Opinion
A149617
07-10-2018
JO ANN CRAWFORD et al., Plaintiffs and Appellants, v. U.S. BANK NATIONAL ASSOCIATION, as Trustee, etc. et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Contra Costa County Super. Ct. No. MSC15-01972)
In 2015 plaintiffs, two property owners, sued three defendants—the mortgage holder and the trustee and beneficiary of the deed of trust—none of whom was involved in the original 2005 loan on plaintiffs' property. The lawsuit alleged six causes of action. The trial court granted judgment on the pleadings without leave to amend, on the basis that a 2013 lawsuit by plaintiffs—against a different entity, in a different capacity, alleging different causes of action—was res judicata to the 2015 lawsuit. We reverse.
BACKGROUND
In 2005 Jo Ann Crawford and Nasrine Ghanaat (plaintiffs) took out an $847,360 mortgage loan, secured by a deed of trust on the property on Campanula Drive, San Ramon (the property). The deed of trust named National City Bank as the lender and trustee, and Mortgage Electronic Registration Systems, Inc. (MERS) as the beneficiary.
In 2009, plaintiffs went into default on the loan.
In May, 2011 MERS, the original beneficiary of the deed of trust, recorded an assignment of it, assigning "all beneficial interest" in the deed of trust and loan to U.S. Bank. In November, 2011, Recontrust Co. was substituted in as trustee. At some point (not clear from the record), Bank of America N.A. (BofA) became involved as the servicer of the loan. And at another point a foreclosure sale came to be scheduled.
In August 2012, plaintiffs received a written offer to participate in a Department of Justice balance reduction program. And, as plaintiffs would allege it, they complied with the instructions in that offer and contacted BofA's customer assistance center, to be told that no appointments would be available until after the Labor Day holiday. Plaintiffs attended a foreclosure seminar in Redwood City on or about September 11 and submitted a complete loan modification application, at which time a BofA representative told them the property would not be sold at a foreclosure sale scheduled for the following day. In fact, and unbeknownst to plaintiffs, the property was sold at a trustee's sale on September 12 and a three-day notice to quit was posted on their door.
On January 18, 2013, plaintiffs filed a complaint naming BofA and Recontrust (the 2013 action). The operative first amended complaint alleged five causes of action: (1) wrongful foreclosure; (2) to set aside trustee sale; (3) cancellation of trustee deed; (4) negligent misrepresentation; and (5) promissory estoppel. The essence of the case was the conduct and representations of BofA, and the fact that plaintiffs had submitted a complete loan modification application that was still pending at the time of the foreclosure.
Whatever happened in the course of the 2013 lawsuit is not apparent from the record. What we do know is that the trustee's sale was rescinded and plaintiffs remained in the property. And on October 29, 2013, plaintiffs filed a dismissal of the 2013 lawsuit with prejudice.
On August 18, 2014, U.S. Bank assigned "all its interest" under the deed of trust to Nationstar Mortgage, LLC (Nationstar). Eight days later, August 26, Nationstar recorded a substitution of trustee, substituting Sage Point Lender Services, LLC (Sage) as trustee. That same day Sage recorded a notice of default against the property, claiming that plaintiffs were behind $375,583.78 in payments and that BofA, the servicer, tried with due diligence to contact the borrowers regarding loss mitigation alternatives, but could not. On December 9 an entity called Barrett, Daffin Frappier Treder & Weiss, LLP (Barrett), acting "as duly appointed Trustee," filed a notice of trustee's sale, scheduled for December 30, 2014. The second page of the notice said Barrett "is acting as a debt collector attempting to collect a debt."
On December 22, plaintiffs filed their second lawsuit (the 2014 action), naming only one defendant, Nationstar. The 2014 action was quickly resolved, as on January 30, 2015, Barrett "as agent for the beneficiary," recorded a notice of rescission of the notice of default. Plaintiffs then dismissed the 2014 action without prejudice.
On June 19, 2015, another notice of default and election to sell under the deed of trust was recorded, this at the request of Quality Loan Service Corporation (Quality), attached to which was the identical declaration that had been attached to the August 26, 2014 notice. That prompted the lawsuit here.
