In re Parker
| Docket Number | Case No.: 19-cv-2588-YGR,4:14-BK-44083-CN |
| Decision Date | 22 March 2021 |
| Citation | 644 B.R. 805 |
| Parties | IN RE: Sarah-Jane PARKER, Debtor. |
| Court | U.S. District Court — Northern District of California |
Paul H. Deese, LS Carlson Law, Aliso Viejo, CA, for Appellants Laurence Jennings, Raj Patel.
Christina Latta Henry, Henry and DeGraaff PS, Seattle, WA, Marc Alan Fong, APC, Marlene Ann Fong, Fong & Fong APC, Alameda, CA, for Appellee.
Miriam Hiser, Law Offices of Miriam Hiser, San Francisco, CA, for Appellants Bayside Court Owners Association, Andrew Cantor, Justin Hu, Lawrence Drouin, Laurence Jennings, Raj Patel.
ORDER AFFIRMING IN PART AND VACATING AND REMANDING IN PART BANKRUPTCY COURT ’ S JUDGMENT
Presently before the Court are: (1) the appeal of Bayside Court Owners Association, Inc. ("BCOA"), Laurence Jennings, Raj Patel, Justin Hu, Lawrence Drouin, and Andrew Cantor (collectively, "Respondents") from the judgment entered April 11, 2019 by the bankruptcy court; and (2) the cross-appeal of debtor Sarah-jane Parker. The Court has jurisdiction over this appeal of a final order of the bankruptcy court. 28 U.S.C. § 158(a)(1).
Having carefully considered the papers submitted and the bankruptcy court record, and for the reasons detailed herein:
On the appeal of Respondents, the Court AFFIRMS the decision of the bankruptcy court with respect to all issues raised.
On the cross-appeal of Parker, the Court VACATES AND REMANDS for further findings applying standard from the United States Supreme Court's decision in Taggart on the contempt claims, and for further findings on that portion of the stay violation damages which continued post-discharge.
The appeals herein are rooted in a long, contentious dispute between the parties culminating in a multi-day trial on Parkers’ allegations that Respondents engaged in violations of the automatic stay and discharge injunction and acted in contempt of the bankruptcy court's orders. On January 29, 2019, the bankruptcy court issued a 29-page Memorandum Decision After Trial (BKDkt. No.1 299, "Mem. Dec.") and on April 11, 2019, an Order Awarding Attorneys’ Fees and Costs to Parker (BKDkt. No. 315)2 . Portions of both decisions are appealed. Core to many of the ongoing disputes is the classification of certain of the BCOA's assessments.
In its Memorandum Decision After Trial, the bankruptcy court found that Parker had proved BCOA, and some of the individual Respondents, engaged in multiple violations of the stay. (BKDkt. No. 299, Memorandum Decision After Trial ["Mem. Dec."].) The bankruptcy court awarded Parker $5,000.00 in emotional distress damages, $39,000.00 in property right interference damages, and $10,000 in punitive damages on account of those violations. The bankruptcy court found two individual BCOA board members, Secretary/Treasurer Laurence Jennings and President Raj Patel, to be jointly and severally liable as to the $39,000.00 in property interference damages. However, the bankruptcy court found that Respondents should not be held in contempt under Bankruptcy Code 105 for repeated stay violations or under Bankruptcy Code 524(a)(2) for violation of the discharge injunction, applying the "good faith belief" standard stated by the Ninth Circuit in Lorenzen v. Taggart (In re Taggart), 888 F.3d 438, 444 (9th Cir. 2018). (Id . at 25.)
Upon application for attorneys’ fees and costs, the bankruptcy court further ordered attorneys’ fees of $369,346.90 and costs of $9,770.05 to be paid to Parker by BCOA. (BKDkt. No. 315.)
District courts have jurisdiction over appeals "from final judgments, orders, and decrees" entered by bankruptcy courts. 28 U.S.C. § 158(a)(1) ; Wei Suen v. Demas Wai Yan (In re Demas Wai Yan) , 381 B.R. 747, 752 (N.D. Cal. 2007). The district court reviews the bankruptcy court's conclusions of law de novo and its findings of fact for clear error. Preblich v. Battley , 181 F.3d 1048, 1051 (9th Cir. 1999). Findings of fact are clearly erroneous when the reviewing court "is left with a definite and firm conviction that a mistake has been committed." In re Roman , 283 B.R. 1 (B.A.P. 9th Cir. 2002).
Whether the automatic stay provisions of 11 U.S.C. § 362(a) have been violated is a question of law reviewed de novo. Eskanos & Adler, P.C. v. Leetien (In re Leetien) , 309 F.3d 1210, 1213 (9th Cir. 2002). "Whether a party has willfully violated the automatic stay is a question of fact reviewed for clear error." Id. () (emphasis supplied). The amount of any sanctions imposed for a willful violation of the automatic stay is reviewed for an abuse of discretion. In re Leetien , 309 F.3d at 1213 (citing Franchise Tax Board v. Roberts (In re Roberts), 175 B.R. 339, 343 (9th Cir. BAP 1994) ).
