Court Opinion

ID: 873255
Source: CourtListenerOpinion
Date Created: 2013-05-30 00:02:11.723403+00
Date Added: 2024-06-11T09:12:39.670729
License: Public Domain

FILED
 1                                                        MAY 29 2013

 2                                                    SUSAN M SPRAUL, CLERK
                                                        U.S. BKCY. APP. PANEL
                                                        OF THE NINTH CIRCUIT
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )      BAP No. CC-12-1395-DKiTa
                                   )
 6   ALEN L. LY,                   )      Bk. No. LA 12-25257-TD
                                   )
 7                  Debtor.        )
     ______________________________)
 8                                 )
     ALEN L. Ly,                   )
 9                                 )
                    Appellant,     )
10                                 )
     v.                            )      M E M O R A N D U M1
11                                 )
     MICHELLE V. CHE,              )
12                                 )
                    Appellee.      )
13   ______________________________)
14                    Argued and Submitted on May 15, 2013
                             at Pasadena, California
15
                              Filed - May 29, 2013
16
               Appeal from the United States Bankruptcy Court
17                 for the Central District of California
18       Honorable Thomas B. Donovan, Bankruptcy Judge, Presiding
19
     Appearances:     Edgardo M. Lopez, Esq. argued for Appellant
20                    Alen L. Ly; Caroline S. Kim, Esq. argued
                      for Appellee Michelle V. Che.
21
22   Before:   DUNN, KIRSCHER, and TAYLOR, Bankruptcy Judges.
23
24
25
26        1
            This disposition is not appropriate for publication.
27   Although it may be cited for whatever persuasive value it may
     have (see Fed. R. App. P. 32.1), it has no precedential value.
28   See 9th Cir. BAP Rule 8013-1.
 1        The appellant, Alen L. Ly (“Ly”), appeals the decision of
 2   the bankruptcy court granting relief from stay for cause to the
 3   appellee, Michelle V. Che (“Che”), to pursue her California state
 4   law unlawful detainer action against Ly for all purposes.
 5   Subsequent to this appeal being filed, Che filed a motion with
 6   this Panel for sanctions (“Sanctions Motion”) against Ly and his
 7   counsel for pursuing a frivolous appeal.   We AFFIRM the
 8   bankruptcy court’s relief from stay order, and we GRANT the
 9   Sanctions Motion and award sanctions in the amount of Che’s
10   attorney’s fees, totaling $6,650, and costs in the amount of
11   $114, for a total award of $6,764, jointly and severally against
12   Ly and his attorney.
13                               I. FACTS
14        Although the parties dispute one another’s accounts of
15   prebankruptcy events, what occurred in Ly’s chapter 72 case is
16   essentially undisputed.
17        In Appellant’s Opening Brief, Ly states that he filed his
18   bankruptcy petition on May 14, 2012.   The record reflects that
19   Ly’s bankruptcy petition actually was filed on April 30, 2012.3
20
21        2
            Unless otherwise indicated, all chapter and section
22   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
     all “Rule” references are to the Federal Rules of Bankruptcy
23   Procedure, Rules 1001-9037. The Federal Rules of Civil Procedure
24   are referred to as “Civil Rules.”
          3
25          The original excerpts of record submitted by Ly did not
     include any of the exhibits filed by Che to her Declarations
26   filed in support of her motion for relief from stay. After Che
27   filed a Motion to Augment Record with this Panel and the
     subsequent order of the motions panel requiring Ly to supplement
28                                                      (continued...)

                                    -2-
 1        On June 20, 2012, Che filed a motion for relief from stay
 2   (“Stay Motion”) with respect to certain residential property in
 3   Long Beach, California (“Property”).    In his Schedule A, Ly
 4   declared that he owned the Property.    In the Stay Motion, Che
 5   stated that she was a “Holder of Deed of Trust.”   In her Real
 6   Property Declaration, however, Che stated that she was “the
 7   Movant and owner of the Property.”    In her further Declaration
 8   (“Further Declaration”) in support of the Stay Motion, Che stated
 9   that she had leased the Property to Ly’s sister, Vanessa A. Ly
10   (“Vanessa”), on or about March 1, 2006.   Che further stated that
11   she did not find out that Ly was residing at the Property until
12   October 2008.   Che also stated that after making one rent
13   payment, neither Vanessa nor Ly paid any further rent.
14        In the Further Declaration, Che stated that Ly “forged my
15   signature and transferred the [Property] to himself.”    Che stated
16   that she sued Ly in 2009 for the alleged fraudulent transfer of
17   the Property (“State Court Lawsuit”) and obtained a judgment
18   (“Judgment”).   A certified copy of the Judgment was attached as
19   Exhibit A to the Further Declaration.   The Judgment, that was
20   entered on Ly’s default, included a specific description of the
21   Property and ordered that it be transferred from Ly to Che.     The
22   Judgment included the following additional provisions:
23        2) The previously recorded Grant Deed, Los Angeles
          County recorder number 061576358 recorded on July 18,
24        2006 is hereby declared void based upon the forged
          signature of Michelle Che.
25        3) The clerk of this court is empowered and ordered to
26
          3
27         (...continued)
     the record, Ly filed supplemental excerpts of record, including
28   the critical exhibits for our review.

