Licursi et al v. California Bank & Trust

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UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
SAN FERNANDO VALLEY DIVISION
In re:
John Michael Licursi
Susan Annette Licursi
Debtor(s).
Case No.: 1:10-bk-26168-GM
Adv No: 1:13-ap-01248-GM
Chapter 11
MEMORANDUM OF OPINION REGARDING
DEFENDANT’S MOTION TO DISMISS
PLAINTIFF’S COMPLAINT PURSUANT TO
FEDERAL RULE OF BANKRUPTCY
PROCEDURE 7012 [DOCKET NUMBER 9]
John Michael Licursi, Susan Annette
Licursi
Plaintiff(s),
v.
California Bank & Trust
Defendant(s).
Date: January 14, 2014
Time: 10:00 a.m.
Courtroom: 303
California Bank and Trust (CB&T) seeks an order dismissing this adversary
complaint. Debtors/Plaintiffs oppose dismissal. The matter came on for hearing on
January 14, 2014. Based on the moving and responding papers, the pleadings herein,
and matter contained within the Court record on the underlying bankruptcy case, the
Court sets forth its findings of fact and conclusions of law in this memorandum. The
Court takes judicial notice of the timeline set forth below, some of which facts are
delineated in this memorandum.
FILED & ENTERED
JAN 17 2014
CLERK U.S. BANKRUPTCY COURT
Central District of California
BY DEPUTY CLERK	Williams
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This complaint seeks injunctive relief, declaratory relief, and sanctions for
violation of the automatic stay. The gravamen of the action is that California Bank and
Trust continued to prosecute Superior Court case BC438702 (herein "case 1") and filed
Superior Court case BC524292 (herein "case 2") in violation of the automatic stay.
Case 1 is against Spectrum Glass & Aluminum, Inc. ("Spectrum Aluminum") and the
Licursis and was pending at the time that the bankruptcy of the Licursis was filed. The
complaint asserts that after the Notice of Stay, CB&T requested entry of default
judgment, filed liens against the Debtors' property, and sought post-judgment
examinations. Each time CB&T cancelled the judgment debtor examinations.
In October 2013 CB&T filed case 2 against Spectrum Glass & Mirror ("Spectrum
Mirror"), seeking the stock which is property of this estate and the source of the Debtors'
earnings.
The bankruptcy was filed on December 28. 2010, notice was given, and CB&T
filed a notice of stay in the case 1 on January 4, 2011. On January 18, 2011, CB&T
filed a request to dismiss case 1 (only against Does 1-30) On that same day a default
judgment was entered against Spectrum Aluminum and John and Susan Licursi. Two
abstracts of judgment were issued - one on January 31, 2011 and one on February 4,
2011. On February 23, 2011 a notice of stay was filed in case 1 by the Licursis. The
status conference in case 1 was continued from time to time due to the bankruptcy and
on September 14, 2011 CB&T requested dismissal of case 1 without prejudice , which
was granted on September 15, 2011. On April 10, 2012 CB&T filed for a partial
dismissal with prejudice as to the Licursis, which seems to have been granted that
same day.
On January 12, 2012 CB&T requested an order for a judgment debtor
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examination (ORAP) of John Licursi as owner of Spectrum Aluminum. This was
vacated on April 9, 2012. On July 26, 2012 CB&T filed for an ORAP of John Licursi as
a third party, which was withdrawn on September 12, 2012. There was a final ORAP
sought on September 27, 2012 as to Susan Marshall, CEO of Spectrum Mirror, which
went off calendar. [The Court notes that the bankruptcy petition shows that Susan
Licursi is or was known as Susan Marshall.]
Case 2 was filed on October 10, 2013. Spectrum Glass & Mirror, Inc. is the only
defendant in that case. Debtors' counsel demanded that it be dismissed, but CB&T has
refused.
