248 B.R. 820, *; 2000 Bankr. LEXIS 584, **; 36 Bankr. Ct. Dec. 51; 2000 Cal. Daily Op. Service 4448

In re BRENDA MARIE BEBENSEE-WONG, Debtor. BRENDA MARIE BEBENSEE-WONG, Appellant, v. FEDERAL NATIONAL MORTGAGE ASSOCIATION, Appellee.

BAP No. EC-99-1699-RBMa

UNITED STATES BANKRUPTCY APPELLATE PANEL FOR THE NINTH CIRCUIT

248 B.R. 820; 2000 Bankr. LEXIS 584; 36 Bankr. Ct. Dec. 51; 2000 Cal. Daily Op. Service 4448; 2000 Daily Journal DAR 5967

March 23, 2000, Argued and Submitted at Sacramento, California April 25, 2000, Filed

PRIOR HISTORY:  [**1]  Appeal from the United States Bankruptcy Court for the Eastern District of California. Bk. No. 99-30952-C-13. Honorable Christopher M. Klein, Bankruptcy Judge, Presiding.

DISPOSITION: AFFIRMED.

CASE SUMMARYPROCEDURAL POSTURE: Appellant debtor appealed from the United States Bankruptcy Court for the Eastern District of California, which granted appellee relief from the automatic stay to take possession of property appellant sold to appellee prepetition at a trustee's sale.

OVERVIEW: Appellee purchased appellant debtor's home at a trustee's sale. Approximately 12 days later, appellant filed her bankruptcy petition. After the petition was filed and 14 days after the trustee's sale, appellee recorded the deed. Pursuant to Cal. Civ. Code § 2924h(c), appellee moved for relief from the automatic stay to take possession of the property. The bankruptcy court granted appellee relief from the automatic stay. On appeal, the court affirmed the decision. Since appellee recorded the deed within 15 days of the sale, the trustee's sale became perfected at 8 a.m. on the day of the sale pursuant to § 2924h(c). Because this day was 12 days before appellant's petition, perfection occurred before the filing, even though appellee recorded postpetition. Thus, appellant had no interest in the property at the time of her petition. Therefore, the bankruptcy court did not abuse its discretion in granting appellee relief from the automatic stay.

OUTCOME: Grant of relief from automatic stay was affirmed; perfection of sale occurred before appellant filed her bankruptcy petition since appellee recorded deed within 15 days of sale.

CORE TERMS: foreclosure sale, automatic stay, recorded, deed, trustee's sale, prepetition, trustee's deed, purchaser, postpetition, perfection, perfected, state law, foreclosure, present case, date of sale, transfer of property, recordation, recording, perfect, notice, void, bid

LEXISNEXIS® HEADNOTES Hide

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Appeals 

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > General

Overview 

Bankruptcy Law > Practice & Proceedings > Appeals > General Overview 

HN1 The appellate panel reviews a bankruptcy court's decision to grant relief from the automatic stay for an abuse of discretion.  More Like This Headnote | Shepardize: Restrict By Headnote

Real Property Law > Deeds > General Overview 

HN2 See Cal. Civ. Code § 2924h(c).

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Coverage > Exceptions >

Perfection of Property Interests 

Estate, Gift & Trust Law > Trusts > Trustees > General Overview 

HN3 Pursuant to 11 U.S.C.S. § 362(b)(3), an act to perfect an interest in property does not violate the automatic stay to the extent that the trustee's rights and powers are subject to such perfection under 11 U.S.C.S. § 546(b).  More Like This Headnote

Bankruptcy Law > Case Administration > Examiners, Officers & Trustees > Limitations on Trustee's Power 

Bankruptcy Law > Case Administration > Examiners, Officers & Trustees > Voidable Transfers > Lien

Creditor & Purchaser 

HN4 11 U.S.C.S. § 546(b) provides that a trustee's right to avoid a transfer pursuant to 11 U.S.C.S. §§ 544(a) or 549 is subject to any generally applicable law that permits perfection to relate back and to be effective against one who acquires rights in the property before the date of perfection.  More Like This Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > General Overview 

Bankruptcy Law > Case Administration > Examiners, Officers & Trustees > Postpetition Transactions 

Real Property Law > Financing > Mortgages & Other Security Instruments > Foreclosures > General

Overview 

HN5 Pursuant to Cal. Civ. Code § 2924h(c), a foreclosure sale purchaser who records its deed within 15 days of the foreclosure sale will prevail over someone who purchases the real property from the debtor after the foreclosure sale even if that person records its deed first. Therefore, the recordation of a foreclosure sale deed within 15 days of the sale does not violate the automatic stay and is not avoidable pursuant to 11 U.S.C.S. §§ 544 or 549.  More Like This Headnote | Shepardize: Restrict By Headnote

COUNSEL: Scott A. CoBen, SCOTT A. COBEN & ASSOCIATES, Sacramento, CA, for Brenda Marie Bebensee-Wong, Appellant(s).

Glenn Wechsler, Walnut Creek, CA, for Federal National Mortgage Association, Appellee(s).

JUDGES: Before: RUSSELL, BRANDT, and MARLAR, Bankruptcy Judges.

OPINION BY: RUSSELL

OPINION

 [*821]  RUSSELL, Bankruptcy Judge:

The appellant's home was sold at a trustee's sale to the appellee, who recorded the deed after the appellant filed her chapter 13 1 petition, but within a special fifteen-day window provided by state law. The appellee sought relief from the automatic stay to take possession of the property postpetition, alleging that the sale had been perfected prepetition pursuant to state law. The bankruptcy court granted relief. This appeal followed. We AFFIRM.

FOOTNOTES

1 Unless otherwise indicated, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330.

 [**2] I. FACTS

This appeal presents our first opportunity to rule on the application of California Civil Code § 2924h(c), which was amended in 1993 to clarify the status of property sold in a prepetition foreclosure sale where the prior owner later files bankruptcy. The underlying facts of the appeal are undisputed.

On August 4, 1999, the Benicia, California home of the appellant, Brenda Marie Bebensee-Wong, was sold to Federal National Mortgage Association   ("Fannie Mae   ") at a trustee's sale. On August 10, 1999, Fannie Mae   served Bebensee-Wong with a thirty-day notice to quit. Six days later, on August 16, 1999, Bebensee-Wong (hereinafter "the debtor") filed her chapter 13 petition.

The debtor failed to vacate the premises, causing Fannie Mae,   without notice of the petition, to initiate an unlawful detainer proceeding in state court on August 18, 1999. On this same day, which was fourteen days after the trustee's sale, Fannie Mae recorded the Trustee's Deed Upon Sale. Fannie Mae   moved for relief from the

automatic stay to take possession of the property. Citing California Civil Code § 2924h(c), Fannie Mae   argued that the debtor had no interest in the property because the trustee's [**3]  sale had been perfected prepetition by virtue of the deed's recordation within fifteen days of the sale. The debtor opposed Fannie Mae   's motion, alleging difficulty in obtaining the foreclosure file. At the bankruptcy court's request, both parties filed supplemental briefs regarding the validity of Civil Code § 2924h(c).

A hearing on the motion was held in October 1999. The issue before the court was whether the debtor had an interest in the property, the answer to which turned upon the effectiveness of Civil Code § 2924h(c) in the face of the automatic stay. The court concluded that Civil Code § 2924h(c) was valid and granted Fannie Mae   relief from the automatic stay. The court's order granting relief took effect on October 22, 1999. After the debtor timely appealed, the parties stipulated to an order granting the debtor's motion for stay pending appeal.

II. ISSUE

Whether the bankruptcy court properly granted relief from the automatic stay when the appellee recorded the trustee's deed within the grace period provided by California Civil Code Section § 2924h(c).

III. STANDARD OF REVIEW

HN1 We review a bankruptcy court's decision to grant relief from the automatic stay [**4]  for an abuse of discretion. See In re Berg , 198 B.R. 557, 560 (9th Cir. BAP 1996)(citing In re Jewett , 146 B.R. 250, 251 (9th Cir. BAP 1992)) .

IV. DISCUSSION

The debtor argues on appeal that the bankruptcy court improperly granted Fannie Mae   relief from the automatic stay.  [*822]  In view of California Civil Code § 2924h(c), we disagree.

In California and other jurisdictions that utilize a typical race-notice recording statute, prepetition foreclosure sales have been avoided when the debtor "won the race to the courthouse" by filing bankruptcy after the sale occurred but before the foreclosure trustee's deed was recorded. See In re Sanders , 198 B.R. 326, 327 (Bankr. S.D. Cal. 1996)(citing In re Duncombe , 143 B.R. 243, 245 (Bankr. C.D. Cal. 1992)); see also In re Williams , 124 B.R. 311, 315 (Bankr. C.D. Cal. 1991) . As observed in Sanders, the California legislature in 1993 responded to the frustration expressed by lenders and foreclosure trustees by amending California Civil Code § 2924h(c). See Sanders , 198 B.R. at 327 . HN2 As amended, Civil Code § 2924h(c) provides in pertinent [**5]  part: The trustee's sale shall be deemed final upon the acceptance of the last and highest bid, and shall be deemed perfected as of 8 a.m. on the actual date of sale if the trustee's deed is recorded within 15 calendar days after the sale. . . .Prior to 1993, this section provided only that the trustee's sale was final upon acceptance of the last and highest bid.

One bankruptcy court has aptly expounded on the interaction between Civil Code § 2924h(c) and the Code, stating: HN3 Pursuant to 11 U.S.C. § 362(b)(3), an act to perfect an interest in property does not violate the automatic stay to the extent that the trustee's rights and powers are subject to such perfection under 11 U.S.C. § 546(b). HN4 Section § 546(b) provides

that a trustee's right to avoid a transfer pursuant to 11 U.S.C. §§ 544(a) or 549 is subject to any generally applicable law that permits perfection to relate back and to be effective against one who acquires rights in the property before the date of perfection. HN5 Pursuant to section 2924h(c), a foreclosure sale purchaser who records its deed within fifteen days of the foreclosure [**6]  sale will prevail over someone who purchases the real property from the debtor after the foreclosure sale even if that person records its deed first. Therefore, the recordation of a foreclosure sale deed within fifteen days of the sale does not violate the automatic stay and is not avoidable pursuant to 11 U.S.C. §§ 544 or 549.In re Stork , 212 B.R. 970, 971 (Bankr. N.D. Cal. 1997) .

The debtor attacks the relation-back concept set forth in Civil Code § 2924h(c), calling our attention to the following language in Sanders: "If California Civil Code Section 2924h(c) provides for a postpetition action to relate back to before the bankruptcy was filed, it conflicts with federal law and it is pre-empted by the federal bankruptcy law." Sanders , 198 B.R. at 329 (citing Hillsborough County v. Automated Medical Labs , 471 U.S. 707, 85 L. Ed. 2d 714, 105 S. Ct. 2371 (1985) ; In re Rega Properties, Ltd. , 894 F.2d 1136 (9th Cir. 1990)) . In Sanders, unlike the present case, the foreclosure sale occurred after the debtor filed his petition. 198 B.R. at 327. Even though the sale deed was recorded [**7]  within fifteen days of the sale, the court in Sanders held that the foreclosure sale conducted postpetition was void. Id. at 329. The court stated: Under these circumstances, state law cannot make valid a foreclosure sale conducted in violation of the automatic stay by providing that the void act relates back to a time before it occurred. In this Court's view, § 2924h(c) properly may only be invoked, if at all, where there is a valid foreclosure sale which occurs prepetition. In that situation, the California law facilitates the completion of a valid transfer of property and there may be no bankruptcy interest in preventing the recording of a valid transfer of property. Whether that view is correct, however, is for another day, and a case which presents those facts.Id.

Not only does this appeal clearly differ from Sanders, but also from In re Engles , [*823]   193 B.R. 23 (Bankr. S.D. Cal. 1996) , a case cited by the debtor involving a foreclosure sale followed by a bankruptcy filing. Engles is not instructive because the central fact of the case was that no sale deed had been recorded. See Engles , 193 B.R. at 25. This was [**8]  because the foreclosure sale trustee refused to issue one after he learned of the bankruptcy, alleging that it would violate the automatic stay. Id. Here, the deed clearly was issued and subsequently recorded by Fannie Mae.  

Unlike Sanders and Engles, In re Garner , 208 B.R. 698 (Bankr. N.D. Cal. 1997) , mirrors the present case. In Garner, a prepetition foreclosure sale was conducted at which property was sold to a third party purchaser. See Garner , 208 B.R. at 699 . After the debtor filed bankruptcy, a foreclosure sale deed was issued and delivered to the purchaser. Id. Six days after the debtor's petition, and seven days after the foreclosure sale, the purchaser recorded the deed. Id. The purchaser sought relief from the automatic stay, which the court granted on the basis of Civil Code § 2924h(c). Id. at 701 .

In the case before us, fourteen days following the trustee's sale, Fannie Mae   recorded the Trustee's Deed Upon Sale. Therefore, pursuant to Civil Code § 2924h(c), the trustee's sale became perfected at 8 a.m. on the day of the sale. Because this day was twelve days before the debtor's petition, perfection [**9]  occurred before the filing, even though Fannie Mae   recorded postpetition. Thus, the debtor had no

interest in the property at the time of her petition. Therefore, the court did not abuse its discretion in granting Fannie Mae   relief from the automatic stay.

V. CONCLUSION

It is clear that the relation back effect of California Civil Code § 2924h(c) operated to perfect the trustee's sale on the actual date of sale. Because this date preceded the debtor's petition, relief from the automatic stay was proper. We AFFIRM.

315 B.R. 858, *; 2004 Bankr. LEXIS 1760, **

In re KANDI KAUFMAN, Debtor. KANDI KAUFMAN, Plaintiff, vs. JOE MONTE, POLO INVESTMENTS FUND I, COAST CAPITAL CORPORATION et al., Defendants.

No. 00-44380 J, Adv. No. 03-4028 AJ

UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

315 B.R. 858; 2004 Bankr. LEXIS 1760

October 19, 2004, Decided

DISPOSITION: Judgment entered in favor of plaintiff.

CASE SUMMARYPROCEDURAL POSTURE: Plaintiff debtor filed a voluntary petition under Chapter 13 of the Bankruptcy Code. She sought an award of damages pursuant to 11 U.S.C.S. § 362(h) based on defendants' acts in willful violation of the automatic stay provided by § 362(a). Defendants included mortgagee, mortgage broker, a loan officer, and an auctioneer who all together evicted debtor and then sold her personal property in a lien sale.

OVERVIEW: The debtor, in default on a loan against her residence, received a written solicitation from the mortgage broker telling her that she could avoid foreclosure with a refinance loan. She applied for one and the broker agreed to arrange a loan which was made by the mortgagee. The loan was secured by a deed of trust on the residence, but not secured by personal property inside the residence. The loan went into default, the residence was sold in foreclosure, and the debtor was physically evicted. The debtor unsuccessfully attempted to recover her personal property which was taken to the auctioneer's premises. The debtor filed her Chapter 13 petition, but a public lien sale of her personal possessions was conducted shortly afterwards anyway. The court held that: (1) defendants violated the automatic stay by selling or causing the sale of the debtor's property and by retaining the excess proceeds of the lien sale; (2) defendants had knowledge of the bankruptcy at the time of the lien sale and therefore their violation was willful; (3) the debtor suffered actual damages of $ 116,000; and (4) defendants' misconduct was the result of intentional malice, trickery, or deceit.

OUTCOME: The court entered its judgment in favor of the debtor, against the mortgagee in the sum of $ 570,000, against the loan officer in the sum of $ 360,000, against the broker in the sum of $ 170,000, and against the auctioneer in the sum of

$ 135,000 plus, in each case, attorneys' fees and costs. Defendants' liability was joint and several.

CORE TERMS: personal property, tenant, storage, automatic stay, landlord, punitive damages, notice, damages award, punitive, actual damages, market value, misconduct, eviction, removal, prepetition, furniture, auction, wealth, times, clothing, retrieve, willful violation, advertising, willful, redeem, foreclosure, furnishings, boxes, bankruptcy filing, bankruptcy case

LEXISNEXIS® HEADNOTES Hide

Bankruptcy Law > Case Administration > Administrative Powers > Stays > General Overview 

HN1 See 11 U.S.C.S. § 362(a).

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Coverage > Exceptions >

Perfection of Property Interests 

HN2 A lienholder with a valid prepetition possessory lien does not violate the stay under 11 U.S.C.S. § 362(a)(3) merely by refusing to return possession of encumbered property to the debtor. 11 U.S.C.S. §§ 362(b)(3), 546(b).  More Like This Headnote

Bankruptcy Law > Case Administration > Notice 

Bankruptcy Law > Estate Property > Redemption 

Civil Procedure > Judgments > Entry of Judgments > Stays of Proceedings > Automatic Stays 

HN3 In a case where a lienholder retains possession of property, the debtor may have a right to regain possession from the lienholder through postbankruptcy payment of the secured obligation under a Chapter 13 plan or by court order, or by obtaining a "turnover order" from the court pursuant to 11 U.S.C.S. § 542(a). In addition, in the case of exempt property, a debtor also has the right under the Bankruptcy Code to redeem property from a lien pursuant to 11 U.S.C.S. § 722. The debtor and estate are protected from a forced sale unless the court, after notice to the debtor and a hearing, enters an order lifting or conditioning the automatic stay.  More Like This Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > General Overview 

Bankruptcy Law > Estate Property > Noncustodial Turnovers 

HN4 See 11 U.S.C.S. § 542(a).

Bankruptcy Law > Case Administration > Examiners, Officers & Trustees > Statutory Liens 

Bankruptcy Law > Estate Property > Redemption 

Contracts Law > Secured Transactions > Default > Foreclosure & Repossession > Redemption 

HN5 See 11 U.S.C.S. § 722.

Bankruptcy Law > Case Administration > Examiners, Officers & Trustees > Statutory Liens 

Bankruptcy Law > Estate Property > Redemption 

Contracts Law > Secured Transactions > Default > Foreclosure & Repossession > Redemption 

HN6 In the case of a lien sale, the debtor is divested of title. All of the debtor's rights to pay off the lien through a Chapter 13 plan, redeem the encumbered property, maximize value or preserve equity through an orderly market sale, or to seek turnover are gone if the lien sale is valid. Indeed, 11 U.S.C.S. § 362(a) distinguishes between possession and control (subsection (3)) and other lien enforcement such as a sale (subsections (4), (5), and (6)).  More Like This Headnote

Real Property Law > Landlord & Tenant > Landlord's Remedies & Rights > Eviction Actions > General

Overview 

Real Property Law > Landlord & Tenant > Tenant's Remedies & Rights > General Overview 

HN7 California law sets forth a detailed set of procedures regarding a tenant's personal property following an eviction. Cal. Code Civ. Proc. § 1174(g), (h), (i); Cal. Civ. Code §§ 1965(a), 1988. After an eviction, the landlord in possession of the property has a duty to return it to the tenant if the tenant: (a) requests in writing the personal property within 18 days after the eviction, (b) tenders payment of any reasonable costs associated with the landlord's removal of the property, and (c) effects the removal within 72 hours of the tender. Cal. Civ. Code § 1965(a)(1)-(4). If the tenant does not comply, then the landlord may opt to notice a lien sale of the personal property in accordance with the provisions of Cal. Civ. Code § 1988. Under these provisions, the tenant must be given 15 days notice of a right to reclaim; absent timely reclamation, the property may be sold.  More Like This Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Remedies > Damages 

Civil Procedure > Remedies > Damages > Punitive Damages 

HN8 See 11 U.S.C.S. § 362(h).

