In re: Armin Dirk Van Damme ( 2023 )

FILED
APR 12 2023
NOT FOR PUBLICATION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. NV-22-1175-GCB
ARMIN DIRK VAN DAMME,
Debtor. Bk. No. 2:19-bk-14142-MKN
ARMIN DIRK VAN DAMME, Adv. No. 2:21-ap-01067-MKN
Appellant,
v. MEMORANDUM*
WELLS FARGO BANK, N.A.,
Appellee.
Appeal from the United States Bankruptcy Court
for the District of Nevada
Mike K. Nakagawa, Bankruptcy Judge, Presiding
Before: GAN, CORBIT, and BRAND, Bankruptcy Judges.
INTRODUCTION
Chapter 131 debtor Armin Dirk Van Damme (“Debtor”) appeals the
bankruptcy court’s order dismissing his adversary complaint against Wells
Fargo Bank, N.A. (“Wells Fargo”). Debtor alleged that Wells Fargo lacked
* 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.
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.
standing to assert a secured claim, failed to provide adequate
documentation to support its claim, and committed fraud by asserting that
Debtor executed a loan modification in 2008. Debtor also claimed that the
lien was extinguished under Nevada’s “ancient lien statute,” Nevada
Revised Statutes (“NRS”) 106.240.
The bankruptcy court dismissed the complaint with prejudice under
Civil Rule 12(b)(6), made applicable by Rule 7012, because Debtor’s claims
of fraud and lack of standing were previously dismissed with prejudice by
the United States District Court for the District of Nevada (“District
Court”). The bankruptcy court held that Debtor’s claims were barred by
claim preclusion, issue preclusion, and Nevada’s statutes of limitations,
and Debtor failed to allege a cognizable theory for recovery under NRS
106.240. The court reasoned that even if the loan was accelerated by a
notice of default, and even if such acceleration was sufficient to trigger the
ancient lien statute, the loan modification effectively rescinded any
acceleration.
Debtor urges us to review documents which he believes prove Wells
Fargo’s lack of standing and fraud, but like the bankruptcy court, we are
bound by the prior decision of the District Court. Our review is limited to
whether the bankruptcy court erred by dismissing the claims. It did not,
and we AFFIRM.
2
FACTS 2
A. Prepetition events
In 2004, Debtor and his wife Geraldine Van Damme refinanced their
existing mortgages with a loan of $740,000 from BNC Mortgage, Inc
(“BNC”) secured by a deed of trust on their home in Las Vegas, Nevada
(the “Property”). In October 2007, National Default Servicing Corporation
(“NDSC”), the deed of trust trustee, recorded a notice of default indicating
a payment default of $37,401.44. In January 2008, NDSC rescinded the first
notice of default and recorded a second notice of default indicating a
payment default of $53,914.90 (the “Second Notice of Default”).
BNC subsequently assigned its interest in the deed of trust to LaSalle
Bank, N.A. (“LaSalle”), as trustee under the Trust Agreement for the
Structured Asset Investment Loan Trust Series 2004-11 (the “Trust”). Bank
of America, N.A. became successor by merger with LaSalle, and
subsequently assigned its interest to U.S. Bank, N.A. (“US Bank”).3 Wells
Fargo was the servicer for the Trust, which owned the note.
2
Debtor did not provide excerpts of the record relevant to the order on appeal.
We exercise our discretion to take judicial notice of documents electronically filed in
Debtor’s bankruptcy case and the related adversary proceeding. See Atwood v. Chase
Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003). Debtor
improperly included in his excerpts, and through several additional filings, documents
which were not before the bankruptcy court at the time it decided the issue on appeal.
We do not consider those documents.
3 Debtor disputes the validity and timing of these assignments, and he contests
Wells Fargo’s authority to modify the loan, but as discussed below, the District Court
dismissed with prejudice Debtor’s claims involving these arguments.
3
In March 2008, Debtor agreed to a loan modification which added the
arrears to the principal balance, fixed the previously variable interest rate,
adjusted the monthly payment amount, and removed Geraldine Van
Damme as a borrower (the “2008 Loan Modification”). Wells Fargo
recorded the 2008 Loan Modification in April 2008.
Debtor failed to make payments under the 2008 Loan Modification,
and NDSC recorded a third notice of default in October 2008. NDSC
rescinded the third notice of default, and in July 2015, it recorded a fourth
notice of default. After a failed attempt at mediation, Debtor filed suit in
Nevada state court.
