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Cesar v. Charter Adjustments Corp.

United States District Court, E.D. California

October 14, 2014

JOSEPH M. CESAR and LATSAMY L. CESAR, Appellants,
v.
CHARTER ADJUSTMENTS CORPORATION and DONALD E. STERNBERG, Appellees

Decided Date: October 10, 2014

For Joseph M. Cesar, Latsamy L. Cesar, Appellants: Daniel J. Hanecak, Law Office Of Daniel J. Hanecak, Sacramento, CA.

For Charter Adjustments Corporation, Appellee: Donald E. Sternberg, Law Office Of Donald E. Sternberg, Woodland Hills, CA.

For Donald E. Sternberg, Appellee: Roy Garfield Weatherup, LEAD ATTORNEY, Lewis Brisbois Bisgaard & Smith, LLP, Los Angeles, CA.

Office of the U.S. Trustee (Sac), Trustee, Pro se, Sacramento, CA.

Garry Lee Ness, Trustee, Pro se, Aptos, CA.

Page 793

ORDER

Kimberly J. Mueller, UNITED STATES DISTRICT JUDGE.

Appellants Joseph M. Cesar and Latsamy L. Cesar's bankruptcy appeal is currently pending before the court. On July 11, 2014, the court heard oral argument on the matter. Daniel Hanecak appeared for appellants; Roy Weatherup appeared for appellee Donald E. Sternberg and specially appeared on behalf of counsel Donald E. Sternberg for appellee Charter Adjustments Corporation.

After considering the parties' papers and arguments, the bankruptcy judgment is AFFIRMED.

I. BACKGROUND

Appellants owned a chain of clothing stores that began to fail in 2006. App. Vol.

Page 794

I at 57 (" Vol. I" ), ECF No. 4-1.[1] In 2007, appellants began using the equity in their home to cover expenses. Id. After running out of money, appellants missed their first house payment in August 2008. Id.

Before appellants filed for bankruptcy, one of appellants' creditors assigned its claim against appellants to appellees. On April 2, 2009, appellees obtained a default judgment against appellants for $6,970.47. App. Vol. II at 226-229 (" Vol. II" ), ECF No. 4-2. Appellees filed an abstract of judgment on November 6, 2009. Id. at 230. The abstract of judgment was recorded on March 8, 2010. Id.

On April 29, 2010, Wells Fargo Bank foreclosed on appellants' home. Vol. I at 57. In July 2010, appellants filed a Chapter 7 petition in bankruptcy court. Id. at 127-129. The petition listed appellees as unsecured creditors. Id. On October 28, 2010, attorney Frank J. Ferris substituted in as attorney of record for appellants. Vol. II at 369. On November 16, 2010, the bankruptcy trustee filed a " no-asset" report indicating there were no assets that could be liquidated for the benefit of unsecured creditors. Vol. I at 7-9. Also on November 16, 2010, a copy of appellants' discharge was mailed by the Bankruptcy Noticing Center to appellees.[2] Id. at 10-15; see also Vol. II at 369 (bankruptcy case docket showing notice of filing report of no distribution was transmitted to Bankruptcy Noticing Center for service).

Two years later, in November 2012, appellant Joseph Cesar applied for credit at Macy's but was purportedly denied due to liens on the public record. Id. at 59, 68-69. On December 17, 2012, after discovering appellees maintained a judgment lien against them that was still on record, appellants, without the assistance of counsel, mailed a letter to appellees notifying them of the discharge and requesting removal of the judgment lien and negative credit reporting. Id. at 71. On December 27, 2012, appellants received a response from appellees. Id. at 73. The letter informed appellants that appellees had not reported the lien to any credit reporting agency and, unless appellant was able to go back into bankruptcy court, the abstract would remain attached to any real property appellants may own until it is satisfied by payment in full or some other satisfactory payment arrangement. Id. The letter further stated, " If you have written because you are in the process of selling or refinancing your home and that process has uncovered this lien, a resolution can be realized through a demand in escrow." Id. Finally, the letter informed appellants the amount owed, after interest, was approximately $9,000. Id.

The parties continued their correspondence in early January 2013, during which time appellee made references to appellants' property and the judgment secured against it. Id. at 76-86. During this time, appellants did not inform appellees they no longer owned the real property. Vol. II at 191. In May 2013, counsel for appellants, Daniel Hanecak, requested appellees remove the lien from the record in light of the discharge, but also did not mention appellants no longer owned the property. Vol. I at 93.

After reopening their bankruptcy matter, appellants' counsel, Mr. Hanecak, filed

Page 795

motions for expungement of the lien and sanctions against appellees for willful violation of the bankruptcy court's prior discharge order. Id. at 33. On September 23, 2013, the court denied the motion to expunge the lien because appellants no longer owned the property.[3] Id. at 138-139. The court also dismissed the motion for sanctions without prejudice due to notice defects. Vol. II at 354. On this same day, appellees were informed appellants' home had been sold at a foreclosure sale on April 16, 2010. Vol. I at 138.

On November 18, 2013, appellants filed another motion for sanctions against appellees. Id. at 37-55. Appellants argued appellees' efforts at collecting the judgment lien caused appellants to suffer emotional distress. Id. at 49-54. Appellees' counsel argued he never received any of the motion for sanctions pleadings despite his name appearing on the proof of service. Id. at 154. A final hearing on the sanctions motion was heard on January 13, 2014. Vol. II at 305-315. The bankruptcy court recognized appellees " didn't actually know that the property had been lost in a foreclosure" and did not find appellants' constructive notice argument persuasive. Id. at 306-307 . The court denied the motion and found " [t]he debtors have not met their burden of persuasion -- by clear and convincing evidence -- that the [appellees] were attempting to collect a debt to which the discharge injunction was applicable . . . or that the [appellees'] actions violated the discharge injunction . . . ." Id. at 302.

II. LEGAL STANDARD

A district court may " affirm, modify, or reverse a bankruptcy judge's judgment, order, or decree or remand with instructions for further proceedings." Fed. R. Bankr. P. 8013. The court reviews " 'the bankruptcy court's findings of fact under the clearly erroneous standard[,] . . . its conclusions of law de novo,'" Clinton v. Acequia, Inc. (In re Acequia, Inc.), 787 F.2d 1352, 1357 (9th Cir. 1986) (quoting Ragsdale v. Haller, 780 F.2d 794, 795 (9th Cir. 1986)), and " [m]ixed questions of law and fact . . . de novo." Beaupied v. Chang (In re Chang), 163 F.3d 1138, 1140 (9th Cir. 1998). Rulings regarding issue preclusion are mixed questions of law and fact, in which legal issues predominate. Khaligh v. Hadaegh (In re Khaligh), 338 B.R. 817, 823 (9th Cir. B.A.P. 2006).

" 'A finding is " clearly erroneous" when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.'" Anderson v. Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985) (quoting United States v. U.S. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 ...


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