Court Opinion

ID: 9399038
Source: CourtListenerOpinion
Date Created: 2023-06-01 18:01:21.899076+00
Date Added: 2024-06-11T17:19:38.318424
License: Public Domain

FILED
                                                                                    JUN 1 2023
                          NOT FOR PUBLICATION
                                                                               SUSAN M. SPRAUL, CLERK
                                                                                 U.S. BKCY. APP. PANEL
                                                                                 OF THE NINTH CIRCUIT
           UNITED STATES BANKRUPTCY APPELLATE PANEL
                     OF THE NINTH CIRCUIT

 In re:                                              BAP No. CC-22-1183-GFS
 ALICIA MARIE RICHARDS,
               Debtor.                               Bk. No. 8:21-bk-10635-SC

 ALICIA MARIE RICHARDS,                              Adv. No. 8:22-ap-01067-SC
               Appellant,
 v.                                                  MEMORANDUM*
 RYAL W. RICHARDS,
               Appellee.

               Appeal from the United States Bankruptcy Court
                      for the Central District of California
                Scott C. Clarkson, Bankruptcy Judge, Presiding

Before: GAN, FARIS, and SPRAKER, Bankruptcy Judges.

                                 INTRODUCTION

       Chapter 71 debtor Alicia Marie Richards (“Alicia”) appeals the

bankruptcy court’s order remanding all family law matters to the Orange

County Superior Court, Family Law Division, including the action

commenced by her ex-husband, Ryal W. Richards (“Ryal”), 2 to determine

       *
         This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
       1 Unless specified otherwise, all chapter and section references are to the

Bankruptcy Code, 11 U.S.C. §§ 101–1532.
       2 Because the parties share a last name, we refer to them by first name to avoid
his interest in proceeds from the sale of their jointly owned home (the

“Residence”).

      The bankruptcy court previously granted stay relief to allow Ryal to

litigate all family law matters in state court. The court then approved a sale

of the Residence and ordered the chapter 7 trustee to withhold half of the

$600,000 homestead exemption pending a determination by the state court

of Ryal’s interest. After Ryal filed a motion in state court seeking payment

of $300,000, Alicia filed a notice of removal, and the bankruptcy court

granted Ryal’s motion to remand. The bankruptcy court did not abuse its

discretion. We AFFIRM.

                                        FACTS

A.    Prepetition events

      In 2015, Ryal commenced divorce proceedings in state court. Richards

v. Marshack (In re Richards), BAP Nos. CC-21-1262-SGL, CC-21-1266-SGL,

2022 WL 16754394, at *1 (9th Cir. BAP Nov. 7, 2022). At the time, Ryal and

Alicia owned the Residence as joint tenants.

      In 2017, the parties signed a stipulation for judgment which provided

for Alicia to refinance the Residence and buy out Ryal’s community

property interest within three weeks. If Alicia was unable to do so, the

stipulation required the sale of the Residence and an equal division of

confusion. No disrespect is intended.
                                          2
proceeds. In accordance with the stipulation, the state court entered a final

dissolution judgment in January 2018.

      Alicia was unable to buy out Ryal’s interest, and she failed to

cooperate with the requirement to sell the Residence. She moved to set

aside the dissolution judgment based on fraud and duress, but the state

court denied the motion, and the California Court of Appeal affirmed. In re

Marriage of Richards, Case No. G055927, 2020 WL 104357, at *9-13 (Cal. Ct.

App. Jan 9, 2020).

      Although Alicia did not appeal the dissolution judgment, she filed

several post-judgment motions to stop enforcement of the dissolution

judgment and sale of the Residence. In re Richards, 2022 WL 16754394, at *1.

The state court denied her motions and none of her appeals were

successful. Id. In disposing of Alicia’s fifth appeal, the Court of Appeal

noted, “[c]ontrary to [Alicia’s] contention on appeal, the former couple’s

respective rights concerning the [Residence] were determined long ago by

the final marital dissolution judgment.” Id. (quoting In re Marriage of

Richards, Case No. G057803, 2020 WL 5902889, at *5 (Cal. Ct. App. Oct. 6,

2020)).

      In July 2019, the state court entered an order granting Ryal exclusive

use, possession, and control of the Residence. Ryal sought to evict Alicia,

and after an unsuccessful chapter 13 filing and a second eviction attempt,

Alicia filed the current chapter 7 case in March 2021.

B.    The bankruptcy and sale of the Residence

                                       3
      Alicia scheduled the Residence as an asset of her bankruptcy estate

and listed it as community property. In May 2021, Ryal sought stay relief to

pursue claims in state court, including modification of child support and

custody orders, a claim for attorney’s fees, and to evict Alicia and sell the

Residence.

