BK Law Re Deed, Transfer and Notice

248 B.R. 820, *; 2000 Bankr.
LEXIS 584, **;

36 Bankr. Ct. Dec. 51; 2000 Cal. Daily Op. Service 4448
In re BRENDA MARIE BEBENSEE-WONG, Debtor. BRENDA MARIE BEBENSEE-WONG,

Appellant, v. FEDERAL NATIONAL MORTGAGE ASSOCIATION, Appellee.
BAP No. EC-99-1699-RBMa
UNITED STATES BANKRUPTCY APPELLATE PANEL FOR THE NINTH CIRCUIT
248 B.R. 820; 2000 Bankr. LEXIS 584; 36 Bankr. Ct. Dec. 51; 2000 Cal. Daily Op.
Service 4448; 2000 Daily Journal DAR 5967
March 23, 2000, Argued and Submitted at Sacramento, California

April 25, 2000, Filed
PRIOR HISTORY: [**1] Appeal from the United States Bankruptcy Court for the
Eastern District of California. Bk. No. 99-30952-C-13. Honorable Christopher M.
Klein, Bankruptcy Judge, Presiding.
DISPOSITION: AFFIRMED.
CASE SUMMARY
PROCEDURAL POSTURE: Appellant debtor appealed from the United States
Bankruptcy Court for the Eastern District of California, which granted appellee relief
from the automatic stay to take possession of property appellant sold to appellee
prepetition at a trustee's sale.
OVERVIEW: Appellee purchased appellant debtor's home at a trustee's sale.

Approximately 12 days later, appellant filed her bankruptcy petition. After the
petition was filed and 14 days after the trustee's sale, appellee recorded the deed.
Pursuant to Cal. Civ. Code § 2924h(c), appellee moved for relief from the automatic
stay to take possession of the property. The bankruptcy court granted appellee
relief from the automatic stay. On appeal, the court affirmed the decision. Since
appellee recorded the deed within 15 days of the sale, the trustee's sale became
perfected at 8 a.m. on the day of the sale pursuant to § 2924h(c). Because this day
was 12 days before appellant's petition, perfection occurred before the filing, even
though appellee recorded postpetition. Thus, appellant had no interest in the
property at the time of her petition. Therefore, the bankruptcy court did not abuse
its discretion in granting appellee relief from the automatic stay.
OUTCOME: Grant of relief from automatic stay was affirmed; perfection of sale
occurred before appellant filed her bankruptcy petition since appellee recorded deed
within 15 days of sale.
CORE TERMS: foreclosure sale, automatic stay, recorded, deed, trustee's sale,
prepetition, trustee's deed, purchaser, postpetition, perfection, perfected, state law,
foreclosure, present case, date of sale, transfer of property, recordation, recording,
perfect, notice, void, bid
LEXISNEXIS® HEADNOTES Hide
Bankruptcy Law > Case Administration > Administrative Powers > Stays > Appeals
Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > General
Overview
Bankruptcy Law > Practice & Proceedings > Appeals > General Overview
HN1
The appellate panel reviews a bankruptcy court's decision to grant relief from
the automatic stay for an abuse of discretion. More Like This Headnote | Shepardize:
Restrict By Headnote
Real Property Law > Deeds > General Overview
HN2
See Cal. Civ. Code § 2924h(c).
Bankruptcy Law > Case Administration > Administrative Powers > Stays > Coverage > Exceptions >
Perfection of Property Interests
Estate, Gift & Trust Law > Trusts > Trustees > General Overview
HN3
Pursuant to 11 U.S.C.S. § 362(b)(3), an act to perfect an interest in property
does not violate the automatic stay to the extent that the trustee's rights and
powers are subject to such perfection under 11 U.S.C.S. § 546(b). More Like This
Headnote
Bankruptcy Law > Case Administration > Examiners, Officers & Trustees > Limitations on Trustee's
Power
Bankruptcy Law > Case Administration > Examiners, Officers & Trustees > Voidable Transfers > Lien
Creditor & Purchaser
HN4
11 U.S.C.S. § 546(b) provides that a trustee's right to avoid a transfer
pursuant to 11 U.S.C.S. §§ 544(a) or 549 is subject to any generally
applicable law that permits perfection to relate back and to be effective
against one who acquires rights in the property before the date of
perfection. More Like This Headnote
Bankruptcy Law > Case Administration > Administrative Powers > Stays > General Overview
Bankruptcy Law > Case Administration > Examiners, Officers & Trustees > Postpetition Transactions
Real Property Law > Financing > Mortgages & Other Security Instruments > Foreclosures > General
Overview
HN5
Pursuant to Cal. Civ. Code § 2924h(c), a foreclosure sale purchaser who
records its deed within 15 days of the foreclosure sale will prevail over
someone who purchases the real property from the debtor after the
foreclosure sale even if that person records its deed first. Therefore, the
recordation of a foreclosure sale deed within 15 days of the sale does not
violate the automatic stay and is not avoidable pursuant to 11 U.S.C.S. §§
544 or 549. More Like This Headnote | Shepardize: Restrict By Headnote
COUNSEL: Scott A. CoBen, SCOTT A. COBEN & ASSOCIATES, Sacramento, CA, for
Brenda Marie Bebensee-Wong, Appellant(s).
Glenn Wechsler, Walnut Creek, CA, for Federal National Mortgage Association,
Appellee(s).
JUDGES: Before: RUSSELL, BRANDT, and MARLAR, Bankruptcy Judges.
OPINION BY: RUSSELL
OPINION
[*821] RUSSELL, Bankruptcy Judge:
The appellant's home was sold at a trustee's sale to the appellee, who recorded the
deed after the appellant filed her chapter 13 1 petition, but within a special fifteen-
day window provided by state law. The appellee sought relief from the automatic
stay to take possession of the property postpetition, alleging that the sale had been
perfected prepetition pursuant to state law. The bankruptcy court granted relief.
This appeal followed. We AFFIRM.
FOOTNOTES
1Unless otherwise indicated, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1330.
[**2] I. FACTS
This appeal presents our first opportunity to rule on the application of California Civil
Code § 2924h(c), which was amended in 1993 to clarify the status of property sold
in a prepetition foreclosure sale where the prior owner later files bankruptcy. The
underlying facts of the appeal are undisputed.
On August 4, 1999, the Benicia, California home of the appellant, Brenda Marie
Bebensee-Wong, was sold to Federal National Mortgage Association ("Fannie Mae
") at a trustee's sale. On August 10, 1999, Fannie Mae served Bebensee-Wong with
a thirty-day notice to quit. Six days later, on August 16, 1999, Bebensee-Wong
(hereinafter "the debtor") filed her chapter 13 petition.
The debtor failed to vacate the premises, causing Fannie Mae, without notice of
the petition, to initiate an unlawful detainer proceeding in state court on August 18,
1999. On this same day, which was fourteen days after the trustee's sale, Fannie
Mae recorded the Trustee's Deed Upon Sale. Fannie Mae moved for relief from
the automatic stay to take possession of the property. Citing California Civil Code §
2924h(c), Fannie Mae argued that the debtor had no interest in the property
because the trustee's [**3] sale had been perfected prepetition by virtue of the
deed's recordation within fifteen days of the sale. The debtor opposed Fannie Mae
's motion, alleging difficulty in obtaining the foreclosure file. At the bankruptcy
court's request, both parties filed supplemental briefs regarding the validity of Civil
Code § 2924h(c).
A hearing on the motion was held in October 1999. The issue before the court was
whether the debtor had an interest in the property, the answer to which turned
upon the effectiveness of Civil Code § 2924h(c) in the face of the automatic stay.
The court concluded that Civil Code § 2924h(c) was valid and granted Fannie Mae
relief from the automatic stay. The court's order granting relief took effect on
October 22, 1999. After the debtor timely appealed, the parties stipulated to an
order granting the debtor's motion for stay pending appeal.
II. ISSUE
Whether the bankruptcy court properly granted relief from the automatic stay when
the appellee recorded the trustee's deed within the grace period provided by
California Civil Code Section § 2924h(c).
III. STANDARD OF REVIEW
HN1
We review a bankruptcy court's decision to grant relief from the automatic
stay [**4] for an abuse of discretion. See In re Berg, 198 B.R. 557, 560 (9th Cir.
BAP 1996)(citing In re Jewett, 146 B.R. 250, 251 (9th Cir. BAP 1992)).
IV. DISCUSSION
The debtor argues on appeal that the bankruptcy court improperly granted Fannie
Mae relief from the automatic stay. [*822] In view of California Civil Code §
2924h(c), we disagree.
In California and other jurisdictions that utilize a typical race-notice recording

statute, prepetition foreclosure sales have been avoided when the debtor "won the
race to the courthouse" by filing bankruptcy after the sale occurred but before the
foreclosure trustee's deed was recorded. See In re Sanders, 198 B.R. 326, 327
(Bankr. S.D. Cal. 1996)(citing In re Duncombe, 143 B.R. 243, 245 (Bankr. C.D. Cal.
1992)); see also In re Williams, 124 B.R. 311, 315 (Bankr. C.D. Cal. 1991). As
observed in Sanders, the California legislature in 1993 responded to the frustration
expressed by lenders and foreclosure trustees by amending California Civil Code §
2924h(c). See Sanders, 198 B.R. at 327. HN2 As amended, Civil Code § 2924h(c)
provides in pertinent [**5] part:
The trustee's sale shall be deemed final upon the acceptance of the last and highest
bid, and shall be 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. . . .
Prior to 1993, this section provided only that the trustee's sale was final upon
acceptance of the last and highest bid.
One bankruptcy court has aptly expounded on the interaction between Civil Code §
2924h(c) and the Code, stating:
HN3
Pursuant to 11 U.S.C. § 362(b)(3), an act to perfect an interest in property
does not violate the automatic stay to the extent that the trustee's rights and powers
are subject to such perfection under 11 U.S.C. § 546(b). HN4 Section § 546(b)
provides that a trustee's right to avoid a transfer pursuant to 11 U.S.C. §§ 544(a) or
549 is subject to any generally applicable law that permits perfection to relate back
and to be effective against one who acquires rights in the property before the date
of perfection. HN5 Pursuant to section 2924h(c), a foreclosure sale purchaser who
records its deed within fifteen days of the foreclosure [**6] sale will prevail over
someone who purchases the real property from the debtor after the foreclosure
sale even if that person records its deed first. Therefore, the recordation of a
foreclosure sale deed within fifteen days of the sale does not violate the automatic
stay and is not avoidable pursuant to 11 U.S.C. §§ 544 or 549.
In re Stork, 212 B.R. 970, 971 (Bankr. N.D. Cal. 1997).
The debtor attacks the relation-back concept set forth in Civil Code § 2924h(c),
calling our attention to the following language in Sanders: "If California Civil Code
Section 2924h(c) provides for a postpetition action to relate back to before the
bankruptcy was filed, it conflicts with federal law and it is pre-empted by the federal
bankruptcy law." Sanders, 198 B.R. at 329 (citing Hillsborough County v. Automated
Medical Labs, 471 U.S. 707, 85 L. Ed. 2d 714, 105 S. Ct. 2371 (1985); In re Rega
Properties, Ltd., 894 F.2d 1136 (9th Cir. 1990)). In Sanders, unlike the present
case, the foreclosure sale occurred after the debtor filed his petition. 198 B.R. at
327. Even though the sale deed was recorded [**7] within fifteen days of the sale,
the court in Sanders held that the foreclosure sale conducted postpetition was void.
Id. at 329. The court stated:
Under these circumstances, state law cannot make valid a foreclosure sale conducted
in violation of the automatic stay by providing that the void act relates back to a
time before it occurred. In this Court's view, § 2924h(c) properly may only be
invoked, if at all, where there is a valid foreclosure sale which occurs prepetition. In
that situation, the California law facilitates the completion of a valid transfer of
property and there may be no bankruptcy interest in preventing the recording of a
valid transfer of property. Whether that view is correct, however, is for another day,
and a case which presents those facts.
Id.
Not only does this appeal clearly differ from Sanders, but also from In re Engles,
[*823] 193 B.R. 23 (Bankr. S.D. Cal. 1996), a case cited by the debtor involving
a foreclosure sale followed by a bankruptcy filing. Engles is not instructive because
the central fact of the case was that no sale deed had been recorded. See Engles,
193 B.R. at 25. This was [**8] because the foreclosure sale trustee refused to
issue one after he learned of the bankruptcy, alleging that it would violate the
automatic stay. Id. Here, the deed clearly was issued and subsequently recorded by
Fannie Mae.
Unlike Sanders and Engles, In re Garner, 208 B.R. 698 (Bankr. N.D. Cal. 1997),
mirrors the present case. In Garner, a prepetition foreclosure sale was conducted at
which property was sold to a third party purchaser. See Garner, 208 B.R. at 699.
After the debtor filed bankruptcy, a foreclosure sale deed was issued and delivered
to the purchaser. Id. Six days after the debtor's petition, and seven days after the
foreclosure sale, the purchaser recorded the deed. Id. The purchaser sought relief
from the automatic stay, which the court granted on the basis of Civil Code §
2924h(c). Id. at 701.
In the case before us, fourteen days following the trustee's sale, Fannie Mae
recorded the Trustee's Deed Upon Sale. Therefore, pursuant to Civil Code §
2924h(c), the trustee's sale became perfected at 8 a.m. on the day of the sale.
Because this day was twelve days before the debtor's petition, perfection [**9]
occurred before the filing, even though Fannie Mae recorded postpetition. Thus,
the debtor had no interest in the property at the time of her petition. Therefore,
the court did not abuse its discretion in granting Fannie Mae relief from the
automatic stay.
V. CONCLUSION
It is clear that the relation back effect of California Civil Code § 2924h(c) operated to
perfect the trustee's sale on the actual date of sale. Because this date preceded the
debtor's petition, relief from the automatic stay was proper. We AFFIRM.
315 B.R. 858, *; 2004 Bankr. LEXIS 1760, **
In re KANDI KAUFMAN, Debtor. KANDI KAUFMAN, Plaintiff, vs. JOE MONTE, POLO
INVESTMENTS FUND I, COAST CAPITAL CORPORATION et al., Defendants.
No. 00-44380 J, Adv. No. 03-4028 AJ
UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF

CALIFORNIA
315 B.R. 858; 2004 Bankr. LEXIS 1760
October 19, 2004, Decided
DISPOSITION: Judgment entered in favor of plaintiff.
CASE SUMMARY
PROCEDURAL POSTURE: Plaintiff debtor filed a voluntary petition under Chapter
13 of the Bankruptcy Code. She sought an award of damages pursuant to 11
U.S.C.S. § 362(h) based on defendants' acts in willful violation of the automatic stay
provided by § 362(a). Defendants included mortgagee, mortgage broker, a loan
officer, and an auctioneer who all together evicted debtor and then sold her
personal property in a lien sale.
OVERVIEW: The debtor, in default on a loan against her residence, received a

written solicitation from the mortgage broker telling her that she could avoid
foreclosure with a refinance loan. She applied for one and the broker agreed to
arrange a loan which was made by the mortgagee. The loan was secured by a deed
of trust on the residence, but not secured by personal property inside the residence.
The loan went into default, the residence was sold in foreclosure, and the debtor
was physically evicted. The debtor unsuccessfully attempted to recover her personal
property which was taken to the auctioneer's premises. The debtor filed her
Chapter 13 petition, but a public lien sale of her personal possessions was
conducted shortly afterwards anyway. The court held that: (1) defendants violated
the automatic stay by selling or causing the sale of the debtor's property and by
retaining the excess proceeds of the lien sale; (2) defendants had knowledge of the
bankruptcy at the time of the lien sale and therefore their violation was willful; (3)
the debtor suffered actual damages of $ 116,000; and (4) defendants' misconduct
was the result of intentional malice, trickery, or deceit.
OUTCOME: The court entered its judgment in favor of the debtor, against the
mortgagee in the sum of $ 570,000, against the loan officer in the sum of $ 360,000,
against the broker in the sum of $ 170,000, and against the auctioneer in the sum of
$ 135,000 plus, in each case, attorneys' fees and costs. Defendants' liability was
joint and several.
CORE TERMS: personal property, tenant, storage, automatic stay, landlord, punitive
damages, notice, damages award, punitive, actual damages, market value,
misconduct, eviction, removal, prepetition, furniture, auction, wealth, times,
clothing, retrieve, willful violation, advertising, willful, redeem, foreclosure,
furnishings, boxes, bankruptcy filing, bankruptcy case
HN1
See 11 U.S.C.S. § 362(a).
HN2
A lienholder with a valid prepetition possessory lien does not violate the stay
under 11 U.S.C.S. § 362(a)(3) merely by refusing to return possession of
encumbered property to the debtor. 11 U.S.C.S. §§ 362(b)(3), 546(b). More
Like This Headnote
Bankruptcy Law > Case Administration > Notice
Bankruptcy Law > Estate Property > Redemption
Civil Procedure > Judgments > Entry of Judgments > Stays of Proceedings > Automatic Stays
HN3
In a case where a lienholder retains possession of property, the debtor may
have a right to regain possession from the lienholder through postbankruptcy
payment of the secured obligation under a Chapter 13 plan or by court order,
or by obtaining a "turnover order" from the court pursuant to 11 U.S.C.S. §
542(a). In addition, in the case of exempt property, a debtor also has the
right under the Bankruptcy Code to redeem property from a lien pursuant to
11 U.S.C.S. § 722. The debtor and estate are protected from a forced sale
unless the court, after notice to the debtor and a hearing, enters an order
lifting or conditioning the automatic stay. More Like This Headnote
Bankruptcy Law > Estate Property > Noncustodial Turnovers
HN4
See 11 U.S.C.S. § 542(a).
Bankruptcy Law > Case Administration > Examiners, Officers & Trustees > Statutory Liens
Contracts Law > Secured Transactions > Default > Foreclosure & Repossession > Redemption
HN5
See 11 U.S.C.S. § 722.
Contracts Law > Secured Transactions > Default > Foreclosure & Repossession > Redemption
HN6
In the case of a lien sale, the debtor is divested of title. All of the debtor's
rights to pay off the lien through a Chapter 13 plan, redeem the encumbered
property, maximize value or preserve equity through an orderly market
sale, or to seek turnover are gone if the lien sale is valid. Indeed, 11 U.S.C.S.
§ 362(a) distinguishes between possession and control (subsection (3)) and
other lien enforcement such as a sale (subsections (4), (5), and (6)). More
Like This Headnote
Real Property Law > Landlord & Tenant > Landlord's Remedies & Rights > Eviction Actions > General
Overview
Real Property Law > Landlord & Tenant > Tenant's Remedies & Rights > General Overview
HN7
California law sets forth a detailed set of procedures regarding a tenant's
personal property following an eviction. Cal. Code Civ. Proc. § 1174(g), (h),
(i); Cal. Civ. Code §§ 1965(a), 1988. After an eviction, the landlord in
possession of the property has a duty to return it to the tenant if the tenant:
(a) requests in writing the personal property within 18 days after the
eviction, (b) tenders payment of any reasonable costs associated with the
landlord's removal of the property, and (c) effects the removal within 72
hours of the tender. Cal. Civ. Code § 1965(a)(1)-(4). If the tenant does not
comply, then the landlord may opt to notice a lien sale of the personal
property in accordance with the provisions of Cal. Civ. Code § 1988. Under
these provisions, the tenant must be given 15 days notice of a right to
reclaim; absent timely reclamation, the property may be sold. More Like This
Headnote
Bankruptcy Law > Case Administration > Administrative Powers > Stays > Remedies > Damages
Civil Procedure > Remedies > Damages > Punitive Damages
HN8
See 11 U.S.C.S. § 362(h).
HN9
For purposes of 11 U.S.C.S. § 362(h), "willful" does not mean that the party
causing injury had a specific intent to violate the stay; rather all that is
required for a finding that a violation was willful is that the defendant knew of
the automatic stay and that the defendant's actions that violated the stay
were intentional. For this purpose, knowledge of the bankruptcy is the legal
equivalent of knowledge of the automatic stay provided under § 362. More
Like This Headnote
Bankruptcy Law > Practice & Proceedings > Adversary Proceedings > General Overview
Torts > Damages > Compensatory Damages > Pain & Suffering > Emotional & Mental Distress > General
Overview
HN10
When defendants willfully violated an automatic stay, the debtor is entitled
to actual damages. 11 U.S.C.S. § 362(h). The basic measure of damages is
the amount of the economic loss the debtor suffered as the proximate
result of the defendants' violation, taking into account the fair market value
of the property that they disposed of in violation of the stay and any other
factors relevant to making the debtor economically whole. Damages for
emotional distress, however, may not be awarded. More Like This Headnote
Torts > Damages > Punitive Damages > General Overview
HN11
11 U.S.C.S. § 362 (h) provides that a debtor injured by a willful violation of
the automatic stay may recover punitive damages in appropriate
circumstances. Although the Bankruptcy Code does not specify the
circumstances that are appropriate, general case law regarding punitive
damages does. As the United States Court of Appeals for the Ninth Circuit
has stated, the fact finder has considerable discretion in fixing damages. The
factors to be considered are (1) the nature of the defendants' acts; (2) the
amount of the compensatory damages awarded; and (3) the wealth of the
defendants. In addition, the United States Supreme Court has observed that
the purpose of punitive damages in civil cases is the governmental one of
deterrence and retribution, and has held that due process dictates that
punitive damage awards not be grossly excessive or arbitrary. More Like This
Headnote | Shepardize: Restrict By Headnote
HN12
The United States Supreme Court has said that perhaps the most important
indicium of the reasonableness of a punitive damages award is the degree of
reprehensibility of the defendants' conduct. More Like This Headnote
Civil Procedure > Remedies > Damages > General Overview
Torts > Damages > Punitive Damages > Conduct Supporting Awards
HN13
The United States Supreme Court has instructed courts to determine the
reprehensibility of a defendant by considering whether: the harm caused
was physical as opposed to economic; the tortious conduct evidenced an
indifference to or a reckless disregard of the health or safety of others; the
target of the conduct had financial vulnerability; the conduct involved
repeated actions or was an isolated incident; and the harm was the result of
intentional malice, trickery, or deceit, or mere accident. More Like This Headnote
Torts > Damages > Punitive Damages > Award Calculations > Appellate & Posttrial Review
HN14
The United States Supreme Court has noted that the second and perhaps
most commonly cited indicium of an unreasonable or excessive punitive
damages award is its ratio to the actual harm inflicted on the plaintiff. (The
first indicium is the degree of reprehensibility of the defendants' conduct.)
There is no hard and fast rule as to the appropriate relationship that punitive
damages should bear to a plaintiff's actual damages. The Supreme Court has
stated that in practice, few awards exceeding a single-digit ratio between
punitive and compensatory damages will satisfy due process. The United
States Court of Appeals for the Ninth Circuit has upheld a punitive damage
award that was seven times the plaintiff's actual damages. More Like This
276 B.R. 233, *; 2002 Bankr. LEXIS 363, **;

