In re: Gregory S. Tift

FILED
DEC 09 2016
1 NOT FOR PUBLICATION
SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
2 OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL
4 OF THE NINTH CIRCUIT
5 In re: ) BAP No. WW-15-1002-KuJuTa
)
6 GREGORY S. TIFT, ) Bk. No. 14-17966
)
7 Debtor. ) Adv. No. 14-01432
______________________________)
8 )
GREGORY S. TIFT, )
9 )
Appellant, )
10 )
v. ) MEMORANDUM*
11 )
RESOURCE TRANSITION )
12 CONSULTANTS, LLC; JACK CULLEN;)
SUSAN ALTERMAN, )
13 )
Appellees. )
14 ______________________________)
15 Argued and Submitted on November 17, 2016
at Pasadena, California
16
Filed – December 9, 2016
17
Appeal from the United States Bankruptcy Court
18 for the Western District of Washington
19 Honorable Timothy W. Dore, Bankruptcy Judge, Presiding
20 Appearances: Appellant Gregory S. Tift argued pro se; Jack
Cullen of Foster Pepper PLLC argued for appellees.
21
22 Before: KURTZ, JURY and TAYLOR, Bankruptcy Judges.
23
24
25
26 *
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 8024-1.
1 INTRODUCTION
2 Former Chapter 131 debtor Gregory S. Tift appeals from a
3 summary judgment in favor of appellees Resource Transition
4 Consultants LLC, Jack Cullen and Susan Alterman. In the
5 underlying adversary proceeding, Tift requested damages and
6 injunctive relief for an alleged violation of the automatic stay
7 based on the appellees’ continued participation in state court
8 contempt proceedings against Tift, which proceedings partly took
9 place after the commencement of Tift’s chapter 13 bankruptcy
10 case.
11 The bankruptcy court held, as a matter of law, that the
12 automatic stay did not apply to the contempt proceedings against
13 Tift. We agree, so we AFFIRM.
14 FACTS
15 The dispute between the parties arose in state court, before
16 Tift commenced his bankruptcy case. As part of its efforts to
17 enforce its rights as a secured creditor of Remian LLC, in July
18 2014, Fannie Mae sought and obtained the appointment of a
19 custodial receiver. The state court appointed the receiver –
20 appellee Resource Transition Consultants – to exercise control
21 over Fannie Mae’s collateral: a 16-unit apartment building in
22 Tacoma, Washington.2 In aid of the receivership, the state court
23
1
24 Unless specified otherwise, all chapter and section
references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
25 all "Rule" references are to the current version of the Federal
Rules of Bankruptcy Procedure, Rules 1001-9037. All “Civil Rule”
26 references are to the Federal Rules of Civil Procedure.
27 2
As for the other two appellees, appellee Susan Alterman is
28 Fannie Mae’s legal counsel in the state court litigation, and
(continued...)
2
1 in August 2014 granted Resource Transition Consultants an
2 injunction, which in relevant part enjoined Tift from interfering
3 with the receiver’s duties, including the collection of rents
4 from the apartment building’s tenants. The injunction also
5 required Tift to produce any and all documents in his possession
6 pertaining to the receivership property.
7 Tift claimed to be a secured creditor of Remian and, by
8 virtue of his alleged secured creditor status, opposed the
9 appointment of a receiver and later sought to have the receiver
10 removed. In contrast, the receiver asserted that Tift, in
11 essence, was engaged in the unlicensed practice of law.
12 According to the receiver, Tift holds himself and his company out
13 to the community as a professional legal services company and
14 frequently files court papers, negotiates loan workouts and
15 provides other services normally provided by attorneys. The
16 receiver contends that, by way of these services, Tift seeks to
17 delay and impede the creditors of his clients from enforcing
18 their legal rights.
