, In Re Del Mission Limited, Debtor.state of California Employment Development Department;state of California State Board of Equalization, Appellants, v. Harold S. Taxel, Trustee for Del Mission Limited, Appellee, 98 F.3d 1147 (9th Cir. 1996) :: US LAW

In Re Del Mission Limited, Debtor.state of California Employment Development Department;state of California State Board of Equalization, Appellants, v. Harold S. Taxel, Trustee for Del Mission Limited, Appellee, 98 F.3d 1147 (9th Cir. 1996) :: US LAW

    In Re Del Mission Limited, Debtor.state of California Employment Development Department;country of California State Board of Equalization, Appellants, v. Harold S. Taxel, Trustee for Del Mission Limited, Appellee, ninety eight F.3d 1147 (9th Cir. 1996)

    U.S. Court of Appeals for the Ninth Circuit - ninety eight F.3d 1147 (ninth Cir. 1996) Argued and Submitted Aug. nine, 1996. Decided Oct. 23, 1996

    Richard W. Bakke, Deputy Lawyer General, Los Angeles, CA, for appellants.

    Jeffry A. Davis, Gray, Cary, Ware & Freidenrich, San Diego, CA, for appellee.

    Appeal from the Ninth Circuit Bankruptcy Appellate Panel, Jones, Hagan and. BAP No. SC-ninety four-1191-JhR.

    Before: FLETCHER and TASHIMA, Circuit Judges, and RESTANI, Court of International Trade Judge.* 

    TASHIMA, Circuit Judge:

    This enchantment presents critical problems. First, we remember whether or not failing to return financial disaster property belongings in a well timed way constitutes a violation of the automatic stay provision of 11 U.S.C. § 362(a) (three). We conclude that it does. Next, we clear up whether or not a bankruptcy courtroom might also award prices and expenses incurred in prior appellate court cases as a contempt sanction under 11 U.S.C. § one hundred and five(a). We conclude that it could no longer.


    This is the second spherical of litigation between these parties. The first spherical arose when appellants California Employment Development Department and State Board of Equalization (collectively the "State") refused to approve the sale of Chapter 7 debtor Del Mission Limited s ("Del Mission") liquor license until it paid all exceptional taxes and hobby accumulated thereon. The trustee of Del Mission, appellee Harold S. Taxel ("Taxel"), paid the disputed taxes under protest, and then brought a intending in the bankruptcy courtroom searching for compensation. The financial disaster court located that the State s movement violated the automatic stay provision of 11 U.S.C. § 362(a) (three), and ordered the State to pay Del Mission $15,604.1  Taxel v. California Employment Dev. Dep t (In re Del Mission Ltd.), 116 B.R. 734 (Bankr.S.D. Cal. 1990) ("Del Mission I "), aff d, one hundred thirty B.R. 362, 1991 WL 169078 (ninth Cir. BAP 1991) (TABLE in Westlaw) ("Del Mission II "), aff d, 998 F.second 756 (9th Cir. 1993) ("Del Mission III ").

    The failure of the State to repay the disputed taxes in a timely way is the situation of this 2d round of litigation. In spite of the financial disaster courtroom s order, the State did not repay the disputed taxes at the same time as the underlying case changed into being appealed. Following our selection in Del Mission III, Taxel filed a motion with the financial ruin court looking for to maintain the State in civil contempt of the automated stay for failing to pay off the disputed taxes in a well timed way.2  As sanctions, Taxel requested attorney s fees and fees incurred in imposing the automated live on enchantment in Del Mission II and Del Mission III. The financial ruin courtroom denied the motion, concluding that the automatic stay violation merged into the formerly provided money judgment. As an opportunity floor for its decision, the courtroom also concluded that it had no criminal authority to award prices incurred on previous appeals. The financial ruin appellate panel ("BAP") reversed on both issues, and offered Taxel the costs and prices he incurred in Del Mission II and Del Mission III, at the earlier appeals.three 

    We have jurisdiction of this attraction beneath 28 U.S.C. § 158(d), and we confirm in component and opposite in element.


