February 2023 Update
The Tax Cuts and Jobs Act (TCJA) was amended by Pub L 117–69, 136 Stat 1818 to extend to January 1, 2030. See §1.23.
The former Department of Business Oversight is now the Department of Financial Protection and Innovation. See §§2.39A, 2.63A, 2.49, 2.49E, 10.8C, 12.31, 13.116.
Many relevant statutes created or amended in response to either the housing crisis or the COVID-19 pandemic were extended or otherwise had their sunset dates affected. These include, but are not limited to, the following: CC §§2924f–h, and 2924m. See §§2.63, 2.73, 2.76, 2.79, 2.99A, 2.133, 2.74, 2.75, 7.93, 9.4, 10.74, 11.9, 11.15, 11.81, 11.87.
Civil Code §2924o was created by Stats 2022, ch 642 (AB 137). This statute requires that, beginning on January 1, 2023, all eligible bidders described in CC §2924m(a)(3)(C)–(G) who purchase a property under CC §2924m are subject to the new CC §2924o, which states that the property will be subject to a recorded covenant that ensures the property shall be sold at an affordable housing price or rented at an affordable rent. See §§2.79, 2.99A, 2.133, 7.93, 11.9, 11.81, 11.87.
People v Miller (2022) 78 CA5th 1051 held that a trial court in a criminal proceeding is empowered to void a grant deed tainted by forgery even where a separate civil quiet title action relating to the same deed is pending. See §2.129B.
Siry Investment, LP v Farkhondehpour (2022) 13 C5th 333 confirmed Pen C §496(c) can apply to business disputes and other noncriminal proceedings. See §2.129C.
The Second Circuit in Gunsalus v County of Ontario (2d Cir 2021) 37 F4th 859 affirmed the decision of the District Court to reverse the bankruptcy court’s decision that the tax lien sale at issue was not a fraudulent transfer. In Gunsalus v County of Ontario (2d Cir 2021) 37 F4th 859, 865, the Second Circuit relied upon Justice Scalia’s statement in BFP that “BFP covers only mortgage foreclosures of real estate ... the considerations bearing upon other foreclosures and forced sales (to satisfy tax liens, for example) may be different.” BFP v Resolution Trust Corp. (1994) 511 US 531, 573 n3, 114 S Ct 1757 (emphasis added). Moving forward, BFP seems to apply only in the mortgage foreclosure context. See §§7.28, 11.86.
Watson v Confer (In re Confer) (BAP 9th Cir 2022, Mar. 10, 2022, No. EC-21-1140-TBG) 2022 Bankr Lexis 631 vacated and remanded the decision in In re Confer (Bankr ED Cal, June 8, 2021, No. 21-20167-A-13 BHS-1) 2021 Bankr Lexis 1545 regarding the effect of a prepetition contract on an automatic stay, although this decision may be fact specific as the court only held that the prepetition contract was not executory and remanded for determination if stay of relief is proper. See §§7.87, 11.5, 11.46.
For Chapter 13 cases filed June 21, 2022, through June 20, 2024, there is no separation between secured and unsecured debts. 11 USC §109(e) as amended by Pub L 117-151, 136 Stat 1298. As long as the total of all debt is under $2,750,000, debtor is eligible to file under Chapter 13. See §§7.101, 11.2, 11.31, 11.92, 11.97, 11.119, 11.119B, 11.126.
In the case of Nunez v Wilmington Sav. Fund Soc’y (In re Nunez) (Bankr SD Fla 2021) 635 BR 870, the bankruptcy court found a purchase of foreclosed property by the foreclosing creditor was not a preference as it was not on account of an antecedent debt, citing Ninth Circuit authority in Wilson v US Bank NA (In re Wilson) (Bankr D DC, Sept. 14, 2020, Nos. 19-00504, 19-10026) 2020 Bankr Lexis 2413. See §7.112.
Shoker v Superior Court (2022) 81 CA5th 271 questions the validity of the approach in BGJ Assocs., LLC v Superior Court (1999) 75 CA4th 952 toward lis pendens, citing the decision in Kirkeby v Superior Court (2004) 33 C4th 642, n6. See §10.73.
“Family farmer” as defined by 11 USC §101(18) was amended to raise the aggregate debt for an individual or individual and spouse allowable to $11,097,350. “Family fishermen” is defined similarly to “family farmers,” but with lower debt ($2,268,550). See §11.2.
Under 11 USC §707(b), as amended by 87 Fed Reg 6625 (Feb. 4, 2022), dismissal or conversion requires a showing of “abuse,” and it is presumed that “abuse” exists if the debtor’s monthly income, after deduction for certain standardized expenses over a 60-month period, is not less than the lesser of $15,150 or 25 percent of the debtor’s unsecured debt (not to exceed $9,075). See §11.3.
The applicability of the automatic stay in “small business cases” is narrow. See 11 USC §362(n). However, such cases include only individuals or businesses “engaged in commercial or business activities” and exclude those debtors “whose primary activity is the business of owning or operating real property or activities incidental thereto” or whose debts are more than $3,024,725. 11 USC §101(51C)–(51D), amended by 87 Fed Reg 6625 (Feb. 4, 2022). Effective February 19, 2020, the definition of “small business” changes to exclude those “whose primary activity is the business of owning single asset real estate” or whose debts are more than $3,024,725. 11 USC §101(51C)–(51D), amended by Pub L 116–54, 133 Stat 1079; amount increased effective April 1, 2022, by 87 Fed Reg 6625 (Feb. 4, 2022). See §11.6.
