Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_05-cv-00940/USCOURTS-caed-1_05-cv-00940-2/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:0158 Notice of Appeal re Bankruptcy Matter (BAP)

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UNITED STATES DISTRICT COURT

 EASTERN DISTRICT OF CALIFORNIA

In re: WILLIAM P. IRWIN

Debtor.

_________________________________

THOMAS H. OHANIAN,

Appellant,

v.

WILLIAM P. IRWIN,

Appellee.

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DISTRICT COURT CASE 

NO. CIV-F-05-0940 AWI

BANKRUPTCY COURT CASE

NO. 04-19318-A-7

ORDER RE: MOTION FOR STAY

The matter is before the court on a bankruptcy appeal. Appellant has made motion for a

stay pending appeal of the bankruptcy court’s order avoiding his judicial liens on Appellee’s

property. Appellee opposes the motion. Oral argument was held on February 27, 2006. 

I. History

William Irwin filed a Chapter 7 bankruptcy petition on November 3, 2004. A Chapter 7

Trustee, James Salven, was appointed in this case. His case was assigned to Bankruptcy Judge

Whitney Rimel. At the time of his filing, Irwin resided at 1441 Morris Avenue in Fresno

(“Property”). The undisputed fair market value of the Property was $425,000. Irwin claimed a

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1Cal. Code of Civ. Proc. § 704.730(a)(3) requires those seeking an exemption to qualify

under one of its three subparts. The record before the court does not show which prong Irwin

falls into. However, there is no indication that Ohanian has raised or disputed this issue. Judge

Rimel states that “No one has challenged the exemption claimed by the debtor when the case was

filed.” Doc. 19, Ex. H, at 6:26-27. So, it is assumed that Irwin qualified under one of the three

subparts. California has opted out of the federal exemption scheme, and so debtors in California

are entitled to the California homestead exemption. Kendall v. Pladson, 35 F.3d 462, 464 (9th

Cir. 1994). 

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$150,000 homestead exemption under Cal. Code of Civ. Proc. § 704.730(a)(3).1 Bank of

America held a $188,647 mortgage on the Property as of that date. Irwin also owed Fresno

County $17,482.92 secured by a tax lien on the Property. In addition, three judgement liens

existed against the Property: Richard Gunner perfected a $55,760.24 lien on September 7, 1999,

which had increased to $85,758.56 as of November 3, 2004 by including interest; Appellant

Thomas Ohanian perfected a $209,482 lien on June 19, 2001; and Jim O’Neal perfected a

$100,991 lien on July 6, 2004. The origin of Ohanian’s lien was a judgment in case where

Ohanian’s father sued Irwin for breach of contract, fraud, and malpractice. Since 1994, the

formal owner of the Property was the “William P. Irwin and Jo Ann Irwin Revocable Living

Trust.” Their daughter, Tracy Barry, was named the liquidating trustee upon their deaths. Under

the design of revocable living trust, property passes in accordance with the terms of the trust,

avoiding probate; the liquidating trustee normally manages the assets without court supervision. 

Jo Ann Irwin had passed away by the time the bankruptcy petition was filed. William Irwin

passed away on November 7, 2004.

As the sum total of liens on the Property plus the $150,000 homestead exemption

exceeded the fair market value of the Property, Appellee filed a motion to avoid judgment liens

on the Property on March 16, 2005. The motion was denied without prejudice on April 13, 2005

due to defective service. On April 27, 2005, Appellee filed a second motion to avoid judgment

liens on the Property concurrently with a motion by Barry to substitute herself in as a party for

the second motion to avoid judgment liens. Ohanian (but not Gunner and O’Neal) opposed the

motions. Oral argument was held on May 25, 2005 after which Judge Rimel took the matters

under submission. On June 29, 2005, Judge Rimel issued Findings of Fact and Conclusions of

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Law (“June 29 Findings”) granting both the second motion to avoid judicial liens and the motion

to substitute parties. On July 11, 2005, Judge Rimel formally issued an order avoiding judicial

liens (“OAL”) and an order substituting parties. The OAL completely avoided Ohanian’s

$209,482 lien and O’Neal’s $100,991 lien while avoiding Gunner’s lien to the extent it exceeded

$68,870.08. 

On July 20, 2005, Ohanian filed a notice of appeal as to both OAL and the order

substituting parties, forming the substance of the case before this court. On August 9, 2005,

Ohanian filed a motion to stay the effectiveness of the OAL. A hearing was scheduled for

September 13, 2005 was moved to August 31, 2005 and designated as a preliminary hearing on

the request of Ohanian. Doc. 19, Ex. D. Due to the shortened schedule, opposition to the motion

was argued at the hearing without prior briefing. At the August 31, 2005 hearing, Judge Rimel

made a ruling from the bench (“August 31 Findings”) granting a temporary stay of the OAL.

Doc. 19, Ex. F. On September 12, 2005, Judge Rimel issued a written order (“Bankruptcy Stay”)

that the OAL “shall be and hereby is STAYED until the first date that is more than 30 days

following the entry of any order by this court on a motion to abandon the Property” but denying

the “request made by [Appellant] for a stay of the effectiveness of the OAL for the entire

duration of Ohanian’s appeal.” Doc. 19, Ex. G, at 2. 

