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Lucore v. U.S. Bank, NA

United States District Court, S.D. California

February 26, 2018

STEVEN H. LUCORE, SR., JUDY L. LUCORE, Plaintiffs,
v.
U.S. BANK, NA, as Trustee for the Certificate Holders of Bank of America Funding Corporation Mortgage Pass-Through Certificates, Series 2006-H, Defendant.

         ORDER: (1) GRANTING DEFENDANT'S MOTION TO DISMISS; (2) DISMISSING WITHOUT PREJUDICE PLAINTIFFS' SECOND AMENDED COMPLAINT; (3) GRANTING DEFENDANT'S REQUEST FOR JUDICIAL NOTICE; AND (4) GRANTING PLAINTIFFS' MOTION TO AMEND COMPLAINT (ECF NOS. 41, 46)

          Hon. Janis L. Sammartino, United States District Judge

         Presently before the Court is Defendant U.S. Bank's Motion to Dismiss Plaintiffs' Second Amended Complaint, (“MTD, ” ECF No. 41). Additionally, Defendant filed a Request for Judicial Notice (“RJN”), (ECF No. 42). Also before the Court is Plaintiffs Steven H. Lucore and Judy L. Lucore's Opposition[1] to, (“Lucore Opp'n, ” ECF No. 44), the Motion to Dismiss. Defendant did not file a reply brief.

         The Court vacated the hearing for Defendant's MTD and took the matter under submission without oral argument pursuant to Civil Local Rule 7.1(d)(1). (ECF No. 45.) After the Court vacated the hearing, Plaintiffs filed a Motion to File a Third Amended Complaint, (“MTN, ” ECF No. 46). Defendant filed an Opposition to, (“U.S. Bank Opp'n, ” ECF No. 48), and Plaintiffs filed a Reply in support of, (“Reply, ” ECF No. 54), the motion to amend. Having considered the parties' arguments and the law, the Court GRANTS Defendant's MTD (ECF No. 41), DISMISSES WITHOUT PREJUDICE Plaintiffs' Second Amended Complaint, (“SAC, ” ECF No. 40), and GRANTS Defendant's RJN (ECF No. 42). The Court GRANTS IN PART and DENIES IN PART Plaintiffs' RJN, (ECF No. 44). Additionally, the Court GRANTS Plaintiffs' Motion to File a Third Amended Complaint, (ECF No. 46).

         BACKGROUND

         On or around January 6, 2009, Plaintiffs allegedly rescinded a mortgage loan encumbering real property located at 11132 Summit Avenue, Santee, CA 92071 (the Property). (SAC ¶ 7.) Defendant foreclosed the Property on August 18, 2011, (id. ¶ 11), and pursued three eviction proceedings in state court against Plaintiffs in February 2013, (id. ¶ 12), and in April and June 2015, (id. ¶¶ 13-14). All eviction cases have been dismissed. (Id. ¶¶ 11-13.) Defendant has threatened to sell the Property since August 21, 2015. (Id. ¶ 15.)

         On October 8, 2015, Plaintiffs filed a complaint alleging two causes of action for violation of the Rosenthal Fair Debt Collection Practices Act (“RFDCPA”) and violation of California's Unfair Competition Law (“UCL”) § 17200, (ECF No. 1). On October 26, 2015, Plaintiffs filed an amended complaint alleging the same causes of action as their original complaint. (ECF No. 7.) Defendant filed a motion to dismiss or, alternatively, to stay the proceedings pending the outcome of related state court litigation. (ECF No. 9.) After this action was transferred from Judge Roger T. Benitez to this Court pursuant to the low number rule, (ECF No. 15), the Court stayed the proceedings pending the outcome of state court litigation, (ECF No. 24). The Court lifted the stay on August 14, 2017, (ECF No. 39). Then, Plaintiffs' filed their Second Amended Complaint, (“SAC, ” ECF No. 40). The parties then filed the present motions.

         MOTION TO DISMISS

         I. Legal Standard

         Federal Rule of Civil Procedure 12(b)(6) permits a party to raise by motion the defense that the complaint “fail[s] to state a claim upon which relief can be granted, ” generally referred to as a motion to dismiss. The Court evaluates whether a complaint states a cognizable legal theory and sufficient facts in light of Federal Rule of Civil Procedure 8(a), which requires a “short and plain statement of the claim showing that the pleader is entitled to relief.” Although Rule 8 “does not require ‘detailed factual allegations, ' . . . it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In other words, “a plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of a cause of action's elements will not do.” Twombly, 550 U.S. at 555 (alteration in original). “Nor does a complaint suffice if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'” Iqbal, 556 U.S. at 678 (alteration in original) (quoting Twombly, 550 U.S. at 557).

