in re: michael rene rodarte, 9th cir. bap (2012)

7/25/2019 In re: Michael Rene Rodarte, 9th Cir. BAP (2012)

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1 Thi s di sposi t i on i s not appr opr i at e f or publ i cat i on.Al t hough i t may be ci t ed f or what ever per suasi ve val ue i t mayhave ( see Fed. R. App. P. 32. 1) , i t has no pr ecedent i al val ue.See 9t h Ci r . BAP Rul e 8013- 1.

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

I n r e: ) BAP No. CC- 12- 1276- HKi D)

MI CHAEL RENE RODARTE, ) Bk. No. 09- 10411- TA)

Debt or . )______________________________)

)MI CHAEL RENE RODARTE, )

)Appel l ant , )

)v. ) M E M O R A N D U M1

)ESTATES AT MONARCH COVE )COMMUNI TY ASSOCI ATI ON, )

)Appel l ee. )

______________________________)

Ar gued and Submi t t ed on November 15, 2012at Pasadena, Cal i f or ni a

Fi l ed - December 6, 2012

Appeal f r om t he Uni t ed St at es Bankrupt cy Cour tf or t he Cent r al Di str i ct of Cal i f or ni a

Honor abl e Theodor C. Al ber t , Bankrupt cy J udge, Pr esi di ng

Appear ances: Dougl as Cr owder , Esq. ar gued f or Appel l ant ;Ber nar d J ohn Fr i mond, Esq. ar gued f or Appel l ee.

Bef or e: HOLLOWELL, KI RSCHER, and DUNN, Bankr upt cy J udges.

FILED

DEC 06 2012

SUSAN M SPRAUL, CLERKU.S. BKCY. APP. PANELOF THE NINTH CIRCUIT


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Mi chael Rene Rodart e ( t he Debt or) appeal s an order of t he

bankrupt cy cour t t hat gr ant ed annul ment of t he aut omat i c st ay.

We AFFI RM.

I. FACTS

The Debt or owns proper t y as a t enant - i n- common wi t h hi s

f at her , Manuel Rodar t e ( Rodar t e) i n Dana Poi nt , Cal i f or ni a ( t he

Pr oper t y) . The Pr oper t y i s par t of a homeowner s associ at i on,

t he Est at es at Monarch Cove Communi t y Associ at i on ( Monarch) . A

di sput e ar ose between the Debt or , Rodart e, and Monarch wi t h

r espect t o mai nt enance of t he Proper t y. I n 2003, Monar ch f i l ed a

compl ai nt i n Cal i f or ni a st at e cour t agai nst t he Debt or and

Rodar t e t o det er mi ne t hat a sl ope ar ea on the Pr oper t y was t hei r

r esponsi bi l i t y to mai nt ai n under t he t er ms of Monar ch s

Covenant s, Condi t i ons and Rest r i ct i ons ( CC&Rs) . Monar ch

pr evai l ed af t er a j ur y t r i al . On November 17, 2006, t he st at e

cour t ent ered a j udgment agai nst t he Debt or and Rodar t e ( t he CC&R

J udgment ) .

The CC&R J udgment or der ed t he Debt or and Rodar t e t o r epai rand rest ore l andscapi ng on the Pr oper t y and to pr ovi de ongoi ng

mai nt enance on i t t o compl y wi t h t he CC&Rs. I t pr ovi ded t hat i f

t he Debt or and Rodar t e f ai l ed t o r epai r or mai nt ai n t he Pr oper t y,

Monar ch was aut hor i zed t o l andscape and i r r i gat e the Proper t y t o

CC&R st andards and t o charge t he cost t o t he Debt or and Rodar t e

by way of speci al assessment . Ther eaf t er , i n Mar ch 2007, t he

CC&R J udgment was amended t o i ncl ude an award of at t orneys f eesand cost s i n f avor of Monarch. The CC&R J udgment was r ecor ded i n

t he amount of $147, 474. 39, wi t h 10% i nt er est f r om August 22,

2006.


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2 Unl ess ot her wi se i ndi cat ed, al l chapt er and sect i onr ef er ences ar e t o t he Bankrupt cy Code, 11 U. S. C. 101- 1532.Rul e r ef er ences ar e t o t he Feder al Rul es of Bankrupt cyProcedur e, Rul es 1001- 9037.

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I n 2008, pur suant t o t he CC&R J udgment , Monarch ent ered t he

Pr oper t y t o r est or e t he l andscapi ng. Li t i gat i on cont i nued. I n

l at e 2008, t he st at e cour t i ssued an or der f or t he Debt or t o

appear on J anuar y 22, 2009, and show cause why t he st at e cour t

shoul d not gr ant a mot i on f i l ed by Monarch t o have t he Propert y

sol d.

On J anuar y 21, 2009, t he Debt or f i l ed a chapt er 132

bankrupt cy pet i t i on. On Febr uar y 5, 2009, t he Debt or f i l ed hi s

bankrupt cy schedul es al ong wi t h a chapt er 13 pl an. Accor di ng t o

t he Debt or s schedul es, Monar ch was t he Debt or s onl y credi t or ,

hol di ng t he CC&R J udgment as a secured cl ai m. The Debt or

pr oposed t o pay t he CC&R J udgment i n f ul l over t he ter m of t he

pl an.

