FILED APR 21 2021 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

In re: BAP No. CC-20-1194-GKT TRACEY P. NUBIA, Debtor. Bk. No. 2:19-bk-24337-NB

TRACEY P. NUBIA, Appellant, v. MEMORANDUM1 REAL TIME RESOLUTIONS, INC, Appellee.

Appeal from the United States Bankruptcy Court for the Central District of California Neil W. Bason, Bankruptcy Judge, Presiding

Before: GAN, KLEIN, 2 and TAYLOR, Bankruptcy Judges.

INTRODUCTION

Chapter 13 3 debtor Tracey Nubia (“Debtor”) appeals the bankruptcy

court’s order valuing her residence at $430,000 and denying her motion to

1 This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. 2 Hon. Christopher M. Klein, United States Bankruptcy Judge for the Eastern

District of California, sitting by designation. 3 Unless specified otherwise, all chapter and section references are to the

Bankruptcy Code, 11 U.S.C. §§ 101–1532.

1 avoid the junior lien held by Appellee Real Time Resolutions, Inc. as agent

for The Bank of New York Mellon as Trustee for the Certificate Holders of

CWHEQ Revolving Home Equity Loan Trust, Series 2005-F (“RTR”).

Debtor argues that the bankruptcy court erred by failing to accept her

estimated repair costs and instead determining that mold damage to the

residence was not as extensive as Debtor claimed. The bankruptcy court’s

factual determinations are supported by the record and Debtor has not

shown that the court clearly erred in valuing the residence. Accordingly,

we AFFIRM.

FACTS 4

Debtor filed her chapter 13 petition in December 2019. She listed her

residence (the “Property”) in Schedule A/B with a value of $390,000. The

Property was encumbered by a first position deed of trust in the amount of

$400,670.56 and a second position deed of trust held by RTR, in the amount

of $40,702.38.

Debtor filed a motion to avoid RTR’s junior lien pursuant to § 506(d).

She asserted that the value of the Property was no more than $390,000 as

evidenced by an attached appraisal and declaration from Bert Camp. Mr.

Camp appraised the Property as of March 3, 2020. He relied on comparable

sales with prices averaging approximately $500,000 and adjusted for the

4 We exercise our discretion to take judicial notice of the bankruptcy court’s docket. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood),

, 233 n.9 (9th Cir. BAP 2003). 2 poor condition of the Property due to approximately $110,000 in deferred

maintenance and estimated repairs, which in his opinion rendered the

Property “almost uninhabitable.” Mr. Camp included an estimate from an

unnamed contractor demonstrating repair costs of $111,150.

RTR opposed the motion and argued it was based on a flawed

appraisal because Mr. Camp did not appraise the Property as of the

petition date and he relied on an estimate from an unnamed contractor.

RTR asserted that the Property had a fair market value of $455,000 based

on an appraisal from Eric DeLuca. Mr. DeLuca also relied on comparable

sales with prices averaging approximately $500,000, but his adjustment for

deferred maintenance was $20,000. Mr. DeLuca noted water damage in the

upstairs bathroom and estimated costs for remediation of the damage at

$20,000, “based on discussions with local contractors and handymen.” His

appraisal was “subject to” an inspection from a mold expert and was based

on the “extraordinary” assumption that the water damage required no

additional remediation for mold damage.

Debtor filed a reply and argued that Mr. DeLuca improperly relied

on inadmissible hearsay in estimating repair costs at $20,000 and failed to

adjust for mold damage remediation despite having a reasonable suspicion

that it existed. Concurrent with the reply, Debtor submitted a declaration

from Daniel Messina, a certified mold removal contractor, who inspected

the Property in May 2020. Mr. Messina provided an estimate to remediate

all damages, including mold removal, in the amount of $131,925.

