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Category Archives: Case Laws

What Borrowers Must Know About Voiding Liens in a Mortgage

06 Sunday Oct 2019

Posted by BNG in Appeal, Bankruptcy, Banks and Lenders, Borrower, Case Laws, Case Study, Federal Court, Foreclosure, Foreclosure Crisis, Foreclosure Defense, Fraud, Judicial States, Legal Research, Litigation Strategies, Loan Modification, Mortgage fraud, Mortgage Laws, Non-Judicial States, Note - Deed of Trust - Mortgage, Pro Se Litigation, Real Estate Liens, State Court, Trial Strategies, Your Legal Rights

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enforceability of judgment lien, Foreclosure, foreclosure defense, homeowners, involuntary liens, Lien, lien stripping, lien voidance, liens, Loan, Loan servicing, Mortgage loan, Mortgage modification, Mortgage servicer, Pro se legal representation in the United States, Property Lien Disputes, property liens, Real Estate Liens, Removing Liens, Types of Real Estate Liens, Unperfected Liens, voluntary liens

There are numerous methods for voiding questionable liens in any given mortgage. In this post, we’ll discuss an interesting decision by the U.S. Court of Appeals for the Ninth Circuit in Bankruptcy Adversary Proceeding.

This decision from the U.S. Court of Appeals for the Ninth Circuit poses a serious threat to mortgage companies that service mortgages of chapter 13 debtors. Mortgage servicers should be aware of the case’s implications and adjust their internal case monitoring procedures as necessary.

Consider a common situation. A borrower files a chapter 13 bankruptcy case, and her mortgage servicer files a proof of claim for the mortgage balance. The borrower then objects to the proof of claim based on some purported technicality: the signature was forged, the endorsement was improper, the servicer lacks standing to enforce the note, etc. For whatever reason, the mortgage servicer does not respond to this objection, and the claim is disallowed by default.

When this happens, the borrower will often attempt to leverage a favorable settlement, like a mortgage modification, by filing a lawsuit to void the mortgage under 11 U.S.C. § 506(d). This provision allows a bankruptcy court to void a lien if the lien secures a claim that is not “allowed.” Because the mortgage was “disallowed” by default due to the mortgage servicer’s failure to respond, this statute theoretically allows the court to void the mortgage altogether.

Courts generally do not void mortgages that are substantively valid but were disallowed because of a default. The most common solution in these situations is a settlement and a motion to reconsider the disallowance under 11 U.S.C. § 502(j). Bankruptcy courts may grant these motions for “cause” at their discretion, which is typically satisfied if the mortgage servicer can prove the substantive validity of the mortgage. See generally In re Oudomsouk, 483 B.R. 502, 513-14 (Bankr. M.D. Tenn. 2012). This works to everyone’s advantage: the mortgage servicer gets paid through the bankruptcy, and the debtor avoids the risk of post-bankruptcy foreclosure if the lien’s validity is ultimately upheld after the case concludes.

The decision of the U.S. Court of Appeals for the Ninth Circuit in In re Blendheim may change this result. 2015 WL 5730015 (9th Cir. Oct. 7, 2015). In Blendheim, the debtors owned a condominium with two mortgages. After filing chapter 7 and obtaining a discharge of their unsecured debts, the debtors immediately filed a chapter 13 case to restructure their mortgages on the condominium (this process is known as a “chapter 20”). HSBC, the senior servicer, filed a proof of claim for the senior mortgage, but the debtors objected because (a) HSBC attached only the deed of trust, and not the promissory note, to the proof of claim, and (b) one of the signatures on the note was purportedly forged.

For reasons unknown, HSBC did not respond to the objection, and the bankruptcy court entered an order disallowing HSBC’s claim by default. Five months later, the debtors brought an adversary proceeding to void the mortgage under 11 U.S.C. § 506(d). Almost eighteen months after the bankruptcy court disallowed HSBC’s claim, HSBC filed a motion to reconsider the disallowance. HSBC also challenged the debtors’ attempt to void the mortgage because the disallowance was not actually litigated; it was the result of a default. The bankruptcy court disagreed, finding that (a) HSBC had no good reason for failing to respond to the claim objection, and (b) the statute plainly permitted lien avoidance in these circumstances. After the bankruptcy court confirmed the debtors’ plan, which provided for payment of only the junior mortgage, HSBC appealed.

On appeal, HSBC raised three primary issues. First, it argued that Section 506(d) should not operate to void its mortgage, notwithstanding the plain language of the statute, when the order disallowing the claim was not actually litigated but was based on a default. Second, it argued that even if the lien were properly voided under Section 506(d), the result could not be permanent because the debtors, having recently received a discharge in their chapter 7 case, were not eligible for a discharge in their chapter 13 case. Third, it argued that by losing its lien because of a default order in the bankruptcy case, as opposed to a formal lawsuit, it was denied due process.

The court disagreed with HSBC on each issue. First, it held that lien avoidance was appropriate. HSBC cited cases where courts refused to void a mortgage when a claim was disallowed for being filed late. The court distinguished these cases, holding that a creditor who files a late proof of claim is not “actively participating in the case” and therefore cannot have its state law lien rights impacted. See generally Dewsnup v. Timm, 502 U.S. 410, 418-19. But when a creditor timely files a proof of claim then willfully fails to respond to the debtors’ objection to the claim, the situation is fundamentally different. According to the court, the Bankruptcy Code plainly allows permanent lien avoidance when a creditor, like HSBC, “just sle[eps] on its rights and refuse[s] to defend its claim.” Blendheim, 2015 WL 5730015, at *11.

Next, the court addressed HSBC’s second argument and held that lien avoidance was appropriate even though the debtors were not eligible for a discharge. Acknowledging a split of authority, the court clarified that discharge affects only personal liability, not the in rem rights of creditors, so the cases on which HSBC relied were distinguishable. Nothing in the Bankruptcy Code prohibits lien avoidance just because a borrower has no right to a discharge.

Finally, the court held that HSBC’s due process was not offended. HSBC received notice of the claim objection and had ample time to respond.  Its failure to do so, while fatal to its lien, did not violate its due process rights.

What This Means for Mortgage Creditors

The Blendheim case may have serious implications for mortgage creditors. This situation is not an outlier: mortgage servicers commonly fail to respond to claim objections. his may be because of the quick deadline to respond to these objections or the use of separate legal counsel for handling administrative functions in bankruptcy versus defending adversary proceedings. Historically, when a claim is disallowed based on a creditor’s failure to respond to a claim objection, bankruptcy courts will grant a reconsideration motion under Section 502(j) if the creditor can prove the substantive validity of the mortgage.

After Blendheim, the result may be different. The Blendheim court, after all, did not seem to care about the underlying validity of HSBC’s claim. Instead, it focused on HSBC’s failure to respond without a good reason.

How does this Affect Mortgage Creditors

Mortgage servicers should be aware of this decision and should make sure that they are closely following the dockets of cases involving their borrowers in bankruptcy. If they don’t, they risk losing their mortgage lien, if any, altogether.

CASE STUDY:  HSBC v. BLENDHEIM

[The views expressed in this document are solely the views of the Author. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance]

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

If you are a homeowner already in Chapter 13 Bankruptcy with questionable liens on your property, you needs to proceed with Adversary Proceeding to challenge the validity of Security Interest or Lien on your home, Our Adversary Proceeding package may be just what you need.

Homeowners who are not yet in Bankruptcy should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

If you have received a Notice of Default “NOD”, take a deep breath, as this the time to start the FIGHT! and Protect your EQUITY!

If you do Nothing, you will see the WRONG parties WITHOUT standing STEAL your home right under your nose, and by the time you realize it, it might be too late! If your property has been foreclosed, use the available options on our package to reverse already foreclosed home and reclaim your most prized possession! You can do it by yourself! START Today — STOP Foreclosure Tomorrow!

 

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What Homeowners With Business Should know About Federal Judgments and Chapter 11 Plans

16 Tuesday Jul 2019

Posted by BNG in Affirmative Defenses, Bankruptcy, Borrower, Case Laws, Credit, Federal Court, Judgment, Judicial States, Litigation Strategies, Non-Judicial States, Pro Se Litigation, Trial Strategies, Your Legal Rights

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10 years, chapter 11, chapter 11 bankruptcy, Chapter 11 Plans, Consent decrees, dormant judgment, enforceability of judgment lien, enforceability of judgments, entry of judgment, execution method, execution on a judgment, extinguishment, federal courts, Federal Judgments, federal statute, homeowners, installment judgments, issuance of the remittitur, Judgment, judgment creditors, judgment expired, notice of entry of judgment, periodic payments, registered judgment, renewal of judgment, renewing a judgment, state law, Statute of Limitations, statute of limitations for judgment renewals, statute of repose, time-barred judgment, write of execution

What greeting card do you expect from the judgments warehoused in your file cabinets? Yes, those judgments can mail you a greeting card. Your first choice is the birthday card: “Happy 10th Year Anniversary. What a ride. Thanks for the renewal. See you in ten years.” Your other choice is the condolence card: “10 years? You waited too long. My dearest sympathy.”

Victory lasts forever, but not a federal judgment. “There is ‘no specific federal statute of limitations on how long [a federal] judgment is effective. (citation omitted) When no federal statute applied, state practices and procedures are utilized.”1 State law provides a judgment creditor with the rights and remedies to enforce a federal money judgment under F.R.C.P. 69(a)(1), including the renewal of a money judgment.2 The law of the state measures the life of a federal judgment. A pending appeal does not toll the enforceability period under C.C.P. § 683.020.3

The Law of the Domicile Measures the Life of a Federal Judgment

In In Re Levander,4 the Ninth Circuit held that the federal courts apply the law of the domicile in the enforcement of a judgment.5 Similarly, in McCarthy v. Johnson,6 the court held that Utah state law provided the mechanism for the renewal of a federal judgment. In Fidelity Nat. Fin. Inc. v. Friedman, the Ninth Circuit held that state law applies when measuring the life of judgments. Federal and bankruptcy courts apply state law when renewing a judgment because federal judgments lack a federal expiration date.7 While Fidelity dealt with a registered judgment, the principle that a registered judgment is deemed a judgment for all purposes under 28 U.S.C. § 1963 is nevertheless applicable.

The Ninth Circuit held that the federal courts are to apply state law in determining the statute of limitations.8 Likewise, the Fifth Circuit applied Texas state law in Andrews v. Roadway Express, Inc. (5th Cir. 2006) 473 F.3d 565, holding that a consent decree, arising from a class action suit, was time barred as a result of the plaintiffs’ failure to timely renew the judgment and raising the issue whether other judgment providing for payment to class bear a fixed life.9 Unless a federal statute provides otherwise, the practice relative to the revival of dormant judgment is governed by state law.10

Deader Than a Doornail: the Statue of Repose

Some states have held that a time-barred judgment is extinguished and ceases to exist (“statute of repose”), as opposed to having a procedural rule that bars recovery in the enforcement of judgments.11 In United States v. Tacoma Gravel & Supply Inc.,12 the Ninth Circuit, construing Washington state law, held that Washington state’s limit on the enforceability of judgments is a statute of extinguishment (i.e., a statute of repose),13 not a statute of limitations. Moreover, the Ninth Circuit unequivocally held that “this is not a statute of limitations but of extinguishment; after six years, a Washington judgment has no force or effect—it ceases to exist. [Collection of Washington state cases]”14 The Tacoma court applied Washington state law to bar enforcement brought by the United States, stating that the “Appellant had no judgment left to renew,” a conclusion predicated in part on the government’s filing in state court.15 The court did not leave the government empty-handed. It left open the prospect that the underlying claim was still viable under United States v. Summerlin.16 Tacoma is important because it demonstrates that a renewal statute is also a statute of repose that may extinguish the judgment completely.

Read the Manual

California Code of Civil Procedure §§ 683.110 through 683.220 provide for the renewal of a judgment consisting generally of the filing and service of an application for renewal [Sections 683.140 to 683.150]. Upon filing the application, the clerk shall enter the renewal in the court records.17 Section 683.150(a) authorizes renewal without the necessity of service of process of the renewal “package.” (Judicial Council Form Nos. EJ-190, EJ-195, and MC-012, and include a detailed declaration of interest).

To initiate enforcement, the judgment creditor must serve the renewal by mail. See C.C.P § 683.160(b). To maintain the judgment lien on the real property, the judgment creditor must record a certified copy of the application for renewal. SeeC.C.P § 683.180.18 Ten years is a long time and expect that the debtor might have conveyed the property, fraudulently or otherwise. The judgment creditor must personally serve the transferee and file proof of service within 90 days of the renewal filing. See §§ 683.180(b)(1) & (2) in prosecuting the renewal. This is a common error and title reports (modern parlance and much cheaper: litigation guaranty) are de riguer in identifying the transferee. In the online world, nearly every county recorder (except Los Angeles) will identify the grantee of the debtor under the “granter/grantee” index. Use Judicial Council Form EJ-190 for the Northern District of California, not the Central District, which requires a traditional filing.19

Chapter 11 Plans Are Money Judgments and Expire Like Any Other Federal Judgment

The fact that a class action [“Andrews”] judgment expired suggests that a confirmed Chapter 11 plan, providing for payment to the creditors, would likewise expire unless renewed pursuant to the domicile law. Chapter 11 plans are a blend of contract, judgment, and consent decree, offering payment to a group of creditors.20 Chapter 11 plans assure payment equivalent to their recovery in a Chapter 7 liquidation21 and are subject to enforcement if breached.22 If a consent decree arising from a class action expires like any other federal judgment, the confirmed Chapter 11 plan, bearing the near-identical attributes (judgment, class of claimants, continuing supervision, claim filings procedures, and pro rata payment based on the consent decree), would likewise expire absent a renewal under state law.23 The statute of repose would extinguish the plan obligations and reinvigorate a mediocre balance sheet. The plan discharge would recapitalize the debtor. Who would be beneficiary of the plan “kicking the bucket?” Answer: the shareholders who are the [pre-petition] creditors.

Is dumping the Chapter 11 plan a good deal and for whom? Answer: Yes, if stock of the debtor, freed of the plan and publicly traded, offers greater value to the creditors than payments under the plan. Expiring Chapter 11 plans recast the asbestos mega-cases24 whose plans bear a lifespan of 10 years plus and compensate claimants with debtor’s stock [through a claimant’s trust]. The statute of repose frees the debtor of plan obligations [billions], jumpstarts the stock, and puts real money in the hands of the claimants.

Federal Courts Are Eternal But Federal Judgments Are Not

The life of a federal judgment could easily exceed 10 years, given various appeals up to the Supreme Court. Consent decrees offering payment over time to claimants can run 10 years or more. Asbestos Chapter 11 plans readily exceed ten years and the Johns Manville plan is now in excess of 20 years. These plans [judgments or decrees] bear the risk of extinguishment if not renewed and, if expired, would upset settled social and political expectations.

Is a plan implosion a disaster? In a Chapter 11, the beneficiaries are the creditors as shareholders, anticipating an upswing in the stock value, would move to extinguish the plan and inherit a revived company. This result suggests that the plan extinguishment more efficiently compensates victims of the mass tort than the plan payments because the invisible hand of the marketplace reveals this outcome. The plan extinguishment will wipe out the plan and the market will rush to the stock.

1. In re Fifarek (Stark v. Fifarek), 370 B.R. 754, 758 (Bankr. Court, W.D. Mich. 2007); In re Hunt (Lillie v. Hunt), 323 B.R. 665, 666 (Bankr. W.D. Tenn. 2005) (“Since there is no specific statute of federal statute of limitations on how long this judgment is effective, the parties agree that we must look to Tennessee law [citation omitted])”.

2. Fed R. Civ Pr. 69(a)(1)&(2)

3. Fidelity Creditor Service, Inc. v. Browne (2001) 89 Cal.App.4th 195, 201 [106 Cal.Rptr.2d 854]: The period prescribed in Section 683.020 commences on the date of entry and is not tolled for any reason

4 In re Levander, 180 F.3d 1114 (9th Cir. 1999)

5. Id. at 1121-1122, “We have held that Federal Rule of Civil Procedure 69(a) empowers federal courts to rely on state law to add judgment-debtors under Rule 69(a), which permits judgment creditors to use any execution method consistent with the practice and procedure of the state in which the district court sits.” citing to Cigna Property & Cas. Ins. Co. v. Polaris Pictures Corp., 159 F.3d 412, 421 (9th Cir.1998) (quoting Peacock v. Thomas, 516 U.S. 349, 359 n. 7, 116 S.Ct. 862 [1996])(internal quotation marks omitted); see also, Andrews at 568; Crump v. Bank of America, 235 F.R.D. 113, 115 (D.D.C. 2006); RMA Ventures v. Sun Am. Life Ins. Co., 576 F.3d 1070, 1074 (10th Cir. 2009) (“Once a federal district court issues a write of execution, a judgment creditor must follow the procedure on execution established by the laws of the state in which the district court sits. [Citations omitted] ***). Thus, as required by FRCP 69(a)(10), Defendants have turned here to the method of execution prescribed under Utah law.”

6. McCarthy v. Johnson, 172 F.3d 63 (10th Cir. 1999). Unpublished Opinion

7. Fed.R.Civ.Pro 69(a) et seq. incorporates the law of the state in enforcing money judgments, including the requirement of a renewal. McDaniel v. Signal Capital Corp., 198 B.R. 483, 486-487 (Bankr. S.D. Texas 1996); see also, In re Brink, 227 B.R. 94, 95-96 (Bankr. N.D. Texas, 1998); In re Davis, 323 B.R. 745, 748-749 (Bankr. D. Ariz, 2005); In re Hunt; (Lillie v. Hunt), 323 B.R. 665, 666-667 (Bankr. W.D. Texas 2005); In re Fifarek (Stark v. Fifark), 370 B.R. 754, 758 (Bankr. W. D. Mich. 2007). Also In re Romano (Romano v. LaVecchia), Westlaw cite unavailable [WESTLAW?] (9th Circuit BAP, 2009) (“Thus, state law governs the procedure for execution on a judgment in the absence of an applicable federal statute. There is no relevant federal statute we have been able to locate with regard to the renewal of judgment. The parties agree that Nevada law governs the enforcement of the judgment.” [6 years], aff’d 2010 Ap. Lex 5444 (9th Circuit, 2010).

8. See Marx v. Go Publ. Co., Inc., 721 F.2d 1272, 1273 (1983); see also; Duchek v. Jacobi, 646 F.2d 415, 417 (1981).

9. Andrews at 567-568 (collection of cases). Note the discussion whether the issue is the time limits for the issuance of a writ of execution is subject to state law and whether the judgment is extinguished.

10. See Donellan Jerome Inc. v. Trylon Metals Inc., 996 F. Supp. 996 (USDC, N.D.Ohio 1967 (Collection of cases).

11. Mississippi provides for statute of repose, not statute of limitations for judgment renewals. [Mississippi Code § Ann 15-1-43].

