ARROW SAND AND GRAVEL INC v. SUNBURST DECORATIVE ROCK INC (1984)

This original proceeding in mandate presents the novel question of whether section 409 of the Code of Civil Procedure ¹ denies equal protection to the extent it allows only defendants who file cross-complaints to record notice of lis pendens, and denies that right to owners of real property who are defendants and whose title to the property is at issue in the action but who do not have any claim against the opposing litigants that could be the basis of a valid cross-complaint.

Procedurally, the issue arises in the underlying action because a defendant owner of real property was denied the right to maintain a post-judgment notice of lis pendens in connection with its appeal from an adverse judgment directing a judicial foreclosure sale on plaintiff's deed of trust.   The appeal contests the validity of the judgment's determination of plaintiff's present entitlement to foreclosure and, accordingly, concerns defendant's legal title to the property.

For the reasons discussed below, it must be concluded that as it is applied here there is no rational basis for the classification created by section 409, subdivision (a), and that owners of real property whose title to real property is at issue on appeal must be included within the class of litigants entitled to record notice of lis pendens thereby giving constructive notice that their claim of title is at issue in a pending appeal.

Petitioning appellant (hereafter referred to as Arrow) was the owner of certain commercial real property.   In 1980, Arrow secured an indebtedness to plaintiff/respondent (hereafter referred to as Sunburst) by a promissory note and deed of trust on the property.   Arrow defaulted on the note and Sunburst satisfied certain senior lienholders and tax deficiencies to maintain its security interest in the property.

In May 1983, Sunburst filed an action against Arrow to obtain judicial foreclosure on the deed of trust and for attorneys' fees.

Arrow filed an answer to the complaint that alleged certain affirmative defenses.   These claims were in the nature of set-offs against Arrow's indebtedness to Sunburst secured by the deed of trust.   The subject of the affirmative defenses had been alleged by Arrow as claims for damages against Sunburst in other state and federal actions.   In essence, the affirmative defenses claim tortious injury to and breach of contract and lease interests concerning real property adjacent to the subject real property.   None of these defenses appears to directly affect title to or the right of possession of the subject real property.

Arrow filed no cross-complaint in the underlying action.

In November 1983, Sunburst moved for summary judgment against Arrow on the basis that its entitlement to foreclosure under the deed of trust was not controverted and that the “affirmative defenses” were shams and did not affect plaintiff's right of foreclosure.   Arrow opposed the motion.

Summary judgment was granted and judgment was entered on December 7, 1983.   Arrow was served on January 3, 1984, with notice that a commissioner's foreclosure sale was set for January 20, 1984.   On January 16, 1984, Arrow caused to be recorded a notice of lis pendens.   The foreclosure sale was postponed due to the lis pendens.

On January 19, 1984, Sunburst filed its motion to expunge the lis pendens.   The sole basis of the motion was that section 409, subdivision (a), restricts entitlement to file such notice to plaintiffs who file a complaint and defendants who file a cross-complaint and that Arrow falls within neither class.   Arrow opposed the motion, contending that section 409, if construed as suggested by Sunburst, violates equal protection guarantees.

Respondent issued its order for expungement of the lis pendens on January 31, 1984, and a copy of that order was served by mail upon Arrow on that date.

On February 6, 1984, Arrow filed notice of appeal from the judgment entered December 7, 1983.

On February 20, 1984, the order expunging lis pendens was filed and recorded and the foreclosure sale occurred.   The commissioner's deed of sale states that the property was purchased by Sunburst.   Arrow claims not to have had notice that the sale was to occur on that date.

On February 24, 1984, Arrow filed the present petition.   We issued the alternative writ and set the proceeding for argument.

I

 Preliminarily, it should be mentioned that Sunburst initially contested the timeliness of the petition on the basis it was filed 24 days after service upon petitioner, by mailing a copy of the January 31, 1984 order expunging lis pendens.   Sunburst has abandoned this contention, but due to the importance of clarifying the period within which a petition may be filed, we will point out why the petition is timely.

