In re: Shanel Ann Stasz

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: November 30, 2011
• Docket: CC-11-1050-HKiPa
• Status: Unpublished

Opinion

FILED NOV 30 2011 1 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-11-1050-HKiPa ) 6 SHANEL ANN STASZ, ) Bk. No. LA 05-43980 ) 7 Debtor. ) ______________________________) 8 ) SHANEL ANN STASZ, ) 9 ) Appellant, ) 10 ) v. ) M E M O R A N D U M1 11 ) ROSENDO GONZALEZ, Chapter 7 ) 12 Trustee, ) ) 13 Appellee. ) ______________________________) 14 Submitted Without Oral Argument 15 on November 17, 2011 16 Filed - November 30, 2011 17 Appeal from the United States Bankruptcy Court for the Central District of California 18 Honorable Alan M. Ahart, Bankruptcy Judge, Presiding 19 20 Appearances: Shanel Stasz, pro se, on brief. Patrick Kelly McClellan on brief for Rosendo 21 Gonzalez, Chapter 7 Trustee. 22 Before: HOLLOWELL, KIRSCHER and PAPPAS, Bankruptcy Judges. 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. 28 See 9th Cir. BAP Rule 8013-1. 1 Shanel Stasz (the Debtor) appeals the bankruptcy court’s 2 order approving the chapter 72 bankruptcy trustee’s Final Report, 3 Application for Compensation and Application for Compensation for 4 Professionals (Final Report). We conclude that the Debtor’s 5 standing to appeal is tenuous; however, assuming she does have 6 standing, we AFFIRM. 7 I. FACTS3 8 On October 13, 2005, the Debtor filed a voluntary petition 9 for relief under chapter 7. Rosendo Gonzales was appointed the 10 bankruptcy trustee (Trustee). In January 2006, the Trustee filed 11 an application to employ Patrick K. McClellan (McClellan) as 12 general bankruptcy counsel to assist him in the investigation, 13 recovery and liquidation of assets. The application was approved 14 on March 1, 2006. 15 Throughout the Debtor’s bankruptcy case, the Debtor 16 challenged the Trustee’s efforts to recover and monetize assets 17 18 2 19 Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330, as 20 enacted and promulgated prior to the effective date of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, 21 Pub. L. 109-8, 119 Stat. 23 and Bankruptcy Rules 1001-9036. 22 3 Many of the facts recited here were obtained by taking 23 judicial notice of documents filed with the bankruptcy court’s electronic docketing system since they were not submitted by the 24 Debtor in the record on appeal. Such documents include the 25 bankruptcy trustee’s declaration, which supported the Final Report, his supplemental declaration supporting the Final Report, 26 and his responses to the Debtor’s objection to the Final Report. 27 See O’Rourke v. Seaboard Sur. Co. (In re E.R. Fegert), 887 F.2d 955, 957-58 (9th Cir. 1988); Atwood v. Chase Manhattan Mortg. Co. 28 (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).

-2- 1 of the estate.4 On September 21, 2010, the Trustee filed the 2 Final Report. In the Final Report, the Trustee accounted for 3 $618,639.23 in estate assets that had been reduced to cash and 4 sought approval for the following distributions: 5 (1) $36,864.58 for his fees and $672.98 for his expenses 6 pursuant to § 326(a); 7 (2) $325,260.00 in fees and $2,655.19 in expenses for 8 McClellan’s work performed throughout the bankruptcy 9 case, pursuant to § 330(a); 10 (3) $8,815.50 in fees and $102.13 in expenses for work 11 performed by the Trustee’s hired accountant; 12 (4) $4,101.01 to pay the allowed priority claim of the 13 Internal Revenue Service (IRS); and, 14 (5) a $239,407.84 payment on creditor Hugo W. Quackenbush’s 15 nondischargeable unsecured claim of $1,984,778.10. 16 A declaration to support the requested fees was submitted on 17 September 29, 2010, which described the Trustee’s and his 18 counsel’s various and protracted efforts in investigating the 19 Debtor’s interest in real property, in avoiding and recovering 20 the fraudulent transfer of that interest to a family trust, and 21 22 4 Background on salient events and disputes in this 23 bankruptcy case are chronicled in: Stasz v. Gonzales (In re Stasz), 2007 WL 7370101 (9th Cir. BAP Aug. 9, 2007), 24 dismissed, 348 Fed. Appx. 234 (9th Cir. 2009), cert. denied, 25 131 S.Ct. 209 (2010); Stasz v. Gonzales (In re Stasz), 387 B.R. 271 (9th Cir. BAP 2008); Stasz v. Quakenbush (In re Stasz), 26 2007 WL 75401964 (9th Cir BAP Feb. 28, 2009), aff’d 352 Fed. 27 Appx. 154 (9th Cir. 2009), cert. denied, 130 S.Ct. 3293 (2010); Stasz v. Gonzales (In re Stasz), 2011 WL 3299162 (9th Cir. BAP 28 Apr. 5, 2011).

