Bank of New York Mellon v. Citibank

A declaratory relief claim based on equitable subrogation in a priority dispute between two home equity lines of credit is not governed by a three-year limitations period and so was wrongly dismissed.  A borrower engaged in a double refinancing of his existing HELOC, secured by a second deed of trust in favor of Citibank.  Countrywide paid off the balance due on the existing HELOC, expecting to have its deed of trust assume second position when the existing HELOC was reconveyed.  Meanwhile, Citibank had issued the borrower a second HELOC, and the deed of trust securing that HELOC was recorded before Countrywide’s deed of trust.  When the borrower defaulted, Countrywide’s successor in interest, BONYM, sued for declaratory relief regarding the priority of the two deeds of trust.  The judgment dismissing the complaint on statute of limitations grounds is reversed.  An action for declaratory relief is governed by the limitations period applicable to the right sued upon.  Here, contrary to BONYM’s contention, it had no statutory right to priority under Civil Code 2941 and 2943.  However, it did have a viable claim for equitable subordination since the proceeds of its loan had repaid the debt secured by Citibank’s original deed of trust securing its first HELOC.  Without deciding which statute of limitations does apply to that equitable subordination claim, this decision holds that for certain it is not CCP 338(a) (statutory claim) or (d) (fraud or mistake).  So the trial court erred in dismissing the case as time barred under that statute.

California Court of Appeal, Second District, Division 4 (Epstein, P.J.); February 16, 2017; 2017 WL 632755

 

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