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1 This disposition is not appropriate for publication. 

Although it may be cited for whatever persuasive value it may

have (see Fed. R. App. P. 32.1), it has no precedential value. 

See 9th Cir. BAP Rule 8013-1.

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. CC-11-1099-DKiPa

) 

RUBEN MARTINEZ, ) Bk. No. LA 10-25770-ER

)

Debtor. ) Adv. No. LA 10-03133-ER

______________________________)

)

RUBEN MARTINEZ, )

)

Appellant, )

)

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

)

EDWARD H. OLAGUE, SR., )

)

Appellee. )

______________________________)

Argued and Submitted on September 23, 2011

at Pasadena, California

Filed - October 11, 2011

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Ernest M. Robles, Bankruptcy Judge, Presiding 

Appearances: Robert Anthony Brown, Esq. appeared for Appellant

Ruben Martinez. Thomas Andrew Fasel, Esq.

appeared for Appellee Edward H. Olague, Sr. 

Before: DUNN, KIRSCHER and PAPPAS, Bankruptcy Judges.

FILED

OCT 11 2011

SUSAN M SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT
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2

 Unless otherwise indicated, all chapter, section and rule

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

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

The Federal Rules of Civil Procedure are referred to as “Civil

Rules.”

2

The debtor, Ruben Martinez, appeals the bankruptcy court’s

order dismissing his complaint against Edward H. Olague, Sr.

(“Olague”) for an alleged violation of the discharge injunction.2

We AFFIRM.

FACTS

Five years before the debtor’s bankruptcy filing, Olague, in

his capacity as Edward H. Olague, Sr., Successor Trustee of the

Theodosia A. Olague Living Trust, dated April 28, 1998, sold

certain real property located in Pico Rivera, California, to

Wladimir Klimenko (“Klimenko”). Klimenko executed a promissory

note, secured by a trust deed against the real property, in favor

of Olague. Under the terms of the promissory note, the entire

loan became due and payable if Olague’s mother, Theodosia Olague,

died or if Klimenko transferred the real property.

Shortly after his mother’s death in February 2009, Olague

demanded payment of the balance of the loan. However, three

years earlier, without Olague’s consent, Klimenko had transferred

the real property to the debtor. Klimenko then recorded a

substitution of trustee and full reconveyance (“full

reconveyance”) as to the real property, without paying off the

loan.

Sometime in late 2009, Olague initiated a state court action
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3

 Olague initiated the state court action against Klimenko

in August 2009, adding the debtor as a defendant in November

2009. Olague named other defendants as well, including the

notary public of the full reconveyance and “Does 1 through 500.”

Because the debtor was title holder of the real property in

which Olague sought to establish a secured interest in the state

court action, there is no question that the debtor was a

necessary party to that action.

4 Olague asserted seven causes of action, all of them

against Klimenko, but only four of them against the debtor. The

(continued...)

3

against Klimenko and the debtor.3

 Olague alleged in the state

court action that Klimenko fraudulently obtained his signature on

the full reconveyance and falsely recorded the full reconveyance. 

He further contended that Klimenko did not disclose to Olague his

intent to transfer the real property to Martinez. Olague also

alleged that the debtor had actual and/or constructive knowledge

of Olague’s secured interest in the real property and/or the full

reconveyance.

Olague sought the following relief against the debtor:

(1) to quiet title in the real property, with a judgment

determining that he had a secured interest in the real property

free and clear of any right, title, estate or interest of the

debtor; (2) a determination that Olague had a continuing secured

interest in the real property through the trust deed; (3) to

cancel the full reconveyance, with a declaration that the full

reconveyance was void and unenforceable; and (4) an injunction

requiring the debtor to cancel the full reconveyance and

prohibiting him from enforcing the full reconveyance and from

transferring, hypothecating or encumbering the real property.4
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4(...continued)

remaining claims against Klimenko were: (1) breach of contract;

(2) breach of fiduciary duty; and (3) fraud.

5 The debtor moved to reopen his bankruptcy case, but the

bankruptcy court neither held a hearing nor entered an order

granting the motion to reopen. In its tentative ruling on

Olague’s motion to dismiss (which it adopted as its final

ruling), the bankruptcy court explained that the debtor received

“special permission” to remove the state court action and to

initiate the adversary proceeding.

