Brumfiel v. U.S. Bank

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT July 24, 2015
_________________________________
Elisabeth A. Shumaker
Clerk of Court
LISA KAY BRUMFIEL,
Plaintiff - Appellant,
v. No. 14-1421
(D.C. No. 1:12-CV-02716-WJM-MEH)
U.S. BANK; LARRY CASTLE, in his (D. Colo.)
individual and corporate capacity;
CASTLE STAWIARSKI, LLC; MERS,
a division of MERSCorp. and DOES
1-110; CYNTHIA MARES, Public
Trustee, in her official capacity; ROBERT
J. HOPP, JR., in his corporate and
individual capacites,
Defendants - Appellees.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before MATHESON, BACHARACH, and MORITZ, Circuit Judges.
_________________________________
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist in the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
Lisa Kay Brumfiel, proceeding pro se,1 appeals the district court’s dismissal of
her complaint, which alleged that a Colorado foreclosure proceeding violated her
rights under the Constitution and state law. Exercising jurisdiction under 28 U.S.C.
§ 1291, we affirm.
I. BACKGROUND
Some years after borrowing money to buy a house, Ms. Brumfiel stopped
making her payments. The loan was evidenced by a promissory note and secured by
a deed of trust on the house. In the fall of 2011, U.S. Bank, as trustee of a mortgage
loan trust that then held the note, initiated a non-judicial public trustee foreclosure
under Colo. R. Civ. P. 120. Shortly thereafter, in December 2011, Ms. Brumfiel filed
a Chapter 7 bankruptcy petition. The bankruptcy court entered a discharge order in
April 2012 and closed Ms. Brumfiel’s bankruptcy case in May 2012. The Rule 120
proceeding remained pending during this time.
In October 2012, Ms. Brumfiel filed this federal action against U.S. Bank and
the law firm and lawyer who were representing it in the Rule 120 proceeding.
Seeking both money damages and injunctive relief, she alleged that the Rule 120
proceeding violated her right to due process because the rule limits the state court to
determining two matters: (1) whether a default occurred, and (2) whether an order
1
Because Ms. Brumfiel is proceeding pro se, we construe her filings liberally.
See Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per curiam); see also United States
v. Pinson, 584 F.3d 972, 975 (10th Cir. 2009) (“[W]e must construe [a pro se
litigant’s] arguments liberally; this rule of liberal construction stops, however, at the
point at which we begin to serve as his advocate.”).
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authorizing sale is proper under the Service Members Civil Relief Act. See
Colo. R. Civ. P. 120(d). Further, Rule 120 does not allow for an appeal. See id.Ms. Brumfiel also targeted a Colorado statute that allows the holder of a debt
to seek foreclosure without producing the original evidence of debt or original deed
of trust. Instead, a holder may produce a copy along with a statement signed by itself
or its attorneys that the copy of the original evidence is true and correct. See
Colo. Rev. Stat. § 38-38-101(1)(b)(II), (1)(c)(II). She asserted that the defendants
had conspired to have the statute amended to permit the taking of property without
due process.
Ms. Brumfiel further alleged the defendants had committed state-law torts
against her. She later amended her complaint to add other participants in the
Rule 120 proceeding, including the public trustee, and additional claims. The
defendants moved to dismiss under Fed. R. Civ. P. 12(b)(1) and 12(b)(6).
In December 2012, the state court authorized the sale of Ms. Brumfiel’s
property under Rule 120. The sale was set to occur in May 2013. Just before the sale
date, the district court enjoined the sale for fourteen days and set a preliminary
injunction hearing. U.S. Bank immediately moved to dismiss the Rule 120
proceeding. It then moved the district court to vacate the preliminary injunction
hearing as moot because there was no Rule 120 foreclosure for the court to enjoin.
Further, it consented to a permanent injunction barring it from using the Rule 120
process against Ms. Brumfiel, because instead of bringing another Rule 120
proceeding, it intended to commence a judicial foreclosure under Colo. R. Civ. P.
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105. Construing this consent as a confession to Ms. Brumfiel’s motion for a
preliminary injunction, the district court enjoined any Rule 120 proceeding against
Ms. Brumfiel’s property for the duration of the federal action. U.S. Bank promptly
filed a Rule 105 judicial foreclosure action in state court.2
The district court ultimately dismissed Ms. Brumfiel’s complaint without
prejudice under Fed. R. Civ. P. 12(b)(1). It held Ms. Brumfiel lacked standing to
pursue her claims for monetary relief because she had no redressable injury: the
bankruptcy estate owned the claims, which only the bankruptcy trustee could assert.