48 Collier Bankr. Cas. 2d (MB) 1187; 2002 Daily Journal DAR 4293
In re: AHEONG, ALTHEA KEHAULANI, Debtor, ALTHEA KEHAULANI AHEONG,

Appellant, v. MELLON MORTGAGE COMPANY, Appellee.
BAP number: HI-01-1315-MoRyB
UNITED STATES BANKRUPTCY APPELLATE PANEL FOR THE NINTH CIRCUIT
276 B.R. 233; 2002 Bankr. LEXIS 363; 48 Collier Bankr. Cas. 2d (MB) 1187; 2002
Daily Journal DAR 4293
November 28, 2001, Argued and Submitted at Honolulu, Hawaii

March 29, 2002, Filed
SUBSEQUENT HISTORY: [**1] Modified April 18, 2002.
PRIOR HISTORY: Appeal from the United States Bankruptcy Court for the District
of Hawaii. BK Number: 99-00320-LK. Honorable Lloyd King, Bankruptcy Judge,
Presiding.
DISPOSITION: Appeal dismissed. Order annulling stay affirmed.
CASE SUMMARY
PROCEDURAL POSTURE: The debtor appealed orders of the United States
Bankruptcy Court for the District of Hawaii reopening her previously-dismissed
Chapter 13 case and annulling the automatic stay of 11 U.S.C.S. § 362 as to the
creditor's foreclosure proceedings, claiming the bankruptcy court had no jurisdiction
under 28 U.S.C.S. § 1334, and that no adequate cause was shown to annul the stay
because the creditor delayed in moving for relief for two years.
OVERVIEW: The appellate panel held the bankruptcy court had jurisdiction to annul
the stay notwithstanding the dismissal of the case and regardless of whether the
case was reopened. The bankruptcy court had ancillary jurisdiction to interpret and
enforce D. Haw. Bankr. Gen. Procedural Order 1, which required the debtor to
advise the creditor and the state court of her bankruptcy and provided that failure to
do so could constitute cause for nullification of the stay. The creditor's motion to
annul the stay commenced a civil proceeding "arising under" the Bankruptcy Code,
as opposed to civil proceedings "arising in" or "related to" cases under the
Bankruptcy Code, within the meaning of 28 U.S.C.S. § 1334(b). The "arising under"
jurisdiction did not depend on the existence of a non-dismissed, non-closed
bankruptcy case. The debtor lacked standing to appeal the reopening. The
bankruptcy court did not abuse its discretion by annulling the stay. The creditor was
denied mortgage payments while the debtor gained free use of the home. That
harm to the creditor and the lack of unjust harm to the debtor was ample
justification for annulling the stay.
OUTCOME: The appeal of the order reopening the case was dismissed. The order
annulling the stay was affirmed.
CORE TERMS: automatic stay, bankruptcy cases, annul, reopening, annulling,

general order, ancillary jurisdiction, civil proceedings, postdismissal, post-dismissal,
dismissal orders, jurisdictional, cause of action, foreclosure, ancillary, bankruptcy
code, adversary proceedings, notice, standing to appeal, prior rulings, willful
violation, retroactive, contested, mortgage, reopened, reopen, moot, bankruptcy
petition, attorney's fees, legislative history
Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > Cause
Bankruptcy Law > Case Administration > Notice
HN1
When bankruptcy petitions are filed, the debtors are given by the clerk's office
copies of D. Haw. Bankr. Gen. Procedural Order 1 which advises them of their
responsibilities to advise opposing parties in the state court of their
responsibility to give notice and warns that failure to comply may constitute
cause for nullification of the automatic stay. More Like This Headnote
Bankruptcy Law > Practice & Proceedings > Appeals > Standards of Review > De Novo Review
Civil Procedure > Appeals > Standards of Review > De Novo Review
HN2
Standing is a legal issue reviewed de novo. More Like This Headnote | Shepardize:
Bankruptcy Law > Practice & Proceedings > Appeals > Standards of Review > De Novo Review
Civil Procedure > Appeals > Standards of Review > De Novo Review
HN3
The bankruptcy court's jurisdiction is a legal issue reviewed de novo. More Like
This Headnote | Shepardize: Restrict By Headnote
Bankruptcy Law > Case Administration > Closings & Reopenings > Procedures for Reopening
Bankruptcy Law > Practice & Proceedings > Appeals > Standards of Review > Abuse of Discretion
Civil Procedure > Appeals > Standards of Review > Abuse of Discretion
HN4
A bankruptcy court's decision whether to reopen a bankruptcy case is reviewed
for abuse of discretion. More Like This Headnote | Shepardize: Restrict By Headnote
Overview
Bankruptcy Law > Practice & Proceedings > Appeals > Standards of Review > Abuse of Discretion
HN5
A bankruptcy court's decision whether to annul the automatic stay is reviewed
for abuse of discretion. More Like This Headnote | Shepardize: Restrict By Headnote
Civil Procedure > Justiciability > Standing > General Overview
Civil Procedure > Appeals > Reviewability > Adverse Determinations
HN6
Although parties have not raised a debtor's standing as an issue on appeal, a
bankruptcy appellate panel has an independent duty to consider standing. More
Like This Headnote
Civil Procedure > Justiciability > Standing > General Overview
Civil Procedure > Appeals > Reviewability > Adverse Determinations
HN7
Appellate standing in bankruptcy is determined under the "person aggrieved"
test, under which only one who is directly and adversely affected pecuniarily
has standing to appeal a bankruptcy court's order. More Like This Headnote
Bankruptcy Law > Case Administration > Closings & Reopenings > General Overview
Bankruptcy Law > Case Administration > Filing Fees
Estate, Gift & Trust Law > Trusts > General Overview
HN8
Reopening a bankruptcy case typically presents only a narrow range of issues:
(1) whether further administration appears to be warranted; (2) whether a
trustee should be appointed; and (3) whether the circumstances of reopening
necessitate payment of another filing fee. More Like This Headnote | Shepardize:
Bankruptcy Law > Practice & Proceedings > Appeals > Jurisdiction
HN9
A bankruptcy appellate panel has an independent duty to consider jurisdictional
issues. More Like This Headnote
Bankruptcy Law > Practice & Proceedings > Jurisdiction > General Overview
HN10
Bankruptcy jurisdiction is governed primarily by 28 U.S.C.S. § 1334. More Like
This Headnote
Civil Procedure > Jurisdiction > Subject Matter Jurisdiction > Jurisdiction Over Actions > Exclusive
Jurisdiction
HN11
See 28 U.S.C.S. § 1334(a), (b).
Bankruptcy Law > Case Administration > Administrative Powers > Stays > Coverage > General
Overview
Bankruptcy Law > Conversion & Dismissal > Effects of Dismissal
Bankruptcy Law > Discharge & Dischargeability > Individuals With Regular Income
HN12
Dismissing and closing a bankruptcy case are two distinct events. Dismissal
allows creditors and debtors to get on with their non-bankruptcy business and
resolve their disputes in appropriate fora. Among other things, dismissal
generally ends the automatic stay and revests property of the estate in the
entity in which such property was vested immediately before the
commencement of the case. 11 U.S.C.S. §§ 349(b)(3), 362(c)(1), (2)(B). The
basic purpose of 11 U.S.C.S. § 349(b) is to undo the bankruptcy case, as far
as practicable, and to restore all property rights to the position in which they
were found at the commencement of the case. Closing a bankruptcy case is a
separate matter. Typically, dismissal does not coincide with termination of all
proceedings. Chapter 13 cases usually stay open after dismissal to deal with
approval of the Chapter 13 trustee's final report and discharge of the trustee
and trustee's surety. Once all such administration is completed an order may
issue closing the dismissed case. More Like This Headnote | Shepardize: Restrict By
Headnote
HN13
See 11 U.S.C.S. § 349(b).
HN14
Bankruptcy courts retain jurisdiction after dismissal in some
circumstances. More Like This Headnote | Shepardize: Restrict By Headnote
Bankruptcy Law > Case Administration > Closings & Reopenings > Grounds for Reopening
Bankruptcy Law > Conversion & Dismissal > Effects of Conversion
Bankruptcy Law > Practice & Proceedings > General Overview
HN15
Bankruptcy court jurisdiction continues over many matters after a case has
been not only dismissed but also closed. More Like This Headnote
Overview
HN16
Reopening a closed bankruptcy case is not a jurisdictional prerequisite to
subject-matter jurisdiction under 28 U.S.C.S. § 1334(b). More Like This Headnote
| Shepardize: Restrict By Headnote
Overview
Civil Procedure > Jurisdiction > Subject Matter Jurisdiction > Supplemental Jurisdiction > Ancillary
Jurisdiction
HN17
After dismissal of a bankruptcy case, the bankruptcy court has ancillary
jurisdiction to interpret and effectuate its orders. More Like This Headnote |
Shepardize: Restrict By Headnote
Overview
HN18
The prohibition on granting new relief after dismissal of a bankruptcy case only
bars the bankruptcy court from granting new relief independent of its prior
rulings. More Like This Headnote | Shepardize: Restrict By Headnote
Overview
Jurisdiction
HN19
A bankruptcy appellate panel has discretion to affirm on any basis supported
by the record. More Like This Headnote
Overview
Bankruptcy Law > Practice & Proceedings > General Overview

HN20
General bankruptcy court orders, in the context of the prohibition on granting
new relief independent of the court's prior rulings after dismissal of a case,
can be characterized as more in the nature of local rules than prior "rulings."
The distinction does not matter for jurisdictional purposes because, like any
other order, a general order applies statutes and rules of general application to
a debtor's individual case. A general order simply saves the bankruptcy court
from the ministerial step of entering an order in each case. More Like This
Bankruptcy Law > Case Administration > Administrative Powers > Stays > Duration
HN21
Unlike an order reopening a bankruptcy case, which does not undo any of the
statutory consequences of closing, setting aside an order dismissing a
bankruptcy case would have potentially enormous, highly disruptive, and
unintended consequences. Upon dismissal, avoided transfers are reinstated,
certain voided liens revive, all property of the estate revests in the entity in
which such property was vested immediately before bankruptcy, and the
automatic stay against interests other than property of the estate terminates.
11 U.S.C.S. §§ 349, 362(c)(2)(B). More Like This Headnote | Shepardize: Restrict By
Headnote
HN22
See 11 U.S.C.S. § 362(d)(1).
HN23
28 U.S.C.S. § 1334 divides jurisdiction into three broad categories of civil
proceedings: (1) those arising under the Bankruptcy Code; (2) those arising in
cases under the Bankruptcy Code; and (3) those related to cases under the
Bankruptcy Code. 28 U.S.C.S. § 1334(b). It is significant that only the latter
two categories refer to "cases." More Like This Headnote
HN24
The first category of jurisdiction under 28 U.S.C.S. § 1334(b), "arising
under" jurisdiction, includes proceedings based on a right or cause of action
created by the Bankruptcy Code. More Like This Headnote | Shepardize: Restrict By
Headnote
Governments > Local Governments > Administrative Boards
HN25
The second category of jurisdiction under 28 U.S.C.S. § 1334(b), "arising in"
a case under the Bankruptcy Code, has been interpreted to mean primarily
those administrative proceedings that, while not based on any right created
by the Bankruptcy Code, nevertheless have no existence outside
bankruptcy. More Like This Headnote
HN26
The United States Court of Appeals for the Ninth Circuit's test for the third
and final category of jurisdiction under 28 U.S.C.S. § 1334(b), "related to"
jurisdiction, is whether the outcome of the proceeding could conceivably
have any effect on the estate being administered in bankruptcy. More Like This
Headnote
HN27
28 U.S.C.S. § 1334(b) refers to a "case" for "arising in" and "related to"
jurisdiction, but not for "arising under" jurisdiction. More Like This Headnote
Civil Procedure > Jurisdiction > Subject Matter Jurisdiction > Jurisdiction Over Actions > Exclusive
Jurisdiction
HN28
The portion of the 28 U.S.C.S. § 1334(b) statutory sentence addressing
"arising under" jurisdiction does not refer to the existence of a presently-
open bankruptcy case. Since the straightforward language does not refer to
the existence of a "case" under 28 U.S.C.S. § 1334(a), the text of the
statute does not appear to require that the bankruptcy case must be open in
order to exercise 28 U.S.C.S. § 1334(b) "arising under" jurisdiction. More Like
This Headnote
Bankruptcy Law > Case Administration > Closings & Reopenings > Procedures for Reopening
HN29
28 U.S.C.S. § 1334(b) "arising under" jurisdiction does not depend on the
present existence of an open case or a non-dismissed case. It depends
solely on the existence of civil proceedings arising under the Bankruptcy
Code. More Like This Headnote
HN30
A bankruptcy court has jurisdiction not just "within a case" but also, for
example, after a case is closed. More Like This Headnote
Overview
HN31
The phrase "arising under Title 11" (the Bankruptcy Code) under 28 U.S.C.S.
§ 1334(b) enables the bankruptcy court to hear any matter under which a
claim is made under a provision of the Bankruptcy Code. More Like This
Overview
Bankruptcy Law > Practice & Proceedings > Contested Matters
HN32
Fed. R. Bankr. P. 4001(a) provides that a motion for relief from the
automatic stay provided by the Bankruptcy Code shall be made in
accordance with Fed. R. Bankr. P. 9014, and Fed. R. Bankr. P. 9014 refers to
a contested matter in a case under the Bankruptcy Code not otherwise
governed by the Federal Rules of Bankruptcy Procedure. This does not
mean, however, that a motion for relief under 11 U.S.C.S. § 362(d) can only
be brought "in a case." Fed. R. Bankr. P. 9014 simply emphasizes that when
no other rules govern and a contested matter arises within a case, then the
procedures in Rule 9014 govern, but Fed. R. Bankr. P. 4001(a) makes Fed.
R. Bankr. P. 9014's procedures applicable to motions for relief from the
automatic stay regardless whether those motions arise within a case or after
it is dismissed or closed. Nothing in Rule 9014 is to the contrary. More Like
Overview
HN33
28 U.S.C.S. § 1344(b)'s phrase "all civil proceedings arising under Title 11"
(the Bankruptcy Code) is not limited to causes of action under the
Bankruptcy Code but includes proceedings based on a "right" under the
Bankruptcy Code. More Like This Headnote | Shepardize: Restrict By Headnote
Overview
HN34
Given Congress' intent for dismissal to undo the bankruptcy case, as far as
practicable, and to restore all property rights to the position in which they
were found at the commencement of the case, and given that creditors
sometimes do not even know there is a bankruptcy case until after
dismissal, it is particularly appropriate that the bankruptcy court have
jurisdiction to annul the automatic stay after dismissal. More Like This Headnote
| Shepardize: Restrict By Headnote
Bankruptcy Law > Case Administration > Administrative Powers > Stays > Duration
Overview
HN35
28 U.S.C.S. § 1334(b)'s reference to "all civil proceedings arising under Title
11" (the Bankruptcy Code) includes all proceedings arising under 11
U.S.C.S. § 362(d). This necessarily includes a proceeding to annul the stay
after the underlying case has been dismissed, or closed, or both. More Like
Bankruptcy Law > Practice & Proceedings > Appeals > Jurisdiction
Jurisdiction
Governments > Courts > Judicial Precedents
HN36
The United States Bankruptcy Appellate Panel for the Ninth Circuit will not
overrule its prior rulings unless a United States Court of Appeals for the
Ninth Circuit decision, United States Supreme Court decision, or subsequent
legislation has undermined those rulings. More Like This Headnote | Shepardize:
Overview
Bankruptcy Law > Practice & Proceedings > Jurisdiction > Core Proceedings
HN37
28 U.S.C.S. § 157(b) refers to core proceedings both "arising under" or
"arising in" the Bankruptcy Code. What could be more "under" the
Bankruptcy Code than the automatic stay, 11 U.S.C.S. § 362(a), and the
right to seek to annul it, 11 U.S.C.S. § 362(d)? More Like This Headnote |
Overview
Civil Procedure > Appeals > Appellate Jurisdiction > Final Judgment Rule
HN38
A bankruptcy court's order granting a motion to annul the stay is a final
decision reviewable by the bankruptcy appellate panel. More Like This Headnote
Governments > Legislation > Effect & Operation > Retrospective Operation
HN39
Retroactive relief from the Bankruptcy Code's automatic stay should be
applied only in extreme circumstances. However, the bankruptcy court has
wide latitude in crafting relief from the automatic stay, including the power
to grant retroactive relief from the stay. Cause to annul the stay may exist
where the stay harms the creditor and lifting the stay will not unjustly harm
the debtor or other creditors. Ultimately, the decision is left to the sound
discretion of the bankruptcy court. More Like This Headnote | Shepardize: Restrict By
Headnote
JUDGES: Before: MONTALI, RYAN and BRANDT, Bankruptcy Judges. RYAN,

Bankruptcy Judge, concurring in part and dissenting in part. BRANDT, Bankruptcy
Judge, concurring.
OPINION BY: Dennis Montali
OPINION
[*236] MONTALI, Bankruptcy Judge:
Debtor Althea Kehaulani Aheong ("Debtor") appeals from the bankruptcy court's
orders reopening her previously-dismissed chapter 13 case (the "Reopening Order")
and annulling the automatic stay of Section 362 1 (the "Order Annulling Stay") as to
foreclosure proceedings of secured creditor Mellon Mortgage Company, a Colorado
company ("Mellon"). 2
FOOTNOTES
1 Unless otherwise indicated, all chapter, section and rule references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1330, and the Federal Rules of Bankruptcy
Procedure, Rules 1001-9036. The references to schedules, statements and the
creditor matrix are to the documents required to be filed by Rule 1007. [**2]
2 Mellon is now known as Chase Mortgage Company West but for convenience we will
continue to refer to it as Mellon.
Debtor claims the bankruptcy court had no jurisdiction to enter the Order Annulling
Stay without issuing the Reopening Order, and no jurisdiction to enter the Reopening
Order without first setting aside the order dismissing her chapter 13 case (the
"Dismissal Order"). We disagree, and rule that Debtor lacks standing to challenge
the Reopening Order. Her appeal from that order will be DISMISSED.
Debtor argues in the alternative that Mellon did not show adequate cause for the
bankruptcy court to annul the automatic stay, primarily because Mellon did not move
for such relief until over two years after it learned of the chapter 13 case. We rule
that the bankruptcy court did not abuse its discretion and that the Order Annulling
Stay will be AFFIRMED.
I. FACTS
Debtor and her late husband, Cecil Aheong, executed a promissory note, dated May
3, 1990, in the principal amount of $ 137,200 secured by a mortgage on Debtor's
residence in Kahului, Maui, Hawaii (the "Residence"). Mellon filed a foreclosure
complaint in state court on March 12, 1998, and moved for summary judgment
and [**3] an interlocutory decree of foreclosure in accordance with Hawaii law (the
"State Court Motion"). On January 26, 1999, the day before a scheduled hearing on
the State Court Motion, Debtor filed her chapter 13 case pro se (Case No. 99-
00320, the "Bankruptcy Case"). Debtor listed only one creditor, Mellon, in her
creditor matrix. She filed no schedules, statements, or chapter 13 plan, nor did she
notify the state court or Mellon that she had filed a bankruptcy petition, nor appear
at the hearing on the State Court Motion. On January 27, 1999, the state court orally
granted the State Court Motion.
On February 17, 1999, the bankruptcy court ordered Debtor to file her schedules,
statements, and chapter 13 plan within 15 days or the Bankruptcy Case would be
dismissed. On February 25, 1999, Debtor herself moved to dismiss her Bankruptcy
Case, and on March 1, 1999, the Dismissal Order was entered pursuant to that
request.
The Dismissal Order provided that the bankruptcy court would retain jurisdiction to
receive and review the final account of the chapter 13 trustee, enter an order
discharging the trustee and the trustee's surety, and make such orders as might be
necessary and proper [**4] to close the case. [*237] On June 25, 1999, the
bankruptcy court entered an order entitled "Order Approving Final Report,
Discharging Trustee and Closing Estate in Chapter 13 Case Dismissed Before
Confirmation."
Mellon proceeded with its foreclosure action and on October 11, 1999, the state
court entered a written order that, like its oral ruling during the Bankruptcy Case,
granted the State Court Motion. Debtor filed two subsequent bankruptcy petitions,
first under chapter 13 and then chapter 7. On January 17, 2001, Debtor received
her chapter 7 discharge but the foreclosure proceeding continued and on April 12,
2001, a deputy sheriff served Debtor with a writ of possession of the Residence.
On April 17, 2001, Debtor moved in state court for an emergency stay of the writ of
possession, asserting that the order granting the State Court Motion was void as
having been obtained in violation of the automatic stay under Section 362 in the
Bankruptcy Case. The state court granted a stay to allow the parties time to seek
clarification from the bankruptcy court and on May 4, 2001, Mellon moved to reopen
the Bankruptcy Case for the limited purpose of considering its motion to annul the
automatic [**5] stay (the "Motion to Annul the Stay") and to reclose the
Bankruptcy Case when that matter was concluded.
At a hearing on May 23, 2001, on Mellon's motions the bankruptcy court stated:
This is a motion to reopen the first of the Debtor's three bankruptcy cases, each of
which was filed . . . [on] the eve or within a few days of something about to happen
in the state court. 3 It's at least alleged and I think not denied that the State court
and the creditor [Mellon] were not advised of the filing of the petition.
FOOTNOTES
3 These facts are discussed further in Part IV.3 of this opinion below.
HN1
When petitions are filed, the debtors are given by the clerk's office copies of our
General Order No. 1 4 which advises them of their responsibilities to advise opposing
parties in the State court of their responsibility to give notice and warns that failure
to comply may constitute [cause for] nullification of the automatic [**6] stay. So
granting the motion - these motions would constitute standing by our general order.
FOOTNOTES
4 General Order No. 1 states, in part:
IT IS HEREBY ORDERED THAT:
1. If a debtor in a voluntary or involuntary bankruptcy case, filed in the District of

