Van Leeuwen v. Bank of America , 387 P.3d 521 ( 2016 )

2016 UT App 212THE UTAH COURT OF APPEALS
MICHAEL J. VAN LEEUWEN,
Appellant,
v.
BANK OF AMERICA NA,
Appellee.
Memorandum Decision
No. 20150610-CA
Filed October 27, 2016
Third District Court, Salt Lake Department
The Honorable Laura S. Scott
No. 150902048
Michael J. Van Leeuwen, Appellant Pro Se
Chandler P. Thompson and Jason T. Baker,
Attorneys for Appellee
JUDGE STEPHEN L. ROTH authored this Memorandum Decision, in
which JUDGES J. FREDERIC VOROS JR. and DAVID N. MORTENSEN
concurred.
ROTH, Judge:
¶1 Michael J. Van Leeuwen appeals the district court’s
dismissal of his complaint under rule 12(b)(6) of the Utah Rules
of Civil Procedure. We reverse the district court’s dismissal
order and remand for further proceedings.
Van Leeuwen v. Bank of America
BACKGROUND1
¶2 In December 2005, Van Leeuwen executed a deed of trust
on certain real property (the Property) securing a promissory
note for a loan he had received from Intermountain Mortgage
Company Inc. (Intermountain). The trust deed named Mortgage
Electronic Registration Systems Inc. (MERS), the nominee of
Intermountain, as ‚the beneficiary under this Security
Instrument.‛ The trust deed further indicated that ‚MERS holds
only legal title to the interests granted by [Van Leeuwen] . . . but,
if necessary to comply with law or custom, MERS . . . has the
right: to exercise any or all of those interests, including, but not
limited to, the right to foreclose and sell the Property.‛
¶3 In an effort to halt foreclosure after failing to make
payments on the loan, Van Leeuwen filed a complaint in July
2010 (the 2010 Complaint), asserting claims against several
defendants, including Intermountain, MERS, and BAC Home
Loans Servicing (BAC), but not Bank of America NA (the Bank).
Van Leeuwen’s theory was that ‚*w+hen the ‘beneficial interest’
in the trust deed(s) securing the promissory note(s) executed by
the lender and [Van Leeuwen] [was] assigned to MERS, the
note(s) were split from the trust deed(s), rendering the
mortgage(s) unenforceable.‛ He claimed this was so because,
even though MERS was listed as the beneficiary under his trust
deed, its ownership of the mortgage was ‚purely fictional‛
because MERS did not own ‚legal title to the mortgage,‛ was
‚never entitled to receive *his+ monthly payments . . . [or] the
proceeds of a foreclosure or deed of trust sale,‛ and otherwise
1. ‚In reviewing the *district+ court’s decision, we accept
the factual allegations in the complaint as true and interpret
those facts and all inferences drawn from them in [the]
light most favorable to . . . the non-moving party.‛ Capri
Sunshine, LLC v. E & C Fox Invs., LLC, 2015 UT App 231, ¶ 2, 366
P.3d 1214 (citation and internal quotation marks omitted).
20150610-CA 2 2016 UT App 212Van Leeuwen v. Bank of America
‚ha*d+ no actual financial interest in any mortgage loan.‛
Instead, he alleged that MERS was merely paid by finance
companies ‚to record an assignment to MERS with the local
county recorder‛ so that ‚all further assignments of the loan do
not have to be recorded.‛ He argued that, as a result, MERS and
its successors and assignees did not have standing or legal
authority to foreclose on the Property. Accordingly, he sought a
declaratory judgment that MERS and the other defendants
lacked standing to foreclose on the Property. He also sought
relief from the foreclosure process, including a judgment
quieting title to the Property in his favor.2 The case was removed
2. Van Leeuwen described his 2010 Complaint as being ‚solely
about MERS,‛ arguing that ‚MERS lacked standing to bring
foreclosure actions.‛ Van Leeuwen is not the first plaintiff to
challenge MERS’ standing to foreclose. Indeed, in the past
decade, plaintiffs have repeatedly challenged MERS’ authority
to, among other things, initiate foreclosure proceedings and sell
a property even though MERS had been declared the beneficiary
of the trust deed. Plaintiffs in such actions typically argue that
MERS lost its interest and rights under the trust deed when ‚the
underlying note was securitized.‛ See, e.g., West v. Mortgage Elec.
