Carmel Financing, LLC v. Schoenmann
- William Orrick
- 3:21-cv-07387
- U.S. District Court · Northern District of California
- 3
In Carmel Financing v. Schoenmann, Judge Orrick denied Carmel’s rehearing motion, leaving rulings on insurance proceeds, security-interest perfection, and fees in place.
Carmel Financing, LLC, whose motion for rehearing was denied; the order also left in place the earlier rulings affecting Carmel and Schoenmann’s bankruptcy appeals.
What happened
In Carmel Financing, LLC v. Schoenmann, Carmel asked the court to reconsider an earlier order resolving the parties’ appeals from several bankruptcy-court rulings.
Carmel argued that a communication qualified as legally sufficient notice, that it was automatically entitled to insurance proceeds as a loss payee, and that the case qualified for attorney’s fees. The court rejected each argument, noting that Carmel was not listed on the insurance policy and had not perfected its security interest before the Tubbs Fire.
The court denied the motion for rehearing. Judge William H. Orrick said the earlier order adequately addressed most of Carmel’s arguments and concluded that the case involved enforcement and perfection of a contractual security interest under bankruptcy law, unlike the case Carmel cited about discharge of a debt.
The detailed version
- Carmel Financing, LLC v. Schoenmann · No. 3:21-cv-07387
- William Orrick
- Sept. 8, 2022
Background
Carmel Financing, LLC, the appellant and cross-appellee, moved under Federal Rule of Bankruptcy Procedure 8022 for rehearing of an earlier order resolving the parties’ appeals from several Bankruptcy Court rulings. The court explained that a rehearing request is meant to ensure that the appellate court considered relevant information, not to give a party another opportunity to reargue its case. The court denied the motion for rehearing.
Arguments and analysis
First, Carmel argued that a communication qualified as notice under California Commercial Code § 9312(b)(4). The court denied rehearing on that issue because the earlier order had fully addressed it and Carmel’s motion largely repeated its previous arguments.
Second, Carmel argued that it was automatically a loss payee under the insurance policy and therefore was entitled to insurance proceeds even if its security interest was not perfected. The court rejected that argument. It stated that Carmel was not named or listed as a loss payee, was not listed as a mortgagee in the policy declarations, and was never added to the policy in response to a 2015 handwritten notation. The court also noted that Carmel had taken no steps to protect its rights in an insurance policy before the Tubbs Fire and had not sought contract reformation, a legal process for correcting a written contract.
Third, Carmel challenged the earlier order’s determination concerning attorney’s fees and argued that Bos v. Board of Trustees contradicted that determination. The court found Carmel’s analogy unpersuasive in this case. It explained that Bos involved whether a debt arising from a contract could be discharged, while this case involved whether a contractual security interest had been perfected under state law and could be enforced or was given lower priority under bankruptcy law. The court therefore maintained its earlier conclusion about whether the case qualified for attorney’s fees.
Disposition
The court denied Carmel’s motion for rehearing. The order was signed by United States District Judge William H. Orrick on September 8, 2022.
Read the full 3-page opinion on CourtListener, the free public archive maintained by the Free Law Project.