In re: Steven Harry Lucore, Sr. and Judy Lynne Lucore

FILED MAY 30 2013 1 SUSAN M SPRAUL, CLERK 2 U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT

3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. SC-12-1604-JuBaPa ) 6 STEVEN HARRY LUCORE, SR. and ) Bk. No. 11-14196 JUDY LYNNE LUCORE, ) 7 ) Debtors. ) 8 ______________________________) STEVEN HARRY LUCORE, SR.; ) 9 JUDY LYNNE LUCORE, ) ) 10 Appellants, ) ) 11 v. ) M E M O R A N D U M* ) 12 US BANK, NA; DAVID L. SKELTON,) Chapter 13 Trustee, ) 13 ) Appellees. ) 14 ______________________________) 15 Argued and Submitted on May 15, 2013 at Pasadena, California 16 Filed - May 30, 2013 17 Appeal from the United States Bankruptcy Court 18 for the Southern District of California 19 Honorable Peter W. Bowie, Bankruptcy Judge, Presiding _______________________ 20 Appearances: Appellant Steven Harry Lucore, Sr. argued pro se; 21 Bernard J. Kornberg, Esq., Severson & Werson, argued for Appellee US Bank, N.A. 22 _______________________ 23 Before: JURY, BASON** and PAPPAS, Bankruptcy Judges. 24 25 * This disposition is not appropriate for publication. 26 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 27 See 9th Cir. BAP Rule 8013-1. 28 ** Hon. Neil W. Bason, United States Bankruptcy Judge for the Central District of California, sitting by designation.

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1 Chapter 131 debtors, Steven Harry Lucore, Sr. and Judy 2 Lynne Lucore, appeal from the bankruptcy court’s order denying 3 their motion for reconsideration of an order granting U.S. Bank, 4 N.A. (Bank) relief from the automatic stay. We AFFIRM. 5 I. FACTS 6 A. Prepetition Events 7 In April 2006 debtors obtained a loan from American Home 8 Mortgage (AHM). The loan was evidenced by a note and secured by 9 a deed of trust (DOT) encumbering their property located on 10 Summit Avenue, Santee, California. The DOT named AHM as the 11 lender, Fidelity National Title Company as the trustee and 12 Mortgage Electronic Registration Systems, Inc. (MERS) as nominee 13 and beneficiary. 14 At some point debtors defaulted on the loan. On 15 September 1, 2010, a notice of default was recorded. 16 On November 10, 2010, debtors filed a thirty-seven page 17 complaint against Bank and other parties in the San Diego 18 Superior Court which was based on the wrongful foreclosure of 19 their property. Debtors alleged that they had no “formal” 20 evidence that their mortgage was sold or transferred to Bank. 21 Debtors further alleged that MERS did not have the authority to 22 record a substitution of trustee and assignment of DOT on 23 August 30, 2010. Due to MERS’ alleged lack of authority, 24 debtors alleged that Bank was not a beneficiary under the DOT 25 1 26 Unless otherwise indicated, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532. 27 “Rule” references are to the Federal Rules of Bankruptcy Procedure and “Civil Rule” references are to the Federal Rules of 28 Civil Procedure.

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1 with power to declare a default on the loan. Bank filed a 2 demurrer, which was sustained without leave to amend, and 3 judgment entered in its favor. 4 Debtors appealed the order. Their appeal was dismissed and 5 the order became final. 6 On August 18, 2011, Bank purchased the property at a 7 trustee’s sale held by Recontrust Company, N.A. (Recontrust). 8 On August 26, 2011, Recontrust prepared and executed a 9 trustee’s deed upon sale (Trustee’s Deed) memorializing the sale 10 of the property to Bank. 11 Fifteen days after the trustee’s sale, on September 2, 12 2011, the Trustee’s Deed was recorded in the San Diego County’s 13 Recorders Office. 14 B. Bankruptcy Events 15 On August 25, 2011, debtors filed their chapter 13 16 petition. Debtors’ original plan provided for payments of 17 $1,714.65 per month, with $1,114.65 allocated to AHM and $600 18 allocated to non-priority unsecured claims. Debtors’ plan has 19 not been confirmed. 20 On July 27, 2012, Bank filed a motion for relief from stay 21 to initiate unlawful detainer proceedings. Debtors opposed the 22 motion on several grounds: (1) no default had occurred because 23 they had been making payments through their chapter 13 plan; 24 (2) Bank was not a real party in interest; and (3) the Trustee’s 25 Deed was defective. Bank responded by asserting that the 26 Trustee’s Deed was conclusive evidence of its standing to move 27 for relief from stay. 28 On August 22, 2012, the bankruptcy court heard the matter

