Barer v. County of Riverside (57 Cal. App. 4th 558, 1997)

Opinion

McDANIEL, J.

The question presented here is whether ad valorem tax liens on a possessory interest in tax-exempt (Indian) land were eliminated by a nonjudicial foreclosure sale of the possessory interest by a senior lien-holder. The trial court determined, and we agree, that the tax liens were not eliminated by the sale. Accordingly, we shall affirm the summary judgment entered in favor of the County of Riverside and the County of Riverside Tax Collector (collectively referred to as defendant) in an action for quiet title and declaratory relief brought by Charles J. Barer, as trustee for the Charles J. Barer Trust (plaintiff). Such action was brought by plaintiff as the owner of a condominium on land in Palm Springs managed by the Department of Indian Affairs (the property) which was the subject of the tax liens noted.

Factual and Procedural Background

On November 7, 1989, the owners of the property (Leslie Kay Houston and others, hereinafter referred to as Houston) executed a deed of trust imposing a lien thereon (the deed of trust) in favor of First Fidelity Thrift and Loan Association (First Fidelity).

On March 1, 1991, the 1991-1992 real property tax was assessed against the property and placed on the secured roll. (Rev. & Tax. Code, §§ 2190.2, 109.)

Sometime before December 10, 1991, when the first installment of the 1991-1992 real property taxes on the property became delinquent, Houston sold the property to Jack Hawkins (Hawkins).

On March 1, 1992, the 1992-1993 real property tax was assessed against the property and placed on the secured roll.

Sometime in March 1992, Hawkins filed a petition in bankruptcy court.

In June 1992, while Hawkins was still the record owner of the property, defendant recorded a certificate of lien against Hawkins for $5,238.72 in unpaid taxes for the 1991-1992, plus a penalty and costs. The certificate of lien provided, upon its recordation, that the amount owing constituted a lien upon “all personal property and real property now owned or subsequently acquired by [Hawkins] before the date on which this lien expires.”

On or about July 1, 1992, after the first and second installments of the 1991-1992 taxes had become delinquent, the taxes were transferred to the unsecured roll for collection. (§ 107.) The assessment and the tax lien on the property, however, remained on the secured roll.

On June 11, 1993, while Hawkins was still the record owner of the property, defendant recorded a second certificate of lien against him for $5,251.36 in unpaid taxes for the fiscal year 1992-1993, plus a penalty and costs.

Thereafter, the delinquent taxes for 1992-1993 (but not the assessment) were transferred to the unsecured roll.

Shortly afterwards, Paula Heatley (Heatley), a field investigative officer for defendant, in an effort to locate the holder of the first trust deed on the property, requested a title report thereon from Gateway Title.

On June 21, 1993, Heatley received a title report from Gateway Title indicating that First Fidelity held the first trust deed on the property.

On the following day, June 22, 1993, Heatley informed First Fidelity of the delinquent taxes on the property for 1991-1992 and 1992-1993 (the delinquent taxes).

On October 21, 1993, Heatley contacted First Fidelity in regard to payment of the delinquent taxes. First Fidelity told Heatley that it would pay the delinquent taxes after the conclusion of the foreclosure proceedings it had commenced pursuant to the power of sale in its deed of trust.

On May 19, 1994, First Fidelity purchased the property at a nonjudicial foreclosure pursuant to the power of sale above noted. However, contrary to its representation to Heatley, First Fidelity did not pay the delinquent taxes after the sale.

On September 7, 1994, plaintiff obtained a first amended preliminary title report on the property from Chicago Title Company (Chicago Title). The report did not disclose that there were delinquent taxes, constituting a lien against the property. According to a declaration of a title officer employed by Chicago Title, such taxes had later been discovered in a review of “the general index and secured tax rolls,” but had not been included in the report because the title company believed (mistakenly) that the liens had been eliminated by the foreclosure sale.

On September 15, 1994, First Fidelity sold the property to plaintiff.

On April 10, 1995, Heatley made a field call to the property to see if it were occupied. As she was preparing to leave a note on the door, plaintiff opened the door. Heatley informed plaintiff of the delinquent taxes. Plaintiff said he would ask his wife to contact Chicago Title in order to find out why the taxes had not been paid.

On the same day, April 10, 1995, defendant sent plaintiff a notice and demand for payment of $16,083.72 in delinquent taxes. The notice stated, if the $16,083.72 were not paid by April 17, 1995, that collection “must be enforced by ... [^D Seizure/sale of all property to satisfy tax.”

On April 14, 1995, plaintiff filed the current action against defendant for: (1) declaratory relief, (2) quiet title, and (3) an injunction to restrain defendant from seizing the property. In allegations incorporated in all counts of the complaint, plaintiff set forth that: (1) the real property which was the subject matter of the complaint was a subleasehold estate on land managed and/or controlled by the Department of Indian Affairs; (2) the certificates of lien recorded against Hawkins were tax liens; (3) when he (plaintiff) purchased the property he did not have any knowledge or notice of the certificates of lien “or of any other tax liens against the subject property”; (4) when he purchased the property the “tax liens” against Hawkins were “ ‘wiped out’ and/or ‘eliminated’ ” by First Fidelity’s foreclosure sale; (5) if he had known or suspected that such tax liens were outstanding liens against the property he would not have paid First Fidelity $375,000 for the property; (6) such tax liens were junior in priority to the lien created by the deed of trust; (7) when he purchased the property, such purported tax liens were not shown on the secured rolls where real property taxes were shown and therefore he was a bona fide purchaser for value and his interest in the property was senior to defendant’s claimed interest therein, and (8) defendant was barred and estopped from enforcing the obligations underlying such tax liens because defendant “consented to the removal of the tax liens from the secured rolls and instead recorded the certificates of lien” and “acquiesced in the fact that said taxes were no longer on the secured rolls for property taxes.”

