In re: Charity M. Seymour ( 2013 )


Menu:
  •                                                            FILED
    APR 23 2013
    1
    SUSAN M SPRAUL, CLERK
    U.S. BKCY. APP. PANEL
    2                                                        OF THE NINTH CIRCUIT
    3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
    4                            OF THE NINTH CIRCUIT
    5   In re:                        )      BAP No.     EC-11-1669-MkDJu
    )
    6   CHARITY M. SEYMOUR,           )      Bk. No.     11-35650
    )
    7                  Debtor.        )      Adv. No.    11-02551
    ______________________________)
    8                                 )
    CHARITY M. SEYMOUR,           )
    9                                 )
    Appellant,     )
    10                                 )
    v.                            )      MEMORANDUM*
    11                                 )
    BANK OF AMERICA, N.A.;        )
    12   STEPHEN CHARLES FERLMANN,     )
    Chapter 7 Trustee,            )
    13                                 )
    Appellees.     )
    14   ______________________________)
    15                   Argued and Submitted on March 22, 2013
    at Sacramento, California
    16
    Filed – April 23, 2013
    17
    Appeal from the United States Bankruptcy Court
    18                 for the Eastern District of California
    19       Honorable Robert S. Bardwil, Bankruptcy Judge, Presiding
    20
    Appearances:     Appellant Charity M. Seymour argued on her own
    21                    behalf; K. Lee Marshall of Bryan Cave LLP argued
    for Appellee Bank of America, N.A.
    22
    23   Before:   MARKELL, DUNN and JURY, Bankruptcy Judges.
    24
    25
    26        *
    This disposition is not appropriate for publication.
    27   Although it may be cited for whatever persuasive value it may
    have (see Fed. R. App. P. 32.1), it has no precedential value.
    28   See 9th Cir. BAP Rule 8013-1.
    1                              INTRODUCTION
    2        Debtor Charity Seymour (“Seymour”)1 commenced an adversary
    3   proceeding in her chapter 72 bankruptcy case seeking to enjoin
    4   Bank of America, N.A. and BAC Home Loan Servicing (jointly, “Bank
    5   of America”) from foreclosing on her residence located in
    6   Stockton, California (“Property”).     Bank of America moved to
    7   dismiss Seymour’s adversary complaint under Civil Rule 12(b)(6).
    8   The bankruptcy court granted that motion and dismissed the
    9   adversary complaint without leave to amend.    Seymour appealed the
    10   bankruptcy court’s dismissal order.    We hereby MODIFY the
    11   bankruptcy court’s dismissal order to clarify that the adversary
    12   proceeding is dismissed based on Seymour’s lack of standing, and
    13   we AFFIRM the dismissal order, as MODIFIED.
    14                                  FACTS
    15        In August 2006, Seymour borrowed $582,250 (“Loan”) from
    16   Resmae Mortgage Corporation ("Resmae").    In exchange for the
    17   Loan, Seymour executed an Adjustable Rate Note ("Note") and a
    18   Deed of Trust ("Deed Of Trust") against the Property to secure
    19   her Loan obligations.   The Deed of Trust was recorded in the
    20   Official Records of San Joaquin County on August 16, 2006.
    21   (Doc. No. 2006-175477).   The Deed of Trust identified Seymour as
    22   the borrower, Resmae as the lender, Chicago Title Company as the
    23
    24        1
    Seymour also has been known as Charity Pantalion, but for
    ease of reference, we will refer to her herein only as Seymour.
    25
    2
    26         Unless specified otherwise, all chapter and section
    references are to the Bankruptcy Code, 
    11 U.S.C. §§ 101-1532
    , and
    27   all “Rule” references are to the Federal Rules of Bankruptcy
    Procedure, Rules 1001-9037. All “Civil Rule” references are to
    28   the Federal Rules of Civil Procedure.
    2
    1   trustee and Mortgage Electronic Registration Systems (“MERS”) as
    2   beneficiary (solely as the nominee for the lender and its
    3   successor and assigns).
    4        In June 2009, Quality Loan Service (“Quality”) commenced
    5   foreclosure proceedings under the Deed Of Trust by recording a
    6   Notice of Default (“Notice Of Default”) in the Official Records
    7   of San Joaquin County (Doc. No. 2009-097418).   The Notice Of
    8   Default indicated that Seymour had defaulted on her Loan
    9   obligations by not making her monthly Loan payments due on and
    10   after April 1, 2008.   Quality signed the Notice Of Default as the
    11   agent for MERS as nominee for Resmae.   Quality also recorded a
    12   Notice of Sale (Doc. No. 2011-001426), but the parties have
    13   indicated that the foreclosure sale has not yet occurred and that
    14   no sale date currently is scheduled.
    15        In August 2009, in response to the commencement of
    16   foreclosure proceedings, Seymour filed a complaint ("District
    17   Court Complaint") in the United States District Court for the
    18   Eastern District of California (“District Court”).   Seymour did
    19   not dispute that she had borrowed $582,250 from the original
    20   lender Resmae or that she had defaulted on her Loan payments.     In
    21   fact, the District Court Complaint acknowledged Seymour’s receipt
    22   of the Loan proceeds and her execution of the Note and the Deed
    23   Of Trust in exchange for the Loan.   Nonetheless, Seymour alleged
    24   a variety of misconduct related to the origination of the Loan,
    25   its securitization, its servicing, and its enforcement.3
    26
    3
    27         The District Court Complaint identified nine causes of
    action: (1) violation of the Truth in Lending Act ("TILA"),
    28                                                      (continued...)
    3
    1        Seymour named, among many other defendants, Resmae, Wilshire
    2   Credit Corp. ("Wilshire") (which apparently serviced the Loan at
    3   the time), MERS, Merrill Lynch Mortgage Investors, Inc., and
    4   Merrill Lynch Investors Trust Series 2006 RM5 ("Trust") (which
    5   apparently claimed the Loan as part of a pool of mortgage backed
    6   securities) (collectively, “Lender And Servicer Defendants”).
    7        While the allegations of misconduct are wide-ranging, we are
    8   primarily concerned here with those against the Trust and its
    9   representatives asserting that they were not persons entitled to
    10   enforce the Note under California Comm’l Code § 3301.4   As stated
    11   in the District Court Complaint:
    12             On information and belief, Plaintiff alleges that
    Defendants are not “person entitled to enforce” the
    13        security interest under the Note and Deed of Trust as
    defined in California Commercial Code § 3301.
    14        Plaintiff alleges that Defendants sold their home loans
    to other financial entities, which “pooled” large
    15        numbers of loans, put them into trusts, and sold
    securities based on them. Plaintiff alleges that the
    16        Defendants do not own the loan that is the subject of
    17
    3
    (...continued)
    18
    
