In re Greenberg

626 B.R. 554

IN RE Enrique V. GREENBERG, Debtor,

Enrique V. Greenberg, Appellant,

v.Champion Mortgage Company, Appellee.

Case No.: 20-cv-00506-GPC-MDD

Bankruptcy No. 19-00878-MM11

United States District Court, S.D. California.

Signed February 1, 2021

Filed February 2, 2021

Enrique V. Greenberg, Temecula, CA, pro se.

Christopher M. McDermott, Pite Duncan LLP, Theron Spencer Covey, III, Tiffany & Bosco, PA, Todd Stephen Garan, Aldridge Pite, LLP, San Diego, CA, for Debtor.

ORDER AFFIRMING IN PART AND VACATING AND REMANDING IN PART BANKRUPTCY COURT'S ORDER OVERRULING APPELLANT'S OBJECTIONS TO APPELLEE'S PROOF OF CLAIM

Hon. Gonzalo P. Curiel, United States District Judge

Before the Court is Appellant Enrique V. Greenberg's ("Greenberg") Appeal of the Bankruptcy Court's March 3, 2020 Order Overruling Objection to Claim 2-2, a proof of claim filed by Appellee Champion Mortgage Company ("Champion"). ECF No. 29. The appeal has been fully briefed.

ECF Nos. 31, 35, 38. Having considered the parties' submissions and for the reasons set forth below, the bankruptcy court's order is AFFIRMED in part and VACATED and REMANDED in part.

BACKGROUND

Greenberg appeals the bankruptcy court's March 3, 2020 order ("Order on Claim 2-2") overruling his objections to Champion's proof of claim ("Claim 2-2") in Greenberg's most recent bankruptcy case, originally filed in bankruptcy court under Chapter 11 of the Bankruptcy Code on February 20, 2019 ("Current Bankruptcy Case"). ECF No. 1 at 4; Bk. No. 19-00878-MM11. Champion asserts Claim 2-2 based on a reverse mortgage loan evidenced by an adjustable rate note executed by Greenberg's mother, Antonia Cortes. ECF No. 12 at 6, 10; Bk. No. 19-00878-MM11 Claims Register, Claim 2-2. The note is secured by a deed of trust against Greenberg's principal residence in Temecula, California ("Property"). ECF No. 12 at 6; Bk. No. 19-00878-MM11 Claims Register, Claim 2-2. Both parties acknowledge that several of Greenberg's prior bankruptcy cases are relevant to his appeal of the Order on Claim 2-2.

I. Bankruptcy Proceedings¹

On January 17, 2014, Greenberg filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code ("2014 Bankruptcy Case"). See Bk. No. 14-00260-MM7, ECF No. 1. In the 2014 Bankruptcy Case, the bankruptcy court appointed Leslie Gladstone ("Trustee") as the Chapter 7 Trustee for the benefit of the bankruptcy estate. Bk. No. 14-00260-MM7, ECF No. 2. The Trustee discovered an incorrect digit in the legal description of the Property in the Deed of Trust and on April 16, 2014, filed an adversary complaint against U.S. Bank National Association ("U.S. Bank"), Champion's predecessor in interest, to avoid the Deed of Trust. Adv. No. 14-90052-MM, ECF No. 1. The Trustee and U.S. Bank later reached a compromise in which the Trustee agreed to execute the documents needed to correct the error in the legal description in the Deed of Trust and U.S. Bank agreed to pay the Trustee $58,000 for the benefit of the bankruptcy estate. Bk. No. 14-00260-MM7, ECF No. 150.

On March 12, 2015, the Trustee filed a Notice of Intended Action requesting court approval of the compromise, which Greenberg opposed. Bk. No. 14-00260-MM7, ECF Nos. 115, 119. Greenberg raised a number of grounds in his multiple filings opposing the Trustee's motion, including that the Trustee was likely to succeed in the adversary proceedings, that the Trustee did not closely scrutinize the facts involving the dispute and failed to exercise proper business judgment in entering into the settlement, that the settlement was not "fair, reasonable, and equitable," that U.S. Bank lacked standing, and that the bankruptcy court lacked subject matter jurisdiction. Bk. No. 14-00260-MM7, ECF No. 142 at 2–4.

On July 6, 2015, the bankruptcy court issued an order approving the settlement and authorized the Trustee to execute and deliver documents necessary to reform the Deed of Trust ("Compromise Order"). Bk. No. 14-00260-MM7, ECF No. 150. Greenberg did not appeal this decision. See Bk. No. 14-00260-MM7. Following discharge of the debtor and administration of the bankruptcy estate by the Trustee, the case was closed. Bk. No. 14-00260-MM7, ECF Nos. 76, 176. On September 11, 2015, the Trustee executed the Corrective Deed of Trust and delivered the original to U.S. Bank, but the original was lost or misplaced. ECF No. 13-1 at 27; Bk. No. 14-00260-MM7, ECF No. 150. The Corrective Deed of Trust was not recorded until December 20, 2017. ECF No. 12 at 8; ECF No. 17 at 16.

