Opinion
A156227
01-28-2020
FARID GHALEHTAK, et al., Plaintiffs and Appellants, v. FAY SERVICING, LLC, 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Alameda County Super. Ct. No. RG18898872)
Plaintiffs Farid Ghalehtak and Shirin Tabatabai (Borrowers) defaulted on their home loan, and the property was sold at a nonjudicial foreclosure. They appeal from a judgment entered after the trial court sustained defendants Fay Servicing, LLC's and Wilmington Trust, N.A.'s demurrer to their first amended complaint without leave to amend. They also challenge a postjudgment order awarding attorney fees. We conclude, as did the trial court, that Borrowers' action is barred by the doctrines of res judicata and collateral estoppel, and affirm.
BACKGROUND
We set forth the facts, derived from the allegations of the first amended complaint and documents of which judicial notice was taken, to the limited extent necessary to address the dispositive issue on appeal.
"If all of the facts necessary to show that the action is barred are within the complaint or subject to judicial notice, a trial court may properly sustain a general demurrer." (Carroll v. Puritan Leasing Co. (1978) 77 Cal.App.3d 481, 485.) The trial court took judicial notice of certain documents, including the deed of trust and other underlying documents related to the property on file with the Alameda County Recorder's Office. We previously granted respondents' request for judicial notice of certain orders and pleadings in the underlying action and in a federal court action.
Borrowers obtained a loan from First National Bank of Arizona in 2007 in the amount of $804,900.00. The loan was secured by a deed of trust, with Mortgage Electronic Registration Systems, Inc. (MERS) as the original beneficiary and Alliance Title as the trustee.
In 2009, MERS recorded a substitution of trustee substituting Quality Loan Service Corporation as trustee under the deed of trust.
Borrowers stopped making payments in May 2012.
In October 2015, Borrowers executed a grant deed granting a 25 percent undivided interest in the property to one Latina Conley. A few days later, MERS assigned its beneficial interest in the deed of trust to FNBN I, LLC (FNBN). About a week later, FNBN recorded a substitution of trustee naming MTC Financial Inc. dba Trustee Corps (MTC) as trustee under the deed of trust, replacing Quality Loan Service Corporation.
Four days later, FNBN recorded a notice of default and election to sell under the deed of trust. The notice stated Borrowers were in arrears by $276,230.43.
In December, Borrowers filed a federal lawsuit against FNBN, alleging the securitization was improper and FNBN had no rights in the loan. The court dismissed the federal claims on the merits with prejudice and declined to exercise jurisdiction over the state law claims.
In August 2017, MTC recorded a notice of trustee's sale to be held on September 22, 2017. Two days before the sale date, Latina Conley filed for Chapter 13 bankruptcy, which stayed the sale. Conley's action was dismissed about three weeks later.
In September 2017, FNBN assigned the deed of trust to Wilmington Trust, N.A. (Wilmington), solely in its capacity as trustee of the MFRA Trust 2014-2, replacing FNBN. The assignment was recorded on October 20, 2017.
A week after dismissal of Conley's bankruptcy petition, on October 18, 2017, Borrowers filed a second federal lawsuit, naming Fay Servicing, LLC (Fay) and MTC as defendants. One week later, borrower Ghalehtak filed for Chapter 13 bankruptcy. The bankruptcy action was dismissed a month later. Borrowers' second federal lawsuit was then dismissed with prejudice, on grounds of res judicata, in March 2018.
On May 2, 2018, the property was sold at a foreclosure sale.
Borrowers filed the operative first amended complaint in this case against Fay and Wilmington, alleging the following causes of action: violation of the Rosenthal Fair Debt Collection Practices Act, wrongful foreclosure, violations of Civil Code sections 2924.17 and 2924, subdivision (a)(6), violation of the Unfair Competition Law, cancellation of written instruments, and intentional infliction of emotional distress, and seeking injunctive relief under the Unfair Competition Law.
