Filed 6/22/20 Kling v. Bank of America CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

MARIA D. KLING,

Plaintiff and Appellant,

v.

BANK OF AMERICA, N.A.,

Defendant and Respondent.

E072083

(Super.Ct.No. CIVDS1811882)

OPINION

APPEAL from the Superior Court of San Bernardino County. John M. Tomberlin, Judge. Affirmed.

J. Wright Law Group and Jamie Wright for Plaintiff and Appellant.

Severson & Werson, Kerry W. Franich and Jan T. Chilton for Defendant and Respondent.

Plaintiff and appellant Maria D. Kling defaulted on her home loan, and the residence located on Glendale Avenue in Hesperia (the property) was sold at a nonjudicial foreclosure. She appeals from a judgment entered after the trial court sustained defendant and respondent Bank of America, N.A.’s (BANA) demurrer to Kling’s first amended complaint (the FAC) without leave to amend. We conclude, as did the trial court, that Kling’s action is barred by the doctrines of res judicata and collateral estoppel, and we affirm.

I. PROCEDURAL BACKGROUND AND FACTS

In December 2006, Kling obtained a loan from Countrywide Bank, N.A., secured by a deed of trust encumbering the property. In 2010, Kling “experienced a financial hardship and a decrease in income that led to her being unable to make the scheduled payments and the debt fell into default.” In 2011, the deed of trust was assigned to BANA. In 2013, a notice of default was recorded against the property.

A. Kling’s First Civil Action.

On April 16, 2013, Kling initiated her first civil action against BANA (as successor in interest to Countrywide Bank, N.A., and Wells Fargo Bank, as Trustee for Harborview Mortgage Loan Trust 2007-1, Mortgage Pass-through Certificates Series 2007-1) in the United States District Court for the Central District of California, case No. 2:13-cv-02648-DSF-CW (Kling I). She alleged there was no enforceable deed of trust on the property, defendant had no interest in the loan, and securitization of her loan somehow rendered it unenforceable; and she did not have to pay on the deeds that form the basis of the action. BANA successfully moved for summary judgment. The federal district court concluded BANA “provided evidence that it had an interest in the note and the authority to foreclose.” Judgment was entered in BANA’s favor on July 8, 2014, and Kling did not appeal.

B. Kling’s Second Civil Action.

During the pendency of Kling’s federal action, BANA substituted Clear Recon Corp. as the new trustee under the deed of trust. On November 14, 2014, Kling initiated her second civil action in San Bernardino County Superior Court against Countrywide Bank, N.A., and Countrywide Bank, FSB, to quiet title to the property. She asserted that she had executed a first trust deed in December 2006 and a second one in September 2007; however, “there is no holder of any valid ‘Deed of Trust’ as claimed herein and that no Party herein can establish that they are the valid holder of any ‘Deed of Trust’ whatsoever.” On January 8, 2015, BANA answered the complaint, alleging it was the successor by merger to Countrywide Bank, N.A., and successor by merger to Countrywide Bank, FSB, (erroneously sued as Countrywide Bank, N.A., and Countrywide Bank, FSB) and then successfully moved for judgment on the pleadings on the grounds the action was barred by res judicata. Kling appealed, and this court affirmed the judgment in July 2016. (Kling v. Bank of America, N.A., (July 19, 2016, E063835) (Kling II).)

In July 2017, a trustee’s sale was held, and the property was conveyed to PAL Holdings, LLC, by a trustee’s deed upon sale.

C. Kling’s Third Civil Action.

On May 15, 2018, Kling initiated this (her third) action against BANA. Kling alleges BANA acquired her debt while the loan on the property was in default; however, since BANA has no interest in the loan, deed of trust, or property, the foreclosure constituted an unfair debt collection practice. Based on this allegation, Kling asserts claims for (1) wrongful foreclosure, (2) intentional infliction of emotional distress, (3) violation of the California Homeowner Bill of Rights (Civ. Code, §§ 2924.17 & 2924), (4) violation of the Rosenthal Fair Debt Collection Practices Act (the Rosenthal Act) (Civ. Code, § 1788 et seq.), (5) violation of Civil Code section 2934a, which governs the substitution of trustees, and (6) unfair business practices (Bus. & Prof. Code, § 17200). On November 15, 2018, the trial court sustained BANA’s demurrer to the FAC without leave to amend, and judgment was entered accordingly.

II. DISCUSSION

A. Standard of Review.

“‘Our standard of review of an order sustaining a demurrer is well settled. We independently review the ruling on demurrer and determine de novo whether the complaint alleges facts sufficient to state a cause of action. [Citation.] In doing so, we “give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] Further, we treat the demurrer as admitting all material facts properly pleaded, but do not assume the truth of contentions, deductions or conclusions of law.”’” (Bocanegra v. Jakubowski (2015) 241 Cal.App.4th 848, 853.)

