Dr. Leevil, LLC v. Westlake Health Care Center

IN THE SUPREME COURT OF

CALIFORNIA

DR. LEEVIL, LLC,

Plaintiff and Respondent,

v.

WESTLAKE HEALTH CARE CENTER,

Defendant and Appellant.

S241324

Second Appellate District, Division Six

B266931

Ventura County Superior Court

00465793-CU-UD-VTA

December 17, 2018

Justice Chin authored the opinion of the court, in which Chief

Justice Cantil-Sakauye and Justices Corrigan, Liu, Cuéllar,

Kruger, and Peña* concurred.

*

Associate Justice of the Court of Appeal, Fifth Appellate

District, assigned by the Chief Justice pursuant to article VI,

section 6 of the California Constitution.

DR. LEEVIL, LLC v. WESTLAKE HEALTH CARE CENTER

S241324

Opinion of the Court by Chin, J.

In this case, we decide a procedural question related to the

timing of the notice that must precede an unlawful detainer

action, where the action is not brought by a landlord but rather

by a new owner that has acquired title to the property under a

power of sale contained in a deed of trust. The question we

decide is whether perfection of title, which includes recording

the trustee’s deed, is necessary before the new owner serves a

three-day written notice to quit on the possessor of the property

or whether perfection of title need only precede the filing of the

unlawful detainer action. We conclude that the new owner must

perfect title before serving the three-day written notice to quit.

Because the Court of Appeal reached a different conclusion, we

reverse the judgment of the Court of Appeal.

FACTS

Westlake Village Property, L.P. (Westlake Village) owned

property in Thousand Oaks that it leased in 2002 to defendant

Westlake Health Care Center (Westlake Health) so the latter

could operate a skilled nursing facility on the property. Six

years later, Westlake Village obtained a bank loan, executing a

promissory note and a deed of trust on the property (the latter

to secure the promissory note). After Westlake Village defaulted

on the loan, the bank sold the promissory note and the deed of

trust to Dr. Leevil, LLC (Dr. Leevil), plaintiff in this action.

Dr. Leevil then instituted a nonjudicial foreclosure and bought

DR. LEEVIL, LLC v. WESTLAKE HEALTH CARE CENTER

Opinion of the Court by Chin, J.

the property at a trustee’s sale. The next day, Dr. Leevil served

a three-day written notice to quit upon the property’s tenant,

Westlake Health, and five days after that, Dr. Leevil recorded

title to the property. Westlake Health did not vacate the

property, and Dr. Leevil initiated this unlawful detainer action

40 days after service of the written notice to quit.

Proceedings in the trial court ended in a judgment against

Westlake Health, based on stipulated facts, with Westlake

Health preserving its right to appeal various legal rulings of the

court. On appeal, the Court of Appeal affirmed. (Dr. Leevil,

LLC v. Westlake Health Care Center (2017) 9 Cal.App.5th 450.)

Among other things, the Court of Appeal concluded that, under

Code of Civil Procedure section 1161a, subdivision (b) (section

1161a(b)), an owner that acquires title to property under a

power of sale contained in a deed of trust need not perfect title

before it serves a three-day written notice to quit on the

possessor of the property. Instead, the Court of Appeal

concluded that the new owner may serve the notice to quit

immediately after acquiring ownership, after which it may

perfect title, so long as title is perfected before the new owner

files an unlawful detainer action. (9 Cal.App.5th at pp. 455–

457.) In reaching that conclusion, the Court of Appeal expressly

disagreed with the Appellate Division of the San Diego County

Superior Court, which addressed the same issue in U.S.

Financial, L.P. v. McLitus (2016) 6 Cal.App.5th Supp. 1

(McLitus). (9 Cal.App.5th at p. 455.) Because Dr. Leevil

perfected title before initiating this unlawful detainer action,

although not before serving the notice to quit, the Court of

Appeal concluded that the action complied with section

1161a(b). (9 Cal.App.5th at p. 457.)

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Opinion of the Court by Chin, J.

Westlake Health petitioned for review, which we granted,

limiting the issue to the section 1161a(b) issue described above.