Motion to Dismiss
The basis of this motion is that the automatic stay which protects the individual
Debtors does not apply to the corporation of which the Debtors are the sole
shareholders. Default was entered in case 1 on July 28, 2010 and the request for
default/judgment was actually received by the Superior Court on August 11, 2010, some
four months before the bankruptcy was filed. The Superior Court did not act on this and
on January 14, 2010 CB&T sent a new proposed judgment to the court, seeking
judgment only as to Spectrum Aluminum and not as to the Licursis. The judgment that
was entered was only against Spectrum Aluminum and in September 2011 the claims
against the Licursis were dismissed. The judgment debtor examinations were against
the officers and directors of Spectrum Aluminum, who happen to be the Debtors.
Likewise, the complaint against Spectrum Mirror as the successor to Spectrum
Aluminum is also as to a third party and not the Debtors.
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Opposition
First the opposition restates the factual allegations of the complaint. It notes that
the post-judgment examinations were as to the Debtors, but they were identified as
"owner," "third party," or "CEO." Opposing these "malicious attacks" diverted time and
money from the Debtors. CB&T withdrew the first two examination orders after the
Debtors fought them. The third was quashed by the Superior Court because all
defendants had been dismissed in case 1.
Case 2 was brought when Debtors were without counsel. Although naming only
Spectrum Mirror, a corporation can only act through individuals and the causes of action
are premised on Spectrum Mirror being an alter ego of Spectrum Aluminum. The
Debtors argue that the Court "must determine whom CB&T will identify as the 'Does' in
case 2 before this Court can render a decision dismissing Debtor's Complaint." The
only agents of Spectrum Mirror are the Debtors.
The Debtors theorize that because of the dismissal of case 1, CB&T's unsecured
claim against the Debtors is at risk But if there is a finding of fraud in the state court
action against Spectrum Mirror's agents (who are the Debtors), then the CB&T claim
against the Debtors would be converted into an unsecured claim.
As to the claim and delivery assertion, had CB&T been allowed to go forward, it
would have seized the property on which the Debtor's reorganization is based.
The Debtors then recount the creation of Spectrum Aluminum and assert that the
sale price of the assets to Spectrum Mirror was based on a third-party appraisal at
forced auction value rather than at liquidation value. They describe the two businesses
as different and the ownership as different.
Legally the dismissal of the entire action in case 1 was a final judgment and
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nullified the default of July 28, 2010 and default judgment of January 18, 2011.
Nonetheless, CB&T tried three times to conduct judgment debtor examinations. Even
though the notice of bankruptcy filed January 4, 2011 stayed all collection actions
against Debtors, CB&T continued to prosecute case 1 by submitting declarations in
support of a default judgment and actually obtaining a default judgment against the
Licursis and Spectrum Aluminum. This was a violation of the automatic stay, as were
the later ORAPs. CB&T was told of this, but they even threatened contempt if the
Debtors did not appear to be examined. Other acts of intimidation are described.
Because there was a willful violation of the stay, Debtors are entitled to damages
under 11 USC §363(k). Section 105 also allows a sanction for civil contempt. CB&T
knew of the stay and its actions that violated it were intentional.
Debtors then do an analysis of each claim for relief.
Reply
The Debtors erroneously believe that CB&T violated the automatic stay. CB&T
then restated the reasons and theories set forth in the motion. Rediger Invs. Corp. v. H.
Granados Communs,, Inc. 2013 Bankr. LEXIS 5401 (BAP 9th Cir. Dec. 24, 2013) does
not support the Debtor's contention since that case deals with action against the debtor
and not a third party. CB&T took no action against the Debtors, but only sought post-
petition discovery as to Spectrum Mirror, which is a non-debtor entity.
Analysis
Although most of the facts set forth in the Complaint are supported by the
evidence, there are some assertions which are incorrect. For example, the judgment in
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case 1 of January 18, 2011, attached to the complaint as Bates stamped 122, is solely
against Spectrum Aluminum. While CB&T originally had sought default judgment
against all defendants, that was done prepetition and CB&T never obtained a judgment
against the Licursis and did not seek one after the bankruptcy case was filed.
