Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_15-cv-01636/USCOURTS-cand-4_15-cv-01636-1/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 28:1345 Foreclosure

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

MASAZUMI INOUE,

Plaintiff,

v.

BANK OF AMERICA, NATIONAL 

ASSOCIATION, ET AL.,

Defendants.

Case No. 15-cv-1636-YGR 

ORDER GRANTING MOTION TO DISMISS

Re: Dkt. No. 12

Currently before the Court is defendants’ motion to dismiss plaintiff’s FAC based on the 

doctrine of res judicata and various other grounds, filed on June 6, 2015 (Dkt. No. 13 (“Mtn.”).) 

Plaintiff Masazumi Inoue opposed the motion (Dkt. No. 21 (“Oppo.”)), and defendants timely 

filed a reply. (Dkt. No. 26.) Having carefully considered the papers submitted,1the record in this 

case, oral argument, and good cause shown, the Court hereby GRANTS defendants’ motion to 

dismiss WITHOUT LEAVE TO AMEND.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. The Previously-Litigated State Court Action 

On May 9, 2013, the plaintiff filed a wrongful foreclosure case in the California Superior 

Court, County of San Francisco, asserting six causes of action: (1) violation of California Civil 

 

1

 In connection with its motion, the defendants filed a request for judicial notice of certain 

publicly recorded documents from the record in the related state case. (Dkt. No. 14 (“RJN”).) 

The Court GRANTS the unopposed request pursuant to Federal Rule of Evidence 201. “[A] court 

may take judicial notice of ‘matters of public record.’” Lee v. City of Los Angeles, 250 F.3d 668, 

689 (9th Cir. 2001). The facts subject to judicial notice are properly considered on a motion to 

dismiss under Federal Rule of Civil Procedure 12(b)(6). Mullis v. United States Bankruptcy Ct., 

828 F.3d 1385, 1388 (9th Cir. 1987). 

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Code section 2923.5; (2) fraud; (3) intentional misrepresentation; (4) violation of California Civil 

Code section 2923.6; (5) violation of California Civil Code section 1572; and violations of 

California Business and Professions Code section 17200. (RJN, Ex. 1 (“State Court Complaint”).) 

That complaint generally alleged wrongful conduct in connection with events leading up to and 

including a mortgage foreclosure by defendant Bank of America, N.A. (“BANA”).2

Relevant to defendants’ motion to dismiss, the State Court Complaint included the 

following allegations against BANA: 

 “Defendants have no standing to enforce non-judicial foreclosure. Defendants 

are strangers to this transaction, and have no authority to go forward with the 

foreclosure and Trustee’s Sale because an assignment was not acknowledge 

[sic] or recorded.” (State Court Complaint ¶ 30.) 

 “The San Mateo County Recorder’s Office does not contain any evidence of a 

recorded assignment from BANA.” (Id. ¶ 34.) 

 “Furthermore, This [sic] defendant did not adhere to the mandates laid out by 

congress before foreclosure can be considered duly perfected ... However, 

Defendants do not have the Deed of Trust, nor do they provide any documents 

evidencing obligations secured thereby. For the aforementioned reasons, the 

Notice of Default will be void as a matter of law and Defendants recorded a 

false document.” (Id. ¶ 42.) 

 “Plaintiff allege [sic] that the Defendants’ practices are likely to mislead the 

general public, and therefore, constitute a fraudulent business act of [sic] 

practice within the meaning of Business and Professional Code Section 17200.” 

 

2

The State Court Complaint also listed ReconTrust Co., Inc. as a named defendant, but 

plaintiff does not name that entity in the FAC. 

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(Id. ¶ 65.) 

 Judgment was entered in the state court action in favor of defendants and against plaintiff 

on November 21, 2013. (RJN, Ex. 2.) 

B. This Federal Action 

On April 9, 2015, the plaintiff initiated this action in federal court. (Dkt. No. 1.) The 

FAC, filed on April 28, 2015, asserts causes of action for: (1) wrongful foreclosure; (2) 

negligence; (3) fraud; (4) negligent infliction of emotional distress; (5) intentional infliction of 

emotional distress; and (6) violations of the California Business and Professions Code section 

17200 et seq. (Dkt. No. 8.) In addition to BANA, plaintiff further names defendants Mortgage 

Electronic Registration Systems, Inc. (“MERS”), and Bank of New York Mellon (“BNYM”) as 

trustee for the loan trust. 

