Omer Beaird

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	No. 08-42942 TM
Chapter 7
OMER BEAIRD,
Debtor.
________________________________/
MEMORANDUM OF DECISION RE MOTION FOR RECONSIDERATION
AND MOTIONS FOR RELIEF FROM THE AUTOMATIC STAY
The 	above-captioned 	debtor 	(the 	“Debtor”) 	moved 	for
reconsideration 	of 	the 	Court’s 	order: 	(1) 	approving 	the 	chapter 	7
trustee’s 	(the 	“Trustee”) 	motion 	to 	sell 	certain 	real 	property 	and
(2) denying the Debtor’s motion to: (A) reconvert the case to chapter
11 and (B) vacate the order granting the Trustee’s motion to abandon
certain 	real 	property, 	formerly 	property 	of 	the 	bankruptcy 	estate,
back 	to 	the 	Debtor. 	Wachovia 	Mortgage 	FSB 	(“Wachovia”) 	moved 	for
relief 	from 	the 	automatic 	stay 	as 	to 	three 	properties 	owned 	by 	the
Debtor 	and 	previously 	abandoned 	by 	the 	Trustee. 	For 	the 	reasons
stated below, the Debtor’s motion for reconsideration will be denied.
Wachovia’s 	motions 	will 	be 	denied. 	Because 	the 	properties 	in
question are no longer property of the estate, they are not protected
Signed: February 08, 2010
________________________________________
LESLIE TCHAIKOVSKY
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
February 09, 2010
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
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by 	the 	automatic 	stay. 	However, 	the 	Court 	will 	sign 	orders 	so
stating if submitted by Wachovia.
BACKGROUND
The 	Debtor 	filed 	a 	voluntary 	petition 	seeking 	relief 	under
chapter 11 of the Bankruptcy Code on June 10, 2008. 	In his Schedules
of Assets and Liabilities (the “Debtor’s Schedules”), he listed the
following real property, valued as set forth below and encumbered by
liens as set forth below:
1. 	The 	Debtor’s 	residence 	located 	at 	14 	Snow 	Court, 	Orinda,
California 	(the 	“Snow 	Court 	House”), 	valued 	at 	$1.2 	million 	and
subject to one or more secured claims totaling $694,135.
2. 	A 	three-unit 	income 	property 	located 	at 	406-410 	Clayton
Street, San Francisco, California (the “Clayton Street Three-Plex”),
valued 	at 	$1.5 	million 	and 	subject 	to 	one 	or 	more 	secured 	claims
totaling $809,416.
3. 	A 	co-tenancy 	interest 	in 	a 	residence 	located 	at 	1677
Carpentier 	Street, 	San 	Leandro, 	California 	(the 	“Carpentier 	Street
House”), valued at $450,000 and subject to one or more secured claims
totaling $215,444.
4. 	A 	co-tenancy 	interest 	in 	a 	two-unit 	residential 	building
located at 1645 Carpentier Street, San Leandro, California, valued at
$700,000 (the “Carpentier Street Duplex”) and subject to one or more
secured claims totaling $602,884.
5. 	A residence located at 201 Makin Road, Oakland, California
(the 	“Makin 	Road 	House”), 	valued 	at 	$450,000 	and 	subject 	to 	one 	or
more secured claims totaling $214,006.
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6. 	A multi-unit property, the nature of which is not described,
located 	at 	262-266 	Fitzgerald 	Road, 	Oakland, 	California 	(the
“Fitzgerald Road Multiple”), valued at $500,000 and subject to one or
more liens totaling $330,079.
7. 	A 	residence 	located 	at 	8331 	Dowling 	Street, 	Oakland,
California 	(the 	“Dowling 	Street 	House”), 	valued 	at 	$600,000 	and
subject to no secured claims.
8. 	A 	residence 	located 	at 	200 	Makin 	and 	9310-12 	Empire 	Road,
Oakland, California (the “Empire Road House”), valued at $500,000 and
subject to one or more secured claims totaling $261,086.
A status conference was scheduled in the case on July 14, 2008.
