1 NOT FOR PUBLICATION 2 POSTED TO THE WEBSITE 3 UNITED STATES BANKRUPTCY COURT 4 EASTERN DISTRICT OF CALIFORNIA 5 6 In re: Case No. 24-24334-A-13 7 KENNETH G. WILKINSON,

8 9 Debtor. 10 KENNETH G. WILKINSON, et al., Adv. No. 25-02061 11 Plaintiffs, LIW-1; AP-1 12

V. Memorandum Regarding Defendants’ 13 Motions to Dismiss Complaint 14 PHH MORTGAGE CORPORATION, et al.,

15 Defendants.

16 17 18 Argued and submitted on September 9, 2025 19 at Sacramento, California 20 21 Honorable Fredrick E. Clement, Bankruptcy Judge Presiding 22 23 Kenneth Wilkinson, in propria persona; Kelly G. Appearances: Wilkinson, in propria persona; Jillian Benbow, 24 Aldridge Pite LLP for Aldridge Pite LLP; and Kathryn A. Moorer, Wright, Finley & Zalk, LLP for PHH Mortgage 25 Corporation, Western Progressive Trustee, LLC; Bank of New York Mellon Trust Company, N.A.; JP Morgan

as Trustee for Residential Asset Mortgage Products, Inc; Mortgage Asset-Backed Pass-Through Certificates, 27 Series 2003-RP-1; and Wright, Finlay & Zak, LLP 1 Lender and its agents move to dismiss the plaintiffs’ complaint 2 against them. For the second time, homeowners have sued the 3 defendants for breach of contract and torts arising from a note or 4 deed of trust that they never executed. Their previous case was 5 dismissed with prejudice for lack of standing. Plaintiffs also sue 6 for a violation of the stay, which defendants admit. Should the court 7 grant the defendant’s motion, at least in part? 8 I. FACTS 9 Kenneth G. Wilkinson and Kelly G. Wilkinson (“plaintiffs 10 Wilkinson”) are engaged in a dispute with the holders of the note and 11 deed of trust against the home in which they reside, 3961 Nugget Lane, 12 Placerville, California (“the property”). The Wilkinsons reside on 13 the property. 14 Lei Anne Wilkinson acquired the property.1 Ex. A & B, Mot. 15 Dismiss Compl. ECF No. 14. In 1999, Lei Anne Wilkinson executed a 16 promissory note in the amount of $136,000 and deed of trust against 17 the property in favor of BYL Bank. Over time the promissory note and 18 deed of trust were assigned to other financial institutions, 19 terminating with the Bank of New York Mellon Trust Company. 20 In 2020, Lei Anne Wilkinson died. Thereafter, the property was 21 passed to the plaintiffs Wilkinson. 22 In 2021, the loan went into default for non-payment. 23

