Greenstein v. Wells Fargo Bank, N.A. (In re Greenstein), Case No.: 1:12-bk-15099-MB

• Court: United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — Central District of California
• Writing for the Court: Martin R Barash United States Bankruptcy Judge
• Docket Number: Case No.: 1:12-bk-15099-MB,Adv. Case No.: 1:15-ap-01220-MB
• Parties: In re: LAUREL GREENSTEIN, Debtor. LAUREL GREENSTEIN, Plaintiff, v. WELLS FARGO BANK, N.A.; ROGER LIPKIS, STEVEN WOLVEK; DEAN REEVES; MARISOL NAGATA; ROBERT LITTLE; ROBERT BAILEY; JOHN STUMPF; ROBERT LINDAMAN; MARTY A. DURAN; PATRICIAN M. DURAN; THE DURAN FAMILY TRUST; DOES 1 THROUGH 10, Defendants.
• Decision Date: 31 October 2017

In re: LAUREL GREENSTEIN, Debtor.

LAUREL GREENSTEIN, Plaintiff,
v.
WELLS FARGO BANK, N.A.; ROGER LIPKIS, STEVEN WOLVEK; DEAN REEVES;
MARISOL NAGATA; ROBERT LITTLE; ROBERT BAILEY; JOHN STUMPF;
ROBERT LINDAMAN; MARTY A. DURAN; PATRICIAN M. DURAN;
THE DURAN FAMILY TRUST; DOES 1 THROUGH 10, Defendants.

Case No.: 1:12-bk-15099-MB
Adv. Case No.: 1:15-ap-01220-MB

UNITED STATES BANKRUPTCY COURT CENTRAL DISTRICT OF CALIFORNIA SAN FERNANDO VALLEY DIVISION

October 31, 2017

FOR PUBLICATION

Chapter 7

AMENDED CONSOLIDATED MEMORANDUM OF DECISION:

(1) DENYING MOTION TO SET ASIDE FORECLOSURE SALE IN VIOLATION OF AUTOMATIC STAY;
(2) GRANTING MOTIONS TO DISMISS ADVERSARY PROCEEDING WITH PREJUDICE AS TO ALL DEFENDANTS;
(3) DENYING AS MOOT SPECIAL MOTION TO STRIKE CERTAIN CLAIMS; AND
(4) DENYING REQUEST FOR VEXATIOUS LITIGANT RESTRICTIONS ON PLAINTIFF

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TABLE OF CONTENTS

I. INTRODUCTION ........................................................................................................... 1

II. BACKGROUND ............................................................................................................. 5

A. The Lipkis Bankruptcy Case and the In Rem Order ............................................ 5

B. Debtor's Bankruptcy Case And Her Multiple Attempts To Vacate The In Rem Order And/Or Seek Relief Against Defendants ...................................... 8

1. The Lipkis Motions ............................................................................... 8
2. The Adversary Proceedings .................................................................. 9
3. The Second State Court Complaint ...................................................... 13
4. The Set Aside Motion ........................................................................... 14
5. Debtor's Appeal and the BAP Memorandum ....................................... 16

III. JURISDICTION .............................................................................................................. 17

IV. SET ASIDE MOTION .................................................................................................... 17

A. Claim Preclusion .................................................................................................. 17

B. Issue Preclusion ................................................................................................... 21

C. Validity of the In Rem Order ............................................................................... 22

1. Section 362(d)(4) .................................................................................. 23
2. Jurisdiction ............................................................................................ 26
3. Due Process .......................................................................................... 29
4. Finality of In Rem Order/No Collateral Attack .................................... 35

D. No Stay Violation ................................................................................................ 35

V. MOTIONS TO DISMISS ................................................................................................ 36

A. Wells Fargo Defendants ...................................................................................... 38

1. Claim Preclusion ................................................................................... 38
2. Issue Preclusion .................................................................................... 40
3. Claim Specific Analysis ....................................................................... 40

a. Stay Violation Claim ................................................................... 40
b. Fraud and Related Claims ............................................................ 40

(1) Fraud/Deceit .................................................................... 41
(2) Constructive Fraud ........................................................... 44
(3) Fraud on the Court, Perjury and False Evidence ............. 45

c. Emotional Distress and Personal Injury ...................................... 54
d. Quiet Title .................................................................................... 55

B. Nagata and Wolvek .............................................................................................. 55

C. Duran Defendants ................................................................................................ 56

VI. MOTION TO STRIKE AND SANCTIONS ................................................................... 57

VII. VEXATIOUS LITIGANT REQUEST ............................................................................ 58

VIII. CONCLUSION ................................................................................................................ 63

