Bailey v. Citibank, N.A.Bailey v. Citibank, N.A.
OPINION
APPEALS from a judgment of the Superior Court of Kern County. Linda S. Etienne, Temporary Judge. (Pursuant to
Klein, DeNatale, Goldner, Cooper, Rosenlieb & Kimball, Catherine E. Bennett, Barry L. Goldner and R. Jeffrey Warren for Plaintiffs and Appellants.
Severson & Werson and Jan T. Chilton for Defendant and Appellant.
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Thereafter, Citibank moved to set aside both the default and the judgment under the mandatory provisions of
FACTS AND PROCEDURAL HISTORY
The 2005 Deed of Trust
We begin by describing the original ownership of the property prior to plaintiffs’ commencement of their adverse possession. Robert Lifson and his wife, Toni Black, acquired the property by grant deed in 2004. In 2005, they executed a deed of trust to secure a $582,000 loan from Option One Mortgage Corporation. The deed of trust was recorded on September 1, 2005, and the beneficiary named therein was Option One Mortgage Corporation (the 2005 deed of trust). In 2008, Lifson and Black defaulted on the secured loan. A notice of default and election to sell under deed of trust was recorded. Lifson and Black responded by filing a series of bankruptcy petitions. Whether due to the bankruptcy filings or other reasons, no notice of trustee‘s sale was recorded at that time; the foreclosure process came to a halt and did not proceed for nearly a decade.
Plaintiffs’ Adverse Possession Commences
Meanwhile, in 2013, plaintiffs observed the property was unoccupied. On June 28, 2013, plaintiffs took possession of the property without permission and claimed it as their own. Their possession of the property was open and obvious. Since that time, plaintiffs have stored equipment and trailers on the property, kept chickens, pigs and goats there, made repairs to the residence, and paid the assessed property taxes each year when due.
Citibank Becomes Successor of the 2005 Deed of Trust
The 2005 deed of trust, which continued to constitute a lien or encumbrance on the property, was assigned by the original beneficiary and subsequently assigned two more times. In 2017, under a duly recorded assignment, Citibank became the successor in interest of the 2005 deed of trust. Thereafter, Citibank, as the “present Beneficiary under said Deed of Trust,” recorded
Plaintiffs’ Complaint to Quiet Title
On July 16, 2018, approximately three months after Citibank‘s foreclosure was completed, plaintiffs filed their complaint to quiet title. The complaint contained a single cause of action seeking to quiet title to the property in plaintiffs’ favor based on their alleged adverse possession. Plaintiffs alleged they had openly and adversely possessed the property for five years, as of June 28, 2013, and had also paid the property taxes during that five-year period.
Citibank Serves a Notice to Quit
On July 28, 2018, plaintiffs forwarded to their attorney a “Notice to Quit” that had been served on plaintiffs by Citibank‘s eviction or unlawful detainer attorneys (eviction counsel), dated July 25, 2018. Plaintiffs’ attorney responded by contacting Citibank‘s eviction counsel and (i) informed them of plaintiffs’ pending lawsuit seeking to quiet title to the property, and also (ii) provided a copy of plaintiffs’ complaint to quiet title and the related lis pendens. Upon receiving this information, Citibank‘s eviction counsel indicated they were unaware of plaintiffs’ claim of ownership and stated they would have to confer with their client. However, no further communication was received from Citibank‘s eviction counsel.
Citibank‘s Default Taken
Plaintiffs’ complaint was served by mail on Citibank on October 3, 2018. When Citibank failed to answer or otherwise respond to the complaint, plaintiffs requested and obtained Citibank‘s default. On November 14, 2018, default was entered against Citibank. Notice of entry of default was served on Citibank on November 15, 2018.
Evidentiary Hearing on Plaintiffs’ Quiet Title Claim
On February 13, 2019, the trial court conducted an evidentiary hearing on plaintiffs’ quiet title claim. There was no live testimony at the hearing. The evidence presented by plaintiffs included the complaint, the declaration of
Days later, the trial court ruled that plaintiffs are the owners in fee simple of the real property described in the complaint, not Citibank. Accordingly, a written judgment quieting title in plaintiffs’ favor was entered by the trial court. Notice of entry of judgment was filed and served on February 21, 2019.
