Struiksma v. Ocwen Loan Servicing, LLC

• Decision Date: 14 July 2021
• Docket Number: G059223
• Citation: 280 Cal.Rptr.3d 881,66 Cal.App.5th 546
• Court: California Court of Appeals Court of Appeals
• Parties: Dwayne A. STRUIKSMA et al., Plaintiffs and Appellants, v. OCWEN LOAN SERVICING, LLC, et al., Defendants and Respondents.

66 Cal.App.5th 546

280 Cal.Rptr.3d 881

Dwayne A. STRUIKSMA et al., Plaintiffs and Appellants,

v.OCWEN LOAN SERVICING, LLC, et al., Defendants and Respondents.

G059223

Court of Appeal, Fourth District, Division 3, California.

Filed July 14, 2021

Vasu Vijayraghavan for Plaintiffs and Appellants.

Locke Lord, Regina McClendon and Meagan S. Tom, San Francisco, for Defendants and Respondents.

OPINION

MOORE, J.

Plaintiffs Linda and Dwayne Struiksma lost title to their home in a foreclosure sale. The purchaser at the sale then brought an unlawful detainer action against them under Code of Civil Procedure section 1161a, subdivision (b)(3).¹ A default judgment was issued, and plaintiffs were evicted from their property. Plaintiffs then filed this action against defendants HSBC Bank USA, N.A. and Ocwen Loan Servicing, LLC (collectively, defendants), their lender and loan servicer, who were not parties to the unlawful detainer action. Generally, they alleged defendants carelessly failed to credit several payments to their loan balance. Thus, plaintiffs contended they were never in default and defendants wrongfully foreclosed on the property. The trial court sustained defendants' demurrer to the complaint. It found all of plaintiffs' claims were precluded by the unlawful detainer judgment except for a claim under the Truth in Lending Act (TILA), which was defective for other reasons. Plaintiffs were denied leave to amend on all claims and appealed the resulting judgment.

We find the court erred in ruling plaintiffs' claims were precluded, and we publish this case to clarify the preclusive effect of an unlawful detainer action under section 1161a. In such a proceeding, the court must determine whether the purchaser duly perfected title. But this is a limited inquiry focusing on how the trustee's sale is conducted. Issues of title outside this narrow scope need not be raised and are not precluded in subsequent lawsuits. Here, plaintiffs' claims were not directly related to the conduct of the sale and were not at issue in the unlawful detainer action. Nor were plaintiffs required to bring their claims against defendants in that proceeding.

Defendants also argue that certain claims the trial court found precluded fail for reasons other than preclusion. Given its ruling, the court had no opportunity to consider these arguments. So, we remand this case for the court to consider them in the first instance. Finally, as to the TILA claim, it suffers from several defects and the court correctly sustained the demurrer to this claim without leave to amend.

For these reasons, we affirm the court's decision in part, reverse in part, and remand as directed.

IFACTS

In 2006, plaintiffs obtained a $510,000 loan to buy a home in Placentia (the property) from nonparty First Street Financial Inc. (First Street). The loan was secured by a deed of trust on the property. A few years later, First Street assigned its beneficial interest in the deed of trust to defendant "HSBC Bank USA, N.A., as Trustee on behalf of ACE Securities Corp. Home Equity Loan Trust and for the registered holders of ACE Securities Corp. Home Equity Loan Trust, Series 2007-HE2, Asset Backed Pass-Through Certificates" (HSBC). Defendant Ocwen Loan Servicing, LLC, was HSBC's servicer for the loan.

A notice of default was recorded on the property in February 2017, but it was rescinded the following month. Another notice of default was recorded in September 2017, which was followed by the recording of a notice of trustee's sale in March 2018. The property was sold at a foreclosure sale in November 2018 to DNE Associates (DNE).

DNE then sought to evict plaintiffs under section 1161a, subdivision (b)(3), which allows the purchaser at a nonjudicial foreclosure sale to file an unlawful detainer action against the occupant in possession. Plaintiffs responded with a motion to strike. The motion was denied, and plaintiffs were ordered to file an answer.² They failed to do so, and a default judgment was entered against them in March 2019. Plaintiffs claim their counsel at the time, Nationwide Legal, LLC, was responsible for the default. DNE subsequently evicted plaintiffs.

