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NOTFOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. NC-14-1266-JuTaPa

)

DEMAS WAI YAN, ) Bk. No. NC-04-33526

)

Debtor. ) Adv. No. NC-08-03166

______________________________)

)

CRYSTAL LEI, )

)

Appellant, )

)

v. ) M E M O R A N D U M1

)

DEMAS WAI YAN; CHEUK TIN YAN, )

)

Appellees. )

______________________________)

Submitted Without Oral Argument

on February 19, 20152

Filed - February 26, 2015

Appeal from the United States Bankruptcy Court

for the Northern District of California

Honorable Thomas E. Carlson, Bankruptcy Judge, Presiding

 

Appearances: Appellant Crystal Lei, pro se, on brief; Mark W. 

Lapham on brief for appellees.

 

FILED

FEB 26 2015

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

1 This disposition is not appropriate for publication.

Although it may be cited for whatever persuasive value it may

have (see Fed. R. App. P. 32.1), it has no precedential value. 

See 9th Cir. BAP Rule 8024-1.

2 On September 3, 2014, the BAP issued a Clerk’s Notice,

indicating that this appeal appeared appropriate for submission

without oral argument. No response was received. On

September 22, 2014, the BAP entered an Order Re Oral Argument,

ordering that this appeal be submitted without oral argument.

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Before: JURY, TAYLOR, and PAPPAS, Bankruptcy Judges.

Creditor Crystal Lei (Lei) appeals from the bankruptcy

court’s denial of her motion seeking damages for violations of

the automatic stay under § 362(k)(1).3 Because Lei did not have

standing to prosecute the violations of the automatic stay and

the bankruptcy court did not abuse its discretion in not

exercising its inherent authority to impose sanctions,

we AFFIRM.

I. FACTS4

Background

The facts in this case are not in dispute. On October 18,

2000, Demas W. Yan (Debtor) and Tony Fu (Fu) entered into a

joint-venture agreement to convert a single-family residence

into condominium units (the Real Property). Debtor executed a

promissory note in favor of Fu’s sister, Stella Chen (Chen); the

note was secured by a deed of trust against the Real Property. 

Lei is Fu’s ex-wife.

On February 20, 2004, Debtor filed an action in state court

to prevent Chen from foreclosing under the note. After the

state court denied Debtor’s motion to stop the foreclosure,

3 Unless otherwise indicated, all chapter and section

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and

“Rule” references are to the Federal Rules of Bankruptcy

Procedure.

4 Lei filed three Requests for Judicial Notice of certain

items on the docket (the Requests). Because all of the

referenced documents are irrelevant to the issues we decide in

this appeal, the Requests are DENIED.

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Debtor filed for chapter 11 relief on December 19, 2004.5

While in chapter 11, Debtor sold the Real Property at a

price sufficient to pay all allowed secured and unsecured claims

in full. On May 19, 2006, the bankruptcy court entered an order

appointing Janina N. Hoskins (Hoskins) as chapter 11 trustee.

Later the case was converted to chapter 7, and Hoskins continued

to serve as the chapter 7 trustee (Trustee).

Lei filed two proofs of claim in the bankruptcy case. On

May 29, 2008, the bankruptcy court approved a settlement

agreement between Trustee and Lei (the Settlement). The

Settlement provided that Lei would have an allowed, unsecured

non-priority claim in the amount of $45,000 and included broad

mutual releases of all known and unknown claims of Lei and

Trustee. By June 2008, Trustee had released all of the estate’s

prepetition claims against Lei. The assets of the estate have

since been liquidated and all allowed claim holders, including

Lei, have been paid in full with interest.

The State-Court Actions

Without authorization from the bankruptcy court or the

Trustee, Debtor filed three post-petition lawsuits against both

Fu and Lei in state court (collectively, the State Court

Actions).

Fu commenced an adversary proceeding on December 31, 2008,

5 We exercise our discretion to take judicial notice of

documents electronically filed in the underlying bankruptcy case

and adversary proceeding. See O’Rourke v. Seaboard Sur. Co.

