Michael Lynn Richter

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
FOR PUBLICATION
UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
RIVERSIDE DIVISION
In re
Michael Lynn Richter,
Debtor.
Case No. 6:14-bk-10231-SY
Chapter 13
MEMORANDUM DECISION ON
RUSTLING OAKS, LLC’S MOTION
FOR RELIEF FROM THE
AUTOMATIC STAY (UNLAWFUL
DETAINER)
Before the Court is a motion by Rustling Oaks, LLC (“Rustling Oaks”) for relief
from the automatic stay to commence an unlawful detainer proceeding against the
debtor Michael Lynn Richter (“Debtor”) and evict Debtor from his residence, which
Rustling Oaks purchased at a prepetition foreclosure sale. The sale, however, was
subject to Debtor’s postsale right of redemption under California law, which is
available to the prior owners of real property sold in a nonjudicial foreclosure by a
homeowners’ association on its lien for delinquent assessments. Debtor confirmed a
Chapter 131 plan without objection that he characterizes as exercising this right. The
1 Unless otherwise indicated, all chapter, section, and rule references are to the
Bankruptcy Code, 11 U.S.C. §§ 101–1532, and to the Federal Rules of Bankruptcy Procedure,
Rules 1001–9037.
FILED & ENTERED
JAN 20 2015
CLERK U.S. BANKRUPTCY COURT
Central District of California
BY DEPUTY CLERK	hawkinso
FOR PUBLICATION
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 1 of 34

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
broad issue here is whether relief from the automatic stay is warranted in light of
Debtor’s purported redemption through his plan.
For the reasons set forth below, the Court will regrettably grant Rustling
Oaks’ motion. The automatic stay as to the property will be annulled retroactively to
validate certain actions taken by the foreclosure trustee, and Rustling Oaks will be
entitled to begin its unlawful detainer proceeding to gain possession of the property.
1. FACTUAL BACKGROUND.
In 2000, Debtor purchased a condominium unit within a country club in Palm
Desert, California (the “Residence”). As part of a common interest development, the
Residence is subject to a set of covenants, conditions, and restrictions (the “CC&Rs”)
enforced by the development’s homeowners’ association, Marrakesh Community
Association (“MCA”); one of those CC&Rs requires the condo owner to pay various
assessments to MCA. If assessments are not paid, the CC&Rs allow a trustee
designated by MCA to initiate a nonjudicial foreclosure of the Residence.
Debtor became delinquent on his assessments. The delinquencies prompted
MCA to execute and record a Notice of Assessment Lien in February 2013, indicating
that it had a lien in the amount of $7,206.08 for unpaid assessments, interest, and
related fees. In the Notice, MCA designated the law firm Wayne S. Guralnick, APLC
(“Guralnick”) to act as the foreclosure trustee.
The delinquencies continued, so Guralnick, on behalf of MCA, began the
nonjudicial foreclosure process by recording in May 2013 a Notice of Default and
Election to Sell Pursuant to Assessment Lien and the Provisions of the Declaration of
Restrictions. Guralnick then recorded a Notice of Trustee’s Sale in September 2013,
which stated that the Residence would be sold at public auction on October 10, 2013.
The auction took place as scheduled. By this date, the total unpaid debt to
MCA reached $18,836. At the auction, Rustling Oaks, a third party unrelated to
MCA, became the highest bidder, purchasing the Residence for $36,000. After
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 2 of 34

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
Rustling Oaks paid the purchase price,2 Guralnick recorded the Certificate of
Foreclosure Sale Subject to Redemption on October 17, 2013. The Certificate
informed Debtor that he had 90 days from the sale date to redeem the Residence.
On January 8, 2014, the final day of the redemption period, Debtor filed his
Chapter 13 petition. Formal notice of the bankruptcy filing was provided to MCA and
Guralnick, but not to Rustling Oaks. These three entities did not file a proof of claim
or otherwise participate in Debtor’s bankruptcy case.
Using this district’s mandatory form, Debtor then proposed a Chapter 13 plan
that he believed was sufficient to redeem the Residence from the foreclosure sale (the
“Plan”). Debtor listed MCA in Class 2 of the Plan, which is intended for the “cure and
maintenance” of claims secured by a debtor’s principal residence. In this class, Debtor
proposed to directly pay MCA the ongoing postconfirmation assessments (the
maintenance) outside of the Plan and to pay MCA through the Plan a total of $18,836
over 60 months (the cure).3
Although Debtor’s intention was to exercise his right of redemption through
the Plan, nothing on the face of the Plan (other than possibly the mere inclusion of
MCA’s name in Class 2) signaled this intention. The Plan’s miscellaneous provisions,
where a debtor is permitted to add his own custom language, did not mention
Rustling Oaks, the prepetition foreclosure sale, or Debtor’s right of redemption.4
Rather, the Plan’s treatment of MCA’s claim in Class 2 resembled what is commonly
proposed for the cure and maintenance of home mortgages in default. Like with the
2 The total debt owed to MCA was paid in full from the sale proceeds.
3 The operative language of the Plan specifically provided, “The postconfirmation
monthly mortgage payment will be made by the Debtor directly to . . . [MCA],” and, “The
Debtor will cure all prepetition arrearages for the primary residence through the Plan
Payment as set forth below,” then listing MCA and the $18,836 arrearage.
4 Debtor did specifically reference his Residence in the Plan by inserting the following
language into one of the Plan’s form provisions: “Debtor has listed his residence for sale and
is aggressively seeking a buyer or reverse mortgage options. A contribution will be made in
the 7th month if the property has not sold or been refinanced.”
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 3 of 34

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
petition, MCA and Guralnick, but not Rustling Oaks, received notice of the Plan, but
neither of them filed an objection. The Plan was then confirmed on March 24, 2014.
MCA began receiving payments from the Chapter 13 trustee and Debtor. But
Guralnick, on MCA’s behalf, returned the checks in May 2014 and informed the
trustee and Debtor that MCA could not accept payments for delinquent or ongoing
assessments because MCA had been paid in full from the sale proceeds and Rustling
Oaks was the new owner of the Residence. Up until then, the trustee was apparently
unaware that the Residence had been sold in a prepetition foreclosure sale.
Debtor’s counsel then exchanged emails with Guralnick, in which she insisted
that her client had successfully redeemed the Residence through the Plan and that
she would initiate an adversary proceeding to redress the alleged violations of the
automatic stay if this situation between Debtor, Guralnick, MCA, and Rustling Oaks
could not be resolved. In response to counsel, Guralnick explained its position, that
“the Chapter 13 plan providing [for] the HOA prepetition payments [made] no sense”
and that “[i]f [Debtor] wanted to redeem the property, he would need to pay [Rustling
Oaks] in full at the time of redemption so that [Rustling Oaks] receives all [of] its
funds back.” Although nothing was resolved between the parties, Debtor never filed
an adversary proceeding.
Two months later, in July, Guralnick sent letters to Debtor’s counsel and the
trustee informing them of its intention to record the Trustee’s Deed. Receiving no
response, Guralnick executed the Trustee’s Deed on July 28, 2014, and then recorded
it on August 1, 2014, perfecting Rustling Oaks’ legal title in the Residence.
On October 7, over six months after confirmation, Rustling Oaks filed its
motion for relief from the automatic stay, which Debtor vehemently opposed. An
initial hearing on the motion was held on October 29, where the Court heard oral
argument and allowed the parties to submit supplemental briefs. Following the
submission of those briefs, the Court entertained final oral argument at the
continued hearing on December 17.
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 4 of 34

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
2. JURISDICTION.
This memorandum decision contains the Court’s findings of fact and
conclusions of law required by Federal Rule of Civil Procedure 52(a), made applicable
to this contested matter by Bankruptcy Rules 7052 and 9014(c). The Court has
jurisdiction under 28 U.S.C. § 1334 and 11 U.S.C. § 362, and this is a core proceeding
under 28 U.S.C. § 157(b)(2)(G).
3. DISCUSSION.
3.1. Introduction.
An entity seeking to evict a debtor from and gain possession of real property
must first obtain relief from the automatic stay under § 362(d) because the stay
protects the debtor’s physical occupation of real property, a possessory interest under
California law. See Eden Place, LLC v. Perl (In re Perl), 513 B.R. 566, 576 (B.A.P. 9th
Cir. 2014). Here, wishing to initiate an unlawful detainer proceeding against Debtor
after a prepetition foreclosure sale and the expiration of the redemption period,
Rustling Oaks argues that cause exists under § 362(d)(1) to grant stay relief.5
Debtor contends that stay relief is not warranted for a number of reasons. His
opposition and supplemental brief can be boiled down to essentially three major
arguments: (1) That the Bankruptcy Code allows Debtor to redeem the Residence
through the Plan; (2) that the Plan’s res judicata effect precludes Rustling Oaks from
moving for stay relief; and (3) that Rustling Oaks’ title is premised on a void
Trustee’s Deed recorded postpetition, making stay relief for an unlawful detainer
proceeding premature at this time. The Court considers each argument below.
5 Rustling Oaks did not request relief under § 362(d)(2). Therefore, the Court does not
need to consider Debtor’s arguments regarding his equity in the Residence and how the
Residence is necessary to his reorganization.
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 5 of 34