-3- 1 in monetizing the asset for the benefit of the estate. 2 Additionally, McClellan provided his full billing records. 3 The United States Trustee (UST) filed a limited objection to 4 the Final Report, questioning the benefit to the estate of the 5 fees incurred in the effort to declare the Debtor a vexatious 6 litigant. The Trustee filed a supplemental declaration 7 addressing the issue and the UST made no further objection to the 8 requested fees. 9 On October 15, 2010, the Debtor requested that the hearing 10 on the Final Report be continued to November 10, 2010. The 11 Debtor then filed, on October 20, 2010, a motion for the 12 disqualification and recusal of the bankruptcy judge under 13 28 U.S.C. § 455(a), and to set aside all prior rulings, orders 14 and judgments in the case, as well as to disgorge all funds 15 received by the Trustee (Motion to Recuse). 16 On October 28, 2010, the Debtor filed an opposition to the 17 Final Report, contending that the bankruptcy judge lacked 18 jurisdiction to rule on the Final Report as a result of the 19 Motion to Recuse. Additionally, she contended that McClellan’s 20 “fee application [was] telltale of the fraud allowed to occur in 21 the case” and that $62,294.53 of McClellan’s fees did not benefit 22 the estate. She alleged that there was no benefit to the estate 23 generally for work related to compelling the Debtor to appear for 24 the Rule 2004 examination, for discussions with the Debtor’s 25 homeowner’s association regarding her real property, and for work 26 done in connection with declaring her a vexatious litigant. The 27 declaration supporting her opposition consisted of simply 28

-4- 1 enclosing the Motion to Recuse and McClellan’s billing statements 2 with various amounts underlined. 3 The Motion to Recuse was scheduled to be heard on 4 November 10, 2010, before a different bankruptcy judge; however, 5 that judge declined to rule on the Motion to Recuse based on 6 contacts he previously had with the Debtor. At the hearing on 7 the Final Report the same day, the Trustee stated that he was 8 trying to expedite having the Motion to Recuse heard by a 9 different judge in the district. The bankruptcy court decided to 10 rule on the Final Report in the interim, on the condition that, 11 if the Motion to Recuse were granted, the Final Report would be 12 heard de novo by a new bankruptcy judge. See Hr’g Tr. (Nov. 10, 13 2010) at 5. The bankruptcy court then approved the Final Report 14 on the basis that the Debtor did not provide any evidence to 15 support her allegations that the fees should be denied. 16 Another bankruptcy judge in the district subsequently ruled 17 on the Motion to Recuse, denying the Debtor’s request on 18 December 28, 2010; the Debtor filed a motion for reconsideration, 19 which was denied on January 14, 2011.5 After the Motion to 20 Recuse was finally decided, on January 20, 2011, the bankruptcy 21 court entered the order approving the Final Report. The Debtor 22 timely appealed. 23 24 25 26 5 The Debtor appealed that order to the Bankruptcy Appellate 27 Panel, but the appeal was dismissed for failure to prosecute. The Debtor then appealed the dismissal of the appeal to the Ninth 28 Circuit on July 27, 2011.

