FILED NOV 27 2024 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
In re: BAP Nos. CC-24-1058-SGC DR. ROOTS HERBS, LLC, CC-24-1092-SGC Debtor. (Related appeals)
GRETA SEDEAL CURTIS, Bk. No. 2:23-bk-10375-BR Appellant, v. Adv. No. 2:23-ap-01116-BR AMMEC INVESTMENTS II, INC.; SISTERS IN LAW, LLC; DR. ROOTS MEMORANDUM* HERBS, LLC; VINCENT THAMES; ROBERT ANTHONY BROWN; CHARLES HASBUN; SALEH HASBUN, Appellees.
Appeal from the United States Bankruptcy Court for the Central District of California Barry Russell, Bankruptcy Judge, Presiding
Before: SPRAKER, GAN, and CORBIT, Bankruptcy Judges.
* This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. INTRODUCTION
Appellant Greta Curtis is the sole owner and managing member of
chapter 71 debtor Dr. Roots Herbs, LLC (“Debtor”). Appellee Ammec
Investments II, Inc. (“Ammec”) commenced an adversary proceeding
against Curtis, Debtor, and others to declare void several transfers of real
property. Prepetition, Ammec obtained a state court judgment voiding its
deed initially conveying the real property to an entity controlled by Curtis.
The property was subsequently transferred from the initial transferee to
Debtor and then Curtis. Ammec argued in the adversary proceeding that
because the first property transfer had been voided, all subsequent
transfers of that property, including the transfers to Debtor and Curtis,
were likewise void. The bankruptcy court agreed with Ammec and entered
summary judgment in its favor. The bankruptcy court additionally
dismissed with prejudice Curtis’ first amended crossclaims.
Curtis appeals from both the summary judgment and the dismissal of
her first amended crossclaims. However, her arguments pertain to matters
beyond the scope this appeal, lack merit, or both. Accordingly, we
AFFIRM.
1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532, all “Rule” references are to the Federal Rules of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of Civil Procedure.
2 FACTS2
A. The parties and the property transfers.
Curtis formerly was a licensed attorney authorized to practice law in
California. She was disbarred in 2014 for misappropriation of client funds
among other things. According to Ammec, at the time she was disbarred,
Curtis was representing Ammec and related defendants in a state court
lawsuit. 3 Ammec claims that without its knowledge, Curtis continued her
legal services even after she was suspended from the practice of law or
disbarred.
In May 2014, at Curtis’ behest, Ammec executed a grant deed in favor
of Sisters in Law, LLC (“Sisters”). Like Debtor, Sisters is a limited liability
company that Curtis owns and controls. This deed was recorded within
several days of its execution (“Ammec/Sisters Deed”). Ammec conveyed to
Sisters a 5.774% interest in two parcels of Los Angeles real property: (1) a
multiple-unit residence on Compton Avenue; and (2) a vacant lot on East
First Street (jointly, the “Property”). The acknowledged purpose of the
Ammec/Sisters Deed was to compensate Curtis for legal services she
rendered to Ammec.
2 We exercise our discretion, when appropriate, to take judicial notice of documents electronically filed in the underlying bankruptcy case and adversary proceeding. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003). 3 Curtis represented Ammec in Ruth Light v. Baypoint Mortgage, Inc., Ammec, Inc.,
et al., LASC Case No. BC476061 (“Ruth Light Action”). 3 Shortly after execution of the Ammec/Sisters Deed, Curtis conveyed
the Property from Sisters to Debtor by grant deed (“Sisters/Roots Deed”).
The Sisters/Roots Deed was recorded in January 2015. Curtis also executed
on behalf of Debtor a deed of trust in favor of Vincent Thames dated May
5, 2016, encumbering the Property to secure a purported debt of $150,000
(“Thames Deed of Trust”). This deed of trust was notarized and recorded
several months later—in December 2016.
In February 2017, Curtis again conveyed the Property—this time
from Debtor to herself (“Roots/Curtis Deed”). Curtis never recorded the
Roots/Curtis Deed. According to Ammec, the Roots/Curtis Deed was the
first part of a two-part straw-conveyance transaction. As Curtis admitted in
a declaration she filed in the adversary proceeding, she executed another
unrecorded deed immediately conveying the Property back to Debtor. This
fourth conveyance was not addressed in Ammec’s adversary complaint,
but the bankruptcy court’s judgment avoided this fourth conveyance as
well (the “Curtis/Roots Deed”). Curtis’ appeal brief did not address the
Curtis/Roots Deed.
B. The state court lawsuit, its disposition, and Curtis’ failed attempt to appeal on behalf of Sisters.
The transactions between Curtis and Ammec spawned several state
court lawsuits. But only one of these lawsuits is relevant to these appeals.
In February 2016, Ammec sued Curtis, Debtor, and Sisters in state court for
fraud, breach of fiduciary duty, negligence, and quiet title. The quiet title
4 cause of action additionally requested declaratory relief to cancel and void
the Ammec/Sisters Deed. Ammec voluntarily dismissed the breach of
fiduciary duty and negligence causes of action. The court then bifurcated
the fraud claim from the fourth cause of action seeking both to quiet title
and cancel the Ammec/Sisters Deed. Ammec tried its fraud claim against
Curtis to a jury. The jury specifically found that Curtis failed to disclose
certain information to Ammec with the intent to deceive. But the jury
entered its verdict in favor of Curtis because it also found that Ammec did
not rely on the nondisclosure or suffer any damages.
