Hansen v. Bank of New York Mellon , 2013 UT App 132 ( 2013 )

2013 UT App 132_________________________________________________________
THE UTAH COURT OF APPEALS
KRIS HANSEN,
Plaintiff and Appellant,
v.
THE BANK OF NEW YORK MELLON AND MARLON L. BATES,
Defendants and Appellees.
Memorandum Decision
No. 20120010‐CA
Filed May 23, 2013
Fifth District, St. George Department
The Honorable G. Rand Beacham
No. 110500249
Adam D. Ford and Matthew B. Crane, Attorneys
for Appellant
Joseph A. Skinner, Attorney for Appellee
Marlon L. Bates
Stephen C. Tingey and Elaina M. Maragakis,
Attorneys for Appellee The Bank of New York
Mellon
JUDGE STEPHEN L. ROTH authored this Memorandum Decision,
in which JUDGES GREGORY K. ORME and JAMES Z. DAVIS
concurred.
ROTH, Judge:
¶1 Plaintiff Kris Hansen appeals the district court’s decision to
grant the respective motions to dismiss filed by Defendants The
Bank of New York Mellon (the Bank) and Marlon L. Bates on the
basis that Hansen’s claims are barred by res judicata. We affirm.
¶2 In 2006, Hansen executed a deed of trust on certain property,
naming Mortgage Electronic Registration Systems, Inc. (MERS) as
Hansen v. Bank of New York Mellon
beneficiary. In May 2010, the Bank, purporting to act as the
beneficiary under the trust deed, executed and recorded a
Substitution of Trustee, naming Bates as a trustee. That same
month, Bates, acting as trustee, initiated nonjudicial foreclosure
proceedings against Hansen’s property on the Bank’s behalf by
executing and recording a Notice of Default.
¶3 In August 2010, Hansen filed a federal lawsuit against the
Bank, MERS, and others, attempting to prevent the Bank from
foreclosing on his property. In the federal lawsuit, Hansen
requested declaratory relief, claiming that the defendants,
including the Bank, “did not own a legal interest in [his] property
due to the illegal securitization of [his] . . . mortgage loan.” In
November 2010, the federal lawsuit was dismissed with prejudice.
¶4 In October 2010, MERS assigned the beneficiary’s interest in
the trust deed to the Bank and recorded the assignment. The
assignment occurred after the Substitution of Trustee and Notice
of Default had been executed and recorded in May 2010, and after
Hansen had filed the federal lawsuit in August 2010, but before the
federal lawsuit was dismissed in November 2010. Hansen filed the
complaint in the case before us in January 2011. In his complaint,
Hansen alleged claims of fraud, negligent misrepresentation,
breach of the covenant of good faith and fair dealing, and improper
execution of foreclosure proceedings. The theory underlying
Hansen’s claims is that the Bank and Bates acted without authority
in initiating foreclosure proceedings on his property in May 2010
because the Bank was not assigned the beneficiary’s interest in the
deed of trust until October 2010. On Defendants’ motions, the
district court dismissed Hansen’s claims with prejudice, concluding
that they were barred by res judicata as a result of the dismissal of
the federal suit.
¶5 “The doctrine of res judicata embraces two distinct branches:
claim preclusion and issue preclusion.” Mack v. Utah State Dep’t of
Commerce, 2009 UT 47, ¶ 29, 221 P.3d 194 (citation and internal
20120010‐CA 2 2013 UT App 132Hansen v. Bank of New York Mellon
quotation marks omitted). Only claim preclusion is at issue here.1
“[C]laim preclusion corresponds to causes of action,” id. (alteration
in original) (citation and internal quotation marks omitted), and
“bars a party from prosecuting in a subsequent action a claim that
has been fully litigated previously,” In re D.A., 2009 UT 83, ¶ 33,
222 P.3d 1172 (citation and internal quotation marks omitted). A
claim is precluded in a subsequent action if (1) “both cases . . .
involve the same parties or their privies,” (2) “the claim that is
alleged to be barred” was “presented in the first suit” or “could
and should have been raised in the first action,” and (3) “the first
suit . . . resulted in a final judgment on the merits.” Mack, 2009 UT
47, ¶ 29 (citation and internal quotation marks omitted).
¶6 Hansen does not dispute that the federal lawsuit resulted in
a final judgment on the merits or that he and the Bank were both
parties in the federal lawsuit. He argues, however, that Bates, who
was not a party to the federal lawsuit, is not in privity with any of
the parties to the federal lawsuit, so res judicata cannot bar his
claims against Bates. He also argues that the claims he brings in
this case against both Bates and the Bank are not barred under
claim preclusion because those claims could not have been raised
in the federal lawsuit. We address each argument in turn.
