C.A. Says Partial Stay of Action Did Not Toll Five-Year Period

Monday, December 16, 2013

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C.A. Says Partial Stay of Action Did Not Toll Five-Year Period

By JUSTIN LEVINE, Staff Writer

A several-month stay of an action that still allowed parties to respond to outstanding discovery requests will not toll the five-year deadline to either begin trial or have the action dismissed in accordance with Civil Procedure §§ 583.310 and 583.360, the Court of Appeal ruled last week in a divided opinion.

The holding resulted in the dismissal of numerous defendants and causes of action in a case involving allegations of fraud in connection with a mortgage foreclosure.

The plaintiff was Fannie Marie Gaines, who in November 2006 filed a complaint against numerous defendants that included Fidelity National Title Insurance Company and 30 Doe defendants.

Gaines alleged fraud, violations of Civil Code home equity sales contract requirements and related claims in connection with the loss of her Los Angeles home after she fell behind on her payments. By January 2008, Gaines had filed three amended complaints that had included other mortgage and real estate companies as defendants, including Aurora Loan Services, LLC and Does 31 to 50.

Mediation Attempt

In April 2008, at Gaines’s request in order allow for a mediation attempt, the court stayed the action except to allow for responses to outstanding discovery requests. The mediation proved unsuccessful and the case was assigned to a new judge who terminated the stay in November 2008 and set a trial date for August 2009.

The trial date was vacated after Aurora indicated that it did not hold any legal title to Gaines’ property nor have any legal rights to an outstanding loan connected with it. Aurora alleged that the loan was actually owned by Lehman Brothers Holdings, Inc., which had declared bankruptcy in 2008 and was not a named defendant in the action.

Another delay occurred in November 2009 when Gaines died. By January 2010, the court had granted an application allowing Gaines’s son Milton to succeed her as plaintiff and file a fifth amended complaint.

Trial had been rescheduled for the end of August of that year, but further delays ensued as the parties disputed who was the proper holder of the loan at issue.

Mitlon Gaines informed the court that he did not wish to add Lehman Brothers as a defendant or seek relief from its bankruptcy stay since he had no proof that the company was a titleholder to the loan.

Frustrated Judge

Judge Rolf M. Treu, expressing frustration, delayed the trial again and issued a series of continuances in order to allow the parties to resolve the issue concerning Lehman Brothers and the ownership of the loan so that it could be determined if Lehman Brothers should be added as a named defendant.

By November 2011, after acknowledging that it held a deed of trust against the property, Lehman Brothers was added as a defendant and a bankruptcy judge agreed to lift a stay as to the plaintiff’s claims after a five-month process of court motions in that separate forum.

Trial was then set for August of last year.

In May of last year, Fidelity moved to dismiss the complaint under Civil Procedure §§ 583.310 and 583.360, arguing that neither the bankruptcy stay nor Fannie Marie Gaines’s death tolled the five-year deadline period that had expired in November 2011.

Treu granted the motion, dismissing the complaint against all defendants. The judge said that even though Fidelity had been the only defendant to move for dismissal and the five-year deadline had not yet run as to Lehman Brothers, it was forced to dismiss the entire action since the five-year dismissal requirement under §§ 583.310 and 583.360 was “jurisdictional.”

Effective Tolling

In response to plaintiff’s arguments that the deadline had been sufficiently tolled throughout the litigation process, Treu said that the deadline had been effectively tolled for 185 days to account for the delay from the plaintiff substitution after Fannie Gaines’s death as well as the efforts to obtain relief from the Lehman Brothers bankruptcy stay. However, he determined that the months-long stay for mediation efforts in 2008 did not toll the deadline since it was only a partial stay and not a stay within the meaning of § 583.340(b).

Hence the total amount of valid tolling did not prevent the five-year deadline from passing, the judge reasoned.

On appeal, a divided appellate court held that the trial court erred in dismissing Lehman Brothers from the case, but affirmed in all other respects.

Writing for the majority, Presiding Justice Tricia Bigelow held that the trial court’s calendar calculations were correct. She was joined in her opinion by Justice Elizabeth Grimes.

Citing the case of Bruns v. E-Commerce Exchange, Inc., (2011) 51 Cal.4th 717, Bigelow wrote:

“[A] section 583.340, subdivision (b) stay is one that stays all prosecution of the action. The 2008 stay in this case allowed for some discovery to proceed, and was therefore not a complete stay. Whether any party actually served discovery responses during the 2008 stay does not recharacterize the trial court order, which allowed for some discovery to take place during the stay.”

She said the fact that defendants had agreed to the 2008 partial stay did not make them equitably estoped from bringing a dismissal motion under §583.340(b) since none of the parties intended that period to extend the statutory deadline.

Bigelow also said that the trial court did not abuse its discretion in concluding the partial stay did not make it impossible, impractical, or futile for plaintiff to bring the action to trial.

She wrote:

“The trial court here could reasonably conclude plaintiff did not establish a causal connection between the 2008 stay and her failure to satisfy the five-year requirement. Some discovery was permitted during the stay, and there is no indication plaintiff was ready for trial at the time of the stay... Further, the 2008 stay was for a relatively short period, several years before the five-year deadline expired. Plaintiff did not establish the stay deprived her of a substantial portion of the five-year period, or that the stay was directly related to her failure to reach trial within five years.”

Bigelow said that the court properly dismissed other defendants that had not filed a dismissal motion since §583.360(a) requires a dismissal from the court’s own motion if the five-year deadline has passed and such motion has been put forth.

In a partial victory for the plaintiff, the court reversed part of Tree’s decision by ruling that Lehman Brothers was improperly dismissed since they had been added as a named defendant much later in the process and the trial deadline had not passed for them.

“Section 583.310 provides that an action shall be brought to trial within five years after the action is commenced against the defendant, singular,” Bigelow wrote. “Section 583 is not ‘jurisdictional’ in the sense that if the five-year period has expired as to one defendant, the action must be dismissed as to all defendants, regardless of their circumstances.”

In dissent, Justice Laurence Rubin said he would not have allowed dismissal of the other defendants and that the deadline should have been tolled under § 583.340(c) since bringing the action to trial was “impossible, impracticable, or futile” in light of the original plaintiff’s death and the confusion over the true owner of the house loan.

“In my view,” he wrote, “the dismissal of this lawsuit under the circumstances described defeats the substantial ends of justice.”

The case is Gaines v. Fidelity National Title Insurance Company, 13 S.O.S. 6324.