In re: Benjamin Menjivar ( 2014 )


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  •                                                           FILED
    1/28/2014
    1                                                     SUSAN M. SPRAUL, CLERK
    U.S. BKCY. APP. PANEL
    OF THE NINTH CIRCUIT
    2
    3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
    4                            OF THE NINTH CIRCUIT
    5   In re:                        )      BAP No.      CC-12-1608-KuBaPa
    )
    6   BENJAMIN MENJIVAR,            )      Bk. No.      LA 11-61208-NB
    )
    7                  Debtor.        )      Adv. No.     LA 12-01125-NB
    ______________________________)
    8                                 )
    BENJAMIN MENJIVAR; SARA       )
    9   MENJIVAR,                     )
    )
    10                  Appellants,    )
    )
    11   v.                            )      MEMORANDUM*
    )
    12   WELLS FARGO BANK, N.A.,       )
    )
    13                  Appellee.      )
    ______________________________)
    14
    Argued on November 21, 2013
    15                          at Pasadena, California
    16                       Submitted on January 28, 2014
    17                          Filed – January 28, 2014
    18               Appeal from the United States Bankruptcy Court
    for the Central District of California
    19
    Honorable Neil W. Bason, Bankruptcy Judge, Presiding
    20
    21   Appearances:     Philip Eberhard Koebel, Esq. argued for appellants
    Benjamin and Sara Menjivar; Robert Collings
    22                    Little, Esq. of Anglin, Flewelling, Rasmussen,
    Campbell & Tryttenn LLP argued for appellee Wells
    23                    Fargo Bank, N.A.
    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   Before: KURTZ, BALLINGER** and PAPPAS, Bankruptcy Judges.
    2                               INTRODUCTION1
    3        Debtors Benjamin and Sarah Menjivar commenced an adversary
    4   proceeding against Wells Fargo Bank (“WFB”) seeking damages and
    5   seeking to invalidate WFB’s trust deed against their residence.
    6   The bankruptcy court dismissed all of the Menjivars’ claims for
    7   relief without leave to amend, and the Menjivars appealed.
    8        None of the Menjivars’ allegations stated a claim for relief
    9   plausible on its face.    Nor were there any amendments consistent
    10   with the Menjivars’ existing allegations that would have cured
    11   the fatal deficiencies in their first amended complaint (“FAC”).
    12   The bankruptcy court properly dismissed their FAC without leave
    13   to amend, so we AFFIRM.
    14                                  FACTS2
    15        In October 2005, the Menjivars obtained a loan from WFB’s
    16   predecessor World Savings Bank in order to refinance the first
    17
    18        **
    Hon. Eddward P. Ballinger, Jr., United States Bankruptcy
    19   Judge for the District of Arizona, sitting by designation.
    20        1
    Unless specified otherwise, all chapter and section
    references are to the Bankruptcy Code, 
    11 U.S.C. §§ 101-1532
    , and
    21   all "Rule" references are to the Federal Rules of Bankruptcy
    22   Procedure, Rules 1001-9037. All "Civil Rule" references are to
    the Federal Rules of Civil Procedure.
    23
    2
    Most of the facts stated herein are drawn from the
    24   Menjivars’ FAC. To the extent the Menjivars’ factual allegations
    are well pleaded, we accept them as true. We also draw some of
    25   the facts from documents referenced in the FAC or which were
    26   submitted by WFB in support of its motion to dismiss and which
    are properly subject to judicial notice. See United States v.
    27   Ritchie, 
    342 F.3d 903
    , 907–08 (9th Cir. 2003) (discussing
    circumstances under which facts are deemed true for purposes of
    28   considering a Civil Rule 12(b)(6) dismissal motion).
    2
    1   and second trust deeds on their residence.      In January 2007,
    2   World Savings Bank persuaded the Menjivars to once again
    3   refinance their residence.    The Menjivars admit that $516,147.97
    4   of the loan proceeds from their January 2007 refinancing were
    5   used to pay off their 2005 home loan, that they also received
    6   $13,462.50 in cash from the January 2007 refinancing, that they
    7   signed a promissory note agreeing to repay $538,750.00, and that
    8   the January 2007 note was secured by a deed of trust on their
    9   residence.
    10           In July 2007, World Savings Bank persuaded the Menjivars to
    11   refinance their residence a third time.      According to the
    12   Menjivars, World Savings Bank persuaded the couple to refinance
    13   by representing that the Menjivars would receive a home loan with
    14   a fixed interest rate.    But the loan documents the Menjivars
    15   signed plainly stated otherwise.       The loan documentation also
    16   stated that the Menjivars’ combined monthly income was $10,600,
    17   which the Menjivars now admit was inaccurately high.      They only
    18   noticed this inaccuracy when they reviewed the loan documentation
    19   later on, presumably after their dispute with WFB arose.
    20           The Menjivars claim that, at closing, they were surprised by
    21   the total amount of settlement charges and fees they had to pay,
    22   particularly the roughly $4,000 they had to pay in cash in order
    23   for the July 2007 refinancing to close.      They further claim that
    24   World Savings Bank pressured them to close quickly.
    25           According to the FAC, the Menjivars blame the stress of the
    26   July 2007 refinancing for a severe stroke Ms. Menjivar suffered
    27   in August 2007 and for the death of their mentally-ill son in
    28   2008.    But the Menjivars have not alleged any legally-cognizable
    3
    1   connection between the July 2007 refinancing and these tragedies.
    2        At some point, WFB became the successor by merger to World
    3   Savings Bank’s rights under the July 2007 note and deed of
    4   trust.3   The Menjivars requested that WFB refinance them into a
    5   fixed rate loan.   But by this time, the national mortgage crisis
    6   already was underway, and WFB told the Menjivars that WFB would
    7   only consider refinancing them if they were in default on the
    8   July 2007 note.    Based on the information from WFB, the Menjivars
    9   defaulted on the 2007 note by not making their mortgage payments.
    10   WFB recorded a notice of default in August 2010 and a notice of
    11   trustee’s sale in November 2010.
    12        In November 2010, with the trustee’s sale looming, the
    13   Menjivars sued WFB in the Los Angeles County Superior Court (LASC
    14   Case No. GC046375) (“First State Court Lawsuit”) and obtained a
    15   temporary restraining order temporarily enjoining the sale
    16   pending further proceedings.   But WFB countered by removing the
    17   First State Court Lawsuit to the United States District Court for
    18   the Central District of California. (USDC Case No. 10-CV-09628).
    19   Ultimately, the temporary injunction terminated, and the
    20   Menjivars voluntarily dismissed the First State Court Lawsuit.4
    21
    3
    22         According to the documents attached to WFB’s request for
    judicial notice filed in support of its dismissal motion, World
    23   Savings Bank changed its name in 2008 to Wachovia Mortgage, FSB,
    and in 2009 changed it name again to Wells Fargo Bank Southwest,
    24   N.A., and merged into WFB. The Menjivars never objected to WFB’s
    judicial notice request and have never disputed WFB’s explanation
    25   of how it became the creditor holding the July 2007 note and
    26   trust deed. The explanation also is generally consistent with
    the FAC’s allegations regarding World Savings Bank and WFB.
    27
    4
    We have reviewed the district court’s case docket, and we
    28                                                      (continued...)
    4
    1        In January 2011, the Menjivars filed a new state court
    2   lawsuit (LASC Case No. GC046687) (“Second State Court Lawsuit”),
    3   and immediately sought a new temporary restraining order to
    4   prevent WFB’s imminent trustee’s sale.5      When it became apparent
    5   that the Menjivars would not be able to obtain a temporary
    6   restraining order before the date of the trustee’s sale,
    7   Ms. Menjivar filed a chapter 13 bankruptcy case (USBC Case No.
    
