Hocker et al v. Wells Fargo Home Mortgage Incorporated et al
Filing
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ORDER granting 7 Motion to Dismiss and Plaintiffs' Complaint (Doc. 1-4) is dismissed with prejudice and the Clerk of the Court shall close its file in this matter. Signed by Magistrate Judge Bruce G Macdonald on 3/4/2019. (SEE ORDER FOR DETAILS) (MCO)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE DISTRICT OF ARIZONA
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John Hocker and Heather Hocker, husband
and wife,
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Plaintiffs,
No. CV-18-0309-TUC-BGM
ORDER
v.
Wells Fargo Home Mortgage, Inc., a
California corporation, now known as
Wells Fargo Bank, a national association;
John Does I-X; Jane Does I-X; Black
Corporations I-X; White Partnerships I-X;
and Red Limited Liability Companies I-X,
Defendants.
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Currently pending before the Court is Defendant Wells Fargo Bank, N.A.’s
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(“Wells Fargo”) Motion to Dismiss (Doc. 7). Plaintiffs filed a Response (Doc. 10), and
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Defendant subsequently replied (Doc. 14). The motion is fully briefed and ripe for
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adjudication.
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In its discretion, the Court finds this case suitable for decision without oral
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argument. See LRCiv. 7.2(f). The Parties have adequately presented the facts and legal
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arguments in their briefs and supporting documents, and the decisional process would not
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be significantly aided by oral argument.
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I.
FACTUAL BACKGROUND
Plaintiffs live at 495 Earl Drive, Sierra Vista, Arizona 85635 (“Plaintiffs’ home”).
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Compl. (Doc. 1-4) at ¶ 6. On February 13, 2003, Plaintiffs executed a Promissory Note
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in the amount of $93,000.00 in favor of Defendant. Id. at ¶ 7. Plaintiff’s home was used
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as collateral for the February 2003 loan, and Plaintiffs executed a Deed of Trust in favor
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of Defendant and naming First American Title of AZ as Trustee. Id. at ¶ 8. On February
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21, 2003, the Deed of Trust was recorded at Instrument number 030206096, in Cochise
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County. Id.
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On December 17, 2015, Defendant informed Plaintiffs that it had initiated
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foreclosure proceedings on Plaintiffs’ home. Id. at ¶ 9.
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Defendant informed Plaintiffs that the total amount past due under the Promissory Note
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was $4,625.76. Compl. (Doc. 1-4) at ¶ 10 & Wells Fargo Reinstatement Quote to
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Hockers 12/21/2015 (Exh. “1”). On December 23, 2015, First American Title Insurance
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Company recorded a Notice of Trustee Sale with the Cochise County Recorder,
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indicating that Plaintiffs’ home would be sold at public auction on March 28, 2016. Id. at
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¶ 11.
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Cancellation of Trustee’s Sale, thereby cancelling the March 28, 2016 public auction. Id.
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at ¶ 13.
On December 21, 2015,
On January 7, 2016, First American Title Insurance Company recorded a
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On January 8, 2016, Plaintiffs paid Defendant $4,625.76 to reinstate the loan and
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avoid foreclosure. Id. at ¶ 14. On January 11, 2016, First American Title Insurance
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Company recorded a second Notice of Trustee Sale with the Cochise County Recorder,
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indicating the Plaintiffs’ home would be sold at public auction on April 13, 2016. Id. at ¶
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15. On February 16, 2016, Defendant sent Plaintiff a statement, which indicated their
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loan had been reinstated from foreclosure.1 Compl. (Doc. 1-4) at ¶ 16 & Wells Fargo
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Statement, Loan No. 0017768391 2/16/2016 (Exh. “3”). Plaintiffs allege that they did
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not receive notice of the second Notice of Trustee Sale, and only learned of the
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foreclosure from a “third party” mailing. Id. at ¶ 19. Plaintiffs contacted a representative
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of the Defendant and were informed that the property was not in foreclosure and no sale
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The Court notes that this statement also indicates a past due payment of $715.99 and an
unpaid late charge of $27.51 remaining on the account.
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or public auction was scheduled. Id. at ¶ 20. Plaintiffs allege that Defendant refused to
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take any action to cancel the April 13, 2016 trustee sale. Id. at ¶ 21. On April 12, 2016,
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Plaintiffs filed for Chapter 13 bankruptcy in the United States Bankruptcy Court, District
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of Arizona to avoid foreclosure. Id. at ¶¶ 22–23. The following day, First American
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Title Insurance Company recorded a Cancellation of the Notice of Trustee’s Sale.
