Prudential Home Mortg. Co. v. Superior Court

Decision Date29 September 1998
Docket NumberNos. G021015,G021066,G021016,s. G021015
Citation66 Cal.App.4th 1236,78 Cal.Rptr.2d 566
CourtCalifornia Court of Appeals Court of Appeals
Parties, 98 Cal. Daily Op. Serv. 7530, 98 Daily Journal D.A.R. 10,413, 98 Daily Journal D.A.R. 11,289 PRUDENTIAL HOME MORTGAGE COMPANY, INC. et al., Petitioners, v. The SUPERIOR COURT of Orange County, Respondent; Joe Diaz et al., Real Parties in Interest. CENTERBANK MORTGAGE COMPANY et al., Petitioners, v. The SUPERIOR COURT of Orange County, Respondent; Joe Diaz et al., Real Parties in Interest. GUILD MORTGAGE COMPANY et al., Petitioners, v. The SUPERIOR COURT of Orange County, Respondent; Joe Diaz et al., Real Parties in Interest.
OPINION

RYLAARSDAM, Associate Justice.

Petitioners Prudential Home Mortgage, Centerbank Mortgage Company and Guild Mortgage Company are all real estate lenders, and each is a defendant in one of three potential class actions by former borrowers. The borrowers claim petitioners violated Civil Code section 2941, which regulates the process for recording a reconveyance of a deed of trust after a borrower pays off a secured loan. For these alleged violations, the borrowers seek to recover the $300 statutory forfeiture for each loan, all of which were repaid more than one year but less than three years before these actions were filed.

Petitioners challenged the pleadings below by demurrers and motions to strike, claiming the recovery of the statutory forfeiture is barred by the one-year statute of limitations. (Code Civ. Proc., § 340, subd. (1).) At a joint hearing on all three cases, the trial court disagreed. Relying on MacManus v. A.E. Realty Partners (1983) 146 Cal.App.3d 275, 194 Cal.Rptr. 567, it ruled that Civil Code section 2941 is remedial, rather than penal, and therefore the three-year statute of limitations applies. (Code Civ. Proc., § 338, subd. (a).) Petitioners seek extraordinary relief from these orders, urging us to find the one-year statute applies to the forfeiture as a matter of law.

In the cases filed against Prudential and Centerbank, the borrowers also request equitable relief under Business & Professions Code section 17200 et seq., requiring those petitioners to record a deed of reconveyance on each repaid, but as yet unreconveyed, deed of trust. The trial court denied the motions to strike the requests for equitable relief by Prudential and Centerbank; they challenge these orders, claiming the legal remedies provided in Civil Code section 2941 are adequate and equitable relief is unnecessary.

These petitions present a statute of limitations issue which is critical to as many as 50 cases pending around the state. Trial courts have issued contradictory rulings, and rulings by the judges of the Orange County Superior Court are inconsistent. Petitioners filed their writs in this court in January 1997. We invited informal responses and subsequently denied the writs. The Supreme Court granted review in all three cases and transferred them to us with instructions to set an order to show cause hearing.

After briefing and argument, we find the one-year statute of limitations applies to the claims for the statutory forfeiture under Civil Code section 2941 and that the statutory remedies preclude additional equitable relief. We publish this opinion with the exception of part I, (post, p. 568) which deals with requests for judicial notice and related matters.

I. **
II. Statute of Limitations

Civil Code section 2941 establishes the respective duties of the beneficiary and trustee with respect to the reconveyance of a deed of trust after the secured obligation is satisfied. Subdivision (b)(1) requires the beneficiary, upon payoff, to "execute and deliver to the trustee the original note, deed of trust, request for a full reconveyance...." The trustee then executes and records the full reconveyance within 21 days of receipt of the documents from the beneficiary, delivers a copy of the reconveyance to the beneficiary and, upon request, delivers the original note and deed of trust to the trustor. (Civ.Code § 2941, subd. (b)(1)(A)-(C).)

In case the former procedure is not followed by either the trustee or the beneficiary, the statute provides two backup methods to assure the trustor can promptly clear title to the secured property. First, upon request by the trustor, the beneficiary must substitute itself in as trustee and execute a full reconveyance. (Civ.Code § 2941, subd. (b)(2).) Second, if neither the trustee nor the beneficiary has executed the full reconveyance within 75 calendar days after the loan payoff, "a title insurance company may prepare and record a release of the obligation" after giving notice of its intent to do so to the trustor, trustee, and beneficiary. "The release issued pursuant to this subdivision shall be entitled to recordation and, when recorded, shall be deemed to be the equivalent of a reconveyance of a deed of trust." (Civ.Code § 2941, subd. (b)(3)(B).)

