Tharp Family Ltd. Partnership v. County of Tulare CA5 ( 2014 )

Filed 6/12/14 Tharp Family Ltd. Partnership v. County of Tulare CA5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIFTH APPELLATE DISTRICT
THARP FAMILY LIMITED PARTNERSHIP,
F066231
Plaintiff and Appellant,
(Super. Ct. No. VCU247734)
v.
COUNTY OF TULARE, OPINION
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Tulare County. Melinda M.
Reed, Judge.
Law Offices of Robert Krase, Robert Krase; Dowling Aaron Incorporated,
Stephanie Hamilton Borchers for Plaintiff and Appellant.
Kathleen Bales-Lange, County Counsel, Julia Langley, Deputy County Counsel
for Defendant and Respondent.
-ooOoo-
E.M. Tharp, Inc., the predecessor of plaintiff Tharp Family Limited Partnership
(Tharp), acquired a security interest in a parcel of real property in Tulare County in 1988.
Tharp’s loan to the owner matured in 1993 and was never repaid. Tharp took no action.
Years later, a nuisance arose on the property. The County of Tulare (county) abated the
nuisance and recorded a notice of assessment of abatement costs against the property on
August 14, 2007. Later the same month, Tharp recorded a notice of default on its 1988
loan. A foreclosure sale was completed and Tharp took title to the property in December
2007.
Tharp informed the county of its view that the security interest upon which it had
foreclosed was superior to the county’s interest based on the recorded notice of
assessment. The county disagreed. Tharp brought this action requesting declaratory
judgment and other remedies. The trial court dismissed the action after sustaining the
county’s demurrer without leave to amend. Tharp appeals.
We will affirm the judgment for two reasons: First, Tharp’s security interest
expired in 2003, 10 years after its loan matured. Consequently, it had no interest in the
property at the time the county asserted its interest based on the unpaid assessment. This
issue was not raised in the trial court, but we have discretion to consider it and we do so.
Second, by statute, the county’s recorded notice of assessment was a “special”
assessment lien—equivalent to a tax lien—and therefore would have priority even if
Tharp’s security interest still existed. Tharp’s argument that its interest is superior
because it is a bona fide encumbrancer for value is without merit.
FACTS AND PROCEDURAL HISTORY
The essential facts are undisputed. According to the complaint, E.M. Tharp, Inc.,
loaned $425,000 to Anthony and Helen Landeros in 1988. To secure the loan, E.M.
Tharp, Inc., became beneficiary and trustee on a deed of trust to the Landeroses’ property
in Tulare County. The loan was to become due on April 15, 1993.
The Landeroses operated a business on the property called Landeros Wood
Recycling Facility. On March 16, 2004, the county issued the Landeroses a notice to
abate code violations. On July 19, 2004, the county issued a notice of violation, stating
that the Landeroses had failed to correct the violations. The notices listed three
violations: (1) construction of a building without a permit; (2) accumulation of solid
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waste; and (3) violation of the terms of a conditional use permit. The notice informed the
Landeroses of their right to a hearing. A hearing took place on August 18, 2004, after
which the hearing officer declared the condition of the property to be a public nuisance.
The county filed an action on behalf of the People against the Landeroses in
superior court in November 2005. This led to a mediation in September 2006, after
which the parties signed an agreement stating that the matter would be deemed resolved
if the Landeroses would “rake clean by 11/15/06 noon the subject property.” The
deadline was extended to January 19, 2007, but the Landeroses failed to clean up the
property.
In March 2007, the Landeroses and the county entered into another settlement
agreement under which the county would abate the nuisance at the Landeroses’ expense.
The agreement stated: “Costs of the abatement shall be a lien against the property and
shall be placed on the tax roll.”
The abatement work was completed on May 18, 2007. The abatement cost
incurred by the county was $160,479.42. The county assessed this amount in a Notice
and Statement of Decision and Order to Abate and Assessment of Abatement Cost
executed on August 9, 2007. The notice stated: “The cost shall be placed as a lien on the
property until such time as [it is] paid in full to the County of Tulare Resource
Management Agency. This cost shall also be added to the tax rolls for this property.”
The county recorded this document against the property on August 14, 2007.
Later the same month, E.M. Tharp, Inc., assigned the deed of trust to Tharp.
