Bank of New York v. Romero , 2016 NMCA 91 ( 2016 )

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integrity of this document
New Mexico Compilation
Commission, Santa Fe, NM
'00'04- 13:58:08 2016.10.25
Certiorari Denied, September 22, 2016, No. S-1-SC-36063
IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: 2016-NMCA-091
Filing Date: July 28, 2016
Docket No. 34,426
THE BANK OF NEW YORK AS TRUSTEE
FOR POPULAR FINANCIAL SERVICES
MORTGAGE/PASS THROUGH
CERTIFICATE SERIES #2006-D,
Plaintiff-Appellant,
v.
JOSEPH A. ROMERO and MARY
ROMERO a/k/a MARY O. ROMERO
a/k/a MARIA ROMERO,
Defendants-Appellees.
APPEAL FROM THE DISTRICT COURT OF RIO ARRIBA COUNTY
Sarah M. Singleton, District Judge
Johnson Law Firm, LC
Thomas L. Johnson
Albuquerque, NM
Rose L. Brand & Associates, P.C.
Eraina M. Edwards
Albuquerque, NM
Houser & Allison, APC
Kerri L. Allensworth
Albuquerque, NM
for Appellant
Daniel Yohalem
Santa Fe, NM
1
Katherine Murray
Santa Fe, NM
Santa Fe Neighborhood Law Center
Frederick M. Rowe
Santa Fe, NM
Joshua R. Simms, P.C.
Joshua R. Simms
Albuquerque, NM
for Appellees
OPINION
SUTIN, Judge.
{1} This is the second time this case has been appealed to this Court. The first appeal
focused on whether the Bank of New York as Trustee for Popular Financial Services
Mortgage/Pass Through Certificate Series #2006-D (the Bank) had standing to bring its
foreclosure action against Joseph and Mary Romero (the Romeros). This Court’s opinion
affirming the district court’s determination that the Bank had standing was appealed to the
New Mexico Supreme Court. Our Supreme Court held that the Bank did not have standing
at the time the complaint was filed and thus reversed this Court and the district court and
“remand[ed] to the district court with instructions to vacate its foreclosure judgment and to
dismiss the Bank[’s] . . . foreclosure action for lack of standing.” Bank of N.Y. v. Romero,
2014-NMSC-007, ¶ 1, 320 P.3d 1.
{2} Upon remand, the district court vacated the final judgment and dismissed the
foreclosure action with prejudice. In this second appeal, the Bank challenges the designation
of the district court’s dismissal as being “with prejudice,” along with the district court’s
ruling that the Bank “is precluded from raising in the future the issue that it is entitled to
enforce the Romeros’ note and foreclose on the Romeros’ mortgage.” We reverse and
remand with instructions.
BACKGROUND
{3} On June 26, 2006, the Romeros executed and delivered to Equity One, Inc. an
adjustable rate note (the Note) in the principal sum of $227,240. After the Romeros defaulted
on the Note, the Bank, on April 1, 2008, filed a complaint for foreclosure. After a bench trial,
the district court entered findings of fact and conclusions of law in favor of the Bank. On
September 1, 2009, the district court entered its final judgment and order for foreclosure sale.
The Romeros appealed the judgment and order. This Court issued an opinion affirming the
district court. Bank of N.Y. v. Romero, 2011-NMCA-110, 150 N.M. 769, 266 P.3d 638, rev’d
2
by 2014-NMSC-007.
{4} The Romeros petitioned for a writ of certiorari, our Supreme Court granted the
petition, and the Court held that the Bank “did not establish its lawful standing in this case
to file a home mortgage foreclosure action.” Romero, 2014-NMSC-007, ¶ 1. And the Court
remanded to the district court “with instructions to vacate its foreclosure judgment and to
dismiss the Bank[’s] . . . foreclosure action for lack of standing.” Id.