      The bankruptcy court granted stay relief to allow all matters before

the state court to proceed, except for those related to the sale of the

Residence and Alicia’s eviction. The bankruptcy court reasoned that

granting stay relief to allow family law litigation to be fully adjudicated in

state court was entirely consistent with Ninth Circuit precedent and noted

that the bankruptcy court cannot be used to avoid adverse state court

rulings.

      The trustee then moved to sell the Residence for a price substantially

higher than the aggregate value of liens against the property. The

bankruptcy court approved the sale over objections from Alicia and her

father, Lawrence Remsen. Alicia and Remsen each appealed, and we

affirmed. In re Richards, 2022 WL 16754394, at *1.

      After the court approved the sale of the Residence, the chapter 7

trustee sought approval to pay Ryal $300,000, which represented one half

of the exempt proceeds, because the dissolution judgment required an

equal division of net proceeds. Alicia opposed the motion and argued that

Ryal was not entitled to any of the homestead exemption because the

dissolution judgment was void.

                                       4
      After a hearing, the bankruptcy court ordered the chapter 7 trustee to

interplead $300,000 with the state court or hold the funds in a segregated

account pending an order from the state court. The court reasoned that the

exempt proceeds were no longer property of the estate and distribution

would have no effect on the administration of the bankruptcy estate. The

court further reasoned that whether Ryal was entitled to half of the

proceeds was a matter of state law, including the state court’s

interpretation of its own orders, and held, “the state court should make the

final determination as to which party is entitled to the Remaining

Proceeds.”

C.    Removal of the state court action and the court’s decision to remand

      After the bankruptcy court’s order, Ryal filed a motion in state court

seeking payment of the $300,000. The day after being served with Ryal’s

motion, Alicia removed the state court action to bankruptcy court and

asserted it was related to her bankruptcy case.3

      In response, Ryal filed a motion for remand under 28 U.S.C.

§ 1452(b). He argued that the bankruptcy court specifically held that his

entitlement to half of the exempt proceeds was a matter of state law and

should be decided by the state court. Ryal noted that the bankruptcy court

already decided that the $300,000 held by the trustee was not property of

      3
        Alicia removed the entire state court case to the bankruptcy court. At the time
of removal, the state court had pending evidentiary hearings involving modification of
child support and custody, spousal support, and attorney’s fees and costs.
                                           5
the estate and, thus, Alicia’s removal was a ploy to delay the matter,

confuse the issue, or otherwise circumvent the bankruptcy court’s prior

order.

      Alicia opposed remand and claimed that the question of Ryal’s

interest in the funds involved a simple contract dispute based on the

stipulation. She maintained that the state court lacked jurisdiction because:

(1) she filed a motion in bankruptcy court to vacate the order permitting

the trustee to interplead or hold the funds; and (2) the state court lost

jurisdiction when it violated Alicia’s substantive due process rights.

      In reply, Ryal noted that Alicia had previously argued the stipulation

was not valid and the state court was the proper forum to litigate any

disputes regarding the dissolution judgment. He also informed the court

that Alicia had twice unsuccessfully attempted to remove the state court

action to federal court based on her contention that the state court violated

her due process rights. Ryal argued that the notice of removal was part of a

long history of Alicia’s attempts to delay the orders of the state court.

      In September 2022, the bankruptcy court vacated the hearing and

entered an order remanding all family law matters to the state court. The

court applied the factors enumerated in Deen v. Deen (In re Deen), BAP No.

SC-21-1035-BSF, 2022 WL 2048485, at *6 (9th Cir. BAP June 7, 2022),4 and

      4The factors identified in Deen are:
              (1) the effect or lack thereof on the efficient administration of the
      estate if the Court recommends [remand or] abstention;
              (2) extent to which state law issues predominate over bankruptcy
                                             6
determined that equitable remand was appropriate based on the law and

facts articulated in the pleadings. The court specifically held: (1) the action

would have little to no material effect on the bankruptcy; (2) state law

issues predominated; (3) there were no difficult or unsettled issues of

federal law; (4) the action involved no bankruptcy issues; (5) jurisdiction

was based on 28 U.S.C. § 1334(b); (6) there were no severability of issues to

consider; (7) it appeared that Alicia was forum shopping; and (8) comity

with state court favored equitable remand. Alicia timely appealed.

                                   JURISDICTION

       issues;
              (3) difficult or unsettled nature of applicable law;
              (4) presence of related proceeding commenced in state court or
       other nonbankruptcy proceeding;
              (5) jurisdictional basis, if any, other than 28 U.S.C. § 1334;
              (6) degree of relatedness or remoteness of proceeding to main
       bankruptcy case;
              (7) the substance rather than the form of an asserted core
       proceeding;
              (8) the feasibility of severing state law claims from core bankruptcy
       matters to allow judgments to be entered in the state court with
       enforcement left to the bankruptcy court;
              (9) the burden on the bankruptcy court's docket;
              (10) the likelihood that the commencement of the proceeding in
       bankruptcy court involves forum shopping by one of the parties;
              (11) the existence of a right to a jury trial;
              (12) the presence in the proceeding of nondebtor parties;
              (13) comity; and
              (14) the possibility of prejudice to other parties in the action.

