Opinion ID: 2670997
Heading Depth: 4
Heading Rank: 2

Heading: Claims Could Have Been Raised in Prior Action

Text: The district court also determined Plaintiffs could have alleged their Tri-State II claims in Tri-State I. It noted the amendments to the UCC filing statements were filed months before Plaintiffs filed their Tri-State I complaint. The court found persuasive FNBW’s argument that Plaintiffs must have known about the UCC filings that substituted FNBW as the secured party of record because Plaintiffs otherwise would have had no need to ask the Tri-State I court to cancel those filings. The district court also concluded that Plaintiffs had constructive knowledge of the filings because they were matters of public record. It therefore determined “the facts on their face suggest that plaintiffs could have filed the claims in Tri-State I.” Id. at 113. We agree Plaintiffs had actual or constructive knowledge of the UCC amendments before they filed Tri-State I. They should at least be charged with constructive knowledge because the UCC filings were public records. Moreover, Plaintiffs should have learned of them when preparing their Tri-State I request to cancel or terminate the filings. As the Seventh Circuit has explained, “[w]hen a litigant files a lawsuit, the courts have a right to presume that he has done his legal - 11 - and factual homework. It would undermine the basic policies protected by the doctrine of res judicata to permit the appellants to once again avail themselves of judicial time and energy while another litigant, who has yet to be heard even once, waits in line behind them.” Car Carriers, Inc. v. Ford Motor Co., 789 F.2d 589, 596 (7th Cir. 1986). Considering Plaintiffs’ knowledge of the UCC amendments along with other facts in the record, we conclude a reasonable commercial borrower exercising due diligence should have discovered the Tri-State II claims and alleged them in Tri-State I. See, e.g., Capitol Hill Grp. v. Pillsbury, Winthrop, Shaw, Pittman, LLC, 569 F.3d 485, 491 (D.C. Cir. 2009) (concluding that plaintiff’s claims were barred because it “would have discovered the specifics of each of the two claims, had it acted with due diligence”); L-Tec Elecs. Corp. v. Cougar Elec. Org., Inc., 198 F.3d 85, 88 (2d Cir. 1999) (noting that facts and events arose prior to the filing of the original complaint and that “claim preclusion applies unless the facts . . . could not have been discovered earlier through plaintiff’s due diligence”); Feminist Women’s Health Ctr. v. Codispoti, 63 F.3d 863, 867 (9th Cir. 1995) (“[R]es judicata applies to every point which properly belonged to the subject of the litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time”) (internal quotation marks omitted)). We reach this result by comparing FNBW’s role in September 2008 with the portrayal of its role in the 2009 UCC amendments. In September 2008, Aleritas and - 12 - FNBW sent a letter to Plaintiffs stating that “payment servicing of your loans (#5483 and #5484) is transferred to” FNBW but that the “loans have not been transferred or sold by Aleritas.” Aplt. App., Vol. II at 184. By July 2009, FNBW had amended all of the relevant UCC filings to show it had replaced Aleritas as the secured party in interest on the loans and that Aleritas had authorized this change. FNBW’s transformed role—from mere servicer of the loans in September 2008 to the secured party on the loans in July 2009—should have prompted the Plaintiffs to ask Aleritas for an explanation. This in turn should have led them to discover whether the statements in the amendments were untrue, as Plaintiffs now allege. Although FNBW does not fully develop this argument in its brief, we may affirm on any ground supported by the record, see Bolden v. PRC Inc., 43 F.3d 545, 548 (10th Cir. 1994). We recognize what a plaintiff should have known often is a factual question for a jury. See Sawtell v. E.I. du Pont de Nemours & Co., 22 F.3d 248, 252 (10th Cir. 1994). But “if the essential facts are undisputed and allow only one conclusion”—in this case, that Plaintiffs knew or should have known whether FNBW made misrepresentations in the UCC amendments—then judgment in favor of FNBW is proper. Id. We agree with the district court that Plaintiffs could have brought their claims in Tri-State I. - 13 - D. Declaratory Judgment Exception Plaintiffs also assert the district court erred in not applying the declaratory judgment exception to res judicata. Under this exception, “the preclusive effect of a declaratory judgment action applies only to the ‘matters declared’ and to ‘any issues actually litigated . . . and determined in the action.’” Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co., 600 F.3d 190, 196 (2d Cir. 2010) (quoting Restatement (Second) of Judgments § 33). Kansas courts have not recognized this exception, but it would otherwise not apply to this case. The declaratory judgment exception applies “when the prior action involved only a request for declaratory relief.” Id. (internal quotation marks omitted). If any party seeks coercive relief—whether in a claim or counterclaim—then the declaratory judgment exception does not apply. See id. (refusing to apply the declaratory judgment exception where plaintiff sought only declaratory relief but defendant had filed counterclaim for coercive relief). In Tri-State I, FNBW and Plaintiffs each sought coercive relief. FNBW asserted a claim for breach of contract and sought damages. Although Plaintiffs say they asked only for declaratory relief, the district court ordered FNBW to return any security to Plaintiffs and to cancel or terminate the UCC filings, which constituted injunctive, not declaratory relief. As we have explained, “this court defines injunctive relief as all equitable decrees compelling obedience under the threat of contempt.” Westar Energy, Inc. v. Lake, 552 F.3d 1215, 1222 (10th Cir. 2009) - 14 - (internal quotation marks omitted). Whether or not the district court in Tri-State I considered the relief to have been injunctive, we must look to the substance of the underlying order. See id. Plaintiffs’ post-judgment conduct demonstrates they considered the relief to be injunctive. Several weeks after judgment was entered in Tri-State I, Plaintiffs’ counsel wrote a letter to FNBW stating that FNBW had not “complied with the Court’s Order” because no security documents had been returned and the UCC filings had not been cancelled. Aplt. App, Vol. II at 286. The letter directed FNBW to return all security documents described in the court’s mandate and to confirm that all UCC filings referenced in the mandate had been canceled or terminated by a date certain. The letter further stated that “[f]ailure to comply with the Court’s mandates will require us to file a motion seeking a further order of the Court finding FNBW to be in contempt.” Id. Because the court’s order compelled FNBW to take action under the threat of contempt, it provided injunctive or coercive relief. The declaratory judgment exception is therefore inapplicable. See, e.g., Laurel Sand & Gravel, Inc. v. Wilson, 519 F.3d 156, 164 (4th Cir. 2008) (“By asking for coercive relief (the injunction) in the first suit, the plaintiff lost the right to invoke the declaratory judgment exception.” (internal quotation marks omitted)). - 15 -