Citibank‘s Motion for Relief under Section 473
On March 11, 2019, Citibank served and filed an ex parte application to set aside the judgment under
Attorney Katz‘s declaration was obviously for the purpose of obtaining relief based on an attorney affidavit of fault under
In relevant part, Katz stated in his declaration as follows:
1. I was assigned to be the handling attorney for this matter on January 10, 2019. [¶] 2. On January 10, 2019, upon being referred this matter, I was informed that Plaintiffs had sent the summons and complaint to Citibank‘s unlawful detainer counsel in July 2018 and that Plaintiffs had taken Citibank‘s default. My intent at the time was to first contact Plaintiffs’ counsel to see if they would stipulate to set aside the default, as that would be the simplest and most efficient way to resolve the issue. If Plaintiff‘s counsel would not stipulate to set aside the default, my intent was to affirmatively seek relief from the entry of default. And, if the court was not inclined to set aside the entry of default, my intent was to actively monitor the Court‘s docket so that Citibank could still appear and present rebuttal evidence at any subsequent quiet title prove-up hearing. Although the proof of service on file with the Court indicates that service was effectuated on Citibank in October 2018 by
mail with return receipt requested, it is currently unknown why the complaint was not properly processed in order to ensure that Citibank made an appearance prior to any attempted default. [¶] 3. Accordingly, I made personal notes at that time to investigate whether the summons had been properly served, to follow up with Plaintiffs’ counsel, to seek relief from the entry of default if needed, and to actively monitor the court‘s docket to make sure that I was aware of any quiet title prove-up proceedings. I sent my legal assistant an email on January 10, 2019 instructing my assistant to activate my calendar notices for this matter in my firm‘s calendaring system. [¶] 4. Unfortunately, I did not reach out to Plaintiff‘s counsel immediately upon being referred the matter as I was in the process of finalizing a summary judgment motion in one of my other matters. Compounding things, I unfortunately did not expressly ask my assistant to calendar any follow-up reminders to reach out to Plaintiffs’ counsel or actively monitor the Court‘s docket. Nor did I manually add such reminders myself. Nor did I expressly instruct my staff to actively monitor the Court‘s docket. [¶] 5. As a result of my inadvertent failure to properly instruct my [assistants] and ensure that such reminders were in place in my calendaring system, I did not contact Plaintiffs’ counsel or actively monitor the Court‘s docket. Had I done so, I would have reached out to Plaintiffs’ counsel and/or been aware that Plaintiff had filed a default prove-up packet on January 28, 2019, and would have taken appropriate action in response. [¶] 6. On or about March 5, 2019, ... I then checked the court‘s online docket, and discovered that a default judgment had been entered against Citibank on February 19, 2019.
Citibank‘s points and authorities in support of their application under
Plaintiffs filed opposition to Citibank‘s motion, arguing that mandatory relief under
The hearing was held on March 28, 2019. On March 29, 2019, the trial court issued its ruling to grant the motion. The trial court explained that although it was denying discretionary relief because there was no evidence to support a finding of mistake, surprise, inadvertence or excusable neglect on the part of Citibank, the court was granting mandatory relief based on the fault of Citibank‘s attorney. The trial court noted that the quiet title statute, at
A formal written order setting aside both the default and the judgment quieting title to real property was filed on May 3, 2019.
Plaintiffs’ Appeal and Citibank‘s Cross-Appeal
On May 20, 2019, plaintiffs timely filed their notice of appeal from the trial court‘s order setting aside the default and the judgment quieting title. Plaintiffs’ appeal contends the trial court erred in granting relief under
On June 5, 2019, Citibank filed notice of its cross-appeal from the “Default Judgment Quieting Title to Real Property.” Citibank argues in its cross-appeal that, as a matter of law, plaintiffs’ evidence did not show possession was hostile and adverse to Citibank for the required five-year period. Also, with reference to plaintiffs’ appeal, Citibank asserts that its cross-appeal moots plaintiffs’ appeal, but in any event, Citibank argues the trial court did not prejudicially err in setting aside the default and default judgment due to the unique nature of a prove-up hearing in a quiet title action.
DISCUSSION
I. Plaintiffs’ Appeal from Order Granting Section 473 Relief
In their appeal, plaintiffs argue the trial court erred in setting aside the default and judgment under the mandatory relief provision of
A. Default Proceedings in Quiet Title Cases
The legal effect of a defendant‘s default in a quiet title action differs in certain respects from that which occurs in other types of cases. To make these differences clear, we first point out the usual or standard consequences of a defendant‘s default in cases alleging other, i.e., non-quiet title, causes of action. Generally, when a defendant‘s default is taken it will—unless set aside—have dire effects on that defendant‘s right to participate in the case.
