Blackwell v. Carrington Mortgage Services, LLC

Background

William Blackwell and Loretta Blackwell, proceeding without lawyers, sued Carrington Mortgage Services, LLC, Carrington Foreclosure Services, LLC, and Does 1-75. The lawsuit concerned property identified as 1914 Whitman Street, Salinas, California. The Blackwells alleged ten claims involving their mortgage and foreclosure, including fraud in concealment, constructive fraud, violation of California’s Unfair Competition Law, defamation, violations of California Civil Code sections 2924.12 and 2924.17, violations of the California Homeowners Bill of Rights, treble damages, cancellation of written instruments, slander of title, and declaratory relief.

The mortgage loan was obtained in 2006 and secured by a deed of trust on the property. The Blackwells later entered two loan-modification agreements, defaulted again, and foreclosure-related notices were recorded. Carrington Foreclosure Services was substituted as trustee in April 2024, and a new notice of default and election to sell was entered the same day.

The Blackwells had previously sued CMS and others in a Monterey County Superior Court action challenging foreclosure of the same property. That court sustained CMS’s demurrer without leave to amend, and the state action was dismissed with prejudice as to CMS.

Motion and judicial notice

Defendants moved under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal for failure to state a legally sufficient claim. The Blackwells did not timely oppose the motion, but later filed an opposition. Because defendants did not object to the late filing, the court considered it. The court also granted defendants’ unopposed request to take judicial notice of eight exhibits, including pleadings and orders from the earlier state action and recorded mortgage and foreclosure documents.

Claim preclusion

Defendants argued that claim preclusion, also called res judicata, barred all of the Blackwells’ claims. Claim preclusion prevents a party from bringing a later lawsuit based on claims that were raised or could have been raised in an earlier action. Applying California law, the court considered whether the two proceedings involved the same claim, whether the earlier proceeding ended in a final judgment on the merits, and whether the parties were the same or legally connected.

The court found that the first requirement was met because both lawsuits sought to vindicate the same primary right: freedom from foreclosure of the property based on the same deed of trust. Although the complaints included some different causes of action, the court found that both challenged the alleged wrongful foreclosure, the transfer of the deed of trust, alleged fraudulent conduct, concealment of information, and the failure to discuss alternatives before a notice of default was entered. The court concluded that all of the current claims could have been brought in the earlier state action.

The court also found a final judgment on the merits. The state court had sustained CMS’s demurrer without leave to amend for failure to state a cause of action and had dismissed the state action with prejudice as to CMS. Under the authorities the court applied, that constituted a final judgment on the merits for claim-preclusion purposes.

Finally, the court found the required identity or legal connection between the parties. The Blackwells were plaintiffs in the earlier state action, and CMS was a defendant. Carrington Foreclosure Services had not been a defendant in that action, but the court found it legally connected to CMS because it was the trustee under the deed of trust. The court therefore concluded that all three elements of claim preclusion were present.

Disposition

The court granted defendants’ motion to dismiss without leave to amend and dismissed all of the Blackwells’ claims with prejudice based on claim preclusion. It did not address defendants’ remaining arguments. The court also vacated the March 6, 2025 case-management conference as moot. Judge Beth Labson Freeman signed the order on January 22, 2025.