                                     -3-
 1        sign a quit claim deed and all of the related papers on
          behalf of Alen Lang Ly and to Plaintiff Michelle Che.
 2        4) Defendant Alen Lang Ly is hereby prohibited from
          approaching less than 100 yards from said [Property].
 3
 4        Ly, through his counsel, Edgardo M. Lopez (“Lopez”), opposed
 5   the Stay Motion (“Opposition”).     In his Declaration in support of
 6   the Opposition (“Opposition Declaration”), Ly stated that he
 7   purchased the Property from Che in July 2006 for $525,000.        He
 8   further stated that he had been living on the Property as his
 9   primary residence since July 2006 and had paid monthly mortgage
10   payments and annual property taxes.
11        Ly admitted in the Opposition Declaration that he had
12   received service of the summons and Che’s complaint in the State
13   Court Lawsuit.   He further declared that he had retained counsel
14   to represent him in the State Court Lawsuit who assured him that
15   “he will take care of everything.”      Thereafter, he stated that he
16   was “completely shocked” when he received a five-day notice to
17   vacate the Property from Che’s attorney and blamed attorney
18   neglect for the entry of the Judgment against him.     In the
19   Memorandum of Points and Authorities filed in support of the
20   Opposition, Lopez argued that stay relief should be denied
21   because Che was not a real party in interest and therefore lacked
22   standing to seek stay relief, and Che was not a secured creditor
23   entitled to invoke § 362(d)(1) to argue a lack of adequate
24   protection of her interest in the Property.
25        Che filed a Reply (“Reply”) to the Opposition.      In her
26   Memorandum of Points and Authorities filed in support of the
27   Reply, Che argued that she never sold the Property to Ly, and
28   Che’s standing arose from the fact that Che was the “legal owner

                                       -4-
 1   of the Property.”   Among other things, Che argued that “cause” to
 2   grant the Stay Motion existed to allow Che to undo Ly’s
 3   “fraudulent transaction.”
 4         The bankruptcy court heard argument (“Hearing”) on the Stay
 5   Motion on July 12, 2012.    At the outset of the Hearing, the
 6   bankruptcy court stated its tentative conclusions that Che had
 7   produced evidence, including the Judgment, that she owned the
 8   Property and was entitled to relief to pursue her unlawful
 9   detainer action in state court.     Lopez essentially argued that
10   the fact that the Judgment was obtained by default cut against
11   Che’s position that she retained an ownership interest in the
12   Property.   Reminding Lopez that, “A judgment is a judgment,” the
13   bankruptcy court overruled Ly’s argument and advised the parties
14   that he would grant the Stay Motion but would not waive the
15   fourteen-day stay of the effectiveness of his order under
16   Rule 4001(a)(3).
17         On July 26, 2012, the bankruptcy court entered an order
18   (“Order”) granting the Stay Motion for cause under § 362(d)(1) to
19   allow Che to “pursue her state court unlawful detainer suit
20   against [Ly] for all purposes.”     In effect, the bankruptcy court
21   granted relief from stay to allow the parties to resolve their
22   competing claims to the Property in state court.    Ly filed a
23   timely notice of appeal on August 7, 2012.
24         Che filed the Sanctions Motion with this Panel, requesting
25   an award of sanctions against both Ly and his counsel, Lopez, for
26   filing a frivolous, meritless appeal, on November 16, 2012.      Ly
27   has not responded to the Sanctions Motion.
28   ///