The court then proceeded to hold a bench trial on Ammec’s
remaining claim. 4 At the beginning of the trial, the court noted that neither
Curtis nor Debtor had appeared in person though both had been instructed
to do so. Curtis appeared by phone, while Debtor appeared through
counsel by video. On Ammec’s motion, the court dismissed without
prejudice both Curtis and Debtor from the fourth cause of action. The court
then conducted a non-jury trial on the fourth cause of action as against
Sisters only, which had been defaulted.5 This effectively narrowed the
4 That the state court held a trial is beyond cavil. The first two pages of its Statement of Decision refer to the court holding “trial” on the fourth cause of action no less than five times. The state court’s decision to hold trial despite the default of Sisters—ultimately the only remaining defendant—is presumably a function of California law prohibiting disposition of quiet title actions by default judgment. See Nickell v. Matlock, 206 Cal. App. 4th 934, 943-44 (2012). 5 In its Statement of Decision, the state court further referenced the remarks of
Debtor’s counsel, Eric O. Ibisi, who stated that “he had a motion pending for relief from
5 matter being tried from a broader quiet title action to cancellation of the
Ammec/Sisters Deed. Ammec prevailed.
In January 2022, the state court entered judgment declaring the
Ammec/Sisters Deed void and contemporaneously issued its Statement of
Decision, which is specifically referenced in the judgment. Consistent with
its dismissal of Debtor and Curtis at the beginning of the bench trial, the
state court focused exclusively on the part of the fourth cause of action
seeking to cancel the Ammec/Sisters Deed. It found that Ammec’s principal
executed the Ammec/Sisters Deed “to pay attorney’s fees to Curtis” for
legal services Curtis rendered in the Ruth Light Action. 6 The court further
found that Curtis failed to prepare any sort of written fee agreement
between herself and any of the multiple defendants she agreed to represent
in that lawsuit. Nor did she disclose any actual or potential conflicts of
interest among her multiple clients.
Based on these factual findings, the state court concluded that Curtis
had violated Rule 3-310(c)(3) and Rule 3-300 of the California Rules of
Professional Conduct (“CRPC”) directed at avoiding interests adverse to a
default by defendant, Sisters LLC.” The court declined to rule on the motion to set aside the default, saying that the only matter on calendar for that day was the bench trial of Ammec’s cancellation of instrument claim. 6 According to the Statement of Decision, Ammec’s principal testified at trial that
Curtis threatened that if he did not sign the Ammec/Sisters Deed, she would “lay down” at trial. 6 client. 7 The state court then declared the deed void based on Ammec’s
election to void it under Sheppard, Mullin, Richter & Hampton, LLP v. J-M
Manufacturing Co., 6 Cal. 5th 59 (2018), and Fletcher v. Davis, 33 Cal. 4th 61
(2004).
Curtis purported to file an appeal on behalf of Sisters. Ammec moved
to dismiss that appeal arguing that Curtis as a disbarred attorney could not
legally commence and prosecute an appeal on behalf of Sisters. Ammec
additionally asserted that Sisters was at the time a suspended California
limited liability company. The California Court of Appeal granted
Ammec’s motion to dismiss the appeal, and the state court’s judgment
avoiding the Ammec/Sisters Deed thereby became final.
C. Debtor files bankruptcy, and Ammec commences its adversary proceeding.
In January 2023, Curtis filed a chapter 11 petition on behalf of Debtor.
In Debtor’s Schedule A/B, she listed the Property as owned by Debtor
notwithstanding the Roots/Curtis Deed. But she did not list Thames as one
of Debtor’s secured or unsecured creditors, even though the Thames Deed
of Trust suggested otherwise.
In April 2023, Ammec commenced an adversary proceeding against
7 Former CRPC Rule 3-310(c)(3) (now CRPC Rule 1.7) precludes an attorney from representing clients adverse to each other in the same matter without informed written consent. Former CRPC Rule 3-300 (now CRPC 1.8.1) precludes attorneys from entering into any business transaction with a client, or acquiring an interest adverse, unless certain written disclosures are made and documentation obtained. 7 Sisters, Debtor, Curtis, and Thames. The complaint’s three claims for
declaratory relief respectively sought determinations that the Sisters/Roots
Deed, the Roots/Curtis Deed, and the Thames Deed of Trust (collectively,
the “Downstream Transfers”) were “void and cancelled” under Cal. Civ.
Code § 3412.8
After Debtor and Curtis unsuccessfully moved to dismiss the
adversary proceeding, they filed an answer and crossclaims. But Sisters
and Thames did not appear, and the bankruptcy court entered Sister’s
default. In relevant part, “Count I” of Curtis’ amended crossclaims sought
a determination that the Ammec/Sisters Deed was not invalid.9
In August 2023, Ammec moved to dismiss Curtis’ first amended
crossclaims with prejudice. After considering the parties’ papers and
holding a hearing, the bankruptcy court granted the motion to dismiss.
D. The parties’ cross-motions for summary judgment and the bankruptcy court’s decision.
In February 2024, Ammec moved for summary judgment. According
8 Cal. Civ. Code § 3412 states: “[a] written instrument, in respect to which there is a reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or canceled.” 9 “Count II” and “Count III” of Curtis’ amended crossclaims respectively sought
a determination that Ammec (and others) could not avoid the Sisters/Roots Deed or the Thames Deed of Trust. But these causes of action were premised on the continuing validity of the Ammec/Sisters Deed, and they are not separately and distinctly discussed in Curtis’ appeal brief. Nor are her other crossclaims for abuse of process, malicious prosecution, slander of title, fraud, and such. 8 to Ammec, the subsequent Downstream Transfers were equally as invalid
as the Ammec/Sisters Deed. It maintained that the bankruptcy court could
enforce the state court judgment against Curtis and Debtor based on the
Full Faith and Credit Act, 28 U.S.C. § 1738, and Cal. Code of Civil
Procedure (“CCP”) § 1908. Ammec argued that in light of the state court
judgment voiding the Ammec/Sisters Deed, the Downstream Transfers
were valid only to the extent that the transferees could establish they
qualified as bona fide purchasers in good faith, for value, and without
notice of the infirmity that led the state court to declare void the
Ammec/Sisters Deed.
