Case Number: BC631510 Hearing Date: May 13, 2019 Dept: 24

Plaintiff Kwang K. Sheen’s motion is DENIED.

On August 23, 2016, Plaintiff Kwang K. Sheen (“Plaintiff”) filed this action against Wells Fargo N.A., Mirabella Investments Group, LLC (“Mirabella”) and FCI Lender Services, Inc. (“FCI”). The operative second amended complaint (“SAC”) alleges four causes of action against for (1) negligence against all defendants; (2) promissory estoppel against Mirabella and FCI; (3) IIED against all defendants; and (4) violation of Bus. & Prof. Code §§ 17200, et seq. against all defendants. On June 22, 2017, the Court sustained Wells Fargo’s demurrer to the first, third, and fourth causes of action without leave to amend. The Court overruled FCI’s and Mirabella’s demurrer to the first cause of action and sustained its demurrer to the second, third, and fourth causes of action without leave to amend. Consequently, the only cause of action remaining is the first cause of action for negligence against FCI and Mirabella.

In the SAC, Plaintiff alleges that he is a borrower who lost his home to foreclosure in October 2014. The home was located at 5224 Cheryl Ave., La Crescenta, California 91214 (“Property”). Plaintiff obtained a first-lien mortgage loan of approximately $500,000.00 in order to purchase the Property. In November 2005 Plaintiff obtained second and third-lien residential mortgage loans from Wells Fargo. These loans were also secured by the Property.

In November 2013, the second-lien loan (“Second Loan”) was transferred to Mirabella. In April 2014, Mirabella recorded a Notice of Default and Election to Sell Under Deed of Trust in the Los Angeles County Recorder’s Office stating that the Second Loan was in default. Next, in July 2014, Mirabella recorded Notice of Trustee’s Sale stating that the Property would be sold at a public auction on August 22, 2014 pursuant to the deed of trust securing the Second Loan. Still in July 2014, Plaintiff received a letter from Mirabella stating that the Second Loan was in default.

Effective August 12, 2014, Mirabella transferred the servicing rights to the Second Loan to FCI. Plaintiff submitted the last in a series of loan modification applications to FCI on or about October 1, 2014 with the assistance of Danny Hernandez, a representative from the Legal Aid Society of Orange County. During the first two weeks of October 2014, FCI represented to Hernandez, after it had rejected this last application, that although the application had been rejected, FCI no longer considered the Second Loan to be in “active foreclosure,” and that a foreclosure sale of the Property was therefore no longer scheduled so that Plaintiff and FCI could continue to attempt to work out a payment plan to bring the Second Loan current.

On October 29, 2014, Plaintiff was informed that the Property would be sold that day at a foreclosure auction. That same day Plaintiff’s home was sold at a trustee’s sale.

On February 4, 2019, the Court granted FCI’s motion for summary judgment. On March 12, 2019, the Court entered judgment in favor of FCI. On March 27, 2019, Plaintiff moved for new trial on grounds that there is newly discovered material evidence that could not with reasonable diligence have been discovered and produced at the MSJ. On April 10, 2019, FCI filed an opposition. On April 15, 2019, Plaintiff filed a reply.

Legal Standard

“A motion for new trial is a creature of statute; . . .” (Neal v. Montgomery Elevator Co. (1992) 7 Cal. App. 4th 1194, 1198.) A movant must satisfy Code of Civil Procedure sections 657 and 659. Under Code of Civil Procedure section 657, a motion for new trial may be granted if there is any:

[¶] 1. Irregularity in the proceedings of the court, jury, or adverse party, or any order of the court or abuse of discretion by which either party was prevented from having a fair trial. [¶] 2. Misconduct of the jury; and whenever any one or more of the jurors have been induced to assent to any general or special verdict, or to a finding on any question submitted to them by the court, by a resort to the determination of chance, such misconduct may be proved by the affidavit of any one of the jurors. [¶] 3. Accident or surprise, which ordinary prudence could not have guarded against. [¶] 4. Newly discovered evidence, material for the party making the application, which he could not, with reasonable diligence, have discovered and produced at the trial. [¶] 5. Excessive or inadequate damages. [¶] 6. Insufficiency of the evidence to justify the verdict or other decision, or the verdict or other decision is against law. [¶] 7. Error in law, occurring at the trial and excepted to by the party making the application.

(Code Civ. Proc., § 657.)

When ruling on an application for a new trial, the court sits as an independent trier of fact. (Lane v. Hughes Aircraft Co. (2000) 22 Cal.4th 405, 412.) The court, therefore, has broad discretion to order new trials, limited only by the obligation to state its reasons for granting a new trial and the existence of substantial evidence in the record to support those reasons. (Ibid.) In assessing the need for a new trial, the court must rely on its view of the overall record, taking into account such factors, among others, as the nature and seriousness of the alleged misconduct, the general atmosphere, including the judge’s control, of the trial, the likelihood of prejudicing the jury, and the efficacy of objection or admonition under all the circumstances. (Dominguez v. Pantalone (1989) 212 Cal.App.3d 201, 211.)

