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FILED

JAN 26 2016

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. CC-14-1101-KiBrD

)

LAUREL BELKIN GREENSTEIN, ) Bk. No. 1:12-15099-AA

)

Debtor. )

 )

)

LAUREL BELKIN GREENSTEIN, )

)

Appellant, )

)

v. ) M E M O R A N D U M1

)

WELLS FARGO BANK, N.A., )

SUCCESSOR BY MERGER WITH )

WELLS FARGO BANK SOUTHWEST, )

N.A., f/k/a WACHOVIA MORTGAGE,) 

FSB, f/k/a WORLD SAVINGS BANK,)

)

Appellee. )

 )

Argued and Submitted on July 23, 2015, 

at Pasadena, California

Filed - January 26, 2016

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Alan M. Ahart, Bankruptcy Judge, Presiding

 

Appearances: Appellant Laurel Belkin Greenstein argued pro se;

Robert A. Bailey of Anglin Flewelling Rasmussen

Campbell & Trytten LLP argued for appellee Wells

Fargo Bank, N.A. 

 

1 This disposition is not appropriate for publication. 

Although it may be cited for whatever persuasive value it may

have, it has no precedential value. See 9th Cir. BAP Rule 8024-1.
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Before: KIRSCHER, BRANDT2 and DUNN, Bankruptcy Judges.

Chapter 73 debtor Laurel Greenstein appeals an 

order denying her motion to set aside the sale of her home, a sale

she contends is void because it violated the automatic stay. The

bankruptcy court denied the motion on the basis of claim

preclusion, but failed to articulate any findings to support the

doctrine's application. Thus, we VACATE and REMAND for further

proceedings. 

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY 

A. The Lipkis bankruptcy case and the in rem order

In 2007, Debtor obtained a $510,000 loan from World Savings

Bank, predecessor to appellee Wells Fargo Bank, N.A., secured by a

deed of trust recorded against her residence in Woodland Hills,

California ("Property"). Debtor later defaulted and a notice of

default was recorded in July 2011. A notice of sale was recorded

on October 26, 2011, with a trustee's sale of the Property

scheduled for November 15, 2011. Meanwhile, Debtor sued Wells

Fargo and others in state court with respect to the pending

foreclosure in October 2011. On November 22, 2011, the state

court issued a temporary restraining order enjoining Wells Fargo

from selling the Property at foreclosure pending a hearing on the

issuance of a preliminary injunction scheduled for January 9,

2012.

2 Hon. Philip H. Brandt, Bankruptcy Judge for the Western

District of Washington, sitting by designation.

3 Unless specified otherwise, all chapter, code and rule

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and

the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. The

Federal Rules of Civil Procedure are referred to as “Civil Rules.”

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On November 10, 2011, five days before the scheduled sale, a

grant deed appeared to be recorded transferring title to the

Property from Debtor to Roger Lipkis ("Lipkis Deed"). On

November 18, 2011, Lipkis filed a chapter 13 bankruptcy case.4

Lipkis did not claim an interest in the Property.5 His case was

assigned to Judge Tighe. 

In February 2012, Debtor sent an email to counsel for Wells

Fargo in the state court action informing him that the Lipkis Deed

was a fake and appeared to be a "cut and paste" job. She denied

knowing Lipkis or executing the Lipkis Deed. In actuality, the

recording number on the Lipkis Deed — 20111253614 — is identified

with a tax lien document recorded on September 15, 2011 (two

months before the Lipkis Deed), against an unrelated third party.

It later became clear that the Property had been transferred

to Lipkis without his knowledge or consent or the consent of Wells

Fargo prior to him filing bankruptcy. On March 7, 2012, counsel

for Lipkis and Wells Fargo filed a stipulation to terminate the

automatic stay with respect to the Property under § 362(d)(1). 

The parties further agreed to in rem relief under § 362(d)(4). 

On March 19, 2012, the bankruptcy court entered an order in

the Lipkis case granting the stipulated motion for relief from

stay under § 362(d)(1) and (d)(4) ("In Rem Order"). The In Rem

4 Wells Fargo contends that Lipkis's bankruptcy filing on

November 18, 2011, stopped the pending trustee’s sale.

5 Notably, the Lipkis Deed indicates that Lipkis is an

"unmarried man," but his bankruptcy documents filed just eight

days later indicate that he is "married."

