In re Blas

614 B.R. 334

IN RE: Leo BLAS, Debtor.

Case No. 17-00411 GS

United States Bankruptcy Court, D. Alaska.

Signed December 17, 2019

Leo Blas, Chugiak, AK, Debtor pro se.

Kathryn Perkins, Seattle, WA, for Office of the U.S. Trustee

MEMORANDUM DECISION ON MOTION FOR RELIEF FROM THE AUTOMATIC STAY

GARY SPRAKER, United States Bankruptcy Judge

For over five years, debtor Leo Blas has challenged the efforts of creditor Bank of America, N.A. (BANA) to pursue its state court remedies with regard to Mr. Blas's real property located at 24245 Temple Drive, Chugiak, AK 99567 (Property). In yet another effort to pursue those remedies, BANA has filed a motion for relief from the automatic stay as to the Property, based on Mr. Blas's alleged bad faith in filing this bankruptcy case. For the reasons set forth below, the court will enter an order granting BANA's motion for relief from the automatic stay.

I. FACTS

As stated in the court's Memorandum Decision on Debtor's Objection to Proof of Claim 3-1,¹ the state court history between the parties is well established by the briefs on file with the court. The brief discussion of that history contained in that decision is incorporated herein by this reference, with additional details pertinent to the underlying motion as follows.

A. The Settlement Agreement Between the Parties

After the Alaska Supreme Court issued its decision² affirming the Alaska Superior Court's grant of summary judgment in case number 3AN-14-04595CI,³ Mr. Blas entered into a settlement agreement with BANA (Settlement Agreement). The confidential Settlement Agreement was filed with the court in this case, and the court has reviewed that document.⁴ For purposes of this decision, the pertinent portions of the Settlement Agreement are as follows:

1. In exchange for a monetary sum and approximately six additional weeks in the Property,⁵ Mr. Blas agreed to vacate the Property, with BANA to have "the unqualified right to enforce its right of possession."

2. As of the date Mr. Blas agreed to vacate the Property, he was deemed to be a trespasser on the Property.

3. BANA was entitled to obtain a Writ of Eviction/Restitution if Mr. Blas remained on the Property after the agreed date of departure, and Mr. Blas agreed to waive his rights to contest the issuance or enforcement of any such writ.

4. Mr. Blas acknowledged that he had defaulted under the terms of the loan documents, and consented to BANA's non-judicial foreclosure. Pursuant to the Settlement Agreement, Mr. Blas "expressly waives any and all rights and defenses he may have to challenge or contest said foreclosure, including, but not limited to, any claims or defenses contesting his default under the [loan documents] or contesting the validity of the foreclosure process or sale." [Emphasis added.]

5. Mr. Blas agreed to dismiss Alaska Superior Court case number 3AN-14-04595CI.

Both Mr. Blas and a representative of BANA signed the Settlement Agreement.

Mr. Blas vacated the Property in June 2017, but according to his own testimony, returned approximately one week later because the Settlement Agreement did not expressly provide that he could not return to the Property after vacating.⁶

B. Second State Court Lawsuit

Thereafter, on September 12, 2017, Mr. Blas commenced Alaska Superior Court case number 3AN-17-09098CI against BANA.⁷ His complaint included a request for issuance of a temporary restraining order to halt BANA's scheduled nonjudicial foreclosure sale. On November 30, 2017, the Superior Court issued its order denying the request for a temporary restraining order, ruling that BANA's foreclosure sale could proceed as scheduled.⁸

In March of 2019, the Alaska Superior Court granted BANA's motion for summary judgment, based in part on its finding that Mr. Blas's current challenges to Bank of America's foreclosure were precluded by the doctrine of res judicata.⁹ Blas appealed that decision to the Alaska Supreme Court. On October 9, 2019, the Alaska Supreme Court affirmed the Superior Court's decision.¹⁰ In that decision, the Supreme Court reiterated once again that " ‘Bank of America ha[s] authority to bring a foreclosure action against Blas.’ "¹¹ It further addressed Mr. Blas's argument that Fannie Mae has standing to foreclose on the note, stating that "even if Fannie Mae somehow were involved, current federal authority suggests that Fannie Mae should not be considered a state actor in foreclosure proceedings."¹²

C. Mr. Blas's Bankruptcy Case

Mr. Blas filed this bankruptcy case on the same day that the Superior Court denied his request to enjoin BANA's foreclosure of the Property. On June 12, 2018, BANA filed its Motion for Relief from Stay (Motion).¹³ BANA seeks relief from the automatic stay under § 362(d)(1), alleging that Mr. Blas has proceeded with bad faith in his dealings with BANA. Primarily, BANA contends that Mr. Blas entered into a settlement agreement with BANA pursuant to which he received cash payments in exchange for: (1) vacating the Property; and (2) agreeing not to contest BANA's nonjudicial foreclosure of the Property.¹⁴ BANA alleges that Mr. Blas signed that agreement and accepted the funds tendered pursuant to that agreement, but returned to the Property after vacating for only a brief period and continued to contest BANA's efforts to foreclose.

