Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of San Diego County, No. 37-2007-00071153- CU-BC-CTL Luis R. Vargas, Judge.
NARES, Acting P. J.
This action involves a dispute between neighbors Michael and Barbara Ann Smith (together, the Smiths) and Mark and Candace L. Byrnes (together, the Byrnes), who reside on the same street in La Jolla, California. The Smiths filed this action against the Byrnes alleging that they constructed a second story on their residence in violation of a declaration of restrictions (CC&R's) recorded for the subdivision in the 1960's that limited residences to a single story.
At trial, the court granted two motions in limine in favor of the Byrnes. The court granted a motion in limine seeking to exclude evidence the Byrnes had made a claim on their title insurance carrier alleging their title insurance failed to disclose the CC&R's limiting construction to one story. The court also granted the Byrnes' motion in limine seeking to exclude any evidence there were enforceable CC&R's because the foreclosure of a deed of trust against John and Mamie Hogan, previous property owners who recorded the CC&R's, eliminated the CC&R's. Based upon the court's ruling that the CC&R's were eliminated by the foreclosure, the court granted judgment on the pleadings and dismissed the Smiths' action.
The Smiths appeal, asserting (1) the issues decided on the Byrnes' motions in limine should have been reserved for trial; (2) the court erred in granting the motion in limine excluding evidence of the title insurance claim because it was relevant to show the Byrnes knew the CC&R's burdened their property; and (3) the court erred in granting the motion in limine that the CC&R's were eliminated because there was substantial evidence the CC&R's encumbered the Byrnes' property. The Byrnes have not filed a respondents' brief. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. Introduction
The Smiths own residential real property located La Jolla. The Byrnes are the Smiths' next door neighbors. Their properties are located in a subdivision known as "Smithers Heights."
B. The CC&R's
Prior to 1960, the Smith and Byrnes' properties, along with all other properties in the area, were owned by Claude and Miriam Smithers (together, the Smithers). On March 1, 1960, the Smithers sold the property to John and Mamie Hogan (together, the Hogans). At the time of their purchase of the property, and with the intent to subdivide it and convey their interest in the property, the Hogans recorded CC&R's with the San Diego County Recorder's Office. Of relevance to this action, the CC&R's provide:
"No lot shall be used except for single-family residence purposes. No building shall be erected, altered, placed or permitted to remain on any lot other than one single-family dwelling not to exceed one and one-half stories in height." (Italics added.)
C. The Chain of Title
The chain of title related to the sale of the Smithers Heights property from the Smithers to the Hogans is relevant to a determination of whether the court erred in determining the CC&R's did not encumber the Byrnes' property because of the Smithers' foreclosure of their deed of trust given by the Hogans as part of their purchase of the property.
That chain of title shows that the deed by which the Smithers conveyed Smithers Heights was recorded on March 1, 1960, as document No. 41956. The next document recorded, No. 41957, was a trust deed in favor of Home Federal Savings and Loan (Home Fed) given by the Hogans to help them purchase the property. The next document, No. 41958, was a purchase money deed of trust given by the Hogans to the Smithers in the amount of $52,000, which was a second deed of trust behind the Home Fed deed of trust (Smithers purchase money deed of trust). That same day, 371 documents later, the Hogans recorded the CC&R's as document No. 42328.
All the deeds of trust, and the CC&R's, contained a scrivener's error in the legal description of the property. On April 5, 1960, the error in the legal description of the property in the deeds of trust, including the Smithers purchase money deed of trust, was corrected and they were rerecorded. The only change in the legal description was to refer to a curve as "non-tangent" instead of "tangent." The error in the legal description contained in the CC&R's was not corrected and it was not rerecorded.
In September of 1961, the Smithers foreclosed on the Smithers' purchase money deed of trust given by the Hogans. The foreclosure trustee's deed states it was based upon the original deed of trust recorded before the CC&R's and contained the original erroneous legal description.
D. The Byrnes' Construction of a Second Story
In 2005 the Smiths discovered the Byrnes intended to erect a second-story addition on their residence. The Smiths gave the Byrnes a copy of the CC&R's. The Byrnes told the Smiths they were unaware of the CC&R's and stopped work on the addition.
In 2007 the Byrnes resumed construction of the second-story addition. According to the Smiths, the addition eliminated the Smith's panoramic view and invaded their privacy because of its size, location and proximity to the Smith's property.
