Blanc v. GMAC Mortgage USA Corporation et al

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
SHEILA ANN BLANC, 	No. 08-11151
Debtor(s).
______________________________________/
SHEILA ANN BLANC,
Plaintiff(s),
v. 	A.P. No. 11-1256
GMAC MORTGAGE, LLC,
Defendant(s).
_______________________________________/
Memorandum on Motion to Dismiss
_________________
Debtor and plaintiff Sheila Blanc filed her Chapter 13 petition on June 11, 2008. She
scheduled her real property at 7319 Witter Road, Sebastopol, California, as being worth $656,500.00
and encumbered by a first deed of trust to defendant GMAC Mortgage, LLC, securing an obligation of
$763,239.00 and a second deed of trust to Select Portfolio Servicing securing an obligation of
$87,925.00. Neither debt was scheduled as disputed.
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Entered on Docket
December 19, 2011
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 11-01256 Doc# 10 Filed: 12/19/11 Entered: 12/19/11 16:47:04 Page 1 of 4

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On September 15, 2008, Blanc’s Chapter 13 plan was confirmed. It provided for the avoidance
of the Select Portfolio deed of trust on the grounds that the lien of GMAC was greater than the value of
the property, so that Select Portfolio was entirely unsecured. The plan also provided for a zero
dividend to unsecured creditors and regular payments to GMAC with arrears paid through the Chapter
13 trustee. The Chapter 13 case is still pending; the plan has not yet been completed, and Blanc’s
discharge has accordingly not been entered.
Without amending her plan, Blanc filed a state court lawsuit against GMAC on August 30,
2011. In the lawsuit, Blanc alleges that GMAC has no valid lien and she accordingly owns her home
free and clear. Blanc did not schedule this cause of action as an asset in her bankruptcy schedules.
GMAC removed the lawsuit to this court. It has filed a motion to dismiss, based on principles
of claim preclusion (res judicata) and judicial estoppel.
It is doubtful that claim preclusion applies, since the plan has not been completed and there is
therefore no final order. Blanc retains a right to dismiss the Chapter 13, which would undo both
confirmation and avoidance of the Select Portfolio lien pursuant to § 349(b) of the Bankruptcy Code.
However, judicial estoppel clearly applies. Blanc obtained confirmation of her plan and
avoidance of the Select Portfolio deed of trust by representing to the court and her creditors that the
GMAC lien was valid. If GMAC has no valid lien, then there is no basis for avoidance of the Select
Portfolio lien and Blanc must pay her creditors a significant dividend, if not payment in full, pursuant
to § 1325(a)(4).
In order for Blanc to proceed with her lawsuit against GMAC, she must either obtain
confirmation of an amended plan which reinstates the Select Portfolio lien and provides for as much to
creditors as they would receive if her home was sold free and clear of the GMAC lien, or she must
dismiss her Chapter 13 case. If she fails to do either within 30 days after entry of an appropriate order,
then GMAC’s motion to dismiss this adversary proceeding will be granted.
Counsel for GMAC shall submit an appropriate form of order.
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Case: 11-01256 Doc# 10 Filed: 12/19/11 Entered: 12/19/11 16:47:04 Page 2 of 4

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Dated: December 19, 2011
SAlan Jaroslovsky
U.S. Bankruptcy Judge
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Case: 11-01256 Doc# 10 Filed: 12/19/11 Entered: 12/19/11 16:47:04 Page 3 of 4

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CERTIFICATE OF MAILING
I, the undersigned, a regularly appointed deputy clerk of the United States Bankruptcy Court for the
Northern District of California, at Santa Rosa, hereby certify:
That I, in the performance of my duties as such clerk, served a copy of the foregoing document by
depositing it in the regular United States mail at Santa Rosa, California on the date shown below, in a
sealed envelope bearing the lawful frank of the Bankruptcy Judge, addressed as listed below.
Dated: December 19, 2011 	By : 	Katie Andersen
Katie Andersen
Deputy Clerk
Sheila Ann Blanc
7319 Witter Rd.
Sebastopol, CA 95472
Case: 11-01256 Doc# 10 Filed: 12/19/11 Entered: 12/19/11 16:47:04 Page 4 of 4