    15 U.S.C. §§ 1601
    , et seq.; (2) violation of the Real Estate
    19   Settlement Procedures Act ("RESPA"), 
    12 U.S.C. § 2605
    ;
    (3) violation of California’s Unfair Competition Law, Cal. Bus. &
    20   Profs. Code § 17200, et seq.; (4) fraud; (5) breach of fiduciary
    duty; (6) negligence; (7) violation of 
    Cal. Civ. Code § 2923.6
    ;
    21   (8) violation of federal securities law; and (9) violation of the
    22   Rosenthal Fair Debt Collection Practices Act, Cal. Civ. Code,
    §§ 1788, et seq.
    23
    4
    California Comm’l Code § 3301 specifies that a “Person
    24   entitled to enforce” (“PETE”) a negotiable instrument includes:
    “(a) the holder of the instrument, (b) a nonholder in possession
    25   of the instrument who has the rights of a holder, or (c)” certain
    26   persons not in possession but nonetheless entitled to enforce the
    instrument under other provisions of the California Comm’l Code.
    27   See also Veal v. Am. Home Mortg. Serv., Inc. (In re Veal),
    
    450 B.R. 897
    , 910-11 (9th Cir. BAP 2011)(discussing who generally
    28   qualifies as a PETE under each of these categories).
    4
    1        this action and are not entitled to enforce the
    security interest.
    2
    3   District Court Complaint (Aug. 17, 2002) at ¶ 27.   The District
    4   Court Complaint further alleged that the defendants attempted to
    5   enforce the Note and Deed Of Trust by commencing foreclosure
    6   proceedings against the Property, even though none of them
    7   qualified as a PETE.   As Seymour put it:
    8        On information and belief, Plaintiff alleges that
    Defendants, in committing the acts alleged in this
    9        Complaint and in other cases, are engaging in a pattern
    of unlawful and illegal activity. In pursuing the
    10        non-judicial foreclosure, Defendants represented that
    they have the right to payment under the note, payment
    11        of which was secured by the deed of trust. Whereas, in
    fact, the Defendants were not in possession of the note
    12        and they were neither holders of the note nor
    non-holders of the note entitled to payment, as those
    13        terms are used in California commercial code section
    3301 and 3309, and therefore they were proceeding to
    14        foreclose without rights under the law. Further,
    Defendants added costs and charges to the payoff amount
    15        of the note that were not justified or proper under the
    terms of the note or law.
    16
    17   Id. at ¶ 36; see also id. at ¶ 29.
    18        The Lender And Servicer Defendants moved to dismiss the
    19   District Court Complaint.   Their motions were heard by a
    20   magistrate, who issued Findings and Recommendations that
    21   determined among other things: (1) that all of Seymour’s federal
    22   claims against the Lender And Servicer Defendants should be
    23   dismissed with prejudice,5 and (2) that the District Court should
    24
    25        5
    The District Court summarized the magistrate’s grounds for
    26   dismissal as follows:
    27        1) Plaintiff’s service on all Defendants was defective,
    thus Defendants were entitled to dismissal; 2) the
    28                                                      (continued...)
    5
    1   decline to exercise supplemental jurisdiction over Seymour’s
    2   state law claims.   On June 23, 2010, the District Court issued an
    3   order (“District Court Dismissal Order”) adopting the
    4   magistrate’s Findings and Recommendations, granting the Lender
    5   And Servicer Defendants’ dismissal motions, and dismissing these
    6   defendants with prejudice.   On December 20, 2010, Seymour
    7   stipulated to dismissal of the remaining defendants (“Dismissal
    8   Stipulation”), which the District Court treated as a stipulation
    9   to dismiss with prejudice the entire remaining action and which
    10   it granted on that basis.
    11        Seymour thereafter moved for relief from the dismissal of
    12   her District Court lawsuit under Civil Rule 60(b), which motion
    13   the District Court denied by order entered June 21, 2011 (“Order
    14   Denying Motion For Relief”).6
    15
    5
    16         (...continued)
    district court had no authority to issue an order
    17        addressing any claims against Defendant ResMAE due to a
    permanent injunction imposed by a Delaware Bankruptcy
    18
    Court prohibiting any claims against this Defendant
    19        after June 15, 2007; 3) Plaintiff’s original complaint
    alleges RESPA violations against seven of the twelve
    20        Defendants; however, she provided no facts other than
    the conclusory allegation that Defendant Wilshire
    21        “acknowledged TILA and RESPA violations;” 4) Plaintiff
    22        alleged no facts related to any specific SEC
    violations; and 5) Plaintiff’s TILA claims were not
    23        only filed beyond the TILA statute of limitations but
    Plaintiff also did not tender repayment of the amount
