In re Nathaneil Basola Sobayo

Case Type:
Case Status:
BAP No. NC-20-1151-BSG (9th Circuit, Jun 09,2021) Not Published
BAP for 9th Cir. affirmed bankruptcy court (ND Cal.) dismissed debtor's adversary complaint against foreclosing creditors and their attorney for willful violation of automatic stay. Real property was co-owned by non-debtor entity and notwithstanding debtor's and entity serial bankruptcy filings, foreclosure of separate interests occurred after bankruptcy cases were dismissed or there was no stay in place.
Procedural context:
Bankruptcy court granted defendants' motion to dismiss debtor's adversary proceeding for failure to state a claim. Debtor appealed to BAP for 9th Circuit.
In May 2017, LLC (Kingsway) purchased a single-family home which it financed by borrowing $580,000 from Nguyen ("Residence"). The promissory note was secured by a deed of trust against the Residence in favor of Nguyen. Once Kingsway ceased making payments to Nguyen in February 2018, Defendants started foreclosure proceedings. What followed was a series of state court litigation and bankruptcy filings by Kingsway and debtor (Sobayo) in an attempt to enjoin the foreclosure sales. Kingsway filed a chapter 11 case on October 31, 2018. It was dismissed on November 8, 2018, for lack of counsel. One week later, Kingsway transferred 95% of its interest in the Residence to Sobayo. This left Kingsway with a 5% interest in the Residence. Sobayo then began filing chapter 13 cases. The first was filed on December 5, 2018, and dismissed on February 4, 2019, for failure to file documents. The second was filed on April 30, 2019. The 30-day automatic stay in the second case was set to expire on May 30. After briefly extending the stay, the bankruptcy court terminated the stay in Sobayo's second case on June 25, 2019. The second case was ultimately dismissed in August 2019. On May 1, 2019, Defendants foreclosed on Kingsway's 5% interest in the Residence. On July 3, 2019, Defendants foreclosed on Sobayo's 95% interest in the Residence.
Brand, Spraker, Gan

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