Case Number: BC591739??? Hearing Date: December 20, 2016??? Dept: 34
SUBJECT: Motion for judgment on the pleadings
Moving Party: Defendant John H. Kohan, joinder by Bank of the West
Resp. Party: Plaintiff Lucerne Valley LLC
Defendant?s motion is DENIED.
Defendants? Request for Judicial Notice is GRANTED. (See Evid. Code, ? 452(d).)
BACKGROUND:
Plaintiff commenced this action on 8/18/15 against defendants for: (1) vacate trustee?s deed of sale; (2) vacate trustee?s deed of sale; (3) quiet title; (4) breach of contract and breach of fiduciary duty; (5) fraud; and (6) violation of Business and Professions Code section 17200. The actions pertain to plaintiff?s agreement with Sunrise to secure refinancing of loans plaintiff had with other lenders.
ANALYSIS:
Defendant Kohan moves for judgment on the pleadings as to plaintiff?s complaint. The second, third, fifth, and sixth causes of action are alleged against Kohan. Plaintiff alleges that Kohan is currently the title holder on the subject property, but is not a bona fide purchaser because he was aware that Sunrise foreclosed on the trust deed in violation of its agreement with plaintiff. (See Compl., ?? 14, 21-22.)
Defendant argues that the stipulated judgment in the unlawful detainer action between defendant and plaintiff conclusively bars this subsequent action challenging title. Defendant primarily relies on Malkoskie v. Option One Mortgage Corporation (2010) 188 Cal.App.4th 968. In Malkoskie, the plaintiff refinanced her property with a loan secured by a note and deed of trust. (Id. at p. 971.) A nonjudicial foreclosure sale was conducted and the property was acquired by Wells Fargo, though no substitution had been recorded showing the defendant as the new beneficiary. (Ibid.) After the foreclosure, Wells Fargo filed an unlawful detainer action against the plaintiffs, and the plaintiffs filed an answer denying the allegations and alleging that the foreclosure sale was invalid due to improper notice and other irregularities. (Id. at p. 972.) Wells Fargo and the plaintiffs thereafter agreed to entry of a stipulated judgment in the unlawful detainer action in favor of Wells Fargo. (Ibid.) The plaintiffs then filed an action against the defendant, Wells Fargo, and others asserting claims for, among other things, quiet title, cancellation of trust deed, and wrongful foreclosure. (Ibid.) The trial court sustained the defendants? demurrer to the complaint without leave to amend. (Ibid.)
On appeal, the court addressed whether the stipulated judgment in the unlawful detainer action barred the plaintiffs? claims in their subsequent action. (Malkoskie, 188 Cal.App.4th at p. 973.) The court found that the stipulated judgment did bar the plaintiffs? action. (Ibid.)
An unlawful detainer action is a summary proceeding ordinarily limited to resolution of the question of possession. [Citation.] Accordingly, it is true that any judgment arising therefrom generally is given limited res judicata effect. [Citation.] However, a ?qualified exception to the rule that title cannot be tried in unlawful detainer is contained in Code of Civil Procedure section 1161a, which extends the summary eviction remedy beyond the conventional landlord-tenant relationship to include certain purchasers of property….? [Citation.] Code of Civil Procedure section 1161a, subdivision (b)(3) (section 1161a), provides an unlawful detainer action may be filed ?[w]here the property has been sold in accordance with Section 2924 of the Civil Code, under a power of sale contained in a deed of trust … and the title under the sale has been duly perfected.? Furthermore, under California law a ?judgment entered without contest, by consent or stipulation, is usually as conclusive a merger or bar as a judgment rendered after trial.? [Citations.]
(Malkoskie, 188 Cal.App.4th at p. 973.) The court discussed prior case law which noted that ? ?subsequent fraud or quiet title suits founded upon allegations of irregularity in a trustee’s sale are barred by the prior unlawful detainer judgment.? [Citation.]? (Id. at p. 974.) Where the second action alleges wrongdoing that is not ?directly connected? to the conduct of the foreclosure sale, the applicability of collateral estoppel to the unlawful detainer judgment becomes doubtful. (Ibid.) The plaintiffs? claims in Malkoskie all arose from the alleged invalidity of the foreclosure sale pursuant to Civil Code section 2924. (Ibid.) The court noted:
?Wells Fargo filed its unlawful detainer action against plaintiffs pursuant to section 1161a. Wells Fargo expressly alleged in its complaint the specific facts it contended established it had perfected legal title to the property, including that the foreclosure sale was conducted in accordance with Civil Code section 2924.[Fn.omitted.] In their answer, plaintiffs denied the allegations and raised two affirmative defenses contending the foreclosure proceedings contained irregularities and were invalid due to lack of notice. The conduct of the sale and the validity of the resulting transfer of title to Wells Fargo were therefore directly in issue in the unlawful detainer case. Because the complaint was brought under section 1161a, it was proper for limited issues pertaining to the validity of title obtained by Wells Fargo in the sale to be raised and conclusively resolved. [Citations.]
