In re Joseph and Judith Wilczak

Case Type:
Case Status:
BAP No. NC-19-1038-FBG (9th Circuit, Nov 13,2019) Not Published
BAP for 9th Cir. affirmed ruling of bankruptcy court (ND Cal.) dismissing chapter 11 debtors' claim objection based on debtors' argument that signatures on mortgage documents were forgered, notwithstanding undisputed history of their obtaining loan for $1.7M, including $351k in cash, making payments on loan for 18 months, and seeking to refinance loan prior to bankruptcy. Bankruptcy court committed no error in concluding debtors remained liable for loan regardless of signatures. Bankruptcy court had sufficient justification to strike debtors' handwriting expert.
Procedural context:
Bankruptcy court (ND Cal.) denied debtors' objection to creditors' claims. Debtors appealed to BAP for 9th Circuit.
Debtors (Wilczaks) owned luxury real property in Los Altos Hills, California, just south of Palo Alto (the “Property”). In 2007, the Wilczaks dealt with Countrywide to refinance their existing mortgage. The Wilczaks went to a title company’s office to sign the refinancing documents. At the appointment, the Wilczaks obtained an an adjustable rate note for $1,311,000, along with a note, deed of trust, Truth in Lending Act (“TILA”) disclosure statement, and a notice of right to cancel. An employee of the title company notarized the documents. The refinancing closed shortly thereafter. The existing lienholder was paid $950,290.59, and the Wilczaks received $351,206.42 in cash. The Wilczaks made regular monthly payments on the loan between September 2007 and March 2009 (18 months). After a while, they had difficulty making the monthly payments. They unsuccessfully sought a loan modification from Countrywide and its successor, Bank of America. In or around May 2011, appellee BONY Mellon acquired the note and deed of trust. SPS became the servicer on the note. The Wilczaks defaulted on the note. The trustee recorded a notice of default in October 2011 and filed a notice of trustee’s sale in January 2012. The Wilczaks commenced litigation in state court against BONY Mellon and others alleging that their signatures on the 2007 loan documents were forgeries and that they did not sign the documents or assent to the loan. The trial court dismissed the Wilczaks’ complaint, and the state court of appeal affirmed. While the state court appeal was pending, the Wilczaks filed a chapter 11 petition. They scheduled the Property, valued at $2.7 million, but stated that “note and deed of trust contain forged signatures” and disputed the amount owed. BONY Mellon filed a timely proof of claim (“Claim”) for the amount due under the note and deed of trust. It represented that the outstanding balance was $1,761,276 and that the loan was $443,085 in arrears.
Faris, Brand, Gan

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