-5- 1 II. ISSUE 2 Did the bankruptcy court abuse its discretion in approving 3 the Final Report? 4 III. JURISDICTION 5 The bankruptcy court had jurisdiction under 28 U.S.C. 6 § 157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158. 7 IV. STANDARDS OF REVIEW 8 Our jurisdiction, including the issue of standing, is a 9 question of law that we address de novo. Menk v. Lapaglia 10 (In re Menk), 241 B.R. 896, 903 (9th Cir. BAP 1999). 11 A bankruptcy court’s award of attorneys’ fees will not be 12 disturbed on appeal absent an abuse of discretion or an erroneous 13 application of the law. Smith v. Edwards & Hale, Ltd. 14 (In re Smith), 317 F.3d 918, 923 (9th Cir. 2002). A bankruptcy 15 court abuses its discretion if it bases a decision on an 16 incorrect legal rule, or if its application of the law was 17 illogical, implausible, or without support in inferences that may 18 be drawn from the facts in the record. United States v. Hinkson, 19 585 F.3d 1247, 1261–63 (9th Cir. 2009) (en banc); Ellsworth v. 20 Lifescape Med. Assocs. (In re Ellsworth), 455 B.R. 904, 914 21 (9th Cir. BAP 2011). 22 Factual findings made in the course of awarding compensation 23 are not disturbed unless clearly erroneous. See Friedman Enters. 24 v. B.U.M. Int’l, Inc. (In re B.U.M. Int’l, Inc.), 229 F.3d 824, 25 830 (9th Cir. 2000); Rule 8013. A finding is clearly erroneous 26 if it is “illogical, implausible, or without support in the 27 record.” Retz v. Samson (In re Retz), 606 F.3d 1189, 1196 28

-6- 1 (9th Cir. 2010) (citing United States v. Hinkson, 585 F.3d at 2 1261-62 & n.21)). 3 V. DISCUSSION 4 The Debtor contends that the filing of the Motion to Recuse 5 divested the bankruptcy court of jurisdiction over proceedings in 6 the case. Additionally, she alleges that the Final Report 7 demonstrated an “outrageous violation of § 330 and 8 § 326(a).” Appellant’s Opening Brief at 4. We address her 9 arguments below, but first consider whether the Debtor has 10 standing to appeal the bankruptcy court’s order approving the 11 Final Report. 12 A. Appellate Jurisdiction 13 The Ninth Circuit has adopted the “person aggrieved” test 14 for determining whether a party has standing to challenge an 15 order of the bankruptcy court. Fondiller v. Robertson 16 (In re Fondiller), 707 F.2d 441, 442-43 (9th Cir. 1983). The 17 test limits appellate standing to “those persons who are directly 18 and adversely affected pecuniarily by an order of the bankruptcy 19 court.” Id.; Sole Survivor Corp. v. Buxbaum, 2009 WL 210471 * 5, 20 6 (C.D. Cal. 2009). A “person aggrieved” is one whose property 21 is diminished, burdens are increased, or rights are impaired by 22 the order on appeal. Id.; Duckor Spradling & Metzger v. Baum 23 Trust (In re P.R.T.C., Inc.), 177 F.3d 774, 777 (9th Cir. 1999). 24 “Ordinarily, a debtor cannot challenge a bankruptcy court’s 25 order unless there is likely to be a surplus after bankruptcy.” 26 Id. at 778 n.2. According to the Final Report, the allowed 27 claims in the Debtor’s bankruptcy case significantly exceed the 28 funds on hand and the Debtor will not receive any distribution