12. United States v. Tacoma Gravel & Supply Co., 376 F.2d 343, 344-345 (9th Cir. 1967) (“Consequently, the judgment becomes inoperative for any purpose after expiration of six years.) Please note that, while Washington has extended the life of a judgment to ten years, the holding in Tacoma that the Washington statute is one of repose, extinguishing the judgment, still applies. Cf. RCW 4.16.020 and 4.56.210

13. A statute of repose cuts off a right of action after a specified period time, irrespective of accrual or even notice that a legal right has been invaded. Giest v. Sequoia Ventures, 83 Cal.App.4th 300, 305 (Cal.App.1 Dist., 2000).

14. Tacoma at 344.

15. Id. at p. 345.

16. In re Penberthy, 211 B.R. 391, 395 (Bankr.W.D. Wash. 1997).

17. Goldman v. Simpson, 160 Cal.App.4th 255, 262: “The statutory renewal of judgment is an automatic, ministerial act accomplished by the clerk of the court; entry of the renewal of judgment does not constitute a new or separate judgment. ‘Filing the renewal application (and paying the appropriate filing fee, Gov.C. § 70626(b)) results in automatic renewal of the judgment. No court order or new judgment is required. The court clerk simply enters the renewal of judgment in the court records.’”

18. Songer v. Cooney (Cal. App. 2 Dist. 1989) 214 Cal.App.3d 387, 393, 264 Cal.Rptr. 1 [abstract of judgment ensures enforceability of judgment lien even though the debtor is bankrupt].

19. If in state court, the alternative method (if timely) is to file a suit to renew the judgment. See Pratali vs. Gates (1992) 4 Cal App. 4th 632, 637-638 and Green vs. Zissis (1992) 5 Cal. App. 4th 1219, 1222; for more a detailed discussion, see Fredric Goldman vs. Orenthal James Simpson (O.J. Simpson) (2008) 160 Cal.App.4th 255 [continuing jurisdiction over judgment debtor who absconds from California]. If the defendant departed the state, C.C.P. § 351 tolls the statute of limitations. Green vs. Zissis, supra., at 1222-1123. See also Kertesz vs. Ostrosky (2004) 115 Cal. App. 4th 369, 373. A California state court judgment becomes final upon expiration of the appeal time, or issuance of the remittitur. Green vs. Zissis, supra. p. 1223. If notice of judgment is service, the judgment becomes final in 60 days, and absent notice, 180 days. The notice of entry of judgment kicks off the 60-day clock under C.R.C. 8.104(a)(1) & (2) [60 days after notice from clerk or party], but under C.R.C. 8.104(a)(3), the judgment does not become final until 180 days after entry of judgment. A federal judgment, on the other hand, differs from state law, and is final upon entry. Eichman v Fotomat Corp. (9th Cir 1985) 759 F.2d 1434, 1439.

20. In re Bruce Bartleson, 253 B.R. 75 (9th Cir. BAP 2000) at 78-79

21. 11 U.S.C. § 1129(a)(7)(A)(ii) [Unsecured creditors should emerge from the Chapter 11 with equal or better than what would a Chapter 7 would pay]

22. See In re OORC Leasing, LLC (Bankr. N.D. Ind. 2007) 359 B.R. 227 at 233.

23. A statute of repose extinguishes the judgment. A statute of limitations on a judgment renders the judgment unenforceable. Consent decrees, Chapter 11 plans, and installment judgments provide for periodic payments, sometimes spanning more than ten years. Chapter 11 asbestos plans span decades. This article suggests that a statute of repose would extinguish the decree, plan, or judgment. The statute of limitations might render the decree, plan, or judgment unenforceable but the obligation might remain viable as a contract and enforceable by way of independent suit. Installment judgments have a separate clock under C.C.P. § 683.130(b)(1) based upon the accrual of the past-due payments. The math is left to another article.

24. Nearly all publicly traded.

[The views expressed in this document are solely the views of the Author. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance]

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

If you have received a Notice of Default “NOD”, take a deep breath, as this the time to start the FIGHT! and Protect your EQUITY!

If you do Nothing, you will see the WRONG parties WITHOUT standing STEAL your home right under your nose, and by the time you realize it, it might be too late! If your property has been foreclosed, use the available options on our package to reverse already foreclosed home and reclaim your most prized possession! You can do it by yourself! START Today — STOP Foreclosure Tomorrow!

If you are a homeowner already in Chapter 13 Bankruptcy and needs to proceed with Adversary Proceeding to challenge the validity of Security Interest or Lien on your home, Our Adversary Proceeding package may be just what you need.

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What Pro Se Homeowners Must Know About Appellate Issues and Record on Appeal

28 Saturday Apr 2018

Posted by BNG in Appeal, Case Laws, Case Study, Federal Court, Foreclosure Defense, Judicial States, Litigation Strategies, Non-Judicial States, Pleadings, Pro Se Litigation, State Court, Trial Strategies, Your Legal Rights

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Appeal, Appellate court, Appellate Issues, appellate proceeding, appellate record, arguments for appeal, closing argument, Jury instructions, litigator, Motion in Limine, Objections, post-judgment, pre-trial, Pro Se Litigating, Pro Se litigator, Pro Se trial litigators, Record on Appeal, trial, Trial court

Trying cases is one of the most exciting things a litigator does during his or her career but it is also certainly one of the most stressful.

While over 90% of the cases never make it to trial before settlement, if your case is one of the 10% or less that made it to trial, as a Pro Se litigator, there are few things to bear in mind.

A study conducted few years back shows that About 97 percent of civil cases are settled or dismissed without a trial. The number tried in court fell from 22,451 in 1992 to 11,908 in 2001, according to the study. Plaintiffs won 55 percent of the cases and received $4.4 billion in damages.

Homeowners litigating their wrongful foreclosure cases Pro Se are not Attorneys by profession, however, this post is designed to help Homeowners perfect and win their wrongful foreclosure Appeals.

Your case on appeal can be greatly improved by focusing on potential appellate issues and the record on appeal from the start of a case until the finish.

While in the trenches during trial, many litigators understandably focus all of their energies on winning the case at hand. But a good litigator knows that trial is often not the last say in the outcome of a case. The final outcome often rests at the appellate level, where a successful trial outcome can be affirmed, reversed, or something in between. The likelihood of success many times hinges on the substance of the record on appeal. The below discusses a variety of issues that Pro Se trial litigators should keep in mind as they prepare and present their case so they position themselves in the best possible way for any appeals that follow.

Prepare Your Appellate Record From The Moment Your Case Begins

Perhaps one of the biggest misconceptions regarding preserving an adequate record on appeal is when a Pro Se litigant should start considering what should be in the record. In short, the answer is from the moment the complaint is filed. At that time, Pro Se Litigants should begin to think carefully about the elements of each asserted cause of action, potential defenses and their required elements, and the burden of proof for each. Every pleading should be drafted carefully to ensure that no arguments are waived in the event they are needed for an appeal. For instance, a complaint should allege with specificity all the factual and legal elements necessary to sustain a claim, while an answer should include any and all applicable affirmative defenses to avoid waiver. See, e.g., Travellers Int’l, A.G. v. Trans World Airlines, 41 F.3d 1570, 1580 (2d Cir. 1994) (“The general rule in federal courts is that a failure to plead an affirmative defense results in a waiver.”).

Likewise, if you file a motion to dismiss, ensure that the motion contains all the
necessary evidence that both a trial court and appellate court would need to find in your favor.

Of particular importance in federal court practice is the pre-trial order. Under Federal
Rule of Civil Procedure 16, the pre-trial order establishes the boundaries of trial. See Elvis Presley Enterprises, Inc. v. Capece, 141 F.3d 188, 206 (5th Cir.1998) (“It is a well-settled rule that a joint pre-trial order signed by both parties supersedes all pleadings and governs the issues and evidence to be presented at trial.”). If the pre-trial order does not contain the pertinent claims, defenses or arguments that you wish to present at trial, you are likely also going to be out of luck on appeal.

Later on in the case, as the factual record becomes more fully developed, consider
whether amending or supplementing the pleadings or other court submissions are necessary to make the record as accurate as possible. Most states follow the federal practice of allowing liberal amendments. However, these can be contested, particularly late in the process, closer to trial. While appellate review is often for abuse of discretion, formulating a strong motion in favor of or in opposition to an amendment can preserve the issue.

What to Keep in Mind as Your Case Proceeds

As the case develops, consider whether the elements you need to prove your case are
sufficiently reflected in the information you obtain during discovery. If not, determine whether there are ways to obtain the information you need well before trial starts. By the time trial arrives, it may be too late to supplement the record to get before the trial judge and the appellate court what you need to win your case. In that regard, anything you have in writing that gets submitted to the court may very well end up being part of the record on review, so make sure it is accurate and understandable. Incomprehensible or incomplete submissions can muddy your appellate record and damage a successful appellate proceeding. In the same vein, make sure
anything presented to the court prior to trial that you want to be part of the record is transcribed.

Otherwise, there will be an insufficient record on appeal. This is particularly so when it comes to discovery disputes. Although they are common in present day litigation, judges hate discovery disputes. To preserve discovery issues for appeal, be sure to get a ruling, and make sure it is reflected in writing. Moreover, carefully review every pre-trial court order or other judicial communication, including court minutes, to ensure accuracy. Attempting to make corrections during the appellate process may not be possible.

Another significant area for appellate issues is the failure to timely identify experts. This is subject to an abuse of discretion standard of review, so it is important that one builds a record on the issue, particularly regarding any prejudice suffered by the untimely disclosure.

After Discovery Closes – The Motion in Limine

Once discovery has closed, consider carefully any motions in limine you may want to
make. Although motions in limine are not strictly necessary, they are helpful in identifying evidentiary issues for the judge and litigant and increase the chances of a substantive objection, sidebar, and ruling when the issue arises at trial. One potential pitfall – some jurisdictions require a party to renew an objection at trial after a motion in limine has been denied, so make sure to do so if necessary. See, e.g., State ex. Rel Missouri Highway and Transp. Com’n v. Vitt, 785 S.W.2d 708, 711 (Mo. Ct. App. E.D. 1990) (“A motion in limine preserves nothing for review. Following denial of a motion in limine, a party must object at trial to preserve for appellate review the point at issue.”) (internal citation omitted). Also, if the Court delivers its ruling on a motion in limine orally, make sure it is transcribed properly by the court reporter.
Leave no doubt that you have raised (and obtained a ruling on) an issue.

Now the Trial – What to Keep in Mind

Above all else, when in doubt, object. Objections should be immediate and specifically describe the basis for the objection so the record is clear. Make the argument to win –
every objection should be more than just reciting labels, and should provide sufficient information for the trial judge to decide the issue. The goal is not to be coy with the trial judge and hope for a lucky break, but to be prepared to make an argument to win the issue at trial or, alternatively, on appeal. In addition, if you are the party proffering the evidence, make sure the proffer is on the record and that you expressly state why the evidence is being offered. This may require pressing on the judge to get the full objection on the record. If you fail to do so, you risk the appellate court not reviewing the claim on appeal. See, e.g., National Bank of Andover v. Kansas Bankers Sur. Co., 290 Kan. 247, 274-75 (2010) (observing “purpose of a proffer is to make an adequate record of the evidence to be introduced … [and] preserves the issue for appeal and provides the appellate court an adequate record to review when determining whether the trial court erred in excluding the evidence.”). Also, always be careful of waiving any issues for appeal by agreeing to a judge’s proposed compromise on evidentiary issues.

An important but often overlooked consideration is the courtroom layout and dynamics. Well-thought and timely objections will be for naught if they are not transcribed. Sometimes the courtroom layout can make record preservation difficult. For example, if objections are made at sidebar conferences where the court reporter is not present, those objections may not make their way into the appellate record or be dependent on the after the fact recollections of others. See, e.g., Ohio App. R. 9(c) (describing procedures for preparing statement of evidence where transcript of proceedings is unavailable and providing trial court with final authority for settlement and approval). This should be avoided whenever possible.

Beyond objections, make sure all the evidence you need for your appeal is properly admitted by the trial court before the close of your case. All exhibits that were used at trial should be formally moved into evidence if there is any doubt as to whether they will be needed on appeal. If you had previously moved for summary judgment and lost, make sure you take the necessary steps at trial to preserve those summary judgment issues, especially in jurisdictions that do not allow interlocutory appeals.

Another important aspect of the trial is the jury instructions. Jury instructions should always be complete. Remember that the instructions you propose can be denied without error if any aspect of them is not accurate, so break them into small bites so that the judge can at least accept some parts. Specifically object to any jury instructions as necessary before the jury begins its deliberations. See, e.g., Fed. R. Civ. P. 51(c). Failure to do so will waive the right to have the instruction considered on appeal. See, e.g., ChooseCo, LLC v. Lean Forward Media, LLC, 364 Fed. Appx. 670, 672 (2d Cir. 2010) (finding that defendant’s objection to jury instructions and verdict form during jury deliberations did not comply with Fed. R. Civ. P. 51(c) and noting that the “[f]ailure to object to a jury instruction or the form of an interrogatory prior to the jury retiring results in a waiver of that objection.”).

Additionally, when you lodge your objections, make sure you explain why the jury charge is in error since general objections are insufficient. See, e.g., Victory Outreach Center v. Meslo, 281 Fed. Appx. 136, 139 (3d Cir. 2008) (holding that general objection to the court’s jury instructions and proposed alternative instructions, “were insufficient to preserve on appeal all potential challenges to the instructions” and were not in compliance with Fed. R. Civ. P. 51(c)(1)). If possible, have a set of written objections to the other side’s jury charges, and get the judge to rule on that, since judges like to hold such conferences off the record.

Also, do not overlook the verdict form. Know that when you agree to a particular form (general or special), that will mean that you are probably taking certain risks and waiving certain arguments one way or the other. Give this thought, and make sure that you know the rules of your jurisdiction on verdict forms so you can object if necessary. See, e.g., Palm Bay Intern., Inc. v. Marchesi Di Barolo S.P.A., 796 F.Supp. 2d 396, 409 (E.D.N.Y. 2011) (objection to verdict sheet should be made before jury retires); Saridakis v. South Broward Hosp. Dist., 2010 WL 2274955, at *8 (S.D. Fla. 2010) (noting that Federal Rule of Civil Procedure 51(c)(2)(B) states that an objection is timely if “a party objects promptly after learning that the instruction or request will be … given or refused” and that the Eleventh Circuit “require[s] a party to object to a … jury verdict form prior to jury deliberations” or the party “waives its right to raise the issue on appeal.”). (internal quotations and citation omitted).

Finally, pay careful attention to the closing argument. This can be an area where winning at trial by convincing a jury may be at odds with preserving the issue on appeal. On the flip side, many litigators are loath to interrupt a closing argument to object. If you need to object to preserve an issue, do so.

Post-Judgment – Final Things to Consider

First, determine whether certain arguments must be made post-judgment to preserve those arguments for appeal. Some arguments (such as those attacking the sufficiency of the evidence) must be made at that time or they are waived. See, e.g., Webster v. Bass Enterprises Production Co., 114 Fed.Appx. 604, 605 (5th Cir. 2004) (holding that failure to challenge back pay award in post-judgment motion waived the issue on appeal absent exceptional circumstances that did not exist). Written motions post-judgment should include all relevant references to trial transcripts and evidence to make as complete and clean a factual record as possible.

Second, when the appellate record is being compiled, carefully double check the record to ensure its accuracy. Many times the trial court clerk or court reporter accidentally omits portions of the record. If this is not caught and corrected in a timely manner, you may be stuck with a bad record. Most jurisdictions have procedures in place for supplementing and correcting the record but understand them well in advance so there is adequate time to address any discrepancies before the appellate briefing is due.

Conclusion

Too often even seasoned trial lawyers get tripped up on appeal by not having an orderly and complete record. As a Pro Se litigator, you must never lose sight of the factual and legal issues in a case and what an appellate court will need to consider in making the desired determinations. As demonstrated above, a winning record requires thought at all stages of the litigation, not just when the notice of appeal is filed. With proper preparation, attention to detail, and forethought, one can ensure that the proper record on appeal is never in doubt.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

 

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What Homeowners Must Know About Mortgage Fraud & Restitution

10 Tuesday Apr 2018

Posted by BNG in Banks and Lenders, Case Laws, Case Study, Foreclosure Crisis, Foreclosure Defense, Fraud, Judicial States, Legal Research, Litigation Strategies, Mortgage fraud, Mortgage Laws, Non-Judicial States, Pro Se Litigation, Restitution, State Court, Your Legal Rights

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Foreclosure, homeowners, Law, Lawsuit, Loan, Monetary Restitution, Mortgage fraud, Nevada, Ninth Circuit, Pro se legal representation in the United States, Restitution

During the peak of the housing boom in Las Vegas, Russell, a mortgage loan processor for a large bank, reviewed a mortgage application. Everything appeared to be in order: this particular type of mortgage loan required no income verification because the buyer had excellent credit and the home would be an owner-occupied property. Russell approved the loan for the bank.

Unbeknownst to Russell and the bank, the applicant was actually a “straw buyer,” using his name and credit to buy the house at the insistence of his business partner, but not actually intending to live in the house. All the applicant had to do was sign a few documents and both the applicant and his business partner would profit from exploding housing prices. The applicant’s credit would allow the pair to purchase a single-family residence for $295,000, and then, before the first mortgage payment came due, they would flip the property, that is, immediately sell the home, and profit from the home’s extraordinary short-term appreciation. The applicant never planned on living in the house nor making any mortgage payments, despite his execution of loan documents to the contrary.

Unfortunately, housing prices did not continue their fantastic escalation and the pair were unable to sell the home. Not surprisingly, neither the applicant nor his business partner made any mortgage payments and the home went into foreclosure. At the time of the home’s foreclosure, the house had a fair market value of $265,000. However, the bank that relied on the applicant’s information had too many similarly situated properties at the time of the foreclosure and decided to keep the home in inventory until it could sell the home at a later date.

Meanwhile, the financial institution became suspicious of the applicant and realized he never even moved into the house, despite claiming on his Uniform Residential Loan Application that this would be an “owner-occupied” property.

Concerned with an increase in mortgage fraud, the lender tipped off authorities, who subsequently investigated and arrested the straw buyer and his business partner. Almost a year later, the partners pled guilty and were sentenced, inter alia, to pay restitution to the financial institution. At the time of sentencing, the home had a fair market value of $145,000.

The court ordered restitution based on the Mandatory Victims Restitution Act (MVRA) concerning fraud and property. The victim, in this case the bank, argued its amount of loss equaled $295,000 (the amount originally borrowed) less the current fair market value of the property returned, $145,000; thus, the court should order the defendants to pay restitution of $150,000. On the other hand, the defendants argued that at the time the property was returned to the financial institution, the value of the home was $265,000. And because the bank had control over the property since that point in time, and had the ability to sell it any time, the defendants should not be liable for the further declining
market conditions. Thus, the defendants argued they only owed restitution of $30,000. Alternatively, the judge could consider a third possibility: recent  recommendations from US Sentencing Guidelines. Under these new guidelines,
the court determines the fair market value of the home on the defendants’ sentencing
date.

