1 NOT FOR PUBLICATION 2 3 UNITED STATES BANKRUPTCY COURT 4 EASTERN DISTRICT OF CALIFORNIA 5 6 In re: Case No. 21-20167-A-13 7 HARLAN PAGE CONFER III and BHS-1 8 CHARLOTTE CLUFF CONFER, 9 MEMORANDUM 10 Debtors. 11

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15 Argued and submitted on May 18, 2021 16 at Sacramento, California 17 Honorable Fredrick E. Clement, Bankruptcy Judge Presiding 18

19 Appearances: Michael O'Dowd Hays for Harlan Page Confer 20 III and Charlotte Cluff Confer; Barry H. Spitzer for Jacob Watson and James Watson; 21 Kristen Koo for David P. Cusick, Chapter 13 trustee 22 23 24 25 26 27 1 Executory contracts may be rejected in Chapter 13. One day 2 before a foreclosure sale, octogenarian sellers contracted to sell 3 their home for one-half its value. Buyers have not yet paid the 4 purchase price; sellers have not conveyed title and remain in 5 possession. Sellers filed Chapter 13 and confirmed a plan rejecting 6 all executory contracts. Buyers move for stay relief to prosecute a 7 specific performance action for the sale contract. Should the court 8 grant the motion? 9 I. FACTS 10 A. Harlan and Charlotte Confer, Their Home and Financial Trouble 11 Harlan Confer is an 86-year old retired Baptist minister and army 12 chaplain; Charlotte Confer (collectively “the Confers”) is an 85-year 13 old retired nurse. 14 In 1986, the Confers purchased a home at 295 San Joaquin Drive, 15 Red Bluff, California. It is a four bedroom, two bathroom, 1,773 16 square foot home built in 1959. Prior to the events that form the 17 basis of this dispute, the Confers’ home had a value of $255,000- 18 280,000 and was encumbered by a first deed of trust in favor of New 19 Rez, LLC. 20 In 2010, the Confers received a home equity loan from Umpqua Bank 21 to build a small outbuilding behind their residence. The amount of 22 that loan was $43,000; the loan was secured by a second deed of trust 23 against their home. 24 Thereafter, Harlan Confer used the couple’s social security and 25 pension income to make unsecured loans to persons who were supposed to 26 use the monies to fund their college education and then repay the 27 Confers. When the Confers’ borrowers did not do so, the Confers fell 1 behind in payments on the loans secured by the first and second deeds 2 of trust. New Rez, LLC commenced foreclosure proceedings.1 The 3 foreclosure sale was noticed for Monday, January 27, 2020, at 2:00 4 p.m. 5 B. The Residential Purchase Agreement 6 During the evening before the foreclosure, Sunday, January 26, 7 2020, and mindful of the pending foreclosure sale, Edward Lenzer 8 (“Lenzer”) of “eXp Realty,” contacted the Confers at their home and 9 suggested a sale of the property to Jacob Watson and James Watson. He 10 promised the Confers $25,000 cash, approximately, in exchange for a 11 deed to their home to the Watsons and the Watsons’ agreement to pay 12 two trust deeds encumbering the property and costs of sale. 13 Initially, Harlan Confer was unwilling to sell, and asked Lenzer to 14 arrange a loan to cure the arrearages or to assist in consolidating 15 the two deeds of trust. Lenzer informed the Confers that the sale was 16 the only mechanism by which the equity in their home could be saved. 17 Harlan Confer remembers that he agreed to the sale, if and only if he 18 had a right to repurchase the property once he received the funds to 19 do so; the Watsons, speaking through Lenzer, dispute that Harlan 20 Confer conditioned the sale on such a repurchase provision. 21 The next morning, Lenzer returned to the Confers’ home and 22 presented them with a Residential Purchase Agreement signed by the 23 Watsons. Under its terms, Jacob Watson and James Watson offered to 24 purchase 295 San Joaquin Drive, Red Bluff, California, from the 25 Confers for $136,000. The Watsons promised to pay the Confers $22,000 26 1 The record is unclear whether it was New Rez, LLC or Umpqua Bank that 27 prosecuted foreclosure proceedings. For the purposes of this motion, the court assumes foreclosure was prosecuted by New Rez, LLC. But the true 1 as a down payment and the balance, $114,000, at or before the close of 2 escrow. Edward Lenzer, eXp Realty, represented both the Confers and 3 the Watsons in the transaction. Possession of the property was to be 4 turned over to the Watsons at the close of escrow. 5 Later that morning, the Confers signed the Residential Purchase 6 Agreement. Charlotte Confer delivered the signed sale agreement to 7 Lenzer at the situs of the foreclosure sale moments before the trustee 8 auctioned 295 San Joaquin Drive, Red Bluff, California. Lenzer 9 provided the auctioneer with proof that the arrearage had been paid 10 (apparently by the Watsons), and the auctioneer cancelled the 11 foreclosure sale. 12 Apparently, in their hurry to sign the agreement, the Confers 13 failed to sign and/or initial all necessary portions of the 14 Residential Purchase Agreement. During the late afternoon or early 15 evening hours of January 27, 2020, Lenzer returned to the Confers’ 16 home to collect still further signatures. Lenzer rushed the Confers 17 to do so, stating that “he wanted to get home and not spend another 18 night in a motel.” Harlan Confer decl. p. 5, lines 1-2, May 4, 2021, 19 ECF No. 40. 20 The Watsons did, in fact, make the $22,000 payment called for by 21 the agreement. Of that amount, the Watsons paid the Confers $19,968 22 directly, outside escrow; the remainder, approximately $2,032, was 23 paid into escrow. But the Watsons did not deposit the balance of the 24 purchase price into escrow. 