Mwangi v. Wells Fargo Bank, N.A. (In Re Mwangi)

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT OCT 21 2014
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
In re: ERIC MWANGI; PAULINE No. 14-15265
MWICHARO,
D.C. No. 2:12-cv-00683-GMN-
Debtors, GWF
BK-S-09-24057-LED
ERIC MWANGI, and PAULINE
MWICHARO,
MEMORANDUM*
Appellants,
v.
WELLS FARGO BANK, N.A.,
Appellee.
Appeal from the United States District Court
for the District of Nevada
Gloria M. Navarro, Chief District Judge, Presiding
Submitted October 17, 2014**
Before: SILVERMAN, W. FLETCHER, and BYBEE, Circuit Judges.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
Appellants Eric Mwangi and Pauline Mwicharo (collectively “the Debtors”)
appeal from a district court affirmance of the bankruptcy court’s denial of their
motion for sanctions. The facts and procedural posture of this case are known to
the parties, and we do not repeat them here. In light of our decision in Mwangi v.
Wells Fargo Bank, N.A. (In re Mwangi), 764 F.3d 1168 (9th Cir. 2014), we dismiss
this appeal as moot.1
Mwangi, our prior decision, arose from the same set of facts as the instant
case. There, the Debtors claimed that Wells Fargo violated 11 U.S.C. § 362(a)(3),
the automatic stay provision of the Bankruptcy Code, when it placed an
“administrative pledge” on the Debtors’ bank accounts, effectively freezing the
accounts and preventing the Debtors from accessing their funds. We held that the
Debtors failed to allege any injury based on the operation of Wells Fargo’s
administrative pledge. Id. at 1177. We reasoned that “[f]rom the filing of the
Chapter 7 bankruptcy petition . . . to the end of the thirty-day objections
period . . . the Debtors had no right to possess or control the account funds.” Id.
1
In their letter brief, the Debtors state that they are “contemplating” filing a
petition for a writ of certiorari in Mwangi and request that this Court stay this case
until either the time for filing a petition for a writ of certiorari has run, or the
Supreme Court renders a decision regarding any petition the Debtors choose to file.
Treating this request as a motion for a stay, we deny the motion.
2
Moreover, after the thirty-day objections period closed, and the funds revested in
the Debtors, the “funds lost their status as estate property” and therefore “were no
longer subject to the protections of § 362(a)(3)’s automatic stay provision.” Id.
Accordingly, we concluded, Wells Fargo’s administrative pledge could not cause
injury to the Debtors during the objections period or after the funds revested in the
Debtors. Id. We also concluded that Wells Fargo did not violate 11 U.S.C.
§ 542(b)’s turnover provision when it sought instructions from the trustee as to
how it should proceed, rather than immediately turning the funds over to the
Debtors. Id. at 1178–79. Finally, we concluded that the Debtors failed to state a
claim under 11 U.S.C. § 105(a), which allows the court to “issue any order,
process, or judgment that is necessary or appropriate to carry out the provisions of
this title,” because the Debtors failed to state a claim under any other provision of
the Bankruptcy Code. Id. at 1179.
In this case, the Debtors claim several errors in the bankruptcy court’s denial
of their motion for sanctions. At the heart of their motion is the Debtors’ claim
that Wells Fargo violated § 362(a)(3) when it placed the administrative pledge on
the Debtors’ bank accounts. Each of the Debtors’ claims is mooted by our decision
in Mwangi.
3
First, the Debtors argue that the bankruptcy court erred in denying the
debtors standing to enforce § 362(a)(3) and § 105(a). This claim is moot because
Mwangi held that the debtors failed to state a claim under §§ 362(a)(3) and 105(a).
See W. Coast Seafood Processors Ass’n v. Natural Res. Def. Council, Inc., 643
F.3d 701, 704 (9th Cir. 2011) (“An appeal is moot if there exists no present
controversy as to which effective relief can be granted.” (internal quotation marks
omitted)).
Second, the Debtors argue that even though the funds revested in the
Debtors after the objections period closed, § 362(a)(3) continued to govern Wells
Fargo’s actions. Our prior opinion also moots this argument. We held in Mwangi
that upon the revesting of the funds in the Debtors, the funds “lost their status as
estate property” and were thus no longer subject to the protections of § 362(a)(3)’s
automatic stay provision. Mwangi, 764 F.3d at 1177. Thus, we have already
rejected the Debtors’ claim that § 362(a)(3) continued to govern Wells Fargo’s
actions after the objections period ended.
Next, the Debtors claim that Wells Fargo violated the § 542(b) turnover
provision by failing to lift the administrative pledge, and that its withholding of the
funds for several months after the objections period closed was unreasonable. To
the contrary, we held in Mwangi that Wells Fargo complied with the turnover
4
provision, and did not wrongfully withhold any estate property from the estate. Id.
at 1178–79.
Finally, with respect to sanctions, the Debtors contend that the bankruptcy
court erred in failing to find a causal link between Wells Fargo’s actions and the
Debtors’ injury, failing to find that Wells Fargo acted willfully in violating
§ 362(a)(3), and denying damages. Each of these claims is moot because Mwangi
held that the Debtors failed to state a claim of injury resulting from any violation of
the automatic stay, the predicate for seeking damages under 11 U.S.C. § 362(k)(1).
See § 362(k)(1) (“[A]n individual injured by any willful violation of a stay
provided by this section shall recover actual damages, including costs and
attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.”
(emphasis added)).
In sum, each of the Debtors’ claims for relief is mooted by our decision in
Mwangi. Accordingly, this appeal is
DISMISSED.
5