In re: Maria Juana Duarte

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: April 15, 2014
• Docket: CC-13-1419-TaDKi
• Status: Unpublished

Opinion

FILED APR 15 2014 1 NO FO PUBL A IO T R IC T N SUSAN M. SPRAUL, CLERK 2 U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT 3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. CC-13-1419-TaDKi ) 6 MARIA JUANA DUARTE, ) Bk. No. 12-24527-MW ) 7 Debtor. ) ______________________________) 8 ) MARIA JUANA DUARTE, ) 9 ) Appellant, ) 10 ) v. ) MEMORANDUM* 11 ) NATIONSTAR MORTGAGE, LLC and ) 12 QUALITY LOAN SERVICE CORP., ) ) 13 Appellees. ) ______________________________) 14 Argued and Submitted on March 20, 2014 15 at Pasadena, California 16 Filed - April 15, 2014 17 Appeal from the United States Bankruptcy Court for the Central District of California 18 Honorable Mark S. Wallace, Bankruptcy Judge, Presiding 19 ________________________________ 20 Appearances: Hector C. Perez, Esq. for Appellant Maria Juana Duarte; Adam N. Barasch, Esq. of Severson & Werson 21 for Appellee Nationstar Mortgage, LLC; and Melissa Robbins Coutts, Esq. of McCarthy & Holthus, LLP 22 for Appellee Quality Loan Service Corporation. ________________________________ 23 Before: TAYLOR, DUNN, and KIRSCHER, Bankruptcy Judges. 24 25 26 * This disposition is not appropriate for publication. 27 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 28 See 9th Cir. BAP Rule 8013-1. 1 INTRODUCTION 2 Appellant, chapter 7 Debtor Maria Juana Duarte, appeals from 3 the bankruptcy court’s denial of her motion seeking damages for 4 violations of the § 3621 automatic stay. She based her motion on 5 the postpetition foreclosure sale of her home. The bankruptcy 6 court found, however, that the violation was not willful as 7 neither of the Appellees had appropriate notice of Debtor’s 8 bankruptcy filing before the foreclosure sale went forward. The 9 bankruptcy court also found that Debtor failed to establish any 10 entitlement to damages under § 362(k) where Appellees, upon 11 learning of the filing, took immediate corrective action. We 12 AFFIRM. 13 FACTS 14 Appellee Nationstar Mortgage, LLC (“Nationstar”) is the 15 beneficiary of a deed of trust recorded against Debtor’s home. 16 Appellee Quality Loan Service Corporation (“Quality”) is the 17 substituted trustee under the deed of trust. Due to mortgage 18 defaults, Quality noticed a trustee’s sale of Debtor’s home for 19 December 28, 2012, at 12:00 p.m. At 11:48 a.m. on the scheduled 20 sale date, Debtor filed a skeletal bankruptcy petition which did 21 not list Nationstar as a creditor. At 11:52 a.m. she sent notice 22 of the filing by facsimile to Quality. The foreclosure sale, 23 however, went forward on the courthouse steps at 12:10 p.m. 24 Nationstar was the highest bidder through a credit bid. 25 In her bankruptcy case, Debtor moved for rescission of the 26 foreclosure and recovery of damages under § 362(k) for Appellees’ 27 1 Unless specified otherwise, all chapter and section 28 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532.

