Dr. Leevil, LLC v. Westlake Health Care Center , 241 Cal. Rptr. 3d 12 ( 2018 )

IN THE SUPREME COURT OF
CALIFORNIA
DR. LEEVIL, LLC,
Plaintiff and Respondent,
v.
WESTLAKE HEALTH CARE CENTER,
Defendant and Appellant.
S241324
Second Appellate District, Division Six
B266931
Ventura County Superior Court
00465793-CU-UD-VTA
December 17, 2018
Justice Chin authored the opinion of the court, in which Chief
Justice Cantil-Sakauye and Justices Corrigan, Liu, Cuéllar,
Kruger, and Peña* concurred.
*
Associate Justice of the Court of Appeal, Fifth Appellate
District, assigned by the Chief Justice pursuant to article VI,
section 6 of the California Constitution.
DR. LEEVIL, LLC v. WESTLAKE HEALTH CARE CENTER
S241324
Opinion of the Court by Chin, J.
In this case, we decide a procedural question related to the
timing of the notice that must precede an unlawful detainer
action, where the action is not brought by a landlord but rather
by a new owner that has acquired title to the property under a
power of sale contained in a deed of trust. The question we
decide is whether perfection of title, which includes recording
the trustee’s deed, is necessary before the new owner serves a
three-day written notice to quit on the possessor of the property
or whether perfection of title need only precede the filing of the
unlawful detainer action. We conclude that the new owner must
perfect title before serving the three-day written notice to quit.
Because the Court of Appeal reached a different conclusion, we
reverse the judgment of the Court of Appeal.
FACTS
Westlake Village Property, L.P. (Westlake Village) owned
property in Thousand Oaks that it leased in 2002 to defendant
Westlake Health Care Center (Westlake Health) so the latter
could operate a skilled nursing facility on the property. Six
years later, Westlake Village obtained a bank loan, executing a
promissory note and a deed of trust on the property (the latter
to secure the promissory note). After Westlake Village defaulted
on the loan, the bank sold the promissory note and the deed of
trust to Dr. Leevil, LLC (Dr. Leevil), plaintiff in this action.
Dr. Leevil then instituted a nonjudicial foreclosure and bought
DR. LEEVIL, LLC v. WESTLAKE HEALTH CARE CENTER
Opinion of the Court by Chin, J.
the property at a trustee’s sale. The next day, Dr. Leevil served
a three-day written notice to quit upon the property’s tenant,
Westlake Health, and five days after that, Dr. Leevil recorded
title to the property. Westlake Health did not vacate the
property, and Dr. Leevil initiated this unlawful detainer action
40 days after service of the written notice to quit.
Proceedings in the trial court ended in a judgment against
Westlake Health, based on stipulated facts, with Westlake
Health preserving its right to appeal various legal rulings of the
court. On appeal, the Court of Appeal affirmed. (Dr. Leevil,
LLC v. Westlake Health Care Center (2017) 9 Cal.App.5th 450.)
Among other things, the Court of Appeal concluded that, under
Code of Civil Procedure section 1161a, subdivision (b) (section
1161a(b)), an owner that acquires title to property under a
power of sale contained in a deed of trust need not perfect title
before it serves a three-day written notice to quit on the
possessor of the property. Instead, the Court of Appeal
concluded that the new owner may serve the notice to quit
immediately after acquiring ownership, after which it may
perfect title, so long as title is perfected before the new owner
files an unlawful detainer action. (9 Cal.App.5th at pp. 455–
457.) In reaching that conclusion, the Court of Appeal expressly
disagreed with the Appellate Division of the San Diego County
Superior Court, which addressed the same issue in U.S.
Financial, L.P. v. McLitus (2016) 6 Cal.App.5th Supp. 1(McLitus). (9 Cal.App.5th at p. 455.) Because Dr. Leevil
perfected title before initiating this unlawful detainer action,
although not before serving the notice to quit, the Court of
Appeal concluded that the action complied with section
1161a(b). (9 Cal.App.5th at p. 457.)
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DR. LEEVIL, LLC v. WESTLAKE HEALTH CARE CENTER
Opinion of the Court by Chin, J.
Westlake Health petitioned for review, which we granted,
limiting the issue to the section 1161a(b) issue described above.
