Summary
In Hogan v. DeAngelis Construction, Inc. (May 17, 2018, A146057, A146582, A147273) [nonpub. opn.], this court held the judgment in the original lawsuit "was 'satisfied in fact' as a matter of law."
Summary of this case from Hogan v. Deangelis Constr.Opinion
A146057 A146582 A147273
05-17-2018
RONALD HOGAN, et al., Plaintiffs and Respondents, v. DEANGELIS CONSTRUCTION, INC., et al., Defendants and Appellants.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Sonoma County Super. Ct. No. SCV230846)
This is our fifth opinion in this case, which arises out of Ronald and Victoria Hogan's rescission of a May 2000 contract to purchase a home in Santa Rosa. In our first opinion, Hogan, et al. v. DeAngelis Construction, Inc., et al. (A117321, A118257, A120840, May 20, 2009) [nonpub. opn.] (Hogan I), we ruled that a portion of the damages award against the developers of the property was duplicative and instructed the trial court to strike that portion of the damages award. We also rejected the Hogans' contention that the judgment did not require them to return the property, a provision we refer to as the return condition. (Hogan I, supra, at pp. 17, 22-23.)
DeAngelis Construction, Inc., DeAngelis-Pope Homes, Marvin DeAngelis, and Gary Pope, to whom we refer as the developers or the developer defendants.
In our second opinion, Hogan, et al. v. DeAngelis Construction, Inc., et al. (A128451, A130351, Apr. 18, 2012) [nonpub. opn.] (Hogan II), we expressed our dismay "that the Hogans continue to retain possession" of the property and rejected the Hogans' attempts to revoke or invalidate their rescission and their related efforts to obtain damages without satisfying the return condition. We held that "although the modified judgment allows the Hogans to recover consequential damages relating to the rescission, those monies are not due unless and until the Hogans return the Gardenview property to the Developers." (Id. at p. 26, italics added). We likewise held that the realtor defendants "are not required to pay consequential damages unless and until the Hogans' [sic] return the . . . property to the Developers." (Id. at p. 30.) And we held that the accrual of interest on the award does not start unless and until the Hogans return the property. (Id. at p. 25.) Finally, in affirming the trial's court order lifting a stay on enforcement of the judgment, we rejected the Hogans' efforts to use "the stay order as justification for refusing to return the house to the Developers" and their contention that the developers must pay damages before the Hogans vacate the property. (Id. at p. 30.)
Clayton Engstrom, Jr., Mary C. Engstrom, and Signature Properties, Inc., to whom we refer as the Engstroms or realtors.
Despite this guidance, plaintiffs refused to return the property, stopped paying the mortgage, and refused to execute the judgment. The property was sold in nonjudicial foreclosure proceedings. The developers moved (with the Engstroms) to deem the judgment fully satisfied, arguing their obligations under the judgment could never mature because the Hogans could never satisfy the return condition. The Hogans, believing the foreclosure was not their fault, made a motion for the release of the Engstroms' damages payment (then on deposit with the court).
The trial court summarily denied defendants' motion to deem the judgment fully satisfied. It granted the Hogans' motion to release the Engstrom deposit, reasoning that once the rescission was affirmed, the developers were obligated to assume the Hogans' mortgage obligations and by failing to pay the mortgage, they caused the foreclosure and should bear the loss of the property. The developers appeal both orders.
To avoid confusion, we note at the outset that the Engstrom defendants also appealed both of these orders, but later withdrew those appeals. (See fns. 12, 15 & 25, post.)
We reverse on both counts. Under the plain language of the judgment, none of defendants' judgment obligations mature until the return condition is satisfied. Thus, as a matter of law, after the foreclosure occurred, the developers no longer had any obligations under the judgment and were entitled to satisfaction of judgment. The order releasing the Engstrom deposit was likewise premised upon an erroneous reading of the judgment (specifically, that the developers were required to assume the mortgage obligation before the return condition was satisfied). As to the latter motion, we further hold that the trial court fundamentally altered the substantive relief provided by the judgment and therefore exceeded its authority under applicable law.
I. FACTUAL AND PROCEDURAL BACKGROUND
The history of this case is set out comprehensively in our prior appellate decisions. Here, we set out only the facts germane to this appeal. A. The Terms of the Modified Amended Judgment
Including Hogan I, supra; Hogan II, supra,; Hogan, et al. v. DeAngelis Construction, Inc., et al. (A138118, Jan. 13, 2016) [nonpub. opn.] (Hogan III); and Hogan, et al. v. DeAngelis Construction, Inc., et al. (A143637, Jan. 13, 2016) [nonpub. opn.] (Hogan IV).
Following trial, the entry of judgment, and the entry of a corrected judgment and resolution of post-judgment motions, an amended judgment was filed on June 6, 2007. It provides, inter alia:
"1. Plaintiffs RONALD HOGAN and VICTORIA HOGAN shall recover judgment against DEVELOPER DEFENDANTS, jointly and severally, in the amount of $394,246.41;
"2. DEVELOPER DEFENDANTS, jointly and severally, shall pay the existing mortgage debt in the amount of $417,000.00;
" . . .
"6. Plaintiffs RONALD HOGAN and VICTORIA HOGAN to return the home at 2014 Gardenview Place, Santa Rosa, California to DEVELOPER DEFENDANTS."