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1 and orally granted Bank’s motion at the hearing. 2 On September 11, 2012, the bankruptcy court entered the 3 order. 4 On September 4, 2012, prior to the entry of the order, 5 debtors filed a motion for reconsideration (MFR). Debtors again 6 asserted that Bank lacked standing and was not the real party in 7 interest. Debtors continued to allege that all the foreclosure 8 procedures were fundamentally flawed, including a defective 9 notice of default and a defective substitution of trustee and 10 assignment of the deed of trust due to the forging of signatures 11 by a notary.2 12 Bank opposed the motion, asserting that no new issues were 13 raised and that the resolution of the state court proceeding 14 collaterally estopped debtors’ arguments as to Bank’s standing. 15 On October 31, 2012, the bankruptcy court heard debtors’ 16 MFR and took the matter under submission. 17 On November 9, 2012, the bankruptcy court issued a five- 18 page order upholding its decision granting the Bank relief from 19 stay and denying debtors’ MFR.3 20 On November 19, 2012, debtors filed their notice of appeal. 21 Thereafter, debtors sought a stay of the order granting 22 Bank relief from stay in the bankruptcy court. The bankruptcy 23 24 2 Debtors also asserted that the judge in this matter refuses to recuse himself from these proceedings. From our 25 review of the docket, debtors never brought a separate motion to 26 recuse the bankruptcy judge in the bankruptcy court. We revisit the recusal request in our discussion below. 27 3 This order contains the court’s written findings and 28 conclusions.

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1 court denied the motion on November 21, 2012. 2 On December 7, 2012, debtor filed a motion before this 3 Panel seeking a stay pending appeal. On December 19, 2012, the 4 Panel denied the motion. 5 II. JURISDICTION 6 The bankruptcy court had jurisdiction over this proceeding 7 under 28 U.S.C. §§ 1334 and 157(b)(2)(G). We have jurisdiction 8 under 28 U.S.C. § 158.4 9 III. ISSUES 10 A. Whether the bankruptcy court erred in finding that 11 Bank was a real party in interest with standing to prosecute the 12 motion for relief from the automatic stay; 13 B. Whether the bankruptcy court abused its discretion in 14 granting Bank relief from the automatic stay; 15 C. Whether the bankruptcy court abused its discretion in 16 denying debtor’s MFR; and 17 D. Whether the bankruptcy judge should be recused. 18 4 19 Here, the appeal was taken solely from the order denying reconsideration of the order granting relief from stay. The 20 issues addressed by the parties, however, relate to the appropriateness of the underlying order granting relief from 21 stay. Moreover, in the bankruptcy court’s written ruling denying debtors’ MFR, the court addressed the merits of the underlying 22 order granting relief from stay. Thus, the court’s decision to 23 deny the MFR was inextricably intertwined with the correctness of the original order. Accordingly, we conclude that debtors’ 24 limited notice of appeal does not present a jurisdictional bar to our review of the order granting relief from stay. McCarthy v. 25 Mayo, 827 F.2d 1310, 1314 (9th Cir. 1987) (stating that a notice 26 of appeal from the denial of a Civil Rule 60(b) motion extended to underlying judgment where district court incorporated 27 underlying judgment in Civil Rule 60(b) order, appellant’s opening brief addressed the propriety of the underlying judgment 28 and the appellee fully briefed the issues).

