Opinion
D045303
12-11-2006
FRANK WHITTY et al., Plaintiffs and Appellants, v. FIRST NATIONWIDE MORTGAGE CORPORATION, Defendant and Respondent.
Frank and Tazu Whitty sued First Nationwide Mortgage Corporation (First Nationwide), alleging numerous causes of action arising from the nonjudicial foreclosure of the Whittys property. At trial, the Whittys asserted two claims: wrongful foreclosure and conversion. On a special verdict, the jury found the Whittys did not prove either cause of action. The court subsequently denied the Whittys equitable claim seeking a portion of the funds received from the foreclosure sale. The court thus entered judgment in First Nationwides favor.
The Whittys appeal from the judgment and from the courts order denying their motion for judgment notwithstanding the verdict (JNOV). As to the judgment, we conclude the appeal is untimely. As to the order denying the JNOV motion, we determine the appeal is timely but the Whittys failed to establish reversible error. Accordingly, we affirm.
FACTUAL AND PROCEDURAL SUMMARY
Under well-settled appellate rules, we summarize the relevant facts in the light most favorable to First Nationwide, the prevailing party.
Events Leading to Foreclosure Sale
In 1989, the Whittys purchased a home in Poway for $285,000 cash. The Whittys soon began to remodel the property. During the remodel, the Whittys borrowed $385,000 from Beverly Hills Securities Company and, in April 1992, the Whittys executed a promissory note with a variable interest rate (the Note). The Note was secured by a first deed of trust encumbering the property. First Nationwide is the successor mortgage loan servicer of the Note and deed of trust.
Within one year, the Whittys began to miss their required monthly payments on the Note. The Whittys frequently made partial payments and/or paid with checks that were returned for insufficient funds. In May 1994, the lender filed a notice of default and election to sell under the deed of trust, stating the Whittys had failed to pay their monthly payments and that they owed $12,922.51.
The next month, in June 1994, the Whittys filed for bankruptcy to prevent a foreclosure because they could not afford to pay the default amount. Generally, a bankruptcy filing automatically stays any foreclosure sale.
Several months later, the Whittys dismissed the bankruptcy action, and First Nationwides predecessor recorded a second notice of trustees sale, scheduling the nonjudicial foreclosure sale for October 1995. Mr. Whitty then filed another bankruptcy petition to prevent the foreclosure sale. After Mr. Whitty dismissed that bankruptcy, First Nationwide rescheduled the foreclosure sale for August 1996. The Whittys then filed a new bankruptcy petition.
In December 1997, the bankruptcy court entered an order requiring the Whittys to make the regular mortgage payments to First Nationwide. Under this order, if the Whittys missed a payment, First Nationwide was entitled to file a declaration to that effect, and the Whittys would then have 10 days to pay this amount. If the Whittys did not pay the amount owed, First Nationwide could seek an order to obtain relief from the automatic stay.
In February 1998, First Nationwide filed a Proof of Claim in bankruptcy court, stating the total amount of the secured loan was $478,792.66 (including the outstanding loan balance, interest, impound funds, and recoverable attorney fees), and the amount owed on the loan as of September 1997 (the reinstatement figure) was $106,744.60. First Nationwide submitted an attachment supporting the accuracy of the claimed amounts.
In May 1998, Mr. Whitty filed an objection to this claim, stating the reinstatement amount was "not properly calculated . . . ." In support, Mr. Whitty filed his own declaration claiming the amount owed on the Note was $47,602.33.
In July 1998, the bankruptcy court issued an order stating that because the lender had not submitted an opposition to Mr. Whittys declaration, the lender "is allowed as a secured claim in the amount of $47,602.33." We shall refer to this order as the "July 1998 arrearages order."
Two months later, in September 1998, the Whittys attempted to obtain a loan to pay off the Note. Michael Zau, an associate manager of United PanAm Mortgage, notified First Nationwide that his company had "prequalified" the Whittys for a loan that would net the Whittys $420,000. Zau said he recognized the payoff amount was $473,928.55 (which reflected First Nationwides claimed arrearages amount), but asked for an 89 percent settlement of this amount. First Nationwide rejected this payoff offer, and enclosed a payoff demand showing the principal outstanding balance on the loan was $474,458.07.
During the next 19 months, First Nationwide filed several declarations in the bankruptcy court stating that the Whittys had failed to comply with the December 1997 order to maintain regular monthly postbankruptcy petition payments. In May 2000, First Nationwide filed an ex parte motion for relief from the bankruptcy stay based on the Whittys failure to pay their postbankruptcy mortgage payments. First Nationwide gave the Whittys notice of this motion, but the Whittys did not oppose the request. On May 26, 2000, the bankruptcy court granted First Nationwide permission to proceed with the foreclosure of the Whittys property. This order stated in relevant part: "the Automatic Stay . . . is immediately vacated and extinguished for all purposes . . . and [First Nationwide] . . . may hereafter proceed with foreclosure of and hold a Trustees Sale of the subject Property, . . . and thereafter commence any action necessary to obtain complete possession of the subject Property."
The Whittys then filed an "emergency" motion to set aside the order, claiming they did not have notice of First Nationwides request for relief from the stay. The hearing on the motion was held on June 20, 2000. During a break at the hearing, Mr. Whitty and his counsel asked First Nationwides counsel (Edward Schloss) for "a couple more months" to attempt to refinance, and, in connection with this request, Mr. Whitty stated that he was willing to engage in settlement discussions regarding the disputed prebankruptcy arrearages amount owed on the Note. Schloss accepted this "global" settlement proposal and agreed to postpone the foreclosure sale for several months, on the conditions that: (1) Mr. Whitty would agree to a procedure to permit the court to reconsider the arrearages amount; (2) the order granting First Nationwide relief from the bankruptcy stay would remain effective; and (3) the Whittys would maintain their required postbankruptcy mortgage payments. Mr. Whitty agreed with these conditions.