    I. Continuing Violation of the Automatic Stay

    The first difficulty we have to decide is whether or not the State s failure to pay off Del Mission in a well timed manner constituted a persevering with violation of 11 U.S.C. § 362(a) (three). "Because we are in as excellent a role because the BAP to have a look at the choice of the bankruptcy court docket, we independently evaluate the bankruptcy courtroom s ruling." Havelock v. Taxel (In re Pace), 67 F.3d 187, 191 (ninth Cir. 1995) (quotation omitted). We assessment de novo whether or not the automatic stay provision of § 362(a) has been violated. Chugach Timber Corp. v. Northern Stevedoring & Handling Corp. (In re Chugach Forest Prod., Inc.), 23 F.3d 241, 244 (9th Cir. 1994). We conclude that the State s retention of the disputed taxes did violate the automated stay.

    The doctrine of merger is a subset of res judicata and precludes a plaintiff from retaining an movement at the authentic claim after a very last judgment has been entered. Restatement (Second) of Judgments § 18 (1980). The financial ruin courtroom reasoned that underneath this doctrine, the State s violation of the automatic stay ended with a final judgment in Taxel s choose. When judgment turned into entered, the violation of the stay ceased to exist and all closing rights between the events merged into the cash judgment. It consequently rejected Taxel s movement for contempt, concluding that the State s retention of the disputed taxes could not, beneath the doctrine of merger, be a persevering with violation of the automatic stay. We decline the State s invitation to adopt the reasoning of the bankruptcy court docket.

    The financial ruin court s evaluation stretches the doctrine of merger beyond its supposed limits. The doctrine of merger does no longer extinguish "benefits to which the plaintiff turned into entitled with appreciate to the unique declare...." Id. at § 18, cmt. g. For example, "if a creditor has a lien upon assets of the debtor and obtains a judgment in opposition to him, the creditor does no longer thereby lose the gain of the lien." Id.

    In the case at bench, the automatic stay, "a bonus [ ] to which the plaintiff become entitled with appreciate to the original claim," id., remains powerful till the financial ruin estate terminates. See 11 U.S.C. § 362(c). Accordingly, till such time as the Del Mission property terminates, the State is obligated to abide by means of the automated stay. Thus, the doctrine of merger does now not immunize the State from future violations of the stay, even though it has been discovered responsible for past violations of the stay. Cf., Harkins Amusement Enter. Inc. v. Harry Nace Co., 890 F.second 181 (9th Cir. 1989) (maintaining in an antitrust in shape that res judicata did now not bar second lawsuit due to the fact the alleged violations happened at some stage in a one-of-a-kind time period). The financial ruin court therefore erred in concluding that, beneath the doctrine of merger, the State s retention of the disputed taxes could not be in violation of the live.

    Given the continuing viability of the automatic live, we have to subsequent take into account whether the State did, in reality, violate the automated live via maintaining the disputed taxes. 11 U.S.C. § 362(a) (three) specially enjoins "any act to gain ownership of assets of the property or of assets from the property or to exercising control over assets of the estate...." In Del Mission III, we concluded that the State s efforts to gather the disputed taxes within the first example did represent a violation of the live underneath subsection (3). 998 F.second at 758.four  Now, we take the analysis one step similarly, and determine whether the State s persevered retention of the disputed taxes was an "act ... to exercising manage over the assets of the property," in persevering with violation of the automatic stay. 11 U.S.C. § 362(a) (three).

