Goodman, In re
Decision Date | 02 June 1987 |
Docket Number | S.F.D |
Citation | 991 F.2d 613 |
Parties | , 28 Collier Bankr.Cas.2d 1261, 24 Bankr.Ct.Dec. 300, Bankr. L. Rep. P 75,229 In re David GOODMAN, d/b/aImports, Sendo Stores, Brass Discount, Debtor. JOHNSTON ENVIRONMENTAL CORPORATION, Successor to International Packaging Corporation, Plaintiff-Appellee-Cross-Appellant, v. James E. KNIGHT; John A. Knight; Mary Katherine Knight, Individually, and Trustees of the Katherine McClellan Knight Revocable Trust UTA |
Court | U.S. Court of Appeals — Ninth Circuit |
William G. Malcolm, Malcolm, Cisneros & Houser, Irvine, CA, Gerard R. Kilroy, Howard, Kulik & Chizever, Los Angeles, CA, William A. Francis, Glendale, CA, for plaintiffs-appellees-cross-defendants-appellants.
Peter M. Appleton, Tyre, Kamins, Katz & Granof, Los Angeles, CA, for defendants-appellants-cross-plaintiffs-appellees.
Appeal from the United States District Court for the Central District of California.
Before: NORRIS, REINHARDT, and TROTT, Circuit Judges.
OVERVIEW
James A. Knight, John A. Knight, and Mary Katherine Knight (collectively "the Knights") own commercial rental property ("the Property") in Santa Ana, California. David Goodman, a Chapter 11 debtor in bankruptcy as of September 1, 1988 ("the Debtor"), was a subordinate sub-sublessee of a portion of the Property. The Debtor acquired this leasehold interest from International Packaging Corporation ("IPC"), the predecessor in interest to Johnston Environmental Corporation ("Johnston"). Because the Debtor's use of the Property violated various provisions of the Santa Ana Municipal Code, the City of Santa Ana threatened the Knights on January 24, 1989, with criminal prosecution. The Knights eventually responded by sending Notices to Quit to all lessees and by filing an unlawful detainer action in Santa Ana Municipal Court against all intermediate lessees, but not the Debtor. Prior to so doing, the Knights by their own admission had been notified by letter of Goodman's pending bankruptcy. The bankruptcy court made a finding of fact that the Knights and their attorney of record were put on notice as of January 19, 1990 that the debtor had filed a petition in bankruptcy. It is also noteworthy that the lease from the Knights' standpoint was economically disadvantageous.
In an attempt to accommodate the automatic stay provisions of 11 U.S.C. § 362, the Knights on February 26, 1990, filed a unilateral "Stipulation" in bankruptcy court in which they tried to exempt the Debtor from the result of their unlawful detainer action in State court. The bankruptcy court rejected the stipulation, however, and determined the Knights had violated the automatic stay provisions of 11 U.S.C. § 362(h) (1988). The bankruptcy court further concluded, however, that the violation was not willful. Accordingly, the Debtor's request for costs and sanctions was denied. The bankruptcy court permanently enjoined the Knights from pursuing the unlawful detainer action.
The Knights then appealed to the district court. The district court upheld the permanent injunction, but reversed the bankruptcy's court's holding that the violations were not willful. The district court remanded the action to the bankruptcy court to determine the amount of damages resulting from the Knights' violation of the automatic stay. The district court's remand order noted that the bankruptcy court should consider the undecided issue of whether a corporation, i.e. Johnston, has standing to obtain damages for a violation of the automatic stay.
I
The Knights belatedly attempted to protect the Debtor from the effects of their action in State court by filing a unilateral "Stipulation." Counsel for the Knights gave as his reason for tendering the stipulation his "experience with Bankruptcy Court," i.e., "when someone comes in and wants relief from a stay where it does apply, that you get held up for six months or nine months or whatever in litigating the issues...." The stipulation was spurned by the Knights' opponents and rejected by the bankruptcy court. An examination of the record indicates the bankruptcy court did not abuse its discretion in so doing. The bankruptcy court specifically concluded, In other words, there is no way of ascertaining how a state court might handle such a unilateral stipulation, and therefore the stipulation might not accomplish its intended purpose. As the bankruptcy court observed, "If [the Knights] terminate the lease, all leases below it fall...." We conclude that the bankruptcy court's handling of this issue fell within the range of its discretion. The Knights could have, and should have, pursued the orthodox remedy: relief from the automatic stay.
II
The Knights argue to the effect that the adversary action was not a "core" proceeding but was, at most, a "related" proceeding, and thus the bankruptcy court lacked jurisdiction to resolve the dispute and enter a final order. The Knights assert the dispute should have been resolved in state court as a landlord-tenant issue. Johnston argues the bankruptcy court correctly processed the proceeding to enjoin the Knights as a core proceeding, thus the bankruptcy court had jurisdiction to enter an injunction.
A proceeding is not removed from the jurisdiction of the bankruptcy court solely because the resolution may be affected by state law. 28 U.S.C. § 157(b)(3). If a claim is not listed explicitly in § 157(b)(2) as a "core proceeding[ ]," we "consider[ ] factors such as whether the rights involved exist independent of title 11, depend on state law for their resolution, existed prior to the filing of a bankruptcy petition, or were significantly affected by the filing of the bankruptcy case." Taxel v. Electronic Sports Research (In re Cinematronics, Inc.), 916 F.2d 1444, 1450 n. 5 (9th Cir.1990). Determinations regarding the nature and extent of the bankruptcy estate are fundamental functions of the bankruptcy court and would be "core proceedings." John Hancock Mutual Life Ins. Co. v. Watson (In re Kincaid), 917 F.2d 1162, 1165 (9th Cir.1990).
We conclude that these bankruptcy proceedings were "core...
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