Saladores et al v. Residential Funding Company, LLC et al, No. 2:2009cv00899 - Document 36 (D. Ariz. 2009)

Court Description: ORDER that the 15 Motion to Dismiss, or in the Alternative Motion for Summary Judgment of Dft Quality Loan Service Corporation is GRANTED. It is further ordered that the 24 Motion for Final Judgment and/or Mandatory Injunction of Plas Coniam and Saladores is DENIED. It is further ordered that the 32 Motion for a Notice of Cease and Desist and Injunctive Relief of Plas Coniam and Saladores is DENIED. Signed by Judge G Murray Snow on 07/31/09. (ESL)
Download PDF
Saladores et al v. Residential Funding Company, LLC et al 1 2 Doc. 36 WO NOT FOR PUBLICATION 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 10 11 12 13 14 15 16 PRISCILLA ANN SALADORES;) ) KATHLEEN L. CONIAM, ) ) Plaintiffs, ) ) vs. ) ) RESIDENTIAL FUNDING COMPANY,) LLC, fka RESIDENTIAL FUNDING) CORPORATION; QUALITY LOAN) ) SERVICE CORPORATION, ) ) Defendants. ) ) No. CV-09-0899-PHX-GMS ORDER 17 18 Pending before the Court are the Motion to Dismiss, or in the Alternative Motion for 19 Summary Judgment of Defendant Quality Loan Service Corporation (Dkt. # 15), the Motion 20 for Final Judgment and/or Mandatory Injunction of Plaintiffs Coniam and Saladores (Dkt. 21 # 24), and the Motion for a Notice of Cease and Desist and Injunctive Relief of Plaintiffs 22 Coniam and Saladores (Dkt. # 32). For the reasons set forth below, the Court grants 23 Defendant’s motion and denies Plaintiffs’ motions. 24 BACKGROUND 25 Plaintiffs Coniam and Saladores are Arizona residents who allegedly own or occupy 26 real property in Arizona at 8438 North 85th Street, Scottsdale, AZ 85258 (the “Scottsdale 27 Property”). On March 24, 2008, Plaintiff Coniam initiated suit in state court against 28 Homecomings Financial Network, Inc.; Homecomings Financial, LLC; IndyMac Bank; and 1 Quality Loan Service Corporation (“QLS”). (Dkt. # 34 Ex. A.)1 In her complaint, Plaintiff 2 Coniam raised a variety of claims relating to the Scottsdale property. Specifically, Plaintiff 3 Coniam claimed that the loan origination process was improper and that the defendants were 4 improperly seeking to foreclose on the property without “original note full disclosure and 5 production of original documents.” (Id. ¶ 12.) In her complaint, Plaintiff Coniam asserted 6 claims for concealment, contract fraud, tort fraud, non-disclosure, and intentional infliction 7 of emotional distress. She consequently sought “[a]n [a]utomatic stay of the [f]oreclosure 8 proceedings,” “[a]n [order] that Defendants pay Plaintiff the value of all pecuniary losses 9 incurred by Plaintiff due to the Defendants’ [f]raud, [m]isrepresentations, [c]oncealment and 10 [n]on-[d]isclosure,” “[a]n [order] that Defendants pay Plaintiff $650,000.00,” and an order 11 to pay punitive damages and other fees and costs. (Id. at 11.) On April 14, 2008, the 12 defendants in the action filed a motion to dismiss to which no objection was filed by Plaintiff 13 Coniam. (Dkt. # 15 Ex. A.) Consequently, on June 20, 2008, the court granted the motion 14 and dismissed the complaint with prejudice. (Id.) 15 On July 16, 2008, Plaintiff Saladores filed a subsequent action in state court against 16 the previously-named defendants and Camelback Title Agency. (Dkt. # 34 Ex. B.) In her 17 complaint, Plaintiff Saladores raises similar claims relating to the Scottsdale property. 