FILED MAY 30 2014 1 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL 2 OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. CC-13-1418-KiLaPa ) 6 RICHARD STEPHEN KVASSAY, ) Bk No. 11-11698-PC ) 7 Debtor. ) Adv. No. 13-01553 ) 8 ) RICHARD STEPHEN KVASSAY, ) 9 ) Appellant, ) 10 ) v. ) M E M O R A N D U M1 11 ) ROBERT V. KVASSAY, Trustee of ) 12 the Kvassay Family Trust ) dated 02/26/1993; RUSSAKOW, ) 13 GREENE & TAN LLP, ) ) 14 Appellees. ) ______________________________) 15 Argued and Submitted on May 15, 2014, 16 at Pasadena, California 17 Filed - May 30, 2014 18 Appeal from the United States Bankruptcy Court for the Central District of California 19 Honorable Peter H. Carroll, Chief Bankruptcy Judge, Presiding 20 21 Appearances: Troy A. Stewart, Esq. argued for appellant, Richard Stephen Kvassay; Richard R. Clements, Esq. argued 22 for appellees, Robert V. Kvassay and Russakow, Greene & Tan LLP. 23 24 25 26 1 This disposition is not appropriate for publication. 27 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 28 Cir. BAP Rule 8013-1. 1 Before: KIRSCHER, LATHAM2 and PAPPAS, Bankruptcy Judges. 2 Chapter 73 debtor Richard Kvassay ("Debtor") appeals an order 3 granting appellees' motion to dismiss Debtor's adversary complaint 4 with prejudice under Civil Rule 12(b)(6). Appellees are Debtor's 5 brother, Robert Kvassay ("Robert"), trustee of the Kvassay Family 6 Trust dated 02/26/1993 ("Trust") and the law firm representing 7 Robert, Russakow, Greene & Tan LLP ("Law Firm")(collectively, 8 "Defendants"). We AFFIRM.4 9 I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY 10 A. Events leading to Debtor's adversary proceeding against Defendants 11 Debtor and his two brothers, Robert and Peter Kvassay 12 ("Peter"), were to have equal beneficial interests in the 13 principal of the Trust. The trustors, the brothers' parents, were 14 deceased by 2006. Until recently, Debtor had lived at his 15 parents' three and a half-acre estate and residence in Los Angeles 16 ("Trust Property") since the 1960s; Peter had lived there since 17 the 1980s. Once under Debtor's and Peter's control, the Trust 18 19 2 Hon. Christopher Latham, Bankruptcy Judge for the Southern 20 District of California, sitting by designation. 21 3 Unless specified otherwise, all chapter, code and rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and 22 the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. The Federal Rules of Civil Procedure are referred to as “Civil Rules.” 23 4 The parties have asked us to take judicial notice of 24 certain documents filed in the state court and a docket summary from the California Court of Appeal. Neither party has objected 25 to the other's request. It is undisputed that these documents were not presented to the bankruptcy court. Generally, we will 26 not consider evidence on appeal that was not before the trial court when it made its decision. See Oyama v. Sheehan (In re 27 Sheehan), 253 F.3d 507, 512 n.5 (9th Cir. 2001). Because the documents have no bearing on our decision, we DENY both requests 28 for judicial notice.
-2- 1 Property became uninhabitable, and Robert had to invest hundreds 2 of thousands of dollars of his own funds to repair it and make it 3 sellable. He also had to obtain a personal loan to save the Trust 4 Property from foreclosure after Peter stopped paying on a 5 $1.5 million loan he obtained against the Trust Property by 6 misrepresenting himself as the trustee of the Trust. 7 In May 2010, Robert, with the Law Firm's assistance, filed a 8 probate petition in the state court seeking to (1) evict Debtor 9 and Peter from the Trust Property and (2) offset Debtor's and 10 Peter's distributive share in the Trust ("Probate Action")(Case 11 No. BP122477). 12 On August 18, 2010, the probate court entered a minute order 13 evicting Debtor and Peter from the Trust Property (the "Eviction 14 Order"). Debtor and Peter appealed. On October 7, 2010, a third 15 party posted a cash deposit of $216,000 made in lieu of an appeal 16 bond to stay enforcement of the Eviction Order ("Appeal Bond").5 17 The $216,000 was based on a fair rental market value of the Trust 18 Property at $12,000 per month, multiplied by 18 months — the 19 anticipated length of time for Debtor and Peter's appeal to be 20 completed. Debtor and Peter were allowed to reside at the Trust 21 Property pending the appeal. 22 On January 13, 2011, while the appeal of the Eviction Order 23 5 Although the funds at issue were a cash deposit made in 24 lieu of an appeal bond, both the state court and the parties have referred to it as an "appeal bond." Therefore, we do as well for 25 consistency. Under CAL. CIV. PROC. § 995.730, bonds and cash deposits are treated in the same manner: 26 A deposit given instead of a bond has the same force and 27 effect, is treated the same, and is subject to the same conditions, liability, and statutory provisions, including 28 provisions for increase and decrease of amount, as the bond.