Prior to the status conference, the Debtor filed a status conference
statement. 	In it, he represented that his goal in chapter 11 was to
increase his net rental income by renting vacant units that had been
renovated after evicting defaulting tenants. 	He asked for 120 days
to file a plan and disclosure statement. 	Accordingly, the Court set
a 	November 	11, 	2008 	deadline 	for 	filing 	a 	plan 	and 	disclosure
statement.
On 	November 	11, 	2008, 	instead 	of 	filing 	a 	plan 	and 	disclosure
statement, 	the 	Debtor 	filed 	a 	motion 	to 	extend 	the 	deadline 	for 	an
additional 	90 	days: 	i.e., 	to 	February 	9, 	2009. 	The 	motion
represented 	that 	he 	had 	increased 	his 	rental 	income 	by 	$6,900 	and
that 	his 	total 	monthly 	income 	now 	exceeded 	his 	total 	monthly
expenses. 	However, 	he 	represented, 	before 	a 	plan 	could 	be
formulated, he needed to complete a loan modification agreement with
Wachovia 	which 	held 	mortgages 	on 	all 	his 	properties. 	No 	proposed
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order was submitted. 	As a result, the motion to extend was neither
granted 	nor 	denied. 	However, 	the 	Court 	calendared 	the 	matter 	for
review after February 9, 2009.
When 	no 	plan 	or 	disclosure 	statement 	was 	filed 	by 	February 9,
the 	Court 	issued 	an 	order 	to 	show 	cause 	why 	the 	case 	should 	not 	be
converted to chapter 7, dismissed, or a chapter 11 trustee appointed,
scheduling a hearing on the order to show cause for March 16, 2009.
On March 12, 2009, the Debtor filed a response to the order to show
cause. 	In 	the 	response, 	the 	Debtor 	stated 	that 	the 	reason 	that 	no
proposed 	order 	had 	been 	submitted 	was 	that 	the 	motion 	needed 	to 	be
amended to seek a longer extension of the plan filing deadline.
On March 15, 2009, the Debtor filed an amended motion to extend,
seeking 	an 	extension 	of 	the 	plan 	filing 	deadline 	to 	June 	10, 	2009:
i.e., 	the 	one 	year 	anniversary 	of 	his 	chapter 	11 	petition. 	In 	the
amended motion, the Debtor represented that he was still attempting
to obtain a loan modification agreement with Wachovia.
The 	Debtor 	also 	noted 	that 	the 	Internal 	Revenue 	Service 	(the
“IRS”) had filed a proof of claim for $788,861.32 for the tax years
2001 through 2007. 	He admitted that he had not filed tax returns for
these 	years 	at 	the 	time 	he 	filed 	his 	chapter 	11 	petition. 	He
represented that, since filing, he had filed his returns for 2001–03
and 2007 and that the returns showed that he had no tax liability for
these 	years 	and 	in 	fact 	the 	right 	to 	a 	$6,839 	refund. 	The 	Debtor
represented 	further 	that 	the 	tax 	returns 	for 	2004-06 	had 	also 	been
completed and demonstrated that he had no tax liability to the IRS.
However, he represented that the tax preparer refused to release the
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1The Trustee stated that he had filed the motion on an ex
parte basis because the Court could have converted the case at the
hearing on the order to show cause. 	The ex parte motion was
granted on June 24, 2009.
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returns 	until 	the 	Debtor 	paid 	his 	bill. 	He 	represented 	that 	this
matter needed to be resolved before he could file a plan.
Given 	the 	lengthy 	period 	that 	the 	Debtor 	had 	already 	been 	in
chapter 	11, 	the 	Court 	granted 	the 	motion 	to 	extend 	the 	plan 	filing
deadline only to May 18, 2009 and continued the hearing on the order
to 	show 	cause 	to 	June 	1, 	2009. 	The 	Debtor 	filed 	a 	plan 	and
disclosure statement on May 18, 2009, which the Court reviewed. 	At
the continued hearing on the order to show cause on June 1, 2009, the
Court 	advised 	the 	Debtor 	that 	disclosure 	statement 	was 	seriously
deficient 	in 	that 	contained 	virtually 	no 	financial 	information, 	no
discussion 	of 	feasibility, 	and 	no 	liquidation 	analysis 	and 	that 	it
found 	the 	plan 	to 	be 	in 	bad 	faith. 	Despite 	what 	appeared 	to 	be
approximately $2 million in equity in the Debtor’s real property, the
plan proposed to make no payments to unsecured creditors until 2014.