-7- 1 from the bankruptcy estate. As a result, the bankruptcy court’s 2 order would not diminish her property or detrimentally affect her 3 rights. 4 However, if we were to reverse the bankruptcy court’s order 5 approving the Final Report and a subsequent hearing resulted in a 6 potential reduction of the trustee’s fees, there could be a 7 resulting increase in distribution to creditor Quakenbush and 8 reduction in the Debtor’s liability on that nondischargeable 9 debt. Therefore, the Debtor’s burden could be increased, 10 providing her sufficient standing to appeal. 11 On the other hand, it is speculation that the bankruptcy 12 court would, upon reversal and remand, find a factual basis to 13 reduce the Trustee’s or McClellan’s fees. Thus, the Debtor’s 14 standing to appeal the order approving the Final Report is 15 tenuous at best. In any event, we address the merits below, and 16 conclude that the bankruptcy court did not abuse its discretion 17 in approving the Final Report. 18 B. Bankruptcy Court Jurisdiction 19 The Debtor opposed the Final Report because she asserted 20 that the pendency of the unresolved Motion to Recuse divested the 21 bankruptcy court of jurisdiction in the case. The Debtor 22 asserted that the Motion to Recuse: 23 establishes that Judge Ahart’s actual bias violated Due Process and he has no jurisdiction over this bankruptcy 24 proceeding and that all of his prior rulings, orders or 25 judgments are void ab initio and that all assets held by the Trustee . . . must be returned to the Trusts 26 that they were illegally taken from. 27 The Debtor provided no legal authority for her assertion. 28 On appeal, the only argument the Debtor submits is that Fed. R.

-8- 1 Civ. P. 62(a) provided a 14-day stay of orders and judgments and 2 therefore, the bankruptcy court’s order approving the Final 3 Report was improperly entered before the stay period dissolved. 4 Neither of the Debtor’s arguments have merit. First, 5 28 U.S.C. § 455 governs the disqualification of bankruptcy judges 6 for reasons of bias or when a judge’s impartiality may reasonably 7 be questioned. There is no provision in 28 U.S.C. § 455 that 8 requires the disqualification of the judge upon presentation of a 9 motion to recuse. 10 We note that under limited circumstances, pursuant to 11 28 U.S.C. § 144, a district court judge may be disqualified upon 12 the presentation of a timely and properly filed motion and 13 affidavit that the judge assigned to a case has demonstrated 14 personal bias or prejudice. 28 U.S.C. § 144. That section 15 requires that proceedings cease until another judge is assigned. 16 However, 28 U.S.C. § 144 does not apply to bankruptcy judges. 17 Seidel v. Durkin (In re Goodwin), 194 B.R. 214, 221 (9th Cir. BAP 18 1996) (internal citations omitted). Furthermore, unlike motions 19 made under § 28 U.S.C. 144, a motion to recuse under 28 U.S.C. 20 § 455 does not require the judge to take the factual allegations 21 as true. Id. at 222. Therefore, there is no legal basis to 22 support the Debtor’s contention that the bankruptcy judge in this 23 case lacked jurisdiction over approval of the Final Report. See 24 28 U.S.C. 157(b)(2)(A). 25 Rule 7062 makes Fed. R. Civ. P. 62 applicable in adversary 26 proceedings. Fed. R. Civ. P. 62(a) provides that “no execution 27 may issue on a judgment nor may proceedings be taken to enforce 28 it, until 14 days have passed after its entry.” Rule 7062 is

-9- 1 inapplicable here. The Final Report was not brought by motion in 2 an adversary proceeding but in conjunction with the general 3 administration of the bankruptcy estate. Moreover, the entry of 4 the bankruptcy court’s order approving the Final Report does not 5 constitute “executing” or “enforcing a judgment” against the 6 Debtor. In sum, the bankruptcy court was not divested of 7 jurisdiction and did not err in ruling on the Final Report. 8 C. Merits 9 Bankruptcy Code §§ 330(a)(1) and 326(a) govern the 10 bankruptcy court’s determination of the amount of reasonable 11 compensation to be awarded to a chapter 7 trustee. Boldt v. U.S. 12 Trustee (In re Jenkins), 130 F.3d 1335, 1337 (9th Cir. 1997). 13 Section 326(a) sets forth the maximum compensation payable to a 14 chapter 7 trustee. It limits a chapter 7 trustee’s compensation 15 to a percentage of the funds disbursed by the trustee. The 16 policy underlying § 326(a) is to ensure that a trustee is 17 compensated commensurate with the value of the services conferred 18 on the bankruptcy estate. Sw. Media, Inc. v. Rau, 708 F.2d 419, 19 423 (9th Cir. 1983). “The crucial test seems to be . . . whether 20 or not the particular property or fund has been justifiably 21 administered in the bankruptcy court, or whether or not the 22 trustee has properly performed services in relation thereto.” 23 Id. at 424 n.4 (quoting In re Schautz, 390 F.2d 797, 800 (2d Cir. 24 1968)). 25 Additionally, § 330(a)(3)(A)-(E) lists the criteria the 26 bankruptcy court must consider in determining the amount of 27 reasonable compensation to be awarded a trustee’s counsel under 28

