Davis et al v. BAC Home Loans Servicing, LP et al

Filing 25

ORDER granting 6 Motion to Dismiss for Failure to State a Claim. IT IS HEREBY ORDERED Bank of America's motion to dismiss is GRANTED and this action is DISMISSED. Signed by Magistrate Judge Jeremiah C. Lynch on 6/10/2016. (ELL, ) Modified on 6/10/2016 Cpy mailed to pro se plaintiffs (ELL, ).

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BUTTE DIVISION
CARL E. DA VIS and
COLLEEN R. DAVIS,

CV 16-7-BU-JCL

Plaintiffs,

ORDER

vs.
BAC HOME LOANS SERVICING, LP,
f/k/a COUNTRYWIDE HOME LOANS,
INC., and UNNAMED DOES 1-100,
Defendants.
Before the Court is Defendant BAC Home Loans Servicing, LP, f/k/a
Countrywide Home Loans, Inc.'s Fed. R. Civ. P. 12(b)(6) motion to dismiss
Plaintiffs Carl and Colleen Davis's complaint. For the reasons discussed, the
Court deems it appropriate to grant the motion, and dismiss this action.

I.

Introduction
On February 8, 2006, Plaintiff Carl Davis obtained a loan from Countrywide

Home Loans, Inc. as memorialized in a Note he signed that date. Carl and Colleen
Davis secured the loan with a Deed of Trust they each signed. The Deed of Trust
pledged real property that the Davises own in Gallatin County, Montana, to secure
the loan. The Davises attached a copy of the Note and the Deed of Trust to their
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complaint filed in this action.
In 2008, Bank of America became the successor, by merger, to Countrywide
Home Loans, Inc.'s interests under the Note and the Deed of Trust, thereby
making Bank of America the lender and beneficiary under the subject loan
documents. 1 In 2010, an assignment was executed and recorded, on behalf of the
lender and beneficiary, purportedly assigning all beneficial interest under the Deed
of Trust, and all rights under the Note, to U.S. Bank. (Doc. 8-1 at 2 of279.)
The Davises allege, however, that in 2009, prior to the referenced
assignment, they sent notices to Countrywide Home Loans, Inc. and Bank of
America which stated that, in accordance with provisions of the Federal Truth in
Lending Act at 15 U.S.C. § 1635, they rescinded their loan transaction
memorialized in the Note and the Deed of Trust. The Davises allege Bank of
America did not contest, dispute, or otherwise challenge their rescission within the
applicable time frame prescribed under the Truth in Lending Act. Thus, they
allege they successfully rescinded the transaction.
Nonetheless, Bank of America continued to pursue collection of the debt
from the Davises. Specifically, it commenced foreclosure proceedings against the

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The Court will refer to Defendant BAC Home Loans Servicing, LP, fi'k/a
Countrywide Home Loans, Inc. as "Bank of America" in this Order.
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Davises and their real property that was subject to the Deed of Trust.
Based on their asserted rescission, the Davises commenced this declaratory
judgment action to confirm that their loan transaction with Bank of America was
rescinded in 2009. Specifically, they request the Court establish that (1) they hold
title to the subject real property, (2) all documents executed by Bank of America
relative to the real property after the 2009 rescission are void, and (3) all claims,
foreclosures, and foreclosure lawsuits asserted by Bank of America after the 2009
rescission are void. The Davises further request a permanent injunction barring all
future claims and debt collection efforts by Bank of America against them. (Doc.
1 at 9.)