The parties thereafter signed a written stipulation reflecting this agreement. The stipulation, entered by the court on November 15, 2000, provides in relevant part:
"It is hereby ordered . . . that although [First Nationwide] obtained relief from [the automatic bankruptcy] stay through [a] Court Order entered May 26, 2000, [First Nationwide] shall not conduct its foreclosure sale until January 21, 2001, provided . . . the Debtors tender . . . [specified mortgage payments to First Nationwide]. [¶] . . . [¶] It is further ordered . . . that in the event the Debtors fail to comply with any of the above-referenced payments, then [First Nationwide] shall immediately hold its foreclosure sale without further order or proceeding being necessary. [¶] It is further ordered. . . that in the event the terms as set forth hereinabove are complied with, Debtors may obtain [certain specified additional postponements of the foreclosure sale]. [¶] . . . [¶] It is further ordered . . . that on or before October 30, 2000, First Nationwide . . . through its counsel of record, . . . shall file a motion to reconsider the [July 1998 arrearages order]. The amount of that claim shall be adjudicated to determine the total pre-petition amount to be reflected in First Nationwides payoff demand for its first deed of trust loan to the Debtors." (Italics added, capitalization omitted.)
For reasons not clear on the record, the stipulation, entered on November 15, 2000, provides First Nationwide would file its motion to reconsider "on or before October 30, 2000." (Italics added.)
On November 20, First Nationwide served the Whittys and the bankruptcy trustee with a notice of motion requesting the court to reconsider its July 1998 arrearages order. The notice stated First Nationwides reconsideration motion would be heard on December 12, 2000.
Under bankruptcy court rules, there is no specific deadline for requesting reconsideration of an order before a final bankruptcy discharge.
Shortly before the December 12, 2000 hearing on First Nationwides reconsideration motion, the parties orally agreed to a process to determine the prebankruptcy petition arrearages amount owed by the Whittys. The parties agreed: (1) to meet and attempt to reach an agreement on the arrearages amount based on relevant accounting paperwork; (2) if the parties could not reach an agreement, either party may request arbitration; and (3) no foreclosure sale would be conducted until 90 days after the date of the award by the arbitrator.
Four months later, on April 7, 2001, Mr. Whitty (and his counsel) and Nationwides counsel (Schloss) met to discuss the arrearages. After lengthy discussions, Mr. Whitty agreed to immediately provide proof of five mortgage payments, and Schloss was to obtain certain tax and insurance refund information. At this meeting, Schloss made clear that First Nationwide would be proceeding with the foreclosure but would delay the foreclosure sale for three months. If the parties complied with their obligations, the parties expected that the issue of the arrearages amount would settle close to the Whittys claimed amount.
However, 10 days later, on April 17, 2001, the Whittys dismissed the bankruptcy action without providing First Nationwide proof of the disputed payments. Neither party requested arbitration. The Whittys thereafter made no additional monthly mortgage payments on the Note for the next 14 months through the time of the foreclosure sale.
On June 15, 2001, First Nationwide sent a letter to the Whittys stating that the Note had been referred for foreclosure proceedings. Four days later, on June 19, First Nationwide filed a notice of default on the Note, stating that the past due amount was $ 114,447 and that this amount would increase as each payment became due. In response, the Whittys again filed for bankruptcy.
Shortly thereafter, in January 2002, the Whittys dismissed the bankruptcy. But after the foreclosure sale was rescheduled in March 2002, Mr. Whitty again filed for bankruptcy. During the next several months, the Whittys attempted to refinance the Note. They were assisted by an escrow officer (Jacqueline Benson) and a loan officer (Maria Salas). Although First Nationwide initially refused to provide these individuals with a payoff amount (for various reasons including that the matter was "in heavy litigation" and in bankruptcy), on April 19, 2002, First Nationwide provided a written payoff amount of $508,827.89, which was valid for 10 days; funds received after that time would require an additional per diem interest payment. The Whittys did not assert any claim at the time that this amount was incorrect.
Ultimately, the Whittys were not successful in obtaining the new loan. In an effort to nonetheless retain ownership of their house (despite that they had not made a mortgage payment for the past 14 months), in early May 2002 the Whittys again asked First Nationwide for additional time to reinstate the loan or pay off the loan in full. Mr. Whitty stated that a previous loan arrangement and fallen through, and asked for more time to "talk[ ] with another investor . . . ."
In response, First Nationwides counsel (Schloss) agreed to a brief postponement on the condition that the Whittys stipulate that the bankruptcy stay is "vacated and extinguished for all purposes." Mr. Whitty agreed to this condition. Within days, on May 15, 2002, Mr. Whitty and Schloss filed a "Stipulated Judgment" reflecting this agreement. The Stipulated Judgment stated that: "The Automatic Stay in [the Whittys] bankruptcy proceeding, effective June 1, 2002, is immediately vacated and extinguished for all purposes . . . . [First Nationwide] . . . may hereafter proceed with foreclosure and conduct a trustees sale of the subject property . . . and thereafter commence any lawful action to obtain complete possession of the subject property without further Court order or proceeding being necessary." Schloss told Mr. Whitty that June 1 was the "final, final date."
Six days later, on May 21, Mr. Whitty asked First Nationwide to postpone the June 1 sale to June 12. First Nationwide denied this request.
Two days later, on May 23, Martin Goodman sent a fax to First Nationwide stating that Mr. Whitty would like to reinstate the loan and that Goodman would be willing to purchase the property and pay the amount needed for reinstatement if First Nationwide would waive the due-on-sale clause in the deed of trust. Schloss declined to waive the due-on-sale clause.
Six days later, on May 29, the Whittys filed a civil complaint in superior court, asserting numerous tort causes of action, and seeking an accounting and a temporary restraining order prohibiting the foreclosure sale from occurring. The court denied the motion for a temporary restraining order.