Paragraphs 3-5 concern the amount of damages the Hogans are to recover from the realtor defendants (the Engstroms).
In Hogan I, we affirmed the amended judgment but remanded the case to the trial court with instructions "to modify the amended judgment to (1) strike the award of damages against the Developers for intentional concealment; (2) provide that the Engstroms are jointly and severally liable for a portion of the Hogans' consequential damages awarded against the Developers, and that the Engstroms' share of that joint and several liability is equivalent to the damages awarded against them for intentional concealment and breach of contract." (Hogan I, supra, at p. 57.) We also declined to modify the amended judgment "to clarify that the Hogans must return the . . . property as a condition of obtaining relief based on rescission," holding that "the amended judgment clearly does require the Hogans to return the . . . Property." (Id. at p. 17.)
On April 20, 2010, the trial court filed an order modifying the judgment in accordance with Hogan I. The order (which we refer to as the modified amended judgment or the judgment) provides, inter alia, "The Hogans are entitled to $278,446.97 from any or all of the Developer Defendants . . . at the time that Plaintiffs return the real property at 2014 Gardenview Place, Santa Rosa, California, to Developer Defendants." (Italics added.) Further, "[t]he Developer Defendants must also remove as an obligation of the Hogans the remaining debt of $417,000 on the real property at the same time as payment of the consequential damages in exchange for the return of the real property, including, but not limited to, any debt for mortgage, deed of trust, or the equivalent, not to exceed the amount of $417,000, the amount of the loan which existed in June 2007 at the time of entry of the Judgment." (Italics added.) B. The Parties' Conflicting Efforts to Execute the Judgment (2010 —2013)
Executing the modified amended judgment should have been straightforward. Instead, the parties battled over enforcement. In Hogan II, we rejected the Hogans' efforts to collect over $602,000 in "costs" from the Engstroms and the Hogans' other efforts, based upon the same premise, to increase their monetary award from the Engstroms. (Hogan II, supra, at pp. 11, 18-24, 29.)
We also considered and rejected the Hogans' various efforts to undermine or invalidate the return condition. We affirmed the trial court's denial of the Hogans' motion to strike the return condition, which the trial court had based upon "language in the modified judgment requiring the Hogans to return the Gardenview property to the Developers as a condition of obtaining their money damages." (Hogan II, supra, at pp. 12, 24-25.) On similar reasoning, we affirmed the denial of the Hogans' request for post-judgment interest, holding that consequential damages "are not due unless and until the Hogans return the . . . property to the Developers" and thus, there was no "money judgment" on which interest could accrue until the property was returned. (Id. at pp. 13, 25-26.) And we held that their failure to return the property precluded the Hogans from collecting defendants' appellate undertakings. (Id. at pp. 29-30.)
In Hogan II, we also construed the judgment provisions governing the Hogans' outstanding mortgage debt. Initially, we rejected the Hogans' contention that the $417,000 then outstanding was an element of damages, payable to the Hogans. (Hogan II, supra, at p. 27.) We also clarified that the Hogans were not entitled to recover, as damages, post-judgment mortgage payments and other expenses they paid "to protect their interest in the . . . property," as they had not requested such damages at trial and "no longer have a legal interest in the . . . property" to protect. (Id. at pp. 28-29.)
Hogan II did not present the issue of when, if ever, the developers' obligation to assume the outstanding mortgage debt would mature, which we address, post.
Finally, we considered the trial court's decision to vacate a 2007 stay of enforcement of judgment (the stay order). (Hogan II, supra, at pp. 16-17, 30-31.) We affirmed, finding the "specific function" of the stay order no longer applied once we resolved judgment-related appeals in Hogan I. (Id. at p. 30.) We also observed that the Hogans' continued reliance upon the stay order to delay execution "until the Developers pay consequential damages" was "directly contrary to the conditional judgment in this case"—thus affirming the conditional nature of the judgment and rejecting the Hogans' contention that the developers must pay damages before the Hogans were required to return the home. (Ibid.)
In November 2010, all defendants demanded full satisfaction of judgment, arguing that the Hogans were refusing to tender the property. (Hogan II, supra, at pp. 17.) The Hogans objected that enforcement of the judgment was automatically stayed by their pending appeals (which were later resolved in Hogan II). (Ibid.; see also Hogan III, supra, at p. 6.) The Engstroms then moved to enforce the judgment, and then requested continuance of the hearing several times throughout 2011. It is not clear whether or how that motion was resolved.
In the two years that followed, the Hogans filed their first bankruptcy petition and engaged in various efforts to enforce the judgment, as they interpreted it, both in the bankruptcy court and in the trial court, including: seeking to confirm the developers' undertaking as "partial" security for the judgment; moving to release the Engstroms' court deposit (while contending that it would not be sufficient to satisfy the realtors' obligations under the judgment, due to additional accrued interest); and moving to stay enforcement of the rescission judgment in order to "meet the requirement . . . for complete relief to the aggrieved party."
This bankruptcy petition was eventually dismissed on the grounds that it was filed in bad faith and for the purposes of delaying execution of the judgment for rescission.
