Fermin Solis Aniel and Erlinda Abibas Aniel

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	) Bankruptcy Case
) No. 09-30452DM
FERMIN SOLIS ANIEL and ERLINDA 	)
ARIBAS ANIEL aka Erlinda Jose 	) Chapter 11
Abibas, 	)
)
Debtors. 	)
___________________________________)
MEMORANDUM DECISION REGARDING ORDER DENYING EMERGENCY MOTION TO
RECONSIDER (PERSIA AVENUE PROPERTY)
In this chapter 11 case the pro se debtors have steadfastly
and repeatedly resisted motions for relief from stay, while at the
same time steadfastly and repeatedly refusing to make payments
pending resolution of their disputes about the standing of those
secured creditors to seek such relief.
The court is sympathetic with any debtor who finds it
difficult, if not sometimes seemingly impossible, to wade through
the maze of transferred notes, assigned deeds of trust, ethereal
beneficiaries, and information and belief allegations about what
some predecessor loan servicing agent did with the original note
and deed of trust. 	But it is equally unsympathetic with debtors
shedding crocodile tears about making adequate protection payments
while at the same time claiming all the benefits the bankruptcy
law provides them. 	If you want to gamble in the casino and hope
to hit the jackpot, you can’t expect to win by using house money.
Signed and Filed: April 20, 2010
________________________________________
DENNIS MONTALI
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
April 21, 2010
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 09-30452 Doc# 180 Filed: 04/20/10 Entered: 04/21/10 09:57:10 Page 1 of
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1See http://www.investopedia.com/terms/s/skininthegame.asp
2Unless 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.
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You’ve got to put a “little skin in the game” 1. 	Because these
debtors have refused to do so, relief from stay could hardly be
more appropriate.
On February 11, 2010, Fermin and Erlinda Aniel (“Debtors”)
filed an “Opposition to Motion for Relief from Stay Supplements;
Emergency Motion for Reconsideration on the Order for Relief from
Automatic Stay; Objection to Claim” (“Emergency Motion for
Reconsideration”) regarding the motion for relief from stay
(“MRS”) filed by Deutsche Bank National Trust Company, as Trustee
for HarborView Mortgage Loan Trust Mortgage Loan Pass-Through
Certificates, Series 2007-5, its assignees and/or successors and
the servicing agent American Home Mortgage Servicing, Inc.
(“Creditor”) as to certain rental property on Persia Avenue in San
Francisco (the “Property”). 	The court entered an order denying
the Emergency Motion for Reconsideration on February 17, 2010.
This memorandum decision explains the reasoning that led to the
February 17 order.
FACTS
I. 	Background Facts
On January 25, 2009, Debtors filed their chapter 11 2
petition. According to their Amended Schedule A filed on August
31, 2009, Debtors hold an ownership interest in seven single
family residences in San Francisco County and San Mateo County.
One of these properties is Debtors’ home; the remaining six are
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3See, e.g., the declaration in support of motion for relief
from stay filed by Litton Loan Servicing, L.P., on July 10, 2009
(Docket No. 39-2) (Debtors have not made any payments since March
2008 on note secured by property located on Earl Avenue in San
Bruno); the declaration filed in support of motion for relief from
stay filed by BAC Home Loans Servicing, L.P., on July 10, 2009
(Docket No. 41-1) (Debtors have not made any payments since June
2008 on note secured by property located on Fairmont Drive in Daly
City); the declaration in support of motion for relief from stay
filed by Aurora Loan Services filed on December 15, 2009 (Docket
No. 106-1) (Debtors have not made any payments since July 2008 on
note secured by property located on Clearfield Drive in Millbrae);
the declaration in support of the motion for relief from stay
filed by Creditor on November 20, 2009 (Docket No. 94-1) (Debtors
have not made any payments since September, 2008, on the
Property).
4The proof of claim filed with respect to the note secured by
the Tobin Clark Drive property in Hillsborough alleges that
Debtors owe $131,866.18 in prepetition arrearages; the proofs of
claim filed with respect to the Clearfield Drive property in
Millbrae allege that Debtors owe $68,452.89 in prepetition
arrearages on one note and $22,633.38 in prepetition arrearages on
another note; the proofs of claim or motions for relief from stay
filed with respect to the Sycamore Drive property in Millbrae
allege that Debtors owe $55,537.13 in prepetition arrearages on
one note and $6,467.49 in prepetition arrearages on another note);
the proof of claim filed with respect to the note secured by the
Fairmont Drive property in Daly City alleges that Debtors owe
$36,073.44 in prepetition arrearages; the proofs of claim or
motions for relief from stay filed with respect to the Property
allege that Debtors owe $12,058.45 in prepetition arrearages on
one note and $3,173.60 in prepetition arrearages on another note;
the proof of claim filed with respect to the note secured by the
Earl Avenue property in San Bruno alleges that Debtors owe
$61,051.28 in prepetition arrearages; and the proof of claim filed
with respect to the note secured by the Foothill Avenue property
in San Mateo alleges that Debtors owe $59,856.46 in prepetition
arrearages.
