Opinion
A160177
09-15-2021
HSBC BANK USA, N.A., as Trustee, etc., Plaintiff and Appellant, v. DONNA MARIE GOLDSTEIN, Defendant and Respondent.
NOT TO BE PUBLISHED
Order Filed Date: 9/30/2021
San Mateo County Super. Ct. No. 18-CIV-01786
ORDER MODIFYING OPINION AND DENYING REHEARING; NO CHANGE IN JUDGMENT
THE COURT:
It is ordered that the opinion filed herein on September 15, 2021, be modified as follows:
1. In Footnote 18, the case name in the citation following the first sentence is changed from “Grant v. De Otto” to “Grant v. De Otte.” The new footnote 18 should read in full as follows:
Actions seeking to enforce equitable liens fall within the scope of Probate Code section 9391. (Grant v. De Otte (1954) 122 Cal.App.2d 724, 728 [plaintiff could pursue suit for an equitable alien under the predecessor statute to Probate Code section 9391 without first making a claim in probate].)
2. In Footnote 19, the third sentence beginning, “Courts have upheld an effective waiver....” is replaced with: “Courts have upheld an effective waiver of recourse where a complaint to foreclose does not expressly seek a deficiency judgment, no deficiency judgment was granted, and there was no prejudice. (Schwartz v. Edmunds (1937) 20 Cal.App.2d 530.) We interpret HSBC's suit as effectively waiving recourse. We further note that, even if not so construed, our Supreme Court has approved of amendments to a complaint to allege waiver, so any amendment that may be required can be sought on remand. (Anglo-Californian Bank, Ltd. v. Field (1905) 146 Cal. 644, 655-656 [request for amendment at trial should have been granted but separate document filed setting forth the waiver was effective under predecessor to Probate Code section 9391]; see also Weimer v. Weimer (1933) 217 Cal. 545, 546-547 [addressing predecessor to Probate Code section 9391 and reversing judgment dismissing complaint where trial court refused to allow amendment to allege waiver].)” Thus, the new footnote 19 should read in full as follows:
Assuming the Option One loan is Andrew's debt alone, as Donna contends, HSBC would have to waive a deficiency judgment that may be available to avoid section 366.2's time-bar. The complaint in this matter does not seek a deficiency judgment. Courts have upheld an effective waiver of recourse where a complaint to foreclose does not expressly seek a deficiency judgment, no deficiency judgment was granted, and there was no prejudice. (Schwartz v. Edmunds (1937) 20 Cal.App.2d 530.) We interpret HSBC's suit as effectively waiving recourse. We further note that, even if not so construed, our Supreme Court has approved of amendments to a complaint to allege waiver, so any amendment that may be required can be sought on remand. (Anglo-Californian Bank, Ltd. v. Field (1905) 146 Cal. 644, 655-656 [request for amendment at trial should have been granted but separate document filed setting forth the waiver was effective under predecessor to Probate Code section 9391]; see also Weimer v. Weimer (1933) 217 Cal. 545, 546-547 [addressing predecessor to Probate Code section 9391 and reversing judgment dismissing complaint where trial court refused to allow amendment to allege waiver].) HSBC argues on appeal that Donna ratified the loan transaction, and the loan is her debt. HSBC did not develop this argument below, but we need not address it given our disposition.
There is no change in judgment.
The petition for rehearing is denied.
BROWN, J.
This case involves a dispute regarding a loan evidenced by a promissory note signed by Andrew Goldstein, defendant Donna Goldstein's husband, and secured by a deed of trust to the family home, also signed by Andrew. HSBC Bank USA, N.A., as trustee for Ace Securities Corporation Home Equity Loan Trust, Series 2006-OP2 (HSBC), appeals from the judgment after the trial court granted summary judgment against HSBC on the ground that the three-year statute of limitations in Code of Civil Procedure section 338, subdivision (d) (section 338(d)) barred HSBC's suit. We reverse the grant of summary judgment because section 338(d) does not apply to HSBC's claims based on theories of equitable mortgage or equitable subrogation, and Donna has not established entitlement to judgment on alternative bases. We conclude, however, that Donna is entitled to summary adjudication of HSBC's causes of action for quiet title, reformation, unjust enrichment, and equitable estoppel, as well as HSBC's cause of action for declaratory relief to the extent that claim is based on theories other than equitable subrogation or equitable mortgage.
Because Andrew and Donna share a last name, we refer to them hereafter by their first names for ease of reference.
All further statutory references are to the Code of Civil Procedure unless otherwise indicated.
HSBC in effect combined multiple causes of action in its declaratory relief claim and prayer for relief on that claim. For purposes of summary adjudication, we may address separate causes of action separately, even if a plaintiff has combined them in one nominal “cause of action” in the complaint. (Exxon Corp. v. Superior Court (1997) 51 Cal.App.4th 1672, 1688, fn. 11.) We consider HSBC's requests for declaratory relief premised on equitable subrogation or equitable mortgage theories to be the same as the equitable subrogation and equitable mortgage claims it pled separately.
FACTUAL BACKGROUND
In 1989, Donna and Andrew acquired the real property located at 1431 Laguna Avenue, Burlingame, California 94010 (the property) and held title as “Andrew Goldstein and Donna M. Goldstein, husband and wife, as community property.”
On September 28, 2005, Andrew and Donna signed a grant deed transferring title of the property to “Andrew Goldstein, a married man as his sole and separate property.” That deed was recorded on October 18, 2005. Also recorded on October 18, 2005 was a deed of trust on the property (the 2005 deed of trust) that Andrew executed as “Andrew Goldstein, a married man as his sole and separate property, ” in favor of Long Beach Mortgage Company as security for a $650,000 loan evidenced by a promissory note (the Long Beach loan).
On October 31, 2005, a grant deed was recorded that reconveyed title of the property from “Andrew Goldstein, a married man, as his sole and separate property” to “Andrew Goldstein and Donna M. Goldstein, husband and wife as community property.” Andrew had executed that grant deed on September 28, 2005.
In May 2006, Option One Mortgage Corporation (Option One) loaned Andrew $780,000, and he executed an adjustable rate note for that amount (the Option One loan). Donna was not a signatory. On May 11, 2006, Andrew executed a deed of trust to Option One as security for the Option One loan as “Andrew Goldstein, a married man as his sole and separate property”; this deed was recorded on May 18, 2006 (the 2006 deed of trust). Again, Donna was not a signatory. The Option One loan paid off the Long Beach loan in the payoff amount of approximately $656,992, and Long Beach reconveyed the 2005 deed of trust. Approximately two months before Option One loaned Andrew the money, it obtained a title report erroneously stating that title to the property was vested in “Andrew Goldstein, a married man as his sole and separate property.”
