Opinion
NOT FOR PUBLICATION
Argued and Submitted at San Diego, California: September 18, 2008
Appeal from the United States Bankruptcy Court for the Southern District of California. Bk. No. 05-13457. Honorable Peter W. Bowie, Chief Bankruptcy Judge, Presiding.
Before: JURY, KWAN[ and MONTALI, Bankruptcy Judges.
Robert N. Kwan, United States Bankruptcy Judge for the Central District of California, sitting by designation.
MEMORANDUM
Appellant-debtor Philip H. Frazier appeals pro se the bankruptcy court's order granting appellee relief from stay to (1) petition the Probate Division of the Superior Court for the County of Santa Clara for authority to file a partition action against debtor and (2) take any additional actions it deems necessary to sell the real property in which debtor and his mother each hold a fifty-percent interest.
We liberally construe debtor's pleadings due to his pro se status. Ozenne v. Bendon (In re Ozenne), 337 B.R. 214, 218 (9th Cir. BAP 2006).
We AFFIRM.
I. FACTS
Debtor filed his voluntary chapter 13 petition on October 14, 2005. Debtor's modified plan provided for 100 percent payment to unsecured creditors.
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 and promulgated prior to the effective date of The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, 119 Stat. 23, because the case from which this appeal arises was filed before its effective date (generally October 17, 2005).
We take judicial notice of the pleadings which were imaged and docketed by the bankruptcy court in Case No. 05-13457 pursuant to Atwood v. Chase Manhattan Mortgage Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).
Debtor listed his fifty-percent interest in real property located in San Jose, California in his Schedule A and valued the property at $800,000. Debtor's mother, Thelma Frazier, who was the subject of a conservatorship controlled by the County of Santa Clara, held the other fifty-percent interest and at one time occupied the house on the property. A first trust deed in favor of Bank of America in an amount less than $100,000 was the only encumbrance on the property.
Debtor filed an ex parte application to sell the property post-confirmation. Debtor represented that the County of Santa Clara would employ real estate professionals to list and sell the property. Debtor also stated that excess proceeds would be used to pay off the balance of his chapter 13 plan. The court authorized the sale by an amended order entered on June 14, 2007.
Appellee prepared to obtain an order in Thelma Frazier's probate case authorizing the sale of her interest in the property. Before appellee could obtain the order, debtor's counsel informed it that debtor no longer wished to sell the property and that appellee should not proceed with the sale order because to do so would violate the automatic stay.
Appellee accordingly sought relief from stay in the bankruptcy court on February 27, 2008. Years prior to appellee's motion, on November 18, 2005, appellee had moved debtor's mother from the property to a skilled nursing facility, where her care was being paid for by the California State medical welfare program, commonly known as Medi-Cal. Since debtor's mother had no assets other than the real property, appellee sought to sell it to provide her with funds for personal amenities and medical care not covered by Medi-Cal.
Debtor opposed appellee's motion on several grounds. First, debtor contended that his mother had $291,000 of equity in the property which was more than sufficient as adequate protection. Next, debtor disputed the veracity of Jane Aiello's (" Aiello") declaration filed in support of appellee's motion. Aiello testified that the residence on the property was in a state of disrepair and not habitable. Debtor contended that this statement was false. Debtor also maintained that he and his sister, who resided in Michigan, were working diligently to ensure that their mother was receiving the proper care and hoped to return her to the property. Finally, debtor argued that the stay should not be lifted because of a pending proceeding that involved appellee.
Contrary to appellee's contention that debtor first raises this argument on appeal, debtor raised the issue of the veracity of Aiello's declaration in his opposition to appellee's motion. There was no evidence in the record, however, that supported debtor's argument that Aiello's statement regarding the habitability of the property was false.
Debtor filed a " Verified Ex Parte Motion to Compel The Public Guardian Santa Clara County San Jose, CA the Conservator of Thelma Louise Frazier to pay their (sic) one-half amount owing on the Bank of America Home Equity Line of Credit Debt; The Public Guardian to Disclose amount of money received from Sale of Thelma Louis Frazier's Personal Property and Disclose whereabouts of personal property of Co-owner Phillip H. Frazier...." Debtor's ex parte motion was filed on February 26, 2008, one day prior to the filing of appellee's stay relief motion.
