Allana Baroni

Opinion

FILED & ENTERED

AUG 09 2022

UNITED STATES BANKRUPTCY CCOLEURKR UT.S . BANKRUPTCY COURT Central District of California CENTRAL DISTRICT OF CALIFOBRYN C e I t Au l i o DEPUTY CLERK SAN FERNANDO VALLEY DIVISION In re: Case No. 1:12-bk-10986-MB ALLANA BARONI, Chapter 7 Debtor. ORDER RE: [1] BARONI AND ANTOGNINI’S EVIDENTIARY OBJECTION AND REQUEST TO STRIKE ENTIRE DECLARATION OF FAY JANATI [CASE DKT. 1433]; AND [2] BARONI AND ANTOGNINI’S EVIDENTIARY OBJECTION AND REQUEST TO STRIKE ENTIRE DECLARATION OF BERNARD J. KORNBERG [CASE DKT. 1434]

The chapter 7 debtor, Allana Baroni (the “Debtor”), and Richard Antognini (“Antognini”) have filed joint evidentiary objections (case dkt. 1433, 1434) to the declarations of Fay Janati and Bernard J. Kornberg appended to the Supplemental Brief in support of Memorandum in Opposition to Allana Baroni’s Motion to Remove the Trustee and for Criminal Referrals filed by Wells Fargo Bank (case dkt. 1428) and request the Court strike the entirety of those declarations for failure to comply with 28 U.S.C. § 1746(2) because both are signed: “I declare under penalty of perjury that the foregoing is true and correct to the best of my knowledge . . . “ The Debtor and Antognini argue the qualification “to be the best of my knowledge” renders the declarations improper. They fail, however, to offer any authority other than 28 U.S.C. §1746(2) in support. “To the best of my knowledge” is an improper qualification. Sherwin-Williams Co. v. Performance Auto Body, Inc., 2014 WL 12558844, *2 (C.D. Cal., Jan. 29, 2014). However, section 1746 requires only that declarations must be “substantially” in the form set forth in the statute. CFTC v. Topworth Int'l Ltd., 205 F.3d 1107, 1112 (9th Cir. 1999). In Schroeder v. McDonald, the Ninth Circuit Court of Appeals determined that a verification of facts as “true and correct as known to me” satisfied 28 U.S.C. § 1746 despite not following the statute’s “form with precision.” Schroeder v. McDonald, 55 F.3d 454, 460 n. 10 (9th Cir. 1995). Because there is no material difference between the qualification “as known to me” and “to the best of my knowledge,” and because the jurat otherwise complies with section 1746, the objection is OVERRULED and the request to strike is DENIED. ¶ OF DECLARATION EVIDENTIARY RULING Objection to the Declaration of Fay Janati ¶ 8. FRE 802 Hearsay to Sustained only as the sentence Even in a case such as this where there is still personal liability owed, which the business “Nationstar’s records still Nationstar’s system can only treat the loan one way. As such the Note is records exception in reflect the account as being returned “paid in full” once the secured portion of the loan has been 803(6) does not open due to the pending ¶ OF DECLARATION EVIDENTIARY RULING paid. apply. FRE 1002 litigation and the outstanding