But previously, in 2010, and in response to Bank of America's foreclosure
efforts, the Davises had commenced an action in state district court identified as

Davis v. BAC Home Loans Servicing, LP flk/a Countrywide Home Loans, Inc. et

al., Case No. DV 10-544C, filed in the Montana Eighteenth Judicial District
Court, Gallatin County. (See Doc 8-1.) In that action the Davises advanced
claims against Bank of America challenging its procedures and efforts to foreclose
on the subject real property, and alleging it was liable for fraud and for violations
of the federal Real Estate Settlement Practices Act, 12 U.S.C. § 2601 et seq. in
connection with the loan transaction and foreclosure proceedings. The Davises
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sought compensatory damages, and a declaratory judgment as to the "validity of
the loan, [ ... and] Deed of Trust," and a declaration that "the transaction between
[the Davises] and Bank" was void. (Doc. 8-1at13 of279.) Ultimately, however,
all of the Davises' claims in that state court action were dismissed with prejudice.
(Doc. 8-1at63-70 of279, and 260-268 of279.)

II.

Applicable Law
A motion to dismiss under Fed. R. Civ. P. 12(b)(6) for failure to state a

claim upon which relief can be granted "tests the legal sufficiency of a claim."
Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). A dismissal for failure to
state a claim under Rule 12(b)(6) is proper ifthere is a "lack ofa cognizable legal
theory or the absence of sufficient facts alleged under a cognizable legal theory."
Balistreri v. Pacifica Police Department, 901 F.2d 696, 699 (9th Cir. 1990). To
survive a motion to dismiss, a plaintiff's complaint must have sufficient facts "to
state a facially plausible claim to relief." Shroyer v. New Cingular Wireless
Services, Inc., 622 F .3d 1035, 1041 (9'h Cir. 20 I 0). The court accepts all factual
allegations in the complaint as true and construes the pleadings in the light most
favorable to the plaintiff. Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005).
Conclusory allegations and unwarranted inferences, however, are insufficient to
defeat a motion to dismiss. Johnson v. Lucent Techs. Inc., 653 F .3d 1000, 1010
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(9th Cir. 2011 ).
Because the Davises are proceeding pro se the Court must construe their
pleading liberally, and the pleading is held "to less stringent standards than formal
pleadings drafted by lawyers[.]" Haines v. Kerner, 404 U.S. 519, 520 (1972). See

also Neitzke v. Williams, 490 U.S. 319, 330 n.9 (1989).

III.

Discussion
Bank of America moves to dismiss the Davises' complaint on the ground,

inter alia, that this action is barred under the doctrine of res judicata due to the
Davises' prior state court case. For the reasons discussed, the Court agrees.

It is well-established that a federal court must give a state court judgment
the same preclusive effect that the judgment would be given by the courts of the
State in which the judgment was rendered. Allen v. McCurry, 449 U.S. 90, 96
(1980); Mackv. Kuckenmeister, CPA, MST, 619 F.3d 1010, 1016 (9th Cir. 2010).
This rule ofinterjurisdictional preclusion arises from the provisions of28 U.S.C. §
1738 which state, in relevant part, as follows:
[J]udicial proceedings[ ... ] shall have the same full faith and credit in every
court within the United States [... ] as they have by law or usage in the courts
of such State[ ... ] from which they are taken.
28 U.S.C. § 1738. See Noel v. Hall, 341 F.3d 1148, 1159 (9th Cir. 2003). Thus, in
considering the preclusive effect of a state court judgment, section 173 8 requires
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federal courts to apply the law of res judicata as adopted by the State from which
the subject judgment emerged. Adam Bros. Farming, Inc. v. County of Santa

Barbara, 604 F.3d 1142, 1148 (9th Cir. 2010).
The doctrine of res judicata in Montana provides that "a final judgment on
the merits of an action precludes the parties or their privies from relitigating
claims that were or could have been raised in that action." Brilz v. Metropolitan

General Ins. Co., 285 P.3d 494, 499 (Mont. 2012). "The doctrine is premised on
the policy that there must be some end to litigation." Wiser v. Montana Board of

Dentistry, 251P.3d675, 676 (Mont. 2011).
Specifically, res judicata is applicable where the following circumstances
exist:
(1) the parties or their privies are the same in the first and second actions;
(2) the subject matter of the actions is the same; (3) the issues are the same
in both actions, or are ones that could have been raised in the first action,
and they relate to the same subject matter; (4) the capacities of the parties
are the same in reference to the subject matter and the issues between them;
and (5) a valid final judgment has been entered on the merits in the first
action by a court of competent jurisdiction.

