California court finds defendant bank in adverse possession dispute – Finance and Banking

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United States: California court finds defendant bank in adverse possession dispute

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The California Court of Appeals, Fifth Appeal Division, recently ruled in favor of the defendant Citibank, NA (“Citibank”) in a dispute over the ownership of a property in an unincorporated area of ​​southern California. See Bailey v. Citibank, NA, 66 Cal. App. 5th 335 (2021). Plaintiffs Charles and Kimberley Bailey took possession of a property in Frazier Park, California (the “Property”) in 2013 and claimed to be the rightful owners by virtue of their alleged adverse possession for a period of five years. Before this period was over, however, Citibank became successor in the interest of a trust deed that had been registered in 2005, and seized and acquired title to the property under the trustee deed in 2018. When the plaintiffs subsequently filed their quiet title claim, Citibank was named as the lead defendant. Citibank, however, did not respond or otherwise respond to the complaint, and its default was recorded. The trial court subsequently proceeded to a hearing of the evidence on the plaintiffs’ discrete title claim and found that the title to the property belonged to the plaintiffs and not to Citibank. Citibank did not appear at the evidence hearing. At the end of the hearing, the court of first instance rendered a judgment repealing the title in favor of the plaintiffs. Subsequently, Citibank requested that the default and the judgment be set aside under the mandatory provisions of Article 473 of the Code of Civil Procedure, on the basis of the fault affidavit of Citibank’s lawyer. The court of first instance granted Citibank’s request, and the default and the title to set aside the judgment were quashed. The plaintiffs appealed against this order on the grounds that there was no basis for a potential remedy under Section 473 since Citibank’s lawyer was not retained to deal with this matter until after registration. of the fault. In response to the plaintiffs’ appeal, Citibank filed a protective cross-appeal, arguing that even though a Section 473 remedy was not available, the judgment which revoked title in favor of the plaintiffs was wrong. in law and should be set aside.

The court disagreed with Citibank, finding that the application of section 473 by the court of first instance was inappropriate, because it should have applied only if the default was the fault of a lawyer. In this case, Citibank had not even appointed an attorney at the time of the default, so it could not have been the attorney’s fault. However, the court ruled that the trial court had misapplied the doctrine of adverse possession and that Citibank had therefore always been entitled to the property throughout the litigation. First, the court concluded that under the doctrine the possession of the property by the plaintiffs was not contrary or hostile to the rights of Citibank until Citibank took title to the fees under the deed. of the trustee in 2018, just before the filing of the complaint, and well before the five-year deadline. time required for possession to be unfavorable. Next, the court found that the plaintiffs were attempting to claim a higher title than that claimed in the 2005 trust deed, and that even if the plaintiffs were granted title, it would be subject to the trust deed. of 2005. Third, since Citibank only obtained a right of possession over the property in 2018, the court rejected the plaintiffs’ argument that Citibank previously had a right of possession, holding that the 2005 trust deed simply gave the lender the right to sue or defend themselves, and did not convey a right of possession against which adverse possession could be claimed. Finally, the court determined that the public policy reasons cited by the plaintiffs to promote adverse possession did not apply, as Citibank’s lower stake in the property until 2018 meant it was not the kind of absent owner against whom the theory of adverse possession protected.

For a copy of the decision, please contact Michael O’Donnell at [email protected], Michael Crowley at [email protected], Desiree McDonald at [email protected], or Kevin Hakansson at [email protected]

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