19 After the issuance of the injunction against Tift and
20 others, the receiver filed against Tift, first, a contempt motion
21 and, later, a sanctions motion. The receiver maintained that
22 Tift had contravened the injunction by interfering with the
23 receiver’s duties and by not producing all of the documents that
24 Tift had been ordered to produce. In response, Tift claimed,
25
26 2
(...continued)
27 appellee Jack Cullen, also an attorney, has represented Resource
Transition Consultants in both the state court and the bankruptcy
28 court.
3
1 among other things, that many of his prior emails pertaining to
2 Remian had been deleted and that he could not produce what he
3 previously deleted.
4 The state court entered its order finding Tift in contempt
5 on October 3, 2014. The contempt order gave Tift an additional
6 two weeks to comply with the production aspects of the court’s
7 injunction. The contempt order further specified that Tift was
8 required to turn over to Resource Transition Consultants all of
9 his computers, along with all password and login information
10 necessary to give Resource Transition Consultants complete access
11 to any and all records relating to Remian. The contempt order
12 also specified that Tift’s failure to comply with the injunction
13 would result in the imposition of monetary sanctions, as well as
14 incarceration.
15 In response to the receiver’s sanctions motion, Tift filed a
16 petition with the state court of appeals seeking an emergency
17 stay. That petition was denied on October 30, 2014 – the eve of
18 the hearing on the receiver’s sanctions motion. Immediately
19 after the denial of his emergency stay motion, on October 30,
20 2014, Tift commenced his chapter 13 bankruptcy case.3
21
3
That bankruptcy case was dismissed on December 2, 2014,
22
based on Tift’s failure to submit most of the required case
23 commencement documents. Subsequently, the bankruptcy court
denied Tift’s motion to vacate the case dismissal. Among other
24 things, the court pointed out that Tift had admitted in his
schedules that he had over $900,000 in noncontingent, liquidated
25 unsecured debt. This amount of unsecured debt exceeded the
26 chapter 13 debt limits specified in § 109(e), which governs
eligibility to be a chapter 13 debtor. Shortly after the
27 bankruptcy court denied Tift’s motion to vacate the dismissal of
his chapter 13 case, Tift commenced a chapter 7 bankruptcy case
28 (continued...)
4
1 The day after Tift commenced his chapter 13 bankruptcy case,
2 the state court proceeded with the hearing on the receiver’s
3 sanctions motion. Tift did not appear. The state court and
4 counsel for the receiver – appellee Jack Cullen – discussed the
5 potential applicability of the automatic stay, but Cullen
6 persuaded the state court that the commencement of Tift’s
7 bankruptcy case did not stay the contempt proceedings. Based on
8 the inapplicability of the stay and Tift’s continuing contempt of
9 court, the state court awarded contempt sanctions of $2,000 per
10 day and also issued a warrant for Tift’s arrest.
11 Meanwhile, in the bankruptcy court, Tift filed his adversary
12 complaint seeking injunctive relief and damages based on the
13 appellees’ alleged violation of the automatic stay. According to
14 Tift, the continued prosecution of the state court contempt
15 proceedings, including the October 31, 2014 sanctions hearing,
16 violated the stay and justified the relief requested.
17 Almost immediately, the appellees responded to the complaint
18 by moving for summary judgment. The appellees argued that the
19 automatic stay did not apply to the contempt proceedings. Tift
20 filed a declaration in response to the summary judgment motion in
21 which he contended that he needed more time to conduct discovery
22 and that there were issues of fact that needed to be decided by
23 the bankruptcy court. But Tift’s declaration did not identify
24 these alleged issues of fact.
25
26 3
(...continued)
27 (Case No. 14-18931), which was pending at the time the bankruptcy
court disposed of Tift’s adversary proceeding by granting the
28 appellees’ summary judgment motion.
5
1 At the hearing on the summary judgment motion, the
2 bankruptcy court ruled in favor of the appellees and against
3 Tift.4 The bankruptcy court held that the automatic stay did not
4 apply to the state court contempt proceedings. The court also
5 held that Tift did not need additional time to conduct discovery
6 because there were no facts Tift could uncover that would render
7 the contempt proceedings subject to the stay. Because no factual
8 dispute existed and because Ninth Circuit law clearly supported
9 the appellees’ position (that the stay did not apply), the
10 bankruptcy court concluded that the appellees were entitled to
11 summary judgment against Tift.
