Court Opinion

ID: 4514578
Source: CourtListenerOpinion
Date Created: 2020-03-11 00:01:44.031398+00
Date Added: 2024-06-11T09:44:12.793924
License: Public Domain

FILED
                                                                          JUL 31 2019
                           NOT FOR PUBLICATION
                                                                     SUSAN M. SPRAUL, CLERK
                                                                        U.S. BKCY. APP. PANEL
                                                                        OF THE NINTH CIRCUIT

             UNITED STATES BANKRUPTCY APPELLATE PANEL
                       OF THE NINTH CIRCUIT

In re:                                               BAP No. CC-19-1011-TaSKu

PAMELA DIANE LAWSON,                                 Bk. No. 8:18-bk-13376-ES

                    Debtor.

PAMELA DIANE LAWSON,

                    Appellant,

v.                                                    MEMORANDUM*

WELLS FARGO BANK, N.A.; WELLS FARGO
BANK, N.A., as Trustee for Option One
Mortgage Loan Trust 2007-3, Asset-
Backed Certificates, Series 2007-3;
AMRANE COHEN; SAND CANYON
CORPORATION,

                    Appellees.

               Submitted Without Oral Argument on July, 18, 2019
                           at Pasadena, California

         *
        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.
                                Filed – July 31, 2019

               Appeal from the United States Bankruptcy Court
                    for the Central District of California

           Honorable Erithe A. Smith, Bankruptcy Judge, Presiding

Appearances:        Appellant Pamela Lawson pro se on brief; Michael J.
                    Hassen of REALLAW, APC on brief for Appellee Sand
                    Canyon Corporation f/k/a Option One Mortgage
                    Corporation.

Before: TAYLOR, SPRAKER, and KURTZ, Bankruptcy Judges.

                                INTRODUCTION

      Chapter 131 debtor Pamela Lawson appeals an order dismissing her

case after the bankruptcy court denied confirmation of her chapter 13 plan

because it concluded that she was not appropriately pursuing a chapter 13

case. Her plan did not propose plan payments, did not specify the plan

term, and did not provide for payment to Wells Fargo Bank, N.A., her only

significant creditor.

      On appeal, Ms. Lawson fails to persuade us that the bankruptcy court

      1
        Unless specified otherwise, 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, and all “Civil Rule” references are to the Federal Rules of
Civil Procedure.

                                           2
abused its discretion. Accordingly, we AFFIRM.

                                        FACTS

      In 2006, Ms. Lawson obtained a $582,250 loan from Sand Canyon f.k.a

Option One Mortgage Corporation (“Option One”), evidenced by a note

and secured by a deed of trust encumbering real property located in Costa

Mesa, California (the “Property”). In 2009, Option One assigned the loan to

Wells Fargo. Ms. Lawson promptly defaulted.

      In September 2018, Ms. Lawson filed this chapter 13 petition.2 She

disclosed two earlier bankruptcy cases, a successful chapter 7 and a brief-

lived chapter 11 (her husband had previously filed his own chapter 13

petition). The Lawsons had also initiated a state court action against

Wells Fargo.

      Ms. Lawson scheduled the Property, valued it at $700,000, and listed

Option One as holding a $582,250 secured interest in the Property. She

scheduled Ocwen Loan Servicing, LLC, with a $350,000 unsecured claim

and Wells Fargo with two disputed claims. Her Schedule J reflected a

monthly net income of $2,516.25.

      Ms. Lawson’s first plan provided for monthly payments of $3,483.75

for three months and named Ms. Lawson as the disbursing agent. It

      2
         We grant Appellee’s request for judicial notice. We also exercise our discretion
to take judicial notice of documents filed in the bankruptcy case. Atwood v. Chase
Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).

                                            3
provided no treatment for any secured creditor. Wells Fargo objected

because the plan would modify its claim, which was secured by

Ms. Lawson’s principal residence. Ms. Lawson responded that Wells Fargo

was a fake creditor who lacked standing and relied on corrupted, forged,

and invalid assignments of deeds of trust.

     Wells Fargo filed a $959,064.97 proof of claim. It attached an

accounting showing that no payments had been made since 2010 and

copies of the signed loan modification documents; a trust deed listing

Option One as the initial beneficiary; a recorded trust deed assignment to

Wells Fargo; and a signed note and attached allonge making the note

payable to Wells Fargo.

     Ms. Lawson next filed an amended plan that specified neither the

amount of plan payments nor the plan’s term. It did, however, propose a

“100%,” $3,000 distribution to unsecured claims, $0 to Option One on

account of its $582,250 scheduled claim, and noted that Ms. Lawson would

file a motion to avoid Option One’s lien because the transfer was

robosigned.

