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In re Dardashti

United States Bankruptcy Appellate Panel of the Ninth Circuit
Feb 12, 2008
BAP CC-07-1311-PaDMo (B.A.P. 9th Cir. Feb. 12, 2008)

Opinion


In re: HOUSHANG DARDASHTI, Debtor. HOUSHANG DARDASHTI, Appellant, v. JEFFREY I. GOLDEN, Chapter 7 Trustee, Appellee BAP No. CC-07-1311-PaDMo United States Bankruptcy Appellate Panel of the Ninth CircuitFebruary 12, 2008

NOT FOR PUBLICATION

Argued and Submitted at Orange, California: January 25, 2008

Appeal from the United States Bankruptcy Court for the Central District of California. Bk. No. LA 99-36522 BR. Hon. Barry Russell, Bankruptcy Judge, Presiding.

Before: PAPPAS, DUNN and MONTALI, Bankruptcy Judges.

MEMORANDUM

This is an appeal of an order of the bankruptcy court holding debtor Houshang Dardashti (" Dardashti") in contempt for failure to comply with the court's turnover order, and directing that Dardashti be incarcerated until he complies with a provision of the turnover order, imposing monetary sanctions, and awarding damages to the trustee. We AFFIRM.

FACTS

This is the Panel's second encounter with the dispute between these parties.

Dardashti filed a chapter 7 petition on July 15, 1999, and Jeffrey I. Golden (" Trustee") was appointed trustee. On November 2, 1999, the case was closed as a " no asset" bankruptcy.

Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. § § 101-1330, as enacted and promulgated prior to the effective date (October 17, 2005) of the relevant provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, April 20, 2005, 119 Stat. 23, and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.

Then, on November 14, 1999, some 122 days after Dardashti filed his bankruptcy petition, Dardashti's father, Loghman Dardashti (" Loghman"), died. Loghman's will, which was probated in the Family Court of Israel, devised to Dardashti a 40 percent interest in two parcels of real property in Israel (the " Properties"). Loghman's probate estate was approved for distribution on April 13, 2000.

Dardashti did not supplement or amend his bankruptcy schedules to reflect his inheritance. When Trustee finally became aware of these events, he moved to reopen Dardashti's bankruptcy case to assert the bankruptcy estate's interest in the Properties. The bankruptcy court granted the motion on September 27, 2005.

On November 18, 2005, Trustee filed a motion requesting that Dardashti's interest in the Properties be turned over to Trustee pursuant to § 521(a)(3) and (4) (the " Turnover Motion"). Trustee argued that, under § 541(a)(5)(A), Dardashti's interest in the Properties was property of the estate because he acquired it, or became entitled to acquire it, by bequeath, devise or inheritance within 180 days of the filing of his bankruptcy petition.

Dardashti did not respond to the Turnover Motion. After conducting a hearing on the Turnover Motion on December 6, 2005, at which Dardashti did not appear, the bankruptcy court entered an order granting the Turnover Motion on December 28, 2005 (the " Turnover Order"). The Turnover Order provides, in relevant part, that:

Although it was sent to the address in his petition, Dardashti would later argue that he did not receive notice of the hearing. In his brief and at oral argument, Trustee's counsel represents that Dardashti still has not updated his mailing address in the records of the bankruptcy court.

(2) The Debtor shall immediately, upon receipt from the Trustee, execute and return to the Trustee a power of attorney form . . . and convey his interests in the [Properties] to the Trustee (or an assignee of the Trustee) and . . . execute all other appropriate documents necessary to effect the turnover of the [Properties] to Trustee.

The Turnover Order also directed Dardashti to provide a copy of Loghman's will to Trustee, turn over any other property bequeathed or devised in the will, amend his bankruptcy schedules to reflect the Properties inherited from Loghman, and cooperate with Trustee in identifying and recovering any property of the bankruptcy estate.

Dardashti did not seek reconsideration or a stay of enforcement of the Turnover Order, nor did he appeal. Trustee alleges that Dardashti has refused to comply with the Turnover Order, and, in particular, that he has not executed the power of attorney so that Trustee may exercise control over, or be conveyed, the bankruptcy estate's interest in the Properties.

