Hatch v. Collins, A045292

• Decision Date: 30 October 1990
• Docket Number: No. A045292,A045292
• Citation: 225 Cal.App.3d 1104,275 Cal.Rptr. 476
• Court: California Court of Appeals Court of Appeals
• Parties: Noel HATCH et al., Plaintiffs and Appellants, v. Kathryn B. COLLINS et al., Defendants and Respondents.

Page 476

275 Cal.Rptr. 476

225 Cal.App.3d 1104

Noel HATCH et al., Plaintiffs and Appellants, v. Kathryn B. COLLINS et al., Defendants and Respondents.

No. A045292.

Court of Appeal, First District, Division 2, California.

Oct. 30, 1990.

As Modified Nov. 27, 1990.

Charles Cohler, Lasky, Hass, Cohler & Munter, San Francisco, for plaintiffs and appellants.

Sean McCarthy, Sandi L. Nichols, Washburn, Briscoe, & McCarthy, San Francisco, Robert Dudugjian, Dudugjian & Swoyer, Roseville, Richard Heller, Campbell & Heller, Walnut Creek, William Herbert, Goodman, Herbert & Lucas, Fairfield, for defendants and respondents.

SMITH, Associate Justice.

In this action to set aside a foreclosure sale of three parcels of real property which occurred more than seven years ago, plaintiffs and appellants Noel Hatch and Nola Hatch appeal from summary judgments entered in favor of the defendants and respondents, who are the beneficiaries under the deed of trust (Kathryn B. Collins et al., hereafter sometimes referred to as the Collins defendants), the purchasers at the foreclosure sale (hereafter the Emigh-Sanchez defendants) and the sale trustee and its agent (California Land Title Company and Rick Frost). We will affirm for two different but equally compelling reasons.

BACKGROUND

The moving and opposing papers established the following undisputed facts:

On May 16, 1973, plaintiffs Noel and Nola Hatch, along with other family members (the Hatches) executed a promissory note in favor of the Collins defendants. Pursuant thereto, the Hatches executed and delivered a deed of trust securing four parcels of land located in Solano county, naming themselves as trustors and defendant California Land Title Company as trustee.

In 1982 the Hatches defaulted under their obligations under the promissory note and the Collins defendants recorded a notice of default and election to sell. After publishing and posting notices of sale, California Land Title, through its agent Richard Frost, held a nonjudicial foreclosure sale on April 25, 1983. Plaintiff Noel Hatch and his brothers Howard and Dell, who were also trustors on the deed of trust, attended. Attorney Dennis Bunting The sale was characterized by disorder and confusion--Howard and Dell were shouting at the prospective bidders, taking their pictures and handing out copies of a complaint and lis pendens with respect to the subject parcels.

was present on behalf of the Collins defendants.

The Hatches were given the opportunity to select the order in which the parcels were to be sold, but could not come to an agreement. Accordingly, Frost opened the bidding on the first of the parcels. In the confusion, Bunting made a bid for the full amount of the indebtedness, believing he was bidding on all four parcels. Before Frost accepted the bid, ¹ one or more of the Hatch brothers jumped up and shouted that the sale was over and that the beneficiaries had made a full credit bid on only one parcel.

Complete chaos broke out and Bunting thereupon requested that Frost call a postponement of the sale. Frost agreed, and publicly announced that the sale was being temporarily postponed until after a meeting between himself and Bunting; the two men then left the room to discuss the matter. Bunting explained to Frost that he thought he was bidding on all four parcels, and that he had no authority to make a full credit bid on only one parcel. Since the bid had not been accepted, Frost and Bunting decided the best course of action would be to reinitiate the sale and sell off each parcel individually, setting up minimum bids based on their acreage. The sale was reconvened and the lots sold in the order in which they appeared on the deed of trust. The Hatches did not object to this procedure and even participated in the bidding. The Emigh-Sanchez defendants were the successful bidders on two of the parcels and the Collins defendants on a third. All were given trustee's deeds to the property. The fourth parcel was not offered, since the proceeds from the first three sales satisfied the Hatches' outstanding indebtedness.

In August of 1986, more than three years after the trustee's sale was held, the Hatches filed an amended complaint labelled "breach of fiduciary duty, to set aside trustee's sale and damages." The complaint alleged that the sale was improperly held because Frost and Bunting had "collusively agreed" to allow Bunting to withdraw a full credit bid on only one parcel, "in violation of the trustee's duty to conduct an open sale." The Hatches prayed for a cancellation of the deeds, the imposition of a constructive trust on the property, and for consequential damages.

