Eden Place, LLC v. Perl (In re Perl)
| Citation | 811 F.3d 1120 |
| Decision Date | 08 January 2016 |
| Docket Number | No. 14–60039.,14–60039. |
| Parties | In re Sholem PERL, Debtor. Eden Place, LLC, Appellant, v. Sholem Perl, Appellee. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
811 F.3d 1120
In re Sholem PERL, Debtor.
Eden Place, LLC, Appellant,
v.
Sholem Perl, Appellee.
No. 14–60039.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted Aug. 31, 2015.
Filed Jan. 8, 2016.
Ronald N. Richards (argued), Law Offices of Ronald Richards & Associates,
APC, Beverly Hills, California; Howard N. Madris, Law Office of Howard N. Madris, APC, Beverly Hills, California, for Appellant.
No appearance for Appellee.
Before: SUSAN P. GRABER, JOHNNIE B. RAWLINSON, and PAUL J. WATFORD, Circuit Judges.
Opinion by Judge RAWLINSON ; Dissent by Judge WATFORD.
OPINION
RAWLINSON, Circuit Judge:
Appellant Eden Place, LLC (Eden Place), appeals the decision of the Bankruptcy Appellate Panel (BAP) affirming the bankruptcy court's determination that Eden Place violated the automatic stay provisions of the Bankruptcy Code by evicting Debtor Sholem Perl (Perl) from a residential property. Because we conclude that Perl had no legal or equitable interest remaining in the property at the time of his eviction, we reverse the bankruptcy court's ruling that Eden Place violated the automatic stay.
I. BACKGROUND1
A. State Court Proceedings
Perl and a joint tenant owned a single-family duplex in Los Angeles, California. After refinancing, Perl defaulted on his mortgage payments, and Bank of America instituted foreclosure proceedings. The property was sold to Eden Place through a non-judicial foreclosure sale on March 20, 2013. Eden Place timely recorded the trustee's deed nine days later.
Despite the legal transfer of title, Perl refused to vacate the premises. Eden Place served Perl with a three-day notice to quit, and later served Perl with two unlawful detainer complaints, one for each side of the duplex. In response, Perl filed a complaint against Eden Place to set aside the trustee's sale (Complaint to Set Aside Sale), and Eden Place filed a cross-complaint for damages, trespass, and interference with prospective economic advantage (Cross–Complaint), and a motion to expunge Perl's lis pendens.
On June 11, 2013, the state court entered judgment in favor of Eden Place on the unlawful detainer actions, resulting in a judgment for possession and restitution. Three days later, the state court entered a Writ of Possession in favor of Eden Place. Sometime between June 14 and June 24, the Los Angeles County Sheriff posted the lockout notice. On June 19, the state court heard Perl's motion to stay the unlawful detainer proceedings and set various conditions for a stay. Once Perl failed to meet the conditions, the unlawful detainer judgment for possession remained in effect, culminating in eviction by the Sheriff.
B. Bankruptcy Court Proceedings
Rather than complying with the state court requirements to stay the unlawful detainer proceedings, Perl filed a "skeletal" chapter 13 bankruptcy petition pro se. He failed to file any schedules, financial affairs statement, or proposed plan of reorganization. Although not listed as a creditor, Eden Place learned of the bankruptcy filing from Perl's counsel, who informed Eden Place that no exceptions to the automatic stay applied and that any eviction would violate the automatic stay.
Perl also filed a notice of removal in the three state court actions (Complaint to Set Aside Sale, Cross–Complaint, and Unlawful Detainer Actions). Because there was a previously scheduled state court hearing to expunge the lis pendens on the property, Eden Place sought to remand the three state court actions and also sought relief from the automatic stay (Stay Relief Motion). Eden Place argued, in the alternative, that the automatic stay did not apply because the property was not property of the estate. Specifically, Eden Place argued that, prior to the filing of the bankruptcy petition by Perl, Eden Place purchased the property at a trustee's sale, recorded the trustee's deed, and obtained a judgment and writ of possession.
Before the bankruptcy court held a hearing on the Stay Relief Motion, the Sheriff proceeded with the lockout and evicted Perl. As a result, Perl was unable to remove some of his personal belongings. Perl then filed an emergency motion to enforce the automatic stay, arguing that the eviction interfered with protectable equitable interests based on his continued possessory interest in the premises.
