Filed 10/28/13 Levy v. Wells Fargo Asset Securities CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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 This opinion has not been certified for publication 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. 

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

MICHAEL LEVY,

Plaintiff and Appellant,

v.

WELLS FARGO ASSET SECURITIES 

CORPORATION et al.,

Defendants and Respondents.

 D061617

 (Super. Ct. No.

 37-2010-00060492-CU-BC-NC)

APPEAL from a judgment of the Superior Court of San Diego County, Jacqueline 

M. Stern, Judge. Reversed with directions.

Veljovich Law Group and David Andrew Veljovich for Plaintiff and Appellant.

Sheppard, Mullin, Richter & Hampton, Erik S. Bliss, Karin Dougan Vogel, and 

John C. Dineen for Defendants and Respondents.
2

I.

INTRODUCTION

Plaintiff Michael Levy appeals from a judgment of dismissal entered after the trial 

court sustained defendant Wells Fargo Asset Securities Corporation's demurrer to Levy's 

first amended complaint without leave to amend. Defendant U.S. Bank National 

Association, as trustee for Wells Fargo Asset Securities Corporation, joined in the 

demurrer and is identified in the judgment of dismissal as a prevailing defendant.1 

Levy's action concerns certain improvements and conditions on residential property 

adjacent to his residence that were determined in a prior action against the previous 

owners to violate governing covenants, conditions and restrictions (CC&Rs) and to 

constitute a nuisance. Wells Fargo owned the adjacent property at the time Levy filed 

this action.

The first amended complaint includes a first cause of action under Civil Code 

section 1354 for enforcement of governing documents, including CC&Rs; a second cause 

of action for declaratory relief; and a third cause of action for nuisance. Levy alleges that 

he is entitled to both injunctive relief and damages under the first and third causes of 

action. On appeal, Levy contends that the trial court erred in ruling that his previous 

successful action against the prior owners of the subject property (the prior action) bars 

all of his claims against Wells Fargo under the doctrine of res judicata. As we explain 

below, we conclude that the doctrine of res judicata does not bar Levy's claim for 

 

1 We will refer to both defendants collectively as Wells Fargo.
3

injunctive relief, which he is entitled to pursue against the current owner of the subject 

property. We further conclude that the doctrine of res judicata does not bar Levy's causes 

of action for enforcement of governing documents and nuisance against Wells Fargo, to 

the extent that those causes of action seek damages that accrued during the period that 

Wells Fargo owned the subject property.

II.

FACTUAL AND PROCEDURAL BACKGROUND2

A. The Prior Action

In the prior action, Levy sued the owners of real property that is adjacent to his 

property for "Enforcement of Governing Documents—Civil Code § 1354," declaratory 

relief and nuisance.3 Levy alleged that the owners had violated the CC&Rs and other 

governing documents by "failing to obtain approval for improvements, installing 

 

2 Because this case is on appeal from the sustaining of a demurrer, our statement of 

facts is based on the allegations of Levy's first amended complaint filed in this action and 

matters of which the trial court took judicial notice. (Crowley v. Katleman (1994) 8 

Cal.4th 666, 672; Saks v. Damon Raike & Co. (1992) 7 Cal.App.4th 419, 422.) In ruling 

on Wells Fargo's demurrer, the trial court took judicial notice of the following documents 

filed in the prior action: (1) Levy's first amended complaint; (2) Levy's "Legal 

Memorandum in Support of Judgment;" and (3) the judgment.

3 The adjacent property owners who were named as defendants in Levy's first 

amended complaint in the prior action were Mark Shneour and Lori Fincer, as trustees of 

the Schneour Mark & Lori Fincer Trust, and Shneour in his individual capacity as the 

alleged "beneficial owner" of the property. We will refer to these defendants in the prior 

action as the "previous owners." Levy's first amended complaint in the prior action also 

named the Bressi Ranch Community Association (HOA) as a defendant and included a 

cause of action for declaratory relief against the HOA. However, the judgment in the 

prior action does not address that cause of action.
4

improvements in violation of the governing documents; failing to obtain City building 

permits for improvements; [violating] City building codes and setback requirements; 

[and] maintaining a nuisance upon the property." He sought injunctive relief, damages, 

attorney fees and costs for the alleged violations of the governing documents, and a 

judicial declaration determining the rights and obligations of the parties. In his nuisance 

cause of action, Levy alleged that the previous owners "failed to maintain, care and 

otherwise used the property, in violation of the [HOA's] governing documents, in 

violation of City ordinances, codes and requirements and otherwise kept the property in a 

state of disrepair." Levy sought damages caused by the alleged nuisance and an 

injunction to abate the nuisance.

