Court Opinion

ID: 4192721
Source: CourtListenerOpinion
Date Created: 2017-08-03 17:02:22.551597+00
Date Added: 2024-06-11T14:40:20.612834
License: Public Domain

FILED
                                                                    JUL 07 2016
 1                         NOT FOR PUBLICATION
                                                                SUSAN M. SPRAUL, CLERK
 2                                                                U.S. BKCY. APP. PANEL
                                                                  OF THE NINTH CIRCUIT
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )        BAP No. EC-15-1139-JuDTa
                                   )
 6   ZOYA KOSOVSKA,                )        Bk. No. 14-25893
                                   )
 7                  Debtor.        )        Adv. No. 14-02271
     ______________________________)
 8   ZOYA KOSOVSKA; LILIYA WALSH, )
                                   )
 9                  Appellants,    )
                                   )
10   v.                            )        M E M O R A N D U M*
                                   )
11   MAX DEFAULT SERVICES CORP.;   )
     FEDERAL NATIONAL MORTGAGE     )
12   ASSOCIATION; SETERUS, INC.,   )
                                   )
13                  Appellees.     )
     ______________________________)
14
                     Argued and Submitted on June 23, 2016
15                         at Sacramento, California
16                            Filed - July 7, 2016
17             Appeal from the United States Bankruptcy Court
                   for the Eastern District of California
18
        Honorable Michael S. McManus, Bankruptcy Judge, Presiding
19                      _________________________
20   Appearances:     Appellants Zoya Kosovska and Liliya Walsh argued
                      pro se; Michael W. Stoltzman of The Ryan Firm
21                    argued for appellees Federal National Mortgage
                      Association and Seterus, Inc.**
22                         _________________________
23   Before:   JURY, DUNN, and TAYLOR, Bankruptcy Judges.
24
        *
           This disposition is not appropriate for publication.
25 Although it may be cited for whatever persuasive value it may
26 have (see Fed. R. App. P. 32.1), it has no precedential value.
   See 9th Cir. BAP Rule 8024-1.
27
        **
            Max Default Services Corp. has not participated in this
28 appeal.

                                      -1-
 1        Chapter 111 debtor Zoya Kosovska (Kosovska) and non-debtor
 2   Liliya Walsh2 (Walsh)(collectively, Appellants) removed a state
 3   court action alleging claims related to a non-judicial
 4   foreclosure to the bankruptcy court on the same day that
 5   Kosovska’s bankruptcy case was dismissed.   Appellees and
 6   defendants in the state court action, Seterus, Inc. and Federal
 7   National Mortgage Association (collectively, Appellees), moved
 8   to remand the matter.    The bankruptcy court granted Appellees’
 9   motion and awarded them attorneys’ fees and costs, finding
10   Appellants did not have an objectively reasonable basis for
11   removal.   Appellants filed a motion for reconsideration, which
12   the bankruptcy court denied.   This appeal followed.
13        Appellees contend that Appellants’ appeal of the remand
14   order has become moot.   Appellants argue it is not moot because
15   the state court had no jurisdiction over the matter while this
16   appeal was pending and the bankruptcy clerk failed to mail a
17   certified copy of the remand order as required by 28 U.S.C.
18   § 1447(c), which allowed the state court to proceed with the
19   case.   Appellants are mistaken on both assertions.    The state
20   court had jurisdiction over the matter because Appellants did
21   not seek a stay pending appeal.   Further, the record shows that
22   the clerk mailed a certified copy of the remand order to the
23   state court.
24
        1
          Unless otherwise indicated, all chapter and section
25 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
26 all “Rule” references are to the Federal Rules of Bankruptcy
   Procedure.
27
        2
          Liliya Walsh is the daughter of Zoya Kosovska and Ivan
28 Kosovskiy.

                                     -2-
 1            While this appeal was pending, the state court entered an
 2   order sustaining Appellees’ demurrers to Appellants’ second
 3   amended complaint without leave to amend, thus terminating the
 4   state court action.      Therefore, the state court action no longer
 5   exists and cannot be revived.       In addition, because Kosovska’s
 6   chapter 11 case was dismissed there is no longer any case or
 7   controversy involving issues regarding the reorganization of the
 8   estate.      Accordingly, we cannot grant Appellants any effective
 9   relief.      We thus DISMISS as MOOT this aspect of the remand order
10   on appeal.
11            Appellants also contend the bankruptcy court erred by
12   awarding Appellees their fees and costs in the amount of
13   $1,459.50.      Finding no abuse of discretion, we AFFIRM this
14   aspect of the remand order.
15                                  I.   FACTS3
16            On December 19, 2013, Appellants commenced a civil action
17   against Appellees in the California superior court seeking
18   relief related to non-judicial foreclosure proceedings.      The
19   complaint included claims for violation of Cal. Civ. Code
20   § 2924,4 slander of title and cancellation of instrument.        Among
21   other adverse rulings, the state court denied Appellants’
22   request for a preliminary injunction to enjoin the trustee’s
23   sale of the underlying property, dissolved the temporary
24   restraining order, and sustained Appellees’ demurrers to
25
          3
26          Many of the background facts are set forth in the
     bankruptcy court’s ruling on the motion to remand.
27
          4
          This statute states the requirements for initiating a
28 non-judicial foreclosure.

