Opinion
Case No. 15-27861-B-7 DC No. MDE-1
01-05-2016
In re: JESUS RIVAS ACEVEDO and EVENGELINA CHACON RIVAS, Debtor(s).
ORDER GRANTING WELLS FARGO BANKS' MOTION FOR RELIEF FROM AUTOMATIC STAY
Introduction
Presently before the court is a motion for relief from the automatic stay of 11 U.S.C. § 362(a) filed by Wells Fargo Bank, N.A. Wells Fargo requests relief from the automatic stay of § 362(a) to commence and/or continue post-foreclosure unlawful detainer proceedings under applicable non-bankruptcy law. Wells Fargo seeks to recover possession of real property located at 177 Buckeye Street, Woodland, CA. Debtors Jesus Acevedo and Evengelina Rivas have opposed the motion. For the reasons explained below, Wells Fargo's motion will be granted. Background
Wells Fargo's motion was filed on October 28, 2015. The debtors' opposition was filed on November 23, 2015. The court held a hearing on November 24, 2015. Because that hearing was set on less than 28-days' notice, the court continued the hearing to January 5, 2016, to allow Wells Fargo additional time to reply to the debtors' opposition. Wells Fargo filed a supplemental declaration and related exhibits on December 22, 2015. The debtors also filed supplemental declarations on December 23, 2015.
The relevant facts are generally not in dispute. Wells Fargo foreclosed on the debtors' residence on June 15, 2015. The debtors contend that foreclosure was wrongful for a number of reasons but, primarily, because Wells Fargo engaged in "dual-tracking." Nevertheless, a Trustee's Deed Upon Sale was executed and delivered to Wells Fargo on or about June 15, 2015. That trustee's deed was recorded with the Yolo County Recorder on or about June 18, 2015.
"Dual-tracking" is a practice unlawful under California law in which a lender pursues foreclosure while a loan modification is pending. See Cal. Civ. Code § 2923.6; Singh v. Bank of America, 2013 WL 1858436 (E.D. Cal. May 1, 2013).
Wells Fargo served the debtors with a notice to vacate the foreclosed property on or about July 8, 2015. On or about July 31, 2015, Wells Fargo filed an unlawful detainer complaint in Yolo County Superior Court and on September 29, 2015, an unlawful detainer judgment was entered in favor of Wells Fargo and against the debtors. A writ of possession also issued on September 29, 2015. The debtors filed this chapter 7 case on October 7, 2015. Discussion
Relief From the Automatic Stay
The debtors oppose Wells Fargo's motion on three grounds: (1) Wells Fargo lacks standing to prosecute the motion and seek stay relief; (2) the debtors have wrongful foreclosure claims against Wells Fargo; and (3) Wells Fargo has not established cause.
The court overruled and disposed of the debtors' first objection during the hearing on November 24, 2015. Wells Fargo produced, and the court took judicial notice of, a valid and properly recorded trustee's deed which vested title in the aforementioned real property in Wells Fargo. Based on that trustee's deed, the court concluded that Wells Fargo did in fact have standing. See Cruz v. Stein Strauss Trust # 1361, PDQ Investments, LLC (In re Cruz), 516 B.R. 594, 602 (9th Cir. BAP 2014) (citations omitted); see also Budd v. Fidelity Asset Management, LLC (In re Budd), 2011 WL 4485190 at *2-4 (9th Cir. 2011) (trustee's deed upon sale issued upon conclusion of California nonjudicial foreclosure sufficient to establish colorable claim and standing). The court now reaffirms that earlier ruling, which disposes of the debtors' first objection.
Regarding the debtors' second objection, the court need not reach the merits of any claims the debtors may have against Wells Fargo in order to determine if stay relief is warranted. A motion for relief from the automatic stay is a summary proceeding that does not involve an adjudication of the merits of claims. As stated by the Ninth Circuit Bankruptcy Appellate Panel in In re Luz Intern., Ltd., 219 B.R. 837 (9th Cir. BAP 1998):
Given the limited grounds for obtaining a motion for relief from stay, read in conjunction with the expedited schedule for a hearing on the motion, most courts hold that motion for relief from stay hearings should not involve an adjudication of the merits of claims, defenses, or counterclaims, but simply determine whether the creditor has a colorable claim to the property of the estate.Id. at 842 (citations omitted); see also Veal v. Am. Home Mortg. Servicing, Inc. (In re Veal), 450 B.R. 897, 914-15 (9th Cir. BAP 20111); Budd, 2011 WL 4485190 at *2-4.
