In re: Monica Hujazi

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: July 12, 2017
• Docket: NC-15-1206-BSKu
• Status: Unpublished

Opinion

FILED JUL 12 2017 SUSAN M. SPRAUL, CLERK 1 NOT FOR PUBLICATION U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT 2 3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. NC-15-1206-BSKu ) 6 MONICA HUJAZI, ) Bk. No. 13-30477-HLB ) 7 Debtor. ) ) 8 ) MONICA HUJAZI, ) 9 ) Appellant, ) 10 ) M E M O R A N D U M1 v. ) 11 ) E. LYNN SCHOENMANN, Chapter ) 12 7 Trustee, ) ) 13 Appellee. ) ______________________________) 14 Argued on January 19, 2017 15 at San Francisco, California 16 Submitted on February 23, 2017 17 Filed - July 12, 2017 18 Appeal from the United States Bankruptcy Court for the Northern District of California 19 Honorable Hannah L. Blumenstiel, Bankruptcy Judge, Presiding 20 21 Appearances: Bradley Kass of Kass & Kass Law Offices argued for 22 appellant Monica Hujazi; Thomas F. Koegel of Crowell & Moring LLP argued for appellee E. Lynn 23 Schoenmann, Chapter 7 Trustee. 24 25 26 1 27 This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may 28 have, it has no precedential value. See 9th Cir. BAP Rule 8024-1. 1 Before: BRAND, SPRAKER2 and KURTZ, Bankruptcy Judges. 2 Former alleged debtor Monica Hujazi appeals an order denying 3 her motion against the chapter 73 trustee in a related debtor's 4 case for violation of the automatic stay. The related debtor, the 5 Zuercher Trust of 1999, was a business trust owned by Hujazi. The 6 former chapter 11 trustee for the Zuercher Trust had filed seven 7 adversary proceedings, two of which were filed against Hujazi 8 individually, in the Zuercher Trust case without obtaining relief 9 from stay in Hujazi's involuntary bankruptcy case. Hujazi 10 objected, contending that the filing of all seven adversary 11 proceedings violated the stay. The bankruptcy court disagreed, 12 holding that, because the adversary proceedings were filed in the 13 same bankruptcy court where Hujazi's bankruptcy case was pending, 14 the trustee's actions had not violated the stay. 15 Prior to this appeal, the Zuercher Trust case was converted 16 to chapter 7. E. Lynn Schoenmann was appointed as the chapter 7 17 trustee of its estate. Subsequent to this appeal, an order for 18 relief was entered in Hujazi's case and Janina Hoskins was 19 appointed as the chapter 7 trustee of her estate. The two 20 chapter 7 trustees then entered into a global settlement 21 agreement, which resolved all issues between the estates, 22 including the adversary proceedings that are the subject of this 23 appeal. The settlement order was not appealed. 24 25 2 Hon. Gary A. Spraker, Chief Bankruptcy Judge for the 26 District of Alaska, sitting by designation. 27 3 Unless specified otherwise, all chapter, code and rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and 28 the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.

-2- 1 We deferred submission of Hujazi's appeal for the parties to 2 brief the issue of whether the appeal was now moot due to the 3 settlement. Upon consideration of those briefs, we conclude that 4 the appeal is MOOT. In addition, we conclude that Hujazi lacks 5 standing to appeal the bankruptcy court's order with respect to 6 the five adversary proceedings that were not filed against her 7 individually. We DISMISS. 8 I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY 9 A. Events leading to the motion at issue 10 Some background is necessary to put this appeal into context. 11 In September 2012, Hujazi caused a chapter 11 bankruptcy case to 12 be filed for the Zuercher Trust. Hujazi formed the Zuercher Trust 13 as a business trust to own and develop real estate in California; 14 she is its trustee and sole beneficiary. The Zuercher Trust case 15 was assigned to and is currently pending before Judge Blumenstiel. 16 On March 1, 2013, an involuntary chapter 7 bankruptcy case 17 was filed against Hujazi by petitioning creditors Recoverex Corp., 18 Michael E. Grodsky, Allen Hyman and the Law Firm of Harold 19 Greenberg, all of whom had filed claims in the Zuercher Trust 20 case. Hujazi's involuntary case was also assigned to Judge 21 Blumenstiel. 22 Prior to the conversion of the Zuercher Trust case, the 23 former chapter 11 trustee filed seven adversary proceedings in 24 that case to recover property allegedly fraudulently transferred 25 by the Zuercher Trust and Hujazi out of the Zuercher Trust estate. 26 The first of the adversary proceedings was filed on March 19, 27 2013, just days after the filing of the Hujazi involuntary; the 28 remainder were filed in September 2014. The seven adversary

