- 9th Cir. BAP No. NC-15-1095-JuKuW (March 1, 2016) (unpublished)
- Debtor's error identifying a second deed of trust that was intended to be stripped off in its Chapter 13 Plan could be corrected after completion of plan. The BAP vacated the bankruptcy court's denial of Debtor's Motion to Correct, and reversed the bankruptcy court's determination that Creditor's due process rights were violated in connection with the plan confirmation proceedings.
- Procedural context:
- Bankruptcy court determined that Creditor's due process rights were violated, that errors in Debtor's Plan could not be corrected under FRCP 60(a) or (b), and denied the Debtor's Motion to Correct. Debtor appealed. The BAP reversed and remanded for further proceedings.
- Debtors filed a motion under Rule 3012 seeking to value their real property under § 506(a) and (d) (Valuation Motion) prior to confirming their fourth amended chapter 131 plan (FAP). Their plan treated the second deed of trust held by Wells Fargo Bank, N.A. (Wells) against their property as unsecured. In the notice accompanying the Valuation Motion, Debtors identified (1) Wells as the creditor with a second deed of trust on their property; (2) the address of their property; (3) the underlying loan number associated with the security; and (4) the amount of the debt. They also stated that there was a lack of equity in the property based on Debtor's opinion that the value of the property was less than the sum owed to the creditor who held the first deed of trust. While the Valuation Motion reiterated this information, instead of referring to Wells’ current deed of trust which was recorded against their property in 2004, Debtors mistakenly referred to a deed of trust recorded in 2002 by Wells which had been reconveyed. The bankruptcy court granted their Valuation Motion and the subsequent order (Valuation Order) again listed the deed of trust recorded in 2002. The bankruptcy court then confirmed their FAP, which treated Wells as an unsecured creditor. Having filed a proof of claim (POC), Wells received over $20,000 in distributions as an unsecured creditor over the course of Debtors’ plan. After completing their plan payments, Debtors sought a judgment voiding Wells’ lien. Although served with the Valuation Motion, the Valuation Order, the plan and amended plans, and Debtors’ request for a judgment voiding its lien, Wells failed to respond. After Debtors realized that they had mistakenly referenced the 2002 deed of trust as opposed to the 2004 deed of trust in the Valuation Order, they filed a motion to correct it (Motion to Correct) and again sought a judgment avoiding Wells’ lien. Wells did not respond or appear at the hearing. The bankruptcy court denied the motion, finding that relief under Civil Rule 60(b)(1) was not available since the motion had been brought more than one year after the Valuation Order was entered. The court further found there was no mistake as defined by case law since the information regarding Wells’ deed of trust was readily available from the public records. Although Debtors’ Motion to Correct and request for judgment wasuncontested, the court declined to grant the motion on the basis that Wells had not received adequate notice that Debtors intended to strip its lien associated with the 2004 deed of trust.
- JURY, KURTZ, and WANSLEE, Bankruptcy Judges.
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