Court Opinion

ID: 9373891
Source: CourtListenerOpinion
Date Created: 2023-02-22 16:10:19.671217+00
Date Added: 2024-06-11T17:16:49.297852
License: Public Domain

FILED
                                                                                 FEB 13 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                          NOT FOR PUBLICATION                               SUSAN M. SPRAUL, CLERK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-22-1167-FLC
 JILL SUZANN MEDLEY,
              Debtor.                               Bk. No. 6:20-bk-11768-SY

 PRECISION BUSINESS CONSULTING,
 LLC,
              Appellant,
 v.                                                 MEMORANDUM*
 JILL SUZANN MEDLEY,
              Appellee.

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

Before: FARIS, LAFFERTY, and CORBIT, Bankruptcy Judges.

                                 INTRODUCTION

      Precision Business Consulting, LLC (“Precision”) appeals the

bankruptcy court’s determination that it violated the automatic stay when

it attempted to collect a real estate sales commission claimed by chapter 13 1

      *
        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.
      Unless specified otherwise, all chapter and section references are to the
      1

Bankruptcy Code, 11 U.S.C. §§ 101-1532, and all “Rule” references are to the Federal
debtor Jill Suzann Medley. It argues that it was a “factor” that owned

Ms. Medley’s right to receive the commission, rather than a creditor with a

security interest in the commission; thus, the commission was not property

of the bankruptcy estate and not subject to the automatic stay.

      The bankruptcy court held an evidentiary hearing and determined

that Precision was a secured creditor and that its attempts to collect the

commission violated the automatic stay. The court sanctioned Precision

$20,000 to compensate Ms. Medley for a portion of her attorneys’ fees.

      We discern no reversible error and AFFIRM.

                                   FACTS

A.    Prepetition events

      Ms. Medley is a licensed real estate broker. She listed for sale a

property located in Lake Elsinore, California (the “Property”), owned by

Sun O. Park. In or around March 2019, Ms. Park accepted an offer to

purchase the Property.

      About a month later, Ms. Medley entered into a set of agreements

with Precision. Under the agreements, Ms. Medley assigned a portion of

the anticipated commission ($46,753) to Precision, and Precision agreed to

make an immediate “advance” to Ms. Medley of $35,070 and pay an

additional $7,010 when it received the commission. The agreements

referred to Precision as the assignee and purchaser of the commission, but

Rules of Bankruptcy Procedure.

                                       2
they also created a security interest, not only in that commission, but also

in all of Ms. Medley’s other commissions. Ms. Medley also agreed to let

Precision hold the deed to her house as additional collateral. The

agreements obligated Ms. Medley to assign replacement commissions to

Precision if Ms. Park’s sale did not close. Further, Ms. Medley was

responsible for “full liability in the event settlement fails to occur pursuant

to the terms of [Ms. Park’s pending purchase contract].”

      The anticipated sale did not close. Ms. Medley withdrew the sale

listing for the Property, allegedly because Ms. Park changed her mind

about selling the property.

B.    Ms. Medley’s bankruptcy case

      The day after she withdrew the sale listing, Ms. Medley filed a

chapter 13 petition. She did not list Precision as a creditor on her schedules

or creditor mailing list. However, she listed an affiliated business, Escrow

Cash Advance, LLC, as holding a claim (arising from a separate

transaction) and included Escrow Cash Advance on the mailing list at the

same address as Precision. James Cooper is the CEO of Precision and also

works for Escrow Cash Advance.

      Precision filed a proof of claim contending that it held a secured

claim of $53,405.32. The proof of claim indicated an 18% annual interest

rate and included a handwritten notation claiming “default interest”

totaling nearly $6,000. Mr. Cooper, on behalf of Precision, signed the proof

of claim and checked the box indicating “I am the creditor.”