Registration Sys., Inc., No. 2:10–CV–1047, 2011 WL 1321404, at *2
(D. Utah Apr. 6, 2011); Commonwealth Prop. Advocates, LLC v.
Mortgage Elec. Registration Sys., Inc., 2011 UT App 232, ¶¶ 7–14,
263 P.3d 397. Notably, the arguments made in these cases against
MERS’ authority to foreclose on that basis have been routinely
dismissed for failure to state a claim under state and federal
versions of rule 12(b)(6) in both federal and state courts. See, e.g.,
Commonwealth Prop. Advocates, LLC v. Mortgage Elec. Registration
Sys., Inc., No. 2:10–CV–340, 2010 WL 3743643, at *3 (D. Utah
Sept. 20, 2010); Burnett v. Mortgage Elec. Registration Sys., Inc., No.
1:09–CV–00069, 2009 WL 3582294, at *3–6 (D. Utah Oct. 27, 2009);
Mitchell v. ReconTrust Co. NA, 2016 UT App 88, ¶¶ 16–23, 373
P.3d 189; see also Commonwealth Prop. Advocates, 2011 UT App
(continued…)
20150610-CA 3 2016 UT App 212Van Leeuwen v. Bank of America
to the United States District Court for the District of Utah, which
dismissed the complaint with prejudice on May 9, 2011. In its
memorandum decision and order, the district court stated that it
was dismissing the case because each of the causes of action in
the 2010 Complaint ‚have been repeatedly rejected by this Court
and rely upon meritless misinterpretations of case law and Utah
statutes,‛ and it found ‚no meaningful distinction between [the
2010 Complaint] and the numerous [similar] actions the Court
ha[d] previously dismissed.‛ The court entered final judgment
against Van Leeuwen shortly thereafter.
¶4 In March 2015, Van Leeuwen filed the complaint in this
case (the 2015 Complaint).3 The 2015 Complaint named the Bank
as a defendant and made claims regarding the same property at
issue in the 2010 Complaint. In the 2015 Complaint, Van
Leeuwen sought a declaratory judgment regarding the Bank’s
‚ownership status‛ in relation to his loan. He asserted that,
although it claimed that it owned his loan, the Bank was merely
the servicer. He based this assertion on a Fair Debt Collection
Practices Act compliance letter he received in February 2011
from the Bank (the Letter) stating specifically that it was the
servicer—and not the creditor/owner—of his loan. The Letter
informed Van Leeuwen that loan servicing responsibilities,
formerly exercised by BAC, had been transferred to the Bank
effective July 1, 2011. In particular, the Letter stated,
(…continued)
232, ¶¶ 7–14 (affirming dismissal of the same claims under
summary judgment).
3. Van Leeuwen also filed a complaint in July 2014 in which he
asserted, as he does in the present case, that the Bank does not
own his ‚loan, note, or otherwise‛ and that he does not owe the
Bank any money. However, in January 2015, he voluntarily
dismissed all of his claims against the Bank without prejudice.
20150610-CA 4 2016 UT App 212Van Leeuwen v. Bank of America
The name of the creditor to whom the debt is
owed: BANA CWB CIG HFI 1ST LIENS. Please note
unless Bank of America, N.A., is listed . . . as the
creditor of your loan, Bank of America, N.A., does not
own your loan and only services your loan on behalf of
your creditor, subject to the requirements and guidelines
of your creditor.
(Emphasis in original.) Accordingly, Van Leeuwen sought a
declaratory judgment that because the Bank contended it owned
his loan and he believed, based on the Letter, that it did not, ‚an
actual judicial controversy exists . . . such that the Court’s
declaration of the parties’ status and rights with respect to‛ his
loan was necessary. He also sought injunctive relief to prohibit
the Bank from foreclosing on the Property, alleging that if he
was not granted a preliminary and permanent injunction, ‚there
is a substantial risk that [the Bank] will attempt to irreparably
injure [him] by attempting to foreclose on the alleged Deed of
Trust.‛
¶5 In response, the Bank filed a motion to dismiss under rule
12(b)(6) of the Utah Rules of Civil Procedure, asserting that Van
Leeuwen’s claims were ‚barred by res judicata and fail[ed] on
the merits.‛ The district court granted the Bank’s motion, stating
without further analysis that it ‚agree*d+ with *the Bank+ that the
instant law suit is barred by the doctrine of res judicata as the
claims in the instant action have all been fully litigated, and all
requirements for res judicata have been met.‛ Van Leeuwen filed
a motion to reconsider, which the district court denied. Van
Leeuwen appeals.
