Bridgeway Marina Corp. v. DCR Mortgage 10 Sub 3, LLC, et al

DCR Mortgage 10 Sub 3, LLC’s demurrer to the Eleventh Cause of Action is sustained without leave to amend.

Procedural Background

On January 19, 2023, Plaintiff Bridgeway Marina Corp. filed its Verified Complaint alleging wrongful foreclosure, breach of contract, negligence, and wrongful business practices against Defendants DCR Mortgage 10 Sub 3, LLC (“DCR”) and Total Lender Solutions, Inc.

In April 2023, DCR filed a motion to compel arbitration with respect to the four causes of action asserted against it.

Plaintiff filed a First Amended Verified Complaint on August 24, 2023, adding Sterling Bank as a defendant and a cause of action for breach of the implied covenant of fair dealing against Sterling Bank.

On September 20, 2023, the Court entered an Order granting DCR’s motion to compel arbitration. Plaintiff filed an Amended Claim for Wrongful Foreclosure (and Related Claims) in the arbitration. An arbitration hearing was conducted on March 10, 2025. On July 17, 2025, the arbitrators issued a Final Award in which they determined among other things that Plaintiff could not assert a wrongful foreclosure claim because no foreclosure sale had occurred and because DCR had properly triggered the due-on-sale provision in the loan documents.

DCR filed a petition to confirm the arbitration award and Plaintiff filed a petition to vacate the award and a motion to amend its Complaint in this Court. On November 10, 2025, the Court entered an Order granting DCR’s petition to confirm, denying Plaintiff’s petition to vacate, and granting Plaintiff’s motion to amend only as to Plaintiff’s allegations regarding excessive fees charged by DCR.

Plaintiff filed a Second Amended Complaint on November 10, 2025. DCR demurred to the Eleventh Cause of Action for disgorgement, which was the only remaining claim following the

Court’s November 10th Order. In the Eleventh Cause of Action, Plaintiff alleged that DCR demanded that Plaintiff pay it default interest and other charges that are not permitted under California law and that Plaintiff only paid those charges in order to avoid a foreclosure sale. Plaintiff sought an order compelling DCR to disgorge the alleged unlawful charges. DCR argued in its demurrer that the Eleventh Cause of Action was barred by the doctrine of res judicata because it could have been raised and adjudicated in the arbitration.

On February 9, 2026, the Court entered an Order sustaining DCR’s demurrer with leave to amend, finding that the same primary right alleged in the Eleventh Cause of Action was at issue in the arbitration because Plaintiff included in its Amended Claim allegations that it had to pay excessive fees to DCR. The Court noted Plaintiff’s argument that its disgorgement claim could not have been decided in the arbitration under Honchariw v. FJM Private Mortgage Fund, LLC (2022) 83 Cal.App.5th 893, but found that Plaintiff did not provide any detail about the allegedly unlawful charges so as to fall within Honchariw and avoid the bar of res judicata.

The Court stated: “The Court will sustain the demurrer but allow Plaintiff an opportunity to amend its Complaint to specifically identify the fees or other charges that it contends were unlawful (broken down by amount and characterization (e.g.. late fee, default interest), as well as the legal basis supporting its allegation that the fees or charges are against public policy such that the claim could not have been decided by the arbitrators. Leave to amend is limited to this narrow issue.” (Order dated February 9, 2016, p. 4:19-23.)

Plaintiff filed a Third Amended Complaint on February 25, 2026.

Request for Judicial Notice

The Court grants DCR’s request for judicial notice of the September 27, 2023 Notice of Entry of Order (Exhibit 1), Plaintiff’s Amended Claim for Wrongful Foreclosure (and Related Claims) in Arbitration (Exhibit 3), the July 17, 2025 Final Award of the AAA panel (Exhibit 4), the November 10, 2025 Order granting petition to confirm arbitration award, denying petition to vacate arbitration award, and granting leave to amend (Exhibit 5), the February 9, 2026 Order (Exhibit 6), and the Third Amended Complaint (Exhibit 7). (Evid. Code §§ 452, 453.)

Plaintiff does not dispute that this Amended Claim for Wrongful Foreclosure was the operative pleading in the arbitration and does not oppose DCR’s request that the Court take judicial notice of it.

The Court grants Plaintiff’s request for judicial notice of the Notice of Default recorded on November 10, 2022 (Exhibit A), the April 2025 AAA Ruling Granting Dispositive Motions (Exhibit C), the November 10, 2025 Order (Exhibit D), and the October 27, 2023 letter (Exhibit G) as this is attached as an exhibit to the Third Amended Complaint. (Evid. Code §§ 452, 453.) The Court denies Plaintiff’s request to take judicial notice of Exhibits B, E, and F as these are tentative rulings and not the final orders. However, the Court will take judicial notice, sua sponte, of the final order entered on September 20, 2023. (See Scott v. JPMorgan Chase Bank, NA (2013) 214 Cal.App.4th 743, 752 [“the court may take judicial notice on its own volition”].)

