James Schubert v. the Bank of New York Mellon, 17-16647

Background

Plaintiff James Schubert brought his sixth lawsuit involving an equity line of credit secured by a deed of trust on his property, seeking quiet title and a declaration that he owes no money on the line.
The district court dismissed Schubert’s complaint; this appeal arises under diversity jurisdiction and requires application of California law.
Defendants are The Bank of New York Mellon and Bank of America, N.A.; a prior California state-court action (Schubert V, final judgment Nov. 13, 2014) resolved related claims.
The central factual allegation repeated from Schubert V was that the equity line had been fully repaid before the prior judgment and thus the deed of trust / debt should be voided.
The district court concluded Schubert’s quiet-title and declaratory-debt claims were barred by res judicata but offered him one opportunity to amend to allege post-2014 changes; Schubert declined and asked for final judgment on his original complaint.
The district court separately dismissed Schubert’s claim based on California’s “one action” rule (Cal. Civ. Proc. Code § 726) for failure to state a claim; that dismissal was affirmed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Schubert’s quiet-title and declaratory claim that he owes nothing on the equity line is barred by res judicata	Schubert contends the present suit seeks relief now (2017) and asserts a different legal theory (quiet title) than prior suit	Defendants argue the current claims assert the same primary right and could have been litigated earlier, so claim preclusion applies	Court holds claims are precluded by res judicata as they assert the same primary right as Schubert V; but vacates dismissal to allow amendment to allege post-judgment changes and remands
Whether Schubert may plead a new claim if the status of the debt or title changed after Schubert V	Schubert says he could seek relief based on facts arising after the prior judgment	Defendants say no new facts were alleged in the complaint and claims mirror prior suit	Court permits leave to amend: if Schubert can, in good faith, allege post-2014 changes, res judicata will not bar that new claim; remand for amendment opportunity
Whether Schubert’s declaratory claim invoking California’s “one action” rule states a claim	Schubert argues § 726 forbids multiple forms of action to enforce a mortgage-related right, so defendants cannot enforce any lien	Defendants say the prior Bank suit sought priority determination, not enforcement of debt or a recovery action against the property	Court affirms dismissal: prior suit was not an action to recover a debt or enforce the deed, so § 726 does not support Schubert’s claim

Key Cases Cited

Mycogen Corp. v. Monsanto Co., 51 P.3d 297 (Cal. 2002) (defines “primary right” test for claim identity in res judicata analysis)
Boeken v. Philip Morris USA, Inc., 230 P.3d 342 (Cal. 2010) (articulates California res judicata elements)
Palomar Mobilehome Park Ass’n v. City of San Marcos, 989 F.2d 362 (9th Cir. 1993) (applies state preclusion law in federal diversity cases)
Gonzales v. Cal. Dep’t of Corr., 739 F.3d 1226 (9th Cir. 2014) (res judicata bars relitigation even when plaintiff pleads different theories or seeks different relief)
Eichman v. Fotomat Corp., 147 Cal. App. 3d 1170 (Cal. Ct. App. 1983) (supports principle that different theories do not avoid claim preclusion)