Court Opinion

ID: 2658177
Source: CourtListenerOpinion
Date Created: 2014-03-28 00:02:24.083313+00
Date Added: 2024-06-11T13:00:47.972185
License: Public Domain

FILED
                                                             MAR 26 2014
 1
                                                         SUSAN M. SPRAUL, CLERK
                                                           U.S. BKCY. APP. PANEL
 2                                                         OF THE NINTH CIRCUIT

 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                         )      BAP No.    CC-12-1538-KuPaTa
                                    )
 6   VAHE AFTANDILIAN,              )      Bk. No.    11-12992
                                    )
 7                  Debtor.         )
     _______________________________)
 8                                  )
     VAHE AFTANDILIAN,              )
 9                                  )
                    Appellant,      )
10                                  )
     v.                             )      MEMORANDUM*
11                                  )
     PRESTIGE MANAGEMENT GROUP, LLC,)
12                                  )
                    Appellee.       )
13   _______________________________)
14                  Argued and Submitted on February 20, 2014
                             at Pasadena, California
15
                             Filed – March 26, 2014
16
              Appeal from the United States Bankruptcy Court
17                for the Central District of California
18        Honorable Maureen A. Tighe, Bankruptcy Judge, Presiding
19
     Appearances:     Appellant Vahe Aftandilian argued pro se; Lewis R.
20                    Landau of Horgan, Rosen, Beckham & Coren, LLP
                      argued for appellee Prestige Management Group,
21                    LLC.
22
     Before: KURTZ, PAPPAS and TAYLOR, Bankruptcy Judges.
23
24
25
26        *
           This disposition is not appropriate for publication.
27   Although it may be cited for whatever persuasive value it may
     have (see Fed. R. App. P. 32.1), it has no precedential value.
28   See 9th Cir. BAP Rule 8013-1.
 1                                INTRODUCTION
 2            After obtaining relief from the automatic stay, appellee
 3   Prestige Management Group, LLC (“Prestige”) conducted a
 4   nonjudicial foreclosure sale of the commercial real property
 5   owned by chapter 111 debtor Vahe Aftandilian.     Aftandilian later
 6   filed a motion asking the bankruptcy court to declare the
 7   foreclosure sale void.
 8        The bankruptcy court denied Aftandilian’s declaratory relief
 9   motion.    The bankruptcy court held that Aftandilian should have
10   filed his request for declaratory relief as an adversary
11   proceeding pursuant to Rule 7001 rather than as a contested
12   matter motion under Rule 9014(a).      The bankruptcy court also held
13   that Aftandilian’s motion was duplicative of one or more of the
14   claims he asserted in his adversary proceeding against Prestige
15   (Adv. No. 12-01230), which the bankruptcy court had dismissed
16   with prejudice.    The bankruptcy court further indicated that
17   Aftandilian’s motion offered the court no reason why it should
18   depart from the analysis it had relied upon in dismissing the
19   adversary proceeding.
20        We agree with the bankruptcy court’s stated reasons for
21   denying Aftandilian’s motion, so we AFFIRM.
22                                    FACTS
23        In March 2011, Aftandilian commenced his bankruptcy case by
24
25
26        1
           Unless specified otherwise, all chapter and section
27   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
     all "Rule" references are to the Federal Rules of Bankruptcy
28   Procedure, Rules 1001-9037.