After the defendants removed the case to the District Court, Debtor
filed his third amended complaint in March 2017. He asserted several
claims against Wells Fargo, BNC, LaSalle, U.S. Bank, and others based on
alleged errors in the assignments and notices of default. He admitted that
he signed the 2008 Loan Modification but alleged that Wells Fargo did not
have authority to modify the loan because the loan and deed of trust had
not yet been assigned to the Trust. Debtor asserted claims for fraud, breach
of contract, and to quiet title to the Property.
The District Court dismissed Debtor’s complaint, holding that Debtor
failed to state cognizable claims for relief. The District Court further held
that Debtor’s claims, which were “premised on Defendants’ improper
securitization and assignment of instruments, which culminated in an
allegedly unauthorized loan modification agreement between Plaintiff and
4
Wells Fargo,” were barred by Nevada’s statutes of limitations. Because
leave to amend would be futile, the District Court dismissed the complaint
with prejudice.
After two further notices of default and a second failed mediation,
NDSC recorded a notice of trustee’s sale set for July 1, 2019.
B. The bankruptcy and adversary complaint
In June 2019, Debtor filed his chapter 13 petition. He scheduled his
interest in the Property and listed US Bank as a secured creditor with a
claim of $808,041. Wells Fargo filed a proof of claim on behalf of US Bank,
evidencing a secured claim of $1,492,802.87.
In May 2021, Debtor filed an adversary complaint asserting that
Wells Fargo lacked standing to enforce the deed of trust, committed fraud
involving the 2008 Loan Modification, and lacked authority to modify the
loan. Debtor filed an amended complaint, adding a claim to extinguish the
lien under NRS 106.240 4 and including a preemptive argument against
application of claim preclusion. He alleged that the Second Notice of
Default accelerated the debt and NDSC never rescinded it. Thus, under the
4 NRS 106.240 provides:
The lien heretofore or hereafter created of any mortgage or deed of trust upon
any real property, appearing of record, and not otherwise satisfied and discharged of
record, shall at the expiration of 10 years after the debt secured by the mortgage or deed
of trust according to the terms thereof or any recorded written extension thereof become
wholly due, terminate, and it shall be conclusively presumed that the debt has been
regularly satisfied and the lien discharged.
5
ancient lien statute, the debt was “wholly due” for more than ten years and
the lien was extinguished.
Wells Fargo filed a motion to dismiss the amended complaint and
argued that Debtor’s claim for fraud and his claim that Wells Fargo lacked
authority to foreclose or to modify the loan were barred by claim
preclusion, issue preclusion, and the statutes of limitations. Wells Fargo
further argued that Debtor failed to state a claim for relief under NRS
106.240 because: (1) the ancient lien statute does not apply to accelerated
loans, only to loans that become “wholly due” under the terms of a deed of
trust; (2) the notice of default did not accelerate the loan; and (3) even if the
loan was accelerated, the 2008 Loan Modification effectively rescinded the
Second Notice of Default. Wells Fargo filed a request for judicial notice of
recorded documents and documents filed in the District Court case.
In opposition, Debtor argued that his claims were distinct from those
decided by the District Court because in the adversary complaint he was
asserting that Wells Fargo lacked standing to file a proof of claim under the
holding of Veal v. American Home Mortgage Servicing, Inc. (In re Veal), 450
B.R. 897 (9th Cir. BAP 2011). He maintained that he alleged a colorable
claim for relief under NRS 106.240 because the Second Notice of Default
included language which accelerated the debt and NDSC did not file a
recission of that notice.
After a hearing on the motion to dismiss, the court entered a
comprehensive written order dismissing Debtor’s amended complaint with
6
prejudice. The court held that Debtor’s claims that Wells Fargo was not the
real party in interest and lacked authority to modify the loan were barred
by issue preclusion because the District Court necessarily decided those
issues by dismissing Debtor’s claim to quiet title. The bankruptcy court
determined that Debtor’s fraud claim was barred by claim preclusion and
both claims were barred by the statutes of limitations.
The court held that Debtor failed to state a claim for relief under
NRS 106.240 because Wells Fargo recorded the 2008 Loan Modification and
the conduct of the parties, including the subsequent notices of default and
recissions, confirmed that the 2008 Loan Modification effectively rescinded
the Second Notice of Default. Thus, the debt was not “wholly due” for
more than ten years as required by the statute. Debtor timely appealed.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(B), (C), and (K). We have jurisdiction under 28 U.S.C. § 158.
ISSUES
Did the bankruptcy court err by granting Wells Fargo’s motion to
dismiss?
Did the bankruptcy court abuse its discretion by dismissing the
amended complaint with prejudice?
