Opinion
19-10412 (JLG) Adversary Proceeding 19-01137 (JLG)
09-04-2019
In re DITECH HOLDING CORPORATION, et al., Debtors.[1] v. DITECH HOLDING CORPORATION; GREEN TREE CREDIT LLC; AND BRECKENRIDGE PROP FUND 2016 LLC; Defendants. MICHAEL MCCHRISTIAN, Plaintiff,
WEIL, GOTSHAL & MANGES LLP Ray C. Schrock, P.C. Sunny Singh Richard W. Slack Attorneys for Debtors and Debtors in Possession
Chapter 11
WEIL, GOTSHAL & MANGES LLP
Ray C. Schrock, P.C.
Sunny Singh
Richard W. Slack
Attorneys for Debtors and Debtors in Possession
DEBTORS' MOTION TO DISMISS PLAINTIFF'S ADVERSARY COMPLAINT
TABLE OF CONTENTS
PRELIMINARY STATEMENT ................................................................................................. 1
FACTS ....................................................................................................................................... 2
ARGUMENT .............................................................................................................................. 3
I. PLAINTIFF'S CLAIMS ARE NOT PROPERLY BROUGHT THROUGH AN ADVERSARY PROCEEDING .................................................................................... 3
II. RES JUDICATA BARS PLANTIFF'S CLAIMS ......................................................... 6
III. ALL CAUSES OF ACTION IN THE ADVERSARY PROCEEDING COMPLAINT ARE BARRED BY JUDICIAL ESTOPPEL ................................................................ 9
CONCLUSION ......................................................................................................................... 11
i
TABLE OF AUTHORITIES
Page(s) & Cases
Amin v. Khazindar, 5 Cal.Rptr.3d 224 (Ct. App. 2003) ......................................................................................... 8
Ashcroft v. Iqbal, 556 U.S. 662 (2009) .............................................................................................................. 7
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) .............................................................................................................. 7
Blecher v. Cooperstein (In re Cooperstein), 7 B.R. 618 (Bankr. S.D.N.Y. 1980) ....................................................................................... 6
Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336 (9th Cir. 1996) ................................................................................................... 6
Conn. v. Dewey & LeBouef LLP (In re Dewey & LeBoeuf LLP), 487 B.R. 169 (Bankr. S.D.N.Y. 2013) ................................................................................... 4
Dade Cty. Sch. Dist. v. Johns-Manville Corp. (In re Johns-Manville Corp.), 53 B.R. 346 (Bankr. S.D.N.Y. 1985) ................................................................................. 4, 6
DBL Liquidating Tr. v. P.T. Tirtamas Majutama (In re Drexel Burnham Lambert Grp., Inc.), 148 B.R. 993 (S.D.N.Y. 1992) ............................................................................................... 4
E. Sys., Inc. v. W. 45th St. Indus. Condos. Inc. (In re E. Sys., Inc.), 1991 WL 90733 (S.D.N.Y. May 23, 1991) ............................................................................ 5
Evergreen Solar, Inc. v. Barclays PLC (In re Lehman Bros. Holdings, Inc.), 2011 WL 722582 (Bankr. S.D.N.Y. Feb. 22, 2011) ............................................................... 4
In re Ephedra Prods. Liab. Litig., 329 B.R. 1 (S.D.N.Y. 2005) ............................................................................................... 3, 5
Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394 (1981) .............................................................................................................. 7
Galitz v. Edghill (In re Edghill), 113 B.R. 783 (Bankr. S.D. Fla. 1990) .................................................................................... 4
Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778 (9th Cir.2001) ............................................................................................ 9, 10 ii
Headwaters Inc. v. U.S. Forest Serv., 399 F.3d 1047 (9th Cir. 2005) ............................................................................................... 7
Holcombe v. Hosmer, 477 F.3d 1094 (9th Cir. 2007) ............................................................................................... 7
HPG Corp. v. Aurora Loan Servs., LLC, 436 B.R. 569 (E.D. Cal. 2010) ............................................................................................. 11
Lee v. City of Los Angeles, 250 F.3d 668 (9th Cir. 2001) ................................................................................................. 7
Mack v. S. Bay Beer Distributors, Inc., 798 F.2d 1279 (9th Cir. 1986) ............................................................................................... 7
Malkoskie v. Option One Mortgage Corp., 115 Cal.Rptr.3d 821 (Ct. App. 2010) ............................................................................... 8, 9
