Court Opinion

ID: 9521650
Source: CourtListenerOpinion
Date Created: 2023-08-07 02:09:24.403075+00
Date Added: 2024-06-11T12:50:02.946842
License: Public Domain

KLEIN, Bankruptcy Judge,
concurring:
I join the majority decision and write separately to note the existence of significant issues that may not be essential to the majority decision but that should not be overlooked. First, whether All Points has appellate standing is uncertain. Second, it would be inappropriate for there to be inconsistent decisions as between All Points and American Capital. Finally, there is a due process notice issue regarding the notice to American Capital that needs to be addressed if, on remand, the bankruptcy court contemplates entry of default.
I
In order to have appellate standing, All Points must be “adversely and pecuniarily affected” by the outcome of the appeal. Gilliam v. Speier (In re KRSM Props., LLC), 318 B.R. 712, 716 (9th Cir. BAP 2004).
So long as the American Capital lien is valid for at least $91,497.50, nothing is left for All Points even if we were to agree with its substantive position. In the present procedural posture of the appeal, we must presume that the American Capital lien is valid to the extent of $275,000 and can be avoided only to the extent it impairs the debtor’s homestead exemption. This suggests that All Points may not have appellate standing.
To the extent that All Points may presently lack standing, it could obtain standing to contend that the § 522(f)(2) calculation yields $91,497.50 of equity as to which judicial liens cannot be avoided. It could, for example, acquire the American Capital lien. It is also possible that All Points could demonstrate that the American Capital lien had been satisfied or paid down by co-debtors to a point that leaves something for All Points or that the hen can be shown to be invalid under California law.
II
Appellant argues two inconsistent positions. First, it contends there is nonexempt equity. Then, it contends that the senior lien should nevertheless have been avoided even though the sole theory for avoiding that senior lien was the absence of nonexempt equity. This theory works only if the contradiction is accepted.
In multiple defendant situations, the long-settled rule is that default judgments must be consistent with judgments on the merits against other parties. 10 Moore’s *92Federal Practice § 55.25; 10A Wright & Miller § 2690.
Thus, it is an abuse of discretion to enter default judgments that are inconsistent with decisions as to other defendants. Neilson v. Chang (In re First T.D. & Inv., Inc.), 253 F.3d 520, 532 (9th Cir.2001). Such inconsistencies are regarded as “unseemly and absurd.” 10 Moore’s Federal Practice § 55.25, quoting Frow v. De La Vega, 15 Wall. 552, 82 U.S. 552, 554, 21 L.Ed. 60 (1872); accord 10A Federal Practice and Procedure § 2690 (quoting Frow).
In the words of the Ninth Circuit’s recent invocation of the Frow principle in a bankruptcy appeal, it is “incongruous and unfair” for a bankruptcy court to enter a default judgment inconsistent with the merits decision regarding another defendant. First T.D. & Inv., Inc., 253 F.3d at 532-33 (“We therefore hold that the bankruptcy court violated the Frow principle and abused its discretion by entering final default judgments, pursuant to Fed. R.Civ.P. 54(b), that directly contradict its earlier ruling in the same action.”).
In this appeal, the analysis is straightforward. Both American Capital and All Points were in the posture of defendants to the motion to avoid lien. Each of the judicial liens exceeds the amount of the $91,497.50 equity that is argued to be available to support a judicial lien. As the lienor in senior position, the lien of American Capital could not be avoided to the extent it exceeds $91,497.50 unless it is determined to be no longer valid on the merits. This result would pertain even if American Capital’s default is entered.
A default judgment that avoids the American Capital hen merely because of a default, thereby permitting All Points to step into the shoes of American Capital so as to reap the benefit of the $91,497.50, plainly would violate the Frow principle, be incongruous and unfair, and amount to a windfall.1
Ill
There is also a due process notice issue embedded in the facts. This necessitates clarification of one of our precedents in light of the recent Supreme Court decision in Jones v. Flowers, 547 U.S. 220, 126 S.Ct. 1708, 164 L.Ed.2d 415 (2006), which emphasizes the need for “reasonable additional steps” when a property right would be extinguished and there is reason to doubt the efficacy of notice.
The lack of response from American Capital to the motion that would extinguish its judgment lien property right may be attributable to confusion resulting from an asymmetry in the interface between the Federal Rules of Bankruptcy Procedure and California law.
We have held that notice of a motion to avoid a judicial lien must be served in the same manner as service of a summons and complaint and when served by mail on a corporation pursuant to Federal Rule of Bankruptcy Procedure 7004(b)(3) must be mailed to the attention of an officer, a managing or general agent, or any other agent authorized by appointment or by law to receive service of process. Beneficial Cal., Inc. v. Villar (In re Villar), 317 B.R. 88, 92-94 (9th Cir. BAP 2004).
*93In accordance with Villar, the motion to avoid lien was served by mail under Rule 7004(b)(3) directed to “American Capital Resources Inc, Attn Managing Agent, Three University Plaza, Hackensack, NJ 07601.” Thus, service appears to have been accomplished on the judgment creditor, American Capital.
The quirk of California law that produces the asymmetry is a provision of the California judgment enforcement statute that notices regarding the judgment are not to be sent to the judgment creditor and, instead, must go to the attorney of record who obtained the judgment or that attorney’s successor. California Code of Civil Procedure § 684.010 provides in relevant part: Cal.Code Civ. Pro. § 684.010 (emphasis supplied).2
when a notice, order, or other paper is required to be served under this title [Title 9 Enforcement of Judgments] on the judgment creditor, it shall be served on the judgment creditor’s attorney of record rather than on the judgment creditor if the judgment creditor has an attorney of record.
Thus, service regarding California judgment enforcement matters must be directed to the counsel who obtained the judgment and not to the judgment creditor. It follows, that a California judgment creditor who receives a notice that must be sent to counsel may reasonably think that the notice can be ignored as either redundant of service on counsel or ineffective.
To be sure, the avoidance of a judgment lien pursuant to the Bankruptcy Code is not a state enforcement of judgment matter, even though it implicates the ultimate enforceability of the judgment. That is, however, a fine distinction that invites confusion and could operate as a trap for the unwary.3
In Jones, the Supreme Court reiterated that due process requires “notice reasonably calculated under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Jones, 126 S.Ct. at 1713-14, quot*94ing Mulleme v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 94 L.Ed. 865 (1950). The notice that is required “will vary with the circumstances and conditions.” Jones, 126 S.Ct. at 1714, quoting Walker v. City of Hutchinson, 352 U.S. 112, 115, 77 S.Ct. 200, 1 L.Ed.2d 178 (1956).
If there is reason to think that notice may not have been effective, then “additional reasonable steps” may be needed “if practicable to do so.” Jones, 126 S.Ct. at 1718.
In the face of the confusion that results from the seemingly contradictory requirements of Villar and of § 684.010, the solution is to require the “additional reasonable step” of giving notice of a motion to avoid a California judgment lien to the attorney of record who is responsible for enforcing the judgment. The reality is that, in view of the attorney of record’s continuing obligations under California statute with respect to recorded judgments, notice to the attorney may be more likely to elicit response than service on the judgment creditor.
This reality is confirmed by the fact that the actual contest of the lien avoidance motion came from All Points, which was not served in the manner required by Vil-lar. Rather, the debtor’s counsel served All Points’ attorney of record in the manner of § 684.010.
It is odd that the debtor’s bankruptcy counsel, having served the lien avoidance motion on All Points’ counsel in the manner of § 684.010, but not on All Points separately in the manner of Villar,4 would not also have served American Capital’s counsel in the same manner.5 Excluding American Capital’s counsel from the loop is even odder because debtor’s bankruptcy counsel is named as the judgment debtor’s counsel of record on the face of American Capital’s Abstract of Judgment; he knew the identity of American Capital’s counsel and, as demonstrated by the manner in which he served All Points, he believed it was appropriate to serve counsel. Oddities like these cause me to worry about sandbags.
It is apparent that the better practice for bankruptcy judicial lien avoidance motions in any state is to serve both the judgment creditor and the attorney of record. In California, the apparent asymmetry created by § 684.010 warrants requiring that the attorney of record be served as an “additional reasonable step” that is “practicable” within the meaning of Jones in order to assure that the essential principle of notice reasonably calculated to come to the attention of the target is honored.
In short, on remand, the bankruptcy court should assure itself that notice consistent with due process in light of Jones was provided to American Capital before proceeding.

