In re: Anibal Mesala Silva

I
                                                                               FILED
                                                                                 JUL 6 2021
                                                                            SUSAN M. SPRAUL, CLERK
                          NOT FOR PUBLICATION                                 U.S. BKCY. APP. PANEL
                                                                              OF THE NINTH CIRCUIT


           UNITED STATES BANKRUPTCY APPELLATE PANEL
                     OF THE NINTH CIRCUIT

In re:                                               BAP No. CC-20-1237-GTL
ANIBAL MESALA SILVA,
            Debtor.                                  Bk. No. 6:19-bk-10026-SY

ANIBAL MESALA SILVA,
                 Appellant,
v.                                   MEMORANDUM*
RIVERSIDE COUNTY TAX COLLECTOR;
MIDFIRST BANK, A Federally Chartered
Savings Association,
                 Appellees.

               Appeal from the United States Bankruptcy Court
                    for the Central District of California
                 Scott Ho Yun, Bankruptcy Judge, Presiding

Before: GAN, TAYLOR, and LAFFERTY, Bankruptcy Judges.

                                 INTRODUCTION

       Chapter 131 debtor Anibal Silva (“Debtor”) appeals the bankruptcy

court’s orders: (1) denying his motion for sanctions against the Riverside

       *
         This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
       1 Unless specified otherwise, all chapter and section references are to the

Bankruptcy Code, 11 U.S.C. §§ 101–1532, all “Rule” references are to the Federal Rules
of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of
County Tax Collector (“Riverside County”) and Midland Mortgage, a

division of appellant MidFirst Bank2 (“MidFirst”) and servicer of the loan;

(2) sustaining MidFirst’s evidentiary objections; and (3) denying his motion

to vacate the order denying the motion for sanctions. Debtor argued that

Midland Mortgage willfully violated the automatic stay by paying

$2,093.57 to Riverside County from an escrow impound account

established by the deed of trust (“Escrow Account”) and Riverside County

willfully violated the stay by accepting the payment.

      We agree with the bankruptcy court that the Escrow Account funds

were not property of the estate and MidFirst had authority, as holder of the

note and assignee of the deed of trust, to pay Debtor’s tax obligation

pursuant to the terms of the loan documents. As to the amended motion to

vacate, Debtor did not provide transcripts of the hearing and we are unable

to review the basis of the court’s orders without the transcripts. We

AFFIRM.




Civil Procedure.
        2 Debtor argues that Midland Mortgage is the correct party to this appeal, and he

filed a motion requesting that we correct the record to name Midland Mortgage as
appellee and prohibit MidFirst Bank from acting on behalf of Midland Mortgage.
MidFirst presented evidence to the bankruptcy court demonstrating that it is the
secured creditor and servicer of Debtor’s loan through its servicing division, Midland
Mortgage. Additionally, Debtor made this argument to the bankruptcy court but failed
to provide a transcript of the court’s ruling. We deny Debtor’s motion.
                                            2
                                       FACTS 3

A.    The Bankruptcy Case And Confirmation Of The Plan

      In January 2019, Debtor filed his chapter 13 petition and plan. He

proposed to pay Riverside County’s claim of $2,093.57 as a priority claim

under Class 1. Debtor included Midland Mortgage as a Class 2 secured

creditor and proposed to cure its arrearage claim of $5,200 while making

regular postpetition payments outside of the plan. Although his regular

postpetition mortgage payments were $1,729.36, which included amounts

for taxes and insurance, Debtor proposed non-standard plan provisions to

allow postpetition payments of principal and interest in the amount of

$1,310 per month and a requirement that Debtor separately pay insurance

and taxes.

