FILED
DEC 14 2012
1 SUSAN M SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
2
UNITED STATES BANKRUPTCY APPELLATE PANEL
3
OF THE NINTH CIRCUIT
4
5 In re: ) BAP No. CC-11-1698-MkBePa
)
6 GENNADY TIKHONOV and ) Bk. No. SV 11–15614-MT
ALBINA TIKHONOV, )
7 )
Debtors. )
8 ______________________________)
)
9 GENNADY TIKHONOV; )
ALBINA TIKHONOV, )
10 )
Appellants, )
11 )
v. ) MEMORANDUM*
12 )
THE BANK OF NEW YORK MELLON )
13 TRUST CO., N.A., )
)
14 Appellee. )
______________________________)
15
Submitted Without Oral Argument
16 on November 15, 2012**
17 Filed – December 14, 2012
18 Appeal from the United States Bankruptcy Court
for the Central District of California
19
Honorable Maureen Tighe, Bankruptcy Judge, Presiding
20
Appearances: Appellants Gennady and Albina Tikhonov pro se on
21 brief; Bernard J. Kornberg, Adam N. Barasch and
Jan T. Chilton of Severson & Werson on brief for
22 appellee The Bank of New York Mellon Trust Co.,
N.A.
23
24
*
This disposition is not appropriate for publication.
25 Although it may be cited for whatever persuasive value it may
26 have (see Fed. R. App. P. 32.1), it has no precedential value.
See 9th Cir. BAP Rule 8013-1.
27
**
By order entered October 10, 2012, this appeal was deemed
28 suitable for submission without oral argument.
1 Before: MARKELL, BEESLEY*** and PAPPAS, Bankruptcy Judges.
2
3 INTRODUCTION
4 Gennady and Albina Tikhonov (“Debtors”) appeal from a
5 bankruptcy court order granting relief from stay under 11 U.S.C.
6 § 362(d)(1)1 to the Bank of New York Mellon Trust Co., N.A.,
7 formerly known as the Bank of New York Trust (“BONY”). We hold
8 that the appellants lack standing, and thus we DISMISS this
9 appeal. Even if the appellants had standing, however, we would
10 AFFIRM.
11 FACTS
12 A. The parties, the debt and the encumbered property
13 The following facts reflect this Panel’s understanding of
14 the key players, the debt incurred and the encumbrances against
15 the relevant parcel of real property: a single-family residence
16 located in Sherman Oaks, California (“Residence”). For the most
17 part, we have drawn these facts from the various deeds, notes and
18 other transaction documents offered as exhibits by the parties.
19 Neither party has attempted to challenge the authenticity of
20 these documents, or the propriety of our considering them. While
21 the parties’ respective statements of fact focus on different
22 parts of the record, neither effectively has challenged the
23
24 ***
Hon. Bruce T. Beesley, United States Bankruptcy Judge for
the District of Nevada, sitting by designation.
25
1
26 Unless specified otherwise, all chapter and section
references are to the Bankruptcy Code,
11 U.S.C. §§ 101-1532, and
27 all “Rule” references are to the Federal Rules of Bankruptcy
Procedure, Rules 1001-9037. All “Civil Rule” references are to
28 the Federal Rules of Civil Procedure.
2
1 existence or the basic nature of the real estate and lending
2 transactions leading up to their dispute.
3 On or about April 6, 2006, a man named Leonid Ovsovich
4 (“Ovsovich”) owned the Residence. On that date, he borrowed
5 roughly $1 million from Mortgageit, Inc. (“Mortgageit”). In
6 exchange for the loan, Ovsovich executed an Adjustable Rate Note
7 (“Note”) and a Deed of Trust (“First Trust Deed”), both dated
8 April 6, 2006.
9 The First Trust Deed was recorded on April 18, 2006, in the
10 Official Records of Los Angeles County, as instrument number
11 XX-XXXXXXX. The First Trust Deed identified Ovsovich as the
12 borrower, Mortgageit as the lender, and Mortgage Electronic
13 Registration Systems, Inc. or “MERS” as the beneficiary, but
14 “solely as nominee for Lender and Lender’s successors and
15 assigns.” The First Trust Deed elsewhere reiterated that “MERS
16 is a separate corporation that is acting solely as a nominee for
17 Lender and Lender’s successors and assigns. MERS is the
18 beneficiary under this Security Instrument.” Under the First
19 Trust Deed, Ovsovich acknowledged his understanding and
20 agreement, on the one hand, that MERS only held a legal interest
21 to the property described under the First Trust Deed, and on the
22 other hand, that MERS had the right/authority as nominee for the
23 lender and the lender’s successors and assigns to exercise all of
24 their rights and interests under the First Trust Deed, to the
25 extent “necessary to comply with law or custom.”
