Owens v. LSF9 Master Participation (In re Owens)

• Decision Date: 08 December 2016
• Docket Number: Adversary No. 2:16-ap-00140-DPC,Case No.: 2:16-bk-02379-DPC
• Parties: In re: DANIELLE GAILYNN OWENS, Debtor. DANNIELLE GAILYNN OWENS, Plaintiff, v. LSF9 MASTER PARTICIPATION; CALIBER HOME LOANS, INC.; SUMMIT SERVICES AND REALTY, LLC; BANK OF AMERICA, N.A.; JOHN DOE (INVESTORS) 1-10,000; and BLACK CORPORATION 1-10, Defendants.
• Court: U.S. Bankruptcy Court — District of Arizona

In re: DANIELLE GAILYNN OWENS, Debtor.

DANNIELLE GAILYNN OWENS, Plaintiff, v. LSF9 MASTER PARTICIPATION;

CALIBER HOME LOANS, INC.;

SUMMIT SERVICES AND REALTY,

LLC; BANK OF AMERICA, N.A.;

JOHN DOE (INVESTORS) 1-10,000;

and BLACK CORPORATION 1-10, Defendants.

Case No.: 2:16-bk-02379-DPC

Adversary No. 2:16-ap-00140-DPC

UNITED STATES BANKRUPTCY COURT DISTRICT OF ARIZONA

December 8, 2016

Chapter 13 Proceedings

UNDER ADVISEMENT RULING ON MOTIONS TO DISMISS DEBTOR'S SECOND AMENDED COMPLAINT(TRO, DECLARATORY RELIEF, TILA RESCISSION AND SLANDER OF TITLE IN CONNECTION WITH THE RESIDENTIAL MORTGAGE)

(NOT FOR PUBLICATION)

The Court is asked to rule on two Motions to Dismiss("Motions")(DE's 57 and 60)¹Plaintiff's Second Amended Complaint (DE 48).The Motions were filed by DefendantsLSF9 Master Participant Trust ("LSF9"), Caliber Home Loans, Inc.("Caliber"), and Bank of America, N.A. ("BofA")(collectively hereinafter "the Defendants").The Court concludes that, after considering arguments raised in pleadings and during oral argument, the Second Amended Complaint of Debtor, Dannielle Gailynn Owens("Debtor"), is in part not well plead.Some of Debtor's counts fail to state a claim upon which relief may be granted.²Others are barred by the preclusive effect of prior court rulings.³However, Debtor's allegations regarding injunctive relief and declaratory relief shall, in part, survive the challenges contained in the Motions.

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I.BACKGROUND

A.Events Prior to the March 10, 2016 Bankruptcy

On August 23, 2006, Debtor borrowed $594,600 from First Magnus Financial Corporation("FMFC") to purchase the residential property located at 136 N. Parkview Lane in Litchfield Park, Arizona 85340 ("Litchfield Property") where she currently resides.Debtor contemporaneously executed a Note ("Note") and Deed of Trust ("DOT") securing the Debt.The original DOT listed MERS as the beneficiary while BofA Home Loans Servicing, LLP("BofA Servicing") was the servicer of the loan.In October of 2006, Debtor defaulted on the loan and subsequently filed a chapter 13 petition("2007 Bankruptcy") in this Court before the Honorable Charles G. Case(2:07-bk-06793-CGC).The 2007 Bankruptcy was converted to a chapter 7 where Debtor received a chapter 7 discharge before the 2007 Bankruptcy was closed.There was no distribution to creditors in that case.

Years later, on September 2, 2009, the DOT was transferred from MERS to BofA Servicing, who appointed Recon Trust Co., NA("Recon") as successor trustee under the DOT.Recon queued up a Trustee Sale of the Litchfield Property for December 8, 2009.As a result, Debtor filed a complaint in the Arizona Superior Court, Maricopa County("State Court") before the Honorable Harriett Chavez, at case number CV 2009-070092("State Court Action").After considering BofA Servicing's Motion to Dismiss, and Debtor's response, the State Court Action was dismissed with prejudice.Judge Chavez found "no basis for the claim that assignment of the Deed of Trust or subsequent notice of Trustee sale [was] not valid."(SeeCV 2009-070092 DE #19, DE #57 P. 33-4).

Debtor raised similar arguments in her complaint filed in the U.S. District Court, District of Arizona("District Court"), before the Honorable James A. Teilborg at case number 2:10-cv-02696-JAT("1^st District Court Action").There, Recon, BofA Servicing, BofA, and MERS filed a Motion to Dismiss Debtor's complaint.Debtor subsequently responded and these defendantsfiled a reply.On August 23, 2011, the District Court dismissed all six of Debtor's causes of action for failure to state a claim entitling Debtor to relief.(AP DE #60 Exhibit B).

Two years later, the District Court heard a very similar case, this time presided over by the Honorable Susan R. Bolton at case number CV-13-02066("2^nd District Court Action").Judge Bolton ruled on a Motion to Dismiss, this time filed by CHL Mortgage Pass-Through Trust 2007-1, Park Granada, LLC, CWMBS, Inc., The Bank of New York, Recon, Countrywide Warehouse Lending, BofA, and MERS.In her December 20, 2013, ruling Judge Bolton analyzed the doctrine of claim preclusion, also known as res judicata, and found that all of the required elements were met.(SeeCV-13-02066 DE 34, AP DE #60 Exhibit C).The 2^nd District Court Action was subsequently dismissed.