A new trial motion is available to challenge a summary judgment. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 858.) When a new trial is granted following summary judgment, the new trial motion is in the nature of a motion for reconsideration (CCP § 1008) and subject to the same requirements (Passavanti v. Williams (1990) 225 Cal.App.3d 1602, 1606.)

Admissibility of the Presented Evidence

Plaintiff moves for new trial based on the newly discovered evidence of Hernandez’s notes during the foreclosure discussions at issue. Particularly, Plaintiff relies on Hernandez’s notes regarding a September 26, 2014 telephone conversation that he had on behalf of Plaintiff with FCI representative “Jessica.” (Hernandez Decl., Ex. A.) FCI objects on hearsay grounds. Plaintiff argues that Hernandez and Sims create a proper foundation for past recollection recorded and business records exception. (Evid. Code §§ 1237, 1271.)

Subject to several foundational prerequisites, the “past recollection recorded” hearsay exception permits the use of evidence of a testifying witness’ writing as substantive proof of the contents where the witness presently has insufficient memory to testify fully and accurately to the facts contained in the writing. (Evid. Code § 1237.) Here, Hernandez’s declaration satisfies the requirement for the above exception. Hernandez establishes that 1) he made the notes, 2) wrote them when the fact recorded in the writing actually occurred or when the fact was fresh in the his memory, and 3) he knew that notes were correctly stated at the time. (Hernandez Decl., ¶¶ 4-9.) This provides a proper foundation and a sufficient assurance of the trustworthiness of the statement provided. Thus, he may testify from the document itself.

Accordingly, FCI’s objections to the various declarations are OVERRULED in their entirety, as the evidence presented is either not hearsay or subject to the above exceptions. (Evid. Code §§ 1237, 1271.)

Newly Discovered Evidence and Diligence

Plaintiff argues that he was diligent in obtaining both Hernandez’s testimony and Hernandez’s notes. CCP section 657 authorizes a trial court to reverse a summary judgment and grant a new trial when there is “[n]ewly discovered evidence, material for the party making the application, which he could not, with reasonable diligence, have discovered and produced at trial.” (CCP § 657(4).) A new trial based on newly discovered evidence is appropriate when the moving party establishes three elements: “[1] the evidence is newly discovered, [2] reasonable diligence was used to find it, and [3] the new evidence is material to the moving party’s case.” (Santillan v. Roman Catholic Bishop of Fresno (2012) 202 Cal.App.4th 708, 727–728.) A party seeking new trial, based on claim of discovery of new evidence following summary judgment, is held to a less demanding standard of reasonable diligence in discovering the evidence than a party asserting a posttrial claim of discovery of new evidence. (Doe v. United Air Lines, Inc. (2008) 160 Cal.App.4th 1500.)

As to Plaintiff’s search for Hernandez, Plaintiff’s counsel explains his method for searching for him. Plaintiff’s counsel had attempted to find and reach Hernandez since the beginning of this case, to no avail. (Grynberg Decl. ¶ 2). Plaintiff’s counsel contacted Legal Aid, but they did not give him any information. (Id., Ex. A.) Plaintiff’s counsel was provided with a telephone number for Hernandez by a community organization that had previously partnered with Legal Aid when Hernandez was employed there. (Id. ¶ 3). Plaintiff’s counsel also searched for Mr. Hernandez using online search tools and background searches, but the name was too common to be useful even with the phone number and other relevant criteria. (Id. ¶ 4). Notably, FCI was similarly unable to locate Hernandez during this litigation, though they never held any obligation or burden to do so. (Id., Ex. C [order on Plaintiff’s motion to quash], Ex. D at 2-3 [FCI’s opposition to Plaintiff’s motion to quash, acknowledging that Mr. Hernandez could not be located for service].)

Following this Court’s ruling on FCI’s motion, Plaintiff’s counsel attempted once again to locate Hernandez. (Id. ¶ 6.) Plaintiff’s counsel then attempted to refine his White Pages search by searching using the phone number he had that was associated with Hernandez. (Ibid.) For the first time, the search returned a result for an address in Riverside, California. (Ibid.) Plaintiff’s counsel next drove to Riverside on a weekend in February 2019. (Id. ¶ 7). Plaintiff’s counsel waited at the address for about an hour until he eventually contacted Hernandez. (Id. ¶ 8). He told Plaintiff’s counsel that he could not remember any details about conversations with FCI about Plaintiff’s loan in 2014, but that he took notes on the calls that Legal Aid held. (Ibid.)