    24        advanced by the lender as required by TILA.
    25
    Order Denying Motion For Relief (Jun. 21, 2011) at 3:2-15.
    26        6
    Seymour appealed the Order Denying Motion For Relief to the
    27   Ninth Circuit Court of Appeals. While not part of the bankruptcy
    court record, we note for background purposes only that the Court
    28                                                      (continued...)
    6
    1        On June 24, 2011, Seymour commenced her chapter 7 bankruptcy
    2   case.7   Shortly thereafter, she filed her adversary complaint
    3   against Bank of America.   Seymour also filed a motion seeking a
    4   temporary restraining order to prevent foreclosure of the
    5   Property.   Unlike her District Court Complaint, Seymour’s
    6   adversary complaint lacked detail.   On its face, it requested no
    7   damages and only sought to enjoin the foreclosure.   It contained
    8   no distinct claims for relief, but instead contained only a
    9   handful of conclusory allegations referring to fraud, conspiracy
    10   and criminal negligence.   But it also asserted that the Deed Of
    11   Trust was void based on the allegations set forth in the District
    12   Court Complaint.
    13        In October 2011, Bank of America moved to dismiss the
    14   adversary complaint under Civil Rule l2(b)(6) (made applicable in
    15   adversary proceedings by Rule 7012).   In its motion to dismiss,
    16   Bank of America in essence asserted that the Trust was the party
    17   entitled to enforce the Note and to foreclose on the Property
    18   under the Deed of Trust and that it was the successor servicing
    19   agent for U.S. Bank, the current trustee under the Trust.
    20
    21        6
    (...continued)
    22   of Appeals summarily affirmed the District Court on November 14,
    2011, holding that “the questions raised in this appeal are so
    23   insubstantial as not to require further argument.” See Ninth
    Circuit Court of Appeals Dkt. No. 11-16770, Doc. No. 8.
    24
    7
    As her chapter 7 petition indicates, Seymour had filed a
    25   prior chapter 13 bankruptcy case on October 20, 2009 (E.D. Cal.
    26   Case No. 09-42699), and a prior chapter 11 bankruptcy case on
    January 25, 2011 (E.D. Cal. Case No. 11-21854). The dockets from
    27   these two prior cases indicate that the chapter 13 case was
    dismissed on March 4, 2010, and that the chapter 11 case was
    28   dismissed on June 1, 2011.
    7
    1        Bank of America further asserted that dismissal with
    2   prejudice was appropriate on the following grounds, among others:
    3        • Based on principles of comity and finality of
    judgments, this Court should dismiss the current action
    4        because a previously-filed civil foreclosure action and
    9th Circuit appeal are already pending, both of which
    5        seek to litigate the same issues against substantially
    the same defendants as are at issue in this action;
    6
    • Debtor seeks to challenge the foreclosure without
    7        alleging tender of the unpaid debt;
    8        • Debtor’s claim for fraud fails because it is time
    barred, it fails to allege a special or fiduciary
    9        relationship between Debtor and Defendants, and Debtor
    fails to allege the circumstances of the supposed fraud
    10        with the requisite particularity under FRCP 9(b);
    11        • Debtor's claim for "conspiracy" fails because the
    allegations of conspiracy lack specificity and fail to
    12        allege any acts against [Bank of America];
    13        • Debtor's Adversary Complaint otherwise fails to
    allege facts upon which relief can be granted.
    14
    15   Mem. Of Points & Authorities (Oct. 3, 2011) at 2:9-20.
    16        In support of its dismissal motion, Bank of America filed a
    17   request for judicial notice, which included the following
    18   documents:
    19        1.   A copy of the Note, showing on its face an indorsement
    20   of the Note by Resmae and made payable to “U.S. Bank National
    21   Association, as Successor Trustee to Bank of America, National
    22   Association, as successor by merger to LaSalle Bank, N.A. as
    23   Trustee for the MLMI Trust Series 2006-RM5”;
    24        2.   A copy of the Deed Of Trust;
    25        3.   A copy of an assignment of the Deed Of Trust from MERS
    26   as nominee for Resmae to “U.S. Bank National Association, as
    27   Successor Trustee to Bank of America, National Association, as
    28   successor by merger to LaSalle Bank, N.A. as Trustee for the MLMI
    8
    1   Trust Series 2006-RM5”;
    2        4.    A copy of the Notice Of Default;
    3        5.    A copy of the Notice Of Sale;
    4        6.    A copy of the bankruptcy court’s minute entry explaining
    5   its reasoning for denying Seymour’s motion to extend the
    6   automatic stay pursuant to § 362(c)(3)(B) and (C);8
    7        7.    A copy of the District Court Dismissal Order;
    8        8.    A copy of the Order Denying Motion For Relief; and