Tharp recorded a Notice of Default on August 21, 2007, one week after the county
recorded the notice of assessment. A trustee’s sale was completed and title was conveyed
to Tharp on December 19, 2007. A trustee’s deed reflecting this transaction was
recorded on December 26, 2007.
On December 13, 2007, shortly before the trustee’s sale was completed, Tharp
sent the county a letter by counsel stating its opinion that the abatement costs “are not
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taxes, they are contractual in nature and, therefore, will not receive priority lien status as
property taxes,” but instead “will receive the same treatment on foreclosure as any other
junior statutory or contractual lienholder.” The county did not respond to the letter.
On September 1, 2011, the county published in a local newspaper a notice that
there was a delinquent assessment on the property. Tharp read the notice and asked the
county for its position. A deputy tax collector replied by e-mail that her office believed
the charge for the abatement costs was associated with the property and Tharp, as the
current owner, was responsible for it. The total amount owed, including penalties and
interest, stood at $272,680.31 as of September 30, 2011.
Tharp submitted a claim to the county pursuant to the Government Claims Act
(Gov. Code, § 810 et seq.) on September 21, 2011. The claim requested the county to
release its lien on the property and contended that its failure to do so constituted slander
of title.
Tharp filed the present lawsuit, titled “Verified Petition for Writ of Mandate, and
Complaint for Declaratory Relief, Inverse Condemnation, and Deprivation of Civil
Rights,” against the county on June 21, 2012. It alleged four causes of action: (1) a
petition for writ of mandate compelling the county to release Tharp from any
responsibility for the abatement costs on the grounds that those costs could be the basis
only of an unsecured debt or a junior lien; (2) a request for declaratory judgment on the
same grounds; (3) an inverse condemnation claim, i.e., a contention that the recording of
the lien constituted a condemnation of the property for which Tharp was entitled to
compensation; and (4) a claim pursuant to 42 U.S.C. section 1983 that the recording of
the lien without prior notice to Tharp violated Tharp’s rights to procedural due process,
substantive due process, and equal protection of the laws under the United States
Constitution.
The county filed a demurrer. The trial court sustained it in a written order, stating
in part as follows:
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“Petitioner essentially contends he is entitled to relief under Government
Code section 25845(d) and (f) because petitioner is a bona fide purchaser or
encumbrancer for value. The court disagrees.
“The facts show, and petitioner asserts, that it or its predecessor held a
recorded deed of trust against the subject property from 1988 until
petitioner completed a non-judicial foreclosure and acquired ownership of
the property in December of 2007. Prior to petitioner’s acquisition of title
in December 2007, the County completed abatement proceedings regarding
a public nuisance on the property and recorded its notice of Assessment of
Abatement Costs. Thus, petitioner was not a bona fide purchaser or
encumbrancer because it did not originally acquire an interest in the
property subject to County’s lien, nor did it acquire ownership upon
foreclosure without notice of the County’s recorded assessment lien.
“Further, under section 25845(d), because the owner failed to pay the
abatement costs, the County was entitled to order the costs of abatement
against the property and apply all laws applicable to the enforcement of
county taxes to the special assessment. Section 25845 does not state that
deed of trust holders are entitled to notice of abatement proceedings in
addition to that provided by the recorded assessment and petitioner does not
cite any persuasive authority to the contrary.
“Thus, as a matter of law, petitioner fails to state sufficient facts to compel
the issuance of a writ or for monetary damages. Since petitioner also fails
to show any reasonable possibility for curing the defects in its
writ/complaint, the demurrer is sustained without leave to amend.”
DISCUSSION
I. Standard of review
Tharp argues that the demurrer should have been overruled. The standard of
review is well established:
“In an appeal from a judgment dismissing an action after a general
demurrer is sustained without leave to amend, our Supreme Court has
imposed the following standard of review. ‘The reviewing court gives the
complaint a reasonable interpretation, and treats the demurrer as admitting
all material facts properly pleaded. [Citations.] The court does not,
however, assume the truth of contentions, deductions or conclusions of law.
[Citation.] The judgment must be affirmed “if any one of the several
grounds of demurrer is well taken. [Citations.]” [Citation.] However, it is
error for a trial court to sustain a demurrer when the plaintiff has stated a
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cause of action under any possible legal theory. [Citation.] And it is an
abuse of discretion to sustain a demurrer without leave to amend if the
plaintiff shows there is a reasonable possibility any defect identified by the
defendant can be cured by amendment. [Citation.]’ [Citations.].” (Genesis
Environmental Services v. San Joaquin Valley Unified Air Pollution
Control Dist. (2003) 113 Cal.App.4th 597, 603.)