    8 LA 11
    -012361-EC).    That case was dismissed in March 2011 because
    9   the debtor did not file one of the papers required to support her
    10   bankruptcy filing.
    11        In February 2011, shortly before WFB’s rescheduled
    12   foreclosure sale, Mr. Menjivar filed a chapter 13 bankruptcy case
    13   (USBC Case No. LA 11-017774-WB).       In December 2011, at the
    14   confirmation hearing held in Mr. Menjivar’s bankruptcy case, the
    15   bankruptcy court dismissed the bankruptcy case.      According to the
    16   Menjivars, they did not oppose the case dismissal because they
    17
    4
    (...continued)
    18
    can take judicial notice of that docket and the imaged documents
    19   attached thereto. See Estate of Blue v. County of Los Angeles,
    
    120 F.3d 982
    , 984 (9th Cir. 1997); Mullis v. Bankr. Ct., 
    828 F.2d 20
       1385, 1388 & n.9 (9th Cir. 1987). Their original state court
    complaint on file therein reflects that the First State Court
    21   Lawsuit arose from the same refinancing transactions and loan
    22   modification attempts referenced in their subsequent state court
    lawsuit and in the FAC. That original complaint stated seventeen
    23   causes of action, including but not limited to violation of the
    Truth In Lending Act, violation of the Real Estate Settlement
    24   Procedures Act, fraud, predatory lending and unlawful
    foreclosure.
    25
    5
    26         The complaint in the Second State Court Lawsuit was
    similar but not identical to the Menjivars’ complaint in the
    27   First State Court Lawsuit. It was based on essentially the same
    predicate facts, but the stated causes of action were slightly
    28   different.
    5
    1   believed that WFB would not offer them a loan modification unless
    2   the bankruptcy case was dismissed.
    3        Also in December 2011, WFB offered to refinance the
    4   Menjivars.   This refinance offer consisted of a three-month trial
    5   loan modification program, which provided in relevant part for
    6   three months of mortgage payments at roughly $2,000 per month,
    7   with a modified interest rate of 2%.
    8        In May 2012, WFB sent the Menjivars documentation for a
    9   permanent loan modification.   The Menjivars wanted to accept the
    10   permanent loan modification offer, but they also wanted to
    11   continue to litigate over the validity of the July 2007 note and
    12   trust deed, so they attempted to amend the permanent loan
    13   modification documents by striking out the paragraph reaffirming
    14   the July 2007 note and trust deed but otherwise accepting the
    15   permanent loan modification documents as drafted.   WFB rejected
    16   the permanent loan modification documents as amended by the
    17   Menjivars.
    18        Mr. Menjivar filed in December 2011 a new chapter 13
    19   bankruptcy case, the case in which the underlying adversary
    20   proceeding was commenced.   According to the Menjivars, this
    21   latest case was necessitated by the wrongful repossession of
    22   their automobile by a creditor not associated with the underlying
    23   adversary proceeding.   Up until January 2012, their Second State
    24   Court Lawsuit remained dormant while the Menjivars’ serial
    25   bankruptcy cases proceeded.    But the Menjivars then removed the
    26   Second State Court Lawsuit to the bankruptcy court, on
    27   January 30, 2012, thereby commencing the adversary proceeding.
    28        On July 31, 2012, the Menjivars filed the FAC.    The FAC
    6
    1   relied on essentially the same facts as their two state court
    2   complaints, but many of the claims for relief set forth in the
    3   FAC were new.   The FAC claims for relief generally fall into one
    4   of several categories: (1) they allege that the 2007 notes and
    5   trust deeds were constructive fraudulent transfers under
    6   California law; (2) they allege that the 2007 notes and trust
    7   deeds were actual fraudulent transfers under California law;
    8   (3) they allege that World Savings Bank fraudulently induced them
    9   to enter into the July 2007 refinancing by misrepresenting that
    10   the refinancing would be for a fixed rate loan when in reality it
    11   was for an adjustable rate loan; (4) they allege that World
    12   Savings Bank did not give them any consideration whatsoever in
    13   exchange for the 2007 notes and trust deeds; (5) they allege that
    14   World Savings Bank violated the Truth in Lending Act (“TILA”);
    15   and (6) they allege that World Savings Bank violated the Fair
    16   Housing Act (“FHA”) and the Equal Credit Opportunity Act
    17   (“ECOA”).   Based on all of these claims, the Menjivars sought to
    18   invalidate the 2007 notes and trust deeds, and sought actual
    19   damages, statutory damages, punitive damages, injunctive relief,
    20   to quiet title, and costs and attorney’s fees.
    21        WFB filed a Civil Rule 12(b)(6) motion to dismiss, and the
    22   Menjivars opposed the motion.   The bankruptcy court heard the
    23   dismissal motion on October 25, 2012, and entered an order
    24   granting the motion with prejudice on November 7, 2012.6   The
    25
    6
    26         The bankruptcy court’s initial dismissal order stated that
    the dismissal was without prejudice but, upon limited remand from
    27   this Panel, the bankruptcy court corrected the dismissal order to
    clarify that the dismissal was with prejudice and without leave
    28                                                      (continued...)
    7
    1   hearing transcript and the tentative ruling incorporated into the
    2   court’s dismissal order reflect that the court essentially
    3   adopted the grounds for dismissal presented by WFB.   In
    4   particular, the bankruptcy court held that some of the claims for
    5   relief were barred by the applicable statutes of limitation and
    6   others could not be reconciled with the contents of the loan
    7   documentation underlying the claims.   The bankruptcy court
    8   further opined that the Menjivar’s claims based on state law
    9   appeared to be preempted by the Home Owners' Loan Act of 1933
