In re Taylor

• Decision Date: 07 August 1987
• Docket Number: Bankruptcy No. LAX 85-54806 GM.,BAP No. CC 86-2172 MoMeV,BAP No. CC 86-1740 MoMeV
• Citation: 77 BR 237
• Parties: In re Ezella M. TAYLOR, Debtor. William LITTLE, Appellant, v. Ezella M. TAYLOR, David Gill, Trustee in Bankruptcy, Appellees. Ezella M. TAYLOR, Appellant, v. Dina TSAFAROFF, Evelyn Simbas, William Little, Appellees.
• Court: U.S. Bankruptcy Appellate Panel, Ninth Circuit

77 B.R. 237 (1987)

In re Ezella M. TAYLOR, Debtor.

William LITTLE, Appellant, v. Ezella M. TAYLOR, David Gill, Trustee in Bankruptcy, Appellees.

Ezella M. TAYLOR, Appellant, v. Dina TSAFAROFF, Evelyn Simbas, William Little, Appellees.

BAP No. CC 86-1740 MoMeV, BAP No. CC 86-2172 MoMeV, Bankruptcy No. LAX 85-54806 GM.

United States Bankruptcy Appellate Panels of the Ninth Circuit.

Submitted without Oral Argument on July 27, 1987.

Decided August 7, 1987.

Leon L. Vickman, A Law Corp., Encino, Cal., for appellant.

Ezella M. Taylor, in pro per.

Before MOOREMAN, MEYERS and VOLINN, Bankruptcy Judges.

OPINION

MOOREMAN, Bankruptcy Judge:

Two separate appeals have arisen from this case and because of the interrelated facts and issues posed within, they have been consolidated. In order to understand the issues presented it is necessary to set forth the relevant facts and proceedings of the underlying case.

FACTS

On September 2, 1984, creditors Dina Tsafaroff and Evelyn Simbas held a note and third deed of trust on the debtor's principal residence which became due and payable in the amount of $12,500. On June 26, 1985, the debtor filed a petition for relief under Chapter 13 of Title 11. The creditors/Tsafaroff and Simbas brought an adversary proceeding to lift the automatic stay on September 6, 1985. However, on September 23, 1985, a hearing was held on the debtor's proposed Chapter 13 plan. After determining that the debtor had failed to file a feasible plan, Bankruptcy Judge William J. Lasarow signed an order dismissing the Chapter 13 petition.

Subsequent to Judge Lasarow's ruling, but prior to the entry of the dismissal order dated October 3, 1985, the debtor filed a second Chapter 13 petition on September 27, 1985. On October 2, 1985, Bankruptcy Judge Barry Russell presided over a hearing on Tsafaroff and Simbas' complaint for relief from the automatic stay. The debtor and the debtor's attorney failed to appear at the hearing and Judge Russell entered a Default Judgment on October 13, 1985. Judge Lasarow's final order dismissing the first Chapter 13 petition had been entered on October 3, 1985.

The debtor's second Chapter 13 petition (case # 85-54806 filed on October 27, 1985) was converted to a Chapter 7 on December 16, 1985. However, relying on the previously entered Default Judgment lifting the automatic stay under the first Chapter 13 petition (case # 85-53242), the creditors Tsafaroff and Simbas proceeded with a foreclosure sale of the property on January 16, 1986. The property was purchased by William Little, for $22,088.94 subject to a $20,000 first deed of trust.¹ Both parties stipulated that the property was valued at at least $100,000 at a hearing on November 21, 1986. ER. at 379.

On April 10, 1986, in case # 85-54806, the debtor filed a complaint to set aside the foreclosure sale as being violative of the automatic stay which became effective upon the filing of the second Chapter 13 petition on September 27, 1985. Tsafaroff, Simbas and Little filed a motion to dismiss the complaint for lack of subject matter jurisdiction on May 12, 1986. They alleged that the original order lifting the automatic stay in the first Chapter 13 case was Res Judicata on any subsequent Chapter 13 petitions. On June 2, 1986, Mr. Little, again through Mr. Vickman, filed an ex parte motion for declaratory relief as to the absence of an automatic stay, and alternatively relief from the automatic stay. Notice of the motion was served on the debtor's attorney eight days prior to the scheduled hearing. The hearing on both the motion to dismiss and the ex parte motion for relief from the automatic stay was held on June 10, 1986, before Bankruptcy Judge Geraldine Mund.

Judge Mund determined that the order lifting the automatic stay was not res judicata on the second Chapter 13 and denied both the motion to dismiss and the ex parte motion for relief from automatic stay. The denial of relief from the automatic stay was based on Judge Mund's finding that the prior order obtained under the first Chapter 13 petition, did not permit the sellers to conduct the foreclosure when the automatic stay from the second filed petition was in effect. She also found that relief from the stay could only be maintained after determining that the buyer Mr. Little was a bona fide purchaser and, therefore, not tainted by a foreclosure which was in violation of the automatic stay.