                                       3
      Ms. Medley objected to Precision’s proof of claim, contending that

Precision’s debt was properly a general unsecured claim. She disclosed

that, after she filed her petition, she had relisted the Property and

anticipated receiving a commission totaling approximately $75,000 within a

month.

      In response to Ms. Medley’s objection to the proof of claim, Precision

argued that it was not a lender; rather, it was “a factoring company that

purchases receivables . . . . Factors don’t loan money.” It said that it became

immediately entitled to its portion of the commission when Ms. Medley

procured a buyer for the Property prepetition. Therefore, Precision argued

that it owned the assigned portion of the commission and that Ms. Medley

and her bankruptcy estate did not own that portion. Precision also argued

that it was a secured creditor because it secured its purchase of the

receivable with a UCC filing.

      In the meantime, Precision took steps to obtain payment of the

commission on the new sale of Ms. Park’s property. Mr. Cooper made

demands on Ms. Park, Ms. Medley, the escrow agent for Ms. Park’s sale,

and the sellers of other properties that Ms. Medley had listed for sale.

Precision did not seek or obtain relief from the automatic stay.

      Later, the bankruptcy court dismissed Ms. Medley’s chapter 13 case.

At some point thereafter, the sale of the Property closed, and Ms. Medley

retained the entire commission for herself.

                                       4
C.    The order to show cause

      Ms. Medley filed a motion for an order to show cause why Precision

should not be held in contempt for violation of the automatic stay. She

argued that Precision had notice of her March 2020 bankruptcy filing, yet it

directly contacted her and Ms. Park, demanding payment of the

commission earned postpetition. She cited §§ 362(k) and 105 and requested

that the court impose civil contempt sanctions of $20,000 for violation of a

court order.

      Precision opposed the motion. It argued that Precision was a factor

that owned a portion of the commission, not a lender whose collateral

included the commission. Precision argued that it did not violate the

automatic stay because it only acted to protect its own asset that it had

purchased prepetition.

      At the hearing on the motion, the bankruptcy court asked

Ms. Medley’s counsel whether she wished to seek a remedy for the stay

violation under § 362(k), in which event she would have to commence an

adversary proceeding, or instead seek sanctions in civil contempt

proceedings under § 105, in which case she would have to ask the court to

issue an order to show cause. Counsel responded that Ms. Medley would

proceed in an adversary proceeding. But she evidently changed her mind

because she did not commence an adversary proceeding; rather, she merely

refiled a substantially similar motion.

      The bankruptcy court granted the motion and entered an order (the

                                      5
“OSC”) requiring Precision to “show cause why the court should not

impose civil contempt sanctions against [Precision] in an amount up to

$20,000 under the court’s inherent sanctioning authority for violating the

automatic stay . . . .” The OSC did not cite § 362(k), but the court

“reserve[d] the right to impose alternate sanctions or sanctions on alternate

grounds as may be warranted by the evidence or argument presented in

connection with this order to show cause.”

      Precision responded to the OSC and repeated its earlier arguments; it

did not claim that Ms. Medley had to commence an adversary proceeding.

      In her reply memorandum, Ms. Medley argued that, under the Ninth

Circuit’s “transfer-of-risk” test, Precision was in reality a secured creditor

and not a buyer of the commission.

      The bankruptcy court required the parties to submit a joint pretrial

stipulation. Ms. Medley eventually submitted a proposed pretrial

stipulation, apparently without Precision’s input or cooperation. The

pretrial stipulation included Ms. Medley’s eleven exhibits but did not list

any for Precision.

      In February 2022, the bankruptcy court held a continued pretrial

conference and scheduled an evidentiary hearing. The court directed

Precision to file a trial brief laying out its legal argument that it was a factor

that could not violate the automatic stay. It also approved the pretrial

stipulation as submitted (i.e., with the admitted facts and without

Precision’s input as to exhibits, witnesses, and legal and factual issues).

                                        6
Precision does not challenge that order in this appeal.

      The parties filed their respective trial briefs, although Precision filed

its brief late, only two days before trial.