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rental properties. 	Debtors have been collecting the rents on the
rental properties since the petition date but have not made any
postpetition payments on the debts secured by various deeds of
trust against the properties. 3 	According to various proofs of
claim and motions for relief from stay filed in this case, Debtors
owe significant prepetition arrearages on the various notes
secured by the properties. 4
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5The court noted that as set forth in B-Real, LLC v. Chaussee
(In re Chaussee), 399 B.R. 225 (9th Cir. BAP 2008), the Bankruptcy
Code and the claims allowance process set forth in it preclude
application of the FDCA and preempt state consumer protection
laws. 	The court further observed that it lacks authority to deal
with alleged violations of the California Penal Code.
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Ms. Aniel admitted at a chapter 11 status conference on
January 14, 2010, that Debtors have been using the rental proceeds
without obtaining authorization to use cash collateral; Debtors
have used the proceeds to, among other things, pay the costs of
litigation against many of the alleged deed of trust holders.
Debtors have opposed the motions for relief from stay and many of
the proofs of claims filed by these lenders for, among other
theories, lack of standing. 	Notwithstanding these objections and
oppositions, Ms. Aniel has admitted on the record that Debtors do
not dispute executing the various notes and deeds of trust. 	She
has also stated that Debtors do not intend to make any adequate
protection payments on these various notes.
II. 	History of the Emergency Motion for Reconsideration
On November 20, 2009, Creditor filed the MRS. 	Debtors
opposed the MRS on the grounds of standing and purported
violations of the Fair Debt Collections Act (“FDCA”), state
consumer protection laws, and the California Penal Code by
Creditor and Creditor’s counsel in filing a proof of claim and the
MRS. 	The court held a hearing on the MRS on December 10, 2009,
and took the matter under submission. 	On December 16, 2009, the
court entered an order overruling the FDCA and California Penal
Code objections 5 but permitting the automatic stay to remain in
effect as long as Debtors tendered adequate protection payments
pending resolution of the standing issue. 	The adequate protection
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payments were to be held by Creditor’s counsel in an interest-
bearing trust account; if Debtors ultimately prevailed on their
standing defenses, the adequate protection payments plus accrued
interest would be returned to them.
On December 23, 2009, Debtors filed a motion to reconsider or
amend the December 16 order on the MRS. 	On December 31, 2009,
this court entered an order granting, in part, this motion for
reconsideration (the “December 31 Order”). 	The December 31 Order
provided:
Debtors have a right to assert their substantive
standing defense to the MRS, but they must provide
adequate protection of Creditor’s asserted security
interest pending resolution of the issue, particularly
as no equity exists in this rental property and no
payments have been made for ten months postpetition. 	11
U.S.C. §§ 361 and 362(d). . . . To continue the
automatic stay, however, the court requires Debtors to
make the regular monthly payments for December, 2009,
and January, 2010, in the total amount of $4,865.04, no
later than January 11, 2010, and $2,432.52 per month
thereafter, on the first business day of each month.
All payments must be made to Creditor’s counsel, who
shall hold these payments in an interest-bearing trust
account pending further order of the court. 	If Debtors
ultimately prevail, these payments plus accrued interest
may be returned to them. 	If Debtors default in making
the January 11, 2010 payment and the monthly payments
thereafter, Creditor shall provide written notice to
Debtors of the nature of the default. 	If Debtors fail
to cure the default within ten days of the date of the
notice, Creditor may file an ex parte declaration of
default and upload an order granting it full relief from
the automatic stay. 	Upon receipt of any declaration of
default from Creditor, the court may grant full relief
from the stay without further hearing.
On February 2, 2010, Creditor filed a declaration of default
(at Docket No. 139) stating that Debtors did not make the January
11 payment, even after Creditor’s counsel sent Debtors a notice of
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6At the chapter 11 status conference on January 14, 2010, Ms.
Aniel stated on the record that Debtors had not made the January
11 adequate protection payment and would not be making any other
adequate protection payments as required by the December 31 Order.
7In support of the MRS, an employee of American Home Mortgage
Servicing, Inc. (the servicing agent on behalf of the “Secured
Creditor”) executed a declaration stating that the “Secured
Creditor holds the original Promissory Note dated 4/17/2007 in the
principal amount of $676,000.00 which is secured by the Deed of
Trust of the same date.” 	The note, however, was not attached as
an exhibit to the declaration or the MRS. 	The note is attached as
an exhibit to the February 2 supplement. 	The note is executed to
the order of Bayporte Enterprises, Inc. 	The last page of the
exhibit contains an endorsement from Bayporte Enterprises, Inc. to
American Home Mortgage Corporation, and a second endorsement in
blank by American Home Mortgage Corporation. 	Apart from the two
endorsements, the last page of the exhibit is blank.
