APPEAL from a judgment of the Superior Court of Los Angeles County. Rita Miller, Judge. Modified in part; affirmed in part. (Los Angeles County Super. Ct. No. BC337889).
The opinion of the court was delivered by: Armstrong, J.
CERTIFIED FOR PUBLICATION
Quality Loan Service (QLS) appeals the trial court's ruling regarding the interest rate to be applied to its monetary obligation to respondent Pro Value Properties, Inc. (Pro Value). We conclude that the trial court erred in its finding that QLS's obligation to Pro Value was contractual in nature, resulting in the accrual of interest at the annual rate of 10 percent. Rather, QLS's obligation to Pro Value was statutory in nature, from which it follows that the proper rate of interest is seven percent.
FACTUAL AND PROCEDURAL BACKGROUND
At the request of the beneficiary of a Deed of Trust on a residence (the Property), QLS instituted non-judicial foreclosure proceedings, commencing with the recordation of a Notice of Default. QLS was not the trustee named in the deed of trust, and so was required to record a Substitution of Trustee pursuant to Civil Code section 2934a. This it neglected to do. Pursuant to a recorded Notice of Trustee Sale, QLS sold the Property to the highest bidder, Pro Value, on June 9, 2005 for $842,000. QLS issued a Trustee's Deed of Sale to Pro Value, which was subsequently recorded.
Some time thereafter, QLS and FV-1, the beneficiary under the Deed of Trust, realized that there was no recorded Substitution of Trustee naming QLS as trustee. Consequently, both QLS and FV-1 determined that the Trustee's Deed of Sale was void.
In August 2005, FV-1 filed this lawsuit, alleging causes of action for cancellation of an instrument and declaratory relief. FV-1 named both QLS and Pro Value as defendants. Pro Value cross-complained against FV-1 for breach of contract, negligence and negligent misrepresentation, and against QLS for negligence.
In October 2005, QLS returned the $842,000 purchase price of the Property together with seven percent interest to Pro Value. Pro Value rejected the proffered funds, claiming that it was the rightful owner of the Property.
Because Pro Value had rejected QLS's proffer of the $842,000 sales price, QLS continued to hold those funds. It therefore filed a complaint in interpleader, seeking a determination of who was entitled to the $842,000 proceeds realized from the sale of the Property.
QLS moved for summary judgment as to FV-1's complaint and Pro Value's cross-complaint. After hearing arguments on the motion on January 25, 2007, the trial court ruled that the Trustee's sale was void and that the Trustee's Deed of Sale which QLS issued to Pro Value was of no force or effect. The court further ruled that Pro Value was entitled to the return of the principal funds plus interest at the legal rate. The court requested additional briefing regarding the legal rate of interest to be applied in this case. Additionally, the trial court ruled against Pro Value on each of the causes of action alleged in the cross-complaint.
The day after the hearing, QLS again returned the $842,000 sales proceeds to Pro Value.
On May 14, 2007, the trial court issued its ruling on the pending interest issue. The court found that although the Trustee's sale was void, and there was no contract as a matter of law, QLS owed interest at the rate of 10 percent -- that is, the rate which applies to obligations founded on contract. The court also found that QLS's tender of funds to Pro Value in October 2005 was insufficient, since it included seven percent interest instead of 10 percent interest. Consequently, the court found that QLS owed Pro Value 10 percent interest on the $842,000 "from the date of sale through the date [QLS] returns the purchase proceeds with 10% interest."
Judgment was entered on November 1, 2007, from which QLS ...