    10   (“HOLA”).   The Menjivars timely filed their notice of appeal on
    11   November 21, 2012.7
    12                              JURISDICTION
    13        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
    14
    15
    16
    17        6
    (...continued)
    to amend.
    18
    7
    19         Shortly before oral argument in this appeal, Mr. Menjivar’s
    current bankruptcy case was converted from chapter 13 to
    20   chapter 7. The Menjivars’ claims for relief at least in part
    were property of Mr. Menjivar’s bankruptcy estate and, hence, the
    21   chapter 7 trustee had a direct interest in the outcome of this
    appeal. See McGuire v. United States, 
    550 F.3d 903
    , 914 (9th
    22
    Cir. 2008); Estate of Spirtos v. One San Bernardino County
    23   Superior Court Case, 
    443 F.3d 1172
    , 1175-76 (9th Cir. 2006).
    Accordingly, we issued an order deferring submission of this
    24   appeal and directing the chapter 7 trustee to advise us whether
    he desired to appear in this appeal. The trustee then filed a
    25   response indicating that he had no intention of participating in
    26   this appeal. He subsequently filed a supplemental response
    indicating that he has abandoned the estate’s interest in the
    27   Menjivars’ real property and in the associated claims for relief.
    As a result, this appeal has been taken under submission and is
    28   now ready for decision.
    8
    1   §§ 1334 and 157(b)(2)(K).8   We have jurisdiction under 28 U.S.C.
    2   § 158.
    3                                  ISSUE
    4        Did the bankruptcy court commit reversible error when it
    5   dismissed the Menjivars’ FAC with prejudice and without leave to
    6   amend?
    7                           STANDARDS OF REVIEW
    8        We review de novo a dismissal under Civil Rule 12(b)(6).
    9   See Movsesian v. Victoria Versicherung AG, 
    670 F.3d 1067
    , 1071
    10   (9th Cir. 2012) (en banc).   When we review a matter de novo, we
    11   consider it anew, “as if no decision previously had been
    12   rendered, giving no deference to the bankruptcy court's prior
    13   determinations.”   Nordeen v. Bank of America, N.A.
    14   (In re Nordeen), 
    495 B.R. 468
    , 475 (9th Cir. BAP 2013).
    15        Generally speaking, we review the bankruptcy court’s
    16   decision to dismiss without leave to amend for an abuse of
    17   discretion.   See, e.g., Zadrozny v. Bank of N.Y. Mellon,
    18   
    720 F.3d 1163
    , 1167 (9th Cir. 2013); Reddy v. Litton Indus.,
    19   Inc., 
    912 F.2d 291
    , 296 (9th Cir. 1990).   It also has been said
    20   that appellate courts should “review strictly a . . . court's
    21
    8
    The Menjivars effectively consented to the bankruptcy court
    22
    entering a final disposition by pursuing their litigation against
    23   WFB in the bankruptcy court, with full knowledge of the decision
    in Stern v. Marshall, 
    131 S.Ct. 2594
     (2011), as that decision is
    24   cited in the second paragraph of the Menjivars’ FAC. WFB
    similarly consented to the bankruptcy court entering a final
    25   disposition. See Res. Funding, Inc. v. Pac. Cont’l Bank
    26   (In re Wash. Coast I, L.L.C.), 
    485 B.R. 393
    , 407-11, (9th Cir.
    BAP 2012). Alternately, the parties have forfeited any argument
    27   challenging the bankruptcy court’s entry of a final disposition
    by not raising the issue either in the bankruptcy court or on
    28   appeal. See 
    id.
    9
    1   exercise of discretion denying leave to amend.”     Albrecht v.
    2   Lund, 
    845 F.2d 193
    , 195 (9th Cir. 1988).
    3         On the other hand, the strictness of this review apparently
    4   diminishes when the plaintiff has amended its complaint, as the
    5   Ninth Circuit has held a number of times that “‘[t]he district
    6   court's discretion to deny leave to amend is particularly broad
    7   where plaintiff has previously amended the complaint.’”     See
    8   Zadrozny, 720 F.3d at 1173 (quoting United States ex rel. Cafasso
    9   v. Gen. Dynamics C4 Sys., Inc., 
    637 F.3d 1047
    , 1058 (9th Cir.
    10   2011)) (emphasis added).   Accord, Mir v. Fosburg, 
    646 F.2d 342
    ,
    11   347 (9th Cir. 1980).
    12         In any event, the Ninth Circuit also has held that
    13   “‘[d]ismissal without leave to amend is improper, unless it is
    14   clear, upon de novo review, that the complaint could not be saved
    15   by any amendment.’”    Intri–Plex Techs., Inc. v. Crest Group,
    16   Inc., 
    499 F.3d 1048
    , 1056 (9th Cir. 2007).     This is the key
    17   standard of review for purposes of our analysis and disposition
    18   of the instant appeal.
    19         We may affirm on any ground supported by the record.       Diener
    20   v. McBeth (In re Diener), 
    483 B.R. 196
    , 202 (9th Cir. BAP 2012).
    21                                DISCUSSION
    22   A.   Overview of Applicable Legal Standards
    23         A defendant may obtain dismissal of a complaint under Civil
    24   Rule 12(b)(6) if the complaint lacks a cognizable legal theory or
    25   lacks sufficient facts to support a cognizable legal theory.       See
    26   Balistreri v. Pacifica Police Dep't, 
    901 F.2d 696
    , 699 (9th Cir.
    27   1988), partially abrogated on other grounds by, Bell Atl. Corp.
    28   v. Twombly, 
    550 U.S. 544
    , 562-63 (2007).      The complaint can
    10
    1   survive the dismissal motion “only if, taking all well-pleaded
    2   factual allegations as true, it contains enough facts to ‘state a
    3   claim to relief that is plausible on its face.’”    Hebbe v.
    4   Pliler, 
    627 F.3d 338
    , 341–42 (9th Cir. 2010) (quoting Ashcroft v.
    5   Iqbal, 
    556 U.S. 662
    , 678 (2009), and Twombly, 
    550 U.S. at 570
    ).
    6        This plausibility standard requires more than the mere
    7   possibility that the defendant is liable to the plaintiff.
    8   Iqbal, 
    556 U.S. at 678
    .     “Where a complaint pleads facts that are
    9   merely consistent with a defendant's liability, it stops short of
    10   the line between possibility and plausibility of entitlement to