6
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
3.2. The Unexpired Statutory Right of Redemption in a Chapter 13 Case.
3.2.1. The Right of Redemption under California Law.
In California, an owner facing foreclosure of his real property is entitled to
redeem it. There are, however, two separate rights of redemption available to him.
Before the property is sold in the foreclosure sale, the owner has an equitable
right of redemption (or equity of redemption), which allows him to pay the entire debt
owed to the foreclosing lienholder “at any time prior to the sale to avoid loss of the
property.” Knapp v. Doherty, 123 Cal. App. 4th 76, 87 (2004) (citing Cal. Civ. Code
§§ 2903, 2905). This redemption has the effect of satisfying the debt, extinguishing
the lien, and terminating the power of sale. See Nguyen v. Calhoun, 105 Cal. App.
4th 428, 440 (2003). But the foreclosure sale extinguishes the owner’s right to
equitably redeem the property. See Moeller v. Lien, 25 Cal. App. 4th 822, 831 (1994).
Following the foreclosure sale, a statutory right of redemption (or statutory
redemption) may be available under certain circumstances, which gives the now-
former owner “an opportunity to regain ownership of the property by paying the
foreclosure sale price [to the purchaser], for a period of time after foreclosure.”
Alliance Mortg. Co. v. Rothwell, 10 Cal. 4th 1226, 1236 (1995). An effective
redemption terminates the effect of the sale and restores the former owner to the
estate sold at the foreclosure sale. Cal. Civ. Proc. Code § 729.080(d). The purpose of a
postsale right of redemption is “to force the purchaser at [the foreclosure] sale to bid
the property in at a price approximating its fair value.” Salsbery v. Ritter, 48 Cal. 2d
1, 11 (1957).
The statutory right of redemption under California law though does not exist
in all foreclosure scenarios. While a judicial foreclosure sometimes provides the prior
owner with this right, a nonjudicial foreclosure generally does not. See Alliance
Mortg., 10 Cal. 4th at 1236; see also Cal. Civ. Proc. Code §§ 726(e), 729.010(a). There
is, however, a narrow exception. The nonjudicial foreclosure by a homeowners’
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 6 of 34

7
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
association on its lien for delinquent assessments6 is subject to statutory redemption,
allowing the former owner to redeem within 90 days of the foreclosure sale. See Cal.
Civ. Code § 5715(b); Cal. Civ. Proc. Code § 729.035.
It is undisputed that Debtor did not equitably or statutorily redeem his
Residence in accordance with applicable California law. He did not pay the entire
amount of the delinquent assessments prior to the foreclosure sale, and he did not
pay the purchase price of the Residence in full within 90 days of the sale. Instead,
Debtor filed his petition before the statutory redemption period expired and then
proposed and confirmed his Plan that pays MCA, the homeowners’ association, the
amount of the delinquent assessments over a 60-month term. Debtor characterizes
this as his lawful redemption through the Plan. In response, Rustling Oaks contends
that the Bankruptcy Code does not allow a plan to do this.
The first issue in this matter is whether the Bankruptcy Code permits Debtor
to do what his Plan has proposed.7 Although this inquiry appears straightforward,
the difficulty in addressing the issue is that what has been proposed within the four
corners of Debtor’s Plan is not the same as what Debtor’s papers argues his Plan has
done. On the one hand, the Plan provides for the repayment of MCA’s $18,836
arrearage, which suggests that Debtor is attempting to cure the default, rather than
exercise and modify his statutory right of redemption. See McCarn v. WyHy Fed.
6 If property within a common interest development is subject to assessments, then a
homeowners’ association in charge of managing that development is entitled to a lien on the
property for the amount of any delinquent assessments. See Cal. Civ. Code § 5675(a). The
homeowners’ association can enforce the assessment lien by a trustee’s sale (i.e., a
nonjudicial foreclosure). See id. § 5700(a) (stating that lien “may be enforced in any manner
permitted by law, including . . . sale by the trustee designated in the notice of delinquent
assessment”); id. § 5710(a) (providing that “[a]ny sale by the trustee shall be conducted in
accordance with Sections 2924, 2924b, and 2924c applicable to the exercise of powers of sale
in mortgages and deeds of trust”).
7 Citing Multnomah County v. Ivory (In re Ivory), 70 F.3d 73 (9th Cir. 1995), Debtor
argues that because his Plan has already been confirmed, the Court cannot disturb his Plan.
However, as discussed below, the Plan is ambiguous and confusing at best regarding the
proposed treatment of the dispute with MCA, Guralnick, and Rustling Oaks. The Court
therefore will exercise its inherent power to interpret and enforce its own orders and
confirmed plans. See Wilshire Courtyard v. Cal. Franchise Tax Board (In re Wilshire
Courtyard), 729 F.3d 1279, 1289–90 (9th Cir. 2013).
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 7 of 34

8
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
Credit Union (In re McCarn), 218 B.R. 154, 162 (B.A.P. 10th Cir. 1998) (explaining
how exercising a statutory right of redemption “is separate from the ability to ‘cure’ a
default in a chapter 13 plan”). On the other hand, Debtor’s opposition and
supplemental brief, while making some reference to curing defaults and even citing
to cases considering the right to cure, have primarily focused on the argument that
Debtor exercised his right of redemption through the Plan and that “[f]ederal law
allows that redemption to be reorganized in chapter 13.” Due to the inconsistency,
Debtor has not articulated a cohesive argument on this first issue.
To alleviate further confusion, the Court believes that the following question
better expresses the heart of the first issue: When a foreclosure sale of a debtor’s
principal residence has occurred prepetition and the debtor then files a Chapter 13
petition before his statutory right to redeem expires, what are his options under the
Bankruptcy Code to save his residence?8
3.2.2. The Curing of Defaults Under § 1322(b)(3) and (b)(5).
Debtor contends that one option to save the Residence is found in the broad
cure provisions of § 1322(b)(3) and (b)(5), which set forth that a debtor may propose a
plan that “provide[s] for the curing of any default.” “[T]he plain meaning of ‘cure,’ as
used in § 1322(b)(3) and (5), provides a debtor with the right to remedy a default and
restore matters to the status quo ante. In other words, cure will nullify all
consequences of default.” Frazer v. Drummond (In re Frazer), 377 B.R. 621, 630
(B.A.P. 9th Cir. 2007) (citations omitted). The argument is that the cure provisions
would allow Debtor to propose a plan that would basically undo the foreclosure sale
and reinstate his presale obligation to pay the assessments to MCA.
Debtor argues that these cure rights are available to him so long as, on the
petition date, he retains an interest in the Residence or his right to redeem has not
8 As a matter of fairness to Debtor and because the Court is sympathetic to Debtor’s
plight of losing his primary residence, the Court will consider every possible argument that
can be extracted from Debtor’s papers.
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 8 of 34

9
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
yet expired. However, he fails to acknowledge § 1322(c)(1), a limitation placed on
§ 1322(b)(3) and (b)(5), that states,
(c) Notwithstanding subsection (b)(2) and applicable nonbankruptcy
law—
(1) a default with respect to, or that gave rise to, a lien on the
debtor’s principal residence may be cured under paragraph (3)
or (5) of subsection (b) until such residence is sold at a foreclosure
sale that is conducted in accordance with applicable
nonbankruptcy law . . . .
11 U.S.C. § 1322(c)(1) (emphasis added). The provision was added to the Bankruptcy
Code in 1994, see Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 301, 108
Stat. 4106, 4131, as a way for Congress to reconcile a circuit split and address when a
debtor’s right to cure a default under § 1322(b)(3) or (b)(5) is extinguished,9 see H.R.
Rep. No. 103-835, at 52 & n.18 (1994), reprinted in 1994 U.S.C.C.A.N. 3340, 3361.
Since Debtor seeks to cure a default with respect to a lien on his principal residence
and the lien can be enforced via a foreclosure sale, § 1322(c)(1) is an applicable
limitation on his Plan. See Frazer, 377 B.R. at 628–29.
Under this provision, the right to cure a default involving a lien on a debtor’s
principal residence is permitted but only “until such residence is sold at a foreclosure
sale that is conducted in accordance with applicable nonbankruptcy law.” 11 U.S.C.
§ 1322(c)(1). Courts are split on when a “residence is sold at a foreclosure sale,” with
many adopting the “gavel rule” and others adopting the “deed-delivery rule.”
9 Specifically, Congress intended to supersede the rule from In re Roach, 824 F.2d
1370, 1379 (3d Cir. 1987) (holding that right to cure “does not extend beyond the entry of a
foreclosure judgment”), and to codify the rule from Federal Land Bank of Louisville v. Glenn
(In re Glenn), 760 F.2d 1428, 1435 (6th Cir. 1985) (“The event we choose as the cut-off date of
the statutory right to cure defaults is the sale of the mortgaged premises.”), and Clark v.
Federal Land Bank of St. Paul (In re Clark), 738 F.2d 869, 874 (7th Cir. 1984) (holding that
debtor can cure after foreclosure judgment but expressing no opinion about debtor’s right to
cure after foreclosure sale). See H.R. Rep. No. 103-835, at 52 & n.18 (1994), reprinted in 1994
U.S.C.C.A.N. 3340, 3361. Prior to § 1322(c)(1)’s addition to the Code, this circuit’s
bankruptcy appellate panel (the “BAP”) agreed with the majority of the circuits that “the
foreclosure sale is the correct point to cutoff the right to cure.” Oregon v. Hurt (In re Hurt),
158 B.R. 154, 160 (B.A.P. 9th Cir. 1993); see also Or. Dep’t of Veterans’ Affairs v. Braker (In
re Braker), 125 B.R. 798, 801 (B.A.P. 9th Cir. 1991).
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 9 of 34