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 Order6 provides, in relevant part:

3. The motion is granted under: 

: 11 U.S.C. § 362(d)(1)

: 11 U.S.C. § 362(d)(4) (See attached

continuation page)

4. As to Movant, its successors, transferees and

assigns, the stay of 11 U.S.C. § 362(a) is:

a. : Terminated as to Debtor and Debtor's

bankruptcy estate.

5. : Movant may enforce its remedies to foreclose

upon and obtain possession of the Property in

accordance with applicable nonbankruptcy law.

9. : The filing of the petition was part of a

scheme to delay, hinder and defraud creditors

that involved either:

: transfer of all or part ownership of, or

other interest in, the Property without

the consent of the secured creditor or

court approval. (see attached

continuation page). 

If recorded in compliance with applicable state law

governing notices of interests or liens in the Property,

this Order is binding and effective under § 362(d)(4)(A)

and (B) in any other bankruptcy case purporting to affect

the Property filed not later than 2 years after the date

of the entry of this Order, except that a debtor in a

subsequent bankruptcy case may move for relief from this

Order based upon changed circumstances or for good cause

shown, after notice and a hearing. Any federal, state or

local government unit that accepts notices of interests or

liens in real property shall accept any certified copy of

this Order for indexing and recording.

The "attached continuation page" in the In Rem Order provides, in

relevant part:

6 Prior to December 22, 2010, the relevant language in

§ 362(d)(4) read “hinder, delay and defraud creditors” (emphasis

added). The Bankruptcy Technical Corrections Act of 2010, Pub. L.

No. 111-327, 124 Stat. 3557 (2010) (effective December 22, 2010)

replaced this language with “hinder, delay or defraud” (emphasis

added). The mandatory form used for the In Rem Order contained

the outdated “and” language.

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a. That [Lipkis] asserts no interest in the [Property]. 

b. That an interest in the Property was impermissibly

transferred to [Lipkis] without the knowledge of

[Lipkis]. Without [Lipkis's] consent, his Chapter 13

bankruptcy case proceeding is being used for an

improper purpose as part of a scheme to delay, hinder

and defraud creditors that involved a transfer of all

or part ownership of, or interest in the [Property]

without the consent of this Movant or court approval.

Nothing in the record indicates Debtor was given notice of

the stipulation or any motion to approve it or of the entry of the

order. A certified copy of the In Rem Order was recorded on

March 28, 2012. A new notice of sale for the Property was

recorded on May 14, 2012, with a trustee's sale scheduled for

June 4, 2012. 

B. Debtor's bankruptcy case and her multiple attempts to vacate

the In Rem Order and/or to seek damages from the alleged stay

violation 

1. The Lipkis motions and Debtor's adversary proceedings 

Debtor filed a chapter 7 bankruptcy case on May 31, 2012,

five days before the rescheduled foreclosure sale of the Property. 

Her case was assigned to Judge Ahart. Debtor identified an

interest in the Property valued at $975,000, subject to Wells

Fargo's secured claim of $575,000. Debtor claimed a homestead

exemption of $150,000.

A trustee's sale of the Property proceeded on July 11, 2012.7

Wells Fargo was the successful bidder with a credit bid of

$563,411.26. A trustee's deed was recorded on November 13, 2012. 

Debtor, pro se, proceeded thereafter to file three post-sale

7 The sale set for June 4 was apparently delayed to July 11

due to Debtor's listing of the Property in her bankruptcy

schedules and the chapter 7 trustee's ("Trustee") attempt to list

and sell the Property on behalf of the estate.

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motions in the Lipkis bankruptcy case attempting to obtain relief

from the In Rem Order. On August 7, 2012, Debtor filed a "Motion

for Hearing to Reverse Order Granting Motion for Relief Under

11 U.S.C. § 362 (Real Property)." Debtor alleged that the facts

presented in the stipulation by counsel for Lipkis and Wells Fargo

were false, and that Wells Fargo had used the In Rem Order to

bypass the automatic stay in her bankruptcy case and sell the

Property. Debtor alleged that the Lipkis Deed was a fake and that

she never transferred the Property to Lipkis, whom she did not

know. Debtor further alleged that while Trustee was not

challenging the July 11 sale, she had previously stated in writing

to Wells Fargo and Debtor that the In Rem Order was improper. 

Debtor presented no evidence to support Trustee's alleged written

statement.8 

Before the August 7 motion could be heard, Debtor filed an

"Amended Motion for Hearing to Reverse Order Granting Motion for

Relief Under 11 U.S.C. § 362 (Real Property)" on August 14, 2012. 

