Opinion
Appeal from a judgment of the Superior Court of Orange County, David A. Thompson, Judge., Super. Ct. No. 05CC03067
De la Flor & Associates and Allan Calomino for Defendants and Appellants John Hathoot and Dina Hathoot.
Wright, Finlay & Zak, Jonathan M. Zak, Richard D. Simpson, Jr., and Jarlath M. Curran, II for Plaintiff and Appellant.
OPINION
BEDSWORTH, ACTING P. J.
John Hathoot and Dina Hathoot (collectively, Hathoot) appeal from a judgment against them in this collection action by Albert J. Schillinger, Jr., as trustee of Nationwide Mortgage Plan and Trust, a pension plan. Hathoot argues the debt was barred by an unreasonable delay in invoking an acceleration clause in the note, and by laches. Schillinger cross-appeals, arguing the evidence does not support a finding that he failed to mitigate damages (and a corresponding reduction in the amount awarded). We find no error and affirm.
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In June 1997, Hathoot executed a promissory note for $40,000 in favor of a financial institution, along with a second deed of trust on his home. The note called for monthly payments of principal and interest, and provided that any remaining unpaid balance was due on June 10, 2002. Later that month, Mego Mortgage (Mego) purchased the Hathoot loan. An assignment of the deed of trust was recorded, but without filling in Mego’s name as assignee – the space provided to identify the assignee was left blank.
At some point, a third deed of trust was recorded against the property. Hathoot paid Mego through December 1997, then defaulted.
In July 1998, the residence was sold at a trustee’s sale following foreclosure by the holder of the senior deed of trust. The same month, the foreclosing trustee wrote to Hathoot to advise that surplus funds of $16,365.92 remained after the sale. Hathoot made no claim to the surplus.
Nationwide Mortgage Plan and Trust (Nationwide) purchased the Hathoot note and trust deed from Mego in November 1998, as part of a pool of nonperforming loans. Mego’s records showed the principal balance due was $39,958.53. By letter dated December 2, 1998, Nationwide notified Hathoot that it had purchased the note and directed him to make future payments to Nationwide. There matters stood for the next six years.
On January 11, 2005, Nationwide wrote to Hathoot to demand payment of the balance due, plus interest and fees. The instant action to collect the note followed. The complaint sought $39,958.53, plus interest, costs, and attorney fees. An answer raised as affirmative defenses the four-year statute of limitations to bring an action on a written instrument (Code Civ. Proc., § 337), laches, and failure to mitigate damages, among others.
The matter was tried on stipulated facts, set out above. In a statement of decision, the trial court explained that Schillinger was entitled to recover on the note without regard to the deed of trust, since he was the successor to a sold-out junior lienor. It rejected Hathoot’s theory that the four-year statute of limitations requires a sold-out junior lienor to sue within four years of the senior sale. Instead, it ruled the statute of limitations merely prohibited recovery of unpaid monthly installments that were more than four years past due. The court also found there was no unreasonable delay in bringing suit that amounted to laches. On the mitigation defense, it found Mego reasonably could have recovered the foreclosure surplus of $16,365.92 by recording an assignment that identified it as the assignee (which would have required the foreclosure trustee to notify Mego of the surplus). It found Schillinger had actual notice of the defective assignment, and in any event, Schillinger took only the rights of his assignor, Mego. Judgment was entered against Hathoot for $47,289.76 ($23,592.61 in principal and $23,697.15 in interest and late charges), plus attorney fees and costs.
I
Hathoot argues the note is unenforceable because an acceleration clause must be exercised within a reasonable time, and the six-year delay in this case was unreasonable. We cannot agree.
It has been said that an acceleration clause in a note must be exercised within a reasonable time, or it is waived. (Fletcher v. Dennison (1894) 101 Cal. 292, 294 [59-day delay is reasonable]); Tourny v. Bryan (1924) 66 Cal.App. 426, 430 [52-day delay is reasonable]; but see Holland v. Paddock (1956) 142 Cal.App.2d 534, 538 [suggesting 11 months unreasonable].)
