California Thrift & Loan Ass'n v. Downey Savings & Loan Ass'n (In re Eagles)
Opinion
Lead Opinion
Ashland, J.
MEMORANDUM OF DECISION
(Application For Declaratory Judgment & Other Relief)
The issue in this adversary proceeding is whether the stay of Bankruptcy Code § 362 stops the running of the three-month reinstatement period both as to the debtor and a junior trust deed holder.
The statutory right of reinstatement by a junior trust deed is found in California Civil Code § 2924c(a):
This bankruptcy case was filed after a notice of default was recorded by the holder of the first deed of trust but before the three-month period in § 2924c(a) had run. Bankruptcy Code § 362(a) is broad enough to stay or toll the running of this time upon the filing of a petition. The purpose of § 362(a) is set forth in the House Report No. 95-595, 95th Congress, First Session, p. 340, U.S.Code Cong. & Admin.News 1978, p. 5787, 6296.
It is argued that the holder of the second should not have a “free ride” during the pendency of the automatic stay and that the holder of the second could and should cure the default despite the stay. While at first blush that argument seems correct, it leads to a disordered result. There would be more than one three-month period, one as to the debtor and a different one as…