ISSUE AND STANDARDS OF REVIEW
¶6 Van Leeuwen contends that the district court dismissed
his case in error. We review a district court’s decision to grant a
rule 12(b)(6) motion to dismiss a complaint ‚for correctness,
20150610-CA 5 2016 UT App 212Van Leeuwen v. Bank of America
giving no deference to the [district] court’s ruling.‛ Capri
Sunshine, LLC v. E & C Fox Invs., LLC, 2015 UT App 231, ¶ 11, 366
P.3d 1214 (citation and internal quotation marks omitted). ‚[T]he
purpose of a rule 12(b)(6) motion is to challenge the formal
sufficiency of the claim for relief, not to establish the facts or
resolve the merits of a case,‛ and accordingly, ‚dismissal is
justified only when the allegations of the complaint clearly
demonstrate that the plaintiff does not have a claim.‛ Id. (citation
and internal quotation marks omitted). In addition, whether res
judicata ‚bars an action‛ is a question of law that we review for
correctness. Mack v. Division of Securities, 2009 UT 47, ¶ 26, 221
P.3d 194 (citation internal quotation marks omitted).
ANALYSIS
¶7 Two distinct branches comprise the doctrine of res
judicata: claim preclusion and issue preclusion. Macris & Assocs.,
Inc. v. Neways, Inc., 2000 UT 93, ¶ 19, 16 P.3d 1214. ‚*C+laim
preclusion corresponds to causes of action[;] issue preclusion
corresponds to the facts and issues underlying the causes of
action.‛ Mack, 2009 UT 47, ¶ 29 (alterations in original) (citation
and internal quotation marks omitted). ‚*B+oth branches of res
judicata serve[] the important policy of preventing previously
litigated issues from being relitigated.‛ Macris, 2000 UT 93, ¶ 19
(second alteration in original) (citation and internal quotation
marks omitted).
¶8 The Bank prevailed below based on its assertion that the
dismissal of the 2010 Complaint precluded relitigation of the
claims asserted in the 2015 Complaint. For claim preclusion to
apply, three requirements must be satisfied:
First, both cases must involve the same parties or
their privies. Second, the claim that is alleged to be
barred must have been presented in the first suit or
must be one that could and should have been
20150610-CA 6 2016 UT App 212Van Leeuwen v. Bank of America
raised in the first action. Third, the first suit must
have resulted in a final judgment on the merits.
Id. ¶ 20 (citation and internal quotation marks omitted). ‚All
three elements must be present for claim preclusion to apply.‛
Id.
¶9 The Utah Supreme Court has ‚fully embrace*d+ the
Restatement’s transactional test‛ for analyzing whether the
claims in two cases are the same under the second requirement
of the claim preclusion branch of res judicata. Gillmor v. Family
Link, LLC, 2012 UT 38, ¶ 13, 284 P.3d 622 (citing Restatement
(Second) of Judgments § 24 (Am. Law Inst. 1982)). ‚Under the
transactional test, the claims are the same if they arise from the
same operative facts, or in other words from the same
transaction.‛ Id. ¶ 12 (citation and internal quotation marks
omitted). There are ‚a variety of considerations‛ in the
transactional test because, ‚*r+ather than resting on the specific
legal theory invoked, [claim preclusion] generally is thought to
turn on the essential similarity of the underlying events giving
rise to the various legal claims.‛ Id. ¶ 13 (alterations in original)
(citation and internal quotation marks omitted). These
considerations include ‚whether the facts are related in time,
space, origin, or motivation, whether they form a convenient
trial unit, and whether their treatment as a unit conforms to the
parties’ expectations or business understanding and usage.‛ Id.
