In re: Alen L. Ly

FILED
1 MAY 29 2013
2 SUSAN M SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL
4 OF THE NINTH CIRCUIT
5 In re: ) BAP No. CC-12-1395-DKiTa
)
6 ALEN L. LY, ) Bk. No. LA 12-25257-TD
)
7 Debtor. )
______________________________)
8 )
ALEN L. Ly, )
9 )
Appellant, )
10 )
v. ) M E M O R A N D U M1
11 )
MICHELLE V. CHE, )
12 )
Appellee. )
13 ______________________________)
14 Argued and Submitted on May 15, 2013
at Pasadena, California
15
Filed - May 29, 2013
16
Appeal from the United States Bankruptcy Court
17 for the Central District of California
18 Honorable Thomas B. Donovan, Bankruptcy Judge, Presiding
19
Appearances: Edgardo M. Lopez, Esq. argued for Appellant
20 Alen L. Ly; Caroline S. Kim, Esq. argued
for Appellee Michelle V. Che.
21
22 Before: DUNN, KIRSCHER, and TAYLOR, Bankruptcy Judges.
23
24
25
26 1
This disposition is not appropriate for publication.
27 Although it may be cited for whatever persuasive value it may
have (see Fed. R. App. P. 32.1), it has no precedential value.
28 See 9th Cir. BAP Rule 8013-1.
1 The appellant, Alen L. Ly (“Ly”), appeals the decision of
2 the bankruptcy court granting relief from stay for cause to the
3 appellee, Michelle V. Che (“Che”), to pursue her California state
4 law unlawful detainer action against Ly for all purposes.
5 Subsequent to this appeal being filed, Che filed a motion with
6 this Panel for sanctions (“Sanctions Motion”) against Ly and his
7 counsel for pursuing a frivolous appeal. We AFFIRM the
8 bankruptcy court’s relief from stay order, and we GRANT the
9 Sanctions Motion and award sanctions in the amount of Che’s
10 attorney’s fees, totaling $6,650, and costs in the amount of
11 $114, for a total award of $6,764, jointly and severally against
12 Ly and his attorney.
13 I. FACTS
14 Although the parties dispute one another’s accounts of
15 prebankruptcy events, what occurred in Ly’s chapter 72 case is
16 essentially undisputed.
17 In Appellant’s Opening Brief, Ly states that he filed his
18 bankruptcy petition on May 14, 2012. The record reflects that
19 Ly’s bankruptcy petition actually was filed on April 30, 2012.3
20
21 2
Unless otherwise indicated, all chapter and section
22 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
all “Rule” references are to the Federal Rules of Bankruptcy
23 Procedure, Rules 1001-9037. The Federal Rules of Civil Procedure
24 are referred to as “Civil Rules.”
3
25 The original excerpts of record submitted by Ly did not
include any of the exhibits filed by Che to her Declarations
26 filed in support of her motion for relief from stay. After Che
27 filed a Motion to Augment Record with this Panel and the
subsequent order of the motions panel requiring Ly to supplement
28 (continued...)
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1 On June 20, 2012, Che filed a motion for relief from stay
2 (“Stay Motion”) with respect to certain residential property in
3 Long Beach, California (“Property”). In his Schedule A, Ly
4 declared that he owned the Property. In the Stay Motion, Che
5 stated that she was a “Holder of Deed of Trust.” In her Real
6 Property Declaration, however, Che stated that she was “the
7 Movant and owner of the Property.” In her further Declaration
8 (“Further Declaration”) in support of the Stay Motion, Che stated
9 that she had leased the Property to Ly’s sister, Vanessa A. Ly
10 (“Vanessa”), on or about March 1, 2006. Che further stated that
11 she did not find out that Ly was residing at the Property until
12 October 2008. Che also stated that after making one rent
13 payment, neither Vanessa nor Ly paid any further rent.
14 In the Further Declaration, Che stated that Ly “forged my
15 signature and transferred the [Property] to himself.” Che stated
16 that she sued Ly in 2009 for the alleged fraudulent transfer of
17 the Property (“State Court Lawsuit”) and obtained a judgment
18 (“Judgment”). A certified copy of the Judgment was attached as
19 Exhibit A to the Further Declaration. The Judgment, that was
20 entered on Ly’s default, included a specific description of the
21 Property and ordered that it be transferred from Ly to Che. The
22 Judgment included the following additional provisions:
23 2) The previously recorded Grant Deed, Los Angeles
County recorder number 061576358 recorded on July 18,
24 2006 is hereby declared void based upon the forged
signature of Michelle Che.
