Opinion
G053840
06-19-2018
GIGI E. RUEGSEGGER, Plaintiff and Appellant, v. MTGLQ INVESTORS, L.P., Defendant and Respondent.
Law Offices of David N. Lake and David N. Lake; Alan S. Yockelson for Plaintiff and Appellant. Wright, Finlay & Zak, Jonathan D. Fink and Bradford E. Klein for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2011-00442197) OPINION Appeal from an order of the Superior Court of Orange County, Deborah C. Servino, Judge. Affirmed. Law Offices of David N. Lake and David N. Lake; Alan S. Yockelson for Plaintiff and Appellant. Wright, Finlay & Zak, Jonathan D. Fink and Bradford E. Klein for Defendant and Respondent.
Gigi E. Ruegsegger appeals from an order dismissing its action against MTGLQ Investors (MTGLQ) on the operative fourth amended complaint. Ruegsegger argues the trial court erred by failing to enter judgment on MTGLQ's default on the first amended complaint. We disagree and affirm the order.
FACTS
The record on appeal does not include a reporter's transcript.
This is the third time this case is before us. We need not provide a detailed discussion of the substantive facts as they can be found in Ruegsegger v. CitiMortgage, Inc. (Feb. 16, 2017, G052454) [nonpub. opn.] (Ruegsegger I), and Ruegsegger v. Homeward Residential, Inc. (Sept. 19, 2017, G052879) [nonpub. opn.].
Suffice it to say, Ruegsegger received a notice of trustee's sale on the family home. On January 20, 2011, she filed a verified complaint against Mortgageit, Inc., CitiMortgage, Inc., CR Title Services, Inc., Mortgage Electronic Registration Systems, Inc. (MERS), Litton Loan Servicing (Litton), and American Home Mortgage Servicing, Inc. (American) alleging numerous causes of action. A week later, CitiMortgage executed an assignment of deed of trust in favor of MTGLQ, which was later recorded. (Ruegsegger I, supra, G052454.)
Following successful demurrers from other defendants, Ruegsegger filed a verified first amended complaint (FAC) against the same defendants except Litton but adding MTGLQ. The July 1, 2011, FAC alleged 14 causes of action, including the following causes of action against MTGLQ: unfair business practices (third); breach of the covenant of good faith and fair dealing (fourth); declaratory relief (fifth); set aside notice of default and notice of trustee sale (sixth); void or cancel assignment of deed of trust (seventh); quiet title (eighth); slander of title (ninth); and injunctive relief (thirteenth). The FAC was incorrectly served on MTGLQ Investments, LP rather than MTGLQ Investors, LP.
MTGLQ did not respond to the FAC. Ruegsegger filed a request for entry of default as to MTGLQ and served it on MTGLQ. The court entered MTGLQ's default. Ruegsegger did not request a prove-up hearing, and MTGLQ did not move to set aside the default.
The following month, Ruegsegger filed a verified second amended complaint (SAC) against the same defendants except Mortgageit. The SAC alleged seven causes of action, including the following against MTGLQ: unfair business practices (third); declaratory relief (fourth); set aside notice of default and notice of trustee sale (fifth); void or cancel assignment of deed of trust (sixth); and quiet title (seventh). Ruegsegger did not serve the SAC on MTGLQ.
A few months later, in January 2012, Ruegsegger filed a verified third amended complaint (TAC) against the same defendants. The TAC alleged seven causes of action, including the following against MTGLQ: unfair business practices (third); declaratory relief (fourth); set aside notice of default and notice of trustee sale (fifth); void or cancel assignment of deed of trust (sixth); and quiet title (seventh). Ruegsegger did not serve the SAC on MTGLQ.
Contrary to Gigi's claim otherwise, the TAC included seven causes of action, not six; the first page of the TAC is incorrect.
Nearly three years later, November 2014, Ruegsegger filed a fourth amended complaint (4AC) against the same defendants. The 4AC alleged three causes of action, including one against MTGLQ, unfair business practices (third). The 4AC does not include a quiet title cause of action. Ruegsegger did not serve the 4AC on MTGLQ.
In April 2015, the trial court granted American and MERS's motion for judgment on the pleadings and we affirmed the court's ruling. (Ruegsegger I, supra, G052454.) The California Supreme Court denied review. (Ruegsegger I, supra, G052454, review den. May 17, 2017, S240850.) A couple weeks later, the trial court granted CR Title Services' motion for summary judgment. Five months later, the trial court dismissed the action against CitiMortgage on Ruegsegger's request. MTGLQ was the only remaining defendant.
