Luis Flores and Bertha Flores

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GPO

Sotelo LE. + ee
Entered on Docket
January 17, 2012
GLORIA L. FRANKLIN, CLERK

U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA

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BSP ose NITED STATES BANKRUPTCY COURT
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NORTHERN DISTRICT OF CALIFORNIA

In re ] Case No. 10-61121-ASW
]
LUIS RAMIREZ FLORES AND ] Chapter 13
BERTHA OROPEZA FLORES, ]
]
Debtors. ]
]

MEMORANDUM DECISION FOLLOWING EVIDENTIARY

HEARING REGARDING DEBTORS’ MOTION TO AVOID

LIEN OF SANTA CRUZ COMMUNITY CREDIT UNION

Before the Court is the motion (“Motion”) by debtors Luis

Ramirez Flores and Bertha Oropeza Flores (“Debtors”) to determine
the value and status of the second priority deed of trust held by
creditor Santa Cruz Community Credit Union (“SCCCU”) against the
Debtors’ primary residence located at 517 Marnell Avenue, Santa
Cruz, California (the “Property”). Debtors seek a determination.
that SCCCU’s second deed of trust is not secured in any amount and
thus may be treated as unsecured in Debtors’ chapter 13 plan.
SCCCU opposes the Motion. Debtors are represented by Jason
Vogelpohl, Esq. Of Central Coast Bankruptcy, Inc. SCCCU is
represented by Thomas Caudill, Esq. Of The Law Offices of Thomas
Caudill.

An evidentiary hearing on the Motion was held on September 6,

2011, and the matter has been submitted for decision. At the

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evidentiary hearing, Debtors called Michael J. Wilson (“Wilson”),
an appraiser, as a witness. SCCCU called Bruce McGuire
(“McGuire”), an appraiser, as a witness.

This Memorandum Decision constitutes the Court’s findings of
fact and conclusions of law, pursuant to Rule 7052 of the Federal

Rules of Bankruptcy Procedure.

I.
FACTS

Debtors commenced this case by filing a petition under
Chapter 13 of the Bankruptcy Code on October 26, 2010. Debtors’
main asset is the Property. Two deeds of trust have been recorded
on the Property. The senior obligation and first deed of trust on
the Property is held by EMC Mortgage (“EMC”). The junior
obligation and second deed of trust is held by SCCCU (“SCCCU’'s
Lien”).

On the bankruptcy petition date, the amount owing to EMC was
no more than $561,904.56. On April 4, 2011, Debtors filed the
Motion. On April 13, 2011, SCCCU filed an objection to the Motion.
The hearing, initially held on July 26, 2011, was continued to
September 6, 2011 for an evidentiary hearing.

At the September 6, 2011 hearing, each party offered an expert
witness to opine as to the value of the Property at the time of
Debtors’ bankruptcy petition. Both experts prepared written
reports and those reports were entered into evidence. Direct
testimony was submitted by declaration, with cross-examination, re-
direct, and re-cross-examination taken at the evidentiary hearings.

Debtors’ expert witness Michael J. Wilson is a certified appraiser

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of real property working as a real estate appraiser primarily in
Monterey County, but also working in San Benito County, Santa Clara
County, and Santa Cruz County. SCCCU’s expert witness Bruce
McGuire is a certified appraiser of real property. Both appraisers
were qualified to testify as experts concerning the value of the
Property.

Wilson holds a license from the State of California to
conduct real estate appraisals. Wilson was first an Appraiser
Trainee on January 30, 2004. Wilson was then a licensed
Residential Appraiser on July 7, 2006 before being licensed as a
Certified Residential Appraiser in April 2009. Wilson has received
over 220 hours of local and online instruction from various
approved continuing education providers with the State of
California, Office of Real Estate Appraisers. Wilson testified
that Wilson appraises roughly one-hundred and twenty properties per
year, but has only appraised ten properties in Santa Cruz County --
none of which were on the east side of Santa Cruz where the
Property is located. Debtors asked Wilson to determine the market
value of the Property as of the petition date, October 26, 2010.