25 3) The clerk of this court is empowered and ordered to
26
3
27 (...continued)
the record, Ly filed supplemental excerpts of record, including
28 the critical exhibits for our review.
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1 sign a quit claim deed and all of the related papers on
behalf of Alen Lang Ly and to Plaintiff Michelle Che.
2 4) Defendant Alen Lang Ly is hereby prohibited from
approaching less than 100 yards from said [Property].
3
4 Ly, through his counsel, Edgardo M. Lopez (“Lopez”), opposed
5 the Stay Motion (“Opposition”). In his Declaration in support of
6 the Opposition (“Opposition Declaration”), Ly stated that he
7 purchased the Property from Che in July 2006 for $525,000. He
8 further stated that he had been living on the Property as his
9 primary residence since July 2006 and had paid monthly mortgage
10 payments and annual property taxes.
11 Ly admitted in the Opposition Declaration that he had
12 received service of the summons and Che’s complaint in the State
13 Court Lawsuit. He further declared that he had retained counsel
14 to represent him in the State Court Lawsuit who assured him that
15 “he will take care of everything.” Thereafter, he stated that he
16 was “completely shocked” when he received a five-day notice to
17 vacate the Property from Che’s attorney and blamed attorney
18 neglect for the entry of the Judgment against him. In the
19 Memorandum of Points and Authorities filed in support of the
20 Opposition, Lopez argued that stay relief should be denied
21 because Che was not a real party in interest and therefore lacked
22 standing to seek stay relief, and Che was not a secured creditor
23 entitled to invoke § 362(d)(1) to argue a lack of adequate
24 protection of her interest in the Property.
25 Che filed a Reply (“Reply”) to the Opposition. In her
26 Memorandum of Points and Authorities filed in support of the
27 Reply, Che argued that she never sold the Property to Ly, and
28 Che’s standing arose from the fact that Che was the “legal owner
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1 of the Property.” Among other things, Che argued that “cause” to
2 grant the Stay Motion existed to allow Che to undo Ly’s
3 “fraudulent transaction.”
4 The bankruptcy court heard argument (“Hearing”) on the Stay
5 Motion on July 12, 2012. At the outset of the Hearing, the
6 bankruptcy court stated its tentative conclusions that Che had
7 produced evidence, including the Judgment, that she owned the
8 Property and was entitled to relief to pursue her unlawful
9 detainer action in state court. Lopez essentially argued that
10 the fact that the Judgment was obtained by default cut against
11 Che’s position that she retained an ownership interest in the
12 Property. Reminding Lopez that, “A judgment is a judgment,” the
13 bankruptcy court overruled Ly’s argument and advised the parties
14 that he would grant the Stay Motion but would not waive the
15 fourteen-day stay of the effectiveness of his order under
16 Rule 4001(a)(3).
17 On July 26, 2012, the bankruptcy court entered an order
18 (“Order”) granting the Stay Motion for cause under § 362(d)(1) to
19 allow Che to “pursue her state court unlawful detainer suit
20 against [Ly] for all purposes.” In effect, the bankruptcy court
21 granted relief from stay to allow the parties to resolve their
22 competing claims to the Property in state court. Ly filed a
23 timely notice of appeal on August 7, 2012.
24 Che filed the Sanctions Motion with this Panel, requesting
25 an award of sanctions against both Ly and his counsel, Lopez, for
26 filing a frivolous, meritless appeal, on November 16, 2012. Ly
27 has not responded to the Sanctions Motion.
28 ///
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1 II. JURISDICTION
2 The bankruptcy court had jurisdiction under 28 U.S.C.
3 §§ 1334 and 157(b)(2)(A) and (G). We have jurisdiction under
4 28 U.S.C. § 158.
5 III. ISSUES
6 1. Did the bankruptcy court err in determining that Che had
7 standing to pursue the Stay Motion?4
8 2. Should sanctions be awarded against Ly and Lopez under
9 Rule 8020 for filing and pursuing a frivolous appeal?
10 IV. STANDARD OF REVIEW
11 Standing is an issue that we review de novo. Loyd v. Paine
12 Webber, Inc., 208 F.3d 755, 758 (9th Cir. 2000); Kronemyer v. Am.
13 Contractors Indem. Co. (In re Kronemyer), 405 B.R. 915, 919 (9th
14 Cir. BAP 2009). De novo review requires that we consider a
15 matter anew, as if it had not been heard before, and as if no
16 decision had been rendered previously. United States v.