25 Later, the Confers declined to proceed with the sale. 26 Specifically, they refused to sign escrow instructions and they also 27 refused to execute a deed to the property. At all times pertinent 1 Drive, Red Bluff, California. 2 The Confers, who did not wish to sell their home, attempted to 3 negotiate a settlement. But funding the settlement was a problem. 4 The Watsons wanted the Confers to honor their agreement to sell. 5 Settlement discussions broke down. 6 C. The State Court Action 7 In June 2020, the Watsons filed an action in state court, seeking 8 specific performance and damages. Steven M. Dean of the Dean Law 9 Firm, Inc. was counsel for the Watsons.2 The complaint plead causes of 10 action for specific performance, breach of contract and fraud. It 11 plead that (1) the Confers owned 295 San Joaquin Drive, Red Bluff, 12 California; (2) the Confers entered into a Residential Purchase 13 Agreement to sell that property to the Watsons for $136,000; (3) the 14 Watsons made an earnest money down payment of $24,032 ($22,000 of 15 which was paid directly to Confers); and (4) the Confers refused to 16 perform the purchase agreement notwithstanding receipt of $22,000 from 17 the Watsons. The Residential Purchase Agreement was appended to the 18 complaint. 19 The Confers were served with the lawsuit but failed to make a 20 timely appearance. 21 After the Confers’ default was entered, in October 2020, the 22 state court conducted a default prove up hearing. The court found 23 that: (1) there was a “valid written contract”3 between the Confers and 24

2 The court takes judicial notice of the Complaint, Watson v. Confer, No. 25 20CI000087 (Tehama County Superior Court June 8, 2020), attached as Exhibit 1 to Adversary Complaint, Watson v. Confer, 21-2024 (Bankr. E.D. Cal. April 27, 26 2021), ECF No. 1. Fed. R. Evid. 201. 3 Facts not within the horizon of the Tehama County Superior Court make the 27 court’s use of the phrase “valid written contract” unfortunate and make the Watsons’ dealings with the Confers more than a little troubling. First, the 1 the Watsons for the sale of 295 San Joaquin Drive, Red Bluff, 2 California, for $136,000; (2) the Watsons paid $22,000 ($19,967.88 3 directly to Confers) in earnest money; (3) the Confers refused to 4 proceed with the sale; (4) the Confers remained in possession of the 5 property; and (5) the Watsons had no adequate remedy at law. The 6 court ordered the Confers to sign escrow instructions and to execute 7 and deliver a grant deed for 295 San Joaquin Drive, Red Bluff to the 8 escrow holder. It also ordered escrow to close “[two] business days 9 decl. 2:3-13, April 15, 2021, ECF No. 23. Second, it appears that the 10 purchase was not for the Watsons’ use as a personal residence, Lenzer decl. 2:7-15, May 7, 2011, ECF No. 44 (describing the subject property as “worth 11 the investment by them”), Harlan Confer p. 4, May 4, 2021, ECF No. 40 (“He [Lenzer] informed me that they had a couple of investors that might be 12 willing to agree but that he had to talk with them first”); contra Residential Purchase Agreement ¶ 9(A), April 15, 2021, ECF No.24 (suggesting 13 use as a personal residence); see also Cal. Civ. Code § 1695.1(a)(1)(excluding purchases for use as the buyer’s personal residence). 14 Third, at the time of the transaction in dispute, Harlan Confer and Charlotte Confer were 86 and 85 years old, respectively. Charlotte Confer decl. p. 2, 15 May 4, 2021, ECF No. 39. Fourth, the Watsons first approached the Confers 20 hours before the Confers’ first deed of trust holder was to conduct a 16 foreclosure sale of 295 San Joaquin Drive, Red Bluff, California, and the Watsons made their purchase offer 4 hours before the foreclosure sale. Lenzer decl. 2:4-6, May 7, 2021, ECF No. 44; Lenzer decl. 2-13, April 15, 17 2021, ECF No. 23; Charlotte Confer p. 3, May 4, ,2021, ECF No. 39. Fifth, the Watsons’ purchase offer was for one-half the value of home. Compare 18 Order for Specific Performance 2:9-16, April 15, 2021, ECF No. 24, with Schedule A/B, February 1, 2021, ECF No. 14 (purchase price of $136,000 19 against a value of $255,000). Sixth, eXp Realty (acting through Edward J. Lenzer) acted on behalf of both the Watsons and the Confers. Residential 20 Purchase Agreement pp. 1, 10, April 15, 2021, ECF No. 24. Seventh, the Watsons and Lenzer appear to have violated the Home Equity Sales Contract 21 Act, Cal. Civ. Code § 1695 et seq., by: (A) failing to give the Confers statutorily mandated notice of right to cancel the contract, Cal. Civ. Code § 22 1695.5, Residential Purchase Agreement ¶ 5(B) (omitting reference to Home Equity Sales Contract Act); (B) failing to include statutorily required 23 information, Cal. Civ. Code § 1695.3; (C) paying consideration prior to expiration of time to rescind, Cal. Civ. Code §1695.6(b)(4); and (D) acting 24 unconscionably, i.e., payment of one-half price to octogenarian sellers hours before foreclosure sale, Cal. Civ. Code §§ 1695.13-1695.14. This court believes that the buyers/Lenzer’s actions give rise to causes of action 25 against them for (1) Watsons: violation of Home Equity Sales Contract Act, Cal. Civ. Code § 1695.7 (actual and treble damages, as well as attorney’s 26 fees, Cal. Civ. Code § 1695.7); (2) Lenzer: breach of fiduciary duty, Restatement (Second) Agency § 387 et seq. (actual damages); and (3) Watsons 27 and Lenzer: financial abuse of an elder person, Cal. Welfare & Inst. Code §§ 15610.30, 15657.5 (actual and punitive damages as well as attorney’s fees). 