In re: Thi Ho

FILED
OCT 05 2011
1 SUSAN M SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
2
UNITED STATES BANKRUPTCY APPELLATE PANEL
3
OF THE NINTH CIRCUIT
4
5 In re: ) BAP No. CC-11-1078-PaDKi
)
6 THI HO, ) Bk. No. LA-10-42200-RN
)
7 Debtor. ) Adv. No. LA-10-02686-RN
______________________________)
8 )
THI HO, )
9 )
Appellant, )
10 )
v. ) M E M O R A N D U M1
11 )
BANK OF AMERICA, N.A.; )
12 REGIONAL SERVICE CORPORATION; )
MILES, BAUER, BERGSTROM, )
13 WINTERS, LLP, )
)
14 Appellees. )
______________________________)
15
Submitted Without Oral Argument on September 23, 2011
16
Filed – October 5, 2011
17
Appeal from the United States Bankruptcy Court
18 for the Central District of California
19 Honorable Richard M. Neiter, Bankruptcy Judge, Presiding
____________________________
20
Appearances: Appellant Thi Ho, pro se, on brief; Chaise R.
21 Biven of Severson & Werson on brief for Appellee
Bank of America, N.A.
22 ____________________________
23 Before: PAPPAS, DUNN and KIRSCHER, Bankruptcy Judges.
24
25 1
This disposition is not appropriate for publication.
26 Although it may be cited for whatever persuasive value it may
have (see Fed. R. App. P. 32.1), it has no precedential value.
27 See 9th Cir. BAP Rule 8013-1.
1 Chapter 72 debtor and appellant Thi Ho (“Ho”) appeals the
2 bankruptcy court’s orders dismissing her adversary proceeding
3 against appellees Bank of America, N.A. (“BANA”), Regional
4 Service Corporation (“RSC”) and Miles, Bauer, Bergstrom,
5 Winters, LLP (“MBBW”) and the court’s order denying Ho’s motion
6 for reconsideration of those dismissal orders. We AFFIRM.
7 FACTS
8 This is the second recent appeal from the Ho bankruptcy
9 case. The first appeal resulted in an unpublished decision
10 affirming the bankruptcy court's order granting BANA relief from
11 the automatic stay to pursue eviction of Ho from real property
12 ("Property"). Ho v. Bank of America, N.A. (In re Ho), BAP case
13 no. CC-10-1363 (9th Cir. BAP, August 9, 2011). For clarity, this
14 earlier case is referred to as In re Ho I.
15 The Underlying Foreclosure Sale
16 On May 13, 2008, Javier A. Romero and Yvelise Orta (the
17 “Borrowers”) purchased residential property in Downey, California
18 (the “Property”). The Borrowers financed purchase of the
19 Property with two loans from BANA, a first mortgage loan for
20 $850,000 and a second mortgage loan for $400,000. These loans
21 were secured by separate deeds of trust.
22 The Borrowers fell behind in payments and on September 9,
23 2009, a notice of default was recorded stating that they were
24
2
Unless specified otherwise, all chapter and section
25 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
26 all “Rule” references are to the Federal Rules of Bankruptcy
Procedure, Rules 1001-9037. All “Civil Rule” references are to
27 the Federal Rules of Civil Procedure.
2
1 $51,030.92 in arrears on the first loan. On December 14, 2009,
2 BANA recorded the substitution of RSC as trustee under the note.
3 That same day, RSC recorded a notice of trustee’s sale,
4 scheduling a foreclosure on the Property for December 31, 2009.
5 The foreclosure sale was held on January 6, 2010, BANA was the
6 successful bidder, and a trustee’s deed upon sale was recorded on
7 January 14, 2010. All these documents were recorded in the
8 Official Records of Los Angeles County.
9 Ho’s name does not appear on any of the above documents
10 filed in the Official Records.
