Errol Locke v. Wells Fargo Bank, N.A.

• Court: District Court, C.D. California
• Decided: June 30, 2020
• Docket: 2:19-cv-08854
• Status: Unknown

Opinion

O

7 United States District Court 8 Central District of California

9 10 11 PLAINTIFFS IN PRO PER ERROL AND Case No. 2:19-cv-08854-ODW (JPRx) 12 TABATHA LOCKE, 13 Plaintiffs, ORDER GRANTING DEFENDANT’S 14 v. MOTION TO DISMISS [26] 15 WELLS FARGO BANK, N.A. AND 16 AMERICA’S SERVICING COMPANY, 17 Defendants. 18 I. INTRODUCTION 19 Plaintiffs Errol and Tabatha Locke (the “Lockes”), proceeding pro se, bring this 20 action against various defendants for multiple claims based on an alleged wrongful 21 foreclosure sale of their home (the “Subject Property”). (See First Am. Compl. 22 (“FAC”) at 3., ECF No. 21). Defendant Wells Fargo, N.A. (“Wells Fargo”) moves to 23 dismiss the Lockes’ First Amended Complaint (“FAC”). (See Mot. to Dismiss 24 (“Mot.”), ECF No. 26.) 25 For the reasons that follow, the Court GRANTS Defendant’s Motion to 26 Dismiss. 27 28 1 I. BACKGROUND 2 In 2005, the Lockes took out a loan in the amount of $340,000 backed by a 3 deed of trust in the Subject Property. (Req. for Judicial Notice (“RJN”) Ex. 3 4 (“Assignment of Deed and Trust”), ECF No. 27.) In 2008, the Lockes fell three 5 months behind in payments. (FAC at 3.) To make up the missed payments, the 6 Lockes entered into multiple “Special Forbearance Programs.” (FAC at 10.) 7 The Lockes allege that Wells Fargo’s representatives promised that once they 8 completed the program their mortgage would be modified through the “Making Home 9 Affordable Act.” (FAC at 11.) However, their loan was not modified despite their 10 alleged success in completing the program. (FAC at 12.) Wells Fargo represented 11 that the modification was denied because of the Lockes’ income and a broken 12 forbearance agreement. (FAC at 12.) As a result of these circumstances, the Lockes 13 faced foreclosure. (FAC at 12.) 14 In March 2010, the Lockes filed a Chapter 7 bankruptcy petition. (Mot. 9.) 15 The Lockes did not disclose their potential claim against Wells Fargo in their initial 16 bankruptcy schedule or their amended schedules. (FAC Ex. R. (“Schedule B- 17 Personal Property”) 7.) Shortly after, the Lockes enlisted the legal services of a non- 18 profit organization in order to rescind their foreclosure. (FAC at 12.) Despite the 19 Lockes’ best efforts, Wells Fargo did not rescind the foreclosure. (FAC at 13.) 20 In 2018, the Lockes once again asked Wells Fargo to reconsider its decision to 21 foreclose on their home. (FAC at 13.) However, on November 15, 2018, Wells Fargo 22 reaffirmed its decision. (FAC at 13.) The Lockes believe that Wells Fargo refused to 23 admit it wrongfully foreclosed on the Subject Property in retaliation for the Lockes’ 24 complaint to the Comptroller of Currency, which they had filed prior to the 25 foreclosure. (FAC at 21.) 26 On August 27, 2019, the Lockes brought suit in the Superior Court of California 27 and on October 15, 2019, Wells Fargo removed the action to this Court. (See Notice 28 of Removal by Def. Wells Fargo Bank, N.A. (“Removal”), ECF No. 1.) 1 II. LEGAL STANDARD 2 A court may dismiss a complaint under Rule 12(b)(6) for lack of a cognizable 3 legal theory or insufficient facts pleaded to support an otherwise cognizable legal 4 theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). To 5 survive a dismissal motion, a complaint need only satisfy the minimal notice pleading 6 requirements of Rule 8(a)(2)—a short and plain statement of the claim. Porter v. 7 Jones, 319 F.3d 483, 494 (9th Cir. 2003). The factual “allegations must be enough to 8 raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 9 U.S. 544, 555 (2007). That is, the complaint must “contain sufficient factual matter, 10 accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. 