I Was Never Served With The Lawsuit

By Ryan C. Wood

Yeah, I know you were not served with the lawsuit.  That does not mean a judgment, that is, a default judgment, was not entered against you accruing judgment interest at 10% (California Law).  You were sued and the process service company committed a fraud and filed a proof of service under penalty of perjury saying you were somehow personally served with the summons and complaint.  You are now finding out about the lawsuit because your employer received a wage garnishment notice or your bank account was levied on.  I know this is the first you are hearing of this lawsuit.  The lawsuit was probably filed over five years ago and has now grown to a substantial amount of money given the 10% judgment interest and addition of attorneys’ fees and expenses.  Bankruptcy lawyers hear about this over and over again unfortunately.  So what happened?

Service of a Lawsuit

When a lawsuit is filed against you the summons and complaint with other documents are supposed to be personally served on you.  That means the summons and complaint were handed to you, thus personal service.  If the summons and complaint cannot be handed to you for whatever reason there is also personal service by substitute service.  Generally a competent member of your household, someone that lives with you, your domicile, someone 18 years of age or older can be served personally instead of you with the summons and complaint.  Then the summons and complaint has to be mailed to you at that address.  You can be served at your place of employment if the summons and complaint are left with your boss or someone in charge.  There are issues with personal service by substitute service at your place of employment though given the nature of it and is less common than substitute service where you live.  You can even be served personally by publication believe it or not. 

How Come I Never Knew About This Lawsuit

You will need to obtain the proof of service of the summons and complaint filed in the case to know how the summons and complaint were allegedly served on you and when.  I am talking about primarily collection lawsuits for various debts such as credit cards.  It is not possible to hide a lawsuit between neighbors for building a fence on the wrong property and a lawsuit is filed to have the fence removed.  It is very easy to hide a lawsuit for unpaid bills and have the lawsuit move forward without your knowledge.  The goal is to obtain a default judgment and then enforce it at some point in the future.  Not move a fence, an unpaid wage claim or personal injury claim.  The reason you did not pay the debt in full or stopped making payments does not matter.  The account may have gone to a collection agency too and that is the entity suing.  The summons and complaint were filed with the court then sent to a process service company to personal serve you.  The lawsuit filer does have information about you that may or may not still be accurate.  You filled out an application for the credit card or some other type of credit account.  You may or may not still live there.  If you still live at the same address as in the application and the process service company alleges they personally served you there or served a competent member of your household at that location by substitute service it is difficult to prove whether they actually did or not.  If you lived at a different address then what is listed in the proof of service at that time there is hope.  If there is other inaccurate or impossible information like the address where you were allegedly served does not actually exist on Earth there is hope.  Yes, I have in fact dealt with a proof of service of a summons and complaint allegedly served at an address that does not exist on planet Earth and a default judgment was entered against the defendant in that case.  Not good.  The point is the proof of service will have some sort of discrepancy you know is not accurate or true.  Proving that the method of service never happened is another story and is not free.  So you never were served with the summons and complaint and now the plaintiff requested and received a default judgment against you that is enforceable.  Your bank accounts can be levied on.  Your wages can be garnished.  A judgment lien can be recorded against your home or other real property if you own any.  Not good. 

The Plaintiff or Their Attorneys Will Wait Four Years or More to Enforce the Judgment

This is part of the game plan for the fraudulent service of lawsuits on defendants.  It has been going on for years and years.  Why do they wait to enforce the default judgment?  One reason is the fraudulently obtained default judgment accrues interest at 10% per annum here in California.  So a $7,000 judgment that was not worth spending too much time trying to collect on becomes $12,000 or more and becomes much more worth spending time and money to enforce.  Second it becomes more and more difficult to prove the service of the summons and complaint is fraudulent as time passes.  Records are lost and memories fade. 

