Case Type:
Case Status:
BAP No. CC-22-1106-LCF (9th Circuit, Jan 30,2023) Not Published
The U.S. Bankruptcy Appellate Panel of the Ninth Circuit held a bankruptcy court did not abuse its discretion in granting a creditor in rem relief from the automatic stay under 11 USC § 362(d)(4). The record supported the bankruptcy court's conclusion that the debtor filed his petition as part of a scheme to delay, hinder, or defraud the creditor, which scheme involved both improper transfers of and multiple bankruptcy filings affecting the subject real property. No payments had been made on the debt for the property for over a dozen years.
Procedural context:
The issue on appeal was whether the bankruptcy court abused its discretion in granting the creditor's motion for in rem relief from the automatic stay under § 362(d)(4). After a hearing on the motion, the bankruptcy court advised the debtor: “This is probably one of the worst bad faith cases I have seen in a very long time. The . . . multiple appeals and . . . filings . . . in my court[] were all frivolous, that is, motions filed by you, Mr. Galvan. . . . “, The debtor timely appealed the court's written order. which contained findings supporting its ruling,
Debtor Jose Humberto Aguilar Galvan filed a chapter 7 bankruptcy petition in the U.S. Bankruptcy Court for the Central District of California in June 2021. He claimed an interest in real property on his Schedule A even though he had no recorded interest in that property as of the petition date (Debtor's parents transferred it to him post-petition). A deed of trust held by PHH Mortgage Corporation encumbered the property. Although Debtor was not a borrower on the promissory note (also held by PHH), he scheduled a debt to PHH for that note on his Schedule D. The note, owed only by his mother, had been delinquent since August 2009. Between November 2009 and Debtor's petition date, the real property at issue purportedly was transferred five times--even though the deed of trust precluded transfer without the beneficiary's prior written consent. In addition, Debtor's mother filed eight bankruptcy cases between March 2011 and January 2019 that involved the real property. In Debtor's 2021 bankruptcy case, he moved to avoid PHH's lien under § 522(f), which motion was denied. Debtor then objected to PHH's claim, but the objection was overruled as PHH had not filed a proof of claim in Debtor's case; the bankruptcy court expressed that the objection was “an improper attempt to avoid PHH’s Deed of Trust through a contested bankruptcy matter.” Debtor's appeals of the bankruptcy court's rulings failed. PHH, in the meantime, requested in rem relief from the automatic stay under § 362(d)(4), arguing (with evidentiary support) that Debtor's bankruptcy case "was filed as part of a bad faith scheme to hinder, delay, or defraud PHH and because monthly payments were not being made and there is no equity cushion." The bankruptcy court granted PHH the requested relief.

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