On October 21, 2015, plaintiffs filed a new complaint naming three defendants: U.S. Bank National Association, as Trustee for the Benefit of Harborview 2005-3 Trust Fund; Nationstar; and Quality. It alleged six causes of action: (1) cancellation of instruments (Civ. Code § 3412); (2) violation of California Business and Professions Code section 17200; (3) violation of California Civil Code section 2924, subdivisions (a)(6) and (f)(3); (4) declaratory relief; (5) violation of California Civil Code section 2923.55; and (6) breach of contract.
On November 20, defendants U.S. Bank and Nationstar filed an answer, alleging 34 affirmative defenses.
On March 18, 2016, defendants filed a motion for judgment on the pleadings (the motion), which motion was based on three grounds: (1) the 2013 action was res judicata; (2) defendants had a right to foreclose; and (3) the complaint did not state any claims. A hearing on the motion was scheduled for May 27, 2016.
Plaintiffs filed an opposition, and defendants a reply. On May 26, the trial court issued what can only be called a curious tentative ruling, on its own motion continuing the hearing to July 1, with instructions to the parties—instructions that from all appearances were to assist defendants in their motion because their moving papers were inadequate and at the same time to caution plaintiffs as to their pleadings. The supplemental briefing was filed, and on July 21 the trial court issued a tentative ruling granting the motion on the grounds that "Plaintiffs' claims are barred by the doctrine of Res Judicata." The motion came on for hearing on July 22, a hearing that was brief indeed, all of five pages, at the conclusion of which the court announced the "tentative ruling will stand." An order was entered granting the motion without leave to amend on res judicata grounds, followed by a judgment of dismissal, which plaintiffs timely appealed.
The tentative ruling provided in substantive part as follows: "Defendants shall provide further briefing on the issue of res judicata: [¶] 1. Discuss privity between the moving Defendants and Bank of America. Please include in your brief information regarding when the assignment was made to Bank of America, by whom, and by what instrument. (This information is not included in the documents of which Defendants requested the court take judicial notice.) [¶] 2. Describe the chain of succession from Bank of America to U.S. Bank and Nationstar. Plaintiff shall provide further briefing on the following: [¶] 1. In the related case, . . . Crawford v. Bank of America, Plaintiffs allege the property was sold on September 12, 2012. (First Amended Complaint, 17-18) In the case at bar, Case No. C15-01972, plaintiffs allege they are the current owners of the Property. (Complaint, 13) The court understands that on a motion for judgment on the pleadings the factual allegations are accepted as true, but given the allegation in the related case is inconsistent with the current allegation, the court requires an explanation. (Plaintiff is reminded of the truth-in-pleading rule and is to address it as it relates to the instant allegations when compared to those in the related case.) Please address whether there was a rescission of the Trustee's sale and how Plaintiff came to be the current owner. [¶] 2. In the 3rd Cause of Action, Plaintiff alleges violations of Civil Code 2924(f)(3). Please clarify, as there is no paragraph 3 to subdivision (f)."
DISCUSSION
The Standard of Review
This appeal presents a mixed question of law and fact that is predominantly legal, and thus subject to our independent review. (Gerawan Farming, Inc. v. Lyons (2000) 24 Cal.4th 468, 515.)
The Law of Res Judicata
In Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, the Supreme Court discussed at length the subject of res judicata: " 'As generally understood, "[t]he doctrine of res judicata gives certain conclusive effect to a former judgment in subsequent litigation involving the same controversy." [Citation.] The doctrine "has a double aspect." [Citation.] "In its primary aspect," commonly known as claim preclusion, it "operates as a bar to the maintenance of a second suit between the same parties on the same cause of action. [Citation.]" [Citation.] "In its secondary aspect," commonly known as collateral estoppel, "[t]he prior judgment . . . 'operates' " in "a second suit . . . based on a different cause of action . . . 'as an estoppel or conclusive adjudication as to such issues in the second action as were actually litigated and determined in the first action.' [Citation.]" [Citation.] "The prerequisite elements for applying the doctrine to either an entire cause of action or one or more issues are the same: (1) A claim or issue raised in the present action is identical to a claim or issue litigated in a prior proceeding; (2) the prior proceeding resulted in a final judgment on the merits; and (3) the party against whom the doctrine is being asserted was a party or in privity with a party to the prior proceeding. [Citations.]" ' (People v. Barragan (2004) 32 Cal.4th 236, 252-253.)