¶ 14 (citing Restatement (Second) of Judgments § 24(2)). ‚*N+o
single factor is determinative.‛ Id. (citing Restatement (Second)
of Judgments § 24 cmt. b). And even in the event that ‚the
current claims were factually available at the time of the prior
suit[], [a plaintiff is] not required to bring them [if] they do not
arise from the same common nucleus of operative facts.‛ Id. ¶ 23.
In such a case, ‚res judicata does not bar *the plaintiff’s+ claims.‛
Id.
¶10 To apply the transactional test, we must analyze the
operative facts of the two complaints. In his 2010 Complaint, as
20150610-CA 7 2016 UT App 212Van Leeuwen v. Bank of America
discussed above, Van Leeuwen sought to prevent foreclosure on
the Property by arguing that MERS and its successors and
assignees ‚lack*ed+ standing to prosecute the foreclosure.‛
MERS lacked standing, he alleged, because it was an ‚entity
unknown to traditional mortgage law that serves no role in the
lending process,‛ as it does not own legal title to the mortgage.
Accordingly, he sought, among other things, a declaration that
MERS and its successors and assignees ‚lack[] standing to bring
foreclosure actions‛; a judgment that MERS and ‚any servicer or
trustee acting on MERS’ behalf‛ violated the Fair Debt Collection
Practices Act by ‚foreclosing on *his+ home without the legal
authority to do so‛; an order that the defendants ‚produce the
‘blue-ink’ note verifying and validating both the identity of the
creditor and the amount due on the mortgage loan obligation‛; a
judgment ‚releasing the trust deeds and quieting title to the
property in favor of [Van Leeuwen]‛ on the basis that ‚*n+o
named defendant has any valid interest in the trust deeds and/or
the notes and/or the Property‛; ‚declaratory and/or injunctive
relief to remedy the harm to [him], and to other Utah
homeowners, caused by MERS’ actions‛; and reformation of his
‚mortgage contract by ordering a reduction in the principal and
an affordable fixed interest rate for the life of the loan.‛
¶11 In his 2015 Complaint, by comparison, Van Leeuwen
sought an order declaring who owned his loan after the 2011
change of his loan servicer—specifically, a declaration that the
Bank was merely the servicer of his loan, not its creditor/owner.
In particular, he alleged that the Bank had recently claimed that
it was the creditor/owner of his debt but that the Letter stated
that it was the servicer only and not the owner of the loan. Based
on the Letter, Van Leeuwen alleged that, although the Bank
‚contends that it owned the purported Debt Instruments at the
time *Van Leeuwen+ received the Letter,‛ the Bank did not. He
also disputed ‚that there *was+ any money owing under the
purported Debt Instruments‛ and alleged that even if there was
money owing, ‚the debt would not be owed to or owned by *the
20150610-CA 8 2016 UT App 212Van Leeuwen v. Bank of America
Bank],‛ who had apparently demanded payment. Accordingly,
he requested declaratory relief from the court regarding ‚the
parties’ status and rights with respect to the Debt Instruments.‛
He also requested injunctive relief, alleging that ‚there is a
substantial risk that [the Bank] will attempt to irreparably injure
[him] by attempting to foreclose on the alleged Deed of Trust
unless they are preliminarily and permanently enjoined.‛
¶12 Although the parties dispute whether the privity and
finality requirements have been met,4 we are not persuaded that
the claims litigated in the 2010 Complaint are sufficiently similar
to those presented in the 2015 Complaint or that the loan
ownership claim could have and should have been brought in
2010. Certainly the fact that the two complaints concern the same
property and the same loan, apparently in the process of
foreclosure at the point of each filing, does not mean that the
substance of the claims in the two complaints is necessarily the
same. And on appeal, Van Leeuwen’s arguments are sufficient to
support his point that the substance of the claims he raised in his
2015 Complaint was not presented in the 2010 Complaint
because the 2010 Complaint concerned MERS’ authority to
foreclose, while the claims in the 2015 Complaint concern the
Bank’s authority to foreclose—a question that he contends did
not arise until he received the Letter in 2011. In response, just as
it did below, the Bank fails to compare the actual allegations of
the two complaints and explain why, given the circumstances in
this case, the district court’s decision—which contained no
4. Because all the requirements for claim preclusion must be met
for the res judicata doctrine to apply and we resolve this case on
the claim similarity requirement, we do not address the parties’
privity and finality arguments. In any event, both requirements
seem to require a fact-intensive inquiry better suited for
development and resolution in the district court.