D.    The evidentiary hearing

      The bankruptcy court held the evidentiary hearing on March 16,

2022. Ms. Medley and Mr. Cooper were the only witnesses who testified.

The bankruptcy court admitted all of the exhibits previously identified by

Ms. Medley and precluded Precision from introducing additional exhibits

or making oral motions.

      Ms. Medley testified about the correspondence that she and her

clients received from Precision. She said that Mr. Cooper threatened her

multiple times on the phone and came to her residence and pounded on

her door. She testified that she considered the advance a loan. She

explained that she was “borrowing funds from the future, that I could pay

back soon as one of my properties sold, and I identified which property

that would be.”

      Mr. Cooper testified that he sent correspondence to Ms. Park and

Ms. Medley to preserve Precision’s legal rights to the commission. He

denied that he ever called Ms. Medley to discuss the commission, went to

her residence, or threatened her. Rather, he testified that Ms. Medley called

him postpetition and assured him that he would be paid at the close of

escrow. Instead, when she received and kept the commission, “she stole the

money.”

                                         7
      Mr. Cooper requested that “we state for a matter of record that I’m a

secured creditor[.]” His counsel agreed but also qualified, “[J]ust to be

clear, we dispute that [Precision] is a lender.”

      Mr. Cooper testified that Precision “exclusively acts as a factor. . . . It

has never once done a loan.” He explained why he believed that Precision

was not a lender and its portion of the commission was not part of the

bankruptcy estate subject to the automatic stay.

      The bankruptcy court made an extensive oral ruling at the conclusion

of the hearing and at a further hearing on Precision’s objection to

Ms. Medley’s proposed order. The court determined that Precision had

received actual notice of Ms. Medley’s bankruptcy filing.

      The bankruptcy court rejected Precision’s position that it was a factor

that had purchased the account receivable prepetition, rather than a

secured creditor holding a claim subject to the automatic stay. It relied on

Precision’s judicial admissions that it was a creditor in both its filings and

Mr. Cooper’s testimony. It also held that, while Precision attempted to label

its transaction as a true purchase, the transaction was in substance a

disguised financing agreement.

      The bankruptcy court thus concluded that Precision willfully violated

the automatic stay when Mr. Cooper, on behalf of Precision, made

demands on Ms. Park and Ms. Medley.

      The court held that, under the U.S. Supreme Court’s decision in

Taggart v. Lorenzen, 139 S. Ct. 1795 (2019), an objective standard applies to

                                        8
stay violations, and a subjective good-faith belief will not negate a

violation. It continued, “I don’t think there’s a real honest objective good-

faith belief that [Precision] could rely on to say it shouldn’t be sanctioned.”

      The bankruptcy court awarded a sanction of $20,000. It observed that

Ms. Medley’s counsel had provided evidence of about $26,000 of attorneys’

fees and that, even if some of those fees were unreasonable, the amount

would be at least $20,000. The court repeatedly stated that it wished it

could award a larger sanction but believed that it could not because the

OSC sought only that amount.

      In its written order, the bankruptcy court decided that “$20,000

amounts to an appropriate civil sanction award in the context of this case

for Precision’s willful violation of the automatic stay under 11 U.S.C.

§ 362(k).” The court ordered Precision to “pay a civil sanction for actual

damages incurred by [Ms. Medley] in the form of her attorney’s fees and

costs in the amount of $20,000 . . . .”

      Precision timely appealed.

                                JURISDICTION

      The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

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

                                     ISSUE

      Whether the bankruptcy court erred in sanctioning Precision for

violation of the automatic stay.

                                          9
                         STANDARDS OF REVIEW

      “A bankruptcy court’s determination that the automatic stay was

violated is a question of law subject to de novo review.” Yellow Express, LLC

v. Dingley (In re Dingley), 514 B.R. 591, 595 (9th Cir. BAP 2014), aff’d on other

grounds, 852 F.3d 1143 (9th Cir. 2017). “De novo review requires that we

consider a matter anew, as if no decision had been made previously.”

