Opinion
B302438
01-21-2021
KIRKLAND WADE LAZARUS, et al., Plaintiffs and Appellants, v. U.S. BANK NATIONAL ASSOCIATION, INC., et al. Defendants and Respondents.
Alfred O. Anyia for Plaintiffs and Appellants. Locke Lord, Regina J. McClendon, Kinga L. Wright for Defendants and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for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(a). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115(a). (Los Angeles County Super. Ct. No. BC723252) APPEAL from an order of the Superior Court of Los Angeles County, Holly J. Fujie, Judge. Affirmed. Alfred O. Anyia for Plaintiffs and Appellants. Locke Lord, Regina J. McClendon, Kinga L. Wright for Defendants and Respondents.
INTRODUCTION
Appellants Kirkland Wade Lazarus and his wife, Beverly F. Lazarus, appeal a judgment dismissing their case after the trial court sustained without leave to amend a demurrer by respondent U.S. Bank National Association Inc. (U.S. Bank) to the Lazaruses' third amended complaint. The Lazaruses contend the trial court erred by (1) sustaining U.S. Bank's earlier demurrer to their causes of action for wrongful trustee's sale and quiet title because the bank's arguments could have been, but were not, raised in its initial demurrer; (2) sustaining U.S. Bank's demurrer to their remaining cause of action for negligence; and (3) refusing further leave to amend.
For the reasons discussed below, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
The Lazaruses obtained a mortgage on a North Hollywood home in 2005. The loan was later acquired by U.S. Bank. The Lazaruses defaulted on the loan in 2012 and from that point on they attempted to submit multiple loan modification applications. U.S. Bank recorded both a notice of default and a notice of a trustee's sale, and sold the home by July 2016.
In October 2016, U.S. Bank brought an unlawful detainer action against the Lazaruses ("UD Action"). The parties later entered into a stipulated judgment in favor of U.S. Bank. The Lazaruses did not appeal that stipulated judgment.
In September 2018, the Lazaruses filed their complaint in this case.
In their initial complaint, the Lazaruses alleged causes of action for negligence, wrongful trustee's sale, and quiet title. They claimed U.S. Bank violated the California Homeowners Bill of Rights ("HBOR") by proceeding with a foreclosure sale while loan modification applications were pending. The trial court overruled an initial demurrer by U.S. Bank to the wrongful trustee and quiet title causes of action, but sustained the demurrer to the negligence cause of action with leave to amend.
The Lazaruses then filed their First Amended Complaint. The trial court sustained the bank's demurrer without leave to amend the claims for wrongful trustee sale and quiet title. The trial court found those causes of action were barred under the doctrine of collateral estoppel, due to the stipulated judgment in the UD Action. The trial court sustained the demurrer to the negligence claim because the Lazaruses failed to articulate the breach element, but granted leave to amend.
The negligence claim was the only viable remaining cause of action in the Second Amended Complaint. The trial court sustained the bank's demurrer to the negligence claim, finding the Lazaruses failed to adequately plead the proximate cause element, but granted leave to amend.
The Lazaruses improperly pled the dismissed causes of action for wrongful foreclosure sale and quiet title in their Second and Third Amended Complaints.
The Lazaruses filed a Third Amended Complaint. In its ruling on the demurrer to that complaint, the trial court found the Lazaruses properly pled the duty and breach elements of their negligence claim. It held, however, that the Lazaruses failed to plead the element of proximate cause. The trial court sustained U.S. Bank's demurrer without leave to amend and entered judgment in favor of U.S. Bank. This appeal followed.
DISCUSSION
1. Legal Standard
On appeal from a judgment of dismissal following the sustaining of a demurrer without leave to amend, "[w]e first review the complaint de novo to determine whether the complaint alleges facts sufficient to state a cause of action under any legal theory or to determine whether the trial court erroneously sustained the demurrer as a matter of law. [Citation.]" (Aguilera v. Heiman (2009)174 Cal.App.4th 590, 595.) "[W]e assume the truth of all properly pleaded facts [and] accept as true all facts that may be implied or inferred from those expressly alleged. [Citations.]" (Curcini v. County of Alameda (2008) 164 Cal.App.4th 629, 633 fn. 3.) "[W]e give the complaint a reasonable interpretation, and read it in context. [Citation.]" (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081 (Schifando).)