Section 409.4 provides that a party aggrieved by a grant or denial of a motion to expunge lis pendens must file a petition for mandate within 20 days after service of written notice of such order or within an additional 20 days if so allowed by order of the trial court.   No such extension was granted here.   Filing was on the 24th day.

Section 1013 provides that where service of a notice of ruling is by mail the service is complete as of the time of deposit;  but if within a given number of days after such service a right may be exercised or a duty to do any act or make any response is to be done by the party receiving notice, the period for such act is extended by the given number of days if the address of service is within the State of California.

In Shearer v. Superior Court (1977) 70 Cal.App.3d 424, 138 Cal.Rptr. 824, this court held that section 1013 applied to extend the 10-day jurisdictional filing period for a petition for mandate under section 418.10, subdivision (c), for review of a denial of a motion to quash service for lack of personal jurisdiction.   Under this court's analysis in Shearer, it is clear that section 1013 applies to extend by five days the time period for filing a petition pursuant to section 409.4.   Thus, petitioner here had 25 days, following the January 31 service of notice by mail, within which to file the petition.

This conclusion has the additional consequence of rendering premature the February 20, 1984 recordation of the order expunging lis pendens, which notice was thus in effect with regard to the foreclosure sale occurring that date.   Section 409.5 provides:  “No order expunging a notice of pendency of action made pursuant to Section 409.1 or 409.2 shall be effective, nor shall it be recorded in the office of any county recorder, until the time within which a petition for writ of mandate may be filed pursuant to Section 409.4 has expired.   This section imposes no duty upon the county recorder to determine that the requirement of this section has been met.”

II

No cases have been cited by the parties, nor has research revealed any cases, which treat the equal protection aspects of section 409.   However, numerous cases in other areas have established the test for and provided useful examples of unlawful denial of equal protection as guaranteed by article I, sections 11 and 21 of the California Constitution and by the Fourteenth Amendment to the United States Constitution.

 The test, although subject to slight variation in terminology amongst the cases (Newland v. Board of Governors (1977) 19 Cal.3d 705, 711, 139 Cal.Rptr. 620, 566 P.2d 254), is that under California and federal equal protection guarantees a statute may single out a class for different treatment, such as denial of an economic benefit available to others, only if creation of that class bears a reasonable relation to a legitimate governmental purpose served by the legislation.  (Brown v. Merlo (1973) 8 Cal.3d 855, 861, 106 Cal.Rptr. 388, 506 P.2d 212;  Steed v. Imperial Airlines (1974) 12 Cal.3d 115, 124, 115 Cal.Rptr. 329, 524 P.2d 801;  D'Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 16, 112 Cal.Rptr. 786, 520 P.2d 10.)   The requirement is that “persons similarly situated with respect to the legitimate purpose of the law receive like treatment.”  (Purdy & Fitzpatrick v. State of California (1969) 71 Cal.2d 566, 578, 79 Cal.Rptr. 77, 456 P.2d 645;  Brown v. Merlo, supra, 8 Cal.3d 855, 106 Cal.Rptr. 388, 506 P.2d 212.)

“The Equal Protection Clause ․ [denies] to States the power to legislate that different treatment be accorded to persons placed by a statute into different classes on the basis of criteria wholly unrelated to the objective of that statute.   A classification ‘must be reasonable, not arbitrary, and must rest upon some ground of difference having a fair and substantial relation to the object of the legislation, so that persons similarly circumstanced shall be treated alike.’ ”  (Reed v. Reed (1971) 404 U.S. 71, 75–76, 92 S.Ct. 251, 253–254, 30 L.Ed.2d 255, quoting Royster Guano Co. v. Virginia (1920) 253 U.S. 412, 415, 40 S.Ct. 560, 561, 64 L.Ed. 989.)

