United States District Court, D. Arizona
Douglas L. Rayes United States District Judge
2015, Plaintiff Patricia Garcia filed a verified complaint
against Defendants JP Morgan Chase Bank N.A.
("Chase") and Bank of America N.A. (BANA) in case
number CV-15-01493-PHX-DLR ("Garcia I"),
alleging that Defendants broke promises, acted negligently,
committed fraud, and otherwise violated the law while
evaluating Garcia for a home loan modification. Roughly nine
months later, Garcia filed this case ("Garcia
II") questioning Defendants' relationship to
her loan and seeking, inter alia, an order quieting
title in her favor. In April 2017, however, the Court granted
summary judgment in favor of Defendants on all claims
asserted against them in Garcia I and, in so doing,
found that BANA purchased Garcia's loan in 2007 and at
all relevant times possessed it through Chase, which services
the loan on BANA's behalf. The Court now considers
whether this matter should be dismissed in light of the
disposition of Garcia I. For the following reasons,
the Court finds that claim preclusion principles require
dismissal of this action.
to the question before the Court is whether Defendants'
relationship to Garcia's loan-an issue characterized
interchangeably throughout these cases as whether Defendants
"own" the loan, are the "note holder, "
or have "standing to foreclose"-was at issue in
Garcia I such that the claims asserted in these two
cases may be deemed transactionally related. The Court
therefore recounts the relevant factual and procedural
history of both cases, with special emphasis on the ownership
Garcia Attempts to Obtain a Home Loan
December 13, 2006, Garcia executed a promissory note
("note" or "loan") in the principal
amount of $830, 000 in favor of Washington Mutual Bank, F.A.
("WaMu"). (Doc. 278 at 3 in Garcia I.)
Garcia also executed a deed of trust in favor of WaMu, which
secured the note using real property in Scottsdale, Arizona
as collateral. (Id.) BANA purchased the note from
WaMu in 2007, and at all relevant times BANA possessed the
note through Chase, which services the loan on BANA's
behalf. (Id.) Though Garcia generally paid the loan
on time, she began missing payments in late 2012, and by
April 2014 stopped making payments entirely because "she
simply had run out of funds to pay her mortgage[.]"
(Id. at 3-4.)
this period, Garcia applied several times for a home loan
modification. (Id.) Defendants offered Garcia a
permanent loan modification in February 2015, but Garcia did
not execute the agreement because it required her to
represent that her home was not in a state of disrepair.
(Id. at 4.) Garcia's home had flooded in late
2014, and she could not make such a representation in light
of the flood damage. (Id.) After Garcia experienced
medical problems, and upon request by her attorneys,
Defendants agreed to cease default-related communications.
(Id. at 5-6.) Garcia, however, did not make any
further payments on her loan, nor did she repair the flood
damage and reapply for a loan modification. (Id. at
6-7.) Consequently, Defendants noticed a trustee's sale
of the Scottsdale property in May 2015. (Id. at 7.)
looming trustee's sale prompted Garcia in July 2015 to
file a verified complaint against Defendants in Maricopa
County Superior Court, alleging eight claims related to her
loan modification efforts and Defendants'
foreclosure-related activities: (1) promissory estoppel, (2)
breach of the covenant of good faith, (3) fraud, (4)
negligence, (5) negligent performance of an undertaking, (6)
violation of the Arizona Consumer Fraud Act (ACFA), (7)
violation of the Real Estate Settlement Procedures Act
(RESPA), and (8) negligence per se. (Doc. 1-1 at 18-44 in
Garcia I.) Defendants removed the matter to this
Court soon thereafter.
Introduction of the Ownership Issue and the Filing of
her verified complaint in Garcia I alleged that BANA
is the current beneficiary of the deed of trust, and that
Chase services the loan on BANA's behalf (Doc. 1-1 at 20,
31 ¶¶ 11, 13, 110-11 in Garcia I), Garcia
began questioning Defendants' relationship to her home
loan as early as February 2016. For example, on February 5,
2016, Garcia's attorney, Daniel Cracchiolo, sent a letter
to David Cowles, the trustee under the deed of trust,
tendering $5.00 and demanding that BANA quiet title in
Garcia's favor. (Doc. 114-1 at 12-13 in Garcia
II.) The letter explained that Cyndee Rae Estrada, an
expert witness Garcia had hired in connection with Garcia
I, believed the BANA did not own Garcia's loan. The
issue arose again on February 19, 2016, when, during a
private mediation, Garcia's attorneys indicated that they
believed BANA and Chase lacked "standing" to
foreclose. (Doc. 39-1 ¶ 10 in Garcia I.)