Chugach Timber Corp. v. Northern Stevedoring & Handling Corp. (In re Chugach
Forest Products), 23 F.3d 241 (9th Cir. 1994) makes it clear that the automatic stay does
not stay actions against anyone who has not, itself, filed bankruptcy. While the stay may
apply when there is a unity of interest between the Debtor and the third party, the Ninth
Circuit has not determined that this is the rule. But even if it is, when the obligations of
the non-Debtor are not derivative of those of the Debtor in bankruptcy, the automatic
stay simply does not apply to proceeding against the non-Debtor. Id. at 246, citing to
O'Malley Lumber Co. v. Lockard (In re Lockard), 884 F.2d 1171, 1179 (9th Cir. 1989).
And in the cases (in other circuits) where it has been applied, there was an injunction
granted by the bankruptcy court, not just an "automatic" stay.
While the stock in Spectrum Aluminum and Spectrum Mirror is property of the
estate and cannot be levied on without relief from the stay, property of those entities is
not covered by the automatic stay. Further, the examination of the Debtors as officers
and directors of Spectrum Aluminum is not a violation of the stay. Groner v. Miller (In re
Miller), 262 B.R. 499 (9th Cir. BAP 2001).
Further, Spectrum Aluminum appears to be independently liable to CB&T.
Looking at the exhibits attached to the removed complaint against Spectrum Mirror
(1:13-ap-01251-GM), the Court finds that the original borrower was Spectrum
Aluminum, which also signed a Commercial Security Agreement (Bates stamp 150 to
the complaint in 1:13-ap-01248-GM). Therefore, to the extent that Spectrum Aluminum
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was independently liable to CB&T, there is no automatic stay.
Similarly, the complaint against Spectrum Mirror seeks no liability of the Licursis.
No automatic stay exists as to this either.
To the extent that this complaint seeks an injunction because the Licursis are
dependent on the income from Spectrum Mirror, they have not set forth sufficient
grounds.
In summary, the automatic stay is simply not as broad as the Debtors would like
to make it. Under their theory, if one owns stock in a corporation, the benefit of the
automatic stay applies to that corporation, but the corporation has none of the
responsibilities of a debtor, none of the burdens, and can go on its merry way without
court supervision. This simply is not the law.
Grant the motion to dismiss the complaint with prejudice.
The Court will also remand the complaint against Spectrum Mirror.
###
Date: January 17, 2014
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TIMETABLE OF EVENTS
Date Action source
5/28/2010 CB&T filed case 1 - LASC BC438702 complaint ex. A
7/28/2010 Default entered as to Spectrum
Aluminum, John Licursi and Susan
Licursi
complaint ex. A
8/11/2010 CB&T sent request for default
judgment to the LASC - as to Spectrum
Aluminum, John Licursi and Susan
Licursi
CB&T request for
judicial notice ex.
1
10/26/2010 OSC re: default judgment; hearing
continued
complaint ex. A
12/28/2010 Licursis filed chapter 11
1/4/2011 CB&T filed a notice of stay in case 1 complaint ex. A
1/14/2011 OSC re: default judgment as to
individual defendants - discharged
complaint ex. A
1/14/2011 Proposed judgment sent to superior
court as to Spectrum Aluminum
Complaint ex. K
1/18/2011 CB&T requested dismissal for Does 1-
30
complaint ex. A
1/18/2011 Default judgment entered as to
Spectrum Aluminum
complaint ex. K
1/26/2011 Abstract of judgment requested as to
Spectrum Aluminum - abstract #1
complaint ex. C
1/31/2011 Abstract of Judgment issued as to
Spectrum Aluminum - abstract #1
complaint ex. C
2/1/2011 Abstract of judgment requested as to
Spectrum Aluminum - abstract #2
complaint ex. C
2/3/2011 Abstract of judgment recorded -
abstract #1
complaint ex. C
2/4/2011 Abstract of Judgment issued as to
Spectrum Aluminum - abstract #2
complaint ex. C
2/8/2011 Abstract of judgment recorded -
Abstract #2
dec. of Susan
Licursi ex. 6
2/23/2011 Notice of Stay filed by Defendants complaint ex. A
9/14/2011 CB&T filed request for dismissal of
entire action without prejudice
complaint ex. F
9/15/2011 Dismissal of entire action granted
without prejudice
complaint ex. F
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Date Action source
1/12/2012 CB&T filed for ORAP of John Licursi as
owner of Spectrum Aluminum
complaint ex. A,
D
4/9/2012 CB&T vacates 4/16/12 ORAP of John
Licursi
complaint ex. G
4/9/2012 Spectrum Aluminum filed motion to
quash ORAP
complaint ex. F
4/10/2012 CB&T filed partial dismissal with
prejudice of John Licursi and Susan
Licursi. This seems to have been
granted that same day.
