Lewis v. US Bank , 2020 UT App 55 ( 2020 )

2020 UT App 55THE UTAH COURT OF APPEALS
BRIAN K. LEWIS,
Appellant,
v.
U.S. BANK TRUST NA AND LSF9 MASTER PARTICIPATION TRUST,
Appellees.
Opinion
No. 20190276-CA
Filed April 2, 2020
Fourth District Court, Nephi Department
The Honorable Anthony L. Howell
No. 180600022
Brian K. Lewis, Appellant Pro Se
Heidi G. Goebel and Keith S. Anderson, Attorneys
for Appellees
JUDGE DIANA HAGEN authored this Opinion, in which
JUDGES MICHELE M. CHRISTIANSEN FORSTER and JILL M. POHLMAN
concurred.
HAGEN, Judge:
¶1 Brian K. Lewis filed suit against U.S. Bank Trust NA (U.S.
Bank) to quiet title and for unjust enrichment. U.S. Bank filed a
motion to dismiss on res judicata grounds, which the district
court granted. Lewis appeals, arguing that the district court
erred in concluding that res judicata bars his claims. Because the
district court could not decide this issue without considering
materials outside the pleadings, the motion to dismiss should
have been converted to one for summary judgment.
Accordingly, we reverse and remand for further proceedings.
Lewis v. U.S. Bank
BACKGROUND 1
¶2 This case arises from a dispute over ownership of a piece
of property. In 2008, the owner of the property (the prior owner)
executed a promissory note in favor of a mortgage company and
conveyed a trust deed to that same company to secure the note.
In 2009, the prior owner defaulted on the promissory note, filed
for bankruptcy, and abandoned the property.
¶3 In late 2009, a notice of default was issued against the
property, but it was rescinded in April 2014. On the same day
that the original notice of default was rescinded, however, a
second notice of default was issued.
¶4 Then, in late 2014 and with permission from the prior
owner, Lewis began to occupy the property. In early 2015, Lewis
purchased the property from the prior owner, who conveyed the
property to Lewis via warranty deed. Lewis has made
substantial improvements to the property since he began living
there.
¶5 No further action was taken against the property
following the second notice of default until January 2016, when a
new successor trustee was appointed. In May 2016, Lewis
received a notice informing him that the prior owner’s mortgage
loan had been sold to another company, LSF9 Master
Participation Trust (LSF9). Although Lewis knew that the prior
owner had filed for bankruptcy prior to receiving the notice of
the mortgage sale, he had thought that any other parties with an
1. “On appeal from a motion to dismiss, we review the facts only
as they are alleged in the complaint. We accept the factual
allegations as true and draw all reasonable inferences from those
facts in a light most favorable to the plaintiff.” Haynes v.
Department of Public Safety, 2020 UT App 19, n.2 (cleaned up).
20190276-CA 2 2020 UT App 55Lewis v. U.S. Bank
interest in the property had forfeited their interest by not taking
any action against the property between 2009 and 2014.
¶6 In 2018, Lewis instigated the present action against U.S.
Bank—which had since been made the trustee of LSF9—bringing
claims to quiet title and for unjust enrichment. 2 In response, U.S.
Bank filed a motion to dismiss for failure to state a claim under
rule 12(b)(6) of the Utah Rules of Civil Procedure, arguing that
Lewis’s claims were barred by res judicata. 3 U.S. Bank pointed to
a prior quiet title action brought by Lewis that had been
removed to federal court and then involuntarily dismissed,
arguing that resolution of that claim precluded Lewis’s current
claims from being litigated. 4 In support of this motion, U.S. Bank
attached a variety of documents including: the promissory note,
2. Lewis amended his complaint multiple times, and the original
complaint alleged different causes of action. However, the third
amended complaint governs here, so we recite the claims
brought in that iteration of the complaint.
3. The motion to dismiss also challenged the sufficiency of
Lewis’s complaint, arguing that he failed to state a claim upon
which relief can be granted. However, this issue was not reached
by the district court and we decline to reach the issue as an
alternative ground for affirmance. See, e.g., O'Connor v.
Burningham, 2007 UT 58, ¶ 23, 165 P.3d 1214 (“While we possess
the authority to review the matters constituting the alternative
grounds for affirmance urged by the [appellees], we are not
obligated to exercise this authority.”).