In April 2012, the developers renewed their efforts to enforce the judgment. Informal negotiations, which extended through the summer, were fruitless. In the interim, not only had the Hogans filed a bankruptcy petition, they stopped paying the mortgage without advising the developers.
During this time, the Hogans also tried to enforce the judgment, serving two "tenders" of the property, first in March and then in August of 2012. Both tenders, however, purported to include costs, fees and post-trial expenses to which the Hogans were not entitled under Hogan II. The tenders also conditioned return of the property on defendants' prior payment of consequential damages (and other disputed amounts) contrary to our ruling in Hogan II. The Hogans' amended tender also contradicted Hogan II by asserting an entitlement to post-judgment interest. The developers explained to the Hogans why the tenders were ineffective and invalid, to no avail.
The Hogans also made a motion to release certain funds on deposit with the court (the Engstrom deposit), which the realtor defendants had deposited with the court in November 2009, after the Hogans rejected the Engstroms' tender of damages. However, the Hogans failed to serve any memorandum of points and authorities, and then withdrew the motion in light of their bankruptcy petition.
The Hogans had refused to accept the realtors' tendered payment as full satisfaction, apparently based upon their belief that the realtors would eventually be assessed additional fees and costs.
In February 2013, the Engstroms again demanded compliance with the judgment. That summer, the developers also re-initiated talks with the Hogans regarding enforcement of the judgment. The Hogans responded by filing a motion to enforce liability on defendants' appeal bonds, to release the realtors' court deposit, and for other relief, but never filed a memorandum of points and authorities. That motion was dropped for failure to provide a proof of service. C. Default and Foreclosure Proceedings
As noted, in response to our holding in Hogan II that the Hogans were not entitled to collect post-judgment mortgage payments as damages, the Hogans ceased paying the mortgage. In 2013, the Hogans received notices of default from their lenders. The Hogans responded by recording a Civil Code section 3050 purchaser's lien on the property and filing a lawsuit against the lenders and others, in part to stop the foreclosure sale from occurring. The Hogans' request for preliminary injunction was heard and denied in early 2014. The Hogans amended their complaint and sought preliminary injunctive relief under their new cause of action, which motion was also denied. D. Further Enforcement Disputes in 2014
In denying injunctive relief in the related action, the trial court found that after the rescission, the Hogans were "no longer mortgagors" and thus lacked standing to assert the new cause of action under the California Homeowners' Bill of Rights.
With foreclosure proceedings pending, the Hogans again endeavored to enforce the judgment. First, they filed, recorded and served a renewal of judgment for over $1.3 million in damages, which was based upon the pre-trial rescission order entered in 2004, not the final judgment in this case—and which purported to include post-judgment interest. The court granted defendants' motion to vacate and expunge this renewal of judgment. The Hogans also sought an ex parte order confirming their asserted liens on the property and vacating a prior order staying certain abstracts of judgment the Hogans had filed in 2010; the order was denied due to pending appeals.
In June 2014, the Hogans filed a second bankruptcy petition. We ruled that the automatic stay in bankruptcy was inapplicable to bar the pending appeal and shortly thereafter, the bankruptcy court granted relief from the stay.
The Hogans' second bankruptcy petition was dismissed in May 2015.
In October 2014, the property was sold in a nonjudicial foreclosure sale. E. The Developers Move for Full Satisfaction of Judgment and Release of Bond
Once the foreclosure was final, defendants again sought to enforce the judgment. First, the developers filed a motion for satisfaction of judgment, arguing that the Hogans had consistently, for a period of years, resisted proper enforcement of the judgment for rescission and had obstructed its execution and increased the debt against the property until the home was lost in foreclosure, rendering defendants' performance impossible or impractical. In addition, they argued that after the foreclosure rendered the Hogans unable to satisfy a condition precedent (the return condition) as a matter of law, defendants' obligation to pay consequential damages would never mature. Citing George S. Nolte Consulting Civil Engineers, Inc. v. Magliocco (1979) 93 Cal.App.3d 190 (Nolte), they asserted that under these circumstances they were entitled to full satisfaction of judgment and asked the court to release their appellate undertaking, citing California Rules of Court, rule 3.1130. The Engstroms joined in the developers' motion.
The Hogans opposed the motions, admitting they had stopped paying the mortgage in mid-2012, but denying they had increased the encumbrances on the property prior to foreclosure. Their opposition mischaracterized the nature and amount of monetary recovery provided by the judgment (claiming the right to the entire purchase price, plus consequential damages, and all fees and costs incurred in the litigation); claimed the return condition had been invalidated and was no longer a condition of receiving damages; and asserted the developers were "in default" for having failed to pay the damages award within 30 days of the remittitur after Hogan II, even though the Hogans continued to occupy the property.
The Hogans also pointed to the purchaser's lien they had previously recorded, which is the subject of the separate lawsuit the Hogans filed in 2013 against their lenders (and possibly other litigation). In addition, they argued that they had tendered performance in 2012, and further that nothing prevented the developers from complying with their obligations under the judgment.
Although the Hogans' remaining arguments are difficult to understand, as best we can ascertain they asserted that the court had constructive possession of the property and the power to impose a constructive trust; that granting the motion would unfairly deprive the Hogans of "complete relief," including attorneys' fees and costs they demanded in their 2002 rescission offer and which the developer defendants purportedly agreed to pay when they accepted the offer; that the defendants should be estopped from asserting a right to full satisfaction; and that the court had a duty to protect the Hogans' interests over the defendants' interests.