?Indeed, because the sole basis upon which Wells Fargo asserted its right to possession of the property was its ?duly perfected? legal title obtained in the nonjudicial foreclosure sale, the validity of Wells Fargo’s title had to be resolved in the unlawful detainer action. ?Under section 1161a, Code of Civil Procedure, a purchaser who has acquired the title at such trustee’s sale must prove that the property was sold in accordance with section 2924 of the Civil Code under a power of sale and that title under the sale has been duly perfected. Under such unlawful detainer statutes title to the extent required by section 1161a not only may but must be tried…. [Citations.] The bleak language of the judgment which merely restored possession to [the grantee ] is a sufficient adjudication of her ownership in view of the issues tendered.? [Citation.]? (Malkoskie, 188 Cal.App.4th at pp. 974-975.)
The court noted that ? ?[a] stipulated judgment normally concludes or determines all matters put into issue by the pleadings, unless the parties agree to restrict its scope by expressly withdrawing an issue from that judgment,? and, because the parties? stipulated judgment did not reserve any issues for later resolution in a separate action, the plaintiffs? consent to the judgment conclusively determined the issue of whether Wells Fargo had obtained valid record title. (Id. at p. 975.) ?We therefore hold the unlawful detainer judgment has claim preclusive effect in this action challenging the validity of Wells Fargo’s title.? (Id. at p. 976.)
In the opposition, plaintiff relies on Evans v. Superior Court (1977) 67 Cal.App.3d 162. In Evans, an entity executed a deed of trust conveying the subject property to a trustee for Bank of America (?BOA?) to secure payment of a debt. (Id. at p. 165.) BOA thereafter recorded a notice of default and intention to sell, and trustee?s sale was held where BOA was the purchaser and received a trustee?s deed to the property. (Ibid.) BOA thereafter conveyed title to the property to the petitioner. (Ibid.) The real parties in interest were in possession of condominium units at the property, and the petitioner brought an unlawful detainer action against the real parties in interest pursuant to section 1161a. (Id. at pp. 164-165.) The real parties argued that they entered into possession of the property via agreements and thereby became equitable owners of their units, and BOA, by failing to give them actual notice of the filing of the notice of default and trustee?s sale, caused the real parties to believe that BOA intended to ratify those contracts. (Id. at p. 166.) The Court of Appeal addressed whether a subsequent purchaser from a purchaser at a foreclosure sale can maintain an unlawful detainer action under section 1161a. (Id. at p. 167.)
The court rejected the real parties? argument that subsequent purchasers should not be allowed to maintain an unlawful detainer action. (Evans, 67 Cal.App.3d at pp. 168-169.)
?Real parties assert that to allow the action to be maintained by a subsequent purchaser from a purchaser at a foreclosure sale would alter the summary nature of the remedy. We do not agree. At common law the sole issue in an unlawful detainer action was the right to possession, a tenant being estopped to challenge his landlord’s claim of title. The essence of the statutory action, too, is a right to possession and remains summary in character; however, ?… to the limited extent of proving deraignment of title in the manner expressly provided for in the unlawful detainer statutes themselves the question of title not only may, but must, be tried in such actions ….? [Citation.] In an action pursuant to section 1161a, subdivision 3, title is in issue to the extent that the plaintiff must prove that a sale was held in compliance with section 2924 of the Civil Code, and that title under such sale was duly perfected. [Citation.] Adding the additional requirement that a subsequent purchaser from the foreclosure sale purchaser prove his own acquisition of title from said foreclosure sale purchaser no more destroys the summary nature of the proceedings than does the corresponding requirement that the landlord’s successor in estate prove his acquisition of such interest in a proceeding pursuant to section 1161 of the Code of Civil Procedure.? (Id. at p. 169.)
