In re: Vahe Aftandilian

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: March 26, 2014
• Docket: CC-12-1538-KuPaTa
• Status: Unpublished

Opinion

FILED MAR 26 2014 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-12-1538-KuPaTa ) 6 VAHE AFTANDILIAN, ) Bk. No. 11-12992 ) 7 Debtor. ) _______________________________) 8 ) VAHE AFTANDILIAN, ) 9 ) Appellant, ) 10 ) v. ) MEMORANDUM* 11 ) PRESTIGE MANAGEMENT GROUP, LLC,) 12 ) Appellee. ) 13 _______________________________) 14 Argued and Submitted on February 20, 2014 at Pasadena, California 15 Filed – March 26, 2014 16 Appeal from the United States Bankruptcy Court 17 for the Central District of California 18 Honorable Maureen A. Tighe, Bankruptcy Judge, Presiding 19 Appearances: Appellant Vahe Aftandilian argued pro se; Lewis R. 20 Landau of Horgan, Rosen, Beckham & Coren, LLP argued for appellee Prestige Management Group, 21 LLC. 22 Before: KURTZ, PAPPAS and TAYLOR, Bankruptcy Judges. 23 24 25 26 * 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 INTRODUCTION 2 After obtaining relief from the automatic stay, appellee 3 Prestige Management Group, LLC (“Prestige”) conducted a 4 nonjudicial foreclosure sale of the commercial real property 5 owned by chapter 111 debtor Vahe Aftandilian. Aftandilian later 6 filed a motion asking the bankruptcy court to declare the 7 foreclosure sale void. 8 The bankruptcy court denied Aftandilian’s declaratory relief 9 motion. The bankruptcy court held that Aftandilian should have 10 filed his request for declaratory relief as an adversary 11 proceeding pursuant to Rule 7001 rather than as a contested 12 matter motion under Rule 9014(a). The bankruptcy court also held 13 that Aftandilian’s motion was duplicative of one or more of the 14 claims he asserted in his adversary proceeding against Prestige 15 (Adv. No. 12-01230), which the bankruptcy court had dismissed 16 with prejudice. The bankruptcy court further indicated that 17 Aftandilian’s motion offered the court no reason why it should 18 depart from the analysis it had relied upon in dismissing the 19 adversary proceeding. 20 We agree with the bankruptcy court’s stated reasons for 21 denying Aftandilian’s motion, so we AFFIRM. 22 FACTS 23 In March 2011, Aftandilian commenced his bankruptcy case by 24 25 26 1 Unless specified otherwise, all chapter and section 27 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and all "Rule" references are to the Federal Rules of Bankruptcy 28 Procedure, Rules 1001-9037.

2 1 filing a chapter 11 petition.2 In his bankruptcy schedules, 2 Aftandilian listed Prestige as a secured creditor holding first 3 and second trust deeds against Aftandilian’s commercial real 4 property located in Reseda, California. Aftandilian operated a 5 car wash and an oil change business on part of the property and 6 leased another portion of the property to a restaurant operator. 7 In August 2011, roughly five months after the bankruptcy 8 filing, Prestige filed a motion for relief from the automatic 9 stay under § 362(d)(1) and (2) to enable it to proceed with 10 foreclosure and an action for possession of the property. On 11 September 23, 2011, the bankruptcy court entered an order on 12 Prestige’s initial relief from stay motion. The order left the 13 automatic stay in place, but required Aftandilian to make 14 adequate protection payments of $22,547 per month. If 15 Aftandilian defaulted on his adequate protection payments, the 16 order further provided, Prestige could obtain termination of the 17 automatic stay on an expedited basis and thereafter proceed with 18 its foreclosure and its other remedies against the property. 19 Aftandilian apparently made the ordered adequate protection 20 payments to Prestige, but Prestige nonetheless filed a new relief 21 from stay motion in January 2012. According to Prestige, it had 22 discovered that Aftandilian also owed a substantial amount of 23 unpaid prepetition secured real property taxes against the 24 2 Most of the facts set forth herein are undisputed and are 25 drawn from the bankruptcy court’s docket and the imaged documents 26 attached thereto. We take judicial notice of the filing and contents of those documents. See O'Rourke v. Seaboard Sur. Co. 27 (In re E.R. Fegert, Inc.), 887 F.2d 955, 957–58 (9th Cir. 1989) (holding that the Panel can take judicial notice of contents of 28 the bankruptcy court record).