{5} On remand, the Romeros filed a motion to vacate the final judgment and for other
relief. The district court granted the Romeros’ motion, vacated the foreclosure sale, and
ordered the Bank to “pay all property taxes due on the property[,]” “remove . . . liens,
encumbrances[,] or charges” on the property, “promptly issue a quit claim deed conveying
the property that was the subject of this foreclosure action back to [the Romeros,]” and repay
any rental fees or monies paid to the Bank or their counsel. Thereafter, the Romeros filed a
motion to dismiss the foreclosure with prejudice, arguing that the Supreme Court’s opinion
supported dismissal with prejudice and that “both res judicata and the statute of limitations
bar any subsequent attempts to collect on the accelerated Romero note and accompanying
mortgage.” The district court granted the motion and dismissed the foreclosure with
prejudice.
{6} In its order granting the motion to dismiss and dismissing the foreclosure with
prejudice, the district court stated, “it is the opinion of the [c]ourt that by reason of issue
preclusion . . . [the] Bank . . . is precluded from raising in the future the issue that it is
entitled to enforce the Romeros’ note and foreclose on the Romeros’ mortgage.” (Emphasis
added.) The court then ordered that “the [c]omplaint for [f]oreclosure is dismissed with
prejudice and the Bank . . . cannot refile a complaint to enforce the Romeros’ note and
foreclose on the Romeros’ mortgage.”
{7} On appeal, the Bank argues that the dismissal with prejudice and the district court’s
statement that the Bank “is precluded from raising in the future the issue that it is entitled
to enforce the Romeros’ note and foreclose on the Romeros’ mortgage” were in error.
{8} Although the district court referred to “issue preclusion” as the basis for its dismissal
with prejudice, we address the elements and merits of both issue and claim preclusion
because (1) the district court appears to have merged the doctrines in its order when it
dismissed the foreclosure claim with prejudice due to the Supreme Court’s decision on the
standing issue, and (2) the Romeros argued in district court and now argue on appeal that
claim preclusion may also support dismissal with prejudice. As well, the Bank argues that
the order is not supported under law of the case, claim preclusion, issue preclusion, or some
“hybrid” between the two.
DISCUSSION
I. Law of the Case
3
{9} “Whether law of the case applies, as well as how it applies, are questions of law
subject to de novo review.” State ex rel. King v. UU Bar Ranch Ltd. P’ship, 2009-NMSC-
010, ¶ 20, 145 N.M. 769, 205 P.3d 816. “The doctrine of law of the case has long been
recognized in New Mexico[.]” Ute Park Summer Homes Ass’n v. Maxwell Land Grant Co.,
1972-NMSC-018, ¶ 13, 83 N.M. 558, 494 P.2d 971. The law of the case doctrine “is a matter
of precedent and policy; it is a determination that, in the interests of the parties and judicial
economy, once a particular issue in a case is settled it should remain settled.” Trujillo v. City
of Albuquerque, 1998-NMSC-031, ¶ 40, 125 N.M. 721, 965 P.2d 305 (internal quotation
marks and citation omitted). Our Supreme Court has held that “a decision by an appeals
court on an issue of law made in one stage of a lawsuit becomes binding on subsequent trial
courts as well as subsequent appeals courts during the course of that litigation.” King, 2009-
NMSC-010, ¶ 21. When there “is any doubt or ambiguity regarding the [appellate] mandate,
the meaning of the [appellate] opinion governs.” Id. ¶ 22.
{10} The parties disagree as to whether law of the case based on the Supreme Court’s
opinion in Romero, 2014-NMSC-007, dictates a dismissal with prejudice. The Romeros
argue that the Supreme Court’s opinion “clearly demonstrates that the Supreme Court
intended that the foreclosure be dismissed with prejudice.” They argue that the Supreme
Court’s statements regarding mootness of the claim and future foreclosure attempts under
the Home Loan Protection Act (HLPA), NMSA 1978, §§ 58-21A-1 to -14 (2003, as
amended through 2009), by whichever “institution may be able to establish standing to
foreclose on the Romero home” clearly show that the Supreme Court meant to preclude the
Bank from bringing future actions. Romero, 2014-NMSC-007, ¶ 39. Conversely, the Bank
argues that the Supreme Court acknowledged its inability to reach the merits of the case and
thus anticipated that a future action may be filed by any institution, including the Bank. See
id. ¶¶ 15, 39. According to the Bank, because law of the case only applies to decisions on
the merits, it should not apply, and a dismissal with prejudice is unsupported. The Bank
points out that the Supreme Court was silent on whether the dismissal should be with or
without prejudice, but argues that the reference to future attempts should be interpreted to
mean that dismissal should be without prejudice. The Bank also argues that “changed
circumstances” of fact or law have undermined the law of the case to such an extent that
dismissing the case with prejudice would be unjust.
