EPHRAIM v. METROPOLITAN TRUST CO OF CALIFORNIA (1945)

The plaintiffs have appealed from a judgment which was rendered against them for failure to amend their complaint within the time allowed therefor after separate general and special demurrers had been sustained. The trial court held that the complaint failed to state a cause of action to quiet title to real property under Section 738 of the Code of Civil Procedure, to remove a cloud from the title under Sections 3412 and 3413 of the Civil Code, or for declaratory relief under Section 1060 of the Code of Civil Procedure.

The complaint is lengthy and complicated. It contains two counts. The first cause alleges that plaintiffs are owners and in possession of specified lots in ‘Tahoe Cedars Addition’ in El Dorado County, according to the map thereof recorded in that county; that the named defendants claim an interest in said lots ‘as trustee, mortgagee and beneficiary’ under a trust or mortgage which is attached to the complaint as ‘Exhibit A’; that said declaration of trust is ‘void, and casts a cloud upon the title of said plaintiffs'. That cause fails to allege facts upon which plaintiffs rely for holding that the trust is void or defective. The first cause then asserts, as a mere conclusion, that it is brought ‘under sections 738 and 1060 of the California Code of Civil Procedure.’

The second cause contains fifteen pages. It adopts the essential allegations of the first count. The two causes of action appear to be interrelated and dependent upon the same facts which are recited chiefly in the last count. Both causes are founded on certain alleged defects of three instruments which are marked exhibits ‘A’, ‘B’ and ‘C’ which are attached to the complaint and made a part thereof, and which the plaintiffs declare constitute clouds upon their title, which they ask the court of chancery to determine to be void. Those documents are the ‘Declaration of Trust’ marked ‘Exhibit A’, which was executed February 10, 1930, between Metropolitan Trust Company, as trustee, and H. L. Henry and Clara S. Henry, as beneficiaries, to ‘hold, subdivide, improve and sell said real property, and to distribute the proceeds therefrom’, in the manner specifically provided therein. Exhibit B is an assignment of a beneficial interest in the lots in said tract to the defendant R. H. Strosnider, in satisfaction of a lien to secure a loan of several thousand dollars, executed August 12, 1933, between said trustee and beneficiary. Exhibit C is a deed executed after sale on May 5, 1937, by which the Metropolitan Trust Company conveys the property in question to R. H. Strosnider. Neither of these instruments appears on its face to be invalid or void.

Paragraph XX of the second count of the complaint alleges that plaintiffs acquired title to the real property in question from W. M. Peterson, by deed dated December 30, 1939, and that their grantor obtained title thereto from H. L. Henry and Clara S. Henry, his wife, by deed dated July 25, 1939. It is conceded the common source of title of the respective parties is H. L. and Clara S. Henry.

After carefully analyzing the allegations of the complaint as a whole we are persuaded that, aside from certain conclusions, the plaintiffs rely upon their assertions, based solely on information and belief, that a former deed to the real property in question from H. L. and Clara S. Henry to the Metropolitan Trust Company, dated December 20, 1927, was in fact intended as a mere mortgage to secure an antecedent debt, without assigning alleged facts or reasons therefor; that the Declaration of Trust attached to the complaint as Exhibit A is also a mere mortgage with power of sale, to secure a debt of 10,000 owing to the Henrys, and as a second lien for payment to Girlie Strosnider of the further sum of $13,000, due to her from the Henrys; that for default of said payments the holder was authorized by said Declaration of Trust to foreclose the mortgage and sell the beneficial interest of the Henry at public auction only pursuant to Section 2924 of the Civil Code and Section 692 of the Code of Civil Procedure, after publication of notice; that the trustee did unlawfully sell and assign the beneficial interest of the Henrys for default in payment of said sum of $13,000 to Girlie Strosnider, upon publication of notice therefor, without conforming to the requirements of Section 2924 of the Civil Code, which rendered said sale and assignment void; that said default and sale are barred by the statute of limitations and are void and cast ‘a cloud upon plaintiffs' title’. The prayer of the complaint asks that the court decree that the sale and assignment of the beneficial interest of the Henrys be adjudged ‘null and void and the clouds thereby created * * * be removed and discharged’ and that it be determined that the Declaration of Trust is a mere mortgage and lien upon the property to secure payment of the indebtedness secured thereby to H. L. and Clara S. Henry.

Separate general and special demurrers to the complaint were filed by Metropolitan Trust Company and by R. H. and Girlie Strosnider. The demurrers were sustained with leave to amend the pleading within ten days. On motion, for failure to amend their complaint, judgment was rendered against the plaintiffs, from which they have appealed.

The appellants contend that the complaint states three separate causes of action, namely, the statutory suit to quiet title to real property under Section 738 of the Code of Civil Procedure, a cause to remove the cloud upon the title created by the alleged invalidity of the instruments attached to the complaint as exhibits thereto, and an action for declaratory relief under Section 1060 of the Code of Civil Procedure. It is asserted that if any one of said causes is sufficiently alleged in the complaint, the demurrers were erroneously sustained.