One day before the hearing, the court issued a tentative ruling summarily denying defendants' motions for satisfaction of judgment and overruling all objections. At the hearing, the developers orally requested a "statement of decision" and immediately afterwards, they filed a written request. On June 23, 2015, the court issued its final, amended order (the June 23 order) simply denying the motion and declining to issue a statement of decision. The June 23 order is the first order challenged by the developers, and their first appeal (A146057) in this consolidated proceeding. F. The Hogans Move to Release the Realtors' Court Deposit
Initially, the realtor defendants also appealed from this order. Later, however, the Engstroms' court deposit was released to the Hogans. (See § II.B., post.) As we explain in Hogan, et al. v. Engstrom, et al. (A149571) [nonpub. opn.] (Hogan VI), filed today, the Engstroms ultimately decided to seek full satisfaction of judgment on different grounds—that they had paid all damages assessed against them in the judgment. The Engstroms' motion for full satisfaction of judgment was granted and the Hogans appealed. We affirm that order in Hogan VI.
In June 2015, the Hogans moved to release the Engstroms' damages payment, which the realtors had offered to the Hogans following the Hogan I opinion, and then, when the Hogans refused it, deposited those monies with the court in November 2009. After quibbling about the amount of interest to which they were entitled, the Hogans' motion asserted that the court deposit was unlawful for lack of any statutory or other support and demanded the immediate release of the funds.
The Engstroms opposed the motion, arguing that under Hogan II, the Hogans' failure to comply with the return condition precluded them from asserting any entitlement to money damages. The developers joined in the realtors' opposition.
One day before the scheduled hearing date, the court issued a tentative ruling. After briefly describing the proceedings and the judgment, the court observed: "Notwithstanding the course of these protracted legal maneuverings, the Hogans retained possession of the property through most of this litigation. Numerous appeals were taken, some still pending. However, the Court of Appeal, in its filed opinion dated April 18, 2012 [Hogan II], stated unequivocally that the payment of any consequential damages to the Hogans is conditioned on the return of the Gardenview property by the Hogans. Incredibly, this never occurred." (Italics added.)
The tentative ruling continued, somewhat cryptically, that the court was seeking to fulfill its "obligation to determine whether the rescission . . . was effectual," or, if not, whether it should provide "alternate relief"; then, it directed the parties to "provide evidence . . . supporting the current status of ownership and also, addressing the issue of responsibility for payment of the mortgage and resulting foreclosure," and permitted supplemental briefing. Finally, it ruled that there "shall be no further oral argument with regard to the supplemental filings ordered herein."
No party contested the tentative ruling. As instructed, the parties submitted supplemental evidence and briefs.
On August 25, 2015, the court issued its order (the August 25 order and the subject of the developers' second appeal) granting the Hogans' motion in part, ordering release of realtors' court deposit and denying the Hogans any additional compensation for interest or otherwise. The trial court again acknowledged that " 'the payment of any consequential damages to the Hogans is conditioned on the return of the . . . property to the Developers,' " quoting Hogan II. By contrast, it observed, "nothing in the judgment indicates that assumption of the mortgage is conditioned upon the return of the Property." It concluded that performance of the return condition "is now moot given the foreclosure sale of the property."
The trial court then considered who should bear the loss caused by the foreclosure. Reasoning that by virtue of the rescission in 2004, the developers were the owners of the property and therefore the mortgagees but "refused and failed to" pay the mortgage, the court blamed the developers for the foreclosure. It also found that the developers "accepted the rescission and ownership of the Property, but then changed [their] purpose, acting as if [they] did not own the Property and generally consistently acting counter to the rescission despite consistently arguing that it took place." Characterizing the parties' "stalemate" as "false," the court concluded that the developers had the ability to force the Hogans out "by seeking unlawful detainer" or similar relief, but did not. It therefore concluded that the developers should bear the loss.
Specifically, it found that "[the developers] ha[ve] owned the Property since the rescission order of May 2004 and, since at least the judgment, had the only interest or obligation to pay the mortgage and is at fault for failing to do so, ultimately resulting in the foreclosure."
The developers also appeal the August 25 order [A146582]. G. Defendants Move for a New Trial , to Vacate the August 25 Order , and the Hogans Move to Enforce Liability on the Developers' Appeal Bond
As with the appeal of the motion for full satisfaction (A146057), the realtors initially appealed this order but subsequently requested that we dismiss the appeal (in response to the Hogans' demand related to Hogan VI, supra), which we did on April 7, 2016. (See fn. 12, ante.)
The developers then moved for a new trial or, in the alternative, to vacate the August 25 order and enter a different order. The developers challenged the validity of the August 25 order on numerous grounds, procedural and substantive.
The Hogans opposed and filed their own motion to enforce liability on the developers' existing appeal bond, arguing they had performed their judgment obligations while the developers had defaulted. The court set the Hogans' motion to be heard on November 2, 2015, and continued the developers' motions to the same date.