11 Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). 12 The determination of whether a complaint satisfies the plausibility standard is a 13 “context-specific task that requires the reviewing court to draw on its judicial 14 experience and common sense.” Id. at 679. A court is generally limited to the 15 pleadings and must construe all “factual allegations set forth in the complaint . . . as 16 true and . . . in the light most favorable” to the plaintiff. Lee v. City of Los Angeles, 17 250 F.3d 668, 679 (9th Cir. 2001). But a court need not blindly accept conclusory 18 allegations, unwarranted deductions of fact, and unreasonable inferences. Sprewell v. 19 Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Pro se pleadings are to be 20 construed liberally, but a plaintiff must still present factual allegations sufficient to 21 state a plausible claim for relief. See Hebbe v. Pliler, 627 F.3d 338, 341 (9th Cir. 22 2010). A court may not “supply essential elements of the claim that were not initially 23 pled.” Pena v. Gardner, 976 F.2d 469, 471 (9th Cir. 1992). A liberal reading cannot 24 cure the absence of such facts. Ivey v. Bd. of Regents of the Univ. of Alaska, 673 F.2d 25 266, 268 (9th Cir. 1982). 26 Where a district court grants a motion to dismiss, it should generally provide 27 leave to amend unless it is clear the complaint could not be saved by any amendment. 28 See Fed. R. Civ. P. 15(a); Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1 1025, 1031 (9th Cir. 2008). Leave to amend may be denied when “the court 2 determines that the allegation of other facts consistent with the challenged pleading 3 could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture 4 Co., 806 F.2d 1393, 1401 (9th Cir. 1986). Thus, leave to amend “is properly 5 denied . . . if amendment would be futile.” Carrico v. City of San Francisco, 656 F.3d 6 1002, 1008 (9th Cir. 2011). 7 III. REQUEST FOR JUDICIAL NOTICE 8 Wells Fargo requests judicial notice of ten documents: Exhibit 1: Interest First 9 Note; Exhibit 2: Deed of Trust; Exhibit 3: Assignment of Deed of Trust; Exhibit 4: 10 Notice of Default; Exhibit 5: Trustee’s Deed Upon Sale; Exhibit 6: Voluntary Chapter 11 Seven Bankruptcy Petition; Exhibit 7: Amended Schedule(s) and/or Statement(s); 12 Exhibit 8: Motion for Relief from Automatic Stay; Exhibit 9: Discharge of Debtor; 13 Exhibit 10: Bankruptcy Docket for Voluntary Chapter Seven Bankruptcy Court. (Req. 14 for Judicial Notice 2–3, ECF No. 27.) Plaintiffs do not oppose Wells Fargo’s request. 15 A court is generally limited to the pleadings in ruling on a Rule 12(b)(6) motion 16 but may consider documents incorporated by reference in the complaint or properly 17 subject to judicial notice without converting a motion to dismiss into one for summary 18 judgment. See Lee, 250 F.3d at 688–89. “[A] court may judicially notice a fact that is 19 not subject to reasonable dispute because it: (1) is generally known within the trial 20 court’s territorial jurisdiction; or (2) can be accurately and readily determined from 21 sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). A 22 document may be incorporated by reference where neither party disputes its 23 authenticity and the pleading necessarily relies on the document. See Marder v. 24 Lopez, 450 F.3d 445, 448 (9th Cir. 2006). 25 The Deed of Trust, Assignment of Deed of Trust, Notice of Default and 26 Trustee’s Deed Upon Sale Deed of Trust are proper subjects of judicial notice because 27 they are undisputed public documents recorded by the Los Angeles County 28 Recorder’s Office. See, e.g., Grant v. Aurora Loan Servs., Inc., 736 F. Supp. 2d 1257, 1 1264 (C.D. Cal. 2010) (collecting cases granting judicial notice of documents 2 recorded by the County Recorder’s Office). Accordingly, the Court GRANTS 3 judicial notice of the Deed of Trust, Assignment of Deed of Trust, Notice of Default 4 and Trustee’s Deed Upon Sale Deed of Trust. 