GAINES v. FIDELITY NATIONAL TITLE INSURANCE COMPANY

Respondents, Aurora Loan Services LLC and Lehman Brothers Holdings, Inc., Supplemental Brief

Cal.August 31, 2015

SUPREME COURT FILED SUPREME COURT COPY — ave si 208 IN THE SUPREME COURT OF CALIFORNIA MILTON HOWARD GAINES, CASE NO. 8215990 Plaintiff and Appellant, 2™4 District Court ofAppeal Case No. B244961 v. Los Angeles Superior Court FIDELITY NATIONALTITLE Case No. BC361768 INSURANCE COMPANY,et al., Defendants and Respondents. On Appeal from the Judgmentofthe Court of Appeal, Second District, Division 8 Case No. B244961 Superior Court, Los Angeles County Case No. BC361768 The Honorable Rolf M. Treu, Judge SUPPLEMENTAL LETTER BRIEF OF RESPONDENTS LEHMAN BROTHERS HOLDINGSINC. AND AURORA LOAN SERVICES LLC Steven Ray Garcia (State Bar No. 110479)* Alexander Levy (State Bar No. 61887) GARCIA LEGAL, A PROFESSIONAL CORPORATION 234 East Colorado Boulevard, 8" Floor Pasadena, California 91101 Email: Steven@GarciaLegal.Email Telephone: (626) 577-7500| Facsimile: (626) 628-1800 Attorney for Defendants and Respondents Lehman Brothers Holdings Inc., and Aurora Loan Services LLC FIRST AMENDED CERTIFICATE OF INTERESTED ENTITIES OR PERSONS §$215990 — Gaines v. Tornberg, et al. This form is being submitted on behalf of respondents Lehman Brothers Holdings Inc. and Aurora Loan Services. Full Nameof Interested Entity/Person Party / Non-Party Nature of Interest Aurora Loan Services LLC [x] [ ] Respondent Lehman Brothers Holdings Inc. [x] [ ] Respondent Great Ajax Operating Partnership, LP f ] [Ex] Financial [ ] C€ ] [1.1] [1] [ ] [ ] C€ ] [L J) [ [ ] C J The undersignedcertifies that the above listed persons or entities have either (1) an ownership interest at 10 percent or morein the part if it is an entity; or (2) a financial or other interest in the outcome of the proceeding that the justices should consider in determining whetherto disqualify themselves, as defined in rule 8.208(3)(2). Submitted by: Dated: August 28, 2015 GARCIA LEGAL, A PROFESSIONAL CORPORATION Lehman Brothers HolAN Services LLC gs Inc-and Aurora Loan TABLE OF CONTENTS I. QUESTIONS PRESENTED1.0000... cceseeeceecceceseeeeseeseseesensescscessessecseseseneesecsesesenes -2- Tl. SUMMARYOF CONCLUSIONS0000.0... cceeseseesseseseessececeeesescateeteeeseescseessacaeseeseceees -3- Ill. THE AGREED UPON ORDERSTRIKING THE TRIAL DATE DID NOT CONSTITUTE A STAY OF TRIAL OF THE ACTION............cccccceccecseeseeee -3- IV. THE DISTINCTION BETWEEN A STAY AND A CONTINUANCE SHOWS THAT THE ORDER STRIKING THE TRIAL DATE WASNOTA STAY UNDER SECTION 583.340(b) .....ccscccccccoccceccevsuccsssecesesssuecsssecsssessssssesssssssessecestecsssssesssesessssesee -7- V. CONCLUSION.......eccsccceescreresseteneseeeceececeeseeseseeacsesessaeseaesenessesassesesessseeateseeeess - 10- TABLE OF AUTHORITIES Cases Au-Yang v. Barton (1999) 21 Cal.4th 958ooseseeseceeceeasecseeseeesenserssseeecsesasieeseteeereenesseses - 10- Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, fin. 4 oo.eccseseeseteceseseeseceeeeeeseeeesessenessenseeneeseeees -5- Bruns v. E-Commerce Exchange, Inc. (2011) 51 Cab.4th 717eeseesensesceceseneesesecsetesseeseetaesesseseseseeseeseeeseneesase passim Brunzell Construction Co. v. Wagner (1970) 2 Cal.3d 545ooeesscsecseeseeseeeeseeesseteeseceescecessesateaeseeseeasseses -6-,-9-,-10- Continental Pac. Lines v. Superior Court (1956) 142 CalApp.2d 744 oooececcesssnenessesessescessesseceseessesecesssssesessssessenesaeene -9- De Santiago v. D and G Plumbing, Inc. (2007) 155 Cal.App.4th 365 oooecsecsecceseseneesseseeeneeseeseseeesseeetseseereneers -10-,-11- Holland v. Dave Altman’s R.V. Center (1990) 222 Cal.App.3d 477 oo. esccecceesceeceeccessseesesesenseeecesesseeseaeersees-8-,-9-,-10- Imperial Merchant Services, Inc. v. Hunt (2009) 47 Cal.4th 381eeceeceeeneceeaceesaesensseesaeeseesseceseesenessecsseeteeseseeneers -4- Marcus v. Superior Court (1977) 75 Cal.App.3d 204 ooo. icsscscseneceesseesesseessesessesterseseecseseesesssesseensseenes -5-,-6- O'Donnell v. City & County ofSan Francisco (1956) 147 Cal.App.2d 63oessecsesssenetscceersesseececesessecesesseeessteessesseeestesseaasans -9- People v. Calhoun (1983) 141 CalApp.3d 117oieessccseseessesessseeeseseesecsesssseeseseesseeessesseeneesseeessees -7- People v. Santana (1986) 182 Cal.App.3d 185 00... ceccescssesceseseccsessesescesscneeseessesessssenses-7-,-8-,-9- Webster v. Superior Court (1988) 46 Cal.3d 338occcceesenseeeeeseeseseeeesseseecceseesaseeaecseressessesessuecucsees - 10- Youngblood v. Terra (1970) 10 Cal.App.3d 533 ooeeeceesenecssessesenessceseseeaseseseesesseesesssecseesnseesansecsaes - 10- Statutes LT] U.S.C.A. § 362.0.ceceesseseeseneeseteeeeeeseeneseneceesetatseseestesecassecatssaesacseseceens -9-,-10- Rules Rule 3.729, Cal. Rules of Court ....0...........cccccccssscsscsssesssscsececssescsscecsascseeseeerersesssesenes -10- Rule 3.1335, Cal. Rules of Court........0000ccccc ecesssceesscececscseccecectsctesestsecesessusceesersees -10- Rule 8.490, Cal. Rules of Court ...........0cc.ccscsscsscsssesssssssescessscesecssseceseceguscessasesessauese -10- Rule 8.499(d), Cal. Rules of Court........0....ccccccsccscsesseseesecssseceseseressssssasessessvsssensenas -10- ii IN THE SUPREME COURTOF CALIFORNIA MILTON HOWARDGAINES, CASE NO. 8215990 Plaintiff and Appellant, 2"d District Court ofAppeal Case No. B244961 Vv. Los Angeles Superior Court FIDELITY NATIONAL TITLE Case No. BC361768 INSURANCE COMPANY,etal.. Defendants and Respondents. On Appealfrom the Judgmentofthe Court ofAppeal, SecondDistrict, Division 8 Case No. B244961 Superior Court, Los Angeles County Case No. BC361768 The Honorable Rolf M. Treu, Judge SUPPLEMENTAL LETTER BRIEF OF RESPONDENTS LEHMAN BROTHERS HOLDINGS INC. AND AURORA LOAN SERVICES LLC I. QUESTIONS PRESENTED By an order dated July 29, 2015, this Court requested that the parties submit supplemental letter briefs on the following questions: 1. Didthe trial court’s April 3, 2008 order “striking the current Trial Date of September 22, 2008” (CT 279) constitute a stay of the “trial of the action” under Code of Civil Procedure, section 583.340, subdivision (b)? 2. Whatfactors distinguish betweena stay oftrial and a continuanceoftrial for purposes Code (sic) of Civil Procedure, section 583.340, subdivision (b)? Il. SUMMARYOF CONCLUSIONS Becausethe trial court’s order striking thetrial date did not “freeze”the trial court’s ability to set the case fortrial or the ability of the parties to carry on other proceedings in the action, it did not constitute a stay of trial ofthe action under Code of Civil Procedure § 583.340(b). The distinction between a continuanceoftrial under and a stay of trial for the purposes of section 583.340(b)is that the formeris part of the normal litigation process for which the party has been given the five-year period by the Legislature, while with the latter, the time during whichthestay is in effect is precluded from the five-year period because the parties are barred from obtaininga trial date during its effective term, which is dependent upon someevent beyondthe control of the parties or the court. Ill. THE AGREED UPON ORDER STRIKING THE TRIAL DATE DID NOT CONSTITUTE A STAY OF TRIAL OF THE ACTION The Court’s first question asks whetherthetrial court’s April 3, 2008 order striking then currenttrial date constituted a stay oftrial of the action under Code of Civil Procedure § 583.340(b). Aurora and Lehman have concluded the answeris that it did not. To reach this conclusion, we begin by looking at the languagein thestatute since it is the -3- Court’s purpose to determine the legislature’s intent focusing on the plain words of the statute with their usual and ordinary meaning that govern in thefirst instance. (Bruns v. E-Commerce Exchange, Ine. (2011) 51 Cal.4th 717, 724; Imperial Merchant Services, Inc. v. Hunt (2009) 47 Cal.4th 381, 387-388.) Section 583.340(b) provides: In computing the time within which an action must be brought to trial pursuant to this article, there shall