RAISCH v. MYERS (1945)

District Court of Appeal, First District, Division 1, California.

RAISCH v. MYERS et al.*

Civ. 12826.

Decided: July 03, 1945

Henry F. Wrigley, of San Francisco, for appellant. Alma M. Myers, of San Francisco, in pro. per.

Defendant Federal Construction Company appeals from a judgment holding that it does not have an assessment lien on certain real property and that a certain street improvement bond is void.

Plaintiff filed an action to foreclose the lien of a street assessment issued in 1939 for work performed under the San Francisco Street Improvement Ordinance of 1934. Defendant Myers is the owner of the real property assessed. No question is raised here concerning the validity of the judgment for the foreclosure of that assessment, except as it might be affected by the question of priority as between the plaintiff and the appellant Federal Construction Company. Appellant Federal Construction Company appeared by answer and cross-complaint, in which it asked to have the court declare a lien upon the Myers property for street work done and a bond issued in 1928 under the San Francisco Street Improvement Ordinance of 1918. The effect of the assessment and bond for that work is the question here involved. Plaintiff Raisch has not appeared on this appeal. Respondent Myers contends, and the court found, that the bond in question is void and that, anyhow, any cause of action based on the bond or the assessment is barred by the limitations in the ordinance and statutes.

Appellant's position is that the execution of the bond is a waiver of all limitations of action and that, in any event, whether the bond be valid or invalid, or if the right to foreclose the assessment lien is barred by any ordinance or any statute, still the assessment lien continues and the property owner cannot quiet her title without payment of, or offering to pay, the unpaid portion of the assessment. Appellant distinguishes between the lien itself and the right of foreclosure of that lien, and, while admitting (again subject to the effect of the alleged waiver in the bond) that the right to foreclose is barred, contends that the lien of the assessment itself is never extinguished.

The facts concerning the assessment and bond in question are not disputed. The assessment, diagram and warrant were issued by the Board of Public Works on January 3, 1928, to A. E. Hennessey. On January 6, 1928, Hennessey assigned the same to appellant, Federal Construction Company. On April 2, 1928, pursuant to the San Francisco Street Improvement Ordinance of 1918, defendant Myers, as owner of the property, executed the bond in question. It is for the sum of $579.85 (the amount of the assessment against the Myers property). The claimed invalidity of the bond arises from the fact that the bond refers to an assessment and diagram issued to Federal Construction Company when in actual fact they were issued to A. E. Hennessey. Appellant contends that this is a minor error; that section 34 of the 1918 ordinance provides the form of the bond and that such form does not require any mention of the person to whom the assessment and diagram are issued, but merely reference to the amount of the assessment and a description of the real property, and that the bond sufficiently makes such reference. The bond in this respect refers to the assessment and diagram issued by the Board of Public Works Januar 3, 1928, and recorded in ‘Volume numbered 25A at pages . . . numbered 2204 of the Record of Assessments for Street Improvements, in the office of said Board of Public Works.’

The form of the bond required under section 34 only requires reference to two things, (1) a description of the property, and (2) the amount of the assessment. It would seem, in view of the definite reference to the assessment and diagram, its number in the Board of Public Works record, and the fact that the requirement of section 34 as to the description of the property and the amount of the assessment has been fully met, that the error in the name would not be sufficient to invalidate the bond. Especially is this true in view of the provisions of section 47 of the ordinance: ‘The provisions of this Ordinance shall be liberally construed to promote the objects thereof, and no error, omission, or irregularity in connection with the proceedings thereunder not affecting a substantial right of a party interested shall invalidate any of such proceedings.’ Certainly no substantial right of the owner is affected by the surplusage in the bond referring to the Federal Construction Company. The owner is given a description of the property, the amount of the assessment, the volume of the recording of the assessment and the assessment number. By an examination of such proceedings the owner would determine that the Federal Construction Company was the assignee of the contractor who did the work and to whom the assessment was originally issued.

