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MOTION FOR RELIEF, “SHOW ME THE NOTE” AND OTHER ISSUES
IMPORTANT: This firm makes NO representations as to the accuracy or current status of any law, case, article or publication cited herein or linked to. Warning – some of these references are pre-BAPCPA.
DEBTOR FAILS TO OBTAIN STAY OF MFR ORDER
Castaic Partners II, LLP v. DACA Castaic, LLP (9th Cir. 5/23/16) – In a bankruptcy case, in which the bankruptcy courted granted a party’s motion for relief from the automatic bankruptcy stay so that it could proceed with foreclosure sale, the debtors’ appeal to the District Court without seeking a stay of the bankruptcy court’s order pending appeal, allowing the foreclosures to occur, the debtors’ appeals are dismissed where they were constitutionally moot because there no longer was any case or controversy.
CREDITOR MUST HAVE COLORABLE INTEREST TO FILE POC
Veal v. American Home Mortgage Servicing, Inc. (In re Veal), 2011 WL 2304200 (9th Cir. BAP 2011). In Veal, the Ninth Circuit BAP explained that standing is an independent inquiry that must be made in all federal litigation, and must be determined prior to consideration of the substantive rights of the parties. Id. at *13-14. In Veal, American Home Mortgage, Inc. (AHMI) filed a proof of claim in the Veals’ bankruptcy. Id. at *1. The debtor objected to the proof of claim, arguing that AHMI was not the real party in interest, nor an agent for the real party in interest, and therefore lacked standing to file the proof of claim. Id. at *2. The bankruptcy court overruled the Veals’ objection. Id. at *4. The BAP concluded that once the Veals had challenged AHMI’s standing, AHMI had an affirmative obligation to show that it was a real party in interest, or that party’s agent. Id. at *16. Because AHMI had provided no evidence at all on the issue, the BAP vacated the bankruptcy court’s order and remanded. id. at *16, 18. PARTY NEED ONLY SHOW THEY HAVE A “COLORABLE CLAIM TO BRING ACTION”
WHO IS REAL PARTY IN INTEREST?
Cervantes vs Countrywide Home Loan, Inc. 2011 WL 3911031 (9th Cir., September 7, 201 This is a putative class action challenging origination and foreclosure procedures for home loans maintained within the Mortgage Electronic Registration System (MERS). The plaintiffs appeal from the dismissal of their First Amended Complaint for failure to state a claim. In their complaint, the plaintiffs allege conspiracies by their lenders and others to use MERS to commit fraud. They also allege that their lenders violated the Truth in Lending Act (TILA), 15 USC. § 1601 et seq., and the Arizona Consumer Fraud Act, Ariz. Rev. Stat. § 44-1522, and committed the tort of intentional infliction of emotional distress by targeting the plaintiffs for loans they could not repay. The plaintiffs were denied leave to file their proposed Second Amended Complaint, and to add a new claim for wrongful foreclosure based upon the operation of the MERS system.
In re Matson, BAP NO. Az-101-1433 (Bankr. 9th Cir. June 7 2011) The debtors, David and Deborah Matson, appeal the bankruptcy court’s decision to grant Citibank, N.A. (“Citibank”) relief from stay as to their home in Gilbert, Arizona.3 On appeal, the debtors contend that the bankruptcy court abused its discretion in granting Citibank relief from stay because Citibank did not have standing to request such relief as it was not a real party in interest. We AFFIRM.
In re Sardana, BAP No. AZ-101-1368 (Bankr. 9th Cir. June 2011) Even so, as counsel for Bank of America admitted at oral argument, to be a “real party in interest” for standing purposes to prosecute a motion for relief from stay, the moving party must have a right to enforce the subject obligation under Arizona law. See, e.g., BAC Home Loans Servicing, L.P. v. Zitta (In re Zitta), 2011 WL 677289 (Bankr. D. Ariz. Jan. 25, 2011); In re Weisband, 427 B.R. 13 (Bankr. D. Ariz. 2010); and In re Hill, 2009 WL 1956174 (Bankr. D. Ariz. July 6, 2009). With Ms. Sardana having made an offer of proof, which the bankruptcy court apparently accepted but disregarded, that the Note had been assigned to Fannie Mae, Bank of America needed to establish that it retained the right to enforce the Note obligation in order to establish its standing to prosecute the Motion. It did not meet its burden of proof to make that showing. Accordingly, we determine that it is appropriate to vacate the Order and remand to the bankruptcy court to conduct an evidentiary hearing on the issue of Bank of America’s standing as a real party in interest to prosecute the Motion and on such other matters as the bankruptcy court determines to be appropriate. CONCLUSION For the foregoing reasons, we VACATE the Order and REMAND to the bankruptcy court to conduct an evidentiary hearing.
