In re City of Desert Hot Springs

Decision Date29 April 2003
Docket NumberNo. 02-55835.,02-55835.
Citation339 F.3d 782
PartiesIn re CITY OF DESERT HOT SPRINGS, Debtor. Silver Sage Partners, Ltd., Richard Earlix, Robert E. Fillet, Paul Saben, Michael Link, Edward Moore, Jr. and Albert Pimentel, Appellant, v. City of Desert Hot Springs, Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

William J. Davis, Davis & Company, Los Angeles, CA, for the appellants.

James O. Johnston, Jr., Hennigan, Bennett & Dorman, Los Angeles, CA, for the appellee.

Appeal from the Ninth Circuit Bankruptcy Appellate Panel; Perris, Marlar and Montali, Bankruptcy Judges, Presiding. BAP No. CC-02-01164-MoPMa.

Before FERGUSON, HALL, and BERZON, Circuit Judges.

ORDER

CYNTHIA HOLCOMB HALL, Circuit Judge.

The opinion filed April 29, 2003, and found at 327 F.3d 930, is hereby amended as follows:

p. 931, first paragraph, line 5: Change "motion to dismiss" to "objection to and motion to dismiss"

p. 931, first paragraph, line 10: Change "moved to dismiss the bankruptcy" to "objected to and moved to dismiss the bankruptcy"

p. 933, final paragraph of "Background" section: Delete the first sentence and replace with: "In bankruptcy court, Silver Sage objected to and moved to dismiss the bankruptcy because it claimed that the City filed the bankruptcy in bad faith."

p. 933, first sentence of "Waiver" section: Change "denial of the motion to dismiss" to "denial of the motion"

p. 936, first full paragraph, first sentence: Change "in the context of motions to dismiss" to "in the context of objections to and motions to dismiss a bankruptcy" p. 936, first full paragraph: Delete second sentence and replace with the following: "A court's denial of such a motion merely allows the municipality to proceed with the bankruptcy."

p. 936, second column, line 5: Change "motion to dismiss" to "objection to"

p. 937, first full paragraph: Delete the second sentence and replace with the following: "As noted above, the procedures that must be followed before an order for relief is granted in an involuntary case are similar to the procedures that must be followed before relief is granted in any other lawsuit. The procedures to be followed before relief is granted in a chapter 9 case, however, cannot be similarly characterized."

p. 937, first full paragraph, last sentence: Change "debtors will go into bankruptcy." to "debtors will file for bankruptcy."

p. 937, first full paragraph, last sentence: Add footnote 4: "We do not decide whether a Chapter 9 order for relief issues automatically once the municipality files a voluntary petition, 11 U.S.C. § 301, or whether the court must first consider objections to the bankruptcy under 11 U.S.C. § 301(c) before entering the order for relief. Compare Collier on Bankruptcy, 15th ed. revised, § 921.04[5] with In re Colorado Centre Metropolitan Dist., 113 B.R. 25, 27 (1990). Regardless of when the order for relief is entered, we hold that chapter 9 supplies a creditor with adequate protections against irreparable harm to distinguish In re Mason, 709 F.2d 1313."

p. 938, first full paragraph, first sentence: Change "The denial of a motion to dismiss" to "The denial of an objection to and a motion to dismiss"

p. 938, first sentence of "Conclusion" section: Change "motion to dismiss" to "motion to dismiss and objections to"

p. 938, second sentence of "Conclusion" section: change "motion to dismiss" to "motion"

With this amendment, the panel has voted to deny appellant's petition for panel rehearing. Judge Berzon has voted to deny the petition for rehearing en banc and Judges Ferguson and Hall so recommend. The full court has been advised of the petition for rehearing en banc and no judge has requested a vote on whether to rehear the matter en banc. Fed. R.App. P. 35.

The petition for panel rehearing and the petition for rehearing en banc are DENIED.

The clerk shall accept no further filings in this specific appeal.

OPINION

Silver Sage Partners, Ltd. ("Silver Sage") appeals the Bankruptcy Appellate Panel's ("BAP") dismissal of its appeal from an order of the bankruptcy court denying Silver Sage's objection to and motion to dismiss a chapter 9 bankruptcy. After the City of Desert Hot Springs ("City") filed for bankruptcy protection under chapter 9 of the bankruptcy code, 11 U.S.C. § 901 et seq., Silver Sage objected to and moved to dismiss the bankruptcy, claiming that it was brought in bad faith. The bankruptcy court denied its motion. Silver Sage appealed to the BAP. The BAP construed Silver Sage's appeal as interlocutory and exercised its discretion not to hear the appeal. Silver Sage argues here that the BAP erred by construing its appeal as interlocutory. Silver Sage claims that the bankruptcy court's order was a final decision and the BAP was therefore obliged to hear an appeal from such a decision. 28 U.S.C. § 158(a)(1).

