Court Opinion

ID: 9373956
Source: CourtListenerOpinion
Date Created: 2023-02-22 16:10:45.590916+00
Date Added: 2024-06-11T17:16:49.896947
License: Public Domain

FILED
                                                                                     MAY 16 2022

                           ORDERED PUBLISHED                                  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-21-1181-FLT
 GERALD N. REED and BEATRICE J.
 REED,                                              Bk. No. 9:09-bk-14594-DS
              Debtors.

 GERALD N. REED; BEATRICE J. REED,
              Appellants,
 v.                                                 OPINION
 HENRIK NIELSEN,
              Appellee.

              Appeal from the United States Bankruptcy Court
                    for the Central District of California
              Deborah J. Saltzman, Bankruptcy Judge, Presiding

                            APPEARANCES:
Michael A. Jones of M Jones and Associates, PC on brief for appellants.

Before: FARIS, LAFFERTY, and TAYLOR, Bankruptcy Judges.

FARIS, Bankruptcy Judge:

                                 INTRODUCTION

      Chapter 71 debtors Gerald N. Reed and Beatrice J. Reed appeal the

      1
        Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, and all “Civil Rule” references are to the
Federal Rules of Civil Procedure.
bankruptcy court’s order determining that creditor Henrik Nielsen did not

violate the discharge injunction. The Reeds argue that a judgment in

Mr. Nielsen’s prepetition judicial foreclosure action transformed a secured

obligation into a wholly in personam debt that was subsequently

discharged in their bankruptcy case.

       The Reeds’ arguments have no merit. We AFFIRM. We publish to

explain that a bankruptcy discharge has no effect on a foreclosure

judgment in a California judicial foreclosure proceeding.

                                   FACTS

A.     Prepetition events

       In May 2007, the Reeds executed a promissory note for $292,500 and

a deed of trust encumbering real property located in San Miguel, California

(the “Property”). Mr. Nielsen holds the note and is the beneficiary under

the deed of trust. The promissory note provided for an interest rate of

fourteen percent per annum.

       The Reeds defaulted on the promissory note. Mr. Nielsen filed a

complaint in California state court to foreclose on the deed of trust. In his

prayer for relief, he asked the superior court to enter judgment for the

amount due on the note and requested “that the deed of trust be foreclosed

and the usual judgment be made for the sale of the property according to

law, by the levying officer; that the proceeds be applied to the amounts due

plaintiff . . . .”

       The superior court entered a default judgment in Mr. Nielsen’s favor.

                                       2
The form judgment provided that “Defendant . . . must pay plaintiff on the

complaint” a total of $331,002.25. (Emphasis added.) An attached Judgment

of Foreclosure and Order of Sale provided “that in addition to the

monetary damages set forth in the Judgment[,]” the Property will be sold,

the levying officer will pay Mr. Nielsen the judgment amount, and the

surplus would be paid to the Reeds. (Emphasis added.)

B.    The Reeds’ chapter 7 case

      Months later, the Reeds filed a chapter 7 petition. They scheduled the

judgment debt in favor of Mr. Nielsen as an unsecured nonpriority claim in

the amount of $331,017. In their statement of financial affairs, they

mentioned a “levy by creditor” and a “money judgment” in favor of

Mr. Nielsen based on “Debtors Guarantors of Loan.”

      The Reeds received their chapter 7 discharge in March 2010, and the

bankruptcy court closed the Reeds’ case.

C.    The alleged violations of the discharge injunction

      Mr. Nielsen continued his collection efforts against the Property. In

March 2011, the superior court issued a writ of sale concerning the

Property. The Sheriff’s Office recorded a notice of levy and a notice of sale.

      The Reeds filed in the superior court a motion to quash the writ of

sale and levy. The superior court enjoined the Sheriff’s Office from selling

the Property.

      In April 2012, the superior court ruled that the 2009 default judgment

was defective because the post-judgment interest rate of fourteen percent

                                       3
exceeded the statutory interest rate. The superior court quashed the writ of

sale and vacated the levy without prejudice.

      Mr. Nielsen filed an application for a modified default judgment. The

proposed judgment corrected the post-judgment interest rate and also

specified that the default judgment was a non-deficiency judgment due to

the Reeds’ chapter 7 discharge. The Reeds opposed Mr. Nielsen’s

application, arguing that the 2009 judgment was defective and void ab

initio, so Mr. Nielsen never held a perfected lien prepetition and the

discharge voided the judgment.