How to Make it All Go Away

Well, unfortunately filing for bankruptcy if eligible is the fastest and cheapest way to make the default judgment go away forever.  This is a broad generalization and depending upon your individual circumstances not possible.  As a bankruptcy attorney I have discussed the service of a summons and complaint over and over again with potential clients.  If you have other debts that are a problem as well again bankruptcy will tie that all up into a nice neat bow.  To fight in state court and have the default vacated attorneys’ fees and expenses can exceed $3,000 or more. 

Is A Claim Allegedly Created By A Debtor’s Bankruptcy Filing Property of The Bankruptcy Estate

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Which came first, the chicken or the egg? When a bankruptcy case is filed a bankruptcy estate is created including all claims of the bankruptcy filer at the time of the filing of the case. The timing is down to the hour, minute and second. The second the bankruptcy case is filed the automatic stay takes effect stopping any and all collection activity and draws a line in the sand as to what is part of the bankruptcy estate and what is not. The bankruptcy estate includes potential claims or causes of action that exist at the time the bankruptcy case is filed that may or may not be collectable or possible to be pursued. “Legal causes of action are included within the broad scope of § 541.” Goldstein v. Stahl (In re Goldstein), 526 B.R. 13, 21 (9th Cir. BAP 2015) (citing Sierra Switchboard Co. v. Westinghouse Elec. Corp., 789 F.2d 705, 707 (9th Cir. 1986) ). More key words are the claim has to be “sufficiently rooted in the pre-bankruptcy past.”

The issue that is the subject of this article is about whether a claim that would not exist but for what took place in the bankruptcy case a claim that is property of the bankruptcy estate? Which came first, the chicken or the egg?

Appellate Part of the Story

This particular case is a recent Ninth Circuit Bankruptcy Appellate Panel appeal from the State of Nevada involving an alleged malpractice claim against the bankruptcy attorney of the bankruptcy filers. This happened to be a Chapter 7 case and the Chapter 7 trustee assigned to the case argued the malpractice claim against the attorney for the bankruptcy filers was property of the estate given the problem arguably arose prior to the bankruptcy case being filed. The issue was the filing of an extension for a tax return that made certain taxes not dischargeable in the Chapter 7 bankruptcy case. The case was filed on October 10, 2016, and the order of discharge was signed and entered in February 21, 2017. If the chapter 7 bankruptcy case had been filed six days later the tax debt for tax year 2012 would have been dischargeable. The bankruptcy case was not closed though due to other issues. In June 2017 the Internal Revenue Service sent notice to the bankruptcy filers they still owed the IRS $257,570.46 for tax year 2012. Not good. The bankruptcy filers obtained new counsel filed their malpractice claim against their original bankruptcy attorney alleging damages including their passports being revoked due to the tax debt, one of the bankruptcy filers could not obtain employment so they alleged total damages of over $1 million. The lower bankruptcy court held the malpractice claim was not part of the bankruptcy estate and the Chapter 7 trustee appealed this ruling.

The Part of the Story That is Not Part of the Appellate Record

One of the biggest problems with tales like is context. Us business owners get bit by this all the time and probably many people in general. Someone has a gripe or complaint about a service they received but when telling others about it they leave out certain facts and the part that will make them seem unreasonable for having a problem. There are always two sides to a situation. So here is some more context as obtained in the actual bankruptcy petition filed under chapter 7 that is the subject of this appeal.

Secured Debt: The bankruptcy filers owned a house in Las Vegas, NV with secured debt totaling $883,948 and an alleged fair market value of $650,000; so the house is underwater.

Unsecured Priority Debt: These are unsecured debts that are not dischargeable. The bankruptcy filers owed a total of $106,000 to the State of Nevada for unpaid sales tax from their businesses.

General Unsecured Debt: These are unsecured debts that are dischargeable.

