California Cases August 19, 2020: Jean-Louis v. Deutsche Bank Nat'l Tr. Co.

Case Description

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Super.Ct.No. RIC1803988)

OPINION

APPEAL from the Superior Court of Riverside County. Sunshine S. Sykes and Randall S. Stamen, Judges. Affirmed.

Law Offices of Douglas E. Klein, and Douglas E. Klein, for Plaintiff and Appellant.

Kutak Rock, and Steven M. Dailey, for Defendants and Respondents.

Page 2

Plaintiff and appellant, Louis J. Jean-Louis's house was subject to a foreclosure proceeding because he defaulted on his mortgage loan payments. He sued respondents and other entities in federal court, generally alleging that the foreclosure proceeding was unlawful. The federal district court dismissed his case without leave to amend for failure to state a claim, and the federal appellate court affirmed. His house was then sold in a nonjudicial foreclosure sale.

Jean-Louis then filed this case. He alleged numerous claims, all of which are premised on his assertion that the foreclosure proceeding was unlawful. Respondents demurred on various grounds, including that Jean-Louis's claims were barred by the doctrine of res judicata, also known as claim preclusion. The trial court sustained the demurrer without leave to amend, and Jean-Louis timely appealed. We affirm.

Page 3

Jean-Louis obtained a mortgage loan on a property he previously owned in Riverside, California (the property). The loan was secured by a recorded deed of trust, which was subsequently sold and reassigned. After he defaulted on the loan, a notice of default was recorded to initiate foreclosure proceedings on the property.

Jean-Louis sued Respondents in the federal court, asserting ten causes of action. The thrust of his complaint was that the foreclosure proceeding was illegal. He alleged, among other things, that Respondents were not authorized to foreclose on the property because the deed of trust was unlawfully sold and therefore "void." Thus, according to Jean-Louis, the foreclosure proceeding was invalid because it was premised on the void deed of trust. Based on these and other allegations, Jean-Louis asserted Respondents were liable for fraud, conspiracy, and violating various consumer protection statutes.

Respondents moved to dismiss Jean-Louis's operative complaint for failure to state a claim. The district court granted the motion, finding that Jean-Louis lacked standing to assert some of his claims, and that all of his claims failed to plead a valid cause of action. The district court therefore dismissed Jean-Louis's complaint without leave to amend and entered judgment in Respondents' favor. The judgment was affirmed on appeal. (See Jean-Louis v . J . P . Morgan Chase Bank , N . A . (9th Cir. 2017) 676 Fed.Appx. 717.)

Page 4

About a year later, the property was sold at a trustee's sale. Jean-Louis claimed the sale was "void." An unlawful detainer action against him followed.

Jean-Louis then filed this case. He alleged ten causes of action. As in his federal action, Jean-Louis's principal allegation was that the foreclosure proceeding was invalid because Respondents did not have the legal authority to foreclose on the property.

Respondents demurred to Jean-Louis's complaint. They asserted, among other things, that Jean-Louis's claims were barred under the doctrine of claim preclusion because his federal case arose out of the "same transactional nucleus of facts" and there was a final judgment on the merits in that case. Jean-Louis did not file an opposition to the demurrer. The trial court sustained the demurrer without leave to amend "for the reasons stated in the Demurrer" and entered judgment for Respondents. Jean-Louis timely appealed.

Respondents argue that Jean-Louis's failure to oppose their demurrer means he abandoned his claims and forfeited any argument on appeal that the trial court incorrectly sustained the demurrer. We disagree. (See Code Civ. Proc., § 472c, subd. (a) ["When any court makes an order sustaining a demurrer without leave to amend the question as to whether or not such court abused its discretion in making such an order is open on appeal even though no request to amend such pleading was made."]; Mercury Ins . Co . v . Pearson (2008) 169 Cal.App.4th 1064, 1072 ["'A trial court's order sustaining a

Page 5

demurrer without leave to amend is reviewable for abuse of discretion "even though no request to amend [the] pleading was made." [Citation.] While it is the plaintiff's burden to show "that the trial court abused its discretion" and "show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading" [citation], a plaintiff can make "such a showing . . . for the first time to the reviewing court" [citation].'"]).