E. The Byrnes' Claim with Their Title Insurance Company
Upon being notified by the Smiths that there were CC&R's that allegedly prohibited their construction of a second-story addition, the Byrnes made a claim against their title insurance company. The title insurance company paid the claim.
F. The Smith's Complaint
In response to the Byrnes' construction of a second-story addition, the Smiths brought an action for breach of the CC&R's, nuisance and injunctive relief.
G. The Byrnes' Motion in Limine No. 1
Prior to trial, the Byrnes brought several motions in limine seeking to exclude evidence at trial. In their motion in limine no. 1, the Byrnes sought to exclude evidence they made a claim on their title insurance policy, arguing that evidence a defendant has insurance was irrelevant and inadmissible. In response, the Smiths asserted there were "other reasons" why evidence of the Byrnes' title insurance claim was relevant. The Smiths asserted this evidence was relevant to show the Byrnes were on notice of the existence and enforceability of the CC&R's. The Smiths also argued it was relevant to show the Byrnes' intentional and willful breach of the CC&R's and to assist in a determination as to whether punitive damages were warranted.
H. The Byrnes' Motion in Limine No. 2
As originally submitted, the Byrnes' motion in limine no. 2 sought to exclude lay opinion regarding the existence of the CC&R's. Specifically, the Byrnes sought to prevent the Smiths from testifying the CC&R's encumbered the Byrnes' property.
Thereafter, the Byrnes amended their motion in limine no. 2, arguing (1) the legal description in the CC&R's did not "close" and thus they were unenforceable. The Byrnes also argued that the foreclosure of the Smithers purchase money deed of trust eliminated the CC&R's. In support of their amended motion in limine no. 2, the Byrnes submitted the declaration of Radford Roy Provence, a title insurance officer and expert witness/consultant to title insurance companies. He opined that the CC&R's when recorded were junior in priority to the Smithers purchase money deed of trust. He further opined that because that deed of trust had priority, when it was foreclosed upon it eliminated the CC&R's from the Smithers Heights subdivision, and they were no longer an encumbrance on any of the lots in the Smithers Heights subdivision.
Provence also noted that the deed from the Hogans to the Smithers transferring the property to them, the trust deed from the Smithers to Home Fed, and the Smithers purchase money deed of trust all had a scrivener's error in their legal description of the property. On April 5, 1960, they were rerecorded to correct the scrivener's error. Provence opined that, based upon the custom and practice in the title insurance industry, the rerecording of those deeds to correct a scrivener's error did not impact the priority of the original deeds over the CC&R's. In doing so, Provence noted that the trustee's deed foreclosing on the property was based upon the original deed of trust that was recorded prior to the CC&R's.
In opposition to the Byrnes's amended motion in limine no. 2, the Smiths submitted the declarations of William H. Gardner and James L Meyer. Gardner, an attorney who worked in the title insurance industry, opined that the foreclosure of the Smithers' purchase money deed of trust did not eliminate the CC&R's as an encumbrance on the Smithers Heights subdivision. He based his opinion on the fact the purchase money deed of trust was rerecorded on April 5, 1960, causing it to become junior in priority to the CC&R's. Meyer, a land surveyor, opined that the legal description on the original deeds, even though they contained errors, were proper as they did in fact "close."
The Smiths also argued that motions in limine were an inappropriate method to resolve disputed factual issues that should be resolved by the trier of fact.
The Byrnes filed a reply memorandum addressing Gardner's declaration that the rerecordation changed the priority of the purchase money deed of trust. The Byrnes provided the court with excerpts from Gardner's deposition wherein he admitted he did no research and did not consult any authority in rendering his opinion. He also testified that he was aware of no authority supporting his opinion. The Byrnes also provided authority that held that rerecordation to correct errors in the description of the property did not change the priority of the deeds.
I. Court's Ruling on Motions In Limine
The court granted the Byrnes' motion in limine no. 1, excluding any evidence the Byrnes had made a claim on their title insurance.
On the Byrnes' motion in limine no. 2, the court found the CC&R's did "close" and thus had a valid legal description. The court then found that the CC&R's were "eliminated by the September 1961 foreclosure of the purchase money deed of trust from the Hogans to the Smithers [Citation.]. Thereafter, conveyances of the Smithers Heights subdivision were free and clear of encumbrances on title."
Based upon its ruling on the Byrnes' motion in limine no 2, the court granted judgment on the pleadings in favor of the Byrnes because each of the Smiths' causes of action relied upon the validity and enforceability of the CC&R's.
