Summary
finding the three New Hampshire factors satisfied where "Plaintiff twice received the benefit of an automatic stay and did not disclose his claims against Defendants" in the bankruptcy proceedings
Summary of this case from Sharp v. Nationstar Mortgage LLCOpinion
No. 2:13-cv-02082-TLN-CKD
03-20-2014
CHRISTOPHER ALAN SWENDSEN, Plaintiff, v. OCWEN LOAN SERVICING, LLC; WELLS FARGO BANK; WESTERN PROGRESSIVE, LLC and Does I-XX et. al., Defendants.
ORDER
This matter is before the court on Defendants' Amended Motions to Dismiss the Complaint and to Expunge the Lis Pendens. (Defs.' Am. Mot. Dismiss, ECF 12.) Plaintiff opposes the motion. (Pl.'s Opp'n, ECF 13.) Defendants have filed a reply. (Defs.' Reply, ECF 15.) For reasons set forth below, Defendants' Motions are GRANTED.
Because oral argument will not be of material assistance, the court orders this matter submitted on the briefs. E.D. Cal. L.R. 230(g).
BACKGROUND
A. Parties and Relevant Factual Allegations
Plaintiff is the owner of real property located at 200 Scrub Oak Court, Roseville, California 95747. (Compl., ECF 2 ¶ 2.) Defendants in this action are Ocwen Servicing, LLC, ("Ocwen") the servicer of Plaintiff's home loan, Wells Fargo Bank, N.A., the former trustee for the loan, and Western Progressive, LLC, ("Western Progressive") the foreclosing agent and current trustee. (ECF 12 at 1-2.)
On January 2, 2004, Plaintiff signed a note for the loan that is the subject of this action. (ECF 10-1, Ex. 1.) The deed of trust for the 200 Scrub Oak Court property was recorded by the Placer County Recorder on January 16, 2004. (Deed of Trust, ECF 10-1, Ex. 2.) In May 2011, Plaintiff defaulted on the loan. (Not. Default, ECF 10-1, Ex. 5.) Western Progressive filed a notice of default with the Placer County Recorder on September 26, 2011. (ECF 10-1, Ex. 5.)
Defendants request that this court take judicial notice of documents recorded with the Placer County Recorder and the United States Bankruptcy Court for the Eastern District of California. (Req. Judicial Notice, ECF 10.) In resolving a motion to dismiss, the court may consider matters that are subject to judicial notice, including matters of public record, and proceedings in other courts if they have a direct relation to the matters at issue. See Akhtar v. Mesa, 698 F.3d 1202, 1212 (9th Cir. 2012); United States ex rel. Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir. 1992). Here, the documents recorded by the Placer County Recorder (ECF 10-1, Ex. 1-7) are public records and Plaintiff's Voluntary Petitions for Bankruptcy (ECF 10-1, Ex. 8-9) are matters directly related to these proceedings. For these reasons, the court GRANTS Defendants' request for judicial notice. 3 The Complaint erroneously states "Plaintiff defaulted on his loan with Defendants in or about 2010." (ECF 2 at 5.)
Plaintiff claims that "in 2011, Defendants initiated negotiations with Plaintiff toward a loan modification." (ECF 2 ¶ 13.) "The Bank requested certain specific information and provided a deadline to provide that information." (Id.) Plaintiff alleges that he submitted a completed loan modification application to Defendants on October 11, 2011. (Id.) Plaintiff further alleges that on October 13, 2011, he called Defendant Ocwen's customer service department and asked the service agent to provide his or her name, which the agent refused to do. (Id. ¶ 13.) Plaintiff states that on that day he "faxed complete copies of the loan modification application to three separate fax numbers . . . as [he was] directed to do by the customer service agent." (Id.) Plaintiff alleges that when he followed-up, "[o]n or about October 14, 201[1], Plaintiff was told by "Ahmad", an employee with Defendant Western Progressive, that the loan application was incomplete." (Id. ¶ 14.) "Ahmad stated that Plaintiff was to contact Ocwen." (Id.) Plaintiff alleges that he then contacted Defendant Ocwen, whose agent again refused to provide his name and falsely stated that Ocwen had not received a loan modification application from Plaintiff. (ECF 2 ¶ 16.)