                                        2
 1   filing a chapter 11 petition.2   In his bankruptcy schedules,
 2   Aftandilian listed Prestige as a secured creditor holding first
 3   and second trust deeds against Aftandilian’s commercial real
 4   property located in Reseda, California.   Aftandilian operated a
 5   car wash and an oil change business on part of the property and
 6   leased another portion of the property to a restaurant operator.
 7        In August 2011, roughly five months after the bankruptcy
 8   filing, Prestige filed a motion for relief from the automatic
 9   stay under § 362(d)(1) and (2) to enable it to proceed with
10   foreclosure and an action for possession of the property.    On
11   September 23, 2011, the bankruptcy court entered an order on
12   Prestige’s initial relief from stay motion.   The order left the
13   automatic stay in place, but required Aftandilian to make
14   adequate protection payments of $22,547 per month.   If
15   Aftandilian defaulted on his adequate protection payments, the
16   order further provided, Prestige could obtain termination of the
17   automatic stay on an expedited basis and thereafter proceed with
18   its foreclosure and its other remedies against the property.
19        Aftandilian apparently made the ordered adequate protection
20   payments to Prestige, but Prestige nonetheless filed a new relief
21   from stay motion in January 2012.    According to Prestige, it had
22   discovered that Aftandilian also owed a substantial amount of
23   unpaid prepetition secured real property taxes against the
24
          2
           Most of the facts set forth herein are undisputed and are
25   drawn from the bankruptcy court’s docket and the imaged documents
26   attached thereto. We take judicial notice of the filing and
     contents of those documents. See O'Rourke v. Seaboard Sur. Co.
27   (In re E.R. Fegert, Inc.), 887 F.2d 955, 957–58 (9th Cir. 1989)
     (holding that the Panel can take judicial notice of contents of
28   the bankruptcy court record).

                                      3
 1   property.    These additional secured obligations, Prestige
 2   asserted, left its interest in the property inadequately
 3   protected.
 4        The bankruptcy court once again declined to grant Prestige
 5   immediate relief from the automatic stay.   Instead, the court set
 6   a schedule of monthly installments that it directed Aftandilian
 7   to pay in order to satisfy the unpaid prepetition property taxes,
 8   and it continued the relief from stay hearing so that the motion
 9   could be considered in conjunction with Aftandilian’s and
10   Prestige’s competing reorganization plans and proposed disclosure
11   statements.
12        In conjunction with the disclosure statement proceedings,
13   the bankruptcy court ruled, on March 30, 2012, that it would
14   grant Prestige relief from the stay.   However, in granting stay
15   relief, the court also granted Aftandilian a concession.      Instead
16   of permitting Prestige to immediately record a notice of sale, it
17   ruled that the notice of sale could not be recorded before May
18   15, 2012, provided that Aftandilian made the adequate protection
19   payments and the tax payments that were due in the interim.     The
20   order granting relief from stay, in relevant part, provided as
21   follows:
22        Movant may record its Notice of Trustee Sale on the
          first to occur of the following dates:
23
          a. Immediately upon dishonor of any check for one of
24        the payments referred to in the following sections;
25        b. April 2, 2012 if Debtor fails to email not later
          than April 2, 2012 to Movant’s counsel a Los Angeles
26        County receipt for payment of $3,548.98 paid on or
          before March 15, 2012 for the March, 2012 payment due
27        under the Court’s order entered February 21, 2012;
28        c. April 2, 2012 but only if Debtor fails to deliver