10
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
The courts adopting the gavel rule, including most of the courts of appeals and
the BAPs that have considered § 1322(c)(1), conclude that the statutory language is
unambiguous, that when property is “sold at a foreclosure sale” refers to a specific
event and not to a multistep process, and that this provision cuts off a debtor’s right
to cure a default at the conclusion of the foreclosure auction, rather than a later point
in time. See, e.g., In re Connors, 497 F.3d 314, 319–21 (3d Cir. 2007); Cain v. Wells
Fargo Bank, N.A. (In re Cain), 423 F.3d 617, 620–21 (6th Cir. 2005); TD Bank, N.A.
v. LaPointe (In re LaPointe), 505 B.R. 589, 597 (B.A.P. 1st Cir. 2014); McCarn, 218
B.R. at 160–62; In re Bobo, 246 B.R. 453, 456–59 (Bankr. D.C. 2000); see also
Commercial Fed. Mortg. Corp. v. Smith (In re Smith), 85 F.3d 1555, 1558 n.3 (11th
Cir. 1996) (dicta).
In contrast, the other courts, who have adopted the deed-delivery rule, have
usually concluded that § 1322(c)(1) is ambiguous and requires looking at legislative
history, that when property is “sold at a foreclosure sale” refers to the entire
foreclosure process, and that the debtor’s right to cure survives until title passes to
the purchaser (i.e., when the debtor no longer has any interest in the property) under
state law, which is typically when a deed is delivered or recorded. See, e.g., In re
Jenkins, 422 B.R. 175, 181–82 (Bankr. E.D. Ark. 2010); In re Beeman, 235 B.R. 519,
524–26 (Bankr. D.N.H. 1999); see also Colon v. Option One Mortg. Corp., 319 F.3d
912, 920–21 (7th Cir. 2003) (suggesting that debtor has right to cure until at least
expiration of all rights of redemption).
This Court agrees with those courts adopting the gavel rule. The language in
§ 1322(c)(1) is clear and unambiguous. “[T]he preposition ‘at’ in ‘sold at a foreclosure
sale’ signifies a discrete event, rather than an ongoing process,” Connors, 497 F.3d at
320, and that discrete event must be the “auction at which the highest bidder
purchases the property,” Cain, 423 F.3d at 620; accord Connors, 497 F.3d at 322
(holding that “foreclosure sale” is “‘completed’ with the fall of the gavel and the
vesting of equitable title in the winning bidder”). “To define the word ‘sold’ as the
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 10 of 34

11
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
point at which a deed is transferred to the prevailing bidder subsequent to the date of
the auction . . . removes the words ‘foreclosure sale’ from the statute.” In re Crichlow,
322 B.R. 229, 234 (Bankr. D. Mass. 2004). Thus, “[t]he language of section 1322(c)(1)
is clear and unambiguous in establishing the date of the actual foreclosure sale as
the cut-off for curing a . . . default under section 1322(b).” McCarn, 218 B.R. at 160.
Because there is no ambiguity in the statute, the Court has no need to consult the
legislative history.10 See United States v. Ron Pair Enters., Inc., 489 U.S. 235, 240–
41 (1989); Sloan v. Lewis, 89 U.S. (22 Wall.) 150, 155 (1874) (“If the intention of
Congress is manifest from what there appears we need not go further.”).
If the Court must consider “applicable nonbankruptcy law,” the result remains
the same in this case: Property is “sold at a foreclosure sale” at the completion of the
foreclosure auction under California law, rather than at the delivery or recordation of
the trustee’s deed. In a typical trustee’s sale, every bid is “deemed to be an
irrevocable offer by that bidder,” Cal. Civ. Code § 2924h(a), and the sale is “deemed
final upon the acceptance of the last and highest bid,” id. § 2924h(c). Therefore, “[a]s
a general rule, a trustee’s sale is complete upon acceptance of the final bid” under
California law.11 Nguyen, 105 Cal. App. 4th at 441.
10 Even if the Court considered it, the legislative history is inconclusive as to
Congress’s intent as some courts have concluded. See, e.g., McCarn, 218 B.R. at 161 n.5.
Also, the legislative history does not appear to favor adoption of the deed-delivery rule. That
rule is more in line with a prior version of § 1322(c)(1) that appeared in a bill passed by the
Senate, which allowed a debtor to cure as long as he “possesse[d] any legal or equitable
interest, including a right of redemption, in [the subject] real property” on the petition date.
S. 540, 103d Cong. § 301 (as passed by Senate, Apr. 21, 1994), available at
http://www.gpo.gov/fdsys/pkg/BILLS-103s540es/pdf/BILLS-103s540es.pdf; see also S. Rep.
No. 103-168, at 51 (1993) (“[I]f the debtor still possesses an interest in the land, such as a
right of redemption, then the debtors may use preemptive Federal bankruptcy rights to save
their homes from foreclosure, notwithstanding State law.”), 1993 WL 444315. However, the
bill was never passed by the House and died in the first session of the 103rd Congress. In the
second session, the House introduced a new version of the bill that abandoned the language
found in the Senate’s bill. See H.R. 5116, 103d Cong. § 301 (as introduced by House, Sept. 28,
1994) (allowing debtor to cure “until such residence is sold under such lien and in accordance
with applicable nonbankruptcy law”), available at http://www.gpo.gov/fdsys/pkg/BILLS-
103hr5116ih/pdf/BILLS-103hr5116ih.pdf. Indeed, “Congress’s rejection of the Senate bill in
favor of the current language of § 1322(c)(1) is telling.” Connors, 497 F.3d at 322.
11 Further, the owner’s right to cure under state law in the form of an equity of
redemption also ends when the foreclosure sale occurs, rather than at a later time. See Cal.
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 11 of 34

12
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
The addition of a statutory right of redemption to the equation, however, does
not extend the point in which property is “sold at a foreclosure sale” from the date of
the foreclosure auction to the end of the redemption period. Notwithstanding this
postsale right, property is still sold (i.e., equitable title is transferred to the
purchaser) at the foreclosure auction. Cf. Foorman v. Wallace, 75 Cal. 552, 556 (1888)
(stating that certificate of sale is “evidence of a sale, whereby . . . the entire equitable
title is conditionally vested in the purchaser, subject to be defeated by a
redemption”). By redeeming, the prior owner has effectively terminated the sale (i.e.,
transferred equitable title back) and “restored [himself] to the estate therein sold at
the sale.” Cal. Civ. Proc. Code § 729.080(d); cf. Bagley v. Ward, 37 Cal. 121, 129
(1869) (“The redemption is virtually a transfer of the certificate of sale.”). Yet, the law
still acknowledges that a sale took place. It follows that California law would dictate
that property “is sold at a foreclosure sale” on the completion of the foreclosure
auction, regardless of whether a statutory right of redemption is available or not.
Lastly, adopting the gavel rule is a logical choice because a foreclosure sale can
introduce a third-party purchaser into the relationship. The rule protects such
purchasers “by avoiding an interpretation that turns § 1322(c)(1) into a federal
vehicle for divesting them of property rights acquired at foreclosure sales.” Connors,
497 F.3d at 323; cf. Jim Walter Homes, Inc. v. Spears (In re Thompson), 894 F.2d
1227, 1230 (10th Cir. 1990) (pre-§ 1322(c)(1) context) (“Purchase by an independent
third party at a foreclosure sale raises enough additional concerns to justify ending
the right to cure in bankruptcy at that point.”).
For these reasons, this Court concludes that “§ 1322(c)(1) terminates a debtor’s
right to cure a . . . default when the gavel comes down on the last bid at the
Civ. Code § 2903 (allowing owner to redeem “before his right of redemption is foreclosed”);
Stockwell v. Barnum, 7 Cal. App. 413, 418–19 (1908) (concluding that attempted redemption
after completion of foreclosure auction but before delivery of trustee’s deed was ineffectual).
The gavel rule’s interpretation of § 1322(c)(1) therefore does not cut off any cure rights a
debtor may have under California law.
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 12 of 34

13
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
foreclosure sale.” Cain, 423 F.3d at 621 (internal quotation marks omitted). Because
the Residence “[was] sold at a foreclosure sale that [was] conducted in accordance
with applicable nonbankruptcy law”12 before the petition date, Debtor could no longer
utilize the cure provisions of § 1322(b)(3) and (b)(5), as limited by § 1322(c)(1), to cure
the delinquent assessments that gave rise to MCA’s lien on the Residence.
3.2.3. The Modification of Claims Under § 1322(b)(2).
Debtor has also singled out § 1322(b)(2) as another argument to save his
Residence. Under this provision, a debtor is allowed to propose a plan that will
“modify the rights of holders of secured claims . . . or of holders of unsecured
claims.”13 11 U.S.C. § 1322(b)(2). If viable, this would allow Debtor to exercise and
modify his statutory right of redemption by paying the redemption price over the
duration of his Plan.14 However, Debtor’s ability to do so turns on whether Rustling
Oaks is considered a holder of a claim, or more specifically, whether Rustling Oaks
holds a “claim” against Debtor or his property by reason of Debtor’s right to redeem
by paying the redemption price to Rustling Oaks.
The Bankruptcy Code defines a “claim” as either a “right to payment, whether
or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured,”
id. § 101(5)(A), or a “right to an equitable remedy for breach of performance if such
breach gives rise to a right to payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured, or unsecured,” id. § 101(5)(B). The Supreme Court has
12 Debtor has not raised any issues with the foreclosure process. Thus, the Court
assumes that the foreclosure sale complied with applicable California law.
13 Debtor’s position is, once again, confusing and contradictory because in the Plan, he
purports to treat the claim in dispute as a claim secured only by a security interest in real
property that is his principal residence.
14 Although Debtor referenced § 1322(b)(2) in his supplemental brief, as will be
discussed in Part 3.3.2, Debtor’s Plan did not demonstrate a modification of his statutory
right of redemption.
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 13 of 34