Francis v. Wallace (In re Francis), 505 B.R. 914, 917 (9th Cir. BAP 2014).

      We review for an abuse of discretion the bankruptcy court’s

imposition of contempt sanctions. Knupfer v. Lindblade (In re Dyer), 322 F.3d

1178, 1191 (9th Cir. 2003); Eskanos & Adler, P.C. v. Leetien, 309 F.3d 1210,

1213 (9th Cir. 2002) (“The amount of sanctions imposed for a willful

violation of the stay is reviewed for an abuse of discretion.”). A bankruptcy

court abuses its discretion if it applies an incorrect legal standard or

misapplies the correct legal standard, or if its factual findings are illogical,

implausible, or without support from evidence in the record. United States

v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc).

      We review the court’s underlying factual findings, including whether

the violation was willful, for clear error. Eskanos & Adler, P.C., 309 F.3d at

1213. Findings of fact are clearly erroneous only if they are illogical,

implausible, or without support in the record. Retz v. Samson (In re Retz),

606 F.3d 1189, 1196 (9th Cir. 2010). We give particular deference to the

bankruptcy court’s credibility findings. Id. If two views of the evidence are

possible, the court’s choice between them cannot be clearly erroneous.

                                        10
Anderson v. City of Bessemer City, 470 U.S. 564, 573-74 (1985).

      We may affirm on any basis supported by the record. Black v. Bonnie

Springs Family Ltd. P’ship (In re Black), 487 B.R. 202, 211 (9th Cir. BAP 2013).

                                    DISCUSSION

A.    The bankruptcy court did not err in determining that Ms. Medley’s
      right to receive the commission was subject to the automatic stay.

      1.     The transaction was a secured loan in substance.

      Precision’s primary argument on appeal is that it was a “factor” that

purchased and owned the right to receive a portion of the commission, not

a lender that made a loan secured by the commission. The bankruptcy

court did not err when it ruled against Precision.

      “Factoring” is described as “[t]he buying of accounts receivable at a

discount. The price is discounted because the factor (who buys them)

assumes the risk of delay in collection and loss on the accounts receivable.”

Produce Pay, Inc. v. FVF Distribs. Inc., 468 F. Supp. 3d 1304, 1309 n.3 (S.D.

Cal. 2020) (quoting BLACK’S LAW DICTIONARY 612 (7th ed. 1999)).2

      The bankruptcy court applied the familiar principle that the legal

consequences of a transaction are based on its economic substance rather

than its form. California courts have applied this principle in many

      2
         Similarly, the California Financial Code defines “factoring” as “an accounts
receivable purchase transaction that includes an agreement to purchase, transfer, or sell
a legally enforceable claim for payment held by a recipient for goods the recipient has
supplied or services the recipient has rendered that have been ordered but for which
payment has not yet been made.” Cal. Fin. Code § 22800(i).
                                           11
contexts, such as usury. See Boerner v. Colwell Co., 21 Cal. 3d 37 (1978) (“A

loan . . . is the delivery of a sum of money to another under a contract to

return at some future time an equivalent amount with or without an

additional sum agreed upon for its use; and if such be the intent of the

parties the transaction will be deemed a loan regardless of its form.”).

      The same basic principle applies to transactions involving accounts

receivable. Whether a transaction is a sale or loan is a factual determination

that is based on the substance of the agreement:

            Accounts receivable financing is an uncertain area in the
      usury law and no exact tests have been formulated. The
      question whether a transaction is a sale or a usurious loan is
      one of fact and the trier of fact should look to substance
      rather than to form. We must determine whether there is any
      substantial evidence to support the findings and, where a
      finding of either a loan or a sale can be inferred from the facts,
      we may not substitute our judgment for that of the trial court.