                                         -3-
 1   Appellants’ complaint.
 2           Due to the pending foreclosure, Kosovska filed a chapter 11
 3   petition on June 2, 2014.     Despite the bankruptcy filing, eight
 4   days later Appellants filed a second amended complaint in the
 5   state court action.
 6           A few months after the filing, the United States Trustee
 7   (UST) filed a motion to dismiss Kosovska’s bankruptcy case.
 8   The bankruptcy court granted the motion by order entered on
 9   September 15, 2014.     Kosovska did not appeal the dismissal
10   order.
11           On September 15, 2014, the same day that Kosovska’s case
12   was dismissed, Appellants filed a notice of removal under
13   28 U.S.C. § 1452(a)5, removing the state court action to the
14   bankruptcy court.     At the time of removal, Appellees had
15   multiple motions pending in the state court action, including
16   demurrers to Appellants’ amended complaint and a motion to
17   expunge the lis pendens recorded against the underlying
18   property.
19           On October 14, 2014, Appellees moved to remand the action
20   back to the state court on the grounds that Appellants’ removal
21   was untimely and the bankruptcy court lacked jurisdiction over
22   the state court action since Kosovska’s underlying bankruptcy
23   case had been dismissed.     Appellees also argued that they were
24   entitled to an award of their attorneys’ fees and costs because
25
         5
26        The statute provides that “a party may remove any claim or
   cause of action in a civil action . . . to the district court for
27 the district where such civil action is pending, if such district
   court has jurisdiction of such claim or cause of action under
28 Section 1334 of this title.”

                                      -4-
 1   Appellants had no objectively reasonable basis for removal.
 2        On November 24, 2014, the bankruptcy court granted
 3   Appellees’ motion, finding:   (1) it did not have subject matter
 4   jurisdiction over claims not involving the bankruptcy estate
 5   (specifically, claims of Walsh, who was not a debtor);
 6   (2) Appellants’ claims arose solely under state law; (3) it did
 7   not have “related to” jurisdiction over the claims as Kosovska’s
 8   bankruptcy case had been dismissed; (4) there was no basis to
 9   retain jurisdiction after the dismissal of the bankruptcy case;
10   (5) equitable remand was proper; and (6) the removal was
11   untimely.
12        The bankruptcy court further found that neither of the
13   Appellants “had an objectively reasonable basis for removal”
14   and, therefore, awarded Appellees their attorneys’ fees and
15   costs incurred in making the motion to remand in the amount of
16   $1,459.50.   On January 5, 2015, the court entered an order
17   remanding the state court action back to the state court.
18        On January 20, 2015, Appellants filed a motion for
19   reconsideration of the remand order.   The bankruptcy court
20   denied the motion finding no grounds for reconsideration and
21   concluding that its order granting Appellees’ fees and costs was
22   proper.   On April 14, 2015, the bankruptcy court entered the
23   order denying Appellants’ motion for reconsideration.
24   Appellants filed a timely notice of appeal.
25        In their responsive brief, Appellees informed the Panel
26   that the state court proceeding had been concluded and argued
27   that the appeal of the remand was moot.   The Panel issued a one-
28   judge order regarding mootness which required Appellants to file

                                    -5-
 1   a response by November 12, 2015.
 2        On November 16, 2015, Appellants filed a request to extend
 3   the time to file a responsive brief regarding the order
 4   regarding mootness and preliminary response to the mootness
 5   argument (Mootness Brief).      There, Appellants argued, among
 6   other things, that the state court had no jurisdiction to hear
 7   the matter given the appeal to the Panel.        Based on this
 8   premise, they contended that the state court’s decision was
 9   void.     Appellants further argued that jurisdiction was not
10   returned to the state court because “there is no indication in
11   the record that the clerk of the bankruptcy court ever mailed a
12   certified copy of an order remanding the case to Placer County
13   Superior Court.”     According to Appellants, the state court never
14   reacquired jurisdiction due to this deficiency.
15        On December 18, 2015, the Panel issued an order informing
16   the parties that their respective arguments regarding mootness
17   would be determined by the merits Panel.        Accordingly, we
18   address the mootness arguments below.
19                             II.    JURISDICTION
20        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
21   §§ 1334 and 157(b)(2)(A).       We have jurisdiction under 28 U.S.C.
22   § 158.
23                                III.    ISSUES
24        A.      Whether appeal of the bankruptcy court’s decision to
25   remand the state court action is moot; and
26        B.      Whether the bankruptcy court abused its discretion by
27   awarding Appellees their attorneys’ fees and costs under
28   28 U.S.C. § 1447(c).

