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Barragan v. Deutsche Bank National Trust Co.

United States District Court, C.D. California

June 9, 2015

ELISEO V. BARRAGAN, an individual; MARIA GUZMAN, an individual, ELISEO VARGAS, JR., an individual; MARYCHUY VARGAS, an individual; ELISEO V. VARGAS as guardian ad item for A. V. a minor; AGENLINA VARGAS, an individual and as guardian ad litem for M.P, a minor, A.P., a minor, and L.L. a minor, MIRTHA AYALA, an individual and as guardian ad litem for R.H., Jr. a minor and P.H., a minor, Plaintiffs,
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee, in Trust for Registered Holders of Long Beach Mortgage Loan Trust 2006-WL2, Asset-Backed Certificates, Series 2006-WL2, a banking business entity; SELECT PORTFOLIO SERVICING, a banking business entity, Defendants.

ORDER RE DEFENDANTS' MOTION TO DISMISS [Dkt. No. 7.]

DEAN D. PREGERSON, District Judge.

Presently before the Court is Defendants' motion to dismiss. (Dkt. No. 7.) Having heard oral arguments and considered the parties' submissions, the Court adopts the following order.

I. BACKGROUND

Plaintiff Barragan is the resident/owner of 4615-4615 3/4 Saint Charles Place, Los Angeles, CA 90019. (Compl., ¶ 18.) The mortgage on the property was secured by a deed of trust, initially held by JPMorgan Chase Bank and later transferred to Defendant U.S. Bank. (Id. at ¶ 19.) Several times between 2011 and 2014, Plaintiff fell behind on his mortgage payments and received notices of Defendant's intent to sell the property, based on Plaintiff Barragan's default. (Id. at ¶¶ 20-33.) Each time, Plaintiff Barragan immediately contacted the bank to make arrangements to bring his payments current. (Id.)

On or shortly after March 6, 2014, Plaintiff Barragan received another such notice; he then submitted an application for a loan modification, as he alleges he was advised to do by Defendants. (Id. at ¶ 33-34.) On August 15, 2014, Defendant Select Portfolio Servicing ("SPS") sent him a letter stating that it was reviewing Plaintiff's account "for loss mitigation assistance, " including loan modification. The letter announced that SPS would "continue the foreclosure process" while reviewing the account, but that "NO FORECLOSURE SALE WILL BE CONDUCTED AND YOU WILL NOT LOSE YOUR HOME during the evaluation." (Compl., Ex. 1.) On September 25, 2014, SPS sent another letter explaining that it had not received all the documents needed for its evaluation and was therefore "clos[ing] this request for review." (Id., Ex. 2.) That letter also stated that Plaintiff Barragan had thirty calendar days to "contact SPS to discuss the reason for non-approval, " and that no foreclosure sale would occur during the 30-day window. (Id.)

On September 26, 2014, however, Defendants did conduct a foreclosure sale. (Compl., ¶ 39.) Plaintiff Barragan alleges that sometime shortly thereafter, one of his tenants on the property refused to pay rent because of the foreclosure sale. (Id. at ¶ 40.) On October 1, 2014, Plaintiff filed an unlawful detainer action against the tenant. (Id. at ¶ 41.) The tenant's defense to the unlawful detainer action was that Plaintiff was not the owner of the property. On November 1, a judge denied Plaintiff Barragan's claim on the ground that he was not the record owner of the property. (Id. at ¶ 43.)

On October 21, 2014, Plaintiff filed for bankruptcy. (Id. at ¶ 44.) The Complaint seems to indicate that at that time he was unaware that the foreclosure sale had taken place and acted in reliance on Defendants' representation that no foreclosure sale would take place. (Id.) Defendant Deutsche Bank then obtained relief from the automatic stay in the bankruptcy and evicted the residents from the property on January 8, 2015. (Id. at ¶¶ 46-51.) Also on January 8, Plaintiff Barragan's bankruptcy plan was not confirmed by the bankruptcy judge, because Plaintiff was no longer the owner of the property. (Id. at ¶ 52.) On January 9, 2015, Plaintiff Barragan alleges, a representative of Defendant SPS admitted that "it was wrong for them to have foreclosed" and told him the foreclosure sale would be rescinded. (Id. at ¶ 54.) Plaintiffs filed this action in state court on January 20, 2015. (Compl. at 1.) The sale was rescinded on March 25, 2015. (Defs.' RJN, Ex. 13.) This action was removed to federal court on April 8, 2015. (Dkt. No. 1.)