Notably, though these issues arose well before the February
29, 2016 deadline for amending pleadings, Garcia never
amended her verified complaint and the allegations therein
remained operative throughout the case.
than amend her verified complaint to remove the verified
allegations regarding BANA and Chase's relationship to
her loan and to add related claims, Garcia filed a separate
verified complaint on March 14, 2016 in Maricopa County
Superior Court "to determine the title and ownership of
said property." (Doc. 1-2 at 6 ¶ 17; Doc. 12 in
Garcia II.) Evidently, comments made by the private
mediator in Garcia I led Garcia's attorneys to
believe that the quiet title action was more appropriately
brought in a separate state court lawsuit. (Doc. 94 at 4 in
Garcia Places Ownership "Directly" at Issue in
filing a separate action on the ownership question, Garcia
kept pursuing the issue in Garcia I. During a March
22, 2016 telephonic discovery dispute hearing in Garcia
I, Garcia's attorney, Monique Wilhite, asked the
Court to order Defendants to respond to inquiries
"having to do with the ownership of the loan."
(Doc. 66 at 4 in Garcia I.) She explained:
During the discovery process we've learned that [BANA] is
not the owner of the loan, and we learned this, one, because
in some of the documents that we have that our client has
indicated that [BANA] simply manages some type of public
security in which her loan is supposed to exist.
Furthermore, we found out that the loan when the loan was
actually written-[WaMu] is the bank that the loan was written
with-it was-it did not exist. She wrote the loan in 2006 and
[WaMu] was gone, did not exist after 2004, I believe.
And we further have information from an actual employee of
[BANA] indicating that the loan is not with [BANA].
We believe that that is completely relevant because if [BANA]
owns the loan they approve or disapprove any type of loan
modification or settlement in this case, and so we need to
make sure that we're dealing with the right party.
So we believe that we're entitled to information
regarding the whereabouts of this loan and who actually owns
it so that we know we're dealing with the right person.
Furthermore, during the modification process our client was
told that [BANA] had approved the loan modification and
different aspects of it. If that was not the case, that
further goes to the negligence and the other claims that
we've made against Chase and how they handled this loan
(Id. at 4-5.) Ms. Wilhite specified that "the
information we need" included "the prospectus for
the trust where the loan is supposed to be, the credit
default swap and credit swap default provider, the [master]
sales and servicing agreement for the loan, the custodial
agreement and [master] servicing agreement, those types of
things." (Id. at 8-9.)
Shely, counsel for Defendants, responded that Garcia:
just filed a quiet title action in [s]tate [c]ourt raising
this issue with [WaMu] and so forth. So there's a whole
[other] litigation in which the question of the bank's
role is at issue, and we will address those issues in that
lawsuit, but they are not-the standing question is not at
(Id. at 9-10.) Ms. Wilhite, however, maintained that
the ownership issue:
is directly relevant to our claim of negligence in
handling the loan modification and the like.
Because Miss Garcia was told that Chase consulted with [BANA]
regarding her modification and they had to approve it and
those type of things, and now we have information that [BANA]
does not even own the loan.
So that's what we need to know. That's-and that
information is absolutely relevant because if [BANA]
doesn't own the loan and Chase was telling Miss Garcia
that they did and that they had to approve her loan
modification, that goes directly to all of our
(Id. at 10-11 (emphasis added).)
hearing the parties' arguments-and accepting Ms.
Wilhite's representation that Defendants'
relationship to Garcia's loan was directly relevant to
all of the claims in Garica I-the Court ordered
Defendants "to produce the documents the bank relies on
to establish its ownership or relationship to the
loan[.]" (Id. at 27.) As early as March 22,
2016, then, Defendants' relationship to Garcia's home
loan was "directly" at issue in Garcia I.
Indeed, Garcia raised the issue again two days later, in her
Reply in Support of Motion for Sanctions. (Doc. 47 in
Garcia I.) Specifically, she argued that Defendants
"have no standing to foreclose nor do they have any
ownership interest in the Garcia loan, " and claimed
that they could not settle the case because they could not
document their ownership of the note and deed of trust.
(Id. at 3-5.)
on April 12, 2016, Defendants removed Garcia II and
the case was assigned to this Court. The following day, the
Court heard oral argument in Garcia I on
Garcia's motion for sanctions, during which the ownership
issue again emerged. Mr.
While this is not in the pleadings, we've certainly given
[Defendants] plenty of notice. We think this is really a real
party in interest type of case, and we so told the mediator
that in their presence, and what we told the mediator is we
didn't think that [BANA] was the owner of this promissory
note and had really no authority to settle and really had no
And as I understand what the mediator did is he told us or
told counsel for the defendant, [BANA], to see if the
standing issue could be resolved, after which we would go in
front of him again and see if we could resolve the matter.