    The "exercise manage" clause of § 362(a) (3) became introduced by using the Bankruptcy Amendments and Federal Judgeship Act of 1984. Pub. L. No. 98-353, 1984 U.S.C.C.A.N. (98 Stat.) 371. Congress did not offer an evidence of that change. In re Young, 193 B.R. 620, 623 (Bankr.D.C.1996). The Ninth Circuit BAP has interpreted this amendment as broadening the scope of § 362(a) (three) to proscribe the mere understanding retention of property assets. Abrams v. Southwest Leasing & Rental Inc. (In re Abrams), 127 B.R. 239, 241-43 (ninth Cir. BAP 1991) (failure to return repossessed automobile after receiving notice of Chapter 7 filing constituted a contravention of the automatic stay). In dicta, this circuit has common that interpretation. Chugach, 23 F.3d at 246. We now undertake the reasoning of Abrams and Chugach, and preserve that the knowing retention of estate assets violates the automated stay of § 362(a) (3).

    11 U.S.C. § 542(a) offers that an entity in possession of estate property "shall" deliver such property to the trustee. This is a mandatory duty springing up upon the filing of the bankruptcy petition. Knaus v. Concordia Lumber Co. (In re Knaus), 889 F.2nd 773, 775 (eighth Cir. 1989). Thus, " [w]ithout doubt, a creditor s understanding retention of property of the estate constitutes a contravention of § 362(a) (three)." Chugach 23 F.3d at 246 (quoting Abrams, 127 B.R. at 242); accord Knaus, 889 F.2nd at 775 ("The failure to [turn over], irrespective of whether or not the authentic seizure was lawful, constitutes a prohibited try to exercise control over the belongings of the estate in violation of the automated live."); Carlsen v. IRS (In re Carlsen), 63 B.R. 706, 711 (Bankr.C.D. Cal. 1986) (failure of IRS to go back finances acquired pursuant to a levy after receiving notice violated automatic live).

    These instances emphasize the underlying motive of the automated live, that's to alleviate the monetary traces at the debtor. See, e.g., Knaus, 889 F.2d at 775; see additionally Utah State Credit Union v. Skinner (In re Skinner), ninety B.R. 470 (D. Utah 1988), aff d, 917 F.2nd 444 (tenth Cir. 1990). To effectuate the purpose of the automatic stay, the onus to go back estate property is positioned upon the possessor; it does now not fall on the debtor to pursue the possessor. Abrams, 127 B.R. at 243.

    [I]f individuals who may want to make no sizable damaging declare to a debtor s assets of their ownership may want to, without cost to themselves, compel the debtor or his trustee to deliver suit as a prerequisite to returning the property, the powers of a financial ruin courtroom and its officials to acquire the estate for the gain of creditors would be hugely decreased.

    Knaus, 889 F.second at 775. Moreover, "the case law and the legislative records of § 362 indicate that Congress did now not intend to location the load on the financial ruin property to soak up the cost of potentially multiple turnover movements, as a minimum not without imparting a way to recover damages sustained thus thereof." Abrams, 127 B.R. at 243.

    Under this line of authority, we conclude that the State s knowing retention of the disputed taxes violated the automated live. As this case indicates, the potential for a couple of moves to attain what's rightfully because of a financial ruin property is a completely actual problem. The State contends that it did not repay Del Mission in a timely way due to the fact Taxel did not make any particular demand on it. As noted by way of the BAP, " [t]his argument is frivolous." BAP Dec. at 7. In Del Mission I, the financial disaster court mainly held that Del Mission changed into entitled to money back of the disputed taxes. 116 B.R. at 739. Moreover, the State cites no aid for its contention that no obligation to repay arose until it received a selected request from the trustee. That competition is in direct warfare with Abrams and Chugach.

    In summary, each the case law and policy issues compel the realization that the State violated the automatic stay by means of knowingly retaining the disputed taxes, following the financial ruin courtroom s order to repay Del Mission.

