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Barabino v. Citizens Automobile Finance

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA


October 4, 2010

ROBERT BARABINO, PLAINTIFF,
v.
CITIZENS AUTOMOBILE FINANCE, INC., A CORPORATION; JPMORGAN CHASE BANK, A CORPORATION; WESTERN SURETY COMPANY, A CORPORATION; AND DOES ONE THROUGH TWENTY; DEFENDANTS.

The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge

MEMORANDUM AND ORDER

Presently before the Court is a Motion by Defendant Citizens Automobile Finance, Inc. ("Defendant") for Judgment on the Pleadings. Defendant's Motion is made on the grounds that the claim for declaratory relief asserted by Plaintiff Robert Barabino ("Plaintiff") in this proceeding is barred by the statute of limitations or, in the alternative, precluded by principles of either collateral estoppel or res judicata. In his opposition to this motion, Plaintiff filed a Motion requesting Rule 11 Monetary Sanctions. For the reasons set forth below, Defendant's Motion for Judgment on the Pleadings is denied and Plaintiff's Motion requesting Rule 11 Monetary Sanctions is denied.

BACKGROUND*fn1

On January 14, 2002, Plaintiff executed a "Retail Installment Sales Contract" ("Contract") for the purchase of a 2001 Bounder Diesel ("Vehicle") from Dan Gamel's Rocklin RV Center ("Seller"). The Contract states "ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF THE GOODS OR SERVICES OBTAINED PURSUANT HERETO" ("Holder Clause"). Subsequent to Plaintiff's purchase, Seller assigned its rights under the Contract to Bank One, N.A. Defendant JPMorgan Chase Bank, N.A. ("JPMorgan") acquired rights under the Contract as successor in interest to Bank One, N.A. by way of merger. Plaintiff made payments to JPMorgan in excess of $25,000. JPMorgan thereafter assigned its rights to Defendant. Plaintiff has since made payments to Defendant in excess of $25,000. Defendant currently holds the contract and Plaintiff continues to make payments.

In 2004, Plaintiff filed suit in Eastern District of California, Case No. 2:04-cv-2359-MCE-EFB, (hereinafter "Barabino I") against Seller and the manufacturer of the vehicle alleging violations of the Song-Beverly Consumer Warranty Act, the Magnuson-Moss Warranty Federal Trade Commission Improvement Act, the Consumers Legal Remedies Act, and fraud. In 2009, Plaintiff obtained judgment on all causes of action against Seller and was awarded damages in the amount of $270,590.20.

On November 26, 2008, Plaintiff filed a second action in state court ("Barabino II")*fn2 . (Def.'s Req. For Judicial Notice, Ex. 3). This suit was removed to the United States District Court for the Eastern District of California, Case No. 2:09-cv-86-GEB-KJM. Both JPMorgan and Citizens were named as Defendants. In Barabino II, Plaintiff alleged that pursuant to the "Holder Clause" both Defendants were subject to the same claims brought against Seller in Barabino I. (Def.'s Req. For Judicial Notice, Ex. 3, ¶¶ 16-17.) Ultimately, the court in Barabino II dismissed Plaintiff's claims as barred by the statute of limitations. (Def.'s Req. For Judicial Notice, Ex. 4.)*fn3

In the present action (Barabino III), Plaintiff's Complaint contains one cause of action requesting declaratory relief. The cause of action, however, requests resolution of two issues:

1) whether the Contract held by Citizen is enforceable, and

2) whether Defendants have any liability for claims which Plaintiff has or could have asserted against Seller.

Prior to the filing of the present Motion, both Defendants filed Motions to Dismiss. Those Motions were granted in part and denied in part. In its Memorandum and Order filed March 29, 2010, this Court held that Plaintiff was collaterally estopped from relitigating the issue of whether Defendants are subject to liability for claims that could have been asserted against Seller. In partially denying Defendants' Motions, the Court explained that enforceability of the Contract was not directly addressed in either Barabino I or Barabino II.

STANDARD

A motion for judgment on the pleadings pursuant to Rule 12(c) challenges the legal sufficiency of the opposing party's pleadings. E.g. Westlands Water Dist. v. Bureau of Reclamation, 805 F. Supp. 1503, 1506 (E.D. Cal. 1992). Any party may move for judgment on the pleadings after the pleadings are closed but within such time as to not delay trial. Fed. R. Civ. P. 12(c).

The standard for evaluating a motion for judgment on the pleadings is essentially the same as the standard applied to a Rule 12(b)(6) motion. Dworkin v. Hustler Magazine, Inc., 867 F.2d 1188, 1192 (9th Cir. 1989). A motion for judgment on the pleadings should only be granted if, accepting as true all material allegations contained in the nonmoving party's pleadings, the moving party "'clearly establishes that no material issue of fact remains to be resolved and that he [or she] is entitled to judgment as a matter of law.'" Doleman v. Meiji Mut. Life Ins. Co., 727 F.2d 1480, 1482 (9th Cir. 1984) (quoting Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1368 (1969)); Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1550 (9th Cir. 1989).

ANALYSIS

A. Defendant's Motion for Judgment on the Pleadings

1. Statute of Limitations

Under California Law, a party seeking rescission of a contract for fraud must bring an action within four years of the date the party first discovers the facts constituting the fraud. Cal. Civ. Proc. § 337(3). Defendant argues that since Barabino I alleged fraudulent inducement of a contract, Plaintiff was aware of facts constituting the fraud no later than November 3, 2004, the date Barabino I was filed.

