Source: https://amsantoslaw.blogspot.com/2013/12/vacating-order-as-void-ab-initio.html
Timestamp: 2018-02-24 01:49:59
Document Index: 290410506

Matched Legal Cases: ['§362', '§ 362', '§ 362', '§362', '§362', '§362', '§362', '§ 362', '§ 1334', '§ 362', '§ 362', '§362', '§362']

A.M. Santos Law, Chtd.: Vacating an Order as Void Ab Initio Pursuant to NRCP 60(b)
On May 6, 2010, Plaintiff filed a Motion for Partial Summary Judgment (attached hereto as Exhibit “A”) seeking an order from this Court that Debtor/Defendant breached the terms and conditions of certain loan agreement(s) and failed to perform in accordance with the terms of certain promissory notes where the debtor was to repay the loan proceeds together with interest to Plaintiff. As result of these alleged breaches and non-payment, or non-performance, Plaintiff likewise sought judgment against Jerry Seinfeld based on a guaranty that in the event Debtor/Defendant Vandelay Industries (“Debtor” or “Vandelay”) breached or otherwise failed to perform, he would be obliged. See, Exhibit “A”, See also, Exhibit “E”
On May 19, 2010, Defendants filed an opposition to Plaintiff’s Motion for Partial Summary Judgment (attached hereto as Exhibit “B”). On June 8, 2010, the Court held a hearing on the matter. The Court granted Plaintiff’s motion in its entirety.[4] In so doing, the Court held that the claims against Debtor/Defendant Vandelay as made by Plaintiff in her motion for summary judgment were supported by facts not in dispute that as a matter of law, Debtor/Defendant must be held liable on the judgment as requested by Plaintiff and as a consequence, so too must Seinfeld. The Court further ordered Mr. Kramer to prepare the order reflecting this outcome and to submit same to opposing counsel for approval as to form and content. See, Exhibit “E”
But, before the order was signed (by the then sitting Judge) and entered; before it went into effect; Vandelay filed for bankruptcy on June 11, 2010. On August 26, 2010, a Notice of Removal was filed with the U.S. Bankruptcy Court, District of Nevada. On January 30, 2011, Plaintiff filed a Motion for Remand. On August 19, 2011 an Order granting remand was filed (Exhibit “C”). The order for remand was limited explicitly to non-debtor defendants such that the Plaintiff was obliged to relinquish any and all claims against Debtor/Defendant Vandelay and dismiss it as a party from the suit.
Two years later, on September 9, 2013, Plaintiff’s counsel took it upon himself to whitewash, rehash, edit or amend the former Judge’s Order for Partial Summary Judgment against Debtor/Defendant Vandelay Industries and non-debtor Defendant Jerry Seinfeld (without conferring with each of Defendants’ Counsel in contravention of the order as contemplated, and as reflected in the minutes of the hearing)[5]. Counsel for Plaintiff metaphorically scratched out references to the Debtor Defendant then submitted the order as edited (the “Belated Order” (Exhibit “D”)). Judge Dredd appears to have signed the order nonetheless. It is unknown whether or not Judge Dredd reviewed the Order on Remand so as to ensure the Belated Order complied therewith. The Order for Remand is not referenced in the Belated Order.
On September 17, 2013 Plaintiff entered the Belated Order as modified, prior to complying with the Order of Remand which necessitated the dismissal of Debtor first in the form of an amended complaint duly filed. At no point in time did Plaintiff seek to lift the automatic stay with respect to Debtor/Defendant Vandelay. From the moment Debtor/Defendant Vandelay
filed for bankruptcy through today’s date, the automatic stay is still in effect as to Debtor/Defendant Vandelay modified only to permit dismissal.
1. In the MSJ, Plaintiff sought adjudication of facts and law against debtor and as a consequence a judgment against debtor.
The order Plaintiff sought from the court was an order for partial summary judgment against Debtor/Defendant Vandelay and given this, a tandem order for relief against Seinfeld as well. She asked the Court to deliberate on, and adjudicate her claims against the Debtor and sign off on findings of facts and conclusions of law with respect to the Debtor. The very first paragraph of her motion makes this abundantly clear. It reads as follows:
Plaintiff moves this Honorable Court for Partial Summary Judgment in her favor against Defendants Jerry Seinfeld ("Mr. Seinfeld" or "Defendant Seinfeld") and Vandelay Industries Corporation ("Vandelay Industries" or "Defendant Vandelay") on a limited issue regarding certain promissory notes, because there exists no genuine issue as to any material fact and Plaintiff is entitled to judgment as a matter of law. This Motion is supported by the attached Memorandum of Points and Authorities, the Affidavits of Elaine Benes and Cosmo Kramer, Esq., the deposition transcript of Jessica Rabbit, all papers and pleadings on file herein, and any oral argument that this Honorable Court chooses to hear.
