Lezine v. Security Pacific Financial Services, Inc.

14 Cal.4th 56 (1996)


In 1974, Henry (H) and W purchased for their residence. In 1989, the property was encumbered by a deed of trust in favor of San Clemente Savings and Loan Association (San Clemente Savings), and a deed of trust in favor of Imperial Thrift. On November 8, 1989, H forged W's signature on a quitclaim deed, and the signature falsely was notarized by a notary public. The quitclaim deed purported to divest W of any interest in the Halm Avenue property. It was recorded, and H obtained a loan in the amount of $240,000 from Guardian Savings and Loan Association (Guardian) secured by a deed of trust executed by H encumbering the property. W was unaware of the loan. The proceeds were used to repay the loan obligations, and balance of the loan proceeds was not used for the benefit of the community. On April 12, 1990, H obtained a $100,000 line of credit from Security Pacific secured by a deed of trust. Approximately $60,000 was advanced to H under the line of credit. W was unaware of the line of credit; no conduct on the part of W misled Security Pacific as to the validity of the quitclaim deed, and no portion of the proceeds from the line of credit was used for the benefit of the community. W learned of the two deeds of trust and sued D seeking to have the transfer of the security interest set aside. W also filed a petition for the dissolution of her marriage. Ds claimed the status of bona fide encumbrancers and sought declaratory relief, foreclosure of an equitable lien, and indemnity. The court entered judgment in favor of W on the complaint, declaring the deeds of trust void and canceled in their entirety. Guardian was granted an equitable lien encumbering the residence in the amount of $106,305.38 and Ds were granted judgment against H personally in the amount of $302,527.85 and $87,799.59, respectively, and against the bonding company for the notary public in the amount of $ 10,000 (the bond limit). Ds were awarded no relief against W. Ds recorded abstracts of their money judgment against H in the Los Angeles County Recorder's office. The divorce court awarded W the property as her sole and separate property, subject to the equitable lien in favor of Guardian, and assigned the debt formerly secured by the deeds of trust in favor of Guardian and Security Pacific exclusively to H. W discovered the two abstracts of judgment that had been recorded by Ds and that appeared as liens encumbering title to the residence. The trial court issued an order clarifying that the abstracts of judgment 'shall not constitute liens against the [Halm Avenue] real property. D appealed. The Court of Appeal reversed; The abstract of judgment created a judgment lien that attached to the community real property, and that W accordingly acquired the Halm Avenue property as her separate property subject to the judgment lien. It reasoned that the community estate is liable for a debt incurred by either spouse during the marriage, regardless whether both spouses are parties to the debt or a judgment for a debt, and that this liability continues until the property is awarded to one spouse as his or her separate property in a dissolution proceeding. W appealed.