Pac. W. Bank v. Ehrenberg (In re Levine)

Decision Date08 January 2018
Docket NumberRelated Case No.: CV17–01069–AB,Bankr. Case no.: 12–22639–ER,District Ct. Case No.: CV 17–00576–AB
Citation583 B.R. 231
Parties IN RE: Claire LEVINE, Debtor. Pacific Western Bank, Appellant v. Howard M. Ehrenberg, Appellee
CourtU.S. District Court — Central District of California

Brent G. Cheney, Jonathan E. Burke, Parker Milliken Clark O'Hara and Samuelian APC, Assaf S. Hami, SulmeyerKupetz APC, Daniel A. Lev, Gerard L. Friend, Los Angeles, CA, Stella Anne Havkin, Havkin and Shrago, Woodland Hills, CA, for In re Claire Levine.

Peter Rudinskas, Los Angeles, CA, pro se.

ORDER AFFIRMING BANKRUPTCY COURT'S ORDERS DENYING IN PART RELIEF FROM AUTOMATIC STAY

ANDRÉ BIROTTE JR., UNITED STATES DISTRICT COURT JUDGE

Appellant Pacific Western Bank ("Bank") appeals the bankruptcy court's tentative and final orders denying in part Bank's Motion for Relief from Automatic Stay. Bk. Dkt. Nos. 360, 361, 429. Appellee Howard M. Ehrenberg, Chapter 7 Trustee ("Trustee") for debtor Claire Levine's bankruptcy estate, filed a responsive brief, and Bank filed a reply brief. Claire Levine ("Levine") and Gerald Goldstein ("Goldstein") together filed a responsive brief, and Bank filed another reply brief. The Court therefore has considered the following memoranda: Dkt. Nos. 22, 39, 44, 46, and 54. For the following reasons, the Court AFFIRMS the bankruptcy court's orders.

I. BACKGROUND

Goldstein and Levine were in a long-term romantic relationship, but never married. During their relationship, Goldstein and Levine purchased multiple properties together, including:

• A property at 1027 Napoli Drive, Pacific Palisades, California 90272 (the "Napoli Property"), which Goldstein and Levine purchased as trustees of the Amadeus Trust;
• A property at 3800 Wailea Aluani, Apartment B101, Maui, Hawaii 96753 (the "B101 Apartment"), which Goldstein and Levine purchased as Tenants by the Entirety as "husband and wife";
• A property at 3800 Wailea Aluani, Apartment E201, Maui, Hawaii 96753 (the "E201 Apartment");
• A property at 11847 Gorham Avenue, Number 303, Los Angeles California 90049 (the "Brentwood Condo");
• A property at 15 East 69th Street, Number 4d, New York, NY 10027 (the "New York Apartment"), which Goldstein and Levine purchased as trustees of the Amadeus Trust; and
• A property at 888 Napoli Drive, Pacific Palisades, California 90272, which Goldstein and Levine purchased as trustees of the Amadeus Trust.

AA Vol. 1, pp. 145, 147–50, 152, 160–63, 165–68, 170–72; AA Vol. 2, p. 573 (¶ 1). According to Levine, the Amadeus Trust was a revocable living trust in which Levine and Goldstein were settlors, trustees, and beneficiaries. AA Vol. 1, p. 278 (¶ 53).

In 2008, the romantic relationship between Goldstein and Levine ended, and Levine filed a palimony lawsuit against Goldstein. Levine alleged that she purchased nine real estate properties, including those listed above, with her separate property. AA Vol. 1, pp. 277–281. She claimed that she had revoked the Amadeus Trust in 2008 and that the real properties she purchased should revert back to her. AA Vol. 1, pp. 277–280.

In April 2012, Levine filed for Chapter 11 bankruptcy. Bk. Dkt. No. 1. The bankruptcy case was later converted to a Chapter 7 bankruptcy, and Trustee was appointed to administer Levine's bankruptcy estate. Bk. Dkt. Nos. 78, 81. Goldstein filed a creditor's claim against Levine's bankruptcy estate, claiming $5.5 million for expenses Amadeus Trust paid for real properties. AA Vol. 1, pp. 305–08.

In September 2014, Goldstein, Trustee, and Levine entered into a settlement agreement (the "Settlement Agreement"). AA Vol. 2, pp. 572–85. The Settlement Agreement resolved the palimony lawsuit between Levine and Goldstein, as well as Goldstein's creditor's claim against the bankruptcy estate. AA Vol. 2, p. 572. The agreement was contingent on the Short Sale or Early Sale of the B101 Apartment. AA Vol. 2, p. 573 (¶ 2.a). Once the B101 Apartment was sold pursuant to the Settlement Agreement's terms, Levine would take sole title to the Napoli Property and the Brentwood Condo, while Goldstein would take sole title to the E201 Apartment. AA Vol. 2, pp. 574–75 (¶ 3.a). The bankruptcy court approved the Settlement Agreement on September 24, 2015. Bk. Dkt. No. 326.