Hawaii, is also a party to any matter pending in any Court of the State of Hawaii,
notice of the filing of the bankruptcy case shall be given to the State Court at the
earliest possible date. The notice shall be directed to the State Court Judge to whom
the matter is assigned, the Clerk of the State Court in which the matter is pending,
and to all counsel of record and parties who are not represented by counsel.
2. * * *
3. Notice of the commencement of a voluntary case shall be given by counsel for the
debtor or by the debtor, if the debtor is not represented by counsel. . . .
4. * * *
5. Failure to give the notice required by paragraph one of this order may constitute
cause for nullification of the automatic stay.
General Order No. 1 (dated Feb. 17, 1994). General Order No. 1 was revised on Aug.
1, 2001; the changes are not applicable here.
. . . These appear to be filings just for the cause of delay. If there are truth-in-
lending claims [against Mellon], fine, let them be resolved in the State court if they
are in fact unresolved.
On June 15, 2001, the bankruptcy court granted both motions and entered the
Reopening Order and the Order Annulling Stay, with a ten-day stay of the latter. On
June 25, 2001, Debtor filed a notice of appeal of both orders and filed with the
[*238] bankruptcy court a motion, later granted, to stay the foreclosure action
pending Debtor's appeal.
II. ISSUES
1. Whether Debtor has standing to challenge the Reopening Order.
2. Whether the bankruptcy court had jurisdiction to consider the Motion to Annul the
Stay.
3. Whether the bankruptcy court erred in issuing the Order Annulling Stay.
III. STANDARD OF REVIEW
HN2
Standing is a legal issue reviewed de novo. Loyd v. Paine Webber, Inc., 208 F.3d
755, 758 (9th Cir. 2000). [**7] HN3 The bankruptcy court's jurisdiction is also a
legal issue reviewed de novo. Ferm v. U.S. Trustee (In re Crowe), 243 B.R. 43, 47
(9th Cir. BAP 2000), aff'd, 246 F.3d 673 (9th Cir. 2000) (table). HN4 A bankruptcy
court's decision whether to reopen a bankruptcy case is reviewed for abuse of
discretion. Elias v. U.S. Trustee (In re Elias), 188 F.3d 1160, 1162 (9th Cir. 1999).
HN5
A bankruptcy court's decision whether to annul the automatic stay is reviewed
for abuse of discretion. Palm v. Klapperman (In re Cady), 266 B.R. 172, 178 (9th
Cir. BAP 2001); Ung v. Boni (In re Boni), 240 B.R. 381, 384 (9th Cir. BAP 1999).
IV. DISCUSSION
1. Standing
The HN6 parties have not raised Debtor's standing as an issue on this appeal, but
we have an independent duty to consider standing. Gen. Elec. Capital Auto Lease,
Inc. v. Broach (In re Lucas Dallas, Inc.), 185 B.R. 801, 804 (9th Cir. BAP 1995). HN7
Appellate standing in bankruptcy is determined under the "person aggrieved" test,
under which "only one who is directly and adversely affected pecuniarily has standing
to appeal a bankruptcy court's order." Menk v. LaPaglia (In re Menk), 241 B.R. 896,
917 (9th Cir. BAP 1999); [**8] Fondiller v. Robertson (In re Fondiller), 707 F.2d
441, 442-43 (9th Cir. 1983). HN8 Reopening a case typically "presents only a narrow
range of issues: whether further administration appears to be warranted; whether a
trustee should be appointed; and whether the circumstances of reopening
necessitate payment of another filing fee." Menk, 241 B.R. at 916-17. Debtor
challenges none of those issues, so ordinarily she would lack standing to appeal the
Reopening Order. Id. at 913-17.
Debtor argues, however, that (a) the bankruptcy court had no jurisdiction to issue
the Order Annulling Stay until it properly reopened her case, and (b) the bankruptcy
court had no jurisdiction to issue the Reopening Order because it did not set aside
the Dismissal Order. If Debtor's theory is correct then she is aggrieved by the
Reopening Order, and has standing to challenge it, because without it there would
have been no Order Annulling Stay and she might have avoided Mellon's attempt to
proceed with its foreclosure and eviction. See generally Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560-561, 119 L. Ed. 2d 351, 112 S. Ct. 2130 (1992)
(requirements [**9] for standing).
In the next part of this opinion, however, we determine that the bankruptcy court did
not need to reopen the Bankruptcy Case to have jurisdiction to consider the Motion
to Annul the Stay. Therefore, we will conclude that Debtor lacks standing to appeal
from the Reopening Order, although she has standing to appeal from the Order
Annulling Stay itself.
2. Jurisdiction
The parties have raised some but not all of the jurisdictional issues we address
[*239] below. HN9 We have an independent duty, however, to consider
jurisdictional issues. WMX Tech., Inc. v. Miller, 104 F.3d 1133, 1135 (9th Cir. 1997).
HN10
Bankruptcy jurisdiction is governed primarily by 28 U.S.C. Section 1334
("Section 1334") 5 and has been described as a "swamp." Menk, 241 B.R. at 902.
Two poorly-charted areas of that swamp are the bankruptcy court's jurisdiction after
dismissal of a case, and to what extent closing a case bears on jurisdiction.
FOOTNOTES
5 Section 1334(a) and (b) of title 28 provide, in full:
§ 1334. Bankruptcy cases and proceedings
HN11
(a) Except as provided in subsection (b) of this section, the district courts [and
the bankruptcy courts as a unit thereof under 28 U.S.C. § 157] shall have original
and exclusive jurisdiction of all cases under title 11 [the Bankruptcy Code].
(b) Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court
or courts other than the district courts, the district courts shall have original but not
exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or
related to cases under title 11.
28 U.S.C. § 1334(a) and (b).
HN12
[**10] Dismissing and closing a bankruptcy case are two distinct events.
Dismissal allows creditors and debtors to get on with their non-bankruptcy business
and resolve their disputes in appropriate fora. Among other things, dismissal
generally ends the automatic stay and revests property of the estate in the entity in
which such property was vested immediately before the commencement of the
case. 11 U.S.C. §§ 349(b)(3) and 362(c)(1) and (2)(B). "The basic purpose of
[Section 349(b)] is to undo the bankruptcy case, as far as practicable, and to restore
all property rights to the position in which they were found at the commencement
of the case." H.R. Rep. No. 595, 95th Cong., 1st Sess. 338 (1977); S. Rep. No. 989,
95th Cong., 2d Sess. 48-49 (1978). 6
FOOTNOTES
6 Section 349(b) provides, in full:
HN13
(b) Unless the court, for cause, orders otherwise, a dismissal of a case other
than under section 742 of this title -
(1) reinstates -
(A) any proceeding or custodianship superseded under section 543 of this title;
(B) any transfer avoided under section 522, 544, 545, 547, 548, 549, or 724(a) of
this title, or preserved under section 510(c)(2), 522(i)(2), or 551 of this title; and
(C) any lien voided under section 506(d) of this title;
(2) vacates any order, judgment, or transfer ordered, under section 522(i)(1), 542,
550, or 553 of this title; and
(3) revests the property of the estate in the entity in which such property was
vested immediately before the commencement of the case under this title.
11 U.S.C. § 349(b).
[**11] Closing a bankruptcy case is a separate matter. Typically, dismissal does

not coincide with termination of all proceedings. For example, chapter 13 cases
usually stay open after dismissal to deal with approval of the chapter 13 trustee's
final report and discharge of the trustee and trustee's surety. Once all such
administration is completed an order may issue closing the dismissed case. That is
what happened in Debtor's case.
The Ninth Circuit Court of Appeals has held that HN14 bankruptcy courts retain
jurisdiction after dismissal in some circumstances. For example, in one case the
Ninth Circuit held that after dismissal of the underlying case the bankruptcy court
retained jurisdiction to "interpret" its orders entered prior to dismissal and "to
dispose of ancillary matters such as an application for an award of attorney's fees for
services rendered in connection with [*240] the underlying action" but not to
grant "new relief independent of its prior rulings." Tsafaroff v. Taylor (In re Taylor),
884 F.2d 478, 481 (9th Cir. 1989). 7
FOOTNOTES
7 See also Spacek v. Thomen (In re Universal Farming Indus.), 873 F.2d 1334 (9th
Cir. 1989) (relative priority of two claims not so closely linked with debtor's
bankruptcy that dismissal of chapter 11 case renders action moot); Armel
Laminates, Inc. v. Lomas & Nettleton Co. (In re Income Prop. Builders, Inc.), 699
F.2d 963 (9th Cir. 1983) (appeal from order denying motion to reimpose automatic
stay was mooted when bankruptcy case was dismissed); Carraher v. Morgan Elecs.,
Inc. (In re Carraher), 971 F.2d 327, 328 (9th Cir. 1992) (bankruptcy court has the
discretion to retain jurisdiction over adversary proceedings after dismissal of main
case after considering "economy, convenience, fairness and comity").
[**12]
It is less clear to what extent closing and reopening bankruptcy cases have
jurisdictional significance. We have noted that HN15 jurisdiction continues over many
matters after a case has been not only dismissed but also closed. See Menk, 241
B.R. at 906-910. In fact, we have said that reopening a bankruptcy case in
connection with a discharge-related adversary proceeding was "not of jurisdictional
significance." Id. at 910. More broadly, we have stated that HN16 "reopening a closed
case is not a jurisdictional prerequisite to subject-matter jurisdiction under [Section]
1334(b)." Id. at 911.
With this background, we address whether the bankruptcy court had jurisdiction to
consider Mellon's Motion to Annul the Stay.
a. Ancillary Jurisdiction
As noted above, the Ninth Circuit has ruled that HN17 after dismissal the bankruptcy
court has ancillary jurisdiction to "interpret" and "effectuate" its orders. Taylor, 884
F.2d at 481; see also Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 379-380,
128 L. Ed. 2d 391, 114 S. Ct. 1673 (1994). By granting Mellon's Motion to Annul the
Stay the bankruptcy court was acting to [**13] "interpret" and "effectuate"
General Order No. 1, which directed Debtor to notify Mellon and the state court of
her bankruptcy filing and provided that "failure to give [such] notice . . . may
constitute cause for nullification of the automatic stay." The bankruptcy court
interpreted General Order No. 1 by deciding whether the facts presented by Mellon
did in fact constitute cause to nullify the automatic stay and, having determined that
such cause was shown, it enforced General Order No. 1 by granting the Motion to
Annul the Stay.
The foregoing analysis is not undermined by HN18 the Ninth Circuit's prohibition on
"new relief" after dismissal, because that prohibition only bars the bankruptcy court
from granting "new relief independent of its prior rulings." Taylor, 884 F.2d at 481
(emphasis added). For the reasons stated above, the Order Annulling Stay was not
"independent" of General Order No. 1. 8
FOOTNOTES
8 Although the bankruptcy court relied on its General Order No. 1 HN19 we have
discretion to affirm on any basis supported by the record. Fernandez v. GE Capital
Mortgage Servs., Inc. (In re Fernandez), 227 B.R. 174, 177 (9th Cir. BAP 1998),
aff'd 208 F.3d 220 (9th Cir. 2000) (table). Therefore, as an alternative basis for
holding that the bankruptcy court had ancillary jurisdiction we hold that by granting
Mellon's Motion to Annul the Stay the bankruptcy court was acting to "interpret" and
"effectuate" its Dismissal Order, and was not granting new relief "independent" of
that order. The "basic purpose" of the Dismissal Order was "to undo the bankruptcy
case, as far as practicable, and to restore all property rights to the position in which
they were found at the commencement of the case." H.R. Rep. No. 595, 95th Cong.,
1st Sess. 338 (1977); S. Rep. No. 989, 95th Cong., 2d Sess. 48-49 (1978). Since
the bankruptcy court could not have known of Mellon's (apparently inadvertent)
violation of the automatic stay, its Dismissal Order did not "undo" that violation.
Annulling the automatic stay cured this problem and "effectuated" or "interpreted"
the Dismissal Order consistent with the court's true intent.
Put differently, when Debtor asked the bankruptcy court to dismiss her case she
was, in effect, asking the bankruptcy court to "undo" her bankruptcy case. When
Debtor later moved for an emergency stay in state court, arguing that Mellon's
foreclosure was void for violation of the automatic stay in her dismissed case, she
was in effect arguing that the bankruptcy case had not been completely "undone." In
that context the bankruptcy court had ancillary jurisdiction to vindicate the intent of
its Dismissal Order by fully "undoing" the Bankruptcy Case. See generally Kokkonen,
511 U.S. at 380 (ancillary jurisdiction includes vindication of court's authority and
effectuating its decrees).
[**14] [*241] This conclusion is consistent with the limited authority on what
constitutes "new relief independent of [the bankruptcy court's] prior rulings." On the
one hand, imposing a stay after a bankruptcy case was dismissed was held
impermissible because it was independent of prior rulings. Beneficial Trust Deeds v.
Franklin (In re Franklin), 802 F.2d 324, 327 (9th Cir. 1986) (interpreting Income
Prop. Builders, 699 F.2d 963). On the other hand, seeking disallowance of a
bankruptcy attorney's fees earned in a dismissed case, for alleged non-disclosure
under Rule 2014, was held by the Ninth Circuit to be within the bankruptcy court's
ancillary jurisdiction, notwithstanding the conclusion by a majority of the bankruptcy
appellate panel (the "BAP") that the debtor sought extra-jurisdictional "new relief."
See Elias v. Lisowski Law Firm, Chtd. (In re Elias), 215 B.R. 600, 603-04, 615-17
(9th Cir. BAP 1997) ("Elias I") and Elias v. U.S. Trustee (In re Elias), 188 F.3d at
1162 ("Elias II").
In Elias I the BAP majority acknowledged that the bankruptcy court has an interest
in ensuring that bankruptcy attorneys conduct themselves properly, [**15] but
commented that this interest could be vindicated through disciplinary proceedings:
. . . that interest does not extend so far as to grant the bankruptcy court jurisdiction
to involve itself in a state-court dispute by launching an independent inquiry into an
attorney's conduct during a now-dismissed bankruptcy case. Such an inquiry would
not have any connection to the issues presented in the bankruptcy, would not
affect[] the rights of any creditor, and would not serve any of the purposes
underlying the bankruptcy code. In short, the bankruptcy court would be granting
the Debtor new relief that would serve no purpose in advancing the dismissed case.
Elias I, 215 B.R. at 603-04 (emphasis added).
The Ninth Circuit rejected this conclusion without comment, simply stating that
consideration of attorneys' fees after dismissal was ancillary (but affirming the
bankruptcy court's refusal to hear the matter on the ground that this was within its
discretion). Elias II, 188 F.2d at 1162 (majority opinion); and id. at 1163-66
(concurring and dissenting opinion). It appears from Elias II that seeking to deny
fees for non-disclosure under [**16] Rule 2014 is not "new relief" because it is not
independent of the order authorizing the attorney's employment pursuant to that
rule.
Under the above cases, Mellon's Motion to Annul the Stay did not seek new relief
"independent" of General Order No. 1. Rather, the bankruptcy court acted within its
jurisdiction to "interpret" and "enforce" that order. 9
FOOTNOTES
9 We note that had Debtor complied with General Order No. 1 she would have saved
much time and effort by the parties, the state court, and the bankruptcy court. The
state court hearing presumably would have been continued to allow Mellon to seek
relief from the automatic stay or dismissal of the Bankruptcy Case, and there would
have been no need for Mellon to bring its Motion to Annul the Stay. Certainly
common courtesy and professionalism call for counsel for debtors to notify opposing
counsel and affected courts (of which those counsel no doubt are themselves officers
in most cases) of the imposition of the automatic stay as soon as possible. Pro se
debtors should do the same regardless of their lack of connection with other courts.
Failure to notify those courts and counsel immediately leads to wasted effort and
expense of preparing for hearings or trials which are suddenly blocked by the
automatic stay. This case illustrates the good sense of having a mandate such as
General Order No. 1 and the wisdom of enforcing it after-the-fact when it has been
ignored without justification.
[**17] [*242] We recognize that Taylor's reference to "prior rulings" does not
mention general orders. HN20 General orders could be characterized as more in the
nature of local rules than prior "rulings." We believe the distinction does not matter
for Taylor's jurisdictional purposes because, like any other order, a general order
applies statutes and rules of general application to a debtor's individual case. A
general order simply saves the bankruptcy court from the ministerial step of entering
an order in each case.
For all of these reasons, the bankruptcy court had ancillary jurisdiction to enter the
Order Annulling Stay. That jurisdiction was not dependent on reopening Debtor's
case or vacating the Dismissal Order.
b. "Arising Under" Jurisdiction
As an alternative basis for our ruling, we hold that the bankruptcy court had "arising
under" jurisdiction pursuant to Section 1334(b). We address this issue for two
reasons. First, our conclusion that there is ancillary jurisdiction under the Taylor line
of cases starts us on an unexplored path through the jurisdictional "swamp." That
path is not perfectly clear. As noted above, for example, Taylor's applicability to
general orders is [**18] not free from doubt. We wish to remove any doubt about
the bankruptcy court's jurisdiction.
Second, General Order No. 1 will not help in many situations. We are aware that
other districts within the Ninth Circuit have no equivalent to General Order No. 1,
though they might consider adopting such an order. Moreover, General Order No. 1
provides no basis for jurisdiction over the usual and necessary post-dismissal
matters, such as approval of the chapter 13 trustee's report. 10 Therefore, as an
[*243] alternative and more general basis for the bankruptcy court's post-
dismissal jurisdiction, we rule that the Motion to Annul the Stay arose under Section
362(d) 11 and therefore commenced a civil proceeding "arising under" title 11 within
the meaning of Section 1334(b).
FOOTNOTES
10 Debtor suggests that bankruptcy courts have a ready method to reassert their
jurisdiction after dismissal - namely, to vacate their dismissal orders. That solution is
not so simple.
HN21
Unlike an order reopening a bankruptcy case, which "does not undo any of the
statutory consequences of closing" ( Menk, 241 B.R. at 913), setting aside an order
dismissing a bankruptcy case would have potentially enormous, highly disruptive,
and unintended consequences. Upon dismissal, "avoided transfers are reinstated,
certain voided liens revive, . . . all property of the estate revests in the entity in
which such property was vested immediately before bankruptcy . . ." and "the
automatic stay against interests other than property of the estate terminates."
Menk, 241 B.R. at 912. See 11 U.S.C. §§ 349 and 362(c)(2)(B). Would setting aside
a dismissal order re-void the previously avoided then reinstated transfers and liens,
revest property in the estate, and reimpose the automatic stay as if there had been
no dismissal? Would creditors who took actions between the time the dismissal order
issued and when it was set aside have to move to annul the automatic stay to
validate those actions? What about third parties, such as bona fide purchasers for
value during that time? How could these problems be avoided without setting aside
the dismissal for some purposes but not others, creating another jurisdictional
swamp?
These questions do not appear to have been addressed by the few reported cases
that involve vacation of dismissal orders. Compare G.E. Capital Mortgage Servs., Inc.
v. Thomas (In re Thomas), 194 B.R. 641, 644-51 (Bankr. D. Ariz. 1995) (declining to
follow cases vacating dismissal, and discussing conflicting authority) with In re
Application of County Collector for Delinquent Taxes, 291 Ill. App. 3d 588, 593-94,
683 N.E.2d 995, 998-99, 225 Ill. Dec. 492, 495-96 (1997)(declining to follow
Thomas, and also discussing conflicting authority) and France v. Lewis & Coulter,
Inc. (In re Lewis & Coulter, Inc.), 159 B.R. 188, 191 & n.4 (Bankr. W.D. Pa. 1993)
(vacating dismissal to allow administrative claim for vacation pay, without discussing
other possible effects of vacating dismissal). We prefer not to answer any of these
difficult questions until we must. [**19]
11 Section 362(d) provides, in relevant part:
HN22
(d) On request of a party in interest and after notice and a hearing, the court
shall grant relief from the stay provided under subsection (a) of this section, such as
by terminating, annulling, modifying, or conditioning such stay -
(1) for cause, including the lack of adequate protection of an interest in property of
such party in interest;
***
11 U.S.C. § 362(d).
We begin our analysis with the plain language of Section 1334. HN23 That statute
divides jurisdiction into three broad categories of civil proceedings: those "arising
under title 11 [i.e. under the Bankruptcy Code]"; those "arising in . . . cases under
title 11"; and those "related to cases under title 11." 28 U.S.C. § 1334(b) (emphasis
added). As we discuss further below, it is significant that only the latter two
categories refer to "cases."
HN24
The first category, "arising under" jurisdiction, has been interpreted using
various tests. We conclude below that it includes proceedings based on a right or
cause of action [**20] created by title 11. Examples include proceedings to declare
a debt nondischargeable under Section 523, to enforce the non-discrimination
provisions of Section 525, or to recover a fraudulent transfer or obligation under
Section 548. Menk, 241 B.R. at 904 and 908-09 & n.3; 1 Collier on Bankruptcy, PP
3.01[4][b] and [c][i], pp. 3-17 to 3-20 (Lawrence P. King et al. eds. 15th ed. rev.
2001) ("Collier") (quoting H.R. Rep. No. 595, 95th Cong., 1st Sess. 445 (1977)); 1
W. Norton, Jr., 1 Norton Bankr. L. & Prac. 2d, § 4:43, text accompanying n.53
(2001) ("Norton").
HN25
The second category, "arising in . . . a case under title 11," has been
interpreted to mean "primarily those administrative proceedings that, while not
based on any right created by title 11, nevertheless have no existence outside
bankruptcy." Menk, 241 B.R. at 909 (citations omitted). See also Eastport Assocs. v.
City of L.A. (In re Eastport Assocs.), 935 F.2d 1071, 1076 (9th Cir. 1991) (same, but
noting lack of clear definition); 1 Norton § 4:43, text accompanying n.56 (same). Cf.
1 Collier P 3.01[4][c][iv], p. 3-29 (matters that are not "related"
proceedings [**21] and do not "arise under title 11" must perforce "arise in" the
title 11 case).
HN26
The Ninth Circuit's test for the third and final category, "related to" jurisdiction,
is "whether the outcome of the proceeding could conceivably have any effect on the
estate being administered in bankruptcy." Feitz v. Great W. Sav. (In re Feitz), 852
F.2d 455, 457 (9th Cir. 1988). See also 1 Collier P 3.01[4][c]; 1 Norton § 4:44.
[*244] In considering these three categories we repeat our observation above and
in Menk that HN27 the statute refers to a "case" for "arising in" and "related to"
jurisdiction but not for "arising under" jurisdiction:
HN28
The portion of the § 1334(b) statutory sentence addressing "arising under"
jurisdiction does not refer to the existence of a presently-open bankruptcy case: "the
district courts [and bankruptcy courts as units thereof under 28 U.S.C. § 157] shall
have original but not exclusive jurisdiction of all civil proceedings arising under title
11." 28 U.S.C. § 1334(b) (emphasis added).
Since this straightforward language does not refer to the existence of a "case" under
§ 1334(a), the [**22] text of the statute does not appear to require that the
bankruptcy case must be open in order to exercise § 1334(b) "arising under"
jurisdiction.
Menk, 241 B.R. at 905. 12
FOOTNOTES
12 The facts in Menk were somewhat different from Debtor's case, but not in any
way that would make its reasoning less applicable. Debtor's Bankruptcy Case was
dismissed, closed, and then reopened. The bankruptcy case in Menk was closed but
not dismissed, and judgment creditors moved to reopen the case to challenge the
dischargeability of the judgment debt. We ruled that the debtor in Menk lacked
standing to challenge the bankruptcy court's order reopening the case because the
bankruptcy court had ancillary jurisdiction over the dischargeability action whether or
not the case was reopened. Thus, although dismissal was not at issue in Menk, that
decision held that jurisdiction did not depend on the present existence of a
bankruptcy "case." Menk, 241 B.R. 896.
Similarly, we have held that after dismissal [**23] of a bankruptcy case the
bankruptcy court retains jurisdiction over an action for damages for willful violation
of the automatic stay. An action for such damages arises under Section 362(h) and
therefore is a civil proceeding "arising under title 11" notwithstanding dismissal of
the underlying case. Davis v. C.G. Courington (In re Davis), 177 B.R. 907, 912 (9th
Cir. BAP 1995); see also Fernandez, 227 B.R. at 179 (following Davis), aff'd 208 F.3d
220 (9th Cir. 2000) (table).
As Menk and Davis illustrate, HN29 "arising under" jurisdiction does not depend on
the present existence of an open case or a non-dismissed case. It depends solely on
the existence of "civil proceedings arising under title 11." 13
FOOTNOTES
13 Although the bankruptcy court reopened Debtor's case, we hold below that this
was not necessary. The bankruptcy court implied, in its Memorandum Concerning
Debtor's Motion for Stay Pending Appeal ("Stay Memorandum"), that it reopened
Debtor's case as much for the convenience of having a case number under which to
file the relevant papers as anything else:
All that reopening does is to provide a case in which the related contested matter, for
relief from stay, will be considered. While practices among bankruptcy courts may
differ, this bankruptcy court does not assign separate docket numbers to contested
matters. Such matters use the docket number of the underlying bankruptcy case.
See also Menk, 241 B.R. at 910 (noting that some bankruptcy clerk's offices may
choose to reopen the case for "practical administrative reasons related to internal
management" which are "benign from the standpoint of jurisdiction.").
[**24] The legislative history supports this analysis. In discussing the broad range
of "civil proceedings" it emphasizes that HN30 the bankruptcy court has jurisdiction
not just "within a case" but also, for example, after a case is closed:
. . . anything that occurs within a case is a proceeding. Thus, proceeding here is

