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Voidable Conveyances / Equitable Subrogation

Tuesday, May 16, 2017  
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Nautilus, Inc. v. Yang

Cal.App. 4th Dist., Div. 3 (G051956)  4/21/17

Nautilus, Inc. obtained a judgment against Stanley Kuo Hua Yang, and recorded an abstract of judgment against real property on which Stanley and his brother, Peter Chun Hua Yang, held title. Stanley and Peter transferred title on the property to their father, Chao Chen Yang, who obtained a reverse mortgage loan on the property. In its title search, the title insurance company missed Nautilus's abstract of judgment when the reverse mortgage loan funded. The court upheld the judgment awarding an equitable lien in favor of the lender in the amount of liens that were paid off that were senior to the judgment lien, holding:

  1. The trial court properly ruled that the transfer of Stanley's 1/2 interest was a fraudulent conveyance, but not as to the lender because the lender acted in good faith. Lack of good faith would require a showing, not present in this case, that the transferee had actual knowledge of facts showing the transferor had fraudulent intent.
  2.  The title company's error in failing to find the abstract of judgment does not defeat the lender's right to equitable subrogation because the title company's knowledge or negligence is not imputed to the insured lender, and the ability of the lender to recover from the title company does not defeat the lender's claim for equitable subrogation.
  3. The trial court's imposition of a lien on the property to support a judgment in favor of plaintiff rendered in the current action was within the court's equitable authority.

California Land Title Association

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