The infirmity at issue was Curtis’ violation of CRPC Rules 3-300 and
3-310(c)(3), as addressed in the state court’s decision. Because the
Ammec/Sisters Deed had been voided due to Curtis’ ethics breaches,
Ammec argued that Debtor’s and Curtis’ actual or constructive knowledge
of Curtis’ unethical conduct—and the lack of consideration given for the
Downstream Transfers—conclusively demonstrated that neither Debtor
nor Curtis qualified as bona fide purchasers for value and hence rendered
the Downstream Transfers voidable as well under Cal. Civ. Code § 3412.
Curtis and Debtor jointly opposed Ammec’s summary judgment
motion. They asserted that issue preclusion, claim preclusion, California
tax law, equitable estoppel, various statutes of limitation, and the parol
evidence rule all barred Ammec from voiding the Downstream Transfers.
They further attempted to attack, in myriad ways, the state court judgment
9 voiding the Ammec/Sisters Deed. They asserted that the state court
judgment was obtained by fraud, violated several principles of substantive
California law,10 and was unenforceable as against Curtis because she was
dismissed from the state court action before the trial of the fourth cause of
action. They further maintained that Ammec could not properly invoke
issue preclusion in support of its summary judgment motion.
Curtis and Debtor also moved for summary judgment. But the
contents of their joint summary judgment motion merely reiterated many
of the same points set forth in their opposition to Ammec’s summary
judgment motion.
The bankruptcy court held a hearing on the cross-motions for
summary judgment in April 2024. After considering the arguments both
sides presented, the bankruptcy court rejected Curtis’ arguments and
adopted Ammec’s arguments. The bankruptcy court did not specify exactly
why Ammec was entitled to summary judgment—and Curtis and Debtor
were not. Instead, it broadly stated that it agreed with Ammec’s positions
and disagreed with Curtis’ and Debtor’s positions.
10Most of the principles of California law Curtis and Debtor cited to attack the state court judgment were the same ones they invoked in defense against Ammec’s action to invalidate the Downstream Transfers. But they additionally asserted that Ammec should not have prevailed on its state court “quite title” cause of action because it had not demonstrated that it held title to the Property at the time it filed its state court lawsuit. Aside from the obvious problem that full faith and credit principles bar us from looking behind the state court judgment, their “quiet title” argument fails because Ammec prevailed on its request for relief to declare the Ammec/Sisters Deed void and cancelled. It did not obtain relief quieting title. 10 On April 16, 2024, the bankruptcy court entered judgment in favor of
Ammec on all three counts stated in Ammec’s adversary complaint and
declared void and cancelled the Sisters/Roots Deed, the Roots/Curtis Deed,
the Thames Deed of Trust, and the Curtis/Roots Deed. Curtis timely
appealed the summary judgment ruling on April 26, 2024. In a separate
order entered on May 30, 2024, the bankruptcy court dismissed with
prejudice Curtis’ first amended crossclaims. Curtis timely appealed the
dismissal on June 12, 2024.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334. 11 We
have jurisdiction under 28 U.S.C. § 158.
ISSUES
1. Did the bankruptcy court err when it granted Ammec’s motion for
summary judgment and denied Curtis’ and Debtor’s cross-motion for
summary judgment?
2 Did the bankruptcy court err when it dismissed Curtis’ first amended
crossclaims?
11Curtis argues that the bankruptcy court lacked subject matter jurisdiction over Ammec’s claims for relief. We disagree. Each of Ammec’s claims pertained to Debtor’s asserted ownership of the Property. As such, the bankruptcy court had jurisdiction pursuant to 28 U.S.C. § 1334(b) because the adversary proceeding was a proceeding either “arising under,” “arising in,” or “related to” a case under title 11. See generally Wilshire Courtyard v. Cal. Franchise Tax Bd. (In re Wilshire Courtyard), 729 F.3d 1279, 1285- 87 (9th Cir. 2013) (explaining bankruptcy court jurisdiction under 28 U.S.C. § 1334(b)). 11 STANDARDS OF REVIEW
We review de novo the bankruptcy court’s summary judgment
ruling. Stadtmueller v. Sarkisian (In re Medina), 619 B.R. 236, 240 (9th Cir.
BAP 2020), aff'd, 2021 WL 3214757 (9th Cir. July 29, 2021). We also review
de novo its dismissal of Curtis’ crossclaims under Civil Rule 12(b)(1) and
(6). Barnes v. Belice (In re Belice), 461 B.R. 564, 572 (9th Cir. BAP 2011). These
Civil Rules are made applicable in adversary proceedings by Rule 7012(b).
Id. at 569 n.3 (9th Cir. BAP 2011). “De novo review requires that we
consider a matter anew, as if no decision had been made previously.”
Francis v. Wallace (In re Francis), 505 B.R. 914, 917 (9th Cir. BAP 2014).
SUMMARY JUDGMENT STANDARDS
A court must grant summary judgment when the pleadings and
evidence show that there are no genuine issues of material fact and the
movant is entitled to judgment as a matter of law. Civil Rule 56(a)
(incorporated by Rule 7056); Roussos v. Michaelides (In re Roussos), 251 B.R.
86, 91 (9th Cir. BAP 2000), aff'd, 33 F. App’x 365 (9th Cir. 2002). The moving
party initially must show the absence of genuine issues of material fact. If
the moving party meets this burden, then the nonmoving party must show
specific facts establishing the existence of genuine issues for trial. Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986).
DISMISSAL STANDARDS
When we review an order granting a Civil Rule 12(b)(6) motion, we
consider the legal sufficiency of the plaintiff’s complaint. See Johnson v. 12 Riverside Healthcare Sys., LP, 534 F.3d 1116, 1121–22 (9th Cir. 2008). We must
assess whether the complaint presents a cognizable legal theory and
whether it contains sufficient factual allegations to support that theory. Id.
Thus, “for a complaint to survive a motion to dismiss, the non-conclusory
‘factual content,’ and reasonable inferences from that content, must be
plausibly suggestive of a claim entitling the plaintiff to relief.” Moss v. U.S.
Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (citing Ashcroft v. Iqbal, 556 U.S.