Wilson testified that Wilson believed the fair market value of
the Property was $550,000.00 as of October 26, 2010. Wilson based
that conclusion upon a sales comparison analysis of five comparable
properties. A sales comparison approach to value is based upon an
analysis of comparable properties within the same neighborhood in
light of factors such as the real estate market of the particular
neighborhood, the school systems, and the dwelling’s

characteristics including square footage, age, and condition.

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Wilson’s report contained five comparable properties. The
sales price of the Wilson comparables ranged from $500,035 to
$639,000. Wilson’s comparable properties were located from .21 to
1.25 miles away from the Property. Three of the five properties
were sold before Debtors’ bankruptcy petition date. Comparable
number four sold on November 16, 2010 -- shortly after Debtors’
bankruptcy. Comparable number five’s sale is listed as pending in
Wilson’s report, meaning that whether the property actually closed
escrow and, if so, when, and at what price, is unknown.

At the evidentiary hearing, Wilson was cross-examined
regarding several aspects of his report. First, counsel for SCCCU
confirmed with Wilson that only three of Wilson’s five comparable
properties had closed escrow before the date of Debtors’ bankruptcy
petition. Wilson verified that comparable properties four and five
had not closed escrow prior to October 26, 2010. Wilson explained
‘that common-appraisal-practice when given a retroactive appraisal
assignment is to include properties that were in contract before
the effective date, but that closed escrow within thirty to forty-
five days after the effective date. Comparable number four closed
escrow on November 16, 2010 -- twenty-one days after the date of
Debtors’ bankruptcy petition. As noted above, Wilson testified
that Wilson did not know at the time Wilson submitted Wilson’s
appraisal report, nor at the time of the evidentiary hearing,
whether comparable number five ever closed escrow.

Counsel for SCCCU also inquired as to Wilson’s use of $55 per
square foot when adjusting for the gross living area variance
between the Property and Wilson’s comparable properties. Wilson

explained that Wilson had consulted two Santa Cruz appraisers who

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were familiar with the area -- Dave Becrera and Laura Bishop.
Wilson testified that Bishop suggested Wilson use $55-$75 per
square foot when making adjustments and that $75 per square foot
would be used for extremely high-end properties. Wilson also
testified that Becrera suggested that Wilson use $60-$65 per square
foot.

SCCCU’s expert witness Bruce McGuire is a California Certified
Residential Real Estate Appraiser. McGuire has been an appraiser
for over thirty-six years and estimates that McGuire has appraised
thousands of properties during that time. McGuire was a Deputy
Assessor in Santa Cruz County for ten years and has been a
California State Probate Referee for Santa Cruz County since 1998.
McGuire testified that McGuire believed the fair market value of
the Property was $595,000.00 as of October 26, 2010. McGuire based

that conclusion upon a sales comparison analysis of six comparable

properties;:--McGuire emphasized-in-McGuire’s Declaration that

McGuire’s valuation is conservative for the following reasons:
(1) in 2010 and prior to October 26, 2010, there were three sales
on the same street as the Property for $595,000, $650,000 and
$770,000, respectively; (2) McGuire did not adjust for the
Property’s upgraded and remodeled granny unit; and (3) McGuire did
not adjust for any increase in the value of the Property derived
from the Property’s two separate units.

The sales prices of McGuire’s comparable properties ranged
from $573,000 to $720,477 and were sold between February 17, 2010
and August 17, 2010. All of McGuire’s comparable properties were

listed as sold before the date of Debtors’ bankruptcy petition in

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McGuire’s report. The comparable properties were located from .02
to 1.27 miles away from the Property.

At the evidentiary hearing, counsel for Debtors asked McGuire
about ‘McGuire’s criticism of Wilson’s lack of knowledge of Santa
Cruz’s Accessory Dwelling Unit (“ADU”) Program. McGuire testified
that Wilson was not familiar with the ADU program, and that the
existence of Santa Cruz City building permits have an impact on
the value of the property. For example, McGuire explained that
McGuire’s comparable number one has a legal ADU, which would affect
the value for comparable number one.

