Spahi v. NCB, FSB

OCR transcription for search; preserved printed pages are authoritative

Case 2:11-ap-01124-PC Doc7 _ Filed 01/21/11 Entered 01/21/11 15:13:03 Desc

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AUTHENTICATED
U.S. GOVERNMENT
INFORMATION

GPO

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NOT FOR PUBLICATION __ ENTERED

UNITED STATES BANKRUPTCY COURT| ©} JAN 2 | 204

CENTRAL DISTRICT OF CALIFORNIA See USaraer OF F CALIFORNIA
EY

LOS ANGELES DIVISION
In re: ) Case No. 2:10-bk-55570-PC
)
OMAR YEHIA SPAHI, ) Adversary No. 2:1 1-ap-01124-PC
)
) Chapter 11
Debtor. )
)
OMAR YEHIA SPAHI, ) MEMORANDUM DECISION
)
Plaintiff,
se * FILED
Vv. )
) ,
NCB, FSB, ) nN ra 2010
)
Defendant. ) ann Pear
) puty Clork

Plaintiff, Omar Yehia Spahi (“Spahi”) has filed an Emergency Motion for Preliminary
Injunction and Temporary Restraining Order Pursuant to 11 U.S.C. § 105(a) and FRBP 7065,
and/or for an Extension of the Automatic Stay “(“Motion”). Spahi seeks a hearing on the Motion
on shortened notice. By written opposition, Defendant, NCB, FSB (“FCB”) opposes both an
expedited hearing on the Motion and the relief sought in the Motion. Having considered Spahi’s
Motion and supporting declaration in light of NCB’s response, the court denies the relief
requested in the Motion and abstains from exercising jurisdiction over this adversary proceeding
based upon the following findings of fact and conclusions of law' made pursuant to F.R.Civ.P.
52(a)(1), as incorporated into FRBP 7052 and made applicable to contested matters by FRBP
9014(c).

4 To the extent that any finding of fact is construed to be a conclusion of law, it is hereby
adopted as such. To the extent that any conclusion of law is construed to be a finding of fact, it is
hereby adopted as such.

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I. STATEMENT OF FACTS

Spahi filed a voluntary petition under chapter 11 in Case No. 2:09-bk-44294-SB on
December 4, 2009. On September 16, 2010, NCB filed a motion seeking relief from the
automatic stay to exercise its rights with respect to Units # 504-B, 1809-P, 1705-P, 609-P, 508-B,
801-P, and 904-P, 201 Ocean Avenue, Santa Monica, California. Spahi opposed each of the
motions.’ At a hearing on October 6, 2010, the court granted NCB’s motion and lifted the stay as
to each of the units identified in the motion in conjunction with dismissal of the case.

On October 22, 2010, Spahi filed his second voluntary chapter 11 petition — 15 days after
entry of the order dismissing his previous case. On November 8, 2010, Spahi filed a motion
seeking a continuation of the automatic stay under 11 U.S.C. § 362(c)(3) as to all creditors,
including NCB and its efforts to exercise its contractual and statutory rights with respect to Units
# 801P, 609P, and 504B (the “Critical NCB Units”). On November 21, 2010, the court denied
Spahi’s motion based on findings of fact and conclusions of law set forth in its Memorandum
Decision. The Order Denying Motion for Order Imposing a Stay or Continuing the Automatic
Stay, together with the Memorandum Decision of even date therewith, were entered on
November 22, 2010. On December 6, 2010, Spahi filed a Motion for Reconsideration of Order
Denying Debtor’s Request to Extend the Automatic Stay and sought a hearing on the motion on
shortened notice. NCB opposed the motion. After a hearing on regular notice, the court denied
Spahi’s motion for reconsideration on January 6, 2011. An Order Denying Motion for
Reconsideration of Order Denying Debtor’s Request to Extend Automatic Stay was entered on
January 10, 2011.