complaint ex. A
4/16/2012 ORAP off calendar complaint ex. A
4/24/2012 CB&T filed for ORAP (possibly not
served)
complaint ex. A
7/20/2012 ORAP off calendar complaint ex. A
7/26/2012 CB&T filed for ORAP of John Licursi 3rd
Party
complaint ex. A,
H
9/5/2012 Spectrum Aluminum filed motion to
quash ORAP
complaint ex. I
9/12/2012 CB&T filed notice of withdrawal of
application for ORAP
complaint ex. A
9/21/2012 ORAP off calendar complaint ex. A
9/27/2012 CB&T filed for ORAP of Susan Marshall,
CEO of Spectrum Mirror
complaint ex. A,
K
11/1/2012 Spectrum Aluminum filed motion to
quash ORAP
dec. of Susan
Licursi ex. 11
11/8/2012 ORAP off calendar complaint ex. A
12/12/2012 CB&T withdrawal of ORAP of John
Licursi
complaint ex. J
10/11/2013 CB&T filed complaint against Spectrum
Mirror in LASC - BC524292
10/11/2013 CB&T filed case 2 - LASC BC524292
against Spectrum Mirror and Does 1-60
complaint ex. O
11/15/2013 Licursis filed adversary 13-01248
11/16/2013 Licursis filed notice of removal of
BC524292 as related case to adv. 13-
01248, which becomes 13-01251
11/18/2013 Licursis filed Motion for TRO and OSC
re Preliminary Injunction in adversary
13-01248
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This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.
June 2012 F 9021-1.1.NOTICE.ENTERED.ORDER
NOTICE OF ENTERED ORDER AND SERVICE LIST
Notice is given by the court that a judgment or order entitled (specify): _ MEMORANDUM OF
OPINION REGARDING DEFENDANT’S MOTION TO DISMISS PLAINTIFF’S
COMPLAINT PURSUANT TO FEDERAL RULE OF BANKRUPTCY PROCEDURE
7012 [DOCKET NUMBER 9]
______________________
was entered on the date indicated as AEntered@ on the first page of this judgment or order and will be
served in the manner stated below:
1. SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF) B Pursuant to controlling
General Orders and LBRs, the foregoing document was served on the following persons by the court via
NEF and hyperlink to the judgment or order. As of (date)________________, the following persons are
currently on the Electronic Mail Notice List for this bankruptcy case or adversary proceeding to receive
NEF transmission at the email addresses stated below.
PLAINTIFF’S COUNSEL - Catherine Christiansen christiansenlaw@yahoo.com
DEFENDANT’S COUNSEL - Anthony J Napolitano anapolitano@buchalter.com, IFS_filing@buchalter.com
UNITED STATES TRUSTEE - United States Trustee (SV) ustpregion16.wh.ecf@usdoj.gov
Service information continued on attached
page
2. SERVED BY THE COURT VIA UNITED STATES MAIL: A copy of this notice and a true copy of this
judgment or order was sent by United States mail, first class, postage prepaid, to the following persons
and/or entities at the addresses indicated below:
John and Susan Licursi
17442 Canadia Street
Granada Hills, CA 91344
Service information continued on attached
page
3. TO BE SERVED BY THE LODGING PARTY: Within 72 hours after receipt of a copy of this judgment
or order which bears an AEntered@ stamp, the party lodging the judgment or order will serve a complete
copy bearing an AEntered@ stamp by United States mail, overnight mail, facsimile transmission or email
and file a proof of service of the entered order on the following persons and/or entities at the addresses,
facsimile transmission numbers, and/or email addresses stated below:
Service information continued on attached
page
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