In re: Victor Orlando Rivera

Opinion

FILED DEC 23 2014 1 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK 2 U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT

3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. CC-13-1505-KuPaTa ) 6 VICTOR ORLANDO RIVERA, ) Bk. No. 13-14646 ) 7 Debtor. ) Adv. No. 13-01650 ________________________________) 8 ) VICTOR ORLANDO RIVERA, ) 9 ) Appellant, ) 10 ) v. ) MEMORANDUM* 11 ) MORTGAGE ELECTRONIC REGISTRATION) 12 SYSTEMS, INC.; OCWEN LOAN ) SERVICING, LLC; WELLS FARGO ) 13 BANK N.A., Trustee for Soundview) Home Loan Trust 2007-OPT1, ) 14 Asset-Backed Certificates, ) Series 2007-OPT1, ) 15 ) Appellees. ) 16 ________________________________) 17 Argued and Submitted on November 20, 2014 at Los Angeles, California 18 Filed – December 23, 2014 19 Appeal from the United States Bankruptcy Court 20 for the Central District of California 21 Honorable Vincent Zurzolo, Bankruptcy Judge, Presiding 22 Appearances: Appellant Victor Orlando Rivera argued pro se; 23 Robert W. Norman, Jr. of Houser & Allison, APC, argued for appellees Ocwen Loan Servicing, LLC and 24 Wells Fargo Bank N.A., as Trustee for Soundview Home Loan Trust 2007-OPT1, Asset-Backed 25 26 * This disposition is not appropriate for publication. 27 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 28 See 9th Cir. BAP Rule 8013-1. 1 Certificates, Series 2007-OPT1; Stefan Perovich of Keesal, Young & Logan argued for appellee Mortgage 2 Electronic Registration Systems, Inc. 3 4 Before: KURTZ, PAPPAS and TAYLOR, Bankruptcy Judges. 5 6 INTRODUCTION 7 Debtor Victor Orlando Rivera filed a chapter 131 bankruptcy 8 case and an adversary proceeding seeking to derail nonjudicial 9 foreclosure proceedings pending against his residence. Rivera’s 10 complaint identified the defendants, including Wells Fargo 11 Bank N.A. as trustee for a mortgage securitization trust, as the 12 parties responsible for the foreclosure proceedings. In support 13 of his challenge to the foreclosure proceedings, Rivera alleged 14 that Wells Fargo and its agents were not legally entitled to 15 foreclose. According to Rivera, Wells Fargo’s asserted 16 foreclosure rights were based on an invalid assignment of a deed 17 of trust. 18 With certain exceptions not applicable here, California law 19 does not permit a borrower in default to challenge pending 20 nonjudicial foreclosure proceedings by seeking an advance 21 judicial determination of the foreclosing party’s right to 22 foreclose. Accordingly, we AFFIRM the bankruptcy court’s Civil 23 Rule 12(b)(6) dismissal of Rivera’s adversary proceeding. 24 25 1 26 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and 27 all "Rule" references are to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. All “Civil Rule” references are to 28 the Federal Rules of Civil Procedure.

2 1 FACTS 2 Rivera refinanced his home in Los Angeles, California in 3 February 2007 by executing a $875,000 note and a deed of trust in 4 favor of Option One Mortgage Corporation. Option One thereafter 5 conveyed its rights as beneficiary under the deed of trust to 6 Wells Fargo, as the trustee for a mortgage securitization trust. 7 This conveyance is documented by an assignment of deed of trust 8 dated December 27, 2007, and recorded in the Official Records of 9 Los Angeles County on February 22, 2008. 10 Rivera’s complaint did not dispute that he had fallen behind 11 on his loan payments and that he was in default on the loan. In 12 fact, at oral argument, Rivera confirmed that, after his 2007 13 refinancing, he made only two or three monthly loan payments and 14 that he has not made any loan payments for roughly the last seven 15 years. Based on his default, Rivera indicates, Wells Fargo and 16 its agents caused nonjudicial foreclosure proceedings to be 17 commenced against his residence. In furtherance of these 18 proceedings, Rivera alleges, Wells Fargo or its agents recorded a 19 notice of default, a substitution of trustee, a notice of 20 trustee’s sale and other documents. Rivera did not attach copies 21 of these foreclosure documents as exhibits to his complaint, but 22 they are referenced therein and are attached to other adversary 23 proceeding filings. 24 The complaint, which Rivera filed pro se, is difficult to 25 understand as a whole. At times, it is incomprehensible. It 26 contains no distinct claims for relief, but instead generally 27 relies on phrases irregularly disbursed throughout the body of 28 the document – phrases like “declaratory relief,” “quiet title,”

