Ayala v. Stafford

Decision Date27 July 2021
Docket NumberDA 20-0418
Citation491 P.3d 734 (Table),2021 MT 185 N
CourtMontana Supreme Court
Parties Wade AYALA, Plaintiff, Counterclaim-Defendant. and Appellee, v. Gail STAFFORD, Defendant, Counter-Claimant, Third-Party Plaintiff and Appellant, and Cross-Appellee, v. ReconTrust Company, N.A.; Bank of America, N.A.; Federal National Mortgage Association ; and Equity Process Management, Inc., Third-Party Defendants, Appellees, and Cross-Appellants, Pamela Pfaff, Personal Representative of the Estate of Joseph Nowakowski; Brandy Lou Ayala, Sadie Lynn Barrett; and Does 1-10, Third-Party Defendants and Appellees.

For Appellant: Adam H. Owens, Gregory G. Costanza, Granite Peak Law, PLLC, Belgrade, Montana

For Appellee Wade Ayala: Charles E. Hansberry, Jenny M. Jourdonnais, Hansberry & Jourdonnais, PLLC, Missoula, Montana

For Appellees and Cross-Appellants ReconTrust Company, N.A.; Bank of America, N.A.; and Federal National Mortgage Association: Mark D. Etchart, Browning, Kaleczyc, Berry & Hoven, P.C., Helena, Montana

For Appellee and Cross-Appellant Equity Process Management, Inc.: John F. Haffey, Mitchell J. Vap, Haffey Vap PLLC, Missoula, Montana

Justice Jim Rice delivered the Opinion of the Court.

¶1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating Rules, this case is decided by memorandum opinion and shall not be cited and does not serve as precedent. Its case title, cause number, and disposition shall be included in this Court's quarterly list of non-citable cases published in the Pacific Reporter and Montana Reports.

¶2 Gail Stafford appeals the July 23, 2020 Order on Pending Matters, entered by the Second Judicial District Court, Silver-Bow County. We affirm in part, and reverse in part, and remand with instructions to dismiss all of Stafford's claims consistent with this Opinion. The primary issue on appeal is whether Stafford's claims are barred by application of the doctrine of res judicata, and we conclude that they are.

¶3 In January 2010, Stafford began leasing the building referred to as the "back house" on the property located at 86 Elkhorn Lane in Butte, Montana (Property). Stafford maintains she and Colin Caffrey, the Property owner at that time, signed a hand-written residential landlord-tenant agreement with an initial term of one year, with the option to continue the lease on a month-to-month basis thereafter. Stafford did not retain a copy of the agreement and Caffrey died two years later, leaving no written evidence of the agreement.

¶4 Caffrey had purchased the Property in 2008. He executed a promissory note in favor of Mann Mortgage, LLC on January 18, 2008, and also executed a Deed of Trust listing Mortgage Electronic Registration Systems, Inc. (MERS), as the grantee and nominee on behalf of Mann Mortgage and its successors or assignees. Caffrey, addressing medical issues up to his passing, fell behind on payments, and on July 6, 2012, MERS assigned the Deed of Trust to Bank of America, N.A. (BANA). BANA substituted ReconTrust Company, N.A. (ReconTrust) as substitute trustee on August 6, 2012, and scheduled a foreclosure sale of the Property on December 14, 2012. Upon learning of the sale, Stafford contacted ReconTrust and was informed that the opening bid would be $190,851.90. Stafford claims to have attended the sale, bringing with her a cashier's check for $170,000 and $49,000 in cash, totaling $219,000. Joseph Nowakowski, an employee of Equity Process Management, Inc., (Equity) cried the sale. Prior to the sale, Stafford claims Nowakowski examined her means of payment and determined that she was qualified to bid, while turning away another potential bidder, Anthony King, for lack of appropriate funds. As alleged by Stafford, Nowakowski then "made a call out of earshot," after which he returned and stated that "he was not allowed to answer any questions and that he was about to read [the Trustee's Sale script]," which stated:

The beneficiary has submitted a written bid in the amount of $190,851.90. This is the minimum bid. We have been authorized by the beneficiary to enter a final bid in the amount of $238,564.88. I now open the bidding with the minimum bid of $190,851.90.