    9        9.    A copy of the District Court Complaint.
    10        Seymour filed a late response to the dismissal motion.        In
    11   it, she did not do much to oppose Bank of America’s asserted
    12   grounds for dismissal.    Seymour merely reiterated her belief that
    13   the Note and Deed of Trust were void based on fraud, violations
    14   of TILA “and by operation of law.”    But she did indicate a desire
    15   to file an amended adversary complaint in order to address the
    16   alleged effect of her chapter 7 bankruptcy case on the Deed Of
    17   Trust.    Citing § 506(d), Seymour suggested that her discharge,
    18   her scheduling Bank of America as an unsecured creditor and her
    19   exemption claim relating to the Property all worked in concert to
    20   invalidate the lien arising from the Deed Of Trust.
    21        Without holding a hearing, the bankruptcy court granted Bank
    22   of America’s dismissal motion without leave to amend.      The court
    23   issued a minute entry on November 9, 2011, setting forth its
    24   reasoning.   The bankruptcy court held that Seymour lacked
    25
    26        8
    Debtor filed a motion to extend the automatic stay under
    27   § 362(c)(3)(B) and (C) because the automatic stay in her
    chapter 7 case automatically terminated pursuant to
    28   § 362(c)(3)(A) as a result of her prior chapter 11 case.
    9
    1   standing to prosecute the adversary complaint.   As the bankruptcy
    2   court explained it, the adversary complaint concerned claims that
    3   arose prior to the filing of her bankruptcy case.   Consequently,
    4   those claims were property of her bankruptcy estate, and hence
    5   they only could be pursued by her chapter 7 trustee.
    6        The bankruptcy court further opined that it lacked subject
    7   matter jurisdiction over the adversary complaint.   According to
    8   the court, the resolution of the claims stated in the adversary
    9   complaint “could not conceivably have any effect” on the
    10   administration of the bankruptcy estate because Seymour already
    11   had received her discharge and the chapter 7 trustee already had
    12   issued a report of no distribution.9
    13        The bankruptcy court alternately held on the merits that, in
    14   light of the District Court’s disposition of the District Court
    15   action, Seymour was barred by claim preclusion from prosecuting
    16   her adversary complaint, which was based on alleged infringement
    17   of the same rights as the District Court action, arose from the
    18
    19        9
    We are perplexed by the bankruptcy court’s ruling on
    20   subject matter jurisdiction. The record reflects that Seymour
    never scheduled the claims asserted in her adversary complaint as
    21   assets of the bankruptcy estate, so these assets never were
    administered. As such, and regardless of their value, they
    22
    remained property of the bankruptcy estate even after the
    23   chapter 7 trustee issued his report of no distribution. See
    Cusano v. Klein, 
    264 F.3d 936
    , 945-48 (9th Cir. 2001).
    24   Additionally, there is nothing in the record indicating that the
    chapter 7 trustee ever considered whether Seymour’s claims had
    25   any value to the estate. Thus, we have trouble discerning how
    26   and why the bankruptcy court concluded that the claims were of no
    consequence to Seymour’s bankruptcy case. In any event, because
    27   we are affirming the bankruptcy court’s ruling based on Seymour’s
    lack of standing, we have no need to further discuss the issue of
    28   subject matter jurisdiction.
    10
    1   same transaction or series of transactions concerning the Note
    2   and the Deed Of Trust, and relied upon essentially the same
    3   allegations of misconduct.    The bankruptcy court further ruled
    4   that the dismissal of the District Court action was a final
    5   ruling on the merits and that the party against whom claim
    6   preclusion was invoked – Seymour – was the same in both lawsuits,
    7   and consequently all of the factors for application of claim
    8   preclusion had been met.
    9        Finally, the bankruptcy court concluded it should deny
    10   Seymour leave to amend because any attempt at amendment would
    11   have been futile.    As the bankruptcy court put it:
    12        Amendment of the complaint would be futile. The
    principle of claim preclusion will apply regardless of
    13        what other facts the plaintiff might allege with regard
    to the circumstances of the making and servicing of the
    14        loan. There is no set of circumstances the plaintiff
    might allege that would support a claim that any of the
    15        events in her underlying bankruptcy case affects the
    validity or extent of the defendant's lien. Finally,
    16        this court simply has no jurisdiction to consider the
    plaintiff's claims against the defendant, and the