On July 19, 2006, approximately ten months after the Turnover Order became final, Dardashti commenced an adversary proceeding against Trustee. In his complaint, Dardashti sought a declaratory judgment from the bankruptcy court determining that his interest in the Properties is not property of the bankruptcy estate. Dardashti alleged that because the Properties are located in Israel, that nation's real property and probate laws apply. According to Israeli law, Dardashti suggested, the operative date for purposes of § 541(a)(5)(A) (i.e., the date he " acquired, or became entitled to acquire" an interest in the Properties) is the date a probate order is entered by the Israeli court giving him, as a devisee, the right to possession of property, not the date of Loghman's death.

Trustee moved to dismiss the complaint on November 27, 2006. Trustee argued that Dardashti's complaint was both an impermissible collateral attack on the Turnover Order, and that his arguments regarding the effective date under § 541(a)(5)(A) were incorrect as a matter of law.

The bankruptcy court heard oral argument from counsel for both parties on January 17, 2007, and ruled orally on the record. The court stated that because it had previously decided that Dardashti's interest in the Properties was property of the bankruptcy estate in connection with granting the Turnover Order, Dardashti was precluded from further litigating that issue. The bankruptcy court therefore dismissed the adversary proceeding with prejudice by order entered on February 6, 2007 (the " Dismissal Order"). Tr. Hr'g 7:18 - 8:1 (January 17, 2007).

Dardashti appealed the Dismissal Order to this Panel. In its October 31, 2007, decision in the appeal, the Panel concluded that the bankruptcy court erred in dismissing the complaint on the grounds of preclusion. However, because the Panel could affirm for any reason supported by the record that was raised sufficiently for the bankruptcy court to rule, see In re E.R. Fegert, Inc., 887 F.2d 955 (9th Cir. 1989), it ruled that Dardashti's interest in the Properties was property of the estate as a matter of law:

[B]ecause [Dardashti] acquired rights in the Interest as of the Testator's death within 180 days of the filing of his bankruptcy petition, which rights he could renounce, transfer and encumber and which rights creditors could reach, these rights were property of his bankruptcy estate under § 541(a)(5)(A).

Memorandum at 16, Dardashti v. Golden (In re Dardashti), No. CC- 07-1066 TPaMk (9th Cir. BAP, October 31, 2007). The Panel therefore affirmed the Dismissal Order. The Panel's decision was not appealed.

In the meantime, Trustee took action in Israel to enforce the Turnover Order (the " Israeli Proceedings"). At Trustee's request, on July 4, 2007, the Israeli court entered a preliminary injunction enjoining Dardashti from transferring his interest in the Properties while the Israeli Proceedings were pending (the " Israeli Injunction"). In the Israeli Injunction, the Israeli court reasoned:

It could be that the foreign law, in accordance with which the proceedings were renewed due to the discovery of assets that came into [Dardashti's} hands after he was discharged from his debts and the bankruptcy case was closed, does not resemble the bankruptcy laws that apply in this regard in Israel. However, even if the foreign law varies from the law in Israel as [Dardashti] claims, the content of the Foreign Judgment [the Turnover Order] that was intended to realize the obligation and consent of [Dardashti] to hand over his assets to the bankruptcy fund in return for being discharged from his debts to his creditors, does not harm basic social values in Israel. It therefore seems that the [Turnover Order] is not contrary to the public order.

The Israeli judge also wrote in the Israeli Injunction, " I was convinced that [Trustee] has a good chance of winning the [proceedings to enforce the Turnover Order]."

In addition, on April 13, 2007, Trustee filed a motion in the bankruptcy court for an order to show cause requiring Dardashti to appear and show why he should not be held in contempt of court and sanctioned for violating the Turnover Order. Trustee asserted that Dardashti had willfully ignored the bankruptcy court's instructions in the Turnover Order to execute a power of attorney in favor of Trustee, to amend his schedules, and to cooperate with the Trustee in his efforts to recover and administer the Properties. Trustee requested that Dardashti be held in civil contempt, that he be incarcerated and fined $500 per day until he complied with the Turnover Order, and that he pay Trustee's damages, attorney's fees, and costs incurred in enforcing the Turnover Order.