Respondents alternatively argue the trial court rightly sustained their demurrer without leave to amend because Jean-Louis's complaint is barred by claim preclusion. We agree.

A. Applicable Law and Standard of Review

"A demurrer should be sustained when '[t]he pleading does not state facts sufficient to constitute a cause of action.' [Citation.] 'We independently review the superior court's ruling on a demurrer and determine de novo whether the complaint alleges facts sufficient to state a cause of action or discloses a complete defense. [Citations.] We assume the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded and matters of which judicial notice has been taken. [Citation.] [¶] '"We affirm if any ground offered in support of the demurrer was well taken but find error if the plaintiff has stated a cause of action under any possible legal theory. [Citations.] We are not bound by the trial court's stated reasons, if any, supporting its ruling; we review the ruling, not its rationale."' [Citation.] [¶] When a court sustains a demurrer without leave to amend, the plaintiff has the burden

Page 6

of proving how an amendment would cure the defect. [Citation.] If the plaintiff does not demonstrate on appeal 'how he can amend his complaint, and how that amendment will change the legal effect of his pleading,' we must presume the plaintiff has stated his allegations 'as strongly and as favorably as all the facts known to him would permit.' [Citation.]" ( The Inland Oversight Committee v . City of San Bernardino (2018) 27 Cal.App.5th 771, 778-779.)

Under the doctrine of claim preclusion, "a valid, final judgment on the merits is a bar to a subsequent action by parties or their privies on the same cause of action.' [Citation.] Whether causes of action in two lawsuits are the same for purposes of res judicata depends on whether they involve the same 'primary right.' [Citations.] '"The plaintiff's primary right is the right to be free from a particular injury, regardless of the legal theory on which liability for the injury is based."' [Citation.] '[A]n "injury," for purposes of determining a primary right, "is defined in part by reference to the set of facts, or transaction, from which the injury arose."' [Citation.]" ( The Inland Oversight Committee v . City of San Bernardino , supra , 27 Cal.App.5th at p. 779.) Accordingly, claim preclusion "bars not only issues that were raised in the prior suit but related issues that could have been raised." ( Villacres v . ABM Industries Inc . (2010) 189 Cal.App.4th 562, 569.) We determine whether claim preclusion applies under a de novo standard of review. ( Johnson v . GlaxoSmithKline , Inc . (2008) 166 Cal.App.4th 1497, 1507.)

Page 7

B. Analysis

Respondents argue—and Jean-Louis concedes—that his complaint is barred by claim preclusion in light of the final federal court judgment. We agree. The elements for claim preclusion are: "'(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, 253.)

Jean-Louis does not and cannot dispute that all three elements are met here. Both this case and his federal case asserted claims against Respondents related to the foreclosure on the property. His core allegation in both cases was that Respondents did not have the legal authority to foreclose on the property and that their attempt to do so was invalid. In short, both cases arose out of the same "nucleus of transactional facts" and involved the same "primary right." (See Gillies v . JPMorgan Chase Bank , N . A . (2017) 7 Cal.App.5th 907, 914 [third lawsuit to prevent foreclosure was barred by res judicata because it implicated "the same primary right which appellant ha[d] always claimed"].) The federal court judgment, affirmed on appeal, is a final judgment on the merits.

Page 8

Although Jean-Louis concedes the doctrine of claim preclusion applies, he argues we should not apply the doctrine under the "public interest exception" to the doctrine. We decline to do so because the exception is not applicable here.

The public interest exception is "extremely narrow" and applies only in "exceptional circumstances." ( Arcadia Unified School Dist . v . State Dept . of Education (1992) 2 Cal.4th 251, 259.) As its name suggests, it applies only when the case presents an issue that affects the general public. (See ibid .) For instance, the exception applied in a case involving whether the State of California was required to pay for certain costs incurred by local governments ( City of Sacramento v . State of California (1990) 50 Cal.3d 51), in a similar case concerning the validity of a tax affecting public finances ( Myers v . Board of Equalization (2015) 240 Cal.App.4th 722, 742-743), and in a case about whether certain campaign finance laws were constitutional. ( Kopp v . Fair Pol .

