De Los Santos et al v. Nationstar, LLC et al

Filing 22

ORDER that the bankruptcy court's order dismissing plaintiff/appellant Leonor M De Los Santos' claims against appellee CAM 1 Trust/HMC Assets, LLC be, and the same hereby is, AFFIRMED, consistent with the foregoing. FURTHER ORDERED that 21 Objection is DENIED. Signed by Judge James C. Mahan on 10/5/15. (Copies have been distributed pursuant to the NEF - MMM)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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***

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In re:
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LEONOR M. DE LOS SANTOS,
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Bankruptcy Case No. 14-10902 MKN

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Debtor.
_______________________________________

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LEONOR M. DE LOS SANTOS,
Case No. 2:14-CV-1522 JCM

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Plaintiff(s),
ORDER

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v.

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NATIONSTAR, LLC, et al.,

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Defendant(s).
_______________________________________

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LEONOR M. DE LOS SANTOS,
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Appellant(s),
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v.
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CAM I TRUST/HMC ASSETS, LLC, et al.,
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Appellee(s).
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James C. Mahan
U.S. District Judge

Presently before the court is an appeal from a bankruptcy order (docs. ## 1,4) dismissing
certain parties from the adversary proceeding De Los Santos v. Nationstar, LLC, et. al, bankruptcy
adversary proceeding number 14-01091-MKN. Appellant Leonor De Los Santos’ (hereinafter
“appellant”) filed an opening brief. (Doc. # 10). Appellees Cam I Trust (“CAM”) and HMC Assets,
LLC (“HMC”) (collectively “appellees”) filed an answering brief in opposition. (Doc. # 12).

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Instead of filing a timely reply brief, appellant filed an objection (doc. # 21) to this court’s order
(doc. # 20) denying a motion to extend time to file a reply brief. (Doc. # 18).
I.

Background
The appeal is from a bankruptcy court order dismissing appellees from an adversary

proceeding based on the principle of res judicata. (Doc. # 12 at 7). Despite a final judgment to the
contrary, appellant Leonor De Los Santos claims that CAM and HMC lack standing to foreclose
on a mortgage loan secured by her investment property located at 7318 Dolphine Crest Avenue,
Las Vegas, Nevada (“subject property”). (Id.).
In 2012, CAM commenced an action in the Eighth Judicial District Court, Clark County,
Nevada, case no. A-12-656582, in order to foreclose on the subject property. (Doc. # 12 at 7). On
April 3, 2013, based on CAM’s motion for summary judgment, the court entered findings of fact
and conclusions of law that CAM was the holder of a promissory note signed by appellant and the
beneficiary of the deed of trust encumbering the subject property. (Id.). On that same date, the
court entered final judgment permitting CAM to proceed with foreclosure to satisfy outstanding
obligations appellant owed on the mortgage loan.1 (Id. at 8).
The instant appeal stems from appellant’s fifth chapter 13 bankruptcy case, commenced on
February 13, 2014. (Id.). Appellant retained counsel and filed a motion under 11 U.S.C. §
362(c)(4)(B) to impose an automatic stay. (Id.). CAM, through HMC, opposed the motion. (Id. at
9). The bankruptcy judge denied the motion without prejudice. (Id.).
On May 23, 2014, appellant, proceeding pro se, purported to initiate an adversary
proceeding. (Id.). Appellant filed a motion for preliminary injunction and recorded a lis pendens
on the subject property, but never filed an adversary complaint. (Id.). Appellant sought to stop
CAM’s May 28, 2014, sheriff’s sale because she did not believe CAM or HMC had standing to
foreclose. (Id.). However, appellant failed to set the application for hearing and no notice of
hearing was filed. (Id.). Without an automatic stay or temporary restraining order/preliminary

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James C. Mahan
U.S. District Judge

The court’s judgment also expunged a fraudulent reconveyance of the foreclosing deed
of trust appellant executed and recorded against the subject property.
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injunction in effect, CAM proceeded with the scheduled sheriff’s sale on May 28, 2014, and
acquired the subject property through credit bid. (Id.).
On July 28, 2014, CAM and HMC filed a motion to dismiss the adversary case and to
expunge lis pendens. (Id.). The motion argued that: (1) the adversary case had to be dismissed
since De Los Santos never filed a complaint; (2) the requested injunctive relief was moot since the
sheriff’s sale had occurred and De Los Santos was surrendering the subject property in her chapter
13 plan to CAM; (3) res judicata and issue preclusion barred any foreclosure standing issues; and
(4) the lis pendens should be expunged because no legitimate legal grounds existed for its
recordation. (Id.). The bankruptcy trustee was not served with the motion, since it was not a party
to the case and because De Los Santos’ amended chapter 13 plan on file proposed surrender of the
subject property to CAM. (Id.).
De Los Santos’ opposition to the motion argued that it was insufficient and not properly
before the bankruptcy court because: (1) CAM and HMC did not admit or deny that the proceeding
was core or non-core; (2) CAM and HMC did not file a disclosure statement pursuant to Federal
Rule of Bankruptcy Procedure 7007.1; (3) a formal adversary complaint was filed by her son; and
(4) CAM and HMC should be required to prove their standing again. (Id. at 10).
On September 3, 2014, the bankruptcy court entered its order granting CAM and HMC’s
motion to dismiss the adversary case and expunging the lis pendens. (Id.). Because De Los Santos
had filed no adversary complaint, the court construed the application for preliminary injunction as
a pleading or complaint. (Id.). Applying the standard for Federal Rule of Civil Procedure 12(b)(6),
the court found De Los Santos failed to state a claim for which relief could be granted and
dismissed her “complaint.” (Id.). The court re-emphasized that CAM and HMC’s foreclosure on
the subject property was properly completed, since no stay had been in place. (Id.).
The bankruptcy court held that De Los Santos’ foreclosure standing claims and allegations
were barred by res judicata because the claims had been adjudicated in the state court action and
judgment. (Id. at 10-11). The court also noted in a footnote that an admission or denial as to a core
or non-core proceeding was not required since CAM and HMC’s motion was not a pleading as