At some point, American changed its name to Homeward Residential Inc. (Ruegsegger I, supra, G052454.)
At a hearing on December 18, 2015, Ruegsegger requested the trial court set a default prove-up hearing, which the court granted. At the hearing a few days later, Ruegsegger offered evidence and testimony on the quiet title cause of action. The court took the matter under submission. Later the same day, the trial court issued an order to show cause (OSC). The court questioned whether the default prove-up hearing was proper because Ruegsegger failed to properly serve the FAC and MTGLQ was not in default. The court added that even if default was proper, the SAC superseded the FAC because each amended complaint had substantive changes that "'opened'" the default as to MTGLQ even though it did not respond to the FAC. The court concluded the 4AC was the operative pleading and because MTGLQ was not in default as to that complaint, the default prove-up hearing was improper.
The trial court issued an OSC as follows: "[T]his [c]ourt orders [Ruegsegger] to show cause why this matter should not be dismissed for delay in prosecution under Code of Civil Procedure sections 583.410 to 583.430, based upon [Ruegsegger's] (1) failure to serve the [4AC] upon . . . MTGLQ . . . [citation]; (2) failure to file a proof of service of summons and the [4AC on] . . . MTGLQ . . . [citation]; and/or (3) failure to request entry of default against . . . MTGLQ . . . after the [4AC] was filed [citation]. [Ruegsegger] is further ordered to show cause why the matter should not be dismissed because the action was not brought to trial within five years after the action was commenced against [MTGLQ] on January 20, 2011. [Citations.]" The court set the matter for hearing in February 2016.
All further statutory references are to the Code of Civil Procedure
Before the OSC hearing, Ruegsegger filed a declaration from David N. Lake, her attorney. Lake stated the FAC was properly served on MTGLQ Investors and the proof of service had been corrected. Lake added that SAC included no substantive changes from the FAC, and in fact the claims against MTGLQ "were narrowed and reduced."
On appeal, MTGLQ does not assert it was not in default because service of the FAC was improper.
A few days later, the trial court ruled as follows: "[The] [c]ourt finds the matter should be dismissed for delay in prosecution under . . . sections 583.410 to 583.430, based upon [Ruegsegger's] (1) failure to serve the [4AC] upon . . . MTGLQ . . . (Cal. Rules of Court, [r]ule 3.110); (2) failure to file a proof of service of summons and the [4AC] [on] . . . MTGLQ . . . (. . . § 583.210); and/or (3) failure to request entry of default against . . . MTGLQ . . . after the [4AC] was filed (Cal. Rules of Court, [r]ule[] 3.110)[.] [¶] The [c]ourt orders MTGLQ . . . be dismissed without prejudice on [the 4AC]."
DISCUSSION
Ruegsegger asserts the FAC is the operative complaint and argues the trial court erred by refusing to enter judgment on MTGLQ's default under the FAC's eighth cause of action for quiet title. We disagree.
"[T]he unambiguous language of section 764.010 precludes a traditional default prove-up in quiet title actions and imposes an absolute ban on a 'judgment by default' in such actions." (Nickell v. Matlock (2012) 206 Cal.App.4th 934, 947 (Nickell); Harbour Vista, LLC v. HSBC Mortgage Services Inc. (2011) 201 Cal.App.4th 1496, 1500.) "[N]otwithstanding a defendant's default in a quiet title action, the plaintiff is not automatically entitled to judgment in its favor but must prove its case in an evidentiary hearing with live witnesses and any other admissible evidence. [Citations.]" (Nickell, supra, 206 Cal.App.4th at p. 947.)
Here, entry of default against MTGLQ was taken on the FAC, but Ruegsegger did not request a default prove-up hearing on the quiet title cause of action to obtain a judgment. Instead, Ruegsegger filed the SAC.
Where, after the default of a defendant has been entered, the complaint is amended in matters of substance, the amendment "opens" the default. (Cole v. Roebling Construction Co. (1909) 156 Cal. 443, 446; Ford v. Superior Court (1973) 34 Cal.App.3d 338, 342 (Ford).) The original pleading, having been superseded by the amended pleading, drops out of the case and ceases to have any effect as a pleading or as a basis for a judgment. (Sheehy v. Roman Catholic Archbishop (1942) 49 Cal.App.2d 537, 540-541 (Sheehy).) As a result, any default entered on the superseded complaint is rendered a nullity. (Id. at p. 541.)