    17        plaintiff has no standing to pursue them. Thus, any
    amendment of the complaint would be futile, and the
    18        court will grant the defendant's motion without leave
    to amend.
    19
    20   Minute Entry (Nov. 9, 2011) at p. 3.
    21        On November 14, 2011, the bankruptcy court entered its
    22   minute order dismissing the adversary complaint without leave to
    23   amend, and Seymour timely filed a notice of appeal on
    24   November 28, 2011.
    25                                JURISDICTION
    26        Subject to the standing discussion set forth below, the
    27   bankruptcy court had jurisdiction pursuant to 
    28 U.S.C. §§ 1334
    28   and 157(b)(2)(A) and (K).    We have jurisdiction under 28 U.S.C.
    11
    1   § 158.
    2                                   ISSUES
    3         1.   Did the bankruptcy court err in concluding that Seymour
    4   lacked standing to prosecute the adversary complaint?
    5         2.   Did the bankruptcy court err in denying Seymour leave to
    6   amend?
    7                             STANDARDS OF REVIEW
    8         The standing issue is subject to de novo review.      See
    9   Palmdale Hills Prop., LLC v. Lehman Commercial Paper, Inc.
    10   (In re Palmdale Hills Prop., LLC), 
    654 F.3d 868
    , 873 (9th Cir.
    11   2011); Veal v. Am. Home Mortg. Servicing, Inc. (In re Veal),
    12   
    450 B.R. 897
    , 906 (9th Cir. BAP 2011).
    13         The bankruptcy court’s dismissal without leave to amend also
    14   is subject to de novo review.    See Intri-Plex Techs., Inc. v.
    15   Crest Group, Inc., 
    499 F.3d 1048
    , 1056 (9th Cir. 2007)
    16   (“Dismissal without leave to amend is improper unless it is
    17   clear, upon de novo review, that the complaint could not be saved
    18   by any amendment.”).
    19                                 DISCUSSION
    20   A.   Seymour’s standing
    21         “Standing is a ‘threshold question in every federal case,
    22   determining the power of the court to entertain the suit.’”
    23   In re Veal, 
    450 B.R. at 906
     (quoting Warth v. Seldin, 
    422 U.S. 24
       490, 498 (1975)).   Constitutional standing requires injury in
    25   fact, causation, and redressability.       Doubtlessly, Seymour met
    26   the minimal standards for constitutional standing.      Seymour
    27   alleged that she was being injured by the foreclosure proceedings
    28   and related conduct.   In addition, the relief Seymour sought in
    12
    1   her adversary complaint – an injunction of the foreclosure
    2   proceedings – would have remedied her alleged injuries.    Cf.
    3   In re Veal, 
    450 B.R. at 906
    .
    4        However, the existence of constitutional standing does not
    5   end our standing analysis.   Seymour also needed to demonstrate
    6   that she was asserting her own legal rights and not those
    7   belonging to others.   
    Id.
     at 907 (citing Sprint Commc'ns Co., LP
    8   v. APCC Servs., Inc., 
    554 U.S. 269
    , 289 (2008)).     This aspect of
    9   standing is known as the doctrine of third party standing.
    10   Strictly speaking, it is not jurisdictional but rather is a
    11   judicially self-imposed prudential limitation on federal courts’
    12   exercise of jurisdiction.    See Los Angeles v. County of Kern,
    13   
    581 F.3d 841
    , 845 (9th Cir. 2009).10
    14        Here, Seymour’s adversary complaint sought to assert claims
    15   that arose before her chapter 7 bankruptcy filing.    Even though
    16   Seymour did not schedule her claims as assets of the bankruptcy
    17   estate, her claims nonetheless became estate property.    See
    18   § 541(a); McGuire v. United States, 
    550 F.3d 903
    , 914 (9th Cir.
    19
    20
    10
    Another aspect of prudential standing doctrine is
    21   bankruptcy appellate standing, which requires an appellant to
    show that he or she has been “directly and adversely affected
    22
    pecuniarily” by the bankruptcy court's decision. See
    23   In re Palmdale Hills Prop., LLC, 
    654 F.3d at 874
    . To satisfy
    bankruptcy appellate standing, an appellant typically must show
    24   that the order on appeal diminished its property, increased its
    burdens, or detrimentally affected its rights. See Fondiller v.
    25   Robertson (In re Fondiller), 
    707 F.2d 441
    , 442 (9th Cir. 1983).
    26   On this record, Seymour’s potential residual interest in the
    estate's assets appears sufficient to establish that she was a
    27   “person aggrieved” by the bankruptcy court's dismissal order.
    Accordingly, we will not dispose of this appeal on bankruptcy
    28   appellate standing grounds.
    13
    1   2008); Rosner v. Worcester (In re Worcester), 
    811 F.2d 1224
    , 1228
    2   (9th Cir. 1987); see also Goodwin v. Mickey Thompson Entm't Grp.,
    3   Inc. (In re Mickey Thompson Entm't Grp., Inc.), 
    292 B.R. 415
    , 421
    4   (9th Cir. BAP 2003) (identifying trustee's settlement of debtor's
