In the recent case of MTC Financial, Inc. v. California Department of Tax and Fee Administration, the California Appellate Court confirmed the need for accuracy and sufficiency of the legal description of the property in a deed of trust in order for it to be enforceable.
In the underlying case, proceeds remaining after a home foreclosure sale were deposited with the trial court due to competing claims to the proceeds. A primary dispute between the claimants was whether a first in time deed of trust sufficiently described the foreclosed property. Among other things, the trial court found the description was insufficient, and the trust deed was therefore void. It entered judgment in favor of the next in time state tax lien. Finding no error in the result of the judgment, the Appellate Court affirmed.
In 2017, a foreclosure sale for the home (the property) of Kamini and Anand Chopra (collectively, the Chopras) was conducted by MTC Financial Inc. (the trustee). Following an initial distribution of the sale proceeds, the trustee determined there was a conflict between outstanding claims to the remaining proceeds (the surplus fund). The trustee deposited the surplus fund with the trial court so it could determine the claimants’ respective priorities pursuant to California Civil Code section 2924j, subdivisions (c) and (d).
Among the claimants was appellant Rajindar Mehta, the grantee of a 2004 deed of trust signed by the Chopras (the trust deed). Mehta claimed his trust deed was senior in priority because it was created first in time relative to the outstanding claims to the fund.
Respondent, the California Department of Tax and Fee Administration (the Tax Department), disputed Metha’s claim and contended that its 2008 tax lien against Kamini Chopra had senior priority as next in time because, among other things, the trust
deed was void and unenforceable based upon its insufficient legal description of the property.
The trust deed’s legal description of the property contained multiple points of inaccuracy or ambiguity:
(1) the lot number of “68” was incorrect (it should have been “88”);
(2) the book page number of “810-11” was incorrect (it should have been “1-11”);
(3) the city of the property was not identified; and
(4) regarding the county where the property is located, the description only reads “said county,” although a preceding information field does state the correct “Orange County.”
At the same time, the trust deed referenced an assessor’s parcel number, which matched the number identified for the property according to attachments to the trustee’s petition which was filed with the deposit of the surplus fund.
The attachments included two copies of a purported assessor’s map denoting information that could correspond to the trust deed’s legal description of the property. For example, the map purports to depict a “Tract No. 9268,” which is the tract described in the trust deed.
Ambiguously, however, both numbers “68” and “88” (respectively, the incorrect lot number listed in the trust deed and the true lot number that should have been listed) appear at different locations on the map. Neither Mehta nor the Tax Department discussed this map in their briefs, either at the trial court level or on the appeal.
An assessor’s parcel number, also referred to as an APN, is a numerical identifier associated with a particular piece of property for property tax assessment purposes.
After conducting two hearings, the trial court found in favor of the Tax Department. Among other things, the court determined the Tax Department’s tax lien claim to have priority over Mehta’s claim because the trust deed contained a fatally defective legal description of the property and Mehta had failed to produce evidence of actually lending money to the Chopras, as the trust deed purported.
The order also stated: As for the assessor’s parcel number appearing on the face of the trust deed, there is no evidence that such number is the correct assessor’s parcel number assigned by the Orange County Assessor to the subject real property, especially given the other erroneous information appearing in the deed of trust.
A judgment for the Tax Department was entered and was timely appealed by Mehta. On appeal, Mehta argued the trial court erred in finding the trust deed void. Mehta, as the appellant, had the burden of demonstrating the trial court erred.
Well-established principles for determining the relative priorities of property interests were implicated. California observes a “first in time, first in right” system of lien priorities where, generally, competing enforceable interests have priority among themselves according to the time of their creation. (Civil Code § 2897.)
As to determining the enforceability of such interests, a trust deed must sufficiently describe the property securing it to be enforceable. To be sufficient, the description must be such that the land can be identified or located on the ground by use of the description. A description that is equally applicable to two different parcels is fatally defective.
Mehta contended his trust deed sufficiently described the property because of the parcel number, address, and trustor names contained in it.
