Court Opinion

ID: 2716138
Source: CourtListenerOpinion
Date Created: 2014-08-07 23:00:47.40377+00
Date Added: 2024-06-11T13:26:25.325059
License: Public Domain

FILED
                                                            AUG 07 2014
 1                         NO FO PUBL A IO
                             T R     IC T N
 2                                                      SUSAN M. SPRAUL, CLERK
                                                          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.     CC-13-1557-PaKiTa
                                   )
 6   EDWARD NEGRETE, JR.           )      Bankr. No.     13-10036-RN
                                   )
 7                  Debtor.        )
     ______________________________)
 8                                 )
     EDWARD NEGRETE, JR.,          )
 9                                 )      M E M O R A N D U M1
                    Appellant,     )
10                                 )
     v.                            )
11                                 )
     CITIZENS STATE BANK,          )
12                                 )
                    Appellee.      )
13   ______________________________)
14                      Submitted Without Oral Argument2
                                on July 25, 2014
15
                             Filed - August 7, 2014
16
              Appeal from the United States Bankruptcy Court
17                for the Central District of California
18       Honorable Richard M. Neiter, Bankruptcy Judge, Presiding
19
     Appearances:     Edward Negrete, Jr., on brief, pro se.
20
21   Before: PAPPAS, KIRSCHER AND TAYLOR, Bankruptcy Judges.
22
23        1
             This disposition is not appropriate for publication.
24   Although it may be cited for whatever persuasive value it may
     have (see Fed. R. App. P. 32.1), it has no precedential value.
25   See 9th Cir. BAP Rule 8013-1.
26        2
             In an order entered April 4, 2014, the Panel unanimously
27   determined that this appeal is suitable for submission without
     oral argument. Fed. R. Bankr. P. 8012; Ninth Circuit BAP R.
28   8012-1.
 1        Chapter 73 debtor Edward Negrete, Jr. (“Debtor”) appeals the
 2   bankruptcy court’s order denying his motion for reconsideration
 3   of an order denying his motion for contempt.    We AFFIRM.
 4                                   FACTS
 5        At the center of this appeal are proceeds from the sale of a
 6   single family home located on a residential lot in Riverside
 7   County, California   (the “Property”).   Debtor’s mother
 8   transferred title to the Property to her eight children as
 9   tenants in common in 2006.
10        On October 3, 2011, a state court judgment was entered
11   against Debtor in favor of Citizens State Bank (“Creditor”) for
12   $231,373.65 (“Judgment”).    Creditor recorded an Abstract of the
13   Judgment in Riverside County, and thereby obtained a judgment
14   lien against the Property.   Cal. Code Civ. Proc. § 697.310(a).
15   The Property was also encumbered by a consensual lien in favor of
16   Wells Fargo Bank which, as of September 9, 2012, had a balance of
17   $4,035.82.
18        On January 2, 2013, Debtor filed a chapter 7 petition.    In
19   his schedules, Debtor listed his interest in the Property on
20   schedule A, and claimed it exempt in the amount of $20,815.87 on
21   schedule C pursuant to California’s “wildcard” exemption, Cal.
22   Civ. Proc. Code § 703.140(b)(5).   He also listed the Judgment as
23   a secured claim on schedule D, and in his Statement of Intention,
24
25
          3
             Unless otherwise indicated, all chapter and section
26   references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532, all
27   Rule references are to the Federal Rules of Bankruptcy Procedure,
     Rules 1001–9037, and all Civil Rule references are to the Federal
28   Rules of Civil Procedure 1–86.

                                      -2-
 1   Debtor advised that it was his intent to avoid Creditor’s
 2   judgment lien.
 3        On February 19, 2013, Debtor, acting pro so, filed his first
 4   motion seeking to avoid Creditor’s judgment lien on the Property,
 5   which motion was denied by the bankruptcy court for “[f]ailure to
 6   serve authorized agent of Wells Fargo Bank and the lienholders.
 7   Failure to submit reliable evidence of Fair Market Value of
 8   property.”   Order on Motion to Avoid Lien at 2, March 18, 2013.
 9   Debtor filed another motion to avoid Creditor’s judgment lien on
10   the Property on April 9, 2013.   This second motion was also
11   denied by the bankruptcy court due to “insufficient and
12   inadmissible evidence of fair market value of property.”    Order
13   on Motion to Avoid Lien at 2, April 25, 2013.
14        In May 2013, four of the Property owners commenced an action
15   in California state court against Debtor and the three other
16   owners for partition and for an accounting, seeking to have the
17   Property sold and the proceeds distributed among the eight
18   owners.   The Property was listed for sale by July 2013.
19        On July 10, 2013, Debtor filed a third motion seeking to
20   avoid Creditor’s judgment lien, this time accompanied by
21   evidence concerning the Property’s fair market value.   The
22   bankruptcy court entered an order on August 8, 2013, granting the
23   motion, but only in part (the “Partial Avoidance Order”).     This
24   Partial Avoidance Order avoided Creditor’s judgment lien on the
25   Property, but only to the extent of $96,225.52.4   The following
26
          4
27           This amount was determined by the bankruptcy court
     presumably as the result of erroneously attributing sole
28                                                         continue...

