In re: JULIETA JIMENEZ

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: August 2, 2021
• Docket: CC-20-1275-FSG; CC-21-1030-FSG
• Status: Unpublished

Opinion

FILED AUG 2 2021 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

In re: BAP No. CC-20-1275-FSG JULIETA JIMENEZ, CC-21-1030-FSG Debtor. (Related Appeals)

JULIETA JIMENEZ, Bk. No. 2:20-bk-20564-SK Appellant, v. MEMORANDUM* ARCPE 1, LLP A/K/A ARCPE HOLDING, LLC, c/o Wilshire Financial Network (W.F. Loan Service), Appellee.

Appeal from the United States Bankruptcy Court for the Central District of California Sandra R. Klein, Bankruptcy Judge, Presiding

Before: FARIS, SPRAKER, and GAN, Bankruptcy Judges.

INTRODUCTION

Chapter 131 debtor Julieta Jimenez, her husband, and a third person

have filed multiple bankruptcy cases (some fraudulently) in an attempt to

* This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. Unless specified otherwise, all chapter and section references are to the 1

Bankruptcy Code, 11 U.S.C. §§ 101-1532. prevent appellee ARCPE 1, LLP, aka ARCPE Holding, LLC c/o Wilshire

Financial Network (“ARCPE”) from foreclosing on her property. In this

latest iteration, Mrs. Jimenez filed her petition the day before the

foreclosure sale, but ARCPE quickly obtained in rem relief from the

automatic stay and sold the property. The bankruptcy court later dismissed

her case because the sale of the property obviated the bankruptcy case.

Mrs. Jimenez appeals both orders, arguing that the court and the chapter 13

trustee failed to properly determine that ARCPE’s claim was invalid.

We reject her arguments and AFFIRM.

ARCPE filed a motion to dismiss this appeal as moot, as it already

sold the property at a foreclosure sale. We DENY that motion.

FACTS2

A. Prepetition events and the prior bankruptcy cases

In February 2008, Mrs. Jimenez and her husband, Javier Jimenez,

borrowed $160,000 from E-Loan, Inc., pursuant to a home equity line of

credit (“HELOC”) agreement. To secure the debt, they executed a second

priority deed of trust on their property in Los Angeles, California (the

“Property”). Mortgage Electronic Registration System was named as the

beneficiary of the deed of trust, as nominee for the owner of the HELOC

note. ARCPE claims interests in the HELOC note and deed of trust though

2 We exercise our discretion to review the bankruptcy court’s docket in this case, as appropriate. See Woods & Erickson, LLP v. Leonard (In re AVI, Inc.), 389 B.R. 721, 725 n.2 (9th Cir. BAP 2008).

2 a series of assignments.

The Jimenezes struggled to pay their senior mortgage loan. They

initiated two successive chapter 13 cases (in 2009 and 2012) and eventually

received a loan modification from the senior mortgage lender in 2013. They

voluntarily dismissed both cases.

The HELOC matured on April 1, 2018, but the Jimenezes did not pay

the balance. ARCPE, which by then was the beneficiary of the HELOC

deed of trust, recorded a notice of default in November 2018. It recorded a

notice of trustee’s sale on February 28, 2019.

The following day, Mr. Jimenez filed a chapter 13 petition. ARCPE

sought stay relief, but Mr. Jimenez argued that ARCPE did not have a valid

claim. The court granted ARCPE stay relief under §§ 362(d)(1) and (d)(4)

and dismissed the case. On appeal, we affirmed the dismissal order and

dismissed as moot the appeal of the grant of stay relief under § 362(d)(1),

but we reversed the grant of in rem relief under § 362(d)(4), holding that

the two earlier cases were insufficient to prove a scheme. Jimenez v. ARCPE

1, LLP (In re Jimenez), 613 B.R. 537 (9th Cir. BAP 2020).