      After Debtor filed his plan, MidFirst filed its proof of claim and

attached the note, deed of trust, and assignments. MidFirst’s claim

evidenced arrears of $5,320.58, comprised of $3,917.04 for principal and

interest, $56 for prepetition fees, and $1,752.01 for a projected escrow

shortage. MidFirst attached an escrow account analysis which showed a


      3 Debtor filed a motion, pursuant to Rules 8013(a) and 8009(e)(3), to modify his
designation of the record to add new evidence which was filed on March 15, 2021 in
adversary proceeding 6:20-ap-1142. We decline to consider evidence that was
unavailable to the bankruptcy court at the time it entered the orders on appeal and
therefore deny Debtor’s motion. See Morrison v. Hall, 

261 F.3d 896

, 900 n.4 (9th Cir.
2001). We also decline to consider documents attached to Debtor’s Reply Briefs which
were not designated as part of the record and which were not before the bankruptcy
court. However, we exercise our discretion to take judicial notice of relevant documents
electronically filed in Debtor’s bankruptcy case. Atwood v. Chase Manhattan Mortg. Co.
                                           3
balance of $1,238.69 on the petition date. Riverside County also filed a

proof of claim of $2,093.57 for prepetition property taxes.

       Debtor objected to Riverside County’s claim and argued that his

assessed property tax for fiscal year 2018 was $4,187.14, payable in two

installments of $2,093.57. Debtor contended that the first installment was

paid prepetition and, because the second was not due until April 2019,

Riverside County did not have a prepetition claim.

       On March 5, 2019, the bankruptcy court held a hearing on

confirmation of Debtor’s chapter 13 plan. The court continued the hearing

to March 19, 2019 to coincide with Debtor’s objection to Riverside County’s

claim and advised Debtor that it would not confirm a plan with non-

standard provisions.

       At the continued hearing, the bankruptcy court overruled Debtor’s

objection to Riverside County’s claim. The court stated that the tax was an

ad valorem secured claim, and it agreed with Riverside County that,

although the second installment could be paid by April 2019 without a

penalty, the entire amount of the tax was assessed on January 1, 2018 and

was therefore a prepetition claim.

       The chapter 13 trustee stated that he would support confirmation if

Debtor agreed to reclassify the Riverside County claim as a Class 2 secured

claim and remove the non-standard provisions. Debtor agreed to the



(In re Atwood), 

293 B.R. 227

, 233 n.9 (9th Cir. BAP 2003).
                                             4
modifications, and the court entered the order confirming the plan on April

10, 2019.

      On March 28, 2019, prior to entry of the confirmation order, MidFirst

disbursed $2,093.57 to Riverside County for payment of the second

installment of the 2018-2019 property taxes.

B.    Debtor’s Motion For Sanctions

      In September 2020, Debtor filed a motion for sanctions under

§§ 362(k) and 105(a) against Riverside County and Midland Mortgage,

alleging that payment of the tax obligation on March 28, 2019 was a willful

violation of the automatic stay. He argued that failure to return the funds

constituted a violation of the terms of the confirmed plan under § 1327(a)

because the plan provided for payment of Riverside County’s prepetition

claim from plan payments.

      Riverside County opposed the motion and argued that MidFirst’s

payment of property taxes to protect its security interest was not an act to

create, perfect, or enforce a lien, and therefore was not a stay violation.

Additionally, Riverside County maintained that it took no action to collect

the tax and merely received and applied the payment, which could not

support liability for a stay violation under the holding of Zotow v. Johnson

(In re Zotow), 

432 B.R. 252

 (9th Cir. BAP 2010). Riverside withdrew its proof

of claim and stated that it returned the monthly distributions it received

under the plan to the chapter 13 trustee.



                                       5
      MidFirst opposed the motion and argued that the Escrow Account

was established at the time of the loan origination and under the loan

documents MidFirst had a contractual obligation to apply funds to pay

escrow items, including property taxes. MidFirst argued that the funds in

the Escrow Account were not property of the estate and any interest that

Debtor had in the funds was contingent upon payment of all sums secured

by the deed of trust. And MidFirst asserted that Debtor’s confirmed plan

did not modify the contractual payments, which included amounts for

taxes. MidFirst contended that it acted in good faith according to its

contractual arrangement with Debtor and the payment to Riverside County

was not prohibited by the confirmation order.

      Debtor replied and argued that MidFirst did not prove its connection

to Midland Mortgage, which was the party who allegedly violated the stay.