The Court concluded that it was unlikely that the Debtor would
be 	able 	to 	propose 	a 	confirmable 	reorganization 	plan, 	given 	his
goals. 	It 	concluded 	that 	the 	best 	course 	was 	to 	direct 	the
appointment 	of 	a 	chapter 	11 	trustee 	who 	would 	presumably 	act 	more
pragmatically. 	A trustee (the “Trustee”) was appointed on or about
June 	17, 	2009. 	On 	June 	24, 	2009, 	the 	Trustee 	filed 	an 	ex 	parte
motion to convert the case to chapter 7. 1 	The motion stated that on
June 18, 2009, the Trustee had met with the Debtor and the Debtor’s
counsel in order to evaluate the value of the Debtor’s real property
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and whether it was preferable to retain the case in chapter 11 or to
convert 	it 	to 	chapter 	7. 	The 	motion 	stated 	that 	the 	Trustee 	had
concluded that conversion was the better of the two alternatives. 	He
believed 	that 	some 	of 	the 	real 	property, 	if 	sold, 	would 	produce
sufficient net proceeds to pay unsecured creditors. 	Moreover, this
could be done more economically in a chapter 7 case than in a chapter
11 	case 	given 	the 	need 	to 	formulate 	a 	plan 	in 	a 	chapter 	11. 	The
Trustee 	indicated 	that 	he 	intended 	to 	move 	to 	abandon 	the 	real
property that appeared to have no net equity or that the estate did
not need to liquidate to pay creditors.
On September 16, 2009, the Trustee filed a notice of intent to
abandon 	the 	Carpentier 	Street 	House 	and 	Duplex, 	the 	Empire 	Road
House, 	the 	Makin 	Road 	House, 	and 	the 	Fitzgerald 	Street 	Multiple
(collectively the “Abandoned Real Property”). 	The notice indicated
that it did not appear likely that the sale of these properties would
produce any net proceeds for unsecured creditors. 	On September 17,
2009, the Trustee filed a notice of intent to sell the Dowling Street
House to John A. Camacho for $126,800 subject to overbids. 	In each
instance, 	interested 	parties 	were 	given 	20 	days 	to 	object. 	The
Debtor did not file an objection to the notice of intent to abandon
the Abandoned Real Property, and an order approving the abandonment
was filed on October 14, 2009.
The 	Debtor 	did 	object 	to 	the 	notice 	of 	intent 	to 	sell 	the
Dowling 	Street 	House. 	In 	the 	objection, 	the 	Debtor 	asked 	that 	a
hearing 	on 	the 	proposed 	sale 	be 	scheduled 	for 	October 	29, 	2009 	or
later to enable the Court to consider at the same time the Debtor’s
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motion 	to 	reconvert 	the 	case 	to 	chapter 	11. 	The 	objection
represented that there was a strong likelihood that the Debtor would
be able to secure a pre-packaged plan with creditors’ approval. 	In
any 	event, 	the 	objection 	represented 	that 	the 	Debtor 	had 	about
$10,000 in net monthly income with which to fund a plan. 	The Debtor
represented that he would file the motion to reconvert on or before
October 15, 2009.
In 	deference 	to 	the 	Debtor’s 	objection, 	the 	Trustee 	did 	not
immediately 	proceed 	with 	the 	proposed 	sale. 	However, 	no 	motion 	to
reconvert 	the 	case 	was 	filed 	on 	or 	before 	October 	15, 	2009. 	As 	a
result, on October 24, 2009, the Trustee filed a motion to sell the
Dowling 	Street 	House 	and 	scheduled 	it 	for 	hearing 	on 	December 	3,
2009.