In re Deen, 2022 WL 2048485, at * 6 (quoting Nilsen v. Neilson (In re Cedar Funding,
Inc.), 419 B.R. 807, 820-21 & n.18 (9th Cir. BAP 2009)).
                                             7
      The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b)(2). We have jurisdiction under 28 U.S.C. § 158.

                                    ISSUE

      Did the bankruptcy court abuse its discretion by remanding the state

court action under 28 U.S.C. § 1452(b)?

                            STANDARD OF REVIEW

      We review for abuse of discretion a bankruptcy court’s decision on a

motion to remand. McCarthy v. Prince (In re McCarthy), 230 B.R. 414, 416

(9th Cir. BAP 1999). A bankruptcy court abuses its discretion if it applies an

incorrect legal standard or its factual findings are illogical, implausible, or

without support in the record. TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d

820, 832 (9th Cir. 2011).

                                DISCUSSION

      Pursuant to 28 U.S.C. § 1452(b), a bankruptcy court may remand a

proceeding removed from state court on “any equitable ground.” The

remand standard “is an unusually broad grant of authority” that

“subsumes and reaches beyond all of the reasons for remand under

nonbankruptcy removal statutes.” In re McCarthy, 230 B.R. at 417. The

statute does not define what constitutes “any equitable ground,” but we

have identified factors which courts may consider in determining whether

to remand. In re Cedar Funding, Inc., 419 B.R. at 820-21 & n.18. The

                                       8
bankruptcy court applied those factors and concluded that remand was

warranted.

      On appeal, Alicia argues that: (1) the question of Ryal’s interest in the

proceeds was a core proceeding that would have a significant effect on

administration of the bankruptcy estate; (2) the state court lost jurisdiction

because of a pending appeal and its violation of Alicia’s due process rights;

and (3) the bankruptcy court could have efficiently resolved the issue by

granting declaratory relief. 5

      Bankruptcy courts have discretion to remand core proceedings under

28 U.S.C. § 1452(b). See id. at 820 (“That the matter is core does not preclude

a discretionary remand. . .”). But here, none of the claims involved in the

state court litigation constitute core bankruptcy proceedings.

      Alicia suggests that the question of Ryal’s interest in the proceeds is

intertwined with bankruptcy issues because the dispute arose only by

virtue of the bankruptcy court’s orders pertaining to the sale and

homestead exemption. We disagree. The division of property interests in

the Residence was decided long ago by the dissolution judgment. See In re

Marriage of Richards, 2020 WL 590889, at *5. The bankruptcy court merely

authorized the trustee to sell estate property and prudently directed the

parties to the state court to resolve their dispute about Ryal’s entitlement to

      5
        Alicia also filed a motion to strike portions of appellee’s answering brief which
she asserts are unsupported by citations to the record. We find no basis to strike; the
motion is DENIED.
                                            9
half of the proceeds—a dispute that directly involved interpretation of the

state court’s judgment and application of state law.

      Alicia claims that resolution of the dispute will have a significant

effect on administration of the bankruptcy estate. But the bankruptcy court

correctly observed that the exempt proceeds were no longer property of the

estate. See Galvan v. Galvan (In re Galvan), 110 B.R. 446, 449 (9th Cir. BAP

1990), superseded by statute on other grounds as recognized in In re Moe, 199

B.R. 737, 739 (Bankr. D. Mont. 1995) (citing Woodson v. Fireman’s Fund Ins.

Co. (In re Woodson), 839 F.2d 610, 616 n.8 (9th Cir. 1988)). Thus, whether

Ryal was entitled to half of the exempt proceeds would have no impact on

administration of estate assets.

      Moreover, Alicia’s contention that the state court lost jurisdiction is

baseless. She argued the state court lost jurisdiction by violating her right

to due process and equal protection under the law. Alicia does not clearly

articulate how the state court violated her rights, but the alleged violations

apparently stem from the entry of the original dissolution judgment. Alicia

provides no basis why the state court cannot interpret its own judgment or

why her arguments about the validity of that judgment should not be, or

were not already, decided in state court.

      Finally, we see no error in the bankruptcy court’s conclusion that the

factors favored remand. Contrary to Alicia’s argument, the court was not

required to consider all fourteen factors identified in Cedar Funding or Deen.

See In re Cedar Funding, Inc., 419 B.R. at 820 (“Courts may consider up to

                                       10
fourteen factors under [28 U.S.C. § 1452(b)].”). And the court was not

required to set an evidentiary hearing; the basis for remand was amply

supported by the pleadings and the record itself and did not require

resolution of disputed facts.

                                CONCLUSION

      Based on the foregoing, we AFFIRM the bankruptcy court’s order

remanding all family law issues to the state court.

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