On April 21, 2011, Andrew and Donna filed a joint Chapter 13 bankruptcy petition. In 2013, HSBC received an assignment of the 2006 deed of trust from Option One. Andrew passed away on November 18, 2014. On August 25, 2015, the bankruptcy court entered a final decree of hardship discharge and an order dismissing the bankruptcy trustee.
PROCEDURAL BACKGROUND
HSBC sued Donna on April 11, 2018. The complaint alleged causes of action for quiet title, reformation, equitable subrogation, equitable estoppel, declaratory relief, unjust enrichment, and an equitable mortgage and/or lien.
Donna filed a motion for summary judgment based on two statutes of limitation, or, alternatively, for summary adjudication of each of HSBC's causes of action. As a ground for summary judgment, Donna argued that section 338(d) barred the action because undisputed evidence showed that Option One had information that would have put a reasonable person on inquiry notice of mistake more than three years before the filing of the complaint, even considering the bankruptcy tolling period. Contending that HSBC sought to hold her personally liable for Andrew's separate liability more than one year after his death, Donna also argued that section 366.2 barred the action.
Section 338(d) provides a three-year statute of limitations for “[a]n action for relief on the ground of fraud or mistake. The 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.”
Section 366.2 provides in relevant part as follows: “If a person against whom an action may be brought on a liability of the person, whether arising in contract, tort, or otherwise, and whether accrued or not accrued, dies before the expiration of the applicable limitations period, and the cause of action survives, an action may be commenced within one year after the date of death, and the limitations period that would have been applicable does not apply.” (§ 366.2, subd. (a).)
The trial court ruled that section 338(d) barred the suit. It found, “No triable issue of material fact exists as to the dates of record notice of Defendant's interest in the Property and Defendant is entitled to judgment as a matter of law.... [¶] Plaintiff has not provided admissible contrary evidence to Defendant's evidence... that Option One Mortgage was notified by North American Title Insurance Company in a Trustee's Sale Guarantee that title to the Property was vested as ‘Andrew Goldstein and Donna M. Goldstein, husband and wife as community property,' on March 23, 2007; that on February 27, 2008, and again on March 14, 2008 Option One Mortgage was notified by First American Title Insurance Company Loss Mitigation Title Services that the Subject Loan was not holding first lien position on the property, that Donna Goldstein was a record owner at the time of the Subject Deed of Trust, and that all vested owners must execute the loan modification; that on April 14, 2009 and again on September 28, 2010 Option One Mortgage was notified by Chicago Title Insurance Co. in a Trustee Sale guarantee that title to the Property was vested as ‘Andrew Goldstein and Donna M. Goldstein, husband and wife as community property, '; that further notice was provided on October 8, 2010 by Fidelity National Title Company of Defendant Donna Goldstein's interest. This information would put a reasonable person on inquiry that Defendant had an interest in the Subject Property which was senior to the Deed of Trust. The statute of limitations pursuant to [section] 338(d) therefore began to run on March 23, 2007, and expired three years thereafter on March 23, 2010, prior to the filing of the bankruptcy action which would have tolled the statute.”
The court did not address section 366.2 or Donna's alternative requests for summary adjudication. Donna's subsequent motion to expunge the lis pendens was granted, and judgment was entered in Donna's favor. The judgment included a decree that the 2006 deed of trust no longer encumbered the property. HSBC timely appealed.
DISCUSSION
I. Standard of Review
Summary judgment is appropriate “if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” (§ 437c, subd. (c).) A defendant meets “his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to the cause of action.” (§ 437c, subd. (p)(2).) Where the defendant moves for summary judgment on the grounds that one or more elements of the plaintiff's claim cannot be established, the defendant must present evidence that either “conclusively negate[s] an element of the plaintiff's cause of action” or “show[s] that the plaintiff does not possess, and cannot reasonably obtain, ” evidence needed to establish an element of the claim. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 853-854.) A defendant can also satisfy his or her initial burden of proof on summary judgment by “showing” a “complete defense” to a cause of action. (§ 437c, subd. (p)(2).) If the defendant meets his or her initial burden, the burden shifts to the plaintiff to show “that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.” (§ 437c, subd. (p)(2).)
We review an order granting summary judgment de novo, considering the evidence set forth in the moving and opposing papers except that to which objections were made and sustained. (Yanowitz v. L'Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1037.) “We liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” (Ibid.)
II. Mortgages and Deeds of Trust
As this dispute centers on secured real property transactions, we begin with some background relating to these transactions. “A real property loan generally involves two documents, a promissory note and a security instrument. The security instrument secures the promissory note. This instrument ‘entitles the lender to reach some asset of the debtor if the note is not paid. In California, the security instrument is most commonly a deed of trust (with the debtor and creditor known as trustor and beneficiary and a neutral third party known as trustee). The security instrument may also be a mortgage (with mortgagor and mortgagee, as participants). In either case, the creditor is said to have a lien on the property given as security, which is also referred to as collateral.' ” (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1235 (Rothwell).)
“California has an elaborate and interrelated set of foreclosure and antideficiency statutes relating to the enforcement of obligations secured by interests in real property.” (Rothwell, supra, 10 Cal.4th at p. 1236.) “Pursuant to this statutory scheme, there is only ‘one form of action' for the recovery of any debt or the enforcement of any right secured by a mortgage or deed of trust.” (Ibid.) That form of action is foreclosure, either judicial or nonjudicial. (Ibid, citing §§ 725a, 726, subd. (a).)
Because a security instrument is merely incident to, and measured by, the performance of the underlying obligation (5 Miller & Starr, Cal. Real Estate (4th ed. 2016) § 13:1; see Rothwell, supra, 10 Cal.4th at p. 1235), a mortgage or an equitable mortgage that secures an obligation that is unenforceable because of the expiration of the period of limitations cannot be enforced by either judicial foreclosure proceedings or, where a mortgage includes a power of sale, by the exercise of that power. (5 Miller & Starr, supra, § 13:161; Civil Code, § 2911, subd. (1) .) Likewise, a deed of trust cannot be foreclosed through judicial proceedings when the period of limitations has expired for the enforcement of the underlying obligation. (Nicolopulos v. Superior Court (2003) 106 Cal.App.4th 304, 309 (Nicolopulos).)
This statute provides, in relevant part, “A lien is extinguished by the lapse of time within which, under the provisions of the Code of Civil Procedure... [¶]... [a]n action can be brought upon the principal obligation.”