Brilz, 285 P.3d at 501. For the reasons discussed, the Court concludes these
elements are satisfied in this case.
Carl and Colleen Davis sued BAC Home Loans Servicing, LP, f/k/a
Countrywide Home Loans, Inc. in both their prior state court action, and in this

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action. And the Davises have prosecuted both this action and their prior action in
their capacities as the borrowers and grantors under the Note and Deed of Trust,
and in each case they advanced claims against BAC Home Loans Servicing in its
capacity as the lender, beneficiary, and creditor on the Note and Deed of Trust.
The subject matter of this action and the subject matter of the Daviscs' prior
state court action are the same. In each action the Davises have challenged the
continuing validity of the Note and Deed of Trust, and have argued those
transaction documents are void for various legal reasons. In each action the
Davises have challenged Bank of America's authority to foreclose on the real
property that is the subject of the Deed of Trust.
Next, the issues are the same in each of the Davises' two actions, or at least
the cases involve legal issues that could have been raised in the two actions, all of
which relate to the same subject matter. Although the Davises now advance a new
legal claim for rescission under the Truth in Lending Act which they did not
specifically plead in their prior state court action, the doctrine of res judicata is
sufficiently broad to preclude claims that they could have brought in that prior
action. Because res judicata operates to bar claims that a party already had an
"opportunity" to litigate, the doctrine "bars not only issues that were actually
litigated, but also those that could have been litigated in a prior proceeding."

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Wiser, 251 P.3d at 679 (emphasis in original) (quoting State ex rel. Harlem
Irrigation District v. Montana Seventeenth Judicial District Court, 894 P.2d 943,
946 (Mont. 1995)). Thus, for purposes ofresjudicata, finality is accorded to a
judgment entered "as to all issues which could have been properly raised
irrespective of whether the particular matter was in fact litigated." Hall v.

Heckerman, 15 P.3d 869, 872 (Mont. 2000) (citation and quotation omitted).
Here, as a matter of law, the Davises could have advanced their rescission
claim under the Truth in Lending Act in their prior state court action. The state
and federal courts have concurrent jurisdiction over claims under the Truth in
Lending Act. 15 U.S.C. § 1640(e). In particular, state courts have concurrent
jurisdiction over rescission claims under section 163 5 of the Act. Caligiuri v.

Columbia River Bank Mortgage Group, 2007 WL 1560623, *4 (D. Or. 2007); and
Blake v. Wells Fargo Bank, NA., 917 F. Supp. 2d 732, 738 (S.D. Ohio 2013).
Thus, the Davises' section 1635 rescission claim predicated upon a 2009
rescission is one which they could have litigated previously in their 2010 state
court action. See Caligiuri, at *4 (concluding borrower's subsequent rescission
claim against lender in federal court was barred by res judicata due to borrower's
prior state court action challenging lender's foreclosure efforts).
Finally, the state court's decision on the Davises' prior state court action is
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deemed a final judgment. That action was dismissed with prejudice, and absent an
appeal of that decision the dismissal is a final judgment. See In re Marriage ol

Schoenthal, 106 P .3d 1162, 1165 (Mont. 2005). Bank of America asserts the
judgment dismissing the Davises' state court claims was final, and the Davises do
not contend otherwise.
IV.

Conclusion
Based on the foregoing, the Davises' rescission claim under 15 U.S.C. §

1635 advanced in this action is barred under the doctrine of res judicata.
Therefore, IT IS HEREBY ORDERED Bank of America's motion to dismiss is
GRANTED, and this action is DISMISSED.
DATED this 10th day of June, 2016.

~c~

ereIDiahC:Lynch
United States Magistrate Judge

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