On October 13, 2015, Greenberg filed a voluntary petition for relief under Chapter 11 ("2015 Bankruptcy Case").² Bk. No. 15-06578-MM11. On April 25, 2016, Greenberg filed an objection to the proof of claim of U.S. Bank, which Greenberg had filed on U.S. Bank's behalf. Bk. No. 15-06578-MM11, ECF No. 68; Claims Register, Claim 3. On May 3, 2016, U.S. Bank moved the bankruptcy court for relief from the automatic stay to allow U.S. Bank to commence a state court action to quiet title, reform the deed, and obtain related declaratory relief. Bk. No. 15-06578-MM11, ECF No. 74. U.S. Bank argued the state court action was necessary despite the Compromise Order because although the Compromise Order rendered U.S. Bank's interest in the Property that of a secured creditor, the Compromise Order had not resolved the issue given that it was Cortes—not Greenberg—who was party to the original Deed of Trust. Id. On July 18, 2016, the bankruptcy court lifted the automatic stay to allow U.S. Bank to proceed in state court to determine its rights in the Property, overruled Greenberg's objections, and deemed the claims withdrawn without prejudice. Bk. No. 15-06578-MM11, ECF Nos. 134, 154. Greenberg appealed and moved to stay that order pending appeal, and additionally moved for reconsideration of the order, but the bankruptcy court denied both motions. Bk. No. 15-06578-MM11, ECF Nos. 109, 117, 139, 154, 171. On October 28, 2016, the bankruptcy court dismissed the 2015 Bankruptcy Case. Bk. No. 15-06578-MM11, ECF No. 207. The Bankruptcy Appellate Panel of the Ninth Circuit then dismissed as moot Greenberg's appeal of the order granting relief from the automatic stay. BAP No. SC-16-1212, ECF No. 23.

On February 20, 2019, Greenberg filed the Current Bankruptcy Case under Chapter 11. Bk. No. 19-00878-MM11, ECF No. 1. On August 15, 2019, Champion filed its Amended Proof of Claim in the amount of $274,709.60. Bk. No. 19-00878-MM11, Claims Register, Claim 2-2. On October 21, 2019, Greenberg filed his objection to Claim 2-2, challenging the validity of the Corrective Deed of Trust based upon the bankruptcy court's order in the 2015 Bankruptcy Case permitting U.S. Bank to litigate the reformation issue in state court and challenging Champion's standing to file a proof of claim. Bk. No. 19-00878-MM11, ECF No. 56. The Parties then filed further briefing on the objection to Claim 2-2. Bk. No. 19-00878-MM11, ECF Nos. 62, 79, 81, 89. On March 3, 2020, the bankruptcy court issued its Order on Claim 2-2, overruling Greenberg's objections as a matter of law. Bk. No. 19-00878-MM11, ECF No. 103. The bankruptcy court found that it had already litigated and ruled upon the Trustee's authority to execute the corrective deed of trust, and thus that the doctrines of res judicata and collateral estoppel barred Greenberg from relitigating the validity of the Corrective Deed of Trust. Id. The bankruptcy court did not make a determination as to the proper dollar amount of Claim 2-2. Id.

On March 17, 2020, Greenberg appealed the Order on Claim 2-2 to this Court. ECF No. 1. While this appeal has been pending, the Chapter 11 case proceeded in bankruptcy court as Greenberg did not seek a stay pending appeal. On August 6, 2020, the bankruptcy court dismissed Greenberg's bankruptcy case upon finding that Greenberg could not confirm a plan of reorganization over Champion's objection, and that there had been gross mismanagement of the estate and bad faith in filing the bankruptcy case as Greenberg was unwilling to resolve Champion's claim. Bk. No. 19-00878-MM11, ECF No. 206. The bankruptcy court also barred Greenberg from filing another bankruptcy case for 180 days. Id. On August 7, 2020, Greenberg appealed the bankruptcy court's dismissal of his case to this Court. Case No. 20-cv-1532-GPC-MDD, ECF No. 1. This Court has consolidated that appeal of the case dismissal with this appeal of the Order on Claim 2-2. ECF No. 33.

II. District Court Proceedings

After the filing of his present appeal, Champion moved to dismiss. ECF No. 12. On October 6, 2020, the Court denied Champion's motion. ECF No. 26. On October 13, 2020, after initially failing to properly file on the Court's docket, Greenberg filed his opening brief for this appeal. ECF No. 29. Champion then filed a responsive brief and Greenberg filed a reply. ECF Nos. 31, 35. The Court thereafter directed Champion to file a sur-reply related to the issue of standing, ECF No. 37, and Champion filed its sur-reply on January 14, 2021, ECF No. 38.

LEGAL STANDARD

The Court has jurisdiction to review a bankruptcy court's final orders pursuant to 28 U.S.C. § 158(a). On appeal, the district court reviews the bankruptcy court's findings of fact for clear error and its conclusions of law de novo . Havelock v. Taxel , 67 F.3d 187, 191 (9th Cir. 1995). Fed. R. Bankr. Proc. 8013. The application of res judicata, as a conclusion of law, is therefore reviewed de novo . In re Kelley , 199 B.R. 698, 701 (B.A.P. 9th Cir. 1996). When the bankruptcy court does not make formal findings of fact on a contested matter "sufficient to enable a reviewing court to determine the factual basis for the court's ruling," the reviewing court must vacate the bankruptcy court's order and remand for further proceedings unless the record contains a clear basis for the court's ruling. In re Veal , 450 B.R. 897, 920–20 (B.A.P. 9th Cir. 2011) (citing Vance v. Am. Hawaii Cruises, Inc. , 789 F.2d 790, 792 (9th Cir. 1986) ).

DISCUSSION

Greenberg...