Martin F. Vrabel

OCR transcription for search; preserved printed pages are authoritative

Entered on Docket

Troe ANN, CLERK FILED

U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA

JUN 17 2005
1 NOT FOR PUBLICATION MAR DS BKCY, APPLPANEL
2
3 UNITED STATES BANKRUPTCY APPELLATE PANEL
4 OF THE NINTH CIRCUIT
5
6 WIn re: BAP No. NC-04-1331-PBS

7 }WMARTIN F. VRABEL, Bk. No. 04-40559

)
)
)
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8 Debtor. )
)
9 )
MARTIN F. VRABEL AND SOPHIE }
10 |} VRABEL, )
)
11 Appellants, )
)
12 Iv. ) MEMORANDUM+
)
13 |MARTHA G. BRONITSKY, Chapter 13 )
Trustee; WASHINGTON MUTUAL BANK; )
14 |G. JUDSON SCOTT, JUR.; MICHAEL )
QUIRK, )
15 )
Appellees. )
16 )
17 Argued and Submitted on
May 19, 2005 at San Jose, California
18
Filed - June 17, 2005
19
Appeal from the United States Bankruptcy Court
20 for the Northern District of California
21 Honorable Randall J. Newsome, Chief Bankruptcy Judge, Presiding
22

23 |Before: PERRIS, BRANDT and SMITH, Bankruptcy Judges.
24

25

26 1 This disposition is not appropriate for publication and
may not be cited to or by the courts of this circuit except when

relevant under the doctrines of law of the case, res judicata, or
collateral estoppel. See 9th Cir. BAP Rule 8013-1.

INFORMATION

GPO

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The issue in this appeal is whether the bankruptcy court erred
in entering an order barring a nondebtor spouse from filing
bankruptcy for 180 days after dismissal of her husband’s bankruptcy
case.2 While there was no jurisdictional defect, the nondebtor
spouse was denied due process. We therefore REVERSE and REMAND for
the nondebtor spouse to be given adequate notice and opportunity to
respond, if the bankruptcy court deems it appropriate to pursue a

bar order against her.

FACTS

Martin F. Vrabel (“debtor”) filed the chapter 13° petition out
of which this appeal arises in February 2004. Debtor’s wife, Sophie
Vrabel (“Sophie”), is not listed as a joint debtor on the bankruptcy
petition. Debtor and Sophie claim to have an ownership interest in
a certain parcel of real property. Debtor filed his bankruptcy
petition to stop an imminent foreclosure.

Appellee Washington Mutual Bank (“WMB”), which holds first and
second trust deeds on the property, filed motions for relief from
stay. On June 3, 2004, the court held a hearing on the motions for
relief and other matters. Appellants did not provide us with a
transcript of this hearing. However, there is no dispute that one

of the issues discussed at the hearing was the possibility that

2 The order on appeal addresses other matters. For the
reasons explained below, the only issue before us in this appeal is
the propriety of entry of the 180-day bar against the debtor’s
spouse.

3 Unless otherwise indicated, all chapter, section and rule
references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330, and to
the Federal Rules of Bankruptcy Procedure, Rules 1001-9036.

2

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debtor and Sophie had engaged in misconduct in connection with

debtor’s bankruptcy case.
The bankruptcy court continued the June 3 hearing to June 17,
and entered an order to show cause, stating as follows:
Pursuant to the record established at a June 3, 2004 hearing
., the Court hereby orders Martin F. Vrabel to appear on June

17, 2004... and show cause why [debtor’s] bankruptcy case
should not be dismissed, with prejudice.

After the June 17 continued hearing, the court entered an order
granting WMB conditional relief from stay, disposing of several

other matters, and stating as follows:

5. The Court’s Order to Show Cause filed on June 4, 2004
(doc. 51) is hereby vacated. If this case is, however,
subsequently dismissed for any reason, that dismissal
shall be with prejudice as to the Debtor, and both the
Debtor and Sophie Vrabel shall be prohibited from filing
another bankruptcy case of any kind for 180 days from the
date of dismissal of this case.