-3- 1 was pending, Debtor filed a chapter 11 bankruptcy case, which was 2 later converted to chapter 7. In June 2011, the chapter 7 trustee 3 filed an application to employ counsel to assist him in, among 4 other things: (1) determining the nature and extent of Debtor's 5 beneficial interest in the Trust and the Appeal Bond; and 6 (2) liquidating Debtor's beneficial interest in the Trust and the 7 Appeal Bond by resolving the Probate Action. 8 In September 2011, Robert moved for relief from the automatic 9 stay to proceed with the Probate Action, Case No. BP122477 ("Stay 10 Relief Motion"). Robert requested an order allowing him to 11 proceed to a final judgment in the matter, "provided that the stay 12 remain[ed] in effect with respect to enforcement of any judgment 13 against Debtor(s) or estate property." Attached was a copy of the 14 complaint from the Probate Action. The chapter 7 trustee 15 initially opposed the Stay Relief Motion, contending that he 16 needed more time to investigate the pending Trust litigation. He 17 later withdrew his objection at the related hearing on October 6, 18 2011. Debtor did not oppose the Stay Relief Motion. 19 On October 21, 2011, the bankruptcy court entered an order 20 granting Robert's Stay Relief Motion under § 362(d)(1)("Stay 21 Relief Order"). It provided that Robert could "proceed in the 22 non-bankruptcy forum to final judgment (including any appeals) in 23 accordance with applicable non-bankruptcy law." In Paragraph 6 of 24 the order — Limitations on Enforcement of Judgment — neither box 25 is checked, indicating that no limitations were imposed 26 restricting Robert’s enforcement of any final judgment(s) he 27 received against Debtor. Litigation in the Probate Action 28 continued.
-4- 1 On February 3, 2012, the California Court of Appeal affirmed 2 the Eviction Order, Kvassay v. Kvassay, 2012 WL 336117 (Cal. Ct. 3 App. Feb. 3, 2012 (unpublished), review denied (Apr. 18, 2012), 4 and issued its remittitur on May 9, 2012. Debtor and Peter were 5 ultimately evicted from the Trust Property on May 21, 2012. 6 On April 23, 2012, Robert, represented by the Law Firm, moved 7 to release the full amount of the Appeal Bond to the Trust "now 8 that the appeal has been decided in favor of Petitioner." The 9 probate court denied Robert's first bond motion because it had 10 been filed before the remittitur was issued. Robert filed a 11 second motion to release the Appeal Bond to the Trust on June 26, 12 2012. He contended the Trust was entitled to the full amount 13 because the appeal process had taken more than 20 months. Debtor 14 and Peter opposed the release of the Appeal Bond. 15 In response to Robert's actions, the chapter 7 trustee filed 16 a motion for production of documents under Rule 2004, asserting 17 that because Robert was seeking to have the Appeal Bond released 18 to the Trust, he wanted access to Debtor's bank records to 19 evaluate whether the Appeal Bond was a potential asset of the 20 bankruptcy estate. The bankruptcy court granted the Rule 2004 21 motion. 22 After an evidentiary hearing on Robert's second motion to 23 release the Appeal Bond, the probate court entered a minute order 24 on December 12, 2012, which stated: "Judgment is entered in the 25 amount of $192,660.00, joint and severally against [Debtor and 26 Peter]. As to the balance of funds, there shall be no further 27 funds released pending the outcome of the Bankruptcy or further 28 court order."
-5- 1 On January 24, 2013, the probate court entered an "Amended 2 Order re. Release of Bond" in connection with its December 12 3 minute order, directing that $192,660 be paid from the Appeal Bond 4 on deposit with the court to Robert, trustee of the Trust 5 ("Amended Bond Order"). 6 On January 29, 2013, Debtor and Peter filed a Petition for 7 Peremptory Writ of Prohibition and/or Writ of Mandate in the 8 California Court of Appeal, seeking to vacate the Amended Bond 9 Order, and on February 6, 2013, filed a notice of appeal. The 10 writ was denied. Defendants thereafter took possession of 11 $192,660 of the $216,000 Appeal Bond. The California Court of 12 Appeal affirmed the Amended Bond Order on May 14, 2014. Kvassay 13 v. Kvassay, 2014 WL 1913307 (Cal. Ct. App. May 14, 2014) 14 (unpublished). 15 On May 9, 2013, upon request of the chapter 7 trustee, the 16 bankruptcy court entered an order abandoning any potential 17 interest of the bankruptcy estate in the Probate Action and the 18 Appeal Bond due to their inconsequential value to the estate. 19 B. Debtor's adversary complaint and Defendants' motion to dismiss 20 21 On May 22, 2013, Debtor filed an adversary complaint 22 ("Complaint"), contending that Defendants had violated the 23 automatic stay under § 362(a)(1) and (a)(6) by: 24 (1) filing state court motions to obtain a judgment against Debtor to enforce against the Appeal Bond without 25 obtaining relief from stay to file the motions; 26 (2) obtaining the judgment against Debtor to enforce against the Appeal Bond without obtaining relief from 27 stay to pursue the judgment against him; 28 (3) obtaining the first bond order and Amended Bond Order
-6- 1 without obtaining relief from the stay to enforce the judgment against Debtor; and 2 (4) executing the Amended Bond Order and taking 3 possession of $192,660.00 of the Appeal Bond without obtaining relief from the stay to enforce the judgment 4 against Debtor. 5 Specifically, Debtor asserted that the Stay Relief Order provided 6 only that Robert could proceed to final judgment in the Probate 7 Action as to the "causes of action pleaded in the non-bankruptcy 8 forum," and those causes of action did not include a claim for a 9 judgment against Debtor to enforce against the Appeal Bond and 10 that the claim underlying the judgment Robert obtained against 11 Debtor on December 12, 2012, was not pending in the state court. 12 Alternatively, Debtor argued that Defendants had violated the stay 13 by pursuing a judgment against him that was not "final" due to the 14 pending appeal. Debtor also alleged that Defendants should be 15 held in contempt under § 105(a) for their willful violation of the 16 Stay Relief Order. Debtor sought damages in excess of $70,000 17 under either § 362(k) or § 105(a). 18 On July 3, 2013, Defendants electronically filed their 19 Notice of Motion and Motion to Dismiss the Complaint under Civil 20 Rule 12(b)(6) ("Motion to Dismiss") under the event code "Notice 21 of Motion/Application."6 Defendants' Notice and Motion to Dismiss 22 were labeled accordingly but were combined into one document. The 23 attached proof of service stated that the Notice and Motion to 24 Dismiss were served electronically and by mail to Debtor's counsel 25 6 The entry in the bankruptcy court’s docket no. 9 states: 26 "Notice of motion/application Defendants' Notice of Motion and Motion to Dismiss Complaint; Memorandum of Points and Authorities 27 Filed by Defendant Kvassay Robert V Trustee of the Kvassay Family Trust dated February 26, 1993. (Clements, Richard)(Entered: 28 07/03/2013)[.]"