On October 30, 2009, the Debtor filed a motion to reconvert the
case 	and 	to 	vacate 	the 	October 	14, 	2009 	order 	abandoning 	the
Abandoned 	Real 	Property 	back 	to 	the 	Debtor. 	This 	hearing 	was 	also
scheduled 	for 	December 	3, 	2009. 	In 	the 	motion, 	the 	Debtor
acknowledged 	that 	he 	had 	not 	prosecuted 	his 	chapter 	11 	case 	in 	a
diligent fashion prior to its conversion. 	He represented that he now
understood the requirements of chapter 11 and was prepared to satisfy
them. 	He 	represented 	that 	he 	intended 	to 	fund 	the 	plan 	primarily
through 	the 	sale 	of 	the 	Dowling 	Street 	House 	which 	he 	anticipated
would produce approximately $100,000 in net sale proceeds.
On 	November 	17, 	2009, 	the 	Trustee 	filed 	an 	opposition 	to 	the
Debtor’s motion. 	In the opposition, the Trustee represented that the
Debtor had attempted to interfere with the Trustee’s efforts to sell
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the 	Dowling 	Street 	House. 	First, 	the 	Debtor 	refused 	to 	give 	the
Trustee’s 	representative 	a 	key 	to 	the 	premises. 	Later, 	after 	the
Trustee 	had 	located 	a 	proposed 	buyer, 	the 	Debtor 	attempted 	to
discourage 	the 	proposed 	buyer 	from 	purchasing 	the 	Dowling 	Street
House 	by 	informing 	him 	that 	the 	area 	in 	which 	the 	Dowling 	Street
House was located was very dangerous.
On 	October 	18, 	2009, 	the 	Debtor 	filed 	an 	opposition 	to 	the
Trustee’s 	motion 	to 	sell 	the 	Dowling 	Street 	House. 	He 	now 	agreed
that the Dowling Street House should be sold. 	However, he urged that
it 	be 	sold 	to 	Beyene 	Negewo 	(“Negewo”), 	whom 	he 	represented 	had
submitted a timely overbid to purchase the Dowling Street House for
$136,800. 	He also argued that the case should then be reconverted to
chapter 	11, 	and 	the 	funds 	should 	be 	turned 	over 	to 	him 	to 	fund 	a
plan.
At 	the 	hearing, 	the 	Court 	asked 	the 	Trustee 	to 	explain 	why 	he
had not considered accepting the proposed overbid of Negewo since it
was for more money. 	The Trustee explained that a broker purportedly
representing Negewo did attend the sale auction and purport to submit
an overbid. 	However, the broker had no offer in writing from Negewo
to 	support 	the 	overbid. 	The 	Trustee 	stated 	that 	he 	had 	also 	been
concerned 	that 	there 	might 	be 	a 	connection 	between 	the 	proposed
overbidder and the Debtor. 	He gave Negewo’s broker until 5 p.m. that
day to submit a written overbid signed by Negewo as well as a signed
representation 	that 	there 	was 	no 	connection 	between 	him 	and 	the
Debtor.
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At the hearing, the Debtor conceded that Negewo failed to submit
a 	written 	offer 	for 	several 	weeks 	after 	the 	sale 	auction 	and 	that,
initially, 	Negewo 	had 	agreed 	to 	give 	the 	Debtor 	an 	option 	to
repurchase the Dowling Street House. 	The Debtor represented that he
had released Negewo from this agreement when he learned that it might
present a problem. 	The Trustee responded that he had also never seen
any 	evidence 	that 	Negewo 	was 	capable 	of 	funding 	the 	overbid. 	He
stated 	that 	if 	Negewo 	were 	present 	at 	the 	hearing 	with 	a 	cashier’s
check 	to 	fund 	the 	proposed 	overbid, 	he 	would 	recommend 	selling 	the
Dowling Street House to him. 	However, neither Negewo nor anyone on
his 	behalf 	was 	present 	at 	the 	hearing. 	Based 	on 	these 	facts, 	the
Court overruled the Debtor’s objection to the sale and approved the
sale to Camacho.
