Court Opinion

ID: 9373943
Source: CourtListenerOpinion
Date Created: 2023-02-22 16:10:40.489018+00
Date Added: 2024-06-11T17:16:43.852986
License: Public Domain

FILED
                                                                                   JUL 12 2022
                          NOT FOR PUBLICATION                                 SUSAN M. SPRAUL, CLERK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 Nos. CC-21-1240-SGF
 GARY ABRAMS,                                                CC-21-1241-SGF
                     Debtor.
                                                    Bk. No. 2:19-bk-21243-VZ
 GARY ABRAMS,
                     Appellant,                     Adv. No. 2:20-ap-01015-VZ
 v.
 JONI SCHINSKE; UNITED STATES                       MEMORANDUM*
 TRUSTEE; NANCY K CURRY,
              Appellees.

               Appeal from the United States Bankruptcy Court
                     for the Central District of California
                Vincent Zurzolo, Bankruptcy Judge, Presiding

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

                                 INTRODUCTION

      The day after debtor Gary Abrams filed his current bankruptcy

petition, appellee Joni Schinske purchased Abrams’ Florida real property at

a foreclosure sale. When Schinske later found out about the bankruptcy,

she commenced an adversary proceeding and obtained a default judgment

      *
        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.
that the automatic stay under § 362(a)1 never went into effect because this

was Abrams’ third bankruptcy pending within a year and the first two

bankruptcies had been dismissed. Abrams never appealed that judgment.

      Schinske likewise obtained an order in Abrams’ main bankruptcy

case determining that the codebtor stay under § 1301 did not enjoin the

foreclosure sale because the debt foreclosed on did not qualify as a

consumer debt within the meaning of the Code. Abrams never appealed

that order either.

      Abrams has since repeatedly moved to invalidate the default

judgment and the codebtor stay order. Each motion has been denied; only

the last two denials are within the scope of these appeals.

      Abrams appeals from the denial of his second post-judgment motion

to “dismiss” the adversary proceeding. He also appeals from the denial of

his third motion for Rule 9011 sanctions. None of Abrams’ arguments have

any merit, so we AFFIRM.

                                       FACTS

A.    Abrams’ bankruptcy filing and Schinske’s adversary proceeding.

      Abrams commenced his current bankruptcy case by filing a

      1
        Unless specified otherwise, chapter and section references are to the Bankruptcy
Code, 11 U.S.C. §§ 101–1532, “Rule” references are to the Federal Rules of Bankruptcy
Procedure, “Civil Rule” references are to the Federal Rules of Civil Procedure, and
“Local Rule” references are to the Local Bankruptcy Rules for the Central District of
California.
                                           2
voluntary chapter 13 petition in September 2019.2 In his schedules, he

identified two parcels of real property that he owned as community

property with his non-debtor spouse. One was his residence in Culver City,

California, and the other was residential property in St. Petersburg, Florida.

      In January 2020, Schinske commenced her adversary proceeding

seeking declaratory relief that the automatic stay never went into effect in

Abrams’ underlying bankruptcy case because this was Abrams’ third

bankruptcy pending within a year. Schinske alleged that she purchased

Abrams’ Florida property at a judicial foreclosure sale conducted on the

day after Abrams filed his latest bankruptcy case. Her complaint

referenced and attached a copy of the state court’s certificate of title

showing that she purchased the property at the foreclosure sale. Based on

these allegations, Schinske contended that the bankruptcy had no effect on

the foreclosure sale.

      When Abrams failed to timely respond to the complaint, Schinske

obtained entry of default and moved for entry of a default judgment.

Meanwhile, Abrams moved to set aside the default. The court denied

Abrams’ motion and entered default judgment confirming that the

automatic stay never came into effect upon the filing of Abrams’ latest

chapter 13 petition. Abrams did not appeal from the default judgment.

      2
          We exercise our discretion to take judicial notice of documents electronically
filed in the underlying bankruptcy case and adversary proceeding. See Atwood v. Chase
Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).
                                            3
B.    The codebtor stay motion.

      While the default judgment proceedings were still pending, Schinske

filed a motion for relief from stay, in relevant part seeking relief from the

codebtor stay under § 1301. She argued that the codebtor stay never went

into effect for the same reasons the automatic stay did not go into effect.

Alternately, she argued that the codebtor stay only applies to consumer

debts. She maintained that Abrams’ Florida property was a multi-unit

residential property that he acquired as a rental property and for

investment purposes, so the mortgage he and his wife executed to acquire

the property was not a debt incurred for personal, family, or household

purposes.

