The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge
ORDER DENYING MOTION FOR A STAY PENDING APPEAL
Appellants Alejandro Diaz-Barba and Martha Barba (the "Diaz family") have appealed a judgment of the Bankruptcy Court. They seek a stay of the Bankruptcy Court's order mandating that they turn over a villa overlooking the ocean located in Jalisco, Mexico (the "Villa") to Appellee Kismet Acquisition, LLC ("Kismet"). For the reasons set forth below, the Court DENIES Appellant's motion for a stay of the judgment pending appeal.
In or about 1995, D. Donald Lonie and the Lonie Family Trust (the "Lonies") sold a leasehold interest*fn1 in the Villa to Jerry and Donna Icenhower (the "Icenhowers.") On March 24, 2000, the Lonies commenced an action against the Icenhowers in district court regarding payment for the sale of the Villa. On March 4, 2002, the Icenhowers transferred their interest in the Villa to Howell & Gardner ("H&G"), a Nevada corporation.
On November 24, 2003, the district court entered judgment against the Icenhowers for $550,000 plus additional amounts for interest and advances. Shortly thereafter, on December 15, 2003, the Icenhowers filed for bankruptcy protection. On or about June 7, 2004, H&G sold the Villa to the Diaz family, who are Mexican nationals and residents of San Diego, California.*fn2
On August 23, 2004, the Trustee of the Bankruptcy estate commenced a fraudulent transfer action against H&G to recover the Icenhower's transfer of the Villa property. Upon learning that H&G had subsequently transferred this property to the Diaz family, the Trustee amended his complaint to add the Diaz family as Defendants in the fraudulent transfer action. On August 3, 2006, the Trustee filed a second, alternative action against H&G seeking a ruling to the effect that (1) H&G was the alter ego of the Icenhowers, and (2) that the assets of the Debtors and H&Gshould be substantively consolidated nunc pro tunc to the petition filing date.
On December 7, 2006, Kismet purchased the Lonies' claim arising from their litigation with the Icenhowers in order to gain possession of the Villa. Wolfgang and Dieter Hahn, who formed Kismet, own the land surrounding the Villa and are developing a golf resort.
The bankruptcy judge consolidated these two actions and issued a decision on June 2, 2008. The bankruptcy court issued two alternative rulings. First, the bankruptcy court found that H&G was the alter ego of the Icenhowers. As a result, even though the Icenhowers had transferred the Villa to H&G prior to the bankruptcy petition, the Villa was still part of the Icenhower's bankruptcy estate at the time of filing the petition. The Court therefore ruled that the subsequent transfer of the Villa to the Diaz family was avoidable as an unauthorized post-petition transfer. Alternatively, the bankruptcy court ruled that even if the Villa was not a part of the estate at the time of filing the petition, the transfer from the Icenhowers to H&G was avoidable as a fraudulent transfer (i.e., transfer made by the creditor "with actual intent to hinder, delay, or defraud any creditor of the debtor") and recoverable from the Diaz family, the subsequent transferee. Accordingly, the bankruptcy court ruled that Kismet is entitled to recover the Villa and ordered that the Diaz family take all actions necessary to undo the unauthorized transfer and reconvey the property to a fideicomiso trust for the benefit of Kismet. The bankruptcy court also provided for the alternative of a money judgment for Kismet at Kismet's sole option. It appears that Kismet has not chosen to exercise its option for a money judgment.
The Diaz family has appealed this judgment to this Court and seeks a stay of the bankruptcy court's order that they turn over the Villa to Kismet pending appeal.
Stay as a Matter of Right
Appellants argue that they are entitled to an automatic stay of judgment upon filing a supersedeas bond pursuant to Federal Rule of Civil Procedure 62(d) and Bankruptcy Rule 7062. As Appellants themselves point out, stays as a matter of right are limited to cases involving a money judgment. In re Capital West Investors, 180 B.R. 240, 242 (Bankr. N.D. Cal. 1995) Contrary to appellants' argument, the bankruptcy court's order that Appellants turn over the Villa property constitutes injunctive relief not equivalent to a money judgment. Posting a money bond would not adequately compensate Kismet in terms of lost opportunities to develop the property or otherwise take action regarding the property while the appeal is pending. The cases cited by Appellants are inapposite because they deal with instances, such as foreclosure scenarios, where the judgment directing the transfer of real property is equivalent to a money judgment. See United States v. Mansion House Center Redevelopment Co., 682 F. Supp. 446, 450 (E.D. Mo. 1988) (mortgage foreclosure judgment should be treated like money judgment.) Here, Kismet is not solely interested in the money resulting from the sale or foreclosure of the property or else it would have opted for the money judgment as offered by the bankruptcy court. The Court therefore DENIES Appellants motion for a stay as a matter of right upon posting bond.
Bankruptcy Rule 8005 enables courts to provide for a discretionary stay of judgment pending appeal. In order to obtain a stay, appellants must establish the following: (1) appellants are likely to succeed on the merits of the appeal; (2) appellants will suffer irreparable injury; (3) no substantial harm will come to appellees; and (4) the stay will do no harm to the public interest. In re Wymer, 5 B.R. 802, 806 (9th Cir. 1980). Pursuant to Rule 8005, an application for a stay pending appeal must first be presented to the bankruptcy judge. Where the bankruptcy court has denied a ...