FILED

NOV 07 2018

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

NOTFOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re:

KIM C. KERRIGAN,

Debtor.

KIM C. KERRIGAN,

Appellant,

v.

BAYVIEW LOAN SERVICING, LLC;

M&T BANK; FEDERAL HOME LOAN

MORTGAGE CORPORATION,

Appellees.

BAP No. WW-17-1271-KuTaB

Bk. No. 2:16-bk-16219-TWD

Adv. No. 2:17-ap-01075-TWD

MEMORANDUM*

Argued and Submitted on October 25, 2018

at Seattle, Washington

Filed – November 7, 2018

Appeal from the United States Bankruptcy Court

*

 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 8024-1.
for the Western District of Washington

Honorable Timothy W. Dore, Bankruptcy Judge, Presiding

 

Appearances: Appellant Kim C. Kerrigan argued pro se; Gregor A.

Hensrude, Klinedinst PC, argued for appellees Bayview

Loan Servicing, LLC, M&T Bank, and Federal Home Loan

Mortgage Corporation.

 

Before: KURTZ, TAYLOR, and BRAND, Bankruptcy Judges.

Chapter 131

 debtor, Kim C. Kerrigan, appeals from the bankruptcy

court's order dismissing her adversary complaint in favor of appelleedefendants, Bayview Loan Servicing, LLC (Bayview), M&T Bank (M&T),

and Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively,

Defendants) with prejudice. We AFFIRM.

FACTS

A. Prepetition Events

Ms. Kerrigan owned residential property on 9th Avenue in Seattle

(Property). In February 2008 she refinanced the loan secured against the

Property with Washington Mutual (WAMU). Bayview is the assignee of

1

 Unless specified otherwise, all chapter and section references are to the

Bankruptcy Code, 11 U.S.C. §§ 101-1532, all “Rule” references are to the Federal Rules

of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of

Civil Procedure.

2
the WAMU deed of trust. Quality Loan Corporation of Washington

(Quality) was appointed the successor trustee in March 2015. Qualstar

Credit Union (Qualstar) is the beneficiary under a second deed of trust on

the Property.

1. The State Court Complaint

In August 2016, Ms. Kerrigan filed a complaint against Bayview,

Quality, and Qualstar in King County Superior Court alleging that

Bayview's and Quality's attempt to foreclose on her Property violated the

Washington Collection Agency Act (WCAA), the Federal Fair Debt

Collection Practices Act (FDCPA), and the Washington Consumer

Protection Act (CPA). Ms. Kerrigan asserted that she had not made any

payments for six years on the notes and deeds of trust and therefore the

six-year statute of limitations barred any threatened foreclosure.

Ms. Kerrigan also asserted a quiet title cause of action, alleging that the

liens against her Property were void on the grounds that the statute of

limitations had run.

Bayview removed the proceeding to the United States District Court

for the Western District of Washington in September 2016.2

2

 On September 8, 2016, Ms. Kerrigan filed a bankruptcy case to stop the pending

foreclosure sale (Bankr. Case No. 16-14638-TWD). The case was dismissed on

November 14, 2016, due to Ms. Kerrigan's failure to participate or follow the court

deadlines.

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2. The District Court's Ruling

Bayview and Qualstar filed motions to dismiss Ms. Kerrigan's

complaint, asserting that she failed to state a claim for relief under Civil

Rule 12(b)(6).

In December 2016, the district court granted the motions and entered

a judgment dismissing all claims with prejudice. In connection with

Ms. Kerrigan's quiet title claim, the district court observed that a deed of

trust foreclosure remedy was subject to a six-year statute of limitations. The

court noted that under Washington law, when recovery was sought on an

obligation payable by installments, the statute of limitations runs against

each installment from the time it becomes due; that is, from the time when

action might be brought to recover it. Edmundson v. Bank of Am., 378 P.3d

272, 276 (Wash. Ct. App. 2016). The court found that the six-year statute of

limitations did not bar a future action for foreclosure because there were

still payments that would have become due in the last six years and there

were future payments that would become due for the next twenty-two

years after that. The court dismissed Ms. Kerrigan's quiet title claim against

Qualstar, Bayview, and Quality with prejudice on this basis.

The district court also found that Ms. Kerrigan's claims against

Bayview and Quality for violations of the WCAA, FDCPA and CPA failed

to state a claim upon which relief could be granted. Noting that the statute

of limitations was tolled, the court concluded that Bayview and Quality did

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not act unlawfully by initiating the most recent notice of trustee's sale. The

court dismissed these claims with prejudice.