- 2 - 1 violation of the automatic stay (“Sanctions Motion”).2 Debtor 2 argued that Appellees received effective facsimile notice of the 3 bankruptcy filing on the day of sale, but nonetheless proceeded 4 with the foreclosure, and, thus, willfully violated the automatic 5 stay. Debtor also alleged that at an unspecified time Quality 6 acknowledged notice of the bankruptcy filing. 7 Debtor alleged in a declaration that as a result of the 8 foreclosure she no longer owned her home.3 She also alleged that 9 post-foreclosure she “received a request for property occupancy” 10 and condition information from Appellees’ agents. ECF No. 62-1 11 at 3. To support this allegation, she filed a copy of a “Notice” 12 and a business card of Victor Vasu, Executive Director of The 13 Vasu Preferred Team. Debtor’s counsel’s paralegal alleged that 14 in response to this Notice, he called Quality, told them about 15 the information request, and obtained acknowledgment that the 16 sale violated the stay as well as a promise to rescind the 17 foreclosure. Debtor further alleged that Nationstar contacted 18 her “to determine what [her] plans are to relocate now that the 19 mortgage has been foreclosed upon,”4 and that she received 20 notices and telephone calls from “multiple businesses purporting 21 2 22 The bankruptcy court granted this initial Sanctions Motion, based, in part, on lack of opposition by either 23 Nationstar or Quality. The order was subsequently set aside on Nationstar’s motion and after the bankruptcy court determined 24 that Debtor failed to properly serve Nationstar and Quality. Debtor thereafter re-filed and served her Sanctions Motion, 25 denial of which is at issue in this appeal. 26 3 At oral argument in this appeal, Debtor’s counsel conceded that title remained in Debtor’s name. 27 4 Debtor does not allege when this contact occurred or by 28 what method.

- 3 - 1 to provide post foreclosure assistance.” Id. She finally 2 asserted that she never received a notice of rescission and 3 argued that she should have. 4 As damages, Debtor alleged generally that she suffered 5 “emotional distress, including increased heart palpitations, 6 headaches, anxiety, sleeplessness, stomach aches, stress, and 7 depression” as a result of Appellees’ stay violation. Id. at 4. 8 In addition, she alleged that she incurred $7,200 in attorney’s 9 fees for legal assistance to obtain rescission of the foreclosure 10 and to file her bankruptcy petition. 11 Appellees opposed the Sanctions Motion, primarily on two 12 grounds. First, they asserted that violation of the stay was not 13 willful; Quality received the facsimile notice so close in time 14 to the scheduled time of sale that Quality was not able to review 15 it in time to stop a sale that took place at another location 16 18 minutes later. The record before the bankruptcy court 17 contained unchallenged declaratory evidence from Quality’s 18 bankruptcy supervisor that on the day of the sale, she personally 19 reviewed all the bankruptcy notices in the bankruptcy 20 department’s fax inbox, which averaged between 100 and 150 faxes 21 per day. She testified that the notice of Debtor’s filing showed 22 that it came in at 11:53:58 a.m., and she attached a copy of the 23 facsimile to her declaration. She further testified that she 24 contacted the sales company after processing the information 25 contained in the Debtor’s facsimile, but that the sale had 26 already been cried. She finally testified that at 12:59 p.m. 27 that same day, she contacted Quality’s foreclosure unit, advising 28 them that the sale violated the stay and would need to be

- 4 - 1 rescinded. 2 Appellees also emphasized that upon review of the bankruptcy 3 notice later that same day, and after recognizing that the sale 4 was void, Quality took steps to rescind the sale and did not 5 prepare or record a trustee’s deed upon sale. Appellees argued 6 that, as no trustee’s deed upon sale was ever issued, the sale 7 was not effective and an order of rescission was unnecessary. 8 Appellees’ evidence generally described in-house procedures and 9 specifically identified call records and actions taken on the 10 sale date and afterwards. Based on this evidence, Appellees 11 argued that after the void sale, they committed no further 12 violation of the automatic stay and that Debtor failed to prove 13 otherwise. 14 As to communications allegedly received by Debtor, Appellees 15 argued that Debtor failed to specify a date or time of the call 16 allegedly confirming Quality’s receipt of the bankruptcy notice. 17 Quality provided evidence that its call records reflected that 18 only one call was received, on January 3, 2013, days after the 19 sale. And, as to other alleged notices, calls, and 20 correspondence after foreclosure, Appellees argued that none of 21 the activity was attributable to either of them and that Debtor’s 22 evidence did not show otherwise. 23 Appellees finally asserted that even if Debtor established 24 that the stay violation was willful, she failed to prove 25 recoverable damages. Appellees acknowledged that Debtor likely 26 suffered emotional distress in the days that led to her 27 bankruptcy and the foreclosure, but she did not establish any 28 particular emotional distress caused by postpetition actions