24 1 Plaintiffs Wilkinson’s complaint makes reference to their action, Wilkinson v. PHH Mortgage Corporation et al., No. 2:24-cv-1416 (E.D. Cal. 2024), 25 against PHH Mortgage Corporation and Western Progressive, with specific reference to the complaint and its dismissal based on plaintiffs’ lack of 26 standing. Compl. §§ 5.11, 5.225.28. As a result, this court takes judicial notice of the following documents in the district court action: (1) Amended 27 Complaint, ECF No. 10; (2) Findings and Recommendations, ECF No. 29; and (3) Order, ECF No. 31 (adopting findings and recommendations and dismissing case 1 Thereafter, Western Progressive, LLC, acting as the trustee for the 2 Bank of New York Mellon, issued a Notice of Default and Election to 3 Sell. 4 In the spring of 2024, Western Progressive, LLC recorded its 5 Notice of Trustee’s Sale. 6 Thereafter, Kenneth G. Wilkinson and Kelly G. Wilkinson filed an 7 action in the United States District Court against PHH Mortgage 8 Corporation and Western Progressive LLC. The complaint contended that 9 defendants PHH Mortgage Corporation and Western Progressive LLC were 10 “attempting to enforce a void mortgage contract” and included causes 11 of action for breach of contract, breach of the covenant of good faith 12 and fair dealing, injunctive relief, and quiet title. Defendants PHH 13 Mortgage Corporation and Western Progressive LLC moved to dismiss the 14 complaint. Finding a lack of standing on the part of Kenneth G. 15 Wilkinson and Kelly G. Wilkinson, the District Court dismissed the 16 complaint without leave to amend. Findings and Recommendations 2:12, 17 Wilkinson v. PHH Mortgage Corporation, No. 2:24-cv-1416 (E.D. Cal. 18 February 20, 2025), adopted by Order, ECF No. 31. 19 On September 26, 2024, Western Progressive, LLC conducted the 20 foreclosure sale for the property and the holder of the note and deed 21 of trust, Bank of New York Mellon Trust Company was the successful 22 bidder. Compl. 9:12-17, ECF No. 1. 23 On September 27, 2024, the day following the foreclosure sale, 24 Kenneth Wilkinson filed a Chapter 13 bankruptcy petition. Schedule 25 A/B listed the Nugget Lane property and described its value as 26 $325,000. Schedule A/B, In re Kenneth G. Wilkinson, No. 24-24334 27 (Bankr. E.D. Cal. 2024), ECF No. 20. Schedule D listed a secured debt 1 Corporation. Id. at Schedule D, ECF No. 20. Western Progressive, LLC 2 and Bank of New York Mellon were also listed as secured creditors. 3 Notwithstanding the foreclosure sale on the day prior to filing 4 bankruptcy, Kenneth G. Wilkinson answered “No” to the question: 5 “Within 1 year before you filed for bankruptcy, was any of your 6 property repossessed, foreclosed, garnished, attached, seized, or 7 levied?” Id. at Statement of Financial Affairs No. 10, ECF No. 21. 8 The debtor has proposed, but not confirmed, a plan. 9 On December 5, 2024, Western Progressive, LLC recorded the 10 Trustee’s Deed Upon Sale in favor of the Bank of New York Mellon Trust 11 Company. Compl. 9:12-17, ECF No. 1; Ex. L, Mot. Dismiss Compl., ECF 12 No. 14. 13 Thereafter, the plaintiffs Wilkinson brought the instant 14 adversary proceeding against PHH Mortgage Corporation; Western 15 Progressive, LLC; Wright, Finlay & Zak, LLP, Bank of New York Mellon 16 Trust, and Aldridge Pite LLP. The complaint pleads causes of action 17 for declaratory relief; unconscionable contract, violation of the Fair 18 Debt Collections Practices Act, failure of consideration, and 19 violation of the stay. 20 II. PROCEDURE 21 The defendants have each moved to dismiss the complaint under 22 Rule 12(b)(6); the plaintiffs oppose those motions. The court 23 entertained argument and took the matter under submission. 24 III. JURISDICTION 25 This court has jurisdiction.

(a)-(b), 157(b); 26 see also General Order No. 182 of the Eastern District of California. 27 All matters fall within the bankruptcy court’s core jurisdiction, 28 1 title 11) as to the: (1) the first four causes of actions to determine 2 the validity of the underlying note and deed of trust, §

157(b)(2)(L), (O),(b)(3)(notwithstanding that the rights arise under 4 non-bankruptcy law);

(a)(5); In re Oakhurst Lodge, 5 Inc.,

, 790 (Bankr. E.D. Cal. 2018); In re Bataa/Kierland 6 LLC, (D AZ 2013)

, 188–189 (D. Ariz. 2013) (underlying 7 contract dispute necessary to determine plan confirmation); In re 8 Charles Street African Methodist Episcopal Church of Boston,

, 99–100 (Bankr. D. Mass. 2013); as to the fifth cause of action for 10 stay violation,

