Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_09-cv-00792/USCOURTS-casd-3_09-cv-00792-0/pdf.json

Nature of Suit Code: 371
Nature of Suit: Truth in Lending
Cause of Action: 15:1601 Truth in Lending

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

ROBERTO MORFIN,

Plaintiff,

CASE NO. 09cv792-WQH-BLM

ORDER

vs.

ACCREDITED HOME LENDERS, INC.;

et al.,

Defendants.

HAYES, Judge:

The matter before the Court is the Notice of Bankruptcy Filing. (Doc. # 32).

Background

On April 16, 2009, Plaintiff initiated this action by filing a Complaint in this Court.

(Doc. # 1). On April 16, 2009, Plaintiff filed Notice of Lis Pendens. (Doc. # 3). On August

27, 2009, Plaintiff filed a First Amended Complaint. (Doc. # 6).

On September 29, 2009, Defendant JP Morgan Chase Bank, N.A., as an acquirer of

certain assets and liabilities of Washington Mutual Bank, filed a Motion to Dismiss the First

Amended Complaint. (Doc. # 13).

On October 8, 2009, non-party Lendsure Investments Fund 1, LLC filed a Motion to

Expunge Lis Pendens. (Doc. # 16).

On October 19, 2009, Plaintiff filed an opposition to Defendant JP Morgan Chase Bank,

N.A.’s Motion to Dismiss. (Doc. # 19). On October 22, 2009, Plaintiff filed response in

opposition to the Motion to Expunge Lis Pendens, and a Motion to Strike the Motion to

Case 3:09-cv-00792-WQH-BLM Document 34 Filed 11/17/09 Page 1 of 3
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Expunge Lis Pendens. (Doc. # 23-24).

On October 27, 2009, Defendant Franklin Credit Management Corporation filed a

Motion to Dismiss the First Amended Complaint. (Doc. # 27). 

On November 12, 2009, Plaintiff filed a Notice of Bankruptcy Filing. (Doc. # 32). The

Notice of Bankruptcy Filing notified the parties and the Court that on November 10, 2009,

Plaintiff filed a voluntary petition for bankruptcy under Chapter 7 of the United States

Bankruptcy Code with the United States Bankruptcy Court, Southern District of California,

case number 09-17310-LT7.

Ruling of the Court

Section 362(a) of the Bankruptcy Code operates as an automatic stay of the

commencement or continuation of a judicial proceeding “against the debtor” commenced prior

to the filing of bankruptcy. 11 U.S.C. § 362(a)(1). “The automatic stay of § 362(a) is intended

to preserve the status quo and provide a debtor with a breathing spell from its creditors, while

simultaneously preventing creditors from racing to various courthouses to pursue independent

remedies against a debtor.” In re Way, 229 B.R. 11, 13 (9th Cir. B.A.P. 1998) (citation

omitted). “The primary purposes of § 362 do not apply, however, to offensive actions by a

debtor or bankruptcy trustee, as the same policy considerations do not exist where the debtor

has initiated a prepetition lawsuit against a creditor. Therefore, we have clearly held that the

automatic stay does not prohibit a defendant in an action brought by a plaintiff/debtor from

defending itself in that action.” Id. (citing In re White, 186 B.R. 700, 703 (9th Cir. B.A.P.

1995); In re Merrick, 175 B.R. 333, 336 (9th Cir. B.A.P. 1994)). In Way, the defendants filed

a prepetition motion to dismiss, seeking dismissal of a lawsuit filed by the debtor in state court.

Following the bankruptcy filing, the state court ruled on the motion, and dismissed the lawsuit

with prejudice. The Ninth Circuit Bankruptcy Appellate Panel held that the “[defendants] did

not violate the automatic stay by obtaining dismissal postpetition of a state court action

initiated by the debtor prepetition.” Id. at 15. The Bankruptcy Appellate Panel “recognized

that § 362 does not prevent a trustee or a debtor from continuing to prosecute a debtor’s

pre-bankruptcy lawsuit, and determined that out of fairness a defendant should be allowed to

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defend himself from attack.... The automatic stay should not tie the hands of a defendant while

the plaintiff debtor is given free reign to litigate.” Id. at 14.

IT IS HEREBY ORDERED that this action, which was initiated by Plaintiff prepetition,

is not stayed. Any opposition to the Motion to Dismiss the First Amended Complaint filed

by Defendant Franklin Credit Management Corporation (Doc. # 27), shall be filed no later than

December 4, 2009. Any reply shall be filed no later than December 11, 2009. After ruling

on the pending Motions to Dismiss, the Court will consider what effect, if any, Plaintiff’s

bankruptcy filing has upon the pending Motion to Expunge Lis Pendens. (Doc. # 16).

DATED: November 17, 2009

WILLIAM Q. HAYES

United States District Judge

Case 3:09-cv-00792-WQH-BLM Document 34 Filed 11/17/09 Page 3 of 3