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Peterson v. Wells Fargo Bank, N.A..

California Court of Appeals, Second District, Fifth Division

May 8, 2015

PAUL PETERSON et al., Plaintiffs and Respondents,
v.
WELLS FARGO BANK, N.A., Defendant and Appellant.

APPEAL from a judgment of the Superior Court of Los Angeles County No. BC451520, Conrad Richard Aragon and Josh M. Fredricks, Judges.

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[Copyrighted Material Omitted]

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COUNSEL

Fidelity National Law Group, Jacky P. Wang; Garrett & Tully, Ryan C. Squire, and Zi C. Lin for Defendant and Appellant.

Slovak, Baron, Empey, Murphy & Pinkney and Shaun Michael Murphy for Plaintiffs and Respondents.

OPINION

MOSK, J.

INTRODUCTION

A probate court ordered the distribution of real property to a surviving spouse who executed and recorded a deed of trust on the real property in favor of a lender to secure a loan. When the surviving spouse died, and payments were not made on the loan, the lender recorded a notice of default

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and election to sell the real property. Plaintiffs, who purported to have a remainder fee interest in the real property, brought an action, inter alia, to quiet title to the property. They claimed that the surviving spouse only had a life estate in the real property and had no power to encumber it. The lender contends that the trial court erred in granting a summary judgment in favor of plaintiffs because, inter alia, the surviving spouse had the power to sell the property during her lifetime with the proceeds being divided among her and plaintiffs, the probate court order should be interpreted as providing her with fee title to the property and thus the power to encumber it; and the encumbering of real property with a deed of trust was a permissible conveyance of a fee simple estate in the real property. The lender contends alternatively that the surviving spouse had a percentage fee interest in the property and, as a matter of equity, the loan should be viewed as an advance against the proceeds to which the surviving spouse would have been entitled had the property been sold during her life.[1] We reject the lender’s contentions and affirm the judgment in favor of plaintiffs. Even though the surviving spouse had a right to sell the property, that right did not convert her life estate into a fee simple estate. The lender had no rights in the property upon the death of the surviving spouse.

BACKGROUND

By grant deed recorded in 1965, Lawrence Peterson (Lawrence) and his then wife, Carolyn Peterson, acquired title to real property at 4385 Mentone Avenue in Culver City, California (Property). Lawrence acquired sole title to the Property by a quitclaim deed that was recorded in 1985. Lawrence, who was then married to Jacqueline Peterson (Jacqueline), died in 1986. At the time of his death, Lawrence owned the Property as his sole and separate property.

The Los Angeles Superior Court, in a probate proceeding entitled In the Matter of the Estate of Lawrence Peterson etc., admitted Lawrence’s last will and testament. In 1986, the trial court in that proceeding entered an order settling first and final report of the executrix, allowing statutory commission to the executrix, allowing statutory fees to the attorneys for the executrix and allowing final distribution of estate (Probate Order) that provided, in relevant part:

“Distribution is hereby authorized to decedent’s wife, JACQUELINE C. PETERSON, of the improved parcel of real property located at 4385 Mentone Avenue, in the City of Culver City, County of Los Angeles, State of California, (‘Premises’) more particularly described as follows:

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“‘Lot No. 57 of Tract No. 17328 in Culver City as per Map recorded in Book 426, Pages 44 to 46 (Assessor’s Parcel No. 4209 019 005)’

“[¶] Subject to the conditions hereinafter set forth:

“(1) Decedent’s said wife may reside in the Premises rent free for her lifetime; provided, however, that if she shall remarry, the Premises shall thereupon be sold, and the proceeds therefrom shall be distributed one-third to decedent’s wife and one-third each to decedent’s two sons, MARK C. PETERSON (‘MARK’) and PAUL D. PETERSON (‘PAUL’) [plaintiffs];

“(2) Decedent’s wife may at her option sell the Premises at any time, whereupon the proceeds therefrom shall be distributed in the same manner set forth in paragraph (1) immediately preceding;

“(3) Upon the death of decedent’s said wife prior to a sale of the Premises, the Premises shall pass in ...


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