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District Court of Appeal, First District, Division 2, California.

FLACK v. BOLAND et al.†

Civ. 10505.

Decided: June 24, 1937

H. R. Griffin, of San Bernardino, for appellant. Robert Mack Light, of San Bernardino, for respondent.

This is an appeal by the plaintiff as executor of the estate of Max Janka submitted on the judgment roll. From the pleadings and findings, it appears that defendants Boland, on August 3, 1926, executed and delivered a note for $1,500 to Max Janka, now deceased, and secured the same by a deed of trust on certain real property. This promissory note by its terms fell due three years after date.

On August 20, 1931, defendants Boland executed and delivered to defendant and cross–complainant Mack another promissory note for $1,000 payable one year after date and secured the same by a second deed of trust on the same property.

On December 15, 1934, appellant commenced an action to foreclose the trust deed given to Janka and joined respondent Mack as a defendant. The defendants Boland defaulted but respondent Mack filed an answer and cross–complaint setting up the statute of limitations, Code of Civil Procedure, § 337, subd. 1 (as amended by St.1933, p. 2116), as a bar to appellant's action, and asking the court to foreclose his deed of trust and declare it prior to that sought to be foreclosed by appellant. To the corss–complaint appellant filed a demurrer, which was overruled.

The trial court found that appellant's cause of action was barred as against respondent Mack by the statute of limitations, and that respondent's deed of trust was prior in right to appellant's and ordered the real property sold, the proceeds to be applied first to satisfy respondent's claim and the balance, if any, to satisfy the claim of appellant.

The questions presented on this appeal are: (1) Is the defense of the statute of limitations available in an action to foreclose a deed of trust under Code of Civil Procedure, § 725a? (2) If the statute of limitations is applicable, has appellant made such an election by seeking to foreclose as to deprive him of his alternative right to sell under the trust deed, and therefore to make his rights subordinate to those of respondent?

The first question must be answered in the affirmative.

It is well settled that the trustee's right to sell under a deed of trust to satisfy the obligation secured is not barred by the statute of limitations. Grant v. Burr, 54 Cal. 298; Travelli v. Bowman, 150 Cal. 587, 89 P. 347; Sacramento Bank v. Murphy, 158 Cal. 390, 115 P. 232; Roberts v. True, 7 Cal.App. 379, 94 P. 392; Bank of Italy Nat. Trust & Sav. Ass'n v. Bentley, 217 Cal. 644, 655, 20 P.(2d) 940. It is equally settled that the right to foreclose a trust deed by action, given by section 725a, Code of Civil Procedure (as added by St. 1933, p. 1673, as re–enacted by St. 1935, p. 1807), affords an alternative and concurrent remedy to the right of sale by the trustee. Lincoln v. Superior Court, 2 Cal.(2d) 127, 39 P.(2d) 405.

The reason why the statute of limitations does not apply to sales under trust deeds given to secure debts is made plain by the cases above cited commencing with Grant v. Burr, supra. The statute of limitations applies only to the time within which actions may be commenced (Code Civ.Proc. § 335), and neither operates to extinguish the obligation nor to divest the trustee of his title or right to sell the property held in trust to satisfy the obligation. The sale under the trust deed is not in any sense the commencement of an action and hence the statute of limitations has no application.

But, where an action to foreclose under Code of Civil Procedure, § 725a, is commenced these reasons no longer apply and by a parity of reasoning the statute of limitations may be pleaded as a bar to the action. While the question is novel in this state it has been so held in a similar situation in other jurisdictions. Schwertner v. Provident Mutual Building Loan Ass'n, 17 Ariz. 93, 148 P. 910; Scott v. District Court, 15 N.D. 259, 107 N.W. 61. We conclude that the trial court properly held that appellant's right to foreclose was barred by the statute of limitations.