But, if the bank had not sold the home by that date, that fair market value would be based on the county’s assessed value of the property. In Clark County, where Las Vegas is situated, the Assessor’s Office updates property values annually and, depending on the specific time frame in this hypothetical, the assessment value can range from a lagging property assessment valuing the home at $280,000 to a more current assessment valuing the home at $125,000.

Which measure of restitution and subsequent calculation is best? That is, which value most adequately compensates the injured victim without unfairly burdening the defendants? The Ninth Circuit would side with the defendants in this case, having previously held that the value of the home on the date the bank gains control is the proper measure of restitution. Accordingly, the defendants in this case would be ordered to pay only $30,000 in restitution. On the other hand, the Seventh Circuit would hold that the “property” stolen was the money used to finance the home purchase, and not the actual home.

Subsequently, the “property” is not returned to the victim until the bank sells the
house and gets the entire amount it loaned to the defendants back. For that reason, if the bank sold the home by the sentencing date for $145,000, the defendants would be ordered to pay $150,000 in restitution. And if a judge considered the US Sentencing Guidelines, she would look to the local assessor’s office to determine the correct value. Thus, the amount of restitution a defendant pays depends on where the mortgage fraud takes place and whether the presiding judge considers the US Sentencing Guidelines. Accordingly, mortgage fraud restitution is not uniform throughout the United States.

This note discusses the circuit split in applying the Mandatory Victims Restitution Act of 1996 to mortgage fraud crimes—specifically, the difference in the mortgage fraud restitution formula. In Part I, I provide an introduction to mortgage fraud. In Part II, I provide background on the Mandatory Victims Restitution Act of 1996, which established a directive to courts to order restitution to identifiable victims. Further, the Act indicated, albeit imprecisely, that the restitution amount is based on the property’s value on the sentencing date, less the property’s “value” on the date the property is returned. Regrettably, the Act does not provide a definition of the word property,” which has resulted in a circuit split. Three circuit courts calculate the mandatory restitution as the property’s “value” based on the date the property is returned—that is, the property’s fair market value on that date. On the other hand, four circuits insist that the “value” of the property can only be determined when the bank actually sells that property. In Part III, I will discuss the circuit split where courts disagree on the “appropriate” restitution calculation.

In an effort to provide a uniform calculation, last year the US Sentencing Commission proposed changes to the US Sentencing Guidelines. While the Guidelines are only advisory and not mandatory, these recent amendments result in a third possible calculation that I discuss in Part IV.

Finally, in Part V, I critique each of the three imperfect approaches. In addition, I provide comparisons to various state foreclosure deficiency statutes as an illustration of alternative calculations. I conclude by proposing an amendment to the Mandatory Victim Restitution Act that, in the cases of collateralized loans obtained by fraud, defines “property” as the actual property fraudulently obtained: cash. In addition, I propose an additional “good faith” clause to the amendment to prevent banks from holding onto a foreclosed property longer than necessary. The sooner a property is sold, the sooner the bank recuperates some of its lost funds and the sooner a defendant knows the restitution
amount he must pay.

A. What is Mortgage Fraud?

In the hypothetical above, the partners executed mortgage fraud by using the applicant’s name and credit as a “straw buyer.” That is, a person who allows his name to be used in the loan process but has no intention of actually making any mortgage loan payments. Mortgage fraud comes in a variety of forms. For example, a person commits loan origination fraud when he misrepresents or omits information on a loan application upon which an underwriter ultimately relies to write a loan. Mortgage fraud can also occur with illicit programs aimed at current homeowners who are having trouble with their payments. Lately, this type of foreclosure rescue fraud is increasing. These types of scams focus on homeowners on the verge of foreclosure. Criminals promise to “stop or delay the foreclosure process,” and, in return, homeowners sign over their property to the criminals.

Mortgage fraud can also include “flopping.” Flopping occurs when a bank agrees to a short sale with the homeowner who then attempts to get the lowest price possible by purposefully damaging the soon-to-be-sold house. The house is then bought by an accomplice, cleaned up, and immediately flipped for a profit of upwards of 30 percent. In 2011, Nevada ranked second to Florida in the Mortgage Fraud Index (MFI), a ranking of states based on reported fraud and misrepresentation investigations. The FBI investigates mortgage fraud through Suspicious Activity Reports (SARs) filed by financial institutions.

The number of mortgage fraud SARs filed in 2011 was 93,508. To put this in perspective, in 2003 the number of reports filed was less than 7,000. However, mortgage fraud may be decreasing: 2012 SARs are down 25 percent compared to the previous year.

B. Why Does Mortgage Fraud Matter?

Mortgage fraud is a “significant contributor” to our economic crisis. Mortgage fraud has contributed to an increasing number of home foreclosures, decreasing home prices, and tightening of credit because of investor losses attributable to mortgage-backed securities. Further, “[t]he discovery of mortgage fraud via the mortgage industry loan review processes, quality control measures, regulatory and industry referrals, and consumer complaints lags behind economic indicators—often up to two years or more, with the impacts [of the fraud] felt far beyond these years.” Undeniably, reports of mortgage fraud persist and are continually emphasized in the news.

Lenient underwriting standards and a booming housing market have shaped a perfect backdrop for fraud to thrive. However, “[b]y 2007, real estate values began to fall and mortgage lenders began experiencing large losses due to fraud, reducing their ability to fund new mortgage loans.” The economic implications of mortgage fraud are staggering. The actual dollar amount attributed to mortgage fraud is unknown, however in 2010 alone “more than $10 billion in loans originated with fraudulent application data.”

Moreover, in fiscal year 2012, 70,291 SARs were filed with losses of $2.69 billion. And while the number of mortgage fraud instances has decreased, the dollar amounts involved in instances of fraud has increased.

C. Why Restitution?

Until the early 1980s, courts did not habitually consider restitution as part of sentencing guidelines. In fact, if a court ordered restitution, it was usually based on the defendant’s ability to pay. The passage of the Victim and Witness Protection Act (VWPA) in 1982, its subsequent revision in 1986, and later the Mandatory Victims Restitution Act (MVRA) in 1996 empowered federal judges to order restitution to victims of certain crimes without consideration of the defendant’s ability to pay. Unfortunately, victims receive only a fraction of the costs from crimes through restitution, as not all defendants have the resources to pay the restitution and their income potential diminishes significantly once they are in jail. However, as courts consider both the MVRA and the frequently cited public policy argument for restitution (making the victim whole), courts consequently order restitution awards to mortgage fraud victims. Indeed, “[v]ictims in mortgage fraud cases are statutorily entitled to restitution.

D. The Split

When a court convicts a defendant of mortgage fraud, and the defendant’s return of the property alone is not enough to fully restore the identified victim, the court will try to offset this deficiency in one of two ways. The Second, Fifth, and Ninth Circuits determine restitution based on the property’s fair market value the day the victim receives title to the property. The Third, Eighth, Tenth, and, most recently, Seventh Circuits hold the shortage is calculated based on the actual sale of the collateral real estate. Thus, the value of the property is unknown until the property has been sold and the lender receives the net proceeds. Consequently, this split “sets up a potential case for the U.S.
Supreme Court to decide whether the MVRA requires a court to determine restitution based on the fair market value of collateral real estate on the date it is returned to a victim . . . or the cash value upon foreclosure sale.”

II. THE MANDATORY VICTIMS RESTITUTION ACT OF 1996

Congress first enacted legislation in support of victims’ rights with the Victim and Witness Protection Act of 1982 (VWPA). The act included a broad provision for victim restitution. In considering the bill, the Committee on the Judiciary indicated that [t]he principle of restitution is an integral part of virtually every formal system of criminal justice, of every culture and every time. It holds that, whatever else the sanctioning power of society does to punish its wrongdoers, it should also insure that the wrongdoer is required to the degree possible to restore the victim to his or her prior state of well-being.

However, while this report indicated the importance of requiring restitution,
the Act only provided that a Court may order the defendant to pay restitution. Congress expanded and amended legislation for victims in future legislation, most notably in the Mandatory Victims Restitution Act of 1996. Congress identified one of the primary purposes of the Act as “requiring Federal criminal defendants to pay full restitution to the identifiable victims of their crimes.” In addition, Congress specifically made mandatory restitution applicable to fraudulent crimes against property. Moreover, Congress explicitly identified the legislation’s purpose:

This legislation is needed to ensure that the loss to crime victims is recognized, and
that they receive the restitution that they are due. It is also necessary to ensure that
the offender realizes the damage caused by the offense and pays the debt owed to the
victim as well as to society. Finally, this legislation is needed to replace an existing
patchwork of different rules governing orders of restitution under various Federal
criminal statutes with one consistent procedure.

If restitution is appropriate, a court may only award it to identifiable victims. A
federal crime victim is defined as “a person directly and proximately harmed as
a result of the commission of a Federal offense or an offense in the District of Columbia.” Further, restitution is only applicable to crime victims when the
defendant is actually convicted. In addition, “[a] ‘victim’s’ participation in a
fraudulent mortgage scheme . . . will generally exclude the victim from
restitution.”

It should also be remembered that restitution, “like all criminal sanctions . . . is a sanction of limited application.” Restitution is only complete, then, when payment of the obligation is complete. In jurisdictions that allow “extended or nominal payment mechanisms,” which can prolong the repayment, the variable time value of money may cause any restitution to be technically incomplete, even once the balance is repaid in full. Unfortunately, only 17.4 percent of measured property offenses resulted in criminal charges. Where convictions of mortgage fraud do result, however, courts consider the language of the MVRA in awarding restitution:

The court may also order restitution . . . . The order may require that such defendant
. . . return the property to the owner of the property . . . or . . . if return of the property . . . is impossible, impractical, or inadequate, pay an amount equal to the greater of . . . the value of the property on the date of the damage, loss, or destruction, or . . . the value of the property on the date of sentencing, less the value (as of the date the property is returned) of any part of the property that is returned . . . .

Accordingly, when the return of the property is inadequate restitution, the MVRA states that the offset value must be determined as of the date the property is returned. However, the statute is silent as exactly how to measure the value of the property on that date. Consequently, in the absence of clear guidelines, three possible formulas have arisen.

III. THE CIRCUIT SPLIT

With a lack of clarity in defining “property” in the MVRA, the circuit courts have split in their interpretations of restitution. Two circuits have followed the Ninth Circuit in determining that the value of the property is the fair market value on the date of the property’s return, arguing that once the property is returned to the victim, the victim has control over the property and may dispose of the property whenever it chooses. Accordingly, these courts calculate the fair market value of the property based on the date the property is returned rather than waiting for a later sale. Conversely, four circuits hold that the “property” can only be valued when the house is eventually sold and the proceeds are provided to the victim because cash, not real estate, was the actual
property the defendants took from the victim.

A. The Ninth Circuit Method

A bank would say a restitution calculation can only be determined when the property is sold, but a defendant would argue that if a bank holds on to the property in a declining market, it is unfair for the defendant to pay more in restitution than what the property was worth when the victim regained control of it. The Ninth Circuit method considers the fairness of a bank refraining from selling a property immediately, and ultimately agrees with the defendant’s argument.

After the passage of the Victim and Witness Protection Act in 1982, the Ninth Circuit became the first circuit court to consider mortgage fraud restitution. The court turned to an earlier decision in a timber theft case for property valuation guidance. In United States v. Tyler, the defendant was ordered to pay restitution for his theft of timber from a national forest. However, the victim, the federal government, did not sell the timber upon its seizure and in fact purposefully held onto the timber, claiming it needed the timber for evidentiary purposes in its case against Tyler. During the period between the
arrest and sentencing, timber prices declined. The district court found that the
amount of restitution equaled the difference of the timber’s value from sentencing
date and the higher value when defendant actually stole the timber. The Ninth Circuit disagreed with the District Court and held that the defendant should not have an increased restitution when the victim decides to retain the property. The court reasoned that the defendant’s conduct did not cause the subsequent loss the government experienced and therefore restitution was properly calculated as the property’s value on the date the victim regained control of the timber.

The Ninth Circuit subsequently applied this logic to a mortgage fraud context in United States v. Smith, where the defendant obtained loans secured by speculative real estate. The court determined that the credit against restitution should be based on the value of the property on the date title is transferred to the victim. The court noted, “[a]s of that date, the new owner had the power to dispose of the property and receive compensation.” Because the victim has control over the property’s sale once the property is returned, “[v]alue should therefore be measured by what the financial institution would have received in a sale as of that date.”

The Smith decision served as the “keystone for all of the subsequent decisions.”
The Ninth Circuit reinforced this valuation method in later cases. Further, in United States v. Gossi, the court elaborated on its prior decisions that value should be based on the date the victim has control over the property. Specifically, the court noted that what comes with control of the property is the power to dispose, which allows the victim to sell the property anytime and provides no immediate calculation of restitution. Subsequently, the court cited Smith, stating the “[v]alue should therefore be measured by what the financial institution would have received in a sale as of that date.” Finally, this past year, the Ninth Circuit upheld its mortgage fraud restitution calculation in United States v. Yeung. In Yeung, the defendant enlisted five people in a scheme involving false information on straw buyers’ loan applications in order to purchase and refinance homes in Northern California during the booming housing market. The district court considered a sentencing memo indicating that Yeung should pay restitution in the amount of the “outstanding principal balance on the defaulted loans less any money recovered from a sale of the properties used as collateral for the loans.”

Applying the US Sentencing Guidelines, rather than the MVRA, the district court ordered a restitution award in excess of $1.3 million. The Court of Appeals, however,
indicated that a financial institution has control of the property either when the
property is sold or when, citing Smith, the lender “had the power to dispose of
the property and receive compensation,” and therefore restitution should be
based on the fair market value on the date the property is returned. One distinction in Yeung, however, involved a loan purchased on the secondary market. One of the loans had been sold from the originating lender to a loan purchaser at a discount. The court indicated that the “property” in such circumstances is the actual loan, and not the original real property. The court determined that the restitution calculation in this type of circumstance must consider how much the loan purchaser paid for the loan, “less the value of the real property collateral as of the date the victim took control of the collateral property.”

Further, the court disagreed with the district court’s calculation of one property’s value. The district court determined the value of one of the properties as $363,863—the amount the victim received from the property’s sale. However, this sale did not occur until sixteen months after the victim took control of the property. Accordingly, the court found the actual value should be determined from the date the victim took control of the property. Two circuits follow the Ninth Circuit’s restitution calculation. In both United States v. Reese and United States v. Holley, the Fifth Circuit maintained that a property’s value is determined based on the date the collateral property is returned to the lender. Further, in Holley, the Fifth Circuit specifically analogized the facts of Holley to the Smith case in subscribing to the Ninth Circuit calculation

Relatedly, in United States v. Boccagna, the Second Circuit performed an extensive analysis of how property value should be measured, ultimately agreeing with the Ninth and Fifth Circuits. The Boccagna court noted that the MVRA does not define how to determine the value of property. Instead, the court stated, the “law appears to contemplate the exercise of discretion by sentencing courts in determining the measure of value appropriate to restitution calculation in a given case.” The court found the property’s sale price was lower than the fair market value and remanded the case to determine this value as part of the restitution calculation.

B. The Seventh Circuit Method

In contrast, four circuit courts presume the fair market value is determined only by the actual sale of the property. I have referred to this calculation as the Seventh Circuit method because of that court’s recent decision in which it analyzed all circuit holdings to date. However, these decisions begin outside of that circuit. The Third Circuit, in United States v. Himler, observed that the return of the property would be inadequate to compensate the victim, and explicitly disagreed with the Ninth Circuit’s view that value of the property is “as of the date the victim took control of [it].” The court noted instead that real estate is an illiquid asset, and “is only worth what you can get for it.” Thus, the court held that restitution would equal the original loan amount, less the eventual amount recovered from a sale. Surprisingly in this case, waiting until the sale actually
occurred resulted in the defendant paying less restitution than he would have if the fair market value had been used. The condominium in Himler sold for significantly more than its presumed value when title was transferred, due to favorable market conditions.

The Tenth Circuit, in United States v. James, also concluded that value is based on the actual foreclosure sales price and not an appraised value when the property is returned to the mortgage holder. The court noted that the MVRA “generally uses the term ‘value,’ and does not limit calculation of ‘value’ only to the use of the ‘fair market value’ of the property at issue.” Further, because the statute does not specifically mention value as being fair market value, there are other examples of value that may be appropriate, such as foreclosure sales price and replacement price. The court subsequently noted that
value can be a flexible concept, and a court with discretionary powers should keep in mind the purpose of restitution—to make the victim whole. The court concluded, therefore, that the foreclosure sale price in that case reflected a more accurate measure of the victim’s loss. Similarly, the Eighth Circuit, in United States v. Statman, used the foreclosure sale price of a fraudulently purchased bakery business in calculating the restitution award to a state’s small business-funding agency. While the defendant wanted the court to consider the appraised value of the bakery, the court cited James and determined that a foreclosure sale price was a permissible calculation method. The court also agreed with the Tenth Circuit; its decision aligns with the public policy concerns, which justify the existence of restitution in the first place—the need to make victims whole for the actual loss. While this case involved financial fraud, and not mortgage fraud per se, the chosen calculation method aligns this circuit with the sale-price camp.

Most recently, in United States v. Robers, the Seventh Circuit joined the Third, Eighth, and Tenth Circuits concluding “it is proper to determine the offset value [of property that is returned] based on the eventual amount recouped by the victim following sale of the collateral real estate.” The court observed that because the victim loaned cash to the defendants to purchase the property, the cash was therefore the “property” taken, not a home. Basing its opinion on the plain language of the MVRA, the Seventh Circuit decided that “ ‘property’ must mean the property originally taken from the victim,” the value can only be determined by the amount of cash returned to the victim from a sale.

IV. YET ANOTHER PERSPECTIVE—US SENTENCING GUIDELINES

The US Sentencing Guidelines are advisory rules that set out uniform sentencing guidelines for various offenses. The Guidelines are not mandatory,
and while judges have discretion in sentencing, courts must consider the Guidelines
in determining a defendant’s sentence. Moreover, a court of appeals reviewing a sentence that follows the Guidelines will consider the sentencing reasonable per se. Under these Guidelines, the factors considered when imposing a sentence include restitution to the victim. Further, the Guidelines state that, “[i]n the case of an identifiable victim, the court shall . . . enter a restitution order for the full amount of the victim’s loss, if such order is authorized under 18 U.S.C. . . . § 3663.”

