Court Opinion

ID: 3174809
Source: CourtListenerOpinion
Date Created: 2016-02-05 09:53:09.731562+00
Date Added: 2024-06-11T14:49:43.322852
License: Public Domain

Filed 2/4/16 Grill v. Burwell CA2/2
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                  DIVISION TWO

BENJAMIN GRILL,                                                      B259272

         Plaintiff and Respondent,                                   (Los Angeles County
                                                                     Super. Ct. No. PC055535)
         v.

CLIFTON J. BURWELL et al.,

         Defendants and Appellants.

         APPEAL from a judgment of the Superior Court of Los Angeles County.
Stephen P. Pfahler, Judge. Affirmed.

         Orren & Orren, Tyna Thall Orren; and Richard D. Marks, for Plaintiff and
Respondent.

         Phillip K. Fife, for Defendants and Appellants.

                                                       ******
       Defendant-appellant Clifton Burwell (Burwell) obtained a money judgment
against plaintiff-respondent Benjamin Grill (Grill) in 1983 and recorded it as a judgment
lien on Grill’s home, but allowed the lien to expire in 2003. In 1985, Burwell became the
assignee of a 1977 deed of trust on Grill’s home that secured the same obligation
underlying the money judgment. When Grill tried to sell his home in 2013, Burwell
initiated nonjudicial foreclosure proceedings on the deed of trust. Grill sued for a judicial
declaration that the expiration of the debt underlying the deed of trust also extinguished
the deed of trust. The trial court preliminarily enjoined Burwell from proceeding with
any foreclosure. Burwell appeals the injunction. We conclude that Grill has not shown
he will likely prevail on his claim that the deed of trust is invalid, but has shown that he
will likely prevail on his alternate claim that Burwell is trying to obtain repayment of a
grossly inflated amount under the deed of trust. Because Burwell does not attack the trial
court’s conclusion that the balancing of the interim harms favors Grill, we affirm.
                    FACTS AND PROCEDURAL BACKGROUND
I.     Loan Guarantees
       In 1976, Grill, Burwell, and Oded Sturman (Sturman) formed and became co-
owners of Aqua Brain Manufacturing Corporation (Aqua Brain), which was formed to
develop and market an automatic sprinkler control device. Aqua Brain took out a
$125,000 line of credit from Barclay’s Bank of California (Bank), secured by the
personal guarantees of each co-owner and a deed of trust on each of their homes. The
deeds of trust were recorded on March 18, 1977.
II.    Default on Line of Credit and Ensuing Litigation
       In March 1977, Aqua Brain drew down $100,000 on the line of credit but by May
1977 ran into difficulty making repayments. The Bank foreclosed on Aqua Brain’s assets
in October 1977, but came up $18,890.62 short. This prompted two sets of lawsuits.
       A.     Lawsuits culminating in “the 1983 Judgment Lien”
       Seeking the remaining deficiency, the Bank initiated a judicial foreclosure action
against the deed of trust on Burwell’s home. To avoid foreclosure, Burwell, in the fall of
1977, paid the outstanding $18,890.62; to obtain repayment of that amount, Burwell

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cross-claimed against Grill and Sturman seeking contribution and equitable contribution.
Burwell also cross-claimed for damages arising out of the alleged conversion of Aqua
Brain’s assets prior to the Bank’s foreclosure. Grill and Sturman responded by filing
cross-claims against Burwell for fraud, breach of fiduciary duty, intentional interference
with a prospective business advantage, breach of a $40,000 promissory note, and
rescission of assignment and patent rights. All of these claims were consolidated for trial
along with a separately filed lawsuit by Burwell against Grill and Sturman regarding a
number of promissory notes.
       The jury in September 1982 rejected all of the claims brought by Grill and
Sturman, and awarded Burwell a total of $193,332.61. Of that amount, $14,441.93 was
awarded on Burwell’s contribution claim against Grill (consisting of one-third the
$18,890.62 ($6,296.87) plus interest).
       Burwell recorded the abstract of judgment as a lien on Grill’s property in August
1983 (“the 1983 Judgment Lien”).
       B.     Lawsuit culminating in “the 1985 Deed of Trust”
       After Burwell paid the balance of Aqua Brain’s debt but while the cross-claims
between Burwell, Grill, and Sturman were still being litigated, the Bank, in 1981, filed an
interpleader action seeking direction as to whom it should convey the deeds of trust on
Grill’s and Sturman’s homes. The trial court ruled that the Bank should convey and
assign the deeds of trustee to Burwell and his wife “in order to enforce their right to
contribution and . . . to secure performance by [Grill and Sturman] of their respective
Continuing Guaranties.” Although the court issued its ruling in 1982, the Bank did not
convey the re-assigned deeds of trust until January 1985; Burwell recorded them on
January 30, 1985 (“the 1985 Deed of Trust”).
III.   The Next Twenty Years
       In 1986, Grill declared bankruptcy. As part of the bankruptcy, the bankruptcy
court in 1991 set aside the 1983 judgment “except for . . . a judgment lien on [Grill’s
house] in the total amount of $37,676.46 and no more.” The court also ruled that the
1985 Deed of Trust “secures an obligation . . . in the amount of $14,441.93 together with

