Opinion
NOT FOR PUBLICATION
Submitted Without Oral Argument: March 18, 2009
Appeal from the United States Bankruptcy Court for the Central District of California. Honorable Thomas B. Donovan, Bankruptcy Judge, Presiding. BK No. LA 04-10052-TD, 401 B.R. 447. Adv. No. LA 08-01559-TD.
Before: MARKELL, HOLLOWELL and MONTALI, Bankruptcy Judges.
MEMORANDUM
The debtor, Stephen Law (" Debtor"), appeals from the dismissal of his removed state court lawsuit against his chapter 7 trustee, Alfred Siegel (" Trustee"). For reasons set forth below, we AFFIRM.
Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. § § 101-1532, and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.
I. Facts
Debtor filed for chapter 7 relief in January of 2004. Soon thereafter, the Trustee sued to set aside a consensual lien on Debtor's residence as, among other things, a fraudulent transfer (" Avoidance Action"). The Trustee sued a person named Lili Lin, which was the name of the beneficiary on the deed of trust. Therein starts the confusion. The Debtor maintains that there are two persons named Lili Lin: one lives in Artesia, California (" Lin of Artesia"); and the other apparently resides in China (" Lin of China"). According to Debtor, he borrowed money from Lin of China, and is a judgment creditor of Lin of Artesia.
After some procedural problems, the Trustee served Lin of Artesia in the Avoidance Action. He ultimately settled with her in early 2005, after which she submitted declarations indicating that she was the beneficiary of the deed of trust at issue in the Avoidance Action. The settlement was heard and approved by the bankruptcy court on May 18, 2005. By way of stipulated judgment entered shortly thereafter, the lien was avoided and preserved for the benefit of the estate. Lin of China appealed the settlement, lost at the BAP, Lin v. Siegel (In re Law), No. CC- 05-1303 (9th Cir. BAP, Dec. 29, 2006), and again at the Ninth Circuit. Lin v. Siegel (In re Law), 308 Fed.Appx. 161, 2009 WL 117877 (9th Cir., 2009) (unpublished).
No stay pending appeal was obtained. The Trustee sold Debtor's residence in March of 2006. The sale yielded about $316, 650 in net equity, inclusive of Debtor's homestead interest.
Debtor contested the validity of the sale, and has contested many of the bankruptcy court's decisions in this case; he has filed no less than fifteen appellate actions arising out of his bankruptcy case. In January, 2009, however, along with affirming this court's affirmance of the bankruptcy court's approval of the lien Avoidance Action, the Ninth Circuit upheld the sale of the residence. Lin v. Siegel (In re Law), 308 Fed.Appx. 152, 2009 WL 117869 (9th Cir., 2009) (unpublished). The direct attacks on the Trustee's actions were thus resolved in the Trustee's favor.
The Trustee filed a separate motion requesting that we take judicial notice of some of these cases, and of some motions filed in those cases. We deny that motion. Information regarding Debtor's prior appeals was obtained from the court's own docket.
Debtor also sought relief from the Trustee's actions in California state court. In May of 2006, after the Trustee sold his residence, he and Lin of China filed a lawsuit in Los Angeles County Superior Court, Case No KC048398 (the " California Action"). The only named defendant was Lin of Artesia, although the complaint listed several other " Doe" defendants. The lawsuit alleged that Lin of Artesia impersonated or assumed the identity of Lin of China in the bankruptcy case and committed perjury in agreeing to settle the Avoidance Action, all of which caused Debtor and Lin of China monetary losses. The complaint sounded in fraud, interference with contractual relations, and abuse of process.
Lin of Artesia responded to the California Action with demurrers and motions to dismiss. After being amended several times, Debtor and Lin of China filed a Third Amended Complaint in May, 2007 (" TAC"). Lin of Artesia answered the TAC in July, 2007. Thereafter, Debtor moved for summary judgment in the California Action, and before it was decided, the parties settled. Lin of Artesia soon thereafter requested dismissal from the action.
