Jalonowski v. Jean (In re Jean)

Jalonowski v. Jean (In re Jean), 9th Cir. B.A.P., BAP No. NC-14-1198-KuPaJu (November 21, 2014) [Unpublished]
In an unpublished opinion, the 9th Circuit Bankruptcy Appellate Panel affirmed the bankruptcy court’s orders confirming the debtors chapter 13 plan and denying the appellants dismissal motion and objection to confirmation of debtor's plan. The appellants argued that debtors petition and plan were filed in bad faith but the bankruptcy court found, based on the totality of the circumstances, that debtor’s petition and plan were both filed in good faith.
Procedural context:
The appellants challenged debtor’s chapter 13 bankruptcy petition and his proposed plan, claiming that both the petition and the plan were filed in bad faith. The bankruptcy court found, that debtor’s petition and plan were both filed in good faith. The appellants timely appealed the bankruptcy court ruling.
In 2007, Jean purchased from the Jablonowskis a parcel of residential real property located in Glen Ellen, California, for $500,000. Jean paid $75,000 in cash and financed the balance by executing a $425,000 note in favor of the Jablonowskis. The note was secured by a first trust deed against the property. In 2011 and early 2012, Jean and the Jablonowskis engaged in negotiations for the potential payoff or restructuring of the loan. The Jablonowskis testified that both Jean and his father in law threatened that Jean would file bankruptcy if the Jablonowskis did not agree to the restructuring or payoff terms that Jean and his father in law were proposing. At some point, Jean stopped making his mortgage payments and negotiations between the parties broke down. The Jablonowskis thereafter filed a lawsuit in the Sonoma County Superior Court (Case No. SCV-251584) for breach of the promissory note, for judicial foreclosure, and for waste of the real property collateral securing the loan. The parties stipulated to a judgment entitling the Jablonowskis to foreclose, but the waste cause of action only was resolved by judgment after a jury trial. The jury found that Jean was liable for bad faith waste on two separate grounds. First, the jury found that Jean committed bad faith waste in the amount of $9,263.37 by failing to pay real property taxes on the property. Second, the jury found that Jean also committed bad faith waste by making unpermitted improvements to the property. the state court entered judgment in favor of the Jablonowskis and against Jean for $44,263.37 on the waste cause of action./p/ /p/ The Jablonowskis then sought to recover their fees and costs of roughly $130,000. After the state court issued a tentative ruling indicating that it would grant the Jablonowskis’ request for fees and costs but before entry of a final order granting the request, Jean commenced his chapter 13 bankruptcy case.
KURTZ, PAPPAS and JURY, Bankruptcy Judges

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