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Compl. (Doc. 1-4) at ¶ 24.
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On May 9, 2016, Plaintiffs filed their Bankruptcy Schedules and Statements. In
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re: Hocker, D. Ariz., Case No. 16-BK-03848-BMW, Official Form 106Sum (Doc. 15).
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In the Bankruptcy Schedules, Plaintiffs denied having any claims against third parties or
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other contingent and unliquidated claims. Id. at ¶¶ 33, 34. Plaintiffs failed to identify
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any claims against Wells Fargo in their Bankruptcy Schedules. See id. On November 16,
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2017, Plaintiffs’ Second Amended Chapter 13 Plan was confirmed. In re: Hocker, D.
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Ariz., Case No. 16-BK-03848-BMW, Stipulated Order Confirming Second Amended
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Chapter 13 Plan (Doc. 44).
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On May 17, 2018, Plaintiffs filed a Complaint in the Superior Court of Arizona,
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Cochise County, alleging claims for a Violation of A.R.S. § 33-420; Breach of Contract;
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and Breach of the Implied Covenant of Good Faith and Fair Dealing. Compl (Doc. 1-4).
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Plaintiffs allege “Defendant knew that the Second Notice of Trustee Sale was forged,
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groundless, contained a material misstatement and/or false claim.” Id. at ¶ 27. Plaintiffs
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further allege that the recording of the Second Notice violated A.R.S. § 33-420 and that
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Defendant’s alleged wrongful initiation of the second foreclosure proceeding forced
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Plaintiffs to hire an attorney and file for bankruptcy. Compl. (Doc. 1-4) ¶¶ 33, 35, 39.
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On June 22, 2018, Defendant removed the case to this Court. Notice of Removal (Doc.
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1). Defendant seeks dismissal of the Complaint pursuant to Rule 12(b)(6), Federal Rules
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of Civil Procedure.
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II.
STANDARD OF REVIEW
A complaint is to contain a “short and plain statement of the claim showing that
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the pleader is entitled to relief[.]” Rule 8(a), Fed. R. Civ. P. While Rule 8 does not
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demand detailed factual allegations, “it demands more than an unadorned, the-defendant-
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unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct.
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1937, 1949, 173 L.Ed.2d 868 (2009). “Threadbare recitals of the elements of a cause of
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action, supported by mere conclusory statements, do not suffice.” Id.; Pareto v. Fed.
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Deposit Ins. Corp., 139 F.3d 696, 699 (9th Cir. 1998) (“conclusory allegations of law and
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unwarranted inferences are not sufficient to defeat a motion to dismiss.”).
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Dismissal is appropriate where a plaintiff has failed to “state a claim upon which
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relief can be granted.” Rule 12(b)(6), Fed. R. Civ. P. “To survive a motion to dismiss, a
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complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to
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relief that is plausible on its face.’” Ashcroft, 556 U.S. at 678, 129 S.Ct. at 1949 (quoting
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Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974, 167 L.Ed.2d
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929 (2007)). Further, “[a] claim has facial plausibility when the plaintiff pleads factual
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content that allows the court to draw the reasonable inference that the defendant is liable
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for the misconduct alleged.
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requirement,’ but it asks for more than a sheer possibility that a defendant has acted
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unlawfully.” Id. (citations omitted).
The plausibility standard is not akin to a ‘probability
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“When ruling on a motion to dismiss, [the Court must] accept all factual
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allegations in the complaint as true and construe the pleadings in the light most favorable
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to the nonmoving party.” Association for Los Angeles Deputy Sheriffs v. County of Los
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Angeles, 648 F.3d 986, 991 (9th Cir. 2011) (quoting Knievel v. ESPN, 393 F.3d 1068,
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1072 (9th Cir. 2005)).
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plaintiff.” Id. (citing Newcal Industries, Inc. v. Ikon Office Solution, 513 F.3d 1038, 1043
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n.2 (9th Cir. 2008)).
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statements as a factual basis. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127
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S.Ct. 1955, 1964, 167 L.Ed.2d 929 (2007); Mann v. City of Tucson, 782 F.2d 790, 793
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(9th Cir. 1986) (“Although we must, in general, accept the facts alleged in the complaint
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as true, wholly vague and conclusory allegations are not sufficient to withstand a motion
“The court draws all reasonable inferences in favor of the
This Court is not required, however, to accept conclusory
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to dismiss.”).