It appears Plaintiff erred in pleading that the call with Ahmad took place on October 14, 2010, as Plaintiff recounts the phone call as part of a series of events that he alleges took place in 2011.
Plaintiff alleges that on November 5, 2011, Western Progressive refused to provide the status of Plaintiff's loan modification, "and again requested another authorization letter, which letter had been previously provided, as a delaying tactic." (Id.) Plaintiff alleges that he made numerous phone calls to Defendants from November 2011, to the Spring of 2012, attempting to secure a loan modification. (Id. ¶¶ 17-18.) Plaintiff asserts that he resubmitted the loan modification application several times throughout this period, including filing another loan modification application "[o]n or about April 2012." (Id. ¶ 19.) Defendants served Plaintiff with another notice of default on February 2, 2013, and served Plaintiff with a notice of trustee's sale on July 22, 2013. (Id. at ¶¶ 20-21.) Plaintiff alleges that Defendants engaged in dilatory and evasive tactics to prevent Plaintiff from modifying his loan and wrongfully engaged in the foreclosure process while Plaintiff's modification application was pending
B. Plaintiff's Claims for Relief and Relevant Procedural History
Plaintiff filed for Chapter 13 bankruptcy relief in the United States Bankruptcy Court for the Eastern District of California on October 31, 2012, as Case No. 12-39223 ("first Bankruptcy"). The Bankruptcy Court dismissed and terminated Plaintiff's first Bankruptcy on January 14, 2013. (ECF 10-1, Ex. 9 at 1-7.) Plaintiff filed for a second Chapter 13 bankruptcy in the United States Bankruptcy Court for the Eastern District of California on March 11, 2013, as Case No. 13-23230 ("second Bankruptcy"). (Id., Ex. 8.) Plaintiff scheduled Defendants' loan without dispute and did not schedule or disclose any of the claims in this action. (Summary of Schedules for Second Bankruptcy, Schedules A, B & D, ECF 10-1, Ex. 8.) The Bankruptcy Court dismissed Plaintiff's second Bankruptcy on September 10, 2013. (ECF 10-1, Ex. 9.)
Plaintiff does not challenge Defendants' assertion that Plaintiff did not schedule potential claims against Defendants in his filings for either bankruptcy.
On October 3, 2013, Plaintiff filed this action in Federal District Court for the Eastern District of California, asserting the following claims: (1) Wrongful Foreclosure in Violation of California Civil Code § 2924 et seq, and (2) Unfair Competition under California Business and Professions Code § 17200 et seq. (ECF 2.) On October 15, 2013, Plaintiff filed a Lis Pendens in conjunction with this action, recorded in the official records of the Placer County Recorder as Doc-2013-0097944-00. (ECF 12 at 21.)
STANDARD
Federal Rule of Civil Procedure 8(a) requires that a pleading contain "a short and plain statement of the claim showing that the pleader is entitled to relief." See Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). Under notice pleading in federal court, the complaint must "give the defendant fair notice of what the claim . . . is and the grounds upon which it rests." Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). "This simplified notice pleading standard relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002).
On a motion to dismiss, the factual allegations of the complaint must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322 (1972). A court is bound to give plaintiff the benefit of every reasonable inference to be drawn from the "well-pleaded" allegations of the complaint. Retail Clerks Int'l Ass'n v. Schermerhorn, 373 U.S. 746, 753 n.6 (1963). A plaintiff need not allege "'specific facts' beyond those necessary to state his claim and the grounds showing entitlement to relief." Twombly, 550 U.S. at 570. Ultimately, a court may not dismiss a complaint in which the plaintiff has alleged "enough facts to state a claim to relief that is plausible on its face." Iqbal, 556 U.S. at 697 (quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. 544, 556 (2007)). Only where a plaintiff has failed to "nudge[] [his or her] claims . . . across the line from conceivable to plausible[,]" is the complaint properly dismissed. Id. at 680.