The entire focus of Plaintiff’s motion and the proceeding in Court at the hearing focused first on alleged loans made to debtor/defendant and then on the alleged breach or nonperformance by Debtor/Defendant in Plaintiff’s efforts to secure a finding against Debtor. (This, despite the fact that the parties had reached an agreement in full accord and satisfaction for Debtor to provide Plaintiff with collateral and cash thereby relinquishing Seinfeld’s obligations under the guaranty.) These findings were a necessary precursor to her claims against the Guarantor (Seinfeld) such that in the event Debtor/Defendant was found to have breached or failed to perform, that triggered Plaintiff’s claims under the guaranty against Seinfeld. Plaintiff’s motion for partial summary judgment is replete with arguments and claims as to Debtor/Defendant Vandelay, the loans, and the alleged breach or nonperformance by Debtor/Defendant. For example:
The overall case is a collection action related to various loans and other business relations made by Benes and/or the Trust with Vandelay Industries and other related entities that were all personally guaranteed by Vandelay's principal, Jerry Seinfeld. See, Exhibit “A” Page 4, lines 3-5.
By way of background, Plaintiff made five (5) loans to Vandelay Industries, collectively totaling over Seven Million Dollars ($7,000,000.00), with each loan documented by a separate Promissory Note . . . Defendant Seinfeld executed the Notes in 2006 as President/CEO and majority stockholder of Vandelay Industries. Id. Page 4 lines 5-10
For purposes of this Motion, Plaintiff is seeking Summary Judgment on the issues of the Notes only. Id. Page 4, lines 26-27.
As stated in Elaine's Affidavit, on or about March 15, 2006, she loaned Vandelay Industries the sum of One Million Two Hundred Twenty-Five Thousand Dollars ($1,225,000.00) (the "First Loan"), documented with a Promissory Note. Id. Page 6, lines 3-5.
On or about March 15, 2006, Elaine loaned Vandelay Industries the sum of Two Million Dollars ($2,000,000.00) (the "Second Loan"), documented with a Promissory Note. Id. Page 6, lines 6-8.
On or about March 15, 2006, Elaine loaned Vandelay Industries the sum of Three Million Dollars ($3,000,000.00) (the "Third Loan"), documented with a Promissory Note. Id. Page 6, lines 8-10.
On or about April 7, 2006, Elaine loaned Vandelay Industries the sum of One Hundred Thirty-Five Thousand Dollars ($135,000.00) (the "Fourth Loan"), documented with a Promissory Note. Id. Page 6, lines 11-12.
On or about April 7, 2006, Elaine loaned Vandelay Industries the sum of Seven Hundred Thousand Dollars ($700,000.00) (the "Fifth Loan"), documented with a Promissory Note. Id. Page 6, lines 13-15.
Plaintiff performed all conditions required of her under the Notes and has never been in breach as her only obligation was to provide the funds. Id. Page 6, lines 16-17.
Summary judgment Is Appropriate Because Elaine Benes and Vandelay Industries Entered into Valid Enforceable Contracts Whereby Plaintiff Loaned Defendants Several Million Dollars Which Defendants Have Not Repaid. Id. Page 11, lines 18-20.
Each of the Notes between Plaintiff and Vandelay Industries constitutes a valid contract as each contains an offer, acceptance, and bargained-for consideration. Id. Page 12, lines 1-3.
Defendants Seinfeld and Vandelay Materially Breached All Contracts by Failing to Re-pay Plaintiff. Id. Page 15, lines 1-2.
Seinfeld and Vandelay have repeatedly failed and continue to fail to perform their obligations by refusing to repay the oustanding principal and accrued interest, thus breaching the contracts. Vandelay's failure to timely re-pay the Notes, and Seinfeld's failure to re-pay pursuant to his written, personal unconditional Guaranty, constitute separate breaches of contract. Id. Page 15, lines 21-25.
Accordingly, both Defendants Vandelay and Seinfeld materially breached their contracts to repay. Id. Page 15, line 28.
Plaintiff's Remedy For the Material Breaches Is Money Damages from Defendants Seinfeld and Vandelay. Jointly and Severally. Id. Page 16, lines 1-2.
According to the Notes, Elaine is entitled to recover attorneys' fees and costs to collect and/or enforce the Loans. Therefore, Defendants Seinfeld and Vandelay Industries owe Elaine the amount of Two Million Seven Hundred Seventy-Three Thousand One Hundred Seventy and 66/100 Dollars ($2,773,170.66) for accrued unpaid principal and interest. Id. Page 17, lines 1-5.
Accordingly, Plaintiff seeks summary judgment against Defendants Seinfeld and Vandelay Industries in the total amount of Three Million One Hundred Forty-Three Thousand, Eight Hundred Ninety-Eight and 95/100 Dollars ($3,143.898.95). Id. Page 17, lines 9-11.
