324 F.3d 12 (1st Cir. 2003), 02-9008, In re Colonial Mortg. Bankers Corp.

Docket Nº:02-9008
Citation:324 F.3d 12
Case Date:March 26, 2003
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

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324 F.3d 12 (1st Cir. 2003)





No. 02-9008

United States Court of Appeals, First Circuit

March 26, 2003

Heard March 5, 2003.

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[Copyrighted Material Omitted]

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Wanda Luna Martinez, with whom Montañez & Alicea Law Offices was on brief, for appellant.

Iván R. Fernández-Vallejo, with whom Goldman Antonetti & Cordova, P.S.C., Jorge Souss, and Rodriguez & Fernández were on brief, for appellees.

Before Selya, Circuit Judge, Coffin, Senior Circuit Judge, and Lipez, Circuit Judge.

SELYA, Circuit Judge.

This is the latest chapter in a seemingly endless bankruptcy litigation. We previously adjudicated the underlying dispute, involving rights to a substantial bank account standing in the name of the debtor, in favor of the trustee in bankruptcy. See Crefisa Inc. v. Washington Mut. Bank, 186 F.3d 46 (1st Cir. 1999). The appellant attempts an end run around that ruling. Because our prior adjudication precludes the appellant's claim, we affirm the dismissal of its complaint.



Our earlier decision limns the full historical relationship, both procedural and factual, that is needed to put this proceeding into perspective. See id. at 47-49. Rather than retrace our steps, we include here only the bare minimum that is necessary to frame the issues on appeal. We draw our account from the brute facts that appear on the face of the complaint, the supporting documentation referenced therein, and matters susceptible to judicial notice.

On April 4, 2000, Banco Santander de Puerto Rico (Santander) filed a complaint in the federal district court requesting the court to order Washington Mutual Bank to turn over funds deposited in a certain "Golden Passbook" account. The complaint alleged that, on November 26, 1986, Caguas Federal Savings Bank loaned Milton Rua, president of Colonial Mortgage Bankers Corp., $500,000; that Rua signed a promissory note (the Note) in that amount and simultaneously pledged the Golden Passbook account to secure payment of the Note; and that Rua used the loan proceeds to fund the Golden Passbook account. The complaint then cited, and incorporated by reference, earlier litigation involving these funds, namely, Civil Action No. 87-1874, in the United States District Court for the District of Puerto Rico.

In that regard, the complaint alleged that Bowery Savings Bank (predecessor in interest to Washington Mutual) sued Rua, Colonial, and Caguas Federal in the same month that Colonial sought the protection of the bankruptcy court, alleging various defalcations in connection with a mortgage loan servicing agreement. The complaint proceeded to cite, and incorporated by reference, a bankruptcy case (Bankr. No. 87-03026) in which the bankruptcy court had ordered Caguas Federal to turn over the funds held in the Golden Passbook account to the trustee in bankruptcy (Hans López-Stubbe). Caguas Federal had complied with the turnover order, delivering a check for $557,720.86 (principal plus accrued interest) to the trustee on or about November 1, 1989.

The Resolution Trust Corporation (RTC) was appointed as the receiver of Caguas Federal in August of 1999. According to the complaint in the instant case, the RTC thereafter "sold and assigned Page 15

to [Santander] the assets that it acquired from Caguas . . ., which included Rua's loan with its collateral," and Santander then sold to Crefisa "all the assets that it acquired from RTC, including the loan granted to . . . Rua with its collateral." Crefisa proceeded to bring an action to recover the monies on deposit in the Golden Passbook account, but lost because, in the words of the complaint, "[i]t was determined that the collateral was not transferred with the loan, and that Crefisa did not have standing to claim the monies." The complaint alleges that Crefisa thereupon transferred the loan back to Santander, "which has the collateral, so that Santander may claim the monies." The defendants, López-Stubbe and Washington Mutual, asked the bankruptcy court to take judicial notice of the prior proceedings involving the Golden Passbook account, see Fed. R. Evid. 201, and simultaneously moved for dismissal of the complaint on res judicata grounds. They argued that the earlier proceeding brought by Crefisa precluded Santander's current claim. The bankruptcy court agreed and granted the motion. Banco Santander de P.R. v. López-Stubbe (In re Colonial Mtge. Bankers Corp.), Ch. 7 Case No. B87-03026(ESL), Adv. No. 00-0026, slip op. at 6 (Bankr. D.P.R. July 10, 2001). Santander appealed. The Bankruptcy Appellate Panel rejected the appeal. Banco Santander de P.R. v. López-Stubbe (In re Colonial Mtge. Bankers Corp.), No. 01-073, slip op. at 26-27 (B.A.P. 1st Cir. Aug. 16, 2002). Santander now appeals to this court.




