Second District Challenges Supreme Court on Timing of Post-Foreclosure Eviction “Three Day Notice To Quit”

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“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, but it does not give the court jurisdiction over the parties.”

In U.S. Financial, L.P. v. McLitus, a purchaser at a trustee’s sale following non-judicial foreclosure served a three-day notice to quit on the former owner, following the purchase but before perfecting title after the sale, and brought an unlawful detainer action to recover possession. The Superior Court for the County of San Diego awarded possession to the purchaser, but the previous owner appealed to the Appellate Division of the Superior Court, which reversed and remanded.

California has a comprehensive statutory regime for non-judicial foreclosures. This serves as a summary and low-cost procedure for banks to recover property after the borrower defaults. California’s Unlawful Detainer Statutes further provide a summary remedy to purchasers at the non-judicial “trustee’s sale” to recover possession of the property from the previous owner.

While the plaintiff (presumably) complied with the procedural formalities of the unlawful detainer, by properly serving a facially valid notice to quit, the Appellate Division found that “the sale was perfected at the time the three-day notice was served, but not the title”. The non-judicial foreclosure statutes provide that “the trustee’s sale shall be deemed final upon the acceptance of the last and highest bid, and shall be deemed perfected as of 8 a.m. on the actual date of sale if the trustee’s deed is recorded within 15 calendar days after the sale”. While the plaintiff was the owner, it did not have record title of the property at the time of the service of the notice to quit.

According to the Appellate Division, “such a practice would practically prevent a defendant from effectively verifying the identity of the alleged purchaser of a property as a search of recorded documents would prove futile”. Without a legally sufficient notice to quit, a plaintiff cannot maintain a cause of action for unlawful detainer.

The second most interesting thing about McLitus is that the Supreme Court of California granted a request that the opinion be published (even though it comes from the appellate division of a superior court instead of the Fourth Appellate District, which reviews decisions from San Diego County).

The most interesting thing about McLitus is that the Second Appellate District is apparently not altogether pleased with the Supreme Court’s publication order.

Only a few months later, the Second District certified Dr. Leevil, LLC v. Westlake Health Care Center for publication.

In Dr. Leevil, the owner of a skilled nursing facility leased to Westlake and later took out a promissory note secured by a deed of trust on the facility. The owner defaulted and filed for bankruptcy and the loan was then sold to Dr. Leevil, LLC. Leevil instituted a non-judicial foreclosure after obtaining relief from the bankruptcy stay, and ended up purchasing at the sale.

As in McLitus, after the sale but before recording title, Leevil served a notice to quit. The trial court found that the notice to quit was valid, Westlake appealed, and the case was ultimately argued and submitted. But when the Supreme Court ordered publication of McLitus, the Dr. Leevil court vacated submission and ordered supplemental briefing to discuss the recent decision. Relying on McLitus, Westlake argued that the trial court should have granted judgment on the pleadings for failure to perfect title before serving the notice to quit. And under the McLitus rule, this would be the inevitable result.

However, the Dr. Leevil court looked at a provision of the Unlawful Detainer Statutes governing post-foreclosure evictions. That section merely states that someone is guilty of unlawful detainer if they hold over and continue in possession after “a three-day written notice to quit the property has been served”, where the property “has been sold” in accordance with the non-judicial foreclosure statues “and the title under the sale has been duly perfected”.

The court noted that the statute does not require that the title be perfected before service of the notice to quit, only that it be perfected before the occupant “may be removed”. While a valid notice to quit is necessary for an unlawful detainer action, the Dr. Leevil court found that service of the notice was not equivalent to bringing an unlawful detainer action. It discounted McLitus‘ concern that a former owner would not know whether the party serving the notice to quit was actually the owner of the property, urging that such a defendant can actually challenge title in a post-foreclosure unlawful detainer (a defense not normally available in an eviction lawsuit) and that the new owner would need record title before actually bringing the lawsuit.

It further found support in the recent Borsuk opinion. Borsuk questioned the viability of a “Delta Motion” – a motion to quash directed at the cause of action for unlawful detainer (as opposed to service of the unlawful detainer summons), on the theory that the requirements for an unlawful detainer action are jurisdictional such that any defects in the cause of action frustrate the unique five-day unlawful detainer summons.

Borsuk distinguished between jurisdiction and the merits of the lawsuit, finding that jurisdiction is conferred by the service of a summons, not service of the prerequisite notice to quit, which must be alleged in the complaint and proven at trial. Dr. Leevil relied on Borsuk in concluding that, “Because title was perfected before the complaint was filed, the unlawful detainer proceedings were valid” and that “To conclude otherwise, we would have to rewrite [the Unlawful Detainer Statutes] to add the requirement that title be perfected before the notice to quit is served. That, however, is a legislative function”.

Where the Supreme Court of California took special note of an appellate division opinion, and the Court of Appeal expressly rebuked the appellate division’s reasoning, it seems inevitable that Dr. Leevil must be reconciled with McLitus. It is even possible that the Supreme Court will finally address the distinction between the elements of an unlawful detainer cause of action and the jurisdictional prerequisites to an unlawful detainer five-day summons (a doctrine that has only received passing acknowledgement from the Supreme Court in the past, in Greener v. Workers’ Comp. Appeals Bd. (1993) 6 Cal. 4th 1028).