3 1 “fraud table,” and “Robbo [sic] Signature.” Even so, the 2 complaint in essence alleged that the foreclosure documents 3 should be set aside and the defendants enjoined from further 4 pursuing foreclosure because the assignment of the deed of trust 5 to Wells Fargo was invalid and, hence, Wells Fargo and its agents 6 had no right to foreclose.2 7 Several of the defendants filed motions to dismiss Rivera’s 8 complaint. Among other things, the defendants pointed out that 9 California law generally permits nonjudicial foreclosures to 10 proceed without requiring the foreclosing party to first prove in 11 a judicial action that they are entitled to foreclose. 12 At the hearing on the dismissal motions, Rivera confirmed 13 that his complaint sought to attack the foreclosure proceedings 14 by challenging the right of Wells Fargo and its agents to 15 foreclose: 16 THE COURT: . . . it seems that Mr. Rivera is attempting to challenge a foreclosure sale and he is asserting 17 that somehow the Defendants involved in this motion to dismiss, Ocwen Loan Servicing and Wells Fargo Bank, are 18 not -- do not have the legal authority to conduct the foreclosure sale. 19 MR. RIVERA: Exactly. 20 21 Hr’g Tr. (Sept. 26, 2013) at 7:14-19. 22 23 2 On appeal, Rivera apparently claims that his loan 24 obligations were somehow satisfied, and he points to two documents entitled “Full Reconveyance” as supporting his claim. 25 However, the reconveyance documents on which Rivera relies, one 26 dated in 2006 and the other dated in 2007 do not reflect the satisfaction of the secured loan that is the subject of the 27 foreclosure proceedings Rivera currently is challenging. Rather, the reconveyance documents indicate that Rivera paid off prior 28 secured loans by refinancing his home.

4 1 In ruling on the dismissal motions, the bankruptcy court in 2 relevant part adopted the defendants’ argument that California 3 law generally does not permit borrowers to challenge nonjudicial 4 foreclosure proceedings by seeking an advance judicial 5 determination of the foreclosing party’s right to foreclose. 6 The bankruptcy court also expressed concern that Rivera’s 7 bankruptcy case appeared to suffer from numerous serious 8 deficiencies and that Rivera appeared to have filed bankruptcy 9 solely for the purpose of filing an adversary proceeding 10 challenging the foreclosure proceedings. 11 Based on these circumstances, the bankruptcy court entered 12 an order on October 24, 2013, dismissing Rivera’s complaint 13 without leave to amend and dismissing the entire adversary 14 proceeding with prejudice. Rivera timely filed a notice of 15 appeal. 16 JURISDICTION 17 The bankruptcy court had jurisdiction pursuant to 28 U.S.C. 18 §§ 1334 and 157(b)(2)(A) and (O). We have jurisdiction under 19 28 U.S.C. § 158. 20 ISSUE 21 Did the bankruptcy court err when it dismissed the claims 22 for relief stated in Rivera’s first amended complaint? 23 STANDARD OF REVIEW 24 We review de novo the bankruptcy court's Civil Rule 12(b)(6) 25 dismissal. Barnes v. Belice (In re Belice), 461 B.R. 564, 572 26 (9th Cir. BAP 2011). 27 CIVIL RULE 12(b)(6) STANDARDS AND JUDICIAL NOTICE STANDARDS 28 When we review a matter de novo, we consider the matter anew