Similar to the State Court Complaint, the FAC generally alleges wrongful foreclosure 

based on fraudulent assignment and improper securitization of the same loan secured by the same 

property, and that defendants did not have standing to foreclose. The relevant allegations are as 

follows: 

 “The foregoing sales [of Plaintiff’s loan] were made without the required 

intervening assignment of Plaintiff’s Deed of Trust and endorsement of the note 

in contravention of the governing trust documents.” (FAC ¶ 14.) 

 “Recontrust could not legally conduct a foreclosure sale of Plaintiff's property 

for the additional reason that the only Notice of Default [“NOD”] filed against 

the Plaintiffs [sic] (Exhibit "F") was executed and recorded on behalf of BNY, 

an invalid beneficiary in violation of Cal. Civil Code sections 2924(a)(1)(C) 

which requires that a (valid) beneficiary provide notice to the borrower of any 

breaches of mortgage obligations actually known to it. The Notice of Default is 

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the cornerstone of the non-judicial foreclosure statute and failure to comply 

with the requirements applicable to notices of default constitutes an egregious 

violation of the statute.” (FAC ¶ 44.) 

 “The detailed allegations of fact set forth in this Verified Complaint establish 

that none of the named defendants to this action is ‘a person entitled to enforce 

the note’ or a purchaser of the note or creditor of the payee to whom it was 

issued that obtained a property interest in the note.” (FAC ¶ 49.) 

 “Moreover, the NOD issued against the Plaintiff by Recontrust on behalf of 

BNYM did not notify him of breaches of his mortgage obligations actually 

known to the true beneficiary in violation of Cal. Civil Code section 

2924(a)(1)(C). The notification set forth in the NOD is inaccurate. Inaccurate 

notice is no notice at all. Therefore, Plaintiff was never in default of his 

mortgage loan obligations within the meaning of the non-judicial foreclosure 

statute.” (FAC ¶ 103.) 

 “Specifically, and as set forth with greater particularity in preceding paragraphs, 

BANA engaged, and continues to engage, in deceptive business practices with 

respect to mortgage servicing by collecting and attempting to collect mortgage 

payments from Plaintiff on behalf of BNYM, an invalid beneficiary.” (FAC ¶ 

102.) 

II. LEGAL STANDARD

“Federal Rule of Civil Procedure 8(a)(2) requires only a ‘short and plain statement of the 

claim showing that the pleader is entitled to relief,’ to ‘give the defendant fair notice of what the 

claim is and the grounds upon which it rests.’” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 554 

(2007) (quoting Fed. R. Civ. P. 8(a)(2)). Even under the liberal pleading standard of Rule 8(a)(2), 

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“a plaintiff’s obligation to provide the grounds of his entitlement to relief requires more than 

labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” 

Twombly, 550 U.S. at 555 (citing Papasan v. Allain, 478 U.S. 265, 286 (1986) (internal brackets 

and quotations omitted)). The Court will not assume facts not alleged, nor will it draw 

unwarranted inferences. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (“Determining whether a 

complaint states a plausible claim for relief [is] a context-specific task that requires the reviewing 

court to draw on its judicial experience and common sense.”). 

The FAC must also comply with Federal Rule of Civil Procedure 9(b) with respect to the 

claim for fraud. Rule 9 provides that “[i]n alleging fraud or mistake, a party must state with 

particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other 

conditions of a person's mind may be alleged generally.” Fed. R. Civ. P. 9(b). Such 

circumstances include the “time, place, and specific content of the false representations as well as 

the identities of the parties to the misrepresentations.” Swartz v. KPMG LLP, 476 F.3d 756, 764 

(9th Cir. 2007) (quoting Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004)). “In 

the context of a fraud suit involving multiple defendants, a plaintiff must, at a minimum ‘identif[y] 

the role of [each] defendant[ ] in the alleged fraudulent scheme.’” Id. at 765 (quoting Moore v. 

Kayport Package Express, 885 F.2d 531, 541 (9th Cir. 1989)). 