In Brown v. Merlo, supra, 8 Cal.3d 855, 106 Cal.Rptr. 388, 506 P.2d 212, section 17158 of the Vehicle Code (known as the “guest statute”) was held to violate equal protection under these standards because it restricted causes of action for personal injuries to exclude guests (nonpaying passengers) of negligent automobile drivers while continuing to allow such negligence causes to be maintained by paying passengers.   The court first determined the statute to have two purposes:  first, to promote “hospitality” by drivers of automobiles by insulating them from actions by ungrateful, injured guest passengers;  second, to prevent collusive lawsuits by friends seeking to obtain insurance proceeds from the driver's carrier.   The court then held that the statutory classifications did not bear a “substantial and rational relation to the statute's purposes.”  (Id., at p. 882, 106 Cal.Rptr. 388, 506 P.2d 212.)   Specifically, the court held that “․ in barring suits by all automobile guests simply to protect insurance companies from some collusive lawsuits, the guest statute exceeds the bounds of rationality and constitutes a denial of equal protection.”  (Id., at p. 877, 106 Cal.Rptr. 388, 506 P.2d 212.)   The “generosity of the host” was similarly held not to be a rational basis for restricting tort recovery against negligent host-drivers exclusively to paying passengers.  (Id., at p. 866, 106 Cal.Rptr. 388, 506 P.2d 212.)   Neither does the distinction between automobile guests and other guests bear a substantial and rational relation to the statutory purpose of preventing collusive actions or of promoting the hospitality of host-drivers.  (Id., at p. 882, 106 Cal.Rptr. 388, 506 P.2d 212.)

In Newland v. Board of Governors, supra, 19 Cal.3d 705, 139 Cal.Rptr. 620, 566 P.2d 254, an otherwise qualified applicant for a community college teaching credential was rejected solely on the basis of his prior misdemeanor conviction classified as a “sex offense” (lewd conduct in public place) under an Education Code statute that allowed for certification of persons convicted of felony “sex offenses” who later obtained a “certificate of rehabilitation.”   The statutory purpose was perceived to be the protection of students.  (Id. at p. 711, 139 Cal.Rptr. 620, 566 P.2d 254.)   The certificates of rehabilitation are available, under Penal Code provisions, only to felony sex offenders because felony sex offenders require restoration of certain civil rights not lost by misdemeanant sex offenders.  (Id., at p. 710–711, 139 Cal.Rptr. 620, 566 P.2d 254.)   It was held that the statutory classification discriminating against misdemeanants, whether by inadvertent statutory draftsmanship or by design, lacks a rational relation to the legislative goals and thus denies misdemeanants equal protection of the laws.  (Id., at p. 713, 139 Cal.Rptr. 620, 566 P.2d 254.)

The provision of section 409 subject to equal protection challenge is that section which delineates the parties entitled to file a notice of lis pendens.   It states:  “(a) In an action concerning real property or affecting the title or the right of possession of real property, the plaintiff, at the time of filing the complaint, and the defendant, at the time of filing a cross-complaint, or at any time afterwards, may record ․ a notice of the pendency of the action․”  (Emphasis added.)   As mentioned, in the underlying action defendant Arrow filed no cross-complaint and so does not qualify under the section 409 requirement.

To determine whether section 409 denies defendant equal protection of the law, it is necessary to first ascertain the purpose underlying the lis pendens statute and that underlying the particular qualification distinguishing between defendants who file cross-complaints and those who do not.  (Newland v. Board of Governors, supra, 19 Cal.3d at p. 711, 139 Cal.Rptr. 620, 566 P.2d 254;  Brown v. Merlo, supra, 8 Cal.3d at p. 861, 106 Cal.Rptr. 388, 506 P.2d 212.)

 In has long been judicially acknowledged that the sole purpose for recording a notice of lis pendens is to give constructive notice of the pendency of an action to all third parties who might acquire an interest in the subject property during such pendency, thus binding them by any final judgment rendered therein and protecting the asserted interest of the litigant causing the notice to be recorded.  (Albertson v. Raboff (1956) 46 Cal.2d 375, 379, 295 P.2d 405;  Lee v. Silva (1925) 197 Cal. 364, 373, 240 P. 1015;  Brandolino v. Lindsay (1969) 269 Cal.App.2d 319, 325, 75 Cal.Rptr. 56.)

