In re Moi

• Decision Date: 29 January 2008
• Docket Number: Bankruptcy No. 07-02209-B13.,Adversary No. 07-90289.
• Citation: 381 B.R. 770
• Parties: In re Anasuga MOI and Taiu Moi, Debtors, Anasuga Moi and Taiu Moi, Plaintiffs, v. Asset Acceptance LLC, and Does. 1 through 10, inclusive, Defendant.
• Court: U.S. Bankruptcy Court — Southern District of California

381 B.R. 770

In re Anasuga MOI and Taiu Moi, Debtors Anasuga Moi and Taiu Moi, Plaintiffs, v. Asset Acceptance LLC, and Does. 1 through 10, inclusive, Defendant.

Bankruptcy No. 07-02209-B13.

Adversary No. 07-90289.

United States Bankruptcy Court, S.D. California.

January 29, 2008.

Michael G. Doan, Doan, Levinson & Liljegren, LLP, Carlsbad, CA, for Plaintiffs.

Dean T. Kirby, Jr., Kirby & McGuinn, P.C., San Diego, CA, for Defendant.

ORDER ON MOTION TO DISMISS

PETER W. BOWIE, Chief Judge.

This matter came on regularly for hearing on defendant's motion to dismiss plaintiffs' First Amended Complaint.

This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1334 and General Order No. 312-D of the United States District Court for the Southern District of California. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A) & (B).

DISCUSSION

Plaintiffs' First Amended Complaint purports to set out two claims for relief. The first is styled "Objection to Proof of Claim", and the second is captioned "Contempt of Court 11 USC 105". The thrust of defendant's motion to dismiss is that neither of those claims are among those which "may be brought as an adversary proceeding" under Rule 7001, Fed. R.Bankr.P.

Rule 7001 provides:

An adversary proceeding is governed by the rules of this Part VII. The following are adversary proceedings:

(1) a proceeding to recover money or property, other than a proceeding to compel the debtor to deliver property to the trustee, or a proceeding under § 554(b) or § 725 of the Code, Rule 2017, or Rule 6002;

(2) a proceeding to determine the validity, priority, or extent of a lien or other interest in property, other than a proceeding under Rule 4003(d);

(3) a proceeding to obtain approval under § 363(h) for the sale of both the interest of the estate and of a co-owner in property;

(4) a proceeding to object to or revoke a discharge;

(5) a proceeding to revoke an order of confirmation of a chapter 11, chapter 12, or chapter 13 plan (6) a proceeding to determine the dischargeability of a debt;

(7) a proceeding to obtain an injunction or other equitable relief, except when a chapter 9, chapter 11, chapter 12, or chapter 13 plan provides for the relief;

(8) a proceeding to subordinate any allowed claim or interest, except when a chapter 9, chapter 11, chapter 12, or chapter 13 plan provides for subordination;

(9) a proceeding to obtain a declaratory judgment relating to any of the foregoing; or

(10) a proceeding to determine a claim or cause of action removed under 2 8 U.S.C. § 1452.

Defendant is clearly correct that neither objection to claim nor civil contempt are included in the list. In fact. Rule 3007 provides that "[i]f an objection to claim is joined with a demand for relief of the kind specified in Rule 7001, it becomes an adversary proceeding." The clear implication is that a simple objection to claim need not be brought as an adversary proceeding. The issue, though, is not whether an objection to claim (or request for a holding of civil contempt) must be brought as an adversary proceeding, but whether it may be.

The cases relied upon by defendant simply hold that an objection to claim need not be brought as an adversary proceeding — they do not hold that it may not. See In re Wylie, 349 B.R. 204, 214 (9th Cir. BAP 2006) and this Court's decision in In re America's Shopping Channel, Inc., 110 B.R. 5, 8 (Bankr.S.D.Cal.1990). The same is true of the cases involving requests for attorney fees. See e.g., In re Chambers, 140 B.R. 233, 238 (N.D.Ill.1992).

This Court has found no case which holds that an objection to claim may not be brought as an adversary proceeding. The Court has found one case opining that it may. In In re Lexington Healthcare Group, Inc., the court stated that the "fact that adding a claim under Rule 7001 to an objection to claim requires all be heard as an adversary proceeding does not mean that an objection to claim alone cannot be heard as an adversary proceeding." 339 B.R. 570, 578 (Bankr.D.Del.2006).

Nothing in the Rules or Code specifically precludes an objection to claim being brought as an adversary proceeding and the Court can think of no practical reason to so hold. The adversary procedure imposes no additional hardship on the claimant and, in fact, it affords a claimant heightened due process.

That is how this Court sees it — an adversary proceeding is a more formal procedure for reaching resolution of certain issues. A policy determination has been made in Rule 7001 which sets out those matters where the more formal procedure is required to be utilized, rather than the more common and less formal motion process. As noted, Rule 3007 provides a further illustration. At its core, however, an adversary proceeding is just a procedure and does not, of itself, give rise to some broader array of causes of action or remedies. In the instant case, a claim objection is still a claim objection, whether raised by filed objection or by adversary. Plaintiffs have adequately pleaded their objection to defendant's proof of claim, so as to the plaintiffs' first claim for relief, defendant's motion to dismiss is denied.

As noted, plaintiffs' second claim for relief is for contempt of court, and invokes 11 U.S.C. § 105. At the center of the question is whether plaintiffs may sue defendant, for contempt of court. The Court concludes they may not directly sue defendant' for contempt unless expressly authorized by Congress, similar to the authorization granted in 11 U.S.C. § 362(k).

In 2002, the Ninth Circuit Court of Appeals filed its decision in Walls v. Wells Fargo Bank, 276 F.3d 502. In that case, the court was asked to find a private right of action in the discharge injunction statute, 11 U.S.C. § 524, and also in 11 U.S.C. § 105. The court declined, and this Court is bound by its ruling.

In explaining its holdings, the Ninth Circuit observed:

In the 1984 amendments, Congress added subsection (h) to § 362, expressly conferring on debtors the right to sue for damages for a willful violation of the automatic stay. Section 524 was amended on the same day, but no similar provision, providing a private right of action for violation of the discharge injunction, was added.

276 F.3d at 509. After another sentence, the court placed its footnote 3, which stated:

This also bolsters our conclusion that § 105 does not allow for a private right of action to enforce § 524. If Congress had understood § 105 as permitting a private cause of action, the 1984 amendment creating one for violations of § 362 would have been superfluous.

Id.

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