Miller v. Wholesale America Mortgage, Inc et al, No. 3:2017cv05495 - Document 40 (N.D. Cal. 2018)
Court Description: ORDER granting motion to dismiss, denying motion to appear by telephone as moot, and severing non-appearing defendant. (Beeler, Laurel) (Filed on 1/5/2018)
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Miller v. Wholesale America Mortgage, Inc et al Doc. 40 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 NORTHERN DISTRICT OF CALIFORNIA 10 San Francisco Division United States District Court Northern District of California 11 MARY MILLER, Case No. 17-cv-05495-LB Plaintiff, 12 v. 13 14 WHOLESALE AMERICA MORTGAGE, INC, et al., 15 Defendants. 16 17 ORDER SEVERING CLAIMS AGAINST DEFENDANT WHOLESALE AMERICA MORTGAGE, INC. AND GRANTING REMAINING DEFENDANTS’ MOTIONS TO DISMISS Re: ECF Nos. 9, 20 INTRODUCTION 18 This is the second action filed by plaintiff Mary Miller regarding the mortgage on her home 19 (referred to in the complaint as the “Subject Property”). Ms. Miller previously filed an action in 20 2012 requesting a court order cancelling her mortgage debt and obligations, enjoining foreclosure, 21 and awarding her full title to the Subject Property. Following four years of litigation, Ms. Miller’s 22 first action was dismissed in its entirety. Ms. Miller now brings this second action against many of 23 the same defendants (plus several new ones), once again seeking a court order cancelling her 24 mortgage debt and obligations, enjoining foreclosure, and awarding her full title to the Subject 25 Property. The defendants have moved to dismiss on a number of grounds, including the ground 26 that this second action of Ms. Miller is barred by res judicata.1 27 1 28 Pursuant to Civil Local Rule 7-1(b), the court finds this matter suitable for determination without oral argument and vacates the hearing set for January 11, 2018. ORDER – No. 17-cv-05495-LB Dockets.Justia.com As discussed below, the undersigned lacks jurisdiction over Ms. Miller’s claims against one of 1 2 the defendants, Wholesale America Mortgage, Inc. (“Wholesale America”), and therefore severs 3 the claims against that defendant. The undersigned retains jurisdiction over the rest of Ms. Miller’s 4 claims and dismisses them with prejudice as barred by res judicata. 5 6 7 STATEMENT 1. The Mortgage on the Subject Property 8 On March 1, 2006, Ms. Miller entered into a mortgage with defendant Wholesale America.2 9 Specifically, she executed an adjustable-rate promissory note (the “Note”) payable to Wholesale America and secured the Note with a deed of trust (the “Deed of Trust”) on the Subject Property.3 11 United States District Court Northern District of California 10 The Deed of Trust identified Wholesale America as the lender, the Financial Trust Company as 12 the trustee, and defendant Mortgage Electronic Registration Systems, Inc. (“MERS”) as nominee 13 for Wholesale America as the beneficiary.4 Ms. Miller alleges that at the time she executed the Note and Deed of Trust, Wholesale 14 15 America did not hold a California Residential Mortgage Lender’s License.5 She also alleges that 16 defendant Lehman Brothers Holdings Inc. (“Lehman Brothers”) entered into a series of 17 agreements, including a funding agreement, a mortgage loan purchase agreement, and a trust 18 agreement, with defendant Greenpoint Mortgage Funding, Inc. (“Greenpoint”) to purchase her 19 loan.6 She alleges that Wholesale America identified MERS as the beneficiary on the Deed of 20 21 22 23 Compl. – ECF No. 1 at 5–6 (¶¶ 23–24). Citations refer to material in the Electronic Case File (“ECF”); pinpoint citations are to the ECF-generated page numbers at the top of documents. 2 Id.; Compl. Ex. 2 (Note) – ECF No. 1-1 at 4–10; Compl. Ex. 3 (Deed of Trust) – ECF No. 1-1 at 12– 34. 