Opinion
A154582
12-10-2018
MICHAEL SCOTT FRAZER et al., Plaintiffs, Cross-defendants and Respondents, v. SIMON CHAN, Defendant, Cross-complainant and Appellant.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Contra Costa County Super. Ct. No. MSC14-00633)
Plaintiffs Michael Scott Frazer, Alan Miller, William Chan, Michelle Chan, Jeff Chang, Tomas Velken and Julie Lam (together, plaintiffs) move to dismiss defendant Simon Chan's (defendant) appeal on the grounds that: (1) the appeal is "void" because defendant filed his notice of appeal in violation of a bankruptcy court stay that was in effect at the time; and (2) defendant lacks standing to pursue the appeal. For the reasons set forth below, we shall dismiss the appeal.
FACTUAL AND PROCEDURAL BACKGROUND
On March 28, 2014, plaintiffs brought an action (the state action) against defendant alleging he defrauded them in connection with a real estate investment venture. On January 24, 2018, after a court trial, the Contra Costa Superior Court issued a statement of decision finding in favor of plaintiffs.
The next day, and before judgment was entered in the state action, defendant filed a voluntary chapter 7 bankruptcy petition in the United States District Court for the Northern District of California. The filing of a bankruptcy petition by defendant effected an automatic stay of the state action. (11 U.S.C. § 362(a) [bankruptcy petition triggers an automatic stay of all judicial proceedings against the debtor]; Shah v. Glendale Federal Bank (1996) 44 Cal.App.4th 1371, 1376 [same].)
On March 22, 2018, plaintiffs and the trustee in the bankruptcy case stipulated to have the automatic stay lifted "for the limited purpose of allowing the Plaintiffs to procure a monetary judgment in the [sic] this [state] action . . . ." Based on the stipulation, the bankruptcy court ordered the stay lifted on March 28, 2018, "for the limited purpose of allowing the Creditors to procure a monetary judgment" in the state action. On April 18, 2018, the Contra Costa Superior Court entered judgment in favor of plaintiffs and against defendant in the state action.
On June 15, 2018, defendant filed a notice of appeal. Defendant did not request or obtain an order lifting the stay before filing the notice of appeal.
On September 26, 2018, plaintiffs filed a motion in this court seeking to dismiss defendant's appeal. Defendant filed an opposition to the motion on October 10, 2018.
On October 30, 2018, we issued an order stating that the automatic stay, which remained in effect, precluded this court from acting on the motion to dismiss. (In re Wardrobe (9th Cir. 2009) 559 F.3d 932, 934 ["actions, including judicial proceedings, 'taken in violation of the automatic stay are void' "]; Rosh v. Cave Imaging Systems, Inc. (1994) 26 Cal.App.4th 1225, 1239 [same]; Traweek v. Finley, Kumble, etc. Myerson & Casey (1991) 235 Cal.App.3d 1128, 1135 ["a nonbankruptcy court may not dismiss but may only stay an action in which a defendant has filed for bankruptcy"].) We directed defendant to file status reports regarding the bankruptcy case (Ct. App., First Dist., Local Rules, rule 12(c)), and instructed the parties to notify this court of any circumstance or order permitting this court to proceed to act on the motion to dismiss.
On November 5, 2018, defendant submitted a letter to this court stating, among other things, that the bankruptcy stay was lifted on September 6, 2018, when the bankruptcy court issued a discharge. (Citing 11 U.S.C. § 362(c)(2) for the proposition that an automatic stay remains in effect "until the earliest of (A) the time the case is closed; (B) the time the case is dismissed; or (C) . . . the time a discharge is granted or denied"].) He submitted a copy of the bankruptcy court's September 6, 2018 notice of discharge, of which we take judicial notice. (Evid. Code, §§ 452, 453.) In light of the lifting of the stay by the bankruptcy court, we hereby proceed with the appellate proceedings and rule on plaintiffs' motion to dismiss.
