Case Type:
Case Status:
20-1267 (9th Circuit, Oct 06,2021) Not Published
Disposing of an appeal filed by a chapter 13 debtor named "Eric Dutra" (DR), the U.S. Bankruptcy Appellate Panel of the Ninth Circuit (BAP) affirmed the decision of the U.S. Bankruptcy Court for the Southern District of California (BC) denying the DR's motion to reopen his chapter 13 case, vacate its dismissal, and reinstate the automatic stay nunc pro tunc.
Procedural context:
On October 2, 2020, after the BC had announced its decision to dismiss the DR's second chapter 13 case (the Second Chapter 13 Case) on the motion of the chapter 13 trustee (TR) motion but before entry of the dismissal order, the DR, through new counsel, filed a motion to reopen the first chapter 13 case (the First Chapter 13 Case), vacate the dismissal, and reinstate the automatic stay nunc pro tunc (the Motion). He had launched that case so as to halt foreclosure sales of his San Diego home (the Property) by Wells Fargo Bank (WFB), which held a first deed of trust, and Angelica Francis Trust (Trust), but he had indifferently prosecuted and voluntarily dismissed it within a three-month span. Filed only five days after the Trust had managed to consummate the foreclosure sale, record its deed, and pay off WFB's entire claim, the Second Chapter 13 Case had been dismissed after the BC found it to have not been filed in good faith. It had thus denied the DR's motion to extend the stay, docketed soon after (or simultaneously with) his second petition's submission, but granted the Trust's motion for relief from it. The Motion spawned three rejoinders. In the Motion itself, the DR faulted his attorney for advising dismissal and "virtually abandon[ing]" post-petition by virtue of an unspecified illness that rendered him unavailable. He further maintained that he could now cure all arrearages and propose a confirmable plan. Because the automatic stay could not be re-imposed, the TR argued that a reopening could provide no benefit to the DR. Because its loan had been repaid, WFB asked that no stay be re-imposed if the case was to be reopened. And because it had paid off WFB and had obtained judgment for possession of the Property after winning stay relief in the Second Chapter 13 Case, the Trust asserted that this substantial change in position, made in reliance on the First Chapter 13 Case's dismissal, militated against the DR's request. The BC denied the Motion, and the DR timely appealed.
The First Chapter 13 Case began with the usual filing of a petition on March 3, 2020. The DR did so to stay the foreclosure sales of his residence in San Diego, California (the Residence), scheduled by WFB, which held a first deed of trust, and the Trust, which a held a second, for late March 2020. The DR's proposed plan treated these creditors differently: it provided for regular monthly payments and the arrears on WFB's loans, but entirely ignored the Trust's. This distinction proved irrelevant, for the DR made no plan payments or any mortgage payments to WFB or the Trust during the pendency of the First Chapter 13 Case and seemingly lacked sufficient funds to render any proposal feasible, for which he blamed the state's COVID-19 shutdown. Whatever the reason, the DR voluntarily dismissed his first chapter 13 attempt on June 9, 2020. Upon receiving notice of this dismissal, the Trust moved quickly. It first held its previously planned foreclosure sale on June 10, 2020. Two days later, on June 12, 2020, it recorded the Deed Upon Sale, thereby formally transferring title to itself. Sometime between June 12, 2020, and June 16, 2020, it paid off the DR's obligation to WFB. On June 17, 2020, the DR returned to the BC with a new chapter petition. In this Second Chapter 13 Case, the DR quickly docketed a motion to extend the automatic stay; in response, the Trust moved for relief from the stay. Finding that the Second Chapter 13 Case had not been filed in good faith, the BC denied the DR's motion but granted the Trustee's. On October 9, 2020, on the TR's motion, the BC dismissed the Second Chapter 13 Case.
William J. Lafferty III; Scott H. Gan; and Mary Jo Heston

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