5 1 as if the bankruptcy court had not previously ruled. Sachan v. 2 Huh (In re Huh), 506 B.R. 257, 262 (9th Cir. BAP 2014) (en banc). 3 Therefore, we apply the same standards to Civil Rule 12(b)(6) 4 dismissal motions that all other federal courts are required to 5 apply. In re Belice, 461 B.R. at 572-73. 6 Under Civil Rule 12(b)(6), made applicable in adversary 7 proceedings by Rule 7012, we may dismiss a complaint for 8 “failure to state a claim upon which relief can be granted.” 9 To survive a Civil Rule 12(b)(6) dismissal motion, a complaint 10 must present cognizable legal theories and sufficient factual 11 allegations to support those theories. See Johnson v. Riverside 12 Healthcare Sys., LP, 534 F.3d 1116, 1121-22 (9th Cir. 2008). As 13 the Supreme Court has explained: 14 a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is 15 plausible on its face. . . . A claim has facial plausibility when the plaintiff pleads factual content 16 that allows the court to draw the reasonable inference that the defendant is liable for the misconduct 17 alleged. . . . Threadbare recitals of the elements of a cause of action, supported by mere conclusory 18 statements, do not suffice. 19 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citations and 20 internal quotation marks omitted). 21 In reviewing the sufficiency of a complaint under Civil 22 Rule 12(b)(6), we must accept as true all facts alleged in the 23 complaint and draw all reasonable inferences in favor of the 24 plaintiff. See Newcal Indus., Inc. v. Ikon Office Solutions, 25 513 F.3d 1038, 1043 n. 2 (9th Cir. 2008). However, we do not 26 need to accept as true conclusory allegations or legal 27 characterizations cast in the form of factual allegations. See 28 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555–56 (2007).

6 1 We may use judicially noticed facts to establish that a 2 complaint does not state a claim for relief. Skilstaf, Inc. v. 3 CVS Caremark Corp., 669 F.3d 1005, 1016 n.9 (9th Cir. 2012). In 4 addition, we can take judicial notice of the existence, filing 5 and content of documents filed in Rivera’s underlying bankruptcy 6 case. See O'Rourke v. Seaboard Sur. Co. (In re E.R. Fegert, 7 Inc.), 887 F.2d 955, 957–58 (9th Cir. 1989). 8 We also may consider the existence and content of documents 9 attached to and referenced in the complaint as exhibits. Lee v. 10 City of L.A., 250 F.3d 668, 688 (9th Cir. 2001); Durning v. First 11 Boston Corp., 815 F.2d 1265, 1267 (9th Cir. 1987). Even when a 12 document is not physically attached to the complaint, we may 13 consider its existence and contents when its authenticity is not 14 contested and when it necessarily is relied upon by the 15 plaintiffs in their complaint. See United States v. Ritchie, 16 342 F.3d 903, 907–08 (9th Cir. 2003); Lee, 250 F.3d at 688. 17 Of course, just because a judicially-noticed document states 18 a “fact” does not necessarily mean that this fact is true. Roth 19 v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007). Whether the facts 20 stated in a judicially noticed document are reasonably subject to 21 dispute depends on the nature of the facts stated and the nature 22 and purpose of the document as a whole. See Ferguson v. Wells 23 Fargo Bank, N.A., 2013 WL 504709, at **2-3 (E.D. Cal. 2013); see 24 also Lee, 250 F.3d at 690. 25 DISCUSSION 26 As set forth above, Rivera’s complaint challenges the 27 foreclosure proceedings and hinges on his allegation that the 28 assignment of deed of trust was invalid. On its face, the

7 1 assignment of deed of trust duly assigned to Wells Fargo the 2 original lender’s rights under Rivera’s note and deed of trust, 3 including the right to foreclose. Nonetheless, Rivera has 4 offered three different arguments why, in his view, the 5 assignment of deed of trust was invalid. We will address each of 6 these arguments in turn. 7 First, Rivera contends that the attempted securitization of 8 his loan effectively rendered his note and deed of trust 9 unenforceable. While his reasoning on this point is difficult to 10 follow, Rivera appears to rely on alternate legal theories. 11 According to Rivera, either the attempted assignment to Wells 12 Fargo as trustee failed because the securitization trust did not 13 actually exist or the attempted assignment was successful but 14 resulted in the original lender being “paid off” and thereby 15 “satisfied” Rivera’s note and deed of trust. Under either 16 theory, California law does not permit a borrower to attack 17 nonjudicial foreclosure proceedings by invoking either the 18 alleged failure or the alleged success of the securitization 19 process. See Jenkins v. JP Morgan Chase Bank, N.A., 20 216 Cal.App.4th 497, 514-15 (2013); Nordeen v. Bank of Am., N.A. 21 (In re Nordeen), 495 B.R. 468, 479-81 (9th Cir. BAP 2013) (citing 22 Lane v. Vitek Real Estate Indus. Grp., 713 F.Supp.2d 1092, 1099 23 (E.D. Cal. 2010)). Both Jenkins and In re Nordeen stand for the 24 general proposition that the borrower is not a party to the 25 securitization transaction and has no right to invoke the 26 securitization as a defense against nonjudicial foreclosure. 27 Second, Rivera contends that Wells Fargo and its agents had 28 no right to foreclose unless and until Wells Fargo established