26 On November 2, 2006, Ovsovich borrowed another $25,000
27 against the Residence, this time from Reliant Group, Inc.
28 (“Reliant”). In exchange for this loan, Ovsovich executed a
3
1 promissory note and a Deed of Trust (“Second Trust Deed”), both
2 dated November 2, 2006. The Second Trust Deed was recorded on
3 November 9, 2006, in the Official Records of Los Angeles County,
4 as instrument number XX-XXXXXXX.
5 In 2007, Reliant conducted foreclosure proceedings against
6 the residence, which culminated in a trustee’s sale held on
7 December 10, 2007, at which the Akselrod Revocable Family Trust
8 (“Akselrod Family Trust”) was the successful bidder. That same
9 day, the trustee under the Second Deed of Trust executed a
10 Trustee’s Deed Upon Sale conveying the Residence to the Akselrod
11 Family Trust. The Trustee’s Deed Upon Sale was recorded on
12 January 10, 2008, in the Official Records of Los Angeles County,
13 as instrument number 20080057975.
14 In July 2008, one of the Debtors, Albina Tikhonov, purchased
15 the Residence from the Akselrod Family Trust. In furtherance of
16 this sale, the Akselrod Family Trust executed a Grant Deed in
17 favor of Albina Tikhonov, dated July 2, 2008. The Grant Deed
18 was recorded on July 9, 2008, in the Official Records of Los
19 Angeles County, as instrument number 20081215761. In conjunction
20 with this sales transaction, Albina Tikhonov promised to pay the
21 Akselrod Family Trust $100,000 and executed a Deed of Trust
22 (“Third Trust Deed”) dated July 15, 2008, to secure her $100,000
23 debt. The Third Trust Deed was recorded on July 22, 2008, in the
24 Official Records of Los Angeles County, as instrument number
25 20081303344.
26 Because the Second Trust Deed was junior to the First Trust
27 Deed, the Akselrod Family Trust and its successor in interest,
28 Albina Tikhonov, took title to the the Residence subject to the
4
1 First Trust Deed.2
2 B. The Debtors’ bankruptcy case and BONY’s relief from stay
motion
3
4 The Debtors filed their chapter 13 bankruptcy case in May
5 2011, and the bankruptcy court entered an order in October 2011
6 confirming their second amended chapter 13 plan (“Confirmed
7 Plan”). The Debtors’ Confirmed Plan did not provide for any
8 payments to secured creditors. Moreover, the Confirmed Plan
9 explicitly provided that the Debtors were immediately and
10 unconditionally surrendering the Residence to the Akselrod Family
11 Trust. As the Confirmed Plan put it:
12 The Debtor hereby surrenders the following personal or
real property (Identify property and creditor to which
13 it is surrendered.)
14 Creditor Name: Description:
The Akselrod Family Trust 14713 Valleyheart Dr.
15 Sherman Oaks, CA 91403
16 2nd Amended Chapter 13 Plan (July 11, 2011) at p. 7.
17 Notwithstanding the Debtors’ surrender of their interest in
18 the Residence to the Akselrod Family Trust, BONY filed a motion
19 for relief from stay. In the motion, BONY: (1) asserted that it
20 was the successor to Mortgageit under the First Trust Deed, and
21 (2) sought relief from the stay to permit BONY to pursue
22 foreclosure proceedings against the Residence. BONY asserted
23
2
24 See 5 Harry D. Miller and Marvin B. Starr, CAL. REAL ESTATE
§ 11:100 (3d ed. 2009) (stating that the purchaser at a
25 foreclosure sale takes title subject to any senior interests in
26 the foreclosed property, and further stating that “the liens of
any trust deeds recorded before the foreclosed security remain on
27 the property after the foreclosure sale, and the title of the
purchaser is subject to the payment of their secured obligations
28 when due.”)