14
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
“explained that Congress intended by this language to adopt the broadest available
definition of ‘claim.’” Johnson v. Home State Bank, 501 U.S. 78, 83 (1991) (citing
Penn. Dep’t of Pub. Welfare v. Davenport, 495 U.S. 552, 558, 563–64 (1990),
superseded by statute on other grounds, Criminal Victims Protection Act of 1990,
Pub. L. No. 101-581, 104 Stat. 2865; Ohio v. Kovacs, 469 U.S. 274, 279 (1985)).
Many courts have permitted debtors to modify their postsale right of
redemption that arose after a tax sale under § 1322(b)(2), concluding that the third-
party purchaser at the tax sale holds a “claim” under either statutory definition.15
See, e.g., In re LaMont, 740 F.3d 397, 407–09 (7th Cir. 2014); Salta Grp., Inc. v.
McKinney, 380 B.R. 515, 520–21 (C.D. Ill. 2008), appeal dismissed sub nom. In re
McKinney, 610 F.3d 399 (7th Cir. 2010); In re Terry, 505 B.R. 660, 665–66 (Bankr.
E.D. Penn. 2014); In re Martin, 496 B.R. 323, 328–29 (Bankr. S.D.N.Y. 2013); Francis
v. Scorpion Grp., LLC (In re Francis), 489 B.R. 262, 268–69 (Bankr. N.D. Ga. 2013);
Hammond v. Allegheny Cnty. Treasurer (In re Hammond), 420 B.R. 633, 636 (Bankr.
W.D. Penn. 2009); In re Bates, 270 B.R. 455, 463–65 (Bankr. N.D. Ill. 2001).
However, this Court does not share the same view. Neither definition under § 101(5)
is broad enough to include this redemption relationship between a new third-party
purchaser and a prior owner as a “claim.”
Under the first definition, a “claim” means a “right to payment,” 11 U.S.C.
§ 101(5)(A), and “[t]he plain meaning of ‘right to payment’ is nothing more nor less
15 Other courts have disagreed and have not allowed such modifications based on
different rationales. See, e.g., Tax 58 v. Froehle (In re Froehle), 286 B.R. 94, 103 (B.A.P. 8th
Cir. 2002) (concluding that § 1322(b)(2) does not permit debtor to pay redemption price over
time based on holding of Justice v. Valley National Bank, 849 F.2d 1078, 1082–83 (8th Cir.
1988)); In re Murray, 276 B.R. 869, 876 (Bankr. N.D. Ill. 2002) (holding that § 108(b) limits
§ 1322(b)(2) with regard to redemptions), abrogated by In re LaMont, 740 F.3d 397 (7th Cir.
2010); Blue v. Town of Lake Bldg. Corp. (In re Blue), 247 B.R. 748, 751 (Bankr. N.D. Ill.
2000) (reasoning that tax purchaser has no right to receive payment from debtor), abrogated
by LaMont, 740 F.3d 397; see also In re Stage I Land Co., 60 B.R. 539, 542 (Bankr. D. Minn.
1986) (chapter 11 context) (concluding that “right of redemption cannot be transformed
through the mere filing of a bankruptcy petition into a restructurable debt”), aff’d sub nom.
Stage I Land Co. v. United States, 71 B.R. 225 (D. Minn. 1986). But none of those cases have
thoroughly analyzed whether a statutory right of redemption can be characterized as a
“claim.”
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 14 of 34

15
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
than an enforceable obligation,” Davenport, 495 U.S. at 559. The Supreme Court has
suggested that an obligation is enforceable if the debtor can be threatened with the
loss of his liberty or property in the event of nonperformance. See id. at 559–60.
Thus, in Davenport, the Court held that a debtor’s obligation under a court order in a
state criminal action to pay restitution as a condition of probation constituted a
“right to payment” and therefore a “claim” since “the obligation is enforceable by the
substantial threat of revocation of probation and incarceration.” Id. at 559.
Courts have relied on this part of the Supreme Court’s analysis to conclude
that a purchaser holds a “right to payment.” See, e.g., Bates, 270 B.R. at 464
(reasoning that the substantial threat of a debtor losing property, including all of its
equity, if the debtor does not redeem “creates a right to payment . . . on behalf of the
tax purchaser”); McKinney, 380 B.R. at 515 (“Because this ‘substantial threat’ of
losing her property hangs over the property owner, the investor [purchaser] is, for all
intensive purposes [sic], acting as a creditor to the bankruptcy estate.”). While it is
true that a debtor will lose his remaining interest in the property as a consequence of
not redeeming, the threat of this loss alone is insufficient to establish the purchaser’s
“right to payment.” The “right to payment” requires, in addition to enforceability,
that there be an obligation. See Davenport, 495 U.S. at 558 (stating that language of
§ 101(5) “reflects Congress’ broad . . . view of the class of obligations that qualify as a
‘claim’” (emphasis added)); see also H.R. Rep. No. 95-595, at 309 (1977) (providing
that Bankruptcy Code “contemplates that all legal obligations of the debtor, no
matter how remote or contingent, will be able to be dealt with in the bankruptcy
case” (emphasis added)), reprinted in 1978 U.S.C.C.A.N. 5963, 6266; S. Rep. No.
95-989, at 22 (1978) (same), reprinted in 1978 U.S.C.C.A.N. 5787, 5808. Yet, with
statutory redemption, what the debtor has is not an obligation or duty to pay the
redemption price to avoid losing ownership of the property but a voluntary right or
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 15 of 34

16
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
opportunity to pay the redemption price in order to regain ownership.16 See Alliance
Mortg., 10 Cal. 4th at 1236. Without any entity’s obligation to pay the redemption
price, what Rustling Oaks holds cannot be characterized as a “right to payment”
under § 101(5)(A).
A “claim” can also be a “right to an equitable remedy for breach of performance
if such breach gives rise to a right of payment.” 11 U.S.C. § 101(5)(B). In other words,
a right to an equitable remedy will constitute a claim if monetary payment (i.e.,
money damages) can be a viable alternative remedy for breach of the underlying
obligation. See Top Rank, Inc. v. Ortiz (In re Ortiz), 400 B.R. 755, 766 (C.D. Cal.
2009). Thus, a judgment ordering specific performance from a debtor would
constitute a “claim” under § 101(5)(B) where a money judgment could function as a
sufficient remedy if specific performance is refused. See Kovacs, 469 U.S. at 280–83
(holding that injunction ordering debtor to clean up environmental waste was a
“claim” when receiver subsequently sought payment of money from debtor for the
costs of that cleanup).
Even assuming that Rustling Oaks’ right to receive the Trustee’s Deed after
the redemption period expires without payment of the redemption price constitutes a
“right to an equitable remedy for breach of performance,” this right to an equitable
remedy can only become a “claim” if the underlying breach can give rise to a
monetary remedy. Those courts that have concluded that a purchaser has a “claim”
under § 101(5)(B) argue that a monetary remedy does exist in the form of a debtor’s
payment of the redemption price. See, e.g., Francis, 489 B.R. at 268–69; Bates, 270
B.R. at 464–65. However, they confuse the payment of the redemption price as being
the remedy when it actually represents the underlying “obligation” owed to the
purchaser. As a result, those courts end up asserting that a debtor’s breach for failing
16 The courts’ consideration of this right as an interest in property that becomes
property of the estate, rather than an obligation, is also telling. See, e.g., United States ex
rel. Block v. Aldrich (In re Rigden), 795 F.2d 727, 731 (9th Cir. 1986) (stating that statutory
right of redemption is estate property that can be sold by a bankruptcy trustee).
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 16 of 34

17
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
to pay the redemption price to the purchaser gives rise to the purchaser’s remedy of
payment of the redemption price, an argument with questionable value.
To the extent a debtor’s failure to redeem within the required period
constitutes a breach of performance, the only remedy that the purchaser can obtain is
the right to receive the trustee’s deed. The purchaser would not be entitled to a
money judgment against the debtor for the redemption price, and it would not be
entitled to a right to foreclose on the property to be paid from the sale proceeds. The
purchaser’s only remedy is to receive the deed and full legal title to the property.
There are simply no alternative remedies, let alone a monetary one. Therefore,
Rustling Oaks’ right to delivery of the Trustee’s Deed following the expiration of the
redemption period is also not a “right to an equitable remedy for breach of
performance if such breach gives rise to a right of payment” under § 101(5)(B).
Finally, both in his papers and arguments by his counsel at the hearings on
the motion, Debtor has strenuously asserted that Rustling Oaks is not a creditor in
his bankruptcy case and thus not a holder of a claim. As a result, he is now bound by
that statement and estopped from asserting a contrary one. See Countrywide Home
Loans, Inc. v. Hoopai (In re Hoopai), 581 F.3d 1090, 1097 (9th Cir. 2009).
Because Rustling Oaks, as a purchaser of property subject to a statutory right
of redemption, does not hold a “claim” within the meaning of § 101(5)(A) or (B) by
reason of Debtor’s right to pay the redemption price,17 Debtor cannot rely on
§ 1322(b)(2) to exercise and modify his right of redemption.
17 Not only is the interpretation of a statutory right of redemption as a “claim”
unsupported by the plain language of the Bankruptcy Code, but it also allows a debtor to
hold a third-party purchaser hostage for potentially five years by “redeeming” the property
over the duration of a Chapter 13 plan. This cannot be what Congress intended when it
provided that the Bankruptcy Code “contemplates that all legal obligations of the debtor, no
matter how remote or contingent, will be able to be dealt with in the bankruptcy case.”
H.R. Rep. No. 95-595, at 309; S. Rep. No. 95-989, at 22.
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 17 of 34

