Eden Place, LLC v. Perl (In re Perl)
| Decision Date | 11 June 2014 |
| Docket Number | Bankruptcy No. 13–26126–NB.,BAP No. CC–13–1328–KiTaD. |
| Citation | 513 B.R. 566 |
| Parties | In re Sholem PERL, Debtor. Eden Place, LLC, Appellant, v. Sholem Perl, Appellee. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
OPINION TEXT STARTS HERE
Preempted
West's Ann.Cal.C.C.P. § 715.050Ronald N. Richards, Esq., of the Law Offices of Ronald Richard & Associates, APC, argued, Beverly Hills, CA, for appellant Eden Place, LLC; Appellee failed to file a brief and waived right to oral argument.
Before KIRSCHER, TAYLOR and DUNN, Bankruptcy Judges.
Appellant Eden Place, LLC (“Eden Place”) appeals an order from the bankruptcy court that determined, in part, that the postpetition lockout/eviction by the Los Angeles County Sheriff's Department (“Sheriff”) of the debtor from his residence on June 27, 2013, made at the request of Eden Place violated the automatic stay. Based on the Panel's decision in Williams v. Levi (In re Williams), 323 B.R. 691, 699 (9th Cir.BAP2005), aff'd,204 Fed.Appx. 582 (9th Cir.2006),1 we AFFIRM.
Appellee-debtor Sholem Perl (“Perl”) and a joint tenant (collectively, “Perls”) owned a single-family duplex in Los Angeles, California (“Residence”). In 2005, Perls refinanced their mortgages in connection with the Residence; in 2009, Perls fell behind in their mortgage payments.
After recording a notice of default and a notice of trustee's sale, Bank of America sold the Residence on March 20, 2013 to Eden Place. Eden Place timely recorded the trustee's deed on March 29, 2013.
Perls failed to vacate the Residence after being served with a 3–day notice to quit; Eden Place filed two identical complaints (one for each side of the duplex) for unlawful detainer on March 26, 2013 (“UD Actions”).
On April 12, 2013, the Perls filed a complaint in state court against Eden Place (and others) to set aside the sale. Perls alleged claims for (1) wrongful foreclosure, (2) violation of the Homeowner Bill of Rights, (3) unfair business practices and (4) breach of contract (“Complaint to Set Aside Sale”). Eden Place filed a cross-complaint on May 7, 2013, for (1) holdover damages, (2) trespass and (3) interference with prospective economic advantage (“Cross–Complaint”), as well as a motion to expunge the lis pendens filed by the Perls.
On June 11, 2013, the state court entered an unlawful detainer judgment in favor of Eden Place (including a judgment for possession and restitution of $11,700) in the UD Actions (“UD Judgment”). The state court entered a Writ of Possession in favor of Eden Place on June 14, 2013. Sometime between June 14 and June 24, 2013, the Sheriff posted the lockout notice.
On June 19, 2013, the state court heard Perls' motion to stay the UD Judgment and set various requirements for a stay, which Perls failed to satisfy. Consequently, a second scheduled hearing for June 26 was taken off calendar; the state court did not stay the UD Judgment. Eden Place contends that when Perls failed to obtain a stay of the UD Judgment, the Sheriff was on “auto pilot” to complete the eviction.
On June 20, 2013, Perl, acting pro se, filed a “skeletal” chapter 13 2 bankruptcy petition. Perl needed to file his schedules, statement of financial affairs, chapter 13 plan and other required documents by July 5, 2013. Although not listed as a creditor, Eden Place received notice of Perl's bankruptcy filing. On June 24, 2013, Perl's counsel faxed a letter to Eden Place's counsel and to the Sheriff's department informing them of the bankruptcy filing. In the letter, Perl's counsel asserted that no landlord-tenant relationship existed between Perl and Eden Place, so any exceptions to the automatic stay provided in § 362(b)(22) did not apply. He also asserted, citing to In re Butler, 271 B.R. 867, 876 (Bankr.C.D.Cal.2002), that Cal.Code Civ. P. § 715.0503 operated in contraventionto the Code and was therefore unconstitutional.
On June 24, 2013, Perl filed a notice to remove the three state court actions—the Complaint to Set Aside Sale, the Cross–Complaint and the UD Actions (“Removed Actions”). Prior to Perl filing this notice of removal, the state court scheduled a hearing on June 25, 2013, to consider Eden Place's motion to expunge the lis pendens Perls had recorded against the Residence.
Later on June 24, 2013, Eden Place moved to remand the Removed Actions (“Motion for Remand”) and filed its application for an order shortening time. The bankruptcy court scheduled the Motion for Remand for hearing on June 28, 2013. Also on June 24, Eden Place filed a motion in bankruptcy court for relief from stay (“Stay Relief Motion”), pursuant to the provisions of § 362(d)(1) and (2). Alternatively it asserted that the automatic stay did not apply. Eden Place asserted that it purchased the Residence at the March 20, 2013 prepetition foreclosure sale, that the trustee's deed had been properly recorded, that the UD Judgment had been obtained as well as a Writ of Possession and that the Residence was not property of Perl's bankruptcy estate. The bankruptcy court set a hearing on the Stay Relief Motion for July 9, 2013.