5
1 that it was entitled to relief from stay under § 362(d)(1), for
2 cause, because its interest in the residence was not adequately
3 protected. According to BONY, the Debtors had not made any
4 postpetition payments due on the debt secured by the First Trust
5 Deed, and over $25,000 in accrued postpetition payments had not
6 been made. The notice accompanying the motion warned the
7 Debtors: “If you fail to file a written response to the Motion or
8 fail to appear at the hearing, the court may treat such failure
9 as a waiver of your right to oppose the Motion and may grant the
10 requested relief.” Notice Of Motion And Motion For Relief From
11 The Automatic Stay (Oct. 25, 2011) at p. 2.
12 The Debtors did not file an opposition to BONY’s relief from
13 stay motion. Instead, the Debtors filed a document entitled:
14 “Debtor’s Objection to Claims of the Bank of New York Mellon
15 Trust Company, National Association FKA the Bank of New York
16 Trust Company, N.A. as Successor to JPMorgan Chase Bank N.A. as
17 Trustee.” The Debtors also filed a declaration and a memorandum
18 of points and authorities in support of their claim objection
19 (collectively, “Claim Objection Papers”).
20 The Claim Objection Papers are difficult to read at best and
21 incomprehensible at times. Nonetheless, it seems reasonably
22 clear that the Debtors intended the Claim Objection Papers to be
23 linked to BONY’s relief from stay motion. While the nature of
24 the intended link is far from clear, the Claim Objection Papers
25 repeatedly reference the relief from stay motion. Moreover, the
26 November 30, 2011 hearing date for the relief from stay motion is
27 listed on the caption page of each of the Claim Objection Papers.
28 The bankruptcy court held a hearing on the relief from stay
6
1 motion on November 30, 2011. Shortly before the hearing, the
2 bankruptcy court issued a tentative ruling in which it indicated
3 that it was inclined to grant the relief from stay motion. The
4 tentative ruling stated that no opposition had been filed in
5 response to the motion. The tentative ruling accepted a $900,000
6 valuation of the Residence based on the Debtors’ bankruptcy
7 schedules. The other facts stated in the tentative ruling appear
8 to have been drawn from BONY’s motion. These facts included:
9 (1) $1,256,638.61 as the amount owed to BONY, (2) the absence of
10 an equity cushion, and (3) Debtors’ negative equity in the
11 Residence in the amount of $356,638.61 ($900,000 value, less
12 underlying debt of $1,256,638.61). The tentative ruling further
13 specified that attendance at the November 30, 2011 relief from
14 stay hearing was required: “APPEARANCE REQUIRED – RULING MAY BE
15 MODIFIED AT HEARING.” Tentative Ruling (Nov. 29, 2011) at p. 1.
16 The hearing on the relief from stay motion was brief.
17 BONY’s counsel appeared telephonically. No one appeared on
18 behalf of the Debtors. After BONY indicated that it was prepared
19 to rest on the bankruptcy court’s tentative ruling, the court
20 granted the motion as follows:
21 Okay. There was an objection to your claim filed,
which is why I thought there might be a Debtor here,
22 but there isn’t, and that was noticed -- I think it
came in with no date -- for December 13th. So your
23 motion is granted, and we’ll deal with that other
matter [the claim objection] at that time.
24
25 Hr’g Tr. (Nov. 30, 2011) at 1:8-14.
26 The bankruptcy court entered an order granting the relief
27 from stay motion, and the Debtors timely appealed.
28 While not technically part of the record before the
7
1 bankruptcy court at the time it ruled on the relief from stay
2 motion, the bankruptcy court’s January 4, 2012 order overruling
3 the Debtors’ claim objection arguably gives some insight into the
4 court’s thought process at the time it ruled on BONY’s relief
5 from stay motion.3 In the order on the claim objection, the
6 bankruptcy court acknowledged that it was unclear on the face of
7 the Claim Objection Papers whether the Debtors had meant to
8 object to a claim or to oppose BONY’s relief from stay motion.
9 The court further acknowledged: (1) that BONY had not filed any
10 proof of claim, and (2) that the November 30 hearing date on the
11 relief from stay motion was referenced in the Claim Objection
12 Papers.
13 According to the bankruptcy court, notwithstanding the
14 above-referenced facts, in light of the Debtors’ failure to
15 appear at the relief from stay hearing, it elected to treat the
16 Claim Objection Papers as an objection to claim, and set a
17 continued hearing on the objection to claim for December 13,
18 2011. When the Debtors also failed to appear at the December 13,
19 2011 hearing on the objection to claim, the court overruled the
20 objection to claim.
21 The debtors never have attempted to explain their absence
22 from the hearings. Nor have they argued that the bankruptcy
23 court erred in relying on their failure to appear in making its
24 rulings. Nor have they denied receipt of adequate notice of all
25 relevant documents and proceedings.
26
27
3
Our consideration of this post-appeal order does not alter
28 our analysis or the outcome of this appeal.
8
1 JURISDICTION
2 The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
3 §§ 1334 and 157(b)(2)(G). We have jurisdiction under 28 U.S.C.
4 § 158.