{11} We are not persuaded that there is clear law of the case that dictates that the Romero
Court intended, one way or the other, that the dismissal be with or without prejudice. The
Supreme Court expressed nothing from which any reasonable inference can be drawn to
support either party’s interpretation of the Court’s intent. See id. ¶ 1 (“We . . . remand to the
district court with instructions to . . . dismiss the Bank[’s] . . . foreclosure action for lack of
standing.”). Due to the Romero Court’s silence on the matter and the resulting ambiguity,
we are unable to comfortably opine as to the Supreme Court’s intent regarding the dismissal,
and we therefore address the preclusion arguments made by both sides. However, before
doing so, it is important to understand the connection between dismissals “with” or
“without” prejudice and the preclusion principles. We begin by discussing the “with” and
“without” designations that accompany dismissals and explain their impact on preclusion.
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II. Dismissal With/Without Prejudice
{12} Claim and issue preclusion are doctrines that may arise when a lawsuit is filed by the
same plaintiff against the same defendant after the same or similar lawsuit has previously
been dismissed. See, e.g., State ex rel. Peterson v. Aramark Corr. Servs., LLC, 2014-NMCA-
036, ¶¶ 1-2, 9, 321 P.3d 128 (considering the applicability of claim and issue preclusion
when a plaintiff, seeking damages because the defendant refused to provide him with a
nutritionally adequate vegetarian diet, first filed a lawsuit for breach of duty, fraud, unfair
practices, and violation of the New Mexico Religious Freedom Act, and then later filed a
Fraud Against Taxpayers Act claim based on the same or similar facts); Kirby v. Guardian
Life Ins. Co. of Am., 2010-NMSC-014, ¶¶ 59-62, 148 N.M. 106, 231 P.3d 87 (considering
whether a dismissal of the plaintiff’s first claim for wrongful denial of benefits against the
defendant precluded the plaintiff’s later action against the same defendant for enforcement
of a writ of garnishment under the doctrine of claim preclusion). Although both doctrines
may be implicated in a single case, we note that a designation of a dismissal as being “with
prejudice” is relevant in a claim preclusion analysis but not in an issue preclusion analysis.
See Pielhau v. State Farm Mut. Auto. Ins. Co., 2013-NMCA-112, ¶¶ 10-11, 314 P.3d 698
(stating that “[a] dismissal with prejudice is an adjudication on the merits only to the extent
that when a claim has been dismissed with prejudice, the . . . element of res judicata (a final
valid judgment on the merits) will be presumed . . . . We note that this rule applies to
preclude claims (claim preclusion/res judicata), but not issues (issue preclusion/collateral
estoppel)” (first omission in original) (first emphasis, internal quotation marks, and citation
omitted)); Bralley v. City of Albuquerque, 1985-NMCA-043, ¶¶ 17-18, 102 N.M. 715, 699
P.2d 646 (stating that a dismissal without prejudice is not intended to be res judicata and that
“[t]he words ‘without prejudice’ when used in an order or decree generally indicate that
there has been no resolution of the controversy on its merits and leave the issues in litigation
open to another suit as if no action had ever been brought”).