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default on January 13, 2010. 6 	Therefore, on February 4, the court
entered an order granting Creditor’s MRS.
On February 11, 2010, Debtors filed their Emergency Motion
for Reconsideration because, inter alia, Creditor has not
established a chain of title showing that it is an assignee of the
underlying deed of trust. 	The December 31 Order directed Creditor
to file, no later than February 5, a supplement to its MRS to
demonstrate the chain of title. 	Creditor filed a supplement on
February 2, 2010, but that supplement does not show how and when
Creditor acquired its rights in the deed of trust. 7
Nonetheless, because Debtors failed to make any effort to
tender the adequate protection payment on January 11, the court
entered the February 17 order denying the Emergency Motion for
Reconsideration. 	The February 17 order specifically states that
it does not preclude Debtors from challenging in state court the
Creditor’s right to pursue remedies under the deed of trust and
note and that it does not preclude Debtors from filing a separate
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8In a state court action to restrain a foreclosure, Debtors
would not be required to make periodic mortgage payments but they
most likely would have to post a bond in an amount sufficient to
protect Creditor’s interests pending resolution of the dispute
there.
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objection to Creditor’s proof of claim in this chapter 11 case. 8
DISCUSSION
In the past year or two, several bankruptcy courts have
published decisions regarding the standing of creditors and
servicing agents acting on the creditors’ behalf to prosecute
motions for relief from stay. 	See, e.g., In re Wilhelm, 407 B.R.
392 (Bankr. D. Id. 2009); In re Jacobson, 402 B.R. 359 (Bankr.
W.D. Wash. 2009); In re Hwang, 396 B.R. 757 (Bankr. C.D. Cal.
2008). 	In general, these cases apply Federal Rule of Civil
Procedure 17(a)(1) (incorporated by Rule 7017, which is in turn
made applicable to motions for relief from stay by Rules
4001(a)(1) and 9014), which provides that an action “must be
prosecuted in the name of the real property in interest.” 	The
real property in interest in a relief from stay motion is a party
entitled to enforce the right being asserted under applicable law.
Jacobson, 402 B.R. at 366.
Addressing the principles of “real party in interest” and
standing in the context of motions for relief from the automatic
stay, the Wilhelm court held that movants must show that they have
“an interest in the relevant note” and they have been “injured by
debtor’s conduct (presumably through a default on the note).”
Wilhelm, 407 B.R. at 398. 	“Beyond that, [m]ovants must also show
they have the right, under applicable substantive law, to enforce
the notes.” 	Id. 	The court identified two threshold questions for
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9As discussed in footnote 7, above, Creditor’s motion is
supported by a declaration stating that it is the holder of the
relevant note here. 	Creditor has produced a copy of the note
endorsed in blank. 	Debtors challenge the legitimacy of the
endorsement, and demand that Creditor produce the original note.
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establishing standing: (1) Has the movant established an interest
in the relevant promissory note? (2) Is the movant entitled to
enforce the notes? 	Id.
To resolve these threshold questions of standing, the courts
have looked to the state law governing negotiable instruments.
Hwang, 396 B.R. at 762. 	In California, section 3301 of the
Commercial Code governs who is entitled to enforce a note:
“Person entitled to enforce” an instrument means (a) the
holder of the instrument, (b) a nonholder in possession
of the instrument who has the rights of a holder, or (c)
a person not in possession of the instrument who is
entitled to enforce the instrument pursuant to Section
3309 or subdivision (d) of Section 3418. 	A person may
be a person entitled to enforce the instrument even
though the person is not the owner of the instrument or
is in wrongful possession of the instrument.
Cal. Comm. Code § 3301. 	A “holder” of a note is “the person in
possession of a negotiable instrument that is payable either to
bearer or, to an identified person that is the person in
possession.” 	Cal. Comm. Code § 1201(B)(21)(a). 	When endorsed in
blank, an instrument becomes payable to bearer and may be
negotiated by transfer of possession alone. 	Cal. Comm. Code §
3205. 9
In general, this court agrees with the principle that
creditors moving for relief from stay should establish a prima
facie case that they have standing to enforce the underlying note
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10Recently, in a case arising from this court, the District
Court affirmed denial of a motion for relief from stay based upon
a contention by the trustee that the creditor had violated TILA.
In re Hubbel, 2010 WL 1222777, (N.D. Cal., March 24, 2010) In
doing so it acknowledged that standing needed to be established:
As to the second point, § 362(d) provides that the stay may
only be lifted as to a party in interest. Therefore, there
must be some preliminary determination as to whether the
moving party is, in fact, a party in interest. See 11 U.S.C.
