Barry v. OC Residential Properties
(2011) 194 Cal.App.4th 861
Law Offices of David A. Elwell and David A. Elwell for Plaintiff and Appellant.
Law Offices of Steven D. Silverstein and Steven D. Silverstein for Defendant and Respondent. [194 Cal.App.4th 864]
RYLAARSDAM, Acting P. J.-
Plaintiff Shelby E. Barry filed a petition in the superior court to
determine the redemption price for her unit in a common interest
development that defendant OC Residential Properties, LLC had acquired
at a nonjudicial foreclosure sale. (Civ. Code, § 1367.1, subd. (g); Code
Civ. Proc., § 729.070, subd. (a).) The trial court ruled the amount due
was $18,148.71, a sum that included over $17,900 in expenses defendant
paid for maintenance and repair work on the unit after the foreclosure
sale, an electric bill, and interest on the foreclosure sale purchase
price. Plaintiff challenges the inclusion of these sums in the
redemption price and the constitutionality of the procedure for
determining the amount she needed to pay to redeem the property. Finding
no error, we shall affirm the order.
In 1977, plaintiff acquired a unit in a common interest development. Over the years, she leased the unit to others. [194 Cal.App.4th 865]
Plaintiff failed to pay the monthly association fee. In June 2008,
Associated Lien Services, the trustee under an October 2006 lien
recorded by the homeowners association, issued a notice of trustee's
sale. According to the notice, "the unpaid balance of the obligation
secured by the property," plus costs, exceeded $10,000. Initially, the
sale was scheduled for July 2008 but it was continued until June 17,
On the latter date, defendant purchased the unit at the foreclosure sale
for $66,092.60. The sale was subject to plaintiff's right of
At the time of the foreclosure sale the unit was vacant. In a
declaration supporting her petition, plaintiff claimed her "last tenant
made substantial improvements" and the property was "in a condition such
that I could re-rent it" with only some "minimal cleaning . . . ."
After purchasing the unit at the foreclosure sale, defendant paid a
locksmith $336.11 to change the locks. One of its employees claimed,
"Upon entering the . . . property on 6/17/09, . . . [defendant]
discovered the property in need of repair and rehabilitation."
Between June 22 and July 2 defendant: (1) paid a pest control company
$800 to repair termite damage to the unit; (2) hired a contractor to
make repairs, paying $16,800 for the work; and (3) paid an electricity
bill for $17.15.
In her declaration, plaintiff claimed that, on July 3, she had a
locksmith replace the locks. She also asserted "[a]n inspection of [the]
property was made at that time which disclosed . . . the work
undertaken by [defendant] was not complete," and the unit "could not be
rented in the condition it was in."
The trustee sent plaintiff a letter enclosing a schedule showing the
balance due to redeem the unit was $29,548.71 after deducting nearly
$57,900 then held in trust. The schedule included the sums mentioned
above, plus two months homeowners' association assessments, taxes,
collection costs, and $770 for two months' interest on defendant's
purchase price. Plaintiff objected to including the repair expenses,
utility payment, and interest in the redemption price. She deposited
$11,500 with the trustee and filed the current petition for a judicial
determination of the amount owed.
After a hearing, the court issued an order declaring "the additional
amount required to redeem the property total[ed] $18,148.71,"
constituting the difference between plaintiff's deposit and the balance
claimed by the trustee. In part, the court found plaintiff "failed to
meet her burden of proof to show that [194 Cal.App.4th 866] the
work performed was not for the reasonable maintenance, upkeep, and
repair of improvements on the property." Although not supported by the
appellate record, plaintiff's opening brief asserts she timely paid the
additional sum due and redeemed the unit.
Generally, there is no right of redemption in nonjudicial foreclosure proceedings. (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226,
1236.) But this case involves the foreclosure of a unit in a common
interest development that resulted from plaintiff's failure to pay the
homeowner association's monthly assessment for maintenance and
preservation of the development's common areas. (Civ. Code, §§ 1367,
subd. (a); 1367.1, subd. (g) [association may enforce lien for
delinquent assessments through "sale by . . . trustee"].) Code of Civil
Procedure section 729.035 declares, "Notwithstanding any provision of
law to the contrary, the sale of a separate interest in a common
interest development is subject to the right of redemption . . . if the
sale arises from a foreclosure by the association of a common interest
development pursuant to subdivision (g) of [s]ection 1367.1 of the Civil
Code . . . ." (See also Civ. Code, § 1367.4, subd. (c)(4) ["A
nonjudicial foreclosure by an association to collect upon a debt for
delinquent assessments shall be subject to a right of redemption"].)