Mycogen Corp. v. Monsanto Co., 51 P.3d 297 (Cal. 2002) ......................................................................................................... 7
Palomar Mobilehome Park Ass'n v. City of San Marcos, 989 F.2d 362 (9th Cir.1993) .................................................................................................. 8
Prewitt v. N. Coast Vill., Ltd. (In re N. Coast Vill., Ltd.), 135 B.R. 641 (B.A.P. 9th Cir. 1992) ...................................................................................... 4
In re Residential Capital, LLC, 2014 WL 3057111 (Bankr. S.D.N.Y. July 7, 2014) ................................................................ 4
Rissetto v. Plumbers & Steamfitters Local 343, 94 F.3d 597 (9th Cir.1996) .................................................................................................. 10
Scott v. Aegis Mortg. Corp. (In re Aegis Mortg. Corp.), 2008 WL 2150120 (Bankr. D. Del. May 22, 2008) ................................................................ 5
Scott v. Kuhlmann, 746 F.2d 1377 (9th Cir.1984) ................................................................................................ 7
United States v. Certain Parcels of Land, 131 F.Supp. 65 (S.D. Cal. 1955) ........................................................................................... 6
Statutes & Rules
Cal. Civ. Code § 755 ................................................................................................................... 6
Cal. Civ. Code § 2429 ................................................................................................................. 8
Cal. Civ. Proc. § 1161a ............................................................................................................... 8 iii
Fed. R. Bankr. 7001 ................................................................................................................ 4, 5
Fed. R. Civ. P. 12(b)(6) ........................................................................................................... 6, 7 iv
TO THE HONORABLE UNITED STATES BANKRUPTCY JUDGE:
Ditech Holding Corporation and Green Tree Credit LLC (together with Ditech Holding Corporation, the "Ditech Defendants"), submit this motion to dismiss (the "Motion") the above captioned adversary proceeding (the "Action") complaint (the "Complaint") filed by Michael McChristian ("Plaintiff") and respectfully represent as follows:
PRELIMINARY STATEMENT
1. Plaintiff Michael McChristian, through this Action, has attempted to bring an adversary proceeding that is not authorized by the Bankruptcy Code. Plaintiff seeks money damages for pre-petition conduct and purported associated equitable relief, specifically the cancellation of a foreclosure that the Plaintiff himself has conceded was proper, from the Ditech Defendants that, if not both moot and barred by res judicata and judicial estoppel, could be reduced to a money judgment. Indeed, the Plaintiff concurrent with the filing of his adversary proceeding also filed a proof of claim seeking $650,000. Thus, it is evident that Plaintiff recognizes that this pre-petition claim (if valid) can be reduced to a monetary amount. Instead of following the proof of claims process established by the Bankruptcy Code and the Court, Plaintiff has elected to commence this duplicative and wasteful adversary proceeding, to the detriment of the Debtors, the estate and its creditors. Because this Action is not authorized by the Bankruptcy Code, the Court should dismiss it with prejudice.
2. Plaintiff's Adversary Complaint also fails to state a claim against the Defendants and should also be dismissed with prejudice on this ground. Plaintiff seeks to unwind a foreclosure sale of residential property on a theory that the foreclosing party lacked authority to foreclose. Plaintiff's claims are barred by res judicata because Plaintiff previously litigated the same dispute in an unlawful detainer action. Plaintiff is also judicially estopped from litigating this 1 dispute as he failed to disclose this claim in a prior bankruptcy action filed by the Plaintiff. The Court should dismiss the Complaint with prejudice.
FACTS
3. On February 18, 2005, Michael McChristian executed a promissory note in the amount of $ 326, 000 (the "Note") associated with the purchase of real property located at 11118 Ironwood Rd., San Diego, California (the "Property"). As security for the Note, Plaintiff executed a Deed of Trust. (The Deed of Trust was publicly recorded and is attached hereto as Ex. A). The Deed of Trust identified Homecomings Financial Network, Inc. as the Lender and Mortgage Electronic Registration Systems, Inc. ("MERS") as the nominee for the Lender and the beneficiary of the Deed of Trust. Id. ¶¶ C-E. The Deed of Trust also referenced the Note. Id. ¶ F. (Collectively, the Note and the Deed of Trust constitute the "Loan").
References to "Ex. __" refer to the exhibits attached to the Declaration of Richard W. Slack, submitted in support of the instant Motion.