Although a determination of the merits of the debtors' wrongful foreclosure claims is beyond the scope of this decision, there may indeed be valid "dual-tracking" claims against Wells Fargo. - The declaration of Erica Loftis filed on December 22, 2015, states that Wells Fargo denied the debtors' loan modification application on March 23, 2015, and published a notice of sale twenty-three days later on April 15, 2015. That may violate Cal. Civ. Code § 2923.6(d) (borrower entitled to 30 days to appeal denial of loan modification application) and § 2923.6(e)(1) (absent an appeal notice of sale may not be published for at least 31 days after loan modification application denied). The denial letter of March 23, 2015, included with the Loftis declaration, may also be defective and violate Cal. Civ. Code § 2923.6(f). The completed set of documents the debtors' agent submitted to Wells Fargo on or about May 1, 2015, might also be construed as a valid loan modification application. That would mean when Wells Fargo foreclosed on or about June 15, 2015, it foreclosed while there was a loan modification application pending. --------
Having determined that Wells Fargo has shown a colorable claim to the foreclosed property, the only remaining question is whether Wells Fargo has established cause under § 362(d)(1) to permit it to commence and/or continue with unlawful detainer proceedings. The court is persuaded that it has.
Following foreclosure and the entry of an adverse unlawful detainer judgment, the debtors no longer have any interest in the foreclosed property. In essence, their status is effectively that of "squatters" even if they have claims against Wells Fargo for wrongful foreclosure. See Budd, 2011 WL 4485190 at *4-5. Courts routinely find these circumstances are cause under § 362(d)(1). This court agrees. Therefore, Wells Fargo's motion will be granted and the parties may proceed with their respective claims in an appropriate state court forum.
Waiver of the 14-Day Stay of Federal Rule of Bankruptcy Procedure 4001(a)(3)
Wells Fargo has requested a waiver of the 14-day stay of Federal Rule of Bankruptcy Procedure 4001(a)(3). That request will be denied. In cases involving real property, a debtor's residence in particular, the court will not waive the 14-day stay of Federal Rule of Bankruptcy Procedure 4001(a)(3) as a matter of course. Doing so would render the Rule meaningless. Thus, if a party seeks a waiver of the 14-day stay of Rule 4001(a)(3), it will need to plead and provide evidence of a real harm if the order granting relief is stayed. Wells Fargo has not done so.
Therefore, based on the foregoing;
IT IS ORDERED that Wells Fargo's motion is GRANTED and the automatic stay of 11 U.S.C. § 362(a) is terminated and vacated for cause under 11 U.S.C. § 362(d)(1) to permit Wells Fargo, its agents, representatives, successors, and/or assigns to exercise rights under applicable non-bankruptcy law including, but not limited to, the commencement and/or continuation of unlawful detainer proceedings to recover possession of the real property located at 177 Buckeye Street, Woodland, California.
IT IS FURTHER ORDERED that the request by Wells Fargo for waiver of the 14-day stay of Federal Rule of Bankruptcy Procedure 4001(a)(3) is DENIED.
IT IS FURTHER ORDERED that all other relief requested by Wells Fargo is denied.
IT IS FURTHER ORDERED that nothing prohibits the debtors or the trustee from pursuing any claims against Wells Fargo in an appropriate forum.
Dated: January 5, 2016.
/s/_________
UNITED STATES BANKRUPTCY JUDGE
INSTRUCTIONS TO CLERK OF COURT
SERVICE LIST
The Clerk of Court is instructed to send the attached document, via the BNC, to the following, parties: Robert McCann
2100 Watt Avenue, Suite 100
Sacramento CA 95825 Mark D. Estle
12526 High Bluff Dr #238
San Diego CA 92130 Alan S. Fukushima
5050 Laguna Blvd #112-580
Elk Grove CA 95758