Pursuant to Federal Rule of Civil Procedure 12(b)(6), a complaint may be dismissed for 

failure to state a claim upon which relief may be granted. Dismissal for failure to state a claim 

under Rule 12(b)(6) is proper if there is a “lack of a cognizable legal theory or the absence of 

sufficient facts alleged under a cognizable legal theory.” Conservative Force v. Salazar, 646 F.3d 

1240, 1242 (9th Cir. 2011) (citing Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 

1988). The legal sufficiency of the claims themselves, and not sufficiency of the facts alleged, is 

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at issue here.3

III. DISCUSSION

A. Legal Framework 

The doctrine of res judicata operates to bar litigation in a subsequent action where a 

plaintiff raised, or could have raised, the same claims in a prior action that resulted in a final 

judgment on the merits. W. Radio Servs. Co. v. Glickman, 123 F.3d 1189, 1192 (9th Cir. 1997); 

Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 713 (9th Cir. 2001). To determine 

whether res judicata precludes a plaintiff’s claims a federal court must apply the res judicata rules 

of the particular state – in this case California – to judgments issued by that state. Robi v. Five 

Platters, Inc., 838 F.2d 318, 322 (9th Cir. 1988). Under California law, res judicata will bar 

claims “whenever there is (1) an identity of claims, (2) a final judgment on the merits, and (3) 

identity or privity between the parties.” Owens, 244 F.3d at 713 (internal quotations omitted). 

California does not require that the claims be identical for res judicata to preclude relitigating those claims. “Res judicata precludes piecemeal litigation by splitting a single cause of 

action or relitigation of the same cause of action on a different legal theory or for different relief.” 

Mycogen Corp. v. Monsanto Co., 28 Cal.4th 888, 897 (2002). “If the same primary right is 

involved in two actions, judgment in the first bars consideration not only of all matters actually 

raised in the first suit but also all matters which could have been raised.” Gonzalez v. California 

Dept. of Corrections, 739 F.3d 1226, 1233 (9th Cir. 2014) (quoting Eichman v. Fotomat Corp., 

147 Cal.App.3d 1170, 1174 (1983). “[U]nder the primary rights theory, the determinative factor is 

the harm suffered. When two actions involving the same parties seek compensation for the same 

 

3 Defendants also partially move to dismiss the FAC on grounds that plaintiff did not 

sufficiently allege facts giving rise to claims for negligence, fraud, negligent infliction of 

emotional distress, and intentional infliction of emotional distress. See Mtn. Because the Court 

finds that plaintiff’s complaint wholly fails due to the doctrine of res judicata, however, the Court 

need not address the sufficiency of the facts alleged to state a claim in the FAC. 

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harm, they generally involve the same primary right.” Boeken v. Philip Morris USA, Inc., 48 

Cal.4th 788, 108 (2008). California also subscribes to the view that identity or privity of parties 

must only be satisfied as to the party against whom res judicata is asserted. In other words, the 

pertinent question with respect to privity of parties is whether “the party against whom the plea [of 

res judicata] is asserted [was] a party or in privity with a party to the prior adjudication.” 

Bernhard v. Bank of Am. Nat. Trust & Sav. Ass’n, 19 Cal.2d 807, 813 (1942). 

Res judicata “has the dual purpose of protecting litigants from the burden of relitigating an 

identical issue with the same party or his privy and of promoting judicial economy by preventing 

needless litigation.” Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 (1979). Because “[r]es 

judicata prevents litigation of all grounds for, or defenses to, recovery that were previously 

available to the parties, regardless of whether they were asserted or determined in the prior 

proceeding[, it] thus encourages reliance on judicial decisions, bars vexatious litigation, and frees 

the courts to resolve other disputes.” Brown v. Felsen, 442 U.S. 127, 131 (1979). 

B. Analysis 

The defendants contend that res judicata should act as a complete bar to the claims in the 

FAC because plaintiff has already raised, or could have raised, each of his claims in the state court 

action that resulted in a dismissal with prejudice. Plaintiff Inoue neither addresses the three 

prongs – (1) identity of claims, (2) final judgment on the merits, and (3) identity of parties – nor 

argues that they are not met in this case. Instead, plaintiff argues that a “manifest injustice” 

exception to the doctrine of res judicata should apply in these circumstances, but he provides no 

citation or authority for this proposition. The Court addresses each of the three prongs of res 

judicata and then turns to plaintiff’s purported exception.

i. The Three-Prong Test for Res Judicata is Satisfied 

First, the identity of claims prong is satisfied because the factual allegations in both the 

State Court Complaint and the FAC “involve the same primary right,” or the alleged wrongful 

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foreclosure. Boeken, 48 Cal.4th at 108. In particular, the plaintiff alleges that defendants 

wrongfully foreclosed on the same loan on the same real property, and plaintiff raises challenges 

to the validity of the assignment of the same deed of trust. That the plaintiff adds myriad new 

factual allegations in the FAC, mostly related to so-called “dual tracking,” and various new state 

law claims is not relevant to this inquiry. See Gonzalez, 739 F.3d at 1233 (the doctrine of res 

judicata operates to bar not only all claims that were actually raised in a previous action, but also 

those that could have been raised.) Plaintiff provides no alternative perspective. Accordingly, this 

prong is met. 