3 1 property. These additional secured obligations, Prestige 2 asserted, left its interest in the property inadequately 3 protected. 4 The bankruptcy court once again declined to grant Prestige 5 immediate relief from the automatic stay. Instead, the court set 6 a schedule of monthly installments that it directed Aftandilian 7 to pay in order to satisfy the unpaid prepetition property taxes, 8 and it continued the relief from stay hearing so that the motion 9 could be considered in conjunction with Aftandilian’s and 10 Prestige’s competing reorganization plans and proposed disclosure 11 statements. 12 In conjunction with the disclosure statement proceedings, 13 the bankruptcy court ruled, on March 30, 2012, that it would 14 grant Prestige relief from the stay. However, in granting stay 15 relief, the court also granted Aftandilian a concession. Instead 16 of permitting Prestige to immediately record a notice of sale, it 17 ruled that the notice of sale could not be recorded before May 18 15, 2012, provided that Aftandilian made the adequate protection 19 payments and the tax payments that were due in the interim. The 20 order granting relief from stay, in relevant part, provided as 21 follows: 22 Movant may record its Notice of Trustee Sale on the first to occur of the following dates: 23 a. Immediately upon dishonor of any check for one of 24 the payments referred to in the following sections; 25 b. April 2, 2012 if Debtor fails to email not later than April 2, 2012 to Movant’s counsel a Los Angeles 26 County receipt for payment of $3,548.98 paid on or before March 15, 2012 for the March, 2012 payment due 27 under the Court’s order entered February 21, 2012; 28 c. April 2, 2012 but only if Debtor fails to deliver

4 1 $22,547.40 to Movant on or before April 2, 2012; 2 d. April 10, 2012 but only if Debtor: (1) fails to deliver $20,384.94 to the Los Angeles County Treasurer 3 and Tax Collector by April 10, 2012 (with direction that payment is for the real property tax payments due 4 on parcels 2103-026-034 & 2103-026-035 due not later than April 10, 2012); or (2) Debtor fails to email on 5 or before April 10, 2012 to Movant’s counsel a Los Angeles County receipt for payment of $20,384.94; 6 e. April 15, 2012 but only if Debtor: (1) fails to 7 deliver $3,548.98 to the Los Angeles County Treasurer and Tax Collector by April 15, 2012; or (2) Debtor 8 fails to email not later than April 15, 2012 to Movant’s counsel a Los Angeles County receipt for such 9 payment; 10 f. May 1, 2012 but only if Debtor fails to deliver $22,547.40 to Movant on or before May 1, 2012; 11 g. May 15, 2012 but only if Debtor: (1) fails to 12 deliver $3,548.98 to the Los Angeles County Treasurer and Tax Collector by April 15, 2012; or (2) Debtor 13 fails to email not later than Mary 15, 2012 [sic] to Movant’s counsel a Los Angeles County receipt for such 14 payment; 15 h. May 16, 2012. 16 Order Granting Relief from Stay (April 23, 2012) at ¶ 11.d. 17 Aftandilian appealed the relief from stay order, and also 18 sought an emergency stay of the foreclosure from the Panel. The 19 Panel issued an order on May 30, 2012 granting a temporary stay 20 to maintain the status quo while the Panel considered the 21 emergency stay motion. However, the Panel issued a subsequent 22 order on June 5, 2012, denying Aftandilian’s emergency stay 23 motion and dissolving the temporary stay. According to the 24 Panel’s June 5 order, Aftandilian had not demonstrated a 25 sufficient likelihood of success on the merits of the appeal to 26 justify a stay for the remainder of the appeal. 27 Prestige thereafter completed its nonjudicial foreclosure 28 sale against the property, and purchased the property at the