On July 25, 2005, the Chapter 7 trustee filed a “Notice of Intent to Abandon Property”

which indicated his plan for the estate to abandon its interest in the Property. On September 7,

2005, Appellee filed a motion to compel the Chapter 7 trustee to abandon the Property. Ohanian

opposed the motion while the Chapter 7 trustee did not oppose the motion. A hearing was held

on October 5, 2005 at which time the matter was taken under submission. On January 12, 2006,

Judge Rimel issued findings of fact and conclusions of law and a separate order granting Barry’s

motion to compel abandonment. Doc. 19, Exs. H and I. Judge Rimel found that Ohanian is not a

creditor (secured or unsecured) of the Irwin estate. Doc. 19, Ex. H, at 5:18-20. Rather, he simply

holds a lien on the Property. Ohanian has also appealed Judge Rimel’s decision to grant the

motion to compel abandonment. While appeal to the district court was filed January 23, 2006,

the case does not yet appear in our records. Similarly, there has been a delay in the processing of

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the current appeal. While Ohanian filed the appeal on July 20, 2005, the district court had not

received certification that the record for appeal was complete until February 2, 2006. 

Consequently, there has not yet been briefing on the merits of the appeal.

The Bankruptcy Stay is set to automatically expire 30 days after entry of a bankruptcy

order on a motion to abandon the Property. Whether the order compelling abandonment qualifies

as such an order has not been judicially determined. Based on that possibility, on January 31,

2006, Ohanian filed a motion seeking a district court stay of the OAL and an ex parte motion to

shorten time to schedule the hearing on February 13, 2006. Docs. 4 and 7. Appellee filed an

opposition to the motion seeking to shorten time on February 1, 2006, Doc. 11. On February 6,

2006, the court issued an order setting a revised briefing schedule, scheduling a hearing for

February 27, 2006, and granting a limited stay of the OAL until February 28, 2006. Doc. 12. 

Appellee filed a timely opposition to the motion on February 15, 2006. Doc. 18. Ohanian filed a

timely reply on February 17, 2006. Doc. 20. Oral argument was held on February 27, 2006. 

II. Legal Standards

“An appellant seeking a discretionary stay pending appeal under Bankruptcy Rule 8005

must prove: (1) appellant is likely to succeed on the merits of the appeal; (2) appellant will suffer

irreparable injury; (3) no substantial harm will come to appellee; and (4) the stay will do no harm

to the public interest.” Universal Life Church v. United States, 191 B.R. 433, 444 (E.D. Cal.

1995), citations omitted. “The party moving for a stay has the burden on each of these

elements.” In re Shenandoah Realty Partners, L.P., 248 B.R. 505, 510 (W.D. Va. 2000). 

“Movant’s failure to satisfy one prong of the standard for granting a stay pending appeal dooms

the motion.” In re Deep, 288 B.R. 27, 30 (N.D.N.Y. 2003), citations omitted; accord In re Pon,

No. C-93-2745 MHP, 1994 U.S. Dist. LEXIS 2559, at *6 (N.D. Cal., February 25 1994).

Under Federal Rules of Bankruptcy 8005, “A motion for a stay of the judgment, order, or

decree of a bankruptcy judge...pending appeal must ordinarily be presented to the bankruptcy

judge in the first instance....A motion for such relief, or for modification or termination of relief

granted by a bankruptcy judge, may be made to the district court or the bankruptcy appellate

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panel, but the motion shall show why the relief, modification or termination was not obtained

from the bankruptcy judge.” Review of the bankruptcy judge’s decision is limited. “[A]ppellate

courts are reluctant to entertain a request for stay unless it is demonstrated that the trial judge is

unavailable or that the request was denied by the trial judge. Nevertheless, only in the former

situation does the appellate tribunal normally exercise its own discretion; in other instances (such

as where the trial court has denied the stay) the appellate court simply determines whether the

trial court abused its discretion.” In re Wymer, 5 B.R. 802, 807 (B.A.P. 9th Cir. 1980). “When a

bankruptcy court has ruled on the issue of a stay of its order pending appeal, the district court,

sitting as an appellate court, reviews that decision for abuse of discretion.” Universal Life Church

v. United States, 191 B.R. 433, 444 (E.D. Cal. 1995). “Discretion will be found to have been

abused when the judicial action is arbitrary, fanciful or unreasonable which is another way of

saying that discretion is abused only where no reasonable man would take the view adopted by

the trial court. If reasonable men could differ as to the propriety of the action taken by the trial

court, then it cannot be said that the trial court abused its discretion. It is equally well-established

that on appeal to the district court from bankruptcy court, issues of law are reviewed de novo

while the district court is constrained to accept the bankruptcy court’s findings of facts unless

they are clearly erroneous.” In re Blackwell, 162 B.R. 117, 119 (E.D. Pa. 1993).

III. Discussion

While Judge Rimel did grant a temporary stay, she denied a request for a more permanent

stay. At the hearing on August 31, 2005, Judge Rimel said that “the statements I made at the

beginning of the hearing...will constitute my findings of fact and conclusions of law with respect

to this motion.” Doc. 19, Ex. F, August 31 Findings, at 10:2-4. The substance of her findings

are:

This Court is not persuaded, based on the papers before me, that, first of all, there will be

irreparable harm. There’s no evidence that anybody is trying to sell this property. I don’t

have, because this is the first hearing and there hasn’t been any opposition filed, any

evidence about substantial injury to the other party [Appellee].

In this Court’s view, there is not a substantial possibility appellant will prevail on

appeal. Not just because I think the decision I wrote was correct...[but] because it’s

supported by published decision of the Bankruptcy Appellate Panel. 

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Doc. 19, Ex. F, at 4:19-5:5. The final, written order on the matter stated that “The Court denies

the request made by Moving Party [Appellant] for a stay of the effectiveness of the OAL for the

entire duration of Ohanian’s appeal, i.e. until such time as there would be a final nonappealable

order on the issue of the avoidability of Ohanian’s lien.” Doc. 19, Ex. G, Bankruptcy Stay, at

2:24-3:2. 

