Daff v. Good (In re Swintek), 16-60003

• Decision Date: 22 October 2018
• Docket Number: No. 16-60003,16-60003
• Citation: 906 F.3d 1100
• Parties: IN RE Richard James SWINTEK, Debtor, Charles W. Daff, Appellant, v. Karen M. Good, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

906 F.3d 1100

IN RE Richard James SWINTEK, Debtor,

Charles W. Daff, Appellant,

v.Karen M. Good, Appellee.

No. 16-60003

United States Court of Appeals, Ninth Circuit.

Argued and Submitted September 1, 2017 Pasadena, California

Filed October 22, 2018

Arjun Sivakumar (argued), Cathrine M. Castaldi, and Ronald Rus, Brown Rudnick LLP, Irvine, California, for Appellant.

Michael A. Wallin (argued), Slater Hersey & Lieberman LLP, Irvine, California, for Appellee.

Before: Kim McLane Wardlaw and Jay S. Bybee, Circuit Judges, and Harvey Bartle III,^* District Judge.

Dissent by Judge Wardlaw

BYBEE, Circuit Judge:

Appellant Charles W. Daff, the trustee for the bankruptcy estate of Richard J. Swintek ("the debtor"), appeals from the Bankruptcy Appellate Panel's ("BAP") decision reversing the bankruptcy court's grant of summary judgment in the trustee's favor. Appellee Karen M. Good is a judgment creditor who, before the debtor filed for bankruptcy, obtained an "ORAP" lien encumbering the debtor's personal property under California law. Due to the bankruptcy code's automatic stay on actions to recover on claims against a debtor, Good was unable to execute on her lien, and she failed to renew it under state law.

This appeal presents the question of whether an ORAP lien falls within the scope of the code's tolling provision, which applies to "a period for commencing or continuing a civil action ... on a claim against the debtor" that arose before the bankruptcy petition. 11 U.S.C. § 108(c). We hold that the period in which a creditor may execute on a lien constitutes the continuation of the original action that resulted in the judgment and is thus tolled during the automatic stay. We therefore affirm the BAP's decision and remand for further proceedings.

I

This case originates from two money judgments awarded in 2001 in favor of non-parties and against the debtor. Good acquired these judgments by assignment in 2009 and renewed them in 2010. In June 2010, a California superior court issued an Order for Appearance and Examination ("ORAP"), which required the debtor to appear for a judgment-debtor examination. Good served the debtor with the order the same day and thus created a one-year "ORAP lien" encumbering the debtor's personal property under California Code of Civil Procedure § 708.110(d). See S. Cal. Bank v. Zimmerman (In re Hilde ), 120 F.3d 950, 956 (9th Cir. 1997) ("[A]n ORAP lien is created simply by service on the debtor of an order to appear for a debtor's examination ....").

In August 2010, the debtor filed a Chapter 7 bankruptcy petition, and Daff became the bankruptcy estate's trustee. Good eventually filed proofs of claim in the bankruptcy case in the amounts of her judgments. In March 2013, Good commenced an adversarial proceeding seeking a declaration that her ORAP lien had a priority superior to that of the trustee. Both parties eventually moved for summary judgment. The trustee argued that Good's ORAP lien expired in June 2011 because it is undisputed that she failed to renew the lien under state law at the end of its one-year term. Good countered that, because the debtor filed for bankruptcy after the ORAP lien was created, the lien was tolled under § 108(c) of the bankruptcy code.

The bankruptcy court ruled in the trustee's favor, holding that the tolling provision is not applicable to ORAP liens and, consequently, that Good's lien expired in 2011. The BAP reversed on appeal, concluding that this question is controlled by our decision in Spirtos v. Moreno (In re Spirtos ), 221 F.3d 1079 (9th Cir. 2000), where we held that § 108(c) tolls the period for renewing a judgment. Good v. Daff (In re Swintek ), 543 B.R. 303, 309–11 (B.A.P. 9th Cir. 2015).