STANDARDS OF REVIEW
We review de novo the bankruptcy court’s order granting a motion
to dismiss under Civil Rule 12(b)(6). Movsesian v. Victoria Versicherung AG,
7
670 F.3d 1067, 1071 (9th Cir. 2012) (en banc). Under de novo review, we
look at the matter anew, giving no deference to the bankruptcy court’s
determinations. Francis v. Wallace (In re Francis), 505 B.R. 914, 917 (9th Cir.
BAP 2014).
We review the bankruptcy court’s decision to dismiss a complaint
with prejudice for abuse of discretion. Willard v. Lockhart-Johnson (In re
Lockhart-Johnson), 631 B.R. 38, 44 (9th Cir. BAP 2021). A bankruptcy court
abuses its discretion if it applies an incorrect legal standard or its factual
findings are illogical, implausible, or without support in the record.
TrafficSchool.com v. Edriver, Inc., 653 F.3d 820, 832 (9th Cir. 2011). We may
affirm on any basis supported by the record. Bill v. Brewer, 799 F.3d 1295,
1299 (9th Cir. 2015).
DISCUSSION
Debtor’s sole argument on appeal is that the bankruptcy court erred
by considering facts outside of the record to dismiss the complaint. He
contends that the court should have treated the motion as a motion for
summary judgment and given Debtor an opportunity to submit facts and
affidavits which he claims prove Wells Fargo’s lack of authority and fraud.
A. Legal standards governing motions to dismiss
Civil Rule 12(b)(6) provides for dismissal if the plaintiff fails “to state
a claim upon which relief can be granted[.]” Fed. R. Civ. P. 12(b)(6).
Motions to dismiss under Civil Rule 12(b)(6) can challenge the legal
sufficiency of a complaint by testing whether it contains cognizable legal
8
theories or whether it includes sufficient factual allegations to support
those theories. Johnson v. Riverside Healthcare Sys., 534 F.3d 1116, 1121 (9th
Cir. 2008). 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).
In reviewing a motion to dismiss, the court generally may not
consider any materials beyond the pleadings. Lee v. City of Los Angeles, 250
F.3d 668, 688 (9th Cir. 2001), overruled on other grounds by Galbraith v. Cnty.
of Santa Clara, 307 F.3d 1119 (9th Cir. 2002); see also Fed. R. Civ. P. 12(d) (“If,
on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are
presented to and not excluded by the court, the motion must be treated as
one for summary judgment under Rule 56.”). But the court may consider
documents attached to and referenced in the complaint. Lee, 250 F.3d at
688. And the court may consider documents which are properly subject to
judicial notice. United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).
When allegations in the complaint contradict matters that are properly
subject to judicial notice, the court need not accept those allegations as true
when considering a motion to dismiss. Lazy Y Ranch Ltd. v. Behrens, 546
F.3d 580, 588 (9th Cir. 2008).
Here, the bankruptcy court properly considered the documents
attached to the amended complaint and those included in Wells Fargo’s
request for judicial notice; it was not required to treat the motion to dismiss
9
as a motion for summary judgment. Debtor offers no other argument why
the bankruptcy court erred in dismissing his complaint and we find no
error in the bankruptcy court’s decision.
B. The bankruptcy court did not err by granting the motion to
dismiss.
The bankruptcy court properly dismissed Debtor’s claims that Wells
Fargo was not a real party in interest, lacked authority to modify or enforce
the loan, and committed fraud, under claim preclusion, issue preclusion,
and the statutes of limitations.
Claim preclusion prohibits relitigation of “any claims that were
raised or could have been raised” in a prior action between the same
parties or their privies. Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708,
713 (9th Cir. 2001) (citation omitted). The preclusive effect of the District
Court’s decision is governed by federal law, Taylor v. Sturgell, 553 U.S. 880,
891 (2008), which requires: “(1) an identity of claims; (2) a final judgment
on the merits; and (3) the same parties or privity between parties,” Owens,
244 F.3d at 713. To determine whether claims are identical, we consider
four criteria:
(1) whether rights or interests established in the prior judgment
would be destroyed or impaired by prosecution of the second
action; (2) whether substantially the same evidence is presented
in the two actions; (3) whether the two suits involve
infringement of the same right; and (4) whether the two suits
arise out of the same transactional nucleus of facts.
10
Harris v. Cnty. of Orange, 682 F.3d 1126, 1132 (9th Cir. 2012). Whether
the suits arise out of the same transactional nucleus of facts is the
most important criterion. Id.Here, all of Debtor’s claims—except for his claim under
NRS 106.240—arise from the same transactional nucleus of facts at issue in
the District Court action: the allegedly improper or untimely assignments
which deprived Wells Fargo of authority to enforce the deed of trust or
modify the loan, and Wells Fargo’s alleged fraud in executing the 2008
Loan Modification. The District Court’s dismissal with prejudice is a final
judgment on the merits, Leon v. IDX Systems Corp., 464 F.3d 951, 962 (9th
Cir. 2006), and Debtor and Wells Fargo were both parties in that litigation.