II. Tharp’s security interest had expired
As a threshold matter, we hold that Tharp no longer had any security interest in
the property when the county recorded its lien. This conclusion defeats all of Tharp’s
causes of action, as all are based on a claimed deprivation of that security interest.
Civil Code section 882.020, enacted in 1982, sets an outer time limit for the
enforcement of deeds of trust and mortgages even when the general statute of limitations
might have been extended. (See Recommendation Relating to Marketable Title of Real
Property (Nov. 1981) 16 Cal. Law Revision Com. Rep. (1982) 401, 437.) The statute
provides:
“(a) Unless the lien of a mortgage, deed of trust, or other instrument that
creates a security interest of record in real property to secure a debt or other
obligation has earlier expired pursuant to Section 2911, the lien expires at,
and is not enforceable by action for foreclosure commenced, power of sale
exercised, or any other means asserted after, the later of the following
times:
“(1) If the final maturity date or the last date fixed for payment of the
debt or performance of the obligation is ascertainable from the recorded
evidence of indebtedness, 10 years after that date.
“(2) If the final maturity date or the last date fixed for payment of the
debt or performance of the obligation is not ascertainable from the recorded
evidence of indebtedness, or if there is no final maturity date or last date
fixed for payment of the debt or performance of the obligation, 60 years
after the date the instrument that created the security interest was recorded.
“(3) If a notice of intent to preserve the security interest is recorded
within the time prescribed in paragraph (1) or (2), 10 years after the date
the notice is recorded.” (Civ. Code, § 882.020.)
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In other words, the security interest expires 10 years after the due date of the last
payment if that date is ascertainable from the recorded documents, and 60 years after
recordation if that date is not ascertainable. (The “later of” language might be thought to
introduce some uncertainty about when the 10-year limit applies, but the Law Revision
Commission’s comment makes clear that the maximum enforcement period is 10 years
from maturity if the maturity date is ascertainable and 60 years from recordation if not.
(See Recommendation Relating to Marketable Title of Real Property, supra, at p. 438.)
To waive or extend the time limit, it is necessary to prepare and record a written waiver
or extension before the time expires. (Civ. Code, § 882.020, subd. (c).)
The Law Revision Commission explained that this statute allows the maximum
life of a deed of trust to be determined from the recorded documents alone:
“Section 882.020 prescribes a maximum time for enforcement of a
mortgage or deed of trust. It operates to bar enforcement of a mortgage or
deed of trust after the time prescribed even though the general statutes of
limitation may not have run due to tolling, partial payment, or waiver.…
[¶] … The effect of subdivision (a) is to prescribe a maximum life for a
mortgage or deed of trust based exclusively on the record for marketability
of title purposes.” (Recommendation Relating to Marketable Title of Real
Property, supra, at pp. 437-438.)
The new law was necessitated by the possibility under former law that an
“encumbrance will burden the property indefinitely,” giving rise to difficulties with the
marketability and insurability of title. This problem was the result of a court-made “rule
that the power of sale under a deed of trust ‘never outlaws.’ See, e.g., 3 B. Witkin,
Summary of California Law, Security Transactions in Real Property §§ 84-85 (8th ed.
1973).)” (Recommendation Relating to Marketable Title of Real Property, supra, at
p. 409 & fn. 11.)
The effect of the expiration of time is that the security interest can no longer be
enforced in any way:
“Expiration of the lien of a mortgage, deed of trust, or other security
interest pursuant to this chapter or any other statute renders the lien
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unenforceable by any means commenced or asserted thereafter and is
equivalent for all purposes to a certificate of satisfaction, reconveyance,
release, or other discharge of the security interest .…” (Civ. Code,
§ 882.030.)
In this case, it is undisputed that the last payment date on Tharp’s deed of trust is
ascertainable from the recorded documents. The recorded deed of trust states that the
final payment of principal and interest was due no later than April 15, 1993. It follows
that the security interest expired on April 15, 2003, four years before Tharp purported to
execute the power of sale and eight years before Tharp asserted its interest in this
litigation. As a result, Tharp can have had no lien senior to the county’s lien because
Tharp no longer had any lien at all.
