Worcester, In re, 84-5993

Citation811 F.2d 1224
Decision Date07 May 1987
Docket NumberNo. 84-5993,84-5993
Parties16 Collier Bankr.Cas.2d 589, 7 Fed.R.Serv.3d 733, Bankr. L. Rep. P 71,637 In re Norma E. WORCESTER, Debtor. Irving ROSNER and William Little, Plaintiffs-Appellees, v. Norma E. WORCESTER, Defendant-Appellant. Norma E. WORCESTER, Counter-Claimant, v. Irving ROSNER, et al., Counter-Defendants.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

Kathleen Courts, Oakland, Cal., for defendant-appellant.

Alfred Fadel, Los Angeles, Cal., for plaintiff-appellee Rosner.

Leon L. Vickman, Encino, Cal., for plaintiff-appellee Little.

Appeal from the United States District Court for the Central District of California.

Before BOOCHEVER, NORRIS and HALL, Circuit Judges.

CYNTHIA HOLCOMB HALL, Circuit Judge:

Norma E. Worcester appeals from the decision of the district court validating a California foreclosure sale of her residence and reversing a decision of the bankruptcy court. The district court held that Worcester failed to satisfy certain requirements under California law necessary to set aside a foreclosure action. Specifically, the district court held that California law required Worcester to tender payment of the amount necessary to redeem the deed of trust at the time she filed suit to set aside the foreclosure sale, and the court determined that she had failed to satisfy this requirement. The district court also concluded that Worcester did not demonstrate that any misdescription of the subject property resulted in prejudice to Worcester's interests at the foreclosure sale as mandated by the law of California.

We reverse and remand to the district court.

I

On October 6, 1977, Worcester entered into three loan agreements with National Mortgage Security Company (National Mortgage). The loans in the amounts of $20,000, $11,000, and $1,800 were secured by deeds of trust on Worcester's residence and its four-acre lot. While Worcester claims that she specifically negotiated with National Mortgage for fully amortized loans, the loan agreements Worcester signed provided for balloon payments after three years.

In 1980, the balloon payments fell due and Worcester was unable to make them. National Mortgage rejected the partial payments Worcester sent to them, and Worcester and National Mortgage failed to reach any agreement on refinancing the amount owed. In June 1981, Worcester filed suit against National Mortgage, Trust Deed Diversified Services (Trust Services), and their employees, alleging fraud and breach of fiduciary duty for arranging loans for her that included balloon payments.

Worcester owned a forty-acre parcel of unimproved land adjacent to the four-acre plot containing her residence. The deeds of trust securing Worcester's loans only encumbered the four-acre plot containing the house. Yet, when Trust Services filed their Notice of Trustee's Sale, the notice appeared to refer to land in addition to the four-acre parcel containing Worcester's house. The notice referred to two parcels, Parcel 1 and Parcel 2. The description under the words "Parcel 1" accurately described the four-acre lot surrounding Worcester's residence. Under "Parcel 2" the notice read:

THE SOUTHWEST CORNER OF THE NORTHWEST QUARTER OF SECTION 2, TOWNSHIP ONE SOUTH, RANGE 17 WEST, SAN BERNARDINO MERIDIAN, ACCORDING TO THE OFFICIAL PLAT OF THE SURVEY OF SAID LAND ON FILE IN THE BUREAU OF LAND MANAGEMENT. EXCEPT THEREFROM ONE-HALF OF ALL OIL RIGHTS, AS RESERVED BY IDA MABEL MCCLAIN IN DEED RECORDED MAY 21, 1947 IN BOOK 24548 PAGE 440, OFFICIAL RECORDS.

AND EXCEPTING THEREFROM A 25 PERCENT ROYALTY OF AND THE RIGHTS TO ALL OIL, GAS OR OTHER HYDROCARBONS OR THE PROCEEDS THEREOF, WHICH MAY BE PRODUCED FROM SAID PREMISES, AS SAID 25 PERCENT ROYALTY INTEREST IS RESERVED IN DEED RECORDED OCTOBER 2, 1951 AS INSTRUMENT NO. 19523, IN BOOK 37329 PAGE 145, OF OFFICIAL RECORDS, SUCH RESERVATION BEING IN FAVOR OF TERESA PASQUARO.

The parties agree that if the description had stated the "Southwest Quarter" as opposed to the "Southwest Corner" it would accurately describe the 40-acre parcel.

The foreclosure sale was held on February 5, 1982. The minimum bid price was set at $14,026.53. Irving Rosner purchased the property for $14,975. There were only two bidders at the auction. On February 12, 1982, Rosner filed an unlawful detainer action against Worcester, and she answered on February 23. On February 22, 1982, Rosner sold the property to William Little for $130,000. An appraiser testified before the bankruptcy court that the parcel was worth $240,000. In Re Worcester, 28 B.R. 910, 913 & n. 3 (Bankr.C.D.Cal.1983).

On March 12, 1982, Worcester filed a Chapter 13 bankruptcy petition, and on March 23, 1982, Rosner and Little filed with the bankruptcy court a complaint to vacate the automatic stay. Worcester answered this complaint on April 14 and counterclaimed to set aside the trustee's sale, naming as counterdefendants, Rosner, Little, the lender, the mortgage brokers, and the trustee.

