Conner v. Wilmington Trust NA

• Court: District Court, D. Arizona
• Decided: February 13, 2020
• Docket: 2:19-cv-01076
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Kenneth Alan Conner, et al., No. CV-19-01076-PHX-DWL

10 Appellants, ORDER

11 v.

12 Wilmington Trust NA,

13 Appellee. 14 15 Appellants Kenneth and Deanna Conner (“the Conners”) have appealed the 16 bankruptcy court’s order granting Appellee Wilmington Trust NA’s (“Wilmington”) 17 motion to enforce a settlement agreement and dismissing the Conners’ adversary 18 proceeding. For the following reasons, the order of the bankruptcy court is affirmed.1 19 BACKGROUND 20 I. Factual Background 21 This case stems from the 2014 foreclosure of the Conners’ Scottsdale residence. 22 (Doc. 19 at 5.) The Conners, after living in the residence for several years, refinanced their 23 mortgage in October 2005. (Doc. 19 at 3; Doc. 19-1 at 161.) To that end, the Conners 24 executed a deed of trust that named First Magnus Financial (“First Magnus”) as the lender, 25 Mortgage Electronic Registration System (“MERS”) as the beneficiary, and Title Security 26

27 1 The Conners have requested oral argument. That request is denied because the “facts and legal arguments are adequately presented in the briefs and record, and the 28 decisional process would not be significantly aided by oral argument.” Fed. R. Bankr. P. 8019(b)(3). See also Fed. R. App. P. 34(A)(2)(c) (same). 1 Agency of Arizona as the trustee. (Doc. 19-1 at 181-82.) After the Conners struggled to 2 make their payments on the refinanced loan, it was modified twice by Aurora Loan 3 Services, LLC. (Doc. 19 at 4.) 4 In 2012, MERS purportedly assigned the deed of trust to Nationstar Mortgage LLC 5 (“Nationstar”). (Doc. 19 at 4; Doc. 19-1 at 220.) After this assignment, the Conners 6 submitted several applications to further modify their loan. (Doc. 19 at 4-5.) Nationstar 7 modified the Conners’ loan once but otherwise denied these applications. (Doc. 19 at 4-5; 8 Doc. 19-1 at 222.) As the Conners continued to negotiate for further loan modifications, 9 they were purportedly told to discontinue payments so as to not “confuse the system.” 10 (Doc. 19-1 at 162-64.) 11 Nevertheless, Nationstar filed a notice of trustee’s sale in December 2013. (Id. at 12 163.) The sale was scheduled for March 24, 2014. (Id.) Nationstar denied another loan 13 modification request in February 2014. (Doc. 19 at 9.) At that point, the Conners 14 contracted with a third-party counseling agency, which would handle further negotiations 15 with Nationstar, and Nationstar “verbally informed” the Conners that the March 2014 16 trustee’s sale would be postponed to June 2, 2014. (Id.; Doc. 19-1 at 163.) 17 In April 2014, the Conners received a letter from Nationstar stating they were 18 delinquent on their loan. (Doc. 19 at 5.) When Mr. Conner called Nationstar to discuss 19 the letter, he was informed that his latest modification application had been denied and that 20 the June 2014 trustee’s sale date would be placed on hold. (Id.) Nationstar also promised 21 to send a new sale date via mail. (Id.) 22 The Conners continued to seek relief on their loan. (Doc. 19-1 at 163-64.) Their 23 last option was a mortgage relief fund. (Id. at 164.) The application for that fund required 24 a letter from Nationstar stating that the Conners had exhausted loan modification options. 25 (Id.) In light of the phone conversation with Nationstar, the Conners waited for a denial 26 letter to be sent to them. (Id.) 27 On May 30, 2014, and without the Conners’ knowledge, Nationstar transferred the 28 deed of trust to Wilmington. (Doc. 19 at 5.) On June 2, 2014, the trustee’s sale went 1 forward, also without the Conners’ knowledge. (Id.) As the holder of the deed of trust, 2 Wilmington placed a credit bid and ultimately purchased the property. (Id.) 3 On June 20, 2014, the Conners received a letter notifying them that the trustee’s sale 4 had taken place. (Id. at 6.) In August 2014, Wilmington sold the property to CSK 5 Investments, LLC (“CSK”). (Id.) The Conners then received a notice of eviction. 