On August 31, 2005, Judge Rimel said “I’m inclined to grant a temporary stay for thirty

days to allow the appellant to go to District Court and seek a stay – any further extent of a stay.

That solves the rush to the courthouse problem, keeps the parties in the same position they are

now, and you can ask the District Court who has the appeal pending before it if the District Court

thinks the stay is reasonable.” Doc. 19, Ex. F, August 31 Findings, at 5:7-13. Ohanian says that

“the Bankruptcy court awarded a stay of limited duration, and in fact the language used by the

bankruptcy judge expressly contemplated that any additional stay would have to be obtained

from the District Court...to allow the District Court to decide whether a longer stay was

‘reasonable.’” Doc. 20, Reply, at 5:9-17, emphasis in original. At oral argument on February 27,

2006, Appellant again asserted that Judge Rimel effectively invited the district court to make an

independent review of the motion regardless of the appropriate standard of review. The court

disagrees with this interpretation of Judge Rimel’s intent. She explicitly denied Ohanian’s

request for a stay lasting for the duration of the appeals process. Doc. 19, Ex. G, Bankruptcy

Stay. From the language she used, it seems that she wished to avoid the “rush to the courthouse

problem” that would occur if she issued no stay at all. The limited Bankruptcy Stay was

designed to allow Appellant adequate time to seek a stay from district court, but did not in any

way indicate an abdication of her responsibility to make a full ruling on the motion before her. 

Even if, arguendo, Judge Rimel’s statement were read as a suggestion that the district court apply

a reasonableness standard in determining whether to grant a stay, the district court is not

constrained by such a suggestion and is bound to apply the legally correct standard. 

A. Standard of Review

All parties agree as to the substantive standard for obtaining a stay. The seeker of the stay

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(Ohanian) has the burden of showing (1) he is likely to succeed on the merits of the appeal; (2)

he will suffer irreparable injury; (3) no substantial harm will come to Appellee; and (4) the stay

will do no harm to the public interest. With respect to these four factors, Appellee summarizes

Judge Rimel’s findings as follows:

The bankruptcy court held that Ohanian failed to meet his burden on the first two

elements. The bankruptcy court further indicated that it has no basis upon which to

determine whether Appellee will suffer substantial harm in that Appellee was not allowed

the opportunity to file a written opposition and present evidence to such effect. The

bankruptcy court made no mention as to whether it believed Ohanian had or had not met

his burden as to the fourth factor implicating public policy. 

Doc. 18, Opposition, at 9:3-15. 

The parties disagree as to what weight this court should give Judge Rimel’s findings. In

the order granting a temporary stay and rescheduling this hearing, the court stated that the

applicable standard was reviewing Judge Rimel’s ruling for abuse of discretion, largely relying

on an old BAP decision, In re Wymer, 5 B.R. 802 (B.A.P. 9th Cir. 1980). See Doc. 12, February

6, 2006 Order. Appellee agrees that abuse of discretion is the correct standard. Doc. 18,

Opposition, at 6:12-21. 

Ohanian argues that abuse of discretion is the incorrect standard, and the court must make

a completely independent evaluation. He argues that, structurally, his motion for a district court

stay is an independent motion and not an appeal of Judge Rimel’s denial of a more lasting stay. 

Indeed, a BAP concurring opinion states that “the proper procedure after denial of a stay pending

appeal by a bankruptcy court is not to appeal the denial, but rather to request a stay directly from

the [appellate court]. Therefore, no appeal may lie from the bankruptcy court’s denial of the

stay.” BC Brickyard Assocs. v. Ernst Home Ctr., Inc., 221 B.R. 243, 248 (B.A.P. 9th Cir. 1998). 

“Considering civil procedure in the abstract, ‘abuse of discretion’ is one of the standards applied

upon the appeal of an order of a lower court or administrative tribunal, but it is not found among

the standards used for determining a motion, and for good reason: in order to apply the standard,

there must necessarily be ‘at issue’ the decision of an inferior court or tribunal capable of

exercising (and thus abusing) its discretion.” Doc. 20, Reply, at 8:3-10, emphasis in original. 

However, Bankruptcy Rule 8005 explicitly provides that “the motion shall show why the relief,

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“In reviewing the orders of the bankruptcy court, findings of fact are reviewed under a

‘clearly erroneous’ standard, and conclusions of law are reviewed de novo. Parties seeking a stay

pending appeal of an order of the bankruptcy court must ordinarily apply to the bankruptcy judge

in the first instance. Only then may a party move for a stay in the district court, provided that the

motion shows why the relief was not obtained from the bankruptcy judge.” In re Family

Kingdom, 225 B.R. 65, 69 (D.N.J. 1998), quotations omitted. 

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“This court’s decision in the case of In re Skinner, 202 B.R. 867 (W.D. Va. 1996),

provides the framework for analysis of [appellant’s] request for a stay pending appeal.” In re

Shenandoah Realty Partners, L.P., 248 B.R. 505, 510 (W.D. Va. 2000). In determining if stay

was appropriate, “Review of the bankruptcy court’s conclusions of law by this court is de novo.”

In re Skinner, 202 B.R. 867, 869 (W.D. Va. 1996).

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modification, or termination was not obtained from the bankruptcy judge.” Fed. R. Bankr. Proc.

8005. Inherent in the motion is a requirement that the moving party provide a record of the

bankruptcy court’s actions (be it contained in a formal order or otherwise) for review. There is

no contradiction in applying an appeals standard to these motions for stays. 