While the plausibility requirement is not akin to a probability requirement, it demands more than "a sheer possibility that a defendant has acted unlawfully." Id. at 678. This plausibility inquiry is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679.
In ruling upon a motion to dismiss, the court may consider only the complaint, any exhibits thereto, and matters which may be judicially noticed pursuant to Federal Rule of Evidence 201. See Mir v. Little Co. of Mary Hosp., 844 F.2d 646, 649 (9th Cir. 1988); Isuzu Motors Ltd. v. Consumers Union of United States, Inc., 12 F. Supp. 2d 1035, 1042 (C.D. Cal. 1998).
If a complaint fails to state a plausible claim, "'[a] district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts.'" Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (en banc) (quoting Doe v. United States, 58 F.3d 484, 497 (9th Cir. 1995)); see also Gardner v. Marino, 563 F.3d 981 (9th Cir. 2009) (finding no abuse of discretion in denying leave to amend when amendment would be futile).
ANALYSIS
A. Judicial Estoppel
Defendants argue that Plaintiff should be judicially estopped from pursuing his claims because Plaintiff knew of but failed to disclose his potential claims against Defendants in his bankruptcy schedules, as required by the Bankruptcy Code. (ECF 12 at 4.) Defendants argue that it would be unjust to permit Plaintiff to hide his claims from the Bankruptcy Court and then pursue them in this court. (ECF 15 at 2-3.) In opposition, Plaintiff argues that Defendants cannot invoke the equitable doctrine of judicial estoppel because "they have unclean hands . . . [and] the assertion of an equitable doctrine requires clean hands." (ECF 13 at 4.) According to Plaintiff, Defendants have unclean hands because they "unlawfully failed to evaluate Plaintiff's application for loan modification in good faith as required by law, . . . [as] part of a concerted scheme . . . to steal Plaintiff's home in order to generate insurance proceeds to pay investors, and Defendants themselves, for nonperforming loans." (ECF 13 at 4-5.) Plaintiff also argues that the Court should let a jury determine whether Plaintiff knew that he had potential claims against Defendants during the course of his bankruptcy proceedings. (ECF 13 at 5.)
The court notes the dearth of case law cited by Plaintiff in support of this argument. It also appears Plaintiff's counsel copied and pasted directly from Westlaw in lieu of selecting appropriate authorities and applying them to the facts of this case.
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Judicial estoppel, or the doctrine of preclusion of inconsistent positions, bars "a party from gaining an advantage by taking one position, and then seeking a second advantage by taking an incompatible position." Whaley v. Belleque, 520 F.3d 997, 1002 (9th Cir. 2008) (quoting Rissetto v. Plumbers & Steamfitters Local 343, 94 F.3d 597, 600 (9th Cir. 1996)). Judicial estoppel is "an equitable doctrine invoked by a court at its discretion," New Hampshire v. Maine, 532 U.S. 742, 750 (2001) (quoting Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990)). A court may invoke judicial estoppel "not only to prevent a party from gaining an advantage by taking inconsistent positions, but also because of 'general consideration[s] of the orderly administration of justice and regard for the dignity of judicial proceedings,' and to 'protect against a litigant playing fast and loose with the courts.'" Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th Cir. 2001) (quoting Russell, 893 F.2d at 1037).
In the bankruptcy context, a party is "judicially estopped from asserting a cause of action not . . . mentioned in the debtor's schedules or disclosure statements." Hamilton, 270 F.3d at 782-83 (holding that plaintiff was judicially estopped from later asserting claims he knew of but failed to disclose in his bankruptcy, even though the bankruptcy was dismissed without a discharge of debt.) A debtor who does not disclose a potential claim to the bankruptcy court and then files a lawsuit on the same claim, "would gain a windfall by receiving the protection of the bankruptcy court without having disclosed a potential asset while retaining the possibility of a settlement or verdict" on the undisclosed claim. Caviness v. England, 2007 WL 1302522, at *10-11 (E.D. Cal. May 2, 2007).
