Trenk v. Soheili

• Decision Date: 21 December 2020
• Docket Number: B295434
• Citation: 273 Cal.Rptr.3d 184,58 Cal.App.5th 1033
• Court: California Court of Appeals Court of Appeals
• Parties: Joseph TRENK et al., Plaintiffs and Respondents, v. Maryam SOHEILI et al., Defendants and Appellants.

58 Cal.App.5th 1033

273 Cal.Rptr.3d 184

Joseph TRENK et al., Plaintiffs and Respondents,

v.Maryam SOHEILI et al., Defendants and Appellants.

B295434

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

Filed December 21, 2020

As Modified December 22, 2020

Paul Kujawsky, Studio City, for Defendants and Appellants.

Joseph Trenk, Sherman Oaks, in pro. per., for Plaintiffs and Respondents.

LUI, P. J.

Maryam Soheili and Morteza Sohyly (Appellants) appeal from a judgment quieting title to a house in Granada Hills owned by respondents Joseph and Dinah Trenk (the Residence).¹ Joseph Trenk is a lawyer who previously represented Sohyly. Sohyly sued him for malpractice, and the parties settled in 2003. Joseph agreed to pay $100,000 and executed a promissory note and a trust deed on the Residence to secure the obligation. Sohyly's sister, Maryam Soheili, was designated as the beneficiary of the trust deed. Dinah did not sign the deed or the note.

Joseph stopped regular payments on the note after 2003, and by 2018 he still owed about $75,000. Sohyly (through his sister) began nonjudicial foreclosure proceedings in January 2018. The Trenks then filed this lawsuit to clear title to their house, alleging that the trust deed was no longer enforceable. After a short trial, the trial court quieted title in the Residence in favor of the Trenks, ruling that both the statute of limitations and the Marketable Record Title Act ( Civ. Code, § 880.020 et seq. ) barred enforcement of the trust deed.²

Appellants argue that the 60 year time period for enforcement of a trust deed applies here under section 882.020, subdivision (a)(2). The Trenks dispute that claim, but also argue as an alternative ground for affirmance that the trust deed is unenforceable because Dinah did not sign it. We agree with both arguments.

A power of sale in a trust deed is enforceable even if the statute of limitations has run on the underlying obligation. Because the trust deed here did not state the last date for payment under the promissory note, under section 882.020, subdivision (a)(2) Appellants would have 60 years to exercise the power of sale in the trust deed.

However, the power of sale is not enforceable for another reason. The Residence presumptively is community property. Appellants did not rebut that presumption at trial. Because Dinah did not execute the trust deed, she has the power to void it. Accordingly, we affirm the judgment.

BACKGROUND

1. The Settlement Agreement and Trust Deed³

Sohyly sued Joseph in 2001 for legal malpractice. The parties settled that action in 2003.

The written settlement agreement obligated Joseph to pay Sohyly $100,000 over three years. Joseph was to pay $10,000 upon execution of the settlement agreement, and then $2,500 per month for the next 36 months, beginning in May 2003.

Joseph also executed a zero interest installment note (Note). The Note was for $200,000, but, like the settlement agreement, specified 36 monthly payments of $2,500. The Note stated that "on receipt of 36 payments hereunder, any and all obligations evidenced by this note and trust deed shall be deemed fully satisfied."⁴ The Note was not recorded.

The Note was secured by a deed of trust (Trust Deed) with a power of sale for the Residence, where the Trenks had lived for 30 years. The Trenks originally took title to the Residence as joint tenants and did not change the manner in which they held title "at any time after the recording of the deed."

The Trust Deed stated that it was provided for the purpose of securing a promissory note "in the principal sum of $200,000.00 ... subject to settlement agreement." The Trust Deed did not refer to the payment schedule under the settlement agreement or identify the date on which the Note was to be fully paid. The Trust Deed identified Maryam Soheili as the beneficiary.

Only Joseph executed the Trust Deed. Dinah testified that she was unaware of the Trust Deed until she received a "foreclosure letter" in January 2018.

2. Joseph's Default and the Initiation of Nonjudicial Foreclosure

Joseph made the initial $10,000 payment and six $2,500 payments from May 2003 through December 2003. He paid nothing more until October 2017, when he made on additional payment of $2,500.

Joseph testified that Sohyly called him in October or November 2017 asking for payment. Joseph offered to resume monthly payments but Sohyly did not agree.

On January 4, 2018, Appellants recorded a notice of default and election to sell under the Trust Deed. The notice stated that Joseph owed $174,202 as of December 15, 2017.

The Trenks filed this action on March 5, 2018.