Ohanian represents that there is a lack of consensus as to how to review these motions

under Bankruptcy Rule 8005. He cited to six cases from district courts across the country that he

said made independent evaluations of these motions to stay without giving any deference to

bankruptcy court findings, i.e. did not act as if they are reviewing another court’s order on appeal.

Doc. 20, Reply, at 9:5-14. Review of these cases show that one court actually applied an abuse

of discretion standard2 while another cited to another case which plainly reviewed the motion as

if it were an appeal3. In two other cases, there is no indication that the court in fact held appellant

to the requirement that a motion for stay pending appeal under Bankruptcy Rule 8005 first

appraoch the bankruptcy court for a stay. See In re Adelphia Communs. Corp., 333 B.R. 649, 659

(S.D.N.Y. 2005); In re Deep, 288 B.R. 27, 29 (N.D.N.Y. 2003). 

Ohanian then cites to two cases for the proposition that “the decision to grant or to deny a

stay pending appeal of a bankruptcy court order rests in the discretion of the district court.” WCI

Cable, Inc. v. Alaska R.R. Corp., 285 B.R. 476, 478 (D. Or. 2002), citing In re First South Sav.

Assoc., 820 F.2d 700, 709 (5th Cir. 1987). The District of Oregon opinion was not on a motion

to stay a bankruptcy court’s order pending appeal under Bankruptcy Rule 8005; instead it dealt

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with a motion to stay a withdrawn matter (already before the district court) pending appeal of a

collateral decision in the bankruptcy court. WCI Cable, Inc. v. Alaska R.R. Corp., 285 B.R. 476,

478 (D. Or. 2002). In the Fifth Circuit case, the court noted the special procedural background of

the case before it: “[the district] court was confronted with the task of determining the propriety

of a stay in an emergency context, without the benefit of the reasons underlying the bankruptcy

court’s denial of the request for a stay.” In re First South Sav. Assoc., 820 F.2d 700, 708 (5th Cir.

1987). Further, the Fifth Circuit applied an abuse of discretion standard, stating that “In

assessing the propriety of the district court’s decision to deny a stay pending appeal of the

bankruptcy court’s [order], we note that the district court’s decision to grant or deny a stay

pending appeal rests in the discretion of that court. However, the exercise of that discretion is not

unbridled but rather, the court must exercise its discretion in light of what this court has

recognized as the four criteria for a stay pending appeal.” In re First South Sav. Assoc., 820 F.2d

700, 709 (5th Cir. 1987). As another case Ohanian cites stated “the district court stands in the

same relation to the bankruptcy court as does the circuit court to the district court when a party

seeks a stay of a district court order.” In re Adelphia Communs. Corp., 333 B.R. 649, 659

(S.D.N.Y. 2005). 

While arguing that abuse of discretion is the incorrect standard, Ohanian does recognize

that some courts do in fact apply that standard citing two cases. Doc. 20, Reply, at 9:12-14. 

Nevertheless, he represents that it “is not the majority standard.” Doc. 20, Reply, at 10:2-3,

emphasis in original. Ohanian specifically criticized the BAP case, In re Wymer, 5 B.R. 802,

807 (B.A.P. 9th Cir. 1980), as it is 25 years old and applied Bankruptcy Rule 805, the

predecessor to the modern Bankruptcy Rule 8005. Doc. 20, Reply, at 7:19-22. While this is true,

a later BAP decision suggested in dicta that abuse of discretion is the right standard when dealing

with Bankruptcy Rule 8005: “Under Fed.R.Bankr.P. 8005, a bankruptcy court ‘may suspend or

order the continuation of other proceedings in the case’ while an order is on appeal. The Rule

does not provide that the bankruptcy court must stay all other proceedings. The court had the

discretion to stay the proceedings in this case.” In re Hagel, 184 B.R. 793, 798-99 (B.A.P. 9th

Cir. 1995). Among the federal district courts overseen by the Ninth Circuit, the abuse of

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discretion standard has been explicitly applied several times in deciding motions for stay pending

appeal under Bankruptcy Rule 8005. See, e.g. Universal Life Church v. United States, 191 B.R.

433, 444 (E.D. Cal. 1995) (“When a bankruptcy court has ruled on the issue of a stay of its order

pending appeal, the district court, sitting as an appellate court, reviews that decision for abuse of

discretion”); Lynch v. Cal. PUC, No C-04-0580 VRW, 2004 U.S. Dist. LEXIS 6022, at *5 (N.D.

Cal., April 9, 2004) (“When a bankruptcy court has ruled on the issue of a stay of its order

pending appeal, the district court reviews that decision for an abuse of discretion”); In re Pon,

No. C-93-2745 MHP, 1994 U.S. Dist. LEXIS 2559, at *5 (N.D. Cal., February 25 1994) (“The

standard of review for a bankruptcy court's decision to grant or deny a stay pending appeal is

abuse of discretion”); In re Wilson, 53 B.R. 123, 124 (D. Mont. 1985). Upon review, the court

finds that the abuse of discretion standard, while not universally applied, is the correct standard

for this motion. 

Ohanian makes another argument regarding the evaluation of conclusions of law within

the abuse of discretion context. He appears to have misconstrued how the district court has

stated the abuse of discretion standard contained in the February 6, 2006 Order. Ohanian argues,

at length, that “‘abuse’ must be defined expansively to include errors of law.” Doc. 20, Reply, at

6:4-5. As was noted in the earlier order, it is “well-established that on appeal to the district court

from bankruptcy court, issues of law are reviewed de novo while the district court is constrained

to accept the bankruptcy court’s findings of facts unless they are clearly erroneous.” In re

Blackwell, 162 B.R. 117, 119 (E.D. Pa. 1993). The abuse of discretion standard encompasses a

de novo review of the law.