B.Events of the Bankruptcy

On March 10, 2016, (the "Petition Date") Debtor filed a petition for relief under chapter 13 of the Bankruptcy Code.(Administrative case, DE #1).She subsequently initiated the instant adversary proceeding against the Defendants⁴ by filing a Complaint on March 11, 2016.(DE #1).Debtor's first Complaint was never served.Debtor subsequently filed an Amended Complaint on March 14, 2016.(DE #3).LSF9 and Caliber filed a Motion to Dismiss the Amended Complaint on May 9, 2016(DE # 26).Debtor subsequently sought and obtained the Court's approval to amend the Amended Complaint.(DE #35).The Second Amended Complaint ("SAC") was filed on July 11, 2016.(DE #48).Caliber and LSF9 filed a Motion to Dismiss the SAC on July 25, 2016.BofA filed a Motion to Dismiss the SAC on August 10, 2016.(DEs # 57 & 60).The Court heard oral argument on the Motions on October 11, 2016.Debtor was given an opportunity to submit additional responsive pleadings following oral argument.(DE #73).Debtor's Memoranda of Points and Authorities in Opposition to the Motions to Dismiss was filed on October 21, 2016.(DE #78).The Court subsequently took these matters under advisement.

II.Issues

1.Has the Debtor properly plead any new claims that were not otherwise addressed by the three previous rulings from the State Court and/or District Court?

2.If so, are the new claims plead with sufficient detail to survive the Defendants' Motions?

III.Law

1.Motions to Dismiss

In ruling on these Motions, the Court must apply the well-known standards detailed in the Supreme Court's decisions in Bell Atlantic Corp.v. Twombly and Ashcroft v. Iqbal.

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face."

Ashcroft v. Iqbal, 556 U.S. 662, 678(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570(2007).

"[A]plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do."

Twombly, 550 U.S. at 555.

A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.

Iqbal, 556 U.S. at 663.

2.Rule 8 of the Federal Rule of Civil Procedure

The Federal Rules of Civil Procedure lay out the minimum pleading requirements in Rule 8:

(a) Claim for Relief.A pleading that states a claim for relief must contain:

(1) a short and plain statement of the grounds for the court's jurisdiction, unless the court already has jurisdiction and the claim needs no new jurisdictional support;

(2) a short and plain statement of the claim showing that the pleader is entitled to relief; and

(3) a demand for the relief sought, which may include relief in the alternative or different types of relief.

Fed. R. Civ. P. 8

3.Issue Preclusion/Collateral Estoppel

In In re Child, the 9th Circuit BAP reversed the Bankruptcy Court's finding that a prior state court judgment had preclusive effect.The BAP carefully examined the doctrine of issue preclusion generally, as well as specifically under Arizona law.

The doctrine of issue preclusion, or collateral estoppel, prohibits relitigation of issues that have been adjudicated in a prior action.Kirkland v. Barnes(In re Kirkland), 2008 WL 8444824, at *7(9th Cir. BAPNov. 26, 2008)(citingLopez v. Emergency Serv. Restoration, Inc.(In re Lopez), 367 B.R. 99, 104(9th Cir. BAP2007)).The party asserting issue preclusion bears the burden of proof as to all elements and must introduce a sufficient record to reveal the controlling facts and the exact issues litigated.Kirkland, 2008 WL 8444824, at *7(citingKelly v. Okoye(In re Kelly), 182 B.R. 255, 258(9th Cir. BAP1995)).

. . .

The rules of federal and state comity require that federal courts give prior state judgments the same preclusive effect as the courts of the state court that rendered the judgment.28 U.S.C. § 1738(2012).As a matter of full faith and credit, a federal court must determine the preclusive effect of a prior state court judgment by applying the issue preclusion law of the state of the court that rendered the prior judgment.Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. at 81, 104 S.Ct. 892;Far Out Prods., Inc. v. Oskar, 247 F.3d 986, 993(9th Cir.2001);Branam v. Crowder(In re Branam), 226 B.R. 45, 51(9th Cir. BAP1998);In re Nourbakhsh, 67 F.3d at 800(citingMarrese v. Am. Acad. of Orthopaedic Surgeons, 470 U.S. 373, 380, 105 S.Ct. 1327, 84 L.Ed.2d 274(1985)).

In re Child, 486 B.R. 168, 172(B.A.P. 9th Cir.2013).

The Child court set out the factors for issue preclusion, citing Chaney Building Co. v. City of Tucson, 148 Ariz. 571, 716 P.2d 28, 30(1986), the seminal decision for issue preclusion under Arizona law.

. . . [I]ssue preclusion is applicable when:

(1) the issue or fact to be litigated was actually litigated in a previous suit,

(2) a final judgment was entered, and

(3)the party against whom the doctrine is to be invoked had a full opportunity to litigate the matter,

(4)and actually did litigate it, [and]

(5) such issue or fact was essential to the prior judgment.

Id. At 172-73(emphasis in original).

In Garcia v. Gen. Motors Corp., 195 Ariz. 510, 514, 990 P.2d 1069, 1073(Ct. App.1999), the court explained that the factors which must be met for a finding of issue preclusion in federal court are virtually the same as the factors applied by Arizona state court.Accord, Lawlor v. Nat'l Screen Serv. Corp., 349 U.S. 322, 326, 75 S. Ct. 865, 867, 99 L. Ed....