While the BAP appeal was pending, Victor Orlando Rivera, an

acquaintance of the Jimenezes, filed a chapter 7 case in September 2019. He

scheduled the Property as an asset subject to ARCPE’s lien. However, he

also indicated that his ownership interest in the Property was “no interest

in any value” and that he had scheduled the Property to protect it from

ARCPE. ARCPE again moved for stay relief. The bankruptcy court granted

3 the motion on the ground that Mr. Rivera filed his case in bad faith and as

part of a scheme to hinder, delay, or defraud that involved multiple

bankruptcy cases and a transfer of an interest in the Property to Mr. Rivera.

We affirmed. Rivera v. ARCPE 1, LLP (In re Rivera), BAP No. CC-20-1024-

SFL (9th Cir. BAP Sept. 23, 2020).

ARCPE thereafter scheduled a foreclosure sale for December 1, 2020.

B. The present bankruptcy case

Mrs. Jimenez filed her chapter 13 petition a day before the scheduled

foreclosure sale. She did not immediately file any schedules, statement of

financial affairs, income information, or a plan.

1. ARCPE’s motion for relief from the automatic stay

ARCPE filed a proof of claim for the HELOC loan. It also filed a

motion for relief from the automatic stay (“Stay Relief Motion”), requesting

a “comfort order” to proceed with the foreclosure sale because it had

already obtained § 362(d)(4) relief in Mr. Rivera’s bankruptcy case.

ARCPE asserted many bases for stay relief under § 362(d)(1): its

interest in the Property was not adequately protected; the bankruptcy case

was filed in bad faith; and Mrs. Jimenez had not made mortgage payments

to ARCPE. ARCPE requested in rem relief under § 362(d)(4), asserting that

the bankruptcy case was part of a scheme to delay, hinder, or defraud

creditors that involved multiple bankruptcy cases affecting the Property.

The Stay Relief Motion attached the note, deed of trust, assignments,

copies of the earlier relief from stay orders, and proof of recordation of the

4 in rem relief order in the Los Angeles County Recorder’s Office.

Mrs. Jimenez opposed the Stay Relief Motion. She represented that

there was significant equity in the Property and that the Property was

insured. She denied that she had filed her case in bad faith.

Finally, she challenged ARCPE’s right to foreclose on the Property,

arguing that ARCPE had not proved its debt and had filed a false claim in

Mr. Jimenez’s case in March 2019. She claimed that another creditor had

filed a proof of claim for the same debt in the 2012 chapter 13 case. She

further asserted that ARCPE’s claim was “fabricated” because the

assignments are suspect.

At the hearing on the Stay Relief Motion, the bankruptcy court

recounted that it had granted in rem stay relief in the prior case, which was

affirmed by the BAP and duly recorded. It held that its order was binding

on the present case, so there was currently no stay affecting the Property.

It stated that Mrs. Jimenez’s arguments concerning the proof of claim

in the earlier bankruptcy case were misplaced, because she could not object

to a proof of claim (in another case) by opposing a stay relief motion.

Regarding § 362(d)(1), the bankruptcy court held that Mrs. Jimenez

had not established that she had provided ARCPE with proof of insurance

and that Mrs. Jimenez had filed her petition in bad faith.

Regarding § 362(d)(4), the bankruptcy court held that the case was

part of a scheme to delay, hinder, or defraud ARCPE. It noted the

bankruptcy filings by three debtors over the past eighteen months,

5 including Mr. Rivera’s fraudulent filing.

The bankruptcy court entered an order granting the Stay Relief

Motion (“Stay Relief Order”), and Mrs. Jimenez timely filed her notice of

appeal. She did not seek a stay pending appeal.

2. The Trustee’s motion to dismiss

Mrs. Jimenez filed her schedules and scheduled ARCPE’s secured

claim but valued it at $0. She did not schedule any unsecured claims. She

listed her combined monthly income as $3,032 and net monthly income of

approximately $227.

She also filed a chapter 13 plan and proposed paying $182.11 per

month for sixty months for a total of approximately $10,926. She indicated

that the payments would go toward her first mortgage loan and the

chapter 13 trustee’s fee but otherwise largely left the plan blank.

