Nelson v. Wells Fargo Bank
Filed 3/5/12 Nelson v. Wells Fargo Bank CA2/2
California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115
IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND
APPELLATE DISTRICT
DIVISION
TWO
GEORGE NELSON,
Plaintiff and Appellant,
v.
WELLS FARGO BANK, N.A.,
Defendant and Respondent.
B229120
(Los Angeles County
Super. Ct. No. BC387234)
APPEAL from
a judgment of the Superior Court of
County.
Mary Ann Murphy, Judge.
Affirmed.
John E.
Sweeney & Associates, John E. Sweeney, Robert N. Pafundi for Plaintiff and
Appellant.
Severson & Werson, Jan T.
Chilton, Eric J. Troutman for Defendant and Respondent.
___________________________________________________
After duping a lender into funding his purchase of real
property—by using another person’s name and good credit—George Nelson now
complains that the loan servicing agent did not properly credit his payments on
the loan. The problem is that the lender
has never had a contractual
relationship with Nelson. As a result,
notices regarding the loan were sent to the named borrower, not to Nelson, and
the loan servicing agent refused to discuss the loan with Nelson because his
name is not on the promissory note nor on the deed of trust.
Nelson’s claims are barred by
2010, the mortgagee asserted a claim. In
response, Nelson objected that his payments on the loan were not properly
credited by the servicing agent. Nelson
and the lender settled their dispute in the bankruptcy court. Nelson is estopped from relitigating whether
his loan payments were mishandled: this
matter was raised in the bankruptcy court,
and was (or should have been) resolved there.
FACTS
name="_ftnref1" title="">[1]
In 1999,
Nelson leased a home on Lockhurst Drive in Woodland Hills (the Property). The lease contained an option to purchase the
Property. Nelson’s then-fiancée Paula
Koerner obtained a loan for $384,000 to purchase the Property. Koerner is the sole “borrower” named in the
deed of trust securing the promissory note.
Koerner’s purchase of the Property was originally funded by GreenPoint
Mortgage Funding. In September 2002,
GreenPoint sold the note and trust deed on the Property to EMC Mortgage
Corporation.
title="">[2] Respondent Wells Fargo Bank was the loan servicing
agent for the Lender.
The prior
owner of the Property deeded title to Koerner.
In turn, Koerner executed a grant deed transferring title to the
Property to Nelson, on July 23, 2001.
The second grant deed (from Koerner to Nelson) was recorded in May
2002. There is no allegation or
documentation showing that the Lender ever agreed to have Nelson assume the
loan and become the “borrower.” On its
face, Koerner’s deed of trust requires the Lender’s written approval prior to
any transfer of title by Koerner.
In
September 2002, Nelson and Koerner had a falling out and ended their marital
engagement. One month later, Nelson
called the Lender to say that he, not Koerner, owns the Property. Koerner advised the Lender that she was
tricked into signing the deed transferring title to Nelson, or that her
signature was forged. Koerner brought an
action to quiet title to the Property.
Nelson prevailed in the action, and in April 2003, a court found that
Koerner has no financial interest in the Property.
In 2005,
Nelson notified the Lender about his success in the action to quiet title: the Lender received the July 2001 grant deed
and the 2003 court order quieting title in favor of Nelson. At the same time, Nelson’s mortgage payment
was lost, and the Lender worked with Nelson to resolve the problem. After the problem was resolved, Nelson
continued to make mortgage payments.
In November
2005, Wells Fargo began servicing the loan.
It received files and records disclosing that Nelson made the mortgage
payments on the Property; that he had in the past resolved delinquencies
directly with the Lender; and that the quiet title action was resolved in his
favor. Though Nelson made mortgage
payments on the property from November 2005 until October 2006, Wells Fargo
delayed negotiation of the checks.
Nelson sent his payments by express mail or Western Union, so he has
proof that his payments were timely.
Wells Fargo initiated foreclosure
proceedings and notified the borrower, Koerner, that the loan was in arrears and
was being accelerated. Koerner told
Wells Fargo that she did not want a loan modification; rather, she invited a
foreclosure. She suggested that Nelson
was a “tenant” whose failure to pay “rent” caused the loan to go into default.
Nelson tried to ensure that his
payments were being received, processed and credited to Koerner’s loan. Wells Fargo did not acknowledge Nelson’s
letters and refused to speak with him on the telephone, but all of his payments
were cashed. Nelson learned that the
Property was in foreclosure in October 2006.
No notice of default was sent to Nelson.
To stop the foreclosure, Nelson sent a cashier’s check to Wells Fargo,
thus making duplicate payments. He has
mail receipts for payments made from November 2006 to July 2007, which were
cashed by Wells Fargo.