11 On April 27, 2010, the Borrowers and “Does 1-10" were given
12 a Notice to Vacate. This was followed on May 10, 2010, with a
13 summons and complaint initiating an unlawful detainer proceeding
14 in Los Angeles Superior Court. Bank of America v. Orta, et al.,
15 case no. 10C01936. Transcripts of the state court proceedings
16 are not in the record before us. An unlawful detainer judgment
17 was entered on July 14, 2010, and a writ of possession was
18 granted on July 22, 2010. In addition to the Borrowers, judgment
19 and the writ of possession were specifically awarded against Ho.3
20 Ho appealed the unlawful detainer judgment to the California
21 Court of Appeals on September 24, 2010. That appeal is pending.
22
23
3
BANA filed a Request for Judicial Notice with this Panel on
24 May 25, 2011, relating to a number of other state court
proceedings and documents involving the Borrowers, other third
25 parties, and Ho. BANA indicated in its request that the
26 documents would support its opening brief. Because BANA provided
no information about the documents requested or other
27 justification for notice, BANA’s request is DENIED.
3
1 Ho filed a voluntary petition under chapter 7 on August 2,
2 2010.
3 Within days, BANA moved for relief from the automatic stay
4 to allow it to enforce the unlawful detainer judgment and writ of
5 possession against Ho. In Re Ho I at 2. Following briefing from
6 both parties, the bankruptcy court held a hearing on the motion
7 for relief from stay on September 13, 2010. The court posted a
8 tentative ruling before the hearing, in which it found cause for
9 relief from stay under § 362(d)(1) based on the prepetition
10 foreclosure sale and writ of possession, and for relief under
11 § 362(d)(2) because the debtor had neither equity in the Property
12 nor was it necessary for reorganization. Id. at 12. The court
13 entered its order granting relief from stay on September 16,
14 2010. Id. at 6. On appeal, the Panel affirmed the bankruptcy
15 court’s order on August 9, 2011.
16 The day before the hearing on relief from stay, September
17 13, 2010, Ho filed a complaint initiating the adversary
18 proceeding leading to this appeal. Ho’s complaint, much like her
19 brief in this appeal, is disjointed and difficult to follow. The
20 crux of the complaint seems to be that the foreclosure sale,
21 unlawful detainer action, subsequent unlawful detainer judgment
22 and writ of possession were improper, fraudulent, illegal and
23 invalid. All of Ho’s allegations in the complaint, however,
24 would appear to be premised on an alleged illegal foreclosure of
25 the Property conducted by RSC. Ho alleges in her complaint that,
26 “[t]he illegal foreclosure consisted of a scam which deployed a
27 false Substitution of Trustee over a deed of trust executed by
4
1 defendant Regional Service Corporation. In this scam, no
2 assignment is actually executed by the authorized trustee, PRLAP
3 Inc.” Based on this purported “Fraudulent Substitution of
4 Trustee,” Ho alleges that the subsequent foreclosure sale and
5 BANA’s purchase of the Property were invalid because RSC had no
6 authority to conduct the sale. Further, since the foreclosure
7 was invalid, so too was the unlawful detainer proceeding because
8 BANA never obtained title to the Property. Ho’s various other
9 claims were procedural, generally seeking to overturn the
10 foreclosure and subsequent unlawful detainer.
11 RSC moved for dismissal under Civil Rule 12(b)(6) on
12 October 13, 2010. RSC argued that Ho failed to state a claim for
13 relief, based on Ho’s misunderstanding of the law regarding
14 substitute trustees. Further, RSC alleged that Ho did not have
15 standing because Ho’s claim to title by adverse possession of the
16 Property is not supported by the facts or legal authority.
17 MBBW, BANA’s attorney in the foreclosure and unlawful
18 detainer actions and defendant in the adversary proceeding, moved
19 for dismissal on October 14, 2010. MBBW argued that Ho did not
20 have standing because the claims asserted would belong to her
21 bankruptcy estate. Additionally, MBBW attempted to address each
22 of the state law claims asserted in the complaint, arguing that
23 Ho had only presented conclusory arguments devoid of facts.
24 BANA moved for dismissal under Civil Rule 12(b)(6) on
25 November 9, 2010. BANA argued that Ho did not have standing
26 because she was not the real party in interest, both on the
27 grounds that her chapter 7 trustee was the real party in interest
5
1 to prosecute claims for her estate and that she could not
2 establish the elements of adverse possession. BANA also examined
3 the state law claims, generally asserting that they were
4 inconsistent with established law.