3 4 24 25 26 27 28 Compl. – ECF No. 1 at 5 (¶ 24); Compl. Ex. 3 (Deed of Trust) – ECF No. 1-1 at 12. Compl. – ECF No. 1 at 2 (¶ 3), 3–4 (¶ 11), 8 (¶ 36), 9 (¶ 42), 11 (¶ 59), 12 (¶ 70), 16 (¶ 105), 21 (¶ 143(c)). As an aside, the Note and the Deed of Trust identify Wholesale America as having had a California residential mortgage lender license number: 4150037. Compl. Ex. 2 (Note) – ECF No. 1-1 at 4; Compl. Ex. 3 (Deed of Trust) – ECF No. 1-1 at 12. This license was revoked in 2008. See Order Summarily Revoking Residential Mortgage Lender and/or Servicer License, Cal. Corp. Comm’r v. Cal. Fin. Grp., Northpoint Fin. (Wholesale Am. Mortg., Inc., DBA), No. 4150037 (Cal. Dep’t Corp. Nov. 5, 2008), http://www.dbo.ca.gov/FSD/08pdf/4150037.pdf. 5 6 Compl. – ECF No. 1 at 8 (¶ 39), 20 (¶ 143(a)). ORDER – No. 17-cv-05495-LB 2 1 Trust to conceal from her the fact that Lehman Brothers was the true funder of her loan through its 2 purchase agreement with Greenpoint.7 In February 2011, a substitution of trustee was executed in which the Financial Title Company 3 4 was substituted as trustee with Cal-Western Reconveyance Corp.8 In March 2011, an assignment of deed of trust was executed in which MERS as nominee for 5 6 Wholesale America assigned all rights and interest in the Deed of Trust to defendant Aurora Loan 7 Services, LLC (“ALS”).9 Later that same month, Cal-Western Reconveyance Corp. issued Ms. Miller a notice of 8 9 default, stating she was behind on her payments.10 In July 2012, an assignment of deed of trust was executed in which ALS assigned all rights 10 United States District Court Northern District of California 11 and interest in the Deed of Trust to defendant Nationstar Mortgage, LLC (“Nationstar”).11 12 In February 2016, an assignment of deed of trust was executed in which Nationstar assigned 13 all rights and interest in the Deed of Trust to defendant U.S. Bank N.A. (“U.S. Bank”) as trustee 14 for the Lehman XS Trust Mortgage Pass-Through Certificates, Series 2006-GP1.12 In January 2017, a company called Quality Loan Service Corp., as trustee for U.S. Bank, 15 16 issued Ms. Miller a second notice of default, stating that she was behind on her payments.13 In May 2017, Quality Loan Service Corp. issued Ms. Miller a notice that she was in default of 17 18 her Deed of Trust and that the Subject Property could be sold at a public sale.14 19 20 21 7 Id. (¶ 41). How this worked, or how money or title was transferred between Wholesale America and MERS, on the one hand, and Lehman Brothers and Greenpoint, on the other, goes unexplained in Ms. Miller’s complaint. Compl. – ECF No. 1 at 6 (¶ 25); Compl. Ex. 4 (Substitution of Trustee) – ECF No. 1-1 at 36. 22 8 23 Compl. – ECF No. 1 at 6 (¶ 26); Compl. Ex. 5 (Corporate Assignment of Deed of Trust) – ECF No. 1-1 at 38–39. 24 10 9 Compl. – ECF No. 1 at 6 (¶ 26); Compl. Ex. 6 (Notice of Default) – ECF No. 1-1 at 41–42. 25 Compl. – ECF No. 1 at 7 (¶ 30); Compl. Ex. 7 (Corporate Assignment of Deed of Trust) – ECF No. 1-1 at 44–46. 26 Compl. – ECF No. 1 at 7 (¶ 31); Compl. Ex. 8 (Assignment of Deed of Trust) – ECF No. 1-1 at 48– 49. 11 12 27 13 Compl. – ECF No. 1 at 7 (¶ 32); Compl. Ex. 9 (Notice of Default) – ECF No. 1-1 at 51–54. 28 14 Compl. – ECF No. 1 at 7 (¶ 33); Compl. Ex. 10 (Notice of Trustee’s Sale) – ECF No. 1-1 at 56–57. ORDER – No. 17-cv-05495-LB 3 1 2. The Prior Litigation In May 2012, Ms. Miller filed a complaint in the California Superior Court in Marin County 2 3 against Wholesale America, Lehman Brothers, U.S. Bank, and ALS (among other defendants), 4 alleging violations of the Truth in Lending Act (TILA); violations of the Home Ownership and 5 Equity Protection Act (HOEPA); fraud, deceit, and misrepresentation; breach of fiduciary duty; 6 and quiet title, securitization, and chain of title violations.15 Among other things, the complaint 7 sought a court order enjoining any foreclosure of the Subject Property, cancelling the Note and 8 Deed of Trust, and awarding Ms. Miller title to the Subject Property.16 ALS and U.S. Bank removed the case to the Northern District of California on the basis of 10 federal-question jurisdiction arising from Ms. Miller’s TILA and HOEPA claims.17 Over the next 11 United States District Court Northern District of California 9 year, Ms. Miller filed three successive amended complaints; the last was filed in April 2013 and 12 named (among other defendants) Wholesale America, Lehman Brothers, U.S. Bank as Trustee for 13 Lehman XS Trust Mortgage Pass-Through Certificates, Series 2006-GP1, ALS, and Nationstar — 14 all defendants in this action — and asserted claims for negligence, negligent misrepresentation, 15 violation of