Robin v. Crowell

• Citation: 270 Cal.Rptr.3d 25,55 Cal.App.5th 727
• Decision Date: 08 October 2020
• Docket Number: F077325
• Parties: Cathleen ROBIN et al., Plaintiffs and Respondents, v. Al CROWELL, Defendant and Appellant.
• Court: California Court of Appeals

55 Cal.App.5th 727

270 Cal.Rptr.3d 25

Cathleen ROBIN et al., Plaintiffs and Respondents,

v.Al CROWELL, Defendant and Appellant.

F077325

Court of Appeal, Fifth District, California.

Filed October 8, 2020

Al Crowell, in pro. per.; Patrick B. Greenwell, Sonora, for Defendant and Appellant.

Gary S. Garfinkle, Lafayette, Maria J. Garfinkle, Lafayette, Peter H. Gold ; Hobin & Hobin, and Richard Hobin, for Plaintiffs and Respondents.

SMITH, J.

Plaintiffs, holders of a first deed of trust on certain property, judicially foreclosed, but failed to name defendant, the holder of a second deed of trust on the same property, as a defendant in that action. After purchasing the property at the foreclosure sale, plaintiffs discovered the second deed of trust, and brought this quiet title action to correct their mistake and terminate defendant's lien. Defendant raised the statute of limitations in defense. The trial court found in favor of plaintiffs.

We conclude the statute of limitations on a judicial action to foreclose the first deed of trust had run, and the lien had been extinguished, prior to the filing of the quiet title action. The 60-year statute of limitations on which the trial court relied applied only to a nonjudicial trustee's sale. The trial court could not exercise the trustee's power of sale through a quiet title action after the expiration of the statute of limitations on a judicial action to foreclose. Further, after the judicial foreclosure sale, there was no trustee holding title to the property who could transfer title through a trustee's sale. Consequently, plaintiffs' action was barred by the statute of limitations and the judgment must be reversed.

FACTUAL AND PROCEDURAL SUMMARY

Steve and Marta Weinstein owned several parcels of vacant land, which they anticipated developing. In 2006, plaintiffs loaned them $450,000, secured by a deed of trust on one parcel of the Weinstein's property (Parcel E or the property). Before plaintiffs made the loan, Marta Weinstein represented there were no prior encumbrances on Parcel E. Plaintiffs obtained a title report, which showed there was a 2004 deed of trust on the property, securing a $250,000 promissory note from the Weinsteins to defendant Crowell. Marta Weinstein represented that the Crowell deed of trust was a mistake, and obtained from Crowell a partial reconveyance of that deed of trust to remove his lien. Plaintiffs and the Weinsteins modified the promissory note to prohibit the Weinsteins from encumbering the property again without plaintiffs' consent while plaintiffs' loan was unpaid. Subsequently, plaintiffs executed the promissory note, recorded the deed of trust, and completed the funding of the loan. In 2007, without plaintiffs' knowledge, the Weinsteins and Crowell recorded a second deed of trust on the property, again securing Crowell's 2004 promissory note.

The Weinsteins' promissory note to plaintiffs permitted plaintiffs to accelerate the due date of their loan in the event a tentative subdivision map for the development of the property was not approved by January 1, 2008. Plaintiff Cathleen Robin exercised this right, accelerating the due date to April 5, 2008, and the Weinsteins failed to make payment by that date. Robin subsequently initiated a judicial foreclosure under the deed of trust, joining plaintiff, Michael Fontes, as a nominal defendant. The foreclosure complaint failed to name Crowell as a defendant, despite his recorded deed of trust. The trial court entered a judgment in favor of plaintiffs in the foreclosure action in 2011, ordering the sale of the property. In 2014, plaintiffs purchased the property at the foreclosure sale for a credit bid of $150,000.

After the Weinsteins' one-year redemption period expired, plaintiffs attempted to sell the property to the owners of a neighboring property. The title search conducted at that time revealed Crowell's recorded deed of trust. In June 2016, plaintiffs filed this quiet title action to clear title to the property. Crowell answered, asserting he held an interest in the property superior to plaintiffs' and raising defenses, including the expiration of the statute of limitations. He also filed a cross-complaint for declaratory relief, seeking a declaration regarding the extent to which the foreclosure action or foreclosure sale affected his interest in the property, and whether plaintiffs could prevent him from exercising his rights under his deed of trust.

The matter was tried to the court and though no statement of decision was requested or issued, the court did provide a four-page written decision addressing the claims, findings and applicable law. The trial court entered judgment in favor of plaintiffs on the complaint and the cross-complaint. It exercised its equitable powers to correct a mistake in the prior foreclosure action -- the mistake of failing to include Crowell as a party to that action. The trial court granted Crowell a three-month redemption right, which it believed would put him in the same position he would have been in if he had been included in the Weinstein foreclosure action. The judgment provided that, if Crowell failed to redeem the property within the allowed time, plaintiffs would own the property unencumbered by Crowell's deed of trust. Crowell appeals from the judgment.