used in its broadest sense, and would encompass what are now called contested
matters, adversary proceedings, and plenary actions under the current bankruptcy
[*245] law. It also includes any disputes related to administrative matters in a
bankruptcy case.
The use of the term "proceeding," though, is not intended to confine the bankruptcy
case. Very often, issues will arise after the case is closed, such as over the validity of
a purported reaffirmation agreement, [under Section] 524(b), the existence of
prohibited post-bankruptcy discrimination, [under Section] 525, the validity of
securities issued under a reorganization plan, and so on. The bankruptcy courts will
be able to hear these proceedings because they arise under title 11.
H.R. Rep. No. 595, 95th Cong., 1st Sess. 445 (1977), quoted in Collier P 3.01[4][b],
p. 3-19 (emphasis added).
Similarly, [**25] Senate Report No. 95-989 states, in some relevant parts:
This broad grant of jurisdiction [in Section 1334] will enable the bankruptcy courts,
which are created as adjuncts of the district court for the purpose of exercising the
[sic] jurisdiction, to dispose of controversies that arise in bankruptcy cases or under
the bankruptcy code.
***
HN31
The phrase "arising under title 11" will enable the Bankruptcy Court to hear any
matter under which a claim is made under a provision of title 11.
S. Rep. No. 989, 95th Cong., 2d Sess. 154 (1978).
Therefore, our interpretation is supported both by the plain language of Section

1334(b) and, if there were any ambiguity in that language, by the legislative history.
The bankruptcy court had post-dismissal and post-closing jurisdiction over the
Motion to Annul the Stay. 14
FOOTNOTES
14 We note that HN32 Rule 4001(a) provides that a "motion for relief from the
automatic stay provided by the Code . . . shall be made in accordance with Rule
9014," and Rule 9014 refers to "a contested matter in a case under the Code not
otherwise governed by these rules . . . ." Fed. R. Bankr. P. 9014 (emphasis added).
This does not mean, however, that a motion for relief under Section 362(d) can only
be brought "in a case." The quoted portion of Rule 9014 simply emphasizes that
when no other rules govern and a contested matter arises within a case then the
procedures in Rule 9014 govern, but Rule 4001(a) makes Rule 9014's procedures
applicable to motions for relief from the automatic stay regardless whether those
motions arise within a case or after it is dismissed or closed. Nothing in Rule 9014 is
to the contrary.
[**26]
We are aware that our reading of the plain language of the statute is somewhat
different from the gloss we have previously put on it. We have previously stated that
"arising under title 11" means a "cause of action created by title 11." Menk, 241 B.R.
at 904 and 908-09 & n.3 (emphasis added, citations omitted). The Ninth Circuit also
has referred to "causes of action" created by title 11. Eastport, 935 F.2d at 1076.
See also Wood v. Wood (Matter of Wood), 825 F.2d 90, 96-97 (5th Cir. 1987).
None of these cases, however, held that a bankruptcy court lacked jurisdiction
because of the difference between a "cause of action" and some other type of civil
proceeding. Moreover, we have previously referred to "rights" as well as "causes of
action" when distinguishing "arising in" from "arising under" jurisdiction. See Menk,
241 B.R. at 909 (the phrase "arising in a case under title 11" means "primarily those
administrative proceedings that, while not based on any right created by title 11,
nevertheless have no existence outside bankruptcy") (emphasis added). [*246]
The Ninth Circuit has also used both phrases. Eastport, 935 F.2d at 1076. [**27]
See also Wood, 825 F.2d at 96-97 (description of "arising under" jurisdiction as
"matters invoking a substantive right created by federal bankruptcy law").
We believe that the cases using the term "cause of action" are grappling with various
tests to determine when a civil proceeding "arises under" title 11, rather than
narrowing the statutory term "civil proceeding." The discussion in Collier is
illustrative of the courts' struggle. Collier analogizes to the tests for "arising under"
jurisdiction outside of bankruptcy, and observes that one such test is whether the
"title or right set up by one party, may be defeated by one construction of the . . .
laws of the United States, and sustained by the opposite construction . . . ." 1 Collier
P 3.01[4][c], p. 3-19, text at n.45, quoting 15 Moore's Federal Practice, ch. 103
(Matthew Bender 3d ed.) (emphasis added). Another test is that "[a] suit arises
under the law that creates the cause of action." 1 Collier P 3.01[4][c][i], p.3-21, text
accompanying n.46 (emphasis added, quotation marks and citations omitted).
Another commentator states that the "essence" of arising under jurisdiction [**28]
is that "the claim asserted is grounded upon a particular provision of the Bankruptcy
Code." 1 Norton § 4:43, text accompanying n.53.
We conclude that HN33 Section 1344(b)'s phrase "all civil proceedings arising under
title 11" is not limited to causes of action under title 11 but includes proceedings
based on a "right" under title 11. Mellon's Motion to Annul the Stay sought to enforce
just such a right, namely its right to relief upon a proper showing of "cause" under
Section 362(d). 15
FOOTNOTES
15 We are not presented with, and do not decide, whether matters that do not
involve "rights" or "causes of action" are included in the term "civil proceedings." For
example, we have noted that under one test cited in Collier a "civil proceeding"
includes a "title" created by law. 1 Collier P 3.01[4][c], p. 3-19, text at n.45. Without
deciding what such a "title" might be, we note that Mellon's "civil proceeding" sought
to enforce a right, namely the right to relief under Section 362(d) upon a proper
showing of "cause."
[**29] We also find nothing inconsistent between the plain language of Section
1334 and the relatively few Ninth Circuit cases that have addressed bankruptcy
courts' post-dismissal jurisdiction. As discussed above, those cases recognize that
bankruptcy courts have post-dismissal jurisdiction to "interpret" orders entered prior
to dismissal and "to dispose of ancillary matters such as an application for an award
of attorney's fees for services rendered in connection with the underlying action."
Taylor, 884 F.2d at 481. See also Universal Farming Indus., 873 F.2d at 1335-36;
Income Prop. Builders, 699 F.2d 963. Some of those cases also state that the
bankruptcy court lacks the power to grant "new relief independent of its prior
orders" after dismissal. Taylor, 884 F.2d at 481. See also Income Prop. Builders, 699
F.2d at 963. We have previously distinguished Taylor and Income Prop. Builders,
however, as involving only motions for "prospective relief regarding the automatic
stay," not retroactive relief. Davis, 177 B.R. at 912 (retroactive relief was damages
for alleged willful violation of automatic stay). See [**30] also Fernandez, 227 B.R.
at 179 (following Davis), aff'd 208 F.3d 220 (9th Cir. 2000) (table). Moreover, both
cases are inapplicable for other reasons.
In Taylor two creditors sought relief from the automatic stay not only in the case
then pending but also in future bankruptcy cases. To obtain this extraordinary relief
the creditors filed an adversary proceeding. Both that adversary proceeding
[*247] and the underlying bankruptcy case were dismissed by one bankruptcy
judge, but notwithstanding these dismissals a second bankruptcy judge later entered
a default judgment granting the requested relief in future bankruptcy cases. The
Ninth Circuit held that this judgment was beyond the jurisdiction of the second
bankruptcy judge. Taylor, 884 F.2d 478.
Nothing in that holding is contrary to the analysis herein. The automatic stay in
Taylor's dismissed bankruptcy case terminated by operation of law, so relief under
Section 362(d) was no longer at issue. 11 U.S.C. §§ 349(b)(3) and 362(c)(1) and (2)
(B). The only issue on appeal, therefore, was whether the bankruptcy court could
prospectively lift the automatic stay in future bankruptcy [**31] cases. The basis
for this extraordinary relief was a res judicata theory, in which the bankruptcy court
purported to determine the future res judicata effect of its own judgment. See Little
v. Taylor (In re Taylor), 77 B.R. 237, 239-240 (9th Cir. BAP 1987) (quoting
judgment). That theory appears to be independent of the Bankruptcy Code, not
arising under it, so the bankruptcy court in Taylor would not have had the "arising
under" jurisdiction discussed herein. Moreover, Taylor does not discuss or even refer
to Section 1334. See Taylor, 884 F.2d 478. In other words, Taylor is both factually
and legally inapposite.
In Income Prop. Builders when one creditor was granted relief from the automatic
stay to foreclose on and sell a condominium project, a second creditor complained
that it had received no notice of the proceedings. The bankruptcy court denied the
second creditor's motion to reimpose the stay, and while the second creditor's appeal
was pending the bankruptcy case was dismissed. The second creditor failed to
oppose dismissal of the bankruptcy case or to obtain a stay of the sale pending its
appeal. In that context the Ninth Circuit held that the [**32] appeal was moot
because "once the bankruptcy case was dismissed, a bankruptcy court no longer had
power to order the stay . . . ." Income Prop. Builders, 699 F.2d at 964. A later Ninth
Circuit decision summarizes the case as holding that "relief in the nature of a new
stay" could only be granted "while a bankruptcy case was pending." Beneficial Trust
Deeds v. Franklin (In re Franklin), 802 F.2d 324, 327 (9th Cir. 1986) (emphasis
added). In other words, as we have previously held, the relief was prospective, not
retroactive. Davis, 177 B.R. at 912.
The Income Prop. Builders case also stated that the bankruptcy court had no power
to "award damages allegedly attributable to [the stay's] vacation." Income Prop.
Builders, 699 F.2d at 964. This appears to be dicta because there is no indication
that the second creditor in that case sought damages -- its motion was entitled
"Motion to Reinstate Stay." Armel Laminates, Inc. v. Lomas & Nettleton Co. (In re
Income Prop. Builders), 8 B.R. 304, 305 (9th Cir. BAP 1980). Moreover, if the Ninth
Circuit meant that under the circumstances the bankruptcy court had no authority
to [**33] award damages for violation of the automatic stay we believe that
conclusion was legislatively overruled the following year by enactment of Section
362(h), which provides for damages for willful violation of the automatic stay. 11
U.S.C. § 362(h) (enacted 1984). That section gives the bankruptcy court "arising
under" jurisdiction even if none existed before. In addition, after Income Prop.
Builders the Ninth Circuit has affirmed our holding that the bankruptcy court has
post-dismissal jurisdiction to impose sanctions under Section 362(h). Fernandez, 227
B.R. at 179, aff'd 208 F.3d 220 (9th Cir. 2000) (table). Finally, Income Prop. Builders
does not mention [*248] Section 1334. In other words, nothing in that case is
contrary to the analysis herein.
Similarly, we have distinguished Universal Farming as an application of standard

mootness doctrines, which do not bar jurisdiction where the courts can "fashion
meaningful relief." Indus. Comm'n of Ariz. v. Solot (In re Sierra Pacific
Broadcasters), 185 B.R. 575, 576 n.3 (9th Cir. BAP 1995). Mellon's Motion to Annul
the Stay seeks meaningful retroactive relief and no argument has [**34] been
made that it is moot.
Therefore the bankruptcy court's jurisdiction was not barred by the Taylor, Universal
Farming Indus., and Income Prop. Builders line of cases. None of those cases
involved post-dismissal jurisdiction comparable to Debtor's situation. Indeed, HN34
given Congress' intent for dismissal "to undo the bankruptcy case, as far as
practicable, and to restore all property rights to the position in which they were
found at the commencement of the case," and given that creditors sometimes do not
even know there is a bankruptcy case until after dismissal, it is particularly
appropriate that the bankruptcy court have jurisdiction to annul the automatic stay
after dismissal. H.R. Rep. No. 595, 95th Cong., 1st Sess. 338 (1977); S. Rep. No.
989, 95th Cong., 2d Sess. 48-49 (1978). 16
FOOTNOTES
16 We have previously held, after a Chapter 13 case was dismissed, that whether
the bankruptcy court should have lifted the automatic stay nunc pro tunc was a moot
question "because there is no longer an attempt to pursue a Chapter 13 plan."
Omoto v. Ruggera (In re Omoto), 85 B.R. 98, 100 (9th Cir. BAP 1988). Debtor,
however, was pursuing a Chapter 13 plan, and if she recovered her house she could
continue to do so, or pursue refinancing or some other alternative. Therefore, Omoto
is distinguishable. Cf. Davis, 177 B.R. at 911 (distinguishing Omoto because it did
not involve a claim for damages for violation of the automatic stay).
[**35] In sum, we hold that HN35 Section 1334(b)'s reference to "all civil
proceedings arising under title 11" includes all proceedings arising under Section
362(d) of title 11. This necessarily includes a proceeding to annul the stay after the
underlying case has been dismissed, or closed, or both.
The concurrence and dissent of Judge Ryan rejects post-dismissal "arising under"
jurisdiction. Respectfully, we disagree.
The dissent starts by noting that bankruptcy courts are courts of limited jurisdiction,
particularly post-dismissal. We agree. We do not support any expansion of that
jurisdiction beyond the limits that Congress established in Section 1334 and the
Bankruptcy Code.
The dissent next argues that a motion for relief from the automatic stay is an
"administrative" matter within the "arising in" category of bankruptcy jurisdiction,
and that this somehow precludes it from being in the "arising under" category.
Assuming for the moment that a motion under Section 362(d) is "administrative,"
the dissent offers no reason why "arising in" and "arising under" jurisdiction would be
mutually exclusive. Courts frequently have multiple and overlapping grounds for
asserting jurisdiction. [**36] See In re Storm Technology, Inc., 260 B.R. 152,
155-56 (Bankr. N.D. Cal. 2001) (asserting both "related to" jurisdiction and
jurisdiction "arising under title 11 or arising in a case under title 11"). See generally
Vylene Enterprises, Inc. v. Naugles, Inc. (In re Vylene Enterprises, Inc.), 968 F.2d
887 (9th Cir. 1992) (jurisdiction could arise under 28 U.S.C. § 158(d), § 1291, or
both). See also Eastport, 935 F.2d at 1076 (noting lack of clear distinction between
"arising under" and "arising in" clauses of Section [*249] 1334(b)); Wood, 825
F.2d at 92 ("Legislative history indicates that the phrase 'arising under title 11 or
arising in or related to cases under title 11" was meant, not to distinguish between
different matters, but to identify collectively a broad range of matters subject to the
bankruptcy jurisdiction of federal courts.").
Moreover, we do not see how we can fulfil our duty to follow Davis, which held that
there is post-dismissal "arising under" jurisdiction over a proceeding seeking
damages under Section 362(h), without holding that there is likewise post-dismissal
"arising under" jurisdiction [**37] to annul the stay under Section 362(d). See
Davis, 177 B.R. at 912.
Rather than expanding jurisdiction, we are following and applying our own binding
precedent in Davis, as we must. Ball v. Payco-General American Credits, Inc. (In re
Ball), 185 B.R. 595, 596-98 (9th Cir. BAP 1995) ("HN36 We will not overrule our
prior rulings unless a Ninth Circuit Court of Appeals decision, Supreme Court
decision or subsequent legislation has undermined those rulings.").
The dissent distinguishes Davis as relying on ancillary jurisdiction, but that decision
never mentions ancillary jurisdiction and plainly relies on "arising under" jurisdiction:
The bankruptcy court had subject-matter jurisdiction over all claims alleging willful
violation of the automatic stay. Bankruptcy courts have jurisdiction over "all civil
proceedings arising under title 11, or arising in or related to cases under title 11." 28
U.S.C. § 1334(b). Appellant's action for willful violation of the automatic stay is
created by section 362(h) of title 11 of the United States Code. Thus, the action
arises under title 11 and is within the subject-matter jurisdiction of the [**38]
bankruptcy court.
Davis, 177 B.R. at 912 (emphasis added). Cf. id. at 912-13 (discussing
"supplemental jurisdiction over Appellant's state law claims") (emphasis added).
Moreover, if jurisdiction in Davis had been based on ancillary jurisdiction, then under
the dissent's analysis, the bankruptcy court in Davis would have been precluded from
granting new relief independent of a prior order. Where is the prior order in Davis?
See Davis, 177 B.R. at 912 and passim.
Returning to the dissent's premise that a motion for relief from the automatic stay is
"administrative," and hence part of "arising in" jurisdiction, we find little support for
that notion. The dissent points out that Collier lists motions to annul the automatic
stay as one of the proceedings "arising in" a bankruptcy case. We note that Collier's
reading of Section 1334 is attenuated: Collier starts with the Fifth Circuit's comment
in Wood that the phrase "arising in" is "less clear [than 'arising under'], but seems to
be a reference to those 'administrative' matters that arise only in bankruptcy cases";
Collier concludes from this tentative definition in Wood that the [**39] "principal
constituent" of "arising in" jurisdiction is "the phrase 'administrative matters,'" which
Collier says is "discussed below" with a cross-reference to its discussion of a slightly
different phrase, "matters of administration," which is one of four "convenient"
categories Collier itself creates to discuss "core" proceedings under 28 U.S.C. §
157(b)(2); and Collier defines "matters of administration" to include not only what
the statute refers to as "administration" -- "(A) matters concerning the
administration of the estate" -- but also some of the other statutory categories,
without explanation why these are "administrative" while other statutory categories
are not -- e.g., Collier defines "(G) motions to terminate, annul, or modify the
[*250] automatic stay" and "(L) confirmations of plans" as administrative. See 1
Collier PP 3.01[4][c][iv] at nn. 89-93 and accompanying text, and P 3.02[3], at pp.
3-28 and 3-36 to 3-38, citing Wood, 825 F.2d at 96-97 and 28 U.S.C. § 157(b)(2).
Moreover, there is no indication in Collier that its authors considered a post-dismissal
motion to annul the automatic stay, or any comparable [**40] situation.
Therefore, when it comes to motions to annul the stay post-dismissal the cited
sections of Collier are neither persuasive authority against jurisdiction nor
inconsistent with our opinion. We note, further, HN37 that 28 U.S.C. § 157(b) refers
to core proceedings both "arising under" or "arising in" Title 11 (so noted in Eastport,
935 F.2d at 1076). What could be more "under" Title 11 than the automatic stay (11
U.S.C. § 362 (a)) and the right to seek to annul it (11 U.S.C. § 362 (d))?
Given the questionable "authority" of the Collier quotes and the binding effect of
Davis, our course here is clear.
Third, reading Section 1334 to preclude post-dismissal jurisdiction would bar