                                       -5-
 1                             II. JURISDICTION
 2         The bankruptcy court had jurisdiction under 28 U.S.C.
 3   §§ 1334 and 157(b)(2)(A) and (G).      We have jurisdiction under
 4   28 U.S.C. § 158.
 5                                III. ISSUES
 6         1.   Did the bankruptcy court err in determining that Che had
 7   standing to pursue the Stay Motion?4
 8         2. Should sanctions be awarded against Ly and Lopez under
 9   Rule 8020 for filing and pursuing a frivolous appeal?
10                          IV. STANDARD OF REVIEW
11         Standing is an issue that we review de novo.     Loyd v. Paine
12   Webber, Inc., 208 F.3d 755, 758 (9th Cir. 2000); Kronemyer v. Am.
13   Contractors Indem. Co. (In re Kronemyer), 405 B.R. 915, 919 (9th
14   Cir. BAP 2009).    De novo review requires that we consider a
15   matter anew, as if it had not been heard before, and as if no
16   decision had been rendered previously.     United States v.
17   Silverman, 861 F.2d 571, 576 (9th Cir. 1988); B-Real, LLC v.
18   Chaussee (In re Chaussee), 399 B.R. 225, 229 (9th Cir. BAP 2008).
19   ///
20   ///
21
22
           4
            In Appellant’s Statement of Issues on Appeal, Ly also
23   asserts as an issue whether the bankruptcy court erred in
     granting the Stay Motion under § 362. However, in Appellant’s
24
     Opening Brief, Ly only argues that Che lacked standing to seek
25   stay relief. Accordingly, any argument that the Stay Motion was
     improperly granted, beyond the question of Che’s standing, is
26   waived. City of Emeryville v. Robinson, 621 F.3d 1251, 1261 (9th
27   Cir. 2010) (Appellate courts in this circuit “will not review
     issues which are not argued specifically and distinctly in a
28   party’s opening brief.”).

                                      -6-
 1                              V. DISCUSSION
 2   1.   Che had standing to seek stay relief.
 3        Ly argues one issue on appeal: whether Che had standing to
 4   seek relief from the automatic stay in Ly’s bankruptcy case.
 5        Whether a party has standing to pursue a claim is a
 6   “threshold question in every federal case, determining the power
 7   of the court to entertain the suit.”   Warth v. Seldin, 422 U.S.
 8   490, 498 (1975); Edwards v. Wells Fargo Bank, N.A.
 9   (In re Edwards), 454 B.R. 100, 104 (9th Cir. BAP 2011).
10   “Standing” has both constitutional and prudential aspects, but Ly
11   only challenges Che’s standing as a prudential matter.5
12        Ly argues that Che has no prudential standing because she is
13   not a real party in interest.   Appellant’s Opening Brief at 6-10.
14   In stay relief proceedings, the moving party bears the burden of
15   proof to establish that it has standing to prosecute the motion.
16   See In re Wilhelm, 407 B.R. 392, 399-400 (Bankr. D. Id. 2009),
17   citing Lujan v. Defenders of Wildlife, 504 U.S. at 561.    Under
18   § 362(d), a “party in interest” may request relief from the
19   automatic stay.   Because “party in interest” is not defined in
20   the Bankruptcy Code, whether a party moving for relief from stay
21
          5
22          Constitutional standing relates to whether a party’s stake
     in a matter is adequate to create a “case or controversy” to
23   which the federal judicial authority under Article III of the
     Constitution may apply. Warth v. Seldin, 422 U.S. at 498-99;
24
     Lujan v. Defenders of Wildlife, 504 U.S. 555, 559-60 (1992). In
25   her Further Declaration, Che declared that she had been paid no
     rent for the Property, occupied by Ly, since March 2006 and that
26   Ly had forged her signature to engineer a fraudulent transfer of
27   the Property to himself. That evidence is adequate to establish
     Che’s constitutional standing to file and prosecute the Stay
28   Motion.

                                     -7-
 1   has the status of a party in interest under § 362(d) is a fact-
 2   based inquiry, determined on a case-by-case basis, considering
 3   the claimed interest of the moving party and the impact of the
 4   stay on that interest.   In re Kronemyer, 405 B.R. at 919.     A
 5   party in interest can include any party that has a pecuniary
 6   interest in the matter, a practical stake in its resolution or
 7   whose interest is impacted by the stay.   Brown v. Sobczak
 8   (In re Sobczak), 369 B.R. 512, 517-18 (9th Cir. BAP 2007).
 9        Motions for relief from stay are contested matters.     See
10   Rules 4001(a) and 9014(a).    Rule 9014(c) provides that Rule 7017
11   applies in contested matters.   Rule 7017 incorporates Civil
12   Rule 17(a), which provides that “[a]n action must be prosecuted
13   in the name of the real party in interest. . . .”   Considering
14   the application of these rules, as a threshold matter, relief
15   from stay proceedings are very limited in scope.
16        Given the limited grounds for obtaining . . . relief
          from stay, read in conjunction with the expedited
17        schedule for a hearing on the motion, most courts hold
          that motion for relief from stay hearings should not
18        involve an adjudication on the merits of claims,
          defenses, or counterclaims, but simply determine
19        whether the creditor has a colorable claim to the
          property of the estate.
20
21   Biggs v. Stovin (In re Luz Int’l), 219 B.R. 837, 842 (9th Cir.
22   BAP 1998) (emphasis added).   See, e.g., Johnson v. Righetti
23   (In re Johnson), 756 F.2d 738, 740-41 (9th Cir. 1985).
24        Cornell University Law School’s Legal Information Institute
25   defines a “colorable claim” as:
26        A plausible legal claim. In other words, a claim
          strong enough to have a reasonable chance of being
27        valid if the legal basis is generally correct and the
          facts can be proven in court. The claim need not
28        actually result in a win.

