Case Name: Pasha, et al. v. Select Portfolio Servicing, Inc. et al.
Case No.: 18CV333123

Defendants Select Portfolio Servicing, Inc. (“SPS”) and U.S. Bank N.A., successor trustee to Bank of America, N.A., successor to LaSalle Bank, N.A., as trustee, on behalf of the WAMU Mortgage Pass-through Certificates, Series 2005-AR14 (erroneously sued as Bank of America, N.A.) (the “Trust”) (collectively, “Defendants”) demur to the First Amended Complaint (“FAC”) filed by plaintiffs Arif Pasha and Mahjabeen Pasha (collectively, “Plaintiffs”) and move to strike portions contained therein.

I. Factual Background

This is an action for fraud and violations of the California Homeowners’ Bill of Rights (the “HBOR”), among other things, arising out of the foreclosure of a residential property located in Santa Clara (the “Subject Property”). According to the allegations of the operative FAC, on September 14, 2005, Plaintiffs obtained a loan from Washington Mutual Bank (“Washington Mutual”) in the amount of $650,000 (the “Loan”), which was secured by a Deed of Trust (“DOT”) against the Subject Property. (FAC, ¶ 9; see also Defendants’ Request for Judicial Notice (“RJN”), Exhibit G.) Plaintiffs allege that Washington Mutual did not assign its contractual rights with respect to the Loan to any of Defendants and Defendants are not the third party beneficiaries under the note or DOT. (Id.) On June 29, 2009, JP Morgan Chase Bank, successor in interest to Washington Mutual, assigned all beneficial interest under the DOT to Bank of America, N.A. as successor by merger to LaSalle Bank, N.A. as Trustee for Washington Mutual Bank 2005-AR14 (the “Trust”). (Id., ¶¶ 12-13; RJN, Exhibit H.) Plaintiffs allege that JP Morgan Chase is not the holder of Plaintiffs’ Note and had no legal authority to assign Plaintiffs’ interest in the DOT. (FAC, ¶ 13.)

Between 2009 and 2013, multiple Notices of Default and Notices of Trustee’s Sale were recorded against the Subject Property. (RJN, Exhibits I-N.) On March 6, 2014, SPS, as attorney-in-fact for the Trust, recorded a Substitution of Trustee substituting ALAW as Trustee of the DOT. (Id., Exhibit O.) On November 20, 205, SPS recorded a Substitution of Trustee substituting Quality Loan as Trustee of the DOT. (Id., Exhibit R.) Plaintiffs allege that this substitution is void and has no force and effect. (FAC, ¶ 15.)

On April 27, 2016, Quality Loan Service Corporation recorded a Notice of Default on the Subject Property; Plaintiffs allege that this action was illegal. (FAC, ¶ 17; RJN, Exhibit S.) Plaintiffs further allege that Quality Loan Service unlawfully recorded several Notices of Trustee’s Sale on the Subject Property that were subsequently rescinded. (Id., ¶¶ 20-22.) Plaintiffs maintain that Defendants do not have standing to foreclose on their home.

Plaintiffs seek redress from Defendants in the form of monetary damages and cancellation of written instruments based on Defendants’ alleged violations of the HBOR and failure to perfect their security interest in the Subject Property. (FAC, ¶ 24.) Based on the foregoing allegations, Plaintiffs filed the FAC on January 10, 2019, asserting claims for: (1) intentional misrepresentation; (2) negligent misrepresentation; (3) violation of Civil Code §§ 2924.12 and 2924.17(a) and (b); (4) violation of Civil Code § 3294(c)(3); (5) violations of the HBOR; (6) for treble damages; (7) cancellation of written instruments; (8) violation of Business & Professions Code § 17200 et seq.; (9) construction fraud; (10) slander of title; (11) quiet title; (12) declaratory relief; (13) injunctive relief; and (14) intentional infliction of emotional distress.