I. Privity
¶7 Hansen first argues that Bates was not a privy of the Bank
in the federal suit. “‘The legal definition of a person in privity with
another, is a person so identified in interest with another that he
represents the same legal right.’” Press Publ’g, Ltd. v. Matol Botanical
1. In his brief, Hansen also addressed the issue preclusion branch
of res judicata. But because we affirm the district court’s decision
on the basis of claim preclusion, we need not reach the question of
issue preclusion. Further, the parties only presented arguments
under claim preclusion to the district court, and the Defendants
have similarly limited their arguments on appeal.
20120010‐CA 3 2013 UT App 132Hansen v. Bank of New York Mellon
Int’l, Ltd., 2001 UT 106, ¶ 20, 37 P.3d 1121 (quoting Searle Bros. v.
Searle, 588 P.2d 689, 691 (Utah 1978)). “[P]rivity depends mostly [on
the parties’] relationship to the subject matter of the litigation.” Id.(second alteration in original) (citation and internal quotation
marks omitted). Thus, the issue is whether Bates, as the trustee
under the trust deed, represents the same legal interest as the Bank
in its capacity as the beneficiary under the trust deed in the federal
suit.
¶8 In arguing whether Bates and the Bank are privies, the
parties rely on the statutory definitions of a trust deed, trustee, and
beneficiary. A trust deed is a “deed . . . conveying real property to
a trustee in trust to secure the performance of an obligation of the
trustor . . . to a beneficiary.” Utah Code Ann. § 57‐1‐19(3)
(LexisNexis 2010). The beneficiary is “the person . . . designated in
a trust deed as the person for whose benefit a trust deed is given,”
while the trustee is “a person to whom title to real property is
conveyed by trust deed.” Id. § 57‐1‐19(1), (4).
¶9 According to Hansen, all of the defendants in the federal
lawsuit were beneficiaries under the deed of trust. Hansen thus
argues that because Bates is not a beneficiary under the deed of
trust, he does not represent the same legal right as the Bank.
Rather, Hansen argues, Bates is a trustee, making his interest in the
deed of trust “substantively different from that of a beneficiary.”
In particular, Hansen argues that a “trustee is not a simple
employee, agent or assign of the beneficiary but . . . has duties to
the trustor or homeowner.” (Citing Russell v. Lundberg, 2005 UT
App 315, ¶ 19, 120 P.3d 541 (“In certain circumstances . . . it is
possible that the trustee is bound by a fiduciary duty to act in the
interest of the trustor.” (citation and internal quotation marks
omitted)).) The Bank and Bates point out, however, that a trustee
holds property for the benefit of the beneficiary, namely to secure
the debt owed to the beneficiary, and that this is particularly true
in the case of foreclosure where the trustee acts at the instance and
in the interest of the beneficiary to foreclose the secured property
20120010‐CA 4 2013 UT App 132Hansen v. Bank of New York Mellon
in order “to assure the payment of the debt secured by the trust
deed.” See id. (“A trustee’s primary obligation is to assure the
payment of the debt secured by the trust deed.”). Foreclosure is
therefore a circumstance in which the duties and interests of the
trustee align with the interests of the beneficiary and not with the
trustor property owner.
¶10 Under the facts of this case, we agree with the Bank and
Bates that the Bank’s legal interest as the beneficiary and Bates’s
legal interest as the trustee are aligned in these lawsuits. In both the
federal lawsuit and this lawsuit, Hansen has attempted to prevent
foreclosure on his property by arguing that the Bank does not have
a beneficial interest in the trust deed. Bates has acted in his capacity
as the trustee under the trust deed to foreclose on the property for
the benefit of the Bank. Accordingly, we conclude that for purposes
of this case, the Bank and Bates represent the same legal interest
and are therefore in privity. See, e.g., Brunson v. Bank of N.Y. Mellon,
2012 UT App 222, ¶ 4, 286 P.3d 934 (per curiam) (reasoning that
where the first lawsuit had been litigated against the trustee under
the trust deed and the second action was brought against both the
trustee and the beneficiary of the trust deed, the second lawsuit
was “against parties who were in privity with” the parties in the
first action).
II. The Claims Could Have Been Raised in the Federal Suit
¶11 Hansen next argues that the claims alleged in this case could
not have been brought in the federal lawsuit because the facts that
establish the basis for these claims only occurred after the federal
lawsuit was filed.2 The Bank and Bates disagree, asserting that the
2. In challenging the “same claim” element of claim preclusion,
Hansen argues that the claims alleged in this lawsuit could not
have been brought in the federal lawsuit because these claims are
(continued...)
20120010‐CA 5 2013 UT App 132Hansen v. Bank of New York Mellon
critical facts upon which Hansen’s claims are based occurred
months before he filed the federal lawsuit. We agree with the Bank
and Bates.