4. MERS assigned its beneficial interest in the Deed of Trust to GMAC Mortgage, LLC ("GMAC"), as memorialized by an Assignment of Deed of Trust recorded on September 17, 2010. Ex. B. In turn, GMAC assigned the Deed of Trust to Green Tree Servicing, LLC ("Green Tree") in a Corporate Assignment of Deed of Trust, which was recorded on March 2, 2015. Ex. C.
5. A notice of Plaintiff s default on the Deed of Trust was recorded on or about November 29, 2016. Ex. D. A notice of trustee's sale was recorded against the Property, setting a sale date of January 5, 2018. Ex. E. Plaintiff acknowledges that he was in default under the Deed of Trust but disputes the amounts past-due under the that agreement. Compl. ¶ 75. The Complaint asserts that Plaintiff filed a chapter 13 bankruptcy in April 2018 in order to avoid foreclosure. 2 Compl. ¶ 79. As part of the 2018 bankruptcy petition, Plaintiff executed a Personal Property Schedule A/B on which he was required to identify and estimate the value of "[c]laims against third parties [including]…rights to sue," and "[o]ther contingent and unliquidated claims of every nature, including counterclaims of the debtor, and rights to setoff claims." Ex. F at 15, ¶¶ 33-34. Plaintiff's Personal Property Schedule did not disclose any of the lender liability claims asserted in the Complaint or any right to set-off against the Ditech Defendants. Id. The bankruptcy was dismissed in December 2018.
6. The Property was sold to Defendant Breckenridge Prop Fund 2016, LLC ("Breckenridge") at a foreclosure sale, and a trustee's deed upon sale was recorded on January 15, 2019. Ex. G. Breckenridge commenced an unlawful detainer eviction action (the "Unlawful Detainer Action") against Plaintiff to obtain possession of the Property. Plaintiff filed an answer in the Unlawful Detainer Action, alleging as an affirmative defense that the trustee's sale was invalid. Ex. H. Plaintiff then commenced this Action on May 15, 2019 and the following day filed a proof of claim (the "Proof of Claim"). Ex. I. The Proof of Claim seeks $650,000 and listed "Litigation" under section 8 of the proof of claim form which asks for the basis of the claim. Id. at 2. Plaintiff subsequently entered into a stipulated judgment for possession of the Property, agreeing that Plaintiff would surrender possession of the Property to Breckenridge on July 8, 2019. Ex. J. As set forth below, Plaintiff's Complaint fails as a matter of law and should be dismissed.
ARGUMENT
I. PLAINTIFF'S CLAIMS ARE NOT PROPERLY BROUGHT THROUGH AN ADVERSARY PROCEEDING
7. It is well established that pre-petition claims for money damages are properly brought through the claim process, not as adversary proceedings. See In re Ephedra Prods. Liab. Litig., 329 B.R. 1, 7 (S.D.N.Y. 2005) ("In bankruptcy, the only appropriate way to 3 assert a claim against a debtor's estate is through the timely filing of a properly executed proof of claim and not through an adversary proceeding.") (internal quotation marks omitted); In re Residential Capital, LLC, 2014 WL 3057111, at *6 (Bankr. S.D.N.Y. July 7, 2014) ("Damage claims should be asserted in a proof of claim."); Conn. v. Dewey & LeBouef LLP (In re Dewey & LeBoeuf LLP), 487 B.R. 169, 178 (Bankr. S.D.N.Y. 2013) (noting that prepetition claims for money damages must be asserted by proof of claim); Evergreen Solar, Inc. v. Barclays PLC (In re Lehman Bros. Holdings, Inc., 2011 WL 722582, at *7-8 (Bankr. S.D.N.Y. Feb. 22, 2011) (dismissing a claim for breach of contract because the claim should have been asserted "in accordance with the claims allowance process, and not by means of an adversary proceeding"); Galitz v. Edghill (In re Edghill), 113 B.R. 783, 784 (Bankr. S.D. Fla. 1990) ("Because the creditor's cause of action is predicated on a pre-petition contract claim, this Court finds that the creditor is precluded from recovering damages via this adversary proceeding."); See also Prewitt v. N. Coast Vill., Ltd. (In re N. Coast Vill., Ltd.), 135 B.R. 641, 644 (B.A.P. 9th Cir. 1992) ("[A]n adversary proceeding against the debtor seeking to recover on a pre-petition dischargeable claim would not, under our holding today, violate the automatic stay. Such a proceeding could, however, be dismissed and sanctions could be awarded under Fed.R.Bankr.P. 9011 in an appropriate proceeding, because the claim should have been asserted through the claims allowance process.").