17 Silverman, 861 F.2d 571, 576 (9th Cir. 1988); B-Real, LLC v.
18 Chaussee (In re Chaussee), 399 B.R. 225, 229 (9th Cir. BAP 2008).
19 ///
20 ///
21
22
4
In Appellant’s Statement of Issues on Appeal, Ly also
23 asserts as an issue whether the bankruptcy court erred in
granting the Stay Motion under § 362. However, in Appellant’s
24
Opening Brief, Ly only argues that Che lacked standing to seek
25 stay relief. Accordingly, any argument that the Stay Motion was
improperly granted, beyond the question of Che’s standing, is
26 waived. City of Emeryville v. Robinson, 621 F.3d 1251, 1261 (9th
27 Cir. 2010) (Appellate courts in this circuit “will not review
issues which are not argued specifically and distinctly in a
28 party’s opening brief.”).
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1 V. DISCUSSION
2 1. Che had standing to seek stay relief.
3 Ly argues one issue on appeal: whether Che had standing to
4 seek relief from the automatic stay in Ly’s bankruptcy case.
5 Whether a party has standing to pursue a claim is a
6 “threshold question in every federal case, determining the power
7 of the court to entertain the suit.” Warth v. Seldin, 422 U.S.
8 490, 498 (1975); Edwards v. Wells Fargo Bank, N.A.
9 (In re Edwards), 454 B.R. 100, 104 (9th Cir. BAP 2011).
10 “Standing” has both constitutional and prudential aspects, but Ly
11 only challenges Che’s standing as a prudential matter.5
12 Ly argues that Che has no prudential standing because she is
13 not a real party in interest. Appellant’s Opening Brief at 6-10.
14 In stay relief proceedings, the moving party bears the burden of
15 proof to establish that it has standing to prosecute the motion.
16 See In re Wilhelm, 407 B.R. 392, 399-400 (Bankr. D. Id. 2009),
17 citing Lujan v. Defenders of Wildlife, 504 U.S. at 561. Under
18 § 362(d), a “party in interest” may request relief from the
19 automatic stay. Because “party in interest” is not defined in
20 the Bankruptcy Code, whether a party moving for relief from stay
21
5
22 Constitutional standing relates to whether a party’s stake
in a matter is adequate to create a “case or controversy” to
23 which the federal judicial authority under Article III of the
Constitution may apply. Warth v. Seldin, 422 U.S. at 498-99;
24
Lujan v. Defenders of Wildlife, 504 U.S. 555, 559-60 (1992). In
25 her Further Declaration, Che declared that she had been paid no
rent for the Property, occupied by Ly, since March 2006 and that
26 Ly had forged her signature to engineer a fraudulent transfer of
27 the Property to himself. That evidence is adequate to establish
Che’s constitutional standing to file and prosecute the Stay
28 Motion.
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1 has the status of a party in interest under § 362(d) is a fact-
2 based inquiry, determined on a case-by-case basis, considering
3 the claimed interest of the moving party and the impact of the
4 stay on that interest. In re Kronemyer, 405 B.R. at 919. A
5 party in interest can include any party that has a pecuniary
6 interest in the matter, a practical stake in its resolution or
7 whose interest is impacted by the stay. Brown v. Sobczak
8 (In re Sobczak), 369 B.R. 512, 517-18 (9th Cir. BAP 2007).
9 Motions for relief from stay are contested matters. See
10 Rules 4001(a) and 9014(a). Rule 9014(c) provides that Rule 7017
11 applies in contested matters. Rule 7017 incorporates Civil
12 Rule 17(a), which provides that “[a]n action must be prosecuted
13 in the name of the real party in interest. . . .” Considering
14 the application of these rules, as a threshold matter, relief
15 from stay proceedings are very limited in scope.
16 Given the limited grounds for obtaining . . . relief
from stay, read in conjunction with the expedited
17 schedule for a hearing on the motion, most courts hold
that motion for relief from stay hearings should not
18 involve an adjudication on the merits of claims,
defenses, or counterclaims, but simply determine
19 whether the creditor has a colorable claim to the
property of the estate.