1. American Express: $195,919.00
2. Bank of America: $236,305.59
3. Chase: $54,197.00
4. Dino Sattalante Trust: $1,500,000.00
5. Forum Shops, LLC: $60,000.00
6. Internal Revenue Service:
—Tax Year 2011 $311,495.92
—Tax Year 2012 $243,231.67
7. James G. Naughton Trust: $55,000.00
8. Mario Herman, Esq. $40,000.00
9. MOAC Mall Holdings, LLC $196,809.20
10. RPAI South West Management $440,000.00
11. Sphere Investments, LLC $628,000.00
12. Wells Fargo Bank $19,632.00

TOTAL: $3,989,473.48 in dischargeable general unsecured debts that were ultimately discharged upon the entry of the debtors’ order of discharge on February 27, 2017, but for the 2012 taxes owed to the IRS.

Let Us Have Fun With Numbers

For some additional context let us compare debts discharged in this case with a 30 year work life for a normal American. If we divide $3,989,473 by 30 years it works out to $129,666.66 a year or more than 95% of Americans earn in a lifetime……..
The bankruptcy attorney that is subject of the malpractice claim charged the bankruptcy filers $10,000, a pretty good lick, for her services and successfully helped them discharge 85% of their debts. A realtor would have received $111,974.19 in commission for selling a house with a value of $3,732,473 …..

Please note there is no issue in this case regarding the $3,732,473 in debt discharged or the $311,495.92 owed to the IRS for tax year 2011. It is all discharged; poof, gone. So again the issue is the unpaid taxes owed to the IRS totaling $243,231.67 for tax year 2012 only.

Some Additional Context Regarding The Timing of The Filing of This Chapter 7 Not Provided in the Appeal Facts

These bankruptcy filers had a judgment entered against them by Sphere Investments, LLC, listed above totaling $680,000 prior to the case being filed and the Sphere Investments, LLC, levied on the bankruptcy filers’ Wells Fargo Bank accounts obtaining $29,069.23. I am going to speculate a little here, but it is more than plausible and makes sense. The part of the story that is not told is that the levy took place on July 12, 2016. This chapter 7 case was filed on October 6, 2017, or less than 90 days after the levy of the bankruptcy filers’ bank accounts and the seizing of the $29,069.23 by Sphere Investments, LLC. The filing of the chapter 7 bankruptcy case within 90 days of the levy made the levy a voidable preference claim/transfer pursuant to Section 547 of the Bankruptcy Code and the levied funds would have to be turned over to the chapter 7 trustee and/or possibly returned to the bankruptcy filers depending upon circumstances. I am speculating here again, but I could absolutely understand if the plan was to file the chapter 7 to prevent any further levy on bank accounts and file the case within 90 days of the levy to try and get some of the levy funds back. If anything at least the judgment creditor Sphere Investments, LLC will not get to keep the levied funds. Again, I am speculating, but the bankruptcy filers’ say great, the litigation with Sphere Investments, LLC was very bitter so let us hurry up and file the chapter 7 petition within 90 days if the levy date. No mention that an extension regarding their 2012 tax return was filed extending the time for the taxes to be dischargeable……. Again, I am speculating some here, but very plausible.

The chapter 7 trustee and judgment creditor ended up settling that each would get half of the levied funds. The point is if the chapter 7 case has been filed

Back To The Appeal And Is The Malpractice Claim Property Of The Bankruptcy Estate

The bankruptcy court held that the malpractice claim against the bankruptcy filers’ attorney was not a claim of the bankruptcy estate and the Ninth Circuit Bankruptcy Appellate Panel affirmed the bankruptcy court’s ruling. The bankruptcy filers’ alleged the attorney was negligent for not advising them about the consequences of the six month extension they filed with the IRS regarding the 2012 tax return.

The definition of what is a claim when filing for bankruptcy protection is broad on purpose and the broad definition is for a good reason. So is a claim created by the filing of the bankruptcy case recoverable by the trustee assigned to the case for the benefit of the creditors in the bankruptcy case? When did the claim arise?