DISCUSSION
Plaintiffs contend the appeal must be dismissed as "void" because defendant filed his notice of appeal in violation of the bankruptcy court stay that was in effect at the time. We agree.
In light of our conclusion that the appeal must be dismissed as void, we will not address plaintiffs' additional contention that defendant lacks standing to pursue the appeal.
The filing of a bankruptcy petition triggers an automatic, immediate stay of "the commencement or continuation . . . of a judicial . . . proceeding against the debtor that was . . . commenced" before the bankruptcy case began. (11 U.S.C. § 362(a)(1).) Once an automatic stay goes into effect, all acts taken in violation of the stay are void and of null effect. (In re Wardrobe, supra, 559 F.3d at p. 934 ["actions, including judicial proceedings, 'taken in violation of the automatic stay' " are void ab initio].)
"The automatic stay has two broad purposes. First, it provides debtors with protection from hungry creditors by giving them a 'breathing spell' against all harassment, collection efforts and foreclosure actions. Second, it protects the debtor's creditors by preventing a race for the debtor's assets." (Grant v. Clampitt (1997) 56 Cal.App.4th 586, 590.) Because the stay is not solely for the debtor's protection, a debtor may not unilaterally waive the automatic stay. (Commerzanstalt v. Telewide Systems, Inc. (2d Cir. 1986) 790 F.2d 206, 207.) Instead, any creditor or debtor seeking to have the stay lifted must request relief from the stay in the bankruptcy court. (11 U.S.C. § 362(d) [bankruptcy court "shall grant relief from the stay" upon a showing of "cause"].)
It is settled that the filing of a notice of appeal in a state court action in which the debtor was a defendant is a "continuation . . . of a judicial . . . proceeding against the debtor" (11 U.S.C. § 362(a)(1)) and therefore subject to the automatic stay provision of title 11 United States Code section 362. (Parker v. Bain (9th Cir. 1995) 68 F.3d 1131, 1135-1136; Delpit v. C.I.R. (9th Cir. 1994) 18 F.3d 768, 770.) Moreover, an automatic stay does not toll the jurisdictional deadline for filing a notice of appeal, because the mere running of a statutory time period does not constitute "the commencement or continuation" of a judicial proceeding. (ECC Construction, Inc. v. Oak Park Calabasas Homeowners Assn. (2004) 118 Cal.App.4th 1031, 1037 (ECC Construction) ["the filing of the bankruptcy petition and the imposition of the automatic stay did not toll the running of the period of time in which defendant was required to file its notice of appeal"]; Lewow v. Surfside III Condominium Owners Assn., Inc. (2012) 203 Cal.App.4th 128, 135 [automatic stay did not toll period for filing motion for attorney fees]; Napue v. Gor-Mey West, Inc. (1985) 175 Cal.App.3d 608, 617-619 [automatic stay did not toll the three-month reinstatement period for curing default under deed of trust]; Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2018) ¶ 7:68.1, p. 7-25.)
However, under title 11 United States Code section108(c)(2), a bankruptcy defendant-debtor has the option of filing a timely notice of appeal after the termination of the automatic stay. This section provides that if a "nonbankruptcy law . . . fixes a period for commencing or continuing a civil action in a court other than a bankruptcy court on a claim against the debtor . . . , and such period has not expired before the date of the filing of the petition, then such period does not expire until . . . [¶] . . . [¶] (2) 30 days after notice of the termination or expiration of the stay . . . ." Accordingly, a defendant-debtor who did not file a notice of appeal before the automatic stay went into effect, or did not request relief from the stay to file a notice of appeal while the stay was in effect, nevertheless has 30 days after the stay ends to file a timely notice of appeal. (ECC Construction, supra, 118 Cal.App.4th at pp. 1039-1040 [rejecting the defendant-debtor's argument that 11 U.S.C. § 108(b) or (c)(1) applied to extend the time for him to file a notice of appeal, but holding that 11 U.S.C. § 108(c)(2) applied and rendered his notice of appeal timely].)