20
21 Biggs v. Stovin (In re Luz Int’l), 219 B.R. 837, 842 (9th Cir.
22 BAP 1998) (emphasis added). See, e.g., Johnson v. Righetti
23 (In re Johnson), 756 F.2d 738, 740-41 (9th Cir. 1985).
24 Cornell University Law School’s Legal Information Institute
25 defines a “colorable claim” as:
26 A plausible legal claim. In other words, a claim
strong enough to have a reasonable chance of being
27 valid if the legal basis is generally correct and the
facts can be proven in court. The claim need not
28 actually result in a win.
-8-
1 http://topics.law.cornell.edu/wex/colorable_claim.
2 As noted above, in her Real Property Declaration filed in
3 support of the Stay Motion, Che stated that she was the “Movant
4 and owner of the Property.” Attached as Exhibit A to her Further
5 Declaration was a certified copy of the Judgment voiding Ly’s
6 deed to the Property as obtained through forgery and ordering
7 that the Property be transferred from Ly to Che. That the
8 Judgment was obtained by default does not negate its impact as
9 providing clear evidence that Che had at least a “colorable
10 claim” to ownership of the Property. In fact, there is no
11 evidence in the record before us that Ly ever moved to set aside
12 the default or appealed the Judgment. At oral argument, Lopez
13 confirmed that the Judgment had become final. A party moving for
14 stay relief has a colorable claim sufficient to establish
15 standing to prosecute the motion if it has an ownership interest
16 in the subject property. In re Edwards, 454 B.R. at 105; Veal v.
17 Am. Home Mortg. Servicing, Inc. (In re Veal), 450 B.R. 897, 913
18 (9th Cir. BAP 2011).
19 Ly lays down a red herring when he argues, “It is clear from
20 [Che’s] relief from stay motion that she is seeking to enforce
21 the right of a holder of a deed of trust on the subject property
22 . . . ; [Che] claims as a holder of the deed of trust and to have
23 an interest on the [Property] given as collateral.” Appellant’s
24 opening Brief at 8-9. The bankruptcy court did not take that
25 bait, and neither do we.
26 It is true that when the Stay Motion was filed, Che’s
27 counsel checked the box on the motion form stating that “Movant
28
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1 is the (check one) Holder of Deed of Trust.”6 However, again as
2 noted above, Che’s declarations filed in support of the Stay
3 Motion asserted and provided evidence to support her claim that
4 she owned the Property. The Judgment provided admissible
5 evidence, independent of Che’s own self-serving statements, of
6 her ownership interest in the Property.
7 Based on the evidence before the bankruptcy court, focusing
8 on the Judgment, the bankruptcy court did not err in finding that
9 Che had standing to file and prosecute the Stay Motion as a real
10 party in interest. As the bankruptcy court aptly noted, “A
11 judgment is a judgment.” Ly’s appeal of the Order, based solely
12 on his argument that Che lacked prudential standing to pursue
13 stay relief, is patently meritless.
14 2. Che’s motion to sanction Ly and his counsel for pursuing a
frivolous appeal should be granted.
15
16 In the Sanctions Motion, Che requested sanctions against Ly
17 and his counsel for filing a meritless and frivolous appeal
18 pursuant to Federal Rule of Appellate Procedure (“FRAP”) 38. The
19 relevant Rule before this Panel is Rule 8020. Rule 8020, which
20 conforms to the language of FRAP 38, provides in relevant part
21 that:
22 If a . . . bankruptcy appellate panel determines that
an appeal from an order . . . of a bankruptcy judge is
23 frivolous, it may, after a separately filed
motion . . . and reasonable opportunity to respond,
24 award just damages and single or double costs to the
appellee.
25
26 6
The other two choices on the motion form that were not
27 checked were: “Assignee of Holder of Deed of Trust,” and
“Servicing Agent for Holder of Deed of Trust or Assignee of
28 Holder of Deed of Trust.”
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1 As previously noted, Che filed the Sanctions Motion on
2 November 16, 2012. Ly has not filed any response to the
3 Sanctions Motion. However, in response to the Clerk’s Notice of
4 Possible Mootness of this appeal, Ly responded that the appeal
5 was not moot because the Property now was subject to a pending
6 adversary proceeding in Ly’s bankruptcy, and “the state court
7 action affecting the subject [Property] has been held in
8 abeyance.” Compliance Statement Re: Notice of Possible Mootness,
9 filed with this Panel on February 11, 2013.