However, where a quiet title action is concerned, the process for entering a judgment is governed by the specific requirements of the quiet title statutory scheme codified at
B. Mandatory Relief Provision and Standard of Review
was available based on Citibank‘s attorney‘s declaration of fault.3 Plaintiffs appeal from that order. The sole issue on appeal is whether grounds for mandatory relief were presented—i.e., whether the requirements for such relief under the statute were met. “Whether
The mandatory relief provision of
apply because the default must in fact be caused by the attorney‘s mistake. (Cisneros v. Vueve (1995) 37 Cal.App.4th 906, 908, 910–912 (Cisneros).)
C. Mandatory Relief Was Not Available
In Cisneros, supra, 37 Cal.App.4th 906, the Court of Appeal held, based on the unequivocal language of the mandatory relief provision of
Here, it is undisputed that Citibank‘s default was entered on November 14, 2018, but Citibank‘s attorney, Jeremy Katz, was not referred or assigned to act as attorney on this case until January 10, 2019. Because attorney error could not possibly have caused the default in this case, mandatory relief was unavailable under the reasoning of Cisneros as a matter of law. (Accord, Cowan v. Krayzman (2011) 196 Cal.App.4th 907, 915 [no relief where attorney not representing defendants at time default was entered].)
Citibank argues that because of the differences in the consequences of default in a quiet title case as compared to other cases, we should uphold the trial court‘s decision to grant mandatory relief in this unique setting. We decline to do so because we are bound to follow and apply the clear statutory wording of
Based on the foregoing, we conclude the trial court erred as a matter of law in granting mandatory relief under
II. Citibank‘s Cross-Appeal from the Judgment Quieting Title
As noted, Citibank has filed a protective cross-appeal challenging the judgment quieting title. According to Citibank, the judgment must be reversed because it is unsupported by any evidence on essential elements of an adverse possession claim; namely, possession that is hostile and adverse to Citibank‘s title for a full five years.4 For the reasons explained below, we agree with Citibank.
In an action to quiet title based on adverse possession, the burden is upon the plaintiff to establish every necessary element. (Dimmick v. Dimmick (1962) 58 Cal.2d 417, 421.) The elements of an adverse possession claim consist of the following: (1) actual possession by the plaintiff of the property under claim of right or color of title; (2) the possession consists of open and notorious occupation of the property in such a manner as to constitute reasonable notice to the true owner; (3) the possession is adverse and hostile to the true owner; (4) the possession is uninterrupted and continuous for at
least five years; and (5) the plaintiff has paid all taxes assessed against the property during the five-year period. (Hansen v. Sandridge Partners, L.P. (2018) 22 Cal.App.5th 1020, 1032–1033; Buic v. Buic (1992) 5 Cal.App.4th 1600, 1604; Gilardi v. Hallam (1981) 30 Cal.3d 317, 321.)5 Unless each of these elements is established by the evidence, the plaintiff has not acquired title by adverse possession. (West v. Evans (1946) 29 Cal.2d 414, 417.)
Based on our review of the undisputed facts and applicable law, we conclude plaintiffs have not established that their possession of the property was adverse or hostile to Citibank for the required five-year period. Rather, as we shall make clear, plaintiffs’ possession of the property did not become adverse or hostile to Citibank‘s rights until such time as Citibank actually took title under the trustee‘s deed in April of 2018, only a few months before
A. Plaintiffs’ Possession Was Not Adverse to Citibank‘s Rights as Trust Deed Beneficiary Under Preexisting Deed of Trust
At its most basic level, the doctrine of adverse possession relates to possessory estates, i.e., it involves possession of property hostile to the corresponding rights of the true owner. (Gilardi v. Hallam, supra, 30 Cal.3d 317, 321; Sorensen v. Costa, supra, 32 Cal.2d 453, 460 [statute accrues when owner deprived of possession]; see Unger v. Mooney (1883) 63 Cal. 586, 590.) Here, however, Citibank‘s interest in the property until it obtained fee title under the 2018 trustee‘s deed was not that of an owner with a right of possession, but merely that of a trust deed beneficiary. Therefore, under the particular facts of this case, prior to Citibank gaining possessory rights at the time of the foreclosure sale and delivery of the trustee‘s deed in 2018, plaintiffs’ occupation of the property was not hostile to Citibank‘s rights as a secured lienholder, and therefore the five-year statute was not running against Citibank under the undisputed facts of this case.6
In our discussion of these principles, an elaboration of the nature of the interest held by a trust deed beneficiary, i.e., Citibank‘s interest prior to foreclosure, is helpful.