Counsel for Debtors also inguired as to McGuire’s use of the
property located at 503 Marnell Avenue (McGuire’s comparable number
six) as a comparable property. The reason for the inquiry was that
McGuire's comparable number six is roughly forty-six percent
smaller than the Property. McGuire explained that comparable
“number: six is located four houses~from the Property and that,
because location is the most important factor when searching for
comparable properties, McGuire thought that comparable six was
still a very good indicator of the Property’s. value. McGuire also
explained that, despite being forty-six percent smaller than the
Property, comparable number six sold for $595,000 on March 19,
2010, roughly seven months prior to the petition date. This is the
exact same figure used for McGuire’s appraisal of the Property.

Counsel for Debtors also asked McGuire about the variance
between McGuire and Wilson’s living area adjustment figures.

Wilson used $55 per square foot when making adjustments while
McGuire used $100 per square foot. McGuire explained that McGuire

used the Building Residential Technique to calculate the his $100

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per square foot figure. The Building Residential Technique
subtracts the value of the land from the total value of the
property to determine the value of the actual home, and then
divides the resulting value by the square footage. McGuire’s
Declaration also explains that as part of McGuire’s review of
Wilson’s appraisal, McGuire contacted Bercera -- the same
individual that Wilson consulted -- and McGuire and Bercera went
through the adjustment calculation. McGuire and Bercera came up
with $105.00 per square foot.

Lastly, counsel for Debtors asked McGuire why a $30,000 time
adjustment was made for comparable number six, which was sold on
March 29, 2010, and comparable number five, which was sold on
March 19, 2010, while a $25,000 adjustment was made for comparable
number one, which was sold on March 26, 2010. McGuire was not able
to explain the discrepancy.

If.
ANALYSIS

Debtors’ Motion requests this Court to determine the value and
status of SCCCU’s Lien as wholly unsecured and void. Debtors
contend that because the fair market value of the Property on the
bankruptcy petition date was less than the debt secured by EMC’s
first priority trust deed, SCCCU’s Lien was wholly unsecured at the
time of the bankruptcy. SCCCU opposes the Motion arguing the fair
market value of the Property exceeded EMC’s first priority lien;
thus SCCCU’s second priority trust deed was at least partially
secured and entitled to the “antimodification” provision of

Bankruptcy Code section 1322 (b) (2).

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Debtors seek to value SCCCU’s Lien on the: Property based on
Bankruptcy Code section 506(a) (1), which states:
An allowed claim of a creditor secured by a lien on
property in which the estate has an interest ...isa
secured claim to the extent of the value of such
creditor’s interest in the estate’s interest in such
property .. . and is an unsecured claim to the extent
that the value of such creditor’s interest . .. is less
than the amount of such allowed claim.
11 U.S.C. § 506 (a) (1). If the Court finds SCCCU’s Lien to be wholly
unsecured, as Debtors contend, then SCCCU is not the “holder of a
secured claim” whose rights are subject to the “antimodification”

protection of Bankruptcy Code section 1322 (b) (2). Zimmer v. PSB

Lending Coporation (In re Zimmer), 313 F.3d 1220 (9th Cir. 2002).

The consequence of such a finding is that Debtors could provide for
SCCCU’s claim through Debtors’ chapter 13 plan as a general unsecured
claim, rather than a secured claim. Zimmer, 313 F.3d at 1227.
Conversely, if the Court. finds SCCCU’s Lien to be secured by even
$1.00, the “antimodification” protection of Bankruptcy Code section
1322(b) (2) applies and the claim must be paid as a secured claim and
cannot be modified by Debtors’ chapter 13 plan.

Bankruptcy Code section 506(a) (1) instructs that when a court is
requested to determine the value of collateral, “such value shall be
determined in light of the purpose of the valuation and of the
proposed disposition or use of such property...” 11 U.S.C.