DISCUSSION

I. Standard of Review

In entering its judgment, the trial court stated it was exercising its equitable powers to correct a mistake. We review the exercise of equitable powers under the abuse of discretion standard. ( Hirshfield v. Schwartz (2001) 91 Cal.App.4th 749, 771, 110 Cal.Rptr.2d 861.) " ‘An abuse of discretion occurs if, in light of the applicable law and considering all of the relevant circumstances, the court's decision exceeds the bounds of reason and results in a miscarriage of justice. [Citations.] The abuse of discretion standard affords considerable deference to the trial court, provided that the court acted in accordance with the governing rules of law.’ " ( Kayne v. The Grande Holdings Limited (2011) 198 Cal.App.4th 1470, 1474-1475, 130 Cal.Rptr.3d 751.) "The burden is on the party complaining to establish an abuse of discretion." ( Dorman v. DWLC Corp. (1995) 35 Cal.App.4th 1808, 1815, 42 Cal.Rptr.2d 459.)

"When applying the deferential abuse of discretion standard, ‘the trial court's findings of fact are reviewed for substantial evidence, its conclusions of law are reviewed de novo, and its application of the law to the facts is reversible only if arbitrary and capricious.’ " ( In re C.B. (2010) 190 Cal.App.4th 102, 123, 117 Cal.Rptr.3d 846.) The determination of the statute of limitations applicable to a cause of action is a question of law we review de novo. ( McLeod v. Vista Unified School Dist. (2008) 158 Cal.App.4th 1156, 1164, 71 Cal.Rptr.3d 109.)

II. Statute of Limitations – Quiet Title v. Foreclosure

Defendant's primary argument for reversal of the judgment is that the trial court erred when it concluded the 60-year limitations period set out in Civil Code section 882.020 applied to plaintiffs' action. He contends the limitations period applicable to judicial foreclosure actions, either four years under Code of Civil Procedure section 337¹ or six years under Commercial Code section 3118, applies to plaintiffs' action. He asserts the limitations period expired no later than April 5, 2014. Plaintiffs respond that the trial court chose the correct statute of limitations. Alternatively, they assert their action was timely, because it was an action to quiet title on the ground of mistake, to which a three-year limitations period applies, commencing upon discovery of the cause of action (§ 338, subd. (d)). They contend they filed the action promptly upon discovering defendant's trust deed had been re-recorded against the property.

A. Quiet Title Based on Mistake

Plaintiffs' complaint alleged one cause of action to quiet title to the property. "The Legislature has not established a specific statute of limitations for actions to quiet title. [Citation.] Therefore, courts refer to the underlying theory of relief to determine the applicable period of limitations. [Citations.] An inquiry into the underlying theory requires the court to identify the nature (i.e., the ‘gravamen’) of the cause of action." ( Salazar v. Thomas (2015) 236 Cal.App.4th 467, 476, 186 Cal.Rptr.3d 689.) "The gravamen of an action depends on the nature of the right sued upon or the principal purpose of the action." ( Bank of New York Mellon v. Citibank, N.A. (2017) 8 Cal.App.5th 935, 943, 214 Cal.Rptr.3d 504.)

Plaintiffs contend the gravamen of their cause of action was mistake. A three-year limitations period applies to an action seeking relief on the ground of mistake, and "[t]he cause of action in that case is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake." (§ 338, subd. (d).) "Case law has interpreted this accrual provision to mean that ‘a cause of action for ... mistake accrues, and the limitations period commences to run, when the aggrieved party could have discovered the ... mistake through the exercise of reasonable diligence.’ " ( Creditors Collection Service v. Castaldi (1995) 38 Cal.App.4th 1039, 1044, 45 Cal.Rptr.2d 511.)

A quiet title action is a statutory action that seeks to declare the rights of the parties in realty. (§ 760.020; Western Aggregates, Inc. v. County of Yuba (2002) 101 Cal.App.4th 278, 305, 130 Cal.Rptr.2d 436 ( Western Aggregates ).) " ‘ "The object of the action is to finally settle and determine, as between the parties, all conflicting claims to the property in controversy, and to decree to each such interest or estate therein as he may be entitled to." ’ " ( Western Aggregates, supra , at p. 305, 130 Cal.Rptr.2d 436.) The purpose of a quiet title action is to determine any adverse claim to the property that the defendant may assert, and to declare and define any interest held by the defendant, "...