In December 2009, before the court entered judgment in the prior action, Wells 

Fargo acquired title to the property through a trustee sale, presumably because the 

previous owners defaulted on their mortgage loan. After the previous owners twice failed 

to appear for trial, the trial court struck their answer and entered their default. Based on 

the evidence and legal memorandum that Levy presented in support of a default 

judgment, the court entered judgment awarding Levy declaratory relief; damages for 

nuisance in the amount of $25,000; attorney fees in the amount of $22,150; and costs in 

the amount of $1,682.83. The judgment did not address Levy's request for injunctive 

relief.

The judgment included the court's findings that the previous owners had violated 

the governing documents by failing to comply with the HOA architectural committee's 

conditional approval requirements, including failing to revise and resubmit plans for 
5

approval; failing to timely complete approved exterior improvements; failing to obtain 

the HOA's approval before commencing exterior improvements; installing a deck in 

violation of the CC&Rs and architectural guidelines; planting trees within three feet of 

the property line; installing an unapproved above-ground spa within five feet of the 

property line; installing walls in the front yard that exceed the maximum permitted 

height; installing planters containing soil placed against adjacent wood fences; and 

painting the driveway.

During oral argument on Wells Fargo's demurrer in the present case, the trial court 

asked Levy's counsel why the judgment in the prior action did not include injunctive 

relief. Levy's counsel explained: "By the time we got to the default prove-up process, 

[Wells Fargo] owned the property. We actually sought leave to add [Wells Fargo] to that 

lawsuit, and at that point the court denied it and said, 'If you're going to file a lawsuit 

against the bank, you can go file a new lawsuit against the bank and deal with that.' "

B. The Present Action

Levy filed the present action against Wells Fargo in October 2010. His operative 

first amended complaint in this action includes the same three causes of action that he 

brought against the previous owners ("Enforcement of Governing Documents—Civil 

Code § 1354," declaratory relief, and nuisance). The allegations against Wells Fargo in 
6

each of these causes of action are substantially the same as those stated in the 

corresponding causes of action against the previous owners in the prior action.4

Wells Fargo demurred to Levy's amended complaint on the ground that his claims 

were barred by res judicata. The trial court sustained the demurrer on that ground 

without leave to amend and entered a judgment of dismissal.

III.

DISCUSSION

A. Standard of Review

"A demurrer tests the legal sufficiency of the complaint, and the granting of leave 

to amend involves the trial court's discretion. Therefore, an appellate court employs two 

separate standards of review on appeal. [Citations.] First, the complaint is reviewed de 

novo to determine whether it contains sufficient facts to state a cause of action." 

(Hernandez v. City of Pomona (1996) 49 Cal.App.4th 1492, 1497.) Second, when the 

demurrer is sustained without leave to amend, we determine whether the trial court 

abused its discretion in denying leave to amend. (Ibid.)

 

4 Levy's first cause of action for enforcement of the governing documents in the 

prior action included allegations concerning the HOA's failure to enforce the CC&Rs. 

These allegations are not included in the first amended complaint in the present action. 

In addition, certain allegations were added to the first cause of action in the present case, 

including that Wells Fargo has "failed and refused to correct the violation of governing 

documents and the violation remains in existence, despite request for corrections by 

[Levy]" and that "[Levy] gave requisite notice to defendants as required by law [and] 

received no response from defendants."
7

B. Judicial Notice of Deed

Wells Fargo filed an unopposed request that we take judicial notice of a recorded 

deed by which ownership of the subject property was transferred from Wells Fargo to a 

third party on February 23, 2012, while this appeal was pending. " 'Judicial notice is the 

recognition and acceptance by the court, for use by the trier of fact or by the court, of the 

existence of a matter of law or fact that is relevant to an issue in the action without 

requiring formal proof of the matter.' [Citation.]" (Lockley v. Law Office of Cantrell, 

Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 882.) "[A] reviewing court 

may take judicial notice of any matter specified in [Evidence Code] Section 452." (Evid. 