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“As a general rule, a district court may not consider any material beyond the
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pleadings in ruling on a Rule 12(b)(6) motion.” Lee v. City of Los Angeles, 250 F.3d.
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668, 688 (9th Cir. 2001) (quotations and citations omitted). “There are, however, two
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exceptions to the requirement that consideration of extrinsic evidence converts a 12(b)(6)
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motion to a summary judgment motion. Id. “First, a court may consider material which
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is properly submitted as part of the complaint[.]” Id. Second, “[a] court may take
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judicial notice of ‘matters of public record’ without converting a motion to dismiss into a
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motion for summary judgment.” Id. at 689 (citing MGIC Indem. Corp. v. Weisman, 803
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F.2d 500, 504 (9th Cir. 1986)); see also Fed. R. Evid. 201.
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III.
ANALYSIS
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Defendant seeks dismissal of Plaintiffs’ Complaint without leave to amend
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because 1) Plaintiffs failed to identify any potential claims against Wells Fargo in their
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prior bankruptcy case and are therefore judicially estopped from doing so now; and 2)
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Plaintiffs failed to provide Wells Fargo of any alleged breach as required by the contract.
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See Def.’s Mot. to Dismiss (Doc. 7).
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A. Judicial Estoppel
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Defendant asserts that “Plaintiffs are judicially estopped from asserting their
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claims against Wells Fargo because Plaintiffs did not disclose them during their
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bankruptcy proceeding.” Def.’s Mot. to Dismiss (Doc. 7) at 4. Defendants further assert
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that because “Plaintiffs derived an unfair advantage by obtaining the benefits of plan
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confirmation in their bankruptcy while failing to accurately complete their bankruptcy
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schedules[,]” the Complaint currently before this Court must be dismissed with prejudice.
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Reply (Doc. 14) at 4. Plaintiffs counter that because the told the Bankruptcy Trustee
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about the claim, they have not taken an inconsistent position in the instant litigation. Pls.’
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Response (Doc. 10) at 5. Plaintiff’s further assert that Defendant has “unclean hands”
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and therefore should be precluded from raising judicial estoppel.
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“Judicial estoppel, sometimes also known as the doctrine of preclusion of
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inconsistent positions, precludes a party from gaining an unfair advantage by taking one
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position, and then seeking a second advantage by taking an incompatible position.”
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Whaley v. Belleque, 520 F.3d 997, 1002 (9th Cir. 2008).
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equitable doctrine[.]” Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th
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Cir. 2001). “This court invokes judicial estoppel not only to prevent a party from gaining
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an advantage by taking inconsistent positions, but also because of general
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consideration[s] of the orderly administration of justice and regard for the dignity of
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judicial proceedings, and to protect against a litigant playing fast and loose with the
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courts.” Id. (quotations and citations omitted). The Supreme Court of the United States
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has delineated several factors for consideration in a particular case: 1) “a party’s later
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position must be ‘clearly inconsistent’ with its earlier position”; 2) the party must have
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“succeeded in persuading a court to accept that party’s earlier position”; and 3) “the party
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seeking to assert an inconsistent position would derive an unfair advantage” if allowed to
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adopt the new position. New Hampshire v. Maine, 532 U.S. 742, 750–51, 121 S.Ct.
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1808, 1815, 149 L.Ed.2d 968 (2001) (citations omitted); see also Hamilton, 270 F.3d at
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782–83. This list of factors is not exhaustive or inflexible. New Hampshire, 532 U.S. at
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751, 121 S.Ct. at 1815.
“Judicial estoppel is an
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Moreover, “[t]he application of judicial estoppel is not limited to bar the assertion
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of inconsistent positions in the same litigation, but is also appropriate to bar litigants from
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making incompatible statements in two different cases.” Hamilton, 270 F.3d at 783
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(citations omitted). “Judicial estoppel will be imposed when the debtor has knowledge of
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enough facts to know that a potential cause of action exists during the pendency of the
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bankruptcy, but fails to amend his schedules or disclosure statements to identify the cause
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of action as a contingent asset.” Id. at 784; see also Hay v. First Interstate Bank of
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Kalispell, N.A., 978 F.2d 555 (9th Cir. 1992).