In early June 2002, the foreclosure sale was held. At the sale, First Nationwide made a credit bid for the amount of the claimed amount owed on the Note ($516,285.48). Martin Goodman then made an offer at one cent over this bid ($516,285.49), and was the successful purchaser. First Nationwide thus obtained a full recovery on the claimed amount of the Note.
The Trial
Two years later, a trial was held on the Whittys claims against First Nationwide. At the time of trial, the Whittys asserted two causes of action: (1) common law wrongful foreclosure; and (2) conversion.
Before trial, the Whittys moved for an order excluding all evidence and argument by First Nationwide that the arrearages on the Note were greater than $47,602.33 as of September 1997. The Whittys argued the courts July 1998 arrearages order setting the amount at $47,602.33 was "res judicata" and thus First Nationwide should not be permitted to relitigate the issue. First Nationwide opposed the motion, asserting that the evidence showed the parties had agreed to reopen the issue during their settlement discussions in August 2000 and as part of their stipulation entered in November 2000. After considering these arguments, the court stated it would defer ruling on the issue until it had a better understanding of the issue based on the evidence presented.
At the conclusion of the evidence, the court agreed with the Whittys position on the res judicata issue and instructed the jury on the Whittys proposed instruction (entitled "RES JUDICATA") as follows: "You are instructed that the Order dated July 8, 1998, Exhibit 9, determining the arrears on the subject loan to be $47,602.33 as of September 23, 1997 was a final determination as to the amount of arrears owing as of that date."
In his closing argument, the Whittys counsel asserted that based on the July 1998 arrearages order (reducing the claimed arrearages from $106,744.60 to $47,602.33) and the undisputed evidence that First Nationwide failed to adjust its records to reflect the adjustment, the Whittys missed opportunities to refinance and thus to save their home. He also argued that First Nationwide wrongfully precluded the Whittys from obtaining financing from the companies represented by Zau, Goodman, and Salas, by refusing to provide payoff demands and/or to accept payoff offers. The Whittys counsel further argued that First Nationwide breached its agreement by conducting the foreclosure sale without first seeking arbitration as to the amount of the pre-1998 arrearages. With respect to damages, counsel argued the Whittys were entitled to the difference between the fair market value of the property on the date of the foreclosure sale (which he claimed to be $950,000) and the actual amount owing against the property at that time (which he claimed to be $416,656.08). The Whittys counsel also requested the jury find that First Nationwides conduct was "malicious, oppressive or fraudulent" and to award punitive damages.
In defense, First Nationwides counsel asserted that First Nationwide had correctly stated the loan balance owed through the time of the foreclosure sale, relying on the testimony of its expert witness. Counsel alternatively argued that regardless of the particular amount owed, it was undisputed that the Whittys were in default on the date of the foreclosure sale and that the Whittys had never made any real attempt to tender the arrearages that they conceded were due, and thus they could not recover on their wrongful foreclosure claim. Counsel also urged the jury to find the Whittys were barred from any relief based on the unclean hands doctrine, arguing that the Whittys were merely "working the system" and had violated standards of fair play and good faith by continuing to live in the home for many years without any meaningful attempt to pay for admittedly past due amounts on the secured note.
On a special verdict, the jury found against the Whittys on their wrongful foreclosure and conversion claims, determining: (1) First Nationwide did not wrongfully foreclose on the Whittys residence; and (2) First Nationwide did not "take possession of one or more of [the Whittys] mortgage payments with the intention of not applying said payment(s) to the reduction of the subject loan . . . ." The jury thus did not reach the issue of damages or First Nationwides unclean hands defense.
After the jury was excused, the Whittys attorney requested the court to permit the Whittys to amend their complaint to add a declaratory relief claim. In support, the Whittys attorney argued that (1) First Nationwide (on behalf of the lender) received $ 516,285.48 from the trustee after the foreclosure sale, based on its claim that this amount was owing on the Note; and (2) this amount was excessive because it was calculated based on the arrearages that First Nationwide claimed were owed in 1998 ($106,744.60), rather than the arrearages amount ordered by the court in July 1998 ($47,602.33)—a difference of approximately $59,000. The Whittys thus requested the court to award them $99,000 (the $59,000 "surplus" plus interest and other related costs). As will be discussed in more detail below, the court permitted the Whittys to amend their complaint to add the declaratory relief cause of action, but denied any relief on this claim.
The court thereafter denied the Whittys motions for new trial and for a JNOV.
DISCUSSION
I. Timeliness of the Appeal
In their appellate briefs, the Whittys seek to appeal from: (1) the judgment; and (2) the order denying their JNOV motion. First Nationwide moved to strike the portions of the Whittys briefs challenging the judgment because the appeal from the judgment is untimely. To determine the timeliness of the appeal, we first summarize the procedural facts relevant to the timeliness issue and then set forth the rules governing notices of appeal. Based on this analysis, we conclude the appeal from the judgment is untimely and thus we have no jurisdiction to consider this portion of the appeal.
A. Relevant Facts
The jury reached its verdict on May 11, 2004. On June 8, the court entered the judgment in First Nationwides favor. Three days later, on June 11, First Nationwide served a Notice of Entry of Judgment on Kenneth Stone, the attorney for the Whittys. Six days later, on June 17, the Whittys filed a substitution of attorney and served the notice of substitution form on First Nationwide. The substitution form stated that Mr. Whitty was substituting himself as a pro per litigant in place of his counsel, Stone.
Six days later, on June 23, the Whittys filed a JNOV motion, asserting that they were entitled to judgment as a matter of law based on the evidence presented at trial. Shortly thereafter, on July 6, the Whittys filed a new trial motion.
On July 30, 2004, the court held a hearing on the Whittys new trial and JNOV motions. Approximately three weeks later, on August 26, the court denied the Whittys JNOV motion. On August 30, the court denied the Whittys new trial motion.
Three days later, on September 2, First Nationwide served a Notice of Entry of these two orders (the orders denying the JNOV and new trial motions) on the Whittys.
