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Summarizing by Amir Shachmurove

Badea v. Schwartzer (In re Badea)

Case Type:
Case Status:
Affirmed in part and Reversed in part
BAP No. NV-18-1183-BKuTa (9th Circuit, Mar 05,2019) Not Published
Ninth Circuit BAP affirmed bankruptcy court order sanctioning chapter 7 debtor for suing chapter 7 trustee, without bankruptcy court approval, based upon the Barton doctrine, but reversed and remanded the portion of the decission awarding attorneys' fees.
Procedural context:
Trustee filed motion for sanctions based on violation of Barton doctrine. Bankruptcy court granted motion and debtor appealed.
Debtor, John Badea, was denied a chapter 7 discharge based upon, among other things, his fraudulent transfer of his condominium to his brother George shortly before the petition date. The trustee evetually recovered the condominium. During Trustee's efforts to sell the condominium, Badea filed a complaint against Trustee and Trustee's investigator in the Nevada state court on January 2, 2018 ("State Court Complaint"). Badea alleged that Trustee had taken the condominium by "fraud and deception," and that he had breached his fiduciary duty. Badea sought compensatory damages directly from Trustee (and his investigator), as well as punitive damages. Badea did not seek or obtain authority from the bankruptcy court prior to filing the State Court Complaint. Badea did not serve the State Court Complaint and summons on Trustee; rather, he handed Trustee a copy of the complaint during an unrelated hearing at the bankruptcy court. Later that same day, Trustee sent Badea a letter informing him of the Barton doctrine and demanding that he dismiss the State Court Complaint within five business days. If Badea refused to do so, Trustee would seek sanctions from the bankruptcy court. Badea did not dismiss the complaint. The Trustee sent a second letter to Badea demanding dismissal of the State Court Complaint. Trustee warned that if Badea did not file the dismissal by a date certain, he would move for an order to dismiss it and for sanctions of attorney's fees. The trustee filed a motion for sanctions, which was granted by the bankruptcy court. On appeal, the Ninth Circuit BAP affirmed, noting: “For nearly 140 years, the United States Supreme Court has barred suits against a court-appointed receiver in a non-appointing court for acts within the receiver's official capacity if brought without the appointing court's prior permission. Barton v. Barbour, 104 U.S. 126, 128 (1881). The Ninth Circuit has extended the Barton doctrine to bankruptcy trustees and their professionals.”
Brand, Kurtz, and Taylor

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