 Given this statutory purpose, it is apparent that as of the time that an adverse judgment is entered threatening to divest an owner of real property of legal title, that owner would have the same sort of interest in recording notice of lis pendens as any other defendant claiming an interest in real property from the time of entry into the action.   The possibility exists that the property could be sold to third party bona fide purchasers prior to determination of his appeal from that judgment.²  Although such defendant files no cross-complaint, the filing of an appeal seeks affirmative relief from the judgment that threatens to affect defendant's title to real property.

As to the purpose underlying the challenged classification, the requirement of section 409, as initially enacted in 1872, that parties entitled to lis pendens must have filed a complaint or an “answer when affirmative relief is claimed in such answer,” suggests an intention to prevent parties who had no affirmative claim affecting title to real property involved in an action from recording lis pendens.   No other purpose for this requirement is apparent and no reported case has discussed the basis of the requirement.   This inferred purpose is consistent with the fact that the statutory lis pendens in California was intended to curb the broad restriction upon a third party purchaser's ability to obtain clear title to real property under the common law doctrine which provided that a purchaser of real property took subject to the resulting judgment in any pending litigation affecting that property, whether or not the purchaser had knowledge of such litigation.  (Sampson v. Ohleyer (1863) 22 Cal. 200, 210;  Note, Abuses of the California Lis Pendens:  An Appeal for Legislative Remedy (1966) 39 So.Cal.L.Rev. 108, 109–110;  3 American Law of Property, § 13.12 (Casner ed. 1952).)   The statutory shift requiring actual recordation of notice, in conjunction with the absence of a procedure for expungement, suggests the need to preclude abusive employment of lis pendens by defendants having no affirmative claim to an interest affecting title to the real property involved in the action.

In 1980, section 409 was amended to restrict entitlement to record lis pendens to defendants who file a cross-complaint rather than, as had previously been provided, to defendants who filed answers claiming affirmative relief.   This amendment appears to have been merely an adjustment in terminology to reconcile section 409 with the 1979 amendment to section 431.30 which proscribes the seeking of affirmative relief by way of an answer and relegates such requests for relief to cross-complaints.  (Leg. Council's Dig., comment of Assem. Bill No. 1967, as amended (1979–1980 Reg.Sess.).) ³

Thus, this “affirmative relief” classification appears on its face to serve its apparent purpose and not to treat disparately defendants who are similarly situated with regard to such purpose.   However, the facts of the underlying action demonstrate that while not expressly singling out defendants such as petitioner for a denial of equal protection, the classification as applied to the present situation is subject to equal protection challenge.

Denial of lis pendens to such defendant title holders does not serve the purpose of preventing inappropriate use of the notice by litigants who claim no interest affecting the subject real property.   The classification is in this respect overly broad in relation to its legitimate purpose.

 It has only relatively recently been judicially acknowledged in California that for purposes of lis pendens an action is “pending” until final determination on appeal.  (United Professional Planning, Inc. v. Superior Court (1970) 9 Cal.App.3d 377, 384–386, 88 Cal.Rptr. 551;  California-Hawaii Development, Inc. v. Superior Court (1980) 102 Cal.App.3d 293, 300, 162 Cal.Rptr. 365;  Peery v. Superior Court (1981) 29 Cal.3d 837, 845, 176 Cal.Rptr. 533, 633 P.2d 198.)   The reasoning of these decisions makes clear that notice of lis pendens may be filed for the first time after entry of judgment and remain in effect (unless expunged pursuant to the statutory criteria of § 409.1 or § 409.2) until final resolution of the appeal.   (Peery v. Superior Court, supra, 29 Cal.3d at pp. 842, 844–846, 176 Cal.Rptr. 533, 633 P.2d 198;  Code Civ.Proc., § 1049.)