"Here, we are concerned with the claim preclusion aspect of res judicata. To determine whether two proceedings involve identical causes of action for purposes of claim preclusion, California courts have 'consistently applied the "primary rights" theory.' (Slater v. Blackwood (1975) 15 Cal.3d 791, 795.) Under this theory, '[a] cause of action . . . arises out of an antecedent primary right and corresponding duty and the delict or breach of such primary right and duty by the person on whom the duty rests. "Of these elements, the primary right and duty and the delict or wrong combined constitute the cause of action in the legal sense of the term . . . ." ' (McKee v. Dodd (1908) 152 Cal. 637, 641.)
"In California the phrase 'causes of action' is often used indiscriminately . . . to mean counts which state [according to different legal theories] the same cause of action . . . .' (Eichler Homes of San Mateo, Inc. v. Superior Court (1961) 55 Cal.2d 845, 847-848.) But for purposes of applying the doctrine of res judicata, the phrase 'cause of action' has a more precise meaning: The cause of action is the right to obtain redress for a harm suffered, regardless of the specific remedy sought or the legal theory (common law or statutory) advanced. (See Bay Cities Paving & Grading, Inc. v. Lawyers' Mutual Ins. Co. (1993) 5 Cal.4th 854, 860.) As we explained in Slater v. Blackwood, supra, 15 Cal.3d at page 795: '[T]he "cause of action" is based upon the harm suffered, as opposed to the particular theory asserted by the litigant. [Citation.] Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for relief. "Hence a judgment for the defendant is a bar to a subsequent action by the plaintiff based on the same injury to the same right, even though he presents a different legal ground for relief." [Citations.]' Thus, under the primary rights theory, the determinative factor is the harm suffered. When two actions involving the same parties seek compensation for the same harm, they generally involve the same primary right. (Agarwal v. Johnson (1979) 25 Cal.3d 932, 954.)" (Boeken v. Philip Morris USA, Inc., supra, 48 Cal.4th at pp. 797-798.)
How the doctrine of res judicata operates is described differently depending on whether it is the defendant or the plaintiff asserting it. Here, with defendants asserting application of the doctrine, they are asserting that the 2013 action is a bar to the instant action. (Slater v. Blackwood, supra, 15 Cal.3d at p. 795, and cases there collected.) By contrast, if it is the plaintiff asserting the doctrine, it is explained on the basis of merger. (Passanisi v. Merit-McBride Realtors, Inc. (1987) 190 Cal.App.3d 1496, 1510; Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1766, 1769.)
But, in either case, whether analyzed as a merger, or as here, a bar, the doctrine will apply only if the former case was based on the same cause of action. As Witkin puts it in his typically terse fashion: "If the cause of action is different, the first judgment is not a bar. (See Hall v. Coyle (1952) 38 [Cal.]2d 543, 546; Agarwal v. Johnson[, supra,] 25 [Cal.]3d [at p.] 954 [judgment was not bar where cause of action was different]; Ball v. Stephens (1945) 68 [Cal.App.]2d 843, 851; McNulty v. Copp (1954) 125 [Cal.App.]2d 697, 708." (7 Witkin, Cal. Procedure (5th ed. 2008) Judgment, § 407, p. 1043.)
The rule as to merger is similar: "If the second action is on a different cause of action, as where there are successive breaches of an obligation, or separate and distinct torts, or new rights accrued since the rendition of the former judgment, there is no merger." (7 Witkin, supra, Judgment, § 404, p. 1038.) --------
The 2013 Action Is Not a Bar
Defendants' position is simple and straightforward. As their argument puts it: "The Present Action and the 2013 Action Concern the Same Cause of Action Because They Both Concern the Same Primary Right: Freedom from Wrongful Foreclosure." Defendants are wrong.
As indicated above, the 2013 case was based simply—and solely—on representations by BofA that no foreclosure sale would occur while the loan modification was being considered. And while there were several causes of action, each was based on, and referenced, those representations.
