FILED
NOV 13 2019
NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP No. NC-19-1038-FBG
JOSEPH L. WILCZAK and JUDITH A. Bk. No. 15-52365-SLJ
WILCZAK,
Adv. No. 16-05022
Debtors.
JOSEPH L. WILCZAK; JUDITH A.
WILCZAK,
Appellants,
v. MEMORANDUM*
SELECT PORTFOLIO SERVICING, INC.;
THE BANK OF NEW YORK MELLON, as
trustee, on behalf of the holders of the
Alternative Loan Trust 2007-OA10,
Mortgage Pass-Through Certificates
Series 2007-OA10,
Appellees.
Argued and Submitted on October 25, 2019
at San Francisco, California
*
This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
Filed – November 13, 2019
Appeal from the United States Bankruptcy Court
for the Northern District of California
Honorable Stephen L. Johnson, Bankruptcy Judge, Presiding
Appearances: Joseph L. Wilczak argued pro se; Bryan L. Hawkins of
Stoel Rives LLP argued on behalf of appellees Select
Portfolio Servicing and The Bank of New York Mellon.
Before: FARIS, BRAND, and GAN, Bankruptcy Judges.
INTRODUCTION
Chapter 111 debtors Joseph L. Wilczak and Judith A. Wilczak objected
to the claim of appellees Select Portfolio Servicing, Inc. (“SPS”) and The
Bank of New York Mellon, as trustee, on behalf of the holders of the
Alternative Loan Trust 2007-OA10, Mortgage Pass-Through Certificates
Series 2007-OA10 (“BONY Mellon”) (collectively “Creditors”). The
Wilczaks admit that the Creditors paid off their prior deed of trust and
advanced them over $351,000 in cash. They also admit that they made
payments on the loan for eighteen months. But they argue that someone
1
Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code,
11 U.S.C. §§ 101-1532, all “Rule” references are to the Federal Rules
of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of
Civil Procedure.
2
forged their signatures on the loan documents and therefore they are not
obligated to repay the loan. The bankruptcy court held a trial and carefully
evaluated the evidence. It decided that the Wilczaks’ signatures were
genuine and valid and overruled the objection.
The Wilczaks appeal. We discern no error and AFFIRM.
FACTUAL BACKGROUND2
A. Prepetition events
The Wilczaks own real property located in Los Altos Hills, California
(the “Property”). In or around 2007, the Wilczaks dealt with Countrywide
Bank, FSB (“Countrywide”3) to refinance their existing mortgage.
On May 21, 2007, the Wilczaks went to a title company’s office to sign
the refinancing documents. The Creditors claim that the Wilczaks signed a
loan application, an adjustable rate note for $1,311,000 in favor of
Countrywide, a deed of trust in favor of Countrywide, a Truth in Lending
Act (“TILA”) disclosure statement, and a notice of right to cancel. Cindy
North, an employee of the title company, notarized the documents.
The refinancing closed shortly thereafter. The existing lienholder was
paid $950,290.59, and the Wilczaks received $351,206.42 in cash.
2
We exercise our discretion to review the bankruptcy court’s docket, as
appropriate. See Woods & Erickson, LLP v. Leonard (In re AVI, Inc.),
389 B.R. 721, 725 n.2
(9th Cir. BAP 2008).
3
We use “Countrywide” to refer to both Countrywide Bank, FSB and its
successor in interest, Countrywide Home Loans.
3
The Wilczaks made regular monthly payments on the loan between
September 2007 and March 2009. After a while, they had difficulty making
the monthly payments. They unsuccessfully sought a loan modification
from Countrywide and its successor, Bank of America.
In or around May 2011, appellee BONY Mellon acquired the note and
deed of trust. Appellee SPS became the servicer on the note.
The Wilczaks defaulted on the note. The trustee recorded a notice of
default in October 2011 and filed a notice of trustee’s sale in January 2012.
The Wilczaks commenced litigation in state court against BONY
Mellon and others. For the first time, they asserted that their signatures on
the 2007 loan documents were forgeries and that they did not sign the
documents or assent to the loan. The trial court dismissed the Wilczaks’
complaint, and the state court of appeal affirmed.