J. The Smiths' Motion for New Trial
After the court granted the Byrnes' motion for judgment on the pleadings, the Smiths filed a motion for new trial. The Smiths argued that where a lender approved or consented to restrictions on the use of real property, equity might enforce those restrictions against the lender. The Smiths also argued resolution of this issue was improper by way of a motion in limine.
The court denied the motion for new trial, finding there was no prejudicial error of law.
DISCUSSION
A. Propriety of Using Motions in Limine To Dispose of Action
The Smiths contend the court erred in disposing of this action through a motion in limine without allowing them to present relevant evidence at trial or contest it through the normal process of dispositive motions. This contention is unavailing.
The Smiths cite to Amtower v. Photon Dynamics, Inc.(2008) 158 Cal.App.4th 1582, 1593 for the proposition that in limine motions are not designed to replace dispositive motions prescribed by the Code of Civil Procedure. However, that opinion, while acknowledging there are dangers in using in limine motions to dispose of a claim as opposed to the ordinary statutory proceedings such as a motion for nonsuit, held that "trial courts do have the inherent power to use them in this way." (Amtower, supra, at p. 1595.) In Amtower, the court held that "[c]ourts have inherent power, separate from any statutory authority, to control the litigation before them and adopt any suitable method of practice, even if the method is not specified by statute or by the Rules of Court." (Ibid.) The Court of Appeal held that a trial court's disposing of a case through a motion in limine is not improper if the plaintiff "could not have produced any additional evidence that would have changed the result." (Ibid.) The Court of Appeal held it was proper for the trial court to dismiss one of the plaintiff's claims by way of a motion in limine on the ground that it was barred as a matter of law by the statute of limitations. (Id. at p. 1596; see also Coshow v. City of Escondido (2005) 132 Cal.App.4th 687, 701-702 [trial court may construe motion in limine as a motion for judgment on the pleadings]; Lucas v. County of Los Angeles (1996) 47 Cal.App.4th 277, 284-285 [proper to dispose of claim by motion in limine where " 'even if the plaintiff's allegations were proved, they would not establish a cause of action' "].)
Thus, the court's use of the Byrnes' motion in limine no. 2 to dispose of this action was appropriate because, as we shall discuss, post, the evidence presented showed that the Smiths' claims were barred as a matter of law based upon the foreclosure of the Smithers' purchase money deed of trust, which eliminated the CC&R's as an encumbrance on the Smithers Heights properties.
B. Enforceability of the CC&R's
The Smiths do not dispute that the Smithers' purchase money deed of trust, when foreclosed, eliminated all junior encumbrances, including the CC&R's if they were junior to the Smithers purchase money deed of trust. (5 Miller & Starr, Cal. Real Estate (3d ed. 2009) § 11:100, pp. 11-296 to 11-298.)
Rather, the Smiths make several arguments why the Smithers' purchase money deed of trust should not have priority over the CC&R's. The Smiths assert the Smithers' purchase money deed of trust did not have priority because (1) the CC&R's were created before the Smithers' purchase money deed of trust; (2) they had equal priority because the CC&R's were recorded on the same day, shortly after the Smithers' purchase money deed of trust, and were part of the same transaction; (3) the Smithers had notice of the CC&R's before they recorded their purchase money deed of trust; and (4) the deed of trust was rerecorded in a position junior to the CC&R's. These contentions are unavailing.
A special rule of priority applies to purchase money deeds of trust. They have priority over all other liens on the property, even those created first: "A mortgage or deed of trust given for the price of real property, at the time of its conveyance, has priority over all other liens created against the purchaser, subject to the operation of the recording laws." (Civ. Code, § 2898.)
Thus, it matters not that the CC&R's were drafted and signed before the Smithers purchase money deed of trust. "Because of the special rule in favor of purchase money liens, the lien securing the purchase money loan has priority over liens previously created by the buyer." (5 Miller & Starr, Cal. Real Estate, supra, § 11:104, p. 11:330, fn. omitted.)
Nor does the Smithers' purchase money deed of trust have equal priority with the CC&R's because they were recorded on the same day, with the CC&R's recorded shortly after the purchase money deed of trust: "When two instruments create interests in the same property and both are recorded, the dates of recording, and the time of day of recording (in case the dates coincide), determine priority." (5 Miller & Starr, Cal. Real Estate, supra, § 11:3, p. 11:21, italics added.)
