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FILED

DEC 02 2016

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. CC-16-1028-DKiF

)

JOHN K. REED, ) Bk. No. 15-12230-PC

)

Debtor. )

______________________________)

)

JOHN K. REED, )

)

Appellant, )

)

v. ) M E M O R A N D U M1

)

NEW YORK COMMUNITY BANK, )

)

Appellee. )

______________________________)

Argued and Submitted on November 17, 2016

at Pasadena, California

Filed - December 2, 2016

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Peter H. Carroll, Bankruptcy Judge, Presiding

 

Appearances: Appellant John K. Reed argued pro se; Megan E.

Lees of Pite Duncan, LLP argued for appellee.

 

Before: DUNN,2 KIRSCHER and FARIS, Bankruptcy Judges.

1 This disposition is not appropriate for publication. 

Although it may be cited for whatever persuasive value it may

have (see Fed. R. App. P. 32.1), it has no precedential value. 

See 9th Cir. BAP Rule 8024-1.

2 The Hon. Randall L. Dunn, United States Bankruptcy Judge

for the District of Oregon, sitting by designation.
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Former chapter 133 debtor John K. Reed appeals from the

bankruptcy court's order granting relief from the automatic stay,

including in rem relief, to New York Community Bank. To the

extent we have jurisdiction over this appeal, we AFFIRM.

I. FACTUAL BACKGROUND

Reed purchased a home in Santa Barbara (the “Property”) in

2005. The purchase was financed through a loan from Ohio Savings

Bank in the original amount of $999,990, memorialized by a note

and secured by a deed of trust. After the failure of Ohio

Savings Bank, its assets were transferred to the appellant, New

York Community Bank (the “Bank”). Apparently, the assets

transferred included the note and deed of trust concerning the

Property.4

Eventually, Reed stopped making payments, and the Bank

commenced nonjudicial foreclosure proceedings against the

Property. In October 2010, Reed transferred his interest in the

Property as a gift to the JKR Olive Trust, an entity under Reed’s

control.5 Reed commenced a chapter 13 case in 2011, which was

dismissed within three months. He promptly filed a second

chapter 13 case, which was dismissed the following year for

3 Unless otherwise indicated, all chapter and section

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532. 

All “Rule” references are to the Federal Rules of Bankruptcy

Procedure. All “Civil Rule” references are to the Federal Rules

of Civil Procedure.

4 We use the word “apparently” because Reed disputes this

proposition.

5 Reed told the bankruptcy court, “I am JKR Olive Trust.”

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failure to make plan payments.

Meanwhile, while the second chapter 13 case was pending,

Reed made additional transfers of ownership interests in the

Property. First, he caused the JKR Olive Trust to transfer its

interest to Karen Williams as trustee of the JKR Olive Trust,6

with Reed as its 100% beneficiary. Later, Reed amended the trust

documents to name an entity called Lawson-Currell Centre, LLC

(“Lawson-Currell”) as a 10% beneficiary. Lawson-Currell was, at

the time, a chapter 11 debtor in a case pending in the Northern

District of California. According to a stipulated order entered

in that case, Lawson-Currell had no knowledge that it held any

interest in the Property.

After dismissal of his second case, Reed executed another

amendment to the JKR Olive Trust, this time naming Bankers For

Real Estate, LLC as a 10% beneficiary. Bankers For Real Estate,

LLC filed a chapter 11 petition in the Southern District of

California shortly thereafter. That case was dismissed, after

which another chapter 11 case was commenced, this time by

“Bankers 4 Real Estate, LLC” (which listed “Bankers For Real

Estate, LLC” as its alias). After four months, this case was

dismissed as well.

In 2014, Reed tried unsuccessfully to modify his home loan

with the Bank. In 2015, he took a new approach. He wrote to the

Bank that he wanted to tender full payment of the amount owing,

and he wished to inspect the original note and deed of trust

6 The significance or purpose, if any, of this transfer from

the JKR Olive Trust to its own trustee is unclear.

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before paying. The Bank agreed to permit the inspection of the

note and deed of trust in its possession (the “Loan Documents”).

At the agreed time, Reed appeared, accompanied by Dr. James

Kelley, an electrical and computer engineer who provides computer

forensic examination services. Dr. Kelley spent hours examining

the Loan Documents and taking extensive notes. He opined that

the documents were fabricated. Reed reported Dr. Kelley's

suspicions to various law enforcement authorities, but there is

no indication in the record that any official action was taken,

and Reed took no legal action of his own regarding the alleged

fabrication.

