JOHN E.F. DINAPOLI, ESQ. (CA SBN 84365)
DINAPOLI & SIBLEY
Ten Almaden Boulevard, Suite 1250
San Jose, California 95113
Tel: (408) 999-0900
Fax: (408) 999-0191
W. JEFF BARNES, ESQ. (pro hac vice)
6655 West Sahara Avenue, Suite B200
Las Vegas, Nevada 89146
Tel: (702) 222-3202
Fax: (702) 804-8137
Attorneys for Debtor
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA – SAN JOSE DIVISION
In re ) CASE NO. 08-50378-RLE
DEBTOR ) Chapter 7
) R.S. No. MAW-39
) DEBTOR’S MOTION TO VACATE
ORDER GRANTING MOTION FOR ) RELIEF FROM AUTOMATIC STAY
) (Bankruptcy Rule 9024, Fed. Rule 60(b)
) DATE: Wednesday, September 17, 2008
) TIME: 10:30 a.m.
) CTRM: 3099
) 280 South First Street, #303
___________________________________) San Jose, California 95113-3099
Debtor, pursuant to Bankruptcy Rule 9024, Federal Rule of Civil Procedure 60(b), and applicable decisional law, moves for an order vacating this Court’s prior Order of April 16, 2008 which granted the Motion of Mortgage Electronic Registration Systems, Inc. Solely as Nominee for Alliance Bancorp, its successors and/or assigns (hereafter “Movant”) for relief from the automatic stay.
MEMORANDUM OF POINTS AND AUTHORITIES
I. Background Material Facts
On or about February 26, 2008, Movant filed a Motion for Relief From Automatic Stay which was scheduled for hearing for March 19, 2008. Debtor questioned Movant’s standing at the March 19 hearing. Movant withdrew its Motion, and re-filed same on or about March 26, 2008 with this Motion being scheduled for hearing for April 16, 2008. For purposes of the instant Motion, both of the Movant’s Motion for Relief From Automatic Stay filed on or about February 26, 2008 and March 26, 2008 will be referred to as “Movant’s Motions”.
Movant’s Motions both recited that on or about October 13, 2006, Debtor made, executed, and delivered to Movant a Deed of Trust granting Movant a security interest in real property described as 9 Sonoma Lane, Carmel, California 93923. A copy of the subject Deed of Trust was attached as an exhibit to Movant’s Motions denominated as Document No. 2006094479 filed with the Monterey County Recorder on October 25, 2006.
Movant’s Motions were also accompanied by the Declaration of one Andrew Kneady in alleged support of Movant’s Motions. The Kneady Declarations, both of which were signed on the same day as each of the Motions under penalty of perjury under the laws of the United States of America that each Declaration was true and correct, both recited the same factual allegations as the Movant’s Motions as to the Debtor making, executing, and delivering the Deed of Trust to Movant on or about October 13, 2006 and same having been recorded with the Monterey County Recorder’s office on October 25, 2006.
Conspicuously absent from both of Movant’s Motions and both of the Kneady Declarations (which Declarations were submitted under oath as being “true and correct”) was any reference to facts known to Movant at the time that both Motions and both Kneady Declarations were filed (that being in February and March of 2008) that on October 17, 2007, Movant, through one “Yvonne J. Wheeler, Asst. Sec.” of Movant, executed an Assignment of the Deed of Trust the subject of Movant’s Motions and both Kneady Declarations (denominated as Instrument No. 2006094479 recorded in the Official Records of the Monterey County Recorder’s Office) whereby Movant granted, assigned, and transferred all of its beneficial interest in the subject Deed of Trust to an entity denominated as Chase Home Finance, LLC. A copy of this first Assignment is attached hereto and incorporated herein by reference. Although this first Assignment of the subject Deed of Trust was not notarized until June 17, 2008 and not recorded until June 23, 2008, this first Assignment was effective as of October 17, 2007.
Further and on the same day (October 17, 2007), the same “Yvonne J. Wheeler”, this time affirmatively representing herself to be the “A.V.P.” of “Chase Home Finance LLC by Cal-Western Reconveyance Corporation as Attorney-In-Fact”, executed a second Assignment of the same Deed of Trust the subject as the first Assignment (Instrument No. 2006094479) to an entity known as “Homesales, Inc.”, by which Chase Home Finance LLC granted, assigned, and transferred all beneficial interest under the subject Deed of Trust to Homesales, Inc. A copy of this second Assignment is attached hereto and incorporated herein by reference. Although this second Assignment of the subject Deed of Trust was not notarized until June 17, 2008 and not recorded until June 23, 2008, this second Assignment was also effective as of October 17, 2007.
There is no allegation in either of Movant’s Motions or either of the Kneady Declarations that Homesales, Inc. ever re-assigned its interest in the subject Deed of Trust back to Movant in order for Movant to seek relief in this proceeding or granted Movant with any rights to seek such relief.
