Ensign et al v. U.S. Bank National Association

Filing 29

Opinion and Order: The Bankruptcy Court Order is affirmed and this appeal is dismissed. Any pending motions are denied as moot. Signed on 2/21/2017 by Judge Marco A. Hernandez. (sss)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

LAURA A. ENSIGN and
STEPHEN T. ENSIGN,
No. 3:16-cv-01609-HZ
Appellants,
OPINION & ORDER
v.
U.S. BANK NATIONAL ASSOCIATION,
as Trustee,
Appellee.
Laura A. Ensign
Stephen T. Ensign
P.O. Box 564
Forest Grove, OR 97116
Pro Se Appellants
Jesse A.P. Baker
ALDRIDGE PITE, LLP
PO Box 17933
San Diego, CA 92177
Attorney for Appellee
1 – OPINION & ORDER

HERNÁNDEZ, District Judge:
Appellants Laura Ensign and Stephen Ensign appeal the United States Bankruptcy Court
for the District of Oregon’s decision to strike Appellants’ amended complaint and close the case.
See Notice of Appeal 4 (“Bankr. Ct. Order”), ECF 1. Appellants elected to have the appeal
reviewed by this Court instead of the Bankruptcy Appellate Panel. This Court has jurisdiction
over the appeal pursuant to 28 U.S.C. § 158(a)(1). Because the Bankruptcy Court’s dismissal of
Appellants’ case was supported by the facts in the record and was not clearly erroneous, this
Court affirms the decision of the Bankruptcy Court.
BACKGROUND
On February 24, 2016, the Circuit Court of Oregon for Yamhill County granted summary
judgment to U.S. Bank in its case brought against Appellants for judgment and foreclosure on
their property. Appellants’ Request Judicial Notice Ex. A at 11, ECF 11-1. Circuit Court Judge
Cynthia Easterday signed a “General Judgment Determining Amount Owed and Foreclosure,”
declaring $626,679.17 as the total amount of Appellants’ debt to U.S. Bank. Id. at 14.
On April 12, 2016, Appellants initiated a complaint against U.S. Bank in Bankruptcy
Court for the District of Oregon. Bankr. Ct. Order. The Bankruptcy Court held a hearing on July
5, 2016, in which it granted U.S. Bank’s motion to dismiss the complaint and provided
Appellants an opportunity to amend their complaint. Id. Appellants filed an amended complaint.
Id. However, the Bankruptcy Court determined that the amended complaint was “functionally
indistinguishable” from the original complaint, which the court had already determined failed to
state a claim. Id. at 6. Therefore, the Bankruptcy Court sua sponte struck the amended complaint
and directed the Clerk of the Court to close the proceeding. Id.

2 – OPINION & ORDER

On August 8, 2016, Appellants filed a Notice of Appeal with the Bankruptcy Court,
electing to have their appeal heard in this District. Id. at 1. The entirety of the Notice of Appeal
is: “We appeal this court’s ‘ORDER STRIKING AMENDED COMPLAINT’ and closing this
case (docket #33).” Id.
STANDARD
A district court acts as an appellate court when it reviews a judgment of the bankruptcy
court. In re Marquam Inv. Corp., 188 B.R. 434, 437 (D. Or. 1995). The bankruptcy court’s
conclusions of law and interpretation of the Bankruptcy Code are reviewed de novo and its
factual findings are reviewed for clear error. In re Greene, 583 F.3d 614, 618 (9th Cir. 2009).
The court “must accept the bankruptcy court's findings of fact unless, upon review, the court is
left with the definite and firm conviction that a mistake has been committed by the bankruptcy
judge.” Id.
DISCUSSION
The Bankruptcy Court’s Order is supported by the facts in the record and is not clearly
erroneous. Thus, this Court affirms the Bankruptcy Court’s Order.
I.