Monarch moved t o di smi ss t he Debt or s bankr upt cy case,

asser t i ng t hat t he Debt or f i l ed i t i n bad f ai t h t o avoi d

cont i nued l i t i gat i on i n t he st at e cour t r egar di ng t he Pr oper t y.

Monar ch al so obj ect ed t o the Debt or s pl an on t he basi s t hat i t

f ai l ed t o f ul l y pr ovi de f or payment of Monar ch s cl ai ms. Monar chasser t ed t hat i n addi t i on t o t he CC&R J udgment , i t hel d t wo

unsecur ed j udgment s: ( 1) an awar d of cost s i ncur r ed i n pl ant i ng

and r est or i ng t he Pr oper t y i n the amount of $18, 544. 50; and

( 2) an awar d of $6, 092. 50 i n at t or neys f ees and cost s f r om

pr evai l i ng on an appeal of t he CC&R J udgment . Over Monarch s

obj ect i ons, an amended pl an ( Pl an) was conf i r med on Febr uary 22,


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2010. The Pl an pr oposed t o pay Monarch s secur ed cl ai m wi t h 6%

i nt er est.

On Apr i l 9, 2010, Monar ch f i l ed a mot i on f or r el i ef f r om t he

aut omat i c st ay ( MRS) . On Apr i l 13, 2010, Monar ch f i l ed a si mi l ar

mot i on f or r el i ef as t o Rodar t e as a co- debt or . Monar ch

r equest ed r el i ef f r om t he st ay i n or der t o enf or ce t he CC&R

J udgment , i ncl udi ng t he abi l i t y t o r e- l andscape t he Pr oper t y and

assess t he Debt or and hi s f at her f or al l post pet i t i on cost s,

i ncl udi ng at t or ney f ees i ncur r ed i n connect i on wi t h t he

l andscapi ng i f t he Debt or and Rodar t e f ai l ed t o per f or m

necessary post pet i t i on mai nt enance on t he Proper t y. Memorandum

of Law i n Support of MRS at 2. Monarch st ated t hat i t

ant i ci pat [ ed] f i l i ng a new l egal act i on agai nst [ t he Debt or and

Rodar t e] t o r est r ai n t hei r ongoi ng post pet i t i on vi ol at i ons of t he

[ CC&Rs] , whi ch i t asser t ed wer e i mpact i ng t he val ue of

nei ghbor i ng pr oper t i es. I d.

The Debt or f i l ed an opposi t i on t o t he MRS on Apr i l 16, 2010.

He asser t ed t hat r el i ef shoul d not be gr ant ed because ( 1) Monar chhad hi r ed thr ee l aw f i r ms and i s wel l - f i nanced and ( 2) Monar ch

wi l l be i n a posi t i on t o make t he St at e Cour t l i t i gat i on so

expensi ve t hat t he Debt or wi l l be unabl e to make hi s pl an

payment s. Debt or s Response t o MRS at 5- 6.

On May 4, 2010, t he bankr upt cy cour t hel d a hear i ng on t he

MRS (MRS Hear i ng) at whi ch Monarch, t he Debt or and hi s counsel

at t ended. The bankrupt cy cour t i ssued a t ent at i ve r ul i ng pr i ort o the MRS Hear i ng ( MRS Tent at i ve) st at i ng t hat i t i nt ended t o

gr ant t he st ay r el i ef as t o any ongoi ng post pet i t i on vi ol at i ons:


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A t r anscr i pt of t he MRS Hear i ng was not pr ovi ded i n t her ecor d and i s unavai l abl e on t he bankrupt cy cour t s docket .However , we have gl eaned i nf ormat i on about t he hear i ng f r omt hepar t i es br i ef s, t he docket , and f r om t he bankr upt cy cour t i t sel fwhen i t l ater r ecount ed what t ook pl ace at t he MRS Hear i ng. SeeHr g Tr . ( Apr . 18, 2012) at 12- 18.

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[ t ] o the ext ent t hat movant needs t o i ni t i at e pr ocesst o enf orce the ongoi ng covenant s ( as opposed t o themonetary sums al r eady embodi ed i n the ear l i er j udgment )t her e i s ei t her no st ay, or i f t her e i s, t he movantwoul d be i r r epar abl y har med . . . i f t hi s l ot wer eal l owed t o r emai n i n a non- conf or mi ng st at e f or t hebal ance of t he t er m of t he pl an.

Tent at i ve Rul i ng ( May 4, 2010) .

Consi st ent wi t h t he MRS Tent at i ve, t he bankr upt cy cour t

or al l y r ul ed at t he MRS Hear i ng that i t woul d deny Monar ch the

abi l i t y t o enf or ce t he monet ary por t i ons of t he CC&R J udgment ,

deal t wi t h i n t he Pl an, but woul d gr ant st ay r el i ef t o al l ow

Monar ch t o l i qui dat e pr epet i t i on at t or ney f ees not deal t wi t h i n

t he Pl an, and t o al l ow Monarch to reduce the f ees t o j udgment . 3

Addi t i onal l y, t he bankr upt cy cour t gr ant ed st ay rel i ef so t hat

Monar ch coul d pur sue i t s r emedi es under st at e l aw t o enf or ce i t s

CC&Rs wi t h regard to t he ongoi ng dut i es of t he Debt or and

Rodar t e. An ent r y on t he bankr upt cy case docket dated May 4,

2010, st at es:

Hear i ng Hel d . . . Mot i on f or Rel i ef f r om St ay . . .MOTI ON GRANTED I N PART AND DENI ED I N PART; Rel i ef i s

deni ed as t o sums al r eady deal t wi t h i n t he pl an.Modi f y co- debt or st ay as t o pr epet i t i on amount s notdeal t wi t h i n t he pl an. Gr ant ed as t o ongoi ng dut i esunder t he CC&Rs.