Thus, all of Debtor’s claims other than his lien extinguishment claim are
barred by claim preclusion. 5
Additionally, Debtor offers no argument, nor do we perceive any,
why his claims involving Wells Fargo’s authority to enforce the note and
5
Though we affirm the bankruptcy court’s dismissal of Debtor’s claims against
Wells Fargo under claim preclusion, we find no error in the court’s application of issue
preclusion to dismiss some of those claims. Issue preclusion under federal law requires:
(1) there was a full and fair opportunity to litigate the issue in the prior action; (2) the
issue was actually litigated; (3) the issue was lost as a result of a final judgment in the
prior action; and (4) the party against whom issue preclusion is asserted was a party or
in privity with a party in the prior action. I.R.S. v. Palmer (In re Palmer), 207 F.3d 566, 568
(9th Cir. 2000). The validity of the assignments and Wells Fargo’s authority to enforce
the note and deed of trust were actually litigated in the District Court action as part of
Debtor’s claim to quiet title. Debtor was the plaintiff in that action, had a full and fair
opportunity to litigate the issues, and lost those issues by virtue of the District Court’s
dismissal with prejudice.
11
deed of trust, or his claim of fraud, are not barred by Nevada’s statutes of
limitations.6 The District Court alternatively relied on the statutes of
limitations to dismiss Debtor’s prior action. The claims were time-barred
when Debtor filed the District Court action in 2015, and they remained
time-barred when he filed his adversary complaint in 2021.
Finally, the bankruptcy court properly dismissed Debtor’s remaining
claim—to extinguish the lien under NRS 106.240—because Debtor did not
state a cognizable claim for relief. Debtor alleged only that the Second
Notice of Default accelerated the loan and NDSC never rescinded the
default notice. His allegations are insufficient to state a claim under the
statute because they are belied by the documents attached to his complaint
and judicially noticed by the bankruptcy court.
The Nevada Supreme Court has not definitively held that a loan
acceleration is sufficient to trigger NRS 106.240, but we need not resolve
the question because the 2008 Loan Modification unequivocally decelerated
any acceleration under the Second Notice of Default.
The 2008 Loan Modification restated the unpaid principal balance as
$796,930.46, fixed the interest rate, and provided for payment of the
6
NRS 11.190(1)(b) provides that: “An action upon a contract, obligation or
liability founded upon an instrument in writing . . .” must be commenced within six
years. NRS 106.330 defines “instrument” as “a mortgage, deed of trust or other
instrument encumbering real party as security for the repayment of a debt.” As noted
by the bankruptcy court, the 2008 Loan Modification meets this definition. NRS
11.190(3)(d) provides that fraud actions must be filed within three years of discovery.
12
balance through monthly payments of principal and interest beginning in
March 2008. It further provided that, if Debtor still owed amounts under
the note and deed of trust as amended, those amounts would be due on
October 1, 2034. Thus, even though Debtor disputes the validity of the 2008
Loan Modification, it is clear evidence that Wells Fargo no longer held the
amounts under the loan and deed of trust as “wholly due.” The subsequent
default notices and recissions further evidence that the Second Notice of
Default was rescinded by the 2008 Loan Modification.
The bankruptcy court properly considered the recorded and
judicially noticed documents in determining that Debtor failed to state a
cognizable claim for relief under NRS 106.240, and we discern no error.
C. Dismissal of the amended complaint with prejudice was
warranted.
Pursuant to Civil Rule 15, made applicable by Rule 7015, leave to
amend a complaint should be freely given when justice so requires. The
Ninth Circuit has repeatedly held that a 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.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (citations
omitted).
Because the bankruptcy court correctly determined that Debtor’s
claims were barred by claim preclusion, issue preclusion, and the statutes
of limitations—and his claim under NRS 106.240 fails as a matter of law
13
based on the judicially noticed documents—amendment would be futile.
See, e.g., Censo, LLC v. NewRez, LLC (In re Censo, LLC), 638 B.R. 416, 426 (9th
Cir. BAP 2022) (affirming dismissal with prejudice where relief was barred
by claim preclusion). Accordingly, the court properly dismissed the
amended complaint with prejudice.
CONCLUSION
Based on the foregoing, we AFFIRM the bankruptcy court’s order
dismissing Debtor’s amended complaint with prejudice.
14