Plaintiffs filed this lawsuit in January 2019 against numerous parties. They alleged the following claims against defendants: (1) wrongful foreclosure; (2) negligence; (3) violation of TILA; (4) violation of Business and Professions Code section 17200 ; (5) quiet title; (6) cancellation of the trustee's deed on sale; (7) breach of contract; (8) breach of the implied covenant of good faith and fair dealing; (9) unjust enrichment; and (10) slander of title.³

All these claims, except the TILA claim, were based on plaintiffs' allegations that they made four telephonic payments on their loan from March to June 2017, which defendants failed to apply to their account. They allegedly informed defendants about the error over the phone on multiple occasions, submitted paperwork on the missing payments, and even provided proof that the payments had been made. Plaintiffs claimed that though they were never in default, defendants proceeded with the trustee's sale and unlawfully sold the property to DNE.

Defendants demurred to the complaint, arguing, among other things, that the non-TILA claims were precluded by the unlawful detainer action. They asserted the TILA claim failed because TILA only applies to the initial creditor, which was First Street, not defendants. The trial court agreed with both arguments and sustained defendants' demurrer without leave to amend. Judgment was entered in their favor in May 2020, which plaintiffs now appeal.

IIDISCUSSION

A. Failure to Cite the Record

Plaintiffs' opening statement of facts sparsely cites to the record. "If a party fails to support an argument with the necessary citations to the record, that portion of the brief may be stricken and the argument deemed to have been waived." ( Duarte v. Chino Community Hospital (1999) 72 Cal.App.4th 849, 856, 85 Cal.Rptr.2d 521.) Though we admonish plaintiffs for their lack of citations, the material facts are drawn from the complaint and assumed to be true for purposes of the demurrer. ( Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126, 119 Cal.Rptr.2d 709, 45 P.3d 1171.) Since there are no factual disputes and the complaint is relatively short, we will overlook plaintiffs' error and consider their arguments.

B. Legal Standard

" ‘ "We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed." [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff.’ " ( Zelig v. County of Los Angeles, supra , 27 Cal.4th at p. 1126, 119 Cal.Rptr.2d 709, 45 P.3d 1171.)

C. Preclusion of Non-TILA Claims

The trial court found that plaintiffs' non-TILA claims against defendants were precluded by the unlawful detainer action: "the validity of the foreclosure, the foreclosure process, and the trustee's sale were encompassed by the unlawful detainer action. Plaintiffs' claims that the foreclosure and the trustee's sale were wrongful could have been litigated in the unlawful detainer case. The default judgment entered on the unlawful detainer complaint therefore necessarily adjudicated issues relating to the propriety of the foreclosure and the trustee's sale." As we explain below, the preclusive effect of an unlawful detainer action under section 1161a is narrow. The non-TILA claims arise from defendants' failure to credit plaintiffs' payments to their account, not any irregularity in the trustee's sale. As such, they are not precluded by the unlawful detainer action.

"The law of preclusion helps to ensure that a dispute resolved in one case is not relitigated in a later case.... [I]ts contours and associated terminology have evolved over time. We now refer to ‘claim preclusion’ rather than ‘res judicata’ [citation], and use ‘issue preclusion’ in place of ‘direct or collateral estoppel ....’ " ( Samara v. Matar (2018) 5 Cal.5th 322, 326, 234 Cal.Rptr.3d 446, 419 P.3d 924.) "Claim preclusion prevents relitigation of entire causes of action. [Citations.] [It] applies only when ‘a second suit involves (1) the same cause of action (2) between the same parties [or their privies] (3) after a final judgment on the merits in the first suit.’ [Citation.] Issue preclusion, by contrast, prevents ‘relitigation of previously decided issues,’ rather than causes of action as a whole. [Citation.] It applies only ‘(1) after final adjudication (2) of an identical issue (3) actually litigated and necessarily decided in the first suit and (4) asserted against one who was a party in the first suit or one in privity with that party.’ " ( Id. at pp. 326-327, 234 Cal.Rptr.3d 446, 419 P.3d 924.)

"[A]n unlawful detainer judgment has limited [preclusive] force because it typically follows a summary proceeding focused only on deciding a party's right to immediate possession of property." ( Gombiner v. Swartz (2008) 167 Cal.App.4th 1365, 1371, 85 Cal.Rptr.3d 83.) Thus, title issues generally cannot be raised in unlawful detainer actions. ( Martin-Bragg v. Moore (2013) 219 Cal.App.4th 367, 385, 161 Cal.Rptr.3d 471.) "However, where title is acquired through [ section 1161a proceedings], courts must make a limited inquiry into the basis of the plaintiff's title." ( Old National Financial...