Unpublished Disposition, 933 F.2d 1014 (9th Cir. 1991)

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US Court of Appeals for the Ninth Circuit - 933 F.2d 1014 (9th Cir. 1991)

Klaus W. LEHMANN, a single man, Plaintiff-Appellant,v.FLEET FINANCE, INC., a Delaware Corporation, Home EquityMortgage Company, a Massachusetts Corporation, FleetNational Bank, a Rhode Island Corporation, NationalForeclosure Services, Inc., an Arizona Corporation, AspenFinancial Group, an Arizona Partnership, Defendants-Appellees.

No. 90-15165.

United States Court of Appeals, Ninth Circuit.

Submitted May 13, 1991.*Decided May 23, 1991.

Before FARRIS, BOOCHEVER and FERNANDEZ, Circuit Judges.


Klaus Lehmann appeals the district court's judgment dismissing his complaint and action against Fleet Finance, Inc. ["Fleet"], Fleet National Bank, National Foreclosure Services, Inc. ["NFSI"], [collectively referred to as "the Fleet defendants"], Home Equity Mortgage Company ["Home"], and Aspen Financial Group ["Aspen"].1 He further appeals the district court's denial of his motion for leave to file an amended complaint which sought to add new defendants and assert new causes of action against previously dismissed defendants. We affirm.

In August 1985, Lehmann executed a promissory note and deed of trust secured by his residence in favor of Aspen. Through a series of assignments, Fleet became the holder of the note and beneficial interest under the deed of trust. When Lehmann failed to keep the payments current, Fleet instituted a non-judicial trustee's sale of the residence. James B. Ball served as the trustee. NFSI conducted the trustee's sale. Fleet was the highest bidder, and the property was deeded to Fleet. Lehmann then commenced actions to, somehow, try to avoid the effects of his defaults.

He first brought this action, but his complaint was dismissed, and properly so, after he failed to respond to a meritorious motion to dismiss under Fed. R. Civ. P. 12(b) (6). The dismissal was made, in part, pursuant to Local Rule 11(i) of the United States District Court for the District of Arizona, a rule which allows the court to deem dismissal consented to. We have, in effect, previously approved of that rule. See United States v. Warren, 601 F.2d 471, 473 (9th Cir. 1979).

Lehmann then sought to amend, but before that motion could be heard he filed for bankruptcy. Two adversary proceedings were commenced in the bankruptcy court.

In the first proceeding, Fleet sought to terminate the automatic stay, and the bankruptcy court conducted three days of evidentiary hearings in which it considered Lehmann's contention that the trustee sale was invalid. The court determined that the automatic stay should be terminated, and permitted Fleet to pursue a state forcible detainer action against Lehmann. In so doing, that court issued findings of fact and conclusions of law in which it determined, among other things, that the assignments were proper, that the foreclosure sale was properly conducted, and that Lehmann had no further ownership interest in the property. Its determination was affirmed by the district court.

In the second proceeding, Lehmann brought claims which were essentially the same as those contained in his proposed amended complaint before the district court in this action. That proceeding was also resolved against him in an oral ruling of the bankruptcy judge before the district court heard the motion to amend. The bankruptcy court's formal order issued after the district court's oral ruling on the motion in this case, but before the district court's formal judgment of dismissal.

Two separate grounds support the district court's dismissal of this action.

First, the bankruptcy court's determinations in the lift stay proceeding and in the separate adversary proceeding commenced in that court by Lehmann properly disposed of the bases of virtually all of Lehmann's claims before the district court. Thus, principles of res judicata and collateral estoppel militated in favor of and support the dismissal of this action. Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n. 5, 99 S. Ct. 645, 649 n. 5, 58 L. Ed. 2d 552 (1979) (judgment on merits bars subsequent action involving same claim, including matters which should have been asserted in first action, and prevents relitigation of issues actually and necessarily litigated); In re Howe, 913 F.2d 1138, 1143-47 (5th Cir. 1990) (where validity of lien vigorously contested, bankruptcy confirmation order res judicata in subsequent lender liability action brought by debtor); McClain v. Apodaca, 793 F.2d 1031 (9th Cir. 1986) (dismissal of bankruptcy adversary action res judicata in second action alleging violation of same primary right). The only possibly new claim was one under the Truth in Lending Act, but that act has a one-year statute of limitations. 15 U.S.C. § 1640(e). Here, the Truth in Lending violation, if any, took place in 1985 and this action was not even filed until March of 1989. Thus, the proposed amended complaint was unmeritorious.

Second, since a parallel action, brought by Lehmann himself, was regularly proceeding in the bankruptcy court, principles of sound judicial administration made it proper for the district court to defer to the bankruptcy court. See Church of Scientology v. United States Dept. of the Army, 611 F.2d 738, 749 (9th Cir. 1980) (federal court may decline judgment on issue properly before another district); United States v. Stone, 59 F.R.D. 260, 267 (D. Del. 1973) (staying action pending tax court determination of liability); In re Fotochrome, Inc., 346 F. Supp. 958, 961 (E.D.N.Y. 1972) (bankruptcy court and tax court had concurrent jurisdiction over claimed tax deficiency; bankruptcy court and tax court had concurrent jurisdiction over claimed tax deficiency; bankruptcy court should defer to tax court on that issue). That was especially proper in a case like this, since the bankruptcy court is an adjunct to the district court, 28 U.S.C. § 151, and exercises authority over cases when the district court so permits. 28 U.S.C. § 157. Moreover, the district court ultimately reviews determinations of the bankruptcy court. 28 U.S.C. § 158.

Of course, neither of these supports for the district court's decision in this case affects Lehmann's pursuit of his actions in the bankruptcy matter, and we express no opinion on the propriety or merits of those actions.

The Fleet defendants seek attorney's fees on appeal, pursuant to 28 U.S.C. § 1912 and Fed. R. App. P. 38. We may award attorney's fees on appeal when an appeal is frivolous. Fed. R. App. P. 38; 28 U.S.C. § 1912. "An appeal is frivolous when the result is obvious and the arguments on appeal wholly lack merit." McCarthy v. Mayo, 827 F.2d 1310, 1318 (9th Cir. 1987) (citing Grimes v. Commissioner, 806 F.2d 1451 (9th Cir. 1986)). An appeal which lacks merit, but is not wholly without substance, is not necessarily frivolous. McCarthy, 827 F.2d at 1318.

Lehmann's appeal is meritless. However, the reason for the district court's dismissal could have been stated more clearly. Though the dismissal was proper on res judicata, collateral estoppel, or comity grounds, if the bankruptcy court's judgment were overturned on direct appeal, Lehmann might not have been able to pursue his claims without clarification that the ultimate judgment in this action was based wholly on those grounds. His appeal thus has sufficient substance that an award of fees would be inappropriate.