Plaintiff contends that section 409 was not intended to apply in circumstances where execution of judgment is to be effected by judicial sale of real property because alternative remedies at law are available.   Specifically, it is contended that section 917.4 reflects the legislative intent that judgments directing the sale or conveyance of title to real property must be stayed by the posting of an undertaking or granting of a writ of supersedeas and that lis pendens is thus not appropriate for such post-judgment situations.

Whatever force this contention might have appears to be wholly dispelled by the Supreme Court in Peery v. Superior Court, supra, 29 Cal.3d at page 842, 176 Cal.Rptr. 533, 633 P.2d 198, where the court expressly rejected the contention that “after judgment the protective function of the lis pendens is adequately served by other remedies such as the writ of supersedeas.”   The court stated:

“We believe that the salutary policy of avoiding prolongation of frivolous suits to force unfair settlements can be served without fashioning an automatic expungement procedure on appeal at odds with the precedents and with the general statutory definition of ‘pendency’ as including the period during which an appeal is contested.  (§ 1049.)   Consequently, we hold that the lis pendens may remain on record while the appeal is pending, subject to the statutory right of the adversely affected party to seek expungement under sections 409.1 and 409.2.” ⁴  (Id., at p. 842, 176 Cal.Rptr. 533, 633 P.2d 198.)

While Peery was, of course, speaking in the context of a plaintiff's notice of lis pendens after judgment is entered for the defendant, the recognition that lis pendens is available pending appeal and is not rendered inapplicable by the availability of alternative post-judgment remedies has clear application here.  Section 409, subdivision (a), of course, expressly states that a defendant may record “a notice of the pendency of the action” upon filing a cross-complaint “or at any time afterwards.”

If it were true, as plaintiff argues in the form of conclusion, that the drafters of section 409 in 1872 did not intend lis pendens to be used in the post-judgment context of a defendant seeking to stay or frustrate a foreclosure sale against his real property in execution of judgment, then logically such usage would also be denied to a defendant holder of title who had filed a cross-complaint in the action seeking some affirmative relief affecting title.   However, the plain language of section 409 indicates otherwise.   The statute originally authorized recordation during pendency of an action by a defendant who had filed an answer that seeks affirmative relief.   Assuming for purposes of this discussion that such “affirmative relief” was implicitly intended to “concern the real property” or “affect title or the right of possession” thereof,⁵ it follows that a defendant who filed an answer seeking such affirmative relief would be entitled to record a notice of lis pendens at any later time during the pendency of the action.

Section 1049 has provided since enactment in 1872 that:  “An action is deemed to be pending from the time of its commencement until its final determination upon appeal, or until the time for appeal has passed, unless the judgment is sooner satisfied.”   It must be assumed that the Legislature had section 1049 in mind when it provided for recordation of lis pendens as of the commencement of the action (statutorily recognized as the date of filing of a complaint—§ 350) “or at any time afterwards” to give notice of the “pendency of the action.”

Plaintiff also argues that defendant is not “similarly situated” to a plaintiff who records notice of lis pendens in connection with his action that affects title to real property.   But this is not the crux of the equal protection problem.   It is, rather, the line drawn between defendants.   Again, the problem is that after suffering judgment adversely affecting its title a defendant property owner who has no affirmative claim upon which to base a cross-complaint is in the same position as a defendant owner who has such affirmative claim and could record lis pendens.   This is so because each defendant has a claim to title that is affected by the action and each has a similar interest in giving constructive notice of that claim to third parties who might purchase during the remaining pendency of the action.   Whether the trial court has found against the defendant owner on the single issue of the validity of the plaintiff's claim or has found against defendant both as to the plaintiff's claim and as to the affirmative claim asserted by defendant's cross-complaint, the two classes of defendants are in precisely the same post-judgment situation with respect to the purpose of lis pendens.   Both classes of defendants will seek to restore their title by prevailing on appeal;  both are in equal need of lis pendens to protect their claim to title pending that appeal.