18 Specifically, Plaintiff Saladores claimed that the named defendants acted improperly at loan 19 origination and were improperly seeking to foreclose on the property without “[a]ctual 20 [n]otice of [o]riginal [n]ote [f]ull [d]isclosure and [p]roduction of blue ink [o]riginal 21 documents.” (Id. ¶ 16-17.) Plaintiff Saladores asserted claims for fraud, contract fraud, 22 conspiracy, and “breach.” (Id. ¶¶ 18-39.) She consequently sought “[a]n [order] that 23 Defendants pay Plaintiff the value of all pecuniary losses incurred by Plaintiff due to their 24 misrepresentations” and an order to pay punitive damages and other fees and costs. (Id. at 25 26 27 28 1 On a motion to dismiss, a court may take judicial notice of facts outside the pleadings. Sears, Roebuck & Co. v. Metro. Engravers, Ltd., 245 F.2d 67, 70 (9th Cir. 1956). Accordingly, the Court has taken judicial notice of the court records from Plaintiffs’ statecourt suits. -2- 1 23-24.) On April 17, 2008, the court granted a motion to dismiss filed by the defendants and 2 dismissed the complaint “as against all Defendants, with prejudice.” (Dkt. # 15 Ex. B.) 3 The present action was initiated in state court on January 12, 2009 – nearly three 4 months before the second state-court action was dismissed – and the parties to this suit again 5 include Plaintiffs Saladores and Coniam and Defendant QLS. (Dkt. # 1 Pt. 2 at 6.) On May 6 4, 2009, Plaintiffs Saladores and Coniam filed their First Amended Complaint (“FAC”). In 7 the FAC, Plaintiffs allege that in May of 2006, Plaintiff Coniam obtained financing related 8 to the Scottsdale property from Homecomings Financial Network in the amount of 9 $650,000.00. (Dkt. # 10 Pt. 2.) The financing was obtained pursuant to a promissory note 10 and secured by a deed of trust on the property. Apparently, a non-judicial trustee sale has 11 been or is being pursued on the Scottsdale property due to default on the promissory note. 12 Defendants are financial/real estate businesses that are involved in some manner with the 13 trustee sale of Plaintiffs’ property. In the FAC, Plaintiffs assert claims for fraudulent 14 misrepresentation, negligence, civil conspiracy, intentional reckless acts, and violations of 15 the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq., the Truth in Lending Act 16 (“TILA”), 15 U.S.C. § 1601 et seq., the Real Estate Settlement Procedures Act (“RESPA”), 17 12 U.S.C. § 2601 et seq., and the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. 18 § 1692 et seq. (Id. ¶¶ 20-51.) Each of Plaintiffs’ claims relate to either the origination of the 19 $650,000.00 loan or the attempted foreclosure on the Scottsdale property. In the FAC, 20 Plaintiffs seek “[r]ecissions of the entire [m]ortgage and [p]romissory [n]otes,” an order “that 21 Defendants are liable to Plaintiffs in an amount not less than $200.00 and up to $2,000.00 22 for each violation after proven,” “[d]amages as a result of the aforementioned violations,” 23 “[a]ward of 100% ownership to Plaintiffs of [the] subject real property,” and other costs/fees 24 incurred. (Id. at 16-17.) 25 On May 15, 2000, Defendant QLS moved for dismissal pursuant to Federal Rule of 26 Civil Procedure 12(b)(6), arguing that “[t]he claims asserted by Plaintiffs are barred by the 27 doctrine[] of res judicata . . . by virtue of the [state-court proceedings].” (Dkt. # 15.) 28 Additionally, on June 23, 2009, Plaintiffs moved for final judgment and/or mandatory -3- 1 injunction against Defendant Residential Funding Company (Dkt. # 24), and on July 16, 2 2009, again moved for injunctive relief against Defendants (Dkt. # 32). 3 4 DISCUSSION I. Quality Loan Service Corporation’s Motion to Dismiss 5 Defendant QLS argues Plaintiffs’ claims are barred under principles of claim 6 preclusion by virtue of the dismissal with prejudice of their state-court actions. (Dkt. # 15 7 at 1-4.) Claim preclusion is appropriately raised on a motion to dismiss if the defendant does 8 not raise issues of disputed facts. Scott v. Kuhlmann, 746 F.2d 1377, 1378 (9th Cir. 1984). 