DISCUSSION

“Our role in interpreting statutes is to ascertain and

effectuate the intended legislative purpose. [Citations.] We

begin with the text, construing words in their broader statutory

context and, where possible, harmonizing provisions concerning

the same subject. [Citations.] If this contextual reading of the

statute’s language reveals no ambiguity, we need not refer to

extrinsic sources. [Citations.]” (United Riggers & Erectors, Inc.

v. Coast Iron & Steel Co. (2018) 4 Cal.5th 1082, 1089–1090.)

Section 1161a(b) authorizes a summary proceeding to

remove the possessor of real property in specified circumstances.

It is structured to enumerate five “cases” in which its

substantive provision applies. Specifically, section 1161a(b)

opens with the phrase “[i]n any of the following cases,” then it

sets forth its substantive provision (authorizing an unlawful

detainer action to remove “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”), and then

it enumerates five separate situations in which its substantive

provision comes into play.1 Thus, the substantive provision of

1

Section 1161a(b) provides in full: “In any of the following

cases, a person who holds over and continues in possession of a

manufactured home, mobilehome, floating home, or real

property after a three-day written notice to quit the property has

been served upon the person, or if there is a subtenant in actual

occupation of the premises, also upon such subtenant, as

prescribed in Section 1162, may be removed therefrom as

prescribed in this chapter: [¶] (1) Where the property has been

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Opinion of the Court by Chin, J.

section 1161a(b) has no operative effect unless one of the five

enumerated situations (what the statute calls “cases”) is

present. Put another way, section 1161a(b) contemplates that a

property owner seeking to avail itself of the statute’s remedy

will begin by looking at the five enumerated “cases,” considering

whether the conditions of any of them are satisfied. Only when

one of the cases is satisfied may the substantive provision of the

statute be invoked.

Section 1161a(b)(3) is one of those “cases,” and it is the

only provision on which Dr. Leevil relies. Therefore, Dr. Leevil

was not entitled to the remedy provided by the substantive

provision of section 1161a(b) unless it first satisfied the

conditions of section 1161a(b)(3). Section 1161a(b)(3) describes

the following case: “Where the property [(A)] has been sold in

sold pursuant to a writ of execution against such person, or a

person under whom such person claims, and the title under the

sale has been duly perfected. [¶] (2) Where the property has

been sold pursuant to a writ of sale, upon the foreclosure by

proceedings taken as prescribed in this code of a mortgage, or

under an express power of sale contained therein, executed by

such person, or a person under whom such person claims, and

the title under the foreclosure has been duly perfected. [¶] (3)

Where the property has been sold in accordance with Section

2924 of the Civil Code, under a power of sale contained in a deed

of trust executed by such person, or a person under whom such

person claims, and the title under the sale has been duly

perfected. [¶] (4) Where the property has been sold by such

person, or a person under whom such person claims, and the

title under the sale has been duly perfected. [¶] (5) Where the

property has been sold in accordance with Section 18037.5 of the

Health and Safety Code under the default provisions of a

conditional sale contract or security agreement executed by such

person, or a person under whom such person claims, and the

title under the sale has been duly perfected.”

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Opinion of the Court by Chin, J.

accordance with Section 2924 of the Civil Code, [(B)] under a

power of sale contained in a deed of trust executed by [the

holdover possessor], or a person under whom such person

claims, and [(C)] the title under the sale has been duly

perfected.” (Italics added.) There are two things to notice about

the language of section 1161a(b)(3). First, the provision is in the

past tense (“has been sold” and “has been duly perfected”),

suggesting completion. By contrast, the substantive provision

of section 1161a(b) uses the present tense (“holds over and

continues” and “may be removed”). These choices of verb tense

strongly support the conclusion that section 1161a(b)(3), when

it is relied upon by a plaintiff, enumerates conditions precedent

that the plaintiff must satisfy before invoking the substantive

provision of section 1161a(b) — that is, before serving a notice

to quit. (See Hughes v. Board of Architectural Examiners (1998)

17 Cal.4th 763, 776 [“In construing statutes, the use of verb

tense by the Legislature is considered significant.”].)