5 1 foreclosure sale by credit bid. Prestige then obtained an 2 unlawful detainer judgment in the Los Angeles County Superior 3 Court, which entitled Prestige to take possession of the 4 property. Ultimately, the Panel dismissed as moot Aftandilian’s 5 appeal from the relief from stay order. 6 In July 2012, roughly one month after Prestige’s foreclosure 7 sale, Aftandilian commenced a lawsuit against Prestige in the Los 8 Angeles County Superior Court seeking to set aside the 9 foreclosure sale. The operative complaint, Aftandilian’s first 10 amended complaint, stated several legal theories, all of which 11 were based on the same predicate facts: (1) that, on June 1, 12 2012, Aftandilian made an adequate protection payment of $22,547 13 to Prestige; (2) that, on June 4, 2012, Prestige accepted that 14 payment; (3) that, on June 6, 2012, Prestige conducted its 15 foreclosure sale and purchased the property at the sale; and 16 (4) having accepted the June 1, 2012 adequate protection payment, 17 Prestige could not lawfully foreclose on the property on June 6, 18 2012. 19 Prestige removed Aftandilian’s lawsuit to the bankruptcy 20 court, and, while the lawsuit was pending before the bankruptcy 21 court Aftandilian filed a separate motion in his bankruptcy case 22 seeking to have Prestige’s foreclosure sale declared void. 23 Aftandilian never disputed that his declaratory relief motion 24 arose from exactly the same facts as set forth in his lawsuit. 25 Instead, he merely asserted that the lawsuit focused on his state 26 law legal theories, whereas the motion focused on his bankruptcy 27 law legal theories. More specifically, Aftandilian’s motion 28 asserted that, pursuant to the bankruptcy court’s September 23,

6 1 2011 adequate protection order, the automatic stay continued in 2 effect so long as he was current on his adequate protection 3 payments. And since he was current on his adequate protection 4 payments at the time of foreclosure sale, that sale was void. 5 The bankruptcy court dismissed the lawsuit with prejudice. 6 In the process of so ruling, the court held that nothing in its 7 September 23, 2011 adequate protection order, nor in its 8 April 23, 2012 relief from stay order, nor in the Panel’s 9 temporary stay order prohibited Prestige from foreclosing as it 10 did on June 6, 2012. The court further explained that the 11 explicit intent of the April 23, 2012 relief from stay order was 12 to unconditionally permit Prestige to move forward with all 13 foreclosure related proceedings on and after May 16, 2012. The 14 court also pointed out that the September 23, 2011 adequate 15 protection order explicitly provided that Prestige could accept 16 adequate protection payments from Aftandilian without affecting 17 Prestige’s entitlement to foreclose under applicable 18 nonbankruptcy law. In essence, the court held that, no matter 19 how Aftandilian characterized Prestige’s acceptance of the 20 June 1, 2012 adequate protection payment, no state law theory, no 21 bankruptcy law theory, and no court order prohibited Prestige 22 from foreclosing on June 6, 2012. 23 On or about October 3, 2012, the bankruptcy court issued a 24 tentative ruling on Aftandilian’s declaratory relief motion. In 25 the tentative ruling, the court pointed out that, under 26 Rule 7001, Aftandilian’s motion should have been brought as an 27 adversary proceeding. The court also noted that the facts 28 alleged, issues raised and relief sought all were duplicative of

7 1 other proceedings that Aftandilian had previously brought before 2 the court. According to the court, it had recently considered 3 and rejected the points made in the declaratory relief motion in 4 conjunction with its dismissal of Aftandilian’s removed state 5 court lawsuit. The court concluded that nothing in Aftandilian’s 6 motion had persuaded it to change its position regarding its 7 analysis and resolution of Aftandilian’s claims seeking to set 8 aside Prestige’s foreclosure sale. 9 On October 4, 2012, the bankruptcy court held a hearing on 10 Aftandilian’s declaratory relief motion, at which it adopted its 11 tentative ruling and denied the motion. On October 9, 2012, the 12 bankruptcy court entered its order denying Aftandilian’s 13 declaratory relief motion, and on October 23, 2012, Aftandilian 14 timely appealed that order. 15 JURISDICTION 16 The bankruptcy court had jurisdiction pursuant to 28 U.S.C. 17 §§ 1334 and 157(b)(2)(O), and we have jurisdiction under 18 28 U.S.C. § 158. 19 Prestige has argued strenuously that this appeal is moot. 20 According to Prestige, the following facts would make it either 21 impossible or inequitable for this Panel to grant relief on 22 appeal to Aftandilian: (1) after the bankruptcy court denied the 23 declaratory relief motion, Aftandilian did not attempt to obtain 24 a stay or injunction in order to maintain the status quo while 25 his appeal was pending; (2) Prestige has taken a number of 26 actions in reliance on its ownership of the property, including 27 the eviction of the restaurant tenant, the leasing of the car 28 wash to a new tenant and the construction of improvements to the