B. Res Judicata and Collateral Estoppel.

Kling maintains the trial court abused its discretion in sustaining BANA’s demurrer on the grounds her causes of action are barred by principles of res judicata or collateral estoppel. She asserts the FAC alleges causes of action that were not, and could not have been, included in her prior actions because her prior actions “did not allege violations of the Rosenthal [Act].” We disagree.

1. Applicable legal principles.

“‘Res judicata’ describes the preclusive effect of a final judgment on the merits. Res judicata, or claim preclusion, prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them. Collateral estoppel, or issue preclusion, ‘precludes relitigation of issues argued and decided in prior proceedings.’ [Citation.] Under the doctrine of res judicata, if a plaintiff prevails in an action, the cause is merged into the judgment and may not be asserted in a subsequent lawsuit; a judgment for the defendant serves as a bar to further litigation of the same cause of action. [¶] A clear and predictable res judicata doctrine promotes judicial economy. Under this doctrine, all claims based on the same cause of action must be decided in a single suit; if not brought initially, they may not be raised at a later date. ‘“Res judicata 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.”’ [Citation.] A predictable doctrine of res judicata benefits both the parties and the courts because it ‘seeks to curtail multiple litigation causing vexation and expense to the parties and wasted effort and expense in judicial administration.’” (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896-897, fn. omitted.)

Res judicata applies “only if (1) the decision in the prior proceeding is final and on the merits; (2) the present action is on the same cause of action as the prior proceeding; and (3) the parties in the present action or parties in privity with them were parties to the prior proceeding.” (Zevnik v. Superior Court (2008) 159 Cal.App.4th 76, 82.) The doctrine bars a claim that could have been brought in the prior suit, “whether or not it was actually asserted or decided.” (Ivanoff v. Bank of America, N.A. (2017) 9 Cal.App.5th 719, 727.)

A judgment of dismissal following the sustaining of a demurrer without leave to amend “may be on the merits” for the purposes of res judicata, if the elements of res judicata are satisfied. (Ojavan Investors, Inc. v. California Coastal Com. (1997) 54 Cal.App.4th 373, 383-384; Goddard v. Security Title Ins. & Guarantee Co. (1939) 14 Cal.2d 47, 52 [judgment given after the sustaining of a general demurrer on a ground of substance (absolute defense is disclosed by the allegations) or failure of the allegations to establish a cause of action “may be deemed a judgment on the merits, and conclusive in a subsequent suit”].)

2. Analysis.

a. The elements of res judicata are met in this case.

The first element considers whether the prior action was final and on the merits. Here, Kling’s first action filed against BANA alleged the foreclosure of the property was wrongful and, among other things, sought to set aside the trustee’s sale and cancel the trustee’s deed. The federal district court granted summary judgment in favor of BANA on the grounds “it had an interest in the note and the authority to foreclose.” Therefore, the judgment in Kling I was on the merits. Moreover, Kling’s failure to timely appeal the district court’s order granting summary judgment resulted in the judgment becoming final. (Browder v. Director, Dep’t of Corrections (1978) 434 U.S. 257, 264.) For purposes of res judicata, a federal judgment is binding on the state court. (Estate of Hilton (1988) 199 Cal.App.3d 1145, 1168.)

In Kling II, Kling sued BANA in state court to quiet title to the property on the grounds “there is no holder of any valid ‘Deed of Trust’ as claimed herein and that no Party herein can establish that they are the valid holder of any ‘Deed of Trust’ whatsoever.” BANA successfully moved for judgment on the pleadings on the grounds the action was barred by res judicata (Kling I) and this court affirmed, issuing the remittitur on September 21, 2016. The judgment in Kling II was “on the merits.” (Association of Irritated Residents v. Department of Conservation (2017) 11 Cal.App.5th 1202, 1220 [“‘A judgment is on the merits for purposes of res judicata “if the substance of the claim is tried and determined . . . .” [Citation.]’ [Citation.] This may include a judgment of dismissal following a general demurrer or a dismissal motion if the disposition was plainly reached ‘on a ground of substance.’”].)

Accordingly, the federal court judgment in Kling I and the state court judgment in Kling II provide a bar to Kling’s current claims against BANA.

The second element addresses whether plaintiff has asserted the same primary right in each of the actions. “To determine whether two proceedings involve identical causes of action for purposes of claim preclusion, California courts have ‘consistently applied the “primary rights” theory.’” (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 797.) Under this theory, “[t]he 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. at p. 798.) Therefore, “[w]hen two actions involving the same parties seek compensation for the same harm, they generally involve the same primary right.” (Ibid.)