3 At the hearing on Debtor’s motion, the bankruptcy court asked the

parties how they wanted to proceed on the question of valuation. The

parties agreed to submit the issue on the existing record, including the

motion, opposition, and reply and stipulated that the declarations and

appraisals filed in support of the documents were admitted as evidence.

The bankruptcy court took the matter under advisement and issued a

memorandum decision and order denying Debtor’s motion.

The bankruptcy court noted that the primary difference between the

competing appraisals was the adjustment for necessary repairs. It

determined that although there was a substantial likelihood of mold and

water damage, it was not as extensive or costly as Debtor asserted. The

court reasoned that Mr. DeLuca’s adjustment of $20,000 for repairs did not

include mold remediation, but Mr. Messina’s estimate of $131,925 included

extensive work beyond mold removal and roof repair, including a

complete replacement of bathtubs, fixtures, vanities, lighting and plumbing

for two bathrooms, and did not include a breakdown of his total dollar

estimate. Based on the appraisals, the court determined that the Property

had a value of $430,000, and accordingly denied Debtor’s motion to avoid

the lien. Debtor timely appealed.

JURISDICTION

The bankruptcy court had jurisdiction under

and

157(b)(2)(K). We have jurisdiction under

.

4 ISSUE

Whether the bankruptcy court erred by valuing the Property at

$430,000 and denying Debtor’s motion to avoid RTR’s junior lien.

STANDARD OF REVIEW

A bankruptcy court’s determination of property value is a question of

fact which we review for clear error. Arnold & Baker Farms v. United States

(In re Arnold & Baker Farms),

(9th Cir. 1996). Factual

findings are clearly erroneous if they are illogical, implausible, or without

support in the record. Retz v. Samson (In re Retz),

(9th

Cir. 2010).

DISCUSSION

In general, a chapter 13 debtor may not modify the rights of a

creditor whose claim is secured “only by a security interest in real property

that is the debtor’s principal residence.” § 1322(b)(2). However, if such

claim is wholly unsecured, the anti-modification provision of § 1322(b)(2)

does not apply, and the lien may be avoided under § 506(d). Zimmer v. PSB

Lending Corp. (In re Zimmer),

(9th Cir. 2002).

Whether a junior lienholder has a secured claim or a wholly

unsecured claim depends on whether there is any value in the collateral to

secure the claim.

at 1225 (citing Lane v. W. Interstate Bancorp (In re Lane),

(6th Cir. 2002)). Pursuant to § 506(a)(1), a lienholder’s

claim is “a secured claim to the extent of the value of such creditor’s

interest in the estate’s interest in such property” and an unsecured claim

5 “to the extent that the value of such creditor’s interest . . . is less than the

amount of such allowed claim.”

Debtor does not dispute the existence of a valid first position lien

secured by the Property in the amount of $400,670.56. Therefore, the

bankruptcy court erred by denying the motion only if the value of the

Property was less than $400,670.56.

A. The Appraisals

Debtor argues that the bankruptcy court’s valuation was clearly

erroneous because the court did not accept Mr. Messina’s uncontested

repair estimates, and it considered Mr. DeLuca’s appraisal, which relied on

hearsay evidence.

RTR was not required to contest Mr. Messina’s repair estimate, and

the bankruptcy court was not required to adopt it as part of its valuation.

RTR contested Debtor’s motion and provided appraisal evidence in

support of its opposition. More importantly, the bankruptcy court is not

bound to accept valuation opinions or appraisals and may form its own

opinion of value based on the evidence presented. In re Creekside Senior

Apartments, LP,

(6th Cir. BAP 2012) (quoting In re Smith,

(Bankr. S.D. Ohio 2001)); In re Capitol Station 65, LLC, No. 17-

23627,

, at *5 (Bankr. E.D. Cal. Jan. 8, 2018); In re Prewitt,

(Bankr. E.D. Tex. 2015); see also Sammons v. Comm’r,

(9th Cir. 1988) (“the trial court has broad discretion to evaluate ‘the

6 overall cogency of each expert’s analysis.’” (quoting Ebben v. Comm’r,

, 909 (9th Cir. 1986)).