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interest thereon at the legal rate from January 11, 1983 until paid. Said deed of trust
secures no other judgments or obligations.” No one appealed the bankruptcy court’s
ruling.
          In 1993, Burwell exercised his statutory right under Code of Civil Procedure
section 683.180, subdivision (a) to apply for a renewal of the 1983 Judgment Lien for
another 10 years—until 2003. The trial court granted Burwell’s application but, noting
that the 1983 Judgment Lien had been reduced by the bankruptcy court to $37,676.46,
limited the judgment lien to that amount. Burwell did not appeal this ruling.
          Burwell did not renew the 1983 Judgment Lien a second time, so it expired in
2003 pursuant to Code of Civil Procedure section 697.310, subdivision (b).
IV.       This Case
          In May 2013, Grill sought to sell his home. While a prospective sale was in
escrow, Burwell, in November 2013, filed a notice of default and election to sell under
the 1985 Deed of Trust. The notice asserted that Grill owed $298,696.10. Less than a
month later, Burwell’s attorney wrote a letter demanding $633,187.60.
          In March 2014, Grill sued Burwell (personally and as trustee for the Burwell
Plumbing Company Profit Sharing Plan and Trust), Burwell’s wife and others for
(1) declaratory relief, (2) quiet title, (3) cancellation of the 1985 Deed of Trust, and
(4) injunctive relief. Specifically, Grill sought a declaration that the expiration of the
1983 Judgment Lien extinguished the 1985 Deed of Trust and, alternatively, that the
amount necessary to pay off the 1985 Deed of Trust is far less than the amounts Burwell
was demanding. Grill also sought a preliminary injunction precluding foreclosure during
pendency of his lawsuit.
          In August 2014, the trial court granted Grill’s motion for a preliminary injunction.
The court concluded that Grill demonstrated “a reasonable probability” of succeeding on
his claims because “there is a genuine dispute as to whether [Burwell] may foreclose on
the [1985] deed of trust [when that deed of trust is] based on an underlying judgment
which appears to be unenforceable [because] it has expired.” The court further found that
Grill “will suffer greater harm if [injunctive] relief is not granted [because the foreclosure

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by Burwell would cause Grill to] lose his interest in [his] home” while the denial of an
injunction would “delay[] [Burwell] slightly longer from recovering on a judgment which
has been outstanding for decades.” The court ordered Grill to post a $60,000 bond.
       Burwell and his wife (collectively, Burwells) timely appeal.
                                        DISCUSSION
       In deciding whether to issue a preliminary injunction, a trial court is (1) to
“‘consider the likelihood that the plaintiff will prevail on the merits at trial’” and (2) to
“‘weigh the interim harm to the plaintiff if the injunction is denied against the harm to the
defendant if the injunction is granted.’” (City of Cerritos v. State of California (2015)
239 Cal. App. 4th 1020, 1033, quoting Miller v. City of Hermosa Beach (1993) 13
Cal. App. 4th 1118, 1138.) Where, as here, “the trial court addresses” both prongs, “an
order granting or denying a preliminary injunction will be reviewed only for [an] abuse of
discretion.” (City of Cerritos, at p. 1033; IT Corp. v. County of Imperial (1983) 35
Cal. 3d 63, 69.) The burden of proving an abuse of discretion rests with the appealing
party. (Oiye v. Fox (2012) 211 Cal. App. 4th 1036, 1047.)
       Burwell does not on appeal challenge the trial court’s balancing of the interim
harms; his appeal instead assails the court’s assessment of the merits of Grill’s claims.
Analytically, Grill’s likelihood of prevailing turns on two questions: (1) can Burwell
enforce the 1985 Deed of Trust at all; and, if so, (2) will Burwell be able to collect
$298,696.10 or $633,187.60 on that deed of trust? The court answered the first question
“no,” and never reached the second. As we explain below, we disagree with the court’s
resolution of the first question, but conclude that Grill is likely to prevail on his claim for
a judicial declaration that the 1985 Deed of Trust secures far less than the amounts
Burwell seeks. Because we review a trial court’s ruling and not its reasoning (e.g.,
People v. Chism (2014) 58 Cal. 4th 1266, 1295, fn. 12), we affirm the issuance of the
preliminary injunction.
I.     Enforceability of the 1985 Deed of Trust
       Grill offers two arguments in support of his claim that the 1985 Deed of Trust is
no longer valid: (1) the 1985 Deed of Trust secured Grill’s obligation to contribute to