It further held the claims for injunctive relief were moot because U.S. Bank’s
withdrawal meant there was no longer any Rule 120 proceeding to enjoin.
Ms. Brumfiel now appeals.
II. DISCUSSION
Applying de novo review, see Niemi v. Lasshofer, 770 F.3d 1331, 1344
(10th Cir. 2014), we agree with the district court that Ms. Brumfiel’s claims for
injunctive relief became moot during the suit. And we agree that her claims for
2
In February 2014, the state court granted U.S. Bank’s motion for summary
judgment seeking judicial foreclosure, concluding that Ms. Brumfiel was in default
and the trust was the holder of the original promissory note and deed of trust. The
Colorado Court of Appeals recently affirmed that judgment. See U.S. Bank, N.A. v.
Brumfiel, No. 14CA0464, slip op. at 1, 29 (Colo. App. May 21, 2015) (unpublished).
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money damages should be dismissed. As to those claims, we affirm because she was
not the real party in interest.3
A. Claims for Injunctive Relief
“Article III of the Constitution grants the Judicial Branch authority to
adjudicate ‘Cases’ and ‘Controversies.’ . . . A case becomes moot—and therefore no
longer a ‘Case’ or ‘Controversy’ for purposes of Article III—when the issues
presented are no longer live or the parties lack a legally cognizable interest in the
outcome.” Already, LLC v. Nike, Inc., 133 S. Ct. 721, 726 (2013) (internal quotation
marks omitted).
Ms. Brumfiel’s complaint concerned the Rule 120 proceeding. U.S. Bank
voluntarily dismissed that proceeding and instead pursued foreclosure under
Rule 105. After U.S. Bank dismissed the Rule 120 proceeding, Ms. Brumfiel’s
claims for injunctive relief regarding that proceeding became moot. And U.S. Bank
was not likely to file another Rule 120 proceeding against Ms. Brumfiel because it
instead was proceeding under Rule 105.
Ms. Brumfiel argues her objections to Colo. Rev. Stat. § 38-38-101 apply
equally to the Rule 105 proceeding and therefore the district court should have
extended its injunction against the Rule 120 proceeding to the Rule 105 proceeding.
The district court, however, appropriately limited its order to the subject of the
complaint.
3
We may affirm on any grounds supported by the record. Awad v. Ziriax,
670 F.3d 1111, 1128 n.14 (10th Cir. 2012).
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B. Claims for Money Damages
“The Supreme Court’s standing jurisprudence contains two strands: Article III
standing, which enforces the Constitution’s case-or-controversy requirement, and
prudential standing which embodies judicially self-imposed limits on the exercise of
federal jurisdiction.” Wilderness Soc’y v. Kane Cty., 632 F.3d 1162, 1168 (10th Cir.
2011) (en banc) (alteration and internal quotation marks omitted). “The prudential
standing doctrine encompasses various limitations, including the general prohibition
on a litigant’s raising another person’s legal rights.” Id. (internal quotation marks
omitted). Fed. R. Civ. P. 17(a)(1), which provides that “[a]n action must be
prosecuted in the name of the real party in interest,” essentially codifies this portion
of the prudential standing doctrine. See RMA Ventures Cal. v. SunAmerica Life Ins.
Co., 576 F.3d 1070, 1073 (10th Cir. 2009) (citing Rawoof v. Texor Petrol. Co.,
521 F.3d 750, 757 (7th Cir. 2008)).
The district court’s decision focused on Article III standing. We rely instead
on the prudential standing and real party in interest doctrines, which preclude
Ms. Brumfiel from proceeding with her claims for money damages. “[T]he
prudential standing doctrine[] represents the sort of ‘threshold question’ we have
recognized may be resolved before addressing jurisdiction.” Tenet v. Doe, 544 U.S.
1, 6 n.4 (2005); see also Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 585 (1999)
(“It is hardly novel for a federal court to choose among threshold grounds for
denying audience to a case on the merits.”); Wilderness Soc’y, 632 F.3d at 1168(proceeding directly to prudential standing without considering constitutional
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standing). Once Ms. Brumfiel filed her bankruptcy petition, she was not the real
party in interest, as required by Rule 17(a)(1).4
Under 11 U.S.C. § 541(a)(1), the bankruptcy estate includes “all legal or
equitable interests of the debtor in property as of the commencement of the case.”
When a Chapter 7 bankruptcy petition is filed, “[t]he trustee of the bankruptcy estate
has the sole capacity to sue and be sued over assets of the estate.” Mauerhan v.
Wagner Corp., 649 F.3d 1180, 1184 n.3 (10th Cir. 2011) (citing 11 U.S.C. § 323(b)).
