In re Laurel Greenstein, No. 2:2017cv08371 - Document 38 (C.D. Cal. 2018)
Court Description: MEMORANDUM OPINION by Judge Otis D. Wright, II : Court AFFIRMS the bankruptcy courts judgments, as appealed from in the following consolidated case numbers: 2:17-cv-8371-ODW (Lead Case); 2:17-cv-8919-ODW; 2:17-cv-8899-ODW; 2:17-cv-8923-ODW; 2:17-cv-8373-ODW.(Made JS-6. Case Terminated.) (lc)
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In re Laurel Greenstein Doc. 38 O JS-6 1 2 3 4 5 6 7 8 9 10 United States District Court Central District of California 11 12 13 14 Lead Case No. 2:17-cv-08371-ODW Consolidated with: 2:17-cv-08373-ODW 2:17-cv-08899-ODW 2:17-cv-08919-ODW 2:17-cv-08923-ODW IN RE LAUREL GREENSTEIN, Debtor. 15 16 Bankruptcy Case Nos. 1:12-bk-15099-MB 17 18 20 Adversary Case Nos. 1:15-ap-01220-MB 21 MEMORANDUM OPINION 19 22 23 24 25 26 27 28 AND CONSOLIDATED APPEALS I. INTRODUCTION Appellant Laurel Greenstein appeals from several orders issued by the bankruptcy court, relating to her Chapter 7 bankruptcy, and related adversary proceedings. She contends that her home (the “Property”) was wrongfully foreclosed Dockets.Justia.com 1 on by Wells Fargo Bank, N.A., and several corporate representatives,1 (collectively, 2 “Wells Fargo”) in violation of the automatic stay in her case. 3 4 5 6 7 8 9 In a 63-page Amended Consolidated Memorandum of Decision, the bankruptcy court denied Greenstein’s Motion to Set Aside Foreclosure Sale in violation of Automatic Stay (“Set Aside Motion”), and granted Motions to Dismiss Adversary Proceedings with Prejudice as to All Defendants. (Appellant’s Appendix of Evidence (“AA”) vol. I, 135–99, ECF No. 27.2) While Greenstein sets forth seven issues on appeal, the substance of her appeal focuses on the validity of an in rem order (the “In Rem Order”) issued by another bankruptcy court in an action involving debtor Roger Lipkis (the “Lipkis Action”). Among other things, Greenstein claims the In Rem 10 Order was invalid because a fraudulent deed was presented in the Lipkis Action, 11 which purported to transfer ownership rights in the Property from Greenstein to 12 Lipkis. 13 Marty A. Duran, Patricia M. Duran, and The Duran Family Trust (collectively, 14 the “Duran Defendants”) purchased the Property from Wells Fargo two years after the 15 16 17 18 19 20 21 22 23 24 25 26 27 28 foreclosure sale. (Duran Defendants’ Appendix of Evidence (“DER”) 8, ECF No. 301, 30-2.) Greenstein filed adversary proceedings against the Duran Defendants as part of her Chapter 7 bankruptcy. Greenstein’s Opening Brief and excerpts of record are riddled with procedural defects. She fails to adequately cite to the record, which makes it difficult for the Court, much less her opponents, to sort through her arguments. In any event, for the reasons explained below, the Court AFFIRMS the bankruptcy court with respect to all of Greenstein’s consolidated appeals.3 1 The “Wells Fargo” appellees also include Dean Reeves, Robert Little, Robert Bailey, and John Stumpf. Steven Wolvek, Marisol Nagata, and Roger Lipkis are also appellees named in Greenstein’s several appeals. 2 Unless otherwise noted, all references to docket numbers are to the docket in the lead case, In re Laurel Greenstein, 2:17-cv-8371-ODW (C.D. Cal. Nov. 16, 2017). 3 Greenstein requested oral argument in her Opening Brief. (ECF No. 26.) Federal Rule of Bankruptcy Procedure 8019(b) does not require a court to permit oral argument if it is unnecessary because: “(1) the appeal is frivolous; (2) the dispositive issue or issues have been authoritatively decided; or (3) the facts and legal arguments are adequately presented in the briefs and record, and the decisional process would not be significantly aided by oral argument.” The Court declines to hold oral argument because the dispositive issues have been authoritatively decided. Id. 2 II. 1 FACTUAL AND PROCEDURAL BACKGROUND 2 This case arises from several bankruptcies, adversary proceedings, and related 3 civil actions. This convoluted procedural history arises from Wells Fargo foreclosing 4 on Greenstein’s home after she defaulted on her payments. 5 A. The First Civil Action 6 On October 13, 2011, Greenstein filed an action in California state court, 7 wherein she challenged, among other things, Wells Fargo’s standing to foreclose on 8 her home (the “First Civil Action”). (See AA vol. I, 141; Wells Fargo Appellee’s 9 Supp. Appendix (“SA”) vol. III, 660–71, ECF No. 31-5, 31-6.) At a hearing on 10 February 10, 2012, Wells Fargo’s counsel informed the court and Greenstein that it 11 obtained a grant deed, which purported to transfer title of the Property from 12 Greenstein to Roger Lipkis (the “Lipkis Deed”). (Appellant’s Opening Brief (“AOB”) 13 16–17, ECF No. 26; SA vol. III, 678.) The Lipkis Deed, on its face, appears to have 14 been signed by Greenstein, notarized by a notary public, and recorded with the Los 15 Angeles County Recorder’s Office on November 10, 2011. (AA vol. II, 367.) The 16 court ultimately sustained Wells Fargo’s demurrer, and dismissed the First Civil 17 Action with prejudice. (AA vol. I, 49; SA vol. III, 674–76.4). 