The real parties also argued that allowing the petitioner to maintain the unlawful detainer action ?would enable him to cut off defenses which would have been available to real parties in a suit against them by Bank of America.? (Ibid.) The court rejected this:
?Petitioner has never claimed the status of bona fide purchaser without notice, nor could a subsequent purchaser from a purchaser at a foreclosure sale assert such status against one in open and notorious possession of the premises. [Citation.] Petitioner does claim that the defenses which real parties seek to raise would have been unavailable to them in an unlawful detainer, had such action been brought by Bank of America . . . .? (Ibid.)
The court noted that the unlawful detainer action solely addressed the right to detainer. (Id. at p. 170.)
?It is true that where the purchaser at a trustee’s sale proceeds under section 1161a of the Code of Civil Procedure he must prove his acquisition of title by purchase at the sale; but it is only to this limited extent, as provided by the statute, that the title may be litigated in such a proceeding. [Citations.] … Irrespective of the merits of the defenses raised by the answer, the alleged equitable grounds of attack on plaintiff’s title have no place in the present summary proceeding, for if such issues are permissible, the proceeding entirely loses its summary character. In our opinion the plaintiff need only prove a sale in compliance with the statute and deed of trust followed by purchase at such sale, and the defendant may raise objections only on that phase of the issue of title. Matters affecting the validity of the trust deed or primary obligation itself, or other basic defects in the plaintiff’s title, are neither properly raised in this summary proceeding for possession, nor are they concluded by the judgment.? [Citation.] (Id. at pp. 170-171.)
The court found that the affirmative defenses asserted by the real parties, which raised questions as to title, were inappropriate in the unlawful detainer action. (Id. at p. 171.) The court noted:
?Real parties are not left without a remedy. The issues which they seek to litigate can be pursued by way of quiet title actions. [Citation.] Those issues not being cognizable in unlawful detainer, the judgments in the pending matters will not be res judicata as to them. [Citation.] Nor is the pendency of the unlawful detainer actions a bar to the simultaneous maintenance of quiet title actions. [Citation.]? (Ibid.)
Plaintiff has the better argument. The ruling in Malkoskie was limited to claims that were directly connected to the conduct of the foreclosure sale, i.e., compliance with Civil Code section 2924. Here, plaintiff is alleging that Sunrise foreclosed on the property in violation of its agreement with plaintiff, and Kohan was aware of such when he purchased the property. (See Compl., ?? 12, 18, 22.) Defendant fails to provide authority which suggests that collateral estoppel applies to an unlawful detainer claim where such a challenge to title is raised. The court in Evans suggested that such attacks on title are not proper in summary unlawful detainer proceedings, and the issues may be pursued in actions for quiet title. Other case law supports the determination that section 1161a is limited as to title determinations.
?Section 1161a provides for a narrow and sharply focused examination of title. To establish that he is a proper plaintiff, one who has purchased property at a trustee’s sale and seeks to evict the occupant in possession must show that he acquired the property at a regularly conducted sale and thereafter ?duly perfected? his title. (s 1161a, subd. 3.) Thus, we have declared that ?to this limited extent, as provided by the statute, . . . title may be litigated in such a proceeding.?
Applying the traditional rule that a judgment rendered by a court of competent jurisdiction is conclusive as to any issues necessarily determined in that action, the courts have held that subsequent fraud or quiet title suits founded upon allegations of irregularity in a trustee’s sale are barred by the prior unlawful detainer judgment. [Citations.] Where, however, the claim sought to be asserted in the second action encompasses activities not directly connected with the conduct of the sale, applicability of the res judicata doctrine, either as a complete bar to further proceedings or as a source of collateral estoppel, is much less clear.? (Vella v. Hudgins (1977) 20 Cal.3d 251, 255-256.)
Here, plaintiff?s claims are not directly connected with the conduct of the sale; instead, they pertain to Sunrise?s breach of the agreement with plaintiff. Moreover, there is no showing that there was a full and fair litigation of plaintiff?s bona fide purchaser arguments. (See id. at pp. 256-257 [a judgment may be conclusive where there was a full and fair litigation after a fair opportunity to litigate the defense in the unlawful detainer action, such as where the parties waive the summary proceeding in favor of extensive adjudication of the conflicting claims].)
Defendant?s motion for Judgment on the Pleadings is DENIED.