B. The Wilczaks’ chapter 11 case
While the state court appeal was pending, the Wilczaks filed a
chapter 11 petition. They scheduled the Property, valued at $2.7 million,
but stated that “note and deed of trust contain forged signatures” and
disputed the amount owed.
BONY Mellon filed a timely proof of claim (“Claim”) for the amount
due under the note and deed of trust. It represented that the outstanding
balance was $1,761,276 and that the loan was $443,085 in arrears.
4
C. Objection to the Creditors’ Claim
The Wilczaks objected to the Creditors’ Claim (“Objection”). They
argued that the Claim was invalid because the signatures on the loan
documents were forgeries. They submitted a report from Nancy H. Cole,
who examined the signatures and offered her opinion that the signatures
were forgeries.
The Wilczaks moved for summary judgment on the Claim and
Objection. They relied on Ms. Cole’s report and argued that there was “no
dispute” that the Creditors sought to enforce forged loan documents.
The Creditors objected to Ms. Cole’s expert witness testimony, in part
because the Wilczaks had failed to disclose her as an expert witness.
The Creditors filed their own motion for summary judgment,
contending that the Wilczaks’ arguments were barred by the Rooker-
Feldman doctrine and preclusion principles, because the court had already
ruled against the Wilczaks when granting the Creditors’ motion to dismiss
two years earlier.4
The bankruptcy court denied both motions. It also excluded
Ms. Cole’s expert report because the Wilczaks had failed to comply with
Civil Rule 26’s disclosure requirements.
4
The Wilczaks had previously commenced an adversary proceeding that
included an objection to the Claim. The bankruptcy court twice dismissed the complaint
with leave to amend.
5
D. Trial on the Creditors’ Claim and the Wilczaks’ Objection
The parties proceeded to trial on limited issues relating to the Claim
and Objection. The court noted that it had already excluded direct evidence
of experts. But it said that, assuming that Ms. Cole could qualify as an
expert, it would allow her to testify as a rebuttal witness in response to the
Creditors’ evidence that the Wilczaks’ signatures were genuine.
The court also stated that it had received an ex parte communication
from the Wilczaks in which they apparently sought to terminate their
attorney, Brian Elley. It cautioned the Wilczaks that, if they chose to
terminate Mr. Elley, it would not continue the trial. After consulting each
other in private, the Wilczaks opted not to discharge Mr. Elley.
The Wilczaks testified that the signatures on the loan documents
were not theirs and they did not authorize anyone else to sign for them.
They pointed out discrepancies in the dates of the documents, noted that
names were misspelled and middle initials looked like they were added
after the fact, and testified that the signatures did not look like their normal
signatures. They testified that they never met a notary named Cindy North.
They stated that they attended a meeting at escrow to sign loan
documents. They signed some of the documents but realized that the loan
terms were different than what they had wanted. At that point, they
stopped signing documents and walked out of the meeting.
The Wilczaks testified that the lender asked them to come back for
6
another meeting, at which the lender’s representatives gave the Wilczaks a
check for $354,000 and said they would send documents for them to sign.
They admitted that they received a reconveyance of the deed of trust from
the original lender in 2007. They also admitted that they made payments
on the new loan and did not raise the issue of the alleged forgery until
2011.
Notary Cindy North testified that she did not have any independent
recollection of notarizing the Wilczaks’ loan documents in 2007, but stated
that she would not have notarized the documents if the people purporting
to be the Wilczaks had not presented her with the proper identification. She
identified the entry in her notary book that showed that the Wilczaks had
provided identification, signed the notary book, and marked the book with
their thumbprints.
A litigation director at SPS also testified that SPS’s payment history
records for the Wilczaks’ account showed that they paid the exact amounts
due between September 2007 and June 2008.
The Wilczaks next offered the rebuttal testimony of their handwriting
expert, Ms. Cole. Under voir dire examination by the Creditors, Ms. Cole
testified that she retired in 2003 and had not thereafter obtained continuing
education credits, published articles, taught classes, or been qualified as an
expert.