    5   prepetition causes of action against third party as a sale of
    6   estate property).
    7        The Bankruptcy Code requires a chapter 7 trustee to “collect
    8   and reduce to money” all property of the estate.   § 704(a)(1).
    9   Absent abandonment, this duty extends to pre-petition claims
    10   against third parties.   See id.; § 554(a).   Furthermore, unless
    11   and until a chapter 7 trustee abandons them, a debtor’s
    12   unscheduled claims continue to be property of the estate.     See
    13   § 554(c), (d); Cusano, 
    264 F.3d at
    945–46.    The Bankruptcy Code
    14   designates the trustee as the estate's representative and
    15   authorizes the trustee to sue and be sued in that capacity.
    16   § 323; Spirtos v. One San Bernardino County Super. Ct. Case
    17   (In re Spirtos), 
    443 F.3d 1172
    , 1175 (9th Cir. 2006).      Thus,
    18   generally speaking, only the trustee has standing to prosecute
    19   claims for relief that are estate property.   McGuire, 
    550 F.3d at
    20   914; In re Spirtos, 
    443 F.3d at
    1175–76; see also Commodity
    21   Futures Trading Comm'n v. Weintraub, 
    471 U.S. 343
    , 352–53 (1985).
    22        Here, Seymour has not disputed that her claims arising from
    23   the Loan are estate property.   Instead, she attempts to
    24   characterize her lack of standing as a “ministerial issue,” and
    25   she argues that she can “cure” her failure to schedule her claims
    26   and seek chapter 7 trustee abandonment thereof at any time, so
    27   her adversary complaint should not have been dismissed on
    28   standing grounds.   See Aplt. Opn. Brf. (Mar. 22, 2012) at
    14
    1   17:6-10.    We disagree.   Based on the analysis set forth above, we
    2   hold that Seymour’s standing was a foundational requirement she
    3   failed to meet and that the bankruptcy court properly dismissed
    4   Seymour’s adversary complaint for lack of standing.    See Hansen
    5   v. Finn (In re Curry & Sorensen, Inc.), 
    57 B.R. 824
    , 828–29 & n.4
    6   (9th Cir. BAP 1986) (dismissing complaint without prejudice based
    7   on plaintiff's lack of standing).
    8   B.   Leave to amend
    9           When reviewing the dismissal of a complaint like Seymour’s –
    10   a complaint based on unscheduled pre-petition claims – we often
    11   limit our decision to an analysis of the standing issue.     See,
    12   e.g., Lopez v. JPMorgan Chase Bank, N.A (In re Lopez), 
    2012 WL 13
       603675 (9th Cir. BAP 2012); Diaz v. Washington Mutual Bank
    14   (In re Diaz), 
    2011 WL 5838568
     (9th Cir. BAP 2011); Edwards v.
    15   Wells Fargo Bank (In re Edwards), 
    2011 WL 4485560
     (9th Cir. BAP
    16   2011).
    17           Here, however, Seymour in essence has argued that the
    18   bankruptcy court should have allowed her to amend her complaint
    19   to state a claim based on post-petition events.    Seymour argues
    20   that certain post-petition events rendered the Deed Of Trust
    21   void.    Seymour points to the fact that she scheduled the Loan as
    22   an unsecured debt, the fact that no one filed a proof of secured
    23   claim based on the Loan, and the fact that she has received a
    24   chapter 7 discharge of her personal liability.    According to
    25   Seymour, these facts when considered together establish the
    26   voidness of the Deed Of Trust.    Citing § 506(d), Seymour
    27   essentially contends that the claim secured by the Deed Of Trust
    28   was disallowed (and hence the lien voided) because the claim was
    15
    1   administered in her bankruptcy case as an unsecured claim and
    2   discharged.
    3        Seymour misconstrues the applicability of § 506(d).     She
    4   conflates the effect of a discharge, which is governed by
    5   § 727(b), with the effect of disallowance, which is governed by
    6   § 506(d).   Seymour also relies upon Dewsnup v. Timm, 
    502 U.S. 410
    7   (1992), but Seymour’s reliance on Dewsnup is misplaced.     Dewsnup
    8   actually discredits Seymour’s argument.    Dewsnup makes clear
    9   that, unless grounds for disallowance of the secured creditor’s
    10   claim are established pursuant to § 502(b), a secured creditor’s
    11   lien generally passes through a chapter 7 debtor’s bankruptcy
    12   unaffected.   See id. at 415-18.    Other cases have confirmed this
    13   point and have emphasized that secured creditors generally are
    14   not required to assert their secured claim in the debtor’s
    15   bankruptcy case in order for their lien to ride through the
    16   bankruptcy case unaffected.   See, e.g., Brawders v. County of
    17   Ventura (In re Brawders), 
    503 F.3d 856
    , 867-68 (9th Cir. 2007)
    18   (“Absent some action by the representative of the bankruptcy
    19   estate, liens ordinarily pass through bankruptcy unaffected,
    20   regardless whether the creditor holding that lien ignores the
    21   bankruptcy case, or files an unsecured claim when it meant to