This motion was identical to the first motion, except for the

inclusion of a declaration from Debtor. Debtor said she knew who

did the "cut and paste" job to create the fake Lipkis Deed and get

it to Wells Fargo, but she could not prove it. In any event, she

denied any involvement. Debtor stated that the notary who

allegedly signed the Lipkis Deed was willing to testify that she

8 Debtor later included a copy of an email from Trustee to

Wells Fargo's counsel dated July 11, 2012 — the day of the sale —

with her motion to set aside the sale filed in December 2013. In

that email, Trustee opined "[t]here is no in rem relief contained

in the [In Rem Order]." Trustee further opined that the sale had

violated the automatic stay and had to be reversed immediately. 

Trustee indicated that significant equity existed in the Property

(about $133,000 based on a $749,000 sale price).

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never notarized the document and that she had no record of it in

her notary book.

Two days later on August 16, 2012, Debtor filed a third

motion — "Motion to set hearing Re contempt." In this motion,

Debtor requested that the bankruptcy court find counsel for Lipkis

and Wells Fargo in contempt for their alleged willful

misrepresentations made to the court in their stipulation for stay

relief in the Lipkis bankruptcy case.

Four days after filing the last of her three motions in the

Lipkis bankruptcy case, Debtor in her own bankruptcy case filed an

adversary proceeding against Wells Fargo, its counsel and counsel

for Lipkis, Adv. No. 12-1300 ("First Adversary Proceeding").

Although her complaint failed to set forth any precise claim for

relief, Debtor attacked the validity of the In Rem Order and

contended that the July 11 sale was void because it violated the

automatic stay in effect in her case. Debtor requested that title

to the Property be restored to her and that she be awarded

monetary damages for the alleged stay violation. 

Wells Fargo moved to dismiss the First Adversary Proceeding

on September 24, 2012, asserting several theories as to why the

complaint should be dismissed, including that Debtor lacked

standing to bring the action. Wells Fargo argued that the claims

asserted by Debtor arose out of an alleged prepetition action and

were property of the bankruptcy estate. Because Debtor had not

scheduled these alleged claims and/or because Trustee had not yet

abandoned them, Wells Fargo argued that Debtor lacked standing to

pursue them on her own behalf. A hearing on Wells Fargo's motion

to dismiss was scheduled for October 23, 2012. Meanwhile, on

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October 4, 2012, Trustee filed her notice of intent to abandon the

Property as burdensome and of inconsequential value to the estate. 

No objections were filed. 

The hearing on Wells Fargo's motion to dismiss the First

Adversary Proceeding went forward on October 23, 2012. We do not

have a transcript, but because Debtor filed another adversary

proceeding the next day, we assume the bankruptcy court announced

its intent to dismiss the First Adversary Proceeding at that

hearing. 

The court entered an order on November 1, 2012, granting

Wells Fargo's motion to dismiss without leave to amend on the

basis that "Debtor has no standing." The First Adversary

Proceeding was closed shortly thereafter. Debtor did not appeal

the dismissal of the First Adversary Proceeding.

Before the First Adversary Proceeding was dismissed, Debtor

filed a second adversary proceeding against the same defendants on

October 24, 2012, Adv. No. 12-1379 ("Second Adversary

Proceeding"). The complaint in the Second Adversary Proceeding

was virtually identical to the first one, except Debtor asserted

that she now had standing to pursue the action against defendants

because Trustee had abandoned the Property. All three defendants

filed separate motions to dismiss under Civil Rule 12(b)(6). 

Wells Fargo filed its motion to dismiss on November 26, 2012. It

contended that Debtor still lacked standing to pursue the action

despite Trustee's abandonment of the Property, because her

purported claims arose out of an alleged prepetition action

respecting the loan for the Property and those claims had not been

abandoned by Trustee. 

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On December 4, 2012, Judge Tighe ruled on Debtor's post-sale

motions filed in Lipkis's bankruptcy case, denying all three. 

Judge Tighe noted that Debtor had filed the Second Adversary

Proceeding on October 24, 2012, in her own case which stated the

same allegations of fact that were the basis for the three

motions. Judge Tighe opined that the Second Adversary Proceeding,

rather than the post-sale motions, was the proper action for

Debtor to address her complaints. Debtor did not appeal the

orders. 

On December 19, 2012, the bankruptcy court held a hearing on

two of the defendants' motions to dismiss the Second Adversary

Proceeding. Wells Fargo's motion was not scheduled to be heard

until January 2, 2013, but it appeared at the December 19 hearing. 