-3- 1 proceedings at issue are: 2 1. 13-03046 — Kravitz v. Peninsula Commons, LLC 3 2. 14-03117 — Kravitz v. Monica Hujazi 4 3. 14-03118 — Kravitz v. Monica Hujazi 5 4. 14-03119 — Kravitz v. Bay Cities Fin. Corp. 6 5. 14-03120 — Kravitz v. M & J Real Estate Appraisal 7 6. 14-03122 — Kravitz v. Brownstone Lofts, LLC 8 7 14-03124 — Kravitz v. Emerald Square, LLC 9 B. Hujazi's motion for violation of the automatic stay 10 Prior to the entry of the order for relief in her bankruptcy, 11 Hujazi filed a motion against Trustee Schoenmann, alleging that 12 the seven adversary proceedings filed in the Zuercher Trust case 13 had been filed and/or pursued in violation of the automatic stay 14 effective in Hujazi's case (the "Challenged APs"). Hujazi's one- 15 and-one-half page brief failed to explain how, or otherwise 16 support her contention that, the Challenged APs had violated the 17 stay, arguing only that they had and were void as a result. 18 Hujazi requested that the court strike the complaints and dismiss 19 the Challenged APs. 20 Trustee Schoenmann opposed the motion. She first noted that 21 Hujazi was named as a defendant in only two of the seven 22 Challenged APs; thus, she lacked standing to raise a stay 23 violation claim as to the other five. Trustee Schoenmann further 24 argued that, because the Challenged APs were filed in the "home 25 bankruptcy court" of Hujazi, they fell within an exception to the 26 automatic stay. For her argument, Trustee Schoenmann relied on 27 Prewitt v. North Coast Village, Ltd. (In re North Coast Village, 28 Ltd.), 135 B.R. 641, 643 (9th Cir. BAP 1992), where the Panel held

-4- 1 that "the stay does not apply to proceedings commenced against the 2 debtor in the bankruptcy court where the debtor's bankruptcy case 3 is pending." Alternatively, Trustee Schoenmann requested that the 4 bankruptcy court grant retroactive annulment of the automatic stay 5 under § 362(d)(1) for cause. 6 Hujazi disputed Trustee Schoenmann's interpretation of the 7 holding in North Coast Village, arguing that it did not define 8 "home bankruptcy court" as being the "courthouse." Rather, the 9 phrase meant the "actual case" in which the party is seeking to 10 take some type of action. Thus, argued Hujazi, the former 11 chapter 11 trustee was required to obtain relief from stay before 12 filing the Challenged APs in the Zuercher Trust case against her. 13 C. The bankruptcy court's ruling on Hujazi's motion 14 At the hearing on Hujazi's motion, the bankruptcy court 15 expressed its disagreement with Hujazi's interpretation of the 16 case law, concluding that the automatic stay did not apply to 17 proceedings filed against the debtor in the "same bankruptcy 18 court" where the debtor's bankruptcy case is pending. The court 19 also noted Hujazi's failure to address that she was not even a 20 defendant in five of the Challenged APs. 21 Hujazi timely appealed the bankruptcy court's order denying 22 her motion for violation of the automatic stay. 23 D. Events subsequent to the appeal 24 On November 30, 2015, the bankruptcy court entered an order 25 for relief in Hujazi's individual bankruptcy case. As noted, 26 Trustee Hoskins was appointed as the chapter 7 trustee. 27 On July 11, 2016, Trustees Schoenmann and Hoskins entered 28 into a settlement agreement resolving all disputes between the