It is clear that no issues of material fact exist with respect to each of Plaintiff's claims against Defendants Seinfeld and Vandelay Industries for breach of contract and non-payment of Notes in the principal amount of $2,300,000.00, plus interest and costs. Therefore, Plaintiff is entitled to judgment as a matter of law as: 1) Elaine, Seinfeld and Vandelay Industries entered into five (5) Notes, an unconditional personal Guaranty by Defendant Seinfeld, individually, to repay the Loans, and a Modification to Seinfeld's unconditional Guaranty, all of which were and are valid, enforceable contracts; 2) Defendants Seinfeld and Vandelay Industries materially breached all of these valid, enforceable contracts; and 3) due to the material breaches of both Seinfeld and Vandelay Industries, Plaintiff Elaine has incurred substantial damages in excess of Three Million Dollars ($3,000,000.00). Accordingly, Plaintiff respectfully requests this Court enter a partial summary judgment against Defendants Seinfeld and Vandelay Industries, jointly and severally, in the amount of Three Million One Hundred Forty-Three Thousand, Eight Hundred Ninety-Eight and 95/100 Dollars ($3,143.898.95), as more particularly set forth above. Id. Page 17 - 18, lines 13-23, 1-2.
It is clear then that Plaintiff sought adjudication on her claims against Debtor/Defendant and rescission of her valid and binding agreements with Debtor, which included cash and property transfers between Plaintiff and Debtor. This is so notwithstanding the plain fact that Plaintiff’s claims have been relinquished and must be dismissed by virtue of the bankruptcy court order).
THE MINUTES OF THE HEARING ON PARTIAL SUMMARY JUDGMENT.
Apparently no court reporter was present; no video is available; and no audio is available with respect to the proceedings of the hearing on partial summary judgment. We are left with the party’s filings with respect to the matter and the minutes as posted by the clerk. Those minutes appear as follows:
Motion for Partial Summary Judgment (9:00 AM) (Judicial Officer Dredd, Kathleen E.) Plaintiffs' Motion for Partial Summary Judgment Against Defendants, Jerry Seinfeld and Vandelay Industries Corporation
Arguments by counsel regarding securities, "pay downs," structured payouts, and Personal Guarantee being continuing obligation. Mr. Kramer advised he is not fighting $7.5 million part of case this day as it is a separate issue; only the $4.5 million assets are being sought at this time. Mr. Kramer further advised he did not receive the Deeds of Trust. Further arguments by counsel regarding Appraisal Waiver and whether section 17.11 of Guarantee is applicable. Colloquy regarding deposition transcript of Jessica Rabbit. As there are no genuine issues of material fact and as securities are a nullity, COURT ORDERED, motion GRANTED. Mr. Kramer to prepare Findings of Fact and Conclusions of Law, and Mr. Gewerter to approve as to form and content. COURT NOTED counsel may submit competing Orders for Court to determine.
The Court simply granted Plaintiff’s Motion for Partial Summary in its entirety.
THE BANKRUPTCY FILING, REMOVAL AND REMAND
1. The Bankruptcy Filing
On June 10, 2010 Debtor/Defendant Vandelay filed for bankruptcy. This triggered the provisions of 11 USC. §362, (automatic stay). To date, Plaintiff has never sought to lift the stay and it remains in effect as to the Debtor.
2. The Removal
After the Debtor filed its bankruptcy petition, several individual Non-Debtor Defendants, Michael Seinfeld, Judith Seinfeld, Marlon Steele, Jr., and Shawn Wright, removed the State Court Action to the bankruptcy court pursuant to Section1452(a).
3. The Motion for Remand
On January 30, 2011, Plaintiff filed a Remand Motion to return the matter to State Court. In the Remand Motion, she represented that she would amend her complaint in the State Court Action to relinquish all claims asserted against the Debtor.[6]
In her motion for remand, Plaintiff asserts to the Bankruptcy Court the following: “Benes argues that remand is appropriate because her claims against the Seinfeld Defendants have little relationship to the Debtor’s case and that liquidation of the claims in State Court will not interfere with the Trustee’s administration of the bankruptcy estate. She also maintains that because she will be amending her complaint to relinquish any claims against the Debtor, there also would be no “core matters” pending before the court, much less any “related matters” affecting the estate.”[7]
4. The Bankruptcy Court Order
As a result of this assertion, on July 20, 2011, the Bankruptcy Court ordered (attached hereto as Exhibit “C”) in favor of remand on the condition that Benes would in fact relinquish all claims against the Debtor/Defendant Vandelay reiterating the assertion as follows:
However, in this case Benes has agreed to amend her complaint in the State Court Action to dismiss all claims against the Debtor.
Specifically the bankruptcy Court ordered as follows:
[T]hat Elaine Benes, Individually and as Trustee of the Elaine Benes Family Trust Dated 3/11/85 shall take all necessary steps to amend her complaint in Case No. A578385, pending in the Eighth Judicial District Court for Clark County, Nevada, to dismiss the above-captioned Debtor as a defendant in the proceeding. The automatic stay under 11 U.S.C. § 362(a) is modified for cause pursuant to 11 U.S.C. § 362(d)(1) to permit the plaintiff to amend her complaint consistent with this order.