- 5 - 1 taken by Appellees. As to recovery of attorney’s fees, Appellees 2 argued that, pursuant to Sternberg v. Johnson, 595 F.3d 937, 948 3 (9th Cir. 2010), attorney’s fees incurred after remedy of the 4 stay violation are not recoverable under § 362(k). Further, they 5 noted that while Debtor failed to break down the attorney’s fees 6 by date incurred, the fee request included $3,953 more than the 7 $3,000 amount claimed in the first Sanctions Motion and appeared 8 to include fees and costs totally unrelated to the stay 9 violation, such as fees to defend against Nationstar’s motion to 10 set aside the order on the first Sanctions Motion (for improper 11 service) and Debtor’s bankruptcy filing costs. The bankruptcy 12 court issued a lengthy tentative ruling in advance of the 13 hearing. In its tentative ruling, the bankruptcy court 14 preliminarily found, in part, that: 15 Neither Quality nor Nationstar [ ] had appropriate notice of Debtor’s bankruptcy filing prior to the 16 foreclosure sale. As soon as Quality determined the foreclosure sale had proceeded in violation of the 17 automatic stay, the appropriate people within Quality were informed and no Trustee[‘]s Deed Upon Sale was 18 ever produced. Neither Quality nor Nationstar have taken any further action in violation of the automatic 19 stay. Aside from the foreclosure sale that occurred on December 28, 2012, Debtor has not provided any evidence 20 of violations of the automatic stay. While Debtor claims to have received numerous telephone calls and 21 correspondence from a business purporting to provide post-foreclosure assistance, these cannot be directly 22 attributed to Nationstar or Quality. The only evidence submitted by Debtor regarding any of this 23 correspondence is a one-page occupancy request notice delivered by a company called the Vatsu (sic) Preferred 24 Team. Debtor has failed to present any supporting evidence to show that Quality and/or Nationstar 25 willfully violated the automatic stay. 26 ECF No. 71 at 4. 27 After hearing oral argument, the bankruptcy court placed 28 additional comments and findings on the record. It found that

- 6 - 1 Appellees “act[ed] pretty quickly” by voiding the sale within 2 less than an hour, considering that facsimile notice was received 3 only minutes before the lunch hour. Hr’g Tr. (July 29, 2013) at 4 14:21-25, 15:1-3. The bankruptcy court, thus, held that the 5 short-lived stay violation was not the type of violation to “give 6 rise to damages.” Id. at 15:1. And even if it were, the 7 bankruptcy court found that Debtor suffered no actual damages in 8 the “intervening hour.” Id. at 15:3. The bankruptcy court 9 adopted its tentative ruling as its final ruling and denied the 10 Sanctions Motion, with prejudice. 11 Debtor timely appealed. 12 JURISDICTION 13 The bankruptcy court had jurisdiction pursuant to 28 U.S.C. 14 §§ 1334 and 157(b)(2). We have jurisdiction under 28 U.S.C. 15 § 158. 16 ISSUES 17 1. Whether the bankruptcy court committed reversible error 18 when it found that neither Nationstar nor Quality willfully 19 violated the automatic stay. 20 2. Whether the bankruptcy court committed reversible error 21 when it found that debtor failed to establish entitlement to any 22 damages under § 362(k). 23 STANDARD OF REVIEW 24 We review the bankruptcy court’s factual finding that a 25 creditor did not willfully violate the automatic stay under the 26 clearly erroneous standard. See Sternberg v. Johnston, 595 F.3d 27 at 943; Ozenne v. Bendon (In re Ozenne), 337 B.R. 214, 218 (9th 28 Cir. BAP 2006). A court’s findings of fact are clearly erroneous

