Memorandum of Decision Re: Bad Faith

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Decisions
IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA
In re HOMAYOUN NAIMI,                                                               No. 95-11998      Debtor. ___________________________/ HOMAYOUN NAIMI,      Plaintiff,      v.                                                                                               A.P. No. 95-1310 NORTH BAY DRYWALL, INC., et al.,      Defendants. ______________________________/
Memorandum of Decision
     In late 1994, plaintiff Homayoun Naimi and his wife were facing foreclosure because they had not made a mortgage payment on their home in over a year. On the eve of foreclosure, Naimi's wife filed a Chapter 11 petition. Even though the filing was basically a sham filed to delay foreclosure, the court granted her until May 12, 1995, to sell or refinance the property. She and Naimi did neither. Instead, on the day before the renoticed foreclosure sale, she and Naimi filed a state court action against the foreclosing creditor and obtained a temporary restraining order.      In the state court proceeding, Naimi and his wife convinced two judges that they just needed a few weeks to raise the necessary funds to save their home. By a succession of misrepresentations to judges, they were able to stave off foreclosure until August 14, 1995. Naimi filed a skeleton Chapter 11 petition in pro per a few minutes before the foreclosure sale. The sale was conducted after the automatic stay went into effect.      The court knew all of the above facts on September 14, 1995, when defendants' motion for relief from the automatic stay came before it. It fully recognized that Naimi had filed the petition in bad faith. However, the court succumbed to the same representations it had heard in the prior wife's case, just like the state court judges: "Just a few more weeks and we can pay them off in full and save our home."      While the court was enough of a sucker to grant the extra time, it did try to impose closure on the situation. It ordered that if Naimi paid $156,000.00 by the date promised, then he could save the home. However, if he did not pay then the stay was annulled. The court thought there would be no further opportunity for more of the shenanigans the court clearly recognized. The court was unduly naive.      Naimi of course did not pay as promised. He first fought the eviction action brought by plaintiffs. The state court recognized him for what he was, noting that he and his wife had used every conceivable device to retain possession of the property without any payment for 25 months. When his argument was rejected by the state court, Naimi filed the present action in this court. He alleges that he had the money to pay through an escrow, but that defendants refused to submit a proper demand. He argues that therefore he tendered performance, and the foreclosure proceeded in violation of this court's order. Now before the court is the defendant's motion for summary judgment.      At the hearing on September 14, 1995, the court knew Naimi had filed in bad faith. It should have annulled the stay without condition on the spot, but for the sympathy it feels for anyone faced with losing their home. Naimi took advantage of that sympathy. However, Naimi said nothing about need of an escrow and such an escrow was not a condition of the order. Naimi did not meet the conditions of the order. There is no competent evidence that any defendant acted improperly. Naimi comes before the court with unclean hands, and is accordingly not entitled to any equitable relief. Defendants' motion will accordingly be granted.      Counsel for defendants shall submit an appropriate form of order granting the motion and a form of judgment.
Dated: May 13, 1996                                                         _______________________                                                                                               Alan Jaroslovsky                                                                                               U.S. Bankruptcy