Opinion
B276066
04-12-2018
RAYMOND A. SCHEP, Plaintiff and Appellant, v. T.D. SERVICE COMPANY, Defendant and Respondent.
Raymond A. Schep, in pro. Per.; and Timothy L. McCandless for Plaintiff and Appellant. Lawrence J. Dreyfuss for Defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Los Angeles County Super. Ct. No. BC533555) APPEAL from a judgment of the Superior Court of Los Angeles County. Maureen Duffy-Lewis, Judge. Affirmed and remanded. Raymond A. Schep, in pro. Per.; and Timothy L. McCandless for Plaintiff and Appellant. Lawrence J. Dreyfuss for Defendant and Respondent.
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In Schep v. Capital One, N.A. (2017) 12 Cal.App.5th 1331, 1336 (Schep I), we held that a trustee's conduct in recording a notice of sale, a notice of default, and a trustee's deed upon sale—all in conjunction with a nonjudicial foreclosure under a deed of trust—were, at a minimum, conditionally privileged under Civil Code section 47, subdivision (c), such that the plaintiff could not state a claim for slander of title against the beneficiary who directed the trustee to record the trustee's deed upon sale. This appeal involves the same case and asks: Does that plaintiff state a claim for slander of title against the trustee? We already answered this question in Schep I, but plaintiff in his opening brief just ignores Schep I, and in his reply brief either tries to distinguish it on grounds Schep I itself explicitly addressed or argues that Schep I is wrong. Plaintiff's appeal is accordingly frivolous, and we impose sanctions against the plaintiff and his attorney for the amount of attorney's fees incurred by the trustee in defending against this appeal.
After issuing an initial opinion, we granted rehearing as to the issue of sanctions and denied rehearing as to the merits of the demurrer ruling. With the exception of this footnote and Section II of the Discussion, this opinion is identical to our initial opinion.
FACTS AND PROCEDURAL BACKGROUND
I. Facts
In 2007, Raymond A. Schep (plaintiff) borrowed $910,000, and secured that loan with a deed of trust on his home in Beverly Hills. By the fall of 2009, plaintiff had fallen behind on his mortgage payments. At the behest of the deed of trust's beneficiary, T.D. Service Company (T.D. Service) recorded a "Notice of Default and Election to Sell Under Deed of Trust" and a "Notice of Trustee's Sale." Capital One, N.A. (Capital One) bought the home at the foreclosure sale, and thereafter directed T.D. Service to record the Trustee's Deed Upon Sale.
In the period between T.D. Service's recording of the Notice of Default and the recording of the Notice of Trustee's Sale, Timothy Fitzgerald (Fitzgerald) of "US Banc Trustee TTE" recorded a "Substitution of Trustee and Full Reconveyance" (the "wild deed"). In this document, Fitzgerald inaccurately recited that he was the "Original Beneficiary" of the deed of trust and then purported to "substitute [himself] as the new Trustee" and "reconvey" the deed of trust back to plaintiff "without warranty," thereby purporting to absolve plaintiff of any obligation to repay the mortgage.
II. Procedural Background
Plaintiff sued both T.D. Service and Capital One for slander of title stemming from the recording of the Notice of Default, the Notice of Trustee's Sale, and the Trustee's Deed Upon Sale.
Plaintiff also named both defendants in a claim for breach of fiduciary duty, and T.D. Service in a claim for breach of contract. The trial court eventually sustained demurrers without leave to amend on these additional claims, and plaintiff has not appealed those rulings.
A. Litigation Against Capital One
Capital One demurred to plaintiff's second amended complaint. The trial court sustained the demurrer without leave to amend after concluding that (1) plaintiff never alleged he had title to the property, and (2) the notice of default and notice of sale documents are privileged under Civil Code section 47, subdivision (c). Plaintiff appealed, and we affirmed in Schep I.
B. Litigation Against T.D. Service
T.D. Service demurred to plaintiff's second amended complaint, and the trial court sustained the demurrer with leave to amend. After plaintiff filed a third amended complaint that added new allegations, T.D. Service demurred to this new complaint. The trial court sustained the demurrer without leave to amend after concluding that (1) plaintiff "does not have a title interest in the property" and thus "lacks standing to claim slander of title," and (2) "the alleged slander concerned the foreclosure notices and those notices were privileged."