6 (Doc. 19-1 at 166.) After receiving the notice, the Conners moved out of the residence. 7 (Id.) 8 II. Procedural History 9 The Conners filed for bankruptcy in September 2014. (Doc. 19 at 6.) Later that 10 month, they initiated an adversary proceeding against Nationstar, Wilmington, and CSK. 11 (Doc. 19-1 at 72.) The complaint was later amended to include MERS and First Magnus. 12 (Doc. 19-1 at 81 [first amended complaint]; Doc. 19-1 at 116 [second amended 13 complaint].) Although the Conners’ theories of liability expanded with their successive 14 amendments, the thrust of the Conners’ argument was that the parties involved in the 15 foreclosure of their home lacked authority to pursue a foreclosure. (Doc. 19-1 at 72-79; 16 98-99; 137-139.) Specifically, the Conners alleged that MERS was never a beneficiary of 17 the deed of trust, so it lacked the authority to assign the deed of trust to anyone. (Doc. 19- 18 1 at 98-99; 137-139.) The assignment of the deed of trust from MERS to Nationstar, then, 19 was void, as was every subsequent assignment. (Id.) 20 In March 2016, while a motion to dismiss the second amended complaint was 21 pending, Nationstar, MERS, and the Conners entered into a settlement agreement. (Doc. 22 19 at 6; Doc. 20 at 3; Doc. 19-1 at 283-87 [actual agreement].) The agreement provided 23 that the parties “wish[ed] to resolve their differences regarding the Complaint and the 24 Dispute.” (Doc. 19-1 at 283.) The “Complaint” referred to the adversary proceeding 25 initiated by the Conners. (Id.) The Complaint included the “Dispute,” which was: 26 [A]mong other things, that various documents related to the Debt and the Property were invalid or void, including but not limited to the Deed of Trust 27 as well as all assignments and other recorded documents executed by parties 28 including MERS and Nationstar, and that Nationstar had engaged in a variety of fraudulent or otherwise improper conduct regarding the Debt and the 1 Trustee’s Sale. 2 (Id.) As part of the settlement agreement, the Conners agreed to “dismiss the Complaint 3 with prejudice.” (Id. at 284.) Finally, in a portion of the settlement agreement entitled 4 “The Debtors’ Release of Nationstar,” the Conners agreed that: 5 The Debtors and each and all of his current, former, and future partners, 6 affiliates, predecessors, successors, assigns, attorneys, employees, representatives and agents (the “Debtors Releasing Parties”) release and 7 forever discharge Nationstar and each and all of its current, former and future 8 parents, divisions, subsidiaries, affiliates, predecessors, successors, assigns, officers, directors, attorneys, shareholders, employees, representatives and 9 agents (the “Nationstar Released Parties”), from any and all claims, charges, 10 complaints, liabilities, obligations, promises, agreements, damages, causes of action, suits, rights, demands, costs, losses, debts and expenses (including 11 attorneys’ fees) of any nature whatsoever, whether in law or equity, which 12 the Debtor Releasing Parties now have or may have had against the Nationstar released Parties related to the Complaint and Dispute (the 13 “Released Matters”). 14 (Id.) Identical language was used to reflect the Conners’ release of MERS, MERS’s release 15 of the Conners, and Nationstar’s release of the Conners (with the appropriate substitutions 16 made to reflect which parties were in which position). (Id. at 284-85.) All parties to the 17 agreement were represented by counsel. (Id. at 286.) The agreement was signed by the 18 Conners, Nationstar, and MERS. (Id. at 287.) 19 On March 10, 2016, the Conners, Nationstar, and MERS notified the bankruptcy 20 court that they had reached a settlement. (Doc. 20-1 at 12-13.) Accordingly, in May 2017, 21 the bankruptcy court entered an order dismissing with prejudice the Conners’ “Second 22 Amended Complaint and all claims in this action.” (Id. at 16-17.) A ten-month period of 23 inactivity followed. 