¶12 In essence, Hansen claims that the Bank did not have
authority to execute and record the Substitution of Trustee
appointing Bates as trustee, and consequently, Bates lacked
authority to execute and record the Notice of Default because the
beneficial interest in the trust deed was not assigned to the Bank
until months later. Indeed, the beneficial interest in the trust deed
was not assigned to the Bank until October 2010, five months after
the Substitution of Trustee and Notice of Default were executed
2. (...continued)
based on facts that did not exist at the time he brought the federal
lawsuit. Hansen does not argue that the claims alleged in this
lawsuit should not have been brought in the federal lawsuit
because they arise out of a different transaction or set of operative
facts. See generally Mack v. Utah State Dep’t of Commerce, 2009 UT 47,
¶ 30, 221 P.3d 194 (“Claims or causes of action are the same as
those brought or that could have been brought in the first action if
they arise from the same operative facts, or in other words from the
same transaction.” (citing Restatement (Second) of Judgments § 24
(1982))). Based on a cursory review, it appears that Hansen’s claims
raised in this lawsuit and in the federal lawsuit are part of the same
transaction or set of operative facts. See id.; see also Brunson v. Bank
of N.Y. Mellon, 2012 UT App 222, ¶¶ 2, 5, 286 P.3d 934 (per curiam)
(reasoning that where the first lawsuit raised issues related to
securitization and the second lawsuit raised claims of wrongful
foreclosure and both lawsuits were brought to prevent foreclosure
of the same loan involving the same property, the claims brought
in both lawsuits were the same for res judicata purposes). But
because Hansen does not raise this issue in any meaningful way,
we will not consider the issue more thoroughly. See generally Utah
R. App. P. 24(a)(9).
20120010‐CA 6 2013 UT App 132Hansen v. Bank of New York Mellon
and recorded in May 2010 and two months after the federal lawsuit
was filed in August 2010. As Hansen explains it, “[t]he key factual
assertion raised in the present case is that [t]he Bank . . . received its
interest in [Hansen]’s loans through an assignment of Deed of
Trust [in October 2010] . . . , transferring a beneficial interest in the
Deed of Trust to [t]he Bank . . . yet appointed Bates and instructed
him to act as trustee five months earlier[,]” and that “Bates
accepted this appointment and attempted to act as trustee on behalf
of [t]he Bank even though he should have known that the [B]ank
did not yet have authority to act.”
¶13 Thus, according to Hansen, “[t]hese causes of action each
depend on the [a]ssignment that occurred after the [federal
lawsuit] was filed.” But in reality, Hansen’s claims actually depend
on the allegation that the Bank and Bates lacked authority in May
2010, not that the authority was finally conveyed with the
beneficial interest months later in October. In other words, the
alleged lack of authority was a fact in existence at the time the
federal suit was filed in August 2010, regardless of the timing of the
later assignment or whether a subsequent assignment occurred at
all. In fact, the October 2010 assignment seems largely irrelevant to
the lack of authority issue because it had no effect on the status of
the Bank and Bates in May 2010, and its later occurrence changed
that status only from that point forward. Because that critical fact
existed as early as May 2010 and well through the August 2010
filing date, we conclude that the claims alleged in the case before
us could have been brought in the federal lawsuit.
¶14 Given the substance of Hansen’s claims, the question arises
whether Hansen knew or reasonably should have known about the
nonexistence of the assignment after May 2010, based on his
knowledge that the Bank and Bates had executed and recorded the
Substitution of Trustee and Notice of Default. But notably, Hansen
20120010‐CA 7 2013 UT App 132Hansen v. Bank of New York Mellon
has not presented such an argument on appeal.3 We therefore limit
our analysis to the arguments Hansen has actually raised.4
¶15 Hansen does not otherwise challenge the district court’s
decision. Because we conclude that Bates was in privity with the
Bank’s position in the federal lawsuit and Hansen’s claims in this
case could have been brought in the federal action, we hold that the
district court correctly dismissed Hansen’s claims as being barred
by res judicata.
¶16 Affirmed.
3. In his complaint, Hansen alleges that Defendants misrepresented
their authority to initiate foreclosure proceedings on the property
and that he reasonably relied on those misrepresentations. He did
not allege in his complaint nor argue in opposing Defendants’
motions to dismiss that he did not know or reasonably could not
have known that the Bank had not been assigned the beneficiary’s
interest in the trust deed. We therefore decline to consider this
issue.
4. Another fact that Hansen argues did not exist when he filed the
federal lawsuit is that in January 2011, Defendants scheduled a
foreclosure sale. According to Hansen, he could not have pleaded
a claim for “improper execution of foreclosure proceedings,” as he
has done in this case, without the occurrence of that fact. However,
Defendants initiated foreclosure proceedings by recording a Notice
of Default in May 2010. Were the foreclosure proceeding to move
forward, it would be inevitable that a foreclosure sale would
eventually be scheduled. Thus, Hansen has not convinced us that
the scheduling of a foreclosure sale is a new fact that gave rise to a
claim that would not otherwise have been available to him,
particularly because this claim, like the others, is based on the
theory that Defendants acted without authority in executing and
recording the Notice of Default in May 2010.
20120010‐CA 8 2013 UT App 132