Code, § 459, subd. (a).) Evidence Code section 452, subdivision (c), authorizes courts to 

take judicial notice of "[o]fficial acts of the legislative, executive, and judicial 

departments of the United States and any state of the United States." Evidence Code 

section 452, subdivision (g) authorizes courts to take judicial notice of "[f]acts and 

propositions that are of such common knowledge within the territorial jurisdiction of the 

court that they cannot reasonably be the subject of dispute." A court may take judicial 

notice of a grant deed under both of these subdivisions. (Ragland v. U.S. Bank National 

Assn. (2012) 209 Cal.App.4th 182, 194; Lockhart v. MVM, Inc. (2009) 175 Cal.App.4th 

1452, 1460). Accordingly, we take judicial notice of the recorded deed showing that 

Wells Fargo no longer owns the subject property.

C. Applicability of Res Judicata to Levy's Claims
8

Under the doctrine of res judicata, a valid final judgment on the merits in a 

defendant's favor bars further litigation on the same cause of action. (Takahashi v. Board 

of Education (1988) 202 Cal.App.3d 1464, 1473 (Takahashi).) Collateral estoppel, a 

secondary aspect of res judicata, bars a party from litigating matters that were litigated 

and determined in a prior proceeding. (Id. at pp. 1473-1474.) The bar against further 

litigation on the same cause of action is referred to as "claim preclusion" and the 

collateral estoppel aspect of res judicata is referred to as "issue preclusion." (Mata v. City 

of Los Angeles (1993) 20 Cal.App.4th 141, 149, fn. 7.)

" 'The prerequisite elements for applying the doctrine to either an entire cause of 

action or one or more issues are the same: (1) A claim or issue raised in the present action 

is identical to a claim or issue litigated in a prior proceeding; (2) the prior proceeding 

resulted in a final judgment on the merits; and (3) the party against whom the doctrine is 

being asserted was a party or in privity with a party to the prior proceeding.'

[Citation.]" (People v. Barragan (2004) 32 Cal.4th 236, 253.) However, "[e]ven if these 

threshold requirements are established, res judicata will not be applied 'if injustice would 

result or if the public interest requires that relitigation not be foreclosed.' [Citation.]" 

(Citizens for Open Access Etc. v. Seadrift Assn. (1998) 60 Cal.App.4th 1053, 1065.)

1. Claim for Injunctive Relief

Although Levy obtained a default judgment in the prior action, the trial court 

declined to rule on his request for injunctive relief—the only relief that can truly remedy 

the alleged nuisance and violations of governing documents that gave rise to this 

litigation. As noted, when Levy learned that Wells Fargo had acquired title to the 
9

property at issue, he requested permission to add Wells Fargo as a defendant, presumably 

so that he could obtain the injunctive relief that he had requested in his complaint. 

According to Levy's counsel, the court denied Levy's request to name Wells Fargo as a 

defendant, and instead advised him to file a new action against Wells Fargo. The trial 

court in the prior action did not deny Levy's request for injunction relief. Rather, the 

court simply did not address it. We assume that the judgment in the prior action does not 

address Levy's claim for injunctive relief against the previous owners because the court 

correctly viewed that claim as having been rendered moot, as to the previous owners, by 

Wells Fargo's acquisition of the subject property.5 

Although Levy's claim for injunctive relief has become moot as to Wells Fargo as 

well because Wells Fargo no longer owns the subject property, it is not barred under the 

doctrine of res judicata. A judgment "is not res judicata . . . as to any matters which the 

court expressly refused to determine and which it directed should be litigated in another 

forum or in another action." (Cason v. Glass Bottle Blowers Assn. (1951) 37 Cal.2d 134, 

141; Stark v. Coker (1942) 20 Cal.2d 839, 843 ["[W]hen it affirmatively appears that an 