On October 25, 2004, the Whittys filed a notice of appeal using the judicial council form. The notice states that the Whittys appeal "from the following judgment or order in this case, which was entered on . . . : 8/26/2004." (Italics added.) In identifying the particular "order or judgment" appealed from, the Whittys checked only the box stating "An order of judgment under Code of Civil Procedure section 904.1(a)(3)-13" (which governs orders denying JNOV motions), and did not check the box stating "Judgment after jury trial."
B. Analysis
Generally, the time for filing a notice of appeal from a judgment is the earliest of: (1) 60 days after the party or clerk mails a document entitled "Notice of Entry" of judgment or a file-stamped copy of the judgment, or (2) 180 days after entry of judgment. (Cal. Rules of Court, rule 2.) However, this time period is extended if a party files a motion for new trial or JNOV. (Rule 3; Van Beurden Ins. Services, Inc. v. Customized Worldwide Weather Ins. Agency, Inc. (1997) 15 Cal.4th 51, 56.) For a JNOV motion, the time for appealing a judgment is extended until the earliest of: (1) 30 days after the mailing or service of an order denying the JNOV motion; (2) 30 days after denial of the motion by operation of law; or (3) 180 days after entry of judgment. (Rule 3(c).) For a new trial motion, the time is extended until the earliest of: (1) 30 days after the mailing of an order denying the new trial motion; (2) 90 days after the first notice of intention to move is filed; or (3) 180 days after entry of judgment. (Rule 3(a).)
All further rule references are to the California Rules of Court.
First Nationwide served the Notice of Entry of Judgment on the Whittys attorney on June 11, triggering the 60-day time period. However, this deadline was extended because the Whittys then filed motions for JNOV and new trial. The notice of entry of the orders denying these motions was served on September 2, 2004. Thus, under Rules 3(a) and 3(c), the time to file the appeal from the judgment was 30 days from September 2, or October 3, 2004. However, the Whittys did not file their notice of appeal until October 25, 2004. Thus, the notice of appeal from the judgment is untimely.
In an attempt to avoid this result, the Whittys argue that they were never properly served with the Notice of Entry of Judgment, and therefore the 180-day deadline applies. Although they acknowledge that the Notice of Entry of Judgment was served on attorney Stone on June 11, 2004, they argue that Stone lacked authority to accept this service. In support, they submitted copies of emails between Mr. Whitty and Stone written in late May 2004, regarding Mr. Whittys intent to retain another attorney in place of Stone.
The submitted emails do not support the Whittys argument that the service on Stone on June 16 was improper. Under Code of Civil Procedure section 1015, if an opposing party is represented by an attorney, "the service of papers . . . must be upon the attorney instead of the party . . . ." (Italics added.) This service requirement applies unless and until the party files a substitution of counsel form pursuant to Code of Civil Procedure section 284 (section 284). The purpose of section 284 is to "have the record of representation clear so that the parties may be certain with whom they are authorized to deal." (People v. Metrim Corp. (1960) 187 Cal.App.2d 289, 294.) Thus, compliance with section 284 is the only method for obtaining a substitution of attorney. (In re Barnett (2003) 31 Cal.4th 466, 478; Board of Commissioners v. Younger (1865) 29 Cal. 147, 149; In re Marriage of Read (2002) 97 Cal.App.4th 476, 481; People ex rel. Dept. of Pub. Wks. v. Hook (1967) 248 Cal.App.2d 618, 623-624; Davis v. Rudolph (1947) 80 Cal.App.2d 397, 402.) As the California Supreme Court stated long ago: "A party to an action may appear in his own proper person or by attorney, but he cannot do both. [¶] If he appears by attorney he must be heard through him. . . . So long as he remains the attorney of record the Court cannot recognize any other as having the management of the case. If the party for any cause becomes dissatisfied with his attorney the law points out a remedy. He may move the Court for leave to change his attorney . . . . Until that has been done, the client cannot assume control of the case." (Board of Commissioners, supra, 29 Cal. at p. 149, italics added.)
Section 284 states: "The attorney in an action or special proceeding may be changed at any time before or after judgment or final determination, as follows: [¶] 1. Upon the consent of both client and attorney, filed with the clerk, or entered upon the minutes; [¶] 2. Upon the order of the court, upon the application of either client or attorney, after notice from one to the other."
At the time of the June 11 service of the Notice of Entry of Judgment, the Whittys were represented by attorney Stone. Thus, service of the notice on Stone was proper. The Substitution of Attorney form was not executed until June 16 and was not filed and served until June 17. Thus, the Notice of Entry of Judgment, served on June 11, was effective service. Accordingly, the appeal from the judgment—filed more than 30 days after notice of entry of the orders denying the posttrial motions—was untimely.
The Whittys urge us to nonetheless consider their late appeal based on principles that appellate courts are to liberally construe notices of appeal to favor a full review on the merits and that " the law aspires to respect substance over formalism . . . . " However, these rules are inapplicable to an untimely appeal. As our high court has repeatedly stated, "[t]he time for appealing a judgment is jurisdictional; once the deadline expires, the appellate court has no power to entertain the appeal." (Van Beurden Ins. Services, Inc. v. Customized Worldwide Weather Ins. Agency, Inc., supra, 15 Cal.4th at p. 56.) " The requirement as to the time for taking an appeal is mandatory, and the court is without jurisdiction to consider one which has been taken subsequent to the expiration of the statutory period. In the absence of statutory authorization, neither the trial nor appellate courts may extend or shorten the time for appeal, even to relieve against mistake, inadvertence, accident, or misfortune. " (Maynard v. Brandon (2005) 36 Cal.4th 364, 372-373 (italics added); accord Annette F. v. Sharon S. (2005) 130 Cal.App.4th 1448, 1454.) This is true even if the tardiness of the appeal is caused by attorney error. (Ten Eyck v. Industrial Forklifts Co. (1989) 216 Cal.App.3d 540, 545-546.)
