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BankruptcyCourtOpinions

INRE:SALAMON(B.A.P.9thCir.462015)
Inre:JAMESHARRYSALAMONJEANNEFIXLERSALAMON,Debtors.PETERJ.MASTAN,
chapter7trusteefortheestateofDavidJ.Behrend,Appellant,v.JAMES
HARRYSALAMONJEANNEFIXLERSALAMON,Appellees.
BAPNo.CC141334PaKiTa,Bk.No.SA1217145ES
UnitedStatesBankruptcyAppellatePanel,NinthCircuit
ArguedandSubmittedonMarch19,2015atPasadena.
FiledApril6,2015.

AppealfromtheUnitedStatesBankruptcyCourtfortheCentralDistrictof
California,Hon.EritheA.Smith,U.S.BankruptcyJudge,Presiding.
JohnN.Tedford,IV,ofDanning,Gill,Diamond,andKollitz,LLP,arguedfor
appellantPeterJ.Maston.MichaelR.TotaroofTotaro&Shanahanarguedfor
appelleesJamesHarrySalamonandJeanneFixlerSalamon.
Before:PAPPAS,KIRSCHER,andTAYLOR,BankruptcyJudges.
OPINION
Pappas,BankruptcyJudge
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CreditorPeterJ.Mastan("Mastan"),thechapter7[fn1]trusteeinthe
bankruptcycaseofDavidJ.Behrend("Behrend"),appealstheorderofthe
bankruptcycourtdisallowinghisclaiminthechapter11bankruptcycaseof
debtorsJamesHarrySalamon("James")[fn2]andJeanneFixlerSalamon
("Jeanne"and,togetherwithJames,"theSalamons").WeAFFIRM.
I.FACTS
Thematerialfactsinthiscaseareundisputed.
ThePropertyandtheLiens
In2009,Jeannepurchaseda28unitapartmentbuildinginLosAngeles(the
"Property")from716S.WestlakeAvenueTrust,aselfsettledtrustcreated
andcontrolledbyBehrend.[fn3]Atthetime,therewerelienssecuringtwo
preexistingloanssecuredbytheProperty,bothdatingbackto2005:(1)a
loanof$829,575.00securedbyafirstprioritydeedoftrustinfavorof
UnitedCommercialBank("FirstLoan")and(2)aloanof$135,000securedby
asecondprioritydeedoftrustinfavorofFrankMcHugh("SecondLoan").
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Inconnectionwiththepurchase,Jeanneexecuteda"wraparound"noteand
mortgage,whichincludedtheFirstandSecondloansanddeedsoftrust,
knownastheAllInclusiveNoteandAllInclusiveDeedofTrust("AITD"),
for$1,030,000,[fn4]infavorofEarthwiseLLC,astrusteefortheseller(a
trustcontrolledbyBehrend).TheAITDwasrecordedasathirdprioritydeed
oftrustontheProperty.
Finally,Jeannealsoexecutedanoteforafourthloanintheamountof
$325,000infavorofEarthwise(Behrend),securedbyarecordedfourth
prioritydeedoftrust(the"FourthLoan").TheAITDloanandtheFourth
Loanproceedswereusedentirelyforthepurchasepriceofthe
Property.[fn5]TheAITDandtheFourthLoandocumentsweresignedbyJeanne
onApril6,2009.
Behrendfiledachapter11bankruptcypetitiononMarch25,2010.Mastan
wasappointedchapter11trusteeinthatcaseonMarch1,2011.OnMay9,
2011,thebankruptcycourtconvertedBehrend'scasetoachapter7case,and
Mastanwasappointedchapter7trustee.