18 B. The Lipkis Bankruptcy, In Rem Order, and Foreclosure 19 On November 18, 2011, Roger Lipkis filed a Chapter 13 bankruptcy. 20 (DER 220). As it turns out, the reasons that he filed for bankruptcy are not germane 21 to the Court’s analysis, but the Lipkis Deed is. 22 The origin of the Lipkis Deed is murky. At one time, Greenstein claimed that 23 she “strongly believe[d] [she knew] who set this fake Grant Deed up and why, but 24 [she couldn’t] prove it.” (AA vol. II, 373.) Now, she simply maintains that it was a 25 fraud. 26 27 28 4 As noted by the Bankruptcy Court, the court did not sign the Judgment of Dismissal with Prejudice in the First Civil Action. (AA vol. I, 141 n.6.) However, as explained below, there is no evidence that Greenstein appealed the judgment from the First Civil Action, and the state court docket indicates the court dismissed the First Civil Action with prejudice on December 6, 2012. (See id.) 3 1 After Wells Fargo learned of the Lipkis Deed in the First Civil Action, it sought 2 a stipulation to exclude the Property from the Lipkis bankruptcy estate. It needed to 3 do this so that it could foreclose on the Property, which was purportedly part of the 4 Lipkis estate by virtue of the Lipkis Deed. (AA vol. II, 412–16.) On March 19, 2012, 5 the court accepted Wells Fargo and Lipkis’s stipulation for relief from the automatic 6 stay in the Lipkis Action, pursuant to 11 U.S.C. § 362(d)(4),5 and entered an order 7 reflecting the same (as defined above, the “In Rem Order”). (Id.; AA vol. II, 390–91.) Mimicking verbatim Section 362(d)(4), the In Rem Order explained: If recorded in compliance with applicable State laws governing notices of interests or liens in real property, an order entered under paragraph (4) shall be binding in any other case under this title purporting to affect such real property filed not later than 2 years after the date of the entry of such order by the court, except that a debtor in a subsequent case under this title may move for relief from such order based upon changed circumstances or for good cause shown, after notice and a hearing. Any Federal, State, or local governmental unit that accepts notices of interests or liens in real property shall accept any certified copy of an order described in this subsection for indexing and recording. 8 9 10 11 12 13 14 15 16 17 18 (AA vol. II, 391 (emphasis added).) The In Rem Order also found that “an interest in 19 the Property was impermissibly transferred to [Lipkis] without the knowledge of 20 [Lipkis]. Without [Lipkis’s] consent, his Chapter 13 bankruptcy case proceeding is 21 being used for an improper purpose as part of a scheme to delay, hinder and defraud 22 creditors….” (AA vol. II, 392.) Greenstein did not appeal the In Rem Order. 23 On March 12, 2012, Wells Fargo recorded the In Rem Order at the County 24 Recorder’s Office. (AA vol. II, 388; DER 114–21.) Greenstein was not initially 25 served with the In Rem Order, but admittedly learned of it on May 31, 2012, and 26 27 28 5 Section 362(d)(4) provides that a bankruptcy court “shall grant relief from the stay…with respect…to real property…if the court finds that the filing of the petition was part of a scheme to delay, hinder, or defraud creditors….” The Court addresses this section in detail below. 4 1 received a copy of it on June 1, 2012. (AA vol. I, 143 (citing Greenstein’s own 2 admissions that she received a copy of the In Rem Order), 169–70.) Greenstein did 3 not seek modification of the In Rem Order after receiving a copy of it. 4 On May 14, 2012, the trustee recorded a new Notice of Sale. (SA vol. III, 707.) 5 On May 31, 2012, Greenstein filed her Chapter 7 bankruptcy. (AA vol. I, 144; SA 6 vol. I, 1.) On July 11, 2012, the Property was sold by foreclosure to Wells Fargo. 7 (AA vol. I, 34–35.) The Duran Defendants purchased the property a few years later. 8 (DER 8.) 9 C. Greenstein’s Chapter 7 Bankruptcy & Related Actions 10 Greenstein attempted on several occasions to invalidate the In Rem Order 11 through the filing of adversary proceedings in her Chapter 7 case, and the filing of a 12 second state court action. The bankruptcy court discharged Greenstein’s debt on 13 September 29, 2015. (SA vol. I, 201.) 14 1. 15 In her first adversary case against Wells Fargo, the court granted Wells Fargo’s 16 motion to dismiss, and dismissed the adversary proceeding based on Greenstein’s lack 17 of standing. (AA vol. I, 145–46; SA vol. II, 472.) 