(In re E.R. Fegert, Inc.), 887 F.2d 955, 957-58 (9th Cir. 1989);

Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R.

227, 233 n.9 (9th Cir. BAP 2003).

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which sought to enjoin Debtor from asserting prepetition claims

that remained property of the estate. On February 26, 2009, the

bankruptcy court granted a permanent injunction prohibiting

Debtor from asserting prepetition claims. Because there were

sufficient estate funds to pay all claims in full, on June 15,

2009, the Court entered an order abandoning all prepetition

claims to Debtor. The effect of the abandonment was to dissolve

the injunction. On February 22, 2011, the bankruptcy court

vacated the order abandoning the prepetition claims to Debtor.

Lei became a de facto party to the adversary proceeding

when the bankruptcy court entered an injunction on July 26,

2011, directing Debtor to dismiss the State Court Actions

against both Fu and Lei. On December 24, 2013, in a separate

adversary proceeding, the bankruptcy court found that the State

Court Actions were frivolous because the claims asserted were

property of the estate and Debtor had no authority to assert the

claims on the estate’s behalf. Moreover, the estate had already

given a full release of all claims.

Lei’s Motion for Attorney Fees and Punitive Damages

On October 17, 2013, Lei filed a motion for attorney fees

and punitive damages against Debtor and his father, Cheuk Tin

Yan.6 The bankruptcy court agreed that Debtor “willfully

violated the automatic stay by asserting prepetition claims in

state court when he was no longer authorized to do so and after

those claims had been released.” However, the bankruptcy court

6 The bankruptcy court previously found that Debtor, not

his father, “perpetrated the acts in question.”

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found that Lei was seeking damages for harm sustained in her

capacity as a defendant to the State Court Actions, not as a

creditor of the bankruptcy estate. Because Lei did not seek

redress for interference with the administration of the estate,

Lei did not have standing to bring a claim under § 362(k)(1). 

The bankruptcy court also found that it would be improper to

exercise its inherent power to impose sanctions based on conduct

in state court. The order denying Lei’s motion was entered on

May 9, 2014. Lei filed a timely notice of appeal.

II. JURISDICTION

The bankruptcy court had jurisdiction over this proceeding

under 28 U.S.C. §§ 1334 and 157(b)(2)(A). We have jurisdiction

under 28 U.S.C. § 158.

III. ISSUE

1. Whether Lei has standing under § 362(k)(1) to prosecute

damages for violation of the automatic stay;

2. Whether the bankruptcy court abused its discretion in

declining to exercise its inherent authority to impose

sanctions on Debtor for conduct in another court; and

3. Whether the Panel should consider Lei’s argument for

sanctions under 28 U.S.C. § 1927 and, if so, whether the

bankruptcy court has the power to make such award.

IV. STANDARD OF REVIEW

Questions of law are subject to de novo review. United

States v. Lang, 149 F.3d 1044, 1046 (9th Cir. 1998). Questions

of fact are reviewed under the clearly erroneous standard.

Pullman-Standard v. Swint, 456 U.S. 273, 287 (1982).

The bankruptcy court’s imposition of sanctions under its

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inherent power is reviewed for abuse of discretion. Chambers v.

NASCO, Inc., 501 U.S. 32, 55 (1991). 

The bankruptcy court abuses its discretion when it applied

the incorrect legal rule or when its application of the law to

the facts was: (1) illogical; (2) implausible; or (3) without

support in inferences that may be drawn from the facts in the

record. United States v. Hinkson, 585 F.3d 1247, 1263 (9th Cir.

2009) (en banc).

V. DISCUSSION

A. Whether Lei as an Individual Creditor May Recover Damages

Under § 362(k)(1)

11 U.S.C. § 362(k)(1) provides that “[a]n individual

injured by any willful violation of a stay provided by [section

362] shall recover actual damages, including costs and

attorneys’ fees, and, in appropriate circumstances, may recover

punitive damages.” The issue on appeal is whether Lei had

standing to prosecute a claim for damages for violation of the

automatic stay under § 362(k)(1) in this case.