                                       4
 1        $22,547.40 to Movant on or before April 2, 2012;
 2        d. April 10, 2012 but only if Debtor: (1) fails to
          deliver $20,384.94 to the Los Angeles County Treasurer
 3        and Tax Collector by April 10, 2012 (with direction
          that payment is for the real property tax payments due
 4        on parcels 2103-026-034 & 2103-026-035 due not later
          than April 10, 2012); or (2) Debtor fails to email on
 5        or before April 10, 2012 to Movant’s counsel a Los
          Angeles County receipt for payment of $20,384.94;
 6
          e. April 15, 2012 but only if Debtor: (1) fails to
 7        deliver $3,548.98 to the Los Angeles County Treasurer
          and Tax Collector by April 15, 2012; or (2) Debtor
 8        fails to email not later than April 15, 2012 to
          Movant’s counsel a Los Angeles County receipt for such
 9        payment;
10        f. May 1, 2012 but only if Debtor fails to deliver
          $22,547.40 to Movant on or before May 1, 2012;
11
          g. May 15, 2012 but only if Debtor: (1) fails to
12        deliver $3,548.98 to the Los Angeles County Treasurer
          and Tax Collector by April 15, 2012; or (2) Debtor
13        fails to email not later than Mary 15, 2012 [sic] to
          Movant’s counsel a Los Angeles County receipt for such
14        payment;
15        h. May 16, 2012.
16   Order Granting Relief from Stay (April 23, 2012) at ¶ 11.d.
17         Aftandilian appealed the relief from stay order, and also
18   sought an emergency stay of the foreclosure from the Panel.    The
19   Panel issued an order on May 30, 2012 granting a temporary stay
20   to maintain the status quo while the Panel considered the
21   emergency stay motion.   However, the Panel issued a subsequent
22   order on June 5, 2012, denying Aftandilian’s emergency stay
23   motion and dissolving the temporary stay.   According to the
24   Panel’s June 5 order, Aftandilian had not demonstrated a
25   sufficient likelihood of success on the merits of the appeal to
26   justify a stay for the remainder of the appeal.
27        Prestige thereafter completed its nonjudicial foreclosure
28   sale against the property, and purchased the property at the

                                      5
 1   foreclosure sale by credit bid.    Prestige then obtained an
 2   unlawful detainer judgment in the Los Angeles County Superior
 3   Court, which entitled Prestige to take possession of the
 4   property.    Ultimately, the Panel dismissed as moot Aftandilian’s
 5   appeal from the relief from stay order.
 6           In July 2012, roughly one month after Prestige’s foreclosure
 7   sale, Aftandilian commenced a lawsuit against Prestige in the Los
 8   Angeles County Superior Court seeking to set aside the
 9   foreclosure sale.    The operative complaint, Aftandilian’s first
10   amended complaint, stated several legal theories, all of which
11   were based on the same predicate facts: (1) that, on June 1,
12   2012, Aftandilian made an adequate protection payment of $22,547
13   to Prestige; (2) that, on June 4, 2012, Prestige accepted that
14   payment; (3) that, on June 6, 2012, Prestige conducted its
15   foreclosure sale and purchased the property at the sale; and
16   (4) having accepted the June 1, 2012 adequate protection payment,
17   Prestige could not lawfully foreclose on the property on June 6,
18   2012.
19           Prestige removed Aftandilian’s lawsuit to the bankruptcy
20   court, and, while the lawsuit was pending before the bankruptcy
21   court Aftandilian filed a separate motion in his bankruptcy case
22   seeking to have Prestige’s foreclosure sale declared void.
23   Aftandilian never disputed that his declaratory relief motion
24   arose from exactly the same facts as set forth in his lawsuit.
25   Instead, he merely asserted that the lawsuit focused on his state
26   law legal theories, whereas the motion focused on his bankruptcy
27   law legal theories.    More specifically, Aftandilian’s motion
28   asserted that, pursuant to the bankruptcy court’s September 23,

                                        6
 1   2011 adequate protection order, the automatic stay continued in
 2   effect so long as he was current on his adequate protection
 3   payments.   And since he was current on his adequate protection
 4   payments at the time of foreclosure sale, that sale was void.
 5        The bankruptcy court dismissed the lawsuit with prejudice.
 6   In the process of so ruling, the court held that nothing in its
 7   September 23, 2011 adequate protection order, nor in its
 8   April 23, 2012 relief from stay order, nor in the Panel’s
 9   temporary stay order prohibited Prestige from foreclosing as it
10   did on June 6, 2012.    The court further explained that the
11   explicit intent of the April 23, 2012 relief from stay order was
12   to unconditionally permit Prestige to move forward with all
13   foreclosure related proceedings on and after May 16, 2012.     The
14   court also pointed out that the September 23, 2011 adequate
15   protection order explicitly provided that Prestige could accept
16   adequate protection payments from Aftandilian without affecting
17   Prestige’s entitlement to foreclose under applicable
18   nonbankruptcy law.   In essence, the court held that, no matter
19   how Aftandilian characterized Prestige’s acceptance of the
20   June 1, 2012 adequate protection payment, no state law theory, no
21   bankruptcy law theory, and no court order prohibited Prestige
22   from foreclosing on June 6, 2012.
23        On or about October 3, 2012, the bankruptcy court issued a
24   tentative ruling on Aftandilian’s declaratory relief motion.    In
25   the tentative ruling, the court pointed out that, under
26   Rule 7001, Aftandilian’s motion should have been brought as an
27   adversary proceeding.   The court also noted that the facts
28   alleged, issues raised and relief sought all were duplicative of