On May 28, 2008, Debtor amended the California action by substituting the Trustee for one of the Doe defendants. A summons was issued and served by mail on May 30, 2008. On June 26, 2008, the Trustee removed the California Action to the bankruptcy court. On July 2, 2008, the bankruptcy court entered an order to show cause why the California action should not be remanded, and set a hearing on the matter for September 3, 2008. On July 2, the Trustee having not responded to the TAC, Debtor requested that the bankruptcy court enter the Trustee's default. On the same day, the Trustee filed a motion to dismiss the removed action, and obtained a hearing date of August 20, 2008. Debtor filed a written opposition to Trustee's motion, to which the Trustee replied.
On August 18, 2008, two days before the scheduled hearing, the bankruptcy court issued its tentative ruling. This ruling indicated that the court would grant the motion to dismiss for failure to state a claim, for failure to obtain bankruptcy court approval before suing the Trustee, and for misuse of the " Doe" practice in California. The tentative ruling further stated that the parties' appearances on August 20 were not necessary, and directed the Trustee to lodge a proposed order within seven days. The Trustee did, and the bankruptcy court signed that order. That order also stated that the order to show cause regarding the remand was moot, and all hearings related to that order to show cause were taken off calendar.
Debtor appeals.
II. Statement of Jurisdiction
The Trustee's removal of the California Action to the bankruptcy court was timely under 28 U.S.C. § 1452 and Rule 9027.
Once removed, the bankruptcy court had core jurisdiction under 28 U.S.C. § 1334(b) over the causes of actions stated in the TAC because " as the functional equivalent of an action against the trustee, [they were] inextricably tied to the determination of an administrative claim against the estate and [were] similarly tied to questions concerning the proper administration of the estate." Honigman, Miller, Schwartz & Cohn v. Weitzman (In re DeLorean Motor Co.), 155 B.R. 521, 525 (9th Cir. BAP 1993). See also Kirk v. Hendon (In re Heinsohn), 247 B.R. 237, 243-44 (E.D. Tenn. 2000).
The order dismissing Debtor's adversary proceeding is a final order over which this court has jurisdiction. 28 U.S.C. § 158. This court has jurisdiction over the appeal of the order denying remand. 28 U.S.C. § 1452(b).
III. Issues Presented
Was the dismissal of the TAC as to the Trustee proper? Put another way, was it appropriate to retain jurisdiction and dismiss the TAC:
(a) for failure to secure prior bankruptcy court approval to sue the Trustee for case-related activities;
(b) for abuse of the " Doe" defendant practice;
(c) because the Trustee had immunity with respect to the acts specified in the TAC?; or
(d) because the TAC failed to state any claims for which relief could be granted?
IV. Standards of Review
Dismissals of adversary proceedings are reviewed de novo. North Slope Borough v. Rogstad (In re Rogstad), 126 F.3d 1224, 1228 (9th Cir. 1997); Mandalay Resort Group v. Miller (In re Miller), 292 B.R. 409, 412 (9th Cir. BAP 2003). " Our review is based on the contents of the complaint, the allegations of which we accept as true and construe in the light most favorable to the plaintiff." Love v. United States, 915 F.2d 1242, 1245 (9th Cir.1990), amending 871 F.2d 1488 (9th Cir.1989). " Dismissal is improper unless 'it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Id., (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).
In addition, the Panel may affirm on any basis found in the record. Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1295 (9th Cir. 1998); Warrick, v. Birdsell (In re Warrick), 278 B.R. 182, 184 (9th Cir. BAP 2002).
Finally, to the extent that the dismissal of the TAC constituted a decision not to remand, a refusal to remand is reviewed under the abuse of discretion standard. Miles v. Okun (In re Miles), 294 B.R. 756, 759 (9th Cir. BAP 2003), aff'd, 430 F.3d 1083 (9th Cir. 2005); McCarthy v. Prince (In re McCarthy), 230 B.R. 414, 416 (9th Cir. BAP 1999).
V. Discussion
A. Overview
Analysis of Debtor's points is difficult. Debtor appears pro se, and his briefs indicate a limited command of English. In addition, his command of the law is also weak; while his opening brief refers to the order appealed from, his reply brief refers to issues not germane to this appeal, and includes a long list of findings of fact that he proposes we enter. He asserts that the bankruptcy court improperly overruled orders entered prior to removal by the state court, but that would seem impossible. Debtor settled with the only named defendant before he substituted the Trustee for a previously-unnamed Doe defendant. The Trustee then promptly removed the action to bankruptcy court. The Trustee does not seek to challenge any action taken against any other defendant.