§ 506(a) (1). When the debtors intend to stay in their house, the
proper valuation of the house under Bankruptcy Code section 506 (a)

is the fair market value. Taffi v. United States of America (In re

Taffi), 96 F.3d, 1190, 1192 (9th Cir. 1996). The fair market value
is not the “replacement” value because the house is not being

replaced. Neither is it the “foreclosure” value because no

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foreclosure is intended in the chapter 13 plan. Taffi, 96 F.3d at
1192. The fair market value is “the price which a willing seller
under no compulsion to sell and a willing buyer under no compulsion
to buy would agree upon after the property has been exposed to the
market for a reasonable time.” Taffi, 96 F.3d at 1192. Debtors
intend to stay in the Property, cure the loan owed to EMC, and treat
SCCCU. as a general unsecured creditor.

For purposes of granting or denying the Motion, this Court does

not need to determine the exact value of the Property. In re Serda,

395 B.R. 450 (Bankr. E.D. Cal. 2008). The Court only needs to
determine whether or not the value of the Property at the time of
Debtors’ bankruptcy petition was greater than, equal to, or less than
the amount of the senior secured debt owed to EMC. Serda, 395 B.R.
at 453. Here, the amount owing to the first deed of trust holder was
no more than $561,904.56 on the bankruptcy petition date.

Debtors bear the initial burden of proof of overcoming any
presumption established by the stated value in the secured creditor’s
proof of claim. Serda, 395 B.R. at 454. The secured creditor has
the ultimate burden of persuasion to demonstrate, by a preponderance
of the evidence, the value of the collateral which secures its claim.

In re Southmark Storage Associates Ltd. Partnership, 130 B.R. 9, 10

(Bankr. D. Conn. 1991).

Both parties’ expert witnesses used the sales comparable method
to estimate the fair market value of the Property at the time of
Debtors’ bankruptcy petition. The hearing on the matter lasted
roughly three hours wherein both experts testified. The Court
considered all the evidence admitted at trial, including the

testimony of both experts. In addition, the Court prepared its own

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statistical analysis based solely upon the appraisal reports
submitted by the two experts. (Attached as Exhibits 1-4).'

A. SCCCU’s Motion in Limine

On August 26, 2011, SCCCU filed a written motion in limine to
exclude the expert opinion testimony of Debtors’ expert appraiser
Wilson. SCCCU’s motion argues that Wilson is not an expert appraiser
as to property values in the Santa Cruz area because: (1) by Wilson’s
own admission, Wilson has never undertaken a residential appraisal in
the specific area where the Property is located; (2) since 2006,
Wilson has appraised approximately ten properties in Santa Cruz
County; (3) Wilson is not familiar with the East Santa Cruz area; and
(4) Wilson had not heard of the Santa Cruz ADU Program -- which is
unique to Santa Cruz in connection with residential properties --
prior to submitting Wilson’s appraisal. |

Debtors opposed SCCCU’s motion, arguing that Wilson has been a
certified residential appraiser since-April 2009, is in good standing
with the Office of Real Estate. Appraisers, and has received over 220
hours of local and online instruction from various approved
continuing education providers with the State of California Office of
Real Estate Appraisers. Debtors argued that if SCCCU believes that
Wilson’s ignorance of Santa Cruz’s ADU Program is relevant, SCCCU may

cross-examine Wilson at the evidentiary hearing.

As explained in the Bankruptcy Evidence Manual by Judge Barry

Russell:

' The Court does not imply that the fair market value of any
property is purely a statistical calculation, but it recognizes
that such analysis can be instructive when confronted with
conflicting and multifaceted data.

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1 The admissibility of expert testimony under Rule 702
requires that two preliminary determinations be made by the
court. Rule 104(a). First, the court must decide whether
expert testimony could assist the trier of fact in
understanding the evidence or determining a fact in issue.
The court may be required as an aspect of this inquiry to
determine whether a sufficiently reliable body of
scientific, technical, or other specialized knowledge has
been developed. Second, the court must also determine
whether the witness called is properly qualified to give
the testimony sought. The witness may be qualified as an
expert on the bases of either knowledge, skill, experience
or education or a combination thereof. Morganroth &
Morganroth v. DeLorean, 213 F.3d 1301 (10th Cir. 2000)
(Expert opinion evidence in affidavit form could properly
be considered on motion for summary judgment.); In re
Moyer, 421 B.R. 587 (Bkrtcy. S.D. Ga. 2007) (Expert ;
testimony will assist trier of fact, as required for it t
10 be admissible, if it concerns matters that are beyond
understanding of lay persons. Burden of laying proper

11 foundation for admission of expert testimony is on party
offering the expert. Admissibility of expert testimony

12 must be shown by preponderance of evidence.).