6 The debtor initiated two adversary proceedings: (1) the

adversary proceeding involving the discharge injunction complaint

(“discharge injunction adversary proceeding”)(10-3133-ER) and

(2) the adversary proceeding involving the removed action

(“removal adversary proceeding”)(10-3132-ER). The removal

adversary proceeding is not part of this appeal.

Olague filed the motion to dismiss and a motion to remand

the removal action (“remand motion”) in both adversary

proceedings. The bankruptcy court addressed both motions at the

hearing on January 25, 2011, in the discharge injunction

adversary proceeding.

The bankruptcy court noted in its tentative ruling that it

was unclear whether Olague sought dismissal of the removed action

or the discharge injunction complaint. The bankruptcy court

(continued...)

4

The debtor filed an answer in the state court action.

The debtor filed his chapter 7 petition on April 23, 2010. 

He listed the real property in his schedules, with only Bank of

America holding two secured claims against it. The debtor listed

Olague as an unsecured creditor with a contingent, unliquidated

and disputed claim in an unknown amount, based on the state court

action. The debtor received his discharge on August 18, 2010. 

Three months after his bankruptcy case closed on August 25,

2010,5 the debtor removed the state court action to the

bankruptcy court (“removed action”).6 He also filed a complaint
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6(...continued)

pointed out that Olague listed in his motion to dismiss the

number for the discharge injunction adversary proceeding. It

further noted that Olague referred to the discharge injunction

complaint in the motion to dismiss and argued that he had not

violated the discharge injunction. The bankruptcy court thus

concluded that Olague sought dismissal of the discharge

injunction complaint.

The bankruptcy court ultimately found that the state court

action did not violate the discharge injunction, as the state

court action did not seek personal liability against the debtor. 

It concluded that because the state court action did not violate

the discharge injunction, there was no reason to maintain the

removed action as it involved state law issues only. The

bankruptcy court thus granted the remand motion. It entered two

separate orders on the motion to dismiss and the remand motion in

both adversary proceedings.

5

against Olague for allegedly violating the discharge injunction

under § 524 (“discharge injunction complaint”).

The debtor asserted in the discharge injunction complaint

that Olague had actual knowledge of the debtor’s bankruptcy case

before he received his discharge. He contended that Olague

neither held title to nor had a secured interest in the real

property after the full reconveyance was recorded. He asserted

that Olague neither objected to entry of the discharge nor

pursued an action to except the debt from discharge. The debtor

also pointed out that Olague did not file a claim in the

bankruptcy case.

He argued that Olague violated the discharge injunction by

continuing to prosecute the state court action against him. He

claimed that any debt owed to Olague had been discharged, as

Olague only held an unsecured claim. The debtor further asserted

that he had “the right to reinstate his loan with Bank of
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7 Civil Rule 12(b)(6) is applicable through Rule 7012(b).

8

 Olague also moved to dismiss the discharge injunction

complaint under Rule 12(b)(1) for lack of subject matter

jurisdiction. The bankruptcy court denied the motion to dismiss

to the extent Olague sought dismissal under Rule 12(b)(1), as the

discharge injunction complaint clearly involved issues of

bankruptcy law. Neither the debtor nor Olague appealed the

bankruptcy court’s determination on this issue.

6

America[,] free and clear of any purported lien [held] by

Olague.” He argued that Olague was interfering with the debtor’s

right to reinstate his loan by continuing to proceed with the

state court action against him.

The debtor sought a determination that Olague was in

contempt under § 105 for violating the discharge injunction. He

also sought to enjoin Olague permanently from prosecuting the

state court action. The debtor sought monetary “civil sanctions”

against Olague, as well as attorney’s fees and costs.

Olague moved to dismiss the discharge injunction complaint

under Civil Rule 12(b)(6).7

 He stressed that he was not

attempting to collect a debt as a personal liability of the

debtor, but as a personal liability of Klimenko only. Olague

claimed he simply sought a determination as to his interest in

the real property.

He argued that a bankruptcy discharge does not prohibit a

creditor from pursuing in rem claims against real property. 

Olague contended that the discharge injunction complaint failed

to state a claim upon which relief could be granted because all

the claims for relief against the debtor in the state court

action were in rem claims.8
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7

The debtor opposed the motion to dismiss, asserting that

Olague had an unsecured claim on which the debtor’s personal

liability was discharged. The debtor pointed out that Olague

neither objected to entry of the discharge nor sought to except

any debt from discharge. He further contended that Olague sought

to create a security interest in the real property through the

state court action, as he never held a security interest in the

real property in the first place. Because Olague did not have a

secured claim but an unsecured claim, the debtor contended, he

could not proceed with the state court action against the debtor

after entry of the discharge.