The validity of the bond is only important on the question of alleged waiver of limitations. If the bond be valid and its language does not constitute a waiver, then the right to foreclose is barred by the provisions of section 329 of the Code of Civil Procedure. If the bond be invalid, the right to foreclose the assessment is barred by the provisions of section 24 of the ordinance, and by the provisions of subdivision 1 of section 337, subdivision 1 of section 338, and section 343 of the Code of Civil Procedure. Assuming the bond to be valid, does it contain language which creates a waiver of the statute of limitations? The language depended upon for this purpose is the following: ‘The person in legal ownership of this bond shall, in the event of such default, have the right to foreclose the lien created by the said assessment for any unpaid portion thereof, as in the case where no bond had been made or executed, and such lien shall continue until such assessment is fully paid. It is hereby expressly provided that a lien for the full amount * * * is hereby created and acknowledged upon, in and to the real property described herein * * *.’ (Emphasis added.) (Sec. 34, S.F. Street Imp. Ord. 1918.)

To sustain its position appellant has cited a number of cases upon the general subject of waiver, none of which is in point, as they do not refer to street improvement bonds. There is no express waiver of the statute in the bond, and appellant has cited no case which holds that the general language of the bond constitutes such waiver. The language to the effect that the lien shall continue until fully paid does not mean that any limitations provided for by law in the ordinance or in the codes shall not apply.

The main question raised by appellant is that under the Street Improvement Ordinance of 1918, and under the decisions of the courts in this state, the lien of the assessment never outlaws, even if the right to foreclose does. Section 28 of the ordinance provides: ‘In all actions brought to enforce the lien of assessments made pursuant to the proceedings of this Ordinance the proceedings therein shall be governed and regulated by the provisions of this Ordinance, and when not in conflict therewith, by the Codes of this State.’ (Emphasis added.) Section 40 thereof provides: ‘In case it should appear at any time that any bond made as herein provided was not executed by the owner of the property described therein, or for any reason was invalid, or that a sale in accordance with its terms would not convey a full and clear title to such property, then the person entitled to collect and receipt for the payment of the original assessment, or his assigns, shall have the right to foreclose the lien thereof for any unpaid portion as originally imposed and such lien shall continue until such original assessment is fully paid.’ (Emphasis added.) Appellant contends that as section 28 provides that enforcement of the lien is governed and regulated by the ordinance and as admittedly, San Francisco being a charter city, its charter supersedes, in this field, state law; and since the Street Improvement Ordinance adopted pursuant to such charter has the same effect as the charter itself (Mardis v. McCarthy, 162 Cal. 94, 121 P. 389), then, under section 40, the lien continues regardless of any limitations in the ordinance or the codes until the original assessment is fully paid. Section 40 applies to a situation where the bond ‘for any reason was invalid.’ If the bond is valid, then under its very wording the assessment lien is to ‘confinue until such original assessment is fully paid.’

The cases sustain appellant's contention in this respect. Bradley Company v. Ridgeway, 14 Cal.App.2d 326, 58 P.2d 194, was a case in which a property owner sought to quiet title against the lien of street improvement bonds issued under the Street Improvement Act of 1911, St.1911, p. 730. On page 336 of 14 Cal.App.2d, on page 199 of 58 P.2d, the court says: ‘With reference to the third cause of action, it should further be observed that the attempt is here made to state a cause of action for quieting title against claims for payment of principal and interest due on bonds validly issued on the ground that such payments are barred by the statute of limitations, without pleading willingness to pay the indebtedness represented by the bonds, which indebtedness is admittedly due. The cause of action thus attempted to be stated is strictly equitable in character and is to be measured by equitable principles. No principle of equity is more firmly established than the familiar rule that he who seeks equity must first do equity. Unwillingness to pay a just indebtedness concededly due does not commend him who seeks the aid of equity to avoid payment of such indebtedness on the ground that the debt, though morally due, is barred by the provisions of a statute limiting the time within which an action to enforce payment of the obligation may be instituted. Hayne v. San Francisco, 174 Cal. 185, 197, 162 P. 625; Dool v. First National Bank, 207 Cal. 347, 352, 278 P. 233; Warden v. Barnes, 111 Cal.App. 287, 292, 295 P. 569. For this additional reason, we conclude that the third cause of action is vulnerable to the claim that it fails to state a cause of action for equitable relief.’

