In re: Marisela Dangcil
CC-16-1185-FCTa
| 9th Cir. BAP | Mar 21, 2017Background
- Debtor Marisela Dangcil was on title to a Brea, CA residential property; the promissory note was in Victor Chavez’s name and later assigned to JPMorgan Chase Bank, N.A. (Chase).
- Dangcil stopped making mortgage payments for about eight years, producing a large arrearage and an increased loan balance (Chase claimed ~$1.29M owed; property valuations ranged from ~$531k to ~$892k).
- Chase moved for relief from the automatic stay under 11 U.S.C. § 362(d)(1), (2), and (4), alleging lack of adequate protection, no equity/need for reorganization, and that the bankruptcy filing was part of a scheme to hinder creditors.
- The bankruptcy court held hearings, admitted supplemental valuations, and granted relief from stay; its written order checked boxes for § 362(d)(1), (2), and (4) but did not explain any § 362(d)(4) basis.
- Dangcil appealed, arguing lack of due process (improper service), that a loan modification existed and provided equity/adequate protection, and challenging the § 362(d)(4) finding.
Issues
| Issue | Dangcil's Argument | Chase's Argument | Held |
|---|---|---|---|
| Did failure to properly serve papers deny Dangcil due process? | Chase failed to serve her with motion/supplemental appraisal, so she lacked notice and opportunity to respond. | Dangcil had actual notice, responded, and appeared at hearings; she waived procedural objection by not raising it below. | Court: No due process violation (waived and no prejudice). |
| Was there "cause" under § 362(d)(1) (lack of adequate protection)? | Dangcil asserted equity existed and a loan modification would protect Chase. | Loan balance (including accrued interest/advances) exceeded property value; debtor missed ~94 payments over 8 years. | Court: Relief under § 362(d)(1) proper — lack of adequate protection and persistent nonpayment constitute cause. |
| Did an alleged loan modification bar stay relief? | Dangcil contended parties had agreed to a modification, which would create equity. | No executed modification or proof of assent; draft terms would have increased principal, not reduced it. | Court: No enforceable modification shown; it would not have created equity; argument rejected. |
| Was § 362(d)(4) relief supported (scheme to hinder/defraud)? | Dangcil challenged imposition of § 362(d)(4) relief. | Chase pleaded § 362(d)(4) in motion and relied on borrower statements. | Court: Inclusion of § 362(d)(4) was unsupported by the record/oral ruling; reversed as to § 362(d)(4) only; other relief affirmed. |
Key Cases Cited
- Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 306 (1950) (due-process notice standard: notice reasonably calculated to apprise interested parties)
- In re Rosson, 545 F.3d 764 (9th Cir. 2008) (procedural defects require showing of prejudice)
- HSBC Bank USA v. Blendheim, 803 F.3d 477 (9th Cir. 2015) (notice and hearing standard reviewed as mixed question)
- United States v. Hinkson, 585 F.3d 1247 (9th Cir. 2009) (two-part abuse-of-discretion review: legal standard de novo; factual findings for clear error)
- MacDonald v. MacDonald (In re MacDonald), 755 F.2d 715 (9th Cir. 1985) (no fixed definition of "cause" under § 362(d)(1); case-by-case inquiry)
- Price v. Delaware State Police Fed. Credit Union, 370 F.3d 362 (3d Cir. 2004) (persistent failure to make payments can constitute cause for stay relief)