Dardashti responded to this motion on April 20, 2007. Among his arguments were (1) that there had never been a final determination that his interest in the Properties was property of the bankruptcy estate; (2) that the issue was before the Panel on appeal; and (3) that Dardashti had no further interest in the Properties because he had executed an irrevocable power of attorney to his brother, Albert, " to do all things related to their Israeli property" on March 8, 2001, and later executed an irrevocable power of attorney conveying his interest in the Properties to his sister, Paridokht, on May 12, 2002.

The bankruptcy court issued an order to show cause (" OSC") to Dardashti on April 16, 2007. He responded to the OSC, adding the following to his previous arguments against contempt: (1) the contempt motion violates the restraining orders sought and obtained by the Trustee in the Israeli Proceedings; (2) the motion attempts to circumvent Israeli rights to administer properties within its borders; (3) the issue whether Dardashti's interest in the Properties is property of the estate is on appeal before the Panel; (4) the motion is premature; and (5) the contempt motion places Dardashti in an untenable position concerning violation of Israeli law.

On June 12, 2007, the bankruptcy court conducted the hearing on the OSC, at which the parties appeared through counsel. In its ruling in favor of Trustee, the court reaffirmed its decision that Dardashti's interest in the Properties was property of the bankruptcy estate. Tr. Hr'g 10:20-21 (June 12, 2007). Additionally, the court ruled that his execution of the powers of attorney in favor of his siblings did not prevent Dardashti from signing the power of attorney in favor of Trustee. In particular, the court first reasoned that, via the power of attorney, Dardashti was only required by the Turnover Order to turn over whatever interest he may have in the Properties, and Dardashti conceded that he had some interest. Second, the court noted that the agreements between Dardashti and his siblings did not prevent Dardashti from complying with the Turnover Order because

The Properties were not scheduled and the automatic stay has applied to the Properties continuously since the Petition Date of July 15, 1999, including while the case was closed. The automatic stay enjoins, inter alia, " any act to obtain possession of property of the estate or of property from the estate, or to exercise control over property of the estate." 11 U.S.C. § 362(a)(3). All of the Agreements were executed after the Petition Date and, therefore, are null, void, and not enforceable with respect to the estate.

Memorandum, Conclusion of Law 7.

The bankruptcy court entered an order finding Dardashti was in contempt of the Turnover Order (the " Contempt Order") on August 14, 2007. It issued a warrant for Dardashti's civil arrest and ordered that he be incarcerated until he complied with the Turnover Order by signing the power of attorney; that he pay $500 per day until he complied with the Turnover Order's provision requiring him to execute the power of attorney; and that he pay Trustee $202, 603.16 for damages resulting from his contempt.

We were informed at oral argument that Dardashti remains in Israel and has not been incarcerated at any time for his violation of the Turnover Order.

Dardashti filed a timely notice of appeal of the Contempt Order on August 17, 2007.

JURISDICTION

Dardashti questions the jurisdiction of the bankruptcy court to enter the Contempt Order. We consider his arguments below and determine that the bankruptcy court had jurisdiction pursuant to 28 U.S.C. § § 1334 and 157(b)(2)(A). We have jurisdiction pursuant to 28 U.S.C. § 158.

ISSUES

Whether the bankruptcy court lacked jurisdiction to enter the Contempt Order.

Whether the bankruptcy court abused its discretion in finding Dardashti in contempt of the Turnover Order and in imposing incarceration and monetary sanctions.

STANDARDS OF REVIEW

We review the jurisdiction of the bankruptcy court de novo. Johnson v. TRE Holdings (In re Johnson), 346 B.R. 190, 193 (9th Cir. BAP 2006).

We review a bankruptcy court's civil contempt order for abuse of discretion. Knupfer v. Lindblade (In re Dyer), 322 F.3d 1178, 1191 (9th Cir. 2003). A trial court's decision to impose coercive sanctions for contempt is also reviewed for abuse of discretion. Hansbrough v. Birdsell (In re Hercules Enters., Inc.), 387 F.3d 1024, 1027 (9th Cir. 2004); Hook v. Ariz. Dep't of Corrections, 107 F.3d 1397, 1403 (9th Cir. 1997). An award of attorney's fees in a civil contempt proceeding is within the discretion of the trial court. Birdsell, 387 F.3d at 1027; Harcourt Brace Jovanovich Legal & Prof. Publ'n, Inc. v. Multistate Legal Studies, Inc., 26 F.3d 948, 953 (9th Cir. 1994). Underlying factual findings made in connection with a civil contempt order are reviewed for clear error. Irwin v. Mascott, 370 F.3d 924, 931 (9th Cir. 2004).