Next, we turn to "'each cause of action to determine whether there are other grounds for sustaining the demurrer without leave to amend. "[I]t is an abuse of discretion to sustain a general demurrer to a complaint without leave to amend if there is a reasonable possibility that the defect in the complaint can be cured by amendment. [Citations.]"'" (Holcomb v. Wells Fargo Bank, N.A. (2007) 155 Cal.App.4th 490, 495, italics omitted.) "If we find that an amendment could cure the defect. . . we reverse[.]" (Schifando, supra, 31 Cal.4th at p. 1081.) 2. First and Second Causes of Action—Wrongful Trustee Sale and Quiet Title
a. Waiver
At the outset, we reject the Lazaruses' contention that U.S. Bank waived its collateral estoppel argument under Code of Civil Procedure section 430.41, subdivision (b) by failing to raise it in its initial demurrer. Because the Lazaruses still had a right to appeal the judgment in the UD Action at the time of the earlier demurrer, the judgment was not then final. (Bouley v. Long Beach Memorial Medical Center (2005) 127 Cal.App.4th 601, 608.) U.S. Bank, therefore, could not have raised collateral estoppel in its earlier demurrer. Thus, we find U.S. Bank did not waive its collateral estoppel argument.
All further statutory references are to the Code of Civil Procedure unless otherwise noted.
"A party demurring to a pleading that has been amended after a demurrer to an earlier version of the pleading was sustained shall not demur to any portion of the amended complaint . . . on grounds that could have been raised by demurrer to the earlier version of the complaint. . . ." (§ 430.41, subd. (b).)
b. Collateral Estoppel
Turning to the merits, the Lazaruses contend the trial court erroneously dismissed their claims for wrongful trustee sale and quiet title under the doctrine of issue preclusion ("collateral estoppel") because they claim to have an independent right to challenge the validity of the trustee sale under HBOR. Relying on the judgment in the UD Action, U.S. Bank argues these claims are barred under the doctrine of collateral estoppel. We agree with U.S. Bank.
"The aspect of res judicata known as issue preclusion or collateral estoppel bars a party from relitigating any issues necessarily included in a prior, final judgment. [Citation.]" (Malkoskie v. Option One Mortgage Corp. (2010) 188 Cal.App.4th 968, 973, fn. 4, italics omitted (Malkoskie).) "Collateral estoppel is the more accurate term to use on these facts and we use it accordingly." (Ibid.)
The doctrine of collateral estoppel applies when " "(1) [an] issue raised in the present action is identical to [an] issue litigated in a prior proceeding; (2) the prior proceeding resulted in a final judgment on the merits; and (3) the party against whom the doctrine is being asserted was a party . . . to the prior proceeding. [Citations.]"' [Citation.]" (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 797 (Boeken).) The party who asserts the doctrine "bears the burden of proving" the requirements. (Hong Sang Market, Inc. v. Peng (2018) 20 Cal.App.5th 474, 489 (Hong).)
"Because the scope of an unlawful detainer proceeding is limited, the preclusive effect of an unlawful detainer judgment is likewise limited." (Hong, supra, 20 Cal.App.5th at p. 491.) When an unlawful detainer defendant claims the foreclosure sale was invalid as an affirmative defense, however, the validity of the sale becomes an issue conclusively resolved in the unlawful detainer proceeding. (Malkoskie, supra, 188 Cal.App.4th at p. 974.) "'A stipulated judgment normally concludes or determines all matters put into issue by the pleadings, unless the parties agree to restrict its scope. . . .' [Citation.]" (Ibid, italics omitted.)