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Here, Plaintiffs knew of the facts supporting their claims against Wells Fargo at
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the time that they filed bankruptcy. In fact, they allege that Wells Fargo’s conduct is
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what lead them to file for bankruptcy. On May 9, 2016, Plaintiffs filed their Bankruptcy
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Schedules and Statements. In re: Hocker, D. Ariz., Case No. 16-BK-03848-BMW,
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Official Form 106Sum (Doc. 15). In the Bankruptcy Schedules, Plaintiffs denied having
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any claims against third parties or other contingent and unliquidated claims. Id. at ¶¶ 33,
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34.
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Schedules. See id. On November 16, 2017, Plaintiffs’ Second Amended Chapter 13 Plan
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was confirmed. In re: Hocker, D. Ariz., Case No. 16-BK-03848-BMW, Stipulated Order
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Confirming Second Amended Chapter 13 Plan (Doc. 44). As such, Plaintiffs position in
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the Bankruptcy proceeding was “clearly inconsistent” with the one being asserted in this
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case. Through confirmation of a Chapter 13 Plan which relied upon that position,
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Plaintiffs succeeded in persuading a court to accept their previous position. Plaintiffs’
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“failure to list [their] claims against [Wells Fargo] as assets on [their] bankruptcy
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schedules deceived the bankruptcy court and [Plaintiffs’] creditors, who relied on the
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schedules to determine what action, if any, they would take in the matter.” Hamilton,
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270 F.3d at 785. Plaintiffs assert that they informed the Bankruptcy Trustee regarding
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the alleged wrongful foreclosure and potential lawsuit and argue this should be sufficient
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to prevent judicial estoppel here. Pls.’ Response (Doc. 10) at 4–5 & Hockers’ Decl.
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(Exh. “1”) & Trustee Questionnaire (Exh. “2”). Plaintiffs, however, cannot shift their
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continuing duty to disclose all assets on the bankruptcy schedules to the Bankruptcy
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Trustee.2 Furthermore, Plaintiffs enjoyed the benefit of both an automatic stay and
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reorganization of their debt through the Chapter 13 bankruptcy proceeding.
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Hamilton, 270 F.3d at 785.
Plaintiffs failed to identify any claims against Wells Fargo in their Bankruptcy
See
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“[T]he integrity of the bankruptcy system depends on full and honest disclosure by
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debtors of all their assets.” Id. at 785 (citing In re Coastal Plains, 179 F.3d 197, 208 (5th
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Cir. 1999). “The interests of both the creditors, who plan their actions in the bankruptcy
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proceeding on the basis of information supplied in the disclosure statements, and the
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Additionally, the Bankruptcy Trustee’s questionnaire was not filed in the Bankruptcy
Court’s docket which alerts creditors and the Bankruptcy Court of information submitted in the
case.
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bankruptcy court, which must decide whether to approve the plan of reorganization on
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the same basis, are impaired when the disclosure provided by the debtor is incomplete.”
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Id. (citing In re Coastal Plains, 179 F.3d 197, 208 (5th Cir. 1999).
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Plaintiffs’ assertion that Wells Fargo’s “unclean hands” should preclude application of
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judicial estoppel to their claims in this case is without merit.
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conduct did not cause Plaintiffs’ failure to accurately list their assets in the Bankruptcy
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schedules. See Seller Agency Council, Inc. v. Kennedy Center for Real Estate Educ., Inc.,
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621 F.3d 981, 986–87 (9th Cir. 2010) (“Unclean hands does not constitute misconduct in
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the abstract, unrelated to the claim to which it is asserted as a defense.”) (quotations and
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Defendant’s alleged
citations omitted).
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Additionally,
Accordingly, Plaintiffs are judicially estopped from pursuing claims against
Defendant Wells Fargo in this matter.
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B. Lack of Notice
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Because Plaintiffs are judicially estopped from bringing the claims at issue in this
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lawsuit, the Court declines to address this issue.
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VI.
CONCLUSION
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Based upon the foregoing, IT IS HEREBY ORDERED that:
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1) Defendants’ Motion to Dismiss (Doc. 7) is GRANTED;
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2) Plaintiffs’ Complaint (Doc. 1-4) is DISMISSED WITH PREJUDICE; and
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3) The Clerk of the Court shall close its file in this matter.
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Dated this 4th day of March, 2019.
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