McDonell v. City of San Buenaventura

Filed 12/1/05 McDonell v. City of San Buenaventura CA2/6

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

BRUCE McDONELL et al., Plaintiffs and Appellants, v. CITY OF SAN BUENAVENTURA et al., Defendants and Respondents.

2d Civil No. B175857 (Super. Ct. No. CIV 223596) (Ventura County)

The Marketable Record Title Act (Act) was enacted in 1983. (Civ. Code, § 880.310 et seq.) Under this statute, holders of a future interest in real property must record a notice of intent to preserve their interest. Appellants Bruce McDonell and Jay C. Cortner filed a quiet title action against the City of San Buenaventura, claiming a reversionary interest in a city-owned park. The City filed a demurrer, which the trial court sustained without leave to amend. We affirm the judgment of dismissal. Appellants failed to record notice of their intent to preserve their interest within the statutory time period, causing their interest to expire.

FACTS

Transfer of Parcels to City

In 1912, Kenneth and Tonie Grant transferred a single parcel of 400 square feet of real property to three individuals: Alice D. Bartlett, Orpha W. Foster and Luella Farrand Mack. The Grants directed that a cross was to be built on the parcel, which was to be maintained as a public park. On May 16, 1918, Kenneth and Tonie Grant conveyed the "surrounding" 30-acre parcel to the City as a gift. The record does not contain a map indicating the parcels' relative locations. However, the parties agree in their briefs that the 30-acre parcel surrounds the 400 square foot parcel.

The 1918 deed from the Grants to the City contained the language that "This conveyance is made and accepted upon the condition subsequent, that the premises hereby conveyed shall be kept and used forever for a public park or resort; and if at any time the said premises are not kept for a public park or resort then the title of the party of the second part [the City] shall revert to said grantors Kenneth P. Grant and Tonie Grant, their heirs and assigns." Approximately two weeks later (on June 5, 1918), the owners of the 400 square foot parcel deeded their property to the City. Their deed also contained language that ownership would revert to the Grant's heirs should the property cease to be used as a park.

In 2003, the City agreed to sell a one-acre portion of the park containing the cross. The decision was prompted by citizen objections to the presence of a religious symbol on City-owned property. Appellants are heirs of the original grantors. While the sale was pending, they filed a quiet title action against the City, San Buenaventura Heritage, Inc., Grant Park Conservancy and Christy Weir seeking to establish ownership of the property in fee simple absolute. They alleged that the City had violated the deed restriction by agreeing to sell a portion of the park to San Buenaventura Heritage, Inc.^[1] Appellants alleged in their complaint that "[t]he failure of the CITY to keep and use the PROPERTY 'forever for a public park or resort" is therefore a condition subsequent which voids the original grant, of May 16, 1918" from Kenneth and Tonie Grant to the City. Appellants also contended that the pending sale invalidated the grant to the City of the smaller parcel. They alleged two causes of action for conspiracy. Appellants claimed that the City acted to "intentionally prevent and deny [them] from receiving and regaining the property" and conspired to "wrongfully sell and transfer" the property.

Appellant Bruce McDonell is the Grants' sole surviving grandchild.^[2] He is 96 years of age and has a grandson, co-appellant Jay C. Cortner, who is his heir and "the personal representative of McDONNELL's estate under McDONNELL's will." McDonell has allegedly granted to Cortner "equal ownership of the reversionary rights set forth in the Grant Deed."

Procedural History

Appellants filed a lis pendens with their complaint. The City demurred and moved to expunge the lis pendens. In support of its motion to expunge, the City made reference to a preliminary title report. The City alleged that the report did not reflect that appellants had recorded a notice of intent to preserve their interest as required by the Act. (Civ. Code, § 880.310 et seq.)^[3] Attached to the City's motion was a preliminary title report prepared by Chicago Title Insurance. It indicated that four documents entitled "Declaration of Breach of Conditions Subsequent and Reentry" had been recorded by Bruce McDonell in 1969, 1972, 1974 and 1975. Another report reflected appellants' pending action involving the property.

The City demurred on the ground that appellants had failed to timely file notices of intent to preserve the property as required under the Act. As to the conspiracy causes of action, the City claimed that appellants had failed to allege a tort upon which the alleged conspiracy was based. In their opposition to the demurrer, appellants claimed that 1) there is no requirement that they allege compliance with the Act to state a cause of action for cancellation of instruments or to quiet title; 2) the City "relie[d] on" inadmissible evidence; and 3) the issues raised go to the merits and may not be resolved by demurrer. They did not allege the existence of, or attach copies of the documents referred to in the title report.