The parties were unable to sell the B101 Apartment pursuant to the Settlement Agreement's terms. For that reason, they amended the Settlement Agreement in September 2016. AA Vol. 2, pp. 561–70. The amendment provided that the Settlement Agreement would be entirely contingent on the Short Sale of the B101 Apartment to HAR–Bronson Diversified LLC ("Bronson"). AA Vol. 2, p. 561 (¶ 2.a). It also instructed Bronson to resell the B101 Apartment following the Short Sale. AA Vol. 2, p. 562 (¶ 2.e). Bronson would receive $5.3 million of the proceeds from the resale, Levine would receive $1.1 million, and Trustee would receive $300,000. AA Vol. 2, p. 563 (¶ 2.g). If money from the resale was left over, Nemecek & Cole, a law firm that represented Goldstein, could receive $150,000 as partial satisfaction of fees and costs Goldstein owed the firm. AA Vol. 2, p. 563 (¶ 2.g.8). The bankruptcy court approved the amendment to the Settlement Agreement, over Bank's objection, on January 19, 2017. AA Vol. 3, pp. 991–993.

In separate proceedings, Bank obtained two state court judgments against Goldstein on July 8, 2016. First, the state court entered a $1,044,277.73 judgment against Goldstein and his company Far Out Productions, plus interest. AA. Vol. 1, pp. 249–252. Second, it entered a $2,870,012.65 judgment against Goldstein and his company Audio Visual Entertainment, Inc., plus interest. AA Vol. 1, pp. 256–257.

In an effort to enforce the judgments against Goldstein, Bank filed a motion for relief from the automatic stay. AA Vol. 1, pp. 190–236. It sought to record abstracts of judgment against Goldstein's separate interest in properties he co-owned with Levine. AA Vol. 1, pp. 199–200. It also sought to record notices of judgment liens against Goldstein's personal property. AA Vol. 1, pp. 200–201.

On October 3, 2016, the bankruptcy court issued a tentative ruling that granted Bank relief from the automatic stay with respect to Goldstein's personal property, but denied Bank relief from the automatic stay with respect to Levine's real properties. AA Vol. 2, pp. 504–12. It explained that "[a]llowing [Bank] to record abstract judgments against Goldstein's interest in [real properties] ... may cloud title and hamper the administration of [Levine's] bankruptcy estate." AA Vol. 2, p. 510. The bankruptcy court conditioned its ruling, however, on a signed settlement agreement being filed within 30 days. AA Vol. 2, pp. 514–15. After the bankruptcy court granted an extension to file a settlement agreement, Trustee filed the amended Settlement Agreement for approval on December 5, 2016. AA Vol. 2, pp. 538–630. Then, on January 19, 2017, the bankruptcy court entered a final order accepting its tentative ruling. AA Vol. 3, pp. 995–96. Bank filed notices of appeal regarding both the tentative ruling and the final order. AA Vol. 3, pp. 958–62, 998–1004.

Bank has represented that Goldstein and Levine lost the E201 Apartment in a foreclosure sale and that the New York Apartment was sold in 2013. Dkt. No. 22, at p. 16, n.3; AA Vol. 1, p. 86. The bankruptcy court previously terminated the automatic stay of the property at 888 Napoli Drive. Bk. Dkt. No. 40. Thus, Bank, through its appeal, only seeks leave to record abstracts of judgment against the B101 Apartment, the Napoli Property, and the Brentwood Condo (together, the "Real Properties").

II. ISSUE PRESENTED

The issue presented on appeal is whether an automatic bankruptcy stay protects a non-debtor's separate interest in property he co-owns with a bankruptcy debtor where the non-debtor's separate interest would be extinguished by the effectuation of a settlement agreement.

III. STANDARD OF REVIEW

Courts review questions of law de novo. See Hillis Motors, Inc. v. Hawaii Auto. Dealers' Ass'n , 997 F.2d 581, 585 (9th Cir. 1993). The scope of an automatic stay is a question of law subject to de novo review. See In re Chugach Forest Prods., Inc. , 23 F.3d 241, 244 (9th Cir. 1994). However, a bankruptcy court can, in its discretion, grant relief from an automatic stay. 11 U.S.C. § 362(d). Courts apply an abuse of discretion standard of review to such discretionary decisions. Benedor Corp. v. Conejo Enters., Inc. , 96 F.3d 346, 351 (9th Cir. 1996). The proper standard of review therefore depends on whether an appellant challenges a bankruptcy court's assessment of the scope of an automatic stay or its decision to grant (or deny) relief from an otherwise applicable automatic stay.

Here, Bank contends that the bankruptcy court erred because it overextended the scope of the automatic stay. Instead of arguing that the bankruptcy court improperly failed to grant relief from an applicable automatic stay, Bank claims the automatic stay cannot, as a matter of law, apply to Goldstein's interest in the Real Properties. Because Bank challenges the bankruptcy court's legal determination about the scope of the automatic stay, a de novo standard of review applies.

IV. DISCUSSION

As soon as a bankruptcy case is filed, an automatic stay goes into effect that prevents creditors from taking actions against the property of the bankruptcy estate. 11 U.S.C. § 362(a). The stay prohibits, among other things, "the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title" and "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate." Id. § 362(a)(2–3). The automatic stay protects both the debtor and creditors. It gives the debtor breathing space while she attempts to regain her financial footing. See Hillis Motors , 997 F.2d at 585 ; In re Schwartz , 954 F.2d 569, 571 (9th Cir. 1992). At the same time, it...

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