As for the other two defendants, the bankruptcy court entered two

orders dismissing the Second Adversary Proceeding without leave to

amend on December 26 and 27, 2012. Before Wells Fargo's motion

was heard, Debtor voluntarily dismissed the Second Adversary

Proceeding without prejudice on December 28, 2012. The Second

Adversary Proceeding was closed July 24, 2013.9 

9 A hearing on Wells Fargo's motion to dismiss the Second

Adversary Proceeding went forward on January 2, 2013, but Debtor

failed to appear. Judge Ahart announced at that hearing that he

would grant Wells Fargo's motion and dismiss the Second Adversary

Proceeding with prejudice, not knowing that Debtor had already

dismissed it without prejudice several days prior. For reasons

unknown, and without ever conducting a hearing, Judge Ahart then

entered an order granting Wells Fargo's motion to dismiss and

dismissing the Second Adversary Proceeding with prejudice on

February 7, 2014, even though the proceeding had already been

dismissed and closed on July 24, 2013. The order did not set

forth the reasons for the dismissal. Debtor tried to appeal the

February 7 dismissal order on August 11, 2014, and at the same

time filed a motion to reconsider in the bankruptcy court. We

(continued...)

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2. Debtor's motion to set aside the sale of the Property 

Debtor, pro se, filed the instant motion in her bankruptcy

case against Wells Fargo (only) on December 27, 2013. By this

time, she had been evicted from the Property. Essentially, Debtor

sought damages for Wells Fargo's alleged willful violation of the

automatic stay. As with her prior motions and adversary

complaints, Debtor contended that because Wells Fargo had failed

to seek relief from stay in her bankruptcy case, Wells Fargo

violated the stay when it foreclosed on the Property on July 11,

2012. Debtor made no mention of the In Rem Order. 

Wells Fargo maintained that it had not violated the automatic

stay because the In Rem Order entered and recorded in March 2012

authorized the trustee's sale on July 11, 2012, despite Debtor's

bankruptcy filing on May 31, 2012. Therefore, because the sale

9(...continued)

dismissed the appeal as untimely on September 29, 2014. Debtor’s

reconsideration motion went forward.

On July 8, 2015, Debtor informed the Panel of recent

developments respecting her motion to reconsider the dismissal

order entered on February 7, 2014. On June 25, 2015, Judge Barash

(to whom the adversary proceeding had been assigned) entered an

order allowing supplemental briefing on the matter, realizing the

court's potential mistake of dismissing the Second Adversary

Proceeding with prejudice when Debtor had already dismissed it

without prejudice. The bankruptcy court scheduled a hearing for

August 19, 2015. On September 1, 2015, the bankruptcy court

granted Debtor’s motion and vacated the February 7, 2014 order

dismissing the Second Adversary Proceeding. Debtor subsequently

filed a third adversary proceeding, 1:15-ap-01220-MB. On

December 15, 2015, the bankruptcy court dismissed the third

adversary proceeding with leave to amend prior to February 5,

2016. To the extent the parties have requested that we take

judicial notice of these recent developments, we GRANT that

request. Otherwise, we are able to take judicial notice of the

existence, filing and content of documents filed in Debtor’s

underlying bankruptcy case and her related adversary proceedings. 

O’Rourke v. Seaboard Surety Co. (In re E.R. Fegert, Inc.),

887 F.2d 955, 957-58 (9th Cir. 1989).

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did not violate the automatic stay, Wells Fargo argued that no

basis existed for setting it aside. 

In her reply, Debtor contended that the In Rem Order did not

apply in her case because: (1) the Lipkis court had no authority

or jurisdiction to make any order relating to the Property;

(2) the Property was never part of the Lipkis bankruptcy nor did

Lipkis ever claim any interest in it; and (3) Wells Fargo knew

months before the sale the Lipkis Deed was a fake and was never

recorded. Debtor further contended that the In Rem Order provided

no findings of an intent to hinder, delay or defraud creditors;

there was only a stipulation to that by parties she alleged had no

authority to make the stipulation. Debtor contended she had no

opportunity to address the allegations raised in support of the

In Rem Order. 

Prior to the hearing on February 12, 2014, the bankruptcy

court issued a tentative ruling sua sponte denying Debtor’s motion

on the basis of claim preclusion. The court stated that because

it had "previously determined that debtor is unable to void the

sale, the debtor cannot do so now via the motion." 