Fay and Wilmington filed a demurrer, which the trial court sustained without leave to amend, on the ground, among others, the action was barred by res judicata. Judgment was entered and notice of entry of judgment was served on November 13, 2018.
After Borrowers filed their notice of appeal, the court granted respondents' unopposed motion for attorney fees. On April 2, 2019, notice of entry of the revised judgment reflecting the fee award was served on Borrowers.
DISCUSSION
Res Judicata and Collateral Estoppel
Borrowers maintain the trial court erred in sustaining the demurrer on the ground their causes of action are barred by principles of res judicata or collateral estoppel. They assert the operative complaint in this case alleged causes of action that were not, and could not have been, included in their federal court actions.
" 'Res judicata' describes the preclusive effect of a final judgment on the merits. 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. Collateral estoppel, or issue preclusion, 'precludes relitigation of issues argued and decided in prior proceedings.' [Citation.] Under the doctrine of res judicata, if a plaintiff prevails in an action, the cause is merged into the judgment and may not be asserted in a subsequent lawsuit; a judgment for the defendant serves as a bar to further litigation of the same cause of action. [¶] A clear and predictable res judicata doctrine promotes judicial economy. Under this doctrine, all claims based on the same cause of action must be decided in a single suit; if not brought initially, they may not be raised at a later date. ' "Res judicata precludes piecemeal litigation by splitting a single cause of action or relitigation of the same cause of action on a different legal theory or for different relief." ' [Citation.] A predictable doctrine of res judicata benefits both the parties and the courts because it 'seeks to curtail multiple litigation causing vexation and expense to the parties and wasted effort and expense in judicial administration.' " (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896-897, italics & fn. omitted.)
Res judicata applies "only if (1) the decision in the prior proceeding is final and on the merits; (2) the present action is on the same cause of action as the prior proceeding; and (3) the parties in the present action or parties in privity with them were parties to the prior proceeding." (Zevnik v. Superior Court (2008) 159 Cal.App.4th 76, 82.) The doctrine bars a claim that could have been brought in the prior suit, "whether or not it was actually asserted or decided." (Ivanoff v. Bank of America, N.A. (2017) 9 Cal.App.5th 719, 727.)
California courts apply the " ' "primary rights" ' " theory to determine "whether two proceedings involve identical causes of action." (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 797.) Under the primary rights theory, the "cause of action is the right to obtain redress for a harm suffered, regardless of the specific remedy sought or the legal theory. . . advanced." (Id. at p. 798.) Therefore, "[w]hen two actions involving the same parties seek compensation for the same harm, they generally involve the same primary right." (Ibid.)
A judgment of dismissal following the sustaining of a demurrer (or, in this case, the grant of a Fed. Rules Civ. Proc., rule 12(b)(6) motion) "may be on the merits" for the purposes of res judicata, if the other elements of res judicata are satisfied. (Ojavan Investors, Inc. v. California Coastal Com. (1997) 54 Cal.App.4th 373, 383-384.)
Borrowers claim res judicata does not apply because their "Rosenthal Act claims were subject to a one-year statute of limitations. Based purely on the statutory requirement of one-year, [their first amended complaint] could not be subject to res judicata." (Boldface omitted.) They also assert "nothing within the statute itself . . . states res judicata applies or can be applied."
Borrowers misconstrue the doctrine of res judicata. Its application does not depend on whether a statute establishing a cause of action states res judicata can apply to the claim. So understandably, they cite no authority for this assertion.
Nor does the fact their Rosenthal Act claim would now be time-barred bar the application of res judicata. They maintain the "continuing pattern and course of conduct in violation of the Rosenthal Act" constitutes a " 'continuing violation,' " somehow preventing application of res judicata principles to that cause of action. Borrowers cite no authority in support of that claim, and it has been rejected as meritless. (See Jerry Beeman & Pharmacy Servs., Inc. v. Anthem Prescription Mgmt., Inc. (C.D. Cal., Aug. 27, 2007) 2007 WL 8434030, at * 5 ["Plaintiffs' argument that preclusion does not apply to this case because they allege continuing violations of [the statute] lacks merit."].) "A continuing violation is occasioned by continual unlawful acts, not by continual ill effects from an original violation." (Ward v. Caulk (9th Cir. 1981) 650 F.2d 1144, 1147.) Where "[d]istinct conduct is alleged only in the limited sense that every day is a new day, so doing the same thing today as yesterday is distinct from what was done yesterday," the doctrine of collateral estoppel barred a subsequent claim. (In re Dual-Deck Video Cassette Recorder Antitrust Litigation (9th Cir. 1993) 11 F.3d 1460, 1464.)