                                      -3-
 1   day, August 9, 2013, Debtor filed an ex parte application to
 2   reconsider the Partial Avoidance Order; it was granted by the
 3   bankruptcy court in an order entered on September 4, 2013 (the
 4   “Total Avoidance Order”).   The Total Avoidance Order avoided
 5   Creditor’s judgment lien on the Property in its entirety, and
 6   declared it void and unenforceable.
 7        In the meantime, however, a sale of the Property had been
 8   negotiated.   In anticipation of this sale, on August 12, 2013,
 9   after entry of the Partial Avoidance Order, but prior to entry of
10   the Total Avoidance Order, Creditor’s counsel contacted the
11   escrow officer handling the closing of the sale of the Property
12   and offered to release its judgment lien in exchange for payment
13   of Debtor’s share of the net proceeds of the sale.   The following
14   day, on August 12, 2013, Debtor recorded the bankruptcy court’s
15   order granting him a discharge, as well as the Partial Avoidance
16   Order, in Riverside County.
17        On August 19, 2013, the sale of the Property closed, and
18   Debtor informed Creditor’s counsel of the existence of the
19   bankruptcy discharge as well as the Partial Avoidance Order.
20   Despite this, according to the closing statement, Debtor’s
21   siblings each received their respective share of the sale
22   proceeds, but Debtor’s portion, $19,461.54, was disbursed by the
23   escrow company to Creditor’s counsel on August 20, 2013.
24        On August 22, 2013, Debtor sent a written demand to
25   Creditor’s counsel seeking payment of the sale proceeds because
26
          4
27         ...continue
     ownership of the Property to Debtor, rather than the one-eighth
28   interest he actually held.

                                     -4-
 1   Creditor’s judgment lien had been avoided by the bankruptcy court
 2   and because the sale proceeds were exempt.    Creditor did not
 3   return the proceeds to Debtor, and on September 4, 2013, Debtor
 4   filed a motion in the bankruptcy court seeking an order holding
 5   Creditor in contempt.   On October 4, 2013, the bankruptcy court
 6   entered an order denying the motion for contempt:
 7        The Court, having reviewed the pleadings and related
          docket, and finding that (i) the amended order entered
 8        on September 4, 2013 (“Amended Order”) avoiding the
          Citizens State Bank lien in its entirety was not
 9        entered until after Citizens State Bank (the
          “Creditor”) had already legally collected the proceeds
10        from the sale of the subject property; (ii) there was
          no evidence to demonstrate that the Creditor willfully
11        violated a direct order of the Court in retaining the
          funds; and (iii) the Debtor has other means available
12        to him outside of the bankruptcy process in order to
          collect the funds from the Creditor . . . IT IS HEREBY
13        ORDERED that Debtor’s Motion is DENIED.
14   Order Denying Debtor’s Motion for Contempt at 1, October 4, 2013.
15   (“Order Denying Contempt”).
16        Debtor requested that the bankruptcy court reconsider the
17   Order Denying Contempt in a motion filed October 10, 2013.    The
18   motion was set for hearing on November 6, 2013, and the day
19   before the hearing, the bankruptcy court issued a tentative
20   ruling denying the motion.    Neither of the parties appeared at
21   the scheduled hearing and, on November 27, 2013, the bankruptcy
22   court entered an order adopting its tentative ruling and denying
23   the motion (“Order Denying Reconsideration”) because, the court
24   explained:
25        [T]he First Order Avoiding Lien only partially avoided
          Creditor’s lien. Creditor collected Debtor’s 1/8
26
27
28