On November 16, 2015, the court filed an order (the November 16 order) denying the developers' motions, affirming its view that the developers, as owners, were obligated to pay the mortgage and in failing to do so caused the foreclosure. The court also declined to rule on the Hogans' motion to enforce liability on the developers' appeal bond, ruling the matter to be "stayed during the pendency of the appeal." The developers also appeal this order (A147273). H. Procedural History on Appeal
We granted the developers' unopposed motion to consolidate all three appeals. The Hogans moved to dismiss appeal A146582 (concerning the August 25 order) and "portions" of appeal A147273 (the November 16 order denying developers' motion for a new trial). We ordered the parties to address the motion to dismiss in their responding and reply briefs on appeal.
II. DISCUSSION
A. Motions for Satisfaction of Judgment and for Release of Bond [A146057]
The trial court summarily ruled in its June 23 order that the developers were not entitled to satisfaction of judgment or release of their appellate bond. The developers challenge this order as inconsistent with the modified amended judgment, as construed in our prior opinions, and erroneous as a matter of law. As we explain, we have already held that under the modified amended judgment, the return condition is a condition precedent to the payment of any damages. Because the foreclosure made it impossible to satisfy the return condition, the developers' obligation to pay the Hogans can never mature. As such, the judgment was "satisfied in fact" as a matter of law, and it was an abuse of discretion to deny the motion.
We start with the terms of the modified amended judgment, which we construe independently. The judgment expressly provides that the Hogans are entitled to their consequential damages "at the time that [they] return the real property . . . to Developer Defendants." (Modified amended judgment, ¶ 2, italics added.) In Hogan II, we held—repeatedly—that no obligation to pay damages arises until the return condition is satisfied: "[A]lthough the modified judgment allows the Hogans to recover consequential damages relating to the rescission, those monies are not due unless and until the Hogans return the . . . property to the Developers." (Hogan II, supra, at p. 26, italics added.) We also held that the Hogans cannot enforce defendants' appellate undertakings until they have complied with the return condition. (Id. at pp. 29-30.) Similarly, we concluded that there is no money judgment, for purposes of interest, until the return condition is satisfied. (Id. at pp. 13, 25-26.)
The construction and interpretation of the judgment is determined according to the same rules governing the interpretation of writings, generally. (In re Insurance Installment Fee Cases (2012) 211 Cal.App.4th 1395, 1429-1430, citing authorities; People v. Landon White Bail Bonds (1991) 234 Cal.App.3d 66, 76.) If possible, we attempt to discern the intention of the parties from the writing, alone. (Tribeca Companies, LLC v. First American Title Insurance Co. (2015) 239 Cal.App.4th 1088, 1111.) Where there is no need to consider conflicting extrinsic evidence regarding the proper interpretation, the issue is a question of law, and the correct standard of review is de novo. (Morey v. Vannucci (1998) 64 Cal.App.4th 904, 913.)
Accordingly, in 2015, when the developers sought satisfaction of judgment, it was the law of the case that defendants had no obligation to pay any damages until the Hogans returned the property to the developers. (See 9 Witkin, Cal. Procedure (5th ed., 2008) Appeal § 459, p. 515, and discussion in Hogan IV, supra, at p. 6, fn. 6.) Moreover, there was no dispute that property, which had been sold in foreclosure, could not be returned to the developers. As a result, the developers' obligation to pay consequential damages could never mature as a matter of law.
Under these circumstances, the judgment was satisfied in fact. (Nolte, supra, 93 Cal.App.3d at p. 194 [where undisputed facts showed that contingent liability could never mature, court reasonably concluded that judgment was satisfied in fact].) Indeed, if the trial court did not find the judgment to be "satisfied in fact," it "would otherwise remain unsatisfied indefinitely"—with predictable negative consequences for defendants. (Ibid.) Not only would the developers remain as judgment debtors on a technically unsatisfied judgment (which, as Nolte acknowledged, could impair their credit or discourage others from doing business with them), they would be obligated to maintain the appellate bond, and be subject to the Hogans' repeated attempts to collect on that bond. As such, denial of this motion plainly prejudiced the developers.
As demonstrated by the developers' Supplemental Request for Judicial Notice, filed March 20, 2017, and granted herein, the Hogans persist in attempting to collect the developers' appellate bond, although they have not returned the property.
We do not accept the developers' argument that the doctrine of impossibility (or commercial frustration) also warranted a finding that the judgment was satisfied. This doctrine only applies where the creditor prevents the debtor from performing under an agreement (here, arguably the modified amended judgment). (Civ. Code, § 1512 ["If the performance of an obligation be prevented by the creditor, the debtor is entitled to all the benefits which he would have obtained if it had been performed by both parties."].) Assuming, arguendo, that the judgment imposed on the developers any obligations independent of the return condition, the developers have not shown that the Hogans prevented them from paying damages or assuming the mortgage. Rather, they have shown that the Hogans prevented the developers' obligations from ever maturing.