(b)(2)(A),(G),(O); In re Zumbrun, 88

(9th Cir. BAP 1988); In re Sun West Distributors, Inc., 12

(Bankr. C.D. Cal. 1987); In re Oakhurst Lodge, Inc., 13

, 791 (Bankr. E.D. Cal. 2018). The parties have not 14 signaled their consent to final orders and judgments by this court. 15 Fed. R. Bankr. P. 7008, 7012(b). 16 IV. LAW 17 Under Federal Rule of Civil Procedure 12(b)(6), a party may move 18 to dismiss a complaint for “failure to state a claim upon which relief 19 can be granted.” Fed. R. Civ. P. 12(b)(6), incorporated by Fed. R. 20 Bankr. P. 7012(b). “A Rule 12(b)(6) dismissal may be based on either a 21 lack of a cognizable legal theory or the absence of sufficient facts 22 alleged under a cognizable legal theory.” Johnson v. Riverside 23 Healthcare Sys., LP,

, 1121–22 (9th Cir. 2008); accord 24 Navarro v. Block,

(9th Cir. 2001). “To survive a 25 motion to dismiss, a complaint must contain sufficient factual matter, 26 accepted as true, to ‘state a claim to relief that is plausible on its 27 face.’” Ashcroft v. Iqbal,

(2009) (quoting Bell Atl. Corp. v. Twombly 1 After Iqbal and Twombly, courts employ a three-step analysis in 2 deciding Rule 12(b)(6) motions. At the outset, the court takes notice 3 of the elements of the claim to be stated. Eclectic Properties East, 4 LLC v. Marcus & Millichap Co.,

(9th Cir. 2014). 5 Next, the court discards conclusions. Ashcroft v. Iqbal,

, 6 679 (2009); United States ex rel. Harper v. Muskingum Watershed 7 Conservancy District,

(6th Cir. 2016) (the complaint 8 failed to include “facts that show how” the defendant would have known 9 alleged facts). Finally, assuming the truth of the remaining well- 10 pleaded facts, and drawing all reasonable inferences therefrom, the 11 court determines whether the allegations in the complaint “plausibly 12 give rise to an entitlement to relief.” Iqbal,

; 13 Sanchez v. United States Dept. of Energy,

(10th 14 Cir. 2017). See generally, Wagstaff Practice Guide: Federal Civil 15 Procedure Before Trial, Attacking the Pleadings, Motions to Dismiss § 16 23.75-23.77 (Matthew Bender & Company, Inc. 2019). 17 Plausibility means that the plaintiffs’ entitlement to relief is 18 more than possible. Twombly, 550 U.S. at 570 (the facts plead “must 19 cross the line from conceivable to plausible”); Almanza v. United 20 Airlines, Inc.,

(11 Cir. 2017). Allegations that 21 are “merely consistent” with liability are insufficient. Iqbal, 556 22 U.S. at 662; McCauley v. City of Chicago,

(7th Cir. 23 2011). 24 In addition to looking at the facts alleged in the complaint, the 25 court may also consider some limited materials without converting the 26 motion to dismiss into a motion for summary judgment under Rule 56. 27 Such materials include (1) documents attached to the complaint as 1 and (3) matters properly subject to judicial notice. United States v. 2 Ritchie,

(9th Cir. 2003); accord Swartz v. KPMG LLP, 3

(9th Cir. 2007) (per curium) (citing Jacobson v. 4 Schwarzenegger,

(C.D. Cal. 2004)). A document 5 may be incorporated by reference, moreover, if the complaint makes 6 extensive reference to the document or relies on the document as the 7 basis of a claim. Ritchie,

. 8 V. DISCUSSION 9 A. Standing 10 “The preclusive effect of a federal court judgment is determined 11 by federal common law. Taylor v. Sturgell,

, 128

,

(2008).” In re Greenstein,

, 13 159 (Bankr. C.D. Cal. 2017), aff'd,

(C.D. Cal. 2018), 14 aff'd,

(9th Cir. 2019). 15 Issue preclusion applies if and only if three elements exist 16 between the parties “(1) an identity of claims; (2) a final judgment 17 on the merits; and (3) the same parties or privity between parties.” 18 In re Damme, No. 2:19-BK-14142-MKN,

, at *4 (B.A.P. 9th 19 Cir. Apr. 12, 2023), aff'd sub nom. In re Van Damme, No. 23-60023, 20