5 The Court Docket from the related Bankruptcy Petition and the Order are also 6 proper subjects of judicial notice. See U.S. ex rel Robinson Rancheria Citizens 7 Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir. 1992) (stating the court “may 8 take notice of proceedings [and related filings] in other courts, both within and 9 without the federal judicial system, if those proceedings have a direct relation to 10 matters at issue”). Accordingly, the Court GRANTS judicial notice of Exhibits 6–10. 11 The Interest First Note is not a proper subject of judicial notice and the Court 12 therefore DENIES this request. 13 IV. DISCUSSION 14 Wells Fargo moves to dismiss Plaintiffs’ claims on the basis that they are barred 15 by the statute of limitations and judicial estoppel, and the Lockes lack standing to 16 assert their claims and have failed to state a claim. Here, the Court only addresses 17 judicial estoppel as it is dispositive of the Motion. 18 Wells Fargo argues that the Lockes are judicially estopped from asserting their 19 claims because they failed to disclose them during bankruptcy proceedings. (Mot. 8.) 20 Judicial estoppel “precludes a party from gaining an advantage by taking one position, 21 and then seeking a second advantage by taking an incompatible position.” Rissetto v. 22 Plumbers & Steamfitters Local 343, 94 F.3d 597, 600 (9th Cir. 1996). In New 23 Hampshire v. Maine, the Supreme Court identified three factors that “typically inform 24 the decision whether to apply the doctrine in a particular case.” 532 U.S. 742, 743 25 (2001). First, a party’s later position must be clearly inconsistent with its earlier 26 position. Second, courts regularly inquire whether the party has 27 succeeded in persuading a court to accept that party’s earlier position, so 28 that judicial acceptance of an inconsistent position in a later proceeding would create the perception that either the first or the second court was 1 misled. Third, courts ask whether the party seeking to assert an 2 inconsistent position would derive an unfair advantage or impose an 3 unfair detriment on the opposing party if not estopped. Id. The Court addresses each factor in turn. 4 A. Inconsistent Positions 5 The Ninth Circuit has held that “in the bankruptcy context, a party is judicially 6 estopped from asserting a cause of action not raised in a reorganization plan or 7 otherwise mentioned in the debtor’s schedules or disclosure statements.” Hamilton v. 8 State Farm Fire & Cas. Co., 270 F.3d 778, 783 (9th Cir. 1992). Judicial estoppel bars 9 a plaintiff’s claim when the plaintiff-debtor has “knowledge of enough facts to know 10 that a potential cause of action exists during the pendency of the bankruptcy, but fails 11 to amend his schedules or disclosure statements to identify the cause of action as a 12 contingent asset.” Id. at 784. The duty to disclose potential claims continues for the 13 duration of the bankruptcy proceeding. Id. at 785. 14 Here, the Lockes failed to disclose their claim against Wells Fargo in their 15 bankruptcy schedule and failed to later amend the schedule to include their claim. 16 (FAC Ex. R. 7.) The Lockes filed a Chapter 7 bankruptcy petition in March 2010. 17 (Mot. 9.) In their bankruptcy schedule, the Lockes were asked to list “other 18 contingent and unliquidated claims of every nature, including tax refunds, 19 counterclaims of the debtor, and rights to setoff claims.” (FAC Ex. R. 7.) The Lockes 20 checked off the box indicating “None.” (FAC Ex. R. 7.) 