662, 677-78 (2009)).
DISCUSSION
A. Appeal from grant of Ammec’s summary judgment motion and denial of Curtis’ and Debtor’s cross-motion for summary judgment.
In evaluating the bankruptcy court’s summary judgment rulings,
there are two main issues we must address. First, we consider whether the
state court judgment against Sisters voiding the Ammec/Sisters Deed is
binding and enforceable against Debtor and Curtis. In other words,
Ammec has no claim to void the subsequent Downstream Transfers unless
its deed to Sisters was voidable. If the Ammec/Sisters Deed was properly
voided, then we reach the second question: were Debtor and Curtis bona
fide purchasers for value? Where, as here, a prior transfer is merely
voidable rather than void, a “subsequent bona fide purchaser of the
property was entitled to rely on it.” Schiavon v. Arnaudo Brothers, 84 Cal.
App. 4th 374, 379 (2000); see also Fonteno v. Wells Fargo Bank, N.A., 228 Cal.
App. 4th 1358, 1371 (2014) (“should a trustee's deed be voidable, rather
13 than void, bona fide purchasers are generally entitled to keep the property
purchased”). Therefore, even if Ammec’s deed to Sisters was properly
voided, Debtor and Curtis obtained enforceable title if they gave value in
exchange for their respective property interests and took those interests
without notice of the infirmity that rendered the Ammec/Sisters Deed
voidable.12
1. The scope of this appeal.
In the adversary proceeding, Ammec sued Curtis, Sisters, Debtor,
and Thames. The bankruptcy court entered judgment voiding and
cancelling the Sisters/Roots Deed and the other Downstream Transfers. Yet,
Curtis is the only party that has appealed. This has potentially significant
consequences concerning the scope of this appeal.
Curtis’ attempt to appeal on behalf of Sisters, Debtor, and Thames
raises prudential, third-party standing concerns. See generally Tingley v.
Ferguson, 47 F.4th 1055, 1069 (9th Cir. 2022) (explaining third party
12 As a preliminary matter we must note the difficulty we have encountered in interpreting Curtis’ arguments; they indiscriminately pivot back and forth between attacks on the state court judgment and the bankruptcy court’s decision without offering sufficient factual or legal development. We have attempted to address her arguments. However, as a former attorney, she is not entitled to the same leeway in interpreting her papers to which less sophisticated pro se litigants are entitled. See Albert v. Gonzalez, 2023 WL 8895708, at *1 n.1(C.D. Cal. Oct. 6, 2023) (citing Huffman v. Lindgren, 81 F.4th 1016, 1020 (9th Cir. 2023)), aff'd, 2024 WL 3874234 (9th Cir. Aug. 20, 2024). To the extent that any of her arguments are not specifically addressed, they are rejected as meritless. 14 standing principles). 13 Furthermore, given that Curtis no longer is licensed
to practice law in California, she cannot act as counsel in this appeal for
anyone except herself. See D-Beam Ltd. P'ship v. Roller Derby Skates, Inc., 366
F.3d 972, 973–74 (9th Cir. 2004). Nor can Curtis, acting as Debtor’s sole
owner and managing member, circumvent the requirement that entities
appear through licensed counsel. See United States v. High Country Broad.
Co., 3 F.3d 1244, 1245 (9th Cir. 1993). Moreover, Debtor’s chapter 11 case
was converted to chapter 7 in April 2024. Accordingly, any appeal arising
from the cancellation of the Sisters/Roots Deed—which affected property of
Debtor’s bankruptcy estate—should have been pursued (if at all) by the
chapter 7 trustee and not Curtis. See Est. of Spirtos v. One San Bernadino
Cnty. Super. Ct. Case Numbered SPR 02211, 443 F.3d 1172, 1175 (9th Cir.
2006); Meehan v. Ocwen Loan Servicing, LLC (In re Meehan), 2014 WL
4801328, at *4 (9th Cir. BAP Sept. 29, 2014), aff'd, 659 F. App’x 437 (9th Cir.
2016). 14
13 Curtis’ web of interests in and affiliations with the Property, Sisters, and Debtor establishes that she has a sufficient stake in the outcome of these appeals to satisfy Article III standing requirements. See generally Bates v. United Parcel Serv., Inc., 511 F.3d 974, 985 (9th Cir. 2007) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992)) (describing Article III standing requirements). As set forth above, however, she may only argue on behalf of her own interests, which have been obfuscated by her execution of the Curtis/Roots Deed immediately following her execution of the Roots/Curtis Deed. These two deeds arguably cancelled each other out and appear to have deprived Curtis of any legitimate direct interest in the Property or the outcome of this appeal. 14 Curtis has repeatedly alleged that she is a third-party beneficiary of the
Ammec/Sisters Deed. She also has alleged that Sisters held this deed in trust for her
15 In light of these restrictions, Curtis’ arguments on Debtor’s behalf
attacking the cancellation of the Sisters/Roots Deed are beyond the proper
scope of this appeal. Similarly, Curtis cannot appeal on Thames’ behalf the
cancellation of the Thames Deed of Trust. This cancellation also is beyond
the proper scope of this appeal. Even so, for the sake of analytical
completeness—and in light of issues Curtis has raised on appeal as to her
interests in the Property—we address the cancellation of the Sisters/Roots
Deed.
2. The judgment voiding the Ammec/Sisters Deed is binding.
The state court action voided the Ammec/Sisters Deed based on
Curtis’ violation of her professional obligations as Ammec’s counsel.
Though the state court previously had entered default against Sisters, it
proceeded to conduct a trial on Ammec’s claim to void the Ammec/Sisters
Deed. Sisters failed to appear, but Ammec presented its case to the court.
