### NOT FOR PU BLICA TION

U NIT E D ST A T E S BA NK RU PT CYA PPE L L A T E PA N E L

OF T HE NINT H CIRCU IT In re: PRI N C IPIAEQ U ITA S LLC,

Deb to r. C HA RLES BA RK ER

, III, A p pellant,

v. K EN N ETH S. EILER

, Trustee, A p pellee. BA P N o . O R -18-1128-SK uF Bk. N o . 18-30028-tm

b 7

M E M O RA ND U M *

A rgued and Sub m itted o n March 20, 2019

a t Po rtland, O rego n Filed – March 28, 2019 A ppeal fro m the U nited States Bankruptcy C o urt

fo r the Distric t o f O rego n 

# FIL ED MAR 28 2019 SUSAN M . SPRAUL, CLERK U

. S. B KCY

. APP. PANEL O F T HE NI N T H CI R CUI T

* Thi s di sposi ti on i s not appr opr i ate for publi cati on. Although i t may be ci ted for whatev er per suasiv e v alue i t may hav e, see Fed. R. App. P. 32.1, i t has no pr ecedenti al v alue. See 9th Ci r . BAP Rule 8024-1.Ho no rab le Trish M. Bro wn, Bankruptcy Judge, Presiding

A ppearanc es: A p pellant C harles Barker, III, argued prose. Befo r e: SPRA K ER

, KU RTZ, and FA R IS, Bankruptcy Judges.

INT ROD U CT I ON A ppellant C harles Barker, III, is the so le o wner and m anaging m emb er o f chapter 7 1 deb t o r Princ ipia Equitas LLC . Princ ipia’s so le asset is a parc el o f real pro p erty. Barker do es no t dispute that there is, o f rec o rd, a first deed o f trust fully enc u mb ering the pro perty. Fo ryears, Barker has b een litigating in no nb ankruptc y c o urts with the alleged ho lder o f the first deed o f trust: Bank o f N ew Y o rk Mello n (the “Bank”). Barker filed a series o f m o tio ns in the b ankruptc y c o urt seeking to objec t to the Bank’s secured c laimeven tho ugh the Bank never filed a pro o f o f c laimand even tho ugh the c hapter 7 trustee filed a final repo rt identifying Princ ipia’s b ankruptc y c ase as a no -asset c ase. The b ankruptc y c o urt held that it had no autho rity to adjudic ate Barker’s c laimobj ec tio n b ec ause the Bank had no t filed a pro o f o f c laimand denied each o f Barker’s m o tio ns. W e agree that Barker’s m o tio ns were no twell taken. Barker c o uld no t initiate the c laim s adjudic atio n pro c ess b y filing a c laimobj ec tio n against

1 Unless speci fi ed other wi se, all chapterand secti on r efer ences ar e to the Bankr uptcy Code, 11 U.S
. C. §§ 101-1532. 2an alleged sec ured c redito r who had no t filed a pro o f o f c laim
.

A c c o rdingly, we A FFIRM the b ankruptc y c o urt’s o rders denying Barker’s m o tio ns. FA CT S O n January 4, 2018, Principia c o m m enc ed its b ankruptc y c ase b y filing a vo luntary chapter 7 petitio n. Barker signed the petitio n o n b ehalf o f Princ ipia as its m a naging m emb er. The petitio n identified the c ase as a single-asset real estate c ase. The sub jec t real estate is lo c ated in Po rtland, O rego n. In its schedules, Princ ipia listed the value o f the pro p erty at $668,840.00. Principia also listed secured deb t enc umb ering the pro perty o f $944,114.71, o f whic h $862,423.00 was the disputed claimo f the Bank. Barker has b een litigating fo r years in a num b er o f different c o urts o ver the b o na fides o f the first trust deed o f rec o rd enc umb ering the pro perty. The b ankruptc y petitio n and schedules dono t identify the type o f real pro perty invo lved, b ut the papers filed in the no nb ankruptc y litigatio n indic a te that the pro perty is a parc el o f residential real pro perty. 2 Many o f Barker’s filings are redundant, and the purpo se o f so m e o f them is ob scure. R egardless, in the final analysis, they all b o il do wn to a

