Case Type:
Case Status:
CC-22-1167-FLC (BAP) (9th Circuit, Feb 13,2023) Not Published
Bankruptcy court did not err in concluding that creditor was a secured creditor and that its attempts to collect a real estate commission claimed by chapter 13 debtor violated the automatic stay.
Procedural context:
Appeal from the U.S. Bankruptcy Court for the Central District of California; reviewed de novo (for determination of stay violation) and for abuse of discretion (for imposition of contempt sanctions).
Debtor, a licensed real estate broker, entered into agreements with Creditor under which Debtor assigned a portion of an anticipated commission to Creditor in exchange for an "advance" of funds and a grant of a security interest in all of Debtor's commissions. After the sale anticipated to result in the commission failed to close, Debtor filed a chapter 13 petition. Debtor did not list Creditor on her schedules or creditor mailing listed but did list an affiliated business. Creditor filed a proof of claim and contended that it held a secured claim. Debtor objected, contending that debt was properly a general unsecured claim. Subsequently, Debtor relisted the property and disclosed that she anticipated receiving a commission from that property. In response to Debtor's objection, Creditor claimed that it was a factoring company and had in fact purchased the assigned portion of Debtor's commission. Thus, Creditor alleged that the assigned portion of the commission was not part of the bankruptcy estate. Creditor also made demands on Debtor and others to obtain payment of the commission from the new sale without obtaining stay relief. The bankruptcy court dismissed Debtor's chapter 13 case; thereafter, the sale of the property closed, and Debtor retained the commission for herself. Debtor filed a motion for an order to show cause why Creditor should not be held in contempt for violation of the automatic stay. Creditor opposed the motion, arguing that it was a factor rather than a lender that was acting only to protect its own asset, which it had purchased prepetition. The bankruptcy court granted the motion. Creditor repeated its earlier arguments in response to the order to show cause. Debtor argued that Creditor was a secured creditor rather than a buyer of the commission. After an evidentiary hearing, the bankruptcy court determined that Creditor had received actual notice of Debtor's bankruptcy filing and rejected Creditor's position that it was a factor rather than a secured creditor. The bankruptcy court concluded that Creditor willfully violated the automatic stay when Creditor made demands on Debtor. The bankruptcy court further found that Creditor did not have a good-faith belief and that it should be sanctioned in the amount of $20,000.
Faris, Lafferty, Corbit

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