California Court of Appeal Affirms Judgment In Favor of Union Bank

Ruzicka, Wallace & Coughlin, LLP successfully represented Union Bank in both the trial court and on appeal in a lawsuit filed by a borrower against the bank.  The borrower obtained a loan secured by a deed of trust against the borrower’s residence.  When the borrower failed to obtain homeowner’s insurance, the bank exercised its right under the deed of trust to obtain homeowner’s insurance at the borrower’s expense (known as force placed insurance).  The insurance covered losses sustained by the bank but not the borrower. The borrower alleged that his house suffered damage when a car hit a hydrant in front of the house.  The borrower alleged that he spent $130,000 to repair the damage and sued the bank and its insurance company to cover the alleged loss.  However, a month after the alleged incident, the borrower filed bankruptcy.  In his bankruptcy filings, the borrower never disclosed his claim that the bank owed him $130,000.  Further, the borrower denied the existence of any liquidated (certain) and unliquidated or contingent (uncertain) claims owed to him.  He denied any casualty loss (such as to his house) in the last year.  He denied the existence of any pending contracts (such as for home repairs).  The borrower’s list of accounts payable (money owed to creditors) did not list money owed for house repairs.  The borrower disclosed making payments to only two creditors (for mortgage payments, not house repairs) in the prior 60 days.  The borrower stated that he had only $750 cash on hand, no bank accounts, combined household income of $3,000 a month, and total annual income for the prior year of $35,674, yet unpaid debt of $644,578.  Thereafter, the bankruptcy court ordered discharge of the borrower’s debts. The borrower did not amend any of the information from his bankruptcy filing.  The bank filed a demurrer to the borrower's first amended complaint arguing, among other things, that case should be dismissed based on, among other reasons, the doctrine of judicial estoppel, which precludes “a party from assuming a position in a legal proceeding inconsistent with one previously asserted.”  The trial sustained the abnk's demurrer without leave to amend and dismissed the case.  The Court of Appeal affirmed the judgment in favor of the bank. (See, Manookian v. Union Bank et. al, California Court of Appeal, Second Appellate District, Division One).