Nowakowski declared under penalty of perjury1 that he read the script "at the prescribed time and place." Stafford claims to have immediately bid "one dollar more" for a sum of $190,852.90. According to Stafford, Nowakowski then verbally stopped the sale, stating "that the group holding the auction required the entire amount of the $233,000 obligation[,]"2 leaving Stafford unable to match the acceptable bid threshold. Affidavits of Stafford and the only two other witnesses, King and David Kneebone, claim Stafford was the only bidder present at the public sale. In contrast, in a signed affidavit dated September 5, 2014, Nowakowski stated that no third-party bid was made and, according to his declaration, "the property sold to the beneficiary for $190,851.90." The property was sold to the beneficiary, Federal National Mortgage Association (Fannie Mae), and a Trustee's Deed with a sales price of $190,851.90 was recorded on December 24, 2012. Stafford signed a notarized affidavit confirming that she became aware of the sale to Fannie Mae on December 27, 2012, and sometime between that date and December 31, 2012, she was notified by ReconTrust of its use of an auctioneering service, Equity.

¶5 Following the foreclosure sale, Stafford continued to occupy the back house. On March 13, 2013, Fannie Mae served Stafford notice that her tenancy would expire on April 13, 2013. Stafford refused to vacate and held over her tenancy, and in June 2013, Fannie Mae filed an unlawful detainer action against Stafford. See Fannie Mae v. Stafford , No. DA 18-0439, 396 Mont. 547, 440 P.3d 644, 2019 MT 114N, 2019 Mont. LEXIS 174, 2019 WL 2098770 (Stafford I ). Stafford answered and counterclaimed, denying Fannie Mae's standing and alleging it did not legally own the property because there was no representative for Fannie Mae present at the public auction. Stafford I , ¶ 5. Stafford's counterclaim asked the district court to "enter a declaratory judgment quieting title in her name as to a leasehold interest in the property for a period of one year." Stafford I , ¶ 5. Stafford did not claim she had a contract to purchase the Property as a result of the actions taken at the auction. Fannie Mae moved for summary judgment on all of Stafford's claims, but consideration was delayed as Fannie Mae failed to comply with discovery, even over Stafford's motion to compel. Stafford also sought summary judgment, and after oral arguments in September 2014, the matter pended for over three years despite the parties continuing to file additional motions and notices of issues. Stafford I , ¶ 6.

¶6 In January 2018, Wade Ayala purchased the Property from Fannie Mae, and Fannie Mae quitclaimed the Property to him. In March 2018, Fannie Mae, no longer having an interest in the Property, moved to dismiss the action with prejudice. Stafford I , ¶ 7. Stafford objected and moved for leave to amend her pleadings to "bring additional counterclaims for fraud, negligent misrepresentation, unjust enrichment, compensatory and punitive damages, violation of the Montana Unfair Trade Practices and Consumer Protection Act, and a declaratory judgment to quiet title in Stafford's favor"—all claims rooted in the belief she was entitled to rightful ownership and possession of the Property, a peculiar request given that, up until that point, neither the court nor Fannie Mae was aware that Stafford claimed an ownership interest in the Property. Stafford I , ¶ 17. On July 2, 2018, the district court denied Stafford's motion for leave to amend and granted Fannie Mae's motion to dismiss with prejudice, though the order stipulated that Stafford was "free to file a separate action against any party or parties presently claiming an interest in the subject real property." We affirmed the court following Stafford's appeal, stating:

Whether Fannie Mae lawfully owned the property was only tangentially related to Stafford's primary issue—whether she was entitled to a one-year leasehold interest. Stafford did in fact remain on the property for one year (and every year since). Thus, regardless of Stafford's complaints about the property's public auction, because Stafford already received the relief she requested, the District Court correctly found that it could no longer provide her relief, rendering her counterclaim moot.
The District Court acted within its discretion in denying Stafford's motion for leave to amend her pleading. The court found the timing and nature of Stafford's proposed amendments problematic. It found Stafford knew about the potential additional parties and claims several years before filing her motion and took issue with the fact that she only filed her motion to amend after Fannie Mae filed its motion to dismiss. The District Court thus concluded the "liberal freedom to amend pleadings contemplated by [ M. R. Civ. P. 15 ], does not afford any relief to [Stafford] under the circumstances." Stafford also offered no meaningful justification for failing to move to amend her pleading earlier . Accordingly, ... we hold the court did not abuse its discretion by denying Stafford's motion for leave to amend.
After Fannie Mae sold the property, the third-party purchaser [here, Ayala] would have become a relevant party in any lawsuit that sought to establish ownership of the property. The fact remains, however, that Stafford only sought to establish a leasehold interest in the property with her initial counterclaim. She did not assert an ownership interest until she filed her motion for leave to amend , and therefore, the District Court did not abuse its discretion by denying her motion under this theory.

Stafford I , ¶¶ 11, 14, 18 (emphasis added).

¶7 On July 5, 2018, Ayala initiated his own wrongful detainer action against Stafford. Stafford...

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