Code of Civil Procedure section 729.060, subdivision (a) requires "[a]
person who seeks to redeem the property [to] deposit the redemption
price with the levying officer who conducted the sale before the
expiration of the redemption period." Subdivision (b) of this statute
defines the redemption price as "the total of the following amounts . . .
. [¶] (1) The purchase price at the sale. [¶] (2) The amount of any
assessments or taxes and reasonable amounts for fire insurance,
maintenance, upkeep, and repair of improvements on the property. [¶] (3)
Any amount paid by the purchaser on a prior obligation secured by the
property to the extent that the payment was necessary for the protection
of the purchaser's interest. [¶] (4) Interest on the amounts described
in paragraphs (1), (2), and (3) . . . ." In addition, subdivision (c) of
Code of Civil Procedure section 729.060 authorizes an offset to the
redeeming party for "[r]ents and profits from the property paid to the
purchaser or the value of the use and occupation of the property to the
purchaser . . . ."
 After the trustee notified plaintiff of the amount required to
redeem the property, she challenged it by filing a petition under Code
of Civil Procedure section 729.070. This statute creates a procedure
allowing one [194 Cal.App.4th 867] "seeking to redeem the
property [who] disagree[s with] the redemption price" to petition "the
court for an order determining the redemption price . . . ." (Code Civ.
Proc., § 729.070, subd. (a).) The statute requires a hearing on the
petition at which "the person seeking to redeem the property has the
burden of proof." (Code Civ. Proc., § 729.070, subds. (c), (e).) "At the
conclusion of the hearing, the court shall determine by order the
amount required to redeem the property" based "upon affidavit or
evidence satisfactory to the court" and, "[i]f an amount in addition to
that deposited with the levying officer is required to redeem the
property, the person seeking to redeem shall" have "10 days after the
issuance of the order[ to] pay the additional amount . . . ." (Code Civ.
Proc., § 729.070, subds. (f), (g).)
The trial court ruled against plaintiff, finding she had not met her
burden of proof to show the redemption price demanded by the trustee
exceeded the legally permitted amount or that she entitled to an offset.
2. Due Process
Plaintiff attacks the constitutionality of the redemption procedure
created by Code of Civil Procedure section 729.070. She claims
defendant's "conduct [in entering the unit] prevented [her] from
describing the [property's] condition" and therefore the statute "does
not afford a meaningful hearing for [a] . . . homeowner to meet her
burden of proof."
 Both the United States Constitution and the California Constitution
guarantee no one may be deprived of his or her property "'without due
process of law.'" (Morongo Band of Mission Indians v. State Water Resources Control Bd. (2009) 45 Cal.4th 731,
736.) In civil proceedings, this guarantee includes the right to have a
matter decided by a tribunal having jurisdiction of the action that is
free of bias and conducts a full hearing on the matter after the parties
have been given notice of the proceeding and an opportunity to appear
and participate in it. (7 Witkin, Summary of Cal. Law (10th ed. 2005)
Constitutional Law, §§ 640-642, pp. 1041-1044; 2 Witkin, Cal. Proc. (5th
ed. 2008) Jurisdiction, §§ 302-304, 307-308, pp. 914-916, 918-921.)
"When the Constitution requires a hearing, it requires a fair one, one
before a tribunal which meets established standards of procedure. . . .
Procedure is the fair, orderly, and deliberate method by which matters
are litigated. To judge in a contested proceeding implies the hearing of
evidence from both sides in open court, a comparison of the merits of
the evidence of each side, a conclusion from the evidence of where the
truth lies, application of the appropriate laws to the facts found, and
the rendition of a judgment accordingly." (Estate of Buchman (1954) 123 Cal.App.2d 546, 560.) [194 Cal.App.4th 868]
 Plaintiff's argument is meritless. She does not claim the trustee
failed to give her notice of her default or the impending nonjudicial
foreclosure sale resulting from her failure to pay monthly homeowner
assessments. After the foreclosure sale, she admittedly received an
itemized notice of the amount needed to redeem the property. The
procedure created by Code of Civil Procedure section 729.070 afforded
her a means to challenge the amount demanded by the trustee with a
noticed hearing before an unbiased judicial tribunal where she was
allowed to present evidence and argument on the issue.
Plaintiff claims this procedure fails to "safeguard . . . the right to
discovery" and she was not given a chance to document the condition of
the premises before defendant entered and began making modifications to
the unit. But she also acknowledged her last tenant vacated the premises
before the foreclosure sale, thereby giving her possession of the
premises to inspect and document the unit's habitable condition. There
is no explanation of why plaintiff could not have obtained a declaration
from the former tenant or photographically documented the condition of
the premises when the last tenancy ended.