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13 ||Hon. Barry Russell, Bankruptcy Evidence Manual, §702:1 (2011 ed.).

14 |The Bankruptcy Evidence Manual further explains:

15 Once a witness has qualified as an expert by the
Court, the lack of strong qualifications affects the weight

16 ‘rather than the-admissibility of the evidence. In re 3dfx
Interactive, Inc., 389 B.R. 842 (Bankr. N.D. Cal. 2008)

17 (Even uncontradicted expert testimony is not necessarily
conclusive. Court may decline to accept an expert’s

18 opinion, in whole or in part, and may reject an expert’s
opinion based upon its conclusions regarding the expert’s

19 credibility). It is for the trier of fact to determine the
weight to be given to the testimony of an expert witness.

20 In re Piece Goods Shops Co., L.P., 188 B.R. 778 (Bankr.
M.D.N.C. 1995) (plan proponents’ expert’s testimony given

21 greater weight than objector’s expert due to experience and
knowledge of relevant facts); Matter of 1616 Reminc Ltd.

22 Partnership, 9 B.R. 679 (Bankr. E.D. Va. 1981); In re Lona,
393 B.R. 1 (Bankr. N.D. Cal. 2008) (Bankruptcy court may

23 simply disregard the testimony of any witness whom it finds
not to be credible, and bankruptcy court’s credibility

24 determinations are given due regard on appeal).

25 Id. at § 702:2.
26 Here, the motion in limine is based not on Wilson’s expertise as
27 lan appraiser per se, but rather due to Wilson’s relative inexperience

28 lin appraising residential property where Debtors’ residence is

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located. Such concerns have been taken into account in the weight
that this Court accords Wilson’s testimony. Accordingly, SCCCU’s
motion in limine is denied.

B. Presumption of Value

As noted above, Debtors’ expert, Wilson, analyzed five
comparable properties that were located between .21 and 1.25 miles
from the Property. Three of the properties Wilson included in
Wilson’s report were sold before October 26, 2010 -- the date of
Debtors’ bankruptcy petition. Wilson’s comparable number four closed
escrow on November 16, 2010. Wilson testified that Wilson did not
know whether Wilson’s comparable number five had closed escrow as of
the date of the evidentiary hearing. Based on these comparable
properties, Wilson concluded that the Property had a fair market
value of $550,000 on the petition date. Debtors have presented
sufficient evidence to overcome the presumption of value within
SCCCU’s claim.

_C. Living Area Adjustment. Value

One of the primary issues discussed at the evidentiary hearing
was the discrepancy between the figures used for Wilson and McGuire’s
living area adjustments. When using a sales comparison approach to
formulate an appraisal value, the appraiser selects recent sales of
comparable properties and then makes adjustments to account for
differences between the two properties that might account for
different sales prices. For example, if a property that sold one day
prior to the effective date was identical to the subject property
except that the subject property’s home possessed twice the square
footage as the earlier sold property, the appraiser would make an

adjustment to the earlier sold property’s sale price to account for

——0

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the smaller home size. While the earlier sold property may have sold
for $500,000, an appraiser might value the subject property at
$600,000 because of the larger home size.’

Here, Wilson chose to use a living area adjustment value of $55
per square foot. Wilson, who admitted to being unfamiliar with the
Santa Cruz area, called two local appraisers to ask what an
appropriate living area adjustment value might be. Wilson testified
that one of the appraisers, Laura Bishop, suggested Wilson use an
adjustment value of $55-75 per square foot with the $75 value
representing extremely high-end property. Wilson also testified that
the other appraiser, Dave Becrera, suggested Wilson use an adjustment
value of $60-65 per square foot. Wilson testified that Becrera later
told Wilson that Becrera knew of McGuire and told Wilson that
McGuire’s use of $100 per square foot was on the high side.