"The bankruptcy code. . . places an affirmative duty on debtors to schedule their assets and liabilities with the bankruptcy court, including potential causes of action. . ." Yack v. Washington Mut., Inc., 389 B.R. 91, 95-96 (N.D. Cal. 2008) (citing 11 U.S.C. § 521(1); Cusano v. Klein, 264 F.3d 936, 947-48 (9th Cir.2001)) (internal citations omitted). "The debtor's duty to disclose potential claims as assets does not end when the debtor files schedules, but instead continues for the duration of the bankruptcy proceeding." Hamilton, 270 F.3d at 785 (citing In re Coastal Plains, Inc., 179 F.3d 197, 208 (5th Cir. 1999)). "The debtor need not know all the facts or even the legal basis for the cause of action; rather, if the debtor has enough information . . . prior to confirmation to suggest that it may have a possible cause of action, then that is a 'known' cause of action such that it must be disclosed." In re Coastal Plains, Inc., 179 F.3d at 207-08 (internal citations omitted). Thus, "[a] plaintiff who fails to fulfill this duty to inform the bankruptcy court of his claims risks having those claims barred by judicial estoppel." Becker v. Wells Fargo Bank, NA, 2012 WL 5187792, at *3 (E.D. Cal. Oct. 18, 2012).
In determining whether to apply judicial estoppel, "courts apply a three-part test: (1) whether a party's later position is clearly inconsistent with its original position; (2) whether the party has successfully persuaded the court of the earlier position; and (3) whether allowing the inconsistent position would allow the party to derive an unfair advantage or impose an unfair detriment on the opposing party." United States v. Ibrahim, 522 F.3d 1003, 1009 (9th Cir. 2008) (quoting New Hampshire v. Maine, 532 U.S. at 750-51)).
1. Clearly Inconsistent Positions
Defendants argue that Plaintiff has taken clearly inconsistent positions before the Bankruptcy Court and this Court. Defendants assert that Plaintiff represented to the Bankruptcy Court that he had no potential claims, but subsequently filed claims against Defendants in this Court, based on events that allegedly occurred before or during his bankruptcies. (ECF 12 at 6-7.) Plaintiff insists that Defendants have failed to prove Plaintiff took inconsistent positions because they have not shown that Plaintiff knew—during his bankruptcy proceedings—that the present litigation was likely to arise. (ECF 13 at 5.)
A party takes clearly inconsistent positions when he first declares to the bankruptcy court that he does not have potential claims and subsequently brings suit on those undisclosed claims. See Hamilton, 270 F.3d at 784 ("Hamilton clearly asserted inconsistent positions. He failed to list his claims against State Farm as an asset on his bankruptcy schedules, and then later sued State Farm on the same claims."). In Chapter 13 bankruptcy proceedings, a debtor must disclose not only the claims he is aware of when he files a petition, but also those potential claims which are acquired "after the commencement of the case but before the case is closed, dismissed, or converted." 11 U.S.C. § 1306(a)(1). "The integrity of the bankruptcy system depends on full and honest disclosure by debtors of all their assets." Hamilton, 270 F.3d at 785 (quoting In re Coastal Plains, 179 F.3d at 208)). Therefore, "[j]udicial estoppel will be imposed when the debtor has knowledge of enough facts to know that a potential cause of action exists during the pendency of the bankruptcy, but fails to amend his schedules or disclosure statements to identify the cause of action as a contingent asset." Hamilton, 270 F.3d at 785.
