1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 CARMEL FINANCING, LLC, Case No. 3:21-cv-07387-WHO

8 Appellant,

ORDER ON MOTION FOR

9 v. REHEARING

10 SCHOENMANN, Re: Dkt. No. 15 Appellee. 11

12 13 Appellant and cross-appellee Carmel Financing, LLC (“Carmel”) moves for rehearing 14 under Federal Rule of Bankruptcy Procedure 8022 of my recent order resolving the parties’ 15 appeals of several rulings of the Bankruptcy Court. See Motion for Rehearing (“Mot”) [Dkt. No. 16 15]; Order on Bankruptcy Appeals (“Prior Order”) [Dkt. No. 13]. Under Rule 8022, “[p]etitions 17 for rehearing are designed to ensure that the appellate court properly considered all relevant 18 information in rendering its decision. A petition for rehearing is not a means by which to reargue 19 a party’s case.” In re Hessco Indus., Inc., 295 B.R. 372, 375 (B.A.P. 9th Cir. 2003) (internal 20 quotation marks and citations omitted). This Order assumes familiarity with the Prior Order and 21 the motion. The motion for rehearing is DENIED. 22 First, rehearing is denied on Carmel’s argument that the communication sent qualified as 23 notice under Cal. Com. Code § 9312(b)(4). See Mot. 2–4. The Prior Order fully and adequately 24 explained my ruling on this issue, see Prior Order 11–13, and Carmel’s rehearing motion is largely 25 a remix of its previous arguments. 26 Second, I reject Carmel’s argument that it was “automatically a loss payee” and, so, was 27 entitled to the proceeds regardless of whether its security interest was perfected. See Mot. 4–6. 1 Even assuming that this issue was adequately raised in its opening brief,1 Carmel is incorrect. As 2 a matter of undisputed fact, Carmel was not named or listed as a loss payee on the policy. And 3 “[t]he general rule in California limits recovery of proceeds under an insurance contract to the 4 named insureds.” Bonaparte v. Allstate Ins. Co., 49 F.3d 486, 488 (9th Cir. 1994) (citation 5 omitted). To get around this, Carmel argues that it should have been named a loss payee due to 6 the 2015 handwritten notation. See Mot. 4–5. But it is undisputed that, in response to the 7 notation, it was never added to the policy. It responds that the policy itself provides that it will 8 pay to mortgagees, making it “automatically” a loss payee, but that it not so: the policy states that 9 it will pay to mortgage holders “shown in the Declarations in their order of precedence, as 10 interests may appear.” Dkt. No. 9-2 at 267 (emphasis added). Carmel was not listed in the 11 declaration as a mortgagee. Though it thinks not being added was wrongful or mistaken, as the 12 Bankruptcy Court correctly observed, it “took no steps to protect its rights in any insurance policy 13 prior to the Tubbs Fire,” In re Mayacamas Holdings LLC, No. AP 19-03012-DM, 2020 WL 14 9211191, at *3 (Bankr. N.D. Cal. Nov. 2, 2020), and did not bring an action for reformation of the 15 contract.2 16 1 The thrust of Carmel’s opening brief cut against this argument; in its current motion, it relies on 17 the fact that, in the final two pages, it arguably advanced a version of the argument. That it now relies on it so strongly is, at the very least, odd. See Prior Order 10–11 (“Carmel also appears to 18 argue that, because it was legally owed the insurance proceeds under the agreement, it should have been named a loss payee on the insurance policy and that, this aside, it is the loss payee as a matter 19 of law. Open Br. 26–31. I need not address whether either is true because, regardless, the relevant question for present purposes is whether the trustee’s strong-arm powers prevail over Carmel’s 20 interest. As explained, for Carmel to prevail, it had to perfect its interest under the statute regardless of what else happened. It does not dispute that this is so. See, e.g., id. 15 (‘[W]hile the 21 Trustee makes much of the wholly irrelevant fact that Carmel was not listed as a loss payee under the Policy, that is actually a red herring.’ (emphasis added)); id. (making an argument about what 22 would occur ‘even if the designation of the loss payee in the Policy were relevant’); Appellant and Cross-Respondent’s Reply Brief on Appeal (“App. Reply”) [Dkt. No. 11] 2 (‘[T]he issue on this 23 appeal is solely one of perfection of that security interest.’); id. (arguing that ‘to the extent that it may be of significance’ to rebut the Trustee’s affirmative argument, ‘Carmel is a loss payee’); id. 24 3 (‘[T]he Trustee’s Brief seeks to impose a requirement that Carmel be listed as a loss payee under the insurance policy in order to perfect its security interest, when there is no such requirement in 25 any statute or case law under the Policy.’).” 26 2 Carmel’s previous briefing cited a principle that California courts have sometimes applied: “That which ought to have been done is to be regarded as done, in favor of him to whom, and against 27 him from whom, performance is due.” Dkt. No. 9 at 29 (quoting Cal. Civ. Code § 3529). It has 1 Third, | reject Carmel’s argument on the Prior Order’s determination about whether this 2 || case qualifies for attorney’s fees. See Mot. 6-10. Most of its argument retreads old ground and is 3 adequately addressed by the Prior Order. The only other argument is Carmel’s contention that Bos 4 || v. Bd. of Trustees, 818 F.3d 486 (9th Cir. 2016), contradicts my determination. Carmel’s analogy 5 to Bos is not baseless because Bos held that a nondischargeability action in an adversary 6 || proceeding was not an action “on a contract” under the attorney’s fees statute. See Bos, 818 F.3d 7 at 490. But Bos does not reach the situation here. Bos itself explained its limits when 8 || distinguishing an earlier case that held an action did qualify as “on the contract,” In re Penrod, 9 802 F.3d 1084 (9th Cir. 2015). Bos explained that Penrod was about “whether a provision of the 10 || contract should be enforced according to its terms, or whether its enforceability was limited by 11 bankruptcy law.” Bos, 818 F.3d at 490 (quoting Penrod) (alteration omitted). It required “the 12 || bankruptcy court to determine the enforceability of the agreement, and so it was comfortably an 5 13 action ‘on a contract.’” Id. at 490-91 (internal quotation marks and alteration omitted). As the 14 || Prior Order explained, that describes this case too: the suit was about whether the security interest 3 15 created by the contract could be enforced or, instead, was deprioritized by the operation of the 16 || bankruptcy laws. See Prior Order 19-21. Unlike this case, Bos concerned whether a debt, which 3 17 happened to arise as a result of a contract, could be discharged. This case concerned whether, 18 || under state law, a contractual security interest had been perfected. Id. 19 The motion for rehearing is DENIED. 20 IT IS SO ORDERED. 21 Dated: September 8, 2022 22 . 23 ® A W8liam H. Orrick United States District Judge 25 26 27 2g || Judicial actions to reform contracts in these circumstances, a framework Carmel has not attempted to use. See, e.g., Bonaparte, 49 F.3d at 488 (analyzing similar claim under reformation doctrine).