It being demonstrated that under the circumstances in the present proceeding real property owners not filing a cross-complaint are denied a protection afforded to other defendants with title or possession claims, and it also being evident that the classification created by the statute does not bear a substantial and rational relation to the legitimate purposes of the statute, it must be held that section 409 violates petitioner's equal protection guarantees.

Accordingly, to the extent section 409, as applied in the underlying action, provides disparate treatment as between defendants who file a cross-complaint seeking affirmative relief and defendants who are legal title holders but do not file such a cross-complaint, the statute denies equal protection with regard to its purpose.   As so applied, the classification bears no substantial and rational relationship to the statute's purpose.   The challenged statutory classification is to this extent overbroad and may not be constitutionally applied to deny to the later class the benefit afforded to the former.  (Newland v. Board of Governors, supra, 19 Cal.3d at p. 714, 139 Cal.Rptr. 620, 566 P.2d 254.)

Let a peremptory writ of mandate issue directing respondent to vacate its order of January 31, 1984, expunging the notice of lis pendens in Los Angeles Superior Court case No. EAC 43616, entitled Sunburst Decorative Rock, Inc. v. Arrow Sand and Gravel, Inc., and to reconsider plaintiff's motion to expunge lis pendens under the criteria set forth in sections 409.1 and 409.2 of the Code of Civil Procedure in a manner consistent with this opinion.  (Cf. Peery v. Superior Court, supra, 29 Cal.3d at p. 846, 176 Cal.Rptr. 533, 633 P.2d 198.)

FOOTNOTES

1.   All statutory references are to the Code of Civil Procedure unless otherwise indicated.

2.   It is not impossible to conceive of situations where a defendant owner of real property would have no affirmative claim to be pleaded by cross-complaint, yet have an interest in recording notice of lis pendens in connection with an appeal from a judgment in the action that negatively affects his legal title.   A holder of legal title sued under a theory of constructive or resulting trust would usually have no basis to cross-complain against the plaintiff for affirmative relief to quiet title that goes beyond the defensive plea to deny the constructive trust.   Yet upon entry of a judgment imposing a trust in plaintiff's favor and conveying title, the defendant would be entitled to appeal and would desire the legitimate benefit of a notice of lis pendens during the pendency thereof to prevent third parties from making a pendente lite purchase free of the effect of a possible appellate decision restoring title to defendant.   An owner sued to compel specific performance of an alleged contract to convey real property would be in a similar situation.

3.   “Under existing law, in any action concerning real property or affective the title a [sic:  or] right to possession of real property, a notice of the pendency of the action may be recorded ․ by the plaintiff, or by the defendant, where the defendant claims affirmative relief in his answer.   However, existing law no longer permits affirmative relief to be claimed by answer, but instead such relief may be claimed in a cross-complaint.  [¶]  This bill would provide for such actions that a notice of the pendency of the action may be filed where the defendant files a cross-complaint.”

4.   Neither is the relief afforded by post-judgment lis pendens identical in scope to that effected by a section 917.4 undertaking stay or a writ of supersedeas.   In the underlying action the purchaser at the foreclosure sale was plaintiff Sunburst.   Assuming that plaintiff desires the property for its own use rather than immediate resale, lis pendens pending appeal does not significantly frustrate plaintiff's remedy of foreclosure as a stay of execution pursuant to section 917.4 would do.   The cloud temporarily cast upon plaintiff's acquired title did not stop plaintiff from acquiring title and plaintiff would already be bound by any possible final judgment in the action eventually entered in defendant's favor.   Similarly, in an action to compel specific performance of a contract to convey real property, it is unlikely that a section 917.4 stay and lis pendens afford the defendant the same extent of relief.

5.   This assumption appears valid in view of the purpose of the statute and the requirement that a complaint concern or affect title or the right of possession.

WOODS, Presiding Justice.

KINGSLEY, and McCLOSKY, JJ., concur.