1 after [the Confers] have deposited the [d]eed and escrow instructions 2 with [the escrow holder] and [the Watsons] have deposited the cash 3 balance of the purchase price.” Order for Specific Performance 3:18- 4 4:15, Watson v. Confer, No. 20CI000087 (Tehama County Superior Court 5 October 7, 2020). The court reserved the issue of damages for later 6 determination. Id. at 5:20-21. 7 The Confers did not sign the escrow instructions or convey title. 8 The monetary component of the state court action was not proved 9 up and no judgment was entered. 10 D. Harlan Confer and Charlotte Confer file Chapter 13 Bankruptcy and Confirm a Plan 11 12 In January 2021, the Confers filed a Chapter 13 bankruptcy. As 13 pertinent here, they claimed ownership in 295 San Joaquin Drive, Red 14 Bluff, California, which they valued at $255,000. Their schedules 15 indicate that their residence at 295 San Joaquin Drive, Red Bluff, 16 California was encumbered by a first deed of trust in favor of New 17 Rez, LLC and a second deed of trust in favor of Umpqua Bank. Both 18 were in default. The Confers claimed a homestead exemption in their 19 San Joaquin Drive residence in the amount of $300,000.4 Schedule C, ECF 20 No. 13. Their Schedule E/F, which lists “Creditors Who Have Unsecured 21 Claims,” included the following scheduled debt: “Dean Law Firm, Inc., 22 1610 West Street, Ste 2, P.O. Box 994134, Redding, CA 96099-4134”5 in 23 the amount of $32,174.42.” Id. at Schedule E/F. In describing the 24 debt, the Confers categorized the debt as “Other” and added the 25 following verbiage “Attorneys for Jacob and James Watson in Case No. 26 4 Cal. Code of Civ. Proc. 703.740. 27 5 That address is consistent with Steven Dean/Dean Law Firm’s address as indicated in the pleadings filed in Watson v. Confer, No. 20CI000087 (Tehama 1 20CI000087 in Tehama County Superior Court, Red Bluff...” Id. Schedule 2 G, which should list “Executory Contracts and Unexpired Leases,” was 3 left blank. Id. at Schedule G. The creditors’ matrix filed in support 4 of the petition included the “Dean Law Firm, Inc.,” at that firm’s 5 correct address, but it did not include Jacob Watson or James Watson 6 specifically. 7 The Confers also filed a Chapter 13 plan. Chapter 13 Plan, 8 January 25, 2021, ECF No. 12. The plan provided for 60 monthly 9 payments: $1,518 per month from February 2021 to September 25, 2023, 10 and then $1,709 per month for the remainder of the plan. Id. at §§ 11 2.01, 2.03, 7.0. From those funds, the Chapter 13 trustee was to pay 12 creditors by class. The plan provided for payment of administrative 13 expenses, i.e., trustee and debtor’s counsel’s fees, as well as 14 payment of ongoing and delinquent amounts due to the first and second 15 trust deed holders, i.e., New Rez, LLC and Umpqua Bank. Id. at § 16 3.07. Unsecured creditors were provided for by the plan, but the 17 Confers estimated that the dividend paid to that class would be “0%.” 18 Id. at § 3.14. That plan rejected all executory contracts. Id. at §§ 19 4.01, 4.02. It also revested all property of the estate in the 20 debtors upon confirmation. Id. at § 6.01. 21 The Clerk of the Court served the Notice of Chapter 13 Bankruptcy 22 Case, February 9, 2021, ECF No. 15, and the Confers’ Chapter 13 Plan, 23 January 25, 2021, ECF No. 15, on the creditors, including the Dean Law 24 Firm, Inc., who was included on the Confers’ creditors’ matrix. 25 Certificate of Notice, February 11, 2021, ECF Nos. 16-17. Because the 26 Watsons were not included on the creditors’ matrix, they were not 27 served with the Notice of Chapter 13 Bankruptcy Case, except through 1 deadlines for objecting to the claims of exemptions, objection to plan 2 confirmation and filing adversary proceedings to challenge the 3 discharge of certain debts. Notice §§ 8, 9, February 9, 2021, ECF No. 4 15. 5 The trustee convened, and concluded, the meeting of creditors. 6 After the deadlines for objection to the debtors’ claim of 7 exemption and to confirmation of the plan passed—and neither the 8 trustee nor any party in interest having objected, the Confers’ 9 Chapter 13 plan was confirmed. 10 Neither the Watsons, nor Lenzer, filed a Proof of Claim, and the 11 non-governmental claims bar date has passed. 12 The Watsons subsequently filed an adversary proceeding to except 13 the Confers’ debt to them, contending that the debt incurred to them 14 arose from fraud and/or constituted a willful and malicious injury. 15 11 U.S.C. § 523(a)(2)(A), (a)(6).6 Watson v. Confer, No. 21-2024 16 (Bankr. E. D. Cal. 2021). 