In re Brawders

• Decision Date: 11 September 2007
• Docket Number: No. 05-55988.,05-55988.
• Citation: 503 F.3d 856
• Parties: In re Robert BRAWDERS; In re: Cheryl Brawders, Debtors, Robert Brawders; Cheryl Brawders, Appellants, v. County of Ventura, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

503 F.3d 856

In re Robert BRAWDERS; In re: Cheryl Brawders, Debtors Robert Brawders; Cheryl Brawders, Appellants, v. County of Ventura, Appellee.

No. 05-55988.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 10, 2007.

Filed September 11, 2007.

Michael D. Kwasigorch, Simi Valley, CA, for the debtors-appellants.

Noel A. Klebaum, County Counsel, and Donald O. Hurley, Assistant County Counsel, County of Ventura, CA, for the defendant-appellee.

Appeal from the Ninth Circuit Bankruptcy Appellate Panel; Klein, Perris, and Montali, Bankruptcy Judges, Presiding. BAP No. CC-04-01165-MoPK.

Before: ANDREW J. KLEINFELD and RICHARD A. PAEZ, Circuit Judges, and WILLIAM HART,^* Senior District Judge.

Opinion by Judge PAEZ; Dissent by Judge KLEINFELD

PAEZ, Circuit Judge:

Robert and Cheryl Brawders ("the Brawders") appeal from a decision of the Bankruptcy Appellate Panel ("BAP") reversing in part and remanding a bankruptcy court judgment which awarded them damages for the County of Ventura's ("County") violation of an automatic stay in the Brawders' prior Chapter 13 proceeding. The bankruptcy court had determined in a summary judgment ruling that the Chapter 13 Plan ("Plan") discharged the Brawders' liability for pre-petition property taxes owed the County, including the amount secured by a lien on the Brawders' real property. As a result of this ruling, the court's damages award included a refund for overpayments of pre-petition taxes in excess of the amount paid under the Plan. The BAP agreed that the County was liable for damages resulting from its violation of the automatic stay, but held that the Plan did not alter the County's lien rights to recover pre-petition taxes that remained unpaid. Therefore, the BAP held that the Brawders were not due a refund of the taxes paid in excess of the confirmed Plan amount.

We have jurisdiction under 28 U.S.C. § 158(d)(1), and we affirm.¹ We adopt as our own the BAP's thorough and well-reasoned opinion, 325 B.R. 405 (B.A.P. 9th Cir.2005), attached as an Appendix. See Appendix infra. We further elaborate upon the facts of the case and address the effect of the parties' stipulation in the current Chapter 13 adversary proceeding on the County's right to enforce its lien to recover the pre-petition taxes that were not paid fully by the prior Plan payments. We conclude that, in light of the bankruptcy court's summary judgment ruling, the stipulation did not affect the County's right to recover pre-petition taxes.²

I.

The Brawders owned a house in Ventura County. They fell behind on their property tax, mortgage, and other payments, and, as a result, filed a Chapter 13 petition on February 8, 1995 in bankruptcy court in the Central District of California, No. ND 95-10521 RR. The Brawders proposed a Plan that identified the County as a Class Two creditor with a tax indebtedness secured by the Brawders' property. The Plan stated that the Brawders were in default to the County in the amount of $9,350, and proposed to repay the County $11,109.21, including interest, over a period of 60 months. The Plan provided that Class II Secured Creditors would retain their lien rights. The County received notice of the Plan by mail, but did not timely object.³ Bankruptcy Judge Robin Riblet ordered the Plan confirmed on March 31, 1995.⁴ As a result of the Plan confirmation, the automatic stay remained in effect. See 11 U.S.C. § 362(c)(1). The Chapter 13 Trustee made payments to the County pursuant to the Plan beginning April 28, 1995, and the County accepted them.

In June 1997, the County violated the automatic stay by sending two notices, "Notice of Impending Tax Collector's Power to Sell" to the Brawders and GreenPoint Mortgage Funding, Inc. ("GreenPoint"), the holder of the first deed of trust on the Brawders' home. One was in the amount of $30,264.32 and the other, erroneously, in the amount of approximately six billion dollars. The Brawders contacted the County and were told to pay $1,622.20 in post-petition taxes. They did so.

In January 1998, GreenPoint contacted the office of the Chapter 13 Trustee and was advised that the only taxes remaining to be paid to the County via the Plan were in the amount of $4,273.01. The following month, GreenPoint issued a check for $26,380.88 —the total unpaid taxes and interest claimed by the County less the amount due under the Plan.

