JOHN OWENS VS REDWOOD TRUST, INC., ET AL.

Tentative Rulings

Case Number: *******8132 Hearing Date: February 25, 2022 Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

Defendants Redwood Trust, Inc., 5 Arch Income Fund 2, LLC and Gene Clark’s Demurrer to Complaint of John Owen is overruled.

Defendants Redwood Trust, Inc., 5 Arch Income Fund 2, LLC, and Gene Clark (collectively, the “Defendants”) demur to plaintiff John Owens’ (“Plaintiff’s”) Complaint in its entirety, on the grounds that: (1) the Complaint does not allege facts sufficient to constitute each of its causes of action (C.C.P., 430.10(e)) [Grounds 1, 3, 5, 7, 9, 11, 13, 15, 17];[1] (2) the Complaint is uncertain and unambiguous [Ground 29 (sic)] and (3) the causes of action have been previously dismissed (C.C.P. 430.70) [Grounds 2, 4, 6, 8, 10, 12, 14, 16, 18]. In particular, the Defendants claim that the instant action’s Complaint is barred by the doctrine of res judicata because the same claims were previously asserted by Plaintiff in two different actions that had their complaints dismissed. (Notice of Demurrer, pp. 3-4.)

On September 13, 2021, Defendants filed the instant demurrer. The initial hearing for the instant demurrer was scheduled for January 10, 2022. On January 10, 2022, Plaintiff filed his opposition papers to the instant demurrer. The Court continued the hearing scheduled for January 10, 2022, to February 25, 2022.

On February 7, 2022, Defendants filed a declaration as their reply.

Request for Judicial Notice

Defendants’ Request for Judicial Notice Is granted, but not the truth asserted therein. (See Defendants’ Request for Judicial Notice (“RJN”), Exhs. 1–5.)

Demurrer Based on Res Judicata is Overruled

Defendants move the Court to sustain their demurrer to the Complaint in its entirety based on the ground that this action has been, or in the alternative could have been, litigated in a prior action involving the same parties, or parties in privity to those in the previous actions.

Here, the Court finds that the Defendants have failed to carry their burden to show that the requirements of the doctrine of res judicata were met.

“As generally understood, ‘[t]he doctrine of res judicata gives certain conclusive effect to a former judgment in subsequent litigation involving the same controversy.’ ” (People v. Barragan (2004) 32 Cal.4th 236, 252.) The res judicata doctrine promotes judicial economy by precluding piecemeal litigation that may occur if a single cause of action is split into more than one lawsuit or if a particular issue has already been decided in an earlier lawsuit. (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 897.)

“ ‘In its primary aspect,’ commonly known as claim preclusion, it ‘operates as a bar to the maintenance of a second suit between the same parties on the same cause of action. [Citation.]’ [Citation.] ‘In its secondary aspect,’ commonly known as collateral estoppel, ‘[t]he prior judgment ... “operates” ’ in ‘a second suit ... based on a different cause of action ... “as an estoppel or conclusive adjudication as to such issues in the second action as were actually litigated and determined in the first action.” ’ ” (People v. Barragan, supra, 32 Cal.4th at pp. 252–253; see C.C.P. 1908 (codification of common law doctrine of res judicata).)

“ ‘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.’ ” (People v. Barragan, supra, 32 Cal.4th at p. 253.) A “judgment or final order in an action or special proceeding” is conclusive as to “the matter directly adjudged.” (C.C.P. 1908(a)(2).)

Claims that could have been litigated are barred from being litigated in a subsequent lawsuit. (Needelman v. DeWolf Realty Co. (2015) 239 Cal. App. 4th 750, 759.) A party who asserts claim or issue preclusion as a bar to further litigation bears the burden of proving that the requirements of the doctrine are satisfied. (C.C.P. 1908; Vella v. Hudgins (1977) 20 Cal.3d 251, 257.)