be excluded the time during which any of the following conditions existed: * *&k * (b) Prosecutionortrial of the action was stayed or enjoined. In Bruns, supra, this Court explained, “Only whenthe ‘prosecution’or‘the trial’ of the ‘action’ is stayed does the runningofthe five-year period halt under 583.340(b).” (51 Cal.4th at 725.) Then, this Court concluded, “Whenthestatute is read as a whole,it becomes apparentthat subdivision (b) contemplates a bright-line, nondiscretionary rule that excludes from the time in which a plaintiff must bring a casetotrial only that time during which all proceedingsin an action are stayed.” (51 Cal.4th at 726.) As the court in Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, 1797, fn. 4—a case in whichtheparties stipulated that the trial of the action would be stayed pending completion of contractual arbitration—noted: The stay exception was an offshoot of the catchall impossible/impracticable/futile doctrine developed in commonlaw before the enactmentofsection 583.340 in 1984. (See, e.g., Marcus v. Superior Court (1977) 75 Cal.App.3d 204, 212-213.) “In determining whether the prescribed five-year period has expired, time during whichit is impossible or impracticable to proceedto trial is excluded. [Citations.] While the stay orderis in effect, it will be impossible or impracticable to proceedto trial. -4d- Therefore, the five-year period cannot expire because stay is ordered.” (Ibid.) The stay exception was then separately codified (§ 583.340, subd. (b)) from the catchall exception (§ 583.340, subd. (c)). (6 Witkin, op.cit. supra, Proceedings Without Trial, § 138, p. 443.) In Bruns, this Court noted that the Law Revision Commission’s commentto section 583.340(b) cited only Marcus v. Superior Court, supra, for the proposition that subdivision (b) codifies existing law, concluding “the fact that the Law Revision Commissioncited only that case to support its statement that subdivision (b) codified existing case law suggests that the subdivision applies only to complete stays.” (51 Cal.4th at 729.) Applying the same rationale—that subdivision (b)’s “stayed or enjoined” language applies only whenthetrial is completely stayed—notonly is grammatically consistent but also is consistent with this Court’s interpretations of the lawpriorto the enactmentof subdivision (b). (See, e.g., Brunzell Construction Co. v. Wagner (1970) 2 Cal.3d 545 [periods during which trial of the action was stayed by an injunction against proceeding issued by a Nevada court and by an appeal in California madeit impossible or impracticable to go to trial against parties to claims not stayed.].) Striking the trial date and setting a new trial setting conference did notconstitute a stay oftrial of the action here, however. It is helpful to recall the circumstances under whichthetrial court orderstriking the trial date cameinto existence. Plaintiff! had sold her home to Tornberg, who obtained new financing on it to save it from being lost to foreclosure by the loan plaintiff and her husband had received from Countrywide. By the time Aurora Loan Services, LLC (Aurora) was named, Tomberg’s new loan wasin 1 Respondents will continue their practice ofreferring to Fannie Marie Gaines as “plaintiff” and Milton Gainesas “appellant.” (See Answering Brief of Respondents Lehman Brothers Holdings Inc. and Aurora Loan Services LLC on the Merits, p. 5, fn. 6.) default, and the holder of the loan, Lehman Brothers Holdings Inc. (Lehman), was threatening foreclosure through its servicing agent, Aurora. Plaintiff had named Aurora but not Lehman as a defendantin the case, and Aurora’s general counsel approached plaintiff's counsel seeking an opportunity to discuss settlement before litigating. Due to the so-called Fast Track Rules implemented following the Trial Court Delay Reduction Act”, however, the parties did not have sufficient time to arrange a global mediation before Aurora’s response to the complaint would be due. (Gov’t Code, § 68616(b); 