The Ninth Circuit Bankruptcy Appellate Panel agreed with the lower bankruptcy court and affirmed that the malpractice claim was not part of the bankruptcy estate and arose after the case was filed. The chapter 7 trustee argued that the bankruptcy filers’ had a contingent interest in the malpractice claim at the time the case was filed that was sufficiently rooted in the bankruptcy filers’ pre-bankruptcy given the bankruptcy attorney’s legal representation began prepetition/before the case was filed. The lower bankruptcy court applied Nevada Law regarding the malpractice claim and focused on the actual damages. For there to be a claim actual damages must accrue. In this case the bankruptcy court held the actual damages did not accrue until after the bankruptcy case was filed when the original bankruptcy attorney did not seek to dismiss the chapter 7 case before discharge or after the June 2017 letter was received by the bankruptcy filers informing them the 2012 taxes were not discharged.

Ninth Circuit Bankruptcy Panel has previously held that to be sufficiently rooted in the prebankruptcy past the payment or claim must arise from some prepetition right or entitlement. In re Bender, 385 B.R. 800 (Table), 2007 WL 4896288, *4 (9th Cir. BAP 2007), appeal dismissed, 586 F.3d 1159 (9th Cir. 2009)(“[The Ninth Circuit] has limited its use of Segal to situations where a debtor received a post-petition benefit pursuant to a pre-petition right or entitlement.”); see also In re Bolton, 584 B.R. 44, 55 (Bankr. D. Idaho 2018).
In sum if the damages arise post-petition then the claim should not be part of the bankruptcy estate even though some of the facts or events that led to the post-petition damages took place before the case was filed.

Chapter 13 Bankruptcy and Escrow Payments and Projected Escrow Shortages

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Let the insanity begin. What I will be discussing today are mortgage payments that include property taxes and insurance. The property tax and insurance have been “impounded” as part of the normal monthly mortgage payment and is traditionally called an escrow account. So this type of mortgage payment includes principal, interest, property tax and insurance. Before discussing how this has become extremely frustrating when filing a Chapter 13 bankruptcy case in the Northern District of California let us look at why this situation exists to begin with.

Why Are Property Taxes and Insurance Not Paid Directly By The Borrower

Lenders need to protect their investment. Fine, so as part of that lenders need to ensure property taxes are paid timely and the home is insured. No problem. Here in California lenders cannot force an impound escrow account unless the borrower’s loan to value ratio exceeds 80 percent. I believe this is the most common reason why impound accounts exist. A house is purchased via some favorable program that allows less than a 20% down payment at the time of purchase resulting in a ratio 80% or more. So if you put 20% or more as a down payment then the mortgage company cannot force you into an escrow or impound account. A lender or loan officer could also suggest the borrower have an impound escrow account and the borrower then would voluntarily agree to it.

Also here in California servicers and lenders are required to pay 2% interest to borrowers on funds held in escrow accounts. See Cal. Civ. Code Section 2954.80.

Pursuant to the Real Estate Settlement Procedures Act (RESPA) the servicer or mortgage company must review the property taxes and insurance each year to make sure they are not holding a surplus. At the same time RESPA allows the servicer or lender to collect up to two additional months of escrow payments as a cushion or reserve to protect the servicer or lender in the event a borrower misses monthly mortgage payments. See 12 U.S.C §2609(a)(1).

This is where the problem is created.

How Can A Borrower Have A Projected Escrow Shortage If They Paid All Mortgage Payments When Filing a Chapter 13 Bankruptcy Case?

The key words here are “projected escrow shortage” at the time the chapter 13 bankruptcy case is filed by the bankruptcy attorney of the borrow. So yeah, property taxes change and so do insurance premiums, but not that much. When a borrower files for relief under chapter 13 and is current with all mortgage payments at the time of filing the petition the bankruptcy filer normally just keeps paying the servicer or mortgage company directly just like prior to the filing of the chapter 13 since there are no missed mortgage payments. If no missed payments then no problem; life goes on regarding the loan even though the chapter 13 petition is filed. The chapter 13 should have no effect on the servicer or mortgage lender or the borrower as the bankruptcy filer. The servicer or mortgage lender is a secured creditor and normally files a proof of claim in the chapter 13 bankruptcy case providing the amount of the total secured debt owed and that there are no mortgage arrears or missed payments prior to the case being filed.