The state court’s Statement of Decision detailed the basis for voiding the
Ammec/Sisters Deed. It granted Ammec’s claim to cancel and void this
deed based on Curtis’ violation of former CRPC Rules 3-310 and 3-300,
stating:
Based on the testimony of Charles Hasbun, Ammec’s CEO, that the May 6, 2014 Grant Deed (Ammec’s Exhibit No.1 admitted into evidence at trial) was to pay attorney’s fees to Curtis, and
benefit. But we have not found in the summary judgment record any evidence to support these allegations. More importantly, Curtis has not made similar allegations as to the Sisters/Roots Deed. Nor have we seen any evidence in the record to support that notion. 16 that there was no written fee agreement for any of Curtis's multiple defendants and no disclosures by Curtis of actual or potential conflicts among her multiple clients in the Ruth [Light] case, the Grant Deed is voidable by Ammec. Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing Co., Inc. (2018) 6 Ca1. 5th 59 . . . , citing Rule 3-310(C)(3), Cal. Rules of Prof. Conduct.
Curtis’ appeal on behalf of Sisters was dismissed by the California Court of
Appeal, and the state court’s judgment cancelling the Ammec/Sisters Deed
is final.
Ammec contends that the state court judgment conclusively
establishes that the Ammec/Sisters Deed is void, thereby calling into
question the validity of the Downstream Transfers. Curtis disagrees. She
raises numerous challenges to the Statement of Decision and the
bankruptcy court’s reliance on it. Primarily, she argues that the state court
could not avoid the Ammec/Sisters Deed because the jury entered its
verdict in her favor and against Ammec on its claim for fraud. But the jury
verdict on the fraud claim has nothing to do with the state court’s
cancellation of the Ammec/Sisters Deed. The state court voided that deed
because Curtis acquired it in violation of her ethical obligations as
Ammec’s counsel—not as a result of fraud.
Undaunted, Curtis says that she objected to the admission of the
Statement of Decision “because it did not make sense in light of the actual
judgment.” Aplt. Opn. Br. at p. 11. This argument merely continues her
17 effort to view the state court judgment solely through the prism of the
fraud claim on which she prevailed. However, this is not a basis to
collaterally attack the state court’s judgment voiding Ammec’s deed to
Sisters, which makes perfect sense because it is not based on the
unsuccessful fraud claim.
a. The Rooker-Feldman doctrine does not apply.
Additionally, Curtis argues that the bankruptcy court’s decision
violated the Rooker-Feldman doctrine. This doctrine emanates from the
holdings in Rooker v. Fidelity Trust Co., 263 U.S. 413, 416 (1923) and District
of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 486-87 (1983), “under
which a party losing in state court is barred from seeking what in substance
would be appellate review of the state judgment in a United States district
court, based on the losing party’s claim that the state judgment itself
violates the loser’s federal rights.” Johnson v. De Grandy, 512 U.S. 997, 1005–
06 (1994). Once again, this argument is tied to Curtis’ belief that the state
court judgment was based on the unsuccessful fraud claim. She also
contends that she prevailed on all claims in the state court action because
Ammec voluntarily dismissed her from its fourth cause of action seeking to
cancel the Ammec/Sisters Deed just before the state court held its bench
trial on that claim. Alternatively, she argues that she prevailed in the state
court because Ammec also dismissed its claim against her for breach of her
fiduciary duties.
Notwithstanding Curtis’ arguments, the state court judgment
18 specifically canceled and voided the Ammec/Sisters Deed. Nothing Curtis
has said or argued can change this unequivocal fact. The meaning and
import of the state court judgment is not subject to legitimate dispute.
Thus, neither Ammec’s adversary proceeding—nor the bankruptcy court’s
summary judgment ruling—violated the Rooker-Feldman doctrine.
Rather, it is Curtis who attempts to collaterally attack the state court’s
judgment voiding the Ammec/Sisters Deed. We acknowledge that neither
Curtis nor Debtor were parties to the state court judgment voiding the
Ammec/Sisters Deed because the court granted Ammec’s motion to
dismiss them without prejudice immediately before the bench trial
occurred. Consequently, the Rooker-Feldman doctrine does not apply. It only
can be applied against parties to the prior action. Fatehmanesh v. Seror (In re
Manesh), 2018 WL 989582, at *10 (9th Cir. BAP Feb. 6, 2018), aff'd, 774 F.
App’x 413 (9th Cir. 2019).
b. Full faith and credit principles apply.
Even though the Rooker-Feldman doctrine does not apply, full faith
and credit principles are both applicable and controlling. Under 28 U.S.C.
§ 1738, “state judicial proceedings shall have the same full faith and credit
in every court within the United States as they have in the courts of the
State from which they are taken . . . .” Migra v. Warren City Sch. Dist. Bd. of
Educ., 465 U.S. 75, 76 (1984). “The most direct consequence of applying the
Full Faith and Credit statute is that a federal court must enforce a state
court judgment when an action is brought for that purpose.” C. Wright &
19 A. Miller, 18B FEDERAL PRACTICE AND PROCEDURE, JURISDICTION, § 4469 &
n.16 (3d ed. 2024) (listing cases). Full faith and credit doctrine also prohibits
us from considering Curtis’ collateral attacks on the state court judgment.
See, e.g., Greenfield v. Sheley (In re Greenfield), 2022 WL 1115412, at *5 n.8 (9th
Cir. BAP Apr. 14, 2022) (acknowledging that under Full Faith and Credit
Act the bankruptcy court “could not examine the propriety of the
underlying judgment”); Italiane v. Jeffrey Catanzarite Fam. Ltd. P'ship (In re
Italiane), 632 B.R. 662, 675 n.6 (9th Cir. BAP 2021) (“To the extent
[Appellant] is asking us to second-guess the state court’s [decisions], we
cannot do so. Such second-guessing would contravene . . . 28 U.S.C. § 1738
and would constitute an impermissible collateral attack . . . .”), aff'd, 2022
WL 17412881 (9th Cir. Dec. 5, 2022); Hobbs v. Arizona (In re Hobbs), 2016 WL
5956648, at *6 (9th Cir. BAP Oct. 13, 2016) (holding that bankruptcy court
“was required to give full faith and credit to the Judgment” and that “[a]ny
error in the underlying state court findings should have been addressed in
a motion for reconsideration or an appeal to the appropriate state
tribunal.”).