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Remedies > Damages 

HN9 For purposes of 11 U.S.C.S. § 362(h), "willful" does not mean that the party causing injury had a specific intent to violate the stay; rather all that is required for a finding that a violation was willful is that the defendant knew of the automatic stay and that the defendant's actions that violated the stay were intentional. For this purpose, knowledge of the bankruptcy is the legal equivalent of knowledge of the automatic stay provided under § 362.  More Like This Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Remedies > Damages 

Bankruptcy Law > Practice & Proceedings > Adversary Proceedings > General Overview 

Torts > Damages > Compensatory Damages > Pain & Suffering > Emotional & Mental Distress > General

Overview 

HN10 When defendants willfully violated an automatic stay, the debtor is entitled to actual damages. 11 U.S.C.S. § 362(h). The basic measure of damages is the amount of the economic loss the debtor suffered as the proximate result of the defendants' violation, taking into account the fair market value of the property that they disposed of in violation of the stay and any other factors relevant to making the debtor economically whole. Damages for emotional distress, however, may not be awarded.  More Like This Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Remedies > Damages 

Civil Procedure > Remedies > Damages > Punitive Damages 

Torts > Damages > Punitive Damages > General Overview 

HN11 11 U.S.C.S. § 362 (h) provides that a debtor injured by a willful violation of the automatic stay may recover punitive damages in appropriate circumstances. Although the Bankruptcy Code does not specify the circumstances that are appropriate, general case law regarding punitive damages does. As the United States Court of Appeals for the Ninth Circuit has stated, the fact finder has considerable discretion in fixing damages. The factors to be considered are (1) the nature of the defendants' acts; (2) the amount of the compensatory damages awarded; and (3) the wealth of the defendants. In addition, the United States Supreme Court has observed that

the purpose of punitive damages in civil cases is the governmental one of deterrence and retribution, and has held that due process dictates that punitive damage awards not be grossly excessive or arbitrary.  More Like This

Headnote | Shepardize: Restrict By Headnote

Civil Procedure > Remedies > Damages > Punitive Damages 

HN12 The United States Supreme Court has said that perhaps the most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendants' conduct.  More Like This Headnote

Civil Procedure > Remedies > Damages > General Overview 

Torts > Damages > Punitive Damages > Conduct Supporting Awards 

HN13 The United States Supreme Court has instructed courts to determine the reprehensibility of a defendant by considering whether: the harm caused was physical as opposed to economic; the tortious conduct evidenced an indifference to or a reckless disregard of the health or safety of others; the target of the conduct had financial vulnerability; the conduct involved repeated actions or was an isolated incident; and the harm was the result of intentional malice, trickery, or deceit, or mere accident.  More Like This Headnote

Civil Procedure > Remedies > Damages > Punitive Damages 

Torts > Damages > Punitive Damages > Award Calculations > Appellate & Posttrial Review 

HN14 The United States Supreme Court has noted that the second and perhaps most commonly cited indicium of an unreasonable or excessive punitive damages award is its ratio to the actual harm inflicted on the plaintiff. (The first indicium is the degree of reprehensibility of the defendants' conduct.) There is no hard and fast rule as to the appropriate relationship that punitive damages should bear to a plaintiff's actual damages. The Supreme Court has stated that in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages will satisfy due process. The United States Court of Appeals for the Ninth Circuit has upheld a punitive damage award that was seven times the plaintiff's actual damages.  More Like This

Headnote | Shepardize: Restrict By Headnote

276 B.R. 233, *; 2002 Bankr. LEXIS 363, **; 48 Collier Bankr. Cas. 2d (MB) 1187; 2002 Daily Journal DAR 4293

In re: AHEONG, ALTHEA KEHAULANI, Debtor, ALTHEA KEHAULANI AHEONG, Appellant, v. MELLON MORTGAGE COMPANY, Appellee.

BAP number: HI-01-1315-MoRyB

UNITED STATES BANKRUPTCY APPELLATE PANEL FOR THE NINTH CIRCUIT

276 B.R. 233; 2002 Bankr. LEXIS 363; 48 Collier Bankr. Cas. 2d (MB) 1187; 2002 Daily Journal DAR 4293

November 28, 2001, Argued and Submitted at Honolulu, Hawaii March 29, 2002, Filed

SUBSEQUENT HISTORY:  [**1]  Modified April 18, 2002.

PRIOR HISTORY: Appeal from the United States Bankruptcy Court for the District of Hawaii. BK Number: 99-00320-LK. Honorable Lloyd King, Bankruptcy Judge, Presiding.

DISPOSITION: Appeal dismissed. Order annulling stay affirmed.

CASE SUMMARYPROCEDURAL POSTURE: The debtor appealed orders of the United States Bankruptcy Court for the District of Hawaii reopening her previously-dismissed Chapter 13 case and annulling the automatic stay of 11 U.S.C.S. § 362 as to the creditor's foreclosure proceedings, claiming the bankruptcy court had no jurisdiction under 28 U.S.C.S. § 1334, and that no adequate cause was shown to annul the stay because the creditor delayed in moving for relief for two years.

OVERVIEW: The appellate panel held the bankruptcy court had jurisdiction to annul the stay notwithstanding the dismissal of the case and regardless of whether the case was reopened. The bankruptcy court had ancillary jurisdiction to interpret and enforce D. Haw. Bankr. Gen. Procedural Order 1, which required the debtor to advise the creditor and the state court of her bankruptcy and provided that failure to do so could constitute cause for nullification of the stay. The creditor's motion to annul the stay commenced a civil proceeding "arising under" the Bankruptcy Code, as opposed to civil proceedings "arising in" or "related to" cases under the Bankruptcy Code, within the meaning of 28 U.S.C.S. § 1334(b). The "arising under" jurisdiction did not depend on the existence of a non-dismissed, non-closed bankruptcy case. The debtor lacked standing to appeal the reopening. The bankruptcy court did not abuse its discretion by annulling the stay. The creditor was denied mortgage payments while the debtor gained free use of the home. That harm to the creditor and the lack of unjust harm to the debtor was ample justification for annulling the stay.

OUTCOME: The appeal of the order reopening the case was dismissed. The order annulling the stay was affirmed.

CORE TERMS: automatic stay, bankruptcy cases, annul, reopening, annulling, general order, ancillary jurisdiction, civil proceedings, postdismissal, post-dismissal, dismissal orders, jurisdictional, cause of action, foreclosure, ancillary, bankruptcy code, adversary proceedings, notice, standing to appeal, prior rulings, willful violation, retroactive, contested, mortgage, reopened, reopen, moot, bankruptcy petition, attorney's fees, legislative history

LEXISNEXIS® HEADNOTES Hide

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > Cause 

Bankruptcy Law > Case Administration > Notice 

Civil Procedure > Judgments > Entry of Judgments > Stays of Proceedings > Automatic Stays 

HN1 When bankruptcy petitions are filed, the debtors are given by the clerk's office copies of D. Haw. Bankr. Gen. Procedural Order 1 which advises them of their responsibilities to advise opposing parties in the state court of their responsibility to give notice and warns that failure to comply may constitute cause for nullification of the automatic stay.  More Like This Headnote

Bankruptcy Law > Practice & Proceedings > Appeals > Standards of Review > De Novo Review 

Civil Procedure > Appeals > Standards of Review > De Novo Review 

HN2 Standing is a legal issue reviewed de novo.  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Practice & Proceedings > Appeals > Standards of Review > De Novo Review 

Civil Procedure > Appeals > Standards of Review > De Novo Review 

HN3 The bankruptcy court's jurisdiction is a legal issue reviewed de novo.  More Like

This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Case Administration > Closings & Reopenings > Procedures for Reopening 

Bankruptcy Law > Practice & Proceedings > Appeals > Standards of Review > Abuse of Discretion 

Civil Procedure > Appeals > Standards of Review > Abuse of Discretion 

HN4 A bankruptcy court's decision whether to reopen a bankruptcy case is reviewed for abuse of discretion.  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Appeals 

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > General

Overview 

Bankruptcy Law > Practice & Proceedings > Appeals > Standards of Review > Abuse of Discretion 

HN5 A bankruptcy court's decision whether to annul the automatic stay is reviewed for abuse of discretion.  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Practice & Proceedings > Appeals > General Overview 

Civil Procedure > Justiciability > Standing > General Overview 

Civil Procedure > Appeals > Reviewability > Adverse Determinations 

HN6 Although parties have not raised a debtor's standing as an issue on appeal, a bankruptcy appellate panel has an independent duty to consider standing.  More Like This Headnote

Bankruptcy Law > Practice & Proceedings > Appeals > General Overview 

Civil Procedure > Justiciability > Standing > General Overview 

Civil Procedure > Appeals > Reviewability > Adverse Determinations 

HN7 Appellate standing in bankruptcy is determined under the "person aggrieved" test, under which only one who is directly and adversely affected pecuniarily has standing to appeal a bankruptcy court's order.  More Like This Headnote

Bankruptcy Law > Case Administration > Closings & Reopenings > General Overview 

Bankruptcy Law > Case Administration > Filing Fees 

Estate, Gift & Trust Law > Trusts > General Overview 

HN8 Reopening a bankruptcy case typically presents only a narrow range of issues: (1) whether further administration appears to be warranted; (2) whether a trustee should be appointed; and (3) whether the circumstances of reopening necessitate payment of another filing fee.  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Practice & Proceedings > Appeals > Jurisdiction 

HN9 A bankruptcy appellate panel has an independent duty to consider jurisdictional issues.  More Like This Headnote

Bankruptcy Law > Practice & Proceedings > Jurisdiction > General Overview 

HN10 Bankruptcy jurisdiction is governed primarily by 28 U.S.C.S. § 1334.  More Like This Headnote

Bankruptcy Law > Practice & Proceedings > Jurisdiction > General Overview 

Civil Procedure > Jurisdiction > Subject Matter Jurisdiction > Jurisdiction Over Actions > Exclusive

Jurisdiction 

HN11 See 28 U.S.C.S. § 1334(a), (b).

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Coverage > General Overview 

Bankruptcy Law > Conversion & Dismissal > Effects of Dismissal 

Bankruptcy Law > Discharge & Dischargeability > Individuals With Regular Income 

HN12 Dismissing and closing a bankruptcy case are two distinct events. Dismissal allows creditors and debtors to get on with their non-bankruptcy business and resolve their disputes in appropriate fora. Among other things, dismissal generally ends the automatic stay and revests property of the estate in the entity in which such property was vested immediately before the commencement of the case. 11 U.S.C.S. §§ 349(b)(3), 362(c)(1), (2)(B). The basic purpose of 11 U.S.C.S. § 349(b) is to undo the bankruptcy case, as far as practicable, and to restore all property rights to the position in which they were found at the commencement of the case. Closing a bankruptcy case is a separate matter. Typically, dismissal does not coincide with termination of all proceedings. Chapter 13 cases usually stay open after dismissal to deal with approval of the Chapter 13 trustee's final report and discharge of the trustee and trustee's surety. Once all such administration is completed an order may issue closing the dismissed case.  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Conversion & Dismissal > Effects of Dismissal 

HN13 See 11 U.S.C.S. § 349(b).

Bankruptcy Law > Conversion & Dismissal > Effects of Dismissal 

Bankruptcy Law > Practice & Proceedings > Jurisdiction > General Overview 

HN14 Bankruptcy courts retain jurisdiction after dismissal in some

circumstances.  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Case Administration > Closings & Reopenings > Grounds for Reopening 

Bankruptcy Law > Conversion & Dismissal > Effects of Conversion 

Bankruptcy Law > Practice & Proceedings > General Overview 

HN15 Bankruptcy court jurisdiction continues over many matters after a case has been not only dismissed but also closed.  More Like This Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > General

Overview 

Bankruptcy Law > Case Administration > Closings & Reopenings > General Overview 

Bankruptcy Law > Practice & Proceedings > Jurisdiction > General Overview 

HN16 Reopening a closed bankruptcy case is not a jurisdictional prerequisite to subject-matter jurisdiction under 28 U.S.C.S. § 1334(b).  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > General

Overview 

Bankruptcy Law > Conversion & Dismissal > Effects of Dismissal 

Civil Procedure > Jurisdiction > Subject Matter Jurisdiction > Supplemental Jurisdiction > Ancillary

Jurisdiction 

HN17 After dismissal of a bankruptcy case, the bankruptcy court has ancillary jurisdiction to interpret and effectuate its orders.  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > General

Overview 

Bankruptcy Law > Conversion & Dismissal > Effects of Dismissal 

HN18 The prohibition on granting new relief after dismissal of a bankruptcy case only bars the bankruptcy court from granting new relief independent of its prior rulings.  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > General

Overview 

Bankruptcy Law > Practice & Proceedings > Appeals > General Overview 

Civil Procedure > Jurisdiction > Subject Matter Jurisdiction > Supplemental Jurisdiction > Ancillary

Jurisdiction 

HN19 A bankruptcy appellate panel has discretion to affirm on any basis supported by the record.  More Like This Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > General

Overview 

Bankruptcy Law > Case Administration > Closings & Reopenings > General Overview 

Bankruptcy Law > Practice & Proceedings > General Overview 

HN20 General bankruptcy court orders, in the context of the prohibition on granting new relief independent of the court's prior rulings after dismissal of a case, can be characterized as more in the nature of local rules than prior "rulings." The distinction does not matter for jurisdictional purposes because, like any other order, a general order applies statutes and rules of general application to a debtor's individual case. A general order simply saves the bankruptcy court from the ministerial step of entering an order in each case.  More Like This

Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Duration 

Bankruptcy Law > Case Administration > Examiners, Officers & Trustees > Statutory Liens 

Civil Procedure > Judgments > Entry of Judgments > Stays of Proceedings > Automatic Stays 

HN21 Unlike an order reopening a bankruptcy case, which does not undo any of the statutory consequences of closing, setting aside an order dismissing a bankruptcy case would have potentially enormous, highly disruptive, and unintended consequences. Upon dismissal, avoided transfers are reinstated, certain voided liens revive, all property of the estate revests in the entity in which such property was vested immediately before bankruptcy, and the automatic stay against interests other than property of the estate terminates. 11 U.S.C.S. §§ 349, 362(c)(2)(B).  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > General Overview 

HN22 See 11 U.S.C.S. § 362(d)(1).

Bankruptcy Law > Practice & Proceedings > Jurisdiction > General Overview 

HN23 28 U.S.C.S. § 1334 divides jurisdiction into three broad categories of civil proceedings: (1) those arising under the Bankruptcy Code; (2) those arising in cases under the Bankruptcy Code; and (3) those related to cases under the Bankruptcy Code. 28 U.S.C.S. § 1334(b). It is significant that only the latter two categories refer to "cases."  More Like This Headnote

Bankruptcy Law > Practice & Proceedings > Jurisdiction > General Overview 

HN24 The first category of jurisdiction under 28 U.S.C.S. § 1334(b), "arising under" jurisdiction, includes proceedings based on a right or cause of action created by the Bankruptcy Code.  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Practice & Proceedings > Jurisdiction > General Overview 

Governments > Local Governments > Administrative Boards 

HN25 The second category of jurisdiction under 28 U.S.C.S. § 1334(b), "arising in" a case under the Bankruptcy Code, has been interpreted to mean primarily those administrative proceedings that, while not based on any right created by the Bankruptcy Code, nevertheless have no existence outside bankruptcy.  More Like This Headnote

Bankruptcy Law > Practice & Proceedings > Jurisdiction > General Overview 

HN26 The United States Court of Appeals for the Ninth Circuit's test for the third and final category of jurisdiction under 28 U.S.C.S. § 1334(b), "related to" jurisdiction, is whether the outcome of the proceeding could conceivably have any effect on the estate being administered in bankruptcy.  More Like This Headnote

Bankruptcy Law > Practice & Proceedings > Jurisdiction > General Overview 

HN27 28 U.S.C.S. § 1334(b) refers to a "case" for "arising in" and "related to" jurisdiction, but not for "arising under" jurisdiction.  More Like This Headnote

Bankruptcy Law > Practice & Proceedings > Jurisdiction > General Overview 

Civil Procedure > Jurisdiction > Subject Matter Jurisdiction > Jurisdiction Over Actions > Exclusive

Jurisdiction 

HN28 The portion of the 28 U.S.C.S. § 1334(b) statutory sentence addressing "arising under" jurisdiction does not refer to the existence of a presently-open bankruptcy case. Since the straightforward language does not refer to the existence of a "case" under 28 U.S.C.S. § 1334(a), the text of the statute does not appear to require that the bankruptcy case must be open in order to exercise 28 U.S.C.S. § 1334(b) "arising under" jurisdiction.  More Like This Headnote

Bankruptcy Law > Case Administration > Closings & Reopenings > Procedures for Reopening 

Bankruptcy Law > Practice & Proceedings > Jurisdiction > General Overview 

HN29 28 U.S.C.S. § 1334(b) "arising under" jurisdiction does not depend on the present existence of an open case or a non-dismissed case. It depends solely on the existence of civil proceedings arising under the Bankruptcy Code.  More Like This Headnote

Bankruptcy Law > Case Administration > Closings & Reopenings > General Overview 

Bankruptcy Law > Practice & Proceedings > Jurisdiction > General Overview 

HN30 A bankruptcy court has jurisdiction not just "within a case" but also, for example, after a case is closed.  More Like This Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > General

Overview 

Bankruptcy Law > Practice & Proceedings > Jurisdiction > General Overview 

HN31 The phrase "arising under Title 11" (the Bankruptcy Code) under 28 U.S.C.S. § 1334(b) enables the bankruptcy court to hear any matter under which a claim is made under a provision of the Bankruptcy Code.  More Like This

Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > General

Overview 

Bankruptcy Law > Practice & Proceedings > Contested Matters 

HN32 Fed. R. Bankr. P. 4001(a) provides that a motion for relief from the automatic stay provided by the Bankruptcy Code shall be made in accordance with Fed. R. Bankr. P. 9014, and Fed. R. Bankr. P. 9014 refers to a contested matter in a case under the Bankruptcy Code not otherwise governed by the Federal Rules of Bankruptcy Procedure. This does not mean, however, that a motion for relief under 11 U.S.C.S. § 362(d) can only be brought "in a case." Fed. R.

Bankr. P. 9014 simply emphasizes that when no other rules govern and a contested matter arises within a case, then the procedures in Rule 9014 govern, but Fed. R. Bankr. P. 4001(a) makes Fed. R. Bankr. P. 9014's procedures applicable to motions for relief from the automatic stay regardless whether those motions arise within a case or after it is dismissed or closed. Nothing in Rule 9014 is to the contrary.  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > General

Overview 

Bankruptcy Law > Practice & Proceedings > Jurisdiction > General Overview 

HN33 28 U.S.C.S. § 1344(b)'s phrase "all civil proceedings arising under Title 11" (the Bankruptcy Code) is not limited to causes of action under the Bankruptcy Code but includes proceedings based on a "right" under the Bankruptcy Code.  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > General

Overview 

Bankruptcy Law > Practice & Proceedings > Jurisdiction > General Overview 

HN34 Given Congress' intent for dismissal to undo the bankruptcy case, as far as practicable, and to restore all property rights to the position in which they were found at the commencement of the case, and given that creditors sometimes do not even know there is a bankruptcy case until after dismissal, it is particularly appropriate that the bankruptcy court have jurisdiction to annul the automatic stay after dismissal.  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Duration 

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > General

Overview 

Bankruptcy Law > Practice & Proceedings > Jurisdiction > General Overview 

HN35 28 U.S.C.S. § 1334(b)'s reference to "all civil proceedings arising under Title 11" (the Bankruptcy Code) includes all proceedings arising under 11 U.S.C.S. § 362(d). This necessarily includes a proceeding to annul the stay after the underlying case has been dismissed, or closed, or both.  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Practice & Proceedings > Appeals > Jurisdiction 

Civil Procedure > Jurisdiction > Subject Matter Jurisdiction > Supplemental Jurisdiction > Ancillary

Jurisdiction 

Governments > Courts > Judicial Precedents 

HN36 The United States Bankruptcy Appellate Panel for the Ninth Circuit will not overrule its prior rulings unless a United States Court of Appeals for the Ninth Circuit decision, United States Supreme Court decision, or subsequent legislation has undermined those rulings.  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > General

Overview 

Bankruptcy Law > Practice & Proceedings > Jurisdiction > Core Proceedings 

HN37 28 U.S.C.S. § 157(b) refers to core proceedings both "arising under" or "arising in" the Bankruptcy Code. What could be more "under" the Bankruptcy Code than the automatic stay, 11 U.S.C.S. § 362(a), and the right to seek to annul it, 11 U.S.C.S. § 362(d)?  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Appeals 

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > General

Overview 

Civil Procedure > Appeals > Appellate Jurisdiction > Final Judgment Rule 

HN38 A bankruptcy court's order granting a motion to annul the stay is a final decision reviewable by the bankruptcy appellate panel.  More Like This Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > Cause 

Governments > Legislation > Effect & Operation > Retrospective Operation 

HN39 Retroactive relief from the Bankruptcy Code's automatic stay should be applied only in extreme circumstances. However, the bankruptcy court has wide latitude in crafting relief from the automatic stay, including the power to grant retroactive relief from the stay. Cause to annul the stay may exist where the stay harms the creditor and lifting the stay will not unjustly harm the debtor or other creditors. Ultimately, the decision is left to the sound discretion of the bankruptcy court.  More Like This Headnote | Shepardize: Restrict By Headnote

JUDGES: Before: MONTALI, RYAN and BRANDT, Bankruptcy Judges. RYAN, Bankruptcy Judge, concurring in part and dissenting in part. BRANDT, Bankruptcy Judge, concurring.