         “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Id. (quoting Twombly, 550 U.S. at 570); see also Fed. R. Civ. P. 12(b)(6). A claim is facially plausible when the facts pled “allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). That is not to say that the claim must be probable, but there must be “more than a sheer possibility that a defendant has acted unlawfully.” Id. (citing Twombly, 550 U.S. at 556). “[F]acts that are ‘merely consistent with' a defendant's liability” fall short of a plausible entitlement to relief. Id. (quoting Twombly, 550 U.S. at 557). Further, the Court need not accept as true “legal conclusions” contained in the complaint. Id. at 678-79 (citing Twombly, 550 U.S. at 555). This review requires “context-specific” analysis involving the Court's “judicial experience and common sense.” Id. at 679. “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged- but it has not ‘show[n]'-‘that the pleader is entitled to relief.'” Id. (quoting Fed.R.Civ.P. 8(a)(2)). The Court will grant leave to amend unless it determines that no modified contention “consistent with the challenged pleading . . . [will] cure the deficiency.” DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992) (quoting Schriber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)).

         II. Analysis

         A. Request for Judicial Notice

         Defendant requests the Court take judicial notice of various state court actions associated with the Property and Plaintiffs. (See ECF No. 42.) The request is unopposed.

         Under Federal Rule of Evidence 201, the court may take judicial notice of “a fact that is not subject to reasonable dispute because it can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed.R.Evid. 201(b). In addition, a court also may take judicial notice of material incorporated by reference into the complaint without converting the motion to dismiss into a motion for summary judgment. Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir. 2010); Intri-Plex Techs., Inc. v. Crest Group, Inc., 499 F.3d 1048, 1052 (9th Cir. 2007). Documents are incorporated into the complaint by reference “in situations where the complaint necessarily relies upon a document or the contents of the document are alleged in a complaint, the document's authenticity is not in question and there are no disputed issues as to the document's relevance.” Coto Settlement, 593 F.3d at 1038; see also United States v. Corinthian Colls., 655 F.3d 984, 999 (9th Cir. 2011).

         The court records submitted by Defendant support its contention that Plaintiffs' claims are barred by res judicata. A court may take judicial notice of its own files and of documents filed in other courts for the purpose of determining whether a party's claims are barred by res judicata. See, e.g., Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006); Holder v. Holder, 305 F.3d 854, 866 (9th Cir. 2002). Here, the Court must consider whether Plaintiffs' claims are barred by res judicata and, in the context of Plaintiffs' Motion to Amend, (ECF No. 46), whether amending to add a defendant would also be barred under res judicata. Therefore, the Court GRANTS Defendant's Request for Judicial Notice, (ECF No. 42).

         Plaintiffs also submitted a RJN as part of their Opposition. (See Opp'n 11.) Plaintiffs request the Court notice state court documents related to the unlawful detainer action filed by Defendant against Plaintiffs in state court, the Supreme Court's opinion in Jesinoski v. Countrywide Home Loans, Inc., 135 S.Ct. 790 (2015), and an opinion from the federal district in the District of Oregon. (See Opp'n 14.) Plaintiffs' request is unopposed.

         It is well established that that courts may consider legal reasoning and conclusions of other federal courts without resort to Rule 201. See, e.g., Derum v. Saks & Co., 95 F.Supp.3d 1221, 1224 (S.D. Cal. 2015) (citing McVey v. McVey, 26 F.Supp.3d 980, 984- 85 (C.D. Cal. 2014)). Therefore, the Court GRANTS IN PART and DENIES IN PART Plaintiffs' Request for Judicial Notice. The Court grants the request with respect to documents relating to the unlawful detainer action. The Court denies the request with respect to the legal opinions. The Court will consider the legal opinions for any value they might have as precedent.

         B. Res Judicata

         Defendant argues that res judicata bars Plaintiffs' claims. (MTD 4.) The doctrine of res judicata gives conclusive effect to former judgment in subsequent litigation involving the same controversy. People v. Barragan, 32 Cal.4th 236, 252 (2004). Res judicata has two aspects: claim preclusion and collateral estoppel. “Claim preclusion, the ‘primary aspect' of res judicata, acts to bar claims that were, or should have been, advanced in a previous suit involving the same parties. Issue preclusion, the ‘secondary aspect' historically called collateral estoppel, describes the bar on relitigating issues that were argued and decided in the first suit.” DKN Holdings LLC v. Faerber, 61 Cal.4th 813, 824, (2015) (internal quotation marks omitted) (quoting Boeken v. Philip Morris USA, Inc., 48 Cal.4th 788, 797 (2010)). “It has long been established that [28 U.S.C.] § 1738 does not allow federal courts to employ their own rules of res judicata in determining the effect of state judgments.” Kremer v. Chem. Constr. Corp., 456 U.S. 461, 481-82 (1982); see also In re Bugna, 33 F.3d 1054, 1057 (9th Cir. 1994) (“In determining the collateral estoppel effect of a state court judgment, federal courts must, as a matter of full faith and credit, apply that state's law of collateral estoppel.”).

