James Schubert v. the Bank of New York Mellon ( 2019 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS APR 3 2019
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
JAMES W. SCHUBERT, No. 17-16647
Plaintiff-Appellant, D.C. No. 4:17-cv-00856-KAW
v.
MEMORANDUM*
THE BANK OF NEW YORK MELLON, as
successor trustee to JP Morgan Chase Bank,
N.A., as Trustee for the Certificateholders of
CWABS, Inc., CWABS Master Trust,
Revolving Home Equity Loan Asset Backed
Notes, Series 2004-K and BANK OF
AMERICA, N.A.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of California
Kandis A. Westmore, Magistrate Judge, Presiding
Argued and Submitted December 20, 2018
San Francisco, California
Before: GOULD and BERZON, Circuit Judges, and MÁRQUEZ,** District Judge.
This case is Plaintiff James Schubert’s sixth suit concerning an equity line of
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Rosemary Márquez, United States District Judge for
the District of Arizona, sitting by designation.
credit secured by a deed of trust on Schubert’s real property. In this suit, Schubert
asserts quiet title and declaratory relief claims against Defendants, The Bank of
New York Mellon and Bank of America, N.A., asserting that he does not owe
Defendants money on the equity line of credit and that the deed of trust should no
longer burden his property. The district court dismissed Schubert’s claims. We
have jurisdiction under 28 U.S.C. § 1291.
1. We agree with the district court that Schubert’s claims for quiet title and a
declaration that he does not owe money on the equity line of credit are barred by
res judicata because of the final judgment entered against Schubert in Schubert v.
Bank of New York Mellon (Schubert V) in 2014. No. RG13662247 (Alameda Cty.
Sup. Ct. Nov. 13, 2014). This case comes to us under diversity jurisdiction, and
therefore requires us to apply California law, including California’s res judicata
principles, to Schubert’s complaint. See Palomar Mobilehome Park Ass’n v. City
of San Marcos, 989 F.2d 362, 364 (9th Cir. 1993). California law declares that an
entire claim is precluded under res judicata if (1) the claim raised is identical to a
claim brought in a prior proceeding, (2) the prior proceeding resulted in a final
judgment on the merits, and (3) the claim is raised against a party to the prior
proceeding or a party in privity with a party to the prior proceeding. Boeken v.
Philip Morris USA, Inc., 230 P.3d 342, 348 (Cal. 2010). The second and third
elements of this test are met, and only the application of the first element is at
2
issue.
California considers two claims to be identical when they attempt to
vindicate the same “primary right” by asserting the same “right to be free from the
particular injury suffered.” Mycogen Corp. v. Monsanto Co., 51 P.3d 297, 306–07
(Cal. 2002) (citations omitted). In both Schubert V and the current suit, Schubert
asserted that he owes no money on the equity line of credit and that the deed of
trust is not a valid encumbrance on his title. Stated another way, Schubert V and
this suit both asserted the same right to be free of the same debt and lien. Despite
the fact that the district court gave Schubert an opportunity to amend his complaint
to state a claim about events after Schubert V, Schubert declined that opportunity
and asked that final judgment be entered on his original complaint, which centered
on the same facts as Schubert V.1
1
The dissent’s argument that this suit by Schubert asserts a second harm that
should not be foreclosed by the prior judgment in Schubert V does not reflect well-
established preclusion principles. The leading federal procedural treatise, Wright
et al., discusses the problem of successive harms in several different kinds of
contexts. See, e.g. 18A Charles Alan Wright et al., Federal Practice and Procedure
§ 4409 (3d ed. 2018 update). For example, § 4409 states that “[e]vents that are
related in origin and nature may nonetheless involve such clear separations or
discontinuities as to create separate causes of action without room for dispute. The
easiest circumstances occur when the second action draws on facts or seeks
remedies that simply could not have been asserted in the first action.” Id. That
situation would obviously arise if, for example, a distributor sued a manufacturer
for a late shipment occurring one month into a longer-term contract and then sued
again for another late shipment that became due after a final judgment in the first
suit. Because the second late shipment could not have been discovered at the time
3
While Schubert characterizes his legal theory in the current suit differently
than he did in Schubert V, claims that assert the same right to be free from injury
are identical “even if in the second suit the plaintiff pleads different theories of
recovery, seeks different forms of relief and/or adds new facts supporting
recovery.” Gonzales v. Cal. Dep’t of Corr., 739 F.3d 1226, 1233 (9th Cir. 2014)
(quoting Eichman v. Fotomat Corp., 147 Cal. App. 3d 1170, 1174 (1983)). The
district court correctly concluded that Schubert’s current claims to quiet title and
for declaratory relief that Schubert owes nothing on the line of equity were
of the first suit, there should be no res judicata and it is clear the suit is on a
separate harm. See id. at § 4408 (“Contract cases often can be resolved by a
simple rule that the first suit must claim every breach that has then occurred.”).
