Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_16-cv-00430/USCOURTS-caed-2_16-cv-00430-0/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 28:1441 Petition for Removal- Breach of Contract

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

GILBERT S. ESCALANTE, JR. and 

LISA E. ESCALANTE,

Plaintiffs,

v.

FEDERAL NATIONAL MORTGAGE 

ASSOCIATION; WELLS FARGO 

BANK, N.A.; BARRETT DAFFIN 

FRAPPIER TREDER & WEISS, LLP; 

and DOES 1 through 100, 

Inclusive,

Defendants.

No. 2:16-cv-00430-JAM-KJN

ORDER DENYING PLAINTIFFS’ MOTION 

TO REMAND, DENYING PLAINTIFFS’ 

MOTION FOR SANCTIONS, AND

GRANTING DEFENDANTS’ MOTION TO 

DISMISS

This case arises from a lawsuit filed by plaintiffs Gilbert 

S. Escalante and Lisa E. Escalante (“the Escalantes”) alleging 

various state statutory and common law violations in connection 

with the foreclosure of their home. Defendants Federal National 

Mortgage Association (“FNMA”), Wells Fargo Bank, N.A. (“WFB”), 

Barrett Daffin Frappier Treder & Weiss, LLP (“Barrett Daffin”) 

(collectively “Defendants”) removed the case to federal court. 

The Escalantes now move to remand the case back to state court

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and request that the Court impose sanctions against Defendants. 

Defendants move to dismiss all causes of action. For the reasons 

stated below, the Court denies the motion to remand and the 

motion for sanctions and grants the motion to dismiss.1

I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

The Escalantes are the owners and residents of the real 

property at 10055 Berryessa Drive, Stockton, California 95219 

(“the Subject Property”). Compl. ¶ 2. In connection with their 

purchase of the Subject Property, the Escalantes executed a 

promissory note in the amount of $269,200 and a deed of trust in 

favor of Ohio Savings Bank. Id. ¶ 13. WFB subsequently 

purchased the promissory note from Ohio Savings Bank and became 

the assigned beneficiary under the deed of trust. Id. ¶¶ 14-16. 

On August 12, 2013, the Escalantes applied and received a Home 

Affordable Modification Agreement in the amount of $278,278.93. 

Id. ¶ 15. WFB recorded a Notice of Default on January 16, 2015. 

Id. ¶ 16. A notice of sale was issued by WFB on September 29, 

2015, with a sale of the Subject Property scheduled for October 

22, 2015. Id. ¶ 17. Barret Daffin was appointed trustee for the 

sale. Id.

After notice of default was issued, the Escalantes conferred 

with CalHFA Mortgage Assistance Corporation under its “Keep Your 

Home California” program. Id. ¶ 18. The Escalantes submitted to 

WFB two “Request for Assistance” forms provided by CalFHA, one on 

 

1 This motion was determined to be suitable for decision without 

oral argument. E.D. Cal. L.R. 230(g). The hearing was 

scheduled for June 28, 2016.

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April 22, 2015, and another on September 1, 2015. Id. ¶¶ 18-19. 

After both of the submissions were ignored, the Escalantes called 

WFB and spoke to an authorized WFB representative. Id. ¶ 20. 

This representative allegedly told the Escalantes that the 

foreclosure sale would be postponed if the Escalantes completed a 

uniform borrower assistance package and paid a lien for past due 

homeowner’s association fees. Id. ¶¶ 20-21. On October 18, 

2015, the Escalantes paid the lien. Id. ¶ 21. And on October 

21, 2015, the Escalantes transmitted a borrower assistance 

package to WFB. Id. ¶ 22. Despite complying with WFB’s 

requests, Barret Daffin conducted a trustee’s sale of the Subject 

Property on October 22, 2015, for $289,576.17, to FNMA. Id. ¶ 

24. The Subject Property allegedly had an estimated market value 

of $340,000. Id. ¶ 25.