OPINION BY: Dennis Montali

OPINION

 [*236]  MONTALI, Bankruptcy Judge:

Debtor Althea Kehaulani Aheong ("Debtor") appeals from the bankruptcy court's orders reopening her previously-dismissed chapter 13 case (the "Reopening Order") and annulling the automatic stay of Section 362 1 (the "Order Annulling Stay") as to foreclosure proceedings of secured creditor Mellon Mortgage Company,   a Colorado company ("Mellon"). 2

FOOTNOTES

1 Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330, and the Federal Rules of Bankruptcy Procedure, Rules 1001-9036. The references to schedules, statements and the creditor matrix are to the documents required to be filed by Rule 1007.  [**2] 

2 Mellon is now known as Chase Mortgage Company West but for convenience we will continue to refer to it as Mellon.

Debtor claims the bankruptcy court had no jurisdiction to enter the Order Annulling Stay without issuing the Reopening Order, and no jurisdiction to enter the Reopening Order without first setting aside the order dismissing her chapter 13 case (the "Dismissal Order"). We disagree, and rule that Debtor lacks standing to challenge the Reopening Order. Her appeal from that order will be DISMISSED.

Debtor argues in the alternative that Mellon did not show adequate cause for the bankruptcy court to annul the automatic stay, primarily because Mellon did not move for such relief until over two years after it learned of the chapter 13 case. We rule that the bankruptcy court did not abuse its discretion and that the Order Annulling Stay will be AFFIRMED.

I. FACTS

Debtor and her late husband, Cecil Aheong, executed a promissory note, dated May 3, 1990, in the principal amount of $ 137,200 secured by a mortgage on Debtor's residence in Kahului, Maui, Hawaii (the "Residence"). Mellon filed a foreclosure complaint in state court on March 12, 1998, and moved for summary judgment and [**3]  an interlocutory decree of foreclosure in accordance with Hawaii law (the "State Court Motion"). On January 26, 1999, the day before a scheduled hearing on the State Court Motion, Debtor filed her chapter 13 case pro se (Case No. 99-00320, the "Bankruptcy Case"). Debtor listed only one creditor, Mellon, in her creditor matrix. She filed no schedules, statements, or chapter 13 plan, nor did she notify the state court or Mellon that she had filed a bankruptcy petition, nor appear at

the hearing on the State Court Motion. On January 27, 1999, the state court orally granted the State Court Motion.

On February 17, 1999, the bankruptcy court ordered Debtor to file her schedules, statements, and chapter 13 plan within 15 days or the Bankruptcy Case would be dismissed. On February 25, 1999, Debtor herself moved to dismiss her Bankruptcy Case, and on March 1, 1999, the Dismissal Order was entered pursuant to that request.

The Dismissal Order provided that the bankruptcy court would retain jurisdiction to receive and review the final account of the chapter 13 trustee, enter an order discharging the trustee and the trustee's surety, and make such orders as might be necessary and proper [**4]  to close the case.  [*237]  On June 25, 1999, the bankruptcy court entered an order entitled "Order Approving Final Report, Discharging Trustee and Closing Estate in Chapter 13 Case Dismissed Before Confirmation."

Mellon proceeded with its foreclosure action and on October 11, 1999, the state court entered a written order that, like its oral ruling during the Bankruptcy Case, granted the State Court Motion. Debtor filed two subsequent bankruptcy petitions, first under chapter 13 and then chapter 7. On January 17, 2001, Debtor received her chapter 7 discharge but the foreclosure proceeding continued and on April 12, 2001, a deputy sheriff served Debtor with a writ of possession of the Residence.

On April 17, 2001, Debtor moved in state court for an emergency stay of the writ of possession, asserting that the order granting the State Court Motion was void as having been obtained in violation of the automatic stay under Section 362 in the Bankruptcy Case. The state court granted a stay to allow the parties time to seek clarification from the bankruptcy court and on May 4, 2001, Mellon moved to reopen the Bankruptcy Case for the limited purpose of considering its motion to annul the automatic [**5]  stay (the "Motion to Annul the Stay") and to reclose the Bankruptcy Case when that matter was concluded.

At a hearing on May 23, 2001, on Mellon's motions the bankruptcy court stated:

This is a motion to reopen the first of the Debtor's three bankruptcy cases, each of which was filed . . . [on] the eve or within a few days of something about to happen in the state court. 3 It's at least alleged and I think not denied that the State court and the creditor [Mellon] were not advised of the filing of the petition.

FOOTNOTES

3 These facts are discussed further in Part IV.3 of this opinion below.

HN1 When petitions are filed, the debtors are given by the clerk's office copies of our General Order No. 1 4 which advises them of their responsibilities to advise opposing parties in the State court of their responsibility to give notice and warns that failure to comply may constitute [cause for] nullification of the automatic [**6]  stay. So granting the motion - these motions would constitute standing by our general order.

FOOTNOTES

4 General Order No. 1 states, in part:

IT IS HEREBY ORDERED THAT:

1. If a debtor in a voluntary or involuntary bankruptcy case, filed in the District of Hawaii, is also a party to any matter pending in any Court of the State of Hawaii, notice of the filing of the bankruptcy case shall be given to the State Court at the earliest possible date. The notice shall be directed to the State Court Judge to whom the matter is assigned, the Clerk of the State Court in which the matter is pending, and to all counsel of record and parties who are not represented by counsel.

2. * * *

3. Notice of the commencement of a voluntary case shall be given by counsel for the debtor or by the debtor, if the debtor is not represented by counsel. . . .

4. * * *

5. Failure to give the notice required by paragraph one of this order may constitute cause for nullification of the automatic stay.

General Order No. 1 (dated Feb. 17, 1994). General Order No. 1 was revised on Aug. 1, 2001; the changes are not applicable here.

. . . These appear to be filings just for the cause of delay. If there are truth-in-lending claims [against Mellon], fine, let them be resolved in the State court if they are in fact unresolved.

On June 15, 2001, the bankruptcy court granted both motions and entered the Reopening Order and the Order Annulling Stay, with a ten-day stay of the latter. On June 25, 2001, Debtor filed a notice of appeal of both orders and filed with the [*238]  bankruptcy court a motion, later granted, to stay the foreclosure action pending Debtor's appeal.

II. ISSUES

1. Whether Debtor has standing to challenge the Reopening Order.

2. Whether the bankruptcy court had jurisdiction to consider the Motion to Annul the Stay.

3. Whether the bankruptcy court erred in issuing the Order Annulling Stay.

III. STANDARD OF REVIEW

HN2 Standing is a legal issue reviewed de novo. Loyd v. Paine Webber, Inc., 208 F.3d 755, 758 (9th Cir. 2000). [**7]  HN3 The bankruptcy court's jurisdiction is also a legal issue reviewed de novo. Ferm v. U.S. Trustee (In re Crowe), 243 B.R. 43, 47 (9th Cir. BAP 2000), aff'd, 246 F.3d 673 (9th Cir. 2000) (table). HN4 A bankruptcy court's decision whether to reopen a bankruptcy case is reviewed for abuse of discretion. Elias v. U.S. Trustee (In re Elias), 188 F.3d 1160, 1162 (9th Cir. 1999). HN5 A bankruptcy court's decision whether to annul the automatic stay is reviewed for abuse of discretion. Palm v. Klapperman (In re Cady), 266 B.R. 172, 178 (9th Cir. BAP 2001); Ung v. Boni (In re Boni), 240 B.R. 381, 384 (9th Cir. BAP 1999).

IV. DISCUSSION

1. Standing

The HN6 parties have not raised Debtor's standing as an issue on this appeal, but we have an independent duty to consider standing. Gen. Elec. Capital Auto Lease, Inc. v. Broach (In re Lucas Dallas, Inc.), 185 B.R. 801, 804 (9th Cir. BAP 1995). HN7 Appellate standing in bankruptcy is determined under the "person aggrieved" test, under which "only one who is directly and adversely affected pecuniarily has standing to appeal a bankruptcy court's order." Menk v. LaPaglia (In re Menk), 241 B.R. 896, 917 (9th Cir. BAP 1999); [**8]  Fondiller v. Robertson (In re Fondiller), 707 F.2d 441, 442-43 (9th Cir. 1983). HN8 Reopening a case typically "presents only a narrow range of issues: whether further administration appears to be warranted; whether a trustee should be appointed; and whether the circumstances of reopening necessitate payment of another filing fee." Menk, 241 B.R. at 916-17. Debtor challenges none of those issues, so ordinarily she would lack standing to appeal the Reopening Order. Id. at 913-17.

Debtor argues, however, that (a) the bankruptcy court had no jurisdiction to issue the Order Annulling Stay until it properly reopened her case, and (b) the bankruptcy court had no jurisdiction to issue the Reopening Order because it did not set aside the Dismissal Order. If Debtor's theory is correct then she is aggrieved by the Reopening Order, and has standing to challenge it, because without it there would have been no Order Annulling Stay and she might have avoided Mellon's attempt to proceed with its foreclosure and eviction. See generally Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-561, 119 L. Ed. 2d 351, 112 S. Ct. 2130 (1992) (requirements [**9]  for standing).

In the next part of this opinion, however, we determine that the bankruptcy court did not need to reopen the Bankruptcy Case to have jurisdiction to consider the Motion to Annul the Stay. Therefore, we will conclude that Debtor lacks standing to appeal from the Reopening Order, although she has standing to appeal from the Order Annulling Stay itself.

2. Jurisdiction

The parties have raised some but not all of the jurisdictional issues we address [*239]  below. HN9 We have an independent duty, however, to consider jurisdictional issues. WMX Tech., Inc. v. Miller, 104 F.3d 1133, 1135 (9th Cir. 1997).

HN10 Bankruptcy jurisdiction is governed primarily by 28 U.S.C. Section 1334 ("Section 1334") 5 and has been described as a "swamp." Menk, 241 B.R. at 902. Two poorly-charted areas of that swamp are the bankruptcy court's jurisdiction after dismissal of a case, and to what extent closing a case bears on jurisdiction.

FOOTNOTES

5 Section 1334(a) and (b) of title 28 provide, in full:

§ 1334. Bankruptcy cases and proceedings

HN11 (a) Except as provided in subsection (b) of this section, the district courts [and the bankruptcy courts as a unit thereof under 28 U.S.C. § 157] shall have original and

exclusive jurisdiction of all cases under title 11 [the Bankruptcy Code].

(b) Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.

28 U.S.C. § 1334(a) and (b).

 [**10]  HN12 Dismissing and closing a bankruptcy case are two distinct events. Dismissal allows creditors and debtors to get on with their non-bankruptcy business and resolve their disputes in appropriate fora. Among other things, dismissal generally ends the automatic stay and revests property of the estate in the entity in which such property was vested immediately before the commencement of the case. 11 U.S.C. §§ 349(b)(3) and 362(c)(1) and (2)(B). "The basic purpose of [Section 349(b)] is to undo the bankruptcy case, as far as practicable, and to restore all property rights to the position in which they were found at the commencement of the case." H.R. Rep. No. 595, 95th Cong., 1st Sess. 338 (1977); S. Rep. No. 989, 95th Cong., 2d Sess. 48-49 (1978). 6

FOOTNOTES

6 Section 349(b) provides, in full:

HN13 (b) Unless the court, for cause, orders otherwise, a dismissal of a case other than under section 742 of this title -

(1) reinstates -

(A) any proceeding or custodianship superseded under section 543 of this title;

(B) any transfer avoided under section 522, 544, 545, 547, 548, 549, or 724(a) of this title, or preserved under section 510(c)(2), 522(i)(2), or 551 of this title; and

(C) any lien voided under section 506(d) of this title;

(2) vacates any order, judgment, or transfer ordered, under section 522(i)(1), 542, 550, or 553 of this title; and

(3) revests the property of the estate in the entity in which such property was vested immediately before the commencement of the case under this title.

11 U.S.C. § 349(b).

 [**11]  Closing a bankruptcy case is a separate matter. Typically, dismissal does not coincide with termination of all proceedings. For example, chapter 13 cases usually stay open after dismissal to deal with approval of the chapter 13 trustee's final report and discharge of the trustee and trustee's surety. Once all such administration is completed an order may issue closing the dismissed case. That is what happened in Debtor's case.

The Ninth Circuit Court of Appeals has held that HN14 bankruptcy courts retain jurisdiction after dismissal in some circumstances. For example, in one case the Ninth Circuit held that after dismissal of the underlying case the bankruptcy court retained jurisdiction to "interpret" its orders entered prior to dismissal and "to dispose of ancillary matters such as an application for an award of attorney's fees for services rendered in connection with  [*240]  the underlying action" but not to grant "new relief independent of its prior rulings." Tsafaroff v. Taylor (In re Taylor), 884 F.2d 478, 481 (9th Cir. 1989). 7

FOOTNOTES

7 See also Spacek v. Thomen (In re Universal Farming Indus.), 873 F.2d 1334 (9th Cir. 1989) (relative priority of two claims not so closely linked with debtor's bankruptcy that dismissal of chapter 11 case renders action moot); Armel Laminates, Inc. v. Lomas & Nettleton Co. (In re Income Prop. Builders, Inc.), 699 F.2d 963 (9th Cir. 1983) (appeal from order denying motion to reimpose automatic stay was mooted when bankruptcy case was dismissed); Carraher v. Morgan Elecs., Inc. (In re Carraher), 971 F.2d 327, 328 (9th Cir. 1992) (bankruptcy court has the discretion to retain jurisdiction over adversary proceedings after dismissal of main case after considering "economy, convenience, fairness and comity").

 [**12] 

It is less clear to what extent closing and reopening bankruptcy cases have jurisdictional significance. We have noted that HN15 jurisdiction continues over many matters after a case has been not only dismissed but also closed. See Menk, 241 B.R. at 906-910. In fact, we have said that reopening a bankruptcy case in connection with a discharge-related adversary proceeding was "not of jurisdictional significance." Id. at 910. More broadly, we have stated that HN16 "reopening a closed case is not a jurisdictional prerequisite to subject-matter jurisdiction under [Section] 1334(b)." Id. at 911.

With this background, we address whether the bankruptcy court had jurisdiction to consider Mellon's Motion to Annul the Stay.

a. Ancillary Jurisdiction

As noted above, the Ninth Circuit has ruled that HN17 after dismissal the bankruptcy court has ancillary jurisdiction to "interpret" and "effectuate" its orders. Taylor, 884 F.2d at 481; see also Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 379-380, 128 L. Ed. 2d 391, 114 S. Ct. 1673 (1994). By granting Mellon's Motion to Annul the Stay the bankruptcy court was acting to [**13]  "interpret" and "effectuate" General Order No. 1, which directed Debtor to notify Mellon and the state court of her bankruptcy filing and provided that "failure to give [such] notice . . . may constitute cause for nullification of the automatic stay." The bankruptcy court interpreted General Order No. 1 by deciding whether the facts presented by Mellon did in fact constitute cause to nullify the automatic stay and, having determined that such cause was shown, it enforced General Order No. 1 by granting the Motion to Annul the Stay.

The foregoing analysis is not undermined by HN18 the Ninth Circuit's prohibition on "new relief" after dismissal, because that prohibition only bars the bankruptcy court from granting "new relief independent of its prior rulings." Taylor, 884 F.2d at 481

(emphasis added). For the reasons stated above, the Order Annulling Stay was not "independent" of General Order No. 1. 8

FOOTNOTES

8 Although the bankruptcy court relied on its General Order No. 1 HN19 we have discretion to affirm on any basis supported by the record. Fernandez v. GE Capital Mortgage Servs., Inc. (In re Fernandez), 227 B.R. 174, 177 (9th Cir. BAP 1998), aff'd 208 F.3d 220 (9th Cir. 2000) (table). Therefore, as an alternative basis for holding that the bankruptcy court had ancillary jurisdiction we hold that by granting Mellon's Motion to Annul the Stay the bankruptcy court was acting to "interpret" and "effectuate" its Dismissal Order, and was not granting new relief "independent" of that order. The "basic purpose" of the Dismissal Order was "to undo the bankruptcy case, as far as practicable, and to restore all property rights to the position in which they were found at the commencement of the case." H.R. Rep. No. 595, 95th Cong., 1st Sess. 338 (1977); S. Rep. No. 989, 95th Cong., 2d Sess. 48-49 (1978). Since the bankruptcy court could not have known of Mellon's (apparently inadvertent) violation of the automatic stay, its Dismissal Order did not "undo" that violation. Annulling the automatic stay cured this problem and "effectuated" or "interpreted" the Dismissal Order consistent with the court's true intent.

Put differently, when Debtor asked the bankruptcy court to dismiss her case she was, in effect, asking the bankruptcy court to "undo" her bankruptcy case. When Debtor later moved for an emergency stay in state court, arguing that Mellon's foreclosure was void for violation of the automatic stay in her dismissed case, she was in effect arguing that the bankruptcy case had not been completely "undone." In that context the bankruptcy court had ancillary jurisdiction to vindicate the intent of its Dismissal Order by fully "undoing" the Bankruptcy Case. See generally Kokkonen, 511 U.S. at 380 (ancillary jurisdiction includes vindication of court's authority and effectuating its decrees).

 [**14]   [*241]  This conclusion is consistent with the limited authority on what constitutes "new relief independent of [the bankruptcy court's] prior rulings." On the one hand, imposing a stay after a bankruptcy case was dismissed was held impermissible because it was independent of prior rulings. Beneficial Trust Deeds v. Franklin (In re Franklin), 802 F.2d 324, 327 (9th Cir. 1986) (interpreting Income Prop. Builders, 699 F.2d 963). On the other hand, seeking disallowance of a bankruptcy attorney's fees earned in a dismissed case, for alleged non-disclosure under Rule 2014, was held by the Ninth Circuit to be within the bankruptcy court's ancillary jurisdiction, notwithstanding the conclusion by a majority of the bankruptcy appellate panel (the "BAP") that the debtor sought extra-jurisdictional "new relief." See Elias v. Lisowski Law Firm, Chtd. (In re Elias), 215 B.R. 600, 603-04, 615-17 (9th Cir. BAP 1997) ("Elias I") and Elias v. U.S. Trustee (In re Elias), 188 F.3d at 1162 ("Elias II").

In Elias I the BAP majority acknowledged that the bankruptcy court has an interest in ensuring that bankruptcy attorneys conduct themselves properly,  [**15]  but commented that this interest could be vindicated through disciplinary proceedings:

. . . that interest does not extend so far as to grant the bankruptcy court jurisdiction to involve itself in a state-court dispute by launching an independent inquiry into an

attorney's conduct during a now-dismissed bankruptcy case. Such an inquiry would not have any connection to the issues presented in the bankruptcy, would not affect[] the rights of any creditor, and would not serve any of the purposes underlying the bankruptcy code. In short, the bankruptcy court would be granting the Debtor new relief that would serve no purpose in advancing the dismissed case.

Elias I, 215 B.R. at 603-04 (emphasis added).

The Ninth Circuit rejected this conclusion without comment, simply stating that consideration of attorneys' fees after dismissal was ancillary (but affirming the bankruptcy court's refusal to hear the matter on the ground that this was within its discretion). Elias II, 188 F.2d at 1162 (majority opinion); and id. at 1163-66 (concurring and dissenting opinion). It appears from Elias II that seeking to deny fees for non-disclosure under [**16]  Rule 2014 is not "new relief" because it is not independent of the order authorizing the attorney's employment pursuant to that rule.

Under the above cases, Mellon's Motion to Annul the Stay did not seek new relief "independent" of General Order No. 1. Rather, the bankruptcy court acted within its jurisdiction to "interpret" and "enforce" that order. 9

FOOTNOTES

9 We note that had Debtor complied with General Order No. 1 she would have saved much time and effort by the parties, the state court, and the bankruptcy court. The state court hearing presumably would have been continued to allow Mellon to seek relief from the automatic stay or dismissal of the Bankruptcy Case, and there would have been no need for Mellon to bring its Motion to Annul the Stay. Certainly common courtesy and professionalism call for counsel for debtors to notify opposing counsel and affected courts (of which those counsel no doubt are themselves officers in most cases) of the imposition of the automatic stay as soon as possible. Pro se debtors should do the same regardless of their lack of connection with other courts. Failure to notify those courts and counsel immediately leads to wasted effort and expense of preparing for hearings or trials which are suddenly blocked by the automatic stay. This case illustrates the good sense of having a mandate such as General Order No. 1 and the wisdom of enforcing it after-the-fact when it has been ignored without justification.

 [**17]   [*242]  We recognize that Taylor's reference to "prior rulings" does not mention general orders. HN20 General orders could be characterized as more in the nature of local rules than prior "rulings." We believe the distinction does not matter for Taylor's jurisdictional purposes because, like any other order, a general order applies statutes and rules of general application to a debtor's individual case. A general order simply saves the bankruptcy court from the ministerial step of entering an order in each case.