In contrast, the expiration of the time to enforce the obligation underlying a deed of trust does not bar nonjudicial foreclosure of the lien. (Nicolopulos, supra, 106 Cal.App.4th at p. 309; Trenk v. Soheili (2020) 58 Cal.App.5th 1033, 1042-1043.) Before 1982, the power of sale under a deed of trust was never time-barred. (Nicolopulos, at p. 310.) After the 1982 enactment of the Marketable Record Title Act, Civil Code section 880.020 et seq., the lien enforceable through the power of sale in a deed of trust expires 10 years after the final maturity date of the obligation if that date “is ascertainable from the recorded evidence of indebtedness, ” or 60 years after recordation of the deed if not. (Civ. Code, § 882.020, subd. (a)(1) & (2).)
Historically, the rule has been that time does not outlaw the trustee's power of sale under a deed of trust, although the same power in a mortgage would be subject to the statute of limitations on the underlying debt. (Aviel v. NG (2008) 161 Cal.App.4th 809, 817, fn. 4.)
This statute states, “Unless 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” 10 years after the final maturity date of the obligation if ascertainable from the recorded indebtedness or 60 years after recordation of the deed if not. (Civ. Code, § 882.020, subd. (a).) The law prior to this statute's enactment established that a lien enforced through a deed of trust's power of sale could not be extinguished through Civil Code section 2911, so courts interpret the statute's first use of the word “lien” as excluding such a lien. (Trenk v. Soheili, supra, 58 Cal.App.5th at p. 1042, fn. 8.) Civil Code section 882.030, which states that “[e]xpiration of the lien of a mortgage, deed of trust, or other security interest pursuant to this chapter or any other statute renders the lien unenforceable by any means commenced or asserted thereafter, ” similarly does not bar nonjudicial foreclosure pursuant to the power of sale in a deed of trust where the statute of limitations has run on the underlying obligation. (Ung v. Koehler (2005) 135 Cal.App.4th 186, 192-195.)
III. Statute of Limitations Analysis
HSBC alleged causes of action for: 1) quiet title; 2) reformation; 3) equitable subrogation; 4) equitable estoppel; 5) declaratory relief; 6) unjust enrichment; and 7) an equitable mortgage/lien. HSBC's claims for quiet title, reformation, equitable estoppel, and an equitable mortgage seek to ensure a lien on the entire property in the principal amount of the Option One loan, whereas HSBC's unjust enrichment and equitable subrogation claims assert theories of recovery based on Option One's payoff of the Long Beach loan. In its declaratory relief claim, HSBC seeks enforcement of the 2006 deed of trust as a lien on the entire property, or alternatively, a lien based on its equitable lien theory or a lien based on Option One's payment of the Long Beach loan under its theory of equitable subrogation.
Donna moved for summary judgment on the grounds that the statutes of limitation set forth in sections 338(d) and 366.2 barred the action. “To determine the statute of limitations which applies to a cause of action it is necessary to identify the nature of the cause of action, i.e., the ‘gravamen' of the cause of action.” (Hensler v. City of Glendale (1994) 8 Cal.4th 1, 22-23; see Robin v. Crowell (2020) 55 Cal.App.5th 727, 739.) “ ‘The gravamen of an action depends on the nature of the right sued upon or the principal purpose of the action.' ” (Robin v. Crowell, at p. 739.)
A. Reformation and Quiet Title
A claim for reformation of an instrument based on fraud or mistake is subject to a three-year statute of limitations. (§ 338(d); Welsher v. Glickman (1969) 272 Cal.App.2d 134, 140 [reformation of deed due to mistake]; Tarke v. Bingham (1898) 123 Cal. 163, 165-166 [reformation of mortgage due to mistake].) HSBC's reformation cause of action alleges that, “due to mistake and inadvertence, ” the 2006 deed of trust failed to encumber both Donna's and Andrew's interests in the property. Section 338(d) thus provides the applicable statute of limitations for the reformation cause of action.
HSBC conceded in the trial court that the statute of limitations “on the reformation claims” “may have started and expired.” In its reply brief on appeal, it likewise states that its “cause of action for reformation is arguably an ‘action for relief on the ground of fraud or mistake' ” to which section 338(d) applies.
Regarding HSBC's quiet title claim, “[t]he 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.” (Salazar v. Thomas (2015) 236 Cal.App.4th 467, 476.) HSBC seeks a judgment quieting title and “establishing that the May 9, 2006 Deed of Trust... is/was a lien against the entirety of the [property].” (Italics added.) The only theory HSBC pled that would allow the 2006 deed of trust itself to constitute a lien on the entire property is its theory of reformation based on mistake. As such, section 338(d) provides the applicable statute of limitations for this cause of action as well.
This stands in contrast to HSBC's equitable mortgage and subrogation theories discussed in parts III(B) and (C), post.
A cause of action subject to section 338(d) does not accrue “until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” (§ 338(d).) It was undisputed that the 2005 grant deed reconveying title of the property to Andrew and Donna as community property was recorded before the 2006 deed of trust. Civil Code section 1213 provides, in part, “Every conveyance of real property... acknowledged or proved and certified and recorded as prescribed by law from the time it is filed with the recorder for record is constructive notice of the contents thereof to subsequent purchasers and mortgagees....” On March 23, 2007, Option One issued a notice of default and received a trustee's sale guarantee notifying it that Donna and Andrew held the property as community property. On February 27, 2008, Option One was notified by a report from First American Title Insurance Company that ownership of the property transferred to Andrew and Donna as community property on October 31, 2005, and that “[m]ortgage holder and vested owner do not match.” While HSBC maintains its mistake-based reformation claim did not accrue until 2016, the record is clear that HSBC's predecessor knew, or should have known, of the facts constituting the alleged mistake by February 27, 2008, at the latest. HSBC's claims for reformation and quiet title were time-barred before the April 2011 bankruptcy.
HSBC purported to dispute this fact in its response to Donna's separate statement. However, HSBC argued only that the trustee's sale guarantee “does not constitute notice of the title of the property, ” Option One did not know the state of title at that time, and Option One relied on Andrew's will and information “from the Long Beach mortgage.” The only supporting evidence that HSBC submitted with this response was the purported will, and the trial court sustained Donna's objection thereto.