According to Defendant, because the present action was filed in state court on November 16, 2009, more than four years after the Barabino I filing date, Plaintiff's cause of action is barred by the statute of limitations.

The problem with Defendant's reasoning is it is based on a misunderstanding of the relief Plaintiff currently seeks. Defendant argues that, although Plaintiff's cause of action is worded as a request for declaratory relief, Plaintiff is actually requesting rescission of a contract and restitution for payments made under the contract. In its prior order ruling on Defendant's Motion to Dismiss, this court clearly articulated the issues in the present case. Notwithstanding the clear language of that order, Defendant still apparently does not understand the relief requested by Plaintiff.

As the Court explained in its March 29, 2010 Memorandum and Order, "Plaintiff is... seeking resolution on two issues;

1) whether the Contract held by [Defendant] is enforceable and,

2) whether there is any liability of Defendant[] for claims which Plaintiff has and could have asserted against Seller." In that Memorandum and Order, the Court held that Plaintiff was collaterally estopped from relitigating the issue of Defendant's liability for claims brought against the Seller. The Court also held that the issue of enforceability of the Contract had not been addressed in the prior cases. As a result of that order, the only issue remaining before this Court is whether the Contract is enforceable in light of the entry of judgment in Barabino I.

In Barabino I, judgment was entered in favor of Plaintiff on April 20, 2009, less than seven months before the present action was filed. This Court is unaware of a statute of limitation that would preclude it from determining the enforceability of the Contract in light of the recent judgment. Thus, Plaintiff's cause of action is not time-barred.

2. Collateral Estoppel

Under California Law, collateral estoppel only applies if five threshold requirements are met. In Re Baldwin, 249 F.3d 912 (9th Cir. 2001) (citing Lucido v. Superior Court, 51 Cal. 3d 355, 340 (1990)). First, the issue sought to be precluded from relitigation must be identical to that decided in a former proceeding. Id. Second, this issue must have been actually litigated in the former proceeding. Id. Third, it must have been necessarily decided in the former proceeding. Id. Fourth, the decision in the former proceeding must be final and on the merits. Id. Finally, the party against whom preclusion is sought must be the same as, or in privity with, the party to the former proceeding. Id.

Here, Plaintiff seeks judicial determination of the enforceability of the Contract. Plaintiff contends that the Contract was rendered void by the Barabino I judgment, and he is no longer required to make further payments under the Contract. This issue was not addressed in either Barabino I or Barabino II. Accordingly, collateral estoppel does not bar Plaintiff's cause of action for declaratory relief.

3. Res Judicata

"The doctrine of claim preclusion (res judicata) provides that a final judgment on the merits bars a subsequent action between the same parties or their privies over the same cause of action." In re Imperial Corp. Of America, 92 F.3d 1503, 1506 (9th Cir. 1996). "Res judicata prevents litigation of all grounds for...recovery that were previously available to the parties, regardless of whether they were asserted or determined in the prior proceeding." Brown v. Felson, 442 U.S. 127, 131 (1979). The Ninth Circuit has identified four factors to consider when determining whether successive lawsuits involve the same cause of action. These factors are: "(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 the two actions; (3) whether the two suits involve infringement of the same right; (4) whether the two suits arise out of the same transactional nucleus of facts." In re Imperial Corp. Of America, 92 F.3d at 1506 (quoting Nordhorn v. Ladish Co., Inc., 9 F.3d 1402, 1405 (9th Cir. 1993).

Plaintiff's cause of action is essentially a request that this Court determine whether the Contract is enforceable. As already stated, Plaintiff believes that the judgment in Barabino I rendered the Contract void. Plaintiff further alleges that Defendant contends that the Contract is currently an enforceable instrument.

A determination by this Court as to whether the Contract is void as a result of the judgment in Barabino I will not change or impair the parties' rights under the contract. It will simply declare what the parties' obligations are, if any, under the Contract.

Additionally, this case does not involve the same evidence or arise out of the same transactional nucleus of facts. The focus here is on the judgment in Barabino I and its effect on the enforceability of the Contract. Because the judgment in Barabino I was issued at a time when the parties could not litigate its effect, res judicata does not preclude Plaintiff's claim.

B. Rule 11 Sanctions

In Plaintiff's Opposition to Defendant's Motion for Judgment on the Pleadings, Plaintiff requests monetary sanctions for violation of Rule 11. Under Rule 11, sanctions are appropriate where a motion is filed for an improper purpose, the defenses or legal contentions made are not supported by law, or there is no evidentiary support for the factual contentions asserted. See Fed. R. Civ. P. 11(b).

Plaintiff claims that Defendant's motion is simply another motion to dismiss disguised as a motion for judgment on the pleadings. Although Defendant makes many of the same arguments in support of both motions, the present motion contains additional arguments and evidence not present in the prior motion.

Additionally, there is nothing to indicate the present motion was filed for an improper purpose or lacked legal or factual support. Because Plaintiff has failed to describe any conduct by Defendant or his attorney violating Rule 11 of the Federal Rules of Civil Procedure, Plaintiff's motion is denied. See Fed. R. Civ. P. 11(c)(2).

CONCLUSION

For the reasons stated above, Defendant's Motion for Judgment on the Pleadings (ECF No. 39) is DENIED and Plaintiff's Request for Rule 11 Monetary Sanctions (ECF No. 50) is also DENIED.*fn4

IT IS SO ORDERED.


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