The Court finds that this satisfies Plaintiff’s diligence insofar as it concerns Hernandez’s direct testimony, which as Plaintiff discovered was relatively worthless. It may have been useful to establish the past record recorded, however Plaintiff correctly points out that the business record exception could have also applied, and the documents could have been authenticated by Sims. Thus, Plaintiff will still need to justify his inability to obtain the notes he claims justify his motion for new trial.

Plaintiff states that he had no reason to believe that these documents existed prior to contacting Hernandez, and that he therefore acted diligently when he first learned of the notes after contacting Hernandez for the first time after the hearing. In New York Times Co. v. Superior Court (2005) 135 Cal. App. 4th 206, the plaintiff moved for reconsideration based upon the deposition testimony of two representatives who plaintiff deposed two business days before the hearing on a summary judgment motion. (Id. at 212.) In denying the motion, the court noted that plaintiff “easily could have obtained this evidence by deposition or declarations . . . during discovery.” (Id. at 212-213.) Because the evidence was available to Plaintiff throughout the discovery process and was easily obtainable, it did not constitute the type of “new or different facts, circumstances or law” that would justify reconsideration. (Id. at 213.)

In Doe, the Second District found a lack of diligence when a plaintiff attempted to present expert testimony at a new trial motion. (Doe v. United Air Lines, Inc. (2008) 160 Cal.App.4th 1500, 1509.) The court observed that plaintiff’s counsel knew that a clinical psychologist’s opinion was necessary to establish that the minor was suffering from post-traumatic stress disorder (PTSD) prior to an MSJ hearing. The court held that the testimony of the expert was neither newly discovered nor produced with reasonable diligence where counsel knew about psychologist’s opinion at hearing on airline’s summary judgment motion, yet counsel neither submitted a declaration from psychologist nor sought a continuance in order to do so.

Here, the Court observes a similar situation as the above cases. Legal Aid held these documents in Plaintiff’s client file and was fully available to Plaintiff throughout the litigation. The Court finds it odd that he would not request a copy of the file from Legal Aid, either informally (as he apparently has now) or through subpoena, just as a matter of course. Even so, Plaintiff was aware of the client file and knew of the materiality of Hernandez’s testimony. Essentially, Plaintiff always had these documents available to him throughout the litigation. He just did not think to look.

The record in this case establishes that Plaintiff knew of the client file during the August 2017 motions to quash. There, Plaintiff sought quash FCI’s subpoenas to Legal Aid and Hernandez which he argued sought documents protected by attorney-client privilege/work product doctrine. Specifically, Plaintiff objected to discovery of his client file at Legal Aid because it was privileged. In response, the Court quashed items no. 38-41, which included the client files regarding Sheen and the Property. This Court apparently agreed that the request for the files was overbroad and quashed accordingly. Naturally, Hernandez’s notes that Plaintiff now relies on for this motion were in the client file. Thus, Plaintiff successfully quashed discovery of the information that he now purports to be new evidence.

Further, Plaintiff argues that he had no reason to serve a duplicative document subpoena on Legal Aid in this case because FCI’s document subpoena was extensive, and Plaintiff assumed that all responsive documents had been produced in response to the subpoena. However, as noted the subpoena excluded privileged and non-discoverable information. He alone could have requested this information from Legal Aid.

Given that 1) Plaintiff was aware of the file in 2017; 2) Plaintiff was aware that only he could request the file due to privilege/work product issues; 3) Plaintiff actively prevented FCI from discovering the file on that basis (which was properly quashed); and 4) Plaintiff had apparently no issues obtaining this file from Legal Aid after realizing that it was important, the Court cannot now find that Plaintiff’s new-found “discovery” of the contents of the file constitutes a diligent effort to obtain this information. The reality of the situation, as it appears to the Court, is that Plaintiff just did not realize that Hernandez’s testimony or the client file would be critical to the prosecution of his claim against FCI, despite the fact that he alleged in all of his complaints identify Hernandez as the critical witness to the misrepresentations. (See Compl., ¶¶ 26-27; FAC ¶ 39; SAC ¶ 42.)

That said, the Court understands that Plaintiff did diligently search for Hernandez and attempted to get his testimony regarding the case. The Court is also somewhat troubled by FCI’s silence on the issue of the audio tapes. However, FCI’s speculated failure to turn over audio tapes that Plaintiff does not know exist is not at issue here.

Looking at the totality of these circumstances, the Court is not inclined to hold that Plaintiff was diligent in his search of the notes. This provides an independent basis for denial of the motion. That said, the Court will still look to the materiality of the documents to conclude that the motion should still be denied.

