California Court Finds For Defendant Bank In Adverse Possession Dispute

• Published date: 16 November 2021
• Subject Matter: Finance and Banking, Litigation, Mediation & Arbitration, Financial Services, Arbitration & Dispute Resolution, Trials & Appeals & Compensation
• Law Firm: Riker Danzig Scherer Hyland & Perretti
• Author: Mr Michael O'Donnell, Michael Crowley, Desiree McDonald and Kevin Hakansson

The California Court of Appeals, Fifth Appellate Division, recently found for defendant Citibank, N.A. ("Citibank") in a dispute over the ownership of property in an unincorporated area of southern California. See Bailey v. Citibank, N.A., 66 Cal. App. 5th 335 (2021). Plaintiffs Charles and Kimberley Bailey took possession of property in Frazier Park, California (the "Property") in 2013, and claimed to be rightful owners based on their alleged adverse possession thereof for a five-year period. Before that period was completed, though, Citibank became successor in interest of a deed of trust which had been recorded in 2005, and foreclosed and acquired title to the property under the trustee's deed in 2018. When plaintiffs subsequently filed their complaint to quiet title, Citibank was named as the primary defendant. Citibank, however, failed to answer or otherwise respond to the complaint, and its default was entered. The trial court subsequently conducted an evidentiary hearing on plaintiffs' quiet title claim and concluded that title to the property was vested in plaintiffs, not Citibank. Citibank did not appear at the evidentiary hearing. Following the hearing, the trial court entered a judgment quieting title in plaintiffs' favor. Thereafter, Citibank moved to set aside both the default and the judgment under the mandatory provisions of Code of Civil Procedure section 473, based on Citibank's attorney's affidavit of fault. The trial court granted Citibank's motion, and the default and the judgment quieting title were set aside. Plaintiffs appealed from that order on the ground that no basis existed for potential relief under section 473 since Citibank's attorney was not retained to handle this case until after the default was entered. In response to plaintiffs' appeal, Citibank filed a protective cross-appeal, arguing that even if relief under section 473 was unavailable, the judgment quieting title in plaintiffs' favor was erroneous as a matter of law and should be reversed.

The court initially disagreed with Citibank, finding that the trial court's application of section 473 was improper, as it should have...