On or around December 15, 2020, ARCPE sold the Property at a

trustee’s sale and recorded a Trustee’s Deed Upon Sale on or around

December 18, 2020.3

The chapter 13 trustee, Kathy A. Dockery (“Trustee”), filed an

objection to plan confirmation. She asserted that Mrs. Jimenez failed to

meet all of the mandatory requirements set forth in § 1325 and needed to

amend her plan and schedules.

3On January 19, 2021, Mrs. Jimenez filed an adversary complaint against ARCPE and others to determine the validity of the HELOC lien. That case was dismissed pursuant to ARCPE’s motion to dismiss. Mrs. Jimenez appealed the dismissal order to the BAP, where it is currently pending. 6 In response, Mrs. Jimenez amended her plan and schedules to

disclose unsecured credit card debt. She amended her schedules to increase

her monthly income by $123 and increased her plan payments to $202.49

per month.

The bankruptcy court held a confirmation hearing on February 4,

2021. The Trustee recommended that the court dismiss the case with a one-

year bar on refiling, because the plan was unfeasible given that the

Property was sold at a foreclosure sale in December 2020. She also asserted

that the case was filed in bad faith.

Mrs. Jimenez again claimed that ARCPE’s proof of claim was

defective and that it had refused to negotiate with her. The court pointed

out that it had previously authorized the foreclosure sale and that the

Property had been sold weeks earlier. It noted that she had not obtained a

stay pending appeal, and even if she had, ARCPE had properly recorded a

valid § 362(d)(4) order for in rem relief.

The court concluded that there was no purpose in continuing the case

because she no longer owned the Property. It additionally noted that she

had failed to provide documents and information listed in the Trustee’s

objection to confirmation. It thus dismissed her case with a six-month bar

on refiling.

The court entered an order dismissing her case (“Dismissal Order”),

and Mrs. Jimenez timely filed her notice of appeal.

7 JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b)(2)(A) and (G).

ARCPE filed a motion to dismiss these appeals as moot because it has

already sold the Property at auction. According to ARCPE, this means that

we cannot grant Mrs. Jimenez any effective relief on appeal.

We cannot exercise jurisdiction over a moot appeal. United States v.

Pattullo (In re Pattullo), 271 F.3d 898, 900 (9th Cir. 2001). The test for

mootness of an appeal is whether the appellate court can give the appellant

any effective relief if the appeal is decided in favor of the appellant. Motor

Vehicle Cas. Co. v. Thorpe Insulation Co. (In re Thorpe Insulation Co.), 677 F.3d

869, 880 (9th Cir. 2012); see also Varela v. Dynamic Brokers, Inc. (In re Dynamic

Brokers, Inc.), 293 B.R. 489, 493‐94 (9th Cir. BAP 2003).

We could grant Mrs. Jimenez some relief despite the sale of the

Property. We could remove the two-year period imposed by the Stay Relief

Order, which affects Mrs. Jimenez and parties not before the court. See

Sepehry-Fard v. U.S. Bank, N.A. (In re Sepehry-Fard), BAP No. NC-17-1118-

BTaF, 2018 WL 2709718, at *5 (9th Cir. BAP June 5, 2018). Reversal of the

Dismissal Order would allow Mrs. Jimenez to reorganize her unsecured

debt in this case and would free her from the six-month bar on refiling.

Therefore, we have jurisdiction under 28 U.S.C. § 158.

ISSUES

(1) Whether the bankruptcy court abused its discretion in granting

8 ARCPE relief from the automatic stay, including in rem relief.

(2) Whether the bankruptcy court abused its discretion in dismissing

Mrs. Jimenez’s chapter 13 case.

STANDARD OF REVIEW

We review for an abuse of discretion the bankruptcy court’s order

granting a creditor relief from the automatic stay. First Yorkshire Holdings,

Inc. v. Pacifica L 22, LLC (In re First Yorkshire Holdings, Inc.), 470 B.R. 864, 868

(9th Cir. BAP 2012). Similarly, we review a bankruptcy court’s dismissal of

a chapter 13 case for an abuse of discretion. Ellsworth v. Lifescape Med.