2 AA 254: 12-17; 257:25-27; 259:15-25; and 260:19-24.) What is more, Countrywide wanted to be sure that by agreeing to go to mediation, it did not lose its rightto file a motion for summary judgment, which could only be accomplished by moving thetrial date. (2 AA 254: 24-255:2.) As such, the partial stay of proceedings was agreed to by the parties and implemented bythe trial court through the orderstriking the trial date. (2 AA 278-279.) Nevertheless, as the trial court found, and the Court of Appeal concurred, the agreed- upon orderstriking the trial date did not constitute a stay under section 583.340(b). “The terms ‘stay’ and ‘strike’ are not legally synonymous. (People v. Calhoun (1983) 141 Cal.App.3d 117, 124.) A stay is a temporary suspension of a procedure in a case until the happening of a defined contingency.” (People v. Santana (1986) 182 Cal.App.3d 185, 190, fn. omitted.) A stay “freezes” the trial court proceedings at a particular point. (Bruns v. E-Commerce Exchange, Inc., supra, 51 Cal.4th at 724.) By contrast, striking is the unconditional deletion ofthe legal efficacy of the stricken event, allegation, or facts for the purposes of the proceeding. (/d.) In no wayheredid thetrial court’s order striking the trial date “freeze” the proceedings orthe resetting ofthe trial date at that point. Instead, the parties were ordered to respondto currently outstanding written discovery (2 AA 279: 5-7) and to mediate the dispute. Thus, by strikingthetrial date, the trial court merely eliminatedthe initial effect of setting the trial date so as to 2 Government Code, § 68600, et seq. -6- extend the time to conduct discovery (Code Civ. Proc., § 2024.020), potentially to file motions for summary judgment (Code Civ. Proc., § 437c(a)), and to mediate the case, as agreed to by the parties and reflected in the trial court’s order. What is more, thetrial court also set a new trial setting conference and post mediation status conference on July 16, 2008. (2 AA 279:16-17.) But, because a great deal of activity toward the prosecution of the action was contemplated in the interim, including setting a newtrial date, the trial court’s action striking the trial date did not constitute a stay either of the prosecution ofthe case orofthe trial but rather was morelike a continuance,andthis is a significant distinction that will be discussed in the next section. Iv. THE DISTINCTION BETWEENA STAY AND A CONTINUANCE SHOWS THAT THE ORDERSTRIKING THE TRIAL DATE WASNOTA STAY UNDER SECTION 583.340(b) As noted above, this Court noted that a stay “freezes” the trial proceedingsat a particular point. (Bruns, supra, 51 Cal.4th at 724.) The Court then discussed the only other case to discuss the meaning of the term “stay” under section 583.340(b), Holland v. Dave Altman's R.V. Center (1990) 222 Cal.App.3d 477, quoting the case as follows: “[T]he term [“stay”] appears to have a commonly understood meaning as an indefinite postponementof an act or the operation of some consequence, pending the occurrence of a designated event. Thus, in People v. Santana (1986) 182 Cal.App.3d 185, 190, a case involvingthe stay of a sentence, the court concludedthat ‘[a] stay is a temporary suspension of a procedure in a case until the happening of a defined contingency.’ Black's Law Dictionary [, supra, at] page 1267 defines the term as ‘a suspension of the case or some designated proceedings within it.’ ” (Holland, supra, 222 -7- Cal.App.3d at p. 482, 271 Cal.Rptr. 706.) Relying on Holland,plaintiff argues that a “stay” under subdivision (b)is “an indefinite suspension of the entirety of the case or designated acts/proceedings within it that yield the practical inability (as opposed to ‘complete’ or ‘absolute’ inability) to proceedto trial.” But Holland does not support this position. Holland gave examplesof time periods during which the case could not be broughtto trial. They included the “absenceoftrial court jurisdiction to try [the case]” and “a court order barringthe trial (by a stay or injunction).” (/d. at p. 482, 271 Cal.Rptr. 706.) Holland did not address whetherthe “prosecution” of the action was stayed within the meaning of section 583.340 when only a designated proceedingin a case, other than a trial, was stayed or suspended “until the happening of a defined contingency.” (People v. Santana, supra, 182 Cal.App.3d at p. 190, 227 Cal.Rptr. 51.) Bruns, supra, 51 Cal.4th at 724-725. This Court then concludedthat either total prosecution of the action ortrial must be halted by the “stay” in order for section 583.340(b)’s exception to apply. As noted above, however,striking the trial date and setting a newtrial setting conferenceat the request of the parties so that they can complete pending discovery and mediate the caseis not a “stay”oftrial of the action under section 583.340(b). There was no defined contingency ofunknown duration that kept the trial court from resetting the trial such as a stay pending appeal (Holland v. Dave Altman’s R.V. Center, supra, 222 Cal.App.3d at 482), a pending bankruptcy of a defendant (11 U.S.C.A. § 362), or any other court order precludingtrial from being set. (Brunzell Construction Co. v. Wagner, supra [injunctions and appeals preventedtrial from being set].) Thus, this circumstance was morelike a continuance ofthe trial. Trial continuance periods are “ordinary incidents of proceedingslike disposition of demurrer, amendmentofpleadings in the normal time of waiting for a place on the court’s calendar or securing ajury trial”; they are included in the five-year calculation and do not extend the five-year mandatory dismissal period. (O'Donnell v. City & County ofSan Francisco (1956) 147 Cal.App.2d 63, 65-66; Continental Pac. Lines v. Superior Court (1956) 142 Cal.App.2d 744, 750 [the time necessary for service of process, settlement of the pleadings and the time when the parties are waitingfor a trial date are ordinary proceedingsnot to be excluded from the computation of the five-year period]; Youngbloodv. Terra (1970) 10 Cal.App.3d 533, 536-537 [the period during which the trial court ordered the case offthe court’s trial calendar due to plaintiff’s illness was not excludable from the five-year period, particularly since the plaintiff had ample time to seek trial date]; De Santiago v. D and G Plumbing, Inc. (2007) 155 Cal.App.4th 365, 376 [periods of continuance while the parties mediate are not excluded from five-year period where there is a possibility the case could have been broughtto trial before the expiration ofthe five-year mark].) It thus appears that for purposes of section 583.340(b), the distinction between a stay of trial and a continuanceoftrial is a similar brightlinetest to that set out by this Court in Bruns, Where a continuance is concerned, the parties are free to move the case to trial—whether through normal trial setting procedures (e.g., Rule 3.729, Cal. Rules of Court), a motion to advance, specially set or reset the trial (e.g., Rule 3.1335, Cal. Rules of Court) or a motion for preferential setting (Code Civ. Proc., § 36)—while carrying on with other procedural aspects of the case. On the other hand, whentrial of the action is stayed under section 583.340(b), the trial court may notsetthe case for trial until the contingency giving rise to the stay has occurred so as to lift the stay, such as the lifting of a bankruptcy stay regarding a defendant (11 U.S.C.A. § 362; Au-Yang v. Barton (1999) 21 Cal.4th 958, 961; Webster v. Superior Court (1988) 46 Cal.3d 338, 349), the issuance -9- of the remittitur on appeal (Rules 8.272, 8.490(d), 8.499(d), Cal. Rules of Court; Holland v. Dave Altman’s R.V. Center, supra), or the dissolution of a stay issued by anothertrial court. (Brunzell Construction Co. v. Wagner, supra.) It has been uniformly held that continuancesdo nottoll the running of the five-year period but stays that preventtrial from occurring do. There is no reason to interpret what occurred in this case differently. The trial