The bankruptcy court did not err by considering Mr. DeLuca’s

appraisal. At the hearing on the motion, the parties agreed to forego an

evidentiary hearing and submit the motion on the evidence in the record.

The parties stipulated that the appraisals and declarations in the record

were admitted as evidence and therefore, Debtor waived any objection to

Mr. DeLuca’s appraisal. See United States v. Cruz-Rodriguez,

(10th Cir. 2009) (“A stipulation by its very nature signals the

intentional relinquishment of any and all rights to challenge the

admissibility of the stipulated evidence, and is a clear example of waiver if

anything is.”) (quotations marks and citations omitted). Furthermore,

experts may rely on evidence that would otherwise be hearsay to explain

the basis of their opinions. Paddack v. Dave Christensen, Inc.,

(9th Cir. 1984); Fed. R. Evid. 703.

B. The Bankruptcy Court Did Not Clearly Err By Valuing The Property At $430,000

Valuation is not an exact science. In re Arnold & Baker Farms,

. The Ninth Circuit has explained:

Complex factual inquiries such as valuation require the trial judge to evaluate a number of facts: whether an expert appraiser’s experience and testimony entitle his opinion to more or less weight; whether an alleged comparable sale fairly approximates the subject property’s market value; and the overall cogency of each expert’s analysis. Trial courts 7 have particularly broad discretion with respect to questions of valuation.

Ebben, 783 F.2d at 906.

The bankruptcy court’s decision to value the Property at $430,000 is

supported by evidence in the record. The primary difference between the

competing appraisals is the adjustment made by each appraiser for

necessary repairs to the Property. Mr. DeLuca’s appraisal did not include

costs for mold damage, but it did include adjustments for repairs

associated with water damage, ceiling and roof repair, bathroom repair,

and cleanup. And, while Mr. Messina’s repair estimate included costs for

mold damage, it also included a complete replacement of two bathrooms

and did not allocate the total dollar estimate between the various repairs.

The court carefully considered the evidence submitted by the parties

and, based on the appraisals and a review of the photographs, determined

that although there was a substantial likelihood of water and mold damage

to the Property, remediation costs were not likely to be as extensive as

Debtor suggested.

Debtor argues that the court clearly erred by not accepting Mr.

Messina’s repair estimate after determining that mold damage was

substantially likely. But the evidence submitted to the bankruptcy court

does not demonstrate the cost for mold damage remediation. It

demonstrates only a cost for all repairs, including work which the

bankruptcy court found unnecessary. By stipulating to submit the motion

8 on the existing record, Debtor gave up her ability to clarify the opinions of

her experts or test the credibility of RTR’s expert at an evidentiary hearing.

The bankruptcy court, in its capacity as trier of fact, is not required to

accept the opinion of one or the other competing experts. Rather, the role of

experts is to help the trier of fact to understand the evidence or determine a

fact in issue. Fed. R. Evid. 702(a). Experts are entitled reasonably to rely on

facts or data that are not admissible. Fed. R. Evid. 703. Here, it is apparent

that the trier of fact was assisted by both experts, who each started with

comparable sales of about $500,000, but arrived at final values of $390,000

and $455,000 based on different adjustments for repairs, deferred

maintenance, and mold remediation. The court’s conclusion that the value

was $430,000 is within the range a rational trier of fact could determine

based on the evidence. It is noted, that even if the court had determined

that adjustments of an additional $29,000 were appropriate, the result for

Debtor, in view of the $400,670.56 senior deed of trust, would have been

the same.

The court’s valuation is not illogical, implausible, or without support

in the record, and Debtor has not shown that the court clearly erred in

valuing the Property at $430,000.

CONCLUSION

For the reasons stated above, we AFFIRM the bankruptcy court’s

order denying Debtor’s motion to avoid the junior lien held by RTR.

9