Court Opinion

ID: 4150721
Source: CourtListenerOpinion
Date Created: 2017-03-07 19:02:28.11318+00
Date Added: 2024-06-11T14:23:41.897203
License: Public Domain

Filed 3/7/17
                CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                 SECOND APPELLATE DISTRICT

                           DIVISION SIX

DR. LEEVIL, LLC,                         2d Civil No. B266931
                                       (Super. Ct. No. 56-2015-
     Plaintiff and Respondent,         00465793-CU-UD-VTA)
                                           (Ventura County)
v.

WESTLAKE HEALTH CARE
CENTER,

     Defendant and Appellant.

             A purchaser at a foreclosure sale seeks to evict the
occupant of the property as soon as possible. It serves a notice to
quit after the sale but before recording title to the property. Here
we reject the occupant’s claim that the notice to quit is
premature, and hold that Code of Civil Procedure section 1161a1
does not require that title be recorded before the notice to quit is
served. We affirm.

        1
       All statutory references are to the Code of Civil Procedure
unless otherwise stated.
                           BACKGROUND
              Jeoung Hie Lee and Il Hie Lee own Westlake Village
Property, L.P. (Westlake Village), a business entity that formerly
owned a skilled nursing facility. In 2002, Westlake Village leased
the facility to Westlake Health Care Center (Westlake Health), a
corporation also owned and controlled by the Lees. The lease had
an automatic subordination clause and a permissible
subordination clause with a nondisturbance provision. It was for
a 20-year term.
              Six years into the lease, Westlake Village took out a
five-year loan from TomatoBank, N.A., secured by a deed of trust
on the nursing facility. When Westlake Village defaulted on the
loan and filed for bankruptcy, TomatoBank sold the loan to Dr.
Leevil, LLC (Leevil). Leevil obtained relief from the bankruptcy
stay, instituted a nonjudicial foreclosure, and purchased the
nursing facility at a trustee’s sale.
              The day after it purchased the facility, Leevil served
Westlake Health with a notice to quit. Leevil recorded title to the
facility five days later. Westlake Health did not vacate the
facility, and Leevil sued for unlawful detainer. Westlake Health’s
answer alleged that its lease was senior to the deed of trust and
that the notice to quit was invalid because it was served before
title was recorded. At a bifurcated trial, the court found that the
lease was subordinate to the deed of trust and was extinguished
by the trustee’s sale. The court also found that the notice to quit
was valid.
              Westlake Health agreed to surrender possession of
the facility and pay damages before the second phase of trial
began. The parties stipulated that the judgment would “not
affect any party’s appellate rights.” The sheriff evicted Westlake

                                 2
Health and Leevil leased the facility to another skilled nursing
provider.
             After Westlake Health filed its opening brief, Leevil
filed a motion to dismiss the appeal as moot. We deferred ruling
on the motion until after oral argument. While this case was
under submission, our Supreme Court ordered publication of U.S.
Financial, L.P. v. McLitus (2016) 6 Cal.App.5th Supp. 1
(McLitus). In McLitus, the Appellate Division of the San Diego
County Superior Court held that a property owner’s service of a
notice to quit before it perfects title to the property renders
invalid any subsequent unlawful detainer proceeding. (Id. at pp.
Supp. 3-5.) We vacated submission and ordered supplemental
briefing.
                            DISCUSSION
                        The Motion to Dismiss
             Leevil asks us to dismiss the appeal as moot because
Westlake Health is no longer in possession of the facility and
cannot operate it without a license. We deny this request.
             Westlake Health reserved the right to appeal in the
stipulation, and correctly argues that this court can restore its
possession of the facility. (Old National Financial Services, Inc.
v. Seibert (1987) 194 Cal. App. 3d 460, 467-468.) Moreover,
Westlake Health could apply to renew its license if possession
were restored. The appeal is not moot.
        The Opportunity to Present Argument and Evidence
             Westlake Health complains that it was denied the
opportunity to present extrinsic evidence concerning the intent
and purpose behind the lease’s subordination clauses. We are not
persuaded.

