9 Cal. App. 5th 450
Cal. Ct. App.2017Background
- Westlake Village Property, L.P. owned a skilled nursing facility and leased it to Westlake Health Care Center (Westlake Health) under a 20-year lease that included an automatic subordination clause and a permissible subordination clause with a nondisturbance provision.
- Westlake Village obtained a deed of trust to secure a loan from TomatoBank; after default and bankruptcy, the loan was sold to Dr. Leevil, LLC (Leevil).
- Leevil foreclosed nonjudicially, purchased the property at trustee’s sale, served a three-day notice to quit the day after purchase, and recorded the trustee’s deed five days later.
- Westlake Health remained in possession; Leevil filed unlawful detainer. The trial court found the lease subordinate to the deed of trust, extinguished by the trustee’s sale, and validated the notice to quit.
- Westlake Health surrendered possession and appealed; Leevil moved to dismiss the appeal as moot. While on appeal, the court requested supplemental briefing after publication of U.S. Financial, L.P. v. McLitus, which questioned serving a notice to quit before title perfection.
Issues
| Issue | Plaintiff's Argument (Leevil) | Defendant's Argument (Westlake Health) | Held |
|---|---|---|---|
| Whether the lease was subordinate to the deed of trust and extinguished by the trustee’s sale | Lease contained automatic subordination; therefore sale extinguished lease | Lease’s permissive subordination plus nondisturbance prevents termination absent invocation; lease is senior | Lease was automatically subordinate and extinguished by trustee’s sale; court construed ambiguities against drafter (lessee) |
| Whether service of a three-day notice to quit before recording the trustee’s deed invalidates unlawful detainer | Section 1161a requires title be perfected before removal, not before service; notice may be served before recording if title is perfected before removal/eviction | Notice was premature because title had not been recorded when served; McLitus held notice must await recorded title | Court refused to adopt McLitus; held statute does not require recording before notice; title must be perfected before removal (and here it was perfected before complaint/eviction) |
| Mootness of appeal after surrender and eviction | Appeal not moot because stipulation preserved appellate rights and court can restore possession; appellant could seek license renewal if possession restored | Appeal moots because Westlake Health no longer possesses or operates facility | Appeal not moot; appeal proceeds |
| Whether trial court denied opportunity to present extrinsic evidence about intent of subordination clauses | No, issues were legal questions; no disputed facts requiring extrinsic evidence | Trial court prevented presentation of testimony about intent and drafting | No reversible error; lease interpretation was a question of law and no factual showing requiring extrinsic evidence was made |
Key Cases Cited
- City of Hope Nat. Med. Ctr. v. Genentech, 43 Cal.4th 375 (2008) (interpretation of contract language is a question of law where facts are undisputed)
- Miscione v. Barton Dev. Co., 52 Cal.App.4th 1320 (1997) (permissible subordination with nondisturbance allows lessee to compel nondisturbance if lender so elects)
- Dover Mobile Estates v. Fiber Form Prods., Inc., 220 Cal.App.3d 1494 (1990) (trustee’s sale can extinguish a preexisting lease under applicable clauses)
- Garfinkle v. Superior Court, 21 Cal.3d 268 (1978) (purchaser at trustee’s sale generally entitled to bring unlawful detainer action after proper perfection of title)
- Borsuk v. Appellate Div. of Superior Court, 242 Cal.App.4th 607 (2015) (serving a notice to quit does not itself invoke court jurisdiction; filing complaint summons does)