Roth v. Plikaytis (In re Roth)
| Decision Date | 10 December 2018 |
| Docket Number | Bankruptcy No. 10-07659-MM,Case No.: 18-cv-1475-GPC-BGS |
| Citation | 595 B.R. 572 |
| Parties | IN RE James Marvin ROTH, Debtor, Debra Ann Roth, an Individual, Appellant, v. Anice Plikaytis, an Individual, Appellee. |
| Court | U.S. District Court — Southern District of California |
L. Scott Keehn, Keehn Law Group, APC, San Diego, CA, for Appellant.
Scott A. McMillan, The McMillan Law Firm, La Mesa, CA, for Appellee.
ORDER AFFIRMING BANKRUPTCY COURT'S ORDER OF JUNE 26, 2018
Before the Court is a bankruptcy appeal brought by Third Party Claimant – Appellant Debra Ann Roth ("Debra" or "Appellant") against Appellee Anice Plikaytis ("AP" or "Appellee"). The Court reviews the June 26, 2018 "Amended Tentative Ruling" issued by Bankruptcy Judge Margaret M. Mann of the United States Bankruptcy Court for the Southern District of California. (R.1 at 4-12.)
Pursuant to Civil Local Rule 7.1(d)(1) and Federal Rule of Bankruptcy Procedure 8019(b), the Court finds the matter suitable for adjudication without oral argument. For the reasons stated below, the bankruptcy court's June 26, 2018 Order is AFFIRMED .
On May 3, 2010, Debtor James Marvin Roth ("James") filed a voluntary petition under Chapter 11 of the Bankruptcy Code. (Bankruptcy Case No. 10-7659-MM11, Dkt. No. 1.) In August 2011, an evidentiary hearing was held concerning the approval of the Chapter 11 Plan. (Id., Dkt. No. 314.) At the end of the hearing, the court sua sponte made a motion to appoint an examiner. (Id., Dkt. No. 351.) On September 27, 2011, Christopher Barclay was appointed as the Chapter 11 Examiner. (Id., Dkt. No. 359.) On June 22, 2012, the Chapter 11 Plan was confirmed. (Id., Dkt. No. 483.) The Plan provided that "[p]ending any discharge of either or both Reorganized Debtors, all Creditors are enjoined and stayed from taking any action against the Reorganized Debtors, their estates, or property of their estates." (Id., Dkt. No. 509 at 55.) On August 29, 2012 the bankruptcy court approved an order directing that "Roth [James] and RMC are ordered not to incur any new debt or obligations, including by [sic] not limited to incurring guarantees, trade debt, secured loans or unsecured loan, without the approval of Anice Plikaytis2 and the Disbursing Agent." (Id., Dkt. No. 535 at 16.) On April 5, 2013, James was authorized to borrow money from Debra's separate property on an unsecured basis and the estate and its property would not be liable for the loan. (Id., Dkt. No. 854.) According to Appellant, she lent money to James on an unsecured basis and claims $ 148,537 is due. (Bankruptcy Case No. 10-90359-MM, Dkt. No. 384, TPC ¶ 4.3)
In August 2013, at a hearing on Anna Plikaytis' motion to convert James' case to a Chapter 7 liquidation, the bankruptcy court denied the motion to convert and amended the Plan and appointed former examiner Barclay to be the Post-Confirmation Estate Fiduciary. (Bankruptcy Case No. 10-7659-MM11, Dkt. No. 1002 at 2.) The Estate Fiduciary is vested with the authorities and responsibilities comparable to a trustee under 11 U.S.C. § 1104. (Id. at 3.)
On November 22, 2013, in the underlying adversary proceeding, Appellee Anice Plikaytis's ("AP") obtained a judgment in the bankruptcy court in the amount of $ 2,997,000 against James Roth for the portion of his debt to her under a final judgment entered in the San Diego Superior Court as nondischargeable. (R. at 73.)
On September 28, 2017, the bankruptcy court held a hearing concerning the completion of the Plan. (Bankruptcy Case No. 10-7659-MM11, Dkt. No. 1254 at 1.) Barclay, the Estate Fiduciary, sought abandonment of James' 100% equity interest in the Zanzibar rental properties as of October 1, 2012 and the bankruptcy court granted his motion. (Id. at 1, 5; R. at 90.)
In anticipation of the abandonment, on Saturday, September 30, 2017, Debra prepared a deed of trust to secure money she had loaned to James for necessary legal services and gave them to her husband unsigned knowing that the properties would be abandoned by the bankruptcy estate on Monday, October 2, 2017 and knowing that the actual liens could not be created until Monday, October 2, 2017. (R. at 115-116.) On the same day, Debra accompanied James to the notary public where he signed the Deed of Trust with Assignment of Rents with respect to Zanzibar properties. (Bankruptcy Case No. 10-903598-MM, Dkt. No. 442 at 55-56; R. at 39-43.) On Monday, October 2, 2017, James went to the San Diego County Recorder's Office and recorded the Deeds of Trust ("DOT") at 8:26 a.m. (R. at 116.) When he returned, James delivered the DOT to Debra and she accepted their delivery. (Id. ) On October 2, 2017, the bankruptcy court issued an abstract of judgment on AP's judgment. (Bankruptcy Case No. 10-90359-MM, Dkt. No. 244.) On Tuesday, October 3, 2017, AP recorded her abstract of judgment with the County Recorder's office. (R. at 67-70.)