California Civil Code § 2923.5, securitization and chain of title violations, quiet title, 16 and violations of California Business and Professions Code § 17200 et seq.18 After Ms. Miller filed her third amended complaint, which no longer alleged a federal claim, 17 18 the district court remanded Ms. Miller’s case back to the Marin County Superior Court.19 Back in 19 state court, ALS, U.S. Bank, and Nationstar filed a demurrer (the California state-court equivalent 20 21 22 15 Compl., Miller v. Wholesale Am. Mortg., Inc., No. CIV 1202426 (Cal. Super. Ct. Marin Cty. May 25, 2012) (attached as Nationstar et al.’s Mot. to Dismiss Request for Judicial Notice (“RJN”) Ex. I – ECF No. 10 at 55–77). The court may take judicial notice of state court filings. Mir v. Little Co. of Mary Hosp., 844 F.2d 646, 649 (9th Cir. 1988). 23 16 24 17 25 26 27 28 Id. at 70–72 (¶¶ 78–88). Notice of Removal, Miller v. Wholesale Am. Mortg., Inc., No. 3:12-cv-03481-JST (N.D. Cal. July 3, 2012), ECF No. 1 (attached as Nationstar et al.’s Mot. to Dismiss RJN Ex. I – ECF No. 10 at 48–50). 18 Third Amend. Compl., Miller v. Wholesale Am. Mortg., Inc., No. 3:12-cv-03481-JST (N.D. Cal. Apr. 13, 2013), ECF No. 46 (attached as Nationstar et al.’s Mot. to Dismiss RJN Ex. M – ECF No. 10 at 144–63). 19 Order Remanding Case, Miller v. Wholesale Am. Mortg., Inc., No. 3:12-cv-03481-JST (N.D. Cal. May 8, 2013), ECF No. 49 (attached as Nationstar et al.’s Mot. to Dismiss RJN Ex. O – ECF No. 10 at 167–68). ORDER – No. 17-cv-05495-LB 4 1 of a motion to dismiss). In September 2013, the Superior Court granted the defendants’ demurrer 2 as to all claims.20 Ms. Miller appealed. In May 2015, the California Court of Appeal reversed 3 solely as to Ms. Miller’s claim for violation of California Civil Code § 2923.5 and affirmed the 4 dismissal of all other claims.21 Following another year of litigation, the Marion County Superior 5 Court denied Ms. Miller’s application to enjoin foreclosure of the Subject Property, ordered that 6 foreclosure could proceed, and ordered Ms. Miller to show cause why her case should not be 7 dismissed in its entirety.22 Ms. Miller told the court that there was no reason why her case should 8 not be deemed dismissed, and the court then dismissed her case.23 9 10 STANDARD OF REVIEW A complaint must contain a “short and plain statement of the claim showing that the pleader is United States District Court Northern District of California 11 12 entitled to relief” to give the defendant “fair notice” of what the claims are and the grounds upon 13 which they rest. See Fed. R. Civ. P. 8(a)(2); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). 14 A complaint does not need detailed factual allegations, but “a plaintiff’s obligation to provide the 15 ‘grounds’ of his ‘entitlement to relief’ requires more than labels and conclusions, and a formulaic 16 recitation of the elements of a cause of action will not do. Factual allegations must be enough to 17 raise a claim for relief above the speculative level . . . .” Id. (internal citations omitted). To survive a motion to dismiss, a complaint must contain sufficient factual allegations, which 18 19 when accepted as true, “‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 20 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility 21 when the plaintiff pleads factual content that allows the court to draw the reasonable inference that 22 20 23 24 Decision on Demurrer, Miller v. Wholesale Am. Mortg., Inc., No. CIV 1202426 (Cal. Super. Ct. Marin Cty. Sept. 16, 2013) (attached as Nationstar et al.’s Mot. to Dismiss RJN Ex. CC – ECF No. 10 at 233–37). 21 25 26 Miller v. Aurora Loan Servs., LLC, No. A140403, 2015 WL 1003907 (Cal. Ct. App. Mar. 4, 2015). 22 Minute Order, Miller v. Aurora Loan Servs., No. CIV 1202426 (Cal. Super. Ct. Marin Cty. Sept. 16, 2016) (attached as Nationstar et al.’s Mot. to Dismiss RJN Ex. R – ECF No. 10 at 187–88). 