                                      -5-
 1        interest in the Property, or $19,480.945, which was
          within the un-avoided amount under the First Order
 2        Avoiding Lien. The Amended Order had not yet been
          entered. As such, taking into consideration this fact,
 3        which the Court did take into consideration when
          deciding the Motion for Contempt, there was no
 4        violation of a Court order. . . . The Court found that
          Creditor did not wilfully violate a Court order when it
 5        obtained the sales proceeds for the reasons explained
          above. In addition, the Court found that Creditor did
 6        not willfully violate a Court order to turn over the
          sale proceeds. Debtor provides no evidence showing
 7        that Creditor willfully disregarded a Court
          Order. . . . Debtor has not shown by clear and
 8        convincing evidence that Creditor violated a specific
          and definite Order of the Court either in collecting
 9        the sale proceeds or in retaining them.
10   Order Denying Reconsideration at 2, November 27, 2013.
11        Debtor filed a timely appeal of the Order Denying
12   Reconsideration.
13                               JURISDICTION
14        The bankruptcy court had jurisdiction under 28 U.S.C.
15   §§ 1334 and 157(b)(2)(A).   We have jurisdiction under 28 U.S.C.
16   § 158.
17                                 ISSUES6
18        Whether the bankruptcy court abused its discretion when it
19   denied Debtor’s motion for contempt?
20
          5
             The closing statement indicated that $19,461.54 was
21
     disbursed to Creditor’s counsel. Any difference in this amount
22   is immaterial.
23        6
             Although Debtor’s notice of appeal indicates that he
     appeals only the denial of his motion to reconsider, the
24
     arguments in his briefing also reiterate the arguments made in
25   favor of his contempt motion. Because Debtor appears pro se, we
     have exercised our discretion and construe his papers liberally.
26   Ozenne v. Bendon (In re Ozenne), 337 B.R. 214, 218 (9th Cir. BAP
27   2006). Accordingly, we consider both the Order Denying Contempt
     as well as the Order Denying Reconsideration to be within the
28   scope of this appeal.

                                     -6-
 1        Whether the bankruptcy court abused its discretion when it
 2   denied Debtor’s motion to reconsider the denial of the motion for
 3   contempt?
 4                               STANDARDS OF REVIEW
 5        We review the bankruptcy court’s denial of the motion for
 6   contempt for abuse of discretion.         Labor/Cmty. Strategy Ctr. v.
 7   L.A. Cnty. Metro. Transp. Auth., 564 F.3d 1115, 1119 (9th Cir.
 8   2009); Rosales v. Wallace (In re Wallace), 490 B.R. 898, 904-05
 9   (9th Cir. BAP 2013).   We also review the denial of the motion for
10   reconsideration for abuse of discretion.        Ta Chong Bank Ltd. v.
11   Hitachi High Techs. Am., Inc., 610 F.3d 1063, 1066 (9th Cir.
12   2010); Collect Access LLC v. Hernandez (In re Hernandez),
13   483 B.R. 713, 719 (9th Cir. BAP 2012).        Moreover, we review a
14   bankruptcy court’s interpretation of its own order for abuse of
15   discretion.   In re Wallace, 490 B.R. at 905.
16        The abuse of discretion standard has two parts.        First, we
17   consider whether the bankruptcy court applied the correct legal
18   standard; and second, we decide whether the court's factual
19   findings supporting the legal analysis were clearly erroneous.
20   Alakozai v. Citizens Equity First Credit Union (In re Alakozai),
21   499 B.R. 698 (9th Cir. BAP 2013) (citing United States v.
22   Hinkson, 585 F.3d 1247, 1261-62 (9th Cir. 2009) (en banc).
23                                   DISCUSSION
24                          I.    The Contempt Motion
25        Debtor’s contempt motion is premised on his argument that
26   Creditor was not entitled to payment of Debtor’s portion of the
27   Property sale proceeds because Creditor’s lien had been avoided,
28   at least in part, and because the discharge order prohibited

                                         -7-
 1   Creditor from enforcing what was now an unsecured Judgment.    The
 2   bankruptcy court denied Debtor’s contempt motion, reasoning that,
 3   at the time Creditor received the sale proceeds, only the Partial
 4   Avoidance Order had been entered and that order left a portion of
 5   Creditor’s judgment lien intact.    Thus, the court ruled, because
 6   it held a secured claim, collection of the sale proceeds by
 7   Creditor was not prohibited by the discharge order.    Moreover,
 8   the bankruptcy court concluded, Creditor’s retention of the funds
 9   was not a willful violation of any order of the court.     Finally,
10   the bankruptcy court noted that if Debtor were entitled to
11   recover the funds paid to Creditor, he could seek that relief in
12   a forum other than the bankruptcy court and through a motion
13   other than one based on contempt.
14        Debtor’s motion for reconsideration was based on what Debtor
15   alleged was newly discovered evidence and manifest injustice
16   resulting from the Order Denying Contempt.   Because the
17   bankruptcy court erred in calculating the extent that Creditor’s
18   judgment lien should be avoided when it entered the Partial
19   Avoidance Order, but later corrected that mistake in the Total
20   Avoidance Order, Debtor contended that it would be manifestly
21   unjust to permit Creditor to rely upon the incorrect order to
22   obtain payment of the funds, or to allow Creditor to retain those
23   funds once the error was corrected by the bankruptcy court’s
24   entry of the Total Avoidance Order.
25        The bankruptcy court denied Debtor’s motion for
26   reconsideration, holding that since Creditor still held a partial
27   judgment lien when it obtained Debtor’s portion of the sale
28   proceeds, Creditor did not violate any order in place at the