17 II. PROCEDURE 18 The Watsons move for stay relief to enforce the order for 19 specific performance issued by the state court. In support of their 20 position, they argue that: (1) they were not given notice of the 21 Confers’ Chapter 13 petition; (2) the state court order of specific 22 23 6 This court lacks subject matter jurisdiction over this adversary proceeding 24 i Un .s So .f Ca .r § a 5s 2 3i (t a )r (a 6i )se ; s s et eh e T ow si tl el f vu .l Sa mn ed d bm ea rl gi c (i Io nu s r ee x Tc oe sp tt ei )o ,n 2t 0o 1 4d i Ws Lc h 3a 9r 0g 8e 1, 3 91 1 ( 9th Cir. BAP August 12, 2014) (recognizing the discharge of 11 U.S.C. § 1328(a) 25 does not except willful and malicious injuries from discharge and that only the hardship discharge of 11 U.S.C. § 1328(b)-(c) excepts those debts from 26 the Chapter 13 discharge). Since the Confers have not yet sought--and may never seek--a hardship discharge, the court lacks subject matter jurisdiction 27 over any § 523(a)(6) cause of action. Fed. R. Bankr. P. 4007(d). The court has issued an Order to Show Cause regarding dismissal. Order, Watson v. 1 performance extinguished the Confers’ rights to the 295 San Joaquin 2 Drive residence; (3) the state court’s findings preclude this court 3 from denying stay relief, i.e., the Rooker-Feldman doctrine; and (4) 4 cause exists to allow the state court to complete the specific 5 performance portion of their action. The Confers oppose the motion. 6 III. JURISDICTION 7 This court has jurisdiction, 28 U.S.C. §§ 1334, 157 (a), (b)(1); 8 General Order No. 182 of the U.S. District Court for the Eastern 9 District of California, and this is a core proceeding in which this 10 court may enter final orders and judgment, 28 U.S.C. § 157(b)(2)(A), 11 (G). 12 IV. LAW 13 Filing a Chapter 13 petition invokes the stay. 11 U.S.C. §§ 14 103(a), 362(a). “The stay protects the [1] debtor, [2] the debtor's 15 property, and [3] property of the estate.” In re Oakhurst Lodge, Inc., 16 582 B.R. 784, 791 (Bankr. E.D. Cal. 2018), citing In re Casgul of 17 Nevada, Inc., 22 B.R. 65, 66 (9th Cir. BAP 1982). 18 (a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this 19 title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a 20 stay, applicable to all entities, of-- 21 (1) the commencement or continuation, including the issuance or employment of process, of a judicial, 22 administrative, or other action or proceeding against the debtor that was or could have been commenced before 23 the commencement of the case under this title, or to recover a claim against the debtor that arose before 24 the commencement of the case under this title; 25 (2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before 26 the commencement of the case under this title; 27 (3) any act to obtain possession of property of the estate or of property from the estate or to exercise 1 (4) any act to create, perfect, or enforce any lien against property of the estate; 2 (5) any act to create, perfect, or enforce against 3 property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement 4 of the case under this title; 5 (6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement 6 of the case under this title.... 7 11 U.S.C. § 362(a) (emphasis added). 8 Ordinarily, the stay terminates either upon discharge or when the 9 property is no longer property of the estate. 10 (c) Except as provided in subsections (d), (e), (f), and 11 (h) of this section-- 12 (1) the stay of an act against property of the estate under subsection (a) of this section continues until 13 such property is no longer property of the estate; 14 (2) the stay of any other act under subsection (a) of this section continues until the earliest of-- 15 (A) the time the case is closed; 16 (B) the time the case is dismissed; or 17 (C) if the case is a case under chapter 7 of this 18 title concerning an individual or a case under chapter 9, 11, 12, or 13 of this title, the time a 19 discharge is granted or denied.... 20 11 U.S.C. § 362(c)(1), (c)(2). 21 While the stay remains effective, creditors may not take any of 22 the acts described in § 362(a). Acts in violation of the stay are 23 void, not voidable. In re Gruntz, 202 F.3d 1074, 1081-1082 (9th Cir. 24 2000); Hillis Motors, Inc. v. Hawaii Auto. Dealers' Ass'n, 997 F.2d 25 581, 586 (9th Cir. 1993); In re Schwartz, 954 F.2d 569, 571 (9th Cir. 26 1992) (acts in violation of the stay may not be cured or ratified). 27 Persons who violate the stay may be held to answer for actual and 1 punitive damages, as well as attorney’s fees, 11 U.S.C. § 362(k), or 2 may be held in contempt of court. In re Pace, 67 F.3d 187, 193-194 3 (9th Cir. 1995). 4 Persons wishing to proceed against the debtor, the debtor’s 5 property or property of the estate must seek, and obtain, leave of the 6 bankruptcy court. 11 U.S.C. § 362(d). 7 (d) On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay 8 provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such 9 stay-- 10 (1) for cause, including the lack of adequate protection of an interest in property of such party in 11 interest; 12 (2) with respect to a stay of an act against property under subsection (a) of this section, if-- 13 (A) the debtor does not have an equity in such 14 property; and 15 (B) such property is not necessary to an effective reorganization.... 16 11 U.S.C. § 362(d)(1), (d)(2). 17 18 Relief from the stay is sought by motion. Fed. R. Bankr. P. 19 4001(a)(1). When such a motion is presented, the parties share the 20 burden of proof. 21 (g) In any hearing under subsection (d) or (e) of this section concerning relief from the stay of any act under 22 subsection (a) of this section-- 23 (1) the party requesting such relief has the burden of proof on the issue of the debtor's equity in property; 24 and 25 (2) the party opposing such relief has the burden of proof on all other issues. 26 27 11 U.S.C. § 362(g). 