 

5 An injunction is not an in rem remedy that runs with the land. (People ex rel. 

Gwinn v. Kothari (2000) 83 Cal.App.4th 759, 765.) "[A]n injunction—a writ or order 

requiring a person to refrain from a particular act or to do a particular act [citation]—is an 

in personam remedy. [Citation.] 'An injunction is obviously a personal decree. It 

operates on the person of the defendant by commanding him to do or desist from certain 

action.' [Citation.] [¶] It is well established that injunctions are not effective against the 

world at large." (Ibid.) Accordingly, Levy's claim for injunctive relief became moot as 

to the previous owners when Wells Fargo acquired the subject property, although judicial 

economy arguably would have been better served by granting Levy leave to name Wells 

Fargo as a defendant in the prior action rather than directing him to file a new action 

against Wells Fargo.
10

issue was not determined by the judgment, [the judgment] obviously is not res judicata 

upon that issue"].) " 'Where a party was precluded by the court from litigating a claim in 

the first action on the ground that it should be litigated in a separate action, the rules of 

res judicata do not preclude him from litigating it in a separate action; on the contrary his 

right to litigate it in a separate action is res judicata.' [Citation.]" (Estate of Doyle 

(1962) 202 Cal.App.2d 434, 439, italics added.)

Accordingly, the fact that Levy was not permitted to pursue his claim for 

injunctive relief against Wells Fargo in the prior action by adding Wells Fargo as a 

defendant in that action precludes the application of res judicata to that claim, because the 

claim was not "litigated and determined in a prior proceeding." (Takahashi, supra, 202 

Cal.App.3d at pp. 1473-1474.)6 Because Levy can obtain the injunctive relief that he 

 

6 Wells Fargo cites Stafford v. Yerge (1954) 129 Cal.App.2d 165, 170 (Stafford) and 

Riddle v. Fiano (1961) 194 Cal.App.2d 684, 695 (Riddle) for the proposition that a 

judgment is conclusive not only as to relief granted but as to relief denied or withheld. 

However, both of those cases involved a prior adjudication that the plaintiff was not 

entitled to particular relief that the plaintiff sought, not a prior judgment in which the 

court did not adjudicate a claim for relief one way or another.

In Riddle, the plaintiff sued for imposition of a constructive trust on $15,000 in 

cash that he allegedly gave a defendant for safekeeping the night before the federal 

officers arrested the defendant on narcotics charges and confiscated $17,000 in cash from 

the defendant's apartment. The federal officers gave the cash to the Director of Internal 

Revenue who applied it to a tax deficiency that the defendant owed. (Riddle, supra, 194 

Cal.App.2d at pp. 685-686.) The Court of Appeal concluded that the doctrine of res 

judicata barred the plaintiff's action because a federal court in a prior action that plaintiff 

brought against the federal government had determined that the confiscated cash was not 

the same cash that the plaintiff gave to the defendant for safekeeping. (Id. at pp. 694-

695.) The Riddle court decided that the same factual issue was presented in both cases 

and observed that "[a] final judgment is conclusive as to the relief granted and also as to 

the relief denied." (Id. at p. 695.) Read in context, the court's observation simply 

articulates the principle that the adjudication of an issue in a prior action bars relitigation 
11

seeks only from the current owner of the subject property, he would be unfairly denied 

that relief if he is not allowed to pursue his claims against the current owner. Barring 

Levy's claim for injunctive relief under the doctrine of res judicata would be particularly 

unfair in light of the fact that he prevailed on his causes of action for declaratory relief 

and nuisance in the prior action, which is a strong indication that he would also have 

prevailed on his request for injunctive relief if the previous owners had not lost the 

property to foreclosure or if the current owner had been a party. We will therefore direct 

the trial court in the present case to grant Levy leave to file an amended complaint 

naming the current owner or owners as a defendant or defendants if he still wishes to 

pursue his claim for injunctive relief.

With respect to the current owners of the subject property, if Levy pursues his 

claims against them, the question regarding the application of res judicata would not be 

 

of the same issue in a later action, regardless of whether the adjudication results in 

granting or denying the relief sought in the prior action.