      On July 31, 2012, the superior court issued a “non-deficiency court

default judgment foreclosing on [the Reeds’] property.” It ordered that “[a]

decree of Judicial Foreclosure will be entered against [the Reeds] in favor of

[Mr. Nielsen] for the secured amount of $331,002.25.” It further ordered

that the Property “or so much of it as may be necessary, will be sold[,]” that

“the levying officer will pay to plaintiff[ ] . . . the amount due plaintiff” and

that “[t]here shall be no judgment for deficiency.”

      The Reeds twice moved the superior court to set aside the 2012

judgment. The superior court rejected these requests, and the Reeds

appealed.

      The California Court of Appeal affirmed the superior court’s ruling

to adjust the interest rate in the 2009 judgment but held that the superior

court lacked authority to modify the 2009 judgment to address the

availability of a deficiency judgment. It ordered the superior court to set

                                        4
aside the 2012 judgment and issue an order striking the post-judgment

interest rate from the 2009 judgment. Other than the change of the interest

rate, the 2009 judgment, including the attached Judgment of Foreclosure

and Order of Sale, remained intact.

      Mr. Nielsen resumed his foreclosure efforts, and the superior court

issued another writ of sale. A few days before the scheduled foreclosure

sale, the Reeds filed a new chapter 7 petition. After Mr. Nielsen sought and

obtained relief from the automatic stay, the Sheriff’s Office sold the

Property on April 10, 2019. A few weeks later, the bankruptcy court

granted the Reeds their discharge and closed the case.

D.    The Reeds’ first motion for sanctions

      In April 2020, the Reeds filed in their 2009 bankruptcy case a motion

for an order to show cause why Mr. Nielsen should not be held in

contempt for his alleged violation of the discharge injunction. They took

the view that the 2009 state court judgment was an in personam money

judgment because it provided that the Reeds “must pay” Mr. Nielsen and

directed the levying officer to pay Mr. Nielsen the judgment debt from the

proceeds of the sale. They argued that the March 2010 discharge had

discharged all liability to Mr. Nielsen, including the foreclosure judgment.

They concluded that the chapter 7 discharge “voided the judicial

foreclosure judgment that had been entered against the Debtors in 2009

and thus invalidated the purported conveyance and sale of the property by

the Sheriff. As a result of the judgment being void, the Debtor’s [sic]

                                      5
interest in the subject property remains intact and vested in the Debtor

[sic].”

      The bankruptcy court denied the motion without prejudice. It ruled

that the Reeds had failed to demonstrate that the discharge had

extinguished the secured debt owed to Mr. Nielsen.

E.    The Reeds’ second motion for sanctions

      The Reeds were undeterred. They filed another motion seeking

damages for the alleged discharge violation (the “Sanctions Motion”).

      The Sanctions Motion expanded on the factual and procedural

history of the case. The Reeds argued that: (1) Mr. Nielsen did not have a

secured interest in the Property because the March 2009 judgment was not

recorded prior to the petition date; (2) the March 2010 discharge discharged

the 2009 judgment, which was an in personam money judgment by the

terms of the order; and (3) Mr. Nielsen’s post-discharge collection actions

violated the discharge injunction.

      The bankruptcy court held a hearing on the Sanctions Motion. Only

the Reeds appeared. The bankruptcy court began by reminding the Reeds’

counsel of his “ethical obligations and obligations under [Civil] Rule 11 to

put forth legal theories that are based in reality, because I think that that is

where the motion really falls short.”

      Nevertheless, the Reeds insisted that the 2009 judgment was an in

personam money judgment. They reasoned that the judgment “indicates

directly that the plaintiff is entitled to recover the dollar amount, $331,000

                                        6
from the Debtors[,]” and as a result “the Reed family then becomes

personally liable on that event.” They argued that California foreclosure

law “creates an in personam judgment against the individual debtors, that

the judgment creditor is then authorized to collect through levy that’s done

through that state-issuance process.” They concluded that, pursuant to

§ 524, the discharge voided the 2010 judgment.

      The bankruptcy court rejected the Reeds’ argument as “completely

unsupported by the law.” It stated that the dollar amount in the 2009

judgment did not transform the judgment into a simple money judgment.

It explained that there was a loan, a consensual lien, a default, and a

foreclosure judgment with a specific dollar amount that allows the creditor

to sell the property to satisfy the judgment. It quoted the U.S. Supreme

Court’s decision in Johnson v. Home State Bank, 501 U.S. 78, 82-83 (1991), for

the proposition that a secured creditor may foreclose on the debtor’s real

property securing the loan and that right survives the bankruptcy

discharge. It held that the Reeds failed to show that the foreclosure

judgment established any personal liability that was discharged.

