In re: RICHARD JAMES SWINTEK, Debtor. KAREN M. GOOD, Appellant, v. CHARLES W. DAFF, Chapter 7 Trustee, Appellee.
BAP No. CC-14-1569-KiTaKu
UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
December 18, 2015
Adv. No. 8:13-01106-TA; Bk. No. 8:10-22458-TA; Argued and Submitted on November 19, 2015, at Pasadena, California; Appeal from the United States Bankruptcy Court for the Central District of California; Honorable Theodor C. Albert, Bankruptcy Judge, Presiding
Before: KIRSCHER, TAYLOR and KURTZ, Bankruptcy Judges.
ORDERED PUBLISHED
O P I N I O N
Appearances:
KIRSCHER, Bankruptcy Judge:
Appellant and judgment creditor Karen Good appeals an order wherein the bankruptcy court determined that
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
A. Prepetition events
In 2001, two law firms obtained money judgments totaling approximately $300,000 against Richard J. Swintek, a former certified public accountant, for unpaid legal fees. In 2009, Good acquired the money judgments by assignment. She renewed the judgments in 2010 and began collection efforts.
On June 30, 2010, the state court issued an Application and Order for Appearance and Examination (“ORAP“) to Swintek pursuant to
In July 2010, Good instructed the Orange County Sheriff to levy upon several deposit accounts and certificates of deposit held in the name of Swintek and/or his wife. The sheriff took custody of approximately $67,000.
Swintek failed to appear for the ordered examination, resulting in the state court continuing it until October 14 and issuing a bench warrant for his arrest. Good claims she served Swintek with the new notice.
B. Postpetition events
Swintek filed a chapter 7 bankruptcy case on September 2, 2010. He identified Good as a secured creditor with an execution lien valued at $2,900, and he identified her as an unsecured creditor holding a claim for $310,000 for “attorney‘s fees.” Notably, Good is Swintek‘s only creditor. Trustee Charles W. Dаff was appointed to Swintek‘s case.
Trustee eventually acquired the $67,000 in levied funds. Good claimed all rights to them in her filed proof of claim. Thereafter, upon Swintek‘s motion under
1. Good‘s first adversary complaint
In 2013, Good filed an adversary complaint against Trustee seeking a determination on the priority of her lien and declaratory relief. Good alleged that upon serving Swintek with the ORAP, she obtained a lien (the “ORAP Lien“) on all of his personal property assets for one year under
In his motion to dismiss, Trustee argued that Good‘s ORAP Lien, issued on June 30, 2010, expired one year after the date of the order; thus, any lien created by service of the ORAP expired
on June 30, 2011. Trustee contended the one-year durational period in
Rejecting the “dictum” in Gbadebo that
Good filed an amended complaint against Trustee and the parties filed multiple motions for summary judgment. Good contended her ORAP Lien constituted an “enforcement” lien under California law and remained stayed by
Trustee contended that Good‘s ORAP Lien expired by its own terms on June 30, 2011, before her adversary complaint was filed, and that
“continuation” of a civil action, as
In ruling for Trustee, the bankruptcy court acknowledged that no appellate court within the Ninth Circuit has addressed the issue of whether
Good timely appealed.
II. JURISDICTION
The bankruptcy court had jurisdiction under
III. ISSUE
Did the bankruptcy court err in determining that
IV. STANDARD OF REVIEW
We review the bankruptcy court‘s legal conclusions, including
its interpretation of the Code, de novo. Sachan v. Huh (In re Huh), 506 B.R. 257, 262 (9th Cir. BAP 2014)(en banc). Likewise, we review the bankruptcy court‘s order granting summary judgment de novo. Centre Ins. Co. v. SNTL Corp. (In re SNTL Corp.), 380 B.R. 204, 211 (9th Cir. BAP 2007).
V. DISCUSSION
Trustee disputes and Good contends she held a valid ORAP lien against Swintek at the time he filed his bankruptcy case. This contention may involve a factual matter the bankruptcy court will have to determine on remand. If valid, then it is undisputed the one-year expiration period under
A. CCP § 708.110 and 708.120
In 1982, California enacted a comprehensive Enforcement of Judgments Law governing the enforcement of all civil judgments in California.
Under
property.
An ORAP lien exists from the date the order to appear is served and is effective for one year unless extended or sooner terminated by the court.
B. Section 108(c)
Section 108(c) provides that “if applicable nonbankruptcy law . . . fixes a period for commencing or continuing a civil action in a court other than a bankruptcy court on a claim against the
debtor, . . . and such period has not expired before the datе of the filing of the petition, then such period does not expire until . . . 30 days after notice of the termination or expiration of the stay under section 362 . . . .” The “applicable nonbankruptcy law” at issue here is
C. The bankruptcy court erred in determining that the one-year expiration period for an ORAP lien is not tolled by § 108(c).
1. Preliminary matters
Before we begin our analysis, we make two preliminary observations. We conclude that
Second, the appeal is not moot based on Swintek‘s discharge. Even though Swintek received a discharge in October 2012, which effectively terminated the automatic stay as to him, the stay is still in effect here because funds remain in the bankruptcy
estate, which Trustee has not abandoned.
