Homeward Opportunities Fund I Trust 2019-2 v. Taptelis

314 Cal.Rptr.3d 391

HOMEWARD OPPORTUNITIES FUND I TRUST 2019-2, Plaintiff and Respondent,

v.Ilias Louie TAPTELIS, Defendant and Appellant.

H049791

Court of Appeal, Sixth District, California.

Filed October 12, 2023

Attorneys for Defendant and Appellant, Ilias Louis Taptelis: Law Offices of Ronald H. Freshman, Ronald H. Freshman, Fallbrook

Attorneys for Plaintiff and Respondent, Homeward Opportunities Fund I Trust 2019-2: The Ryan Firm, Timothy M. Ryan, Michael W. Stoltzman, Jr., Anaheim

LIE, J.

Upon purchasing property in a nonjudicial foreclosure sale under a borrower's deed of trust, the new owner must perfect title under the sale before seeking to evict the trustor/borrower. ( Code Civ. Proc., § 1161a, subd. (b)(3) ;¹ Dr. Leevil, LLC v. Westlake Health Care Center (2018) 6 Cal.5th 474, 241 Cal.Rptr.3d 12, 431 P.3d 151 ( Dr. Leevil ).) Although the recording of a trustee's deed is typically sufficient to raise a conclusive presumption of title under the sale as to a bona fide purchaser for value without notice ( Civ. Code, § 2924, subd. (c) ), plaintiff Homeward Opportunities Fund I Trust 2019-2 (Homeward), the beneficiary under a deed of trust executed by defendant-borrower Ilias Louie Taptelis, purchased the trust property subject to Taptelis's duly recorded lis pendens—notice of Taptelis's pending wrongful foreclosure action. Homeward thereafter served Taptelis with notice to quit the premises and obtained a judgment of unlawful detainer against him, without first expunging the lis pendens. Because the lis pendens clouded Homeward's title under the sale, and Taptelis was denied the opportunity to assert it in the unlawful detainer trial as a defense to Homeward's claim of title, we reverse the unlawful detainer judgment.

I. BACKGROUND

A. The Nonjudicial Foreclosure and the Wrongful Foreclosure Suit

Taptelis borrowed $1.24 million from Recovco Mortgage Management to purchase property located at Fennel Court. To secure the loan, he executed a Deed of Trust by which he conveyed the Fennel Court property to Stewart Title of California, Inc., as trustee with power of sale, to hold for the benefit of Recovco's designee, Mortgage Electronic Registration Systems, Inc. (MERS). The deed of trust was recorded in June 2019.

Taptelis defaulted on the loan later in 2019. After his default, the following documents concerning the Fennel Court property were recorded in Santa Clara County: (1) In April 2020, MERS executed an Assignment of Deed of Trust, through which it purported to assign its beneficial interest under the Deed of Trust to Homeward;² (2) in May 2020, Specialized Loan Servicing LLC (SLS), acting as attorney-in-fact for Homeward, executed a Substitution of Trustee, through which Homeward purported to substitute Quality Loan Service Corporation (Quality) for Stewart Title as the trustee; and (3) in June 2020, Quality issued a Notice of Default and Election to Sell Under Deed of Trust.

As stated in the Notice of Default, as of June 2020, Taptelis needed to pay $87,221.09 to cure the default. Quality appended a California Declaration of Compliance to the Notice of Default, representing that the mortgage servicer had exercised due diligence to contact Taptelis to assess his financial situation and explore options to avoid foreclosure 30 days or more before the date of the declaration.

Quality's Notice of Trustee's Sale, scheduled for December 4, 2020, was recorded in October 2020.

Two weeks later, Taptelis filed a civil action challenging the foreclosure and naming various involved entities as defendants, including Homeward. In the complaint, Taptelis described the documents that had been recorded to date.

Taptelis alleged nine causes of action: (1) Violation of the Homeowner Bill of Rights by filing the Notice of Default while Taptelis had a loan modification application pending, that is, "dual-tracking"; (2) Violation of Civil Code section 2923.5, subdivision (b), by SLS and Quality for failing to provide certain information prior to filing the Notice of Default; (3) Violation of Civil Code section 2924.17 by SLS and Quality by submitting a declaration in support of the Notice of Default that was not based on reliable and competent evidence; (4) Violation of the implied covenant of good faith and fair dealing by dual-tracking; (5) Negligence in servicing the loan in connection with the alleged dual-tracking; (6) Wrongful foreclosure flowing from the foregoing violations of the HBOR and Civil Code; (7) Cancelation of the Assignment, Substitution, Notice of Default, and Notice of Trustee's Sale on the ground that they were not based on reliable and competent evidence and that SLS and Quality improperly filed the Notice of Default; (8) Violation of the Unfair Competition Law arising out of the foregoing causes of action; and (9) Quiet Title.