Plaintiff then filed a timely notice of appeal.
DISCUSSION
Plaintiff argues that the trial court erred in sustaining T.D. Service's demurrer without leave to amend. T.D. Service responds that plaintiff should be sanctioned because his appeal is frivolous in light of Schep I.
I. Ruling on Demurrer
In evaluating whether a trial court properly sustained a demurrer without leave to amend, we must ask: (1) Was the demurrer properly sustained; and (2) was leave to amend properly denied? Because plaintiff only challenges the trial court's ruling as to the first question, we focus our analysis on that issue by independently "'examin[ing] the complaint'" (Lee v. Hanley (2015) 61 Cal.4th 1225, 1230) in order to "'"determine whether the complaint states facts sufficient to constitute a cause of action"'" (Centinela Freeman Emergency Medical Associates v. Health Net of California, Inc. (2016) 1 Cal.5th 994, 1010). "[W]e accept as true all '"'"material facts properly pleaded"'"' and consider any materials properly subject to judicial notice; we disregard any '"'"contentions, deductions or conclusions of fact or law"'"' set forth in the operative complaint." (McClain v. Sav-On Drugs (2017) 9 Cal.App.5th 684, 694, review granted June 14, 2017, S241471.)
A. Schep I
In Schep I, supra, 12 Cal.App.5th 1331, we evaluated whether plaintiff had validly stated a claim against Capital One for slander of title. We noted that a claim for slander of title only lies where there is "'(1) a publication, (2) which is without privilege or justification,' (3) which is false, and (4) which 'causes direct and immediate pecuniary loss.'" (Id. at p. 1336, quoting Manhattan Loft, LLC v. Mercury Liquors, Inc. (2009) 173 Cal.App.4th 1040, 1050-1051, italics added.) We held that plaintiff could not state a claim for slander of title because each of the three "publications" plaintiff relied upon—the Notice of Default, the Notice of Trustee's Sale, and the Trustee's Deed Upon Sale—was privileged. (Schep I, at pp. 1336-1337.) We ruled that Civil Code section 2924, subdivision (d)(1), expressly declared the recording of a notice of default and notice of sale to be privileged under Civil Code section 47. (Id. at p. 1336.) We further ruled that Civil Code section 2924, subdivision (d)(2) rendered the recording of a trustee's deed upon sale privileged under Civil Code section 47 because the act of recording that document was one of the "procedures set forth in this article." (Ibid., citing Civil Code, §§ 2924.12, subds. (a)(1), (b) & 2924.19, subds. (a)(1), (b).) After assuming that the applicable privilege was the narrower "qualified privilege" under Civil Code section 47, subdivision (c) (as opposed to the broader "absolute privilege" under Civil Code section 47, subdivision (b)), we lastly ruled that plaintiff had not alleged the requisite degree of "malice" necessary to overcome the qualified privilege. (Id. at pp. 1336- 1337.)
B. Analysis
Schep I dictates the outcome of this appeal. Although Schep I addressed the validity of plaintiff's slander of title claim against Capital One, its reasoning applies with greater force to T.D. Service because T.D. Service was the one who actually recorded all three documents, while Capital One merely directed T.D. Service to file the last of the three (the Trustee's Deed Upon Sale).
Plaintiff nowhere acknowledges the existence of Schep I in his opening brief, even though Schep I had been decided more than six weeks before that brief was filed and finally modified three weeks after the filing. When plaintiff finally addresses Schep I in his reply brief, he offers what boil down to five reasons why Schep I is either distinguishable or wrong.
First, he argues Schep I and its rationale apply only to deed of trust beneficiaries like Capital One rather than trustees like T.D. Service. He is incorrect. Schep I expressly holds that a "trustee's acts in recording a notice of default, a notice of sale, and a trustee's deed upon sale [are] privileged" (Schep I, supra, 12 Cal.App.5th at pp. 1333, 1335, italics added), and goes on to explain that this holding "applies with equal force to both the trustee who actually records the trustee's deed upon sale as well as the principal [here, the beneficiary] who directs that recording" (id. at p. 1336). In other words, plaintiff has it backwards: The rationale for applying the privilege to the trustee is even more compelling than it is for applying it to the beneficiary, as Schep I explicitly stated.