II. LEGAL STANDARD

In order to survive a motion to dismiss for failure to state a claim, a complaint need only include "a short and plain statement of the claim showing that the pleader is entitled to relief." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 55 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint must include "sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). When considering a Rule 12(b)(6) motion, a court must "accept as true all allegations of material fact and must construe those facts in the light most favorable to the plaintiff." Resnick v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000).

III. DISCUSSION

A. Judicial Estoppel

As an initial matter, Defendants contend that Plaintiff Barragan is judicially estopped from bringing any of his claims, because he did not list his claims as assets in his bankruptcy. Plaintiffs argue, however, that he is not estopped, because the present claims were filed with this Court several months after the bankruptcy was filed.

"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). A party is judicially estopped if the two positions asserted are "clearly inconsistent, " a court actually accepted and relied on the earlier position, and the party would either receive an unfair advantage or impose an unfair detriment on the opposing party by asserting the inconsistent positions. Id. at 782-83.

Specifically, a party who files for bankruptcy but fails to list a pending legal claim among his assets has asserted inconsistent claims before the bankruptcy court and the other court, and may be estopped from pursuing his legal claim. Id. at 784. Nor does the legal claim have to be filed prior to the filing of the bankruptcy to be estopped: "Judicial 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." Id. (emphasis added).

In this case, it is undisputed that Plaintiff Barragan did not include any notice of his legal claims in his bankruptcy petition. Barragan alleges that he did not actually know at the time he filed the petition that Defendants had proceeded to the foreclosure sale.[1] Nonetheless, he must have known of the sale by November 1, 2014, when the state court ruled against him in the unlawful detainer action - or at the very latest by November 5, 2014, when Deutsche Bank filed for relief from the bankruptcy court's automatic stay. He knew of facts related to his causes of action as to the evictions by January 8, 2015. He certainly knew all the relevant facts when he filed this action on January 20, 2015. Yet to date, nearly six months later, Plaintiff Barragan does not seem to have amended his bankruptcy schedules to reflect this lawsuit.

On the other hand, there has not yet been a decision in the bankruptcy case; thus, it is not clear that Plaintiff Barragan has yet obtained an unfair advantage in the bankruptcy by failing to disclose this suit. The bankruptcy court has continued the hearing in his case to June 24, 2015. (Bankruptcy Case No. 2:14-bk-29876-SK, Dkt. No. 27.) Thus, the bankruptcy court does not appear to have "accepted" Plaintiff Barragan's representations yet, nor has he yet received a confirmed bankruptcy plan based on those representations.

The Court therefore orders as follows: if Plaintiff Barragan does not amend his bankruptcy schedules to reflect any and all claims he wishes to pursue in this case before the bankruptcy court confirms a bankruptcy plan, the Court will consider his claims estopped and will dismiss at that time, on an appropriate and timely motion by Defendants. If he does amend his bankruptcy schedules before any decision by the bankruptcy court on his bankruptcy plan, he may proceed with his claims.

B. Standing As To Other Plaintiffs

Defendants argue that the Plaintiffs other than Barragan do not have standing to bring these claims, because "all of the claims raised in the Complaint are predicated upon the contractual relationship between Plaintiff Barragan and Defendants." (Defs.' Mem. P. & A. at 6.) This is not quite true: the wrongful eviction, interference with contract, and negligence claims are not directly predicated on that relationship and could, in a theoretical sense, stand as independent torts. As to the other claims, however, Defendants are correct.

Plaintiffs assert that they do have standing, because they were "foreseeable victims, were forced from their home, and were damaged thereby." (Opp'n at 8:16-18.) Plaintiffs cite no authority that these facts, even if shown, give them standing. To establish standing, "the plaintiff must have suffered an injury in fact'-an invasion of a legally protected interest." Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992).

The alleged agreement between Barragan and Defendants[2] cannot provide that legally protected interest: "It is a general rule of law that before recovery can be had under a contract by a third party, he must show that the contract was made for his direct benefit." Williams v. Fenix & Scisson, Inc., 608 F.2d 1205, 1208 (9th Cir. 1979). No facts have been alleged to show that the agreement, if any, was for the other Plaintiffs' benefit specifically, rather than Barragan's benefit as a homeowner, or that Defendants knew that it was for their benefit.[3]

Similarly, the consumer protection statutes cited in the Complaint operate for the benefit of homeowners, and Plaintiffs have cited no authority to show that they should be extended ...


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