5 ISSUES
6 1. Do the Debtors have standing to prosecute this appeal?
7 2. If the Debtors had standing to appeal, did the bankruptcy
8 court err when it granted BONY’s motion for relief from the
9 automatic stay?
10 STANDARDS OF REVIEW
11 Standing is a legal issue we review de novo. Allen v. U.S.
12 Bank, N.A. (In re Allen),
472 B.R. 559, 565 (9th Cir. BAP 2012)
13 (citing Veal v. Am. Home Mortg. Serv., Inc. (In re Veal),
14
450 B.R. 897, 906, 918 (9th Cir. BAP 2011)).
15 We review an order granting relief from stay for abuse of
16 discretion. Kronemyer v. Am. Contractors Indem. Co. (In re
17 Kronemyer),
405 B.R. 915, 919 (9th Cir. BAP 2009). Under the
18 abuse of discretion standard, we apply a two-part test. First,
19 we consider de novo whether the bankruptcy court identified the
20 correct law to consider in light of the relief requested. United
21 States v. Hinkson,
585 F.3d 1247, 1262 (9th Cir. 2009) (en banc).
22 Second, we review the bankruptcy court’s factual findings, and
23 its application of those findings to the relevant law, to
24 determine whether they were either “(1) ‘illogical,’
25 (2) ‘implausible,’ or (3) without ‘support in inferences that may
26 be drawn from the facts in the record.’”
Id. (quoting Anderson v.
27 City of Bessemer City, N.C.,
470 U.S. 564, 577 (1985)).
28
9
1 DISCUSSION
2 A. The Debtors lack standing to appeal the relief from stay
order.
3
4 Even though neither party raised it, we must satisfy
5 ourselves that the Debtors have standing to appeal. Standing is
6 a threshold issue in all federal cases that must be satisfied
7 before the court can exercise jurisdiction. In re Veal,
450 B.R.
8 at 906 (citing Warth v. Seldin,
422 U.S. 490, 498 (1975)).
9 Article III of the Constitution requires litigants to demonstrate
10 their standing by showing: injury in fact, causation, and
11 redressability.
Id.
12 We do not doubt here the existence of Article III standing.
13 The order on appeal granted BONY relief from the automatic stay,
14 which in turn permitted BONY to pursue foreclosure proceedings
15 against property listed on the Debtor’s bankruptcy schedules as
16 property of their bankruptcy estate. In addition, if we were to
17 reverse, that reversal would redress any harm allegedly caused by
18 the order granting relief from the stay.
19 However, in addition to Article III standing, there are a
20 number of prudential limitations on federal court jurisdiction.
21 Whereas Article III standing focuses on whether the court has
22 jurisdiction, prudential standing doctrine focuses on whether the
23 court should exercise that jurisdiction. See Sprint Commc’ns Co.
24 v. APCC Servs., Inc.,
554 U.S. 269, 289 (2008) (stating that
25 prudential standing embodies judicially self-imposed limits on
26 the exercise of jurisdiction).
27 Two aspects of prudential standing doctrine are implicated
28 by the facts of this case. First, federal courts ordinarily
10
1 decline to exercise jurisdiction when a party seeks to vindicate
2 rights belonging to others, rather than their own legal rights.
3 See Warth,
422 U.S. at 509; In re Veal,
450 B.R. at 906-07. This
4 aspect of prudential standing is commonly referred to as third
5 party standing. See
id. Second, federal appellate courts
6 typically decline to exercise jurisdiction over appeals
7 originating from bankruptcy cases unless the appellant is a
8 “person aggrieved” – that is, a person who has been “‘directly
9 and adversely pecuniarily affected’” by the order on appeal. See
10 Sherman v. SEC (In re Sherman),
491 F.3d 948, 957 n.8 (9th Cir.
11 2007) (quoting Fondiller v. Robertson (In re Fondiller),
707 F.2d
12 441, 442 (9th Cir. 1983)). The Ninth Circuit has referred to
13 this doctrine as the “prudential appellate standing” doctrine.
14
Id. We address each of these prudential standing doctrines in
15 turn below.
16 1. The Debtors lack third party standing.