DISCUSSION

1. The bankruptcy court had jurisdiction to enter the Contempt Order.

Dardashti attempts to render this issue unnecessarily complicated by reference to irrelevant facts and misleading arguments. But to determine whether the bankruptcy court had jurisdiction to enter the Contempt Order, we need only focus on a few essential events and considerations.

Dardashti inherited an interest in the Properties within 180 days of his bankruptcy filing, but did not inform Trustee or amend his schedules. The bankruptcy court entered the Turnover Order compelling Dardashti to cooperate with Trustee in his efforts to administer the bankruptcy estate's interest in the Properties. To accomplish this, the Turnover Order required Dardashti, among other things, to execute a power of attorney in favor of Trustee so that he could exercise whatever rights Dardashti had in the Properties. Dardashti did not oppose the Turnover Motion, nor did he appeal or request a stay of the Turnover Order.

Trustee attempted to communicate with Dardashti on numerous occasions over a period of sixteen months to demand that he comply with the Turnover Order; Dardashti ignored these demands. Trustee then asked the bankruptcy court to hold Dardashti in civil contempt for his willful failure to obey the Turnover Order. After a hearing at which Dardashti was represented by counsel, the bankruptcy court found Dardashti had willfully failed to comply with the Turnover Order, and was in contempt. The court directed that Dardashti be incarcerated and imposed a daily fine until he complied with one element of the Turnover Order (that Dardashti execute the power of attorney), and ordered that Dardashti pay the estate's expenses, attorney's fees and costs incurred in enforcing the Turnover Order. Dardashti has appealed the Contempt Order, but has not requested a stay pending appeal.

Dardashti argues that the bankruptcy court lacked jurisdiction to enter the Contempt Order because another order, the Dismissal Order, was pending on appeal before the Panel. Because in that appeal Dardashti raised the issue of whether his interest in the Properties was property of the bankruptcy estate, and because the Turnover Order's provision that Dardashti execute a power of attorney to Trustee presumed that the bankruptcy estate held an interest in the Properties, Dardashti argues that the Contempt Order enforcing the Turnover Order was affected by the appeal of the Dismissal Order. Because it affected the appeal, Dardashti suggests the bankruptcy court could not enforce the Turnover Order pending resolution of that appeal. This argument lacks merit for at least two reasons.

Dardashti cites Bialac v. Harsh Inv. Corp. (In re Bialac), 694 F.2d 625, 627 (9th Cir. 1982), for the proposition that the appeal of the Dismissal Order " deprive[d] the bankruptcy court of jurisdiction to enter orders that would affect or modify [our emphasis] any issue or matter on appeal." Dardashti also cites a bankruptcy court decision noting that the trial court has no jurisdiction to do anything that impacts on [an] issue or matter under appeal. In re Commodore Corp., 87 B.R. 62, 63 (Bankr. N.D. Ind. 1987).

However, Dardashti misstates the holdings in both Bialac and Commodore. The court of appeals in Bialac does not use the words " affect or modify any issue or matter on appeal." Instead, the court held that " a bankruptcy court may [not] vacate or modify an order while on appeal." Bialac, 694 F.2d at 627 (emphasis added). In other words, under Bialic, a bankruptcy court lacks jurisdiction to modify or vacate an order that is under review on appeal; the Bialac decision does not prohibit the bankruptcy court from taking any steps that may " affect" the appeal. Moreover, while announcing its belief that it had no jurisdiction to impact the issue or matter under appeal, the Commodore court went on to make changes in an appealed order that it believed did not significantly impact the appeal. Commodore, 87 B.R. at 64. In short, the case law upon which Dardashti relies does not support the argument that an appeal divests the bankruptcy court of jurisdiction to issue any order that might affect an order on appeal.

