4th Street East Investors, Inc.

-1-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
LOS ANGELES DIVISION
In re:
4th Street East Investors, Inc.,
Debtor(s).
Case No.: 2:12-bk-17951-NB
CHAPTER 11
MEMORANDUM DECISION GRANTING IN
REM RELIEF FROM THE AUTOMATIC
STAY
Date: June 26, 2012
Time: 10:00 AM
Courtroom: 1545
A hearing was held at the above-referenced time and place on the motion of
Ocean II, LLC (the “Movant”) for relief from the automatic stay (dkt. 95) (the “Motion”)
and other papers filed in relation thereto (dkt. 116 and 127). Appearances were as
noted on the record.
Based on (i) the foregoing papers, (ii) the bankruptcy schedules (“Schedules”)
and Statement Of Financial Affairs (“SOFA”) (dkt. 1) filed by the above captioned
debtor(s) (“Debtor”), (iii) the proof of service included in the Motion papers showing
service on the owner/borrower listed in the loan documents (the “Owner”), and (iv) the
other documents and records in this case and the arguments and evidence presented at
the hearing, I make the following findings of fact and conclusions of law.
FILED & ENTERED
JUN 29 2012
CLERK U.S. BANKRUPTCY COURT
Central District of California
BY DEPUTY CLERK	walter
Case 2:12-bk-17951-NB Doc 135 Filed 06/29/12 Entered 06/29/12 12:06:46 Desc
Main Document Page 1 of 6

-2-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
A. Findings of Fact
This case matches the profile of certain other cases that have come before the
Court:
(1) In violation of the loan documents, an interest in the subject property
purportedly was transferred to Debtor.
(2) Movant has presented sufficient evidence, including the following, to establish
that the purported transfer was part of a “scheme” to delay or hinder Movant’s remedies
against the property by implicating the automatic stay of 11 U.S.C. § 362(a) in Debtor’s
bankruptcy case:
(a) The grant deed reflects that the purported transfer was for little or no
consideration.
(b) The purported transfer occurred, or it was made known to Movant, at a
time when Movant was seeking to pursue its remedies against the
property.
(c) No evidence or argument was presented that would establish any
legitimate purpose for such a purported transfer.
(3) Movant has not established that Debtor was part of such scheme1 because
on the present record:
(a) There is evidence that the purported transfer occurred after Debtor’s
bankruptcy petition was filed (if the transfer had occurred before the
petition date then that would imply advance coordination between the
transferor and Debtor).
(b) There is no evidence of any other connection between Debtor and (i) the
property, (ii) any transferor of the property (a “Transferor”), or (iii) any
obligor under the movant’s loan documents (e.g., there is no indication
that Debtor was acquainted with a Transferor or obligor or resided at the
property).
1 I make no finding regarding that issue one way or the other.
Case 2:12-bk-17951-NB Doc 135 Filed 06/29/12 Entered 06/29/12 12:06:46 Desc
Main Document Page 2 of 6

-3-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
(c) There is insufficient other evidence to support a finding of an intent by
Debtor, in filing the bankruptcy petition, to hinder, delay or defraud
creditors, such as blank or otherwise substantially defective bankruptcy
schedules, or the debtor’s failure to attend the meeting of creditors under
11 U.S.C. § 341(a).
(d) Based on the foregoing, this case is consistent with the pattern in so-
called “hijacked” or “dumping” cases – i.e., cases in which a transferor of
property, acting without the debtor’s participation or acquiescence, seeks
to implicate the automatic stay for the transferor’s own benefit by
purporting to transfer property into a random bankruptcy estate, or by
back-dating or falsifying a grant deed to make it appear that such a
transfer has occurred.
(4) If Movant intended to seek a specific finding of this Court that Debtor was part
of the scheme, the Motion papers and the facts and circumstances described above did
not sufficiently notify Debtor of that possibility, and therefore Debtor had insufficient
notice of any reason to oppose the Motion.
B. Conclusions of Law
Based on the foregoing facts, although it is not appropriate to find that Debtor
participated in the scheme, it is appropriate to grant relief of the type set forth in 11
U.S.C. '362(d)(4) (“in rem” relief), for the following reasons.
(1) Relief is appropriate under 11 U.S.C. § 364(d)(4) because, as of the time
when the scheme was implemented, the debtor’s “filing of the petition was part of a
scheme [by Transferor] to delay, hinder, or defraud creditors” (11 U.S.C. § 362(d)(4)).
In other words, I interpret the term “was” as descriptive of the type of scheme (a scheme
that involves the fact that filing the petition created an automatic stay), rather than as a
temporal limitation intended by Congress to exclude schemes that are implemented
post-petition. Compare In re Scarborough, 461 F.3d 406, 411 (3d Cir. 2006)
(interpreting the word “is” in 11 U.S.C. § 1322(b)(2) as descriptive, not temporal); In re
Case 2:12-bk-17951-NB Doc 135 Filed 06/29/12 Entered 06/29/12 12:06:46 Desc
Main Document Page 3 of 6