June 23, 2004 Order, at 2. Debtor and Sophie timely appealed.’

On January 21, 2005, debtor’s case was dismissed for failure to
make plan payments. We have entered an order limiting the issue on
appeal to whether the bankruptcy court erred in imposing a 180-day
bar against Sophie, because that is the sole issue raised by
appellants on appeal that has not become moot as a result of the
dismissal of debtor’s case. We also expedited this appeal, because

an order barring access to bankruptcy for 180 days is not subject to

4 The notice of appeal states that only debtor “hereby
appeals[.]” However, both debtor and Sophie signed the notice of
appeal. Sophie also signed the opening brief on appeal, identifying
herself as an appellant. We therefore conclude that Sophie is an

appellant in this appeal.

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cf

review after passage of 180 days. See In re Fernandez, 227 B.R.

174, 178 (9th Cir. BAP 1998). The 180 day period expires on July
20, 2005.
ISSUES
1. Whether the bankruptcy court had jurisdiction.
2. Whether the bankruptcy court violated due process in
imposing a 180-day bar against Sophie.?°
STANDARDS OF REVIEW

Questions of jurisdiction are reviewed de novo. In re

Castlerock Properties, 781 F.2d 159, 161 (9th Cir. 1986). Whether

an individual was afforded due process is a question of law, which

we also review de novo. In re Niles, 106 F.3d 1456, 1459 (9th Cir.

1997); In_re Repp, 307 B.R. 144, 148 (9th Cir. BAP 2004).

DISCUSSION

1. Jurisdiction

An order entered without subject matter or personal

jurisdiction is void. In re Pac. Land Sales, Inc., 187 B.R. 302,

309 (9th Cir. BAP 1995). It is not clear whether appellants contest
the bankruptcy court’s subject matter jurisdiction over the matter

at issue in this appeal (entry of a 180-day bar order against a non-

° Appellants state in the “Introduction” section of their
opening brief that the bankruptcy court also erred in imposing a
180-day bar against debtor. This statement is not supported by any
subsequent argument in appellants’ appellate brief. Therefore, we
deem it waived. See Acosta-Huerta v. Estelle, 7 F.3d 139, 144 (9th
Cir. 1992) (issues raised in appellate brief but not supported by
argument are deemed abandoned).

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debtor) or personal jurisdiction over Sophie. Therefore, we will

address both subjects.

A. Subject Matter Jurisdiction

28 U.S.C. § 1334(a) provides the federal district courts with
original and exclusive jurisdiction over bankruptcy cases. The
district courts have referred bankruptcy cases to the bankruptcy
courts, as provided for by 28 U.S.C. § 157.© 1 Alan N. Resnick &
Henry J. Sommer, COLLIER ON BanKRUPTCY § 3.01[1] (15th ed. Rev. 2004).
The bankruptcy court in this case had subject matter jurisdiction to
enter the order on appeal, because the order flows from the court’s
exercise of jurisdiction over debtor’s bankruptcy case.

The 180-day bar order entered against Sophie in this case is
effectively an injunction entered by the court sua sponte pursuant

to § 105(a).’ Section 105(a) states that a bankruptcy “court may

6 “Rach district court may provide that any or all cases
under title 11. . . shall be referred to the bankruptcy judges for

the district.” 28 U.S.C. § 157(a).

| Appellants argue that the court violated § 109(g) in
entering the 180-day bar against Sophie, because she is not a debtor
in the bankruptcy case out of which this appeal arises. Section 109

states as follows:

(g) Notwithstanding any other provision of this section, no
individual or family farmer may be a debtor under this title
who has been a debtor in a case pending under this title at any

time in the preceding 180 days if--

(1) the case was dismissed by the court for willful
failure of the debtor to abide by orders of the court, or
to appear before the court in proper prosecution of the
case; or

(2) the debtor requested and obtained the voluntary
(continued...)