{13} When considering whether a subsequent action may be precluded on the basis of
claim preclusion, subsequent courts may reasonably look to the type of dismissal in the first
action, i.e., with or without prejudice, for guidance. Although a dismissal with prejudice does
not automatically result in claim preclusion, “when a claim has been dismissed with
prejudice, the fourth element of res judicata (a final valid judgment on the merits) will be
presumed so as to bar a subsequent suit against the same defendant by the same plaintiff
based on the same transaction.” Kirby, 2010-NMSC-014, ¶ 66 (first emphasis omitted). But
see Turner v. First N.M. Bank, 2015-NMCA-068, ¶ 8, 352 P.3d 661 (concluding that, despite
the fact the complaint was dismissed without prejudice, the dismissal constituted a judgment
“on the merits” because the complaint failed to state a cause of action and was thus “entitled
to claim preclusion effect”).
{14} All in all, although not determinative in every case, the designation of a dismissal as
“with” or “without” prejudice will generally substantially impact the viability of a plaintiff’s
future, related claim. As will be explained later in this Opinion, in this case, the district
court’s inclusion of the “with prejudice” designation on the dismissal of the Bank’s
5
foreclosure claim against the Romeros suggests a presumption that any future foreclosure
claim would be precluded under claim preclusion principles. In our view, this is problematic
insofar as the district court did not dismiss the foreclosure claim under claim preclusion
principles but rather did so under issue preclusion, which was improper.
III. Claim Preclusion
{15} Appellate courts in New Mexico review de novo whether elements for claim
preclusion have been satisfied. See Kirby, 2010-NMSC-014, ¶ 61 (stating that the standard
of review for claim preclusion is de novo). The doctrine of claim preclusion, or res judicata,
“bars re-litigation of the same claim between the same parties or their privies when the first
litigation resulted in a final judgment on the merits.” Peterson, 2014-NMCA-036, ¶ 24
(alteration, internal quotation marks, and citation omitted). “ ‘The party asserting claim
preclusion must satisfy the following four requirements: (1) the parties must be the same, (2)
the cause of action must be the same, (3) there must have been a final decision in the first
suit, and (4) the first decision must have been on the merits.’ ” Tunis v. Country Club Estates
Homeowners Ass’n, 2014-NMCA-025, ¶ 20, 318 P.3d 713 (alteration omitted) (quoting
Kirby, 2010-NMSC-014, ¶ 61). “The purpose of our application of res judicata is to protect
individuals from multiple lawsuits, to promote judicial economy, and to minimize the
possibility of inconsistent judgments.” Moffat v. Branch, 2002-NMCA-067, ¶ 14, 132 N.M.
412, 49 P.3d 673; see also Turner, 2015-NMCA-068, ¶ 6 (“Res judicata[,] i.e., claim
preclusion[,] is designed to relieve parties of the cost and vexation of multiple lawsuits,
conserve judicial resources, prevent inconsistent decisions, and encourage reliance on
adjudication.” (alteration, internal quotation marks, and citation omitted)).
{16} In the present case, the third and fourth elements have not been met by the Romeros
because there has been no adjudication on the merits of the Bank’s foreclosure claim in favor
of the Romeros, and thus claim preclusion does not apply to preclude the Bank’s foreclosure
claim. The Supreme Court determined that the Bank lacked standing and determined that due
to the lack of standing the foreclosure claim must be dismissed. Romero, 2014-NMSC-007,
¶ 1 (“We reverse the Court of Appeals and district court and remand to the district court . . .
to dismiss the Bank[’s] . . . foreclosure action for lack of standing.”). The Romeros argue
that the Supreme Court’s determination constituted an adjudication on the merits. The
Supreme Court did not, however, adjudicate the merits of the foreclosure claim. Although
the Romeros argue that “standing is an issue that is essential to get to a claim for relief” and
thus, as a threshold issue, standing can ultimately preclude a claim on the basis of claim
preclusion, we see no support for such a broad application of claim preclusion. The
Romeros’ argument circumvents the elements of claim preclusion. And, although the
appellate courts of this state have not yet evaluated whether a negative determination on
standing in the foreclosure context precludes future foreclosure claims, other courts have
held that a dismissal based on lack of standing is not an adjudication on the merits of a
foreclosure claim such that future claims are precluded. See Federal Home Loan Mortg.