We are of the opinion the complaint fails to state facts sufficient to constitute a cause of action. Both counts of the complaint refer to the Declaration of Trust which is attached to and made a part thereof, and designate that instrument as a cloud upon plaintiffs' title without assigning any reason therefor except such as are clearly in conflict with the language of the trust. The counts are interrelated and dependent upon the same facts, and, in effect, constitute but one cause of action based on alleged infirmities of the Declaration of Trust creating a cloud on the title. The plain language of the trust instrument refutes the defects complained of. The gist of the allegations of the complaint amounts to an ineffectual effort to state a cause of action to remove a cloud upon the title. It is true that an ordinary complaint to quiet title to real property under Section 738 of the Code of Civil Procedure is sufficient if it alleges that the plaintiff is the owner and entitled to possession of the property, and that the defendant claims an interest therein adverse to plaintiff's title thereto, which claim is without right, and prays for a decree quieting title in plaintiff. Hyatt v. Colkins, 174 Cal. 580, 163 P. 1007; 22 Cal.Jur. 146, secs. 28–30. But the authorities are uniform to the effect that the statutory suit to quiet title must be distinguished from an action to remove a cloud on the title alleged to have been created by a designated instrument. In a suit to remove a cloud the complaint must state facts, and not mere conclusions, showing the apparent validity of the instrument designated, and point out the reason for asserting that it is actually invalid. Hibernia Savings & Loan Society v. Ordway, 38 Cal. 679; Castro v. Barry, 79 Cal. 443, 21 P. 946; Hughes v. Beekley, 85 Cal.App. 313, 318, 259 P. 337; Kroeker v. Hurlbert, 38 Cal.App.2d 261, 101 P.2d 101; Thompson v. Moore, 8 Cal.2d 367, 65 P.2d 800, 109 A.L.R. 1027; 22 Cal.Jur. 151, secs. 31–33; 51 C.J. 215, §§ 154–165; 4 Bancroft's Code Pleading, 3900, sec. 2188; 44 Am.Jur. 63, sec. 79.

In reconciling the cases with relation to the necessity of pleading facts upon which an action to remove clouds from titles, as distinguished from a simple suit to quiet title to real property, it should be observed that some complaints to quiet title have been upheld by disregarding as surplusage certain allegations with respect to asserted void instruments for the reasons that no demurrers were filed to the complaints, or because the answers tendered the issues and the cases were tried on that theory without objection.

In the present case the insufficiency of the complaint was challenged by demurrers which were sustained, and the plaintiffs elected to stand upon their complaint. It is apparent that each of the counts in this complaint is directed against the Declaration of Trust which is referred to as a cloud on the title. It is attached to the pleading as an exhibit and made a part thereof. The plaintiffs allege their title was derived by deed dated December 30, 1939, through W. M. Peterson from H. L. and Clara S. Henry, by deed dated July 25, 1939, which was approximately six years after the Henrys executed the Declaration of Trust. The written Declaration of Trust, which was executed by H. L. and Clara S. Henry as trustors appears to be a valid voluntary trust conforming to the provisions of Section 2221 of the Civil Code for the purposes of subdividing, selling and accounting for the proceeds of sales of the real property in the manner specifically provided therefor. It may not be held to constitute a mere mortgage or deed of trust to secure the grantors' interest in the real property in payment of specified debts, as the plaintiffs contend. The Declaration of Trust does provide for a lien on the land for repayment of $10,000 advanced to the Henrys by the Metropolitan Trust Company; for payment of a second lien thereon to secure an indebtedness of $13,000 owing from the Henrys to Girlie Strosnider, and for sale of land in the manner specifically prescribed to satisfy said indebtedness in case of default in the payments. For default in payment by the Henrys to Girlie Strosnider of the last-mentioned indebtedness, certain lots were sold in the manner designated by the trust instrument, and the assignment in satisfaction of that debt was made August 12, 1933, as shown by Exhibit B also attached to the complaint and made a part thereof. Any claim for a beneficial interest in the real property which the Henrys may have had on account of alleged irregular or defective procedure in said sale of lots was adjusted and settled as this court held in a prohibition proceeding determined in November, 1936. Strosnider et al. v. Superior Court, 17 Cal.App.2d 647, 62 P.2d 1394, 1396. The parties to that suit included the Henrys, the Strosniders and the Metropolitan Trust Company, who are involved in this action. The Henrys were declared bankrupts February 12, 1934. In a controversy over the same claim which is involved in the challenged sale of land in this case, this court said: ‘During the bankruptcy proceedings the trustee in bankruptcy entered into negotiations with the Strosniders and the trust company to settle the controversies existing between themselves and the Henrys, and on April 22, 1935, an agreement was entered into whereby, for a valuable consideration paid, all matters of dispute were settled and the agreement approved. The Henrys appealed from the order approving the compromise, but said appeal was dismissed by the federal court and said order is now final.’