Second, the sale of the property in question is only one of

three distinct conditions set forth in section 1161a(b)(3), and the

use of the conjunctive word “and” to connect the three conditions

can only mean that all three conditions must be satisfied. In

other words, all three conditions of section 1161a(b)(3),

including perfection of title, were prerequisites to Dr. Leevil

having any right to the remedy section 1161a(b) affords. And in

this context, perfection of title requires that the instrument of

conveyance (the trustee’s deed) be recorded pursuant to

Government Code section 27280. As the Court of Appeal

explained in Kessler v. Bridge (1958) 161 Cal.App.2d Supp. 837,

“[t]itle is duly perfected when all steps have been taken to make

it perfect, i.e., to convey to the purchaser that which he has

purchased, valid and good beyond all reasonable doubt[]

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[citation], which includes good record title [citation], but is not

limited to good record title, as between the parties to the

transaction. . . . The court in an unlawful detainer [action] . . .

has jurisdiction to determine the validity of such defenses.” (Id.

at p. 841, italics added.) Because one of the conditions set forth

in section 1161a(b)(3) is that “title under the sale has been duly

perfected,” Dr. Leevil was not entitled to a section 1161a(b)

remedy until it first perfected title, which required, among other

things, that the instrument of sale (the trustee’s deed) be

recorded. That being so, the most natural reading of the statute

required Dr. Leevil to perfect title before invoking section

1161a(b) — but it is undisputed that Dr. Leevil served the three-

day written notice to quit before it perfected title to the property.

Dr. Leevil, therefore, took the first step in the removal process

authorized by section 1161a(b) before satisfying all of the

prerequisite conditions.

“It has long been recognized that the unlawful detainer

statutes are to be strictly construed and that relief not

statutorily authorized may not be given due to the summary

nature of the proceedings. [Citation.] The statutory

requirements in such proceedings ‘ “must be followed

strictly . . . .” ’ ” (WDT–Winchester v. Nilsson (1994) 27

Cal.App.4th 516, 526; see Underwood v. Corsino (2005) 133

Cal.App.4th 132, 135; Cal–American Income Property Fund IV

v. Ho (1984) 161 Cal.App.3d 583, 585.) “The remedy of unlawful

detainer is a summary proceeding to determine the right to

possession of real property. Since it is purely statutory in

nature, it is essential that a party seeking the remedy bring

himself clearly within the statute.” (Baugh v. Consumers

Associates, Ltd. (1966) 241 Cal.App.2d 672, 674.) Because

Dr. Leevil served the three-day notice to quit before it perfected

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Opinion of the Court by Chin, J.

title, it did not bring itself within the scope of section 1161a(b),

as that provision is most naturally read, before taking the first

step in the removal process that the statute authorizes. Its

notice to quit was, therefore, premature and void, and its

unlawful detainer action, improper.

The Court of Appeal rejected the foregoing reading of

section 1161a(b) because it did not focus on the statute’s

structure. As noted, section 1161a(b) opens with the phrase “[i]n

any of the following cases,” and it enumerates five separate

situations, one of which must be satisfied before the substantive

provision of the statute has any operative effect. The Court of

Appeal ignored that structure, instead construing the statute as

if the opening phrase were omitted and as if the requirements

of section 1161a(b)(3) merely qualified the words “may be

removed.” (§ 1161a(b).) Based on that reading, the Court of

Appeal concluded that a holdover possessor of real property

“may be removed” (§ 1161a(b)) only after section 1161a(b)(3) is

satisfied, but the three-day written notice to quit may be served

before section 1161a(b)(3) is satisfied, because the three-day

notice does not, by itself, remove the property’s possessor.

(Dr. Leevil, LLC v. Westlake Health Care Center, supra, 9

Cal.App.5th at pp. 456–457.) In so concluding, the Court of

Appeal failed to discern the most natural reading of section

1161a(b).