Our conclusion that the Whittys have not properly appealed from the judgment is further supported by their notice of appeal which reflects a clear intent to appeal only from the order denying their JNOV motion. The notice expressly states that the order appealed from was entered on "8/26/2004," which was the order denying the JNOV motion. Additionally, the Judicial Council form contains several boxes for an appellant to specify the type of order or judgment from which the party is appealing, and the Whittys checked only one box—the box referring to appealable orders such as an order denying a JNOV motion. The Whittys left blank the box stating "Judgment after jury trial." The Whittys also added a note on the notice of appeal referring solely to the order denying their JNOV motion and explaining that it was not mailed to them until September 2.
Based on this notice of appeal, the only reasonable conclusion is that the Whittys did not intend to appeal from the judgment when they filed the appeal. As this court recently held, " [t]he rule favoring appealability in cases of ambiguity cannot apply where there is a clear intention to appeal from only part of the judgment or one of two separate appealable judgments or orders. [Citation.] . . . "[A] notice of appeal will not be considered adequate if it completely omits any reference to the judgment [or order] being appealed." " (Colony Hill v. Ghamaty (2006) 143 Cal.App.4th 1156, 1172.)
We thus grant First Nationwides motion to strike those portions of the Whittys briefs in which the Whittys seek to appeal from the judgment, and examine only the Whittys contentions challenging the courts denial of their JNOV motion. As explained below, this appellate posture substantially limits the scope of our review on appeal. To prevail on an appeal only from an order denying a JNOV motion, the appellant must show he or she is entitled to judgment as a matter of law and there are no issues remaining to be decided on that claim.
The Whittys appeal from the order denying their JNOV motion was timely. Although the Whittys also seek to appeal from the order denying their new trial motion, this order is not appealable independent from the judgment. (Walker v. Los Angeles County Metropolitan Transportation Authority (2005) 35 Cal.4th 15, 19.)
II. Applicable JNOV Review Standard
On appeal from the denial of a JNOV motion, an appellate court must review the record de novo and make an independent determination whether there is any substantial evidence to support the jurys findings. (Paykar Construction, Inc. v. Spilat Construction Corp. (2001) 92 Cal.App.4th 488, 493-494; Tognazzini v. San Luis Coastal Unified School Dist. (2001) 86 Cal.App.4th 1053, 1057-1058.) The scope of the review is limited to determining whether there is any substantial evidence, contradicted or not, to support the jurys verdict. (Begnal v. Canfield & Associates, Inc. (2000) 78 Cal.App.4th 66, 72.) The court must accept as true the evidence supporting the verdict, disregard conflicting evidence, and indulge every legitimate inference to support the verdict. (Ibid.) The court does not weigh the evidence or judge the credibility of the witnesses. (Tognazzini, supra, 86 Cal.App.4th at p. 1058.) If sufficient evidence supports the verdict, a reviewing court must uphold the trial courts denial of the JNOV motion. (See Shapiro v. Prudential Property & Casualty Co. (1997) 52 Cal.App.4th 722, 730.)
An appellate courts authority in reviewing the denial of a JNOV motion is limited to determining whether sufficient evidence supported the judgment and does not extend to granting a new trial (or partial new trial). (See Spillman v. City etc. of San Francisco (1967) 252 Cal.App.2d 782, 786-787.) An appellant who appeals only from a JNOV denial order must therefore establish he or she is entitled to judgment as a matter of law. (Ibid., see Hansen v. Sunnyside Products, Inc. (1997) 55 Cal.App.4th 1497, 1511-1521; Teitel v. First Los Angeles Bank (1991) 231 Cal.App.3d 1593, 1603-1604.) Thus, even if the reviewing court concludes the undisputed evidence supports liability on a claim, a reversal of an order denying a JNOV motion is improper if there are any remaining factual issues as to damages or affirmative defenses on that claim. (See Hansen, supra, 55 Cal.App.4th at pp. 1511-1521.)
Applying this narrow review standard, we examine the Whittys contention that there was no substantial evidence to support a finding that they did not prove their causes of action for wrongful foreclosure, conversion, and declaratory relief.
III. Wrongful Foreclosure
Before trial, the Whittys dismissed their statutory wrongful foreclosure claim, and stated their wrongful foreclosure claim was based only on a common law tort theory. Thus, the cause of action is governed by general tort principles, requiring the Whittys to prove duty, breach of duty, causation, and damages. (See Munger v. Moore (1970) 11 Cal.App.3d 1, 7 [rule of liability for a common law wrongful foreclosure is applicable "upon the basic principle of tort liability declared in the Civil Code that every person is bound by law not to injure the person or property of another or infringe on any of his rights"].)
It is undisputed that First Nationwide, as the agent for the lender, owed the Whittys a duty to act in a fair and reasonable manner in the foreclosure process. The Whittys theory at trial was that First Nationwide breached this duty in three ways: (1) First Nationwide issued incorrect payoff demands and thereby prevented them from refinancing; (2) First Nationwide wrongfully rejected offers to pay the correct amount of the arrearages; and (3) First Nationwide breached its agreement to refrain from foreclosure until 90 days after an arbitration. By concluding that the Whittys failed to prove their wrongful foreclosure cause of action, the jury necessarily found the Whittys did not meet their burden to prove any of these three theories. On our examination of the record, we determine that substantial evidence supports these findings.
Incorrect Payoff Demand
With respect to the incorrect payoff demand, this claim was based on the Whittys assertions that: (1) the amount stated in the July 1998 arrearages order ($47,602.33) was binding under the res judicata doctrine; (2) First Nationwides subsequent payoff demands were calculated based on its higher claimed amount in its January 1998 bankruptcy filing ($106,744.60); and (3) the Whittys would have repaid or refinanced the loan and thus prevented the foreclosure sale if First Nationwides payoff demand had been calculated based on the "correct" amount.