4. Lewis’s complaint makes no mention of the prior lawsuit.
Accordingly, although we usually recite only the facts as alleged
in the complaint, see supra n.1, we refer to the prior federal
lawsuit not as a matter of fact but because it is necessary to
understand the issue raised on appeal.
20190276-CA 3 2020 UT App 55Lewis v. U.S. Bank
the deed of trust, bank records, the first notice of default,
multiple assignments of the deed of trust, the notice of rescission
of the first notice of default, the second notice of default, the
warranty deed, a document showing the substitution of trustee,
the notice of the sale of ownership of the mortgage loan, letters
from the new trustee to the prior own and Lewis, and Lewis’s
original and second complaints in this action. Although the
motion to dismiss provided the case number from the prior
federal case, the original complaint from that case was not
attached to the motion.
¶7 The district court agreed that Lewis’s claims were barred
by res judicata and granted the motion to dismiss the complaint.
Lewis appeals.
ISSUE AND STANDARD OF REVIEW
¶8 Lewis contends, in part, that the district court erred in
granting U.S. Bank’s motion to dismiss under rule 12(b)(6) of the
Utah Rules of Civil Procedure because the district court did not
convert the motion to one for summary judgment but
nevertheless considered evidence outside the pleadings to arrive
at its conclusion that Lewis’s claims were barred by res judicata. 5
“We review a decision granting a motion to dismiss for
correctness, granting no deference to the decision of the district
5. It is unclear whether Lewis preserved this particular argument
below; nonetheless, we exercise our discretion to reach it because
U.S. Bank did not raise the preservation issue on appeal and we
cannot review the merits of the res judicata issue that was
preserved without venturing outside the pleadings. See State v.
Johnson, 2017 UT 76, ¶ 12, 416 P.3d 443 (holding that appellate
courts have “wide discretion when deciding whether to
entertain or reject issues that are unpreserved” (cleaned up)).
20190276-CA 4 2020 UT App 55Lewis v. U.S. Bank
court.” Haynes v. Department of Public Safety, 2020 UT App 19, ¶ 5
(cleaned up).
ANALYSIS
¶9 Lewis argues that U.S. Bank’s motion to dismiss should
have been “considered as a motion for summary judgment
under Rule 56 of the Utah Rules of Civil Procedure because it
relies on evidence outside the pleadings to support [its] . . . res
judicata arguments.” Rule 12(b)(6) of the Utah Rules of Civil
Procedure allows the district court to dismiss a complaint where
the pleadings “fail[] to state a claim upon which relief can be
granted.” A motion to dismiss under this rule addresses only the
sufficiency of the pleadings and, therefore, “is not an
opportunity for the trial court to decide the merits of a case.”
Tuttle v. Olds, 2007 UT App 10, ¶ 14, 155 P.3d 893. In other
words, motions under rule 12(b)(6) are limited to addressing
“the legal viability of a plaintiff’s underlying claim as presented
in the pleadings.” Williams v. Bench, 2008 UT App 306, ¶ 20, 193
P.3d 640.
¶10 If a court considers materials outside the pleadings, a
motion under rule 12(b)(6) must be treated as a motion for
summary judgment. See Utah R. Civ. P. 12(b)(6) (“If, on a motion
. . . to dismiss for failure of the pleading to state a claim upon
which relief can be granted, matters outside the pleading are
presented to and not excluded by the court, the motion shall be
treated as one for summary judgment and disposed of as
provided in Rule 56.”). “When a rule 12(b)(6) motion is so
converted, the trial court must give the parties a reasonable
opportunity to present evidence in accordance with rule 56 of
the Utah Rules of Civil Procedure in order to determine whether
the motion can be granted as a matter of law.” BMBT, LLC v.
Miller, 2014 UT App 64, ¶ 5, 322 P.3d 1172. Failure to either
exclude material outside the pleadings or convert a rule 12(b)(6)
motion to one for summary judgment “is reversible error unless
20190276-CA 5 2020 UT App 55Lewis v. U.S. Bank
the dismissal can be justified without considering the outside
documents.” Tuttle, 2007 UT App 10, ¶ 6 (cleaned up).
¶11 In this case, U.S. Bank filed a rule 12(b)(6) motion to
dismiss Lewis’s complaint on res judicata grounds. The doctrine
of res judicata is comprised of two branches: claim preclusion
and issue preclusion. Macris & Assocs., Inc. v. Neways, Inc., 2000
UT 93, ¶ 19, 16 P.3d 1214. “Claim preclusion corresponds to
causes of action; issue preclusion corresponds to the facts and
issues underlying the causes of action.” Van Leeuwen v. Bank of
Am. NA, 2016 UT App 212, ¶ 7, 387 P.3d 521 (cleaned up). “Both
branches of res judicata serve the important policy of preventing
previously litigated issues from being relitigated.” Id. (cleaned
up).