At the hearing, Debtor was represented by attorney Lenore

Albert ("Albert"). Albert sought clarification from the

bankruptcy court as to which order or judgment had already

determined the issues raised in Debtor's motion. The court never

directly answered Albert's question, but when it noted that Wells

Fargo had filed a motion to dismiss the Second Adversary

Proceeding, Albert responded that the proceeding was dismissed

only as to the other two defendants, not as to Wells Fargo; Debtor

dismissed that proceeding without prejudice before Wells Fargo's

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motion was decided. Nonetheless, Albert argued that even if the

Second Adversary Proceeding had been dismissed as to Wells Fargo

under Civil Rule 12(b)(6), such dispositions are not final

judgments on the merits. 

Counsel for Wells Fargo conceded that Wells Fargo had not

been dismissed from the Second Adversary Proceeding before Debtor

dismissed it without prejudice, but argued that the issue of the

validity of the In Rem Order was decided in that proceeding as to

the other defendants when they were dismissed. The bankruptcy

court agreed and set forth its oral ruling: 

THE COURT: Well, you know, I'm going to – first of all,

I agree with opposing counsel. I've already ruled on the

merits – how do I put this – it's really – you say res

judicata. I haven't used the word res judicata. I've

ruled on the particular claims here on the merits. Okay. 

So I wouldn't call that – you want to call it collateral

estoppel, claim preclusion, whatever, it's there. It's

been done. She's had her bites at the apple. Okay. So

this – that's why I said what I said in the tentative. 

So I believe she is barred from bringing this motion at

this point. 

. . . .

So I'm going to stick to my tentative and I'm going to

deny the motion and ask opposing counsel to prepare the

order. 

Hr'g Tr. (Feb. 12, 2014) at 8:2-14, 8:19-21. The order denying

Debtor's motion to set aside the sale of the Property entered on

March 5, 2014, states only that the motion was "denied." This

timely appeal followed.10

10 On July 9, 2015, Debtor filed a motion for sanctions. Her

motion is essentially an unauthorized third brief for her appeal. 

Instead of the $150,000 she requested in her Second Adversary

Proceeding, Debtor now seeks compensatory damages of "not less

than $5,000,000" and "substantial punitive damages." The Panel

cannot grant Debtor such relief in the context of this appeal,

(continued...)

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II. JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334

and 157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158. 

III. ISSUE

Did the bankruptcy court err in denying Debtor's motion to

set aside the sale of the Property on the basis of claim

preclusion? 

IV. STANDARDS OF REVIEW

We review rulings regarding the availability of res judicata

doctrines, including claim preclusion, de novo as mixed questions

of law and fact in which legal questions predominate. George v.

City of Morro Bay (In re George), 318 B.R. 729, 732-33 (9th Cir.

BAP 2004) (citing Robi v. Five Platters, Inc., 838 F.2d 318, 321

(9th Cir. 1988), and Alary Corp. v. Sims (In re Associated Vintage

Grp., Inc.), 283 B.R. 549, 554 (9th Cir. BAP 2002)). Once we

determine that the doctrines are available to be applied, the

actual decision to apply them is left to the trial court's

discretion. In re George, 318 B.R. at 732-33 (citing Robi,

838 F.2d at 321).

The Panel must apply a two-part test to determine whether the

bankruptcy court abused its discretion. United States v. Hinkson,

585 F.3d 1247, 1261-62 (9th Cir. 2009) (en banc). First, we

consider de novo whether the bankruptcy court applied the correct

legal standard. Id. A bankruptcy court abuses its discretion if

10(...continued)

even if we reversed. Any proof of damages would have to be

presented in the first instance to the bankruptcy court. 

Accordingly, we DENY the sanctions motion.

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it applied the wrong legal standard or its findings were

illogical, implausible, or without support in the record. See

TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th

Cir. 2011).

V. DISCUSSION

A. Governing law

1. Section 362

The filing of a bankruptcy petition creates an automatic 

stay. See generally § 362(a). Unless an exception enumerated in

§ 362(b)(1)-(28) applies, the automatic stay prohibits, among

other things, any act to enforce a lien against property of the

debtor or of the bankruptcy estate. § 362(a)(4), (5). Actions

taken by creditors in violation of the automatic stay are void. 

Griffin v. Wardrobe (In re Wardrobe), 559 F.3d 932, 934 (9th Cir.

2009). In cases of a willful violation, the injured individual

can recover actual damages, including costs and attorney's fees,

and, in appropriate circumstances, may recover punitive damages. 