1) Standing under § 362(a)

The Ninth Circuit has held that creditors do not have

standing to enforce the protections of the automatic stay and

the power to do so in a chapter 7 case belongs to the trustee. 

Tilley v. Vucurevich (In re Pecan Groves of Ariz.), 951 F.2d

242, 245 (9th Cir. 1991).

In Pecan Groves, a trust deed holder foreclosed on property

belonging to the debtor-in-possession without first obtaining

relief from the automatic stay. Id. at 243. The chapter 11

case was eventually dismissed. Id. During debtor’s subsequent

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involuntary chapter 7 case, the property was sold by the

foreclosing creditor to third party purchasers in an arms-length

negotiated transaction. Id. at 244. The chapter 7 trustee, in

the following voluntary chapter 7 case, initiated an adversary

proceeding against the trust deed holder and the third party

purchasers. Id. One of the trustee’s causes of action sought

to void the foreclosure because it was done in violation of the

automatic stay. Id. Two creditors intervened as plaintiffs and

alleged the same causes of action asserted by the trustee. Id. 

After the bankruptcy court ruled against the trustee and

creditors, the creditors alone appealed to the BAP. Id. The

BAP affirmed the bankruptcy court’s ruling and held that the

creditors did not have independent standing to appeal. Id. The

Ninth Circuit affirmed the BAP and held that these creditors “do

not have standing to attack violations of the stay because they

are merely creditors, and not the debtor or the trustee.” Id.

at 244-45. 

In so holding, the Ninth Circuit emphasized that the

primary purpose of the automatic stay was to protect the

debtor’s estate. Id. at 245. The Ninth Circuit cited

bankruptcy level cases indicating that “if the trustee does not

seek to enforce the protections of the automatic stay, no other

party may challenge acts purportedly in violation of the

automatic stay.” Id. (citing cases). Allowing creditors to

invoke the protections of the automatic stay would “subvert the

trustee’s powers.” Id. Because the trustee is entrusted with

the administration of the estate, standing to enforce the

automatic stay in a chapter 7 case falls within the exclusive

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authority of the trustee. Id.

Pecan Groves is consistent with the legislative history

behind § 362, namely to protect the debtor and to assure equal

distribution among creditors. H.R.Rep. No. 595, 95th Cong., 1st

Sess. 343 (1977). Pecan Groves merely clarifies that where the

violation of the stay interferes with the administration of the

estate to the detriment of creditors, the trustee as the

representative of the bankrupt estate is the only party with

standing to bring such claims. Pecan Groves, 951 F.2d at 245

(“The trustee is charged with the administration of the estate

for the debtor’s and creditor’s benefit.”).

Here, Lei does not have standing to prosecute a violation

of the automatic stay under § 362(a)(3). Debtor’s act of filing

the State Court Actions, albeit improper, did not interfere with

the administration of the estate. Lei as a creditor of the

estate was paid in full pursuant to the Settlement. Because Lei

is neither the trustee nor the debtor and the stay violation did

not affect the administration of the estate, Lei does not have

standing under § 362(a).

2) Standing under § 362(k)(1)

Without a violation of the automatic stay, no party may

proceed to recover damages under § 362(k)(1).7 Although Pecan

Groves denies Lei standing to assert the stay violation, its

reasoning is consistent with that applied by the bankruptcy

7 Section 362(k)(1) provides: “[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.”

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court here when it declined to award damages to Lei. 

The bankruptcy court here relied on Magnoni v. Globe Inv.

and Loan Co. (In re Globe Inv. and Loan Co.), 867 F.2d 556 (9th

Cir. 1989), a Ninth Circuit case decided before Pecan Groves. 