                                       -8-
 1   http://topics.law.cornell.edu/wex/colorable_claim.
 2        As noted above, in her Real Property Declaration filed in
 3   support of the Stay Motion, Che stated that she was the “Movant
 4   and owner of the Property.”   Attached as Exhibit A to her Further
 5   Declaration was a certified copy of the Judgment voiding Ly’s
 6   deed to the Property as obtained through forgery and ordering
 7   that the Property be transferred from Ly to Che.   That the
 8   Judgment was obtained by default does not negate its impact as
 9   providing clear evidence that Che had at least a “colorable
10   claim” to ownership of the Property.    In fact, there is no
11   evidence in the record before us that Ly ever moved to set aside
12   the default or appealed the Judgment.   At oral argument, Lopez
13   confirmed that the Judgment had become final.   A party moving for
14   stay relief has a colorable claim sufficient to establish
15   standing to prosecute the motion if it has an ownership interest
16   in the subject property.   In re Edwards, 454 B.R. at 105; Veal v.
17   Am. Home Mortg. Servicing, Inc. (In re Veal), 450 B.R. 897, 913
18   (9th Cir. BAP 2011).
19        Ly lays down a red herring when he argues, “It is clear from
20   [Che’s] relief from stay motion that she is seeking to enforce
21   the right of a holder of a deed of trust on the subject property
22   . . . ; [Che] claims as a holder of the deed of trust and to have
23   an interest on the [Property] given as collateral.”   Appellant’s
24   opening Brief at 8-9.   The bankruptcy court did not take that
25   bait, and neither do we.
26        It is true that when the Stay Motion was filed, Che’s
27   counsel checked the box on the motion form stating that “Movant
28

                                     -9-
 1   is the (check one) Holder of Deed of Trust.”6    However, again as
 2   noted above, Che’s declarations filed in support of the Stay
 3   Motion asserted and provided evidence to support her claim that
 4   she owned the Property.    The Judgment provided admissible
 5   evidence, independent of Che’s own self-serving statements, of
 6   her ownership interest in the Property.
 7           Based on the evidence before the bankruptcy court, focusing
 8   on the Judgment, the bankruptcy court did not err in finding that
 9   Che had standing to file and prosecute the Stay Motion as a real
10   party in interest.    As the bankruptcy court aptly noted, “A
11   judgment is a judgment.”    Ly’s appeal of the Order, based solely
12   on his argument that Che lacked prudential standing to pursue
13   stay relief, is patently meritless.
14   2.      Che’s motion to sanction Ly and his counsel for pursuing a
             frivolous appeal should be granted.
15
16           In the Sanctions Motion, Che requested sanctions against Ly
17   and his counsel for filing a meritless and frivolous appeal
18   pursuant to Federal Rule of Appellate Procedure (“FRAP”) 38.     The
19   relevant Rule before this Panel is Rule 8020.    Rule 8020, which
20   conforms to the language of FRAP 38, provides in relevant part
21   that:
22           If a . . . bankruptcy appellate panel determines that
             an appeal from an order . . . of a bankruptcy judge is
23           frivolous, it may, after a separately filed
             motion . . . and reasonable opportunity to respond,
24           award just damages and single or double costs to the
             appellee.
25
26           6
            The other two choices on the motion form that were not
27   checked were: “Assignee of Holder of Deed of Trust,” and
     “Servicing Agent for Holder of Deed of Trust or Assignee of
28   Holder of Deed of Trust.”