Materiality

Plaintiff argues that Hernandez’s notes are material because they demonstrate that FCI’s agent made misrepresentations regarding the sale date. These notes only establish one potential statement that bears on the sale date: on September 26, 2014, FCI’s agent “Jessica” represented to Hernandez that “there is no sale date” regarding the foreclosure sale of Plaintiff’s home. (Hernandez Decl., Ex. A.) The remainder of the notes are irrelevant to any alleged misrepresentations by FCI to Hernandez regarding the foreclosure sale. Hernandez otherwise does not remember the conversation, except as reflected in the notes. (Id., ¶ 10.)

“The filing of a bankruptcy proceeding operates as a stay of ‘the commencement or continuation . . . of a judicial . . . action or proceeding against the debtor that was or could have been commenced before the commencement of the [bankruptcy] case.’” (Weakly-Hoyt v. Foster (2014) 230 Cal.App.4th 928, 931.) Notably, “[c]ourts have consistently held that legal proceedings in violation of the automatic stay are void, regardless of whether the party initiating or continuing the proceedings has knowledge of the stay.” (In re Johnston (D. Ariz. 2005) 321 B.R. 262, 274.) Civ. Code section 2924g(e) provides that a foreclosure sale may occur as soon as the automatic bankruptcy stay expires.

The Court cannot consider the statement “there is no sale date,” or any reasonable interpretation of that statement, to be material to the outcome of the underlying MSJ because this cannot be characterized as a “material misrepresentation” based on the undisputed facts submitted at the MSJ and the instant motion. The undisputed facts show that there was no sale date going forward at that point due to the bankruptcy stay on the foreclosure proceedings. (See SSUF 14.) Plaintiff specifically did not dispute that he filed for bankruptcy protection on August 28, 2014 which ended when it was dismissed by the court on October 24, 2014. (SSUF 14, 24; SAC ¶ 45; MSJ RJN Ex. 6.) As repeatedly observed in the demurrers to the Complaint, FAC, and SAC, the statement that the loan was not in “active foreclosure” (or, as it is now, “no sale date”) was indeed true because of the automatic bankruptcy stay. Plaintiff’s SAC allegations indicated that FCI represented that it considered the Loan no longer in active foreclosure because FCI intended to work with Plaintiff to work out a payment plan not merely because that would be the effect of a bankruptcy stay. This new statement does not have this same implication, even when read in context. Further, there is no support for such a statement found in the record.

Plaintiff also cites to no case law that requires that a creditor have full knowledge of a pending bankruptcy case in order to violate the automatic stay. Thus, whether FCI had knowledge of Plaintiff’s bankruptcy filing during the September 26, 2014 call is irrelevant because setting the sale during Plaintiff’s pending bankruptcy case would have amounted to a violation of the automatic stay.

Plaintiff argues that the fact that the word “cancelled” does not appear in the call logs does not mean that the word was never used, just that it was not transcribed verbatim in an internal call log. However, Plaintiff presents no evidence, here or during the MSJ, that such a word was uttered by any FCI representative. Unlike the alleged statements in the SAC, the newly provided statement (and the prior evidence) cannot be liberally interpreted to suggest that FCI’s agent Jessica misrepresented that the date was “cancelled” or that FCI misrepresented that the loan was not in “active foreclosure” so that the parties could continue to discuss loan modification makes the entire statement untrue and misleading. Therefore, this is not fairly interpreted as an “inaccurate or untimely communication about a foreclosure sale or about the status of a loan modification application” to render this bare statement a misrepresentation during the bankruptcy stay. (See Alvarez v. BAC Home Loan Servicing, L.P. (2014) 228 Cal.App.4th 941, 948.)

Additionally, Plaintiff’s argument that the new evidence contradicts FCI’s claim that only certain calls took place is unimportant. Plaintiff’s new evidence does not remedy the core issue of the MSJ, that Plaintiff does not have evidence of a misrepresentation of material fact regarding the foreclosure date and/or its alleged cancellation. The Court further observes that Plaintiff does not tie any specific evidence of reliance on the September 26 statement, especially considering that he was already working on loan modifications after the statement was made.

Once the court dismissed the bankruptcy case on October 24, 2014, Mirabella was free to proceed with the foreclosure sale of the property without further notice to Plaintiff. (Civ. Code § 2924g(e).) However, on September 26, 2014, there is no evidence that suggests that there was a set sale date. In other words, the statement that there was no sale date as of September 26, 2014 is true, even if Jessica did not know about a bankruptcy stay or when it would expire. Therefore, the Court does not find that the newly presented evidence is material to the outcome of the underlying MSJ.

Accordingly, Plaintiff’s motion is DENIED.

Moving party is ordered to give notice.