He requested that the court strike MidFirst’s opposition and deem

admitted the allegations against Midland Mortgage.

      The bankruptcy court issued a tentative ruling denying Debtor’s

motion for sanctions but requiring appearances at the hearing. Two days

before the scheduled hearing, Debtor filed a notice that he would not

attend. He stated that he did not believe he could change the court’s

position, and he asserted that based on the court’s other rulings in the case

he was not being treated fairly and equally under the law.

      On September 29, 2020, the bankruptcy court conducted the hearing

and denied Debtor’s motion for sanctions. The court determined that

                                      6
Debtor failed to comply with several procedural requirements in filing and

noticing the motion but denied it on substantive grounds as well.4 The

court held that the funds in the Escrow Account were not property of the

estate and MidFirst did not violate § 362(a) by paying Riverside County. It

also held that Riverside County did not violate the stay by accepting the

payment. The court entered its order denying Debtor’s motion on October

7, 2020.

C.    Debtor’s Motion To Vacate

      On October 7, 2020, Debtor filed a motion to vacate the order denying

his motion for sanctions pursuant to Civil Rules 59(e) and 60(b), made

applicable by Rules 9023 and 9024. In November 2020, he filed an amended

motion to vacate. He argued that he was deprived of due process because

the court was biased against him and should have recused itself. Debtor

also argued that the court erred by refusing to strike MidFirst’s opposition

and by determining that the Escrow Account funds were not property of

the estate. Debtor attached several documents purporting to show that

MidFirst did not hold a valid interest in the note or deed of trust and that

Riverside County should not have been permitted to withdraw its claim.

      Riverside County opposed the motion on the grounds that Debtor

did not present any newly discovered evidence or show that the court

committed a clear error of law. MidFirst also opposed the motion and


      4
       Because we affirm the court’s denial of the motion on substantive grounds, we
need not address the procedural bases for the court’s decision.
                                          7
argued that Debtor had ample opportunity to be heard on the sanctions

motion but chose to submit the matter without argument.

      MidFirst maintained that it was the real party in interest and cited the

declaration it supplied with its opposition to the motion for sanctions, in

which it stated that Debtor’s loan was serviced by MidFirst through its

servicing division, Midland Mortgage. Finally, MidFirst disputed Debtor’s

contention that it lacked standing to enforce the note and deed of trust but

noted that Debtor acknowledged that MidFirst’s standing was not related

to the sanctions motion.

      MidFirst filed an objection to Debtor’s evidence attached to his

amended motion to vacate on the basis that the evidence was inadmissible

hearsay that did not relate or pertain to Debtor’s loan obligation with

MidFirst or the subject of Debtor’s motion to vacate. Debtor did not

respond to the evidentiary objection.

      The bankruptcy court issued a tentative ruling stating its intent to

deny the amended motion to vacate and requiring the parties to appear at

the hearing on December 15, 2020. One day prior to the hearing, Debtor

filed an objection to the bankruptcy court’s tentative ruling and asserted

that oral argument was unnecessary since the court already denied the

requested relief.

      Debtor did not appear at the hearing. On January 6, 2021, the

bankruptcy court entered orders sustaining MidFirst’s evidentiary



                                        8
objections and denying Debtor’s amended motion to vacate for the reasons

stated on the record. Debtor timely appealed.

                               JURISDICTION

      The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.

                                    ISSUES

      Did the bankruptcy court err by denying Debtor’s motion for

sanctions?

      Did the bankruptcy court abuse its discretion by sustaining

MidFirst’s evidentiary objections and denying Debtor’s amended motion to

vacate?

                         STANDARDS OF REVIEW

      We review de novo whether a creditor has violated the automatic

stay. In re Zotow, 

432 B.R. at 257

. Under de novo review, we “consider a

matter anew, as if no decision had been made previously.” Francis v.

Wallace (In re Francis), 

505 B.R. 914

, 917 (9th Cir. BAP 2014).

