In re Rinard

• Decision Date: 09 May 2011
• Docket Number: Adversary No. 6:11–ap–01660–SC.,Bankruptcy No. 6:10–bk–50349–SC.
• Citation: 451 B.R. 12
• Parties: In re Richard John RINARD, Debtor(s).Richard John Rinard, Debtor and Helen R. Frazer, Chapter 7 Trustee, Plaintiff(s),v.Positive Investments, Inc., Defendant(s).
• Court: U.S. Bankruptcy Court — Central District of California

451 B.R. 12

In re Richard John RINARD, Debtor(s).Richard John Rinard, Debtor and Helen R. Frazer, Chapter 7 Trustee, Plaintiff(s),

v.Positive Investments, Inc., Defendant(s).

Bankruptcy No. 6:10–bk–50349–SC.

Adversary No. 6:11–ap–01660–SC.

United States Bankruptcy Court,C.D. California,Riverside Division.

May 9, 2011.

D. Edward Hays, Sarah C. Boone, Marshack Hays LLP, Irvine, CA, for Plaintiffs.Positive Investments, Inc., pro se.Lori E. Eropkin, Sherman Oaks, CA, for Defendant.

MEMORANDUM OPINION

SCOTT C. CLARKSON, Bankruptcy Judge.

Before the Court is an Emergency Motion pursuant to Rule 65 of the Federal Rules of Civil Procedure filed by Movants Richard John Rinard (the “Debtor”) and Helen R. Frazer, the Chapter 7 Trustee for the Debtor's Bankruptcy Estate (“Trustee”) (together the “Movants”) seeking entry of a temporary restraining order and/or a preliminary injunction order enjoining Defendant Positive Investments, Inc. (the “Defendant” or “Respondent”) and its officers, agents, servants, employees, and attorneys and those in active concert or participation with them, from foreclosing on commercial real property of the bankruptcy estate commonly known as 1812–1816 W. Foothill, Upland, CA, 91786 (the “Foothill Parcels”).

The Court is presented with, among others, the following issues:

(1) Does the Automatic Stay remain in existence, with respect to Estate Property, at this time?

(2) Are decisions by the Bankruptcy Appellate Panel authoritative and precedential?

(3) Are the Movants entitled to the Temporary Restraining Order or Preliminary Injunction Order they seek under the presented circumstances?

Background

The pending Chapter 7 case is the Debtor's second case filed within a year. The Debtor originally filed a voluntary petition under Chapter 7 of Title 11 of the United States Code on November 9, 2010, as case no. 6:10–bk–46358. That case was dismissed by order of the Court on November 30, 2010, when the Debtor's Schedules and Statements were not timely filed with the Court.

Following the entry of the order of dismissal of the Debtor's first case on November 30, 2010, on December 15, 2010, this case (the Debtor's second chapter 7 case) was commenced. Apparently cognizant of the provisions of 11 U.S.C. § 362(c)(3)(A), which instructs that “the stay under subsection (a) with respect to any action taken with respect to a debt or property securing such debt or with respect to any lease shall terminate with respect to the debtor on the 30th day after the filing of the later case.” ( emphasis added ), the Debtor, through counsel, twice sought to have a hearing on his request to extend the automatic stay.

On January 12, 2011 (Dk. No. 16), the Debtor filed an “Emergency motion For Order Imposing a Stay or Continuing the Automatic Stay as the Court Deems Appropriate” which was denied by an order of the Court entered January 13, 2011 (Dk. No. 20). On January 13, 2011 (Dk. No. 21), the Debtor renewed his request and filed an “Application shortening time, in addition to Notice of Motion and Motion in Individual Case for Order Imposing a Stay or Continuing the Automatic Stay as the Court Deems Appropriate” which was again denied by the Court by an order entered January 13, 2011 (Dk. No. 23).

Due to procedural error (a fee was not paid) on the first attempt, the Debtor's motion to extend the stay was denied. It is not clear to this Court why the second attempt was denied without a hearing ¹; however, the thirty day period passed after January 14, 2011.

The Estate Property at Issue

Part of the Debtor's Bankruptcy Estate is the previously identified Foothill Parcels, which are the subject of this Motion. According to the Movants, “foreclosure proceedings have been instituted by creditor Positive Investments, Inc., 222 S. Santa Anita Ave, Arcadia, CA 91006, against certain real property commonly known as 1812–1816 W. Foothill, Upland, CA, 91786 (the “Foothill Parcels”). The foreclosure sale is scheduled for May 17, 2011.” Motion, page 1:3–6, and the D. Edward Hays Declaration (the “Hays Declaration”) stating that the Respondent “published” a Notice of Sale, ¶ 8, page 11:9–12. ² There is further evidence before the Court as to when the Respondent instituted “foreclosure proceedings” or “published” a Notice of Sale, that date being April 11, 2011 ³, which the Court observes is after the Petition Date of this case. The Respondent has not addressed the act or timing of publication of the Notice of Sale.