-10- 1 § 330(a), including whether the services were necessary to the 2 administration of, or beneficial toward the completion of a 3 bankruptcy case. The burden of establishing entitlement to the 4 fees requested from the estate rests with the trustee. Roderick 5 v. Levy (In re Roderick Timber Co.), 185 B.R. 601, 606 (9th Cir. 6 BAP 1995). 7 The Debtor did not initially dispute the compensation sought 8 by the Trustee under § 326(a), but on appeal argues that the 9 Trustee’s calculation of his percentage is wrong, that his fees 10 were not itemized, and are excessive. Because these arguments 11 were not presented to the bankruptcy court, we do not address 12 them here. In re E.R. Fegert, Inc., 887 F.2d at 957 (internal 13 citation omitted). Furthermore, we note that the Trustee 14 provided a lengthy declaration explaining the work performed 15 throughout the bankruptcy case and the resulting benefit of that 16 work to recovering assets for the estate, as well as a form 17 outlining his calculations. 18 Before the bankruptcy court, the Debtor opposed the approval 19 of the Final Report by contending that $62,894.53 of McClellan’s 20 fees did not benefit the estate. She argued that there was no 21 benefit to the estate from his fees generally incurred in 22 attempting to complete a Rule 2004 Examination of the Debtor, in 23 talking to the Debtor’s homeowners’ association, in attempting to 24 deem the Debtor a vexatious litigant, and in revoking the 25 Debtor’s discharge.6 However, the Debtor did not identify 26 27 6 No fees were sought by the Trustee related to revoking the 28 Debtor’s discharge. -11- 1 specific line item amounts or present any reasoned legal 2 arguments or facts as to why such efforts did not benefit the 3 estate. 4 The Debtor asserts that the bankruptcy court erred in 5 determining that she did not provide evidence to support her 6 argument. She contends that she supported her argument with 7 “detailed findings of $62,894.53 in false billings included 8 within McClellan’s outrageous $327,925.19 bill and her [Motion to 9 Recuse].” Appellant’s Opening Brief at 7. 10 While McClellan submitted comprehensive billing records to 11 support his fee request, our review of the record reveals that 12 the Debtor did not provide any detail about the source of her 13 $64,894.53 calculation and did not provide a declaration setting 14 forth facts to support her conclusory assertion that certain work 15 performed by McClellan did not benefit the estate. As a result, 16 her assertions are merely argument and provide insufficient 17 evidentiary support or facts which the bankruptcy court may use 18 in its findings. See, e.g., British Airways Bd. v. Boeing Co., 19 585 F.2d 946, 952 (9th Cir. 1978). 20 The record supports the bankruptcy court’s ruling that the 21 Debtor did not provide any evidence or factual support for her 22 allegation that certain work performed by the Trustee and 23 McClellan did not benefit the estate. Indeed, the Trustee 24 submitted a lengthy declaration detailing his and his counsel’s 25 protracted efforts in conducting a Rule 2004 Examination of the 26 Debtor, in interviewing the homeowner’s association in his 27 efforts to recover real property for the estate, and in his 28 efforts to limit the expenses and fees in responding to the -12- 1 numerous challenges by the Debtor, throughout the administration

2 of the estate, by having her deemed a vexatious litigant. The

3 Trustee stated in his declaration that all of those various

4 efforts taken by McClellan resulted in assets being recovered and

5 reduced to cash. Accordingly, the bankruptcy court had

6 uncontroverted evidence that the work performed by the Trustee

7 and McClellan benefitted the estate. Under these circumstances,

8 we conclude that the bankruptcy court did not abuse its

9 discretion by approving the Final Report.

10 VI. CONCLUSION

11 For the foregoing reasons, we AFFIRM the bankruptcy court’s

12 order approving the Final Report.

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