Federal Home Loan Bank v. Countrywide Financial Corp.

*1523 Opinion

The trial court concluded res judicata barred Federal Home Loan Bank of San Francisco’s (the Bank) claim against Countrywide Financial Corporation (Countrywide Financial) and sustained Countrywide Financial’s demurrer to the first amended complaint without leave to amend.

The Bank appeals. It contends the court erred by concluding res judicata barred its claim against Countrywide Financial because “[t]here was no final judgment on the merits in a prior action that could have given rise to res judicata in this action.” We disagree and affirm. We conclude the doctrine of res judicata bars the Bank’s claim against Countrywide Financial because (1) the Bank’s voluntary dismissal of its claim against Countrywide Financial in the prior action was a final judgment on the merits and (2) the claim the Bank dismissed in a prior lawsuit is the same cause of action as the claim it asserts against Countrywide Financial in the current lawsuit. Having voluntarily dismissed with prejudice claims of control-person wrongdoing against one of multiple defendants for its own strategic reasons, the Bank may not avoid the res judicata consequences of its decision and sue the dismissed…