                                       7
 1   other proceedings that Aftandilian had previously brought before
 2   the court.   According to the court, it had recently considered
 3   and rejected the points made in the declaratory relief motion in
 4   conjunction with its dismissal of Aftandilian’s removed state
 5   court lawsuit.   The court concluded that nothing in Aftandilian’s
 6   motion had persuaded it to change its position regarding its
 7   analysis and resolution of Aftandilian’s claims seeking to set
 8   aside Prestige’s foreclosure sale.
 9        On October 4, 2012, the bankruptcy court held a hearing on
10   Aftandilian’s declaratory relief motion, at which it adopted its
11   tentative ruling and denied the motion.   On October 9, 2012, the
12   bankruptcy court entered its order denying Aftandilian’s
13   declaratory relief motion, and on October 23, 2012, Aftandilian
14   timely appealed that order.
15                              JURISDICTION
16        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
17   §§ 1334 and 157(b)(2)(O), and we have jurisdiction under
18   28 U.S.C. § 158.
19        Prestige has argued strenuously that this appeal is moot.
20   According to Prestige, the following facts would make it either
21   impossible or inequitable for this Panel to grant relief on
22   appeal to Aftandilian: (1) after the bankruptcy court denied the
23   declaratory relief motion, Aftandilian did not attempt to obtain
24   a stay or injunction in order to maintain the status quo while
25   his appeal was pending; (2) Prestige has taken a number of
26   actions in reliance on its ownership of the property, including
27   the eviction of the restaurant tenant, the leasing of the car
28   wash to a new tenant and the construction of improvements to the

                                      8
 1   property; and (3) while this appeal has been pending, the
 2   underlying bankruptcy case has been dismissed.   A BAP motions
 3   panel already has considered whether this appeal has been
 4   rendered moot, and the motions panel concluded that this appeal
 5   is not moot.   We agree with the motions panel that this appeal is
 6   not moot.
 7        The party asserting mootness has a heavy burden to establish
 8   that the appeal should be dismissed as moot.   Focus Media, Inc.
 9   v. Nat'l Broad. Co. Inc. (In re Focus Media, Inc.), 378 F.3d 916,
10   923 (9th Cir. 2004).   Prestige must therefore persuade us that
11   it was either impossible or inequitable for us to grant any
12   meaningful relief.   See id.   We are not persuaded.
13        If Aftandilian were to prevail on the merits of his appeal,
14   we do not perceive how the dismissal of the underlying bankruptcy
15   case would preclude this Panel from issuing a decision reversing
16   the bankruptcy court and holding that Prestige’s foreclosure sale
17   was void as a violation of the automatic stay.   Nor would
18   Prestige’s post-foreclosure actions with respect to the property
19   necessarily render it impossible or inequitable for Aftandilian,
20   armed with such a decision, to seek at least some measure of
21   relief in state court.
22        Simply put, Prestige has not sufficiently demonstrated to us
23   that a “comprehensive change of circumstances” has occurred such
24   that it would be impossible or inequitable for us to hold that
25   its foreclosure sale was void.   See Motor Vehicle Cas. Co. v.
26   Thorpe Insulation Co. (In re Thorpe Insulation Co.), 677 F.3d
27   869, 880 (9th Cir. 2012);   In re Focus Media, Inc., 378 F.3d
28   922-23.     We acknowledge that any such relief could not, in