The Court also denied the Debtor’s motion to reconvert the case
to 	chapter 	11 	and 	to 	vacate 	the 	order 	abandoning 	the 	Abandoned
Properties. 	The 	Court 	stated 	that 	it 	was 	clear 	that 	the 	Debtor
wished to retain as much of his real property as possible even at the
risk 	that 	the 	unsecured 	creditors 	would 	receive 	no 	payment. 	His
negotiation of an option to repurchase the Dowling Street House was
evidence of this determination. 	The Court expressed the belief that,
if the $100,000 in sale proceeds were turned over to the Debtor, it
would 	be 	used 	to 	cure 	the 	arrearages 	on 	the 	Debtor’s 	real 	property
without regard to whether there was any equity in the real property
at 	present. 	Although 	he 	may 	have 	the 	best 	of 	intentions 	of 	paying
the unsecured creditors later, when and if he was able, his ability
to do so at some time in the future was uncertain.
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The Debtor’s counsel admitted that, if the case were reconverted
to chapter 11, the Debtor’s plan would be to pay off the arrearages
on 	the 	real 	property 	first 	and 	to 	begin 	payments 	to 	the 	unsecured
creditors after the arrearages were cured. 	He stated that the Debtor
may 	have 	received 	bad 	legal 	advice 	from 	his 	prior 	counsel 	and 	may
have 	acted 	inappropriately 	in 	the 	past. 	However, 	he 	was 	now
rehabilitated and would behave responsibly. 	The Court acknowledged
that 	it 	was 	a 	close 	question, 	given 	the 	fact 	that 	no 	creditor 	was
objecting 	to 	the 	reconversion. 	However, 	given 	the 	Debtor’s 	past
conduct 	in 	the 	case 	and 	the 	delays 	that 	had 	already 	occurred, 	the
Court 	concluded 	that 	conversion 	of 	the 	case 	back 	to 	chapter 	11
presented too great a risk to unsecured creditors.
Orders 	were 	entered 	approving 	the 	sale 	of 	the 	Dowling 	Street
House 	to 	Camacho 	and 	denying 	the 	Debtor’s 	motion 	to 	reconvert 	the
case 	and 	to 	vacate 	the 	abandonment 	order 	on 	December 	12, 	2009. 	On
December 28, 2009, the Debtor filed a notice of appeal and a motion
to 	reconsider 	both 	orders. 	The 	motion 	to 	reconsider 	was 	set 	for
hearing on February 5, 2009.
In 	the 	meantime, 	Wachovia 	filed 	motions 	for 	relief 	from 	the
automatic 	stay 	with 	respect 	to 	the 	Carpentier 	Street 	House, 	the
Empire 	Road 	Tri-Plex 	and 	the 	Makin 	Road 	House. 	Although 	the 	Court
noted that, since they had been abandoned by the Trustee, there was
no automatic stay protecting these properties, because Wachovia did
not object, the Court continued the hearings to February 5, 2009, to
be 	heard 	with 	the 	motion 	to 	reconsider. 	All 	matters 	were 	fully
briefed, 	and 	the 	parties 	appeared 	at 	the 	February 	5, 	2009 	hearing.
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At the conclusion of the hearing, the Court stated its ruling on the
record 	and 	indicated 	that 	it 	would 	issue 	a 	written 	opinion 	setting
forth the basis for its decision.
DISCUSSION
A. 	MOTION TO RECONSIDER
The 	Debtor 	asked 	the 	Court 	to 	reconsider 	its 	approval 	of 	the
sale of the Dowling Street House and its order denying the Debtor’s
motion 	to 	reconvert 	the 	case 	to 	chapter 	11 	and 	to 	vacate 	the 	order
abandoning the Abandoned Properties. 	Motions for reconsideration are
more 	properly 	viewed 	as 	motions 	to 	alter 	or 	amend 	a 	judgment 	under
Rule 59(e) of the Federal Rules of Civil Procedure, made applicable
here by Rule 9023 of the Federal Rules of Bankruptcy Procedure. 	The
grounds 	for 	such 	a 	motion 	are 	“(1) 	manifest 	error 	of 	fact; 	(2)
manifest error of law; or (3) newly discovered evidence.” 	See In re
Hansen, 368 B.R. 868, 878 (Bankr. 9th Cir. 2007).