      Though Abrams opposed Schinske’s relief from stay motion and filed

a supporting declaration, his opposition papers contained no evidence

specifically addressing whether the mortgage debt qualified as a consumer

debt within the meaning of the Code. In contrast, in her reply in support of

her relief from stay motion, Schinske included the applicable mortgage and

the accompanying “1-4 Family Rider.” In relevant part, the 1-4 Family

Rider overrode the mortgage’s occupancy requirement. It also contained an

assignment of rents provision and a requirement that borrowers maintain

rental loss insurance. Schinske argued that these documents showed that

the property was purchased as an investment.

      Relying on Abrams’ schedules and Schinske’s evidence, the court

held that the mortgage debt did not qualify as consumer debt. Because the

                                       4
codebtor stay is limited to consumer debts, the court entered an order that

Abrams’ latest bankruptcy filing did not enjoin the foreclosure sale.

Abrams did not appeal the codebtor stay order.

C.    Abrams’ repeated requests for relief from the default judgment and
      the codebtor stay order.

      Undaunted, Abrams filed motion after motion seeking relief from the

default judgment and the codebtor stay order. In the bankruptcy case,

Abrams eventually filed an appeal from the denial of one of these motions,

but the district court dismissed that appeal for failure to prosecute.

      The repetitive nature of Abrams’ requests for relief ultimately led the

bankruptcy court to enter a vexatious litigant order against him,

prohibiting him from filing any new papers in either the adversary

proceeding or the main case pertaining to the parties to the foreclosure

sale, except for notices of appeal.

D.    Abrams’ sanctions motions.

      Abrams filed three sanctions motions in Schinske’s adversary

proceeding, all of which the bankruptcy court denied. Each motion

invoked Civil Rule 11, which is made applicable in adversary proceedings

and bankruptcy cases by Rule 9011. The first sanctions motion was one

page and contained no allegations or grounds supporting sanctions. Unlike

the first sanctions motion, the second and third sanctions motions set forth

allegations and grounds in support of sanctions. More specifically, Abrams

relied on the same mortgage documents Schinske had attached to her reply

                                       5
in support of her codebtor stay motion. Abrams claimed that these

documents proved he and his spouse incurred the mortgage debt for

personal, family, or household purposes. Though he had not presented any

relevant evidence in his opposition to the codebtor stay motion, he further

claimed that all of the occupants of the Florida property were family

members. Abrams therefore maintained that the codebtor stay motion and

reply were factually baseless and that Schinske did not make a reasonable

inquiry before filing them. He also claimed that Schinske filed the motion

and reply for the improper purposes of defrauding him out of the property

and evading the consequences of her stay violation. He asserted that

Schinske commenced her adversary proceeding for the same improper

purposes.

      The bankruptcy court denied the second and third sanctions motions

for identical reasons. Initially, the court noted that these sanctions motions

did not comply with a Local Rule applicable when a litigant files a

duplicative motion. Abrams also failed to comply with Rule 9011(c)’s safe

harbor requirement. More importantly, he failed to present any evidence

demonstrating cause for sanctions. The court observed that in granting the

codebtor stay motion and entering the default judgment, it necessarily

determined that both matters were properly brought and meritorious.

      Abrams timely appealed the denial of his third sanctions motion.

E.    Abrams’ motions to “dismiss” Schinske’s adversary proceeding.

      In August 2021, roughly 15 months after entry of the default

                                       6
judgment against him, Abrams filed his first “motion to dismiss”

Schinske’s adversary proceeding. The motion to dismiss was largely the

same as about a half dozen other motions Abrams filed between April and

August 2021. It only differed from the other motions in one notable respect:

it cited Civil Rule 12(b)(6) as the principal basis for the motion. It also cited

as an alternative basis Civil Rule 56. The motion mentioned subject matter

jurisdiction and standing but was largely based on Abrams’ repetitive

claim that the Florida property was acquired for consumer purposes. The

motion contained no coherent explanation why this claim implicated

subject matter jurisdiction or standing.

      In September 2021, the bankruptcy court denied the first dismissal

motion without a hearing as moot in light of the default judgment. The

court noted that the motion essentially sought the same relief as a number

of Abrams’ prior filings that the court had previously denied. It also noted

that the time to seek relief under Civil Rule 12(b)(6) had passed long ago.