5 Ho responded to RSC’s and MBBW’s motions to dismiss on
6 November 2, 2010. In addition to generally defending her
7 positions in the complaint, Ho asserted two rights: first, that
8 as a pro se litigant she be treated with leniency; second, to the
9 extent that her complaint contains procedural errors, she be
10 allowed to amend the complaint. Ho also objected that she did
11 not have proper service of the motions to dismiss.
12 On November 5, 2010, Ho filed a request for entry of default
13 against BANA because it had not made a timely appearance in the
14 Adversary Proceeding.
15 On November 24, 2010, Ho moved to strike BANA’s motion to
16 dismiss for two reasons: first, BANA failed to respond to the
17 complaint by October 24, 2010; second, BANA lacked standing to
18 appear in the adversary proceeding.
19 After several continuances, the bankruptcy court held a
20 hearing on the three motions to dismiss on December 9, 2010.
21 Before the hearing, the court posted its tentative ruling on the
22 motions. The tentative ruling included the following
23 determinations: (1) The complaint asserts a claim to recover
24 property of the estate under § 548. Ho does not have standing to
25 assert claims under § 548, which may only be asserted by her
26 chapter 7 trustee, and this claim may not be abandoned to the
27 debtor by the trustee. (2) Ho is barred by collateral estoppel
6
1 from asserting the state law claims, which were already litigated
2 in the state court. (3) Ho does not have standing to assert the
3 state law claims because she was not a party to the deed of trust
4 for which she claims she was injured, and her argument that she
5 owned the Property by adverse possession was not proven.
6 (4) Even if the court considered the state law claims, Ho’s
7 arguments are purely conclusory and cannot survive a Civil Rule
8 12(b)(6) challenge. (5) The state law claims were abandoned by
9 the trustee and she could pursue them in state court. Based on
10 the tentative dismissal of Ho's Complaint, the bankruptcy court
11 stated that it would deny Ho's pending motions to strike BANA’s
12 motion to dismiss as moot and would not reach Ho's pending
13 request for entry of default against BANA.
14 At the hearing on December 9, 2010, BANA, RSC and MBBW were
15 each represented by counsel and Ho appeared pro se. Ho was asked
16 by the bankruptcy court to address the issue of standing as
17 discussed in the tentative ruling. Ho noted that the State
18 Court's Order had been appealed, and the appeal was pending.
19 She further made a request to amend her fraud claim. In
20 response, the bankruptcy court asked her if the claims she
21 asserted in the Complaint were any different from the claims she
22 already had asserted in State Court. Ho was not able to
23 articulate any differences, but she reiterated her request to be
24 allowed to amend her Complaint. The bankruptcy court ultimately
25 denied her request to amend the complaint as futile because she
26 did not have standing and stated that it would grant all three
27 Motions to Dismiss.
7
1 The order granting the motions to dismiss of BANA and MBBW
2 was entered on December 21, 2010. The order granting RSC’s
3 motion was entered on January 20, 2011.
4 On December 20, 2010, Ho moved for rehearing of the orders
5 dismissing the adversary proceeding under “Rule 8015.” In her
6 motion, Ho argued that the bankruptcy court erred in relying on
7 collateral estoppel to support dismissal of the Adversary
8 Proceeding in that the State Court’s Order was on appeal and
9 consequently not final. Ho further argued that the bankruptcy
10 court should revisit its ruling on standing “because the debtor
11 is in Common Law Adverse Possession, and the said issue is not at
12 issue in the adversary case . . . .”4
13 BANA, RCS and MBBW filed oppositions to the motion for
14 reconsideration. All three opposition pleadings implicitly
15 agreed with Ho that the bankruptcy court could not rely on
16 collateral estoppel in its decision to dismiss. However, all
17 three oppositions pointed out that Ho’s motion did not address
18 the standing issue or that the state law claims failed to state a
19 claim for relief.
20 The bankruptcy court scheduled a hearing on the
21 reconsideration motion for January 13, 2010. Again before the
22 hearing, the court posted its tentative ruling. The tentative
23 ruling conceded error in the oral ruling regarding collateral
24
4
In her opening brief on appeal, Ho states that she also
25 argued in the motion for reconsideration that “the trustee,
26 Howard Ehrenberg, has abandoned the estate . . ..” Appellant’s
Opening Brief at 6. In fact, that argument is not made in the
27 Motion for Rehearing.
8
1 estoppel and now ruled that it did not apply in this proceeding.
