Mullin v. Wells Fargo Bank (In re Mullin)

Citation:
Mullin v. Wells Fargo Bank (In re Mullin), 9th Cir. B.AP. (BAP No. NC-13-1400-JuKuPa) November 10, 2014 [NOT FOR PUBLICATION]
Tag(s):
Ruling:
In an unpublished opinion, the 9th Circuit Bankruptcy Appellate Panel, affirmed the bankruptcy court’s order dismissing with prejudice their first and second amended adversary complaints filed against appellees, Wells Fargo Bank, N.A. (WFB). The court found that since all the alleged misconduct by WFB occurred prior to January 1, 2013, effective date of the California Homeowner’s Bill of Rights, ((HBOR) Cal. Civ. Code § 2924.18) the debtors had no viable claim under that statute.
Procedural context:
In 2006, debtors obtained a $465,000 loan from WFB’s predecessor World Savings Bank, FSB (World Savings), which was secured by a deed of trust (DOT) recorded against their real property located in San Rafael, California. Debtors defaulted on the loan at the end of 2009, and WFB initiated nonjudicial foreclosure proceedings against the property in 2010. A notice of trustee’s sale was recorded in October 2011, and again in January 2012. A trustee’s sale was conducted on May 1, 2012. WFB took ownership of the property by virtue of a credit bid, and a trustee’s deed upon sale (TDUS) was recorded on May 8, 2012. Debtors filed their joint petition under chapter 13 on December 19, 2012. WFB moved for relief from stay. The bankruptcy court ordered the debtor's to file an adversary proceeding against WFB by February 27, 2013. On July 31, 2013, the bankruptcy court entered an order dismissing debtors’ first and second amended AP filed against WFB. Debtors timely appealed from this order.
Facts:
In 2006, debtors obtained a $465,000 loan from WFB’s predecessor World Savings Bank, FSB (World Savings), which was secured by a deed of trust (DOT) recorded against their real property located in San Rafael, California. Debtors defaulted on the loan at the end of 2009, and WFB initiated nonjudicial foreclosure proceedings against the property in 2010. A notice of trustee’s sale was recorded in October 2011, and again in January 2012. A trustee’s sale was conducted on May 1, 2012. WFB took ownership of the property by virtue of a credit bid, and a trustee’s deed upon sale (TDUS) was recorded on May 8, 2012. After the foreclosure, WFB filed a lawsuit against debtors in the Marin County Superior Court seeking to quiet title, equitable relief and damages under the allegations that debtors had carried out an illegal and fraudulent scheme to reconvey the DOT from the Trustee Sale without its knowledge or consent, in an attempt to deprive WFB of its right to recover its security for the loan. WFB further alleged that debtors recorded various documents that purported to indicate that its NOD was rescinded, the DOT had been modified to reflect that the note had been paid in full, and the DOT reconveyed as if the underlying obligation had been paid in full. Debtors filed their joint petition under chapter 13 on December 19, 2012, which stayed the state court proceeding. WFB moved for relief from stay so that they may proceed with the lawsuit in Superior Court. At the hearing for relief from the automatic stay, the court orally issued an order to show cause why debtors’ case should not be dismissed because they were ineligible for chapter 13 relief. At the February 20, 2013 continued hearing for relief from stay, the bankruptcy court did not dismiss debtors’ case, but ordered them to file an adversary proceeding against WFB by February 27, 2013. The bankruptcy court also ordered that the debtor's begin making adequate protection payments of $2,100 per month to WFB.
Judge(s):
JURY, KURTZ, and PAPPAS, Bankruptcy Judges

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