Upon filing for bankruptcy, Ms. Brumfiel was required to list all the assets of
her estate. 11 U.S.C. § 521(a)(1). Those assets included “all legal claims and causes
of action, pending or potential, which a debtor might have.” Eastman v. Union Pac.
R. Co., 493 F.3d 1151, 1159 (10th Cir. 2007); see also Mauerhan, 649 F.3d at 1184
n.3 (“When an individual files for bankruptcy, all interests of the debtor become
property of the bankruptcy estate, including causes of action.”); Sender v. Buchanan
(In re Hedged-Invs. Assocs., Inc.), 84 F.3d 1281, 1285 (10th Cir. 1996) (“Causes of
action belonging to the debtor fall within [§ 541(a)(1)].”).
4
Fed. R. Civ. P. 17(a)(3) provides that “[t]he court may not dismiss an action
for failure to prosecute in the name of the real party in interest until, after an
objection, a reasonable time has been allowed for the real party in interest to ratify,
join, or be substituted in the action.” This provision does not require a remand for
the district court to allow the trustee to ratify or join this action. We take judicial
notice that the bankruptcy court approved a settlement agreement between the
Chapter 7 trustee and U.S. Bank as trustee of the mortgage loan trust, whereby the
trust agreed to purchase the causes of action from the bankruptcy estate. See In re
Brumfiel, No. 11-39881 HRT, Doc. Nos. 115, 116 (Bankr. D. Colo. Mar. 20, 2015).
The trustee has no interest in litigating these claims on behalf of the estate. And
whether the bankruptcy trustee or the trust now owns the claims, Ms. Brumfiel is not
the real party in interest.
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Ms. Brumfiel argues that her claims did not accrue pre-petition because she
did not suffer an injury in fact until December 2012, when the state court initially
authorized the sale of her property in the Rule 120 proceeding. We disagree. For
one thing, she saw no impediment to filing her complaint in this action in October
2012, two months before the state court’s order. As the district court noted, the
amendments to § 38-38-101 were effective long before the bankruptcy proceeding,
and the Rule 120 proceeding was commenced before the bankruptcy proceeding.
Before she filed her bankruptcy petition, Ms. Brumfiel already had asserted the same
or similar theories, raised in opposition to the Rule 120 foreclosure, that she included
in her federal complaint. Accordingly, she was required to disclose the claims in her
bankruptcy proceeding. See Eastman, 493 F.3d at 1159; see also U.S. ex rel. Spicer
v. Westbrook, 751 F.3d 354, 361-62 (5th Cir. 2014) (holding that debtors must
disclose “all pending and potential claims” “as long as the debtor has enough
information to suggest that he may have a potential claim” (internal quotation marks
omitted)). The district court properly considered the claims to be part of the
bankruptcy estate.5
Because Ms. Brumfiel did not list the claims in her asset schedules, the trustee
neither administered them nor abandoned them at the close of the bankruptcy case,
and they remained the property of the bankruptcy estate. 11 U.S.C. § 554(d).
5
The Colorado Court of Appeals reached the same conclusion in
Ms. Brumfiel’s appeal of the judgment against her in the Rule 105 judicial
foreclosure action. See U.S. Bank, N.A., No. 14CA0464, slip op. at 5-10.
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Accordingly, Ms. Brumfiel lost the authority to pursue the claims. See Spicer,
751 F.3d at 362-64 & n.13; Tyler v. DH Capital Mgmt., Inc., 736 F.3d 455, 465
(6th Cir. 2013); Parker v. Wendy’s Int’l, Inc., 365 F.3d 1268, 1272 (11th Cir. 2004);
Dunmore v. United States, 358 F.3d 1107, 1112 (9th Cir. 2004); Vreugdenhill v.
Navistar Int’l Transp. Corp., 950 F.2d 524, 526 (8th Cir. 1991). That being so,
dismissal was appropriate.
III. CONCLUSION
The judgment of the district court is affirmed. Ms. Brumfiel’s motion to
proceed without prepayment of fees and costs is granted. Cynthia Mares’s motion to
dismiss her as a party to this appeal is denied. U.S. Bank’s motion to take judicial
notice of orders in Ms. Brumfiel’s reopened bankruptcy case is granted. U.S. Bank’s
requests to take judicial notice of state court orders, made in its response brief, are
granted. The Castle defendants’ request for sanctions under Fed. R. App. P. 38,
made in their response brief, is denied—it was not made in a separate motion, as
required by the rule.
ENTERED FOR THE COURT,
Scott M. Matheson, Jr.
Circuit Judge
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