The Court already takes judicial notice of the February 9, 2026 Order in connection with DCR’s request.

Discussion

Res judicata, or claim preclusion, prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them. (DKN Holdings LLC v. Faerber

(2015) 61 Cal.4th 813, 824.) Res judicata arises if the second suit involves (1) the same cause of action (2) between the same parties or those in privity (3) after a final judgment on the merits in the first suit. (Ibid.) For purposes of the first element, “ʽCalifornia law approaches the issue by focusing on the ‘primary right’ at stake: if two actions involve the same injury to the plaintiff and the same wrong by the defendant then the same primary right is at stake even if in the second suit the plaintiff pleads different theories of recovery, seeks different forms of relief and/or adds new facts supporting recovery.’” (Cal Sierra Development, Inc. v.

George Reed, Inc. (2017) 14 Cal.App.5th 663, 675 [citations omitted].) For purposes of the third element, an unconfirmed arbitration award can bar the same cause of action in a subsequent suit even if the award was not reduced to a judgment. (See Bucur v. Ahmad (2016) 244 Cal.App.4th 175, 186; Cal Sierra, 14 Cal.App.5th 663, 679.)

“ʽIf the matter was within the scope of the action, related to the subject-matter and relevant to the issues, so that it could have been raised, the judgment is conclusive on it despite the fact that it was not in fact expressly pleaded or otherwise urged. The reason for this is manifest. A party cannot by negligence or design withhold issues and litigate them in consecutive actions. Hence the rule is that the prior judgment is res judicata on matters which were raised or could have been raised, on matters litigated or litigable.’” (Thibodeau v.

Crum (1992) 4 Cal.App.4th 749, 755 [citation omitted] [emphasis in original].) “The doctrine of res judicata applies not only to judicial proceedings but also to arbitration proceedings. And while it is well established that the arbitrator derives his power solely from the arbitration agreement and has no power to decide issues not submitted, case law also indicates that arbitrating parties are obliged, in the manner of Sutphin, to place before their arbitrator all matters within the scope of the arbitration, related to the subject matter, and relevant to the issues.” (Ibid. [citations and internal quotations omitted].)

As the Court noted in its February 9, 2026 Order, the same primary right alleged in the Eleventh Cause of Action was at issue in the arbitration. While Plaintiff’s main focus in the arbitration was the alleged wrongful foreclosure and alleged defaults that triggered the foreclosure, Plaintiff also included in its Amended Claim allegations that it had to pay excessive fees to DCR. To avoid the bar of res judicata, Plaintiff has continually argued that the arbitrators could not have determined its unlawful fee claim under Honchariw, supra.

In Honchariw, the court held that a late payment fee which included a default interest charge of 9.99% on the total unpaid principal balance of the loan violated public policy because it constituted an unlawful penalty in violation of Civil Code Section 1671. The court also held that the arbitrator exceeded its powers by enforcing the contract that contained this provision because the provision violated public policy. (See Honchariw, 83 Cal.App.5th at pp. 901-906.) In the February 9, 2026 Order, the Court found that Plaintiff had not alleged sufficient facts to show that the alleged improper fees charged by DCR fell within the scope of Honchariw.

In its Third Amended Complaint, Plaintiff alleges the following:

68. As alleged herein, in order to prevent a foreclosure sale, Bridgeway Marina was forced to pay DCR Mortgage large sums of money in the form of default interest and prepayment penalties and legal fees and late charges and other charges that are not permitted under California law. [See, Honchariw v. FJM Private Mortgage Fund, LLC, (2022) 83 Cal.App.5th 893, and the controlling Supreme Court cases cited therein.]

69. Attached to this Complaint as Exhibit D and incorporated as part of the pleadings of this Complaint is a letter from DCR Mortgage to Bridgeway Marina dated October 27, 2023 which set forth in detail the unlawful payoff amounts totally $640,536.20 that Bridgeway Marina paid to DCR Mortgage to prevent foreclosure. In this cause of action, Bridgeway Marina seeks an order of this court compelling DCR Mortgage to disgorge all of these unlawful amounts, including interest thereon, and to pay Bridgeway Marina attorney fees incurred in prosecuting this claim.

(Third Amended Complaint, ¶¶68, 69.) Exhibit D is a letter from DCR to Plaintiff dated October 27, 2023 providing payoff information for the loan.

These allegations and references to the payoff letter are insufficient to avoid the bar of res judicata. Plaintiff fails to plead facts supporting its allegation that any of these fees are against public policy, and thus improper for adjudication in an arbitration, as is required under Honchariw. There is nothing per se unlawful about interest, penalties and/or fees in general. To fall within Honchariw, the amounts charged must be unlawful under California law or against public policy. “The public policy so contravened must be a well-defined and dominant public policy as ascertained by reference to the laws and legal precedents and not from general considerations of supposed public interests.” (Honchariw, 83 Cal.App.5th at p. 899 [citations and internal quotations omitted].)

Plaintiff does not allege which specific amounts are unlawful or against public policy, or why – despite being instructed to do so by the Court in its prior order.

