In re: Theos Fedro Holdings, LLC ( 2022 )


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  •                                                                                 FILED
    DEC 12 2022
    NOT FOR PUBLICATION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-22-1115-SGB
    THEOS FEDRO HOLDINGS, LLC,
    Debtor.                              Bk. No. 21-30202
    MALINKA TACUMA WADE MOYE,
    Appellant,                           Adv. No. 22-03001
    v.
    PENDER CAPITAL, INC.; PENDER                       MEMORANDUM*
    CAPITAL ASSET LENDING FUND, I,
    LP; LABOR COMMISSIONER OF THE
    STATE OF CALIFORNIA,
    Appellees.
    Appeal from the United States Bankruptcy Court
    for the Northern District of California
    Dennis Montali, Bankruptcy Judge, Presiding
    Before: SPRAKER, GAN, and BRAND, Bankruptcy Judges.
    INTRODUCTION
    Malinka Tacuma Wade Moye appeals from an order granting the
    motions to dismiss his adversary proceeding against defendants Pender
    Capital, Inc., Pender Capital Asset Lending, Fund 1, LP, (jointly, “Pender
    *
    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.
    Capital”), and the Labor Commissioner for the State of California. Moye’s
    complaint failed to state any cognizable claim for relief. Accordingly, we
    AFFIRM.
    FACTS
    In January 2022, Moye commenced his adversary proceeding in the
    chapter 11 1 bankruptcy of debtor Theos Fedro Holdings, LLC. His
    complaint is factually incomprehensible. It alleges that the debtor is a
    limited liability company with its principal place of business in San
    Francisco, while defendant Pender Capital is a “loan lending company” in
    Sacramento. Moye stated that he was a creditor “violated by defendants.,
    with principal place of business in Sf & Sacramen, California under
    extortion. Assault. Attempted murder.” Moye also states that “Labor
    Commissioner attorneys have prior record of obstructing creditor.” The
    complaint includes numerous other statements and allegations of crimes by
    others dating back years.
    The relationship of any of these defendants to the debtor and its
    bankruptcy is unclear. His caption identifies as defendants Pender Capital,
    Labor Commissioner for the State of California, and Craft & Layne. There
    are scattered references in the five-page complaint to Pender Capital but no
    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
    mention of it in the prayer for relief. Craft & Layne is not mentioned in the
    complaint except its name was handwritten onto the caption as a
    defendant. 2 There are roughly three references to the Labor Commissioner
    but no explanation of what the Labor Commissioner allegedly did to harm
    Moye, or how it relates to the underlying bankruptcy.
    Moye alleged in his prayer for relief that the debtor “transferred &
    removed funds from United States of America to Greece, or permitted
    transfer & removal, of property of estate with the intent to delay, hinder, or
    defraud a creditor in violation of provisions of 11 USC 727(a)(2)(b) . . . .”
    Moye also references an alleged violation of § 727(a)(2)(A) in the title of his
    complaint and in passing within the body of the complaint. There are
    similar references to fraudulent transfers allegedly involving the debtor, its
    managing member Philip Achilles, and Pender Capital. At one point, Moye
    states: “2020: Pender Capital knowingly loan $3,000,000 unto Phillip
    [sic]Achilles who previously changed title on 819 Ellis St SF, ca 94109
    [“Ellis Property”] to deter transfer unto creditor [Moye] filed claim in lower
    and northern district courts.”
    This is the closest Moye gets to stating a coherent claim for relief that
    might have some link to debtor or its bankruptcy. There are no additional
    factual allegations stated to support Moye’s barebones accusations. There
    are only the above-referenced conclusory statements. The remainder of the
    2
    No entity known as Craft & Layne participated in the underlying adversary
    proceeding. Nor was Craft & Layne named as a party to this appeal.
    3
    complaint is a mélange of seemingly unconnected complaints and
    grievances against a host of third parties. Many of these same matters are
    referenced in the litigation he has unsuccessfully pursued in the state
    courts and in the federal district court. See In Re Moye, Case No. C-14-2533
    EMC (PR), 
    2014 WL 3750055
    , at *1-2 (N.D. Cal. July 28, 2014).