DISCUSSION
“Our role in interpreting statutes is to ascertain and
effectuate the intended legislative purpose. [Citations.] We
begin with the text, construing words in their broader statutory
context and, where possible, harmonizing provisions concerning
the same subject. [Citations.] If this contextual reading of the
statute’s language reveals no ambiguity, we need not refer to
extrinsic sources. [Citations.]” (United Riggers & Erectors, Inc.
v. Coast Iron & Steel Co. (2018) 4 Cal.5th 1082, 1089–1090.)
Section 1161a(b) authorizes a summary proceeding to
remove the possessor of real property in specified circumstances.
It is structured to enumerate five “cases” in which its
substantive provision applies. Specifically, section 1161a(b)
opens with the phrase “[i]n any of the following cases,” then it
sets forth its substantive provision (authorizing an unlawful
detainer action to remove “a person who holds over and
continues in possession of . . . real property after a three-day
written notice to quit the property has been served”), and then
it enumerates five separate situations in which its substantive
provision comes into play.1 Thus, the substantive provision of
1
Section 1161a(b) provides in full: “In any of the following
cases, a person who holds over and continues in possession of a
manufactured home, mobilehome, floating home, or real
property after a three-day written notice to quit the property has
been served upon the person, or if there is a subtenant in actual
occupation of the premises, also upon such subtenant, as
prescribed in Section 1162, may be removed therefrom as
prescribed in this chapter: [¶] (1) Where the property has been
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Opinion of the Court by Chin, J.
section 1161a(b) has no operative effect unless one of the five
enumerated situations (what the statute calls “cases”) is
present. Put another way, section 1161a(b) contemplates that a
property owner seeking to avail itself of the statute’s remedy
will begin by looking at the five enumerated “cases,” considering
whether the conditions of any of them are satisfied. Only when
one of the cases is satisfied may the substantive provision of the
statute be invoked.
Section 1161a(b)(3) is one of those “cases,” and it is the
only provision on which Dr. Leevil relies. Therefore, Dr. Leevil
was not entitled to the remedy provided by the substantive
provision of section 1161a(b) unless it first satisfied the
conditions of section 1161a(b)(3). Section 1161a(b)(3) describes
the following case: “Where the property [(A)] has been sold in
sold pursuant to a writ of execution against such person, or a
person under whom such person claims, and the title under the
sale has been duly perfected. [¶] (2) Where the property has
been sold pursuant to a writ of sale, upon the foreclosure by
proceedings taken as prescribed in this code of a mortgage, or
under an express power of sale contained therein, executed by
such person, or a person under whom such person claims, and
the title under the foreclosure has been duly perfected. [¶] (3)
Where the property has been sold in accordance with Section
2924 of the Civil Code, under a power of sale contained in a deed
of trust executed by such person, or a person under whom such
person claims, and the title under the sale has been duly
perfected. [¶] (4) Where the property has been sold by such
person, or a person under whom such person claims, and the
title under the sale has been duly perfected. [¶] (5) Where the
property has been sold in accordance with Section 18037.5 of the
Health and Safety Code under the default provisions of a
conditional sale contract or security agreement executed by such
person, or a person under whom such person claims, and the
title under the sale has been duly perfected.”
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Opinion of the Court by Chin, J.
accordance with Section 2924 of the Civil Code, [(B)] under a
power of sale contained in a deed of trust executed by [the
holdover possessor], or a person under whom such person
claims, and [(C)] the title under the sale has been duly
perfected.” (Italics added.) There are two things to notice about
the language of section 1161a(b)(3). First, the provision is in the
past tense (“has been sold” and “has been duly perfected”),
suggesting completion. By contrast, the substantive provision
of section 1161a(b) uses the present tense (“holds over and
continues” and “may be removed”). These choices of verb tense
strongly support the conclusion that section 1161a(b)(3), when
it is relied upon by a plaintiff, enumerates conditions precedent
that the plaintiff must satisfy before invoking the substantive
provision of section 1161a(b) — that is, before serving a notice
to quit. (See Hughes v. Board of Architectural Examiners (1998)
17 Cal.4th 763, 776 [“In construing statutes, the use of verb
tense by the Legislature is considered significant.”].)