Al t hough t he bankrupt cy cour t or al l y gr ant ed r el i ef at t he

MRS Hear i ng on May 4, 2010, t he wr i t t en order denyi ng the MRS i n

par t and gr ant i ng i t i n par t was not act ual l y ent er ed unt i l


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4 The or der gr ant i ng r el i ef f r om t he co- debt or st ay wasent er ed J une 21, 2010. I t s t er ms ar e i dent i cal t o t he MRS Or der .

5 The recor d on appeal cont ai ns onl y t he f ace page of t hest at e cour t compl ai nt . Our under st andi ng of t he St at e Cour tAct i on comes f r om t he par t i es br i ef s.

6

The Debt or s decl ar at i on submi t t ed wi t h t he Mot i on t oEst abl i sh Vi ol at i on st ates t hat t he amount of damages awarded was$18, 520. 59. However , he has at other t i mes st ated t he amount ofdamages awar ded was onl y $2, 700. We cannot r esol ve t hedi scr epancy because nei t her t he act ual ver di ct nor t he St at eCour t J udgment i s i ncl uded i n t he recor d on appeal .

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somet i me l ater , on J une 29, 2010 ( t he MRS Or der ) . 4 The MRS Or der

was consi st ent wi t h t he MRS Tent at i ve and t he bankr upt cy cour t s

or al r ul i ng.

I n t he meant i me, act i ng on t he or al r ul i ng by the bankrupt cy

cour t at t he MRS Hear i ng, Monar ch f i l ed, on J une 1, 2010, a

compl ai nt i n st at e cour t t o enf or ce the CC&R J udgment ( t he St at e

Cour t Act i on) . The St at e Cour t Act i on al l eged causes of act i on

ar i si ng f r om t he Debt or s and Rodar t e s cont i nui ng vi ol at i ons of

t he CC&Rs wi t h respect t o mai nt enance of t he Pr opert y. 5

The Debt or and Rodar t e f i l ed an answer i n t he Stat e Cour t

Act i on, al ong wi t h a cr oss compl ai nt agai nst Monarch. The St at e

Cour t Act i on was t her eaf t er f ul l y l i t i gat ed. A j ur y t r i al was

hel d J une 9- 22, 2011. The j ur y subsequent l y f ound i n f avor of

Monar ch, f i ndi ng t hat t he Debt or and Rodar t e wer e l i abl e f or

damages i n the amount of $18, 520. 59. 6 The ver di ct was r educed t o

a j udgment ent ered on August 2, 2011 ( t he St ate Cour t J udgment ) .

The Stat e Cour t J udgment was amended on August 4, 2011, t o

i ncl ude over $300, 000 i n Monarch s at t or ney s f ees and cost si ncur r ed i n t he St at e Cour t Act i on. The f i nal St at e Cour t


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7 Accor di ng t o Monar ch, t he Debt or di d not assert t hat t hest ay vi ol at i on was a basi s f or appeal . ( The Debt or answer ed no

t o a quest i on on t he appeal f or m aski ng I s t her e a r el at edbankrupt cy case or a cour t - or der ed st ay that af f ect s t hi sappeal ?) .

8 An i dent i cal mot i on was f i l ed on Febr uar y 20, 2012, butt hat mot i on appear s t o be an i ncompl et e f i l i ng.

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J udgment agai nst t he Debt or and Rodar t e was ent er ed i n t he amount

of $342, 702. 92. The Debt or l ost an appeal of t he St at e Cour t

J udgment . 7

Not wi t hst andi ng t he St ate Cour t Act i on, t he di sput e bet ween

t he par t i es r egar di ng mai nt enance of t he Pr oper t y was st i l l not

r esol ved. Monar ch i nf or med t he Debt or t hat i t i nt ended t o ent er

t he Pr oper t y on J anuar y 21, 2012, i n or der t o r epai r t he

l andscapi ng.

On J anuary 17, 2012, t he Debt or f i l ed a Mot i on f or Cont empt

f or Vi ol at i on of t he Aut omat i c St ay. Monar ch f i l ed an opposi t i on

and r equest ed t hat t he bankrupt cy cour t r et r oact i vel y annul t he

aut omat i c st ay under 362( d) t o J une 1, 2010. The Debt or l at er

wi t hdr ew t he mot i on. Thereaf t er , on Febr uary 26, 2012, 8 t he

Debt or f i l ed a Mot i on t o Est abl i sh Vi ol at i on of Aut omat i c St ay

( Mot i on t o Est abl i sh Vi ol at i on) , al l egi ng t hat Monar ch vi ol at ed

t he aut omat i c st ay by f i l i ng t he St at e Cour t Act i on bef or e t he

MRS Or der was ent ered. Because t he St ate Cour t Act i on was

commenced bef or e t he MRS Or der was ent er ed, t he Debt or ar guedt hat t he St ate Cour t J udgment was voi d.