    Both Pender Capital and the Labor Commissioner moved to dismiss
    the adversary proceeding with prejudice. Both pointed out the defects in
    the complaint described above. The Labor Commissioner further pointed
    out that the bankruptcy court would lack jurisdiction over many of the
    grievances Moye attempted to raise because they appeared wholly
    unconnected to debtor’s bankruptcy case. Similarly, Pender Capital noted
    that most of the matters referenced in Moye’s complaint concerned alleged
    criminal conduct under California law that appears to have occurred years
    ago with no connection to debtor’s bankruptcy. Moye responded to the
    dismissal motions. But his response was largely incoherent. To the extent
    any sense can be made of it, it fails to address the critical issues raised in
    the motions to dismiss.
    On May 24, 2022, the bankruptcy court entered an order granting the
    defendants’ motions to dismiss for the reasons they stated. The bankruptcy
    court additionally observed: “Plaintiff cannot obtain relief from this court
    regarding criminal law matters or disputes in other state judicial or
    administrative proceedings. What limited relief he might be entitled to
    under the bankruptcy laws [does] not reach the moving parties or any
    4
    other named defendant.” Moye timely appealed. 3
    JURISDICTION
    The bankruptcy court has jurisdiction over Moye’s § 727 claim
    pursuant to 
    28 U.S.C. §§ 1334
     and 157(b)(2)(J). We have jurisdiction under
    
    28 U.S.C. § 158
    .
    ISSUE
    Did the bankruptcy court commit reversible error when it dismissed
    Moye’s complaint without leave to amend?
    STANDARD OF REVIEW
    We review de novo the bankruptcy court’s order granting the
    defendants’ Civil Rule 12(b)(6) motions. Barnes v. Belice (In re Belice), 
    461 B.R. 564
    , 572 (9th Cir. BAP 2011). De novo review means we give no
    deference to the bankruptcy court’s decision. Francis v. Wallace (In re
    Francis), 
    505 B.R. 914
    , 917 (9th Cir. BAP 2014).
    DISCUSSION
    A.    Civil Rule 12(b)(6) standards.
    When we review an order granting a Civil Rule 12(b)(6) motion,
    made applicable in adversary proceedings by Rule 7012, we consider the
    legal sufficiency of the plaintiff’s complaint. See Johnson v. Riverside
    Healthcare Sys., LP, 
    534 F.3d 1116
    , 1121–22 (9th Cir. 2008). This means that
    3  After the appeal was submitted on the briefs, Moye filed a document with two
    attachments from the California Department of Real Estate. This document was not part
    of the record before the bankruptcy court and shall not be considered on appeal. Castro
    v. Terhune, 
    712 F.3d 1304
    , 1316 n.5 (9th Cir. 2013).
    5
    we must assess whether the complaint presents a cognizable legal theory
    and whether it contains sufficient factual allegations to support that theory.
    
    Id.
     Thus, “for a complaint to survive a motion to dismiss, the non-
    conclusory ‘factual content,’ and reasonable inferences from that content,
    must be plausibly suggestive of a claim entitling the plaintiff to relief.”
    Moss v. U.S. Secret Serv., 
    572 F.3d 962
    , 969 (9th Cir. 2009) (citing Ashcroft v.
    Iqbal, 
    556 U.S. 662
    , 677-78 (2009)).
    A claim is facially plausible when it contains factual allegations that,
    if taken as true, would allow the court to reasonably infer that the
    defendant is liable to the plaintiff. Iqbal, 
    556 U.S. at 678
    . “Threadbare
    recitals of the elements of a cause of action, supported by mere conclusory
    statements, do not suffice.” 
    Id.
     Additionally, we do not accept as true mere
    legal conclusions; they cannot by themselves establish a plausible claim for
    relief. 
    Id.
    Determining whether a claim for relief is plausible is “a context-
    specific task that requires the reviewing court to draw on its judicial
    experience and common sense.” 
    Id. at 679
    . Plausibility “asks for more than
    a sheer possibility that a defendant has acted unlawfully.” 