The bankruptcy court heard appellee's motion on March 25, 2008 and granted it relief from stay to (1) petition the Santa Clara County Probate Court for authority to file a partition action against debtor and (2) take any additional actions necessary to sell the property. The order granting relief from stay was entered on April 4, 2008. Appellant timely appealed.
II. JURISDICTION
The bankruptcy court had jurisdiction pursuant to 28 U.S.C. § 1334 over this core proceeding under § 157(b)(2)(G). We have jurisdiction under 28 U.S.C. § 158.
III. ISSUE
Whether the bankruptcy court erred in granting appellee's motion for relief from stay for cause under § 362(d)(1).
IV. STANDARD OF REVIEW
We review the bankruptcy court's decision to grant a motion for relief from the automatic stay for an abuse of discretion. Arkison v. Frontier Asset Mgmt. (In re Skagit Pac. Corp.), 316 B.R. 330, 335 (9th Cir. BAP 2004).
V. DISCUSSION
The automatic stay protects debtors by halting all collection efforts, which gives the debtor a breathing spell from his creditors and affords him the opportunity to reorganize. Dawson v. Washington Mutual Bank, F.A. (In re Dawson), 390 F.3d 1139, 1147 (9th Cir. 2004). It also protects " creditors by preventing [them] from pursuing, to the detriment of others, their own remedies against the debtor's property...." Id .
Despite these protections, 362(d)(1) authorizes the bankruptcy court to grant relief from the stay upon a showing of cause. See § 362(d)(1); see also Delaney-Morin v. Day (In re Delaney-Morin), 304 B.R. 365, 369 (9th Cir. BAP 2003)(bankruptcy court has wide latitude in crafting relief from the automatic stay under 362(d)(1)). " Because there is no clear definition of what constitutes 'cause, ' discretionary relief from the stay must be determined on a case by case basis." Delaney-Morin, 304 B.R. at 369.
Appellee, as the party seeking relief, must first establish a prima facie case that cause exists for relief under § 362(d)(1). Duvar Apt., Inc. v. Fed. Deposit Ins. Corp. (In re Duvar Apt., Inc.), 205 B.R. 196, 200 (9th Cir. BAP 1996). Once a prima facie case has been established, the burden shifts to debtor to show that relief from the stay is not warranted. See § 362(g)(2) ; Duvar Apt., 205 B.R. at 200.
Section 362(g) provides: In any hearing under subsection (d) or (e) of this section concerning relief from the stay of any act under subsection (a) of this section-(1) the party requesting such relief has the burden of proof on the issue of the debtor's equity in property; and (2) the party opposing such relief has the burden of proof on all other issues.
Debtor assigns reversible error to the bankruptcy court's decision granting appellee relief from stay, contending that his mother had equity in the property and, therefore, was adequately protected. The concept of adequate protection, however, is inapplicable under the circumstances here. Debtor's mother is not a secured creditor with an encumbrance on the property entitled to the benefit of her bargain. Rather, she is a co-owner who has equity in the property that can be used to provide her with a higher quality of care.
Moreover, the lack of adequate protection of an interest in property is not the only cause for relief. See Amer. Savings & Loan Assoc. v. Sedona San Carlos Dev. Co. (In re Sedona San Carlos Dev. Co.), 59 B.R. 113, 114 (Bankr. D. Ariz. 1986). In deciding whether to grant a party relief from stay to proceed in a nonbankruptcy forum, a court may consider the lack of connection or interference with the bankruptcy case and the impact of the stay on the parties and the " balance of hurt." Adelson v. Smith (In re Smith), 389 B.R. 902, 918 (Bankr. D. Nev. 2008).