Borrowers also assert their prior federal actions "involved different defendants that were not in privity with Respondents." They claim there was no "contractual privity between Fay and First National Bank of Arizona," the originating lender, and that neither Fay nor Wilmington Trust were parties to the original deed of trust.
Borrowers conflate contractual privity with the privity required for application of res judicata. " 'Privity'—for the purposes of applying the doctrine of res judicata—is a legal conclusion 'designating a person so identified in interest with a party to former litigation that he represents precisely the same right in respect to the subject matter involved.' " (In re Schimmels (9th Cir. 1997) 127 F.3d 875, 881.) "Privity in the res judicata context depends on the relationship between the parties in the first and second lawsuits, and is different from privity of contract." (Meisner v. Zymogenetics, Inc. (D.S.C. Sept. 15, 2016, No. 3:15-cv-3523-CMC) 2016 WL 4858741, at * 4.) For the purposes of res judicata, successor servicers and trustees are in privity to lenders who were parties in a previous lawsuit. (See Janeece Fields v. Bank of New York Mellon (N.D. Cal. May 1, 2017, No. 17-cv-00272-JST) 2017 WL 1549464, at * 3.)
As the trial court concluded, Fay "was an actual party to the second federal lawsuit and was in privity with the parties to the first federal lawsuit because it was the servicer to the same loan. [Wilmington Trust] is in privity because it replaced prior defendant FNBN as beneficiary under the same [deed of trust]."
Lastly, Borrowers assert the second federal court judgment is not final for purposes of res judicata because there is an appeal "currently pending" in the Ninth Circuit and "has not been fully adjudicated." "The federal rule is that a judgment or order, once rendered, is final for purposes of res judicata until reversed on appeal or modified or set aside in the court of rendition." (Levy v. Cohen (1977) 19 Cal.3d 165, 172.) "A federal judgment is as final in California courts as it would be in federal courts." (Calhoun v. Franchise Tax Bd. (1978) 20 Cal.3d 881, 887.)
In any case, by the time Borrowers filed their opening brief in this appeal, the Ninth Circuit had affirmed the judgment of dismissal. And one day after Borrowers filed their opening brief, the Ninth Circuit denied their petition for rehearing as untimely.
Because we conclude Borrowers' underlying lawsuit is barred by the doctrine of res judicata, we need not and do not reach the remaining issues they raise. --------
Challenge to Post-Judgment Order Granting Attorney Fees
Borrowers assert the "trial court's award of attorney's fees must be reversed" because respondents were not the prevailing party. The court granted respondents' motion for attorney fees after the notice of appeal from the underlying judgment was filed. Borrowers did not appeal from that order or from the amended judgment incorporating the award of attorney fees.
" 'If a judgment or order is appealable, an aggrieved party must file a timely appeal or forever lose the opportunity to obtain appellate review.' [Citations.] A postjudgment order which awards or denies costs or attorney's fees is separately appealable. [Citations.] . . . [A]nd if no appeal is taken from such an order, the appellate court has no jurisdiction to review it." (Norman I. Krug Real Estate Investments, Inc. v. Praszker (1990) 220 Cal.App.3d 35, 46, italics omitted.) Thus, we have no jurisdiction to review the propriety of that award.
DISPOSITION
The judgment is affirmed. Costs on appeal to respondents.
/s/_________
Banke, J. We concur: /s/_________
Margulies, Acting P.J. /s/_________
Sanchez, J.