United States District Court, E.D. California
In re: Rick Sillman, Debtor.
RICK SILLMAN, Appellee/Plaintiff. JOHN WALKER, Appellant/Defendant,
MEMORANDUM AND ORDER
MORRISON C. ENGLAND, Jr., Chief District Judge.
Appellant John Walker ("Walker") was a creditor in a voluntary Chapter 13 bankruptcy case instituted by Appellee Rick Sillman ("Sillman"). Ultimately, Sillman filed an adversary action against Walker and another individual who is not a party to this appeal. The bankruptcy court ruled in favor of Sillman and against Walker; that decision is the subject of this appeal.
This case presents a tortured set of facts. On February 9, 2009, Sillman, represented by counsel, commenced his voluntary Chapter 13 case, presumably to forestall a foreclosure sale of his residence. Walker asserted a secured claim in the amount of $51, 000 over real property containing that residence ("the Property"), and on March 9, 2009, Walker filed a pro se motion for relief from the automatic stay. Walker's motion, however, was deficient in a number of ways, including the fact that he failed to pay the applicable filing fee. Accordingly, the bankruptcy clerk issued an order to show cause as to why Walker's motion for relief from the automatic stay should not be dismissed.
A hearing on the order to show cause was held on March 31, 2009. Unfortunately, all attempts to determine what precisely occurred at the hearing have been unsuccessful because there is no transcript, neither the court reporter nor her notes can be located, no civil minutes were prepared or filed, and the judge's hearing notes provide no information as to who attended the hearing or what representations were made at that time. It appears, however, that neither Sillman, his Chapter 13 counsel nor Walker appeared. At the hearing, the presiding judge mistakenly issued an order dismissing Sillman's Chapter 13 bankruptcy case rather than resolving Walker's motion for relief from the automatic stay. Thus, on April 3, 2009, an order dismissing Sillman's Chapter 13 case was entered.
On April 8, 2009, Walker conducted a non-judicial foreclosure sale on the Property and purchased it himself. Just one week later, on April 15, 2009, Sillman filed a motion to reconsider the dismissal and reinstate the bankruptcy case. On April 16, 2009, the bankruptcy court granted Sillman's motion to vacate the dismissal and reinstated the Chapter 13 case. On the same day, the deed from the foreclosure sale was recorded. Undisputed testimony demonstrates that Sillman's bankruptcy counsel contacted Walker and that the parties agreed to execute a stipulation rescinding the foreclosure sale, since the April 3, 2009, dismissal order was unquestionably issued in error. In the meantime, however, Sillman continued making plan payments and the Trustee continued to pay Walker $380.00 monthly. Those payments remained ongoing through approximately December 2009. Despite Walker's apparent agreement to rescind the foreclosure sale through stipulation, no stipulation was ever filed and no deed of reconveyance correcting the real property records was recorded. Consequently, Sillman made payments as if he continued to hold title to the property for some eight months, despite the fact that the foreclosure deed naming Walker as the owner of the property was never rescinded.
On June 26, 2010, the Trustee filed a motion to dismiss Sillman's Chapter 13 case because he was delinquent $4, 668.00 in plan payments and had not filed a motion to confirm his Chapter 13 plan. On July 30, 2010, the Trustee's motion was granted and Sillman's Chapter 13 case was dismissed. Following approval of the Trustee's final report and account, Sillman's Chapter 13 case was closed on October 25, 2010.
Subsequently, Walker (the putative owner of the property as a result of the foreclosure sale) pursued an unlawful detainer action against Sillman, who was still residing on the Property, in state court. In response, Sillman sued Walker, also in state court. Walker ultimately prevailed in his unlawful detainer action and took possession of the Property. He subsequently demolished the structure where Sillman had lived.
On October 27, 2011, almost exactly a year after Sillman's Chapter 13 case was closed, he filed a motion to reopen his bankruptcy case to adjudicate whether the foreclosure sale was void as a matter of law. Over Walker's pro se objection, the bankruptcy court granted Sillman's motion and reopened the bankruptcy case to determine the validity of the foreclosure sale as it relates to the automatic stay.
Subsequently, the court held a hearing on Sillman's motion to void the foreclosure sale and denied the motion without prejudice subject to Sillman filing an adversary action. On January 19, 2012, Sillman filed an adversary action against Walker and Lisa Talcott (Talcott is not a party to this appeal).
On June 24, 2013, August 29, 2013, and November 7, 2013, the bankruptcy court presided over a trial on whether the foreclosure sale violated the automatic stay. In a Memorandum Opinion and Decision filed on January 21, 2014, that court found that the April 3, 2009, order dismissing Sillman's Chapter 13 bankruptcy case was void. The court also determined that the foreclosure sale violated the automatic stay and Sillman was and remains the legal owner of the Property. It further found that Walker willfully violated the automatic stay, entitling Sillman to damages in the amount of $45, 500.00. That damages award consisted of actual damages in the amount of $24, 000.00 for the dispossession of and loss of use of the Property, $14, 000.00 for emotional distress, and punitive damages in the amount of $7, 500.00.
Notwithstanding a number of irrelevant and/or waived arguments advanced by Walker on appeal, this case ultimately turns on three issues: (1) whether the bankruptcy court properly determined that the April 3, 2009, dismissal was void, which rendered the foreclosure sale a violation of the automatic stay; (2) if so, whether the bankruptcy court properly determined that Walker's violation of the automatic stay was willful, thereby entitling Sillman to damages; and (3) if so, whether there was evidence to support the bankruptcy court's award of damages. This Memorandum and Order addresses each issue in turn.
The applicable standard of review for adjudicating a bankruptcy appeal is identical to that employed by circuit courts of appeal in reviewing district court decisions. See Heritage Ford v. Baroff (In re Baroff), 105 F.3d 439, 441 (9th Cir. 1997). Thus, legal conclusions are reviewed de novo, and factual determinations are assessed pursuant to a clearly ...