8 1 property; and (3) while this appeal has been pending, the 2 underlying bankruptcy case has been dismissed. A BAP motions 3 panel already has considered whether this appeal has been 4 rendered moot, and the motions panel concluded that this appeal 5 is not moot. We agree with the motions panel that this appeal is 6 not moot. 7 The party asserting mootness has a heavy burden to establish 8 that the appeal should be dismissed as moot. Focus Media, Inc. 9 v. Nat'l Broad. Co. Inc. (In re Focus Media, Inc.), 378 F.3d 916, 10 923 (9th Cir. 2004). Prestige must therefore persuade us that 11 it was either impossible or inequitable for us to grant any 12 meaningful relief. See id. We are not persuaded. 13 If Aftandilian were to prevail on the merits of his appeal, 14 we do not perceive how the dismissal of the underlying bankruptcy 15 case would preclude this Panel from issuing a decision reversing 16 the bankruptcy court and holding that Prestige’s foreclosure sale 17 was void as a violation of the automatic stay. Nor would 18 Prestige’s post-foreclosure actions with respect to the property 19 necessarily render it impossible or inequitable for Aftandilian, 20 armed with such a decision, to seek at least some measure of 21 relief in state court. 22 Simply put, Prestige has not sufficiently demonstrated to us 23 that a “comprehensive change of circumstances” has occurred such 24 that it would be impossible or inequitable for us to hold that 25 its foreclosure sale was void. See Motor Vehicle Cas. Co. v. 26 Thorpe Insulation Co. (In re Thorpe Insulation Co.), 677 F.3d 27 869, 880 (9th Cir. 2012); In re Focus Media, Inc., 378 F.3d 28 922-23. We acknowledge that any such relief could not, in

9 1 fairness, affect the rights of third parties currently leasing 2 portions of the property. But we are not aware of any reason why 3 our declaration that Prestige's foreclosure sale is void 4 necessarily must do so. Unlike those third parties, Prestige is 5 a party to this appeal and was a party to all of the proceedings 6 in the bankruptcy court, so it would not necessarily be unfair if 7 its rights and duties were altered by this decision. See Spirtos 8 v. Moreno (In re Spirtos), 992 F.2d 1004, 1007 (9th Cir. 1993). 9 Accordingly, this appeal is not moot, and we will consider 10 the merits of the appeal. 11 ISSUE 12 Did the bankruptcy court err when it denied Aftandilian’s 13 declaratory relief motion? 14 STANDARDS OF REVIEW 15 We review de novo the bankruptcy court’s interpretation and 16 application of Rule 7001. See Collect Access LLC v. Hernandez 17 (In re Hernandez), 483 B.R. 713, 719 (9th Cir. BAP 2012). 18 We also review de novo the bankruptcy court’s interpretation 19 of its orders. See Treasurer of Snohomish Cnty. v. Seattle First 20 Nat’l Bank (In re Glasply Marine Indus., Inc.), 971 F.2d 391, 393 21 (9th cir. 1992). Even so, a trial court’s interpretation of its 22 own orders is entitled to special deference. See Officers for 23 Justice v. Civil Serv. Comm'n of City and Cnty. of San Francisco, 24 934 F.2d 1092, 1094 (9th Cir. 1991); Marciano v. Fahs 25 (In re Marciano), 459 B.R. 27, 35 (9th Cir. BAP 2011), aff’d, 26 708 F.3d 1123 (9th Cir. 2013). 27 DISCUSSION 28 Under Rule 7001(2), an action to determine the validity of a

10 1 party’s interest in property must be pursued as an adversary 2 proceeding. The same is true of an action seeking a declaratory 3 judgment regarding the validity of a party’s interest in 4 property. See Rule 7001(9). The bankruptcy court correctly 5 ruled that Aftandilian’s failure to present his declaratory 6 relief motion as an adversary proceeding was a sufficient ground, 7 by itself, to justify denial of the motion. See Bear v. Coben 8 (In re Golden Plan of Cal., Inc.), 829 F.2d 705, 711–12 (9th Cir. 9 1986); In re DBSI, Inc., 432 B.R. 126, 134-35 (Bankr. D. Del. 10 2010). 11 We generally will not consider arguments that the appellant 12 did not specifically and distinctly brief. See Brownfield v. 13 City of Yakima, 612 F.3d 1140, 1149 n.4 (9th Cir. 2010) (citing 14 Greenwood v. F.A.A., 28 F.3d 971, 977 (9th Cir. 1994)); Cashco 15 Fin. Servs., Inc. v. McGee (In re McGee), 359 B.R. 764, 771 n.7 16 (9th Cir. BAP 2006) (citing Doty v. Cnty. of Lassen, 37 F.3d 540, 17 548 (9th Cir. 1994)). In his opening appeal brief, Aftandilian 18 did not even mention, let alone challenge, the bankruptcy court’s 19 ruling that an adversary proceeding was required. This is a 20 sufficient reason alone to affirm. 21 We also agree with the bankruptcy court’s alternate ground 22 for denying Aftandilian’s declaratory relief motion. The 23 bankruptcy court in essence held that Prestige’s acceptance of 24 Aftandilian’s June 1, 2012 adequate protection payment did not 25 prohibit Prestige from immediately proceeding with its 26 foreclosure sale as soon as the Panel terminated its temporary 27 stay on June 5, 2012. 28 Aftandilian contends that the bankruptcy court got it wrong.

