Central District Consumer Bankruptcy Attorney's Association

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Like I said the allegedly mistaken reconveyance from the junior lien
holder was recorded over 5 years before the Chapter 7 was filed. The
current property value is less than is owed on the first trust deed and
there were no new liens recorded by anyone after the reconveyance. The
chapter 7 trustee is not going to administer the estate since there is
no equity above what is owed the first trust deed, let alone after
exemptions and costs of sale. Thus any potential lien avoidance powers
of the trustee are not at issue. The debtor had no idea the 2nd trust
deed had been reconveyed and continued to make payments towards the
loan until shortly prior to the bankruptcy being filed, when the
reconveyance was discovered. The lender was listed as an unsecured
creditor with an explanation in Schedule F and the discharge is still
at least a month away. From what I have learned, apparently the lender
was trying to substitute themselves in as the trustee of the deed of
trust and instead issued a full reconveyance. It is my understanding
this happened regarding numerous loans it issued. I learned yesterday
that the lender after receiving notice of the bankruptcy filing
prepared and recorded postpetition a cancellation of the reconveyance
in violation of bankruptcy code 362(a)(4), so I will have the
pleasure of addressing that matter too. Said cancellation was signed by
the same officer that signed the reconveyance 5 1/2 years ago.
The first question is whether or not the lender currently still
possesses an interest in the collateral after the full reconveyance was
allegedly recorded in error? If the reconveyance is void because it was
issued in error, then the lender still has an interest. If the
reconveyance is merely voidable then I am not sure it currently holds
an interest in the property. The California Court of Appeal found in
DULEY V. WESTINGHOUSE ELECTRIC CORPORATION 97 Cal.App.3d 430 (1979)
that a mistakenly recorded reconveyance is voidable, but I need to
research the issue a bit more to be confident of the current state of
CA law. I found bankruptcy cases relating to state laws other than CA
finding such reconveyances to be void rather than voidable.
Does CCP 338(d) 3 year statute of limitations apply? As Ken
Schwartz pointed out CCP 338(d) provides a 3 year statute of
limitation for fraud or mistake. Without yet delving into research on
it, I wonder whether it is applicable as the chapter it falls under is
for actions other than for the recovery of real property? However,
since CCP 338(d) includes slander of title and actions to challenge
certain tax liens, on the surface it seems reasonable to conclude CCP
whether or not the lender currently still possesses an interest in the
collateral after the full reconveyance was recorded in error? If the
allegedly mistaken reconveyance is voidable, CCP 338(d) would appearto time bar any action by the lender as the facts where known to the
lender all along (even if it did not realize the consequences of its
action). The clock would start ticking the moment the reconveyance was
recorded, not when the lender realized the legal ramifications of its
reconveyance of title to the debtor. On the other hand, if DULEY is not
the current state of the law and the allegedly mistaken reconveyance is
void I do not think the clock under CCP 338(d) ever starts ticking.
If the reconveyance is voidable as set forth in DULEY and assuming
CCP 338(d) applies, then I think the lender is time barred from
pursuing a court order voiding the reconveyance in accords with CA
Civil Code 3412. If the reconveyance is void I do not see anything inthe reconveyance in accords with CA Civil Code 3412.
What if CCP 338(d) does not apply or the 3 year period has not
elapsed and the reconveyance is voidable? Once the underlying
obligation is discharged, can the lender revive the lien after
discharge by obtaining a court order cancelling the reconveyance in
accords with CA Civil Code 3412 and be in compliance with 524(a)(2)
discharge injunction? Would that be considered an action to recover or
offset a debt as a personal liability of the debtor? I could not find
any case law addressing that issue.
Mark T. Jessee
Law Offices of Mark T. Jessee
"A Debt Relief Agency"
50 W. Hillcrest Drive, Suite 200
Thousand Oaks, CA 91360
(805) 497-5868 (805) 497-5864 (Facsimile)
On Sat, 10 Dec 2011 16:09:40 -0800, "Steven B. Lever" wrote:
Killer find, Kenneth. Steve
Behalf Of Kenneth Jay Schwartz
Sent: Saturday, December 10, 2011 3:47 PM
To: cdcbaa@yahoogroups.com
Subject: Re: [cdcbaa] Postpetition rights of Lender re: mistaken
prepetition trust deed reconveyance?
CCP 338(d) SOL is 3 years for mistake
Kenneth Jay Schwartz, Esq.
LAW OFFICE OF KENNETH JAY SCHWARTZ
21031 Ventura Boulevard, Suite 640
Woodland Hills, California 91364-2226
Telephone: (818) 226-1205
Facsimile : (818) 226-1213
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To: cdcbaa@yahoogroups.com
Sent: Sat, December 10, 2011 3:37:43 PM
Subject: Re: [cdcbaa] Postpetition rights of Lender re: mistaken