Nelson’s February 2007 payment was
inexplicably received by Bank of America.
When Nelson attempted to determine what had happened, Wells Fargo
refused to speak to him. He sent a
replacement check. In July 2007, Wells
Fargo indicated that the loan was in default and threatened foreclosure if
$12,519.97 was not received by August 22, 2007.
Again, Nelson sent a cashier’s check, even though it was a duplicate
payment.
In January 2008, Koerner asked
Wells Fargo to put the Property into foreclosure because her “tenant” was not
paying the “rent.” In February 2008,
Wells Fargo sent a letter indicating that the loan was in default, and
threatening foreclosure if it did not receive $9,184.84 by March 2008. Once again, Nelson made duplicate payments
and sent a cashier’s check for the claimed delinquency.
Nelson resumed his payments in
March 2008 until August 2008. His June
payment, which was sent express mail to a post office box that Wells Fargo had
used for more than two years, was placed by the post office in a “dead letter”
repository for two months before it was return to Nelson. As a result, Wells Fargo again placed the
loan in default. It sent a letter to
Koerner indicating that the amount of default was $11,474.79, and threatened to
accelerate the loan if payment was not received by August 19, 2008. Nelson was forced to make this payment to
prevent foreclosure.
Nelson was prevented from
refinancing the Property in his own name:
Wells Fargo stigmatized Nelson’s payment record after he was declared to
be the owner of the Property in the quiet title action. Starting in August 2005, Nelson pursued a
refinance of the loan on the Property, but Wells Fargo refused to supply payoff
information. Nelson seeks to recover the
alleged duplicate payments he made in October 2006, July 2007, March 2008 and
August 2008. He also seeks injunctive
relief to prevent Wells Fargo from misapplying his payments or placing the loan
in default. Nelson asserts claims for
unfair business practices; an accounting; interference with prospective
economic advantage; and for money had and received.
THE TRIAL COURT’S RULING
Wells Fargo filed multiple
demurrers, and the trial court repeatedly gave Nelson leave to amend. On October 29, 2010, the court sustained
demurrers to Nelson’s fifth amended complaint without leave to amend, and
dismissed his action. The court wrote,
“Plaintiff lacks standing to sue the bank on a mortgage to which he is not a
party. Wells Fargo had no duty to make
an accounting to plaintiff Nelson regarding Ms. Koerner’s mortgage, as
plaintiff Nelson is not a party to the contract.” Based on Nelson’s lack of standing, none of
his claims survived demurrer. Nelson
filed a timely appeal from the dismissal of his case.
NELSON’S BANKRUPTCY
On December 14, 2010, Nelson filed
a Chapter 13 voluntary bankruptcy petition. Nelson listed liabilities against the
Property totaling $861,000.
name="_ftnref3" title="">[3] The Lender (through its servicing agent)
submitted a bankruptcy claim asserting that Nelson was $60,125 in arrears on
the loan. Nelson objected to the claim
on the grounds that (1) the Lender overstates the amount due on the note by
$1,000 every month, and (2) Nelson made all of the payments, but Wells Fargo
did not properly credit the account.
The Lender replied that the loan
carries impound fees, so the monthly payment includes principal and interest
($2,884), property taxes ($738), and hazard insurance ($186), totaling $3,810
per month, i.e., $1,000 more per month than Nelson paid. His failure to pay the impound fees created
the delinquency. Further, Nelson sent
his loan payments to the wrong address:
the borrower of record, Paula Koerner, was notified of the loan
servicer’s change of address but Nelson was not notified because the Lender has
no contract with Nelson, and never agreed to transfer the note from Koerner to
Nelson. As a result, Nelson’s payments
were misaddressed and were not credited.
Nelson objected that he was unaware
of the impound fees, because the Lender failed to provide him with a payment
history ledger. He claimed entitlement
to the payment history ledger as the legal and equitable owner of the
Property. He contested the necessity of
the Lender paying property taxes and hazard insurance on the Property through
an impound account.
In September 2011, Nelson and the
Lender stipulated to resolve their dispute.
Nelson agreed that his arrearage on the loan is $64,854.50, and he
withdrew his objection to the Lender’s claim.
The agreement reads, in a handwritten recital, “This stipulation and
resulting orders are not intended to extend to issues raised by Debtor in the
action Nelson v. Wells Fargo case no. B229120 2nd App. Dist; LA Superior
Court case no: BC387234.” The bankruptcy
court entered an order on the parties’ stipulation on September 22, 2011.
DISCUSSION
We invited
supplemental briefing on the issue of Nelson’s bankruptcy petition, and the
effect of the bankruptcy court’s order on this appeal. (Gov. Code, § 68081.) Wells Fargo argues that the bankruptcy court
order is a final judgment that has a res judicata effect barring Nelson’s
claims in this lawsuit. Nelson responds
that the bankruptcy order does not meet the requirements for the application of
res judicata.
