Mohanna v. Wilmington Savings Fund Society FSB

Background

Keyhan Mohanna asserted claims for wrongful foreclosure and violation of Uniform Commercial Code section 3302. He alleged that he obtained a $704,000 mortgage loan in 2005, later received a bankruptcy discharge, and was told through a 1099-C tax form that Bank of America had canceled the mortgage debt in 2013. He argued that the later foreclosure was unlawful because the lien no longer existed.

The loan and deed of trust were transferred several times. Wilmington ultimately became the beneficiary of the deed of trust. Fay Servicing, LLC serviced the loan and acted as Wilmington’s attorney-in-fact. After Mohanna’s continuing default, the property was sold through foreclosure in January 2018, and Wilmington acquired title. Wilmington later sold the property to MM Club LLC.

A related 2018 lawsuit brought by 3H Renovation Services asserted substantially similar theories: that the loan had been canceled in 2013 and that the defendants lacked authority to foreclose. That case ended with a judgment dismissing it with prejudice after the defendants’ demurrer was sustained without leave to amend.

Judicial Notice

Wilmington asked the court to take judicial notice of 33 documents, including recorded property and loan documents and records from earlier court cases. Mohanna objected that the documents were disputed and inadmissible hearsay. The court overruled the objections and granted the request because the recorded documents were official public records and the remaining documents were court records.

Motion to Dismiss

Wilmington moved to dismiss based on claim preclusion, also called res judicata; the statute of limitations; and its argument that the wrongful-foreclosure claims failed as a matter of law. Under claim preclusion, claims that were raised or could have been raised in an earlier case cannot generally be litigated again when the later case involves the same cause of action, the same parties or parties legally connected to them, and a final judgment on the merits.

The court found that the earlier lawsuit involved the same property, the same underlying theory that the loan had been canceled, and a final judgment on the merits. Although Mohanna was not named as a plaintiff in the earlier lawsuit and Wilmington was not named as a defendant, the court found the required legal connections. It determined that Wilmington was legally connected to Fay Servicing because Fay serviced the loan and initiated foreclosure proceedings for Wilmington. It also determined that Mohanna was legally connected to 3H Renovation Services because of the recorded transfers involving the property and Mohanna’s later lease and purchase option involving the property.

The court therefore held that claim preclusion barred both of Mohanna’s claims because both depended on the alleged 2013 cancellation of the loan. The court did not address Wilmington’s other arguments because claim preclusion resolved the case.

Disposition

The court’s discussion states that Mohanna’s claims must be dismissed with prejudice. Its conclusion states that Wilmington’s motion to dismiss was granted without leave to amend because any amendment would be futile. The clerk was directed to close the case.