Sinclair et al v. Fox Hollow, et al

Filing 888

ORDER re: motion for Judicial Estoppel and Equitable Estoppel signed by District Judge Anthony W. Ishii on 3/29/13. (Nazaroff, H)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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FOX HOLLOW OF TURLOCK
OWNER’S ASSOCIATION, et. al.,

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Plaintiffs,
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v.
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MAUCTRUST, LLC et al.,
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Defendants.
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____________________________________ )

CASE NO. 1:03-CV-5439 AWI SAB
ORDER RE: MOTION FOR
JUDICIAL ESTOPPEL AND
EQUITABLE ESTOPPEL

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I. History

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This dispute arises out of a housing development known as Fox Hollow of Turlock

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(“Property”). Plaintiff Fox Hollow of Turlock Homeowners’ Association (“Fox Hollow HOA”)

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is the homeowner’s association. Plaintiff California Equity Management Group, Inc. (“CEMG”)

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is the record owner of lots contained within the Property. Fox Hollow HOA, CEMG, and

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Andrew Katakis (collectively “Plaintiffs”) are represented by the same counsel, and form one

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side of the litigation. Defendants Lairtrust, LLC (“Lairtrust”), Capstone, LLC (“Capstone”),

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Mauctrst, LLC (“Mauctrst”) (collectively “LLC Defendants”) are limited liability companies that

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were allegedly used to convert homeowners’ association funds, effect property transfers, and

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commit other acts. Defendants Richard Sinclair, Brandon Sinclair, and Gregory Mauchley

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(collectively “Individual Defendants”) were principals, directors, or employees of the LLC

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Defendants.
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In 1988, Richard Sinclair and his wife purchased the Property and obtained approval from

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the City of Turlock to construct a 35 unit town house complex. They obtained a loan secured by

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a deed of trust on the Property. They built an apartment complex on the Property. In 1992,

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Richard Sinclair and his wife defaulted on the loan. They obtained approval to subdivide the

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Property into 19 lots. On June 8, 1994, Richard Sinclair filed for bankruptcy. In 1995, Stanley

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Flake as Trustee of the Julie Insurance Trust purchased the Property. In 1997 or 1998, Gregory

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Mauchley and Mauctrst acquired the Property. Gregory Mauchley and Mauctrst obtained loans

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secured by the individual lots on the Property from various third parties. They fell into default on

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those loans. Fox Hollow HOA was established in December 2000. Plaintiffs allege the

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Individual and LLC Defendants collected homeowners’ association dues on lots already sold to

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help pay the cost of foreclosure litigation. Through various legal processes and foreclosure,

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CEMG became the owner of 8 lots on the Property. Defendants challenge CEMG’s ownership

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based on allegations of wrongful foreclosure and interference with contract.

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This case is a consolidation of three related cases: an action commenced by Fox Hollow

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HOA against the Individual Defendants, LLC Defendants, and Stanley Flake as Trustee of

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Capstone Trust, Case No. CV-F-03-5439 (“Fox Hollow Action”); an action commenced by

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CEMG against the Individual Defendants, LLC Defendants, Diana Mauchley, Deborah Sinclair,

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Sinclair Enterprises, Inc., Stanley Flake, and Stanley Flake as Trustee of the F. Hanse Trust and

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of the Julie Insurance Trust Case No. CVF- 03-5774 (“CEMG Action”); and an action

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commenced by the LLC Defendants against Plaintiffs in the Stanislaus County Superior Court,

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Case No. 322675 (“Lairtrust Action”), removed to this Court and consolidated with the Fox

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Hollow and CEMG Actions by Order filed on October 6, 2003 (“Consolidated Federal Action”).

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The Consolidated Federal Action is also related to another state court case (Stanislaus County

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Superior Court, Case No. 332233, originally filed on April 24, 2003) in which the Individual

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Defendants and LLC Defendants filed suit against Plaintiffs (“State Court Action”). Plaintiffs

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also filed a cross-complaint against Richard Sinclair, Gregory Mauchley, and Mauctrst. The

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State Court Action dealt with the substance of the dispute between the parties (the foreclosure

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process, ownership of the individual lots on the Property). A 36 day bench trial was held,
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starting on December 9, 2008. On August 18, 2009, judgment was entered against the Individual

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Defendants and LLC Defendants on the main complaint and judgment was entered against

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Plaintiffs on the cross-complaint. Doc. 433, Part 8. The State Court Action is on appeal.