§ 362(k)(1); Eskanos & Adler, P.C. v. Leetien, 309 F.3d 1210, 1215

(9th Cir. 2002). 

Section 362(d)(4)11 permits the bankruptcy court to grant "in

11 The text of § 362(d)(4) in effect at the time the In Rem

Order was entered stated:

(d) On request of a party in interest and after notice and a

hearing, the court shall grant relief from the stay . . .

such as by terminating, annulling, modifying, or conditioning

such stay – . . . 

(4) with respect to a stay of an act against real

property under subsection (a), by a creditor whose claim

is secured by an interest in such real property, if the

court finds that the filing of the petition was part of

(continued...)

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rem" relief from the automatic stay to a creditor whose legitimate

foreclosure efforts are being thwarted through one or more

transfers of interest or multiple bankruptcy filings. "An order

entered under § 362(d)(4) has serious implications. By seeking

relief under § 362(d)(4), the creditor requests specific

prospective protection against not only the debtor, but also every

non-debtor, co-owner, and subsequent owner of the property." 

First Yorkshire Holdings, Inc. v. Pacifica L 22, LLC (In re First

Yorkshire Holdings, Inc.), 470 B.R. 864, 871 (9th Cir. BAP 2012). 

See also § 362(b)(20).12 

11(...continued)

a scheme to delay, hinder, or defraud creditors that

involved either – 

(A) transfer of all or part ownership of, or other

interest in, such real property without the consent

of the secured creditor or court approval; or

(B) multiple bankruptcy filings affecting such real

property. 

If recorded in compliance with applicable State laws

governing notices of interests or liens in real property, an

order entered under paragraph (4) shall be binding in any

other case under this title purporting to affect such real

property filed not later than 2 years after the date of the

entry of such order by the court, except that a debtor in a

subsequent case under this title may move for relief from

such order based upon changed circumstances or for good cause

shown, after notice and a hearing. Any Federal, State, or

local governmental unit that accepts notices of interests or

liens in real property shall accept any certified copy of an

order described in this subsection for indexing and

recording.

12 Section 362(b)(20) provides that the filing of a petition

does not operate as a stay "under subsection (a), of any act to

enforce any lien against or security interest in real property

following entry of the order under subsection (d)(4) as to such

real property in any prior case under this title, for a period of

2 years after the date of the entry of such an order, except that

the debtor, in a subsequent case under this title, may move for

relief from such order based upon changed circumstances or for

other good cause shown, after notice and a hearing."

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Thus, not only does the § 362(d)(4) order grant stay relief

to the moving party in the immediate bankruptcy case, if properly

recorded, it also gives the moving party stay relief in subsequent

bankruptcy cases. See Alakozai v. Citizens Equity First Credit

Union (In re Alakozai), 499 B.R. 698, 703 (9th Cir. BAP 2013).

2. Claim preclusion

Claim preclusion, sometimes referred to as res judicata,

prohibits relitigation of "any claims that were raised or could

have been raised" in a prior action between the same parties or

their privies. Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d

708, 713 (9th Cir. 2001). The doctrine "serves to promote

judicial efficiency by preventing multiple lawsuits and to enable

the parties to rely on the finality of adjudications." Dodd v.

Hood River Cty., 136 F.3d 1219, 1224-25 (9th Cir. 1998). Claim

preclusion bars a plaintiff from relitigating claims adjudicated

in a prior judgment, even if the prior decision was wrongly

decided. See, e.g., Federated Dep't Stores, Inc. v. Moitie,

452 U.S. 394, 398 (1981)("Nor are the res judicata consequences of

a final, unappealed judgment on the merits altered by the fact

that the judgment may have been wrong or rested on a legal

principle subsequently overruled in another case.").

Claim preclusion requires three elements: (1) an identity of

claims; (2) a final judgment on the merits; and (3) the same

parties or privity between the parties. Owens, 244 F.3d at 713. 

The Ninth Circuit has mandated a four factor test for determining

whether there is an identity of claims: "(1) whether rights or

interests established in the prior judgment would be destroyed or

impaired by prosecution of the second action; (2) whether

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substantially the same evidence is presented in the two actions;

(3) whether the two suits involve infringement of the same right;

and (4) whether the two suits arise out of the same transactional

nucleus of facts." Harris v. Cty. of Orange, 682 F.3d 1126, 1132

(9th Cir. 2012). The common nucleus criterion is the most

important. Id. 

B. The bankruptcy court abused its discretion when it applied

claim preclusion to Debtor's motion to set aside the sale of

the Property. 