Admittedly, application of the full faith and credit doctrine often
overlaps with common law preclusion doctrines and raises doubts when
applied to nonparties in the context of issue preclusion if it is applied
without consideration of concepts like party control and privity. Compare In
re Manesh, 2018 WL 989582, at *10, with Moucka v. Windham, 483 F.2d 914,
916 (10th Cir. 1973). Neither Curtis nor Debtor were parties to the trial
20 resulting in the judgment avoiding the Ammec/Sisters Deed, even though
this deed served as payment for Curtis’ legal fees, and the state court
voided it based on Curtis’ breach of former CRPC Rules 3-310 and 3-300.
Though we must proceed with caution in determining whether and to
what extent Curtis and Debtor are bound by the state court judgment,
neither party has cogently explained how full faith and credit principles
should apply. Curtis does state that she had a right to file a declaratory
relief action to preclude any finding that the Ammec/Sisters Deed was
void. Such an action would directly contravene the full faith and credit to
be given to the state court judgment as Curtis would be attempting to
collaterally attack the state court’s judgment entered against Sisters.
In short, Curtis cannot collaterally attack the state court judgment
voiding the Ammec/Sisters Deed. We hold that the full faith and credit we
are compelled to give the state court’s judgment precluded Curtis’ efforts
to relitigate the validity of the Ammec/Sisters Deed in the adversary
proceeding. Nonetheless, any concerns arising from application of this
doctrine directly against Curtis and Debtor are conclusively resolved by
California statue.
i. CCP § 1908(a)(2).
The bankruptcy court accepted Ammec’s argument that because
Debtor and Curtis claim to be successors in interest to Sisters by virtue of
the Downstream Transfers, CCP § 1908(a)(2) applies to render the state
court judgment voiding the Ammec/Sisters Deed binding on them. As a
21 whole, CCP § 1908 identifies different types of final California judgments
and explains against whom they can be enforced and the circumstances
permitting such enforcement. More specifically, CCP § 1908(a)(2) codifies
certain aspects of common law preclusion doctrine in matters involving
title between parties and successors in interest. See Fed'n of Hillside &
Canyon Ass’ns v. City of L.A., 126 Cal. App. 4th 1180, 1205 (2004); 7 Witkin,
CAL. PROC. § 361 (6th ed. 2024). CCP § 1908(a)(2) provides:
[a] judgment or order is, in respect to the matter directly adjudged, conclusive between the parties and their successors in interest by title subsequent to the commencement of the action or special proceeding, litigating for the same thing under the same title and in the same capacity, provided they have notice, actual or constructive, of the pendency of the action or proceeding.
CCP § 1908(a)(2) (emphasis added).
CCP § 1908(a)(2) supports cancellation of the Roots/Curtis Deed—the
only conveyance at issue within the proper scope of this appeal. Curtis
acquired her interest (if any) in the Property under the Roots/Curtis deed in
February 2017, roughly a year after the commencement of the state court
action. Having been a party to the state court action prior to her dismissal,
Curtis clearly had actual notice of the pendency of the action when she
acquired her interest. Accordingly, the state court’s Statement of Decision
is conclusive as against Curtis under CCP § 1908(a)(2), specifically that the
Ammec/Sisters Deed was void based on Curtis’ breach of former CRPC
Rules 3-310 and 3-300.
22 We note that if somehow the Sisters/Roots Deed was relevant to
Curtis’ appeal, application of CCP § 1908(a)(2) to Debtor based on its
receipt of that deed would be problematic. California law makes clear that
for CCP § 1908(a)(2) to apply, the prior action must have commenced
before the successor acquired its interest in the subject property. Topanga
Corp. v. Gentile, 219 Cal. App. 2d 274, 278–79 (1963) (holding that CCP
§ 1908(a)(2) “does not apply where the interest is acquired before the
commencement of the action”); Holman v. Toten, 54 Cal. App. 2d 309, 314,
128 P.2d 808, 811 (1942) (listing multiple cases). Here, Debtor acquired its
interest in the Property no later than January 2015—when the Sisters/Roots
Deed was recorded. This occurred at least a year before Ammec
commenced the instant state court action in February 2016. Consequently,
Ammec’s argument against Debtor based on CCP § 1908(a)(2) would be
unavailing with respect to the Sisters/Roots Deed.
ii. CCP § 1908(b).
But even if we were to reach the merits of the bankruptcy court’s
cancellation of the Sisters/Roots Deed, we still would affirm. CCP § 1908(b)
provides an alternate ground for affirmance.15 Subsection (b) statutorily
extends the preclusive effect of a judgment to those who control an action:
A person who is not a party but who controls an action, individually
15 We can affirm on any basis supported by the record. Shanks v. Dressel, 540 F.3d 1082, 1086 (9th Cir. 2008). This alternative basis for affirming the cancellation of the Sisters/Roots Deed also could serve as a separate and independent ground for affirming the cancellation of the Roots/Curtis Deed. 23 or in cooperation with others, is bound by the adjudications of litigated matters as if he were a party if he has a proprietary or financial interest in the judgment or in the determination of a question of fact or of a question of law with reference to the same subject matter or transaction . . . .
CCP § 1908(b).
Thus, when a nonparty individual—through their management or
ownership role—controls the defense of a defendant business entity and
has overlapping interests and incentive to litigate with the defendant
business entity, the plaintiff can seek in subsequent proceedings to render
the judgment against the defendant business entity enforceable against the
nonparty individual. See generally Kayne v. Ho, 2013 WL 12123202, at *12
(C.D. Cal. Aug. 28, 2013) (citing Dow Jones Co. v. Avenel, 151 Cal. App. 3d
144, 151 (1984)). Likewise, if that same individual owns and controls
another business entity—also not a party to the prior action but sharing the
defendant business entity’s overlapping interests and incentives to
litigate—the reach of the prior judgment typically can be extended to the
nonparty business entity. See id. at *13 (citing UMG Recordings, Inc. v. BCD
Music Grp., Inc., 2011 WL 798901, at *5 (C.D. Cal. Feb. 25, 2011), aff'd, 509 F.