     The plan and amended plan received several objections. The Trustee

objected to confirmation of the initial plan and sought dismissal or

conversion to chapter 7, in part, because Ms. Lawson had not made any

plan payments. Wells Fargo objected to confirmation of the amended plan,

arguing that Ms. Lawson could not modify its lien on the Property. Option

                                      4
One then objected because it was listed as a creditor even though it had

assigned the debt; it then covered all possible bases: to the extent it was the

secured creditor, it objected because it did not consent to the proposed

treatment of no payments and, alternatively, to the extent Wells Fargo was

the secured creditor, Option One objected because Wells Fargo had not

consented to the proposed treatment.

      In her opposition, Ms. Lawson argued that Option One’s attorney’s

declaration was not trustworthy. The day before the confirmation hearing,

she also filed an “addendum” proposing that the proof of claim deadline

be extended so that the alleged secured creditors could submit proof that

they were secured.

      At the confirmation hearing, the Trustee reported that Ms. Lawson

had made no plan payments. The bankruptcy judge explained that,

because the plan proposed no payments, there was no purpose for the

bankruptcy proceeding. When Ms. Lawson stated that she would like to

pay but did not know whom to pay, the bankruptcy judge recounted:

      Option One has said they don’t hold the debt anymore, but
      they assigned it to someone else. . . . I absolutely cannot confirm
      a plan that does not provide for plan payments. . . . And, in fact,
      no creditor other than Wells Fargo has even filed a claim. . . . So
      if there’s not going to be a provision for Wells Fargo, then
      there’s no point in this chapter 13.

Hr’g Tr. (Dec. 21, 2018) 3:20–4:16. Option One’s counsel reiterated that it

was not the secured creditor and confirmed that Wells Fargo was.

                                       5
       Ms. Lawson then asked for a thirty day continuance, which the

bankruptcy judge denied. The bankruptcy judge then summarized why

dismissal of the plan, as amended, was appropriate: “[A]t this point, since

you’re not prepared to make payments to Wells Fargo, there’s no point to

this Chapter 13.” Id. at 9:3–5.

      The bankruptcy court entered a separate order dismissing the case.

Ms. Lawson timely appealed.

                                  JURISDICTION

      The bankruptcy court had jurisdiction under 28 U.S.C. § 1334,

157(b)(2)(A) and (L). We have jurisdiction under 28 U.S.C. § 158.

                                      ISSUE

      Did the bankruptcy court err when it dismissed the case?

                           STANDARD OF REVIEW

      We review the bankruptcy court’s dismissal of the chapter 13 case for

an abuse of discretion. Schlegel v. Billingslea (In re Schlegel), 526 B.R. 333, 338

(9th Cir. BAP 2015). A bankruptcy court abuses its discretion if it applies

the wrong legal standard, misapplies the correct legal standard, or makes

factual findings that are illogical, implausible, or without support in

inferences that may be drawn from the facts in the record. See

TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011) (citing

United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc)). We

may affirm on any basis supported by the record. California v. Yun (In re

                                         6
Yun), 476 B.R. 243, 251 (9th Cir. BAP 2012).

                                 DISCUSSION

      Section 1307(c) sets forth a nonexclusive list of factors that constitute

“cause” for conversion or dismissal of a chapter 13 case, including a failure

to commence making timely plan payments and denial of confirmation and

a denial of a request for additional time to file a new plan. See 11 U.S.C.

§ 1307(c); Ellsworth v. Lifescape Med. Assocs., P.C. (In re Ellsworth), 455 B.R.

904, 915 (9th Cir. BAP 2011). And a “debtor’s unjustified failure to

expeditiously accomplish any task required either to propose or confirm a

chapter 13 plan may constitute cause for dismissal under § 1307(c)(1).” de la

Salle v. U.S. Bank, N.A. (In re de la Salle), 461 B.R. 593, 605 (9th Cir. BAP

2011) (quoting In re Ellsworth, 455 B.R. at 915).

      On appeal, Ms. Lawson argues that the bankruptcy court erred; she

seeks reversal so that “the alleged secured CREDITORS can prove with

verifiable evidence that they have standing . . . . [And u]pon validation of

the authenticity of the alleged secured CREDITORS, then the estate of

PAMAELA [sic] D. LAWSON can present an Amended Chapter 13 Plan to

settle DEBT obligations.” Opening Br. at 2–3. Although we liberally

construe Ms. Lawson’s briefs due to her pro se status, Kashani v. Fulton (In

re Kashani), 190 B.R. 875, 883 (9th Cir. BAP 1995), her position has no merit.

      To start, although not relied on by the bankruptcy court, Ms. Lawson

does not dispute that she had not made any payments as contemplated in

                                         7
the initial plan. This alone justifies dismissal. 11 U.S.C. § 1307(c)(4).