B. Merits of the Appeal

1. Capacity to Bring Motions

Ohanian argues that “it is self-evident that if an individual debtor has died after filing a

bankruptcy petition, it is no longer possible for any motion to be brought in the name of that

individual.” Doc. 5, Moving Brief, at 10, 15-18. The motion to avoid judicial liens was brought

in conjunction with a motion to substitute parties under Federal Rules of Civil Procedure

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25(a)(1) (made applicable to bankruptcy proceedings through Federal Rules of Bankruptcy

Procedure 7025), allowing Barry to substitute for her father. That motion was heard at oral

argument simultaneously with the motion to avoid judicial liens; it was granted by formal written

order on the same day as the OAL. See Doc. 19, Exs B and C. In effect, Barry, as a substitute for

her father, was the party that brought the lien avoidance motion ab initio.

2. Motion for Substitution

Ohanian then argues the motion for substitution of parties was procedurally defective.

Doc. 5, Moving Brief, at 12:22-13:10. Irwin died on November 7, 2004. The motion to

substitute parties was filed April 27, 2005. Under Rule 25(a)(1), the motion for substitution must

be “made not later than 90 days after the death is suggested upon the record by service of a

statement of the fact of the death.” Fed. R. Civ. Proc. 25(a)(1). Judge Rimel found that “no party

ever filed a formal statement of death of Debtor. The present motion to request substitution of

parties can be deemed a statement of death, and accordingly, the present motion is timely within

the 90-day period. Doc. 19, Ex. A, June 29 Findings, at 7:3-5. Ohanian says that “a statement

about the Debtor’s death must necessarily have been made at the 12/9/04 report of continuance of

the initial creditors’ meeting in the case.” Doc. 5, Moving Brief, at 13:7-10. Even if Ohanian’s

assertion were true, an oral assertion would not serve as a properly filed statement of death

served upon all relevant parties. See Barlow v. Ground, 39 F.3d 231, 233 (9th Cir. 1994)

(“Although Rule 25(a)(1) could be clearer, a careful reading of the rule coupled with an

understanding of its function leads to the conclusion that the rule requires two affirmative steps

in order to trigger the running of the 90 day period. First, a party must formally suggest the death

of the party upon the record. Second, the suggesting party must serve other parties and nonparty

successors or representatives of the deceased with a suggestion of death in the same manner as

required for service of the motion to substitute.”); Acri v. International Asso. of Machinists &

Aerospace Workers, 595 F. Supp. 326, 330 (N.D. Cal. 1983) (“Although dismissal appears to be

mandatory under this Rule unless a motion to substitute a representative is made within 90 days

of a suggestion of death on the record, the incidental mention of the deaths in answers to

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interrogatories does not appear to this Court to have started the 90-day period running. Federal

Form 30 provides an example of the proper suggestion; the answers to interrogatories cited by

defendants do not rise to the required level of formality. Furthermore, the suggestion was not

served as required by the provisions of the Rule”). Whether the motion to substitute parties and

Judge Rimel’s June 29 Findings satisfies Rule 25(a)(1) has not been questioned by the parties; no

briefing or record has been provided on that issue. The court expresses no opinion on that

matter. 

Ohanian states that Barry could not be a “successor” to Irwin since “Barry’s only capacity

was as a back-up trustee under [the William P. Irwin and Jo Ann Irwin Revocable Living Trust].”

Doc. 5, Moving Brief, at 12:25-28. Rule 25(a)(1) requires that a motion be “made by any party

or by the successors or representatives of the deceased party.” Fed. R. Civ. Proc. 25(a)(1). Judge

Rimel found that “The terms ‘trustee’ and ‘successor’ are not mutually exclusive....Barry

‘follows’ the Debtor with respect to the [Property] and is properly the successor.” Doc. 19. Ex.

A, at 6:4-10. In at least one case, when one trustee of a living trust passed away, the remaining

co-trustees were deemed “successors” and substituted pursuant to Rule 25(a)(1). See Bracken v.

Harris & Zide, LLP, 219 F.R.D. 481, 485 (N.D. Cal. 2004) (no objection filed against

substitution of co-trustees as defendants in case). 

Ohanian argues that “state law is used to determine who is a proper successor for

purposes of a substitution motion.” Doc. 20, Reply, at 17:14-16. However, the sources he cites

to for support indicate otherwise. See Servidone Constr. Corp. v. Levine, 156 F.3d 414, 416 (2nd

Cir. 1998) (“the Federal rules, rather than state-law principles, govern the procedure for

substitution following a party’s death, even where the court must apply state substantive law” in

diversity cases); 7C Charles Alan Wright et al., Federal Practice and Procedure § 1952, at 526

(2d ed. 1986) (“In a federal question case, federal law and federal decisions, rather than state law,

determine whether the action survives the death of a party”).

3. Section 522(f)

As part of the initial filing of his Bankruptcy petition, Irwin claimed a homestead

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exemption of $150,000 pursuant to Cal. Code of Civ. Proc. § 704.730(a)(3). After his passing,

Appellee made a motion to avoid certain judicial liens pursuant to 11 U.S.C. § 522(f) which

states, “the debtor may avoid the fixing of a lien on an interest of the debtor in property to the

extent that such lien impairs an exemption to which the debtor would have been entitled under

subsection (b) of this section, if such lien is...a judicial lien.” Title 11 U.S.C. § 522(b) spells out

what qualifies as exempt property. Judge Rimel granted the OAL on the basis that the “right to

exemptions is determined by the facts as they existed on the bankruptcy petition filing date.”