8. This is confirmed by the Bankruptcy Rule relating to adversary proceedings. "Bankruptcy rule 7001 sets out nine specific categories of controversies that can and should be commenced as adversary proceedings. A claim for damages arising from pre-petition conduct is not one of those categories." DBL Liquidating Tr. v. P.T. Tirtamas Majutama (In re Drexel Burnham Lambert Grp., Inc.), 148 B.R. 993, 998 (S.D.N.Y. 1992); see also Dade Cty. Sch. Dist. v. Johns-Manville Corp. (In re Johns-Manville Corp.), 53 B.R. 346, 352-55 (Bankr. S.D.N.Y. 1985) 4 ("Bankruptcy Rule 7001 . . . contains an exclusive list of matters which are classified as adversary proceedings. The list does not include a category for the recovery of claims against the debtor."); Scott v. Aegis Mortg. Corp. (In re Aegis Mortg. Corp.), 2008 WL 2150120, at *6 (Bankr. D. Del. May 22, 2008) (similar).
9. Plaintiff unquestionably seeks money damages in his Action. See Compl. ¶¶ 199-200, 204 and 207-08. Plaintiff's claims arise pre-petition and are thus not properly brought as adversary proceedings but may only be asserted in the proof of claim process. Indeed, Plaintiff also filed a proof of claim which sought $650,000. This alone is sufficient for their dismissal with prejudice.
10. Plaintiff also purports to also seek equitable and declaratory relief, essentially asking the Court to set aside the valid foreclosure and sale at public auction of the Property and return it, free and clear, to the Plaintiff. Compl. ¶¶ 201-3 and 205-6. At best, however, all of the injunctive relief sought by Plaintiff is part and parcel of the money damage relief sought. Moreover, any equitable relief here is void or moot and should be disregarded for the purpose of determining whether the relief sought is monetary. See In re Ephedra Prod. Liab. Litig., 329 B.R. at 7 (dismissing improperly brought adversary proceeding and holding that plaintiff's complaint when "stripped of injunctive and declaratory demands that are meaningless . . . boils down to no more than a claim for money from the Debtors"). At the commencement of these bankruptcy proceedings, the Ditech Defendants, by the Plaintiff's own pleadings, did not hold title or any other instrument over the Property, nor are they alleged to hold title now. See Compl. ¶ 81. The Ditech Defendants cannot convey that which they do not possess and Plaintiff's equitable claims against them were moot ab initio. E. Sys., Inc. v. W. 45th St. Indus. Condos. Inc. (In re E. Sys., Inc.), 1991 WL 90733, at *4 (S.D.N.Y. May 23, 1991) 5 (noting that the "the actual disposition of property . . . may render moot an equitable claim as to the property" and collecting cases).
11. As discussed below in ¶¶ 15-18, Plaintiff has also conceded, in settling the recent Unlawful Detainer Action brought against him by Breckenridge, that Plaintiff lacks a legal right to occupy the Property, thus estopping any possible equitable relief against the Ditech Defendants. Finally, even assuming arguendo that Plaintiff does have a right to the Property, his interest therein can be reduced to money damages, given that the Property has determinable value, and thus belongs in the proof of claims process, not as an adversary proceeding. See In re Johns-Manville Corp., 53 B.R. at 355 (holding that a creditor committee's equitable relief claim was "one which can be reduced to a money judgment. Thus, their adversary proceeding is not an appropriate vehicle for adjudicating the claim").
II. RES JUDICATA BARS PLANTIFF'S CLAIMS
12. A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of a complaint not the facts or merits of the case. On a motion to dismiss for failure to state a claim under Rule 12(b)(6), all allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). A complaint challenged by a Rule 12(b)(6) motion to dismiss does not require detailed factual allegations, but, "a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of 6 the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotation marks omitted). A court is not required to accept as true a "legal conclusion couched as a factual allegation." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
The real property at issue is located in San Diego, California, so California law governs the substantive law of this action. See Blecher v. Cooperstein (In re Cooperstein), 7 B.R. 618, 621 (Bankr. S.D.N.Y. 1980) (noting that "rights to property affixed to realty are governed by the law of the situs of the realty"); United States v. Certain Parcels of Land, 131 F.Supp. 65, 70 (S.D. Cal. 1955); ("[R]ealty is governed by the law of the place where situated- California.") (citation omitted); Cal. Civ. Code § 755 ("Real property within this State is governed by the law of this State, except where the title is in the United States.").