In the instant case, defendant filed a notice of appeal on June 15, 2018, while the automatic stay was in effect. He did not obtain relief from the stay before filing the notice of appeal. Accordingly, the filing of the notice of appeal was a null and void act. (In re Wardrobe, supra, 559 F.3d at p. 934.) Defendant argues the notice of appeal is not void because he filed it after the bankruptcy court ordered on March 28, 2018, that the stay be lifted. As noted, however, the bankruptcy court lifted the stay only "for the limited purpose of allowing the Creditors to procure a monetary judgment . . . in the . . . state court action . . . ." (Italics added.) The bankruptcy court's order did not provide that the stay was lifted for any other purpose, including the filing of a notice of appeal and/or for future appellate proceedings. (Ibid. [orders granting relief from an automatic stay are strictly construed].) The automatic stay was therefore still in effect when defendant filed his notice of appeal on June 15, 2018.
There is also nothing in the record indicating defendant made any efforts to file a timely notice of appeal under title 11 United States Code section 108(c)(2), i.e., within 30 days after the stay terminated on September 6, 2018. In fact, he states for the first time in his November 5, 2018 letter to this court that he wishes to file a second notice of appeal. Noting that his "research has indicated that a second Notice of Appeal may be required in situations where there is a bankruptcy stay that is later lifted after the debtor files an initial notice of appeal," and that "11/5/2018 is the 60th day following the order of discharge," defendant attaches a new notice of appeal to his letter. He cites no authority to support his position that he may file a notice of appeal 60 days after the termination of the stay.
As a reviewing court, we must be certain of our jurisdiction prior to proceeding in a cause of action. The timely filing of a notice of appeal is both mandatory and jurisdictional, and we have no jurisdiction over an appeal absent a properly filed notice of appeal. (UAP-Columbus JV 326132 v. Nesbitt (1991) 234 Cal.App.3d 1028, 1034.) Failure to file a timely notice of appeal therefore mandates dismissal of the appeal. (Hollister Convalescent Hosp., Inc. v. Rico (1975) 15 Cal.3d 660, 674.) Because defendant did not request relief from the stay before filing a notice of appeal and did not timely file a notice of appeal after termination of the stay, we are without jurisdiction to consider his appeal.
Other courts have reached the same result under similar circumstances. In Hewett v. Wells Fargo Bank, N.A. (Fla.Dist.Ct.App. 2016) 197 So.3d 1105, for example, the defendant in a state court action filed a bankruptcy petition shortly after judgment was entered against him, then filed a notice of appeal from the judgment without seeking relief from the automatic stay. (Id. at p. 1105) The Florida appellate court concluded the notice of appeal was a nullity and that the court lacked jurisdiction to consider the appeal. (Id. at pp. 1106-1107.) While noting it was not "without some reservations" about dismissing an appeal, the court held it was nevertheless required to do so: "To hold otherwise—that is, to construe the notice of appeal as merely voidable, or something which effectuates a kind of 'placeholder' status for an appellant while its appeal is stayed pending bankruptcy—raises difficult conceptual problems. Such a construction would effectively condone a continuation of a state court proceeding that section 362(a)(1) of the Bankruptcy Code plainly prohibits. It would, in essence, give some effect to a filing that cannot have effect." (Id. at p. 1106, fn. 1.)
Similarly, in Alt v. Alt (Ala.Ct.Civ.App., Nov. 17, 2017, No. 2160363) ___ So.3d ___ 5507831, the Alabama appellate court held it was without jurisdiction to consider the husband's appeal, where the husband filed a notice of appeal from a family court judgment while a bankruptcy stay was in effect, then failed to file a timely notice of appeal after the bankruptcy stay was lifted. (Id. at p. *2.)
DISPOSITION
The appeal is dismissed. The parties shall bear their own costs on appeal.
/s/_________
Jenkins, J. We concur: /s/_________
Siggins, P. J. /s/_________
Fujisaki, J.