In re Cady
| Decision Date | 07 August 2001 |
| Docket Number | BAP No. CC-01-1007-MoPB. Bankruptcy No. SV 93-26764-AG. |
| Parties | In re Daniel Bryon CADY, Debtor. Jeffrey Brian Palm and Dannielle Lynn Scapparo, Appellants, v. William A. Klapperman, as assignee of Prime Filmworks, Inc.; Daniel Byron Cady; Alfred H. Siegel, Chapter 7 Trustee, Appellees. |
| Court | Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Ninth Circuit |
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
James A. Tiemstra, Miller, Starr & Regalia, Walnut Creek, CA, for Jeffrey Brian Palm, Danielle Scapparo.
William A. Klapperman, Los Angeles, CA, pro se.
Before MONTALI, PERRIS and BRANDT, Bankruptcy Judges.
Transferees of real property appeal from an order (1) denying their motion to annul the automatic stay and (2) finding that a judgment creditor did not violate the automatic stay. We AFFIRM.
This appeal involves an unusual set of facts in that neither appellants nor appellee were parties in interest during pendency of this bankruptcy case. Instead, both parties only became involved in the case over a year after it was closed. Nevertheless, to arrive at the issues raised in this appeal it is necessary to recount events that occurred before, during and after the bankruptcy case.
On November 18, 1988, Daniel Cady ("Debtor") and his wife, Maria Cady (collectively the "Cadys"), purchased real property located at 657 Spyglass Road, Valley Springs, California ("Spyglass"). Two deeds of trust encumbered Spyglass. The first deed of trust, held by Western Sunrise Mortgage Company, secured a $70,000 promissory note. Western Sunrise subsequently transferred its interest in this deed of trust to Federal Home Loan Mortgage Corporation ("FHLMC"). The second deed of trust, held by Geoffrey Rowland ("Rowland"), secured a $53,000 loan made to the Cadys.
Debtor commenced his bankruptcy case on May 11, 1993, by filing a petition in pro se under chapter 7 of the Bankruptcy Code.1 Maria Cady did not file for bankruptcy. Debtor listed Spyglass in Schedule A with a value of $135,000; Schedule D showed the FHLMC and Rowland liens on Spyglass as totaling $127,201.2 In his "Statement of Intention," Debtor indicated that he would surrender Spyglass to the deed of trust holders. Chapter 7 trustee Alfred Siegel subsequently filed a no-asset report on March 1, 1994.
Although the bankruptcy case was open and Spyglass had not been abandoned, the Cadys nevertheless proceeded to transfer their respective interests in Spyglass to Rowland, the second deed of trust holder. Maria Cady transferred her interest to Rowland via quitclaim deed executed September 4, 1994, and recorded October 24, 1994, and Debtor purportedly transferred his interest to Rowland via grant deed executed January 1, 1995, and recorded January 23, 1995.3 Both of these transfers were made with neither the knowledge nor approval of the bankruptcy court or the trustee. In return, Rowland signed a deed of full reconveyance of his deed of trust on January 6, 1995, which was recorded on January 23, 1995.
Meanwhile, in a separate chain of events, creditor Prime Filmworks, Inc. ("PFI") filed a complaint against Debtor under section 523 of the Bankruptcy Code, seeking to have its unsecured claim declared nondischargeable. This adversary proceeding culminated on December 2, 1994, with a stipulated judgment ("Judgment") determining PFI's claim in the amount of $117,677.88 to be nondischargeable. On January 3, 1995, two days after the Spyglass deed to Rowland was executed, but before it was recorded, PFI recorded an abstract of the judgment ("Abstract") against Debtor in Calaveras County, California, where Spyglass is located.
Debtor received his discharge two weeks later and his bankruptcy case was closed by order filed March 30, 1995. As a result, any property not administered by the trustee was abandoned to the Debtor pursuant to section 554(c).
On April 10, 1996, nearly a year after Debtor's bankruptcy case was closed, PFI assigned all of its right, title and interest in the Judgment, including the Abstract, to appellee William A. Klapperman ("Klapperman").
On September 11, 1996, appellants Jeffrey Brian Palm ("Palm") and Dannielle Lynn Scapparo ("Scapparo") purchased Spyglass from Rowland. In connection with this transaction, Palm and Scapparo paid off the obligations secured by FHLMC's first deed of trust with a loan from Fleet Mortgage Corporation ("Fleet"). Fleet, in turn, took a new deed of trust on Spyglass which was recorded September 20, 1996.
