Menjivar v. Wells Fargo Bank, N.A. (In re Menjivar)

In re: BENJAMIN MENJIVAR, Debtor.BENJAMIN MENJIVAR; SARA MENJIVAR, Appellants, v. WELLS FARGO BANK, N.A., Appellee.

BAP No. CC-12-1608-KuBaPa

Bk. No. LA 11-61208-NB

Adv. No. LA 12-01125-NB

UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

Filed: January 28, 2014

NOT FOR PUBLICATION

MEMORANDUM^*

Argued on November 21, 2013

at Pasadena, California

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Neil W. Bason, Bankruptcy Judge, Presiding

Appearances: Philip Eberhard Koebel, Esq. argued for appellants Benjamin and Sara Menjivar; Robert Collings Little, Esq. of Anglin, Flewelling, Rasmussen, Campbell & Tryttenn LLP argued for appellee Wells Fargo Bank, N.A.

Before: KURTZ, BALLINGER^** and PAPPAS, Bankruptcy Judges.

INTRODUCTION¹

Debtors Benjamin and Sarah Menjivar commenced an adversary proceeding against Wells Fargo Bank ("WFB") seeking damages and seeking to invalidate WFB's trust deed against their residence. The bankruptcy court dismissed all of the Menjivars' claims for relief without leave to amend, and the Menjivars appealed.

None of the Menjivars' allegations stated a claim for relief plausible on its face. Nor were there any amendments consistent with the Menjivars' existing allegations that would have cured the fatal deficiencies in their first amended complaint ("FAC"). The bankruptcy court properly dismissed their FAC without leave to amend, so we AFFIRM.

FACTS²

In October 2005, the Menjivars obtained a loan from WFB's predecessor World Savings Bank in order to refinance the firstand second trust deeds on their residence. In January 2007, World Savings Bank persuaded the Menjivars to once again refinance their residence. The Menjivars admit that $516,147.97 of the loan proceeds from their January 2007 refinancing were used to pay off their 2005 home loan, that they also received $13,462.50 in cash from the January 2007 refinancing, that they signed a promissory note agreeing to repay $538,750.00, and that the January 2007 note was secured by a deed of trust on their residence.

In July 2007, World Savings Bank persuaded the Menjivars to refinance their residence a third time. According to the Menjivars, World Savings Bank persuaded the couple to refinance by representing that the Menjivars would receive a home loan with a fixed interest rate. But the loan documents the Menjivars signed plainly stated otherwise. The loan documentation also stated that the Menjivars' combined monthly income was $10,600, which the Menjivars now admit was inaccurately high. They only noticed this inaccuracy when they reviewed the loan documentation later on, presumably after their dispute with WFB arose.

The Menjivars claim that, at closing, they were surprised by the total amount of settlement charges and fees they had to pay, particularly the roughly $4,000 they had to pay in cash in order for the July 2007 refinancing to close. They further claim that World Savings Bank pressured them to close quickly.

According to the FAC, the Menjivars blame the stress of the July 2007 refinancing for a severe stroke Ms. Menjivar suffered in August 2007 and for the death of their mentally-ill son in 2008. But the Menjivars have not alleged any legally-cognizableconnection between the July 2007 refinancing and these tragedies.

At some point, WFB became the successor by merger to World Savings Bank's rights under the July 2007 note and deed of trust.³ The Menjivars requested that WFB refinance them into a fixed rate loan. But by this time, the national mortgage crisis already was underway, and WFB told the Menjivars that WFB would only consider refinancing them if they were in default on the July 2007 note. Based on the information from WFB, the Menjivars defaulted on the 2007 note by not making their mortgage payments. WFB recorded a notice of default in August 2010 and a notice of trustee's sale in November 2010.

In November 2010, with the trustee's sale looming, the Menjivars sued WFB in the Los Angeles County Superior Court (LASC Case No. GC046375) ("First State Court Lawsuit") and obtained a temporary restraining order temporarily enjoining the sale pending further proceedings. But WFB countered by removing the First State Court Lawsuit to the United States District Court for the Central District of California. (USDC Case No. 10-CV-09628). Ultimately, the temporary injunction terminated, and the Menjivars voluntarily dismissed the First State Court Lawsuit.⁴

In January 2011, the Menjivars filed a new state court lawsuit (LASC Case No. GC046687) ("Second State Court Lawsuit"), and immediately sought a new temporary restraining order to prevent WFB's imminent trustee's sale.⁵ When it became apparent that the Menjivars would not be able to obtain a temporary restraining order before the date of the trustee's sale, Ms. Menjivar filed a chapter 13 bankruptcy case (USBC Case No. LA 11-012361-EC). That case was dismissed in March 2011 because the debtor did not file one of the papers required to support her bankruptcy filing.