- 7 - 1 if they are illogical, implausible, or without support in the 2 record. Retz v. Sampson (In re Retz), 606 F.3d 1189, 1197 (9th 3 Cir. 2010). 4 We review the bankruptcy court’s assessment of damages under 5 § 362(k) for an abuse of discretion. See Sternberg, 595 F.3d at 6 945; Eskanos & Adler, P.C. v. Leetien, 309 F.3d 1210, 1213 (9th 7 Cir. 2002).5 We apply a two-part test to determine whether the 8 bankruptcy court abused its discretion. First, we review de novo 9 whether the bankruptcy court selected the correct legal standard 10 to apply. United States v. Hinkson, 585 F.3d 1247, 1261-63 (9th 11 Cir. 2009) (en banc). Second, if the bankruptcy court selected 12 the correct legal standard, we consider whether the court’s 13 findings and its application of those findings to the correct 14 legal standard were illogical, implausible or without support in 15 the record. Id. at 1262. 16 DISCUSSION 17 To find a willful stay violation, the bankruptcy court must 18 conclude that the creditor knew of the bankruptcy filing and 19 intended the actions that violated the stay. See Knupfer v. 20 Lindblade (In re Dyer), 322 F.3d 1178, 1191 (9th Cir. 2003) 21 (citing Pinkstaff v. United States (In re Pinkstaff), 974 F.2d 22 113, 115 (9th Cir. 1992)). In the event of a willful stay 23 violation, an individual injured thereby “shall recover actual 24 damages, including costs and attorneys’ fees, and, in appropriate 25 circumstances, may recover punitive damages.” 11 U.S.C. 26 27 5 As part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub.L. 109-8, 119 Stat. 23, § 362(h) was 28 redesignated as § 362(k).

- 8 - 1 § 362(k)(1). 2 A. The bankruptcy court did not clearly err when it found that the foreclosure sale was not a willful violation of the 3 automatic stay. 4 The bankruptcy court and the parties acknowledged that the 5 foreclosure sale violated the automatic stay. The bankruptcy 6 court found, however, that the violation was not willful because, 7 although the foreclosure sale was an intentional act, the 8 facsimile notice sent by Debtor arrived less than 8 minutes 9 before the scheduled sale and at the lunch hour. Quality, 10 therefore, did not have actual or effective notice of the filing. 11 On appeal, Debtor argues that Appellees acted willfully by 12 going forward with the sale when Quality received the facsimile 13 notice a full 17 minutes before the sale was actually cried at 14 12:10 p.m. 15 We determine that the bankruptcy court’s finding is not 16 clearly erroneous. Based on this record, and, in particular on 17 the evidence provided by Quality’s bankruptcy supervisor, we 18 determine that the bankruptcy court’s finding is well supported 19 by the record and is not illogical or implausible. 20 B. The bankruptcy court did not clearly err when it found that Appellees did not otherwise willfully violate the automatic 21 stay. 22 Even a non-willful stay violation becomes willful if the 23 creditor fails to remedy the violation after receiving notice of 24 the stay. See Eskanos & Adler, P.C., 309 F.3d at 1213 (section 25 362(a) imposes an affirmative duty to cease actions); Goodrich v. 26 Union Planters Mortg. (In re Goodrich), 196 Fed. App’x. 586, 587 27 (9th Cir. 2006) (foreclosing lender has a duty to promptly 28 rescind a trustee’s deed of sale upon learning of the pre-sale

