Filed 9/28/18 CitiMortgage v. Lee CA1/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

Defendant Yeechang Lee wishes to be relieved of an over half-million-dollar mortgage solely because of a scrivener’s error contained in a reconveyance recorded in 2008. Upon discovering the error in 2014, CitiMortgage, Inc. (CitiMortgage) sued Lee for cancellation of the erroneous reconveyance and a declaratory judgment to the same effect. Lee asserted CitiMortgage’s action was barred by the statute of limitations. The trial court disagreed, and entered judgment in favor of CitiMortgage. The judgment is legally correct and supported by substantial evidence, so we affirm.

BACKGROUND

The facts are undisputed. In 2007 Lee purchased a condominium on Dow Place in San Francisco. He financed the transaction through two loans from CitiMortgage: a first mortgage for $562,000 (the first loan) and a second mortgage for $70,250 (the second loan). Deeds of trust securing each loan against the property were recorded seriatim on May 1, 2007. The trust deed for the first loan was recorded at 2007-I378571-00, while the trust deed for the second loan was recorded at 2007-I378572-00, just one digit off.

Lee paid off the second loan in early 2008. On April 29, 2008, trustee Verdugo Trustee Service Corporation (Verdugo) recorded a full reconveyance based on the recent payoff. Unbeknownst to Verdugo, Lee or CitiMortgage, the reconveyance mistakenly identified the deed of trust associated with the first loan, instead of the deed of trust associated with the second loan.

Lee continued to make payments on the first loan until July 2014, and CitiMortgage continued to apply those payments to the first loan. CitiMortgage learned of the trustee’s mistake in October 2014, when a title company notified it that the reconveyance recorded in 2008 identified the deed of trust for the first loan instead of the second.

CitiMortgage sued Lee for cancellation of the erroneous reconveyance and a declaratory judgment that the reconveyance was invalid and unenforceable on the grounds of mutual or unilateral mistake. Lee admitted he had not paid off the first loan and that he was unaware the reconveyance identified the wrong trust deed until he received CitiMortgage’s complaint. But, he asserted that CitiMortgage’s action was barred by laches and various statutes of limitations.

Lee moved before trial to exclude evidence of the 2008 error and CitiMortgage’s discovery of it in 2014. The court denied those motions and, after hearing testimony from CitiMortgage employee Nicole Lopez and Lee, ruled that CitiMortgage had proven by a preponderance of the evidence that the reconveyance was the result of unilateral and mutual mistake.

The court also concluded that Code of Civil Procedure section 338, subdivision (d) provided the applicable statute of limitations.[1] “[U]nder that statute, the cause[s] of action . . . in this case are not deemed to have accrued until the discovery by the aggrieved party of the facts constituting the mistake or fraud.” The Court found CitiMortgage proved by unrefuted evidence that it had neither actual nor constructive knowledge of the mistake until October 2014 and, accordingly, that the statute of limitations had not run. “[T]he Court finds that the evidence was, again, unrefuted here, that there was nothing that could reasonably have caused CitiMortgage to believe that the reconveyance in Exhibit 3 was a mistake. In fact, the evidence was completely to the contrary of any notice of any problem here, because [Lee] continued to also operate under the understanding that the reconveyance did not pertain to the first deed of trust, that it pertained to the second deed of trust.” Moreover, “[t]he evidence was absolutely unrefuted and was overwhelming by Ms. Lopez that, at no time, did CitiMortgage have in its possession or in its files or anywhere in its system the subject reconveyance.” The court also noted Lopez’s testimony that it was CitiMortgage’s practice not to receive reconveyances from the trustee and, specifically, that Verdugo never showed CitiMortgage the erroneous reconveyance. “[T]here was absolutely no indication in the record of any evidence whatsoever that somehow CitiMortgage had anything triggered or any information that could have triggered a duty to investigate further or any indication whatsoever of any problem involving the subject reconveyance earlier than October of 2014.”

Judgment was entered in favor of CitiMortgage cancelling the erroneous reconveyance and declaring that the first deed of trust established CitiMortgage’s first priority position lien. This appeal is timely.

DISCUSSION

As at trial, Lee’s sole contention is that CitiMortgage’s action is barred by the statute of limitations. He maintains the applicable limitations periods is the five-year period for actions relating to the title to real property (§ 319), which by statute is generally not subject to tolling pursuant to the discovery rule. Alternatively, he contends the action may be subject to the four-year period for cancellation of instruments (§ 343) or the three-year period for fraud or mistake (§ 338, subd.(d)). As to those provisions, he contends the limitations period was not tolled because CitiMortgage was on inquiry notice of Verdugo’s error since 2008 because the reconveyance was recorded. Reviewing the court’s determination independently (Vafi v. McCloskey (2011) 193 Cal.App.4th 874, 880), we disagree.

We turn to well-established principles of statutory analysis to decide which statute of limitations applies. “[A] specific statute of limitations takes precedence over a general one, even though the latter ‘ “would be broad enough to include the subject to which the more particular provision relates.” [Citation.]’ [Citations.] The principal purpose or ‘gravamen’ of the action, rather than the form of action or the relief demanded, determines the applicable statute of limitations.” (Vafi v. McCloskey (2011) 193 Cal.App.4th 874, 880.) The gravamen of CitiMortgage’s action was that the reconveyance was recorded by mistake. It is settled that in such circumstances section 338, subdivision (d) provides the applicable statute of limitations. “Ordinarily a suit to set aside and cancel a void instrument is governed by section 343 of the Code of Civil Procedure. [Citation.] However, when the gravamen of the cause of action stated involves fraud or a mistake, Code of Civil Procedure, section 338 [subdivision (d)] is the statute of limitations applicable and the cause of action is not deemed to have accrued until the discovery of facts constituting the mistake. (Zakaessian v. Zakaessian (1945) 70 Cal.App.2d 721, 725, italics added [suit to set aside and cancel a deed issued by mistake]; see also Federal Deposit Ins. Corp. v. Dintino (2008) 167 Cal.App.4th 333, 347-348, 339-340 [§ 338, subd. (d) applied to unjust enrichment cause of action based on mistaken recordation of reconveyance of unpaid trust deed].) This is precisely such a case. Lee’s sole authority for his contention that section 319 provides the applicable limitations period (Robertson v. Superior Court (2001) 90 Cal.App.4th 1319) does not involve a claim of fraud or mistake and is therefore not persuasive here.

Accordingly, the trial court applied the appropriate statute of limitations. Substantial evidence supports its determination that CitiMortgage had neither actual nor inquiry notice of facts that would trigger the running of the statutory period (see generally Rosas v. BASF Corporation (2015) 236 Cal.App.4th 1378, 1389-1390) until the error was brought to its attention in October 2014, so the complaint filed in August 2015 was timely.

DISPOSITION

The judgment is affirmed.

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Siggins, P.J.

We concur:

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Pollak, J.

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Jenkins, J.

CitiMortgage, Inc. v. Lee, A149751