By his motion filed on January 18, 2011, Spahi seeks “issuance of an emergency

temporary restraining order or the imposition of the automatic stay pursuant to Bankruptcy Code

# Spahi is not the individual to whom the loans were made by NCB. Spahi received his interest
in each of the properties that are the subject of NCB’s liens, whether fractional or otherwise, in
contemplation of bankruptcy.

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1 | Sections 362(a) and 105, pending consideration of the Complaint for (1) Disallowance of Claims

2 | and Liens under 11 U.S.C. § 502(d); (2) Validity, Priority or Extent of Lien; [and] (3) Injunctive
3 | Relief Under 11 U.S.C. §§ 105(a) and 363(a) filed on 1/14/11.” Motion, 1:9-14. According to
4 | the motion, Unit 801P is set for a foreclosure sale on January 24, 2011, but no sale has been set
5 | with respect to Unit 609P or 504B. Spahi requests a temporary restraining order (“TRO”) “that
6 | will (i) immediately reinstate the automatic stay until [Spahi] has had an opportunity to seek
7 | confirmation of his chapter 11 plan or (ii) in the alternative, restrain [NCB] from any and all
8 | foreclosure actions against the Critical NCB Units until the court can consider [Spahi’s]
9 | Complaint.” Motion, 4:23-26.

10 Il, DISCUSSION

11 The court has jurisdiction over this contested matter pursuant to 28 U.S.C. §§ 157(b) and

12 | 1334(b). Spahi’s motion is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (G) and (O).

13 | Venue is appropriate in this court. 28 U.S.C. § 1409(a).

14 To the extent that Spahi’s Motion seeks a reinstatement of the automatic stay, the Ninth
15 | Circuit has stated that “[b]ecause the stay under § 362 is ‘automatic’ and ‘self-executing’ only
16 | upon the filing of a bankruptcy petition, no authority exists for ‘reinstating’ an automatic stay
17 | that has been lifted” by the court. Canter v. Canter (In re Canter), 299 F.3d 1150, 1155 n.5 (9*
18 | Cir. 2002).

19 To the extent that Spahi’s Motion seeks issuance of a TRO, it is procedurally defective’
20 | and states the wrong standard for the issuance of a preliminary injunction. Rule 65(a)(1) permits
21 | the court to issue a preliminary injunction on notice to the adverse party. F.R.Civ.P. 65(a)(1).
22 | “A preliminary injunction is an extraordinary remedy never awarded as of right.” Winter v.

23 | Natural Res. Def. Council, Inc., __U.S._, 129 8.Ct. 365, 376, 172 L.Ed.2d 249 (2008); see

24 | Munaf v. Geren, 553 U.S. 128 S.Ct. 2207, 2218-2219, 171 L.Ed.2d 1 (2008) (“A

3

25

26 | ? LBR 7065-1(b)(2) states: “When a TRO is requested, a preliminary injunction must be sought

37 by order to show cause.” Spahi seeks issuance of a TRO on motion set on shortened notice.

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preliminary injunction is an extraordinary and drastic remedy.”). To obtain a preliminary
injunction, the moving party must “establish that he is likely to succeed on the merits, that he is

likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities

tips in his favor, and that an injunction is in the public interest.”* Winter, 129 S.Ct. at 374; see
Sierra Forest Legacy v. Rey, 577 F.3d 1015, 1021 (9th Cir. 2009). “In each case, courts ‘must
balance the competing claims of injury and must consider the effect on each party of the granting

or withholding of the requested relief.”” Winter, 129 S.Ct. at 376 (quoting Amoco Prod. Co. v.

Gambell, 480 U.S. 531, 542 (1987)). A temporary restraining order should not issue absent a
showing that it is necessary to preserve the status quo and prevent irreparable harm pending a
hearing on a preliminary injunction. See Granny Goose Foods, Inc. v. Brotherhood of Teamsters
& Auto Truck Drivers Local No. 70, 415 U.S. 423, 440 (1974).