         In California, the elements for applying claim preclusion to a second suit are: “(1) the same cause of action (2) between the same parties (3) after a final judgment on the merits in the first suit.” DKN Holdings, 61 Cal.4th at 824 (citing, e.g., Mycogen Corp. v. Monsanto Co., 28 Cal.4th 888, 896 (2002)). “If claim preclusion is established, it operates to bar relitigation of the claim altogether.” Id.

         “To determine whether two proceedings involve identical causes of action for purposes of claim preclusion, California courts have ‘consistently applied the primary rights theory.'” Id. (quoting Slater v. Blackwood, 15 Cal.3d 791, 795 (1975)). Under the primary rights 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.” Id. at 797-98 (quoting McKee v. Dodd, 152 Cal. 637, 641 (1908)). In the context of res judicata, “a 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.” Id. (citing Bay Cities Paving & Grading, Inc. v. Lawyers' Mut. Ins. Co., 5 Cal.4th 854, 860 (1993)).

         “California, as most states, recognizes that the doctrine of res judicata will bar not only those claims actually litigated in a prior proceeding, but also claims that could have been litigated.” Castle v. Mortgage Elec. Registration Sys., Inc., No. CV 11-00538, 2011 WL 3626560, at *4 (C.D. Cal. Aug. 16, 2011) (emphasis added) (citing Palomar Mobilehome Park Ass'n v. City of San Marcos, 989 F.2d 362, 364 (9th Cir.1993)). Additionally, “res judicata operates as a bar to the maintenance of a second suit between the same parties or parties in privity with them on them on the same cause of action.” Rice v. Crow, 81 Cal.App.4th 725, 734 (Ct. App. 2000) (emphasis omitted) (quoting Branson v. Sun-Diamond Growers, 24 Cal.App.4th 327, 340 (Ct. App. 1994)). The Court applies California's claim preclusion standard.

         1. Identity of Claims

         The first element requires determining whether two causes of action are the same, using the primary rights theory. See DKN Holdings, 61 Cal.4th at 824. The Court first examines the previously litigated primary right. Then, the Court will examine the primary right at issue in this litigation to determine whether the primary rights are the same. The Court concludes by examining the primary rights at issue in Plaintiffs' declaratory relief cause of action.

         a. Previously Litigated Primary Right

         The Court recites the following facts taken from the California Court of Appeal's unpublished decision in Lucore v. U.S. Bank, N.A., No. D070103, 2017 WL 694530 (Cal.Ct.App. Feb. 22, 2017) (unpublished decision).[2] In November 2010, Plaintiffs filed a verified complaint in San Diego Superior Court against U.S. Bank, Recontrust, BAC Home Loans Servicing, LP, and other individuals (“First State Court Action”). Id. at *2. They alleged causes of action seeking to prevent a foreclosure sale and quiet title to the Property. Id. Plaintiffs alleged that the notice of default on their mortgage was void because the assignment/substitution of trustee was recorded after filing of the notice of default. Id.

         The trial court sustained the defendant's demurrer without leave to amend and entered judgment in favor of the defendants. Id. The trial court found that Plaintiffs' complaint failed as a matter of law because it was predicated on an erroneous allegation that Mortgage Electronic Registration Systems, Inc. (“MERS, ” the entity that was the original beneficiary of Plaintiffs' Deed of Trust) did not have the authority to substitute trustees and assign the deed of trust to a new trustee. The court ruled that MERS had the authority under California law to substitute trustees and, further, that the recorded documents were valid. Id. In May 2011, a Notice of Trustee's Sale was recorded and on August 18, 2011 Defendant purchased Property at the foreclosure sale. Id.

         In June 2012, Plaintiffs filed an adversary proceeding against the same defendants, including U.S. Bank, in the Southern District of California Bankruptcy Court (“Bankruptcy Action”). Id. They asserted various claims including mortgage fraud, breach of contract, fraudulent documentation recordation, and other violations of law. Id. The bankruptcy court dismissed Plaintiffs' adversary complaint without leave to amend. Id.

         In October 2013, Plaintiffs filed a complaint in San Diego Superior Court (“Second State Court Action”). Id. They alleged several causes of action including wrongful foreclosure, quiet title, declaratory relief, unfair business practices, and cancellation of instruments against the same defendants, including U.S. Bank. Id. Plaintiffs argued that flaws in the securitization process meant that U.S. Bank was an improper party to the foreclosure sale. They also argued several recording documents were invalid due to improper signatures. Id. The defendants demurred arguing that Plaintiffs' First State Court Action and the Bankruptcy Action involved the same facts and theories and the final judgments in both those actions were entitled to preclusive effect. Id. The trial court found that Plaintiffs' claims were barred by res judicata and collateral estoppel. Id. Plaintiffs appealed to the California Court of Appeal.

         The Court of Appeal affirmed the trial court's judgment and concluded that the Second State Court Action concerned the same primary rights litigated in the First State Court Action. Id. The court affirmed the trial court on the grounds that res judicata as to the First State Court Action was proper, but did not reach ...


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