For all of these reasons, the bankruptcy court had ancillary jurisdiction to enter the Order Annulling Stay. That jurisdiction was not dependent on reopening Debtor's case or vacating the Dismissal Order.

b. "Arising Under" Jurisdiction

As an alternative basis for our ruling, we hold that the bankruptcy court had "arising

under" jurisdiction pursuant to Section 1334(b). We address this issue for two reasons. First, our conclusion that there is ancillary jurisdiction under the Taylor line of cases starts us on an unexplored path through the jurisdictional "swamp." That path is not perfectly clear. As noted above, for example, Taylor's applicability to general orders is [**18]  not free from doubt. We wish to remove any doubt about the bankruptcy court's jurisdiction.

Second, General Order No. 1 will not help in many situations. We are aware that other districts within the Ninth Circuit have no equivalent to General Order No. 1, though they might consider adopting such an order. Moreover, General Order No. 1 provides no basis for jurisdiction over the usual and necessary post-dismissal matters, such as approval of the chapter 13 trustee's report. 10 Therefore, as an [*243]  alternative and more general basis for the bankruptcy court's post-dismissal jurisdiction, we rule that the Motion to Annul the Stay arose under Section 362(d) 11 and therefore commenced a civil proceeding "arising under" title 11 within the meaning of Section 1334(b).

FOOTNOTES

10 Debtor suggests that bankruptcy courts have a ready method to reassert their jurisdiction after dismissal - namely, to vacate their dismissal orders. That solution is not so simple.

HN21 Unlike an order reopening a bankruptcy case, which "does not undo any of the statutory consequences of closing" ( Menk, 241 B.R. at 913), setting aside an order dismissing a bankruptcy case would have potentially enormous, highly disruptive, and unintended consequences. Upon dismissal, "avoided transfers are reinstated, certain voided liens revive, . . . all property of the estate revests in the entity in which such property was vested immediately before bankruptcy . . ." and "the automatic stay against interests other than property of the estate terminates." Menk, 241 B.R. at 912. See 11 U.S.C. §§ 349 and 362(c)(2)(B). Would setting aside a dismissal order re-void the previously avoided then reinstated transfers and liens, revest property in the estate, and reimpose the automatic stay as if there had been no dismissal? Would creditors who took actions between the time the dismissal order issued and when it was set aside have to move to annul the automatic stay to validate those actions? What about third parties, such as bona fide purchasers for value during that time? How could these problems be avoided without setting aside the dismissal for some purposes but not others, creating another jurisdictional swamp?

These questions do not appear to have been addressed by the few reported cases that involve vacation of dismissal orders. Compare G.E. Capital Mortgage Servs., Inc. v. Thomas (In re Thomas), 194 B.R. 641, 644-51 (Bankr. D. Ariz. 1995) (declining to follow cases vacating dismissal, and discussing conflicting authority) with In re Application of County Collector for Delinquent Taxes, 291 Ill. App. 3d 588, 593-94, 683 N.E.2d 995, 998-99, 225 Ill. Dec. 492, 495-96 (1997)(declining to follow Thomas, and also discussing conflicting authority) and France v. Lewis & Coulter, Inc. (In re Lewis & Coulter, Inc.), 159 B.R. 188, 191 & n.4 (Bankr. W.D. Pa. 1993) (vacating dismissal to allow administrative claim for vacation pay, without discussing other possible effects of vacating dismissal). We prefer not to answer any of these difficult questions until we must. [**19] 

11 Section 362(d) provides, in relevant part:

HN22 (d) On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay -

(1) for cause, including the lack of adequate protection of an interest in property of such party in interest;

* * *

11 U.S.C. § 362(d).

We begin our analysis with the plain language of Section 1334. HN23 That statute divides jurisdiction into three broad categories of civil proceedings: those "arising under title 11 [i.e. under the Bankruptcy Code]"; those "arising in . . . cases under title 11"; and those "related to cases under title 11." 28 U.S.C. § 1334(b) (emphasis added). As we discuss further below, it is significant that only the latter two categories refer to "cases."

HN24 The first category, "arising under" jurisdiction, has been interpreted using various tests. We conclude below that it includes proceedings based on a right or cause of action [**20]  created by title 11. Examples include proceedings to declare a debt nondischargeable under Section 523, to enforce the non-discrimination provisions of Section 525, or to recover a fraudulent transfer or obligation under Section 548. Menk, 241 B.R. at 904 and 908-09 & n.3; 1 Collier on Bankruptcy, PP 3.01[4][b] and [c][i], pp. 3-17 to 3-20 (Lawrence P. King et al. eds. 15th ed. rev. 2001) ("Collier") (quoting H.R. Rep. No. 595, 95th Cong., 1st Sess. 445 (1977)); 1 W. Norton, Jr., 1 Norton Bankr. L. & Prac. 2d, § 4:43, text accompanying n.53 (2001) ("Norton").

HN25 The second category, "arising in . . . a case under title 11," has been interpreted to mean "primarily those administrative proceedings that, while not based on any right created by title 11, nevertheless have no existence outside bankruptcy." Menk, 241 B.R. at 909 (citations omitted). See also Eastport Assocs. v. City of L.A. (In re Eastport Assocs.), 935 F.2d 1071, 1076 (9th Cir. 1991) (same, but noting lack of clear definition); 1 Norton § 4:43, text accompanying n.56 (same). Cf. 1 Collier P 3.01[4][c][iv], p. 3-29 (matters that are not "related" proceedings [**21]  and do not "arise under title 11" must perforce "arise in" the title 11 case).

HN26 The Ninth Circuit's test for the third and final category, "related to" jurisdiction, is "whether the outcome of the proceeding could conceivably have any effect on the estate being administered in bankruptcy." Feitz v. Great W. Sav. (In re Feitz), 852 F.2d 455, 457 (9th Cir. 1988). See also 1 Collier P 3.01[4][c]; 1 Norton § 4:44.

 [*244]  In considering these three categories we repeat our observation above and in Menk that HN27 the statute refers to a "case" for "arising in" and "related to" jurisdiction but not for "arising under" jurisdiction:

HN28 The portion of the § 1334(b) statutory sentence addressing "arising under" jurisdiction does not refer to the existence of a presently-open bankruptcy case: "the district courts [and bankruptcy courts as units thereof under 28 U.S.C. § 157] shall have original but not exclusive jurisdiction of all civil proceedings arising under title

11." 28 U.S.C. § 1334(b) (emphasis added).

Since this straightforward language does not refer to the existence of a "case" under § 1334(a), the [**22]  text of the statute does not appear to require that the bankruptcy case must be open in order to exercise § 1334(b) "arising under" jurisdiction.

Menk, 241 B.R. at 905. 12

FOOTNOTES

12 The facts in Menk were somewhat different from Debtor's case, but not in any way that would make its reasoning less applicable. Debtor's Bankruptcy Case was dismissed, closed, and then reopened. The bankruptcy case in Menk was closed but not dismissed, and judgment creditors moved to reopen the case to challenge the dischargeability of the judgment debt. We ruled that the debtor in Menk lacked standing to challenge the bankruptcy court's order reopening the case because the bankruptcy court had ancillary jurisdiction over the dischargeability action whether or not the case was reopened. Thus, although dismissal was not at issue in Menk, that decision held that jurisdiction did not depend on the present existence of a bankruptcy "case." Menk, 241 B.R. 896.

Similarly, we have held that after dismissal [**23]  of a bankruptcy case the bankruptcy court retains jurisdiction over an action for damages for willful violation of the automatic stay. An action for such damages arises under Section 362(h) and therefore is a civil proceeding "arising under title 11" notwithstanding dismissal of the underlying case. Davis v. C.G. Courington (In re Davis), 177 B.R. 907, 912 (9th Cir. BAP 1995); see also Fernandez, 227 B.R. at 179 (following Davis), aff'd 208 F.3d 220 (9th Cir. 2000) (table).

As Menk and Davis illustrate, HN29 "arising under" jurisdiction does not depend on the present existence of an open case or a non-dismissed case. It depends solely on the existence of "civil proceedings arising under title 11." 13

FOOTNOTES

13 Although the bankruptcy court reopened Debtor's case, we hold below that this was not necessary. The bankruptcy court implied, in its Memorandum Concerning Debtor's Motion for Stay Pending Appeal ("Stay Memorandum"), that it reopened Debtor's case as much for the convenience of having a case number under which to file the relevant papers as anything else:

All that reopening does is to provide a case in which the related contested matter, for relief from stay, will be considered. While practices among bankruptcy courts may differ, this bankruptcy court does not assign separate docket numbers to contested matters. Such matters use the docket number of the underlying bankruptcy case.

See also Menk, 241 B.R. at 910 (noting that some bankruptcy clerk's offices may choose to reopen the case for "practical administrative reasons related to internal management" which are "benign from the standpoint of jurisdiction.").

 [**24]  The legislative history supports this analysis. In discussing the broad range of "civil proceedings" it emphasizes that HN30 the bankruptcy court has jurisdiction not just "within a case" but also, for example, after a case is closed:

. . . anything that occurs within a case is a proceeding. Thus, proceeding here is used in its broadest sense, and would encompass what are now called contested matters, adversary proceedings, and plenary actions under the current bankruptcy  [*245]  law. It also includes any disputes related to administrative matters in a bankruptcy case.

The use of the term "proceeding," though, is not intended to confine the bankruptcy case. Very often, issues will arise after the case is closed, such as over the validity of a purported reaffirmation agreement, [under Section] 524(b), the existence of prohibited post-bankruptcy discrimination, [under Section] 525, the validity of securities issued under a reorganization plan, and so on. The bankruptcy courts will be able to hear these proceedings because they arise under title 11.

H.R. Rep. No. 595, 95th Cong., 1st Sess. 445 (1977), quoted in Collier P 3.01[4][b], p. 3-19 (emphasis added).

Similarly,  [**25]  Senate Report No. 95-989 states, in some relevant parts:

This broad grant of jurisdiction [in Section 1334] will enable the bankruptcy courts, which are created as adjuncts of the district court for the purpose of exercising the [sic] jurisdiction, to dispose of controversies that arise in bankruptcy cases or under the bankruptcy code.

* * *

HN31 The phrase "arising under title 11" will enable the Bankruptcy Court to hear any matter under which a claim is made under a provision of title 11.

S. Rep. No. 989, 95th Cong., 2d Sess. 154 (1978).

Therefore, our interpretation is supported both by the plain language of Section 1334(b) and, if there were any ambiguity in that language, by the legislative history. The bankruptcy court had post-dismissal and post-closing jurisdiction over the Motion to Annul the Stay. 14

FOOTNOTES

14 We note that HN32 Rule 4001(a) provides that a "motion for relief from the automatic stay provided by the Code . . . shall be made in accordance with Rule 9014," and Rule 9014 refers to "a contested matter in a case under the Code not otherwise governed by these rules . . . ." Fed. R. Bankr. P. 9014 (emphasis added). This does not mean, however, that a motion for relief under Section 362(d) can only be brought "in a case." The quoted portion of Rule 9014 simply emphasizes that when no other rules govern and a contested matter arises within a case then the procedures in Rule 9014 govern, but Rule 4001(a) makes Rule 9014's procedures applicable to motions for relief from the automatic stay regardless whether those motions arise within a case or after it is dismissed or closed. Nothing in Rule 9014 is to the contrary.

 [**26] 

We are aware that our reading of the plain language of the statute is somewhat different from the gloss we have previously put on it. We have previously stated that "arising under title 11" means a "cause of action created by title 11." Menk, 241 B.R. at 904 and 908-09 & n.3 (emphasis added, citations omitted). The Ninth Circuit also has referred to "causes of action" created by title 11. Eastport, 935 F.2d at 1076. See also Wood v. Wood (Matter of Wood), 825 F.2d 90, 96-97 (5th Cir. 1987).

None of these cases, however, held that a bankruptcy court lacked jurisdiction because of the difference between a "cause of action" and some other type of civil proceeding. Moreover, we have previously referred to "rights" as well as "causes of action" when distinguishing "arising in" from "arising under" jurisdiction. See Menk, 241 B.R. at 909 (the phrase "arising in a case under title 11" means "primarily those administrative proceedings that, while not based on any right created by title 11, nevertheless have no existence outside bankruptcy") (emphasis added).  [*246]  The Ninth Circuit has also used both phrases. Eastport, 935 F.2d at 1076. [**27]  See also Wood, 825 F.2d at 96-97 (description of "arising under" jurisdiction as "matters invoking a substantive right created by federal bankruptcy law").

We believe that the cases using the term "cause of action" are grappling with various tests to determine when a civil proceeding "arises under" title 11, rather than narrowing the statutory term "civil proceeding." The discussion in Collier is illustrative of the courts' struggle. Collier analogizes to the tests for "arising under" jurisdiction outside of bankruptcy, and observes that one such test is whether the "title or right set up by one party, may be defeated by one construction of the . . . laws of the United States, and sustained by the opposite construction . . . ." 1 Collier P 3.01[4][c], p. 3-19, text at n.45, quoting 15 Moore's Federal Practice, ch. 103 (Matthew Bender 3d ed.) (emphasis added). Another test is that "[a] suit arises under the law that creates the cause of action." 1 Collier P 3.01[4][c][i], p.3-21, text accompanying n.46 (emphasis added, quotation marks and citations omitted). Another commentator states that the "essence" of arising under jurisdiction [**28]  is that "the claim asserted is grounded upon a particular provision of the Bankruptcy Code." 1 Norton § 4:43, text accompanying n.53.

We conclude that HN33 Section 1344(b)'s phrase "all civil proceedings arising under title 11" is not limited to causes of action under title 11 but includes proceedings based on a "right" under title 11. Mellon's Motion to Annul the Stay sought to enforce just such a right, namely its right to relief upon a proper showing of "cause" under Section 362(d). 15

FOOTNOTES

15 We are not presented with, and do not decide, whether matters that do not involve "rights" or "causes of action" are included in the term "civil proceedings." For example, we have noted that under one test cited in Collier a "civil proceeding" includes a "title" created by law. 1 Collier P 3.01[4][c], p. 3-19, text at n.45. Without deciding what such a "title" might be, we note that Mellon's "civil proceeding" sought to enforce a right, namely the right to relief under Section 362(d) upon a proper showing of "cause."

 [**29]  We also find nothing inconsistent between the plain language of Section 1334 and the relatively few Ninth Circuit cases that have addressed bankruptcy courts' post-dismissal jurisdiction. As discussed above, those cases recognize that bankruptcy courts have post-dismissal jurisdiction to "interpret" orders entered prior to dismissal and "to dispose of ancillary matters such as an application for an award of attorney's fees for services rendered in connection with the underlying action." Taylor, 884 F.2d at 481. See also Universal Farming Indus., 873 F.2d at 1335-36; Income Prop. Builders, 699 F.2d 963. Some of those cases also state that the bankruptcy court lacks the power to grant "new relief independent of its prior orders" after dismissal. Taylor, 884 F.2d at 481. See also Income Prop. Builders, 699 F.2d at 963. We have previously distinguished Taylor and Income Prop. Builders, however, as involving only motions for "prospective relief regarding the automatic stay," not retroactive relief. Davis, 177 B.R. at 912 (retroactive relief was damages for alleged willful violation of automatic stay). See [**30]  also Fernandez, 227 B.R. at 179 (following Davis), aff'd 208 F.3d 220 (9th Cir. 2000) (table). Moreover, both cases are inapplicable for other reasons.

In Taylor two creditors sought relief from the automatic stay not only in the case then pending but also in future bankruptcy cases. To obtain this extraordinary relief the creditors filed an adversary proceeding. Both that adversary proceeding  [*247]  and the underlying bankruptcy case were dismissed by one bankruptcy judge, but notwithstanding these dismissals a second bankruptcy judge later entered a default judgment granting the requested relief in future bankruptcy cases. The Ninth Circuit held that this judgment was beyond the jurisdiction of the second bankruptcy judge. Taylor, 884 F.2d 478.

Nothing in that holding is contrary to the analysis herein. The automatic stay in Taylor's dismissed bankruptcy case terminated by operation of law, so relief under Section 362(d) was no longer at issue. 11 U.S.C. §§ 349(b)(3) and 362(c)(1) and (2)(B). The only issue on appeal, therefore, was whether the bankruptcy court could prospectively lift the automatic stay in future bankruptcy [**31]  cases. The basis for this extraordinary relief was a res judicata theory, in which the bankruptcy court purported to determine the future res judicata effect of its own judgment. See Little v. Taylor (In re Taylor), 77 B.R. 237, 239-240 (9th Cir. BAP 1987) (quoting judgment). That theory appears to be independent of the Bankruptcy Code, not arising under it, so the bankruptcy court in Taylor would not have had the "arising under" jurisdiction discussed herein. Moreover, Taylor does not discuss or even refer to Section 1334. See Taylor, 884 F.2d 478. In other words, Taylor is both factually and legally inapposite.

In Income Prop. Builders when one creditor was granted relief from the automatic stay to foreclose on and sell a condominium project, a second creditor complained that it had received no notice of the proceedings. The bankruptcy court denied the second creditor's motion to reimpose the stay, and while the second creditor's appeal was pending the bankruptcy case was dismissed. The second creditor failed to oppose dismissal of the bankruptcy case or to obtain a stay of the sale pending its appeal. In that context the Ninth Circuit held that the [**32]  appeal was moot because "once the bankruptcy case was dismissed, a bankruptcy court no longer had power to order the stay . . . ." Income Prop. Builders, 699 F.2d at 964. A later Ninth Circuit decision summarizes the case as holding that "relief in the nature of a new stay" could only be granted "while a bankruptcy case was pending." Beneficial Trust Deeds v. Franklin (In re Franklin), 802 F.2d 324, 327 (9th Cir. 1986) (emphasis added). In other words, as we have previously held, the relief was prospective, not

retroactive. Davis, 177 B.R. at 912.

The Income Prop. Builders case also stated that the bankruptcy court had no power to "award damages allegedly attributable to [the stay's] vacation." Income Prop. Builders, 699 F.2d at 964. This appears to be dicta because there is no indication that the second creditor in that case sought damages -- its motion was entitled "Motion to Reinstate Stay." Armel Laminates, Inc. v. Lomas & Nettleton Co. (In re Income Prop. Builders), 8 B.R. 304, 305 (9th Cir. BAP 1980). Moreover, if the Ninth Circuit meant that under the circumstances the bankruptcy court had no authority to [**33]  award damages for violation of the automatic stay we believe that conclusion was legislatively overruled the following year by enactment of Section 362(h), which provides for damages for willful violation of the automatic stay. 11 U.S.C. § 362(h) (enacted 1984). That section gives the bankruptcy court "arising under" jurisdiction even if none existed before. In addition, after Income Prop. Builders the Ninth Circuit has affirmed our holding that the bankruptcy court has post-dismissal jurisdiction to impose sanctions under Section 362(h). Fernandez, 227 B.R. at 179, aff'd 208 F.3d 220 (9th Cir. 2000) (table). Finally, Income Prop. Builders does not mention  [*248]  Section 1334. In other words, nothing in that case is contrary to the analysis herein.

Similarly, we have distinguished Universal Farming as an application of standard mootness doctrines, which do not bar jurisdiction where the courts can "fashion meaningful relief." Indus. Comm'n of Ariz. v. Solot (In re Sierra Pacific Broadcasters), 185 B.R. 575, 576 n.3 (9th Cir. BAP 1995). Mellon's Motion to Annul the Stay seeks meaningful retroactive relief and no argument has [**34]  been made that it is moot.

Therefore the bankruptcy court's jurisdiction was not barred by the Taylor, Universal Farming Indus., and Income Prop. Builders line of cases. None of those cases involved post-dismissal jurisdiction comparable to Debtor's situation. Indeed, HN34 given Congress' intent for dismissal "to undo the bankruptcy case, as far as practicable, and to restore all property rights to the position in which they were found at the commencement of the case," and given that creditors sometimes do not even know there is a bankruptcy case until after dismissal, it is particularly appropriate that the bankruptcy court have jurisdiction to annul the automatic stay after dismissal. H.R. Rep. No. 595, 95th Cong., 1st Sess. 338 (1977); S. Rep. No. 989, 95th Cong., 2d Sess. 48-49 (1978). 16

FOOTNOTES

16 We have previously held, after a Chapter 13 case was dismissed, that whether the bankruptcy court should have lifted the automatic stay nunc pro tunc was a moot question "because there is no longer an attempt to pursue a Chapter 13 plan." Omoto v. Ruggera (In re Omoto), 85 B.R. 98, 100 (9th Cir. BAP 1988). Debtor, however, was pursuing a Chapter 13 plan, and if she recovered her house she could continue to do so, or pursue refinancing or some other alternative. Therefore, Omoto is distinguishable. Cf. Davis, 177 B.R. at 911 (distinguishing Omoto because it did not involve a claim for damages for violation of the automatic stay).