9 Under the doctrine of claim preclusion, “a final judgment on the merits bars further claims 10 by parties or their privies based on the same cause of action.” Montana v. United States, 440 11 U.S. 147, 153 (1979); see also Scoggin v. Schrunk, 522 F.2d 436, 437 (9th Cir. 1975) 12 (holding that res judicata bars “assertion of every legal theory . . . that might have been 13 raised” in the first action); Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 713 (9th 14 Cir. 2001) (“[C]laim preclusion . . . bars litigation in a subsequent action of any claims that 15 were raised or could have been raised in the prior action.”). The elements necessary to 16 establish claim preclusion are: (1) an identity of claims; (2) a final judgment on the merits; 17 and (3) privity between the parties. Headwaters Inc. v. U.S. Forest Serv., 399 F.3d 1047, 18 1050-52 (9th Cir. 2005). The Court will address each necessary element in turn. 19 A. 20 In determining whether there is an identity of claims between Plaintiffs’ federal case 21 and Plaintiffs’ state-court cases, the critical question is whether Plaintiffs have stated in the 22 instant suit a cause of action different from those raised in the first suit. Costantini v. Trans 23 World Airlines, 681 F.2d 1199, 1201 (1982); see also Tahoe-Sierra Preservation Council, 24 Inc. v. Tahoe Reg’l Planning Agency, 322 F.3d 1064, 1077 (9th Cir. 2003). The Ninth 25 Circuit addresses this issue by applying the following criteria: 26 27 Identity of Claims (1) whether rights or interests established in the prior judgment would be destroyed or impaired by prosecution of the second action; (2) whether substantially the same evidence is presented in two actions; (3) whether the two suits involve infringement of 28 -4- 1 the same right; and (4) whether the two suits arise out of the same transactional nucleus of facts. 2 Costantini, 681 F.2d at 1201-02 (citation omitted). The last of these criteria is the most 3 important. Id.; see also Cent. Delta Water Agency v. United States, 306 F.3d 938, 952 (9th 4 Cir. 2002). 5 Here, both of Plaintiffs’ state-court cases against QLS did “arise out of the same 6 transactional nucleus of facts” – QLS’s involvement with the foreclosure of the Scottsdale 7 property. Each of the state-court lawsuits, as well as the current action, charge QLS with 8 improperly proceeding with a nonjudicial foreclosure on the Scottsdale property. Therefore, 9 the last of the criteria supports the application of claim preclusion. 10 The other criteria for finding a single cause of action are also met. QLS’s freedom 11 from liability and ability to pursue foreclosure could be impaired by this action if it is 12 permitted to proceed. The evidence in the instant action would be virtually identical to the 13 evidence presented in the state-court proceedings. Finally, the three suits involve 14 infringement of the same right – whether QLS is legally permitted to foreclose on the 15 Scottsdale property. While the titles to the individual claims varied in each suit, the cause 16 of action asserted against QLS in the instant case is identical to the one raised in Plaintiffs’ 17 state-court suits. 18 B. Final Judgment on the Merits 19 Unless otherwise specified, a dismissal with prejudice is typically a final judgment 20 on the merits. See Stewart v. U.S. Bankcorp, 297 F.3d 953, 956 (9th Cir. 2002) (“The phrase 21 ‘final judgment on the merits’ is often used interchangeably with ‘dismissal with 22 prejudice’”); Paganis v. Blonstein, 3 F.3d 1067, 1071 (7th Cir. 1993) (noting that “with 23 prejudice” is an acceptable shorthand for “adjudication on the merits”). In both state-court 24 proceedings filed by Plaintiffs, the courts granted motions filed by defendants based upon 25 their failure to object or respond to the motions and dismissed both complaints with 26 prejudice. (Dkt. # 15 Ex. A (ordering that “[t]he Complaint is dismissed with prejudice”); 27 id. Ex. B (holding that “the Court has no choice but to grant [the] motions” and “dismissing 28 -5- 1 the Plaintiff’s Complaint, as against all Defendants, with prejudice”).) Therefore, whether 2 the dismissal was based on the plaintiffs’ failure to prosecute or were based on the merits of 3 the underlying motions, the results were final adjudications on the merits in both instances. 