21 The Lockes’ response to Wells Fargo’s argument is far from clear. The Lockes 22 argue that “[w]hereas, here the fact at issue is the existence of a statement in a 23 declaration within a bankruptcy proceeding, and not the truth of the statement itself, 24 the accuracy of the fact at issue cannot be reasonably question [sic].” (Opp’n to 25 Mot. 2, ECF No. 30.). In a sense, the Lockes are correct. The Court is not tasked 26 with assessing the veracity of the potential legal claim but simply whether the Lockes 27 disclosed the claim. However, the Lockes did not. To the extent, the Lockes argue 28 1 they should not be judicially estopped because they listed the Subject Property in their 2 Schedule A and Schedule C documents, the Court finds that these disclosures do not 3 save their claims. Judicial estoppel seeks to bar claims that parties knew of but failed 4 to disclose. Hamilton, 270 F.3d at 783. Thus, the Lockes were required to disclose 5 their foreclosure-related claims not the Subject Property on which their claims are 6 premised. (Opp’n 2; Mot. 5.) As the Lockes filed a complaint with the Comptroller 7 of Currency regarding the foreclosure of their home in 2009, the Court finds that the 8 Lockes had knowledge of enough facts to know that a potential claim existed during 9 their bankruptcy proceedings. (FAC at 2.) 10 Furthermore, on April 5, 2010, the Lockes amended their bankruptcy schedule 11 in order to retain their income checks. (FAC at 18.) When amending their bankruptcy 12 schedule, the Lockes were once again asked to list “other contingent and unliquidated 13 claims of every nature, including tax refunds, counterclaims of the debtor, and rights 14 to setoff claims.” (FAC Ex. S.) Again, the Lockes checked off the box indicating 15 “None.” (FAC Ex. S.) Shortly after, on May 5, 2010, the Lockes enlisted the legal 16 services of Bet Tzedek Legal Services in order to rescind their foreclosure, indicating 17 they had knowledge of a potential cause of action against Wells Fargo at the time. 18 (FAC at 12.) 19 Thus, at the time that the Lockes initiated bankruptcy proceedings and amended 20 their bankruptcy schedule, they knew of a potential cause of action against Wells 21 Fargo. Nonetheless, they failed to disclose the claim on their bankruptcy schedules or 22 amend the schedule to reflect the potential claim. Thus, the Lockes position is clearly 23 inconsistent with their earlier position. 24 B. Judicial Acceptance of Plaintiffs’ Earlier Position 25 In the bankruptcy context, the judicial acceptance prong is satisfied if the 26 bankruptcy court relies on the debtor’s nondisclosure of potential claims in some way. 27 Hamilton, 270 F.3d at 784. For instance, the Ninth Circuit has held that “a debtor 28 who failed to disclose a pending claim as an asset in a bankruptcy proceeding where 1 debt were permanently discharged was estopped from pursuing such claim in a 2 subsequent proceeding.” Id. In the Bankruptcy context, “the bankruptcy court may 3 ‘accept’ the debtor’s assertions by relying on the debtor’s nondisclosure of potential 4 claims.” Id. (finding that the bankruptcy court relied on the plaintiff-debtor’s failure 5 to disclose his claims against his creditor when granting him an automatic stay and 6 discharging his debt). 7 Here, the bankruptcy court relied on the Lockes’ initial and amended 8 bankruptcy schedules when discharging their debt. (RJN Ex. 9.) By discharging the 9 Lockes’ debt, the bankruptcy court accepted their initial position that a pending or 10 potential claim against Wells Fargo did not exist. 11 C. Plaintiffs Derived an Unfair Advantage 12 Plaintiff-debtors obtain an unfair advantage when a bankruptcy court grants a 13 “discharge or plan confirmation without allowing the creditors to learn of the pending 14 lawsuit.” Ah Quin v. Cty. of Kauai Dep’t. of Transp., 733 F.3d 267, 271 (9th Cir. 15 2013). In Hamilton, the court held that “[the plaintiff’s] failure to list his claims 16 against State Farm as assets on his bankruptcy schedules deceived the bankruptcy 17 court and [plaintiff’s] creditors, who relied on the schedules to determine what action, 18 if any, they would take in the matter.” 