Here, Kling’s primary right at stake in her prior actions was recovery (monetary or otherwise) for the loss of the property through nonjudicial foreclosure. In her prior actions, Kling contended BANA had no interest in the property and is “fraudulently enforcing a debt obligation.” She sought compensatory damages and an order removing BANA’s interest from the property’s title. In the instant FAC, Kling alleges that BANA has committed substantially the same wrongdoings with respect to the property and the deed of trust, and she seeks the same compensation, albeit under the guise of different claims—violation of the Rosenthal Act and other California statutes, wrongful foreclosure, and intentional infliction of emotional distress. Although the FAC asserts new factual allegations occurring after her prior actions were deemed final, the gravamen of her current claims is dependent on the illegality of the deed of trust and BANA’s wrongful actions, issues that were resolved on the merits in Kling I. These claims all boil down to the same “primary right”: plaintiff’s attempt to seek relief for defendant’s conduct with respect to her mortgage and the foreclosure process.

The final element requires that the prior suit be between the same parties or parties in privity with them. Here, both Kling and BANA were parties to all previous actions, as well as the current litigation. Therefore, they are the same parties.

 

b. Kling’s attempt to evade res judicata fails.

Kling claims res judicata does not apply because she alleged new facts that arose after her prior actions (which did not assert claims under the Rosenthal Act), and her “Rosenthal Act claims were subject to a one-year statute of limitations. [(Civ. Code, § 1788.30, subd. (f).)] Based purely on the statutory requirement of one-year, [she asserts her] FAC could not be subject to res judicata.” She also asserts “[t]here is nothing within the statute itself that states res judicata applies or can be applied.”

Kling misreads the doctrine of res judicata. It is a common law principle and its application does not depend on whether a statute incorporates the doctrine. Nor does the fact her Rosenthal Act claims would now be time-barred preclude application of res judicata, which perhaps explains Kling’s failure to cite any authority for this assertion. Moreover, her assertion of the “continuing violation doctrine” is misplaced. Kling maintains the “continuing pattern and course of conduct in violation of the Rosenthal Act, as opposed to unrelated discrete acts,” constitutes a continuing violation, which somehow prevents application of res judicata principles to that cause of action. However, “[a] continuing violation is occasioned by continual unlawful acts, not by continual ill effects from an original violation.” (Ward v. Caulk (9th Cir. 1981) 650 F.2d 1144, 1147 [res judicata precluded direct suit under the 14th Amendment and other amendments where defendant was amenable to suit under 42 U.S.C. § 1983, notwithstanding fact that plaintiff failed to avail himself of § 1983].) Where “[d]istinct conduct is alleged only in the limited sense that every day is a new day, so doing the same thing today as yesterday is distinct from what was done yesterday,” the doctrine of collateral estoppel bars a subsequent claim. (In re Dual-Deck Video Cassette Recorder Antitrust Litigation (9th Cir. 1993) 11 F.3d 1460, 1464.)

c. The FAC’s claims fail on the merits.

Even if some of Kling’s claims were not barred by res judicata or claim preclusion, they fail on the merits.

Regarding her wrongful foreclosure cause of action, she alleges the substitution of trustee was “invalid because it was executed by [BANA] who failed to have authority pursuant to Civil Code § 2934a(a)(1)(A)(C).” However, the substitution of trustee was recorded and, once recorded, it is conclusive evidence that the substituted trustee or its agents had the authority to act. (Civ. Code, § 2934a, subd. (d) [“[a] trustee named in a recorded substitution of trustee shall be deemed to be authorized to act as the trustee under the . . . deed of trust for all purposes from the date the substitution is executed . . . .”]; Rossberg v. Bank of America, N.A. (2013) 219 Cal.App.4th 1481, 1495.)

Regarding her cause of action for intentional infliction of emotional distress, Kling alleges it “is extreme and outrageous” for BANA to enforce the “power of sale contained in [her] Deed of Trust without the legal right or ability to do so,” and thus she has suffered “severe emotional distress” including “depression, loss of sleep, anxiety, fear, embarrassment, humiliation, and fear.” We agree BANA’s “actions in its own interest are circumscribed in scope and may not be undertaken in an impermissible manner.” (Kruse v. Bank of America (1988) 202 Cal.App.3d 38, 67.) However, insofar as the claim for emotional distress is based on the same conduct alleged to support Kling’s claims in Kling I and Kling II, she is unable to allege any facts showing that BANA acted in an illegal or impermissible fashion because the decisions in her prior actions concluded otherwise. Moreover, “[a] party is not subject to liability for infliction of emotional distress when it has merely pursued its own economic interests and properly asserted its legal rights.” (Kruse v. Bank of America, at p. 67.)

d. No abuse of discretion in denying leave to amend.

To the extent Kling argues the trial court abused its discretion in denying her leave to amend, we reject her argument. The facts are the facts, and Kling makes no representation that she has further facts to plead in order to state a cause of action. Rather, she maintains she has stated her causes of action. (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 273-274 [no abuse of discretion to deny leave to amend where there is no reasonable possibility that plaintiff can cure the defect], overruled in part on other grounds by Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 939.)

III. DISPOSITION

The judgment is affirmed. Appellant shall bear the costs of appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

McKINSTER

Acting P. J.

We concur:

CODRINGTON

J.

FIELDS

J.