18
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
3.2.4. The 60-Day Extension Under § 108(b).
Although Debtor can no longer cure under § 1322(b)(3) and (b)(5) and cannot
exercise and modify his statutory right of redemption under § 1322(b)(2), that does
not preclude Debtor from exercising his redemption right in a Chapter 13 case
entirely. Rather, the Court agrees with Rustling Oaks that § 108(b) can be an option.
This Code provision states,
(b) Except as provided in subsection (a) of this section, if applicable
nonbankruptcy law . . . fixes a period within which the debtor . . . may
. . . cure a default, or perform any other similar act, and such period has
not expired before the date of the filing of the petition, the trustee18 may
only . . . cure, or perform, as the case may be, before the later of—
(1) the end of such period, including any suspension of such
period occurring on or after the commencement of the case; or
(2) 60 days after the order for relief.
11 U.S.C. § 108(b). Exercising a right of redemption created under state law
constitutes “cur[ing] a default” or “perform[ing] any other similar act,” falling within
the scope of § 108(b). See Connors, 497 F.3d at 321; Canney v. Merchants Bank (In re
Frazer), 284 F.3d 362, 372–73 (2d Cir. 2002); Goldberg v. Tynan (In re Tynan), 773
F.2d 177, 179 (7th Cir. 1985); Johnson v. First Nat’l Bank of Montevideo, Minn., 719
F.2d 270, 278 (8th Cir. 1983). If the redemption right has not expired by the petition
date, § 108(b) permits its exercise in the bankruptcy case but only before the original
expiration date under state law or 60 days after the petition date, whichever is later.
Here, the foreclosure sale took place on October 10, 2013, and California law
offered Debtor 90 days, until January 8, 2014, to redeem the Residence. See Cal. Civ.
Code § 5715(b); Cal. Civ. Proc. Code § 729.035. Since Debtor filed his petition on the
last day of the redemption period, § 108(b) extended that period an additional 60
days. Debtor therefore had until March 9, 2014, to exercise his statutory right of
18 Although § 108(b) only grants rights to a “trustee,” courts have extended these
rights to a Chapter 13 debtor. See, e.g., Frazer, 377 B.R. at 631 & n.13.
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 18 of 34

19
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
redemption. But now that that date has passed without Debtor depositing the
redemption price with Guralnick, the § 108(b) option has expired for Debtor as well.
3.3. Res Judicata Effect of a Confirmed Plan.
Even if the Bankruptcy Code does not permit Debtor to cure or redeem
through his Plan, Debtor argues that with the Plan now confirmed without an
objection or an appeal, res judicata binds Rustling Oaks to the Plan and precludes it
from attacking any of the Plan’s potentially erroneous or illegal provisions.
It is well understood that “[o]nce a bankruptcy plan is confirmed, it is binding
on all parties and all questions that could have been raised pertaining to the plan are
entitled to res judicata effect.” Trulis v. Barton, 107 F.3d 685, 691 (9th Cir. 1997)
(emphasis omitted). “[C]reditors are precluded from asserting any other interest than
that provided for them in the confirmed plan,” Fietz v. Great W. Sav. (In re Fietz),
852 F.2d 455, 458 (9th Cir. 1988), even if the plan’s provisions are illegal, Great
Lakes Higher Educ. Corp. v. Pardee (In re Pardee), 193 F.3d 1083, 1086 (9th Cir.
1999). The res judicata effect of a confirmed Chapter 13 plan is partly reflected in
§ 1327. Cnty. of Ventura Tax Collector v. Brawders (In re Brawders), 325 B.R. 405,
410 (B.A.P. 9th Cir. 2005), aff’d, 503 F.3d 856 (9th Cir. 2007) (adopting the BAP’s
opinion as its own). It reads, “The provisions of a confirmed plan bind the debtor and
each creditor, whether or not the claim of such creditor is provided for by the plan,
and whether or not such creditor has objected to, has accepted, or has rejected the
plan.” 11 U.S.C. § 1327(a).
In support of his argument that Rustling Oaks is now bound by the confirmed
Plan’s redemption of the Residence, Debtor cites to Multnomah County v. Ivory (In re
Ivory), 70 F.3d 73 (9th Cir. 1995), a decision in which the Ninth Circuit concluded
that the county, who was the foreclosing lienholder and subsequent purchaser of the
debtor’s property, was bound by the debtor’s Chapter 13 plan’s redemption. Id. at 75.
In Ivory, the debtor became delinquent on property taxes for real property
located in Oregon, so the county initiated a judicial foreclosure action and obtained a
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 19 of 34

20
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
foreclosure judgment against the debtor and the property, resulting in a sale to the
county subject to the debtor’s right to redeem within two years. Id. at 74. Less than a
month before the redemption period would have expired, the debtor filed a petition.
Id. He proceeded to file a proof of claim on behalf of the county, listing the amount of
unpaid taxes as the county’s claim. Id. He then proposed a plan that “cure[d] the
property tax default and redeem[ed] the real property,” which was confirmed by the
bankruptcy court without objection. Id. After the county rejected the trustee’s
payments due to expiration of the redemption period and the preconfirmation
recordation of the deed, the debtor filed a motion to compel the county to accept the
payments as required by the plan. Id. at 74–75.
The bankruptcy court granted the motion, and the district court affirmed. Id.
at 75. On appeal to the Ninth Circuit, the court affirmed in a short opinion, rejecting
the county’s argument that “because it was no longer a creditor of the [debtor] at the
time the plan was confirmed, the bankruptcy court was without jurisdiction to
include the County in the plan.” Id. Rather, the court reasoned, “Even assuming that
the order confirming the plan was in error . . . , res judicata precludes the County
from bringing what amounts to a collateral challenge to that order. This is so even if
the bankruptcy court’s error was jurisdictional.” Id. (citations omitted). As a result,
the county remained bound by the confirmed plan’s redemption.
While Ivory sets forth an important lesson about res judicata, the decision is
not as on point for this case as Debtor suggests. As later noted by the BAP, “[t]here is
no discussion in Ivory of due process, and the decision says nothing about what notice
the county in that case received or how that Chapter 13 plan was worded,” Brawders,
325 B.R. at 416, issues that are raised by Rustling Oaks and relevant here.
3.3.1. Providing Notice to Affected Parties.
A confirmed plan does not have preclusive effect on a party who did not receive
notice sufficient to satisfy its due process rights. Cf. Ellet v. Stanislaus, 506 F.3d 774,
777 (9th Cir. 2007) (“[A] claim cannot be considered to have been provided for by the
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 20 of 34

21
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
plan if a creditor does not receive proper notice of the proceedings.” (internal
quotation marks omitted)). The threshold for due process though is low: Due process
merely requires “notice reasonably calculated, under all the circumstances, to apprise
interested parties of the pendency of the action and afford them an opportunity to
present their objection.” Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306,
314 (1950). In the context of a plan, this means “a creditor need only get ordinary
notice of [the] Chapter 13 plan to be bound by its terms.” Espinosa v. United Student
Aid Funds, Inc., 553 F.3d 1193, 1204 (9th Cir. 2008), aff’d, 559 U.S. 260 (2010).
Yet, in this case, it appears that Rustling Oaks did not receive any notice. Not
only did Debtor fail to give Rustling Oaks formal notice of his bankruptcy case and
his Plan by excluding Rustling Oaks from the list of creditors, but Debtor and his
counsel also made no attempts to informally contact Rustling Oaks about the
bankruptcy.19 Given this lack of notice, Rustling Oaks’ due process rights would be
violated if the Court found that it was bound by a plan that it did not know existed.
Debtor argues though that he did not need to give notice to Rustling Oaks, the
third-party purchaser, but instead, notice to MCA, the foreclosing lienholder and
secured creditor of Debtor, and to Guralnick, the foreclosure trustee and MCA’s
agent, was all that was required. This argument, however, ignores “[t]he purpose of
notice under the Due Process Clause[, which] is to apprise the affected individual of,
and permit adequate preparation for, an impending ‘hearing’” before the individual
“is finally deprived of his property interests.” Memphis Light, Gas & Water Div. v.
Craft, 436 U.S. 1, 14, 16 (1978) (emphasis added) (internal quotation marks omitted).
It does not matter that Rustling Oaks never had a contractual or legal relationship
with Debtor prior to the foreclosure sale. Since the Plan sought to diminish Rustling
19 To the extent Debtor attempts to argue that he could not ascertain the identity of
the purchaser of his Residence, this argument would fail. Debtor could have easily reached
out to Guralnick, who knew due to conducting the foreclosure auction. Further, the
Certificate of Foreclosure Sale, which clearly identified “Rustling Oaks, LLC” as the
purchaser, was recorded right after the sale, so Debtor’s counsel could have also easily
discovered the purchaser’s identity at the recorder’s office.
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 21 of 34

