Defendant Trinity Financial Services, LLC’s Motion for Judgment on the Pleadings as to the Complaint is SUSTAINED in its entirety. Plaintiff has 15 days leave to amend.
Request for Judicial Notice: Defendant’s request for judicial notice for Exhibit Nos. 7-12 is GRANTED. The request is unopposed and proper, and judicial notice is permitted under Evidence Code §§ 452 and 453. The request for judicial notice for Exhibit Nos. 1-6 is DENIED since they are not relevant to the ruling on this motion.
The court takes judicial notice of the existence and filing and/or recordation of these documents, as well as their clear legal effects pursuant to Evidence Code, § 452(c) and (h). (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-265.) However, the court does not take judicial notice of the truth of matters asserted in these documents. (Evid. Code § 452(c), (d). See also, Arce v. Kaiser Foundation Health Plan, Inc. (2010) 181 Cal.App.4th 471, 482).
Judicial Estoppel and Res Judicata: Judicial estoppel, also known as the doctrine of preclusion of inconsistent positions, prevents a party from asserting a position in a legal proceeding that is contrary to a position previously taken in the same or some earlier proceeding. It is an “extraordinary remedy” to be invoked when a party’s inconsistent behavior will otherwise result in a miscarriage of justice. (See Daar & Newman v. VRL International (2005) 129 Cal.App.4th 482, 490–491.)
Judicial estoppel is an equitable remedy, and California courts have considered five factors in determining whether the doctrine applies: “The doctrine [most appropriately] applies when ‘(1) the same party has taken two positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud, or mistake.’ ” (Aguilar v. Lerner (2004) 32 Cal.4th 974, 986–987; accord, MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc. (2005) 36 Cal.4th 412, 422.)
The purpose of judicial estoppel is to protect the integrity of the judicial process, and, as such, the doctrine is primarily concerned with the connection between a party and the judicial system, not the relationship between parties. (Gottlieb v. Kest (2006) 141 Cal. App. 4th 110, 130–32.)
Res judicata precludes a party from relitigating the same claim against the same party when that claim proceeded to a final judgment on the merits in a prior action. Res judicata applies if (1) the issue decided in the prior adjudication is identical with the one presented in the new action; (2) there was a final judgment on the merits in the prior action; and (3) the party against whom the plea is asserted was a party or in privity with a party to the prior adjudication. (San Diego Police Officers’ Ass’n v. San Diego City Employees’ Retirement System (9th Cir. 2009) 568 F.3d 725; Boeken v. Philip Morris USA, Inc. (2010) 48 Cal. 4th 788; In re Conservatorship and Estate of Buchenau (2011) 196 Cal. App. 4th 1031.)
These concepts and terms have been used interchangeably to bar a subsequent lawsuit by a plaintiff who failed to disclose a claim against the defendant in a prior bankruptcy.
In analyzing similar issues to those at bar one court has prefaced: “For the sake of simplicity, we will refer to this general concept as ‘judicial estoppel,’ although other relevant cases use the terms ‘equitable estoppel,’ ‘res judicata,’ ‘waiver,’ or ‘quasi-estoppel’ to justify similar holdings.” (Caplener v. U.S. Nat. Bank (1993) 317 Or. 506, fn. 12 [857 P.2d 830, 837].) We agree that the lender liability cases in the bankruptcy context use the several types of issue preclusion concepts sometimes interchangeably and sometimes one to the exclusion of another. (See also Littlefield v. Union State Bank (N.D. 1993) 500 N.W.2d 881, 883 and citations therein.) Thus, though we may refer to one or another theory by a specific term, we consider the issue in this case to implicate the general concept of issue preclusion as applied to claims in the bankruptcy context. (Italics in original, emphasis added.)
(See Billmeyer v. Plaza Bank of Commerce (1995) 42 Cal.App.4th 1086, 1091-1092 and fn. 2.)
