Thompson v. U.S. Bank National Association

Background

Debbie Alice Thompson obtained a $1,770,000 loan from Washington Mutual Bank, FA, in 2006. The loan was secured by a deed of trust on property in Monte Sereno, California. The loan was later placed into a mortgage trust. The opinion describes several recorded assignments and trustee substitutions involving the deed of trust, including a 2016 assignment to U.S. Bank National Association as trustee for the trust.

After a notice of default was recorded, the property was noticed for a trustee’s sale several times. Thompson previously filed a lawsuit challenging the assignments. In that earlier round of the case, the court dismissed her claims without leave to amend after finding that she had not stated a legally cognizable claim. Thompson later filed this action in California state court, again alleging that the assignments were void and contained false statements about interests and authority. She sought equitable relief cancelling and expunging the recorded instruments.

Defendants removed the case to federal court based on diversity and federal-question jurisdiction. Thompson moved to remand the case to state court. Defendants moved to dismiss, arguing that the claims were barred by claim preclusion, issue preclusion, judicial estoppel, and the statute of limitations.

Motion to Remand

The court denied Thompson’s motion to remand. It found that it had diversity jurisdiction because the amount in controversy exceeded $75,000 and the nondiverse defendants—California Reconveyance Company, Colleen Irby, McCarthy & Holthus, LLP, and Quality Loan Service Corporation—were nominal defendants rather than real parties in interest.

The court explained that Thompson’s complaint did not allege that those defendants had a beneficial interest in the deed of trust or had acted outside their ordinary trustee or related duties. The court therefore disregarded their citizenship for purposes of determining complete diversity. It also found that the value of the property and the rights at issue exceeded $75,000, even though Thompson sought equitable rather than monetary relief.

The court rejected Thompson’s request for abstention under the Burford doctrine. It found no evidence that California had concentrated similar title disputes in particular courts, no difficult state-law questions involving major public-policy concerns, and no likely disruption of California’s efforts to establish consistent policy. The court did not reach Defendants’ separate argument that federal-question jurisdiction also existed because it found diversity jurisdiction sufficient.

Motion to Dismiss

The court granted Defendants’ motion to dismiss without leave to amend based on res judicata, also called claim preclusion. Claim preclusion prevents a party from bringing claims that were raised, or could have been raised, in an earlier case when the earlier case ended in a final judgment on the merits and involved the same parties or parties legally connected to them.

The court found that the current claims were the same as those in Thompson’s earlier lawsuit because both challenged the same three assignments and alleged that they were defective, including an allegation that Irby lacked authority to sign the first assignment. The court treated the earlier dismissal without leave to amend as a final judgment on the merits.

The court also found sufficient legal connection between the defendants in the current case and the defendants in the earlier case because the allegations were the same and the defendants shared the same interest in the deed of trust. Thompson argued that later events, including a 2018 loan-servicing transfer and a 2019 notice of trustee’s sale, created new claims. The court rejected that argument, reasoning that those events were tied to the same previously challenged assignments.

Disposition

The court denied Thompson’s motion to remand and granted Defendants’ motion to dismiss without leave to amend. It stated that Thompson was barred from relitigating the claims, advised her not to file duplicative litigation, ordered that judgment be entered in favor of Defendants, and directed the Clerk to close the file. The order was signed by United States District Judge Edward J. Davila.