13. When evaluating the adequacy of a complaint, a court may consider exhibits submitted with the complaint or those subject to judicial notice, without converting a motion to dismiss into a motion for summary judgment. Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001). A court may take judicial notice of "matters of public record." Mack v. S. Bay Beer Distributors, Inc., 798 F.2d 1279, 1282 (9th Cir. 1986).
14. A defendant may raise the affirmative defense of res judicata or preclusion by way of a motion to dismiss under Rule 12(b)(6). See Scott v. Kuhlmann, 746 F.2d 1377, 1378 (9th Cir.1984). The doctrine of res judicata "is a rule of fundamental and substantial justice, of public policy and of private peace, which should be cordially regarded and enforced by the courts." Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 401 (1981) (internal quotation marks omitted). A final judgment on the merits bars further claims by parties or their privies based on the same cause of action. The elements necessary to establish res judicata are: (1) an identity of claims, (2) a final judgment on the merits, and (3) privity between parties. Headwaters Inc. v. U.S. Forest Serv., 399 F.3d 1047, 1050-52 (9th Cir. 2005); See Holcombe v. Hosmer, 477 F.3d 1094, 1097 (9th Cir. 2007) (federal courts must apply state law regarding res judicata to state court judgments); Mycogen Corp. v. Monsanto Co., 51 P.3d 297, 301 (Cal. 2002) (explaining that in California, res judicata or "claim preclusion . . . prevents relitigation [ (1) after a final judgment on the merits] [ (2) ] of the same cause of action in a second suit [ (3) ] between the same parties or parties in privity with them"). Because the claims the Plaintiff raises in this action were raised, or should have been raised, in the Unlawful Detainer Action, those claims are barred by res judicata. 7
15. First, the claims asserted in the Adversary Complaint were raised, or should have been raised, in the Unlawful Detainer Action. Under California law, when a record title owner brings an unlawful detainer action pursuant to California Code of Civil Procedure section 1161a, the title owner must demonstrate that it acquired the property at a regularly conducted foreclosure sale and then perfected its title. Cal. Civ. Proc. § 1161a. In the Unlawful Detainer Action complaint, Breckenridge alleges "the foreclosure sale, and all required notices were accomplished in compliance with" California Civil Code §§ 2429" and that "title under this sale has been duly perfected." Ex. G. In his answer to the Unlawful Detainer Action complaint, Plaintiff asserted that the foreclosure sale was "defective" and "did not confer clear title" to Breckenridge. Ex. H. Thus, the claims in the Complaint here are the same claims raised in Plaintiff's answer in the Unlawful Detainer Action.
16. Moreover, even if Plaintiff did not raise the precise claims in the Unlawful Detainer Action that he seeks to raise here, res judicata bars litigation of any issue that could have been raised in the prior action. See Palomar Mobilehome Park Ass'n v. City of San Marcos, 989 F.2d 362, 364 (9th Cir.1993) ("California, as most states, recognizes that the doctrine of res judicata will bar not only claims actually litigated in a prior proceeding, but also claims that could have been litigated."); Amin v. Khazindar, 5 Cal.Rptr.3d 224, 229 (Ct. App. 2003).
17. Second, a final judgment was entered in the Unlawful Detainer Action. Specifically, Plaintiff entered into a stipulated judgment for possession of the Property, agreeing that Plaintiff would surrender possession of the Property to Breckenridge on July 8, 2019. Ex. J. The California Court of Appeal addressed whether a stipulated judgment for possession constitute a final judgment for purposes of res judicata in Malkoskie v. Option One Mortgage Corp., 115 Cal.Rptr.3d 821 (Ct. App. 2010). In Malkoskie, a foreclosure sale purchaser acquired property at the 8 trustee's sale and filed an unlawful detainer action against the deed of trust borrower. Id. In response, the borrowers argued that the foreclosure sale was invalid due to improper notice and because there were "irregularities in the sale." Id. at 824. The borrowers and the purchaser agreed to the entry of a stipulated judgment, and the borrower was evicted from the property. Id. The borrower later filed a civil lawsuit against the lender alleging causes of action for declaratory relief, quiet title, cancellation of trustee's deed, willful wrongful foreclosure, negligent wrongful foreclosure, wrongful eviction, and negligence. The California Court of Appeal held that "the stipulated judgment in the related unlawful detainer action . . . was res judicata as to plaintiffs' claims in this action which all arise from the alleged invalidity of the foreclosure sale." Id. at 825, 827. The same result should be reached here.