The same type of situation can come up with violations of intellectual property
rights in which a defendant commits further acts of alleged infringement after the
final judgment in a prior infringement suit. Similarly, a plaintiff may allege “well-
separated acts of discrimination or retaliation” without running afoul of res
judicata. Id. at § 4409. But the types of successive harm in those circumstances
are not present here. The complaint here did not allege that the line of credit was
paid off after the first judgment or that some new basis for the quieting of
Schubert’s title has emerged after the first judgment. Cf. id. at § 4409 (noting that
“defeat of a claim of title does not preclude assertion of an after-acquired title”).
Rather, as in Schubert V, the allegation of harm was that the line of credit had been
fully repaid before the judgment in Schubert V. Labeling this harm as “slander of
title” in Schubert V and then seeking to “quiet title” in this action is not permitted
after judgment in Schubert V when the harm alleged is precisely the same. The
district court said that “[t]he dismissal of the quiet title action with prejudice is
limited to the extent this action is based on the repayment of the debt in 2008” and
gave Schubert an opportunity to amend his complaint to state a claim about events
after Schubert V. Schubert declined that opportunity and asked that final judgment
be entered on his original complaint, which centered on the same facts as Schubert
V.
4
precluded by res judicata on this basis.
However, because Schubert could state a claim that is not barred by res
judicata if he could allege in good faith that the status of his debt or title has
changed since the final judgment in Schubert V, we vacate the district court’s
judgment on Schubert’s claims for quiet title and a declaration that he does not
owe money on the equity line of credit and remand to the district court to provide
him a final opportunity to amend his complaint consistent with this disposition.
2. Schubert’s remaining claim, for a declaration to the effect that Defendants
“cannot enforce any lien they have against the property” because of California’s
“one action rule,” was also correctly dismissed by the district court. California
Code of Civil Procedure § 726 provides, inter alia, that “[t]here can be but one
form of action for the recovery of any debt or the enforcement of any right secured
by mortgage upon real property.” The Bank of New York Mellon’s 2014 suit
seeking a declaration that its deed of trust was prior in right to another security
interest on the property was not an “action for the recovery of any debt or the
enforcement of any right secured” by the deed of trust. Cal. Civ. Proc. Code § 726.
Seeking to establish the order of priority to any possible recovery is not an action
seeking that recovery. Defendants have never attempted to judicially enforce their
security and The Bank of New York Mellon’s prior suit did not involve any claims
against Schubert’s possession of the property, any proceedings in rem against the
5
property, or any argument seeking to compromise whatever title Schubert
possesses in his property. Schubert’s claim for declaratory relief under the “one
form of action” rule was properly dismissed for failure to state a claim. This
portion of the district court’s judgment is affirmed.
AFFIRMED in part, VACATED in part, and REMANDED
6
Schubert v. The Bank of New York Mellon, No. 17-16647 FILED
BERZON, Circuit Judge, dissenting: APR 3 2019
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
I respectfully dissent.
In my view, this case is quite simple. In Schubert V, Schubert “request[ed] a
determination of the validity of the Bank of New York lien as of December 1,
2012.” He also brought an action for slander of title based on an alleged false
representation made by the Bank of New York in April 2012 to a third party. In
the present action, he is requesting a judicial determination as to whether now, as
of 2017, the Bank of New York holds a valid deed of trust against Schubert’s
property, and whether Schubert now “owes [the Bank of New York] any sum of
money as a result of the Equity Lien.”
The two determinations Schubert is requesting in the current suit are not
barred by claim preclusion, because neither claim could have been litigated in
Schubert V. Both claims in the current suit relate to the state of affairs between
Schubert and Bank of New York in 2017; Schubert V was litigated in 2013.
I therefore dissent.