(9th Cir. July 23, 2024), citing Owens v. Kaiser 21 Found. Health Plan, Inc.,

(9th Cir. 2001).2 22

23 2 Issue preclusion has been fairly raised notwithstanding any imprecision in the verbiage in the scheduling order. Order 2:10-18, ECF No. 33 (“doctrine 24 of claim preclusion (res judicata”). That is true for two reasons. First, it was fairly raised by PHH Mortgage et al. in their original motion to dismiss. Mot. Dismiss 2:9-11, ECF No. 8 (“This Motion is made on the grounds 25 that (1) Plaintiffs lack standing to challenge the loan at issue because they are not the borrowers, (2) Plaintiffs’ claims have already been litigated and 26 determined adversely to them, with judgment entered in favor of Defendants...”); see also Mem. P.& A. 21:14-16, ECF No. 10 (“the underlying 27 claims and theories are nearly identical.” Second, the term “res judicata” includes both claim preclusion (including merger and bar) and issue In re Associated Vintage Grp., Inc. 1 Only the first and second elements are in play here. First, 2 there must be identity of claims. 3 To determine whether claims are identical, we consider four criteria: (1) whether rights or interests established in 4 the prior judgment would be destroyed or impaired by prosecution of the second action; (2) whether substantially 5 the same evidence is presented in the two actions; (3) whether the two suits involve infringement of the same 6 right; and (4) whether the two suits arise out of the same transactional nucleus of facts. 7 In re Van Damme, 2023 WL at 4, citing Harris v. Cnty. of Orange, 8

(9th Cir. 2012). 9 The fourth element is the most important.

10 Here, the gist of each action was the parties’ rights and duties 11 from the 1999 loan from BYL Bank Group and Lei Wilkinson and from the 12 bank’s assignee’s exercise of its foreclosure rights, including all 13 required notices and offers to allow cure. All four factors weigh in 14 favor of the identity of claims. But most powerful is that both 15 actions share a common nucleus of operative facts, viz., the 1999 loan 16 and its foreclosure. For these reasons, the court finds identity of 17 claims. 18 Second, for the purposes of issue preclusion, there is a final 19 judgement on the merits.3 In re Damme, No. 2:19-BK-14142-MKN,

2911610, at *4 (B.A.P. 9th Cir. Apr. 12, 2023)(standing), aff'd sub 21 nom. In re Van Damme, No. 23-60023,

(9th Cir. July 23, 22 2024); Ghalehtak v. Fay Servicing, LLC,

, fn 6 23

24 9th Cir. 2002) (“claim preclusion” includes doctrines of “merger” and “bar” that foreclose litigation of matters that have never been litigated…’{I]ssue 25 preclusion,” although often inaccurately called “collateral estoppel,” actually includes doctrines of direct estoppel and of collateral estoppel, 26 both of which foreclose relitigation of matters that have been actually litigated.”). 27 3 Admittedly, the result is different for the purposes of claim preclusion. Fleck & Associates, Inc. v. City of Phoenix, 471, F.3d 1100, 1106-1107 (9th 1 (N.D. Cal. 2018); Brereton v. Bountiful City Corp.,

(10th Cir. 2006); Kasap v. Folger Nolan Fleming & Douglas, Inc., 334

,

(D.C. Cir. 1999); (“[i]n fact, 4 under principles of issue preclusion, even a case dismissed without 5 prejudice has preclusive effect on the jurisdictional issue 6 litigated.”); Okoro v. Bohman,

(7th Cir. 1999); 7 GAF Corp. v. United States,

,

, 912 8 (D.C. Cir. 1987). 9 Here, the District Court litigated to conclusion the precise 10 issue of the plaintiffs standing under the 1999 promissory note and 11 the events that followed and, after thoughtful consideration, held 12 that the plaintiffs lacked standing. As a result, the first four 13 causes of action will be dismissed with prejudice. In re Damme, 2023

, at *5. 15 B. Stay Violations 16 Section 362 provides the rule of decision. 17 Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this 18 title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a 19 stay, applicable to all entities, of-- 20 (1) the commencement or continuation, including the issuance or employment of process, of a judicial, 21 administrative, or other action or proceeding against the debtor that was or could have been commenced 22 before the commencement of the case under this title, or to recover a claim against the debtor that arose 23 before the commencement of the case under this title; 24 (2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before 25 the commencement of the case under this title; 26 (3) any act to obtain possession of property of the estate or of property from the estate or to exercise 27 control over property of the estate; 1 against property of the estate; 2 (5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that 3 such lien secures a claim that arose before the commencement of the case under this title; 4 (6) any act to collect, assess, or recover a claim 5 against the debtor that arose before the commencement of the case under this title... 6

(a). 7 Property of the estate includes “all of the legal or equitable 8 interests of the debtor in property as of the commencement of the 9 case.”