With foreclosure still looming, Reed filed the underlying

chapter 13 case (his third) on November 12, 2015. In his

schedules, Reed reported no debts and listed $0 in encumbrances

against the Property.7 He asserted he was self-employed as a

“facilitator & entertainer” with an average monthly income of

$1,550.

In his initial plan, he proposed to make monthly payments of

$1,000 (even though he purported to have no creditors) for

36 months “or until resolution of finding unknown creditor.” In

the provision regarding rejection of executory contracts, Reed

proposed to reject “New York Community Bank's claim to be a

beneficiary of mortgage.” He included a miscellaneous provision

7 In fact, Reed struck the word “Debtor” every time it

appeared on the forms used for his petition, plan and schedules

and replaced it with “Petitioner.” As he explained in his plan,

“Since I have not been able to identify whether or not there is

an actual beneficiary [of the trust deed], I have listed myself

as a ‘petitioner’ in this filing.”

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stating his belief that the Bank was not a “legitimate”

beneficiary of the deed of trust and that the true beneficiary's

identity was unknown. In an amendment to his plan, Reed

decreased the proposed monthly payments to $100 but left the

other provisions substantively unchanged.

The Bank filed a motion for relief from the automatic stay,

seeking to proceed with foreclosure, and for an order granting

in rem relief against the Property. The Bank submitted with its

motion the declaration of one of its employees, setting forth the

history of Reed’s transfers of fractional ownership interests in

the Property. The Bank further stated that Reed had failed to

make his most recent payment on the deed of trust, which had come

due following the petition date.

Reed filed an opposition to the Bank’s motion, accompanied

by a declaration and a voluminous set of exhibits. In his

declaration, Reed denied that his current bankruptcy filing was

part of a scheme to hinder, delay or defraud creditors. He

admitted, however, that his filings were made to prevent

foreclosure, which he described as the attempted “theft” of the

Property. Included in the attachments to Reed’s declaration were

copies of an affidavit signed by Dr. Kelley and an accompanying

report, in which Dr. Kelley expressed his opinion that the Loan

Documents were not genuine. Reed also argued in his opposition

that he received insufficient notice of the upcoming hearing on

the relief from stay motion.

Nevertheless, Reed appeared at the hearing, and the

bankruptcy court rejected his insufficient notice argument,

noting that Reed obviously had time to file a detailed opposition

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and was present in court. The court explained that stay relief

proceedings were summary, and relief could be granted upon the

Bank’s showing that it had a colorable claim to an interest in

the Property and that its interest was not adequately protected

due to missed payments. The Bank had done this by submitting a

declaration from its employee stating that the Bank possessed the

original Loan Documents, of which it was the proper beneficiary. 

The court excluded the statements in Dr. Kelley’s report as

unauthenticated hearsay.8 In any event, the Bank was not

required to provide definitive proof of its status as

beneficiary, but merely to set forth a colorable claim.

As to the request for in rem relief, the bankruptcy court

noted that Reed effectively conceded the necessary facts when he

admitted making multiple transfers of the Property and filing

multiple cases for the purpose of preventing foreclosure. The

court thus found that Reed had filed the instant case in bad

faith for the purpose of hindering, delaying or defrauding the

Bank. The court entered an order granting relief from stay,

including in rem relief. Reed appealed.

The bankruptcy court later dismissed Reed's chapter 13 case.

Reed did not appeal the dismissal.9

8 The bankruptcy court noted that an affidavit was included

with Dr. Kelley’s report, but Dr. Kelley had not submitted an

independent declaration to the bankruptcy court.

9 We exercise our discretion to take judicial notice of the

bankruptcy court’s electronic docket. See O’Rourke v. Seaboard

Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 955, 957-58 (9th

Cir. 1988); Atwood v. Chase Manhattan Mortg. Co. (In re Atwood),

(continued...)

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II. JURISDICTION

The bankruptcy court had jurisdiction under

28 U.S.C. § 157(b)(2)(G). With the qualifications discussed

below, we have jurisdiction under 28 U.S.C. § 158.

III. ISSUES

1. Whether this appeal is moot.

2. Whether the bankruptcy court abused its discretion by

granting in rem relief.

3. Whether the bankruptcy court denied Reed's

constitutional rights by holding a hearing on insufficient

notice.