Doc. 19, Ex. A, June 29 Findings, at 4:25-26, quoting In re Combs, 101 B.R. 609, 614 (B.A.P.

9th Cir. 1989). Ohanian says that he “does not dispute that the exemption rights of Irwin were

fixed when he filed his petition.” Doc. 5, Moving Brief, at 18:9-10. Instead, he argues that

determination of exemption and avoidance of lien are two separate procedures with different

standards, citing to In re Morgan, 149 B.R. 147 (B.A.P. 9th Cir. 1993). Ohanian makes the

argument that while the exemption is determined at the time of filing, determining whether

avoidance of the lien is proper must be made with reference to the time the motion is made. 

With In re Morgan, the debtor claimed an exemption at filing which was not opposed at

the time. Under 11 U.S.C. § 522(l), “The debtor shall file a list of property that the debtor claims

as exempt under subsection (b) of this section....Unless a party in interest objects, the property

claimed as exempt on such list is exempt.” The BAP found due process and equity concerns

with allowing such a default rule to operate without some substantive review to ensure that

property claimed as exempt actually complied with Section 522(b) before liens were avoided.

See In re Morgan, 149 B.R. 147, 152 (B.A.P. 9th Cir. 1993). In order to provide some oversight,

the BAP found that

the language of § 522(f) indicates that exemption by default under § 522(1) does not

automatically mean that a lien impairing the exemption may be avoided. The first element

of the test described above is that the debtor ‘would have been entitled’ to the exemption

under § 522(b). That the debtor is entitled to the exemption by virtue of § 522(l) does not

mean that the debtor ‘would have been entitled’ to the exemption under § 522(b) which

provides that a debtor may claim either state or federal exemptions. This language

requires the court to find that the debtor is entitled to the exemption under relevant state

or federal law in order to authorize the avoiding of a lien under § 522(f). Reliance by the

exemption-by-default of § 522(1) does not satisfy this burden.

In re Morgan, 149 B.R. 147, 151-52 (B.A.P. 9th Cir. 1993), citations omitted. That is, when a

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motion is made under Section 522(f), the court must determine whether the claimed exemption

was proper in the first place under Section 522(b) even when objections are only raised at a later

motion to avoid liens. “The exemption by default under section 522(l) is not an exemption to

which the debtor would have been entitled under subsection (b) of 11 U.S.C. § 522.” In re

Mohring, 142 B.R. 389, 394 (Bankr. E.D. Cal. 1992), quotations omitted. In re Morgan does not

say that the exemption must be proper based on a determination of rights at the time of the

motion. There is no case authority provided that suggests the right to exemption is determined

with reference to any time but the date of filing. Indeed, the BAP has stated that “A debtor’s §

522(f) lien avoidance rights are also determined as of the petition date. ‘Because lien avoidance

is part and parcel of the exemption scheme, the right to avoid a judicial lien must also be

determined as of the petition date.’” In re Goswami, 304 B.R. 386, 392 (B.A.P. 9th Cir. 2003),

quoting In re Chiu, 266 B.R. 743, 751 (B.A.P. 9th Cir. 2001). Judge Rimel implicitly found that

Irwin was entitled to the exemption at the time of filing. See Doc. 19, Ex. A, at 5:19-21. 

Ohanian argues substantively that the right to an exemption is necessarily personal to a

debtor and does not survive his/her death. Doc. 5, Moving Brief, at 13:19-23. “The bankruptcy

court’s focus on matters of estate administration in the context of a § 522(f)(1) motion is

misplaced for an additional reason. A debtor’s right to avoid a lien under § 522(f) is a ‘personal’

right of the debtor which exists independent of case administration. Indeed, the purpose of lien

avoidance under § 522(f) is to protect a debtor’s exemptions.” In re Goswami, 304 B.R. 386, 392

(B.A.P. 9th Cir. 2003), citations omitted. The root of the “personal right” language can be traced

to a bankruptcy court decision from the District of Idaho: “The right to avoid liens on exempt

property under § 522(f) is a right granted to debtors under the Bankruptcy Reform Act of 1978. It

is a personal right given to a debtor, independent of case administration. It is fundamentally no

different than any other legal right available to an individual.” In re Swanson, 13 B.R. 851, 854

(Bankr. D. Idaho 1981). In general, legal rights available to an individual may or may not

survive death. Ohanian provides no concrete case law suggesting the homestead exemption is

extinguished upon death of debtor. 

Instead, Federal Rule of Bankruptcy Procedure 1016 says specifically that “Death or

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incompetency of the debtor shall not abate a liquidation case under chapter 7 of the Code. In such

event the estate shall be administered and the case concluded in the same manner, so far as

possible, as though the death or incompetency had not occurred.” In the case cited by Judge

Rimel, a bankruptcy court in the Northern District found, “Because the Debtor’s right to claim a

homestead exemption is generally fixed upon the date the chapter 7 petition is filed, the Debtor’s

post-petition death does not affect his right to claim a declared homestead exemption under

California law.” In re Combs, 166 B.R. 417, 421 (Bankr. N.D. Cal. 1994). Indeed, it is well

settled that a claimed exemption (if valid under Section 522(b) at the time of filing) survives the

death of the debtor. See, e.g. In re Peterson, 897 F.2d 935, 937 (8th Cir. 1990) (“We do not agree

with Trustee’s contention that [debtor’s] death cause his exemption to lapse”); In re Friedman, 38

B.R. 275, 275-76 (Bankr. E.D. Pa. 1984) (“We conclude, pursuant to section 522(b)(2)(B) of the

Code and Bankruptcy Rule 1016, that the right to claim the exemption on behalf of the

debtor-husband vested at the time the debtors’ filed their petition and that the debtor-husband’s

subsequent death did not alter said claim of exemption”); In re Doyle, 209 B.R. 897, 907 (Bankr.