23 27 28 Minute Order, Miller v. Aurora Loan Servs., No. CIV 1202426 (Cal. Super. Ct. Marin Cty. Oct. 19, 2016) (attached as Nationstar et al.’s Mot. to Dismiss RJN Ex. S – ECF No. 10 at 190) (“The court inquires if there is any reason this case should not be deemed dismissed. Counsel state there is no reason this case should not be deemed dismissed.”) (capitalization modified). ORDER – No. 17-cv-05495-LB 5 1 the defendant is liable for the misconduct alleged.” Id. “The plausibility standard is not akin to a 2 ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted 3 unlawfully.” Id. (quoting Twombly, 550 U.S. at 557). “Where a complaint pleads facts that are 4 merely consistent with a defendant’s liability, it stops short of the line between possibility and 5 plausibility of ‘entitlement to relief.’” Id. (quoting Twombly, 550 U.S. at 557) (internal quotation 6 marks omitted). While courts will ordinarily dismiss a claim with leave to amend, “[i]t is not an abuse of 7 8 discretion to deny leave to amend when any proposed amendment would be futile.” Reddy v. 9 Litton Indus., Inc., 912 F.2d 291, 296 (9th Cir. 1990) (citing Klamath-Lake Pharm. Ass’n v. 10 Klamath Med. Serv. Bureau, 701 F.2d 1276, 1292–93 (9th Cir. 1983)). United States District Court Northern District of California 11 12 13 ANALYSIS 1. Ms. Miller’s Claims Against Wholesale America Will Be Severed The court first addresses a threshold issue. With one exception, all of the parties have 14 15 consented to magistrate-judge jurisdiction.24 One defendant, however — Wholesale America — 16 has not been served with a summons or complaint and has not appeared in the litigation, and hence 17 has not consented to magistrate-judge jurisdiction. It appears that Wholesale America may no 18 longer be a going concern with the capacity to consent or to defend itself in litigation: it is a 19 California corporation that appears to currently be suspended by the California Secretary of 20 State,25 and “[i]n general, a [California] corporation whose powers have been suspended or 21 forfeited lacks the capacity to prosecute or defend an action, or appeal from an adverse judgment. 22 Suspension or forfeiture prohibits a corporation from taking any litigation action[.]” Ferras v. 23 Husqvarna Constr. Prods. N. Am., Inc., No. C 16-01081 SBA, 2016 WL 3547926, at *3 (N.D. 24 Cal. June 30, 2016) (citing Bourhis v. Lord, 56 Cal. 4th 320, 324 (2013)); see Fed. R. Civ. P. 17(b) 25 (corporation’s capacity to be sued is determined by law under which it is organized). 26 27 24 Consents to Magistrate Judge Jurisdiction – ECF Nos. 6, 18, 19. 28 25 See Freshman Decl. Ex. 1 – ECF No. 29 at 5. ORDER – No. 17-cv-05495-LB 6 1 28 U.S.C. § 636(c) allows a case to be assigned to a magistrate judge “[u]pon the consent of 2 the parties,” and this has been interpreted to require the consent of all of the named parties, 3 including ones that have not been served. See Williams v. King, 875 F.3d 500, 503–04 (9th Cir. 4 2017). Usually, when a party does not consent to magistrate-judge jurisdiction, the court would 5 order the case to be reassigned in its entirety to a district judge. Here, however, there is a question 6 as to whether the one non-consenting party is capable of being sued, much less giving consent. All 7 of the other defendants have fully briefed motions to dismiss, and the court has taken the motions 8 under submission. Reassigning the entire case to a district judge would require duplicative work 9 by that judge, resulting in an inefficient use of judicial resources. Additionally, the other parties, which all consented to magistrate-judge jurisdiction, should not have their consents frustrated just 11 United States District Court Northern District of California 10 because one defendant that may not be capable of being sued or giving consent happened to be 12 named as a party. 13 The court thus turns to Federal Rule of Civil Procedure 21, which states that “[o]n motion or 14 on its own, the court may at any time, on just terms, add or drop a party. The court may also sever 15 any claim against a party.” Fed. R. Civ. P. 21. “The court may sever the claims against a party in 16 the interest of fairness and judicial economy and to avoid prejudice, delay or expense, and has 17 ‘broad discretion’ in determining when severance is appropriate.” Ramos v. Ramos, No. 5:14-cv- 18 04713-PSG, 2016 WL 631993, at *2 (N.D. Cal. Feb. 17, 2016) (Ramos I) (quoting TransPerfect 19 Glob., Inc. v. MotionPoint Corp., No. C 10-2590 CW, 2014 WL 6068384, at *2 (N.D. Cal. Nov. 20 13, 2014)), aff’d, 691 F. App’x 487 (9th Cir. 2017) (Ramos II). The court finds that it is in the best 21 interests of the parties that consented, as well as the interests of judicial economy and avoiding 22 delay, to sever Wholesale America from this action and resolve the consenting defendants’ 23 motions. See id. (severing defendant that was served with complaint but had not yet consented or 24 declined to consent to magistrate jurisdiction in order to decide motions to dismiss of other 25 consenting defendants); Ramos II, 691 F. App’x at 488 (affirming severance of defendant). 