The Bradley case was discussed in Ritter v. Franklin, 50 Cal.App.2d 844, 123 P.2d 866, where the court pointed out that the rule established by the Bradley case applied to a situation where the property owner, as here, wanted to quiet title against the lien of the assessment, although the court held that the statute of limitations would apply as against a foreclosure proceeding by the bondholder.

In Lantz v. Fishburn, 17 Cal.App. 583, at page 588, 120 P. 1068, at page 1071, in connection with bonds issued under the Street Improvement Act of 1893, St.1893, p. 36, the court said: ‘In support of that contention, he [appellant] cites section 2911, Civil Code, which provides as follows: ‘A lien is extinguished by the lapse of the time within which, under the provisions of the Code of Civil Procedure, an action can be brought upon the principal obligation.’ By express provision of the bond act (Stats.1893, p. 36), the amounts of the assessments are made ‘a first lien upon the property affected thereby, until the bond issued for the payment thereof, and the accrued interest thereon, shall be fully paid.’ The power conferred upon the city treasurer to enforce payment in the same manner as a tax collector is authorized to enforce collection of delinquent tax assessments does not, as before noted, include any right to bring a personal action against the property owner. A tax collector has no such authority, although by the statutes of 1880, page 136, such a right is specially given to a city, county, or city and county. Section 2911, Civil Code, is therefore not applicable here, and it follows that the liens of the assessments against the property of plaintiff's testator have not been extinguished by limitation of time.' Respondent here has made the same contention as made in the Lantz case. The language of the 1893 act is almost identical with the language of section 40 of the San Francisco Ordinance. The 1893 Act made the assessments ‘a first lien * * * until the bond * * * shall be fully paid.’ The 1918 ordinance here involved says ‘such lien shall continue until such original assessment is fully paid.’

Hayne v. San Francisco, 174 Cal. 185, 192 P. 625, was an action in which the property owner attempted to quiet title against the lien of an assessment for the construction of the Stockton Street Tunnel, under the provisions of a city ordinance. The court held, page 197 of 174 Cal., page 630 of 162 P.: ‘As we find the assessment to be valid, the property of the plaintiffs is justly liable for its due proportion thereof. In such cases, the plaintiff is not entitled to any relief in a court of equity unless he shall pay, or offer to pay, the amount actually due upon the assessment against his property. As was said in Ellis v. Witmer, 134 Cal. [249], 253, 66 P. [301], 303: ‘This being the case, they cannot successfully invoke the assistance of a court of equity against the irregularities in the sale complained of, unless on the condition of paying what is due from them. * * * Here, no such condition has been imposed by the court, nor is there an offer in the complaint to pay what is due. The plaintiffs were therefore not entitled to relief.’ This states precisely the fact and the law with respect to the present case.'