In Stafford, the Court of Appeal decided that the doctrine of res judicata barred the 

plaintiff's action to collect royalties from an oil well because the action presented issues 

that were identical to issues presented in an earlier action to collect royalties from the 

same well, and plaintiff was in privity with the plaintiffs in the prior action. (Stafford, 

supra, 129 Cal.App.2d at p. 170.) The plaintiff argued that the prior judgment did not 

determine the rights and obligations of the parties to the prior action and therefore the 

doctrine of res judicata did not apply because the prior judgment "determined only 'that 

the plaintiffs take nothing and that the defendants have costs.' " (Id. at p. 170.) The 

Stafford court rejected that argument, stating: "A judgment is not only conclusive as to 

relief granted, but as to relief denied. [Citation.] Otherwise a defendant who had won a 

judgment 'that plaintiff take nothing' after a trial on the merits would not have any 

protection against another suit on the same claim. . . . [¶] The finality of a judgment on 

the merits is the same whether the plaintiff wins or loses." (Ibid.) 

Riddle and Stafford are inapposite because in the present case, the court in the 

prior action did not deny Levy's request for injunctive relief; rather, it declined to address 

it and directed Levy to pursue it in a new action against Wells Fargo.
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whether Levy is precluded from relitigating his claims based on the alleged violations of 

the governing documents and nuisance, but rather whether Levy may use collateral 

estoppel offensively to preclude the current owners from defending those claims.7 In 

determining whether to allow offensive collateral estoppel, courts consider whether the 

defendant had a full and fair opportunity to litigate the issue. (Roos v. Red (2005) 130 

Cal.App.4th 870, 880.) The current owners obviously have had no opportunity to defend 

Levy's claims against their predecessors in interest (the previous owners), and the 

previous owners had no incentive to vigorously litigate because they lost the subject 

property in foreclosure and declined to appear for trial, resulting in a default judgment 

against them. Consequently, the current owners of the property will be entitled to defend 

against all of Levy's claims, if Levy pursues those claims against the current owners.

2. Claims against Wells Fargo

As noted, Levy's claim for injunctive relief is moot as to Wells Fargo because 

Wells Fargo no longer owns the subject property. Levy's cause of action for declaratory 

relief is similarly moot as to Wells Fargo because declaratory relief operates 

prospectively to declare future rights rather than to address past wrongs. (County of San 

Diego v. State of California (2008) 164 Cal.App.4th 580, 607-608.) However, Levy's 

 

7 Although the issue of the res judicata effect of the judgment in the prior action as 

to new defendants that Levy may or may not name is not before us, we briefly address it 

for the guidance of the trial court in view of the unusual circumstances of this case. (See 

People v. Ceja (2010) 49 Cal.4th 1, 10; McCarthy v. Poulsen (1985) 173 Cal.App.3d 

1212, 1219, fn. 3.) 
13

cause of action for nuisance is neither moot as to Wells Fargo nor entirely barred by res 

judicata because Levy effectively alleges a continuing nuisance.8

"[I]f a nuisance is a use which may be discontinued at any time, it is considered 

continuing in character and persons harmed by it may bring successive actions for 

damages until the nuisance is abated. [Citation.] Recovery is limited, however, to actual 

injury suffered prior to commencement of each action. Prospective damages are 

unavailable." (Baker v. Burbank-Glendale-Pasadena Airport Authority (1985) 39 Cal.3d 

862, 869.) "Even solid structures have been considered nuisances where it appeared that 

the structures could have been removed." (Id. at p. 870, fn. 11.) Courts "should be 

particularly cautious not to enlarge the category of permanent nuisances beyond those 

structures or conditions that truly are permanent. Where some means of abatement 

exists, there is little or no incentive to make remedial efforts once the nuisance is 

classified as permanent. Such a result is at odds with tort law's philosophy of 

encouraging innovation and repair to decrease future harm." (Id. at p. 872.)