18. Third, this action and the Unlawful Detainer Action involved both Plaintiff and Breckenridge litigating the validity of the foreclosure sale through reach Breckenridge took title to the Property. In reaching its decision, the Malkoskie court explained that that the validity of the purchaser's "title had to be resolved in the unlawful detainer action" and "by stipulating to judgment against them, [the borrowers] conceded the validity of [the purchaser's] allegations that the sale had been duly conducted and operated to transfer 'duly perfected' legal title to the property." Id. at 86, 827. Just as in Malkoskie, the legitimacy of the purchaser's title was resolved in the unlawful detainer action, and Plaintiff has therefore conceded that the foreclosure sale at issue here was properly conducted.
III. ALL CAUSES OF ACTION IN THE ADVERSARY PROCEEDING COMPLAINT ARE BARRED BY JUDICIAL ESTOPPEL
19. Judicial estoppel is an "equitable doctrine that precludes a party from gaining an advantage by asserting one position, and then later seeking an advantage by taking a clearly inconsistent position." Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th Cir.2001). 9 Courts apply the doctrine of judicial estoppel out of "'general consideration[s] of the orderly administration of justice and regard for the dignity of judicial proceedings" and also to "protect against a litigant playing fast and loose with the courts." Id. Generally, the application of judicial estoppel precludes both the assertion of inconsistent positions in the same litigation and also bars litigants from asserting inconsistent positions in different cases. Rissetto v. Plumbers & Steamfitters Local 343, 94 F.3d 597, 600-604 (9th Cir.1996).
20. There are three factors courts consider when applying the doctrine of judicial estoppel: (1) a party's later position is "clearly inconsistent" with its earlier position; (2) whether the party persuaded a court to accept that party's earlier position such that judicial acceptance of an inconsistent position in another proceeding would create "the perception that either the first or the second court was misled"; (3) whether the party seeking to assert an inconsistent position would derive an unfair advantage on the opposing party if not estopped. Hamilton, 270 F.3d at 782-83. Specifically, "[i]n the bankruptcy context, a party is judicially estopped from asserting a cause of action not raised in a reorganization plan or otherwise mentioned in the debtor's schedules or disclosure statements." Id. at 783, 785 (affirming district court's determination that plaintiff's claim was barred by judicial estoppel because the plaintiff had failed to list the claim as an asset in his Chapter 7 bankruptcy schedule).
21. Here, Plaintiff did not disclose any of claims asserted in the Complaint or any right to set-off against Defendants either in the schedules, or at any time prior to dismissal of his 2018 bankruptcy. Thus, Plaintiff has asserted inconsistent positions by failing to include a cause of action in his bankruptcy filing and subsequently attempting to sue on that claim outside of the bankruptcy proceeding. By filing his petition with the bankruptcy court, Plaintiff received the benefit of an automatic stay from the bankruptcy courts - indeed, Plaintiff admits in his 10 Complaint that he filed a bankruptcy petition for the purpose of stopping foreclosure. See HPG Corp. v. Aurora Loan Servs., LLC, 436 B.R. 569, 578 (E.D. Cal. 2010) (dismissing claims on the basis of judicial estoppel where plaintiffs "sought bankruptcy protection while subverting the bankruptcy process by nondisclosure" because "[w]hile the bankruptcy petitions were each ultimately dismissed, the individual plaintiffs enjoyed the benefit of these stays, not once, but twice, and, in both instances, failed to comply with the requirement of full, accurate disclosures.").
22. Each cause of action in the Complaint arises from the Deed of Trust and all allegedly occurred before Plaintiff filed bankruptcy. Compl. ¶¶ 86-97, 139-43. Moreover, the Plaintiff's bankruptcy achieved the objective for which the Plaintiff asserts the petition was filed - to prevent or delay the foreclosure of the Property. Therefore, all causes of action are subject to judicial estoppel. The Complaint should dismissed with prejudice.
CONCLUSION
For the foregoing reasons, the Complaint against the Ditech Defendants should be dismissed with prejudice. 11