Second, the sale of the property in question is only one of
three distinct conditions set forth in section 1161a(b)(3), and the
use of the conjunctive word “and” to connect the three conditions
can only mean that all three conditions must be satisfied. In
other words, all three conditions of section 1161a(b)(3),
including perfection of title, were prerequisites to Dr. Leevil
having any right to the remedy section 1161a(b) affords. And in
this context, perfection of title requires that the instrument of
conveyance (the trustee’s deed) be recorded pursuant to
Government Code section 27280. As the Court of Appeal
explained in Kessler v. Bridge (1958) 161 Cal.App.2d Supp. 837,
“[t]itle is duly perfected when all steps have been taken to make
it perfect, i.e., to convey to the purchaser that which he has
purchased, valid and good beyond all reasonable doubt[]
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DR. LEEVIL, LLC v. WESTLAKE HEALTH CARE CENTER
Opinion of the Court by Chin, J.
[citation], which includes good record title [citation], but is not
limited to good record title, as between the parties to the
transaction. . . . The court in an unlawful detainer [action] . . .
has jurisdiction to determine the validity of such defenses.” (Id.
at p. 841, italics added.) Because one of the conditions set forth
in section 1161a(b)(3) is that “title under the sale has been duly
perfected,” Dr. Leevil was not entitled to a section 1161a(b)
remedy until it first perfected title, which required, among other
things, that the instrument of sale (the trustee’s deed) be
recorded. That being so, the most natural reading of the statute
required Dr. Leevil to perfect title before invoking section
1161a(b) — but it is undisputed that Dr. Leevil served the three-
day written notice to quit before it perfected title to the property.
Dr. Leevil, therefore, took the first step in the removal process
authorized by section 1161a(b) before satisfying all of the
prerequisite conditions.
“It has long been recognized that the unlawful detainer
statutes are to be strictly construed and that relief not
statutorily authorized may not be given due to the summary
nature of the proceedings. [Citation.] The statutory
requirements in such proceedings ‘ “must be followed
strictly . . . .” ’ ” (WDT–Winchester v. Nilsson (1994) 27
Cal.App.4th 516, 526; see Underwood v. Corsino (2005) 133
Cal.App.4th 132, 135; Cal–American Income Property Fund IV
v. Ho (1984) 161 Cal.App.3d 583, 585.) “The remedy of unlawful
detainer is a summary proceeding to determine the right to
possession of real property. Since it is purely statutory in
nature, it is essential that a party seeking the remedy bring
himself clearly within the statute.” (Baugh v. Consumers
Associates, Ltd. (1966) 241 Cal.App.2d 672, 674.) Because
Dr. Leevil served the three-day notice to quit before it perfected
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Opinion of the Court by Chin, J.
title, it did not bring itself within the scope of section 1161a(b),
as that provision is most naturally read, before taking the first
step in the removal process that the statute authorizes. Its
notice to quit was, therefore, premature and void, and its
unlawful detainer action, improper.
The Court of Appeal rejected the foregoing reading of
section 1161a(b) because it did not focus on the statute’s
structure. As noted, section 1161a(b) opens with the phrase “[i]n
any of the following cases,” and it enumerates five separate
situations, one of which must be satisfied before the substantive
provision of the statute has any operative effect. The Court of
Appeal ignored that structure, instead construing the statute as
if the opening phrase were omitted and as if the requirements
of section 1161a(b)(3) merely qualified the words “may be
removed.” (§ 1161a(b).) Based on that reading, the Court of
Appeal concluded that a holdover possessor of real property
“may be removed” (§ 1161a(b)) only after section 1161a(b)(3) is
satisfied, but the three-day written notice to quit may be served
before section 1161a(b)(3) is satisfied, because the three-day
notice does not, by itself, remove the property’s possessor.
(Dr. Leevil, LLC v. Westlake Health Care Center, supra, 9
Cal.App.5th at pp. 456–457.) In so concluding, the Court of
Appeal failed to discern the most natural reading of section
1161a(b).