The Court has carefully examined the Debtor's Schedules, the Court Docket of this case, and the evidence presented within this Motion. The Foothill Parcels are properly scheduled and the Court can find no actions by the Trustee or operations of law that indicate that the Foothill Parcels have passed from the Estate at this time. Therefore, there is no doubt, and the Court can find no assertions from any of the parties here to the contrary, that the Foothill Parcels remain part of the Estate. Finally, the Court has reviewed the Debtor's sworn Schedules and finds, for purposes of this Motion only, that the value of the Foothill Parcels is $1,500,000.00. In reviewing the pleadings, the Court finds, for purposes of this Motion only, that the claim secured by the lien held by the respondent on the Foothill Parcels is approximately $889,000.00. Finally, the Court finds that, for purposes of this Motion only, there is significant equity in the Foothill Parcels that inure to the benefit of the Estate and/or Debtor.

The Motion For Temporary Restraining Order and/or a Preliminary Injunction Order

On April 29, 2011, the Debtor and the Trustee jointly filed an emergency motion entitled “Joint Emergency Motion of Debtor and Trustee for Order Determining That Automatic Stay Pursuant to 11 U.S.C. Section 362(a) Has Not Been Terminated With Respect to the Estate; Memorandum of Points and Authorities; and Declarations of D. Edward Hays and Richard John Rinard; with Proof of Service.” (Dk. No. 44). The Debtor and Trustee's Motion requested that this Court make an order stating that the automatic stay was not terminated with respect to the estate by operation of 11 U.S.C. § 362(c)(3)(A). On May 3, 2011, the Court conducted a hearing and declined to issue an order on the subject of the pending motion, because, in the Court's opinion, a controversy was not present at that particular time (i.e. the motion was not ripe), and the procedure utilized would have required an impermissible advisory opinion.

On May 3, 2011, a Complaint entitled “Complaint for 1. Declaratory Relief; 2. Injunctive Relief; and 3. Damages for Willful Violation of Automatic Stay,” was filed by the Debtor and the Trustee against the Defendant, as well as their Motion which seeks entry of a temporary restraining order and/or a preliminary injunction order enjoining Defendant and its officers, agents, servants, employees, and attorneys and those in active concert or participation with them, from foreclosing on the Foothill Parcels.

As a precursor to the requested relief, the Movants and Respondent both directly address the presence of the decision of the Ninth Circuit Bankruptcy Appellate Panel's decision in Reswick v. Reswick (In re Reswick), 446 B.R. 362 (9th Cir. BAP 2011). The Movants explain, “[n]otwithstanding the plain meaning of 11 U.S.C. § 362(c)(1)—that the stay as to estate property continues until such property is no longer property of the estate—the Bankruptcy Appellate Panel recently published a case arising in a Chapter 13 which concluded that the stay terminated as to the debtor and the estate upon expiration of the 30 day period in the second bankruptcy case. See, In re Reswick, 446 B.R. 362 (9th Cir. BAP 2011). While the unstated assumption in Reswick is that Section 362(c)(1) does not compel a different result, the failure of the BAP to address this issue results in the case not being persuasive or binding authority on this issue. As such, the declaratory relief issue presented in Movants' Complaint is a question of first impression on an important issue regarding whether a trustee as the estate's representative loses the protections of the stay as to estate property after 30 days have elapsed in a second bankruptcy case filed within one year after dismissal of a prior case. Debtor's counsel is aware that the Reswick case has been appealed to the Ninth Circuit.

Motion, page 2:26–28 through page 3:1–9.

The Respondent also addresses Reswick. “On February 14, 2011, the Ninth Circuit BAP issued a decision in In re Reswick, which provides the most recent precedential authority in the circuit interpreting Bankruptcy Code section 362(c)(3)(A). (Citation omitted).” Opposition, page 3:17–19.

The Respondent further states that this Court is bound by the BAP's Reswick decision because “[t]he principle of stare decisis requires federal courts to adhere to the opinions of higher courts and “ ‘to the explications of the governing rule of law.’ ” (citations omitted.) Opposition, page 4:3–4. Citing several Ninth Circuit decisions on the general premises of stare decisis, the Respondent grounds its assertion that this Court is bound by Reswick firmly on the Ninth Circuit BAP's own decision of 1987, In re Windmill Farms, Inc., 70 B.R. 618, 621 (9th Cir. BAP 1987), rev'd on other grounds, 841 F.2d 1467 (9th Cir.1988).

The parties address Reswick on the issue of whether there continues to exist the automatic stay as to property of the Estate, under 11 U.S.C. § 362(a), for if the automatic stay continues in existence as to property of the Estate, then a decision to issue a Temporary Restraining Order (“TRO”) or Preliminary Injunction (“PI”) by this Court may be unnecessary. Indeed, the determination by this Court of whether the automatic stay remains in force as to the Estate must rest heavily on the minds of the Debtor, the Trustee and the Respondent. If the foreclosure proceeding is not enjoined by this Court, and the automatic stay has been terminated as...