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1 IV. STANDARDS OF REVIEW 2 Standing is a legal issue that we review de novo. Loyd v. 3 Paine Webber, Inc., 208 F.3d 755, 758 (9th Cir. 2000); Kronemyer 4 v. Am. Contractors Indem. Co. (In re Kronemyer), 405 B.R. 915, 5 919 (9th Cir. BAP 2009). 6 We review an order granting relief from stay for abuse of 7 discretion. Veal v. Am. Home Mortg. Servicing, Inc. 8 (In re Veal), 450 B.R. 897, 913 (9th Cir. BAP 2011). We also 9 review a motion for reconsideration of an order for abuse of 10 discretion. First Ave. W. Bldg., LLC v. James (In re Onecast 11 Media, Inc.), 439 F.3d 558, 561 (9th Cir. 2006). A bankruptcy 12 court abuses its discretion if it applied the wrong legal 13 standard or its findings were illogical, implausible or without 14 support in the record. TrafficSchool.com, Inc. v. Edriver Inc., 15 653 F.3d 820, 832 (9th Cir. 2011). 16 When the issue of recusal has been raised for the first 17 time on appeal, we review for plain error. United States v. 18 Holland, 501 F.3d 1120, 1122 (9th Cir. 2007); see also United 19 States v. Bosch, 951 F.2d 1546, 1548 (9th Cir. 1991) (“[E]ven 20 assuming that [the defendant] may raise his [28 U.S.C.] section 21 455 recusal claim for the first time on appeal . . . we would 22 review the district court’s failure to recuse himself under the 23 plain error standard.”). Plain error review involves four 24 prongs: (1) there must be an error, (2) “the legal error must be 25 clear or obvious, rather than subject to reasonable dispute,” 26 (3) the error “must have affected the appellant’s substantial 27 rights, which in the ordinary case means he must demonstrate 28 that it affected the outcome of the district court proceedings,”

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1 and (4) if the first three prongs are satisfied, we have the 2 discretion to remedy the error only if it “seriously affects the 3 fairness, integrity or public reputation of the judicial 4 proceedings.” Puckett v. United States, 556 U.S. 129, 135 5 (2009) (internal quotation marks omitted). 6 V. DISCUSSION 7 A. Standing 8 The central issue on appeal is whether Bank was the “real 9 party in interest” with standing to seek relief from the 10 automatic stay with respect to debtors’ property. Our review on 11 the standing issue is de novo. 12 Standing is a “threshold question in every federal case, 13 determining the power of the court to entertain the suit.” 14 Warth v. Seldin, 422 U.S. 490, 498 (1975). Standing has both 15 constitutional and prudential dimensions. See Edwards v. Wells 16 Fargo Bank, N.A. (In re Edwards), 454 B.R. 100, 103 (9th Cir. 17 BAP 2011). Only prudential standing is at issue in this case. 18 To have prudential standing, “the plaintiff generally must 19 assert his own legal rights and interest, and cannot rest his 20 claim to relief on the legal rights or interests of third 21 parties.” Warth, 422 U.S. at 499. In turn, prudential standing 22 implicates the real party in interest requirement under 23 § 362(d)(1) through application of Civil Rule 17.5 See 24 In re Veal, 450 B.R. at 907. 25 Under § 362(d)(1), on request of a party in interest, 26 5 27 Civil Rule 17 states in part: “An action must be prosecuted in the name of the real party in interest.” This rule 28 applies in bankruptcy proceedings through Rules 7017 and 9014(c).

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1 relief from the stay shall be granted “for cause, including the 2 lack of adequate protection of an interest in property of such 3 party in interest.” Because the term “party in interest” is not 4 defined in the Bankruptcy Code, whether a movant has the status 5 of a party in interest under § 362(d) is a fact-dependent matter 6 to be determined on a case-by-case basis, taking the claimed 7 interest and the alleged impact of the stay on that interest 8 into account. Kronemyer v. Am. Contractors Indem. Co. 9 (In re Kronemyer), 405 B.R. 915, 919 (9th Cir. BAP 2009). 10 Our inquiry into standing and who is a real party in 11 interest in the context of a relief from stay motion does not 12 involve finally deciding a creditor’s claim or security. 13 In re Veal, 450 B.R. at 914 (citing Johnson v. Righetti 14 (In re Johnson), 756 F.2d 738, 740–41 (9th Cir. 1985) (“Hearings 15 on relief from stay are thus handled in a summary fashion. The 16 validity of the claim or contract underlying the claim is not 17 litigated during the hearing.”). Rather, relief from stay 18 hearings are limited to determining whether “the creditor has a 19 colorable claim to the property of the estate.” United States 20 v. Gould (In re Gould), 401 B.R. 415, 425 n.14 (9th Cir. BAP 21 2009), aff’d, 603 F.3d 1100 (9th Cir. 2010) (citing Biggs v. 22 Stovin (In re Luz Int’l, Ltd.), 219 B.R. 837, 842 (9th Cir. BAP 23 1998)); In re Edwards, 454 B.R. at 105; In re Veal, 450 B.R. at 24 914–15. 25 We have held that a moving party may demonstrate a 26 “colorable claim” by showing that it has some property interest 27 in debtors’ property. Thi Ho v. Bank of Am. (In re Ho), 2011 WL 28 4485895, at *3 (9th Cir. BAP 2011). Therefore, the question