The US Sentencing Commission annually reviews the current Guidelines and proposes amendments to reflect inadequacies in recent sentences. Recent revisions to the Guidelines, however, are not consistent with the latest Seventh Circuit decision in Robers. In the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress issued a directive to the US Sentencing Guideline Commission to review and amend federal sentencing guidelines related to “persons convicted of fraud offenses relating to financial institutions or federally related mortgage loans and any other similar provisions of law.” The amendment subsequently attempts to address the inconsistencies with Application Note 3(E) and “credits against loss rule,” which offsets a victim’s
loss by any credit the victim has already received. In general, the rule deducts the fair market value of the property returned to the victim from the amount of restitution the defendant is required to pay. In other words, the restitution is offset by the collateral’s fair market value. The Commission specifically addressed the situation that the circuit courts have wrestled with—when the victim gets the collateral back but has not disposed of the property, resulting in a problematic value calculation. The Commission noted this and, in an attempt to provide uniform guidelines, it proposed two changes. The first change established a specific date of the fair. market value determination: “the date on which the guilt of the defendant has been established.” The second change “establishes a rebuttable presumption that the most recent tax assessment value of the collateral is a reasonable estimate of the fair market value.” The Commission suggests that a court may consider the accuracy of this measure by examining factors such as how current the assessment is and the jurisdiction’s calculation process. In sum, a court ordering restitution following these Guidelines would establish the value of the property based on the official date of the defendant’s guilt. In addition, if the property has been returned to the victim but remains unsold, a court will use the local tax assessor’s value of the property to determine the property’s value.

V. CRITIQUE OF THE THREE CALCULATIONS

The absence of a definition for the term “property” in the MVRA is the root of the different applications of the statute throughout the country. “When the court defines ‘property,’ the question is whether the statute refers to the property stolen or the property returned. They are not necessarily equivalent, particularly in the context of complex financial instruments . . . .” However, as stated previously, the Act’s purpose is to make the victim whole, and no matter which formula is used, each calculation has the potential to not achieve this goal.

A. The Ninth Circuit Method: Control as the Impetus

There are several advantages to the Ninth Circuit mortgage fraud restitution calculation method, which holds that the fair market value should be calculated based on the date the property is returned to the financial institution victim. First, the date reflects the date that control over the property has been returned to the victims. Accordingly, the bank then has the power to dispose of the property at its discretion without additionally penalizing the defendant if the victim refrains from selling the property on that date. For example, a victim may decide to hold on to the property, as in United States v. Tyler or United States v. Smith, coincidental with a declining market. A victim may have too
many properties in inventory to immediately put a particular property up for sale. Or a victim may be making a calculated business decision to retain the property for a certain period of time for accounting purposes. No matter the purpose behind the retention, it is unfair to place the additional penalty that coincides with declining real estate prices on the defendant who had no control or even influence over the property’s sale.

Second, this specific date requires no guesswork when attempting to calculate the amount of restitution, which results in better efficiency. On the date the bank gets the property back, an appraisal can determine the property’s fair market value. The court can immediately calculate the restitution amount with this figure. Waiting until the property actually sells could result in a delay of months or years to determine how much the actual proceeds from the sale are. As a result, the court has an almost immediate figure to apply to the calculation and can order the restitution award right away. On the other hand, the Ninth Circuit calculation method has some considerable weaknesses. First, real estate is an illiquid asset, and determining fair market value of an illiquid asset is difficult. An appraisal only suggests what the house could sell for, not what the house actually will sell for. In addition, appraisals are based on historical data of home sales, and during sharp market increases or decreases an appraisal will not reflect the most up-to-date real estate prices.

Second, the recent housing bubble created an economic environment where home prices decreased at a radical rate. Traditionally, such sharp declines are not a concern with real estate over the long run because, while real estate prices fluctuate, they eventually trend upward. However, in situations like the recent drops in home values, the victim-lender can be punished for the market decline, despite the fact the victim was actively trying to sell the property. In addition, amidst tightening credit conditions, fewer buyers may qualify to purchase a home. This results in too much supply, not enough demand, and
consequently puts further downward pressure on home prices. The victimlender
is therefore penalized for market conditions beyond its control and consequently
does not receive complete restitution. Further, a victim financial institution is not in the business of selling homes; it is in the business of making collateralized mortgage loans for qualified buyers. Not only will the lender have costs associated with selling the
home (for example, carrying costs or realtor commissions), the lender cannot make a sale magically happen, especially if the home is situated in a market flooded with other foreclosure sales. Thus, when the lender eventually sells the home, it can potentially face a greater loss, an inequity beyond its control.

B. The Seventh Circuit Method: Cash Proceeds are the “Property”

As discussed in Part II, the Seventh Circuit, along with three other circuits, requires a sale of the property in order to establish the net proceeds offsetting a restitution award. These circuits distinguish that the property fraudulently obtained was the cash proceeds to finance a real estate purchase, not the actual home. Thus, this method recognizes the illiquidity of real estate and instead requires cash proceeds from a property’s sale; therefore, no return of the property for restitution purposes occurs with just the transfer of title or “control” over the property.

In addition, this method provides a more exact amount to the restitution calculation. With an appraisal, a court only has an approximation of what the house is worth. With an actual sale, the court knows specifically what the home sold for, and also has information on the true net proceeds to the lender.

Finally, this method also provides a buffer of protection for a victim trying to sell a property in a declining housing market. If the victim is unable to sell the property immediately, and home prices continue to plummet, the victim will not be financially punished by an ensuing lower sales price of the property. Thus, by treating the property as cash proceeds and not calculating the restitution award until there is a sale of the property, this allows the victim to come closer to achieving full restitution because the funds returned are the original amount that was taken.

This calculation method, however, has some distinct disadvantages. First, calculating the amount of time a home will be on the market is a challenge. For example, in a downturn economy, is it appropriate for the defendants to wait for the home to sell for months or years? At what point should the restitution award sentence be official? Without an established time period for a requisite sale, there will be a decrease of both efficiency and certainty as the defendant will have to wait longer to find out what the value of the property is and therefore how much restitution is necessary. In addition, what if the lender purposely holds on to the property longer than necessary? Indeed, victim banks could make a “business decision” to hold onto a property for years before attempting to sell. This type of allowance does not encourage an efficient method of asset redistribution, which can delay economic recovery in a down economy. Further, what if the victim holds an improper foreclosure auction—for example, by failing to advertise the foreclosure sale—and subsequently purchases the home itself for an amount far lower than fair market value because of a (not surprising) lack of buyers? Should the
lender be rewarded for its misbehavior? On the other hand, some would argue
that between the two parties—a convicted criminal who attempted to defraud a
financial institution and a more innocent lender who trusted the criminal borrower—
the defendant should absorb the risk.

Further, it is possible in a booming housing market that a defendant will owe no restitution. For example, if the defendant fraudulently obtained a home loan for $200,000 and the victim lender subsequently sold the property for $205,000, the defendant will be absolved from restitution. However, if part of the goal of restitution is to make the victim whole, the victim is more than compensated in a booming housing market.

Moreover, this type of calculation can have an adverse effect on other types of property. Knowing that the value of the property is not calculated until the item is actually sold, a criminal has little incentive to actually return the property. This would not be a concern for real property, but the same legal framework could be applied to other forms of collateral that can be moved and hidden, like cars. Thus, a thief can choose to hold on to the property or never return the property because of a lack of incentive to return it immediately. Accordingly, “[t]he decision is focused on the statute’s goal of making victims whole but potentially interferes with the statute’s goal of returning property to
victims.” Consequently, “[i]f a defendant is going to be on the hook for the offset amount regardless of when the property is sold, then why return the property? Also, the decision may have the unintended consequence of interfering with the marketplace . . . .”

Finally, the loan in question in these circumstances is for a collateralized asset. The actual home provided security to the lender. As such, the lender bore the risk when it made the loan; however, the lender also understood it could foreclose on the home in case of default. Thus, this cost of doing business is already accounted for and a victim lender understands this type of risk when providing mortgage loans.

C. US Sentencing Guidelines: Local Property Assessment is the Real
“Value”

As discussed in Part IV, the US Sentencing Guidelines establish the date of valuation as the conviction date of the defendant. In addition, if the property has not sold by that date, the local property tax assessor’s value of the home is the value of the property for restitution calculation purposes. There are several advantages to this approach. First, if every circuit applied this approach, these guidelines would result in a uniform application throughout the country and would eliminate the conflicting restitution awards. In addition, this approach sets a number that can be calculated and independently verified. An individual could easily confirm the tax assessor’s value of the property and calculate the restitution.

Moreover, the Guidelines allow flexibility. For example, if a court determines that an assessed value is too divergent from a property’s fair market value, the court has discretion to address these differences and assign a fair market value.

The Guideline method, however, has potential disadvantages. First, as previously
noted, the assessed value may not be near the fair market value of the property, and a battle of experts may ensue as both the defendant and the victim claim otherwise. In addition, this discrepancy may afford too much discretion to judges when the goal of the Guidelines is to set a uniform policy.

In addition, this approach disregards the Seventh Circuit method recognizing that the property taken was the actual cash for the home loan. Instead, by relying on a tax assessor’s value if the home remains unsold, the Commission determined that the “property” is the tangible real estate, and not the cash that was lent. Again, if the victim were unable to sell the home in a declining housing market, the restitution award would fail to compensate the victim for its true loss.

D. Alternative Methods of Calculation – State Deficiency Statutes

The problematic issue of fair market assessment is not unique to restitution.
Every state and the District of Columbia have a deficiency statute, whereby a lender can obtain a deficiency judgment to recover the difference between a foreclosure sale price and the current outstanding balance owed on the mortgage loan. Not every jurisdiction, however, calculates this deficiency in the same way. For example, Nevada calculates the home value based on the actual sale price, not the fair market value when the property is returned to the lender. However, the court may also consider the home’s appraised
value in its determination.

Some states maintain that a foreclosure sale price determines the value of the home when calculating a deficiency judgment. In other words, these states determine that a property’s value is only determined at the time of the property’s sale. Therefore, this calculation is similar to the Seventh Circuit method whereby a property’s value can only be determined following a sale of the real estate.

Other states consider the fair market value of the property when considering a deficiency judgment. States that consider the fair market value at the time the property is returned coincide with the Ninth Circuit calculation method. Notably, some of these states are states that have had a high number of foreclosures and are within the Ninth Circuit: for example, Arizona and California. Other states provide that the courts have discretion to determine the appropriate value of the property. This discretion is analogous to the alternative offered by US Sentencing Guidelines. This alternative is available when a court deems the property’s assessed value is inappropriate and provides that a court has authority to consider other evidence in its determination of a property’s value.

Thus, just as there is a lack of uniformity in the restitution calculation depending on which state you live in, there is a corresponding lack of uniformity regarding deficiency judgments. While most states follow the foreclosure sale approach recognizing the property’s value can only be determined with an actual sale, this approach does not account for the amount of time a financial institution can choose to hold onto the property. It further fails to account for the lack of control a mortgagor has over the sale process. On the other hand, while the fair market approach recognizes the importance of the control aspect, this approach does not consider a mortgagee’s potential inability to sell in a down economy.

E. Analysis

Restitution is founded primarily on the idea that the victim should be made whole for his property loss. The actual property that was defrauded from a victim in mortgage fraud is the money lent as part of the real estate transaction.
Therefore, until the actual money is returned, equity has not been restored to the victim. However, equity also demands that a victim not take advantage of the criminal defendant and hold on to the returned real estate property longer than necessary to sell the real estate property. Therefore, there should be a limitation to ensure a victim does not unreasonably allow the property to languish. Accordingly, a “good faith” requirement should be included in any amendment to the MVRA, requiring a victim to sell the property to recoup funds with good faith. Thus, a defendant who believes a victim unfairly held onto a property for too long may petition the court to reduce the amount of restitution owed if the victim did not commence the sales process with good
faith.

If Congress were to amend MVRA, it should provide a definition of the term “property” to help distinguish between properties at the different phases of a financial transaction. Because of the diverse types of financial fraud—e.g. mortgage fraud compared with securities fraud—the term “property” may have more than one meaning within these contexts, and may also change throughout the transaction. For instance, consider a scheming debtor who fraudulently obtained a margin loan to purchase both mortgage backed securities and corporate bonds. The property “stolen” initially in this case is the fraudulently obtained cash used to purchase the assets. However, after the margin loan is received, the property now consists of two types of financial instruments within
the debtor’s portfolio. Indeed, the property in its current form (financial assets)
can be converted back to the form of the original property (cash). However, with the current definition of property, it is unclear if that conversion is even required.

The definition of property should state that “property” is defined as the specific or particular type of asset (such as cash) that the defendant secured from the victim. This way, the “property” returned to the victim (money) will be the same type of property stolen (money used to purchase the home). In addition, similar to many state statutes prohibiting insurance companies from operating in bad faith, the Act should prohibit victim-lenders from operating in bad faith.

VI. CONCLUSION

Defendants, like the partners in the fictional story in the introduction, could face varied restitution awards depending on which state they commit the mortgage fraud in. This lack of a uniform approach results in inadequate restitution to victims. If the goal of the MVRA is to make victims whole, a more standardized and consistent calculation of restitution is required. Providing a definition of property in the MVRA would provide this uniformity. Further, requiring victims to act in good faith as they attempt to convert property back to the type of asset they were deprived of will help ensure defendants aren’t unfairly punished.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

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How Homeowners Can Use Ibanez Case to Fight a Wrongful Foreclosure

26 Monday Mar 2018

Posted by BNG in Bankruptcy, Banks and Lenders, Case Laws, Case Study, Federal Court, Foreclosure Crisis, Foreclosure Defense, Fraud, Judicial States, Legal Research, Litigation Strategies, Loan Modification, MERS, Mortgage Laws, Mortgage mediation, Mortgage Servicing, Non-Judicial States, Pro Se Litigation, Securitization, State Court, Your Legal Rights

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bank forecloses, bankruptcy court, Foreclosure, homeowners, Ibanez Case, Loan, Massachusetts, MERS, Mortgage Electronic Registration System, Pro se legal representation in the United States, US Bank, wrongful foreclosure

Many homeowners who found themselves in wrongful foreclosure situation may have a valid defense, against the perpetrators of these crimes.

How much does it cost to get justice, when a bank forecloses on your house illegally? Thousands of ex-homeowners don’t pursue their rights to a financial settlement because they assume they couldn’t pay the legal fees.

In fact, it costs less than you fear. Consumer lawyers take a few cases at no charge. More likely, you’ll pay fees — upfront or on a monthly plan — tied to the lawyer’s estimate of the time it will take and your ability to pay. If they win your case, they’ll collect from the financial institution, too.

Before readers attack the “greedy lawyers” for defending “deadbeat” clients who couldn’t repay their mortgage loans, let me quote from a groundbreaking decision of 2011 by the Massachusetts Supreme Court. The court reversed two foreclosures because the banks — Wells Fargo and U.S. Bancorp, acting as trustees for investors — couldn’t prove that they actually owned the mortgages. Judge Robert J. Cordy excoriated them for their “utter carelessness.” The fact that the borrowers owed the money was “not the point,” he wrote. The right to deprive people of their property is a powerful one and banks have to prove they have the legal standing to do so.

American law cannot allow property seizures based on backdated, incomplete, or fraudulent documentation, no matter what the circumstances are. Otherwise, no one’s home is safe. Courts enforce private property rights through the cases brought before them. In other words, lawyers.

The Massachusetts case began not with consumers, but with the banks themselves. They asked the courts to affirm that the foreclosures were valid so they could get title insurance. That pulled the borrowers — Antonio Ibanez and Mark and Tammy LaRace — into the fray. When the horrified courts looked at how the foreclosures had gone down, they said, “no way,” and gave the former owners their property back.

Ibanez, a special ed teacher, bought the home for investment in 2005 and defaulted in 2007 on a $103,500 loan, according to the court papers. Even since, the house has been boarded up. Ibanez filed a Chapter 7 bankruptcy, so he now has title to the home and no obligation on the debt. The mortgage investors will take the loss.

The LaRaces borrowed $103,200 to buy their home in 2005 and also defaulted in 2007. They had an offer on their home, but the servicer foreclosed anyway. (During the trial, the foreclosing law firm admitted that servicers are graded on how quickly they can liquidate a mortgage.)

The LaRaces have moved back into their long-unattended home, but first they had to clean up mold, fix plumbing, and make other repairs. They would gladly resume payments on the mortgage, their lawyer Glenn Russell says. But the trustee bank doesn’t own the loan. The investors don’t own it because the mortgage was never transferred properly. The original lender, Option One, no longer exists. So whom do they pay?

This important case opens the door to thousands of foreclosure do-overs in Massachusetts at the time, and continuing and equally influenced courts in other states, as well. But there hasn’t been a rush by lawyers to get involved, probably because the field is complex and not especially remunerative. No class actions have been certified, as at that time or shortly thereafter, so the cases proceeded one by one. The financial trail can be hard to track (the Massachusetts documents were unwound by mortgage-fraud specialist Marie McDonnell).  The lawyer — often, a sole practitioner — is up against the awesome resources of major financial institutions.

Neither Ibanez nor the LaRaces were charged for their lawyer’s services. Collier had file a claim for wrongful foreclosure and was paid from any settlement. Russell did the same. At the time, Russell also thinks the LaRaces are owed something for the cost of repairing their home.

Very few cases start as pro bono, however. Lawyers who defend consumers have bills to pay, just as the banks’ corporate attorneys do. You may opt to fight it Pro Se using the package from our website, or if you want to fight an unfair foreclosure, you might be offered one of several arrangements:

An upfront fee. “Many of my clients were formerly very successful individuals,” Russell says. On average, the value of the homes of the people who contact him is “somewhat north of $500,000.” He suggests a fee based on their means.

Monthly payments. If you’re not making monthly mortgage payments, some portion of that money could be applied to legal expenses. Collier says he puts the payments into escrow and retains them if he gets the house back (he says he always does, in predatory lending cases).

Bankruptcy payment plans. The clients of North Carolina bankruptcy attorney Max Gardner are usually in a Chapter 13 monthly repayment plan. Each state sets the maximum attorney’s fee, payable as part of the plan.

Mostly, the attorneys get paid by suing the financial institutions, who settle claims or suffer court judgements due to their own illegal activity. People who beat up on consumer lawyers scream that they bring frivolous cases just for the fees. But consumer lawyers only get paid if their case is good, so they’re pretty rigorous about whom they choose to represent. “I was called crazy for practicing in this area of law, as in ‘I would be broke’ by not getting enough fees,” Russell says. “Three years later, I am still here and still living my motto of helping people first.”

Most homeowners are successful fighting there case Pro Se using the package we offer for fighting Foreclosure, as your interest is at stake, and you have the most to lose, not Attorneys. They gets paid whether you win or lose. However, homeowners equally have options when fighting wrongful foreclosure.