Citing Civil Code section 1642, the Smiths assert that because the Smithers' purchase money deed of trust was created as part of a transaction that involved the creation of the Smithers Heights subdivision, all documents involved in that transaction, including the CC&R's, should be construed together, giving them equal priority. However, Civil Code section 1642, which provides that "[s]everal contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction, are to be taken together, " is a rule of contract interpretation. It has relevance to contractual disputes between the parties to those agreements. It has no bearing on the issue of priority between liens on property.
The only authority the Smiths cite that dealt specifically with the issue of equal priority is Daggett v. Rankin (1866) 31 Cal. 321, wherein the California Supreme Court held that where co-owners of a property sold it to a third party, each taking back a deed of trust, intending that they would have equal priority, the fact that one was recorded before the other did not give it priority. (Id. at pp. 327-328.) The court there invoked the principle of equity that "looks upon things agreed to be done as actually performed." (Id. at p. 327.)
However, in this case there is no evidence the parties agreed or intended that the Smithers' purchase money deed of trust was to have equal priority with the CC&R's. Further, the Smiths' contention ignores the fact that purchase money deeds of trust, by operation of law, have priority over any other liens (with the exception of other purchase money deeds of trust), even those recorded prior to them. (DMC, Inc. v. Downey Savings & Loan Assn. (2002) 99 Cal.App.4th 190, 195-196; Walley v. P.M.C. Investment Co. (1968) 262 Cal.App.2d 218, 220.)
The Smiths next contend that because California follows the "race-notice" system, the CC&R's, which were created first, had priority over the Smithers purchase money deed of trust, even though it was recorded first. This contention is unavailing.
The "race-notice" system dictates that if a person has notice of a previously created interest, the time of recording does not determine priority. Rather, in such a situation the interest created first will generally retain priority. (5 Miller & Starr, supra, § 11:1, pp. 11-12-11:13.)
However, this rule has no effect on purchase money deeds of trust. Because they have priority over any other liens, even those created and recorded first, knowledge of a prior lien is irrelevant. (DMC, Inc. v. Downey Savings & Loan Assn., supra, 99 Cal.App.4th at pp. 195-196; Walley v. P.M.C. Investment Co., supra, 262 Cal.App.2d at p. 220; 5 Miller & Starr, Cal. Real Estate, supra, § 11:104, p. 11:330.)
The Smith's last contention is that the rerecording of the Smithers' purchase money deed of trust to correct an error in legal description of the property made the CC&R's have priority because the rerecording occurred after the CC&R's were recorded. We reject this contention.
First, the Smiths cite no authority for the proposition that rerecording a purchase money deed of trust to correct a scrivener's error in the legal description has any impact on the priority it obtained by its original recording. Logically, this cannot be so because, as we have stated, ante, a purchase money deed of trust is senior to all other liens, even those created and recorded first. Further, the foreclosure was upon the original deed of trust, not the rerecorded one.
Moreover, where a modification is made to a senior deed of trust, and it has a material, adverse impact on a junior deed of trust, there may be a partial loss of priority, but only in respect to the modified portion of the senior lien. (5 Miller & Starr, Cal. Real Estate, supra, § 11:102, p. 11-323.) Here, there was no material modification, only a minor correction to the legal description of the property. Moreover, even if that correction could be deemed material and adverse, the Smithers' purchase money deed of trust would only lose priority as to that change. Finally, the CC&R's were not a junior deed of trust that could be adversely impacted by the modification.
In sum, the court did not err in finding the CC&R's were unenforceable because the foreclosure of the Smithers' purchase money deed of trust eliminated any junior encumbrances, including the CC&R's.
C. Exclusion of Evidence Title Insurance Claim
The Smiths assert the court erred in excluding evidence they made a claim on their title insurance policy because it was relevant as an admission by the Byrnes and individuals involved in processing the claim that the CC&R's burdened their property. This contention is unavailing.
Because we have concluded, as did the trial court, that the CC&R's were eliminated as a matter of law by the foreclosure, it is irrelevant what the Byrnes or their title insurance company believed as to the enforceability of the CC&R's. The fact they made a claim on their title insurance policy, and that the claim was paid, does not effect the question of whether, as a matter law, the CC&R's were enforceable. Their state of mind or belief has no relevance if the law dictates the CC&R's were not enforceable.
Accordingly, there was no prejudicial error by the court in excluding evidence of the Byrnes' claim on their title insurance policy.
DISPOSITION
The judgment is affirmed.
WE CONCUR: McDONALD, J., O'ROURKE, J.