                                       9
 1   fairness, affect the rights of third parties currently leasing
 2   portions of the property.    But we are not aware of any reason why
 3   our declaration that Prestige's foreclosure sale is void
 4   necessarily must do so.    Unlike those third parties, Prestige is
 5   a party to this appeal and was a party to all of the proceedings
 6   in the bankruptcy court, so it would not necessarily be unfair if
 7   its rights and duties were altered by this decision.    See Spirtos
 8   v. Moreno (In re Spirtos), 992 F.2d 1004, 1007 (9th Cir. 1993).
 9        Accordingly, this appeal is not moot, and we will consider
10   the merits of the appeal.
11                                    ISSUE
12        Did the bankruptcy court err when it denied Aftandilian’s
13   declaratory relief motion?
14                             STANDARDS OF REVIEW
15        We review de novo the bankruptcy court’s interpretation and
16   application of Rule 7001.    See Collect Access LLC v. Hernandez
17   (In re Hernandez), 483 B.R. 713, 719 (9th Cir. BAP 2012).
18        We also review de novo the bankruptcy court’s interpretation
19   of its orders.   See Treasurer of Snohomish Cnty. v. Seattle First
20   Nat’l Bank (In re Glasply Marine Indus., Inc.), 971 F.2d 391, 393
21   (9th cir. 1992).   Even so, a trial court’s interpretation of its
22   own orders is entitled to special deference.    See Officers for
23   Justice v. Civil Serv. Comm'n of City and Cnty. of San Francisco,
24   934 F.2d 1092, 1094 (9th Cir. 1991); Marciano v. Fahs
25   (In re Marciano), 459 B.R. 27, 35 (9th Cir. BAP 2011), aff’d,
26   708 F.3d 1123 (9th Cir. 2013).
27                                 DISCUSSION
28        Under Rule 7001(2), an action to determine the validity of a

                                       10
 1   party’s interest in property must be pursued as an adversary
 2   proceeding.   The same is true of an action seeking a declaratory
 3   judgment regarding the validity of a party’s interest in
 4   property.   See Rule 7001(9).   The bankruptcy court correctly
 5   ruled that Aftandilian’s failure to present his declaratory
 6   relief motion as an adversary proceeding was a sufficient ground,
 7   by itself, to justify denial of the motion.   See Bear v. Coben
 8   (In re Golden Plan of Cal., Inc.), 829 F.2d 705, 711–12 (9th Cir.
 9   1986); In re DBSI, Inc., 432 B.R. 126, 134-35 (Bankr. D. Del.
10   2010).
11        We generally will not consider arguments that the appellant
12   did not specifically and distinctly brief.    See Brownfield v.
13   City of Yakima,   612 F.3d 1140, 1149 n.4 (9th Cir. 2010) (citing
14   Greenwood v. F.A.A., 28 F.3d 971, 977 (9th Cir. 1994)); Cashco
15   Fin. Servs., Inc. v. McGee (In re McGee), 359 B.R. 764, 771 n.7
16   (9th Cir. BAP 2006) (citing Doty v. Cnty. of Lassen, 37 F.3d 540,
17   548 (9th Cir. 1994)).   In his opening appeal brief, Aftandilian
18   did not even mention, let alone challenge, the bankruptcy court’s
19   ruling that an adversary proceeding was required.   This is a
20   sufficient reason alone to affirm.
21        We also agree with the bankruptcy court’s alternate ground
22   for denying Aftandilian’s declaratory relief motion.   The
23   bankruptcy court in essence held that Prestige’s acceptance of
24   Aftandilian’s June 1, 2012 adequate protection payment did not
25   prohibit Prestige from immediately proceeding with its
26   foreclosure sale as soon as the Panel terminated its temporary
27   stay on June 5, 2012.
28        Aftandilian contends that the bankruptcy court got it wrong.