18 19 Adversary Proceedings & Second State Court Action Greenstein filed a second adversary proceeding against Wells Fargo, but voluntarily dismissed it before the hearing. (See AA vol. I, 146–47.) 20 On January 2, 2013, Greenstein filed another state court action against Wells 21 Fargo, and various attorneys for Wells Fargo and Lipkis (the “Second Civil Action”). 22 (See AA vol. I, 149.) She asserted claims for intentional infliction of emotional 23 distress, fraud, conspiracy, breach of contract, and slander of title. (Id.) She based 24 these claims on the same challenges she asserted to the In Rem Order in her 25 bankruptcy case, and related adversary proceedings. (Id.; see also SA vol. III, 714– 26 43.) The state court ultimately sustained Wells Fargo’s demurrer to Greenstein’s 27 amended complaint without leave to amend. (SA vol. III, 748–51.) Greenstein has 28 not appealed, and the state court’s judgement is final. (AA vol. I, 149.) 5 1 2. 2 On December 27, 2013, Greenstein filed a Motion to Set Aside Sale of Property 3 Made in Violation of Automatic Stay (“Set Aside Motion”) in her main bankruptcy 4 action, which challenged the In Rem Order on several grounds. (AA vol. I, 13.) The 5 Bankruptcy Court denied her motion on claim preclusion principles. 6 vol. I, 157.) Greenstein appealed to the Ninth Circuit Bankruptcy Appellate Panel 7 (“BAP”), and the BAP reversed and remanded. (AA vol. I, 112, 128.) The BAP 8 requested additional findings by the bankruptcy court explaining its application of 9 collateral estoppel and/or res judicata. (AA vol. I, 127–32.) Motion to Set Aside & Appeal (See AA 10 On remand, the bankruptcy court declined to apply collateral estoppel or res 11 judicata, but denied Greenstein’s Set Aside Motion because: 1) the bankruptcy court 12 in the Lipkis Action had jurisdiction to issue the In Rem Order, and Greenstein could 13 not collaterally attack that final order through her Set Aside Motion (AA vol. I, 158– 14 64); 2) Greenstein was afforded due process, despite not originally receiving notice of 15 the In Rem Order, because she could have challenged it prior to the sale of the 16 Property, but chose not to for two months; (AA vol. I, 165–71); and 3) to the extent 17 Greenstein challenged the In Rem Order as being improperly granted, as opposed to 18 void, she could not do so via collateral attack. (AA vol. I, 172.) Greenstein now 19 appeals the bankruptcy court’s Order on her Set Aside Motion. 20 3. 21 On October 6, 2015, Greenstein filed her third adversary proceeding against 22 Wells Fargo. (SA vol. II, 241.) She alleged violations of various bankruptcy rules, 23 fraud, fraud on the court, violation of the automatic stay, perjury, and sought a 24 declaration that the In Rem Order was void. (See id.) On December 15, 2015, the 25 Bankruptcy Court granted Wells Fargo’s motion to dismiss Greenstein’s complaint, 26 but granted her leave to amend. 27 permitted Greenstein leave to amend over Wells Fargo’s protest since Greenstein 28 received her bankruptcy discharge in September 2015. Dismissal of Greenstein’s Third Adversary Proceeding (SA vol. III, 540–47.) 6 The bankruptcy court 1 On February 16, 2016, Greenstein filed her First Amended Adversary 2 Complaint (“FAAC”), which named several defendants in addition to Wells Fargo, 3 including Roger Lipkis, Steven Wolvek, Dean Reeves, Marisol Nagata, Robert Little, 4 Robert Bailey, John Stumpf, Robert Lindaman, and the Duran Defendants. 5 (AA vol. II, 285.6) 6 On March 21, 2016, Wells Fargo (along with the associated corporate 7 defendants) moved to dismiss the FAAC. (SA vol. III, 569.) The Duran Defendants, 8 Steven Wolvek (Lipkis’s attorney), and Marisol Nagata (Wells Fargo’s attorney that 9 appeared in the Lipkis Action) also moved to dismiss. (See AA vol. I, 191–93.) On 10 October 31, 2017, after several hearings and continuances, the bankruptcy court 11 granted all defendants’ motions to dismiss, without leave to amend, as detailed in its 12 63-page Amended Consolidated Memorandum of Decision. (AA vol. I, 174–93.) 13 The bankruptcy court then issued separate orders of dismissal for each of the 14 defendants, which led to Greenstein’s multiple appeals. (See AA vol. I, 201–11.) 15 D. Greenstein’s Appeal 16 On November 6, 2017, Greenstein appealed from the bankruptcy court’s Order 17 dismissing the FAAC against Wells Fargo in the third adversary proceeding. (AA vol. 18 I, 1.) She subsequently filed individual appeals relating to the bankruptcy court’s 19 dismissal of Nagata, and the Duran Defendants, as well as its denial of her Set Aside 20 Motion. On January 29, 2018, the Court consolidated all of these appeals because 21 they relate to the same nucleus of fact. (See ECF No. 11.) The consolidated appeals 22 are now before the Court for decision, and have been briefed by the parties. 