In re: JILL SUZANN MEDLEY

Case Type:
Consumer
Case Status:
Affirmed
Citation:
22-1167 (9th Circuit, Feb 13,2023) Not Published
Tag(s):
Ruling:
The U.S. Bankruptcy Appellate Panel of the Ninth Circuit (BAP) affirmed the oral and written rulings of the U.S. Bankruptcy Court for the Central District of California (BC) determining that Precision Business Consulting LLC (Precision) had violated the automatic stay in its attempts to collect a real estate commission claimed by a chapter 13 debtor, Jill S. Medley (DR), thus rejecting Precision's claim that it was a factor that owned that right (as well as, paradoxically, a creditor), and assessing $20,000 in sanctions to cover the DR's attorneys' fees in part.
Procedural context:
In the midst of litigation over the parties' entitlement to a commission owed to the DR upon the purchase of a house she, a licensed real estate broker, had listed, Precision launched an effort to obtain that selfsame property interest. Specifically, James Cooper (Cooper), CEO of Precision, demanded payment from the DR; Sun O. Park (Park), the house's record owner; the escrow agent for Park's original sale; and sellers of other properties that the DR had listed for sale. Neither Cooper nor Precision ever sought or obtained relief from the automatic stay. After her case's dismissal and the sale's closing, the DR filed a motion for an order to show cause why Precision should not be held in contempt for violating the automatic stay, A hearing on this motion, yet other filings, a pretrial hearing, and an evidentiary hearing followed. At the last of these, only Cooper and the DR testified, in preparation for which the DR timely--and Precision untimely--filed trial briefs. Rejecting Precision's description of itself as a "factor," and citing to Precision's judicial admissions that it was a creditor in both its filings and Cooper's testimony ("we state for a matter of record that I'm a secured creditor"), the BC decided the dispute as a contested matter. In substance, it found the transaction at issue to be a disguised financing agreement and Precision to be a secured creditor that willfully violated the stay despite notice of the DR's bankruptcy. It ultimately awarded the sum of $20,000, despite a stated desire to assess a larger sanction, because the order to show cause had sought only that amount. Precision timely appealed.
Facts:
A failed attempt to sell a single house: that was where it all started, where it all went wrong. A licensed real estate broker, the DR listed a property located in Lake Elsinore, California, and owned by Park (Property) for sale. In March 2019, Park accepted an offer for the Property. Roughly a month later, the DR entered into several agreements with Precision. As part of these accords, the DR assigned a portion of her anticipated commission ($46,753) to Precision, and Precision agreed to provide the DR with an immediate advance of $35,070 and another $7,010 upon receipt of the commission. These contracts referred to Precision as the assignee and the purchaser of this interest; created a security interest in all of the DR's commissions, not just the one for the Property; obliged the DR to assign replacement commissions to Precision if the March 2019 sale did not close; and left the DR fully liable in case a settlement fails to occur pursuant to the then pending purchase contract. As further collateral, the DR let Precision hold the deed to her house. Soon after these documents' execution, the DR called the sale off, Park having apparently changed her mind. On the heels of that seminal event came the bankruptcy. A day after the DR withdrew the sale listing, she filed a chapter 13 petition. Though the DR did not list Precision as a creditor, she listed an affiliate business as holding a claim and included that business on the requisite mailing list. Notably, Cooper worked for that connected business, whose address was the same as Precision's. Precision subsequently filed a proof of claim, signed by Cooper as the creditor. The DR objected, contending that Precision's claim was a general unsecured claim. She then revealed that she had relisted the Property--and anticipated a commission of $75,000 or so within a month. In its response, Precision characterized itself as both "a factoring company," a type of entity that it insisted di not loan money but did become immediately entitled to its portion of the commission upon the DR's procurement of a buyer post-petition, and a creditor whose purchase of the receivables was secured by a UCC filing. Subsequent to Precision's post-petition collection efforts (see above), the BC dismissed the DR's case, the sale of the Property finally closed, and the DR kept the commission entirely to herself.
Judge(s):
Robert J. Faris; William J. Lafferty III; and Frederick P. Corbit

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