Notwithstanding the bankruptcy filing and Eden Place's pending Stay Relief Motion, the Sheriff proceeded with Perls' lockout on June 27, 2013, thereby evicting the Perls. Some of Perls' personal belongings remained inside the Residence at the time of the eviction.
Perl, with the assistance of counsel, filed his Amended Emergency Motion to Enforce the Automatic Stay, Set Aside the Eviction and for Order in Contempt (“Emergency Motion to Enforce Stay”) and his application for order shortening time. Perl asserted that by continuing the eviction process against him and eventually evicting him, Eden Place had violated the automatic stay pursuant to § 362(a)(1)–(3). Specifically, Perl asserted that his possessory interest in the Residence constituted an equitable interest under § 541(a) protected by § 362(a)(3), citing In re Butler and Di Giorgio v. Lee (In re Di Giorgio), 200 B.R. 664, 670 (C.D.Cal.1996), vacated on mootness grounds,134 F.3d 971 (9th Cir.1998). Perl also asserted that his pending litigation to set aside the sale and his dispute over the validity of the UD Judgment created a protected equitable interest in the Residence. Perl requested that his Emergency Motion to Enforce Stay be heard on June 28 along with Eden Place's Motion for Remand. A few hours later, Eden Place filed an objection to Perl's Emergency Motion to Enforce Stay, contending that it was moot and procedurally defective.
On June 27, 2013, the bankruptcy court entered its order setting the hearing on Perl's Emergency Motion to Enforce Stay and on Eden Place's Stay Relief Motion for June 28, 2013.
Just hours before the scheduled hearing, Eden Place filed another objection to Perl's Emergency Motion to Enforce Stay. Eden Place argued that, under California law, once the foreclosure occurred and Eden Place recorded its trustee's deed on March 29, 2013, Perl had no legal or equitable interest in the Residence protected by the automatic stay at the time of the eviction on June 27, 2013; he was merely a squatter or trespasser with no cognizable interest. Eden Place further argued that Perl's motion failed to recognize ample authority which supports the position that continued enforcement of a prepetition unlawful detainer judgment is not a violation of the automatic stay. Citing Lee v. Baca, 73 Cal.App.4th 1116, 1117–18, 86 Cal.Rptr.2d 913 (1999), a case involving a residential tenant and landlord, Eden Place argued that an unlawful detainer judgment extinguishes the residential tenant's interest in the property and that a postjudgment bankruptcy filing does not affect the landlord's right to regain possession of the property because it is not, at that point, property of the tenant-debtor's estate. Eden Place also cited In re Smith, 105 B.R. 50, 53–54 (Bankr.C.D.Cal.1989), which held that a debtor-tenant has no legal or equitable interest in rented property once a judgment for possession has been entered in favor of the landlord. Based on these authorities, Eden Place argued that Perl lost whatever possessory interest he might have had in the Residence upon entry of the UD Judgment, so the Sheriff's execution of the Writ of Possession did not affect property of the estate. Eden Place also took the position that once the UD Judgment and Writ of Possession were issued, the Sheriff had no choice but to proceed with the eviction.
Eden Place acknowledged the holdings of In re Butler and In re Di Giorgio, but argued that both cases were inapplicable because they were “tenant” cases, not “squatter” cases. Eden Place further argued that these cases were weakened with the addition of § 362(b)(22) under the amendments of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which clarifies that residential tenants, subject to certain limitations, are not protected by the automatic stay. Eden Place contended that no federal courts of appeals have ever ruled that a squatter who loses an unlawful detainer action still has a cognizable property interest that would warrant invoking the automatic stay. Alternatively, Eden Place argued that cause existed to annul the stay retroactively to June 20, 2013.
The hearing on the Emergency Motion to Enforce Stay, the Stay Relief Motion and the Motion for Remand proceeded on June 28, 2013. Counsel for both parties appeared. Before the parties presented oral argument, the bankruptcy court opined that the postpetition enforcement of the Writ of Possession on June 27 “seem[ed] to be something that would violate the automatic stay.” Hr'g Tr. (June 28, 2013) 2:19–20. After hearing brief argument from counsel for Eden Place, the bankruptcy court made its initial findings with respect to whether Eden Place...
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...the debtor's physical occupation of real property, a possessory interest under California law. See Eden Place, LLC v. Perl (In re Perl), 513 B.R. 566, 576 (9th Cir. BAP 2014). Here, wishing to initiate an unlawful detainer proceeding against Debtor after a prepetition foreclosure sale and t......
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