Rose Court, LLC - Adversary Proceeding

EDWARD J. EMMONS, CLERK 13 G □□ \o. U.S. BANKRUPTCY COURT □□ NORTHERN DISTRICT OF CALIFORNIA a. a Sal □□ 1 . . □□□□□□□□ Signed and Filed: July 22, 2020 □□□□ OL [2] Mini hi 4 Vin fod 5 DENNIS MONTALI U.S. Bankruptcy Judge [6] 7 UNITED STATES BANKRUPTCY COURT 8 NORTHERN DISTRICT OF CALIFORNIA [9] In re ) Bankruptcy Case No. 19-31225 DM 10 ) ROSE COURT, LLC, ) Chapter 11 11 ) ) [12] Debtor. ) 13 ) ) 14 ||ROSE COURT, LLC, ) Adversary Case No. 19-03058-DM ) 15 Plaintiff, ) 16 ) MEMORANDUM DECISION REGARDING Vv. ) DEFENDANTS’ MOTION TO DISMISS 17 ) AND DEBTOR'S MOTION TO AMEND 18 U.S. BANK NA, successor trustee) THE FIRST AMENDED COMPLAINT to Bank of America, NA, ) 19 ||Successor in interest to ) LaSalle Bank NA, as trustee, on ) 20 ||behalf of the holders of the ? WaMu Mortgage Pass-Through ) 21 Certificates, Series 2007-HY7, ) 22 its assignees and/or ) successors, by and through its ) 23 |/Servicing agent Select ) Portfolio Servicing, Inc.i ) 24 ||SELECT PORTFOLIO SERVICING, ) 25 INC.; and QUALITY LOAN SERVICE ) CORPORATION, ) [26] Defendants. ) 27 ) [28] -1- 1 In this adversary proceeding, Rose Court LLC (“Debtor”) is 2 attempting to invalidate a foreclosure sale of certain property 3 located in Monte Sereno, California (the “Property”) that 4 occurred on November 25, 2019. After this court dismissed the 5 original complaint, Debtor filed a first amended complaint (the 6 “FAC”). Defendant Quality Loan Services (“Quality”) filed the 7 underlying motion to dismiss (“MTD”) the FAC. Defendants Select 8 Portfolio Servicing, Inc. (“Select Portfolio”) and U.S. Bank 9 N.A. (“U.S. Bank”) joined the MTD.1 10 Debtor opposed the MTD and moved for leave to amend the FAC 11 (the “Motion to Amend”). Select Portfolio and Quality opposed 12 the Motion to Amend. For the reasons set forth below, the court 13 is granting the MTD and denying the Motion to Amend. 14 I. The FAC and MTD 15 A. Allegations Regarding Falsified Note 16 In the introductory section of the FAC, Debtor states in 17 paragraph 7: 18 7. PLAINTIFF is informed and believes and, based thereon, alleges that Defendant U.S. BANK, through a [19] falsified note instrument and falsified void allonge 20 instrument, is part of a fraudulent collection scheme and is a creditor with a disputed claim allegedly 21 secured by the PLAINTIFF’S real property located at 15520 Quito Road, Monte Sereno, California 95030 (the [22] “SUBJECT PROPERTY”). [23] See FAC at dkt. 31, p. 3, lines 3-9. Apart from that [24] introductory paragraph, Debtor does not plead any facts giving [25] rise to that purported claim. To the contrary, the “General [27] 1 Quality, Select Portfolio, and U.S. Bank are collectively referred to as [28] “Defendants.” 1 Allegations” in paragraphs 12-25 do not mention the purportedly 2 falsified note, and neither does the first and only claim for 3 relief, which focuses on the purported irregularities of the 4 foreclosure sale. 5 B. Allegations Regarding Noncompletion of Foreclosure Sale [6] Debtor asserts in the FAC and in other pleadings that no [7] foreclosure sale actually occurred. Paragraph 15 of the FAC [8] states that the sale was postponed: [9] 10 On November 25, 2019, at 10:22 a.m., the date of the supposed auction, having been no bids by the creditor 11 nor the public, LAM announced publicly that the sale would be postponed, upon which, on information and [12] belief, all bidders relied. 13 Debtor alleges in paragraph 16 of the FAC that on December 5, 14 2019, “despite the sale having been publicly postponed after no 15 bids and no credit bid, Quality fraudulently executed a 16 Trustee’s Deed Upon Sale allegedly transferring the Subject 17 Property to Defendant U.S. BANK pursuant to the falsely alleged 18 Foreclosure Sale.” Yet the FAC itself provides a transcript of 19 the sale that is inconsistent with the contention that the sale 20 was postponed and did not occur: [21] Good Morning. My name is Chapman. I’m here to conduct 22 a trustee’s sale. Today, I will sell for Quality Loan Service Corporation going to sell Trustee Sale Number 23 CA-14-655475-HL, with an APN of 410-36-007 and a purported address of 15520 Quito Road, Monte Sereno, [24] C-A, 95030. [25] I have a clear specific bid in the amount of 26 $3,583,288.06. Does anybody wish to step over and qualify? [28] 1 Trustee’s sale number C-A-14-655475-HL, trustor, Teri Ha Nguyen, a married woman, under deed of trust dated [2] April 24th, 2007, recorded on May 1st, 2007, 3 instrument number 19406773 of official records of Santa Clara County, State of California, covering 4 property in said county and state, described as APN 410-36-007. The common destination is purported to be [5] 15520 Quito Road, Monte Sereno City, C-A, 95030. No 6 warranty is given as to the completeness or the correctness of this address. Sale of the property is 7 on an as is basis and without covenant or warranty, expressed or implied, regarding title, condition, [8] possession or encumbrances. [9] I have been authorized by the trustee and beneficiary 10 to place an opening bid in the amount of 3,583,288.06. Are there any further bids? No. No bidders, no person 11 present. [12] So for the second time, anyone want to bid? For the 13 third and final time, any more bid? Okay. So nobody here, so the property is sold back to the beneficiary 14 with no bidders. So the bidding is closed. 