Following the foreclosure sale, the Escalantes filed for 

bankruptcy in the United States Bankruptcy Court for the Eastern 

District of California. Id. ¶ 26. The Escalantes did not list 

this lawsuit as an asset of the bankruptcy estate. Motion to 

Dismiss (“MTD”) (Doc. #12) at 3; Defendants’ Request for Judicial 

Notice (“D RJN”) (Doc. #13), Ex. B. Defendants thereafter filed 

a motion for relief from bankruptcy stay, which the bankruptcy 

court granted on February 25, 2016. Compl. ¶ 26; MTD Opp. (Doc. 

#20) at 7. 

The Escalantes initially filed this case in San Joaquin

County Superior Court on January 25, 2016. Removal (Doc. #1), 

Exh. 2. The Escalantes allege the following nine causes of 

action: (1) to set aside trustee’s sale; (2) to cancel trustee’s 

deed under California Civil Code (“CCC”) 3412; (3) to quiet 

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title; (4) breach of contract; (5) breach of the covenant of good 

faith and fair dealing; (6) violation of California Business and 

Professions Code section 17200; (7) intentional infliction of 

emotional distress (“IIED”); (8) negligent infliction of 

emotional distress (“NIED”); and (9) declaratory relief. The 

first, second, and sixth through ninth causes of action are 

asserted against all defendants. The third cause of action is 

asserted against FNMA and DOEs 1 through 100. The fourth and 

fifth causes of action are asserted against WFB only. 

Defendants removed the case to federal court on February 29, 

2016, on the basis of federal question jurisdiction, 28 U.S.C. §

1331. Following removal, FNMA and Wells Fargo filed the pending 

motion to dismiss all causes of action (Doc. #11). Defendant 

Barrett Daffin joined the motion (Doc. #21), which was opposed by 

the Escalantes (Doc. #20). After Defendants’ motion to dismiss 

was filed, the Escalantes filed a motion to remand the case back 

to state court (Doc. #16). The remand motion is opposed by FNMA 

and WFB (Doc. #22). As part of their remand motion, the 

Escalantes request that the Court impose sanctions on Defendants. 

Motion to Remand (“MTR”) at 8-9. FNMA has also commenced 

eviction proceedings via an unlawful detainer action filed in 

California state court on April 19, 2016. MTR at 2.

II. OPINION

A. Judicial Notice

In support of their motion to dismiss, Defendants request 

that the Court take judicial notice of the follow four exhibits: 

(A) Trustee’s Deed Upon Sale recorded in the Official Records of 

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San Joaquin County on November 5, 2015, as Document No. 2015-

133273; (B) Gilbert S. Escalante, Jr. and Lisa E. Escalante’s 

Summary of Schedules and Statements of Affairs as filed in the 

United States Bankruptcy Court Eastern District of California 

Case NO. 15-28717; (C) Assignment of Deed of Trust recorded in 

the Official Records of San Joaquin County on March 8, 2012, as 

Document No. 2012-028897; and (D) Gilbert S. Escalante, Jr. and 

Lisa E. Escalante’s Motion to Convert Case from Chapter 13 to 

Chapter 7 as filed in the United States Bankruptcy Court Eastern

District of California Case No. 15-28717 (Doc. #13). The 

Escalantes request that the Court take judicial notice of

“statistical summary of schedules and Schedule A listing 

property as home at 10055 Berryessa Drive, Stockton CA 95219, 

value $340,000” that was apparently filed in the United States 

Bankruptcy Court Eastern District of California Case No. 15-

28717 (Doc. #25). Neither party opposes taking judicial notice 

of any exhibit. 

A court may take judicial notice of a fact that is not 

reasonably disputed if it “can be accurately and readily 

determined from sources whose accuracy cannot reasonably be 

questioned.” Fed. R. Evid. 201(b)(2). “[M]atters of public 

record” are appropriate for judicial notice. Northstar Fin. 