23 24 25 26 27 28 6 As with much of the record submitted by Greenstein, there are several pages of this appendix of evidence that are not numbered, or otherwise marked. For this citation the Court refers to a handwritten “285” on the bottom right-hand corner of the page. The page is also identified as Page 112 of 216, at ECF No. 28. 7 III. 1 ISSUES ON APPEAL Greenstein articulates several issues on appeal. 2 (AOB 11; see also Wells 3 Fargo’s Reply Brief (“WFR”) 3–4, ECF No. 31.) Distilled below in the most basic 4 terms are the issues: 5 1. Whether Greenstein can prevail on appeal without providing a record or 6 opening brief that complies with the Federal Rules of Bankruptcy Procedure 7 (“FRBP”); 2. Whether the bankruptcy court erred in denying Greenstein’s Set Aside 8 Motion; and 9 10 3. Whether the bankruptcy court erred in granting Wells Fargo, the Duran 11 Defendants, Wolvek, and Nagata’s Motion to Dismiss Greenstein’s FAAC 12 in her third adversary proceeding. 13 IV. STANDARDS OF REVIEW 14 The Court has jurisdiction pursuant to 28 U.S.C. § 158(a)(1). 15 Greenstein fails to provide the standard of review in violation of FRBP 16 8014(a)(5). The Court reviews the bankruptcy court’s order granting Defendants’ 17 motions to dismiss with prejudice de novo. I.R.S. v. Snyder, 343 F.3d 1171, 1174 (9th 18 Cir. 2003); see also In re EPD Inv. Co., LLC, 523 B.R. 680, 684 (B.A.P. 9th Cir. 19 2015) (“The bankruptcy court’s dismissal of an adversary complaint for failure to state 20 a claim under Civil Rule 12(b)(6) is reviewed de novo.”). The Court also “review[s] 21 de novo whether the automatic stay provision of § 362(a) has been violated.” In re 22 Del Mission Ltd., 98 F.3d 1147, 1150 (9th Cir. 1996). V. 23 24 A. DISCUSSION Procedural Defects 25 Pro se litigants must comply with basic procedural requirements, despite not 26 being represented by an attorney. See Greco v. Stubenberg, 859 F.2d 1401, 1404 (9th 27 Cir. 1985) (affirming dismissal of bankruptcy appeal where appellant failed to timely 28 make written request for transcript, and where the court permitted appellant 8 1 opportunity to cure non-jurisdictional defects); c.f. United States v. Flewitt, 874 F.2d 2 669, 675 (9th Cir. 1989) (noting in criminal context that “Pro se status does not excuse 3 a criminal defendant from complying with the procedural or substantive rules of the 4 court”). Indeed, appellate courts routinely dismiss, or summarily affirm, appeals 5 where the appellant fails to comply with procedural requirements. Han v. Sekiya v. 6 Gates, 508 F.3d 1198, 1200 (9th Cir. 2007) (dismissing appeal where appellant failed 7 to accurately cite to the record, or provide the appropriate standard of review); Mitchel 8 v. Gen. Elec. Co., 689 F.2d 877, 879 (9th Cir. 1982) (“[Appellant’s] failure to refer to 9 the record works a hardship not only on this court, but also on the opposing 10 litigants.”). 11 Here, the Court explained to Greenstein on several occasions that she must 12 comply with the procedural requirements set forth in the FRBP and the local rules. 13 (See ECF Nos. 7, 9, 19 (“Greenstein must comply with the proper procedures, and 14 cannot continue to disregard the Local Rules.”); 23.) The Court encouraged her to 15 retain counsel, and directly cited to, and quoted from, the rules governing the 16 requirements for, and formatting of, Greenstein’s Opening Brief. (ECF No. 23.) 17 Despite this, she failed to serve an appendix of evidence with her Opening Brief. (See 18 id.) The Court provided her additional time to do so. (Id.) Even then, she 1) did not 19 include the dockets from her bankruptcy or the adversary proceeding; 2) did not 20 include all of the documents identified by appellees; and 3) omits several documents 21 she purports to rely on in her Opening Brief. 22 Greenstein’s Opening Brief itself is equally deficient. As noted above, she did 23 not provide a standard of review. (AOB 22.) She also regularly makes factual 24 assertions that are not supported by citations to the record. (See, e.g., AOB 16 25 (discussing allegations regarding foreclosure forbearance plan, and payments 26 thereunder); 15 (discussing her alleged unlawful detainer action); 18 (discussing her 27 assertion that Lipkis did not list the Property in his bankruptcy schedules); 32 (arguing 28 that Lipkis’s attorney “admitted he signed the stipulation as a favor to a colleague, and 9 1 apparently without his clients’ knowledge…”). Her legal citations often include 2 nothing more than a case name, and sometimes a date. 3 Ultimately, the Court acknowledges the harshness of declining to address the merits of 4 an appellant’s brief because of procedural deficiencies, and thus turns to the merits of 5 Greenstein’s appeal. See Sekiya, 508 F.3d at 1200. However, Greenstein “is not 6 ‘entitled to have [the Court] expatiate on [its] reasons for finding [her] case 7 unmeritorious.’” Id. (quoting N/S Corp. v. Liberty Mut. Ins. Co., 127 F.3d 1145, 1147 8 (9th Cir. 1997)). 