11 1 Because Prestige accepted the June 1, 2012 adequate protection 2 payment, Aftandilian reasons, the September 23, 2011 adequate 3 protection order continued to control the application of the 4 automatic stay vis-a-vis Prestige’s right to foreclose. And 5 because the adequate protection order kept the automatic stay in 6 place so long as Aftandilian did not default on his adequate 7 protection payments, Prestige’s foreclosure sale, which occurred 8 while Aftandilian was current on his adequate protection 9 payments, was void as a violation of the automatic stay.3 10 In other words, Aftandilian is arguing that, by virtue of 11 the June 1, 2012 adequate protection payment it made and Prestige 12 accepted, the terms of the September 23, 2011 adequate protection 13 order enjoyed primacy over the terms of the April 23, 2012 relief 14 from stay order, at least until Aftandilian’s next adequate 15 protection payment was due. However, we don’t understand why, as 16 Aftandilian apparently claims, Prestige’s acceptance of the 17 adequate protection payment vitiated the intended effect of the 18 April 23, 2012 relief from stay order. 19 3 20 In his opening appeal brief, Aftandilian for the first time attempts to argue that Prestige’s acceptance of the June 1, 2012 21 adequate protection payment invalidated the notice of sale Prestige recorded before that payment was made. Aftandilian 22 cited no legal authority to support this proposition. Moreover, 23 the bankruptcy court did not have any opportunity to consider this argument because Aftandilian did not raise it in his 24 declaratory relief motion. Accordingly, we decline to consider this argument. See United Student Aid Funds, Inc. v. Espinosa, 25 559 U.S. 260, 270 n. 9 (2010) ("We need not settle that question, 26 however, because the parties did not raise it in the courts below."); Scovis v. Henrichsen (In re Scovis), 249 F.3d 975, 984 27 (9th Cir. 2001) (holding that court will not consider issue raised for the first time on appeal absent exceptional 28 circumstances).

12 1 In interpreting the effect of a bankruptcy court order, we 2 primarily rely on the bankruptcy court’s intent as manifested in 3 the order’s language. See Mullen v. Hamlin (In re Hamlin), 4 465 B.R. 863, 868 (9th Cir. BAP 2012) (citing Brown v. Wilshire 5 Credit Corp. (In re Brown), 484 F.3d 1116, 1120 (9th Cir. 2007)). 6 And the bankruptcy court’s interpretation of its own orders is 7 entitled to special deference. See Rosales v. Wallace 8 (In re Wallace), 490 B.R. 898, 906 (9th Cir. BAP 2013). 9 Here, as manifested by the unequivocal language of the 10 order, and as subsequently interpreted by the bankruptcy court at 11 the adversary proceeding dismissal hearing, the April 23, 2012 12 relief from stay order was intended to supersede the 13 September 23, 2011 adequate protection order and was intended to 14 modify the automatic stay so as to permit Prestige to 15 unconditionally move forward with foreclosure proceedings on and 16 after May 16, 2012. 17 We acknowledge that the Panel’s temporary stay order, for a 18 period of several days, stayed the effectiveness of the relief 19 from stay order. However, when the Panel terminated that 20 temporary stay on June 5, 2012, the bankruptcy court’s relief 21 from stay order immediately became effective and once again 22 superseded the adequate protection order and permitted immediate 23 foreclosure. Nothing in this Panel’s temporary stay order was 24 intended to have any other effect. 25 We are not aware of any law supporting Aftandilian’s 26 argument regarding the supposed effect of the June 1, 2012 27 adequate protection payment. Nor has Aftandilian cited any. 28 Therefore, the bankruptcy court correctly determined that the

13 1 plain terms of the April 23, 2012 relief from stay order mandated 2 denial of Aftandilian’s declaratory relief motion. 3 CONCLUSION 4 For the reasons set forth above, we AFFIRM the bankruptcy 5 court’s order denying Aftandilian’s declaratory relief motion. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28