In Warden v. Barnes, 111 Cal.App. 287, 295 P. 569, where the property owner was attempting to quiet title against the lien of bonds issued under the 1913 Street Improvement Act, St.1913, p. 845, the court said (page 292 of 111 Cal.App., page 571 of 295 P.): ‘The judgment, however, must be reversed and sent back for the following reasons: The respondents Barnes asked for and obtained affirmative relief as against the plaintiff Grace P. Warden, and judgment was entered in favor of the defendants Barnes quieting their title as against all claims of the plaintiff. To this relief respondents Barnes are not entitled. The statutes of 1893, page 36, so far as the bond involved herein is concerned, reads as follows: ‘Said assessment shall be a first lien upon the property affected thereby, until the bond issued for the payment thereof, and the accrued interest thereon, shall be fully paid.’ While the foreclosure sale and deed based upon the proceedings therein had availed the plaintiff nothing, the lien of the bond was not extinguished. This being an action in equity, title cannot be quieted in favor of a party, extinguishing a valid lien upon real property, without requiring the person in whose favor the judgment is entered, to do equity. The foreclosure proceedings in this case only being held invalid, the property is still subject to the lien of the bond and the trial court should have entered judgment in favor of the respondents Barnes, quieting their title thereto, upon payment of the amount due the plaintiff Grace P. Warden, as the owner of the bond, including such costs as she was entitled to collect. This question is settled, we think, by the following cases: Sawyer v. Berkeley Securities Co., 99 Cal.App. 545, 279 P. 217, and the authorities there cited; Green v. Palmer, 68 Cal.App. 393, 229 P. 876.'

Section 24 provides that the assessment shall be a lien for two years. However, if the property owner elects to pay the assessment in installments, he executes the bond provided for in section 34, which bond continues the lien on the real property, and under the terms of the bond, ‘such lien shall continue until such assessment is fully paid.’ It is conceded that the only obligation of the bond is the obligation to pay the assessment therein described. Hence there is but one lien,—that of the assessment. There is no provision in the ordinance for any limitation other than that set forth in section 28, the two-year limitation where a bond is not executed. It is not necessary to determine whether the provision in section 28, i.e., ‘In all actions brought to enforce the lien of assessments made pursuant to the provisions of this Ordinance the proceedings therein shall be governed and regulated by the provisions of this Ordinance, and when not in conflict therewith, by the Codes of this State,’ and the provision in section 34 to the effect that the assessment lien shall continue until paid, supersede or do away with the code limitations, such as sections 329, 337, 338 and 343 of the Code of Civil Procedure, for the reason that appellant has not asked for, nor is it urging, a foreclosure. However, Griffith Company v. Kelly, 52 Cal.App.2d 739, 126 P.2d 909, upholding the bar of the statute of limitations would appear to solve that problem, as its reasoning concerning the provisions of the Improvement Act of 1911 would apply, by analogy, to the provisions of the San Francisco ordinance. Appellant merely asks the court to find that it has a lien which must be paid off before the Raisch lien is foreclosed or the Myers title quieted.

It is conceded that the only lien involved here is the lien of the assessment. The two-year period for this lien provided in section 28 is a statute of limitations rather than a condition precedent to affirmative action. Ritter v. Franklin, 50 Cal.App.2d 844, 123 P.2d 866. The execution of the bond does not create a new lien, it merely extends the time of the enforceability of the assessment lien. Both sides concede that the bond creates no additional or new lien.

In Woods v. Hyde, 64 Cal.App. 433, 222 P. 168, 170, relied upon by respondent, the court held that in spite of the language in a street improvement bond issued under the 1893 act, ‘The assessment shall be a first lien upon the property affected thereby, until the bond * * * shall be fully paid,’ the statute of limitations applied to an action in mandamus to compel the city treasurer to sell the property, but the court approved the holding in Lantz v. Fishburn, 17 Cal.App. 583, 120 P. 1068, to the effect that before the property owner could quiet his title against the lien of an outlawed street bond he must do equity by paying off such lien. It then goes on to say that the rule established in this state makes a distinction between the existence of a right and the existence of a remedy. Although the remedy may be barred the right still exists. So here, although the remedy of foreclosure is barred, the lien still continues and cannot be eliminated except by payment.