270 F.3d at 785. By failing to disclose his 19 claim, the plaintiff “[enjoyed] the benefit of both an automatic stay and a discharge of 20 debt in his Chapter 7 bankruptcy proceeding.” Id. 21 Similarly, the Lockes benefitted from not disclosing their potential claim 22 against Wells Fargo, because the bankruptcy court discharged the Lockes’ debt. By 23 asserting a cause of action based on a position inconsistent with the one taken in the 24 bankruptcy proceeding, the Lockes are attempting to derive an unfair advantage. 25 D. Inadvertence or Mistake 26 In some cases, “it may be appropriate to resist application of judicial estoppel 27 when a party’s prior position was based on inadvertence or mistake.” New 28 Hampshire, 532 U.S. at 753. The Ninth Circuit has held that “judicial estoppel 1 requires an inquiry into whether the plaintiff’s bankruptcy filing was, in fact, 2 inadvertent or mistaken, as those terms are commonly understood.” Ah Quin, 733 3 F.3d at 276. In Ah Quin, the plaintiff-debtor “filed an affidavit in which she swore 4 that, when she reviewed the bankruptcy schedules, she did not think that she had to 5 disclose her pending lawsuit.” Id. at 277. In light of the affidavit, the court found that 6 “her bankruptcy filing was inadvertent.” Id. at 278. But, in a subsequent, factually 7 similar case, the court found that Ah Quin is distinguishable, explaining that: As in Ah Quin, Plaintiff here filed false (materially incomplete) 8 bankruptcy schedules and did not amend those schedules until Defendant 9 filed a motion to dismiss this action, suggesting that her omission had not 10 been inadvertent. But unlike in Ah Quin, Plaintiff presented no evidence, by affidavit or otherwise, explaining her initial failure to include the 11 action on her bankruptcy schedules. 12 Dzakula v. McHugh, 746 F.3d 399, 401 (9th Cir. 2014). The court in Dzakula 13 ultimately held that, “in light of the timing of Plaintiff’s amendment and her choice 14 not to file a declaration explaining her initial error, no reasonable fact-finder can 15 conclude that the admission was inadvertent or mistaken.” Id. at 401-02. 16 Unlike in the plaintiffs in Ah Quin and Dzakula, the Lockes here did not at any 17 time amend their bankruptcy schedules to include their claim against Wells Fargo. 18 Furthermore, like the plaintiffs in Dzakula, the Lockes did not file an affidavit 19 explaining their initial failure to include the action on their bankruptcy schedules. 20 Thus, the evidence does not suggest that the Lockes’ nondisclosure was inadvertent or 21 mistaken. 22 Upon consideration of the three factors, the Court finds that the application of 23 judicial estoppel is appropriate in this case. The Lockes had a duty to disclose their 24 claim against Wells Fargo during their bankruptcy proceedings but failed to do so 25 despite having knowledge of the claim at the time. The bankruptcy court accepted the 26 Lockes’ initial position by discharging their debt, and thus, the Lockes are attempting 27 to derive an unfair advantage by asserting this claim against Wells Fargo. 28 Additionally, this Court does not find that the Lockes’ failure to include their claim in 1 | the bankruptcy proceedings was a result of inadvertence or mistake. Accordingly, 2 || judicial estoppel bars this action. 3 V. CONCLUSION 4 For the foregoing reasons, the Court GRANTS Wells Fargo’s Motion. The 5 || Court DISMISSES the case in its entirety with prejudice. The Court will enter 6 | Judgment. 7 8 IT IS SO ORDERED. 9 10 June 30, 2020 did Yj 12 GN Mi 13 OTIS D. WRIGHT, II 14 UNITED STATES DISTRICT JUDGE 15 16 17 18 19 20 21 22 23 24 25 26 27 28