” ‘[D]eeds of trust, except for the passage of title [to the trustee] for the purpose of the trust, are practically and substantially only mortgages with a power of sale ....’ ” (Monterey S.P. Partnership v. W. L. Bangham, Inc. (1989) 49 Cal.3d 454, 460.)
“In practical effect, if not in legal parlance, a deed of trust is a lien on the property.” (Ibid.)
It conveys title to the trustee only so far as may be necessary to the execution of the trust for purposes of security. (Ibid.) Thus, “[t]he right to possession does not pass to the trustee or the beneficiary under a trust deed in the absence of a special agreement.” (Snyder v. Western Loan & Bldg. Co. (1934) 1 Cal.2d 697, 701Ibid.; MacLeod v. Moran (1908) 153 Cal. 97, 99; Zolezzi v. Michelis (1948) 86 Cal.App.2d 827, 830.) Because of their similarities, deeds of trust and mortgages are generally treated as analogous under the law. (See, e.g., Monterey S.P. Partnership v. W. L. Bangham, Inc., supra, 49 Cal.3d at pp. 460–461; Snyder v. Western Loan & Bldg. Co., supra, 1 Cal.2d at pp. 701–702.) “[T]he substantial rights of the parties should not be altered because of the more or less accidental form which the security takes.” (Wilson v. McLaughlin (1937) 20 Cal.App.2d 608, 611 (Wilson).) For these reasons, in the context of adverse possession law it is appropriate to apply the cases discussing the status of mortgagees to that of the situation here of a trust deed beneficiary.
For purposes of a claim of adverse possession, “[t]o be considered hostile, the acts relied upon must operate as an invasion of the right of the party against whom they are asserted.” (Laubisch v. Roberdo, supra, 43 Cal.2d 702, 706, citing City of San Diego v. Cuyamaca Water Co. (1930) 209 Cal. 105, 133.) Because, as here, a trust deed beneficiary does not have a right of possession, but stands in substance as a lien holder, the occupation of the property by a person seeking to acquire title by adverse possession would not be considered hostile to the trust deed beneficiary whose rights under the preexisting trust deed would be unaffected. (See Comstock v. Finn (1936) 13 Cal.App.2d 151, 156–158 [applying this principle in context of a mortgagee].) As our Supreme Court observed in a case involving foreclosure of a mechanics lien where an occupying party claimed adverse possession: “The situation here is analogous to a mortgagor-mortgagee relationship. A mortgagor or his grantee in possession of mortgaged property may not set up the [adverse possession] statute of limitations against the mortgagee” since such possession is “presumed to be amicable and in subordination to the mortgage.” (Laubisch v. Roberdo, supra, 43 Cal.2d at p. 706.) Instead, the five-year period of the statute of limitations would not commence to run against a foreclosing mortgagee until the deed was delivered to him at a sheriff‘s sale. (Id. at pp. 706–707.) Applying these principles, the Supreme Court held that the occupier‘s possession was “not hostile” to the interests of one “who had only a lien upon the land,” and was not hostile to the purchaser at the foreclosure
Comstock v. Finn, supra, 13 Cal.App.2d 151 (Comstock) further exemplifies the application of these principles. In Comstock, the defendant in a postforeclosure ejectment action claimed title or ownership to the property based on adverse possession. The defendant asserted that her possession of the property was adverse and hostile even as against the mortgagee where the mortgage preexisted the period of alleged adverse possession. The trial court denied the defendant‘s claim of adverse possession, holding the possession was not adverse or hostile to the mortgagee, whose interest was merely that of an ” ‘owner of the mortgage lien’ ” on the property during much of the five-year period, and the trial court‘s reasoning and conclusion were affirmed on appeal. (Id. at pp. 155-158.) In affirming the judgment, Comstock relied on two distinct rationales. The first was the general rule that the possession of property by a mortgagor or his or her assignees ” ‘cannot be adverse’ ” to the mortgagee unless or until the possessor‘s conduct has invaded the mortgagee‘s rights under the mortgage. (Id. at p. 156.) Based on this rule, Comstock held the trial court had reasonably concluded that the possession of the property, although open and notorious, was not hostile to the rights of the mortgagee. (Id. at p. 157.)