Respondent lays great stress upon the fact that the assessment referred to in the bond is an assessment issued to Federal Construction Company, and, of course, there is no such assessment. Therefore, respondent contends, execution of the bond referring to a Federal Construction Company assessment, does not continue the lien of the Hennessey assessment in force because under section 24 of the ordinance that terminates in two years unless extended by the execution of a valid bond. However, as pointed out before, the bond properly describes the assessment and the property, and the error as to the name of the contractor is unimportant. There is no error in the assessment, and as this is an equitable proceeding the parties must do equity in order to obtain any active relief. Respondent cites City Street Improvement Co. v. Pearson, 181 Cal. 640, 185 P. 962, 20 A.L.R. 1317, on the point that there was no consideration for the bond. In that case the assessment itself was void and the court held that a promissory note given for the payment of the void assessment was without consideration. There is no claim here that the Hennessey assessment was void, but that merely because the bond gives the name of the assignee of the contractor, instead of the name of the contractor, the Hennessey assessment was not carried into the bond. Even were this true, the Hennessey assessment was before the court and would have to be paid before affirmative relief against the Federal Construction Company in a court of equity could be given. Under the authorities hereinbefore cited on this point, it would not make any difference whether any bond had ever been issued. In such event, even though the two years had expired in which foreclosure of the assessment could be brought, still the property owner could not quiet her title against that lien until she did equity by offering to pay the amount of the assessment. All but one of the cases cited by respondent as attempting to show that the lien of the assessment, as distinguished from the right to foreclose, does not continue in spite of the statute of limitations, are not in point. They are all actions in which the holder of the lien was attempting to enforce that lien after the statute of limitations had run. Except the Clark case, hereafter discussed, not a single one was a case in which the property owner was trying, as here, to quiet his title against such outlawed liens. City of San Diego v. Higgins, 115 Cal. 170, 46 P. 923, held that the statute of limitations barred an action to foreclose a lien for city taxes. Woods v. Hyde, 64 Cal.App. 433, 222 P. 168, held that because of the statute of limitations mandamus would not lie to compel the city treasurer to sell property covered by a street bond. Griffith Company v. Kelly, 52 Cal.App.2d 739, 126 P.2d 909, was the consolidation of several actions to foreclose street assessment liens under the Improvement Act of 1911. The question involved was whether the statement in the act that the ‘amounts assessed shall be a lien * * * and such lien shall so continue until it be discharged of record,’ St. 1927, p. 1407, did away with the statute of limitations. The court held that it did not. Again, there the lien holder was attempting affirmatively to foreclose an outlawed lien. Ritter v. Franklin, 50 Cal.App.2d 844, 123 P.2d 866, cited on oral argument, is likewise a case of attempted foreclosure of a street bond which the court found was barred by the statute.

Clark v. City of San Diego, 144 Cal. 361, 77 P. 973, seems to support respondent's position. In that case the court held that because the right of action for the collection of city taxes had been barred by the statute of limitations the lien of the taxes was likewise lost, and the property owner's title was quieted against that lien. However, the later cases of Bradley Company v. Ridgeway, 14 Cal.App.2d 326, 58 P.2d 194; Ritter v. Franklin, 50 Cal.App.2d 844, 123 P.2d 866; Hayne v. San Francisco, 174 Cal. 185, 162 P. 625; and Warden v. Barnes, 111 Cal.App. 287, 295 P. 569, are directly contrary to the Clark case. The Clark case was decided at a time when the courts were extremely technical in their attitude towards the enforcement of taxes and assessments. Courts now feel that, to assure the proper operation and function of government, tax and assessment liens should be enforced wherever reasonably possible. The ruling in the Clark case has not been followed in any other case in California. It is cited in the case of Griffith Company v. Kelly, 52 Cal.App.2d 739, 743, 126 P.2d 909, and a couple of other cases, as authority for the proposition that the statute of limitations does not apply to tax liens, but not upon its holding that because the right to enforce the lien is lost because of the statute of limitations a property owner may quiet title against such lien without doing equity.