24 In March 2017, the Conners filed a third amended complaint. (Doc. 19-1 at 158.) 25 This version reiterated the factual allegations from the second amended complaint, and 26 contained many of the same causes of action, but the only defendant was Wilmington. (Id. 27 at 158-78.) After “efforts to amicably resolve” the third amended complaint failed, 28 Wilmington filed a motion to enforce the settlement agreement against the Conners, or, in 1 the alternative, to dismiss the third amended complaint for failure to state a claim. (Doc. 2 20-1 at 41-56.) In that motion, Wilmington argued that, although it was not explicitly 3 named in the settlement agreement, it was one of the “released parties.” (Id. at 45.) Even 4 if the settlement agreement didn’t apply, Wilmington further argued, the third amended 5 complaint failed to state legally cognizable claims under Arizona law. (Id. at 47-55.) 6 The Conners filed their response in January 2018. (Doc. 20-1 at 58.) In that 7 response, the Conners argued that Wilmington was not a released party. (Id. at 61.) 8 Additionally, the Conners asserted that they had new evidence that would give rise to new 9 claims. (Id. at 59.) This evidence, discovered after the Conners retained an “expert in 10 mortgage-backed securities research and foreclosure forensics,” purported to show that 11 “the very basis of foreclosure was faulty.” (Id. at 59-60.) In light of the expert’s report, 12 the Conners claimed they could show that “Nationstar could not assign to Wilmington 13 Trust an interest in property that was greater than Nationstar’s—and Nationstar had no 14 interest from MERS, or MERS from the original lender.” (Id. at 64.) In a nutshell, the 15 Conners argued that Wilmington never acquired an interest in the property that would allow 16 it to foreclose. (Id.) Consequently, the Conners stated that they planned to file a fourth 17 amended complaint. (Id. at 61.) 18 Although the Conners had indicated in this January 2018 filing that they would file 19 their fourth amended complaint “shortly” (id. at 68), there was no activity in the case for 20 eight months. (Doc. 20 at 4.) Eventually, the bankruptcy court issued an order informing 21 the parties that dismissal of the case was imminent. (Doc. 20-1 at 72.) After the Conners 22 failed to file anything in response, the bankruptcy court dismissed the action in October 23 2018. (Id. at 75.) 24 Only then did the Conners act, and they asked the bankruptcy court to reopen the 25 case. (Doc. 20 at 4.) During a November 2018 hearing, counsel for the Conners informed 26 the court that he had overlooked the due date for his motion to keep the case active. (Doc. 27 20-1 at 83.) After recounting the basics of practicing in bankruptcy court, the court 28 “conclude[d] in [its] discretion that that dismissal is not warranted” and reopened the case. 1 (Doc. 20-1 at 82-89, 100.) The Conners pledged to have a motion for leave to amend, as 2 well as a fourth amended complaint, in front of the court the week after the court reopened 3 the case. (Id. at 89.) 4 The complaint was not filed the next week. Instead, it was filed January 15, 2019— 5 the night before a hearing on Wilmington’s motion to dismiss. (Doc 20 at 4.) The motion 6 for leave to amend was filed three hours before the hearing. (Id.; Doc. 20-1 at 168.) 7 At the hearing, Wilmington largely reiterated the arguments made in its motion to 8 enforce. (Doc. 20-1 at 146-68.) Wilmington asserted that the Conners’ claims against it 9 were barred by the settlement agreement, and even if they weren’t, the third amended 10 complaint failed to state a claim. (Id.) When counsel for the Conners began his argument, 11 he urged the court to consider the motion for leave to amend and the fourth amended 12 complaint before making a ruling. (Id. at 168-70.) The court declined to do so. (Id. at 13 170-71.) 14 On the merits, the Conners reiterated their argument that, because Wilmington was 15 not a party to the settlement agreement, none of the releases applied to it. (Id. at 176-82.) 