Even assuming the validity of the first two points, the jury had a substantial basis to conclude the Whittys did not prove the third point, i.e., that the claimed incorrect payoff amount was a substantial factor in causing the foreclosure sale. First Nationwide presented evidence showing the specific amount of the payoff demands had no effect on the Whittys ability to pay the admitted default amounts or to otherwise obtain financing. This evidence established that the Whittys could not obtain alternate financing for reasons other than the claimed amount of the arrearages, including the Whittys numerous bankruptcy filings and their poor credit history. The undisputed evidence showed that from the very beginning of the loan, the Whittys were in default on the Note and they never paid even those amounts that they admitted were owed on the Note. Based on this evidence, the jury could reasonably find the Whittys did not prove the causation element of their wrongful foreclosure claim.
In attempting to show they met their causation burden, the Whittys contend they presented undisputed evidence that third parties would have been willing to fund the loan at the "correct" amounts. The jury, however, had a substantial basis to find this evidence unpersuasive. The Whittys rely on the testimony of Zau whose mortgage company "prequalified" the Whittys for a loan in September 1998 that would net the Whittys $420,000, an amount that the Whittys say was close to the then-outstanding loan balance calculated based on the courts July 1998 arrearages order. However, Zau admitted that the proposed loan to the Whittys was conditional and dependent on numerous factors, including approval from the bankruptcy trustee and confirmation of various aspects of the Whittys financial condition. Based on this evidence, the jury could have reasonably concluded that the Whittys did not prove they would have obtained the Zau loan even if First Nationwide had stated the allegedly correct outstanding balance on the Note.
The Whittys also relied on evidence that Maria Salas, a loan broker from Lenders Capital Funding, claimed to have obtained a lender willing to refinance the Note. However, the jury had a substantial basis to find that the claimed incorrect payoff amount did not preclude the Whittys from obtaining this new loan. The evidence shows that the Whittys were in bankruptcy at the time and the escrow officer working on this new loan was unable to (or made no attempt to) obtain required bankruptcy court approval for the loan. Additionally, the escrow officer testified that she was notified by the loan broker that "the lender she had involved in the transaction unfortunately was short to fund the loan" and that "the file was not going to be closing."
Moreover, to the extent that the Whittys rely on First Nationwides communications with the escrow officer and loan officer from Lenders Capital Funding to show improper conduct surrounding payoff demands, this reliance is misplaced. Although First Nationwide initially refused to provide a payoff demand to these officers, it did later provide the requested written demands, and although the window periods for the payoff were relatively brief, there was substantial evidence showing that this did not cause this lenders failure to fund the loan.
Wrongful Refusal to Accept Payoff Offers
In a related argument, the Whittys contend the foreclosure was wrongful because the undisputed evidence shows that First Nationwide improperly refused to accept payment for the outstanding balance.
To support this claim, the Whittys rely on Martin Goodmans testimony that he was interested in purchasing the property. However, there was no showing that Goodmans refusal to complete the purchase was caused by an improper act on the part of First Nationwide. Goodman first contacted Schloss on May 23, 2002, one week before the final scheduled foreclosure sale, stating he was willing to purchase the property if First Nationwide would waive the due-on-sale provision in its deed of trust. In refusing to waive this clause, First Nationwide was fully within its contractual rights. A party does not breach a tort duty merely by exercising an express contractual right.
In any event, Goodmans testimony made clear that First Nationwides refusal to waive the due-on-sale clause was not the sole reason that he was unwilling to purchase the property from the Whittys. Goodman testified that he also decided not to purchase the property because Mr. Whitty was insisting that he had a two-year right to repurchase the property from Goodman, which was contrary to Goodmans understanding of the parties previously agreed terms. Additionally, First Nationwide was not required to accept reinstatement later than five business days before the postponed sale date. (Civ. Code, § 2924c, subd. (e).) The evidence did not necessarily show that Goodman was prepared to reinstate the loan within this time period.
Breach of Agreement
At trial, the Whittys argued the foreclosure sale was also wrongful because it constituted a breach of the parties December 2000 agreement that First Nationwide would not foreclose on the property until 90 days after the date of an arbitrators award pertaining to the claimed arrearages. The Whittys argue on appeal that "[n]o reasonable juror" could have found against them on this claim. We disagree.
Approximately two weeks before the June 2002 foreclosure sale, on May 15, the parties filed a stipulation in which the Whittys expressly agreed the bankruptcy stay was vacated and First Nationwide "may hereafter proceed with foreclosure and conduct a trustees sale of the subject property . . . and thereafter commence any lawful action to obtain complete possession of the subject property . . . ." (Italics added.) Based on this agreement, the jury had a reasonable basis to reject the Whittys claim that First Nationwide breached a December 2000 agreement to delay the foreclosure sale until the completion of the arbitration. Under the circumstances, a reasonable factfinder could find that the May 15, 2002 stipulation was the governing agreement at the time of the foreclosure sale and, by signing this stipulation, the Whittys agreed that a foreclosure sale could occur despite the lack of an arbitration hearing. To the extent Mr. Whitty testified that he did not understand the meaning of the May 15 stipulation when he signed it, the jury could reasonably find this testimony was not credible.
IV. Conversion
The Whittys do not expressly argue in their appellate briefs that there was insufficient evidence for the jury to find they did not prove their conversion claim. Thus, they have waived their right to challenge the jurys finding on appeal. To the extent they have raised this argument, we reject it. "[A] necessary element of the tort [of conversion] is an intent to exercise ownership over property which belongs to another." (Collin v. American Empire Ins. Co. (1994) 21 Cal.App.4th 787, 812.) Even assuming First Nationwide improperly failed to adhere to the courts July 1998 arrearages order in calculating the subsequent outstanding principal balances, there was substantial evidence from which the jury could find that First Nationwide did not exercise ownership of funds that did not belong to it. The undisputed evidence shows that the Whittys owed substantial amounts on the Note throughout the entire time period, and that First Nationwide was entitled to each payment (or partial payment) made by the Whittys.