IV. STANDARDS OF REVIEW

We review our own jurisdiction de novo. Franklin High Yield

Tax-Free Income Fund v. City of Stockton, Cal. (In re City of

Stockton, Cal.), 542 B.R. 261, 272 (9th Cir. BAP 2015). An order

granting in rem relief under § 362(d)(4) is reviewed for abuse of

discretion. Ellis v. Yu (In re Ellis), 523 B.R. 673, 677 (9th

Cir. BAP 2014). A bankruptcy court abuses its discretion if it

applies the wrong legal standard, or if its application of the

correct legal standard is based on a view of the evidence that is

illogical, implausible or unsupported by the record. United

States v. Hinkson, 585 F.3d 1247, 1263 (9th Cir. 2009) (en banc).

V. DISCUSSION

A. Mootness

The Bank moved to dismiss this appeal for constitutional and

9(...continued)

293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).

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equitable mootness. A motions panel denied the motion to dismiss

but limited the scope of the appeal to the issue of in rem

relief. In its brief on appeal, the Bank renewed its argument

that the appeal should be dismissed. As explained more fully

below, we agree with the motions panel that dismissal is not

warranted, but the scope of the appeal must be limited to the

in rem issue.

Generally speaking, there are two varieties of mootness that

apply in bankruptcy appeals. First, an appeal is

constitutionally moot if circumstances have changed such that the

appellate tribunal is incapable of granting relief. Motor

Vehicle Cas. Co. v. Thorpe Insulation Co. (In re Thorpe

Insulation Co.), 677 F.3d 869, 880 (9th Cir. 2012). Second, an

appeal is equitably moot if the order on appeal involves complex

transactions or the rights of non-parties such that, although

relief is possible, granting it would be inequitable. JPMCC

2007-C1 Grasslawn Lodging, LLC v. Transwest Resort Props., Inc.

(In re Transwest Resort Props., Inc.), 801 F.3d 1161, 1167 (9th

Cir. 2015).

Because Reed’s underlying bankruptcy case has been

dismissed, the Bank argues that the appeal is constitutionally

moot. Under most circumstances, we would agree. Once the

underlying case was dismissed, the automatic stay terminated by

operation of law. The dismissal of the case is not on appeal,

and we are without jurisdiction to reinstate the bankruptcy case,

even if we believed it would be proper to do so. Reversing the

order granting stay relief would not reimpose the stay or prevent

the Bank from foreclosing.

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The flaw in the Bank's argument, however, is the in rem

provision in the stay relief order. When a bankruptcy court

grants in rem relief under § 362(d)(4), and the order is recorded

in accordance with state law, it removes the subject property

from the protection of the automatic stay not only in the current

case, but in all subsequent bankruptcy cases, regardless of who

files them, for the following two years. See § 362(b)(20). 

Therefore, as the Bank’s counsel acknowledged at oral argument,

the dismissal of Reed’s current bankruptcy case does not prevent

us from granting some effective relief in the event Reed prevails

on the merits of his appeal. It is entirely possible that Reed

or someone else claiming an interest in the Property will file

another bankruptcy case before the two-year period expires.

With respect to equitable mootness, the Ninth Circuit has

developed a four-factor test for determining whether an appeal

should be dismissed. We must consider: (1) whether a stay was

sought, and if so, whether it was obtained; (2) whether

substantial consummation has occurred; (3) the effect a remedy

would have on the interests of non-parties; and (4) whether any

remedy can be granted without creating an unmanageable situation

before the bankruptcy court on remand. In re Transwest Resort

Props., Inc., 801 F.3d at 1167-68 (citing In re Thorpe Insulation

Co., 677 F.3d at 881).

The Bank's equitable mootness argument appears to hinge

entirely on Reed's failure to seek a stay. The Bank concedes

that no non-parties appear to have any interest in the outcome of

this appeal, and we are at a loss to imagine how reversal of the

in rem order would present the bankruptcy court with an

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unmanageable situation on remand. As to the second element,

“substantial consummation” is a concept that relates to the

confirmation of plans of reorganization. Because this appeal

relates to stay relief, rather than plan confirmation, the

appropriate consideration appears to be whether the Bank has

completed its foreclosure. The Bank’s counsel represented at

oral argument that no foreclosure sale has taken place.

It is true that failure to seek a stay pending appeal weighs

in favor of a finding of equitable mootness. In re Transwest

Resort Props., Inc., 801 F.3d at 1168. But such failure does not

always render an appeal moot. Equitable mootness is not a

punishment for choosing not to seek a stay. The Ninth Circuit

has consistently held that equitable mootness applies only where

the order on appeal relates to “complex” transactions that are

“difficult to unwind.” Id. at 1167, quoting Rev Op Grp. v. ML

Manager LLC (In re Mortgs. Ltd.), 771 F.3d 1211, 1215 n.2 (9th

Cir. 2014). The in rem order does not present such a situation.