      Further, however, the bankruptcy court correctly concluded that

Ms. Lawson’s plan was not confirmable in several respects. First, the plan

did not provide for monthly plan payments or submission of them to the

chapter 13 trustee. Section 1322(a) states that the plan “shall provide for the

submission of all or such portion of future earnings or other future income

of the debtor to the supervision and control of the trustee as is necessary

for the execution of the plan[.]” 11 U.S.C. § 1322(a)(1). On appeal,

Ms. Lawson does not dispute this; instead, she states that her “addendum”

provided for a repayment plan. It did not.

      Also, the plan failed to properly provide for the claim secured by

Ms. Lawson’s residence, the Property. Putting aside the question of who

held the claim, Ms. Lawson’s first amended plan proposed bifurcating the

claim and paying it $0. But § 1322(b)(2) prohibits chapter 13 plans from

modifying the rights of a creditor secured by a claim against the debtor’s

principal residence. 11 U.S.C. § 1322(b)(2).

      The plan also failed to appropriately provide for Wells Fargo’s

secured claim. Section 1325(a)(5) requires one of three alternative

treatments for a secured creditor whose claim is included in a chapter 13

plan: “treatment to which the secured creditor consents; retention of

collateral by the debtor with a stream of payments to the secured creditor;

or surrender of the collateral to the secured creditor.” Trejos v. VW Credit,

                                        8
Inc. (In re Trejos), 374 B.R. 210, 214 (9th Cir. BAP 2007). Here, Wells Fargo

filed a $959,064.97 proof of claim secured by the Property. While

Wells Fargo was not named in the plan, its proof of claim and the record in

the case make clear that while the plan named Option One, the real-estate

secured debt addressed in the plan was at bottom the claim now asserted

by Wells Fargo. Ms. Lawson proposed retaining the Property while making

no payments to Wells Fargo. Wells Fargo did not consent, and $0 was not

equal to the present value of its allowed, secured claim.

      On appeal, Ms. Lawson argues that the “addendum” she filed on the

eve of the hearing provided for payment. We disagree. In the addendum,

Ms. Lawson suggested requiring Wells Fargo (or any other alleged secured

creditor) to “validate” their debt before they could receive payment or

surrender of collateral. What Ms. Lawson misunderstands is that

Wells Fargo had submitted proof of its debt—it filed a proof of claim,

which, in addition to being allowed unless a party objected, 11 U.S.C.

§ 502(a), was prima facie evidence of the legitimacy of its claim. Fed. R.

Bankr. P. 3001(f). Ms. Lawson did not object to the presumptively valid

claim and her proposed amendment was unnecessary because the Code

provided an appropriate mechanism to accomplish this very end.

      Accordingly, the bankruptcy court correctly concluded that

Ms. Lawson’s plan was not confirmable. But this, standing alone, does not

warrant case dismissal. Cf. 11 U.S.C. § 1307(c). Although the bankruptcy

                                       9
court did not explicitly identify what prong of § 1307(c) it was dismissing

the case under, we conclude that dismissal was warranted under

§ 1307(c)(1) or § 1307(c)(5), in addition to § 1307(c)(4), as identified above.

      Section 1307(c)(1) permits the bankruptcy court to dismiss a chapter

13 case based on unreasonable delay that is prejudicial to creditors. Here,

Ms. Lawson was not willing to amend the plan to provide for ongoing

payments to the secured creditor; instead, she wanted to wait an additional

thirty (or more) days for Wells Fargo to “validate” its debt to her

satisfaction. She did not propose making even escrowed payments of net

income during that time; instead, the record reflects a desire for an

unbonded injunction via the automatic stay and not an attempt at curative

payment over time. As a result, dismissal was proper because Ms. Lawson

was not prepared to propose a Code-compliant chapter 13 plan.

      Under § 1307(c)(5), denial of plan confirmation and denial of a

request for additional time for filing another plan is also cause for

dismissal. In re Ellsworth, 455 B.R. at 917. Dismissal under this section

“often requires an express request for additional time to file a plan, and a

denial thereof.” Id. Here, Ms. Lawson asked for a thirty day continuance,

and the bankruptcy judge denied that request. When the hearing transcript

is read in conjunction with Ms. Lawson’s “addendum”, it is clear that

Ms. Lawson sought the thirty day continuance to modify her plan. As a

                                       10
result, dismissal was warranted under § 1307(c)(5).3

                                    CONCLUSION

       Based on the foregoing, we AFFIRM.

       3
         When dismissing the case, the bankruptcy judge sought Ms. Lawson’s input on
whether she preferred dismissal or conversion. The bankruptcy judge did not, however,
explicitly conduct the required “best interest of creditors” analysis before dismissing the
case. See In re Schlegel, 526 B.R. at 343 n.10. Nonetheless, on this record dismissal was in
the best interest of creditors and the estate.

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