I n t he Mot i on t o Est abl i sh Vi ol at i on, t he Debt or al so

asser t ed t hat Monar ch was onl y gr ant ed r el i ef t o l i qui dat e

pr epet i t i on at t or neys f ees t hat wer e not par t of t he Pl an and t o


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pur sue post pet i t i on r emedi es t o enf or ce t he CC&Rs, but not t o

i ni t i at e an act i on t o r ecover at t or neys f ees f or any

postpet i t i on l i t i gat i on.

Al so i n t he Mot i on t o Est abl i sh Vi ol at i on, t he Debt or

addr essed var i ous f act or s t hat cour t s consi der when deci di ng

whether t o annul t he aut omat i c st ay and asser t ed t hat t hose

f actors wei ghed agai nst annul ment . The Debt or r equest ed t he

bankr upt cy cour t t o voi d t he St ate Cour t J udgment .

Monar ch f i l ed an opposi t i on on Apr i l 4, 2012, and t he Debt or

t her eaf t er f i l ed a r epl y. Monar ch asser t ed t hat r et r oact i ve

annul ment of t he st ay was appr opr i ate under t he ci r cumst ances of

t he case, par t i cul ar l y because of t he Debt or s l ong si l ence

bef or e asser t i ng t he al l eged vi ol at i on. I n hi s r epl y, t he Debt or

expl ai ned t hat , because he was wi t hout bankrupt cy counsel af t er

t he hear i ng on t he MRS, he di d not di scover unt i l somet i me i n

Oct ober 2011, t hat t he St at e Cour t Act i on was f i l ed bef or e t he

MRS Or der was ent er ed on t he docket .

The bankrupt cy cour t hel d a hear i ng on t he Mot i on t oEst abl i sh Vi ol at i on on Apr i l 18, 2012. Pr i or t o t he hear i ng, t he

bankr upt cy cour t i ssued a t ent at i ve r ul i ng i ndi cat i ng t hat i t

woul d deny the Mot i on t o Est abl i sh Vi ol at i on and i nst ead woul d

gr ant annul ment of t he aut omat i c st ay. The bankr upt cy cour t

det er mi ned t hat i f t her e wer e ever a case f or annul ment i t woul d

be t hi s one. Tent at i ve Rul i ng ( Apr . 18, 2012) at 2. I t f ound

t hat , i n appl yi ng a bal anci ng of t he equi t i es st andar d,t he [ D] ebt or s l ong si l ence i s a st r ong addi t i onalf act or wei ghi ng i n f avor of annul ment . Ot her obvi ousf act or s woul d i ncl ude t hat [ Monar ch] t ook the pr operpr ecaut i on of f i r st seeki ng r el i ef of stay, so t hi s i snot l i ke t hose cases wher e t he cr edi t or bl under s ahead


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wi t hout concer n or cogni zance of t he st ay. Fur t her ,whi l e t he cour t cannot condone act i ons t aken bef or e ther el i ef of st ay or der i s actual l y ent er ed, t he l apse i scer t ai nl y mor e under st andabl e her e si nce i t appar ent l yt ook t he cour t sever al weeks t o pr ocess t he or der .Last l y, i t i s si mpl y an af f r ont t o equi t y ( not t oment i on a t r emendous wast e of r esour ces) t hat t he

debt or shoul d r emai n si l ent awai t i ng t he r esul t s of t hej ury ver di ct , j udgment and t hen even f i l i ng an appealt her e f r om [ si c] , and t hen at t empt t o ci r cumvent al l byseeki ng a l at e decl ar at i on t hat t he ent i r e Super i orCour t act i on was voi d ab i ni t i o. Thi s ser ves nol egi t i mate bankr upt cy pur poses and i s game pl ayi ng( l i ke heads I wi n, t ai l s you l ose) at i t s wor se [ si c].

I d.

At t he hear i ng, t he Debt or accused Monar ch of l yi ng t o

t he bankr upt cy cour t about t he r easons i t f i l ed t he MRS,

asser t i ng t hat t he Debt or had no i ndi cat i on t hat Monar ch

i nt ended t o i mmedi at el y br i ng a cause of act i on agai nst t he

Debt or . The bankr upt cy cour t addr essed t he Debt or s concern

by r evi ewi ng t he MRS Or der and st at i ng t hat i t was cl ear

t hat t he reason Monarch f i l ed t he MRS was t o be abl e t o

r et ur n t o st at e cour t t o enf orce the CC&R J udgment i f

necessary dur i ng t he t er m of t he Pl an.On May 11, 2012, t he bankr upt cy cour t ent ered i t s or der

denyi ng t he Mot i on t o Est abl i sh Vi ol at i on and gr ant i ng

annul ment of t he aut omat i c st ay r et r oact i ve t o J une 1, 2010.

The Debt or t i mel y appeal ed.

II. JURISDICTION

The bankrupt cy cour t had j ur i sdi ct i on pur suant t o

28 U. S. C. 1334 and 157( b) ( 2) ( G) . We have j ur i sdi ct i onunder 28 U. S. C. 158.


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III. ISSUE

Whet her t he bankrupt cy cour t abused i t s di scr et i on i n

annul l i ng t he aut omat i c st ay.

IV. STANDARDS OF REVIEW

A bankrupt cy cour t s deci si on t o gr ant r et r oact i ve

r el i ef f r om t he aut omat i c st ay i s r evi ewed f or an abuse of

di scret i on. Nat l Envt l . Wast e Cor p. v. Ci t y of Ri ver si de

( I n r e Nat l Envt l . Wast e Cor p. ) , 129 F. 3d 1052, 1054 ( 9t h

Ci r . 1997) ; Wi l l i ams v. Levi ( I n r e Wi l l i ams) , 323 B. R. 691,

696 ( 9t h Ci r . BAP 2005) .