                                         -6-
 1                         IV.   STANDARDS OF REVIEW
 2        We review our own jurisdiction, including questions of
 3   mootness, de novo.   Ellis v. Junying Yu (In re Ellis), 523 B.R.
 4   673, 676 (9th Cir. BAP 2014) (citing Silver Sage Partners, Ltd.
 5   v. City of Desert Hot Springs (In re City of Desert Hot
 6   Springs), 339 F.3d 782, 787 (9th Cir. 2003)).
 7        We review an award of fees and expenses for abuse of
 8   discretion.    Lussier v. Dollar Tree Stores, Inc., 518 F.3d 1062,
 9   1065 (9th Cir. 2008).   An abuse of discretion evaluation
10   involves a two-prong test; first, we determine de novo whether
11   the bankruptcy court identified the correct legal rule for
12   application.   See United States v. Hinkson, 585 F.3d 1247,
13   1261–62 (9th Cir. 2009) (en banc).      If not, then the bankruptcy
14   court necessarily abused its discretion.      See id. at 1262.
15   Otherwise, we next review whether the bankruptcy court’s
16   application of the correct legal rule was clearly erroneous; we
17   will affirm unless its findings were illogical, implausible, or
18   without support in the record.     See id.
19                               V.   DISCUSSION
20   A.   The appeal of the bankruptcy court’s decision to remand is
          moot.
21
22        We cannot exercise jurisdiction over a moot appeal.      United
23   States v. Pattullo (In re Pattullo), 271 F.3d 898, 900 (9th Cir.
24   2001); GTE Cal., Inc. v. FCC, 39 F.3d 940, 945 (9th Cir. 1994).
25   A moot case is one where the issues presented are no longer live
26   and no case or controversy exists.      Pilate v. Burrell
27   (In re Burrell), 415 F.3d 994, 998 (9th Cir. 2005).      The test
28   for mootness is whether an appellate court can still grant

                                       -7-
 1   effective relief to the prevailing party if it decides the
 2   merits in his or her favor.    Castaic Partners II, LLC v. Daca-
 3   Castaic, LLC (In re Castaic Partners II, LLC), __ F.3d ___
 4   (9th Cir. 2016), 2016 WL 2957150, at *2 (9th Cir. May 23, 2016)
 5   (citing Motor Vehicle Cas. Co. v. Thorpe Insulation Co.
 6   (In re Thorpe Insulation Co.), 677 F.3d 869, 880 (9th Cir.
 7   2012).    “If it cannot grant such relief, the matter is moot.    In
 8   a bankruptcy appeal, when the underlying bankruptcy case is
 9   dismissed and that dismissal is allowed to become final, there
10   is likely no longer any case or controversy ‘with respect to
11   issues directly involving the reorganization of the estate.’”
12   Id.
13         We conclude that Appellants’ appeal of the bankruptcy
14   court’s decision to remand the matter to the state court is
15   moot.    After the January 2015 remand, Appellants did not seek
16   and obtain stay of the bankruptcy court’s order pending
17   resolution of this appeal pursuant to Rule 8007, which would
18   have preserved the status quo.    Re Op Group v. ML Manager LLC
19   (In re Mortgs. Ltd.), 771 F.3d 1211, 1215 (9th Cir. 2014).
20   Appellants offer no reason for their failure to seek a stay; we
21   further see nothing in the record supporting that a stay would
22   have been appropriate.
23         Appellants also argue in their Mootness Brief that the
24   remand portion of the order on appeal is not moot because the
25   bankruptcy court never mailed a copy of the order remanding the
26   matter to the state court, which Appellants argue was a pre-
27   requisite to the state court’s reacquisition of jurisdiction
28   over the civil action.    28 U.S.C. § 1447(c) provides that “[a]

