Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_09-cv-00974/USCOURTS-caed-2_09-cv-00974-1/pdf.json

Nature of Suit Code: 480
Nature of Suit: Consumer Credit
Cause of Action: 15:1601 Truth in Lending

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

ROBERT ASH and KATHLEEN ASH,

NO. CIV. S-09-974 FCD/DAD

Plaintiffs,

v. MEMORANDUM AND ORDER

ONEWEST BANK, FSB as successor

by acquisition of Indymac

Federal Bank and LENDER DOE,

WELLS FARGO BANK, N.A. as

Trustee/Master Servicer of the

Securitization Trust, MARM

2007-3,

Defendants.

____________________________/

----oo0oo----

This matter is before the court on (1) the motions of

defendant Wells Fargo Bank, N.A. (“Wells Fargo”) to dismiss

plaintiffs Robert and Kathleen Ash’s (“plaintiffs”) Second

Amended Complaint (“SAC”) pursuant to Federal Rule of Civil

Procedure (“FRCP”) 12(b)(6) and to strike the addition of Wells

Fargo as a named defendant in plaintiffs’ SAC, and (2) the motion

of defendant OneWest Bank, FSB (“OneWest”) to dismiss the SAC

Case 2:09-cv-00974-FCD-DAD Document 32 Filed 06/03/10 Page 1 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1 Because oral argument will not be of material

assistance, the court orders these matters submitted on the

briefs. E.D. Cal. L.R. 230(g).

2

pursuant to FRCP 12(b)(6). Plaintiffs oppose the motions. 

On February 10, 2010, plaintiffs filed a SAC that adds Wells

Fargo as a defendant along with the originally named defendant

OneWest. Plaintiffs raise both federal and state claims against

Wells Fargo, including an alleged violation of the federal Truth

in Lending Act (“TILA”), 15 U.S.C. § 1601 et seq. (Pl.’s SAC 

¶ 2).

In its motion to strike, Wells Fargo asserts plaintiffs

improperly added it as a defendant in violation of FRCP 15(a)(1). 

Specifically, Wells Fargo contends that at the time plaintiffs

filed the SAC, they were no longer permitted to amend as a matter

of right and failed to obtain leave of the court or consent from

OneWest to add a new defendant, and thus, it should be dismissed

as a defendant. Alternatively, Wells Fargo filed a motion to

dismiss the SAC, arguing, among other things, that plaintiffs’

TILA claim (Count One of the SAC) should be dismissed under the

doctrine of judicial estoppel. 

For the reasons set forth below,1 the court finds that Wells

Fargo was properly named as a defendant. However, the court

finds that plaintiffs’ TILA claim against Wells Fargo is property

of plaintiffs’ bankruptcy estate, and plaintiffs are estopped

from bringing the claim herein because they failed to list it as

an asset in their bankruptcy proceedings. 

Dismissal of the TILA claim leaves plaintiffs’ SAC devoid of

any federal claims. The remaining claims rest on California

Case 2:09-cv-00974-FCD-DAD Document 32 Filed 06/03/10 Page 2 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

state law. In accordance with 28 U.S.C. § 1367(c), the court

declines to exercise supplemental jurisdiction over plaintiffs’

remaining state law claims, and plaintiffs’ complaint is

DISMISSED. OneWest’s motion to dismiss plaintiffs’ SAC is DENIED

as MOOT, as plaintiffs allege only state law claims against

OneWest. 

BACKGROUND

The court adopts the factual and procedural background set

forth in the Memorandum and Order addressing plaintiffs’ first

amended complaint (“FAC”), filed January 26, 2009. (Docket #17.) 

Additional relevant facts are discussed below:

Plaintiffs brought this action against OneWest, a successor

in interest to IndyMac Federal Bank, FSB, for conduct arising out

of a loan and subsequent foreclosure activity. Plaintiffs’

original complaint, filed on April 9, 2009, asserted a claim for

a violation of TILA, among other claims. OneWest’s motion to

dismiss was granted by this court with leave to amend, and

plaintiffs filed the FAC on September 11, 2009. (Docket #10.) 

OneWest moved to dismiss plaintiffs’ FAC, and the court granted

the motion, again permitting plaintiffs leave to amend. (Docket

# 17.) Plaintiffs filed the SAC on February 10, 2010. 

Plaintiffs’ SAC also names Wells Fargo as a defendant, and

asserts a TILA claim against Wells Fargo, rather than OneWest.

(Pl.’s SAC ¶ 2.); (Docket #18 [finding plaintiffs could not

assert a TILA claim against OneWest because OneWest is a loan

servicer, and not a creditor].) 

