Court Opinion

ID: 822968
Source: CourtListenerOpinion
Date Created: 2013-03-01 19:11:43.021191+00
Date Added: 2024-06-11T10:51:55.827027
License: Public Domain

FILED
                                                           FEB 28 2013
 1
                                                       SUSAN M SPRAUL, CLERK
                                                         U.S. BKCY. APP. PANEL
 2                                                       OF THE NINTH CIRCUIT

 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )      BAP No. CC-12-1312-DKiPa
                                   )
 6   RICHARD RUSSELL, JR. and      )      Bk. No. 09-11901-ES
     JACETA SALENA RUSSELL,        )
 7                                 )
                    Debtors.       )
 8   ______________________________)
                                   )
 9   RICHARD RUSSELL, JR.;         )
     JACETA SALENA RUSSELL,        )
10                                 )
                    Appellants,    )
11                                 )
     v.                            )      M E M O R A N D U M1
12                                 )
     AURORA BANK FSB,              )
13                                 )
                    Appellee.      )
14   ______________________________)
15                      Submitted Without Oral Argument2
                              on February 22, 2013
16
                           Filed - February 28, 2013
17
              Appeal from the United States Bankruptcy Court
18                for the Central District of California
19        Honorable Erithe A. Smith, Bankruptcy Judge, Presiding
20
     Appearances:     Linda Rose Fessler, Esq. on brief for Appellants;
21                    Joseph C. Delmotte and Catherine T. Vihn of Pite
                      Duncan, LLP on brief for Appellee.
22
23
24        1
            This disposition is not appropriate for publication.
25   Although it may be cited for whatever persuasive value it may
     have (see Fed. R. App. P. 32.1), it has no precedential value.
26   See 9th Cir. BAP Rule 8013-1.
27        2
            On February 21, 2013, the Panel granted the stipulated
28   motion of the parties to submit on the briefs.
 1   Before: DUNN, KIRSCHER and PAPPAS, Bankruptcy Judges.
          The debtors, Richard Bernard Russell, Jr. and Jaceta Salena
 2
     Russell, appeal the bankruptcy court’s order granting relief from
 3
     the automatic stay in favor of appellee, Nationstar Mortgage, LLC
 4
     (“Nationstar”),3 pursuant to an adequate protection order earlier
 5
     entered between the debtors and Nationstar.4      We AFFIRM.
 6
 7
                                        FACTS
 8
             Three years before filing for bankruptcy, the debtors
 9
     purchased their residence in Santa Ana, California, through a
10
     home loan.      They executed a promissory note for the home loan,
11
     which was secured by a trust deed encumbering the residence.
12
             The debtors defaulted on their monthly loan payment in June
13
     2008.       A notice of default was recorded in November 2008.   When
14
     the debtors failed to cure the default, a notice of trustee’s
15
     sale (“trustee notice”) was recorded in February 2009.         The
16
     trustee notice indicated that the residence would be sold at a
17
     foreclosure sale on March 10, 2009.
18
             Five days before the foreclosure sale, the debtors filed
19
     their chapter 13 bankruptcy petition.      Nationstar filed a proof
20
     of claim on July 6, 2009, alleging that the debtors owed
21
     $74,071.35 in prepetition arrears on the home loan.      The debtors
22
23           3
            The debtors originally obtained the home loan from
24   Mortgage Lenders Network USA, Inc. The trust deed was assigned
     to Aurora Loan Services, LLC (“Aurora”). Aurora later assigned
25   the beneficial interest in the trust deed to Nationstar. For the
     sake of simplicity, we refer only to Nationstar.
26
             4
27          Unless otherwise indicated, all chapter, section and rule
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
28   to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.

                                          2
 1   objected to the proof of claim.   After a hearing on September 29,
 2   2009, the bankruptcy court overruled the objection.   It later
 3   entered an order consistent with its ruling.
 4        Three weeks after it filed its proof of claim, Nationstar
 5   filed a motion for relief from the automatic stay (“relief from
 6   stay motion”).   It contended that the debtors were behind ten
 7   prepetition monthly loan payments and three postpetition monthly
 8   loan payments.   The debtors opposed the relief from stay motion
 9   (“opposition”), arguing that they had made several monthly loan
10   payments to Nationstar which it failed to take into account.
11        Following several hearings, Nationstar and the debtors
12   resolved the relief from stay motion by stipulated order
13   (“adequate protection order”).    The bankruptcy court entered the
14   adequate protection order on December 15, 2009.
15        Under the adequate protection order, the debtors agreed to
16   make regular monthly loan payments starting January 1, 2010.
17   Nationstar agreed to amend its proof of claim to include
18   postpetition arrears.5
19        The adequate protection order also provided that, in the
20   event of defaults by the debtors, Nationstar would send them up
21   to three written notices of default (“default notice”).    If the
22   debtors failed to cure a noticed default within ten days of the
23   mailing of a default notice, Nationstar could file a declaration
24   specifying the default and submit to the bankruptcy court a
25   proposed order terminating the automatic stay.    The bankruptcy
26
          5
27          The postpetition arrears consisted of four monthly loan
     payments from September 2009 through December 2009 less a
28   suspense balance.