-7- 1 on July 3. 2 Defendants contended that Debtor was reading the Stay Relief 3 Order too narrowly. Contrary to Debtor's interpretation, Robert's 4 actions were not limited to just the causes of action existing at 5 the time it was entered on October 21, 2011; the order clearly 6 covered a judgment against Debtor that could be enforced against 7 the Appeal Bond. Defendants further argued the Complaint was 8 procedurally improper; damages and injunctive relief under 9 § 362(k) had to be sought by motion rather than through an 10 adversary proceeding. The same was true for contempt relief under 11 § 105(a); contempt actions had to be brought by motion per Rule 12 9020. Alternatively, argued Defendants, because Debtor had no 13 claim for a willful violation of the stay, they could not be found 14 in contempt under § 105 in any event. Defendants requested that 15 the Motion to Dismiss be granted without leave to amend and that 16 the adversary proceeding be dismissed with prejudice. The Notice 17 and Motion to Dismiss stated that a hearing was scheduled for 18 August 8, 2013. 19 On July 15, 2013, Defendants received a "Notice to Filer of 20 Error and/or Deficient Document" from the bankruptcy court clerk 21 advising Defendants that an incorrect event code was used to file 22 the Motion to Dismiss. Defendants were instructed "TO RE-FILE THE 23 DOCUMENT USING THE CORRECT EVENT. THIS DOCUMENT IS A MOTION THE 24 CORRECT EVENT CODE IS MOTION TO DISMISS." (Emphasis in original). 25 Defendants did as instructed, and on July 16, 2013, refiled the 26 same document under the correct event code. See docket no. 12. 27 The refiled Motion to Dismiss was identical to the original Motion 28 to Dismiss, including the attached proof of service showing
-8- 1 service on July 3, 2013. 2 Instead of filing a response to the Motion to Dismiss, Debtor 3 filed a first amended complaint ("FAC") on July 30, 2013. The FAC 4 alleged the same stay violation claims under § 362(a)(1) and 5 (a)(6), added a new claim under § 362(a)(5), and sought relief 6 under § 362(k)(1). The contempt claim under § 105(a) was omitted. 7 C. The bankruptcy court's ruling on the Motion to Dismiss 8 A hearing on Defendants' Motion to Dismiss was held on 9 August 8, 2013. At the start, counsel for Debtor informed the 10 bankruptcy court that the FAC had been filed on July 30, thereby 11 mooting the Motion to Dismiss. The court was aware of the FAC but 12 considered it untimely. When Debtor contended that an amended 13 complaint could be filed as a matter of course under Civil Rule 14 15(a), the court disagreed, noting that the time allowed in the 15 rule to file an amended complaint had already expired: 16 The defendant initially filed the [Motion to Dismiss] on July 3, 2013 but . . . the defendant used an incorrect 17 event code. The clerk notified the defendant to correct the error, which defendant did by re-filing the motion on 18 July 16, 2013. The proof of service attached to the re-filed motion reflects that the motion was served by 19 first-class mail on July 3, 2013. The Court's added three extra days for service by mail, so the Rule 15(a) 20 deadline to file the [FAC] based on service of the motion was July 29, 2013 as July 27th fell on a Saturday. The 21 [FAC] was filed on July 30th, so it was one day late. 22 Hr'g Tr. (Aug. 8, 2013) 4:18-5:5. 23 After hearing briefly from the parties and noting that no 24 opposition had been filed, the bankruptcy court announced its 25 tentative ruling to strike the FAC as untimely and grant the 26 Motion to Dismiss without leave to amend, noting that its ruling 27 would not change even if it considered the FAC a proper 28 opposition. Debtor's use of an adversary proceeding, as opposed
-9- 1 to a motion, did not constitute grounds to dismiss the Complaint. 2 However, the Complaint failed to state a plausible claim for 3 relief under § 362(k)(1): 4 The Court's relief from stay order, which is the basis of the complaint, included language . . . that all actions 5 . . . may be taken in the probate action to proceed to final judgment including any appeals in accordance with 6 applicable non-bankruptcy law. And the Court's reading of the complaint filed with the Court does not indicate 7 that there were any actions taken by the defendant that was outside of or in violation of the Court's order 8 entered on October 21, 2011. 9 There's no facts [sic] in the complaint that would state a plausible claim that the defendant took any separate 10 actions against the plaintiff outside the probate action to enforce the Probate Court's order personally as to the 11 debtor. Estate funds were not used to post the appeals bond of the – funds used to post the appeal bond were 12 provided by a third party. 13 Id. at 7:17-8:9. Likewise, the Complaint failed to state a 14 plausible claim for contempt of the Stay Relief Order under 15 § 105(a). 