Ms. Kerrigan filed a motion seeking, among other things, a chance to

amend her complaint. The district court denied her motion. Ms. Kerrigan

appealed the district court's dismissal order to the Ninth Circuit. The Ninth

Circuit affirmed the district court's ruling in Kerrigan v. Qualstar Credit

Union, 728 F. App’x 787 (9th Cir. 2018).

B. Bankruptcy Events

Ms. Kerrigan filed a chapter 13 bankruptcy case in December 2016

just days after dismissal of the federal proceeding and to stop the newlynoticed foreclosure sale.

Her second amended plan provided for monthly payments to

Bayview and Qualstar and $0 to allowed nonpriority unsecured claims

over the term of the plan. The plan also provided that Ms. Kerrigan would

seek a complete modification of her first mortgage, refinance her residence,

or obtain a fully executed purchase and sale agreement for her residence.

The plan required her to have attained one of these options no later than

180 days following confirmation.3 Finally, her plan stated that she would

file an adversary against Bayview, alleging improprieties on the part of the

original lender or at the time of loan origination. The bankruptcy court

confirmed Ms. Kerrigan's plan in June 2017.

3

 It is unclear whether Ms. Kerrigan followed through with any of these options.

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1. The Adversary Proceeding

Prior to confirmation, Ms. Kerrigan filed an adversary proceeding

against Bayview, M&T, and Freddie Mac. In the factual background,

Ms. Kerrigan alleged that Freddie Mac claimed to be the owner and holder

of her note. She further asserted that M&T and Bayview alternatively

claimed to be the servicer of her promissory note. Finally, she alleged that

Bayview claimed to be the owner and holder of the note and deed of trust.

Ms. Kerrigan asserted five claims for relief. In the first claim for relief,

Ms. Kerrigan asserted that she was not certain which, if any, of the three

defendants were entitled to enforce the note. In the second claim,

Ms. Kerrigan alleged that her chapter 13 debtor status allowed her to use

the avoiding powers of the trustee under § 544 to void the WAMU deed of

trust which was not properly acknowledged. In her third claim for relief,

Ms. Kerrigan maintained that she properly exercised her rights to rescind

her loan with WAMU under the Truth in Lending Act, 15 U.S.C. § 1601, et

seq. (TILA), and was therefore entitled to rescission. Her fourth claim was

for attorneys' fees under the WAMU note and deed of trust, and the fifth

claim was for violation of the FDCPA.

Ms. Kerrigan moved to amend the complaint to eliminate the fifth

claim for relief for damages under the FDCPA and replace it with a claim

for civil penalties plus reasonable attorneys' fees for WAMU's alleged

violation of the TILA. She eventually conceded that her claim for civil

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penalties and attorneys' fees under TILA was beyond the statute of

limitations. Ms. Kerrigan filed a proposed second amended complaint

removing that claim, leaving only the first three claims in contention.

2. Defendants' Motion to Dismiss

Meanwhile, Defendants filed a motion to dismiss the adversary

complaint, asserting that (1) Ms. Kerrigan's claims were barred under the

doctrine of claim preclusion; (2) the pending Ninth Circuit appeal of the

district court's judgment dismissing all claims divested the bankruptcy

court of jurisdiction; and (3) the FDCPA and TILA claims were time barred.

3. The Bankruptcy Court's Ruling

In August 2017, the bankruptcy court heard Defendants' motion and

stated its ruling on the record.

First, the court found that despite Ms. Kerrigan's pending appeal of

the district court's dismissal judgment, it had jurisdiction to determine

whether the doctrine of claim preclusion barred further review of

Ms. Kerrigan's claims alleged in the adversary proceeding.

Next, the bankruptcy court considered whether the elements for

federal claim preclusion applied to Ms. Kerrigan's claims; i.e., whether

there was (1) an identity of claims, (2) a final judgment on the merits, and

(3) identity or privity between the parties. W. Radio Servs. Co. v. Glickman,

123 F.3d 1189, 1193 (9th Cir. 1997).

The court found that except for Ms. Kerrigan's second claim which

7
involved the application of the trustee's strong arm powers, there was an

identity of claims because the claims arose from the same transactional

nucleus. The bankruptcy court explained that Ms. Kerrigan's state court

complaint asserted that the WAMU deed of trust was void because the

relevant statute of limitations for the collection of the debt had passed and,

because the WAMU deed of trust was void, the attempt to foreclose on the

WAMU deed of trust was a violation of the CPA and the FDCPA. The court

explained that Ms. Kerrigan's adversary complaint asserted that the

WAMU deed of trust was void under TILA and that she was uncertain

which entity was entitled to enforce the WAMU note. The bankruptcy

court concluded that both suits arose from the same transactional

nucleus—the WAMU deed of trust and note. Further, both suits sought the

same relief—to void the WAMU deed of trust. Finally, the court found that

both suits involved substantially the same evidence—the WAMU deed of

trust and note and Ms. Kerrigan's payment history.

