In re Trust Deed Center, Inc., Bankruptcy No. SA 83-04284 PE
| Decision Date | 10 February 1984 |
| Docket Number | Bankruptcy No. SA 83-04284 PE,Adv. No. SA 83-2941 PE. |
| Citation | 36 BR 846 |
| Court | U.S. Bankruptcy Court — Central District of California |
| Parties | In re TRUST DEED CENTER, INC., Debtor. TRUST DEED CENTER, INC., Plaintiff, v. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, Defendant. |
Richard Barnett, Blake, Niermann & Barnett, Santa Ana, Cal., for debtor/plaintiff.
Jayne Kaplan, Los Angeles, Cal., for defendant.
MEMORANDUM AND ORDER AWARDING SANCTIONS AGAINST WILLIAM E. BAKER, ATTORNEY FOR DEBTOR-PLAINTIFF
On January 17, 1984 I signed and filed findings of fact and conclusions of law and an order in favor of the Bank of America annuling the stay to validate a September 21, 1983 foreclosure of real property. In that order a separate hearing was set to consider sanctions against Robert Peterson and counsel for the debtor, William E. Baker.
In the Bank's ex parte application for an order confirming foreclosure sale nunc pro tunc, treated as a response to the debtor's complaint herein, the Bank sought a contempt citation against Baker. It is alleged that Baker, as counsel for three different entities, filed multiple Chapter 11 cases in bad faith, for the purpose of forestalling Bank of America's foreclosure of certain improved real property in which Baker himself, as well as his clients, had an interest. I determine that sanctions should be imposed for the last two filings.
The real property which is the subject of the multiple filings is a 4.8 acre lot upon which the Plaza Mirada Shopping Center stands. The title to the property was held by SBL partnership, which has three partners: Jack Shine, David Bock and Lef-Tel, Ltd. William Baker is the general partner of Lef-Tel. The Bank of America made a construction loan to SBL and took a first deed of trust in the property as security. In spite of two extensions granted by the Bank, SBL was unable to meet its obligations. Bank of America proceeded to foreclose upon the property. On July 15, 1982, before a foreclosure sale could be conducted, SBL transferred its interest in the property to a newly formed corporation, SBL Partnership, Inc., which filed a Chapter 11 case on July 16, 1982, case numbered SA 82-03099 AP.
The Bank and the debtor, SBL Partnership, Inc., entered into a stipulation continuing the stay in effect until April 30, 1983. The stipulation required monthly interest payments of $15,000. be paid to the Bank. The stipulation was signed by the parties and approved by Bankruptcy Judge Phelps on October 29, 1982.
SBL defaulted on the interest payments and Bank of America proceeded with foreclosure. Prior to default, SBL Partnership, Inc. borrowed money for the purpose of meeting the interest payments. The lenders, Baker and a group including Robert Peterson, were given junior deeds of trust in the property to secure their loans. The debtor did not seek authority to incur secured credit as required by 11 U.S.C. § 364(c).
On or about February 10, 1983, at an ex parte hearing, Judge Phelps ruled that SBL Partnership, Inc. was in default under the October 29, 1982 stipulation and terminated the stay.
On February 11, 1983, Baker conveyed his interest in his junior deed of trust on the subject property to Lef-Tel, Ltd. Lef-Tel, Ltd. filed a Chapter 11 case on the same day, February 11. William Baker was attorney of record for Lef-Tel. Since Lef-Tel's newly acquired interest in the trust deed became part of the estate, Bank of America was again stayed from foreclosure. Bank of America immediately filed for relief from stay. The motion was unopposed and relief from stay was granted on April 11, 1983. Bank of America again proceeded with foreclosure. The sale was scheduled for September 21, 1983.
On September 19, Robert Peterson assigned his interest in his trust deed to the debtor herein, Trust Deed Center, Inc., a previously inactive corporation with headquarters at the same address as William Baker's law practice. Trust Deed Center, Inc. (TDC), represented by William Baker, filed its Chapter 11 case on September 20. The Bank nevertheless allowed the foreclosure sale to take place, and the Bank purchased at the sale.
Baker, on behalf of TDC, filed an application for issuance of an order to show cause and for contempt against Bank of America for violating the automatic stay. Bank of America filed an application for order confirming sale and citation for contempt. On September 30, 1983 I granted Bank of America's application and refused TDC's, reserving jurisdiction to impose sanctions, if appropriate.
William Baker was the principal initiator of the foregoing litigation. He not only prepared and filed each of the bankruptcy petitions, as attorney of record for each of the debtors, but he also is an interested party, intimately involved in the business of each of the debtors.
The applicable statute in this case is 28 U.S.C. § 1927, which provides as follows:
Any attorney or other person admitted to conduct cases in any court in the United States or any territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses and attorney\'s fees incurred because of such conduct.
Baker freely admits that the purpose of each of the three filings was to prevent Bank of America from foreclosing on the subject property.
I do not consider the transfer from the SBL partnership to SBL Partnership, Inc. on the eve of the Chapter 11 filing by the transferee to be relevant as to the issue of sanctions. There appeared to be a business purpose in that several creditors gave up their liens on the real estate in return for stock in SBL Partnership, Inc. In addition, as a...
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