Henrichs v. Valley View Development

• Decision Date: 16 January 2007
• Docket Number: No. 04-56470.,04-56470.
• Parties: John HENRICHS; Anne Henrichs, Plaintiffs-Appellants, v. VALLEY VIEW DEVELOPMENT, a California corporation; Federal Deposit Insurance Corporation, a Federal corporation; Timcor Exchange Corporation, dba Timcor Financial Corporation; Marc Gelman, an individual; Michael Blaha, an individual; Granada Plaza Associates Ltd., a California limited partnership, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 609

474 F.3d 609

John HENRICHS; Anne Henrichs, Plaintiffs-Appellants, v. VALLEY VIEW DEVELOPMENT, a California corporation; Federal Deposit Insurance Corporation, a Federal corporation; Timcor Exchange Corporation, dba Timcor Financial Corporation; Marc Gelman, an individual; Michael Blaha, an individual; Granada Plaza Associates Ltd., a California limited partnership, Defendants-Appellees.

No. 04-56470.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted September 12, 2006.

Filed January 16, 2007.

COPYRIGHT MATERIAL OMITTED

Richard Blasco, Hunt, Ortman, Blasco, Palffy & Rossell, Pasadena, CA, and F. Glenn Nichols, Law Offices of F. Glenn Nichols, Pasadena, CA, for the appellants.

Barry R. Edwards, Spiegelman & Edwards, Beverly Hills, CA, for appellees Valley View Development and Marc Gelman.

Kathleen V. Gunning and Mary Riche, Federal Deposit Insurance Corporation, Washington, DC, and Michael H. Bierman, Luce Forward Hamilton & Scripps, LLP, Los Angeles, CA, for appellee Federal Deposit Insurance Corporation.

Peter L. Weinberger and A. Douglas Mastroianni, Peter L. Weinberger & Associates, Los Angeles, CA, for appellees Michael Blaha and Granada Plaza Associates, Ltd.

Appeal from the United States District Court for the Central District of California; Christina A. Snyder, District Judge, Presiding. D.C. No. CV-04-04225-CAS.

Before WALLACE, McKEOWN, and WARDLAW, Circuit Judges.

McKEOWN, Circuit Judge.

This appeal stems from a quiet title action that began in Los Angeles Superior Court but was resuscitated in federal court after the California courts ruled against appellants John and Anne Henrichs ("Henrichs") on all issues. We consider whether the district court had subject matter jurisdiction over Henrichs' claims arising from a California state court judgment rendered against him. After a series of real estate transactions among Henrichs, Valley View Development ("Valley View"), Marc Gelman, Michael Blaha, and Granada Plaza Associates ("GPA") turned sour, Valley View filed a claim to quiet title in Los Angeles County Superior Court. Henrichs cross-claimed, alleging breach of contract and indemnification claims. The Superior Court, the California Court of Appeal, and the California Supreme Court all held in favor of Valley View and denied Henrichs relief on all claims.

Having extinguished all avenues for relief in the California courts, Henrichs filed suit in the United States District Court for the Central District of California. The district court held that it lacked jurisdiction under the Rooker-Feldman doctrine to review the state court judgment and Henrichs' associated claims and consequently dismissed the action. We now affirm, albeit on slightly different grounds. At issue is whether Henrichs' claims are barred by the Rooker-Feldman doctrine which, in general terms, prevents "a party losing in state court . . . from seeking what in substance would be appellate review of the state judgment in a United States district court." Johnson v. De Grandy, 512 U.S. 997, 1005-06, 114 S.Ct. 2647, 129 L.Ed.2d 775 (1994) (citing District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 482, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983), Rooker v. Fidelity Trust Co., 263 U.S. 413, 416, 44 S.Ct. 149, 68 L.Ed. 362 (1923)). Looking at each claim individually, as we must do, we conclude that two claims are barred by Rooker-Feldman, one claim fails on mootness grounds, and another based upon res judicata.

BACKGROUND

I. FACTUAL BACKGROUND

Although the intricacies of Henrichs' claims are not before us, the chronology of events, which includes various convoluted transactions, is helpful to understanding the relationship between the state and federal court actions. Henrichs' series of lawsuits arise from a dispute relating to two plots of land in Granada Hills, California. In 1990, defendant Valley View owned property in Granada Hills that included two subdivisions, the Balboa lot and the Chatsworth lot. The GPA entity was formed to purchase only the Chatsworth lot from Valley View. John Henrichs, Michael Blaha, and Marc Gelman, Valley View's president and owner, were the original limited partners in GPA.

At that time, the final tract map separating the Balboa and Chatsworth lots had not been recorded. GPA and Valley View expected this approval would take significant time, and without a final tract map, the Chatsworth lot could not be sold separately from the Balboa lot. As a result, GPA purchased both lots from Valley View.