bankruptcy courts from doing what they regularly do post-dismissal, like approving
chapter 13 trustees' reports. Would the bankruptcy courts have to set aside
dismissal orders to approve such reports? Would setting aside dismissals cause the
problems noted in footnote 10 above? How could those problems be avoided without
setting aside the dismissal for some purposes but not others, which would create
another jurisdictional [**41] swamp? We do not see the need or desirability of
wading into these problems when the plain language of Section 1334 permits post-
dismissal "arising under" jurisdiction without reference to whether there is a pending
"case." Sticking with the plain language of the statute, it seems to us, is the best
way to respect the bankruptcy courts' limited jurisdiction. See Linkway Inv. Co. v.
Olsen (In re Casamont Investors), 196 B.R. 517 at 521 (jurisdiction must be
"grounded in and limited by statute" not "judicial decree").
For all of the foregoing reasons, the bankruptcy court had jurisdiction over the
Motion to Annul the Stay. Moreover, because the Reopening Order was without
jurisdictional significance Debtor lacks standing to appeal from it.
3. The Order Annulling Stay
HN38
The bankruptcy court's order granting the Motion to Annul the Stay is a final
decision reviewable by this court. Crocker Nat. Bank v. Am. Mariner Indus., Inc. (In
re Am. Mariner Indus., Inc.), 734 F.2d 426, 429 (9th Cir. 1984). The Ninth Circuit
Court of Appeals has cautioned that HN39 retroactive relief should be "applied only in
extreme circumstances." Mataya v. Kissinger (In re Kissinger), 72 F.3d 107, 109 (9th
Cir. 1995) [**42] (quoting Phoenix Bond & Indemnity Company v. Shamblin (In re
Shamblin), 890 F.2d 123, 126 (9th Cir. 1989)). The Ninth Circuit has also held,
however, that the bankruptcy court has "wide latitude in crafting relief from the
automatic stay, including the power to grant retroactive relief from the stay."
Schwartz v. United States (In re Schwartz), 954 F.2d 569, 572 (9th Cir. 1992).
Cause to annul the stay may exist where "the stay harms the creditor and lifting the
stay will not unjustly harm the debtor or other creditors." In re Murray, 193 B.R. 20,
22 (Bankr. E.D. Cal. 1996) (quotation marks and citation omitted). Ultimately, the
decision is left to the sound discretion of the bankruptcy court. Kissinger, 72 F.3d at
109 (affirming order annulling stay).
The bankruptcy court articulated several reasons for annulling the automatic stay. It
noted that Debtor filed three successive voluntary petitions, each on "the eve or
[*251] within a few days of something about to happen in state court," that "these
appear to be filings just for the cause of delay," that Debtor failed to inform Mellon
and the state court of her first petition (filed [**43] on January 26, 1999, at 3:38
p.m., before a hearing on the State Court Motion set for 8:30 a.m. on January 27,
1999), and General Order No. 1 advised Debtor that her failure to do so "may
constitute cause for nullification of the automatic stay." The record supports these
findings. 17
FOOTNOTES
17 The bankruptcy court elaborated on the underlying facts in its Stay Memorandum,
issued August 16, 2001. Debtor included that decision in her supplemental excerpts
of the record and offered to file a formal motion to supplement the record if
requested. At oral argument before the panel, Mellon's counsel stated that Mellon
had no objection to the panel's consideration of these supplemental excerpts. We
grant the motion.
According to the bankruptcy court's decision, Debtor filed her first petition at 3:38
p.m. on January 26, 1999, just before the hearing on the State Court Motion set for
8:30 a.m. on January 27, 1999. Debtor filed her second petition on November 18,
1999, again without the requisite schedules, statements or chapter 13 plan, two
days before an open house scheduled by the foreclosure commissioner for November
20, 1999. The United States Trustee moved to dismiss that case as having been filed
in bad faith, Debtor filed her own motion to dismiss her case, Mellon moved for
relief from the automatic stay, and the bankruptcy court ordered dismissal with a
180-day bar to refiling. Debtor filed her third petition on October 3, 2000, the day
before a scheduled hearing in state court to confirm the foreclosure sale. After the
United States Trustee moved to dismiss that case for failure to file schedules and
statements, Debtor moved for and was granted an extension of time to file those
documents and she did so on October 30, 2000. Mellon moved for relief from the
automatic stay, which Debtor did not oppose and which was granted by order
entered January 17, 2001. Debtor does not dispute these underlying facts.
[**44]
Debtor argues that the bankruptcy court should not have considered her two
subsequent bankruptcies but should have decided the issue based on facts as of date
she filed her first bankruptcy petition. Debtor cites no authority for this proposition,
and it is inconsistent with the very nature of retroactive relief from the automatic
stay and the broad definition of "cause" to grant such relief. See, e.g., Schwartz, 954
F.2d 569; Kissinger, 72 F.3d 107.
Debtor also argues that Mellon knew about her first bankruptcy petition shortly after
it was filed, or approximately two years before moving for the Reopening Order and
the Order Annulling Stay. The bankruptcy court rejected this argument at the
hearing on May 23, 2001, after noting the history of Debtor's three bankruptcy
petitions:
So there hasn't really been laches. There [has] just been an ongoing battle between
the parties and now . . . it seems appropriate to grant the motion to reopen and to
grant that relief from stay taking into account all of the facts of this case.
Later, as part of its Stay Memorandum, the bankruptcy court stated,
Both Mellon and the Debtor have unreasonably [**45] delayed addressing the
stay violation issue. The violation occurred in January, 1999, during Debtor's first
bankruptcy case. Over two years elapsed before Debtor raised the issue in the state
court and Mellon raised the issue in the bankruptcy court. However, only Mellon has
suffered from the other party's delay. Mellon's main detriment is the absence of
mortgage payments from Debtor. Debtor, on the other hand, has had extended use
and occupation of her home, with no mortgage payments.
[*252] Neither party has contested these findings on appeal. From these facts it
appears that not annulling the stay "harms the creditor" and annulling the stay "will
not unjustly harm the debtor or other creditors." In re Murray, 193 B.R. 20, 22
Finally, as we have stated in footnote 9, annulling the stay after two years
presumably would not have been necessary if Debtor had followed the mandate of
the bankruptcy court's General Order No. 1 and immediately had informed the state
court and Mellon that she had filed her voluntary petition in bankruptcy. Debtor
failed to do so even though Mellon was the only creditor listed on her creditor matrix
and even though she filed her first bankruptcy [**46] petition the day before the
hearing on the State Court Motion. In these circumstances the bankruptcy court did
not abuse its discretion in annulling the stay. See Berg v. Good Samaritan Hosp. (In
re Berg), 198 B.R. 557, 563 n.12 (9th Cir. BAP 1996) (debtor's opportunity but
failure to inform court of bankruptcy filing appeared to present "strong
circumstance" for annulment), aff'd, 230 F.3d 1165 (9th Cir. 2000).
V. CONCLUSION
For two independent reasons the bankruptcy court had jurisdiction to issue the Order
Annulling Stay, notwithstanding the dismissal of the Bankruptcy Case and regardless
whether the case was reopened. First, the bankruptcy court had ancillary jurisdiction
to interpret and enforce its General Order No. 1, which required Debtor to advise
Mellon and the state court of her bankruptcy filing and provided that failure to do so
"may constitute cause for nullification of the automatic stay." Second, Mellon's
Motion to Annul the Stay under Section 362 commenced a "civil proceeding[] arising
under title 11" (as opposed to civil proceedings "arising in or related to cases under
title 11") within the meaning of 28 U.S.C. Section 1334 [**47] (b). This "arising
under" jurisdiction does not depend on the present existence of a non-dismissed,
non-closed bankruptcy case. For either or both of these reasons, reopening was of
no jurisdictional significance. Debtor lacks standing to appeal from the Reopening
Order, and that appeal is DISMISSED.
In addition, the bankruptcy court did not abuse its discretion by issuing the Order
Annulling Stay. While both Debtor and Mellon could have and should have raised the
automatic stay issues two years sooner, Mellon was denied mortgage payments
while Debtor gained free use of the Residence. This harm to Mellon and lack of
unjust harm to Debtor, or any other creditor, is ample justification for annulling the
automatic stay. The Order Annulling Stay is AFFIRMED.
CONCUR BY: RYAN (In Part); BRANDT
CONCUR
[*256contd] [EDITOR'S NOTE: The page numbers of this document may appear
to be out of sequence; however, this pagination accurately reflects the pagination of
the original published documents.] BRANDT, Bankruptcy Judge, concurring:
I would affirm on the basis of "arising under" jurisdiction (part 2.b. of the
discussion), and, alternatively, as ancillary to the dismissal order, as set forth in
footnote 8. I do not think it necessary to reach the question of ancillarity to General
Order No. 1, and the considerations outlined in the penultimate paragraph of part
2.a. suggest we should [**48] not.
I agree that reopening is legally innocuous in this setting and that debtor therefore
lacks standing to appeal that order, and further, that the annulment order was not
an abuse of discretion.
1. Unless otherwise indicated, all chapter, section and rule references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1330, and the Federal Rules of Bankruptcy
Procedure, Rules 1001-9036. The references to schedules, statements and the
creditor matrix are to the documents required to be filed by Rule 1007.
2. Mellon is now known as Chase Mortgage Company West but for convenience we
will continue to refer to it as Mellon.
3. These facts are discussed further in Part IV.3. of this opinion below.
4. General Order No. 1 states, in part:
IT IS HEREBY ORDERED THAT:
DISSENT BY: RYAN (In Part)
DISSENT
[*252contd] [EDITOR'S NOTE: The page numbers of this document may appear
to be out of sequence; however, this pagination accurately reflects the pagination of
the original published documents.] RYAN, Bankruptcy Judge, concurring in part and
dissenting in part:
I believe that the bankruptcy court had ancillary jurisdiction 18 to enter the order
annulling the automatic stay (the "Order"), and I concur with that portion of the
opinion. However, I do not believe that it is [*253] necessary to address whether
the bankruptcy court had "arising under" [**49] jurisdiction, and as to that portion
of the opinion, I respectfully dissent.
FOOTNOTES
18 The term "supplemental jurisdiction" refers to both ancillary and pendent

jurisdiction. See 28 U.S.C. § 1367; Darrell Dunham, Bankruptcy Court Jurisdiction,
67 UMKC L. Rev. 229, 271-75 (1999). Here, I refer to "ancillary jurisdiction" to mean
jurisdiction over a postdismissal matter that involves interpreting orders previously
issued by the bankruptcy court, see Beneficial Trust Deeds v. Franklin (In re
Franklin), 802 F.2d 324, 326-27 (9th Cir. 1986); jurisdiction over a postdismissal
matter that was established prior to dismissal of the case, see Davis v. C.G.
Courington (In re Davis), 177 B.R. 907, 912 (9th Cir. BAP 1995); or jurisdiction to
dispose of "ancillary matters," such as attorney's fee disputes, see Elias v. U.S.
Trustee (In re Elias), 188 F.3d 1160, 1162 (9th Cir. 1999).
A bankruptcy court's jurisdiction is governed by 28 U.S.C. § 1334, [**50] which

provides in part that "the district courts [and bankruptcy courts] shall have original
but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising
in or related to cases under title 11." 28 U.S.C. § 1334(b). The majority takes the
position that even absent ancillary jurisdiction, a bankruptcy court has "arising
under" jurisdiction after a bankruptcy case has been dismissed. Apparently,
according to the majority, as long as the matter involves a provision of title 11,
jurisdiction can be asserted postdismissal. I disagree.
The majority reasons that the legislative history of the Code supports its conclusion.
It further asserts that our prior decisions support their position. Finally, the majority
contends that prior Ninth Circuit authority does not preclude the result that it
reaches today. For the reasons stated below, I disagree with all these assertions.
I begin by noting that a bankruptcy court is a court of limited jurisdiction. See Taxel
v. Elec. Sports Research (In re Cinematronics, Inc.), 916 F.2d 1444, 1449-50 (9th
Cir. 1990). The Ninth Circuit narrowly construes a bankruptcy court's
postdismissal [**51] jurisdiction. See Tsafaroff v. Taylor (In re Taylor), 884 F.2d
478, 481 (9th Cir. 1989). Therefore, we should carefully consider our jurisdiction and
not seek to expand it. See Linkway Inv. Co., Inc. v. Olsen (In re Casamont Invs.,
Ltd), 196 B.R. 517, 521 (9th Cir. BAP 1996).
First, the majority errs because a motion for relief from the automatic stay falls into
the "arising in" category of bankruptcy jurisdiction, and not the "arising under"
category as asserted by the majority. In Eastport Assocs. v. City of L.A. (In re
Eastport Assocs.), 935 F.2d 1071 (9th Cir. 1991), the Ninth Circuit established the
definition for "arising in" jurisdiction. Id. at 1076. There, the court quoted the Fifth
Circuit and stated that
the meaning of "arising in" proceedings is less clear, but seems to be a reference to
those "administrative" matters that arise only in bankruptcy cases. In other words,
"arising in" proceedings are those that are not based on any right expressly created
by title 11, but nevertheless, would have no existence outside of the bankruptcy.
Id. (quoting Wood v. Wood (In re Wood), 825 F.2d 90, 96-97 (5th Cir.
1987) [**52] (emphasis in original)). In Wood, the court's definition of "arising in"
jurisdiction was taken from Collier. See Wood, 825 F.2d at 96-97 (citing 1 Collier on
Bankruptcy P 3.01 at 3-23 (1987)).
Collier defines
"arising in" acts as the residual category of civil proceedings, and [it] includes such
things as administrative matters, "orders to turn over property of the estate," and
"determinations of the validity, extent, or priority of liens." "Arising in" proceedings
might also include contempt matters, motions to change the composition of a
creditors' committee under section 1102, and motions to appoint or elect trustees
and examiners under section 1104. An action to recover a postpetition account
"arises in the bankruptcy case."
It seems apparent, therefore, that the phrase "administrative matters," discussed

below, is the principal constituent of "arising in" jurisdiction.
1 Collier on Bankruptcy P 3.01[4][c][iv] (Lawrence P. King et al. eds. 15th ed. rev.
2001) (footnotes omitted). Collier then cross-references P 3.02[3][a], which is
entitled "Matters of Administration."
[*254] The first category, matters of administration, includes (A) [**53]

matters concerning the administration of the estate; (B) allowance or disallowance of
claims against the estate or exemptions from property of the estate, and estimation
of claims or interests for the purposes of confirming a plan under chapter 11, 12, or
13 of title 11 . . .; (D) orders in respect to obtaining credit; (G) motions to
terminate, annul, or modify the automatic stay; (I) determinations as to the
dischargeability of particular debts; (J) objections to discharges; and (L)
confirmations of plans.
Collier P 3.02[3][a] (emphasis added and footnotes omitted).
By this cross-reference, Collier indicates that the core proceedings discussed in P

3.02[3][a] come under the "arising in" jurisdiction of a bankruptcy court. A motion to
annul the automatic stay is one of those proceedings.
Thus, to the extent that the majority predicates jurisdiction on an "arising under"
basis, the majority errs. The bankruptcy court did not have "arising under"
jurisdiction to annul the automatic stay.
Secondly, even assuming that "arising under" jurisdiction exists, it does not serve as
an independent jurisdictional basis in a dismissed case. The authority cited by
the [**54] majority for this proposition is inapposite. For example, the majority
cites portions of legislative history in support of its argument:
. . . anything that occurs within a case is a proceeding. Thus, proceeding here is
used in its broadest sense, and would encompass what are now called contested
matters, adversary proceedings, and plenary actions under the current bankruptcy
law. It also includes any disputes related to administrative matters in a bankruptcy
case.
The use of the term "proceeding," though, is not intended to confine the bankruptcy
case. Very often, issues will arise after the case is closed, such as over the validity of
a purported reaffirmation agreement, [under Section] 524(b), the existence of
prohibited post-bankruptcy discrimination, [under Section] 525, the validity of
securities issued under a reorganization plan, and so on. The bankruptcy courts will
be able to hear these proceedings because they arise under title 11.
Opinion, part IV.2.b. (quoting H.R. Rep. No. 595, 95th Cong., 1st Sess. 445 (1977)).
The legislative history speaks in terms of closed cases, not dismissed cases.
Congressional intent clearly supports the majority's assertion [**55] that a
bankruptcy court has postclosing jurisdiction over certain matters. However, nothing
in the language of the legislative history supports extending post closing jurisdiction
to postdismissal jurisdiction. Additionally, the majority cites Menk v. LaPaglia (In re
Menk), 241 B.R. 896 (9th Cir. BAP 1999), and Davis v. C.G. Courington (In re
Davis), 177 B.R. 907 (9th Cir. BAP 1995), as standing for the proposition that
"'arising under' jurisdiction does not depend on the present existence of an open
case or a non-dismissed case." Opinion, part IV.2.b. These cases do not support a
claim for postdismissal jurisdiction, as is the case here.
In Menk, the bankruptcy court reopened a chapter 7 debtor's case to allow a

creditor that had not been properly scheduled to file a dischargeability complaint.
After a judgment was entered, the debtor appealed the order reopening his case,
but he did not appeal the determination that the debt was nondischargeable. See
Menk, 241 B.R. at 903-04. We held that the debtor lacked standing to appeal the
order reopening his case because the bankruptcy [*255] court had jurisdiction to
determine the dischargeability of the [**56] underlying debt regardless of whether
the debtor's bankruptcy case was open. Id. at 917.
In Davis, the debtor filed a complaint alleging that a creditor had wilfully violated
the automatic stay. After the debtor's bankruptcy case was dismissed, the creditor
filed a motion to dismiss the adversary proceeding, which the bankruptcy court
granted. See Davis, 177 B.R. at 910.
On appeal we reversed, holding that the dismissal of the underlying bankruptcy case
did not moot a complaint for a willful violation of the automatic stay. Id. at 911. We
reasoned that the bankruptcy court had ancillary jurisdiction postdismissal because
subject-matter jurisdiction had been established prior to dismissal of the case. 19 Id.
at 912. We further stated that "dismissal of the underlying case renders moot a
motion for prospective relief regarding the stay, but does not render moot an action
for damages based on violation of the stay." Id. at 912-13.
FOOTNOTES
19 Subject-matter jurisdiction is determined at the time the action is initiated. See

Linkway Inv. Co., Inc. v. Olsen (In re Casamont Investors, Ltd.), 196 B.R. 517, 525
(9th Cir. BAP 1996).
[**57] Neither Menk nor Davis is on point. As stated above, Menk was a closed
case, not a dismissed case. In Davis, jurisdiction was established as to the complaint
for a willful violation of the automatic stay prior to dismissal. Here, we have a
dismissed case, and the motion to annul the automatic stay was not filed prior to
dismissal of the case. Thus, the holdings of Menk and Davis are clearly
distinguishable from the situation here. 20
FOOTNOTES
20 I note that the majority has not cited a case in which a bankruptcy court has
asserted "arising under" jurisdiction over a postdismissal case. Indeed, my own
research has revealed no such case. However, as noted below, there are numerous
Ninth Circuit cases holding that a bankruptcy court may exercise ancillary jurisdiction
postdismissal.
More importantly, the result reached by the majority is contrary to Tsafaroff v.