The second rationale relied on by Comstock was based on the recognition that a mortgagee ordinarily does not have a right of possession. (Comstock, supra, 13 Cal.App.2d at pp. 156–157.) Comstock explained the significance of this fact at length:
“A further reason appears why the judgment must be affirmed. In California a mortgage does not give the mortgagee right of possession of the mortgaged premises in the absence of a special agreement to that effect. Neither the United States Building and Loan Association [i.e., the assignee of the original mortgage], nor plaintiff [i.e., the receiver who purchased the property at the foreclosure sale], had any right of possession of the mortgaged premises ... until delivery of the sheriff‘s or commissioner‘s deed. [Citation.] A situation involving a legal principle similar to the one before us was before the Supreme Court in the case of Leonard v. Flynn [(1891)] 89 Cal. 535, where it was said: ‘Plaintiffs grantor, as we have already seen, was not possessed of the legal title to this tract of land until he received the deed from the sheriff [in 1888]. He had no right of entry until that time, and it was only at that time that his cause of action accrued. The statute of limitations does not begin to run until the cause of action has accrued. [Citation.] If he had no right of entry until 1888, it would be a harsh rule to hold that a title by adverse possession was undergoing the process of creation against him prior to that
time .... [Citation.] ... [I]t is of vast importance that the law as heretofore laid down by this court should be deemed unquestioned and conclusive. “The statute of limitations does not commence running against a purchaser of land at a sheriff‘s sale until the sheriff‘s deed has been delivered to the purchaser.” [Citation.] ’ ” (Id. at p. 157.)
As the above discussion indicates, apart from a right to possession by the mortgagee, a claim of adverse possession would not accrue against the mortgagee as such, at least with respect to the circumstance of a preexisting mortgage as existed in Comstock. Applying this rationale to the case before it, Comstock stated:
“It follows that as plaintiff‘s [the receiver‘s] right of possession did not accrue until June 6, 1932, and as there had been no holding of possession hostile and adverse to his interest prior to that time[,] no title by adverse possession was established against him or his predecessor in interest [the mortgagee].” (Comstock, supra, 13 Cal.App.2d at pp. 157–158.)
Based on the entire analysis presented in Comstock, the principle that emerges is that where a mortgage was recorded prior to the start of the period of alleged adverse possession, the possession of the land will not be deemed hostile or adverse to the rights of the mortgage holder or to a successor thereof, until such time as a right to possession of the property is acquired under the mortgage through foreclosure and delivery of the trustee‘s deed. (Comstock, supra, 13 Cal.App.2d at pp. 155–158; see Harvey v. Nurick (1968) 268 Cal.App.2d 213, 215 [since a mortgage does not give the mortgagee the right of possession in the absence of a special agreement, the adverse possession statute does not begin to run in the possessor‘s favor “until foreclosure and ... the delivery of the trustee‘s deed“].) Comstock also made the following important clarification of the case law: “There are cases holding that a person in possession may gain title by adverse possession, against a mortgagee, where the adverse possession antedated the mortgage. Those cases are not controlling here, as in the instant case the asserted adverse possession started, if at all, subsequent to the date and recordation of the mortgage.” (Comstock, supra, 13 Cal.App.2d at p. 158.)