                                       3
 1   court could grant the order terminating the automatic stay
 2   without further notice or hearing.      The adequate protection order
 3   further provided for a waiver of the fourteen-day stay of the
 4   effective date of an order granting relief from the automatic
 5   stay created under Rule 4001(a)(3).
 6        The adequate protection order also provided that the debtors
 7   had a right to “a maximum of three [default notices] and
 8   opportunities to cure” the default.      It provided that “[o]nce
 9   [the debtors] had defaulted this number of times on the
10   obligations imposed by this [o]rder and [had] been served with
11   this number of notices of default,” Nationstar shall “be relieved
12   of any obligation to serve additional notices of default and
13   provide additional opportunities to cure.”
14        In a letter dated April 19, 2012 (“default letter”),
15   Nationstar advised the debtors that they again had fallen behind
16   in their postpetition monthly loan payments.      According to
17   Nationstar, the debtors failed to make loan payments for February
18   2012 through April 2012.   It informed the debtors that the total
19   amount past due under the adequate protection order was
20   $12,539.67, after applying funds in suspense.
21        Nationstar advised the debtors that they had ten days from
22   April 19, 2012, to cure the default.      If they failed to cure the
23   default timely, Nationstar would submit to the bankruptcy court
24   “a [d]eclaration as to the default along with an [o]rder
25   terminating the automatic stay.”       It further informed the debtors
26   that their right to notice was “expressly limited to three (3)
27   events of noncompliance under the [o]rder” and that the letter
28   served as the first default notice.

                                        4
 1        On May 25, 2012, Nationstar filed with the bankruptcy court
 2   a declaration asserting that it served a default notice on the
 3   debtors.   It claimed that the debtors failed to cure the default
 4   within the ten-day period established by the adequate protection
 5   order.   The debtors did not contest the declaration.
 6        Based on the declaration, the bankruptcy court entered an
 7   order on June 1, 2012 (“relief from stay order”), terminating the
 8   automatic stay and allowing Nationstar to foreclose on and obtain
 9   possession of the residence.
10        The debtors timely appealed the relief from stay order.
11
12                               JURISDICTION
13        The bankruptcy court had jurisdiction under 28 U.S.C.
14   §§ 1334 and 157(b)(2)(G).   We have jurisdiction under 28 U.S.C.
15   § 158.
16
17                                  ISSUE
18        Did the bankruptcy court err in granting relief from stay
19   pursuant to the adequate protection order?
20
21                           STANDARDS OF REVIEW
22        We review a bankruptcy court’s decision to grant relief from
23   stay for an abuse of discretion.       Gruntz v. County of Los Angeles
24   (In re Gruntz), 202 F.3d 1074, 1084 n.9 (9th Cir. 2000).        We
25   apply a two-part test to determine objectively whether the
26   bankruptcy court abused its discretion.      United States v.
27   Hinkson, 585 F.3d 1247, 1261-62 (9th Cir. 2009)(en banc).       First,
28   we “determine de novo whether the bankruptcy court identified the

                                        5
 1   correct legal rule to apply to the relief requested.”    Id.
 2   Second, we examine the bankruptcy court’s factual findings under
 3   the clearly erroneous standard.   Id. at 1262 & n.20.    A
 4   bankruptcy court abuses its discretion if it applied the wrong
 5   legal standard or its factual findings were illogical,
 6   implausible or without support in the record.   TrafficSchool.com
 7   v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011).
 8
 9                               DISCUSSION6
10        The debtors contend that Nationstar submitted to the
11   bankruptcy court a “falsified” declaration when it obtained the
12   relief from stay order.   The declaration was “falsified” because
13   Nationstar did not take into account four wire transfers the
14   debtors had sent to Nationstar for their February 2012 through
15   May 2012 monthly loan payments.
16        The debtors argue that they remitted their February 2012
17   through May 2012 monthly loan payments to Nationstar by wire
18   transfers on March 15, 2012, April 9, 2012, May 9, 2012 and
19
20
          6
            On appeal, the debtors contest the amount of arrears
21   asserted by Nationstar in its latest amended proof of claim.
22   They argue that the latest amended proof of claim “include[d] the
     arrearage incorrectly claimed by [Nationstar] as its reason for
23   filing the default that resulted in lifting of the [automatic]
     stay.”
24
          The debtors did not raise this issue before the bankruptcy
25   court. Because the debtors raise this issue for the first time
     on appeal, we decline to address it. See United States v.
26   Shaltry (In re Home America T.V.-Appliance Audio, Inc.), 232 F.3d
27   1046, 1052 (9th Cir. 2000)(“[A]bsent exceptional circumstances,
     we generally will not consider arguments raised for the first
28   time on appeal . . . .”).