1 determined on a case-by-case basis. In re MacDonald, 755 F.2d 715, 2 717 (9th Cir. 1985). In some instances, cause includes allowing a 3 creditor to conclude pre-bankruptcy state court litigation that fixes 4 the parties rights. In re Robbins, 310 B.R. 626, 629-630 (9th Cir. 5 BAP 2004) (perfection of prejudgment attachment lien); cf. In re Perl, 6 811 F.3d 1120, 1127 (9th Cir. 2016). In determining whether to allow 7 litigation outside the bankruptcy court, most courts consider multiple 8 factors. In re Sonnax Indus., Inc., 907 F.2d 1280, 1286 (2nd Cir. 9 1990). 10 V. DISCUSSION 11 Long standing Ninth Circuit authority controls this dispute. In 12 In re Alexander, a case that is [almost] indistinguishable from the 13 present dispute, the circuit held that a real estate sales contract 14 was executory and subject to rejection in a Chapter 13 plan, 11 U.S.C. 15 § 1322(b)(7), even though the seller had deposited into escrow all 16 funds necessary to close but where the buyer had neither “give[n] up 17 possession” nor “convey[ed] title”. 670 F.2d 885, 887-888 (9th Cir. 18 1982). 19 Alexander differs from the present case in that the buyers in the 20 present case sought, and the state court issued, an order compelling 21 the sellers, i.e., Harlan Confer and Charlotte Confer, to specifically 22 perform their contract with the Watsons. In the Watsons’ view, that 23 order brings the case within the rule articulated in Perl, 811 F.3d at 24 1127 (which held that a writ of possession, after the conclusion of a 25 foreclosure but prior to bankruptcy, extinguished all of the debtor’s 26 legal and equitable interests in the property). This court disagrees. 27 Perl involves a post-foreclosure sale unlawful detainer proceeding in Perl’s 1 California Civil Code § 2924h(c), which specifically extinguishes the 2 former owner’s rights after nonjudicial foreclosure. That section 3 reads, 4 For the purposes of this subdivision, the trustee's sale shall be deemed final upon the acceptance of the last and 5 highest bid, and shall be deemed perfected as of 8 a.m. on the actual date of sale if the trustee's deed is recorded 6 within 18 calendar days after the sale, or the next business day following the 18th day if the county recorder 7 in which the property is located is closed on the 18th day. 8 California Civil Code § 2924h(c). 9 In contrast, a decree of specific performance is an order only 10 compelling a seller of real estate to complete the transaction, e.g., 11 convey title, Rogers v. Davis, 28 Cal.App.4th 1215, 1221 (1994). It 12 does not extinguish the sellers’ legal and/or equitable rights. 13 Moreover, the Tehama County Superior Court did not consider the 14 seller’s rights in its order. Order for Specific Performance 4:20- 15 5:3, Watson v. Confer, No. 20CI000087 (Tehama County Superior Court 16 April 15, 2021), ECF No. 24 (authorizing the Watsons to use an 17 expedited contempt mechanism to enforce the specific performance 18 order). 19 A. The State Court’s Specific Performance Order Did Not Extinguish the Confers’ Rights in 295 San Joaquin Drive 20 When a Chapter 13 bankruptcy is filed an estate is created. 11 21 U.S.C. § 541(a). That estate holds “all legal or equitable interests 22 of the debtor in property as of the commencement of the case.” Id. 23 State, not federal, law “determine[s] property interests in bankruptcy 24 proceedings.” Perl, 811 F.3d at 1127; Butner v. United States, 440 25 U.S. 48, 54-55 (1979). It is only when the debtor’s legal and 26 equitable interests have both been extinguished prior to the petition 27 that a debtor, and by extension the estate, has no interest in 1 property. Perl, at 1127-1130 (properly noticed non-judicial 2 foreclosure sale and timely recordation of deed extinguishes legal 3 interest, Cal. Civ. Code § 2924h(c), writ of possession extinguishes 4 equitable right of possession after foreclosure sale). 5 California courts have long understood that a buyer who obtains a 6 specific performance decree becomes the equitable owner of the 7 property, and the seller retains legal title until the buyer fully 8 performs the contract. Willis v. Wozencraft, 22 Cal. 607, 616-617 9 (1863); Miller v. Waddingham, 91 Cal. 377, 380 (1891). 10 However, a contract for the sale of real estate may be specifically enforced by the purchaser, equity regarding as 11 done that which ought to be done; it considers the purchaser to be the owner of the land. The vendor who 12 retains the legal title as security for the payment of the purchase price has no greater rights than he would possess 13 if he had conveyed the land and taken back a mortgage. The vendee, particularly after he goes into possession of the 14 land under an executory contract, is for all purposes the owner and the vendor retains mere legal title. 15 Elliott v. McCombs, 17 Cal.2d 23, 31 (1941) (internal citations 16 omitted) (emphasis added). 17 Like Elliott, the state court issued a decree of specific 18 performance. Order of Specific Performance, Watson v. Confer, No. 19 20CK000087 (Tehama County Superior Court October 7, 2020), ECF No. 24. 20 It ordered the Confers to sign escrow instructions and a deed. Id. at 21 3:18-4:8. It also threatened the Confers with contempt for non- 22 compliance. Id. at 4:20-5:3. But it went no further; such an order is 23 not self-effectuating. Had the Watsons wished to enforce that order 24 they would have needed to ask the court to appoint the Clerk of the 25 Court as elisor to sign the escrow instructions and deed on the 26 Confers’ behalf. Cal. Code of Civ. Proc. § 128(a)(4); Blueberry 27 Properties, LLC v. Chow, 230 Cal.App.4th 1017, 1020-1021 (2014); Rayan v. Dykeman 1 not do so. Neither the escrow instructions, nor the deed, were signed 2 by the Confers or the Clerk of the Tehama County Superior Court and 3 there is no indication that the Watsons delivered the balance of the 4 purchase price into escrow. For these reasons, the Confers retained 5 legal title to 295 San Joaquin Drive, Red Bluff on the date of the 6 petition. 