Mass Joinder Requires Real Joinder

Brown v. Superior Court, No. F073964 (D5 Jan. 30, 2018)

This is a sketchy looking mass joinder case attacking home mortgage trust and servicing practices. It appears that some religious-sounding outfit convinced more than 1,000 homeowners to assign it the right to bring any claims related to their loans, along with a 5 percent interest in the underlying estates. The Ministry then re-assigned all those rights to Plaintiff, who filed an enormous litigation that seeks damages on behalf of everyone. 

The issue is whether the homeowner assignors need to be joined as necessary parties under Code of Civil Procedure § 389. In an unpublished part of the opinion, the Court explains that mass aggregation of claims through assignments isn’t necessarily improper. But under the circumstances here, the assignors needed to be joined because a judgment in the litigation could affect their rights to the 95% percent stakes in the underlying realty that they still held.

In the published part of the decision, the Court addresses Plaintiff’s argument that joinder of the assignors is not required due to a different statute—§ 369(a)(3). That provision establishes exceptions to § 367’s real party-in-interest requirement for standing to sue. It permits “a person with whom, or in whose name, a contract is made for the benefit of another” to “sue without joining as parties the persons for whose benefit the action is prosecuted.” Plaintiff’s argument is that because the assignments were made for the benefit of the assignors, § 369(a)(3) permits him sue on the assignors’ behalf without joining them.

The court holds that § 369(a)(3) isn’t entirely clear on its face as to whether an assignee of claims and a partial assignment of the underlying property falls within the rule. But it’s pretty clear from the Law Revision Commission commentary that the purpose of the statute was to permit fiduciaries to sue on behalf of their beneficiaries—e.g., an agent who mads a contract in his own name on behalf of an an undisclosed principal—without joining them. That’s not what we have here. So, based on the commentary and the purpose of the rule, the Court holds that § 369(a)(3) applies only when a plaintiff, who is generally a fiduciary, makes a contract for the sole benefit of the beneficiary. It “does not apply to assignments where the plaintiff obtains a partial interest in the outcome of the litigation and the assignors retain a partial interest in the outcome.” So § 369(a)(3) does not excuse Plaintiff’s failure to join the assignors in this case.

Writ denied.