$325,000infavorofEarthwise(Behrend),securedbyarecordedfourth
prioritydeedoftrust(the"FourthLoan").TheAITDloanandtheFourth
Loanproceedswereusedentirelyforthepurchasepriceofthe
Property.[fn5]TheAITDandtheFourthLoandocumentsweresignedbyJeanne
onApril6,2009.
Behrendfiledachapter11bankruptcypetitiononMarch25,2010.Mastan
wasappointedchapter11trusteeinthatcaseonMarch1,2011.OnMay9,
2011,thebankruptcycourtconvertedBehrend'scasetoachapter7case,and
Mastanwasappointedchapter7trustee.
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TheSalamons'BankruptcyCaseandMastan'sClaim
TheSalamonsfiledtheirownchapter11petitiononJune8,2012,and,
throughoutthatcase,haveexercisedpowersofadebtorinpossessionof
theirbankruptcyestate.See1107(a).
Mastan,astrusteeinBehrend'schapter7case,filedasecuredproofof
claimintheSalamons'chapter11casefor$1,355,000,theprincipaldue
undertheAITDandFourthLoan,onOctober3,2012.
AmericanWestBank("AWB"),thesuccessortoUnitedCommercialBank,and
theSalamonsstipulatedthattheautomaticstaycouldbeterminatedsothat
AWBcouldforecloseonthePropertyunderthefirstprioritydeedoftrust.
ThebankruptcycourtapprovedthestipulationandgrantedstayrelieftoAWB
inanorderenteredonOctober19,2012.AWBservedanoticeofdefault
underthefirstprioritydeedoftrustonNovember1,2012,recordeda
noticeoftrustee'ssaleonFebruary6,2013,andthePropertywassoldata
foreclosuresaleonMarch13,2013,for$1,275,500.
InNovember,2013,Mastanlearnedthatthesalehadgeneratedsufficient
fundstopaythefullamountdueontheFirstandSecondLoansandthat
thereweresurplusfundsavailabletopaytoBehrend'sestate.Aftermaking
demandontheforeclosingtrustee,Mastanreceivedacheckfor$150,560.14.
ThissumwassufficienttopaytheremainingbalanceontheAITD,anda
portionoftheamountdueontheFourthLoan.Mastanfiledanamended
unsecuredproofofclaim(the"APOC")intheSalamons'chapter11casefor
theremainingbalanceintheamountof$303,345.75.
Page5
OnApril28,2014,theSalamonsfiledamotioninthebankruptcycourtfor
anorderdisallowingMastan'sAPOC.TheSalamonsarguedthatunderCal.Civ.
Code580b(a)(2),[fn6]Mastancouldnotassertanunsecuredclaimforany
deficiencyremainingdueontheAITDandFourthLoanaftertheforeclosure.
MastanfiledaresponsetothemotiononMay27,2014.Mastanarguedthat,
althoughtheclaimwouldbebarredunderCalifornialaw,1111(b)(1)
overridesthestatelawprohibitingadeficiencyclaim.Mastanpointedout
thattheonlyexceptionstotheapplicationof1111(b)aclasselection
under1111(b)(2),asaleofthePropertyunder363,orasaleundera
chapter11planwerenotpresent.
InareplyfiledJune3,2014,theSalamonscontendedthatbecausethe
Propertywasremovedfromthebankruptcyestateviatheforeclosuresale,
thestateantideficiencylawappliedtoprecludeMastan'sclaim.Inother
words,becauseMaston'sclaimwasnolongersecuredbyalienonpropertyof
the
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estate,1111(b)didnotapplytoit.
BeforethehearingontheSalamons'motiontodisallowMastan'sclaim,the
bankruptcycourtenteredatentativedecisionwhichstatedinfull:
Exceptasnotedbelow,thecourtincorporatesbyreferenceherein
thelegalanalysisandcasecitationssetforthinDebtor'sMotion
andReplyPleadings.TheCourtnotes,however,thatDebtorsare
incorrectthatthesubjectpropertywasnolongerpropertyofthe
estateatthetimetheordergrantingrelieffromstaywasentered.
Thegrantingofrelieffromstayallowsasecuredcreditorto
proceedwithforeclosureproceedingsbut,untilasaleactually
occurs,thepropertyremainspropertyofthebankruptcyestate.
Accordingly,inthiscase,thepropertywasnolongerpropertyof
theestateasofthedateoftheforeclosuresale,i.e.,onMarch
13,2013.Atthatpoint,Creditornolongerhelda"claimsecuredby
alienonpropertyoftheestate"forpurposesof1111(b).
Further,theCourtagreesthattheantideficiencyprovisionsunder
Californialaw,CCP580(b)[apply].

