## Facts

- Landlords owned real property improved with two triplex dwellings and leased the property to tenants, who later assigned the lease to new tenants.
- The Bank loaned the tenants $332,500 secured by a deed of trust encumbering only the tenants’ leasehold interest.
- The Bank did not obtain any agreement from the Landlords granting notice or cure rights upon tenant default (e.g., recognition/non-disturbance or cure agreement).
- After the tenants defaulted on rent, Landlords sent the Bank a copy of an initial rent-demand notice to the tenants.
- Landlords then served a further pay-or-quit notice on the tenants and filed an unlawful detainer action seeking possession, past-due rent, and a declaration of lease forfeiture; the Bank was not joined or notified.
- The municipal court entered judgment for Landlords, awarding possession and declaring the lease forfeited.
- After judgment, the Bank asked Landlords to allow it to cure the rent default; Landlords refused.
- The Bank sued for declaratory relief, claiming it retained an interest in the leasehold and could cure the default.
- The trial court granted summary judgment for Landlords on the ground that forfeiture terminated the leasehold and extinguished the Bank’s security interest.

## Issues

1. Whether the Bank was an indispensable party to the unlawful detainer action such that the forfeiture judgment was ineffective as to the Bank.
2. Whether the municipal court lacked subject-matter jurisdiction because the Bank’s loan amount allegedly placed the amount in controversy beyond the court’s monetary limits.
3. Whether a judgment forfeiting the tenants’ lease extinguished the Bank’s deed-of-trust interest in the leasehold even though the Bank was not a party to the unlawful detainer action.

## Decision

- The Court of Appeal affirmed summary judgment for Landlords.
- The Bank was not an indispensable party to the unlawful detainer proceeding.
- The municipal court had jurisdiction because the unlawful detainer concerned possession, limited rent damages, and forfeiture as between landlord and tenant, not adjudication of the Bank’s security interest.
- The forfeiture judgment terminated the leasehold estate, thereby extinguishing the Bank’s deed of trust, which was purely derivative of the leasehold.
- The Bank had no independent post-judgment right to cure absent a contract or statute granting such a right.

## Legal Principles

- Unlawful detainer is a summary proceeding primarily resolving the right to possession (and related limited rent damages) between landlord and tenant; it is not designed to adjudicate collateral interests of third-party lienholders.
- A lender holding a security interest in a tenant’s leasehold is not, solely by virtue of that interest, a necessary or indispensable party to the landlord’s unlawful detainer action against the tenant.
- Jurisdiction in unlawful detainer is measured by the possession claim and statutorily limited damages sought, not by the face amount of a third party’s loan secured by the leasehold.
- A deed of trust on a leasehold cannot survive termination of the underlying leasehold estate; forfeiture of the lease extinguishes the lender’s leasehold security interest unless preserved by an independent agreement with the landlord.
- Absent an enforceable agreement or statute, a leasehold lender has no right to compel a landlord to accept a cure after a valid forfeiture judgment has terminated the lease.

## Conclusion

The court held that the landlord’s unlawful detainer judgment forfeiting the lease validly ended the tenant’s leasehold and, because the Bank’s collateral was only the leasehold, extinguished the Bank’s deed of trust; the Bank was not an indispensable party, the municipal court had jurisdiction, and no post-judgment cure right existed without an independent landlord agreement.


Glendale Fed. Bank v. Hadden, 73 Cal. App. 4th 1150 (Cal. Ct. App. 1999)