Corp. v. Schwartzwald, 2012-Ohio-5017, 979 N.E.2d 1214, at ¶ 40 (“The lack of standing
at the commencement of a foreclosure action requires dismissal of the complaint; however,
6
that dismissal is not an adjudication on the merits and is therefore without prejudice.”),
overruling on other grounds recognized by Bank of N.Y. Mellon v. Grund, 2015-Ohio-466,
27 N.E.3d 555; BAC Home Loans Servicing, L.P. v. Devoll, 2011-Ohio-6607, 2011 WL
6740561, at ¶ 17 (non-precedential) (“[T]he dismissal of an action because one of the parties
is not a real party in interest or does not have standing is not a dismissal on the merits for
purposes of res judicata.”); see also Brown v. M & T Bank, 183 So. 3d 1270, 1271 (Fla. Dist.
Ct. App. 2016) (holding that the dismissal of a foreclosure action for lack of standing does
not operate as an adjudication on the merits, and “[b]ecause there has been no adjudication
on the underlying indebtedness, our dismissal has no effect on the underlying duties, rights,
or obligations of the parties” (internal quotation marks and citation omitted)).
{17} Additionally, our Supreme Court has positively cited to cases that either (1) note that
dismissal without prejudice is the proper remedy when a party fails to prove standing, or (2)
approve of allowance of subsequent lawsuits. See Deutsche Bank Nat’l Trust Co. v.
Johnston, 2016-NMSC-013, ¶ 23, 369 P.3d 1046 (citing Schwartzwald, 2012-Ohio-5017);
Deutsche Bank Nat’l Trust v. Brumbaugh, 2012 OK 3, ¶ 11, 270 P.3d 151, 154 (recognizing
“the case may be dismissed without prejudice and the action may be re-filed”); McLean v.
JP Morgan Chase Bank Nat’l Ass’n, 79 So. 3d 170, 175 (Fla. Dist. Ct. App. 2012) (stating
that if the bank had no standing at the time the complaint was filed, “the trial court should
dismiss the instant lawsuit and [the bank] must file a new complaint”); see also U.S. Bank
Nat’l Ass’n v. Kimball, 2011 VT 81, ¶¶ 22-23, 27 A.3d 1087 (upholding a dismissal with
prejudice but specifically determining that the merits of foreclosure were not litigated and
the bank “cannot be precluded from pursuing foreclosure on the merits should it be prepared
to prove the necessary elements”).
{18} During oral argument, this Court asked the Romeros to “point . . . to a single
jurisdiction that on point and definitively has held that when a lending institution fails to
demonstrate standing in a cause of action and the case is then dismissed because of that
failure . . . , [the claim is forever precluded].” In response, the Romeros stated that the Ohio
Supreme Court, in Bank of America, N.A. v. Kuchta, 2014-Ohio-4275, 21 N.E.3d 1040,
reconsideration denied, 2014-Ohio-5251, 20 N.E.3d 730, held that “a determination of
standing is accorded res judicata effect” in a foreclosure context. Additionally, the Romeros
represented to this Court that the following New Mexico cases held that “a determination of
standing is entitled to a preclusive effect”: Kimbrell v. Kimbrell, 2014-NMSC-027, 331 P.3d
915; Eastham v. Pub. Employees’ Ret. Ass’n Bd., 1976-NMSC-046, 89 N.M. 399, 553 P.2d
679; San Juan Agric. Water Users Ass’n v. KNME-TV, 2010-NMCA-012, 147 N.M. 643,
227 P.3d 612; Trujillo v. Acequia de Chamisal, 1968-NMCA-015, 79 N.M. 39, 439 P.2d
557; THI of N.M. at Las Cruces, LLC v. N.M. Human Servs. Dep’t, No. 31,588, 2013 WL
6640490, mem. op. (N.M. Ct. App. Nov. 25, 2013) (non-precedential). After reviewing these
cases, we conclude there is no support for the Romeros’ propositions in their cited case law.