    11   relief.”    
    Id.
     (quoting Twombly, 
    550 U.S. at 557
    ) (internal
    12   quotation marks omitted).    Formulaic recitations of the elements
    13   of a claim for relief are insufficient by themselves to meet the
    14   plausibility standard.    Iqbal, 
    556 U.S. at 678
    .
    15        In reviewing the dismissal, while we must accept as true all
    16   well-pleaded facts, we do not need to accept as true conclusory
    17   statements, statements of law, and unwarranted inferences cast as
    18   factual allegations.   Twombly, 
    550 U.S. at
    555–57; Clegg v. Cult
    19   Awareness Network, 
    18 F.3d 752
    , 754–55 (9th Cir. 1994).     We also
    20   may reject factual allegations contradicted by judicially noticed
    21   material.   See Shwarz v. United States, 
    234 F.3d 428
    , 435 (9th
    22   Cir. 2000).   Indeed, we can use judicially noticed facts and
    23   documents to establish that the complaint fails to state a viable
    24   claim for relief.   Often, we similarly can use documents attached
    25   to or referenced in the complaint.     See Ritchie, 
    342 F.3d at
    26   907–08; Sprewell v. Golden State Warriors, 
    266 F.3d 979
    , 988 (9th
    27   Cir. 2001); Durning v. First Boston Corp., 
    815 F.2d 1265
    , 1267
    28   (9th Cir. 1987).
    11
    1        In short, the allegations of the complaint, along with other
    2   materials properly before the court, may demonstrate that the
    3   plaintiff is not entitled to relief as a matter of law.     See
    4   Weisbuch v. County of L.A., 
    119 F.3d 778
    , 783 n.1 (9th Cir. 1997)
    5   (“If the pleadings establish facts compelling a decision one way,
    6   that is as good as if depositions and other expensively obtained
    7   evidence on summary judgment establishes the identical facts.”).
    8        The Menjivars dispute whether the bankruptcy court properly
    9   dismissed their FAC with prejudice and without leave to amend.
    10   They assert that the bankruptcy court should have explicitly set
    11   forth its reasoning explaining why it was not granting leave to
    12   amend and that the absence of such explicit reasoning mandates
    13   reversal.   We disagree.   The Ninth Circuit expressly rejected
    14   this argument in Ascon Props., Inc. v. Mobil Oil Co., 
    866 F.2d 15
       1149, 1160 (9th Cir. 1989), partially abrogated on other grounds
    16   by, Leatherman v. Tarrant County Narcotics Intelligence and
    17   Coordination Unit, 
    507 U.S. 163
     (1993).      In Ascon Props., even
    18   though the trial court there did not state any explicit reasoning
    19   in support of its decision to dismiss without leave to amend, the
    20   Ninth Circuit held that it still could affirm because adequate
    21   and proper grounds for the trial court’s decision were apparent
    22   from the entire record.    Id. at 1160-61.
    23        When it is apparent from our de novo review that amendment
    24   would have been futile, we may affirm the bankruptcy court’s
    25   dismissal without leave to amend.      See Intri–Plex Techs., Inc.,
    26   
    499 F.3d at 1056
    .     Amendment is futile when it is clear that
    27   amendment would not have remedied the complaint’s fatal
    28   deficiencies.   
    Id.
    12
    1        While the Menjivars stated in their opposition to the
    2   dismissal motion that they desired to amend their FAC in the
    3   event the bankruptcy court determined that their FAC was
    4   deficient, the Menjivars never filed a formal motion to amend
    5   their FAC, never submitted to the court a proposed second amended
    6   complaint,9 and never even indicated in any of their papers how
    7   they would amend the FAC to overcome any deficiencies.     The
    8   Menjivars assert on appeal that there is no rule requiring them
    9   to offer a proposed amended complaint in advance of dismissal and
    10   that their failure to indicate how they would amend the complaint
    11   is not grounds, by itself, for dismissal without leave to amend.
    12   This much is true.   But the Menjivars overlook the real
    13   significance of the absence of proposed amendments.   Whereas the
    14   Menjivars were entitled to propose amendments inconsistent with
    15   their existing allegations, see PAE Gov’t Servs., Inc. v. MPRI,
    16   Inc., 
    514 F.3d 856
    , 859-60 (9th Cir. 2007), in deciding whether
    17   amendment was futile, the bankruptcy court and this Panel only
    18   are required to take into account hypothetical amended pleadings
    19   containing facts consistent with those already alleged.    See
    20   Swartz v. KPMG LLP, 
    476 F.3d 756
    , 761 (9th Cir. 2007) (citing
    21   Albrecht, 845 F .2d at 195, and holding that dismissal without
    22   leave to amend is proper when “allegation of other facts
    23   consistent with the challenged pleading could not possibly cure
    24   the deficiency”) (emphasis added); Schreiber Distrib. Co. v.
    25
    26        9
    If the Menjivars had filed a motion to amend, the
    27   bankruptcy court’s local rules would have required the Menjivars
    to submit the proposed amended pleading in conjunction with that
    28   motion. See Bankr. C.D. Cal. R. 7016-1(a)(1).
    13
    1   Serv–Well Furniture Co., Inc., 
    806 F.2d 1393
    , 1401 (9th Cir.
    2   1986) (same); see also Knox v. Davis, 
    260 F.3d 1009
    , 1013 (9th
    3   Cir. 2001) (in ruling on Civil Rule 12(b)(6) motion, court may
    4   rely on concessions made by plaintiff); Weisbuch, 
    119 F.3d at
    781
    5   (same).
    6   B.   California Fraudulent Transfer Claims
    7         With this legal framework in mind, we turn our attention to
    8   the Menjivars’ claims for relief.      Most of the Menjivars’ claims
    9   explicitly rely on California’s version of the Uniform
    10   Fraudulent Transfer Act (“UFTA”), Cal. Civ. Code. §§ 3439, et
    11   seq., or implicitly rely on the UFTA by referencing the
    12   Menjivars’ fraudulent transfer allegations.
    13         The principal ground for dismissal of the Menjivars’ UFTA
    14   claims was HOLA preemption.   See Silvas v. E*Trade Mortg. Corp.,