Advisors Inc. v. Schwab Investments, 779 F.3d 1036, 1042 (9th 

Cir. 2015). All of the exhibits submitted for judicial notice 

are not subject to reasonable dispute and are matters of public 

record. The Court therefore grants the motion for judicial 

notice of Defendants’ Exhibits A, B, C, and D, and the 

Escalantes’ Exhibit 1. 

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B. Joinder 

Barrett Daffin filed a motion of joinder to join defendants 

FNMA and WFB’s motion to dismiss (Doc. #21). Barrett Daffin 

requests that the Court allow Barrett Daffin to join in the 

motion to dismiss filed by FNMA and Wells Fargo so as to promote 

judicial economy and conserve judicial resources. The Court 

will consider Barrett Daffin to have joined in FNMA and WFB’s 

motion to dismiss in its entirety. However, Barrett Daffin 

makes additional arguments in its joinder motion regarding why 

dismissal is appropriate as to Barrett Daffin. These arguments 

are procedurally defective because they do not properly notice a 

hearing and are untimely for the hearing scheduled on June 28, 

2016. In fact, they were filed with the Court on the same day 

that the Escalantes filed their opposition (Doc. #20) to FNMA 

and WFB’s motion to dismiss. Thus, the Court has not considered 

any arguments made in Barrett Daffin’s joinder. The Court will 

however, for the sake of judicial economy, proceed as if Barrett 

Daffin joined in the original motion to dismiss. 

C. Analysis

1. Remand Motion 

The Escalantes argue that remand is required pursuant to the

prior exclusive jurisdiction doctrine, which is described in 

Chapman v. Deutsche Bank Nat. Trust Co., 651 F.3d 1039 (9th Cir. 

2011). MTR at 4-5. The prior exclusive jurisdiction doctrine 

holds that “[w]here concurrent proceedings in state and federal 

court are both suits in rem or quasi in rem, the court first 

assuming jurisdiction over the property may maintain and exercise 

that jurisdiction to the exclusion of the other.” Chapman, 651 

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F.3d at 1041 (citing Knaefler v. Mack, 680 F.2d 671, 675 (9th 

Cir. 1982)). The Escalantes contend that since this case was 

initially filed in California state court, the state court 

possesses prior jurisdiction over the Subject Property. MTR at 

6; Chapman, 651 F.3d at 1044 (“where the jurisdiction of the 

state court has first attached, the federal court is precluded 

from exercising its jurisdiction over the same res to defeat or 

impair the state court's jurisdiction.”).

The Escalantes’ argument is without merit. Though this case 

was initially filed in state court, upon the filing of a petition 

for removal, “the state court loses jurisdiction.” Resolution 

Trust Corp. v. Bayside Developers, 43 F.3d 1230, 1238 (9th Cir. 

1994). As such, this Court obtained jurisdiction over the real 

property at issue when Defendants removed this lawsuit to federal 

court on February 29, 2016. At that time, there were no pending 

state court actions. The only other state court action involving 

the Subject Property is the unlawful detainer action filed by 

Defendants on April 19, 2016, after this Court took jurisdiction 

over this lawsuit. This procedural history is in stark contrast 

to Chapman, where the state court first asserted jurisdiction 

over an unlawful detainer action and then the federal court 

obtained jurisdiction over a quiet title action when the 

defendants removed the quiet title action four months after the 

unlawful detainer action was filed in state court. Chapman, 651 

F.3d at 1044; see also Montgomery v. Nat'l City Mortgage, 2012 WL 

1965601, at *3 (N.D. Cal. May 31, 2012) (denying a motion to 

remand on the basis of the prior exclusive jurisdiction doctrine 

because the federal court first assumed jurisdiction over the 

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real property at issue when the defendants removed the state case 

to federal court). For these reasons, the motion to remand is 

denied. 