Here is when there are more and more problems because of escrow or impound accounts and alleged shortages. Proof of claims are being filed for escrow shortages or projected escrow shortages even though the bankruptcy filer has paid the servicer or mortgage lender all mortgage payments as required.

If the shortage is projected the shortage does not yet exist until some future date? If it does not exist how can this projected shortage be part of a proof of claim? Or if there is future projected escrow shortfall the only way for the servicer or mortgage company to obtain the shortfall is supposed to be by increasing the future escrow payments after the bankruptcy case is filed just like if no chapter 13 had been filed in the first place.

But wait just a second. So now this touches on what is a “claim” in bankruptcy? The Supreme Court of the United States provides “right to payment” in the definition of “claim” meant “nothing more nor less than an enforceable obligation[.]” Johnson v. Home State Bank, 501 U.S. 78, 83, 111 S.Ct. 2150, 115 L.Ed.2d 66 (1991). “Congress intended by this language to adopt the broadest available definition of `claim.'” Id; see also FCC v. NextWave Pers. Commc’ns Inc., 537 U.S. 293, 302, 123 S.Ct. 832, 154 L.Ed.2d 863 (2003). So applying these definitions to a projected escrow shortage we can all agree the shortage is a “right to payment” pursuant to RESPA and the cushion of two escrow payments and can be part of a proof of claim.

Why is this happening though? The servicer of mortgage company is not properly calculating their RESPA cushion prior to the chapter 13 being filed. After the servicer or mortgage company pays a borrower’s property tax there should be a balance in the escrow account representing two escrow payments, the RESPA cushion. This is not happening and when the chapter 13 case is filed it triggers a review of the escrow account and behold there is a projected shortage.

I am not sure why this has become an issue when this dynamic of escrow accounts and RESPA cushion have existed for a very long time, but it is a problem now. Creditors referring to other Circuit opinions that provide that the collecting of pre-petition projected escrow shortages through post-petition mortgage payments is a violation of the automatic stay and arguably opens the creditor to possible sanctions for the violation of the automatic stay. There are a number of potential solutions to the problem, but the one that makes the most sense is that servicers and mortgage companies just properly calculate the RESPA cushion upon review of escrow accounts like they are supposed and this should never be a problem upon the filing of a bankruptcy case. After all, the borrower has made all payments as required by the servicer or mortgage loan company. What more can the borrower to make sure this is not a problem but make the payment requested each month on time?

Another solution is the include language in the chapter 13 plan that provides the service or mortgage lender may collect a pre-petition escrow shortfall from post-petition payments and not be in violation of the automatic stay. This will most likely trigger the necessity of having a confirmation hearing regarding the chapter 13 plan when a hearing would not normally be necessary. This is a waste of judicial resources, the chapter 13 trustee’s time and the attorney for the debtor’s time given the servicer or mortgage loan company did not properly calculate the escrow payment prior to the chapter 13 being filed.

Another solution is to stipulate that the creditor may collect pre-petition projected escrow shortages from post-petition mortgage payments. There is no guarantee that the trustee’s office will sign-off on this stipulation and again could end up with a hearing regarding confirmation of the chapter 13 plan that normally would not have to take place.

To be fair I could also provide any number of scenarios that a debtor or their bankruptcy attorney creates in the course of seeking confirmation of a chapter 13 plan that creditors, the Court and trustee’s office believe to waste their time over and over again so ………… I am just writing about this issue from a bankruptcy filer’s perspective and their attorney.

Why Is It Difficult to Project Escrow Account Funds?