2 But the bankruptcy court reaffirmed its earlier rulings that Ho
3 did not have standing because she was not a party to the deed of
4 trust and failed to prove elements of adverse possession.
5 Further, the court reaffirmed its finding that Ho had merely
6 asserted conclusory arguments in her state law claims and thus
7 failed to survive the Civil Rule 12(b)(6) challenge.
8 Finally, the court noted that RSC’s opposition to
9 reconsideration had pointed out a fundamental flaw in Ho’s
10 complaint. Ho contended that RSC was not the authorized trustee
11 of record, nor did it have the original trustee’s permission to
12 execute a foreclosure of the Property. However, Cal. Civ. Code
13 § 2934a provides that a lender may at any time appoint a
14 successor trustee by recording that substitution in the Official
15 Records of the county where the property is located. Ho has
16 never disputed that BANA is the lender under the deeds of trust.
17 BANA’s substitution of RSC for the original trustee, PRLAP, Inc.,
18 was recorded in the Official Records of Los Angeles County on
19 December 14, 2009. Cal. Civ. Code § 2934a(d) goes on to state
20 that a recorded substitution “shall constitute conclusive
21 evidence of the authority of the substituted trustee.”
22 A transcript of the hearing on January 13, 2011 is not in
23 the excerpts of record or the bankruptcy court docket. On
24 February 2, 2011, the bankruptcy court entered its order denying
25 the motion for reconsideration, but providing that the order of
26 January 20, 2011 granting the motion to dismiss was amended “to
27 state that collateral estoppel does not apply in this instance.”
9
1 Ho filed a timely appeal on February 15, 2011.
2 JURISDICTION
3 The bankruptcy court had jurisdiction under 28 U.S.C.
4 §§ 1334 and 157(b)(2)(A), (H), (K) and (O). We have jurisdiction
5 under 28 U.S.C. § 158.
6 ISSUES
7 Whether Ho had standing to prosecute the claims asserted in
8 the Complaint.
9 Whether the bankruptcy court abused its discretion in
10 declining to enter a default judgment against BANA.
11 Whether the bankruptcy court abused its discretion in its
12 reconsideration rulings.
13 STANDARDS OF REVIEW
14 Standing is a legal issue that we review de novo. Loyd v.
15 Paine Webber, Inc., 208 F.3d 755, 758 (9th Cir. 2000); Kronemyer
16 v. Am. Contractors Indem. Co. (In re Kronemyer), 405 B.R. 915,
17 919 (9th Cir. BAP 2009). We review the bankruptcy court’s
18 dismissal of an adversary proceeding under Civil Rule 12(b)(6)
19 de novo. N.M. State Inv. Council v. Ernst & Young LLP, 641 F.3d
20 1089, 1094 (9th Cir. 2011); Transcorp/Avant v. Pioneer
21 Liquidating Corp. (In re Consol. Pioneer Mortg. Entities),
22 205 B.R. 422, 424 (9th Cir. BAP 1997). A dismissal of an
23 adversary complaint without leave to amend is reviewed de novo.
24 Id.; Polich v. Burlington North., Inc., 942 F.2d 1467, 1472 (9th
25 Cir. 1991). De novo review means that the reviewing court does
26 not defer to the trial court’s rulings but freely considers the
27 matter anew, as if no decision had been rendered in the trial
10
1 court. Dawson v. Marshall, 561 F.3d 930, 933 (9th Cir. 2009).
2 Denial of a request for entry of a default judgment is
3 reviewed for an abuse of discretion. Eitel v. McCool, 782 F.2d
4 1470, 1471 (9th Cir. 1986); Valley Oak Credit Union v. Villegas
5 (In re Villegas), 132 B.R. 742, 744 (9th Cir. BAP 1991).