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Aqua Brain’s debt, that obligation was reduced to judgment and to the 1983 Judgment
Lien, and the expiration of that judgment lien in 2003 necessarily extinguished the deed
of trust that secured that debt; and (2) even if the 1985 Deed of Trust is still viable,
Burwell is barred from trying to collect on it because, under the “one form of action”
rule, Burwell’s decision to sue Grill for a money judgment waived Burwell’s right to
enforce the deed of trust.
       A.     Expiration of the 1983 Judgment Lien
       Grill’s argument that the expiration of the 1983 Judgment Lien leads to the
extinguishment of the 1985 Deed of Trust that secured that same debt rests on an
extrapolation of two well-settled principles. First, “[t]he security interest created by a
deed of trust [has been described] as the functional equivalent of ‘a lien on the property.’”
(Jenkins v. JP Mortgage Chase Bank, NA (2013) 216 Cal. App. 4th 497, 508; Monterey
S.P. Partnership v. W. L. Bangham, Inc. (1989) 49 Cal. 3d 454, 460 [“in practical effect,
if not in legal parlance, a deed of trust is a lien on the property”].) Second, “[a] security
interest cannot exist without an underlying obligation”; this is why “a mortgage or deed
of trust is generally extinguished by either payment or sale of the property in an amount
which satisfies the lien.” (Alliance Mortgage Co. v. Rothwelll (1995) 10 Cal. 4th 1226,
1234 (Alliance Mortgage); In re Marriage of Walker (2015) 240 Cal. App. 4th 986, 996
[same].) Grill correctly notes that the 1983 Judgment Lien expired in 2003 because
Burwell obtained a 10-year renewal in 1993 but not 2003. (Code Civ. Proc., § 683.180,
subd. (a) [“(i)f a judgment lien on an interest in real property has been created pursuant to
a money judgment and the judgment is renewed pursuant to this article, the duration of
the judgment lien is extended until 10 years from the date of the filing of the application
for renewal . . .”].) Because, Grill argues, the 1985 Deed of Trust was meant to secure
the same debt that underlies the 1983 Judgment Lien and because a deed of trust operates
like a “security interest [that] cannot exist without an underlying obligation” (Alliance
Mortgage, at p. 1234), the expiration of the debt in 2003 consequently extinguished the
1985 Deed of Trust securing that debt.

                                               6
       Despite the superficial appeal of Grill’s reasoning, the statutes specifically
governing deeds of trust foreclose his argument. Deeds of trust may function like other
liens of property, but they are distinct statutory creatures. As pertinent here, a deed of
trust—unlike a judgment lien—may be enforced not only through a judicial foreclosure
(Code Civ. Proc., § 725a), but also through nonjudicial foreclosure if the deed of trust so
provides (Civ. Code, § 2924 et seq.). (Ung v. Koehler (2005) 135 Cal. App. 4th 186, 192
(Ung).)
       When a person enforces a deed of trust through judicial foreclosure, the deed of
trust ceases to be enforceable as soon as the right to seek relief on the underlying debt
expires. (Civ. Code, § 882.020, subd. (a) [creating exception to usual expiration date for
deeds of trust under Civil Code section 2911]; § 2911 [“(a) lien is extinguished by the
lapse of time within which . . . (¶) (a)n action can be brought upon the principal
obligation”]; Nicopolous v. Superior Court (2003) 106 Cal. App. 4th 304, 309
(Nicopolous) [“a civil action to foreclose a deed of trust may be barred under section
2911”]; see also Ung, supra, 135 Cal.App.4th at pp. 192-194 [noting that section
882.030, which provides that “(e)xpiration of the . . . deed of trust . . . renders the lien
unenforceable,” applies only when “the security interest [is] enforceable through judicial
foreclosure”].) This rule dovetails with the rule governing judgment liens.
       However, where, as here, a person enforces a deed of trust through a nonjudicial
power of sale—a remedy unavailable with judicial liens—the rule governing the
longevity of that power of sale is different. Until 1982, a nonjudicial power of sale
“never expired.” (Nicolopous, supra, 106 Cal.App.4th at p. 310 [“prior to 1982, . . . the
power of sale under a deed of trust was never barred . . .”].) This rule had a straight-
forward rationale: A debtor can remove a deed of trust from his title only by invoking a
court’s equitable power to quiet title; “‘courts will not help the debtor to recover . . .
encumbered property unless he pays his debt’”; thus, a deed of trust does not expire until
the debt is paid. (Ung, supra, 135 Cal.App.4th at p. 193.) In 1982, our Legislature
enacted the Mortgage Record Title Act (Act), Civil Code section 880.020 et seq. Among
other things, the Act replaced the common law rule granting legal immortality to deeds of