      We review evidentiary objections for abuse of discretion. United

States v. Parks, 

285 F.3d 1133

, 1138 (9th Cir. 2002). We also review a

bankruptcy court’s denial of relief under Civil Rules 59 and 60 for abuse of

discretion. Carruth v. Eutsler (In re Eutsler), 

585 B.R. 231

, 235 (9th Cir. BAP

2017).

      A bankruptcy court abuses its discretion if it applies an incorrect

legal standard or its factual findings are illogical, implausible, or without

                                        9
support in the record. TrafficSchool.com, Inc. v. Edriver, Inc., 

653 F.3d 820

, 832

(9th Cir. 2011).

                                DISCUSSION

      Debtor argues that MidFirst and Riverside County willfully violated

the automatic stay and the binding obligations of the confirmed plan by

paying the tax obligation from the Escrow Account funds and by accepting

the payment. He also argues that the court abused its discretion by denying

the motion to vacate because he was deprived of a fair hearing, there was

insufficient evidence to justify denial of his motion for sanctions, and the

court made errors of law. Debtor provides no argument in his opening

brief that the court erred by sustaining MidFirst’s evidentiary objections

and he has therefore waived the issue. See Smith v. Marsh, 

194 F.3d 1045

,

1052 (9th Cir. 1999).

      Moreover, Debtor has not provided a sufficient record to permit an

informed review of the orders he appeals.

A.    We Have Discretion To Summarily Affirm Orders For Which
      Debtor Did Not Provide An Adequate Record For Review.

      The orders on appeal do not contain the bankruptcy court’s factual

findings or legal conclusions. Instead, they incorporate the findings and

conclusions made on the record at the September 29, 2020 and December

15, 2020 hearings.

      An appellant’s failure to provide necessary transcripts is cause to

dismiss or summarily affirm the appeal. Hall v. Whitley, 

935 F.2d 164

, 165

                                       10
(9th Cir. 1991); Kyle v. Dye (In re Kyle), 

317 B.R. 390

, 393 (9th Cir. BAP 2004).

We have discretion to disregard such a failure and decide the appeal on the

merits if, after reviewing the record, we determine that an informed review

is possible. In re Kyle, 

317 B.R. at 393

.

      Notwithstanding Debtor’s failure to include the September 29, 2020

transcript, we exercise our discretion to consider the merits of Debtor’s

appeal of the court’s order denying his motion for sanctions. An informed

review is possible because the transcript is on the bankruptcy court’s

docket, MidFirst designated it as part of the record on appeal, and MidFirst

included it in its excerpts of record.

      But the transcript of the December 15, 2020 hearing was not included

in any party’s excerpts of record, and it does not appear on the bankruptcy

court’s docket. The basis of the bankruptcy court’s decision to deny

Debtor’s amended motion to vacate and to sustain MidFirst’s evidentiary

objections was made orally on the record at the December 15, 2020 hearing

and incorporated into its written orders. We cannot determine whether the

court abused its discretion without reviewing the basis of the court’s

decision, and we are unable to do so without the transcript.

      Consequently, we summarily affirm the bankruptcy court’s orders

denying the amended motion to vacate and sustaining MidFirst’s

evidentiary objections.




                                            11
B.    The Bankruptcy Court Did Not Err By Denying Debtor’s Motion
      For Sanctions.

      Debtor takes the position that payment of prepetition taxes from the

Escrow Account constitutes a willful violation of the stay by MidFirst and

Riverside County and is a violation of the binding terms of the plan.

Because Debtor has a remedy for the alleged stay violation under § 362(k),

no additional remedy is available under § 105(a). Snowden v. Check Into Cash

of Wash. Inc. (In re Snowden), 

769 F.3d 651

, 661 (9th Cir. 2014) (citing Adler v.

Roman (In re Roman), 

283 B.R. 1

, 14-15 (9th Cir. BAP 2002)). And, because

the alleged violation occurred prior to confirmation of the plan, it cannot be

a violation of the confirmed plan under § 1327(a).

      A claim under § 362(k) requires a showing that an individual debtor

was injured by a willful violation of the stay. Fernandez v. G.E. Cap. Mortg.