The debtor further argued that the claims in the state court

action sought “personal relief” against him. Specifically, the

debtor contended that claims against him were personal in nature

because they negatively affected his rights to and interest in

the real property. Because the state court action sought to

quiet title to the real property as to the debtor, it was not an

in rem action.

The debtor also argued that, even assuming Olague was a

secured creditor, the exception under § 524(j) did not apply. 

Section 524(j) provides that the injunction would not prohibit a

secured creditor’s post-discharge act if: (1) that secured

creditor had a security interest in the debtor’s residence;

(2) the act was in the ordinary course of business between the

secured creditor and the debtor; and (3) the act was limited to

seeking or obtaining periodic payments associated with a valid

security interest in lieu of pursuit of in rem relief to enforce

the lien. Here, the debtor contended, Olague was not a secured
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creditor, and the real property was not the debtor’s home. The

debtor moreover pointed out that Olague conducted business with

Klimenko, not with him. Also, the debtor argued, Olague was not

seeking periodic payments from the debtor because the debt

matured prepetition.

The debtor further contended that Olague could not assert

claims against him because he was a bona fide purchaser for

value. The debtor argued that he was an “innocent purchaser” –

even Olague had not alleged in the state court action that the

debtor actually knew of the unauthorized reconveyance. Olague

instead alleged that the debtor had actual or constructive

knowledge of Olague’s interest in the real property. The debtor

contended that Olague thus cannot prevail in the state court

action against him because he cannot prove that the debtor

actually knew of the unauthorized full reconveyance.

The bankruptcy court held a hearing on the motion to dismiss

on January 25, 2011. Before the hearing, it issued a tentative

ruling indicating that it would dismiss the discharge injunction

complaint with prejudice under Civil Rule 12(b)(6). The

bankruptcy court found that the state court action did not “seek

personal liability against [the] Debtor, but only [sought] a

determination of [Olague’s] secured status with respect to the

[real property].” It pointed out that the debtor was a party to

the state court action because he was the record owner of the

real property, which might become subject to Olague’s lien. The

bankruptcy court reasoned that if Olague prevailed in the state

court action, he would obtain a lien against the real property

and possibly damages against Klimenko but not against the debtor. 
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It thus concluded that the state court action did not violate the

discharge injunction under § 524(a)(2). 

The bankruptcy court further determined that Olague’s

continued pursuit of the state court action could not have

violated the discharge injunction at any rate because he did not

have any unsecured claim against the debtor. Even though the

debtor scheduled Olague as an unsecured creditor, Olague did not

have an unsecured claim, given the claims asserted against the

debtor in the state court action.

The bankruptcy court further found that the debtor’s

arguments regarding his bona fide purchaser for value status were

irrelevant to whether the state court action violated the

discharge injunction. Even if the debtor successfully

demonstrated that he was a bona fide purchaser for value, “it

would not result in a [determination] that the state court action

violated the discharge injunction.” The bankruptcy court

acknowledged, however, that the debtor could pursue his bona fide

purchaser status argument in state court.

The bankruptcy court told counsel for the debtor at the

hearing that the state court action claims were “all in rem [as

they had] to do with [the real] property.” Tr. of January 25,

2011 hr’g, 6:3. The debtor, it found, “put himself on the chain

of possession of the [real] property. And to the extent that the

state court [was] going to go back and re-vest that property and

title into some other entity, then the Debtor [was] not going to

face personal liability. He may face . . . a declaratory

judgment that state[d] what his interest in the [real] property

[was] or would be.” Tr. of January 25, 2011 hr’g, 6:3-9.
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The bankruptcy court granted the motion to dismiss, entering

an order (“dismissal order”) consistent with its tentative

ruling. The debtor timely appealed.

JURISDICTION

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

§§ 1334 and 157(b)(2)(O). We have jurisdiction under 28 U.S.C.

§ 158.

ISSUE

Did the bankruptcy court err in granting the motion to

dismiss by determining that Olague did not violate the discharge

injunction?