                                      -8-
 1   certified copy of the order of remand shall be mailed by the
 2   clerk to the clerk of the State court.    The State court may
 3   thereupon proceed with such case.”    On January 6, 2015, the
 4   bankruptcy court issued a “Certificate of Mailing” which states
 5   that the “deputy clerk of U.S. Bankruptcy Court for the Eastern
 6   District of California” sent a certified copy of the remand
 7   order, along with the docket, to the “Placer County Superior
 8   Court” on January 6, 2015.    Since the statutory requirement
 9   under 28 U.S.C. § 1447(c) has been met, Appellants’ argument is
10   without merit.
11        In short, the certified copy of the remand order restored
12   jurisdiction in the state court and allowed it to proceed.
13   Without a stay pending appeal, there was no bar to the state
14   court exercising jurisdiction over the lawsuit.    On May 5, 2015,
15   the state court sustained Appellees’ demurrers to Appellants’
16   complaint without leave to amend, thus terminating the state
17   court action by order entered on May 29, 2015.    Contrary to
18   Appellants’ position, this order is not void as the state court
19   had jurisdiction over the matter despite their appeal to the
20   Panel.
21        Because the state court action has been terminated and
22   cannot be revived, we are unable to grant any effective relief
23   to Appellants by reversing the bankruptcy court’s remand order
24   even if it was warranted.    Compare Staker v. Jubber
25   (In re Staker), 498 B.R. 391 (10th Cir. BAP 2013) (Table)
26   (finding appeal of remand order moot when after remand state
27   court vacated default judgments and dismissed actions with
28   prejudice).   Further, Kosovska’s underlying chapter 11 case had

                                     -9-
 1   been dismissed and that dismissal is final.   The dismissal
 2   demonstrates that there is no longer any case or controversy
 3   “‘with respect to issues directly involving the reorganization
 4   of the estate.’”   In re Castaic Partners II, LLC, __ F.3d ___
 5   (9th Cir. 2016), 2016 WL 2957150, at *2 (9th Cir. May 23, 2016).
 6   Accordingly, Appellants’ appeal of the bankruptcy court’s
 7   decision to remand the matter is moot and must be dismissed.
 8   B.   The bankruptcy court did not abuse its discretion in
          awarding Appellees their attorneys’ fees and costs in
 9        obtaining the Remand Order.
10        Unlike the bankruptcy court’s decision to remand, its award
11   of attorneys’ fees and costs to Appellees is not moot because we
12   may give Appellants effective relief if we reverse the
13   bankruptcy court’s decision.   28 U.S.C. § 1447(c) states in
14   relevant part:   “An order remanding the case may require payment
15   of just costs and any actual expenses, including attorney fees,
16   incurred as a result of the removal.”   Courts have wide
17   discretion to grant attorneys’ fees and costs for an improper
18   removal.   Billington v. Winograde (In re Hotel Mt. Lassen,
19   Inc.), 207 B.R. 935, 943 (Bankr. E.D. Cal. 1997) (citing Moore
20   v. Permanente Med. Group, Inc., 981 F.2d 443, 447 (9th Cir.
21   1992)).    In exercising this discretion, the court considers the
22   “reasonableness of the removal.”   Martin v. Franklin Capital
23   Corp., 546 U.S. 132, 141 (2005).   “Absent unusual circumstances,
24   courts may award attorney’s fees under [28 U.S.C. § 1447(c)]
25   only where the removing party lacked an objectively reasonable
26   basis for seeking removal.   Conversely, when an objectively
27   reasonable basis exists, fees should be denied.”   Id.   “Bad
28   faith need not be shown before making a fee award under

                                     -10-
 1   [28 U.S.C.] § 1447(c).”     In re Hotel Mt. Lassen, Inc., 207 B.R.
 2   at 943 (citing Moore, 981 F.2d at 447).
 3           Here, the bankruptcy court used the objectively reasonable
 4   standard when making its decision to award fees and costs.       The
 5   court made several findings addressing why Appellants did not
 6   have an objectively reasonable basis for removal:     (1) removal
 7   was untimely in violation of Rule 9027(a)(2);6 (2) nearly nine
 8   months lapsed between initiation of the state court action and
 9   the removal to this court; (3) there was extensive litigation in
10   state court during the approximately nine months prior to
11   removal; (4) the underlying bankruptcy case had been pending for
12   less than four months prior to dismissal; (5) the bankruptcy
13   case was dismissed only after the UST filed a motion to dismiss;
14   and (6) there was no timely appeal from the order dismissing the
15   underlying bankruptcy case.
16           The bankruptcy court further noted that Appellants and
17   other family members filed multiple bankruptcies - six cases
18   were filed between Kosovska and her former husband, Ivan
19   Kosovskiy, and four cases were filed by Walsh.     These cases were
20   filed without schedules or statements and dismissed.     The court
21
         6
             Rule 9027(a)(2) states:
22
23       If the claim or cause of action in a civil action is
         pending when a case under the Code is commenced, a
24       notice of removal may be filed only within the longest
         of (A) 90 days after the order for relief in the case
25       under the Code, (B) 30 days after entry of an order
26       terminating a stay, if the claim or cause of action in
         a civil action has been stayed under § 362 of the Code,
27       or (C) 30 days after a trustee qualifies in a chapter
         11 reorganization case but not later than 180 days
28       after the order for relief.