2 We can and do take j u di ci al noti ce of the contents of the case dockets i n each of the lawsui ts that Bar ker has i d enti fi ed as per tainin g to the subj ect r eal pr oper ty. Estate of Blue v. Cty. of L.A. , 120 F.3d 982, 984 (9th Ci r . 1997). We also take j udi ci al noti c e of the contents of the under l yin g bankr uptcy case docket. O ' Rourke v. Seaboard Sur. Co. (In re E.R. Fegert, Inc.) , 887 F.2d 955, 957–58 (9th Ci r . 1989). 3single po int; Barker so ught to objec t to the sec u red c laimo f the Bank. But

the Bank did no t file a pro o f o f c laimo r o therwise partic ipate in the b ankruptc y c ase, and the trustee’s final repo rt designated Princ ipia’s b ankruptc y c ase as a no -asset c ase. O n March 20, 2018, the chapter 7 trustee filed an asset invento r y repo rt indic ating that there m ight b e assets todistrib ute to c redito rs. The initial repo rt inc luded an o rder and no tic e issued b y the b ankruptc y c o urt c lerk’s o ffic e direc ting c redito rs to file pro o fs o f c laim o n o r b efo r e June 18, 2018. Ho wever, two days later, o n March 22, 2018, the trustee filed an am ended repo r t indic ating that there were no assets todistrib ute to c redito rs and henc e the b ankruptc y c ase had b een fully adm inistered. O n March 29, 2018, Barker filed a no tic e indic ating that he later wo uld file an objec tio n to the trustee’s March 20, 2018 asset invento ry repo rt. O n A pril 2, 2018, the b ankruptc y c o urt issued a letter in respo nse to Barker’s no tic e. The c o urt po inted o ut that the March 20, 2018 repo rt had b een superseded b y the trustee’s March 22, 2018 no -asset repo r t. The c o urt direc ted Barker to file an am ended obj ec tio n if he disputed the trustee’s am ended repo r t. O ne day later, o n A pril 3, 2018, Barker filed a new no tic e. This o ne disputed the c laimo f the Bank. Barker asserted that any interest the Bank c laim ed in the pro perty was sub jec t to dispute b o th in term s o f am o unt and validity. A c c o rding to Barker, there was no pro o f verifying the existenc e o f
4the Bank’s interest in the pro perty. Barker further c hallenged the validity o f

any assignm ent o f the deed o f trust the Bank relied o n to estab lish that it was the suc c esso r in interest to the o riginal first trust deed ho lder. Barker also po s ited that, even if the Bank had a valid interest in the pro perty, his o wn interest in the pro perty, arising fro mhis alleged investm ent o f ro ughly $57,000, was superio r. Finally, Barker requested that the c o urt enter an o rder direc ting the Bank to pro duc e all do c um ents suppo rting its interest in the pro p erty. O n A p ril 4, 2018, the b ankruptc y c o urt entered an o rder denying all relief requested in Barker’s A pril 3, 2018 no tic e. The b ankruptc y c o urt held that it had no autho r ity to adjudic ate a c laimobjec tio n against the Bank. The c o u rt explained that the Bank had no t filed a pro o f o f c laim, so the c o u rt c o uld no tdeterm ine any c laimthe Bank m ight have asserted had it filed a pro o f o f c laim
. O n A p ril 23, 2018, Barker filed an am ended no tic e o nc e again disputing the Bank’s c laim . The gro unds set fo rth in the am ended no tic e m irro rtho se set fo rth in Barker’s A pril 3, 2018 no t ic e. On A pril 25, 2018, the b ankruptc y c o urt entered an o rder denying the am ended no tic e o f disputed c laimfo r the sam e reaso ns it denied the o riginal A pril 3, 2018 no tic e. O n May 4, 2018, Barker m o ved fo r an o rder delaying the c lo sing o f Princ ipia’s b ankruptc y c ase. A s Barker put it: “There are c ritic al ac t io ns 5that m ust b e undertaken o n b ehalf o f Deb to r, which sub stantially affec t the