 [**35]  In sum, we hold that HN35 Section 1334(b)'s reference to "all civil proceedings arising under title 11" includes all proceedings arising under Section 362(d) of title 11. This necessarily includes a proceeding to annul the stay after the underlying case has been dismissed, or closed, or both.

The concurrence and dissent of Judge Ryan rejects post-dismissal "arising under"

jurisdiction. Respectfully, we disagree.

The dissent starts by noting that bankruptcy courts are courts of limited jurisdiction, particularly post-dismissal. We agree. We do not support any expansion of that jurisdiction beyond the limits that Congress established in Section 1334 and the Bankruptcy Code.

The dissent next argues that a motion for relief from the automatic stay is an "administrative" matter within the "arising in" category of bankruptcy jurisdiction, and that this somehow precludes it from being in the "arising under" category. Assuming for the moment that a motion under Section 362(d) is "administrative," the dissent offers no reason why "arising in" and "arising under" jurisdiction would be mutually exclusive. Courts frequently have multiple and overlapping grounds for asserting jurisdiction.  [**36]  See In re Storm Technology, Inc., 260 B.R. 152, 155-56 (Bankr. N.D. Cal. 2001) (asserting both "related to" jurisdiction and jurisdiction "arising under title 11 or arising in a case under title 11"). See generally Vylene Enterprises, Inc. v. Naugles, Inc. (In re Vylene Enterprises, Inc.), 968 F.2d 887 (9th Cir. 1992) (jurisdiction could arise under 28 U.S.C. § 158(d), § 1291, or both). See also Eastport, 935 F.2d at 1076 (noting lack of clear distinction between "arising under" and "arising in" clauses of Section   [*249]   1334(b) ); Wood, 825 F.2d at 92 ("Legislative history indicates that the phrase 'arising under title 11 or arising in or related to cases under title 11" was meant, not to distinguish between different matters, but to identify collectively a broad range of matters subject to the bankruptcy jurisdiction of federal courts.").

Moreover, we do not see how we can fulfil our duty to follow Davis, which held that there is post-dismissal "arising under" jurisdiction over a proceeding seeking damages under Section 362(h), without holding that there is likewise post-dismissal "arising under" jurisdiction [**37]  to annul the stay under Section 362(d). See Davis, 177 B.R. at 912.

Rather than expanding jurisdiction, we are following and applying our own binding precedent in Davis, as we must. Ball v. Payco-General American Credits, Inc. (In re Ball), 185 B.R. 595, 596-98 (9th Cir. BAP 1995) ("HN36 We will not overrule our prior rulings unless a Ninth Circuit Court of Appeals decision, Supreme Court decision or subsequent legislation has undermined those rulings.").

The dissent distinguishes Davis as relying on ancillary jurisdiction, but that decision never mentions ancillary jurisdiction and plainly relies on "arising under" jurisdiction:

The bankruptcy court had subject-matter jurisdiction over all claims alleging willful violation of the automatic stay. Bankruptcy courts have jurisdiction over "all civil proceedings arising under title 11, or arising in or related to cases under title 11." 28 U.S.C. § 1334(b). Appellant's action for willful violation of the automatic stay is created by section 362(h) of title 11 of the United States Code. Thus, the action arises under title 11 and is within the subject-matter jurisdiction of the [**38]  bankruptcy court.

Davis, 177 B.R. at 912 (emphasis added). Cf. id. at 912-13 (discussing "supplemental jurisdiction over Appellant's state law claims") (emphasis added).

Moreover, if jurisdiction in Davis had been based on ancillary jurisdiction, then under the dissent's analysis, the bankruptcy court in Davis would have been precluded from granting new relief independent of a prior order. Where is the prior order in Davis? See Davis, 177 B.R. at 912 and passim.

Returning to the dissent's premise that a motion for relief from the automatic stay is "administrative," and hence part of "arising in" jurisdiction, we find little support for that notion. The dissent points out that Collier lists motions to annul the automatic stay as one of the proceedings "arising in" a bankruptcy case. We note that Collier's reading of Section 1334 is attenuated: Collier starts with the Fifth Circuit's comment in Wood that the phrase "arising in" is "less clear [than 'arising under'], but seems to be a reference to those 'administrative' matters that arise only in bankruptcy cases"; Collier concludes from this tentative definition in Wood that the [**39]  "principal constituent" of "arising in" jurisdiction is "the phrase 'administrative matters,'" which Collier says is "discussed below" with a cross-reference to its discussion of a slightly different phrase, "matters of administration," which is one of four "convenient" categories Collier itself creates to discuss "core" proceedings under 28 U.S.C. § 157(b)(2); and Collier defines "matters of administration" to include not only what the statute refers to as "administration" -- "(A) matters concerning the administration of the estate" -- but also some of the other statutory categories, without explanation why these are "administrative" while other statutory categories are not -- e.g., Collier defines "(G) motions to terminate, annul, or modify the  [*250]  automatic stay" and "(L) confirmations of plans" as administrative. See 1 Collier PP 3.01[4][c][iv] at nn. 89-93 and accompanying text, and P 3.02[3], at pp. 3-28 and 3-36 to 3-38, citing Wood, 825 F.2d at 96-97 and 28 U.S.C. § 157(b)(2). Moreover, there is no indication in Collier that its authors considered a post-dismissal motion to annul the automatic stay, or any comparable [**40]  situation.

Therefore, when it comes to motions to annul the stay post-dismissal the cited sections of Collier are neither persuasive authority against jurisdiction nor inconsistent with our opinion. We note, further, HN37 that 28 U.S.C. § 157(b) refers to core proceedings both "arising under" or "arising in" Title 11 (so noted in Eastport, 935 F.2d at 1076). What could be more "under" Title 11 than the automatic stay (11 U.S.C. § 362 (a)) and the right to seek to annul it (11 U.S.C. § 362 (d))?

Given the questionable "authority" of the Collier quotes and the binding effect of Davis, our course here is clear.

Third, reading Section 1334 to preclude post-dismissal jurisdiction would bar bankruptcy courts from doing what they regularly do post-dismissal, like approving chapter 13 trustees' reports. Would the bankruptcy courts have to set aside dismissal orders to approve such reports? Would setting aside dismissals cause the problems noted in footnote 10 above? How could those problems be avoided without setting aside the dismissal for some purposes but not others, which would create another jurisdictional [**41]  swamp? We do not see the need or desirability of wading into these problems when the plain language of Section 1334 permits post-dismissal "arising under" jurisdiction without reference to whether there is a pending "case." Sticking with the plain language of the statute, it seems to us, is the best way to respect the bankruptcy courts' limited jurisdiction. See Linkway Inv. Co. v. Olsen (In re Casamont Investors), 196 B.R. 517 at 521 (jurisdiction must be "grounded in and limited by statute" not "judicial decree").

For all of the foregoing reasons, the bankruptcy court had jurisdiction over the Motion to Annul the Stay. Moreover, because the Reopening Order was without jurisdictional significance Debtor lacks standing to appeal from it.

3. The Order Annulling Stay

HN38 The bankruptcy court's order granting the Motion to Annul the Stay is a final

decision reviewable by this court. Crocker Nat. Bank v. Am. Mariner Indus., Inc. (In re Am. Mariner Indus., Inc.), 734 F.2d 426, 429 (9th Cir. 1984). The Ninth Circuit Court of Appeals has cautioned that HN39 retroactive relief should be "applied only in extreme circumstances." Mataya v. Kissinger (In re Kissinger), 72 F.3d 107, 109 (9th Cir. 1995) [**42]  (quoting Phoenix Bond & Indemnity Company v. Shamblin (In re Shamblin), 890 F.2d 123, 126 (9th Cir. 1989)). The Ninth Circuit has also held, however, that the bankruptcy court has "wide latitude in crafting relief from the automatic stay, including the power to grant retroactive relief from the stay." Schwartz v. United States (In re Schwartz), 954 F.2d 569, 572 (9th Cir. 1992). Cause to annul the stay may exist where "the stay harms the creditor and lifting the stay will not unjustly harm the debtor or other creditors." In re Murray, 193 B.R. 20, 22 (Bankr. E.D. Cal. 1996) (quotation marks and citation omitted). Ultimately, the decision is left to the sound discretion of the bankruptcy court. Kissinger, 72 F.3d at 109 (affirming order annulling stay).

The bankruptcy court articulated several reasons for annulling the automatic stay. It noted that Debtor filed three successive voluntary petitions, each on "the eve or [*251]  within a few days of something about to happen in state court," that "these appear to be filings just for the cause of delay," that Debtor failed to inform Mellon and the state court of her first petition (filed [**43]  on January 26, 1999, at 3:38 p.m., before a hearing on the State Court Motion set for 8:30 a.m. on January 27, 1999), and General Order No. 1 advised Debtor that her failure to do so "may constitute cause for nullification of the automatic stay." The record supports these findings. 17

FOOTNOTES

17 The bankruptcy court elaborated on the underlying facts in its Stay Memorandum, issued August 16, 2001. Debtor included that decision in her supplemental excerpts of the record and offered to file a formal motion to supplement the record if requested. At oral argument before the panel, Mellon's counsel stated that Mellon had no objection to the panel's consideration of these supplemental excerpts. We grant the motion.

According to the bankruptcy court's decision, Debtor filed her first petition at 3:38 p.m. on January 26, 1999, just before the hearing on the State Court Motion set for 8:30 a.m. on January 27, 1999. Debtor filed her second petition on November 18, 1999, again without the requisite schedules, statements or chapter 13 plan, two days before an open house scheduled by the foreclosure commissioner for November 20, 1999. The United States Trustee moved to dismiss that case as having been filed in bad faith, Debtor filed her own motion to dismiss her case, Mellon moved for relief from the automatic stay, and the bankruptcy court ordered dismissal with a 180-day bar to refiling. Debtor filed her third petition on October 3, 2000, the day before a scheduled hearing in state court to confirm the foreclosure sale. After the United States Trustee moved to dismiss that case for failure to file schedules and statements, Debtor moved for and was granted an extension of time to file those documents and she did so on October 30, 2000. Mellon moved for relief from the automatic stay, which Debtor did not oppose and which was granted by order entered January 17, 2001. Debtor does not dispute these underlying facts.

 [**44] 

Debtor argues that the bankruptcy court should not have considered her two subsequent bankruptcies but should have decided the issue based on facts as of date she filed her first bankruptcy petition. Debtor cites no authority for this proposition, and it is inconsistent with the very nature of retroactive relief from the automatic stay and the broad definition of "cause" to grant such relief. See, e.g., Schwartz, 954 F.2d 569; Kissinger, 72 F.3d 107.

Debtor also argues that Mellon knew about her first bankruptcy petition shortly after it was filed, or approximately two years before moving for the Reopening Order and the Order Annulling Stay. The bankruptcy court rejected this argument at the hearing on May 23, 2001, after noting the history of Debtor's three bankruptcy petitions:

So there hasn't really been laches. There [has] just been an ongoing battle between the parties and now . . . it seems appropriate to grant the motion to reopen and to grant that relief from stay taking into account all of the facts of this case.

Later, as part of its Stay Memorandum, the bankruptcy court stated,

Both Mellon and the Debtor have unreasonably [**45]  delayed addressing the stay violation issue. The violation occurred in January, 1999, during Debtor's first bankruptcy case. Over two years elapsed before Debtor raised the issue in the state court and Mellon raised the issue in the bankruptcy court. However, only Mellon has suffered from the other party's delay. Mellon's main detriment is the absence of mortgage payments from Debtor. Debtor, on the other hand, has had extended use and occupation of her home, with no mortgage payments.

 [*252]  Neither party has contested these findings on appeal. From these facts it appears that not annulling the stay "harms the creditor" and annulling the stay "will not unjustly harm the debtor or other creditors." In re Murray, 193 B.R. 20, 22

Finally, as we have stated in footnote 9, annulling the stay after two years presumably would not have been necessary if Debtor had followed the mandate of the bankruptcy court's General Order No. 1 and immediately had informed the state court and Mellon that she had filed her voluntary petition in bankruptcy. Debtor failed to do so even though Mellon was the only creditor listed on her creditor matrix and even though she filed her first bankruptcy [**46]  petition the day before the hearing on the State Court Motion. In these circumstances the bankruptcy court did not abuse its discretion in annulling the stay. See Berg v. Good Samaritan Hosp. (In re Berg), 198 B.R. 557, 563 n.12 (9th Cir. BAP 1996) (debtor's opportunity but failure to inform court of bankruptcy filing appeared to present "strong circumstance" for annulment), aff'd, 230 F.3d 1165 (9th Cir. 2000).

V. CONCLUSION

For two independent reasons the bankruptcy court had jurisdiction to issue the Order Annulling Stay, notwithstanding the dismissal of the Bankruptcy Case and regardless whether the case was reopened. First, the bankruptcy court had ancillary jurisdiction to interpret and enforce its General Order No. 1, which required Debtor to advise Mellon and the state court of her bankruptcy filing and provided that failure to do so "may constitute cause for nullification of the automatic stay." Second, Mellon's Motion to Annul the Stay under Section 362 commenced a "civil proceeding[] arising under title 11" (as opposed to civil proceedings "arising in or related to cases under title 11") within the meaning of 28 U.S.C. Section 1334 [**47]  (b). This "arising under" jurisdiction does not depend on the present existence of a non-dismissed, non-closed bankruptcy case. For either or both of these reasons, reopening was of no

jurisdictional significance. Debtor lacks standing to appeal from the Reopening Order, and that appeal is DISMISSED.

In addition, the bankruptcy court did not abuse its discretion by issuing the Order Annulling Stay. While both Debtor and Mellon could have and should have raised the automatic stay issues two years sooner, Mellon was denied mortgage payments while Debtor gained free use of the Residence. This harm to Mellon and lack of unjust harm to Debtor, or any other creditor, is ample justification for annulling the automatic stay. The Order Annulling Stay is AFFIRMED.

CONCUR BY: RYAN (In Part); BRANDT

CONCUR

 [*256contd]  [EDITOR'S NOTE: The page numbers of this document may appear to be out of sequence; however, this pagination accurately reflects the pagination of the original published documents.] BRANDT, Bankruptcy Judge, concurring:

I would affirm on the basis of "arising under" jurisdiction (part 2.b. of the discussion), and, alternatively, as ancillary to the dismissal order, as set forth in footnote 8. I do not think it necessary to reach the question of ancillarity to General Order No. 1, and the considerations outlined in the penultimate paragraph of part 2.a. suggest we should [**48]  not.

I agree that reopening is legally innocuous in this setting and that debtor therefore lacks standing to appeal that order, and further, that the annulment order was not an abuse of discretion.

1. Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330, and the Federal Rules of Bankruptcy Procedure, Rules 1001-9036. The references to schedules, statements and the creditor matrix are to the documents required to be filed by Rule 1007.

2. Mellon is now known as Chase Mortgage Company West but for convenience we will continue to refer to it as Mellon.

3. These facts are discussed further in Part IV.3. of this opinion below.

4. General Order No. 1 states, in part:

IT IS HEREBY ORDERED THAT:

DISSENT BY: RYAN (In Part)

DISSENT

 [*252contd]  [EDITOR'S NOTE: The page numbers of this document may appear to be out of sequence; however, this pagination accurately reflects the pagination of the original published documents.] RYAN, Bankruptcy Judge, concurring in part and dissenting in part:

I believe that the bankruptcy court had ancillary jurisdiction 18 to enter the order annulling the automatic stay (the "Order"), and I concur with that portion of the

opinion. However, I do not believe that it is  [*253]  necessary to address whether the bankruptcy court had "arising under"  [**49]  jurisdiction, and as to that portion of the opinion, I respectfully dissent.

FOOTNOTES

18 The term "supplemental jurisdiction" refers to both ancillary and pendent jurisdiction. See 28 U.S.C. § 1367; Darrell Dunham, Bankruptcy Court Jurisdiction, 67 UMKC L. Rev. 229, 271-75 (1999). Here, I refer to "ancillary jurisdiction" to mean jurisdiction over a postdismissal matter that involves interpreting orders previously issued by the bankruptcy court, see Beneficial Trust Deeds v. Franklin (In re Franklin), 802 F.2d 324, 326-27 (9th Cir. 1986); jurisdiction over a postdismissal matter that was established prior to dismissal of the case, see Davis v. C.G. Courington (In re Davis), 177 B.R. 907, 912 (9th Cir. BAP 1995); or jurisdiction to dispose of "ancillary matters," such as attorney's fee disputes, see Elias v. U.S. Trustee (In re Elias), 188 F.3d 1160, 1162 (9th Cir. 1999).

A bankruptcy court's jurisdiction is governed by 28 U.S.C. § 1334, [**50]  which provides in part that "the district courts [and bankruptcy courts] shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11." 28 U.S.C. § 1334(b). The majority takes the position that even absent ancillary jurisdiction, a bankruptcy court has "arising under" jurisdiction after a bankruptcy case has been dismissed. Apparently, according to the majority, as long as the matter involves a provision of title 11, jurisdiction can be asserted postdismissal. I disagree.

The majority reasons that the legislative history of the Code supports its conclusion. It further asserts that our prior decisions support their position. Finally, the majority contends that prior Ninth Circuit authority does not preclude the result that it reaches today. For the reasons stated below, I disagree with all these assertions.

I begin by noting that a bankruptcy court is a court of limited jurisdiction. See Taxel v. Elec. Sports Research (In re Cinematronics, Inc.), 916 F.2d 1444, 1449-50 (9th Cir. 1990). The Ninth Circuit narrowly construes a bankruptcy court's postdismissal [**51]  jurisdiction. See Tsafaroff v. Taylor (In re Taylor), 884 F.2d 478, 481 (9th Cir. 1989). Therefore, we should carefully consider our jurisdiction and not seek to expand it. See Linkway Inv. Co., Inc. v. Olsen (In re Casamont Invs., Ltd), 196 B.R. 517, 521 (9th Cir. BAP 1996).

First, the majority errs because a motion for relief from the automatic stay falls into the "arising in" category of bankruptcy jurisdiction, and not the "arising under" category as asserted by the majority. In Eastport Assocs. v. City of L.A. (In re Eastport Assocs.), 935 F.2d 1071 (9th Cir. 1991), the Ninth Circuit established the definition for "arising in" jurisdiction. Id. at 1076. There, the court quoted the Fifth Circuit and stated that

the meaning of "arising in" proceedings is less clear, but seems to be a reference to those "administrative" matters that arise only in bankruptcy cases. In other words, "arising in" proceedings are those that are not based on any right expressly created by title 11, but nevertheless, would have no existence outside of the bankruptcy.

Id. (quoting Wood v. Wood (In re Wood), 825 F.2d 90, 96-97 (5th Cir. 1987) [**52]  (emphasis in original)). In Wood, the court's definition of "arising in" jurisdiction was

taken from Collier. See Wood, 825 F.2d at 96-97 (citing 1 Collier on Bankruptcy P 3.01 at 3-23 (1987)).

Collier defines

"arising in" acts as the residual category of civil proceedings, and [it] includes such things as administrative matters, "orders to turn over property of the estate," and "determinations of the validity, extent, or priority of liens." "Arising in" proceedings might also include contempt matters, motions to change the composition of a creditors' committee under section 1102, and motions to appoint or elect trustees and examiners under section 1104. An action to recover a postpetition account "arises in the bankruptcy case."

It seems apparent, therefore, that the phrase "administrative matters," discussed below, is the principal constituent of "arising in" jurisdiction.

1 Collier on Bankruptcy P 3.01[4][c][iv] (Lawrence P. King et al. eds. 15th ed. rev. 2001) (footnotes omitted). Collier then cross-references P 3.02[3][a], which is entitled "Matters of Administration."

 [*254]  The first category, matters of administration, includes (A)  [**53]  matters concerning the administration of the estate; (B) allowance or disallowance of claims against the estate or exemptions from property of the estate, and estimation of claims or interests for the purposes of confirming a plan under chapter 11, 12, or 13 of title 11 . . .; (D) orders in respect to obtaining credit; (G) motions to terminate, annul, or modify the automatic stay; (I) determinations as to the dischargeability of particular debts; (J) objections to discharges; and (L) confirmations of plans.

Collier P 3.02[3][a] (emphasis added and footnotes omitted).

By this cross-reference, Collier indicates that the core proceedings discussed in P 3.02[3][a] come under the "arising in" jurisdiction of a bankruptcy court. A motion to annul the automatic stay is one of those proceedings.

Thus, to the extent that the majority predicates jurisdiction on an "arising under" basis, the majority errs. The bankruptcy court did not have "arising under" jurisdiction to annul the automatic stay.

Secondly, even assuming that "arising under" jurisdiction exists, it does not serve as an independent jurisdictional basis in a dismissed case. The authority cited by the [**54]  majority for this proposition is inapposite. For example, the majority cites portions of legislative history in support of its argument:

. . . anything that occurs within a case is a proceeding. Thus, proceeding here is used in its broadest sense, and would encompass what are now called contested matters, adversary proceedings, and plenary actions under the current bankruptcy law. It also includes any disputes related to administrative matters in a bankruptcy case.