THE BELATED ORDER ON PARTIAL SUMMARY JUDGMENT
Plaintiff was then free to pursue her claims against the non-debtor/Defendants provided she comply with the Bankruptcy Court Order to relinquish her claims and dismiss same against Debtor/Defendant Vandelay. She waited two years and did nothing in the interim.
Then, before complying with her obligation to amend the complaint to dismiss Vandelay, Plaintiff revisited her partial summary judgment motion granted to her against Vandelay and Seinfeld and engaged in some clever (or not so clever) redrafting of a proposed order contorting her motion and the subject of the hearing as held by Judge Dredd back in 2010 so as to create the impression or illusion that somehow, someway, it was not an adjudication and finding against Vandelay; rather it was simply and solely an adjudication and finding against Seinfeld alone.[8] That was not the result. The thrust of the motion and the Judge’s ruling was partial summary judgment against Vandelay and as a result, against Seinfeld. Plaintiff’s liberal use of metaphoric white-out results in a number of contortions and misrepresentations, for example:
Having considered all of the documents on file, the pleadings, evidence and arguments of counsel, this Honorable Court finds that Plaintiff s Motion for Partial Summary Judgment against Defendant Seinfeld shall be GRANTED. (See, Exhibit “D” at page 2).
The plain facts of what transpired together with the very language in the order betray this effort. For example, the first paragraph of the Belated Order reads in part as follows:
On May 6, 2010, Plaintiff, ELAINE BENES (hereinafter "Benes'), individually and as Trustee of THE ELAINE BENES FAMILY TRUST DATED 3/11/85 (hereinafter "the Trust"), (collectively "Elaines"), by and through her attorneys, COSMO P. KRAMER & ASSOCIATES, LTD., filed Plaintiff's Motion for Partial Summary Judgment (hereinafter "the Motion"), Against Defendants, Jerry Seinfeld ("Defendant Seinfeld') and Vandelay Industries Corporation ("Defendant Vandelay"). (See, Exhibit “D”)
What is more disturbing is that in attempting to straddle the mandate of the Bankruptcy Order to relinquish and dismiss any and all claims against Vandelay, yet salvage her pending order for partial summary judgment, Plaintiff has mischaracterized the facts by subtly suggesting that the breaching borrower on the Notes at issue was Jerry Seinfeld not Vandelay.
[D]ocuments, consisting primarily of the five original Notes ("the Notes" and/or "the Loans"); the Agreement of Unconditional Guaranty executed by Defendant Seinfeld ("the Seinfeld Guaranty)), and the new Notes executed by Defendant Seinfeld in March 2007 and April 2007.
The fact is that any and all Notes that were the subject of this litigation may have been executed by Seinfeld, but only in his capacity as an officer of the borrower, Vandelay. It has always been the case that Vandelay was the party responsible for any repayment on the Notes. If and only if Vandelay breached in its performance under the agreement(s) Seinfeld would be obliged under his guaranty(s). Plaintiff’s efforts to obscure this fact and mislead this Court do not change the dynamic, namely: the threshold issue before this Court could reach a finding that results in rescission of Plaintiff’s agreements with the Debtor, reversing transfers of cash and property with the Debtor, so as to secure a judgment against Seinfeld is clearly adjudication and findings affecting the Debtor’s estate. This is the very thing that the Bankruptcy’s order for remand effectively prohibits.
The Belated Order on partial summary judgment as drafted by Mr. Kramer, goes on to state on its first page:
On June 8, 2010, this Court heard the motion and arguments from counsel. Plaintiff was represented by COSMO P. KRAMER, ESQ., of the law firm, COSMO P. KRAMER & ASSOCIATES LTD., and HAROLD P. GEWERTER, ESQ., appeared on behalf of Defendants Seinfeld and Vandelay. Having considered all of the documents on file, the pleadings, evidence and arguments of counsel, this Honorable Court finds that Plaintiffs Motion for Partial Summary Judgment against Defendant Seinfeld shall be GRANTED. (See, Exhibit “D”)
This is nothing more than blatant, revisionist history. Plaintiff simply attempted to whitewash the Belated Order so as to remove what she hoped were merely superficial references to the Debtor in a futile effort to comport with the Bankruptcy Order on remand. But any finding against Seinfeld cannot stand alone absent a result that affect the bankruptcy estate contrary to the import of the Order on Remand. The matter should have been re-motioned (without claims against debtor) and reheard and adjudicated (without findings of fact and conclusions of law as to debtor adversely impacting or touching upon property of its estate).
And this should have been addressed only after leave to amend the pleadings to comport the Bankruptcy order had been filed and granted; after an order reflecting same had been entered; and finally, after the complaint as amended had been filed and served on Defendants.