Here in California we have Proposition 13 that limits how much property taxes can increase each year. You would think this would allow servicers and mortgage companies to easily estimate future property taxes and property insurance payments year after year so that there are no issues. Again, I get how sometimes getting numbers right is difficult even when a good faith effort is made to get the numbers right.

It just appears the escrow analysis that is required by law is not happening until the chapter 13 case is filed and the projected escrow shortage is created. If the chapter 13 case was never filed the servicer or mortgage lender would just continue to send statements with a monthly dollar amount owed and the borrower would just keep making the payment each month and there would be no issues. The part of the monthly escrow payment would increase or decrease depending upon the whim of the servicer or mortgage company ……….

Be Very Careful If You Argue Your Deed Of Trust Or Loan Are Invalid So You Do Not Owe Anything On Your Home

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Over and over again during the mortgage meltdown and now even years after the mortgage meltdown I have potential clients still wanting to argue that they owe nothing on their primary residence because of some issue with the loan, recording or assignment of the loan. Do not get me wrong. There is an exception to every statement anyone makes like this, but it is rare. What I can prove to you is state court lawsuit after state court lawsuit getting dismissed after you the homeowner were lied to about your chances of actually being successful at arguing you owe nothing even though you did not pay the loan off in full. I can also prove to you relief from stay after relief from stay granted by bankruptcy courts when someone files for bankruptcy protection and is behind on their mortgage payments then tries to argue I owe nothing. Since there still seems to be some confusion let me be clear.

If you do not pay your mortgage payment each month at some point your mortgage company will seek foreclosure and if you have filed for bankruptcy protection and do not pay your mortgage on time your mortgage or loan company will get relief from stay to start the foreclosure process in the real world. Hopefully the following provides some more detailed information about why to not argue you do not owe any money on your house. I do not think bankruptcy attorneys mislead potential bankruptcy clients about this topic but state court litigation attorneys still do.

A recent Ninth Circuit Bankruptcy Appellate Panel case from the Central District really highlights the issues with this argument and applicable law in the bankruptcy world. See BAP CC-18-1015-FLS.

Mortgage Company Can Assign or Transfer the Right of Collection of the Note Secured by the Recorded Deed of Trust

In this particular case here is the list of secured creditors for the bankruptcy filer regarding his deed of trust for his house in chronological order.
1. November 2014: GMAC Mortgage Corporation DBA ditech.com is the original loan company with recorded deed of trust for $315,000 and provides Mortgage Electronic Registration Systems, Inc. (“MERS”), as “nominee” for GMAC and its successors and assigns, was the beneficiary under the Deed of Trust;
2. June 2010: Through nominee MERS GMAC assigns deed of trust to GMAC Mortgage, LLC;
3. January 2011: The borrower and bankruptcy filer entered into a loan modification with MERS, nominee for the then-current holder of the Note, GMAC Mortgage, LLC;
4. May 2013: GMAC Mortgage, LLC assigned the Deed of Trust to Green Tree Servicing, LLC;
5. February 2016: Green Tree Servicing, LLC (which was then known as Ditech Financial LL) recorded the notice of default when mortgage payments were not made;
6. December 2017: Ditech Financial assigned the deed of trust to U.S. Bank Trust, N.A., as Trustee for LSF9 Master Participation Trust 13801; Servicer Caliber Home Loans, Inc. as its attorney in fact.
The assignments continued even after the borrower defaulted on payments and filed for bankruptcy protection under Chapter 13 of the Bankruptcy Code. Ditech Financial filed the proof of claim in the bankruptcy case but U.S. Bank and Caliber as the servicer filed the motion for relief from the bankruptcy automatic stay for permission to continue to enforce their state court rights outside of bankruptcy. The bankruptcy filer and/or borrower unfortunately argued U.S. Bank/Caliber had no standing or no right to request relief from stay and that he was current with all post-bankruptcy filing mortgage payments.