If you think you have a case, your toughest challenge isn’t fees, it’s finding a lawyer with the expertise to press your claim successfully, Gardner says. If you don’t have a personal reference for a qualified lawyer, the best place to look is the website of  the National Association of Consumer Advocates. Next best: the National Association of Consumer Bankruptcy Attorneys. In either case, ask if the lawyer has won other securitization, mortgage servicing, and foreclosure cases. “They have to know what documents to ask for,” Gardner says. That’s what wins.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

 

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What Homeowners Must Know About Appeal-able Orders and Judgment from the Federal Courts

01 Thursday Mar 2018

Posted by BNG in Appeal, Case Laws, Case Study, Federal Court, Foreclosure Crisis, Foreclosure Defense, Judicial States, Legal Research, Litigation Strategies, Non-Judicial States, Pro Se Litigation, Your Legal Rights

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Appeal-able Orders, Foreclosure, foreclosure defense, homeowners, Judgment, Orders, Plaintiff, United States

In order to effectively perfect your Appeal case as a Pro Se Litigator, homeowners must familiarize themselves about Appealing unfavorable decisions.

1. Appeal-able Orders: Courts of Appeals have jurisdiction conferred and strictly limited by statute:

(a) Appeals from final orders pursuant to 28 U.S.C. § 1291: Final orders and
judgments of district courts, or final orders of bankruptcy courts which have been appealed to and fully resolved by a district court under 28 U.S.C. § 158, generally are appealable. A final decision is one that “ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.” Pitney Bowes, Inc. v. Mestre, 701 F.2d 1365, 1368 (11th Cir. 1983) (citing Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 633, 89 L.Ed. 911 (1945)).

A magistrate judge’s report and recommendation is not final and appealable until judgment thereon is entered by a district court judge. 28 U.S.C. § 636(b); Perez-Priego v. Alachua County Clerk of Court, 148 F.3d 1272 (11th Cir. 1998). However, under 28 U.S.C. § 636(c)(3), the Courts of Appeals have jurisdiction over an appeal from a final judgment entered by a magistrate judge, but only if the parties consented to the magistrate’s jurisdiction. McNab v. J & J Marine, Inc., 240 F.3d 1326, 1327-28 (11th Cir. 2001).

(b) In cases involving multiple parties or multiple claims, a judgment as to fewer than all parties or all claims is not a final, appealable decision unless the district court has certified the judgment for immediate review under Fed.R.Civ.P. 54(b).
Williams v. Bishop, 732 F.2d 885, 885-86 (11th Cir. 1984). A judgment which resolves all issues except matters, such as attorneys’ fees and costs, that are collateral to the merits, is immediately appealable. Budinich v. Becton Dickinson & Co., 486 U.S. 196, 201, 108 S.Ct. 1717, 1721-22, 100 L.Ed.2d 178 (1988); LaChance v. Duffy’s Draft House, Inc., 146 F.3d 832, 837 (11th Cir. 1998).

(c) Appeals pursuant to 28 U.S.C. § 1292(a): Under this section, appeals are permitted from the following types of orders:

i. Orders granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions; However, interlocutory appeals from orders denying temporary restraining orders are not permitted. McDougald v. Jenson, 786 F.2d 1465, 1472-73 (11th Cir. 1986);

ii. Orders appointing receivers or refusing to wind up receiverships; and

iii. Orders determining the rights and liabilities of parties in admiralty cases.

(d) Appeals pursuant to 28 U.S.C. § 1292(b) and Fed.R.App.P. 5: The certification specified in 28 U.S.C. § 1292(b) must be obtained before a petition for permission to appeal is filed in the Court of Appeals. The district court’s denial of a motion for certification is not itself appealable.

(e) Appeals pursuant to judicially created exceptions to the finality rule: Limited
exceptions are discussed in cases including, but not limited to: Cohen v.
Beneficial Indus. Loan Corp., 337 U.S. 541, 546, 69 S.Ct. 1221, 1225-26, 93
L.Ed. 1528 (1949); Atlantic Fed. Sav. & Loan Ass’n v. Blythe Eastman Paine
Webber, Inc., 890 F.2d 371, 376 (11th Cir. 1989); Gillespie v. United States Steel Corp., 379 U.S. 148, 157, 85 S.Ct. 308, 312, 13 L.Ed.2d 199 (1964).

2. Time for Filing: The timely filing of a notice of appeal is mandatory and jurisdictional.
Rinaldo v. Corbett, 256 F.3d 1276, 1278 (11th Cir. 2001). In civil cases, Fed.R.App.P. 4(a) and (c) set the following time limits:

(a) Fed.R.App.P. 4(a)(1): A notice of appeal in compliance with the requirements set forth in Fed.R.App.P. 3 must be filed in the district court within 30 days after the order or judgment appealed from is entered. However, if the United States or an officer or agency thereof is a party, the notice of appeal must be filed in the district court within 60 days after such entry. THE NOTICE MUST BE RECEIVED AND FILED IN THE DISTRICT COURT NO LATER THAN THE LAST DAY OF THE APPEAL PERIOD – no additional days are provided for mailing. Special filing provisions for inmates are discussed below.

(b) Fed.R.App.P. 4(a)(3): “If one party timely files a notice of appeal, any other party may file a notice of appeal within 14 days after the date when the first notice was filed, or within the time otherwise prescribed by this Rule 4(a), whichever period ends later.”

(c) Fed.R.App.P. 4(a)(4): If any party makes a timely motion in the district court under the Federal Rules of Civil Procedure of a type specified in this rule, the time for appeal for all parties runs from the date of entry of the order disposing of the last such timely filed motion.

(d) Fed.R.App.P. 4(a)(5) and 4(a)(6): Under certain limited circumstances, the district court may extend or reopen the time to file a notice of appeal. Under Rule 4(a)(5), the time may be extended if a motion for an extension is filed within 30 days after expiration of the time otherwise provided to file a notice of appeal, upon a showing of excusable neglect or good cause. Under Rule 4(a)(6), the time to file an appeal may be reopened if the district court finds, upon motion, that the following conditions are satisfied: the moving party did not receive notice of the entry of the judgment or order within 21 days after entry; the motion is filed within 180 days after the judgment or order is entered or within 14 days after the moving party receives notice, whichever is earlier; and no party would be prejudiced by the reopening.

(e) Fed.R.App.P. 4(c): If an inmate confined to an institution files a notice of appeal in either a civil case or a criminal case, the notice of appeal is timely if it is deposited in the institution’s internal mail system on or before the last day for filing. Timely filing may be shown by a declaration in compliance with 28 U.S.C. § 1746 or a notarized statement, either of which must set forth the date of deposit and state that first-class postage has been prepaid.

3. Format of the notice of appeal: Form 1, Appendix of Forms to the Federal Rules of Appellate Procedure, is a suitable format. See also Fed.R.App.P. 3(c). A pro Se notice of
appeal must be signed by the appellant.

4. Effect of a notice of appeal: A district court lacks jurisdiction, i.e., authority, to act after the filing of a timely notice of appeal, except for actions in aid of appellate jurisdiction or to rule on a timely motion of the type specified in Fed.R.App.P. 4(a)(4).

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

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How Homeowners Can Greatly Improve their Chances of Winning on Appeal

24 Wednesday Jan 2018

Posted by BNG in Appeal, Case Laws, Case Study, Discovery Strategies, Federal Court, Foreclosure Defense, Judicial States, Litigation Strategies, Non-Judicial States, Note - Deed of Trust - Mortgage, Pleadings, Pro Se Litigation, Scam Artists, Title Companies, Trial Strategies, Your Legal Rights

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Appeal, Court, District Court, Foreclosure, foreclosure defense, homeowners, Plaintiff, pro se, Pro se legal representation in the United States, State Court, United States district court

A seasoned Attorney will tell you that trying cases is one of the most exciting things a litigator does during his or her career but it is also certainly one of the most stressful. While in the trenches during trial, many litigators understandably focus all of their energies on winning the case at hand. But a good litigator knows that trial is often not the last say in the outcome of a case. The final outcome often rests at the appellate level, where a successful trial outcome can be affirmed, reversed, or something in between. The likelihood of success many times hinges on the substance of the record on appeal. The below discusses a variety of issues that trial litigators should keep in mind as they prepare and present their case so they position themselves in the best possible way for any appeals that follow.

Prepare Your Appellate Record From The Moment Your Case Begins

Perhaps one of the biggest misconceptions regarding preserving an adequate record on appeal is when a lawyer should start considering what should be in the record. In short, the answer is from the moment the complaint is filed. At that time, counsel should begin to think carefully about the elements of each asserted cause of action, potential defenses and their required elements, and the burden of proof for each. Every pleading should be drafted carefully to ensure that no arguments are waived in the event they are needed for an appeal. For instance, a complaint should allege with specificity all the factual and legal elements necessary to sustain a claim, while an answer should include any and all applicable affirmative defenses to avoid waiver. See, e.g., Travellers Int’l, A.G. v. Trans World Airlines, 41 F.3d 1570, 1580 (2d Cir. 1994) (“The general rule in federal courts is that a failure to plead an affirmative defense results in a waiver.”). Likewise, if you file a motion to dismiss, ensure that the motion contains all the necessary evidence that both a trial court and appellate court would need to find in your favor. Of particular importance in federal court practice is the pre-trial order. Under Federal

Rule of Civil Procedure 16, the pre-trial order establishes the boundaries of trial. See Elvis Presley Enterprises, Inc. v. Capece, 141 F.3d 188, 206 (5th Cir.1998) (“It is a well-settled rule that a joint pre-trial order signed by both parties supersedes all pleadings and governs the issues and evidence to be presented at trial.”). If the pre-trial order does not contain the pertinent claims, defenses or arguments that you wish to present at trial, you are likely also going to be out of luck on appeal.

Later on in the case, as the factual record becomes more fully developed, consider whether amending or supplementing the pleadings or other court submissions are necessary to make the record as accurate as possible. Most states follow the federal practice of allowing liberal amendments. However, these can be contested, particularly late in the process, closer to trial. While appellate review is often for abuse of discretion, formulating a strong motion in favor of or in opposition to an amendment can preserve the issue.

What to Keep in Mind as Your Case Proceeds

As the case develops, consider whether the elements you need to prove your case are sufficiently reflected in the information you obtain during discovery. If not, determine whether there are ways to obtain the information you need well before trial starts. By the time trial arrives, it may be too late to supplement the record to get before the trial judge and the appellate court what you need to win your case. In that regard, anything you have in writing that gets submitted to the court may very well end up being part of the record on review, so make sure it is accurate and understandable. Incomprehensible or incomplete submissions can muddy your appellate record and damage a successful appellate proceeding. In the same vein, make sure anything presented to the court prior to trial that you want to be part of the record is transcribed. Otherwise, there will be an insufficient record on appeal. This is particularly so when it comes to discovery disputes. Although they are common in present day litigation, judges hate discovery disputes. To preserve discovery issues for appeal, be sure to get a ruling, and make sure it is reflected in writing. Moreover, carefully review every pre-trial court order or other judicial communication, including court minutes, to ensure accuracy. Attempting to make corrections during the appellate process may not be possible.

Another significant area for appellate issues is the failure to timely identify experts. This is subject to an abuse of discretion standard of review, so it is important that one builds a record on the issue, particularly regarding any prejudice suffered by the untimely disclosure.

After Discovery Closes – The Motion in Limine

Once discovery has closed, consider carefully any motions in limine you may want to make. Although motions in limine are not strictly necessary, they are helpful in identifying evidentiary issues for the judge and counsel and increase the chances of a substantive objection, sidebar, and ruling when the issue arises at trial. One potential pitfall – some jurisdictions require a party to renew an objection at trial after a motion in limine has been denied, so make sure to do so if necessary. See, e.g., State ex. Rel Missouri Highway and Transp. Com’n v. Vitt, 785 S.W.2d 708, 711 (Mo. Ct. App. E.D. 1990) (“A motion in limine preserves nothing for review. Following denial of a motion in limine, a party must object at trial to preserve for appellate review the point at issue.”) (internal citation omitted). Also, if the Court delivers its ruling on a motion in limine orally, make sure it is transcribed properly by the court reporter.

Now the Trial – What to Keep in Mind

Above all else, when in doubt, object. Objections should be immediate and specifically describe the basis for the objection so the record is clear. Make the argument to win – every objection should be more than just reciting labels, and should provide sufficient information for the trial judge to decide the issue. The goal is not to be coy with the trial judge and hope for a lucky break, but to be prepared to make an argument to win the issue at trial or, alternatively, on appeal. In addition, if you are the party proffering the evidence, make sure the proffer is on the record and that you expressly state why the evidence is being offered. This may require pressing on the judge to get the full objection on the record. If you fail to do so, you risk the appellate court not reviewing the claim on appeal. See, e.g., National Bank of Andover v. Kansas Bankers Sur. Co., 290 Kan. 247, 274-75 (2010) (observing “purpose of a proffer is to make an adequate record of the evidence to be introduced … [and] preserves the issue for appeal and provides the appellate court an adequate record to review when determining whether the trial court erred in excluding the evidence.”). Also, always be careful of waiving any issues for appeal by agreeing to a judge’s proposed compromise on evidentiary issues.

An important but often overlooked consideration is the courtroom layout and dynamics. Well-thought and timely objections will be for naught if they are not transcribed. Sometimes the courtroom layout can make record preservation difficult. For example, if objections are made at sidebar conferences where the court reporter is not present, those objections may not make their way into the appellate record or be dependent on the after the fact recollections of others. See, e.g., Ohio App. R. 9(c) (describing procedures for preparing statement of evidence where transcript of proceedings is unavailable and providing trial court with final authority for settlement and approval). This should be avoided whenever possible.

Beyond objections, make sure all the evidence you need for your appeal is properly admitted by the trial court before the close of your case. All exhibits that were used at trial should be formally moved into evidence if there is any doubt as to whether they will be needed on appeal. If you had previously moved for summary judgment and lost, make sure you take the necessary steps at trial to preserve those summary judgment issues, especially in jurisdictions that do not allow interlocutory appeals.

Another important aspect of the trial is the jury instructions. Jury instructions should always be complete. Remember that the instructions you propose can be denied without error if any aspect of them is not accurate, so break them into small bites so that the judge can at least accept some parts. Specifically object to any jury instructions as necessary before the jury begins its deliberations. See, e.g., Fed. R. Civ. P. 51(c). Failure to do so will waive the right to have the instruction considered on appeal. See, e.g., ChooseCo, LLC v. Lean Forward Media, LLC, 364 Fed. Appx. 670, 672 (2d Cir. 2010) (finding that defendant’s objection to jury instructions and verdict form during jury deliberations did not comply with Fed. R. Civ. P. 51(c) and noting that the “[f]ailure to object to a jury instruction or the form of an interrogatory prior to the jury retiring results in a waiver of that objection.”).

Additionally, when you lodge your objections, make sure you explain why the jury charge is in error since general objections are insufficient. See, e.g., Victory Outreach Center v. Meslo, 281 Fed. Appx. 136, 139 (3d Cir. 2008) (holding that general objection to the court’s jury instructions and proposed alternative instructions, “were insufficient to preserve on appeal all potential challenges to the instructions” and were not in compliance with Fed. R. Civ. P. 51(c)(1)). If possible, have a set of written objections to the other side’s jury charges, and get the judge to rule on that, since judges like to hold such conferences off the record. Also, do not overlook the verdict form. Know that when you agree to a particular form (general or special), that will mean that you are probably taking certain risks and waiving certain arguments one way or the other. Give this thought, and make sure that you know the rules of your jurisdiction on verdict forms so you can object if necessary. See, e.g., Palm Bay Intern., Inc. v. Marchesi Di Barolo S.P.A., 796 F.Supp. 2d 396, 409 (E.D.N.Y. 2011) (objection to verdict sheet should be made before jury retires); Saridakis v. South Broward Hosp. Dist., 2010 WL 2274955, at *8 (S.D. Fla. 2010) (noting that Federal Rule of Civil Procedure 51(c)(2)(B) states that an objection is timely if “a party objects promptly after learning that the instruction or request will be … given or refused” and that the Eleventh Circuit “require[s] a party to object to a … jury verdict form prior to jury deliberations” or the party “waives its right to raise the issue on appeal.”). (internal quotations and citation omitted).

Finally, pay careful attention to the closing argument. This can be an area where winning at trial by convincing a jury may be at odds with preserving the issue on appeal. On the flip side, many litigators are loath to interrupt a closing argument to object. If you need to object to preserve an issue, do so.

Post-Judgment – Final Things to Consider

First, determine whether certain arguments must be made post-judgment to preserve those arguments for appeal. Some arguments (such as those attacking the sufficiency of the evidence) must be made at that time or they are waived. See, e.g., Webster v. Bass Enterprises Production Co., 114 Fed.Appx. 604, 605 (5th Cir. 2004) (holding that failure to challenge back pay award in post-judgment motion waived the issue on appeal absent exceptional circumstances that did not exist). Written motions post-judgment should include all relevant references to trial transcripts and evidence to make as complete and clean a factual record as possible

Second, when the appellate record is being compiled, carefully double check the record to ensure its accuracy. Many times the trial court clerk or court reporter accidentally omits portions of the record. If this is not caught and corrected in a timely manner, you may be stuck with a bad record. Most jurisdictions have procedures in place for supplementing and correcting the record but understand them well in advance so there is adequate time to address any discrepancies before the appellate briefing is due.

Conclusion

Too often even seasoned trial lawyers get tripped up on appeal by not having an orderly and complete record. A litigator must never lose sight of the factual and legal issues in a case and what an appellate court will need to consider in making the desired determinations. As demonstrated above, a winning record requires thought at all stages of the litigation, not just when the notice of appeal is filed. With proper preparation, attention to detail, and forethought, one can ensure that the proper record on appeal is never in doubt.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

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Effective Use of Injunctions Can Make or Break Homeowner’s Foreclosure Case

02 Saturday Apr 2016

Posted by BNG in Appeal, Case Laws, Case Study, Federal Court, Foreclosure Defense, Judicial States, Litigation Strategies, Non-Judicial States, Pleadings, Pro Se Litigation, State Court, Your Legal Rights

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automatic stay, injunction, injunctive, motion, relief, stay, stay pending appeal

CASE STUDY: 5 F.3d 539 Unpublished Disposition

Effective Foreclosure Defense requires timing. If you time correctly, you can save your home. Homeowners presently in litigation must use injunctions to their advantage. Ignorance will not be to your advantage.

NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.

In re Evalyn PREBLICH, Debtor.
Evalyn PREBLICH, Appellant,
v.
Kenneth W. BATTLEY; Dennis Sammut, Appellees.

No. 92-36540.

United States Court of Appeals, Ninth Circuit.

Submitted Aug. 11, 1993.*
Decided Aug. 24, 1993.

Appeal from the United States District Court for the District of Alaska; No. CV-91-419-HRH, H. Russel Holland, Chief District Judge, Presiding.

D. Alaska

AFFIRMED.

Before PREGERSON, BRUNETTI and RYMER, Circuit Judges.