The court ruled that it would not qualify Ms. Cole as an expert
7
witness. It noted that she had been retired for many years and was not
active in her field. It stated:
[T]he Debtors/Plaintiffs here have refuted that these are their
signatures. There are obvious problems with the way the
signatures look that even I can see, so I think on balance, her
testimony, one, I don’t think she qualified as an expert from
what I’ve heard so far. Furthermore, I don’t think that her
testimony even if I did admit it would be beneficial to me
which is the most elementary standard.5
E. The bankruptcy court’s decision
The bankruptcy court issued its order after trial, ruling in favor of the
Creditors. It found that the Wilczaks had received the TILA disclosures and
that the loan documents were genuine.
The court found that the signatures were not forged because
“[s]ubtantial evidence supports a conclusion that Debtors signed the
documents and performed under them for more than a year.”
It found that the Wilczaks sought to refinance their existing loan in
2007. As a result of the refinancing, they received over $351,000 in cash,
and the existing loan was paid off. It also found that they received regular
monthly statements and for over a year made payments that corresponded
with amounts listed in the TILA disclosure statement.
The bankruptcy court found that the timing of the forgery allegation
5
After the court ruled, Ms. Cole corrected her earlier testimony and stated that
she retired in 2013.
8
was suspect because it coincided with the start of the Creditors’ foreclosure
efforts. It also found that the Wilczaks wrote to Countrywide and Bank of
America in 2009 to request modification of the loan. They referred to the
loan as “our loan” and did not mention any forgery or hint that the loan
documents were irregular.
The court also found that the Wilczaks’ version of events was
implausible and rejected Mr. Wilczak’s testimony that they left the closing
when they realized the loan terms were not what they had wanted. Rather,
the court found more credible and convincing Ms. North’s testimony that
the Wilczaks had executed the documents as reflected in her notary book.
The bankruptcy court acknowledged that there appeared to be
irregularities with the dates and signatures on the loan documents.
However, it found that those irregularities did not necessarily indicate a
forgery. The court found overall that “[t]he allegations are not credible in
view of the facts” and concluded that the Wilczaks had not met their
burden of proof regarding the Objection. It thus overruled the Objection
and entered judgment for the Creditors.
The Wilczaks timely appealed.6
6
The Wilczaks have filed multiple motions and additional documents and
arguments for the Panel to consider, most of which were not submitted to the
bankruptcy court and none of which are authorized by our rules. We will not consider
these filings. See Padgett v. Wright,
587 F.3d 983, 986 n.2 (9th Cir. 2009) (per curiam)
(stating that appellate courts “will not ordinarily consider matters on appeal that are not
(continued...)
9
JURISDICTION
The bankruptcy court had jurisdiction pursuant to
28 U.S.C. §§ 1334
and 157(b)(2)(B). We have jurisdiction under
28 U.S.C. § 158.
ISSUES
(1) Whether the bankruptcy court erred in overruling the Objection.
(2) Whether the bankruptcy court erred in declining to accept expert
testimony from Ms. Cole at trial.
(3) Whether Mr. Elley breached the “attorney-client relationship.”
STANDARDS OF REVIEW
We review a bankruptcy court’s factual findings under the clearly
erroneous standard. See Carrillo v. Su (In re Su),
290 F.3d 1140, 1142 (9th Cir.
2002) (“We review the bankruptcy court’s conclusions of law de novo and
its factual findings for clear error.”).
Factual findings are clearly erroneous if they are illogical,
implausible, or without support in the record. Retz v. Samson (In re Retz),
606 F.3d 1189, 1196 (9th Cir. 2010). “To be clearly erroneous, a decision
must strike us as more than just maybe or probably wrong; it must . . .
strike us as wrong with the force of a five-week-old, unrefrigerated dead
(...continued)
specifically and distinctly raised and argued in appellant’s opening brief”); United
Student Funds, Inc. v. Wylie (In re Wylie),
349 B.R. 204, 213 (9th Cir. BAP 2006) (“Absent
exceptional circumstances, this court generally will not consider arguments raised for
the first time on appeal.” (citations omitted)).