The Appellate Court disagreed. First, it noted that the trustor names (the Chopras) and address contained in the trust deed do not provide grounds for a sufficient property description in that case. The names have no logical relationship to whether the property is sufficiently described and the subject address is only listed as the address of the trustors (not the property). Accordingly, the only potentially valid basis for finding the property description to be sufficient, of the three offered by Mehta, is the parcel number contained in the trust deed.
While the Appellate Court found no reason to disagree that a parcel number could theoretically satisfy the law’s requirement for sufficient legal description of a property, it also found that a parcel number, by itself, does not necessarily demonstrate the actual, physical location of a property. Generally, such a number corresponds to an assessor’s map which is a type of map that does not have to necessarily correspond with the actual physical location of a property. Parcel numbers assigned pursuant to Revenue & Tax Code section 327 need not correspond with actual subdivisions, lots, tracts or other legal divisions or boundaries of land.
Additionally, the trust deed’s legal description of the property refers to a “recorded” map in its legal description. That revealed another potential issue with respect to locating the property by its parcel number because a “recorded” map could mean a certified parcel map filed in the Orange County Clerk Recorder’s Office. (See Gov. Code § 66499.55.)
Given that a parcel map and assessor’s map need not necessarily correspond to each other, even if the trust deed’s parcel number correctly corresponds to a property depicted in a tax assessor’s map (a fact that had not been demonstrated by Mehta), this would not necessarily establish what property the trust deed is describing in a certified parcel map. In sum, the parcel number in the case, by itself, did not necessarily describe the property’s actual, physical location so that it could be identified or located on the ground.
Mehta offered no demonstration of how the parcel number could have been used to locate the property. He instead argued—as he did to the trial court—that no parol evidence is needed to confirm the trust deed is a lien on this property. Mehta’s argument was incorrect.
The inaccuracies of the trust deed’s legal description of the property created an ambiguity, which implicated a need for clarification by extrinsic evidence. Indeed, in the relevant cases cited by the parties, courts based their determinations regarding sufficient description of a property upon examinations of extrinsic evidence.
A parcel map is used to sell, lease, or finance property. The Subdivision Map Act generally prohibits the sale, lease, or financing of any parcel of a subdivision until the recordation of an approved map in full compliance with the law.
In contrast, no such extrinsic evidence was offered to the court in this matter. This left the trust deed’s ambiguity unresolved with no demonstration that the property could be identified or located by the legal description of the trust deed.
As a result, Mehta failed to carry his independent burden at the trial court level to prove that the trust deed’s legal description of the property was sufficient to be enforceable. On appeal, with respect to the trial court’s factual finding that there was no evidence demonstrating the sufficiency of the parcel number, Mehta failed to meet his burden under substantial evidence review to demonstrate that the evidence was (1) “uncontradicted and unimpeached” and (2) “of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding".
Finally, the Appellate Court was not persuaded that Mehta’s assertions regarding notice of the trust deed should control the disposition of this appeal. Mehta asserted the indexing of the county recorder filing system provided effective notice of the trust deed to the Tax Department. However, Mehta did not say how this point, even if shown, would impact the dispositive issue of whether the trust deed sufficiently described the property.
The absence of meaningful discussion existing within the context of case law supported a conclusion that if the trust deed was void, then notice of it achieved nothing for the purpose of determining the senior interest to the surplus fund. The Appellate Court was not aware of any principle justifying it to hold that the recording of a deed, void as to any person, was notice to such person of anything, except, perhaps, of the existence of the void instrument.
A void thing is as no thing. In other words, Mehta did not persuade that any notice his trust deed may have imparted would outweigh the conclusion that the trust deed was void and unenforceable.
In sum, Mehta failed to carry his independent burden at the trial court level to show the trust deed’s legal description of the property was sufficient to make it enforceable. (Evid. Code § 500.)
On appeal, Mehta did not carry his burden to demonstrate the trial court committed reversible error.
LESSONS:
1. The legal description of the property is essential to have it enforced, and an insufficient legal description may render the trust deed void.
2. Inaccuracies in a trust deed’s legal description of the property creates an ambiguity, which implicates a need for clarification by extrinsic evidence.
3. The recording of a void instrument is only notice of a void and unenforceable instrument.
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