V. Declaratory Relief Claim
The Whittys next challenge the courts denial of their JNOV motion on the declaratory relief claim. We conclude this challenge is without merit.
A. Factual Background
After the trial, the Whittys moved to amend their complaint to add a cause of action for declaratory relief, seeking to recover the surplus proceeds from the foreclosure sale in excess of the amount they owed to First Nationwide. The court permitted the amendment, but denied the claim, finding that declaratory relief was inappropriate because the issue of the Whittys entitlement to surplus funds did not involve a "prospective" conflict.
In so ruling, the court stated the question whether a surplus existed was a factual issue for the jurys determination, and asked why the Whittys did not raise this claim during trial. The Whittys counsel responded that the surplus issue was an equitable matter for the courts determination. Counsel also stated that the matter did not involve a disputed factual issue because the July 1998 arrearages order was res judicata and binding in this action. In essence, counsel argued that First Nationwides receipt of $516,285.48 from the foreclosure sale was excessive because it was based on the arrearages that First Nationwide claimed were owed in 1998 ($106,744.60), rather than the arrearage amount reflected in the bankruptcy courts July 1998 order ($47,602.33)—a difference of approximately $ 59,000. The Whittys thus requested the court to grant declaratory relief in the form of an order requiring First Nationwide to pay this difference (plus interest and other related costs) to the Whittys.
In response, the court noted that although it had ruled that the bankruptcy courts July 1998 arrearages order was "res judicata," this did not mean the order continued to be binding. The court stated that "the parties agreed to redetermine the arrearages," and that it "well might have been" the Whittys fault that the parties never reached a fully executed agreement on this issue.
B. Analysis
A trial court is vested with broad discretion in determining whether to grant declaratory relief. (Dolan-King v. Rancho Santa Fe Assn. (2000) 81 Cal.App.4th 965, 974.) "The court may refuse to exercise the power . . . in any case where its declaration or determination is not necessary or proper at the time under all the circumstances." (Code Civ. Proc., § 1061.) However, a court "may not refuse to grant declaratory relief if the procedure is clearly appropriate." (Weissman v. Lakewood Water & Power Co. (1959) 173 Cal.App.2d 652, 656.)
When reviewing a denial of a JNOV motion challenging the denial of a declaratory relief claim, our review is exceedingly narrow. We may grant relief only where the trial court was required to grant the relief as a matter of law. In this case, we agree that a declaratory relief claim was the proper vehicle for raising the surplus issue, i.e., to determine whether the trustors (the Whittys) were entitled to any excess funds after the secured liens were paid from the foreclosure sale proceeds. (Civ. Code, §§ 2924j, 2924k; see Smith v. James A. Merrill, Inc. (1998) 64 Cal.App.4th 94, 98-99.) However, we conclude the court had a substantial basis to deny the Whittys JNOV motion on this claim. First, despite the courts instruction to the jury, the trial court was within its discretionary authority to reject the fundamental premise underlying the Whittys declaratory relief claim—that the July 1998 arrearages order was binding based on the res judicata doctrine. Second, even assuming the res judicata doctrine applied, the court had a substantial basis to conclude that First Nationwides equitable defenses to the declaratory relief claim had merit.
Res Judicata Doctrine " Res judicata is the term traditionally used to describe two discrete effects: (1) what we now call claim preclusion (a valid final adjudication of a claim precludes a second action on that claim or any part of it) . . . ; and (2) issue preclusion, long called collateral estoppel (an issue of fact or law, actually litigated and resolved by a valid final judgment, binds the parties in a subsequent action, whether on the same or a different claim) . . . ." (Baker v. General Motors Corp. (1998) 522 U.S. 222, 233, fn. 5.) When a party is seeking preclusive effect of a bankruptcy ruling, a court applies federal law applicable to the res judicata and collateral estoppel doctrines. (First Pacific Bancorp, Inc. v. Helfer (9th Cir. 2000) 224 F.3d 1117, 1128; In re Maresh (Bankr. N.D.Ohio 2001) 277 B.R. 339, 345; see Nathanson v. Hecker (2002) 99 Cal.App.4th 1158, 1163 (Nathanson).)
In this case, the Whittys sought to use the July 1998 arrearages order to prove its claim to the remaining equity after the foreclosure sale. Thus, the claim preclusion doctrine was inapplicable because it was a different cause of action. Instead, the potentially applicable theory was issue preclusion ("collateral estoppel"). This theory requires that the issue was " actually litigated " and resolved by a " final judgment. " (See Purdy v. Zeldes (2d Cir. 2003) 337 F.3d 253, 258.)
We agree the 1998 arrearages amount was "actually litigated." Under federal law, "actual litigation" does not necessarily require that each party respond to the other party; it is sufficient that the issue is in fact raised, and each party has an opportunity to argue its position in some form. (See In re Regional Bldg. Systems, Inc. (4th Cir. 2001) 254 F.3d 528, 533 .) The record shows that First Nationwide (and/or its predecessor) had a fair opportunity to litigate the arrearages issue. After the Whittys submitted evidence that the amount owed was $47,602.33 rather than $106,744.60, First Nationwide could have opposed the claim, but failed to take any affirmative action.