Parker filed for bankruptcy under Chapter 13. "A Chapter 13 discharge is intended to be a ‘discharge of all debts,’ barring a few enumerated exceptions." Goudelock v. Sixty-01 Ass'n of Apartment Owners , 895 F.3d 633, 637 (9th Cir. 2018) (citing 11 U.S.C. § 1328(a) ). "A discharge under Chapter 13 ‘is broader than the discharge received in any other chapter’ of the Bankruptcy Code." United Student Aid Funds, Inc. v. Espinosa , 559 U.S. 260, 268, 130 S.Ct. 1367, 176 L.Ed.2d 158 (2010). "Bankruptcy proceedings are intended to grant debtors a ‘fresh start.’ " Id . (quoting Grogan v. Garner , 498 U.S. 279, 286, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991) ). Consequently, the Bankruptcy Code "is to be construed liberally in favor of debtors." Id . (quoting In re Devers , 759 F.2d 751, 754 (9th Cir. 1985) ).
"[O]nly debts arising pre-petition may be discharged" and, for purposes of bankruptcy law, federal law governs when a claim is deemed to arise, i.e. whether it arose pre-petition or post-petition. In re SNTL Corp. , 571 F.3d 826, 839 (9th Cir. 2009). The Bankruptcy Code defines a "debt" as a "liability on a claim." 11 U.S.C § 101(12). A "claim" includes any "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured." 11 U.S.C. § 101(5)(A). Thus, the Bankruptcy Code defines "claim" expansively to encompass even remote or contingent obligations. See SNTL , 571 F.3d at 838. Under the longstanding "fair contemplation" test in the Ninth Circuit, "a claim arises when a claimant can fairly or reasonably contemplate the claim's existence" even if a cause of action would not have accrued under non-bankruptcy law on the claim. Goudelock , 895 F.3d at 638 (citing SNTL , 571 F.3d at 839 ).
Section 362 of the Bankruptcy Code describes the automatic stay in bankruptcy. 11 U.S.C. § 362. The filing of a bankruptcy petition acts as an automatic stay of a variety of actions. "The scope of protections embodied in the automatic stay is quite broad, and serves as one of the most important protections in bankruptcy law." In re Leetien , 309 F.3d at 1214 (citing Chugach Timber Corp. v. Northern Stevedoring & Handling Corp., 23 F.3d 241, 243 (9th Cir.1994) ). The breadth of the automatic stay provisions is intended to ensure "all claims against a debtor be brought in a single forum, the bankruptcy court." Id . (citing Hillis Motors, Inc. v. Hawaii Auto. Dealers’ Ass'n, 997 F.2d 581, 585 (9th Cir.1993) ); see also In re Zotow , 432 B.R. 252, 261 (B.A.P. 9th Cir. 2010) ().
Of import here, the automatic stay bars "any act to create, perfect or enforce any lien against property of the [bankruptcy] estate" under 11 U.S.C. section 362(a)(4). Under section 362(a)(5), the stay extends to "any act to create, perfect or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title." 11 U.S.C. § 362(a)(5) (emphasis supplied). Further, section 362(a)(6) provides that the stay prohibits "any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title." 11 U.S.C. § 362(a)(6) (emphasis supplied). Subject to certain specified exceptions stated in the statute, the automatic stay continues "until the earliest of [:] (A) the time the case is closed; (B) the time the case is dismissed; or (C) if the case [is under, inter alia , chapter 13], the time a discharge is granted or denied." 11 U.S.C. § 362(c)(2). In effect, a "discharge order ‘operates as an injunction’ that bars creditors from collecting any debt that has been discharged." Taggart v. Lorenzen , ––– U.S. ––––, 139 S. Ct. 1795, 1800, 204 L.Ed.2d 129 (2019) (citing 11 U.S.C. § 524(a)(2) ).
With respect to violations of the automatic stay, section 362(k) provides that "an individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages." 11 U.S.C. § 362(k). Willful conduct is demonstrated when the creditor knows of the automatic stay and the actions that violate the stay are intentional. In re Leetien, 309 F.3d at 1215 ; In re Peralta , 317 B.R. 381, 389 (B.A.P. 9th Cir. 2004). "No specific intent is required; a good faith belief that the stay is not being violated ‘is not relevant to whether the act was ‘willful’ or whether compensation must be awarded.’ " In re Peralta , 317 B.R. at 389 (quoting Johnston Envt'l Corp. v. Knight (In re Goodman), 991 F.2d 613, 618 (9th Cir.1993) ). Whether a creditor's action is permissible or prohibited under section 362(a) is a fact-driven inquiry. In re Zotow , 432 B.R. at 259.
An "actual damages" award to individuals injured by a willful...
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