7 B. The State Court’s Order Does Not Bind this Court 8 The Watsons argue that the Rooker-Feldman doctrine controls this 9 court’s decision. It does not. The Watsons conflate the Rooker- 10 Feldman doctrine with the doctrine of res judicata (claim and issue 11 preclusion). The Rooker-Feldman doctrine is a jurisdictional 12 limitation on this court; it “preclude[s] “de facto appeals” from 13 state court judgments—i.e., when a federal plaintiff asserts as a 14 legal wrong an allegedly erroneous decision by a state court and seeks 15 relief from a state court judgment based on that decision.” Virginia 16 A. Phillips and Karen L. Stevenson, California Practice Guide: Federal 17 Civil Procedure Before Trial, Subject Matter Jurisdiction § 2:4945 18 (Rutter Group 2021); 28 U.S.C. § 1257. It “applies only when the 19 federal plaintiff was a party to the state case and is challenging an 20 adverse decision by the state court.” Id. at § 2:4950. That is not 21 the case here. 22 In contrast, “[f]ederal courts must give the same res judicata 23 effect to state court judgments that courts of that state would give 24 (28 U.S.C. § 1738—“full faith and credit”).” Id. Here, the debtors 25 are not asking this court to review, reverse or modify the state 26 court’s order of specific performance; rather, they are resisting the 27 Watsons’ motion for stay relief and are doing so under well-settled Alexander 1 1. Res Judicata - Issue preclusion 2 In federal courts, issue preclusion is determined by law of the 3 state in which the underlying judgment was rendered. Gayden v. 4 Nourbakhsh (In re Nourbakhsh), 67 F.3d 798, 800 (9th Cir. 1995). “The 5 party seeking to employ issue preclusion bears the burden of showing 6 its applicability.” In re Javahery, No. 2:14-BK-33249-DS, 2017 WL 7 971780, at *5 (B.A.P. 9th Cir. Mar. 14, 2017), aff'd, 742 F. App'x 307 8 (9th Cir. 2018), citing Vella v. Hudgins, 20 Cal. 3d 251, 257 (1977). 9 California courts may apply issue preclusion when the following five 10 elements are satisfied. 11 First, the issue sought to be precluded from relitigation must be identical to that decided in a former proceeding. 12 Second, this issue must have been actually litigated in the former proceeding. Third, it must have been necessarily 13 decided in the former proceeding. Fourth, the decision in the former proceeding must be final and on the merits. 14 Finally, the party against whom preclusion is sought must be the same as, or in privity with, the party to the former 15 proceeding. 16 In re Harmon, 250 F.3d 1240, 1245 (9th Cir. 2001) (emphasis added). 17 California recognizes issue preclusion for default judgments but 18 limits its application. 19 The mere fact that “judgment was secured by default does 20 not warrant the application of a special rule.” Williams v. Williams (In re Williams' Estate), 36 Cal.2d 289, 223 P.2d 21 248, 252 (1950). California law does, however, place two limitations on this general principle. The first is that 22 collateral estoppel applies only if the defendant “has been personally served with summons or has actual knowledge of 23 the existence of the litigation.” In re Harmon, 250 F.3d at 1247 (quoting Williams, 223 P.2d at 254). Collateral 24 estoppel, therefore, only applies to a default judgment to the extent that the defendant had actual notice of the 25 proceedings and a “full and fair opportunity to litigate.” Id. at 1247 n. 6. 26 The second limitation, in the context of a default 27 judgment, is that a decision has a preclusive effect in later proceedings “only where the record shows an express finding upon the allegation” for which preclusion is 1 sought. Williams, 223 P.2d at 254. But, as we recognized in In re Harmon, “the express finding requirement can be 2 waived if the court in the prior proceeding necessarily decided the issue.” 250 F.3d at 1248. In such 3 circumstances, an express finding is not required because “if an issue was necessarily decided in a prior proceeding, 4 it was actually litigated.” Id. 5 In re Cantrell, 329 F.3d 1119, 1123–24 (9th Cir. 2003) (emphasis added). 6 Two of the elements for application of issue preclusion are 7 lacking here. First, the state court judgment was not final. A 8 judgment is final for the purposes of issue preclusion “while an 9 appeal remains pending or while the period for filing an appeal has 10 not yet expired. Kay v. City of Rancho Palos Verdes, 504 F.3d 803 (9th 11 Cir. 2007l) (applying California law); Franklin & Franklin v. 7 Eleven 12 Owners for Fair Franchising, 85 Cal.App.4th 1168, 1174 (2000); see 13 also Cal. R. of Court 8.104(a)(1)(C) (ordinarily an appeal must be 14 filed not later than 180 days after entry of judgment)”; Javahery, 15 2017 WL 971780 at *5. Here, the court issued a specific performance 16 order. But judgment was never entered and the time for an appeal did 17 not expire. As a result, issue preclusion is not applicable. 18 Second, because the state court judgment occurred in the context 19 of default judgment, res judicata may only be applied where the record 20 contains express findings on the issue for which preclusion is sought 21 or, absent express findings, where the issue was necessarily decided. 