However, the record contains a substantial basis to find the "final judgment" element of the collateral estoppel doctrine was not satisfied under the circumstances of the case. Generally, " a bankruptcy courts allowance or disallowance of a claim is a final judgment [citation], and "is binding and conclusive on all parties or their privies, and being in the nature of a final judgment, furnishes a basis for a plea of res judicata." " (Nathanson, supra, 99 Cal.App.4th at pp. 1163-1164; Siegel v. Federal Home Loan Mortg. Corp. (9th Cir. 1998) 143 F.3d 525, 529.) But this rule is not inflexible. (See In re Dow Corning Corp. (6th Cir. 1996) 86 F.3d 482, 488.) Finality in bankruptcy is elastic and " is viewed in a more pragmatic and less technical way than in other situations. " (Ibid., quoting In re Cottrell (6th Cir. 1989) 876 F.2d 540, 541-542; see In re Mason (9th Cir. 1983) 709 F.2d 1313, 1318 ["The unique nature of bankruptcy procedure dictates . . . that we take a pragmatic approach to the question of finality"].) For example, after a final judgment in civil litigation, a court generally has no jurisdiction to reconsider its ruling; the only avenue for challenging the judgment is by a postjudgment motion (for a limited time period) and then an appeal. In contrast, with respect to an interim claim allowance order in bankruptcy, the rules allow a party to move for reconsideration and do not provide specific timelines for doing so. (11 U.S.C. § 502(j); In re Lee (Bankr. M.D.Tenn. 1995) 189 B.R. 692, 694-695;In re Levoy (9th Cir. BAP 1995) 182 B.R. 827, 831-832.) Given these liberal reconsideration rules, if a party seeks to use an interim bankruptcy order offensively in a subsequent action, a court has greater flexibility and discretion to determine whether the order was "final" for purposes of the collateral estoppel doctrine.
The facts in this case support a conclusion that the July 1998 arrearages order was not final for collateral estoppel purposes. As discussed above, on May 26, 2000, the court vacated the bankruptcy stay and granted First Nationwide permission to proceed with the foreclosure of the Whittys property. Shortly thereafter, the Whittys filed an "emergency" motion to set aside the order relieving First Nationwide from the stay, claiming they did not have notice of First Nationwides request for relief from the stay. The evidence presented at trial shows this claim was false and that the Whittys did have notice of First Nationwides request. During a break at the hearing on the Whittys motion, Mr. Whitty (likely knowing that there was no factual basis for his motion) offered First Nationwide a deal—he would agree to reopen discussion on the disputed arrearages amount issue if First Nationwide agreed to postpone the foreclosure sale. First Nationwide agreed to this proposal. First Nationwide thereafter brought a motion for reconsideration of the arrearages amount, and the parties engaged in settlement discussions. The parties ultimately were unable to agree as to the proper amount—in part because Mr. Whitty failed to comply with his agreement to provide proof to support his claimed arrearage amount—and shortly thereafter, the Whittys dismissed the bankruptcy (only to file another bankruptcy several months later).
On this record, the Whittys received a substantial benefit from their willingness to reopen the arrearages issue. Had they not agreed to permit reconsideration of the issue, in all likelihood the foreclosure sale would have occurred more than one year earlier than it did. At the time, First Nationwide had already obtained an order relieving it from the bankruptcy stay and was permitted to proceed with the foreclosure sale. First Nationwide agreed to forego this right in exchange for the Whittys agreement to a global settlement process to discuss the arrearages issue. Under these circumstances, the trial court had a substantial basis to refuse to order declaratory relief on the basis of the July 1998 arrearages order.
Equitable Defenses
We alternatively reject the Whittys challenge to the JNOV order on their declaratory relief claim because a disputed issue remains as to the applicability of the unclean hands defense, which is an affirmative defense in actions seeking equitable relief. (Wilson v. S.L. Rey, Inc. (1993) 17 Cal.App.4th 234, 244; Fibreboard Paper Products Corp. v. East Bay Union of Machinists (1964) 227 Cal.App.2d 675, 728.) This defense prevents a party from obtaining relief "if [the party] has engaged in any unconscientious conduct directly related to the transaction or matter before the court." (DeRosa v. Transamerica Title Ins. Co. (1989) 213 Cal.App.3d 1390, 1395; see Wilson, supra, 17 Cal.App.4th at p. 244.)
In this case, First Nationwide presented evidence from which a factfinder could have reasonably concluded that the Whittys engaged in numerous unfair tactics to avoid paying amounts admittedly owed to First Nationwide. The Whittys lived in the house for more than 12 years. However, during most of those years, they owed substantial sums on their mortgage and made only intermittent payments. The evidence showed that the Whittys failure to pay the amounts owed (and the accompanying insurance, taxes and other fees) had nothing to do with First Nationwides alleged wrongful conduct. The record additionally supports a finding that the Whittys misused the bankruptcy court to delay and defeat First Nationwides legitimate claims, including by filing for bankruptcy numerous times, including during the critical 15-month period when they were making no payments on the Note. Further, although the Whittys made continuing promises that they would repay the arrearages and convinced First Nationwide to repeatedly provide them additional time, they did not follow through with their promises and the evidence supports they never intended to do so. The Whittys sued First Nationwide for wrongful foreclosure despite that they were in default under their loan continuously since 1994 even if the July 1998 arrearages order was given full effect.
These facts are consistent with a conclusion that the Whittys engaged in a continuing course of conduct intended to delay or avoid payments and permit them to live in the home without paying on the loan secured by the property. This evidence, which was directly related to their declaratory relief claim that the court credit them with a portion of the funds generated from the foreclosure sale, constitutes a substantial basis for the court to have refused to entertain equitable relief under the doctrine of unclean hands. (See Wilson v. S.L. Rey, Inc., supra, 17 Cal.App.4th at p. 244; Johnston v. Murphy (1918) 36 Cal.App. 469, 471.)
Although the trial court did not reach the issue of the unclean hands defense, we must affirm a denial of a JNOV motion if disputed issues remain to be litigated. In this case, unresolved issues remain regarding the applicability of the res judicata doctrine and the unclean hands defense. Thus, the JNOV order must be affirmed.
VI. Remaining Claims Are Not Properly Raised on an Appeal from JNOV Denial Order
The Whittys additionally raise claims involving evidentiary error and instructional error. These claims are not cognizable on an appeal from an order denying a JNOV motion.
DISPOSITION
We dismiss the appeal from the judgment. We affirm the order denying the Whittys JNOV motion. The Whittys are to bear First Nationwides costs on appeal.
We Concur:
MCINTYRE, J.
AARON, J.