9 B. (See, e.g., AOB 32.) Greenstein’s Set Aside Motion 10 Greenstein’s Set Aside Motion argued that the In Rem Order was invalid at the 11 time the bankruptcy court issued it in the Lipkis Action, and therefore the automatic 12 stay in her Chapter 7 case precluded sale of the Property. (AOB 24.) If, on the other 13 hand, the In Rem Order was valid, then it is clear that it applied to the Property, 14 despite it potentially being part of Greenstein’s estate. 15 Greenstein’s position below can be distilled to three points: 1) the bankruptcy 16 court in the Lipkis Action did not have jurisdiction to issue the In Rem Order; 17 2) Greenstein was not afforded due process because she did not initially receive notice 18 of the In Rem Order, despite disputing the validity of the Lipkis Deed; and 3) the 19 bankruptcy court violated the stay order in her Chapter 7 case. The bankruptcy court 20 addressed these arguments, explained its reasoning, and the Court agrees and 21 AFFIRMS. 22 1. 23 28 U.S.C. § 1334 grants a bankruptcy court “exclusive jurisdiction – (1) of all 24 the property, wherever located, of the debtor as of the commencement of such case, 25 and of property of the estate….” “Federal courts considering [whether] a judgment is 26 void because of a jurisdictional defect generally have reserved relief only for the 27 exceptional case in which the court that rendered judgment lacked even an ‘arguable Jurisdiction & Application of Section 362(d)(4) 28 10 1 basis’ for jurisdiction.” United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 2 271 (2010) (quoting Nemaizer v. Baker, 793 F.2d 58, 65 (2d Cir. 1986)). 3 Here, the bankruptcy court in the Lipkis Action entered its order excusing the 4 Property from the automatic stay pursuant to 11 U.S.C. § 362(d)(4). (AA vol. II, 388– 5 92.) Section 362(d)(4) allows the court to exempt certain property from the automatic 6 stay in all bankruptcy cases for a period of two years where it finds that the property 7 has become part of a scheme to delay, hinder, or defraud creditors. See 11 U.S.C. 8 § 362(d)(4); see also In re First Yorkshire Holdings, Inc., 470 B.R. 864, 870 9 (B.A.P. 9th Cir. 2012) (discussing application of section 362(d)(4)). A debtor does 10 not have to be part of the scheme to hinder, delay, or defraud creditors for section 11 362(d)(4) to apply to the debtor’s bankruptcy. See In re Dorsey, 476 B.R. 261, 267– 12 68 (Bankr. C.D. Cal. 2012) (citing In re Duncan & Forbes Dev., Inc., 368 B.R. 27, 32 13 (Bankr. C.D. Cal. 2006)). This does not leave the uninvolved debtor without recourse, 14 however. 15 Pursuant to section 362(d)(4), a debtor, like Greenstein, in a subsequent 16 bankruptcy action “may move for relief from [an in rem order] based upon changed 17 circumstances or for good cause shown, after notice and a hearing.” 11 U.S.C. 18 § 362(d)(4). Unless a debtor seeks such relief, the entry of an in rem order under 19 Section 362(d)(4) provides expansive protection for creditors: By seeking relief under § 362(d)(4), the creditor requests specific prospective protection against not only the debtor, but also every non-debtor, co-owner, and subsequent owner of the property. [citation] If granted, such relief nullifies the ability of the debtor and any other third party with an interest in the property to obtain the benefits of the automatic stay in future bankruptcy cases for a period of two years. 20 21 22 23 24 25 26 27 In re First Yorkshire Holdings, Inc., 470 B.R. at 871 (citing In re Abdul Muhaimin, 343 B.R. 159, 166–70 (Bankr. Md. 2006)). 28 11 1 The court in the Lipkis Action had jurisdiction to act because it issued its order 2 pursuant to Title 11 of the United States Code. See 28 U.S.C. § 1334(b) (granting 3 broad authority to act under Title 11). Greenstein’s argument that the Lipkis Deed 4 was fraudulent did not affect the court’s jurisdiction because, as explained above, Title 5 11, section 362(d)(4) by its very terms applies to fraudulent transfers of real property. 6 See In re Duncan & Forbes Dev., Inc., 368 B.R. at 34 (quoting In re Braus, 248 F. 55, 7 64 (2d Cir. 1917)) (“A transfer with unlawful intent to hinder or to delay ‘must be 8 devised and contrived of malice, fraud, covin, collusion, or guile.’”). 9 Finally, Greenstein contends that In re Johnson, 346 B.R. 190 (B.A.P. 9th Cir. 10 2006) supports her position. (See, e.g., AOB 40.) However, in Johnson, the BAP 11 analyzed the propriety of an in rem order that was issued prior to the 2005 adoption of 12 section 362(d)(4), in its current form. See In re Johnson, 346 B.R. at 195 (“The 13 foundational proposition is that nothing in § 362, as it existed before October 17, 14 2005, expressly authorized an ‘in rem’ stay relief order.”). Accordingly, Johnson is 15 not applicable here because the court in the Lipkis Action issued the In Rem Order 16 after the enactment of section 362(d)(4), which specifically provides for the relief in 17 the In Rem Order. 