Court Opinion

ID: 4509210
Source: CourtListenerOpinion
Date Created: 2020-02-20 22:00:24.29001+00
Date Added: 2024-06-11T08:12:03.398347
License: Public Domain

FILED
                                 NOT FOR PUBLICATION
                                                                             FEB 20 2020
                       UNITED STATES COURT OF APPEALS                    MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS

                                 FOR THE NINTH CIRCUIT

In re: LEAH AHN,                                     No.   17-60082

               Debtor,                               BAP No. 16-1421

------------------------------
                                                     MEMORANDUM*
LEAH AHN,

               Appellant,

 v.

PRIYA SANGER; et al.,

               Appellees.

                             Appeal from the Ninth Circuit
                               Bankruptcy Appellate Panel
                 Jury, Faris, and Brand, Bankruptcy Judges, Presiding

                                 Submitted October 22, 2019**
                                   San Francisco, California

Before: BYBEE, N.R. SMITH, and COLLINS, Circuit Judges.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
      Appellant Leah Ahn (“Ahn”), the debtor in a Chapter 7 bankruptcy

proceeding, appeals the United States Bankruptcy Appellate Panel of the Ninth

Circuit’s (“BAP”) decision affirming the bankruptcy court’s order denying Ahn’s

motion for civil contempt. We affirm.1

      “We review BAP decisions de novo, and we independently review the

bankruptcy court’s decision on appeal from the BAP.” Boeing N. Am., Inc. v.

Ybarra (In re Ybarra), 424 F.3d 1018, 1021 (9th Cir. 2005). We “apply the same

standard of review that the BAP applied to the bankruptcy court’s ruling.”

Boyajian v. New Falls Corp. (In re Boyajian), 564 F.3d 1088, 1090 (9th Cir. 2009).

We review the bankruptcy court’s ruling on a motion for civil contempt for an

abuse of discretion. See Knupfer v. Lindblade (In re Dyer), 322 F.3d 1178, 1191

(9th Cir. 2003).

      At the time of the BAP’s decision, a creditor who violated a discharge

injunction could not be held in contempt unless “evidence show[ed] the alleged

contemnor was aware of the discharge injunction and aware that it applied to his or

      1
        Neither party argues mootness on appeal, but we have an independent duty
to consider mootness sua sponte. Pilate v. Burrell (In re Burrell), 415 F.3d 994,
997 (9th Cir. 2005). A bankruptcy appeal may be moot under two doctrines—one
doctrine derives “from Article III of the Constitution,” and “the other from equity.”
Rev Op Grp. v. ML Manager LLC (In re Mortgs. Ltd.), 771 F.3d 1211, 1214 (9th
Cir. 2014). Like the BAP, we conclude that this appeal is neither constitutionally
nor equitably moot.
                                          2
her claim.” Emmert v. Taggart (In re Taggart), 548 B.R. 275, 288 (B.A.P. 9th Cir.

2016), vacated and remanded, 139 S. Ct. 1795 (2019). Applying this standard, the

BAP held that the contempt motion was properly denied, because “[t]he record is

devoid of any evidence that the Sangers knew the discharge injunction applied to

their actions to preserve what they thought were in rem rights they had under the

Judgment, even if no such rights existed.” After the BAP decided the instant case,

we affirmed the Taggart standard, holding that a “good faith belief that the

discharge injunction does not apply to the creditor’s claim precludes a finding of

contempt, even if the creditor’s belief is unreasonable.” Lorenzen v. Taggart (In re

Taggart), 888 F.3d 438, 444 (9th Cir. 2018), vacated and remanded, 139 S. Ct.
1795 (2019). However, while this appeal was pending, the Supreme Court reversed

our decision in Taggart and instead held that, to “hold a creditor in civil contempt

for violating a discharge order,” there must be “no objectively reasonable basis for

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

Taggart v. Lorenzen, 139 S. Ct. 1795, 1801 (2019).

      Applying this standard, we find that the BAP correctly affirmed the

bankruptcy court’s denial of Ahn’s contempt motion, because the Sangers had an

objectively reasonable basis to conclude that their actions might be lawful under

the discharge injunction. Generally, a creditor may pursue his or her lien rights

                                          3
(i.e., in rem rights) with respect to a debtor’s real property without violating a

discharge injunction. See HSBC Bank USA, Nat’l Ass’n v. Blendheim (In re

Blendheim), 803 F.3d 477, 494 (9th Cir. 2015).

      The judgment confirmed an arbitration award and required Ahn to continue

making timely payments on the shared mortgage. The judgment awarded the

Sangers their pre-judgment attorneys’ fees and costs and entitled the Sangers to

any post-judgment attorneys’ fees and costs. See Sanger v. Ahn, No. A145714,

2016 WL 3618840, at *5 (Cal. Ct. App. June 28, 2016). The judgment was secured

by an abstract of judgment filed by the Sangers prior to Ahn’s bankruptcy petition.

The validity of the Sangers’ abstract of judgment is at issue in a related appeal. See

Sanger v. Ahn (In re Ahn), No. 18-16794. Importantly, the question of whether the

Sangers’ abstract complied with California law and created a valid lien is

sufficiently debatable such that the Sangers had an objectively reasonable basis for

concluding that they had a valid lien that secured the judgment. Therefore, the

Sangers had an objectively reasonable basis for concluding that their actions to

amend the judgment to include subsequent missed shared mortgage payments and

pre-judgment and post-judgment attorneys’ fees and costs (including those fees

and costs that arose from prosecuting the state court appeal) were lawful in rem

actions under the discharge injunction. See Taggart, 139 S. Ct. at 1801.

                                           4
      Finally, it was also objectively reasonable for the Sangers to conclude that

sending Ahn the Notice of Actionable Violation (“NAV”) with respect to Ahn’s

non-monetary obligations in the amended tenancy-in-common agreement would

not violate the discharge injunction. See id. Indeed, the NAV sought to preserve or

enforce the Sangers’ rights with respect to Ahn’s real property (i.e., in rem rights).

The NAV informed Ahn that, by encumbering her ownership interest in the

property by recording a deed of trust against the property, Ahn violated the

tenancy-in-common agreement. The NAV sought to either: (1) remove the

unapproved encumbrance, or (2) execute a subordination agreement for the

unapproved encumbrance. The NAV’s formal reservation of any possible future

claim for damages was not an assertion of any such claim. Further, Ahn provided

no evidence or authority showing that the equitable remedies sought in the NAV

gave rise to a right to payment or had a money damage alternative. Thus, at the

very least, it was objectively reasonable for the Sangers to conclude that the

equitable remedies asserted did not give rise to a “claim” or “debt” as defined by

                                           5
the Bankruptcy Code and remained unaffected by Ahn’s discharge. See 11 U.S.C.

§§ 101(5)(B), (12).2

      AFFIRMED.

      2
       Ahn filed a supplemental brief entitled “Appellant’s Statement Objecting to
Misrepresentations in Appellees’ Opening Brief.” Ahn’s objections are meritless.
The complained-of statements find support in the record and do not mislead or
misrepresent. We construe Ahn’s objections as a motion to strike and deny the
motion.
                                         6