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James C. Mahan
U.S. District Judge

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defined under Federal Rule of Civil Procedure 7(a), but rather a motion as defined by Federal Rule
of Civil Procedure 7(b). (Id. at 11).

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On September 17, 2014, De Los Santos filed the instant notice of appeal. (Doc. # 1). On
December 9, 2014, the bankruptcy court dismissed the underlying bankruptcy case, In re De Los
Santos, no. 14-10902-MKN, on motion from the bankruptcy trustee. (Id.; app’x CAM191-192).
The bankruptcy court found that De Los Santos had failed to make plan payments. (Id.). Therefore,
confirmation of her plan was denied. (Id.).
II.

Legal standards

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Under 28 U.S.C. § 158(a), a district court has jurisdiction to hear appeals “from final

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judgments, orders and decrees . . . of bankruptcy judges.” 28 U.S.C. § 158(a); In re Rains, 428

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F.3d 893, 900 (9th Cir. 2005). The district court reviews a bankruptcy court’s conclusions of law
de novo. In re Greene, 583 F.3d 614, 618 (9th Cir. 2009).

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The district court reviews the bankruptcy court’s findings of fact for clear error. Id. The
court must accept the bankruptcy court’s findings of fact “unless, upon review, the court is left

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with the definite and firm conviction that a mistake has been committed by the bankruptcy judge.”

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Id. The bankruptcy court’s evidentiary rulings are reviewed for abuse of discretion. In re Kim, 130

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James C. Mahan
U.S. District Judge

F.3d 863, 865 (9th Cir. 1997).
III.

Discussion
On September 3, 2014, the bankruptcy court issued its order, and De Los Santos appealed

on September 18, 2014. (Doc. # 1). In her opening brief (doc. # 10) she argues that: 1) the
bankruptcy court lacked jurisdiction to enter a final order without her consent; 2) the final order
was based on procedural issues, which a bankruptcy court may not rule on; 3) the final order was
inequitable; 4) the trustee was improperly not included; and 5) Judge Nakagawa’s order remanding
eviction case back to state court was improper.
A. The Bankruptcy Appeal
First, the court finds that the proceeding related to the foreclosure was a core proceeding
under 28 U.S.C. 157(b)(2)(B). Appellant’s entire purpose for filing in the bankruptcy court was to
retroactively stay the foreclosure action by initiating a Chapter 13 suit. By necessity then, appellant
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considers the subject property part of the bankruptcy estate. It follows that the bankruptcy court’s
adjudication of a motion for preliminary injunction protecting the subject property is a proceeding
for the “allowance or disallowance of claims against the estate.” 28 U.S.C. 157(b)(2)(B). That
being the case, the court finds, upon de novo review, that the bankruptcy court had jurisdiction to
enter a final order on the core proceeding under 28 U.S.C. 57(b)(1).
Second, the court finds that the bankruptcy court did not exceed its jurisdiction with respect
to any procedural rules. It is not entirely clear from appellant’s opening brief (doc. # 10) exactly
which part of Judge Nakagawa’s order she objects to on procedural grounds. Nevertheless,
reviewing the record de novo, the court finds that the bankruptcy court did not improperly rule on
procedural grounds. Because appellees’ motion to dismiss was a motion and not a pleading, they
were not required to make a statement as to whether the proceeding was core or non-core. The
appellant purported to initiate a core proceeding under 28 U.S.C. 157(b)(1), and the bankruptcy
court had jurisdiction to enter a final order on any timely and lawful motions filed therein.
Third, appellant argues that the result the court reached was inequitable. This court
disagrees. De Los Santos’ action in Nevada state court was fully adjudicated with a valid and final
order. The bankruptcy court was correct in finding that it did not have jurisdiction to adjudicate
what was essentially an appeal of a state court order.
In fact, dismissal of the adversary proceeding against CAM was necessary because the
bankruptcy court lacked subject matter jurisdiction over what was, in reality, a thinly-veiled
attempt to appeal a final state court order to a federal court.
Furthermore, principles of res judicata bar consideration of her claim. Res judicata applies
when “the earlier suit . . . (1) involved the same claim or cause of action as the later suit, (2) reached
a final judgment on the merits, and (3) involved identical parties or privies.” Sidhu v. Flecto Co.,