Thegrantingofrelieffromstayallowsasecuredcreditorto
proceedwithforeclosureproceedingsbut,untilasaleactually
occurs,thepropertyremainspropertyofthebankruptcyestate.
Accordingly,inthiscase,thepropertywasnolongerpropertyof
theestateasofthedateoftheforeclosuresale,i.e.,onMarch
13,2013.Atthatpoint,Creditornolongerhelda"claimsecuredby
alienonpropertyoftheestate"forpurposesof1111(b).
Further,theCourtagreesthattheantideficiencyprovisionsunder
Californialaw,CCP580(b)[apply].
TentativeDecision,June10,2014.
Afterhearingtheargumentsofcounsel,thebankruptcycourtannouncedits
decision,grantingtheSalamons'motiontodisallowMastan'sunsecured
claim.ItsOrdermemorializingitsdecision,enteredonJune20,2014,
explained:
TheCourtfindsthepropertyinquestionremainedpropertyofthe
estateupandtillaforeclosuresaleactuallyoccurs.Atthat
point,theCreditornolongerhadaclaim"securedbyalienon
propertyoftheestate"forpurposesofSection1111(b).Thecourt
furtherfindsthattheantideficiencyprovisionunderCalifornia
Law,CCP580(b),applies.
MastanfiledatimelyappealonJune27,2014.
II.JURISDICTION
Thebankruptcycourthadjurisdictionunder28U.S.C.1334and
157(b)(2)(B).Wehavejurisdictionunder28U.S.C.158.
III.ISSUE
WhetherthebankruptcycourterredindisallowingMastan'samendedclaim.
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IV.STANDARDSOFREVIEW
Thebankruptcycourt'sinterpretationoftheBankruptcyCodeisreviewed
denovo.Durkinv.BenedorCorp.(InreG.I.Indus.,Inc.),204F.3d1276,
1279(9thCir.2000).Disallowanceofaclaimisrevieweddenovo.Margaret
B.McGimseyTrustv.USACapitalDiversifiedTrustDeedFund,LLC(InreUSA
CommercialMortgageCo.),377B.R.608,617(9thCir.BAP2007)
("Disallowanceofaclaimisalegaldeterminationthattheclaimunder
considerationisnotallowablebylaw.").
IV.DISCUSSION
Thepartiesagreethatresolutionofthisappealcentersonthebankruptcy
court'sinterpretationof1111(b)(1)(A),whichprovidesthat:
Aclaimsecuredbyalienonpropertyoftheestateshallbe
allowedordisallowedundersection502ofthistitlethesameasif
theholderofsuchclaimhadrecourseagainstthedebtoronaccount
ofsuchclaim,whetherornotsuchholderhassuchrecourse,unless
(I)theclassofwhichsuchclaimisapartelects,byatleast
twothirdsinamountandmorethanhalfinnumberofallowedclaims
ofsuchclass,applicationofparagraph(2)ofthissubsectionor
(ii)suchholderdoesnothavesuchrecourseandsuchpropertyis
soldundersection363ofthistitleoristobesoldunderthe
plan.
1111(b)(1)(A).
Collierexplainstheroleof1111(b)inreorganizationcases:
Section1111(b)representsanattemptbyCongresstocreate
balancebetweenthedebtor'sneedforprotection,andacreditor's
righttoreceiveequitabletreatment.
...
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Thetextofsection1111(b)(1)(A)tellscourtstoignorestatelaw
andnonrecourseagreements.Unlessotherwiseexcepted,[thecourt]
musttreat"aclaimsecuredbyalienonpropertyoftheestate..