We fail to see how a court could reasonably conclude otherwise. (See, e.g., Thayer v. Wells Fargo Bank, N.A. (2001) 92 Cal.App.4th 819, 833-839 [reversing trial court's decision as an abuse of discretion where the court did not provide any justification and none appeared in the record].) The Hogans' arguments in opposition all lack merit. They assert that the developers were obligated to pay the consequential damages first, and that by failing to do so within 30 days of the remittiturs in prior appeals, the developers had somehow "defaulted" on the judgment. This contention, however, directly contradicts the plain terms of the judgment and our holding in Hogan II that no obligation to pay damages arises unless and until the Hogans return the property. Absent such an obligation, there could be no "default." The same faulty premise underlies the Hogans' contention that the developers suffered no prejudice because they "defaulted on their own obligation[s]"—and their related assertion that, even after the foreclosure, an undertaking remained necessary to protect the Hogans' interest in the damages award.
The Hogans also argue that the "return condition" was invalidated by certain trial court orders, such as the order expunging the developers' lis pendens on the property. As we explained in related litigation, however, the Hogans' interpretation of these orders is patently unreasonable and incorrect as a matter of law. (See Hogan, et al. v. State Farm General Insurance Company (A145482, Mar. 29, 2018) [nonpub. opn.] at p. 13, fn. 13.)
Nor do we accept the Hogans' contention that the return condition is inconsistent with, and thus invalidated by, their later recordation of a purchasers' lien on the property under Civil Code section 3050. The Hogans cite to no authority supporting their assertion that such a lien (assuming it is validly asserted) would entitle the Hogans to remain in possession or confer any ownership interest on them, as opposed to establishing a mere priority to receive a share of proceeds from any foreclosure sale. (Haile v. Smith (1896) 113 Cal. 656, 664 [one cannot both retain possession and seek to recover on the lien].)
The Hogans also argue that the court was authorized to modify the judgment to provide "complete relief," which could even include revocation of the rescission due to changed circumstances. However, our prior opinions, which are law of the case, unequivocally rejected the possibility of revocation. (Hogan I, supra, at pp. 25-30 [rejecting various theories under which the Hogans sought to invalidate or revoke their rescission]; Hogan II, supra, at p. 25 [finding, at this stage of the litigation, the rescission to be "an established and undeniable fact"].)
As to the developers' request to release their appellate bond, the Hogans argue that the developers waived this issue on appeal. In fact, the developers' opening brief requests reversal of that order. Moreover, it is self-evident that if (as the developers argue) the judgment is satisfied as a matter of law, the Hogans have no money judgment to secure. In that case, the purpose for which the developers' appellate bond was given—to protect the Hogans' contingent interest in the payment of damages—had been "abandoned without any liability having been incurred." (Code Civ. Proc., § 995.430, subd. (b).) As such, we find that the trial court also abused its discretion in refusing to permit withdrawal of the bond. (Cal. Rules of Court, rule 3.1130(c).)
In sum, the judgment conditions payment of damages upon the return of the property. No party disputed the fact of the foreclosure or its effect on the Hogans' ability to return the property. Under these circumstances, the only reasonable conclusion was that the developers' obligation to pay damages could never mature and, as such, the judgment was satisfied in fact. The trial court therefore abused its discretion in denying developers' motions to deem the judgment satisfied and to withdraw the bond. (Nolte, supra, 93 Cal.App.3d at pp. 194-195 [utilizing abuse of discretion standard in reviewing order deeming judgment satisfied]; Karuk Tribe of Northern California v. California Regional Water Quality Control Bd., North Coast Region (2010) 183 Cal.App.4th 330, 363 [action that transgresses applicable principles of law is an abuse of discretion]; Lyons v. Chinese Hospital Assn. (2006) 136 Cal.App.4th 1331, 1349 [where record reasonably permitted only one conclusion, contrary finding warranted reversal under abuse of discretion standard].) B. The Hogans' Motion to Release Realtors' Court Deposit (A146582)
The developers also appeal the August 25 order which, blaming the developers for the foreclosure and the Hogans' inability to return the property, ordered the release of the Engstroms' court deposit to the Hogans.
1. The Hogans' Motion to Dismiss This Appeal Lacks Merit
The Hogans moved to dismiss this appeal on mootness and standing grounds. They argue that the deposit was released to, and spent by, the Hogans, such that no relief is available and even if restitution is available, the developers have no interest in the funds (which were deposited by the Engstroms). The matter is not moot, however, because the August 25 order threatens the developers' vital interests in related litigation. Specifically, the August 25 order finds the developers were obligated to pay the outstanding mortgage debt on the property as a result of the rescission and, in failing to do so, are to blame for the foreclosure. In related litigation, a trial court has cited this ruling as a potential basis for finding the developers liable to the Hogans' second lender for the deficiency balance following the foreclosure sale. As the order threatens the developers' vital interests in related litigation, the developers have standing to appeal it. (Hartke v. Abbott (1930) 106 Cal.App. 388, 394; City of Monterey v. Carrnshimba (2013) 215 Cal.App.4th 1068, 1079; Viejo Bancorp, Inc. v. Wood (1989) 217 Cal.App.3d 200, 205-206.) Thus, we deny the Hogans' motion to dismiss the developers' appeal of the August 25 order (A146582).
We grant the developers' Request for Judicial Notice, filed March 6, 2017, as to exhibits A, B, D, G, which are relevant to whether the order appealed from materially affects the rights and interests of developers in other litigation. We deny the request as to exhibits C, E, and F, which are not relevant.