STANDARDS OF REVIEW

We review de novo the bankruptcy court’s grant of a Civil

Rule 12(b)(6) motion to dismiss. Movsesian v. Victoria

Versicherung AG, 629 F.3d 901, 905 (9th Cir. 2010). De novo

means we look at the matter anew, as if it had not been heard

before, and as if no decision had been rendered previously,

giving no deference to the bankruptcy court’s determinations. 

Freeman v. DirecTV, Inc., 457 F.3d 1001, 1004 (9th Cir. 2006). 

“When ruling on a motion to dismiss, we accept all factual

allegations in the complaint as true and construe the pleadings

in the light most favorable to the nonmoving party.” Movsesian,

629 F.3d at 905 (quoting Knievel v. ESPN, 393 F.3d 1068, 1072

(9th Cir. 2005)(quotation marks omitted)). To survive a motion

to dismiss, the complaint must state sufficient facts to state a
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claim for relief that is plausible on its face. Ashcroft v.

Iqbal, 129 S.Ct. 1937, 1949 (2009)(quoting Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 570 (2007)). The “plausibility standard 

. . . asks for more than the sheer possibility that a defendant

acted unlawfully.” Iqbal, 129 S. Ct. at 1949.

The applicability of the discharge injunction is a question

of law that we review de novo. Watson v. Shandell (In re

Watson), 192 B.R. 739, 745 (9th Cir. BAP 1996).

We may affirm on any ground supported by the record. Shanks

v. Dressel, 540 F.3d 1082, 1086 (9th Cir. 2008).

DISCUSSION

The issue, as the bankruptcy court succinctly put it, is

whether Olague’s “pursuit of the [state court action] violate[d]

the discharge injunction set forth [under] § 524(a)(2).” On

appeal, the debtor essentially repeats the arguments he made in

his opposition to the motion to dismiss.

Section 524(a)(2) provides that a discharge “operates as an

injunction against the commencement or continuation of an action

. . . to collect, recover or offset any such debt as a personal

liability of the debtor, whether or not such discharge of such

debt is waived[.]” The bankruptcy discharge “extinguishes only

one mode of enforcing a claim – namely, an action against the

debtor in personam – while leaving intact another – namely, an

action against the debtor in rem.” Johnson v. Home State Bank,

501 U.S. 78, 84 (1991).

An action in rem is one “determining the title to property

and the rights of the parties, not merely among themselves, but
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also against all persons at any time claiming an interest in that

property.” Black’s Law Dictionary 34 (9th ed. 2009). A quasi in

rem action is one “brought against the defendant personally, with

jurisdiction based on an interest in property, the objective

being to deal with the particular property or to subject the

property to the discharge of the claims asserted.” Id. Quiet

title actions are proceedings in rem. 40235 Washington Street

Corp. v. Lusardi, 976 F.2d 587, 589 (9th Cir. 1992). See also

Park v. Powers, 2 Cal.2d 590, 598 (Cal. 1935)(“Actions relating

to land, such as suits to quiet title, are denominated quasi-inrem.”).

Reviewing the state court action, we agree with the

bankruptcy court that Olague did not seek to recover or collect

on a debt as the debtor’s personal liability. As the bankruptcy

court noted, all of the claims asserted against the debtor in the

state court action essentially seek to establish Olague’s secured

interest in the real property.

The debtor characterizes Olague’s quiet title action as an

attempt to collect on a debt as his personal liability, viewing

it as a “right to an equitable remedy for breach of performance

if such breach gives rise to a right to payment . . . .” under

§ 101(5)(B). 

Nothing in Olague’s state court action sought the debtor’s

personal liability on a right to payment. See generally Egebjerg

v. Anderson (In re Egebjerg), 574 F.3d 1045, 1049 (9th Cir.

2009)(“In the Bankruptcy Code, the term ‘debt’ means ‘liability

on a claim.’ ‘Claim’ is defined very broadly within the

[Bankruptcy] Code to mean any ‘right to payment’ . . . . The
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9 Under the Bankruptcy Code, the term “claim” is broad

enough to encompass an equitable remedy “for breach of

performance,” but only “if such breach gives rise to a right to

payment.” Section 101(5)(B). “[R]ights to an equitable remedy

for a breach of performance with respect to which such breach

does not give rise to a right to payment are not ‘claims’ and

would therefore not be susceptible to discharge in bankruptcy.” 

