Norman Safley vs. Wells Fargo Bank
Nature of Proceeding:
Filed By:
Hearing on Demurrer
Coyle, Melissa M.

Defendant Wells Fargo’s Demurrer to the 1st amended complaint is sustained with and without leave to amend as follows:

Defendant Wells Fargo’s Request for Judicial Notice is granted.

Evidence Code
sections 452 and 453 permit the trial court to “take judicial notice of the existence of judicial opinions and court documents, along with the truth of the results reached in the documents such as orders, statements of decision, and judgments but cannot take judicial notice of the truth of hearsay statements in decisions or court files, including pleadings, affidavits, testimony, or statements of fact.”

Plaintiffs’ Request for Judicial Notice is granted.

Plaintiffs allege that they obtained a predatory loan in 2006. Plaintiffs allege they attempted to obtain a loan modification and had a series of loan modification discussions in which Wells Fargo misrepresented that plaintiffs’ loan modification was being considered, but then said that due to their bankruptcy it was not being considered. Plaintiffs never received a loan modification. The alleged misrepresentations by Wells Fargo are alleged to have occurred from March 2010 until August 25, 2011. (FAC ¶¶ 18-45.) Plaintiffs further allege damages resulting from a fire that occurred in January 11, 2012, and that Wells Fargo breached a duty to reimburse plaintiffs for repairs to window coverings. (FAC ¶ 49- 56)

Plaintiffs filed for bankruptcy on December 30, 2010. (RJN Ex. H) Plaintiffs received their discharge in bankruptcy on April 19, 2011. (RJN Ex. J)

Plaintiffs also allege that since the acts complained of occurred after plaintiffs were discharged from bankruptcy on April 19, 2011, their claims regarding the loan modification discussions that occurred after April 19, 2011 survive the defense of judicial estoppel.

The doctrine of judicial estoppel is generally invoked to prevent a party from changing its position over the course of judicial proceedings when those positional changes have an adverse impact on the judicial process. Courts have found it patently wrong to allow a person to abuse the judicial process by first advocating one position, and later, if it becomes beneficial, asserting the opposite, and this principle is not limited to successive actions.International Billing Services, Inc. v. Emigh, (2000) 84 Cal. App. 4th 1175. The doctrine is usually limited to cases where a party misrepresents or conceals material facts. California Amplifier, Inc. v. RLI Ins. Co., (2001) 94 Cal. App. 4th 102.

The Court takes judicial notice of the Complaint in an earlier filed action, Case No. 2012-118745, filed February 15, 2012. (Defendant’s Request for Judicial Notice, Ex. K) The allegations in that case regarding the loan modification discussions are essentially the same as in this case, in that plaintiffs complain about discussions with Wells Fargo that occurred on or before August 25, 2011. (See Ex. K, ¶¶ 19-70) That action was removed to federal court. On June 20, 2012 Judge John Mendez granted

Wells Fargo’s motion to dismiss on the ground plaintiffs lacked standing and on the ground their claims were barred by the doctrine of judicial estoppel because the claims were not raised in their bankruptcy case. The order dismissing the earlier case specifically discussed the loan modification allegations that post-dated the bankruptcy, but still concluded that the claims were barred by judicial estoppel. (RJN Ex M pages 8-9)

Plaintiffs filed this action on February 12, 2012. Plaintiffs allege the following causes of action arising out of the original loan transaction, the loan modification discussions, and the alleged failure of Wells Fargo to reimburse plaintiffs for costs related to the fire: Intentional Misrepresentation (loan modification), Negligent Misrepresentation (loan modification), Negligence (loan modification), Violation of B & P section 17200 (loan modification), Reformation (original 2006 loan) , Unjust Enrichment (insurance proceeds reimbursement), and Equitable Accounting (loan modification).

The claims concerning the loan modification barred by the doctrine of res judicata.