Indeed in a futile effort to contort even the basic facts not otherwise at issue, Plaintiff crafts an order and secures Judge Dredd’s signature based on patently false findings. For example, on page 3 of the order at paragraph 2, Plaintiff endeavors to suggest that Seinfeld not Vandelay defaulted under the Note and that under the Note, Seinfeld not Vandelay owed Plaintiff money. This section reads as follows:
As of November 14, 2008, Defendant Seinfeld was in default under the note an owed Plaintiff outstanding principal of $2,361,033.01, plus interest at a rate of sixteen percent (16%) interest per annum and costs, on the unpaid Loans.
At best, this is certainly misleading.
The Motion for Summary Judgment included findings of facts and conclusions of law barred by or necessarily void in the face of the Bankruptcy Order and constituting violations of of 11 USC §362.
Section 17.11 of the Seinfeld Guaranty contains a condition precedent to any assignment and/or release of the Seinfeld Guaranty. Plaintiff never agreed to any assignment of collateral by Vandelay. This Court is effectively barred (by the Bankrupcty Order and by Section 362) from entering findings of fact or otherwise adjudicating on claims against the Debtor particularly adjudication which my touch upon or effect the Debtor’s estate. This Court therefore cannot adjudicate that Vandelay entered into a loan agreement, that Vandelay breached same or otherwise failed to perform, or that Plaintiff never agreed to any assignment of collateral by Vandelay, the debtor in such a manner that would result in transfer of property and cash of the Debtor’s estate. Plaintiff secured her remand with the understanding that any such claims would be relinquished and dismissed.
Pursuant to the Belated Order, Plaintiff is now somehow entitled to enforce the Notes as executed by the debtor and secure attorney’s fees in so doing. This is simply impossible in light of the Order on Remand and 11 USC §362. The erroneous provision at page 3 paragraph 9 reads in part as follows:
Pursuant to the Notes and the Seinfeld Guaranty, Elaine is entitled to recover
attorneys' fees and costs for collecting and/or enforcing the Notes.
Such a finding is void as contemplated by NRCP 60(b). The Order as crafted by Plaintiff obscures the facts and as written, is simply erroneous. At page 5-6 paragraph 5, it reads as follows:
IT IS FURTHER ORDERED, ADJUDGED AND DECREED, that there exists no genuine issues of material fact regarding the amounts Defendant Seinfeld owes Plaintiff under the Notes and/or the Seinfeld Guaranty.
Again, the fact is that Debtor Vandelay is alleged to owe money to Plaintiff not Seinfeld. Plaintiff’s flippant use of “and/or” does not comport with the facts nor does it satisfy the mandate of the Bankrupcty Order and 11 USC §362. The fact that Plaintiff agreed to waive or relinquish all her claims against the Debtor upon remand must include ratification of her agreement with Debtor and her cash and collateral assignment from the Debtor, which renders the decision a nullity. Not to do so violates the conditions of the Order on Remand and would result in cash and property transfers with the Debtor
NRCP 60(b)
Nevada Rule of Civil Procedure ("NRCP") Rule 60 allows for a party to seek relief from a judgment, including a default judgment. NRCP 60(b)(1) allows a party to seek relief from a final judgment for "mistake, inadvertence, surprise, or excusable neglect." NRCP 60(b)(1) (2005). Such relief must be applied for within six (6) months from the occurrence of certain events. “The motion shall be made within a reasonable time, and for reasons (1), (2), and (3) not more than 6 months after the proceeding was taken or the date that written notice of entry of the judgment or order was served.” NRCP 60(b) (2005). See also, Deal v. Baines, 110 Nev. 509, 874 P.2d 775 (Nev. 1994) holding “Rule 60(b) states that a motion under subsection (b)(1) must be brought ‘not more than six months after judgment, order, or proceeding was entered or taken.’
For a judgment to be void, there must be a defect in the court's authority to enter judgment through either lack of personal jurisdiction or jurisdiction over subject matter in the suit.” Gassett v. Snappy Car Rental, 111 Nev. 1416, 1419, 902 P.2d 258, 261 (Nev. 1995). In Gassett, the judgment was found to be void because of a lack of service on the defaulted defendant, leaving the district court with no personal jurisdiction.
Other grounds for finding a judgment void include the failure to comply with necessary procedures. In Garcia v. Ideal Supply Co., Inc.,110 Nev. 493, 874 P.2d 752 (Nev. 1994), a default judgment was entered when the defendant had not actually been defaulted from the case. “The default judgment entered against Garcia without benefit of a prior default is void.” Id. at 494, 753. In Fierle v. Perez, 125 Nev. 728, 219 P.3d 906 (Nev. 2009), the Court found that a claim was void ab initio for failure to comply with a statutory requirement for bringing the action, albeit not pursuant to NRCP Rule 60. In Christy v. Carlisle, 94 Nev. 651, 654, 584 P.2d 687, 689 (1978), the Court found a judgment to be void where the defendant made an appearance and the other party failed to give the required three day notice pursuant to NRCP 55 before taking a default.