Tharp maintains that the county forfeited1 this argument by failing to raise it in the
trial court. As Tharp acknowledges, however, we have discretion to consider issues not
1Tharp uses the word “waived,” but its contention is that the county failed
previously to assert that the deed of trust had expired under Civil Code section 882.020.
A party’s loss of ability to make a contention on appeal because of its failure to make it
earlier is a forfeiture, not a waiver. (In re Stier (2007) 152 Cal.App.4th 63, 74
[“‘[F]orfeiture’ [and not waiver] is the correct legal term to describe the loss of the right
to raise an issue on appeal due to the failure to pursue it in the trial court.”].) Tharp’s
brief also includes the following: “Civil Code section 880.020 is a ‘personal privilege
and is waived if it is not raised as an affirmative defense by the debtor.’ (Miller & Starr,
California Real Estate 3d, § 10:128.)” The citation of the treatise is both technically and
substantively erroneous. The quoted language is in section 10:161 of Miller and Starr,
not section 10:128. More importantly, the quoted language does not pertain to the
marketable title legislation that begins with Civil Code section 880.020 and that includes
the 10-year expiration provision in section 882.020. Miller and Starr say the statute of
limitations is a personal privilege that is waived if not raised as a defense by the debtor.
(4 Miller & Starr, Cal. Real Estate (3d ed. 2013) § 10:161, p. 10-591, fn. omitted.) This
is a reference to the six-year statute of limitations set forth at California Commercial
Code section 3118. (4 Miller & Starr, supra, at p. 10-591, fn. omitted.) That period is
not at issue in this case. The expiration provisions of Civil Code section 882.020 are
separate and distinct from the underlying statute of limitations and were enacted to
provide a degree of finality that the statute of limitations does not provide, as we have
explained.
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raised below. “[A]n appellate court may review a forfeited claim—and ‘[w]hether or not
it should do so is entrusted to its discretion.’” (In re Sheena K. (2007) 40 Cal.4th 875,
887, fn. 7.) The reason for the general rule against reviewing forfeited claims is that it is
usually unfair to the trial court and the adverse party to take advantage of an error on
appeal that could have been corrected during the trial. (People v. Saunders (1993) 5
Cal.4th 580, 590; Doers v. Golden Gate Bridge etc. Dist. (1979) 23 Cal.3d 180, 184-185,
fn. 1.) One reason for exercising our discretion to consider the forfeited issue in this case
is that giving force to Tharp’s expired security interest would not be an “error that could
be corrected by some means short of an opposite outcome in the trial court.” (Woodward
Park Homeowners Assn., Inc. v. City of Fresno (2007) 150 Cal.App.4th 683, 712.)
Another reason for exercising our discretion to consider the issue is that, contrary
to Tharp’s contention, the equities favor doing so. If Tharp’s position were accepted,
Tharp would receive a nuisance-free property at public expense. Tharp and its
predecessor entity sat on their rights for 14 years after the Landeroses’ debt came due. It
was only when the county cleared the lot and recorded the special assessment that Tharp
swiftly moved to foreclose, intending to extinguish the county’s lien in the process. We
will not exercise our discretion in Tharp’s favor to allow it to enjoy this taxpayer-funded
windfall merely because the county has been tardy in raising the point that Tharp’s
security interest became a nullity years before its purported foreclosure.
Citing Civil Code section 880.030, subdivision (a) (“[n]othing in this title shall be
construed to … [¶] … [l]imit application of the principles of waiver and estoppel, laches,
and other equitable principles”), Tharp contends that we should not consider the forfeited
issue because, if it had been raised in the trial court, Tharp could have attempted to
overcome it on grounds of estoppel or laches. The only consideration Tharp mentions in
support of estoppel or laches, however, is the county’s “excessive delay” in raising the
10-year-expiration-period issue, i.e., its failure to raise it at some point between the time
of Tharp’s foreclosure and the filing of the county’s brief in this appeal. Tharp develops
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no argument and cites no authority in support of the view that this delay could be the
basis of a ruling that the county is barred by estoppel or laches from asserting that
Tharp’s security interest has expired. In particular, Tharp is silent about how it could
have done something different—something that would have made a difference in this
case—if the county had raised the point closer to the time of Tharp’s foreclosure.
Tharp also maintains that we should not consider the forfeited argument because
the county’s failure to raise it earlier deprived Tharp of the opportunity to present in the
trial court a factual dispute about whether Tharp could claim title by adverse possession.