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1 before us is whether the recorded Trustee’s Deed shows that Bank 2 had some property interest in debtors’ property under California 3 law. 4 The Panel has previously examined similar standing issues 5 in Bebensee–Wong v. Fed. Nat’l Mortg. Ass’n 6 (In re Bebensee–Wong), 248 B.R. 820, 822-823 (9th Cir. BAP 2000) 7 and In re Edwards, 454 B.R. 100. From these cases, two rules 8 emerge which control the outcome of this case. First, under 9 § 362(b)(3), a trustee’s deed executed and recorded postpetition 10 is still valid if recorded within fifteen days of the sale due 11 to the relation-back effect of Cal. Civil Code § 2924h(c).6 12 In re Bebensee–Wong, 248 B.R. at 822-823.7 Second, under 13 applicable California law, a “duly-recorded Trustee’s Deed 14 provides that [the bank] is the presumptive current record owner 15 with respect to the Property.” In re Edwards, 454 B.R. at 106 16 (citing In re Salazar, 448 B.R. 814, 819 (Bankr. S.D. Cal. 2011) 17 18 6 Cal. Civil Code § 2924h(c) provides in relevant part: 19 For the purposes of this subdivision, the trustee’s 20 sale shall be deemed final upon the acceptance of the last and highest bid, and shall be deemed perfected as 21 of 8 a.m. on the actual date of sale if the trustee's 22 deed is recorded within 15 calendar days after the sale, or the next business day following the 15th day 23 if the county recorder in which the property is located is closed on the 15th day. 24 7 See also In re Gonzalez, 456 B.R. 429 (Bankr. C.D. Cal. 25 2011). To the extent Gonzalez construes Cal. Civil Code 26 § 2924h(c) differently than Bebensee–Wong, it is a long standing policy of this panel that rulings in published opinions of a 27 panel are binding on subsequent panels. Ball v. Payco–Gen. Am. Credits, Inc. (In re Ball), 185 B.R. 595, 597 (9th Cir. BAP 28 1995).

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1 (the bank moving for relief from stay established standing as 2 the title holder of the subject property under a recorded 3 Trustee’s Deed upon Sale)). 4 Here, the sale was held on August 18, 2011, seven days 5 before debtors’ petition (filed on August 25, 2011) and the 6 Trustee’s Deed was recorded on September 2, 2011, within the 7 fifteen-day period as required under Cal. Civil Code § 2924h(c). 8 Therefore, under our holding in Bebensee–Wong, perfection 9 relates back before debtors’ filing, even though Bank recorded 10 postpetition.8 As a result, under Edwards, the duly-recorded 11 Trustee’s Deed provides that Bank is the presumptive current 12 record owner with respect to the Property. 13 It follows then that Bank had an interest in debtors’ 14 property at the time of their petition. In re Bebensee–Wong, 15 248 B.R. at 823; see also In re Edwards, 454 B.R. at 106 (citing 16 4 Harry D. Miller and Marvin B. Starr, Cal. Real Estate § 10:208 17 (3d ed. 2009) (under California law, “[t]he purchaser at the 18 foreclosure sale receives title free and clear of any right, 19 title, or interest of the trustor or any grantee or successor of 20 the trustor.”). 21 As evidence of Bank’s lack of standing, debtors point to 22 numerous purported defects in the chain of title culminating in 23 24 25 8 26 Section 546(b) provides that a trustee may not avoid a postpetition transfer if applicable law allows perfection to 27 relate back to before the petition filing date. Section 362(b)(3) provides that any such act of perfection does 28 not violate the stay.