    15   
    514 F.3d 1001
    , (9th Cir. 2008).    Silvas held that, pursuant to
    16   
    12 C.F.R. § 560.2
    , claims for relief based on Cal. Bus. and Prof.
    17   Code §§ 17200 and 17500 were preempted as applied by the
    18   plaintiffs therein “because [their] state law claims provide
    19   state remedies for violations of federal law in a field preempted
    20   entirely by federal law.”   In conducting its HOLA preemption
    21   analysis, Silvas focused on the specific factual allegations
    22   contained in the complaint and whether these allegations
    23   referenced activities and conduct subject to the exclusive
    24   regulation of the Office of Thrift Supervision (“OTS”), as
    25   specified in 
    12 C.F.R. § 560.2
    (b).     Because all of the specific
    26   misconduct alleged fell within the ambit of 
    12 C.F.R. § 560.2
    (b),
    27   Silvas concluded that the California statutes at issue were
    28   preempted as applied there by the plaintiffs.
    14
    1        Here, the specific factual allegations underlying the
    2   Menjivars’ UFTA claims are that World Savings Bank10
    3   misrepresented the terms of the 2007 loans, overcharged for
    4   settlement fees, and ultimately extended credit to the Menjivars
    5   under terms that the Menjivars considered unfavorable and
    6   incapable of helping them meet their personal financial goals.
    7   These allegations deal with conduct and activities exclusively
    8   regulated by the OTS.   See 
    12 CFR § 560.2
    (b)(4), (5) and (9).11
    9
    10        10
    WFB’s judicial notice request contains documents
    11   identifying World Savings Bank as a federal savings bank that was
    subject to OTS oversight at the time of the 2007 refinancing
    12   transactions.
    11
    13         The above-referenced subparagraphs of 
    12 CFR § 560.2
    (b)
    provide for field preemption of:
    14
    15        (b) . . . state laws purporting to impose requirements
    regarding:
    16
    *    *   *
    17
    (4) The terms of credit, including amortization of
    18        loans and the deferral and capitalization of interest
    19        and adjustments to the interest rate, balance, payments
    due, or term to maturity of the loan, including the
    20        circumstances under which a loan may be called due and
    payable upon the passage of time or a specified event
    21        external to the loan;
    22
    (5) Loan-related fees, including without limitation,
    23        initial charges, late charges, prepayment penalties,
    servicing fees, and overlimit fees;
    24
    *    *   *
    25
    26        (9) Disclosure and advertising, including laws
    requiring specific statements, information, or other
    27        content to be included in credit application forms,
    credit solicitations, billing statements, credit
    28                                                       (continued...)
    15
    1   Accordingly, based on Silvas and 
    12 CFR § 560.2
    (b), the
    2   bankruptcy court here correctly concluded that the Menjivars’
    3   UFTA claims should be dismissed based on HOLA preemption.      Nor
    4   were there any amendments consistent with the Menjivars’ existing
    5   allegations that would have saved their UFTA claims from
    6   preemption.    Thus, dismissal without leave to amend was
    7   appropriate.
    8        As a separate and independent ground for affirmance, we note
    9   that the Menjivars’ actual fraudulent transfer allegations are
    10   fatally inconsistent with the UFTA, which requires the plaintiff
    11   to plead and prove that the transferor actually intended to
    12   hinder, delay or defraud his creditors.   That the focus is on the
    13   transferor’s intent is plain on the face of the statute.       See
    14   
    Cal. Civ. Code § 3934.04
    (a)(1).    This has been the rule in
    15   California for a long time, well before California enacted the
    16   UFTA:12   "It is well settled that it is the motive of the
    17   grantor, and not the knowledge of the grantee, that determines
    18   the validity of the transfer."    Bush & Mallett Co. v. Helbing,
    19   
    134 Cal. 676
    , 679 (1901).   Here, the Menjivars have not alleged
    20   that they as the transferors of the 2007 notes and trust deeds
    21   entered into the 2007 refinancing transactions with the intent to
    22   hinder, delay or defraud their creditors.    Instead, they in
    23   essence alleged that World Savings Bank duped them into entering
    24
    11
    (...continued)
    25        contracts, or other credit-related documents and laws
    26        requiring creditors to supply copies of credit reports
    to borrowers or applicants[.]
    27
    12
    California enacted the UFTA in 1986.    See Mejia v. Reed,
    28   
    31 Cal.4th 657
    , 664 (Cal. 2003).
    16
    1   into refinancing transactions that were not in their financial
    2   best interests.   No amendments consistent with these existing
    3   allegations were going to meet the requirement to allege
    4   intentional misconduct by the Menjivars, which would be necessary
    5   to state a viable claim to invalidate the 2007 notes and trust
    6   deeds as actual fraudulent transfers.
    7        Similarly, the Menjivars’ constructive fraudulent transfer
    8   allegations are fatally inconsistent with the UFTA, which
    9   requires an absence of reasonably equivalent value.     See Cal.
    10   Civ. Code §§ 3439.04(a)(1)(2), 3439.05.      Reasonably equivalent
    11   value under the UFTA is measured objectively, from the
    12   perspective of the transferor’s creditors.     See Decker v. Tramiel
    13   (In re JTS Corp.), 
    617 F.3d 1102
    , 1109 (9th Cir. 2010); Maddox v.
    14   Robertson (In re Prejean), 
    994 F.2d 706
    , 708 (9th Cir. 1993).
    15   This focus on the creditors’ perspective is consistent with the
    16   underlying purpose of the UFTA, which seeks to protect the
    17   creditors from “transfers that impede them in the collection of
    18   their claims.”    Mejia 
    31 Cal.4th at 664
    .    Here, the Menjivars’