Legal Principles Governing Appellate Review

The jurisprudence of Rule 12(b)(6) is applicable to motions to dismiss in bankruptcy cases. See Fed. R. Bankr. P. 7012(b) (incorporating by reference Fed. R. Civ. P. 12(b)(6)); see also Lawrence Nat'l Bank v. Edmonds, 924 F.2d 176, 180 (10th Cir. 1991); In re Metrobility Optical Sys., Inc., 279 B.R. 37, 40 (Bankr. D.N.H. June 5, 2002). Thus, we review a dismissal of an action for failure to state a claim de novo, adhering to the same criteria that bound the lower courts. See Arruda v. Sears, Roebuck & Co., 310 F.3d 13, 18 (1st Cir. 2002); Garrett v. Tandy Corp., 295 F.3d 94, 97 (1st Cir. 2002). In that process, we assume the truth of all well-pleaded facts and indulge all reasonable inferences that fit the plaintiff's stated theory of liability. Rogan v. Menino, 175 F.3d 75, 77 (1st Cir. 1999); Aulson v. Blanchard, 83 F.3d 1, 3 (1st Cir. 1996). We are not bound, however, to credit "bald assertions, unsupportable conclusions, and opprobrious epithets" woven into the fabric of the complaint. Chongris v. Bd. of Appeals, 811 F.2d 36, 37 (1st Cir. 1987) (citation and internal quotation marks omitted). We can affirm the allowance of a motion to dismiss only if the plaintiff's factual averments hold out no hope of recovery on any theory adumbrated in its complaint. Rogan, 175 F.3d at 77.

These principles require us to consider not only the complaint but also matters fairly incorporated within it and matters susceptible to judicial notice. Cruz v. Melecio, 204 F.3d 14, 21 (1st Cir. 2000); Beddall v. State St. Bank & Trust Co., 137 F.3d 12, 16-17 (1st Cir. 1998); Lovelace v. Software Spectrum Inc., 78 F.3d 1015, 1017-18 (5th Cir. 1996). The first part of this rule is consistent with the axiom that a writing is the best evidence of its contents. See, e.g., Beddall, 137 F.3d at 16-17. The second part of this rule is consistent with the hoary tenet that a court "may look to Page 16

matters of public record in deciding a Rule 12(b)(6) motion." Boateng v. Interamerican Univ., 210 F.3d 56, 60 (1st Cir. 2000). Despite these familiar principles, the appellant challenges the bankruptcy court's decision to go outside the margins of the complaint proper in weighing the res judicata defense. That is an affirmative defense, the appellant says, and should be left to proof at summary judgment or at trial. As a theoretical matter, this challenge is baseless. In an appropriate case, an affirmative defense may be adjudicated on a motion to dismiss for failure to state a claim. See, e.g., Blackstone Realty LLC v. FDIC, 244 F.3d 193, 197 (1st Cir. 2001); LaChapelle v. Berkshire Life Ins. Co., 142 F.3d 507, 509 (1st Cir. 1998); Kale v. Combined Ins. Co., 924 F.2d 1161, 1165 (1st Cir. 1991). The affirmative defense of res judicata is no exception. See, e.g., Boateng, 210 F.3d at 60; Kale, 924 F.2d at 1165. Even without a motion, "a court on notice that it has previously decided an issue may dismiss the action sua sponte, consistent with the res judicata policy of avoiding judicial waste." Bezanson v. Bayside Enterps., Inc., 922 F.2d 895, 904 (1st Cir. 1990).

The conclusion that an action can be dismissed on the basis of an affirmative defense, such as res judicata, does not end our inquiry. Such a dismissal only can occur in an appropriate case. Two conditions must be met. The first condition is that the facts that establish the defense must be definitively ascertainable from the allegations of the complaint, the documents (if any) incorporated therein, matters of public record, and other matters of which the court may take judicial notice. The second condition is that the facts so gleaned must conclusively establish the affirmative defense. See Blackstone Realty, 244 F.3d at 197; LaChapelle, 142 F.3d at 509.


Applying the Principles

Against this backdrop, we turn to the validity of the affirmative defense in this case. The question we must answer is whether, applying the rules enumerated above, Santander's claim is barred by the doctrine of res judicata.

Federal law determines whether an earlier judgment, rendered in a federal court, bars the maintenance of a subsequent federal court action. Mass. Sch. of Law at Andover, Inc. v. Am. Bar Ass'n, 142 F.3d 26, 37 (1st Cir. 1998). Under federal law, "a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action." Allen v. McCurry, 449 U.S. 90, 94 (1980). Thus, the elements of a res judicata defense are (1) a final judgment on the merits in an earlier proceeding, (2) sufficient identicality between the causes...

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