17 As indicated above, under the third party standing doctrine,
18 litigants generally must assert their own legal rights and not
19 the rights of others. See Sprint Commc’ns Co. v. APCC Servs.,
20 Inc.,
554 U.S. at 289-90. The problem here with respect to the
21 Debtors’ third party standing arises from their Confirmed Plan.
22 The Confirmed Plan’s terms are binding on the Debtors, as well as
23 their creditors. § 1327; Enewally v. Wash. Mut. Bank (In re
24 Enewally),
368 F.3d 1165, 1172 (9th Cir. 2004); see also
25 United Student Aid Funds, Inc. v. Espinosa, ––– U.S. –––, 130
26 S.Ct. 1367, 1376 (2010).
27 The Debtors’ Confirmed Plan provides for the Debtors’
28 immediate and unconditional surrender of their interest in the
11
1 Residence to the Akselrod Family Trust. As a result of that
2 surrender, the Debtors do not appear to have retained any
3 interest in the Residence.4 Consequently, the only party
4 potentially impacted by BONY’s obtaining relief from stay with
5 respect to the Residence was the Akselrod Family Trust. Thus,
6 the Debtors impermissibly were seeking to enforce the rights of
7 the Akselrod Family Trust, rather than their own rights. See
8 York Int’l Bldg., Inc. v. Chaney (In re York Int’l Bldg., Inc.),
9
527 F.2d 1061, 1067 (9th Cir. 1975) (applying third party
10 standing doctrine where the debtor and its sole shareholder
11 sought to enforce rights belonging to their creditors).
12 The Debtors’ Confirmed Plan remains in full force and
13 effect. They have not sought to revoke or amend their Confirmed
14 Plan. Accordingly, the Debtors lack third party standing to
15 enforce any rights the Akselrod Family Trust may hold with
16 respect to the Residence.
17 2. The Debtors lack prudential appellate standing.
18 As set forth above, an appellant only has prudential
19
4
20 This surrender also arguably rendered BONY’s relief from
stay proceedings moot because the Residence no longer would have
21 qualified as property of the debtor’s bankruptcy estate. See
§§ 362(c)(1); 541(a)(1). Nonetheless, we decline to decide this
22
appeal on that basis. Creditors often find it necessary to
23 obtain “comfort orders” before they effectively can proceed
against property that used to be estate property. To deny relief
24 from stay on mootness grounds in these situations would deprive
the creditors of any certainty as to the status of the debtors’
25 property and former property, exposing them to the risk of
26 contempt proceedings should they wrongly interpret the status of
that property. Furthermore, third parties on whom the creditor
27 may rely to facilitate the enforcement of their rights against
such property sometimes refuse to act unless the creditor first
28 obtains a comfort order.
12
1 appellate standing if it is a person aggrieved, and an appellant
2 only qualifies as a person aggrieved if it has been directly and
3 adversely affected pecuniarily by the order on appeal. But there
4 are two additional requirements to qualify as a person aggrieved.
5 Provided that the appellant had adequate notice of the bankruptcy
6 court proceedings, the appellant is not a person aggrieved unless
7 he or she: (1) objected to the request for relief leading to the
8 order appealed, and (2) appeared at the hearing on the requested
9 relief. See Brady v. Andrew (In re Commercial W. Fin. Corp.),
10
761 F.2d 1329, 1335 (9th Cir. 1985); see also Weston v. Mann
11 (In re Weston),
18 F.3d 860, 864 (10th Cir. 1994) (creditors
12 lacked standing to appeal bankruptcy court’s order resolving
13 trustee election because they did not participate in resolution
14 of disputed election). These two elements of the person
15 aggrieved test are founded on “the need for economy and
16 efficiency in the bankruptcy system.” In re Ray,
597 F.3d 871,
17 874 (7th Cir. 2010) (citing In re Commercial W. Fin. Corp.,
18
761 F.2d at 1335).
19 Furthermore, the requirements of attendance at and objection
20 in the bankruptcy court proceedings ensures that “the bankruptcy
21 court is made aware of all available evidence and objections when
22 making its determination . . . and prevent[s] a party in interest
23 from ‘lying in the weeds’ during bankruptcy court proceedings
24 . . . only to appeal and generate additional unnecessary
25 proceedings.” White v. Virginia (In re Urban Broad. Corp.),
26
304 B.R. 263, 272 (E.D. Va. 2004) aff’d on other grounds,
27
401 F.3d 236, 244 (4th Cir. 2005) (non-participation is an issue
28 of waiver not standing).
13
1 Here, the Debtors have failed to satisfy two of the
2 prudential appellate standing requirements. For the same reasons
3 that we held above that the Debtors’ lacked third party standing,
4 the Debtors also cannot show that they have been directly and
5 adversely affected pecuniarily by the order on appeal. Pursuant
6 to the Confirmed Plan’s terms, the Debtors no longer have any
7 interest in the Residence. Consequently, the relief from stay
8 order permitting BONY to foreclose on the Residence could not
9 have affected the Debtors in any meaningful way.