6 Orders granting or denying reconsideration are reviewed for
7 abuse of discretion. Arrow Elecs., Inc. v. Justus (In re
8 Kaypro), 218 F.3d 1070, 1073 (9th Cir. 2000).
9 In applying an abuse of discretion standard, we first
10 "determine de novo whether the [bankruptcy] court identified the
11 correct legal rule to apply to the relief requested." United
12 States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc).
13 If the correct legal rule was applied, we then consider whether
14 its "application of the correct legal standard was (1) illogical,
15 (2) implausible, or (3) without support in inferences that may be
16 drawn from the facts in the record." Id. (internal quotation
17 marks omitted). Only in the event that one or more of these
18 three apply are we then able to find that the bankruptcy court
19 abused its discretion. Id.20 DISCUSSION
21 I.
Ho did not have standing to pursue the claims in the complaint.
22
23 Standing is a “threshold question in every federal case,
24 determining the power of the court to entertain the suit.” Warth
25 v. Seldin, 422 U.S. 490, 498 (1975); Thomas v. Mundell, 572 F.3d
26 756, 760 (9th Cir. 2009). Standing has both constitutional and
27 prudential dimensions. Elk Grove Unified Sch. Dist. v. Newdow,
11
1 542 U.S. 1, 11 (2004); Chandler v. State Farm Mut. Auto. Ins.
2 Co., 598 F.3d 1115, 1121-22 (9th Cir. 2010); Veal v. Am. Home
3 Mortg. Serv., Inc. (In re Veal), 450 B.R. 897, 906 (9th Cir. BAP
4 2011). The bankruptcy court correctly determined that Ho lacked
5 standing to bring the claims in the complaint under both the
6 constitutional and prudential dimensions.
7 A. Constitutional Standing
8 The irreducible constitutional minimum for standing contains
9 three elements, and the party asserting standing bears the burden
10 of proof as to all three elements. Lujan v. Defenders of
11 Wildlife, 504 U.S. 555, 560-61 (1992) (emphasis added).
12 First, the plaintiff must prove that he suffered an
"injury in fact," i.e., an "invasion of a legally
13 protected interest which is (a) concrete and
particularized, and (b) actual or imminent, not
14 conjectural or hypothetical," Id. at 560 (citations,
internal quotation marks, and footnote omitted).
15 Second, the plaintiff must establish a causal
connection by proving that her injury is fairly
16 traceable to the challenged conduct of the defendant.
Id. at 560-61, Third, the plaintiff must show that her
17 injury will likely be redressed by a favorable
decision. Id. at 561.
18
19 Chandler, 598 F.3d at 1122 (citing Lujan, 504 U.S at 560-61).
20 The bankruptcy court found that Ho failed to satisfy both the
21 first and second elements of standing. The court found that BANA
22 clearly established by documentary evidence that Ho was not a
23 party to the Deeds of Trust for which she claims to be injured by
24 the foreclosure. Since she was not a party to the security
25 instruments that the Appellees allegedly wrongfully foreclosed,
26 the bankruptcy court reasoned that she did not suffer an injury
27 in fact from the alleged fraudulent foreclosure of those Trust
12
1 Deeds to obtain title to the Property. The court found that Ho
2 failed to negate that position. The court also found that, even
3 assuming that the foreclosure had been fraudulent, the only
4 parties injured by the foreclosure were the Borrowers, not Ho.
5 The only link with the Property, the foreclosure and the
6 resulting “injury” that Ho asserts is her claim to ownership by
7 adverse possession of the Property. In her Complaint, Ho
8 asserted that she was not indebted to any of the Appellees and
9 that she was the owner of the Property by Adverse Possession. In
10 her Motion for Rehearing, Ho asserted that her claim to the
11 Property was based on “common law adverse possession,” and she
12 did not plead any statutory right to adverse possession.
13 However, her claim is without any basis in law. The
14 California Supreme Court has held a party must establish a claim
15 to adverse possession under California statutes. See Sorensen v.
16 Costa, 196 P.2d 900, 903-04 (Cal. 1948) (“A person claiming title
17 to property by adverse possession must establish his claim under
18 either section 322 or under sections 324 and 325 of the Code of
19 Civil Procedure.”) (emphasis added). In other words, under
20 California law, there is no common law right to claim property by
21 adverse possession.
