SLG Client Alert: California Supreme Court Weighs in on When An Eviction Is Proper After Foreclosure

Note: The following is a general discussion on the specified topic or issue and may not be relied on as legal advice in any specific case or matter you encounter. You should review any applicable case, or matter with counsel experienced in this area of law and should not generally rely on the discussion in this Alert.

Date: December 19, 2018
To: All Scheer Law Group Clients and Affiliates
From: Spencer Scheer
Subject: California Supreme Court Weighs in on When An Eviction Is Proper After Foreclosure. Like the Game of “Sorry”, you Start Over Unless The Trustee’s Deed is Recorded.

In the case of Dr. Leevil, LLC v. Westlake Health Care Center (Cal., Dec. 17, 2018, No. S241324) 2018 WL 6597341, at *1, decided on Monday, the California Supreme Court resolved a split in authority in the lower districts, and held that a purchaser at a foreclosure sale cannot take action to evict occupants unless and until there is a recorded Trustee’s Deed Upon Sale.

Boiling down a lengthy opinion to its essence: The Court held that the unlawful detainer (eviction) statue does not allow a foreclosing owner to proceed until the owner perfects title. Title is perfected by recording, so any action taken to evict before this occurs, is in violation of the statute. The recording gives record notice to the world, even though the foreclosure statute can be argued to independently validate the sale the day it is held

Practically, many foreclosing owners “jump the gun” and proceed with eviction immediately after a foreclosure sale. Doing this now will result in having to start over again, if challenged, much like the game of “Sorry.”

Note: To those younger readers who never heard of the game “Sorry”, it is still being played, still being sold and still frustrates many, to this day.

It should also be noted that the Court reaffirmed the summary nature of the unlawful detainer proceeding. The Court confirmed that the question of perfection of title specifically links the eviction statute to an inquiry of whether the procedural requirements under the foreclosure statute have been properly satisfied, but that this does not result in an expansion of jurisdiction in a summary eviction proceeding to include general challenges to the validity of the trust deed or to the primary loan obligation (Dr. Leevil, LLC v. Westlake Health Care Center (Cal., Dec. 17, 2018, No. S241324) 2018 WL 6597341, at *6).

All foreclosing lenders, purchasers and their counsel should note this case for not only for future cases, but for any evictions now pending.

Please call me or Jon Seigel of SLG if you want to discuss.

Spencer Scheer