dispo sitio n o f the instant c ase, as well as the ec o no m icim pac t to b o th the Deb to r, as well as all C redito rs.” A c c o rding to Barker, Princ ipia’s b ankruptc y c o unsel no lo nger was ac ting in Princ ipia’s b est interests and effec tively had ab ando ned the c ase. Barker reaso ned that the c o urt sho uld give him m o re tim e b efo re c lo sing the c ase so that he c o uld find new c o u nsel to represent Princ ipia’s interests in the b ankruptc y c ase. O n May 8, 2018, the b ankruptc y c o urt entered an o rder denying Barker’s m o tio n. A s the c o u r t po inted o ut, Barker failed to spec ify what c ritic al ac t io ns needed to b e taken in the b ankruptc y c ase and ho w o r why Princ ipia’s c o unsel allegedly had failed o r refused to ac t. Lac king any b etter explanatio n fro mBarker, the b ankruptc y c o urt presum ed that the m o tio n was sim ply a third attem pt b y Barker to put the Bank’s c laimat issue. The b ankruptc y c o u rt o nc e again held that it c o uld no t address the Bank’s c laim . Based o n this ho lding, and o n the ab senc e o f evidenc e suppo rting the relief requested, the b ankruptc y c o urt denied the m o tio n. O n the sam e day, May 8, 2018, the b ankruptc y c o urt entered its o rder appro ving the c hapter 7 trustee’s no -asset final repo rt and c lo sing Princ ipia’s b ankruptc y c ase. Barker tim ely appealed the two May 8 o rders. JU RISD ICT ION The b ankruptc y c o urt has jurisdic t io n o ver c laim s litigatio n pursuant to 28 U .S.C . §§ 1334 and 157(b )(2)(B). W e have jurisdic tio n under 28 U .S.C . 6§ 158. ISSU E

Did the b ankruptc y c o urt c o m m it reversib le erro r when it denied Barker’s m o tio ns, thereb y prec luding himfro mobjec t ing to the Bank’s c laim, given that the Bank did no t file a pro o f o f c laim ? ST A ND A RD OF RE V I E W This appeal raises a question o f law regarding the c laim s adjudic atio n pro c ess, which we review de no vo . S ee H S BC Ba nk U S A, N a t'l Ass'n v. Blendheim (In re Blendheim ) , 803 F.3d 477, 484–85 (9th Cir. 2015). D ISCU SSION O n appeal, Barker states the sam e argum ent a variety o f different ways. A c c o rding to Barker, if he c o uld use Princ ipia’s b ankruptc y c a se to challenge the Bank’s c laimand attac k its asserted lien against the sub jec t real pro perty, then all o f Princ ipia’s o ther c redito r s (inc luding him s elf) wo uld b enefit. To wards this end, Barker attem pted to fo rc e the Bank to partic ipate in the b ankruptc y c laim s pro c ess even tho ugh the Bank did no t file a pro o f o f c laimand did no t in any o ther way partic ipate in the b ankruptc y c ase. The b a nkruptc y c o urt held that, under these c irc u m stanc es, Barker c o uld no t fo rc e the Bank to partic ipate in the b ankruptc y c laim s pro c ess. W e agree with the b a nkruptcy c o urt. It lo ng has b een held that liens o n real pro perty o rdinarily pass thro ugh b a nkruptcy unaffec ted. D ewsnup 7v. Tim m , 502 U .S. 410, 418 (1992). Therefo re, secu red c r edito rs have the

o ptio n to fo rego any distrib utio n fro mthe b ankruptc y estate and instead m ay rely o n their lien rights o utside o f b ankruptc y to satisfy any deb t they are o wed. S ee S chlegel v. Billingslea (In re S chlegel) , 526 B.R . 333, 342 (9th C ir. BA P 2015) (c iting Bra wders v. C ty. o f V entura (In re Bra wders) , 503 F.3d 856, 872 (9th C ir. 2007)). In sho rt, secured c redito rs generally c anno t b e fo rc ed to adjudic ate their c laim s in a b ankruptc y c ase. Partic ipatio n in the b ankruptc y c laim s pro c ess is vo luntary rather than c o m p ulso ry fo r secured c redito rs. A s stated b y the N inth C irc uit C o urt o f A ppeals: Every c laimm ust go thro ugh the allo wanc e pro c ess set fo rth in 11 U .S.C . § 502 b efo re the c laimho lder is entitled to partic ipate in the distrib utio n o f estate assets. The b ankruptc y c o urt m ay dec line to allo w— o r “disallo w”— ac laimfo ra variety o f reaso ns. But im portantly, for c reditors holdingliens s ec ured by property, filing