26 27 28 ORDER – No. 17-cv-05495-LB 7 1 2 2. Ms. Miller’s Remaining Claims Are Barred by Res Judicata “Res judicata, or claim preclusion, prohibits lawsuits on ‘any claims that were raised or could have been raised’ in a prior action.” Stewart v. U.S. Bancorp., 297 F.3d 953, 956 (9th Cir. 2002) 4 (emphasis in original) (quoting Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 713 (9th 5 Cir. 2001)). “To determine the preclusive effect of a state court judgment[,] federal courts look to 6 state law.” Manufactured Home Cmtys. Inc. v. City of San Jose, 420 F.3d 1022, 1031 (9th Cir. 7 2005) (citing Palomar Mobilehome Park Ass’n v. City of San Marcos, 989 F.2d 362, 364 (9th Cir. 8 1993)). “In California, res judicata precludes a plaintiff from litigating a claim if: [(1)] the claim 9 relates to the same ‘primary right’ as a claim in a prior action, [(2)] the prior judgment was final 10 and on the merits, and [(3)] the plaintiff was a party or in privity with a party in the prior action.” 11 United States District Court Northern District of California 3 Trujillo v. County of Santa Clara, 775 F.2d 1359, 1366 (9th Cir. 1985) (citations omitted). 12 2.1 13 14 15 Same Primary Right 2.1.1 Governing Law “California’s res judicata doctrine is based on a primary rights theory.” Manufactured Home, 420 F.3d at 1031. The primary rights theory: [p]rovides that a “cause of action” is comprised of a “primary right” of the plaintiff, a corresponding “primary duty” of the defendant, and a wrongful act by the defendant constituting a breach of that duty. The most salient characteristic of a primary right is that it is indivisible: the violation of a single primary right gives rise to but a single cause of action. 16 17 18 19 Id. (quoting Mycogen Corp. v. Monsanto Co., 28 Cal. 4th 888, 904 (2002)). “Thus, in California, 20 ‘if two actions involve the same injury to the plaintiff and the same wrong by the defendant then 21 the same primary right is at stake even if in the second suit the plaintiff pleads different theories of 22 recovery, seeks different forms of relief and/or adds new facts supporting recovery.’” Furnace v. 23 Giurbino, 838 F.3d 1019, 1024 (9th Cir. 2016) (quoting San Diego Police Officers’ Ass’n v. San 24 Diego City Emps. Ret. Sys., 568 F.3d 725, 734 (9th Cir. 2009)). “The critical focus of primary 25 rights analysis is the harm suffered.” Id. (quoting Brodheim v. Cry, 584 F.3d 1262, 1268 (9th Cir. 26 2009)). 27 28 ORDER – No. 17-cv-05495-LB 8 “A party may bring only one cause of action to vindicate a primary right.” Manufactured 1 2 Home, 420 F.3d at 1031 (citing Mycogen, 28 Cal. 4th at 904). “Claims not raised in this single 3 cause of action may not be raised at a later date.” Id. (citing Mycogen, 28 Cal. 4th at 904). 4 2.1.2 Application The primary right Ms. Miller asserts in this litigation is the same as the right she asserted in 5 6 her prior litigation: her right to the Subject Property. The alleged wrong she claims here is the 7 same as the one she claimed there: that the defendants seek to foreclose on the Subject Property 8 without (so Ms. Miller claims) having a right to do so. The relief she seeks here is the same as the 9 relief she sought there: that the defendants be barred from foreclosing on the Subject Property, that the Note and Deed of Trust be cancelled or rescinded, and that Ms. Miller be awarded full title to 11 United States District Court Northern District of California 10 the Subject Property herself. Ms. Miller asserts that “[a] single wrongful act which violates two primary rights can give rise 12 13 to two causes of action.”26 Ms. Miller’s litigations do not involve two primary rights, however. 