12 The bankruptcy court entered summary judgment on
13 December 18, 2014, and Tift timely appealed.
14 JURISDICTION
15 The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
16 §§ 1334 and 157(b)(2)(O), and we have jurisdiction under
17 28 U.S.C. § 158.
18 The bankruptcy court’s summary judgment ruling raised the
19 issue of whether Tift continued to have standing to pursue his
20 stay violation action in light of the chapter 7 case he filed
21 immediately after his chapter 13 case was dismissed. The court
22 queried whether those claims could be pursued only by Tift’s
23 chapter 7 trustee. In any event, Tift’s 2014 chapter 7 case was
24 dismissed in early 2015 based on his failure to pay the filing
25
4
26 At a prior hearing, the bankruptcy court had denied Tift’s
request for injunctive relief. The court held that the request
27 for injunctive relief was rendered moot by the dismissal of
Tift’s chapter 13 case and that Tift had not established a
28 likelihood of success on the merits.
6
1 fee. In yet another chapter 7 case, Case No. 16-10530, Tift has
2 claimed an exemption for his damages claims arising from the
3 appellees’ alleged violation of the automatic stay. As a result
4 of his exemption claim, Tift continues to have a direct stake in
5 the damage claims and in the outcome of this appeal. Thus, Tift
6 has standing. See Mwangi v. Wells Fargo Bank, N.A.
7 (In re Mwangi), 432 B.R. 812, 822-23 (9th Cir. BAP 2010).
8 ISSUE
9 Did the bankruptcy court commit reversible error when it
10 granted the appellees’ summary judgment motion and resolved all
11 of Tift’s claims in their favor?
12 STANDARDS OF REVIEW
13 We review de novo the bankruptcy court's grant of summary
14 judgment. Ulrich v. Schian Walker, P.L.C. (In re Boates),
15 551 B.R. 428, 433 (9th Cir. BAP 2016) (citing Ilko v. Cal. St.
16 Bd. of Equalization (In re Ilko), 651 F.3d 1049, 1052 (9th Cir.
17 2011)).
18 The summary judgment standards are the same for all federal
19 courts. Id. (citing Marciano v. Fahs (In re Marciano), 459 B.R.
20 27, 35 (9th Cir. BAP 2011), aff'd, 708 F.3d 1123 (9th Cir.
21 2013)). Summary judgment may be granted when there are no
22 genuine issues of disputed material fact and when the movant is
23 entitled to prevail as a matter of law. Civil Rule 56 (made
24 applicable in adversary proceedings by Rule 7056); Celotex Corp.
25 v. Catrett, 477 U.S. 317, 322–23 (1986).
26 DISCUSSION
27 Under § 362, the automatic stay arises upon the filing of
28 the debtor’s bankruptcy petition. Among other things, the stay
7
1 prohibits creditors from continuing to prosecute prepetition
2 litigation against the debtor. § 362(a)(1); see also Benedor
3 Corp. v. Conejo Enters., Inc. (In re Conejo Enters., Inc.),
4 96 F.3d 346, 351 (9th Cir. 1996). The stay also prevents
5 creditors from attempting to collect on prepetition debts,
6 § 362(a)(6), and also halts almost any attempt “to obtain
7 possession of property of the estate or of property from the
8 estate or to exercise control over property of the estate.”
9 § 362(a)(3). When creditors violate the automatic stay, an
10 individual debtor harmed by the stay violation can seek contempt
11 sanctions under § 105(a) or can bring an action for damages under
12 § 362(k). See Knupfer v. Lindblade (In re Dyer), 322 F.3d 1178,
13 1189-90 (9th Cir. 2003); Rediger Inves. Servs. v. H Granados
14 Commc'ns, Inc. (In re H Granados Commc'ns, Inc.), 503 B.R. 726,
15 734-35 (9th Cir. BAP 2013).
