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Werbicky v. Green Tree Servicing, LLC

United States District Court, D. Nevada

April 21, 2015



JENNIFER A. DORSEY, District Judge.

Plaintiffs Robert and Deanna Werbicky obtained a default judgment against their home-mortgage lender in state court that relieves them of their loan-repayment obligations based on unauthorized modifications to the loan documents. Although loan servicer Green Tree Servicing, LLC was not a party to that action, the Werbickys seek to enforce that state-court judgment in this action against Green Tree. I rejected the Werbickys' first request-styled as a motion to enforce a declaratory judgment-to give the judgment preclusive effect, and they've repackaged their argument into one motion for full-faith-and-credit recognition of the state-court judgment and three separate motions for summary judgment.[1] Green Tree filed its own motion for summary judgment, [2] and the parties' summary-judgment briefing has generated dozens of filings.

I do not find the state-court judgment against RBS has a preclusive effect in this case against Green Tree, so I deny the motion for full-faith-and-credit recognition of the default judgment. I also find that the fractured way in which the motions for summary judgment have been presented (1) violates the letter and spirit of the local procedural rules and (2) makes it impossible to fairly and efficiently evaluate the parties' arguments. Accordingly, I deny the pending motions for summary judgment without prejudice to each side's ability to file a single, rule-compliant motion for summary judgment by May 29, 2015.

A. Motion for Full-Faith-and-Credit Recognition of the State-Court Judgment

The Werbickys purchased their home at 9661 Bella Citta Street in Clark County, Nevada, in 2006 with two loans from First Horizon Home Loan Corporation secured by promissory notes and deeds of trust. They allege that the loan associated with the second note and deed of trust was originally financed by Residential Capital Corporation, but later altered to indicate First Horizon Home Loan Corporation as the lender. The note and deed of trust for the second loan were assigned to RBS Citizens, N.A. in 2009, which hired Green Tree to service the loan.

In 2009, after the Werbickys defaulted on their loans, First Horizon commenced foreclosure proceedings, prompting a lawsuit by the Werbickys to stop the foreclosure. The Werbickys settled with First Horizon on the first note and deed of trust, and the house was short sold. In 2011, the Werbickys determined that the second note and deed of trust had been impermissibly altered, so they amended their state-court lawsuit to include a claim against RBS. They applied for and obtained a default judgment against RBS from the state court in April 2012;[3] five months, later they separately filed this federal-court action against Green Tree alleging claims for violation of the Fair Debt Collection Practices Act (FDCPA), slander of title, intentional interference with the Werbickys' contractual relationship with First Horizon, and intentional interference with the short-sale contract.[4] The Werbickys then filed a motion to enforce their declaratory judgment. In it, they sought full-faith-and-credit recognition of the state court's default judgment and argued that the state-court judgment has res judicata effect against Green Tree.[5] I concluded that there were too many issues of fact at that time and denied the motion without prejudice.[6] The Werbickys repackaged their request, and they now seek full-faith-and-credit recognition of the default judgment against RBS under 28 U.S.C. § 1738.[7]

1. Full-faith-and-credit recognition of state-court judgments

In their motion for full-faith-and-credit recognition, the Werbickys do not explain what purpose they want the court to recognize the state judgment for; they simply ask me to give it full faith and credit. Under 28 U.S.C. § 1738, state judicial proceedings "shall have the same full faith and credit in every court within the United States... as they have by law or usage in the courts of such State... from which they are taken." "Under the federal full faith and credit statute, federal courts must give state court judgments the preclusive effect that those judgments would enjoy under the law of the state in which the judgment was rendered."[8] Thus, the preclusive effect of a Nevada judgment must be analyzed under Nevada law.[9] In essence, this court cannot recognize the judgment under 28 U.S.C. § 1738 if Nevada's preclusion law does not give the judgment preclusive effect as to Green Tree.[10]

2. The judgment against RBS is not entitled to full-faith-and-credit recognition in this action against Green Tree.

The Werbickys contend that the judgment is "res judicata" as to the "legal relations" between the Werbickys and RBS that form the basis of the Werbickys' FDCPA claim.[11] In practical effect, the Werbickys wish to use the judgment to establish that no valid debt existed, thereby barring Green Tree from ever litigating the issues established in the default judgment against RBS.

Res judicata was once used as an umbrella term to refer to the concept that parties or those in privity with them cannot relitigate a cause of action or an issue that has been finally determined by a court of competent jurisdiction.[12] Nevada law now separates claim preclusion (res judicata) and issue preclusion (collateral estoppel) into two distinct doctrines.[13] Both, however, have a party-or-privity requirement. For a claim to be precluded by a prior judgment, "the same parties or their privies [must be] involved in both cases"; for issue preclusion to apply, only "the party against whom the judgment is asserted must have been a party or in privity with a party to the prior litigation."[14] The doctrines balance the need to conserve judicial resources with the protection of litigants' due-process rights.[15] As the United States Supreme Court reiterated in Taylor v. Sturgell , these preclusion doctrines are inconsistent with basic due-process principles:

A person who was not a party to a suit generally has not had a "full and fair opportunity to litigate" the claims and issues settled in that suit. The application of claim and issue preclusion to nonparties thus runs up against the "deep-rooted historic tradition that everyone should have his own day in court."[16]

Whether I analyze the binding effect of the Werbickys' state-court judgment against RBS under claim preclusion or issue preclusion, I reach the same conclusion: the judgment cannot be given preclusive effect here ...

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