For these reasons, we conclude that the appeal is neither

constitutionally nor equitably moot in its entirety, but its

scope remains limited to the in rem aspect of the order on

appeal.

B. The Stay Relief Order

1. Standing

Throughout his briefs, Reed questions the Bank’s “standing.”

Standing is a threshold jurisdictional issue. Veal v. American

Home Mtg. Servicing, Inc. (In re Veal), 450 B.R. 897, 906 (9th

Cir. BAP 2011). If we were to conclude the Bank lacked standing

before the bankruptcy court, it would follow that the court

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lacked jurisdiction to grant in rem relief. Id. For the most

part, however, Reed’s “standing” arguments do not relate to this

jurisdictional issue.

Instead, by arguing the Bank lacks “standing,” Reed

primarily appears to mean that the Bank does not have the right

to foreclose, because the Loan Documents allegedly are invalid. 

But the Bank’s standing to request stay relief did not depend on

any conclusive determinations regarding the validity of the Loan

Documents. As the Ninth Circuit has explained, “hearings on

relief from the automatic stay are . . . handled in a summary

fashion. . . . The validity of the claim or contract underlying

the claim [here, the Loan Documents] is not litigated during the

hearing.” Johnson v. Righetti (In re Johnson), 756 F.2d 738, 740

(9th Cir. 1985) (emphasis added, internal citation omitted). The

bankruptcy court did not make a final determination of the

validity of the Loan Documents or the Bank’s right to foreclose. 

The court merely concluded that the Bank had a colorable claim

and removed one obstacle - the automatic stay - standing in the

way of foreclosure.

Because the Bank’s right to foreclose was not directly at

issue in the stay relief proceeding, the Bank was not required to

prove that right definitively in order to establish standing. 

Indeed, the requirements for standing to seek stay relief are

“lenient.” In re Veal, 450 B.R. at 913. If a party has a

“colorable claim” to enforce a right against estate property,

that party has standing to seek stay relief. Id. at 914. More

generally, any creditor whose “interests would be harmed by

continuance of the stay” may seek relief. Kronemyer v. Am.

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Contractors Indem. Co. (In re Kronemyer), 405 B.R. 915, 921 (9th

Cir. BAP 2009).

By submitting a declaration from its employee to

authenticate the attached Loan Documents, the Bank established a

colorable claim to its asserted right to foreclose and thus

established standing to seek stay relief. Because the stay

prevented the Bank from pursuing foreclosure proceedings, the

Bank’s interests were harmed by continuance of the stay. This is

true whether or not the Bank ultimately prevails in the

foreclosure proceedings, which - we stress again - is a separate

question that neither the bankruptcy court nor we must decide.

The Bank had standing to request stay relief.

2. In rem relief

Section 362(d)(4) was added to the Bankruptcy Code in 2005

“to address schemes using bankruptcy to thwart legitimate

foreclosure efforts through one or more transfers of interest in

real property.” First Yorkshire Holdings, Inc. v. Pacifica L 22,

LLC (In re First Yorkshire Holdings, Inc.), 470 B.R. 864, 870

(9th Cir. BAP 2012). Once in rem relief is granted, if the order

is recorded in accordance with applicable state law, the subject

property is excluded from the protection of the automatic stay in

any bankruptcy case filed within the following two years. This

prevents a debtor from circumventing a stay relief order by

simply filing another case or transferring the property to

another debtor. An in rem order grants “prospective protection

against not only the debtor, but also every non-debtor, co-owner,

and subsequent owner of the property.” Id. at 871.

Because this relief has serious implications, it is

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available only when the bankruptcy court makes affirmative

findings that three elements are present: (1) the debtor filed

the current case as part of a scheme; (2) the object of the

scheme is to hinder, delay or defraud creditors; and (3) the

scheme involves either unauthorized transfers of the property or

multiple bankruptcy filings affecting the property. Id. at

870-71.

The bankruptcy court made the necessary findings to support

in rem relief. Specifically, it found that Reed caused multiple

transfers of the Property without the Bank’s authorization, that

he filed or caused to be filed multiple cases involving the

Property, and that he did these things for the purpose of

preventing, i.e., hindering, the Bank from foreclosing. Though

the court did not use the word “scheme” to describe Reed's

actions, the stated findings leave us in no doubt that the court

found this element to be present.10

The record supports all of these findings. Indeed, Reed

admitted the necessary facts in his own declaration: “I declare

that this filing and all previous filings have been done for the

sole purpose of trying to protect myself from the theft of my

property.” It is clear from the context that the “theft” to

which Reed referred was the Bank’s foreclosure.