App’x 661 (9th Cir. 2013)).
Curtis has admitted that she owned and controlled both Sisters and
Debtor. Sisters had the opportunity to defend against Ammec’s state court
lawsuit and avoidance of the Ammec/Sisters Deed, which arose from
Curtis’ underlying actions in representing Ammec. Curtis necessarily
24 controlled that defense. She elected to permit entry of default against
Sisters and failed to timely seek to set aside this default. Moreover, Curtis
attempted to appeal the state court judgment on behalf of Sisters but did so
improperly. Again, she necessarily controlled the decision to appeal. That
Curtis ultimate failed to defend or appeal the state court judgment does not
alter the fact that the state court conducted a non-jury trial during which
her conduct was actually litigated, and through her control of Sisters’
defense she had the opportunity to present a defense on Sisters’ behalf. Put
bluntly, Curtis’ litigation missteps do not militate against application of
In matters of due process, the focus is on whether the adverse party
had a “meaningful opportunity” to appear and be heard. Boddie v.
Connecticut, 401 U.S. 371, 378–80 (1971). For purposes of applying CCP
§ 1908(b), whether a nonparty had sufficient due process to justify
extension of the judgment turns on the extent of that nonparty’s control
over the party against whom the judgment was entered, together with the
opportunity and incentive to litigate the matter. Cf. First Nat’l Bank v.
Russell (In re Russell), 76 F.3d 242, 245 (9th Cir. 1996).
Russell is particularly instructive. A state court entered a stipulated
judgment for judicial foreclosure and also determined liability in favor of a
lender and against the Russells’ three related entities, referred to as “Den–
Ed,” “the Trust,” and “SPC.” Id. at 243-44. The state court specifically
excluded the Russells from the stipulated judgment and its determination
25 of the other parties’ personal liability for the loans. The court reserved that
issue as against the Russells for further action in the event the automatic
stay terminated in the Russells’ contemporaneous bankruptcy case. Id. But
the state court did permit judicial foreclosure of the Russells’ real property
collateral. Id.
The Russells later sued the lender in bankruptcy court for alleged
violation of their civil rights. They alleged that the loan officer they dealt
with was motivated by racial animus and sought to financially destroy
them. The Russells argued this led to their loan default and ultimately to
the state court action and judgment. Id.
The bankruptcy court granted the lender’s motion to dismiss the
adversary proceeding with prejudice, “holding that the Russells were
precluded from raising the civil rights claim because of the previous state
court judgment against the entities that the Russells controlled.” Id. The
BAP reversed reasoning that litigants always can agree to limit or negate
the preclusive effect of a judgment when it is the result of consensual
resolution of the action. See Russell v. First Nat’l Bank (In re Russell), 166 B.R.
901, 905 (9th Cir. BAP 1994) (citing Manning v. Wymer, 273 Cal. App. 2d
519, 526-27 (1969)), rev'd, 76 F.3d 242 (9th Cir. 1996). Because the stipulated
judgment specifically excluded the Russells, the BAP concluded that they
were not precluded from bringing their subsequent civil rights action. Id.
More importantly for our purposes, the BAP remarked that because the
Russells likely lacked sufficient incentive to pursue the civil rights action in
26 state court on behalf of Den-Ed and the Trust, it would be unfair and
improper to hold that the Russells—as persons in control of these litigant-
entities—were precluded from personally pursuing their civil rights action
in the bankruptcy court. Id.
The Ninth Circuit reversed the BAP. In relevant part, it specifically
relied on CCP § 1908(b) to conclude that the Russells were precluded from
pursuing in the bankruptcy court their civil rights action. As the Ninth
Circuit explained:
In the present case, we conclude that the state court judgment was a final judgment on the merits with regard to entities that the Russells completely controlled. The state judgment concerned identical issues to those brought in the civil rights claim, namely the legality of the debts. It adjudged that the Trust, SPC, and Den–Ed were in default of their loans to First National and it allowed First National to begin foreclosure proceedings against the property owned by the Russells that was used as collateral for the loans.
Because the Russells are in privity with these entities, we conclude that the state court judgment applies equally to them. The Russells completely control Den–Ed, SPC, and the Trust. Therefore the Russells had a full and fair opportunity to present their civil rights claims in the state court proceeding. The Russells also had a strong financial stake in the proceedings. It is true that the Russells’ personal liability for the deficiency of the foreclosures on their real property has not been adjudged. However, it has been conclusively adjudicated that the loans by First National are valid, that the loans are in default, and that First National can foreclose on the Russells' property. These issues cannot be relitigated by the Russells.
In re Russell, 76 F.3d at 245.
27 Here, the record is clear and unequivocal: Curtis enjoyed exclusive
control of the defense of the claim against Sisters to avoid the
Ammec/Sisters Deed. She not only had control but also had every incentive
to defend against Ammec’s avoidance claim given her asserted interests
individually and as the person in control of Debtor as the other
downstream transferee. 16 Finally, she had sufficient opportunity to control
the defense of Sisters’ interest. That she chose not to avail herself of that
opportunity does not bar application of CCP § 1908(b).
Under § 1908(b), as applied by the Ninth Circuit, Curtis’ breach of her
professional obligations and the resulting voidability of the Ammec/Sisters
deed have been conclusively litigated. As a result, both Debtor and Curtis
are bound by the state court judgment voiding the Ammec/Sisters Deed.
This in turn precludes most of Curtis’ arguments on appeal relating to the
bankruptcy court’s cancellation of the Downstream Transfers. It also means
that her efforts to invalidate the state court judgment are meritless.