MEMORANDUM**

Chapter 7 debtor Evalyn Preblich appeals pro se from the district court’s affirmance of a bankruptcy court order authorizing the sale of certain bankruptcy estate property near Hope, Alaska to appellee Dennis Sammut by appellee-trustee Kenneth W. Battley. The district court held that because Preblich had failed to obtain a stay pending appeal, her challenge to the sale was moot under 11 U.S.C. Sec. 363(m). Preblich also petitions this court to stay the present appeal pending resolution by the Ninth Circuit Bankruptcy Appellate Panel of an allegedly related matter arising from the same bankruptcy. Sammut, meanwhile, moves this court to strike Preblich’s Reply Brief.

We have jurisdiction under 28 U.S.C. Sec. 1291. We affirm the order of the district court, and deny the motions of both parties.

I. MOOTNESS

The district court ruled that Preblich’s challenge to the bankruptcy court’s authorization of the sale of the subject property was moot under 11 U.S.C. Sec. 363(m) because she had failed to obtain a stay pending appeal. Preblich does not dispute the fact that she did not obtain a stay, but instead offers reasons why this situation should be excepted from the stay requirement. After careful consideration of these arguments, we conclude that all of them lack merit.

Section 363(m) provides that an appeal from the bankruptcy court’s authorization of the sale of certain property cannot affect the rights of a good faith purchaser, unless the debtor stays the sale pending an appeal.1 We have applied this statute strictly, and have recognized only two situations in which failure to obtain a stay will not render an appeal moot: “(1) where real property is sold to a creditor subject to the right of redemption and (2) where state law would otherwise permit the transaction to be set aside.” In re Mann, 907 F.2d 923, 926 (9th Cir.1990) (internal citations omitted). We have done so in the interest of promoting finality in bankruptcy. See In re Onouli-Kona Land Co., 846 F.2d 1170, 1172 (9th Cir.1988).

Preblich argues that her appeal of the sale authorization order is not moot because she holds a statutory right of redemption in the subject property which would authorize the setting aside of the sale under state law. Preblich fails, however, to explain either the factual or statutory basis of this claim. Indeed, she cites no Alaska law whatsoever for the proposition that the trustee’s sale of the property in this case may be set aside for any reason. Our own research, reveals that Alaska statutes do recognize a right of redemption, but only where property is sold to satisfy a judgment or other lien. See Alaska Stat. Secs. 09.35.250 (redemption by judgment debtor or successor), 09.45.190 (redemption after foreclosure of lien) (1983). The sale at issue here falls into neither of these categories; it was an ordinary sale of estate assets for the purposes of bankruptcy liquidation.

Preblich also argues that section 363(m) is not applicable to her appeal because Sammut did not purchase the property in “good faith” within the meaning of the statute. Specifically, Preblich contends that the sale price was not adequate, that the auction was not adequately advertised, and that the trustee agreed to pay for unnecessarily expensive environmental cleanup measures. We have defined a lack of good faith under this statute to constitute “fraud, collusion … or an attempt to take grossly unfair advantage of other bidders.” Onouli-Kona Land Co., 846 F.2d at 1173.

After reviewing Preblich’s contentions, we conclude that none are sufficient to establish a lack of good faith on the part of Sammut. First of all, we have explicitly held that good faith does not depend on the value paid for the subject property. Id. at 1174. Preblich’s contentions that Sammut did not pay a sufficiently high purchase price are therefore unavailing. Second, the fact that advertisement of the property was not as extensive as Preblich wished, does not render the sale fraudulent, collusive or unfair. According to the district court, the property was advertised in the Hope-Sunrise area, and was ultimately sold at an auction in which Sammut and one other individual bid against each other. Under these circumstances, we are unable to conclude that the sale lacked good faith. Third, the fact that the trustee may have paid more than necessary for environmental cleanup in connection with the sale is entirely irrelevant to Sammut’s good faith. Although these expenditures may have effectively lowered the purchase price, the inadequacy of that price will not establish that Sammut lacked good faith.

Finally, Preblich argues that her appeal should not be adjudicated moot under section 363(m), because the trustee unlawfully exercised control over the subject property. According to Preblich, the trustee recovered the property from Preblich’s husband and son as a fraudulent conveyance, under a judgment of the bankruptcy court. Preblich contends, however, that the fraudulent conveyance judgment was in error and that the trustee did not have a right to sell the property to Sammut.

However true Preblich’s contentions may be, the fraudulent conveyance issue was the subject of a separate bankruptcy court order which was separately appealable and is not presently before this court. Moreover, a finding that the trustee had improperly recovered the subject property for the bankruptcy estate would not overcome section 363(m). In the absence of a stay, section 363(m) renders moot any action which might affect the rights of a good faith purchaser. Although we have recognized narrow exceptions to this rule, see In re Mann, 907 F.2d at 926, an erroneous fraudulent conveyance holding on the part of the bankruptcy court would satisfy none of them.

II. MOTION TO STAY THE APPEAL

Subsequent to filing the present appeal, Preblich petitioned this court to stay this proceeding pending the resolution of another matter which is pending before the Ninth Circuit Bankruptcy Appellate Panel, BAP No. 92-1861. Preblich contends that “[i]f this case should be decided favorably for the appellant, the Ninth Circuit case would become moot. If it is decided unfavorably, then it will be [appealed] and consolidated with the current appeal so there will be just one appeal.” Preblich, however, gives no description of the issues involved in the BAP case or any explanation of why a favorable BAP decision would render the present appeal moot. For this reason we are not persuaded that staying the present appeal is necessary and accordingly deny Preblich’s motion.2

III. MOTION TO STRIKE

Sammut has moved to strike the Preblich’s Reply Brief on the ground that it raises matters not within the scope of her opening brief and introduces evidence which is not a part of the record. Because we reach the merits of Preblich’s appeal and reject it, we deny Sammut’s motion as moot.

IV. CONCLUSION

For the foregoing reasons, we affirm the district court’s affirmance of the bankruptcy court’s order authorizing the sale of the subject property, deny Preblich’s motion to stay the present appeal and deny Sammut’s motion to strike Preblich’s Reply Brief.

AFFIRMED.

*The panel unanimously finds this case suitable for decision without oral argument. Fed.R.App.P. 34(a); 9th Cir.R. 34-4
**This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3
1 The statute explicitly provides that:

The reversal or modification on appeal of an authorization under subsection (b) or (c) of this section of a sale or lease of property does not affect the validity of a sale or lease under such authorization to an entity that purchased or leased such property in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale or lease were stayed pending appeal.

11 U.S.C. Sec. 363(m).

2 Sammut suggests that the BAP case referred to by Preblich involves an attempt to reopen the adversary proceeding in which the bankruptcy court held that Preblich’s conveyance of the subject property to her husband and son was fraudulent. As we explained above, however, a finding that the conveyance was not fraudulent would not overcome the strict requirement in section 363(m) that a stay be obtained if an appellate court is to provide any relief affecting the rights of a good faith purchaser

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Why Homeowners Must Effectively Use Court Injunctions To Save Their Homes

01 Friday Apr 2016

Posted by BNG in Appeal, Bankruptcy, Case Laws, Case Study, Federal Court, Foreclosure Defense, Judicial States, Litigation Strategies, Non-Judicial States, Pro Se Litigation, Your Legal Rights

≈ Leave a comment

Tags

automatic stay, injunction, injunctive relief, motion, stay, stay pending appeal

CASE STUDY: 893 F.2d 1338 Unpublished Disposition

Effective Foreclosure Defense requires timing. If you time correctly, you can save your home. Homeowners presently in litigation must use injunctions to their advantage. Ignorance will not be to your advantage.

NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.

In re James MILLER, Jr. and Pamala F. Miller,
James MILLER, Jr. and Pamala F. Miller, Appellants,
v.
LINCOLN TITLE COMPANY, Appellee.

No. 88-5687.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Oct. 30, 1989.
Decided Jan. 12, 1990.

Before WILLIAM A. NORRIS, REINHARDT and TROTT, Circuit Judges.

I. MEMORANDUM*

1 The Millers (“Debtors”) seek reversal of an order of the Bankruptcy Appellate Panel (“BAP”) denying the Debtors’ Ex Parte Motion for Order Setting Aside Default Order and dismissing as moot the Debtors’ appeal of the dismissal of their Chapter 11 petition. The Debtors base their appeal on two arguments: (1) the BAP erred in denying the Debtors’ Rule 60(b) motion to set aside the default judgment; and (2) the BAP erred in dismissing the Debtors’ appeal of the bankruptcy court’s order dismissing their Chapter 11 case on the grounds of mootness. We affirm the BAP’s order dismissing the Debtors’ appeal insofar as it relates to the automatic stay and the sale of the property, due to the mootness of that issue, and we remand to the BAP the issues of timeliness of the Debtors’ appeal to the BAP and whether dismissal of the Debtors’ Chapter 11 petition for lack of prosecution of their earlier Chapter 13 petition was proper.

II. STATEMENT OF FACTS

2 The Debtors filed a Chapter 11 petition on June 12, 1986. On March 9, 1987, the U.S. Trustee filed a motion to dismiss the Chapter 11 case or, alternatively, to convert it to a Chapter 7 case. On March 31, 1987, Lincoln Title Company (“Lincoln”) filed a motion to join in the motion to dismiss and its own motion for dismissal. Lincoln based its motion to dismiss on the Debtors’ previous Chapter 13 case that was dismissed for failure to prosecute.1 Lincoln asked the court to take judicial notice of the fact that the Chapter 13 was dismissed pursuant to section 109(g)(1) of the Bankruptcy Code.2 On May 12, 1987, the bankruptcy court dismissed the Debtors’ Chapter 11 case based on the Debtors’ ineligibility to file the Chapter 11 case under section 109(g)(1). The order of dismissal was entered on May 15, 1987, and the Debtors filed their notice of appeal to the BAP on May 28, 1987, two days after the ten-day deadline prescribed by Bankruptcy Rule 8002. The respondent objected on the ground that the appeal was untimely and the BAP filed a conditional order of dismissal on July 22, 1987, inviting the Debtors to file a written explanation showing legal cause why the appeal should not be dismissed. On July 23, 1987, the Debtors filed a motion in opposition to the respondent’s objection. On September 9, 1987, the BAP issued an order denying the motion to dismiss. The order did not specify the BAP’s reasons for denial.
3  While the Chapter 11 case was pending, Creditway of America (“Creditway”) filed a motion for relief from the automatic stay. On September 17, 1986, the bankruptcy court entered an order modifying the automatic stay. This order denied Creditway’s motion to lift the stay subject to the following conditions to be performed by the Debtors: (1) Submission of proof of insurance on the subject property; (2) filing of schedules and statements by August 27, 1986; and (3) filing of a plan and disclosure statement on or before September 29, 1986. The order also stated that if the Debtors failed to perform any of these conditions, Creditway could file a declaration of default or order for relief from stay.
4  The Debtors complied with the first two requirements, but did not file a plan and disclosure statement by the prescribed deadline. However, the Debtors delivered a request for an extension of time to the trustee on September 26, 1986. The Trustee filed the request on September 30, 1986. On October 9, 1986, Creditway filed a document styled, “Declaration of Jeffrey A. Paris and Order Terminating Automatic Stay,” based on the Debtors’ noncompliance with the order to file a plan and disclosure statement by September 29. The Debtors claim to have received this declaration/order on October 20, 1986. On October 24, 1986, the court granted the Debtors’ request for an extension of time to file the plan and disclosure statement until October 27, 1986. On November 24, 1986, Judge Fenning signed Creditway’s proposed order terminating the automatic stay, and on December 16, 1986, entered a default order terminating the stay. The Debtors allege that neither the court nor Creditway provided them with a copy of any signed order. The Debtors did not appeal the November or December order.
5  On January 7, 1987, Creditway conducted a Trustee’s Sale of the property. The property was purchased by an independent third party. The Debtors then filed numerous papers in the state courts as well as the bankruptcy court seeking to set aside the sale. All actions were unsuccessful. In the meantime, the municipal court granted a Writ of Execution, Money Judgment for and Writ of Possession of Real Property on the foreclosed property.
6  On July 27, 1987, the bankruptcy court declined to hear the Debtors’ Complaint to Invalidate Sale of Real Property filed June 1, 1987, due to lack of subject matter jurisdiction since the bankruptcy case had been dismissed. The Debtors then filed with the BAP, on December 2, 1987, an ex parte motion to set aside the default order under Rule 60(b). The BAP denied the Debtors’ motion and dismissed their appeal as moot on January 11, 1988. The panel clarified this order at the request of the Debtors on March 11, 1988, and explained that because the order lifting the automatic stay was never appealed and the property was subsequently sold, the appeal was rendered moot. Debtors then filed a notice of appeal to the Ninth Circuit on February 10, 1988.

III. ANALYSIS

7 The court of appeals reviews a decision of the BAP de novo. Both the court of appeals and the BAP apply the same standard of review to the bankruptcy court judgment, reviewing findings of fact under the clearly erroneous standard and questions of law de novo. See In re Burley, 738 F.2d 981 (9th Cir.1984).

i. The Automatic Stay.

8 We affirm the order of the BAP denying the Debtors’ Rule 60(b) motion and dismissing their appeal insofar as it affects the automatic stay. The issue of the automatic stay and the sale of the Debtors’ residence has been rendered moot by the sale of the property to an independent third party.
9  This circuit has held that where a stay pending appeal is not requested or is not granted, a party risks losing its ability to realize the benefit of a successful appeal. See In re Combined Metals Reduction Co., 557 F.2d 179 (9th Cir.1977); In re Sun Valley Ranches, Inc., 823 F.2d 1373, 1374 (9th Cir.1987) (“We have generally held that where an automatic stay is lifted, the debtor’s failure to obtain a stay pending appeal renders an appeal moot after assets in which the creditor had an interest are sold.”). Where the property has been sold to an independent third party, this circuit has held that the appeal is moot, because the court cannot grant effective relief, at least in the absence of the third party. See In re Royal Properties, Inc., 621 F.2d 984, 987 (9th Cir.1980) (“Once the orders have been performed, an appeal attacking the order is moot. Nor may the appellants attack the validity of the sale or the deed in this appeal. The purchasers of the property have not been made parties to the appeal, and we cannot grant effective relief in their absence.”).
10  In the instant case, the default order was not appealed and a stay was not requested. The Debtors claim that they did not appeal because they were not served with the signed default order within the time period for appeal. Nonetheless, because the subject property was sold to an independent third party pursuant to a bankruptcy court order, we cannot grant effective relief in a proceeding to which the purchaser is not a party. Thus, we affirm the BAP’s denial of the Debtors’ Rule 60(b) motion and its order dismissing the Debtors’ appeal insofar as it affects the automatic stay.

ii. Dismissal of the Debtors’ Chapter 11 Petition

A. Extent of Property Involved

11 The BAP dismissed the Debtors’ appeal of the order dismissing their Chapter 11 case based on the sale of the Debtors’ residence rendering the appeal moot. However, it appears that the BAP mistakenly believed that the only property involved in the Debtors’ Chapter 11 case was the Debtors’ residence. Because other property appears to be involved, we reverse the BAP’s dismissal. On remand, the BAP should determine whether the Chapter 11 case involved other property.

B. Dismissal Under 11 U.S.C. Sec. 109(g)(1).

12  The bankruptcy court dismissed the Debtors’ Chapter 11 petition under section 109(g)(1). This section bars an individual who was a debtor in a previous Title 11 case pending in the preceding 180 days from being a debtor under Title 11 if the previous case was dismissed “for willful failure to abide by orders of the court, or to appear before the court in proper prosecution.” The Debtors’ earlier Chapter 13 case was dismissed for “failure to prosecute” and their subsequent Chapter 11 petition was filed within 180 days of that dismissal. The appellees argue that the dismissal for lack of prosecution of the Chapter 13 proceeding acts as a bar to the Debtors’ Chapter 11 filing. The appellants vigorously disagree, arguing that the Chapter 13 dismissal was not based on a willful failure to prosecute and that since section 109(g)(1) requires the element of willfulness, they are not barred from filing the Chapter 11 petition. The BAP did not consider this issue because it dismissed the appeal as moot. Thus, on remand if the BAP concludes that the appeal is timely (see section C infra ) and that property other than the house is involved, it should also consider the issue of whether the dismissal of the Debtors’ Chapter 13 case for failure to prosecute served to trigger the 180-day filing bar of section 109(g)(1).

C. Timeliness of the Appeal to the BAP.

13  The untimely filing of a notice of appeal is jurisdictional. In re Nucorp Energy, Inc., 812 F.2d 582 (9th Cir.1987). However, Bankruptcy Rule 8002 avoids potential hardship by allowing deadline extensions. If a party does not file the notice of appeal or an extension within the ten-day filing period, he may still receive an extension upon request within twenty days of the deadline if he can show “excusable neglect.” 11 U.S.C. Sec. 8002(c). The Debtors did not actually request an extension of time to file the appeal before the BAP and the BAP order did not indicate whether or not the Debtors had shown excusable neglect. Thus, on remand the BAP should reconsider the issue of the timeliness of the Debtors’ appeal or provide an explanation of the basis for its earlier determination.

AFFIRMED in part, REVERSED in part, and REMANDED for further proceedings consistent with this disposition.
*

This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3
1  The Millers filed a Chapter 13 petition on November 7, 1985. On November 13, 1985, the court filed an order for the Millers to file a plan and statement, and an order to show cause why the case should not be dismissed. On December 2, 1985, a show cause hearing was held and the court dismissed the Chapter 13 petition for “failure to prosecute.” The Millers did not attend this hearing
2  Section 109(1)(g) states that an individual may not be a debtor under Title 11 if he has been a debtor in a Title 11 case pending at any time in the preceding 180 days if “the case was dismissed by the court for willful failure of the debtor to abide by orders of the court, or to appear before the court in proper prosecution.” 11 U.S.C. Sec. 109(g)(1)

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How Homeowners Can Effectively Use Automatic Stay Provisions of the Bankruptcy Code

27 Sunday Dec 2015

Posted by BNG in Bankruptcy, Case Laws, Case Study, Foreclosure Crisis, Foreclosure Defense, Judicial States, Non-Judicial States, Pro Se Litigation, Your Legal Rights

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automatic stay, bankruptcy code, chapter 11 bankruptcy, chapter 13 bankruptcy, chapter 7 bankruptcy, foreclosure defense, lifting automatic stay, pro per, pro se, Pro se legal representation in the United States, wrongful foreclosure

I. Introduction.

A. Scope.

1. Section 362(a) of the Bankruptcy Code (the “Code”) contains a broad
statutory stay of litigation and lien enforcement, effective automatically on the commencement of a bankruptcy case. 11 U.S.C. § 362(a) (“. . . a petition [commencing a case] . . . operates as a stay, applicable to all entities . . .”.).