Respondent argues that the only court action contemplated by the ordinance for enforcement of the lien is an action for foreclosure of the assessment, or, if executed, the bond; and that, therefore, no court has any jurisdiction to declare the assessment a lien where foreclosure is not asked and where it is barred, and refers to the case of Boskowitz v. Thompson, 144 Cal. 724, 730, 78 P. 290. That was an action brought by property owners to enjoin the collector of an irrigation district from selling their lands to pay delinquent irrigation district assessment bonds which they claimed to have been illegally issued. Certain bondholders intervened with the defendant collector to resist the claims of the defendant, and then cross-complained asking the court to declare the bonds liens on the property and to direct the collector to sell the lands to pay the amounts due. The court held that the bondholders were permitted to intervene, not because the controversy between the original parties could not be determined without their presence, but because of their interest in the success of the collector in defeating the claims of the defendants, and that their right to affirmative relief was no greater than was his; that for the purpose of defending the validity of the assessment in his effort to collect it, the collector sufficiently represents the district, but he is not authorized to represent it in any proceeding to have the bonds adjudged a lien upon the land within the district. In any litigation of this kind the district is a necessary party and in its absence the court has no authority to render a judgment. The court then goes on to hold that a court cannot enforce a lien, where the statute provides a method of enforcement, in any other mode than that prescribed. It is apparent that the court in that case was not passing on the question of the claim of a property owner in a proper proceeding to quiet his title against a statutory lien without first doing equity.

There is one question left to determine and that is,—as between the lien of the assessment levied in favor of plaintiff in 1939 and the lien of the assessment levied in 1928 in favor of appellant, which has priority? This matter is not discussed in the briefs. Apparently appellant concedes that the later assessment is prior in right, for, in its opening brief, appellant states: ‘Neither is there any contest between plaintiff, Raisch, and defendant Federal Construction Co.’ However, there is some other language in the appellant's brief which would indicate that the appellant is not quiet sure on this subject.

A study of the San Francisco Ordinance of 1918, in the volume of Ordinances of the City and County of San Francisco, published in 1924, which is the volume submitted to the court as covering all amendments applicable to this case, fails to disclose any provision on the question of priorities between liens imposed under the ordinance at different dates. There being no provision in the ordinance, this question has been determined by the decision in Woodill & Hulse Electric Co. v. Young, 180 Cal. 667, 182 P. 422, 5 A.L.R. 1296, where the court held that in the absence of statutory direction a subsequently imposed street assessment lien is prior in right to a prior imposed street assessment lien. While that case referred to street assessment liens imposed under state law, there is logically no difference between such liens and those imposed by an ordinance which has the effect of state law. ‘It is well established in this state by the decisions of this court that in the absence of any statutory enactment establishing a rule of priority for special assessment and bond liens, that such liens are ranked in the inverse order of their creation, that is to say, that the last in point of time is superior in rank, or is first in priority.’ Cullinan v. Grey, 18 Cal.2d 247, 249, 115 P.2d 460, 461.

The judgment appealed from is reversed and the trial court instructed to modify its findings and judgment to provide:

1. That Raisch has a lien on the premises in the amount as fixed by the judgment appealed from;

2. That Federal Construction Company has a lien on the premises in the amount shown by the evidence;

3. That the Raisch lien is prior in right to the Federal Construction Company lien;

4. That the remedy to enforce the Federal Construction Company lien has been lost, but the lien still exists;

5. That Alma M. Myers is entitled to no affirmative relief, except the declaration that the remedy to enforce the Federal Construction Company lien is lost, without first paying the Federal Construction Company lien, plus costs and expenses;

6. That a sale of the premises to satisfy the Raisch lien is ordered; that any of the parties to this action may bid at that sale; that the money realized from such sale be first applied to the satisfaction of all sums due Raisch, then to the satisfaction of all sums due Federal Construction Company, the excess, if any, to go to Alma M. Myers.

BRAY, Justice pro tem.

PETERS, P. J., and WARD, J., concur.