Here, final judgment on the merits was entered in the UD Action against the Lazaruses and in favor of U.S. Bank. As discussed below, their causes of action for wrongful trustee's sale and quiet title in this case were premised on the alleged invalidity of the foreclosure sale. But the validity of the foreclosure sale was already decided in the UD Action because the Lazaruses had raised "invalid foreclosure" as an affirmative defense in that action and had not carved the issue out of the stipulated judgment. (Malkoskie, supra, 188 Cal.App.4th at p. 974.) The Lazaruses are precluded from relitigating the issue. The trial court, therefore, properly sustained U.S. Bank's demurrers to those causes of action. We discuss each cause of action in turn.
The Lazaruses allege the sale was invalid because U.S. Bank failed to identify a single point of contact as required by HBOR, claimed not to receive their loan modification applications even after allegedly confirming receipt, and failed to make a decision on the applications. They also allege U.S. Bank erroneously recorded a notice of default and a notice of sale, scheduled and conducted the foreclosure sale, and refused to withdraw foreclosure actions on the home all while their loan modification was pending.
c. Wrongful Trustee Sale
"The elements of a wrongful foreclosure cause of action are: '"(1) the trustee or mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property . . . ; (2) the party attacking the sale . . . was prejudiced or harmed; and (3). . . the trustor or mortgagor tendered the amount of the secured indebtedness or was excused from tendering."' [Citation.]" (Sciarratta v. U.S. Bank Nat'l Assn. (2016) 247 Cal.App.4th 552, 561-562.)
The Lazaruses challenged the validity of the sale in the UD Action when they raised the issue as an affirmative defense in their answer. The issue of valid sale was adjudicated in the UD Action, a final judgment was entered in that case, and U.S. Bank was a party. The Lazaruses are therefore collaterally estopped from relitigating the issue in this case via a cause of action for wrongful foreclosure sale. (Malkoskie, supra, 188 Cal.App.4th at p. 974.)
In support of the contention that they have an independent right to challenge the foreclosure sale, the Lazaruses cite Orcilla v. Big Sur, Inc. (2016) 244 Cal.App.4th 982 (Orcilla). Orcilla is inapposite. There, the bank was not the party that obtained a judgment against the plaintiffs in the underlying unlawful detainer action. (Id. at p. 1010.) Because the bank was not a party to the unlawful detainer action, it had no standing to assert collateral estoppel. (Id. at p. 1010-1011; see also Boeken, supra, 48 Cal.4th at p. 797.) Not so in this case.
d. Quiet Title
A complaint for quiet title shall include: "(a) A description of the property . . . . [¶] (b) The title of the plaintiff as to which a determination . . . is sought and the basis of the title. . . . [¶] (c) The adverse claims to the title of the plaintiff against which a determination is sought. [¶] (d) The date as of which the determination is sought. . . . [¶] (e) A prayer for the determination of the title of the plaintiff . . . ." (§ 761.020)
In the underlying UD Action, "the sole basis upon which [U.S. Bank] asserted its right to possession of the property was its 'duly perfected' legal title obtained in the nonjudicial foreclosure sale, the validity of [U.S. Bank]'s title [,therefore,] had to be resolved[.]" (Malkoskie, supra, 188 Cal.App.4th at pp. 974, italics omitted.) "'Under section 1161a, . . . a purchaser who has acquired the title at such trustee's sale must prove that the property was sold in accordance with section 2924 of the Civil Code under a power of sale and that title under the sale has been duly perfected. Under such unlawful detainer statutes title to the extent required by section 1161a not only may but must be tried. . . .' (Bliss v. Security-First Nat. Bank (1947) 81 Cal.App.2d 50, 58-59 . . . [stipulated judgment arising from unlawful detainer action brought under § 1161a held to bar subsequent claims for quiet title. . . ].)" (Malkoskie, supra, 188 Cal.App.4th at pp. 974-975, italics omitted.)