Res
judicata precludes a party from relitigating issues “that were or could have
been raised” in a prior proceeding. (
Cir. 2001) 270 F.3d 895, 898.) A
bankruptcy judgment may bar a related lawsuit if (1) there is a final judgment
on the merits in a court of competent jurisdiction; (2) the same claim or cause
of action is at issue in both cases; and (3) the parties are identical or in
privity. (Id. at p. 899.) Two lawsuits
involve the same cause of action if they share “‘the same nucleus of operative
facts’” so that the asserted claims “could have been effectively litigated” in
the first suit. (Matter of Baudoin (5th Cir. 1993) 981 F.2d 736, 743.)
“A judicially approved settlement
[in bankruptcy court] is considered a final judgment on the merits,” for res
judicata purposes. (Rein v. Providian Financial Corp., supra, 270 F.3d at p. 903.)
The party asserting res judicata has the burden of showing that the
subsequent action is precluded, following the bankruptcy judgment. (Id.
at p. 899, fn. 3.) If a federal judgment
is preclusive in federal court, it is
also preclusive in the California state courts, following the doctrine of full
faith and credit. (Nathanson v. Hecker (2002) 99 Cal.App.4th 1158, 1163.)
Nelson’s bankruptcy claim and this
lawsuit involve the same nucleus of operative facts. “In general, garden variety lender liability
claims alleging wrongful lending or collections practices arise out of the same
transaction as the lenders’ cause of action[ ] to collect on the loans.” (Sanders
v. First Nat. Bank in Great Bend (M.D. Tenn. 1990) 114 B.R. 507, 513;
agreement with his lender—after the lender files a claim in the bankruptcy
proceeding—cannot subsequently sue the lender for wrongful business practices
or for charging a usurious rate on the loan.
(Matter of Howe (5th Cir.
1990) 913 F.2d 1138, 1140-1141, 1143-1147; Sure-Snap
Corp. v. State Street Bank and Trust Co. (2d Cir. 1991) 948 F.2d 869,
872-875.) “‘[T]he loan transaction at
the heart of the present litigation was also the source of [the bank’s] claim
against the [bankruptcy] estate.’
[Citation.] As such . . . the
lender liability claims [made by the debtor were] the ‘same’ as the
bankruptcies, for purposes of res
judicata.” (Matter of Baudoin, supra,
981 F.2d at p. 744.)
A bankruptcy proceeding encompasses
the entire debtor-creditor relationship, including any alleged wrongdoing by a
bank with respect to the debtor’s loan, which induced the debtor to file the
bankruptcy petition. (
Trust Co., supra, 948 F.2d at p.
875.) If the bank’s alleged misconduct
negatively impacts a debtor’s financial status, then the bankruptcy plan and
the lender liability claims “comprise the same essential matter.” (Ibid.;
Matter of Baudoin,
debtor’s bankruptcy, and the debtor fails to object to the validity and amount
of the lender’s claim, the debtor is barred from later pursuing the lender for
improper interest rate adjustments “[b]ecause it had the opportunity to contest
the claim before the bankruptcy court” and thus the claim was barred by res
judicata. (D & K Properties Crystal Lake v. Mutual Life Ins. (7th Cir.
1997) 112 F.3d 257, 262, fn. 4.)
In this case, the Lender submitted
a claim to the bankruptcy court, asserting that Nelson was $60,125 in
default. Nelson objected to the Lender’s
claim, arguing (1) the Lender overstated the monthly payment due and (2) Wells
Fargo failed to properly credit his payments.
In his objection, Nelson asserted that he “repeatedly requested account
information from EMC Mortgage and/or Wells Fargo Mortgage. Creditor EMC Mortgage and Wells Fargo
Mortgage refused and failed to provide said information.”
The dispute over the Lender’s claim
was resolved by stipulation. Nelson
arrearages of $64,854.50, and he withdrew
his objection to the Lender’s claim. The
stipulation operates as a concession that Nelson underpaid—apparently due to
his unawareness that the monthly loan payment was supposed to include another
$1,000 for insurance and property taxes.
Nelson withdrew his objection regarding the conduct of Wells Fargo,
although the matter was properly before the bankruptcy court to show that
Nelson owed less because Wells Fargo allegedly increased his late fees and
duplicated his outlays by mishandling his payments.
The doctrine of res judicata “bars
claims that should have been litigated
in a previous proceeding.” (
2000) 200 F.3d 382, 388, italics added.)