In other words, Tharp contends that it has held itself out as owner since the foreclosure
and the county contests this only now. This argument is mentioned only in a one-
sentence footnote, without authority and with no development of the basis of any
adverse-possession claim.
III. The county’s lien had priority
Even if Tharp’s security interest had not expired, we would agree with the trial
court’s conclusion that the county’s lien has priority under Government Code
section 25845. Tharp cannot show it is free of that lien as a bona fide encumbrancer.
Government Code section 25845 provides procedures by which a county may
abate a nuisance on real property and recover the costs of abatement. These include the
imposition of a “special assessment” against the property:
“If the owner fails to pay the costs of the abatement upon demand by the
county, the board of supervisors may order the cost of the abatement to be
specially assessed against the parcel. The assessment may be collected at
the same time and in the same manner as ordinary county taxes are
collected, and shall be subject to the same penalties and the same procedure
and sale in case of delinquency as are provided for ordinary county taxes.
All laws applicable to the levy, collection, and enforcement of county taxes
are applicable to the special assessment.” (Gov. Code, § 25845, subd. (d).)
Government Code section 53931 and following set forth priority rules for liens
based on “special assessments” (Gov. Code, § 53931). Section 53935 provides that when
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a special assessment becomes delinquent, it may be recorded as a lien on the taxpayer’s
real property. The lien has priority over other security interests:
“The lien of said assessments shall be coequal to and independent of the
lien for general taxes, and, except as provided in Section 53936, not subject
to extinguishment by the sale of the property on account of the nonpayment
of any taxes, and prior and superior to all liens, claims and encumbrances
except (a) the lien for general taxes or ad valorem assessments in the nature
of and collected as taxes levied by the state or any county, city, special
district or other local agency; (b) the lien of any special assessment or
assessments the lien date of which is prior in time to the lien date of the
assessment for which the deed is issued; (c) easements constituting
servitudes upon or burdens to said lands; (d) water rights, the record title to
which is held separately from the title to said lands; (e) restrictions of
record.”
It follows from the plain meaning of these statutes that the county’s special-
assessment lien had priority over Tharp’s deed of trust. It continued to encumber the
property after Tharp foreclosed. This is the essence of the trial court’s written order, and
it alone justified the court in sustaining the demurrer without leave to amend.2
Tharp argues that the priority rule for special assessments does not apply because
the nuisance-abatement assessment in this case was not a special assessment within the
meaning of Government Code section 53931 and following. Tharp discusses the
differences between an assessment for abating a nuisance and other special assessments,
such as an assessment used to construct an improvement benefitting the property. It
asserts that policy considerations favor treating the latter as special assessments for
purposes of lien priority, but not the former.
2Much of the parties’ briefing is devoted to discussion of competing theories of
the general purposes of Government Code section 25845, including an examination of
legislative history documents. It is unnecessary to consider this discussion, as in our
view the plain meaning of the statute supports the trial court’s decision. (Delaney v.
Superior Court (1990) 50 Cal.3d 785, 798 [no need to consult legislative history if
statutory language is clear].)
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There is no need to consider this analysis. Government Code section 25845,
subdivision (d), provides expressly that a nuisance-abatement assessment is a “special
assessment.” Government Code sections 53931 and 53935 expressly provide that a lien
based on a “special assessment” has priority over private liens. There is no reason to
think the Legislature meant “special assessment” in one sense in section 53931 et seq.
and in some other sense in section 25845.
Tharp relies on Isaac v. City of Los Angeles (1998) 66 Cal.App.4th 586 for the
notion that the county’s lien in this case cannot be a true special assessment. That case is
readily distinguishable. Isaac involved an assessment for unpaid utility charges, which a
city ordinance purported to deem a superpriority lien. (Id. at p. 591.) The Court of
Appeal held that the superpriority lien could not be upheld as a special assessment
because no special benefit was conferred on the property; utility services are an
ephemeral commodity, not a permanent improvement to the property. (Id. at p. 597.)
The superpriority lien also could not be upheld on the basis of the city ordinance
purporting to authorize it because the ordinance was preempted by state law on lien
priority. (Id. at pp. 599-602.) In this case, the nuisance abatement did confer a special
benefit on the property, and the superpriority lien was authorized by state law, i.e.,
Government Code sections 25845 and 53935.
We turn next to the bona fide purchaser/bona fide encumbrancer issue.
