Boyd v. Freeman

• Citation: 227 Cal.Rptr.3d 164,18 Cal.App.5th 847
• Decision Date: 20 December 2017
• Docket Number: B279246
• Court: California Court of Appeals
• Parties: Paula BOYD, Plaintiff and Appellant, v. David FREEMAN, Defendant and Respondent.

18 Cal.App.5th 847

227 Cal.Rptr.3d 164

Paula BOYD, Plaintiff and Appellant,

v.David FREEMAN, Defendant and Respondent.

B279246

Court of Appeal, Second District, Division 4, California.

Filed December 20, 2017

Ivie, McNeill & Wyatt and Chandler A. Parker for Plaintiff and Appellant.

The Jamison Law Firm and Guy E. Jamison for Defendant and Respondent.

MANELLA, J.

In the underlying action, appellant Paula Boyd asserted claims against respondent David Freeman predicated on allegations of wrongful foreclosure. The trial court sustained Freeman's demurrer to Boyd's first amended complaint without leave to amend, reasoning that the doctrine of res judicata barred her claims, in view of a judgment in favor of Freeman and against Boyd in a prior action. We conclude that the doctrine did not foreclose Boyd's claims because the prior judgment was not on the merits. We therefore reverse and remand for further proceedings.

RELEVANT FACTUAL AND PROCEDURAL BACKGROUND

In 2005, Boyd executed a promissory note in favor of attorney Freeman secured by a deed of trust for a property in Glendale. Later, Freeman initiated foreclosure proceedings that culminated in a July 16, 2012 foreclosure sale, at which Freeman became owner of the Glendale property.

In June 2012, while the foreclosure proceedings were pending, Boyd initiated her prior action against attorney Freeman (L.A. Super. Ct. Case No. BC486054). Her original complaint asserted claims for legal malpractice, breach of contract, breach of fiduciary duty, fraud, and declaratory relief, predicated on allegations that after Boyd hired Freeman to represent her in a matter, he made a "usurious" loan to her secured by the Glendale property. According to the complaint, in 2007, after Freeman attempted to arrange for a foreclosure sale of the property, Boyd and Freeman entered into a settlement agreement. The complaint asserted that Boyd's claims were for "violations that ... continued to occur after the settlement," alleging that Freeman "continued to use his legal status and his usurious loan terms to try to take the property illegally and wrongfully from [Boyd]." Although the complaint contained no claim for unlawful foreclosure in connection with the then-pending foreclosure, it alleged that Freeman had violated Civil Code section 2924f, which is a provision of the statutory scheme regulating nonjudicial foreclosure sales ( Civ. Code, § 2924 et seq. ).¹

On July 16, 2012, shortly before the foreclosure sale, Boyd submitted an ex parte application for a temporary restraining order to enjoin the foreclosure sale. The application asserted that the notice of default misstated the amount due on the note, in contravention of Civil Code section 2924, subdivision (b)(1). The trial court denied the application.

Freeman demurred to the complaint, contending that Boyd's claims were time-barred under the applicable statutes of limitations. In addition, Freeman argued that the claims failed because the complaint's allegations regarding the 2007 settlement, viewed along with the note and trust deed, demonstrated the nonusurious nature of the loan. The trial court sustained the demurrer, but afforded Boyd leave to amend her claims, with the exception of her request for declaratory relief.

In March 2013, Boyd filed her first amended complaint. The complaint asserted a claim for breach of fiduciary duty predicated on allegations that Freeman had breached his professional obligations as an attorney in making the secured loan to Boyd, a claim for breach of fiduciary duty predicated on allegations that the loan was usurious, and a claim for restitution under the unfair competition law (UCL; Bus. & Prof. Code, § 17200 et seq. ) predicated on violations of the California Consumers Legal Remedies Act (CLRA; Civ. Code, § 1750 et seq. ) and Freeman's other alleged misconduct.² The restitution claim sought recovery of the Glendale property, alleging, inter alia, that Freeman's misconduct resulted "in claims of foreclosure rights not in compliance with California law," as well as "a purportedly lawful but in fact void [t]rustee's sale ...."

Freeman demurred to the first amended complaint on the grounds that its claims were untimely under the applicable statutes of limitations, and were otherwise legally untenable. The trial court sustained the demurrer to the first amended complaint without leave to amend, concluding that it stated no viable claims. In October 2013, the court entered an order dismissing the prior action, from which Boyd noticed an appeal.