3. None of the Downstream Transfers were transfers to bona fide purchasers.
Though the Ammec/Sisters Deed was voidable and declared void by
the state court, a subsequent transferee may rely on voidable title if they
16 Curtis never has asserted that she lacked a personal stake in the validity of the Ammec/Sisters Deed. To the contrary, she has repeatedly alleged that she was a third- party beneficiary of that deed and that Sisters took its interest in the Property in trust for her benefit. Though Curtis never adduced any evidence to support these allegations, she undoubtedly perceived herself as having every incentive in the state court action to attempt to defeat Ammec’s attack on the validity of the Ammec/Sisters Deed. 28 are an innocent bona fide purchaser for value. See Firato v. Tuttle, 48 Cal. 2d
136, 139-40 (1957); Schiavon 84 Cal. App. 4th at 381 (following Firato); see
also Fallon v. Triangle Mgmt. Servs., Inc., 169 Cal. App. 3d 1103, 1106 (1985)
(stating that a voidable deed “can be relied upon and enforced by a bona
fide purchaser”); cf. U.S. Bank Nat'l Ass'n v. Gates, 2014 WL 12572929, at *4
(C.D. Cal. Apr. 29, 2014) (explaining difference under California law
between void and voidable instruments). 17 Under California law, when as
here the prior claimant claims legal title to the property, the subsequent
purchaser bears the burden of proof to establish that she qualifies as a bona
fide purchaser. 4 CAL. REAL ESTATE § 10:51 & nn. 5-7 (4th ed. 2024); see also
Bell v. Pleasant, 145 Cal. 410, 413–14 (1904) (listing cases).
In California, “[a] bona fide purchaser is one who pays value for the
property without notice of any adverse interest or of any irregularity in the
sale proceedings. The elements of bona fide purchase are payment of value,
in good faith, and without actual or constructive notice of another’s rights.”
Countrywide Home Loans, Inc. v. United States, 2007 WL 87827, at *9 (E.D.
Cal. Jan. 9, 2007) (citations omitted).
Here, Curtis has neither alleged nor offered any evidence that she
and Debtor acquired their Downstream Transfers as bona fide purchasers.
Instead, she has asserted that it was unnecessary for her to prove bona fide
17Citing Fallon, Curtis claims that she automatically wins because all of the Downstream Transfers predated the state court judgment voiding the Ammec/Sisters Deed. Curtis simply ignores the part of Fallon limiting this result to bona fide purchasers. 29 purchaser status because the state court judgment was invalid. We already
have rejected this argument. Alternately, she claims that bona fide
purchaser status was unnecessary because Sisters was a bona fide
purchaser when Ammec conveyed the Property. This argument is wholly
at odds with the California voidable title law we cite immediately above
and simply ignores the subsequent transferees.
In sum, the state court judgment voiding the Ammec/Sisters Deed is
enforceable against Debtor and Curtis. There is no evidence demonstrating
that either of them took their respective Downstream Transfers as bona fide
purchasers. As successors in interest to voidable title without bona fide
purchaser status, the bankruptcy court properly entered summary
judgment cancelling both the Sisters/Roots Deed and the Roots/Curtis
Deed. Furthermore, Curtis has no authority to appeal on Debtor’s behalf,
and hence the Sisters/Roots Deed is beyond the scope of these appeals.
4. Thames Deed of Trust.
Curtis lacks standing to challenge the bankruptcy court’s voiding of
the Thames Deed of Trust on Thames’ behalf. See Tingley, 47 F.4th at 1069-
70. There is nothing in the record to suggest that she has any personal stake
in whether the Thames Deed of Trust is valid.
In any event, Curtis’ appeal brief is bereft of any argument
challenging the bankruptcy court’s cancellation of the Thames Deed of
Trust. As a result, she has forfeited any such arguments she might have
made. Leigh v. Salazar, 677 F.3d 892, 897 (9th Cir. 2012) (issues not
30 specifically and distinctly argued in appellant’s opening appeal brief are
forfeited); Dietz v. Ford (In re Dietz), 469 B.R. 11, 22 (9th Cir. BAP 2012)
(same), aff'd and adopted, 760 F.3d 1038 (9th Cir. 2014).
5. None of Curtis’ remaining arguments merit reversal.
Curtis’ remaining arguments are either at odds with our conclusion
that state court judgment is binding against her, are irrelevant to the
matters properly on appeal, or are based on her patently incorrect
understanding of the controlling law and undisputed facts. In short, none
of Curtis’ arguments come close to justifying reversal of the bankruptcy
court’s summary judgment ruling.
Based on our analysis of CCP § 1908 and our understanding of
California law on voidable title, we hold that the bankruptcy court
appropriately granted Ammec’s summary judgment motion and properly
denied Curtis’ and Debtor’s cross-motion for summary judgment.
B. Appeal from dismissal of crossclaims.
Curtis also has appealed from the dismissal with prejudice of her first
amended crossclaims. Her appeal brief only specifically and distinctly
addresses “Count I” in her first amended crossclaims, which seeks a
declaration determining that the Ammec/Sisters Deed was valid. She
attacks the validity of the state court judgment, alleging: (1) the state court
lawsuit was time barred, (2) that Ammec was a suspended business entity
under California tax law at the time it commenced the state court action; (3)
that she and Debtor prevailed in the state court lawsuit when Ammec
31 voluntarily dismissed both of them without prejudice shortly before trial;
and (4) that Ammec as a formerly suspended corporation could not
challenge the validity of the Ammec/Sisters Deed.
As we already have explained above, as a matter of law, the state
court judgment voiding the Ammec/Sisters Deed is binding as against
Curtis. And we have no power to look behind it. For the same reasons we
concluded above as a matter of law that the bankruptcy court correctly
gave full faith and credit to the state court judgment, we also uphold as a
matter of law its dismissal with prejudice of Count 1 of Curtis’ crossclaims.
CONCLUSION
For the reasons set forth above, we AFFIRM.