Baruch Inv. Co. v. Huntoon, 257 Cal. App. 2d 485, 492 (1967) (citations

omitted) (emphasis added).

      The Ninth Circuit discussed factoring in another context in S & H

Packing & Sales Co. v. Tanimura Distribution, Inc., 883 F.3d 797 (9th Cir. 2018)

(en banc). The plaintiffs were growers who had sold produce to a

distributor on credit. The distributor in turn resold the produce on credit

and “sold” the resulting accounts receivable to a factor. The distributor’s

business failed, and it did not pay the growers. The growers sued the

distributor and the factor, arguing that the distributor held the produce

                                       12
and the proceeds of its sale in trust under the Perishable Agricultural

Commodities Act (“PACA”) and that the distributor’s “sale” of the

proceeds of the produce to the factor was a violation of the PACA trust.

The parties agreed that a PACA trustee (such as the distributor) may sell

assets of a PACA trust (such as produce and its proceeds) on commercially

reasonably terms without breaching the PACA trust. But the court held

that this rule applies only if the transaction was a “true sale” and not a

secured loan. Id. at 801-02.

       The court observed that the agreement between the distributor and

the factor was styled as a sale but “involved some hallmarks of a secured

lending arrangement[.]” Id. at 799. For example, the factor “was granted

security interests in accounts receivable and all other asset classes except

inventory; UCC financing statements were filed; other debts were

subordinated; and there was a measure of recourse for [the factor] against

[the distributor] if [the factor] could not collect from [the distributor’s]

customers . . . .” Id. In particular, the Ninth Circuit held “that a transfer of

the primary or direct risk of non-payment on the accounts is the hallmark

of a true sale.” Id. at 808. 3

       In this case, the substance of the transaction and the parties’ intent

support the bankruptcy court’s finding that the agreement was a disguised

       3
        Although S & H Packing & Sales concerned a PACA transaction, there is no
reason to think that its analysis of whether a factoring agreement is a “true sale” or
actually a secured loan is inapplicable in other contexts.
                                            13
loan. Although Precision sometimes called the transaction a “sale,” the

substance of the agreement was otherwise. Ms. Medley agreed that she

would “have full liability in the event settlement fails to occur.” Thus, she

bore the entire risk that the commission would not be paid; Precision bore

that risk only indirectly, to the extent that Ms. Medley might be unable to

pay Precision if she did not receive the commission. Ms. Medley also

expressly granted Precision a security interest, not only in the commission

against which Precision made an advance, but also in all of her present and

future accounts receivable and her residence. She testified that she believed

that she was “borrowing funds from the future” that she had to repay.

Although Mr. Cooper testified otherwise, the bankruptcy court found him

not credible.

       Furthermore, Precision’s conduct and admissions support the

bankruptcy court’s finding that the transaction was a loan in substance. It

repeatedly identified itself as a secured creditor, including in its proof of

claim. The proof of claim also demanded 18% interest on the debt. At trial,

Mr. Cooper insisted that he would “stipulate” that Precision is a secured

creditor.4

       4Standing alone, this factor might not be determinative. Article 9 of the Uniform
Commercial Code provides that it applies to (among other things) “[a] transaction,
regardless of its form, that creates a security interest in personal property or fixtures by
contract” and “[a] sale of accounts, chattel paper, payment intangibles, or promissory
notes” (subject to certain exceptions). Cal. Com. Code §§ 9109(a)(1), (a)(3), (d)(4)-(7). In
other words, some “true sales” of accounts are governed by Article 9 and some “true
buyers” are treated as “secured parties.” But this does not detract from the bedrock
                                             14
       Based on these factors, the bankruptcy court did not err when it

found that the agreement was not a true sale, but rather a secured loan, and

that the right to receive the commission was property of the bankruptcy

estate protected by the automatic stay.5 We must not second-guess that

finding. See W. Pico Furniture Co. v. Pac. Fin. Loans, 2 Cal. 3d 594, 603-04

(1970) (“[T]he role of an appellate court is to determine whether there is

any substantial evidence to sustain the finding of the trier of fact, and,

where a finding of either a loan or a sale can be inferred from the facts, we

may not substitute our judgment for that of the trial court.” (cleaned up)).