The Motion For Relief From Stay

U.S. Bank/Caliber sought relief from the automatic stay under Section 362(d)(1) for cause alleging the borrower and bankruptcy filer failed to make over $19,000 in mortgage payments after the chapter 13 bankruptcy case was filed. First the borrower/bankruptcy filer argued that U.S. Bank/Caliber was not the “real party in interest.” Second that the Deed of Trust was defective at its inception given the original lender was listed as “GMAC Mortgage Corporation dba ditech.com,” but only “GMAC Mortgage Corporation” is registered in the state of Pennsylvania, while the fictional name “ditech.com” is not. Third, the borrower/bankruptcy filer claimed that the January 2011 modification agreement was invalid.

1. Real Party In Interest

In the bankruptcy world the key term regarding this issue “colorable claim” to enforce an alleged debt/claim. A claim is extremely broadly defined and I have written about this issue in a prior article. But a mere colorable claim is all that is required in the bankruptcy world.
See Arkinson v. Griffin (In re Griffin), 719 F.3d 1126, 1128 (9th Cir. 2013) (citing In re Veal, 450 B.R. at 915); see Edwards v. Wells Fargo Bank, N.A. (In re Edwards), 454 B.R. 100, 105 (9th Cir. BAP 2011)
“A party seeking stay relief need only establish that it has a colorable claim to the property at issue.” A party filing a motion for relief from stay or movant must have a colorable claim sufficient to bestow upon it standing to prosecute a motion under § 362 if the party/movant either: (a) owns or has another form of property interest in a note secured by the debtor’s (or the estate’s) property; or (b) is a ‘person entitled to enforce’ . . . such a note under applicable state law”). The borrower and bankruptcy filer argues that the stamp signature on one of the loan documents invalidates the documents. There does not need to be a lengthy discussion about this issue given an endorsement of a negotiable instrument does not require a “live” or “wet” signature. See U.C.C. § 3-204(a) and U.C.C. § 1-201 providing “signed” includes any symbol executed or adopted with present intention to adopt or accept a writing. Or more commonly known as “make your mark” for a valid signature or endorsement of a document. The alleged “stamp” signature argument fails.

2. Failure to Registered a Fictitious Business Name

This is an interesting argument. The borrower and bankruptcy filer also argues that GMAC Mortgage Corporation dba ditech.com did not register or fill out and file a fictitious business for ditech.com. The problem is that cannot invalidate a lender’s ability to make and enforce thousands upon thousands of dollars of loans…..
The borrower and bankruptcy filer then attempts to argue the various assignments between the parties listed above are invalid. This issue has been analyzed before, see: Veal v. Am. Home Mortg. Servicing, Inc. (In re Veal), 450 B.R. 897, 906 (9th Cir. BAP 2011). The Ninth Circuit provides a service has standing to seek relief from the automatic stay when the borrower files for bankruptcy protection.

3. I Did Pay All The Alleged Missed Mortgage Payments

Finally the borrower and bankruptcy filer argues he made all of the post-petition mortgage payments in a declaration but failed to provide any proof the mortgage payments were paid. As a bankruptcy attorney trying to help someone prevent relief from stay being granted this has to be the most frustrating thing to deal with. If mortgage payments are paid there has to be proof of the payment readily available. If you are behind on your mortgage payments most likely the only thing that can prevent relief from stay being granted is a plan the mortgage company will accept to pay back the missed mortgage payments and that means ALL of the missed mortgage payments up to when the motion for relief from stay is filed within a reasonable time. As a side note; most motions for relief from stay are filed for cause or missed mortgage payments regardless of the amount of equity a property has. Cause exists for relief from stay is you missed mortgage payments and cannot pay them back within a reasonable amount of time there is not much anyone can do for you.

Is A Docket Entry or Minute Entry Appealable?