15 See FAC, dkt. 31 at 4:28 (emphasis added). Despite this clear 16 statement by the auctioneer at the duly noticed foreclosure 17 sale, Debtor asserts that the sale was postponed. 18 After the sale concluded and was verbally confirmed, 19 Debtor’s managing members asked the auctioneer about the 20 consequences of the new bankruptcy case on the sale. The 21 transcript of the sale is clear and any other conversations 22 between the managing members and the auctioneer do not overcome 23 the presumption of the validity of the foreclosure sale, 24 particularly when the trustee’s deed was delivered. See Cal. 25 Civ. Code § 2924h (“[T]he trustee’s sale shall be deemed final 26 upon the acceptance of the last and highest bid, and shall be 27 deemed perfected as of 8 a.m. on the actual date of sale if the [28] 1 trustee’s deed is recorded within 15 calendar days after the 2 sale, or the next business day following the 15th day if the 3 county recorder in which the property is located is closed on 4 the 15th day”). That presumption became conclusive upon 5 delivery of the trustee’s deed to the successful bidder. 6 Biancalana v. T.D. Serv. Co., 56 Cal. 4th 807, 814 , 300 P.3d 7 518, 522 (2013). 8 In light of the foregoing, the court will GRANT the MTD. 9 II. The Motion to Amend the FAC [10] In the Motion to Amend and the proposed second amended [11] complaint (“SAC”), Debtor contends that the underlying note and [12] deed of trust are unenforceable. The SAC alleges that the [13] signature of managing member Teri H. Nguyen (“Nguyen”) was [14] forged. This is at least the fourth action since 2017 filed by [15] Nguyen and Debtor contesting the validity and enforceability of [16] the underlying note and the deed of trust.2 [17] Federal Rule of Civil Procedure 41(a)(1)(B) (“Rule 41”), [18] made applicable by Federal Rule of Bankruptcy Procedure 7041, [19] provides that a voluntary dismissal is without prejudice unless [20] the plaintiff previously dismissed any federal or state court [21] action based on or including the same claim: [22] Unless the notice or stipulation states otherwise, the 23 dismissal is without prejudice. But if the plaintiff previously dismissed any federal- or state-court [24] action based on or including the same claim, a notice [26] 2 The court notes that prior to 2017, Debtor and/or Nguyen filed and dismissed multiple actions contesting the validity of the note and deed of trust. See [27] Declaration of Teri Nguyen in Support of Opposition to Motion for Relief to the Automatic Stay filed on December 18, 2012 in In re Rose Court, LLC at [28] dkt. 22 (Case No. 12-58012). 1 o mf e rd ii ts sm .i ”s s a l operates as an adjudication on the [2] Id. 3 Since 2017, Debtor has voluntarily dismissed the 4 following actions against Select Portfolio and Quality that 5 – like the current action - challenged their right to 6 foreclose: [7] (1) Rose Court LLC v. Select Portfolio Servicing 8 Inc., et al, Case No. 17CV313755 in the Superior Court of the State of California, County of Santa 9 Clara filed on February 21, 2018 (see Exh. 1-3 to the Request for Judicial Notice (“RJN”) at dkt. [10] 57)); [11] (2) Rose Court LLC and Teri H. Nguyen v. Select 12 Portfolio Servicing Inc., et al, Case No. CGC-19580261 in the Superior Court of the State of [13] California, County of San Francisco filed on 14 December 22, 2019, and removed to the U.S. District Court as Case No. 3:19-CV-07688-LB (see 15 Exh. 4-5 to the RJN). 16 (2) Rose Court LLC, et al. v. Select Portfolio 17 Servicing, Inc. et al., Case No. 19-CV-359333 in the Superior Court for the State of California, 18 County of Santa Clara, Case No. 19-CV-359333 (see Exh. 6-7 to the RJN). [19] 20 Debtor seeks to amend the FAC to add claims that the 21 note and deed of trust on the Property are unenforceable 22 for reasons unrelated to the foreclosure sale. The claims 23 that Debtor seeks to add were asserted in the three 24 lawsuits that Debtor voluntarily dismissed. Under Rule 25 41(a)(1), these two voluntary dismissals operate as an 26 adjudication on the merits of the claims Debtor wants to [28] 1 add. Consequently, because such an amendment is futile, 2 the court will deny Debtor’s Motion to Amend. 3 III. CONCLUSION 4 For the reasons stated above, the court is granting the MTD 5 and denying the Motion to Amend. Counsel for Select Portfolio 6 should prepare orders GRANTING the MTD and DENYING the Motion to [7] Amend “for the reasons set forth” in this memorandum decision.3 8 Counsel should comply with B.L.R. 9021-1(c) before uploading the 9 order. 10 **END OF MEMORANDUM DECISION** [27] 28 3 The order should not repeat the findings and conclusions of this decision. 1 COURT SERVICE LIST ECF Recipients