2. Purpose – Time to Reorganize. This automatic stay gives a trustee or
chapter 11 debtor-in-possession1 a breathing spell from creditors by stopping all collection efforts, harassment, and all foreclosure actions, allowing a debtor to attempt a reorganization plan. See, e.g., In re Siciliano, 13 F.3d 748, 750 (3d Cir. 1994) (“[t]he purpose of the automatic stay provision is to afford the debtor a ‘breathing spell’ by halting the collection process. It enables the debtor to attempt a repayment or reorganization plan with an aim toward satisfying existing debt.”);
Maritime Electric Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1204 (3d Cir. 1991) (“automatic stay allows debtor breathing spell from creditors and stops collection efforts”); In re Peregrine Systems, Inc., 314 B.R. 31, 44 (Bankr. D. Del. 2004) aff’d in part, rev’d in part on other grounds, 2005 WL 2401955 (D. Del. Sept. 29, 2005) (automatic stay is a “fundamental protection provided to a debtor for the purpose of stopping all creditor collection efforts and harassment of the debtor and to provide … a fresh start.”); Shaw v. Ehrlich, 294 B.R. 260, 267 (W.D. Va. 2003), aff’d, 99 Fed. Appx. 466 (4th Cir. 2004) (“stay protects debtors, as well as creditors, by providing debtors a breathing spell from collection efforts”).

3. Policy Rationale – Debtor Asset Protection. Behind the stay is a clear
policy rationale: “to grant complete, immediate, albeit temporary relief to the debtor from creditors, and also to prevent dissipation of the debtor’s assets before orderly distribution to creditors can be effected.” S.E.C. v. Brennan, 230 F.3d 65, 70 (2d Cir. 2000) (quoting Penn Terra Ltd. v. Department of Envtl. Resources, 733 F.2d 267, 271 (3d Cir. 1984)). See also Reliant Energy Services, Inc. v. Enron Canada Corp., 349 F.3d 816, 825 (5th Cir. 2003) (“purposes of the bankruptcy stay under 11 U.S.C. § 362 ‘are to protect the debtor’s assets, provide temporary relief from creditors, and further equity of distribution among the creditors by forestalling a race to the courthouse.'”) (quoting GATX Aircraft Corp. v. M/V Courtney Leigh, 768 F.2d 711, 716 (5th Cir. 1985)); Mann v. Chase Manhattan Mortgage Corp., 316 F.3d 1, 3 (1st Cir. 2003) (“automatic stay provision is designed to forfend against the disorderly, piecemeal dismemberment of the debtor’s estate outside the bankruptcy proceedings”).

_____________________________

1 Code § 1107(a) gives a chapter 11 debtor-in-possession the “rights,” “duties” and “powers” of a trustee.
See NLRB v. Bildisco & Bildisco, 465 U.S. 513, 517 n. 2 (1984). See also Fed. R. Bankr. P. 9001(10) (“‘Trustee’ includes a debtor in possession in a Chapter 11 case.”).

——————————

4. Procedural Safeguards for Secured Creditors. The Code still imposes
procedural safeguards for the benefit of the secured creditor (e.g., “adequate protection” against erosion of collateral value; time limits on stay modification requests; limits on counterclaims against secured lender seeking stay modification). As shown below, it attempts to reconcile the rights of the secured creditor with the needs of the debtor and its unsecured creditors. See United Savings Assn. of Texas v. Timbers of Inwood Forest Associates, Ltd. (In re Timbers of Inwood Forest Associates, Ltd.), 484 U.S. 365, 376 (1988) (“ . . . lack of any realistic prospect of effective reorganization will require” modification of stay of lien enforcement”).

II. The Automatic Stay.

A. When Effective.

1. The stay is automatic upon filing of the petition commencing a case under Code chapters 7 (liquidation), 9 (municipal debt adjustment), 11 (reorganization),13 (individual debt adjustment), or chapter 15 (cross-border cases) with respect to foreign main proceedings. See e.g. Eskanos & Adler, P.C. v. Leetien, 309 F.3d 1210, 1214 (9th Cir. 2002) (“the automatic stay requires an immediate freeze of the status quo by precluding and nullifying post-petition actions”); Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 527 (2d Cir. 1994) (“[a]utomatic stay is effective immediately upon filing of bankruptcy petition”) (citing Shimer v. Fugazy (In re Fugazy Express, Inc., 982 F.2d 769, 776 (2d Cir. 1992));

2. The stay acts as a specific and definite court order to restrain creditors
from continuing the judicial process or collection efforts against debtor. See e.g. In re San Angelo Pro Hockey Club, Inc., 292 B.R. 118 (Bankr. N.D. Tex. 2003) (automatic stay is self-executing injunction, constituting an order issuing from bankruptcy court); In re Bottone, 226 B.R. 290, 297 (Bankr. D. Mass. 1998) (“as long as the Chapter 13 case is pending . . . the automatic stay … restrains postpetition creditors from taking action against property of the estate”) (quoting In re Woodall, 81 B.R. 17, 18 (Bankr. E.D. Ark. 1987)).

3. Unless modified by the court, the stay is effective for the duration of a
bankruptcy case, and generally cannot be waived by the debtor. Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.2d 1194 (3d Cir. 1991) (held, because automatic stay serves interests of both debtors and creditors, it may not be waived and its scope may not be limited by debtor); In re Atrium High Point Ltd. Partnership, 189 B.R. 599 (Bankr. M.D.N.C. 1995) (before enforcing a debtor’s prepetition waiver of automatic stay bankruptcy court must look at circumstancesunder which prepetition waiver arose); but see In re Excelsior Henderson Motorcycle Mfg. Co., Inc., 273 B.R. 920 (Bankr. S.D. Fla. 2002) (court enforced prepetition agreement under which chapter 11 debtor waived automatic stay).

B. Jurisdictional Basis of Injunctive Power.

1. The district court has “exclusive jurisdiction of all of the property,
wherever located, of the debtor as of the commencement of [the] case.” 28 U.S.C. § 1334(d). A bankruptcy court is a “unit of the district court.” 28 U.S.C. § 151. Section 362 implements this jurisdiction and is supplemented by § 105(a), which authorizes a court to “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of the Code.

2. The broad jurisdictional base of Section 362 confirms the court’s inherent power to protect property within its jurisdiction and to prevent any divestiture of that jurisdiction. Isaacs v. Hobbs Tie & Timber Co., 51 S. Ct. 270, 282 (1931) (held, jurisdiction of bankruptcy court respecting property of debtor’s estate having attached, actions brought in other courts could not affect it). See In re Mohawk Greenfield Motel Corp., 239 B.R. 15 (Bankr. D. Mass. 1999) (“the automatic stay protects the bankruptcy court’s exclusive jurisdiction over the debtor and its property”) (citing In re Soares, 107 F.3d 969, 975 (1st Cir. Mass. 1997)).

3. Section 362(a) stays, among other things:

a. a secured creditor from collecting accounts receivable of debtor.
Matter of Pernie Bailey Drilling Co., Inc., 993 F.2d 67 (5th Cir. 1993)
(account receivables were property of the estate; court must lift stay for
creditors to gain access to receivables);

b. a creditor’s dissolution of a debtor corporation. 11 U.S.C.
§ 362(a)(3); Hillis Motors, Inc. v. Hawaii Automobile Dealers’ Assoc.,
997 F.2d 581 (9th Cir. 1993) (held, dissolution proceeding constituted
exercise of control over debtor’s property);

c. foreclosure proceedings in other courts instituted against debtor’s
property prior to commencement of bankruptcy case. 11 U.S.C.
§ 362(a)(1); see In re Vierkant, 240 B.R. 317, 322 (B.A.P. 8th Cir. 1999)
(citing Kalb v. Feuerstein, 308 U.S. 433 (1940); In re Soares, 107 F.3d
969 (1st Cir. 1997)) (post-petition state court default order signed by judge
two weeks after bankruptcy filing violated automatic stay);

d. a landlord’s proceeding to recover possession of leased premises.
11 U.S.C. § 363(a)(5); 48th St. Steakhouse, Inc. v. Rockefeller Group, Inc.
(In re 48th St. Steakhouse, Inc.), 835 F.2d 427 (2d Cir. 1987) (serving
notice of termination on assignee of restaurant lease rather than on debtor, which still had interest in the property, violated automatic stay); and

e. an IRS sale of property seized prior to commencement of case.
11 U.S.C. § 362(a)(8); United States v. Whiting Pools, Inc., 462 U.S. 198
(1983) (IRS may also be compelled to turn over levied property under
Code § 542).

f. arbitration proceedings that not only concern claims asserted
against the debtor, but also concern the debtor’s claims against a third
party. ACandS, Inc. v. Travelers Casualty and Surety Co., 425 F.3d 252
(3d Cir. 2006), cert. denied, 126 S. Ct. 2291 (2006). (although arbitration
was commenced by debtor, continuation of arbitration proceedings
violated automatic stay because, unlike trial, it is impossible in arbitration
to definitely classify arguments presented (i.e., claims and counterclaims);
arbitration award, which effectively terminated debtor’s insurance
coverage, is invalid because it diminishes estate property); In re Edwin
Epstein Jr. Operating Co., Inc., 314 B.R. 591 (Bankr. S.D. Tex. 2004)
(held, automatic stay applied, not only to prevent non-debtor party to
arbitration proceedings from asserting claims against debtor for tortious
interference and slander of title, but also to prevent arbitrators from
hearing debtor’s claims to replace this non-debtor party as operator of oil
and gas wells based on debtor’s asserted ownership interests therein).

III. Scope and Duration of Stay.

A. Scope of Section 362.

1. Property of Estate. The bankruptcy court’s injunctive power is ordinarily
limited to protecting property belonging to a debtor. Property of the estate is defined in Code § 541(a)(1) (“. . . all legal or equitable interests of the debtor in property as of the commencement of the case.”). See In re Lankford, 305 B.R. 297, 301 (Bankr. N.D. Iowa 2004) (“All recognizable interests of the debtors or the estate are afforded the protection of § 362(a)…This includes a mere possessory interest in real property without any accompanying legal interest.”). See also In re Moffett, 356 F.3d 518 (4th Cir. 2004) (held, chapter 13 debtor’s statutory right of redemption was sufficient interest in automobile that was repossessed prepetition to be included in estate property). But see In re Jasper, 325 B.R. 50, 55 (Bankr. D. Me. 2005) (credit union’s policy of revoking membership benefits of members who caused credit union a loss does not violate automatic stay); In re Santangelo, 325 B.R. 874 (Bankr. M.D. Fla. March 22, 2005) (district court did not violate automatic stay by approving class action
settlement for claims against mortgage lender; rather, court gave prospective class members, including debtor choice of remaining class members or opting out of class); In re Medex Regional Laboratories, LLC, 314 B.R. 716 (Bankr. E.D. Tenn. 2004) (proceeds of debtor’s directors’ and officers’ liability insurance policies were not property of estate and were not protected by automatic stay, even though policies also provided coverage to debtor for indemnification claims, because the debtor had not provided any indemnification to non-debtor insiders and such indemnification claims were merely hypothetical). Compare In re Arter &
Hadden, L.L.P., 335 B.R. 666 (Bankr. N.D. Ohio 2005) (proceeds of debtor’s
directors’ and officers’ liability insurance policies are property of estate because policies also provided coverage to debtor and there was no reason why direct suit against debtor is either practically or procedurally untenable).

a. Property Outside the Scope. The stay is not applicable to actions
against property that is neither the debtor’s nor the estate’s. Rodger v.
County of Munroe (In re Rodgers), 333 F.3d 64 (2d Cir. 2003) (debtor’s
mere possession of title to real property is not sufficient to find property to
be property of estate or to bar delivery of deed to purchaser by operation
of stay); Chugach Timber Corp. v. Northern Stevedoring & Handling
Corp. (In re Chugach Forest Prods., Inc.), 23 F.3d 241 (9th Cir. 1994)
(court refused to extend stay to boat that was not property of debtor’s
estate but on which assets of debtor had been transferred) (11 U.S.C.
§ 541(b)); In re Howell, 311 B.R. 173, 179 (Bankr. D. N.J. 2004)
(automatic stay does not preclude estranged spouse from seeking equitable distribution of non-estate property such as exempt property, postpetition earnings, property excluded from the estate, property abandoned by the trustee or debtor surplus); NLRB v. McDermott, 300 B.R. 40 (D. Col. 2003) (automatic stay did not protect property of debtor’s wife’s). Examples of property outside the stay’s scope are:

(i) Foreclosure. If a lender completes foreclosure before the bankruptcy filing, neither the debtor nor the estate has any interest in the property and the automatic stay does not apply. In re Theoclis, 213 B.R. 880 (Bankr. D. Mass. 1997) (held, foreclosure sale had terminated debtor’s interest in property.); In re Williams, 247 B.R. 449 (Bankr. E.D. Tenn. 2000) (when foreclosure sale of debtor’s residence became final prior to commencement of chapter 13 case, residence did not become property of estate and was not protected by automatic stay);

(ii) Abandonment. Abandonment terminates the stay as to abandoned property. In re Holly’s, Inc., 140 B.R. 643 (Bankr. W.D. Mich. 1992) (once abandonment of debtor’s property is effectuated, or foreclosure of real and personal property is completed, taxing entity is entitled to enforce its
statutory in rem rights against property.). But see In re Thompson-Mendez, 321 B.R. 814, 819 (Bankr. D. Md. 2005) (trustee’s deemed rejection of debtor’s residential lease by failure to timely assume it did constitute
abandonment such that lease was no longer protected by automatic stay).

2. Entities Affected by the Stay. Section 362(a) applies “to all entities,”
including any “person, estate, trust, governmental unit.” 11 U.S.C. § 101(15). This broad definition of “entity” eliminates the need to define who is a “creditor,” “secured creditor” or other person affected by the stay.

B. Duration of the Stay. Unless the court orders otherwise (i.e., unless creditor gets automatic stay modified), the stay “continues until such property is no longer property of the estate.” 11 U.S.C. § 362(c)(1). The stay of all other acts continues until case is closed or dismissed, or, if debtor is an individual, until debtor is granted or denied a discharge. 11 U.S.C. §§ 362(c)(2)(A), (B) and (C). See also In re Allen, 300 F.3d 1055, 1059 (9th Cir. 2002) (automatic stay “prohibits action against the bankruptcy estate only until the bankruptcy court confirms a plan reorganizing the debtor’s property”); Middle Tennessee News Co., Inc. v. Charnel of Cincinnati, Inc., 250 F.3d 1077 (7th Cir. 2001) (automatic stay remains in effect until bankruptcy court disposes of case or grants relief from stay); In re Spirtos, 221 F.3d 1079, 1081 (9th Cir. 2000) (“So long as there are assets in the estate, then, the stay remains in effect”); Eastern Refractories Co. Inc. v. Forty Eight Insulations Inc., 157 F.3d 169 (2d Cir. 1998) (order “terminating” automatic stay operates from date of order’s entry); Lomagno v. Salomon Brothers Realty Corp., 320 B.R. 473, 481 (B.A.P. 1st Cir. 2005), aff’d, 429 F.3d 16 (1st Cir. 2005) (automatic stay not retroactively imposed when dismissal order set aside on due process grounds); In re Peregrine Systems, Inc., 314 B.R. 31, 44 (Bankr. D. Del. 2004), aff’d in part, rev’d in part on other grounds, 2005 WL 2401955 (D. Del. Sept. 29, 2005) (automatic stay “continues until the bankruptcy case is closed, dismissed, or discharge is granted or denied, or until the bankruptcy court grants some relief from the stay.”) (citing Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.3d 1194, 1206 (3d Cir. 1991)); U.S. v. White, 466 F.3d 1241 (11th Cir. 2006) (debtor discharged and automatic stay terminates on date of confirmation of debtor’s reorganization plan even when plan contains a later effective date). If a case is filed by or against a debtor who is an individual and a case of the debtor was pending within the preceding one year period but was dismissed, the automatic stay “with respect to any action taken with respect to a debt or property securing such debt or with respect to any lease shall terminate with respect to the debtor on the 30th day after the filing of the later case.” 11 U.S.C. § 362(c)(3)(A). See Jumpp v. Chase Home Finance, LLC (In re Jumpp), 356 B.R. 789 (B.A.P. 1st Cir. 2006) (interpreting § 362(c)(3)(A) automatic stay terminates only in regard to debtor; stay continues, though, in regard to property of estate).

  • As of October 17, 2005, automatic stay terminates 60 days after a request for relief from stay unless final decision on request is rendered by court within the 60-day period or period is extended by agreement or by court for specific period of time found necessary for good cause.2

__________________________________________

2 The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was enacted on April 20, 2005, and many of its provisions became effective on October 17, 2005.

———————

IV. Acts Stayed. Section 362(a) is broad in scope, but specifically lists eight categories that are subject to its injunctive power.

1. “Commencement or continuation . . . of a judicial, administrative, or other proceeding against the debtor . . . to recover on a prepetition claim against a debtor.”3 Code § 362(a)(l) (emphasis added):

a. Appeals: stay covers all proceedings originally brought against the
debtor, regardless of whether the debtor is appellant or appellee.4 Halmar
Robicon Group, Inc. v. Toshiba Int’l Corp., 127 Fed. Appx. 501, 503 (Fed.
Cir. 2005) (automatic stay only operates as against actions in which debtor
is in defensive posture); Nielson v. Price, 17 F.3d 1276, 1277 (10th Cir.
1994) (“[t]he 362(a)(1) stay applies to actions that are ‘against the debtor’
at their inception, regardless of the subsequent appellate posture of the
case”); Ellis v. Consolidated Diesel Elec. Corp., 894 F.2d 371, 373 (10th
Cir. 1990) (operation of stay should not depend upon whether district
court finds for or against the debtor). But see In re Mid-City Parking,
Inc., 322 B.R. 798 (Bankr. N.D. Ill. 2005) (debtor may unilaterally waive
protections of automatic stay by pursuing appeal without first obtaining
bankruptcy court order lifting stay; debtor could not be held liable for
damages to creditor-appellee arising from debtor’s alleged “willful stay
violation).

b. Administrative proceedings: See In re Krystal Cadillac Oldsmobile
GMC Truck, Inc., 142 F.3d 631 (3d Cir. 1998) (postpetition
determinations by Pennsylvania’s Board of Vehicle Manufacturers,
Dealers and Salespersons, ordering termination of franchise agreement
violated automatic stay); In re Best Payphones, Inc., 279 B.R. 92 (Bankr.
S.D.N.Y. 2002) (administrative law judge’s post-petition decision in
proceeding commenced pre-petition ‘but concluded after debtor’s chapter
11 filing’ was void and without effect because it violated automatic stay).
But see Board of Governors of Federal Reserve System v. MCorp
Financial, Inc., 502 U.S. 32 (1991) (Section 362(a) does not apply to
ongoing, nonfinal administrative/regulatory proceedings, and action of
Board of Governors was excepted from the stay under Section 362(b)(4)
of the Code (the “governmental unit” exception)).

c. Partnerships. Actions against partners and their property are not
protected in first instance by the filing of a partnership petition. Bankers
Trust (Delaware) v. 236 Beltway Inv., 865 F. Supp. 1186 (E.D. Va. 1994)
(automatic stay does not protect partnership debtor’s individual general
partners); O’Neill v. Boden-Wert Real Estate USA Funds I, Ltd., 599
So.2d 1045 (Fla. App. 2d Dist. 1992) (held, automatic stay did not stop action against general partner in partnership debtor or against general
partner’s general partner).