prepetition trust deed reconveyance?
Might there also be a 4 year SOL for actions based upon mistake
[i.e., even without the BK issues, is it too late for the former lender
to assert a successful cause of action]?
Kenneth Jay Schwartz, Esq.
LAW OFFICE OF KENNETH JAY SCHWARTZ
21031 Ventura Boulevard, Suite 640
Woodland Hills, California 91364-2226
Telephone: (818) 226-1205
Facsimile : (818) 226-1213
THE INFORMATION CONTAINED IN THIS E-MAIL IS INTENDED ONLY FOR THE
PERSONAL AND CONFIDENTIAL USE OF THE DESIGNATED RECIPIENT(S) NAMED
ABOVE. THIS MESSAGE MAY BE AN ATTORNEY-CLIENT COMMUNICATION, AND, AS
SUCH, IS PRIVILEGED AND CONFIDENTIAL. IF THE READER OF THIS MESSAGE IS
NOT THE INTENDED RECIPIENT OR AN AGENT RESPONSIBLE FOR DELIVERING IT TO
THE DESIGNATED RECIPIENT, YOU ARE HEREBY NOTIFIED THAT YOU HAVE
RECEIVED THIS E-MAIL IN ERROR, AND THAT ANY REVIEW, DISSEMINATION,
DISTRIBUTION OR COPYING OF THIS MESSAGE IS STRICTLY PROHIBITED. IF YOU
HAVE RECEIVED THIS COMMUNICATION IN ERROR, PLEASE NOTIFY US
IMMEDIATELY. THANK YOU.
To: cdcbaa@yahoogroups.com
Sent: Sat, December 10, 2011 3:08:47 PM
Subject: RE: [cdcbaa] Postpetition rights of Lender re: mistaken
prepetition trust deed reconveyance?
Mark:
Were missing some facts here I think: what position was the
reconveyed deed of trust before it was reconveyed? What are the
timelines, e.g., is the bankruptcy filed yet, is it over? I take it no
cancelation has been recorded yet. Also, what are the values of the
property, the balances on the deeds of trust? Im just not getting
a complete picture here, although it sure seems like an interesting
problem.
Speaking in general: There are no relief from stay issues if they
just wait for the bankruptcy to be over. Then the discharge
injunction applies as to collecting the debt, but not on the
enforcement of its property interest in the collateral. That can all
be addressed in state court. The collateral is no longer property of
the estate.
If there is equity in the property sufficient to fight with them,
Ill bet you can get a great deal for your client even if you cannot
completely capitalize on their mistake. That depends to some degree
whether the reconveyance was covered by title insurance.
Steve Lever
Behalf Of Mark Jessee
Sent: Friday, December 09, 2011 11:40 PM
To: cdcbaa@yahoogroups.com
Subject: [cdcbaa] Postpetition rights of Lender re: mistaken
prepetition trust deed reconveyance?
Lender (acting as both trustee and beneficiary of the deed of
trust) recorded a full reconveyance of security interest 5 years prior
to chap 7 petition being filed. There were no subsequent recorded
liens. Postpetition, lender claims this reconveyance was executed and
recorded in error. The property is underwater related to the first
trust deed so a trustee is not interested in administering it. While
recording a cancellation of the full reconveyance pursuant to CA Civil
Code 3412 and Duley v. Westinghouse Electric Corp. 97 Cal.App.3d 430(1979) may have been an available option prepetition, doing so
postpetition violates bankruptcy code 362(a)(4) and the 362(b)(3)
exception does not apply. Does the lender have an equitable remedy
under the bankruptcy code to somehow cancel the reconveyance and revive
the erstwhile unenforceable trust deed security interest?
Can the lender successfully file an adversary complaint or a motion for
relief from the automatic stay allowing it to seek an order in state
court, allowing it to record a cancellation of the full reconveyance
based upon equitable grounds? I cannot find any bankruptcy case law
addressing the issue of a creditor's postpetition right to seek
cancellation of a prepetition mistakenly recorded reconveyance in a no
asset case.
Mark Jessee
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p{margin: 0;padding: 0;}Like I said the allegedly mistaken
reconveyance from the junior lien holder was recorded over 5 years
before the Chapter 7 was filed. The current property value is less than is owed
on the first trust deed and there were no new liens recorded by anyone after the
reconveyance. The chapter 7 trustee is not going to administer the estate since
there is no equity above what is owed the first trust deed, let alone after
exemptions and costs of sale. Thus any potential lien avoidance powers of the
trustee are not at issue. The debtor had no idea the 2nd trust deed had been
reconveyed and continued to make payments towards the loan until shortly prior
to the bankruptcy being filed, when the reconveyance was discovered. The lender
was listed as an unsecured creditor with an explanation in Schedule F and the
discharge is still at least a month away. From what I have learned, apparently
the lender was trying to substitute themselves in as the trustee of the deed of
trust and instead issued a full reconveyance. It is my understanding this
happened regarding numerous loans it issued. I learned yesterday that the lender
after receiving notice of the bankruptcy filing prepared and recorded
postpetition a cancellation of the reconveyance in violation of bankruptcy code
Said
cancellation was signed by the same officer that signed the reconveyance 5 1/2
years ago.