Servs. (In re Fernandez), 

227 B.R. 174

, 180 (9th Cir. BAP 1998). Debtor has the

burden on each of these elements. 

Id. at 181

. The payment does not

constitute a violation of the stay if, as the bankruptcy court held, the funds

in the Escrow Account were not property of the estate. Debtor offers no

argument why the funds were estate property and instead attempts to shift

the burden by arguing that the creditors failed to present evidence that the

funds were not property of the estate.

      Whether an interest claimed by Debtor is “property of the estate”

under § 541(a) is a question of federal law, but bankruptcy courts must

look to state law to determine “whether and to what extent the debtor has

                                       12
any legal or equitable interests in property” as of the petition date.

McCarthy, Johnson & Miller v. N. Bay Plumbing, Inc. (In re Pettit), 

217 F.3d

1072

, 1078 (9th Cir. 2000).

      The deed of trust provides that, in addition to principal and interest

payments, Debtor shall pay a sum to provide for payment of taxes,

insurance premiums, and other items related to the property. It specifies

that the lender may collect and hold such funds in an amount not to exceed

the maximum allowed under the Real Estate Settlement Procedures Act, 12

U.S.C. §§ 1201-2617 (“RESPA”), and provides that if there is a surplus of

such funds the lender shall account to Debtor as required by RESPA. The

deed of trust also requires the lender to refund any funds held by lender

only upon payment in full of all sums secured by the deed of trust.

      The deed of trust is consistent with California law, which permits a

lender to require an impound, trust, or other account as a condition of a

loan secured by a deed of trust where, as in this case, the loan is

guaranteed or insured by a state or federal governmental agency. Cal. Civ.

Code § 2954. California law limits the amount a lender can require a

borrower to pay into such account to the amount permitted by RESPA5 and


      5  12 U.S.C. § 2609(a) provides:
        A lender, in connection with a federally related mortgage loan, may not require
the borrower or prospective borrower-
...
        (2) to deposit in any such escrow account in any month beginning with the first
full installment payment under the mortgage a sum (for the purpose of assuring
payment of taxes, insurance premiums and other charges with respect to the property)
                                           13
requires a lender to refund excess amounts within 30 days. Cal. Civ. Code

§ 2954.1.

      Debtor’s interest in the Escrow Account funds was contingent on the

account having a surplus on the petition date. But Debtor acknowledges

that the Escrow Account was deficient on the petition date. He scheduled

the debt and proposed payments under the plan to cure the arrearage to

MidFirst, which included an Escrow Account shortage of $1,752.01.

      Debtor did not have a right to refund of any of the Escrow Account

funds on the petition date under the deed of trust or California law. As a

result, the funds in the Escrow Account on the petition date were not

property of the estate and MidFirst’s payment of the taxes did not violate

the automatic stay.

       Riverside County similarly did not violate the stay because it merely

accepted payment from MidFirst and did nothing to enforce its lien or

collect a prepetition debt from Debtor. See In re Zotow, 

432 B.R. at 260

.




in excess of the sum of (A) one-twelfth of the total amount of the estimated taxes,
insurance premiums and other charges which are reasonably anticipated to be paid on
dates during the ensuing twelve months which dates are in accordance with the normal
lending practice of the lender and local custom, provided that the selection of each such
date constitutes prudent lending practice, plus (B) such amount as is necessary to
maintain an additional balance in such escrow account not to exceed one-sixth of the
estimated total amount of such taxes, insurance premiums and other charges to be paid
on dates, as provided above, during the ensuing twelve-month period: Provided,
however, That in the event the lender determines there will be or is a deficiency he shall
not be prohibited from requiring additional monthly deposits in such escrow account to
avoid or eliminate such deficiency.
                                            14
                              CONCLUSION

     Based on the foregoing, we AFFIRM the bankruptcy court’s orders

denying Debtor’s motion for sanctions, denying Debtor’s amended motion

to vacate, and sustaining MidFirst’s evidentiary objections.




                                     15

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