On June 21, 2018, Mr. Blas filed his opposition to the Motion (Opposition).¹⁵ Mr. Blas's nineteen-page Opposition raises multiple arguments, which the court has attempted to summarize as follows: (1) BANA lacks standing to pursue relief from the automatic stay; (2) BANA has not demonstrated that cause exists to lift the automatic stay in this case; (3) the dollar figures set forth in the Motion are inaccurate; (4) the loan in question was rescinded under TILA; (5) underlying state court litigation is ongoing; and (6) various evidentiary objections. Mr. Blas did not challenge BANA's allegations regarding his noncompliance with the Settlement Agreement. BANA did not file a reply brief.

On July 6, 2018, the court held its preliminary hearing on the Motion. Following the preliminary hearing on the Motion, on July 6, 2018, the court issued its order¹⁶ setting a final hearing on BANA's motion for relief from the automatic stay for August 1, 2018, to be heard together with an evidentiary hearing on Mr. Blas's objection to BANA's proof of claim. Pursuant to that order, the court set deadlines for both parties to file witness and exhibit lists. On July 24, 2018, Mr. Blas filed his witness and exhibit list,¹⁷ including a "certified forensic document examiner" by the name of Roland Emmons, who was to appear at the final hearing by telephone. BANA filed its exhibit and witness lists on July 25, 2018.¹⁸

At the hearing on August 29, 2018, BANA's representative presented a document that the court accepted as the original promissory note signed by the debtor in February 2008.¹⁹ The evidentiary hearing was continued to September 13, 2018 to specifically address the parties' arguments and evidence regarding the Motion. At the September 13, 2018 hearing, BANA presented a witness to authenticate the Settlement Agreement, and Mr. Blas also testified. Mr. Blas did not present any witnesses.

Subsequent to the evidentiary hearings, on September 17, 2018, Mr. Blas filed his Motion for Mediation Assistance Per Hearing on September 14, 2018 (Mediation Motion).²⁰ On November 13, 2018, the court entered its Order Regarding Request for Mediation and Staying Pending Matters Between Debtor and Bank of America, N.A. (Order Staying Proceedings)²¹ which stayed all matters in Mr. Blas's bankruptcy case and related adversaries, including all proceedings in the main bankruptcy case, with the sole exception of the chapter 13 trustee's motion to dismiss (Motion to Dismiss).²² Since the entry of the Order Staying Proceedings, two separate unsuccessful settlement conferences have been conducted in this case by the Hon. Trish Brown.²³ Additionally, in response to the Motion to Dismiss, on February 13, 2019 Mr. Blas converted his case to one under chapter 7.²⁴ On May 31, 2019, the Office of the Clerk entered Mr. Blas's chapter 7 discharge.²⁵

At a status conference held on June 5, 2019, the court confirmed on the record that the only matter which remains stayed under the Order Staying Proceedings is adversary proceeding Blas v. Bank of America, N.A. , 18-90028-GS. Also at that status conference, the chapter 7 trustee confirmed his knowledge of the Motion, and his non-opposition thereto.

II. ANALYSIS

A. Summary Nature of Stay Relief Proceedings

Mr. Blas has presented multiple arguments which the court interprets as an attempt to argue the merits of BANA's foreclosure rights regarding the Property. "A proceeding to determine eligibility for relief from a stay only determines whether a creditor should be released from the stay in order to argue the merits in a separate proceeding. Given the limited nature of the relief obtained through this proceeding and because final adjudication of the parties' rights and liabilities is yet to occur, a party seeking stay relief need only establish that it has a colorable claim to the property at issue."²⁶ It is not lost on the court that this matter has now effectively outlasted the bankruptcy itself. Upon conversion of the case to chapter 7, the only potential asset of the estate was the Property itself. Upon the failure of the settlement conferences, the chapter 7 trustee has given notice that the bankruptcy has no assets and is ready to be closed, which together with the discharge, would effectively terminate the automatic stay.

B. Mr. Blas's Challenges to BANA's Standing to File the Motion

To be blunt, the Alaska Supreme Court's decisions establish that BANA is entitled to pursue foreclosure of the Property based upon its interests in the note and deed of trust. This alone establishes BANA's standing as a creditor and to seek relief from stay.²⁷ While it is tempting to end the analysis there, Mr. Blas continues to make...