      The court similarly rejected the Reeds’ argument that a security

interest becomes a judicial lien upon issuance of a judgment of judicial

foreclosure. It quoted In re Chu, 258 B.R. 206, 209 (Bankr. N.D. Cal. 2001):

“[W]hen a claim based on a security interest is reduced to judgment, while

the claim may merge into the judgment, the security interest remains intact

unless the judgment expressly cancels or avoids it.” The court further

                                       7
explained that a consensual lien “doesn’t just disappear.”

      Accordingly, the bankruptcy court denied the Sanctions Motion. The

Reeds timely appealed. 2

                                  JURISDICTION

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

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

                                        ISSUE

      Whether the bankruptcy court erred in holding that Mr. Nielsen did

not violate the discharge injunction and denying the Sanctions Motion.

                           STANDARDS OF REVIEW

      An award or denial of sanctions for an alleged violation of the

discharge injunction is reviewed for an abuse of discretion. See Nash v.

Clark Cnty. Dist. Att’y’s Office (In re Nash), 464 B.R. 874, 878 (9th Cir. BAP

2012). To determine whether the bankruptcy court has abused its

discretion, we conduct a two-step inquiry: (1) we review de novo whether

the bankruptcy court “identified the correct legal rule to apply to the relief

requested” and (2) if it did, we consider whether the bankruptcy court's

application of the legal standard was illogical, implausible, or without

      2
       Mr. Nielsen did not file a timely answering brief. Instead, he filed a very late
motion for leave to file a brief and to postpone oral argument. We removed the appeal
from the oral argument calendar and took under advisement the balance of his motion.
Upon review of the Reeds’ appellate brief and the record on appeal, we have
determined that briefing from Mr. Nielsen and oral argument are unnecessary and
DENY the remainder of his motion.
                                           8
support in inferences that may be drawn from the facts in the record.

United States v. Hinkson, 585 F.3d 1247, 1262-63 & n.21 (9th Cir. 2009) (en

banc).

      “The scope of the bankruptcy discharge injunction is a mixed

question of law and fact to be reviewed either de novo or for clear error,

depending upon whether questions of law or questions of fact

predominate.” Mellem v. Mellem (In re Mellem), 625 B.R. 172, 177 (9th Cir.

BAP 2021), aff’d, No. 21-60020, 2021 WL 5542226 (9th Cir. Nov. 26, 2021).

This appeal largely involves questions of law, so our review is de novo.

Similarly, we apply de novo review to the bankruptcy court’s statutory

interpretation of § 524(a). In re Nash, 464 B.R. at 878.

      “De novo review requires that we consider a matter anew, as if no

decision had been made previously.” Francis v. Wallace (In re Francis), 505

B.R. 914, 917 (9th Cir. BAP 2014).

                                DISCUSSION

      The Reeds argue that the discharge bars the foreclosure of

Mr. Nielsen’s deed of trust. This argument is frivolous. It misrepresents

(1) the effect of the bankruptcy discharge, (2) the plain terms of the 2009

judgment, and (3) the effect of a foreclosure judgment in a California

judicial foreclosure proceeding.

A.    The bankruptcy discharge does not affect a creditor’s in rem rights.

      Section 727(a) provides that, if all requirements are satisfied, “[t]he

[bankruptcy] court shall grant the debtor a discharge.” The discharge

                                        9
“voids any judgment at any time obtained, to the extent that such

judgment is a determination of the personal liability of the debtor” with

respect to a discharged debt, and “operates as an injunction against the

commencement or continuation of an action, the employment of process, or

an act, to collect, recover or offset any such debt as a personal liability of

the debtor[.]” § 524(a)(1), (2). “The discharge injunction survives the

bankruptcy case and applies permanently with respect to every debt that is

discharged.” Garske v. Arcadia Fin., Ltd. (In re Garske), 287 B.R. 537, 542 (9th

Cir. BAP 2002).

      But the discharge only affects the debtor’s “personal liability.” It does

not affect a creditor’s in rem rights, such as a lien created by a deed of trust.

See Johnson, 501 U.S. at 82-83 (explaining that the bankruptcy “discharge

extinguishes only ‘the personal liability of the debtor.’ . . . [A] creditor’s

right to foreclose on the mortgage survives or passes through the

bankruptcy” (quoting § 524(a)(1))). We have repeatedly relied on the U.S.