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1 Bank’s alleged wrongful foreclosure of their property.9 The 2 alleged defects included, among others, forgery by a notary on 3 some of the documents. Debtors also contend that they have 4 evidence that Fannie Mae and Freddie Mac “were the owners of 5 Appellants’ mortgage” and not Bank. However, resolution of 6 these contentions would have required the adjudication of the 7 parties’ underlying substantive rights, which was beyond the 8 scope of Bank’s relief from stay motion. In re Veal, 450 B.R. 9 at 914. In short, for purposes of the relief from stay motion, 10 debtors’ contentions regarding Bank’s underlying substantive 11 rights did not undermine or defeat Bank’s status as the holder 12 of a colorable claim.10 13 Based on these authorities and the record before us, we 14 conclude that Bank satisfied its threshold burden of showing a 15 colorable claim to an ownership interest in the property. 16 Accordingly, the bankruptcy court correctly found that Bank was 17 a real party in interest with standing to seek relief from the 18 automatic stay. 19 20 21 9 Based on the dismissal of debtors’ state court litigation, 22 Bank argues on appeal that collateral estoppel (or issue preclusion) precludes debtors from relitigating the propriety of 23 its foreclosure and thus its standing to seek relief from stay. Bank raised the issue in its opposition to debtors’ MFR, but the 24 bankruptcy court’s written decision denying debtors’ MFR did not mention issue preclusion. In light of our affirmance, we do not 25 discuss this issue for the first time in this appeal. 26 10 Indeed, the bankruptcy court stated in its written ruling 27 that in granting Bank relief from stay, it was not addressing debtors’ claims of wrongful foreclosure which they may be 28 eligible to assert in a different forum.

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1 B. Relief from Stay: “Cause” 2 On appeal, debtors contend that “cause” did not exist to 3 grant Bank from relief from stay. In support, debtors cite 4 Benedor Corp. v. Conejo Enter., Inc. (In re Conejo Enter., 5 Inc.), 96 F.3d 346, 349 (9th Cir. 1996) and Christensen v. 6 Tucson Estates, Inc. (In re Tucson Estates, Inc.), 912 F.2d 7 1162, 1166 (9th Cir. 1990). Debtors’ reliance on these cases is 8 misplaced. The “cause” for relief from stay in those cases was 9 related to abstention issues which were factually and legally 10 distinguishable from the “cause” analysis here. 11 “Cause” for relief from stay exists when a foreclosure sale 12 concludes and the purchaser records the deed in accordance with 13 applicable law because the original trustor or borrower no 14 longer has an interest or right in the subject real property. 15 In re Bebensee–Wong, 248 B.R. at 823. Accordingly, under these 16 circumstances, when debtors filed their petition, there was no 17 reason not to allow Bank to repossess “because filing a 18 bankruptcy petition after loss of ownership cannot reinstate the 19 debtor[s’] title.” In re Edwards, 454 B.R. at 106. Instead, 20 debtors are essentially “‘squatter[s],’ and thus cause for 21 relief from stay is established.” Id. 22 In sum, Bank acquired title to the property by submitting 23 the prevailing bid at a foreclosure sale and the Trustee’s Deed 24 which transferred title was recorded fifteen days later. Based 25 on these facts and on our review of Bank’s rights as a purchaser 26 at a foreclosure sale under California law, we find no abuse of 27 discretion in the bankruptcy court’s decision to grant Bank’s 28 motion for relief from stay so that it could pursue it rights to