    Id. at 678
    . If a
    complaint contains factual allegations “that are merely consistent with a
    defendant’s liability, it stops short of the line between possibility and
    plausibility of entitlement to relief.” 
    Id.
     (quoting Bell Atl. Corp. v. Twombly,
    
    550 U.S. 544
    , 557 (2007)) (internal quotation marks omitted).
    In considering the defendants’ motions to dismiss, the court can take
    6
    into account matters subject to judicial notice, including the other papers
    filed in the adversary proceeding and the underlying bankruptcy case. See
    Est. of Blue v. Cnty. of Los Angeles, 
    120 F.3d 982
    , 984 (9th Cir. 1997); Barron v.
    Reich, 
    13 F.3d 1370
    , 1377 (9th Cir. 1994).
    B.    The bankruptcy court did not err in concluding that Moye failed to
    state a claim.
    Moye’s appeal brief reads similarly to the adversary complaint he
    filed in the bankruptcy court; it is impossible to follow. Having reviewed
    his complaint and his appeal brief, we agree that the complaint fails to state
    any legally cognizable claims for relief. Most of the matters referenced in
    the complaint are alleged to have happened long ago. Many of these
    matters were the subject of Moye’s unsuccessful litigation in the state court
    and in the federal district court—litigation claims he restated so often that
    both the state court and the federal district court declared him a vexatious
    litigant.
    The complaint designated a single cause of action stating that
    “defendant’s debts are not dischargeable Pursuant to 11 USC. 727(a)(b)(2)
    [sic],” and the “Uniform Fraudulent Transfer Act.” Notably, any challenge
    to the debtor’s discharge needed to be directed against the debtor. But
    Moye failed to name the debtor as a defendant. Moye cannot state a viable
    objection to discharge claim against the named defendants because they are
    not the debtor. Only the debtor in a bankruptcy case is potentially subject
    7
    to the Bankruptcy Code’s discharge provisions. See §§ 727(a), 1141(d).4
    Moye also references a fraudulent transfer claim against Pender
    Capital. The only factual reference to Pender Capital is that it loaned debtor
    several million dollars and received in exchange a note and security
    interest in the Ellis Property. This does not state a legally viable fraudulent
    transfer claim. In the parlance of Iqbal, Moye’s allegations against Pender
    Capital are “threadbare” and “conclusory.” They are not entitled to any
    presumption of truth even in the context of a motion to dismiss under Civil
    Rule 12(b)(6). See Iqbal, 
    556 U.S. at 678
    . These allegations come nowhere
    close to permitting the bankruptcy court to infer that Moye plausibly might
    be entitled to any relief from Pender Capital. Twombly, 
    550 U.S. at 557
    .
    Equally significant, it is the bankruptcy estate, not individual
    creditors, that have standing to pursue the debtor’s fraudulent transfer
    claims. Est. of Spirtos v. One San Bernardino Cnty. Super. Ct. Case Numbered
    SPR 02211, 
    443 F.3d 1172
    , 1176 (9th Cir. 2006). In chapter 11 cases, it is the
    debtor-in-possession, or the chapter 11 trustee in this instance, that has
    standing to bring fraudulent transfer claims, unless other parties have been
    granted derivative standing to pursue such claims. See Liberty Mut. Ins. Co.
    4
    Moye references § 727 in his complaint. Section 727 governs the denial of
    discharge in chapter 7 cases. The debtor remains in chapter 11, where discharge is
    governed by § 1141. The discharge of an entity such as the debtor is specifically
    controlled by § 1141(d)(3). See generally 8 Collier on Bankruptcy at 1141.05[4] (16th ed.
    2022). Moye’s complaint did not reference § 1141 or the requirements to deny a
    discharge to an entity under § 1141(d)(3).
    8
    v. Off. Unsecured Creditors' Comm. of Spaulding Composites Co. (In re
    Spaulding Composites Co.), 
    207 B.R. 899
    , 903 (9th Cir. BAP 1997) (citing
    Hansen v. Finn (In re Curry & Sorensen, Inc.), 
    57 B.R. 824
    , 827–29 (9th Cir.
