In re Duplex at Sleepy Hollow, LLC: Ninth Circuit BAP Upholds Retroactive Stay Annulment That Validated Enterprise Bank's Nine Laguna Beach Foreclosures

Lending & Foreclosure Ruling Issued
Date
October 7, 2026
Added to tracker
October 13, 2026
Court or forum
U.S. Bankruptcy Appellate Panel of the Ninth Circuit (appeal from U.S. Bankruptcy Court, Central District of California)
State
California
Presiding judge
Scott C. Clarkson
Amount / scale
Roughly $80 million first-lien debt on ten Laguna Beach properties
Parties
Appellee/Lender: Enterprise Bank and TrustDebtor: Duplex at Sleepy Hollow, LLCDebtor: 777 at Laguna, LLCDebtor: Cliff Drive Properties DE, LLCDebtor: Laguna Festival Center, LLCDebtor: 694 NCH Apartments, LLCDebtor: Retreat at Laguna Villas, LLCDebtor: 891 Laguna Canyon Road, LLCDebtor: Heisler Laguna, LLCDebtor: Sunset Cove Villas, LLCDebtor: Laguna Art District Complex, LLCPetitioning Creditor: Vierergruppe Management, Inc.Petitioning Creditor: Coastline Santa Monica Investments, LLCProposed Purchaser: Special Assets Laguna, LLC

On October 7, 2026, the Ninth Circuit Bankruptcy Appellate Panel affirmed a bankruptcy court order that retroactively annulled the automatic stay. The order validated nine nonjudicial foreclosure sales that Enterprise Bank and Trust held on October 15, 2025 for Laguna Beach properties owned by ten single-asset entities. Involuntary Chapter 11 petitions had been filed against the owners minutes before the sales began. A prospective bidder appealed, arguing all the sales should be re-noticed. The panel found no abuse of discretion, given the bankruptcy court's finding that the filings were made in bad faith.

Why it matters

The ruling shows that a last-minute involuntary bankruptcy filed by related creditors to stop a foreclosure can be undone after the fact. That holds especially when the lender had no notice and already held stay relief from an earlier bankruptcy. It also tells foreclosure-sale bidders that sitting out an auction because they know of a bankruptcy filing, without telling the trustee, weakens any later claim that they were harmed.

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Enterprise Bank and Trust held the first deed of trust on ten Laguna Beach, California parcels. Each parcel was owned by its own single-asset real estate entity, including Laguna Festival Center, LLC, Laguna Art District Complex, LLC, 891 Laguna Canyon Road, LLC, 694 NCH Apartments, LLC and Duplex at Sleepy Hollow, LLC. The properties had a collective book value of about $95 million, and Enterprise was owed roughly $80 million. Each parcel carried at least three deeds of trust. The owners had stopped paying property taxes and regular loan payments. Enterprise sent a default notice in November 2024 and recorded notices of default in February 2025. The defaults came against the backdrop of a long-running dispute over control of the ownership entities.

Case timeline · 7 entries Latest: October 7, 2026 — Ninth Circuit BAP affirms the retroactive annulment

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