    II. The Scope of a Bankruptcy Court s Contempt Power beneath eleven U.S.C. § 105(a)five 

    Although the State violated the automatic live, whether or not that violation authorized the BAP to award Taxel previously incurred appellate charges provides any other query totally. A financial ruin court docket s award of lawyer s prices is reviewed for an abuse of discretion or an erroneous software of the regulation. Feder v. Lazar (In re Lazar), eighty three F.3d 306, 308 (9th Cir. 1996). In the absence of direct authority, we observe this identical general of review to the BAP s award of expenses. Upon review, we finish that the BAP s award of expenses turned into erroneous because § one zero five(a) does not authorize an award of previously incurred appellate fees as a sanction.6 

    Typically, damages for a contravention of the automatic live are recovered below eleven U.S.C. § 362(h). This segment mandates the award of actual damages to " [a]n individual injured through any willful violation of a live provided by means of this phase." Id. (emphasis delivered). A trustee, as the consultant of a prison entity (the bankruptcy estate), is not an "man or woman" in the that means of § 362(h), and therefore cannot get better beneath this statute. Pace, sixty seven F.3d at 192.

    Notwithstanding § 362(h) s inapplicability, a financial disaster court docket may also award damages to a trustee for a violation of the automatic stay under its contempt energy pursuant to 11 U.S.C. § one zero five(a). Pace, 67 F.3d at 193. Section one zero five(a) provides that a financial ruin court "can also difficulty any order ... that is important or appropriate to carry out the provisions of this title." 11 U.S.C. § 105(a). This provision is vast enough to provide comfort to the ones entities which are injured with the aid of willful violations of the automated live, however cannot get better underneath § 362(h). Pace, sixty seven F.3d at 193; United States v. Arkison (In re Cascade Rds., Inc.), 34 F.3d 756, 767 (ninth Cir. 1994). The handiest meaningful difference between awarding damages under § 362(h), as opposed to § one zero five(a), is that relief under § 362(h) is mandatory, while alleviation beneath § 105(a) is discretionary. Pace, sixty seven F.3d at 193-ninety four. However, this doesn't solution the query of whether § a hundred and five(a) authorizes a courtroom to award previously incurred appellate costs. We now flip to that trouble of first affect.

    The bankruptcy court concluded that it could not award prices for appellate illustration beneath Vasseli v. Wells Fargo Bank (In re Vasseli), five F.3d 351 (9th Cir. 1993), which holds that a financial ruin courtroom has no authority to award appellate legal professional s expenses underneath 11 U.S.C. § 523(d). The BAP, but, concluded that Vasseli did now not foreclose an award of formerly incurred appellate fees below a bankruptcy court docket s contempt energy. We consider the financial ruin court docket and conclude, beneath the reasoning of Vasseli, that § a hundred and five(a) does now not authorize an award of appellate costs.

    In Vasseli, Chapter 7 borrowers efficiently defended a motion introduced with the aid of a creditor beneath eleven U.S.C. § 523(a), to decide the dischargeability of a consumer debt. five F.3d at 352. The bankruptcy court provided attorney s costs as provided underneath § 523(d). Id. The creditor s attraction to the district court changed into brushed off as untimely. Id. at 353. The borrowers then returned to the financial ruin court docket and, invoking § 523(d), asked extra attorney s charges incurred inside the appeal to the district court docket. Id.

    Relying on Fed. R. App. P. 38, we held that a bankruptcy courtroom does not have the authority to award attorney s fees incurred in reaction to a frivolous appeal under § 523(d). Id. Vasseli in addition held that Rule 38 is the handiest authority for awarding appellate costs incurred due to a frivolous enchantment. Id. We agreed with the BAP s keeping that "Rule 38 empowers simplest appellate courts, not bankruptcy courts to award damages, lawyer s charges, and different costs incurred via an appellee in response to a frivolous attraction." Id. (emphasis added). Moreover, Vasseli held that an appellate court docket does now not have the authority to delegate this power to a financial ruin court. Id. Thus, Vasseli concluded that the borrowers "ought to have implemented to the district court docket, not the financial disaster courtroom, for fees incurred on their enchantment pursuant to Rule 38." Id. at 354.