That reading, moreover, is confirmed by consideration of

the broader context in which section 1161a(b) was enacted. (See,

e.g., People v. Woodhead (1987) 43 Cal.3d 1002, 1008 [“When the

[statutory] language is susceptible of more than one reasonable

interpretation, . . . we look to a variety of extrinsic aids,

including the ostensible objects to be achieved, the evils to be

remedied, the legislative history, public policy,

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DR. LEEVIL, LLC v. WESTLAKE HEALTH CARE CENTER

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contemporaneous administrative construction, and the

statutory scheme of which the statute is a part”].) The unlawful

detainer action was created to provide property owners who

sought to recover possession of their property with a relatively

inexpensive and quick legal remedy, thus discouraging property

owners from resorting to self-help methods. In 1917, however,

this court decided Francis v. West Virginia Oil Co. (1917) 174

Cal. 168, holding that the unlawful detainer remedy was limited

to landlord–tenant disputes, and therefore a new owner could

not bring an unlawful detainer action against a former owner

who refused to relinquish possession. In 1929, in apparent

response to Francis, section 1161a was added to the Code of Civil

Procedure, expanding the unlawful detainer remedy to bring

within its scope actions by property owners who acquired

ownership as a result of: (1) an execution against the former

owner, (2) a foreclosure of a mortgage executed by the former

owner, or (3) a power of sale clause in a deed of trust executed

by the former owner. (Stats. 1929, ch. 393, § 1, p. 719; see Vella

v. Hudgins (1977) 20 Cal.3d 251, 255 (Vella).) Since 1929,

section 1161a has been expanded in several ways, but as to its

general structure, it has not been substantively changed.

Significantly, there is no indication, in the history of section

1161a or in the case law interpreting it, that the Legislature

intended the unlawful detainer remedy that the statute affords

to be available to a party that does not strictly satisfy all the

conditions of one of the statute’s “cases.”

Dr. Leevil argues that the perfection of its title — which

occurred six days after the sale — was retroactive to the original

sale date under Civil Code section 2924h, subdivision (c) (section

2924h(c)). Section 2924h(c) governs the means by which

payment can be made at a trustee’s sale, and it expressly

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Opinion of the Court by Chin, J.

permits the trustee to withhold the trustee’s deed until the

funds constituting the purchase price become available to the

payee. It provides: “In the event the trustee accepts a check

drawn by a credit union or a savings and loan association

pursuant to this subdivision or a cash equivalent designated in

the notice of sale, the trustee may withhold the issuance of the

trustee’s deed to the successful bidder . . . until funds become

available to the payee or endorsee as a matter of right. [¶] For

the purposes of this subdivision, 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 . . . .” (§ 2924h(c), italics added.)

The purpose of section 2924h(c) is clear from its text. A

bidder at a trustee’s sale might present a check for the purchase

price of the property, but whether the bank account on which

the check is drawn contains sufficient funds to cover the amount

of the check remains to be seen. Therefore, the trustee is

authorized to withhold the deed until the check clears. But

withholding the deed prevents the purchaser from recording the

sale and perfecting its title. The subdivision, therefore, affords

a 15-day period during which the deed may be recorded and the

sale “deemed perfected” as of the original sale date. (§ 2924h(c).)

That way, the original sale date may be memorialized even if

the deed is withheld pending confirmation of the purchaser’s

payment of the purchase price.

Dr. Leevil argues that it recorded title just six days after

the date of the sale, and therefore, under section 2924h(c), the

sale is “deemed perfected” as of the original sale date. Hence,

Dr. Leevil should be deemed to have perfected title for purposes

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Opinion of the Court by Chin, J.

of section 1161a(b) before it served the three-day written notice

to quit on Westlake Health.

The problem with this argument is that, under section

2924h(c), the sale is not “deemed perfected” on the original sale

date until the deed is recorded. Before the deed is recorded, the

sale is neither “perfected” (§ 1161a(b)(3)) nor “deemed perfected”

(§ 2924h(c)) — it is just a sale — and it was before the deed was

recorded that Dr. Leevil served the three-day written notice at

issue in this case. Thus, as of the time Dr. Leevil served the

notice, Dr. Leevil did not meet the conditions of section

1161a(b)(3), and therefore its notice was premature and void.

The fact that Dr. Leevil later met those conditions, and the fact

that the conduct that satisfied those conditions was deemed to

be retroactive, does not change the fact that Dr. Leevil was not

in strict compliance with section 1161a(b) when it took the first

step in the removal process that the statute authorizes.

