Scott and De La Rosa v. Branch and Patterson (In re Patterson)

Case Type:
Case Status:
BAP No. SC-18-1110-LSF (9th Circuit, Apr 17,2019) Not Published
BAP for 9th Cir. affirmed ruling of bankruptcy court (SD Cal.) denying debtors' FRBP 7024/Rule 60(b) motion for reconsideration following bankruptcy court's denial of motion for sanctions for alleged violation of discharge injunction. Bankruptcy court did not abuse discretion in denying reconsideration. Debtors failed to establish elements of Rule 60(b) necessary to vacate prior ruling. Debtors did not contest that judgment at issue entered postpetition and thus was not discharged. Debtors other arguments weren't raised before bankruptcy court and were thus waived.
Procedural context:
Debtors moved for sanctions against creditor alleging violation of discharge injunction. Bankruptcy court (C.D. Cal.) denied motion. Debtors did not appeal order. Debtors moved for reconsideration. Bankruptcy court denied motion. Debtors appealed to BAP for 9th Cir.
In February 2014, Mr. Patterson offered to purchase Debtors’ real property in San Diego, California (the “Property”) for $449,000. Debtors accepted the offer, but the contract was not fully consummated. In April 2014, Mr. Patterson sued Debtors in San Diego County Superior Court for specific performance, breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief (the “Patterson Lawsuit”). In October 2014, Debtors filed a cross-complaint in the Patterson Lawsuit against Mr. Patterson, Debtors’ realtor, and the realtor’s colleague. Shortly thereafter, in November 2014, Debtors filed a chapter 13 petition. Debtors, through counsel, stipulated on the record to lifting the stay to: (1) permit Mr. Patterson to proceed with his motion to compel arbitration in state court; and (2) allow the arbitration to go forward. Shortly thereafter, the parties filed a stipulation for stay relief to allow the Patterson Lawsuit to proceed. The bankruptcy court approved the stipulation. In June 2015, Debtors converted their chapter 13 case to chapter 7. They were granted a discharge on December 31, 2016. Shortly after conversion, the state court ordered the Patterson Lawsuit – including Debtors’ cross-complaint – to binding arbitration; that arbitration took place in April 2016. On August 5, 2016, the state court entered a judgment of $80,132.39 ($72,060 in attorneys’ fees and $8,072.39 in costs) in Mr. Patterson’s favor and against Debtors (the “Patterson Judgment”). Of that amount, $16,209.80 was for attorneys’ fees and costs incurred prepetition. In the meantime, in January 2016, Debtors sued Patterson's attorney ("Mr. Branch"), alleging various torts. Mr. Branch sought and obtained dismissal of the claim, plus an award of fees and costs. Debtors filed a motion in the bankruptcy court seeking damages for Pattersons' attempts to collect allegedly discharged debts, specifically: (1) Mr. Branch’s motion for attorney’s fees and costs related to the Branch Lawsuit; and (2) the setting of the judgment debtor examination in the Patterson Lawsuit. They requested damages of: (1) $5,500 for the attorneys’ fees paid Mr. Hueso to represent them in the Branch Lawsuit; (2) $25,000 in punitive and exemplary damages; and (3) $125,000 for emotional distress and physical suffering directly related to Appellees’ actions.
Lafferty, Spraker, Faris

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