The following is a case update prepared by John W. Kim at Brower Law Group, APC analyzing a recent case of interest:
In People’s Bail Bonds v. Dobos (In re Dobos), 830 F. App’x 928 (9th Cir. 2020) (unpublished), the United States Court of Appeals for the Ninth Circuit agreed with the Ninth Circuit Bankruptcy Appellate Panel’s affirmance of a bankruptcy court’s order dismissing a plaintiffs’ adversary complaint. In a decision focused on timeliness and procedural compliance, the lower courts’ decisions were affirmed because the plaintiffs’ opposition to a motion to dismiss was time barred under the local bankruptcy rules when the opposition was filed the day before the noticed hearing, and not 14 days prior to the hearing. To read the full decision, click here.
On January 11, 2007, People’s Bail Bonds and Harry Kassabian (the “Judgment Creditors”) obtained a prepetition state-court judgment against the individual debtor Agneta Dobos. On October 25, 2013, more than six years after the California state court judgment was entered, the debtor filed for bankruptcy under Chapter 7. The debtor scheduled the Judgment Creditors with a secured debt totaling $52,437.98. In the underlying bankruptcy, the debtor obtained an order avoiding the Judgment Creditors’ lien on her residence under Title 11 of the United States Code, Section 522(f). The Judgment Creditors were served but did not oppose the Motion to Avoid Lien. The debtor received her discharge on February 3, 2014, and the bankruptcy court closed her case.
On September 1, 2015, Judgment Creditor Mr. Kassabian filed a motion to reopen the debtor’s bankruptcy case, claiming that he was not served with the notice of bankruptcy or any motions relating to the lien. The Judgment Creditors waited more than two years to prosecute the motion to reopen the bankruptcy case. On January 2, 2018, the Judgment Creditors filed an adversary complaint seeking to declare the judgment debt nondischargeable. On March 19, 2018, the bankruptcy court granted the motion to reopen, to which the debtor had not responded.
In the interim, prior to 2018, the judgment lien expired pursuant to state law as it was not tolled beyond the 10-year period pursuant to California Code of Civil Procedure section 683.020.
The debtor filed a motion to dismiss the adversary proceeding complaint after an answer was filed. The bankruptcy court dismissed the Judgment Creditors’ complaint pursuant to Local Bankruptcy Rule 9013-1(h). The rule permits the bankruptcy court to decline to consider an untimely opposition and grant a motion when an opposition or response is not timely filed. Instead of filing an opposition at least 14 calendar days before the scheduled hearing on the motion to dismiss, the Judgment Creditors filed an opposition the day before the hearing without “explaining the delay” or obtaining an order to file a late opposition.
Judgment Creditors appealed the bankruptcy court’s order dismissing the adversary complaint to the BAP. Judgment Creditors argued, among other things, that they did not have notice of the debtor’s bankruptcy petition or the avoidance of their judgment lien but timely filed their complaint as soon as they became aware of the debtor’s bankruptcy case. They also contended that the bankruptcy court should have construed the debtor’s motion to dismiss as a motion for summary judgment. The BAP affirmed the bankruptcy court’s decision, agreeing with the debtor that the Judgment Creditors’ judgment had expired, so they could no longer enforce the judgment. Therefore, the bankruptcy court was correct to dismiss their nondischargeability complaint. The automatic stay did not toll since the judgment expired sometime in 2017, before the filing of the adversary complaint. Even if the debtor’s filing of her bankruptcy case tolled the expiration of the judgment, it would make no difference since the tolling period was not long enough to post-date the filing of the 2018 adversary proceeding.
Judgment Creditors appealed the BAP’s order, which was affirmed by the Ninth Circuit due to lack of a timely opposition to the motion to dismiss under local bankruptcy rules and the expiration of the state court judgment under California law.
The Court of Appeals found the Judgment Creditors’ procedural delays in opposing the motion to dismiss and lack of timely prosecution of the state court judgment to be sufficient reasons to affirm the decision by the BAP (and the bankruptcy court) granting the motion to dismiss. Creditors seeking to enforce an avoided lien need to ensure that the judgment did not otherwise expire during litigation or appeal. In this case, a judgment creditor whose lien had been avoided filed a motion to reopen the debtor’s bankruptcy case but then failed to take further action for two years. In the meantime, the judgment expired under state law and the expiration was not tolled based on the automatic stay. Even if the automatic stay tolled the expiration, the period of time from tolling was not long enough to warrant a renewal of the judgment. Additionally, a motion to dismiss filed after an answer was filed was proper under Fed. R. Civ. Proc. 12(c) or (h)(2). Finally, the Court commented that the Judgment Creditors did not provide any reason for the delay in prosecuting the claim after re-opening the case and also waiting until the day before the hearing on the motion to dismiss to file an opposition. The delay in filing a timely opposition proved to be procedurally fatal.
For practitioners, this is a great, short summary of the reminders to be proactive with compliance with procedural rules and avoiding unnecessary (or unjustified) delays. Not only should judgment creditors continue to be cognizant of time frames to renew the judgment under California law, but of equal importance is complying with procedural rules relating to filings and being respectful of the Court’s time and resources. This seems especially true for bankruptcy practitioners who operate under rules of equity more than rules of law.
These materials were written by John W. Kim at Brower Law Group, APC located in Laguna Hills, California. Editorial contributions were provided by Meredith King of Higgs Fletcher Mack.