Debtor first contends that it was reversible error for the

bankruptcy court to apply claim preclusion sua sponte to the

motion to set aside the sale. We disagree. 

The court may dismiss an action sua sponte where a defense of

claim preclusion is not raised by a defendant. United States v.

Sioux Nation of Indians, 448 U.S. 371, 432 (1980). As the Supreme

Court explained, the policy underlying this doctrine is "not based

solely on the defendant's interest in avoiding the burdens of

twice defending a suit, but [is] also based on the avoidance of

unnecessary judicial waste." Id.; see also Clements v. Airport

Auth. of Washoe Cty., 69 F.3d 321, 329 (9th Cir. 1995). A

district court's sua sponte recognition of claim preclusion is

"entirely proper" when the parties are permitted to address the

question before the court. See McClain v. Apodaca, 793 F.2d 1031,

1033 (9th Cir. 1986). Although Wells Fargo did not specifically

raise claim preclusion, the bankruptcy court was free to do so. 

Further, the court put Debtor on notice of the question in its

tentative ruling, and she had an opportunity to address it at the

hearing before a final decision was rendered. 

We are concerned, however, with Debtor's argument that the

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bankruptcy court failed to articulate any findings as to why claim

preclusion applied. The court seemed to indicate at the hearing

that it had already decided the merits of Debtor's claims in the

Second Adversary Proceeding. But, without any findings, we cannot

know for sure. We must consider the bankruptcy court’s

application of claim preclusion and determine whether an abuse of

discretion occurred in that application. 

1. Identity of claims

Both the First Adversary Proceeding and the instant motion

are based on the same set of facts under the transactional test.

In re George, 318 B.R. at 735, citing W. Sys., Inc. v. Ulloa,

958 F.2d 864, 871 (9th Cir. 1991); Restatement (Second) of

Judgments § 24. In both actions, Debtor alleged the same course

of conduct: that the In Rem Order was invalid due to the fake

Lipkis Deed and the alleged false statements made by Wells Fargo

in the stipulation; that the July 11, 2012 foreclosure sale was

void because Wells Fargo had willfully violated the automatic stay

by not first seeking stay relief in her case; and that Debtor was

damaged as a result of Wells Fargo's alleged stay violation. In

addition, the same evidence was presented in both actions and the

two actions involved infringement of the same rights. Clearly,

the instant motion and the First Adversary Proceeding13 have an

identity of claims. 

2. Identity of parties

It is undisputed that Debtor sued Wells Fargo in the First

13 The Second and Third Adversary Proceedings also have an

identity of facts under the transactional test similar, if not

nearly identical, to the First Adversary Proceeding and instant

motion.

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Adversary Proceeding and in her motion to set aside the sale of

the Property. Therefore, this criterion is met. 

3. Final judgment on the merits

Debtor contends that her voluntary dismissal of the Second

Adversary Proceeding without prejudice, which was entered before

Wells Fargo's motion to dismiss that action was heard or decided,

was not a final judgment on the merits. The bankruptcy court

failed to identify which proceeding or order constituted the basis

for applying claim preclusion. Under Rule 7041, incorporating

Civil Rule 41(a)(1)(B), the voluntary dismissal by Debtor of the

Second Adversary Proceeding as to Wells Fargo was without

prejudice and was not an adjudication on the merits. Did the

disposition of the First Adversary Proceeding have any effect on

Debtor’s motion to set aside the sale? 

Wells Fargo moved to dismiss the First Adversary Proceeding

under Civil Rule 12(b)(1), (4) and (6). In that motion, Wells

Fargo challenged Debtor's standing. The bankruptcy court entered

an order on November 1, 2012, granting Wells Fargo's motion under

Civil Rule 12(b)(6) for failure to state a claim based on Debtor's

lack of standing. The court dismissed another defendant, Lipkis's

counsel, on the same ground before that on October 24, 2012. Both

orders state that the First Adversary Proceeding was dismissed

"without leave to amend." Debtor did not appeal these orders; the

First Adversary Proceeding was closed shortly thereafter. 

Although the bankruptcy court granted the motions to dismiss

under Civil Rule 12(b)(6), it did so on the basis that Debtor

lacked standing. Standing is a threshold question that must be

resolved before proceeding to the merits of a case. L.A. Cty. Bar

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Ass'n v. Eu, 979 F.2d 697, 700 (9th Cir. 1992). See also Lujan v.