10 Moreover, all of the types of harm associated with non-
11 appearance alluded to in Urban Broad. Corp., above, occurred
12 here. The Debtors’ failure to appear at the hearing and explain
13 their intentions with respect to their difficult-to-understand
14 Claim Objection Papers left the bankruptcy court in the
15 unenviable position of attempting to ascertain from the face of
16 those papers what the Debtors had intended without their
17 participation and assistance. In addition, their failure to
18 appear directly resulted in the bankruptcy court not addressing
19 their Claim Objection Papers in the context of the relief from
20 stay proceedings, which in turn has spawned the current appeal,
21 as well as the potential for post-appeal proceedings.
22 In sum, given that we cannot ascertain any impact on the
23 Debtors arising from the relief from stay order, and given their
24 failure to attend the relief from stay hearing, we hold that the
25 Debtors lacked prudential appellate standing.
26 B. Even if the Debtors had standing, the bankruptcy court did
not abuse its discretion in granting relief from stay.
27
28 In addressing the issues raised by the Debtors’ pro se
14
1 appeal brief, we are cognizant of our duty to interpret their
2 brief liberally and to ensure that their substantive contentions
3 are not deemed waived simply as a result of their failure to
4 comply with mere technical procedural requirements or their
5 inability to state their contentions using formal legal
6 terminology. See Balistreri v. Pacifica Police Dep’t,
901 F.2d
7 696, 699 (9th Cir. 1990).
8 Nonetheless, having carefully reviewed their appeal brief,
9 we are convinced that their various arguments challenging the
10 order on appeal all boil down to a single relevant assertion:
11 that BONY lacked standing as the “real party in interest” under
12 Civil Rule 17(a)(1) to seek relief from stay in their bankruptcy
13 case. The Debtors have advanced numerous theories why BONY
14 lacked standing. Some of their theories are plausible while
15 others are patently meritless or incomprehensible. However,
16 their critical theories attacked BONY’s contention that it is the
17 holder of the Note and hence had standing as the party entitled
18 to enforce the Note under governing commercial law statutes.5
19 According to the Debtors, BONY is not the party entitled to
20 enforce the note and consequently lacked standing. But we
21
22 5
The parties to this appeal seem to agree that California
23 law should be applied to resolve their dispute. Given that the
Note is silent, that the Debtors reside in California and that
24 Osovich executed the Note and the First Trust Deed in California,
we agree. See
Cal. Com. Code § 1301(b); see also Barclays
25 Discount Bank Ltd. v. Levy,
743 F.2d 722, 724–25 (9th Cir. 1984).
26 Nonetheless, for ease of reference, we will cite the Uniform
Commercial Code (“UCC”) in support of our commercial law
27 analysis. Unless otherwise noted, the relevant provisions of
California’s version of the UCC do not materially diverge from
28 their UCC cognates.
15
1 disagree with the Debtors. For purposes of BONY’s relief from
2 stay motion, BONY sufficiently established its standing as the
3 party entitled to enforce the Note by presenting to the
4 bankruptcy court a copy of the Note and an allonge, which
5 together contained an unbroken chain of special indorsements; the
6 last indorsement in this chain named BONY as payee. We explain
7 immediately below why the Note and the allonge are sufficient to
8 resolve this standing issue in BONY’s favor.6
9 As a preliminary matter, we note the limited scope of stay
10 relief proceedings. Such proceedings are summary in nature and
11 limited to determining whether there are “sufficient
12 countervailing equities to release an individual creditor from
13 the collective stay.” In re Veal,
450 B.R. at 914. Thus, a
14 relief from stay proceeding is not an appropriate vehicle for
15 finally and definitively determining a creditor’s claim or
16 security. Id.; see also Johnson v. Righetti (In re Johnson),
17
756 F.2d 738, 740 (9th Cir. 1985) (“Hearings on relief from the
18 automatic stay are thus handled in a summary fashion. The
19 validity of the claim or contract underlying the claim is not
20 litigated during the hearing.” (citations omitted)).
21 Because stay relief is limited in nature, is subject to an
22
23
6
Arguably, the Debtors did not adequately present their
24 standing argument in the bankruptcy court because they did not
file an explicit objection to BONY’s relief from stay motion and
25 because they did not appear for the relief from stay hearing.
26 Nonetheless, we will exercise our discretion to examine the
Debtors’ standing argument. See City of Los Angeles v. County of
27 Kern,
581 F.3d 841, 846 (9th Cir. 2009) (holding that appellate
court may consider, but was not required to consider, unpreserved
28 prudential-standing argument).
