: KLEIN, P. J. KITCHING, J.