22
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
Oaks’ property interests in the Residence (i.e., either by undoing the foreclosure sale
or by making Rustling Oaks’ title subject to a 60-month, rather than 90-day, right of
redemption), Rustling Oaks is an affected party entitled to notice. Cf. Citicorp Mortg.,
Inc. v. Brooks (In re Ex-Cel Concrete Co.), 178 B.R. 198, 205 (B.A.P. 9th Cir. 1995)
(voiding sale free and clear of lienholder’s lien because “lack of any notice to
[lienholder] constituted constitutional lack of due process which could not confer in
personam jurisdiction on the bankruptcy court to adjudicate [lienholder’s] property
rights”).
3.3.2. Providing Notice of a Plan’s Treatment.
Further, even if Rustling Oaks did receive notice about Debtor’s bankruptcy
case, Debtor’s Plan would still not bind Rustling Oaks because the Plan’s provisions
did not clearly describe what Debtor was trying to accomplish.
A “confirmed plan has no preclusive effect on issues that . . . were not
sufficiently evidenced in a plan to provide adequate notice to the creditor” or other
party affected by the plan. Enewally v. Wash. Mut. Bank (In re Enewally), 368 F.3d
1165, 1173 (9th Cir. 2004); cf. Shook v. CBIC (In re Shook), 278 B.R. 815, 824 (B.A.P.
9th Cir. 2002) (“Although a secured creditor is bound by the plan, this does not mean
that a debtor can void or otherwise extinguish a creditor’s lien without addressing
the lien in the plan.”). The Ninth Circuit BAP has explained,
[A] plan should clearly state its intended effect on a given issue.
Where it fails to do so it may have no res judicata effect for a variety of
reasons: any ambiguity is interpreted against the debtor, any ambiguity
may also reflect that the court that originally confirmed the plan did not
make any final determination of the matter at issue, and claim
preclusion generally does not apply to a “claim” that was not within the
parties’ expectations of what was being litigated, nor where it would be
plainly inconsistent with the fair and equitable implementation of a
statutory or constitutional scheme.
Brawders, 325 B.R. at 411. In other words, a plan requires clarity to be binding.
Here, the treatment provided for in the Plan is bare. All that Debtor did was
place MCA in Class 2 of the Plan, where he proposed to directly pay MCA its
regularly due assessments and to cure MCA’s arrearage of $18,836 over 60 months.
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 22 of 34

23
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
No additional information was inserted into the Plan. And as previously mentioned,
Debtor’s counsel’s confusion has made it difficult for her to articulate what the Plan
is attempting to accomplish. Nevertheless, the two possibilities are both deficient.
If Debtor intended to exercise and modify his statutory right of redemption,
then his Plan failed to demonstrate this entirely. First, the statutory redemption
under California law is paid to the purchaser, not the foreclosing lienholder. See Cal.
Civ. Proc. Code § 729.060(a) (requiring redeeming party to deposit the redemption
price with levying officer); id. § 729.080(b) (requiring levying officer to then tender
deposit to purchaser). Thus, the party that Debtor needed to provide for in his Plan
was Rustling Oaks, not MCA.
Debtor also incorrectly stated the amount necessary to redeem in the Plan.
Unlike the equity of redemption price, the statutory redemption price is not the
unpaid debt owed to the foreclosing lienholder, but it is essentially the amount paid
by the purchaser at the foreclosure sale, along with the purchaser’s additional costs
and interest. See id. § 729.060(b), (c). Debtor’s Plan improperly listed $18,836, the
unpaid debt owed to MCA, when it should have used $36,000, the price paid by
Rustling Oaks. Due to these two errors, no party could have understood that Debtor
was attempting to exercise his right of redemption through the Plan.
If Debtor intended to cure the default to MCA, simply listing MCA’s name and
the amount of the delinquent assessments in Class 2 was also not enough. While this
would have been sufficient in most cases involving the typical cure and maintenance
of a secured claim in default, the circumstances in this case (i.e., the occurrence of a
prepetition foreclosure sale, the existence of a third-party purchaser, and the
payment of a foreclosing lienholder’s claim in full from the sale proceeds) required
more unequivocal language in the Plan. Debtor’s counsel could not rely on the form
plan’s boilerplate provisions when she knew the circumstances of her client’s case
were unique. At a minimum, the Plan needed to provide (1) that the prepetition
foreclosure sale be set aside and Rustling Oaks’ Certificate of Foreclosure Sale
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 23 of 34

24
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
rescinded; (2) that the sale proceeds received by all parties, including the $18,836
paid to MCA, be refunded back to Rustling Oaks; and (3) that MCA’s assessment lien
be reinstated. Without these additional provisions, it was reasonable for MCA and
Guralnick to ignore Debtor’s Plan. The Plan, in its current form, did not signal
Debtor’s intention to undo the foreclosure sale or to take away Rustling Oaks’
interest in the property.20
Due to the lack of notice, Rustling Oaks is not bound by Debtor’s confirmed
Plan, and its interest in the Residence remains unaffected by the Plan’s provisions.
Therefore, nothing precludes Rustling Oaks from moving for stay relief at this time.
3.4. The Postpetition Delivery and Recordation of the Trustee’s Deed.
Debtor also objects to Guralnick’s postpetition delivery and recordation of the
Trustee’s Deed, actions taken to transfer and perfect Rustling Oaks’ legal title in the
Residence21 but without this Court’s approval. According to Debtor, these
unauthorized acts violated the automatic stay. See 11 U.S.C. § 362(a)(3) (barring acts
“to obtain possession of property of the estate or of property from the estate or to
exercise control over property of the estate”); Jewett v. Shabahangi (In re Jewett),
146 B.R. 250, 252 (B.A.P. 9th Cir. 1992) (holding that postpetition recordation of
trustee’s deed was “an action against property of the estate” violating the stay),
superseded by statute, 1993 Cal. Legis. Serv. ch. 724, § 3 (West) (codified as amended
at Cal. Civ. Code § 2924h(c)). These stay violations would, in turn, be void. See
Schwartz v. United States (In re Schwartz), 954 F.2d 569, 571 (9th Cir. 1992).
20 These deficiencies demonstrate why Ivory has no application in this case. In Ivory,
the county was the foreclosing lienholder and the purchaser, and the amount of the debt was
the same as the purchase price. See 70 F.3d at 74. That was why the debtor’s plan that
“cure[s] the property tax default,” as well as “redeem[s] the real property,” could be binding
on the county. Id.
21 In a nonjudicial foreclosure sale under California law, title to real property is
transferred to the purchaser typically by delivery of the trustee’s deed, see Dover Mobile
Estates v. Fiber Form Prods., Inc., 220 Cal. App. 3d 1494, 1498 (1990), and recordation of
that deed perfects the purchaser’s interest, see Walker v. Cal. Mortg. Serv. (In re Walker),
861 F.2d 597, 600 (9th Cir. 1988).
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 24 of 34

25
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
Since Rustling Oaks’ ownership of the Residence is premised on what Debtor
contends is an invalid Trustee’s Deed, Debtor essentially argues that title has not
been perfected and that any unlawful detainer proceeding to evict him is premature
at this time. See Cal. Civ. Proc. Code § 1161a(b)(3) (allowing purchaser to remove
holdover owner from property but only if “title under the sale has been duly
perfected”); see also Malkoskie v. Option One Mortg. Corp., 188 Cal. App. 4th 968,
974–75 (2010). It would follow that stay relief for Rustling Oaks should be denied.
However, this argument fails for a number of reasons.
3.4.1. The Ministerial Acts Exception.
First, Guralnick’s delivery of the Trustee’s Deed constitutes a ministerial act
that does not violate the automatic stay. The Ninth Circuit has adopted the
ministerial acts exception, which provides that the automatic stay does not prohibit
“[m]inisterial acts or automatic occurrences that entail no deliberation, discretion, or
judicial involvement” on the part of an actor. McCarthy, Johnson & Miller v. N. Bay
Plumbing, Inc. (In re Pettit), 217 F.3d 1072, 1080 (9th Cir. 2000). “[W]hen an [actor]’s
duty is delineated by, say, a law or a judicial decree with such crystalline clarity that
nothing is left to the exercise of the [actor]’s discretion or judgment, the resultant act
is ministerial.” Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969, 974 (1st
Cir. 1997).
Courts have determined that this exception extends to an actor’s postpetition
execution, delivery, or recordation of a deed following a prepetition foreclosure or tax
sale when the applicable law obligates the actor to take those actions and provides
the actor with no discretion. See, e.g., Tracht Gut, LLC v. Cnty. of L.A. Treasurer &
Tax Collector (In re Tracht Gut, LLC), 503 B.R. 804, 812 (B.A.P. 9th Cir. 2014)
(finding no stay violation when county tax collector had no discretion in recording
deed under California Revenue and Taxation Code § 3708.1); In re Pineda-Pineda,
510 B.R. 648, 653–54 (Bankr. D. Or. 2014) (dicta) (concluding that there would be no
stay violation when county tax collector issues and records deed due to lack of
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 25 of 34