Judicial Notice
Appellants ask the Court to take judicial notice of a “Notice of Sheriff’s Sale” that was

allegedly posted on Appellants’ gate on November 17, 2016. Request for Judicial Notice Ex. 1,
ECF 20-1. U.S. Bank does not respond to Appellants’ request.
Under Federal Rule of Evidence 201(b), the Court may take judicial notice of facts that
are “not subject to reasonable dispute” because they “can be accurately and readily determined
from sources whose accuracy cannot reasonably be questioned.” A court may not take judicial
notice of a matter that is in dispute. Lee v. City of Los Angeles, 250 F.3d 668, 690 (9th Cir.
3 – OPINION & ORDER

2001). A party requesting judicial notice bears the burden of persuading the trial judge that the
fact is a proper matter for judicial notice. In re Tyrone F. Conner Corp., Inc., 140 B.R. 771, 781
(Bankr. E.D. Cal. 1992) (citing In re Blumer, 95 B.R. 143, 146 (B.A.P. 9th Cir. 1988)).
A court “may take judicial notice of court filings and other matters of public record.”
Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006). The Court
cannot determine, and Appellants do not explain, whether the “Notice of Sheriff’s Sale” was
filed in a court or is a public record. Therefore, the Court does not take judicial notice of the
document. Furthermore, even if the Court did take judicial notice, it would have no impact on the
outcome of this Opinion & Order.
II.

Merits
Appellants present six ways in which they contend that the Bankruptcy Court erred in

striking their amending complaint and dismissing their case. Each argument is unavailing.
A. Final Order in a Non-Core Adversarial Proceeding
Appellants contend that the Bankruptcy Court’s Order violates 28 U.S.C. § 157(c)
because they did not consent, explicitly or implicitly, to the Bankruptcy Court entering a final
order of any kind. Section 157(c) provides that:
A bankruptcy judge may hear a proceeding that is not a core proceeding but that is
otherwise related to a case under title 11. In such proceeding, the bankruptcy judge shall
submit proposed findings of fact and conclusions of law to the district court, and any final
order or judgment shall be entered by the district judge after considering the bankruptcy
judge’s proposed findings and conclusions and after reviewing de novo those matters to
which any party has timely and specifically objected.
28 U.S.C. § 157(c)(1). Thus, at first glance, it appears that the Bankruptcy Court should have
submitted a “proposed findings of fact and conclusions of law” to the district court, instead of
issuing the Order to strike Appellants’ amended complaint and close the case.

4 – OPINION & ORDER

However, a closer look at Appellants’ “Adversary Complaint” leads to a different
conclusion. See Bankr. Docket, 16-03043-tmb, ECF 1 (“Compl.”). Federal Rule of Bankruptcy
Procedure (“F.R.B.P.”) 7008(a) provides that “in an adversary proceeding before a bankruptcy
court, the complaint, counterclaim, cross-claim, or third-party complaint shall contain a
statement that the pleader does or does not consent to entry of final orders or judgment by the
bankruptcy court.” Fed. R. Bankr. P. 7008(a). Similarly, Oregon’s Local Bankruptcy Rule 70081 states that “[a] complaint, counterclaim, cross-claim, or third-party complaint must state
whether the pleader consents to the judge’s entry of final orders or judgment.” L.B.R. 7008-1.
Oregon’s Rule 7008-1 additionally states: “The pleader’s failure to timely make that statement
waives any objection to the judge’s entry of final orders or judgment.” Id.
Appellants stated in their complaint that the Bankruptcy Court had jurisdiction under 28
U.S.C. §§ 157 and 1334, and F.R.B.P. 7001 (1), (2), and (9). Compl. at 1. Appellants also stated
the following: “As required by FRBP 7008(a), to the best of our knowledge and understanding
this is a non-core proceeding pursuant to 28 U.S.C. § 157.” Id. at 2. Appellants did not object to
the Bankruptcy Court’s jurisdiction.
By filing their complaint with the Bankruptcy Court while failing to object to the court's
jurisdiction, Appellants impliedly consented to the Bankruptcy Court’s jurisdiction. See In re
Bellingham Ins. Agency, Inc., 702 F.3d 553, 567 (9th Cir. 2012), aff'd sub nom. Exec. Benefits
Ins. Agency v. Arkison, 134 S. Ct. 2165 (2014) (“a bankruptcy litigant impliedly consents to the
bankruptcy court's jurisdiction when he fails to timely object”); In re Daniels-Head & Assocs.,
819 F.2d 914, 918 (9th Cir. 1987) (“appellant's failure to object to the bankruptcy court's
jurisdiction constitutes consent to that jurisdiction”); Mann v. Alexander Dawson Inc. (In re
Mann), 907 F.2d 923, 926 (9th Cir. 1990) (debtor's decision to file an adversary proceeding in
5 – OPINION & ORDER