On June 3, 1982, the bankruptcy court granted Worcester's motion for judgment as to title to her 40-acre parcel, and on April 8, 1983, the bankruptcy court ordered the foreclosure sale on the four-acre parcel set aside. Id. at 915. Rosner and Little appealed to the district court. The district court, in an unpublished order, reversed and entered judgment on May 25, 1984, holding that the foreclosure sale effected a valid transfer of the four-acre parcel and residence. Worcester filed her notice of appeal eleven days later, on June 5, 1984.

II

Rosner and Little argue that because Worcester's appeal falls outside the 10-day period set out in Bankr.R. 8002 for appeals from bankruptcy judges, Worcester's appeal is untimely. This is true, they argue, despite the fact that Worcester's appeal would be timely under the 30-day filing period of Fed.R.App.P. 4(a)(1).

We disagree. The Advisory Committee Notes to Bankr.R. 8002 make clear that that rule applies only to appeals to the district court from final orders of a bankruptcy court. Nothing in the rule would indicate that it was intended to supplant Fed.R.App.P. 4(a)(1) and to change the period in which appeals to the courts of appeals can be taken. We decline to interpret Bankr.R. 8002 in this manner absent an express indication that the rule was intended to alter the period for appeals to this court. Cf. Cannon v. The Hawaii Corp. (In re The Hawaii Corp.), 796 F.2d 1139, 1141-42 & n. 1 (9th Cir.1986) (liberalized rules of finality in bankruptcy cases do not alter test for finality in 28 U.S.C. Sec. 1291 cases where district court sits in bankruptcy).

Because Worcester's appeal was filed within the 30-day period of Rule 4(a)(1), her appeal is timely, and we have jurisdiction under 28 U.S.C. Sec. 158(d).

III

Appellees also argue that this appeal should be dismissed as moot because Worcester failed to obtain a stay of the foreclosure sale pending appeal.

In Algeran, Inc. v. Advance Ross Corp., 759 F.2d 1421 (9th Cir.1985), we adopted the Eleventh Circuit's approach as to when a stay pending appeal is required in order to prevent mootness. That circuit held in Sewanee Land, Coal & Cattle, Inc. v. Lamb (In re Sewanee Land, Coal & Cattle, Inc.), 735 F.2d 1294 (11th Cir.1984), that, in certain circumstances, the failure to obtain a stay renders an appeal moot. Mootness results when the court of appeals becomes "powerless to grant the relief requested by the appellant." Id. at 1295 (quoting American Grain Association v. Lee-Vac, Ltd., 630 F.2d 245, 247 (5th Cir.1980)).

Bankruptcy is basically a procedural forum designed to provide a collective proceeding for the sorting out of non-bankruptcy entitlements. See Jackson, Bankruptcy, Non-Bankruptcy Entitlements, and the Creditors' Bargain, 91 Yale L.J. 857, 859-71 (1982); Baird & Jackson, Corporate Reorganizations and the Treatment of Diverse Ownership Interests: A Comment on Adequate Protection of Secured Creditors in Bankruptcy, 51 U.Chi.L.Rev. 97, 101-09 (1984). Consequently, the Supreme Court has repeatedly held that the rights of parties to a bankruptcy proceeding are "created and defined by state law." Butner v. United States, 440 U.S. 48, 54-55, 99 S.Ct. 914, 917-18, 59 L.Ed.2d 136 (1979). See also Ohio v. Kovacs, 469 U.S. 274, 285-86, 105 S.Ct. 705, 712, 83 L.Ed.2d 649 (1985) ("the classification of Ohio's interest as either a lien on the property itself, a perfected security interest, or merely an unsecured claim depends on Ohio law") (O'Connor, J., concurring); Bank of Marin v. England, 385 U.S. 99, 101, 87 S.Ct. 274, 276, 17 L.Ed.2d 197 (1966) (trustee assumes rights debtor had prior to filing of petition); Board of Trade v. Johnson, 264 U.S. 1, 15, 44 S.Ct. 232, 235, 68 L.Ed. 533 (1924) (same).

If Worcester has the right under California law to set aside a foreclosure sale after the sale has taken place, after deeds have been recorded, and after the property has been sold to a third party, then she has the right in bankruptcy to do the same and that right is property of the estate. See 11 U.S.C. Sec. 541(a)(1) (property of the estate includes "all legal and equitable interests of the debtor in property"). If Worcester does have such a right under California law, we are not powerless to enforce it, and we may grant Worcester relief to the same extent California courts would in similar circumstances.

Since we determine that Worcester satisfied the requirements for setting aside the foreclosure sale and is entitled to relief under California law, this appeal is not moot. 1 See City of Valdez v. Waterkist Corp. (In re Waterkist Corp.), 775 F.2d 1089, 1091 (9th Cir.1985).

IV

We now turn to consider the question of whether Worcester satisfied California's requirements for setting aside the foreclosure sale. Under California law, "gross inadequacy of price coupled with even slight unfairness or irregularity is a...

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