Two days prior to the foreclosure sale, Taptelis had a lis pendens recorded in connection with the wrongful foreclosure action.³

On December 11, 2020, Santa Clara County recorded Quality's Trustee's Deed Upon Sale. As set forth therein, Quality sold the Fennel Court property to Homeward pursuant to the Deed of Trust through a public auction held on December 4, 2020.

B. The Notice to Quit and this Action

On March 16, 2021, Homeward served notice to quit on Taptelis and all unknown occupants, tenants, and subtenants at the Fennel Court property. Taptelis did not vacate the property, so Homeward initiated the present unlawful detainer suit.

On March 24, 2021, Homeward filed its verified unlimited civil unlawful detainer complaint. Homeward alleged that it had obtained ownership of the property pursuant to a nonjudicial foreclosure on December 4, 2020. Homeward sought to wrest possession of the property from Taptelis and any other unnamed occupants, tenants, and subtenants.

The following month, in the wrongful foreclosure case, Taptelis filed an ex parte application shortening time for a hearing on a motion to consolidate that wrongful foreclosure action with this unlawful detainer action or, in the alternative, a motion to stay this action. Taptelis had not yet filed a motion to consolidate, and the trial court summarily denied the ex parte.

Taptelis answered the unlawful detainer complaint in June 2021. In September 2021, Taptelis submitted for filing in the wrongful foreclosure case a motion to consolidate the two cases or alternatively stay this unlawful detainer case. Later in September, Taptelis filed an ex parte application in this case requesting it be stayed. In the application, Taptelis noted that his duly noticed motion in the wrongful foreclosure case would not be heard until after the unlawful detainer trial date. The trial court denied the ex parte application without prejudice, with instructions to file "[t]he request by noticed motion in the appropriate civil action." The trial court subsequently continued the trial in this action for two weeks, to October 27, 2021.

On October 18, 2021, Taptelis filed an ex parte application in the wrongful foreclosure case seeking a stay—pending resolution of his motion to consolidate—of the trial in this unlawful detainer case. The trial court summarily denied the ex parte application.

The day of the unlawful detainer trial, asked for his time estimate, Taptelis orally advised the court that he "would be looking to request a stay." Taptelis stated that his motion to consolidate had not been calendared in the wrongful foreclosure case.⁴ The trial court acknowledged that the "motion to stay proceedings ... would be within [its] jurisdiction" and understood Taptelis's request as "a motion to continue, so that the other court can rule on the motion to consolidate[.]" Reasoning that an unlawful detainer is "a summary proceeding" that "can't keep getting continued and wait for the other case," the trial court denied the request because "[t]his case has to go forward."

At the bench trial, over Taptelis's objections, Homeward relied on judicial notice of recorded documents—the Deed of Trust, Assignment, Substitution, Notice of Default, Notice of Trustee's Sale, and Trustee's Deed—to establish that it had perfected title to the property by way of a nonjudicial foreclosure sale conducted in compliance with section 2924 of the Civil Code. Homeward called one witness, a process server, to establish that it had served a notice to quit.

In his defense, Taptelis confirmed he secured his loan from Recovco with a Deed of Trust but testified that he never received notice that he had any new creditor and that he had submitted a loan modification application to his loan servicer. The trial court then sustained Homeward's objection that issues concerning Taptelis's loan modification application were beyond the scope of the unlawful detainer. The trial court then sustained relevance objections to testimony from Taptelis regarding his pending wrongful foreclosure case and recorded lis pendens. Taptelis did not offer other evidence.

On December 29, 2021, the trial court issued a written ruling. The trial court "took judicial notice of the recorded documents, their legally operative language, the names of the parties, the identification of the document, the recordation date and the court [then] deduce[d] the legal effect of those recorded instruments. The court ... thus conclude[d] the following: [Homeward] acquired the subject property through foreclosure proceedings, which were (by benefit of a rebuttable presumption) in accordance with applicable law, namely Civil Code § 2924." Moreover, the trial court found that "a three[-]day notice to quit was properly served" based on the testimony and documents introduced through the process server.

In January 2022, Taptelis filed both a limited civil notice of appeal and an ex parte application for stay of judgment or writ of possession pending the appeal. The trial court entered judgment on January 31, 2022, and the writ of possession issued on February 1, 2022.

Taptelis unsuccessfully petitioned this court for a peremptory...