VA BENE TRIST, LLC, a Nevada limited liability company v. Washington Mutual Bank;

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
VA BENE TRIST, LLC, a Nevada limited
liability company,
Appellant,
v.
WASHINGTON MUTUAL BANK; et al.,
Appellees.
No. 12-15169
D.C. No. 2:11-cv-00977-NVW
MEMORANDUM*
Appeal from the United States District Court
for the District of Arizona
Neil V. Wake, District Judge, Presiding
Argued and Submitted February 12, 2014
San Francisco, California
Before: CALLAHAN and M. SMITH, Circuit Judges, and KORMAN, Senior
District Judge.**
Va Bene Trist, LLC (VBT) challenges various aspects of the bankruptcy
judge’s order finding that Washington Mutual Pass-Through Certificates WMALT
FILED
FEB 25 2014
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
** The Honorable Edward R. Korman, Senior District Judge for the U.S.
District Court for the Eastern District of New York, sitting by designation.

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Series 2006-8 Trust (WMALT), held a valid lien on real property owned by VBT
(the Ranch), and that JPMorgan Chase Bank, N.A. (Chase, and, together with
WMALT, Claimants), could enforce that lien as the servicer of WMALT. VBT
challenges: (1) several evidentiary rulings made by the bankruptcy judge; (2) the
finding that Chase and WMALT had standing to enforce the lien; (3) the finding
that Chase and WMALT held a valid lien on the Ranch; and (4) the finding that
WMALT and Chase had timely filed proofs of claim. Because the parties are
familiar with the facts and procedural history of these cases, we repeat only those
facts necessary to resolve the issues raised on appeal. We affirm.
DISCUSSION
A. Evidentiary Challenges
VBT challenges the bankruptcy judge’s decision to admit several
documents, as well as the judge’s decision to allow Vicki Landis, a representative
of Chase, testify despite the fact that she was not specifically listed on the pre-trial
witness list. The district court did not abuse its discretion, and we affirm. See City
of Long Beach v. Standard Oil Co., 46 F.3d 929, 936 (9th Cir. 1995).
B. Standing to Enforce the Lien
“When indorsed in blank, an instrument becomes payable to bearer and may
be negotiated by transfer or possession alone until specifically indorsed.” Ariz.
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Rev. Stat. § 47-3205. Furthermore, “[t]he transfer of any contract or contracts
secured by a trust deed shall operate as a transfer of the security for such contract
or contract.” Ariz. Rev. Stat. § 33-817. WMALT holds the Note, which is
indorsed in blank. Accordingly, WMALT is both the beneficiary of the Note and a
secured party. In re Weisband, 427 B.R. 13, 20 n. 5 (Bankr. Ariz. 2010) (“If the
Note was endorsed in blank (and the Endorsement was properly affixed to the
Note), it would be a bearer instrument and, therefore, enforceable by the party in
physical possession.”).
C. Validity of the Lien
The bankruptcy court properly found that Claimants held a valid lien on the
property under the doctrines of equitable subrogation, replacement mortgage, or
reformation. The bankruptcy court properly concluded that the 2006 loan was
intended to include a security interest on the Ranch, and any failure to perfect such
an interest was due either to mutual mistake or to fraud on behalf of Menken. In
these circumstances, equitable subrogation or replacement mortgage are available.
See Mosher v. Conway, 45 Ariz. 463, 468 (1935); See also Restatement (Third) of
Property: Mortgages Section 7.6(a) (“One who fully performs an obligation of
another, secured by a mortgage, becomes by subrogation the owner of the
obligation and the mortgage to the extent necessary to prevent unjust enrichment”);
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Cont’l Lighting & Contracting, Inc. v. Premier Grading & Utils., LLC, 227 Ariz.
382, 388–89 (2d Ariz. App. Div. 2011) (finding replacement mortgage available
because “[t]he rationale behind the doctrine of replacement is consistent with the
rationale and policy considerations for equitable subrogation” and analyzing
decisions regarding equitable subrogation in order to determine whether
replacement mortgage is available where the second mortgage is obtained by a
different debtor).
Nor may VBT avail itself of Section 544(a)(3) of the Bankruptcy Code,
which allows a trustee or a debtor to stand in the shoes of a bona fide purchaser of
a debtor’s property. 11 U.S.C. § 544. Under Arizona law, both the Deed of Trust
and the Notice of Trustee’s Sale—both recorded in Maricopa County—contained
sufficient information to give constructive notice to the debtor of the security
interests in the Property evidenced and described in the Deed of Trust. The
information contained in the Deed of Trust and the Notice of Trustee’s Sale was
sufficient to “apprise third parties of the nature and substance of the rights claimed
under the deed of trust and therefore imparted constructive notice.” Watson Constr.
Co. v. AMFAC Mortg. Corp., 124 Ariz. 570, 576 (1st App. Div. 1979) (citations
omitted).
D. Timeliness of Proof of Claim
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Secured creditors are not required to provide a proof of claim in order to
preserve their lien. In re Brawders, 503 F.3d 856, 867–68 (9th Cir. 2007) (“Absent
some action by the representative of the bankruptcy estate, liens ordinarily pass
through bankruptcy unaffected, regardless whether the creditor holding that lien
ignores the bankruptcy case, or files an unsecured claim when it meant to file a
secured claim, or files an untimely claim after the bar date has passed.”). Because
Claimants are secured creditors, any failure to timely file proofs of claim does not
bar them from asserting their interest in the Ranch.
AFFIRMED
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