 Nor did defendant engage in wrongdoing when it entered the unit. By
statute, it had the right "from the time of sale until redemption . . .
to enter the property during reasonable hours to repair and maintain the
premises . . . ." (Code Civ. Proc., § 729.090, subd. (c).) Thus, we
reject plaintiff's denial of due process claim.
3. Defendant's Right to Enter and Repair the Unit
Next, plaintiff repeats her argument defendant acted as a trespasser,
claiming it failed to contact her before having a locksmith change the
locks and then engage a contractor to perform work that prepared the
property for sale.
Plaintiff acknowledges Code of Civil Procedure section 729.090,
subdivision (c) authorizes the purchaser at a foreclosure sale to enter
the property "to repair and maintain the premises . . . ." While this
statute limits entry to "reasonable hours" (ibid.), nothing in
the statute required defendant to notify plaintiff or seek her
cooperation. In addition, when the foreclosure sale occurred the unit
was admittedly vacant and plaintiff had not shown any interest in
recovering the property.
After entry, defendant began rehabilitating the unit with the intention
of reselling it. Contrary to plaintiff's claim, this effort did not
alter the unit's intended use. For that reason, plaintiff's reliance on Dwyer v. Carroll (1890) [194 Cal.App.4th 869]
86 Cal. 298 is unpersuasive. There a landlord reentered the leased
premises, a building used as a hotel, purportedly to make needed repairs
to the first floor. Instead, the landlord raised the building's
foundation several feet and added a cellar and a new floor, thereby
requiring the plaintiff and his lodgers to vacate the premises. Here,
the unit was vacant when defendant entered and the work performed by it
was to make the unit habitable. Thus, whether occupied by a third-party
purchaser or a tenant, in either case the unit would be employed for the
same purpose, habitation.
4. The Sums Charged for the Unit's Maintenance, Upkeep, and Repair
Next, plaintiff presents a series of arguments attacking the amount
awarded to defendant for the work performed on the unit before she
retook possession of it.
 One claim is that the trial court erred by not imposing the burden
of proof to establish the reasonableness of the repair costs on
defendant. Plaintiff cites several policy reasons why defendant should
carry the proof burden. But, as she acknowledges, under Evidence Code
section 500, "[e]xcept as otherwise provided by law, a party has the
burden of proof as to each fact the existence or nonexistence of which
is essential to the claim for relief or defense that he [or she] is
asserting." Here, Code of Civil Procedure section 729.070, subdivision
(e) expressly provides "[a]t the hearing on the petition, the person
seeking to redeem the property has the burden of proof." Thus, by
statute the Legislature has declared the party challenging a trustee's
stated redemption price carries the burden to establish the validity of
its objections to the disputed amounts.
Plaintiff's second claim concerns the license status of Axcell
Construction, the contractor defendant hired to repair and rehabilitate
the unit. In support of her petition, plaintiff submitted evidence
Axcell's license was suspended at the time it worked on the unit. She
argues defendant "cannot pass on [to her] an unlawful obligation for
payments made to the unlicensed contractor . . . ." We disagree with
this interpretation of the applicable law.
 Business and Professions Code section 7031, subdivision (a) declares
"no person engaged in the business or acting in the capacity of a
contractor, may bring or maintain any action . . . for the collection of
compensation for the performance of any act or contract where a license
is required by this chapter without alleging that he or she was a duly
licensed contractor at all times during the performance of that act or
contract, regardless of the merits of the cause of action brought by the
person . . . ." While "[g]enerally a contract made in violation of a
regulatory statute is void" and "courts will not '"lend their aid to the
enforcement of an illegal agreement or one against [194 Cal.App.4th 870] public policy"'" (Asdourian v. Araj (1985) 38 Cal.3d 276,
291), "'the rule is not an inflexible one to be applied in its fullest
rigor under any and all circumstances. A wide range of exceptions has
been recognized.' [Citation]" (ibid.).
 "It is not the law that every transaction connected with an illegal
transaction is itself illegal. Each case must turn on its own facts. The
purpose of the statute which has been violated must be considered. In
that connection, the court should consider whether a holding that the
collateral transaction is illegal will tend to assist or defeat the main
purpose of the statute. . . . [¶] This principle is stated . . . as
follows: 'If refusal to enforce or to rescind an illegal bargain would
produce a harmful effect on parties for whose protection the law making
the bargain illegal exists, enforcement or rescission, whichever is
appropriate, is allowed.'" (Robertson v. Hyde (1943) 58 Cal.App.2d 667, 672.)
