Wednesday, April 06, 2016

Hawkins v. SunTrust Bank (Cal. Ct. App. - April 6, 2016)

Wait.  Hold on.  This opinion is obviously wrong.  Isn't it?

I say that with trepidation.  Because when I read the first paragraph, I said to myself:  "Right on!"

Here's how Justice Yegan starts the opinion:

"Rather than giving full faith and credit to a South Carolina foreclosure judgment, appellant contends that we should give it no faith and no credit. This would require riding roughshod over Article IV, §1 of the United States Constitution, section 1913, subdivision (a) of the California Code of Civil Procedure, and time honored principles of res judicata and collateral estoppel.  There is no principled reason to do so."

Hear, hear.

The facts also seem totally straightforward.  SunTrust sues Flordeliza Hawkins in South Carolina in 2010 to foreclose upon her house, Ms. Hawkins defaults, the house gets sold, story over.  But fast forward to 2014, and Ms. Hawkins sues in California for wrongful foreclosure.  The trial court dismisses at the pleading stage on grounds of issue and claim preclusion (res judicata).  The Court of Appeal affirms.

Seems all good, right?

But Ms. Hawkins says she was never, in fact, served with the South Carolina action.  Which means there's no personal jurisdiction.  Which in turn I'm pretty sure means that the South Carolina judgment isn't entitled to full faith and credit.  Some case called Pennoyer or something.  Vague memory from law school.

Justice Yegan has an answer for that, of course.  'Cause I'm quite sure he paid attention that first day of civil procedure.  He says that the South Carolina court determined that there was, in fact, proper service, and hence personal jurisdiction.  It says so right on the South Carolina judgment.

But here's the thing:  That was a default judgment.  Ms. Hawkin's didn't appear.  Yeah, SunTrust filed a proof of service.  But Ms. Hawkins didn't contest it.  Maybe SunTrust was mistaken.  Maybe it lied.

A core requirement for issue preclusion -- which the Court of Appeal applies here -- is that the issue be in fact litigated and resolved.  Default judgments don't count.  Beyond a shadow of a doubt.  (I'll put to one side the fact that Ms. Hawkins eventually files a belated appeal in South Carolina that ultimately gets dismissed on procedural grounds, because that doesn't matter:  we're still talking about giving preclusive effect to a default judgment, which isn't allowed.  Plus the Court of Appeal doesn't even rely on the appeal for it's ruling; it's relying on the default judgment itself.)

Now, the Court of Appeal has an answer.  One that on first glance may make a fair amount of sense.  Justice Yegan says:  "Appellant could have brought a motion to set aside the judgment . . .  . She fails to explain why a motion to vacate the judgment was not filed in South Carolina before moving to California and filing suit here."

Okay, I get the efficiency involved in preferring a motion to vacate in South Carolina over filing a separate action in California.  But here's the thing:  You're not required to do that.  You're allowed to attack a judgment without personal jurisdiction collaterally.  For various policy reasons that I need not identify at length since it's so clearly the actual law.  If there's no personal jurisdiction -- e.g., no proper service -- we might "want" the challenging party to go to the rendering court, but they're not required to do so, since the Full Faith and Credit Clause doesn't apply to judgments without personal jurisdiction.  That whole Pennoyer thing again.  (Plus it would violate the Due Process Clause, as that opinion held, to grant full faith and credit.)

So geeze.

For what it's worth, wholly beyond the relevant law, there are good reasons why we don't, in fact, give preclusive effect to sister state judgments rendered without personal jurisdiction.  Assume for a moment that SunTrust lied in its affidavit, and Ms. Hawkins was never properly served.  She moved from South Carolina to California.  Her home's already been repossessed.  The underlying foreclosure action is sort of moot at this point, since the home is gone.  If she's right that SunTrust lied, however, that entity should still be liable for wrongful foreclosure.  And since both Ms. Hawkins and SunTrust are in California, it may well make sense to do that litigation here, rather than to first go back to South Carolina to reopen a foreclosure litigation about a house that was long-ago already foreclosed.

It doesn't matter that South Carolina said in the default judgment that it had jurisdiction.  It wasn't actually litigated.  (And what else was the court going to say given that it was undisputed since the other side didn't show up -- which, of course, it wouldn't have if the affidavit was a lie.)  This not only makes sense, but it's also the law:  in the words of the California Supreme Court in Hammell, you can still collaterally attack a sister state judgment consistent with the Full Faith and Credit Clause even if such jurisdictional recitals exist.  Which, again, makes sense.

So I'm pretty strongly convinced that this opinion is just flat out wrong.

Now, look, I get maybe why the Court of Appeal issues its opinion.  It does seem like SunTrust did in fact properly serve the South Carolina lawsuit, since surely the woman knew she was being evicted from her home.  Moreover, I read the plaintiff's opening brief in the Court of Appeal.  Let's just say:  The word "brief" accurately describes this submission.  It doesn't even cite Durfee, the leading Supreme Court case on this issue, or Marshall, the Supreme Court's latest word on the issue, or many of the other United States Supreme Court cases that make crystal clear that the Full Faith and Credit Clause does not apply to default judgments rendered without personal jurisdiction.  (And that also answer Justice Yegan's question as to why a plaintiff isn't required to go back to South Carolina and can instead litigate here.)  My hope is that if the Court of Appeal had been informed of all those cases at the time, and had a chance to look at them, it'd have come out the right way.  (And, maybe, upon hearing of them, might now reconsider, since the appellant did, in fact, make the right arguments, just not nearly as persuasively as she might have.)

Ms. Hawkins may well still lose.  But she shouldn't lose on the pleadings.  There is a disputed issue about whether she was properly served.  That issue gets to be resolved here.  You don't give full faith and credit to a default judgment in a sister state that recites that there's personal jurisdiction there.  If, in fact, there wasn't jurisdiction, there's no preclusion of any type.  End of story.

And a published opinion saying otherwise shouldn't be left standing.