16 The Conners also continued to argue that Wilmington had no authority to foreclose on their 17 residence. (Id. at 184.) Finally, the Conners presented further argument on why the claims 18 in the third amended complaint should survive a motion to dismiss. (Id. at 187-92.) 19 The court ruled from the bench on Wilmington’s motion. (Id. at 204.) The court 20 concluded that, “by the expressed language of the settlement, the claims against 21 Wilmington Trust related to the assignment or Nationstar’s improper conduct regarding the 22 trustee sale were released.” (Id. at 205-206.) The court based this determination on the 23 settlement agreement’s definitions of “dispute,” “complaint,” and “the released parties.” 24 (Id. at 204-205.) 25 In the alternative, the court determined that the third amended complaint failed to 26 state a claim. (Id. at 206.) The court found the Conners’ statutory claims unavailing and 27 rejected their state-law tort claims. (Id. at 206-211.) Finally, because the court determined 28 that the settlement agreement foreclosed the Conners’ claims against Wilmington, it 1 determined there was “no reason to amend the complaint or to consider the motion to 2 amend the complaint or to consider the fourth amended complaint or its allegations.” (Id. 3 at 210-11.) The court entered an order reflecting its decision on January 31, 2019. (Doc. 4 19-1 at 398.) 5 On February 14, 2019, the Conners filed a notice of appeal. (Doc. 1 at 1.) That 6 notice was timely under Bankruptcy Rule 8002(a)(1). After several extension requests 7 (Docs. 6, 12, 13, 21), the matter is now fully briefed (Docs. 19, 20, 23). 8 ANALYSIS 9 On appeal, the Conners raise three issues. (Doc. 19 at 5.) First, they challenge the 10 bankruptcy court’s determination that the settlement agreement barred their claims against 11 Wilmington. (Id.) Assuming the court was incorrect on that issue, they next argue that the 12 bankruptcy court erred in declining to consider the motion to amend. (Id.) Finally, they 13 argue that the bankruptcy court erred in dismissing their third amended complaint. (Id.) 14 Whether the second and third issues need be reached turns on the answer to the first 15 issue. Accordingly, the Court begins its analysis with the settlement agreement. 16 I. Standard of Review 17 In reviewing the scope of the settlement agreement, the Court is faced with an issue 18 of contract interpretation. The parties disagree on the appropriate standard of review. The 19 Conners argue that a de novo standard applies. (Doc. 23 at 3.) In contrast, Wilmington 20 argues that the more deferential abuse-of-discretion standard applies. (Doc. 20 at 2-3.) 21 The Court need not resolve this issue. Even assuming the Conners are correct, and 22 that de novo review is required, the bankruptcy court correctly determined that the 23 Conners’ claims against Wilmington are foreclosed by the settlement agreement. 24 II. Merits 25 A. Contract Interpretation 26 The central question is whether the settlement agreement precludes claims against 27 Wilmington related to the 2014 foreclosure on the Conners’ home. Although Wilmington 28 was not a party to the settlement agreement, it contends it was covered by the agreement’s 1 release as to Nationstar. 2 When interpreting a settlement agreement, state law applies. Botefur v. City of 3 Eagle Point, 7 F.3d 152, 156 (9th Cir. 1993). Under Arizona law, the Court’s “purpose in 4 interpreting a contract is to ascertain and enforce the parties’ intent.” ELM Retirement Ctr., 5 LP v. Callaway, 246 P.3d 938, 941 (Ariz. Ct. App. 2010). “To determine the parties’ intent, 6 we look to the plain meaning of the words as viewed in context of the contract as a whole.” 