balancebetweenthedebtor'sneedforprotection,andacreditor's
righttoreceiveequitabletreatment.
...
Page8
Thetextofsection1111(b)(1)(A)tellscourtstoignorestatelaw
andnonrecourseagreements.Unlessotherwiseexcepted,[thecourt]
musttreat"aclaimsecuredbyalienonpropertyoftheestate..
.thesameasiftheholderofsuchclaimhadrecourseagainstthe
debtoronaccountofsuchclaim,whetherornotsuchholderhassuch
recourse."Asaconsequence,apartiallysecurednonrecourse
creditormaydobetterinachapter11casethaninachapter7case
ifitsdeficiencyclaimhasanyvalue.Becauseachapter11plan
doesnotprovideforthesaleorotherliquidationofthe
collateral,anyvaluationwhichdeterminesadeficiencywillbea
judicialvaluation.Inpromulgatingsection1111(b),Congress
essentiallystatedthatsuchajudicialvaluationwasnotpartof
thenonrecoursecreditor'sbargain,andprovidedanavenueforthe
creditortoelecttohavethedeficiencyrecognized.
7CollieronBankruptcy1111.03[1][a](AlanN.Resnick&HenryJ.Sommer,
eds.,16thed.2014).
Although1111(b)(1)(A)bestowsapotentialbenefitonacreditorholding
anonrecourse,partiallysecuredclaiminachapter11case,acondition
precedenttothecreditor'senjoymentofthatspecialstatusisthatitmust
hold"aclaimsecuredbyalienonpropertyoftheestate."Here,the
questioniswhetherthatconditionwassatisfiedbecauseMastanheldsucha
lienonthedatetheSalamons'petitionwasfiled,eventhoughthelienno
longerexistedwhentheallowanceofMastan'sclaimwaschallenged.
IninterpretingtheCode,"'whenthestatute'slanguageinplain,thesole
functionofcourtsatleastwherethedispositionrequiredisnotabsurd
istoenforceitaccordingtoitsterms.'"Lamiev.U.S.Tr.,540U.S.526,
534(2004)Parksv.Drummond(InreParks),475B.R.703,707(9thCir.BAP
2012)("Ifthestatuteisclear,theinquiryisatitsend,andweenforce
thestatuteonitsterms.")."Furthermore,'thewordsof[theCode]mustbe
readintheircontextandwithaviewtotheir
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placeintheoverallstatutoryscheme.'"Danielsonv.Flores(InreFlores),
735F.3d855,859(9thCir.2013)(enbanc)(quotingGalev.FirstFranklin
LoanServs.,701F.3d1240,1244(9thCir.2012))."Whenthestatute's
languageisplain,thesolefunctionofthecourts...istoenforceit
accordingtoitsterms."HartfordUnderwritersIns.Co.v.UnionPlanters
Bank,530U.S.1,6 (2000).
Accordingto1111(b)(1),anonrecourseclaimistreatedasarecourse
claiminachapter11caseifitis"securedbyalienonpropertyofthe
estate."Thebankruptcycourtnotedthat,fromandafterMarch13,2014,the
dateoftheforeclosuresaleatwhichitwassold,thePropertywasno
longerpropertyoftheSalamons'bankruptcyestate."Atthatpoint,[Mastan]
nolongerhadaclaim'securedbyalienonpropertyoftheestate'for
purposesofSection1111(b)."Thus,thebankruptcycourtconcluded,in
treatingMastan'sclaiminthesamefashionasarecourseclaim,
1111(b)(1)(A)nolongerappliedand,instead,theCaliforniaantideficiency
statutes,includingCal.Civ.Code580b,prohibitedenforcementofthe
unsecuredclaim.Asaresult,under502(b)(1),[fn7]Mastan'samendedclaim
wasdisallowed.
Page10
Mastanarguesthatthebankruptcycourterredbynotconsideringthe
languagein1111(b)(1)(A)instructingthat"[a]claimsecuredbyalienon
propertyoftheestateshallbeallowedordisallowedundersection502of
thistitle"inlightoftherequirementin502(b)(1)thatthecourt"shall
determinetheamountofsuchclaiminlawfulcurrencyoftheUnitedStates
asofthedateofthefilingofthepetition[.]"Mastanreasonsthat
because,asofthepetitiondate,hisclaimagainsttheSalamonswassecured
byliensagainstpropertyoftheirbankruptcyestate(i.e.,thedeedsof
trustsecuringtheAITDandFourthLoan),1111(b)(1)(A)overridesstate
lawandrequiresthatMastan'samendedclaimbeallowedasifhehad
recourseagainsttheSalamonsonaccountofhisclaim.Inshort,Mastanasks
ustointerpret"propertyoftheestate"in1111(b)(1)(A)asareference
tothepropertythatexistedatthetimeoffilingthepetition,notatthe
timeofconsideringtheobjectiontotheamendedclaim.
Whilecaselawinterpretingthisphrasein1111(b)(1)(A)issparse,it
iscontrarytoMastan'sposition.Themostoftciteddecisiononthisissue