bankruptcy court, and his failure to object to the court's jurisdiction prior to the time it rendered
judgment against him, meant that “he consented to the court's jurisdiction.”); Baczkowski v. Bank
of N.Y., No. 6:16-CV-00150-MC, 2016 WL 6208270, at *2 (D. Or. Oct. 21, 2016) (same).
Therefore, Appellants waived any objection to the Bankruptcy Judge’s entry of a final order or
judgment.
B. Treatment of Appellants’ Objection
On July 5, 2016, the Bankruptcy Court entered a minute order in which it granted U.S.
Bank’s motion to dismiss Appellants’ complaint and provided Appellants leave to amend. Bankr.
Docket, 16-03043-tmb, ECF 24. On August 1, 2016, Appellants’ filed a document captioned
Objection to Order in which they sought relief from the court’s July 5, 2016 minute order. Id. at
ECF 31. The Bankruptcy Court construed Appellants’ Objection as a motion for relief from a
judgment or order pursuant to Federal Rule of Civil Procedure 60(b) (applicable through Federal
Rule of Bankruptcy Procedure 9024). Id. at ECF 36. The Bankruptcy Court denied Appellants’
motion. Id.
Appellants contend that the Bankruptcy Court erred by construing their objection as a
motion. The Court disagrees. First, Appellants’ Objection stated: “We reserve the right to have
this objection construed so as to do justice according to at least FRBP 1001 and to ensure that we
are heard ‘at a meaningful time and in a meaningful manner.’” Id. at ECF 31. In construing
Appellants’ Objection as a motion for reconsideration, the Bankruptcy Court provided a means
to evaluate their objection and issue a ruling. There is no provision that Appellants cite that
entitles them to file an “objection.” Thus, by construing their Objection as a motion for
reconsideration, the Bankruptcy Court construed it to provide justice by facilitating a means to
consider the merits of Appellants’ argument. See, e.g., Von Croney v. Smith, 17 F.3d 398 (9th
6 – OPINION & ORDER

Cir. 1994) (“To the extent [plaintiff] objects to this order, we construe his objection as a motion
for reconsideration”); Miller v. CDC Warden, No. 107CV01416LJODLBPC, 2009 WL 302227,
at *1 (E.D. Cal. Feb. 6, 2009) (“There is no provision for an objection to an order and the court
therefore construes the objection . . . as a motion for reconsideration”).
More importantly, Appellants fail to show any harm that resulted by the Bankruptcy
Court construing their Objection as a motion. Therefore, even if the Bankruptcy Court erred
(which it did not), any such error was harmless.
C. Meaningful Access to this Court
Appellants argue that the Bankruptcy Court erred by denying them “meaningful access to
this Court.” This Court is unable to discern any way in which Appellants allege they were denied
access to this Court. Instead, Appellant’s argument appears to attack the merits of the
Bankruptcy Court’s ruling, by arguing that the Bankruptcy Court abused its discretion in striking
Appellants’ amended complaint.
Appellants fail to show any factual or legal error. Appellants repeat the arguments they
made before the Bankruptcy Court and before this Court in moving for a preliminary injunction.
According to Appellants, they did not default on the promissory note because U.S. Bank failed to
comply with a statutory duty of presentment of the note. Appellants cite Oregon Revised Statute
§ (O.R.S.) 73.0501(2)(b), which states:
Upon demand of the person to whom presentment is made, the person making
presentment must:
(A) Exhibit the instrument;
(B) Give reasonable identification and, if presentment is made on behalf of another
person, reasonable evidence of authority to do so; and
(C) Sign a receipt on the instrument for any payment made or surrender the instrument if
full payment is made.