16 Unpersuaded by Debtor's further arguments, the bankruptcy 17 court adopted its tentative ruling in favor of Defendants as its 18 final ruling, and further stated: 19 When we get down to the rub of this complaint, it involves a dispute concerning an appeal bond that was 20 posted in the state court action and steps taken in conjunction with the appeal to adjudicate the parties' 21 right to that appeal bond. The appeal bond of $216,000 – it was a deposit in lieu of an appeal bond actually 22 posted by a third party. It's non-estate funds. The fact that the trustee in the bankruptcy case investigated 23 whether any part of that $216,000 could possibly be property of the estate is part of the trustee's duties 24 under Section 704 of the Bankruptcy Code . . . . The trustee made a determination that those funds are not 25 property of the estate . . . . 26 The Court in reviewing the four corners of the original complaint filed in this case and the facts stated in that 27 complaint cannot find sufficient facts that support or state a plausible claim for relief for violation of this 28 Court's order granting relief from the automatic stay
-10- 1 either under Section 362(k) or for willful contempt of the order under Section 105. For those reasons, the 2 motion to dismiss under Rule 12(b)(c) [sic] is granted. It's granted without leave to amend, particularly in 3 light of the fact that no response in opposition to the motion was filed specifically addressing the issues 4 raised in the motion. 5 And the amended complaint that was filed, evidently in lieu of filing a proper response under our rules to the 6 motion, was filed without the consent of the defendant prior to the filing of the motion and it was untimely 7 under Rule 15(a). 8 Id. at 15:18-16:3, 16:6-7, 16:12-17:2. 9 An order granting Defendants' Motion to Dismiss the Complaint 10 without leave to amend and dismissing Debtor's adversary 11 proceeding with prejudice was entered on August 13, 2013. Debtor 12 timely appealed. 13 II. JURISDICTION 14 The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 15 and 157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158. 16 III. ISSUES 17 1. Did the bankruptcy court err in determining that the Motion 18 to Dismiss was filed and served on July 3 rather than on July 16, 19 and thus Debtor's FAC filed on July 30 was untimely? 20 2. Did the bankruptcy court err in dismissing the Complaint 21 under Civil Rule 12(b)(6)? 22 3. Did the bankruptcy court abuse its discretion in denying 23 Debtor leave to amend his Complaint? 24 IV. STANDARDS OF REVIEW 25 We review de novo the bankruptcy court's interpretation of 26 the Federal Rules of Bankruptcy Procedure. Am. Sports Radio 27 Network, Inc. v. Krause (In re Krause), 546 F.3d 1070, 1073 n.5 28 (9th Cir. 2008).
-11- 1 Whether property is property of the estate is a question of 2 law reviewed de novo. Mwangi v. Wells Fargo Bank, N.A. 3 (In re Mwangi), 432 B.R. 812, 818 (9th Cir. BAP 2010)(citing White 4 v. Brown (In re White), 389 B.R. 693, 698 (9th Cir. BAP 2008)). 5 The bankruptcy court's dismissal of an adversary proceeding 6 for failure to state a claim under Civil Rule 12(b)(6) is reviewed 7 de novo. N.M. State Inv. Council v. Ernst & Young LLP, 641 F.3d 8 1089, 1094 (9th Cir. 2011); Barnes v. Belice (In re Belice), 9 461 B.R. 564, 572 (9th Cir. BAP 2011). A denial of leave to amend 10 is reviewed for abuse of discretion. Ditto v. McCurdy, 510 F.3d 11 1070, 1079 (9th Cir. 2007). A bankruptcy court abuses its 12 discretion if it applies an incorrect legal standard or its 13 factual findings are illogical, implausible or without support 14 from evidence in the record. TrafficSchool.com v. Edriver Inc., 15 653 F.3d 820, 832 (9th Cir. 2011). "Dismissal without leave to 16 amend is improper unless it is clear, upon de novo review, that 17 the complaint could not be saved by any amendment." Thinket Ink 18 Info. Res., Inc. v. Sun Microsystems, Inc., 368 F.3d 1053, 1061 19 (9th Cir. 2004)(citation omitted). However, it is not error for 20 the trial court to deny leave to amend where the amendment would 21 be futile. Id. (citing Saul v. United States, 928 F.2d 829, 843 22 (9th Cir. 1991)). 23 V. DISCUSSION 24 A. Defendants were not required to serve the refiled Motion to Dismiss, and therefore the FAC was untimely. 25 26 Under Civil Rule 15(a)(1)(B), applicable here by Rule 7015, 27 "if [a] pleading is one to which a responsive pleading is 28 required," a "party may amend its pleading once as a matter of
