Erik De Jong v. Jle-04 Parker, LLC ( 2020 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS FEB 14 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: ERIK SAMUEL DE JONG; DARYL No. 18-60049
LYNN DE JONG,
BAP No. 17-1280
Debtors,
------------------------------ MEMORANDUM*
ERIK SAMUEL DE JONG; DARYL
LYNN DE JONG,
Appellants,
v.
JLE-04 PARKER, L.L.C.,
Appellee.
In re: ERIK SAMUEL DE JONG; DARYL No. 18-60050
LYNN DE JONG,
BAP No. 17-1292
Debtors,
------------------------------
ERIK SAMUEL DE JONG; DARYL
LYNN DE JONG,
Appellants,
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
v.
JLE-04 PARKER, L.L.C.,
Appellee.
Appeal from the Ninth Circuit
Bankruptcy Appellate Panel
Faris, Spraker, and Bason, Bankruptcy Judges, Presiding
In re: ERIK SAMUEL DE JONG; DARYL No. 19-60021
LYNN DE JONG,
BAP No. 18-1314
Debtors,
------------------------------
ERIK SAMUEL DE JONG; DARYL
LYNN DE JONG,
Appellants,
v.
JLE-04 PARKER, L.L.C.,
Appellee.
Appeal from the Ninth Circuit
Bankruptcy Appellate Panel
Faris, Spraker, and Kurtz, Bankruptcy Judges, Presiding
Argued and Submitted February 5, 2020
Phoenix, Arizona
Before: GRABER, HURWITZ, and MILLER, Circuit Judges.
Debtors Erik and Daryl de Jong appeal the Bankruptcy Appellate Panel’s (the
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“BAP”) decision affirming the bankruptcy court’s finding of conscious trespass and
awarding disgorgement of profits. We affirm.
1. The bankruptcy court did not err in finding the de Jongs to be trespassers.
See In re Pettit Oil Co., 917 F.3d 1130, 1133 (9th Cir. 2019) (stating standard of
review). In the forcible entry and detainer action (the “FED Action”), the Arizona
state court found that because the trustee’s sale to JLE terminated the lease, see Ariz.
Rev. Stat. § 33-811(E), the de Jongs thereafter were “on the Dairy Property without
any right to be there.” That finding establishes “unauthorized physical presence,”
or trespass. State ex rel. Purcell v. Superior Court, 535 P.2d 1299, 1301 (Ariz.
1975); Ranch 57 v. City of Yuma, 731 P.2d 113, 116 (Ariz. Ct. App. 1986).1
2. The bankruptcy court did not clearly err in finding the trespass to be
conscious. See In re Pettit, 917 F.3d at 1133 (stating standard of review). Erik de
Jong admitted that he knew the lease “could be terminated at the drop of a hat,” but
still refused to vacate after the trustee’s sale. Nor did the bankruptcy court authorize
the continued occupation of the dairy farm by the de Jongs until June 1, 2014. The
court instead told the de Jongs that they would not be evicted before then pursuant
to the judgment in the FED Action, but encouraged them to leave as soon as possible,
1
Although the state court described the de Jongs as “tenants at sufferance,” that
status is not inconsistent with liability for trespass, as a tenant at sufferance
“wrongfully continues in possession.” Grady v. Barth ex rel. Cty. of Maricopa, 312
P.3d 117, 120 (Ariz. Ct. App. 2013).
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and did not preclude JLE from seeking damages arising from continuing trespass.
3. The bankruptcy court did not err in ordering disgorgement. See id. (stating
standard of review). Although there is no Arizona case directly on point, Arizona
courts typically look to the American Law Institute’s Restatements of the Law in the
absence of controlling state law. Keck v. Jackson, 593 P.2d 668, 669 (Ariz. 1979).
The Restatements expressly allow for the disgorgement of profits derived from the
conscious trespassory use of real property. See, e.g., Restatement (Third) of
Restitution and Unjust Enrichment § 40 cmt. b (2011); Restatement (Second) of
Torts § 929 cmt. c (1979); Restatement (First) of Restitution § 151 cmt. f (1937).
As the Third Restatement emphasizes:
If a conscious wrongdoer were able to make profitable, unauthorized
use of the claimant’s property, then pay only the objective value of the
assets taken or the harm inflicted, the anomalous result would be to
legitimate a kind of private eminent domain (in favor of a wrongdoer)
and to subject the claimant to a forced exchange.
Restatement (Third) of Restitution and Unjust Enrichment § 3 cmt. c (2011).
Consistent with that view, the Arizona Supreme Court has emphasized that the
“remedy of restitution is not confined to any particular circumstance or set of facts.
It is, rather, a flexible, equitable remedy . . . .” Murdock–Bryant Constr., Inc. v.
Pearson, 703 P.2d 1197, 1202 (Ariz. 1985). And, applying Arizona law, we have
previously ordered a disgorgement remedy for conscious trespass to real property.
Andersen v. Bureau of Indian Affairs, 764 F.2d 1344, 1348 (9th Cir. 1985).
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4. The BAP did not err in ordering disgorgement of all profits derived from
the trespass. See In re Pettit, 917 F.3d at 133 (stating standard of review).
Disgorgement generally requires “a wrongdoer to turn over all profits obtained by
violating the law.” Consumer Fin. Prot. Bureau v. Gordon, 819 F.3d 1179, 1195
(9th Cir. 2016). As the BAP correctly noted, the de Jongs’ “wrongful trespass
affected and enabled their entire dairy business, not a mere component of a larger
enterprise.”
AFFIRMED.
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