Court Opinion

ID: 4529200
Source: CourtListenerOpinion
Date Created: 2020-04-27 21:18:03.195764+00
Date Added: 2024-06-11T12:19:09.123548
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

 WILMINGTON SAVINGS FUND
 SOCIETY, FSB, AS TRUSTEE OF                     No. 79949-5-I
 THE STANWICH MORTGAGE LOAN
 TRUST A,                                        DIVISION ONE

                             Appellant,
                                                 UNPUBLISHED OPINION
                v.

 HIGHLANDS EAST EIGHT GROUP,
 LLC;

                              Respondent,

 DOES 1-10,

                               Defendants.

       CHUN, J. — Wilmington Savings Fund Society, FSB (Wilmington) seeks to

foreclose on its deed of trust on a condominium unit in Enumclaw, Washington

(Unit). The trial court determined that the priority of action rule and res judicata

bar Wilmington’s suit. For the reasons discussed herein, we reverse.

                                  I. BACKGROUND

       In 2012, in a separate matter (original lawsuit), the Pointe East

Condominium Homeowners Association (HOA) sought to judicially foreclose on

its lien on the Unit. The HOA named the Unit’s owners and Mortgage Electronic

Registration Systems, Inc. (MERS), the beneficiary of a deed of trust on the Unit,

as defendants. The owners and MERS failed to appear, and the court entered a

  Citations and pin cites are based on the Westlaw online version of the cited material.
No. 79949-5-I/2

default judgment and foreclosure decree against them. The Condo Group, LLC,

submitted the highest bid at a Sheriff’s auction of the Unit in 2013, and the Sheriff

conveyed the Unit to Highlands East Eight Group, LLC (Highlands) in 2014.1

       In 2018, MERS moved to vacate the default judgment. By this time,

Wilmington had become the beneficiary of the deed of trust on the Unit; MERS

had assigned its interest in the deed of trust to U.S. Bank, who assigned it to the

United States Secretary of Housing and Urban Development (HUD), who, in turn,

assigned it to Wilmington. The court granted the motion to vacate.

       MERS then moved to substitute Wilmington for itself. Highlands opposed

the motion on the ground that, once substituted, Wilmington would attempt to

foreclose on their deed of trust. According to Highlands, if Wilmington did so, it

would upset the stability of the property in violation of public policy and cause

Highlands prejudice, since they had incurred substantial costs on the Unit after

purchasing it more than four years prior to the motion. The court entered an

order denying the motion to substitute (Order Denying Substitution) but noted

therein that “[t]he motion to add the denoted current Deed of Trust beneficiary is

not before this court at this time.” Wilmington did not thereafter seek to join the

original lawsuit.

       Instead, Wilmington then filed the current lawsuit, seeking to foreclose on

its deed of trust on the Unit. Highlands moved for summary judgment on the

       1
          It appears that The Condo Group purchased the Unit on behalf of Highlands, or
that Highlands is The Condo Group’s successor in interest. The Condo Group is not a
party to this action.

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No. 79949-5-I/3

grounds of res judicata and the priority of action rule. The trial court granted

Highlands’s motion. Wilmington moved for reconsideration, and the trial court

denied its motion. Wilmington appeals.2

                                     II. ANALYSIS

       We review de novo summary judgment rulings. Strauss v. Premera Blue

Cross, 194 Wash. 2d 296, 300, 449 P.3d 640 (2019). We also review de novo

questions of law, such as a trial court’s application of res judicata or the priority of

action rule. Atlantic Cas. Ins. Co. v. Oregon Mut. Ins. Co., 137 Wash. App. 296,

302, 153 P.3d 211 (2007).

   A. Res Judicata

       Wilmington argues the trial court erred in concluding that res judicata bars

their foreclosure action, because none of the doctrine’s required elements are

met. Highlands disagrees. We conclude that the Order Denying Substitution did

not constitute a final judgment, so res judicata does not bar Wilmington’s claim.

       “[R]es judicata bars the relitigation of claims that were litigated, might have

been litigated, or should have been litigated in a prior action.” Weaver v. City of

Everett, 4 Wash. App. 2d 303, 320, 421 P.3d 1013 (2018) (emphasis omitted).

“The party asserting the defense of res judicata bears the burden of proof.”

Ensley v. Pitcher, 152 Wash. App. 891, 902, 222 P.3d 99 (2009). Res judicata

       2
          Wilmington included the trial court’s Order Denying Motion for Reconsideration
in its Notice of Appeal. However, they make no reference to this order in their briefing
and assign no error to it and otherwise do not brief the issue. Accordingly, we consider
only the trial court’s Order Granting Motion for Summary Judgment. See
RAP 10.3(a)(6), (g).