                                3
             During the proceedings below, Westlake Health made
offers of proof as to the testimony that would be provided:
(1) testimony from Ms. Lee, who “would simply say that [the
lease] was negotiated on behalf of, yes, her as the principal of the
lessee, as well as the principal of the landlord” and that
“[o]bviously the lender was not a party to the contract at that
time”; and (2) testimony from the attorney who drafted the lease
to explain why the subordination and nondisturbance clauses
were included. The court then indicated how it intended to rule,
and asked Westlake Health whether it intended to submit
additional evidence. Westlake Health stated that it did not.
             In the absence of disputed facts, interpretation of
lease provisions presents a question of law for the court to decide.
(City of Hope National Medical Center v. Genentech, Inc. (2008)
43 Cal. 4th 375, 396 (City of Hope).) Westlake Health has made
no showing that the trial court failed to consider any relevant
facts. There was thus no need for it to consider extrinsic
evidence.
                         The Lease Provisions
             Westlake Health claims that the trial court erred in
finding the lease subordinate to the deed of trust. We disagree.
             A lease made before the execution of a deed of trust
survives a subsequent foreclosure and requires that the
purchaser take the property subject to the lease. (Principal
Mutual Life Ins. Co. v. Vars, Pave, McCord & Freedman (1998) 65
Cal. App. 4th 1469, 1478.) A tenant can, however, agree to
subordinate its lease to a future deed of trust. (Id. at pp. 1478-
1479.) This is usually done through an automatic subordination
clause, which provides that the lease will be subordinate to
encumbrances on the property that later attach. (Id. at p. 1479.)

                                 4
It can also be done through a permissible subordination clause,
which permits the deed holder to compel the lessee to
subordinate its interest. (Miscione v. Barton Development Co.
(1997) 52 Cal. App. 4th 1320, 1328 (Miscione).) If the lease
contains both a permissible subordination clause and a
nondisturbance provision, the lessee can compel the new owner to
abide by the terms of the lease. (Ibid.)
             Westlake Health’s lease contains both an automatic
subordination clause2 and a permissible subordination clause
with a nondisturbance provision.3 There is no evidence that
TomatoBank, as the deed holder, ever invoked the permissible
subordination clause. It had no need to; its position was fixed by
the automatic subordination clause. Under that clause, Westlake

      2  The automatic subordination clause is at paragraph 21.6
of the lease: “This Lease is and shall be subordinated to all
existing and future liens and encumbrances against the
Premises.”

      3 The permissible subordination clause with a
nondisturbance provision is at paragraph 19: “Landlord shall
have the right to subordinate this Lease to any deed of trust
or mortgage encumbering the Premises . . . . Tenant shall
cooperate with Landlord and any lender which is acquiring a
security interest in the Premises or the Lease. Tenant shall
execute such further documents and assurances as such lender
may require, provided that Tenant’s obligations under this
Lease shall not be increased in any material way, and Tenant
shall not be deprived of its rights under this Lease. Tenant’s
right to quiet possession of the Premises during the Term shall
not be disturbed if Tenant pays the rent and performs all of
Tenant’s obligations under this Lease and is not otherwise in
default.”

                                5
Health’s lease was automatically subordinate to TomatoBank’s
deed of trust. (Miscione, supra, 52 Cal.App.4th at p. 1328.) The
trustee’s sale extinguished the lease. (Dover Mobile Estates v.
Fiber Form Products, Inc. (1990) 220 Cal. App. 3d 1494, 1498-
1499.)
             The permissible subordination clause with its
nondisturbance provision does not compel a contrary finding.
Westlake Health interprets the clause as prohibiting termination
of the lease so long as it is not in default. But TomatoBank never
invoked the permissible subordination clause. Moreover,
Westlake Health’s interpretation fails to reconcile the lease’s
automatic subordination clause with the permissible
subordination clause. Westlake Health argued below that the
“ambiguities in the contract” present “an issue that may require
some factual interpretation” to be decided by a jury. But
interpretation of the lease’s provisions presents a legal question
for the court. (Miscione, supra, 52 Cal.App.4th at p. 1325.) And
contract ambiguities are construed against the drafter. (City of
Hope, supra, 43 Cal.4th at pp. 397-398; see also Civ. Code,
§ 1654.) The trial court correctly construed the subordination
clauses against the drafter, i.e., Westlake Health.4
                         The Notice to Quit
             Relying on McLitus, Westlake Health contends that
the trial court should have granted judgment on the pleadings
because Leevil did not perfect title before it served the notice to
quit. It claims the notice to quit was premature and nullified the

      4Given our conclusion, there is no need to consider
Westlake Health’s claim that the trial court erred in finding that
Leevil was not bound by the nondisturbance clause as a third-
party beneficiary. (Schabarum v. California Legislature (1998)
60 Cal. App. 4th 1205, 1216.)