Assocs., P.C. (In re Ellsworth), 455 B.R. 904, 914 (9th Cir. BAP 2011).

To determine whether the bankruptcy court abused its discretion, we

conduct a two-step inquiry: (1) we review de novo whether the bankruptcy

court “identified the correct legal rule to apply to the relief requested,” and

(2) if it did, we consider whether the bankruptcy court’s application of the

legal standard was illogical, implausible, or without support in inferences

that may be drawn from the facts in the record. United States v. Hinkson, 585

F.3d 1247, 1262-63 & n.21 (9th Cir. 2009) (en banc).

DISCUSSION

A. The bankruptcy court did not abuse its discretion in granting ARCPE relief from the automatic stay under §§ 362(d)(1) and (4).

Mrs. Jimenez argues on appeal that stay relief was inappropriate

because ARCPE had asserted a fraudulent proof of claim and could not

establish that it was owed any debt. We reject these arguments.

9 The bankruptcy court may grant relief from the automatic stay under

§ 362(d)(1) when the movant demonstrates “cause” for relief. Delaney-

Morin v. Day (In re Delaney-Morin), 304 B.R. 365, 369 (9th Cir. BAP

2003). Because the statute does not define what constitutes cause for relief

from the stay, cause must be determined on a case-by-case basis. Id.

The bankruptcy court held that relief from stay was appropriate

because Mrs. Jimenez failed to establish that she had adequate insurance

covering the Property, which indicated a lack of adequate protection under

§ 362(d)(1). Mrs. Jimenez only argues that she had proof of insurance and

that a private mortgage insurance policy covers the HELOC. The

bankruptcy court properly rejected these arguments because Mrs. Jimenez

failed to offer admissible proof of homeowner’s insurance.

The bankruptcy court also properly found that Mrs. Jimenez did not

file her petition in good faith; that there were multiple bankruptcy filings

affecting the Property, including Mr. Rivera’s admittedly fraudulent filing;

that Mrs. Jimenez had failed to establish sufficient cash flow, her assets,

and her unsecured creditors; and that Mrs. Jimenez had filed her petition

on the eve of the most recent foreclosure sale. Mrs. Jimenez does not

identify any error in these findings.

Rather, she only focuses on ARCPE’s allegedly fraudulent proof of

claim and argues that ARCPE has no proof that it owns the HELOC lien.

However, we already determined in the two prior appeals concerning the

Property that the bankruptcy court did not err in granting ARCPE relief

10 from the automatic stay in related bankruptcy cases. In re Jimenez, 613 B.R.

at 544 n.7; Rivera v. ARCPE 1, LLP (In re Rivera), BAP No. CC-20-1024-SFL

(9th Cir. BAP Sept. 23, 2020). We also disagree that ARCPE conducted the

foreclosure sale “illegally,” because the bankruptcy court had authorized

the sale in both Mr. Rivera’s case and her case, and neither debtor sought a

stay pending appeal. 4

We recently rejected a debtor’s challenge to a creditor’s standing to

seek stay relief based on an allegedly faulty note and explained that:

[t]he legal standard for establishing standing to seek relief from stay is significantly more liberal than the standard for standing to file a proof of claim. In the relief from stay context, the creditor can establish its standing merely by demonstrating the existence of “a colorable claim to enforce a right against property of the estate.”

DePuydt-Meier v. U.S. Bank, N.A. (In re DePuydt-Meier), BAP Nos. NC-21-

1001-SFB, NC-21-1002-SFB, 2021 WL 2654396, at *7 (9th Cir. BAP June 28,

2021) (quoting Veal v. Am. Home Mortg. Servicing, Inc. (In re Veal), 450 B.R.

897, 914-15 (9th Cir. BAP 2011)). The “right to foreclose under state law

constitutes the requisite colorable claim and the attendant standing to seek

relief from stay to foreclose.” Id. at *8. Therefore, Mrs. Jimenez’s insistence

that ARCPE filed a faulty proof of claim does not preclude stay relief.