    BAP 1986)). Nothing in the record, Moye’s complaint, or his appeal brief
    indicates that Moye obtained, or is capable of obtaining, the bankruptcy
    court’s authorization to pursue any fraudulent transfer claims on behalf of
    the debtor’s bankruptcy estate. Thus, as a matter of law, Moye lacked
    standing to assert a claim for fraudulent transfer.
    C.    Denial of leave to amend.
    Under Civil Rule 15, made applicable in adversary proceedings by
    Rule 7015, “[i]n dismissing for failure to state a claim, a [bankruptcy] court
    should grant leave to amend even if no request to amend the pleading was
    made, unless it determines that the pleading could not possibly be cured
    by the allegation of other facts.” Ebner v. Fresh, Inc., 
    838 F.3d 958
    , 963 (9th
    Cir. 2016) (quoting Doe v. United States, 
    58 F.3d 494
    , 497 (9th Cir. 1995)). A
    bankruptcy court generally must grant leave to amend “unless it
    determines that the pleading could not possibly be cured by the allegation
    of other facts.” Lopez v. Smith, 
    203 F.3d 1122
    , 1130 (9th Cir. 2000). This is
    true even if leave to amend was not requested. 
    Id. at 1127
    ; Cook, Perkiss and
    Liehe, Inc. v. N. Cal. Collection Serv., Inc., 
    911 F.2d 242
    , 247 (9th Cir. 1990).
    Dismissal of a complaint without leave to amend is proper if
    amendment would be futile. Intri-Plex Techs., Inc. v. Crest Grp., Inc., 
    499 F.3d 1048
    , 1056 (9th Cir. 2007) (citing Ascon Props., Inc. v. Mobil Oil Co., 
    866 F.2d
                        9
    1149, 1160 (9th Cir. 1989)); Reddy v. Litton Indus., Inc., 
    912 F.2d 291
    , 296 (9th
    Cir. 1990). Amendment is considered futile when allegation of other facts
    consistent with the existing pleading could not cure the deficiency. See
    Garmon v. Cnty. of Los Angeles, 
    828 F.3d 837
    , 846 (9th Cir. 2016) (citing
    Reddy, 
    912 F.2d at
    296–97); Schreiber Distrib. Co. v. Serv–Well Furniture Co.,
    Inc., 
    806 F.2d 1393
    , 1401 (9th Cir. 1986).
    Here, Moye never sought leave to amend, nor has he raised this issue
    on appeal. Arguably, he has forfeited this argument by not raising it on
    appeal. See Okwu v. McKim, 
    682 F.3d 841
    , 846 n.4 (9th Cir. 2012) (“Okwu
    has waived the argument that she should be allowed to amend her
    complaint to re-style some of her § 1983 claims . . . under the Ex Parte
    Young exception . . . . She did not make that argument to the district court
    or in either of her briefs on appeal.” (citations omitted and emphasis
    added)); quoted with approval in City of San Juan Capistrano v. Cal. Pub. Utils.
    Comm'n, 
    937 F.3d 1278
    , 1282 (9th Cir. 2019).
    But even if we were to consider the issue on appeal, Moye cannot
    allege any set of facts to support a nondischargeability claim against
    defendants who are not debtors in the underlying bankruptcy case. Nor
    can we conceive of any set of alleged facts consistent with Moye’s existing
    complaint that would justify the bankruptcy court granting him authority
    to act as the estate’s representative in pursuing any fraudulent transfer
    claims. The remainder of Moye’s grievances, including those intimating at
    criminal conduct of others and raising prior nonbankruptcy proceedings,
    10
    have nothing to do with the debtor’s bankruptcy or with claims within the
    jurisdiction of the bankruptcy court. We, therefore, agree with the
    bankruptcy court that dismissal with prejudice was warranted as granting
    leave to amend would have been futile.
    CONCLUSION
    For the reasons set forth above, we AFFIRM the bankruptcy court’s
    dismissal with prejudice of Moye’s adversary proceeding.
    11