In Re: Aurora Commercial Corp.

Background

Aurora Commercial Corp. and Aurora Loan Services LLC were debtors in a jointly administered Chapter 11 bankruptcy case. Tia Danielle Smith filed Claim Numbers 20 and 29 concerning the 2011 foreclosure of her California property, when Aurora Loan Services LLC was the mortgage servicer.

Smith had previously litigated claims in California state courts against Aurora Loan Services LLC and other defendants. The bankruptcy debtors objected to Smith’s bankruptcy claims, arguing, among other things, that the claims were barred by res judicata. Res judicata is a legal rule that prevents a party from relitigating claims that were already resolved in an earlier final judgment.

The bankruptcy court sustained the objection in an opinion and order dated January 2, 2020. It concluded that the earlier California litigation barred Smith’s claims and ordered them disallowed. Smith appealed to the district court.

District Court’s Analysis

The district court held that Smith’s claims were barred by res judicata under California law. It agreed with the bankruptcy court that the earlier litigation involved the same underlying right—the right to be free from an unlawful foreclosure—and that Smith and Aurora Loan Services LLC had been parties to the earlier case. The court also agreed that the earlier judgment was final and decided the matter on the merits.

The district court further noted that another California judgment had already determined that claims arising from the foreclosure were precluded. That judgment involved requests concerning ownership of the property, cancellation of an instrument, quiet title, conversion, and fraudulent conveyance, which the district court said were the same claims Smith asserted in the bankruptcy case.

The court rejected Smith’s argument that changed circumstances or new facts prevented application of res judicata because she had not identified relevant new facts or circumstances. It also rejected her due-process argument concerning discovery and an evidentiary hearing. The court found no relevant disputed factual issues and concluded that the bankruptcy court had given Smith an adequate opportunity to present her arguments. It therefore found no abuse of discretion in the bankruptcy court’s decision not to order discovery or hold an evidentiary hearing.

Disposition

Judge J. Paul Oetken affirmed the bankruptcy court’s decision disallowing and expunging Claim Numbers 20 and 29. The clerk was directed to close the matter.