II. Procedural Background

On February 14, 2017, Plaintiffs filed a complaint in this Court (the “First Action”) alleging nearly identical allegations as those contained in the instant suit against defendants JP Morgan Chase Bank, N.A. (“Chase”), Quality Loan Service Corporation (“Quality Loan”) and the Trust. (RJN, Exhibit A.) The subsequently filed first amended complaint asserted claims against the foregoing defendants for: (1) negligence; (2) violations of the HBOR; (3) injunctive relief; (4) predatory lending practices; (5) violations of Business & Professions Code § 17200 et seq. (“UCL”); (6) constructive fraud; (7) fraudulent concealment; (8) fraud in the inducement; (9) slander of title; (10) quiet title; and (11) declaratory relief. (RJN, Exhibit B.)

On March 27, 2017, Chase removed the matter to federal court and then, along with the Trust, moved to dismiss the action. On May 10, 2017, the federal district court granted the motion to dismiss with leave to amend, and Plaintiffs subsequently filed the first amended complaint and added SPS as a defendant. (RJN, Exhibit B.) SPS and the Trust proceeded to file a second motion to dismiss. After briefing was completed on the motion but before the hearing on it took place, the district court determined that diversity jurisdiction was lacking and remanded the case to this Court.

On August 30, 2017, the defendant demurred to the first amended complaint. On November 20, 2017, the Court sustained the demurrer as to ten causes of action and struck the remaining claim for injunctive relief on its own motion. (RJN, Exhibit C.) Plaintiffs then filed a second amended complaint, to which the defendants again demurred and filed a motion to strike. (Id., Exhibits C and D.) Plaintiffs failed to oppose either motion and therefore the Court granted the motion to strike and sustained the demurrer without leave to amend. The case was then dismissed with prejudice on July 2, 2018, based on the aforementioned rulings.

Plaintiffs then initiated the instant action on August 17, 2018, less than two months after the First Action was dismissed. On October 26, 2018, Defendants filed a demurrer to the initial complaint as well as a motion to strike, asserting that this action should be dismissed as barred on res judicata grounds. Before the motions could be heard, Plaintiffs filed the FAC asserting three new claims: (1) violation of Civil Code sections 2924.12 and 2924.17; (2) violation of Civil Code section 3294, subd. (c)(3); and (3) intentional infliction of emotional distress. Defendants then filed the motions that are currently before the Court on February 14, 2019. Plaintiffs oppose both.

III. Defendants’ Requests for Judicial Notice

In support of their demurrer to the FAC and motion to strike portions contained therein, Defendants request that the Court take judicial notice of numerous items, including various versions of the complaint filed in the First Action as well as court orders sustaining Defendants’ demurrers to those pleadings (see Exhibits A-F) and records pertaining to the Subject Property, including the DOT (Exhibit G), the Assignment of the DOT (Exhibit H), several Substitutions of Trustee (Exhibits O and R) and numerous NODs (Exhibits I, K and S), Notices of Rescission (Exhibits J and Q) and Notices of Trustee’s Sale (Exhibits L, M, N, P and T). These items are all proper subjects of judicial notice as court records or facts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy. (Evid. Code, § 452, subds. (d) and (h); see Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-265, disapproved of on other grounds in Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.4th 919 [taking judicial notice of recorded property documents].) Accordingly, Defendants’ request for judicial notice is GRANTED.

Defendants’ supplemental request for judicial notice filed in support of its reply brief, which consists of court records pertaining to the removal of the First Action to federal court and then its remand to this Court, is also GRANTED. (Evid. Code, § 452, subd. (d).)

IV. Defendants’ Demurrer

Defendants demur to eleven of the fourteen causes of action asserted in the FAC on the grounds that they are barred by the res judicata doctrine. Defendants maintain that Plaintiffs are improperly attempting to relitigate claims that were dismissed in the First Action.

Res judicata, or claim preclusion, prevents relitigation of the same cause(s) of action in a second suit between the same parties or parties in privity with them. (See Branson v. Sun-Diamond Growers (1994) 24 Cal.App.4th 327, 340.) The doctrine also 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.” (Weikel v. TCW Realty Fund II Holding Co. (1997) 55 Cal.App.4th 1234, 1245.) Further, res judicata bars the litigation not only of issues that were actually litigated but also issues that could have been litigated in the prior proceeding. (Citizens for Open Government v. City of Lodi (2012) 205 Cal.App.4th 296, 324.) The elements for applying the doctrine are: (1) a claim (or issue) raised in the present action is identical to a claim (or issue) litigated in a prior proceeding; and (2) the party against whom the doctrine is being asserted was a party or in privity with a party to the prior proceeding; and (3) the prior proceeding resulted in a final judgment on the merits. (Brinton v. Bankers Pension Services, Inc. (1999) 76 Cal.App.4th 550, 556.)