byliensagainstpropertyoftheirbankruptcyestate(i.e.,thedeedsof
trustsecuringtheAITDandFourthLoan),1111(b)(1)(A)overridesstate
lawandrequiresthatMastan'samendedclaimbeallowedasifhehad
recourseagainsttheSalamonsonaccountofhisclaim.Inshort,Mastanasks
ustointerpret"propertyoftheestate"in1111(b)(1)(A)asareference
tothepropertythatexistedatthetimeoffilingthepetition,notatthe
timeofconsideringtheobjectiontotheamendedclaim.
Whilecaselawinterpretingthisphrasein1111(b)(1)(A)issparse,it
iscontrarytoMastan'sposition.Themostoftciteddecisiononthisissue
isTampaBayAssocs.,Ltd.v.DRWWorthington,Ltd.(InreTampaBay
Assocs.,Ltd.),864F.2d47(5thCir.1989).[fn8]Inthatcase,priorto
planconfirmation,
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creditorTampaBayobtainedstayrelieffromthebankruptcycourtto
forecloseitslienonanapartmentbuildingownedbydebtorDRWWorthington.
Afterthepropertywassoldataforeclosuresale,TampaBayfiledan
amendedproofofclaimforthedeficiencyremainingdueafterthesale.When
DRWobjectedtotheamendedclaim,thebankruptcycourtdisallowedit,and
thedistrictcourtaffirmed.Id.at49.TheFifthCircuitagreedwiththe
lowercourtsandconcluded:
Section1111(b)(1)(A)specificallystatesthat"aclaimsecuredby
alienonpropertyoftheestateshallbeallowedordisallowed
undersection502...thesameasiftheholderofsuchclaimhad
recourseagainstthedebtor...."OnceTampaBayforeclosedonthe
propertyitextinguishedthe"claimsecuredbyalien"necessaryto
invokeasection1111(b)election.
Id.at5051seealsoNat'lRealEstateLtd.P'shipIIv.Consol.Cap.
Partners(InreNat'lRealEstateLtd.P'shipII),104B.R.968,975(Bankr.
E.D.Wisc.1989)("1111(b)onlyappliesto'aclaimsecuredbyalienon
propertyoftheestate.'When[thecreditor]completeditsforeclosureof
theproperty,itsclaimnolongerwassecuredbyalienonpropertyofthe
estate,and1111(b)nolongerapplied.").Mastanoffersnocaselaw
supportinghisinterpretationof1111(b)(1)(A)requiringthat,ifaclaim
issecuredbyalienonpropertyofadebtor'sbankruptcyestateasofthe
dateofthecasefiling,anotherwisenonrecoursedebtwillthereafterbe
affordedtreatmentasarecoursedebteventhoughthepropertyis
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soldataforeclosuresale.Twoothercourtsofappealsinterpret1111(b)
inamannerconsistentwiththeanalysisofInreTampaBayAssocs.SeeIn
reBrookfieldCommonsNo.1LLC,735F.3d596,598(7thCir.2013)("The
plainmeaningof1111(b)(1)(A)isunambiguous....Thereisone
prerequisite:theclaimissecuredbyalienonthepropertyofthe
estate.")680FifthAve.Assocs.v.MutualBenefitLifeIns.Co.(Inre680
FifthAve.Assocs.),29F.3d95,97(2ndCir.1994)("Theplainmeaningof
1111(b)(1)(A)doesnotlimititselftoconsensualornonconsensualliens..
..Theonlypreconditiontothestatute'sapplicationisaclaimsecuredby
alienonpropertyoftheestate.").
Inthiscase,underCalifornialaw,thelienssecuringMastan'sclaimwere
extinguishedasanecessaryconsequenceofthenonjudicialforeclosuresale.
Thorykv.SanDiegoGas&Elec.Co.,225Cal.App.4th386,399(2014)Bank
ofAm.v.Graves(1996)51Cal.App.4th607,61116(1996).Although
Mastan'soriginalproofofclaimmayhaveassertedaclaimsecuredbyliens
onpropertyoftheestate,asrecognizedintheAPOCMastanfiled,those
lienswereeliminatedasamatteroflawasaresultoftheforeclosure.As
aresult,whenSalamons'objectiontotheclaimwasconsideredbythe
bankruptcycourt,Mastannolongerheldalienonanypropertyofthe
estate.[fn9]Absentalienonestateproperty,thebankruptcycourtdidnot
errindeciding
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that1111(b)(1)(A)didnotapplytotheAPOC,andunderthe
antideficiencylawsofCalifornia,theclaimwasunenforceable.Asprovided
in502(b)(1),thebankruptcycourtdidnoterrindisallowingtheamended
claimbecauseitwasunenforceableunderapplicablelaw.[fn10]
CONCLUSION
WeAFFIRMtheorderofthebankruptcycourtdisallowingMastan'samended
claim.
[fn1]Unlessotherwiseindicated,allchapterandsectionreferencesareto
theBankruptcyCode,11U.S.C.1011532,allRulereferencesaretothe
FederalRulesofBankruptcyProcedure,Rules10019037,allCivilRule
referencesaretotheFederalRulesofCivilProcedure186,andall
AppellateRulereferencesaretotheFederalRulesofAppellateProcedure
148.