(Doc. 68 at 6 in Garcia I.) Thus, by April 12, 2016,
there were two separate cases involving the same parties, the
same general factual predicate, and the same ownership issue.
Early Consolidation Efforts
on May 24, 2016, Garcia moved to consolidate Garcia
I and Garcia II. (Doc. 79 in Garcia
I.) In her motion, Garcia represented that the two cases
share common issues of law and fact, involve substantially
the same transaction or event, and involve substantially the
same parties. She also stated that "one of the major
issues in [Garcia I] is whether the Defendants had
the authority to consider and offer Ms. Garcia a loan
modification." (Id. at 3.) Likewise, "the
main issue, " in Garcia II "is whether
Bank of America is the owner and beneficiary of the
June, 2016, Mr. Shely wrote to Garcia's counsel:
Now that the Court has set dispositive motions dates and a
trial date in Garcia I, it seems to me that he is
unlikely to vacate those dates, so if he were to consolidate
the two actions, he would have to consolidate under the rules
to the first filed action. We might be willing to stip[ulate]
to consolidation if you folks wanted to cross notice the
upcoming depositions of BANA, Chase and Moore for Garcia
II, allow us just to use the depo[sition] transcripts of
Mrs. Garcia that we have already taken in Garcia I
for the purposes of Garcia II. I think we have
already produced all doc[uments] that would be relevant in
both cases in Garcia I. If we can stipulate to use
the dispositive motion deadline of this June 30, and the
trial date of November 2016, then we would probably agree to
consolidate just to take care of both cases sooner rather
than later, which would allow a reduction in the amount of
discovery that is needed, because really I don't think I
need to retake Mrs. Garcia's depo[sition], and if we
agree that you can depose the upcoming deponents for use in
both cases, you would only have to take the depositions one
time for both cases.
Let me know your thoughts as soon as convenient.
(Doc. 178-1 at 6 in Garcia I.) Garcia's
attorneys did not respond to Mr. Shely's email. Instead,
on June 9, 2016 Garcia withdrew her motion to consolidate
without explanation. (Doc. 87 in Garcia I.) Had she
not done so, these matters likely would have been
consolidated and the need for the present order obviated.
counsel for Defendants still believed it would be more
efficient to cross-notice Rule 30(b)(6) depositions in both
cases, considering the substantial overlap in the issues.
Counsel for Garcia, however, objected. Consequently, on June
15, 2016, the Court held a telephonic discovery dispute
hearing in Garcia II to discuss the propriety of
cross-noticing depositions. (Doc. 34 in Garcia II.)
During that hearing, Mr. Cracchiolo reversed course and
claimed that Garcia I and Garcia II:
don't have the same issues. Although we said that, we
were mistaken. The only same issue is . . . that they're
the same parties . . . .
[Garcia I] is the case for damages against Chase and
[BANA] for negligence and other things because they failed to
modify a loan in accordance with the dictates of TARP. Case
number two is a quiet title action, completely different and
has different areas of inquiry.
. . . We maintain [Defendants] don't own the loan in
[Garcia II], which is completely different than the
matters set forth in [Garcia I].
(Id. at 5.) Based on representations from
Garcia's counsel that they could not adequately prepare
for the depositions on the timeline established in Garcia
I, the Court denied Defendants' request to
cross-notice the depositions. (Id. at 14.)
during a June 23, 2016 Rule 16 Scheduling Conference in
Garcia II, the Court remarked:
I'm looking at this new complaint. This looks a lot like
the old one. I mean, the issues look almost identical. It
seems to me that the resolution of [Garcia I] is
going to, if not decide, have a significant impact on the
claims being alleged in the second case. I don't know why
we have two different cases.
. . .
[S]ome of the issues that have been raised involve whether or
not the bank has an interest in the house. Isn't that one
of the defenses or one of the claims that we're hearing
in the other case?
47 at 3-4 Garcia II.) When asked what would be left
to decide in Garcia II after resolution of
Garcia I, Garcia's attorney, Barbara Forde,
responded: "As far as my understanding . . . the actual
issue of who's entitled to enforce the loan is not
directly at issue in the first lawsuit[.]" (Id.
at 4.) Forde's statement contradicted Ms. Wilhite's
March 22, 2016 representation that the ownership issue was
"absolutely relevant" and "goes directly to
all of our claims" in Garcia I.
I've heard a lot of arguments in [Garcia I]
about discovery and that issue has been raised, at least by
Mr. Cracchiolo, a number of times, as I ...