16
1 expedited hearing process, see § 362(e), and does not finally
2 adjudicate the parties’ rights and liabilities, a party seeking
3 stay relief only needs to establish that it has a “colorable
4 claim” against property of the estate. Veal,
450 B.R. at 914–15
5 (citing United States v. Gould (In re Gould),
401 B.R. 415, 425
6 n.14 (9th Cir. BAP 2009); Biggs v. Stovin (In re Luz Int’l,
7 Ltd.),
219 B.R. 837, 842 (9th Cir. BAP 1998); Grella v. Salem
8 Five Cent Sav. Bank,
42 F.3d 26, 32 (1st Cir. 1994)).
9 At its heart, the Debtors’ standing argument questions
10 BONY’s third party standing. As we explained above, in order to
11 establish third party standing, BONY needed to establish that it
12 was asserting its own legal rights and not the rights of others.
13 See Sprint Commc’ns Co. v. APCC Servs., Inc.,
554 U.S. at 289-90.
14 Under § 362(d), any “party in interest” can request relief
15 from the automatic stay. But the term “party in interest” is not
16 defined in the Bankruptcy Code. Whether a moving party qualifies
17 as a party in interest under § 362(d) is determined on a
18 case-by-case basis, taking into account the movant’s claimed
19 interest and the alleged impact of the stay on that interest.
20 In re Kronemyer,
405 B.R. at 919. A “party in interest” includes
21 any party that has “an actual pecuniary interest” in the matter
22 or “a practical stake” in its outcome. Brown v. Sobczak (In re
23 Sobczak),
369 B.R. 512, 517–18 (9th Cir. BAP 2007).
24 As indicated in Veal, a creditor can establish that it is a
25 “party in interest” with standing to seek relief from stay by
26 showing that it is a person entitled to enforce the note, or that
27 it holds some ownership or other interest in the note amounting
28 to a colorable claim.
Id. at 917 (citing In re Hwang,
438 B.R.
17
1 661, 665 (C.D. Cal. 2010)).
2 In relevant part, a party is a person entitled to enforce
3 the note if it is a “holder” of the note, as defined in UCC
4 § 1-201(b)(21)(A). In re Veal,
450 B.R. at 910-11. A “holder”
5 includes a “person in possession of a negotiable instrument that
6 is payable . . . to an identified person that is the person in
7 possession.” UCC § 1-201(b)(21)(A); see also In re Veal,
8
450 B.R. at 911. In turn, a negotiable instrument has been made
9 payable to an identified person when it contains a “special
10 indorsement” specifying that the instrument is payable to that
11 identified person. See UCC § 3-205(a).
12 Here, the face of the Note reflects that Mortgageit, the
13 original payee under the Note, indorsed it by making it payable
14 to an entity called Residential Funding Corp. (“RFC”).7 In turn,
15 RFC specially indorsed the Note by making it payable to JP Morgan
16 Chase Bank, as Trustee (“Chase”).8 Finally, on the face of the
17 allonge, BONY as Chase’s successor essentially specially indorsed
18
19
20
7
BONY has claimed that Mortgageit endorsed the Note in
21 blank. Even if that is true, it appears from the indorsements on
22 the face of the Note that RFC converted Mortgageit’s indorsement
into a special indorsement. See UCC § 3-205(c) (“The holder may
23 convert a blank indorsement that consists only of a signature
into a special indorsement by writing, above the signature of the
24 indorser, words identifying the person to whom the instrument is
made payable.”)
25
8
26 UCC § 3-110(c)(2)(i) provides in relevant part that, for
purposes of determining who is the holder of an instrument, an
27 instrument that is payable to a person described as a trustee is
payable to that trustee, regardless of whether the beneficiary of
28 the trust is named.
18
1 the Note to itself.9
2 Importantly, we have not been able to locate anything in the
3 Debtors’ Claim Objection Papers or in their brief on appeal
4 suggesting in any way that they challenged the effectiveness of
5 any of these indorsements or the validity of the allonge.10 Nor
6 did they dispute that BONY was Chase’s successor. Indeed, all of
7 Debtors’ papers repeatedly referred to BONY as Chase’s successor.
8 BONY attached to its relief from stay motion the declaration of
9 John Castagna (“Castagna”), who declared that he was an employee
10 of BONY’s servicing agent GMAC Mortgage, LLC, and a custodian of
11 records for BONY pertaining to documents concerning the loan
12 transaction from which the Note and the First Trust Deed
13 originated. Castagna further declared that BONY was the current
14 holder of the Note, and he attached to his declaration as
15 exhibits a copy of the Note and the accompanying allonge in
16 support of this contention.11 Under the particular circumstances
17
9
18 See UCC § 3-204(d) (“If an instrument is payable to a
holder under a name that is not the name of the holder,
19 indorsement may be made by the holder in the name stated in the
instrument or in the holder’s name or both, but signature in both
20 names may be required by a person paying or taking the instrument
for value or collection.”)