Second, plaintiff asserts that additional malice allegations in the third amended complaint against T.D. Service are distinguishable from the malice allegations in the second amended complaint at issue in Schep I. They are not. The third amended complaint alleges that T.D. Service acted "malicious[ly]" because the documents it recorded were "in derogation of the facts of the public record, the knowledge of which was possessed constructively by [T.D. Service]." As explained in Schep I, plaintiff's second amended complaint "allege[d] that Capital One and T.D. Service were deemed to be constructively aware of [plaintiff's] competing claim to title due to his recording of the wild deed." (Schep I, supra, 12 Cal.App.5th at p. 1337.) These allegations are substantively indistinguishable.
Third, plaintiff argues that we just got it wrong in Schep I in concluding that Capital One and T.D. Service did not act with malice. To begin, this challenge is itself improper because Schep I is now law of the case. (Leider v. Lewis (2017) 2 Cal.5th 1121, 1127; People v. Iraheta (2017) 14 Cal.App.5th 1228, 1242.) Plaintiff's arguments are in any event entirely without merit. He asserts that the document filed by Fitzgerald is not truly a "wild deed" and that it is Capital One's claim to the property that is a "wild deed." The document Fitzgerald filed purported to be on Fitzgerald's own behalf as the "Original Beneficiary" of the deed of trust. Because Fitzgerald's name appears nowhere on any prior document connected with the property, his document is a document "not in [the] chain of title" and hence, by definition, a "wild deed." (People v. Denman (2013) 218 Cal.App.4th 800, 806; Aguayo v. Amaro (2013) 213 Cal.App.4th 1102, 1107.) Conversely, Capital One acquired title after it purchased the property at the foreclosure sale and then directed T.D. Service to file the Trustee's Deed Upon Sale memorializing that transaction. Plaintiff's argument that Capital One had a "wild deed" because it did not have title prior to buying the property would mean that every purchaser at every foreclosure auction would have a "wild deed" and ostensibly invalid title; this argument is specious.
Fourth, plaintiff asserts that T.D. Service was not required to file a Trustee's Deed Upon Sale, such that its voluntary undertaking to do so cannot be privileged. We rejected this very same assertion in Schep I: "That [Civil Code section 2924] do[es] not expressly mandate that a trustee's deed upon sale be recorded is of no consequence because recording of that deed will occur as a practical matter in every case and, more to the point, the recording of that deed is one of the 'procedures set forth in th[e] article.'" (Schep I, supra, 12 Cal.App.5th at p. 1336.)
Lastly, plaintiff posits that the trial court did not expressly address whether the Trustee's Deed Upon Sale was privileged and thus "tacitly" ruled that it was not privileged. This position is unfounded. The trial court ruled that the "foreclosure notices" were "privileged," and the Trustee's Deed Upon Sale was the capstone of the foreclosure process and hence a "foreclosure notice." Moreover, Schep I holds that the Trustee's Deed Upon Sale is privileged, and, as noted above, is now law of the case.
For the first time during oral argument, plaintiff asked for a continuance to obtain further evidence in support of a new theory for relief. We hereby deny that request.
II. Sanctions On Appeal
Although this power should be used sparingly, an appellate court has the power to impose sanctions when an "appeal indisputably has no merit"—that is, "'when any reasonable attorney would agree that the appeal is totally and completely without merit.'" (Singh v. Lipworth (2014) 227 Cal.App.4th 813, 826 (Singh); In re Marriage of Flaherty (1982) 31 Cal.3d 637, 650.) An appeal "indisputably lacks merit" when it restates arguments based on identical facts and legal issues decided by the court in a prior appeal. (See Bucur v. Ahmad (2016) 244 Cal.App.4th 175, 194-195 [appeal based on same facts and issues in previous appeal was frivolous]; Personal Court Reporters, Inc. v. Rand (2012) 205 Cal.App.4th 182, 193 [same]; Pollock v. University of Southern California (2003) 112 Cal.App.4th 1416, 1432 [portions of appeal that raised same issues asserted by—and decided against—the same plaintiff in a prior appeal were frivolous].)