Here, based on the recorded documents and other undisputed facts and in light of the relevant legal principles outlined hereinabove, we conclude that plaintiffs’ possession of the property did not become adverse or hostile to Citibank‘s rights until such time as Citibank took fee title under the trustee‘s deed in 2018, only a few months before plaintiffs’ complaint was filed. As we have explained, the 2018 trustee‘s deed was based upon the foreclosure of the 2005 deed of trust—a deed of trust that was executed and recorded as a lien
B. Plaintiffs Could Gain No Greater Title Than the Original Owners They Dispossessed
A second reason we conclude Citibank‘s cross-appeal must prevail is this: When adverse possession is being claimed, the possessor—assuming he or she prevails on the
claim—can gain only the title which the owners had when the adverse possession began; and conversely, the possessor cannot, by adverse possession, acquire a greater estate than that held by the owner. (Williams v. Sutton (1872) 43 Cal. 65, 73 [the title acquired by the adverse possessor “must of necessity correspond with that on which the disseizin operated, as he could not acquire by disseizin a greater estate than that held by” the prior owner].)7 Thus, where the claim of adverse possession is concerning the title to property that was subject to a previously recorded deed of trust, the possessor can only gain a corresponding title—that is, a title subject to the prior deed of trust. Consequently, in the present case, the most that plaintiffs could ever have potentially obtained as a result of their possession initiated against the original owners was a title subject to the preexisting 2005 deed of trust.The correctness of this analysis is further confirmed by the well-established principle that the title obtained by a trustee‘s deed on foreclosure relates back to the status of the title held by the trustor when the deed of trust was originally executed and recorded. (See Dover Mobile Estates v. Fiber Form Products, Inc. (1990) 220 Cal.App.3d 1494, 1498 [title obtained by trustee‘s deed on foreclosure relates back to execution of the trust deed].) “The trustee‘s deed therefore passes the title held by the trustor at the time of execution,” free of liens or encumbrances attaching after the deed of trust was recorded. (Id. at p. 1498; accord, Nativi v. Deutsche Bank National Trust Co. (2014) 223 Cal.App.4th 261, 272; R-Ranch Markets #2, Inc. v. Old Stone Bank (1993) 16 Cal.App.4th 1323, 1328; Sain v. Silvestre (1978) 78 Cal.App.3d 461, 471 [purchaser at foreclosure acquired title free of equitable servitudes recorded after recording of trust deed].)
In conclusion, plaintiffs’ claim of ownership by adverse possession fails as a matter of law for two basic reasons. First, the undisputed record shows that plaintiffs’ possession was not adverse or hostile to Citibank for the required
C. Plaintiffs’ Counter Arguments Are Unpersuasive
In seeking to overcome Citibank‘s arguments discussed above, plaintiffs make a series of counter arguments, including (i) that Citibank did have a right to possession of the property prior to foreclosure, (ii) the doctrine of merger of title salvages plaintiffs’ claim of adverse possession, and (iii) the policy of the law of adverse possession weighs in plaintiffs’ favor. We consider each of these points below, and, as noted, we find them unpersuasive.
1. Citibank Did Not Have a Right to Possession
As we have discussed hereinabove, one of Citibank‘s main arguments is that because it was—until 2018—merely a beneficiary of the deed of trust without a right to possession, plaintiffs’ occupation of the property was not adverse to Citibank‘s rights as a lienholder. In an attempt to undermine Citibank‘s position on this point, plaintiffs argue that Citibank did have a right to possession. We disagree.
Plaintiffs make several arguments concerning the right to possession. First, plaintiffs contend that in the bankruptcy proceedings, Citibank or its predecessors were permitted under the terms of the bankruptcy plans filed by the prior owners (i.e., Robert Lifson and Toni Black, husband and wife) to move forward with foreclosure of the property and could have done so with minor effort as early as in 2010. However, even if true, that assertion is beside the point. As correctly noted by Citibank, neither Citibank nor its predecessors were under a duty to foreclose quickly upon the borrower‘s default—and certainly under no such duty for the benefit of would-be adverse possessors. (See, e.g., Nicolopulos v. Superior Court (2003) 106 Cal.App.4th 304, 310 [lien on deed of trust expires 10 years after the final maturity date if ascertainable from the record, or 60 years after recordation of the deed if the final maturity date is not ascertainable from the record].)8 Plaintiffs have also suggested that one of the bankruptcy plans granted a right to immediate possession—but that suggestion is plainly not correct. Under
Plaintiffs also argued that Citibank had the right to possession of the property under the terms of paragraphs 6 and 7 of the 2005 deed of trust. However, there is nothing in paragraph 6 or 7 of the 2005 deed of trust that would grant or convey to Citibank, or Citibank‘s predecessors, a possessory right to the property. Rather, those provisions merely give to the lender (i.e., the beneficiary under the deed of trust) broad powers to sue or to defend litigation to protect the property or its lien rights in the property, such as the power to defend against waste, condemnation or forfeiture. Paragraph 6 of the 2005 deed of trust required the borrower to occupy the property. Paragraph 7, in permitting the lender to protect the property‘s value and the lender‘s rights in the property, accorded to the lender a limited right to enter for the purpose of making repairs. We conclude paragraphs 6 and 7 of the 2005 deed of trust do not provide or grant any actual possessory interest in, or a right to possession of, the property. In short, the general rule that deeds of trust and mortgages do not convey possessory rights to the beneficiary or mortgagee is clearly applicable here, as there is no special agreement to the contrary. (E.g., Harvey v. Nurick, supra, 268 Cal.App.2d at p. 215 [a mortgage does not give the mortgagee the right of possession in the absence of a special agreement].)