B. Equitable Mortgage
Seeking to establish an equitable mortgage, HSBC alleged that Option One loaned $780,000, with the intent and understanding that the loan would be secured by the entire property, and that this security interest would be in senior position. “An ‘equitable mortgage' is one that is created by a court of equity rather than by the formal act of the parties. Under certain circumstances, the court determines that equity, fairness, and justice warrant enforcement of a security interest between the parties despite the fact that no formal mortgage was created or that an attempted creation was defective.” (5 Miller & Starr, Cal. Real Estate, supra, § 13:31.) “When the parties intend to create a mortgage or deed of trust but it is defectively executed or lacks enough specific detail to create a valid security instrument, the court may conclude, nonetheless, that a lien of an equitable mortgage exists on the property.” (Id. § 13:32.) Upon a judicial finding of an equitable mortgage, pursuant to the “one form of action” rule, the remedy available to the grantee-mortgagee is to seek to judicially enforce the equitable mortgage. (Id. § 13:35; see Kaiser Industries Corp. v. Taylor (1971) 17 Cal.App.3d 346, 352; Aguilar v. Bocci (1974) 39 Cal.App.3d 475, 477 (Aguilar).)
As Donna acknowledges, a court will grant an equitable mortgage to carry out the parties' intent (Aguilar, supra, 39 Cal.App.3d at p. 477), but “only as incidental to the enforcement of the original obligation.” (Beal v. United Properties Co. (1920) 46 Cal.App. 287, 297-298 (Beal).) Thus, while the parties cite scant authority addressing what statute of limitations applies to a claim seeking to establish an equitable mortgage, it appears that the pertinent statute of limitations is that applicable to an action to enforce the underlying obligation. Civil Code section 2911 provides, “A lien is extinguished by the lapse of the time within which an action can be brought upon the principal obligation.” “[W]here the principal obligation is unenforceable because barred by the statute of limitations... equity cannot declare or enforce a lien.” (Beal, at p. 298.) In Beal, because an action to enforce the underlying obligation created by an oral contract was time-barred, the court commented that “whatever right plaintiff had to an equitable lien growing out of the oral contract was lost before this action was commenced.” (Ibid.; see Aguilar, supra, 39 Cal.App.3d at p. 477 [remedies of quieting title to declare an equitable lien or judicial foreclosure were time-barred where statute of limitations ran on the underlying debt]; Filmservice Laboratories, Inc. v. Harvey Bernhard Enterprises, Inc. (1989) 208 Cal.App.3d 1297, 1308-1309 [same]; 5 Miller & Starr, Cal. Real Estate, supra, § 13:161 [a mortgage or equitable mortgage that secures an obligation that is unenforceable because of the expiration of the period of limitations cannot be enforced by either judicial foreclosure proceedings or by the exercise of the power of sale].)
Here, the underlying obligation is Option One's written loan evidenced by a promissory note, and a claim to enforce that obligation is not governed by section 338(d). In one part of her briefing, Donna claims that “the Subject Loan [is] barred by the lapse of time, ” but she does not specify what statute of limitations is applicable to the underlying obligation here, and she did not argue or establish below that the time to enforce this obligation had passed. HSBC states briefly that section 337 provides the applicable statute of limitation, but neither party addresses Commercial Code section 3118, subdivision (a), which provides a six-year statute of limitations for an action to enforce the obligation to pay a note payable at a definite time, or whether that statute would apply. Donna did not establish below that either the four-year statute under section 337 or the six-year statute under Commercial Code section 3118, subdivision (a), had run. Although a notice of default issued on March 23, 2007, there was a loan modification in May 2008. Because Donna does not address the statute of limitations on the underlying obligation or whether the modification affects the running of the statute of limitations, summary adjudication on a theory that the statute of limitations ran on the underlying obligation is inappropriate here. The trial court's ruling with respect to this equitable claim must accordingly be reversed.
We take no position on whether Donna may be able to establish her entitlement to summary adjudication on this basis on remand.
C. Equitable Subrogation
“ ‘As applied in the real property context, equitable subrogation provides an exception to the ‘first in time, first in right' system of lien priorities where equity requires a different result. [Citations.] When a lender ‘ “advances money to pay off an encumbrance on realty at the instance of either the owner of the property or the holder of the incumbrance, either on the express understanding, or under circumstances from which an understanding will be implied, that the advance made is to be secured by a first lien on the property, ”' and ‘ “the new security is for any reason not a first lien on the property, ”' then the lender who holds that security, ‘ “if not chargeable with culpable and inexcusable neglect, will be subrogated to the rights of the prior encumbrancer under the security held by him, unless the superior or equal equities of others would be prejudiced thereby.”' [Citation.] In short, equitable subrogation allows a lender who pays off a borrower's debt to a creditor ‘ “to succeed to the rights and remedies of the creditor so paid.”' ” (Bank of New York Mellon v. Citibank, N.A. (2017) 8 Cal.App.5th 935, 948 (Bank of New York).)
“The right of subrogation is purely derivative: a party entitled to subrogation has the same rights as an assignee of the creditor's claim, must stand in the creditor's shoes, and is subject to the same defenses. [Citation.] A claim for equitable subrogation is subject to the statute of limitations that applies to the right to which the claimant is subrogated. [Citation.] In other words, ‘equity will enforce subrogation only when the action is brought within the time in which an action could have been brought to enforce the original obligation to which the right of subrogation is sought.' ” (Bank of New York, supra, 8 Cal.App.5th at p. 948.)
On the question of whether section 338(d) applies to the equitable subrogation claim here, Bank of New York is instructive. There, theplaintiff's predecessor, Countrywide, issued a line of credit secured by a deed of trust in favor of borrowers in 2006. (Bank of New York, supra, 8 Cal.App.5th at p. 941.) The borrowers represented they would use Countrywide's line of credit to pay off a preexisting line of credit secured by a deed of trust from Citibank. (Id. at p. 940.) The borrowers simultaneously then opened, but did not disclose to Countrywide, a second line of credit with Citibank secured by a second deed of trust, and Countrywide's title report did not pick up this line of credit; the borrowers used Citibank's second line of credit to pay down the first line of credit. (Id. at pp. 940-941.) Countrywide's funds were then applied to pay down Citibank's second line of credit, and Countrywide's deed of trust was recorded after Citibank's second deed of trust. (Id. at pp. 940-941.) The borrowers' alleged fraud thus resulted in Countrywide's deed of trust being junior to Citibank's second deed of trust. (Id. at pp. 942, 956.)