A bankr upt cy cour t abuses i t s di scret i on i f i t bases a

deci si on on an i ncor r ect l egal r ul e, or i f i t s appl i cat i on

of t he l aw was i l l ogi cal , i mpl ausi bl e, or wi t hout suppor t i n

i nf er ences t hat may be dr awn f r om t he f act s i n t he r ecor d.

Uni t ed St at es v. Hi nkson, 585 F. 3d 1247, 1262 ( 9t h Ci r .

2009) ( en banc) ; El l swor t h v. Li f escape Med. Assocs. , P. C.

( I n r e El l swor t h) , 455 B. R. 904, 914 ( 9t h Ci r . BAP 2011) .

V. DISCUSSION

Monar ch cont ends t hat i t di d not vi ol at e t he aut omat i c

st ay because t he st ay was di ssol ved af t er t he bankrupt cy

cour t s or al r ul i ng at t he MRS Hear i ng.

Or di nar i l y, a j udgment or or der i s ef f ect i ve when

ent er ed. Rul e 9021; see al so Beat t y v. Tr aub

( I n r e Beat t y) , 162 B. R. 853, 857 ( 9t h Ci r . BAP 1994) ,

overr ul ed on other gr ounds by Marr ama v. Ci t i zens Bank ofMass. , 549 U. S. 365 ( 2007) . Cour t s have, however ,

det er mi ned t hat ent r y of an order i s not al ways necessar y to

ef f ect uat e i t , par t i cul ar l y when t he par t i es had not i ce of


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t he or al or der . Nol i v. Comm r of I nt er nal Revenue, 860

F. 2d 1521, 1525 ( 9t h Ci r . 1988) ; Am. s Ser vi ci ng Co. v.

Schwar t z- Tal l ar d, 438 B. R. 313, 318 ( D. Nev. 2010) . Her e,

t he Debt or cl ear l y had not i ce t hat t he bankrupt cy cour t

gr ant ed Monar ch st ay rel i ef t o ret ur n t o stat e cour t and

enf or ce t he t er ms of t he CC&R J udgment because he had

at t ended, wi t h counsel , t he MRS Hear i ng. The Debt or and

Rodar t e al so had const r uct i ve not i ce of t he st ay r el i ef

because t he oral r ul i ng was ent ered on t he bankr upt cy case

docket t he same day. Ther ef ore, i t i s uncl ear how t he

Debt or was pr ej udi ced by Monarch s act i on t aken bef ore t he

MRS Or der was ent ered as he was aware of t he exi st ence and

ext ent of t he st ay r el i ef . See Nol i , 860 F. 2d at 1525.

A bankr upt cy cour t has di scr et i on t o determi ne whether

i t s or der i s i mmedi at el y ef f ect i ve when gi ven or al l y. Am. s

Ser vi ci ng Co. , 438 B. R. at 318; see al so Sewel l v. MGF

Fundi ng, I nc. ( I n r e Sewel l ) , 345 B. R. 174, 179 ( 9t h Ci r .

BAP 2006) . I n t hi s case, t he bankrupt cy cour t act ed undert he wel l - accept ed r ul e that or der s are ef f ect i ve when

wr i t t en and docketed. See I n r e Br own, 290 B. R. 415, 421

( Bankr . M. D. Fl a. 2003) . Consequent l y, t he bankrupt cy cour t

det er mi ned t her e was a vi ol at i on of t he aut omat i c st ay, but

t hat annul ment was appr opr i at e under t he ci r cumst ances. We

addr ess bel ow t he mer i t s of t hat deci si on.

The bankrupt cy cour t deter mi ned t hat Monar ch vi ol at edt he aut omat i c s t ay because t he MRS Or der had not been

ent er ed bef or e t he St at e Cour t Act i on was i ni t i at ed. I n t he

Ni nt h Ci r cui t , act i ons t aken i n vi ol at i on of t he st ay ar e


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voi d. Schwar t z v. Uni t ed St at es ( I n r e Schwar t z) , 954 F. 2d

569, 571- 72 ( 9t h Ci r . 1992) ; see al so Al ger an, I nc. v.

Advance Ross Corp. , 759 F. 2d 1421, 1425 ( 9t h Ci r . 1985) .

However , an act i on t aken i n vi ol at i on of t he aut omat i c

st ay may be decl ar ed val i d i f cause exi st s f or r et r oact i ve

annul ment of t he st ay. I d. at 573. Sect i on 362( d) empowers

t he bankrupt cy cour t t o annul t he st ay. I t pr ovi des:

On r equest of a par t y i n i nt er est and af t er not i ceand a hear i ng, t he cour t shal l gr ant r el i ef f r omt he st ay pr ovi ded under subsect i on ( a) of t hi ssect i on, such as by t er mi nat i ng, annul l i ng,modi f yi ng, or condi t i oni ng such st ay-

( 1) f or cause, i ncl udi ng t he l ack of adequat epr ot ect i on of an i nt er est i n pr oper t y of suchpar t y i n i nt er est .

11 U. S. C. 362( d) ; I n r e Schwar t z, 954 F. 2d at 572

( [ S] ect i on 362( d) gi ves t he bankrupt cy cour t wi de l at i t ude

i n craf t i ng r el i ef f r om t he aut omat i c stay, i ncl udi ng t he

power t o gr ant r et r oact i ve r el i ef f r om t he st ay. ) .