In an unpublished opinion ( Boyd v. Freeman (May 19, 2015, B253500) 2015 WL 2393991, 2015 Cal.App.Unpub. LEXIS 3449 ), we affirmed the order of dismissal, agreeing with the trial court that the claims in the first amended complaint were time-barred insofar as they relied on a breach of fiduciary duty, and that the UCL claim failed insofar as it relied on the CLRA, as that statute is inapplicable to loans for the purchase of real estate. In determining that leave to amend had been properly denied, we noted that Boyd had not shown that she could state a claim for wrongful foreclosure. We stated: "[A]lthough [Boyd] refers broadly to ‘irregularities in the ... sale’ " and inadequacy of the sale price, she offers no allegations detailing the purported misconduct, and no legal authority showing that any such misconduct supports the proposed claims ...."

On July 16, 2015, Boyd commenced the underlying action. Her first amended complaint (FAC) contains claims for wrongful foreclosure, vacation of the trustee's sale and the trustee's deed upon sale, unjust enrichment, and quiet title, based on allegations that Freeman "caused an illegal, fraudulent or willfully oppressive sale" of the Glendale property. The FAC alleges that the secured note was void—and thus provided no basis for the sale—because it fraudulently stated it had been arranged by a mortgage broker; that Freeman's notice of default overstated the amount in default; that he contravened Civil Code section 2924f by failing to post timely written notices of the foreclosure sale, and "in other particulars"; and that he bought the property at the sale for less that its true value.

Freeman demurred to the FAC, contending that under the doctrine of res judicata, the order of dismissal in Boyd's prior action barred the claims in the FAC. After sustaining the demurrer without leave to amend, the trial court entered a judgment in favor of Freeman and against Boyd. This appeal followed.

DISCUSSION

Boyd contends the trial court erred in sustaining the demurrer to the FAC without leave to amend. For the reasons discussed below, we agree.

A. Standard of Review

"Because a demurrer both tests the legal sufficiency of the complaint and involves the trial court's discretion, an appellate court employs two separate standards of review on appeal. [Citation.] ... Appellate courts first review the complaint de novo to determine whether or not the ... complaint alleges facts sufficient to state a cause of action under any legal theory, [citation], or in other words, to determine whether or not the trial court erroneously sustained the demurrer as a matter of law. [Citation.]" ( Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 879, 6 Cal.Rptr.2d 151, fn. omitted ( Cantu ).) "Second, if a trial court sustains a demurrer without leave to amend, appellate courts determine whether or not the plaintiff could amend the complaint to state a cause of action. [Citation.]" ( Id. at p. 879, fn. 9, 6 Cal.Rptr.2d 151.)

Under the first standard of review, "we examine the complaint's factual allegations to determine whether they state a cause of action on any available legal theory. [Citation.] We treat the demurrer as admitting all material facts which were properly pleaded. [Citation.] However, we will not assume the truth of contentions, deductions, or conclusions of fact or law [citation], and we may disregard any allegations that are contrary to the law or to a fact of which judicial notice may be taken. [Citation.]" ( Ellenberger v. Espinosa (1994) 30 Cal.App.4th 943, 947, 36 Cal.Rptr.2d 360.)

Under the second standard of review, the burden falls upon the plaintiff to show what facts he or she could plead to cure the existing defects in the complaint. ( Cantu, supra, 4 Cal.App.4th at p. 890, 6 Cal.Rptr.2d 151.) "To meet this burden, a plaintiff must submit a proposed amended complaint or, on appeal, enumerate the facts and demonstrate how those facts establish a cause of action." ( Ibid. )

B. Governing Principles

The key issues concern whether the order of dismissal in the prior action barred the claims in the FAC under the doctrine of res judicata or a related doctrine. The term "res judicata" is often used as an umbrella term encompassing the principles of claim preclusion and issue preclusion, viewed as two separate aspects of a single doctrine. ( DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 824, 189 Cal.Rptr.3d 809, 352 P.3d 378 ( DKN Holdings ).) "Claim preclusion, the ‘ " ‘primary aspect’ " ' of res judicata, acts to bar claims that were, or should have been, advanced in a previous suit involving the same parties. [Citation.] Issue preclusion, the ‘ " ‘secondary aspect’ " ' historically called collateral estoppel, describes the bar on relitigating issues that were argued and decided in the first suit." [Citation].) ( Id . at p. 824, 189 Cal.Rptr.3d 809, 352 P.3d 378, quoting Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 797, 108 Cal.Rptr.3d 806, 230 P.3d 342 ( Boeken ).)

Unlike issue preclusion, claim preclusion is directed at "entire causes of action." ( DKN Holdings , supra , 61 Cal.4th at p. 824, 189 Cal.Rptr.3d 809, 352 P.3d 378.) Generally, "[c]laim preclusion arises if a second suit involves: (1) the same cause of action (2) between the same parties (3) after a final judgment on the merits in the first suit." ( Ibid . ) In contrast, "issue preclusion applies: (1) after final adjudication (2) of an identical issue...