After Citibank initiated foreclosure proceedings under its second deed of trust in 2011, the plaintiff, Countrywide's successor, sued Citibank and the borrowers in 2013 seeking, among other things, declaratory relief based on equitable subrogation, and fraud damages from the borrowers. (Bank of New York, supra, 8 Cal.App.5th at pp. 941-942.) The trial court determined on demurrer that section 338(d) and 338, subdivision (a) barred the action. (Id. at pp. 942, 949-950.) The appellate court reversed as to the declaratory relief claim. It found that the gravamen of plaintiff's claim was equitable subrogation, and the right to proceed against the borrowers under Citibank's second deed of trust was not subject to demurrer because the equitable subrogation claim “on its face, is not subject to the three-year statute of limitations in section 338.” (Id. at pp. 947, 949.) As relevant here, the court explained that plaintiff's claim was not time-barred under section 338(d) because plaintiff's equitable subrogation theory was “not in the nature of relief from... fraud or mistake, ” in that Citibank-the creditor to whose position plaintiff sought to be subrogated-was not “the alleged victim of fraud or mistake as to its own security.” (Id. atpp. 949-950.)
HSBC seeks to be subrogated to Long Beach's position of priority by virtue of Option One's payment of the Long Beach loan, which would allow HSBC to assert Long Beach's rights under the 2005 deed of trust. (Simon Newman Co. v. Fink (1928) 206 Cal. 143, 146 [holder of new security who pays off prior creditor will be subrogated to that creditor's rights under that creditor's security].) Like the scenario in Bank of New York, HSBC's right to proceed under the 2005 deed of trust is not in the nature of relief from fraud or mistake, as there is no allegation that Long Beach was the victim of any wrongdoing or error. (Bank of New York, supra, 8 Cal.App.5th at p. 950.) Thus, the trial court erroneously ruled that section 338(d) bars HSBC's equitable subrogation claim.
We address in Section IV, post, Donna's arguments that HSBC's claims are all untimely under section 366.2 even if section 338(d) is inapplicable, and her contention that HSBC is not entitled to equitable subrogation because of its inexcusable neglect and the prejudice to Donna's interest.
D. Declaratory Relief
A claim for declaratory relief is subject to the same statute of limitations as the legal or equitable claim on which it is based. (Bank of New York, supra, 8 Cal.App.5th at p. 943; Embarcadero Mun. Improvement Dist. v. County of Santa Barbara (2001) 88 Cal.App.4th 781, 793.)
HSBC's causes of action for declaratory relief prays for a judgment that “[t]he [2006 deed of trust] is a valid, enforceable, first priority trust deed on the [e]ntirety [of the property] as of May 9, 2006; or [¶] [i]n the event that the [2006 deed of trust] is declared to be a valid, enforceable lien, as to only a one half interest in the subject property, for declaratory judgment that [HSBC] is equitably subrogated as alleged herein; or in the alternative... entitled to an equitable lien as alleged herein.” To the extent that HSBC's request for declaratory relief is premised on a mistake theory, it is time-barred under section 338(d), as explained above. However, unlike HSBC's quiet title claim, its declaratory relief claim alternatively relies on equitable theories. Accordingly, to the extent that HSBC seeks declaratory relief premised on equitable subrogation and equitable mortgage theories, section 338(d) does not bar the claim. (Bank of New York, supra, 8 Cal.App.5th at pp. 943-944, 947, 953 [section 338(d) did not bar plaintiff's declaratory relief claim, which in effect sought a declaration quieting title based on equitable subrogation].)
E. Unjust Enrichment and Equitable Estoppel
HSBC pled in its complaint stand-alone causes of action for unjust enrichment and equitable estoppel. We requested supplemental briefing regarding whether these are stand-alone causes of action under California law. As set forth below, summary adjudication of these purported claims was proper irrespective of section 338(d).
Donna, and HSBC to a lesser extent, submitted argument in supplemental briefing that exceeds the scope of our request. We do not consider these additional arguments.
In the circumstances of this case, HSBC's “unjust enrichment” claim is not distinguishable from its request for equitable subrogation. Courts have observed that “unjust enrichment” does not constitute an independent cause of action, but describes a situation that merits restitution. (E.g., Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4th 779, 793; McBride v. Boughton (2004) 123 Cal.App.4th 379, 387.) Citing Hartford Casualty Ins. Co. v. J.R. Marketing, L.L.C. (2015) 61 Cal.4th 988, 998 (Hartford), HSBC argues that unjust enrichment is a stand-alone cause of action, or its cause of action should be construed as a quasi-contract claim seeking restitution. In Hartford, our Supreme Court held that, in the limited and unusual circumstances of the case before it, an insurer could seek reimbursement directly from Cumis counsel under a trial court order expressly preserving the insurer's postlitigation right to recover “ ‘unreasonable or unnecessary' ” fees billed by the Cumis counsel. (Id. at pp. 994, 999-1000.) We disagree with HSBC's assertion that the Supreme Court “has ruled” that unjust enrichment constitutes an independent cause of action, as that issue was not addressed in Hartford. In the course of holding that the insurer could directly pursue Cumis counsel for reimbursement of allegedly unreasonable fees, the Supreme Court cited the Restatement Third of Restitution and Unjust Enrichment and discussed the equitable principle of restitution. (Hartford, at p. 998.) California courts have recognized that equitable subrogation is a means to enforce restitution to prevent unjust enrichment. (Estate of Kemmerrer (1952) 114 Cal.App.2d 810, 814 [equitable subrogation may be used “ ‘to enforce restitution in order to prevent unjust enrichment' ”]; Bank of New York, supra, 8 Cal.App.5th at pp. 955, 957.) HSBC concedes that it seeks to use a quasi-contract or restitution theory to place Donna “in the same position as her late husband, Andrew Goldstein, on the deed of trust.” As unjust enrichment does not constitute an independent cause of action (McBride, at p. 387), summary adjudication of that claim is appropriate, and we shall consider the unjust enrichment theory in the complaint to be a variation of the equitable subrogation cause of action premised on the equitable principles of restitution, rather than a separate cause of action. (Bank of New York, at p. 955 [finding same and allowing suit to go forward under the doctrine of equitable subrogation].)
Equitable estoppel similarly does not constitute an independent cause of action. (Behnke v. State Farm General Ins. Co. (2011) 196 Cal.App.4th 1443, 1463.) Rather, “ ‘ “[t]he [equitable estoppel] doctrine acts defensively only.”' ” (Ibid.) As stated in Money Store Investment Corp. v. Southern Cal. Bank (2002) 98 Cal.App.4th 722, 732, a separately-pled cause of action for equitable estoppel “cannot stand as such.” In its supplemental briefing, HSBC agrees, and it concedes that it pled a stand-alone cause of action for equitable estoppel. While HSBC attempts to backtrack somewhat and now contends that it actually meant for its equitable estoppel claim to be a mere extension of other claims, the complaint clearly set forth a separate “Fourth Cause of Action” for equitable estoppel. Summary adjudication of this purported stand-alone cause of action is proper.
