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County of Sonoma v. U.S. Bank

Facts: A mortgaged parcel of improved property contains environmental nuisances and substandard living conditions in violation of county ordinances. The mortgage amount exceeds the property’s value. The county files an action to abate the conditions. A receiver is appointed by the court to oversee necessary abatement work and borrow monies to fund the clean-up efforts secured by a super-priority lien on title to the property. Neither the owner nor the mortgage holder are willing to fund the cleanup.

Claim: The mortgage holder claims their trust deed has priority since the receiver’s super-priority lien was improperly created under the general rules of lien priority based on first in time of recording.

Counterclaim: The receiver claims the lien for funding abatement of nuisances under their appointment has super-priority status over the mortgage holder’s lien on the property since mortgage financing to fund the cleanup is not otherwise available.

Holding: A California appeals court holds the lien recorded by the receiver on title to the property has priority over the mortgage holder’s lien since funds for the abatement effort were not available due to the property’s over encumbered title and the owner and mortgage holder were unwilling to provide funding. [County of Sonoma v. U.S. Bank (October 8, 2020) _CA6th_]

Read the case text here.