The deed upon which the plaintiffs in this case rely was not executed by the Henrys until July 25, 1939. We must assume the Henrys then had no title to convey. We also assume this court may take judicial notice of its determination in that prohibition proceeding that the Henrys had no beneficial interest in said land. Schomer v. R. L. Craig Co., 137 Cal.App. 620, 627, 31 P.2d 396; Roberts v. Roberts, 81 Cal.App. 499, 253 P. 1112; 31 C.J.S., Evidence, p. 619, § 50, subsec. a.

The alleged defect in the sale of the lots upon which the appellants rely was the asserted failure to give notice thereof according to Section 2924 of the Civil Code. But paragraph VI of the Declaration of Trust provides specifically for the manner of publishing notice. It does not refer to Section 2924 of the Civil Code, and the Declaration of Trust does provide that ‘the recitals in each such assignment of default and of publication of notice of sale,’ etc., ‘shall be conclusive proof of such failure to pay, of due publication of such notice, and that the sale was made after due and proper demand, and of all facts recited therein.’ In compliance therewith, the Assignment of Beneficial Interest, which is also attached to the complaint and marked Exhibit B, recites that due notice of the sale of lots was made in the manner required by the Declaration of Trust. We must therefore assume that due notice was given, and that there is no merit in the contrary allegation of the complaint in that regard. Moreover, Section 2924 of the Civil Code has no application to sales under this Declaration of Trust. That section provides that it applies to ‘Every transfer of an interest in property, * * * other than * * * any transfer in trust.’ The real property which is involved in this case was transferred ‘in trust’ for specified purposes. We therefore conclude that, if there is a defect of notice of sale pursuant to Section 2924, it has no application to the present case.

Where a written contract, which is the foundation of an action, is attached to the complaint and made a part thereof, the allegations of mere conclusions with respect to the legal construction of the instrument, and averments in conflict with its clear provisions should be disregarded as surplusage. Stoddard v. Tradwell, 26 Cal. 294; Peak v. Republic Truck Sales Corp., 194 Cal. 782, 790, 230 P. 948; Bashford v. A. Levy & J. Zentner Co., 123 Cal.App. 204, 11 P.2d 51; Meer v. Cerati, 53 Cal.App. 497, 200 P. 501; 49 C.J. 618, § 882, 883. In the Stoddard case, supra, it is said in that regard: ‘Where a plaintiff himself sets forth the contract in the terms in which it is written, and then proceeds by averment to put a false construction upon the terms, the allegations, as repugnant to the terms, should be regarded as surplusage.’

In 49 Corpus Juris at page 619 it is said: ‘In case of a variance between the allegations of a pleading and the terms of an instrument set out as an exhibit, the exhibit will control, as far as its legal effect is concerned.’

In accordance with the foregoing principle of pleading we are warranted in holding that the complaint does not state a cause of action on the theory that the Declaration of Trust is a mere mortgage which may be canceled as a cloud upon plaintiffs' title, or that the notice of sale thereunder was defective.

We are of the opinion the complaint does not state facts constituting a present cause of action for declaratory relief. No separate count of that nature was included in the complaint. Paragraph VI of the first cause merely asserts that plaintiffs ‘bring this action under Sections 738 and 1060 of the California Code of Civil Procedure.’ That statement is a mere conclusion. No facts of ownership of the land, of an actual controversy between the parties, or otherwise, are stated to confer jurisdiction in a suit for declaratory relief. Nor does the mere injecting of paragraph XIII in the second count state facts conferring jurisdiction in an action for declaratory relief. It merely states that ‘by reason of the above and foregoing’ there exists a controversy between the parties. By reference to the allegations in the cause to remove a cloud from the title to the real property, upon which the plaintiffs rely, it affirmatively appears there is no valid present controversy between the parties. To state a cause of action for declaratory relief it is necessary to state facts from which the court may assume a valid present controversy exists. In the case of Merkley v. Merkley, 12 Cal.2d 543, 86 P.2d 89, 91, the Supreme Court said: ‘The plaintiff must show that the conditions exist which will justify the court in exercising its discretion to grant the relief sought.’

See 5 California Jurisprudence, Ten Year Supplement, 109, section 3, and cases cited.

Moreover, it appears from the allegations of the complaint that it is not necessary or proper for the court to grant declaratory relief under the present circumstances of this case. Whatever interest in the land the Henrys may have had upon which plaintiffs rely for a cause of action was terminated by settlement in the bankruptcy case long before plaintiffs procured their deed from them. It also affirmatively appears the statute of limitations bars this action. Section 1061 of the Code of Civil Procedure provides that: ‘The court may refuse to exercise the power granted by this chapter in any case where its declaration or determination is not necessary or proper at the time under all the circumstances.’

Even assuming, without so deciding, that the Declaration of Trust was a mere mortgage, the plaintiffs' alleged cause is barred by the statute of limitations which was raised by both demurrers. The complaint alleges that the deed which is challenged was recorded July 9, 1937. The complaint in this action was not filed until October 22, 1943, after the lapse of more than five years. It therefore appears on the face of the complaint that this action is barred by the statute of limitations.

For the foregoing reasons the demurrers were properly sustained.

The judgment is affirmed.

THOMPSON, Justice.

ADAMS, P. J., and PEEK, J., concur.