McGuire chose to use a living area adjustment value of $100 per
square foot. In coming to this value, McGuire used the Building
Residential Technique -- a mathematical formula used at the Appraisal
Institute to arrive at the square foot adjustment for sales price for
square foot. The Building Residential Technique subtracts the value
of the land from the total value of the property to determine the
value of the actual home, and then divides the resulting value by the
square footage.

In McGuire’s Declaration, McGuire explained that McGuire went
through the adjustment calculation with Becrera and came up with
$105.00 per square foot. McGuire also stated at trial that Becrera

told McGuire that Becrera did not give Wilson a specific range of

28

* These examples are purely made-up. They have no basis in
reality for purposes of the instant dispute.

vas

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values to use for Wilson’s appraisal -- rather Becrera directed
Wilson to a webpage.

The Court finds McGuire’s use of $100 per square foot more
persuasive than Wilson’s use of $55 per square foot. McGuire was
able to demonstrate to the Court exactly how McGuire arrived at the
$100 figure through a mathematical analysis. The Court also
considered McGuire’s statement that the Appraisal Institute uses the
Building Residential Technique through the Appraisal Institute’s
course work and text books to become a designated SRA or MAI --
professional designations given by the Apprisal Institute. Further,
no evidence was used to show that McGuire’s use of $100 was
inappropriate. Lastly, McGuire’s statement in McGuire’s Declaration
that a $55 per square foot adjustment was the adjustment used in
Santa Cruz approximately two decades ago supported the use of a
higher adjustment value.

D.-Analysis of Comparable: Properties

Another major issue presented at trial was each appraiser’s
selection of comparable properties and the appraisal of the Property
derived from those comparable properties’ values. In analyzing each
appraiser’s comparable properties, the Court performed its own
statistical analysis. (See Exhibits 1-4).

Wilson used five comparable properties. The average distance of
the comparable properties from the Property is .66 miles. The
average adjusted sales price of the comparable properties is $558,107
and the median adjusted sales price of the comparable properties is
$550,000. Excluding properties with an unknown close of escrow date,
the average adjusted sales price is $572,625 and the median adjusted

sales price is $558,750.

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As the Court found McGuire’s $100 per square foot figure to be
more persuasive than Wilson’s $55 per square foot figure when making
living area adjustments, the Court also analyzed Wilson’s comparable
properties using a $100 per square foot adjustment. Using the $100
per square foot adjustment, the average adjusted sales price for
Wilson’s comparable properties is $569,140 while the median adjusted
sales price is $552,200. Using the $100 per square foot adjustment
and excluding properties with an unknown close of escrow date, the
average adjusted sales price is $579,250 and the median adjusted
sales price is $557,550.

McGuire used six comparable properties. The average distance of
the comparable properties from the Property is .52 miles. The
average adjusted sales price is $672,430 and the median adjusted
sales price is $696,550. No properties closed escrow after the date
of Debtors’ bankruptcy petition and McGuire used a $100 per square
foot-figure when making living area adjustments, so no further
calculations were necessary...

In sum, using an adjustment value of $100 per square foot when
making living area adjustments, and excluding properties with an
unknown close of escrow date, Wilson’s average adjusted comparable
sales price is $17,345.44 greater than the value of EMC’s first deed
of trust and Wilson’s median adjusted comparable sales price is
$4,354.56 less than the value of EMC’s first deed of trust. Using
the same restrictions, McGuire’s average adjusted comparable sales
price is $110,525.44 greater than the value of EMC’s first deed of
trust and McGuire’s median adjusted sales price is $134,645.44
greater than the value of EMC’s first deed of trust. Using the same

restrictions and including the comparable properties used by both

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UNITED STATES BANKRUPTCY COURT

For The Northern District Of California

Oo Oe JN DBD A FF WH NY

NO wo WN WN WN NY NY NN NO FR Ff FF FF FSF YS FOO Sell ES ll
Co ND ON ON BP WO NO KH Oo Oo HN DD HO FF WY NY KF O&O

Wilson and McGuire, the average adjusted sale price is $72,253.44
greater than the value of EMC’s first deed of trust and the median
adjusted sales price is $89,095.44 greater than the value of EMC’s
first deed of trust.