{19} In Kuchta, the Ohio Supreme Court considered the homeowners’ ability to
collaterally attack a judgment in a foreclosure action by asserting lack of standing in a Rule
60(B) motion. Kuchta, 2014-Ohio-4275, ¶ 1; see Ohio Rev. Code Ann. Civ.R. 60(B) (2016).
7
The primary holding in that case was that Rule 60(B) cannot be used as a substitute for a
timely appeal, and “the doctrine of res judicata bars [the homeowners’] attempted collateral
attack against the judgment in foreclosure.” Kuchta, 2014-Ohio-4275, ¶¶ 1, 16. Importantly,
Kuchta did not hold that an appellate court’s determination of lack of standing would have
a preclusive effect on future foreclosure attempts. And, in fact, the Ohio Supreme Court
directly addressed the question of what effect a lack of standing determination would have
on a second foreclosure action and specifically held that “[t]he lack of standing at the
commencement of a foreclosure action requires dismissal of the complaint; however, that
dismissal is not an adjudication on the merits and is therefore without prejudice.”
Schwartzwald, 2012-Ohio-5017, ¶ 40.
{20} The New Mexico cases cited by the Romeros also do not support the broad
proposition offered by the Romeros that an appellate court’s ruling as to standing is entitled
to preclusive effect under claim preclusion. With the exception of Trujillo, 1968-NMCA-
015, none of the cases upon which the Romeros rely addressed the “with” versus “without”
prejudice designation of the dismissals based on standing or questioned the preclusive effect
of the dismissals. The cited cases focused on the appropriateness of the dismissals
themselves, as opposed to the designations. And as noted by the Bank in its reply brief,
Trujillo likewise does not provide support for the Romeros. The primary holding in Trujillo
was that, because the case was dismissed due to the inclusion of an improper plaintiff, there
was no disposition on the merits and thus res judicata was not applicable. 1968-NMCA-015,
¶¶ 3, 11-12, 15. The Trujillo Court held that the proper plaintiffs in the trespass claim could
proceed with their trespass claim should they decide to proceed. Id. ¶ 14. Although this
Court noted in dicta that the improper plaintiff was prohibited from proceeding with the
trespass claim in the future, that holding is of little value to the present case because the
Court provided no explanation or analysis explaining its holding. Id.
{21} In addition to asserting that case law supports precluding any future foreclosure
attempts by the Bank against the Romeros, the Romeros also argue that there are strong
public policies favoring preclusion in this case. Specifically, the Romeros state preclusion
reflects the following policies that (1) defendants not be subjected to repetitive, vexatious,
and costly lawsuits; (2) judicial resources are conserved; (3) inconsistent decisions on the
same issue are prevented; and (4) people are able to rely on the judgments of the court.1 In
regard to the policy favoring finality, the Romeros pose the question of “how many bites at
1
Despite the Romeros’ representations that these policies have been used to support
claim and issue preclusion, the cited cases indicate that the enumerated policies support
claim preclusion, not issue preclusion. See Turner, 2015-NMCA-068, ¶ 6; Cordova v.
Larsen, 2004-NMCA-087, ¶ 23, 136 N.M. 87, 94 P.3d 830; see also First State Bank v.
Muzio, 1983-NMSC-057, ¶ 9, 100 N.M. 98, 666 P.2d 777 (recognizing claim preclusion in
a default judgment context), overruled on other grounds by Huntington Nat’l Bank v. Sproul,
1993-NMSC-051, 116 N.M. 254, 861 P.2d 935; Pielhau, 2013-NMCA-112, ¶ 8 (identifying
the purposes of the claim preclusion doctrine).
8
the apple” should the Bank be given when it has had a full and fair opportunity to litigate
standing? Although we appreciate the Romeros’ concern that parties who have had an
opportunity to litigate should not have infinite proverbial “bites at the apple,” we do not
think that dismissing this case without prejudice runs afoul of our policy favoring finality
because there has been no final decision in favor of the Romeros as to the foreclosure claim,
and, additionally, relying on policy reasons underlying claim preclusion is not persuasive
absent proof of the relevant elements of the doctrine. We decline to affirm based solely on
the policy notions underlying claim preclusion.