In re Weisband, 4:09-bk-05175-EWH (memorandum decision 3/29/10) GMAC failed to provide evidence of standing to bring motion for relief.
Some Arizona cases:
Silving, et al. v. Wells Fargo Bank, N.A., 2011 WL 2669246 (D. Ariz. July 7, 2011) challenging trustee sales – 11 causes of action (fraud, etc)
Bridgeman v.CitiMortgage Inc., et al., Defendants. No. CV11-1106-PHX DGC. (District Court, D. Arizona., September 1, 2011) challenging standing of MERS, etc.
MOTION FOR RELIEF - ABANDONMENT VS CLOSING THE CASE
Gasprom, Inc v. Fateh, et al. (In re Gasprom, Inc) CC-12-1567-KuKiTa , (9th Cir. BAP 10/29/13) Ruling: Foreclosure of real property was in violation of automatic stay where chapter 7 trustee abandoned real property but bankruptcy case was still open and creditor had not obtained relief from stay.
The bankruptcy court here concluded that the August 1, 2012 foreclosure sale had not violated the automatic stay. The bankruptcy court reasoned that the Trustee’s abandonment of the Gas Station earlier that same day had fully terminated the stay as to the Gas Station. We disagree. By operation of law, the August 1, 2012 Abandonment Order only terminated one aspect of the stay, the aspect protecting the Gas Station as “property of the estate.” Upon abandonment, the Gas Station no longer was property of the estate; title to the Gas Station reverted to Gasprom. See Catalano v. Comm’r, 279 F.3d 682, 685 (9th Cir. 2002). Hence, the aspect of the stay protecting estate property no longer applied. See § 362(c)(1).
But the abandonment did not by operation of law terminate the aspect of the stay arising from § 362(a)(5), which protects “property of the debtor.” Absent a ruling by the court granting relief from stay under § 362(d) so as to permit foreclosure to occur, § 362(a)(5) continued to protect the Gas Station from foreclosure, at least until the bankruptcy court closed Gasprom’s bankruptcy case on August 16, 2012. See § 362(c)(2).
CAN DEBTOR BE NAMED IN LAWSUIT AFTER DISCHARGE?
Yes, if there is insurance. The insurance company remains on the hook despite the debtor’s discharge. The plaintiff does a staylift to file the suit against the debtor with a provision that it is only for purposes of collecting on the insurance. The plaintiff cannot sue the insurance company directly. See the procedure described in Stallings v. Spring Meadows Apartment Complex Ltd. Partnership, 185 Ariz. 156, 913 P.2d 496 (Ariz., 1996). In Stallings the Arizona Supreme Court reversed the Arizona Court Of Appeals. Stallings v. Spring Meadows Apartment Complex Ltd. Partnership, 886 P.2d 1373, 180 Ariz. 617 (Ariz. App. Div. 1, 1994) . The dissent in the Arizona Court of Appeals (which turned out to be correct) stated: most courts hold that a discharge in bankruptcy does not preclude an action against a discharged debtor as the nominal defendant where he is insured against liability for negligence. See, e.g., In re Edgeworth, 993 F.2d 51 (5th Cir.1993); First Fidelity Bank v. McAteer, 985 F.2d 114 (3rd Cir.1993); Green v. Welsh, 956 F.2d 30, 35 (2nd Cir.1992); In re Fernstrom Storage and Van Co., 938 F.2d 731, 733-34 (7th Cir.1991); In re Jet Florida Sys., Inc., 883 F.2d 970, 976 (11th Cir.1989); In re Beeney, 142 B.R. 360, 362-63 (Bankr. 9th Cir.1992); In re Greenway, 126 B.R. 253, 255 (Bankr.E.D.Tex.1991); In re Peterson, 118 B.R. 801, 804 (Bankr.D.N.M.1990); In re Traylor, 94 B.R. 292, 293 (Bankr.E.D.N.Y.1989); In re Lembke, 93 B.R. 701, 702-03 (Bankr.D.N.D.1988); In re White, 73 B.R. 983 (Bankr.D.D.C.1987); In re Mann, 58 B.R. 953, 958 (Bankr.W.D.Va.1986). A discharge in bankruptcy does not extinguish the debt itself; it merely releases the debtor from personal liability for the debt. Edgeworth, 993 F.2d at 53. Section 524(e) 10 of the Bankruptcy Code specifies that the debt still exists and can be collected from any other entity that may be liable. Edgeworth, 993 F.2d at 53. Thus, courts have held that the scope of a section 524 injunction does not prevent a proceeding against the discharged debtor to establish a claim against the debtor’s liability insurer. Id. at 54.
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