 Cases have recognized "causes of action that do not seek 'the
collection of compensation for the performance of any act or contract
for which a license is required' are beyond the scope of Business and
Professions Code section 7031." (Holland v. Morse Diesel Internat., Inc. (2001) 86 Cal.App.4th 1443,
1451.) This case does not involve a collection action by Axcell for the
cost of its work. Rather, defendant sought reimbursement from plaintiff
for expenses it incurred to maintain and make repairs to the unit,
including the amount it paid to Axcell. Thus, the sum claimed is in the
nature of indemnification for one who paid by another who in justice
should pay. (See Ranchwood Communities Limted Partnership v. Jim Beat Construction (1996) 49 Cal.App.4th 1397,
1421 ["total ban on . . . liability for equitable indemnity, arising
from a too-strict interpretation of the licensing law, would be a
windfall and would not be within the protective purpose of the licensing
Finally, plaintiff claims defendant is barred from recovering the repair
and maintenance expenses because it "was creating a new thing, i.e.,
rehabilitating a rental unit for sale." This argument essentially
amounts to an attack on the sufficiency of the evidence to support the
trial court's decision. "'It is well established that a reviewing court
starts with the presumption that the record contains evidence to sustain
every finding of fact.' [Citations.]" (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875,
881.) Consequently, "'[w]hen a finding of fact is attacked on the
ground that there is not any substantial evidence to sustain it, the
power of an appellate court begins and ends with the
determination as to whether there is any substantial evidence
contradicted or uncontradicted which will support the finding of fact.'
[Citations.]" (Ibid.) The same rule applies "whether the [194 Cal.App.4th 871] trial court's ruling is based on oral testimony or declarations. [Citation.]" (Shamblin v. Brattain (1988) 44 Cal.3d 474, 479, fn. omitted.)
 As a general rule "the mortgagee may make such repairs as are
reasonably necessary for the preservation of the property, but not
permanent improvements, or things which conduced merely to his comfort
or convenience. [Citations.]" (Raynor v. Drew (1887) 72 Cal. 307,
312.) "'The ordinary rule in respect to improvements is that the
mortgagee will not be allowed for them further than is proper to keep
the premises in necessary repair. Unreasonable improvements may be of
benefit to the estate; but, unless made with the consent and approbation
of the mortgagor, no allowance can be made for them. The mortgagee has
no right to impose them upon the owner, and thereby increase the burden
of redeeming.' [Citation.]" (Malone v. Roy (1895) 107 Cal. 518, 523.)
Defendant's opposition to the petition included the declaration of Toby
Strassenberg, one of its project managers. It stated he "personally
evaluated the extent of damage" to the unit, concluding it was "in need
of repair and rehabilitation." In part, the repair work resulted from
the discovery of substantial termite damage. He also claimed, the
"repairs made were necessary to prevent further damage to the property .
. . ."
Referring to her claim repairs "necessary to 'maintain' the property as a
rental unit" are distinguishable from repairs rehabilitating the unit
for the purpose of a resale, plaintiff claims "no conflict appeared in
the evidence before the trial court." While it may be true defendant
made the repairs with the intent of reselling the unit, as discussed
above, the distinction between one living in the unit as an owner and
one living in it as a tenant, insofar as the right of redemption is
concerned, amounts to a distinction without a difference.
Thus, plaintiff has failed to establish the trial court erred by
awarding defendant the entire amount expended in the effort to repair
and maintain the unit after acquiring it at the foreclosure sale.
5. Denial of Plaintiff's Request for an Offset
Finally, noting the repair work begun by defendant "was not complete at
the date of the hearing" on her petition and claiming "the amount to
complete the work" would exceed the $770 in interest awarded to
defendant as part of the redemption price, plaintiff argues awarding
this amount to defendant would be inequitable. [194 Cal.App.4th 872]
 Code of Civil Procedure section 729.060, subdivision (b)(1) and (4)
expressly provides "[i]nterest on" "[t]he purchase price at the sale"
constitutes an element of the redemption price. The statute allows an
offset to one seeking to redeem the property only for "[r]ents and
profits from the property paid to the purchaser or the value of the use
and occupation of the property to the purchaser . . . ." (Code Civ.
Proc., § 729.060, subd. (c).) As discussed above, defendant presented
evidence supporting a finding substantial repairs were needed to make
the inhabitable. Consequently, the unit was not available for occupation
while it was being rehabilitated. In addition, defendant's failure to
complete the repair work resulted from plaintiff's repossession of the
unit while the work was in progress. Therefore, we reject plaintiff's
offset claim as well.
The order is affirmed. Respondent shall recover its costs on appeal.
O'Leary, J., and Moore, J., concurred.
FN *. Pursuant to Cal. Const., art. VI, § 21.