- 9 - 1 bankruptcy filing). 2 Debtor here testified that she never received notice of the 3 rescission of the foreclosure. She also presented declaratory 4 testimony from her attorney’s paralegal, however, that Quality 5 acknowledged the ineffectiveness of the foreclosure sale during a 6 phone call. Appellees argued that because no trustee’s deed upon 7 sale ever issued or recorded, title did not transfer and the sale 8 had no effect – citing without discussion California Civil Code 9 §§ 1091 and 2924. 10 The bankruptcy court found that Appellees took steps to 11 correct their wrongful sale and did so promptly after learning 12 that Debtor filed bankruptcy. We determine that this finding is 13 not clearly erroneous. 14 The Appellees’ characterization of the effect of the 15 trustee’s deed of sale misinterprets the governing statute. 16 Section 2924h(c) of the California Civil Code provides that for 17 the purposes of finalizing a trustee’s sale, “the sale shall be 18 deemed final upon the acceptance of the last and highest bid.” 19 It then discusses perfection of the sale, which is based on 20 recordation of the trustee’s deed within 15 days. Cal. Civ. Code 21 § 2924h(c). Here, title technically transferred even without 22 recordation of a trustee’s deed on sale. 23 Nonetheless, the bankruptcy court could appropriately 24 determine that Appellees decided to rescind within an hour of the 25 sale and took all appropriate action in connection with this 26 decision. Section 2924h(c) provides that a “sale is subject to 27 an automatic rescission for a failure of consideration . . . .” 28 All the trustee is required to do in the event of failed

- 10 - 1 consideration, is to send a notice of rescission to the “last and 2 highest bidder” whose consideration failed. Cal. Civ. Code 3 § 2924h(c). Notice to the owner of the property subject to 4 foreclosure is not required. 5 When the foreclosing party’s credit bid is the highest bid, 6 the determination that a credit bid was ineffective given the 7 pendency of the automatic stay is equivalent to a failure of a 8 third party bidder to timely tender funds; debt is not repaid and 9 the foreclosure is not finalized. The California foreclosure 10 statutes do not require any formal notice of rescission in this 11 circumstance. Again, notice to the property owner, here the 12 Debtor, is not required, and Appellants provided evidence that 13 they recognized and internally communicated the need for 14 rescission promptly. 15 Thus, under California’s comprehensive foreclosure statute, 16 nothing else was required under the circumstances. There 17 certainly are consequences once the sale is rescinded: a new 18 notice of sale must issue and a new reinstatement period arises. 19 See Cal. Civ. Code § 2924c. Debtor offered no evidence, however, 20 that Appellees took any positions inconsistent with their 21 internal decision to rescind the ineffective sale.6 Therefore, 22 the record supports the bankruptcy court’s finding that Appellees 23 did not further violate the stay by failing to promptly remedy 24 the wrongful foreclosure. 25 6 After completion of briefing on this appeal, Nationstar 26 sought authority from the bankruptcy court to proceed to notice a new foreclosure sale, by way of a motion for relief from stay 27 filed in October 2013. At oral argument, the parties’ counsel conceded that Appellees obtained relief from stay but have not as 28 yet issued a new notice of sale.

- 11 - 1 The bankruptcy court also found that Debtor failed to 2 provide any evidence that would support holding either Nationstar 3 or Quality responsible for the allegedly numerous telephone calls 4 and correspondence from businesses purporting to provide post- 5 foreclosure assistance. The one document submitted in evidence, 6 on its face, contains no reference to either Nationstar or 7 Quality, and Debtor offered no evidence from which the bankruptcy 8 court could reasonably attribute it to either appellee. 9 Therefore, on this record, we conclude that the bankruptcy court 10 did not commit error. 11 C. Even if the violation was willful, Debtor suffered no damages as a result thereof. 12 13 As the bankruptcy court also found, even if it determined 14 that Appellees had adequate notice before the foreclosure sale, 15 Debtor failed to provide evidence of damages suffered during the 16 49 minutes that elapsed between the time of sale and Quality’s 17 determination to rescind the sale. And the record reflects that 18 no trustee’s deed upon sale ever issued. The stay violation was 19 short-lived, and Appellees promptly remedied the wrongful 20 foreclosure on their own. Debtor failed to establish any actual 21 damages. Therefore, even if the notice was deemed to be 22 adequate, the bankruptcy court did not abuse its discretion when 23 it denied Debtor’s Sanctions Motion. 24 CONCLUSION 25 For the reasons set forth above, we AFFIRM the bankruptcy 26 court. 27 28

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