______________________________

3 “‘[C]laim against the debtor’ includes claim against property of the debtor.” 11 U.S.C. § 102(2).
4 Actions against non-debtors and against co-defendants are not stayed. See sub-section (e) infra.

d. Shareholders of corporate debtor. Bankruptcy court has no jurisdiction
over stock of corporate debtor that belongs to third party shareholders.
See e.g. In re Marvel Entertainment Group, Inc., 209 B.R. 832, 838 (D.
Del. 1997) (“automatic stay provisions of the Bankruptcy Code are not
implicated by the exercise of shareholders’ corporate governance rights.”).

e. Actions against surety, co-debtor, or guarantor are not stayed.5 See
e.g. Reliant Energy Services, Inc. v. Enron Canada Corp., 349 F.3d 816,
825 (5th Cir. 2003) (“[by its terms the automatic stay applies only to the
debtor, not to co-debtors under Chapter 7 or Chapter 11”); In re Third
Eighty-Ninth Associates, 138 B.R. 144 (S.D.N.Y. 1992) (suit against
guarantors of chapter 11 debtor was not a “back-door” attempt to acquire
assets of debtor); In re Rohnert Park Auto Parts, Inc., 113 B.R. 610
(B.A.P. 9th Cir. 1991) (automatic stay does not prevent creditors from
suing co-debtors).

f. Actions are not stayed against non-debtor co-defendants.6 See e.g.
Queenie, Ltd. v. Nygard Intl., 321 F.3d 282, 287 (2d Cir. 2003) (debtor’s
filing of bankruptcy petition stayed his appeal and that of his wholly owned corporation7, but not that of co-defendants); 555 M Mfg., Inc. v.
Calvin Klein, Inc., 13 F. Supp. 2d 719 (N.D. Ill. 1998) (automatic stay
protection not available to debtor’s solvent co-defendant in breach of
contract case). But see Woodell v. Ormet Primary Aluminum Corp., 808
N.E.2d 402, 407 (Ohio Ct. App. 2004) (automatic stay applies to claims
against debtor’s employee co-defendants only to the extent that the causes of action against them arise from their status as employees of the debtor).

_____________________________________

5 In limited circumstances, courts have asserted their equitable powers under 11 U.S.C. § 105(a) to enjoin the continuation of litigation against non-debtors when the debtor’s trustee demonstrates that continuation of litigation against non-debtors imminently and irreparably threatens the debtor’s reorganization prospects. E.g. In re United Health Care Org., 210 B.R. 228, 233 (S.D.N.Y. 1997) (staying action against non-debtor principals and officers of debtor when enforcement of judgment imminently and irreparably threatened non-debtors’ ability to fund debtor’s plan); North Star Contracting Corp. v. McSpeedon (In re North Star Contracting Corp.), 125 B.R. 368, 370-71 (S.D.N.Y.1991) (staying action against non-debtor president of debtor when, among other things, continuation of action would distract vital non-debtor and there was no distinct cause of action against him, but merely an action commenced solely to circumvent the stay).

6 Courts may stay actions against a non-debtor third-party defendant under “unusual circumstances” when “there is such identity between the debtor and third-party defendant that the debtor may be said to be the real party defendant and that a judgment against the third-party defendant will in effect be a judgment … against the debtor.” A.H. Robins Co. v. Piccinin, 788 F.2d 994, 999 (4th Cir. 1986). See also In re Nat’l Century Fin. Enter., 423 F.3d 567 (6th Cir. 2005) (commencement of civil action to recover accounts receivable held in collection account in debtor’s name violated automatic stay even though debtor was not named as defendant because action sought to recover estate property); Global Industrial Technologies, Inc. v. Ace Prop. & Cas. Ins. Co. (In re Global Industrial
Technologies), 303 B.R. 753 (W.D. Pa. 2004), vacated in part, modified in part on other grounds, 2004 WL 555418 (Bankr. W.D.Pa. Mar. 19, 2004) (held, state court action brought by insurers for declaratory judgment regarding non-debtor’s rights in insurance policies it shared with debtor violated automatic stay even though debtor was not named as defendant in state court action because outcome of state action could affect debtor’s rights in shared insurance); Teachers Ins. & Annuity Assoc. of America v. Butler, 803 F.2d 61, 65 (2d Cir. 1986) (referred to A.H. Robins decision as case with “unusual circumstances”). Compare In re Transervice Logistics, Inc., 304 B.R. 805 (Bankr. S.D. Ohio 2004) (declining to extend automatic stay to non-debtor co-defendants because, unlike situation
in A.H. Robins, defendant-debtor only faced one suit, not thousands, and thus would not be barraged by discovery and litigation).

——————

g. Proceedings or claims arising post-petition are not subject to automatic
stay, although successful plaintiff must obtain relief from stay if it seeks to enforce judgment against estate.8 Bellini Imports, Ltd. v. Mason & Dixon Lines, Inc., 944 F.2d 199 (4th Cir. 1991) (automatic stay did not bar
institution of action arising out of alleged postpetition breach of contract);
Erickson v. Polk, 921 F.2d 200 (8th Cir. 1990) (lessor of farmland did not
violate automatic stay when it retook possession of property following
postpetition expiration of lease); In re Dominguez, 312 B.R. 499 (Bankr.
S.D.N.Y. 2004) (prepetition lapse of debtor-taxpayer’s redemption period
may constitute “cause” for lifting stay to allow tax authority to exercise its
rights in debtor’s real property; it did not relieve taxing authority’s
obligation to move first for modification of stay).

h. Automatic stay does not apply to post-petition defensive actions in a
prepetition lawsuit brought by a debtor. Stanwyck v. Beilinson, 104 Fed.
Appx. 616 (9th Cir. 2004).

2. Enforcement of prepetition judgment against debtor or its property (11
U.S.C. § 362(a)(2)). See generally Delpit v. Commissioner, 18 F.3d 768 (9th Cir. 1994) (held, appeal to enforce pre-petition judgment was subject to the automatic stay).

3. “[A]ny act” to obtain possession of debtor’s property, or to exercise
control over such property. 11 U.S.C. § 362(a)(3).

__________________________________

7 The court ignored its own precedent in coming to this bizarre result, but justified it by reasoning that adjudication of a claim against the wholly-owned corporation would have an “immediate adverse economic impact” on the debtor. But see Feldman v. Trustees of Beck Ind., Inc. (In re Beck Ind., Inc.), 725 F.2d 880 (2d Cir. 1973) (court cannot enjoin suit against solvent independent subsidiary of debtor merely because stock is held by debtor in reorganization); In re Unishops, Inc., 374 F.Supp. 424 (S.D.N.Y. 1974) (bankruptcy court lacks jurisdiction to grant
a stay of court proceedings against subsidiaries).

8 Judiciary Code, 28 U.S.C. § 959(a), provides relief to holders of postpetition claims against a debtor from having to obtain leave from bankruptcy court to pursue claims arising from “acts or transactions in carrying on business connected with [estate] property.” 28 U.S.C. § 959. Section 959’s exception to the automatic stay is limited to postpetition claims arising from operation of the debtor’s business, and does not include acts associated with liquidation or administration of the bankruptcy estate. See In re Crown Vantage, Inc., 421 F.3d 963, 971-72 (9th Cir. 2005) (postpetition claim against trustee arising from liquidation of estate not subject to § 959 because not related to business operation); Carter v. Rogers, 220 F.3d 1249, 1254 (11th Cir. 2000); In re DeLorean Motor Co., 991 F.2d 1236 (6th Cir. 1993) (malicious prosecution claims against trustee arising from avoidance actions are not based on acts arising from business operation and thus not subject to § 959).

—————————

a. A credit union that accepts and retains postpetition deductions from
chapter 13 debtor’s salary violates automatic stay. See, e.g., Town of
Hempstead Employees Federal Credit Union v. Wicks, 215 B.R. 316
(E.D.N.Y. 1997) (credit union’s four-month-long administrative hold on
chapter 13 debtors’ savings accounts violated automatic stay).

b. Letters of Credit. See, e.g., In re Kmart Corp., 297 B.R. 525 (N.D. Ill.
2003) (letters of credit are not property of debtor’s estate subject to
automatic stay; beneficiary not prevented from drawing on letter of credit
when account party is in bankruptcy); In re A.J. Lane & Co., Inc., 115
B.R. 738 (Bankr. D. Mass. 1990) (held, payment by third party on letter of
credit not stayed because it did not involve a transfer of debtor’s assets).

c. Creditors’ actions against debtor to obtain property fraudulently
transferred by debtor prior to bankruptcy are barred by the automatic stay.
See, e.g. Constitution Bank v. Tubbs, 68 F.3d 685 (3d Cir. 1995) (bank’s
action against guarantors for fraudulent conduct triggered automatic stay
when each guarantor filed a bankruptcy petition during fraud action).

d. Mortgagees’ postpetition foreclosure against real property subject to
deed naming debtor’s spouse a sole owner violated automatic stay because, although debtor only had arguable interest in the property, the
determination should be made by bankruptcy court before mortgagees
foreclosed. In re Chesnut, 422 F.3d 298 (5th Cir. 2005).

e. Debtor’s Tax Benefits. Circuits apparently are split regarding whether
a debtor’s tax benefits (e.g., net operating losses) are property of the estate, thus subject to the automatic stay. See In re UAL Corp., 412 F.3d 775
(7th Cir. 2005) (finding bankruptcy court’s injunction restricting trading in
debtor’s securities to protect tax benefits to be “problematic on the merits,” and questioning court’s reliance on Bankruptcy Code §§ 105(a) and 362 as basis for trading procedures order). Compare In Prudential Lines, Inc., 928 F.2d 565 (2d Cir. 1991) (finding debtor’s tax benefits to be estate property, and that automatic stay thus enjoined debtor’s parent from taking worthless stock deduction on parent’s tax return).

4. Any act to create, perfect, or enforce any lien against debtor’s property
(but not the perfection of mechanic’s lien9 — §§ 362(b)(3) and 546(b) — or when perfection occurs within the 10-day period after the time of effective transfer of the property, under §§ 362(b)(3), and 547(e)(2)(A)). 11 U.S.C. § 362(a)(4). See In re Fuller, 134 B.R. 945 (B.A.P. 9th Cir. 1992) (held, automatic stay prevents creation or perfection of lien, even by operation of law).

_________________________________________

9 The mechanic’s lienor will ordinarily be able to perfect its lien after bankruptcy for work performed prior to bankruptcy. See generally, In re Yobe Electric, Inc., 728 F.2d 207, 208 (3d Cir. 1984) (per curiam) (service of notice of intent to file mechanic’s lien did not violate stay since under state statute “perfection of mechanic’s lien ‘relates back’ to the installation of the first material”); In re Lionel Corp., 29 F.3d 88 (2d Cir. 1994) (held, no automatic stay violation resulted from mechanics’ lienors’ post-petition serving notice of lien upon lessors and
chapter 11 debtor lessee, when New York law permitted perfection of filed mechanics’ lien after another entity had acquired rights to the property).

—————————–

a. Sections 362(b)(3) and 546(b)(1)(A), read together, set the
boundaries of this exception.

(i) Section 362(b)(3) subjects a creditor’s right to “perfect, or
to maintain or continue the perfection of, an interest in property” to
Section 546(b) of Code. 11 U.S.C. §362(b)(3).

(ii) In turn, Section 546(b) limits the trustee’s powers to avoid statutory liens by providing that they “are subject to any generally applicable law that permits perfection of an interest in property to be effective against an entity that acquires rights in such property before the date of perfection.” 11 U.S.C. §546(b)(1)(A) (emphasis added); see, e.g., In re AR Accessories Group, Inc., 345 F.3d 454, 458 (7th Cir. 2003) (held, priming statute need not contain language expressly providing for retroactive perfection in order to trigger exception provided in 11 U.S.C. §546(b)(1)(A)); In re
Hayden, 308 B.R. 428 (B.A.P. 9th Cir. 2004) (held, towing operator did not violate automatic stay in refusing to surrender possession of debtor’s vehicle, which was towed prepetition, unless debtor first paid towing charges because towing operator was merely acting to maintain or continue possession of its lien, not to enforce it).

5. Any act to create, perfect, or enforce a lien against debtor’s property for
prepetition claims. 11 U.S.C. § 362(a)(5). See, e.g., In re Birney, 200 F.3d 225
227 (4th Cir. 1999) (Section 362(a)(5) prohibits “any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title”).

6. “Any act to collect, assess, or recover a prepetition claim against the
debtor.” 11 U.S.C. § 362(a)(6). Pertuso v. Ford Motor Credit Co., 233 F.3d 417,
423 (6th Cir. 2000) (a course of conduct violates § 362(a)(6) if it “(1) could
reasonably be expected to have a significant impact on the debtor’s determination as to whether to repay, and (2) is contrary to what a reasonable person would consider to be fair under the circumstances”) (quoting In re Briggs, 143 B.R. 438 453 (Bankr. E.D. Mich. 1992)); see also In re Diamond, 346 F.3d 224, 227-28 (1st Cir. 2003) (settlement negotiations challenging Chapter 7 debtor’s discharge do not violate the automatic stay per se, but creditor’s threat to seek revocation of debtor’s real estate license during negotiations was coercive, thus dismissal of debtor’s complaint proper); In re Optel, Inc., 60 Fed.Appx. 390 (3d Cir. March 25,
2003) (sale agreement between creditor and debtor provided that debtor either pay $6 million lump sum payment or, if creditor requested, $10 million over time; held, automatic stay prohibited creditor from requesting the $10 million deferred payment, therefore creditor was only entitled to distribution on $6 million claim); In re Jamo, 283 F.3d 392, 399 (1st Cir. 2002) (“a creditor may engage in post petition negotiations pertaining to a bankruptcy-related reaffirmation agreement so long as the creditor does not engage in coercive or harassing tactics”).

7. Setoffs of any prepetition debt owing to the debtor. 11 U.S.C. § 362(a)(7).
See Newbery Corp. v. Fireman’s Fund Ins. Co., 95 F.3d 1392 (9th Cir. 1996)
(right of setoff is subject to automatic stay provisions of chapter 11); Citizens Bank of Maryland v. Strumpf, 516 U.S. 16 (1995) (temporary administrative freeze by bank not a stay violation or setoff; intent to settle accounts permanently is required for setoff within meaning of automatic stay provisions). Compare Jimenez v. Wells Fargo Bank, N.A., 335 B.R. 450 (Bankr. D. N.M. Dec. 21, 2005) (temporary administrative freeze by bank, without right of setoff, violated automatic stay); In re Calvin, 329 B.R. 589 (Bankr. S.D. Tex. 2005) (bank’s administrative freeze of debtor’s account violated automatic stay when bank was not creditor of debtor and thus had no right of setoff); In re Cullen, 329 BR. 52 (Bankr. N.D. Iowa 2005) (bank’s administrative freeze of account jointly held by debtor and debtor’s father violated automatic stay because freeze was intended to continue indefinitely until bankruptcy case was closed; bank did not have valid
right of setoff because funds in account were property of debtor’s father and mutuality requirement for setoff thus was lacking).

a. N.B.: The automatic stay, however, does not prevent a creditor
from exercising its right of recoupment.10 See, e.g., In re Slater Health
Center, Inc., 398 F.3d 98 (1st Cir. 2005) (right of recoupment entitled
government to recoup prepetition overpayments to debtor-health care
provider by reducing postpetition payments to debtor); In re Holyoke
Nursing Home, 372 F.3d 1 (1st Cir. 2004) (same); In re Anes, 195 F.3d
177 (3d Cir. 1999) (held, doctrine of recoupment did not apply so as to
permit pension plans to deduct loan payments from debtors’ postpetition
paychecks because the payments were not part of the same transaction); In
re Delicruz, 300 B.R. 669 (Bankr. E.D. Mich. 2003) (“recoupment reduces
or extinguish[es] a debt arising from the same transaction, and is not
stayed by the bankruptcy”). But see York Linings Int’l, Inc. v. Harbison-
Walker Refractories Co., 839 N.E.2d 766 (Ind. App. 2005) (although
automatic stay does not bar creditor from exercising right of recoupment,
stay does prevent creditor from asserting counterclaim for recoupment in
litigation because such a counterclaim seeks affirmative relief).

_____________________________________

10 “Recoupment” has been defined as follows: “. . . so long as the creditor’s claim arises out of the identical transaction as the debtor’s, that claim may be offset against the debt owed to the debtor, without concern” for the Code’s setoff limitations. In re University Medical Center, 973 F.2d 1065, 1080 (3d Cir. 1992). Recoupment in bankruptcy has been narrowly construed by courts because it violates the basic bankruptcy principle of equal distribution. In re B & L Oil Co., 782 F.2d 155, 158 (10th Cir. 1986) (“[a] fundamental tenet of bankruptcy law is that . . . [once] a petition is filed, debts that arose before the petition may not be satisfied through post-petition transactions. This is seen in bankruptcy restrictions on setoffs [and recoupment].”); In re McMahon, 129 F.3d 93,
97 (2d Cir. 1997) (“in light of the Bankruptcy Code’s strong policy favoring equal treatment of creditors, recoupment . . . should be narrowly construed”).

———————-

8. Commencement or continuation of a proceeding before the United States Tax Court concerning the debtor. 11 U.S.C. § 362(a)(8). See, e.g., Halpern v. C.I., 96 T.C. 895 (U.S. Tax Ct. 1991) (held, automatic stay bars commencement or continuation of any proceeding in Tax Court, regardless of whether claim relates to prepetition or postpetition tax year deficiencies).

  • As of October 17, 2005, § 362(a)(8) is limited to proceedings
    concerning corporate debtor’s tax liability for taxable period the
    bankruptcy court may determine or, if debtor is individual, to tax
    for taxable period ending before date of order for relief.

9. Only affirmative acts are stayed. Section 362 applies only to affirmative
acts against the debtor or its estate.

a. The automatic stay does not affect, and the court may not exercise
its equitable powers to stay or toll, the automatic transfer of rights such as
that occurring by the expiration of a statutory period of redemption.
Canney v. Merchants Bank (In re Frazer), 284 F.3d 362 (2d Cir. 2002)
(did not stay mortgagee’s act of recording a certificate of non-redemption;
held, expiration of statutory period is not an “affirmative act” and
automatic stay did not apply).

b. Omissions and waivers are not stayed by the Code because they
are not affirmative acts. See e.g. Mann v. Chase Manhattan Mortg. Corp.,
316 F.3d 1, 6 (1st Cir. 2003) (mortgagee’s failure to submit
preconfirmation request, pursuant to bankruptcy statute governing rights
of oversecured creditors, to have its postpetition attorney fees included in
its allowed secured claim was not sort of overt, affirmative act that
violates stay).

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