The use of the term "proceeding," though, is not intended to confine the bankruptcy case. Very often, issues will arise after the case is closed, such as over the validity of a purported reaffirmation agreement, [under Section] 524(b), the existence of prohibited post-bankruptcy discrimination, [under Section] 525, the validity of securities issued under a reorganization plan, and so on. The bankruptcy courts will be able to hear these proceedings because they arise under title 11.

Opinion, part IV.2.b. (quoting H.R. Rep. No. 595, 95th Cong., 1st Sess. 445 (1977)). The legislative history speaks in terms of closed cases, not dismissed cases. Congressional intent clearly supports the majority's assertion [**55]  that a bankruptcy court has postclosing jurisdiction over certain matters. However, nothing in the language of the legislative history supports extending post closing jurisdiction to postdismissal jurisdiction. Additionally, the majority cites Menk v. LaPaglia (In re Menk), 241 B.R. 896 (9th Cir. BAP 1999), and Davis v. C.G. Courington (In re Davis), 177 B.R. 907 (9th Cir. BAP 1995), as standing for the proposition that "'arising under' jurisdiction does not depend on the present existence of an open case or a non-dismissed case." Opinion, part IV.2.b. These cases do not support a claim for postdismissal jurisdiction, as is the case here.

In Menk, the bankruptcy court reopened a chapter 7 debtor's case to allow a creditor that had not been properly scheduled to file a dischargeability complaint. After a judgment was entered, the debtor appealed the order reopening his case, but he did not appeal the determination that the debt was nondischargeable. See Menk, 241 B.R. at 903-04. We held that the debtor lacked standing to appeal the order reopening his case because the bankruptcy  [*255]  court had jurisdiction to determine the dischargeability of the [**56]  underlying debt regardless of whether the debtor's bankruptcy case was open. Id. at 917.

In Davis, the debtor filed a complaint alleging that a creditor had wilfully violated the automatic stay. After the debtor's bankruptcy case was dismissed, the creditor filed a motion to dismiss the adversary proceeding, which the bankruptcy court granted. See Davis, 177 B.R. at 910.

On appeal we reversed, holding that the dismissal of the underlying bankruptcy case did not moot a complaint for a willful violation of the automatic stay. Id. at 911. We reasoned that the bankruptcy court had ancillary jurisdiction postdismissal because subject-matter jurisdiction had been established prior to dismissal of the case. 19 Id. at 912. We further stated that "dismissal of the underlying case renders moot a motion for prospective relief regarding the stay, but does not render moot an action for damages based on violation of the stay." Id. at 912-13.

FOOTNOTES

19 Subject-matter jurisdiction is determined at the time the action is initiated. See Linkway Inv. Co., Inc. v. Olsen (In re Casamont Investors, Ltd.), 196 B.R. 517, 525 (9th Cir. BAP 1996).

 [**57]  Neither Menk nor Davis is on point. As stated above, Menk was a closed case, not a dismissed case. In Davis, jurisdiction was established as to the complaint for a willful violation of the automatic stay prior to dismissal. Here, we have a dismissed case, and the motion to annul the automatic stay was not filed prior to dismissal of the case. Thus, the holdings of Menk and Davis are clearly distinguishable from the situation here. 20

FOOTNOTES

20 I note that the majority has not cited a case in which a bankruptcy court has asserted "arising under" jurisdiction over a postdismissal case. Indeed, my own research has revealed no such case. However, as noted below, there are numerous Ninth Circuit cases holding that a bankruptcy court may exercise ancillary jurisdiction

postdismissal.

More importantly, the result reached by the majority is contrary to Tsafaroff v. Taylor (In re Taylor), 884 F.2d 478 (9th Cir. 1989), and Armel Laminates, Inc. v. Lomas & Nettleton Co. (In re Income Prop. Builders, Inc.), 699 F.2d 963 (9th Cir. 1983). [**58]  In Taylor, two creditors sought prospective relief from the automatic stay. To obtain this relief, they filed an adversary proceeding. This adversary proceeding and the underlying bankruptcy case were dismissed by one bankruptcy judge. Later, a second bankruptcy judge entered a default judgment that granted the prospective relief sought. The Ninth Circuit held that the default judgment was void because the second bankruptcy court lacked postdismissal jurisdiction to enter that order. See Taylor, 884 F.2d at 481-82.

There, the Ninth Circuit stated that the bankruptcy court retained subject-matter jurisdiction to interpret orders entered prior to dismissal of the case and to dispose of ancillary matters. However, the bankruptcy court did not have jurisdiction to grant new relief independent of its prior rulings once the bankruptcy case and the adversary action had been dismissed. Therefore, even though the bankruptcy court had jurisdiction to lift the automatic stay prior to the dismissal of the case, it exceeded its jurisdiction postdismissal by signing the stay lift order that granted prospective relief. Id.

In Income Prop. Builders, after a creditor appealed [**59]  an order denying a motion to reimpose the automatic stay, the bankruptcy court dismissed the debtor's case. The Ninth Circuit then dismissed the appeal because the underlying case had been dismissed.  [*256]  The Ninth Circuit stated that "once the bankruptcy was dismissed, a bankruptcy court no longer had power to order the stay or to award damages allegedly attributable to its vacation [of the stay]." Income Prop. Builders, 699 F.2d at 964.

Thus, a bankruptcy court is precluded from granting "new relief" postdismissal that is independent of a prior order. See Franklin, 802 F.2d at 327. Nonetheless, the majority's approach would allow a bankruptcy court to provide new relief independent of a prior order as long as the relief was covered by the "arising under" umbrella. Indeed, the majority's approach would render Taylor and Income Prop. Builders meaningless. According to the majority, a right to relief or a cause of action created by the Code provides "arising under" jurisdiction. Therefore, if the bankruptcy court had "arising under" jurisdiction, then it had jurisdiction to provide postdismissal "new relief." This certainly is contrary to both Taylor and [**60]  Income Prop. Builders.

The Ninth Circuit has provided a clear roadmap for deciding cases such as this one. The Ninth Circuit consistently looks to ancillary jurisdiction for the answer. See, e.g. Taylor, 884 F.2d at 481 (ancillary jurisdiction to interpret orders, but not enter an order granting new relief); Elias, 188 F.3d at 1163-66 (ancillary jurisdiction over attorney's fee dispute); Franklin, 802 F.2d at 326-27 (ancillary jurisdiction to interpret an order); Spacek v. Tabatabay (In re Universal Farming Indus.), 873 F.2d 1332, 1333 (9th Cir. 1989) (ancillary jurisdiction may be exercised postdismissal). We should do likewise.

Here, ancillary jurisdiction appropriately applies and permits the bankruptcy court to take jurisdiction in granting the relief requested. Unwilling to rest on this basis, the majority inappropriately expands a bankruptcy court's postdismissal jurisdiction to anything that arguably falls within the "arising under" umbrella. This is just the type

of jurisdictional expansion that the Ninth Circuit has admonished bankruptcy courts not to undertake.

In summary, I believe that the postdismissal [**61]  jurisdiction of the bankruptcy court to adjudicate an action initiated postdismissal must rest on ancillary jurisdiction, which relates back to the jurisdiction that the court had predismissal. In other words, a bankruptcy court has no separate postdismissal jurisdiction under 28 U.S.C. § 1334 to deal with an action that does not satisfy the ancillary jurisdictional requirements.

130 B.R. 94, *; 1991 Bankr. LEXIS 1090, **; 25 Collier Bankr. Cas. 2d (MB) 440

In re PLANNED PROTECTIVE SERVICES, INC., Debtor(s)

BK No. LA89-12785RR Chapter 11

UNITED STATES BANKRUPTCY COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA

130 B.R. 94; 1991 Bankr. LEXIS 1090; 25 Collier Bankr. Cas. 2d (MB) 440

July 11, 1991, Decided July 17, 1991, Filed

CASE SUMMARYPROCEDURAL POSTURE: Debtor sought approval of its motion to compromise secured creditors' claim in which the deed of trust for the secured real property was recorded post petition but within 10 days of the transaction.

OVERVIEW: Debtor sought approval for the compromise of a claim held by secured creditors for the balance of the proceeds from the sale of real property in debtor's chapter 11 bankruptcy estate. The creditors recorded their deed of trust post petition, but within 10 days of the loan transaction, which included the granting of the deed of trust as security for the loan's repayment. Debtor argued that the creditors' recordation within the 10-day grace period of 11 U.S.C.S. § 547(e)(2)(A) insulated the transfer that would otherwise have been voidable under 11 U.S.C.S. § 544(a). The court denied debtor's motion to approve the compromise, holding it was not fair and equitable to the unsecured creditors of the reorganized debtor because their claims might not be paid in full under the plan of reorganization.

OUTCOME: Debtor's motion to approve a compromise was denied because creditors' post petition recordation was a voidable transfer and it was unfair to unsecured creditors because their claims might not be paid in full under the plan.

CORE TERMS: deed of trust, perfection, post-petition, perfected, grace period, bona fide purchaser, recorded, real property, commencement, reorganized, recordation, voidable, applicable law, question of law, sale proceeds, debtor-in-possession, reorganization, unrecorded, equitable, avoiding, state law, matter of law, secured creditors, security interest, unsecured creditors, automatic stay, transferor, transferee, recording, avoidable

LEXISNEXIS® HEADNOTES Hide

Bankruptcy Law > Reorganizations > Plans > Confirmation > Cramdown 

Contracts Law > Debtor & Creditor Relations 

HN1 Approval of a compromise under Fed. R. Bank. P. 9019 requires more than just a rubber-stamping of an agreement which has been arrived at by good faith negotiations. The court must determine whether the compromise is fair and equitable. Such a determination requires the court to conduct a full and independent assessment of the compromise. Four factors must be considered in the court's inquiry: 1) the probability of success in the litigation; 2) the difficulties, if any, to be encountered in the matter of collection; 3) the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it; 4) the paramount interest of the creditors and a proper deference to their reasonable views.  More Like This Headnote

Bankruptcy Law > Reorganizations > Plans > Confirmation > Cramdown 

HN2 Just as creditors' views are binding on the court, the lack of objection from creditors does not end inquiry into whether the proposed compromise benefits the estate. The reorganized debtor, as the proponent of the compromise, has the burden of persuading the court that the proposed compromise meets the fair and equitable test.  More Like This Headnote

Bankruptcy Law > Case Administration > Examiners, Officers & Trustees > Voidable Transfers > Lien

Creditor & Purchaser 

HN3 See 11 U.S.C.S. § 544(a)(3). Shepardize: Restrict By Headnote

Contracts Law > Types of Contracts > Bona Fide Purchasers 

Real Property Law > Priorities & Recording > Bona Fide Purchasers 

HN4 To determine the rights of a bona fide purchaser, the court looks to state law.  More Like This Headnote

Bankruptcy Law > Reorganizations > Debtors in Possession > Powers & Rights 

Contracts Law > Types of Contracts > Bona Fide Purchasers 

Real Property Law > Priorities & Recording > Bona Fide Purchasers 

HN5 Under Cal. Civ. Code § 1214, a bona fide purchaser for value prevails over a prior unrecorded lien on the property. The debtor-in-possession, by virtue of 11 U.S.C.S. § 544(a)(3) has the rights of such a hypothetical bona fide purchaser and may prevail over unrecorded transfers.  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Case Administration > Examiners, Officers & Trustees > Preferential Transfers > Time

Limitations 

Bankruptcy Law > Case Administration > Examiners, Officers & Trustees > Voidable Transfers > General

Overview 

HN6 See 11 U.S.C.S. § 547(e)(2). Shepardize: Restrict By Headnote

JUDGES:  [**1]  Robin L. Riblet, United States Bankruptcy Judge.

OPINION BY: RIBLET

OPINION

 [*95]  MEMORANDUM OF DECISION

ROBIN L. RIBLET, United States Bankruptcy Judge

Planned Protective Services, Inc. ("PPS"), acting under its confirmed Chapter 11 plan of reorganization, seeks the Court's approval for the compromise of a claim held by Julius and Gladys Levinson concerning their entitlement, as secured creditors, to proceeds from the sale of certain real property of debtor's estate. The Court has jurisdiction over the proposed compromise pursuant to 28 U.S.C. § 157(b)(1).

The facts underlying the Levinsons' claim are not in dispute. On June 8, 1989, the Levinsons loaned $ 35,000 to PPS and received as security therefor a deed of trust on PPS's real property located at 548 South Kingsley Drive in Los Angeles. PPS filed a Chapter 11 petition on June 12, 1989. The Levinsons recorded their deed of trust on June 16, 1989. The court subsequently approved the sale of the property during the pendency of PPS's Chapter 11 case, and creditors holding liens on the property were paid from the proceeds.

The Levinsons were not paid out of the sale proceeds, however, based on a dispute [*96]  with the debtor concerning the validity of their lien under applicable law. During claims litigation [**2]  between the parties PPS asserted that the Levinsons' lien was invalid because the deed of trust was recorded post-petition. The Levinsons, on the other hand, contended they held a validly perfected security interest in the property pursuant to § 547(e)(2)(A) and § 362(b)(3) of the Bankruptcy Code. 1 The agreement reached between the parties proposes to resolve the Levinsons' alleged secured claim. It provides that the Levinsons will be paid from the balance of the sale proceeds as a secured creditor only the principal amount of $ 35,000, and that the Levinsons may assert an unsecured claim for any accrued interest to which they may be entitled. The reason for such a compromise, according to PPS, was to avoid the uncertainty and expense of litigation.

FOOTNOTES

1 All statutory references are to the Bankruptcy Code unless otherwise stated.

At the hearing before the court on the proposed compromise, the Court questioned whether the agreement was in the best interests of creditors on the theory that the Levinsons' lien, as a matter [**3]  of law, was voidable by the debtor. There were no objections raised by creditors, as no creditor had appeared or filed written opposition to the proposed compromise. In response to the Court's queries, PPS further briefed the issue of the applicability of § 547(e)(2)(A) with respect to the post-petition recording of the Levinson deed of trust, and concluded that the Levinsons held a valid lien. Despite the apparent lack of objection by creditors, the Court has undertaken its own assessment of the wisdom of the compromise to determine whether the compromise may be approved.

DISCUSSION

HN1 Approval of a compromise under Bankruptcy Rule 9019 requires more than just a "rubber-stamping" of an agreement which has been arrived at by good faith negotiations. The Court must instead determine whether the compromise is fair and equitable. In re A & C Properties , 784 F.2d 1377, 1381 (9th Cir. 1986) , cert. denied sub nom Martin v. Robinson, 479 U.S. 854, 107 S. Ct. 189, 93 L. Ed. 2d 122 (1986). Such a determination requires the court to conduct a full and independent assessment of the compromise. Id. at p. 1383. Four factors must be considered in the court's inquiry:  [**4]  1) the probability of success in the litigation; 2) the difficulties, if any, to be encountered in the matter of collection; 3) the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it; 4) the paramount interest of the creditors and a proper deference to their reasonable views. In re Woodson, 839 F.2d 610, 620 (9th Cir. 1988); In re A & C Properties , 784 F.2d at 1381. HN2 Just as creditors' views would not be binding on this court, In re General Store of Beverly Hills, 11 Bankr. 539, 541 (Bankr. 9th Cir. 1981), the lack of objection from creditors in this instance does not end inquiry into whether the proposed compromise benefits this estate. See Matter of W.T. Grant Co., 4 Bankr. 53, 69 (Bankr. S.D.N.Y. 1980) (position of creditors is factor to be weighed among others). The reorganized debtor, as the proponent of the compromise, has the burden of persuading the court that the proposed compromise meets the fair and equitable test. In re Hallet, 33 Bankr. 564, 565-66 (Bankr. D. Me. 1983).

Consideration of the law governing the  [**5]  underlying lien dispute between the parties leads the court to conclude that PPS has failed to meet its burden. Under the A & C Properties and Woodson analyses, whether PPS would have succeeded in its litigation depends on the avoidability of the Levinson's lien. Although PPS did not specifically state on which theory it originally believed the lien to be avoidable, presumably it was relying on the "strong arm clause" of § 544(a)(3). 2

FOOTNOTES

2 HN3 Section 544(a)(3) provides: "(a) The trustee shall have, as of the commencement of the case, and without regard to any knowledge of the trustee or any creditor, the rights and powers of, or may avoid any transfer of property of the debtor or any obligation incurred by the debtor that is voidable by--. . . (3) a bona fide purchaser of real property, other than fixtures, from the debtor, against whom applicable law permits such transfer to be perfected, that obtains the status of a bona fide purchaser and has perfected such transfer at the time of the commencement of the case, whether or not such a purchaser exists."

 [**6]   [*97]  Under § 544(a)(3), a trustee may avoid all obligations and transfers that would have been avoidable by a bona fide purchaser of real property at the commencement of the case. In re Probasco, 839 F.2d 1352, 1354 (9th Cir. 1988); In re La Palomento, 29 Bankr. 291, 293 (Bankr. D.N.J. 1983). A debtor-in-possession has the same rights and powers as a bankruptcy trustee. 11 U.S.C. § 1107(a). 3

FOOTNOTES

3 In this instance the reorganized debtor reserved rights accorded the debtor-in-possession regarding the claims resolution process by the terms of its Plan or Reorganization.

HN4 To determine the rights of a bona fide purchaser, the court looks to state law. In re Gurs, 27 Bankr. 163, 165 (Bankr. 9th Cir. 1983); In re La Palomento, 29 Bankr. at 293. HN5 Under California law a bona fide purchaser for value prevails over a prior unrecorded lien on the property. Cal. Civ. Code § 1214. Accordingly, the debtor-in-possession, by virtue of § 544(a)(3) has the rights  [**7]  of such a hypothetical bona fide purchaser and may prevail over unrecorded transfers. In re Chenich, 100 Bankr. 512 (Bankr. 9th Cir. 1987).

There are several reported cases in which a trustee has avoided an unrecorded deed of trust based on the trustee's superior lien interest under § 544(a)(3), despite a creditor's efforts to record its deed of trust shortly after the filing of the debtor's petition. See, e.g., In re Brown, 37 Bankr. 516 (Bankr. E.D. Mo. 1984) (deed of trust recorded minutes after petition filed); Gilbert v. Dixon, 18 Bankr. 579 (Bankr. S.D. Ohio 1982) (deed of trust recorded one month after petition); In re Graham, 110 Bankr. 408 (S.D. Ind. 1990). In each instance, however, the trustee prevailed without discussion by the court of the impact, if any, of the ten-day grace period for perfection provided for in § 547(e)(2)(A). 4

FOOTNOTES

4 HN6 Section 547(e)(2) provides as follows: "(e)(2) For the purposes of this section, except as provided in paragraph (3) of this subsection, a transfer is made--(A) at the time such transfer takes effect between the transferor and the transferee, if such transfer is perfected at, or within 10 days after, such time; (B) at the time such transfer is perfected, if such transfer is perfected after such 10 days; or (C) immediately before the date of the filing of the petition, if such transfer is not perfected at the later of -- (i) the commencement of the case; or (ii) 10 days after such transfer takes effect between the transferor and the transferee."

 [**8]  In the present case, the Levinsons recorded their deed of trust post-petition but within ten days of the loan transaction, which included the granting of the deed of trust as security for the loan's repayment. Section 547(e)(2)(A) provides that a transfer of a security interest occurs when the security interest attaches if it is perfected within ten days thereafter. Section 547(e)(2)(C)(ii) provides that the ten-day grace period continues to run after the petition date. 4 Collier on Bankruptcy, § 547.20, 547 -88 (15th Ed. 1979). Consequently, for purposes of a preference analysis, the transfer of the property interest here took place simultaneously with the execution of the deed of trust pre-petition, and therefore there was no preferential transfer within the meaning of § 547.

The question becomes whether the Levinsons' recordation within the ten-day grace period of § 547(e)(2)(A) insulates a transfer otherwise voidable under § 544(a). PPS has not been able to direct the Court to any authority which permits the ten-day grace period of the preference statute to override, or cross over in application to the trustee's avoiding powers under § 544(a).

On the other hand, there is ample [**9]  authority demonstrating that § 544(a) operates independent of the preference rules, including the ten-day grace period of § 547(e)(2). For example, Section 546(b) provides for an exception to the trustee's avoiding powers under §§ 544, 545 and 549 concerning delays in perfection. Section 546(b) allows perfection to relate back according  [*98]  to "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 such perfection." The phrase "generally applicable law" relates to state law. See H.R. Rep. No. 595, 95th Cong., 1st Sess. 371 (1977); S. Rep. No. 989, 95th Cong., 2d Sess. 86 (1978), 1978 U.S. Code Cong. & Admin. News 5787. In California, perfection of a deed of trust occurs when the document is recorded in the office of the County Recorder. Cal. Civ. Code § 1213; In re Schuman, 81 Bankr. 583, 587 (Bankr. 9th Cir. 1987). Prior to recordation, an interest in real property is not effective against intervening creditors. See Cal. Civ. Code § 1214. Accordingly, the Levinsons could not avail themselves of the limited exception of § 546(b).