Government Code section 25845, subdivision (e), provides that, in addition to imposing a
special assessment having the same status as a tax, a county “also may cause a notice of
abatement lien to be recorded.” This lien has the same effect as a recorded abstract of
judgment (Gov. Code, § 25845, subd. (g)), which, among other things, means it attaches
to all the real property owned by the debtor in the county in which it is recorded. (Code
Civ. Proc., § 697.340.) The parties disagree about the purpose of this provision, but they
agree that the notice of assessment of abatement costs the county recorded was not an
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“abatement lien,” and that no abatement lien within the meaning of subdivision (e) was
ever recorded.
When, as in this case, an abatement lien is not recorded, a subsequent bona fide
purchaser or bona fide encumbrancer takes its interest in the property free of any lien for
abatement costs if the purchase or encumbrance occurs before the first installment of
county taxes becomes delinquent:
“[I]f the board of supervisors does not cause the recordation of a notice of
abatement lien pursuant to subdivision (e), and any real property to which
the costs of abatement relates has been transferred or conveyed to a bona
fide purchaser for value, or a lien on a bona fide encumbrancer for value
has been created and attaches to that property, prior to the date on which
the first installment of county taxes would become delinquent, then the cost
of abatement shall not result in a lien against that real property but shall be
transferred to the unsecured roll for collection.” (Gov. Code, § 25845,
subd. (f).)
Relying on this provision, Tharp says it is not subject to a lien for abatement costs
because it was a bona fide encumbrancer based on the 1988 deed of trust.
Tharp’s position reflects a misunderstanding of the bona fide purchaser/bona fide
encumbrancer doctrine. Miller and Starr summarize the doctrine succinctly:
“A preferential priority is given to a purchaser or encumbrancer who
acquires a lien or title interest in good faith and for value without
knowledge or notice of a prior interest. Such a party is called a ‘bona fide
purchaser’ or a ‘bona fide encumbrancer,’ depending on whether the
interest is an estate in the property or a lien on the property.” (5 Miller &
Starr, Cal. Real Estate (3d ed. 2009) § 11:50, p. 11-170, fns. omitted.)
The same treatise also states: “The subsequent interest of a bona fide purchaser or
encumbrancer achieves priority over a prior interest where the subsequent party acquires
an interest in the property for a valuable consideration, in good faith, and when he or she
first records the instrument creating his or her interest without knowledge or notice of the
prior interest .…” (5 Miller & Starr, Cal. Real Estate, supra, § 11:50, p. 11-171, fns. and
italics omitted.)
The doctrine is embodied in Civil Code section 1214:
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“Every conveyance of real property or an estate for years therein, other than
a lease for a term not exceeding one year, is void as against any subsequent
purchaser or mortgagee of the same property, or any part thereof, in good
faith and for a valuable consideration, whose conveyance is first duly
recorded, and as against any judgment affecting the title, unless the
conveyance shall have been duly recorded prior to the record of notice of
action.”
As these authorities indicate, the purpose of the bona fide purchaser/bona fide
encumbrancer doctrine is to protect a subsequent purchaser or encumbrancer that
acquires its interest without notice of prior interests. There is no rule that those who
acquire interests in property in good faith and for value are unaffected by later-arising
interests in the same property unless they had notice before they acquired their own
interests. That rule would make no sense, for any later-arising interests by definition
would not exist at the time of the purchase or encumbrance, so notice of them would be
in all cases impossible. Priority liens for taxes and special assessments would generally
fail, even against the owners who had originally been delinquent. In reality, this does not
occur because the status of later-arising interests is determined by the normal rules of
priority, including the exceptions to the first-in-time doctrine for tax liens and special
assessments. There is no reason why the concept of a bona fide purchaser or
encumbrancer would work differently in the context of Government Code section 25845
than in any other context.
Tharp became an encumbrancer in 1988. The county’s lien arose in 2007.3 Tharp
thus was not a subsequent encumbrancer and therefore the bona fide
purchaser/encumbrancer doctrine is inapplicable here. The trial court recognized this
3Tharp does not claim it was a bona fide purchaser without notice when it took
title in 2007. It could not make such a claim with any plausibility, since its December 13,
2007, letter to the county shows that it had actual notice of the county’s lien before the
foreclosure sale was completed.