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trust with a statutory rule limiting their lifespan to 60 years from the “date the instrument
that created the security interest was recorded” or, if it is sooner, 10 years after the “final
maturity date or the last date fixed for payment of the debt or performance of the
obligation” if that date “is ascertainable from the recorded evidence of indebtedness.”
(§ 882.020, subd. (a).)
       In this case, the Bank recorded the deed of trust on Grill’s house on March 18,
1977. Because the deed of trust did not state a “final maturity date,” the 60-year rule
governs its nonjudicial power of sale and the 1985 Deed of Trust will not expire until
March 18, 2037. Because Burwell is pursuing a nonjudicial sale, it does not matter
whether the time for him to sue on the underlying debt has expired. (Ung, supra, 135
Cal.App.4th at p. 193 [“(a)lthough (Civil Code) section 2911 was recognized as imposing
a state of limitations on judicial foreclosure of mortgages and other security interests
(citation), the statute almost immediately was held not to apply to nonjudicial foreclosure
under a deed of trust”].) Consequently, it does not matter that Burwell has litigated the
debt, obtained a judgment and judgment lien, and let that lien expire. If we were to bar
recovery when a creditor litigates a debt to judgment but not when that creditor sits idle,
we would not only create a perverse incentive for creditors not to litigate their debts to
judgment, but would also create judicial exceptions to the Act by voiding a deed of trust
prior to the Act’s expiration date (Apple Inc. v. Superior Court (2013) 56 Cal. 4th 128,
158 [courts may not rewrite statutes]) and to the pre-Act rule by voiding a deed of trust
without repayment (Slintak v. Buckeye Retirement Co L.L.C., Ltd. (2006) 139
Cal. App. 4th 575, 584 [noting “equitable rationale” that a debtor “should not be able to
quiet title against his or her encumbered property without first paying the underlying
debt”]).
       For these reasons, Grill is not likely to prevail on his claim that the expiration of
the 1983 Judgment Lien extinguishes the 1985 Deed of Trust.
       B.     Election of remedies under “one form of action” rule
       Grill alternatively argues that Burwell “elected” to sue him judicially for
contribution and, under the “one form of action” rule, this election has waived his right to