2. The bankruptcy court cases addressing this issue are split; the Ninth Circuit and BAP cases cited by the parties do not resolve it.
Two California bankruptcy courts have addressed the precise issue before us, but unfortunately neithеr court provided an extensive analysis. They also reached different conclusions. In Franchise Pictures LLC, the creditor obtained an ORAP lien in March 2004; the debtor filed its bankruptcy case in August 2004, before the lien had expired. 389 B.R. at 137. The debtor argued that the creditor‘s ORAP lien had expired in March 2005, while the bankruptcy case was pending, and was therefore invalid. Id. at 140. The issue involved whether the one-year duration of the ORAP lien was tolled or extended under
This section generally applies “to time periods within which a creditor must bring an action to enforce a lien before the lien expires. It also applies to the time period to renew a judgment to maintain its enforceability.” Collier on Bankr., ¶ 108.04[2] (Alan N. Resnick & Henry J. Sommer, eds.-in-chief, 15th ed. rev. 2007)(footnotes omitted).3
The bankruptcy court in Gbadebo provided far less analysis on the issue. There, a creditor had objected to the debtor‘s chapter 11 plan which classified the creditor‘s claim as unsecured. 431
B.R. at 225. The creditor argued he held a secured claim against the debtor‘s personal property by virtue of an ORAP lien obtained prior to the bankruptcy filing. Id. The bankruptcy court held that the creditor‘s objection may have had merit when it was first asserted, but the one-year ORAP lien had since expired. Id. at 226. To support its decision, the Gbadebo court stated in a footnote: “The Court does not read
Good argues that Burns and Hilde, while not addressing the precise issue before us, have implicitly and necessarily held that an ORAP lien is tolled by
In Hilde, the issue was whether or not an ORAP lien requires perfection. The Ninth Circuit, in reversing the Panel‘s decision, held that it does not. 120 F.3d at 953-54. In the Panel‘s
reversed decision, the issue of tolling under
3. Spirtos controls this issue.
We conclude that Spirtos, a 2000 Ninth Circuit decision not raised by the parties, resolves the issue before us. There, the wife of the deceased debtor argued that the creditor‘s judgment lien was void under the California statute of duration in
After reviewing the statutory language of
On its face, section 108(c) appears to cover our
situation. The California statute of duration is a nonbankruptcy law that applies to the Moreno judgment. The statute fixes a ten-year period during which Moreno had to keep the judgment from expiring by filing for renewal. Under section 108(c), then, the limitations period does not expire until 30 days after the end of the automatic stay.
Id. at 1080-81. See also Morton v. Nat‘l Bank of N.Y.C. (In re Morton), 866 F.2d 561, 566 (2d. Cir. 1989)(holding same regarding ten-year duration period to renew judgment liens in New York).
The Spirtos court also rejected the wife‘s argument that the creditor could not avail herself of
Although Spirtos did not specifically address an ORAP lien under
In reaching its decision, the bankruptcy court focused on the phrase in
[T]o find that
11 U.S.C. § 108(c) tolls thе time a judgment creditor has to renew an ORAP lien seems to require that a mere request to “extend” (as expressly stated inCCP § 708.110 ) the life of an ORAP lien be deemed the equivalent to the “commencement” or “continuation” of a civil action, an analogy which some may find conceptually hard to swallow, particularly when one considers that it is the service of the ORAP is what creates the initial lien.
32 Cal. Bankr. J. 473, 476 (2013)(emphasis in originаl). Not surprisingly, Trustee focuses on the same phrase in
The Spirtos court did not analyze whether renewing a judgment lien under
Lien on his nonexempt personal property.
Trustee contends that because only service is needed to create an ORAP lien, it is not a “commencement” or a “continuation” of a civil action. Trustee overlooks the fact that while an ORAP lien is created by proper service, obtaining an ORAP itself is not just some random, unconnected act.
An ORAP is a means by which а judgment creditor can examine the judgment debtor to discover property and apply it toward the satisfaction of the original money judgment. Imperial Bank v. Pim Elec., Inc., 33 Cal. App. 4th 540, 546-47 (1995). A judgment debtor‘s examination is a “supplemental proceeding attendant to the [original] case.” United States v. Feldman, 324 F. Supp. 2d 1112, 1117 (C.D. Cal. 2004). Even though the initial civil action may be complete, an application for an ORAP is generally filed in the same court where the original money judgment was entered.
Moreover, although proper service is all that is necessary to obtain an ORAP lien initially, court intervention is required to extend it. A party generally files a noticed motion in the initial civil action requesting the extension, which the judge considers and grants or denies. Sеe Bank of Montreal v. SK Foods,
LLC, Case No. 11-80133, Dkt. Nos. 84 & 89 (N.D. Cal. 2013)(Notice of Motion and Motion to Extend Duration of ORAP Lien and Order). Thus, the renewal of an ORAP lien is clearly a “continuation” of the initial civil action, if not a “commencement” of an action within the initial civil action.
Accordingly, we hold that
VI. CONCLUSION
For the foregoing reasons, we VACATE and REMAND.
KIRSCHER, TAYLOR and KURTZ
Bankruptcy Judges