10 Rule 8020 requires that all filed papers, including appeal
11 briefs, be signed, “thereby certifying that the signer has done
12 appropriate legal and factual research and believes that the
13 submission of the paper has merit.” 10 Collier on Bankruptcy
14 ¶ 8020.02 (Alan N. Resnick and Henry J. Sommer eds., 16th ed.
15 2013). The Panel may impose sanctions to penalize an appellant
16 and/or counsel who pursue a frivolous appeal and to compensate
17 the appellee for the delay and expense of defending the appeal.
18 Id. ¶ 8020.03. Cf. Burlington N. R. Co. v. Woods, 480 U.S. 1, 7
19 (1987).
20 “An appeal is frivolous if the result is obvious or the
21 arguments of error are wholly without merit.” Coghlan v.
22 Starkey, 852 F.2d 806, 811 (5th Cir. 1988). See Henry v. Farmer
23 City State Bank, 808 F.2d 1228, 1241 (7th Cir. 1986); Cannon v.
24 The Hawaii Corp. (In re The Hawaii Corp.), 796 F.2d 1139, 1144
25 (9th Cir. 1986). Unfortunately, this appeal meets that standard
26 on both counts.
27 Lopez should have known from our published opinions in
28 In re Veal and In re Edwards that Panel precedent quite clearly
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1 recognizes that a party moving for relief from stay who has a
2 colorable claim to ownership of the subject property has
3 prudential standing. We assume that he read the Panel’s opinion
4 in In re Veal because he cited it to us in Appellant’s Opening
5 Brief specifically for its “exhaustive” discussion of standing
6 and real party in interest issues. See Appellant’s Opening Brief
7 at 8.
8 Particularly troubling to us is the fact that when Lopez
9 submitted Ly’s original excerpts of record, he omitted to include
10 the exhibits to Che’s Declarations filed in support of the Stay
11 Motion, including the certified copy of the Judgment, even though
12 he did include the exhibits to Ly’s Declaration filed in
13 opposition to the Stay Motion. Lopez had to be aware that the
14 Judgment was a critical part of the evidentiary record before the
15 bankruptcy court supporting its finding that Che had standing to
16 seek stay relief, because the bankruptcy court specifically
17 discussed the importance of the Judgment to its decision at the
18 Hearing in its direct responses to Lopez’s arguments. Lopez
19 supplemented the excerpts of record to include the Judgment
20 exhibit only after Che’s counsel filed her motions requesting
21 judicial notice and to supplement the record and the Sanctions
22 Motion, and the motions panel ordered Ly to supplement the record
23 with a complete copy, “including exhibits,” of the Stay Motion.
24 As we previously have determined, Ly’s appeal on the issue
25 of Che’s standing lacks merit, and that lack of merit is obvious
26 from review of the Judgment alone. We conclude that Ly’s appeal
27 is both meritless and frivolous, justifying the imposition of
28 sanctions.
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1 “If we determine that an appeal is frivolous, then damages
2 and single or double costs may be awarded to the appellee.”
3 Burkhart v. Fed. Deposit Ins. Corp. (In re Burkhart), 84 B.R.
4 658, 661 (9th Cir. BAP 1988). In conjunction with the Sanctions
5 Motion, Kim filed her Declaration itemizing her attorney’s fees
6 in this appeal totaling $6,650 and costs totaling $114 “for
7 attorney service” to file Appellee’s Brief and the Sanctions
8 Motion. We find the attorney’s fees and costs requested to be
9 reasonable. In the circumstances of this appeal, we conclude
10 that the Sanctions Motion should be granted, and we award Che
11 attorney’s fees of $6,650 and costs in the amount of $114, for
12 total sanctions of $6,764, jointly and severally against Ly and
13 Lopez.
14 VI. CONCLUSION
15 Based on the foregoing analysis, findings and conclusions,
16 we AFFIRM the Order granting relief from stay to Che and GRANT
17 the Sanctions Motion, awarding sanctions for pursuing a frivolous
18 appeal totaling $6,764 jointly and severally against Ly and his
19 counsel, Lopez.
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