10
fish.” Papio Keno Club, Inc. v. City of Papillion (In re Papio Keno Club, Inc.),
262
F.3d 725, 729 (8th Cir. 2001) (citation omitted). “Review for clear error is
‘significantly deferential.’” Roth v. Educ. Credit Mgmt. Corp. (In re Roth),
490
B.R. 908, 915 (9th Cir. BAP 2013) (quoting Baker v. Mereshian (In re
Mereshian),
200 B.R. 342, 345 (9th Cir. BAP 1996)). If two views of the
evidence are possible, the court’s choice between them cannot be clearly
erroneous. Anderson v. City of Bessemer City,
470 U.S. 564, 574 (1985).
“[W]e review a bankruptcy court’s evidentiary rulings for abuse of
discretion, and then only reverse if any error would have been prejudicial
to the appellant.” Van Zandt v. Mbunda (In re Mbunda),
484 B.R. 344, 351 (9th
Cir. BAP 2012), aff’d, 604 F. App’x 552 (9th Cir. 2015) (citing Johnson v.
Neilson (In re Slatkin),
525 F.3d 805, 811 (9th Cir. 2008)). “We afford broad
discretion to a district court’s evidentiary rulings . . . .” Id. at 352 (quoting
Harper v. City of L.A.,
533 F.3d 1010, 1030 (9th Cir. 2008)).
To determine whether the bankruptcy court has abused its discretion,
we conduct a two-step inquiry: (1) we review de novo whether the
bankruptcy court “identified the correct legal rule to apply to the relief
requested” and (2) if it did, whether the bankruptcy court’s application of
the legal standard was illogical, implausible, or without support in
inferences that may be drawn from the facts in the record. United States v.
Hinkson,
585 F.3d 1247, 1262-63 & n.21 (9th Cir. 2009) (en banc).
11
DISCUSSION
A. The bankruptcy court did not clearly err in finding that the
signatures on the loan documents were not forgeries.
The Wilczaks insist that they did not sign the loan documents and
that their signatures are forgeries. They contend that Ms. North gave false
testimony and that the court should not have believed her. Finally, they
argue that the court found that the signatures were forgeries yet
inexplicably concluded that the signatures were genuine and the
documents enforceable. We have carefully reviewed the transcript and the
court’s ruling, and we find no reversible error.
First, the bankruptcy court properly weighed the conflicting evidence
regarding the authenticity of the Wilczaks’ signatures. When evaluating
factual findings, “we give singular deference to a trial court’s judgments
about the credibility of witnesses. That is proper, we have explained,
because the various cues that ‘bear so heavily on the listener’s
understanding of and belief in what is said’ are lost on an appellate court
later sifting through a paper record.” Cooper v. Harris,
137 S. Ct. 1455, 1474
(2017) (citations omitted). An attack on credibility determinations rarely
succeeds, because “when a trial judge’s finding is based on his decision to
credit the testimony of one of two or more witnesses, each of whom has
told a coherent and facially plausible story that is not contradicted by
extrinsic evidence, that finding, if not internally inconsistent, can virtually
12
never be clear error.” Anderson,
470 U.S. at 575.
On the one hand, the bankruptcy court heard testimony from the
Wilczaks that they did not sign the loan documents and that the signatures
on the documents were not theirs. On the other hand, it heard testimony
from Ms. North that she would not have notarized the loan documents
unless the signatories had properly identified themselves as the Wilczaks.
The court simply found more plausible and persuasive the evidence
offered by the Creditors. It found the Wilczaks’ allegations “not credible,”
taking into account the suspect timing of the forgery claim, the payment on
the refinanced loan, their correspondence acknowledging the loan, and the
financial “impossibility” of the loan they claimed to have wanted. The
court’s decision to believe the Creditors’ evidence was not clear error.
Id. at
573-75.
The Wilczaks argue that the court contradicted itself because it once
stated that the signatures were not genuine but then found that they were
not forgeries. The Wilczaks misunderstand the court’s first comment. In
considering whether Ms. Cole’s expert testimony would be helpful, it
stated, “[t]here are obvious problems with the way the signatures look that
even I can see[.]” It was merely stating that the Wilczaks’ point about the
signatures was obvious from the face of the documents and that the court
did not need further expert testimony. It never made a finding of fact that
the signatures were not genuine.
