Court Opinion

ID: 9373892
Source: CourtListenerOpinion
Date Created: 2023-02-22 16:10:20.014079+00
Date Added: 2024-06-11T17:16:49.272111
License: Public Domain

FILED
                                                                                   FEB 2 2023
                          NOT FOR PUBLICATION                                SUSAN M. SPRAUL, CLERK
                                                                                U.S. BKCY. APP. PANEL
                                                                                OF THE NINTH CIRCUIT
          UNITED STATES BANKRUPTCY APPELLATE PANEL
                    OF THE NINTH CIRCUIT

 In re:                                             BAP No. NC-22-1158-SGB
 RAMON FUENTES,
            Debtor.                                 Bk. No. 21-51321

 RAMON FUENTES,                       Adv. No. 22-05018
                  Appellant,
 v.                                   MEMORANDUM*
 DEUTSCHE BANK NATIONAL TRUST
 COMPANY, as Trustee for Indymac Inda
 Mortgage Loan Trust 2007-AR2,
 Mortgage Pass-Through Certificates
 Series 2007-AR2,
                  Appellee.

              Appeal from the United States Bankruptcy Court
                    for the Northern District of California
              M. Elaine Hammond, Bankruptcy Judge, Presiding

Before: SPRAKER, GAN, and BRAND, Bankruptcy Judges.

                                 INTRODUCTION

      The bankruptcy court determined that debtor Ramon Fuentes

      *
        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.
(“Debtor”) was ineligible for chapter 13 1 and dismissed his case. Debtor did

not appeal that decision.

      Immediately following dismissal of the case, the bankruptcy court

declined to retain jurisdiction over Debtor’s adversary proceeding. It

dismissed the adversary proceeding and subsequently denied Debtor’s

motion for rehearing. Debtor has appealed both the adversary proceeding

dismissal order and the denial of the rehearing motion.

      Debtor has neither alleged nor demonstrated any reversible error.

Accordingly, we AFFIRM.

                                        FACTS2

      In January 2020, Debtor sued Deutsche Bank National Trust

Company as Trustee for Indymac INDA Mortgage Loan Trust 2007-AR2,

Mortgage Pass-Through Certificates Series 2007-AR2 (“DBNTC”) and

others in state court seeking to prevent foreclosure against a residence he

and his wife owned in Watsonville, California (“Property”). Debtor did not

dispute that he and his wife executed a promissory note and deed of trust

requiring him and his wife to repay the principal amount of $676,000 plus

      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   We exercise our discretion to take judicial notice of documents electronically
filed in the underlying bankruptcy case and adversary proceeding. See Atwood v. Chase
Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).

                                            2
interest. But he alleged that he and his wife never received any of those

funds. According to Debtor, no money “changed hands.” Instead, the loan

transaction was executed through a series of bookkeeping transactions.

      In September 2020, the state court dismissed Debtor’s lawsuit with

prejudice. In January 2021, the state court entered orders identifying

Debtor and his wife as vexatious litigants and requiring them to obtain

approval of the presiding judge before commencing any new litigation.

Debtor and his wife appealed the vexatious litigant order and the prefiling

order but ultimately lost their appeal. Debtor did not appeal the dismissal

with prejudice of his lawsuit to prevent the foreclosure.

      In October 2021, Debtor filed a voluntary chapter 13 petition. In his

schedules, he claimed to have secured debt of only $676,000. But two

secured creditors—DBNTC and Rocket Mortgage—filed proofs of claim

asserting that they were owed $1,211,042.39 and $443,617.41, respectively,

for a total of $1,654,659,80 in secured debt.

      In February 2022, the bankruptcy court granted DBNTC relief from

stay permitting it to enforce its rights against the Property as a secured

creditor. That same month, the chapter 13 trustee moved to dismiss the

bankruptcy case under § 109(e) because the aggregate amount of secured

debt Debtor owed exceeded the $1,257,850 statutory ceiling for secured

debt applicable as of the petition date.

      In April 2022, Debtor commenced an adversary proceeding against

DBNTC again seeking to prevent foreclosure. The only comprehensible

                                       3
relief requested in the adversary complaint was for declaratory relief

seeking a determination of DBNTC’s claimed security interest in the

Property. The complaint also attacked DBNTC’s proof of claim. According

to Debtor, DBNTC could not establish that it was entitled to enforce the

note and the deed of trust securing the note.

      DBNTC moved to dismiss the adversary proceeding under Civil Rule

12(b)(2) and (6). The court held hearings on both the trustee’s case

dismissal motion and DBNTC’s adversary proceeding dismissal motion.

The court dismissed the bankruptcy under § 109(e) based on its

determination that Debtor’s secured debt exceeded the statutory ceiling.

The court then heard DBNTC’s motion to dismiss the adversary

proceeding. Instead of considering the merits of the adversary proceeding,

the court dismissed the adversary proceeding without prejudice on

alternate grounds. Citing Carraher v. Morgan Electronics., Inc. (In re

Carraher), 971 F.2d 327, 328 (9th Cir. 1992), the court explained that it had

discretion to decide whether to retain jurisdiction over the adversary

proceeding upon dismissal of the underlying bankruptcy case. After

weighing the four factors articulated in Carraher—judicial economy,

convenience, fairness, and comity—the court determined that it would be

inappropriate to retain jurisdiction. On that basis, it entered an order

dismissing the adversary proceeding.

