In re: Monica Hujazi
NC-15-1206-BSKu
| 9th Cir. BAP | Jul 12, 2017Background
- Monica Hujazi formed the Zuercher Trust (a business trust) and was its trustee/sole beneficiary; the Trust filed chapter 11 in the Northern District of California.
- An involuntary chapter 7 petition was filed against Hujazi shortly after (her individual case was pending in the same bankruptcy court).
- The chapter 11 trustee for the Zuercher Trust filed seven adversary proceedings in the Trust’s bankruptcy to recover alleged fraudulent transfers; only two of those suits named Hujazi individually.
- Hujazi moved to strike/dismiss all seven adversary complaints as violations of the automatic stay in her individual (then-involuntary) bankruptcy case; the bankruptcy court denied relief, adopting a “home bankruptcy court” rule that filings against a debtor in the same court do not violate the stay.
- After the appeal was filed, Hujazi’s individual case entered an order for relief and a chapter 7 trustee was appointed for her; the two trustees later negotiated a global settlement that released all claims and dismissed the adversary proceedings with prejudice, and that settlement was approved and not appealed.
Issues
| Issue | Hujazi's Argument | Trustee's Argument | Held |
|---|---|---|---|
| Standing to appeal re: five APs that do not name Hujazi | Those filings violated the automatic stay and are void | Hujazi lacks standing as the APs were against non-debtors; automatic stay protects only the debtor | Hujazi lacks standing to appeal as to the five APs not naming her |
| Mootness of appeal as to two APs naming Hujazi | Seeks to void the APs and unwind the post-appeal settlement | Settlement between trustees released all claims and is final; trustee controls estate claims; relief is impossible or inequitable | Appeal as to the two APs is constitutionally and equitably moot; dismissal for lack of jurisdiction |
| Scope of the Ninth Circuit "home bankruptcy court" rule | The rule should be limited to actions in the same case, not just the same courthouse or court docket | Rule applies to proceedings filed against the debtor in the same bankruptcy court (even in a related case) | Court did not reach merits, but accepted that the appeal cannot proceed; bankruptcy court’s interpretation stood for purposes of appeal resolution |
Key Cases Cited
- Prewitt v. North Coast Village, Ltd. (In re North Coast Village, Ltd.), 135 B.R. 641 (9th Cir. BAP 1992) (stay does not apply to proceedings against debtor in the bankruptcy court where debtor’s case is pending)
- Boucher v. Shaw, 572 F.3d 1087 (9th Cir. 2009) (automatic stay protects the debtor, not non-debtors or their property)
- Fondiller v. Robertson (In re Fondiller), 707 F.2d 441 (9th Cir. 1983) (prudential standing for bankruptcy appeals requires a party be directly and adversely affected pecuniarily)
- Griffin v. Wardrobe (In re Wardrobe), 559 F.3d 932 (9th Cir. 2009) (actions taken in violation of the automatic stay are void)
- Motor Vehicle Cas. Co. v. Thorpe Insulation Co. (In re Thorpe Insulation Co.), 677 F.3d 869 (9th Cir. 2012) (doctrine of equitable mootness where circumstances make unwinding an approved transaction inequitable)