26
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
discretion under Oregon Revised Statutes § 312.200); In re Rugroden, 481 B.R. 69, 79
(Bankr. N.D. Cal. 2012) (finding no stay violation when IRS official had no discretion
in executing deed under 26 U.S.C. § 6338(b)).
This case is no different. The applicable California statute reads, “If the
redemption price is not deposited pursuant to Section 729.060 before the expiration
of the redemption period, . . . the nonjudicial foreclosure trustee pursuant to
Section 729.035 shall deliver an executed trustee’s deed and comply with the
requirements of Section 2924j of the Civil Code.” Cal. Civ. Proc. Code § 729.080(a)
(emphasis added).
The original 90-day redemption period expired on January 8, 2014, and the
additional 60-day extension period under § 108(b) expired on March 9, 2014. Both
deadlines passed without Debtor depositing the redemption price with Guralnick.
With the statute’s condition precedent met, Guralnick, as the foreclosure trustee, was
obligated by the statute to deliver the executed Trustee’s Deed to Rustling Oaks,
which it did on August 1, 2014.22 Because California Code of Civil Procedure
§ 729.080(a) left Guralnick with no discretion, its delivery of the Trustee’s Deed must
be considered a ministerial act that does not violate the automatic stay.
3.4.2. The Perfection of Interests Exception Under § 362(b)(3).
Second, Guralnick’s postpetition recordation of the Trustee’s Deed falls within
the automatic stay exception under § 362(b)(3), which states that the automatic stay
does not bar “any act to perfect, or to maintain or continue the perfection of, an
interest in property to the extent that the trustee’s rights and powers are subject to
such perfection under section 546(b) of this title.” 11 U.S.C. § 362(b)(3).
Section 546(b), in turn, sets forth that the trustee’s rights and powers are subject to
22 The record only shows that Guralnick executed the Trustee’s Deed on July 28, 2014,
and recorded it on August 1, 2014, but there was no declaration or other evidence concerning
when Guralnick delivered the Trustee’s Deed to Rustling Oaks. Nevertheless, since
Guralnick and Rustling Oaks do not contest the fact that the Trustee’s Deed has been
delivered, the Court will assume that the delivery took place no later than the date of
recordation.
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 26 of 34

27
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
any generally applicable law that permits any act to perfect, or to maintain or
continue the perfection of, an interest in property to be effective against an entity
that acquires rights in such property before the date on which action is taken to
effect such perfection, maintenance, or continuation. Id. § 546(b)(1)(A), (B). Put
another way, a party’s postpetition perfection of its interest in estate property will
not violate the stay if state law allows that party’s interest to be superior to the
interest of any entity (such as a trustee acting as a hypothetical bona fide purchaser)
who obtains its interest prior to the date that the act to perfect is performed. See
Hayden v. Wells (In re Hayden), 308 B.R. 428, 432 (B.A.P. 9th Cir. 2004).
An interest in real property is not perfected until a document conveying the
interest has been recorded with the county recorder. See Walker, 861 F.2d at 600.
Under California’s race-notice recording statute, a subsequent purchaser of real
property has priority over an unrecorded conveyance if the purchaser is a bona fide
purchaser for value who recorded its conveyance first. See Cal. Civ. Code §§ 1213–
1215. However, there are exceptions permitting a subsequently recorded conveyance
to relate back and take priority over another that was recorded first.
One such exception, commonly invoked in bankruptcy cases, is California Civil
Code § 2924h(c), which provides that a purchaser’s title to real property sold at a
trustee’s sale is “deemed perfected as of 8 a.m. on the actual date of sale if the
trustee’s deed is recorded within 15 calendar days after the sale.” A purchaser, who
records its trustee’s deed postpetition but within 15 days of the prepetition sale,
would prevail over a hypothetical bona fide purchaser and would not violate the
automatic stay under § 362(b)(3). See Bebensee-Wong v. Fed. Nat’l Mortg. Ass’n (In
re Bebensee-Wong), 248 B.R. 820, 822–23 (B.A.P. 9th Cir. 2000). If the postpetition
recordation of the trustee’s deed occurs after the 15-day period, then the perfection
does not relate back to the sale date. In re Garner, 208 B.R. 698, 701 (Bankr. N.D.
Cal. 1997). The recordation violates the stay, and the purchaser’s title is subject to
avoidance by the trustee. Id.
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 27 of 34

28
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
There is no comparable California statute for those who purchase real property
at a trustee’s sale subject to redemption, such as Rustling Oaks.23 Nevertheless,
California case law explains that Rustling Oaks’ title would still defeat the trustee’s
avoidance powers due to the Certificate of Foreclosure Sale, a document executed and
recorded prepetition by Guralnick.
Although the relevant statute says little about a certificate of sale,24 related
case law explains the legal significance of this document.25 The certificate of sale is
an instrument in which title is created within the meaning of California Civil Code
§ 1107, Foorman, 75 Cal. at 556, as well as “a conveyance within the meaning of the
recording act [California Civil Code § 1215], by which [the purchaser] is protected
from the unrecorded claims of others, of which [the purchaser] did not have notice,”
Duff v. Randall, 116 Cal. 226, 231 (1897). As a result, recordation of the certificate
“charges all subsequent purchasers with notice of the purchaser’s title.” Hansen v. G
& G Trucking Co., 236 Cal. App. 2d 481, 495 (1965). The deed, once delivered after
expiration of the redemption period, “gives to the purchaser no new title to the land
purchased by him, but is merely evidence that the title has become absolute.” Pollard
23 California Civil Code § 2924h(c)’s 15-day relation-back period obviously cannot
apply because the earliest a trustee’s deed in a trustee’s sale subject to redemption can be
recorded is 90 days after the foreclosure sale when the right of redemption expires. Cf. Cal.
Civ. Code § 5710(a) (making only California Civil Code §§ 2924, 2924b, and 2924c applicable
in a trustee’s sale by a homeowners’ association on its assessment lien).
24 All that California Code of Civil Procedure § 729.040 provides is (1) that following a
purchaser’s payment of its successful bid, a foreclosure trustee must “execute and deliver a
certificate of sale to the purchaser and record a duplicate of the certificate of sale in the office
of the county recorder,” Cal. Civ. Proc. Code § 729.040(a), and (2) that the certificate of sale
must include a description of the property sold, the date of the foreclosure sale, the price paid
for the property, and a statement that the property is subject to a right of redemption, see id.
§ 729.040(b), (c).
25 Section 729.040, governing the certificate of sale issued in foreclosure sales, is
modeled after former § 700a of the California Code of Civil Procedure, which was in effect
until 1983 and governed the certificate of sale issued in execution sales. See Legis. Comm.
Comments to Cal. Civ. Proc. Code § 729.040 (1982) (stating that § 729.040 “continues the
substance of a portion of subdivision (a) of former Section 700a”). Since there are no
published decisions examining certificates of sale under § 729.040 and their effect, the
decisions considering certificates of sale under former § 700a are instructive.
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 28 of 34

29
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
v. Harlow, 138 Cal. 390, 393 (1903) (internal quotation marks omitted) (citing
Robinson v. Thornton, 102 Cal. 675, 680 (1893)).
The superiority of Rustling Oaks’ title is demonstrated by Foorman v. Wallace,
75 Cal. 552 (1888). There, a debtor conveyed his real property to an initial transferee,
but the initial transferee did not record his deed at that time. Id. Thereafter, the
defendant sued and obtained a judgment against the debtor. Id. The judgment was
then enforced via a sheriff’s execution sale, where the defendant, who had no actual
knowledge of the debtor’s prior conveyance, purchased the same real property subject
to a right of redemption. Id. The sheriff’s certificate of sale was recorded shortly
afterwards. Id. When no redemption was made, a sheriff’s deed was delivered to the
defendant. Id. However, after the certificate of sale was recorded but less than a
month before the sheriff’s deed was delivered, the initial transferee finally recorded
his deed. Id. Over a year later, the initial transferee conveyed to the plaintiff by deed.
Id. The plaintiff then brought an action against the defendant over the property. Id.
On appeal, the California Supreme Court had to address whether the
defendant’s title to the real property was paramount to that of the initial transferee
when the initial transferee’s deed was recorded before the sheriff’s deed but after the
certificate of sale. See id. at 553–54. The court answered in the affirmative and ruled
in favor of the defendant. See id. at 558.
The court first found that the defendant, despite being a judgment creditor
purchasing property at his own execution sale, was a bona fide purchaser for value.
Id. at 554. Then, reasoning that the certificate of sale is “evidence of the equitable
interest which the purchaser has in the land,” the court determined that “the
certificate of sale given by the sheriff to [the defendant] was an instrument whereby
he acquired . . . title.” Id. at 556–57, 558. Recordation of the certificate of sale, it
followed, had the effect of “impart[ing] constructive notice to all the world” of the
defendant’s title. Id. at 558. Since the defendant’s certificate of sale was recorded
before the initial transferee’s deed (under which the plaintiff claimed) and the
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 29 of 34