Additionally, in the UD Action, the Lazaruses "raised [an] affirmative defense[ ] contending the foreclosure proceedings . . . were invalid . . . . The conduct of the sale and the validity of the resulting transfer of title to [U.S. Bank] were therefore directly in issue in the [UD Action]. Because the complaint was brought under section 1161a, it was proper for limited issues pertaining to the validity of title obtained by [U.S. Bank] in the sale to be raised and conclusively resolved. [Citations.]" (Malkoskie, supra, 188 Cal.App.4th at p. 974.)
As described above, a stipulated judgment was entered in favor of U.S. Bank and against the Lazaruses. The issue of validity of title of the North Hollywood home was resolved and duly perfected in the UD Action. Because the judgment in the UD Action resolved the issue of valid title, the issue cannot be relitigated now. (Malkoskie, supra, 188 Cal.App.4th at p. 974- 976.) We therefore conclude the Lazaruses' cause of action for quiet title is barred under the doctrine of collateral estoppel. 3. Third Cause of Action—Negligence
The Lazaruses cite Evans v. Superior Court (1977) 67 Cal.App.3d 162 (Evans) to support their contention that they have a right, despite the UD Action, to challenge title. In Evans, the court found title is not typically an issue addressed in an unlawful detainer proceeding; however, the issue is "raised by real parties in their answers[.]" (Id. at p. 170.) As discussed above, the Lazaruses alleged the "eviction was invalid due to invalid foreclosure" in their answer to the UD Action. The issue of title was, therefore, raised by the Lazaruses.
The elements of negligence are: (1) duty; (2) breach of the duty; (3) proximate cause; and (4) damages. (Vasquez v. Residential Investments, Inc. (2004) 118 Cal.App.4th 269, 279.) When a party admits they defaulted on a loan, and a foreclosure sale results, the trigger for the injury is the default on the loan. (Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 523 (Jenkins) disapproved of on other grounds by Yvanova v. New Century Mortgage Corp. (2016) 62 Cal. 4th 919, 939.) A party cannot later assert the foreclosure sale, i.e., the injury, was caused by defendants' wrongful actions. (Jenkins, supra, 216 Cal.App.4th at p., 523.)
The Lazaruses contend their home was foreclosed on as a direct and proximate result of the negligence of U.S. Bank. The Lazaruses, however, defaulted on their loan in 2012. They concede the allegedly wrongful acts upon which they base their claim occurred after the default. The North Hollywood property was, therefore, subject to foreclosure as a result of the Lazaruses' default, not U.S. Bank's alleged violations of HBOR. The Lazaruses cannot claim the foreclosure was caused by U.S. Bank's alleged wrongful actions. (Jenkins, supra, 216 Cal.App.4th at p. 523.) Because the Lazaruses failed to plead the element of proximate cause, they failed to state a cause of action for negligence.
The Lazaruses cite Majd v. Bank of America, N.A. (2015) 243 Cal.App.4th 1293 (Majd) for the contention that harm arose out of U.S. Bank's failure to complete the modification in good faith. Majd is inapplicable. There, the court found plaintiff had stated a cause of action for wrongful foreclosure, not negligence. (Id. at pp. 1297, 1300.) But in this case, as noted above, the Lazaruses' claim of wrongful foreclosure is barred by collateral estoppel.
4. Leave To Amend
"We determine whether the plaintiff[s] [have] shown 'in what manner [they] can amend [the] complaint and how that amendment will change the legal effect of [the] pleading.' . . . '[L]eave to amend should not be granted where . . . amendment would be futile.' [Citation.]" (Long v. Century Indemnity Co. (2008) 163 Cal.App.4th 1460, 1467-1468.)
The Lazaruses have had multiple opportunities to state a cause of action for negligence. They failed below, and on appeal, to show how the complaint can be amended to state a cause of action. We therefore conclude the trial court did not abuse its discretion in denying the Lazaruses leave to amend.
DISPOSITION
The judgment is affirmed. U.S. Bank is awarded its costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS CURREY, J. We concur: MANELLA, P.J. WILLHITE, J.