Appellants, chapter 11
The order was entered in an adversary proceeding in which Debtors alleged that Johnson, who was a police detective for the City of Scottsdale Police Department, violated the automatic stay and Debtors' constitutional rights by allegedly inducing third parties to repossess vehicles owned by Debtors. Based on the pleadings and record before us, we AFFIRM.
The events leading up to the alleged stay violation stem from Johnson's fraud investigation in connection with Debtors' purchase of a residence in Scottsdale, Arizona.
In early April 2010 Debtors agreed to purchase a residence from James and Michele Wilcox for $1.7 million dollars. David gave the Wilcoxes a signed letter from Wells Fargo Bank ("Wells Fargo") showing that he had several million in his bank account. David also offered the Wilcoxes a "personal guarantee" for the purchase in the form of jewelry and a Colt revolver which he represented to be worth $3 million and $90,000, respectively. David showed the Wilcoxes both items which were in a briefcase that he handed over to them. Based on David's purported wealth, the Wilcoxes agreed to allow Debtors to move into the residence by April 6, 2010, if they paid an initial amount. The closing was scheduled for July.
Debtors and their two adult sons, quickly moved into the residence. Debtors did not pay the Wilcoxes any money on April 6, 2010 or anytime after that. The Wilcoxes contacted Wells Fargo and learned that the letter they had received from David was forged and that he had no accounts at the bank. They further learned that the jewelry was costume jewelry and had minimal value, as did the revolver. The Wilcoxes informed the Scottsdale police regarding their discoveries, which prompted an investigation.
On May 3, 2010, Johnson was assigned to assist with the investigation. Johnson discovered that David had forged numerous documents regarding his wealth and also that he had used the documents in connection with the purchase of another residence in Scottsdale from which he and his family had been evicted. She also uncovered other evidence of fraud.
On May 6, 2010, Johnson arrested David for fraud schemes and forgery. He was booked and released. Also on May 6, 2010, Debtors filed their chapter 11 petition.
On May 12, 2010, Johnson learned that David had three vehicles registered in his name, all of which were subject to liens in favor of Auto Cash Title Loans ("Auto Cash"). Johnson called Auto Cash and informed the manager, Jamie Reyes ("Reyes"), that she was investigating David's use of forged documents to obtain goods. Reyes faxed Johnson the documents David had provided to Auto Cash to obtain the loans from Auto Cash on the three vehicles, including a Wells Fargo letter stating that David had $20 million in an account. There was also some discussion about Reyes initiating the repossession of the vehicles. Johnson told Reyes the location of the vehicles, which she had learned through her investigation.
On the same day, Reyes requested Extreme Enterprises, Inc. ("Extreme") to repossess the vehicles. Extreme contacted Johnson who confirmed the location of the vehicles. Extreme repossessed the vehicles.
On May 17, 2010, Debtors filed a complaint against Auto Cash, Extreme and Johnson, alleging all three had willfully violated the automatic stay by repossessing Debtors' vehicles. In the complaint, Debtors alleged that Johnson had "instructed Auto Cash Title Loans . . . to violate an automatic [s]tay and provided the location of the automobiles for repossession." They further alleged that Johnson described their bankruptcy to Reyes as "fraudulent" and "said the court ordered [a]utomatic [stay], is to be disregarded and the 3 Harris autos are to be repossessed and impounded pending further investigation." Finally, they alleged that despite showing Extreme a copy of their bankruptcy petition, Extreme informed Debtors' sons that "[it] was picking up the cars at the direction of the Scottsdale Police Department for impound and they were to produce all the cars or be arrested."
On June 4, 2010, Debtors filed a document entitled "Complaint Cause of Action Willful Violation of Automatic Stay Stipulation for Dismissal." Debtors again alleged that Johnson claimed their bankruptcy filing was a fraud and that she had "compelling evidence" as her basis and authority to violate the automatic stay "but provided nothing in terms of due process or a valid court order to work with the loan and repossession companies in seizure of properties, and acted in violation of color of law, civil rights, under the 4th amendment of the US Constitution." The document further stated that Debtors had settled with Auto Cash and purported to dismiss Auto Cash from the adversary proceeding based on a stipulation which was never presented to the bankruptcy court. Attached to the pleading was an email letter from Reyes which stated that Johnson had called Auto Cash and informed them about the location of the vehicles and her investigation regarding the possible fraud.
On June 17, 2010, Debtors filed a document entitled "Cause of Action, Willful Violation of Automatic Stay, Stipulation of Dismissal, Request for Summary Judgment." Debtors alleged that Johnson acted outside the scope of her authority by assisting Auto Cash in moving property from a place against the wishes of an interested party. They further contend Johnson "induced" Auto Cash and Extreme to violate the automatic stay. Debtors requested summary judgment based on the submitted evidence and documentation.
The document also purported to dismiss Extreme from the adversary proceeding. Attached was an email letter from Jay Miller of Extreme which states that Johnson advised him to pick up the vehicles and if they were not picked up they would be impounded.
On July 20, 2010, Johnson filed a "Response To Motion For Summary Judgment And Cross-Motion For Summary Judgment." Johnson argued that her conduct was excepted from the operation of the automatic stay under § 362(b)(4) unless Debtors could show the action was to enforce a money judgment. She maintained that they could not make such a showing since the government was not a creditor and her investigation was in the furtherance of public policy. Johnson further contended that providing the location of the vehicles was not the proximate cause of Debtors' vehicles being repossessed. According to Johnson, all she did was to inform Auto Cash about the location of the vehicles that were directly linked to her fraud investigation. For all these reasons, Johnson argued that she was entitled to summary judgment as a matter of law.