                                    -8-
 1   time.   The court again noted there were other avenues by which
 2   Debtor could pursue Creditor for the funds.
 3        Debtor’s motion for contempt was founded on § 105(a), which
 4   provides that the bankruptcy court:
 5        may issue any order, process, or judgment that is
          necessary or appropriate to carry out the provisions of
 6        this title. No provision of this title providing for
          the raising of an issue by a party in interest shall be
 7        construed to preclude the court from, sua sponte,
          taking an action or making any determination necessary
 8        or appropriate to enforce or implement court orders or
          rules, or to prevent an abuse of process.
 9
10        To hold a party in civil contempt, “the bankruptcy court
11   must find by clear and convincing evidence that the offending
12   party knowingly violated a definite and specific court order.”
13   Knupfer v. Lindblad (In re Dyer), 322 F.3d 1178, 1190 (9th Cir.
14   2003); Renwick v. Bennett (In re Bennett), 298 F.3d 1059, 1069
15   (9th Cir. 2002).   Following such showing, the burden shifts to
16   the alleged contemnor to show why it was unable to comply with
17   the order.   In re Bennett, 298 F.3d at 1069; FTC v. Affordable
18   Media, 179 F.3d 1228, 1239 (9th Cir. 1999).   A court has wide
19   latitude in determining whether there has been contemptuous
20   defiance of its order.   Gifford v. Heckler, 741 F.2d 263, 266
21   (9th Cir. 1984) (citing Neebars, Inc. v. Long Bar Grinding, Inc.,
22   438 F.2d 47, 48 (9th Cir. 1971)).
23        Civil contempt is appropriate only when a party fails to
24   comply with a court order that is both specific and definite.
25   Balla v. Idaho State Bd. of Corr., 869 F.2d 461, 465 (9th Cir.
26   1989) (citing Gifford, 741 F.2d at 265).   Thus, to support a
27   contempt motion, the order alleged to have been disobeyed must be
28   sufficiently specific.   In re Dual-Deck Video Cassette Recorder

                                     -9-
 1   Antitrust Litig., 10 F.3d at 695 (citing Int’l Longshoremen's
 2   Ass’n, Local 1291 v. Phila. Marine Trade Ass’n, 389 U.S. 64, 76
 3   (1967)).
 4        We conclude the Partial Avoidance Order was sufficiently
 5   specific and definite to avoid a portion of Creditor’s lien.
 6   Although it was a form order in which the bankruptcy court
 7   checked boxes and filled in blanks, it clearly declared in a
 8   handwritten notation by the bankruptcy court that Creditor’s lien
 9   was avoided “in part” in the amount of “$96,225.57".
10        However, the Partial Avoidance Order was neither specific
11   nor definite regarding how any proceeds should be disbursed in
12   the event the Property subject to Creditor’s judgment lien was
13   sold.   The Partial Avoidance Order also made no reference to
14   either the amount of Debtor’s claim of exemption in any sale
15   proceeds, or whether any amount remained above the exemption
16   which Creditor could seize and apply to the unavoided portion of
17   its judgment lien.    In short, because nothing in the Partial
18   Avoidance Order — the only order in effect as of the date
19   Creditor was paid — specifically dictated what was to be done
20   with the sale proceeds, Creditor’s actions in directing the
21   escrow company to disburse those funds to Creditor did not run
22   afoul of its terms.    See In re Dorado Marine, Inc., 343 B.R. 711,
23   713 (Bankr. M.D. Fla. 2006) (“The Opinion and Final Judgment
24   merely establish Kollenbaum’s right to an equitable lien; they do
25   not specifically direct Lickert or the Debtor to pay any net
26   proceeds of the sale to Kollenbaum,” and thus will not support a
27   finding of contempt); see also Mueller v. Hall (In re Parker),
28   368 B.R. 86 (6th Cir. BAP 2007) (a sale order that approved the

