Park v. Laski (In re Holy Hill Community Church)

BAP No. CC-15-1270-TaKuF (BAP 9th Cir. Mar. 7, 2016) (unpublished)
The BAP for the 9th Circuit affirmed in part, and reversed and remanded in part, the ruling of the bankruptcy court (C.D. Cal.), affirming the bankruptcy court's finding of a willful violation of the automatic stay, and affirming the bankruptcy court's awarding of costs under Rule 7054(b), but reversing the bankruptcy court's inclusion of electronic research costs in the costs award. The BAP found the bankruptcy court's finding of willful violation of stay was adequately supported by the factual record, rejecting creditor's arguments that being a non-attorney, she did not understand the restrictions of the automatic stay, and rejecting the creditor's arguments that the trustee had directed her to violate the automatic stay. The BAP also agreed that sanctions for willful violation of the stay against a corporate debtor were appropriate under 11 USC 105. But, because the bankruptcy court limited its sanction to costs under R. 7054(b), the taxing of costs was limited to items set forth by 28 USC 1920, local rules, and the local "Court Manual," which did not allow for recovery of costs for electronic research. Because the bulk of the costs awarded ($10,990 of total costs of $11,858) were for electronic research, the BAP struck the award of these costs, plus an additional $354 in reduced costs incorrectly included notwithstanding the trustee's corrected affidavit, and remanded for entry of costs in the amount of $385.41.
Procedural context:
Creditor commenced post-petition action against debtor in state court without relief from stay. Chapter 11 trustee removed the action to the bankruptcy court, and bankruptcy court dismissed action with prejudice. Trustee moved for costs and sanctions for willful violation of stay, and bankruptcy court granted motion. Creditor appealed to BAP for 9th Circuit.
Pre-petition, chapter 11 debtor - a Presbyterian church - owned valuable real property in Los Angeles, CA. Internal discord between the church leadership, its membership, and its governing organization led to pre-petition litigation in state court. Debtor commenced a chapter 11 case, and the court appointed a chapter 11 trustee. Three months after the bankruptcy filing, Park commenced a state court action against the debtor and others to quiet title in the valuable real property. Park alleged that she held title pursuant to a quit claim deed. Park did not seek relief from stay. After learning of the action, the trustee repeatedly advised Park that her action violated the automatic stay, and she risked sanctions for pursuing it. The state court then found the quit claim deed to be invalid. The trustee removed the state court action to bankruptcy court, then sought and obtained dismissal under Rule 12(b)(6) based on the state court's finding that the quit claim deed was invalid. Park appealed, but the trustee subsequently sold the property pursuant to 11 USC 363, and the BAP found the appeal to be mooted by the sale. The trustee then filed motion for civil contempt citation against Park, seeking an award of costs as the prevailing party in the adversary under Rule 7054(b).
Taylor, Kurtz, Faris

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