22 California Code of Civil Procedure § 325(b) provides that
23 In no case shall adverse possession be considered
established under the provision of any section of this
24 code, unless it shall be shown that the land has been
occupied and claimed for the period of five years
25 continuously, and the party or persons, their
predecessors and grantors, have timely paid all state,
26 county, or municipal taxes that have been levied and
assessed upon the land for the period of five years
27 during which the land has been occupied and claimed.
13
1 Payment of those taxes by the party or persons, their
predecessors and grantors shall be established by
2 certified records of the county tax collector.
3 The California courts strictly enforce Cal. Code Civ. P.
4 § 325(b). Nielson v. Gibson, 178 Cal. App.4th 318, 340 (Cal. Ct.
5 App. 2010). In the absence of evidence that the party claiming
6 title to property by adverse possession has paid taxes on the
7 subject property, such party’s adverse possession claim fails.
8 Mehdizadeh v. Mincer, 46 Cal. App. 4th 1296, 1305 (Cal. Ct. App.
9 1996) (“Mehdizadeh could not claim adverse possession of the
10 disputed property because he did not pay taxes on it.”). There
11 was no evidence that Ho paid any taxes on the Property, or
12 complied with any other provision of Cal. Code Civ. P. § 325(b),
13 in the bankruptcy court or in this appeal. As the bankruptcy
14 court summarized, "the Complaint is wanting of facts that would
15 demonstrate existence of adverse possession in order to establish
16 standing."
17 In sum, the bankruptcy court found that Ho was not a party
18 to the Deeds of Trust and foreclosure proceeding from which she
19 claims she was injured. To the extent that Ho claims ownership
20 of the Property by adverse possession, the court determined that
21 Ho had not asserted facts in the complaint or any subsequent
22 pleading sufficient to prove the elements of title by adverse
23 possession. In short, Ho has not established that she suffered
24 an injury in fact in her complaint and pleadings. Thus, the
25 bankruptcy court did not err in concluding that Ho had not met
26 her burden of proof to establish constitutional standing to bring
27 any of the claims in the complaint. On that basis alone, we can
14
1 confidently affirm the decision of the bankruptcy court
2 B. Prudential Standing for § 548 Claim
3 The court also determined that Ho had not met her burden of
4 proving prudential standing to assert the claim under § 548. One
5 aspect of prudential standing is the doctrine that a movant must
6 assert its own legal rights, and may not assert the legal rights
7 of others. Grove Unified School Dist. v. Newdow, 542 U.S. 1, 11
8 (2004); Chapman v. Pier 1 Imports (U.S.) Inc., 631 F.3d 939, 960
9 (9th Cir. 2011); In re Veal, 450 B.R. at 907.
10 Although the complaint itself deals exclusively with state
11 law claims, the adversary proceeding cover sheet filed with the
12 complaint indicated that Ho was attempting to recover property
13 under § 548. Section 548(a)(1) restricts the scope of the
14 section to actions by the trustee to avoid fraudulent transfers
15 to bring funds back into the bankruptcy estate. A trustee is the
16 legal representative of the bankruptcy estate and as such has the
17 capacity to sue and be sued. § 323; Joseph v. Joseph (In re
18 Joseph), 208 B.R. 55, 60 (9th Cir. BAP 1997). Only a trustee may
19 pursue a cause of action belonging to the bankruptcy estate.
20 Stoll v. Quintanar (In re Stoll), 252 B.R. 492, 495 (9th Cir. BAP
21 2000) (citing Griffin v. Allstate Ins. Co., 920 F. Supp. 127, 130
22 (C.D. Cal. 1996).
23 The bankruptcy court found that, at the time Ho filed her
24 adversary proceeding, Ho’s chapter 7 trustee, not Ho, was the
25 proper party to pursue a § 548 claim. Further, the court
26 determined that the bankruptcy trustee had not abandoned the
27 claim and that it had been administered in the bankruptcy case.
15
1 The bankruptcy court did not err in determining that Ho
2 lacked prudential standing to assert the § 548 claim.
