Airport Business Center v. Alfahel (In re Alfahel)
- Summarized by David Treacy , U.S. Bankruptcy Court, Eastern District of Kentucky
- 1 year 9 months ago
- Case Type:
- Consumer
- Case Status:
- Affirmed
- Citation:
- No. 23-60026 (9th Circuit, May 20,2024) Not Published
- Tag(s):
-
- Ruling:
- The U.S. Court of Appeals for the Ninth Circuit held a bankruptcy court did not err in its application of the "two-dismissal rule" in Federal Rule of Civil Procedure 41(a)(1)(B) to a third motion to avoid a judicial lien under 11. U.S.C. § 522(f). While the rule applies to contested matters, it did not bar the debtors' motion under the facts presented. The bankruptcy court also did not err in rejecting the appellant/judgment creditor's argument that a note secured by a consensual lien included a usurious interest rate as the creditor lacked standing to assert usury as a defense.
- Procedural context:
- Before the Bankruptcy Appellate Panel, Appellant raised three issues: whether the bankruptcy court erred in (a) holding the "two-dismissal rule: inapplicable, (b) calculating the value of the disputed consensual lien on the property, including by allowing usurious interest, thereby undervaluing Debtors' equity in the property to which Appellant's judicial lien could attach, and (c) denying Appellant's laches defense. The BAP affirmed the bankruptcy court in all respects. In its subsequent appeal to the Ninth Circuit, Appellant did not pursue the laches argument.
- Facts:
- Debtors/Appellees Emad Aziz Masoud Alfahel and Lina Nadim Fahel, through counsel, filed a motion in the U.S. Bankruptcy Court for the Northern District of California to avoid the judicial lien of Appellant Airport Business Center under 11. U.S.C. § 522(f). At the same time, they filed motions to avoid three other judicial liens. Appellant objected to the relief requested. Debtors then withdrew all their motions. Several months later, through new counsel, Debtors re-filed the § 522(f) motions and two were granted without opposition. Appellant and another judgment creditor objected to the relief sought. Debtors' counsel then withdrew the remaining two motions. Yet again, through another new attorney, Debtors renewed the two § 522(f) motions. One was granted without opposition, but Appellant again opposed the relief. Debtors and Appellant agreed on the value of Debtors' residence and the exemption they claimed, and agreed to the existence of two notes and deeds of trust encumbering the property. The parties disagreed on the legitimacy of a third note and deed of trust, including its "usurious" interest rate. Appellant also contended the third § 522(f) motion to avoid its lien should be denied under the doctrine of laches and that Debtors should be barred by the "two-dismissal rule" in Federal Rule of Civil Procedure 41(a)(1)(B) (applicable to bankruptcy proceedings under Federal Rules of Bankruptcy Procedure 9014 and 7041) from filing a third motion to avoid Appellant's judicial lien. The bankruptcy court overruled the legal objections and granted the motion after an evidentiary hearing, thereby avoiding Appellant's lien in substantial part. Appellant appealed to the U.S. Bankruptcy Appellate Panel for the Ninth Circuit, which affirmed. Appellant filed a subsequent appeal to the Ninth Circuit.
- Judge(s):
- S.R. THOMAS, CALLAHAN, and SANCHEZ
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