22 Cantrell, 329 F.3d at 1123–24. Stay relief and rejection of executory 23 contracts are federal—not state—issues, 11 U.S.C. §§ 362(d), 24 365(d)(2); Gruntz, 202 F.3d at 1083-1084. As a consequence, these 25 issues were not and could not have been considered by the state court. 26 For these reasons, res judicata is not applicable here. 27 1 2. Rooker-Feldman 2 “Under the [Rooker-Feldman] doctrine, inferior federal courts 3 are precluded from reversing or modifying a state court judgment on 4 the merits where the issues decided in the state court are 5 ‘inextricably intertwined’ with the federal issue before the court.” Pavelich v. McCormick, Barstow, Sheppard, Wayte & Carrut LLP (In re 6 7 Pavelich), 229 B.R. 777, 782 (9th Cir. BAP 1999); Exxon Mobile Corp. 8 v. Saudi Basic Indus. Corp., 544 U.S. 280, 292-293 (2005); Rooker v. 9 Fidelity Trust Co., 263 U.S. 413, 415 (1923); District of Columbia 10 Court of Appeals v. Feldman, 460 U.S. 462, 483 (1983). State court 11 losers may not challenge that judgment in a lower federal court. 12 Johnson v. De Grandy, 512 U.S. 997, 1005-1006 (1994). 13 Rooker-Feldman has four elements: 14 [1] the federal court plaintiff must have lost in state court; [2] the plaintiff must complain of injuries caused 15 by the state court judgment; [3] the plaintiff must be asking the district court to review and reject that 16 judgment; and [4] the state court judgment must have been rendered before the district court proceedings commenced 17 (i.e., Rooker-Feldman has no application to federal court suits proceeding in parallel with ongoing state court 18 litigation). 19 Virginia A. Phillips and Karen L. Stevenson, California Practice 20 Guide: Federal Civil Procedure Before Trial, Subject Matter 21 Jurisdiction § 2:4946 (Rutter Group 2021). 22 Two exceptions to the Rooker-Feldman doctrine exist: writs of 23 habeas corpus, See Plyler v. Moore, 129 F.3d 728, 732 (4th Cir. 1997); 24 Ritter v. Ross, 992 F.2d 750, 753 (7th Cir. 1993); Blake v. Papadakos, 25 953 F.2d 68, 71 n. 2 (3d Cir. 1992); and core proceedings in 26 bankruptcy cases. Gruntz, 202 F.3d at 1083-1084 (bankruptcy courts 27 have exclusive jurisdiction over core matters); In re Dunbar, 245 F.3d 1058, 1061-1064 (9th Cir. 2001); In re McGhan, 288 F.3d 1172, 1181- 1 1182 (9th Cir. 2002); March, Ahart & Shapiro, California Practice 2 Guile: Bankruptcy, Governing Law, Jurisdiction and Venue § 1:275 3 (Rutter Group 2020). 4 Even if the court construed the debtor’s arguments as a request 5 to review the state court’s order for specific performance, it would 6 fall within the bankruptcy core matter exception to the Rooker-Feldman 7 doctrine. The scope of the stay and the decision to modify, or not to 8 modify it, are core and fall within the exclusive jurisdiction of this 9 court. 28 U.S.C. §§ 157(b)(2)(A), (G), 1334(b); Gruntz, 202 F.3d at 10 1083-1084. Likewise, the assumption or reject of executory leases fall 11 within this court’s exclusive jurisdiction. 28 U.S.C. § 12 157(b)(2)(A)(O); Alexander, 670 F.2d at 887-888; In re Turbowind, 13 Inc., 42 B.R. 579, 583 (Bankr. S.D. Cal. 1984). For these reasons, 14 the Rooker-Feldman doctrine is not applicable here. 15 C. The Confirmed Plan Binds the Watsons 16 As a rule, a confirmed plan binds the debtors and their 17 creditors. “The provisions of a confirmed plan bind the debtor and 18 each creditor, whether or not the claim of such creditor is provided 19 for by the plan, and whether or not such creditor has objected to, has 20 accepted, or has rejected the plan.” 11 U.S.C. § 1327(a). “After 21 confirmation, creditors ordinarily cannot assert any interest other 22 than as provided in the plan.” March, Ahart & Shapiro, California 23 Practice Guile: Bankruptcy, Governing Law, Chapter 13 Cases § 13:1090 24 (Rutter Group 2020), citing In re Evans, 30 B.R. 530, 531-532 (9th Cir 25 BAP 1983). 26 But creditors without notice of the Chapter 13 case are not bound 27 by the terms of a confirmed plan. In re Linkous, 990 F.2d 160, 162 Aboody v. U.S. (In re Aboody), 1 Cir. BAP 1998). In most instances, creditors receive notice of a 2 Chapter 13 case when the Clerk of the Court serves the Notice of 3 Chapter 13 Bankruptcy Case. 11 U.S.C. S§ 342(a), 521(1) (debtor must 4 schedule the names and addresses of all creditors); Fed. R. Bank. P. 5 2002(a)(1), (b), (f); Official Form 309. The Clerk of the Court 6 serves that notice on the list of creditors provided by the debtor. 7 In a voluntary case, the debtor shall file with the petition a list containing the name and address of each 8 entity included or to be included on Schedules D, E/F, G, and H as prescribed by the Official Forms. If the debtor is 9 a corporation, other than a governmental unit, the debtor shall file with the petition a corporate ownership 10 statement containing the information described in Rule 7007.1. The debtor shall file a supplemental statement 11 promptly upon any change in circumstances that renders the corporate ownership statement inaccurate. 12 Fed. R. Bankr. P. 1007(a)(1) (emphasis added). 13 But notice of the Chapter 13 case served only on the creditor’s 14 attorney is sufficient if there is “a nexus between the creditor’s 15 retention of the attorney and the creditor’s claim against the debtor. 16 Vicenty v. Sandoval (In re San Miguel Sandoval), 327 B.R. 493, 508 17 (1st Cir. BAP 2005); In re Schicke, 290 B.R. 792, 802-803 (10th Cir. 18

BAP 2003).