(a). Whether the debtor has such a property 10 interest is a question of state law. Butner v. United States, 440

,

,

(1979); Eden Place LLC v. Perl 12 (In re Perl),

(9th Cir. 2016). 13 As a rule, where the beneficiary of the deed of trust is the 14 successful bidder at the foreclosure sale, the sale is final on the 15 acceptance of the highest and last bid and is deemed perfected as of 16 8:00 a.m. as of the actual sale date if a deed is recorded in a timely 17 manner. Cal. Civ. Code § 2924h(c); In re Hager,

, 881 18 (Bankr. E.D. Cal. 2023). In 2020, the legislature enacted complex 19 exceptions to the rule for certain prospective owners and non-profits, 20 which extended the periods of finality and perfection in some 21 circumstances. See Cal. Civ. Code § 2924m(c); Hager, 651 B.R. at 881- 22 882. Because the successful bidder was the holder of the deed of 23 trust and there is no indication that overbids were submitted, the 24 general rule controls. 25 Where, as here, a foreclosure sale occurs but a bankruptcy is 26 filed prior to the date the deed is recorded, on the date of the 27 petition the debtor holds bare legal title. Hager, 651 B.R. at 881; 1 Davisson v. Engles (In re Engles),

(Bankr. S.D.

). In such instances, the foreclosing lender may record the 3 Trustee Deed Upon Sale without violating the say, only (1) without 4 leave of court not later than 21 days of the foreclosure sale, 11

(b) (3); Cal. Civ. Code § 2924h(c); or (2) after an order 6 lifting the stay to allow recordation.

(d); Fed. R. 7 Bankr. P. 4001(a). Other recordations of the Trustees Deed Upon Sale 8 violate the stay and are void. Compare In re Stork,

, 971 9 (Bankr. N.D. Cal. 1997) (deed recorded outside the safe harbor) with 10 Bebensee-Wong v. Fannie Mae,

(B.A.P. 9th Cir. 2000) 11 (recordation of the deed within the safe harbor). 12 The only alleged stay violation was the untimely recordation of 13 the Trustee’s Deed Upon Sale. The sale occurred September 26, 2024, 14 and the Trustee’s Deed Upon Sale was recorded December 5, 2025. Compl. 15 5.25, ECF No. 1. As to Aldrige Pite, LLP, neither the complaint, 16 nor the Trustee’s Deed Upon Sale, had any such involvement on the part 17 of that firm and the motion will be granted with leave to amend. All 18 other defendants concede the violation. Mem. P.& A. 27:20-24, ECF No. 19 10. As a result, a plausible stay violation has been plead and, as to 20 those defendants, the motion will be denied. 21 VI. CONCLUSION 22 For each of these reasons, the motion will be granted with 23 prejudice as to the first four causes of action. As to the fifth 24 cause of action, the motion will be granted with leave to amend, and 25 denied as to all other defendants. An order will issue from chambers. 26 37 Dated: September 16, 2025

MSS Fredrick E. Clement United States Bankruptcy Judge

1 Instructions to Clerk of Court

2 Service List - Not Part of Order/Judgment

3 The Clerk of Court is instructed to send the Order/Judgment or other court generated document transmitted herewith to the parties below. The Clerk of Court will send the document 4 via the BNC, if checked ____, via the U.S. mail.

5

6 Plaintiff(s) Attorneys for the Defendant(s)

7 Bankruptcy Trustee (if appointed in the case) Office of the U.S. Trustee Robert T. Matsui United States Courthouse 8 501 I Street, Room 7-500 9 Sacramento, CA 95814 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27