Supreme Court’s Johnson decision. See In re Garske, 287 B.R. at 542 (holding

that, “in cases where the creditor holds a secured interest in property

subject to a scheduled debt, a discharge extinguishes only the personal

liability of the debtor”); see also Cortez v. Am. Wheel, Inc. (In re Cortez), 191

B.R. 174, 178 (9th Cir. BAP 1995) (holding “that valid liens that have not

been disallowed or avoided survive the bankruptcy discharge of the

underlying debt” (citing Dewsnup v. Timm, 502 U.S. 410, 418 (1992))).

      In short, the Reeds’ discharge had no effect at all on Mr. Nielsen’s

                                         10
right to foreclose the lien created by the deed of trust.

B.    The 2009 judgment enforced, and did not destroy, Mr. Nielsen’s in
      rem rights.

      The Reeds’ arguments on appeal all rest on their false premise that

the 2009 judgment was solely an in personam debt. They assert that the

face of the 2009 judgment evidences the creation of a personal debt because

it directs that they “must pay” Mr. Nielsen and distinguishes between the

“money damages” and the order to sell the Property, such that “any

proceeds from the sale . . . would be applied to the personal liability of the

debtors.” Additionally, they argue that the writs of sale support their

position, because the writs refer to the Reeds as “judgment debtors” and

purport to apply the proceeds of the sale to the “satisfaction of a

judgment.”

      The Reeds’ arguments simply ignore a large portion of the 2009

judgment: the attached Judgment of Foreclosure and Order of Sale. The

superior court decided how much money the Reeds owed to Mr. Nielsen in

conjunction with the foreclosure of the lien created by the deed of trust. See

generally Doughty v. Holder, Case No. 2:13-CV-00295-LRS, 2014 WL 220832,

at *5 (E.D. Wash. Jan. 21, 2014) (stating, in the context of the FDCPA, that “a

‘foreclosure judgment,’ even though it involves a monetary amount, is for

the purpose of enforcing the creditor’s security interest through a

foreclosure. It is quasi in rem. The monetary amount establishes the bid

                                       11
parameters for the foreclosure sale”).3

      The Reeds’ arguments imply that the portion of the 2009 judgment

deciding the amount of the Reeds’ debt to Mr. Nielsen somehow

extinguished the deed of trust. This is obviously false: if the Reeds were

right, the superior court would not have also decreed the foreclosure of the

deed of trust. There is no authority for the proposition that the 2009

judgment extinguished the lien created by the deed of trust and

transformed the Reeds’ secured obligation to Mr. Nielsen into an entirely

personal liability.

C.    The Reeds’ arguments are inconsistent with California’s judicial
      foreclosure process.

      The Reeds’ arguments ignore fundamental principles of California

foreclosure law and procedure.

      California law allows secured creditors two options to enforce a

secured obligation: “The beneficiary may bring an action for judicial

foreclosure or pursue a nonjudicial foreclosure, also known as a trustee’s

sale, pursuant to the power of sale granted in the deed of trust.” Robin v.

Crowell, 55 Cal. App. 5th 727, 743 (2020) (citations omitted); see also Oxford

St. Prop., LLC v. Rehab. Assocs., LLC, 206 Cal. App. 4th 296, 304 n.3 (2012)

      3
         The 2009 judgment also recognized the Reeds’ personal liability to Mr. Nielsen;
when the judgment was entered, the Reeds had not received a discharge, so their
personal liability still existed. The bankruptcy discharge only voided the 2009 judgment
“to the extent [the judgment was] a determination of the personal liability” of the Reeds.
See § 524(a)(1). The discharge had no effect on the 2009 judgment to the extent it
recognized and enforced the Reeds’ in rem obligations under the deed of trust.
                                           12
(“A beneficiary may pursue either remedy of judicial or nonjudicial

foreclosure or both at the same time. However, once the property is sold at

a trustee’s sale, the beneficiary cannot claim a deficiency judgment in the

judicial foreclosure proceeding.”); 5 Cal. Real Est. § 13:155 (4th ed.) (“The

remedies available under the power of sale and under judicial foreclosure

can be exercised alternatively or concurrently. A beneficiary can pursue

either remedy, or it can institute both methods of foreclosure at the same

time and subsequently select one method and complete it at any time prior

to a sale.”).