19 Here, the Watsons were omitted from the list of creditors filed 20 by the debtor. Verification of Master Address List, January 20, 2021, 21 ECF No. 2. But Steven Dean of the Dean Law Firm, Inc., who 22 represented the Watsons in their dispute with the Confers, was 23 included on the Verification of Master Address List and did received 24 timely notice of the Chapter 13 case. This is precisely the nexus 25 contemplated by Sandoval and by Schicke. The Watsons had notice of 26 the Confers’ chapter 13 bankruptcy and are bound by the terms of the 27 confirmed plan. 1 Here, the plan rejected all executory contracts. The Confers’ 2 plan provided: 3 Debtor assumes the executory contracts and unexpired listed below. Debtor shall pay directly to the other party to the 4 executory contract or unexpired lease, before and after confirmation of this plan and whether or not a proof of 5 claim is filed, all post-petition monthly payments required by the lease or contract. Unless a different treatment is 6 required by 11 U.S.C. § 365(d)(1) and is set out in section 7, the Nonstandard Provisions pre-petition arrears shall be 7 paid in full. Trustee shall pay the monthly dividend specified in the table below on account of those arrears. 8 Any executory contract or unexpired lease not listed…below 9 is rejected. 10 Name of Other Party to Executory Contract/Unexpired Lease [debtors inserted the word] ‘-None-.’” 11 Plan §§ 4.01-4.02, January 25, 2021, ECF No. 12; see also Order 12 Confirming Plan, April 16, 2021, ECF No. 27. That the Confers did not 13 identify the Watsons’ interest as an executory contract does not 14 affect that result. 15 The Confers’ schedules and plan signal treatment of the Watsons’ 16 claim as an unsecured debt and rejection of the executory contract. 17 The Watsons had specific and timely notice of the case, the deadlines, 18 and their treatment under the plan through their counsel Steven Dean. 19 As a result, at least absent revocation of the confirmation order, 11 20 U.S.C. § 1330, conversion, 11 U.S.C. § 348(c), Harris v. Viegelahn, 21 575 U.S. 510 (2015), or dismissal, 11 U.S.C. § 349, the plan binds the 22 Watsons, and the Residential Purchase Agreement has been properly 23 rejected and is of no force or effect. 24 D. Stay Relief 25 1. As to the estate 26 As to the estate, the stay lifts when the property is no longer 27 property of the estate. 11 U.S.C. § 362(c)(1). Unless the plan or 1 order confirming the plan provides otherwise, confirmation of a 2 Chapter 13 plan revests property in the debtor. 11 U.S.C. § 1306(b), 3 1327(b); California Franchise Tax Board v. Jones (In re Jones), 657 4 F.3d 921, 927-930 (9th Cir. 2011). 5 Here, the plan revested property in the debtor upon confirmation. 6 Plan § 6.01, January 25, 2021, ECF No. 12. As a matter of law, the 7 stay lifted as to property of the estate upon plan confirmation. 8 Order, April 16, 2021, ECF No. 27. As to the estate, the issue is 9 moot. 10 2. As to the debtors and the debtors’ property 11 As to the debtors and their property, including 295 San Joaquin 12 Drive, Red Bluff, California, the stay remains in effect. 11 U.S.C. § 13 362(c)(2) (stay remains until the case is closed or dismissed or a 14 discharge is granted). 15 Relief may be granted for cause or because there is no equity in 16 the property and the property it is not necessary for an effective 17 reorganization. 11 U.S.C. § 362(d). Cause does not exist. 11 U.S.C. 18 § 362(d)(1). The Confers have effectively rejected their executory 19 contract with the Watsons and have elected to treat them as unsecured 20 creditors. As a consequence, the existence of inchoate specific 21 performance litigation in state court does not constitute cause for 22 stay relief. 23 Moreover, the Confers have equity in 295 San Joaquin. Equity 24 means the fair market value of the property less the amount due on 25 secured claims. In re Mellor, 734 F.2d 1396, 1400, fn. 2 (9th Cir. 26 1984); Stewart v. Gurley, 745 F.2d 1194, 1196 (9th Cir. 1984). The 27 property is valued at $255,000. Schedule A/B, February 1, 2021, ECF 1 (valuing property $280,0000). The first trust deed holder, New Rez, 2 LLC is owed $49,688. Proof of Claim 6-1. The second trust deed 3 holder is owed $46,036. Proof of Claim 3-1. The Confers’ equity is 4 $159,276. They have exempted $300,000. Equity exits. This court will 5 not grant stay relief under § 362(d)(2). 6 As a result, as to the debtors and their property, the motion 7 will be denied. 8 VI. CONCLUSION 9 As to the estate, the motion will be denied as moot; as to the 10 debtors and their property, including 295 San Joaquin Drive, Red 11 Bluff, California, the motion will be denied. 12 To be clear: Harlan Confer, Charlotte Confer and all of their 13 property, e.g., 295 San Joaquin Drive, Red Bluff, California, remain 14 under the wings of this court and continue to be protected by the 15 stay. 11 U.S.C. § 362(a)(1), (a)(5), (a)(6). Any further prosecution 16 of Watson v. Confer, No. 20CI000087 (Tehama County Superior Court June 17 8, 2020), or any action that arose out of the events described 18 therein, whether against Harlan Confer and/or Charlotte Confer 19 personally or to divest them of title, e.g., specific performance, 20 will result in void orders and judgments and will subject all persons 21 participating in that endeavor to an action for damages and/or 22 contempt proceedings before this court. 23 Assuming that the confirmation order is not revoked, the case is 24 neither dismissed nor converted, and that that Harlan Confer and 25 Charlotte Confer receive their discharge, any debt (including specific 26 performance of the Residential Purchase Agreement)7 will be forever 27 7 Excepting those debts determined non-dischargeable in Watson v. Confer, No. 1 unenforceable. 11 U.S.C. § 524(a). 2 The court will issue an order from chambers. 3 Dated: June 08, 2021

MES,

° Fredrick E. Clement 6 United States Bankruptcy Judge 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 25

1 Instructions to Clerk of Court

2 Service List - Not Part of Order/Judgment

3 The Clerk of Court is instructed to send the Order/Judgment or other court generated document transmitted herewith to the parties below. The Clerk of Court will send the document 4 via the BNC or, if checked ____, via the U.S. mail.

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6 Attorney for the Debtor(s) Barry Spitzer 980 9th Street, Ste 380 7 Sacramento, CA 95814 8 Bankruptcy Trustee (if appointed in the case) Office of the U.S. Trustee Robert T. Matsui United States Courthouse 9 501 I Street, Room 7-500 Sacramento, CA 95814 10 Nancy Lee Harlan Confer 2763 Camino Del Rio S. 295 San Joaquin Drive 11 San Diego, CA 92108 Red Bluff, CA 96080 12 Charlotte Confer Dean Law Firm Inc. 295 San Joaquin Drive PO Box 994134 13 Red Bluff, CA 96080 Redding, CA 96099-4134 14

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