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The operative complaint in this Consolidated Federal Action was filed on July 21, 2010.

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Doc. 410. The Individual Defendants filed a document termed a cross-complaint (“Cross-

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Complaint) against Plaintiffs. Doc. 425. Lairtrust filed a counterclaim (“Counterclaim”) against

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Plaintiffs. Doc. 471. Plaintiffs generally allege that the Cross-Complaint and Counterclaim are

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duplicative of the State Court Action. Richard Sinclair is a practicing attorney and has sought to

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represent both himself and other defendants in this case. The Consolidated Federal Action has

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proceeded in parallel to the State Court Action, but as stated above, the heart of dispute is

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contained in the State Court Action. The Consolidated Federal Action appears to be limited to

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ancillary disputes such as homeowners’ association funds and the tactics each party used in

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prosecuting their cases. The parties filed a notice of settlement on July 16, 2007 (“2007

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Settlement”). Doc. 303. Though the 2007 Settlement was meant to resolve all issues, it was not

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finalized. The status of the 2007 Settlement is a contested issue in the State Court Action and

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not part of this case. Judge Wanger retired at the end of September 2011. The case was

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reassigned to the undersigned. Doc. 804.

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Sinclair has made a motion to enforce the 2007 Settlement on grounds of judicial and
equitable estoppel. Doc. 844. Plaintiffs oppose the motion. Doc. 848.

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II. Discussion

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Sinclair asks the court to apply judicial and equitable estoppel to enforce the 2007

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Settlement. Doc. 844, 1:3-6. Sinclair seeks to estop Plaintiffs from taking positions contrary to

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the terms of that agreement. Plaintiffs argue that the 2007 Settlement is currently unenforceable

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as it is the subject of ongoing litigation in the State Court Action. Judge Wanger ruled that “It is

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beyond dispute that one of the issues currently under review by the California Court of Appeal is

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the existence and enforceability of the 2007 settlement agreement. Individual Defendants do not

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content otherwise.” Doc. 563, 5:14-17; see Doc. 477, Part 8, Ex. E, Notice of Appeal. In
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Superior Court, the trial judge had preliminarily accepted the settlement, but ultimately denied a

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formal motion to enforce the 2007 Settlement. On January 23, 2013, the Fifth District Court of

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Appeal issued a ruling, upholding the Superior Court’s ruling, finding there was “no meeting of

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the minds on several material terms.” Sinclair v. Katakis, 2013 Cal. App. Unpub. LEXIS 509,

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*43-44 (Cal. App. 5th Dist. 2013). However, the California Supreme Court’s public online case

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information website shows that Sinclair has appealed that decision.

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“Judicial estoppel is an equitable doctrine that precludes a party from gaining an

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advantage by asserting one position, and then later seeking an advantage by taking a clearly

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inconsistent position.” Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th Cir.

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2001). Critically, judicial estoppel requires that the earlier inconsistent position to have actually

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been relied on by a court: “Absent success in a prior proceeding, a party’s later inconsistent

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position introduces no risk of inconsistent court determinations, and thus poses little threat to

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judicial integrity.” New Hampshire v. Maine, 532 U.S. 742, 751 (2001), citations omitted. In this

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case, Plaintiffs’ earlier inconsistent position was not relied upon by the California state courts as

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they have thus far declined to enforce the 2007 Settlement.

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“[F]our elements must be present in order to apply the doctrine of equitable estoppel: (1)

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the party to be estopped must be apprised of the facts; (2) he must intend that his conduct shall be

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acted upon, or must so act that the party asserting the estoppel had a right to believe it was so

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intended; (3) the other party must be ignorant of the true state of facts; and (4) he must rely upon

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the conduct to his injury.” Driscoll v. Los Angeles, 67 Cal. 2d 297, 305 (Cal. 1967). In this

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circumstance, Sinclair argues his injury is that “there was a written agreement which caused the

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State Court trial to be vacated and also vacated this federal court action for a number of years.”

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Doc. 844, 25:10-12. The fact that trial was delayed does not appear to be good grounds for

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applying equitable estoppel in this circumstance, especially since it has been Sinclair’s legal

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appeals which have pushed out final resolution in the State Court Action. Further, this court

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would not interfere with the California Supreme Court’s jurisdiction by collaterally enforcing the

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2007 Settlement.

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III. Order

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Sinclair’s motion is DENIED.
IT IS SO ORDERED.

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Dated:
0m8i78

March 29, 2013
SENIOR DISTRICT JUDGE

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