Contrary to plaintiffs’ contentions, neither the bankruptcy records nor the language of the 2005 deed of trust conferred upon Citibank a right to possession of the property prior to completion of foreclosure.
2. The Doctrine of Merger Does Not Assist Plaintiffs
Plaintiffs make a somewhat novel argument that the doctrine of merger establishes the validity of their adverse possession claim against Citibank, free and clear of the 2005 deed of trust. In essence, plaintiffs appear to be
For several reasons that shall presently be set forth, we disagree with plaintiffs’ argument premised on the concept of merger. First, plaintiffs have failed to recognize a unique characteristic of the state of title acquired by delivery of a trustee‘s deed upon foreclosure sale. As we have noted previously, the title obtained by a trustee‘s deed on foreclosure relates back to the title held by the trustor when the deed of trust was first executed and recorded. (Dover Mobile Estates v. Fiber Form Products, Inc., supra, 220 Cal.App.3d 1494, 1498.) In its legal effect, “[t]he trustee‘s deed . . . passes the title held by the trustor at the time of execution,” free of liens or encumbrances affecting the title after the deed of trust was originally recorded. (Id. at p. 1498; accord, Nativi v. Deutsche Bank National Trust Co., supra, 223 Cal.App.4th 261, 272 [trustee‘s deed conveys “the trustor‘s interest as of the date that the deed was recorded“]; R-Ranch Markets #2, Inc. v. Old Stone Bank, supra, 16 Cal.App.4th 1323, 1328; Sain v. Silvestre, supra, 78 Cal.App.3d 461, 471 [purchaser at foreclosure acquired title free of equitable servitudes recorded after recording of trust deed].) Plaintiffs have failed to adequately explain, with requisite legal authority, how the doctrine of merger would supplant this basic rule of foreclosure in this case.
Second, it is not entirely clear the doctrine of merger applies, but even if it does apply, plaintiffs have not shown it would make any difference here. The doctrine of merger typically involves situations where one person has acquired both a greater and a lesser estate as to the same property. “‘When a greater and lesser estate coincide and meet in one and the same person, . . . without any intermediate estate, the latter is in law merged in the greater.’ [Citation.]” (Sheldon v. La Brea Materials Co. (1932) 216 Cal. 686, 689.) “‘Under ordinary circumstances where the holder of a mortgage acquires the estate of the mortgagor, the mortgage interest is merged in the fee and the mortgage is extinguished. . . .’ [Citation.]” (Id. at pp. 689–690.) For example, the doctrine may apply where the beneficiary of a deed of trust is given by the property owner a deed in lieu of foreclosure.
Here, in contrast to Wilson, it does not appear the same person acquired or came into the possession of two estates together in the same property, one greater and one lesser, such that the lesser estate would be deemed merged into the greater. (See Sheldon v. La Brea Materials Co., supra, 216 Cal. at p. 689.) Rather, this was a straightforward foreclosure and trustee‘s sale. When a trustee‘s sale of property under a deed of trust occurs, it ordinarily extinguishes the deed of trust. (
It is not a question of whether the 2005 deed of trust was extinguished upon foreclosure and the delivery of the trustee‘s deed in 2018—both parties admit the beneficial interest under the deed of trust was extinguished or no longer exists. The real question is the time reference point for the fee title obtained under said trustee‘s deed, and the cases we have cited provide a clear answer to that question. (Dover Mobile Estates v. Fiber Form Products, Inc., supra, 220 Cal.App.3d 1494, 1498 [a trustee‘s deed “relates back” to title that existed when deed of trust originally executed]; see also Nativi v. Deutsche Bank National Trust Co., supra, 223 Cal.App.4th 261, 272 [a trustee‘s deed conveys “the trustor‘s interest as of the date that the deed was recorded“]; R-Ranch Markets #2, Inc. v. Old Stone Bank, supra, 16 Cal.App.4th 1323, 1328; Sain v. Silvestre, supra, 78 Cal.App.3d 461, 471.)