    22   file a secured claim, or files an untimely claim after the bar
    23   date has passed.”); Bisch v. United States (In re Bisch),
    24   
    159 B.R. 546
    , 549-50 (9th Cir. BAP 1993).
    25        Accordingly, we reject Seymour’s argument that the
    26   bankruptcy court should have granted her leave to amend her
    27   adversary complaint so that she could allege that the Deed Of
    28   Trust was rendered void based on post-petition events.    The
    16
    1   bankruptcy court did not err in denying leave to amend for this
    2   purpose because any such amendment would have been futile.    See
    3   Gardner v. Martino, 
    563 F.3d 981
    , 990 (9th Cir. 2009).     Any claim
    4   for relief based on such allegations would have been meritless.
    5        In her opening appeal brief, Seymour further argues that the
    6   bankruptcy court also should have granted her leave to amend so
    7   that she could attempt to state a claim based on the alleged fact
    8   that neither Bank of America nor the Trust were PETEs.   Citing
    9   In re Veal, she essentially contends that only PETEs are entitled
    10   to enforce a Deed Of Trust securing a promissory note.   We
    11   generally note that Seymour’s contention is not supported either
    12   by In re Veal or by California law, which governs the enforcement
    13   of the Deed Of Trust.11   See In re Veal, 
    450 B.R. at
    917 n.34;
    14   
    Cal. Civ. Code § 2924
    (a)(1) (authorizing “[t]he trustee,
    15   mortgagee, or beneficiary, or any of their authorized agents” to
    16   commence foreclosure proceedings); § 2924b(b)(4) (stating that a
    17   “‘person authorized to record the notice of default or the notice
    18   of sale’ shall include an agent for the mortgagee or beneficiary,
    19   an agent of the named trustee, any person designated in an
    20   executed substitution of trustee, or an agent of that substituted
    21   trustee.”).
    22        We decline to further discuss the PETE issue for two
    23   reasons.   First, it is unnecessary for us to reach the PETE issue
    24   in light of our disposition of this appeal based on Seymour’s
    25
    26        11
    The Deed Of Trust states that it is to be governed by
    27   “federal law and the law of the jurisdiction in which the
    Property is located.” In this instance, the Property is located
    28   in California.
    17
    1   lack of standing.   And second, Seymour did not raise the PETE
    2   issue either in her adversary complaint or in her opposition to
    3   Bank of America’s dismissal motion.   Generally, we will not
    4   consider issues raised for the first time on appeal.   See Padgett
    5   v. Wright, 
    587 F.3d 983
    , 986 n.2 (9th Cir. 2009); Scovis v.
    6   Henrichsen (In re Scovis), 
    249 F.3d 975
    , 984 (9th Cir. 2001);
    7   Golden v. Chicago Title Ins. Co. (In re Choo), 
    273 B.R. 608
    , 613
    8   (9th Cir. BAP 2002).12
    9                               CONCLUSION
    10        Based on the foregoing analysis, we hereby MODIFY the
    11   bankruptcy court’s dismissal order to clarify that the adversary
    12   proceeding is dismissed based on Seymour’s lack of standing, and
    13   we AFFIRM the dismissal order, as MODIFIED.13
    14
    12
    15         In her opening appeal brief, Seymour repeatedly refers to
    the PETE issue as a challenge to Bank of America’s standing. We
    16   disagree. Seymour commenced an adversary proceeding in the
    bankruptcy court seeking to prevent Bank of America from
    17   enforcing the Deed Of Trust. As Seymour directly sought relief
    against Bank of America, it had standing to defend against
    18
    Seymour’s adversary complaint. Put another way, Bank of
    19   America’s standing was not called into question by Seymour’s
    filing of her adversary complaint; the standing inquiry
    20   ordinarily focuses on the plaintiff’s standing to seek relief
    from the court and not on the defendant’s standing to oppose such
    21   relief. See generally de la Salle v. U.S. Bank, N.A. (In re
    22   de la Salle), 
    461 B.R. 593
    , 604 (9th Cir. BAP 2011) (holding that
    debtors’ filing of claim objection and adversary proceeding
    23   against bank challenging bank’s entitlement to enforce deed of
    trust did not undermine the bank’s standing to oppose debtors’
    24   requested relief or to be heard on other issues in the debtors’
    bankruptcy case).
    25
    13
    26         At various times during the course of this appeal, both
    parties have requested that we consider additional authorities,
    27   additional documents and additional issues they had not formerly
    raised either in the bankruptcy court or on appeal. We hereby
    28                                                      (continued...)
    18
    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
    13
    27         (...continued)
    DENY all such requests, both as untimely and as irrelevant to our
    28   disposition of this appeal.
    19
    