In this case, Plaintiff alleges that Defendants were unresponsive to his attempts to modify his home loan, failed to provide information during phone calls, failed to follow statutory requirements to contact him before filing foreclosure paperwork, and engaged in unfair business practices related to the foreclosure process on his home. By his own complaint, Plaintiff alleges that Defendants committed these actions between May of 2011 and October of 2013. (ECF 2 at 2-8.) Plaintiff filed his first bankruptcy in October of 2012, and his second bankruptcy in March of 2013. His second bankruptcy was dismissed September 10, 2013, only a few weeks before he filed the complaint in this action. (ECF 10-1, Ex. 8.) Certainly, by the time he filed his second bankruptcy, or while it was pending, Plaintiff had "knowledge of enough facts to know that a potential cause of action exist[ed] during the pendency of the bankruptcy." See Hamilton, 270 F.3d at 785. Most of Defendants' actions of which Plaintiff complains in his instant cause of action, already occurred at the time his second bankruptcy was pending. Because Plaintiff did not disclose any of his potential claims against Defendants in his Bankruptcy schedules, and then filed claims a few weeks after his bankruptcy was dismissed, Plaintiff has taken clearly inconsistent positions.
2. Judicial Acceptance of an Earlier Position
A court imposing judicial estoppel must find that a court relied on or accepted the party's previous inconsistent position. See Hamilton, 270 F.3d at 783. Therefore, this court must determine whether Plaintiff's position was accepted by the Bankruptcy Court. A bankruptcy court may rely upon or accept a party's position even without a permanent discharge of debts. See Id. at 784-785 (holding that a bankruptcy court may "accept" a petitioner's representations in many ways short of a discharge of debt.) In HPG Corp. v. Aurora Loan Servs., LLC, 436 B.R. 569, 578 (E.D. Cal. 2010), the court found that, because plaintiffs received the benefit of automatic stays, even though their bankruptcy cases were dismissed without discharge of debts, the bankruptcy court had accepted their positions and judicial estoppel of their undisclosed claims asserted in a subsequent action was appropriate. See also Caviness v. England, 2007 WL 1302522, at *12-13 (E.D. Cal. May, 3 2007) (invoking judicial estoppel on undisclosed claims where plaintiff enjoyed the benefit of bankruptcy stay without discharge of debt).
Here, Plaintiff received the benefit of automatic stays under the bankruptcy code for both of his bankruptcies. The bankruptcy court assumed the truth of Plaintiff's schedules, which stated that he did not have any potential claims when indeed he did. Therefore, the Bankruptcy Court accepted Plaintiff's earlier inconsistent position that he did not have potential claims against Defendants. See HPG Corp., 436 B.R. at 578.
3. Unfair Advantage
The court must decide whether Plaintiff will derive an unfair advantage, or Defendants will suffer an unfair detriment, if Plaintiff is allowed to proceed with his claims despite his failure to disclose them in his bankruptcies. The law in this area is clear: a plaintiff who has received the benefit of an automatic stay under 11 U.S.C. § 362(a) would receive an unfair advantage by prosecuting claims against a defendant after failing to disclose those claims in his bankruptcy proceedings. See HPG Corp., 436 B.R. at 578-79 (finding that receipt of automatic stays, even where the bankruptcy cases were subsequently dismissed, was sufficient basis for judicial estoppel to prevent unfair advantage). Where a plaintiff "files successive petitions and obtains successive stays without full disclosure of all assets, the debtor derives an unfair advantage if he can later recover on undisclosed claims, and the bankruptcy system is laid bare for abuse." Id.; see also Hamilton, 270 F.3d at 785 (finding an unfair advantage to a plaintiff who enjoyed "the benefit of both an automatic stay and a discharge of debt").
Here, Plaintiff filed bankruptcy petitions on October 31, 2012, and on March 11, 2013. Plaintiff twice received the benefit of an automatic stay and did not disclose his claims against Defendants in either bankruptcy. As discussed earlier, at a minimum, Plaintiff knew enough facts at the time he filed his second bankruptcy to know that he had potential claims against Defendants. For this reason, it would confer an unfair advantage and condone practices by which "the bankruptcy system is laid bare for abuse" to permit Plaintiff to conceal assets from the Bankruptcy Court, and then permit him to pursue his claims in this court. See HPG Corp., 436 B.R. at 579.