No evidence was presented at trial that persuaded the Court that
any of the properties with known close of escrow dates was an
inappropriate comparable property, and the Court has found that
McGuire’s use of $100 per square foot for making living area
adjustments is more persuasive than Wilson’s $55 per square foot
figure. Therefore, the fact that, excluding properties with an
unknown close of escrow date and using a $100 figure when making
living area adjustments, the average and median adjusted sales values
for Wilson and McGuire’s combined comparable properties are greater
than the value of EMC’s first deed of trust suggests that the value
of the Property is greater than the value of EMC’s first deed of
trust.----

E. McGuire’s Comparable Property Number Six

In addition to the Court’s calculations, the Court aiso found
McGuire’s comparable property number six to be independently
persuasive. At trial, McGuire testified that location is the most
important factor used when selecting comparable properties.
Comparable number six is four houses away from the Property. This
close proximity controls for factors affecting home values that might
otherwise be unaccounted for.

McGuire’s comparable property number six sold on March 29, 2010
for $595,000 -- despite the fact that comparable number six has 1,364
fewer square feet of gross living area than the Property. In other

words, comparable number six sold for $45,000 more than Wilson’s

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UNITED STATES BANKRUPTCY COURT
For The Northern District Of California

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\o oo ~l ON mn

appraisal of the Property despite being roughly half the size of the
Property and having two fewer bedrooms and one less bathroom. The
only other adjustment made to comparable six that might account for
the greater sales price was the time of sale. When making
adjustments for time, Wilson adjusted down 3.25% for Wilson’s
comparable number two which sold on March 19, 2010, and McGuire
adjusted down $30,000 for the same property. Even disregarding the
differences in size and number of bedrooms and bathrooms between
McGuire’s comparable number six and the Property, Wilson’s time
adjustment would yield an adjusted value of $575,662.50 for McGuire’s

comparable number six and McGuire’s time adjustment would yield an

adjusted value of $565,000. Both values are greater than the value
of EMC’s first deed of trust, which suggests that the value of the
Property is significantly greater than the value of EMC’s first deed
of trust. In sum, the fact that comparable number six sold for
$595,000 on March 29, 2010 was very persuasive evidence to the Court.
IIl.
CONCLUSION

Based on the evidence admitted at hearing and the arguments of
counsel, the Court finds McGuire’s appraisal to be more accurate than
Wilson’s appraisal. McGuire was able to show statistically that a
$100 per square foot figure was appropriate when making gross living
area adjustments. Additionally, the Court’s statistical analysis of
Wilson and McGuire’s comparable properties suggests that the value of
the Property as of the date of Debtors’ bankruptcy petition was
greater than the value of EMC’s first deed of trust. Lastly,

McGuire’s comparable property number six, which is four houses down

i

peter ny ilethd Orr lled: ovate Entered: 01/17/12 13:28:20 Page 17 of

—

from the Property and has roughly half the living area, two fewer
bedrooms and one fewer bathroom than the Property, sold for over
$40,000 more than the value of EMC’s first deed of trust. The Court
therefore finds that the value of the Property as of the date of
Debtors’ bankruptcy petition was greater than the value of EMC’s
first deed of trust

For the foregoing reasons, Debtors’ Motion to determine the

value and status of SCCCU’s Lien as wholly unsecured and void is

oOo wo nN Dn A FP WD WN

denied. The Court finds that the value of the Property was greater

than the amount secured by the first deed of trust. Accordingly,

—
- OC

SCCCU’s secured claim is at least partially secured and is entitled

—
No

to the protection of Bankruptcy Code section 1322(b) (2). Counsel for

—
Ge

SCCCU shall prepare a proposed form of order, serve it on counsel for

—

Debtors, and submit it to the Court.