10 The bankruptcy court found that the various transfers and

filings were “done for the sole purpose of trying to protect the

Debtor from [what he considered to be] the theft of his

property.” Based on Reed's history of filings, the court further

found that he did not file the present case in good faith. The

finding of a persistent, purposeful effort to accomplish a goal

that is pursued in bad faith satisfies the “scheme” element of

§ 362(d)(4).

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Reed obviously believes that the Bank has no right to

foreclose, that it has violated state law by attempting to do so,

and that he therefore is morally justified in trying to stop the

foreclosure. These beliefs, however earnestly held, do not

exempt him from the application of § 362(d)(4). If the Bank has

done anything to violate the law in relation to the Property, it

is incumbent upon Reed to raise that argument in a forum capable

of entertaining it.11 Repeatedly invoking the automatic stay,

without any apparent intention of restructuring debts or

obtaining a discharge, is not a legitimate alternative.

The bankruptcy court did not abuse its discretion by

granting in rem relief.

C. Due Process

Finally, we must address Reed’s arguments that the

procedures employed by the bankruptcy court violated his

constitutional right to due process of law.12

Reed argued before the bankruptcy court that he received

insufficient notice of the stay relief proceeding, because he

received the notice and motion less than 20 days before the

11 The parties represented at oral argument that Reed

recently commenced civil litigation against the Bank in relation

to the Loan Documents.

12 Reed refers to both due process and equal protection of

the laws, but he does not raise any specific arguments relating

to equal protection. We address all of Reed’s constitutional

arguments under the rubric of due process.

Reed also suggests in his opening brief that his due process

rights were violated in connection with the dismissal of his

bankruptcy case. This appeal pertains only to the order granting

stay relief. The order dismissing the case was not appealed, and

we have no jurisdiction to review it.

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hearing. We agree with the bankruptcy court, based on the Bank’s

certificate of service, that proper notice was provided. More

importantly, the fact that Reed was able to prepare a lengthy

opposition to the motion demonstrates that he had sufficient

notice of the proceeding. The Constitution requires “notice

reasonably calculated, under all the circumstances, to apprise

interested parties of the action and afford them an opportunity

to present their objection.” Mullane v. Cent. Hanover Bank & Tr.

Co., 339 U.S. 306, 314 (1950); Espinosa v. United Student Aid

Funds, Inc., 553 F.3d 1193, 1202 (9th Cir. 2008), aff’d sub nom

United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (2010). 

When a party receives actual notice, this standard is satisfied. 

Id. at 1203. Reed both responded to the motion and appeared at

the hearing. He does not identify anything more he would have

done if he had received notice earlier.

Next, Reed argues that the bankruptcy court violated his due

process rights by “ignoring” Dr. Kelley’s report, which Reed

attached to his declaration. In fact, the bankruptcy court did

not ignore the report but rather excluded it on grounds of

hearsay and lack of proper authentication. More importantly, as

discussed above, the bankruptcy court was not required to make

any conclusive findings as to the validity of the Loan Documents. 

It therefore was not necessary for the bankruptcy court to

consider Dr. Kelley’s unauthenticated opinion on that subject.13

13 Prior to oral argument, Reed submitted an addendum to his

briefs on appeal, to which he attached a new declaration from

Dr. Kelley. This declaration was not before the bankruptcy court

(continued...)

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We do not perceive any due process violation in the decision to

exclude the report.

Otherwise, Reed argues that his “right to an unbiased

tribunal” somehow was violated. He does not articulate any basis

for concluding that the bankruptcy court was biased, apart from

the fact that it ruled against him and in favor of the Bank. 

“[J]udicial rulings alone almost never constitute a valid basis”

for demonstrating bias. Liteky v. United States, 510 U.S. 540,

555 (1994). Our review of the record discloses no basis for

questioning the bankruptcy court’s impartiality.

VI. CONCLUSION

Based upon the foregoing, we conclude that the bankruptcy

court did not abuse its discretion or otherwise err in entering

the in rem order. We AFFIRM.

13(...continued)

and is not part of the record on appeal. Accordingly, we do not

consider it. See Wilcox v. Parker (In re Parker), 477 B.R. 570,

577 n.10 (9th Cir. BAP 2012) (declining to consider documents not

presented to the bankruptcy court).

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