I n anal yzi ng whet her cause exi st s t o annul t he st ay

under 362( d) ( 1) , t he bankrupt cy cour t i s r equi r ed t obal ance t he equi t i es of t he credi t or s posi t i on i n

compar i son t o t hat of t he debt or . I n r e Nat l Envt l . Wast e

Cor p. , 129 F. 3d at 1055. Under t hi s appr oach, t he

bankrupt cy cour t consi der s ( 1) whet her t he cr edi t or was

awar e of t he bankrupt cy pet i t i on and aut omat i c st ay, and

( 2) whether t he debt or engaged i n unr easonabl e or

i nequi t abl e conduct . I d. The Bankrupt cy Appel l at e Panelappr oved addi t i onal f act or s f or consi der at i on i n Fj el dst ed

v. Li en ( I n r e Fj el dst ed) , 293 B. R. 12, 24 ( 9t h Ci r . BAP

2003) . The Fj el dst ed f act or s ar e empl oyed t o f ur t her


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exami ne the debt or s and cr edi t or s good f ai t h, t he

pr ej udi ce t o t he par t i es, and t he j udi ci al or pr act i cal

ef f i cacy of annul l i ng t he st ay. I d. at 24- 25. The f actor s

i ncl ude:

1. Number of f i l i ngs;

2. Whet her , i n a repeat f i l i ng case, t heci r cumst ances i ndi cat e an i nt ent i on t o del ayand hi nder cr edi t or s;

3. A wei ghi ng of t he ext ent of pr ej udi ce t ocr edi t or s or t hi r d par t i es i f t he stay r el i efi s not made r et r oact i ve, i ncl udi ng whet herhar m exi st s t o a bona f i de pur chaser ;

4. The debt or s overal l good f ai t h ( t ot al i t y of t he ci r cumst ances t est )

5. Whet her credi t or s knew of st ay butnonethel ess t ook act i on, t hus compoundi ng t heprobl em;

6. Whet her t he debt or has compl i ed, and i sotherwi se compl yi ng wi t h t he Bankr upt cy Codeand Rul es;

7. The rel at i ve ease of restor i ng part i es t o t hest atus quo ant e;

8. The cost s of annul ment t o debt or s and

credi t or s;9. How qui ckl y credi t or s moved f or annul ment , or

how qui ckl y debt ors moved t o set asi de thesal e or vi ol at i ve conduct ;

10. Whet her , af t er l ear ni ng of t he bankr upt cy,cr edi t or s pr oceeded t o take st eps i ncont i nued vi ol at i on of t he st ay, or whet hert hey moved expedi t i ousl y t o gai n r el i ef ;

11. Whet her annul ment of t he st ay wi l l causei r r epar abl e i nj ur y t o t he debt or ;

12. Whet her st ay r el i ef wi l l pr omot e j udi ci aleconomy or ef f i ci enci es.

I d. at 25.


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The f act or s mer el y present a f r amewor k f or anal ysi s and

[ i ] n any gi ven case, one f act or may so out wei gh the ot her s

as t o be di sposi t i ve. I d. ; I n r e Wi l l i ams, 323 B. R. at

700.

The r ecor d demonst r at es t hat t he bankrupt cy cour t

pr oper l y bal anced t he equi t i es. The bankrupt cy cour t f ound

t hat t he Debt or s l ong si l ence was a st r ong f act or

wei ghi ng i n f avor of annul ment and t hat i t was si mpl y an

af f r ont t o equi t y t hat t he Debt or shoul d r emai n si l ent

t hr oughout t he St at e Cour t Act i on and af t er l osi ng an appeal

of t he St at e Cour t J udgment bef or e r ai si ng t he i ssue of a

t echni cal st ay vi ol at i on. The bankrupt cy cour t f ound t hi s

conduct amount ed t o game pl ayi ng. I ndeed, t he bankr upt cy

cour t f ound t hat t he Debt or doubl ed down and l ost i n hi s

di sput e agai nst Monar ch. Hr g Tr . ( Apr . 18, 2012) at

14: 4- 5. I t f ound t hat t he Debt or was essent i al l y seeki ng a

pass on t he l ast year and a hal f t hr ough i t s Mot i on t o

Establ i sh Vi ol at i on. I d. at 14: 6- 7.The bankrupt cy cour t wei ghed t he Debt or s conduct

agai nst t he f act t hat Monarch had t aken t he pr oper

pr ecaut i on t o seek rel i ef f r om t he st ay i n t he f i r st

i nst ance. Al t hough i t acknowl edged t hat i t t ook sever al

weeks f or t he bankr upt cy cour t t o pr ocess t he MRS Or der , i t

coul d not condone Monar ch s f i l i ng of t he St at e Cour t

Act i on. Never t hel ess, i t f ound t hat t her e was no equi t abl er eason f or , or bankrupt cy pur pose ser ved by, decl ar i ng t he

St at e Cour t J udgment voi d. I t st at ed:


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[ A] st r i ct mechani cal vi ew of t he l aw woul dsuggest t hat t her e s some subst ance to [ decl ar i ngt he St at e Cour t J udgment voi d as a vi ol at i on oft he st ay] . But , anybody who st ops f or a mi nut eand t hi nks wher e s t he equi t y, wher e s t hej udi ci al r esour ces, what s t he bankrupt cy pur pose,i f any, t o be ser ved, woul d know t hat i t i s a

r i di cul ous ar gument . And i t i s, i n f act, ar i di cul ous ar gument .