The trustee filed a timely appeal to this court. At oral argument, however, it appeared that the parties disputed whether Good had properly served the debtor with the ORAP and thus whether a lien had ever encumbered his personal property. This factual dispute raised a threshold question of justiciability because, if the ORAP lien never existed, our decision on § 108(c)'s applicability would be advisory. We therefore remanded this case to the bankruptcy court, which confirmed that service was proper.¹ Accordingly, we now turn to merits.²

II

The question before us centers on the interplay between two sections of the bankruptcy code: the automatic stay under 11 U.S.C. § 362(a) and the tolling provision under § 108(c). Under § 362(a), the filing of a bankruptcy petition automatically triggers a stay "of actions by all entities to collect or recover on claims" against the debtor. Burton v. Infinity Capital Mgmt ., 862 F.3d 740, 746 (9th Cir. 2017). The stay "is designed to provide breathing space to the debtor, prevent harassment of the debtor, assure that all claims against the debtor will be brought in the sole forum of the bankruptcy court, and protect creditors as a class from the possibility that one or more creditors will obtain payment to the detriment of others." Id . The stay's scope is "quite broad" and "applies to almost any type of formal or informal action against the debtor or property of the estate." Id . at 746–47 (internal quotation marks and citations omitted). The statute enumerates several types of actions within the stay's scope that are relevant to this case:

(1) the commencement or continuation ... of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;

(2) the enforcement , against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;

....

(4) any act to create, perfect, or enforce any lien against property of the estate;

11 U.S.C. § 362(a) (emphasis added).

The stay on such actions remains in place throughout the bankruptcy's pendency. Id . § 362(c). Given the fact that proceedings can span months or (as demonstrated in this case) years, claims that creditors might hold against a debtor are liable to expire before the discharge is granted or denied. The code therefore implements a tolling provision under § 108(c), which provides in relevant part: "[I]f applicable nonbankruptcy law ... fixes a period for commencing or continuing a civil action in a court other than a bankruptcy court on a claim against the debtor, ... and such period has not expired before the date of the filing of the petition, then such period does not expire until ... 30 days after notice of the termination or expiration of the stay under section 362...." 11 U.S.C. § 108(c) (emphasis added).

Here, the applicable nonbankruptcy law is the California ORAP statute. This statute allows a judgment creditor to apply to a California court "for an order requiring the judgment debtor to appear before the court ... to furnish information to aid in enforcement of the money judgment [i.e., an ORAP]." CAL. CIV. PROC. CODE § 708.110(a). A creditor's service of the order upon the debtor "creates a lien on the personal property of the judgment debtor for a period of one year from the date of the order unless extended or sooner terminated by the court." Id . § 708.110(d).

As noted above, the ORAP lien at issue was set to expire during mid-2011, which was after the debtor filed his bankruptcy petition and thus during the automatic stay. Whether the lien has expired depends on whether § 108(c) applies to it and thus tolled its one-year duration.³ Specifically, we must determine whether the period in which a creditor may execute on an ORAP lien constitutes "commencing or continuing a civil action" under the bankruptcy code's tolling provision. See 11 U.S.C. § 108(c).

The trustee contends that the code distinguishes between the concepts of enforcing a judgment—e.g., by executing on a lien—and continuing an action. In interpreting the phrase "commencing or continuing a civil action" under § 108(c)'s tolling provision, the trustee relies on the text of § 362(a)'s stay provision. As seen in the excerpt above, § 362(a)(1) first states that the stay applies to the "commencement or continuation ... of a[n] ... action or proceeding against the debtor," thus using language nearly identical to § 108(c). Compare 11 U.S.C. § 362(a)(1)with 11 U.S.C. § 108(c). Section 362(a), however, separately addresses staying "the enforcement ... of a judgment" against the debtor in its subsequent subsection. Id . § 362(a)(2). Thus, in the trustee's view, treating the enforcement of a judgment as the continuation of a civil action would render the subsections of the stay provision redundant. And because the tolling provision is the counterpart to the automatic stay, the trustee contends that the phrase "commencing or continuing a civil action" in the former should be read identically to the "commencement or continuation ... of a[n] ... action or proceeding" in the latter. See Mertens v. Hewitt Assocs. , 508 U.S. 248, 260, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993) ("[L]anguage used in one portion of a statute ... should be deemed to have the same meaning as the same language used elsewhere in the statute ...."). The trustee therefore concludes that the tolling provision does not apply to the enforcement of a judgment through means such as the ORAP lien at issue.

This argument is premised on the assumption that each subsection under § 362(a) enumerates a distinct, mutually-exclusive form of creditor activity that falls within the stay's scope. There is clear overlap, however, throughout the stay provision's text. Subsection (2), for instance, encompasses "the enforcement , against the debtor or against property of the estate, of a judgment," while subsections (4) and (5) also collectively address "any act to create, perfect, or enforce any lien against property of the estate" or "of the debtor." 11 U.S.C. § 362(a)(2, 4–5) (emphasis added). Subsection (6)...