N.D. Ill. 1997) (“the statutory language, legislative history, and case law mandate the conclusion

that a debtor who dies post-petition is entitled to claims of exemption as well as a discharge”); In

re Costello, 72 B.R. 841, 844 (Bankr. E.D.N.Y. 1987) (“the homestead exemption claimed by

Mrs. Costello survives her death and inures to the benefit of her husband”). 

4. Burden of Showing Property Owned by Irwin

Ohanian argues that Appellee failed to show the Property was in fact owned by Irwin at

the time of filing. Doc. 5, Moving Brief, at 18:27-19:2. “The general rule that the proponent of a

motion has the burden of proof applies to lien avoidance motions.” In re Mohring, 142 B.R. 389,

392 (Bankr. E.D. Cal. 1992). Ohanian states that there were “conflicting statements as to

whether the residence claimed exempt by the Debtor was in fact part of his bankruptcy estate.

The Bankruptcy Court did not have any basis for resolving these disputed statements and for

deciding, based solely on the equivocal Trust documents presented, that the Property had been

effectively made part of the Irwin Trust.” Doc. 5, Moving Brief, at 19:7-12. The court is forced

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to conclude that Judge Rimel made factual findings concerning the ownership of the Property

based on documents presented to her. While Appellant refers to “conflicting statements,” he

does not provide the court with any record (either briefing, affidavits, or transcripts of hearings)

of these statements. As there is no basis upon which to determine if Judge Rimel committed

clear error in making her factual finding, her conclusion must be accepted. 

From a legal standpoint, Ohanian argues that a property transferred into a trust cannot be

part of a bankruptcy estate. Doc. 5, Moving Brief, at 19:3-4. Title 11 U.S.C. § 541(a) specifies

that the bankruptcy estate includes “all legal or equitable interests of the debtor in property as of

the commencement of the case” with some limited exceptions. Ohanian first cites to a case from

the bankruptcy court of the Western District of Pennsylvania, In re Mills, 41 B.R. 849 (Bankr.

W.D. Pa. 1984). That court determined that property previously transferred to a trust for the

benefit of debtors’ children (with a third party trustee) was not part of the bankruptcy estate and

could not be exempted as part of bankruptcy proceedings. In re Mills, 41 B.R. 849, 850 (Bankr.

W.D. Pa. 1984) (“The estate created under § 541 is broad and all-encompassing, and includes all

legal and equitable interests of the debtor in property, both tangible and intangible, including

exempt property. Nonetheless, it is clear that in the case at bar, Debtors had no interest in the

subject property at the time of filing”). However, there is a case directly on point which comes to

a different conclusion:

The trustee maintains that because debtor transferred title to the subject residence to the

Living Trust before filing his bankruptcy petition, the residence is not property of the

estate pursuant to 11 U.S.C. § 541(a) from which debtor can claim an exemption. The

trustee’s contention that debtor cannot claim a homestead exemption in the subject

dwelling because legal title to the property is not held by the bankruptcy estate is without

merit. While title to the dwelling is in the Living Trust, as the trustee asserts, debtor holds

various “legal interests” in the subject dwelling as a trustor and beneficiary of the living

trust.

11 U.S.C. § 541(a)(1) provides that, inter alia, “....a [bankruptcy] estate is

comprised of....all legal or equitable interests of the debtor....” Debtor’s interest as a

trustor and beneficiary under the Living Trust, among other things, all became property of

the bankruptcy estate pursuant to 11 U.S.C. § 541(a) upon the filing of debtor petition.

Debtor is entitled to claim an exemption in either of these legal interests.

Pursuant to debtor’s interest as trustor in the “revocable” living trust, the

bankruptcy estate holds a “contingent reversionary interest” in the subject dwelling. The

bankruptcy trustee -- standing in debtor’s place as trustor of the Living Trust -- can, in his

discretion, revoke the trust in whole or in part, reverting title in the residence back to the

bankruptcy estate. Debtor claims a homestead in this “contingent reversionary interest”

and the trustee has failed to produce any legal authority for the proposition that a

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homestead cannot be claimed in such an interest. The trustee has failed to meet his burden

of proving a homestead exemption claim should be disallowed. Consequently, this court

must find that debtor is entitled to claim a homestead exemption in his principal dwelling

even if debtor’s sole interest in the was a “contingent reversionary interest.”

In re Moffat, 107 B.R. 255, 259-60 (Bankr. E.D. Cal. 1989). Appellant asks the court to follow

the logic of In re Mills, and reject the holding of In re Moffatt. Doc. 5, Moving Brief, at 19:20-

26. As the grantor-debtor in In re Mills had no interest remaining in the property, In re Mills can

be factually distinguished from the present case (and In re Moffatt). There appears to be a

distinction between an irrevocable trust for the benefit of third parties and a living, revocable

trust. Judge Rimel applied the correct law in determining that the Property was part of the

bankruptcy estate.

