Bray v. U.S. Bank National Assoc.

Case Type:
Case Status:
CC-17-1373-SKuF (9th Circuit, Aug 07,2018) Not Published
Bankruptcy court did not commit a reversible error when it annulled the automatic stay nunc pro tunc to validate a postpetition nonjudicial foreclosure sale of real property where the debtor was part of a “fractional interest” scheme. Debtor lacked standing to appeal order reopening the case because the order was nonjurisdictional and did not have “independent legal significance.”
Procedural context:
Appeal to the Ninth Circuit Bankruptcy Appellate Panel from judgment of bankruptcy court granting motions to reopen case and to annul automatic stay.
A chapter 7 involuntary petition was commenced against the debtor in June 2017. A secured creditor objected arguing the petition was filed in bad faith with for the purpose of hindering, delaying, and defrauding creditors. Debtor was allegedly part of a fractional interest scheme, where a borrower facing foreclosure transfers all or part of her ownership interest in real property to potential debtors. The Court dismissed the case and U.S. Bank moved to reopen a few months later seeking annulment of stay to validate a postpetition foreclosure sale. Bank provided evidence that in 2006, Mr. Horton borrowed $860,000 to purchase real property. After default, foreclosure sale was delayed due to multiple bankruptcies and transfers of fractional interests to various parties including the debtor, who received a 10% interest right before the involuntary petition was filed. Bankruptcy court granted the Bank’s motions to reopen and annual stay, and found that the involuntary petition was filed in bad faith.

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