The trial court heard the motion to expunge and the demurrer together. At the hearing, appellants produced the recorded documents that allegedly showed that Bruce McDonell had recorded notice of intent to preserve his interest. These documents had not been filed with the court or submitted to opposing counsel. The court accepted the documents for filing. The motion to expunge the lis pendens was granted. The court sustained the demurrer without leave to amend as to the first and second causes of action for rescission of instruments and quiet title. However, it sustained with leave to amend the third and fourth causes of action for conspiracy. The court set a date (February 9, 2004) for the filing of a first amended complaint.

Appellants did not file an amended complaint. On February 2, 2004, they filed a motion for reconsideration of the trial court's ruling on the demurrer as to their first two causes of action for rescission of instruments and quiet title. Attached to appellant's motion was a proposed first amended complaint which they alleged stated "different facts than the complaint to which the demurrer was sustained."

In support of appellants' motion for reconsideration was the declaration of appellant's counsel that "[t]he Proposed Amended Complaint contains allegations and facts, i.e. facts regarding Plaintiff Bruce McDonnell's recording with the county of Ventura his intentions to maintain his reversionary rights in the subject property, and his compliance with the Marketable Record Title Act, that originally were not considered necessary, however, Plaintiffs are now including said facts and allegations after hearing the comments made in court by Judge Walsh." Within the proposed first amended complaint appellants alleged compliance with the Act and made reference to the documents recorded by McDonell. The City opposed the motion on the ground that appellants had failed to allege any new or different facts.

The trial court denied the motion for reconsideration, ruling that, if appellants had complied with the Act, those allegations could have been included in the original complaint. The court indicated that it had allowed appellants to file the documents recorded in 1969, 1972, 1974 and 1975, but all had failed to comply with the Act. On March 22, 2004, the trial court dismissed the action for appellant's failure to timely file a first amended complaint. (Code Civ. Proc., § 581, subd. (d).)

DISCUSSION

"'In reviewing a judgment of dismissal after a demurrer is sustained without leave to amend, we must assume the truth of all facts properly pleaded by the plaintiffs, as well as those that are judicially noticeable.'" (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 171; Dryden v. Tri-Valley Growers (1977) 65 Cal.App.3d 990, 997; Code Civ. Proc., § 430.30.) "'[A] complaint otherwise good on its face is subject to demurrer when facts judicially noticed render it defective.' [Citation.]" (Joslin v. H.A.S. Ins. Brokerage (1986) 184 Cal.App.3d 369, 374.)

We review the trial court's ruling de novo, exercising our independent judgment to determine whether the complaint states a cause of action under any legal theory. (Ochs v. Pacificare of California (2004) 115 Cal.App.4th 782, 788.) "If there is a reasonable possibility that the defect in a complaint can be cured by amendment, it is an abuse of discretion to sustain a demurrer without leave to amend. [Citation.] The burden is on the plaintiff, however, to demonstrate the manner in which the complaint might be amended." (Hendy v. Losse (1991) 54 Cal.3d 723, 742.)

Marketable Record Title Act

The Act provides a mechanism by which an individual can preserve a future interest in real property. (§ 880.310 et seq.) The Legislature recognized that property interests that have become obsolete can constitute an unreasonable restraint on alienation and hinder marketability. (§ 880.020, subd. (a)(2)-(3).) The Act is intended to facilitate real property title transactions by enabling individuals to rely on record title. (§ 880.020, subd. (b).)

A future interest, such as the interest claimed here, is contingent upon the occurrence of a stated event. Those who hold such future interests must record a "notice of intent" to preserve their interest in the property. (§ 880.320.) The recordation of notice creates a presumption that the person who claims the interest has not abandoned it. (§ 880.310, subd. (b).)