{22} We reject the Romeros’ request that we determine the district court’s dismissal was
supported by claim preclusion, as well as issue preclusion. And we reject any suggestion that
the district court through its “with prejudice” designation appropriately, intentionally, and
effectively precluded the Bank from re-filing the foreclosure action under the doctrine of
claim preclusion. The fact is that neither the Supreme Court nor the district court on remand
addressed the merits of the foreclosure claim and no basis exists to support application of
claim preclusion to the district court’s issue preclusion dismissal.
IV. Issue Preclusion
{23} In general, “[w]e review a decision by the district court to apply or not apply the
doctrine of collateral estoppel for an abuse of discretion.” Brannock v. Lotus Fund, 2016-
NMCA-030, ¶ 7, 367 P.3d 888. However, when the facts are not in dispute, we “review de
novo the question of issue preclusion.” Ideal v. Burlington Res. Oil & Gas Co., 2010-
NMSC-022, ¶ 10, 148 N.M. 228, 233 P.3d 362. “The doctrine of issue preclusion prevents
a party from re-litigating ultimate facts or issues actually and necessarily decided in a prior
suit.” Peterson, 2014-NMCA-036, ¶ 34 (alteration, internal quotation marks, and citation
omitted). Issue preclusion, also known as collateral estoppel, bars re-litigation if the
following four elements are met: “(1) the party to be estopped was a party to the prior
proceeding, (2) the cause of action in the case presently before the court is different from the
cause of action in the prior adjudication, (3) the issue was actually litigated in the prior
adjudication, and (4) the issue was necessarily determined in the prior litigation.” Ideal,
2010-NMSC-022, ¶ 9 (internal quotation marks and citation omitted). According to Cutler
v. Hayes, 818 F.2d 879, 889 (D.C. Cir. 1987), “[p]rinciples of collateral estoppel clearly
apply to standing determinations” and a key inquiry “is whether the issue presented in the
two proceedings is substantially the same.” (Internal quotation marks and footnote citation
omitted.)
{24} In the present case, the district court’s dismissal of the Bank’s complaint “with
prejudice” on the basis of “issue preclusion” was improper because, as stated earlier, the
“with prejudice” designation goes beyond issue preclusion and effectively precludes the
entire foreclosure claim, not just the standing issue addressed by the Supreme Court. As
indicated in Section III of this Opinion, the designation of a dismissal as being “with” or
“without” prejudice typically communicates whether there has been an adjudication on the
merits and whether claim preclusion is implicated. See Kirby, 2010-NMSC-014, ¶ 66;
9
Bralley, 1985-NMCA-043, ¶ 18. To our knowledge, a “with prejudice” designation that
reflects adjudication on the merits of a claim is not to be used to communicate that a discrete
issue, but not the claim, within a case has been litigated, implicating issue preclusion. We
agree with the Bank that when the district court dismissed the action with prejudice, the
court appears to have improperly combined or mixed claim and issue preclusion doctrines
in applying issue preclusion to prevent the Bank’s foreclosure claim. We do not interpret the
Supreme Court’s ruling in Romero regarding the issue of standing as precluding the Bank
from filing a second action asserting a foreclosure claim, and we do not approve the
approach of using issue preclusion to form the basis of a dismissal of a claim. The purposes
and the elements of issue and claim preclusion are distinct, and the former should not be
used to circumvent the requirements of the latter. See Pielhau, 2013-NMCA-112, ¶¶ 10-11
(“A dismissal with prejudice is an adjudication on the merits for purposes of res
judicata. . . . We note that this rule applies to preclude claims (claim preclusion/res
judicata), but not issues (issue preclusion/collateral estoppel).”). This distinction is based
on the fact that issue preclusion requires that the issue was actually litigated and necessarily
determined in the first suit, whereas claim preclusion does not so require.” (alteration,
internal quotation marks, and citations omitted)).