    In the instantaneous case, the BAP outstanding Vasseli by using concluding that the apparent language of § 523(d) precludes an award of appellate costs. § 523(d) offers:

    [i]f a creditor requests a willpower of dischargeability of a purchaser debt ..., and such debt is discharged, the court docket shall provide judgment in desire of the debtor for the fees of, and an inexpensive legal professional s price for, the intending if the court finds that the location of the creditor changed into no longer drastically justified....

    11 U.S.C. § 523(d) (emphasis delivered). The BAP discovered the emphasized word to be "restricting language" precluding an award of appellate expenses. BAP Dec. at eleven. The BAP then referred to that it was no longer restrained by way of such restricting language below the live violation provisions, and consequently became not precluded from awarding previously incurred appellate charges.

    While the BAP s creation of § 523(d) s "proscribing language" may be correct--this is, the language itself might also preclude an award of appellate fees--that was not the premise relied upon by way of Vasseli to finish that a financial disaster courtroom lacked the authority to award appellate charges. As stated above, Vasseli relied absolutely upon Rule 38, and construed Rule 38 because the handiest authority that offers for appellate costs for frivolous appeals. See Vasseli, five F.3d at 354. Accordingly, even as the BAP s attempt to differentiate Vasseli might also have a few floor enchantment, it though must fail due to the fact there may be no basis for the BAP s conclusion that Vasseli s conserving is based totally on the "restricting language" of § 523(d).

    We hence conclude that Vasseli is indistinguishable in precept from the on the spot case, and controls its outcome. Vasseli rejected the idea that a courtroom s express discretionary authority to award charges on the trial stage implied an authority to award costs on the appellate stage. See Vasseli, five F.3d at 353 (refusing to "study into" § 523(d) the authority to award appellate charges). Here, § one zero five(a) has been construed as a vehicle to award discretionary charges on the trial court docket level. Pace, 67 F.3d at 193. Vasseli instructs that we must now not imply from that confined supply of authority a similar authority to award prices on the appellate degree.

    Moreover, due to the fact an award under § 105(a) is discretionary, its use as a device to award previously incurred appellate fees might overlap with Rule 38. Under both authority, a courtroom could be required to recollect the merits of the arguments advanced and the way in which the parties acted in figuring out whether to award costs. Given that Rule 38 already offers for a discretionary award of costs in frivolous appeals, it would be superfluous to deal with § 105(a) as any other automobile to award appellate costs. In accord with Vasseli, we therefore preserve that the most effective authority for awarding discretionary appellate fees in bankruptcy appeals is Rule 38.7  Accordingly, the financial disaster court did no longer err in refusing to award Taxel previously incurred appellate charges.8 

    We therefore opposite the BAP s award to Taxel of formerly incurred appellate charges.9 

    In his responding short, Taxel includes a movement for lawyer s expenses incurred even as protecting this current attraction, below both § one hundred and five(a) and Rule 38. As we have concluded § a hundred and five(a) does no longer authorize appellate prices, we consider best the request made below Rule 38.

    The 1994 Amendment to Rule 38 allows an award of costs simplest "after a one at a time filed movement or word from the court and affordable possibility to respond [.]" Fed. R. App. P. 38 (1994). Taxel has now not filed this type of separate motion. A request made in an appellate brief does not satisfy Rule 38. See Gabor v. Frazer, seventy eight F.3d 459, 459-60 (9th Cir. 1996) (denying Rule 38 movement without prejudice, and allowing the inquiring for birthday celebration to record a separate rate movement).

    In this example, we do no longer deem it suitable to deny the movement with out prejudice and allow Taxel to document a separate motion. Given that the BAP s rate award became faulty, the State s attraction changed into virtually not frivolous. Accordingly, because any separately-filed Rule 38 motion would be denied, allowing Taxel to report the sort of movement could be futile.


