United States District Court, N.D. California, San Jose Division
ORDER DENYING DEBTOR'S MOTION FOR STAY PENDING
APPEAL [RE: ECF 19]
LABSON FREEMAN United States District Judge.
Laura Gens appeals the bankruptcy court's order
converting her Chapter 11 case to a Chapter 7 case.
See Notice of Appeal, ECF 1-1. After unsuccessfully
moving for a stay pending appeal in the bankruptcy court,
see Order Denying Debtor's Motion for Stay
Pending Appeal, ECF 20-18, Debtor filed a motion for a stay
in this Court with a noticed hearing date of September 28,
2017, see Debtor's Motion for Stay, ECF 19. The
motion is opposed by secured creditor Wells Fargo Bank, N.A.
(“Wells Fargo”) and the Chapter 7 Trustee, who
joins in Wells Fargo's opposition. See Wells
Fargo's Opp., ECF 21; Trustee's Joinder in Opp., ECF
25. Because it was concerned that Debtor's home might be
sold prior to the noticed hearing date, the Court sua
sponte reset the hearing date to June 1, 2017.
See Order Resetting Hearing Date, ECF 31.
hearing, the Court clarified that its review of the
bankruptcy court's denial of a stay is limited to
determining whether the bankruptcy court abused its
discretion. After hearing argument, the Court stated its
conclusion that the bankruptcy court had applied the correct
legal standard; the bankruptcy court's factual findings
were adequately supported by the record; and the bankruptcy
court's denial of a stay was not an abuse of discretion.
The Court stated on the record that it would not grant a stay
and advised the parties that it was informing them of its
ruling at the time of the hearing due to time constraints
regarding a possible sale of the property and because the
Court likely would not be able to issue a written order for
several weeks. This written order is intended to explain more
fully the Court's reasoning for its denial of
has filed four bankruptcy cases in the past seven years,
which among other things has prevented Wells Fargo from
foreclosing on her home. See Transcript of BR
Proceedings 1/25/2017, ECF 20-23. The bankruptcy court
summarized those proceedings at a January 25, 2017 hearing on
Wells Fargo's Motion to Dismiss Case or Convert Case to
Chapter 7. See id. Debtor has had a long-running
dispute with Wells Fargo over a loan secured by Debtor's
multi-million dollar home in Palo Alto, California. See
first bankruptcy, Case No. 10-br-55305, was filed in May 2010
and dismissed in June 2012 based on the bankruptcy
court's determination that Debtor could not file or
confirm a plan. Transcript of BR Proceedings 1/25/2017 at 20,
ECF 20-23. Her second bankruptcy, Case No. 12-br-56055, was
filed in August 2012 and dismissed voluntarily in October
2012. Id. Her third bankruptcy, Case No.
13-br-30106, was filed in January 2013 and dismissed in May
2015 when it was reassigned to a new bankruptcy judge with no
plan confirmed. Id. Her fourth bankruptcy (from
which the present appeal arises), Case No. 15-br-53562, was
filed in November 2015 and converted to a Chapter 7 case by
order dated February 1, 2017. Id.; Order Granting
Wells Fargo's Motion to Dismiss or Convert Case to
Chapter 7, ECF 1-1.
bankruptcy court concluded that cause existed under 11 U.S.C.
§ 1112(b) to convert or dismiss the case, and that
conversion rather than dismissal was in the best interest of
the creditors and the estate. See Order Granting
Wells Fargo's Motion to Dismiss or Convert Case to
Chapter 7, ECF 1-1. On the issue of cause, the bankruptcy
court noted on the record that Debtor did not dispute that
her Chapter 11 case should be resolved, but instead requested
dismissal rather than conversion. Transcript of BR
Proceedings 1/25/2017 at 20, ECF 20-23. The bankruptcy court
took Debtor's position as a concession that cause existed
under § 1112(b). Id. at 20-21. Separate and
apart from Debtor's concession, the bankruptcy court
concluded that cause existed based on Debtor's bad faith
in abusing the bankruptcy process, as evidenced by
Debtor's submission of fraudulent documents regarding the
financial resources of her husband, Timothy Gens; Timothy
Gens' refusal to cooperate with Wells Fargo's efforts
to take discovery regarding his financial resources;
Debtor's overestimation of her own income and
underestimation of her expenses; and Debtor's persistence
in objecting to Wells Fargo's claim despite an order
overruling that objection. Id. at 21-30.
issue of conversion versus dismissal, the bankruptcy court
concluded that conversion was in the best interest of the
creditors, because Debtor was a serial filer and likely would
simply file a fifth bankruptcy upon dismissal of her fourth
case. Id. 31-32. The bankruptcy court found that
conversion to Chapter 7 would result in all creditors being
paid more quickly than if Debtor continued with her efforts
to confirm a Chapter 11 plan. Id. at 32. Finally,
the Court found that requiring Wells Fargo to wait longer for
payment would be inherently unfair given Debtor's conduct
to date. Id. at 33.
appealed the bankruptcy court's order converting the
Chapter 11 case to a Chapter 7 case. She now seeks a stay of
that order pending appeal.
motion for a stay pending appeal ordinarily must be brought
in the bankruptcy court in the first instance. Fed.R.Bankr.P.
8007(a). If a party moves for such relief in the district
court, “[t]he motion must: (A) show that moving first
in the bankruptcy court would be impracticable; or (B) if a
motion was made in the bankruptcy court, either state that
the court has not yet ruled on the motion, or state that the
court has ruled and set out any reasons given for the
ruling.” Fed.R.Bankr.P. 8007(b)(2).
the bankruptcy court has denied a motion for a stay pending
appeal, the district court may grant a stay only if it
determines that the bankruptcy court's denial was an
abuse of discretion. See In re Wymer, 5 B.R. 802,
808 (9th Cir. B.A.P. 1980) (“It is . . . important to
the properly functioning bankruptcy court that the trial
judge's rulings on stays pending appeal be disturbed only
in the event of error or abuse of discretion.”); In
re North Plaza, LLC, 395 B.R. 113, 119 (S.D. Cal. 2008)
(“Where the bankruptcy court has already denied a stay
. . . the appellate court's review is limited to a simple
determination of whether the bankruptcy court abused its
discretion.”). “The abuse of discretion standard
on review of the bankruptcy court's order denying a stay
encompasses a de novo review of the law and a
clearly erroneous review of the facts with respect to the
underlying issues.” In re North Plaza, 395
B.R. at 119.