Nevada and Ninth Circuit Bankruptcy Blog

Edwards v. Wells Fargo Bank (In re Edwards), Case No. CC-11-1010-PaMkAl, 2011 WL 4485560 (BAP 9th Cir. Aug. 26, 2011) (mem.; Markell, J., on panel)

Affirming dismissal of Appellant/Ch. 7 Debtor’s adversary proceeding alleging wrongful foreclosure. Claim involves prepetition conduct and Debtor lacked standing to pursue claim absent abandonment of the claim (which had not occurred). Fact that claim was not scheduled does not remove the claim from the estate.

Oasis at Wild Horse Ranch, LLC v. Sholes (In re Oasis at Wild Horse Ranch, LLC), Case No. AZ-11-1142-DKiMY, 2011 WL 4502101 (BAP 9th Cir. Aug. 26, 2011) (mem.)

Affirming dismissal of Chapter 11 case as bad faith filing. Debtor owned and operated a guest ranch. The purported managers and members were a husband and wife, who were divorcing; her brother; her parents; and his parents.

After four years in state court with a receiver, his parents sought to foreclose on the property and debtor filed petition. Judge Marlar dismissed, finding debtor was not authorized to file and the filing represented a two-party dispute. The BAP affirmed.

The Bankruptcy Court did not abuse its discretion in ruling without an evidentiary hearing, when debtor did not seek to present evidence as permitted by local rules. The Bankruptcy Court also did not err in its finding that debtor failed to establish its burden that the petition was authorized. Similarly, based on the payment of debts and funds to pay additional debts, the Bankruptcy Court did not err in its bad-faith finding as a two-party dispute.

BAP denied creditor’s motion to terminate the 14-day stay of the judgment under Rule 8017. Creditors scheduled sale so it would be continued every 24 hours and occur on the first-day after the stay expired. BAP declined to terminate stay earlier, as it would deprive debtor of any ability to pursue any rights in state court.

Zulueta v. Bronitsky (In re Zulueta), Case No. NC-10-1459-HPaJu, 2011 WL 4485621 (BAP 9th Cir. Aug. 23, 2011) (mem., aff’g Jellen, J.)

BAP affirmed that bank, as trustee, was the holder of debtor’s note and had standing to file proof of claim through the bank’s servicing agent. Bank satisfied UCC standards that it or its agent had possession of the note, and note was validly endorsed.

Although servicing agent did not prove agency for bank, , it could enforce note because it was in possession with endorsement in blank. The endorsement was valid on the back of the note, making the party a holder.

Wishengrad Law Offices, LLC v. Weinstein (In re Hall), Case No. NV-10-1407-JuHJo, 2011 WL 4485774 (BAP 9th Cir. Aug. 22, 2011) (mem., aff’g Markell, J.)

Appellant represented debtor prepetition in prosecuting personal injury claim and in defending against civil litigation, filing secured claims for fees and costs from both representations. BAP affirmed objection to both secured claims. Firm failed to evidence prepetition perfection of attorneys lien under NRS 18.015.

BAP rejected argument that interest related back to start of representation, noting absence of language as identified in In re Nicholson, 57 B.R. 672 (Bankr. D. Nev. 1986). BAP also rejected argument of substantially complied with notice in retainer  agreement.

BAP also affirmed lack of common law retaining lien, which permits retention of papers until court order for turnover upon payment or furnishing of security for the attorney’s fees. Court ordered turnover under Section 542(e), which does not address retaining lien, but case law called for valuation of lien.

BAP held valuation done by benefit of attorney’s papers to estate, not value of work done by counsel. Counsel did not provide evidence of value of papers to estate, and does not show abuse of discretion in Bankruptcy Court’s refusal to conduct evidentiary hearing.

BAP affirmed that firm, as unsecured creditor, lacked standing to objected to secured claim of litigation financing company. The fact that counsel originally asserted secured claim is irrelevant as standing can be considered at any time. Trustee best positioned to evaluate claim, including settlement that arose in this case.

Even on merits, objection failed. Court applied contract choice-of-law provision to apply California law, which does not recognize champetry and maintenance; even assuming Nevada law applied, record did show firm satisfied elements of champetry. Dispute over perfection also misplaced because lender perfected interest under California law.

Nahass v. Bellagio, LLC (In re Nahass), Case No. CC-11-1033-MkBPa, 2011 WL 4485672 (BAP 9th Cir. Aug. 22, 2011) (mem., aff’g Albert; Markell, J., on panel)

Affirming denial of motion to extend time to appeal default judgment. Appellant contested Bankruptcy Court’s evaluation of factors but failed to present adequate record with transcript of hearing that addressed evaluation. Debtor also failed to substantiate lack of notice given the presumption of receipt from mail delivery and counsel’s duty to monitor the docket. Counsel also failed to correct email address with court for proper electronic service.

McFadden v. Mariconda (In re Mariconda), Case No. AZ-11-1076-MyDKi, 2011 WL 4502030 (BAP 9th Cir. Aug. 3,2011) (mem., aff'g Baum, J.)

Affirming nondischargeability judgment in favor of Debtor who failed to record deed of trust to secure Appellant's debt. BAP affirmed absence of justifiable reliance; Appellant repeatedly asked debtor prepetition about the status of its recording. BAP also affirmed absence of proven damages. Although Appellant deprived of notice of foreclosure on properties since his deed of trust was not record, Appellant did not present evidence to establish value of the lost opportunity. Debt also was dischargeable even through Debtor failed to disclose unrecorded second deed of trust in loan negotiation with Appellant. Bankruptcy Court could reasonably conclude omission was errant, not fraudulent.

Creditor also failed to establish a fiduciary relationship with Debtor under Section 523(a)(4). Any fiduciary duty arising from deed of trust rested in title company as trustee. BAP held that debtor's holding of the unrecorded deed of trust does not create res subject to fiduciary duties. Finally, BAP held that although Debtor mention Section 523(a)(6) in complaint, it did not specifically plead or prosecute a claim for willful and malicious injury.

Gibson v. Speier (In re Gibson), Case No. CC-11-1028-MkKiD, 2011 WL 4502044 (BAP 9th Cir. Aug. 3, 2011) (mem., aff'g Saltzman, J.; Markell, J., on panel)

Affirming Ch. 7 trustee's compromise of claim over Debtor's objection. Debtor filed prepetition action, alleging breach of contract on lease and civil rights claim. Trustee settled it in exchange for $5,000 and cross-releases for landlord and tenant. BAP held that although Bankruptcy Court did not make specific findings of A&C factors, it could affirm based on record. It also found sufficient evidence to support order approving settlement.

Claim had survived demurrer and summary judgment, but breach and damages were hotly contested. Trustee, a former property manager, exercised business judgment in evaluating probability of success, and Bankruptcy Court did not err in deciding between two permissible views of evidence. While complexity did not lean toward settlement, trustee did not have any funds to deal with cost and delay of litigation. BAP also noted that Debtor was proceeding pro se, and he did not make a competing offer. While Debtor asked for litigation to be abandoned, Trustee must liquidate for benefit of creditors.

BAP also held that Bankruptcy Court was not clearly erroneous in rejecting Debtor’s claim that Trustee was biased against them because he previously had worked as a property manager.