In contrast, the case here does not base any claim on representations that no sale would occur. Rather, this case is based on allegedly void assignments of the deed of trust and the invalidity of the notice of default and notice of sale. The reasons for the claimed invalidity have nothing to do with any representations made by defendants, but are based on allegations that the assignee of the deed of trust does not exist; on the lack of endorsement of the promissory note; and on lack of authority, including of the person who executed the assignment.
Moreover, this action also includes a Business and Professions Code section 17200 claim, a claim that can exist in the circumstances here, as we held ourselves in Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 906-907. Such claim was not asserted before.
On top of all that, this case is based on facts that were not in existence in 2013. For example, this case includes violations of the California "Homeowner's Bill of Rights" based on the declaration attached to the notice of default. The assignment to Nationstar did not occur until August 18, 2014, and this case seeks to declare that assignment void. Again, and obviously, this cause of action could not have been brought in 2013. To put it otherwise, how could a 2013 case include wrongs that occurred in 2015, based on two notices of default recorded after the 2013 action was dismissed? These alleged wrongs had not occurred yet. And these wrongs give rise to new causes of action, based on different duties and different rights.
In Witkin's exhaustive discussion of the law of res judicata, the author has a lengthy section entitled "Different Primary Right," in which there are collected many cases illustrating the point. The following are illustrative:
"Dunkin v. Boskey (2000) 82 [Cal.App.]4th 171, 180 [prior judgment dismissing plaintiff's declaratory relief action to establish parental relationship with child conceived by artificial insemination with anonymous donor did not preclude plaintiff's later action for breach of contract against woman who gave birth to child and who had promised plaintiff parentage, custody, and visitation rights; breach of contract action did not assert same primary right as prior action to establish paternity].
"Le Parc Community Assn. v. Work. Comp. App. Bd. (2003) 110 [Cal.App.]4th 1161, 1168 [employee's voluntary dismissal of negligence action against uninsured employer under Lab.C. 3706 did not bar continued litigation of his related workers' compensation claim; claim under Lab.C. 3706 and workers' compensation claim do not involve same primary right and Legislature expressly authorized cumulative remedies for injured employee whose employer is uninsured].
"Nicholson v. Fazeli (2003) 113 [Cal.App.]4th 1091, 1100 [wife's malicious prosecution action was not barred by prior ruling in dissolution action denying her attorneys' fees and costs; primary rights intended to be vindicated by Family Code provisions for fees (adequate opportunity for all parties to litigate despite disparity in resources, and duty to cooperate and work toward settlement) were different from primary right involved in malicious prosecution (right to be free from malicious lawsuit)].
"Friedman Professional Management Co. v. Norcal Mut. Ins. Co. (2004) 120 [Cal.App.]4th 17, 26 [medical malpractice action alleging that surgery center's incompetence caused patient to suffer vaginal bleeding involved different primary right than patient's later action against surgeon alleging sexual battery and invasion of privacy based on steps taken to control bleeding]." (7 Witkin, supra, Judgment, § 409, p. 1049.)
Defendants place heavy reliance on Gillies v. JPMorgan Chase Bank, N.A. (2017) 7 Cal.App.5th 907 (Gillies), which they cite nine times in their brief. Such reliance is misplaced. Defendants describe Gillies and its holding this way: "In Gillies, the plaintiff previously filed a complaint in 2009 against California Reconveyance Company ('CRC') and JPMorgan Chase Bank N.A. alleging that an August 12, 2009 notice of default was not recorded, that the notice of default violated Civil Code section 2923.5, and that the November 18, 2009 notice of trustee's sale was not recorded. (Gillies, supra, 7 Cal.App.5th at p. 910.) A demurrer to the complaint was sustained without leave to amend. (Ibid.) Thereafter, Plaintiff filed a second complaint against CRC in 2011 alleging that a second notice of trustee's sale recorded on June 30, 2011 was defective and violated a different section of the Civil Code, Section 2923.52. (Ibid.) The trial court granted the defendant's motion to strike this second complaint and dismissed the action. (Ibid.) The case at issue in Gillies concerned the plaintiff's fourth complaint, filed after MTC Financial, Inc., acting as trustee, recorded a notice of trustee's sale on November 16, 2015 setting a foreclosure sale of the property. (Id. at p. 911.) The plaintiff in the action 'responded by filing the present complaint alleging violations of the Homeowners Bill of Rights ('HBOR'), lack of standing to foreclose, unlawful substitution of trustee, fraud, injunctive relief, and damages.' (Ibid.) [¶] Despite the fact that the November 16, 2015 notice of trustee's sale did not exist at the time of any of the previous three lawsuits, and despite the fact that the substitution of trustee occurred after the previous three lawsuits had been dismissed, Gillies held that each of the previous three lawsuits concerned the same primary right. (Gillies, supra, 7 Cal.App.5th at p. 914.) Gillies explained, 'It matters not that appellant has a new theory of wrongful foreclosure. It is the same primary right which appellant has always claimed.' (Ibid.) The Gillies court thus held that res judicata barred the plaintiff's 2015 cause of action based on the dismissals in each of the previous three lawsuits. (Ibid.)"