. This is a multiple defendant situation, the lienors being the defendants. The Frow principle, however, is powerful enough to encompass lien avoidances that are presented by the alternative procedure of separate motions because the matters are so interrelated that they should be treated as the equivalent of a multiple defendant lienor situation. The point of the Frow principle, as enforced by the Ninth Circuit in Neilson, is that inconsistent judgments in such matters are not acceptable.

. This provision is complemented by California Code of Civil Procedure §§ 283, 284, and 285 which eliminate ambiguity about counsel’s post-judgment authority:
An attorney and counselor shall have authority: ... 2. To receive money claimed by his client in an action or proceeding during the pendency thereof, or after judgment, unless a revocation of this authority is filed, and upon the payment thereof, and not otherwise, to discharge the claim or acknowledge satisfaction of the judgment.
Cal.Code Civ. Pro. § 283 (emphasis supplied).
The attorney in an action or special proceeding may be changed at any time before or after judgment or final determination, as follows: 1. Upon the consent of both client and attorney, filed with the clerk, or entered upon the minutes; 2. Upon the order of the court, upon the application of either client or attorney, after notice from one to the other.
Cal.Code Civ. Pro. § 284 (emphasis supplied).
When an attorney is changed, as provided in the last section, written notice of the change and of the substitution of a new attorney, or of the appearance of the party in person, must be given to the adverse party. Until then he must recognize the former attorney.
Cal.Code Civ. Pro. § 285.

. Villar did not address Cal.Code of Civ. Proc. § 684.010 and did not consider whether service in accordance with it would qualify as service under Fed. R. Bankr.P. 7004(a) by virtue of its incorporation of Fed.R.Civ.P. 4(h), which recognizes (by cross-reference to Rule 4(e)(1)) service "pursuant to the law of the state in which the district court is located, or in which service is effected.” Fed.R.Civ.P. 4(e)(1) & (h), incorporated by Fed. R. Bankr.P. 7004(a)(1). We need not reach the question because there was no service in this case on American Capital that purported to comply with § 684.010.

. The service address, taken from the All Points Abstract of Judgment, was: "All Points Capital, c/o Scott Schutzman, Esq., 3700 S Susan Street # 120, Santa Ana, CA 92704.”

. The address on American Capital's Abstract of Judgment is: "American Capital Resources, Inc., a subsidiary of Unicapital Corporation, a Delaware corporation, c/o Ivan-jack & Lambirth, LLP, 500 S. Grand Ave., 21st FI., Los Angeles, CA 90071-0904.” And it shows the counsel who prepared document as: "Thomas B. Shuck — SBN 116228, Ivan-jack & Lambirth, LLP, 500 S. Grand Ave., 21st Floor, Los Angeles, CA 90071-0904,”