As a procedural matter, an appellate court may impose sanctions for the filing of a frivolous appeal only if: (1) either (a) a party seeks sanctions and attaches a declaration setting forth the amount of any monetary sanction sought, or (b) the court itself "give[s] notice in writing" that it is "considering imposing sanctions"; (2) the party against whom sanctions are sought is given the opportunity to file an opposition; and (3) that party is given the opportunity to appear for oral argument. (Cal. Rules of Court, rule 8.276; Committee to Save the Beverly Highlands Homes Assn. v. Beverly Highlands Homes Assn. (2001) 92 Cal.App.4th 1247, 1273, fn. 10.) This Court issued notice to plaintiff and his attorney on February 13, 2018; both parties were given the opportunity to file written responses (and both did—plaintiff filed a response to our notice, and plaintiff's attorney filed a response to our notice as well as a petition for rehearing that discussed the propriety of sanctions); and both parties appeared for oral argument on March 22, 2018. Plaintiff argues that the notice was "uncertain" because it (1) referred to the imposition of sanctions for filing a frivolous appeal "and/or" for filing an appeal "solely for the purpose of delay, and (2) did not expressly spell out why the appeal was frivolous. As to the first point, we discern no uncertainty, but in any event confine our analysis to whether the appeal was frivolous. As to the second point, our initial opinion expressly laid out the reasons why plaintiff's appeal was frivolous, and plaintiff understood those reasons because he responded to some of them in his written opposition to our notice regarding sanctions.
On the merits, plaintiff's appeal qualifies as being "'totally and completely without merit.'" (Singh, supra, Cal.App.4th at p. 826.) That is because Schep I squarely resolves the only question presented in this appeal. Rather than acknowledge this binding authority directly on point, plaintiff brought an appeal that at first ignored that authority, and later attempted to distinguish it (on grounds the authority expressly addressed) or to attack it (despite the authority being law of the case).
Plaintiff or his attorney raise what distill down to six arguments against the imposition of sanctions.
First, both plaintiff and his attorney assert that their appeal was not frivolous because Schep I was not yet "final"—and thus, under the law of the case doctrine, not yet controlling—when they filed their opening brief in this appeal. To be sure, "[t]he law of the case doctrine applies only if the prior decision became a final judgment" (Crossroads Investors, L.P. v. Federal National Mortgage Assn. (2017) 13 Cal.App.5th 757, 773), and a decision is "final" only after "the highest court" has concluded its review (Atchison, T. & S. F. R. Co. v. Railroad Com. of California (1930) 209 Cal. 460, 472). And it is undisputed that Schep I was not "final" until our Supreme Court denied the petition for review on October 11, 2017. But these principles do not render plaintiff's appeal any less frivolous. The fact that Schep I was not "final" when plaintiff filed his opening brief does not mean the decision did not exist at all, yet plaintiff chose not even to mention it. What is more, Schep I was final by the time plaintiff filed his reply brief on November 2, 2017, but rather than withdraw his arguments in acknowledgment of Schep I, plaintiff instead argued that Schep I was either wrongly decided or distinguishable on grounds squarely foreclosed in Schep I itself.
Second, plaintiff's attorney asserts that Schep I's express holding that a trustee's acts in recording various documents were privileged was still not law of the case because (1) that holding was dicta, and (2) that holding went beyond the issues presented by the parties in Schep I, and thus constituted coram non judice. Neither argument has merit. Although the specific question presented in Schep I was whether a deed of trust's beneficiary's act of directing a trustee to record certain documents was privileged under Civil Code section 47, Schep I resolved that question by holding that the beneficiary's acts were privileged because the trustee's acts were privileged. Because "'"the law of the case doctrine"'" applies to "rule[s] of law necessarily decided in an appellate decision" (Optional Capital, Inc. v. Akin Gump Strauss, Hauer & Feld LLP (2017) 18 Cal.App.5th 95, 108), that doctrine applies to Schep I's holding regarding the applicability of the privilege to trustees. For the same reasons, this issue was "involved" in addressing the question regarding beneficiaries presented in Schep I, and thus did not constitute coram non judice. (Baar v. Smith (1927) 201 Cal. 87, 99 [a judgment that "determines issues not tried or involved[] is coram non judice and void"]; Wallace v. Otis (1941) 47 Cal.App.2d 814, 815.)