3 C. Jurisdiction Over Abandoned Claims
4 Before leaving the discussion of standing and subject matter
5 jurisdiction, there is one other aspect of jurisdiction in this
6 case that should be noted. Although the bankruptcy court ruled
7 that Ho did not have standing to assert the § 548 claim and that
8 claim was not abandoned, it did rule that the trustee had
9 abandoned all the state law claims asserted in the complaint.
10 The court commented that Ho was free to pursue those claims in
11 the state court, but did not have standing to pursue them in the
12 bankruptcy court.
13 Abandonment has jurisdictional implications. When a
14 property is abandoned, it reverts to the debtor as if no
15 bankruptcy petition had been filed. Hopkins v. Idaho State Univ.
16 Credit Union (In re Herter), 2011 Bankr. LEXIS 2435 * 20 (Bankr.
17 D. Idaho 2011) (citing Dewsnup v. Timm, 908 F.2d 588, 590 (10th
18 Cir. 1990), aff'd on other grounds, 502 U.S. 410 (1992)). When
19 property is transferred out of the bankruptcy estate, the
20 bankruptcy court's jurisdiction "typically lapses." Gardner v.
21 United States, 913 F.2d 1515, 1518 (10th Cir. 1990) (“When
22 property leaves the bankruptcy estate, however, the bankruptcy
23 court's jurisdiction typically lapses, and the property's
24 relationship to the bankruptcy proceeding comes to an end.");
25 In re Hall's Motor Transit Co., 889 F.2d 520, 523 (3d Cir. 1989);
26 In re Xonics, Inc., 813 F.2d 127, 131 (7th Cir. 1987); Crowder v.
27 Given (In re Crowder), 314 B.R. 445, 449 (10th Cir. BAP 2004)
16
1 (“[P]roperty interests of the bankruptcy estate are within the
2 exclusive jurisdiction of the bankruptcy court; but the court's
3 jurisdiction typically lapses when the property leaves the
4 estate[.]”).
5 The bankruptcy court did not err in determining that Ho did
6 not have constitutional standing to assert any claims in her
7 complaint. The court did not err in determining that Ho did not
8 have prudential standing to assert the § 548 claim. And the
9 court did not err in determining that, following abandonment, Ho
10 could not pursue the state law claims in the bankruptcy court.
11 A dismissal for lack of standing is a subspecies of
12 dismissal for failure to state a claim under Civil Rule 12(b)(6).
13 Quarre v. Saylor (In re Saylor), 178 B.R. 209, 215 (9th Cir. BAP
14 1995), aff’d, 108 F.3d 219 (9th Cir. 1997). Consequently, the
15 bankruptcy court did not err in dismissing Ho’s adversary
16 proceeding for lack of standing under Civil Rule 12(b)(6).
17 II.
The bankruptcy court did not err in declining Ho’s request
18 for entry of default against BANA.
19 Ho argues that the bankruptcy court erred in declining to
20 enter a default against BANA in the Adversary Proceeding because
21 BANA failed to file a timely response after being appropriately
22 served with the Complaint. What Ho clearly wants is a default
23 judgment against BANA, as argued in her opening brief.
24 The entry of defaults and default judgments is governed by
25 Civil Rule 55, applicable in adversary proceedings under Rule
26 7055. A bankruptcy court has “wide discretion” in determining
27 whether it is appropriate to enter a default judgment. See,
17
1 e.g., In re Villegas, 132 B.R. at 746. Under Civil Rule 55(b)(2),
2 The court may conduct hearings or make referrals . . .
when, to enter or effectuate judgment, it needs to:
3 (A) conduct an accounting; (B) determine the amount of
damages; (C) establish the truth of any allegation by
4 evidence; or (D) investigate any other matter.
5 “This provides the trial court with discretion to require, at a
6 hearing under [Civil] Rule 55(b)(2), some proof of the facts that
7 are necessary to a valid cause of action or to determine
8 liability.” In re Villegas, 132 B.R. at 746 (citations omitted).
9 Factors which may be considered by courts in exercising
discretion as to the entry of a default judgment
10 include: (1) the possibility of prejudice to the
plaintiff, (2) the merits of plaintiff’s substantive
11 claim, (3) the sufficiency of the complaint, (4) the
sum of money at stake in the action; (5) the
12 possibility of a dispute concerning material facts;
(6) whether the default was due to excusable neglect,
13 and (7) the strong policy underlying the Federal Rules
of Civil Procedure favoring decisions on the merits.