The Debtor's reply brief is mainly concerned with the Trustee's proposed surcharge of his homestead. That issue was the subject of a prior appeal to this panel. We reversed the earlier surcharge in an unpublished memorandum, leaving open, however, the possibility that the Trustee could renew the issue with better evidence. In re Law, No. CC- 06-1180 (9th Cir. BAP 2006), aff'd mem., In re Law, 309 Fed.Appx. 95 (9th Cir. 2009).
The Trustee asserts that the TAC is either vague or fatally silent about the Trustee's culpability. The TAC's prayer asks only for relief from Lin of Artesia. The Trustee is mentioned by name only as someone who bought the disputed note and deed of trust from Lin of Artesia. Notably, there are no conspiracy claims seeking to hold the Trustee liable for complicity in any fraudulent scheme.
The TAC's " Allegation [sic] Common to All Claims for Relief" refers to the assignment of the note and deed of trust to the Trustee, and mentions the Trustee only in one other paragraph, paragraph 15. That paragraph appears exactly as follows:
15. On or about March 9, 2006, after defendant Lin falsely pretend to be Lin of China, assigned the Note and DOT to Alfred Siegel who sold the real property, therefore, caused by defendant Lin's willful, malicious wrongful conducts, and for the retaliation to plaintiff Law who lost the property and equity of the property, creditability and reputation.
We acknowledge that " [a] document filed pro se is 'to be liberally construed, ' . .., and 'a pro se complaint, however inartfully pleaded, must be held to less stringent standards than formal pleadings drafted by lawyers, '" Erickson v. Pardus, 551 U.S. 89, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (quoting Estelle v. Gamble, 429 U.S. 97, 106, 97 S.Ct. 285, 50 L.Ed.2d 251 (1976)). Accordingly, a pro se litigant such as Debtor should be given an opportunity to amend the complaint to overcome a deficiency unless it is clear that no amendment can cure the defect. Potter v. McCall, 433 F.2d 1087, 1088 (9th Cir. 1970); Stone v. Baum, 409 F.Supp.2d 1164, 1174 (D. Ariz. 2005).
Although courts must construe pro se pleadings liberally, " [p]ro se litigants must follow the same rules of procedure that govern other litigants." King v. Atiyeh, 814 F.2d 565, 567 (9th Cir. 1987). The court will not supply facts the litigants have not pled. See Ivey v. Board of Regents of the Univ. of Alaska, 673 F.2d 266, 268 (9th Cir. 1982).
Against this background, Debtor appears to raise the following points: (1) the bankruptcy court should have sent the case back to state court; (2) the bankruptcy court did not have any jurisdiction over the common law counts he alleged. The first issue is treated below as an assertion that the bankruptcy court should have remanded the matter to state court, an issue subject to abuse of discretion review. The second issue is treated below as an argument that the court should not have dismissed the complaint, an issue subject to de novo review. Since the first point - remand - turns on the second point - jurisdiction - the analysis will first consider the jurisdictional arguments.
B. Jurisdiction and Related Arguments
1. The Bankruptcy Court Had Jurisdiction Over Alleged Wrongs Committed by The Trustee While Acting in the Scope of His Duties and Pursuant to Court Order
Although the causes of action pled by Debtor are common law claims (fraud, interference with contractual relations, and abuse of process), the acts complained of relate to the Trustee's performance of his official duties. In such cases, this court has held that core jurisdiction exists. In re DeLorean Motor Co., 155 B.R. at 525. See also In re Heinsohn, 247 B.R. at 243-44.
The reason for this is relatively simple. Bankruptcy courts have a significant interest in the actions of the trustees who appear before them. The facts of this case illustrate some of the issues: Debtor attacked in state court the actions the Trustee took in bankruptcy court pursuant to a bankruptcy court order. Bankruptcy courts retain jurisdiction over such matters to confirm and preserve their own jurisdiction, lest state courts attack bankruptcy jurisdiction through an attack on the trustees who appear in bankruptcy court. See, e.g., In re Heinsohn, 247 B.R. 237 at 243-44 (debtor brought malicious prosecution action in state court over bankruptcy trustee's criminal referral).