14 They involve only one: Ms. Miller’s claimed right to the Subject Property, free of the Note, the 15 Deed of Trust, and foreclosure. Regardless of how Ms. Miller might modify the factual predicate 16 for her complaints (e.g., claiming in her prior action that the Note and Deed of Trust are 17 unenforceable because of defects in the chain of assignment, versus claiming now that the Note 18 and Deed of Trust are unenforceable because Wholesale America was not a licensed lender in the 19 first place), the underlying primary right she claims is the same right in both her suits. See Ratliff 20 v. Mortg. Store Fin., Inc., No. 17-cv-02155-EMC, 2017 WL 5890090, at *7 (N.D. Cal. Nov. 29, 21 2017) (rejecting attempts by borrower who brought successive litigations to avoid res judicata by 22 pleading different factual predicates for why defendants could not foreclose on deed of trust, as 23 “the [primary right] inquiry turns on [plaintiff]’s ‘right to be free from a particular injury, 24 regardless of the legal theory on which liability is based.’”) (quoting Gilles v. JPMorgan Chase 25 Bank, N.A., 7 Cal. App. 5th 907, 914 (2017)). Courts in this district and elsewhere have uniformly 26 held that successive litigations challenging mortgages and foreclosures like the ones here involve 27 28 26 Pl.’s Opp’n to Defs.’ Mots. to Dismiss – ECF No. 27 at 13. ORDER – No. 17-cv-05495-LB 9 1 the same primary right. See, e.g., id.; Solis v. Nat’l Default Servicing Corp., No. 17-CV-00449- 2 LHK, 2017 WL 1709355, at *6 (N.D. Cal. May 3, 2017); Janson v. Deutsche Bank Nat’l Trust 3 Co., No. 14-cv-05639 JSC, 2015 WL 1250092, at *8 (N.D. Cal. Mar. 18, 2015); Poulson v. Bank 4 of Am. N.A., No. ED CV 14-1534 FMO (JPRx), 2015 WL 756949, at *4 (C.D. Cal. Feb. 23, 2015), 5 aff’d, 675 F. App’x 650 (9th Cir. 2017). Ms. Miller argues specifically that, in this action, she is alleging that Wholesale America was 6 7 an unlicensed lender and that the defendants used MERS to conceal the funding arrangement of 8 the true lender on her loan — allegations she did not make in her prior action — and that this takes 9 her outside the scope of res judicata.27 This exact argument, however, has been squarely rejected in Saterbak v. National Default Servicing Corp., No. 15cv956-WHQ-BGS, 2016 WL 4430922 11 United States District Court Northern District of California 10 (S.D. Cal. Aug. 22, 2016). The plaintiff there, like Ms. Miller here, initially brought a state-court 12 action to stop foreclosure on her property, primarily on the theory that her note and deed of trust 13 had not been properly assigned to the party that was trying to foreclose on the property. See id. at 14 *5 (quoting Saterback v. JPMorgan Chase Bank, N.A., 245 Cal. App. 4th 808, 811 (2016)). The 15 plaintiff there, like Ms. Miller here, then brought a second federal-court action to stop foreclosure 16 on her property, under a new theory that the defendants used “a nonexistent entity. . . . to conceal 17 the real creditor funding the loan” and that “said concealment resulted in what HUD classifies as a 18 table funded loan.” See id. at *1. The plaintiff there, like Ms. Miller here, argued that res judicata 19 did not apply to her second federal-court action, because her allegations in the federal-court action 20 that “the deed of trust is unenforceable due to Defendant’s tortious conduct” in concealing the true 21 lender and in “table funding” the loan were different than her allegations in the state-court action 22 that the defendants could not claim ownership over her debt because of defects in the chain of 23 assignment. See id. at *5. But the court there rejected that argument, holding that “[w]hile Plaintiff 24 asserts additional claims and legal theories in the current action, the underlying remedy Plaintiff 25 seeks is the same — a court order protecting Plaintiff’s home from foreclosure by invalidating the 26 instruments through which Plaintiff’s mortgage loan originated and was transferred” and res 27 28 27 See Pl.’s Opp’n to Defs.’ Mots. to Dismiss – ECF No. 27 at 11. ORDER – No. 17-cv-05495-LB 10 1 judicata therefore applied. Id. at *6. The Saterbak case is instructive, and Ms. Miller cites no on- 2 point authority to the contrary.28 The same conclusion is compelled here — Ms. Miller’s earlier 3 litigation and her current one here involve the same primary right. Ms. Miller also argues that, in addition to challenging the original loan transaction, she is also 4 5 “challenging . . . instruments that were recorded anywhere from four to six years after [her first 6 litigation],” which brings her claims outside the scope of res judicata.29 But Ms. Miller’s claims 7 regarding these later-created documents, such as later-created assignments of the Deed of Trust, 8 are derivative of and depend on her allegation that the original loan transaction in 2006 was 9 unlawful and that the original Note and Deed of Trust are void.30 As courts have held in similar circumstances, simply alleging the existence of later-created mortgage documents is insufficient to 11 United States District Court Northern District of California 10 take a case out of the scope of res judicata where the same “primary right” is at issue in both 12 actions. See, e.g., Grieves v. MTC Fin., Inc., No. 17-CV-01981-LHK, 2017 WL 3142179, at *11 13 14 15 16 17 18 19 20 21 22 28 The cases Ms. Miller cites involve significantly different facts and claims and do not bear on the question of whether a borrower’s claimed right to a property free of any mortgages or foreclosures involves one “primary right” or several. The case she most heavily relies on, Sawyer v. First City Financial Corp., Ltd., 124 Cal. App. 3d 390 (1981), involved successive cases brought by a lender (not a borrower) to enforce a promissory note, where the court held that the “primary right” of the lender to enforce his note by its terms was separate from the “primary right” of the lender not to have his note “stolen” through a sham foreclosure sale. Id. at 402. It does not stand for the proposition that successive lawsuits by a borrower to claim title to a property free of any mortgages or foreclosures involves multiple, different “primary rights.” Cf. Saterbak, 2016 WL 4430922, at *6 (citing Sawyer, 124 Cal. App. 3d at 399–400, and nonetheless concluding that res judicata applied to successive borrower actions). Ms. Miller’s other cases are even further afield. Agarwal v. Johnson, 25 Cal. 3d 932 (1979), was an employment case in which the California Supreme Court held that a judgment on a claim under Title VII of the Civil Rights Act, which limits monetary damages to back pay, did not operate as a res judicata bar on other claims where the plaintiff could recover damages other than back pay. Id. at 955. And Branson v. Sun-Diamond Growers of California, 24 Cal. App. 4th 327 (1994), was an employee-indemnification case involving a question of whether indemnification under the California Corporations Code and contractual indemnification were the same “primary right.” Id. at 343–44. None of these cases are on point here. 23 29 24 30 25 26 27 28 Pl.’s Opp’n to Defs.’ Mots. to Dismiss – ECF No. 27 at 15. See, e.g., Compl. – ECF No. 1 at 10–11 (¶¶ 56–66) (claiming that original loan transaction in 2006 was unlawful because Wholesale America and MERS concealed Lehman Brothers’s involvement), 12–15 (¶¶ 68–96) (same, and alleging that MERS’s assignment of the Deed of Trust to ALS in 2011 was improper because it never had authority to transfer Ms. Miller’s debt), 16–17 (¶¶ 104–14) (claiming that the original Deed of Trust in 2006 fraudulently identified MERS as beneficiary and that subsequent assignments of deed of trust are fraudulent because they “repeat[] the false narrative” in the original 2006 Deed of Trust), 20–21 (¶ 143–44) (alleging RICO and civil conspiracy based on events that took place in 2006), 23 (¶ 162) (alleging Fair Debt Collection Practices Act violation based on illegality of original 2006 transaction and void status of original 2006 Note and Deed of Trust). ORDER – No. 17-cv-05495-LB 11 1 (N.D. Cal. July 25, 2017) (“[plaintiff] cannot avoid res judicata ‘by tacking on new allegations 2 regarding’ foreclosure documents recorded after the . . . prior action”) (internal brackets omitted) 3 (quoting Fields v. Bank of N.Y. Mellon, No. 17-cv-00272-JST, 2017 WL 1549464, at *2 (N.D. Cal. 4 May 1, 2017)).31 The first res-judicata