11 U.S.C. § 362(d)(4). 18 2. 19 Greenstein next argues that she was denied procedural due process because she 20 was not provided notice of the In Rem Order, when the court issued it in the Lipkis 21 Action. (AOB 25.) The bankruptcy court concluded that Greenstein was likely 22 entitled to notice of the In Rem Order in the Lipkis Action, but that she was provided 23 procedural due process because she knew of the In Rem Order prior to the sale of the 24 Property, but did nothing. (See AA vol. I, 165–71.) Due Process 25 Nothing in section 362(d)(4) requires notice to non-debtors like Greenstein. 26 Instead, the bankruptcy court below held that traditional notions of due process 27 required notice to Greenstein. 28 Greenstein had no vested property interest in the stay in the Lipkis Action because the (See id.) 12 On appeal, Wells Fargo argues that 1 In Rem Order had no effect on the Property until she filed her own bankruptcy 2 seeking protection in the form of a stay. (WFB 37–42.) In other words, a prospective 3 stay in her own bankruptcy proceeding, which she admittedly did not start until after 4 the issuance of the In Rem Order, did not entitle her to procedural protections in the 5 Lipkis Action. Courts have come out on both sides of this coin. Compare In re 6 Black, 514 B.R. 605 (Bankr. E.D. Cal. 2014) (holding no notice required because the 7 debtor may request relief from the in rem order in his or her own bankruptcy case); In 8 re Hatton, 2017 WL 4155326, at *3–*4 (Bankr. E.D. Cal. 2017) (holding that non- 9 debtor not entitled to notice of in rem order) with In re Dorsey, 476 B.R. at 270 10 (emphasis added) (noting that there “could be due process concerns as to the original 11 borrower,” but concluding that borrower was afforded due process). 12 declines to affirmatively address whether due process mandates that a non-debtor is 13 provided notice of an order under section 362(d)(4) because it finds that Greenstein 14 was ultimately afforded due process here, despite the initial lack of notice. The Court 15 “[P]rocedural due process claims are resolved by balancing tests, where 16 differing interests can give rise to many differing procedural requirements.” Brittain 17 v. Hansen, 451 F.3d 982, 1000 (9th Cir. 2006) (citing Wilkinson v. Austin, 545 U.S. 18 209, 224 (2005)). “[T]he requirements of due process are flexible and call for such 19 procedural protections as the particular situation demands.” Wilkinson, 545 U.S. at 20 224. Here, Wells Fargo recorded the In Rem Order, in accordance with state law, on 21 March 28, 2012. (AA vol. I, 388.) The foreclosure trustee then issued a new notice of 22 sale on May 14, 2012, with a sale date scheduled for June 4, 2012. (AA vol. I, 115.) 23 Greenstein filed for bankruptcy on May 31, 2012, and on the same day the foreclosure 24 trustee advised her of the In Rem Order, and explained that the automatic stay did not 25 protect the Property as a result. (AA vol. I, 169–70; SA vol. IV, 850–51.) 26 The next day, Wells Fargo’s counsel provided Greenstein with a copy of the In 27 Rem Order, and continued the foreclosure sale for almost six weeks to provide her an 28 opportunity to act accordingly. (See id.) The In Rem Order specifically explained 13 1 that the Property would be exempt from her bankruptcy proceeding, and that she could 2 challenge it “based upon changed circumstances or for good cause shown….” (AA 3 vol. II, 388–94). Despite these very clear warnings, Greenstein did not seek relief 4 until after the foreclosure sale, when she filed a motion in the Lipkis Action on 5 August 7, 2012 (more than three weeks after the sale). (See AA vol. I, 144–47.) The 6 judge in the Lipkis Action denied Greenstein’s request, in addition to two subsequent 7 motions filed by Greenstein. (Id.) 8 Moreover, Greenstein knew of the Lipkis Deed since at least February 2012, 9 which put her on notice of the allegedly fraudulent transfer. (AA vol. II, 371; SA 10 vol. III, 678.) At that point, she was also represented by counsel. (AA vol. II, 371.) 11 Ultimately, the Court finds that Greenstein was provided sufficient due process 12 because she had six weeks to challenge the In Rem Order before the foreclosure sale, 13 but she failed to exercise her right to do so. C.f. Hudson v. Palmer, 468 U.S. 517, 14 533–35 (1984) (discussing procedural due process requirements where plaintiff is 15 afforded post-deprivation remedy); Sorrels v. McKee, 290 F.3d 965, 972 (9th Cir. 16 2002) (holding, in prisoner case, that “[i]f meaningful post-deprivation remedy exists 17 for an alleged deprivation of property, then that post-deprivation remedy is sufficient 18 to satisfy the requirements of due process”). Procedural due process only affords the 19 opportunity to challenge an action; a litigant’s failure to timely take advantage of that 20 opportunity is not sufficient to invalidate a prior final order. 