Under the compromise, the parties have apparently concluded [**10]  that § 547(e)(2)(A) may operate for the benefit of the Levinsons as a further exception to the trustee's avoiding powers under § 544(a). To permit such an application would be in effect to rewrite the Code. Section 546(b) expressly provides an exception for perfection to relate back for purposes of § 544; the preference statute, on the other hand, has its own rules regarding grace periods for perfection. In re Ken Gardner Ford Sales Inc., 10 Bankr. 632, 643 (Bankr. E.D. Tenn. 1981) aff'd, 23 Bankr. 743 (E.D. Tenn. 1981) 4 Collier on Bankruptcy § 547.20, 547 -88 (15th Ed. 1979). Moreover, the legislative comments to § 547(e) recognize, in addition to the statutory language itself, that the rules stated therein are for the specific purposes of the preference section. H.R. Rep. No. 595, 95th Cong., 1st Sess. 374 (1977); S. Rep. No. 989, 95th Cong., 2d Sess. 89 (1978). There is simply no basis on which to apply the preference rules beyond their intended scope in order to validate a lien otherwise voidable under § 544(a)(3).

Section 362(b)(3), contrary to assertions of the parties, does not add credence to their position that the preference  [**11]  grace period validates the Levinsons' lien. Section 362(a)(4) prohibits any post-petition acts "to create, perfect, or enforce any lien against property of the estate." As a result, the post-petition recordation of a lien interest generally would be a violation of the automatic stay. 5 However, § 362(b)

(3) provides an exception for acts of perfection which are authorized under § 546(b) or § 547(e)(2)(A). 6 If such an exception were not included, the post-petition perfection permitted by § 547(e)(2) and § 546(b) would be nullified. H.R. Rep. No. 595, 95th Cong., 1st Sess. 343 (1977); S. Rep. No. 989, 95th Cong., 2d Sess. 51-52 (1978). As previously discussed, § 546(b) and § 547(e)(2) are discrete rules which must be read in the context of the purposes which they serve. Since neither section may be used in this instance to override the effect of § 544(a)(3), the exception to the automatic stay which depends on the successful application of those sections has no relevance here. See In re Italiano, 66 Bankr. 468, 479-80 (Bankr. D.N.J. 1986) (§ 362(b)(3) inapplicable to post-petition actions concerning improperly levied judgment lien where levy could not be cured under [**12]  any applicable state law); In re Alberto, 823 F.2d 712, 722-23 (3rd Cir. 1987) (act of recording ship mortgage did not qualify for § 546(b) exclusion and therefore § 362(b) (3) inapplicable).

FOOTNOTES

5 The court makes no finding as to whether the Levinsons' post-petition recordation was a violation of § 362(a)(4), or § 549 as these issues are not presently before the court.

6 Section 362(b)(3) provides in pertinent part: "(b) The filing of a petition under section 301, 302, or 303 of this title . . . does not operate as a stay-- . . . (3) under subsection (a) of this section, of any act to perfect an interest in property to the extent (3) that the trustee's rights and powers are subject to such perfection under section 546(b) of this title, or to the extent that such act is accomplished within the period provided under section 547(e)(2)(A) of this title . . . . "

CONCLUSION

Based on the above analysis, the court cannot find that the proposed compromise is fair and equitable to the unsecured creditors [**13]  of the reorganized debtor as their claims may not be paid in full under the debtor's Plan of Reorganization. Without compromise of the present  [*99]  lien dispute, and at little cost to the estate, the reorganized debtor will be able to bring $ 35,000 in proceeds from the prior sale of the property as additional funds available for unsecured creditors. Although the interplay between §§ 544, 546, 547 and 362 may not be easily applied, the issue of the validity of the present lien is nonetheless a limited question of law with little necessity for expense and protracted litigation given the potential return to the estate. 7

FOOTNOTES

7 In reaching its conclusion, the court is mindful that in general the bankruptcy judge's responsibility is not to decide the numerous questions of law and fact raised by a motion to compromise, but rather to determine whether the compromise falls below the threshold of reasonableness. In re Heissinger Resources, Ltd., 67 Bankr. 378, 383 (C.D. Ill. 1986); In re W.T. Grant Co., 699 F.2d 599, 608 (2nd Cir. 1983). However, approval of a compromise of claim is inappropriate when the claim is invalid as a matter of law. In re Walsh Construction, Inc., 669 F.2d 1325, 1328 (9th Cir. 1982). Had the question of law here been a complex matter open to interpretation or subject to differing court decisions, the success of the litigation, as in the usual instance, would have been in doubt and resolution of the disputed law

unnecessary and arguably improper. The underlying dispute in the present compromise, by contrast, involved a single, uncomplicated issue of law, the outcome of which is a certainty. Under such circumstances, the court's assessment of the compromise necessarily included a review of controlling law with respect to the lien's validity.

 [**14]  Accordingly, PPS's Motion for Approval of Compromise is denied and the debtor is directed to initiate an action within thirty days to recover the sale proceeds at issue.

344 B.R. 114, *; 2006 Bankr. LEXIS 1047, **; 46 Bankr. Ct. Dec. 185

In re A Partners, LLC, Debtor. Scripps GSB I, LLC, Movant, V. A Partners, LLC, Respondent.

Case No. 06-10069-B-11, DC No. BMJ-2

UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF CALIFORNIA, FRESNO DIVISION

344 B.R. 114; 2006 Bankr. LEXIS 1047; 46 Bankr. Ct. Dec. 185

June 5, 2006, Decided

CASE SUMMARYPROCEDURAL POSTURE: Creditor, the holder of the first priority trust deed against a commercial building, sought relief from the automatic stay pursuant to 11 U.S.C.S. § 362(d) so it could proceed with its non-judicial foreclosure. Debtor did not have any ownership interest in the building but was the fifth lien holder on the building.

OVERVIEW: Debtor, a California limited liability company, was a junior lienholder on the commercial building, which was owned by a related, but different party. All of the liens senior to debtor's were in default, and the building's income was insufficient to service the creditor's loan. The creditor was ready to publish a notice of sale pursuant to Cal. Civ. Code § 2924f(b) and complete the foreclosure process. It moved for relief from the automatic stay in debtor's case for the purpose of completing a foreclosure of its trust deed. The court concluded that cause existed to grant the motion for relief from the automatic stay and concluded that debtor's junior lien had no economic value to debtor and was not necessary to an effective reorganization of debtor. Debtor had little cash and had no ability to protect its junior lien or exercise the rights of a junior lienholder under California law. The creditor also asked the court to waive the provisions of Fed. R. Bankr. P. 4001(a)(3), which otherwise automatically stayed the effect of the ruling for 10 days. The court found such relief would not harm debtor, which already had a 20-day window to appeal.

OUTCOME: Creditor's motion for relief from the automatic stay was granted. Because the foreclosure sale could not take place for at least 20 days after the ruling was entered, the court waived the automatic 10-day stay period as well.

CORE TERMS: parking, foreclosure, automatic stay, default, senior lien, collateral, rent, bankruptcy estate, reorganization, trust deed, real property, receivership, junior lienholder, senior debt, economic value, foreclose, foreclosure sale, junior lien, bankruptcy case, senior lienholders, secured debt, security interest, non-judicial, commencement, acquire, holder, secured claim, right to collect, notice of sale, grant relief

LEXISNEXIS® HEADNOTES Hide

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > Cause 

HN1 See 11 U.S.C.S. § 362(d). Shepardize: Restrict By Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays >

Procedures 

HN2 Pursuant to 11 U.S.C.S. § 362(g), a creditor has the burden of proof on the issue of whether a debtor has equity in a property. The debtor has the burden of proof on all other issues concerning the automatic stay. Although the debtor has the ultimate burden of proof on the issue of showing cause for relief from the stay, the creditor must produce some evidence in the first instance to support the cause allegation.  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Estate Property > General Overview 

HN3 A bankruptcy estate is comprised of all legal and equitable interests of the debtor in property, wherever located and by whomever held, at the commencement of the case. 11 U.S.C.S. § 541(a)(1). The nature and extent of the debtor's interest in property are determined by State law. Once that determination is made, federal bankruptcy law determines if the debtor's interest in property is property of the estate.  More Like This Headnote

Bankruptcy Law > Estate Property > Content 

HN4 All of the rights which the debtor holds as a lien against real property are property of the bankruptcy estate under 11 U.S.C.S. § 541. However, the debtor's property rights come into the estate subject to the conditions, restrictions, and limitations that attached to those property rights under state law prior to commencement of the bankruptcy.  More Like This Headnote

Bankruptcy Law > Estate Property > Content 

HN5 To the extent that an interest in property is limited in the hands of the debtor prior to commencement of the case, it is equally limited as property of the estate. A debtor-in-possession can assert no greater property rights than the debtor had on the date the case was commenced.  More Like This Headnote

Real Property Law > Financing > Mortgages & Other Security Instruments > General Overview 

HN6 Under California law, the rights of a holder of a mortgage or trust deed against real property are defined by statute. They include the right to collect rents on default, the right to foreclose on default, the right to receive notice of the default in a senior lien, the right to purchase the property at a foreclosure sale, and the right to take title to the property in lieu of foreclosure with the consent of the owner. Cal. Civ. Code §§ 2924b through 2924k, 2927.  More Like This Headnote

Real Property Law > Financing > Mortgages & Other Security Instruments > Redemption > Statutory

Redemption 

HN7 When a senior lien against real property is in foreclosure, the holder of a junior lien has the right to reinstate the senior debt, that is, to cure any default in the senior debt up to five days prior to foreclosure by paying the senior lienholder all amounts due at the time of tender, plus the reasonable costs and expenses incurred in enforcing the senior obligation. Cal. Civ. Code § 2924c(a)(1), (c). A junior lienholder also has a right to redeem the property from a senior lien and to be subrogated to the benefits of the senior lien by paying the full amount owed to the senior lienholder. Cal. Civ. Code §§ 2904-2905.  More Like This Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Coverage > Liens 

Real Property Law > Financing > Mortgages & Other Security Instruments > Redemption > Statutory

Redemption 

HN8 Any act which cuts off the rights of a debtor that is a junior lienholder in bankruptcy, such as the pre-foreclosure rights of reinstatement and redemption, is a violation of the automatic stay.  More Like This Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Coverage > Liens 

HN9 Many of the rights and powers which inure to the benefit of a landowner in bankruptcy are not available to a lienholder in bankruptcy. A debtor-in-possession of real property in Chapter 11 has the benefit of the automatic stay to protect its property from the creditors under 11 U.S.C.S. § 362(a). The debtor-in-possession has the right to obtain credit, that is, to borrow money secured by a lien against the real property that is senior to, or equal to, the existing liens, subject to a showing of adequate protection for the existing debt. 11 U.S.C.S. § 364(c)(3). The debtor-in-possession has the right to sell all or substantially all of the property to pay claims, 11 U.S.C.S. § 1123(b)(4), and the ability to modify the rights of the secured creditors in a Chapter 11 plan. 11 U.S.C.S. § 1123(b)(5).  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Coverage > Liens 

HN10 Where a creditor's collateral consists of a contract right, the value of the collateral is a function of the creditor's ability to exercise that right.  More Like This Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Coverage > Exceptions >

Perfection of Property Interests 

Bankruptcy Law > Claims > Types > Secured Claims & Liens > Secured Creditors Rights 

HN11 There is a distinction between having a security interest in property and having a "secured claim" against the property owner.  More Like This Headnote

Bankruptcy Law > Reorganizations > Debtors in Possession > Powers & Rights 

Real Property Law > Financing > Mortgages & Other Security Instruments > Redemption > Statutory

Redemption 

HN12 The holder of a junior lien against real property cannot restructure the senior liens against the same property through a Chapter 11 plan, even if the plan provides for the debtor to first acquire the underlying property.  More Like This Headnote

Bankruptcy Law > Reorganizations > Plans > Impairment 

HN13 Under 11 U.S.C.S. § 1124(1), a secured claim is impaired under a Chapter 11 plan if the plan alters the legal, equitable, and contractual rights of the holder of the claim.  More Like This Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > Equity 

HN14 Where a Chapter 11 debtor has no equity in property within the meaning of 11 U.S.C.S. § 362(d)(2)(A), the debtor must establish that the property is necessary to an effective reorganization. 11 U.S.C.S. § 362(d)(2)(B). What that requires is not merely a showing that if there is conceivably to be an effective reorganization, this property will be needed for it, but that the property is essential for an effective organization that is in prospect. That means that there must be a reasonable possibility of a successful organization within a reasonable time. A debtor's burden to make that showing increases as the exclusivity period expires.  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Reorganizations > Plans > Confirmation > General Overview 

HN15 A Chapter 11 plan cannot be based upon a visionary scheme. 11 U.S.C.S. § 1129(a)(11).  More Like This Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > Cause 

HN16 The language of 11 U.S.C.S. § 362(d)(1) is clear and unambiguous: the court shall grant relief for "cause." The term "shall" is ordinarily the language of command. The term "cause," as it is used in § 362(d)(1), is not defined in the Bankruptcy Code.  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > Cause 

HN17 The term "cause" as used in 11 U.S.C.S. § 362(d)(1) is a broad and flexible concept which permits a bankruptcy court, as a court of equity, to respond to inherently fact-sensitive situations.  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > Cause 

HN18 Factors to consider in determining whether the automatic stay should be modified for cause include (1) an interference with the bankruptcy; (2) good or bad faith of the debtor; (3) injury to the debtor and other creditors if the stay is modified; (4) injury to the movant if the stay is not modified; and (5) the relative portionality of the harms from modifying or continuing the stay.  More Like This Headnote | Shepardize: Restrict By Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays >

Procedures 

HN19 Fed. R. Bankr. P. 4001(a)(3) provides that an order granting a motion for relief from an automatic stay is stayed until the expiration of 10 days after the order is entered, unless the court orders otherwise.  More Like This Headnote

Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays >

Procedures 

HN20 Fed. R. Bankr. P. 4001(a)(3) enables a debtor, or other party who opposes relief from stay, to seek a stay pending appeal of an adverse ruling. Without a stay pending appeal, appeals from such orders can often become moot if the party granted relief proceeds with a sale or some other action that cannot be easily undone.  More Like This Headnote | Shepardize: Restrict By Headnote

COUNSEL:  [**1]  For A Partners LLC, Debtor, Estela O. Pino, Sacramento, CA.

JUDGES: W. Richard Lee, United States Bankruptcy Judge.

OPINION BY: W. Richard Lee

OPINION

 [*117] MEMORANDUM DECISION REGARDING MOTION FOR RELIEF FROM THE AUTOMATIC STAY

Before the court is a motion for relief from the automatic stay. Scripps GSB I, LLC ("Scripps GSB"), wants to complete a non-judicial foreclosure of its first priority trust deed against a commercial building known as the Guarantee Savings Building and an adjacent parking structure (hereinafter, the "Guarantee Buildings" or the "Properties"). The debtor, A Partners, LLC, is a California limited liability company ("Debtor"). The Guarantee Buildings are not owned by the Debtor, they are owned by a related limited liability company known as AB Parking Facilities, LLC ("AB Parking"). The Debtor holds a note from AB Parking (the "AB Parking Note") secured by a deed of trust against the Guarantee Buildings (the "Debtor's Lien"). The Debtor's Lien is fifth in order of priority behind four other deeds of trust held by Scripps GSB, a related entity, Scripps Investments and Loans, Inc. ("Scripps Investments"), and others. 1 The Debtor opposes Scripps GSB's motion. However, the Debtor [**2]  has little cash and it cannot exercise the rights of a junior lienholder under California law to protect its security interest in the Guarantee Buildings. For the reasons set forth below, Scripps GBS's motion for relief from the automatic stay will be granted. Scripps GSB also asks the court to waive the provisions of Fed.R.Bankr.P. 4001(a)(3), which automatically stays the effect of this ruling for 10 days unless the Rule is waived. Because Scripps GSB's foreclosure sale cannot take place for at least 20 days after this ruling is entered, that request will be granted as well.

FOOTNOTES

1 Scripps Investments is the manager of Scripps GSB. The court notes that both entities are represented in this proceeding by the same law firm.

This Memorandum Decision contains the court's findings of fact and conclusions of law as required by Fed.R.Bankr.P. 7052. The bankruptcy court has jurisdiction pursuant to 28 U.S.C. § 1334 and 11 U.S.C. § 362 [**3]  . This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(G).

FACTS AND PROCEDURAL BACKGROUND

The Foreclosure and Receivership Litigation.

Scripps GSB is the successor-in-interest to CapitalSource Finance, LLC,   which initiated both a non-judicial foreclosure against the Guarantee Buildings, and a judicial receivership/foreclosure action against the Properties and AB Parking in the Superior Court of California for the County of Fresno (the "Receivership Action"). Scripps GSB was not scheduled as a creditor of the Debtor and it has not filed a proof of claim in this bankruptcy case. The Debtor was not named as a defendant in the Receivership Action, even though it holds a junior lien against the Guarantee Buildings. 2 Scripps GSB's non-judicial foreclosure commenced in August  [*118]  2005, prior to this bankruptcy, and the initial three-month "notice of default" period prescribed in Cal.Civ.Code § 2924 has now expired. Scripps GSB is ready to publish a notice of sale pursuant to Cal.Civ.Code § 2924f(b) and proceed with its foreclosure.

FOOTNOTES

2 There is a dispute in the State court over whether the Receivership Action is stayed

by the filings of this bankruptcy, the chapter 11 bankruptcy of Mauldin-Dorfmeier Construction, Inc. ("Mauldin-Dorfmeier" -- case number 05-11402 filed on February 28, 2005), and the bankruptcy of Charles W. Briggs ("Briggs"-case number 05-62659 filed on October 28, 2005). Mauldin-Dorfmeier was the holder of the fourth priority lien against the Guarantee Buildings. Briggs is a co-owner of AB Parking, a guarantor of the debt to Scripps Investments and Scripps GSB, and a named defendant in the Receivership Action. The question of whether the Receivership Action is proceeding in violation of the automatic stay has not been presented to this court for resolution.

Mauldin-Dorfmeier is seeking approval of a compromise agreement with Scripps GSB and Scripps Investments to retroactively nullify the automatic stay in its bankruptcy case, validate the actions of CapitalSource Finance, LLC,   and permit Scripps GSB to foreclose against Mauldin-Dorfmeier's lien. That motion was opposed by Allison, Briggs, AB Parking, and the Debtor, and is currently under submission.

 [**4]  The Guarantee Buildings and the Secured Debt.

AB Parking is deeply in debt and the Guarantee Buildings are heavily encumbered. Scripps GSB offered into evidence an appraisal that values the Guarantee Buildings at approximately $ 22 million, which is far less than the secured debt against the Properties. The Debtor contends, through the declaration of its manager, Ronald Allison ("Allison"), that an unnamed, but qualified, entity has given AB Parking a bona fide letter of intent to purchase the Guarantee Buildings for $ 70 million, a price which exceeds the secured debt. 3

FOOTNOTES

3 Allison and his wife own or control 100% of the membership interest in the Debtor. Allison was at one time also a co-owner and manager of AB Parking. There is a pending dispute between Allison and Scripps Investments over a pre-petition foreclosure against Allison's membership interest in AB Parking. Scripps Investments contends that it now controls 50% of AB Parking. The Debtor contends that the Scripps entities and the Receiver have refused to cooperate with AB Parking's efforts to market the Guarantee Buildings. For that reason, Allison declined to identify the prospective purchaser.

 [**5]  The first three deeds of trust against the Guarantee Buildings secure promissory notes held by Scripps GSB and Scripps Investments (collectively, the "Scripps Notes"). The Scripps Notes are fully matured and bear interest at their respective default rates which range from 14% to 24% per annum. The aggregate original principal balance on all of the Scripps Notes totals $ 37 million. The aggregate monthly interest accrual on the Scripps Notes exceeds $ 548,000. 4 The original principal balance of Scripps GSB's note, secured by the first priority lien, is $ 23 million and the monthly interest accrual exceeds $ 268,000.

FOOTNOTES

4 The Scripps Notes provide for the compounding of interest such that accrued interest becomes part of the principal balance. Scripps GSB contends that the balance now due on the Scripps Notes actually exceeds $ 48 million. The Debtor disputes the calculation of accrued interest. However, there is no dispute as to the

monthly interest accruing on the face of the Scripps Notes and that number alone is sufficient to support the court's ruling.