For example, Plaintiff does not contend that there is a late payment fee improperly assessed against the entire principal balance as in Honchariw or Garrett v. Coast & Southern Fed. Sav. & Loan Assn. (1973) 9 Cal.3d 731, a high percentage late fee applied to a final balloon payment as in Poseidon Develop., Inc. v. Woodland Lane Estates, LLC (2007) 152 CA4th 1106, 1115-1116, or a prepayment fee imposed after a late interest payment as in Rigley v. Topa Thrift & Loan Ass’n (1998) 17 Cal.4th 970, 981-982.

Plaintiff argues in its Opposition that DCR was not entitled to any amount other than principal and interest because the Promissory Note (attached as Exhibit B to the Third Amended Complaint) does not provide for the collection of any other charges. This argument fails for two reasons. First, the Promissory Note does in fact address late fees, prepayment fees, and default interest. Second, to the extent Plaintiff argues that there was no basis for DCR to collect fees and interest under these terms, this asserts a simple breach of contract claim that could have been (and was) submitted to, and decided by, the arbitrators.

The Court here is focused on what types of claims could not be decided by the arbitrator as discussed by the court in Honchariw because such claims would be beyond the arbitrator’s authority. (See Honchariw, 83 Cal.App.5th at p. 899 [“Arbitrators may exceed their powers by issuing an award that violates a party’s unwaivable statutory rights or that contravenes an explicit legislative expression of public policy”] [citation and internal quotations omitted].)

To the extent Plaintiff argues that the default interest ($242,556.22), prepayment penalty ($41,479.71), foreclosure fees ($19,152.38), and late charges ($1,492.48) could not be arbitrated because they are “contrary to the California liquidated damages laws”, Plaintiff provides no explanation as to how these charges are contrary to California liquidated damages law or to public policy, either by reference to the language of the Promissory Note itself or case law addressing charges calculated in the same manner as the Promissory Note. The Promissory Note sets forth how each of these amounts are calculated, but Plaintiff does not challenge or discuss any of this specific language. Accordingly, the Court finds that Plaintiff’s claim is barred by res judicata and sustains the demurrer.

Plaintiff’s additional arguments at the end of its Opposition do not compel a different result. Plaintiff argues that Hon. Judge Andrew Sweet did not include the improper fees claim in his order compelling arbitration because that claim was not asserted in the operative complaint at the time of Judge Sweet’s order. However, as noted above, Plaintiff amended its claim before submitting it to the arbitrators and the Amended Claim included allegations of improper charges imposed by DCR. Therefore, this claim was before the arbitrators at the time they reached their final decision.

Plaintiff also contends that the arbitrators did not allow further amendment of Plaintiff’s claims, but this language is from the arbitrators’ decision, after they decided Plaintiff’s amended claim. Finally, Plaintiff argues that the loan documents provide that nothing in the documents precludes a party from seeking equitable relief in court, so Plaintiff should be able to

assert its disgorgement claim here because it is equitable in nature. However, this language is found in the parties’ arbitration agreement and applies only to the scope of the arbitration clause. The language is not pertinent to the issue of whether res judicata applies after Plaintiff submitted its Amended Claim to the panel.

The demurrer is sustained without leave to amend. Plaintiff has had several opportunities to address the deficiencies noted above and has failed to do so. Moreover, Plaintiff does not request further leave to amend and does not indicate how it could amend its Complaint in any event so that the Eleventh Cause of Action falls within the scope of Honchariw.

Defendant is to lodge a proposed order for consideration.

Should any party wish to contest this tentative, the matter will be heard on May 29, 2026, at 1:30 pm in this department. Marin County Superior Court Local Rules, Rule 2.10(A), (B), which provides that if a party wants to present oral argument, the party must contact the Court at (415) 444-7046 and all opposing parties by 4:00 p.m. the court day preceding the scheduled hearing.

Parties must comply with Marin County Superior Court Local Rules, Rule 2.10(A), (B), which provides that if a party wants to present oral argument, the party must contact the Court at (415) 444-7046 and all opposing parties by 4:00 p.m. the court day preceding the scheduled hearing. Notice may be by telephone or in person to all other parties that argument is being requested (i.e., it is not necessary to speak with counsel or parties directly.) Unless the Court and all parties have been notified of a request to present oral argument, no oral argument will be permitted except by order of the Court. In the event no party requests oral argument in accordance with Rule 2.10(B), the tentative ruling shall become the order of the court.

IT IS ORDERED that evidentiary hearings shall be in-person in Department L. For routine appearances, the parties may access Department L for video conference via a link on the court website. Kindly turn your camera on when your case is called and make sure the party or lawyer making the appearance is properly identified on the screen.

FURTHER ORDERED that the parties are responsible for ensuring that they have a good connection and that they are available for the hearing while using the virtual remote courtroom. If the connection is inadequate, the Court may proceed with the hearing in the party’s absence. If it is determined that you are driving your car during the hearing, you will be removed from the virtual courtroom. (Yes, this happens).