The bankruptcy court had jurisdiction over Silver Sage's motion to dismiss the bankruptcy under 28 U.S.C. §§ 157 and 1334(a). The BAP had jurisdiction pursuant to 28 U.S.C. § 158(a). Because the bankruptcy court's order was interlocutory, we have no jurisdiction and DISMISS the appeal.

BACKGROUND

Silver Sage is a partnership organized to purchase and develop low income housing. After the City refused to authorize Silver Sage to build certain low income housing projects, Silver Sage sued the City for, inter alia, violations of the Federal Fair Housing Act. A trial was held in the federal district court for the central district of California. A jury found the City liable and awarded Silver Sage approximately three million dollars in damages. The City moved for a judgment notwithstanding the verdict or, in the alternative, for a new trial. Shortly after the jury verdict but before the district court ruled on the City's new trial motion, Silver Sage served a writ of execution on the City's bank, thereby freezing funds the City used for basic city services, such as payroll, utilities and insurance premiums for worker's compensation. The district court quashed the writ and ordered Silver Sage to show cause for why it should not be sanctioned.

The district court denied the City's motion for a judgment notwithstanding the verdict. The district court, however, found the jury's award of damages "grossly excessive" but denied the motion for a new trial on the condition that Silver Sage accept a remittitur to $388,146.20. Silver Sage rejected the remittitur and a new trial on damages was held. The second jury awarded Silver Sage one dollar. The district court denied both Silver Sage's motion to amend the damages award and its motion for a new trial.

Silver Sage appealed to this court. Because the district court abused its discretion by vacating the first jury's award of damages, we reversed and reinstated the original award of damages. Silver Sage Partners, Ltd. v. City of Desert Hot Springs, 251 F.3d 814, 827 (9th Cir.2001). Around the time that our opinion was filed, the City began consulting with bankruptcy experts in contemplation of possibly filing for bankruptcy, under Chapter 9 of the Bankruptcy Act.

The mandate from this court issued about six months after our opinion was filed. Upon issuance of the mandate, the City asked for assurances from Silver Sage that it would not again attempt to freeze the City's bank accounts. Silver Sage responded by demanding that it be paid and refusing to give the City any assurances. The City then filed a motion in district court that would order Silver Sage not to take any illegal actions to collect its judgment. Silver Sage responded that if the City did not express its willingness to immediately pay the judgment within two days, it would begin the collection process. The City then sought ex parte relief in the district court, seeking an order that would temporarily restrain Silver Sage from levying on its bank accounts. Silver Sage then told the City that it would not seek to freeze the City's bank accounts if the City agreed to several conditions. Silver Sage demanded that: 1) the City agree to an order from the district court that it immediately pay the judgment; 2) the City propose a plan within three weeks to pay the judgment and attorney's fees; 3) the City agree to make no expenditure not in the regular course of business; and 4) the City agree that any payment that Silver Sage disputes is not in the regular course of business not be relied upon to justify the City's not paying the judgment or interest on the judgment. The City decided it could not meet those demands. The district court denied the city's motion for ex parte relief with no explanation.

The City apparently believed that Silver Sage was not interested in negotiating in good faith a plan to pay the judgment. Before the hearing on the City's original motion to stop Silver Sage from taking illegal action to enforce its judgment, the City filed a voluntary petition for bankruptcy under chapter 9 of the bankruptcy code, 11 U.S.C. § 901 et seq. As a result of the petition for bankruptcy, an automatic stay was placed on all efforts by Silver Sage to collect its judgment. 11 U.S.C. § 362.

In a press release, the City stated that it commenced the bankruptcy because "Silver Sage has threatened to seize the city bank accounts and levy on city assets." According to an article in the Desert Sun, the Mayor of the City said that as a result of its filing for bankruptcy, it would likely only pay 10 to 20 cents for every dollar it owed.

In bankruptcy court, Silver Sage objected to and moved to dismiss the bankruptcy because it claimed that the City filed the bankruptcy in bad faith. The bankruptcy court denied the motion on February 15, 2002. Silver Sage filed a notice of appeal and made a motion in the BAP for leave to appeal. The BAP refused to hear the appeal, construing it to be from an interlocutory order. Silver Sage appealed to this court. Silver Sage does not ask us...

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