In Harbour Vista, LLC v. HSBC Mortgage Services Inc.,
2011 WL 6318525 (Cal.App. 4 Dist. 2011), the California Court of
Appeal held that plaintiffs may not obtain default judgments in
quiet title actions.
Harbour owned a ground lease under a condo complex. Julie Nugent
purchased a condo and paid her mortgage to Fieldstone Mortgage
Company. She also subleased from and paid rent to Harbour. Both the
mortgage and the sub-lease were secured by the condo. Nugent
eventually defaulted on both her rent and mortgage. After HSBC
purchased the condo from Fieldstone at a foreclosure sale, Harbour
filed a complaint to quiet title. HSBC failed to respond to the
complaint and Harbour obtained a default judgment. HSBC then moved
to set aside the default judgment, but the trial court denied the
motion. HSBC appealed.
The Court of Appeal reversed the judgment based on the language of
California Code of Civil Procedure Section 764.010, which expressly
provides that the "court shall not enter judgment by
default." According to the Court, this language "is
unequivocal," and the "prohibition against default
judgments in quiet title actions appears absolute." The
statute does not, however, prevent a quiet title plaintiff from
taking a default. Instead, after taking a default, the court must
hold an evidentiary hearing at which the parties (including the
defaulted defendant) are entitled to present evidence regarding
their conflicting claims to the property. Thus, even though HSBC
had not answered the complaint and was in default, the trial court
should have allowed HSBC to present evidence about its claim to the
condo. Once a court holds a properly noticed evidentiary hearing,
it may render a regular judgment in accordance with the evidence
and the law regardless of whether the defaulted defendant
appears.
Though a defaulted defendant has a right to appear at the
evidentiary hearing, a plaintiff has no obligation to provide
notice to the defaulted defendant of this hearing. Nor does the
plaintiff have any obligation "to serve documents or give
notice of any future court dates" to the defaulted defendant.
If the defaulted defendant nevertheless learns of the evidentiary
hearing and appears, it may be heard. If it does not appear, the
Court will proceed and render judgment without the participation of
the defaulted defendant. Following the evidentiary hearing, the
Court should issue a judgment resolving all issues as to
title.
Other causes of action and claims for relief will not be addressed
at this evidentiary hearing and are not affected by this rule. If a
defendant defaults as to other claims, normal procedures for
obtaining entry of default and default judgment apply.
Harbour Vista, LLC v. HSBC Mortgage Services Inc., 2011 WL
6318525 (Cal.App. 4 Dist. 2011)
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