The 	Debtor 	failed 	to 	satisfy 	any 	of 	these 	three 	grounds. 	He
contended 	that 	the 	Court 	committed 	manifest 	error 	of 	law 	by
permitting 	the 	Dowling 	Street 	House 	to 	be 	sold. 	He 	contended 	that
the 	Court 	was 	required 	to 	compel 	the 	Trustee 	to 	“marshal” 	the
Debtor’s 	assets 	by 	requiring 	him 	to 	sell 	property 	other 	than 	the
Dowling Street House first. 	In support of this contention, he cited
Cal. Civ. Code 	§ 3433 and § 2899. 	Section 3433 provides as follows:
Relative Rights of Different Creditors. 	Where a
creditor 	is 	entitled 	to 	resort 	to 	each 	of
several funds for the satisfaction of his claim,
and 	another 	person 	has 	an 	interest 	in, 	or 	is
entitled 	as 	a 	creditor 	to 	resort 	to 	some, 	but
not 	all 	of 	them, 	the 	latter 	may 	require 	the
former to seek satisfaction from those funds to
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which the latter has no such claim, so far as it
can 	be 	done 	without 	impairing 	the 	right 	of 	the
former 	to 	complete 	satisfaction, 	and 	without
doing injustice to third persons.
Cal. Civ. Code § 3433. 	Cal. Civ. Code § 2899 provides as follows:
Order 	of 	Resort 	to 	Different 	Funds. 	Where 	one
has 	a 	lien 	upon 	several 	things, 	and 	other
persons 	have 	subordinate 	liens 	upon, 	or
interests 	in, 	some 	but 	not 	all 	of 	the 	same
things, the person having the prior lien, if he
can do so without risk of loss to himself, or of
injustice 	to 	other 	persons, 	must 	resort 	to 	the
property 	in 	the 	following 	order, 	on 	the 	demand
of any party interested: 1. 	To the things upon
which 	he 	has 	an 	exclusive 	lien; 	2. 	To 	the
things 	which 	are 	subject 	to 	the 	fewest
subordinate liens; 3. 	In like manner inversely
to the number of subordinate liens upon the same
thing; 	and, 	4. 	When 	several 	things 	are 	within
one of the foregoing classes, and subject to the
same 	number 	of 	liens, 	resort 	must 	be 	had 	- 	(1)
To 	the 	things 	which 	have 	not 	been 	transferred
since 	the 	prior 	lien 	was 	created; 	(2) 	To 	the
things which have been so transferred without a
valuable 	consideration; 	and, 	(3) 	To 	the 	things
which 	have 	been 	so 	transferred 	for 	a 	valuable
consideration 	in 	the 	inverse 	order 	of 	the
transfer.
Cal. Civ. Code § 2899.
The 	Debtor 	noted 	that 	the 	doctrine 	of 	marshaling 	has 	been
applied 	in 	Ninth 	Circuit 	bankruptcy 	cases, 	citing 	See 	In 	re 	DAK
Industries, 	195 	B.R. 	129, 	136 	(Bankr. 	C.D. 	Cal. 	1995). 	The 	Debtor
asserted 	that 	he 	had 	obtained 	a 	new 	comparable 	sale 	analysis
demonstrating 	that 	the 	Carpentier 	Street 	House 	would 	generate
$168,000 	in 	net 	cash 	proceeds 	and 	that 	he 	had 	recently 	signed 	a
listing 	agreement 	for 	the 	Carpentier 	Street 	House. 	In 	support 	of
this 	contention, 	he 	attached 	copies 	of 	the 	documents 	in 	question.
Neither document is persuasive.
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The 	first 	document 	is 	entitled 	Comparable 	Sales 	For 	Property
Located 	at 	1677 	Carpentier 	St 	San 	Leandro, 	CA 	94577-4420. 	It 	is
unsigned, refers to assessed rather than market values, and contains
inconsistent 	figures 	with 	respect 	to 	those 	values. 	The 	second
document 	is 	not 	a 	listing 	agreement. 	It 	is 	entitled 	Disclosure
Regarding 	Real 	Estate 	Agency 	Relationship. 	Although 	it 	lists 	the
Debtor 	and 	his 	wife 	as 	sellers, 	it 	contains 	no 	reference 	to 	the
Carpentier Street House. 	Moreover it is also unsigned.