Dated: 4 Al ye hu? Qe —

ee
“ND AN

—
Co

ARTHUR S. WEISSBRODT
UNITED STATES BANKRUPTCY JUDGE

For The Northern District Of California

UNITED STATES BANKRUPTCY COURT
YRRPBREBS

No
oo

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UNITED STATES BANKRUPTCY COURT
For The Northern District Of California

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Court Service List

Luis Flores
517 Marnell Ave
Santa Cruz, CA 95062

Bertha Flores
517 Marnell Ave
Santa Cruz, CA 95062

Santa Cruz Community Credit Union
324 Front Street
Santa Cruz, CA 95060

Santa Cruz Community Credit Union
PO Box 1877
Santa Cruz, CA 95061

Jason Vogelpohl

Central Coast Bankruptcy Inc.
532 Pajaro St.

Salinas, CA 93901

Thomas Caudill

The Law Offices of Thomas Caudill
1025 North Fourth Street

San Jose, CA 951112

Devin Derham-Burk
P.O. Box 50013
San Jose, CA 95150-0013

Office of the U.S. Trustee / SJ
U.S. Federal Bldg.

280 S Ist St. #268

San Jose, CA 95113-3004

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Exhibit 1
Bruce McGuire's Comparables (for SCCCU)
Comparable
Address of Comparable
Proximity to the Subject Property
Close of Escrow
Close of Escrow Pre-Petition?
Comparable Price
Comparable Price Using Gross Building Area Adjustment of $100 per square foot
#1
310 Marnell Avenue
0.17
3/26/2010
YES
$691,900
$691,900
#2
201 Marnell Avenue
0.34
2/17/2010
YES
$573,600
$573,600
#3
365 Gault Avenue
0.59
7/16/2010
YES
$720,477
$720,477
#4
87 Hagermann
0.72
8/17/2010
YES
$631,000
$631,000
#5
124 Caledonia Street
1.27
3/19/2010
YES
$701,200
$701,200
#6
503 Marnell Avenue
0.02
3/29/2010
YES
$716,400
$716,400
Case: 10-61121 Doc# 78 Filed: 01/14/12
23
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Page 20 of

Exhibit 2
Michael J. Wilson's Comparables (for Debtors)
Comparable
Address of Comparable
Proximity to the Subject Property
Close of Escrow
Close of Escrow Pre-Petition?
Comparable Price
Comparable Price Using Gross Building Area Adjustment of $100 per square foot
#1
365 Fairmont Avenue
0.21
2/1/2010
YES
$567,500
$552,200
#2
124 Caledonia Street
1.25
3/19/2010
YES
$639,000
$671,000
#3
201 Marnell Avenue
0.34
2/25/2010
YES
$550,000
$530,900
#4
121 San Juan Avenue
0.43
11/16/2010
NO
$534,000
$562,900
#5
129 Belmont Street
1.07
unknown
NO
$500,035
$528,700
Case: 10-61121 Doc# 78 Filed: 01/14/12
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Page 21 of
1

Exhibit 3
Appraiser
Average Proximity to the Subject Property
Average Sales Price
Median Sales Price
Average Sales Price Excluding Properties with Unknown Close of Escrow Date
Median Sales Price Excluding Properties with Unknown Close of Escrow Date
Bruce McGuire
0.52
$672,430
$696,550
$672,430
$696,550
Michael J. Wilson
0.66
$558,107
$550,000
$572,625
$558,750
Case: 10-61121 Doc# 78
Filed: 01/14/12
23
Entered: 01/17/12 13:28:20
Page 22 of
!

Exhibit 4
Appraiser
Average Proximity to the Subject Property
Average Sales Price Using Gross Building Area Adjustment of $100 per square foot
Median Sales Price Using Gross Building Area Adjustment of $100 per square foot
Average Sales Price Excluding Properties with Unknown Close of Escrow Date and Using Gross Building Area Adjustment of $100 per square foot
Median Sales Price Excluding Properties with Unknown Close of Escrow Date and Using Gross Building Area Adjustment of $100 per square foot
Bruce McGuire
0.52
$672,430
$696,550
$672,430
$696,550
Michael J. Wilson
0.66
$569,140
$552,200
$579,250
$557,550
Both Appraisers
0.58
$625,480
$631,000
$635,158
$651,000
Case: 10-61121
Doc# 78
Filed: 01/14/12
23
Entered: 01/17/12 13:28:20
Page 23 of