    19   specific factual allegations admit that, in July 2007, the
    20   Menjivars executed a note for roughly $550,000 in order to payoff
    21   the $539,000 note they executed in January 2007.     In turn, the
    22   Menjivars executed the January 2007 note in exchange for $13,000
    23   in cash and the payoff of their October 2005 note in the amount
    24   of $516,000.   All three notes were secured by the Menjivars’
    25   residence.
    26        The FAC’s allegations make clear that, from the Menjivars’
    27   subjective viewpoint, the 2007 refinancing transactions did not
    28   meet their personal, subjective financial needs and goals.     But
    17
    1   for purposes of the UFTA, when we consider the transactions as we
    2   must from the creditors’ objective viewpoint, it simply is not
    3   plausible that the satisfaction of antecedent debt accomplished
    4   by the 2007 refinancing transactions did not constitute
    5   reasonably equivalent value.    As a matter of law, a note and
    6   trust deed given on account of antecedent debt does not qualify
    7   as a constructive fraudulent transfer.   See In re Prejean,
    8   
    994 F.2d at 709
    .   Nor would any amendment of the FAC consistent
    9   with its existing allegations cure this deficiency.
    10         In sum, the bankuptcy court did not err by dismissing the
    11   Menjivars’ UFTA claims without leave to amend.
    12   C.   Claims Based on Fraud and Lack of Consideration
    13         In a single claim for relief, the Menjivars state both fraud
    14   and lack of consideration as grounds to invalidate the 2007 notes
    15   and trust deeds.
    16         The Menjivars lack of consideration contention is based on a
    17   false premise: that the agreed-upon satisfaction of their
    18   antecedent debts was invalid or insufficient consideration to
    19   bind them to the terms of 2007 notes and trust deeds.   To the
    20   contrary, the satisfaction of their antecedent debt conferred a
    21   substantial and valid legal benefit on the Menjivars, a benefit
    22   that they were not otherwise entitled to but for the 2007
    23   refinancing transactions.   Thus, the 2007 notes and trust deeds
    24   were supported by sufficient and valid consideration.   See Cal.
    25   Civ. Code § 1605; Raedeke v. Gibraltar Sav. & Loan Assn.,
    26   
    10 Cal.3d 665
    , 673-74 (1974).
    27         As for their fraud contentions, they are barred by
    28   California’s three-year statute of limitations on fraud claims.
    18
    1   See 
    Cal. Civ. Proc. Code § 338
    (d).    The limitations period began
    2   to run when the Menjivars entered into the 2007 refinancing
    3   transactions, and they did not commence the current litigation
    4   until more than three years had elapsed thereafter.
    5        The Menjivars made only one argument in their opening appeal
    6   brief regarding the fraud statute of limitations.   They claim
    7   that their fraud contentions are governed by California’s
    8   four-year limitations period covering claims based on contract,
    9   see 
    Cal. Civ. Code § 337
    (1), and not based on California’s
    10   three-year limitations period covering claims based on fraud.
    11   See 
    Cal. Civ. Code § 338
    (d).    This claim is specious.   The
    12   Menjivars’ allegations that they were fraudulently induced to
    13   execute the 2007 notes and trust deeds sound in fraud and not in
    14   contract.   Under similar circumstances, the Ninth Circuit did not
    15   hesitate to apply a three-year limitations period applicable to
    16   fraud claims.    See Zadrozny, 720 F.3d at 1173; see also Rosenfeld
    17   v. JPMorgan Chase Bank, N.A., 
    732 F.Supp.2d 952
    , 971 (N.D. Cal.
    18   2010) (same).
    19        For the first time in their reply brief, the Menjivars argue
    20   that the fraud statute of limitations did not begin to run until
    21   they were presented with sufficient facts from which a reasonable
    22   person would have been suspicious that some sort of wrong had
    23   been committed.   See Norgart v. Upjohn Co., 
    21 Cal.4th 383
    ,
    24   397-98 (1999).    The Menjivars forfeited this argument by not
    25   raising it either in the bankruptcy court or in their opening
    26   appeal brief.    See Zadrozny, 720 F.3d at 1173.
    27        Even if we were to consider this argument, the July 2007
    28   loan terms the Menjivars now complain of are clear on the face of
    19
    1   the July 2007 loan documents the Menjivars signed.     Accordingly,
    2   California’s discovery rule would not have delayed the
    3   commencement of the limitations period, as the Menjivars had
    4   sufficient information from the outset regarding the true terms
    5   of the July 2007 refinancing transaction.     See id. (alleged
    6   problems with loan transaction evident on the face of loan
    7   documents, so fraud limitations period not tolled);     Rosenfeld,
    8   
    732 F.Supp.2d at 970-71
     (same).
    9         The defects associated with the Menjivars’ fraud and lack of
    10   consideration allegations are not the type the Menjivars could
    11   have cured with amendments consistent with their existing
    12   allegations.   Thus, the bankruptcy court properly dismissed these
    13   claims without leave to amend.
    14   D.   Claims Based on TILA, FHA and ECOA.
    15         The Menjivars had up to three years to demand rescission of
    16   the 2007 refinancing transactions based on alleged TILA
    17   violations.    
    15 U.S.C. § 1635
    (f).    Meanwhile, most TILA damages
    18   claims need to be filed within one year, but a handful of TILA
    19   violations will support a damages claim for up to three years.
    20   See 
    15 U.S.C. § 1640
    (e).    As for the alleged violations of the
    21   FHA and the ECOA, the Menjivars only had two years from the
    22   occurrence of the alleged violations to bring suit.     See
    23   
    42 U.S.C. § 3613
    (a)(1)(A); 15 U.S.C. § 1691e(f).13     Because the
    24
    25         13
    In 2010, Congress enlarged the ECOA limitations period
    26   from two years to five years. See Cottrell v. Vilsack,
    