Document Info

Docket Number: EC-11-1669-MkDJu

Filed Date: 4/23/2013

Precedential Status: Non-Precedential

Modified Date: 4/18/2021

Authorities (21)

Goodwin v. Mickey Thompson Entertainment Group, Inc. (In Re ... , 292 B.R. 415 ( 2003 )

In Re De La Salle , 461 B.R. 593 ( 2011 )

Golden v. Chicago Title Insurance (In Re Choo) , 273 B.R. 608 ( 2002 )

Bisch v. United States (In Re Bisch) , 159 B.R. 546 ( 1993 )

Hansen v. Finn (In Re Curry & Sorensen, Inc.) , 57 B.R. 824 ( 1986 )

Veal v. American Home Mortgage Servicing, Inc. (In Re Veal) , 450 B.R. 897 ( 2011 )

Palmdale Hills Property, LLC v. Lehman Commercial Paper, ... , 654 F.3d 868 ( 2011 )

Padgett v. Wright , 587 F.3d 983 ( 2009 )

Brawders v. County of Ventura (In Re Brawders) , 503 F.3d 856 ( 2007 )

McGuire v. United States , 550 F.3d 903 ( 2008 )

In Re: Arthur Lionel Scovis Jenny Scovis, Debtors. Arthur ... , 249 F.3d 975 ( 2001 )

Gardner v. Martino , 563 F.3d 981 ( 2009 )

City of Los Angeles v. County of Kern , 581 F.3d 841 ( 2009 )

estate-of-thelma-v-spirtos-thelma-v-spirtos-michelle-spirtos-v-one-san , 443 F.3d 1172 ( 2006 )

In the Matter of Harry Fondiller, Debtor. Rosalyn Fondiller ... , 707 F.2d 441 ( 1983 )

Intri-Plex Technologies, Inc. v. Crest Group, Inc. , 499 F.3d 1048 ( 2007 )

in-re-norma-e-worcester-debtor-irving-rosner-and-william-little-v-norma , 811 F.2d 1224 ( 1987 )

vincent-cusano-individually-dba-vinnie-vincent-music-dba-streetbeat , 264 F.3d 936 ( 2001 )

Commodity Futures Trading Commission v. Weintraub , 105 S. Ct. 1986 ( 1985 )

Dewsnup v. Timm , 112 S. Ct. 773 ( 1992 )

View All Authorities »