    The BAP successfully concluded that the State s retention of the disputed taxes violated the automatic live provisions of eleven U.S.C. § 362(a) (3). However, it erred in concluding that eleven U.S.C. § one hundred and five(a) authorizes an award of previously incurred appellate charges. The BAP s award of such fees to Taxel is consequently reversed.

    AFFIRMED in part and REVERSED in component. Each party shall undergo its or his own costs on enchantment. Taxel s motion for charges on attraction is denied.


    The Honorable Jane A. Restani, Judge of the US Court of International Trade, sitting through designation


    In a separate order, the financial disaster courtroom also offered sanctions in opposition to the State identical to the amount of Del Mission s lawyer s charges incurred within the financial disaster court. That order isn't always at issue in this appeal


    Soon after Taxel filed the movement for contempt, the State repaid the disputed taxes


    Hereinafter those costs and expenses shall be called "formerly incurred appellate costs."


    Del Mission III also held that the State s movements violated subsection 6 of § 362(a). 998 F.second at 758. Subsection 6 enjoins "any act to collect, assess, or get better a declare against the debtor that arose earlier than the graduation of the case underneath this identify [.]" eleven U.S.C. § 362(a) (6)


    Although the BAP did no longer cite to § one zero five(a), it's miles the authority that authorizes a financial disaster court to award sanctions for everyday civil contempt. Pace, sixty seven F.3d at 193


    Sanctions cannot be issued towards the State until it has waived sovereign immunity. At the time the State filed a claim for the underlying disputed taxes, a governmental unit waived its sovereign immunity by way of submitting a proof of declare towards the financial disaster property. eleven U.S.C. § 106(a) (1993). This waiver is effective for claims springing up out of the identical transaction or prevalence introduced in reaction to the claims filed through the authorities. Id. Accordingly, the kingdom has waived its sovereign immunity in the on the spot case

    We note that the 1994 Amendments to 11 U.S.C. § 106(a) particularly abrogate sovereign immunity for instances arising beneath §§ one hundred and five and 362. See Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 113, 1994 U.S.C.C.A.N. (108 Stat.) 4106, 4117-18. We similarly be aware that there are capacity constitutional troubles with these amendments. See Ohio Agric. Commodity Depositors Fund v. Mahern, --- U.S. ----, 116 S. Ct. 1411, 134 L. Ed. second 537 (1996) (summarily vacating and remanding Seventh Circuit choice upholding constitutionality of the 1994 Amendments in light of Seminole Tribe v. Florida, --- U.S. ----, 116 S. Ct. 1114, 134 L. Ed. second 252 (1996)). In the case at bench, we want no longer bear in mind the constitutionality of the 1994 Amendments because it's miles clean that the State waived sovereign immunity below pre-amendment regulation.


    Our holding is restrained to awards of discretionary appellate charges in bankruptcy complaints. We do now not take into account whether or not a few financial ruin statutes, such as § 362(h), may additionally provide for a mandatory award of appellate prices


    Moreover, we note that even supposing § a hundred and five(a) did authorize an award of formerly incurred appellate costs, we'd still be pressured to vacate the BAP s award. Because awarding sanctions underneath § a hundred and five(a) is a discretionary function of the financial ruin courtroom, an appellate courtroom may not impose contempt sanctions below § one hundred and five(a) primarily based on its assumption of what a bankruptcy court would do on remand. See Pace, 67 F.3d at 193-94 (despite the fact that financial ruin courtroom expressed first rate displeasure with live violator, BAP s imposition of sanctions turned into vacated in order that the financial disaster courtroom ought to decide what sanctions, if any, to impose); see additionally Cascade Rds., 34 F.3d 756, 766-67 (ninth Cir. 1994) (remanding so financial disaster courtroom could determine whether to award prices in its discretion); Johnston Envtl. Corp. v. Knight, (In re Goodman), 991 F.second 613, 620 (ninth Cir. 1993) (same)


    Because the award should be vacated, it is useless for us to deal with the State s argument that the quantity of the award turned into immoderate