That reading, moreover, is confirmed by consideration of
the broader context in which section 1161a(b) was enacted. (See,
e.g., People v. Woodhead (1987) 43 Cal.3d 1002, 1008 [“When the
[statutory] language is susceptible of more than one reasonable
interpretation, . . . we look to a variety of extrinsic aids,
including the ostensible objects to be achieved, the evils to be
remedied, the legislative history, public policy,
7
DR. LEEVIL, LLC v. WESTLAKE HEALTH CARE CENTER
Opinion of the Court by Chin, J.
contemporaneous administrative construction, and the
statutory scheme of which the statute is a part”].) The unlawful
detainer action was created to provide property owners who
sought to recover possession of their property with a relatively
inexpensive and quick legal remedy, thus discouraging property
owners from resorting to self-help methods. In 1917, however,
this court decided Francis v. West Virginia Oil Co. (1917) 174
Cal. 168, holding that the unlawful detainer remedy was limited
to landlord–tenant disputes, and therefore a new owner could
not bring an unlawful detainer action against a former owner
who refused to relinquish possession. In 1929, in apparent
response to Francis, section 1161a was added to the Code of Civil
Procedure, expanding the unlawful detainer remedy to bring
within its scope actions by property owners who acquired
ownership as a result of: (1) an execution against the former
owner, (2) a foreclosure of a mortgage executed by the former
owner, or (3) a power of sale clause in a deed of trust executed
by the former owner. (Stats. 1929, ch. 393, § 1, p. 719; see Vella
v. Hudgins (1977) 20 Cal.3d 251, 255 (Vella).) Since 1929,
section 1161a has been expanded in several ways, but as to its
general structure, it has not been substantively changed.
Significantly, there is no indication, in the history of section
1161a or in the case law interpreting it, that the Legislature
intended the unlawful detainer remedy that the statute affords
to be available to a party that does not strictly satisfy all the
conditions of one of the statute’s “cases.”
Dr. Leevil argues that the perfection of its title — which
occurred six days after the sale — was retroactive to the original
sale date under Civil Code section 2924h, subdivision (c) (section
2924h(c)). Section 2924h(c) governs the means by which
payment can be made at a trustee’s sale, and it expressly
8
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Opinion of the Court by Chin, J.
permits the trustee to withhold the trustee’s deed until the
funds constituting the purchase price become available to the
payee. It provides: “In the event the trustee accepts a check
drawn by a credit union or a savings and loan association
pursuant to this subdivision or a cash equivalent designated in
the notice of sale, the trustee may withhold the issuance of the
trustee’s deed to the successful bidder . . . until funds become
available to the payee or endorsee as a matter of right. [¶] For
the purposes of this subdivision, the trustee’s sale shall be
deemed final upon the acceptance of the last and highest bid,
and shall be deemed perfected as of 8 a.m. on the actual date of
sale if the trustee’s deed is recorded within 15 calendar days after
the sale . . . .” (§ 2924h(c), italics added.)
The purpose of section 2924h(c) is clear from its text. A
bidder at a trustee’s sale might present a check for the purchase
price of the property, but whether the bank account on which
the check is drawn contains sufficient funds to cover the amount
of the check remains to be seen. Therefore, the trustee is
authorized to withhold the deed until the check clears. But
withholding the deed prevents the purchaser from recording the
sale and perfecting its title. The subdivision, therefore, affords
a 15-day period during which the deed may be recorded and the
sale “deemed perfected” as of the original sale date. (§ 2924h(c).)
That way, the original sale date may be memorialized even if
the deed is withheld pending confirmation of the purchaser’s
payment of the purchase price.
Dr. Leevil argues that it recorded title just six days after
the date of the sale, and therefore, under section 2924h(c), the
sale is “deemed perfected” as of the original sale date. Hence,
Dr. Leevil should be deemed to have perfected title for purposes
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Opinion of the Court by Chin, J.
of section 1161a(b) before it served the three-day written notice
to quit on Westlake Health.
The problem with this argument is that, under section
2924h(c), the sale is not “deemed perfected” on the original sale
date until the deed is recorded. Before the deed is recorded, the
sale is neither “perfected” (§ 1161a(b)(3)) nor “deemed perfected”
(§ 2924h(c)) — it is just a sale — and it was before the deed was
recorded that Dr. Leevil served the three-day written notice at
issue in this case. Thus, as of the time Dr. Leevil served the
notice, Dr. Leevil did not meet the conditions of section
1161a(b)(3), and therefore its notice was premature and void.
The fact that Dr. Leevil later met those conditions, and the fact
that the conduct that satisfied those conditions was deemed to
be retroactive, does not change the fact that Dr. Leevil was not
in strict compliance with section 1161a(b) when it took the first
step in the removal process that the statute authorizes.