An amended complaint "opens" a default only when it makes substantive changes to the claims asserted. Substantive changes include but are not limited to adding a new cause of action based on a different legal theory (Ford, supra, 34 Cal.App.3d at p. 343), and increasing the damages sought (Leo v. Dunlap (1968) 260 Cal.App.2d 24, 26, 27). When a plaintiff amends a complaint, she concedes the challenged pleading was insufficient. (Sheehy, supra, 49 Cal.App.2d at pp. 540-541.)
The following three causes of action all include double the number of allegations in the SAC than in the FAC: unfair business practices, set aside notice of default and notice of trustee sale, and void or cancel assignment of deed of trust. In the FAC's unfair business practices claim, Ruegsegger asserted a violation of Business and Professions Code section 17200, and various Penal Code sections, and alleged MTGLQ and the other defendants engaged in fraudulent practices likely to deceive, including the execution and recordation of false and misleading documents. Ruegsegger did incorporate by reference the FAC's first 87 paragraphs. Those paragraphs alleged Lisa Markham and Kristin Lindner, employees of MERS, CITI, and CR, fraudulently executed and recorded documents. The SAC's unfair business practices cause of action goes further and alleges MTGLQ conspired with the other defendants to implement a robo-signing scheme and fabricate, record, and rely on fraudulent documents to obtain title to the Property.
Additionally, the SAC's set aside notice of default and notice of trustee sale and void or cancel assignment of deed of trust causes of action alleged MTGLQ obtained the note through collusion with the other defendants whereas those causes of action in the FAC did not.
These amendments represent changes in substance, not in form. The SAC alleged these same causes of action, but the SAC included additional allegations that were not in the FAC. The SAC revealed different theories regarding a conspiracy and collusion that were not reasonably disclosed in the FAC. Contrary to Ruegsegger's claim otherwise, the changes were not merely "restatements or elaborations of allegations." Based on our review of the new allegations, we cannot conclude the FAC reasonably disclosed to MTGLQ it had to defend against claims it conspired and colluded with the other defendants to implement a robo-signing scheme to obtain title to the Property.
Once an amended complaint is filed, the original complaint is superseded and "cease[s] to have any effect as a pleading or as a basis for a judgment." (Sheehy, supra, 49 Cal.App.2d at p. 541.) Ruegsegger's filing of the SAC superseded the FAC, and the FAC ceased to have any effect as a pleading or basis of judgment.
A trial court has discretion to dismiss an action for "delay in prosecution" (§ 583.410, subd. (a)), when "[s]ervice is not made within two years after the action is commenced against the defendant" (§ 583.420, subd. (a)(1)), or plaintiff did not bring the action to trial within "three years after the action is commenced against the defendant" (§ 583.420, subd. (a)(2)(A)). We review a trial court's discretionary dismissal for delay under the abuse of discretion standard. (Van Keulen v. Cathay Pacific Airways, Ltd. (2008) 162 Cal.App.4th 122, 131.)
Code Civil Procedure, §§ 583.210, 583.250 [trial court must dismiss if complaint not served within three years of filing]; California Rules of Court, rule 3.110 [complaint must be served within 60 days of filing or sanctions may be awarded].
As we explain above, the SAC contained substantive changes, which "opened" the default. Ruegsegger concedes she failed to serve the SAC, TAC, or 4AC on MTGLQ, and thus she failed to serve MTGLQ within two years of commencing the action. (§ 583.420, subd. (a)(1).) Additionally, she did not bring the action to trial within three years. (§ 583.420, subd. (a)(2)(A).) Ruegsegger filed the FAC naming MTGLQ on July 1, 2011, and she had to bring the action to trial against MTGLQ by July 1, 2014. She did not seek to calendar the default prove-up hearing until late 2015. Thus, the trial court did not abuse its discretion in dismissing MTGLQ from the 4AC.
DISPOSITION
The order is affirmed. Respondent is awarded its costs on appeal.
O'LEARY, P. J. WE CONCUR: FYBEL, J. IKOLA, J.