      Debtor moved for rehearing of the court’s adversary proceeding

dismissal order, but the bankruptcy court denied the motion. Debtor timely

                                       4
appealed from both the dismissal of his adversary proceeding and the

denial of his rehearing motion. But he did not appeal the case dismissal

order.

                               JURISDICTION

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

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

                                    ISSUES

1.    Whether the bankruptcy court abused its discretion when it declined

to retain jurisdiction over Debtor’s adversary proceeding and dismissed it

without prejudice.

2.    Whether the bankruptcy court abused its discretion when it denied

Debtor’s rehearing motion.

                          STANDARD OF REVIEW

      We review for an abuse of discretion the bankruptcy court’s decision

declining to retain jurisdiction over Debtor’s adversary proceeding after

dismissal of the underlying bankruptcy case. In re Carraher, 971 F.2d at 328.

We similarly review for an abuse of discretion the bankruptcy court’s

denial of Debtor’s rehearing motion. See Carruth v. Eutsler (In re Eutsler), 585

B.R. 231, 235 (9th Cir. BAP 2017). The bankruptcy court abused its

discretion if it applied an incorrect legal rule or its factual findings were

illogical, implausible, or without support in the record. TrafficSchool.com v.

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

                                        5
                                DISCUSSION

A.    The bankruptcy court did not abuse its discretion when it
      dismissed Debtor’s adversary proceeding.

      Section 349 governs the effect of dismissal of a bankruptcy case. In re

Carraher, 971 F.2d at 328. However, nothing in § 349 automatically divests

bankruptcy courts of jurisdiction over related adversary proceedings when

the underlying bankruptcy case is dismissed. Id. Rather, bankruptcy courts

may retain jurisdiction of an adversary proceeding when appropriate.

Carraher held that in deciding whether to exercise its discretion to retain

jurisdiction, the bankruptcy court must consider four factors: “[judicial]

economy, convenience, fairness and comity.” Id. Accord, Linkway Inv. Co. v.

Olsen (In re Casamont Invs., Ltd.), 196 B.R. 517, 522 (9th Cir. BAP 1996).

      In his appeal brief, Debtor did not address any of the Carraher factors.

Instead, he focuses exclusively on the underlying merits of his allegations

against DBNTC regarding its claimed status as a secured creditor with a

security interest in the Property. As a result, Debtor forfeited his right to

challenge the bankruptcy court’s findings regarding the controlling issue:

the consideration of the four Carraher factors. See Fikrou v. Yarnall (In re

Fikrou), BAP No. NV-20-1117-FBT, 2020 WL 7214141, at *5 (9th Cir. BAP

Dec. 7, 2020) (citing Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir. 1999)).

      As in Fikrou, even if we were to independently review the

bankruptcy court’s findings regarding application of the four Carraher

factors, we would affirm. With respect to judicial economy, fairness, and

                                        6
convenience, the bankruptcy court correctly observed that Debtor had

presented and lost the same or similar arguments in his state court action.

Therefore, permitting Debtor to proceed with his adversary proceeding

would not further economy, convenience, or fairness since the bankruptcy

court lacked the authority to review or overturn the state court’s decision

pursuant to the Rooker-Feldman doctrine. 3

       As for the final Carraher factor of comity, the bankruptcy court aptly

noted that the underlying merits regarding the validity of DBNTC’s rights

and interest in the Property as a secured creditor presented issues

primarily implicating state law. These issues had already been presented

to, and disposed of by, the state court. Hence, due respect for state law and

the state court’s prior decision militated in favor of the bankruptcy court

not retaining jurisdiction over Debtor’s adversary proceeding.

       Simply put, Debtor has failed to demonstrate that any of the

bankruptcy court’s findings concerning the Carraher factors were illogical,

implausible, or unsupported by the record.

B.     The bankruptcy court did not abuse its discretion when it denied
       Debtor’s motion for rehearing.

       Civil Rule 59(e), made applicable in bankruptcy cases and adversary

       3
         See Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005) (holding
the Rooker-Feldman doctrine applies to “cases brought by state-court losers complaining
of injuries caused by state-court judgments rendered before the [federal] court
proceedings commenced and inviting district court review and rejection of those
judgments.”).
                                             7
proceedings by Rule 9023, applies to Debtor’s motion for rehearing because

it was filed within 14 days of entry of the adversary proceeding dismissal

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

F.3d 558, 561-62 (9th Cir. 2006). Under Civil Rule 59(e) the court may rehear

a matter if it: “(1) is presented with newly discovered evidence, (2)

committed clear error or the initial decision was manifestly unjust, or (3) if

there is an intervening change in controlling law.” Smith v. Clark Cnty. Sch.

Dist., 727 F.3d 950, 955 (9th Cir. 2013) (quoting Sch. Dist. No. 1J v. ACandS,

Inc., 5 F.3d 1255, 1263 (9th Cir. 1993)).

      Debtor has neither alleged nor established any of the criteria that

might support a grant of rehearing. He merely reargues points regarding

the merits of his adversary proceeding and his alleged entitlement to the

relief he requested. On this record, the bankruptcy court did not abuse its

discretion in denying Debtor’s motion for rehearing.

                                CONCLUSION

      For the reasons set forth above, we AFFIRM the bankruptcy court’s

dismissal of Debtor’s adversary proceeding and its denial of Debtor’s

motion for rehearing.

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