4 See Owens, 244 F.3d at 714 (holding that dismissal of a prior action for failure to prosecute 5 was an adjudication on the merits under Rule 41(b) because the appellant failed to file an 6 opposition to a motion); Moore v. City of Westminster, 116 F.3d 1486, *1 (9th Cir. 1997) 7 (holding that res judicata applied when a prior action was dismissed based on an appellant’s 8 failure to timely file an opposition to the defendant’s motion to dismiss). 9 C. Privity Between the Parties 10 Here, the parties do not dispute that QLS was a defendant in both state-court actions 11 as well as a defendant in the present action. Additionally, there is no dispute that Plaintiffs 12 were separately the plaintiffs in the two state-court actions, and their interests in preserving 13 the Scottsdale property were closely intertwined in both cases. See Nordhorn v. Ladish Co., 14 Inc., 9 F.3d 1402, 1405 (9th Cir. 1993) (holding that “when two parties are so closely aligned 15 in interest that one is the virtual representative of the other, a claim by or against one will 16 serve to bar the same claim by or against the other”). Therefore, the identity of parties 17 element is satisfied. 18 Inasmuch as there is an identity of claims, a final judgment on the merits, and identity 19 between the parties, claim preclusion bars the instant suit against QLS. Plaintiffs seek to 20 avoid this conclusion by arguing that they did not have a fair chance to present their case 21 “[b]ecause counsel retained by Plaintiffs to represent them did not communicate or make any 22 appearances to the court or to the defendants.” (Dkt. # 29 at 7.) Generally, before claim 23 preclusion can be applied, the parties must have had “a full and fair opportunity to litigate 24 [their] claim[s].” Kremer v. Chem. Constr. Corp., 456 U.S. 461, 480-81 (1982). However, 25 it is not up to this Court to set aside the final judgments of a state court and there is no 26 evidence that Plaintiffs have sought to have the state-court judgments set aside. The 27 Supreme Court in Kremer narrowed the “full and fair opportunity to litigate” exception to 28 circumstances where “redetermination of issues is warranted [because] there is reason to -6- 1 doubt the quality, extensiveness, or fairness of procedures followed in prior litigation.” Id. 2 at 481. Indeed, in Federated Department Stores, Inc. v. Moitie, the Supreme Court 3 emphasized the need to apply claim preclusion: 4 [W]e do not see the grave injustice which would be done by the application of accepted principles of res judicata. “Simple justice” is achieved when a complex body of law developed over a period of years is evenhandedly applied. The doctrine of res judicata serves vital public interests beyond any individual judge’s ad hoc determination of the equities in a particular case. There is simply no principle of law or equity which sanctions the rejection by a federal court of the salutary principle of res judicata. . . . We have stressed that the doctrine of res judicata is not a mere matter of practice or procedure inherited from a more technical time than ours. It is a rule of fundamental substantial justice, of public policy and of private peace, which should be cordially regarded and enforced by the courts. 