    915 F.Supp.2d 81
    , 90 & n.7 (D. D.C. 2013). But the ECOA
    27   limitations period in effect at the time of the 2007 refinancing
    transactions was two years, and the time for the Menjivars to
    28                                                      (continued...)
    20
    1   Menjivars did not commence their litigation against WFB, and did
    2   not demand rescission of the 2007 refinancing transactions, until
    3   after all of these limitations periods had expired, their TILA,
    4   FHA and ECOA claims are time-barred.
    5        The Menjivars argue for the first time in their appeal reply
    6   brief that one or more of these limitations periods did not run
    7   because they did not discover sufficient facts regarding World
    8   Savings Bank’s TILA, FHA and ECOA violations until sometime in
    9   2010, well after the 2007 refinancing transactions were
    10   consummated.
    11        We reject this argument as to the Menjivars’ TILA claims for
    12   the same reasons we rejected the Menjivars’ similar argument
    13   regarding their discovery of the facts underlying their fraud
    14   claim.    First, the Menjivars forfeited these arguments by not
    15   asserting them in the bankruptcy court or in their opening appeal
    16   brief.    And second, the facts alleged in the FAC and the contents
    17   of the July 2007 loan documents demonstrate that the Menjivars
    18   had sufficient information from the outset regarding the true
    19   terms of the July 2007 refinancing transaction so as to fatally
    20   undermine their discovery argument.    Cf. Meyer v. Ameriquest
    21   Mortg. Co., 
    342 F.3d 899
    , 902 (9th Cir. 2003) (borrowers had all
    22   the information they needed to discover their TILA claim at the
    23
    13
    24         (...continued)
    file their ECOA claim expired in 2009, before the ECOA
    25   limitations period was amended. The new larger limitations
    26   period cannot be applied to the Menjivars’ ECOA claim because
    that claim already was time barred before the 2010 amendment of
    27   the ECOA was enacted. See Chenault v. U.S. Postal Serv., 
    37 F.3d 535
    , 539 (9th Cir. 1994), cited with approval in, Hughes Aircraft
    28   Co. v. United States ex rel. Schumer, 
    520 U.S. 939
    , 950 (1997).
    21
    1   time the loan was consummated, so TILA limitations period was not
    2   tolled); Rosenfeld, 
    732 F.Supp.2d at 964
     (same); Rosal v. First
    3   Fed. Bank of Cal., 
    671 F.Supp.2d 1111
    , 1122-24 (N.D. Cal. 2009)
    4   (same).
    5         As for the Menjivars’ FHA and ECOA claims, once again, the
    6   Menjivars did not timely offer any argument countering WFB’s
    7   contention that these claims were time-barred, and thus they have
    8   forfeited any such argument.   Moreover, the discovery rule simply
    9   does not apply to these claims.    See Garcia v. Brockway,
    10   
    526 F.3d 456
    , 465 (9th Cir. 2008) (en banc); Thiel v. Veneman,
    11   
    859 F.Supp.2d 1182
    , 1199 (D. Mont. 2012); see also Grimes v.
    12   Fremont Gen. Corp., 
    785 F.Supp.2d 269
    , 291-94 (S.D.N.Y. 2011).
    13         Because no amendments consistent with the Menjivars’
    14   existing allegations would have cured the limitations defects in
    15   their TILA, FHA and ECOA claims, the bankruptcy court properly
    16   dismissed these claims without leave to amend.
    17   E.   Other Claims
    18         The FAC sets forth several so-called claims for relief that
    19   in reality are remedies or are entirely derivative of their
    20   other, substantive claims.   Because we have determined that none
    21   of their substantive claims are viable, none of their derivative
    22   claims or remedies-based claims are viable either.14
    23
    14
    24         The Menjivars’ fourteenth claim for relief, seeking to
    disallow as untimely WFB’s proof of claim filed in Mr. Menjivar’s
    25   latest chapter 13 bankruptcy case is derivative because it
    26   assumes that WFB’s claim is unsecured based on the allegations
    contained in the Menjivars’ other claims for relief. In any
    27   event, Rule 3002(c)(3) gives a secured creditor whose security
    interest is avoided by a judgment of the bankruptcy court an
    28                                                      (continued...)
    22
    1                              CONCLUSION
    2        For the reasons set forth above, we AFFIRM the bankruptcy
    3   court’s order dismissing the FAC without leave to amend.
    4
    5
    6
    7
    8
    9
    10
    11
    12
    13
    14
    15
    16
    17
    18
    19
    20
    21
    22
    23
    24
    25        14
    (...continued)
    26   extended deadline to file a proof of claim, until thirty days
    after all appeals from the subject judgment have been exhausted.
    27   Since no judgment has been entered against WFB avoiding its July
    2007 trust deed, the deadline for WFB to file a proof of claim
    28   has not run.
    23
    