-12- 1 course within . . . 21 days after service of a motion to dismiss 2 under [Civil] Rule 12(b) . . . ." Under Civil Rule 5(a)(1)(D) & 3 (E), applicable here by Rule 7005, a written motion and a written 4 notice must be served on every party that has appeared in the 5 action. 6 Virtually all of Debtor's arguments stem from his contention 7 that Defendants failed to serve the refiled Motion to Dismiss 8 filed on July 16, 2013, as required, which precluded him from 9 timely filing the FAC within 21 days of service of the refiled 10 motion. Thus, argues Debtor, the bankruptcy court could not have 11 found the FAC was untimely under Civil Rule 15(a)(1)(B). 12 Defendants argue that Debtor is raising this issue for the first 13 time on appeal, and therefore we should disregard it. 14 Generally, the Panel cannot consider arguments that were not 15 raised or briefed before the bankruptcy court. Katz v. Pike 16 (In re Pike), 243 B.R. 66, 69 (9th Cir. BAP 1999)(citing Whittaker 17 Corp. v. Execuair Corp., 953 F.2d 510, 515 (9th Cir. 1992)). 18 However, we have the discretion to consider an argument raised for 19 the first time on appeal if the "'issue presented is purely one of 20 law and either does not depend on the factual record developed 21 below, or the pertinent record has been fully developed.'" Id. 22 (quoting Boker v. C.I.R., 760 F.2d 1039, 1042 (9th Cir. 1985)). 23 We agree that this argument was not expressly raised before the 24 bankruptcy court. Nonetheless, in reviewing the transcript, 25 counsel for Debtor appeared surprised when the bankruptcy court 26 informed him that the FAC filed on July 30, 2013, was untimely 27 based on the July 3 service date of the Motion to Dismiss. 28 Implicit in the court's finding was that the refiled Motion to
-13- 1 Dismiss filed on July 16, 2013, which the court expressly 2 referenced, did not have to be served on Debtor, and so the 21-day 3 time period for Debtor's responsive pleading started to run on 4 July 3, 2013. See Rule 9006(f). Because of the court's implicit 5 finding, and because the question before us is purely one of law 6 and the record is fully developed, we exercise our discretion to 7 consider the issue. 8 If a pleading that requires service to other parties is 9 electronically filed and served by mail but was filed under the 10 wrong event code, does Civil Rule 5 require service when the same 11 pleading is refiled under the correct event code? We think not. 12 The bankruptcy court clerk instructed Defendants on July 15, 13 2013, to refile their Motion to Dismiss under the correct event 14 code, which they did on July 16, 2013. The clerk did not instruct 15 Defendants to also serve the refiled motion. Citing to no 16 authority other than Civil Rule 5(a)(1)(D) & (E), Debtor contends 17 that because of the refiling, Defendants were required to serve 18 the refiled Motion to Dismiss and Notice thereto. Section 3.5(h) 19 of the Court Manual,7 which addresses errors in electronic 20 7 21 Court Manual § 3.5(h) entitled "Correcting Documents Filed in Error" provides: 22 (1) When a document has been filed electronically, the 23 official record is the electronic recording of the document as stored by the court. Only the Clerk’s Office can make 24 changes to the docket entry. 25 (2) A document incorrectly filed in a case may be the result of posting the wrong PDF file to a docket entry, selecting 26 the wrong document type from the menu, or entering the wrong case number. If an error is detected after an item is on the 27 docket, DO NOT ATTEMPT TO RE-FILE THE DOCUMENT. 28 continue...
-14- 1 filings, is silent as to whether an incorrectly filed document 2 must be served again once refiled. Likewise, the "FAQ" for CM/ECF 3 does not address it.8 Local Rule 5005-4 — Electronic Filing — is 4 also silent on this matter. Therefore, we must turn to other 5 authority. 6 Neither party has cited, and we could not locate, a case 7 involving this exact issue. However, we found several cases 8 involving similar electronic filing errors. In Farzana K. v. Ind. 9 Dep't of Educ., 473 F.3d 703 (7th Cir. 2007), plaintiff's attorney 10 had thirty days from which to file a complaint after a final 11 administrative decision had been issued. On the 30th day, the 12 attorney electronically filed a complaint, but filed it in the 13 plaintiff's former case that had been dismissed two years prior. 14 The computer rejected the filing with the notation that the case 15 had been closed. Id. at 704. Two days later, plaintiff's 16 7 17 ...continue (3) After an error is discovered, contact the CM/ECF Help 18 Desk at (213) 894-2365 as soon as possible. Be sure to have the case number and document number for which the correction 19 is being requested. If appropriate, the court will make an entry indicating that the document was filed in error. You 20 will be advised if you need to re-file the document. The CM/ECF system will not permit you to make changes to a 21 document or docket entry once the transaction has been accepted. 22 (4) If an error regarding a fee occurs, do not pay the fee 23 until after speaking with someone at the CM/ECF Help Desk. 24 8 Question no. 31 of the FAQ found at www.cacb.uscourts.gov/cmecf-frequently-asked-questions (last 25 visited on May 29, 2014) states: "What happens if a document is filed in error? Email the ECF Help Desk at 26 ECF_Support@cacb.uscourts.gov immediately after you discover an error has occurred. Incorrect entries or PDFs will not be 27 deleted. Errors may be edited by court personnel only. A corrective entry by the Court may be required. An e-mail is 28 generated whenever a corrective entry is made."