                                       6
 1   June 6, 2012.   They include in the record on appeal copies of the
 2   wire transfer authorization forms for the February 2012 through
 3   May 2012 monthly loan payments.
 4        The debtors acknowledge that their check for the February
 5   2012 monthly loan payment had been returned for insufficient
 6   funds.   As soon as they discovered the error, however, the
 7   debtors remitted the February 2012 monthly loan payment on
 8   March 15, 2012, along with $50 for the non-sufficient funds fee.
 9   They then proceeded to send the remaining monthly loan payments
10   to Nationstar over the course of the next three months.
11        As Nationstar points out, we cannot consider the debtors’
12   new evidence because it was not presented to the bankruptcy
13   court.   See Oyama v. Sheehan (In re Sheehan), 253 F.3d 507, 512
14   n.5 (9th Cir. 2011)(“Evidence that was not before the lower court
15   will not generally be considered on appeal.”); Kirshner v. Uniden
16   Corp. of America, 842 F.2d 1074, 1077 (9th Cir. 1988)(“Papers not
17   filed with the district court or admitted into evidence by that
18   court are not part of the clerk’s record and cannot be part of
19   the record on appeal.”).
20        The debtors complain that they were not allowed to present
21   this evidence to the bankruptcy court because it immediately
22   lifted the automatic stay based on the “falsified” declaration.
23   But the debtors did not contest the declaration at all, despite
24   having a week to do so.    Nationstar filed the declaration on
25   May 25, 2012.   The bankruptcy court did not enter an order until
26   June 1, 2012.
27        Moreover, based on their own statements in an attachment to
28   their notice of appeal, the debtors did not cure the default

                                       7
 1   within the ten-day period under the adequate protection order.
 2   The debtors remitted the February 2012 monthly loan payment on
 3   March 15, 2012, the March 2012 monthly loan payment on April 9,
 4   2012, and the April 2012 monthly loan payment on May 9, 2012.
 5   Under the default notice, the debtors were required to remit all
 6   three monthly loan payments (i.e., the February 2012 through
 7   April 2012 monthly loan payments) by April 29, 2012.
 8        The debtors also argue that the adequate protection order
 9   required Nationstar to send all three default notices in the
10   event of a default.   They further allege that Nationstar
11   indicated in the default letter that it would be sending all
12   three default notices.
13        But the debtors misconstrue the adequate protection order
14   provision concerning the default notice requirements.    The
15   adequate protection order expressly stated that they had a right
16   to “a maximum of three [default notices].”    “Maximum” does not
17   mean “in succession” or “in an unbroken sequence,” as the debtors
18   seem to suggest.   “Maximum” means “the greatest quantity or
19   degree reached or recorded; the upper limit of variation” or “an
20   upper limit permitted by law or other authority.”    The American
21   Heritage Dictionary 1083 (4th ed. 2000).     The debtors only would
22   receive a default notice for each of up to three defaults they
23   committed.
24        They also misconstrue the default letter.    Nationstar stated
25   in the default letter that the debtors’ right to notice was
26   “expressly limited to three (3) events of noncompliance.”      The
27   debtors only would receive a default notice for each act of
28   noncompliance under the adequate protection order.

                                      8
 1        Based on the record before us, we cannot conclude that the
 2   bankruptcy court abused its discretion in granting relief from
 3   the automatic stay.7
 4
 5                              CONCLUSION
 6        We AFFIRM.
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          7
            Although the record constrains us in the result that we
26   may reach, we note that time has not run for the debtors to seek
27   relief before the bankruptcy court based on mistake or “any other
     reason that justifies relief” under Rule 60(b)(1) or (6) of the
28   Federal Rules of Civil Procedure, applicable under Rule 9024.

                                     9