element is therefore satisfied here. 6 2.2 7 A dismissal with prejudice constitutes a final judgment on the merits, triggering res judicata 8 and barring subsequent lawsuits on the same issues. See, e.g., Torrey Pines Bank v. Super. Ct., 216 9 Cal. App. 3d 813, 820 (1989) (citations omitted). The state trial court originally dismissed Ms. 10 Miller’s prior litigation with prejudice on all claims. The appeals court affirmed the dismissal, 11 United States District Court Northern District of California 5 except as to Ms. Miller’s claim for violation of California Civil Code § 2923.5 and affirmed as to 12 all other claims. Following another year of litigation, the state trial court then ordered Ms. Miller 13 to show cause why the remainder of her case should not be dismissed, and when Ms. Miller 14 offered no cause, dismissed the rest of Ms. Miller’s case. Ms. Miller does not dispute that these 15 judgments are final and were on the merits. The second res-judicata element is therefore satisfied 16 here. Prior Judgment on the Merits 17 2.3 18 Four of the six defendants here — Lehman Brothers, U.S. Bank as Trustee for Lehman XS Same Parties or Parties in Privity 19 Trust Mortgage Pass-Through Certificates, Series 2006-GP1, ALS, and Nationstar — were also 20 defendants in Ms. Miller’s first action. The two remaining defendants — MERS and Greenpoint 21 — are in privity with the earlier defendants. MERS was named as the original beneficiary on the 22 Deed of Trust and assigned its interest to ALS, a party to Ms. Miller’s earlier action, and therefore 23 24 31 25 26 27 28 The one potential claim Ms. Miller asserts that is not derivative of her allegation that the original loan transaction in 2006 is unlawful is her claim that the January 2017 notice of default did not contain a declaration signed under penalty of perjury. Compl. – ECF No. 1 at 18 (¶ 120) (claiming this supposedly violates “Civil Code 2015.5”). But this does not state an actual claim, as there is no actual requirement that declarations accompanying a notice of default be signed under penalty of perjury. Mabry v. Super. Ct., 185 Cal. App. 4th 208, 213–14 (2010) (holding that California Civil Code 2923.5 declarations do not need to be signed under penalty of perjury and rejecting arguments based on California Civil Procedure Code § 2015.5 to the contrary). ORDER – No. 17-cv-05495-LB 12 1 is in privity for res-judicata purposes. See, e.g., Apostol v. CitiMortgage, Inc., No. 13-cv-01983- 2 WHO, 2013 WL 6328256, at *5 (N.D. Cal. Nov. 21, 2013) (finding MERS in privity for res- 3 judicata purposes with defendant named in prior lawsuit where MERS had assigned the deed of 4 trust to that defendant). And Greenpoint allegedly entered into a funding agreement, a mortgage 5 loan purchase agreement, and a trust agreement with Lehman Brothers, a party to Ms. Miller’s 6 earlier action, and therefore is in privity for res-judicata purposes as well. See id.; accord, e.g., Lee 7 v. Thornburg Mortg. Home Loans Inc., No. 14-cv-00602 NC, 2014 WL 4953966, at *6 (N.D. Cal. 8 Sept. 29, 2014) (plaintiff’s allegations that defendants did not properly assign interest in mortgage 9 amongst each other “demonstrat[es] a commonality of interest between the defendants for purposes of res judicata”). Ms. Miller does not dispute that the defendants are in privity. The third 11 United States District Court Northern District of California 10 res-judicata element is therefore satisfied here. 12 13 14 CONCLUSION All three requirements of res judicata being met, the Court accordingly grants the defendants’ 15 motion to dismiss Ms. Miller’s complaint as barred by res judicata. Because res judicata would 16 continue to apply to any amendment of these claims and hence amendment would be futile, the 17 dismissal is with prejudice. Cf., e.g., Ratliff, 2017 WL 5890090, at *11 (dismissing complaint that 18 was barred by res judicata with prejudice because amendment would be futile); Solis, 2017 WL 19 1709355, at *7 (same). 20 21 IT IS SO ORDERED. 22 Dated: January 5, 2018 ______________________________________ LAUREL BEELER United States Magistrate Judge 23 24 25 26 27 28 ORDER – No. 17-cv-05495-LB 13
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