All defendants moved for summary judgment based upon the expiration of the statute of limitations and the lack of substantive merit to the action. The court ordered summary judgment in favor of California Land Title and Frost on the ground that the applicable two and three year statutes of limitations (Code Civ.Proc., §§ 338, 339) had run. Summary judgment for the purchaser defendants was granted based on the absence of any allegation of a contractual relationship between the Hatches and those defendants and the expiration of all other applicable statutes of limitations. The Hatches appeal from both judgments.

APPEAL

I Statute of Limitations

The foreclosure sale by which the Emigh-Sanchez and Collins defendants purchased three of the parcels which the Hatches had owned took place on April 25, 1983. The Hatches did not file an amended complaint alleging the present causes of action until August 8, 1986. ² The first Respondents assert that the Hatches seek relief for breach of statutory duties by the trustee or fraud (both governed by three-year limitations periods), or alternatively, simple negligence in the performance of professional services (which carries a two-year limit). (§§ 338, 339.) The Hatches, on the other hand, seek to avoid the bar of the statute by claiming that the gist of their complaint is for breach of fiduciary duty or breach of a written contract, each of which is governed by four-year time limits. (§§ 343, 337.)

question on appeal is the propriety of the trial court's determination that the Hatches' action was barred by the statute of limitations periods set forth in Code of Civil Procedure sections 338 and 339. ³

Although the Hatches label their complaint "Breach of Fiduciary Duty ..." and, in conclusory fashion, allege that Frost and California Land Title breached their "contractual obligation under the deed of trust ..." we must disregard those characterizations for purposes of determining which limitations period applies. "[T]he applicable statute of limitations is determined by the substance or gravamen of the action rather than the form of the pleading." (Giffin v. United Transportation Union (1987) 190 Cal.App.3d 1359, 1362, 236 Cal.Rptr. 6 [action against labor union labelled breach of contract held governed by three-year statute for liability created by statute]; accord, Guess, Inc. v. Superior Court (1986) 176 Cal.App.3d 473, 478, 222 Cal.Rptr. 79; Edwards v. Fresno Community Hosp. (1974) 38 Cal.App.3d 702, 704, 113 Cal.Rptr. 579; Day v. Greene (1963) 59 Cal.2d 404, 411, 29 Cal.Rptr. 785, 380 P.2d 385.)

Reduced to its essentials, the amended complaint complains of two wrongs: (1) a breach of the trustee's duty "to conduct a fair and open sale" of the property by postponing and reinitiating the sale, thereby nullifying Bunting's initial full-credit bid; and (2) a fraudulent (i.e., "collusive") agreement between Bunting and the trustee to allow Bunting to withdraw his bid, thereby permitting the parcels to be sold "at an artificially depressed price."

It is immediately clear that a three-year limitations period applies to any cause of action, however designated, founded upon a fraudulent conspiracy between the trustee and beneficiaries to deprive the Hatches of the best price for their property at the trustee sale. Section 338, subdivision (d) provides for a three year statute for "[a]n action for relief on the ground of fraud or mistake." This statute applies to any action for conspiracy based upon fraud. (Filice v. Boccardo (1962) 210 Cal.App.2d 843, 846, 26 Cal.Rptr. 789.) Moreover, the section is comprehensive and applies "if fraud or mistake is the basis of the legal injury (the 'ground' of the action) ... regardless of whether the complaint seeks legal or equitable relief or pleads a cause of action in tort or contract." (3 Witkin, Cal.Procedure (3d ed. 1985) Actions, § 448, p. 480; accord, Douglas v. Douglas (1951) 103 Cal.App.2d 29, 32, 228 P.2d 603.) Thus, the three-year statute applies to any equitable action, such as the one herein, to cancel an instrument and impose a constructive trust based on fraud. (See 3 Witkin, op. cit. supra, § 450, p. 481.)

Although the statute does not begin to run until discovery of the facts constituting the fraud (§ 338, subd. (d)), or, in the case of an ongoing conspiracy to defraud, when the last overt act pursuant to the conspiracy has been completed (Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773, 786-787, 157 Cal.Rptr. 392, 598 P.2d 45), there are no allegations of fact in the complaint supporting these postponed accrual provisions, and the Hatches have not asserted that they are applicable herein.

Since any cause of action based on collusion between Frost and Bunting is time-barred, we therefore turn to the Hatches' principal contention that Frost's conduct alone constituted either a breach of written contract or breach of fiduciary duty. Neither characterization is warranted.

The Hatches' assertion that the action could be governed by section 337, the four-year limitations period for breach of written contract, may be quickly dispatched. The deed of trust constitutes a contract between the trustor and the beneficiary, with the trustee acting as agent for both and acting pursuant to the terms of the instrument and their instructions. (...