Nathaniel Lane v. the Bank of New York Mellon
959 F.3d 1226
| 9th Cir. | 2020Background
- Debtor Richard Lane filed Chapter 13, listing Sunnyvale real property subject to secured claims exceeding its value; he disputed the identity of the real party in interest for a large secured claim listed as Bank of America.
- The Bank of New York Mellon (BONY), trustee for a mortgage-backed trust, filed a proof of claim attaching the note (endorsed in blank) and deed of trust; Lane objected asserting BONY failed to prove it was the person entitled to enforce the note.
- BONY’s counsel did not respond; the bankruptcy court entered an order sustaining Lane’s objection and disallowing BONY’s claim. Lane completed his plan, received a discharge, and then sued in an adversary proceeding to have the deed of trust declared void under 11 U.S.C. § 506(d); he also sought attorneys’ fees under Cal. Civ. Code § 1717.
- The bankruptcy court granted summary judgment for Lane, voided the lien, and awarded fees; BONY’s later motion for reconsideration was denied.
- The Bankruptcy Appellate Panel reversed, holding § 506(d) does not void a lien when a proof of claim is disallowed because the filer failed to prove it was the person entitled to enforce the note; the Ninth Circuit affirmed the BAP and reversed the fee award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 506(d) authorizes voiding a lien when a proof of claim is disallowed because the claimant failed to prove it was the person entitled to enforce the note | Lane: disallowance of the claim eliminates the allowed secured claim, so § 506(d) voids the lien | BONY: disallowance on that ground means the claim belongs to someone else; the lien likely secures another party’s claim who did not file — § 506(d)(2) preserves that lien and voiding would affect an absent real party | Court: Affirmed BAP — § 506(d) does not void the lien because the bankruptcy court found BONY was not the person entitled to enforce and the lien, if any, secures a claim of a non‑filing third party protected by § 506(d)(2) |
| Whether the bankruptcy court’s award of attorneys’ fees should stand | Lane: prevailing party entitled to fees under California law | BONY: fee award improper given reversal issue | Court: Affirmed BAP’s reversal of the fee award |
Key Cases Cited
- In re Blendheim, 803 F.3d 477 (9th Cir. 2015) (held that when a claim is disallowed on grounds that the claim itself is invalid, § 506(d) can void the associated lien)
- Dewsnup v. Timm, 502 U.S. 410 (1992) (secured liens may pass through bankruptcy unaffected when creditor bypasses the case)
- Long v. Bullard, 117 U.S. 617 (1886) (historical principle that liens survive bankruptcy when creditor does not file a claim)
- Matter of Tarnow, 749 F.2d 464 (7th Cir. 1984) (explains § 506(d) purpose to void liens that secure invalid claims)
- Siegel v. Fed. Home Loan Mortg. Corp., 143 F.3d 525 (9th Cir. 1998) (claim-disallowance orders are final and have res judicata effect)