2. Sanctions

The Escalantes request that the Court impose sanctions on 

Defendants because “there is just no nonfrivolous, objectively 

reasonable set of facts that have been disclosed to the court by 

defendants, or by the documents filed to support the notice, to 

justify removal.” MTR at 9. Given that removal was proper, the 

request for sanctions is denied. Additionally, the Escalantes 

did not properly seek sanctions in a separate motion and did not 

provide Defendants with a safe harbor period. Fed. R. Civ. P. 

11(c). The motion for sanctions is denied for this reason as 

well.

3. Motion to Dismiss

a. Timeliness of Motion

As a preliminary matter, the Escalantes contend that the 

Court should deny Defendants’ motion to dismiss because it was

untimely under Federal Rule of Civil Procedure (“Rule”)

81(c)(2). Opp. at 4. Defendants did not respond to this 

argument. 

Rule 81(c)(2) states that “[a] defendant who did not answer 

before removal must answer or present other defenses or 

objections under these rules within the longest of these 

periods: (A) 21 days after receiving--through service or 

otherwise--a copy of the initial pleading stating the claim for 

relief; (B) 21 days after being served with the summons for an 

initial pleading on file at the time of service; or (C) 7 days 

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after the notice of removal is filed.” Removing defendants are 

required to supply this Court with copies of all pleadings filed 

in the state court. 28 U.S.C. § 1441(b). 

Here, Defendants had not answered the complaint before 

removal. Removal, Exh. 2. As such, Defendants were required to 

abide by Rule 81(c)(2). Removal was noticed on February 29, 

2016 (Doc. #1). Given that the longest of the three periods 

identified in Rule 81(c)(2) was seven days after the notice of 

removal was filed, Defendants were required to submit an “answer 

or other defenses or objections” by March 7, 2016. Defendants 

filed their motion to dismiss on March 10, 2016 (Doc. #3). The 

Escalantes therefore claim that “[s]ince FNMA did not timely 

file its motion to dismiss or other response, it is in default. 

Plaintiffs have not waived the default.” Opp. at 4. 

But the Escalantes have not filed any motion for an entry of 

default against Defendants. Rule 55 requires a party seeking 

default judgment to apply to the clerk of the court for entry of 

default and then request that the court issue a default judgment. 

A four line paragraph embedded in the “Statement of Facts” 

section of an opposition to a motion to dismiss does not meet the 

requirements of Rule 55. In a case nearly identical to this one, 

a district court refused to deny the defendant’s motion to 

dismiss for violating Rule 81(c)(2) by filing a motion to dismiss 

a removed action more than seven days after the case was removed 

to federal court. Benton v. Moreno-Benton, 2015 WL 2380745, at 

*7 (C.D. Cal. May 18, 2015). Since the plaintiffs in Benton had 

not requested entry of default or a default judgment, the Court 

refused to treat the defendants as having defaulted. Id. Had 

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the Escalantes properly requested entry of default and default

judgment, Defendants would have been permitted to at least 

attempt to justify their delay. See, e.g., Speiser, Krause & 

Madole P.C. v. Ortiz, 271 F.3d 884 (9th Cir. 2001). For these 

reasons, the Court finds that Defendants have not defaulted and

denies the Escalantes’ request not to consider the motion to 

dismiss on the merits.

b. Judicial Estoppel

Defendants move to dismiss all of the causes of action on 

the basis of judicial estoppel. Defendants argue that the 

Escalantes did not list the claims for relief that form the basis 

of this lawsuit as assets of the bankruptcy estate. MTD at 5. 

According to Defendants, Ninth Circuit case law on judicial 

estoppel bars the Escalantes from asserting the claims in this 

case when they have not scheduled the claims as assets in their 

bankruptcy case. Id. (citing Hamilton v. State Farm Fire & Cas. 