13
Moreover, the irregularities do not necessarily imply that the
signatures were forgeries. The court found that an earlier loan application
could explain the inconsistent date on the application, that the altered dates
could have been a “clerical error” that someone corrected, and that the
middle initials added to the signatures do not amount to a forgery. Rather,
it found that, despite these irregularities, “substantial evidence . . . supports
a conclusion that Debtors signed the Refinancing Documents.” This finding
is not illogical, implausible, or without support in the record.
Therefore, the bankruptcy court did not clearly err when it found that
the Wilczaks failed to establish that their signatures on the loan documents
were not genuine.
B. Even if the signatures were altered, the Wilczaks are not entitled to
the relief they seek.
The Wilczaks think that, if they establish that the signatures are
forgeries, then the loan documents are void but they get to keep all of the
loan proceeds. They are mistaken.
If the bankruptcy court had found that the loan agreement was
procured by fraud, it could have rescinded the agreement. But this would
merely restore the parties to their respective positions prior to the
transaction:
Rescission reverses the fraudulent transaction and returns the
parties to the position they occupied prior to the fraud. It
restores the status quo ante. Under true rescission, the plaintiff
14
returns to the defendant the subject of the transaction, plus
any other benefit received under the contract, and the
defendant returns to the plaintiff the consideration furnished,
plus interest.
Ambassador Hotel Co. v. Wei-Chuan Inv.,
189 F.3d 1017, 1031 (9th Cir. 1999)
(citing Green v. Occidental Petroleum Corp.,
541 F.2d 1335, 1342 (9th Cir.
1976) (Sneed, J., concurring)) (emphases added).
Similarly, assuming the bankruptcy court found that the Creditors
had committed a TILA violation, the appropriate remedy would be
rescission of the loan, which involves the borrower returning the loan
proceeds: “Under a TILA rescission, the security interest is dissolved, the
lender returns the borrower’s payments, and the borrower returns the
loan proceeds, less any ‘finance or other charge.’” Semar v. Platte Valley Fed.
Sav. & Loan Ass’n,
791 F.2d 699, 702 (9th Cir. 1986) (citing
15 U.S.C.
§ 1635(b)) (emphasis added); see Yamamoto v. Bank of N.Y.,
329 F.3d 1167,
1171 (9th Cir. 2003) (“rescission should be conditioned on repayment of the
amounts advanced by the lender”); LaGrone v. Johnson,
534 F.2d 1360, 1362
(9th Cir. 1976) (holding that district court erred in failing to condition
rescission on borrower’s tender of the net amounts advanced by lender).
Rescission of a contract does not mean that the victims get to keep the
benefits of the contract while avoiding their obligations. In other words,
even if we were to declare the loan documents invalid, the Wilczaks would
not be entitled to retain the $1.3 million. See Kratz v. Countrywide Bank, Case
15
No. CV 08-01233 DSF(OPX),
2009 WL 3063077, at *5 (C.D. Cal. Sept. 21,
2009) (“The concept that a [borrower] is entitled to a free home or financial
windfall because a creditor failed to check a box on a notice of right to
rescind form is an irrational result that fails to recognize the full scope and
policy behind the TILA’s rescission framework.” (quoting Stanley v.
Household Fin. Corp. (In re Stanley),
315 B.R. 602, 615 (Bankr. D. Kan. 2004)).
The Wilczaks would be required to either return the $1.3 million (less the
payments they made) or keep the $1.3 million but continue making
payments to the Creditors, possibly under a reformed loan agreement.7 In
either case, they do not walk away with a free house.
At oral argument before the Panel, Mr. Wilczak shifted his position
slightly. He argued that his and his wife’s signatures were altered (when
someone later inserted their middle initials) and that any alteration of the
signatures rendered the loan documents unenforceable as a matter of law.
7
A trial court might also find that the Wilczaks ratified the forged signatures by
knowingly accepting the benefit of an allegedly fraudulent loan. “Ratification is the
voluntary election by a person to adopt in some manner as his or her own an act that
was purportedly done on his or her behalf by another person, the effect of which, as to
some of all persons, is to treat the act as if originally authorized by him or her.” Estate of
Stephens,
28 Cal. 4th 665, 673 (2002) (citing Rakestraw v. Rodrigues,
8 Cal. 3d 67, 73 (1972)).
An agent’s act “may be adopted expressly or it may be adopted by implication based on
conduct of the purported principal from which an intention to consent to or adopt the
act may be fairly inferred.” Rakestraw,
8 Cal. 3d at 73. “[I]t is well settled in California,
‘that a principal may ratify the forgery of his signature by his agent.’”