In February 2011, shortly before WFB's rescheduled foreclosure sale, Mr. Menjivar filed a chapter 13 bankruptcy case (USBC Case No. LA 11-017774-WB). In December 2011, at the confirmation hearing held in Mr. Menjivar's bankruptcy case, the bankruptcy court dismissed the bankruptcy case. According to the Menjivars, they did not oppose the case dismissal because theybelieved that WFB would not offer them a loan modification unless the bankruptcy case was dismissed.

Also in December 2011, WFB offered to refinance the Menjivars. This refinance offer consisted of a three-month trial loan modification program, which provided in relevant part for three months of mortgage payments at roughly $2,000 per month, with a modified interest rate of 2%.

In May 2012, WFB sent the Menjivars documentation for a permanent loan modification. The Menjivars wanted to accept the permanent loan modification offer, but they also wanted to continue to litigate over the validity of the July 2007 note and trust deed, so they attempted to amend the permanent loan modification documents by striking out the paragraph reaffirming the July 2007 note and trust deed but otherwise accepting the permanent loan modification documents as drafted. WFB rejected the permanent loan modification documents as amended by the Menjivars.

Mr. Menjivar filed in December 2011 a new chapter 13 bankruptcy case, the case in which the underlying adversary proceeding was commenced. According to the Menjivars, this latest case was necessitated by the wrongful repossession of their automobile by a creditor not associated with the underlying adversary proceeding. Up until January 2012, their Second State Court Lawsuit remained dormant while the Menjivars' serial bankruptcy cases proceeded. But the Menjivars then removed the Second State Court Lawsuit to the bankruptcy court, on January 30, 2012, thereby commencing the adversary proceeding.

On July 31, 2012, the Menjivars filed the FAC. The FACrelied on essentially the same facts as their two state court complaints, but many of the claims for relief set forth in the FAC were new. The FAC claims for relief generally fall into one of several categories: (1) they allege that the 2007 notes and trust deeds were constructive fraudulent transfers under California law; (2) they allege that the 2007 notes and trust deeds were actual fraudulent transfers under California law; (3) they allege that World Savings Bank fraudulently induced them to enter into the July 2007 refinancing by misrepresenting that the refinancing would be for a fixed rate loan when in reality it was for an adjustable rate loan; (4) they allege that World Savings Bank did not give them any consideration whatsoever in exchange for the 2007 notes and trust deeds; (5) they allege that World Savings Bank violated the Truth in Lending Act ("TILA"); and (6) they allege that World Savings Bank violated the Fair Housing Act ("FHA") and the Equal Credit Opportunity Act ("ECOA"). Based on all of these claims, the Menjivars sought to invalidate the 2007 notes and trust deeds, and sought actual damages, statutory damages, punitive damages, injunctive relief, to quiet title, and costs and attorney's fees.

WFB filed a Civil Rule 12(b)(6) motion to dismiss, and the Menjivars opposed the motion. The bankruptcy court heard the dismissal motion on October 25, 2012, and entered an order granting the motion with prejudice on November 7, 2012.⁶ Thehearing transcript and the tentative ruling incorporated into the court's dismissal order reflect that the court essentially adopted the grounds for dismissal presented by WFB. In particular, the bankruptcy court held that some of the claims for relief were barred by the applicable statutes of limitation and others could not be reconciled with the contents of the loan documentation underlying the claims. The bankruptcy court further opined that the Menjivar's claims based on state law appeared to be preempted by the Home Owners' Loan Act of 1933 ("HOLA"). The Menjivars timely filed their notice of appeal on November 21, 2012.⁷

JURISDICTION

The bankruptcy court had jurisdiction pursuant to 28 U.S.C.§§ 1334 and 157(b)(2)(K).⁸ We have jurisdiction under 28 U.S.C. § 158.

ISSUE

Did the bankruptcy court commit reversible error when it dismissed the Menjivars' FAC with prejudice and without leave to amend?

STANDARDS OF REVIEW

We review de novo a dismissal under Civil Rule 12(b)(6). See Movsesian v. Victoria Versicherung AG, 670 F.3d 1067, 1071 (9th Cir. 2012) (en banc). When we review a matter de novo, we consider it anew, "as if no decision previously had been rendered, giving no deference to the bankruptcy court's prior determinations." Nordeen v. Bank of America, N.A. (In re Nordeen), 495 B.R. 468, 475 (9th Cir. BAP 2013).

Generally speaking, we review the bankruptcy court's decision to dismiss without leave to amend for an abuse of discretion. See, e.g., Zadrozny v. Bank of N.Y. Mellon, 720 F.3d...