       2.     The bankruptcy court did not err in ruling on a contested
              matter rather than an adversary proceeding.

       Precision argues that the bankruptcy court erred in deciding this

matter as a contested matter because Rule 7001(2) requires an adversary

proceeding to determine the recharacterization of a debt. It relies on our

unpublished decision in Jahr v. Frank (In re Jahr), BAP No. EW-11-1538-

MkHJu, 2012 WL 3205417, at *4 (9th Cir. BAP Aug. 1, 2012), which also

concerned a stay violation, for the proposition that a Rule 7001(2)

proceeding “must be brought as an adversary proceeding. And it is settled

principles that substance controls over form, and that a transaction labeled as a sale
should be treated as a secured loan if that is its substance.
       5
         Precision argues that Ms. Medley earned the commission when she procured a
ready, willing, and able buyer, and that she was entitled to the commission on the
petition date. We need not address this argument. No matter when Ms. Medley earned
the commission, Precision did not own it, and the automatic stay barred Precision’s
efforts to seize it.

                                            15
law in this circuit that it is error for a bankruptcy court to determine

property interests outside of an adversary proceeding.”

      Precision’s argument exposes some confusion in the record. The

bankruptcy court initially said that, if Ms. Medley wished to proceed under

§ 362(k), she would have to commence an adversary proceeding. But even

though Ms. Medley opted to file a motion commencing a contested matter

rather than a complaint commencing an adversary proceeding, and even

though the court did not cite § 362(k) in its OSC, the court relied on that

section in its written ruling.

      Nevertheless, we disagree that an adversary proceeding was required

in this case.

      First, Precision never requested an adversary proceeding. Even when

the bankruptcy court spent considerable time weighing an adversary

proceeding versus a contested matter, Precision remained silent. 6 It has

waived this point of error.

      Second, even if the bankruptcy court should have required an

adversary proceeding, its failure to do so was harmless. Id. at *5 (“If the

bankruptcy court’s circumvention of the adversary proceeding

requirement was harmless, this Panel need not reverse on that basis.”). We

are to consider whether:

      (1) the material facts were few and undisputed, (2) the
      6
        At oral argument, this Panel asked Precision’s counsel to identify where in the
record Precision demanded an adversary proceeding. Counsel conceded that there was
no demand.
                                          16
      dispositive issues were pure questions of law, (3) neither party
      expressed any discontent with the contested matter procedures
      the bankruptcy court utilized, and (4) this Panel was “satisfied
      that neither the factual record nor the quality of the
      presentation of the arguments would have been materially
      different had there been an adversary proceeding.”

Id. (quoting Ruvacalba v. Munoz (In re Munoz), 287 B.R. 546, 550 (9th Cir.

BAP 2002)).

      Precision was not prejudiced. Considering the first two Munoz

factors, although there were factual disputes, the court held an evidentiary

hearing to resolve them, and Precision does not identify any relevant

differences between that evidentiary hearing and a trial in an adversary

proceeding. Considering the third and fourth factors, neither party

expressed dissatisfaction with the nature of the proceedings at the time or

demanded an adversary proceeding. Given that Precision did not

participate in the joint pretrial stipulation, ignored the court’s orders, and

was unprepared for the evidentiary hearing, an adversary proceeding

would not have changed the outcome.

B.    The bankruptcy court did not err in sanctioning Precision.

      We must first ascertain the legal basis on which the bankruptcy court

relied. In this respect, the record is not perfectly clear.

      In its oral ruling, the court suggested that it would rely on its civil

contempt power. But the written order refers to “civil contempt sanctions”

only in passing; the last (and most explicit) paragraph of the order refers

                                        17
only to a “civil sanction” under § 362(k), and not a “civil contempt

sanction.” The change in the court’s rationale between its oral rulings and

its final written order does not warrant any relief on appeal. See Rawson v.