In Misty Management Corp. v. 1st Judicial District Court, 83 Nev. 180, 182, 426 P.2d 728, 729 (Nev. 1967), the Court stated “That provision [60(b)(4)] is normally invoked (either by motion, or by independent action) in a case where the court entering the challenged judgment was itself disqualified from acting, or did not have jurisdiction over the parties, or of the subject matter of the litigation.” Internal citations omitted.
1. Orders or actions taken in Violation of §362 are void ab initio.
In the Ninth Circuit, actions taken in violation of the automatic stay, including judicial proceedings, are void ab initio. Gruntz, 202 F.3d at 1082 n.6; Schwartz v. United States (In re Schwartz), 954 F.2d 569, 571 (9th Cir. 1992) ("[V]iolations of the automatic stay are void, not voidable."); Phoenix Bond & Indem. Co. v. Shamlin (In re Shamlin), 890 F.2d 123, 125 (9th Cir. 1989) ("Judicial proceedings in violation of th[e] automatic stay are void."). Actions in violation of the stay are void for all purposes and are not validated by dismissal of the bankruptcy case. See, 40235 Washington Street Corp. v. Lusardi, 177 F.Supp.2d 1090, 1104 (S.D. Cal. 2001), [*21] aff'd on other grounds, 329 F.3d 1076 (9th Cir. 2003), cert. denied, 540 U.S. 983, 124 S. Ct. 469, 157 L. Ed. 2d 374 (2003)(“The violations remain ineffective even if the underlying bankruptcy case is dismissed.”); Richard v. City of Chicago, 80 B.R. 451, 454 (N.D. Ill. 1987) (holding that a debtor's voluntary dismissal of his chapter 13 petition did not “resurrect a sale that [was] legally void” as having been conducted in violation of the automatic stay
11 U.S.C. Section 362(a) [9]
1. The Automatic Stay precludes this Court from adjudicating any claims against or affecting Defendant Debtor or it estate.
On July 7, 2010, Vandelay filed a bankruptcy petition in a Chapter 7 proceeding that is pending in United States Bankruptcy Court for Las Vegas, Nevada. As a result, an automatic stay went into effect halting all pending proceedings in other courts (including this one) against the Debtors, pursuant to 11 U.S.C. Section 362(a). An automatic stay is designed to effect an immediate freeze of the status quo by precluding and nullifying post-petition actions, judicial or non-judicial, in non-bankruptcy for or against the debtor or affecting the property of the debtor, Hillis Motors, Inc. v. Hawaii Automobile Dealers' Association, 997 F.2d 581, 585 (9th Cir. 1993).
The filing of a bankruptcy petition automatically stays the commencement or continuation, of a judicial proceeding against the debtor who filed the petition, to recover a claim against the debtor that arose before the commencement of the bankruptcy petition. 11 U.S.C. § 362(a)(1); In re Keen (2004) 301 B.R. 749, 753 (Bankruptcy S.D. Fla. 2003).
Vandelay’s bankruptcy petition was filed on July 7, 2010 and is still in effect. Therefore the Court’s order of judgment on Plaintiff’s Motion for partial summary judgment against debtor is void. It is undisputed that on at the time the Belated Order was executed and entered Plaintiff had not yet complied with the Bankruptcy Court’s mandate to amend the pleadings and dismiss the Debtors. The Bankruptcy Court did not lift the stay, it modified the stay solely for purposes of allowing Plaintiff to amend her pleadings in State Court so as to dismiss the debtor and any and all claims against same. Again, the relevant provision of the bankruptcy Court order reads as follows:
This order does not allow Plaintiff to proceed with her Motion for partial summary judgment on the Debtor as though it has magically transformed into a motion for partial summary judgment solely against Seinfeld.
2. Plaintiffs is effectively precluded securing the Belated Order in its present form against Seinfeld alone because a condition precedent to adjudicating the claims against Seinfeld as motioned by Plaintiff is findings of fact and conclusions of law necessarily affecting Debtor Vandelay or its estate which is outside the scope of this Court’s jurisdiction or power.
A precursor to holding Seinfeld liable for the debts and liabilities of Vandelay as intended in Plaintiff’s motion would necessarily be a finding or adjudication against the Debtor Vandelay, which Defendants argue is the very thing this Court is precluded from doing in the face of the automatic stay and the Order for Remand. Absent such a finding, the findings of fact and conclusions of law in the Belated Order as motioned by Plaintiff and as heard by Judge Dredd cannot stand.