As succinctly summarized in Decon, supra, 227 Cal.App.4th 665: “‘Title conveyed by a trustee‘s deed [(i.e., in a foreclosure sale)] relates back in time to the date on which the deed of trust was executed. The trustee‘s deed therefore passes the title held by the trustor as of that earlier time . . . , rather than the title that the trustor held on the date of the foreclosure sale. [Citation.]’ ” (Id. at pp. 670–671.) Consequently, any liens or other encumbrances created or otherwise attaching to the property after execution of the deed of trust are eliminated by the foreclosure. (Ibid.) However, as Decon further explained, in the case of other types of conveyances subsequently made by a trustor—such as through a deed in lieu of foreclosure (as opposed to a trustee‘s deed)—title passes to the transferee subject to all existing liens or encumbrances at the time of the conveyance, and, depending on the circumstances, principles of merger may come into play. (Decon, supra, at pp. 670–671.) Here, the situation is that of a trustee‘s deed delivered in connection with the foreclosure of the 2005 deed of trust. Consequently, the title obtained by Citibank related back to that which existed in 2005, a title that predated and was consequently free of plaintiffs’ subsequent conduct seeking to gain adverse possession of the property. In light of the above principles relating to trustee‘s deeds and our application thereof to this case, we conclude that plaintiffs’ effort to utilize the merger doctrine to somehow create a contrary rule as to the status of Citibank‘s title under the 2018 trustee‘s deed is ultimately misplaced and unconvincing.10
Finally, we briefly address the second prong of plaintiffs’ merger argument, which is the proposition that adverse possession runs with the land and against the title, and not against any particular owner of the title. In plaintiffs’ view, this leads to the conclusion that Citibank is just like any other transferor or purchaser of property against whom the adverse possession statutory period would continue to run. Citibank responds by noting the cases relied on by plaintiffs actually stand for a somewhat narrower or more nuanced rule that an adverse possessor‘s continuous possession is not interrupted by the title owner‘s subsequent conveyance of an interest in the property to a third party after the adverse possession has commenced. We conclude that Citibank has accurately stated the applicable law.
A sound basis for reconciling the case law in this area was provided in Comstock v. Finn (1936) 13 Cal.App.2d 151, and bears repeating here: “There are cases holding that a person in possession may gain title by adverse possession, against a mortgagee, where the adverse possession antedated the mortgage. Those cases are not controlling here, as in the instant case the asserted adverse possession started, if at all, subsequent to the date and recordation of the mortgage.” (Comstock, 13 Cal.App.2d at p. 158.) As in Comstock, plaintiffs’ adverse possession
3. Policy Arguments Unavailing
Plaintiffs make a series of assertions to the effect that Citibank should have realized what plaintiffs were doing (i.e., trying to gain title to the property by adverse possession) and Citibank should have done something much sooner, such as seeking to eject plaintiffs. Citibank responds, correctly, that ejection “is a possessory action in which the plaintiff must show himself entitled to the present possession.” (Montgomery v. Santa Ana Railway Co. (1894) 104 Cal. 186, 197.) We have elsewhere in this opinion addressed and rejected plaintiffs’ arguments that Citibank had a right to possession prior to purchasing the property at the trustee‘s sale.
Plaintiffs further argue that, because Citibank purportedly lacked vigilance, we should allow plaintiffs’ adverse possession claim to prevail as a means of furthering the public policy that underlies the law, which policy they contend (based on a quote from a treatise on American jurisprudence) is not to reward the diligent trespasser, but to penalize the negligent and dormant owner who allows another for many years to exercise acts of possession over his property. We find the policy argument to be misplaced. Here, Citibank was not a negligent owner, but only had a lien on the property without a right of possession until the time of foreclosure in 2018, as we have explained hereinabove. Thus, in effect, plaintiffs are asking that we reward the diligent trespasser, contrary to the purported policy they cite. Moreover, this case is a title case, resolved by application of legal precedent and established principles of property law under the title record before us. It is not the sort of case that lends itself to a weighing of the sort of generalized policy concerns raised by plaintiffs, and we decline to do so here.
III. Summary of Disposition of Appeal and Cross-Appeal
As to plaintiffs’ appeal, and as previously explained herein, we conclude the trial court erred as a matter of law in granting mandatory relief under
As to Citibank‘s cross-appeal, we hold that Citibank has successfully shown the judgment quieting title must be reversed. To summarize, plaintiffs’ claim of adverse possession fails as a matter of law because (i) the undisputed record shows that plaintiffs’ possession was not adverse or hostile to Citibank for the required five-year period, and (ii) alternatively, even if
DISPOSITION
On plaintiffs’ appeal, the trial court‘s order under
LEVY, Acting P.J.
WE CONCUR:
POOCHIGIAN, J.
SNAUFFER, J.