City of Chicago v Fulton) (2021) __ US ___, 141 S Ct 585, held that where the creditor is only maintaining the status quo, the creditor has no affirmative duty to return property under 11 USC §362(a)(3), but left open the question of whether failure to return property may violate another section of 11 USC §362. See §11.19.
Even if the violation of the automatic stay is a minor technical one, the court is still required to determine the amount of reasonable attorney fees to award pursuant to 11 USC §362(k). The reasonable amount may be zero. Koeberer v Cal. Bank of Commerce (In re Koeberer) (BAP 9th Cir 2021) 632 BR 680, 690. See §11.19.
Italiane v Catanzarite (In re Italiane) (BAP 9th Cir 2021) 632 BR 662 distinguishes between invalid prepetition waivers in In re Cole and In re Wank and postpetition, post-nondischargeability action stipulations. See §11.21.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) is intended to reduce nuisance suits. In cases that do not involve primarily consumer debt, the minimum preferential transfer (in the aggregate) that can be avoided is changed to $7,575. 11 USC §547(c)(9). Moreover, venue of an action to recover nonconsumer debt of less than $27,750 (changed) can only be brought in the district in which the defendant resides. 28 USC §1409(b). See §11.83.
The cap on the amount of the homestead exemption is changed to $189,050 if the debtor elects state law exemptions and acquired the property within 1,215 days before filing a bankruptcy. See 11 USC §522(p), amended by 87 Fed Reg 6625 (Feb. 4, 2022). See §11.88.
In Bhangoo v Engs Commer. Fin. Co. (In re Bhangoo) (BAP 9th Cir 2021) 634 BR 80, the automatic homestead stay was denied where debtor rented out property for multiple years, resided elsewhere on petition date, and otherwise lacked evidence of intent to return; distinguishes In re Karr and other cases. See §11.88.
Effective February 19, 2020, the Small Business Reorganization Act of 2019 (Pub L 116–54, 133 Stat 1079 (Aug. 23, 2019)) provides small business debtors the ability to reorganize through a more streamlined and cost-effective Chapter 11 process commonly referred to as Subchapter V. Key provisions include generally eliminating the disclosure statement requirement, the absolute priority rule, and other confirmation requirements. 11 USC §1181. Eligible small business debtors are defined as entities with less than $7,500,000 in debt and that meet other criteria. 11 USC §1182. Note that the debt ceiling will revert to $3,024,725 on June 21, 2024, unless further extended (Pub L 117-151, 136 Stat 1298 (June 21, 2022)). See §11.97.
Sheen v Wells Fargo Bank (2022) 12 C5th 905 is an important and crucial case. The Sheen court considered whether plaintiff borrowers could bring a negligence claim against Wells Fargo for breaching a duty to consider foreclosure alternatives in the context of loan servicing, specifically the loan modification plaintiff had submitted. The answer was a resounding no. The court primarily based this conclusion on the “economic loss doctrine.” It found that “Plaintiff's claim arises from the mortgage contract he had with Wells Fargo, and as such, falls within the ambit of the economic loss doctrine. That judicially created doctrine bars recovery in negligence for pure economic losses when such claims would disrupt the parties’ private ordering, render contracts less reliable as a means of organizing commercial relationships, and stifle the development of contract law.” 12 C5th at 915. The court expressly disapproved of Weimer v Nationstar Mortgage, LLC (ordered depublished October 28, 2022; former opinion at 47 CA5th 341), Rossetta v CitiMortgage (2017) 18 CA5th 628, Daniels v Select Portfolio Servicing (2016) 246 CA4th 1150, and Alvarez v BAC Home Loans Servicing (2014) 228 CA4th 941, and approved of Nymark v Heart Fed. Sav. & Loan Ass’n (1991) 231 CA3d 1089 and Lueras v BAC Home Loans Servicing (2013) 221 CA4th 49. The opinion was wide ranging. It found no statutory duty (12 C5th at 920–921) and no common law duty either (12 C5th at 921). While the federal courts have not yet applied Sheen, it seems that the California Supreme Court has definitively ruled on the issue, in which there was a split in both California state and federal courts as to whether a lender owed any duty to a borrower to consider foreclosure alternatives. The California Supreme Court has answered no. See §§12.11, 12.11C, 12.11D, 13.94, 13.95.
Usury was found to apply to non-exempt loan modification as it was deemed a forbearance. Moon v Milestone Fin., LLC (In re Moon) (Bankr ND Cal 2022) 639 BR 190. A “usury savings” clause stating that legally excessive interest will be deemed a reduction of principal can shield the nonexempt lender from penalties. Smith v Miller (In re Dominguez) (9th Cir 1993) 995 F2d 883 (applying California law). However, it should be noted that the intent requirement under California usury law is strict: “usury may be found where there has been only a conscious and voluntary taking of more than the legal rate of interest.” Burr v Capital Reserve Corp., (1969) 71 C2d 983, 989. See §13.2.