Moreover, as the appellate division noted in McLitus, the

apparent policy aims of the statute support an inference that the

Legislature intended that a new owner of real property should

perfect title before serving a three-day written notice to quit on

the possessor of the property. In cases where the possessor of

the property is a tenant of the former owner, not the former

owner itself, the tenant may not know whether the entity

serving the notice to quit is a bona fide owner. Thus, section

1161a(b)’s requirement that the new owner perfect title before

serving a notice to quit protects the interests of such a tenant.

As the appellate division stated in McLitus: “[Plaintiff’s]

interpretation . . . would suggest that a post-foreclosure plaintiff

could routinely prematurely issue a three-day notice . . . ,

[a]nd . . . such a practice would practically prevent a defendant

from effectively verifying the identity of the alleged purchaser

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Opinion of the Court by Chin, J.

of a property[,] as a search of recorded documents would prove

futile.” (McLitus, supra, 6 Cal.App.5th at p. Supp. 4.)2

As the McLitus court explained, Dr. Leevil’s statutory

interpretation would put a tenant in a precarious position. A

tenant would be forced to choose between vacating the property

without assurance that title will ever actually be perfected or

remaining in possession of the property and potentially

incurring damages as a holdover tenant if title is, in fact,

perfected. In the first scenario, if the successful bidder at the

trustee’s sale fails to pay the purchase price, the sale could be

rescinded, in which case the tenant vacated the property

unnecessarily. In the second scenario, the tenant could be liable

for damages that exceed the rent specified in the tenant’s lease.

(See Superior Motels, Inc. v. Rinn Motor Hotels, Inc. (1987) 195

Cal.App.3d 1032, 1069.) Our conclusion that a new owner must

perfect title before serving a three-day written notice to quit

eliminates these uncertainties by allowing the tenant to verify

title during the three-day notice period. It thus effectuates the

2

Dr. Leevil argues that the tenant here was a business

entity that was closely related to the property’s former owner,

and therefore the tenant knew that Dr. Leevil was the bona fide

owner. That may be so, but we must interpret section 1161a(b)

considering every situation in which the statute might apply,

including the situation in which the tenant has no such insider

knowledge. Moreover, “the code requirements [governing

unlawful detainer] must be followed strictly . . . .” (Cal–

American Income Property Fund IV v. Ho, supra, 161 Cal.App.3d

at p. 585, italics added.) The phrase “followed strictly” does not

suggest that an owner need only meet those requirements that

the owner considers to be significant in the context of the

transaction at issue.

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Opinion of the Court by Chin, J.

purposes of section 1161a(b), protecting the tenant’s interests

without excessively burdening the new owner.

In response to the foregoing reasoning, the Court of

Appeal asserted: “Westlake Health was free to challenge

[Dr.] Leevil’s claimed ownership in court. (Orcilla v. Big Sur,

Inc. (2016) 244 Cal.App.4th 982, 1010 [198 Cal.Rptr.3d 715]

[title can be litigated in a § 1161a unlawful detainer action].)”

(Dr. Leevil, LLC v. Westlake Health Care Center, supra, 9

Cal.App.5th at p. 456.) On this point, the Court of Appeal was

misleading. Orcilla and the cases on which it relies establish

only that Westlake Health could use the unlawful detainer

action to litigate whether Dr. Leevil “ ‘acquired the property at

a regularly conducted sale and thereafter “duly perfected” [its]

title.’ ” (Orcilla v. Big Sur, Inc. (2016) 244 Cal.App.4th 982,

1011, quoting Vella, supra, 20 Cal.3d at p. 255.) The unlawful

detainer action did not permit Westlake Health to litigate every

possible issue related to Dr. Leevil’s claim of ownership.

“Matters affecting the validity of the trust deed or primary

obligation itself, or other basic defects in the plaintiff’s title, are

neither properly raised in this summary proceeding for

possession, nor are they concluded by the judgment.” (Cheney v.

Trauzettel (1937) 9 Cal.2d 158, 160; see Vella, at p. 258

[“[S]ection 1161a does not require a defendant to litigate, in a

summary action within the statutory time constraints

[citations], a complex fraud claim involving activities not

directly related to the technical regularity of the trustee’s

sale”].)