DeLorean illustrates this point. There, a defendant in a fraudulent transfer lawsuit ultimately prevailed against the trustee. He later sued the trustee and his counsel for malicious prosecution. The trustee removed the action. The state court litigant contended that the action was at best " related to" the bankruptcy case, and that abstention or remand was required. The bankruptcy court agreed, and the BAP reversed. As the BAP noted:
Although the [removed case] asserts a state law claim, as the functional equivalent of an action against the trustee, it is inextricably tied to the determination of an administrative claim against the estate and is similarly tied to questions concerning the proper administration of the estate.
In re DeLorean, 155 B.R. at 525. The court thus found the action to be a core proceeding, thereby undermining the basis of the bankruptcy court's discretionary decision to abstain. Id.
Here, as in DeLorean, all relevant acts in the complaint relate to the Trustee's performance of his duties under the Bankruptcy Code. Indeed, the actions Debtor attacks in the TAC are actions approved by the bankruptcy court when it approved the settlement between Lin of Artesia and the Trustee. As appeals from that settlement have now ended, Debtor's actions are little more than an indirect way to reverse a bankruptcy court decision with which he disagrees, and otherwise interfere with the administration of Debtor's bankruptcy estate. As such, the bankruptcy court had core jurisdiction over the matter.
Debtor contends that since his litigation over his residence is now either completed or on appeal, the bankruptcy court did not have any jurisdiction. This argument is wrong and, in any event, irrelevant. When Debtor chose to sue the Trustee, 28 U.S.C. § 1452 gave the Trustee the power to remove the matter to federal court, since the subject matter of the TAC related directly to the Trustee's administration of Debtor's estate. Moreover, the issues raised in the TAC are dissimilar to the homestead and other issues of which Debtor complains. His arguments thus fail.
2. The Debtor Did Not Obtain Advance Permission to Sue the Trustee in State Court or in Bankruptcy Court
The nature of the bankruptcy court's jurisdiction not only justifies retention of the case, but also dismissal. As plead, the bankruptcy court had exclusive jurisdiction over the claims asserted. Under venerable authority, Barton v. Barbour, 104 U.S. 126, 129, 26 L.Ed. 672 (1881), a person seeking to sue a court officer such as a bankruptcy trustee must first obtain the permission of the court that appointed the officer. Curry v. Castillo (In re Castillo), 297 F.3d 940, 945 (9th Cir. 2002). As stated in Castillo:
[I]t is generally held that without leave of the bankruptcy court, no suit may be maintained against a trustee for actions taken in the administration of the estate. A court other than the appointing court has no jurisdiction to entertain an action against the trustee for acts within the trustee's authority as an officer of the court without leave of the appointing court.
In re Castillo, 297 F.3d at 945 (quoting 3 Collier on Bankruptcy ¶ 323.03[3] (15th rev. ed. 2001)).
There is no dispute here that Debtor did not seek bankruptcy court approval before filing the TAC. As such, the Trustee had sufficient grounds to seek dismissal, and the bankruptcy court was justified in dismissing the case.
3. The Debtor Did Not Comply With the California " Doe" Defendant Procedure
Debtor appears to have played somewhat fast and loose with his state court complaint. Although he filed the action in 2006 after the Trustee sold his residence, he never specifically named or served the Trustee until April 30, 2008, after Debtor had fought, and settled, with Lin of Artesia.
Contrary to these admitted facts, paragraph 4 of his complaint states that:
4. The true names and capacities of the defendants named herein as Does 1 through 30, Inclusive, whether individual, corporate, escrow, associates, law offices, Chapter 7 trustee of the Bankruptcy Court, attorneys or otherwise, plaintiff who therefore sues such defendants by fictitious names pursuant to the California Code of Civil Procedure section 474. . . . Plaintiff will amend this complaint to show such true names and capacities when they have been ascertained.
