- Case Type:
- Case Status:
- NC-16-1405-BSTa (9th Circuit, Sep 19,2018) Published
- The bankruptcy court erred in voiding a holder's first priority deed of trust. The order upholding the debtor's objection to the holder's proof of claim was not a ruling on the merits as to the validity of the first priority deed of trust and underlying promissory note. The prior opinion of the Ninth Circuit, HSBC Bank USA, N.A. v. Blendheim (In re Blendheim), 803 F.3d 477 (9th Cir. 2015), did not support, much less require, the bankruptcy court's decision. The bankruptcy court also erred in awarding the debtor attorney's fees under California Civil Code § 1717.
- Procedural context:
- In reliance on the language of 11 U.S.C. § 506(d) and HSBC Bank USA, N.A. v. Blendheim (In re Blendheim), 803 F.3d 477 (9th Cir. 2015), the bankruptcy court had granted the debtor summary judgment on his action to avoid the holder of a mortgage loan's senior deed of trust on the debtor's residence.
- The debtor/appellee, Richard Lane, filed a chapter 13 case in 2011. Lane scheduled his residence as an asset, valuing it at $420,000. Lane also scheduled senior and junior mortgage debts on his residence, both held by Bank of America. Lane scheduled the senior mortgage debt in the amount of $625,620 and indicated that this claim was disputed as to the "real party in interest." Lane scheduled the junior mortgage debt in the amount of $73,894. While Lane did not dispute this debt, he stated that the debt was wholly unsecured. Lane filed a chapter 13 plan that provided for payment of the senior mortgage loan, but would hold payments in abeyance until the real party in interest (presumably the holder of the mortgage loan) was identified. The Bank of New York Mellon ("BONY") subsequently filed a secured proof of claim in the amount of the senior mortgage loan. and its counsel filed a request for notices. The proof of claim included copies of the mortgage loan documents and an assignment of the note and deed of trust. The note was endorsed in blank. Lane objected to the BONY proof of claim and served it on BONY's lawyer of record. BONY failed to object to the claim objection. The bankruptcy court entered a "default order" that disallowed BONY's claim in its entirety. BONY did not appeal. The chapter 13 trustee filed a plan completion notice in November 2015, and the bankruptcy court entered a discharge. The case subsequently was closed. BONY had Lane's chapter 13 case reopened and argued that its failure to respond to the objection to its claim was due to excusable neglect. The bankruptcy court denied BONY's motion. Lane filed an adversary proceeding against BONY, seeking to void the first priority deed of trust, damages for BONY's failure to cancel the deed of trust, and attorney's fees. Lane filed a motion for summary judgment. The bankruptcy court granted Lane's summary judgment motion to the extent that it sought to void the first priority deed of trust under 11 U.S.C. § 506(d) and awarded Lane attorney's fees. The holder timely appealed to the Bankruptcy Appellate Panel of the Ninth Circuit.
- BRAND, SPRAKER and TAYLOR, Bankruptcy Judges
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