7 – OPINION & ORDER

O.R.S. 73.0501(2)(b). Appellants write: “[N]o one has ever exhibited our Note, nor given us
reasonable proof of their authority to enforce it.” Appellants’ Br. 17. However, as the
Bankruptcy Court explained, the language Appellants cite in O.R.S. 73.0501(2)(b) is prefaced by
the following statement: “The following rules are subject to . . . agreement of the parties[.]”
O.R.S. 73.0501. Where, as here, the parties’ note waived the right of presentment, the
requirements of O.R.S. 73.0501(2)(b) do not apply. See Bankr. Docket, Baker Decl. Ex. A at §
10, ECF 4 (“I and any other person who has obligations under this Note waive the rights of
Presentment and Notice of Dishonor.”); see also Rich v. Wells Fargo Bank, NA, No. 1:14-CV00393-PA, 2014 WL 2770316, at *3 (D. Or. June 18, 2014) (dismissing claim because the terms
of the parties’ agreement meant that O.R.S. 73.0501(2)(b) did not apply).
The Bankruptcy Court acted pursuant to its authority to sua sponte dismiss a case when
there is cause to do so. See In re Leeward Subdivision Partners, LLC, No. BAP.WW-10-1060HRUJU, 2010 WL 6259983, at *6 (B.A.P. 9th Cir. June 11, 2010) (citing 11 U.S.C. § 105(a));
see also In re Tennant, 318 B.R. 860, 869 (B.A.P. 9th Cir. 2004) (“The court can dismiss a case
sua sponte under Section 105(a).”). Appellants’ disagreement with the Bankruptcy Court’s
ruling, without any showing of error, does not form a basis for appealing their case to this Court.
D. FRBP and the Rules Enabling Act
Appellants contend that the Bankruptcy Court erred by failing to construe Appellants’
complaint “so as to do justice according to at least FRBP 1001 and the Rules Enabling Act.”
Appellants’ Br. 21. The Appellants do not offer any argument for this Court to consider
regarding whether or not the Bankruptcy Court erred.
E. Due Process

8 – OPINION & ORDER

Appellants assert that the Bankruptcy Court “violated due process by failing to hear us in
a meaningful manner.” Appellants’ Br. 22. However, Appellants offer no facts or argument to
support this conclusion. See Baczkowski v. Bank of N.Y., No. 6:16-CV-00150-MC, 2016 WL
6208270, at *2 (D. Or. Oct. 21, 2016) (finding no due process violation in bankruptcy
proceedings where the appellant did not present a sufficient factual or legal basis in her pleadings
as to how due process was violated). Further, the Court does not independently find any support
for this assertion. Appellants were given notice of the deficiencies of their original complaint and
were provided a hearing in which the Bankruptcy Court provided guidance and an opportunity to
amend their complaint. The Amended Complaint was dismissed only after the Bankruptcy Court
determined that Appellants had failed to amend their complaint as directed. Thus, there was no
due process violation.
F. Equity
Appellants argue that the Bankruptcy Court’s orders are inequitable and favor U.S. Bank.
Again, Appellants offer no evidence to support this allegation.
CONCLUSION
The Bankruptcy Court Order is affirmed and this appeal is dismissed. Any pending
motions are denied as moot.
IT IS SO ORDERED.

Dated this ______________ day of _______________________________, 2017.

__________________________________________
MARCO A. HERNÁNDEZ
United States District Judge
9 – OPINION & ORDER