Defendants badly overread Gillies. The Court of Appeal analyzed the cause of action for violation of the Civil Code sections 2923.6 and 2923.7, the Homeowner's Bill of Rights claim, on the merits, and held that it did not state a claim. (Gillies, supra, 7 Cal.App.5th at p. 912.) The court then analyzed Gillies's other claims, also on the merits. (Id. at pp. 913-914.) After all that, the Court of Appeal concluded: "The Sanctity and Integrity of Final Judgment [¶] 'Somewhere along the line, litigation must cease.' (In re Marriage of Crook (1992) 2 Cal.App.4th 1606, 1613.) Gillies has lost three superior court cases which allowed the foreclosure proceedings to go forward. He lost the first two appeals to this court and now loses this third appeal. He lost a federal case in the United States District Court. He lost the appeal from this judgment in the Ninth Circuit Court of Appeals. He lost an 'emergency' petition for relief in the Ninth Circuit. He filed for protection in the United States Bankruptcy Court. He lost there." (Gillies, supra, at p. 914.) That hardly describes the situation here.
In sum, we conclude that res judicata does not apply and the trial court erred in concluding it did.
As noted, defendants' motion also claimed that the causes of action in the complaint did not state a claim. The trial court did not reach that issue, and thus we remand the matter for the trial court do so. Since the issue is one of de novo review, we could, of course, make such determination ourselves, but choose not to, especially because even if we were to conclude that no cause of action states a claim—and we do not mean to suggest that this is or is not so—we would apply the rule noted in the leading practical treatise and would sustain the motion with leave to amend. As that treatise puts it: "Leave to amend routinely granted: Even if a demurrer is sustained, leave to amend the complaint is routinely granted. Courts are very liberal in permitting amendments, not only where a complaint is defective in form, but also where substantive defects are apparent: ' Liberality in permitting amendment is the rule, if a fair opportunity to correct any defect has not been given.' [Angie M. v. Sup.Ct. (Hiemstra) (1995) 37 [Cal.App.]4th 1217, 1227; Stevens v. Sup.Ct. (API Ins. Services, Inc.) (1999) 75 [Cal.App.]4th 594, 601].
"Indeed, in the case of an original complaint, plaintiff need not even request leave to amend: 'Unless the complaint shows on its face that it is incapable of amendment, denial of leave to amend constitutes an abuse of discretion, irrespective of whether leave to amend is requested or not.' [McDonald v. Sup.Ct. (Flintkote Co.) (1986) 180 [Cal.App.]3d 297, 303-304; see also City of Stockton v. Sup.Ct. (Civic Partners Stockton, LLC) (2007) 42 [Cal.]4th 730, 747—where plaintiff has not had opportunity to amend complaint in response to demurrer, 'leave to amend is liberally allowed as a matter of fairness unless the complaint shows on its face that it is incapable of amendment']" (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2017) ¶ 7:129, pp. 7(l)-58-59, bold type omitted.)
DISPOSITION
The judgment is reversed, and the case is remanded for further proceedings consistent with this opinion. Plaintiffs shall recover their costs on appeal.
/s/_________
Richman, Acting P.J.
We concur:
/s/_________
Stewart, J.
/s/_________
Miller, J.