We grant the Hogans' Request for Judicial Notice, filed April 10, 2017, as to exhibits 1 and 3, which are court records relevant to their motion to dismiss and substantive issues on appeal. As to exhibit 2, we may take judicial notice that a document was offered in trial exhibit in a related action, not the truth of matters stated therein. (Arce v. Kaiser Foundation Health Plan, Inc. (2010) 181 Cal.App.4th 471, 483.)
We grant the developers' Supplemental Request, filed March 20, 2017, requesting judicial notice of court records reflecting the Hogans' repeated attempts to enforce the developers' appellate bond in this case.
We deny the Hogans' Request for Judicial Notice, filed March 5, 2018. The Hogans state this request was prompted by a question asked at oral argument in February 2018 in Hogan, et al. v. State Farm General Insurance Company (A145482, Mar. 29, 2018), supra. However, the Hogans' request includes several pages of argument and constitutes an unauthorized supplemental brief. It also improperly seeks judicial notice of matters the Hogans admit are already in the record.
County of Alameda v. Carleson (1971) 5 Cal.3d 730, cited by the Hogans, demonstrates that the developers are indeed aggrieved. That case involved an order which could be used in subsequent proceedings to deprive the appellants of benefits to which they would otherwise be entitled. (Id. at p. 737.)
2. No Procedural Irregularities Affected the August 25 Order
Initially, the developers contend they were prejudiced by the trial court's issuance of a tentative ruling requesting additional evidence and briefing on issues related to the ownership status of the property and the cause of the foreclosure, but precluding further oral argument on these issues. We disagree. The tentative ruling gave adequate notice that the court, in determining the Hogans' motion to release the funds, intended to consider which party bore "responsibility for payment of the mortgage and resulting foreclosure" and that it was not inclined to entertain oral argument on this issue. Developer defendants were free to contest the tentative ruling and object to (or seek clarification of) the substantive portion of the tentative ruling and to demand a hearing. (Cal. Rules of Court, rule 3.1308.) They did not.
3. The August 25 Order Exceeded the Trial Court's Authority and Depends Upon a Fundamental Misconstruction of the Judgment
As noted, the August 25 order released the realtors' court deposit to the Hogans despite the Hogans' failure to return the property. The trial court reasoned that the developers were obligated to assume the outstanding mortgage debt as a result of the rescission but, failing to do so, caused the foreclosure. Although the trial court acknowledged the conditional nature of the judgment, it declared that the return condition was "moot[ed]" by the foreclosure and, in ordering the release of the deposit, effectively struck the return condition from the judgment.
The developers argue the trial court lacked authority to alter the substantive relief provided by the judgment. The nature of the trial court's authority to modify the judgment in this case, which combines the 2004 court order affirming the rescission and a jury verdict on legal issues (the amount of restitution and consequential damages to which the Hogans were entitled and the amount of offsets to which the developers were entitled), is unclear. However, even under the most lenient standard applicable to a trial court's equitable decree, the trial court may not alter the substantive rights conferred by the decree. (Lesser & Son v. Seymour (1950) 35 Cal.2d 494, 499-500; Orban Lumber Co. v. Fearrien (1966) 240 Cal.App.2d 853, 858 [authority to modify limited to procedural matters]; Barnes v. Chamberlain (1983) 147 Cal.App.3d 762, 769 [court of equity has "inherent power . . . to make its judgment effective by additional orders supervising the details of the decreed performance"]; see also Gold v. Gold Realty Co. (2003) 114 Cal.App.4th 791, 805 [after entry of judgment ordering sale of property, trial court may only enter orders "affecting the details of performance"].)
Other authority allows a trial court, upon motion, to exercise its discretion to amend any type of judgment. (See, e.g., Code Civ. Proc., § 187; Highland Springs Conference & Training Center v. City of Banning (2016) 244 Cal.App.4th 267, 280 [section 187 contemplates amendment of judgment by noticed motion].) Here, again, however, the court's discretion is limited to orders for the purpose of enforcing, not changing, the substantive rights established by the judgment. (See, e.g., Lofton v. Wells Fargo Home Mortgage (2014) 230 Cal.App.4th 1050, 1065 [affirming trial court's issuance of post-judgment injunction designed to ensure proper distribution of settlement funds in class action as proper exercise of "court's equitable authority to ensure the fair and orderly administration of justice and protect the integrity of its judgment in the class action"]; People v. Hyde (1975) 49 Cal.App.3d 97, 102 [trial court erroneously declined to hear motion to amend judgment to accurately reflect an undisputed fact so as to ensure that defendant's substantive right to credit for time served, a clearly established right, could be preserved]; Phillips, Spallas & Angstadt, LLP v. Fotouhi (2011) 197 Cal.App.4th 1132, 1142-1143 [section 187 intended to allow the court to "find[] a 'workable means' to enforce an established substantive right"].)
Moreover, the developers cite case law prohibiting a trial court from modifying a judgment to impliedly resolve issues that were not raised in the pleadings or pre-trial proceedings. (C.J.A. Corp. v. Trans-Action Financial Corp. (2001) 86 Cal.App.4th 664, 672-673 (C.J.A.).) In C.J.A., the plaintiff, who had elected to pursue judicial foreclosure through trial and judgment, sought to change the judgment to one for damages based upon changed circumstances after entry of judgment. (Id. at pp. 666-667.) The trial court agreed. (Id. at p. 668.) The Court of Appeal reversed, finding this prejudiced the defendant, who was not able to take discovery or defend trial on any of the issues raised by plaintiff after the entry of judgment, and held that the order was extrajudicial and invalid. (Ibid.)