{25} Further, ruling on issue preclusion at this point is premature insofar as there may be
additional facts presented or ways of evaluating the standing issue in the second case that
re-frame the issue. For its ruling, the district court necessarily speculated that different or
additional facts could or would not be pleaded in a second suit that would give rise to
standing. But changes in the law or facts may ultimately place into question the application
of issue preclusion, and the district court should not have prevented the Bank from bringing
a subsequent action based on its assumption that the facts and issues presented in the
subsequent case would be substantially the same as the facts and issues in the first case. See
Bellet v. Grynberg, 1992-NMSC-063, ¶ 14, 114 N.M. 690, 845 P.2d 784 (stating that
“changed circumstances may prevent res judicata from operating” (emphasis omitted)); State
v. Cotton Belt Ins. Co., 1981-NMSC-129, ¶ 5, 97 N.M. 152, 637 P.2d 834 (“The doctrine of
res judicata was never intended to operate so as to prevent a reexamination of the same
question between the same parties where, in the interval between the first and second
actions, the facts have materially changed or new facts have occurred[,] which may have
altered the legal rights or relations of the litigants.” (internal quotation marks and citation
omitted)); Town of Atrisco v. Monohan, 1952-NMSC-011, ¶ 22, 56 N.M. 70, 240 P.2d 216
(stating that, as applied to collateral estoppel, a “subsequent modification of the significant
facts or a change or development in the controlling legal principles may make [a prior]
determination obsolete or erroneous, at least for future purposes”). The Bank has alleged
legal and factual changes that it believes can overcome preclusion and argues that it should
have the opportunity to prove any material changes in law or fact in a second suit.2 Case law
2
As noted earlier in the background section, the district court appears to have ruled
on issue preclusion sua sponte, and thus the parties did not have the opportunity to brief
issue preclusion. If and when a second suit is filed and the parties brief issue preclusion, we
10
cited by both parties contemplates considering the merits of an issue preclusion argument
after the filing of a second suit. See Cutler, 818 F.2d at 889 (stating that the relevant inquiry
“is whether the issue presented in the two proceedings is substantially the same” (internal
quotation marks and footnote citation omitted)). Our United States Supreme Court has
specifically noted that “a court does not usually get to dictate to other courts the preclusion
consequences of its own judgment.” Smith v. Bayer Corp., 564 U.S. 299, 307 (2011)
(internal quotation marks and citation omitted). Unless and until the Bank is given a full
opportunity to argue the merits of its position regarding issue preclusion, we are concerned
that the application of issue preclusion at this point would be unfair. See Albuquerque Police
Dep’t v. Martinez, 1995-NMCA-088, ¶ 28, 120 N.M. 408, 902 P.2d 563 (“[E]ven if the
elements of collateral estoppel are otherwise met, the district court may still determine that
the application of collateral estoppel would be fundamentally unfair and would not further
the aim of the doctrine, which is to prevent endless re[-]litigation of issues.” (internal
quotation marks and citation omitted)).
{26} Because we hold that the district court’s order regarding issue preclusion was
premature, we do not consider whether the standing issue in a second case will or will not
ultimately be precluded.
CONCLUSION
{27} We reverse the district court’s dismissal of the foreclosure action with prejudice, and
we also reverse the court’s ruling that the Bank “is precluded from raising in the future the
issue that it is entitled to enforce the Romeros’ note and foreclosure on the Romeros’
mortgage.” On remand, we instruct the district court to dismiss the complaint without
prejudice.
{28} IT IS SO ORDERED.
____________________________________
JONATHAN B. SUTIN, Judge
WE CONCUR:
____________________________________
M. MONICA ZAMORA, Judge
____________________________________
note that the burden of proving that an issue is precluded falls on “[t]he party invoking the
doctrine[.]” Larsen v. Farmington Mun. Sch., 2010-NMCA-094, ¶ 9, 148 N.M. 926, 242
P.3d 493.
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J. MILES HANISEE, Judge
12