      If the creditor elects a judicial foreclosure, the creditor “initiate[s] . . .

a lawsuit [under California Code of Civil Procedure (“CCP”) section

725a]. . . . [T]he lender must prove that the subject loan is in default and the

amount of default. If the lender proves its case, the court can order the sale

of the property to satisfy the borrower’s debt [under CCP section 726].”

Coker v. JPMorgan Chase Bank, N.A., 62 Cal. 4th 667, 672 (2016) (citations and

quotation marks omitted). In a judicial foreclosure, the creditor may seek a

deficiency judgment against the debtor for the difference between the

amount of debt in the decree of foreclosure and the sale price. See Robin, 55

Cal. App. 5th at 743.

      If the creditor chooses a nonjudicial foreclosure pursuant to

California Civil Code sections 2924-2924l, the creditor avoids a court

proceeding and relies on the deed of trust’s power-of-sale clause: “In

exercising that power [of sale], the beneficiary is not enforcing a lien

                                         13
through judicial action but is invoking the beneficiary’s authority to

demand that the trustee of the property sell the property for the

beneficiary’s benefit.” Trenk v. Soheili, 58 Cal. App. 5th 1033, 1041 (2020), as

modified (Dec. 22, 2020). “The sale is governed by a comprehensive set of

statutory provisions. The trustor has no right of redemption after the sale,

and the creditor may not seek a deficiency judgment.” Robin, 55 Cal. App.

5th at 743 (citations omitted). In other words, a creditor pursuing a

nonjudicial foreclosure may not seek a personal money judgment following

the foreclosure and sale of the property.

      In this case, Mr. Nielsen chose to pursue a judicial foreclosure. He

filed a complaint in state court to foreclose on the deed of trust. The

superior court then entered a decree of foreclosure that allowed

Mr. Nielsen to foreclose on the Property. See CCP section 726(a) (“[T]he

court may, by its judgment, direct the sale of the encumbered real property

. . . and the application of the proceeds of the sale to the payment of the

costs of court, the expenses of levy and sale, and the amount due

plaintiff . . . .”). In compliance with California law, the decree of foreclosure

included the amount of indebtedness due to Mr. Nielsen. See CCP section

726(b) (“The decree for the foreclosure of a mortgage or deed of trust

secured by real property . . . shall declare the amount of the indebtedness

or right so secured . . . .”). Because the superior court had adjudged the

amount due to Mr. Nielsen and ordered a sale of the Property, it issued a

writ of sale to enforce the judgment. See CCP section 716.010(a) (“A

                                       14
judgment for sale of real or personal property may be enforced by a writ of

sale issued pursuant to Section 712.010.”).

      The California Court of Appeal explained this process in this very

case. That court noted that “[a] judicial foreclosure action will often result

in two separate judgments, first a decree of foreclosure that determines the

amount of the debt and the availability of a deficiency judgment and orders

a sale of the property, and second, an award of a deficiency judgment after

the foreclosure sale.” Nielsen v. Reed, Case No. H039647, 2016 WL 685231, at

*4 (Cal. Ct. App. Feb. 19, 2016). It correctly highlighted that a decree of

foreclosure is not a deficiency judgment: “Entry of a decree of foreclosure,

even a decree declaring judgment debtors personally liable for a deficiency

judgment, does not necessarily result in a deficiency judgment being

entered.” Id. at *5. It concluded that the 2009 judgment did not include any

provisions for a deficiency judgment and noted that:

      [h]ad the foreclosure decree fulfilled the complaint’s requests to
      order sale of the property and to allow a deficiency judgment
      against Debtors, Creditor would have been able to pursue
      Debtors’ personal liability if the proceeds of the sale did not
      fully repay the outstanding loan. A creditor who is denied a
      deficiency judgment must look entirely to the property to
      satisfy the secured indebtedness.

Id. at *12.

      In sum, the 2009 judgment was a foreclosure decree that enforced the

deed of trust and did not supersede or destroy it.

      It is true that the borrower in a judicial foreclosure proceeding can be
                                       15
subjected to a personal liability. But this only occurs if there is a deficiency

judgment after the foreclosure sale. See CCP section 726(b); All. Mortg. Co.

v. Rothwell, 10 Cal. 4th 1226, 1236 (1995) (“In a judicial foreclosure, if the

property is sold for less than the amount of the outstanding indebtedness,

the creditor may seek a deficiency judgment, or the difference between the

amount of the indebtedness and the fair market value of the property, as

determined by a court, at the time of the sale.”). But Mr. Nielsen never

sought or obtained a deficiency judgment.