-15- 1 attorney filed a new complaint that was identical to the first 2 one, except that the space for the docket number was left blank 3 and the word "amended" had been deleted. The district court held 4 that the later-filed complaint was untimely and dismissed the 5 suit. Id. at 705. Relying on the mandate provided in Civil 6 Rule 5(e),9 now Civil Rule 5(d)(4), that court clerks must accept 7 filings despite formal defects, and equating the attorney's 8 mistake to filing paper copies with the wrong docket number 9 written in, the Seventh Circuit reversed, holding that the 10 complaint was timely filed despite the electronic filing error.10 11 Id. at 706-07. 12 Still, the fact remains that the complaint was tendered to the clerk's office on the 30th day, and the computer's 13 reaction does more to show the limits of some programmer's imagination than to render the suit 14 untimely. Had a paper copy of the complaint been handed over the counter on July 6, a deputy clerk would have 15 crossed out the old docket number, stamped a new one, and filed the document; there is no reason to throw this suit 16 out of court just because the e-filing system did not know how to take an equivalent step. 17 18 Id. at 707. 19 In Weeks Landing, LLC v. RCMP Enters., LLC, 439 B.R. 897 20 21 9 Former Civil Rule 5(e) read, in relevant part: "The clerk 22 shall not refuse to accept for filing any paper presented for that purpose solely because it is not presented in proper form as 23 required by these rules or any local rules of practices." That rule has now been amended to Civil Rule 5(d)(4), which provides: 24 "The clerk must not refuse to file a paper solely because it is not in the form prescribed by these rules or by a local rule or 25 practice." 26 10 The Farzana K court reasoned that the "software that operates an e-filing system acts for 'the clerk' as far as Rule 5 27 is concerned; a step forbidden to a person standing at a counter is equally forbidden to an automated agent that acts on the 28 court's behalf." 473 F.3d at 707.
-16- 1 (M.D. Fla. 2010), plaintiff's attorney incorrectly filed an 2 adversary complaint in the debtor's main bankruptcy case. Two 3 days later, the clerk issued a form "Order of Conditional 4 Dismissal" instructing the attorney to refile the complaint in an 5 adversary proceeding. Id. at 906. The attorney did as 6 instructed, but not until several days past the filing deadline. 7 The second complaint was identical to the first. Id. Defendants 8 moved to dismiss the complaint with prejudice due to its 9 untimeliness, and the bankruptcy court granted the motion. Id. at 10 907-08. Relying on Civil Rule 5(d)(4) and Rule 5005(a)(1),11 the 11 district court reversed, holding that the adversary complaint was 12 timely filed despite the electronic filing error. Id. at 909. 13 Accord Shuler v. Garrett, 715 F.3d 185, 187 (6th Cir. 2013) 14 (relying on Civil Rule 5(d)(4) to hold that Civil Rule 59 motion 15 electronically filed under incorrect docket number was timely 16 filed notwithstanding counsel's filing mistake, particularly since 17 defendants were also served paper copies of the motion at the time 18 it was filed incorrectly). 19 Finally, in Vince v. Rock Cnty., Wis., 604 F.3d 391 (7th Cir. 20 2010), appellant's counsel electronically filed a notice of appeal 21 on the last day of the appeal period, but used the wrong event 22 code. The clerk's office discovered the error and notified 23 counsel of the mistake in an email three days later, directing him 24 to refile it with the correct event code. Counsel complied, and 25 26 11 Rule 5005(a)(1) provides, in relevant part: "The clerk shall not refuse to accept for filing any petition or other paper 27 presented for the purpose of filing solely because it is not presented in proper form as required by these rules or any local 28 rules or practices."
-17- 1 the second transmission of the notice of appeal was sent six days 2 after the appeal time had expired, causing the court staff to 3 question the timeliness of the appeal. Relying on Civil 4 Rule 5(d)(4) and its prior holding in Farzana K, the Seventh 5 Circuit held that the notice of appeal was timely filed, even 6 though initially filed under the wrong event code. Id. at 393. 7 The Vince court observed that filing documents under the wrong 8 event code is the most common electronic filing error listed in 9 the manual for the Western District of Wisconsin. Id. 10 We are persuaded by Farzana K, Weeks Landing, Shuler and 11 Vince, and hold that Civil Rule 5 did not require Defendants to 12 serve the Motion to Dismiss when it was refiled under the correct 13 event code on July 16, 2013. Undisputedly, if it were not for 14 electronic case filing, we would not be here. The caption on 15 Defendants' Motion to Dismiss states that it is a "Notice of 16 Motion and Motion to Dismiss Complaint; Memorandum of Points and 17 Authorities." Thus, it is clear to anyone reading the caption 18 what Defendants filed. Further, if a paper filing had occurred, 19 the clerk had nothing to correct, which is unlike the 20 circumstances in Farzana K, Weeks Landing and Shuler. 21 Noticeably absent from these cases and particularly Vince, 22 which involved the use of a wrong event code, is the court's 23 instruction that the incorrectly filed document had to be served 24 again once it was properly filed. The error here was due strictly 25 to a nuance that exists only because of electronic filing. It is 26 an error of form rather than substance. Thus, we cannot conclude 27 that Defendants' refiling of the Motion to Dismiss under the 28 correct event code on July 16, 2013, triggered the service
-18- 1 requirements under Civil Rule 5(a)(1)(D) & (E). Had the motion 2 been altered, however, the outcome would be different. 3 Debtor argues that the refiled Motion to Dismiss was the 4 operative motion that set the matter for hearing, not the original 5 filing, which he argues was rejected by the clerk and is wholly 6 irrelevant to the bankruptcy court's application of Civil 7 Rules 15(a)(1)(B) and 5(a)(1)(D). First, we disagree that the 8 Motion to Dismiss filed on July 3 was "rejected." Under Civil 9 Rule 5(d)(4) and Rule 5005(a)(1) the clerk was not allowed to 10 reject it. "An e-filing system likewise must accept every 11 document tendered for filing; it cannot reject any paper that the 12 clerk must accept." Farzana K, 473 F.3d at 708. In this case, 13 the clerk would never have rejected it in the first place because, 14 on the face of it, no error existed. 15 We also disagree with Debtor's contention that the hearing 16 would not have been set had Defendants not refiled the motion, so 17 therefore it must be the operative motion. Docket no. 11, which 18 immediately follows the July 15 error notice and was also entered 19 on July 15, is an entry by the clerk setting the Motion to Dismiss 20 for hearing on August 8. Thus, the refiling of the motion on 21 July 16 was not the prerequisite for the hearing to be set.12 22 12 23 Debtor raises for the first time in his reply brief that the reason Defendants were instructed to refile the Motion to 24 Dismiss was because they failed to comply with Local Rule 9013- 1(c)(2) and (3) and file the "Notice of Motion"and "Motion" as 25 separate documents, and until they did so, the matter could not be set for hearing. Local Bankruptcy Rules 9013-1(c)(2) and (3) 26 provide: 27 (c) Form and Content of Motion and Notice. 28 continue...