The bankruptcy court also observed that if Ms. Kerrigan won in the

adversary proceeding, the rights of the parties established in the district

court action would be impaired. The court reasoned that the district court's

dismissal of the claims in the state court complaint with prejudice

established that Bayview and Quality's notice of trustee's sale did not

violate the FDCPA, the WCAA, or CPA. Moreover, inherent in the district

court's judgment was the determination that Bayview and Quality's

8
foreclosure was lawful. The bankruptcy court stated that if Ms. Kerrigan

believed that Bayview's foreclosure was problematic, either because it

lacked the right to enforce the WAMU deed of trust and note or because

the WAMU deed of trust and note was void since it had been rescinded,

those claims should have been raised in the previous lawsuit.

The bankruptcy court further found that the district court's judgment

dismissing Ms. Kerrigan's claims with prejudice was a final judgment on

the merits.

Lastly, with respect to the identity of the parties, the court found that

the parties in the adversary proceeding were the same or in privity with the

parties to the proceeding in the district court. The court noted that Bayview

was a party in both proceedings. Further, M&T was alleged to be a

potential servicer and Freddie Mac was alleged to be the owner of the note

and deed of trust. The court concluded that to the extent M&T or Freddie

Mac were the servicer or the owner of the WAMU note and deed of trust,

their interests are substantially aligned with, if not identical to, those of

Bayview.

In addition, the court found that Ms. Kerrigan’s acting both

individually and as a representative of her chapter 13 estate did not make

her "different parties" under the holding in Cheng v. K&S Diversified

Investments, Inc. (In re Cheng), 308 B.R. 448 (9th Cir. BAP 2004) as she

argued. The court found the reasoning in Cheng inapplicable due to the

9
differences in the cases. Finally, the court found that to the extent

Ms. Kerrigan individually and as a representative of her chapter 13 estate

could be considered different parties, they were in privity. In reaching this

conclusion, the court reasoned that it was in Ms. Kerrigan's interest to

minimize her secured debts and maximize the value of her assets.

Likewise, it was in the chapter 13 estate's interest to maximize asset value

and minimize secured debt to create a fund to fully pay unsecured

creditors. In the end, the bankruptcy court concluded that all the elements

for claim preclusion were met with respect to Ms. Kerrigan's first and third

claims for relief.

The court also found that Ms. Kerrigan's second claim for relief

regarding her use of the trustee's avoiding powers under § 544 to void

WAMU's lien against her Property failed to state a claim for relief. The

court observed that Ms. Kerrigan did not point to any Bankruptcy Code

section or applicable state law that would allow her to void WAMU's lien

using § 544. Based on the facts in the adversary complaint and the

proposed amended complaint, the bankruptcy court concluded that she

could not establish such a claim.

The court explained that Ms. Kerrigan's claim under § 544(a)(3)4

4

 Section 544(a)(3) provides:

(a) The trustee shall have, as of the commencement of the case, and

(continued...)

10
failed because the WAMU deed of trust was recorded and therefore

constructive notice was given under Wash. Rev. Code § 65.08.030.5 The

court noted that Ms. Kerrigan's adversary complaint showed at

paragraph 15 that the WAMU deed of trust was recorded on February 26,

2008. Therefore, Ms. Kerrigan had constructive notice of the deed of trust

prior to her bankruptcy filing which defeated the trustee's strong arm

power under § 544(a)(3).

In the end, the court denied Ms. Kerrigan's request for leave to

amend her complaint because further attempts to amend would be futile.

4

(...continued)

without regard to any knowledge of the trustee or of any creditor, the

rights and powers of, or may avoid any transfer of property of the debtor

or any obligation incurred by the debtor that is voidable by–

. . .

