Elwess v. Old Republic National Title Insurance Company et al

Filing 20

ORDER - IT IS ORDERED: 1. Defendants' motions to dismiss (Docs. 7 , 9 ) are granted, and this case is dismissed with prejudice. 2. The Clerk is directed to terminate this action. (See document for further details). Signed by Judge David G Campbell on 2/12/13. (LAD)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Dennis C. Elwess,

No. CV12-1956-PHX DGC
Plaintiff,

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ORDER

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v.

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Old Republic National Title Insurance
Company, Mortgage Electronic
Registration Systems, Inc., Litton Loan
Servicing, LP, and Ocwen Loan Servicing
LLC,
Defendants,

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Defendants Litton Loan Servicing LP (“Litton”), Ocwen Loan Servicing LLC

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(“Ocwen”), and Mortgage Electronic Registration Systems, Inc. (“MERS”) have filed a

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motion to dismiss Plaintiff’s complaint based on res judicata, failure to state a claim, and

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lack of standing.

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Republic”) has joined the motion. Doc. 9. The motion has been fully briefed. For the

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reasons stated below, the Court will grant the motion.1

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I.

Doc. 7.

Old Republic National Title Insurance Company (“Old

Background.

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On April 6, 2006, First Magnus Financial Corporation (“Magnus”) loaned Plaintiff

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Dennis C. Elwess $566,664. Doc. 8-1 at 1-3. Repayment of the loan was secured by real

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property located at 20298 East Poco Calle in Queen Creek, Arizona, as evidenced by a

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The requests for oral argument are denied because the parties have fully briefed
the issues and oral argument will not aid the Court’s decision. Fed. R. Civ. P. 78(b).

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deed of trust (“DOT”). Id. MERS was identified as the beneficiary under the DOT, and

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granted the authority to act as a nominee for the lender, and lender’s successors and

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assigns. Id. First American Title Insurance Company (“First American”) was designated

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as Trustee. Id. On April 8, 2009, MERS substituted Old Republic as Trustee under the

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DOT. Doc. 8-1 at 27. On August 7, 2009, Plaintiff’s Note and DOT were assigned by

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Magnus, via MERS as nominee, to The Bank of New York Mellon (“BONYM”) f/k/a

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The Bank of New York, as Trustee for the Certificateholders CWABS, Inc. Asset-Backed

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Certificates, Series 2006-09, whose address is c/o Litton Loan Servicing, LP, 4828 Loop

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Central Drive, Houston, TX 77081. Doc 8-1 at 23-25.

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Plaintiff filed for Chapter 11 Bankruptcy on July, 2, 2009. The bankruptcy was

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later converted to a Chapter 7 and ultimately dismissed when Plaintiff failed to attend the

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meeting of creditors. Doc. 8-1 at 63-64. In a related matter, on April 6, 2010, Plaintiff

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brought an adversary complaint in bankruptcy court against Defendant Litton and

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BONYM, alleging numerous causes of action including frustration of contract, denial of

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due process, and lack of standing to foreclose. In re Elwess, No. 2:10-ap-00601-SSC,

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Doc. 1. Litton’s motion to dismiss was granted with prejudice on June 29, 2010. Doc. 8-

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1 at 60-61. Plaintiff’s complaint against BONYM was dismissed without prejudice. Id.

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On July 16, 2010, Plaintiff filed a petition in the Superior Court of Arizona to,

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among other things, set aside and void a foreclosure sale, cancel his note and DOT, and

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quiet title to the property at issue in the present case. Elwess v. First Magnus Financial

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Corp., et. al., 2:10-cv-01684-NVW, Doc 1-1. Defendants in that case included Magnus,

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First American, MERS, BONYM, Litton, and “all persons unknown, claiming any legal

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or equitable right, title, estate, lien, or interest in the properly described in the complaint

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adverse to plaintiff’s title, or any cloud upon plaintiff’s title thereto.” Id. Plaintiff’s

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primary causes of action included challenging Defendants’ standing to foreclose, failure

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to provide consideration, usury, ultra vires, fraudulent inducement, and RICO violations.

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Id. at 10-18.

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The case was removed to this Court, and on November 19, 2010, the Court

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granted Litton and MERS final judgment on all claims asserted against them. 2:10-cv-

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01684-NVW, Doc 15. The Court found Plaintiff had abandoned his suit, and that “the

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suit was substantially meritless.” Id. Claims against Magnus and First American were

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dismissed without prejudice after Plaintiff failed to file proof of service. Id. at Doc. 14.