Over Eden Place's objection, the bankruptcy judge determined that Perl's "bare possessory interest, coupled with the possibility of some sort of relief [from the pending litigation]" gave "the bankruptcy estate a protected interest that is subject to the automatic stay." Accordingly, the bankruptcy court determined that Eden Place had violated the automatic stay when it evicted Perl, and that the eviction was void. The bankruptcy court stayed its determination regarding contempt sanctions because Perl had not yet offered evidence of damages. Although Eden Place later filed a status report pursuant to the bankruptcy court's order, Perl never filed anything further in his bankruptcy case. Eventually, the bankruptcy case was dismissed for Perl's failure to appear at the creditor's meeting. Eden Place timely appealed the bankruptcy court's order to the BAP.
C. BAP Proceedings
The BAP determined that it had jurisdiction over the appeal because Eden Place remained subject to a claim for damages based on the bankruptcy court's finding that Eden Place violated the automatic stay.
After examining its jurisdiction, the BAP turned to the "sole issue" before it: whether "at the time Perl filed his bankruptcy petition, he had any remaining interest in the Residence protected by the automatic stay." Applying California law, the BAP held that Perl's ownership interest was terminated prepetition when Eden Place purchased the property at the trustee's sale. Nevertheless, the BAP held that Perl had a recognizable equitable interest in the property by virtue of his physical occupancy, notwithstanding the illegality of his continued occupancy.
The BAP noted that "changing the locks on the Residence, locking inside Perl's personal property, which was also property of the estate, was an act to exercise control over property of the estate in violation of" the automatic stay. Thus, the BAP affirmed the bankruptcy court's ruling, and Eden Place filed a timely appeal to this court.
II. STANDARD OF REVIEW
"Whether the automatic stay provisions of 11 U.S.C. § 362(a) have been violated is a question of law reviewed de novo." Mwangi v. Wells Fargo Bank, N.A. (In re Mwangi), 764 F.3d 1168, 1173 (9th Cir.2014) (citation omitted). "We review a bankruptcy court decision independently and without deference to the [BAP]'s decision...." Decker v. Tramiel
(In re JTS Corp.), 617 F.3d 1102, 1109 (9th Cir.2010) (citation omitted).
III. DISCUSSION
A. Jurisdiction–Finality
Before considering the merits of Eden Place's appeal, we first consider whether we have jurisdiction over the appeal. See Sahagun v. Landmark Fence Co. (In re Landmark Fence Co.), 801 F.3d 1099, 1102 (9th Cir.2015) ; see also Stanley v. Crossland, Crossland, Chambers, MacArthur & Lastreto (In re Lakeshore Vill. Resort, Ltd.), 81 F.3d 103, 105 (9th Cir.1996). The bankruptcy court determined as a matter of law that Eden Place violated the automatic stay when it evicted Perl, but deferred its ruling on the contempt sanctions. Subsequently, the bankruptcy case was dismissed because Perl failed to appear at the creditor's meeting. However, the bankruptcy court retained jurisdiction over "all issues arising under Bankruptcy Code" §§ 110 (penalties), 329 (attorney's fees), and 362 (automatic stay).
The BAP determined that it had jurisdiction because there was a final order from the bankruptcy court, and Eden Place remained subject to a claim for damages based on the bankruptcy court's determination that Eden Place violated the automatic stay. See Eden Place, LLC v. Perl (In re Perl ), 513 B.R. 566, 571 n. 5 (9th Cir.BAP 2014). We agree.
We also have jurisdiction over appeals from final judgments and orders of the bankruptcy court. See 28 U.S.C. § 158(d). In determining what constitutes an appealable order in bankruptcy proceedings, we have adopted a "pragmatic approach." Rosson v. Fitzgerald (In re Rosson), 545 F.3d 764, 769 (9th Cir.2008) (citation omitted).
In Bullard v. Blue Hills Bank, ––– U.S. ––––, 135 S.Ct. 1686, 1692, 191 L.Ed.2d 621 (2015), the Supreme Court reaffirmed the principle that, for jurisdictional purposes, "[t]he rules are different in bankruptcy...." In an ordinary civil case, a party may appeal the district court's judgment only under 28 U.S.C. § 1291 and only if the decision "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Firestone Tire & Rubber Co....
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