¶12 The district court concluded that Lewis’s claims were
barred by claim preclusion. 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
raised in the first action. Third, the first suit must
have resulted in a final judgment on the merits. All
three elements must be present for claim
preclusion to apply.
Id. ¶ 8 (cleaned up). U.S. Bank contends that the prior lawsuit
satisfied each of these elements. While its contention may
eventually prove correct, we believe that such a conclusion is
premature at the motion to dismiss stage.
¶13 The first element of claim preclusion requires that “both
cases must involve the same parties or their privies.” Id. (cleaned
up). U.S. Bank argues that this element is satisfied because it is
acting as a trustee for LSF9 and Lewis brought a claim against
20190276-CA 6 2020 UT App 55Lewis v. U.S. Bank
LSF9 in the prior lawsuit. Because U.S. Bank’s role as trustee for
LSF9 is alleged in Lewis’s complaint, we accept it as true for
purposes of reviewing the motion to dismiss. See supra note 1.
However, as the complaint makes no mention of the prior
lawsuit, U.S. Bank cannot establish the identity of the parties to
that action without relying on matters outside the pleadings. “A
party may raise the defense of res judicata in a Rule 12(b)(6)
motion when the existence of the defense can be judged from the
face of the complaint.” Starship Enters. of Atlanta, Inc. v. Coweta
County, 708 F.3d 1243, 1252 n.13 (11th Cir. 2013). But where the
existence of the defense depends on matters outside the
pleadings, “the motion to dismiss must be treated as a motion
for summary judgment, giving all parties a reasonable
opportunity to present evidence.” Young Res. Ltd. P’ship v.
Promontory Landfill LLC, 2018 UT App 99, ¶ 25, 427 P.3d 457.
Here, the district court could not have reached the conclusion
that U.S. Bank was in privity with a defendant from the prior
lawsuit without considering materials outside the pleadings.
¶14 A similar defect dooms U.S. Bank’s argument that Lewis’s
current claims could and should have been brought in the prior
lawsuit—the second element of claim preclusion. See Van
Leeuwen, 2016 UT App 212, ¶ 8. This element is satisfied if the
claims in the first lawsuit “arise from the same operative facts”
as the claims in the second lawsuit. Id. ¶ 9 (cleaned up). This can
be determined only by “analyz[ing] the operative facts of the
two complaints.” Id. ¶ 10. Yet the prior complaint does not
appear in the record, and there is no indication that a copy was
ever provided to the district court. Although U.S. Bank correctly
points out that courts may take judicial notice of public records,
see BMBT, 2014 UT App 64, ¶ 7 (holding that courts can take
judicial notice of public records when considering a rule 12(b)(6)
motion to dismiss even if those documents are not referenced in
the pleadings or central to a plaintiff’s claim), there is nothing in
the record to suggest that U.S. Bank asked the district court to
take judicial notice of any public records or that the court did
20190276-CA 7 2020 UT App 55Lewis v. U.S. Bank
so. 6 It is therefore unclear how the district court (or this court, for
that matter) could compare the two complaints as required for
the res judicata analysis.
¶15 Dismissal of Lewis’s claims on res judicata grounds
cannot be justified without considering materials outside the
pleadings. Therefore, it was error to decide the matter on a
motion to dismiss rather than convert the motion to one for
summary judgment. See Tuttle, 2007 UT App 10, ¶ 6.
CONCLUSION
¶16 Whether Lewis’s claims are barred by res judicata cannot
be determined without considering materials outside the
pleadings. Accordingly, we reverse and remand for the district
court to convert the motion to dismiss to one for summary
judgment pursuant to rule 12(b)(6).
6. U.S. Bank did not attach the complaint from the prior lawsuit
to its appellate brief, but instead provided the federal case
number and asked us to take judicial notice of the documents
contained therein. Even if we were inclined to do so, the federal
docket does not contain an entry for the complaint, and U.S.
Bank did not direct us to a specific docket number where a copy
of the complaint might be found. Nor did U.S. Bank provide us
with the case number for the original state case where the
complaint was filed before being removed to federal court.
20190276-CA 8 2020 UT App 55