Moreover, as the appellate division noted in McLitus, the
apparent policy aims of the statute support an inference that the
Legislature intended that a new owner of real property should
perfect title before serving a three-day written notice to quit on
the possessor of the property. In cases where the possessor of
the property is a tenant of the former owner, not the former
owner itself, the tenant may not know whether the entity
serving the notice to quit is a bona fide owner. Thus, section
1161a(b)’s requirement that the new owner perfect title before
serving a notice to quit protects the interests of such a tenant.
As the appellate division stated in McLitus: “[Plaintiff’s]
interpretation . . . would suggest that a post-foreclosure plaintiff
could routinely prematurely issue a three-day notice . . . ,
[a]nd . . . such a practice would practically prevent a defendant
from effectively verifying the identity of the alleged purchaser
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Opinion of the Court by Chin, J.
of a property[,] as a search of recorded documents would prove
futile.” (McLitus, supra, 6 Cal.App.5th at p. Supp. 4.)2
As the McLitus court explained, Dr. Leevil’s statutory
interpretation would put a tenant in a precarious position. A
tenant would be forced to choose between vacating the property
without assurance that title will ever actually be perfected or
remaining in possession of the property and potentially
incurring damages as a holdover tenant if title is, in fact,
perfected. In the first scenario, if the successful bidder at the
trustee’s sale fails to pay the purchase price, the sale could be
rescinded, in which case the tenant vacated the property
unnecessarily. In the second scenario, the tenant could be liable
for damages that exceed the rent specified in the tenant’s lease.
(See Superior Motels, Inc. v. Rinn Motor Hotels, Inc. (1987) 195
Cal.App.3d 1032, 1069.) Our conclusion that a new owner must
perfect title before serving a three-day written notice to quit
eliminates these uncertainties by allowing the tenant to verify
title during the three-day notice period. It thus effectuates the
2
Dr. Leevil argues that the tenant here was a business
entity that was closely related to the property’s former owner,
and therefore the tenant knew that Dr. Leevil was the bona fide
owner. That may be so, but we must interpret section 1161a(b)
considering every situation in which the statute might apply,
including the situation in which the tenant has no such insider
knowledge. Moreover, “the code requirements [governing
unlawful detainer] must be followed strictly . . . .” (Cal–
American Income Property Fund IV v. Ho, supra, 161 Cal.App.3d
at p. 585, italics added.) The phrase “followed strictly” does not
suggest that an owner need only meet those requirements that
the owner considers to be significant in the context of the
transaction at issue.
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Opinion of the Court by Chin, J.
purposes of section 1161a(b), protecting the tenant’s interests
without excessively burdening the new owner.
In response to the foregoing reasoning, the Court of
Appeal asserted: “Westlake Health was free to challenge
[Dr.] Leevil’s claimed ownership in court. (Orcilla v. Big Sur,
Inc. (2016) 244 Cal.App.4th 982, 1010 [198 Cal.Rptr.3d 715]
[title can be litigated in a § 1161a unlawful detainer action].)”
(Dr. Leevil, LLC v. Westlake Health Care Center, supra, 9
Cal.App.5th at p. 456.) On this point, the Court of Appeal was
misleading. Orcilla and the cases on which it relies establish
only that Westlake Health could use the unlawful detainer
action to litigate whether Dr. Leevil “ ‘acquired the property at
a regularly conducted sale and thereafter “duly perfected” [its]
title.’ ” (Orcilla v. Big Sur, Inc. (2016) 244 Cal.App.4th 982,
1011, quoting Vella, supra, 20 Cal.3d at p. 255.) The unlawful
detainer action did not permit Westlake Health to litigate every
possible issue related to Dr. Leevil’s claim of ownership.
“Matters affecting the validity of the trust deed or primary
obligation itself, or other basic defects in the plaintiff’s title, are
neither properly raised in this summary proceeding for
possession, nor are they concluded by the judgment.” (Cheney v.
Trauzettel (1937) 9 Cal.2d 158, 160; see Vella, at p. 258
[“[S]ection 1161a does not require a defendant to litigate, in a
summary action within the statutory time constraints
[citations], a complex fraud claim involving activities not
directly related to the technical regularity of the trustee’s
sale”].)