Pursuant to the multiple Assignments from Movant to Chase Home Finance LLC and from Chase Home Finance LLC to Homesales, Inc., “Movant” lost its legal standing to seek any relief incident to the subject Deed of Trust on October 17, 2007, including the right to seek any relief from the automatic stay to pursue a Trustee’s Sale. As Movant had actual knowledge, at the time that it filed both Motions for Relief From Automatic Stay and both Kneady Declarations in February and March of 2008 that it had no legal standing to do so as of October 17, 2007, Movant has misrepresented material facts to this Court and has perpetrated a fraud upon this Court to the detriment of the Debtor.
II. Applicable Law
A Federal court has the inherent power to determine whether it may exercise jurisdiction in any particular matter and to determine standing under Federal constitutional principles and under the Bankruptcy Code. In Re Commercial Financial Services, Inc., 238 B.R. 249, 481 (Bankr. N.D. Okl. 1999)(Order striking pleadings for lack of standing, citing Stoll v. Gottleib, 305 U.S. 165, 171, 59 S.Ct. 134, 137, 83 L.Ed. 104 (1938)). The question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or of particular issues, which inquiry involves both constitutional limitations on federal-court jurisdiction and prudential limitations on its exercise. In Re Commercial Financial Services, Inc., supra, citing Warth v. Seldin, 422 U.S. 490, 497, 95 S.Ct. 2197, 2205, 45 L.Ed.2d 343 (1975).
A party seeking to foreclose bears the burden of demonstrating standing and must plead its components with specificity, and must demonstrate that it was the holder and owner of the note and mortgage as of the date that foreclosure relief is sought or the court will enter a dismissal of the foreclosure action. Coyne v. American Tobacco Company, 183 F.3d 488 (6th Circuit 1999), cited in Opinion and Order of Hon. Christopher A. Boyko in the matter of In Re Foreclosure Cases, United States District Court, Northern District of Ohio (Eastern Division)(copy attached hereto, dismissing foreclosure actions for failure of foreclosing party to satisfy its burden of demonstrating standing as of the time of seeking foreclosure relief through filing of Complaint).
Section 1109 of the Bankruptcy Code identifies persons or entities who possess the right to be heard in a bankruptcy case as being a party in interest, including the debtor, the trustee, a creditors’ committee, an equity security holders’ committee, a creditor, an equity security holder, or any indenture trustee. Although any of these parties may raise and may appear and be heard on any issue in a case, the Bankruptcy Court must determine, on a case-by-case basis and pursuant to 11 U.S.C. sec. 1109(b), whether the prospective party in interest has a sufficient stake in the proceeding to require representation. In Re Commercial Financial Services, Inc., supra, citing Vermejo Park Corp. v. Kaiser Coal Amatex Corp., 755 F.2d 1034, 1042 (3d Cir. 1985). If a party seeking relief is not a party in interest, has no personal claim, or does not represent anyone on whose behalf he might be a party in interest, he has no standing to seek relief and any relief sought is without merit and cannot be granted for lack of standing. In Re Property Management & Investment, Inc., 17 B.R. 728, 730 (Bankr. M.D. Fla. 1982).
Bankruptcy Rule 9024 provides for relief from Orders or Judgments, incorporating Federal Rule of Civil Procedure 60(b). Rule 60(b) permits relief from a Judgment or Order for, inter alia,
(1) mistake, inadvertence, surprise, or excusable neglect;
(3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party;
(4) the judgment is void; or
(6) any other reason that justifies relief.
Orders of the United States Bankruptcy Court are subject to the provisions of Rule 60(b), especially with regard to orders granting relief from the automatic stay including those which grant relief from the automatic stay in order to permit a putative creditor to seek foreclosure of the debtor’s residence. “Such orders can be brutal”, and “Where they do not promote their intended purposes, they must be reviewed, and where enforcement produces inequitable results, Rule 60(b)(6) offers an alternative.” In Re Rickey Linda Thomas, A.P. No. 07-00042 (Memorandum Opinion, Bankr. N.D. Ala. Southern Division, April 20, 2007). Rule 60(b)(6) is a provision designed to cover unforeseen contingencies and is available in exceptional circumstances, and where absent such relief an extreme hardship will result. In Re Rickey Linda Thomas, supra at page 7, citing Lasky v. Continental Products Corp., 804 F.2d 250, 255 n.9 (3d Cir. 1986) and Mayberry v. Maroney, 558 F.2d 1159, 1163 (3d Cir. 1977).
When a party demonstrates circumstances that justify vacating an earlier court order lifting the stay to pursue a foreclosure, that party may properly file a motion pursuant to Bankruptcy Rule 9024 and Fed.R.Civ.P. 60(b) for relief from the prior order granting relief from the automatic stay, with the granting of the Rule 9024/60(b) motion operating to reimpose the automatic stay to prevent a foreclosure. In Re Gledhill, 76 F.3d 1070, 1072 (10th Cir. 1996). Doing so does not constitute a request for an injunction which requires an adversary proceeding under Bankruptcy Rule 7001(7), and thus a party may seek relief from a bankruptcy court order which lifted the automatic stay by motion pursuant to Rules 9024 and 60(b) without filing an adversary proceeding. The plain language of Rules 9024 and 60(b) permit a party to request Rule 60(b) relief by filing the motion as a contested matter. In re Gledhill, supra at 1079-1080.