8 1 that it is the holder of the note or otherwise is entitled to 2 enforce the note under California’s version of the Uniform 3 Commercial Code governing negotiable instruments. See Cal. Com’l 4 Code § 3101, et seq. Assuming without deciding that Rivera’s 5 note qualifies as a negotiable instrument governed by the Uniform 6 Commercial Code, Rivera’s second argument lacks merit. 7 California courts do not permit a borrower to impede nonjudicial 8 foreclosure proceedings by demanding an advance judicial 9 determination of the foreclosing beneficiary’s right to enforce 10 the note. Debrunner v. Deutsche Bank Nat’l Trust Co., 11 204 Cal.App.4th 433, 442 (2012); see also Jenkins, 12 216 Cal.App.4th at 511 (citing Debrunner and stating: “California 13 courts have refused to delay the nonjudicial foreclosure process 14 by allowing trustor-debtors to pursue preemptive judicial actions 15 to challenge the right, power, and authority of a foreclosing 16 ‘beneficiary’ or beneficiary's ‘agent’ to initiate and pursue 17 foreclosure.”). 18 In Rivera’s third and final argument, he complains that the 19 assignment of the deed of trust to Wells Fargo was fraudulent and 20 was executed by “Robbo Signature.” However, Rivera’s fraud 21 allegations are insufficient to state a cognizable legal claim. 22 In federal court, fraud allegations must be stated with 23 particularity. See Rule 7009 (incorporating Civil Rule 9(b)); 24 In re Nordeen, 495 B.R. at 483. Moreover, under California law, 25 a fraud cause of action requires allegations of 26 misrepresentation, knowledge of falsity, intent to defraud, 27 justifiable reliance, and resulting injury. See Lazar v. Super. 28 Ct., 12 Cal.4th 631, 638 (1996). Assuming the truth of Rivera’s

9 1 factual allegations, there is no indication that any form of 2 misrepresentation occurred in conjunction with the assignment. 3 More importantly, there is no indication that Rivera was a party 4 to or even aware of the assignment at the time it was made and 5 hence there is no rational basis to infer from Rivera’s 6 allegations that Rivera relied on the so-called fraudulent 7 assignment or suffered damages as a result of any such reliance. 8 As for Rivera’s robo-signing allegations, a bare assertion 9 that a document has been robo-signed does not give rise to a 10 fraud claim, especially when, as here, the borrower has not 11 disputed that he has defaulted on his loan obligations. See 12 Sandri v. Capital One, N.A. (In re Sandri), 501 B.R. 369, 373-74 13 (Bankr. N.D. Cal. 2013); see also Pratap v. Wells Fargo Bank, 14 N.A., 2014 WL 3884413, at *5 (N.D. Cal. 2014) (“numerous courts 15 have found that where a plaintiff alleges that a document is void 16 due to robo-signing, yet does not contest the validity of the 17 underlying debt, and is not a party to the assignment, the 18 plaintiff does not have standing to contest the alleged 19 fraudulent transfer.”). 20 In the parlance of Iqbal, Rivera has not stated a plausible 21 claim for relief based on fraud. He has not pled sufficient 22 factual content that would allow the bankruptcy court or us to 23 draw the reasonable inference that the assignment of deed of 24 trust was fraudulent. 25 CONCLUSION 26 For the reasons set forth above, we AFFIRM the bankruptcy 27 court’s dismissal with prejudice of Rivera’s adversary 28 proceeding.