As for Abrams’ alternate request for summary judgment, in addition to

being rendered moot by entry of the default judgment, the court held that

the motion met none of the procedural summary judgment requirements.

Abrams did not appeal this order.

      In October 2021, Abrams filed his second motion to dismiss. Similar

to his first dismissal motion, Abrams argued that Schinske’s complaint had

failed to establish both the court’s subject matter jurisdiction and her

standing to seek the relief requested in the complaint. The remainder of the

                                        7
second dismissal motion asserted that Schinske had failed to sufficiently

allege in her complaint that the Florida property was acquired as an

investment and for rental purposes.3 The court denied the motion a day

after it was filed for the same reasons it denied the first dismissal motion.

Abrams timely appealed the denial of the second dismissal motion.

                                 JURISDICTION

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

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

                                      ISSUES

1.    Did the bankruptcy court abuse its discretion when it denied

Abrams’ second dismissal motion?

2.    Did the bankruptcy court abuse its discretion when it denied

Abrams’ third sanctions motion?

                           STANDARD OF REVIEW

      Though Abrams described his dismissal motion as a Civil Rule

12(b)(6) motion, the motion essentially sought relief on jurisdictional

grounds from the court’s prior default judgment in favor of Schinske.

Therefore, the governing standard of review is that applicable to Rule 9024

motions, which is abuse of discretion. Fernandez v. GE Cap. Mortg. Servs. (In

      3
        The dismissal motion’s discussion regarding the business or consumer purpose
for acquiring the Florida property is a non sequitur. The adversary complaint did not
challenge the application of § 1301 or whether the underlying debt was a consumer
debt. Those issues were addressed only in the codebtor stay motion, which was
addressed and resolved in the main bankruptcy case.
                                          8
re Fernandez), 227 B.R. 174, 177 (9th Cir. BAP 1998), aff'd, 208 F.3d 220 (9th

Cir. 2000).

      We also review orders regarding Rule 9011 sanctions for an abuse of

discretion. Fjeldsted v. Lien (In re Fjeldsted), 293 B.R. 12, 18 (9th Cir. BAP

2003).

      The bankruptcy court abuses its discretion if it applies an incorrect

legal rule or its factual findings are illogical, implausible, or without

support in the record. United States v. Hinkson, 585 F.3d 1247, 1261–62 (9th

Cir. 2009) (en banc).

      “We may affirm on any ground fairly supported by the record.”

Jimenez v. ARCPE 1, LLP (In re Jimenez), 613 B.R. 537, 543 (9th Cir. BAP

2020).

                                  DISCUSSION

      Abrams challenges the orders denying his second dismissal motion

and his third sanctions motion. We address each denial in turn.

A.    Denial of the second motion to dismiss.

      Abrams maintains that the bankruptcy court should have granted his

second Civil Rule 12(b)(6) motion. But that motion was filed far too late to

be effective. He filed his second dismissal motion roughly 19 months after

the court entered his default under Civil Rule 55(a), 4 and roughly 17

months after entry of the default judgment. After entry of default, Abrams

      4
        Civil Rules 12(b) and 55 are made applicable in adversary proceedings by Rules
7012(b) and 7055, respectively.
                                          9
no longer had the right or ability to respond to Schinske’s complaint. See

Reilly v. Wells Fargo Bank, N.A. (In re Reilly), BAP No. AZ-19-1187-SFB, 2020

WL 710371, at *6 (9th Cir. BAP Feb. 11, 2020), aff'd, 841 F. App’x 37 (9th Cir.

2021). Thus, Abrams no longer could file either an answer or a Civil Rule

12(b) motion to dismiss. See, e.g., Jitrade, Inc. v. Style In USA, Inc., Case No.

2:17-CV-04245-ODW-SK, 2017 WL 8185858, at *1 (C.D. Cal. Oct. 2, 2017)

(striking Civil Rule 12(b)(6) motion to dismiss); Cohen v. Murphy, Case No.

C 03-05793 HRL, 2004 WL 2779942, at *1 (N.D. Cal. Apr. 20, 2004) (striking

defendants’ answer).

      After entry of the default judgment, Abrams could obtain relief only

under Civil Rule 60(b).5 See Civil Rule 55(c); Katzir's Floor & Home Design,

Inc. v. M–MLS.com, 394 F.3d 1143, 1147 n.1 (9th Cir. 2004). Because we must

construe Abrams’ pro se filings liberally, Morrison v. Hall, 261 F.3d 896, 899

n.2 (9th Cir. 2001), we will treat his second dismissal motion as if it were

filed under Civil Rule 60(b).