The first question is whether or not the lender currently still possesses an
interest in the collateral after the full reconveyance was allegedly recorded in
error? If the reconveyance is void because it was issued in error, then the
lender still has an interest. If the reconveyance is merely voidable then I am
not sure it currently holds an interest in the property. The California Court of
Appeal found in DULEY V. WESTINGHOUSE ELECTRIC CORPORATION 97 Cal.App.3d
430 (1979) that a mistakenly recorded reconveyance is voidable, but I need to
research the issue a bit more to be confident of the current state of CA law. I
found bankruptcy cases relating to state laws other than CA finding such
reconveyances to be void rather than voidable.

Does CCP 338(d) 3 year statute of limitations apply? As Ken Schwartz
pointed out CCP 338(d) provides a 3 year statute of limitation for fraud or
mistake. Without yet delving into research on it, I wonder whether it is
applicable as the chapter it falls under is for actions other than for the
recovery of real property? However, since CCP 338(d) includes slander of title
and actions to challenge certain tax liens, on the surface it seems reasonable
to conclude CCP 338(d) would include reconveyances. The question again comes
back to whether or not the lender currently still possesses an interest in the
collateral after the full reconveyance was recorded in error? If the allegedly
mistaken reconveyance is voidable, CCP 338(d) would appear to time bar any
action by the lender as the facts where known to the lender all along (even if
it did not realize the consequences of its action). The clock would start
ticking the moment the reconveyance was recorded, not when the lender realized
the legal ramifications of its reconveyance of title to the debtor. On the other
hand, if DULEY is not the current state of the law and the allegedly
mistaken reconveyance is void I do not think the clock under CCP 338(d) ever
starts ticking.

If the reconveyance is voidable as set forth in DULEY and assuming CCP
a court
order voiding the reconveyance in accords with CA Civil Code 3412. If the
reconveyance is void I do not see anything in 524(a) preventing the lender
from pursuing a court order cancelling the reconveyance in accords with CA Civil
Code 3412.

What if CCP 338(d) does not apply or the 3 year period has not elapsed and
the reconveyance is voidable? Once the underlying obligation is discharged, can
the lender revive the lien after discharge by obtaining a court order cancelling
the reconveyance in accords with CA Civil Code 3412 and be in compliance with
recover
or offset a debt as a personal liability of the debtor? I could not find any
case law addressing that issue.
Mark T. JesseeLaw Offices of Mark T. Jessee"A Debt Relief
Agency"50 W. Hillcrest Drive, Suite 200Thousand Oaks, CA 91360(805)
497-5868 (805) 497-5864 (Facsimile)
On Sat, 10 Dec 2011 16:09:40 -0800, "Steven B. Lever"
<sblever@leverlaw.com> wrote:

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