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foreclose on the deed of trust that secures the same debt. The “one form of action” rule is
based on Code of Civil Procedure section 726, which provides in pertinent part that
“[t]here can be but one form of action for the recovery of any debt or the enforcement of
any right secured by [a] mortgage upon real property . . . .” (§ 726, subd. (a).) In Walker
v. Community Bank (1974) 10 Cal. 3d 729 (Walker), our Supreme Court construed the
statute to mean that “where [a] creditor sues on [an] obligation and seeks a personal
money judgment against the debtor without seeking therein foreclosure of such mortgage
or deed of trust, he makes an election of remedies, electing the single remedy of a
personal action, and thereby waives his right to foreclose on the security or to sell the
security under a power of sale.” (Id. at p. 733; see also Security Pacific National Bank v.
Wozab (1990) 51 Cal. 3d 991, 997, fn. 4 (Wozab) [also applying section 726 to deeds of
trust].)
           We conclude that the one form of action rule does not apply in this case for one,
and possibly two reasons. First, some courts have held that a nonjudicial foreclosure is
not an “action” within the meaning of Code of Civil Procedure 726 based on language in
Walker, supra, 10 Cal. 3d 729 that “a private sale under the power contained in [a] trust
deed is not a judicial foreclosure within section 726 . . .” (Walker, at p. 736, italics
omitted). (See Schmidt v. Bank of America, N.A. (2014) 223 Cal. App. 4th 1489, 1508,
fn. 15; Birman v. Loeb (1998) 64 Cal. App. 4th 502, 509.) Other courts have construed
section 726 more broadly to reach beyond “actions” and thus to bar a creditor who
previously pursued a personal action from nonjudicially setting off a debt (Wozab, supra,
51 Cal.3d at pp. 999-1000); this reasoning could be also extended to other nonjudicial
acts, such as foreclosing on a debt. Under at least one line of authority, however,
Burwell’s nonjudicial foreclosure falls outside the one form of action rule entirely.
           Second, and regardless of how the above-noted split of authority is resolved,
Burwell never made the requisite election in this case. “By its terms, section 726 applies
only where the creditor-beneficiary has brought an action against the debtor-trustor to
recover a debt or to enforce some right secured by a deed of trust” and “does not apply in
other situations.” (Passaini v. Merit-McBride Realtors, Inc. (1987) 190 Cal. App. 3d
9
1496, 1506, italics added; cf. O’Neil v. General Security Corp. (1992) 4 Cal. App. 4th 587,
598 [creditor who sued for money judgment waived right to judicial foreclosure and
debtor cannot waive this effect of section 726].) At the time Burwell brought his action
for contribution, he was not a “creditor-beneficiary” of a deed of trust because the deed of
trust was not assigned to him until years later in 1985. To be sure, the interpleader
judgment entitling Burwell to assignment of the deed of trust was handed down in 1982
and the 1983 Judgment indicated that he was “subrogated” to the “all of the [Bank’s]
rights, remedies and securities.” But neither judgment alters the fact that Burwell was not
in a position to choose between suing or foreclosing on the deed of trust until the deed of
trust was actually assigned to him in 1985; as a result, he never elected between the two.
Indeed, the only action Burwell took with respect to the 1983 Judgment Lien after he
became a “creditor-beneficiary” of the deed of trust in 1985 was to apply for a renewal of
that lien in 1993, but that act merely prevented the nullification of actions he had taken
before becoming a creditor-beneficiary. Our conclusion that Burwell’s application for
renewal does not trigger the one form of action rule is especially appropriate where, as
here, the trial court’s grant of that renewal specifically stated that “[n]either this judgment
herein, nor any renewal therefore, shall affect the right or interest of [Burwell] with
respect to [his] interest in the note and deed of trust.”
       For these reasons, we determine that Grill is unlikely to prevail on his claim that
the 1985 Deed of Trust expired.
II.    Amount Secured by the 1985 Deed of Trust
       Grill’s claim for declaratory relief also seeks a declaration regarding the amount of
debt Burwell may collect pursuant to the 1985 Deed of Trust. Grill is likely to prevail on
that claim. The 1991 bankruptcy order confined the 1985 Deed of Trust to $14,441.93
“with interest therein at the legal rate from January 11, 1983 until paid.” The legal rate of
interest is 10 percent. (Code Civ. Proc., § 685.010, subd. (a).) That adds up to interest of
$47,658.37 as of January 11, 2016, for a total amount due of $62,100.30, which is far less
than the $298,616.10 and $633,187.60 Burwell is demanding.

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       Burwell justifies his higher figures on the ground that (1) the bankruptcy court’s
ruling was incorrect, and (2) he is entitled to interest at the rate specified in the
underlying deed of trust (that is, prime interest rate plus four points, compounded
annually) and to interest on attorney’s fees as well as the underlying debt. We reject both
arguments for the same reason: The bankruptcy court’s ruling confined the 1985 Deed of
Trust to the legal rate of interest on the debt alone; more to the point, that ruling became
final nearly 25 years ago and cannot “be collaterally attacked in [a] state proceeding.”
(Martin v. Martin (1970) 2 Cal. 3d 752, 762.)
       Grill is likely to prevail on his claim for a judicial declaration that the 1985 Deed
of Trust secures less than what Burwell now asserts. Because injunctive relief may be
granted pending a judicial determination of the “amount upon which[a] foreclosure is
based” (Caruso v. Great Western Savings (1991) 229 Cal. App. 3d 667, 675-676), the trial
court’s grant of injunctive relief was appropriate.
                                       DISPOSITION
       The order granting preliminary injunction is affirmed. Grill is entitled to his costs
on appeal.
       NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

                                                           ________________________, J.
                                                                 HOFFSTADT
We concur:

__________________________, P. J.
BOREN

__________________________, J.
CHAVEZ

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