638 B.R. 416
9th Cir. BAP2022Background
- James Pengilly took a BANA loan in 2009 secured by a deed of trust; the loan is now owned by Fannie Mae and serviced by Shellpoint (assignee of the deed of trust).
- HOA foreclosure in 2013 resulted in KAH purchasing the Property; title later transferred through KAH II to Censo (managed by same principal).
- Pengilly sued; litigation removed to federal court. Ditech (Green Tree) counterclaimed asserting its lien survived the HOA sale; Ditech moved for summary judgment.
- Censo filed Chapter 11 in October 2019; the district court thereafter granted Ditech summary judgment, declaring Fannie Mae’s senior lien survived the sale (the “DC Order”).
- Censo filed an adversary in bankruptcy alleging deed-of-trust defects (wrong address, omitted HOA reference) and sought disallowance of Shellpoint’s secured claim; defendants moved to dismiss on claim-preclusion and sufficiency grounds.
- The bankruptcy court dismissed the complaint (finding claim preclusion and insufficiency) and denied leave to amend as futile; Censo appealed, arguing for the first time that the DC Order is void as a violation of the automatic stay.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the DC Order is void as a violation of the automatic stay (§ 362) | DC Order entered post-petition and adjudicated rights in estate property, so it is void ab initio | The DC Order resolved Ditech’s counterclaims as a defense to KAH’s cross-claims and did not disturb the status quo or create/perfect/enforce a lien | Not void; no violation of § 362(a)(1),(3),(4),(5) under these facts |
| Whether claim preclusion bars Censo’s bankruptcy claims | Preclusion inapplicable because parties and claims differ and deed issues were disclosed late | DC Order is a final judgment on the merits; Censo abandoned most preclusion arguments on appeal | Claim preclusion applies; Censo waived many arguments and relief is barred |
| Whether dismissal without leave to amend was an abuse of discretion | Censo urged opportunity to amend to plead alternative bankruptcy-specific claims | Defendants: amendment would be futile because DC Order precludes relief | Denial was not an abuse of discretion; amendment would be futile |
Key Cases Cited
- Movsesian v. Victoria Versicherung AG, 670 F.3d 1067 (9th Cir. 2012) (standard of review for 12(b)(6) dismissal in bankruptcy)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for pleadings)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (limits on conclusory allegations in pleadings)
- City of Chicago v. Fulton, 141 S. Ct. 585 (2021) (§ 362(a)(3) protects status quo; mere retention of control not necessarily a stay violation)
- Stewart v. U.S. Bancorp, 297 F.3d 953 (9th Cir. 2002) (elements of federal claim preclusion)
- Parker v. Bain, 68 F.3d 1131 (9th Cir. 1995) (disaggregation of claims to determine whether stay applies)
- Maritime Elec. Co. v. United Jersey Bank, 959 F.2d 1194 (3d Cir. 1992) (treatment of separate claims/counterclaims when assessing stay applicability)
- In re E.R. Fegert, Inc., 887 F.2d 955 (9th Cir. 1989) (appellate court may judicially notice bankruptcy records)