On Appeal From U.S. Bankruptcy Court District of Alaska Hon. Donald MacDonald IV Bankruptcy 4:08-bk-00110-DMD.
The opinion of the court was delivered by: Ralph R. Beistline United States District Judge
Appellants Louis H. and Nancy E. Green ("Greens") appeal from the Order Granting Debtor's Emergency Motion for Order to Show Cause Why Sanctions for Violation of the Automatic Stay Should Not be Imposed entered by the Bankruptcy Court.
Neither party has timely requested oral argument. The Court, having reviewed the briefs and record on appeal, has determined that oral argument would not materially assist the Court in rendering a decision.*fn1 The matter is submitted on the briefs of the parties.
I. PROCEEDINGS BELOW/JURISDICTION
The Catholic Bishop of Northern Alaska ("CBNA") filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code on March 1, 2008. Subsequently, on November 27, 2009, while CBNA's Chapter 11 proceedings remained ongoing, the Greens filed a quiet title action in the Alaska Superior Court, Second Judicial District at Nome, entitled Green v. The Catholic Diocese of Fairbanks and the Catholic Bishop of Northern Alaska, Case No. 2NO-09-314 CV. When CBNA did not respond to the complaint, the Greens moved for entry of default judgment. CBNA then moved for an order to show cause why sanctions should not be imposed upon the Greens and their attorney, Byron Collins, for violation of the automatic stay.
After holding a hearing on the motion at which counsel for the Greens appeared in person and the Greens appeared telephonically, the Bankruptcy Court granted CBNA's motion. The following are the facts as recited by the Bankruptcy Court in its Memorandum on Sanctions (footnotes omitted):
CBNA has been in chapter 11 since March 1, 2008. CBNA scheduled an interest in real property described as "Pilgrim Springs: geothermal hot springs 70 miles northeast of Nome, AL [sic]; 320 acres lease until 2068." The property was deeded to CBNA in 1917 and used as a mission church and then an orphanage until 1941. In 1969, CBNA entered into a lease with Pilgrim Springs, Ltd. for use of the property. The lease was amended in 1974 and again in 1980. The term of the lease was 99 years. Under its terms, Pilgrim Springs, Ltd., was authorized to operate a resort or other business enterprise on the property, develop the property's geothermal resources and conduct oil, gas and mining operations.
CBNA moved to terminate its lease with Pilgrim Springs, Ltd., on November 7, 2008. No objections to the motion were filed and it was granted on December 5, 2008. However, on December 2, 2008, Louis and Nancy Green filed a proof of claim in this case for $263,143.00. The claim stated that the cancellation of the lease with Pilgrim Springs, Ltd., would "cause them to lose a financial interest" in that amount. The attachment to the Greens' claim stated that they were owed various sums for "labor, equipment, operating and transportation cost in connection with carrying-out duties as care-takers and agents at Pilgrim Hot Springs for Pilgrim Springs LTD." The Greens subsequently withdrew this claim on July 2, 2009.
On November 25, 2009, the Greens filed a complaint, pro se, against CBNA in state superior court in Nome to quiet title to the Pilgrim Springs property. The complaint alleges that the Greens are residents of both Nome, Alaska and Pilgrim Hot Springs. It further alleges that they are owners, by adverse possession, of the hot springs property "by actual, open, hostile, continuous, and exclusive possession." They contend they possessed the property adversely from 1975 to 1985, and again from 1992 to 2009, "in excess of the 10-year period set forth in AS 09.45.052." The Greens seek a judgment finding that they are fee simple owners of the property, and that CBNA does not have an interest in the property.
On November 30, 2009, CBNA's counsel sent the Greens a letter advising them that their quiet title complaint was a violation of the stay and requesting dismissal of the state court action. The Greens apparently retained Bryon Collins as their attorney because he answered CBNA's letter on their behalf. Mr. Collins, in a letter dated December 10, 2009, contended that the automatic stay was inapplicable to the Pilgrim Springs property, refused to dismiss the Greens' complaint and stated his intent to continue with the quiet title action. He also alleged that the bankruptcy court lacked jurisdiction over the property because the Greens were the owners of the property.
CBNA responded with a letter dated December 15, 2009, which disputed all of Collins' allegations and advised of possible sanctions. The letter again requested dismissal of the action. Collins responded by filing a motion for entry of a default judgment against the debtor and filing an affidavit in support of the motion in the state court action. CBNA promptly moved for the issuance of an order to show cause and this court issued the order.
Based upon those facts, the Bankruptcy Court entered the following order:
1) Both the filing of the complaint and the filing of the subsequent motion for entry of default judgment in the state court quiet title action entitled Green v. The Catholic Diocese of Fairbanks and the Catholic Bishop of Northern Alaska, Case No. 2NO-09-314 CV, pending in the Superior Court for the State of Alaska, Second Judicial District at Nome ("the quiet ...