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Plaintiff filed the present complaint on June 20, 2012, alleging numerous causes of

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action including lack of standing to foreclose, fraud, conspiracy to defraud, and violation

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of numerous other state statutes. Doc. 1-1. Defendants removed the case to this Court on

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the basis of diversity jurisdiction.

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II.

Legal Standard.

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A.

Res judicata.

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“The doctrine of res judicata provides that ‘a final judgment on the merits bars

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further claims by parties or their privies based on the same cause of action.’” In re

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Schimmels, 127 F.3d 875, 881 (9th Cir. 1997) (quoting Montana v. United States, 440

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U.S. 147, 153 (1979)). Res judicata applies “whenever there is (1) an identity of claims,

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(2) a final judgment on the merits, and (3) privity between parties.” Tahoe-Sierra Pres.

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Council, Inc. v. Tahoe Reg’l Planning Agency, 322 F.3d 1064, 1077 (9th Cir. 2003)

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(quoting Stratosphere Litig. L.L.C. v. Grand Casinos, Inc., 298 F.3d 1137, 1143 n. 3 (9th

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Cir. 2002)). Identity of claims exists when two suits “arise from the same transactional

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nucleus of facts.” Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 714 (9th Cir.

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2001) (internal quotation marks and citation omitted). “Privity between parties exists

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when a party is ‘so identified in interest with a party to former litigation that he represents

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precisely the same right in respect to the subject matter involved.’” Stratosphere, 322

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F.3d at 1143 n. 3 (quoting Schimmels, 127 F.3d at 881).

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B.

Judicial Notice.

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Defendants ask the Court to take judicial notice not only of the existence of the

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submitted records, but also of the truth of their underlying facts. Doc. 7 at 3. To take

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judicial notice of prior court proceedings and the findings of that court as true, the

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evidence must satisfy the indisputability requirement of Federal Rule of Evidence 201(b).

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“A judicially noticed fact must be one not subject to reasonable dispute in that it is either

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(1) generally known within the territorial jurisdiction of the trial court or (2) capable of

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accurate and ready determination by resort to sources whose accuracy cannot reasonably

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be questioned.” Fed. R. Ev. 201(b). Courts may take judicial notice of “undisputed

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matters of public record,” but generally may not take judicial notice of “disputed facts

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stated in public records.”

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(C.D.Cal.2011) (citing Lee v. City of L.A., 250 F.3d 668, 690 (9th Cir.2001) (emphasis in

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original)).

Brown v. Am. Airlines, Inc., 285 F.R.D. 546, 551

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Although Plaintiff generally denies the validity of documents supporting

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Defendants’ ability to pursue foreclosure of the property in this case, the legitimacy of

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such documents “cannot reasonably be questioned.”

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records of the Maricopa County Recorder for both the April 8, 2009 substitution of

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trustee to Old Republic (Doc. 8-1 at 27) and the August 7, 2009 assignment of the DOT

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to BONYM. Doc. 8-1 at 23-25. Additionally, Defendants ask the Court to take judicial

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notice of documents on file with the Arizona bankruptcy court regarding proceedings

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related to the property and parties in this case. Doc. 7 at 3 n.1. Such documents, as well

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as Plaintiff’s 2010 district court lawsuit against Litton, MERS, Magnus, and First

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American, are generally known within the territorial jurisdiction of this Court.

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Defendants’ motion for judicial notice is granted.

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III.

Defendants provided official

Analysis.

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A.

Defendants Litton and Ocwen.

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This is Plaintiff’s third lawsuit against Defendant Litton regarding the East Poco

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Calle property. Plaintiff’s April 2010 adversarial lawsuit in bankruptcy court primarily

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alleged that Litton lacked standing to foreclose. In re Elwess, No. 2:10-ap-00601-SSC,

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Doc. 1. Plaintiff’s July 2010 lawsuit in this Court claimed that Litton had no authority to

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foreclose the East Poco Calle property. 2:10-cv-01684-NVW, Doc 1-1. In this case,

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Plaintiff’s primary assertion is once again that Litton has no standing to pursue

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foreclosure of the property. Doc. 1-1 at 1-4. Because the current and former lawsuits

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pertain to foreclosure proceedings on the same property, they arise from the same

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transactional nucleus of facts, and thus share identity of claims.