Additionally, plaintiffs’ SAC asserts claims for: (1) Fair

Debt Collection Practices Act violations, California Civil Code 

Case 2:09-cv-00974-FCD-DAD Document 32 Filed 06/03/10 Page 3 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

§ 1788 - 1788.32 (Id. ¶¶ 5, 113-114); (2) negligence, California

Civil Code § 1714(a) (Id. ¶ 116); (3) civil conspiracy,

California Civil Code § 1714(a) (Id. ¶¶ 128, 131); 

(4) constructive fraud, California Civil Code § 1573 (Id. ¶¶ 6,

144-146); and (5) deceit, California Civil Code § 1709 (Id. ¶¶

135-136).

Plaintiffs filed a petition for Chapter 13 bankruptcy on

June 12, 2009. Plaintiffs did not describe their TILA claim

against either Wells Fargo or OneWest when filing the requisite

schedules for their bankruptcy action, despite the fact that

“Item 21" of Schedule B specifically calls for the petitioner to

list “other contingent and unliquidated claims of every nature.”

(Wells Fargo’s Mot. Dismiss., filed June 4, 2010, Ex. 1, at 7.).

ANALYSIS

A. Motion to Strike

Wells Fargo moves to strike plaintiffs’ SAC, asserting it

was improperly named as a defendant in plaintiffs’ SAC. 

Plaintiffs claim that Wells Fargo, as Trustee/Master Servicer of

the Securitization Trust at issue, is an appropriate defendant.

(SAC ¶ 2.)

Rule 15(a) of the FRCP governs a litigant’s ability to amend

complaints before trial. Based on the procedural history of this

case, wherein plaintiffs have filed two amended complaints and 21

days have elapsed since the original complaint was filed, Rule

15(a)(2) is applicable. It requires a party to obtain leave of

the court or written consent of opposing counsel before being

allowed to amend. While Wells Fargo is correct that plaintiffs

received neither written consent from OneWest nor permission from

Case 2:09-cv-00974-FCD-DAD Document 32 Filed 06/03/10 Page 4 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

the court to add Wells Fargo as a defendant, the court

nonetheless allows the amendment as Rule 15(a)(2) provides that

leave to amend should be freely given when justice requires. 

Here, in the interest of judicial economy, leave should be

permitted since had plaintiff timely requested leave to amend it

would have been granted. Good cause exists to allow the

amendment; Wells Fargo is the proper defendant to a TILA action,

and there is no prejudice to any party if amendment is permitted. 

Therefore, Wells Fargo’s motion to strike is DENIED.

B. Motion to Dismiss

Wells Fargo moves to dismiss plaintiffs’ SAC pursuant to

FRCP 12(b)(6) on the ground that it fails to state a claim upon

which relief can be granted. Specifically, with respect to the

sole federal claim for relief in plaintiffs’ SAC, Wells Fargo

asserts that plaintiffs should be judicially estopped from

bringing a TILA claim. 

Judicial estoppel is an equitable doctrine, invoked by a

court at its discretion, that precludes a party from gaining an

advantage by asserting one position and subsequently taking a

clearly inconsistent position. Hamilton v. State Farm Fire &

Casualty Co., 270 F.3d 778, 782 (9th Cir. 2001) (citations

omitted); Russel v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990). 

The United States Supreme Court has listed three factors that

courts may consider in determining whether to apply the doctrine

of judicial estoppel: (1) whether a party’s position is “clearly

inconsistent” with its earlier position; (2) whether the first

court accepted the party’s earlier position; and (3) whether the

party seeking to assert an inconsistent position would derive an

Case 2:09-cv-00974-FCD-DAD Document 32 Filed 06/03/10 Page 5 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

unfair advantage if not estopped. New Hampshire v. Maine, 532

U.S. 742 (2001).

“In the Bankruptcy context, a party is judicially estopped

from asserting a cause of action not raised in a reorganization

plan or otherwise mentioned in the debtor’s schedules or

disclosure statements.” Hamilton, 270 F.3d at 783 (citing Hay v.

First Interstate Bank of Kalispell, N.A., 978 F.2d 555, 557 (9th

Cir. 1992)). In Hamilton, the Ninth Circuit affirmed the

district court’s determination that the plaintiff’s claim against

his insurance company was barred by judicial estoppel because the

plaintiff had failed to list the claim as an asset in his Chapter

7 bankruptcy schedule. Id. at 785. The court noted that this

failure “deceived the bankruptcy court,” and therefore, the court

“must invoke judicial estoppel to protect the integrity of the

bankruptcy process.” Id. (quoting In re Costal Plains, 197 F.3d

197 (5th Cir. 1999) (discussing the continuing duty to disclose

in Chapter 11 bankruptcy proceedings)).

Section 451(a)(1) of the Bankruptcy Code provides that at

the time of commencement of the bankruptcy proceeding, the

bankruptcy estate includes “all legal or equitable interests of

the debtor.” 11 U.S.C. 541(a)(1). This “includ[es] causes of

action belonging to the debtor at the commencement of the

bankruptcy case.” See In re Costal Plains, 179 F.3d at 207-08. 