Because a plaintiff harmed by a continuing nuisance may bring successive actions 

for damages until the nuisance is abated, the doctrine of res judicata does not apply to an 

ongoing dispute over a continuing nuisance. As one federal court observed, " '[R]es 

judicata does not bar claims for continuing conduct complained of in [a] second lawsuit 

 

8 In his third cause of action for nuisance, Levy alleges that "[u]nless the nuisance 

created by defendants is abated, plaintiff's property will continue to diminish in value." 

He further alleges that "[d]efendants' continuing nuisance . . . will require plaintiff to 

bring a multiplicity of actions to protect plaintiff's property interests, thereby rendering 

plaintiff's remedy at law inadequate."
14

that occur[s] after judgment has been entered in the first lawsuit.' [Citation.] If this were 

not the case, defendants who repeatedly cause injury through continuing nuisances would 

effectively have immunity from liability for future violations if a plaintiff did not 

successfully obtain injunctive relief in the initial suit." (Rasmussen v. City of Lake Forest

(N.D. Ill. 2012) 848 F.Supp.2d 864, 868-869.)

Levy is entitled to seek from Wells Fargo any damages that he can prove accrued 

as a result of a continuing nuisance during the time that Wells Fargo owned the subject 

property. The same analysis applies to Levy's first cause of action for enforcement of the 

governing documents. Like the nuisance cause of action, the first cause of action 

includes allegations of a continuing violation that will cause continuing harm if not 

abated by an injunction.9 Levy seeks incidental damages, attorney fees, and costs that he 

allegedly incurred as a result of defendants' violation of the governing documents. He is 

entitled to seek such compensation to the extent that he incurred damages, fees, and costs 

during the time that Wells Fargo owned the subject property. However, like the current 

owners, Wells Fargo has not had the opportunity to defend against Levy's claims on their 

merits. If Levy names Wells Fargo as a defendant in his amended complaint, Wells 

Fargo is entitled to fully defend against the first and third causes of action—i.e., Wells 

 

9 In his first cause of action for enforcement of the governing documents, Levy 

alleges that "[d]efendants have failed and refused to correct the violation of the governing 

documents and the violation remains in existence, despite requests for corrections by 

Plaintiff[,]" and that "[d]efendants' actions will continue to cause great and irreparable 

harm to Plaintiff [unless abated by an injunction]."
15

Fargo may litigate the issue of liability under those causes of action as well as the issue of 

damages during the time period it owned the subject property.

As noted, Levy's second cause of action for declaratory relief is moot as to Wells 

Fargo. When the basis for a judgment disappears during the pendency of an appeal, the 

proper disposition is to reverse the judgment with directions to the trial court to dismiss 

the action as moot. (Paul v. Milk Depots, Inc. (1964) 62 Cal.2d 129, 134-135.) Applying 

that principle to Levy's cause of action for declaratory relief, we conclude that the proper 

disposition of that cause of action is to direct the trial court to dismiss it as moot as to 

Wells Fargo. (See San Bernardino Valley Audubon Society v. Metropolitan Water Dist.

(1999) 71 Cal.App.4th 382, 404 [directing dismissal of one of two causes of action as 

moot].)

IV.

DISPOSITION

The judgment of dismissal is reversed. The trial court is directed to vacate its 

order sustaining Wells Fargo's demurrer to the first amended complaint without leave to 

amend. The court is directed to enter a new order overruling the demurrer as to the first 

cause of action for enforcement of governing documents and the third cause of action for 

nuisance, and granting Levy leave to amend the complaint for the sole purpose of adding 

the current owner or owners of the subject property as a defendant or defendants. The 

court is directed to dismiss the second cause of action for declaratory relief as moot as to 

Wells Fargo. The second cause of action remains viable as to any new defendants. If 

Levy does not amend to add any new defendants within the time period that the trial court 
16

allows, the court is directed to dismiss the second cause of action. Levy's recovery 

against Wells Fargo under the first and third causes of action is limited to damages that 

he may have incurred during the time period that Wells Fargo owned the subject 

property. Levy's recovery of damages against any current owner of the subject property 

named as a defendant is similarly limited to damages incurred during the period of that 

defendant's ownership of the subject property. Levy is awarded his costs on appeal.

AARON, J.

WE CONCUR:

McCONNELL, P.J.

O'ROURKE, J.