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What is a docket entry or minute entry? These are entries made by the court to document what took place at hearing or other court proceeding. Never of these entries meant to be like a transcript of what took place, but a short and concise summary of what took place. It is documenting the events of a hearing or court proceeding in an efficient manner. So what if there is ambiguity or you just disagree with what the docket entry or minute entry says? We are all human and sometimes minute entries need to be edited or corrected. Fair enough. Can a minute entry be appealed because you believe the entry is wrong and has of course negatively impacted you as a party in the case?

It seems like at some point in time there is an appeal of everything that takes place in cases whether appealable or not. So here we go. There is a minute entry and you do not like.

Is a Minute Entry Appealable?

The Ninth Circuit Bankruptcy Appellate Panel recently discussed this issue resulting from an appeal of a minute entry from a bankruptcy case from the District of Arizona. The Chapter 11 bankruptcy filer filed on his own an application for an order to show cause to sanction other parties in the case. The other parties filed a motion to strike the application for an order to show cause on the basis that the bankruptcy filer had a bankruptcy attorney retained and it was not appropriate for the bankruptcy filer to represent himself in the bankruptcy case. The Bankruptcy Court granted the motion to strike the application for an order to show cause and vacated the hearing on the application for an order to show case. The Bankruptcy Court is merely saying the hearing on the order to show cause is off the calendar given the motion to strike was granted.

The original minute entry was as follows: “VACATED: ORDER Granting Motion to Strike and [sic] (Related Doc 453) and Order Denying without prejudice the Application for Order to show cause (Related doc 422) signed on 4/4/2017.”

A couple weeks after the above minute entry was placed on the docket the clerk’s office modified the minute entry to include: “*** THIS M.E. ONLY VACATES THE APRIL 28, 2017, HEARING ***.”

At a hearing held a week after the minute entry was modified, the bankruptcy court rejected the bankruptcy filers interpretation of the original minute order as including vacating the order on the motion to strike the application for order to show cause. According to the bankruptcy court, the original minute entry only vacated the hearing on the application for an order to show cause that had been scheduled for the day of the minute entry.

Now The Appeal

If we were to read the transcript of these various hearings or listen to them I believe we would all know beyond a doubt that the Bankruptcy Court granted the motion to strike the application for order to show cause and vacated the hearing the application as moot given the Bankruptcy Court granted the motion to strike.

The bankruptcy filer again representing himself appealed the minute entry. This calls into question the appealability of the minute entry. Let just cut to the chase here. There is not appealable order or final ruling. The Bankruptcy Court granted the motion to strike and entered an order granting the motion. That is not what is being appealed. The Bankruptcy Court vacated the hearing on the application for an order to show cause as moot given it struck it down. That is not really what is being appealed. The bankruptcy filer is appealing the subsequent minute ENTRY which arguably has some ambiguity as to what is be vacated, but it is not an order.
So there is no appealable order under these circumstances.

A minute entry may constitute a dispositive order for notice of appeal purposes if it: (1) states that it is an order; (2) is mailed to counsel; (3) is signed by the clerk who prepared it; and (4) is entered on the docket sheet.” See, e.g., Brown v. Wilshire Credit Corp. (In re Brown), 484 F.3d 1116, 1121 (9th Cir. 2007); Mullen v. Hamlin (In re Hamlin), 465 B.R. 863, 868 (9th Cir. BAP 2012).

This minute entry was just an administrative recounting of what took place and not a substantive ruling.

Everything about this case and appeal is strange. Why did the bankruptcy filer not have is Bankruptcy Attorney file the application for an order to show cause to begin with? Then after the Bankruptcy Court granted the motion to strike given the bankruptcy filer was representing himself while having a retained attorney the bankruptcy filer still did not have his retained attorney file the application for an order to show cause but instead chooses to appeal the subsequent minute entry. It is always possible there is something that is missing from the record that could shed some light on these circumstances. If you want to represent yourself you need to file a substitute of attorney form saying you now want to represent yourself and your old attorney is longer your attorney. That did not happen here. It also appears the attorney of record for the bankruptcy filer did not file a motion to withdraw from the case either.