-4-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Abdelgadir, 455 B.R. 896, 902-03 (9th Cir. BAP 2011) (same, under 11 U.S.C.
§ 1123(b)(5)).
(2) Alternatively, the same in rem relief is warranted on two alternative grounds:
the Court’s inherent authority, or the plain meaning of 11 U.S.C. § 105(a).
(a) I respectfully disagree with decisions that, in my view, appear to narrow
§ 105(a) almost out of existence and to deny any authority to prevent
such abuse. See, e.g., In re Johnson, 346 B.R. 190 (9th Cir. BAP 2006).
In departing from Johnson, I follow authority holding that decisions of the
Bankruptcy Appellate Panel are not strictly binding (although they are
often persuasive). See, e.g., In re Rinard, 451 B.R. 12, 20-21 (Bankr.
CD Cal. 2011), disagreed with on other grounds, In re Hernandez (Case
No. 2:11-bk-53730-NB, dkt. 40). Both the Court’s inherent authority and
the plain meaning of 11 U.S.C. § 105(a) authorize the Court “to take
appropriate action in order to prevent abuse of the bankruptcy process.”
In re Fernandez, 212 B.R. 361, 372 (Bankr. CD Cal. 1997), aff’d on other
grounds, 227 B.R. 174 (9th Cir. BAP 1998). See also, e.g., In re
Henderson, 395 B.R. 893, 901-02 (Bankr. D.S.C. 2008) (in rem relief not
limited to § 362(d)(4)).
(b) I also respectfully disagree that an adversary proceeding is required in
order to grant in rem relief as described in this decision. See In re Van
Ness, 399 B.R. 897 (Bankr. E.D. Cal. 2009). It is not apparent why more
elaborate procedures should be required under the Court’s inherent
authority or 11 U.S.C. § 105(a) than would be required to grant the same
type of in rem relief as under § 362(d)(4).
(3) To the extent, if any, that Movant seeks any other extraordinary relief, such as
relief against third parties without any notice (“Extraordinary Relief”), Movant has not
provided sufficient legal authority or factual basis for such relief.
(4) Movant has established sufficient cause to waive the 14 day stay under Fed.
Case 2:12-bk-17951-NB Doc 135 Filed 06/29/12 Entered 06/29/12 12:06:46 Desc
Main Document Page 4 of 6

-5-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
R. Bankr. P. 4001(a)(3).
C. Conclusion
A separate order will be issued, concurrent with this Memorandum Decision,
granting Movant relief from the automatic stay of 11 U.S.C. '362(a), including in rem
relief as described above.
###
United States Bankruptcy Judge
DATED: June 29, 2012
Case 2:12-bk-17951-NB Doc 135 Filed 06/29/12 Entered 06/29/12 12:06:46 Desc
Main Document Page 5 of 6

NOTICE OF ENTERED ORDER AND SERVICE LIST
Notice is given by the court that a judgment or order entitled (specify): MEMORANDUM DECISION
GRANTING IN REM RELIEF FROM THE AUTOMATIC STAY was entered on the date indicated as
AEntered@ on the first page of this judgment or order and will be served in the manner stated below:
1. SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF) B Pursuant to controlling
General Orders and LBRs, the foregoing document was served on the following persons by the court via
NEF and hyperlink to the judgment or order. As of (date) 6/29/12, the following persons are currently on
the Electronic Mail Notice List for this bankruptcy case or adversary proceeding to receive NEF
transmission at the email addresses stated below.
• Marvin B Adviento generalmail@alvaradoca.com
• Brielyn S Atwater bknotice@mccarthyholthus.com, bknotice@mccarthyholthus.com
• Gregory J Babcock gbabcock@abbeylaw.com
• Richard J Bauer rbauer@mileslegal.com
• Bradley S Beherns ecfcacb@piteduncan.com
• Russell Clementson russell.clementson@usdoj.gov
• Mark Domeyer mdomeyer@mileslegal.com
• Fahim Farivar ffarivar@margulies-law.com
• Todd S Garan ecfcacb@piteduncan.com
• Barry S Glaser bglaser@swjlaw.com
• Arnold L Graff ecfcacb@piteduncan.com
• Joe M Lozano notice@NBSDefaultServices.com
• Craig G Margulies cmargulies@margulies-law.com
• Scott H Noskin snoskin@mbnlawyers.com,
krose@mbnlawyers.com;amcdow@mbnlawyers.com
• Martin W. Phillips marty.phillips@att.net
• Kelly M Raftery bknotice@mccarthyholthus.com, kraftery@mccarthyholthus.com
• Russell H Rapoport rrapoport@prllplaw.com, lgillis@prllplaw.com
• Daniel I Singer bankruptcy@zievelaw.com
• United States Trustee (LA) ustpregion16.la.ecf@usdoj.gov
• Darlene C Vigil cdcaecf@bdfgroup.com
Service information continued on attached page
2. SERVED BY THE COURT VIA UNITED STATES MAIL: A copy of this notice and a true copy of this
judgment or order was sent by United States mail, first class, postage prepaid, to the following persons
and/or entities at the addresses indicated below:
Debtor:
4th Street East Investors, Inc.
Attn: Kim Holmes
42034 3rd Street E
Lancaster, CA 93535 Service information continued on attached page
3. TO BE SERVED BY THE LODGING PARTY: Within 72 hours after receipt of a copy of this judgment
or order which bears an AEntered@ stamp, the party lodging the judgment or order will serve a complete
copy bearing an AEntered@ stamp by United States mail, overnight mail, facsimile transmission or email
and file a proof of service of the entered order on the following persons and/or entities at the addresses,
facsimile transmission numbers, and/or email addresses stated below:
Service information continued on attached page
Case 2:12-bk-17951-NB Doc 135 Filed 06/29/12 Entered 06/29/12 12:06:46 Desc
Main Document Page 6 of 6