Document Info

Docket Number: CC-12-1608-KuBaPa

Filed Date: 1/28/2014

Precedential Status: Non-Precedential

Modified Date: 4/18/2021

Authorities (34)

Stern v. Marshall , 131 S. Ct. 2594 ( 2011 )

Rosenfeld v. JPMorgan Chase Bank, N.A. , 732 F. Supp. 2d 952 ( 2010 )

Grimes v. Fremont General Corp. , 785 F. Supp. 2d 269 ( 2011 )

In Re Joseph B. Prejean, Debtor. Ursula Maddox v. Jerome E. ... , 994 F.2d 706 ( 1993 )

Leatherman v. Tarrant County Narcotics Intelligence and ... , 113 S. Ct. 1160 ( 1993 )

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

Stanley Chenault v. United States Postal Service , 37 F.3d 535 ( 1994 )

Raedeke v. Gibraltar Savings & Loan Ass'n , 10 Cal. 3d 665 ( 1974 )

Mejia v. Reed , 3 Cal. Rptr. 3d 390 ( 2003 )

Bush & Mallett Co. v. Helbing , 134 Cal. 676 ( 1901 )

Cafasso v. General Dynamics C4 Systems, Inc. , 637 F.3d 1047 ( 2011 )

Hughes Aircraft Co. v. United States Ex Rel. Schumer , 117 S. Ct. 1871 ( 1997 )

United States v. Donald Lawrence Ritchie, Heather Horner, ... , 342 F.3d 903 ( 2003 )

Norgart v. Upjohn Co. , 87 Cal. Rptr. 2d 453 ( 1999 )

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

monica-knox-v-gray-davis-governor-of-california-and-t-a-terhune , 260 F.3d 1009 ( 2001 )

Bell Atlantic Corp. v. Twombly , 127 S. Ct. 1955 ( 2007 )

Ashcroft v. Iqbal , 129 S. Ct. 1937 ( 2009 )

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

Garcia v. Brockway , 526 F.3d 456 ( 2008 )

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