5 6 7 8 9 10 11 452 U.S. 394, 401 (1981) (internal quotations and citations omitted). 12 Here, Plaintiffs do not argue that the state court did not afford them a full and fair 13 opportunity to litigate their claims. Rather, they only argue that decisions and failures on the 14 part of their attorney resulted in their inability to fully present their claims in their state-court 15 actions. While the negligent conduct of an attorney may permit the revival of a terminated 16 action, see, e.g., Spates-More v. Henderson, 305 F. App’x 449 (9th Cir. 2008); Moore v. 17 United States, 262 F. App’x 828 (9th Cir. 2008); Cmty. Dental Servs. v. Tani, 282 F.3d 1164 18 (9th Cir. 2002), it does not allow this Court to set aside the judgment of a state court and 19 reject the application of claim preclusion. Because Plaintiffs were not denied due process 20 in their state-court proceedings, this Court must enforce the principles of claim preclusion. 21 II. Plaintiffs’ Motion for Judgment 22 On May 28, 2009, Defendant Residential Funding Company (“RFC”) filed their 23 Answer to Plaintiffs’ Complaint. (Dkt. # 16.) In their Answer, RFC responds to the 24 allegations in the FAC and asserts a series of fourteen affirmative defenses. (Id.) At the 25 conclusion of their Answer, RFC requests an entry of judgment in their favor and an award 26 of attorneys’ fees and costs. (Id. at 8.) Apparently believing that a reply to RFC’s Answer 27 was necessary and permitted, Plaintiffs filed their Response to RFC’s Answer to Plaintiffs’ 28 -7- 1 FAC and Motion for Final Judgment and/or Mandatory Injunction Against Defendant 2 Residential Funding Company on June 23, 2009. (Dkt. # 24.) 3 Federal Rule of Civil Procedure 7(a) states that only the following pleadings are 4 permitted: “(1) a complaint; (2) an answer to a complaint; (3) an answer to a counterclaim 5 designated as a counterclaim; (4) an answer to a counterclaim; (5) a third-party complaint; 6 (6) an answer to a third-party complaint; and (7) if the court orders one, a reply to an 7 answer.” Here, Plaintiffs filed their Complaint and Defendant RFC properly filed an answer. 8 However, RFC did not assert any counterclaims or third-party claims, and the court has not 9 ordered Plaintiffs to file a reply. Therefore, Plaintiffs were not entitled to file their Reply to 10 RFC’s Answer. 11 In their Reply, Plaintiffs dispute each of the affirmative defenses pled by RFC and, 12 at the conclusion of the Reply, Plaintiffs argue that they have “set forth numerous legally 13 sufficient causes of action against Defendant RFC and Defendant [QLS].” (Dkt. # 24 at 25.) 14 Consequently, Plaintiffs prematurely move for final judgment against Defendants consistent 15 with the demand for relief in their Complaint. (Id. at 25-26.) Additionally, Plaintiffs request 16 that “the Court deny Defendant [RFC] their request for entry of judgment [(in their Answer)] 17 and grant Plaintiff[s’] motion for final judgment.” (Id.) 18 To the extent Plaintiffs’ filing can be construed as a properly filed motion, it is denied. 19 Plaintiffs cites no legal authority, nor is the Court aware of any, that would permit this Court 20 to grant the relief sought in Plaintiffs’ motion. Additionally, because this case is still at the 21 pleading stage, there is no factual basis upon which the Court could grant the motion. 