In Globe the appellants brought an action to set aside a

trustee’s sale because the sale violated the automatic stay. 

Id. at 558. The appellants argued that as creditors of the

estate, they had standing to assert a violation of § 362. Id.

at 559. The Ninth Circuit found that in seeking to obtain title

to the property free and clear of the estate, the appellants

brought the action as property owners with interests adverse to

the estate, not as creditors of the estate. Id. at 560. 

Therefore, they did not fall within the class of parties the

stay was intended to protect. 

The bankruptcy court here applied this principle when it

determined Lei was not in the “zone of interest” entitled to

recover damages under § 362(k)(1). The automatic stay protects

creditors by ensuring “an orderly liquidation procedure under

which all creditors are treated equally.” H.R.Rep. No. 585,

95th Cong., 1st Sess. 340-41 (1977). Here, the integrity of the

automatic stay is intact without Lei’s participation. Trustee

fulfilled her duties to liquidate the assets of the estate, and

all allowed claims have been paid in full with interest. The

protection of the automatic stay with respect to Lei as a

creditor ends there. Accordingly both Globe and Pecan Groves

stand for the principle that where the estate has been fully

administered and equal distribution between creditors

accomplished, creditors do not have standing to recover damages

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under § 362(k)(1).

B. 11 U.S.C. § 105(a) 

An award of damages under § 105(a) is within the discretion

of the bankruptcy court. Havelock v. Taxel (In re Pace),

67 F.3d 187, 192 (9th Cir. 1995)(remanding the BAP’s award of

damages under § 105(a) to allow the bankruptcy court to exercise

its discretion in deciding whether and to what extent it would

impose sanctions under § 105(a)); United States v. Arkison

(In re Cascade Roads, Inc.), 34 F.3d 756, 767 (9th Cir. 1994).

Here, the bankruptcy court found that it could not exercise

its inherent authority to sanction Debtor for his conduct in

state court. Citing Chambers v. NASCO, Inc., 501 U.S. 32, 44-45

(1991), the bankruptcy court noted the Supreme Court’s emphasis

that the bad-faith conduct occurred in the proceedings before

the court that imposed the sanctions. 

We reach a similar conclusion. Section 105 damages have

been limited to circumstances where the bad-faith conduct

occurred in bankruptcy court proceedings. Id. at 44

(“[I]nherent powers must be exercised with restraint and

discretion.”). Because the bankruptcy court did not apply an

incorrect legal rule, and its application of Chambers is not

illogical, implausible, nor without support in inferences drawn

from the facts in the record, the bankruptcy court did not abuse

its discretion by not imposing sanctions under § 105(a). 

C. 28 U.S.C. § 1927

Appellant also asserts for the first time on appeal that

the bankruptcy court should have awarded damages under

28 U.S.C. § 1927.

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28 U.S.C. § 1927 provides that “[a]ny attorney or other

person admitted to conduct cases in any court of the United

States . . . who so multiplies the proceedings in any case

unreasonably and vexatiously may be required by the court to

satisfy personally the excess costs, expenses, and attorneys’

fees reasonably incurred because of such conduct.”

Lei’s argument for relief under 28 U.S.C. § 1927 is waived

because it was not raised before the bankruptcy court. Ruiz v.

Affinity Logistics Corp., 667 F.3d 1318, 1322 (9th Cir. 2012);

Armstrong v. Brown, 768 F.3d 975, 982 (9th Cir. 2014).

Nevertheless, were we to consider it, Lei cannot prevail on this

theory because the Ninth Circuit does not consider a bankruptcy

court as a “court of the United States.” Perroton v. Gray

(In re Perroton ), 958 F.2d 889 (9th Cir. 1992); Determan v.

Sandoval (In re Sandoval), 186 B.R. 490 (9th Cir. BAP 1995). 

Therefore, a bankruptcy court has no power to impose sanctions

under 28 U.S.C. § 1927.

VI. CONCLUSION

We AFFIRM for the reasons stated above.

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