Calmar S.S. Corp., 304 F.2d 202, 206 (9th Cir. 1962) (“The trial judge is not to

be lashed to the mast on his off-hand remarks in announcing decision prior

to the presumably more carefully considered deliberate findings of fact.”).

       Accordingly, we will evaluate the order under § 362(k).

       That section provides that, subject to an exception that does not apply

here, “an individual injured by any willful violation of a stay provided by

this section shall recover actual damages, including costs and attorneys’

fees, and, in appropriate circumstances, may recover punitive damages.”

See Am.’s Servicing Co. v. Schwartz-Tallard (In re Schwartz-Tallard), 803 F.3d

1095, 1100 (9th Cir. 2015) (en banc) (discussing the history and liberal

application of § 362(k) and stating “that Congress sought to encourage

injured debtors to bring suit to vindicate their statutory right to the

automatic stay’s protection, one of the most important rights afforded to

debtors by the Bankruptcy Code”). In other words, § 362(k) “makes an

award of actual damages and attorney’s fees mandatory, and grants

bankruptcy courts the discretion to impose punitive damages in

appropriate cases.” Id. at 1099.

       The record supports a determination that the elements of § 362(k) are

met.

       First, there is no question that Ms. Medley is an “individual.”

                                       18
       Second, as we have discussed, we agree with the bankruptcy court

that Precision violated the stay. Precision does not deny that, if the right to

receive the commission was property of the estate, Precision’s efforts to

intercept the commission violated the automatic stay. 7 See § 362(a)(3), (6).

       Third, the bankruptcy court’s findings are sufficient to support a

determination that Precision’s violation was “willful.” In this circuit, “[a]

willful violation is satisfied if a party knew of the automatic stay, and its

actions in violation of the stay were intentional.” Koeberer v. Cal. Bank of

Commerce (In re Koeberer), 632 B.R. 680, 687 (9th Cir. BAP 2021) (quoting

Eskanos & Adler, P.C., 309 F.3d at 1215); see also Morris v. Peralta (In re

Peralta), 317 B.R. 381, 389 (9th Cir. BAP 2004) (“No specific intent is

required; a good faith belief that the stay is not being violated is not

relevant to whether the act was ‘willful’ or whether compensation must be

awarded.” (cleaned up)).

       Precision does not seriously deny that it had actual knowledge of

Ms. Medley’s bankruptcy filing. Although Precision was not initially

       7
         Precision argues that the U.S. Supreme Court’s decision in City of Chicago v.
Fulton, 141 S. Ct. 585 (2021), supports its position that it did not violate the automatic
stay, because Mr. Cooper’s communication with Ms. Park and Ms. Medley sought only
to preserves the status quo. But Fulton is inapplicable; it concerned whether the
automatic stay requires a creditor in possession of estate property to return that
property to the debtor. The Court held that passive retention of such property does not
violate the stay. Id. at 589 (“The question in this case is whether an entity violates that
prohibition by retaining possession of a debtor’s property after a bankruptcy petition is
filed. We hold that mere retention of property does not violate § 362(a)(3).”). Unlike the
City of Chicago, which did nothing, Precision took active steps to collect its debt.

                                            19
scheduled as a creditor or included in the creditor matrix, it filed a timely

proof of claim. The joint pretrial statement also included as an admitted

fact that Precision received proper notice of the bankruptcy case.

      Similarly, Precision cannot deny that its acts were intentional.

Mr. Cooper did not contact Ms. Park, Ms. Medley, the escrow agent for

Ms. Park’s sale, and Ms. Medley’s other clients by mistake.