On July 28, 2010, Debtors filed a "Response and Opposition To Cross Motion For Summary Judgment." In that document, Debtors argued for a trial and alleged that Johnson used her police power to violate the automatic stay by using a third party under color of law. Debtors relied on the email letters from Reyes and Jay Miller to support their view that there were triable issues of fact regarding the extent of Johnson's involvement in the repossession and stay violation.
On September 13, 2010, the bankruptcy court conducted a hearing and ruled orally. In granting summary judgment for Johnson, the court found that Debtors' email letters were not authenticated and thus inadmissible for purposes of summary judgment. Moreover, the court found that even if the emails were admissible, it was not clear "how Detective Johnson actively encouraged a stay violation and provided the directions here." The court further concluded that Johnson's activities were excepted from the stay under § 362(b)(1) and (4). Last, the court concluded that "it's up to the creditors, as independent parties, to make their own decisions about whether or not they're going to take a chance and violate the automatic stay." The order reflecting the court's ruling was entered on September 16, 2010. Debtors filed this timely appeal.
The bankruptcy court had jurisdiction over this proceeding under 28 U.S.C. §§ 1334 and 157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.
Whether the bankruptcy court erred in granting summary judgment for Johnson.
We review an order granting a motion for summary judgment de novo.
In reviewing the bankruptcy court's decision on a motion for summary judgment, we apply the same standards as the bankruptcy court. Summary judgment is properly granted when no genuine and disputed issues of material fact remain, and when, viewing the evidence most favorably to the non-moving party, the movant is entitled to prevail as a matter of law. Fed. R. Civ. P. 56 (made applicable by Rule 7056);
The moving party bears the initial burden of showing that there is no material factual dispute. Where the moving party does not bear the burden of proof on an issue at trial, "the moving party may discharge its burden of production by either of two methods."
If the moving party meets its initial burden, the burden then shifts to the non-moving party to set out, by affidavits or admissible discovery material, specific facts showing a genuine issue for trial. Fed. R. Civ. P. 56(e)(2). "A trial court can [] consider [only] admissible evidence in ruling on a motion for summary judgment."
When Debtors filed their bankruptcy petition, they were immediately protected by the automatic stay under § 362(a), which operates as a stay of, among other things,
§ 362(a)(3), (4), (5). The stay does not, however, prevent
§ 362(b)(1), (4).
Nevertheless, "[t]he scope of protections embodied in the automatic stay is quite broad, and serves as one of the most important protections in bankruptcy law."
As the party moving for summary judgment on her cross motion, Johnson bore the initial burden of showing that there was no material factual dispute. Johnson provided her sworn declaration which provides in relevant part:
We agree with the bankruptcy court's assessment that based on Johnson's declaration there could not be a stay violation. Johnson's testimony shows that the alleged infraction amounted to no more than her providing the location of the vehicles to Auto Cash and Extreme during the course of a criminal investigation regarding David's alleged fraud.
Once Johnson met her initial burden on summary judgment, the burden then shifted to Debtors as the non-moving parties to set out, by affidavits or admissible discovery material, specific facts showing a genuine issue for trial. Fed. R. Civ. P. 56(e)(2). The only evidence Debtors submitted were the email letters from Reyes and Jay Miller. Reyes stated:
Jay Miller stated:
The record shows that these email letters were obtained by Debtors' son, Toby, through Michael D. Miller, the attorney for Auto Cash and Extreme. An email from Toby to Attorney Miller dated May 26, 2010, states:
Toby goes on:
The bankruptcy court correctly observed that the email letters from Reyes and Jay Miller were not authenticated and thus not admissible for purposes of summary judgment.
Even assuming the documents were admissible, we conclude that Debtors still failed to meet their burden of producing evidence that set forth specific facts showing a genuine issue for trial as required under Fed. R. Civ. P. 56(e). We agree with the bankruptcy court that Jay Miller's email letter said nothing more than Johnson provided the location of the vehicles for the repossession. Moreover, drawing all reasonable inferences in Debtors' favor with respect to Reyes's email letter, it does not support the conclusion that Debtors suggest; namely, that Johnson told Reyes to violate the stay because Debtors' bankruptcy case was a fraud. In short, other than the self-serving email letters, which lack any detailed facts or supporting evidence, Debtors presented no evidence to show a question of material fact exists with respect to Johnson's involvement in the repossession.
Further, the factual context of the record before us renders Debtors' claim against Johnson implausible. As the bankruptcy court observed, the City was not a creditor and had no financial interest in Debtors' vehicles. Other than Debtors' unsupported arguments, there is no evidence in the record that shows Johnson had any interest in Debtors' vehicles being repossessed.
Like the bankruptcy court, we conclude there were no genuine issues of material fact regarding the alleged stay violation. The record shows that Johnson simply informed Auto Cash and Extreme about the location of the vehicles. Standing alone, this communication hardly amounts to a stay violation. Therefore, Johnson was entitled to judgment as a matter of law on this element of Debtors' claim.
Even if the stay did apply, Johnson's communications were excepted from the scope of the automatic stay. It is undisputed that Johnson's communications to Auto Cash and Extreme regarding the location of Debtors' vehicles were made while she was investigating David's alleged fraud. Thus, as a matter of law, the communications were excepted from the stay under § 362(b)(1).
Further, police and regulatory activities are excepted from the automatic stay under § 362(b)(4) unless the debtor can show that the actions were to enforce a money judgment. Johnson's communications had nothing to do with enforcing a money judgment. Thus, her communications would also be excepted from the stay under § 362(a)(4).
Last, Debtors raise numerous issues that relate to violation of their constitutional rights arising from the automatic stay violation and Johnson's alleged involvement in the repossession. Debtors' constitutional claims are based on 42 U.S.C. § 1983 which provides a remedy for civil rights violations.
For the reasons discussed above, we AFFIRM.