-19- 1 Defendants were not required to serve the Motion to Dismiss 2 when it was refiled on July 16 due to being filed under a wrong 3 event code on July 3. Debtor does not dispute receiving notice of 4 the Motion to Dismiss by mail when it was filed on July 3. 5 Therefore, the FAC had to be filed by July 29. It was not filed 6 until July 30. As such, Debtor was not allowed to file an amended 7 complaint without consent from Defendants or leave of court, 8 neither of which he had. Civil Rule 15(a)(1)(B); 6 Wright, Miller 9 & Kane, Fed. Practice and Proc. § 1480 (3d 2010)(when the 21-day 10 time period has expired to file an amended complaint as a matter 11 of course, Civil Rule 15(a)(1) no longer applies and an amendment 12 falls under Civil Rule 15(a)(2), which requires leave of court or 13 14 12 ...continue (2) Notice of Motion. Every motion must be accompanied by 15 written notice of motion specifying briefly the relief requested in the motion and, if applicable, the date, time, 16 and place of hearing. Except as set forth in LBR 7056-1 with regard to motions for summary judgment or partial summary 17 adjudication, or as otherwise ordered, the notice of motion must advise the opposing party that LBR 9013-1(f) requires a 18 written response to be filed and served at least 14 days before the hearing. If the motion is being heard on shortened 19 notice pursuant to LBR 9075-1, the notice must specify the deadline for responses set by the court in the order 20 approving the shortened notice. 21 (3) Motion. There must be served and filed with the motion and as a part thereof: 22 (A) Duly authenticated copies of all photographs and documentary evidence that the moving party intends to submit 23 in support of the motion, in addition to the declarations required or permitted by FRBP 9006(d); and 24 (B) A written statement of all reasons in support thereof, together with a memorandum of the points and authorities upon 25 which the moving party will rely. 26 Although we are not really sure how this argument helps Debtor, nothing in the rules state that the Notice of Motion and Motion 27 must be filed separately, or that failure to do so will not set a matter for hearing. As discussed above, the clerk set the Motion 28 to Dismiss for hearing before Defendants even refiled it.
-20- 1 written consent of the opposing party). Accordingly, the 2 bankruptcy court did not err in striking the FAC as untimely. 3 B. The bankruptcy court did not err in granting the Motion to Dismiss under Civil Rule 12(b)(6) and dismissing the 4 Complaint. 5 Under Civil Rule 12(b)(6), made applicable in adversary 6 proceedings through Rule 7012, a bankruptcy court may dismiss a 7 complaint if it fails to "state a claim upon which relief can be 8 granted." In reviewing a Civil Rule 12(b)(6) motion, the trial 9 court must accept as true all facts alleged in the complaint and 10 draw all reasonable inferences in favor of the plaintiff. Newcal 11 Indus., Inc. v. Ikon Office Solutions, 513 F.3d 1038, 1043 n.2 12 (9th Cir. 2008). To avoid dismissal under Civil Rule 12(b)(6), a 13 plaintiff must aver in the complaint "sufficient factual matter, 14 accepted as true, to 'state a claim to relief that is plausible on 15 its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)(quoting 16 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim 17 has facial plausibility when the pleaded factual content allows 18 the court to draw a reasonable inference that the defendant is 19 liable for the misconduct alleged." Iqbal, 556 U.S. at 663 20 (citation omitted). 21 A debtor may request and obtain sanctions against a creditor 22 if it willfully violated the automatic stay. See § 362(k). A 23 creditor willfully violates the automatic stay if it knew of the 24 automatic stay and intentionally acted in violation of it. 25 Eskanos & Adler, P.C. v. Leetien, 309 F.3d 1210, 1215 (9th Cir. 26 2002)(analyzing automatic stay violation under former § 362(h)). 27 Debtor contends that the bankruptcy court erred in granting 28 the Motion to Dismiss and dismissing the Complaint for two
-21- 1 reasons. First, the court erred by failing to consider whether or 2 not the Amended Bond Order was a final judgment. Debtor argues 3 that the Stay Relief Order authorized Robert to enforce only 4 "final" judgments and, therefore the Defendants violated the Stay 5 Relief Order by enforcing the Amended Bond Order, which was still 6 on appeal and not final.13 Second, Debtor argues Defendants' claim 7 to enforce the Appeal Bond, which Debtor characterizes as a 8 personal judgment against him, is a separate and distinct claim 9 for relief under California law that was not disclosed to the 10 bankruptcy court or authorized by the Stay Relief Order. Thus, 11 argues Debtor, the bankruptcy court erred in concluding that 12 Defendants’ pursuit of the Appeal Bond was merely part and parcel 13 of the Probate Action. Debtor also argues that no factual basis 14 existed for the bankruptcy court to determine that the $216,000 15 Appeal Bond was "non-estate funds," since any potential estate 16 interest in it was not abandoned until after Defendants took the 17 violative actions. 