C. Irreparable Harm to Appellant

At the August 31, 2005 hearing, Judge Rimel found no irreparable harm since “There’s

no evidence that anybody is trying to sell this property.” Doc. 19, Ex. F, August 31 Findings, at

4:21-22. At that time, she was aware that the Chapter 7 trustee had filed a notice to abandon the

Property. Doc. 19, Ex. F, August 31 Findings, at 8:8-13. Ohanian argued that “it would be very

difficult in a case like this for a moving party to present evidence that the other party is in the

process of selling the property. Doc. 19, Ex. F, August 31 Findings, at 5:17-20. The situation has

factually changed since Judge Rimel granted an order to compel the Chapter 7 trustee to abandon

the Property, and Appellee now represents that if the OAL were effective, she would “sell the

[Property] today.” Doc. 18, Opposition, at 12:14-15. As Judge Rimel did not find a sale likely,

she did not discuss whether sale of the Property constitutes irreparable harm. This court must

make a de novo review of that legal issue. 

Initially, Ohanian represented that the irreparable injury from denial of a stay was the

“depriv[ation] of the prospect of a money recovery on his judgment lien whether through a sale

or through mootness of this appeal.” Doc. 5, Moving Brief, at 21:3-5. In his reply, Ohanian

substantially revised both assertions. As to mootness, Ohanian now recognizes that the

possibility of mootness does not constitute irreparable harm. Doc. 20, Reply, at 20:4-5. 

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“Bankruptcy’s mootness rule applies when an appellant has failed to obtain a stay from an order

that permits a sale of a debtor’s assets.” In re Onouli-Kona Land Co., 846 F.2d 1170, 1171 (9th

Cir. 1988). “It is well settled that an appeal being rendered moot does not itself constitute

irreparable harm.” In re 203 N. LaSalle St. Pshp., 190 B.R. 595, 598 (N.D. Ill. 1995), citing In re

Public Serv. Co. of New Hampshire, 116 Bankr. 347, 349-50 (Bankr. D.N.H. 1990). Instead,

Ohanian “does not believe that this appeal will be rendered moot even if a stay is denied” by the

district court. Doc. 20, Reply, at 3:25-26. 

As to denial of monetary recovery through sale of the Property,Ohanian initially said “the

Property or the value of Irwin’s interest in the Property is his only recourse for recovering on the

judgment.” Doc. 5, Moving Brief, at 20:16-19. In his reply, Ohanian says “While it is clear that

Ohanian will be irreparably harmed by having the property exposed to sale free of his lien,

because Ohanian would then lose the main leverage he has to ensure payment of the lien, it does

not necessarily follow that Ohanian could no longer have a claim against Tracy Barry if it were

eventually found that his lien should not have been avoided but that Barry had gone ahead and

sold the property and dissipated the proceeds in the meantime.” Doc. 20, Reply, at 21:22-22:2,

emphasis in original. Ohanian is claiming that there will be irreparable harm from sale of the

Property even though he represents that he could still recover the amount of his judgment lien

from Barry even if there were a sale. In speaking of “leverage,” the court assumes Ohanian is

referring to the possibility of settlement with Barry. Loss of bargaining power or negotiating

position does not constitute irreparable harm. “[E]conomic injury alone does not support a

finding of irreparable harm, because such injury can be remedied by a damage award.”

Rent-A-Center, Inc. v. Canyon Television & Appliance Rental, Inc., 944 F.2d 597, 603 (9th Cir.

1991). The only harms Ohanian has put forth are economic in nature. Further, he represents that

there are adequate causes of action to protect that interest if the Property is sold and the OAL is

ultimately overturned. As Ohanian states that any injury may be remedied by a damage award,

Ohanian has not met his burden. 

The court now independently finds no irreparable harm in denial of a stay. As Appellant

cannot show the threat of irreparable injury under any standard, Appellant’s motion for stay can

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be denied on this basis alone. See In re Pac. Gas & Elec. Co., No C-02-1550 VRW; 2002 U.S.

Dist. LEXIS 27549, at *7-8 (N.D. Cal., November 14, 2002) (“[T]he test for a stay pending

appeal is susceptible to different formulation. ‘Under any formulation of the test, [movants] must

demonstrate that there exists a significant threat of irreparable injury.’ If movants fail to meet the

‘minimum showing’ of a threat of irreparable injury, the court ‘need not decide whether movants

are likely to succeed on the merits’”), quoting Oakland Tribune, Inc. v. Chronicle Pub. Co., 762

F.2d 1374, 1376 (9th Cir. 1985).

As to the January 12, 2006 Order, this court will not unnecessarily interpret the terms of

Judge Rimel’s stay. Any previous statement as to whether denial of a stay by the district court

would allow sale of the Property (implicitly finding that Judge Rimel’s stay has already run out)

has no binding legal effect and simply represented the court’s understanding of the factual

background in the case at the time. Indeed, should the issue arise at a later date, “the bankruptcy

court’s interpretation of its own order warrants customary appellate deference.” In re Casse, 198

F.3d 327, 333 (2nd Cir. 1999), citations omitted. Similarly, the court does not, at this time,

express any conclusion as to whether sale of the Property would render any appeal moot.

D. Conclusion

The standard of review for the motion is abuse of discretion. Nevertheless, Appellant

cannot show that he is entitled to a stay on even a de novo standard of review. Appellant is not

likely to succeed on the merits of the appeal, and Appellant will not suffer any irreparable harm

from denial of a stay. 

///

///

///

///

///

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IV. Order

Appellant’s motion for stay pending appeal is DENIED. Per this court’s Order of February 2,

2006, the existing district court stay (of Judge Rimel’s July 11, 2005 Order Granting Motion to

Avoid Judicial Liens in Bankruptcy Case No. 04-19318-A-7) expires at 6 PM Tuesday, February

28, 2006. 

IT IS SO ORDERED.

Dated: February 28, 2006 /s/ Anthony W. Ishii 

0m8i78 UNITED STATES DISTRICT JUDGE

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