We express no opinion on HSBC's ability to use the doctrine of equitable estoppel in support of any of its claims that survive summary adjudication.
F. Estoppel to Assert the Statute of Limitations
HSBC next argues that Donna is equitably estopped from asserting the statute of limitations because of her acts in the bankruptcy. We reject this argument because HSBC did not argue below that Donna's bankruptcy acts served to estop her from asserting the statute of limitations. “[P]ossible theories that were not fully developed or factually presented to the trial court cannot create a ‘triable issue' on appeal.” (Havstad v. Fidelity National Title Ins. Co. (1997) 58 Cal.App.4th 654, 661 .) HSBC argued below only that Donna was equitably estopped from asserting the statute of limitations because HSBC relied on Andrew's alleged 1992 will, which purportedly required Donna to assume payment on the Option One loan along with its bequeath of Andrew's interest in the property. In any event, HSBC's new argument does not assist it because the earliest act serving as a basis for its theory occurred after the April 21, 2011 bankruptcy filing, by which time the statute of limitations had already run on its claims for reformation, quiet title, and declaratory relief based on reformation or mistake.
G. Additional New Arguments on Appeal
HSBC raises a number of other arguments for the first time on appeal, including that Donna ratified the Option One loan and 2006 deed of trust, Donna is equitably estopped from invoking Family Code section 1102 because of her knowing acceptance of a benefit, Donna is judicially estopped from denying the Option One loan and 2006 deed of trust, and Donna did not dispute this deed of trust under Family Code section 1102 within a year as allegedly required. HSBC did not, however, argue ratification as a basis for withstanding summary judgment. HSBC makes no effort to connect these arguments to the statute of limitations issue ruled upon below, and we decline to address arguments that were not adequately raised in the trial court. (Havstad v. Fidelity National Title Ins. Co., supra, 58 Cal.App.4th at p. 661 .)
IV. Alternative Grounds for Summary Judgment/Adjudication
Having determined that the trial court erred in finding that Donna was entitled to summary judgment under section 338(d), we turn to Donna's arguments concerning alternative bases for affirming the judgment in her favor.
A. Section 366.2 and Probate Code sections 13550, 13551, and 13554
Donna urges us to affirm the grant of summary judgment on the alternative ground that the Option One loan was Andrew's separate obligation, not a community obligation, and that Probate Code sections 13550, 13551, 13554, and the one-year statute of limitations in section 366.2 (made applicable through Probate Code section 13554, subdivision (c)), provide a complete defense to HSBC's complaint. The trial court did not address this ground. Although in some instances a reviewing court may affirm the grant of summary judgment on a basis not relied upon by the trial court (§ 437c, subd. (m)(2)), we decline to do so in this case.
First, a review of relevant community property and probate principles is warranted. Donna argues that the loan incurred by Andrew was not a community obligation, but the community is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt. (Fam. Code, § 910, subd. (a); Lezine v. Security Pacific Financial (1996) 14 Cal.4th 56, 63-64.) This is true whether a spouse incurs an obligation for the benefit of the community or whether he or she incurs an obligation for his or her own personal benefit. (Lezine, at p. 64.)
Upon the death of a spouse, one half of the community property belongs to the surviving spouse and the other half belongs to the decedent. (Prob. Code, § 100, subd. (a).) When a spouse dies leaving property that passes intestate to a surviving spouse (Prob. Code, § 6401), or dies and by will devises all or a part of his or her property to the surviving spouse, the property passes to the surviving spouse without the need for administration. (Prob. Code, § 13500.) Although property may pass without administration, the surviving spouse may choose to initiate legal proceedings. The surviving spouse may petition for a court determination that administration is not necessary and to have his or her ownership of the property confirmed. (Prob. Code, § 13650 et seq.) The surviving spouse also may elect to have the property passing from the decedent administered, and further may elect to submit to administration the share of community and/or quasi-community property belonging to the surviving spouse. (Prob. Code, § 13502.) The surviving spouse may elect administration to avoid personal liability that may otherwise exist if property passes without administration. (Prob. Code, § 13553.)
When the surviving spouse succeeds to a deceased spouse's property without administration, Probate Code section 13550 applies to determine the personal liability of the surviving spouse for the decedent spouse's debts. (Dawes v. Rich (1997) 60 Cal.App.4th 24, 31 (Dawes).) “Under [Probate Code] section 13550, the surviving spouse who receives community property without probate administration ‘is personally liable for the debts of the deceased spouse chargeable against the property described in [Probate Code] Section 13551 to the extent provided in [Probate Code] Section 13551.' (Italics added.) Probate Code section 13551 in turn provides that the liability created by Probate Code section 13550 shall not exceed the fair market value [minus the amount of encumbrances and liens] of the community property and the decedent's separate property which passed to the survivor without administration.” (Dawes, at p. 31; § 13551.) This rule reflects basic tenets of California's community property scheme dictating that community property is liable for the debts of either spouse incurred before or during marriage, but the separate property of one spouse is liable only for that spouse's debt. (Fam. Code, §§ 910, subd. (a), 913, subds. (a), (b).) Creditors seeking to hold the surviving spouse personally liable for the decedent's debts must bring suit within the one-year time limit set forth by section 366.2. (Prob. Code, § 13554, subd. (c).)
Section 366.2 provides, in relevant part, “If a person against whom an action may be brought on a liability of the person, whether arising in contract, tort, or otherwise, and whether accrued or not accrued, dies before the expiration of the applicable limitations period, and the cause of action survives, an action may be commenced within one year after the date of death, and the limitations period that would have been applicable does not apply.” (§ 366.2, subd. (a).) In 1990, the Legislature made various amendments to the Probate Code, as well as to section 366.2's predecessor, former section 353, to address concern that the then-applicable four-month period governing creditor claims in probate was not constitutionally sound for creditors who lacked actual notice. (Dawes, supra, 60 Cal.App.4th at p. 33.) The Law Revision Commission believed the one-year statute running from death, now embodied in section 366.2, would pass constitutional muster. (Recommendation Relating to Notice to Creditors in Estate Administration (Dec. 1989) 20 Cal. Law Revision Com. Rep. (1990) pp. 512-513.) The Law Revision Commission recommendation explained that “ ‘the one year statute of limitations is intended to apply in any action on a debt of the decedent[, ]” including creditor actions against surviving spouses. (Collection Bureau of San Jose v. Rumsey (2000) 24 Cal.4th 301, 308, italics omitted.)