Defs. of Wildlife, 504 U.S. 555, 570 n.5 (1992)(Article III

standing like other bases of jurisdiction must be present at the

inception of the lawsuit). Therefore, because standing is

jurisdictional, lack of standing precludes a ruling on the merits. 

Media Techs. Licensing, LLC v. Upper Deck Co., 334 F.3d 1366, 1370

(Fed. Cir. 2003)(citing Scott v. Pasadena Unified Sch. Dist.,

306 F.3d 646, 653-54 (9th Cir. 2002)("[w]e must establish

jurisdiction before proceeding to the merits of the case"); Bird

v. Lewis & Clark Coll., 303 F.3d 1015, 1019 (9th Cir. 2002)

(recognizing that before reaching merits of the case the court

must determine the threshold issue of standing). Accord Stewart,

297 F.3d at 957.

Without question, “a judgment in favor of a defendant

ordinarily bars the plaintiff from maintaining another action on

the same claim.” In re George, 318 B.R. at 735. But the

bankruptcy court failed to consider the implications of dismissal

for lack of standing, which is jurisdictional and precludes a

ruling on the merits. See Restatement (Second) of Judgments § 19

& 20.14 

14 The General Rule of Bar is:

§ 19. Judgment for Defendant—The General Rule of Bar

A valid and final personal judgment rendered in favor of

the defendant bars another action by the plaintiff on the

same claim.

RESTATEMENT (SECOND) OF JUDGMENTS § 19.

The exceptions to the General Rule of Bar are:

§ 20. Judgment for Defendant—Exceptions to the General

(continued...)

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C. Procedural Due Process

We do not reach the question of whether procedural due

process was satisfied when, after Debtor had informed Wells

Fargo’s counsel that she challenged the validity of the Lipkis

Deed, Wells Fargo apparently failed to notice Debtor of the

stipulation for in rem relief from stay or its motion for approval

of it. Debtor was, after all, the borrower and the record title

holder if her allegation was correct – clearly someone whose

property interest would be affected if in rem relief were granted. 

See Ford v. Ford (In re Ford), 159 B.R. 590, 594 (Bankr. D. Or.

1993). Without dispute, Debtor has enjoyed due process in the

subsequent motions and proceedings. 

Given the procedural history and pending proceedings, we

conclude that vacating and remanding the order denying the motion

14(...continued)

Rule of Bar

(1) A personal judgment for the defendant, although valid

and final, does not bar another action by the plaintiff on

the same claim:

(a) When the judgment is one of dismissal for lack of

jurisdiction, for improper venue, or for nonjoinder or

misjoinder of parties; or

(b) When the plaintiff agrees to or elects a nonsuit (or

voluntary dismissal) without prejudice or the court

directs that the plaintiff be nonsuited (or that the

action be otherwise dismissed) without prejudice; or

(c) When by statute or rule of court the judgment does not

operate as a bar to another action on the same claim, or

does not so operate unless the court specifies, and no

such specification is made.

(2) A valid and final personal judgment for the defendant,

which rests on the prematurity of the action or on the

plaintiff's failure to satisfy a precondition to suit,

does not bar another action by the plaintiff instituted

after the claim has matured, or the precondition has been

satisfied, unless a second action is precluded by

operation of the substantive law.

RESTATEMENT (SECOND) OF JUDGMENTS § 20.

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to set aside the sale of the Property allows the bankruptcy court

to consider questions discussed herein in one comprehensive

proceeding.15

IV. CONCLUSION 

For the foregoing reasons, we VACATE and REMAND for further

proceedings consistent with this memorandum.16

15 We disagree with Wells Fargo's contention that this appeal

is "moot." Because Debtor was seeking stay violation damages

under § 362(k), this appeal would never be moot. Further, it does

not appear from the record that Wells Fargo has sold the Property

to a third party. Even if it has, that fact would not absolve

Wells Fargo from any potential stay violation damages.

16 Debtor filed a request for judicial notice along with her

opening brief on appeal. She asks the Panel to take judicial

notice of three documents: (1) a copy of the complaint filed in

the First Adversary Proceeding; (2) the order dismissing the First

Adversary Proceeding; and (3) one of the three orders entered by

Judge Tighe respecting the post-sale motions filed in Lipkis's

bankruptcy case. Because we are able to take judicial notice of

the existence, filing and content of documents filed in Debtor's

underlying bankruptcy case and her related adversary proceedings,

In re E.R. Fegert, Inc., 887 F.2d at 957–58, we GRANT Debtor's

request for judicial notice of these documents.

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