18 In reviewing the Stay Relief Order, the bankruptcy court 19 determined that Defendants' attempt to recover on the Appeal Bond 20 was not an action separate from the Probate Action, and therefore 21 did not violate the automatic stay or provide a basis for 22 contempt. "We accord substantial deference to the bankruptcy 23 court's interpretation of its own orders and will not overturn 24 that interpretation unless we are convinced it amounts to an abuse 25 of discretion." Rosales v. Wallace (In re Wallace), 490 B.R. 898, 26 906 (9th Cir. BAP 2013)(citing Marciano v. Fahs (In re Marciano), 27 13 As noted earlier, the California Court of Appeal affirmed 28 the Amended Bond Order on May 14, 2014.
-22- 1 459 B.R. 27, 35 (9th Cir. BAP 2011)). We are not convinced the 2 bankruptcy court's interpretation of the Stay Relief Order was an 3 abuse of discretion. We agree that Defendants' pursuit of the 4 Appeal Bond was not an action taken outside of the authorized 5 Probate Action, Case No. BP122477. 6 Debtor is correct that the bankruptcy court did not expressly 7 address the finality of the Amended Bond Order, which was still on 8 appeal when Defendants sought to recover on the Appeal Bond, and 9 whether they violated the Stay Relief Order by pursuing the funds. 10 However, this is of no moment, because the Appeal Bond was never 11 estate property. 12 In its ruling, the bankruptcy court implied that it was 13 granting the Motion to Dismiss because the Appeal Bond was 14 non-estate funds, so, therefore, Defendants could not have 15 violated the automatic stay in any event. The Appeal Bond at 16 issue was actually a $216,000 cash deposit in lieu of an appeal 17 (or supersedeas) bond. It was posted to protect the Trust from 18 any further damages incurred during Debtor and Peter's appeal of 19 the Eviction Order issued in the Probate Action. Generally, when 20 a "debtor puts up his own money as a cash deposit[,] [t]he debtor 21 continues to have not only a legal interest, but also a residual 22 interest in the cash deposit. Therefore, the cash deposit is 23 property of the estate." Canzone v. Hammon (In re Hammon), 24 180 B.R. 220, 223 (9th Cir. BAP 1995)(prepetition cash deposit 25 made by general contractor-debtor with state licensing board, as 26 required by state law to insure payment of claims made against 27 him, was property of the estate because debtor retained legal and 28 residual equitable interest in the funds); In re S-Tran Holdings,
-23- 1 Inc., 414 B.R. 28, 35 (Bankr. D. Del. 2009)(holding same and 2 citing In re Hammon). Here, however, the cash deposit was made by 3 a third party. As such, Debtor never had any interest in the 4 proceeds of it and neither did his bankruptcy estate. This 5 conclusion is consistent with him not listing it as an asset in 6 his Schedule B. (See docket no. 10). The beneficiary of the 7 Appeal Bond was either Robert if he prevailed, or the third party 8 who posted the funds should Debtor and Peter have prevailed. 9 Because the $216,000 cash deposit was never property of the 10 estate, it was never subject to the automatic stay. Therefore, 11 Defendants could not have violated the stay or the Stay Relief 12 Order in trying to recover it. Accordingly, because the Complaint 13 failed to establish a plausible claim for relief under § 362(k) or 14 § 105(a), the bankruptcy court did not err in granting the Motion 15 to Dismiss. 16 C. The bankruptcy court did not abuse its discretion in dismissing the Complaint without leave to amend. 17 18 Under Civil Rule 15(a)(2), Debtor could amend his Complaint 19 only with Defendants' consent or with the bankruptcy court's 20 leave. Debtor contends that the bankruptcy court abused its 21 discretion in denying leave to amend because it did so on the 22 basis of a clearly erroneous factual finding — that the Motion to 23 Dismiss was served on July 3 as opposed to July 16. As we have 24 concluded above, the bankruptcy court did not err in finding that 25 the Motion to Dismiss was served on July 3. In any event, 26 amending the Complaint in this case would have been futile because 27 Debtor could never state a plausible claim for relief under 28 § 362(k) or § 105(a) on the basis of Defendants' actions to
-24- 1 recover on the Appeal Bond. Therefore, the bankruptcy court did 2 not err in denying leave to amend. Thinket Ink Info. Res., Inc., 3 368 F.3d at 1061 (trial court does not err in denying leave to 4 amend where amendment would be futile). 5 VI. CONCLUSION 6 For the foregoing reasons, we AFFIRM. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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