 [**6]  The fourth priority lien is held by St. Paul Fire and Marine Insurance Company, successor-in-interest to Mauldin-Dorfmeier (the "MDC Lien") through Mauldin-Dorfmeier's chapter 11 plan of reorganization. See footnote 2. The original principal balance on the obligation secured by the MDC Lien is $ 630,000. The record is unclear as to the interest rate, the accrued interest, and the balance due on the Mauldin-Dorfmeier obligation.

The Helm Building.

The Debtor owns another commercial building known as the Helm Building,  [*119]  which the Debtor values on its schedules at $ 15 million. The Helm Building is undergoing a major renovation and is largely unrentable. The record is silent regarding the status of, and source of funds for, the renovation project. The Helm Building currently has six retail tenants who pay a small irregular amount of rent to the Debtor. 5 All rent is cash collateral for the senior lien held by Scripps Investments, which has not consented to its use.

FOOTNOTES

5 According to the Debtor's bankruptcy schedules, the Debtor collected rent from the Helm Building in the amount of $ 116,545.57 for the entire 2005 fiscal year. The Debtor's monthly operating reports disclose that the Debtor has collected rents from the Helm Building for the months of February, March, and April 2006, in the amounts of $ 9,484.91, $ 5,666.67, and $ 5,511.03 respectively.

 [**7]  The Debtor's schedules report that at the commencement of this bankruptcy case, the Debtor had cash bank deposits totaling $ 145.95. On March 13, 2006, this court authorized the Debtor to borrow $ 40,000 from Allison on an unsecured basis (the "Motion to Borrow"). The Debtor needed the money to fund the Debtor's operating expenses, including insurance, employee salaries, and utilities for the Helm Building. There was no money in the proposed budget for any payments to secured creditors. Allison was personally funding the operations of the Debtor prior to the bankruptcy. The Debtor's bankruptcy schedules list Allison as an unsecured creditor with an estimated claim in excess of $ 400,000.

The Helm Building is collateral for three secured obligations, all of which are in default. The senior obligation, in excess of $ 1.2 million, is owed to Scripps Investments. Scripps Investments contends that the Helm Building is only worth about $ 1 million and it has a motion for relief from stay pending in this court to complete the non-judicial foreclosure of its first priority lien. The second trust deed secures a group of obligations owed to Mauldin-Dorfmeier. Mauldin-Dorfmeier has filed a [**8]  proof of secured claim in this case in excess of $ 1.8 million. The third trust deed secures the Debtor's commercial guarantee of AB Parking's obligation to Scripps Investments, the debt which is also secured by the third trust deed against the Guarantee Buildings. That obligation has a principal balance in excess of $ 3 million. In support of the Motion to Borrow, Allison represented that the Debtor is actively seeking a lender to refinance all of the debt against the Helm Building.

The Effect of a Foreclosure.

The Guarantee Buildings are not properties of any bankruptcy estate and are not protected by an automatic stay. The only reason Scripps GSB needs relief from stay in this bankruptcy is the fact the AB Parking Note, the Debtor's Lien, and the attendant rights and remedies of a junior lienholder, are property of this bankruptcy estate. According to the Debtor's bankruptcy schedules, AB Parking owes the Debtor more than $ 4.5 million on the AB Parking Note and that obligation is fully matured. However, the Debtor's Lien will be extinguished if Scripps GSB forecloses, relegating the Debtor to the status of an unsecured creditor of AB Parking. There is no evidence [**9]  to suggest that AB Parking has any assets other than the Guarantee Buildings, or any way to repay its debts if the Guarantee Buildings are lost through foreclosure.

A foreclosure by Scripps GSB will also extinguish Scripps Investments' third trust deed against the Guarantee Buildings, thereby forcing the Debtor to honor the $ 3 million guarantee to Scripps Investments, which is secured by the Helm Building. Again, there is no evidence to suggest that  [*120]  the Debtor will have any recourse against AB Parking for indemnity or repayment of this obligation after a foreclosure.

The electrical energy, heating and cooling for the Guarantee Buildings are provided through a system of fuel cells located on the site and operated (prior to the Receivership Action) by the Debtor. The Debtor's schedule of assets lists an "account receivable" from AB Parking for "electricity supply [sic] to the Guarantee Buildings" in excess of $ 718,500. There is a major dispute between the Debtor, the Receiver, and the supplier of the fuel cells over ownership of the electrical equipment, the obligation to maintain the equipment, and the Debtor's right to collect the utility fees. It is not clear how or when this [**10]  dispute will be resolved, or whether it can be resolved without protracted litigation. Neither is it clear what will happen to the fuel cells and the "account receivable" if Scripps GSB forecloses and AB Parking loses title to the Guarantee Buildings. More crucial to this bankruptcy, there is no evidence to suggest that AB Parking will have the ability to pay the "account receivable," even if the Debtor prevails in that dispute.

The Debtor's Opposition.

The Debtor contends, inter alia, that the value of the Guarantee Buildings greatly exceeds all of the liens and that a sale of the Properties is necessary to the Debtor's reorganization. Based thereon, the Debtor proposes two scenarios in opposition to this motion for relief from stay. The Debtor asks that all foreclosure activity be suspended indefinitely until AB Parking can sell the Guarantee Buildings in an "orderly fashion" for $ 65 million to $ 70 million. Alternatively, the Debtor proposes to conduct its own foreclosure against the Guarantee Buildings and to liquidate the Properties on its own. The Debtor has not made either of these proposals formally in a chapter 11 plan. 6

FOOTNOTES

6 The Debtor filed a chapter 11 plan and disclosure statement after oral argument on this motion. The proposed plan provides for payment of the debt against the Helm Building from "business revenue" which will include rent from the renovated Helm Building and cash flow from the fuel-cell operation. With regard to the Guarantee Buildings, the proposed plan does not provide for any payments to senior lienholders to protect the Debtor's Lien. The proposed plan contemplates that AB Parking can

still sell the Guarantee Buildings to pay all of the secured debts, including the AB Parking Note without the need for a foreclosure by the Debtor. However, it does state without specifics that the Debtor will "attempt to collect" the AB Parking Note. It also purports to permanently enjoin any foreclosure against the Debtor's Lien.

 [**11] APPLICABLE LAW

Scripps GSB moves for relief under § 362(d) 7 which provides: HN1 On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay --

(1) for cause, including the lack of adequate protection of an interest in property of such party in interest;

(2) with respect to a stay of an act against property under subsection (a) of this section, if -- (A) the debtor does not have an equity in such property; and

 [*121]  (B) such property is not necessary to an effective reorganization.

FOOTNOTES

7 Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330, and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9036, as enacted an promulgated prior to the effective date of The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, Apr. 20, 2005, 119 Stat. 23.

 [**12]  HN2 Pursuant to § 362(g), Scripps GSB has the burden of proof on the issue of the Debtor's equity. The Debtor has the burden of proof on all other issues. Although the Debtor has the ultimate burden of proof on the "cause" issue, Scripps GSB must produce some evidence in the first instance to support the "cause" allegation. Tirey Distributing Company v. Sloan (In re Tirey Distributing Co.) , 242 B.R. 717, 723 (Bankr. E.D. Okla. 1999) (quoting In re Tursi , 9 B.R. 450, 453 (Bankr.E.D.Pa. 1981)).

Scripps GSB moves for relief under both subsections 362(d)(1) and (d)(2). In opposition, the Debtor lodged with the court a Statement of Disputed Facts for which it requested an evidentiary hearing. However, virtually all of the factual disputes are tied to questions regarding the fair market value of the Guarantee Buildings (the "FMV"), cash flow from the Properties, and the amount of the senior debt. 8 The Debtor requested an opportunity to conduct discovery and to depose, inter alia, Scripps GSB's appraiser. However, the Debtor does not own the Guarantee Buildings and they are not property of this bankruptcy estate. The Debtor makes no showing how an adjudication [**13]  of the disputed facts might affect its ability to protect the Debtor's Lien and exercise the rights it holds as a junior lienholder. The material facts which support this ruling are already in the record, they appear to be uncontroverted, and an evidentiary hearing is not necessary.

FOOTNOTES

8 The Debtor offered evidence that the Receiver had collected rent and paid over to Scripps GSB at least $ 268,000 since commencement of the Receivership Action. In response, Scripps GSB acknowledged receipt of $ 348.000 from the Receiver. However, the rent revenue appears to be substantially less than the accruing monthly interest on the senior debt.

ANALYSIS AND CONCLUSIONS OF LAW

The Debtor's Junior Lien Has No Economic Value to the Bankruptcy Estate.

Debtor argues that the Debtor's Lien has "equity" within the meaning of § 362(d)(2)(A) because the Guarantee Buildings have an FMV greatly in excess of the senior liens. The concept of "equity" in property is based on the premise that the property itself [**14]  has some economic value to its owner. "Equity" is defined as "[t]he amount by which the value of or an interest in property exceeds secured claims or liens; the difference between the value of the property and all encumbrances upon it." BLACK'S LAW DICTIONARY 580 (8th ed. 2004). The property at issue here is a fifth priority security interest in the Guarantee Buildings, not the Guarantee Buildings themselves.

The Debtor asks this court to assign an economic value to the Debtor's Lien based on (1) the AB Parking Note, which is in default, and (2) the purported "equity" in the Guarantee Buildings, which Debtor argues, would make the AB Parking Note a fully secured asset of this bankruptcy estate. The Debtor contends that the Debtor's Lien should be valued in essentially the same way that the court would calculate the value of AB Parking's interest in the Guarantee Buildings; i.e., FMV less the amount owed on the non-avoidable senior liens. However, the Debtor's interest in the Guarantee Buildings is materially different from that of the fee holder. The Debtor cites no authority for the proposition that a security interest in real property should be valued, in the face of a senior [**15]  lienholder's foreclosure, based solely on a [*122]  mathematical calculation of the equity in the underlying collateral.

This discussion begins with an analysis of the Debtor's Lien and the property rights, the proverbial "bundle of sticks," which attach to it. The commencement of this bankruptcy case created an "estate." § 541(a). HN3 The estate is comprised of all legal and equitable interests of the debtor in property, wherever located and by whomever held, at the commencement of the case. § 541(a)(1). The nature and extent of the debtor's interest in property are determined by State law. First Federal Bank of California v. Cogar (In re Cogar) , 210 B.R. 803, 809 (9th Cir. BAP 1997) (citing In re Farmers Markets, Inc. , 792 F.2d 1400, 1402 (9th Cir. 1986)) . Once that determination is made, federal bankruptcy law determines if the debtor's interest in property is property of the estate. In re Cogar , 210 BR. at 809 (citing In re King , 961 F.2d 1423, 1426 (9th Cir. 1992) ; § 541(a)).

HN4 All of the rights which the debtor holds as a lien against real property are property of the bankruptcy estate under § 541. In re Capital Mtg. & Loan, Inc. , 35 B.R. 967, 971 (Bankr. E.D. Cal. 1983). [**16]  However, the debtor's property rights come into the estate subject to the conditions, restrictions and limitations that attached to those property rights under State law prior to commencement of the bankruptcy. 5 Collier on Bankruptcy , (15th Ed. Revised), P 541.04 , pg. 541-12, 13. HN5

To the extent that an interest in property is limited in the hands of the debtor prior to commencement of the case, it is equally limited as property of the estate. The debtor-in-possession can assert no greater property rights than the debtor

had on the date the case was commenced. Id.; see also Keller v. Keller (In re Keller) , 185 B.R. 796, 800-801 (9th Cir. BAP 1995) (property rights which the debtor holds subject to reserved jurisdiction of the State Family Court remain subject to modification by the State court even after the debtor files bankruptcy).

HN6 Under California law, the rights of a holder of a mortgage or trust deed against real property are defined by statute. They include the right to collect rents on default, the right to foreclose on default, the right to receive notice of the default in a senior lien, the right to purchase the property [**17]  at a foreclosure sale, and the right to take title to the property in lieu of foreclosure with the consent of the owner. Cal.Civ.Code §§ 2924b through 2924k, 2927; see also In re Cogar , 210 B.R. at 809 .

The rights most pertinent to this analysis are the statutory rights of reinstatement and redemption. HN7 When a senior lien against real property is in foreclosure, the holder of a junior lien has the right to reinstate the senior debt, i.e., to cure any default in the senior debt up to five days prior to foreclosure by paying the senior lienholder all amounts due at the time of tender, plus the reasonable costs and expenses incurred in enforcing the senior obligation. Cal.Civ.Code § 2924c(a)(1) & (c). The junior lienholder also has a right to redeem the property from a senior lien and to be subrogated to the benefits of the senior lien by paying the full amount owed to the senior lienholder. Cal.Civ.Code §§ 2904-2905. HN8 Any act which cuts off the rights of a junior lienholder in bankruptcy, such as the pre-foreclosure rights of reinstatement and redemption, is a violation of the automatic stay. [**18]  See Harsh Investment Corp. v. Bialac (In re Bialac) , 712 F.2d 426, 432 (9th Cir. 1983) .

For the purpose of evaluating the Debtor's Lien in this bankruptcy, it is also necessary to consider what the Debtor's interest in the Guarantee Buildings does [*123]  not include. HN9 Many of the rights and powers which inure to the benefit of a landowner in bankruptcy are not available to a lienholder in bankruptcy. For example, the debtor-in-possession of real property in chapter 11 has the benefit of the automatic stay to protect its property from the creditors under § 362(a). The debtor-in-possession has the right to obtain credit, i.e., to borrow money secured by a lien against the real property that is senior to, or equal to, the existing liens, subject to a showing of adequate protection for the existing debt. § 364(c)(3). The debtor-in-possession has the right to sell all or substantially all of the property to pay claims (§ 1123(b)(4)) and the ability to modify the rights of the secured creditors in a chapter 11 plan. § 1123(b)(5).

In contrast, the Debtor here is not in possession of the Guarantee Buildings. The Debtor's Lien does not extend the automatic stay to the Guarantee [**19]  Buildings. It protects only the Debtor's security interest in the Properties. The Debtor's Lien does not give the Debtor the ability to sell the Guarantee Buildings, or even to borrow money against the Properties. Neither does the Debtor have the right to restructure any of the senior debt against the Guarantee Buildings through a chapter 11 plan. In re Cogar , 210 B.R. at 812 (the senior lienholder does not have a claim against the estate of the junior lienholder that could be modified through the junior lienholder's chapter 11 plan, even if the plan provides for transfer of the underlying real property to the debtor).

The Debtor's right to collect the rents from the Guarantee Buildings has no economic value here because it is subordinate to each senior lienholder's right to collect the same rents; indeed, it appears that those rents are already being collected in the Receivership Action. The Debtor's right to foreclose on default is conditioned on the Debtor's ability to complete that foreclosure before the Debtor's Lien is extinguished by the foreclosure of a senior lien. Again, that right has no

economic value here because Scripps GSB has already started and substantially [**20]  completed the non-judicial foreclosure process; the Debtor has not.

The Debtor has the right either to cure the default in the obligation to Scripps GSB, or to redeem the Guarantee Buildings and become subrogated to the rights of Scripps GSB. However, Scripps GSB's note is fully matured, so there is no curable "default." Therefore, the economic value of the Debtor's Lien in this case is tied to the Debtor's ability to redeem the Properties, i.e., to pay the full balance due to Scripps GSB in cash. It is undisputed that the Debtor has no resources with which to exercise that right. The debt to Scripps GSB already exceeds $ 23 million and it increases each month, based on the interest accrual alone, by more than $ 268,000.

The Debtor's Lien is an interest in real property, but it is also a contract right, and the Debtor stands in the shoes of a creditor of AB Parking. HN10 When a creditor's collateral consists of a contract right, the value of the collateral is a function of the creditor's ability to exercise that right. In re Emarco, Inc. , 45 B.R. 627, 629 (Bankr. M.D. Penn. 1985).

In Emarco, the debtor ("Emarco"), received a purchase order to install an elevator [**21]  for a third party. Emarco assigned the purchase order to its bank to secure a loan; it was the bank's only collateral for the loan. However, because of a work stoppage caused by a strike, Emarco was unable to perform the contract. Emarco was forced to abandon the elevator contract in its chapter 11 bankruptcy and the project was ultimately completed by another contractor. The bankruptcy court ruled  [*124]  that the value of Emarco's interest in the contract was zero. Consequently, the bank was determined to be an unsecured creditor because it was "not able in any way to look to the collateral assigned to it for repayment of its debt." Id.

Here, the Debtor stands in essentially the same position as the bank in Emarco. It holds a contractual security interest which is subordinate to significant senior liens. The value of that interest is a function of the Debtor's ability to exercise its rights as a junior lienholder. The Debtor would have to redeem Scripps GSB's note to protect its junior lien from being extinguished in a foreclosure. That recourse is not available to the Debtor, so the Debtor's Lien has no practical value to this bankruptcy estate.

HN11 There is a distinction between [**22]  having a security interest in property and having a "secured claim" against the property owner. The AB Parking Note may be a "secured" asset on the Debtor's books, but the court is not persuaded that the Debtor is in fact a "secured creditor" of AB Parking. "By definition, 'secured claim' requires availability of collateral to secure the creditor's right to payment." In re Elliott , 64 B.R. 429, 430 (Bankr. W.D. Mo. 1986) (citing In re Emarco , 45 B.R. at 629 ) (a creditor with a lien against personal property, a diamond ring, which disappeared without the debtor's permission and cannot be found, retained its security interest, but had an unsecured claim in the debtor's chapter 13 bankruptcy). Here, the Debtor's collateral, a fifth priority lien against a seriously distressed piece of property, is literally unavailable to the Debtor for repayment of the AB Parking Note. The Debtor's Lien has little value to the Debtor, just as the missing jewelry had little value to the creditor in Elliott.

It is important to note that the courts in both Emarco and Elliott, never considered the face value of the underlying collateral, the balance due on Emarco's [**23]  construction contract, and the value of Elliot's diamond ring, respectively. The purported "value" of the collateral was immaterial to the economic value of the

creditors' liens because the collateral was unavailable to satisfy those liens. The Debtor disputes, inter alia, Scripps GSB's appraisal of the Guarantee Buildings and the interest accrual on the senior debt, but the court does not need to decide those disputed issues because the benefits of the Debtor's Lien are not available to the bankruptcy estate. The court cannot find that there is any "equity" in the Debtor's Lien within the meaning of § 362(d)(2)(A).

The Debtor's Lien is Not Necessary to an Effective Reorganization Because the Senior Secured Debt Cannot Be Restructured Through a Chapter 11 Plan.

The Debtor argues that the Debtor's Lien is necessary to an effective reorganization within the meaning of § 362(d)(2)(B) because AB Parking is trying to sell the Guarantee Buildings, which it contends, if successful, will pay the AB Parking Note and significantly reduce the debt against the Helm Building. Alternatively, the Debtor argues that it can acquire title through a foreclosure of the Debtor's Lien [**24]  and liquidate the Guarantee Buildings on its own. However, the Debtor's "game plan" requires this court to effectively impose a permanent injunction against the foreclosure of all senior liens against the Properties.

The Debtor's proposal amounts to a de facto plan of reorganization. Under the Debtor's "plan," Scripps GSB's secured debt would be materially "impaired" within the meaning of § 1124; the due date on Scripps GSB's note would be deferred indefinitely and Scripps GSB would be permanently stripped of its foreclosure [*125]  remedy under California law. 9 The Debtor is essentially trying to achieve, indirectly through its opposition to this motion, a result which it cannot achieve directly through the chapter 11 plan confirmation process. HN12 The holder of a junior lien against real property cannot restructure the senior liens against the same property through a chapter 11 plan, even if the plan provides for the debtor to first acquire the underlying property. In re Cogar , 210 B.R. at 809 .

FOOTNOTES

9 HN13 Under 11 U.S.C. § 1124(1), a secured claim is impaired under a chapter 11 plan if the plan alters the legal, equitable and contractual rights of the holder of the claim.

 [**25]  In Cogar, the bankruptcy estate held a third trust deed against an apartment building. The debt to First Federal Bank secured by the first trust deed was in foreclosure. In an effort to save some value from the third trust deed for the bankruptcy estate, the chapter 11 trustee tried to confirm a plan under which the estate would acquire the real property from its owner by a deed in lieu of foreclosure, the note secured by the first trust deed would be restructured, and the property would then be transferred back to the original owner, subject to the restructured debt. The bankruptcy court confirmed the plan; the Bankruptcy Appellate Panel reversed. After analyzing the nature of the senior lien and the debtor's interest in the apartment building, the court held: In summary, First Federal did not hold a claim against the bankruptcy estate which was subject to treatment in the Chapter 11 plan. The real property was not property of the estate, as opposed to the estate's lien interest in the property.