WeAFFIRMtheorderofthebankruptcycourtdisallowingMastan'samended
claim.
[fn1]Unlessotherwiseindicated,allchapterandsectionreferencesareto
theBankruptcyCode,11U.S.C.1011532,allRulereferencesaretothe
FederalRulesofBankruptcyProcedure,Rules10019037,allCivilRule
referencesaretotheFederalRulesofCivilProcedure186,andall
AppellateRulereferencesaretotheFederalRulesofAppellateProcedure
148.

[fn2]Werefertosomepartiesbytheirfirstnamesforclarity.No
disrespectisintended.

[fn3]Behrendconductedhisbusinessandfinancialaffairsthroughvarious
trustsandotherentities.Asrelevanthere,thepartiesdonotdisputethat
Behrend'sbankruptcyestate,representedbybankruptcytrusteeMastan,holds
thebeneficialinterestintheProperty.

[fn4]Althoughitisnotclearintherecord,the$1,030,000apparently
representedthebalancedueforprincipalandinterestontheFirstand
SecondLoans.Jeannedidnotassumeliabilityfortheseloans,butinstead
"wrappedaround"theloanswiththeAITD.Jeannewasresponsibleformaking
paymentsontheAITDandFourthLoan,andBehrendwasresponsibleformaking
thepaymentsontheFirstandSecondLoans.

[fn5]Thus,underCalifornialaw,theAITDandFourthLoanwerepurchase
moneymortgages.Apurchasemoneytransactionoccurswhen"[t]hesum
representedbythenoteandtrustdeedwasanecessarypartofthepurchase
price."HeritagePac.Fin.LLCv.Edgar(InreMontano),501B.R.96,109
n.11(9thCir.BAP2013)(quotingStocktonSav.&LoanBankv.Massanet,
114P.2d592,597(Cal.1941).Significanthere,purchasemoneymortgages
comewithinthepurviewofCalifornia'santideficiencystatutes.SeeCal.
CodeCiv.Proc.580b(a)(2)(quoted,infra,n.6).