The crucial statute here is subdivision (d) of section 2941, which provides: "The violation of this section shall make the violator liable to the person affected by the violation for all damages which that person may sustain by reason of the violation, and shall require that the violator forfeit to that person the sum of three hundred dollars ($300)." Petitioners claim this is an action for a statutory penalty or forfeiture, which is clearly governed by Code of Civil Procedure section 340, subdivision (1). 1 We agree.

The language of Civil Code section 2941 itself and the cases construing it uniformly characterize the $300 sum as a penalty or forfeiture. Subdivision (d) compels a statutory violator to "forfeit" the sum to the affected person, in addition to actual damages. The legislative history of the statute consistently refers to the sum imposed as a forfeiture or civil penalty. And in Dixon v. Grossman (1972) 22 Cal.App.3d 941, 99 Cal.Rptr. 659, the court stated, "The obvious statutory purpose [of the $300 sum] is to encourage prompt reconveyance by penalizing unwarranted delay. It imposes a statutory penalty [citation] which may properly be fixed without reference to the actual damages sustained [citation]." (Id. at p. 944, 99 Cal.Rptr. 659; accord Trustors Security Service v. Title Recon Tracking Service (1996) 49 Cal.App.4th 592, 602-603, 56 Cal.Rptr.2d 793; Pintor v. Ong (1989) 211 Cal.App.3d 837, 844, 259 Cal.Rptr. 577; Drewry v. Welch (1965) 236 Cal.App.2d 159, 174, 46 Cal.Rptr. 65.)

Case law has consistently applied the one-year limitations period to statutes that provide for recovery of actual damages and a mandatory additional penalty. The seminal case is Los Angeles County v. Ballerino (1893) 99 Cal. 593, 34 P. 329, in which the Supreme Court stated, "The statutory penalty there referred to [in section 340 subdivision (1) ] is one which an individual is allowed to recover against a wrong-doer, as a satisfaction for the wrong or injury suffered, and without reference to the actual damage sustained, or one which is given to the individual and the state as a punishment for some act which is in the nature of a public wrong. The action to recover such a penalty is a penal action, founded upon a statute, and is the action which, under section 340 of the Code of Civil Procedure, must be brought within one year." (Id. at p. 596, 34 P. 329; accord County of San Diego v. Milotz (1956) 46 Cal.2d 761, 300 P.2d 1; Hansen v. Vallejo Electric Light & Power Co. (1920) 182 Cal. 492, 188 P. 999.) Although there is no recent Supreme Court case reiterating the rule, the Courts of Appeal have consistently done so. "[T]he settled rule in California is that statutes which provide for recovery of damages additional to actual losses incurred, such as double or treble damages, are considered penal in nature [citations], and thus governed by the one-year period of limitations stated in section 340, subdivision (1)." (G.H.I.I. v. MTS, Inc. (1983) 147 Cal.App.3d 256, 277, 195 [66 Cal.App.4th 1243] Cal.Rptr. 211; accord Sylve v. Riley (1993) 15 Cal.App.4th 23, 26, 18 Cal.Rptr.2d 608; Menefee v. Ostawari (1991) 228 Cal.App.3d 239, 243-245, 278 Cal.Rptr. 805; Community Cause v. Boatwright (1981) 124 Cal.App.3d 888, 897, 177 Cal.Rptr. 657; and see Ashland Oil Co. v. Union Oil Co. (Em.App.1977) 567 F.2d 984, 991.)

Petitioners contend that MacManus v. A.E. Realty Partners, supra, 146 Cal.App.3d 275, 194 Cal.Rptr. 567, on which the trial court relied, is the "sole exception to the otherwise unanimous line of authority interpreting Code of Civil Procedure section 340(1)" and was wrongly decided. Because the case was decided by this court, they urge us to reconsider and reject its "divergent limitations test."

In MacManus, plaintiffs alleged violations of Civil Code section 2995, which prohibits a real estate developer from requiring the provision of escrow services by an entity in which the developer has a financial interest. Section 2995 states a violator "shall be liable to the purchaser ... in the amount of three times the amount charged for the escrow services, but in no event less than two hundred fifty dollars ($250), plus reasonable attorney's fees and costs." In determining the statute was governed by the three-year statute of limitations, the court stated, "Our decision [regarding the applicable limitations period] must depend upon whether...

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