Finally, in September of 1997, a year after Palm and Scapparo purchased Spyglass from Rowland, Klapperman took steps to enforce the Judgment and execute on Spyglass after Debtor failed to make the first installment payment on the Judgment. During a series of unsuccessful settlement discussions between Klapperman and representatives of Fleet's title insurer, First American Title Insurance Company ("FATIC"), FATIC contended that (1) Fleet was entitled to step into former deed of trust holder FHLMC's first priority position through equitable subrogation and (2) the Abstract was void because its recordation violated the automatic stay in Debtor's bankruptcy case. Klapperman, in turn, argued that Fleet was not subrogated to FHLMC due to Fleet's actual and/or constructive knowledge of defects in the Cady-Rowland transfer.
On October 2, 2000, Palm and Scaparro filed motions seeking to (1) reopen the Debtor's bankruptcy case; (2) annul the automatic stay with regard to the transfer of Spyglass from the Debtor to Rowland; and (3) have the bankruptcy court determine that recordation of the Abstract violated the automatic stay. Klapperman filed oppositions to these motions.
Both motions came for hearing before the bankruptcy court on October 26, 2000. During oral argument, Palm and Scapparo conceded that the Debtor violated the automatic stay by transferring property of the estate, i.e., Spyglass to Rowland, and the court took that concession as a stipulation with Klapperman.
Although the court granted Palm and Scapparo's motion to reopen the Debtor's bankruptcy case (which is not an issue on appeal), it denied their motion for annulment of the automatic stay. Then, as the court prepared to conclude the hearing, Palm and Scaparro renewed their argument that PFI's recordation of the Abstract violated the automatic stay. After entertaining oral argument on this issue, the Court found that recordation of the Abstract did not violate the automatic stay, relying on this court's decision in Watson v. City National Bank (In re Watson), 78 B.R. 232 (9th Cir. BAP 1987) ("Watson I").
Accordingly, on December 19, 2000, the Bankruptcy Court entered its "Order Re: Motion to Reopen and Annul the Automatic Stay," which mirrored the court's oral findings of fact and conclusions of law made during the October 26 hearing. Palm and Scapparo filed a timely Notice of Appeal on December 29, 2000.
A bankruptcy court's decision to deny annulment of the automatic stay is reviewed for an abuse of discretion. National Environmental Waste Corp. v. City of Riverside (In re National Environmental Waste Corp.), 129 F.3d 1052, 1054 (9th Cir.1997), citing Mataya v. Kissinger (In re Kissinger), 72 F.3d 107, 108 (9th Cir. 1995). "A bankruptcy court necessarily abuses its discretion if it bases its ruling on an erroneous view of the law." In re Cybernetic Services, Inc., 239 B.R. 917, 918-19 (9th Cir. BAP 1999), aff'd, 252 F.3d 1039 (9th Cir.2001). "The Panel also finds an abuse of discretion if it has a `definite and firm conviction the court below committed a clear error of judgment in the conclusion it reached....'" Beatty v. Traub (In re Beatty), 162 B.R. 853, 855 (9th Cir. BAP 1994), quoting Mission Indians v. American Management, 824 F.2d 710, 724 (9th Cir.1987).
A determination of whether the automatic stay provisions of section 362 have been violated is a question of law subject to de novo review. Groner v. Miller (In re Miller), 262 B.R. 499, 502 (9th Cir. BAP 2001); McCarthy, Johnson & Miller v. North Bay Plumbing, Inc. (In re Pettit), 217 F.3d 1072, 1077 (9th Cir.2000).
Issues of collateral estoppel are reviewed de novo. Watson v. Shandell, (In re Watson), 192 B.R. 739, 745 (9th Cir. BAP 1996), aff'd, 116 F.3d 488 (9th Cir. 1997).
This Panel has jurisdiction to hear appeals of final orders pursuant to 28 U.S.C. § 158(b). Roderick v. Levy (In re Roderick Timber Co.), 185 B.R. 601, 604 (9th Cir. BAP 1995).
"Section 362 gives the bankruptcy court wide latitude in crafting relief from the automatic stay, including the power to grant retroactive relief from the stay." Schwartz v. United States (In re Schwartz), 954 F.2d 569, 572 (9th Cir. 1992). By annulling the automatic stay, a court can validate an otherwise invalid transaction. Algeran, Inc. v. Advance Ross Corp., 759 F.2d 1421, 1425 (9th Cir. 1985) ()
As explained previously, Palm and Scapparo stipulated that by transferring Spyglass to Rowland the Debtor took action against property of the estate in violation of section 362(a), thereby rendering the transfer void under Schwart...
To continue reading
Request your trial