Not to be deterred, Mr. Little filed on July 2, 1986, a Motion to Alter or Amend Judge Mund's previous order on the motion for relief from stay. Judge Mund considered the Motion to Alter or Amend the equivalent of a motion to reconsider and after a hearing on the matter denied the motion. Judge Mund determined that the previous ex parte motion for declaratory relief was improperly brought and should have been brought as an "adversary proceeding." She also determined that Mr. Little's attorney, Mr. Vickman had "multiplied the litigation in this matter . . . and has attempted to shortcut the provisions of the Bankruptcy Code and Rules. . . ." Based on these and other findings Judge Mund imposed sanctions against Mr. Vickman in the amount of $500.

From this order denying the Motion to Alter or Amend and imposing sanctions on Mr. Vickman, Mr. Little appeals ("the first appeal").

After the filing of the first appeal, a trial was held on the debtor's complaint to set aside the foreclosure sale as void. Judge Mund determined therein that Mr. Little was a bona fide purchaser at the foreclosure sale and held the sale to be valid. Judge Mund also determined that an issue remained as to whether Mr. Little retained only a lien on the property pursuant to section 549(c) of the Bankruptcy Code concerning "fair equivalent value." This issue was taken under advisement by Judge Mund. The debtor then filed a notice of appeal with respect to Judge Mund's order deeming the foreclosure sale valid ("the second appeal"). (These appeals have been consolidated in consideration of the interrelated facts and judicial economy.)

DISCUSSION.

I.

This Panel reviews the bankruptcy court's findings of fact under a "clearly erroneous" standard, while conclusions of law are reviewed de novo. Bankr.Rule 8013; Anderson v. City of Bessemer, 470 U.S. 564, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985). A bankruptcy court's decision to impose sanctions upon an attorney will be reversed only upon a showing of abuse of discretion. In re Chisum, 68 B.R. 471, 473 (9th Cir. BAP 1986).

II.

In the first appeal, the issues are: 1-whether the trial court erred in holding that the prior order lifting the stay in the first Chapter 13 was not res judicata on the automatic stay arising under the second petition; and 2- whether the trial court abused its discretion in imposing sanctions upon Mr. Vickman.²

Mr. Little argues that the bankruptcy court erred in holding that Judge Russell's initial order lifting the automatic stay did not have res judicata effect. In support of his contention Mr. Little cites the express language of Judge Russell's order from the default judgment entered on October 16, 1985. The order states as follows:

3. That for a period of six months from the date of entry of the Judgment herein, this relief from automatic stay shall also apply, as res judicata, to any subsequent Chapter 13 cases and proceedings and to any subsequent conversions of this case, which involve the debtor herein, the subject property and the plaintiffs herein, as to conducting a foreclosure proceeding under the power of sale of the deed of trust. . . .

4. That for a period of six months from the date of entry of the Judgment herein, this Judgment shall act as a bar against the automatic stay arising from any further Chapter 13 bankruptcy proceedings, and from any subsequent conversions of this case, relating to the subject real property herein and the foreclosure and unlawful detainer proceedings herein. . . .

Judge Mund determined that since the order had been drafted by the attorney for Mr. Little, it would be construed strictly. Further, that the language of the order created a "gap" period prior to the entry of the order and that the debtor's second Chapter 13 petition was filed during this time period on September 27, 1985. Thus, the debtor's second petition was not filed during the six month time period "from the date of entry" of the default judgment. We agree.

A literal reading of the language in the order supports the trial court's determination that the order was intended only to apply to Chapter 13 petitions filed "after" the entry of the default judgment. The debtor's second Chapter 13 petition was filed on September 27, 1985. It appears that based on this filing the debtor did not attend the hearing on the complaint to lift the automatic stay held 5 days later, on October 2, 1985. As further evidence that the order was not intended to apply to the second Chapter 13 petition, is the fact that appellant brought a Motion to Amend the order before Judge Russell, however, Judge Russell refused to hear it. ER. at 54.

Construing the order strictly against the drafter Mr. Little, the trial court's finding that it was not intended to apply to the Chapter 13 petition filed on September 27, 1985, was not clearly erroneous. See Interpetrol Bermuda Ltd. v. Kaiser Aluminum International Corp., 719 F.2d 992, 998 (9th Cir.1984).

Even if this Panel accepts Mr. Little's argument that the intent of the order lifting the automatic stay in case # 85-53242 was to apply to any and all Chapter 13 petitions filed by the debtor, it is doubtful that a bankruptcy court can enter such an order. The Bankruptcy Code creates an automatic stay in all bankruptcy proceedings. In a case involving a similar order, the District Court for the Eastern District of Pennsylvania determined that "a bankruptcy judge in a pending proceeding simply does not have the power to determine the automatic stay shall not be available in subsequent bankruptcy...