      In its oral ruling, the bankruptcy court focused on civil contempt

rather than § 362(k). The court did not refer to the Ninth Circuit’s definition

of “willful” for an automatic stay violation under § 362(k). Instead, the

bankruptcy court cited the standard enunciated in Taggart for civil

contempt sanctions based on a violation of the discharge injunction. 139 S.

Ct. at 1804 (“A court may hold a creditor in civil contempt for violating a

discharge order where there is not a ‘fair ground of doubt’ as to whether

the creditor’s conduct might be lawful under the discharge order.”).

Taggart concerned the discharge injunction and did not decide what

standard applies when sanctions are sought under § 362(k) for a violation

of the automatic stay. Id. at 1803-04.

      The bankruptcy court held that this standard was met because there

was no “real honest objective good-faith belief that [Precision] could rely

on to say it shouldn’t be sanctioned.” This satisfies the Taggart standard

that there be “no objectively reasonable basis for concluding that [the

violator’s] conduct might be lawful.” See id. at 1799.

      Although the court’s analysis in its oral ruling did not focus on

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§ 362(k), its findings establish that Precision harbored the mental state

required under § 362(k). The bankruptcy court must have found, even if

only implicitly, that Precision’s “actions in violation of the stay were

intentional.” Eskanos & Adler, P.C., 309 F.3d at 1215.

       Accordingly, § 362(k) required the bankruptcy court to award “actual

damages, including costs and attorneys’ fees . . . .” “Only an award of fees

reasonably incurred is mandated by the statute; courts awarding fees

under § 362(k) thus retain the discretion to eliminate unnecessary or

plainly excessive fees.” In re Schwartz-Tallard, 803 F.3d at 1101.

       In its written order, the court explained that it was allowing “actual

damages incurred by [Ms. Medley] in the form of her attorney’s fees and

costs in the amount of $20,000.” In its oral comments, the court stated that

it had reviewed the requested fees, considered Precision’s objections,

identified improper billing entries that would warrant minor reductions,

and ultimately determined that the reasonable total fees exceeded the

$20,000 cap. This explanation is adequate. See Moreno v. City of Sacramento,

534 F.3d 1106, 1111 (9th Cir. 2008) (holding that the explanation of a fee

award “need not be elaborate, but it must be comprehensible”).8

       8
        Precision argues that the bankruptcy court erred by ignoring Ms. Medley’s
abuse of the bankruptcy system. But the bankruptcy court did consider Ms. Medley’s
conduct and rightly concluded that it did not change her entitlement to the automatic
stay or Precision’s violation of the stay. Precision also argues that the bankruptcy court
should have considered Ms. Medley’s failure to mitigate her damages. But the
bankruptcy court reviewed the fees and concluded that the award was reasonable.
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Considering that Ms. Medley had requested about $26,000 of fees, and the

litigation against Precision included a full-day trial, the court did not

commit clear error when it found that Ms. Medley’s reasonable attorneys’

fees were $20,000.

      It is true that, in its oral ruling, the court referred to divergent legal

grounds for the amount of its award, and some of those reasons would

have been erroneous. For example, the court repeatedly suggested that it

wished to punish Precision or deter it from similar conduct in future cases.

But the court did not expressly or implicitly make the findings that would

support an award of punitive damages under § 362(k). Elsewhere, the court

said that Precision could “purge its contempt” by paying the $20,000

sanction. This suggests that the court may have thought that it could justify

the $20,000 award as a coercive sanction. But § 362(k) does not mention

coercive sanctions and, in any event, a flat, nonreducible fine cannot be

justified as a coercive measure.

      On appeal, we review the court’s final written findings, and we

disregard any prior inconsistent oral comments. See Rawson, 304 F.2d at

206. The court’s award of $20,000 of attorneys’ fees under § 362(k) was

correct.

                                CONCLUSION

      The bankruptcy court did not err in holding that the commission was

subject to the automatic stay and that Precision violated the stay and in

awarding $20,000 as compensation for Ms. Medley’s attorneys’ fees. We

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AFFIRM.

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