Taylor (In re Taylor), 884 F.2d 478 (9th Cir. 1989), and Armel Laminates, Inc. v.
Lomas & Nettleton Co. (In re Income Prop. Builders, Inc.), 699 F.2d 963 (9th Cir.
1983). [**58] In Taylor, two creditors sought prospective relief from the automatic
stay. To obtain this relief, they filed an adversary proceeding. This adversary
proceeding and the underlying bankruptcy case were dismissed by one bankruptcy
judge. Later, a second bankruptcy judge entered a default judgment that granted the
prospective relief sought. The Ninth Circuit held that the default judgment was void
because the second bankruptcy court lacked postdismissal jurisdiction to enter that
order. See Taylor, 884 F.2d at 481-82.
There, the Ninth Circuit stated that the bankruptcy court retained subject-matter
jurisdiction to interpret orders entered prior to dismissal of the case and to dispose
of ancillary matters. However, the bankruptcy court did not have jurisdiction to grant
new relief independent of its prior rulings once the bankruptcy case and the
adversary action had been dismissed. Therefore, even though the bankruptcy court
had jurisdiction to lift the automatic stay prior to the dismissal of the case, it
exceeded its jurisdiction postdismissal by signing the stay lift order that granted
prospective relief. Id.
In Income Prop. Builders, after a creditor appealed [**59] an order denying a

motion to reimpose the automatic stay, the bankruptcy court dismissed the debtor's
case. The Ninth Circuit then dismissed the appeal because the underlying case had
been dismissed. [*256] The Ninth Circuit stated that "once the bankruptcy was
dismissed, a bankruptcy court no longer had power to order the stay or to award
damages allegedly attributable to its vacation [of the stay]." Income Prop. Builders,
699 F.2d at 964.
Thus, a bankruptcy court is precluded from granting "new relief" postdismissal that is
independent of a prior order. See Franklin, 802 F.2d at 327. Nonetheless, the
majority's approach would allow a bankruptcy court to provide new relief
independent of a prior order as long as the relief was covered by the "arising under"
umbrella. Indeed, the majority's approach would render Taylor and Income Prop.
Builders meaningless. According to the majority, a right to relief or a cause of action
created by the Code provides "arising under" jurisdiction. Therefore, if the
bankruptcy court had "arising under" jurisdiction, then it had jurisdiction to provide
postdismissal "new relief." This certainly is contrary to both Taylor and [**60]
Income Prop. Builders.
The Ninth Circuit has provided a clear roadmap for deciding cases such as this one.
The Ninth Circuit consistently looks to ancillary jurisdiction for the answer. See, e.g.
Taylor, 884 F.2d at 481 (ancillary jurisdiction to interpret orders, but not enter an
order granting new relief); Elias, 188 F.3d at 1163-66 (ancillary jurisdiction over
attorney's fee dispute); Franklin, 802 F.2d at 326-27 (ancillary jurisdiction to
interpret an order); Spacek v. Tabatabay (In re Universal Farming Indus.), 873 F.2d
1332, 1333 (9th Cir. 1989) (ancillary jurisdiction may be exercised postdismissal).
We should do likewise.
Here, ancillary jurisdiction appropriately applies and permits the bankruptcy court to
take jurisdiction in granting the relief requested. Unwilling to rest on this basis, the
majority inappropriately expands a bankruptcy court's postdismissal jurisdiction to
anything that arguably falls within the "arising under" umbrella. This is just the type
of jurisdictional expansion that the Ninth Circuit has admonished bankruptcy courts
not to undertake.
In summary, I believe that the postdismissal [**61] jurisdiction of the bankruptcy

court to adjudicate an action initiated postdismissal must rest on ancillary
jurisdiction, which relates back to the jurisdiction that the court had predismissal. In
other words, a bankruptcy court has no separate postdismissal jurisdiction under 28
U.S.C. § 1334 to deal with an action that does not satisfy the ancillary jurisdictional
requirements.
130 B.R. 94, *; 1991 Bankr. LEXIS 1090, **;

25 Collier Bankr. Cas. 2d (MB) 440
In re PLANNED PROTECTIVE SERVICES, INC., Debtor(s)
BK No. LA89-12785RR Chapter 11
UNITED STATES BANKRUPTCY COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA
130 B.R. 94; 1991 Bankr. LEXIS 1090; 25 Collier Bankr. Cas. 2d (MB) 440
July 11, 1991, Decided

July 17, 1991, Filed
CASE SUMMARY
PROCEDURAL POSTURE: Debtor sought approval of its motion to compromise
secured creditors' claim in which the deed of trust for the secured real property was
recorded post petition but within 10 days of the transaction.
OVERVIEW: Debtor sought approval for the compromise of a claim held by secured
creditors for the balance of the proceeds from the sale of real property in debtor's
chapter 11 bankruptcy estate. The creditors recorded their deed of trust post
petition, but within 10 days of the loan transaction, which included the granting of
the deed of trust as security for the loan's repayment. Debtor argued that the
creditors' recordation within the 10-day grace period of 11 U.S.C.S. § 547(e)(2)(A)
insulated the transfer that would otherwise have been voidable under 11 U.S.C.S. §
544(a). The court denied debtor's motion to approve the compromise, holding it
was not fair and equitable to the unsecured creditors of the reorganized debtor
because their claims might not be paid in full under the plan of reorganization.
OUTCOME: Debtor's motion to approve a compromise was denied because

creditors' post petition recordation was a voidable transfer and it was unfair to
unsecured creditors because their claims might not be paid in full under the plan.
CORE TERMS: deed of trust, perfection, post-petition, perfected, grace period, bona
fide purchaser, recorded, real property, commencement, reorganized, recordation,
voidable, applicable law, question of law, sale proceeds, debtor-in-possession,
reorganization, unrecorded, equitable, avoiding, state law, matter of law, secured
creditors, security interest, unsecured creditors, automatic stay, transferor,
transferee, recording, avoidable
Bankruptcy Law > Reorganizations > Plans > Confirmation > Cramdown
Contracts Law > Debtor & Creditor Relations
HN1
Approval of a compromise under Fed. R. Bank. P. 9019 requires more than just
a rubber-stamping of an agreement which has been arrived at by good faith
negotiations. The court must determine whether the compromise is fair and
equitable. Such a determination requires the court to conduct a full and
independent assessment of the compromise. Four factors must be considered in
the court's inquiry: 1) the probability of success in the litigation; 2) the
difficulties, if any, to be encountered in the matter of collection; 3) the
complexity of the litigation involved, and the expense, inconvenience and delay
necessarily attending it; 4) the paramount interest of the creditors and a
proper deference to their reasonable views. More Like This Headnote
Bankruptcy Law > Reorganizations > Plans > Confirmation > Cramdown
HN2
Just as creditors' views are binding on the court, the lack of objection from
creditors does not end inquiry into whether the proposed compromise benefits
the estate. The reorganized debtor, as the proponent of the compromise, has
the burden of persuading the court that the proposed compromise meets the
fair and equitable test. More Like This Headnote
Bankruptcy Law > Case Administration > Examiners, Officers & Trustees > Voidable Transfers > Lien
Creditor & Purchaser
HN3
See 11 U.S.C.S. § 544(a)(3). Shepardize: Restrict By Headnote
Contracts Law > Types of Contracts > Bona Fide Purchasers
Real Property Law > Priorities & Recording > Bona Fide Purchasers
HN4
To determine the rights of a bona fide purchaser, the court looks to state
law. More Like This Headnote
Bankruptcy Law > Reorganizations > Debtors in Possession > Powers & Rights
Contracts Law > Types of Contracts > Bona Fide Purchasers
Real Property Law > Priorities & Recording > Bona Fide Purchasers
HN5
Under Cal. Civ. Code § 1214, a bona fide purchaser for value prevails over a
prior unrecorded lien on the property. The debtor-in-possession, by virtue
of 11 U.S.C.S. § 544(a)(3) has the rights of such a hypothetical bona fide
purchaser and may prevail over unrecorded transfers. More Like This Headnote |
Bankruptcy Law > Case Administration > Examiners, Officers & Trustees > Preferential Transfers > Time
Limitations
Bankruptcy Law > Case Administration > Examiners, Officers & Trustees > Voidable Transfers > General
Overview
HN6
See 11 U.S.C.S. § 547(e)(2). Shepardize: Restrict By Headnote
JUDGES: [**1] Robin L. Riblet, United States Bankruptcy Judge.
OPINION BY: RIBLET
OPINION
[*95] MEMORANDUM OF DECISION
ROBIN L. RIBLET, United States Bankruptcy Judge
Planned Protective Services, Inc. ("PPS"), acting under its confirmed Chapter 11
plan of reorganization, seeks the Court's approval for the compromise of a claim held
by Julius and Gladys Levinson concerning their entitlement, as secured creditors, to
proceeds from the sale of certain real property of debtor's estate. The Court has
jurisdiction over the proposed compromise pursuant to 28 U.S.C. § 157(b)(1).
The facts underlying the Levinsons' claim are not in dispute. On June 8, 1989, the
Levinsons loaned $ 35,000 to PPS and received as security therefor a deed of trust
on PPS's real property located at 548 South Kingsley Drive in Los Angeles. PPS filed
a Chapter 11 petition on June 12, 1989. The Levinsons recorded their deed of trust
on June 16, 1989. The court subsequently approved the sale of the property during
the pendency of PPS's Chapter 11 case, and creditors holding liens on the property
were paid from the proceeds.
The Levinsons were not paid out of the sale proceeds, however, based on a dispute
[*96] with the debtor concerning the validity of their lien under applicable law.
During claims litigation [**2] between the parties PPS asserted that the Levinsons'
lien was invalid because the deed of trust was recorded post-petition. The Levinsons,
on the other hand, contended they held a validly perfected security interest in the
property pursuant to § 547(e)(2)(A) and § 362(b)(3) of the Bankruptcy Code. 1 The
agreement reached between the parties proposes to resolve the Levinsons' alleged
secured claim. It provides that the Levinsons will be paid from the balance of the
sale proceeds as a secured creditor only the principal amount of $ 35,000, and that
the Levinsons may assert an unsecured claim for any accrued interest to which they
may be entitled. The reason for such a compromise, according to PPS, was to avoid
the uncertainty and expense of litigation.
FOOTNOTES
1 All statutory references are to the Bankruptcy Code unless otherwise stated.
At the hearing before the court on the proposed compromise, the Court questioned
whether the agreement was in the best interests of creditors on the theory that the
Levinsons' lien, as a matter [**3] of law, was voidable by the debtor. There were no
objections raised by creditors, as no creditor had appeared or filed written opposition
to the proposed compromise. In response to the Court's queries, PPS further briefed
the issue of the applicability of § 547(e)(2)(A) with respect to the post-petition
recording of the Levinson deed of trust, and concluded that the Levinsons held a
valid lien. Despite the apparent lack of objection by creditors, the Court has
undertaken its own assessment of the wisdom of the compromise to determine
whether the compromise may be approved.
DISCUSSION
HN1
Approval of a compromise under Bankruptcy Rule 9019 requires more than just
a "rubber-stamping" of an agreement which has been arrived at by good faith
negotiations. The Court must instead determine whether the compromise is fair and
equitable. In re A & C Properties, 784 F.2d 1377, 1381 (9th Cir. 1986), cert. denied
sub nom Martin v. Robinson, 479 U.S. 854, 107 S. Ct. 189, 93 L. Ed. 2d 122 (1986).
Such a determination requires the court to conduct a full and independent
assessment of the compromise. Id. at p. 1383. Four factors must be considered in
the court's inquiry:
[**4] 1) the probability of success in the litigation;

2) the difficulties, if any, to be encountered in the matter of collection;
3) the complexity of the litigation involved, and the expense, inconvenience and
delay necessarily attending it;
4) the paramount interest of the creditors and a proper deference to their reasonable
views.
In re Woodson, 839 F.2d 610, 620 (9th Cir. 1988); In re A & C Properties, 784 F.2d
at 1381. HN2 Just as creditors' views would not be binding on this court, In re
General Store of Beverly Hills, 11 Bankr. 539, 541 (Bankr. 9th Cir. 1981), the lack of
objection from creditors in this instance does not end inquiry into whether the
proposed compromise benefits this estate. See Matter of W.T. Grant Co., 4 Bankr.
53, 69 (Bankr. S.D.N.Y. 1980) (position of creditors is factor to be weighed among
others). The reorganized debtor, as the proponent of the compromise, has the
burden of persuading the court that the proposed compromise meets the fair and
equitable test. In re Hallet, 33 Bankr. 564, 565-66 (Bankr. D. Me. 1983).
Consideration of the law governing the [**5] underlying lien dispute between the
parties leads the court to conclude that PPS has failed to meet its burden. Under the
A & C Properties and Woodson analyses, whether PPS would have succeeded in its
litigation depends on the avoidability of the Levinson's lien. Although PPS did not
specifically state on which theory it originally believed the lien to be avoidable,
presumably it was relying on the "strong arm clause" of § 544(a)(3). 2
FOOTNOTES
HN3
2 Section 544(a)(3) provides: "(a) The trustee shall have, as of the
commencement of the case, and without regard to any knowledge of the trustee or
any creditor, the rights and powers of, or may avoid any transfer of property of the
debtor or any obligation incurred by the debtor that is voidable by--. . . (3) a bona
fide purchaser of real property, other than fixtures, from the debtor, against whom
applicable law permits such transfer to be perfected, that obtains the status of a
bona fide purchaser and has perfected such transfer at the time of the
commencement of the case, whether or not such a purchaser exists."
[**6] [*97] Under § 544(a)(3), a trustee may avoid all obligations and transfers
that would have been avoidable by a bona fide purchaser of real property at the
commencement of the case. In re Probasco, 839 F.2d 1352, 1354 (9th Cir. 1988); In
re La Palomento, 29 Bankr. 291, 293 (Bankr. D.N.J. 1983). A debtor-in-possession
has the same rights and powers as a bankruptcy trustee. 11 U.S.C. § 1107(a). 3
FOOTNOTES
3In this instance the reorganized debtor reserved rights accorded the debtor-in-
possession regarding the claims resolution process by the terms of its Plan or
Reorganization.
HN4
To determine the rights of a bona fide purchaser, the court looks to state law. In
re Gurs, 27 Bankr. 163, 165 (Bankr. 9th Cir. 1983); In re La Palomento, 29 Bankr.
at 293. HN5 Under California law a bona fide purchaser for value prevails over a
prior unrecorded lien on the property. Cal. Civ. Code § 1214. Accordingly, the
debtor-in-possession, by virtue of § 544(a)(3) has the rights [**7] of such a
hypothetical bona fide purchaser and may prevail over unrecorded transfers. In re
Chenich, 100 Bankr. 512 (Bankr. 9th Cir. 1987).
There are several reported cases in which a trustee has avoided an unrecorded deed
of trust based on the trustee's superior lien interest under § 544(a)(3), despite a
creditor's efforts to record its deed of trust shortly after the filing of the debtor's
petition. See, e.g., In re Brown, 37 Bankr. 516 (Bankr. E.D. Mo. 1984) (deed of trust
recorded minutes after petition filed); Gilbert v. Dixon, 18 Bankr. 579 (Bankr. S.D.
Ohio 1982) (deed of trust recorded one month after petition); In re Graham, 110
Bankr. 408 (S.D. Ind. 1990). In each instance, however, the trustee prevailed
without discussion by the court of the impact, if any, of the ten-day grace period for
perfection provided for in § 547(e)(2)(A). 4
FOOTNOTES
HN6
4 Section 547(e)(2) provides as follows: "(e)(2) For the purposes of this section,
except as provided in paragraph (3) of this subsection, a transfer is made--(A) at the
time such transfer takes effect between the transferor and the transferee, if such
transfer is perfected at, or within 10 days after, such time; (B) at the time such
transfer is perfected, if such transfer is perfected after such 10 days; or (C)
immediately before the date of the filing of the petition, if such transfer is not
perfected at the later of -- (i) the commencement of the case; or (ii) 10 days after
such transfer takes effect between the transferor and the transferee."
[**8] In the present case, the Levinsons recorded their deed of trust post-petition
but within ten days of the loan transaction, which included the granting of the deed
of trust as security for the loan's repayment. Section 547(e)(2)(A) provides that a
transfer of a security interest occurs when the security interest attaches if it is
perfected within ten days thereafter. Section 547(e)(2)(C)(ii) provides that the ten-
day grace period continues to run after the petition date. 4 Collier on Bankruptcy, §
547.20, 547-88 (15th Ed. 1979). Consequently, for purposes of a preference
analysis, the transfer of the property interest here took place simultaneously with
the execution of the deed of trust pre-petition, and therefore there was no
preferential transfer within the meaning of § 547.
The question becomes whether the Levinsons' recordation within the ten-day grace
period of § 547(e)(2)(A) insulates a transfer otherwise voidable under § 544(a). PPS
has not been able to direct the Court to any authority which permits the ten-day
grace period of the preference statute to override, or cross over in application to the
trustee's avoiding powers under § 544(a).
On the other hand, there is ample [**9] authority demonstrating that § 544(a)
operates independent of the preference rules, including the ten-day grace period of §
547(e)(2). For example, Section 546(b) provides for an exception to the trustee's
avoiding powers under §§ 544, 545 and 549 concerning delays in perfection. Section
546(b) allows perfection to relate back according [*98] to "generally applicable law
that permits perfection of an interest in property to be effective against an entity
that acquires rights in such property before the date of such perfection." The phrase
"generally applicable law" relates to state law. See H.R. Rep. No. 595, 95th Cong.,
1st Sess. 371 (1977); S. Rep. No. 989, 95th Cong., 2d Sess. 86 (1978), 1978 U.S.
Code Cong. & Admin. News 5787. In California, perfection of a deed of trust occurs
when the document is recorded in the office of the County Recorder. Cal. Civ. Code §
1213; In re Schuman, 81 Bankr. 583, 587 (Bankr. 9th Cir. 1987). Prior to
recordation, an interest in real property is not effective against intervening
creditors. See Cal. Civ. Code § 1214. Accordingly, the Levinsons could not avail
themselves of the limited exception of § 546(b).
Under the compromise, the parties have apparently concluded [**10] that § 547(e)
(2)(A) may operate for the benefit of the Levinsons as a further exception to the
trustee's avoiding powers under § 544(a). To permit such an application would be in
effect to rewrite the Code. Section 546(b) expressly provides an exception for
perfection to relate back for purposes of § 544; the preference statute, on the other
hand, has its own rules regarding grace periods for perfection. In re Ken Gardner
Ford Sales Inc., 10 Bankr. 632, 643 (Bankr. E.D. Tenn. 1981) aff'd, 23 Bankr. 743
(E.D. Tenn. 1981) 4 Collier on Bankruptcy § 547.20, 547-88 (15th Ed. 1979).
Moreover, the legislative comments to § 547(e) recognize, in addition to the
statutory language itself, that the rules stated therein are for the specific purposes of
the preference section. H.R. Rep. No. 595, 95th Cong., 1st Sess. 374 (1977); S.
Rep. No. 989, 95th Cong., 2d Sess. 89 (1978). There is simply no basis on which to
apply the preference rules beyond their intended scope in order to validate a lien
otherwise voidable under § 544(a)(3).
Section 362(b)(3), contrary to assertions of the parties, does not add credence to
their position that the preference [**11] grace period validates the Levinsons' lien.
Section 362(a)(4) prohibits any post-petition acts "to create, perfect, or enforce any
lien against property of the estate." As a result, the post-petition recordation of a
lien interest generally would be a violation of the automatic stay. 5 However, §
362(b)(3) provides an exception for acts of perfection which are authorized under §
546(b) or § 547(e)(2)(A). 6 If such an exception were not included, the post-petition
perfection permitted by § 547(e)(2) and § 546(b) would be nullified. H.R. Rep. No.
595, 95th Cong., 1st Sess. 343 (1977); S. Rep. No. 989, 95th Cong., 2d Sess. 51-52
(1978). As previously discussed, § 546(b) and § 547(e)(2) are discrete rules which
must be read in the context of the purposes which they serve. Since neither section
may be used in this instance to override the effect of § 544(a)(3), the exception to
the automatic stay which depends on the successful application of those sections has
no relevance here. See In re Italiano, 66 Bankr. 468, 479-80 (Bankr. D.N.J. 1986) (§
362(b)(3) inapplicable to post-petition actions concerning improperly levied
judgment lien where levy could not be cured under [**12] any applicable state law);
In re Alberto, 823 F.2d 712, 722-23 (3rd Cir. 1987) (act of recording ship mortgage
did not qualify for § 546(b) exclusion and therefore § 362(b) (3) inapplicable).
FOOTNOTES
5 The court makes no finding as to whether the Levinsons' post-petition recordation

was a violation of § 362(a)(4), or § 549 as these issues are not presently before the
court.
6 Section 362(b)(3) provides in pertinent part: "(b) The filing of a petition under
section 301, 302, or 303 of this title . . . does not operate as a stay-- . . . (3) under
subsection (a) of this section, of any act to perfect an interest in property to the
extent (3) that the trustee's rights and powers are subject to such perfection under
section 546(b) of this title, or to the extent that such act is accomplished within the
period provided under section 547(e)(2)(A) of this title . . . . "
CONCLUSION
Based on the above analysis, the court cannot find that the proposed compromise is
fair and equitable to the unsecured creditors [**13] of the reorganized debtor as
their claims may not be paid in full under the debtor's Plan of Reorganization.
Without compromise of the present [*99] lien dispute, and at little cost to the
estate, the reorganized debtor will be able to bring $ 35,000 in proceeds from the
prior sale of the property as additional funds available for unsecured creditors.
Although the interplay between §§ 544, 546, 547 and 362 may not be easily applied,
the issue of the validity of the present lien is nonetheless a limited question of law
with little necessity for expense and protracted litigation given the potential return to
the estate. 7
FOOTNOTES
7 In reaching its conclusion, the court is mindful that in general the bankruptcy
judge's responsibility is not to decide the numerous questions of law and fact raised
by a motion to compromise, but rather to determine whether the compromise falls
below the threshold of reasonableness. In re Heissinger Resources, Ltd., 67 Bankr.
378, 383 (C.D. Ill. 1986); In re W.T. Grant Co., 699 F.2d 599, 608 (2nd Cir. 1983).
However, approval of a compromise of claim is inappropriate when the claim is
invalid as a matter of law. In re Walsh Construction, Inc., 669 F.2d 1325, 1328 (9th
Cir. 1982). Had the question of law here been a complex matter open to
interpretation or subject to differing court decisions, the success of the litigation, as
in the usual instance, would have been in doubt and resolution of the disputed law
unnecessary and arguably improper. The underlying dispute in the present
compromise, by contrast, involved a single, uncomplicated issue of law, the outcome
of which is a certainty. Under such circumstances, the court's assessment of the
compromise necessarily included a review of controlling law with respect to the lien's
validity.
[**14] Accordingly, PPS's Motion for Approval of Compromise is denied and the
debtor is directed to initiate an action within thirty days to recover the sale proceeds
at issue.
344 B.R. 114, *; 2006 Bankr. LEXIS 1047, **;
46 Bankr. Ct. Dec. 185
In re A Partners, LLC, Debtor. Scripps GSB I, LLC, Movant, V. A Partners, LLC,