7 Id. at 941-42. Further, “each section of an agreement must be read in relation to each other 8 to bring harmony, if possible, between all parts of the writing.” Chandler Med. Bldg. 9 Partners v. Chandler Dental Grp., 855 P.2d 787, 791 (Ariz. Ct. App. 1993). A provision 10 in a contract will not be read so as to render another provision meaningless. Id. 11 These principles guide the Court’s interpretation of the releases. Although 12 Wilmington is not explicitly mentioned in the agreement, the provision releasing 13 Nationstar from claims also includes all of Nationstar’s “former and future partners, 14 affiliates, predecessors, successors, assigns, attorneys, employees, representatives and 15 agents.” (Doc. 19-1 at 284.) Because Nationstar assigned the deed of trust to Wilmington, 16 and that assignment formed part of the Conners’ theory of liability as to Nationstar and 17 Wilmington (Doc. 19-1 at 164 ¶ 49), the meaning of “assign” serves as a starting point in 18 determining whether Wilmington is included in the released parties. 19 The settlement agreement uses “assign” as a noun. When used as a noun, “assign” 20 refers to an “assignee.” Assign, Black’s Law Dictionary (10th ed. 2014). Although “[u]se 21 of the term is so widespread that it is difficult to ascribe positive meaning to it with any 22 specificity,” it generally reflects the transfer of some interest from one party to another. 23 Assignee, Black’s Law Dictionary (10th ed. 2014). Whether one is an assignee also relies 24 on “the intent of the assignor and assignee.” Id. 25 Under this definition, Wilmington is an “assign” of Nationstar. The settlement 26 agreement does not provide a definition that would suggest an alternate or more narrow 27 meaning of “assign,” and the intent of the parties is clear—Nationstar fully meant to assign 28 the deed of trust to Wilmington, thus making Nationstar an assignor and Wilmington an 1 assignee.2 2 This comports with other portions of the settlement agreement. The agreement 3 required the Conners, without qualification, “to dismiss the Complaint with prejudice.” 4 (Id. at 284.) This suggests the parties intended the settlement agreement to encompass all 5 of the claims the Conners had asserted during the adversary proceeding, including their 6 claims against Wilmington. 7 Notwithstanding all of this, the Conners argue that “assign” does not include 8 Wilmington. They contend that “‘assigns’ is clearly meant in the corporate context, not 9 just because Wilmington Trust received a (void) assignment.” (Doc. 19 at 18.) They 10 further contend that, because “assigns” appears near “affiliates” and “predecessors” in the 11 release, “assigns” is “clearly in reference to other entities that became either Nationstar and 12 MERS, or entities that Nationstar and MERS might become.” (Id. at 17.) This is 13 essentially a noscitur a sociis argument—the definition of “assign” is determined by the 14 company the word keeps. See, e.g., Estate of Braden ex rel. Gabaldon v. State, 266 P.3d 15 349, 352 (Ariz. 2011). 16 This argument is unavailing because it ignores the full context of the release. The 17 release covers not only “affiliates,” “predecessors,” and “assigns,” but also “former and 18 future partners,” “attorneys,” “employees,” “representatives,” and “agents.” The full list 19 covers a variety of legal relationships with Nationstar, not just “corporate” relationships. 20 The closest, “affiliate,” is “[a] corporation that is related to another corporation by 21 shareholdings or other means of control; a subsidiary, parent, or sibling corporation.” 22 Affiliate, Black’s Law Dictionary (10th ed. 2014). Even that definition, though, is not 23 limited to a company that either became Nationstar or descends from Nationstar. 24 Further, the Conners’ argument would render other portions of the agreement 25 nonsensical. The Conners’ released parties also include their affiliates and predecessors. 26 2 This conclusion also defeats the Conners’ argument that, because Wilmington is not 27 a third-party beneficiary to the settlement agreement, it cannot seek to enforce it. (Doc. 19 at 18-19.) As the Conners acknowledge, this argument is premised on the assumption that 28 “Wilmington Trust is . . . not among the ‘Released Parties.’” (Id.) But as discussed in this order, Wilmington is a released party. 