                                 6
unlawful detainer proceedings that followed. We are not
persuaded by the reasoning of McLitus and reject this contention.
             McLitus relies on the language of section 1161a,
subdivision (b)(3), which provides that “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 . . . may be
removed therefrom . . . [w]here the property has been sold in
accordance with [s]ection 2924 of the Civil Code . . . and the title
under the sale has been duly perfected.” The statute does not
require that title be perfected (i.e., that the trustee’s deed be
recorded) before service of the three-day notice. It requires that
title be perfected before a tenant “may be removed” from the
property.
             Westlake Health concedes that it held over in
possession after the three-day notice to quit was served. It does
not contend that the trustee’s sale failed to comply with section
2924 of the Civil Code, or that Leevil failed to perfect title before
Westlake Health was removed from the property. Section
1161a’s requirements were strictly complied with.
             To conclude otherwise, this court would have to
impose an additional requirement onto the statutorily required
notice to quit, i.e., perfection of title before service. McLitus held
that unless the trustee’s deed was recorded prior to service of the
notice to quit, the tenant would be prevented “from effectively
verifying the identity of the alleged purchaser of a property as a
search of recorded documents would prove futile.” (McLitus,
supra, 6 Cal.App.5th at p. Supp. 4.) But here, if Westlake Health
were concerned with verifying Leevil as the purchaser of the
property, it had more than five weeks between service of the
notice to quit and filing of the unlawful detainer complaint to do

                                  7
so. And, in any event, Westlake Health was free to challenge
Leevil’s claimed ownership in court. (Orcilla v. Big Sur, Inc.
(2016) 244 Cal. App. 4th 982, 1010 [title can be litigated in a
section 1161a unlawful detainer action].)
             None of the cases cited in McLitus support the
requirement that title be perfected before service of the notice to
quit: Baugh v. Consumers Associates, Limited (1966) 241
Cal. App. 2d 672, 674-675 and Bevill v. Zoura (1994) 27
Cal. App. 4th 694, 697 (Bevill), consider the required contents of a
notice to quit served in a landlord-tenant dispute, not one served
after a trustee’s sale. The contents of the two notices are
different. (Compare § 1161, subd. (2) with § 1161a, subd. (b)(3).)
Stonehouse Homes LLC v. City of Sierra Madre (2008) 167
Cal. App. 4th 531, 540-541, discusses when a controversy is ripe in
a declaratory judgment action, not the type of proceeding here.
Kessler v. Bridge (1958) 161 Cal. App. Supp. 2d 837, 841, describes
the steps required to perfect title, an issue not raised in this case.
Garfinkle v. Superior Court (1978) 21 Cal. 3d 268, 275 (Garfinkle)
and Salazar v. Thomas (2015) 236 Cal. App. 4th 467, 480, suggest,
in dicta, that the purchaser of property at a trustee’s sale “is
entitled to bring an unlawful detainer action” (Garfinkle, at p.
275) after recording the trustee’s deed: precisely what happened
here.
             The McLitus court read Bevill’s statement that a
three-day notice “is a prerequisite to an unlawful detainer action”
(Bevill, supra, 27 Cal.App.4th at p. 697) as holding that service of
the three-day notice marks the start of an unlawful detainer
action. But one does not “bring an unlawful detainer action” by
serving a notice to quit.

                                  8
             A trial court acquires jurisdiction over the parties
when the plaintiff serves the defendant with the unlawful
detainer summons and complaint. (Borsuk v. Appellate Division
of Superior Court (2015) 242 Cal. App. 4th 607, 612.) Service of
the notice to quit is an element of the action that must be alleged
in the complaint and proven at trial (id. at pp. 612-613), but it
does not give the court jurisdiction over the parties (id. at pp.
616-617). Filing of the complaint is the beginning of an unlawful
detainer action. Because title was perfected before the complaint
was filed, the unlawful detainer proceedings were valid. To
conclude otherwise, we would have to rewrite section 1161a,
subdivision (b)(3) to add the requirement that title be perfected
before the notice to quit is served. That, however, is a legislative
function.
                            DISPOSITION
             The motion to dismiss the appeal is denied. The
judgment is affirmed. Leevil is awarded costs on appeal.
             CERTIFIED FOR PUBLICATION.

                                     TANGEMAN, J.
We concur:

             YEGAN, Acting P. J.

             PERREN, J.

                                 9
                 Vincent J. O’Neill, Jr., Judge

               Superior Court County of Ventura

                ______________________________

           Enenstein Ribakoff LaViña & Pham, Teri T. Pham
and Courtney M. Havens, for Defendant and Appellant.

            Law Offices of Ronald Richards & Associates, Ronald
N. Richards, Nicholas Bravo; Law Offices of Geoffrey Long and
Geoffrey S. Long, for Plaintiff and Respondent.