      Having reviewed Abrams’ appeal brief and his second dismissal

motion, the only coherent arguments he makes that might be cognizable

under Civil Rule 60(b) concern the court’s subject matter jurisdiction and

Schinske’s standing. The absence of subject matter jurisdiction or a lack of

Article III standing potentially could support relief from the default

judgment under Civil Rule 60(b)(4). See generally United Student Aid Funds,

      5
       Civil Rule 60(b) is made applicable in bankruptcy cases and adversary
proceedings by Rule 9024.
                                         10
Inc. v. Espinosa, 559 U.S. 260, 271 (2010) (explaining that a federal court’s

judgment is void under Civil Rule 60(b)(4) only in those rare instances

where the federal court manifestly lacks jurisdiction, lacking even an

arguable basis for jurisdiction). Unfortunately for Abrams, both of his

jurisdictional arguments are frivolous.

          With respect to subject matter jurisdiction, bankruptcy courts have

core jurisdiction over proceedings regarding the validity and scope of the

automatic stay. 28 U.S.C. § 157(b)(2)(A), (G); see Contractors’ State License Bd.

v. Dunbar (In re Dunbar), 245 F.3d 1058, 1062–63 (9th Cir. 2001).6 As for

Article III standing, the requirements are relatively minimal. Veal v. Am.

Home Mortg. Servicing, Inc. (In re Veal), 450 B.R. 897, 906 (9th Cir. BAP 2011).

The litigant merely needs to show injury in fact, caused by or traceable to

some conduct or statutory prohibition, which the requested relief likely

would redress. Id.; see also Cruz v. Stein Strauss Tr. # 1361 (In re Cruz), 516

B.R. 594, 601-02 (9th Cir. BAP 2014) (holding that successful bidder at

foreclosure sale had statutory standing under § 362(d) to move for relief

from stay). Here, Schinske’s complaint readily established her Article III

standing. Absent the declaratory relief she requested regarding the

inapplicability of the automatic stay, the stay threatened to void her

      6
         More precisely, 28 U.S.C. § 1334 conferred subject matter jurisdiction on the
district court, which was referred to the bankruptcy court pursuant to 28 U.S.C. § 157(a)
and General Order No. 13-05 of the United States District Court for the Central District
of California. 28 U.S.C. § 157(b)(2)(A) and (G) then gave the bankruptcy court authority
to enter a final judgment.
                                           11
purchase of the Florida property.

      In short, Abrams’ second dismissal motion failed to present any

meritorious grounds for relief from the default judgment. Therefore, the

bankruptcy court correctly denied the second dismissal motion.

B.    Denial of the third sanctions motion.

      Abrams contends that the bankruptcy court should have granted his

third Rule 9011 sanctions motion. We disagree. As recognized by the

bankruptcy court, Abrams made no attempt to comply with Rule 9011’s

“safe harbor” requirement, which requires the movant to serve the

sanctions motion 21 days in advance of filing to give the respondent an

opportunity to withdraw the offending papers. See Rule 9011(c)(1)(A).

Failure to provide the required advance notice justifies denial of the

sanctions motion. See Radcliffe v. Rainbow Constr. Co., 254 F.3d 772, 789 (9th

Cir. 2001) (enforcing Civil Rule 11’s safe harbor requirement); Barber v.

Miller, 146 F.3d 707, 710 (9th Cir. 1998) (same).

      Substantively, the court’s prior rulings are fatal to the sanctions

motion. Abrams bore the burden to prove that Schinske filed the adversary

complaint and the codebtor stay motion for improper purposes and that

they were frivolous. Marsch v. Marsch (In re Marsch), 36 F.3d 825, 829-31 (9th

Cir. 1994); Tom Growney Equip., Inc. v. Shelley Irr. Dev., Inc., 834 F.2d 833, 837

(9th Cir. 1987). But the court granted Schinske the relief she sought in both

matters. In other words, the court had already ruled that, Schinske’s

arguments were neither baseless nor filed for an improper purpose. The

                                       12
record amply supported the bankruptcy court’s finding that Abrams failed

to meet his burden. Abrams cannot relitigate issues previously decided

against him under the guise of requesting sanctions.

                             CONCLUSION

     For the reasons set forth above, we AFFIRM both orders appealed.

                                    13