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In re Icenhower

United States Court of Appeals, Ninth Circuit

June 26, 2014

IN RE: JERRY L. ICENHOWER, DBA Seaview Properties; DONNA L. ICENHOWER, Debtors,
v.
ALEJANDRO DIAZ-BARBA; MARTHA MARGARITA BARBA DE LA TORRE, Defendants-Appellants. KISMET ACQUISITION, LLC, Plaintiff-Appellee, IN RE: JERRY L. ICENHOWER, DBA Seaview Properties; DONNA L. ICENHOWER, Debtors, KISMET ACQUISITION, LLC, Plaintiff-Appellant,
v.
ALEJANDRO DIAZ-BARBA; MARTHA MARGARITA BARBA DE LA TORRE, Defendants-Appellees

Argued and Submitted, Pasadena, California February 11, 2014.

Page 1131

[Copyrighted Material Omitted]

Page 1132

Appeal from the United States District Court for the Southern District of California. D.C. Nos. 3:08-cv-02326-BTM-BLM, 3:08-cv-02329-BTM-BLM, 3:08-cv-02409-BTM-BLM, 3:08-cv-02410-BTM-BLM, 3:09-cv-00329-BTM-BLM, 3:09-cv-00330-BTM-BLM, 3:09-cv-00331-BTM-BLM, 3:09-cv-00332-BTM-BLM, 3:09-cv-00432-BTM-BLM, 3:09-cv-00457-BTM-BLM, Barry T. Moskowitz, District Judge, Presiding.

SUMMARY[*]

Bankruptcy

The panel affirmed the district court's judgment affirming in part and vacating in part the bankruptcy court's post-judgment imposition of contempt sanctions on defendants for failing to transfer a Mexican coastal villa to the plaintiff in a bankruptcy adversary proceeding.

The panel held that the bankruptcy court had jurisdiction, post-judgment, to substitute a property transferee because it retained jurisdiction to supervise the course of conduct mandated by the judgment.

The panel held that even though the bankruptcy court's contempt and sanctions orders were based solely on affidavits, they did not violate due process because, in light of the defendants' noncompliance with the judgment, the defendants bore the burden of showing their inability to comply. The panel held that the judgment was sufficiently specific to support a finding of civil contempt because it ordered the defendants to undertake a specific and definite course of conduct: to transfer the villa interest to the plaintiff or its assignee. The panel rejected the defendants' argument that Mexican law rendered compliance with the judgment impossible. The panel also held that the bankruptcy court's findings of contempt for a particular period were not clearly erroneous.

The panel held that the bankruptcy court did not err in issuing an order abrogating a defendant's attorney-client privilege.

On the plaintiff's cross-appeal, the panel held that the district court did not err in vacating compulsory sanctions of $25,000 per day for a period before the defendants were put on notice that their continued occupation of the villa would trigger such sanctions.

Edward I. Silverman (argued), Sandler, Lasry, Laube, Byer & Valdez, LLP, San Diego, California, for Defendant-Appellant/Cross-Appellee Alejandro Diaz-Barba.

D. Anthony Gaston (argued), Law Offices of D. Anthony Gaston, San Diego, California, for Defendant-Appellant/Cross-Appellee Martha Margarita Barba De La Torre.

Janet D. Gertz (argued) and Ali M.M. Mojdehi, Cooley LLP, San Diego, California, for Plaintiffs-Appellees/Cross-Appellants.

Before: Jerome Farris, N. Randy Smith, and Paul J. Watford, Circuit Judges.

OPINION

Page 1133

FARRIS, Circuit Judge:

This appeal arises from contempt sanctions issued by the bankruptcy court against defendants Alejandro Diaz-Barba and Martha Margarita Barba De La Torre (collectively, the " Diazes" ) for failing to transfer a Mexican coastal villa to plaintiff

Page 1134

Kismet Acquisition, LLC. The district court confirmed that the Diazes' conduct was sanctionable, but remanded for consideration of appropriate sanctions. The Diazes appealed the conclusion that their conduct was sanctionable, and Kismet cross-appealed part of the district court's decision reversing the bankruptcy court.

We have jurisdiction pursuant to 28 U.S.C. § 158(d)(1). Despite the district court's partial remand to the bankruptcy court to recalculate the amount of fees and costs, immediate review is proper: this appeal concerns primarily legal questions regarding the propriety of the bankruptcy court's contempt orders, the factfinding to be conducted by the bankruptcy court on remand is not related to a central issue raised on appeal, and the Panel's decision might dispose of the case and obviate the need for factfinding. See In re Lehtinen, 564 F.3d 1052, 1057 (9th Cir. 2009); In re Dyer, 322 F.3d 1178, 1187 (9th Cir. 2003); In re Bonner Mall P'ship, 2 F.3d 899, 904 (9th Cir. 1993). We affirm.

I.

A. The bankruptcy court's underlying judgment.

Debtors Jerry and Donna Icenhower owned an interest in Villa Vista Hermosa, a coastal villa in Jalisco, Mexico. Their interest was not a fee simple, as Mexican law prohibits foreign nationals from owning title to land within 100 kilometers of the border or 50 kilometers of the coast. See Brady v. Brown, 51 F.3d 810, 814, 817 n.8 (9th Cir. 1995). Rather, Debtors held the beneficial interest in a fideicomiso trust -- an arrangement wherein a Mexican bank holds title to property and a foreign national is granted the right to its use. See id. at 814. A fideicomiso trust may be created only with a permit issued by the Mexican Ministry of Foreign Affairs. See id.

On March 4, 2002, Debtors purchased H& G, a shell company, and transferred the Villa interest to H& G. On December 15, 2003, Debtors filed for bankruptcy protection. On June 7, 2004, H& G sold the Villa interest to the Diazes for $1.5 million.

On August 23, 2004, the bankruptcy trustee filed an action seeking to avoid the transfer of the Villa interest from Debtors to H& G as a fraudulent conveyance. On August 3, 2006, the trustee filed an action seeking to avoid the transfer from H& G to the Diazes as an unauthorized postpetition transfer. H& G did not appear in either action. By agreement approved by the bankruptcy court on November 30, 2006, Kismet purchased the estate's assets and was substituted for the trustee.

On June 2, 2008, following a bench trial, the bankruptcy court ruled for Kismet in both actions. On the same day, the court issued a separate judgment, ordering the Diazes, under 11 U.S.C. § 550(a):

[a] to take all actions necessary to execute and deliver any and all documents needed to undo the avoided transfer, and to take all actions necessary to cause the property to be reconveyed to a fideicomiso trust naming [Kismet] as the sole beneficiary for the benefit of the bankruptcy estate; or
[b] alternatively, at [Kismet]'s sole option made upon proper noticed motion, the court reserves jurisdiction to enter a monetary judgment in favor of Kismet, and against Defendants, in an amount necessary to make the estate whole at the time of judgment.

On July 29, 2008, the court filed an Amended Consolidated Judgment, in which it clarified that the Villa interest was an interest in a fideicomiso trust, not a fee simple, and required the Diazes to comply within 10 days. Following denials of a stay pending ...


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