court’s order striking the trial date and setting a newtrial setting conference did notstaytrial of this case under section 583.340(b). V. CONCLUSION Thetrial court’s orderstriking the trial date did not “freeze”all proceedings in this action or prevent this case from beingsetfortrial. Instead, like most continuances, it was an ordinary part of the procedure in the case, one designed to give the parties the opportunity they desired to mediate the case. (De Santiago v. D and G Plumbing, Inc., supra, 155 Cal.App.4th 365; cf., Code Civ. Proc., § 1775.7.) It did not preclude other actions toward prosecuting the case, including discovery or mediation. As such, it was not a “stay” of the trial of the action under Code of Civil Procedure § 583.340(b). In order to be a stay, it would have had to precludethetrial from being set at all, and it did not. Therefore, the order was not a stay, and the time following when the order was issued should not be deducted from the five-year period. The judgmentof the Court of Appeal should be affirmed. Dated: August 27, 2015 GARCIA LEGAL, A PROFESSIONAL CORPORATION tak gittor R es pondentsLehman Brothers Faidings Inc. and Aurora Loan Services LLC -10- CERTIFICATE OF COMPLIANCE WITH RULE8.204(c)(1), CAL. RULES OF COURT I, Steven Ray Garcia, counsel for respondents Lehman Brothers Holdings Inc. and Aurora Loan Services LLC, certify that the foregoing brief is prepared and proportionally spaced Times New Roman 13 point type and based on the word countof the word processing system used to prepare the brief, exclusive of tables, is 2,572 wordslong. Dated: August 27, 2015 GARCIA LEGAL,A PROFESSIONAL CORPORATION Services LLC -jlil- PROOF OF SERVICE BY OVERNIGHT MAIL . . Gaines v. Tornberg California Supreme Court Case Number SC215990 I am over18 years of age and nota party to the aboveentitled action. Iam employed in the County where the mailing took place. My business addressis 301 North Lake Ave., Seventh Floor, Pasadena, CA 91101. On August 28, 2015,I mailed from Pasadena, California, the following document: 1. LETTER DATED AUGUST28, 2015 TO CLERK OF THE SUPREME COURT 2. SUPPLEMENTAL LETTER BRIEF OF RESPONDENTS AURORA LOAN SERVICES, LLC, AND LEHMAN BROTHERS HOLDINGS,INC. 3. FIRSTAMENDED CERTIFICATE OF INTERESTED ENTITIES OR PERSONS I served the documents by enclosing them in an envelope and placing the envelopefor collection and mailing following our ordinary businesspractices. I am readily familiar with this businessespractice of collecting and processing correspondence for overnightmail. On the samedate that correspondenceis laced for collection and mailing, it isdeposited in the ordinary course of usiness with the Golden State Overnight in a sealed envelope with postagefully prepaid. _, The envelopes were addressed and mailed as stated on the attached mailinglist. I declare underpenalty of perjury underthe lawsofthe State of California that - the foregoing is true andcorrect. Executed on August 28, 2015, at Pasadena, California. LL,oS -Victoria C. Putnam SERVICE LIST Gainesv. Tornberg,et al. California Supreme Court Case Number SC215990 Clerk, California Supreme Court 350 McAlister Street San Francisco, CA 94102-7303 f Second Appellate District, Division Two Clerk, California Court ofAppeal 300 S. Spring Street Floor Two, North Tower Los Angeles, CA 90013-1213 Clerk of the Superior Court / 111 N. Hill Street Los Angeles, CA 90012-3014 A.J. Roop 3424 E. Turney Avenue Phoenix, AZ 85018-3928 A.J. Roop 19475 N. Grayhawk, Suite 1089 Phoenix, AZ 85255 Joshua Tornberg 26065 N. 68% Drive Peoria, AZ 85383-7047 Joshua Tornberg 6900 E.Princess Drive, Unit 1182 Phoenix, AZ 85054-4108 Kevin Broersma Fidelity National Law Group 915 Wilshire Boulevard, Suite 2100 Los Angeles, CA 90017-3450 Ray Management Group,Inc. c/o Craig Johnson 6410 W. Maya Way Phoenix, AZ 85083-6599 W.Keith Wyatt Ivie, McNeill & Wyatt 444 S. FlowerStreet, Suite 1800 Los Angeles, CA 90071-2919 Craig Johnson 6410 W. Maya Way Phoenix, AZ 85083-6599