Nationstar’s records still reflect the Best Evidence Rule. unsecured portion as set forth in account as being open due to the pending litigation and the outstanding the revised proof of claim 7-2 is unsecured portion as set forth in the revised proof of claim 7-2 is still still owed.” owed. Objection to the Declaration of Bernard J. Kornberg ¶ 7, lines 14-18 FRE 802 Hearsay Sustained as inadmissible ...While my conversations with Nationstar are privileged, the ultimate Lack of Foundation hearsay. factual determination was that it was Nationstar’s practice to return the FRE 1002 Best note to a post-confirmation Chapter 11 borrower once a secured claim is Evidence Rule. paid in full. That is because in almost all cases, the payment of the secured claim represents the extinguishment of all recoverable debt owed on the loan. ¶¶ 8-9 Improper legal Overruled. Generally, legal 8. However, in this matter, personal liability on the note remained. Debtor conclusions. arguments are inappropriate in was coborrower on the note with her husband, James Baroni. James Irrelevant. declaration testimony. King Baroni is not in bankruptcy and has never received a discharge. Cty. v. Rasmussen, 299 F.3d Accordingly, Wells Fargo still had 1077, 1082 (9th Cir. 2002); recourse against James for the balance of the note. GemCap Lending, LLC. v. 9. Further, the unsecured portion of Claim 7 Quarles & Brady, LLP, 269 remained unpaid. Therefore, while Allana Baroni’s personal liability F.Supp. 3d 1007, 1026 (C.D. had been discharged, Wells Fargo Cal. 2017). Here, however, Mr. continued to have an unsecured claim in the case. Kornberg is offering his understanding of the legal issues to explain why he signed ¶ OF DECLARATION EVIDENTIARY RULING and filed the Amended Wells Fargo POC, and the testimony is admissible for that purpose. ¶¶ 11-15 Improper legal Overruled. Mr. Kornberg is 11. First, the return of the note to Baroni is legally irrelevant to the conclusions. offering his understanding of proof of claim. Section 506(a) states that, to the extent a secured claim is Irrelevant. the legal issues to explain why subject to bifurcation, that a creditor has an “unsecured claim to the extent he signed and filed the that the value of such creditor’s Amended Wells Fargo POC, interest or the amount so subject to set off is less than the amount of such and the testimony is admissible allowed claim.” 11 U.S.C.§ 506(a). Here, Baroni bifurcated Wells for that purpose. Fargo’s claim in the Chapter 11 plan. Thus by operation of law Wells Fargo is entitled to an unsecured claim for the remainder. Therefore, the unsecured claim’s validity is not predicated on the note which created the debt. 12. Second, even if the claim is dependent on the note, the return of the note is not conclusive. In my legal research, I determined that the return of a note to the borrower does not necessarily extinguish the note if personal liability remained. Instead, the “longstanding policy of California law [is] to correct forfeitures (and the accompanying windfall).” Great W. Sav. v. United States, 1986 U.S. Dist. LEXIS 20318, at *4 (C.D. Cal. Sep. 16, 1986). Numerous other cases support this proposition. To the best of my knowledge, no case, binding or persuasive, that stands to the contrary. Accordingly, Wells Fargo could assert a claim predicated on a legal action for the return of the note. ¶ OF DECLARATION EVIDENTIARY RULING debt, I determined that there was a good faith, and quite likely prevailing, argument that the April 29, 2019 conversion of the case to Chapter 7 lifted the cap on payments set in the Chapter 11 plan to unsecured creditors. 14. This determination was based in part on the 2015 Supreme Court case of Harris v. Viegelahn, 135 S. Ct. 1829, 1838 (2015), which held that [w]hen a debtor exercises his statutory right to convert, the case is placed under Chapter 7’s governance, and no Chapter 13 provision holds sway. §103(i) (“Chapter 13 . . . applies only in a case under [that] chapter.”). Harris having converted the case, the Chapter 13 plan was no longer “bind[ing].” §1327(a). 15. In my opinion, this holding also applies to a conversion of a case from Chapter 11 to Chapter 7. Therefore, I determined that Wells Fargo could assert it was entitled to the entire balance of the loan as an unsecured claim. ¶ 17 Improper legal Sustained. This is And in the opposition to Debtor’s Motion to Dismiss the Case, Wells conclusions. impermissible legal argument Fargo disclosed the following: Debtor asserts that Wells Irrelevant. restating disclosures made to Fargo’s claim was fully extinguished when she paid the Court in a filed pleading the secured portion of the rather than explaining Mr. claim during her Chapter 11 and Wells Fargo reconveyed Kornberg’s intent and reasoning the deed of trust and then released the note to Debtor. for filing the Amended Wells Wells Fargo is still investigating the facts behind Fargo POC for his client. {| OF DECLARATION EVIDENTIARY RULING this time believes that the release of the note was in error. In 99.9% of cases, the payment of the secured portion of the claim also results in the full discharge of the obligations of the note. In g this case, that was not the case as even if Debtor had received her Chapter 11 discharge, a large unsecured claim remained against James Baroni. If the note was released to Debtor in error, D Wells Fargo may demand its return and payment of the unsecured portion of the claim. [Citation.] Wells Fargo has had preliminary discussion regarding this issue with the Trustee and hopes to resolve the issue without litigation. A copy of this brief is attached as Exhibit 2 to this Declaration. □□□ : Aft, 0 Bast — Date: August 9, 2022 en ODED Martin R Barash United States Bankruptcy Judge