16 Here, the bankruptcy court held that the appellees had not
17 violated the automatic stay by attending and participating at the
18 state court hearing on their motion for contempt sanctions
19 because, according to Ninth Circuit and Bankruptcy Appellate
20 Panel precedent, the automatic stay does not apply to contempt
21 proceedings based on the debtor’s failure to comply with
22 discovery orders and to pay related monetary sanctions. The
23 resolution of this appeal, therefore, hinges on the continued
24 validity of the line of Ninth Circuit and Panel decisions
25 recognizing this exception to the automatic stay.
26 The first case in this line was David v. Hooker, Ltd.,
27 560 F.2d 412, 417–18 (9th Cir. 1977). In Hooker, which predates
28 the 1978 enactment of the Bankruptcy Code, the court of appeals
8
1 held that a contempt order requiring obedience with prior court
2 orders directing the debtor business entity and its managing
3 agent to answer interrogatories, and directing the managing agent
4 to pay $2,000 in compensatory sanctions for not previously
5 answering the interrogatories, did not contravene the automatic
6 stay then in effect.5 Id. at 418. The court of appeals in
7 relevant part explained that, so long as the contempt proceedings
8 did not involve the determination of or attempt to collect the
9 creditor’s underlying prepetition claim against the debtor and
10 did not involve a mere ploy by the creditor to harass the debtor,
11 the postpetition continuation of the contempt proceedings did not
12 violate the bankruptcy rule 401(a) stay. Id.13 The next case in this line was In re Dumas, 19 B.R. at 676.
14 The alleged stay violation in Dumas arose from state court
15 judgment enforcement proceedings, in which the judgment debtor
16 Dumas stipulated that he was in contempt of court for failure to
17 comply with a subpoena. Id. at 676-77. Instead of complying
18 with the subpoena before the sentencing hearing on the contempt,
19
5
20 At the time, the automatic stay arose from federal rule of
bankruptcy procedure 401(a), which provided:
21
The filing of a petition shall operate as a stay of the
22
commencement or continuation of any action against the
23 bankrupt, or the enforcement of any judgment against
him, if the action or judgment is founded on an
24 unsecured provable debt other than one not
dischargeable under clause (1), (5), (6), or (7) of
25 section 35(a) of this title.
26
Hooker, 560 F.2d at 415 n.4. The stay provision set forth in
27 bankruptcy rule 401(a) ultimately was subsumed within § 362(a).
See Dumas v. Atwood (In re Dumas), 19 B.R. 676, 677 (9th Cir. BAP
28 1982).
9
1 Dumas filed a bankruptcy petition and notified the judgment
2 creditor Atwood. Id. at 677.
3 In spite of that notification, the state court sentencing
4 hearing went forward, at which Atwood advocated that a contempt
5 sentence be imposed against Dumas. (The state court initially
6 did impose a sentence of one week in jail, plus a $275 fine, but
7 later vacated that sentence on Dumas’s motion.) Id.8 Dumas then filed in the bankruptcy court a contempt motion
9 against Atwood and his attorney for violation of the automatic
10 stay. The bankruptcy court “dismissed” the motion without
11 explaining the grounds for dismissal, and Dumas appealed. Id.12 On appeal, this Panel held that Hooker was controlling and that
13 the state court’s contempt sentencing did not violate the
14 automatic stay. Id. at 677-78. In so holding, Dumas noted that
15 Hooker only had involved a monetary contempt sanction award
16 against the debtor’s principal and not against the debtor itself,
17 but Dumas opined that this distinction was immaterial, positing
18 that, notwithstanding the automatic stay, Hooker also would have
19 permitted monetary contempt sanctions against the debtor itself
20 if such sanctions had been awarded: “we perceive no reluctance by
21 the circuit court to have imposed the sanction on the corporation
22 solely because it was the bankrupt.” Id. at 678.