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1 gain possession of the property. 2 C. Debtors’ Motion for Reconsideration 3 Debtors sought reconsideration from the order granting Bank 4 relief from stay pursuant to Civil Rule 60(b)(1) and (d)(3),11 5 applicable in contested matters under Rule 9024. Debtors’ MFR 6 simply reiterated that all of the foreclosure procedures were 7 fatally flawed, the Trustee’s Deed was defective and fatally 8 flawed, and Bank did not have standing to move for relief from 9 stay. However, as noted above, the resolution of debtors’ 10 contentions would have required the adjudication of the parties’ 11 underlying substantive rights, which was beyond the scope of 12 Bank’s relief from stay. In re Veal, 450 B.R. at 914. Further, 13 the bankruptcy court’s decision to grant Bank relief from stay 14 was consistent with applicable law and the facts before it. 15 A bankruptcy court has discretion in deciding whether to 16 reconsider its own orders under Civil Rule 60(b). However, the 17 grounds for granting such relief are not without limits; they 18 are clearly set forth within the rule. Debtors’ MFR did not 19 show “mistake, inadvertence, surprise, or excusable neglect” 20 within the meaning of Civil Rule 60(b)(1). Moreover, debtors 21 advanced no grounds that would warrant setting aside the 22 underlying order granting relief from stay to Bank due to fraud 23 on the court under Civil Rule 60(b)(3). Accordingly, we do not 24 see any abuse of discretion in the bankruptcy court’s decision 25 11 26 Civil Rule 60(b)(1) gives the bankruptcy court discretion “to relieve a party . . . from a final . . . order . . . based on 27 mistake, inadvertence, surprise, or excusable neglect.” Civil Rule 60(d)(3) makes clear that the bankruptcy court has the power 28 to “set aside a judgment for fraud on the court.”

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1 to deny debtors’ MFR. 2 D. Recusal of the Bankruptcy Judge Is Unwarranted 3 Debtors imply that the bankruptcy judge should be 4 disqualified because he showed bias toward them throughout this 5 case. Debtors did not file a motion for recusal in the 6 bankruptcy court. However, failure to move for recusal at the 7 trial court level does not preclude raising the issue of recusal 8 on appeal. Holland, 501 F.3d at 1122. 9 28 U.S.C. § 455 applies to bankruptcy judges. Seidel v. 10 Durkin (In re Goodwin), 194 B.R. 214, 221 (9th Cir. BAP 1996). 11 Under 28 U.S.C. § 455(a), a judge shall disqualify himself or 12 herself in any proceeding in which his or her impartiality might 13 reasonably be questioned. Under subsection (b)(1) of the 14 statute, a judge shall disqualify himself or herself where he or 15 she has a personal bias or prejudice against a party or personal 16 knowledge of disputed evidentiary facts concerning the 17 proceeding. 18 “Judicial impartiality is presumed.” First Interstate Bank 19 of Ariz., N.A. v. Murphy, Weir & Butler, 210 F.3d 983, 987 (9th 20 Cir. 2000). An objective standard is used for judging the 21 appearance of impartiality for purposes of recusal under 28 22 U.S.C. § 455: “whether a reasonable person with knowledge of all 23 the facts would conclude that the judge’s impartiality might 24 reasonably be questioned.” Seidel, 194 B.R. at 222. 25 Debtors had the burden on appeal to demonstrate that the 26 bankruptcy court had such a bias against them as to warrant 27 recusal. However, all that is before us are their general 28 conclusory allegations. We have reviewed the transcript and it

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1 reflects no bias. Reading between the lines, debtors’ 2 allegation of bias appear to stem solely from their 3 dissatisfaction with the judge’s rulings. “[J]udicial rulings 4 alone almost never constitute a valid basis for a bias or 5 partiality motion . . . . Almost invariably, they are proper 6 grounds for appeal, not for recusal.” Liteky v. United States, 7 510 U.S. 540, 555 (1994). 8 In sum, we find nothing in the record provided that would 9 cause us to question the bankruptcy judge’s impartiality or that 10 shows us that he had a personal bias or prejudice against the 11 debtors. Accordingly, there are no grounds for recusal. 12 E. Judicial Notice 13 On April 22, 2013, debtors filed a request for judicial 14 notice with the Panel which consisted of numerous documents. 15 None of these documents is relevant to the issues in this 16 appeal. Accordingly, debtors’ request for judicial notice is 17 denied. See Santa Monica Food Not Bombs v. City of Santa 18 Monica, 450 F.3d 1022, 1025 n.2 (9th Cir. 2006) (declining to 19 take judicial notice of documents that were not relevant to the 20 resolution of the appeal). 21 VI. CONCLUSION 22 For the reasons stated, we AFFIRM. 23 24 25 26 27 28

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