But that rule is inapplicable here. Hathoot failed to raise the issue below, and a new theory that depends on unproven facts may not be raised for the first time on appeal. (Mattco Forge, Inc. v. Arthur Younge & Co. (1997) 52 Cal.App.4th 820, 847.) Assuming for the moment that an unreasonable delay may be found to be an implied waiver of the right to accelerate, a point we take up shortly, surely one is entitled to offer contrary evidence of no intent to waive. Hathoot never raised the waiver defense below, and to consider it now would be manifestly unfair, since Schillinger has not had the opportunity to offer evidence on this fact question. So, it is too late to raise this issue.
We also have our doubts whether it is the law that a mere delay in accelerating a note, without regard to the holder’s intent, amounts to a waiver as a matter of law. The only case cited by Hathoot that said a delay was unreasonable is
Holland v. Paddock, supra, 142 Cal.App.2d 534, but Holland is distinguishable. There, a lawyer had performed services for a client who paid in part. The lawyer had also borrowed a sum of money from his client, signing a promissory note with an acceleration clause. When the client demanded payment of the note, the lawyer deducted the amount of unpaid fees and tendered payment, but this did not satisfy the client. The client accelerated the note and sued for the balance. The lawyer sued for a declaration that his fees were reasonable, and to determine whether he was liable for the sums claimed on the note. At trial, the client withdrew the claim on the note. Nonetheless, the court said the client had waived the right to accelerate the note by delaying 11 months after the lawyer ceased making payments. (Id. at pp. 537-538.) Since the note was no longer in issue, the statement is dicta, and we cannot take any guidance from the case. The delay in accelerating the note does not give Hathoot a defense.
II
Hathoot argues he offered sufficient evidence to establish the defense of laches. We disagree.
Laches requires, in relevant part, a showing of unreasonable delay plus prejudice to the defendant from the delay. “‘It is not so much a question of the lapse of time as it is to determine whether prejudice has resulted. If the delay has caused no material damage in statu quo, ante, i.e., no detriment suffered by the party pleading the laches, his plea is in vain.’” (Conti v. Board of Civil Service Commissioners (1969) 1 Cal.3d 351, 360.)
As evidence of prejudice, Hathoot relies on the defective notice of assignment of the deed of trust to Mego. His theory goes like this. Since Mego’s name was missing from the assignment, the trustee foreclosing the senior lien was unable to give Mego notice of surplus proceeds. Had Mego received notice, it would have claimed the $16,365.92 surplus and never sold the note to Nationwide. Had the note still been sold, Schillinger could have recovered the surplus had he pursued it with reasonable diligence, and that “would have created a more favorable and equitable status quo” between Schillinger and Hathoot.
The trial judge was quite right to find this insufficient evidence of prejudice to support a laches defense. In fact, it is not evidence at all. What Mego might have done had it received the surplus is conjecture, and the assertion that Schillinger could have filed a successful claim for the surplus is just that – an assertion, not evidence. Laches was not established, and Schillinger was entitled to collect the note.
III
Schillinger’s appeal is based on his contention that the failure to mitigate finding was unsupported by the evidence. He reasons that he only purchased the note nine months after the senior foreclosure and could not have taken any action to claim the surplus. He also asserts Hathoot was in a better position to avoid the loss, since Hathoot could have claimed the surplus or notified Mego of its existence. Neither point is relevant.
The trial court found Schillinger stood in the shoes of Mego, which failed to take reasonable steps to mitigate because it recorded a blank assignment that denied it the chance to receive notice of any surplus. So what Schillinger might or might not have done on his own is irrelevant: He was charged with Mego’s failure.
The same is true regarding what Hathoot might have done. A homeowner who loses his residence to foreclosure has no duty to notify a junior lienor of surplus proceeds. And it is rather incredible to suggest Hathoot could have claimed the surplus proceeds from the senior sale. The Mego deed of trust also was in default, and the surplus was payable to junior lienors in order of their priority before any distribution to the trustor on the foreclosed senior trust deed. The record supports the finding that Schillinger failed to mitigate damages.
Since the waiver defense was not raised below and laches was not proven, Schillinger was entitled to enforce the note. But the amount collectible was properly reduced because the evidence supports the finding that Schillinger – and his predecessor in interest – failed to mitigate damages. The judgment appealed from is affirmed. The parties shall bear their own costs on appeal.
WE CONCUR: ARONSON, J., FYBEL, J.