      The Reeds argue that Mr. Nielsen’s entire claim, including his lien

rights under the deed of trust, merged into the 2009 judgment, such that

the deed of trust was replaced by a judicial lien. The bankruptcy court

correctly rejected this argument. As the court held in Chu, “a security

interest does not become a judicial lien upon issuance of a judgment of

judicial foreclosure.” In re Chu, 258 B.R. at 209. The court explained that,

“when a claim based on a security interest is reduced to judgment, while

the claim may merge into the judgment, the security interest remains intact

unless the judgment expressly cancels or avoids it.” Id. at 209. It concluded

that “the Creditors hold a security interest in the Residence despite the fact

that their claim was reduced to a foreclosure judgment pre-petition.” Id. at

209-10.

      The court’s reliance on Chu is sound and comports with the Johnson

                                        16
holding.4 Moreover, the Reeds’ argument is absurd: if we were to accept

their position, it would be impossible to conduct a judicial foreclosure of a

lien against a discharged debtor, because the process always starts with a

decree of foreclosure, like the 2009 judgment, determining that a debt is

owed and the creditor is entitled to foreclose. Depriving the lien creditor of

the right to a judicial foreclosure remedy would strip an important right of

the lien creditor, and, as Johnson, Garske, Chu, and a host of other authorities

hold, the discharge simply does not have that effect.

D.    Mr. Nielsen did not violate California’s “one-action” rule.

      The Reeds argue that the bankruptcy court’s ruling violated the one-

action rule. They did not make this argument in the bankruptcy court, and

we need not consider it in the first instance on appeal. See Padgett v. Wright,

587 F.3d 983, 985 n.2 (9th Cir. 2009) (we do not consider arguments and

allegations raised for the first time on appeal).

      Even if this argument were properly before us, we would reject it.

The Reeds urge that Mr. Nielsen violated CCP section 726(a) because the

2009 judgment was a money judgment that precluded a subsequent

foreclosure on the same instrument. See CCP section 726(a) (“There can be

but one form of action for the recovery of any debt or the enforcement of

      4
        The Reeds argue that Chu, Johnson, and other cases are inapposite, because they
concern consensual liens, while Mr. Nielsen “didn’t foreclose a consensual lien . . . .
Creditor enforced a money judgment through an execution sale.” This argument
conveniently ignores the fact that the 2009 judgment provided for the foreclosure of a
deed of trust, which is a consensual lien.

                                          17
any right secured by mortgage upon real property . . . .”). This section

“compels the secured creditor, in a single action, to exhaust its security

judicially before it may obtain a monetary ‘deficiency’ judgment against the

debtor.” Metropolitan Life Ins. Co. v. Sunnymead Shopping Ctr. Co. (In re

Sunnymead Shopping Ctr. Co.), 178 B.R. 809, 815 (9th Cir. BAP 1995) (citation

omitted); see also Smyth v. City of Oakland (In re Brooks-Hamilton), 271 F.

App’x 654, 658 (9th Cir. 2008) (“California’s one action rule is an election of

remedies statute. It requires a creditor seeking recovery of a debt secured

by property to do so by foreclosing on the security; if a creditor chooses

another form of action (remedy) for the recovery of the debt, for example

by seeking a personal judgment against the debtor, the creditor waives his

security interest in the property.”). The Reeds completely ignore the fact

that Mr. Nielsen did exactly what the one-action rule requires: he brought a

single action to recover the debt and foreclose the deed of trust. See Gen.

Star Indem. Co. v. First Am. Title Ins. Co. of Napa, Case No. 20-CV-03210-TSH,

2021 WL 916850, at *5 (N.D. Cal. Mar. 10, 2021) (“California law mandates

that the lender only bring one action to recover a real estate secured debt,

and that ‘action’ is the sale of the real property by way of foreclosure,

applying the sale proceeds to repay the debt.”); In re Brooks-Hamilton, 271 F.

App’x at 659 (stating that “the one action rule applies where a creditor

pursues an action to recover the underlying debt owed that is inconsistent

with the remedy of foreclosure on its security”).

                                       18
                              CONCLUSION

      The bankruptcy court did not err in denying the Sanctions Motion,

because it correctly held that the 2009 judgment was the first step in the

foreclosure of the creditor’s in rem rights, not merely a money judgment

against the Reeds personally. Accordingly, Mr. Nielsen’s post-discharge

enforcement actions were not against the Reeds personally and did not

violate the discharge injunction. We AFFIRM.

                                      19