Third, and relatedly, plaintiff's attorney asserts the law of the case doctrine cannot apply to Schep I's analysis of whether Civil Code section 47 applies to trustees because plaintiff never had the opportunity to brief that issue in Schep I. This assertion overlooks that plaintiff did, in fact, address this very issue in his opening brief in Schep I when he argued that Civil Code section 47 did not apply because "TDSC [T.D. Service, the trustee] and/or Capital One issued and recorded [the various documents] at a time when [the trustee] was aware of the legal consequences of the" prior deed purporting to effect a "reconveyance in favor of [plaintiff]."
Fourth, plaintiff and his attorney contend that this appeal is not frivolous because the arguments they raise in this appeal are distinct from the ones raised and rejected in Schep I. Plaintiff's attorney points to three arguments in particular that he claims are novel (and hence, in his view, not frivolous). He points to his argument that the wild deed severed T.D. Service's power to act as Capital One's agent in recording the foreclosure-related documents, but Schep I already held that the actual effect of the wild deed was irrelevant because the viability of plaintiff's slander of title claim turned on the existence (or nonexistence) of malice, which turned on whether T.D. Service and Capital One had a "reasonable basis to believe in the viability of the nonjudicial foreclosure proceedings." (Schep I, supra, 12 Cal.App.5th at p. 1338.) Plaintiff's attorney also points to his argument that the wild deed defeated the privilege and asserts that Schep I's discussion of malice did not resolve this issue because the privilege "has nothing to do" with malice, but Schep I applied the plain language of the privilege (which "'applies only to communications made without malice'") and, in so doing, concluded that "the existence of the wild deed did not defeat the reasonableness of Capital One's or T.D. Service's belief in the legitimacy of the nonjudicial foreclosure proceedings they were pursuing." (Id. at p. 1337.) Plaintiff's attorney at oral argument additionally argued that trustees generally have different duties than beneficiaries, but any differences as a general matter in no way detract from Schep I's specific holding that Capital One and T.D. Service were identically situated vis-à-vis plaintiff's claim for slander of title. For this reason and for the reasons set forth above, we conclude that Schep I squarely resolved every argument presented in this appeal.
Fifth, plaintiff's attorney asserts that this appeal should not be considered frivolous because he withdrew, in his reply brief, two of the five grounds he ultimately presented as to why Schep I did not apply. He asserts that he should be deemed to have withdrawn his argument that the trial court never expressly ruled that a Trustee's Deed Upon Sale was privileged because plaintiff did not repeat it in his reply brief. Plaintiff's attorney provides no support for his assertion that any argument not repeated in a reply brief has been abandoned; to the contrary, his assertion is in tension with basic tenets of appellate practice. And plaintiff's withdrawal of his argument that the privilege does not apply to filings that are not required does not make up for the fact that he continued to press four other baseless grounds to distinguish Schep I.
Lastly, plaintiff argues that he should not be sanctioned because he was merely following the advice of his attorney. Even if we assume the availability of an "advice of counsel" defense in this context, it does not aid plaintiff. That is because plaintiff appeared pro se at oral argument in this appeal and continued to advance the same arguments on the merits contained in the briefs prepared by his attorney. Moreover, plaintiff and his attorney appear to be engaged in a coordinated and collective effort even after plaintiff's attorney withdrew as counsel: Plaintiff's former attorney admits that he is still counseling plaintiff, and plaintiff is using his former attorney's staff to serve documents he is filing as a pro se litigant. In these circumstances, an order finding plaintiff and his attorney jointly responsible for paying T.D. Service's reasonable attorney's fees for defending this appeal is warranted. (See, e.g., Keitel v. Heubel (2002) 103 Cal.App.4th 324, 343 [attorney's fees incurred in responding to a frivolous appeal is an appropriate measure of sanctions under Code of Civil Procedure section 907]; Collins v. Department of Transportation (2003) 114 Cal.App.4th 859, 868-869 [same].)
DISPOSITION
The judgment is affirmed. In addition to the regular costs on appeal to which T.D. Service is entitled, plaintiff and his attorney are jointly ordered to pay T.D. Service's reasonable attorney's fees incurred on appeal—the amount of which is to be determined by the trial court on remand.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
/s/_________, J.
HOFFSTADT We concur: /s/_________, P. J.
LUI /s/_________, J.
ASHMANN-GERST