21 3. 22 Greenstein also argued that the court violated the stay in her case by allowing 23 the sale of the Property. (AA vol. I, 18.) However, as reasoned by the court below 24 and explained in detail above, the In Rem Order was a valid, final order of the court in 25 the Lipkis Action. It allowed Wells Fargo to recover the Property, and excluded it 26 from any subsequent bankruptcy stays pursuant to section 362(d)(4). Moreover, to the 27 extent that Greenstein challenged the specific findings made in the Lipkis Action, as 28 opposed to arguing it was void, she may not collaterally attack that order in a The Bankruptcy Court Did Not Violate the Stay 14 1 subsequent proceeding. See In re Alakozai, 499 F.R. 698, 704 (B.A.P. 9th Cir. 2013) 2 (holding that the grant of a motion for relief from the automatic stay is a final order 3 that may not be collaterally attacked). In conclusion, the Court AFFIRMS the decision below denying Greenstein’s 4 5 Set Aside Motion. 6 C. Defendants’ Motions to Dismiss 7 The Bankruptcy Court dismissed Greenstein’s FAAC because it failed to state a 8 claim upon which relief could be granted. On a motion to dismiss, bankruptcy courts 9 apply the well-known standard of Federal Rule of Civil Procedure 12(b)(6), made 10 applicable to bankruptcy proceedings through FRBP 7012. A complaint’s “[f]actual 11 allegations must be enough to raise a right to relief above the speculative level.” Bell 12 Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). A claim has facial plausibility 13 when the plaintiff pleads factual content that allows the court to draw the reasonable 14 inference that the defendant is liable for the misconduct alleged.” Aschcroft v. Iqbal, 15 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). The bankruptcy court 16 separately addressed Wells Fargo’s, Wolvek and Nagata’s, and the Duran Defendants’ 17 Motions to Dismiss, and so will this Court. 18 1. 19 With the exception of Greenstein’s claim that Wells Fargo violated the stay, the 20 bankruptcy court dismissed all of Greenstein’s claims in the FAAC without leave to 21 amend because they were barred by res judicata.7 (AA vol., I 174–75.) Res judicata 22 applies if a second suit involves (1) the same cause(s) of action (2) between the same 23 parties, or those in privity, (3) after a final judgment on the merits in the first suit. Wells Fargo 24 25 26 27 28 7 Wells Fargo notes, and the Court acknowledges, that the Bankruptcy Court declined to apply res judicata principles in the portion of its order denying Greenstein’s Set Aside Motion, but then later applied it to dismiss Greenstein’s FAAC. (WFB 33.) This inconsistency is troubling, but the Court may affirm on any basis supported by the record. Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940, 949 (9th Cir. 2005). And, the Court chooses to apply res judicata here. As explained above, Greenstein’s Set Aside Motion was properly denied for a variety of reasons, despite the Bankruptcy Court’s failure to apply res judicata. 15 1 Citizens for Open Gov’t v. City of Lodi, 205 Cal. App. 4th 296, 324 (2012). “Res 2 judicata bars the litigation not only of issues that were actually litigated but also issues 3 that could have been litigated.” Id. (citing Busick v. Workmen’s Comp. Appeals Bd., 4 7 Cal. 3d 967, 975 (1972)). 5 Here, Greenstein’s Second Civil Action asserted claims for intentional infliction 6 of emotional distress, fraud/deceit, breach of contract, conspiracy, and slander of title. 7 (SA vol. III, 714–44.) It named Wells Fargo, Marisol Nagata, and Steven Wolvek as 8 defendants, among others. (Id.) In any event, the allegations in the Second Civil 9 Action complaint surround the same nucleus of facts that form the basis of her FAAC: 10 1) she claimed she suffered harm because Wells Fargo improperly foreclosed on her 11 home; 2) she claimed the Lipkis Deed was a forgery that the defendants fraudulently 12 used to assist in foreclosing on her home; and 3) she requested damages and equitable 13 relief resulting from application of the In Rem Order and sale of her home. (Compare 14 id. with AA vol. II, 285, et seq.) Despite the addition of a few new defendants in her 15 FAAC, including attorneys and other agents of Wells Fargo, the allegations remain the 16 same—that her rights were violated by way of application of the In Rem Order, and 17 subsequent foreclosure of her home. To the extent that these claims were not brought 18 in the Second Civil Action, they certainly could have been, as they were based on the 19 same facts. Citizens for Open Gov’t, 205 Cal. App. 4th at 324. 