Thus, in this case, as in Hamilton and HPG Corp., "[t]he application of judicial estoppel . . . is necessary to protect the integrity of the bankruptcy process." See HPG Corp., 436 B.R. at 579; Hamilton, 270 F.3d at 785. Here, the Bankruptcy Court accepted Plaintiff's clearly inconsistent earlier position and Plaintiff would derive an unfair advantage if the court permits him to pursue undisclosed claims. For the reasons set forth above, Defendants' motion to dismiss Plaintiff's Complaint is GRANTED without leave to amend.
B. Defendants' Motion to Expunge the Lis Pendens
A lis pendens is a "recorded document giving constructive notice that an action has been filed affecting title or right to possession of the real property described in the notice." Pedersen v. Greenpoint Mortgage Funding, Inc., 900 F. Supp. 2d 1071, 1084 (E.D. Cal. 2012) (quoting Park 100 Investment Group II v. Ryan, 180 Cal.App.4th 795, 807, 103 Cal.Rptr.3d 218 (2010)) (internal citation & quotation omitted). "Once filed, a lis pendens prevents the transfer of that real property until the lis pendens is expunged or the litigation is resolved." Ohlendorf v. Am. Home Mortgage Servicing, 279 F.R.D. 575, 579 (E.D. Cal. 2010) (quoting BGJ Assoc., LLC v. Superior Court of Los Angeles, 75 Cal.App.4th 952, 966-67, 89 Cal.Rptr.2d 693 (1999)).
California Code of Civil Procedure sections 405 through 405.61 authorize expungement of a lis pendens. "At any time after notice of pendency of action has been recorded, any party . . . may apply to the court in which the action is pending to expunge the notice. . . ." Cal. Code Civ. Pro. § 405.30. A court must expunge a lis pendens if it finds that the plaintiff "'has not established by a preponderance of the evidence the probabl[e] validity of a real property claim,' where probabl[e] validity requires a showing that it is more likely than not that the plaintiff will obtain a judgment against the defendant on the claim, . . ." Ohlendorf, 279 F.R.D. at 579 (internal citations omitted). A real property claim is a claim that affects title or possession of specific real property. See Id.; Cal. Code Civ. Pro. § 405.4.
Defendants move to expunge the lis pendens filed in conjunction with this action. According to Defendants, the court must order the lis pendens expunged because Plaintiff has not established by a preponderance of the evidence the probable validity of any real property claim against Defendants. (ECF 12 at 19-21.) Defendants argue that because each of Plaintiff's claims fail, he cannot maintain the lis pendens. Plaintiff argues that the Court should not grant the motion to expunge the lis pendens because all of Plaintiff's claims should survive Defendants' motion to dismiss. (ECF 13 at 14.)
Here, Plaintiff cannot succeed in opposing Defendants' motion to expunge the lis pendens. Plaintiff has not "tender[ed] evidence to successfully demonstrate that he is more likely than not to obtain a judgment against defendants." Ohlendorf, 279 F.R.D. at 584. As stated in this order, the Court holds that all of Plaintiff's claims are barred by the doctrine of judicial estoppel and orders Plaintiff's Complaint dismissed with prejudice. Since all of his claims are ordered dismissed, it is not possible for Plaintiff to establish that it is more likely than not that he will obtain a judgment against Defendants in this action. See Castaneda v. Saxon Mortgage Servs., Inc., 2010 WL 726903, *8 (E.D.Cal. Feb. 26, 2010) (holding that plaintiffs could not establish that it was more likely than not that they would succeed on the merits of any of their claims where all of plaintiffs' claims were dismissed due to their serious defects.) For this reason, Defendants' motion to expunge the lis pendens is GRANTED.
CONCLUSION
For the stated reasons, Defendants' Amended Motion to Dismiss (ECF 12) is GRANTED. Plaintiff's claims are DISMISSED without leave to amend. Defendants' Amended Motion to Expunge Lis Pendens (ECF 12) is GRANTED. The Court orders the lis pendens recorded in the Placer County Recorder's Office as Doc-2013-0097944-00 expunged. The Clerk of the Court is ordered to close the case.
IT IS SO ORDERED.
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Troy L. Nunley
United States District Judge