(Emphasis added.) This allegation was made despite the fact that the Trustee was specifically named in several other paragraphs of the TAC.
Section 474 of the California Code of Civil Procedure, however, states that:
When the plaintiff is ignorant of the name of a defendant, he must state that fact in the complaint, . . . and when his true name is discovered, the pleading or proceeding must be amended accordingly . . . .
Cal. Code. Civ. Pro. § 474. Under California law, the effect of improperly substituting a known defendant as a " Doe" fictitious defendant is denial of any relation-back of the complaint, and preclusion of the substitution. Taito v. Owens Corning, 7 Cal.App.4th 798, 802, 9 Cal.Rptr.2d 687, 689 (Cal.App. 1992)(" When it appears that plaintiff knew both the person's identity and the facts giving rise to liability when the complaint was filed, but did not name him, that person cannot be served as a Doe after the statute of limitations has run."). Thus, the TAC should be deemed to have been filed as against the Trustee as of May 30, 2008.
At least one federal court has held that the California " Doe" practice is substantive law under Erie. Brennan v. Lermer Corp., 626 F.Supp. 926 (N.D. Cal. 1986).
But the actions complained of against the Trustee occurred in May of 2005, when the settlement of the adversary proceeding resulted in the avoidance of the lien alleged to be in favor of Lin of China. So unless the statute of limitations for any cause of action is longer than two years, Debtor's service of the TAC was untimely, and dismissal would be appropriate under California law. Taito, 7 Cal.App.4th at 802, 9 Cal.Rptr.2d at 689; Woo v. Superior Court, 75 Cal.App.4th 169, 89 Cal.Rptr.2d 20 (Cal.App. 1999) (if plaintiff was not ignorant of a defendant's identity at time original complaint was filed, that defendant may not be added after the statute of limitations has expired even if the new defendant cannot establish prejudice resulting from the delay).
Under California law, fraud, the subject of Debtor's first cause of action, has a three-year statute of limitations. Cal. Code. Civ. Pro. § 338(d). Tortious interference with a contractual relationship, the subject of the Debtor's second cause of action, has a two-year statute of limitations. Cal. Code Civ. Proc., § 339(1); Tu-Vu Drive-In Corp. v. Davies, 66 Cal.2d 435, 437, 58 Cal.Rptr. 105, 426 P.2d 505 (1967). Debtor's third and final cause of action sounds in abuse of process, and that has a one-year statute of limitation. Cal. Code Civ. Proc. § 340(3); Cantu v. Resolution Trust Corp., 4 Cal. App.4th 857, 886, 6 Cal.Rptr.2d 151, 168 (Cal.App. 1992).
The statute of limitations for the second and third causes of action - for interference with contract and abuse of process - had thus already expired when the TAC was amended on April 30, 2008 to add the Trustee. These two causes of action would thus be barred by the statute of limitations, and dismissal would be appropriate.
The first cause of action for fraud also probably had expired. The TAC's main allegations assert reliance on a misrepresentation by Lin of Artesia in 2000, which occurred more than three years before the TAC's amendment. But the TAC might be read to include some of Lin of Artesia's representations to relate to the bankruptcy settlement, which was not memorialized in an order until May of 2005. Regardless of time, however, the TAC's first cause of action does not contain any allegation of any misrepresentation by the Trustee or any reliance by Debtor or Lin of China.
Although the bankruptcy court explicitly ruled in the Trustee's favor on his Doe defendant argument, the court's tentative ruling did not provide any reasoning for that result. Even if this reference did not incorporate the Trustee's arguments, we can affirm on any basis found in the record. Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1295 (9th Cir. 1998); Warrick, v. Birdsell (In re Warrick), 278 B.R. 182, 184 (9th Cir. BAP 2002). This rule, when combined with the statement in the tentative ruling that " Plaintiff has misused the Doe defendant device of California procedural law", provides a basis here to find that, even if Debtor could surmount all other procedural and substantive hurdles, his second and third causes of action were time-barred, and thus dismissal of those causes of action was appropriate.