“For the purposes of identifying a cause of action under the doctrine of res judicata, California has consistently applied the ‘primary rights’ theory, under which the invasion of one primary right gives rise to a single cause of action.” (Slater v. Blackwood (1975) 15 Cal.3d 791, 795.) Critically, the “cause of action” is based upon the harm suffered, as opposed to the particular theory asserted by the litigant. (Id.) “Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for relief.” (Id.)

With the foregoing in mind, Defendants persuasively argue that in the instant action, Plaintiffs seek to assert the same primary right, namely, their interest in the Subject Property, the same right they sought to vindicate in the First Action. In that action, Plaintiffs’ complaint was predicated on theories of defective securitization of Plaintiffs’ Loan resulting in Defendants’ lacking power to foreclose on Plaintiffs’ home. (RJN, Exhibits A-B.) In the instant action, despite the addition of four new claims, Plaintiffs are nonetheless again challenging Defendants’ standing to foreclose based on similar allegations. Moreover, Plaintiffs attempt to bring claims they could have asserted in the First Action, including those for fraud, cancellation of instruments and various violations of the HBOR and Civil Code. These claims are primarily predicated on alleged wrongdoing by Defendants in connection with the Subject Property that had already occurred by the time Plaintiffs’ brought the First Action in February 2017. To the extent that any post-2017 conduct is at issue in the FAC, it is based on legal theories of liability that were already rejected in the First Action (e.g., defective securitization and therefore improper assignments and/or transfers of the DOT and Note by Defendants). Thus, as Defendants suggest, nothing has materially changed between the First Action and the instant action. Accordingly, the first prong of res judicata analysis- identical claims- is met.

Next, it is clear that the second prong of the doctrine is met as Plaintiffs sued SPS and the Trust in the First Action and have again sued them in the complaint at bar. As for the remaining prong, the First Action was dismissed with prejudice after the Court sustained Defendants’ demurrer and granted their motion to strike portions of the second amended complaint, both without leave to amend. (RJN, Exhibits D and E.) A dismissal with prejudice indicates an adjudication on the merits and operates as res judicata to preclude subsequent litigation to the same extent as if the action had been tried to a final adjudication. (Long Beach Grand Prix Assn. v. Hunt (1994) 25 Cal.App.4th 1195, 1203.) Thus, the third prong- the prior proceeding resulted in a final judgment on the merits- has also been established.

Given that all three prongs are satisfied, Plaintiffs’ claims are barred by the doctrine of res judicata. Plaintiffs impliedly concede the merits of this argument by completely failing to address it in their opposition. Accordingly, Defendants’ demurrer to the first, second, third, fifth, seventh, eighth, ninth, tenth, eleventh, twelfth and fourteenth causes of action in the FAC on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

V. Defendants’ Motion to Strike

With the instant motion, Defendants’ move to strike the fourth, sixth and thirteenth causes of action of the FAC in their entirety, as well as Plaintiffs’ request for punitive damages. While it is generally true that the proper mechanism to attack an improperly pleaded claim is a demurrer and not a motion to strike (see, e.g., Quiroz v. Seventh Ave. Ctr. (2006) 140 Cal.App.4th 1256, 1281), Defendants maintain that the “causes of action” they seek to strike are not that, but rather improper requests for damages, and therefore the instant motion is appropriate. Indeed, a motion to strike is the correct instrument to address such requests. (See Caliber Bodyworks, Inc. v. Superior Court (2005) 134 Cal.App.4th 365, 884-385.) Defendants’ assertion that the “causes of action” they seek to strike are actually improper damages requests is well taken, as the fourth “cause of action” that alleges violation of the punitive damages statute merely seeks to recover such damages, the sixth only requests treble damages for violations of the HBOR asserted in the preceding cause of action and the thirteenth requests injunctive relief. Given the ruling on the demurrer, there are no claims left in the FAC that can serve as bases for Plaintiffs to recover damages and injunctive relief. Therefore, Defendants’ motion to strike is GRANTED WITHOUT LEAVE TO AMEND.