On April 17, 2018, Debra filed a Third Party Claim asserting an interest superior to that held by Creditor AP in the monies received from rents owed to James based on his interest in the Zanzibar properties. (R. at 4.) An opposition was filed on April 30, 2018. (R. at 3.) Debra filed a reply. (Dkt. No. 408.) On May 10, 2018, the bankruptcy court issued a tentative ruling concluding that the Third Party Claim be overruled. (R. at 88.) The court found that the DOT was void as the acts preparing the DOT violated the automatic stay as the stay prohibits all actions against the property. (R. at 93-94.) On June 25, 2018, the court held a hearing and after allowing Debra to file a supplemental brief, issued an amended tentative ruling sustaining tentative ruling that overruled the Third Party Claim and entered judgment. (R. at 3.)
Appellant challenges the bankruptcy judge's ruling that the (Dkt. No. 5 at 6.) This conclusion is based on the bankruptcy court's finding that "the transfer was not initiated by James but by Debra and her request and for her benefit." (R. at 6.)
The district court has jurisdiction to hear this bankruptcy appeal pursuant to 28 U.S.C. § 158(a)(1). On appeal, the district court functions as an appellate court and the standard of review over a bankruptcy appeal is the same as used by circuit courts reviewing district court decisions. See In re Baroff, 105 F.3d 439 (9th Cir. 1997).
Therefore, the court reviews a bankruptcy court's findings of fact for clear error and reviews its conclusions of law de novo. In re Int'l Fibercom, 503 F.3d 933, 940 (9th Cir. 2007). By well-settled rule, "factual findings are reviewable only for clear error-in other words, with a serious thumb on the scale for the bankruptcy court." U.S. Bank Nat. Ass'n ex rel. CWCapital Asset Mgmt. LLC v. Vill. at Lakeridge, LLC, ––– U.S. ––––, 138 S.Ct. 960, 966, 200 L.Ed.2d 218 (2018). Whether the bankruptcy court applied the correct legal standard is a legal issue which is reviewed de novo. In re Karelin, 109 B.R. 943, 946 (9th Cir. BAP 1990).
"A mixed question of law and fact occurs when the historical facts are established; the rule of law is undisputed ... and the issue is whether the facts satisfy the legal rule."
In re Bammer, 131 F.3d 788, 792 (9th Cir. 1997) (citations omitted). The standard of review for a mixed question of law and fact depends on whether answering it entails primarily legal or factual work. U.S. Bank, 138 S.Ct. at 967. Where mixed questions immerse courts in case-specific factual issues, appellate courts should review a decision with deference. Id. Whether the automatic stay provisions of § 362(a) have been violated is a question of law reviewed de novo. In re Mwangi, 764 F.3d 1168, 1173 (9th Cir. 2014).
Here, Appellant argues that the Court should review the bankruptcy judge's order de novo as the essential facts surrounding the acts to establish the lien by the DOT is not disputed and she objects to the bankruptcy court's application of the law. Appellee contends that the "clear error" standard of review should apply where the court, based on undisputed facts, made findings of fact and applied the law.
Here, the Court concludes that the issue presented is a mixed question of law and fact and primarily focuses on the law. Appellant does not dispute the facts or the applicable law, but challenges the interpretation of the facts as applied to the law; specifically, the question raised is whether the violation of the automatic stay was debtor-initiated or creditor-initiated and whether the automatic stay provisions have been violated. Therefore, the Court reviews the bankruptcy order de novo.
Appellant challenges the bankruptcy court's conclusion that the "deed of trust under which Debra claimed as superior right to Zanzibar was prepared and executed in violation of the automatic stay" because the DOT, at issue, should have been governed by 11 U.S.C. § 549, not 11 U.S.C. §§ 362(a)(3) or (a)(4) because James, the debtor, initiated the "transfer", not Debra, the creditor. In response, Appellee argues that the bankruptcy court properly found that the preparation and execution of the DOT by Debra was a creditor-initiated transaction, and a creditor imposed lien is a violation of the automatic stay provisions.
To determine which whether § 549 or § 362 applies, the Court must determine whether the transfer or action taken against the Zanzibar properties was debtor-initiated or creditor-initiated. Appellant argues that through § 362(b)(24)3 , an exception to the automatic stay provisions, § 5494 applies to this case because the James, the debtor initiated the transfer. In contrast, Appellee argues that §§ 362(a)(3) and (a)(4) applies because the...
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