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issue any order, process or judgment that is necessary or

appropriate to carry out the provisions of” the Bankruptcy Code.
Congress anticipated that a $ 105(a) injunction would be used to
enjoin nondebtors in certain circumstances. 2 Resnick & Sommer,

COLLIER ON BANKRUPTCY G7 105.03 (15th ed. Rev. 2000). See also In re

Schwinn Bicycle Co., 210 B.R. 747, 761 (Bankr. N.D. Ill.

1997) (§ 105(a) repeatedly has been held to empower a bankruptcy
court to enjoin parties other than the debtor), aff'd, 217 B.R. 790
(N.D. Ill. 1997). Moreover, a court may enjoin a party on its own
motion, if such action is necessary or appropriate to prevent an

abuse of the bankruptcy system. See In re Graves, 279 B.R. 266, 273

(9th Cir. BAP 2002).

A bankruptcy court acting pursuant to $ 105(a) has the power to
prevent a continuing abuse of the bankruptcy system by multiple

parties acting in concert. In re Yiman, 214 B.R. 463, 466 (Bankr.

D. Md. 1997); In re Kinney, 51 B.R. 840 (Bankr. C.D. Cal. 1985).

Here, the bankruptcy court found that debtor and Sophie committed
fraud and engaged in other abusive conduct in connection with
debtor’s chapter 13 case. See Transcript of June 24, 2004 Hearing,
12:16-24. While appellants suggest that the court erred in these

findings, the record provided on appeal is not sufficient to permit

7(,..continued)
dismissal of the case following the filing of a request
for relief from the automatic stay provided by section 362
of this title.

The facts of this case indicate that the court imposed the bar order
pursuant to § 105(a), not § 109(g).

6

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Ca

review of that question, because appellants did not provide us with
transcripts of the June 3 and 17 hearings. An appellant is obliged
to provide the appellate court with a record sufficient for

meaningful review. United States v. Vasquez, 985 F.2d 491, 495

(10th Cir. 1993). When the appellant fails to provide a complete
record, we are entitled to presume that the appellant does not

regard the missing portions as helpful. In re McCarthy, 230 B.R.

414, 417 (9th Cir. BAP 1999).

B. Personal Jurisdiction

A defect in personal jurisdiction is a defense that may be

waived. In re Pac. Land Sales, Inc., 187 B.R. 302, 309 (9th Cir.

BAP 1995). Sophie submitted to the bankruptcy court’s exercise of
jurisdiction over her by virtue of her extensive, voluntary
participation in debtor’s bankruptcy case.

Sophie affirmatively invoked the jurisdiction of the bankruptcy
court on several occasions. She filed multiple motions to conduct
2004 exams of individuals claiming to hold liens on the property.
She also jointly filed an opposition to WMB’s motions for relief
from stay, requesting sanctions against WMB under Rule 9011. Sophie
did not limit her appearances before the bankruptcy court in any of
the pleadings she filed in the bankruptcy court. Therefore, we
conclude that she consented to the bankruptcy court’s exercise of
adjudicatory authority over her.

In addition, Sophie responded to the bankruptcy court’s order
to show cause, directly addressing the subject of the court’s

concerns about the propriety of her and debtor’s conduct in debtor’s

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:

bankruptcy case. ee Declaration of Sophie Vrabel in Response to
Order to Show Cause and Relief from Stay. Sophie’s declaration is
akin to a responsive pleading. Sophie did not assert a lack of

personal jurisdiction in her declaration, thus waiving any defect in

the court’s exercise of such jurisdiction. See Benny v. Pipes, 799

F.2d 489, 492 (9th Cir. 1986) (defect in personal jurisdiction waived
by the filing of a responsive pleading that fails to contest

jurisdiction), opinion amended on other grounds, 807 F.2d 1514 (9th

Cir. 1986).

2. Due Process

Appellants argue that Sophie was denied due process when the
bankruptcy court entered a 180-day bar against her. WMB does not
address appellants’ due process argument in its appellate brief.

Due process requires adequate notice and an opportunity to be

heard. Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314

(1950); In re Colortran, Inc., 218 B.R. 507, 511 (9th Cir. BAP

1997).