I d. at 14: 9- 14.

Af t er r evi ewi ng t he recor d, we cannot say t hat t he

bankr upt cy cour t abused i t s di scret i on i n i t s anal ysi s

suppor t i ng annul ment of t he st ay. Fur t her mor e, we f i nd t he

Debt or s ar gument s on appeal , t hat t he bankr upt cy cour t made

sever al er r or s i n appl yi ng t he bal anci ng t est , unavai l i ng.

We br i ef l y addr ess t hose ar gument s bel ow.

Fi r st , t he Debt or ar gues t hat t he bankrupt cy cour t made

a cl ear l y er r oneous f i ndi ng t hat t he Debt or del i ber at el y

wai t ed unt i l af t er t he j ur y t r i al t o move t o est abl i sh a

vi ol at i on of t he aut omat i c st ay as a l egal t act i c. He

i nsi st s t hat , because he di d not have bankrupt cy counsel t o

assi st hi m, he di d not know t her e was a vi ol at i on of t hest ay. He ar gues that t he bankrupt cy cour t er r ed i n f i ndi ng

hi s expl anat i on f or t he del ay was not cr edi bl e.

We gi ve f i ndi ngs of f act based on credi bi l i t y

par t i cul ar def er ence. Rul e 8013; Ander son v. Ci t y of

Bessemer Ci t y, N. C. , 470 U. S. 564, 575 ( 1985) . Thi s

def er ence i s gi ven t o i nf er ences drawn by t he bankrupt cy

cour t . Ar ab Monet ar y Fund v. Hashi m ( I n r e Hashi m) ,379 B. R. 912, 925 ( 9t h Ci r . BAP 2007) . Addi t i onal l y, wher e

t her e ar e t wo per mi ssi bl e vi ews of t he evi dence, t he f act

f i nder s choi ce bet ween t hem i s not cl ear l y er r oneous. I d.


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9 The par t i es have not pr ovi ded us wi t h t he cont r ol l i ngst at e st at ut es t hat pr ovi de f or ar bi t r at i on under t heseci r cumst ances or suggest ed that t her e i s a t i me r equi r ement

wi t hi n whi ch a par t y must r equest ar bi t r at i on.10 At oral argument , t he Debt or acknowl edged t hat he

det er mi ned t he st ay vi ol at i on was si gni f i cant onl y af t er t hest at e cour t awar ded over $300, 000 i n at t or neys f ees s i nce theact ual damages award was nomi nal .

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( ci t i ng Ander son, 470 U. S. at 574 ( Thi s appl i es t o

credi bi l i t y- based f i ndi ngs and t o f i ndi ngs based on

i nf er ences f r om ot her f acts. ) ) . Accor di ngl y, t he

bankrupt cy cour t s f i ndi ng t hat t he Debt or s si l ence was a

l egal t act i c cannot be cl ear l y er r oneous.

The Debt or al so ar gues t hat t he bankrupt cy cour t f ai l ed

t o gi ve pr oper wei ght t o t he ext r eme pr ej udi ce suf f er ed by

t he Debt or . Appel l ant s Openi ng Br . at 14. He asser t s

t hat he was hi ghl y pr ej udi ced by t he st ay vi ol at i on because

he coul d have avoi ded a cost l y j ur y t r i al i n l i eu of

ar bi t r at i on. 9

As we not ed above, t he Debt or had act ual knowl edge of

t he bankrupt cy cour t s deci si on, del i ver ed at t he MRS

Hear i ng, t o gr ant st ay rel i ef so t hat Monar ch coul d enf or ce

t he CC&R J udgment . I ndeed, he has not art i cul ated i n what

way the vi ol at i on of t he st ay act ual l y pr ej udi ced hi m.

Rather , he argues onl y that he was pr ej udi ced due t o t he

out come of t he St at e Cour t Act i on si nce he l ost on t hemer i t s, and mor e speci f i cal l y, because the stat e cour t

awarded over $300, 000 i n at t orneys f ees. 10 Thus, i f

Monar ch had wai t ed t o f i l e t he St at e Cour t Act i on af t er


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ent r y of t he MRS Or der , and t he Debt or agai n had

par t i ci pat ed f ul l y i n t he l i t i gat i on r esul t i ng i n t he same

out come, what pr ej udi ce coul d t he Debt or demonst r ate?

Si mi l ar l y, what pr ej udi ce coul d t he Debt or demonst r at e i f he

had pr evai l ed i n t he St at e Cour t Act i on?

Fur t her mor e, i t i s ent i r el y uncl ear how Monar ch s

f i l i ng of t he St at e Cour t Act i on bef or e t he MRS Or der was

docket ed af f ect ed i n any way t he Debt or s abi l i t y t o have

asser t ed hi s r i ght t o ar bi t r at e i n def endi ng agai nst t he

St at e Cour t Act i on. The Debt or s counsel appar ent l y

conceded t hi s poi nt : now t hat we ve l ost t he l awsui t ,

we r e goi ng t o do i t agai n. And t hi s t i me, we r e not goi ng

t o make t he mi st akes t hat caused us t o l ose. We get a

second bi t e at t he appl e t oo because what was done bef ore

was voi d. Hr g Tr . ( Apr . 18, 2012) at 8: 2- 5.