However, appellant insists that even though his right to foreclose by judicial proceeding was so barred, his right to satisfaction by trustee's sale was not barred and the court erred in making his security subordinate to respondent's. Respondent replies that by commencing and prosecuting his foreclosure action to judgment appellant has made a binding election of remedies which precludes him from insisting on his remedy by trustee's sale. These divergent claims necessitate an investigation of the basis of the doctrine of election of remedies.

Ordinarily, a binding election of remedies only occurs when a plaintiff has two inconsistent remedies and elects to proceed under one of them. It has no application where two consistent remedies are open to plaintiff and he pursues one, so that he may afterwards if the remedies are consistent pursue the other despite his previous resort to the first. 10 Cal.Jur., Election of Remedies, § 7, pp. 9, 10; 20 C.J., Election of Remedies, § 7, p. 6, § 18, p. 26; Commercial Centre Realty Co. v. Superior Court, 7 Cal.(2d) 121, 59 P. (2d) 978, 982, 107 A.L.R. 714.

That the remedy by foreclosure is consistent with the remedy by sale is clear from the court's discussion in Lincoln v. Superior Court, supra. The remedy by foreclosure and that by trustee's sale are but two parallel avenues to the satisfaction of an identical contract right.

The case of Commercial Centre Realty Co. v. Superior Court, supra, is quite similar on its facts. There involved was a mortgage with power of sale, instead of a deed of trust. In that case the mortgagee commenced an action to foreclose, and concurrently started the steps for a sale under the power. The sale having been effected under the power, plaintiff filed an amended and supplemental complaint in the foreclosure action reciting the fact of sale and seeking a deficiency judgment. It was claimed that plaintiff had made a binding election. The Supreme Court said:

“Moreover, if it be conceded merely for the sake of argument that the mortgagee elected to proceed by foreclosure, such election did not preclude the subsequent exercise of the power of sale. The doctrine of election of remedies is but a specific application of the equitable doctrine of estoppel, and it has been frequently held that a change in remedies does not bring about an election of remedies unless the change involves a prejudice to the opposing party.”

It only remains to determine whether the prosecution of the foreclosure action to judgment calls for the application of a different rule. Respondent cites Boots v. Ferguson, 46 Hun (N.Y.) 129, and Stokes v. Wright, 20 Ga.App. 325, 93 S.E. 27, in support of his claim that the prosecution of an action to judgment where the judgment goes against plaintiff on the ground of bar by statute of limitations operates as an election so as to prevent later resort to another remedy not barred by the statute.

In both of the cited cases plaintiff had a choice of inconsistent remedies, one in tort and the other in contract. Having elected to sue in tort, he was held to be barred from later suing on contract. In Stokes v. Wright, supra, the Court of Appeals of Georgia makes the distinction perfectly clear in the following language:

“It is settled law that one may pursue any number of concurrent and consistent remedies, but, as between conflicting and inconsistent remedies, he must elect. He will not be permitted, after the choice of one of several inconsistent and conflicting remedies, which he might originally have pursued at his option, to change his position and take a course wholly inconsistent with the remedy which he first selected.”

Furthermore, respondent filed a cross–complaint to which appellant demurred and his demurrer was overruled. Thereafter appellant could not dismiss (Code Civ.Proc. § 581, subd. 1, as amended by St.1935, p. 1954), and was compelled to allow the action to proceed. To the cross–complaint appellant filed an answer claiming the priority of his rights under the first deed of trust. This as squarely presented the question of the priority of his right under the power of sale as if the suit had originally been commenced by respondent to foreclose the second trust deed and appellant had been made a defendant. Under the latter circumstances, the court must have recognized the priority of appellant's trust deed and power of sale thereunder. Grant v. Burr, supra. We are satisfied for the reasons previously stated that respondent as cross–complainant, since he was seeking the same relief, was in no better position than he would have been as plaintiff.

Judgment reversed.

DOOLING, Justice pro tem.

We concur: SPENCE, Acting P. J.; STURTEVANT, J.

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