14
15 Eitel v. McCool, 782 F.2d at 1471-72. Entry of a default does
16 not entitle a party to judgment as a matter of right. See, e.g.,
17 Gordon v. Duran, 895 F.2d 610, 612 (9th Cir. 1990); Warner Bros.
18 Entm’t, Inc. v. Caridi, 346 F.Supp. 2d 1068, 1071 (C.D. Cal.
19 2004).
20 Default had not been entered against BANA at the time of the
21 hearing on the Motions to Dismiss. In light of our previous
22 conclusion that the bankruptcy court did not err in dismissing
23 the Adversary Proceeding based on Ho’s patent lack of standing,
24 we conclude that the bankruptcy court did not abuse its
25 discretion in declining to enter a default judgment in Ho’s favor
26 against BANA in the Adversary Proceeding. Aldabe v. Aldabe,
27 616 F.2d 1089, 1092-93 (9th Cir. 1980) (“Given the lack of merit
18
1 in appellant’s substantive claims, we cannot say that the
2 district court abused its discretion in declining to enter a
3 default judgment in favor of appellant.”).
4 III.
The bankruptcy court did not abuse its discretion in its
5 reconsideration rulings.
6 Ho has appealed the Order Denying Plaintiff’s “Motion for
7 Rehearing (Pursuant to Rule 8015) Regarding to the Dismissal of
8 Adversary Proceeding.” On several grounds, we affirm the
9 decision of the bankruptcy court.
10 First, although Ho listed this order in her notice of
11 appeal, she failed to discuss it at all in her brief. An
12 appellate court in this circuit “will not review issues which are
13 not argued specifically and distinctly in a party's opening
14 brief.” City of Emeryville v. Robinson, 621 F.3d 1251, 1261 (9th
15 Cir. 2010).
16 Second, the bankruptcy court properly determined that
17 Rule 8015 is only applicable in appeals in the district court and
18 bankruptcy appellate panel. Apparently, the bankruptcy court did
19 apply the proper procedural basis for the motion, Civil
20 Rule 59(e), made applicable in bankruptcy proceedings by
21 Rule 9023. Shapiro v. Paradise Valley Unified Sch. Dist. No. 69,
22 374 F.3d 857, 863 (9th Cir. 2004)(motions for reconsideration
23 filed within ten days of judgment are considered motions to alter
24 or amend judgment under Civil Rule 59(e)).5
25
26 5
Rule 9023 was amended in 2009 to enlarge the time period
for requesting alteration or amendment of judgment from ten days
27
(continued...)
19
1 A motion for reconsideration under Rule 9023/Civil Rule
2 59(e) should not be granted unless the court is presented with
3 newly discovered evidence, committed clear error, or if there is
4 an intervening change in the controlling law. Kona Enter., Inc.
5 v. Bishop, 229 F.3d 877, 890 (9th Cir. 2000). Ho argued
6 successfully, and unopposed by the other parties, that the
7 bankruptcy court had clearly erred in its earlier ruling on the
8 collateral estoppel basis for dismissal. The court did indeed
9 reconsider its previous position, and amended its dismissal order
10 to state that collateral estoppel does not apply.
11 Ho alleged no other errors in its rehearing motion, nor
12 suggested that there was newly discovered evidence or an
13 intervening change in law. We conclude that the bankruptcy court
14 did not abuse its discretion in its reconsideration rulings.
15 CONCLUSION
16 The bankruptcy court did not err in concluding that Ho
17 lacked standing to prosecute the claims in the Complaint in the
18 Adversary Proceeding. Accordingly, the bankruptcy court did not
19 err in dismissing the Complaint without leave to amend. In these
20 circumstances, the bankruptcy court did not abuse its discretion
21 in declining to enter a default judgment in Ho's favor against
22 BANA. And the court did not abuse its discretion in its
23 reconsideration rulings. We AFFIRM.
24
25 5
(...continued)
26 to fourteen days. This change is of no consequence in this
appeal, because Ho moved for reconsideration within ten days of
27 the oral ruling dismissing the complaint.
20