                                      11
 1   Because Prestige accepted the June 1, 2012 adequate protection
 2   payment, Aftandilian reasons, the September 23, 2011 adequate
 3   protection order continued to control the application of the
 4   automatic stay vis-a-vis Prestige’s right to foreclose.     And
 5   because the adequate protection order kept the automatic stay in
 6   place so long as Aftandilian did not default on his adequate
 7   protection payments, Prestige’s foreclosure sale, which occurred
 8   while Aftandilian was current on his adequate protection
 9   payments, was void as a violation of the automatic stay.3
10        In other words, Aftandilian is arguing that, by virtue of
11   the June 1, 2012 adequate protection payment it made and Prestige
12   accepted, the terms of the September 23, 2011 adequate protection
13   order enjoyed primacy over the terms of the April 23, 2012 relief
14   from stay order, at least until Aftandilian’s next adequate
15   protection payment was due.   However, we don’t understand why, as
16   Aftandilian apparently claims, Prestige’s acceptance of the
17   adequate protection payment vitiated the intended effect of the
18   April 23, 2012 relief from stay order.
19
          3
20         In his opening appeal brief, Aftandilian for the first time
     attempts to argue that Prestige’s acceptance of the June 1, 2012
21   adequate protection payment invalidated the notice of sale
     Prestige recorded before that payment was made. Aftandilian
22
     cited no legal authority to support this proposition. Moreover,
23   the bankruptcy court did not have any opportunity to consider
     this argument because Aftandilian did not raise it in his
24   declaratory relief motion. Accordingly, we decline to consider
     this argument. See United Student Aid Funds, Inc. v. Espinosa,
25   559 U.S. 260, 270 n. 9 (2010) ("We need not settle that question,
26   however, because the parties did not raise it in the courts
     below."); Scovis v. Henrichsen (In re Scovis), 249 F.3d 975, 984
27   (9th Cir. 2001) (holding that court will not consider issue
     raised for the first time on appeal absent exceptional
28   circumstances).

                                     12
 1        In interpreting the effect of a bankruptcy court order, we
 2   primarily rely on the bankruptcy court’s intent as manifested in
 3   the order’s language.   See Mullen v. Hamlin (In re Hamlin),
 4   465 B.R. 863, 868 (9th Cir. BAP 2012) (citing Brown v. Wilshire
 5   Credit Corp. (In re Brown), 484 F.3d 1116, 1120 (9th Cir. 2007)).
 6   And the bankruptcy court’s interpretation of its own orders is
 7   entitled to special deference.   See Rosales v. Wallace
 8   (In re Wallace), 490 B.R. 898, 906 (9th Cir. BAP 2013).
 9        Here, as manifested by the unequivocal language of the
10   order, and as subsequently interpreted by the bankruptcy court at
11   the adversary proceeding dismissal hearing, the April 23, 2012
12   relief from stay order was intended to supersede the
13   September 23, 2011 adequate protection order and was intended to
14   modify the automatic stay so as to permit Prestige to
15   unconditionally move forward with foreclosure proceedings on and
16   after May 16, 2012.
17        We acknowledge that the Panel’s temporary stay order, for a
18   period of several days, stayed the effectiveness of the relief
19   from stay order.   However, when the Panel terminated that
20   temporary stay on June 5, 2012, the bankruptcy court’s relief
21   from stay order immediately became effective and once again
22   superseded the adequate protection order and permitted immediate
23   foreclosure.   Nothing in this Panel’s temporary stay order was
24   intended to have any other effect.
25         We are not aware of any law supporting Aftandilian’s
26   argument regarding the supposed effect of the June 1, 2012
27   adequate protection payment.   Nor has Aftandilian cited any.
28   Therefore, the bankruptcy court correctly determined that the

                                      13
 1   plain terms of the April 23, 2012 relief from stay order mandated
 2   denial of Aftandilian’s declaratory relief motion.
 3                              CONCLUSION
 4        For the reasons set forth above, we AFFIRM the bankruptcy
 5   court’s order denying Aftandilian’s declaratory relief motion.
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