-5- 1 Zuercher Trust and Hujazi bankruptcy estates. Over Hujazi's 2 objection, the bankruptcy court approved the settlement in both 3 cases on August 11, 2016. The settlement required dismissal of 4 the Challenged APs with prejudice. No party appealed the 5 settlement order. 6 II. JURISDICTION 7 The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 8 and 157(b)(2)(O). We discuss our jurisdiction below. 9 III. ISSUES 10 1. Does Hujazi have standing to appeal the order denying her 11 motion with respect to the five Challenged APs not naming her as a 12 defendant? 13 2. Is the appeal moot? 14 3. If the appeal is not moot, does the Ninth Circuit's "home 15 court" rule, which excepts from the automatic stay those actions 16 "against the debtor in the bankruptcy court where the debtor's 17 bankruptcy case is pending," include actions against the debtor in 18 a different but related bankruptcy case pending before the same 19 court? 20 IV. STANDARDS OF REVIEW 21 We review de novo our own jurisdiction, including questions 22 of standing and mootness. Palmdale Hills Prop., LLC v. Lehman 23 Comm. Paper, Inc. (In re Palmdale Hills Prop., LLC), 654 F.3d 868, 24 873 (9th Cir. 2011) (standing); Suter v. Goedert, 504 F.3d 982, 25 985 (9th Cir. 2007) (mootness). 26 "Whether the automatic stay provisions of 11 U.S.C. § 362(a) 27 have been violated is a question of law reviewed de novo." 28 Eskanos & Adler, P.C. v. Leetien, 309 F.3d 1210, 1213 (9th Cir.

-6- 1 2002) (citing Cal. Emp't Dev. Dep't v. Taxel (In re Del Mission), 2 98 F.3d 1147, 1150 (9th Cir. 1996)). However, whether a party has 3 willfully violated the automatic stay is a question of fact 4 reviewed for clear error. Id. (citing McHenry v. Key Bank 5 (In re McHenry), 179 B.R. 165, 167 (9th Cir. BAP 1995)). 6 V. DISCUSSION 7 A. Hujazi lacks standing to appeal the order with respect to the five adversary proceedings not filed against her. 8 9 "A federal court may exercise jurisdiction over a litigant 10 only when that litigant meets constitutional and prudential 11 standing requirements." Veal v. Am. Home Mortg. Servicing, Inc. 12 (In re Veal), 450 B.R. 897, 906 (9th Cir. BAP 2010) (citing Elk 13 Grove Unified Sch. Dist. v. Newdow, 542 U.S. 1, 11 (2004)). 14 "Standing is a 'threshold question in every federal case, 15 determining the power of the court to entertain the suit.'" Id. 16 (quoting Warth v. Seldin, 422 U.S. 490, 498 (1975)). 17 Constitutional standing requires an injury in fact, which is 18 caused by or fairly traceable to some conduct or some statutory 19 prohibition, and which the requested relief will likely redress. 20 Sprint Commc'ns Co. v. APCC Servs., Inc., 554 U.S. 269, 273–74 21 (2008). Prudential standing embodies judicially self-imposed 22 limits on the exercise of federal jurisdiction. Id. at 289. For 23 prudential standing, the plaintiff must assert its own legal 24 rights and may not assert the legal rights of others. Id. 25 Hujazi fails to explain why the filing of five of the seven 26 Challenged APs not naming her as a defendant violated the 27 automatic stay effective in her case or, more importantly, how she 28 had standing to prosecute stay violation claims for parties other

-7- 1 than herself, especially when those parties are non-debtors and no 2 stay even exists. See Boucher v. Shaw, 572 F.3d 1087, 1092-93 3 (9th Cir. 2009) (automatic stay protects only the debtor, not non- 4 debtors or their property). She described no individual injury 5 from the five adversary proceedings filed against non-debtor third 6 parties. And, for purposes of this appeal, Hujazi has not shown 7 that she has been "directly and adversely affected pecuniarily" by 8 the bankruptcy court's decision to deny her stay violation motion 9 with respect to the five adversary filings. Fondiller v. 10 Robertson (In re Fondiller), 707 F.2d 441, 442 (9th Cir. 1983) 11 (bankruptcy appellate prudential standing doctrine dictates that 12 "[o]nly those persons who are directly and adversely affected 13 pecuniarily by an order of the bankruptcy court" have standing to 14 appeal that order). 15 Accordingly, Hujazi lacks standing to appeal the bankruptcy 16 court's order denying her stay violation motion as to the five 17 adversary proceedings not naming her as the defendant. 18 B. The appeal is moot. 19 Hujazi does, however, have standing to appeal the order as it 20 relates to the two Challenged APs in which she is a defendant.4 21 Nonetheless, we conclude that her appeal is both constitutionally 22 4 In response to a clerk's order challenging Hujazi's 23 standing to bring this appeal as a chapter 7 debtor, Hujazi asserted that her estate is a surplus estate. A debtor has 24 standing to challenge a bankruptcy court’s order if a surplus estate is likely. Duckor Spradling & Metzger v. Baum Tr. 25 (In re P.R.T.C., Inc.), 177 F.3d 774, 778 n.2 (9th Cir. 1999). Trustee Schoenmann has not disputed Hujazi's surplus estate 26 assertion or her standing in this appeal, at least with respect to the two Challenged APs filed against her. Accordingly, we are 27 satisfied that Hujazi has established standing to appeal the bankruptcy court's order as it relates to these two adversary 28 proceedings.