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On June 29, 2010, Litton’s motion to dismiss was granted with prejudice. Doc. 8-

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1 at 60-61. Moreover, Rule 41(b) of the Federal Rules of Civil Procedure provides that

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unless stated otherwise, “[a]ny dismissal . . . except one for lack of jurisdiction, improper

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venue, or failure to join a party . . . operates as an adjudication on the merits.” Thus, both

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of Plaintiff’s previous lawsuits against Litton operate as final judgments on the merits.

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Ocwen Financial Corporation, parent company of Ocwen Loan Servicing, LLC,

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acquired Litton in a cash sale on September 1, 2011. After the acquisition, Ocwen

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assumed responsibility for servicing Plaintiff’s loan. Id. As subsequent loan servicer,

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Ocwen shares the same interest as Litton did in Plaintiff’s previous lawsuits against it.

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Ocwen and Litton are in privity.

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Plaintiff argues that res judicata should not apply because “the issues and the

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parties [in the present action] are not totally the same [as those in his previous lawsuits].”

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Doc. 16 at 4. As discussed above, however, Defendants Ocwen and Litton are the same

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as, or in privity with, Defendants in Plaintiff’s previous lawsuits. Additionally, res

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judicata bars all claims “which could have been asserted, whether they were or not, in a

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prior suit between the same parties (or their privies) on the same cause of action, if the

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prior suit concluded in a final judgment on the merits.” Ross v. Int’l Bhd. of Elec.

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Workers, 634 F.2d 453, 457 (9th Cir.1980).

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Plaintiff’s claims against Ocwen and Litton are barred by res judicata. The Court
will grant their motion to dismiss.

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B.

Defendant MERS.

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MERS was a named party in Plaintiff’s 2010 lawsuit in this Court. Judgment was

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entered in favor of MERS on all claims asserted by Plaintiff in that case. 2:10-cv-01684-

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NVW, Doc. 15. The Court will grant MERS’s motion to dismiss based on res judicata.

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C.

Defendant Old Republic.

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In addition to the arguments raised above by Ocwen, Litton, and MERS, Old

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Republic argues that, as a foreclosure trustee, it is not a proper party to the lawsuit. Doc.

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9 at 2-3. Old Republic cites A.R.S. § 33–807(E), which provides that a “trustee need

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only be joined as a party in legal actions pertaining to a breach of the trustee’s obligations

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under this chapter or under the deed of trust . . . . If the trustee is joined as a party in any

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other action, the trustee is entitled to be immediately dismissed and to recover costs and

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reasonable attorney fees from the person joining the trustee.”

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To receive the benefit of this statute, a trustee must show: (1) the trustee has been

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named as a defendant in the claim, (2) the claim relates to the authority of the trustee to

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act, given to the trustee either by the trust deed or Arizona statutes regulating trust deeds,

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and (3) the claims do not allege that the trustee breached any of his or her obligations that

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arise under either the deed of trust or the chapter of the Arizona Revised Statues that

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regulates deeds of trust. Puzz v. Chase Home Finance, LLC, 763 F. Supp. 2d 1116, 1125

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(D. Ariz. 2011).

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All three elements are satisfied in this case. Old Republic has been named as a

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Defendant and the claim relates to the authority of Old Republic to act because of alleged

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irregularities with the deed of trust. Doc. 1-1. The claim does not allege that Old

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Republic has breached any of its duties under the DOT or Arizona Revised Statutes.

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Although Plaintiff claims Old Republic is in violation of A.R.S. § 33-404(C) for failing

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to file a notice of change of beneficiary with the county recorder, his claim is misplaced.

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Doc 1-1 at 2-3. A trustee under a deed of trust is exempt from the filing requirement.

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A.R.S. § 33-404(G). Old Republic’s motion to dismiss is granted, and it is entitled to file

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a motion for recovery of costs and reasonable attorney fees.

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D.

Dismissal with Prejudice.

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Pro se Plaintiffs should be granted leave to amend if the defects in their claims can

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be cured by re-pleading. The defects in this case – res judicata and statutory immunity –

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cannot be cured by re-pleading. The Court therefore will grant the motions to dismiss

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with prejudice.

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IT IS ORDERED:

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Defendants’ motions to dismiss (Docs. 7, 9) are granted, and this case is
dismissed with prejudice.

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The Clerk is directed to terminate this action.

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Dated this 12th day of February, 2013.

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