“[T]he integrity of the bankruptcy system depends on full and

honest disclosure by debtors of all their assets.” Hamilton, 270

F.3d at 785 (quoting In re Costal Plains, 179 F.3d at 208). “The

courts will not permit a debtor to obtain relief from the

bankruptcy court by representing that no claims exist and then

Case 2:09-cv-00974-FCD-DAD Document 32 Filed 06/03/10 Page 6 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7

subsequently to assert those claims for his own benefit in a

separate proceeding.” Id.

As in Hamilton, plaintiffs, here, have clearly asserted

inconsistent positions by failing to include a cause of action in

their bankruptcy filings and are subsequently attempting to sue

on that claim outside of the bankruptcy proceeding. See

Hamilton, 270 F.3d at 784. As noted above, plaintiffs made no

mention of their TILA claim against Wells Fargo or OneWest in

responding to “Item 21" of Schedule B. These claims are the

property of the bankruptcy estate, and plaintiffs, whether by an

act of attempted deceit or mere oversight, undisputedly failed to

list the claims for relief when required to do so.

The duty to disclose, which is necessary to the integrity of

the bankruptcy system, prevents the plaintiff from proceeding on

a cause of action which is the property of the bankruptcy estate. 

See Hamilton, 270 F.3d at 784 (“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.” (Citation omitted)). By allowing the bankruptcy court to

adopt plaintiffs’ schedule that failed to include all known

claims and then attempting to pursue the present complaint,

plaintiffs have “deceived the bankruptcy court.” Hamilton, 270

F.3d at 785. As such, judicial estoppel must bar plaintiffs’

TILA claim. See, e.g., Balthrop v. Garcia-Mitchell, Civ. No. 09-

1013 FCD/JFM, 2010 WL 430840 (E.D. Cal. Feb. 1, 2010) (applying

judicial estoppel to preclude an action by a debtor in Chapter 13

Case 2:09-cv-00974-FCD-DAD Document 32 Filed 06/03/10 Page 7 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

8

bankruptcy who had failed to disclose the claim in his bankruptcy

proceedings); Flores v. GMAC Mortg., Civ. No. 09-1216 GEB/GGH,

2010 WL 582115 (E.D. Cal. Feb. 11, 2010) (estopping plaintiff

from bringing a TILA claim because the claim was not disclosed in

the plaintiff’s bankruptcy schedules). Therefore, Wells Fargo’s

motion to dismiss Count One of plaintiff’s SAC is GRANTED.

Dismissal of the TILA claim leaves the complaint devoid of

any federal claims. The remaining claims for violation of the

California Rosenthal Fair Debt Collection Practices Act,

negligence, civil conspiracy, constructive fraud, and deceit are

based on California state law and common law. Subject to the

conditions set forth in 28 U.S.C. § 1367(c), district courts may

decline to exercise supplemental jurisdiction over state law

claims. See Acri v. Varian Associates, Inc., 114 F.3d 999, 1000

(9th Cir. 1997) (en banc). The court’s decision whether to

exercise supplemental jurisdiction should be informed by values

of “economy, convenience, fairness, and comity.” Id. at 1001

(citations omitted). Further, primary responsibility for

developing and applying state law rests with the state courts. 

Therefore, when federal claims are eliminated before trial,

district courts should usually decline to exercise supplemental

jurisdiction. See Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343,

359 (1988); Gini v. Las Vegas Metrpolitan Police Dept., 40 F.3d

1041, 1046 (9th Cir. 1994) (“[I]n the usual case in which

federal-law claims are eliminated before trial, the balance of

factors . . . will point toward declining to exercise

jurisdiction over the remaining state law claims.”) (quoting

Schneider v. TRW Inc., 938 F.2d 986, 993 (9th Cir. 1991)). In

Case 2:09-cv-00974-FCD-DAD Document 32 Filed 06/03/10 Page 8 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

9

accordance with 28 U.S.C. § 1367(c), the court declines to

exercise supplemental jurisdiction over plaintiffs’ remaining

state law claims.

CONCLUSION

For the foregoing reasons, Wells Fargo’s motion to strike is

DENIED. Its motion to dismiss, however, is GRANTED. Plaintiffs

are judicially estopped from bringing a TILA claim against Wells

Fargo or OneWest. As no federal claim for relief remains, the

court declines to exercise supplemental jurisdiction over the

remaining state law claims against Wells Fargo and OneWest. 

OneWest’s motion to dismiss is DENIED as MOOT. 

IT IS SO ORDERED. 

DATED: June 2, 2010

 

FRANK C. DAMRELL, JR.

UNITED STATES DISTRICT JUDGE

Case 2:09-cv-00974-FCD-DAD Document 32 Filed 06/03/10 Page 9 of 9