Rule 60(b) “gives the court a ‘grand reservoir of equitable power to do justice in a particular case’”. In Re Gledhill, supra, citing Pierce v. Cook & Co., 518 F.2d 720, 722 (10th Cir. 1075)(en banc), quoting Radack v. Norwegian America Line Agency, Inc., 318 F.2d 538, 542 (2d Cir. 1963). Rule 60(b) should be liberally construed to achieve substantial justice. United States v. Gould, 301 F.2d 353, 355-56 (5th Cir. 1962), quoting 7 Moore’s Federal Practice P. 60.19, at 237-39.
The allowance of a movant to foreclose on a debtor’s home results in the debtor suffering irreparable injury, and the threatened injury to the debtor from a foreclosure is greater than any damage which the movant may claim to suffer. In Re Rickey Linda Thomas, supra at page 14.
III. Application of Law to Facts and Relief Sought
Movant has failed to demonstrate, and cannot demonstrate, that it had legal standing to request relief from the automatic stay to pursue a foreclosure and Trustee’s Sale of the Debtor’s property at the time that it filed either of its Motions and Declarations, both of which were devoid of any allegations that Movant’s previously assigned interest in the Deed of Trust to Chase Home Finance LLC and subsequently assigned to Homesales, Inc. were either re-assigned back to Movant or that Movant had been provided with any legal authority by Homesales, Inc. to pursue relief from the automatic stay. As in the attached decision of Judge Boyko, “…none of the Assignments show the named Plaintiff to be the owner of the rights, title, and interest under the Mortgage at issue as of the date of the Foreclosure Complaint.”
The material omissions by Movant and the material nondisclosure by Movant of the multiple Assignments in either of Movant’s Motions or the accompanying Declarations resulted in a ruse to have this Court believe, at the time that Movant’s Motions were filed and on April 16, 2008, that Movant had full legal standing to request the drastic form of relief from the automatic stay to pursue a foreclosure on the Debtor’s home. As in the Boyko decision, Movant has failed to satisfy its threshold obligation of demonstrating legal standing to seek relief.
Under these now record circumstances, the entry of this Court’s April 16, 2008 Order granting Movant’s Motion for Relief From Automatic Stay was a mistake based on the misrepresentations of Movant ab initio, thus justifying the vacation of the subject Order pursuant to Fed.R.Civ.P. 60(b)(1). The material omissions and misrepresentations of Movant constitute fraud, misrepresentation, and misconduct by Movant, thus warranting the vacation of this Court’s April 16, 2008 Order pursuant to Fed.R.Civ.P. 60(b)(3).
As this Court’s Order of April 16, 2008 was based on a premise which is conclusively false (lack of standing or legal interest of Movant), the subject Order granting relief from the automatic stay for Movant to pursue a foreclosure is void, warranting the vacation of the subject Order pursuant to Fed.R.Civ.P. 60(b)(4). As the injustice resulting from the entry of this Court’s April 16, 2008 Order is extraordinary, not anticipated by the Court at the time of entry of the April 16, 2008 Order, and as such harm is substantial and represents irreparable injury to the Debtor which greatly outweighs any alleged “harm” to the Movant (who had no interest in the subject Deed of Trust as of October 17, 2007), this Court’s April 16, 2008 Order should be vacated pursuant to Fed.R.Civ.P. 60(b)(6).
Debtor thus requests that this Court’s April 16, 2008 Order be vacated and, if the Court deems appropriate, that sanctions be entered against Movant and any other responsible party pursuant to Bankruptcy Rule 9011.
DINAPOLI & SIBLEY
John E. F. DiNapoli (CA SBN )
W. Jeff Barnes (pro hac vice)
Attorneys for Debtor
CERTIFICATE OF SERVICE
THE UNDERSIGNED HEREBY CERTIFIES that a true and correct copy of the foregoing has been forwarded, via U.S. Mail, to all parties and counsel on the attached Service List. DINAPOLI & SIBLEY
/s/ John E. F. DiNapoli (CA SBN 84365)
W. Jeff Barnes (pro hac vice)
Attorneys for Debtor
CHAPTER 7 TRUSTEE
John W. Richardson
5161 Soquel Drive, #F
Soquel, California 95073
U.S. Trustee, Department of Justice
U.S. Federal Building
280 S. 1st St., #268
San Jose, California 95113-3004
C/o Managing or Servicing Agent
P.O. Box 79135
Phoenix, Arizona 85062-9135
Melodie A. Whitson
Pite Duncan LLP
525 E. Main Stret
P.O. Box 12289
El Cajon, California 92022-2289