§ 362(d) (“On the request of a party in interest .... “
(emphasis added)). Surely it cannot be sufficient for a party
to bring a motion for relief from the stay and obtain relief
without presenting prima facie evidence that he has an
interest of some sort. In such a situation, a bankruptcy
judge must have the discretion to deny relief until such time
as the moving party can present sufficient evidence.
2010 WL 1222777 at *7.
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or obligation. 10
In this circuit, relief from stay hearings are “limited to
issues of the lack of adequate protection, the debtor’s equity in
the property, and the necessity of the property to an effective
reorganization. 	Hearings on relief from the automatic stay are
thus handled in a summary fashion.” 	Johnson v. Righetti (In re
Johnson), 756 F.2d 738, 740 (9th Cir. 1985) (overruled on other
grounds by Travelers Cas. & Sur. Co. v. Pac. Gas & Elec. Co., 549
U.S. 443 (2007)). 	“The validity of the claim or contract
underlying the claim is not litigated during the hearing.”
Johnson, 756 F.2d at 740 (emphasis added). 	As noted by the Ninth
Circuit BAP in First Fed. Bank of Cal. v. Robbins (In re Robbins),
310 B.R. 626, 631 (9th Cir. BAP 2004) (emphasis added):
Stay relief hearings do not involve a full adjudication
on the merits of claims, defenses, or counterclaims, but
simply a determination as to whether a creditor has a
colorable claim.
Here, Creditor has made a colorable claim that it has
standing by showing that it holds the note, endorsed in blank.
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11As recently noted in Hubbel at *6:
...the statute does indeed provide that the bankruptcy court
“shall” provide relief in certain circumstances, but the
relief available is by no means limited to an unequivocal
dissolution of the stay. On the contrary, the statute
provides that relief may include “terminating, annulling,
modifying, or conditioning such [a] stay.” 11 U.S.C. 362(d).
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Debtors do not dispute that they executed the note and deed of
trust which are the subject of the MRS. 	If Debtors wish to
maintain the status quo pending resolution of matters that require
more plenary proceedings than relief from stay motions (e.g.,
adversary proceedings for declaratory relief to determinethe
proper holder of a note; objections to the claim of the creditor;
confirmation of a Chapter 11 reorganization plan that restructures
the claim of the creditor, etc.), the conventional way to do so is
to make adequate protection payments in the meantime. 11
Because of Debtors’ adamant refusal to make such payments the
court is less tolerant than the Wilhelm, Jacobson, and Hwang
courts in one material respect: whether debtors should provide
adequate protection payments to the Creditor until the standing
issues are fully adjudicated. 	They have not made any payment on
this note (or the notes secured by the six other properties in
which Debtors assert an ownership interest) in over a year while
they have been in bankruptcy. 	They failed to make at least five
prepetition payments on the note secured by the Property. 	They
have no equity in the Property. 	They have used cash collateral
without permission.
Under such circumstances, justice dictates that Debtors make
adequate protection payments pending resolution of the standing
issues. 	The court will not continue the stay with all of the risk
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being borne by the creditor. 	In circumstances where there is no
doubt that the Debtors signed the note that is the subject of the
motion, (and, frankly, not much doubt that ultimately Creditor
will be able to “connect the dots” by showing the chain of title
of the note and deed of trust), denial of relief from stay when
adequate protection payments could be made would be patently
unfair to Creditor and impose on it all of the risk of further
deterioration of its security without protection. 	Since Debtors
have no inclination to make payments, it is abundantly clear that
once the Creditor (and other similarly situated secured creditors
on other properties of Debtors) proves its standing, Debtors will
allow the Property to be foreclosed. 	There is simply no point in
delaying the inevitable.
Debtors were not unprotected or left without remedy if they
had made the adequate protection payments as ordered by the court.
As the December 31 order provides, the adequate protection
payments consist of the monthly payments due under the note
undisputedly executed by them, and Creditor’s counsel was to hold
such payments in trust pending resolution of the standing
challenge. 	If Debtors had ultimately prevailed, the payments
(plus interest) would have been returned to Debtors. 	Moreover,
the order granting relief from the automatic stay does not
preclude Debtors from challenging in state court the legitimacy of
Creditor’s right to foreclose.
Debtors chose not to comply with this court’s December 31
order. 	They chose not to make the adequate protection payments.
They must accept the consequences of their decision. 	Under the
circumstances described in this memorandum decision, the court
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questions whether the Debtors’ challenges to standing are made in
good faith. 	The court therefore did not and will not vacate the
order granting relief from stay.
* * * END OF MEMORANDUM DECISION * * *
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COURT SERVICE LIST
Fermin Solis Aniel
Erlinda Aribas Aniel
75 Tobin Clark Dr.
Hillsborough, CA 94010
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