-8- 1 and equitably moot. 2 Once the order for relief was entered in Hujazi's case in 3 November 2015, Trustee Hoskins succeeded to whatever rights might 4 have existed for the alleged injury to the Hujazi involuntary 5 estate from the alleged stay violation. As trustee, she could 6 choose to pursue or to settle any claims belonging to the Hujazi 7 involuntary estate. § 323(b); § 704(a)(1); Rule 9019; Hamilton- 8 Brown Shoe Co. v. Ben L. Berwald Shoe Co., 10 F.2d 275, 276 (5th 9 Cir. 1925) (trustee may, with court approval, compromise any 10 controversy concerning the bankrupt estate) (citing the former 11 Bankruptcy Act § 27). Trustee Hoskins chose to settle the 12 fraudulent transfer claims against the Hujazi estate. 13 The post-appeal settlement agreement entered into by Trustees 14 Schoenmann and Hoskins in July 2016 not only settled all 15 fraudulent transfer disputes between the Zuercher Trust and Hujazi 16 bankruptcy estates and authorized the division and sale of some of 17 the subject properties, it also provided a full, mutual release of 18 any and all claims, known or unknown, between the two estates. 19 The order approving the trustees' settlement was not appealed and 20 is final. 21 An appeal is constitutionally moot if it has become 22 impossible for the appellate court to fashion meaningful relief. 23 Ederel Sport, Inc. v. Gotcha Int'l L.P. (In re Gotcha Int'l 24 L.P.), 311 B.R. 250, 253 (9th Cir. BAP 2004). If no effective 25 relief is possible, we must dismiss for lack of jurisdiction. 26 Ellis v. Yu (In re Ellis), 523 B.R. 673, 677 (9th Cir. BAP 2014). 27 Hujazi's appeal is constitutionally moot, because we are 28 unable to provide Hujazi with any of the relief she has

-9- 1 requested.5 Even if we determined that a stay violation occurred 2 with the filing of the two adversary proceedings against her, 3 thereby rendering those proceedings void,6 that does not change 4 the court-approved settlement containing a complete release of any 5 and all claims between the two estates or the division of 6 properties that were the subject of those proceedings. Certainly, 7 no adversary proceedings were even necessary for the trustees to 8 resolve the fraudulent transfer disputes between the two estates. 9 Hujazi's appeal is also equitably moot. Equitable mootness 10 applies "when a comprehensive change of circumstances has occurred 11 so as to render it inequitable for the appellate court to consider 12 the merits of the appeal." Motor Vehicle Cas. Co. v. Thorpe 13 Insulation Co. (In re Thorpe Insulation Co.), 677 F.3d 869, 880 14 (9th Cir. 2012) (internal quotation marks and citation omitted). 15 For an appeal to be equitably moot, "[t]he question is whether the 16 case presents transactions that are so complex or difficult to 17 unwind that the doctrine of equitable mootness would apply." Id. 18 (internal quotation marks and citation omitted). 19 As noted by the trustees, the two estates have moved forward 20 with the unstayed settlement and the trustees have sold two of 21 three subject properties to third-party buyers not before this 22 Panel. The sale orders were also neither stayed nor appealed. 23 24 5 In response to the Panel’s request for briefing on the 25 mootness issue, Huzaji reaffirmed that she seeks to unwind the settlement between the bankruptcy estates and dismissal of the 26 Challenged APs as void. 27 6 Actions taken by a party in violation of the automatic stay are void. Griffin v. Wardrobe (In re Wardrobe), 559 F.3d 28 932, 934 (9th Cir. 2009).

-10- 1 Therefore, even if we could fashion any sort of effective relief 2 for Hujazi, it would be inequitable, if not impossible, to unwind 3 the sale of those properties. Nor would it be equitable to 4 deprive the Zuercher Trust estate of the benefit of the bargain in 5 a fair and equitable settlement. 6 VI. CONCLUSION 7 Hujazi lacks standing to appeal the order with respect to the 8 five Challenged APs not naming her as a defendant. As to the 9 remaining two Challenged APs filed against her, we conclude that 10 her appeal is MOOT and DISMISS for lack of jurisdiction.7 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 7 Because we are dismissing the appeal for lack of jurisdiction, we do not reach the merits of the bankruptcy court's 28 decision with respect to Hujazi's motion.

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