“Once a bankruptcy plan is confirmed, it is binding on all parties and all
questions that could have been raised pertaining to the plan are entitled to
v. Barton (9th Cir. 1995) 107 F.3d 685, 691.) Nelson’s defense against the Lender’s
claim—that his loan payments were mishandled—should have been resolved in the
bankruptcy court. He certainly raised
that defense in his objection to the Lender’s claim. He cannot pursue his claim now, after
conceding to a $64,854 loan payment deficiency in bankruptcy court. The true amount owing on the loan—late fees
and duplicative payments included—is a settled matter.
Nelson acknowledges in his
may be in privity with respect to the loan underlying this action . . . .” Wells Fargo is the loan servicer for
EMC. “[A] loan servicer acts only as the
agent of the owner of the instrument.” (
3300933.) The loan servicer is in
privity with the owner of the loan instrument.
(Lettenmaier v. Federal Home Loan
Mortg. Corp. (D.Or. 2011) 2011 WL 3476648; Arias v. Superior Court (2009) 46 Cal.4th 969, 986 [collateral
estoppel applies not just to parties to the prior action, but also to those for
whom a party acted as an agent or proxy].)
Nelson’s claims against Wells Fargo
arise from its acts as the Lender’s agent.
The bankruptcy court resolution of the Lender’s claim equally resolved
the matter of Nelson’s claims against the Lender’s agent for the alleged
mishandling of Nelson’s loan payments.
Even if (as Nelson claims) Wells Fargo at one point owned the loan, and
was not merely the servicer, EMC’s and Wells Fargo’s successive relationship to
the same property and to the same loan establishes privity as owners of the
lien or assignees. (Taylor v. Sturgell (2008) 553 U.S. 880, 894; Lowell Staats Min. Co. v. Philadelphia Elec. Co. (10th Cir. 1989)
878 F.2d 1271, 1275; Kawa v. United Sates
(2007) 77 Fed. Cl. 294, 308.)
Within the bankruptcy order is the
handwritten recital stating that the order is “not intended to extend to issues
raised by Debtor” in this appeal. This
recital is unavailing. One court cannot
dictate whether its judgment has preclusive consequences in a subsequent court
proceeding. (Smith v. Bayer Corp. (2011) ___ U.S. ___, ___ [131 Sup.Ct. 2368,
2375]; Midway Motor Lodge v. Innkeepers’
Telemgmt.& Equip. (7th Cir. 1995) 54 F.3d 406, 409;
Resource (2d Cir. 2003) 318 F.3d 392, 397-398.) “[C]an a federal court grant a declaration
precluding a second court from applying the doctrines of claim or issue
preclusion The answer is ‘no.’ It is well-established that in federal courts
the court rendering the first judgment does not have the power to determine
that judgment’s effect; the second court is entitled to make its own
decision.” (Gagliardi v. American Home Products Corp. (E.D.Wis. 1998) 29
F.Supp.2d 972, 974.)
Finally, Nelson observes that this
lawsuit was filed before he filed for bankruptcy. It does not matter which case was filed
first. “[A] judgment in a later-filed
action can act as res judicata to bar an earlier-filed action.” (United
States v. Liquidators of European
Federal Credit Bank (9th Cir. 2011) 630 F.3d 1139, 1152, fn. 8.) When two actions based on the same claim are
pending concurrently, the one decided first becomes conclusive, regardless of
which lawsuit was filed first. (
2000) 211 F.3d 935, 937-938.) If
anything, this 2008 lawsuit shows that Nelson knew full well that he supposedly
overpaid on the loan before he
stipulated to a $64,854 deficiency payment in bankruptcy court in 2011. Nelson would never have agreed to fork out
such a huge deficiency if he really believed that he made multiple duplicate
payments on the loan in the past, thereby overpaying the Lender.
DISPOSITION
The
judgment is affirmed.
NOT TO
BE PUBLISHED IN THE OFFICIAL REPORTS.
BOREN,
P.J.
We concur:
DOI TODD,
J.
ASHMANN-GERST,
J.
name="_ftn1" title="">[1] The
facts are taken from appellant’s fifth amended complaint. At the parties’ request, we take judicial
notice of publicly recorded documents and documents filed in appellant’s
voluntary bankruptcy proceeding. (Evid.
Code, § 452, subd. (h); Evans v.
California Trailer Court, Inc. (1994) 28 Cal.App.4th 540, 549 [judicial
notice of publicly recorded deeds; Bunch
v. Hoffinger Industries, Inc. (2004) 123 Cal.App.4th 1278, 1290, fn. 3
[judicial notice of bankruptcy court proceedings]
name="_ftn2" title="">[2] GreenPoint
Mortgage Funding and EMC Mortgage Corp. (the Lender) are not parties to this
appeal, nor is Koerner.