An elementary and fundamental requirement of due process in any
proceeding which is to be accorded finality is notice
reasonably calculated, under all the circumstances, to apprise
interested parties of the pendency of the action and afford
them an opportunity to present their objections.

Mullane, 339 U.S. at 314. An order is void if entered in a manner

inconsistent with due process. In re Loloee, 241 B.R. 655, 661 (9th

Cir. BAP 1999).
There is no question that, had WMB or any other third party
requested entry of a bar order against Sophie, it would have had to

have done so by filing an adversary complaint. See In re Roeben,

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294 B.R. 840, 846 (Bankr. E.D. Ark. 2003). Rule 7001(7) requires an
adversary proceeding to obtain an injunction. Adversary proceedings
in bankruptcy are commenced by the filing of a complaint, Rule 7003,
which must be served in accordance with Rule 7004.
As we discuss above, a bankruptcy court can impose an
injunction on its own motion pursuant to § 105(a). However,
[a] bankruptcy court acting on its own motion in a matter that
ordinarily requires an adversary proceeding must, in deference
to principles of due process, assure that the defendant is
afforded procedural protections that inhere in an adversary

proceeding because the rules of procedure generally define what
process is due.

In re Graves, 279 B.R. 266, 274 (9th Cir. BAP 2002).

The bankruptcy court failed to afford Sophie due process,
because there is no indication that the court gave Sophie any notice
whatsoever that it was considering entry of a bar order against her,
much less notice approaching the quality of that required to
institute an adversary proceeding in compliance with the Rules
discussed above. Immediately after the June 3 hearing, the court
entered the show cause order set forth above, but that order only
addressed the dismissal of debtor’s case. Without prior notice,
Sophie did not have an adequate opportunity to address the court’s
concerns or object to entry of the bar order.

CONCLUSION

While there was no defect in the bankruptcy court’s exercise of
subject matter or personal jurisdiction, Sophie was not afforded due
process when the court entered the 180-day bar order. Therefore, we

REVERSE and REMAND for Sophie to be given adequate notice and

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opportunity to respond, if the bankruptcy court deems it appropriate

to pursue a bar order against her.

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U.S. Bankruptcy Appellate Panel
of the Ninth Circuit
125 South Grand Avenue, Pasadena, California 91105
Appeals from Central California (626) 229-7220
Appeals from all other Districts (626) 229-7225

NOTICE OF ENTRY OF JUDGMENT

BAP No. NC-04-1331-PBS

RE: MARTIN F. VRABEL

A separate Judgment was entered in this case on June 17, 2005.

BILL OF COSTS:

Bankruptcy Rule 8014 provides that costs on appeal shall be taxed by the
Clerk of the Bankruptcy Court. Cost bills should be filed with the Clerk
of the Bankruptcy Court from which the appeal was taken.

9th Cir. BAP Rule 8014-1

ISSUANCE OF THE MANDATE:

The mandate, a certified copy of the judgment sent to the Clerk of
the Bankruptcy Court from which the appeal was taken, will be issued
7 days after the expiration of the time for filing a petition for
rehearing unless such a petition is filed or the time is shortened or
enlarged by order. See Federal Rule of Appellate Procedure 41.

APPEAL TO COURT OF APPEALS:

An appeal to the Ninth Circuit Court of Appeals is initiated by

filing a notice of appeal with the Clerk of this Panel. The Notice

of Appeal should be accompanied by payment of the $255 filing fee
(effective November 1, 2003) and a copy of the order or decision on
appeal. Checks may be made payable to the U.S. Court of Appeals for

the Ninth Circuit. See Federal Rules of Appellate Procedure 6 and the
corresponding Rules of the United States Court of Appeals for the Ninth
Circuit for specific time requirements.

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CERTIFICATE OF MAILING

The undersigned, deputy clerk of the U.S. Bankruptcy
Appellate Panel of the Ninth Circuit, hereby certifies that a copy
of the document on which this certificate appears was mailed this date

to all parties of record to this appeal.
By: Patti Ippolito

Deputy Clerk: June 17, 2005

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