22 Therefore, Plaintiffs’ motion is denied.2 23 24 25 26 27 28 2 This Court is permitted to recommend that Plaintiffs retain an attorney. See, e.g., Cunningham v. Ridge, 258 F. App’x 221, 223 (10th Cir. 2007) (“The magistrate judge wisely recommended Cunningham retain a lawyer to assist with the procedural requirements . . . .”); Kim v. U.S. Dep’t of Labor, No. 1:06-CV-683, 2007 WL 844871, at *2 (W.D. Mich. Mar. 16, 2007) (“The court strongly recommends that plaintiff retain a competent attorney to represent him in this matter.”). Because it appears from the pleading and motions on file that Plaintiffs may not fully appreciate the nature of their claims, the requirements of the -8- 1 III. Plaintiffs’ Motion for Injunctive Relief 2 On July 16, 2009, Plaintiffs filed their Motion for a Notice of Cease and Desist and 3 Injunctive Relief, which the Court interprets as a motion for a temporary restraining order 4 (“TRO”) or preliminary injunction. (Dkt. ## 31, 32.) In the motion, Plaintiffs request that 5 this Court enjoin a trustee’s sale of the Scottsdale property scheduled for August 26, 2009. 6 (Dkt. # 32 at 2.) 7 Federal Rule of Civil Procedure 65 authorizes the Court to issue a preliminary 8 injunction or TRO upon a proper showing. The standard for issuing a TRO is the same as 9 that for issuing a preliminary injunction. See Brown Jordan Int’l, Inc. v. The Mind’s Eye 10 Interiors, Inc., 236 F. Supp. 2d 1152, 1154 (D. Haw. 2007). To prevail on a request for a 11 preliminary injunction, a plaintiff must show either “(a) probable success on the merits 12 combined with the possibility[3] of irreparable injury or (b) that [it] has raised serious 13 questions going to the merits, and that the balance of hardships tips sharply in [its] favor.” 14 Bernhardt v. Los Angeles County, 339 F.3d 920, 925 (9th Cir. 2003). The Ninth Circuit has 15 explained that “these two alternatives represent ‘extremes of a single continuum,’ rather than 16 two separate tests. Thus, the greater the relative hardship to the moving party, the less 17 probability of success must be shown.” Immigrant Assistant Project of Los Angeles County 18 Fed’n of Labor (AFL-CIO) v. INS, 306 F.3d 842, 873 (9th Cir. 2002) (citation omitted). 19 While Plaintiff did submit a verified FAC, it consists of seventeen pages of 20 amorphous factual and legal allegations. In the FAC, Plaintiffs rest on allegations of fraud 21 without pleading that fraud with particularity pursuant to Federal Rule of Civil Procedure 22 9(b). Additionally, Plaintiffs are precluded from pursuing their claims against QLS due to 23 24 25 26 27 28 procedural rules, and how the two interact, the Court recommends that Plaintiffs retain an attorney to represent them in this matter. 3 In Winter v. Natural Res. Def. Council, Inc., the Supreme Court held that “the Ninth Circuit’s ‘possibility’ standard is too lenient.” 129 S. Ct. 365, 375 (2008). The Court stated that the “standard requires plaintiffs seeking preliminary relief to demonstrate that irreparable injury is likely in the absence of an injunction.” Id. (citations omitted). -9- 1 their state-court proceedings. Other than the FAC, Plaintiffs failed to present any affidavits 2 or other admissible evidence supporting a likelihood of success on the merits. Indeed, 3 Plaintiffs entirely failed to provide any legal authority or advance any argument 4 demonstrating a likelihood of success on the merits or serious questions going to the merits. 5 After review of the FAC and the motion, the Court finds that Plaintiffs have failed to make 6 the requisite showing sufficient to grant injunctive relief. 7 CONCLUSION 8 IT IS HEREBY ORDERED that the Motion to Dismiss, or in the Alternative Motion 9 for Summary Judgment of Defendant Quality Loan Service Corporation (Dkt. # 15) is 10 11 12 13 14 15 GRANTED. IT IS FURTHER ORDERED that the Motion for Final Judgment and/or Mandatory Injunction of Plaintiffs Coniam and Saladores (Dkt. # 24) is DENIED. IT IS FURTHER ORDERED that the Motion for a Notice of Cease and Desist and Injunctive Relief of Plaintiffs Coniam and Saladores (Dkt. # 32) is DENIED. DATED this 31st day of July, 2009. 16 17 18 19 20 21 22 23 24 25 26 27 28 - 10 -