In 1992, section 353 was repealed and reenacted without substantive change as sections 366.1 and 366.2. (Stats. 1992, ch. 178, §§ 6, 8, p. 887; Revised Recommendation Regarding Litigation Involving Decedents (Apr. 1992) 22 Cal. Law Revision Com. Rep. (1991-1992) p. 895, 919.)
This is also true for actions against a personal representative (Probate Code sections 9350 to 9354), a distributee (Probate Code section 9392), a person who takes the decedent's property and is liable for the decedent's debts under Probate Code sections 13109 (affidavit procedure for collection or transfer of personal property), 13156 (court order determining succession to real property), 13204 (affidavit procedure for real property of small value), and 13554 (passage of property to surviving spouse without administration), or a trustee. (Rumsey, supra, 24 Cal.4th at p. 308.)
Amidst this legal backdrop, the court in Dawes, on which Donna relies to support her section 366.2 argument, addressed whether former section 353 applied to an attempt by creditors to reach community property of a deceased spouse to satisfy a judgment obtained against the surviving spouse on his business liability. (Dawes, supra, 60 Cal.App.4th at p. 33.) The creditors sued the surviving spouse during the marriage, but their suits did not resolve until after his wife's death. (Id. at pp. 26-27.) Upon her death, her community property passed to two irrevocable trusts against which the creditors sought to execute their judgment. (Ibid.) The appellate court held that the trustees of the irrevocable trusts did not receive the deceased spouse's share of the community estate entirely free from liability for debts incurred by her husband during the marriage, but former section 353 barred the creditors' attempts to reach these trust assets. (Id. at pp. 32, 36.) The court observed that, when the surviving spouse is asked to pay debts incurred by a deceased spouse, section 366.2 expressly applies (Prob. Code, § 13554), and the court reasoned, “It is difficult to discern any reason for providing a surviving spouse greater protection from claims incurred during a marriage than is afforded to his or her deceased spouse's estate.... [I]t does not seem likely that the Legislature would intend that third party distributees would be exposed to claims against community assets for a longer period of time than an actual surviving member of the marital community.” (Dawes, at pp. 34-35.)
Here, Donna purportedly took Andrew's share of the community property chargeable with community debts without probate administration, so this case is in that sense similar to the circumstances in Dawes, as well as those contemplated by Probate Code section 13350. This case is distinguishable, however, because it involves a secured debt. Claims by secured creditors provide an exception to section 366.2. As part of the 1990 amendments discussed above, the Legislature also amended Probate Code section 9391 to exempt actions on secured obligations from the scope of former section 353. (Stats. 1990, ch. 140, § 12, pp. 1177-1178.) The Law Revision Commission recommendation explained, “The one year limitation period would not apply to special classes of debts where public policy favors extended enforceability. These classes are (i) secured obligations, (ii) tax claims, and (iii) liabilities covered by insurance.” (20 Cal. Law Revision Com. Rep., supra, p. 513, fns. omitted.) Probate Code section 9391 thus provides, “Except as provided in Section 10361, the holder of a mortgage or other lien on property in the decedent's estate, including, but not limited to, a judgment lien, may commence an action to enforce the lien against the property that is subject to the lien, without first filing a claim as provided in this part, if in the complaint the holder of the lien expressly waives all recourse against other property in the estate. Section 366.2... does not apply to an action under this section.” The 1990 Law Revision Commission comment adds, “The statute of limitations otherwise applicable to an action to enforce the lien continues to apply notwithstanding [former] Section 353.” (20 Cal. Law Revision Com. Rep., supra, p. 522.)
Actions seeking to enforce equitable liens fall within the scope of Probate Code section 9391. (Grant v. De Otto (1954) 122 Cal.App.2d 724, 728 [plaintiff could pursue suit for an equitable lien under the predecessor statute to Probate Code section 9391 without first making a claim in probate].)
HSBC's remaining equitable claims seek to establish and declare the scope of an equitable lien on the property through equitable subrogation or equitable mortgage theories arising from transactions that predated Andrew's death. Donna fails to mention or discuss Probate Code section 9391 or the legislative history set forth above. Given section 366.2's inapplicability to creditor suits to enforce a lien against the debtor's property even where the decedent's estate is probated, and the “public policy” supporting “extended enforceability” of secured claims (20 Cal. Law Revision Com. Rep., supra, p. 513), we cannot conclude that section 366.2, rather than the statute of limitations otherwise applicable to an action to enforce a lien, applies here. (Dawes, supra, 60 Cal.App.4th at pp. 34-35 [it is “difficult to discern” a reason to provide a surviving spouse greater protection from claims incurred during a marriage than that afforded to the deceased spouse's estate].)
Assuming the Option One loan is Andrew's debt alone, as Donna contends, HSBC would have to waive a deficiency judgment that may be available to avoid section 366.2's time-bar. The complaint in this matter does not seek a deficiency judgment. Courts have upheld an effective waiver of recourse where a complaint to foreclose does not expressly seek a deficiency judgment, no deficiency judgment was granted, and there was no prejudice (Schwartz v. Edmunds (1937) 20 Cal.App.2d 530), and we interpret HSBC's suit as effectively waiving recourse. HSBC argues on appeal that Donna ratified the loan transaction, and the loan is her debt. HSBC did not develop this argument below, but we need not address it given our disposition.
B. Equitable Subrogation
Donna argues that she is entitled to summary adjudication on HSBC's equitable subrogation claim because she was not a principal debtor to the Long Beach loan. She also briefly contends that HSBC is chargeable with culpable and inexcusable neglect, and that Donna's superior interest would be prejudiced, because Option One's knew of Donna's record interest. We decline Donna's invitation to affirm summary adjudication on these grounds.
Regarding Donna's inexcusable neglect and prejudice arguments, in addition to the fact that she appears to have forfeited them by failing to support them with meaningful analysis (Taniguchi v. Restoration Homes LLC (2019) 43 Cal.App.5th 478, 486, fn. 6), Donna's contentions are factually unsupported. Donna asserts that Option One “knew” of her interest in the property, but in her separate statement of undisputed material facts, she did not provide evidence that Option One had actual knowledge of her interest in the property when it made the loan at issue in 2006. Moreover, Donna's failure to raise these arguments below has resulted in an undeveloped factual record that renders affirmance on her alternative theories inappropriate. (See Greystone Homes, Inc. v. Midtec, Inc. (2008) 168 Cal.App.4th 1194, 1221 [declining to affirm summary adjudication on alternative ground involving factual questions not raised below].)