The record shows that the relief granted would not interfere with debtor's bankruptcy case at all. The bankruptcy court correctly recognized that " it is not a plan problem." Moreover, when debtor sought court authority to sell the property, he represented that excess proceeds from the sale would be used to pay off his chapter 13 plan. Creditors may thus benefit from a sale of the property by receiving earlier payment. Lastly, the court observed that debtor's rights in the property were fully protected in the context of the state court proceeding. The relief granted thus had little relationship to the purpose of the automatic stay, which is to protect debtor and his estate from creditors so that he could have a chance to reorganize.
The record does not support debtor's contention that granting relief from stay would harm him or his creditors. In contrast, ample evidence demonstrates that his mother would be harmed if relief from stay were denied. A sale of Thelma Frazier's only asset would provide her with the needed funds for her care and comfort to improve her quality of life as a full time resident in the skilled nursing facility beyond the minimum care covered by the Medi-Cal welfare program.
The record further shows that it was unlikely debtor's mother would ever return to the property. She had been in the nursing home since late 2005. Although debtor contended that he was working with his sister to ensure his mother's proper care, Aiello declared that debtor's sister had not been to California for years, was employed and took care of a disabled husband. No contrary evidence appears in the record. Aiello further declared that Thelma Frazier's primary physician opined that a skilled nursing facility was the most appropriate place for her. Again, the record contains no evidence rebutting this statement. Therefore, the impact of the automatic stay arising in debtor's bankruptcy case on debtor's mother was great because it denies her the benefit of her only asset absent a sale.
The record also reflects debtor's delay. Debtor originally sought to sell the property, but months later the property remained unsold and debtor had changed his mind about selling. Meanwhile, debtor's mother continued to live at the nursing facility with inadequate funds for the basic necessities of life. The bankruptcy court noted, " I think we need to get this resolved."
Finally, debtor's allegation that Aiello committed perjury regarding the condition of the residence is irrelevant, because the bankruptcy court did not consider its habitability as grounds for granting appellee relief from stay. Rather, the record implies that the bankruptcy judge left that issue for consideration by the state court. Motions for relief from the stay are intended to be determined under an expedited procedure, such that hearings are handled in a summary fashion. Consequently, the issues are generally limited to the grounds for relief stated in 362(d)(1), lack of adequate protection or other cause for relief. Here, appellee asserted a prima facie case that cause existed for granting relief from stay, unrelated to the habitability of the property.
Likewise, debtor's contention that the bankruptcy court erred in granting relief from stay because there was a pending proceeding on other matters between debtor and appellee is without merit. The hearing on the motion for relief from stay does not involve an adjudication of the merits of claims, defenses, or counterclaims. See Biggs v. Stovin (In re Luz Int'l., Ltd.), 219 B.R. 837, 842 (9th Cir. BAP 1998). Any claims that debtor has against appellee on unrelated issues were beyond the scope of a stay relief motion. Regardless, the stay relief does not impede debtor from moving forward with his asserted claims against the Public Guardian.
These issues pertained primarily to how the County disposed of personal property of debtor and his mother.
In sum, the record confirms that the bankruptcy court did not base its decision on an erroneous view of the law or clearly erroneous factual findings. Skagit Pac. Corp., 316 B.R. at 335. We thus find no reversible error under the abuse of discretion standard of review.
In his reply brief, debtor mentions that after the bankruptcy court granted appellee relief from stay, a hearing took place in the superior court in San Jose, California, Probate Division before the Honorable Judge Grilli. Judge Grilli granted appellee's request to proceed with the partition action. Debtor requests that this Panel vacate the order of Judge Grilli as being in violation of the stay. Although debtor filed a pleading titled " Notice of Stay of Proceedings, " there is nothing in the record that shows debtor ever requested a stay pending his appeal from the bankruptcy court pursuant to Rule 8005. Therefore, we perceive no stay violation. At oral argument, appellee confirmed that it has moved forward with filing a complaint to partition the property. Nonetheless, we observe, and appellee concedes, that the commencement of its partition action did not make this appeal moot because the property has yet to be sold.
VI. CONCLUSION
For the reasons stated above, we AFFIRM the bankruptcy court's order.