When a fee simple estate is subject to a condition subsequent, the holder of that restriction is said to possess a "power of termination."^[4] If the condition subsequent is breached, the holder may terminate the fee simple estate and enforce the restriction. (§ 885.010; Sanders v. East Bay Mun. Utility Dist. (1993) 16 Cal.App.4th 125, 130.) However, failure to record a notice of intent during the statutory time period will cause the power of termination to expire.^[5] (Severns v. Union Pacific Railroad Co. (2002) 101 Cal.App.4th 1209, 1220, 1222 [holder of future interest forfeited power by failing to timely record notice of intent to preserve interest].) Upon its expiration, the power becomes unenforceable and is effectively quitclaimed to the fee simple owner. (§ 885.060; Greenwald & Asimow, Cal. Prac. Guide: Real Property Transactions (The Rutter Group 2003) ¶ 3:300.5, pp. 3-54 to 3-54.1.)

The Act describes in detail the content and the format required for the notice of intent. (§§ 880.330, 880.340.) It must substantially comply with the statutory form and be recorded prior to the expiration of the interest. (§ 880.310, subd. (a); 4 Miller & Starr, Cal. Real Estate (3d. ed. 2000) § 10:130, p. 402.) Recording a notice of intent will not validate an interest that is otherwise invalid or unenforceable. (§ 880.310, subd. (b); 5 Miller & Starr, Cal. Real Estate (3d. ed. 2000) § 11.62, p. 168.)

1) Breach of Condition Subsequent

By the language in the deed, the Grants conveyed a fee simple subject to a condition subsequent. (See City of Palm Springs v. Living Desert Reserve (1999) 70 Cal.App.4th 613, 622; Concord & Bay Point Land Co. v. City of Concord (1991) 229 Cal.App.3d 289, 295.) Appellants argue that they properly filed this action on the breach of the condition and had recorded adequate notice to preserve their interest in the property. The City claims that the recorded documents do not comply with the statutory requirement, thus appellants have lost any ownership interest. Our inspection of the documents reveal that they are not notices of intent to preserve a property interest. (§ 880.310.) Rather, they are notices of an attempt to exercise a power of termination. (§ 885.050.) Neither party identified the type of instruments recorded, thus we requested supplemental briefing on this issue.

The documents McDonell recorded were entitled, "Declaration of Breach of Conditions Subsequent and Reentry." All identified McDonell as heir to the grantors and stated, "I . . . do hereby DECLARE A BREACH OF CONDITIONS SUBSEQUENT by reason of non-performance of the conditions subsequent set out in that certain written deed and conveyance dated on the 16th day of May, 1918 . . . ." (Italics added.) There followed a legal description of the property and the language: "That by the power of termination vested in me, I do further declare that the deed and conveyance hereinabove referred to be, and the same hereby is TERMINED [sic]; that I, the owner of the right of re-entry, have re-entered into possession of said hereinabove described real property, and now claim title to said property in fee simple absolute against the world." None of the four notices alleged how the conditions had been breached.

As we will explain, appellants' action is time-barred, because their power of termination expired before they filed their lawsuit. Under section 885.050 a power of termination must be exercised within five years after breach of the condition subsequent. (Concord & Bay Point Land Co. v. City of Concord, supra, 229 Cal.App.3d at p. 298.) "A power of termination shall be exercised only by notice or by civil action and, if the power of termination is of record, the exercise shall be of record. The notice shall be given, and any civil action shall be commenced, within five years after breach of the restriction to which the fee simple estate is subject." (§ 880.050, italics added.)

Appellants claimed that they were not required to file a civil action because section 885.070 permits a holder to exercise his power by either notice or by filing a civil action. Appellants correctly state that notice may be given in either manner. However, the filing of a civil action is necessary to adjudicate the alleged breach. If the holder gives notice of the exercise of his power, but does not bring an action, he has failed to take the required steps to obtain title in fee simple.

In their letter brief appellants argue that, following recordation of the 1969 and 1972 documents, McDonell filed lawsuits against the City which caused it to cure the alleged breaches. Appellants contend, for the first time, that the City cured the 1974 and 1975 breaches without litigation, thus there was no need to file a civil action. We cannot consider the effect of factual allegations made in the letter brief. Appellants had the opportunity to present evidence to the trial court detailing their history of litigation with the City, but did not do so. There was no evidence to indicate whether they took further action to enforce the restriction or abandoned their interest altogether.