1 (Doc. 19-1 at 285.) Under their definition, only entities legally indistinguishable from the 2 Conners could fall under these categories. Because the Conners are actual people, though, 3 that category would be limited to them and them alone, rendering the inclusion of 4 “affiliates” and “predecessors” meaningless. The Court will not interpret the agreement in 5 that way. Chandler Med. Bldg. Partners, 855 P.2d at 791. 6 In their reply, the Conners advance a slightly different argument. They argue the 7 settlement agreement does not include Wilmington because “Wilmington Trust produced 8 no evidence that either Nationwide or MERS assigned their rights under the 2016 9 settlement agreement to Wilmington Trust.” (Doc. 23 at 6.) According to the Conners, 10 because Wilmington was an assignee before the settlement agreement was executed, it 11 cannot possibly be an “assign” under the terms of the agreement. (Id. at 5.) Again, this 12 argument is unsupported by the plain text of the word “assign”—its use in the agreement 13 doesn’t contemplate such a narrow construction. More important, this argument ignores 14 the rest of the release, which includes “each and all of [Nationstar’] current, former, and 15 future . . . assigns.” (Doc. 19-1 at 284, emphasis added.) The Conners’ argument would 16 read the agreement to simultaneously include and exclude certain parties. Such a 17 construction is impermissible. 18 A broad definition of “assign” disturbs the Conners. (Doc. 19 at 18.) In their view, 19 including Wilmington as an “assign” means “Nationstar and MERS could shield anyone 20 from claims by the Conners simply by assigning them an unspecified right,” which would 21 “apply the release even beyond this litigation.” (Id.) True, the releases are broad. But they 22 are not as limitless as the Conners claim. Even if the releases extended to any entity that 23 “has done business” with Nationstar or MERS, as the Conners claim (Doc. 19 at 18), the 24 rest of the settlement agreement limits the extent of the release. The releases are limited to 25 claims “related to the Complaint and Dispute.” (Doc. 19-1 at 284-85.) The Complaint is 26 limited to the adversary proceeding initiated by the Conners at issue here, and the Dispute 27 is a subset of the Complaint. (Id. at 283.) Thus, the releases only extend as far as the 28 allegations in the Conners’ adversary complaint. This context provides an important 1 limitation that defeats the Conners’ concerns. ELM Retirement, 246 P.3d at 941-42. 2 Finally, although the Court need not rely on them, the Conners’ own actions indicate 3 that Wilmington was intended to be included in the agreement’s releases. The agreement 4 itself stipulates that the Conners will dismiss the complaint—with no exception or carve- 5 out—with prejudice. (Doc. 19-1 at 284.) Pursuant to the agreement, the Conners, 6 Nationstar, and MERS filed a joint stipulation notifying the bankruptcy court that they had 7 settled. (Doc. 20-1 at 12-13.) When the bankruptcy court later granted a joint stipulation 8 to dismiss the complaint, it dismissed with prejudice “Plaintiff’s Second Amended 9 Complaint and all claims in this action.” (Doc. 20-1 at 16-17 [emphasis added].) That is, 10 the bankruptcy court dismissed the entire complaint, which included Wilmington. (Doc. 11 19-1 at 113.) If this was error, one might have expected an immediate action by the 12 Conners to correct it. Instead, the Conners waited ten months to file a third amended 13 complaint.3 14 At bottom, the meaning of “assign” is clear in this case. That meaning includes 15 Wilmington. This is not a matter, as the Conners contend, of the bankruptcy court being 16 “more interested in reading intent into the agreement (and clearing its docket).”4 (Doc. 23 17 at 6.) Instead, it is a straightforward interpretation of the plain meaning of the words of the 18 contract. The bankruptcy court correctly determined that the settlement agreement released 19 the Conners’ claims against Wilmington.