The parties signed an agreement (the "Ground Lease") in which Valley View leased the Balboa lot for one dollar per year for 99 years from GPA and Valley View received an option to purchase the lot back from GPA for one dollar when the final tract map was recorded. The Ground Lease provided that if Valley View exercised the purchase option, GPA would convey the Balboa lot to Valley View in fee simple, free of all liens and encumbrances.

GPA obtained a construction loan of almost $4 million from Capital Bank of California to finance construction on the Chatsworth lot. The loan agreement stated that the entire property — both lots — was collateral for the loan.

The final tract map was ultimately recorded in January 1992, and Valley View exercised the option in the Ground Lease to buy back the Balboa lot. Valley View believed that it had received title free and clear of any liens, including the pledge of collateral in the loan from Capital Bank.

In June 1993, the Federal Deposit Insurance Corporation ("FDIC") acquired the loan when it was appointed receiver of Capital Bank. GPA defaulted on the loan in 1994.

Following the default, GPA, Gelman, and Blaha agreed that GPA would pay the FDIC $300,000, and in exchange, the FDIC would cancel or assign the loan and the accompanying deed. The agreement (the "FDIC Settlement Agreement") contained an indemnification clause and a proviso that bound all parties to the agreement and their representatives and successors. GPA decided that the FDIC should assign the loan and accompanying deed, which occurred through a separate agreement (the "Assignment Agreement") in approximately the following shares: 22% to Henrichs, 12% to Randy Carpenter, and 66% to Blaha Construction and Development.

II. PROCEEDINGS IN STATE COURT

In 1996, Gelman obtained a preliminary title report that reflected a lien on the Balboa lot. Valley View then demanded that the assignees of the note — Henrichs, Carpenter, and Blaha Construction and Development — reconvey the deed to Valley View to eliminate the lien. When the assignees refused to reconvey, Valley View filed a state court action to quiet title to the Balboa lot. Henrichs filed a cross-complaint alleging causes of action for indemnification under the FDIC Settlement Agreement and breach of contract by GPA, Gelman, and Blaha for failing to indemnify Henrichs.

The Los Angeles County Superior Court held that Valley View owned the Balboa lot free and clear of any encumbrance based on the Capital Bank loan and rejected Henrichs' claims for breach of contract and indemnification. The California Court of Appeal affirmed, and the California Supreme Court denied review.

During the pendency of the proceedings in the state courts, Valley View sold the Balboa lot for $550,000. Valley View placed these funds in a trust account with Timcor Exchange Corporation ("Timcor") pending the outcome of the state court action.

III. PROCEEDINGS IN THE DISTRICT COURT

Following his loss in state court, Henrichs filed a suit in federal court. The complaint asserted four claims: 1) a request for a declaratory judgment voiding the state court judgment awarding the Balboa lot to Valley View in fee simple and removing the lien on the property; 2) breach of the Assignment Agreement by the FDIC; 3) a claim for indemnification against GPA, Gelman, and Blaha for damages and legal expenses incurred by the state court litigation; and 4) a request for an injunction barring Timcor from giving Valley View the proceeds from the Balboa lot's sale because, according to Henrichs, Valley View was not entitled to those profits. The district court held that the Rooker-Feldman doctrine barred all claims and dismissed the action for lack of subject matter jurisdiction.

ANALYSIS

We affirm the dismissal of Henrichs' claims.¹ We conclude that the Rooker-Feldman doctrine bars the claim for declaratory relief. The claim against the FDIC is moot. The doctrine of res judicata precludes the claim for indemnity against GPA, Gelman, and Blaha. Additionally, both Rooker-Feldman and the Anti-Injunction Act bar the claim for injunctive relief.

Before delving into a claim-by-claim analysis, we briefly outline the contours of the Rooker-Feldman doctrine. The Rooker-Feldman doctrine provides that federal district courts lack jurisdiction to exercise appellate review over final state court judgments. Rooker, 263 U.S. at 415-16, 44 S.Ct. 149; Feldman, 460 U.S. at 482-86, 103 S.Ct. 1303; Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 283-84, 125 S.Ct. 1517, 161 L.Ed.2d 454 (2005). Essentially, the doctrine bars "state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced" from asking district courts to review and reject those judgments. Id. at 284, 125 S.Ct. 1517. Absent express statutory authorization, only the Supreme Court has jurisdiction to reverse or modify a state court judgment. The clearest case for dismissal based on the Rooker-Feldman doctrine occurs when "a federal plaintiff asserts as a legal wrong an allegedly erroneous decision by a state court, and seeks relief from a state court judgment based on that decision . . . ." Noel v. Hall, 341 F.3d 1148, 1164 (9th Cir.2003).

Rooker-Feldman does not override or supplant issue and claim preclusion doctrines. Exxon Mobil, 544 U.S. at 284, 125 S.Ct. 1517. The doctrine applies when the federal plaintiff's claim arises...