The return condition was not a mere procedural device. It constituted substantive relief awarded to the developers. It required the Hogans to hand over real property worth hundreds of thousands of dollars, which value factored into the jury's weighing of the equities and its calculation of the Hogans' awards for restitution and compensatory damages, before the Hogans could obtain other relief (damages and relief from the mortgage obligation) under the judgment. In declaring the return condition "moot" and releasing the deposit without requiring the return of the property, the trial court effectively increased the damages assessed against the developers. Arguably, it also changed the nature of the action and judgment from rescission to legal damages (despite our prior holding that the Hogans' election of remedies was irrevocable), based upon post-judgment developments that were not the subject of discovery or trial. (C.J.A., supra, 86 Cal.App.4th at p. 668.) Thus, the August 25 order exceeded the court's authority.
The August 25 order also constitutes an abuse of discretion because it rests upon a clear error of law concerning the developers' duty to assume the mortgage liability. To review, the trial court justified its release of the deposit, despite the Hogans' noncompliance with the return condition, by concluding the Hogans were not at fault for the foreclosure; it found that the developers were to blame because they had been obligated to pay the mortgage since the 2004 rescission and failed to do so, and otherwise failed to "act" like the owners of the property. In reaching this result, the court assumed that "nothing in the judgment indicates that assumption of the mortgage is conditioned upon the return of the Property."
As we note above, the construction of a judgment is subject to the same rules and standard of review as any other writing; under the circumstances presented here, we independently construe the terms of the judgment. (See fn. 16, ante.)
This assumption is incorrect. The modified amended judgment plainly conditions assumption of the mortgage upon the return of the property to the developers. It requires the developers to "also remove as an obligation of the Hogans the remaining debt of $417,000 on the real property at the same time as payment of the consequential damages in exchange for the return of the real property . . . ." (Italics added.) If the mortgage obligation accrues at "the same time as" the damages obligation, and damages are not payable unless and until the Hogans comply with the return condition (as we held in Hogan II, supra, at pp. 12, 24-26, 29-30), the mortgage obligation is likewise "conditioned upon the return of the property." Accordingly, the finding that the developers, as owners, were obligated to assume the mortgage obligation contradicts, and rests upon an erroneous construction of, the judgment.
The order also concludes that the developers failed to engage in sufficient efforts to enforce the rescission, "accept[ing] the rescission and ownership of the Property, but then chang[ing] [their] purpose, acting as if [they] did not own the Property and generally consistently acting counter to the rescission despite consistently arguing that it took place." We are unaware of any provision of the judgment or any other legal authority imposing these affirmative obligations upon the developers. As to the trial court's suggestion that the developers "generally consistently act[ed] counter to the rescission," the record reveals that the developers repeatedly attempted to consummate the rescission judgment, which efforts the Hogans consistently rebuffed. (See §§ I, B. & D., ante.)
Because the court's entire decision rests upon an erroneous conclusion of law, the August 25 order constitutes an abuse of discretion. (See, e.g., Farmers Insurance Exchange v. Superior Court (2013) 218 Cal.App.4th 96, 106 ["a discretionary order based on . . . incorrect legal assumptions is not an exercise of informed discretion and is subject to reversal"]; Highland Springs Conference & Training Center v. City of Banning, supra, 244 Cal.App.4th at p. 280 [court's decision to modify judgment, pursuant to Code of Civil Procedure section 187, will not be disturbed upon appeal so long as "there is a legal basis for the decision"].) We therefore reverse and vacate the August 25 order. C. The Motion for New Trial and Related Matters Resolved November 16 (A147273)
While this holding might have entitled the Engstroms to restitution, the Engstroms withdrew their appeal of the August 25 order, electing instead to seek a full satisfaction of judgment from the Hogans.
In light of our reversal of the June 23 and August 25 orders, the issues decided in the November 16 order are moot. To the extent that the November 16 order affirmed the trial court's prior ruling that the developers were obligated to pay the mortgage and failed to do so, however, we reiterate that this conclusion rests upon an erroneous legal presumption and therefore constitutes an abuse of discretion. (Sole Energy Co. v. Petrominerals Corp. (2005) 128 Cal.App.4th 187, 194 [motion for new trial reviewed for abuse of discretion]; Philippine Export & Foreign Loan Guarantee Corp. v. Chuidian (1990) 218 Cal.App.3d 1058, 1076 [motion to vacate reviewed for abuse of discretion].) As to the Hogans' motion to enforce the developers' appellate bond, following this decision, there will be nothing left to enforce.
III. DISPOSITION
We reverse. On remand, the trial court shall vacate all three orders and enter a new order deeming the judgment fully satisfied as to the developers and releasing the developer defendants' appellate bond.
The developer defendants shall recover their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1).)
/s/_________
Miller, J. We concur: /s/_________
Richman, Acting P.J. /s/_________
Stewart, J.