Appellants contend the statutory provisions governing powers of termination do not apply to them because McDonell exercised his power in 1975, before passage of the Act. This argument fails because the statute provides a five-year grace period for recording notice. "[T]his chapter applies on the operative date [1983] to all powers of termination, whether executed or recorded before, on, or after the operative date." (§ 885.070.)^[6] McDonell did not file an action within five years of the alleged 1975 breach, as required by statute. His power of termination expired, at the latest, in 1988. This terminated the deed restriction, causing it to become unenforceable. (§ 885.060, subd. (b).) Nor did McDonell record a notice of intent to preserve interest during the statutory time period. "Nothing in this title [concerning the recordation of intent to preserve interest] extends the period for enforcement, for bringing an action, or for doing any other required act, or revives an interest in real property that expires and is unenforceable, pursuant to any applicable statute of limitation." (§ 880.250, subd. (b).)

Lastly, appellants claim that the content of their recorded documents accomplished the legislative purpose of the Act to "put the world on notice, through an examination of recent records only, that Mr. McDonell intended to maintain his interest in the subject Property." However, the question is not one of McDonell's intent, but whether he complied with the statutory requirements. He has not.

The most obvious defect with appellants' complaint is that their notices bear no relationship to the quiet title action. The conditions allegedly breached in 1969, 1972, 1974 and 1975 are unrelated to the condition that occurred in 2003--the sale of the one-acre parcel. It is undisputed the breach of which appellants complain occurred after they exercised their last power of termination.

Appellants have presented no evidence that they preserved an interest in Grant Park and possess a power of termination. In the absence of such evidence, they cannot maintain a quiet title action against the City.

2) Compliance with the Act

Appellants claim that their complaint should have survived a demurrer because they were not required to plead compliance with the statutory notice requirement. They ccontend that we are bound by the "holding" to this effect in Walton v. City of Red Bluff (1991) 2 Cal.App.4th 117, 131. They are mistaken. The Walton court stated in dicta that "[p]leading compliance with the statute is not required as such compliance is not an element of the cause of action to reenter property or quiet title thereto." (Id. at p. 131 [city waived affirmative defense that heir failed to record under Act by raising issue for first time on appeal].) We reject appellants' argument because statements in dicta are not controlling authority. (9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, § 947, p. 989.)

Appellants argue that the court improperly relied on "extrinsic evidence" in rendering its decision. They claim the court decided their action on the merits by determining the notices did not comply with the Act. This argument is gratuitous because appellants first produced these documents at the hearing and only then requested permission for filing. Moreover, the court was entitled to take judicial notice of the documents. (See Small v. Fritz Companies, Inc., supra, 303 Cal.4th 167, 171.)

Having independently reviewed the operative pleadings, we conclude the trial court properly sustained the City's demurrer. Appellants failed to meet their burden to demonstrate how their complaint could have been amended. We need not address their argument concerning the constitutionality of the Act.

The judgment is affirmed. Costs on appeal are awarded to Respondents.

NOT TO BE PUBLISHED.

COFFEE, J.

We concur:

GILBERT, P.J.

PERREN, J.

Henry J. Walsh, Judge

Superior Court County of Ventura

______________________________

Law Office of A. Kimble Ouerbacker III, A. Kimble Ouerbacker III for Appellants Bruce McDonell and Jay C. Cortner.

Robert G. Boehm and Christopher G. Norman for Respondents City of BuenaVentura and San BuenaVentura Heritage, Inc.

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^[1] Counsel for the City also represented San Buenaventura Heritage, Inc. The action was dismissed without prejudice as to defendants Grant Park conservancy and Christy Weir for appellants' failure to file a proof of service of the complaint.

^[2] The correct spelling of appellant's surname is Bruce McDonell, however it is spelled in several legal documents as McDonnell.

^[3] All further statutory references are to the Civil Code, unless otherwise stated.

^[4] The term "power of termination" replaces all terms such as "reversionary interest," "right of reentry," and a "restriction in the form of a condition subsequent." (§§ 885.010; 885.020.)

^[5] A power of termination expires at the later of (1) 30 years from recordation of original instrument or (2) 30 years after recordation of last notice of intent. (§ 885.030, subd. (a)(1)-(3).) However, the statute provides a five-year grace period from its 1983 effective date (until 1988) to record an intent to preserve the power. (880.370; Severns v. Union Pacific Railroad Co., supra, 101 Cal.App.4th at p. 1220.)

^[6] Section 885.070, subdivision (b)(1) & (2) provides that a power of termination must be exercised within the earlier of the following times: 1) the time applicable according to law in effect prior to passage of the statute, or 2) five years after the operative date of the chapter. (Concord & Bay Point Land Co. v. City of Concord, supra, 229 Cal.App.3d at pp. 298-299, 301.)