20 3 Additionally, Wilmington presented evidence to the bankruptcy court that, when the parties were negotiating the settlement agreement, the Conners initially requested a “carve 21 out” for future claims against Wilmington, this request was rejected, and the Conners then signed the settlement agreement despite its absence. (Doc. 19-1 at 280 ¶ 4.) Although the 22 Court need not rely on this evidence, because the text of the settlement agreement provides sufficiently clear evidence of the parties’ intent, it provides further support for the 23 bankruptcy court’s conclusion. Cf. Associated Students of the Univ. of Ariz. v. Ariz. Bd. of Regents, 584 P.2d 564, 569 (Ariz. Ct. App. 1978) (“The acts of parties under a contract, 24 before disputes arise, are the best [extrinsic] evidence of the meaning of doubtful contract terms.”). 25 4 The Court questions the prudence of attributing ill intent to the bankruptcy court. 26 Not only is it unpersuasive and in bad taste, it is belied by the record in this case. The bankruptcy court, in its discretion, allowed the Conners to reopen a case that had been 27 dormant for close to a year. (Doc. 20-1 at 100.) In reaching that decision, the court generously chose to overlook several of the procedural missteps committed by the 28 Conners’ counsel and offered advice to make further proceedings go more smoothly. (Id. at 82-88.) Whatever the failings in this case, they are not the bankruptcy court’s. 1 B. Fraud In The Inducement 2 In addition to debating the definition of “assign” in the settlement agreement, the 3 Conners allege the settlement agreement was induced by fraud. (Doc. 19 at 19; Doc. 23 at 4 7-8.) In their view, they were deprived of the “true facts” behind the settlement agreement, 5 which “cloud[s] the validity” of the agreement. (Doc. 19 at 15.) 6 Even if the Conners’ assertion is accurate, it does not require reversal. Like contract 7 interpretation, whether a contract is enforceable is governed by state law. Jeff D. v. Andrus, 8 899 F.2d 753, 759 (9th Cir. 1989). Under Arizona law, a party alleging fraudulent 9 inducement has two options: it may seek rescission of the contract or it may affirm the 10 contract and sue for damages. Hennesy Equip. Sales Co. v. Valley Nat’l Bank, 543 P.2d 11 123, 124 (Ariz. Ct. App. 1975); Jennings v. Lee, 461 P.2d 161, 165 (Ariz. 1969); 12 Restatement (Second) of Contracts § 164 (1981) (stating that a fraudulently induced 13 contract is voidable, but not void). 14 During the proceedings in bankruptcy court, the Conners’ counsel stated that, 15 although he might prefer to seek rescission of the settlement agreement, that was “not an 16 option” because the Conners did not want to “have to return the settlement payment.” 17 (Doc. 19-1 at 42.) That means that, even if the Conners have a valid fraudulent inducement 18 claim, their only remaining option is to affirm the agreement and sue for damages. The 19 merits of such a case are not before the Court, but the bottom line is that the settlement 20 agreement is still in effect. 21 * * * 22 The meaning of the settlement agreement is clear. The word “assign” in the 23 agreement’s release as to Nationstar includes Wilmington. Accordingly, the agreement 24 precludes further claims against Wilmington. Given this conclusion, there is no need to 25 review the bankruptcy court’s analysis concerning the sufficiency of the claims asserted in 26 the Conners’ third amended complaint or the bankruptcy court’s resolution of the Conners’ 27 request for leave to submit a fourth amended complaint. 28 … 1 Accordingly, IT IS ORDERED that: 2 (1) — The decision of the bankruptcy court dismissing the Conners’ third amended 3 || complaint without leave to amend is affirmed; and 4 (2) | The Clerk of the Court shall enter judgment accordingly and terminate this || action. 6 Dated this 13th day of February, 2020. 7 g _-

10 United States District Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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