Id. at 74 (quoting
Volandri v. Hlobil,
170 Cal. App. 2d 656, 659-660 (1959)). But the bankruptcy court did
not consider or rule on this matter, so neither do we.
16
He did not cite any legal authority for this position, and we are not aware
of any.
C. The bankruptcy court did not err in rejecting Ms. Cole’s expert
testimony.
The Wilczaks argue that the court should have considered Ms. Cole’s
expert report and testimony. We disagree.
Federal Rule of Evidence 702 provides that an expert witness may
offer her opinion if “(a) the expert’s scientific, technical, or other specialized
knowledge will help the trier of fact to understand the evidence or to
determine a fact in issue[.]” Fed. R. Evid. 702(a). “[T]he trial court has
discretion to decide how to test an expert’s reliability as well as whether
the testimony is reliable, based on the particular circumstances of the
particular case.” City of Pomona v. SQM N. Am. Corp.,
750 F.3d 1036, 1044
(9th Cir. 2014) (citation omitted).
Thus, this rule imposes a two-pronged test: (1) the proffered witness
must have “specialized knowledge”; and (2) the proffered testimony must
be helpful. The bankruptcy court decided that neither prong was met. First,
the court observed that the witness’s qualifications were stale; in other
words, that she no longer had sufficient specialized knowledge. Second,
the court noted that the features of the signatures that the witness pointed
out were obvious to the court without the assistance of an expert; in other
words, that her testimony would not have been helpful to the fact finder.
17
The bankruptcy court did not abuse its discretion in making these rulings.
There is an additional procedural requirement for expert testimony.
Civil Rule 26(a)(2), made applicable in adversary proceedings by Rule 7026,
requires certain pretrial disclosures about experts. The bankruptcy court
ruled, before the trial, that the Wilczaks had not timely made the required
disclosures about Ms. Cole. Thus, the bankruptcy court acted within its
permitted discretion when it declined to receive her report and allowed the
Wilczaks to offer her only as a rebuttal witness.
D. The “attorney-client relationship” is not relevant to this appeal.
Finally, the Wilczaks make a number of attacks against their own
attorney, Mr. Elley. None of these arguments warrants any relief on appeal.
They generally argue that Mr. Elley violated the “attorney client
relationship” by declining to present or highlight certain aspects of their
case or refusing to undertake the discovery they wanted. They imply that
he made these decisions because he “sustained severe head trauma.”8
These arguments are meritless. Any problems with their “attorney-
client relationship” with Mr. Elley have no bearing on the court’s decision
to overrule the Objection. Our review of the record indicates that Mr. Elley
represented the Wilczaks capably. Further, there is no right to counsel in
bankruptcy proceedings, much less a guaranteed right to effective counsel.
8
Mr. Elley had stated during the trial that he suffered a fractured skull. There
was no indication that his physical condition affected his mental processes.
18
Chunchai Yu v. Nautilus, Inc. (In re Chunchai Yu), BAP No. CC-16-1045-
KuFD,
2016 WL 4261655, at *7 (9th Cir. Aug. 11, 2016), aff’d, 694 F. App’x
542 (9th Cir. 2017).
The Wilczaks further claim that the court refused to listen to evidence
of their “problematic” attorney-client relationship and advised them not to
terminate Mr. Elley. They allege that the court violated their right to due
process and equal protection.
The bankruptcy court did not deprive the Wilczaks of due process.
Rather, it cautioned Mr. Wilczak not to inadvertently disclose privileged
communication or strategy such that he waived the attorney-client
privilege. Nor did it compel him to retain Mr. Elley; the court explained the
Wilczaks’ options, and Mr. Wilczak opted for “No termination.”
Finally, we will not consider any new evidence that the Wilczaks
failed to present at trial. In re Wylie,
349 B.R. at 213.
CONCLUSION
The bankruptcy court did not err. We AFFIRM.
19