Defendant answered the complaint, and alleged 10 affirmative defenses. Among such defenses were that: (1) ad valorem property taxes had priority over all other liens on real property, regardless of the time of their creation (§ 2192.1), and (2) it (defendant) was entitled to seize and sell the property. (§ 2951.)

Thereafter, plaintiff and defendant each moved for summary judgment. Plaintiff’s separate statement of undisputed material facts in support of his motion included the following: “10. . . . [T]he delinquent possessory interest ta[x]es for the property were transferred to the unsecured roll for collection, in accordance with Revenue & Taxation Code, sec. [1]07. . . . HD • • .16. The recorded certificates of lien ... for 1991-92 and 1992-93 taxes apply to and are enforceable against the assessee named in each certificate. In this case, the assessee is John J. Hawkins, not Barer. [Emphasis in original.] . . . [H 17. The delinquent taxes the County is attempting to enforce were not shown on the secured tax roll for the property in Sept. 1994, and are what is commonly known as ‘secret liens’ against the subject property.^ ... [U ... 19. The delinquent taxes the County is attempting to enforce against Barer were not on the secured tax roll for the subject property at the time Barer purchased the subject property on or about Sept. 29, 1994. . . . [H 20. The County’s extended secured rolls ... are manufactured documents and are not true or accurate representations of the secured tax roll for the subject property. ... [^D ... 34. [Chicago Title’s] preliminary report showed all the predecessor’s interests and taxes assessed by Defendants as of 9/7/94 were current and/or already paid. . . . [‘JO 35. Delinquent taxes under the certificates of lien . . . were not shown in the preliminary report because they were eliminated/‘wiped out’ by the foreclosure sale under the First Fidelity deed of trust. . . . [H 36. John Hawkins is the assessee for the 1991-92, 92-93 taxes which the County is attempting to enforce against Barer. ... [^D ... 38. Prior to Barer accepting the assignment [of First Fidelity’s interest in the property], he had no knowledge or notice of the existence of the tax liens against the subject property.”

Defendant disputed all of the foregoing facts except Nos. 10 and 16.

Defendant’s separate statement of material facts filed in support of its motion included the following: “2. The subject property is real property, a possessory interest, located on tax-exempt land. . . .[*][] 3. The Riverside County Assessor assessed the subject real property on the secured roll in 1991 and 1992. . . . [‘JQ 4. The real property taxes on the subject property are secured by the subject property. . . . [^ 5. The real property taxes on the subject property attach to the property by operation of law. , . . [IQ . . . 8. The 1991 and 1992 real property tax liens and assessments on the secured roll have, at all times, remained on the secured roll. . . . HQ 9. The secured assessments on the subject property were delivered to the Riverside County Auditor each tax year including 1991 and 1992. ...[*][] 10. The Auditor extended the secured assessment each year to determine the amount of the real property tax on the subject property. ... [U 11. After the Auditor extended the secured roll for each tax year, including 1991-92 and 1992-93, the rolls were delivered to the Tax Collector to prepare the real property tax bills. . . . [^Q 12. Both the 1991 and 1992 secured real property taxes on the subject property remained unpaid at the time set for declaration of default for taxes carried on the secured roll. ... [^Q 13. Delinquent taxes on the subject real property are required to be collected by the collection procedures utilized for the collection of taxes assessed on the unsecured roll. . . . . . .19. First Fidelity’s foreclosure on the subject property did not wipe out or eliminate the secured tax liens on the subject property. . . . [H 20. The tax liens have priority over all other liens regardless of the time of it’s [szc] creation.”

Plaintiff disputed all the foregoing facts except Nos. 2, 3, 9, 10, and 11.

Before the hearing on the motions for summary judgment, plaintiff remitted to defendant $17,352.54 in payment of the delinquent taxes, plus interest.

After hearing the motions, the trial court entered an order: (1) denying plaintiff’s motion for summary judgment, (2) granting defendant’s motion for summary judgment, and (3) entering judgment in favor of defendant. The order included the following “Conclusions of Law”: “50. That pursuant to Revenue and Taxation Code Section 107, the County was forced to transfer the 1991-92 and 1992-93 secured delinquent taxes to the unsecured roll for collection. . . . Barer had an obligation to search the prior years’ secured and unsecured rolls to determine what, if any, delinquent taxes were due against the subject property. [*][]... 52. The tax liens have priority over all other liens regardless of the time of their creation. [1 . . . 54. Where a delinquency exists, by a prior owner of the leasehold interest or the lessee, insofar as payments on a mortgage or anything that might cause the property to be put into foreclosure, and there is a non-payment of taxes, resulting in the taxes being placed on the unsecured tax rolls for the year, it is the duty of the buyer or purchaser out of foreclosure to investigate at least to the time that the initial delinquency occurred. ... [^D ... 57. That although Barer did not have actual notice of the delinquent taxes at the time he (Barer) purchased the subject property, he (Barer) was on constructive notice of the delinquencies based upon his obligation to conduct such a search of the secured and unsecured rolls.”

The final judgment recited in relevant part: “60. That although the delinquent taxes did not show on the current secured roll for 1994 when Barer purchased the property, it was Barer’s obligation as a matter of law to search prior years’ secured and unsecured rolls for real property tax delinquencies. Barer failed to conduct such a search and, therefore, he (Barer) takes the property subject to the 1991-92 and 1992-93 tax liens. [D 61. That the case of T.M. Cobb v. County of Los Angeles (1976) 16 Cal.3d 606 . . . does not apply to the facts of this case, specifically, real property possessory interest taxes on tax-exempt land assessed on the secured roll. [