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Buechel v. Billingslea

United States District Court, S.D. California

June 23, 2015

IN RE ROBERT W. BUECHEL AND CARI DONAHUE, Appellants,
v.
THOMAS H. BILLINGSLEA, JR., CHAPTER 13 TRUSTEE, Appellee. Bankruptcy Case No. 14-4191-LT

ORDER AFFIRMING SANCTIONS ORDERED BY THE BANKRUPTCY COURT

GONZALO P. CURIEL, District Judge.

This case comes before the Court on appeal from an order of the Bankruptcy Court for the Southern District of California ("Bankruptcy Court") in a Chapter 13 bankruptcy proceeding. On September 12, 2014, Appellants, Debtor Robert W. Buechel and Attorney Cari Donahue, filed notice with the Court appealing the Bankruptcy Court's imposition of sanctions under its inherent power under 11 U.S.C. § 105(a). Based on the reasoning below, the Court AFFIRMS the sanctions ordered by the Bankruptcy Court.

Background

This appeal arose from a voluntary Chapter 13 bankruptcy petition filed by Appellants on May 29, 2014. (See S.D. Cal. Bankr. Case No. 14-04191-LT13.[1]) It was not Appellants' first bankruptcy petition.

On June 29, 2010, Appellant Debtor and his wife filed a voluntary Chapter 11 bankruptcy petition. (S.D. Cal. Bankr. Case No. 10-11371-LT7.) In response, Appellee Anne Dierickx, one of the creditors involved, initiated an adversary proceeding on June 15, 2011, to determine the dischargeability of the debt owed by Appellant Debtor and his wife to her. (S.D. Cal. Bankr. Case No. 11-90294-LT, Dkt. No. 1.) On February 13, 2012, the bankruptcy court granted Appellant Debtor's motion to convert the Chapter 11 bankruptcy case into a Chapter 7 bankruptcy case. (S.D. Cal. Bankr. Case No. 10-11371-LT7, Dkt. No. 230.) On November 27, 2012, the Bankruptcy Court closed the Chapter 7 case and discharged the debtor, but the adversary proceeding continued. (See S.D. Cal. Bankr. Case No. 10-11371-LT7, Dkt. No. 253.) Appellant Attorney represented Appellant Debtor in the adversary proceeding.[2]

On July 18, 2013, Appellant Debtor filed his first voluntary Chapter 13 petition. (S.D. Cal. Bankr. Case No. 13-07298-LT13, Dkt. No. 1.) On October 10, 2013, the Bankruptcy Court dismissed the case without prejudice. (S.D. Cal. Bankr. Case No. 13-07298-LT13, Dkt. No. 25.) Appellant Attorney also represented Appellant Debtor in that matter.

On May 29, 2014, Appellant Debtor filed his second voluntary Chapter 13 bankruptcy petition, once again represented by Appellant Attorney. (Dkt. No. 13-1, Appellants Record on Appeal ("ROA"), Ex. 1.) On June 4, 2014, Appellants filed notice of the Chapter 13 petition in the adversary proceeding. (Dkt. No. 14-2, Appellee ROA No. 13.) The notice asserted that the "filing of the [Chapter 13 petition] automatically stays collection and actions against the debtors, the debtors' property, and certain codebtors pursuant to Bankruptcy Code § 362(a)." (Id.)

On June 5, 2014, the Bankruptcy Court issued an Order to Show Cause Re Dismissal of Chapter 13 Case and Sanctions ("OSC"). (Dkt. No. 13-4, Appellants ROA, Ex. 4.) The OSC directed Appellants to appear before the Bankruptcy Court and show cause as to why the Chapter 13 case should not be dismissed as a bad faith filing, and why Appellants should not be sanctioned under 11 U.S.C. § 105(a) and the Bankruptcy Court's inherent authority. (Id.) The Bankruptcy Court explicitly "directed [Appellants] to appear" before the Bankruptcy Court on June 13, 2014, and set June 11, 2014, as the deadline for filing documents in support of or in opposition to the OSC. (Id.)

Appellants did not submit any documents in opposition to the OSC, nor did they appear at the hearing. (See Dkt. No. 13-5, Appellants ROA, Ex. 5.) Instead, on June 12, 2014, during a telephonic conference in the adversary proceeding, attorney Laurence Haines appeared on behalf of Appellant Debtor and requested a continuance of the OSC hearing. (Id.) The Bankruptcy Court continued the OSC hearing to July 18, 2014. (Id.)

On July 16, 2014, two day before the continued OSC hearing, Appellants submitted a request for dismissal of the Chapter 13 bankruptcy case. (Dkt. No. 13-6, Appellants ROA, Ex. 6.)

On July 18, 2014, Appellants did not appear at the continued OSC hearing before the Bankruptcy Court. Instead, Vanessa Kajy appeared as the attorney for Appellant Debtor. (Dkt. No. 14-2, Appellee ROA No. 17.) The Bankruptcy Court dismissed the Chapter 13 case, but specifically retained jurisdiction to assess sanctions against Appellants regarding the OSC. (Id.) The Bankruptcy Court continued the OSC hearing to August 27, 2014. (Dkt. No. 13-7, Appellants ROA, Ex. 7.) The Bankruptcy Court informed Appellants that Appellant Debtor had waived his right to file a written response, but noted that Appellants "must appear at the continued hearing." (Id.) Additionally, the Bankruptcy Court put Appellants on notice that it would "further consider sanctions." (Id.)

On August 27, 2014, the Bankruptcy Court held the final OSC hearing. Appellants did not appear personally. (See S.D. Cal. Bankr. Case No. 14-04191-LT13, Dkt. No. 69.) Laurence Haines appeared as the attorney for Appellant Debtor. (Id.) In the Order on Order to Show Cause Re Dismissal of Chapter 13 Case and Sanctions ("Order on OSC"), the Bankruptcy Court concluded that Appellants "acted in bad faith and engaged in willful misconduct, " and therefore found sanctions appropriate. (Dkt. No. 13-8, Appellants ROA, Ex. 8.) The Bankruptcy Court sanctioned Appellants under its inherent authority pursuant to 11 U.S.C. § 105(a). (Id.) The Bankruptcy Court ordered compensatory sanctions in the amount of $2, 133.00 against Appellants, jointly and severally, payable to Appellee Dierickx. (Id.) The Bankruptcy Court also stated that, as a sanction against Appellant Attorney, it would "report the facts related to this OSC to the California State Bar and to the Standing Committee on Attorney Discipline of the United States District Court for the Southern District of California[.]" (Id.)

On September 12, 2014, Appellants filed notice of appeal. (Dkt. No. 1.) On January 30, 2015, Appellants submitted an opening brief. (Dkt. No. 12.) On February 3, 2015, Appellants submitted a designation of record on appeal and exhibits in support of their opening brief. (Dkt. No. 13.) On February 26, 2015, Appellee Thomas H. Billingslea, Chapter 13 Trustee ("Appellee Trustee") submitted a responsive brief, designation of record on appeal, and record on appeal in support of that brief. (Dkt. No. 14.) On February 27, 2015, Appellee Dierickx submitted a joinder ...


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