Counsel for Seinfeld argued in the opposition to Plaintiff’s Motion against Debtor and Seinfeld in part as follows:
Prior to 2007, Defendant VANDELAY INDUSTRIES CORPORATION ("VANDELAY") had borrowed Seven Million Sixty Thousand Dollars ($7,060,000.00) from Plaintiff ELAINE BENES ("BENES"), and in February 2007, Defendant JERRY SEINFELD ("SEINFELD") signed a guarantee of these amounts and the due dates were extended. One of the conditions of the guarantee (see section 17.11 of Guarantee attached hereto as Exhibit "1") was that the guarantee would be released if the notes were eventually secured with collateral. By November 2008, the balance due to Plaintiff BENES was paid down to Two Million Three Hundred Sixty One Thousand Thirty Three Dollars and One Cent ($2,361,033.01). Plaintiff BENES scheduled a lunch with Jessica Rabbit, and demanded an immediate meeting with Defendant SEINFELD to secure her notes with collateral. Plaintiff BENES signed all of the documents to place her Two Million Three Hundred Thousand Dollars ($2,300,000.00) in unsecured promissory notes to a secured 1st trust deed position in the Pueblo property, along with an assignment of the Deed of Trust. (See Exhibit "2" attached hereto). Plaintiff BENES was also paid the remaining funds due of $61,033.01 per her instructions, which Plaintiff BENES cashed.
Plaintiff BENES released the guarantee by Defendant SEINFELD when she took the assignment of the note and deed of trust from Vandelay in the Pueblo loan in November 2008.
Plaintiff BENES does not deny that she signed paperwork extending the terms of the Notes until November 1, 2012 but claims that this extension is invalid due to failure to be delivered an appraisal on the property. The problems with this argument are multifold. First, Plaintiff BENES produced the supposed missing appraisal during discovery.
If she never received the appraisal how is it that she was able to produce it? Secondly, Plaintiff BENES waived her rights to the appraisal in two (2) standard Mortgage Lending Division forms. See Exhibit "3" attached hereto. Therefore, the due date on the Notes is November 1, 2012 and thus the Notes have not yet come due making summary judgment inappropriate on this claim. The central factual issues of this claim remain unresolved, and therefore, this matter is not a proper subject for summary judgment.
Plaintiff BENES released the guarantee by Defendant SEINFELD when she transferred to Collateralized Notes in 2008. Section 17.11 of the Guarantee (See Exhibit 1 attached hereto) states as follows:
17.11 Security. In the event Lender and Debtor mutually agree, which agreement may not be unreasonably withheld, to an assignment of collateral in a performing Promissory Note and Deed of Trust in the same form as Lender has invested in the past with Vandelay Mortgage, Lender shall hold all right, title, and benefit of such assignment and release Debtor and Guarantor from the unsecured promissory note(s) and guarantee to the monetary extent of such assignment.
In November of 2008, Plaintiff BENES signed all of the documents to place her Two Million Three Hundred Thousand Dollars ($2,300,000.00) in unsecured promissory notes into a secured 1st trust deed position in the Pueblo property, along with an assignment of the Deed of Trust. (See Exhibit "2" attached hereto). Plaintiff BENES was also paid the remaining funds due of Sixty One Thousand Thirty Three Dollars and One Cent ($61,033.01) per her instructions, which Plaintiff BENES cashed. Plaintiff BENES released the guarantee by Defendant SEINFELD when she took the assignment of the note and deed of trust in the Pueblo loan in November 2008. Therefore, Defendant SEINFELD disputes that there is any guarantee for Plaintiff BENES to attempt to enforce. The central factual issues of this case remain unresolved, and therefore, this matter is not a proper subject for summary judgment.
This Court must have adjudicated the following in order to give rise to the Belated Order:
(1) That the Debtor entered into a legally binding loan agreement with Plaintiff;
(2) Debtor failed to perform;
(3) That Collateral proffered by Debtor to Plaintiff was not duly accepted by Plaintiff;
(4) Lender and Debtor did not therefore mutually agree; or that Plaintiff had some unilateral right to partially rescind her acceptance of the collateral yet somehow keep the $61,033.01 at the expense of Debtor;
(5) That the recordation of the Deed of Trust in favor of Plaintiff on the Pueblo property is null and void given her unilateral rescission.[10]
(6) Therefore Debtor is not released from the unsecured promissory note(s); and
(7) Seinfeld is subject to the Guaranty/
If the Belated order stands in its present form, despite Plaintiff’s superficial efforts to avoid affecting the Debtor and its estate, the net result would be that the Deed of Trust on the Pueblo Property must be revised and rerecorded rescinding Plaintiff’s pro rata interest in same. As a result the Debtor’s Note in favor of Plaintiff must be reinstated and reflected by amending Debtor’s bankruptcy schedules; and Plaintiff would be obliged to return to the Debtor’s estate the $61,033.01 she received as part of the transaction she now claims she rescinded. Such a result is not consistent with Bankruptcy on Remand which presumed that any and all claims against Debtor were to be dismissed prior to Plaintiff proceeding on remand in state court.
In Dean v. TWA, 72 F.3d 754 (9th Cir. Wash. 1995) the Court discussed as an example, similar circumstances at issue here.