Co., 270 F.3d 778, 781 (9th Cir. 2001)). In opposition, the 

Escalantes argue that Defendants have failed to meet their burden 

to prove the elements required to apply judicial estoppel and 

that the Escalantes actually disclosed their claims to the 

bankruptcy court when they filed a motion for relief from the 

bankruptcy stay. MTD Opp. at 5-8.

“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, 270 F.3d at 782. The judicial estoppel 

doctrine can be invoked at the court’s discretion to “protect the 

integrity of the judicial process by prohibiting parties from 

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deliberately changing positions according to the exigencies of 

the moment.” New Hampshire v. Maine, 532 U.S. 742, 743 (2001). 

In the context of bankruptcy, the Ninth Circuit has held that a 

party is judicially estopped from bringing claims that it did not 

raise in a debtor’s schedule, reorganization plan, or disclosure 

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

Interstate Bank of Kalispell, N.A., 978 F.2d 1033, 1037 (9th Cir. 

1992)). Federal courts in the Eastern District of California 

have adopted a basic default rule: “[i]f a plaintiff-debtor omits 

a pending (or soon-to-be-filed) lawsuit from the bankruptcy 

schedules and obtains a discharge (or plan confirmation), 

judicial estoppel bars the action.” Garcia v. Standard Ins. Co., 

2015 WL 1814327, at *1 (E.D. Cal. Apr. 21, 2015) (citing Ah Quin 

v. Cnty. Of Kauai Dep’t of Transp., 733 F.3d 267, 271 (9th Cir. 

2013)). 

In the bankruptcy context, the Ninth Circuit has adopted at 

least three factors courts should consider to determine whether 

judicial estoppel is appropriate, including: 1) whether a party’s 

later and earlier positions are clearly inconsistent; 2) whether 

a party succeeded in persuading a bankruptcy court to accept its 

earlier position; and 3) whether the party seeking to assert the 

inconsistent position obtained an unfair advantage. Ah Quin, 733 

F.3d at 271. Other considerations may also inform the doctrine’s 

application, such as “inadvertent” or “mistaken” omission. Id.

at 276-278 (broadly interpreting “inadvertence” and “mistake”); 

Jones-Riley v. Hewlett Packard Co., 2015 WL 300703 at *5 (E.D. 

Cal. Jan. 21, 2015) (finding that the plaintiff’s omission was 

not inadvertent because she had previously filed those claims 

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with the EEOC). 

With respect to the first part of the judicial estoppel 

doctrine, the Escalantes’ present lawsuit is inconsistent with 

their bankruptcy schedules. Estoppel has been applied when a 

plaintiff had enough facts to know of a potential claim yet fails 

to amend her bankruptcy schedules or otherwise identify the claim 

as an asset. Hamilton, 270 F.3d at 784. There is a duty to 

report a claim when a cause of action is complete with all its 

elements. Jones-Riley, 2015 WL 300703 at *3. 

Here, the Escalantes’ claims existed at the time of filing 

for bankruptcy. The nine claims alleged by Plaintiffs were based 

upon a foreclosure sale that occurred on October 22, 2015, and 

purported conversations prior to that day. Compl. ¶¶ 19-25. The 

Escalantes filed for Chapter 13 bankruptcy eighteen days after 

the foreclosure sale. Id. ¶ 26. Yet these claims are omitted 

from the Summary of Schedules. Defs’ RJN, Ex. B; Pls’ RJN, Ex. 

1. The fact that the Escalantes filed the present claims after 

filing for bankruptcy is of no consequence. Hamilton, 270 F.3d 

at 784 (finding judicial estoppel applicable where the plaintiff 

filed discrimination claims one year after bankruptcy). Though 

Plaintiffs allege that they disclosed their claims to the 

bankruptcy court during Defendants’ successful motion for relief 

from bankruptcy stay, they do not submit any evidence that 

substantiates this assertion. The Court therefore finds that the 

Escalantes’ attempt to bring forth the claims in this action is

inconsistent with their bankruptcy proceedings.

