First Yorkshire Holdings, Inc. v. Pacifica L 22, LLC. (In Re First Yorkshire Holdings, Inc.)
470 B.R. 864
| 9th Cir. BAP | 2012Background
- First Yorkshire is a Delaware corporation formed to acquire and sell real property interests and held a junior lien on Southern California real property owned via Serron and Weissmann.
- Weissmann obtained a $1.32 million purchase-money loan from East West Bank in Jan 2009, secured by East West Bank's first deed of trust recorded Jan 30, 2009.
- Weissmann transferred the property to Serron in Sep 2009; Serron later conveyed back to Weissmann a 25% interest, making them co-owners.
- Serron executed two additional deeds of trust in Apr 2010: a $265,000 junior lien to First Yorkshire and a $245,000 lien to Durham Development, recorded Nov 2010.
- East West Bank’s interest was assigned to Pacifica L 22, LLC in Sep 2010; First Yorkshire filed for chapter 11 on Dec 23, 2010, shortly after FY’s Lien Interest was recorded.
- Pacifica sought relief from stay under 11 U.S.C. § 362(d)(2) and (d)(4) based on alleged lack of equity and potential debtor schemes.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the bankruptcy court abused discretion granting stay relief under § 362(d)(2). | First Yorkshire contends it has equity in the property and that FY’s Lien Interest is estate property; thus relief is improper. | Pacifica asserts there is no equity and the lien lacks protection; burden on debtor to prove equity; value methodology unclear. | vacate and remand for explicit equity and value findings under § 362(d)(2) |
| Whether the bankruptcy court abused discretion granting stay relief under § 362(d)(4). | First Yorkshire argues no scheme or improper transfers; due process concerns due to lack of findings. | Pacifica contends a scheme existed and relief necessary to address attempts to thwart foreclosure; seeks in rem relief. | vacate and remand to make explicit § 362(d)(4) findings supporting relief |
Key Cases Cited
- In re Sun Valley Newspapers, Inc., 171 B.R. 71 (9th Cir. BAP 1994) (defines equity as value minus encumbrances; property of estate includes liens held by debtor on third-party property)
- In re Cogar, 210 B.R. 803 (9th Cir. BAP 1997) (lien on third-party property is estate property but does not alter third-party lien priorities)
- In re Abdul Muhaimin, 343 B.R. 159 (Bankr. D. Md. 2006) (sets burden of proof for § 362(d)(4) elements; emphasizes importance of findings)
- In re A Partners, LLC, 344 B.R. 114 (Bankr. E.D. Cal. 2006) (equity and necessity to a reorganization under § 362(d)(2))
- Ameline, 409 F.3d 1073 (9th Cir. 2005) (requires precise FRCP 52(a) findings and separate conclusions of law on contested matters)