20 21 Next, the parties in both actions were the same or in privity with each other. (SA vol. III, 714–44; AA vol. II, 285, et seq.) Thus, the second element is met. 22 Finally, the court in the Second Civil Action sustained Wells Fargo’s demurrer 23 without leave to amend. (SA vol. III 746–49.) This acted as a final decision on the 24 merits, which Greenstein never appealed. See Boeken v. Philip Morris USA, Inc., 48 25 Cal. 4th 788, 793 (2010); Palomar Mobilehome Park Ass’n v. City of San Marcos, 26 989 F.2d 362, 364 (9th Cir. 1993) (“In California, a judgment entered after the 27 sustaining of a general demurrer is a judgment on the merits, and, to the extent that it 28 adjudicates that the facts alleged do not establish a cause of action, it will bar a second 16 1 action on the same facts.”). Accordingly, with the exception of the claim that Wells 2 Fargo violated the stay, Greenstein’s claims against Wells Fargo and its attorneys and 3 employees were barred by the judgment in the Second Civil Action. The bankruptcy 4 court below went on to address her claims individually, but the Court declines to do so 5 because it may affirm on any basis supported by the record. Livid Holdings Ltd., 416 6 F.3d at 949. 7 Greenstein’s claim that Wells Fargo and its agents violated the stay in her 8 Chapter 7 bankruptcy case is also unavailing. The Court explained in detail above 9 how and why the In Rem Order exempted the Property from the stay in her 10 bankruptcy case, and incorporates that reasoning here by reference. 11 (See supra Part V.B.3.) 12 Greenstein did not challenge the denial of leave to amend in her appeal, 13 therefore has waived that argument. Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir. 14 1999) (citing Brookfield Commc’n, Inc. v. West Coast Entm’t Corp., 174 F.3d 1036, 15 1046 n.7 (9th Cir. 1999)) (“[O]n appeal, arguments not raised by a party in its opening 16 brief are deemed waived.”). In any event, leave would have been futile given the facts 17 of this case. Accordingly, the Court AFFIRMS the dismissal of Greenstein’s claims 18 against Wells Fargo, Dean Reeves, Robert Little, Robert Baily, and John Stumpf. 19 2. 20 The Bankruptcy Court dismissed Greenstein’s claims against these defendants 21 because they were barred by the final judgments in the Second Civil Action, and the 22 second adversary proceeding. (AA vol. I, 191–92.) On appeal, Nagata joins in Wells 23 Fargo’s reply brief (ECF No. 33), and Wolvek failed to respond. In any event, the 24 Court AFFIRMS, for the reasons below. Wolvek & Nagata 25 Greenstein’s Second Civil Action complaint asserted claims against Wolvek 26 and Nagata, which centered on the Lipkis Action, Lipkis Deed, In Rem Order, and 27 subsequent foreclosure. (SA vol. III, 714–49.) The court dismissed these claims 28 without leave to amend. (Id.) For the same reasons discussed above, this foreclosed 17 1 Greenstein’s claims against the same defendants surrounding the same conduct, in a 2 successive suit. Citizens for Open Gov’t, 205 Cal. App. 4th at 324. 3 3. 4 The Bankruptcy Court dismissed the Duran Defendants because Greenstein did The Duran Defendants 5 not allege a plausible claim against them. (AA vol. I, 193.) Greenstein only 6 mentioned the Duran Defendants twice in the FAAC, and only in reference to them 7 purchasing the property from Wells Fargo years after the Property was sold at 8 foreclosure. (AA vol. II, 288, 338.) This was not enough to sustain a claim against 9 them. The Bankruptcy Court liberally construed these allegations as supporting 10 Greenstein’s claim for quiet title. However, as discussed above, Greenstein’s attempts 11 to invalidate the sale of the Property are not legally sound, and therefore she could not 12 maintain such an action against the Duran Defendants for quiet title because she did 13 not have a valid claim of title. See Cal. Civ. Proc. Code § 761.020 (listing elements 14 for cause of action in quiet title); see also Humphreys v. Ocwen Loan Servicing, LLC, 15 No. CV0808154MMMRCX, 2009 WL 10672594, at *6 (C.D. Cal. Feb. 23, 2009) 16 (holding plaintiff must allege title to property). Moreover, there were no allegations 17 that the Duran Defendants were not bona fide purchasers. Accordingly, the Court 18 AFFIRMS. 19 /// 20 /// 21 /// 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// 18 VI. 1 2 3 4 5 6 7 8 CONCLUSION For the foregoing reasons, the Court AFFIRMS the bankruptcy court’s judgments, as appealed from in the following consolidated case numbers: 2:17-cv-8371-ODW (Lead Case) 2:17-cv-8919-ODW 2:17-cv-8899-ODW 2:17-cv-8923-ODW 2:17-cv-8373-ODW 9 10 IT IS SO ORDERED. 11 August 14, 2018 12 13 14 15 ____________________________________ OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE 16 17 18 19 20 21 22 23 24 25 26 27 28 19
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