21
10
22 At pages 28 through 30 of their opening appeal brief, the
Debtors do discuss the requirements for indorsement of negotiable
23 instruments, citing California’s versions of UCC §§ 3-201, 3-203
and 3-204. But they never claim there or elsewhere in their
24 brief that there was anything wrong with the Mortgageit
indorsement, the RFC indorsement or the Chase indorsement.
25 Instead, in an inexplicable non sequitur, they claim that the
26 allegedly fraudulent conduct of Executive Trustee Services
prevented any proper negotiation of the Note.
27
11
The Debtors did not raise any question, let alone a
28 (continued...)
19
1 of this matter as described above, Castagna’s declaration and the
2 attached exhibits were sufficient to establish BONY’s status as
3 the current holder of the Note, as the person entitled to enforce
4 the Note, and as a party with standing to seek relief from
5 stay.12
6 We once again acknowledge the duty that all federal courts
7 have “to ensure that pro se litigants do not lose their right to
8
9 11
(...continued)
genuine question, regarding the authenticity of the original Note
10 BONY claimed to hold. Nor did they assert any evidentiary
11 objection based on Fed. R. Evid. 1002 to the copy of the Note
attached as an exhibit to Castagna’s declaration. Accordingly,
12 BONY was not required to produce in court the original Note in
order to substantiate their status as a holder of the Note for
13 purposes of the relief from stay proceedings. At pages 26 and 27
of their appeal brief, the Debtors did complain about a
14 promissory note, but it is reasonably clear that Debtors were not
15 complaining about BONY’s Note – the Note securing the First Trust
Deed. Rather, it appears that they were complaining about the
16 promissory note that Albina Tikhonov executed and made payable to
the Akselrod Family Trust, which was secured by the Third Trust
17 Deed.
18 12
Because we have concluded that BONY had standing as the
19 holder of the Note, we need not determine whether BONY also held
the beneficial interest in the First Trust Deed. In any event,
20 the beneficial interest in a deed of trust follows the note. See
Cal. Civ. Code § 2936 (“The assignment of a debt secured by
21 mortgage carries with it the security.”); Cockerell v. Title Ins.
& Trust Co.,
42 Cal. 2d 284, 291,
267 P.2d 16, 20 (Cal. 1954)
22
(“Assuming for the moment that the assignment of the note,
23 secured by the third trust deed, was a valid assignment, no
further assignment of the deed of trust was necessary.”); see
24 also Carpenter v. Longan,
83 U.S. 271, 275 (1872) (“The transfer
of the note carries with it the security, without any formal
25 assignment or delivery, or even mention of the latter.”); UCC
26 § 9-203(g) (“The attachment of a security interest in a right to
payment or performance secured by a security interest or other
27 lien on personal or real property is also attachment of a
security interest in the security interest, mortgage, or other
28 lien.”)
20
1 a hearing on the merits of their claim [or defense] due to
2 ignorance of technical procedural requirements.” Balistreri,
3 901 F.2d at 699. Nonetheless, this duty has its limits. Neither
4 this Panel nor the bankruptcy court are required to ferret out
5 and substantiate arguments on behalf of pro se parties when the
6 parties make no attempt to assert these arguments. See DeBuono
7 v. Fanelli (In re Fanelli),
263 B.R. 50, 62 (Bankr. N.D.N.Y.
8 2001). In other words, the requirement of stating a valid,
9 comprehensible claim or defense is not a “technical procedural
10 requirement” that a pro se party can be excused from. See
11 Victery v. Arizona,
2011 WL 2940763, at *4 (D. Ariz. 2011).
12 Here, the Debtors simply did not make any challenge to the
13 authenticity of the Note or the accompanying allonge. Nor did
14 they challenge the indorsements on either of these documents.
15 Consequently, the presentation of evidence that BONY made in
16 conjunction with its relief from stay motion was sufficient to
17 establish its standing to seek relief from stay.
18 CONCLUSION
19 For all of the reasons set forth above, we hold that the
20 appellants lack standing, and thus we DISMISS this appeal. Even
21 if the appellants had standing, however, we would AFFIRM.
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