4 Mrs. Jimenez claims that another creditor filed a proof of claim for the same debt in the 2012 bankruptcy case. But that was before ARCPE obtained its interest in the Property via a 2018 assignment, and the proof of claim was likely filed by the creditor that then held the mortgage and deed of trust. 11 Further, in rem relief under § 362(d)(4) was appropriate. Relief is

warranted if the movant establishes three conditions:

First, debtor’s bankruptcy filing must have been part of a scheme. Second, the object of the scheme must be to delay, hinder, or defraud creditors. Third, the scheme must involve either (a) the transfer of some interest in the real property without the secured creditor’s consent or court approval, or (b) multiple bankruptcy filings affecting the property.

In re First Yorkshire Holdings, Inc., 470 B.R. at 870.

The bankruptcy court was correct that in rem relief already applied to

the Property, as ordered in Mr. Rivera’s bankruptcy case. The court also

held that in rem relief was appropriate because the bankruptcy filing was

part of a scheme to delay, hinder, and defraud creditors. It incorporated its

previous ruling, noting the three bankruptcy cases within eighteen months

that were filed to frustrate ARCPE’s foreclosure efforts, including the

transfer of a fractional interest in the Property to Mr. Rivera for no

consideration. Mrs. Jimenez does not address the court’s reasoning on

appeal. Therefore, we discern no error in the Stay Relief Order.

B. The bankruptcy court did not err in dismissing Mrs. Jimenez’s case.

The bankruptcy court held that dismissal was appropriate because

Mrs. Jimenez admittedly sought bankruptcy protection only to save her

Property, which had since been sold at a foreclosure sale. We agree.

Section 1307(c) allows the bankruptcy court to dismiss a case “for

cause.” Schlegel v. Billingslea (In re Schlegel), 526 B.R. 333, 339 (9th Cir. BAP

12 2015). The subsections offer a nonexclusive list of circumstances that can

amount to cause. In re Henson, 289 B.R. 741, 750-51 (Bankr. N.D. Cal. 2003)

(“[T]he list set forth at § 1307(c)(1)-(10) is a non-exclusive one that does not

define the term ‘cause’ but merely illustrates examples of it.”).

“Dismissal under § 1307(c) is a two-step process. Once the court has

determined that cause to dismiss exists, it still must decide what remedial

action — what form of dismissal — should be taken.” In re Ellsworth, 455

B.R. at 922; see Nelson v. Meyer (In re Nelson), 343 B.R. 671, 675 (9th Cir. BAP

2006) (“[A] choice must be made between conversion and dismissal based

on the ‘best interests of the creditors and the estate.’”).

The court held that dismissal was appropriate because the

bankruptcy case served no useful purpose after ARCPE sold the Property.

Mrs. Jimenez contends that ARCPE had no interest in the Property and

argues that dismissal was premature. She laments that she “trusted the

Justice Department in finding me a solution to my worrisome family life.”

We have already rejected her arguments regarding the legitimacy of

ARCPE’s lien. She fails to address the bankruptcy court’s reasoning that

continuation of her bankruptcy case was futile because she can no longer

save the Property. As the court pointed out, any further remedy would

have to be procured in state court. Moreover, she appears to have a

fundamental misunderstanding of the bankruptcy process and believes

that it was the Trustee’s responsibility to save her Property from

foreclosure. The Trustee’s role is to administer the estate, not represent the

13 debtor. Therefore, the futility of pursuing the bankruptcy case supports

“cause” for dismissal under § 1307(c).

For the second step of its analysis, the bankruptcy court needed to

decide whether dismissal was in the best interests of the creditors and the

estate. Although the court did not explicitly make such a determination,

the record easily supports its implicit determination that, given the sale of

the Property, dismissal was in the best interest of the creditors and the

estate and that allowing the case to continue would prejudice creditors. It

was not an abuse of discretion to dismiss the case under § 1307(c).

CONCLUSION

The bankruptcy court did not err in granting ARCPE in rem relief

from the automatic stay and dismissing the chapter 13 case. We AFFIRM.