                                       -11-
 1   found that all the cases were filed to benefit from the
 2   automatic stay and, with the exception of one case, all were
 3   dismissed shortly after the filing.
 4        The bankruptcy court also found significant that Walsh was
 5   neither a debtor or creditor in the underlying bankruptcy case
 6   and that her property interest was never part of the bankruptcy
 7   estate.   Accordingly, the court noted that it never had subject
 8   matter jurisdiction over Walsh’s claims against the Appellees.
 9        Although we found the bankruptcy court’s decision regarding
10   remand moot, some evaluation of the merits of the remand order
11   is necessary to review an award of attorneys’ fees.    Moore,
12   981 F.2d at 447.   Here, we conclude that the underlying record
13   supports the bankruptcy court’s conclusion that there was no
14   objectively reasonable basis for the removal.
15        First, contrary to Appellants’ arguments that
16   Rule 9027(a)(2)(B) or (C) applied to their notice of removal,
17   only (a)(2)(A) is applicable.   Rule 9027(a)(2)(A) states that a
18   notice of removal may be filed 90 days after the order for
19   relief in the case.   Appellants did not file the notice of
20   removal until after the 90-day period had expired.    Second,
21   Kosovska proceeded in state court for nine months prior to the
22   removal which was precipitated by adverse rulings.    See Moore,
23   981 F.2d at 447 (“[R]ight to remove is waived by acts which
24   indicate an intent to proceed in state court, and that
25   Defendants may not ‘experiment’ in state court and remove upon
26   receiving an adverse decision.”).
27        Next, even if the removal were timely, the bankruptcy court
28   did not have core or related to subject matter jurisdiction over

                                     -12-
 1   the claims asserted in the removed action since Kosovska’s
 2   underlying bankruptcy case was in the process of dismissal.       She
 3   did not appeal that decision.    Appellants’ assertion that the
 4   court had jurisdiction because the claims involved property of
 5   the estate are without merit.    Upon dismissal, the automatic
 6   stay ceased to exist and there was no longer the possibility of
 7   a successful reorganization.    See In re Castaic Partners II,
 8   LLC, __ F.3d ___ (9th Cir. 2016), 2016 WL 2957150, at *2 (9th
 9   Cir. May 23, 2016) (there is likely no longer any case or
10   controversy after dismissal “‘with respect to issues directly
11   involving the reorganization of the estate.’”).      Further, as the
12   bankruptcy court noted, it did not have jurisdiction over
13   Walsh’s claims since her property interest was never part of
14   Kosovska’s bankruptcy estate.
15        Finally, although a finding of bad faith is not required,
16   it is a factor which the bankruptcy court may consider since the
17   court looks to whether Appellants had a good reason to remove
18   the state court action.    28 U.S.C. § 1452(b) authorizes the
19   court to remand claims on “any equitable ground.”      This standard
20   is an “unusually broad grant of authority” that “subsumes and
21   reaches beyond all of the reasons for remand under
22   non-bankruptcy removal statutes.”      McCarthy v. Prince
23   (In re McCarthy), 230 B.R. 414, 417 (9th Cir. BAP 1999).      The
24   bankruptcy court noted Kosovska’s and Walsh’s numerous prior
25   bankruptcy filings without schedules or statements, all but one
26   of which were dismissed.    The clear implication is that the
27   filings were made to obtain the benefit of the automatic stay
28   and not for any broader legitimate bankruptcy purpose.      The

                                     -13-
 1   bankruptcy court properly considered Appellants’ prior conduct
 2   when exercising its discretion to award Appellees their
 3   attorneys’ fees and costs.
 4        In sum, the bankruptcy court did not abuse its discretion
 5   when it awarded Appellees their attorneys’ fees and costs in an
 6   amount that appears reasonable and clearly is not excessive.
 7                           VI.   CONCLUSION
 8        For the reasons stated, the bankruptcy court’s decision to
 9   remand is DISMISSED as MOOT and the bankruptcy court’s decision
10   to award Appellees their attorneys’ fees and costs is AFFIRMED.
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                                   -14-