ROSE COURT, LLC V. SELECT PORTFOLIO SERVI
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 21-16663 (9th Circuit, Oct 17,2024) Published
- Tag(s):
-
- Ruling:
- A panel of the U.S. Court of Appeals for the Ninth Circuit affirmed a ruling by the U.S. District Court for the Northern District of California affirming the decision of that district's bankruptcy court (BC) to dismiss and deny leave to amend for futility the adversary complaint of debtor Rose Court LLC (DR) for declaratory relief as to an allegedly fraudulent transfer, the DR's assertion and dismissal of the same "claims" in past civil actions triggering the two-dismissal rule in Fed. R. Civ. P. 41(a)(1)(B) applied by the BC, though the panel split 2-1 over the better definition of "claim."
- Procedural context:
- Over a decade ago, the DR's predecessor in interest had defaulted on a mortgage loan secured by real property in Monte Sereno, California (the Property). After a number of assignments resulted in U.S. Bank, N.A. (U.S. Bank) becoming the holder, Select Portfolio Servicing, Inc. (SPS) the servicer, and Quality Loan Service Corporation (Quality) the trustee, Quality initiated nonjudicial foreclosure proceedings. In response, the DR filed and voluntarily dismissed multiple lawsuits pending in state and federal court challenging these efforts to foreclose and collect on the loan.
Then came bankruptcy. While its various civil actions were ongoing, the DR filed for bankruptcy in October 2017. U.S. Bank sought, and won, relief from the automatic stay and recorded the order soon thereafter; Quality then scheduled a foreclosure sale. Two days before the sale, the DR filed another bankruptcy petition. Citing to the lift stay order from the DR's first bankruptcy case, Quality nevertheless proceeded with the sale and sold the Property to U.S. Bank. After completion of the foreclosure sale, the DR filed this adversary proceeding in bankruptcy court against U.S. Bank, SPS, and Quality. The BC granted the Defendants' motion to dismiss but allowed DR to amend. DR filed an amended complaint, which the Defendants again challenged. The BC (1) granted this second dismissal because the foreclosure sale transcript contradicted the DR's allegations that the auctioneer postponed the sale, and (2) denied the DR's leave to file an amended second complaint pursuant to Fed. R. Civ. P. 41(a)(1)(B) because the DR had previously asserted and voluntarily dismissed the claims in its proposed second amended complaint in the aforementioned state civil actions.
The DR appealed first to the U.S. District Court for the Northern District of California, which affirmed the BC, and then appealed to the Circuit, now challenging only the BC's refusal to allow further amendment.
- Facts:
- In 2007, Teri Nguyen (Nguyen) obtained a refinance loan from Washington Mutual Bank, FA (WaMu) secured by the Property. Nguyen executed a promissory note and deed of trust in favor of WaMu, which named California Reconveyance Company (CRC) as trustee. Once Nguyen defaulted, CRC recorded a notice of default in 2009. In response, Nguyen transferred the Property from her sole ownership to joint ownership with her husband; together, the married duo then transferred the Property to the DR, a limited liability company in which they are managing members. Famously, WaMu eventually failed. Multiple assignments of the loan followed: JPMorgan Chase Bank, N.A. acquired the loan from WaMu, and assigned it to Bank of America, N.A., which assigned it to U.S. Bank, the current note holder and beneficiary. Later, SPS became the loan servicer, and U.S. Bank substituted Quality as the new trustee under the deed of trust.
- Judge(s):
- Daniel P. Collins; Danielle J. Forrest; and Jennifer Sung
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