30
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
defendant had no actual notice of that deed, the court concluded that the defendant’s
title was superior to the title claimed by the initial transferee and the plaintiff. Id.
Here, the Certificate of Foreclosure Sale was recorded shortly after the
foreclosure sale and almost three months before the petition was filed. Despite the
postpetition recordation of the Trustee’s Deed, Rustling Oaks has priority over a
hypothetical bona fide purchaser who perfected its interest on the petition date.
Rustling Oaks was a purchaser for value, having paid $36,000 for the Residence, and
its conveyance, in the form of the Certificate of Foreclosure Sale, was recorded first
and prior to the petition date. It follows that the recordation of the Trustee’s Deed,
which gave Rustling Oaks no new title, was an act to maintain or continue the
perfection of its title in the Residence that does not violate the stay under § 362(b)(3).
3.4.3. Retroactive Annulment of the Stay.
Lastly, Debtor ignores Rustling Oaks’ prayer for retroactive annulment of the
automatic stay. Section 362(d) “gives the bankruptcy court wide latitude in crafting
relief from the automatic stay, including the power to grant retroactive relief from
the stay.” Schwartz, 954 F.2d at 572. By retroactively annulling the stay, a court can
validate an otherwise void act. See Algeran, Inc. v. Advance Ross Corp., 759 F.2d
1421, 1425 (9th Cir. 1985).
To determine whether retroactive relief is justified, the bankruptcy court must
balance the equities on a case-by-case basis. Nat’l Envtl. Waste Corp. v. City of
Riverside (In re Nat’l Envtl. Waste Corp.), 129 F.3d 1052, 1055 (9th Cir. 1997). This
necessarily requires a court to engage in a multifactor analysis.26 See Palm v.
26 The Ninth Circuit BAP has formulated twelve factors for this analysis: (1) the
number of bankruptcy filings; (2) whether the circumstances of a repeat filing indicate an
intention to delay or hinder creditors; (3) prejudice to creditors or third parties, including
bona fide purchasers, if stay relief is not retroactive; (4) the debtor’s overall good faith
conduct; (5) whether the creditors knew of the stay but nevertheless took action; (6) whether
the debtor is complying with the Bankruptcy Code and Rules; (7) the relative ease of
restoring the parties to the status quo ante; (8) the costs of annulment to the debtor and
creditors; (9) how quickly creditors moved for annulment, or how quickly the debtor moved to
set aside the violative conduct; (10) whether creditors, after learning of the bankruptcy,
proceeded to continue violating the stay or moved expeditiously to gain relief; (11) whether
annulment will cause irreparable injury to the debtor; and (12) whether stay relief will
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 30 of 34

31
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
Klapperman (In re Cady), 266 B.R. 172, 179–80 (B.A.P. 9th Cir. 2001), aff’d sub nom.
Palm v. Cady (In re Cady), 315 F.3d 1121 (9th Cir. 2003) (adopting the BAP’s opinion
as its own). Here, balancing the equities of this case favors granting retroactive
annulment of the stay to validate Guralnick’s postpetition delivery and recordation of
the Trustee’s Deed.
Only two factors favor denying retroactive relief. First, MCA and Guralnick
both knew and had notice of Debtor’s bankruptcy, but Guralnick still proceeded to
record the Trustee’s Deed without obtaining stay relief beforehand. Guralnick is not
a completely innocent actor. Second, restoring the parties to the status quo ante is a
relatively simple exercise; all that must be done is for this Court to void the Trustee’s
Deed.27 These factors, however, are outweighed by the other, more significant ones.
To start with, Debtor’s and his counsel’s conduct, like Guralnick’s, was also not
exemplary. Despite knowing that there had been a prepetition foreclosure sale,
Debtor’s counsel made no attempts to figure out who purchased the Residence and to
notify the purchaser about Debtor’s bankruptcy and his Plan that supposedly
impacted the purchaser’s interests. Debtor’s counsel also did not draft the Plan in a
manner that unambiguously expressed Debtor’s intention to exercise his right of
redemption. Additionally, Debtor’s counsel failed to proactively act to protect her
client’s interests, waiting until Rustling Oaks filed this stay relief motion in October
2014 to bring all of these issues to the Court’s attention. Even though Guralnick
explained its position to Debtor’s counsel in May 2014 and informed her of its
promote judicial economy or other efficiencies. Fjeldsted v. Lien (In re Fjeldsted), 293 B.R.
12, 25 (B.A.P. 9th Cir. 2003). The Ninth Circuit has also mentioned a debtor’s failure to
object to violative conduct despite knowledge of that conduct and the bankruptcy court’s
belief that it would have granted stay relief had the violating party moved for it beforehand
as other valid factors. See Nat’l Envtl. Waste Corp., 129 F.3d at 1055–56. This Court’s
discussion only addresses those factors relevant to this case.
27 At the second hearing on the motion, Rustling Oaks’ counsel stated that Rustling
Oaks incurred additional costs after the foreclosure sale. However, no evidence of those costs
was submitted, so they are not part of the Court’s record at this time.
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 31 of 34

32
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
intention to record the Trustee’s Deed in July 2014, Debtor’s counsel still did nothing
despite previously threatening to file an adversary proceeding.
Further, although Debtor will suffer irreparable injury if retroactive relief is
granted (i.e., losing his Residence), Debtor’s loss is an inevitable one. Rustling Oaks
successfully purchased the Residence subject only to Debtor’s right of redemption.
Since Debtor has not redeemed within the required time and he cannot and has not
confirmed a plan that effectively redeems the Residence, there is nothing that Debtor
can do, at this point, to save his Residence indefinitely. Rustling Oaks is ultimately
entitled to have title to the Residence.
The denial of retroactive relief would only offer Debtor temporary relief; it
would not somehow undo the foreclosure sale. Rather, if annulment is denied, that
would just mean that Guralnick has to file its own stay relief motion in order to
redeliver and re-record the Trustee’s Deed, a motion that would certainly be granted.
Debtor would have no basis for arguing for the denial of that motion because
Rustling Oaks is entitled to have legal title to the Residence and to have the
Trustee’s Deed delivered and recorded. Granting retroactive relief now, as a result,
promotes judicial economy by saving Guralnick the costs and efforts of filing and
litigating a new stay relief motion.
Based on a consideration of the relevant factors, retroactive annulment of the
automatic stay is appropriate. If Guralnick’s postpetition delivery and recordation of
the Trustee’s Deed were somehow acts that violated the automatic stay and were not
covered by any exception, these otherwise void acts are now valid.
3.5. Cause for Relief from the Automatic Stay under § 362(d)(1).
The Court having rejected each of Debtor’s arguments, the only remaining
issue is whether there is cause under § 362(d)(1) to grant Rustling Oaks relief from
the automatic stay to initiate its unlawful detainer proceeding against Debtor.
Cause is not defined by the Bankruptcy Code, so it must be determined on a
case-by-case basis. Christensen v. Tucson Estates, Inc. (In re Christensen), 912 F.2d
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 32 of 34

33
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
1162, 1166 (9th Cir. 1990). After a prepetition foreclosure sale of the debtor’s
property and prepetition recordation of the trustee’s deed, the debtor no longer holds
equitable or legal title to the property and the filing of a petition cannot reinstate the
debtor’s title. Edwards v. Wells Fargo Bank, N.A. (In re Edwards), 454 B.R. 100, 106
(B.A.P. 9th Cir. 2011). “Instead, the debtor is essentially a ‘squatter,’ and thus cause
for relief from stay is established.” Id. This case is slightly more complicated than
that, but Rustling Oaks has still established cause for granting relief.
A prepetition foreclosure sale of the Residence took place, but it was subject to
Debtor’s statutory right of redemption. Debtor filed his petition prior to the
redemption period expiring and prior to the delivery and recordation of the Trustee’s
Deed. Yet, Debtor did not exercise his right of redemption before the original
deadline under California law or the extended deadline under bankruptcy law. He
also did not confirm a plan that effectively redeemed the property or set aside the
foreclosure sale. He has therefore lost his right of redemption.
Further, given the Court’s ruling that the delivery and recordation of the
Trustee’s Deed either do not violate the stay or are validated by retroactive
annulment of the stay, legal title to the property has been transferred and perfected.
Debtor no longer has a title interest in the property.
All that remains is Debtor’s possessory interest in the property. But because
the redemption period has expired, Debtor is no longer entitled to legally possess the
property. See First Nat’l Trust & Sav. Bank of San Diego v. Staley, 219 Cal. 225, 227
(1933). Instead, Debtor is a holdover owner following a foreclosure sale, occupying the
property without a lease with the purchaser. Therefore, he is essentially a squatter,
which establishes cause under § 362(d)(1).
4. CONCLUSION.
For the foregoing reasons, the Court will grant Rustling Oaks’ motion. Cause
exists under § 362(d)(1) to grant relief from the automatic stay, and retroactive
annulment of the stay is appropriate under the circumstances. The postpetition
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 33 of 34

34
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
delivery and recordation of the Trustee’s Deed by Guralnick, acting on behalf of
MCA, are not void acts. Rustling Oaks, as the entity holding valid title to the
Residence, is permitted to initiate an unlawful detainer proceeding against Debtor.
But due to a high probability of an appeal by Debtor, Rustling Oaks’ requested
waiver of the fourteen-day stay under Bankruptcy Rule 4001(a)(3) will be denied.
Counsel for Rustling Oaks is to lodge an order consistent with this
memorandum decision within seven days.
###
Date: January 20, 2015
Case 6:14-bk-10231-SY Doc 51 Filed 01/20/15 Entered 01/20/15 13:14:42 Desc
Main Document Page 34 of 34