The Debtor also contended that he had newly discovered evidence
concerning the value of the Dowling Street House. 	He contended that,
at 	the 	time 	of 	the 	hearing, 	he 	was 	unaware 	of 	the 	many 	unique
features 	of 	the 	Dowling 	Street 	House 	that 	enhanced 	its 	value. 	He
asserted 	that 	these 	features 	made 	it 	clear 	that 	the 	sale 	price 	was
much 	too 	low 	and 	that 	the 	actual 	value 	of 	the 	Dowling 	Street 	House
was between $175,000 and $319,000. 	In support of this contention, he
attached 	a 	document 	entitled 	Comparable 	Sales 	for 	8331 	Dowling 	St,
Oakland, CA 94605-3440. 	Like the other comparable sale analysis, the
document was unsigned and ambiguous.
In response to the Debtor’s motion, the Trustee filed a status
report 	and 	opposition. 	By 	way 	of 	a 	status 	report, 	the 	Trustee
informed 	the 	Court 	that 	the 	sale 	of 	the 	Dowling 	Street 	House 	to
Camacho had closed on January 20, 2010, title had been transferred to
him, and the estate had received $111,707.99 in net sale proceeds.
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2 Section 363(m) provides that, unless a sale order is stayed,
the reversal or modification of the order on appeal will not affect
the validity of a sale to a good faith purchaser. 	The Debtor
failed to obtain a stay of the sale order. 	There is no evidence
that Camacho was not a good faith purchaser.
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Thus, 	pursuant 	to 	11 	U.S.C. 	§ 	363(m), 	the 	Trustee 	noted 	the 	sale
order may not be altered at this time. 2
The 	Trustee 	argued 	that 	the 	doctrine 	of 	marshaling 	had 	no
relevance to the facts presented here. 	Moreover, he noted that the
Debtor 	failed 	to 	raise 	this 	legal 	theory 	prior 	to 	the 	entry 	of 	the
sale 	order 	and 	the 	order 	denying 	the 	motion 	to 	reconvert 	the 	case.
He asserted that a motion for reconsideration may not be based on a
new 	legal 	theory. 	See 	Simon 	v. 	United 	States, 	891 	F.2d 	1154, 	1159
(5 th Cir. 1990).
The 	Trustee 	also 	disputed 	the 	Debtor’s 	contention 	that 	the
evidence 	of 	the 	unique 	features 	of 	the 	Dowling 	Street 	House, 	which
the Debtor contended affected its value, constituted newly discovered
evidence. 	According 	to 	the 	Truste, 	evidence 	does 	not 	qualify 	as
newly 	discovered 	unless 	the 	moving 	party 	could 	not 	have 	discovered
the evidence earlier through reasonable diligence. 	See Toledo Scale
Co. v. Computing Scale Co., 261 U.S. 399, 425 (1923). 	The evidence
offered 	by 	the 	Debtor 	could 	have 	been 	discovered 	and 	presented
earlier.
The Court finds the Trustee’s recitation of the law accurate and
his application of the law to the facts presented here sound. 	As a
result, it will deny the motion for reconsideration. 	It is clearly
too 	late 	to 	reconsider 	the 	sale 	order. 	The 	Debtor 	failed 	to 	raise
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the legal theory of marshaling prior to entry of the sale order. 	It
was 	neither 	the 	Court’s 	nor 	the 	Trustee’s 	responsibility 	to 	choose
which property to sell in such a way as to benefit the Debtor in the
absence of a request by the Debtor. 	Both Cal. Civ. Code § 3433 and
§ 2899, recited above, indicate that marshaling is required only when
the 	party 	to 	be 	benefitted 	demands 	it. 	At 	the 	sale 	hearing, 	the
Debtor 	did 	not 	oppose 	the 	sale 	of 	the 	Dowling 	Street 	House. 	He
merely asserted that it should be sold to a different person and that
he should be given control of the net sale proceeds.