(3) a bona fide purchaser of real property, other than fixtures, from the

debtor, against whom applicable law permits such transfer to be

perfected, that obtains the status of a bona fide purchaser and has

perfected such transfer at the time of the commencement of the case,

whether or not such a purchaser exists.

5

 The statute entitled "Recorded irregular instrument imparts notice" provides:

An instrument in writing purporting to convey or encumber real estate or

any interest therein, which has been recorded in the auditor's office of the

county in which the real estate is situated, although the instrument may

not have been executed and acknowledged in accordance with the law in

force at the time of its execution, shall impart the same notice to third

persons, from the date of recording, as if the instrument had been

executed, acknowledged, and recorded, in accordance with the laws

regulating the execution, acknowledgment, and recording of the

instrument then in force.

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The court dismissed all claims in the adversary proceeding with prejudice

by order entered on August 2, 2017.

4. Ms. Kerrigan's Motion For Reconsideration

Ms. Kerrigan filed a timely motion for reconsideration. On August 30,

2017, the bankruptcy court denied her motion, finding that its dismissal

order was not based on any manifest errors of law or fact and that

Ms. Kerrigan did not submit any new evidence that could not have been

asserted earlier. Ms. Kerrigan filed a timely notice of appeal from the

bankruptcy court's dismissal order on September 13, 2017.

JURISDICTION

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

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

ISSUES

Did the bankruptcy court err in granting Defendants' motion to

dismiss Ms. Kerrigan's first and third claims on claim preclusion grounds?

Did the bankruptcy court err in granting Defendants' motion to

dismiss Ms. Kerrigan's second claim under § 544 for failure to state a claim

under Civil Rule 12(b)(6)?

Did the bankruptcy court abuse its discretion in denying Debtor's

motion for reconsideration?

STANDARDS OF REVIEW

We review rulings regarding the availability of claim preclusion de

12
novo as a mixed question of law and fact in which legal questions

predominate. Robi v. Five Platters, Inc., 838 F.2d 318, 321 (9th Cir. 1988);

Alary Corp. v. Sims (In re Associated Vintage Grp., Inc.), 283 B.R. 549, 554 (9th

Cir. BAP 2002). De novo review requires that "we consider a matter anew,

as if no decision had been rendered previously." Mele v. Mele (In re Mele),

501 B.R. 357, 362 (9th Cir. BAP 2013).

Once we determine that claim preclusion is available to be applied,

the actual decision to apply the doctrine is left to the trial court's discretion.

Robi, 838 F.2d at 321. A bankruptcy court abuses its discretion if it applies

the wrong legal standard, misapplies the correct legal standard, or if it

makes factual findings that are illogical, implausible, or without support in

inferences that may be drawn from the facts in the record. See

TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011) (citing

United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc)).

We review de novo the bankruptcy court's order granting a motion to

dismiss for failure to state a claim under Civil Rule 12(b)(6) (incorporated

by Rule 7012). Movsesian v. Victoria Versicherung AG, 670 F.3d 1067, 1071

(9th Cir. 2012) (en banc).

We review the denial of a motion for reconsideration for abuse of

discretion. First Ave. W. Bldg., LLC v. James (In re Onecast Media, Inc.), 439

F.3d 558, 564 (9th Cir. 2006). Courts enjoy "considerable discretion" in

deciding reconsideration motions. McDowell v. Calderon, 197 F.3d 1253, 1255

13
n.1 (9th Cir.1999).

We may affirm the decision of the bankruptcy court on any basis

supported by the record. See ASARCO, LLC v. Union Pac. R.R. Co., 765 F.3d

999, 1004 (9th Cir. 2014).

DISCUSSION

In deciding this appeal, we liberally construe Ms. Kerrigan's pro se

brief. See Erickson v. Pardus, 551 U.S. 89, 94 (2007) (documents filed pro se

are to be liberally construed and must be held to less stringent standards

than formal pleadings drafted by lawyers); Nordeen v. Bank of Am., N.A.

(In re Nordeen), 495 B.R. 468, 483 (9th Cir. BAP 2013). However, even under

the most liberal reading of Ms. Kerrigan's four page informal brief, she fails

to address how the bankruptcy court erred in dismissing her adversary

complaint with prejudice and identifies no specific error for this court to

consider. Instead, she raises numerous issues which are not relevant to the

order on appeal. We do not consider issues relating to the merits of her

underlying claims such as "serious chain of title issues" nor do we decide

whether Defendants violated TILA, RESPA, or FDCPA. We also do not

answer her "one central question" as to which entity is the true creditor.