As for Donna's argument that equitable subrogation fails because she was not a primary debtor, we do not believe that the doctrine is as narrow as Donna claims. Equitable subrogation is “ ‘broad and expansive and has a very liberal application.... [I]t is broad enough to include every instance in which one person, not acting as a mere volunteer or intruder, pays a debt for which another is primarily liable, and which in equity and good conscience should have been discharged by the latter.... [¶] ‘The doctrine of subrogation embraces all cases where, without it, complete justice cannot be done. Bottomed on this premise, there is, it has been said, no limit to the circumstances that may arise in which the doctrine may be applied.' ” (Estate of Kemmerrer, supra, 114 Cal.App.2d at p. 814.)
Instructive here is Copp v. Millen (1938) 11 Cal.2d 122, 127, a case addressing an equitable doctrine therein described as “ ‘closely akin to that of equitable subrogation' ” and subsequently applied in equitable subrogation cases (Lawyers Title Ins. Corp. v. Feldsher (1996) 42 Cal.App.4th 41, 51-52; Branscomb v. JPMorgan Chase Bank, N.A. (2014) 223 Cal.App.4th 801, 807-809). There, the defendant purchased land with loans from the plaintiff's predecessor, secured by a recorded mortgage and deed of trust. (Copp, at p. 124.) The defendant then executed a land sale contract with a third party, Russell, who went into possession, made payments, and eventually paid all amounts due. (Ibid.) Russell had no actual knowledge of the prior encumbrances, and his sale contract was not recorded. (Ibid.) The defendant defaulted after she executed the sale contract, the plaintiff agreed to give her a new consolidated loan and mortgage, and the old security instruments were discharged. (Ibid.) The plaintiff agreed to a new loan in part because a title report indicated there were no intervening liens of record. (Id. at p. 126.) The defendant defaulted on the refinanced loan, and the plaintiff sought to judicially foreclose, claiming subrogation rights and mistake in the discharge of the original security instruments. (Id. at pp. 124-126.)
The trial court found that the plaintiff's actual knowledge of the sale contract precluded her claim to foreclose against Russell, and the Supreme Court reversed. (Copp, supra, 11 Cal.2d at pp. 125, 128, 130-131.) “[S]ome knowledge or means of knowledge of the existence of other person's [sic] rights in the property does not in every case preclude the court from granting the relief sought. So that if, notwithstanding the mortgagee had some knowledge or notice, the intervening lienholder is not prejudiced by the continuance of the priority of the original mortgage and is in no different position than he would have been had the release not been recorded, equity will place the parties in their original position.” (Id. at p. 130.)
Donna retook title to the property on October 31, 2005, subject to the 2005 deed of trust, and the community estate was liable for the loans at issue, which were incurred during the marriage. (Fam. Code, § 910, subd. (a).) “Real property is transferable even though the title is subject to a mortgage or deed of trust, but the transfer will not eliminate the existence of that encumbrance. Thus, the grantee takes title to the property subject to all deeds of trust and other encumbrances, whether or not the deed so provides. This means that the property may be sold on foreclosure of that deed of trust if the debt is not paid, even though the original debtor no longer owns the property.” (Bernhardt, Cal. Mortgages, Deeds of Trust, and Foreclosure Litigation (Cont. Ed. Bar 4th ed. 2009) § 9.170, p. 9-172.) In these circumstances, Donna's lack of signature on the Long Beach loan does not, in and of itself, prohibit equitable subrogation. (See Copp v. Millen, supra, 11 Cal.2d at p. 130.)
Whether HSBC is entitled to equitable subrogation will be for the trial court to decide, and we express no opinion on this question.
C. Equitable Mortgage
Donna's final argument is that she is entitled to summary adjudication of HSBC's equitable mortgage claim because there is no triable issue of fact regarding the parties' intent to encumber the entire property, but we disagree. Below, Donna pointed to her lack of signature on the 2006 deed of trust and the Option One loan, and to 2016 correspondence from Option One's loan servicer stating that the loan was Andrew's responsibility alone. In opposition, HSBC pointed to the language of the 2006 deed of trust, which purported to encumber the entire property at “026-073-060-1 [¶] Lot 12 Block 3, in the City of Burlingame, County of San Mateo, State of California, (being a part of Burl Rancho), filed July 16, 1906 page book 4, page 46, San Mateo County Records.” Additional evidence in the record shows that Option One's escrow instructions required that its lien be recorded in first position and that title to the property match the deed of trust. Donna testified that Andrew handled all the finances during their marriage, she knew there was some mortgage on the home, and she lived at the property for thirty-one years. The record also contains a 2011 bankruptcy declaration from Andrew wherein he refers to the loan modification application for the Option One loan as his and Donna's joint request, as well as a schedule of secured creditors that lists the Option One loan as Andrew's debt, but at the same time lists the amount secured by the 2006 deed of trust to be $600,000, which was the entire value of the property. This evidence shows a triable issue of fact as to the parties' intent, precluding summary adjudication of the equitable mortgage claim.
Donna cites People v. Nogarr (1958) 164 Cal.App.2d 591 for the proposition that the mortgage lien by one joint tenant terminates upon that joint tenant's death, and the property passes to the surviving joint tenant free of the lien. This case does not assist Donna because she has not shown that she and Andrew held the property as joint tenants at any point. “A joint tenancy is created when two or more persons acquire property in equal shares by the same conveyance and at the same time, with identical possessory rights, pursuant to an instrument of transfer that expressly declares the co-ownership to be a joint tenancy.” (Greenwald & Bank, Cal. Practice Guide: Real Property Transactions (The Rutter Group 2020) ¶ 12:4, citing Civil Code, § 683.) The evidence Donna submitted below indicates that after October 31, 2005, Donna and Andrew held the property “as community property.”
DISPOSITION
The judgment is reversed, and the matter is remanded for further proceedings consistent with this opinion on HSBC's claims based on equitable subrogation and equitable mortgage theories. The trial court is directed to enter an order granting summary adjudication to Donna on HSBC's claims to quiet title, for reformation, for declaratory relief to the extent that claim rests on a mistake or reformation (and not on theories of equitable subrogation or equitable mortgage), for unjust enrichment, and for equitable estoppel. The court is to deny Donna's motion for summary judgment or summary adjudication in all other respects. The parties shall bear their own costs on appeal.
WE CONCUR: POLLAK, P. J. TUCHER, J. [*]
[*] Presiding Justice of the Court of Appeal, First Appellate District, Division Three, sitting by assignment pursuant to article VI, section 6 of the California Constitution.