Suppose a defendant moves for summary judgment on law-of-the-case grounds before filing for bankruptcy. If the court grants this motion after the filing, then one could argue, in retrospect, that the court did not violate the purpose of debtor protection because it has lightened the debtor's litigation burden and protected the debtor's estate. If, however, the court denies the motion, then it has violated the debtor protection purpose and impermissibly continued the proceeding. A court must be able to know whether its consideration of a matter will violate the stay before it considers the matter, such as in IUFA, not after.
Dean v. TWA, 72 F.3d 754, 756 (9th Cir. Wash. 1995).
The plain fact is that despite Plaintiff’s whitewashing of the Belated Order it nonetheless constitutes an impermissible continuance of a proceeding against Debtor. No amount of whiteout or contorted or clever crafting can succeed in transforming her motion for partial summary judgment against the Debtor into something else.
3. This Court lacks subject matter jurisdiction to adjudicate those matters in the Belated Order specifically referencing Debtor Defendant and any claims against Seinfeld which claims are necessarily dependent upon adjudicating claims against Debtor Defendants.
The Defendant Debtor invoked bankruptcy court subject matter and in personam jurisdiction by filing a voluntary petition in bankruptcy. With the commencement of the bankruptcy cases, the bankruptcy court acquired exclusive in rem jurisdiction over all the debtor's legal or equitable interests in property wherever located and by whomever held. 28 U.S.C. § 1334(e); Commodity Futures Trading Comm'n v. Co Petro Mktg. Group, Inc., 700 F.2d 1279, 1282 (9th Cir.1983). Moreover the Defendant Debtor is entitled to the full protection of Section 362. Any claims against the Debtor in this matter before this Court must be abandoned or dismissed. Plaintiff promised as much before the Bankruptcy Court. Those claims as against Debtor Defendant cannot be adjudicated by this Court. Indeed this was the very basis by which Plaintiff secured remand in the first place. She cannot have her cake and eat it too.
Section 362(d) of the Bankruptcy Code provides that a party may be entitled to relief from the automatic stay under certain circumstances. 11 U.S.C. § 362(d); In re Eclair Bakery Ltd., 255 B.R. 121, 132 (Bankr. S.D.N.Y. 2000). Specifically, on request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay—(1) for cause, including the lack of adequate protection of an interest in property of such party in interest. Such a request must be made before the bankruptcy court. To date, Plaintiff has made no such request. The remand of this matter back to this Court, merely put the parties back in the same position they were in prior to removal pointedly, subject to relinquishing any and all claims against Vandelay and the fullest measure of the benefit of the automatic stay The automatic stay under 11 U.S.C. § 362(a) was modified by the Bankruptcy only in so far as may be required to permit the Plaintiff to amend her complaint consistent with the mandate that she relinquish and dismiss any and all claims against Debtor. The means by which Plaintiff secured the Belated order is an impermissible continuance of a proceeding that violates both the Bankruptcy Order and 11 USC §362. It is therefore void and, pursuant to NRCP 60(b) it must be vacated.
In light of the foregoing, Defendants request that the order for Partial Summary Judgment be vacated pursuant to NRCP 60(b) (1), (3), and (4) and for such other and further relief as the Court deems just and proper.
[1] If or when the Order is deemed to be a final order as contemplated by the Supreme Court, Defendants intend to file an appeal based on the prior Judges’ misapplication of the law and errors or omission in the findings underlying the order in the face of the evidence presented at the hearing.
[2] Plaintiff’s Counsel represented to this Court that this delay was due to his belief at the time that the matter was tolled and that as a result, he had up until December of 2014 to bring the matter to trial and that he was conducting “research” during this two-year period.
[3] See Section III(F)(2) at pages 17-18, below.
[4] Apparently no court reporter was present; no video is available; and no audio is available with respect to the proceedings of this hearing.
[5] While it is true that Plaintiff’s Counsel submitted the whitewashed order to George Costanza and secured his consent as to form and content, Mr. Costanza had not seen the Order for remand. In any event, Plaintiff’s counsel never submitted the order as proposed to counsel for the Movants herein.
[6] See, Exhibit “C”. Case 10-01321-mkn Doc 52 Entered 08/19/11 16:42:53 Page 2 of 8
[7] See, Exhibit “C”. Case 10-01321-mkn Doc 52 Entered 08/19/11 16:42:53 Page 3 of 8
[8] The very fact that Plaintiff filed and entered the Belated Order before seeking leave to amend and before filing an amended complaint dismissing debtor, is a violation of the Bankruptcy Court order and a violation of §362.
[9] Under Section 362(a), the filing of a bankruptcy petition operates as a stay, applicable to all entities, of- (1) the commencement or continuation .... of a judicial, administrative, or other action or proceeding against the debtor .... [and] (3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate.
[10] To date, Plaintiff has not returned the $61,033.01 nor has she reassigned her $2.3 million, pro-rata, recorded interest in the Pueblo Property in furtherance of executing on her so-called rescission.
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