4. The Trustee Has an Absolute Defense of Immunity
The Trustee acts as an official of the court. " Bankruptcy trustees are entitled to broad immunity from suit when acting within the scope of their authority and pursuant to court order." Bennett v. Williams, 892 F.2d 822, 823 (9th Cir. 1989). Here, the TAC does not allege that the Trustee was acting outside the scope of his authority. Indeed, the TAC refers to him only in his capacity as a case trustee. It is beyond dispute that the Trustee obtained an order from the bankruptcy court approving the settlement after a fully-noticed motion, and avoided the lien pursuant to that order. In such cases, the Trustee enjoys immunity from collateral or direct attack of his actions. Id . See also Curry v. Castillo (In re Castillo), 297 F.3d 940, 951 (9th Cir. 2002) (chapter 13 trustee has quasi-judicial immunity for actions taken in noticing motion); 3 Collier on Bankruptcy ¶ 323.03[3] (Henry Sommers & Alan Resnick, eds., 15th rev. ed. 2008).
5. The Bankruptcy Court Properly Found That the Debtor's Complaint Did Not State Any Viable Cause of Action Against the Trustee
The TAC principally alleges misdeeds by Lin of Artesia. Its only connection with the Trustee is that it recites that Trustee took an assignment from Lin of Artesia, and further alleges:
15. On or about March 9, 2006, after defendant Lin falsely pretend to be Lin of China, assigned the Note and DOT to Alfred Siegel who sold the real property, therefore, caused by defendant Lin's willful, malicious wrongful conducts, and for the retaliation to plaintiff Law who lost the property and equity of the property, creditability and reputation.
The Trustee contends that there is nothing for him to respond to, since none of the paragraphs of the complaint indicate that he did anything wrongfully, and the prayer only asks for relief against Lin of Artesia. Although this argument might be overcome by liberally construing the complaint, the Trustee points out the following:
o With respect to the first cause of action, fraud, the misrepresentation alleged is stated to have occurred in 2000, long before Debtor filed his bankruptcy case, and thus long before the Trustee was appointed. He thus cannot be liable for fraud since he could not have made the misrepresentation. Further, to the extent that the fraud could be alleged to have occurred in connection with the settlement with Lin of Artesia, the TAC contains no allegations of any misrepresentations by the Trustee, or of any reliance by Debtor or Lin of China on any statements made by the Trustee.
o The second and third causes of action allege only that the Trustee was the assignee of the note and deed of trust. As the Trustee points out, however, there was no assignment; the lien was avoided pursuant to a judgment entered pursuant to a settlement, and now has been preserved for the benefit of the estate under 11 U.S.C. § 551. Although consideration of the order approving the settlement - a matter outside the complaint - technically would transform the motion to dismiss into a summary judgment motion, Fed.R.Civ.P. 12(d) (incorporated by Fed.R.Bankr.P. 7012), there is no harm in considering the court's own docket here. It is undisputed that the lien was avoided pursuant to bankruptcy court process, rather than voluntary private action. This is a fatal fact for Debtor. As is, the TAC contradicts the bankruptcy court's docket, and an order of the bankruptcy court. Were the Debtor to seek to amend the TAC to allege the facts as shown by the court's docket, he would then face the insurmountable hurdle of immunity.
VI. Conclusion
Debtor attempted to sue the Trustee in state court over actions the Trustee took in his official capacity, and pursuant to bankruptcy court order. The bankruptcy court had jurisdiction over the removal of this action, and properly dismissed it. At least four independent grounds support the bankruptcy court's action: Debtor did not secure advance approval to file suit against the Trustee; the Trustee enjoys immunity for acting pursuant to court order; the Debtor misused the California " Doe" practice such that the TAC would be deemed filed against the Trustee long after the expiration of any applicable statute of limitations; and, finally, the TAC states no claims against the Trustee on the merits, regardless of how liberally construed.
AFFIRMED.
Following the Ninth Circuit's actions in January, the Trustee sought again to surcharge Debtor's homestead, and after the briefing in this appeal was closed, the bankruptcy court issued a new opinion again surcharging Debtor's entire homestead interest. In re Law, 401 B.R. 447, 2009 WL 483821 (Bankr. C.D. Cal. 2009).