23 Dumas also acknowledged that Hooker was interpreting the
24 bankruptcy rule 401(a) automatic stay then in effect and not the
25 version of the automatic stay set forth in § 362(a). Even so,
26 Dumas did not perceive any material distinction between the
27 bankruptcy rule 401(a) automatic stay and the § 362(a) automatic
28 stay: “the present statute and the former rule are essentially
10
1 similar.” Id. at 677.
2 The third and final case in this line is Yellow Express, LLC
3 v. Dingley (In re Dingley), 514 B.R. 591 (9th Cir. BAP 2014). In
4 Dingley, the debtor Dingley was ordered by the state court to pay
5 roughly $4,000 in compensatory sanctions to the plaintiff Yellow
6 Express based on Dingley’s failure to appear for a post judgment
7 debtor's exam. Id. at 593. When Dingley did not pay the
8 sanctions award, Yellow Express requested and obtained an order
9 to show cause why Dingley should not be held in contempt. Id.10 Before the show cause hearing was held, Dingley commenced his
11 chapter 7 bankruptcy case. Id. Even though Dingley notified
12 Yellow Express of the bankruptcy filing and the automatic stay,
13 Yellow Express advocated in the state court that the automatic
14 stay did not apply to the contempt proceedings, citing Dumas and
15 Hooker. Id. at 593-94. Dingley did not respond to the state
16 court’s order requiring briefing on the automatic stay issue.
17 Instead, Dingley filed a motion to enforce the automatic stay.
18 Id.19 After considering the parties’ positions, the bankruptcy
20 court ruled that the automatic stay prevented the state court and
21 Yellow Express from continuing with contempt proceedings based on
22 Dingley’s failure to pay the $4,000 prepetition discovery
23 sanctions award. Id. at 594-95. The bankruptcy court
24 essentially conceded that the automatic stay did not shield
25 Dingley from his willful disobedience of the state court’s order.
26 But the bankruptcy court nonetheless concluded that Yellow
27 Express had violated the automatic stay by urging the state court
28 to follow through with the contempt proceedings based on
11
1 Dingley’s nonpayment of a prepetition dischargeable debt (the
2 $4,000 discovery sanctions award). Id.3 On appeal, this Panel reversed and held that Hooker had