The pol i cy behi nd 362 i s t o prot ect t he bankr upt cy

est at e f r om bei ng depl et ed by credi t or s. I t i s i nt ended t o

gi ve debt or s br eat hi ng r oom af t er f i l i ng t he pet i t i on byst oppi ng col l ect i on ef f or t s, har assment , and f or ecl osur e

act i ons. I t al so pr event s pi ecemeal di smember ment of t he

est at e and al l ows t he debt or t i me t o r eor gani ze. Lehman

Commer ci al Paper , I nc. v. Pal mdal e Hi l l s Pr op. , LLC

( I n r e Pal mdal e Hi l l s Pr op. , LLC) , 423 B. R. 655, 663

( 9t h Ci r . 2009) . Her e, t he Debt or had t he br eat hi ng r oom

af f or ded by the st ay t o r eor gani ze and conf i r m a chapt er 13pl an. But as t he bankrupt cy cour t not ed, si mpl y because t he

Debt or i s i n bankr upt cy, i t does not gi ve hi m l i cense t o

di sr egar d hi s ongoi ng dut i es wi t h r espect t o t he Pr oper t y.


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11 At oral argument , t he Debt or argued t hat t he causes ofact i on may have i ncl uded pr epet i t i on damages. However , becauset he st at e cour t compl ai nt i s not i ncl uded i n t he r ecor d, we haveno way of eval uat i ng t hat ar gument . Moreover , t hi s ar gument wasnot made t o t he bankrupt cy cour t , and t her ef or e, i t i s wai ved onappeal . Campbel l v. Ver i zon Wi r el ess S- CA ( I n r e Campbel l ) ,336 B. R. 430, 434 n. 6 ( 9t h Ci r . BAP 2005) ( ci t i ng O Rour ke v.

Seaboar d Sur . Co. ( I n r e E. R. Feger t , I nc. ) , 887 F. 2d 955, 957( 9t h Ci r . 1989) ( The r ul e i n t hi s ci r cui t i s t hat appel l at ecour t s wi l l not consi der ar gument s t hat ar e not pr oper l yr ai se[ d] i n t he t r i al cour t s. ) ) . The Debt or s ar gument t o t hebankrupt cy cour t was t hat a r equest f or at t or neys f ees wasout si de the scope of t he MRS Or der .

-18-

Hr g Tr . ( Apr . 18, 2012) at 15- 18; Tent at i ve Rul i ng ( May 4,

2010) at 2.

The Debt or al so ar gues t hat t he bankrupt cy cour t er r ed

i n annul l i ng t he st ay because i t al l owed Monar ch t o have

exceeded t he scope of t he MRS Or der . The Debt or asser t s

t hat Monarch br ought new causes of act i on agai nst t he Debt or

i n i t s Stat e Cour t Act i on t hat wer e not cont empl at ed by t he

part i es. However , t he r ecor d demonst r ates that t he MRS was

f i l ed, and t he MRS was gr ant ed, so t hat Monarch coul d pur sue

enf orcement of t he CC&R J udgment as t o post pet i t i on

vi ol at i ons. The MRS st at ed t hat Monar ch ant i ci pat ed f i l i ng

a new st ate cour t act i on t o enf orce t he CC&R J udgment , whi ch

woul d i ncl ude recover y f or monetary damages and at t orneys

f ees. 11

The Debt or s f i nal ar gument on appeal i s t hat t he

bankrupt cy cour t er r ed i n annul l i ng t he aut omat i c st ay

because Monarch di d not make a separatel y not i ced mot i on

aski ng f or r et r oact i ve annul ment , depr i vi ng Debt or of due


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pr ocess and t he abi l i t y t o oppose t he r equest . Appel l ant s

Openi ng Br . at 18. Thi s ar gument i s a non- st ar t er . The

Debt or opposed annul ment i n hi s Mot i on t o Est abl i sh

Vi ol at i on. He set out t he Fj el dst ed f act or s and cont ended

t hat t hey wei ghed agai nst annul ment . The Debt or al so f i l ed

a r epl y br i ef r ei t er at i ng hi s argument t hat t her e was no

cause or f act or s t hat suppor t ed annul ment . Addi t i onal l y,

t he Debt or , t hr ough counsel , ar gued hi s mot i on t o the

bankrupt cy cour t at t he Apr i l 18, 2012 hear i ng.

Consequent l y, t her e i s no basi s f or t he Debt or t o asser t

t hat he was depr i ved of due pr ocess here.

Accor di ng t o t he bankrupt cy cour t , r et r oact i ve

annul ment of t he st ay was appr opr i at e i n l i ght of t he

Debt or s conduct wai t i ng unt i l af t er t he St at e Cour t

Act i on r esul t ed i n an adver se j udgment bef or e asser t i ng t hat

t her e was a st ay vi ol at i on, and i n l i ght of i t s f i ndi ng t hat

voi di ng t he St ate Cour t J udgment woul d not suppor t any

bankrupt cy pur pose, but woul d i nst ead be a wast e of j udi ci alr esour ces. That deci si on was not i l l ogi cal , i mpl ausi bl e, or

unsuppor t ed by t he evi dence i n t he recor d, and t her ef or e,

was not an abuse of di scr et i on.

VI. CONCLUSION

For t he f oregoi ng r easons, we AFFI RM.

in re: michael rene rodarte, 9th cir. bap (2012)

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