In re: Maziyar James Khabushani

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: June 22, 2021
• Docket: CC-20-1243-TFL
• Status: Unpublished

Opinion

FILED JUN 22 2021 SUSAN M. SPRAUL, CLERK NOT FOR PUBLICATION U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT

UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

In re: BAP No. CC-20-1243-TFL MAZIYAR JAMES KHABUSHANI, Debtor. Bk. No. 2:19-bk-11796-BR

MAZIYAR JAMES KHABUSHANI, Appellant, v. MEMORANDUM* KILEY TASLITZ ANDERSON, Appellee.

Appeal from the United States Bankruptcy Court for the Central District of California Barry Russell, Bankruptcy Judge, Presiding

Before: TAYLOR, FARIS, and LAFFERTY, Bankruptcy Judges.

* This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. INTRODUCTION

Chapter 71 debtor Maziyar James Khabushani appeals the

bankruptcy court’s order granting creditor Kiley Taslitz Anderson relief

from the automatic stay to file a California Code of Civil Procedure § 187

motion to amend her California state court judgment to add

Mr. Khabushani’s postpetition-created entity as a judgment debtor and to

enforce the judgment against the entitynot against estate assets.

On this record, however, the matter was moot when decided.

Mr. Khabushani received a § 727 discharge nearly twelve weeks

beforehand, and the stay terminated for all applicable purposes at that

time. Thus, the bankruptcy court abused its discretion by granting relief

from a nonexistent stay. We REVERSE.

FACTS 2

Prepetition, Ms. Anderson obtained a final arbitration award

(“Award”) determining that Mr. Khabushani was jointly and severally

liable for her wrongful termination.

Mr. Khabushani later filed his chapter 7 bankruptcy case, and

Ms. Anderson successfully excepted the Award from discharge. In a

concurrently pending appeal, we affirmed this determination.

1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532. 2 We exercise our discretion to take judicial notice of documents electronically

filed in the bankruptcy court’s dockets. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003). 2 After filing bankruptcy, Mr. Khabushani created Dreamcrzy Studios

LLC (“Dreamcrzy”). Ms. Anderson, having identified Dreamcrzy as a

possible source of collection, filed a motion for relief from the automatic

stay allowing her to: (1) file a motion to amend the state court judgment to

add Dreamcrzy as an additional judgment debtor pursuant to California

Code of Civil Procedure § 187 3; and (2) enforce the state court judgment

against Dreamcrzy. Her motion specified that the stay would remain in

effect with respect to any enforcement action against property of

Mr. Khabushani’s bankruptcy estate or as to other collection action against

him.

Mr. Khabushani opposed the stay relief motion. He disputed that

Dreamcrzy was his alter ego or otherwise liable for payment of the Award.

He further contended that assuming, arguendo, that Dreamcrzy was his

alter ego, Dreamcrzy would be his equivalent and Ms. Anderson would be

essentially seeking an improper enforcement of the judgment against him

and his postpetition assets.

At the hearing on the stay relief motion, the bankruptcy court did not

address the arguments made by the parties in their papers. Instead, it

indicated that it would grant Ms. Anderson stay relief if she prevailed on

3 Under California Code of Civil Procedure § 187, “[j]udgments may be amended to add additional judgment debtors on the ground that a person or entity is the alter ego of the original judgment debtor.” Danko v. O'Reilly, 232 Cal. App. 4th 732, 736 (2014) (citation omitted).

3 her thenpending § 523(a)(6) claim. Thus, the bankruptcy court trailed the

stay relief motion until it considered a summary judgment motion

potentially resolving the § 523(a)(6) matter.

Thereafter and before the summary judgment hearing, the

bankruptcy court entered an order granting Mr. Khabushani a § 727

discharge. It then held a joint hearing on the stay relief motion and

summary judgment motion at which it orally granted Ms. Anderson

summary judgment on her § 523(a)(6) claim, and, consistent with its

tentative ruling, orally granted stay relief. A judgment and stay relief order

followed.

Mr. Khabushani timely appealed.

JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b)(2)(G). We have jurisdiction under 28 U.S.C. § 158.

ISSUE

Did the bankruptcy court abuse its discretion in granting

Ms. Anderson stay relief?

STANDARD OF REVIEW

We review a bankruptcy court’s order granting relief from the

automatic stay for an abuse of discretion. Lakhany v. Khan (In re Lakhany),

538 B.R. 555, 559 (9th Cir. BAP 2015). A bankruptcy court abuses its

discretion if it applies the wrong legal standard or its findings are illogical,

implausible, or without support in the record. See TrafficSchool.com, Inc. v.

4 Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011).

DISCUSSION

Pursuant to § 362(a), the filing of a bankruptcy petition imposes an

automatic stay on, among other things: (1) the continuation of prepetition

litigation against the debtor; (2) any act to collect or recover a prepetition

claim against the debtor; and (3) the enforcement, against the debtor or

against property of the estate, of a judgment obtained before the

bankruptcy filing. § 362(a)(1), (2), (6). “[T]he stay of an act against property

of the estate . . . continues until such property is no longer property of the

estate[.]” § 362(c)(1). The stay of all other acts listed in § 362(a) expires at

the earliest of the time the bankruptcy case is closed, the case is dismissed,

or a discharge is granted or denied. § 362(c)(2). Thus, “insofar as the

automatic stay bars actions against the debtor, the stay automatically

expires upon the grant of a discharge.” In re Lakhany, 538 B.R. at 561

(quoting Ruvacalba v. Munoz (In re Munoz), 287 B.R. 546, 551 (9th Cir. BAP

2002)); see also ZiLOG, Inc. v. Corning (In re ZiLOG, Inc.), 450 F.3d 996, 1009

n.13 (9th Cir. 2006).4

A bankruptcy court abuses its discretion by granting relief from the

automatic stay after the stay has terminated. In re Lakhany, 538 B.R. at 561;

In re Munoz, 287 B.R. at 551. Here, the stay terminated as to the

4 Typically, when the automatic stay terminates, the discharge injunction takes its place. But the bankruptcy court held that the Award was not dischargeable, and we affirmed that decision; the discharge injunction did not apply to it.

5 continuation of the state court action and other acts against

Mr. Khabushani and his non-estate property when Mr. Khabushani

received his § 727 discharge. While at the time of the stay relief order the

automatic stay remained in effect as to acts against estate property, no one

contends that Dreamcrzy is an estate asset and nothing in the record

suggests a different conclusion. Further, Ms. Anderson never sought stay

relief to pursue estate property. She sought stay relief only to enforce the

Award against Dreamcrzy, which Mr. Khabushani contends he formed

postpetition with non-estate property.

Because the stay did not prevent Ms. Anderson from continuing the

state court action or enforcing the Award against Dreamcrzy at the time the

stay relief order was entered, the bankruptcy court necessarily abused its

discretion in granting stay relief.

CONCLUSION

Based on the foregoing, we REVERSE.