In re: Moo Jeong and Myoungja Jeong

CourtUnited States Bankruptcy Appellate Panel for the Ninth Circuit
DecidedMarch 16, 2020
DocketCC-19-1244-STaF
StatusUnpublished

This text of In re: Moo Jeong and Myoungja Jeong (In re: Moo Jeong and Myoungja Jeong) is published on Counsel Stack Legal Research, covering United States Bankruptcy Appellate Panel for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re: Moo Jeong and Myoungja Jeong, (bap9 2020).

Opinion

FILED MAR 16 2020 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT

UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

In re: BAP No. CC-19-1244-STaF

MOO JEONG and MYOUNGJA JEONG, Bk. No. 6:19-bk-10728-WJ

Debtors.

MIN W. SUH,

Appellant,

v. MEMORANDUM*

KARL T. ANDERSON, Chapter 7 Trustee; CHRISTOPHER KWON; YOUNG SOO OH,

Appellees.

Argued and Submitted on February 27, 2020 at Pasadena, California

Filed – March 16, 2020

Appeal from the United States Bankruptcy Court

* 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. for the Central District of California

Honorable Wayne E. Johnson, Bankruptcy Judge, Presiding

Appearances: Appellant Min W. Suh argued pro se; Tinho Mang of Marshack Hays LLP argued for appellee Karl T. Anderson, chapter 7 trustee.

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

INTRODUCTION

Appellant Min W. Suh appeals the bankruptcy court’s order holding

him in contempt for his involvement in the postpetition filing of two

“corrective” deeds of trust against the debtors’ residence. Suh jointly

represented both the debtors and the junior secured creditors during the

case and argues that the creditors were not stayed from recording the

corrective deeds under § 362(b)(3).1 We agree with the bankruptcy court

that Suh clearly violated the automatic stay. Because Suh had no

objectively reasonable basis for concluding that his conduct did not violate

the stay, the bankruptcy court did not abuse its discretion when it held him

in contempt of court and imposed sanctions.

The trustee has also moved for an award of fees and costs under Rule

1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and all “Rule” references are to the Federal Rules of Bankruptcy Procedure.

2 8020. The motion is well founded. Consequently, we AFFIRM the

bankruptcy court’s contempt order and direct the trustee to supplement his

motion for appellate fees and costs as specified in the body of this decision.

FACTS

Suh commenced the Jeongs’ bankruptcy by filing their chapter 7

petition. At the time of the filing, the Jeongs owned a residence in Rancho

Cucamonga, California. In their schedules, the Jeongs listed three deeds of

trust encumbering their residence: (1) a first priority deed of trust in favor

of an institutional lender; (2) a second priority deed of trust in favor of

Young Soo Oh; and (3) a third priority deed of trust in favor of Christopher

Kwon.

The chapter 7 trustee for the Jeongs’ estate, Karl T. Anderson, sent

letters to Oh and Kwon informing them that the legal descriptions

appended to their respective deeds of trust either did not exist or did not

accurately describe the Jeongs’ residence. Therefore, Anderson claimed that

both deeds of trust were void. Anderson requested that Oh and Kwon

stipulate to the avoidance, recovery, and preservation of their respective

deeds of trust for the benefit of the bankruptcy estate.

Suh sent a letter responding to Anderson’s contention that the junior

deeds of trust were void. Though he represented the Jeongs, Suh began by

stating that he had been retained to represent Oh and Kwon and was

responding on their behalf. Suh informed the trustee that Oh and Kwon

3 had requested Ms. Jeong to record new deeds of trust to remedy the defects

in the property descriptions pointed out in Anderson’s letter. Suh further

stated that Ms. Jeong recorded these “corrective” deeds of trust on June 27,

2019, and he attached copies of the two newly-recorded corrective deeds of

trust. Suh concluded his letter by requesting that Anderson confirm that

Oh and Kwon were holders of valid deeds of trust against the residence.

That same day, Anderson replied to Suh’s letter. Anderson asserted

that the recording of the corrective deeds of trust constituted a violation of

the automatic stay and demanded that Suh and his clients immediately

reconvey or withdraw them. Anderson further advised Suh that, “if this

violation of the automatic stay is not remedied by [July 5, 2019], the Trustee

will file a motion for sanctions against you and each of your clients

individually and seek compensatory damages for the violation of the stay,

which include attorney’s fees.”

Suh never responded to Anderson’s demand letter. On August 1,

2019, Anderson filed a motion for issuance of an order to show cause why

Suh, the Jeongs, Oh, and Kwon, should not be held in contempt. The

bankruptcy court promptly entered an order to show cause against the

Jeongs, Oh, Kwon, and Suh.

Oh and Kwon, represented by new counsel, opposed the show cause

order. The Jeongs, also represented by new counsel, filed a separate

opposition. They contended that they relied entirely on the advice of their

4 former counsel, Suh, who prepared the corrective deeds of trust and

recommended that the Jeongs sign and record them.

Suh also filed an opposition.2 Suh argued that § 362(b)(3) carved out

an exception to the automatic stay which permitted the recording of the

corrective deeds of trust. Suh also argued that the Jeongs could and did

waive the automatic stay by filing the corrective deeds of trust.

On August 29, 2019, the bankruptcy court held its first show cause

hearing. At the hearing, Suh elaborated on his theory that § 362(b)(3)

permitted the recordation of the corrective deeds of trust. According to

Suh, § 362(b)(3) permitted any and all steps necessary to perfect a security

interest against property of the estate without limitation. After the court

pointed out that Suh’s limitless interpretation of § 362(b)(3) was

inconsistent with the plain language of the statute, Suh changed tack. He

then argued, without citing any relevant authority, that the postpetition

recording of the corrective trust deeds did not violate the automatic stay

because the street address set forth in the original deeds of trust was

correct. According to Suh, the postpetition trust deeds did not violate the

automatic stay because they merely corrected a minor mistake, and they

related back to the prepetition date of the original deeds of trust.

2 Suh’s opposition stated that it was filed on behalf of the Jeongs and on his own behalf. Suh later explained that, at the time he filed the opposition, he was unaware that the Jeongs had retained substitute counsel to respond to the show cause order.

5 The bankruptcy court continued the matter in order to allow the

parties an opportunity to explore settlement of the dispute. The court also

invited further briefing on the consequences of the errors in the legal

descriptions if the matter was not completely settled. But the court also

stated that “there was a clear-cut violation of the automatic stay here.”

After the first hearing, Anderson settled with the Jeongs, Oh, and

Kwon.

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