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279 F.3d 896, 900 (9th Cir. 2002). Claim preclusion “bars litigation in a subsequent action of any

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claims that . . . could have been raised in the prior action.” Owens v. Kaiser Foundation Health

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U.S. District Judge

Plan, Inc., 244 F.3d 708, 714 (9th Cir. 2001). A federal court may take judicial notice of a state
court decision and the filings therein to determine if res judicata applies. See Manufactured Cmtys.
Inc. v. City of San Jose, 420 F.3d 1022, 1033 (9th Cir. 2005).
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The bankruptcy court properly considered the record of the state court proceeding, and
determined that its consideration of appellant’s standing arguments was barred under res judicata.
Plaintiff’s application asked the bankruptcy court to determine that CAM did not have standing to
foreclose. Under Nevada law, standing is, of course, an element that a foreclosing creditor must
prove in order to obtain final judgment in a foreclosure action. See Edelstein v. Bank of New York
Mellon, 286 P.3d 249 (Nev. 2012).
The bankruptcy court found (1) that both the application and the state court action involved
the same foreclosure action, (2) the state court reached summary judgment on the merits, and (3)
De Los Santos and Cam I were both parties to the foreclosure action. See Sidhu at 900. Thus, claim
preclusion applies. The bankruptcy court was correct to hold that it was barred from readjudicating the state court’s final judgment.
Fourth, appellant argues that the court and defendants failed to include the trustee in the
proceedings. Appellant states that the trustee was a necessary party. The court disagrees. The
trustee may have had an interest in whether the subject property was part of the bankruptcy estate,
but had no interest in the foreclosure action itself because it had no property interest in the subject
property at the time of that action, nor was the property subject to any automatic stay.
Finally, appellant argues that the bankruptcy court should not have remanded the illegal
detainer proceedings to state court. This issue was not addressed in the order under appeal here. In
fact, De Los Santos filed a separate notice of appeal with respect to that order. The bankruptcy
appellate panel affirmed that order in a separate appeal case. This court does not address the
argument further.
C.

Appellant’s objection to this court’s order denying her motion to extend time

De Los Santos initiated the instant appeal on September 18, 2014. (Doc. # 1). The court set
a briefing schedule on October 22, 2014. (Doc. # 6). De Los Santos’ opening brief was due within
fourteen days of the scheduling order. (Doc. # 6). On November 7, 2014, De Los Santos requested
an extension of time until December 8, 2014, to file her opening brief. (Doc. # 8). The court granted
appellant’s extension. (Doc. # 9).

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James C. Mahan
U.S. District Judge

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On December 22, 2014, appellee filed its answering brief. (Doc. # 12). Appellant thereafter
filed three motions to extend her time to file her reply brief. (Docs. ## 14, 16, 18). The court

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granted appellant’s first two motions and denied her third motion. (Docs. ## 15, 17, 20).

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Appellant’s reply brief was due on March 9, 2015. (Doc. # 17). Appellant failed to file a reply and

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the deadline to do so passed.

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Appellant objects to the court’s denial of her third motion to extend time to file her reply

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brief. (Id.). Appellant states that she believes this court “has acted inequitably and prejudicially

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against [her].” (Doc. # 21 at 3).

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The court has broad discretion in managing its docket. See, e.g., Landis v. N. American
Co., 299 U.S. 248, 254 (1936) (Every court has inherent power to “control the disposition of the
causes on its docket with economy of time and effort for itself, for counsel, and for litigants.”). In
exercising that discretion, the court is guided by the goals of securing the just, speedy, and
inexpensive resolution of actions. See Fed. R. Civ. P. 1. Federal courts have an inherent “traditional
power to manage their own affairs so as to achieve the orderly and expeditious disposition of
cases.” In re Lavender, 180 F.3d 1114, 1118 (9th Cir. 1999) (citing Chambers v. NASCO, Inc.,
501 U.S. 32, 43 (1991)).

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James C. Mahan
U.S. District Judge

Here, the court granted appellant two extensions to file her reply brief, before denying
appellant’s third motion to extend time to file her reply brief. Because of appellant’s multiple
extensions, her reply brief was due on March 9, 2015, nearly three months beyond the initially
scheduled due date. (Doc. # 17). Based on the foregoing, the court does not find denial of her third
request for an extension to be inequitable or prejudicial.
IV.

Conclusion
Reviewing the record de novo, the court finds that the bankruptcy court’s dismissal of

appellant’s adversary proceeding with respect to CAM or HMC was proper.
Accordingly,
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the bankruptcy court’s
order dismissing plaintiff/appellant Leonor M De Los Santos’ claims against appellee CAM 1
Trust/HMC Assets, LLC be, and the same hereby is, AFFIRMED, consistent with the foregoing.
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IT IS FURTHER ORDERED that plaintiff/appellant Leonor M De Los Santos’ objection
to this court’s order (doc. # 21) be, and the same hereby is, DENIED.
DATED October 5, 2015.

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__________________________________________
UNITED STATES DISTRICT JUDGE

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James C. Mahan
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