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I. INTRODUCTION

Laurel Greenstein, chapter 7 debtor pro se, contends that her home was wrongfully foreclosed on by Wells Fargo Bank, N.A. ("Wells Fargo") in violation of the automatic stay in her case. Greenstein seeks redress for this alleged violation of the automatic stay pursuant to the instant Motion to Set Aside Sale of Property Made in Violation of Automatic Stay (the "Set Aside Motion"), Case Dkt. 71, and a series of adversary proceedings, the third of which remains pending. Adv. Dkt. 30.¹

At the time of the foreclosure sale, the automatic stay in Greenstein's case was in effect generally, but Greenstein's home was the subject of an order entered pursuant to Bankruptcy Code section 362(d)(4), exempting her home from the protection of the automatic stay. A court may enter such an "in rem" order when it determines that a bankruptcy case is being used as part of a scheme to hinder, delay or defraud a secured creditor with an interest in real property. 11 U.S.C. § 362(d)(4). If properly recorded, the order exempts the subject real property from the protection of the automatic stay in any subsequent bankruptcy case, for a period of two years—subject to the right of the debtor in such case to seek relief from the order based on changed circumstances or for cause shown. Id.

Approximately six months prior to the foreclosure of Greenstein's home, the Court entered an order under section 362(d)(4) (the "In Rem Order"), in the chapter 13 case of an entirely unrelated debtor, Roger Lipkis. Wells Fargo sought this relief in the Lipkis case based on its discovery of a grant deed purporting to transfer an interest in Greenstein's home to Lipkis, without the consent of Wells Fargo. Disclaiming any interest in Greenstein's home, Lipkis (through his attorney) stipulated to Wells Fargo's request for an order for relief from the automatic stay under

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section 362(d)(4) and the Court entered the In Rem Order. Wells Fargo thereafter recorded the order in accordance with section 362(d)(4).

The entry and recordation of the In Rem Order should be dispositive of Greenstein's contention that Wells Fargo violated the automatic stay in her own bankruptcy case when Wells Fargo foreclosed. If her home was not protected by the stay, there could be no violation of the stay resulting from the foreclosure.

In her Set Aside Motion, Greenstein argues that the Court should disregard the In Rem Order and deem the foreclosure sale void. First, Greenstein argues that the In Rem Order is void for lack of jurisdiction. Specifically, Greenstein argues that the deed purporting to transfer an interest in her property to Lipkis was a forgery, that no interest in property was actually transferred to Lipkis (or his estate) and, therefore, that the Court did not have jurisdiction to enter the In Rem Order.

Second, Greenstein argues that entry of the In Rem Order violated her due process rights because she did not receive notice and an opportunity to be heard on the stipulation pursuant to which Wells Fargo and Lipkis consented to entry of the In Rem Order. Greenstein contends that if she had been given notice, she could have opposed the relief affecting her property, preserved the benefit of the automatic stay in her subsequent bankruptcy case, and prevented the foreclosure of her home.

Without specifically addressing these issues, the prior bankruptcy judge assigned to this case, denied the Set Aside Motion on the grounds of claim preclusion, i.e., that he had already denied the same claim for relief in a prior proceeding. At the time of this ruling, the Court had granted several motions to dismiss various parties from adversary complaints filed by Greenstein. But in denying the Set Aside Motion, the Court did not identify which of its prior rulings constituted a final judgment precluding relief on the Set Aside Motion.

Greenstein appealed the Court's denial of the Set Aside Motion to the Ninth Circuit Bankruptcy Appellate Panel ("BAP"). The BAP vacated the order and remanded the matter to this Court for further proceedings. See Case Dkt. 137; BAP Case No. 14-1101, Dkt. 62 (hereinafter, the "BAP Memorandum"). The BAP found that the Court's failure to make specific findings made it

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difficult to determine whether the requirements of claim preclusion had been satisfied. In light of this conclusion, the BAP did not find it necessary to address Greenstein's arguments regarding the validity of the In Rem Order.

Following remand, the Court heard argument from the parties on all of the issues raised by the BAP Memorandum in respect of the Set Aside Motion, including the validity of the In Rem Order. In conjunction with these post-remand hearings, the Court also heard argument on separate motions to dismiss (the "Motions to Dismiss") filed by four different groups of defendants in the above-captioned adversary proceeding, Adv. Dkt. 32,² 34,³ 37,⁴ 39,⁵ and a special motion to strike and award sanctions filed by certain of the defendants (the "Motion to Strike"), Adv. Dkt. 35. One of the motions to dismiss also contained a request for a vexatious litigant injunction preventing Greenstein from commencing future litigation in the Court, without first obtaining leave of court. (the...