Page 9

Practices Com . (1995) 11 Cal.4th 607). The California Supreme Court applied the exception so that it could review (and reject) an agency's interpretation of a statute regulating alcohol because the issue affected a number of third parties and involved "an industry requiring close supervision." ( Louis Stores , Inc . v . Department of Alcoholic Beverage Control (1962) 57 Cal.2d 749, 762.)

In brief, the public interest exception applies only when "the public interest requires that relitigation not be foreclosed." ( Kopp v . Fair Political Practices Commission , supra , 11 Cal.4th 607, 622.) The exception therefore was not applied in several cases ostensibly affecting the public interest because each case involved a private matter. (E.g., Dailey v . City of San Diego (2013) 223 Cal.App.4th 237 [dispute over municipal employee's publicly funded retirement benefits]; ( Consumer Advocacy Group , Inc . v . ExxonMobil Corp . (2008) 168 Cal.App.4th 675 [case brought by environmental groups on behalf of the public]; Acuna v . Regents of Univ . of California (1997) 56 Cal.App.4th 639 [discrimination lawsuit against public entity employer].)

Jean-Louis relies primarily on Chern v . Bank of America (1976) 15 Cal.3d 866, and Bates v . Jones (9th Cir. 1997) 131 F.3d 843 to argue that the public interest exception applies. Neither case supports Jean-Louis's position. Bates involved a constitutional challenge to a voter-approved initiative. ( Id . at p. 845.) Chern was a class action in which the named plaintiff alleged the defendant-bank's practice of calculating interest on its mortgage loans breached the class's mortgage agreements and violated Business & Professions Code section 17500, which prohibits false advertising. ( Chern v . Bank of

Page 10

America , supra , at pp. 870-871.) Although the named plaintiff had asserted identical claims in a prior suit and lost, the Chern court held res judicata did not bar her class action complaint for two reasons. ( Id . at p. 871.) First, in her previous suit, the plaintiff had alleged claims against a different defendant arising out of "a different transaction." ( Ibid .) Second, the Chern court found the public interest exception applied because of a then-recent "proliferation" of new laws against false advertising. ( Id . at p. 873.) The court reasoned that "the quality and intensity of the public interest involved" in the case warranted a "reexamination" of the plaintiff's claims. ( Ibid .)

Although Jean-Louis tries to frame this case as involving unsettled public interest issues "permeat[ing]" the state and federal courts, this case involves a purely private matter between private parties. At issue is whether Respondents properly foreclosed on Jean-Louis's private residence because he defaulted on his personal loan. The resolution of this routine foreclosure case, whether in Jean-Louis's favor or otherwise, will not generally affect the public at large. Unlike in Chern v . Bank of America , supra , 15 Cal.3d 866, there has not been a "proliferation" of new, relevant legislation that suggests we should "reexamine" Jean-Louis's claims. Nor does this case involve a matter of statewide concern as in Bates v . Jones (9th Cir. 1997) 131 F.3d 843. In other words, we discern no "clear and convincing need" to allow the parties to relitigate the issues presented in Jean-Louis's federal case because there is no risk that upholding the federal court's judgment will "create[] a potential adverse impact on the public or persons not parties to the federal action." ( Acuna v . Regents of Univ . of California , supra , 56

Page 11

Cal.App.4th at p. 652.) Simply put, this case does not concern broad issues of public concern or present "exceptional circumstances" that justify applying the "extremely narrow" public interest exception. ( Arcadia Unified School Dist . v . State Dept . of Education , supra , 2 Cal.4th at p. 259.) We therefore conclude the public interest exception does not apply.

Because Jean-Louis's complaint was barred by the doctrine of claim preclusion and the public interest exception to the doctrine does not apply here, the trial court properly sustained Respondents' demurrer without leave to amend. We therefore need not address the parties' other contentions and affirm the judgment.

The judgment is affirmed. Respondents shall recover their costs on appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

CODRINGTON
Acting P. J.

We concur:

FIELDS
J.

MENETREZ
J.