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In re Perl

United States Court of Appeals, Ninth Circuit

January 8, 2016


Argued and Submitted August 31, 2015, Pasadena, California

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[Copyrighted Material Omitted]

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Appeal from the Ninth Circuit, Bankruptcy Appellate Panel. BAP No. 13-1328. Kirscher, Taylor, and Dunn, Bankruptcy Judges, Presiding.


On appeal from the Bankruptcy Appellate Panel, the panel reversed the bankruptcy court's determination that Eden Place, LLC, violated the automatic stay by evicting a chapter 13 debtor from a residential property.

The panel held that it had jurisdiction over the appeal. Because the case did not involve a remand, the panel applied the two-part finality test articulated in SS Farms, LLC v. Sharp (In re SK Foods, L.P.), 676 F.3d 798 (9th Cir. 2012). The panel concluded that the bankruptcy court's decision (1) resolved and seriously affected substantive rights and (2) finally determined the discrete issue to which it was addressed.

On the merits, the panel concluded that the debtor had no legal or equitable interest remaining in the property at the time of his eviction. An unlawful detainer judgment and writ of possession entered pursuant to California Code of Civil Procedure § 415.46 bestowed legal title and all rights of possession upon Eden Place. Accordingly, Eden Place did not violate the automatic stay provisions of 11 U.S.C. § 362(a).

Dissenting, Judge Watford wrote that he would dismiss the appeal for lack of jurisdiction because the bankruptcy court's order, finding a stay violation but postponing until later a ruling on damages, could not be deemed final.

Ronald N. Richards (argued), Law Offices of Ronald Richards & Associates, APC, Beverly Hills, California; Howard N. Madris, Law Office of Howard N. Madris, APC, Beverly Hills, California, for Appellant.

No appearance for Appellee.

Before: Susan P. Graber, Johnnie B. Rawlinson, and Paul J. Watford, Circuit Judges.


Page 1123

Johnnie B. Rawlinson, Circuit Judge.

Appellant Eden Place, LLC (Eden Place), appeals the decision of the Bankruptcy Appellate Panel (BAP) affirming the bankruptcy court's determination that Eden Place violated the automatic stay provisions of the Bankruptcy Code by evicting Debtor Sholem Perl (Perl) from a residential property. Because we conclude that Perl had no legal or equitable interest remaining in the property at the time of his eviction, we reverse the bankruptcy court's ruling that Eden Place violated the automatic stay.


A. State Court Proceedings

Perl and a joint tenant owned a single-family duplex in Los Angeles, California. After refinancing, Perl defaulted on his mortgage payments, and Bank of America instituted foreclosure proceedings. The property was sold to Eden Place through a non-judicial foreclosure sale on March 20, 2013. Eden Place timely recorded the trustee's deed nine days later.

Despite the legal transfer of title, Perl refused to vacate the premises. Eden Place served Perl with a three-day notice to quit, and later served Perl with two unlawful detainer complaints, one for each side of the duplex. In response, Perl filed a complaint against Eden Place to set aside the trustee's sale (Complaint to Set Aside Sale), and Eden Place filed a cross-complaint for damages, trespass, and interference with prospective economic advantage (Cross-Complaint), and a motion to expunge Perl's lis pendens.

On June 11, 2013, the state court entered judgment in favor of Eden Place on the unlawful detainer actions, resulting in a judgment for possession and restitution. Three days later, the state court entered a Writ of Possession in favor of Eden Place. Sometime between June 14 and June 24, the Los Angeles County Sheriff posted the lockout notice. On June 19, the state court heard Perl's motion to stay the unlawful detainer proceedings and set various conditions for a stay. Once Perl failed to meet the conditions, the unlawful detainer judgment for possession remained in effect, culminating in eviction by the Sheriff.

B. Bankruptcy Court Proceedings

Rather than complying with the state court requirements to stay the unlawful detainer proceedings, Perl filed a " skeletal" chapter 13 bankruptcy petition pro se. He failed to file any schedules, financial affairs statement, or proposed plan of reorganization. Although not listed as a creditor, Eden Place learned of the bankruptcy filing from Perl's counsel, who informed Eden Place that no exceptions to the automatic stay applied and that any eviction would violate the automatic stay.

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Perl also filed a notice of removal in the three state court actions (Complaint to Set Aside Sale, Cross-Complaint, and Unlawful Detainer Actions). Because there was a previously scheduled state court hearing to expunge the lis pendens on the property, Eden Place sought to remand the three state court actions and also sought relief from the automatic stay (Stay Relief Motion). Eden Place argued, in the alternative, that the automatic stay did not apply because the property was not property of the estate. Specifically, Eden Place argued that, prior to the filing of the bankruptcy petition by Perl, Eden Place purchased the property at a trustee's sale, recorded the trustee's deed, and obtained a judgment and writ of possession.

Before the bankruptcy court held a hearing on the Stay Relief Motion, the Sheriff proceeded with the lockout and evicted Perl. As a result, Perl was unable to remove some of his personal belongings. Perl then filed an emergency motion to enforce the automatic stay, arguing that the eviction interfered with protectable equitable interests based on his continued possessory interest in the premises.

Over Eden Place's objection, the bankruptcy judge determined that Perl's " bare possessory interest, coupled with the possibility of some sort of relief [from the pending litigation]" gave " the bankruptcy estate a protected interest that is subject to the automatic stay." Accordingly, the bankruptcy court determined that Eden Place had violated the automatic stay when it evicted Perl, and that the eviction was void. The bankruptcy court stayed its determination regarding contempt sanctions because Perl had not yet offered evidence of damages. Although Eden Place later filed a status report pursuant to the bankruptcy court's order, Perl never filed anything further in his bankruptcy case. ...

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