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Brugnara v. PSG Mortgage Lending Corp. (In re: PSG Mortgage Lending Corp.)

Case Type:
Case Status:
BAP No. NC-22-1065-GBS (9th Circuit, Jun 29,2023) Not Published
The Bankruptcy Appellate Panel of the Ninth Circuit held a bankruptcy court did not err in denying a motion to remand a removed civil action and in granting a summary judgment for the defendants/appellees in that case based on claim preclusion. Plaintiff/Appellant waived argument on these issues based on the contents of his brief. But on the merits, the record reflected (1) the lower court did not abuse its discretion in denying the motion to remand, and (2) claim preclusion warranted entry of a summary judgment in appellees' favor.
Procedural context:
Plaintiff/Appellant Luke Brugnara appealed two issues to the panel: (1) whether the bankruptcy court erred in denying a motion to remand a state court civil action that a debtor removed to the bankruptcy court pursuant to 28 U.S.C. § 1452 and Fed. R. Bankr. P. 9027 even though the debtor was not a party to the state court action, and (2) whether the bankruptcy court erred in granting a summary judgment in favor of the defendants in the removed case based on claim preclusion. However, Mr. Brugnara did not offer arguments in his appellate brief on these issues. Instead, he argued the bankruptcy court erred in granting a declaratory judgment against him in a separate adversary proceeding even though he had not appealed from the order awarding this relief.
This factually-convoluted appeal involves multiple bankruptcy cases and adversary proceedings in the U.S. Bankruptcy Court for the Northern District of California, all of which involved one parcel of real property on Sea Cliff Avenue in San Francisco. Appellant Luke Brugnara owned an entity, BPVI, that had title to the Property. BPVI scheduled the Property as an asset in a chapter 11 case in 2017. BPVI filed adversary proceedings against entities with interests in/ties to the Property, asserting claims for breach of contract, intentional misrepresentation, and other business torts. The bankruptcy court converted BPVI's bankruptcy case to chapter 7 in 2018. The chapter 7 trustee settled the estate's claims against all defendants for cash in exchange for the with-prejudice dismissal of the adversary proceedings. The chapter 7 trustee also stipulated to stay relief as to the Property in favor of one of the AP defendants, PSG Capital Partners, Inc. That entity took title to the Property in 2020 through a nonjudicial foreclosure and then transferred the Property in 2021 to PSG Mortgage Lending Corp., which ultimately filed the chapter 11 case related to this appeal later in August 2021. In December 2021, Debtor PSG Mortgage Lending Corp. filed a notice to remove a state court action Mr. Brugnara filed against parties - other than Debtor - related to the Property. Mr. Brugnara's state court complaint alleged the same claims that BPVI had pursued in its prior adversary proceedings against the same parties, and one remedy he sought was to quiet title to the Property. Mr. Brugnara moved the bankruptcy court to remand the case to state court. Debtor opposed that motion, arguing the court had subject matter jurisdiction over the claims in the state court complaint as they concerned property of Debtor's estate even if Debtor wasn't a named defendant. One of the defendants in the removed action, joined by Debtor, moved the bankruptcy court to enter a summary judgment on the claims in the complaint on claim preclusion grounds as the chapter 7 trustee had settled the same claims against the defendants in the prior BPVI bankruptcy proceeding. After argument, the bankruptcy court entered an order in March 2022 denying Mr. Brugnara's motion to remand and granting the defendant's motion for summary judgment, finding it had exclusive jurisdiction to determine matters concerning property of the estate and that the claims in Mr. Brugnara's complaint duplicated those the chapter 7 trustee settled and dismissed with prejudice in BPVI's bankruptcy case. Mr. Brugara timely appealed from this order. Finally, in February 2022, Debtor filed a separate adversary proceeding against Mr. and Mrs. Brugnara, seeking a declaratory judgment that they held no right, title or interest in the Property given the nonjudicial foreclosure. Debtor sought a summary judgment on its claim, the Brugnaras did not oppose the motion, and the bankruptcy court entered an order granting a declaratory judgment in Debtor's favor. The Brugnaras did not appeal from this order.

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