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No. 79949-5-I/4

cannot apply without a valid and final judgment on the merits in a prior suit.

Ensley, 152 Wash. App. at 899.

       Highlands argues that, since Wilmington apparently intended to foreclose

on its deed of trust once substituted, the Order Denying Substitution constituted a

final judgment that, under principles of res judicata, bars Wilmington’s current

foreclosure claim. Highlands primarily analogizes to Ensley in support of their

argument. In Ensley, the plaintiff sued a tavern for negligence after a patron

drunkenly injured them. 152 Wash. App. at 895. The trial court partially granted

the tavern’s motion for summary judgment but did not enter a final judgment.

Ensley, 152 Wash. App. at 896–97. The plaintiff then moved to add an individual

claim against the bartender who allegedly overserved the patron; the trial court

denied the motion. Ensley, 152 Wash. App. at 897. The plaintiff then filed a new

lawsuit for negligence against the bartender. Ensley, 152 Wash. App. at 897. In

the new lawsuit, the plaintiff filed a motion to amend their claim to add the tavern

as a defendant, and to add a claim of vicarious liability against them. Ensley,
152 Wash. App. at 898. The court held that, while the record lacked an entry of

final judgment, the partial summary judgment constituted a final judgment for the

purposes of res judicata. Ensley, 152 Wash. App. at 901–02.

       Unlike in Ensley, where the trial court granted partial summary judgment

against the plaintiff’s claims, the record here does not demonstrate that the

original court made any ruling as to MERS’s or Wilmington’s ability to foreclose

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No. 79949-5-I/5

on the deed of trust. Thus, the Order Denying Substitution did not constitute a

final judgment.3 Accordingly, res judicata does not bar Wilmington’s claims.

   B. Priority of Action Rule

       Wilmington argues the trial court erred in concluding that the priority of

action rule bars their foreclosure action, because they are not currently

attempting to foreclose on their deed of trust in the original lawsuit. Again,

Highlands disagrees. We conclude the priority of action rule does not bar the

current lawsuit.

       Under the priority of action rule, “the first court to obtain jurisdiction over a

case possesses exclusive jurisdiction to the exclusion of other coordinate courts,”

lasting “until the matter is finally and completely disposed of.” Atlantic Cas. Ins.,
137 Wash. App. at 302. The rule applies where there is identity of subject matter,

parties, and relief between the two actions. Atlantic Cas. Ins., 137 Wash. App. at

302. “The identity must be such that a decision of the controversy by one

tribunal would, as res judicata, bar further proceedings in the other tribunal.” City

       3
          Highlands offers a second argument in support of its claim that the Order
Denying Substitution constituted a final judgment. It contends that, according to Ensley,
res judicata’s finality requirement is “quite similar” to that of appellate review. 152 Wn.
App. at 900. Accordingly, it argues that, since an order denying a motion to substitute
“may be appealed as with other final orders,” it also constitutes a final judgment for
purposes of res judicata. In support of their argument that such an order is final and
may be appealed, Highlands cites Barker v. Mora, 52 Wash. App. 825, 826, 764 P.2d 1014
(1988). But there, the trial court dismissed a claim on the ground that the plaintiff’s
personal representative had not substituted in for the plaintiff within a year after the latter
had died. Barker, 52 Wash. App. at 826–827. In doing so, the trial court also dismissed as
untimely a pending motion to substitute that the plaintiff’s counsel filed more than a year
after the plaintiff’s death. Barker, 52 Wash. App. at 827. Thus, the trial court denied a
motion to substitute, but unlike here, also dismissed the plaintiff’s substantive claims.
Barker therefore does not demonstrate that such orders denying substitution are final.

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No. 79949-5-I/6

of Yakima v. Int’l Ass’n of Fire Fighters, 117 Wash. 2d 655, 675, 818 P.2d 1076

(1991).

        MERS’s motion to substitute did not substantively argue that Wilmington

has a right to foreclose on its deed of trust. The original court denied MERS’s

motion to substitute without making any substantive ruling as to Wilmington’s

ability to foreclose on its deed of trust. The record does not demonstrate that the

original court is currently adjudicating Wilmington’s ability to foreclose on its deed

of trust. While the original court stated that it was not deciding a motion to add

Wilmington as a party, no law cited by Highlands establishes that Wilmington

must seek to join the original lawsuit. Neither is it clear, based on the record

before us, whether Wilmington could successfully join the original lawsuit at this

point. Because the original court has not ruled on Wilmington’s substantive

claims, and does not appear to be doing so currently, a decision of the

controversy by the original court would not, as res judicata, bar proceedings in

the current lawsuit. Thus, the priority of action rule does not bar Wilmington’s

suit.

        We reverse.

WE CONCUR:

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