a proof of c laimand partic ipatingin the allowanc e proc es s — indeed, partic ipatingin the bankruptcy proc es s as a whole— is c om p letely v oluntary. Ac reditor with a lien on a debtor’sproperty m ay g e nerally ig nore the bankruptcy proc eeding s and dec line to file a c laimwithout im perilinghis lien, s ec ure in the in rem rig ht that the lien g uaranteeshimunder non-bankruptcy law: the rig ht of forec los ure . In re Blendheim, 803 F.3d at 484–85 (citatio ns o m itted and em phasis added); see a lso W

a de v. Fo rest V

illaH o m eo wners’ Ass’n (In re W a de) , BA P N o . N C -14-1562-DJuTa, 2015 WL 7281670, at *3 n.4 (9th Cir. BA P N o v. 17,
82015), a

ff’d , 671 F. A pp’x 689 (9th C ir. 2016) (“a secured c redito r ‘m a y disregard the b ankruptc y pro c eeding, dec line to file a c laimand rely so lely upo n his security if that sec u rity is pro p erly and so lely in his po ssessio n’”) (quo ting U .S . N

a t'l Ba nk in Jo hnsto wn v. Cha se N a t'l Ba nk o f N . Y .C . , 331 U .S. 28, 33 (1947)). Barker attem pted to invo ke the b a nkruptc y c laim s pro c ess against the Bank in a no -asset c ase where the Bank had no t filed a pro o f o f c laim
. 3 That c laim s pro c ess wo uld b e m eaningless unless the trustee adm inistered the real pro perty and that adm inistratio n yielded funds fo r distrib utio n to the estate’s c redito rs. But the trustee did no t adm inister the real pro perty. Instead, the chapter 7 trustee duly filed a final repo rt identifying this c ase as a no -asset c ase. Barker has never disputed that there exists a lien o f rec o r d fully enc umb ering the so le asset o f the estate – the sub jec t real pro perty. Thus, o n its fac e, there was no thing inc o rrec t with the trustee’s dec isio n no t to adm inister the asset and to file a no -asset final repo rt. N o r do es the rec o rd reflec t any erro r in the b ankruptc y c o urt’s appro val o f that repo rt and its dec isio n to c lo se the c ase. Indeed, Barker never filed any paper in the b a nkruptc y c o urt spec ific a lly arguing that the trustee’s no

3 Bar ker admi ttedly has been li ti gati n g wi th the Bank for year s in nonbankr uptcy v enues concerning the li en. It i s telling that, after all of that li ti gati on, Bar ker was unable to pr esent in the bankr uptcy cour t any ev i dence to suppor t hi s concer ns r egar ding the li en. All he pr esented to the cour t wer e hi s suspi ci ons and hi s speculati on r egar ding the li en. 9asset repo rt was im pro vident o r in erro r .

O n appeal, Barker assails the decisio ns o f b o th the trustee and the b ankruptc y c o urt. A t o ral argum ent, Barker c o m plained that the trustee’s and the b ankruptc y c o urt’s inac tio n with respec t to the Bank's alleged lien dem o nstrated an ab senc e o f “intellec tual curio sity.” But intellec tual c urio s ity do es no t go vern the c laim s adjudic atio n pro c ess, particularly when there is no pro o f o f c laimfiled against the b ankruptc y estate. There is no legitim ate purpo se served in dec iding who is entitled to a distrib utio n fro ma deb to r’s b ankruptc y estate when there are no assets todistrib ute. In re W a de, 2015 WL 7281670, at *3 (citing 4 C o llier o n Bankruptc y ¶ 501.01[3][b ] (A lan N . R esnic k & Henry J. So m m er, eds., 16th ed. rev.)). A s set fo rth ab o ve, the trustee and the b ankruptc y c o u rt c o rrec tly dec ided no t to take further ac tio n b ased o n the dic t ates o f the Bankruptc y C o de and Rules. On this rec o rd, the b ankruptc y c o urt did no t c o m m it reversib le erro r when it denied all relief Barker so ught in his m o tio ns. CONCL U SION Fo r the reaso ns set fo rth ab o ve, we A FFIRM the b ankruptc y c o urt’s o rders denying Barker’s m o t io ns seeking to invo ke the c laim s adjudic atio n pro c ess against the Bank.

10