H.R. Rep. No. 95-595, at 435 (1978), reprinted in 1978

U.S.C.C.A.N. 5963, 6437.

13

terms ‘debt’ and ‘claim’ are coextensive, ‘flip sides to the same

coin.’”)(internal citations omitted). Olague is not seeking a

right to payment of any kind from the debtor; he simply wishes to

assert his interest in the real property. The discharge

injunction thus does not bar such an action against the debtor.9

Also, contrary to the debtor’s argument, Olague was not an

unsecured creditor. We agree with the bankruptcy court that

Olague does not have an unsecured claim based on the claims

asserted in the state court action, as they do not seek a right

to payment on a debt as to the debtor.

The debtor further argues that Olague’s quiet title claims

are in personam, relying on Parker v. Handy (In re Handy),

624 F.3d 19 (1st Cir. 2010), in support of his argument.

At the outset, we note that Parker concerned a constructive

trust claim to pursue an alleged fraudulent transfer of funds,

rather than a quiet title action. In Parker, the appellant

initiated a state court action against the debtor, alleging that

the debtor purchased a home with funds conveyed to her by her exhusband in violation of the Uniform Fraudulent Transfer Act

(“UFTA”). The appellant sought money damages and the imposition

of a constructive trust on the home. When the appellant appealed
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the state court’s judgment in the debtor’s favor, the debtor

filed for bankruptcy. The appellant then moved for relief from

stay, which the bankruptcy court denied because he did not have a

claim in rem. Id. at 21. The bankruptcy court held that the

appellant had not established an interest in the debtor’s home by

attachment or a provisional remedy. Id. The appellant’s request

for a constructive trust did not give rise to an in rem action. 

Id.

The First Circuit affirmed, determining that simply seeking

a constructive trust “did not of itself give rise to an in rem

action.” Id. at 22. Constructive trusts are not substantive

rights that confer a cause of action, the First Circuit

continued, but are remedial devices used by courts once liability

is found and where equity requires. Id. The First Circuit thus

concluded that the appellant’s claims against the debtor were in

personam. Id.

The debtor misapprehends the nature of in rem/quasi in rem

actions. He construes Olague’s quiet title claims as remedial

devices under Parker. He argues that Olague neither held title

to the real property nor obtained any provisional relief in state

court. Appellant’s Opening Brief at 10. But as we mentioned

earlier, quiet title actions are in rem actions. See Lusardi,

976 F.2d at 589; Park, 2 Cal.2d at 598.

Moreover, contrary to the debtor’s argument, Olague did not

need to have title to the real property nor obtain provisional

relief in order to assert a quiet title claim against the debtor. 

The purpose of a quiet title action is to establish a party’s

right and/or title to real property. See Peterson v. Gibbs,
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81 P. 121, 122-23 (Cal. 1905)(“The object of the [quiet title]

action is to finally settle and determine, as between the

parties, all conflicting claims to the property in controversy,

and to decree to each such interest or estate therein as he may

be entitled to.”). Olague is attempting to establish a secured

interest to the real property by compelling the debtor to

recognize his claim to it. He does not need to obtain

provisional relief first before asserting his quiet title claim

against the debtor.

Finally, the debtor’s arguments as to the application of the

exception under § 524(j) and his status as a bona fide purchaser

for value are irrelevant to a determination of whether Olague

violated the discharge injunction. With respect to his argument

under § 524(j), this exception does not apply because Olague is

not seeking to enforce a right to payment on a debt.

As to the debtor’s assertions regarding his bona fide

purchaser status, we agree with the bankruptcy court that it has

no bearing as to whether Olague violated the discharge

injunction. Even if the debtor was a bona fide purchaser of the

real property for value, it would not demonstrate that the state

court action sought to collect or recover a debt as the debtor’s

personal liability in violation of § 524(a)(2). If the debtor

establishes his bona fide purchaser status, that may entitle him

to prevail on Olague’s claims in the state court action, but it

has nothing to do with any alleged violation of the discharge

injunction.

///

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CONCLUSION

The debtor has not shown how Olague’s state court action

violated the discharge injunction under § 524(a)(2). The

bankruptcy court thus did not err in dismissing the debtor’s

discharge injunction complaint for failure to state a claim upon

which relief can be granted under Civil Rule 12(b)(6). 

Accordingly, we AFFIRM.