The 	Debtor 	has 	also 	failed 	to 	present 	sufficient 	grounds 	for
reconsideration of the order denying the motion to reconvert the case
and to vacate the order abandoning the Abandoned Real Property. 	The
Court considered the possibility of converting the case and retaining
the 	Trustee 	as 	a 	chapter 	11 	trustee 	at 	the 	hearing 	on 	the 	order 	to
show cause. 	It declined to do so primarily because the Debtor’s plan
was 	to 	use 	the 	sale 	proceeds 	to 	cure 	the 	arrearages 	on 	his 	real
property, requiring the unsecured creditors to wait for payment until
later and subjecting them to the uncertainty of the Debtor’s ability
to 	make 	any 	such 	payments 	at 	that 	time. 	The 	Court 	continues 	to
believe that conversion of the case to chapter 7 was the appropriate
decision.
B. MOTIONS FOR RELIEF FROM THE AUTOMATIC STAY
Wachovia has filed three motions for relief from the automatic
stay, all with respect to the Abandoned Real Property. 	The automatic
stay 	does 	not 	protect 	property 	that 	has 	been 	abandoned 	from 	the
estate. 	See 	11 	U.S.C. 	§ 	362(c)(1). 	Wachovia 	presumably 	filed 	the
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motions and agreed to continue the hearings on the motions in light
of 	the 	Debtor’s 	motion 	to 	reconsider 	the 	Court’s 	order 	denying 	his
motion 	to 	vacate 	the 	abandonment 	order. 	Since 	the 	Court 	has
concluded 	that 	the 	motion 	for 	reconsideration 	should 	be 	denied,
Wachovia is free to exercise its rights under state law with respect
to 	the 	three 	properties. 	The 	Court 	will 	not 	grant 	relief 	from 	the
automatic stay since such relief is unnecessary. 	However, the Court
will sign an order or orders stating that the automatic stay does not
apply to the property in question if Wachovia so desires.
CONCLUSION
The 	motion 	to 	reconsider 	the 	order 	approving 	the 	sale 	of 	the
Dowling 	Street 	Property 	to 	Camacho 	will 	be 	denied. 	The 	sale 	has
already been concluded, and there are no legal or equitable grounds
upon which it can be set aside. 	The Trustee is directed to submit a
proposed form of order in accordance with this decision.
The 	motion 	to 	reconsider 	the 	order 	denying 	the 	motion 	to
reconvert the case to chapter 11 and to vacate the order abandoning
the Abandoned Real Property will also be denied. 	The Debtor was in
chapter 	11 	for 	nearly 	a 	year 	before 	proposing 	a 	plan 	of
reorganization. 	The 	plan 	filed 	at 	that 	time 	was 	in 	bad 	faith, 	and
the 	disclosure 	statement 	contained 	no 	meaningful 	financial
information. 	The 	Debtor’s 	avowed 	goal 	was 	and 	is 	to 	hold 	onto 	as
much 	of 	his 	real 	property 	as 	possible. 	This 	is 	a 	reasonable 	goal
from the Debtor’s point of view. 	However, it presents too big a risk
of 	nonpayment 	for 	unsecured 	creditors. 	In 	chapter 	7, 	the 	net 	sale
proceeds 	from 	the 	sale 	of 	the 	Dowling 	Street 	House 	will 	be 	used 	to
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pay unsecured claims. 	The Debtor will presumably be able to retain
the bulk of his real property. 	The Trustee is directed to submit a
proposed form of order in accordance with this decision as well.
Wachovia’s three motions for relief from the automatic stay will
be denied as there is no automatic stay protecting the real property
in question. 	The properties in question have been abandoned by the
Trustee, and the Court is denying the motion to vacate that decision.
However, 	Wachovia 	may 	submit 	orders 	declaring 	that 	there 	is 	no
automatic stay applicable to these properties.
END OF DOCUMENT
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COURT SERVICE LIST
Ellen E. S. Rodin
Law Office of Ellen E. S. Rodin
1611 Telegraph Ave., Ste. 729
Oakland, CA 94612
Jeremy W. Katz
Pinnacle Law Group
425 California St. #1800
San Francisco, CA 94104
Dave M. McGraw
Law Offices of Dave M. McGraw
2890 N. Main St., Ste. 307
Walnut Creek, CA 94597-2738
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