Spahi’s evidence of “likelihood of success on the merits” and likelihood of irreparable
harm” hinges on Spahi’s own declaration which is based, in pertinent part, on information and
belief. Even if the court were to accept the statements in the declaration as true for purposes of
the Motion, “[e]conomic injury alone does not support a finding of irreparable harm because

such injury can be remedied by a damage award.” Irwin, 338 B.R. at 854 (citing Rent-A-Center

Inc. v. Canyon Television & Appliance Rental, Inc., 944 F.2d 597, 603 (9" Cir. 1991). “Mere

¥ Prior to Winter, the Ninth Circuit recognized two differing standards for the issuance of a
preliminary injunction. The traditional test required the plaintiff to establish “(1) a strong
likelihood of success on the merits, (2) the possibility of irreparable injury to plaintiff if
preliminary relief is not granted, (3) a balance of hardships favoring the plaintiff, and (4)
advancement of the public interest (in certain cases).” Taylor v. Wesly, 488 F.3d 1197, 1200
(9th Cir. 2007). The “alternative test” required that “plaintiff demonstrate either a combination
of a probable success on the merits and the possibility of irreparable injury or that serious
questions are raised and the balance of hardships tips sharply in his favor.” Id. “These two
formulations represent[ed] two points on a sliding scale in which the required degree of
irreparable harm increase[d] as the probability of success decrease[d]. They [were] not separate
tests but rather outer reaches of a single continuum.” Id. The Ninth Circuit has clarified “[t]o the
extent that our cases have suggested a lesser standard, they are no longer controlling, or even
viable.” Am. Trucking Ass’ns, Inc. v. City of L.A., 559 F.3d 1046, 1052 (9th Cir. 2009).

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financial injury, . . . , will not constitute irreparable harm if adequate compensatory relief will be

available in the course of litigation.” Goldie’s Bookstore, Inc. v. Superior Court of State of Cal.,

739 F.2d 466, 471 (9" Cir. 1984) (affirming trial court’s decision not to enjoin the loss of a
commercial leasehold). Spahi states in his declaration that “the NCB are necessary for an
effective reorganization under the terms of the Plan,” but there is nothing in the declaration that
establishes that each of the Critical NCB Units are essential to the success of such plan and that
the plan will be confirmed within a reasonable period of time. Spahi’s Motion fails to address
the remaining two elements of Winter.

Finally, and most importantly, Spahi’s complaint re-urges the issue of “validation” that
was first argued by Spahi in connection with his motion to continue the automatic stay. In
denying such motion, the court in its Memorandum Decision entered on November 22, 2010,
stated:

With respect to the issue of validation, the court notes that Spahi did not raise this issue at

the hearing on NCB’s motion for relief from the stay on October 7, 2010. Since dismissal

of his first case, Spahi has filed suit against NCB in Case No. BC448630, styled Spahi v.

NCB, a Federal Savings Bank, in the Superior Court of California, County of Los

Angeles, seeking a declaratory judgment and damages for alleged wrongful foreclosure,

violation of statutory duties, and unjust enrichment. Spahi is free to raise the issue of

whether NCB has standing to enforce the note and deed of trust in state court in the event
further action is taken to foreclose on these units. These issues arise under state law,
were the subject of a pending state court action when Spahi filed his petition in this case,
and can be properly and timely adjudicated in state court.
Memorandum Decision, 8:3-11. Because the state court action remains pending between Spahi
and NCB and the complaint made the basis of this adversary proceeding alleges causes of action
between Spahi and NCB that arise under non-bankruptcy law which can be timely adjudicated in

the non-bankruptcy forum, the court will abstain exercising jurisdiction over this adversary

proceeding pursuant to 28 U.S.C. § 1334(c)(1).

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—

Ill. CONCLUSION
Based on the foregoing, Spahi’s Motion must be denied. The court will enter a separate
order consistent with this opinion.

Dated: January 21, 2011

_,

PETER H. CARROLL
United States Bankruptcy Judge

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In re:
CHAPTER:

Debtor(s). CASE NUMBER:

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