[fn6]"(a)[N]odeficiencyjudgmentshalllieinanyeventforthe
following:...(2)Underadeedoftrustormortgagegiventothevendor
tosecurepaymentofthebalanceofthepurchasepriceofthatrealproperty
orestateforyearstherein."Cal.CodeCiv.Proc.580b(a)(2).
TherewassomediscussionatoralargumentaboutwhetherCal.Code.Civ.
Proc.580b(a)(2),580b(a)(3)or580dappliesinthissituation.However,
byitsterms,Cal.CodeCiv.Proc.580b(a)(3)onlyappliestoforeclosures
ofresidentialpropertiesoffourunitsorless,andthePropertyhad
twentyeightunits.AndwhileCal.Code.Civ.Proc.580disamoregeneral
statutethatextendstheantideficiencyruletoallmortgages,notjust
purchasemoneymortgages,Cokerv.JPMorganChaseBank,N.A.,
281Cal.App.4th1,9(2013),itdoesnotapplytoanonforeclosingjunior
lien,suchastheAITDorFourthLoan.CadlerockJointVenture,LPv.Lobel,
206Cal.App.4th1531,1549(2012).Therefore,Cal.CodeCiv.Proc.
580b(a)(2)controlsinthiscase.

[fn7]ThisCodeprovisionstates:
(b)Exceptasprovidedinsubsections(e)(2),(f),(g),(h)and(i)ofthis
section,ifsuchobjectiontoaclaimismade,thecourt,afternoticeanda
hearing,shalldeterminetheamountofsuchclaiminlawfulcurrencyofthe
UnitedStatesasofthedateofthefilingofthepetition,andshallallow
suchclaiminsuchamount,excepttotheextentthat
(1)suchclaimisunenforceableagainstthedebtorandpropertyofthe
debtor,underanyagreementorapplicablelawforareasonotherthan
becausesuchclaimiscontingentorunmatured[.]
502(b)(1).

[fn8]Thecitationtothiscaseapparentlycontainsanerror.TampaBay
Associateswasacreditor,notthedebtorthedebtorwasDRWWorthington,
Ltd.AsreportedintheFederal2dSeries,andinLEXISandWestlaw,all
haveanincorrectcaption,andthusascitedbyothers,theerrorhasbeen
perpetuated.

[fn9]Indeed,MastanconcededthatthePropertywasnolongerpropertyof

[fn8]Thecitationtothiscaseapparentlycontainsanerror.TampaBay
Associateswasacreditor,notthedebtorthedebtorwasDRWWorthington,
Ltd.AsreportedintheFederal2dSeries,andinLEXISandWestlaw,all
haveanincorrectcaption,andthusascitedbyothers,theerrorhasbeen
perpetuated.

[fn9]Indeed,MastanconcededthatthePropertywasnolongerpropertyof
theestateafterforeclosure:"Thedebtor'spositionisthatsomehowthe
foreclosuresalethendivestedthispropertyoftheestate,whichIbelieve
theforeclosuresalewouldittake[sic]awayfrompropertyoftheestate,
butthat'snotthedetermination."Hr'gTr.3:912,June10,2014.
UnfortunatelyforMastan'sposition,asshownabove,thatistheproper
determination.

[fn10]Likethebankruptcycourt,becausewebaseourdecisionontheplain
languageof1111(b)(1)(A)requiringthat,toconvertanonrecourseclaim
torecourse,theclaimmustbe"securedbyalienonpropertyofthe
estate,"weneednotconsidertheFifthCircuit'sandothercourts'
alternativereasoningfordisallowingsuchaclaim:thataforeclosureis
tantamounttoa363sale,andthattherefore,Congresswouldintendthat
theexceptionin1111(b)(1)(A)(ii)apply.InreTampaBayAssoc.,
864F.2dat50InreWoodbridgeN.Apts,Ltd.,71B.R.189,192(Bankr.
N.D.Cal.1987).

Copyright2014CCHIncorporatedoritsaffiliates