These issues are beyond the scope of the issues pertaining to the order on

appeal.

What is at issue is whether the bankruptcy court properly dismissed

Ms. Kerrigan's first and third claims for relief on claim preclusion grounds

14
and her second claim for relief under § 544 for failure to state a claim.

While Ms. Kerrigan's comments about her credit history at oral argument

appeared sincere, this appeal is not about her credit history or sincerity. If

there is an error, it was incumbent on Ms. Kerrigan to brief it. "It is not the

Court's role to make arguments for any party." Ortiz v. Ga. Pac., 973 F.

Supp. 2d 1162, 1185 (E.D. Cal. 2013); see also Gross v. Town of Cicero, 619 F.3d

697, 704 (7th Cir. 2010) ("[I]t is not this court's responsibility to research and

construct the parties' arguments."); see also Cruz v. Int'l Collection Corp., 673

F.3d 991, 998 (9th Cir. 2012) ("We review only issues which are argued

specifically and distinctly in a party's opening brief."). We do the best we

can with what we have in the record.

After a careful review, we discern no errors. The bankruptcy court

carefully analyzed the elements for claim preclusion in connection with

Ms. Kerrigan's first and third claims for relief. In deciding whether there

was an identity of claims, the bankruptcy court properly applied the

transactional test. This test focuses on the transactional nucleus of

operative facts and includes all rights to remedies with respect to all or any

part of the "transaction," determined pragmatically, out of which the action

arose, so long as they could conveniently be tried together. George v. City of

Morro Bay (In re George), 318 B.R. 729, 735 (9th Cir. BAP 2004) (citing

Restatement (Second) Of Judgments § 24.8). We see no error with the

court's analysis or conclusion that there was an identity of claims between

15
those Ms. Kerrigan asserted in the prior lawsuit and those she asserted in

the adversary proceeding.

The court also correctly found that the district court's order

dismissing Ms. Kerrigan's complaint was a final judgment on the merits.

See Stewart v. U.S. Bancorp, 297 F.3d 953, 957 (9th Cir. 2002) ("[A] dismissal

for failure to state a claim under [Civil] Rule 12(b)(6) is a 'judgment on the

merits' to which res judicata applies."); Hagans v. Lavine, 415 U.S. 528, 542

(1974) ("[I]t is well settled that the failure to state a proper cause of action

calls for a judgment on the merits."). The pendency of Ms. Kerrigan's

appeal did not affect the finality determination. See Tripati v. Henman, 857

F.2d 1366, 1367 (9th Cir. 1988) ("The established rule in the federal courts is

that a final judgment retains all of its res judicata consequences pending

decision of the appeal . . . ."). Nonetheless, the Ninth Circuit's affirmance

"added a dimension to the finality" of the district court's decision. In re

George, 318 B.R. at 734.

Finally, the bankruptcy court did not err by concluding that the third

element—identity or privity between the parties—was met. The Cheng case

does not support Ms. Kerrigan's argument that her posture as an

individual and as a representative of her chapter 13 estate makes her

"different parties" for purposes of the claim preclusion analysis. In Cheng,

the bankruptcy court found that the debtors were judicially estopped,

based on representations previously made on their motion to avoid a

16
judicial lien on exemption impairment grounds, from challenging the

creditor's proof of claim. On appeal, the Panel reversed, finding that

debtors acted as debtors when they filed a motion under § 522(f)(1) to

protect their homestead exemption, but acted as debtors-in-possession

when they filed an objection to the creditor's claim. The BAP found because

they acted in different capacities they were not judicially estopped by

representations made as debtors. The holding in Cheng has nothing to do

with the standards for deciding whether the identity of the parties is the

same for purposes of claim preclusion.

In sum, the bankruptcy court did not err by dismissing

Ms. Kerrigan's first and third claims based on the doctrine of claim

preclusion.

The bankruptcy court also properly dismissed Ms. Kerrigan's second

claim for relief which relied § 544 for avoidance of WAMU's lien. As

observed by the court, this claim failed to state a claim for relief when

Ms. Kerrigan had constructive notice of the recorded deed of trust which

was alleged to be improperly acknowledged.

As we have found no reversible error in the bankruptcy court's

decision to dismiss Ms. Kerrigan's adversary complaint with prejudice, we

hold that the bankruptcy court did not abuse its considerable discretion in

denying her motion for reconsideration.

CONCLUSION

For the reasons explained above, we AFFIRM.

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