                                       -10-
 1        As previously noted, Che filed the Sanctions Motion on
 2   November 16, 2012.       Ly has not filed any response to the
 3   Sanctions Motion.    However, in response to the Clerk’s Notice of
 4   Possible Mootness of this appeal, Ly responded that the appeal
 5   was not moot because the Property now was subject to a pending
 6   adversary proceeding in Ly’s bankruptcy, and “the state court
 7   action affecting the subject [Property] has been held in
 8   abeyance.”   Compliance Statement Re: Notice of Possible Mootness,
 9   filed with this Panel on February 11, 2013.
10        Rule 8020 requires that all filed papers, including appeal
11   briefs, be signed, “thereby certifying that the signer has done
12   appropriate legal and factual research and believes that the
13   submission of the paper has merit.”        10 Collier on Bankruptcy
14   ¶ 8020.02 (Alan N. Resnick and Henry J. Sommer eds., 16th ed.
15   2013).    The Panel may impose sanctions to penalize an appellant
16   and/or counsel who pursue a frivolous appeal and to compensate
17   the appellee for the delay and expense of defending the appeal.
18   Id. ¶ 8020.03.     Cf.    Burlington N. R. Co. v. Woods, 480 U.S. 1, 7
19   (1987).
20        “An appeal is frivolous if the result is obvious or the
21   arguments of error are wholly without merit.”       Coghlan v.
22   Starkey, 852 F.2d 806, 811 (5th Cir. 1988).        See Henry v. Farmer
23   City State Bank, 808 F.2d 1228, 1241 (7th Cir. 1986); Cannon v.
24   The Hawaii Corp. (In re The Hawaii Corp.), 796 F.2d 1139, 1144
25   (9th Cir. 1986).    Unfortunately, this appeal meets that standard
26   on both counts.
27        Lopez should have known from our published opinions in
28   In re Veal and In re Edwards that Panel precedent quite clearly

                                         -11-
 1   recognizes that a party moving for relief from stay who has a
 2   colorable claim to ownership of the subject property has
 3   prudential standing.    We assume that he read the Panel’s opinion
 4   in In re Veal because he cited it to us in Appellant’s Opening
 5   Brief specifically for its “exhaustive” discussion of standing
 6   and real party in interest issues.       See Appellant’s Opening Brief
 7   at 8.
 8           Particularly troubling to us is the fact that when Lopez
 9   submitted Ly’s original excerpts of record, he omitted to include
10   the exhibits to Che’s Declarations filed in support of the Stay
11   Motion, including the certified copy of the Judgment, even though
12   he did include the exhibits to Ly’s Declaration filed in
13   opposition to the Stay Motion.     Lopez had to be aware that the
14   Judgment was a critical part of the evidentiary record before the
15   bankruptcy court supporting its finding that Che had standing to
16   seek stay relief, because the bankruptcy court specifically
17   discussed the importance of the Judgment to its decision at the
18   Hearing in its direct responses to Lopez’s arguments.      Lopez
19   supplemented the excerpts of record to include the Judgment
20   exhibit only after Che’s counsel filed her motions requesting
21   judicial notice and to supplement the record and the Sanctions
22   Motion, and the motions panel ordered Ly to supplement the record
23   with a complete copy, “including exhibits,” of the Stay Motion.
24           As we previously have determined, Ly’s appeal on the issue
25   of Che’s standing lacks merit, and that lack of merit is obvious
26   from review of the Judgment alone.       We conclude that Ly’s appeal
27   is both meritless and frivolous, justifying the imposition of
28   sanctions.

                                       -12-
 1        “If we determine that an appeal is frivolous, then damages
 2   and single or double costs may be awarded to the appellee.”
 3   Burkhart v. Fed. Deposit Ins. Corp.    (In re Burkhart), 84 B.R.
 4   658, 661 (9th Cir. BAP 1988).   In conjunction with the Sanctions
 5   Motion, Kim filed her Declaration itemizing her attorney’s fees
 6   in this appeal totaling $6,650 and costs totaling $114 “for
 7   attorney service” to file Appellee’s Brief and the Sanctions
 8   Motion.   We find the attorney’s fees and costs requested to be
 9   reasonable.   In the circumstances of this appeal, we conclude
10   that the Sanctions Motion should be granted, and we award Che
11   attorney’s fees of $6,650 and costs in the amount of $114, for
12   total sanctions of $6,764, jointly and severally against Ly and
13   Lopez.
14                             VI. CONCLUSION
15        Based on the foregoing analysis, findings and conclusions,
16   we AFFIRM the Order granting relief from stay to Che and GRANT
17   the Sanctions Motion, awarding sanctions for pursuing a frivolous
18   appeal totaling $6,764 jointly and severally against Ly and his
19   counsel, Lopez.
20
21
22
23
24
25
26
27
28

                                     -13-