In this case, plaintiffs knew they had claims against defendant since they filed this lawsuit about a week and half before filing for bankruptcy and were represented in both actions by the same counsel. See Complaint filed April 4, 2018 (ROA 2) and RJN, Ex. 9, Chapter 13 Voluntary Bankruptcy Petition filed April 13, 2018. Plaintiffs’ disclosed defendant as a secured creditor and the amount of the loan in their Second Amended Chapter 13 Plan (RJN, Ex. 11), which was confirmed by the bankruptcy court. RJN, Ex. 12.
Defendant also argues that, in their bankruptcy schedules, plaintiffs identified defendant as a secured creditor, did not indicate that this claim was disputed, and did not disclose the existence of any claims against defendant. Although these facts are not disputed by plaintiffs, they are not properly before this court and cannot be considered in this motion because defendant did not attach the bankruptcy schedules to their request for judicial notice and there are no facts regarding the bankruptcy in the Complaint. The document attached as Exhibit 10 to the Request for Judicial Notice is actually the original Chapter 13 Plan, not plaintiffs’ bankruptcy schedules.
Whether to apply judicial estoppel turns on the plaintiff/debtor’s nondisclosure of a known potential or existing claim. As recognized in Gottlieb v. Kest, supra, 141 Cal. App. 4th at 137 when discussing judicial estoppel:
Courts of various jurisdictions have held that a debtor’s assertion [in a civil action] of legal claims not disclosed in earlier bankruptcy proceedings constitutes an assumption of inconsistent positions…. This holding stems from the requirement that a debtor seeking the shelter provided by federal bankruptcy laws disclose all legal or equitable property interests to a bankruptcy court…. [¶] The omission of a cause of action or claim ‘from … mandatory bankruptcy filings is tantamount to a representation that no such claim existed. (Citations omitted, emphasis added.)
Since the bankruptcy filings before this court do not show that plaintiffs failed to disclose their claims against defendant, the court cannot sustain this motion based on judicial estoppel.
However, the court can and does sustain the motion in its entirety based on res judicata. While plaintiffs recognize the confirmed Chapter 13 plan constitutes a binding contract between them and defendant, plaintiffs argue, without any authority, that the issues have not been litigated. This is incorrect.
In re Evans (B.A.P. 9th Cir. 1983) 30 B.R. 530, 531 explains that “[a]n order confirming a Chapter 13 plan is res judicata as to all justifiable issues which were or could have been decided at the confirmation hearing. (Emphasis added.)”.) The Second Amended Chapter 13 Plan (RJN, Ex. 11) and Order confirming the Second Amended Chapter 13 Plan (RJN, Ex. 12), even without the schedules, are sufficient to find res judicata. The plan specifically identifies defendant as a secured creditor and the amount of the arrearage (see RJN, Ex. 11, at p. 6) and the Order references the property. See RJN, Ex. 12, at p. 3, ¶¶E-F. Given the debtor’s duty under the Bankruptcy Code to disclose all potential, contingent and/or existing claims, there is no dispute that all claims alleged in the Complaint were or could have been decided in bankruptcy court.
Leave to Amend: Although the claims in the Complaint are barred, plaintiffs may be able to allege facts that permit them to pursue the claims (especially since the bankruptcy schedules are not in evidence). Accordingly, the court GRANTS 15 days leave to amend. The court notes that any amendment filed pursuant to this order cannot include new defendants or causes of action. If plaintiff wishes to amend more broadly, plaintiff must seek leave through noticed motion.
Further, the court notes that plaintiffs’ claims in the Complaint depend largely on their allegation that defendant told them the HELOC loan was “charged off.” However, the Opposition makes it clear that this is inaccurate and that Wells Fargo told plaintiffs the HELOC was “written off.” Given the court’s ruling and these different allegations that go to the heart of the Complaint, the court does not reach the merits of defendant’s other arguments.
The moving party is ordered to give notice.