California Woman Cops Plea To Duping Mentally Impaired Homeowner Into Deeding Over Title To Property, Then Pocketing $336K On Subsequent Refinance

In Santa Clara County, California, the San Jose Mercury News reports:

• A San Leandro woman who defrauded a vulnerable San Jose woman by illegally refinancing her house and taking an estimated $336,000 pleaded guilty Friday to real estate fraud and grand theft charges, according to the Santa Clara County District Attorney's Office.

• Diana Marks, 45, is facing a four-year prison sentence, according to the district attorney's office. Marks was arrested in May 2009 after a concerned neighbor of the victim's tipped off the district attorney's real estate and elder-dependent adult fraud unit, which investigated the case.

• Prosecutors say Marks persuaded the woman into gift-deeding to her the title of the victim's house. The victim had suffered brain injuries from an accident years earlier and did not understand the transaction, according to prosecutors.

• Marks told the victim she was going to help her get rid of about $26,000 worth of liens levied against her home, which is valued at about $300,000. Except for the liens, the victim owned her house. After removing the liens, Marks refinanced the house and cashed out its remaining equity. Marks gained nearly $336,000, most of which was spent on her family, according to prosecutors.

• When it was time to pay the mortgage, Marks defaulted on the loan and the house went into foreclosure. The victim lost her house and all of its equity and was at risk of eviction. Marks is scheduled to be sentenced Sept. 23, when she will be ordered to pay restitution as a condition to the plea, according to the district attorney's office.(1)

Source: San Leandro woman pleads guilty to defrauding San Jose homeowner.

(1) Unwinding or undoing a scam like this requires the filing of a civil suit in which, among other things, a determination is sought as to whether the deed signed by the unwitting victim is void, or is merely voidable. See Schiavon v. Arnaudo Bros., 84 Cal. App. 4th 374; Cal.Rptr.2d 801 (Cal. App 6th Dist. 2000), for California case law that references the propositions that:

• A deed is void if the grantor's signature is forged or if the grantor is unaware of the nature of what he or she is signing. (Erickson v. Bohne, supra, "130 Cal.App.2d at pp. 555-556.)
  
  A voidable deed, on the other hand, is one where the grantor is aware of what he or she is executing, but has been induced to do so through fraudulent misrepresentations. (Fallon v. Triangle Management Services, Inc. (1985) 169 Cal.App.3d 1103, 1106 [215 Cal.Rptr. 748].) The same rules apply to the reconveyance of the property interest under a deed of trust as to the conveyance of property by grant deed. (Wutzke v. Bill Reid Painting Service, Inc. (1984) 151 Cal.App.3d 36, 43 [198 Cal.Rptr. 418] (Wutzke).)

If the deed is found to be void, a subsequent bona fide purchaser for value is not protected by the state recording statutes, in which case his/her interest is a nullity. If the deed is found to be voidable, a subsequent conveyance to a bona fide purchaser will be recognized as valid. Fallon v. Triangle Management Services, Inc. (1985) 169 Cal.App.3d 1103 [215 Cal.Rptr. 748]:

• A deed obtained as a result of fraud committed against the grantor or by use of undue influence by the grantee may be rescinded by the grantor. (Rogers v. Warden (1942) 20 Cal.2d 286 [125 P.2d 7].) If a grantor is aware that the instrument he is executing is a deed and that it will convey his title, but is induced to sign and deliver by fraudulent misrepresentations or undue influence, the deed is voidable and can be relied upon and enforced by a bona fide purchaser. (Peterson v. Peterson (1946) 74 Cal.App.2d 312 [168 P.2d 474]; Conklin v. Benson (1911) 159 Cal. 785 [116 P. 34].)

• In Conn. Life Ins. Co. v. McCormick (1873) 45 Cal. 580, the Supreme Court held a deed voidable, not void, if obtained as a result of undue influence or compulsion. Such a deed "stands on the same footing as a deed procured by fraud." The court concluded that a deed or mortgage procured by duress cannot be set aside as against a party purchasing in ignorance of the facts constituting the duress, that is to say as against a purchaser for a valuable consideration and without notice of the duress. Until a voidable deed is declared void it is fully operative. (Frink v. Roe (1886) 70 Cal. 296 [11 P. 820].) Civil Code section 1107 provides: "Every grant of an estate in real property is conclusive against the grantor, also against everyone subsequently claiming under him, except a purchaser or incumbrancer who in good faith and for a valuable consideration acquires a title or lien by an instrument that is first duly recorded."

For more, see Unwinding An Abusive Or Fraudulent Real Estate Transaction? Determining If The Deed Is Void, Or Merely Voidable.