20150610-CA 9 2016 UT App 212Van Leeuwen v. Bank of America
independent analysis, but simply referenced the Bank’s
arguments in support of the motion to dismiss—was correct.
¶13 Further, we are not persuaded that Van Leeuwen ‚could
and should have . . . raised‛ the 2015 Complaint claims in the
2010 Complaint. See Gillmor, 2012 UT 38, ¶ 10 (citation and
internal quotation marks omitted). While it does not seem
entirely sufficient to argue that the claims in the 2015 Complaint
could not have been brought in the 2010 Complaint simply
because certain events occurred after 2010, see id. ¶¶ 14–21
(explaining that the transactional test considers whether a claim
is barred by res judicata given the variety of circumstances
present in a particular case and that ‚‘no single factor is
determinative’‛ (quoting Restatement (Second) of Judgments
§ 24 cmt. b (Am. Law Inst. 1982))), that is not the sole premise of
Van Leeuwen’s argument. Rather, he asserts that in 2010 he
could not have known that the Bank, as a post-2010 successor to
BAC, would assume a substantively different, nonownership
relationship to the loan at some point in the future. See id. ¶ 10
(noting that for claim preclusion to apply, the claim must either
‚have been presented in the first suit or be one that could and
should have been raised in the first action‛ (citation and internal
quotation marks omitted)). And importantly, the 2010
Complaint does not identify a loan servicer at all; it certainly
does not allege that the loan is serviced by any entity separate
from the note holder and beneficiary of the trust deed, as Van
Leeuwen alleges in the 2015 Complaint. As a consequence, on
the record before the court, it is premature to conclude that Van
Leeuwen’s present claims—based on the legal implications of
the separation between loan owner and loan servicer—‚could
and should have been raised‛ in connection with the 2010
Complaint, as the Bank claims. See id. (citation and internal
quotation marks omitted).
¶14 To be sure, the legal implications of having the Bank
declared a servicer as opposed to a creditor/owner are less than
clear. The Bank suggests, for example, that because Utah is a
20150610-CA 10 2016 UT App 212Van Leeuwen v. Bank of America
nonjudicial foreclosure state, ‚the foreclosing party *is not
required to] produce the original note or other evidence of
standing in order to foreclose.‛ (Citing Utah Code Ann. §§ 57-1-
19 et seq. (LexisNexis 2010).) The Bank further asserts that in
Utah, a party may be able to enforce an instrument even if he or
she is not the owner of it. (Citing Utah Code Ann. §§ 70A-3-201,
70A-3-203, 70A-3-205, and 70A-3-301 (Lexis Nexis 2009).) While
that may be the case, the district court did not address these
issues in its order, and it is not clear to us at this point in the
litigation whether these concepts are pertinent enough to be
decisive. That said, we do not suggest by this decision that Van
Leeuwen’s 2015 Complaint may not be dismissed on the basis of
res judicata or any other basis under rule 12(b)(6) as the case
develops further. Instead, we merely decide that Van Leeuwen
has presented a reasonable argument that, as the case now
stands, res judicata does not bar the 2015 Complaint, a
proposition that the Bank’s arguments do not adequately refute.
¶15 Accordingly, because it is not clear that the claims in the
2015 Complaint ‚have been presented‛ in the 2010 Complaint or
that they ‚could and should have been raised‛ in that action,
Macris & Assocs., Inc. v. Neways, Inc., 2000 UT 93, ¶ 20, 16 P.3d
1214 (citation and internal quotation marks omitted), we reverse
the dismissal of Van Leeuwen’s complaint and remand the case
for further proceedings.
CONCLUSION
¶16 For the reasons discussed above, we reverse the district
court’s dismissal order and remand the case for further
proceedings.
20150610-CA 11 2016 UT App 212