4 established a bright-line rule excepting contempt proceedings
5 from the automatic stay, so long as the contempt proceeding
6 “‘does not involve a determination [or collection] of the
7 ultimate obligation of the bankrupt nor does it represent a ploy
8 by a creditor to harass him.’” Id. at 597 (quoting Hooker,
9 560 F.2d at 418). The panel recognized that a number of courts
10 have criticized Hooker and Dumas and also noted the “strength of
11 the points” expressed in Judge Jury’s separate concurrence, which
12 questioned the continuing validity of Hooker and Dumas. Id. at
13 599-600. Notwithstanding these concerns, Dingley ultimately held
14 that it was bound by Hooker’s bright-line rule “as followed post-
15 Code by Dumas.” Id. at 600.
16 The case currently before us presents little in the way of
17 facts that would permit us to depart from Hooker, Dumas and
18 Dingley. Tift contends that this line of cases is
19 distinguishable because the postpetition state court contempt
20 proceedings against him sought to enforce, in part, a state court
21 order requiring him to turn over his computers to the state court
22 receiver, Resource Transition Consultants. According to Tift,
23 because the state court order interfered with his possession of
24 and control over property of his bankruptcy estate, its
25 enforcement by way of contempt proceedings fell outside the
26 exception to the automatic stay recognized in Hooker, Dumas and
27 Dingley.
28 At least superficially, Tift’s contention might seem to be
12
1 supported by Goichman v. Bloom (In re Bloom), 875 F.2d 224 (9th
2 Cir. 1989). Bloom involved a postpetition contempt motion in
3 federal district court arising from the debtor’s failure to
4 attend a postjudgment deposition. Bloom also involved the
5 district court’s postpetition denial of an exemption claim that
6 Bloom had asserted prepetition in response to the creditor
7 Goichman’s garnishment efforts. Id. at 225. At the contempt
8 hearing, the district court imposed a $500 monetary sanction
9 against Bloom and directed Bloom to transfer partnership assets
10 to Goichman to secure Goichman’s prepetition judgment. Id.11 Bloom then filed a complaint against Goichman for violation
12 of the automatic stay. Id. In response, Goichman filed a motion
13 in the district court asking the district court to withdraw the
14 reference pursuant to 28 U.S.C. § 157(d). Id. Ultimately, Bloom
15 prevailed in his stay enforcement action, and Goichman appealed.
16 Id.17 The Ninth Circuit Court of Appeals upheld the bankruptcy
18 court’s determination that Goichman’s postpetition actions
19 violated the automatic stay. Id. at 226. In so ruling, the
20 Ninth Circuit explained that Goichman’s postpetition actions went
21 well beyond the prosecution of a contempt motion against Bloom:
22 Goichman's motion, however, was not merely a motion to
hold Bloom in contempt. Among other things, Goichman
23 moved to appoint a receiver for Bloom's estate, to
order Bloom to comply with the prebankruptcy consent
24 decree, to strike Bloom's claim of exemption, and to
order transfer of certain Florida properties to
25 himself. On its face, the motion patently violates the
spirit and letter of section 362.
26
27 Id. As the Bloom court further noted, Goichman did not even
28 attempt to defend his postpetition efforts to compel compliance
13
1 with the consent decree, to strike Bloom's exemption claim and
2 to withdraw the reference. Id. Bloom thus concluded that
3 Goichman was not protected by Hooker because “Goichman filed the
4 contempt motion with the purpose of securing assets protected by
5 the stay.” Id.6 In Dingley, this Panel interpreted Bloom as limiting the
7 scope of Hooker. 514 B.R. at 599. Among other things, we stated
8 in Dingley that Bloom prevented bankruptcy courts from extending
9 Hooker to cover contempt proceedings in which the creditor sought
10 either to enforce the underlying judgment or to obtain a transfer
11 of bankruptcy estate assets. Id. (citing Bloom, 875 F.2d at12 226-27).
13 Nonetheless, the case currently before us is distinguishable
14 from Bloom. Here, the state court’s order directing the turnover
15 of Tift’s computers was for the patent and limited purpose of
16 allowing the state court receiver – Resource Transition
17 Consultants – to complete its discovery by enabling it to examine
18 the computers’ memory for any information or documents concerning
19 Remian LLC or the receivership property. It was not an attempt
20 to secure or otherwise utilize estate assets in the satisfaction
21 of an underlying debt. In short, the facts presented here are
22 far more similar to Dingley and Dumas than they are to Bloom.6
23 The other arguments Tift has attempted to raise on appeal
24 are devoid of merit. For instance, Tift argues on appeal that
25
6
26 In fact, the automatic stay likely was inapplicable for a
separate and independent reason. Generally, the automatic stay
27 does not prohibit a litigant from seeking (or enforcing) third
party discovery against a debtor. See Groner v. Miller
28 (In re Miller), 262 B.R. 499, 503-05 (9th Cir. BAP 2001).
14
1 the bankruptcy court ignored his emotional distress claim for
2 relief. However, Tift’s adversary complaint reflects that all of
3 Tift’s claims were based on the appellees’ alleged violation of
4 the automatic stay. In light of our ruling upholding the
5 bankruptcy court’s determination that, as a matter law, the
6 appellees did not violate the automatic stay, the bankruptcy
7 court correctly resolved all of Tift’s adversary claims in the
8 appellees’ favor.
9 CONCLUSION
10 For the reasons set forth above, we AFFIRM the bankruptcy
11 court’s summary judgment in favor of the appellees.
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
15