Therefore, Westlake Health’s ability to challenge

Dr. Leevil’s claim of ownership was limited, and the Court of

Appeal erred in suggesting otherwise. And more generally, if

the cloud on a new owner’s title concerns an issue that cannot

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Opinion of the Court by Chin, J.

be litigated in an unlawful detainer action, and if, as the Court

of Appeal concluded, a new owner can serve a three-day written

notice to quit before perfecting title, then a holdover possessor

of the property would have no choice but to vacate the property

upon receipt of the notice. It is possible, however, that the cloud

on the title would prevent the title from ever being perfected, in

which case the holdover possessor would have vacated the

property unnecessarily. Therefore, a rule requiring a new owner

to perfect title before serving its three-day notice would avoid

the imposition of possibly unnecessary relocation expenses on

the possessor of the property.

Dr. Leevil argues that such a rule will lead to a delay

ranging from several days (in a typical case) to several weeks (in

a less typical case) and that the delay will increase the new

owner’s “carrying charges” (i.e., interest payments on debt,

property taxes, insurance, etc.), which will increase the damages

that a holdover possessor of the property will owe once the new

owner prevails in an unlawful detainer action. (See Code Civ.

Proc., § 1174, subd. (b).) In the case of a large commercial

property, a delay of a week or two might increase damages

significantly. Dr. Leevil argues that this increase in damages

will increase the number of unlawful detainer actions that can

be filed as “unlimited civil cases” — cases, that is, where the

amount in dispute exceeds $25,000 (see Code Civ. Proc., § 86,

subd. (a)(4)) — thus “clogging the court system.” We are not

persuaded by the argument. As an initial matter, we doubt that

a significant number of unlawful detainer cases will shift, as a

result of our decision, from limited civil cases to unlimited civil

cases (Code Civ. Proc., § 88). In the typical case, the far greater

proportion of the amount in dispute will likely depend on when

the unlawful detainer action is filed, as opposed to when the

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Opinion of the Court by Chin, J.

three-day written notice to quit is served. Here, for example,

Dr. Leevil perfected title five days after service of the notice to

quit, but it did not initiate this unlawful detainer action until a

month later, and during that time damages continued to mount.

In any event, our task is to read the statute as written, and for

reasons already explained, we read the statute as calling for title

to be perfected before the three-day notice is served.

CONCLUSION

We conclude that an owner that acquires title to property

under a power of sale contained in a deed of trust must perfect

title before serving the three-day written notice to quit required

by Code of Civil Procedure section 1161a(b). Accordingly, the

judgment of the Court of Appeal is reversed.

CHIN, J.

We Concur:

CANTIL-SAKAUYE, C. J.

CORRIGAN, J.

LIU, J.

CUÉLLAR, J.

KRUGER, J.

PEÑA, J.*

*

Associate Justice of the Court of Appeal, Fifth Appellate

District, assigned by the Chief Justice pursuant to article VI,

section 6 of the California Constitution.

14

See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Dr. Leevil, LLC v. Westlake Health Care Center

__________________________________________________________________________________

Unpublished Opinion

Original Appeal

Original Proceeding

Review Granted XXX 9 Cal.App.5th 450

Rehearing Granted

__________________________________________________________________________________

Opinion No. S241324

Date Filed: December 17, 2018

__________________________________________________________________________________

Court: Superior

County: Ventura

Judge: Vincent J. O’Neill, Jr.

__________________________________________________________________________________

Counsel:

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

Defendant and Appellant.

Law Offices of Ronald Richards & Associates, Ronald N. Richards, Nicholas Bravo; Wilson, Elser,

Moskowitz, Edelman & Dicker, Robert Cooper; Law Offices of Geoffrey Long and Geoffrey S. Long for

Plaintiff and Respondent.

Counsel who argued in Supreme Court (not intended for publication with opinion):

Teri T. Pham

Enenstein Pham & Glass

12121 Wilshire Boulevard, Suite 600

Los Angeles, CA 90025

(310) 899-2070

Ronald N. Richards

Law Offices of Ronald Richards & Associates

P.O. Box 11480

Beverly Hills, CA 90213

(310) 556-1001