3. Proceedings in the Trial Court

The Trenks’ verified complaint alleged causes of action for quiet title, slander of title, cancellation of deed, and fraud. The complaint alleged that Joseph tendered $75,000 in full payment on the Note on January 5, 2018 (the day after the notice of default was recorded), but that Appellants refused the tender.

The complaint alleged that the four year statute of limitations under Code of Civil Procedure section 337 had expired on Joseph's obligation under the Note. It also alleged that the Trust Deed contains a "reference which makes the last date fixed for payment of the debt or the performance of the obligation ... readily ascertainable."⁵

The Trenks first obtained a temporary restraining order and then moved for a preliminary injunction to prevent the trustee's sale of the Residence. The trial court granted the preliminary injunction, finding that there was a dispute about the amount of money that Joseph owed on the Note and that an unjustified trustee sale would cause irreparable harm.

The case was tried to the court on October 15, 2018. The court found against the Trenks on their fraud claim, but found in their favor on their claims for quiet title and cancellation of the Trust Deed.

In its statement of decision, the trial court set forth findings that: (1) enforcement of the settlement agreement and Note are barred by the statute of limitations; (2) enforcement of the Trust Deed is barred by "both the statute of limitations and the Marketable Record Title Act"; and (3) Appellants did not commit fraud. The court also found that "[a]t all relevant times, Plaintiffs Joseph Trenk and Dinah Trenk held title to the property as joint tenants."

DISCUSSION

1. The 60-Year Time Limit on Enforceability Under Section 882.020, Subdivision (a)(2) Applies to the Trust Deed

The Trenks argue that the Trust Deed was unenforceable because the statute of limitations had already run on enforcement of the Note. Alternatively, they argue that the 10-year enforcement period under section 882.020, subdivision (a)(1) applied to the power of sale in the Trust Deed. We disagree with both arguments.⁶

Under Civil Code section 882.020, "[u]nless the lien of a mortgage, deed of trust, or other instrument that creates a security interest of record in real property to secure a debt or other obligation has earlier expired pursuant to Section 2911, the lien expires at, and is not enforceable by action for foreclosure commenced, power of sale exercised, or any other means asserted after, the later of the following times: [¶] (1) If the final maturity date or the last date fixed for payment of the debt or performance of the obligation is ascertainable from the recorded evidence of indebtedness, 10 years after that date. [¶] (2) If the final maturity date or the last date fixed for payment of the debt or performance of the obligation is not ascertainable from the recorded evidence of indebtedness, or if there is no final maturity date or last date fixed for payment of the debt or performance of the obligation, 60 years after the date the instrument that created the security interest was recorded." ( Civ. Code, § 882.020, subd. (a)(1)–(2).)⁷ Civil Code section 2911 in turn provides that a "lien is extinguished by the lapse of time within which, under the provisions of the Code of Civil Procedure ... [¶] 1. An action can be brought upon the principal obligation."

Thus, the interplay between sections 882.020 and 2911 precludes an action for judicial foreclosure to enforce a lien on real property after the statute of limitations on the secured obligation has run. However, where a trust deed is involved, section 2911 applies only to the lien that is "enforceable through judicial foreclosure, and not the power of sale." ( Robin v. Crowell (2020) 55 Cal.App.5th 727, 750, 270 Cal.Rptr.3d 25 ( Robin ).)

Judicial enforcement of a lien and nonjudicial enforcement though a power of sale are conceptually separate. A trust deed provides a beneficiary with two means of enforcement. First, under Code of Civil Procedure section 725a, a beneficiary under a deed of trust has "the right to bring suit to foreclose ... in the manner and subject to the provisions, rights and remedies relating to the foreclosure of a mortgage." When exercising this right, the beneficiary is enforcing a lien with "the same legal effect as a traditional mortgage." ( Ung v. Koehler (2005) 135 Cal.App.4th 186, 192, 37 Cal.Rptr.3d 311 ( Ung ).)

Second, if a deed of trust includes a power of sale, a beneficiary may exercise that power pursuant to the governing statutes apart from the judicial process. ( Ung, supra, 135 Cal.App.4th at p. 192, 37 Cal.Rptr.3d 311.) In exercising that power, the beneficiary is not enforcing a lien through judicial action but is invoking the beneficiary's authority to demand that the trustee of the property sell the property for the beneficiary's benefit. ( Id. at p. 195, 37 Cal.Rptr.3d 311 ; see Grant v. Burr (1880) 54 Cal. 298, 301 ( Burr ).)

Before section 882.020 was enacted in 1982, it was well established that the power of sale in a deed of trust was not extinguished when the statute of limitations governing the underlying obligation expired. (See Burr, supra, 54 Cal. at p. 301 ; Ung, supra, 135 Cal.App.4th at pp. 192–193, 37 Cal.Rptr.3d 311.) Indeed, the rule was that "the statute of limitations never...