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when it wrote that Tharp was not a bona fide encumbrancer because it “did not originally
acquire an interest in the property subject to County’s lien .…”
Tharp relies on County of Butte v. North Burbank Pub. Utility Dist. (1981) 124
Cal.App.3d 342, in which it was held that an assessment for unpaid sewage charges did
not become a priority lien because a preexisting (not subsequent) deed of trust holder was
a bona fide encumbrancer. (Id. at p. 347.) The court in County of Butte, however, did
not consider whether the fact that the assessment came later than the deed of trust meant
the notion of a bona fide encumbrancer did not apply. “Language used in any opinion is
of course to be understood in the light of the facts and the issue then before the court, and
an opinion is not authority for a proposition not therein considered.” (Ginns v. Savage
(1964) 61 Cal.2d 520, 524, fn. 2.)
Next, Tharp argues that the county cannot enforce a priority lien based on the
special assessment because its settlement agreement with the Landeroses provided that
the debt for the nuisance abatement would be “unsecured.” The words of the settlement
agreement do not support this contention. The agreement states: “Costs of the abatement
shall be a lien against the property and shall be placed on the tax roll.” (Italics added.)
A lien is a security interest in property. “Lien” is defined as “[a] legal right or interest
that a creditor has in another’s property, lasting usu. until a debt or duty that it secures is
satisfied.” (Black’s Law Dict. (9th ed. 2009) p. 1006, col. 1.) The settlement agreement
contemplated that the county would have a security interest in the property.
Tharp also asserts, “[T]he county contracted to create a lien against the property,
not a special assessment,” but this contention fails since the concept of a lien against the
property and that of a special assessment are not in opposition to each other. The county
contracted to create a lien based on a special assessment for nuisance-abatement costs
incurred pursuant to Government Code section 25845, subdivision (d): a special-
assessment lien. Tharp’s view is that the lien referred to in the settlement agreement is an
abatement lien within the meaning of Government Code section 25845, subdivision (e),
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not a special-assessment lien created in accordance with subdivision (d), but there is no
basis in the settlement agreement for this interpretation. Assuming an abatement lien
would have had a lower priority than a special-assessment lien, we see no reason why the
county would have entered into an agreement for that lower priority.
Even if the agreement were read to support Tharp’s claims, Tharp would not be
able to enforce it, for Tharp is not a party to the settlement. A third party can sue to
enforce a contract only if it is an intended beneficiary of the contract. (1 Witkin,
Summary of Cal. Law (10th ed. 2005) Contracts, § 688, p. 775.) Tharp does not claim to
be an intended third-party beneficiary of the settlement agreement.
Finally, Tharp argues that it would be “inherently unconstitutional” to “allow[] the
County to contract away [Tharp’s] collateral .…” The county did not contract away
Tharp’s security interest. It imposed a priority lien authorized by statute.
Tharp concedes that the Legislature has a valid constitutional power to create, by
express act, tax and assessment liens that have priority over preexisting private liens. In a
passage quoted by Tharp, Miller and Starr state:
“In many cases … enabling legislation specially provides that [a] particular
tax or assessment lien has seniority over prior, pre-existing private liens.
The tax lien only has priority over private liens when the statute that
provides for the lien expressly provides that it has priority over private liens
regardless of the date the tax lien is recorded. This authority of the
legislature to create a tax lien that is senior to pre-existing private liens is a
constitutional exercise of the police power.” (5 Miller & Starr, supra,
§ 11:157, p. 11-511, fns. omitted.)
Tharp accordingly also concedes that all of its causes of action depend on its view that
the county’s special-assessment lien was unauthorized.
As we have said, Government Code section 25845, subdivision (d), expressly
provides that an assessment for nuisance-abatement costs is a special assessment
enforceable by all means available for the enforcement of taxes, and Government Code
section 53935 expressly provides that a special assessment is a lien having priority over
preexisting private liens. In light of this and of Tharp’s concessions (and our view, ante,
16.
that Tharp’s security interest was long expired when the county asserted its rights), it is
unnecessary to examine separately Tharp’s claims that its constitutional rights were
violated by a taking of property for public use without just compensation and that its
property was taken without due process of law.
For all the above reasons, we conclude that the trial court properly sustained the
demurrer without leave to amend.
DISPOSITION
The judgment is affirmed. Respondent County of Tulare is awarded costs on
appeal.
_____________________
Sarkisian, J.*
WE CONCUR:
_____________________
Kane, Acting P.J.
_____________________
Peña, J.
*Judge of the Superior Court of Fresno County, assigned by the Chief Justice
pursuant to article VI, section 6 of the California Constitution.
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