The Defendants contend that the instant action’s Complaint is barred by the doctrine of res judicata because the present action is identical to a claim or issue litigated in two prior actions also brought by Plaintiff. In the First Action entitled Echo Park Cooperation’s, LLC v. 5 Arch Funding Corp., etc. et. al., Superior Court of California, County of Los Angeles Case Number 20STCV24548 (the "First Action") the complaint was voluntarily dismissed with prejudice. (See RJN Exh. 3 (Dismissal order of First Action’s complaint).) In the Second Action entitled Echo Park Cooperations LLC, etc. v. 5 Arch Funding Corp., etc. et. al, Superior Court of California, County of Los Angeles Case Number 20STCV46406 (the "Second Action") the Court sustained defendants’ demurrers based upon res judicata as to those defendants who had been served with the complaint and to those defendants who had not been served, the Court dismissed the complaint for failure to prosecute. (See RJN Exh. 5 (Dismissal order of Second Action’s complaint).)

According to the Complaint, Plaintiff and his partner purchased 3 particular lots of real property. (Compl., pp. 4:19–6:24.) Plaintiff took out mortgages on the subject properties and said loans were financed by Defendants. (Ibid.) The Complaint alleges that in connection with their financing, the Defendants made false and misleading allegations regarding Owens’ payments on the loans, took strong-arm tactics to thwart Owens’ attempted refinancing of the loans. Ultimately, the Complaint alleges that the Defendants tactics led to the wrongful foreclosure of the subject real properties. (Compl., pp. 6:26–15:10.)

The Defendants claim that every cause of action in the instant action’s Complaint was asserted in the First or Second Action’s complaint, and that those complaints were either dismissed with prejudice by Plaintiff or dismissed after the court sustained a demurrer to the pleading without leave to amend.[2] (Memorandum ISO Oppo., pp. 8:2–17.)

Here, the Court finds that the Defendants have failed to carry their burden to show that the requirements of the doctrine of res judicata were met. Defendants do not enumerate the requirements for the doctrine of res or explain their application. Defendants claim that the causes of action asserted by the Complaint are identical to the First and Second action’s complaints. However, the “redlined versions” do not reflect what is identical and what is new, nor do Defendants explicitly explainwhat is new. Indeed, Defendants concede that there is a new second and third cause of action, although they are characterized as a rehash of facts from the causes of action that have been dismissed.

Moreover, Defendants have not discussed all of the requirements for the application of res judicata. (Memorandum ISO Oppo., pp. 8:2–17.) They have not shown why a dismissal for failure to prosecute (Second Action) is a final judgment on the merits such that the doctrine of res judicata applies. (See RJN Exh. 5.) Nor have they established privity. A party who asserts claim or issue preclusion as a bar to further litigation bears the burden of proving that the requirements of the doctrine are satisfied. (Vella, supra, 20 Cal.3d at 257.) Defendants have failed to carry their burden to show that the requirements of the doctrine of res judicata were met.

Accordingly, the Defendants’ demurrer is overruled on these grounds. (C.C.P. 430.10(e).)

Demurrer Based on Ambiguity and/or Uncertainty is Overruled

Defendants demur to the Complaint in its entirety based on the ground that the Complaint is uncertain and ambiguous. (C.C.P. 430.10(f).) Specifically, they note that paragraph 63 of the Complaint states: "In the purported agreement, which is attached as Exhibit A, ….” (Id.) Exhibit A is not attached to the Complaint. (See generally Compl.)

Here, the Court finds that the Complaint is not vague or ambiguous. Exhibit A is patently missing such that there is no ambiguity or vagueness as a result. The proper grounds for a demurrer would be a failure to state a cause of action in connection to the specific cause of action, or entire Complaint if the alleged agreement is material to all causes of action. That particular argument was not made by the Defendants.

Accordingly, the Defendants’ demurrer is overruled. (C.C.P. 430.10(e).)

Conclusion

Based on the foregoing, the Defendants’ Demurrer is overruled.

Dated: February 25, 2022

Hon. Monica Bachner

Judge of the Superior Court

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