The doctrine of res judicata precludes a second suit between the same parties on the same cause of action. (People v. Barragan (2004) 32 Cal.4th 236, 253. All claims based on the same cause of action must be decided in a single suit. If not, the first action bars relitigation of a second. Consequently, a plaintiff may not split a single cause of action or relitigate the same cause of action on a different legal theory or seek different relief. (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 897.

The dismissal of these claims in federal court was with prejudice, based on a finding that plaintiffs were judicially estopped to raise any of the claims relating to the loan modification because plaintiffs did not assert the claims in bankruptcy. Plaintiff cannot now raise those same claims in this action. A dismissal with prejudice of an action is a bar to the bringing of the same cause of action thereafter, and precludes the plaintiff from litigating that issue again. (
Ghiringhelli v. Riboni (1950) 95 Cal.App.2d 503, 506.)

Judge Mendez’ opinion found that judicial estoppel applied even to events that occurred after that bankruptcy was discharged. The decision of the federal district court is final. Plaintiffs contend that the dismissal of their claims by the federal court based on judicial estoppel is not a dismissal with prejudice. These allegations are legal conclusions and are incorrect as a matter of law. The fact that Wells Fargo did not prevail on a claim for attorneys fees does not change the fact that the ruling on the motion to dismiss regarding judicial estoppel is a dismissal with prejudice.

The claim for reformation of the original loan is also barred by the doctrine of res judicata, as that claim was also raised in the prior filed action and dismissed on the basis of judicial estoppel.

The only claim surviving the res judicata argument is that relating to Wells Fargo’s failure to reimburse plaintiffs for the fire damage.

1st cause of action Intentional Misrepresentation

: Sustained without leave to amend for failure to state facts sufficient to constitute a cause of action. This claim relates only to the alleged loan modification discussions. These claims are barred by res judicata. See RJN Ex. M, Federal Court Order Granting Defendant’s Motion to Dismiss.

2nd cause of action Negligent Misrepresentation

: Sustained without leave to amend for failure to state facts sufficient to constitute a cause of action. This claim relates only to the alleged loan modification discussions. These claims are barred by res judicata. See RJN Ex. M Federal Court Order Granting Defendant’s Motion to Dismiss.

3rd cause of action Negligence

: Sustained with leave to amend for failure to state facts sufficient to constitute a cause of action. Although the loan modification allegations are barred by res judicata, the plaintiffs may be able to plead a cause of action arising out of the failure to reimburse for funds expended for fire damage.

4th cause of action Violation of B&P 17200

: Sustained with leave to amend for failure to state facts sufficient to constitute a cause of action. Although the loan modification allegations are barred by res judicata, the plaintiffs may be able to plead a cause of action arising out of the failure to reimburse for funds expended for fire damage.

5th cause of action Reformation

: Sustained without leave to amend for failure to state facts sufficient to constitute a cause of action. This claim relates only to the alleged underlying loan from 2006. This claim is barred by the doctrine of res judicata. See RJN Ex. M Federal Court Order Granting Defendant’s Motion to Dismiss.

6th cause of action Unjust Enrichment

: Sustained with leave to amend for failure to state facts sufficient to constitute a cause of action. Plaintiffs have not adequately alleged an underlying duty of Wells Fargo to reimburse plaintiffs for costs incurred in the fire. The fact that State Farm told plaintiffs that reimbursements for window coverings must be made by Wells Fargo does not create a duty.

7th cause of action Equitable Accounting:

Sustained without leave to amend for failure to state facts sufficient to constitute a cause of action. This claim relates only to the alleged loan modification discussions. These claims are barred by res judicata. See RJN Ex. M Federal Court Order Granting Defendant’s Motion to Dismiss.

Where leave to amend is granted, plaintiffs may file and serve a 2nd amended complaint on or before January 27, 2014. Response to be filed within 10 days of service of the amended complaint, 15 days if served by mail.

The minute order is effective immediately. No formal order pursuant to CRC Rule 3.1312 or further notice is required.