                                     -10-
 1   trustee’s sale of the debtor’s interest in an ongoing lawsuit but
 2   did not require debtor or his counsel to perform or refrain from
 3   performing any particular acts was not specific enough to support
 4   an order of contempt when debtor’s counsel continued to prosecute
 5   the lawsuit).
 6        Simply stated, a party cannot be in contempt of an order
 7   that does not yet exist.     The bankruptcy court did not abuse its
 8   discretion when it determined that Creditor had not violated any
 9   specific order and, therefore, denied Debtor’s motion for
10   contempt.
11                       II.   The Reconsideration Motion
12        Debtor sought reconsideration of the Order Denying Contempt
13   under Civil Rule 59(e), made applicable in bankruptcy cases by
14   Rule 9023.   The case law explains that reconsideration under
15   Civil Rule 59(e) is appropriate where the movant establishes the
16   existence of any one of three conditions:
17        To establish that the bankruptcy court abused its
          discretion in denying the motions for reconsideration,
18        [the movant] must demonstrate the existence of newly
          discovered evidence that was not available at the time
19        of the original hearing, or that the bankruptcy court
          committed clear error or made a decision that was
20        manifestly unjust, or that there was an intervening
          change in controlling law.
21
22   Marciano v. Fahs (In re Marciano), 459 B.R. 27, 51 (9th Cir. BAP
23   2011) (citing Zimmerman v. City of Oakland, 255 F.3d 734, 740
24   (9th Cir. 2001)).
25        Debtor argues that because the Total Avoidance Order was
26   entered after Debtor filed the motion for contempt, it
27   constituted “newly discovered evidence” sufficient to require
28   reconsideration by the bankruptcy court of the Order Denying

                                       -11-
 1   Contempt.   We disagree.
 2        In its ruling concerning Debtor’s motion for contempt, the
 3   bankruptcy court explicitly considered the timing and effect of
 4   the Total Avoidance Order, but correctly determined that, at the
 5   time Creditor was paid, its judgment lien had only been partially
 6   avoided.    Because the bankruptcy court considered the Total
 7   Avoidance Order at the time it made its decision concerning the
 8   motion for contempt, it cannot be characterized as newly
 9   discovered evidence to support reconsideration of the Order
10   Denying Contempt.    That the bankruptcy court entered the Total
11   Avoidance Order completely avoiding Creditor’s judgment did not
12   alter the fact that, at the time Creditor was paid Debtor’s
13   portion of the sale proceeds, Creditor still held a partially
14   valid judgment lien on the Property.
15        Debtor also contends that there was a “manifest failure by
16   the [bankruptcy court] to consider material facts and dispositive
17   legal arguments which were presented to the Court before the
18   entry of the Order Denying Debtor’s Motion For Contempt.”    By
19   this contention, we assume Debtor is arguing that the bankruptcy
20   court employed an incorrect legal standard in ruling on the
21   motion for contempt.
22        In the Order Denying Contempt, the bankruptcy court
23   concluded that there was “no evidence to demonstrate that the
24   Creditor willfully violated a direct order of the Court in
25   retaining the funds.”    Order Denying Debtor’s Motion for Contempt
26   at 1, October 4, 2013.     Debtor correctly asserts that the proper
27   standard for contempt required him to demonstrate that Creditor
28   “violated a specific and definite order of the court,” but argues

                                      -12-
 1   that it was not the retention of the funds but rather the
 2   Creditor’s original receipt of the funds in the first instance
 3   which constituted Creditor’s contemptible act.
 4        The bankruptcy court did not abuse its discretion in denying
 5   Debtor’s motion for reconsideration.     The court’s statement in
 6   its order recited the proper standard for civil contempt, i.e.,
 7   that the moving party must demonstrate that a violation of a
 8   definite, specific court order occurred.     As explained above,
 9   however, the Total Avoidance Order simply did not address either
10   the disbursement or retention of any sale proceeds for the
11   Property.   Therefore, especially given the other potential
12   remedies available to Debtor to recover the payment to Creditor,7
13   Debtor has not shown the Order Denying Contempt constitutes a
14   manifest injustice sufficient to warrant reconsideration of the
15   order denying Debtor’s motion for contempt.
16                               CONCLUSION
17        We AFFIRM the orders of the bankruptcy court.
18
19
20
21
22
23
24
25
          7
             Debtor’s motions in the bankruptcy court sought an order
26   holding Creditor in contempt; they did not seek to recover the
27   sale proceeds paid to Creditor. We do not consider and express
     no opinion as to whether Debtor could obtain such relief in
28   either the bankruptcy court or another forum.

                                    -13-