GreenPoint then sought to foreclose on the Brawders' property to recoup the amount it paid the County.⁵ It moved to have the automatic stay modified so that it could commence foreclosure proceedings. The Brawders and GreenPoint stipulated that the Brawders would pay GreenPoint the amount it paid to the County, but the Brawders later defaulted on the stipulation. GreenPoint again moved for relief from the automatic stay. Its request was granted in November 1999, and GreenPoint initiated foreclosure proceedings.

As a result, the Brawders filed a second Chapter 13 bankruptcy petition to stop the foreclosure sale on June 27, 2000 in the Central District of California, No. SV00-15661KL. The second plan was approved on December 11, 2000. In this bankruptcy proceeding, the Brawders filed an adversary complaint against both the County of Ventura Tax Collector and GreenPoint. In their second amended complaint, the Brawders alleged claims for: (1) declaratory relief and an accounting against GreenPoint and the County; (2) damages for violation of the automatic stay against GreenPoint and the County, for GreenPoint paying, and the County accepting payment on, the Brawders' past due property taxes; (2) injunctive relief and an order voiding the notice of default, notice of sale, and foreclosure sale by GreenPoint; (4) damages for the County's violation of the automatic stay by its issuing of the notices of tax sale and other acts demanding payments of pre-petition taxes; (5) damages for the County's maintenance of a fraudulent claim seeking overpayments; and (6) damages for abuse of process by the County.⁶ The County moved for summary judgment. In support of its motion, the County argued that the confirmed Plan did not remove or alter its secured tax lien, see Cal. Rev. & T.Code § 2187, and therefore that it could properly initiate foreclosure proceedings to collect the balance of the pre-petition taxes owed.

The bankruptcy court ruled on the motion for summary judgment on April 8, 2002. It granted summary judgment in favor of the County on the second, fifth and sixth claims for relief, and—although the Brawders had not moved for summary judgment—granted summary judgment in favor of the Brawders on the fourth claim for violation of the automatic stay. In a corresponding "Memorandum on Legal Issue: The Effect of the Provision for the County's Claim and Lien Interest in the Plan Confirmed in Case No. ND 95-10521 RR," filed April 8, 2002, the court, in rejecting the County's legal argument, determined that the Plan, which had been confirmed without objection by the County, "provided for payment in full of the County's claim as a class 2 secured claim of approximately $11,000." The court therefore concluded that "the County's pre-petition claim against the Debtors has been paid in full and the real property subject to said lien revested in the Debtors free of any lien interest held by the County on account of its pre-petition claims."

Following the court's order, in January 2003, the Brawders and the County entered into a "Stipulation Regarding Amount of Tax Refund and Interest Thereon Due to Plaintiffs" ("Stipulation"), which stated, in relevant part:

9. On April 8, 2002, Judge Kathleen Lax issued an Order on Motion for Summary Judgment in which, as set forth in a separate Memorandum filed on the same date, she opined that upon completion of the Plan of Reorganization, the County's secured pre-petition real property taxes, were discharged as being considered "paid in full" and the lien thereon "revested in the Debtors free of any lien interest held by the County on account of its pre-petition claims."

10. It is hereby agreed and stipulated by the parties that the result of the foregoing court's ruling, together with payments and refunds previously made as reflected in Cathy Caron's declaration, is that a refund of $12,905.86 is due to the plaintiffs by the County.

The bankruptcy court issued an order approving the Stipulation.

The remaining issue of damages was decided through a court trial. On April 30, 2003, the bankruptcy court issued a "Memorandum on Trial and Motion for Attorneys Fees and Costs," in which the court determined that the Brawders were entitled to damages of $39,668.21, including $12,905 for tax overpayments (as stipulated by the parties), interest on tax overpayments, compensation for excess costs incurred in the refinance of the Brawders' home, attorneys' fees, and costs. Judgment was entered June 19, 2003.

Both parties appealed to the BAP.⁷ The County argued that the bankruptcy court erred in determining that the Plan discharged all pre-petition taxes and interest owed the County, including through the lien against the property. The Brawders responded that: (1) the County's cross-appeal was untimely; (2) the Stipulation rendered the issues raised by the County moot; and (3) the bankruptcy court's ruling that the Plan discharged all pre-petition taxes and interest owed the County was proper.

In its opinion, the BAP determined that the County's appeal was timely and, in footnote 6, that the Stipulation did not render the issues raised by the County moot because it merely constituted an accounting of the amount due the Brawders, but did not address "in rem tax `liability' issues." 325 B.R. at 409 n. 6. It went on to conclude that the "[c]onfirmation of the Plan did not reduce the amount of Ventura's tax assessments or affect its lien rights." Id. at 417. The BAP therefore held that the County did not owe the Brawders a tax refund of $12,905, and remanded to the bankruptcy court to...