Second, the dismissal of the state court action is a final judgment on the merits. The state 

court entered an order and judgment, dismissing that action with prejudice for plaintiff’s failure to 

prosecute. (See RJN Ex. 3.) “Unless otherwise specified, such a dismissal [with prejudice for 

failure to prosecute] ‘operates as an adjudication on the merits.’” Owens, 244 F.3d at 714 (quoting 

Fed. R. Civ. P. 41(b)). Again, plaintiff provides no authority to the contrary. On this basis, the 

second prong is satisfied. 

Finally, the requirement of identity or privity of parties is satisfied here. Plaintiff is 

unquestionably the same person in both the state court action and this federal action, and 

defendant BANA is likewise the same entity. Defendants MERS and BNYM were not parties to 

the state court action, but they may still assert res judicata as to these claims. Bernhard, 19 Cal.2d 

at 812-13 (“There is no compelling reason, however, for requiring that the party asserting the plea 

of res judicata must have been a party, or in privity with a party, to the earlier litigation.”) The 

FAC addresses the same primary rights previously adjudicated against plaintiff in the state court 

action, and so MERS and BNYM are entitled to assert res judicata against plaintiff. Id. 

ii. No Exception to Res Judicata Applies to Plaintiff’s Claims

Plaintiff’s discussion of why the “manifest injustice” exception to res judicata should 

apply here is hardly a model of clarity. As the Court noted at the outset, plaintiff does not cite any 

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law in support of this proposition.4 Moreover, his analysis quickly devolves into a nonsensical 

discussion of defendants’ constitutional standing. The relevance of defendants’ standing in this 

Court – the forum chosen by plaintiff – is lost on the Court. It simply has no bearing on whether 

the doctrine of res judicata should apply under these circumstances. 

Consequently, no applicable exception applies, and res judicata will bar the present suit. 

C. Leave to Amend 

Leave to amend is liberally granted. Foman v. Davis, 371 U.S. 178, 182 (1962); Chodos v. 

West Pub. Co., 292 F.3d 992, 1003 (9th Cir. 2002). One exception to this general rule of 

permissiveness, however, is where amendment would be futile. Foman, 371 U.S. at 182; Smith v. 

Pac. Props. & Dev. Corp., 358 F.3d 1097, 1101 (9th Cir. 2004). The plaintiff has failed to 

identify other facts or theories that would avoid application of res judicata to his claims and 

justify granting leave to amend. The Court finds that it would be futile to grant leave to amend. 

IV. CONCLUSION 

For the reasons stated above, the Court GRANTS the defendants’ motion to dismiss 

WITHOUT LEAVE TO AMEND. The defendants shall submit a proposed form of judgment, 

approved as to form by the plaintiff, within five (5) business days of the date of this Order. 

This order terminates Docket Number 12. 

IT IS SO ORDERED. 

 

4

The Court acknowledges that the concept of “manifest injustice” as an exception to res 

judicata has some minimal basis in law. See Greenfield v. Mather, 32 Cal.2d 23, 35 (1948) (“[I]n 

rare cases a judgment may not be res judicata, when proper consideration is given to the policy 

underlying the doctrine, and there are rare instances in which it is not applied.”) However, the 

California Supreme Court has since said that while there is some authority “for the proposition 

that, in particular circumstances, courts may refuse to apply res judicata when to do so would 

constitute manifest injustice,” that it considers the exception “of doubtful validity” and notes that 

“it has been severely criticized.” Slater v. Blackwood, 15 Cal.3d 791, 796 (1975) (internal 

citations and quotations omitted). 

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Northern District of California

Dated: July 23, 2015 

______________________________________ 

YVONNE GONZALEZ ROGERS

UNITED STATES DISTRICT COURT JUDGE

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