Respondent.
Case No. 06-10069-B-11, DC No. BMJ-2
UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF CALIFORNIA,

FRESNO DIVISION
344 B.R. 114; 2006 Bankr. LEXIS 1047; 46 Bankr. Ct. Dec. 185
June 5, 2006, Decided

CASE SUMMARY
PROCEDURAL POSTURE: Creditor, the holder of the first priority trust deed against
a commercial building, sought relief from the automatic stay pursuant to 11 U.S.C.S.
§ 362(d) so it could proceed with its non-judicial foreclosure. Debtor did not have
any ownership interest in the building but was the fifth lien holder on the building.
OVERVIEW: Debtor, a California limited liability company, was a junior lienholder

on the commercial building, which was owned by a related, but different party. All of
the liens senior to debtor's were in default, and the building's income was
insufficient to service the creditor's loan. The creditor was ready to publish a notice
of sale pursuant to Cal. Civ. Code § 2924f(b) and complete the foreclosure process.
It moved for relief from the automatic stay in debtor's case for the purpose of
completing a foreclosure of its trust deed. The court concluded that cause existed to
grant the motion for relief from the automatic stay and concluded that debtor's
junior lien had no economic value to debtor and was not necessary to an effective
reorganization of debtor. Debtor had little cash and had no ability to protect its
junior lien or exercise the rights of a junior lienholder under California law. The
creditor also asked the court to waive the provisions of Fed. R. Bankr. P. 4001(a)(3),
which otherwise automatically stayed the effect of the ruling for 10 days. The court
found such relief would not harm debtor, which already had a 20-day window to
appeal.
OUTCOME: Creditor's motion for relief from the automatic stay was granted.
Because the foreclosure sale could not take place for at least 20 days after the ruling
was entered, the court waived the automatic 10-day stay period as well.
CORE TERMS: parking, foreclosure, automatic stay, default, senior lien, collateral,
rent, bankruptcy estate, reorganization, trust deed, real property, receivership,
junior lienholder, senior debt, economic value, foreclose, foreclosure sale, junior lien,
bankruptcy case, senior lienholders, secured debt, security interest, non-judicial,
commencement, acquire, holder, secured claim, right to collect, notice of sale, grant
relief
HN1
See 11 U.S.C.S. § 362(d). Shepardize: Restrict By Headnote
Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays >
Procedures
HN2
Pursuant to 11 U.S.C.S. § 362(g), a creditor has the burden of proof on the
issue of whether a debtor has equity in a property. The debtor has the
burden of proof on all other issues concerning the automatic stay. Although the
debtor has the ultimate burden of proof on the issue of showing cause for
relief from the stay, the creditor must produce some evidence in the first
instance to support the cause allegation. More Like This Headnote | Shepardize:
Bankruptcy Law > Estate Property > General Overview
HN3
A bankruptcy estate is comprised of all legal and equitable interests of the
debtor in property, wherever located and by whomever held, at the
commencement of the case. 11 U.S.C.S. § 541(a)(1). The nature and extent of
the debtor's interest in property are determined by State law. Once that
determination is made, federal bankruptcy law determines if the debtor's
interest in property is property of the estate. More Like This Headnote
Bankruptcy Law > Estate Property > Content
HN4
All of the rights which the debtor holds as a lien against real property are
property of the bankruptcy estate under 11 U.S.C.S. § 541. However, the
debtor's property rights come into the estate subject to the conditions,
restrictions, and limitations that attached to those property rights under state
law prior to commencement of the bankruptcy. More Like This Headnote
Bankruptcy Law > Estate Property > Content
HN5
To the extent that an interest in property is limited in the hands of the debtor
prior to commencement of the case, it is equally limited as property of the
estate. A debtor-in-possession can assert no greater property rights than the
debtor had on the date the case was commenced. More Like This Headnote
Real Property Law > Financing > Mortgages & Other Security Instruments > General Overview
HN6
Under California law, the rights of a holder of a mortgage or trust deed against
real property are defined by statute. They include the right to collect rents on
default, the right to foreclose on default, the right to receive notice of the
default in a senior lien, the right to purchase the property at a foreclosure
sale, and the right to take title to the property in lieu of foreclosure with the
consent of the owner. Cal. Civ. Code §§ 2924b through 2924k, 2927. More Like
This Headnote
Real Property Law > Financing > Mortgages & Other Security Instruments > Redemption > Statutory
Redemption
HN7
When a senior lien against real property is in foreclosure, the holder of a
junior lien has the right to reinstate the senior debt, that is, to cure any default
in the senior debt up to five days prior to foreclosure by paying the senior
lienholder all amounts due at the time of tender, plus the reasonable costs and
expenses incurred in enforcing the senior obligation. Cal. Civ. Code § 2924c(a)
(1), (c). A junior lienholder also has a right to redeem the property from a
senior lien and to be subrogated to the benefits of the senior lien by paying the
full amount owed to the senior lienholder. Cal. Civ. Code §§ 2904-2905. More
Like This Headnote
Bankruptcy Law > Case Administration > Administrative Powers > Stays > Coverage > Liens
Redemption
HN8
Any act which cuts off the rights of a debtor that is a junior lienholder in
bankruptcy, such as the pre-foreclosure rights of reinstatement and
redemption, is a violation of the automatic stay. More Like This Headnote
HN9
Many of the rights and powers which inure to the benefit of a landowner in
bankruptcy are not available to a lienholder in bankruptcy. A debtor-in-
possession of real property in Chapter 11 has the benefit of the automatic
stay to protect its property from the creditors under 11 U.S.C.S. § 362(a). The
debtor-in-possession has the right to obtain credit, that is, to borrow money
secured by a lien against the real property that is senior to, or equal to, the
existing liens, subject to a showing of adequate protection for the existing debt.
11 U.S.C.S. § 364(c)(3). The debtor-in-possession has the right to sell all or
substantially all of the property to pay claims, 11 U.S.C.S. § 1123(b)(4), and
the ability to modify the rights of the secured creditors in a Chapter 11 plan.
11 U.S.C.S. § 1123(b)(5). More Like This Headnote | Shepardize: Restrict By Headnote
HN10
Where a creditor's collateral consists of a contract right, the value of the
collateral is a function of the creditor's ability to exercise that right. More Like
This Headnote
Bankruptcy Law > Claims > Types > Secured Claims & Liens > Secured Creditors Rights
HN11
There is a distinction between having a security interest in property and
having a "secured claim" against the property owner. More Like This Headnote
Bankruptcy Law > Reorganizations > Debtors in Possession > Powers & Rights
Redemption
HN12
The holder of a junior lien against real property cannot restructure the senior
liens against the same property through a Chapter 11 plan, even if the plan
provides for the debtor to first acquire the underlying property. More Like This
Headnote
Bankruptcy Law > Reorganizations > Plans > Impairment
HN13
Under 11 U.S.C.S. § 1124(1), a secured claim is impaired under a Chapter 11
plan if the plan alters the legal, equitable, and contractual rights of the holder
of the claim. More Like This Headnote
Bankruptcy Law > Case Administration > Administrative Powers > Stays > Relief From Stays > Equity
HN14
Where a Chapter 11 debtor has no equity in property within the meaning
of 11 U.S.C.S. § 362(d)(2)(A), the debtor must establish that the property
is necessary to an effective reorganization. 11 U.S.C.S. § 362(d)(2)(B).
What that requires is not merely a showing that if there is conceivably to be
an effective reorganization, this property will be needed for it, but that the
property is essential for an effective organization that is in prospect. That
means that there must be a reasonable possibility of a successful
organization within a reasonable time. A debtor's burden to make that
showing increases as the exclusivity period expires. More Like This Headnote |
Bankruptcy Law > Reorganizations > Plans > Confirmation > General Overview
HN15
A Chapter 11 plan cannot be based upon a visionary scheme. 11 U.S.C.S. §
1129(a)(11). More Like This Headnote
HN16
The language of 11 U.S.C.S. § 362(d)(1) is clear and unambiguous: the
court shall grant relief for "cause." The term "shall" is ordinarily the
language of command. The term "cause," as it is used in § 362(d)(1), is not
defined in the Bankruptcy Code. More Like This Headnote | Shepardize: Restrict By
Headnote
HN17
The term "cause" as used in 11 U.S.C.S. § 362(d)(1) is a broad and flexible
concept which permits a bankruptcy court, as a court of equity, to respond
to inherently fact-sensitive situations. More Like This Headnote | Shepardize:
HN18
Factors to consider in determining whether the automatic stay should be
modified for cause include (1) an interference with the bankruptcy; (2) good
or bad faith of the debtor; (3) injury to the debtor and other creditors if
the stay is modified; (4) injury to the movant if the stay is not modified; and
(5) the relative portionality of the harms from modifying or continuing the
stay. More Like This Headnote | Shepardize: Restrict By Headnote
Procedures
HN19
Fed. R. Bankr. P. 4001(a)(3) provides that an order granting a motion for
relief from an automatic stay is stayed until the expiration of 10 days after
the order is entered, unless the court orders otherwise. More Like This Headnote
Procedures
HN20
Fed. R. Bankr. P. 4001(a)(3) enables a debtor, or other party who opposes
relief from stay, to seek a stay pending appeal of an adverse ruling. Without
a stay pending appeal, appeals from such orders can often become moot if
the party granted relief proceeds with a sale or some other action that
cannot be easily undone. More Like This Headnote | Shepardize: Restrict By Headnote
COUNSEL: [**1] For A Partners LLC, Debtor, Estela O. Pino, Sacramento, CA.
JUDGES: W. Richard Lee, United States Bankruptcy Judge.
OPINION BY: W. Richard Lee
OPINION
[*117] MEMORANDUM DECISION REGARDING MOTION FOR RELIEF FROM

THE AUTOMATIC STAY
Before the court is a motion for relief from the automatic stay. Scripps GSB I, LLC
("Scripps GSB"), wants to complete a non-judicial foreclosure of its first priority trust
deed against a commercial building known as the Guarantee Savings Building and an
adjacent parking structure (hereinafter, the "Guarantee Buildings" or the
"Properties"). The debtor, A Partners, LLC, is a California limited liability company
("Debtor"). The Guarantee Buildings are not owned by the Debtor, they are owned
by a related limited liability company known as AB Parking Facilities, LLC ("AB
Parking"). The Debtor holds a note from AB Parking (the "AB Parking Note") secured
by a deed of trust against the Guarantee Buildings (the "Debtor's Lien"). The
Debtor's Lien is fifth in order of priority behind four other deeds of trust held by
Scripps GSB, a related entity, Scripps Investments and Loans, Inc. ("Scripps
Investments"), and others. 1 The Debtor opposes Scripps GSB's motion. However,
the Debtor [**2] has little cash and it cannot exercise the rights of a junior
lienholder under California law to protect its security interest in the Guarantee
Buildings. For the reasons set forth below, Scripps GBS's motion for relief from the
automatic stay will be granted. Scripps GSB also asks the court to waive the
provisions of Fed.R.Bankr.P. 4001(a)(3), which automatically stays the effect of this
ruling for 10 days unless the Rule is waived. Because Scripps GSB's foreclosure sale
cannot take place for at least 20 days after this ruling is entered, that request will be
granted as well.
FOOTNOTES
1Scripps Investments is the manager of Scripps GSB. The court notes that both
entities are represented in this proceeding by the same law firm.
This Memorandum Decision contains the court's findings of fact and conclusions of
law as required by Fed.R.Bankr.P. 7052. The bankruptcy court has jurisdiction
pursuant to 28 U.S.C. § 1334 and 11 U.S.C. § 362 [**3] . This is a core proceeding
pursuant to 28 U.S.C. § 157(b)(2)(G).
FACTS AND PROCEDURAL BACKGROUND
The Foreclosure and Receivership Litigation.
Scripps GSB is the successor-in-interest to CapitalSource Finance, LLC, which

initiated both a non-judicial foreclosure against the Guarantee Buildings, and a
judicial receivership/foreclosure action against the Properties and AB Parking in the
Superior Court of California for the County of Fresno (the "Receivership Action").
Scripps GSB was not scheduled as a creditor of the Debtor and it has not filed a
proof of claim in this bankruptcy case. The Debtor was not named as a defendant in
the Receivership Action, even though it holds a junior lien against the Guarantee
Buildings. 2 Scripps GSB's non-judicial foreclosure commenced in August [*118]
2005, prior to this bankruptcy, and the initial three-month "notice of default" period
prescribed in Cal.Civ.Code § 2924 has now expired. Scripps GSB is ready to publish a
notice of sale pursuant to Cal.Civ.Code § 2924f(b) and proceed with its foreclosure.
FOOTNOTES
2 There is a dispute in the State court over whether the Receivership Action is stayed
by the filings of this bankruptcy, the chapter 11 bankruptcy of Mauldin-Dorfmeier
Construction, Inc. ("Mauldin-Dorfmeier" -- case number 05-11402 filed on February
28, 2005), and the bankruptcy of Charles W. Briggs ("Briggs"-case number 05-
62659 filed on October 28, 2005). Mauldin-Dorfmeier was the holder of the fourth
priority lien against the Guarantee Buildings. Briggs is a co-owner of AB Parking, a
guarantor of the debt to Scripps Investments and Scripps GSB, and a named
defendant in the Receivership Action. The question of whether the Receivership
Action is proceeding in violation of the automatic stay has not been presented to this
court for resolution.
Mauldin-Dorfmeier is seeking approval of a compromise agreement with Scripps GSB

and Scripps Investments to retroactively nullify the automatic stay in its bankruptcy
case, validate the actions of CapitalSource Finance, LLC, and permit Scripps GSB to
foreclose against Mauldin-Dorfmeier's lien. That motion was opposed by Allison,
Briggs, AB Parking, and the Debtor, and is currently under submission.
[**4] The Guarantee Buildings and the Secured Debt.
AB Parking is deeply in debt and the Guarantee Buildings are heavily encumbered.
Scripps GSB offered into evidence an appraisal that values the Guarantee Buildings
at approximately $ 22 million, which is far less than the secured debt against the
Properties. The Debtor contends, through the declaration of its manager, Ronald
Allison ("Allison"), that an unnamed, but qualified, entity has given AB Parking a
bona fide letter of intent to purchase the Guarantee Buildings for $ 70 million, a price
which exceeds the secured debt. 3
FOOTNOTES
3 Allison and his wife own or control 100% of the membership interest in the
Debtor. Allison was at one time also a co-owner and manager of AB Parking. There
is a pending dispute between Allison and Scripps Investments over a pre-petition
foreclosure against Allison's membership interest in AB Parking. Scripps Investments
contends that it now controls 50% of AB Parking. The Debtor contends that the
Scripps entities and the Receiver have refused to cooperate with AB Parking's efforts
to market the Guarantee Buildings. For that reason, Allison declined to identify the
prospective purchaser.
[**5] The first three deeds of trust against the Guarantee Buildings secure
promissory notes held by Scripps GSB and Scripps Investments (collectively, the
"Scripps Notes"). The Scripps Notes are fully matured and bear interest at their
respective default rates which range from 14% to 24% per annum. The aggregate
original principal balance on all of the Scripps Notes totals $ 37 million. The
aggregate monthly interest accrual on the Scripps Notes exceeds $ 548,000. 4 The
original principal balance of Scripps GSB's note, secured by the first priority lien, is $
23 million and the monthly interest accrual exceeds $ 268,000.
FOOTNOTES
4 The Scripps Notes provide for the compounding of interest such that accrued
interest becomes part of the principal balance. Scripps GSB contends that the
balance now due on the Scripps Notes actually exceeds $ 48 million. The Debtor
disputes the calculation of accrued interest. However, there is no dispute as to the
monthly interest accruing on the face of the Scripps Notes and that number alone is
sufficient to support the court's ruling.
[**6] The fourth priority lien is held by St. Paul Fire and Marine Insurance
Company, successor-in-interest to Mauldin-Dorfmeier (the "MDC Lien") through
Mauldin-Dorfmeier's chapter 11 plan of reorganization. See footnote 2. The original
principal balance on the obligation secured by the MDC Lien is $ 630,000. The record
is unclear as to the interest rate, the accrued interest, and the balance due on the
Mauldin-Dorfmeier obligation.
The Helm Building.
The Debtor owns another commercial building known as the Helm Building,
[*119] which the Debtor values on its schedules at $ 15 million. The Helm
Building is undergoing a major renovation and is largely unrentable. The record is
silent regarding the status of, and source of funds for, the renovation project. The
Helm Building currently has six retail tenants who pay a small irregular amount of
rent to the Debtor. 5 All rent is cash collateral for the senior lien held by Scripps
Investments, which has not consented to its use.
FOOTNOTES
5 According to the Debtor's bankruptcy schedules, the Debtor collected rent from
the Helm Building in the amount of $ 116,545.57 for the entire 2005 fiscal year. The
Debtor's monthly operating reports disclose that the Debtor has collected rents
from the Helm Building for the months of February, March, and April 2006, in the
amounts of $ 9,484.91, $ 5,666.67, and $ 5,511.03 respectively.
[**7] The Debtor's schedules report that at the commencement of this

bankruptcy case, the Debtor had cash bank deposits totaling $ 145.95. On March
13, 2006, this court authorized the Debtor to borrow $ 40,000 from Allison on an
unsecured basis (the "Motion to Borrow"). The Debtor needed the money to fund
the Debtor's operating expenses, including insurance, employee salaries, and
utilities for the Helm Building. There was no money in the proposed budget for any
payments to secured creditors. Allison was personally funding the operations of the
Debtor prior to the bankruptcy. The Debtor's bankruptcy schedules list Allison as
an unsecured creditor with an estimated claim in excess of $ 400,000.
The Helm Building is collateral for three secured obligations, all of which are in
default. The senior obligation, in excess of $ 1.2 million, is owed to Scripps
Investments. Scripps Investments contends that the Helm Building is only worth
about $ 1 million and it has a motion for relief from stay pending in this court to
complete the non-judicial foreclosure of its first priority lien. The second trust deed
secures a group of obligations owed to Mauldin-Dorfmeier. Mauldin-Dorfmeier has
filed a [**8] proof of secured claim in this case in excess of $ 1.8 million. The third
trust deed secures the Debtor's commercial guarantee of AB Parking's obligation to
Scripps Investments, the debt which is also secured by the third trust deed against
the Guarantee Buildings. That obligation has a principal balance in excess of $ 3
million. In support of the Motion to Borrow, Allison represented that the Debtor is
actively seeking a lender to refinance all of the debt against the Helm Building.
The Effect of a Foreclosure.
The Guarantee Buildings are not properties of any bankruptcy estate and are not
protected by an automatic stay. The only reason Scripps GSB needs relief from stay
in this bankruptcy is the fact the AB Parking Note, the Debtor's Lien, and the
attendant rights and remedies of a junior lienholder, are property of this bankruptcy
estate. According to the Debtor's bankruptcy schedules, AB Parking owes the
Debtor more than $ 4.5 million on the AB Parking Note and that obligation is fully
matured. However, the Debtor's Lien will be extinguished if Scripps GSB forecloses,
relegating the Debtor to the status of an unsecured creditor of AB Parking. There is
no evidence [**9] to suggest that AB Parking has any assets other than the
Guarantee Buildings, or any way to repay its debts if the Guarantee Buildings are
lost through foreclosure.
A foreclosure by Scripps GSB will also extinguish Scripps Investments' third trust
deed against the Guarantee Buildings, thereby forcing the Debtor to honor the $ 3
million guarantee to Scripps Investments, which is secured by the Helm Building.
Again, there is no evidence to suggest that [*120] the Debtor will have any
recourse against AB Parking for indemnity or repayment of this obligation after a
foreclosure.
The electrical energy, heating and cooling for the Guarantee Buildings are provided
through a system of fuel cells located on the site and operated (prior to the
Receivership Action) by the Debtor. The Debtor's schedule of assets lists an
"account receivable" from AB Parking for "electricity supply [sic] to the Guarantee
Buildings" in excess of $ 718,500. There is a major dispute between the Debtor, the
Receiver, and the supplier of the fuel cells over ownership of the electrical
equipment, the obligation to maintain the equipment, and the Debtor's right to
collect the utility fees. It is not clear how or when this [**10] dispute will be
resolved, or whether it can be resolved without protracted litigation. Neither is it
clear what will happen to the fuel cells and the "account receivable" if Scripps GSB
forecloses and AB Parking loses title to the Guarantee Buildings. More crucial to this
bankruptcy, there is no evidence to suggest that AB Parking will have the ability to
pay the "account receivable," even if the Debtor prevails in that dispute.
The Debtor's Opposition.
The Debtor contends, inter alia, that the value of the Guarantee Buildings greatly
exceeds all of the liens and that a sale of the Properties is necessary to the
Debtor's reorganization. Based thereon, the Debtor proposes two scenarios in
opposition to this motion for relief from stay. The Debtor asks that all foreclosure
activity be suspended indefinitely until AB Parking can sell the Guarantee Buildings in
an "orderly fashion" for $ 65 million to $ 70 million. Alternatively, the Debtor
proposes to conduct its own foreclosure against the Guarantee Buildings and to
liquidate the Properties on its own. The Debtor has not made either of these
proposals formally in a chapter 11 plan. 6
FOOTNOTES
6 The Debtor filed a chapter 11 plan and disclosure statement after oral argument
on this motion. The proposed plan provides for payment of the debt against the Helm
Building from "business revenue" which will include rent from the renovated Helm
Building and cash flow from the fuel-cell operation. With regard to the Guarantee
Buildings, the proposed plan does not provide for any payments to senior lienholders
to protect the Debtor's Lien. The proposed plan contemplates that AB Parking can
still sell the Guarantee Buildings to pay all of the secured debts, including the AB
Parking Note without the need for a foreclosure by the Debtor. However, it does
state without specifics that the Debtor will "attempt to collect" the AB Parking Note.
It also purports to permanently enjoin any foreclosure against the Debtor's Lien.
[**11] APPLICABLE LAW
Scripps GSB moves for relief under § 362(d) 7 which provides:

HN1
On request of a party in interest and after notice and a hearing, the court shall
grant relief from the stay provided under subsection (a) of this section, such as by
terminating, annulling, modifying, or conditioning such stay --
(1) for cause, including the lack of adequate protection of an interest in property of
such party in interest;
(2) with respect to a stay of an act against property under subsection (a) of this
section, if --
(A) the debtor does not have an equity in such property; and
[*121] (B) such property is not necessary to an effective reorganization.
FOOTNOTES
7 Unless otherwise indicated, all chapter, section and rule references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1330, and to the Federal Rules of Bankruptcy
Procedure, Rules 1001-9036, as enacted an promulgated prior to the effective date
of The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L.
109-8, Apr. 20, 2005, 119 Stat. 23.
[**12] HN2 Pursuant to § 362(g), Scripps GSB has the burden of proof on the
issue of the Debtor's equity. The Debtor has the burden of proof on all other
issues. Although the Debtor has the ultimate burden of proof on the "cause" issue,
Scripps GSB must produce some evidence in the first instance to support the "cause"
allegation. Tirey Distributing Company v. Sloan (In re Tirey Distributing Co.), 242
B.R. 717, 723 (Bankr. E.D. Okla. 1999) (quoting In re Tursi, 9 B.R. 450, 453
(Bankr.E.D.Pa. 1981)).
Scripps GSB moves for relief under both subsections 362(d)(1) and (d)(2). In
opposition, the Debtor lodged with the court a Statement of Disputed Facts for
which it requested an evidentiary hearing. However, virtually all of the factual
disputes are tied to questions regarding the fair market value of the Guarantee
Buildings (the "FMV"), cash flow from the Properties, and the amount of the senior
debt. 8 The Debtor requested an opportunity to conduct discovery and to depose,
inter alia, Scripps GSB's appraiser. However, the Debtor does not own the
Guarantee Buildings and they are not property of this bankruptcy estate. The
Debtor makes no showing how an adjudication [**13] of the disputed facts might
affect its ability to protect the Debtor's Lien and exercise the rights it holds as a
junior lienholder. The material facts which support this ruling are already in the
record, they appear to be uncontroverted, and an evidentiary hearing is not
necessary.
FOOTNOTES
8 The Debtor offered evidence that the Receiver had collected rent and paid over to
Scripps GSB at least $ 268,000 since commencement of the Receivership Action. In
response, Scripps GSB acknowledged receipt of $ 348.000 from the Receiver.
However, the rent revenue appears to be substantially less than the accruing
monthly interest on the senior debt.
ANALYSIS AND CONCLUSIONS OF LAW
The Debtor's Junior Lien Has No Economic Value to the Bankruptcy Estate.
Debtor argues that the Debtor's Lien has "equity" within the meaning of § 362(d)
(2)(A) because the Guarantee Buildings have an FMV greatly in excess of the senior
liens. The concept of "equity" in property is based on the premise that the property
itself [**14] has some economic value to its owner. "Equity" is defined as "[t]he
amount by which the value of or an interest in property exceeds secured claims or
liens; the difference between the value of the property and all encumbrances upon
it." BLACK'S LAW DICTIONARY 580 (8th ed. 2004). The property at issue here is a
fifth priority security interest in the Guarantee Buildings, not the Guarantee Buildings
themselves.
The Debtor asks this court to assign an economic value to the Debtor's Lien based
on (1) the AB Parking Note, which is in default, and (2) the purported "equity" in the
Guarantee Buildings, which Debtor argues, would make the AB Parking Note a fully
secured asset of this bankruptcy estate. The Debtor contends that the Debtor's
Lien should be valued in essentially the same way that the court would calculate the
value of AB Parking's interest in the Guarantee Buildings; i.e., FMV less the amount
owed on the non-avoidable senior liens. However, the Debtor's interest in the
Guarantee Buildings is materially different from that of the fee holder. The Debtor
cites no authority for the proposition that a security interest in real property should
be valued, in the face of a senior [**15] lienholder's foreclosure, based solely on a
[*122] mathematical calculation of the equity in the underlying collateral.
This discussion begins with an analysis of the Debtor's Lien and the property
rights, the proverbial "bundle of sticks," which attach to it. The commencement of
this bankruptcy case created an "estate." § 541(a). HN3 The estate is comprised of
all legal and equitable interests of the debtor in property, wherever located and by
whomever held, at the commencement of the case. § 541(a)(1). The nature and
extent of the debtor's interest in property are determined by State law. First
Federal Bank of California v. Cogar (In re Cogar), 210 B.R. 803, 809 (9th Cir. BAP
1997) (citing In re Farmers Markets, Inc., 792 F.2d 1400, 1402 (9th Cir. 1986)).
Once that determination is made, federal bankruptcy law determines if the debtor's
interest in property is property of the estate. In re Cogar, 210 BR. at 809 (citing In
re King, 961 F.2d 1423, 1426 (9th Cir. 1992); § 541(a)).
HN4
All of the rights which the debtor holds as a lien against real property are
property of the bankruptcy estate under § 541. In re Capital Mtg. & Loan, Inc., 35
B.R. 967, 971 (Bankr. E.D. Cal. 1983). [**16] However, the debtor's property
rights come into the estate subject to the conditions, restrictions and limitations that
attached to those property rights under State law prior to commencement of the
bankruptcy. 5 Collier on Bankruptcy, (15th Ed. Revised), P 541.04, pg. 541-12, 13.
HN5
To the extent that an interest in property is limited in the hands of the debtor
prior to commencement of the case, it is equally limited as property of the estate.
The debtor-in-possession can assert no greater property rights than the debtor
had on the date the case was commenced. Id.; see also Keller v. Keller (In re
Keller), 185 B.R. 796, 800-801 (9th Cir. BAP 1995) (property rights which the
debtor holds subject to reserved jurisdiction of the State Family Court remain
subject to modification by the State court even after the debtor files bankruptcy).
HN6
Under California law, the rights of a holder of a mortgage or trust deed against
real property are defined by statute. They include the right to collect rents on
default, the right to foreclose on default, the right to receive notice of the default in a
senior lien, the right to purchase the property [**17] at a foreclosure sale, and
the right to take title to the property in lieu of foreclosure with the consent of the
owner. Cal.Civ.Code §§ 2924b through 2924k, 2927; see also In re Cogar, 210 B.R.
at 809.
The rights most pertinent to this analysis are the statutory rights of reinstatement
and redemption. HN7 When a senior lien against real property is in foreclosure, the
holder of a junior lien has the right to reinstate the senior debt, i.e., to cure any
default in the senior debt up to five days prior to foreclosure by paying the senior
lienholder all amounts due at the time of tender, plus the reasonable costs and
expenses incurred in enforcing the senior obligation. Cal.Civ.Code § 2924c(a)(1) &
(c). The junior lienholder also has a right to redeem the property from a senior lien
and to be subrogated to the benefits of the senior lien by paying the full amount
owed to the senior lienholder. Cal.Civ.Code §§ 2904-2905. HN8 Any act which cuts
off the rights of a junior lienholder in bankruptcy, such as the pre-foreclosure rights
of reinstatement and redemption, is a violation of the automatic stay. [**18] See
Harsh Investment Corp. v. Bialac (In re Bialac), 712 F.2d 426, 432 (9th Cir. 1983).
For the purpose of evaluating the Debtor's Lien in this bankruptcy, it is also
necessary to consider what the Debtor's interest in the Guarantee Buildings does
[*123] not include. HN9 Many of the rights and powers which inure to the benefit
of a landowner in bankruptcy are not available to a lienholder in bankruptcy. For
example, the debtor-in-possession of real property in chapter 11 has the benefit
of the automatic stay to protect its property from the creditors under § 362(a). The
debtor-in-possession has the right to obtain credit, i.e., to borrow money secured
by a lien against the real property that is senior to, or equal to, the existing liens,
subject to a showing of adequate protection for the existing debt. § 364(c)(3). The
debtor-in-possession has the right to sell all or substantially all of the property to
pay claims (§ 1123(b)(4)) and the ability to modify the rights of the secured
creditors in a chapter 11 plan. § 1123(b)(5).
In contrast, the Debtor here is not in possession of the Guarantee Buildings. The
Debtor's Lien does not extend the automatic stay to the Guarantee [**19]
Buildings. It protects only the Debtor's security interest in the Properties. The
Debtor's Lien does not give the Debtor the ability to sell the Guarantee Buildings,
or even to borrow money against the Properties. Neither does the Debtor have the
right to restructure any of the senior debt against the Guarantee Buildings through a
chapter 11 plan. In re Cogar, 210 B.R. at 812 (the senior lienholder does not have a
claim against the estate of the junior lienholder that could be modified through the
junior lienholder's chapter 11 plan, even if the plan provides for transfer of the
underlying real property to the debtor).
The Debtor's right to collect the rents from the Guarantee Buildings has no
economic value here because it is subordinate to each senior lienholder's right to
collect the same rents; indeed, it appears that those rents are already being
collected in the Receivership Action. The Debtor's right to foreclose on default is
conditioned on the Debtor's ability to complete that foreclosure before the Debtor's
Lien is extinguished by the foreclosure of a senior lien. Again, that right has no
economic value here because Scripps GSB has already started and
substantially [**20] completed the non-judicial foreclosure process; the Debtor
has not.
The Debtor has the right either to cure the default in the obligation to Scripps GSB,
or to redeem the Guarantee Buildings and become subrogated to the rights of
Scripps GSB. However, Scripps GSB's note is fully matured, so there is no curable
"default." Therefore, the economic value of the Debtor's Lien in this case is tied to
the Debtor's ability to redeem the Properties, i.e., to pay the full balance due to
Scripps GSB in cash. It is undisputed that the Debtor has no resources with which to
exercise that right. The debt to Scripps GSB already exceeds $ 23 million and it
increases each month, based on the interest accrual alone, by more than $ 268,000.
The Debtor's Lien is an interest in real property, but it is also a contract right, and
the Debtor stands in the shoes of a creditor of AB Parking. HN10 When a creditor's
collateral consists of a contract right, the value of the collateral is a function of the
creditor's ability to exercise that right. In re Emarco, Inc., 45 B.R. 627, 629 (Bankr.
M.D. Penn. 1985).
In Emarco, the debtor ("Emarco"), received a purchase order to install an

elevator [**21] for a third party. Emarco assigned the purchase order to its bank
to secure a loan; it was the bank's only collateral for the loan. However, because of a
work stoppage caused by a strike, Emarco was unable to perform the contract.
Emarco was forced to abandon the elevator contract in its chapter 11 bankruptcy
and the project was ultimately completed by another contractor. The bankruptcy
court ruled [*124] that the value of Emarco's interest in the contract was zero.
Consequently, the bank was determined to be an unsecured creditor because it was
"not able in any way to look to the collateral assigned to it for repayment of its
debt." Id.
Here, the Debtor stands in essentially the same position as the bank in Emarco. It
holds a contractual security interest which is subordinate to significant senior liens.
The value of that interest is a function of the Debtor's ability to exercise its rights as
a junior lienholder. The Debtor would have to redeem Scripps GSB's note to protect
its junior lien from being extinguished in a foreclosure. That recourse is not available
to the Debtor, so the Debtor's Lien has no practical value to this bankruptcy estate.
HN11
There is a distinction between [**22] having a security interest in property
and having a "secured claim" against the property owner. The AB Parking Note may
be a "secured" asset on the Debtor's books, but the court is not persuaded that the
Debtor is in fact a "secured creditor" of AB Parking. "By definition, 'secured claim'
requires availability of collateral to secure the creditor's right to payment." In re
Elliott, 64 B.R. 429, 430 (Bankr. W.D. Mo. 1986) (citing In re Emarco, 45 B.R. at
629) (a creditor with a lien against personal property, a diamond ring, which
disappeared without the debtor's permission and cannot be found, retained its
security interest, but had an unsecured claim in the debtor's chapter 13
bankruptcy). Here, the Debtor's collateral, a fifth priority lien against a seriously
distressed piece of property, is literally unavailable to the Debtor for repayment of
the AB Parking Note. The Debtor's Lien has little value to the Debtor, just as the
missing jewelry had little value to the creditor in Elliott.
It is important to note that the courts in both Emarco and Elliott, never considered
the face value of the underlying collateral, the balance due on Emarco's [**23]
construction contract, and the value of Elliot's diamond ring, respectively. The
purported "value" of the collateral was immaterial to the economic value of the
creditors' liens because the collateral was unavailable to satisfy those liens. The
Debtor disputes, inter alia, Scripps GSB's appraisal of the Guarantee Buildings and
the interest accrual on the senior debt, but the court does not need to decide those
disputed issues because the benefits of the Debtor's Lien are not available to the
bankruptcy estate. The court cannot find that there is any "equity" in the Debtor's
Lien within the meaning of § 362(d)(2)(A).
The Debtor's Lien is Not Necessary to an Effective Reorganization Because

the Senior Secured Debt Cannot Be Restructured Through a Chapter 11 Plan.
The Debtor argues that the Debtor's Lien is necessary to an effective

reorganization within the meaning of § 362(d)(2)(B) because AB Parking is trying to
sell the Guarantee Buildings, which it contends, if successful, will pay the AB Parking
Note and significantly reduce the debt against the Helm Building. Alternatively, the
Debtor argues that it can acquire title through a foreclosure of the Debtor's
Lien [**24] and liquidate the Guarantee Buildings on its own. However, the
Debtor's "game plan" requires this court to effectively impose a permanent
injunction against the foreclosure of all senior liens against the Properties.
The Debtor's proposal amounts to a de facto plan of reorganization. Under the

Debtor's "plan," Scripps GSB's secured debt would be materially "impaired" within
the meaning of § 1124; the due date on Scripps GSB's note would be deferred
indefinitely and Scripps GSB would be permanently stripped of its foreclosure
[*125] remedy under California law. 9 The Debtor is essentially trying to achieve,
indirectly through its opposition to this motion, a result which it cannot achieve
directly through the chapter 11 plan confirmation process. HN12 The holder of a
junior lien against real property cannot restructure the senior liens against the
same property through a chapter 11 plan, even if the plan provides for the debtor
to first acquire the underlying property. In re Cogar, 210 B.R. at 809.
FOOTNOTES
HN13
9 Under 11 U.S.C. § 1124(1), a secured claim is impaired under a chapter 11
plan if the plan alters the legal, equitable and contractual rights of the holder of the
claim.
[**25] In Cogar, the bankruptcy estate held a third trust deed against an
apartment building. The debt to First Federal Bank secured by the first trust deed
was in foreclosure. In an effort to save some value from the third trust deed for the
bankruptcy estate, the chapter 11 trustee tried to confirm a plan under which the
estate would acquire the real property from its owner by a deed in lieu of
foreclosure, the note secured by the first trust deed would be restructured, and the
property would then be transferred back to the original owner, subject to the
restructured debt. The bankruptcy court confirmed the plan; the Bankruptcy
Appellate Panel reversed. After analyzing the nature of the senior lien and the
debtor's interest in the apartment building, the court held:
In summary, First Federal did not hold a claim against the bankruptcy estate which
was subject to treatment in the Chapter 11 plan. The real property was not
property of the estate, as opposed to the estate's lien interest in the property.

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248 B.R. 820, *; 2000 Bankr.

LEXIS 584, **;

In re BRENDA MARIE BEBENSEE-WONG, Debtor. BRENDA MARIE BEBENSEE-WONG,

BAP No. EC-99-1699-RBMa

UNITED STATES BANKRUPTCY APPELLATE PANEL FOR THE NINTH CIRCUIT

March 23, 2000, Argued and Submitted at Sacramento, California

OVERVIEW: Appellee purchased appellant debtor's home at a trustee's sale.

Real Property Law > Deeds > General Overview

JUDGES: Before: RUSSELL, BRANDT, and MARLAR, Bankruptcy Judges.

OPINION BY: RUSSELL

[*821] RUSSELL, Bankruptcy Judge:

III. STANDARD OF REVIEW

In California and other jurisdictions that utilize a typical race-notice recording

315 B.R. 858, *; 2004 Bankr. LEXIS 1760, **

No. 00-44380 J, Adv. No. 03-4028 AJ

UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF

315 B.R. 858; 2004 Bankr. LEXIS 1760

October 19, 2004, Decided

DISPOSITION: Judgment entered in favor of plaintiff.

OVERVIEW: The debtor, in default on a loan against her residence, received a

LEXISNEXIS® HEADNOTES Hide

Bankruptcy Law > Case Administration > Notice

Bankruptcy Law > Estate Property > Redemption

Bankruptcy Law > Estate Property > Noncustodial Turnovers

Bankruptcy Law > Estate Property > Redemption

Bankruptcy Law > Estate Property > Redemption

Civil Procedure > Remedies > Damages > Punitive Damages

Torts > Damages > Punitive Damages > General Overview

Civil Procedure > Remedies > Damages > Punitive Damages

Civil Procedure > Remedies > Damages > General Overview

Civil Procedure > Remedies > Damages > Punitive Damages

276 B.R. 233, *; 2002 Bankr. LEXIS 363, **;

In re: AHEONG, ALTHEA KEHAULANI, Debtor, ALTHEA KEHAULANI AHEONG,

BAP number: HI-01-1315-MoRyB

UNITED STATES BANKRUPTCY APPELLATE PANEL FOR THE NINTH CIRCUIT

November 28, 2001, Argued and Submitted at Honolulu, Hawaii

SUBSEQUENT HISTORY: [**1] Modified April 18, 2002.

DISPOSITION: Appeal dismissed. Order annulling stay affirmed.

CORE TERMS: automatic stay, bankruptcy cases, annul, reopening, annulling,

LEXISNEXIS® HEADNOTES Hide

Bankruptcy Law > Case Administration > Notice

Civil Procedure > Justiciability > Standing > General Overview

Civil Procedure > Appeals > Reviewability > Adverse Determinations

Civil Procedure > Justiciability > Standing > General Overview

Civil Procedure > Appeals > Reviewability > Adverse Determinations

Bankruptcy Law > Case Administration > Filing Fees

Bankruptcy Law > Conversion & Dismissal > Effects of Dismissal

Bankruptcy Law > Conversion & Dismissal > Effects of Dismissal

Bankruptcy Law > Conversion & Dismissal > Effects of Dismissal

Bankruptcy Law > Conversion & Dismissal > Effects of Conversion

Bankruptcy Law > Practice & Proceedings > General Overview

Bankruptcy Law > Conversion & Dismissal > Effects of Dismissal

Bankruptcy Law > Conversion & Dismissal > Effects of Dismissal

Bankruptcy Law > Practice & Proceedings > General Overview

Bankruptcy Law > Practice & Proceedings > Contested Matters

Governments > Courts > Judicial Precedents

JUDGES: Before: MONTALI, RYAN and BRANDT, Bankruptcy Judges. RYAN,

OPINION BY: Dennis Montali

[*236] MONTALI, Bankruptcy Judge:

4 General Order No. 1 states, in part:

IT IS HEREBY ORDERED THAT:

1. If a debtor in a voluntary or involuntary bankruptcy case, filed in the District of

1. Whether Debtor has standing to challenge the Reopening Order.

III. STANDARD OF REVIEW