The second element of judicial estoppel is also satisfied 

because the bankruptcy court accepted the Escalantes’ schedules

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when it granted Defendants relief from the bankruptcy stay. A 

bankruptcy court need not discharge the debts for this element to 

be satisfied. Hamilton, 270 F.3d at 784. The bankruptcy court 

may rely on the debtor’s nondisclosure of potential claims in 

other ways, such as approving a plan of reorganization or lifting 

a stay based partly on the nondisclosure. Id. (citing In re 

Coastal Plains, 179 F.3d 197 (5th Cir. 1999) (finding judicial 

acceptance when a bankruptcy court lifted a stay based on the 

debtor’s nondisclosure in its bankruptcy schedules)). Here, as

the Escalantes concede, the Defendants successfully motioned for 

relief from a bankruptcy stay. Compl. ¶ 26; Opp. at 7. Relief 

from a bankruptcy stay has been deemed sufficient for the 

application of judicial estoppel. Hamilton, 270 F.3d at 785 

(noting that a bankruptcy court relied on the plaintiff’s 

omissions when he obtained both an automatic stay and a debt 

discharge); In re Coastal Plains, 179 F.3d at 210. Thus, based on

the Escalates’ own admissions, the Court concludes that the

bankruptcy court relied upon the incomplete schedules.

Finally, it is clear that omitting the claims on the 

bankruptcy schedules provided an unfair advantage. Because a 

bankruptcy court evaluates a debtor’s potential assets, omitting 

such claims deceives the bankruptcy court and a debtor’s 

creditors. Hamilton, 270 F.3d at 785. An unfair advantage can 

exist when a debtor represents that no claims exist, and then 

subsequently alleges that claims exist for their personal 

benefit. Id. Allowing the Escalantes to proceed without 

disclosing their claims provides them with an unfair advantage. 

The Escalantes have not updated this Court on the status of 

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their bankruptcy proceedings, submitted notifications of any 

schedule amendments, or made any allegations that their omissions 

were inadvertent or mistaken. Application of judicial estoppel 

ensures “the orderly administration of justice and regard for the 

dignity of judicial proceedings” and protects against litigants 

“playing fast and loose with the courts.” Hamilton, 270 F.3d at 

782. Since the interests of creditors and the courts would be 

impaired, the Court determines that judicial estoppel is 

applicable in this case. Accordingly, the Escalantes are 

judicially estopped from pursuing claims against Defendants, and 

no other issues in the motion to dismiss need to be addressed.

D. Sanctions

The Court issued its Order re Filing Requirements for Cases 

Assigned to Judge Mendez (“Order”) on February 29, 2016 (Doc. 

#2-2). The Order requires that memoranda in opposition to 

motions to dismiss be limited to fifteen pages and that reply 

memoranda in support of a motion to dismiss be limited to five 

pages. The Order also states that violations of the page limit 

will result in the imposition of monetary sanctions against 

counsel in the amount of $50.00 per page and that the Court will 

not consider any arguments made past the page limit. The 

Escalantes’ opposition memorandum (Doc. #20) is twenty pages 

long and Defendants’ reply memorandum (Doc. #23) is eight pages 

long. As such, the Court imposes sanctions against counsel for 

the Escalantes in the amount of $250.00 and against counsel for 

the Defendants in the amount of $150.00. The Court has not 

considered any arguments made after page fifteen of the 

Escalantes’ opposition and page five of Defendants’ reply. 

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III. ORDER

For the reasons set forth above, the Court DENIES the 

Escalantes’ motion to remand, DENIES the Escalantes’ motion for 

sanctions, and GRANTS WITH PREJUDICE Defendants’ Motion to 

Dismiss. Counsel for the Escalantes is ordered to pay $250.00 

and counsel for Defendants is ordered to pay $150.00 in sanctions 

to the Clerk of the Court within five days of the date of this 

Order.

IT IS SO ORDERED.

Dated: August 4, 2016

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