Therefore, Westlake Health’s ability to challenge
Dr. Leevil’s claim of ownership was limited, and the Court of
Appeal erred in suggesting otherwise. And more generally, if
the cloud on a new owner’s title concerns an issue that cannot
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Opinion of the Court by Chin, J.
be litigated in an unlawful detainer action, and if, as the Court
of Appeal concluded, a new owner can serve a three-day written
notice to quit before perfecting title, then a holdover possessor
of the property would have no choice but to vacate the property
upon receipt of the notice. It is possible, however, that the cloud
on the title would prevent the title from ever being perfected, in
which case the holdover possessor would have vacated the
property unnecessarily. Therefore, a rule requiring a new owner
to perfect title before serving its three-day notice would avoid
the imposition of possibly unnecessary relocation expenses on
the possessor of the property.
Dr. Leevil argues that such a rule will lead to a delay
ranging from several days (in a typical case) to several weeks (in
a less typical case) and that the delay will increase the new
owner’s “carrying charges” (i.e., interest payments on debt,
property taxes, insurance, etc.), which will increase the damages
that a holdover possessor of the property will owe once the new
owner prevails in an unlawful detainer action. (See Code Civ.
Proc., § 1174, subd. (b).) In the case of a large commercial
property, a delay of a week or two might increase damages
significantly. Dr. Leevil argues that this increase in damages
will increase the number of unlawful detainer actions that can
be filed as “unlimited civil cases” — cases, that is, where the
amount in dispute exceeds $25,000 (see Code Civ. Proc., § 86,
subd. (a)(4)) — thus “clogging the court system.” We are not
persuaded by the argument. As an initial matter, we doubt that
a significant number of unlawful detainer cases will shift, as a
result of our decision, from limited civil cases to unlimited civil
cases (Code Civ. Proc., § 88). In the typical case, the far greater
proportion of the amount in dispute will likely depend on when
the unlawful detainer action is filed, as opposed to when the
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Opinion of the Court by Chin, J.
three-day written notice to quit is served. Here, for example,
Dr. Leevil perfected title five days after service of the notice to
quit, but it did not initiate this unlawful detainer action until a
month later, and during that time damages continued to mount.
In any event, our task is to read the statute as written, and for
reasons already explained, we read the statute as calling for title
to be perfected before the three-day notice is served.
CONCLUSION
We conclude that an owner that acquires title to property
under a power of sale contained in a deed of trust must perfect
title before serving the three-day written notice to quit required
by Code of Civil Procedure section 1161a(b). Accordingly, the
judgment of the Court of Appeal is reversed.
CHIN, J.
We Concur:
CANTIL-SAKAUYE, C. J.
CORRIGAN, J.
LIU, J.
CUÉLLAR, J.
KRUGER, J.
PEÑA, J.*
*
Associate Justice of the Court of Appeal, Fifth Appellate
District, assigned by the Chief Justice pursuant to article VI,
section 6 of the California Constitution.
14
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion Dr. Leevil, LLC v. Westlake Health Care Center
__________________________________________________________________________________
Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XXX 9 Cal.App.5th 450Rehearing Granted
__________________________________________________________________________________
Opinion No. S241324
Date Filed: December 17, 2018
__________________________________________________________________________________
Court: Superior
County: Ventura
Judge: Vincent J. O’Neill, Jr.
__________________________________________________________________________________
Counsel:
Enenstein Ribakoff LaViña & Pham, Enenstein Pham & Glass, Teri T. Pham and Courtney M. Havens for
Defendant and Appellant.
Law Offices of Ronald Richards & Associates, Ronald N. Richards, Nicholas Bravo; Wilson, Elser,
Moskowitz, Edelman & Dicker, Robert Cooper; Law Offices of Geoffrey Long and Geoffrey S. Long for
Plaintiff and Respondent.
Counsel who argued in Supreme Court (not intended for publication with opinion):
Teri T. Pham
Enenstein Pham & Glass
12121 Wilshire Boulevard, Suite 600
Los Angeles, CA 90025
(310) 899-2070
Ronald N. Richards
Law Offices of Ronald Richards & Associates
P.O. Box 11480
Beverly Hills, CA 90213
(310) 556-1001