Instead, this Panel has explained that, when there is no stay pending appeal, the bankruptcy court retains jurisdiction to enforce an order that is on appeal, on condition that in doing so, the bankruptcy court does not significantly alter or expand upon the terms of that order. The Panel stated,

While an appeal of an order is pending, the trial court retains jurisdiction to implement or enforce the order. This is true because in implementing an appealed order, the court does not disrupt the appellate process so long as its decision remains intact for the appellate court to review. Accordingly, courts have recognized a distinction between acts undertaken to enforce the judgment, which are permissible, and acts which expand upon or alter it, which are prohibited.

Hagel v. Drummond (In re Hagel), 184 B.R. 793, 798 (9th Cir. BAP 1995); see also Rains v. Flinn (In re Rains), 428 F.3d 893, 904 (9th Cir. 2005) (" Absent a stay or supersedeas, the trial court retains jurisdiction to implement or enforce the judgment or order but may not alter or expand upon the judgment."). Under this approach, we need only inquire whether the Contempt Order significantly altered, amended or expanded the Dismissal Order while that order was on appeal.

In this instance, the bankruptcy court's Contempt Order did none of these things. Indeed, the bankruptcy court did not alter, amend or expand the Dismissal Order at all. The only change in the status quo brought about by the Contempt Order was to enforce a single provision of the Turnover Order, the one compelling Dardashti to sign a power of attorney in favor of Trustee so that Trustee could exercise whatever rights Dardashti had in the Properties. In requiring Dardashti to sign a power of attorney, the bankruptcy court did nothing to modify, alter, or change any of the rulings it had made in the Dismissal Order. Nor did the Contempt Order impair Dardashti's ability to seek review of the Dismissal Order on appeal.

In this regard, two statements in Dardashti's Brief are puzzling. First, he states: " The OSC Proceedings by the Chapter 7 Trustee clearly affected the [appeal of the Dismissal Order], in that had Debtor complied with the Trustee's request, as opposed to filing the [appeal of the Dismissal Order, ] no Opposition OSC re: Contempt would have been filed." Dardashti Opening Br. at 11. This is, of course, true: Had Dardashti complied with the Turnover Order, there presumably would have been no need for the contempt motion. But Dardashti then goes on: " Reversal of the Court's [Dismissal Order] would make the Chapter 7 Trustee's OSC proceedings impossible." Id . This statement is not necessarily true. Since the Dismissal Order granted Trustee's motion to dismiss, one possible result would have been our remand to the bankruptcy court to conduct further proceedings in the action. Only had the Panel reversed the Dismissal Order and ruled that Dardashti's interest in the Properties was not property of the estate, would grounds have existed to vacate both the Turnover Order and the Contempt Order.

But, of course, the Panel did not reverse the Dismissal Order, and instead affirmed the bankruptcy court's decision by ruling that Dardashti's interest in the Properties was indeed property of the estate as a matter of law. Under these facts, it cannot be said that the Contempt Order had any appreciable effect on the Panel's consideration of the Dismissal Order.

Because no stay was in place, the bankruptcy court was free to enforce the Turnover Order. The Contempt Order did not significantly alter, amend, or expand the Dismissal Order on appeal. Thus, the bankruptcy court had jurisdiction to enter the Contempt Order pursuant to 28 U.S.C. § § 1334 and 157(b)(2)(A).

2. The bankruptcy court did not abuse its discretion in finding Dardashti in contempt, in imposing incarceration and monetary sanctions, and awarding damages.

Congress has granted broad powers to the bankruptcy courts to implement the bankruptcy code. Section 105(a) provides:

The court may issue any order, process or judgment that is necessary or appropriate to carry out the provisions of this title. No provision of this title providing for the raising of an issue by a party in interest shall be construed to preclude the court from, sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process.

The Ninth Circuit has held that § 105(a) grants bankruptcy courts the power to hold parties in civil contempt. Birdsell, 387 F.3d at 1027; Dyer, 322 F.3d at 1191; Caldwell v. Unified Capital Corp. (In re Rainbow Magazine, Inc.), 77 F.3d 278, 285 (9th Cir. 1996). In the exercise of the civil contempt power, courts in this circuit may incarcerate an individual for failure to obey an order of the court until such time as the offender complies with the order. Dyer, 322 F.3d at 1193; Conn. Gen. Life Ins. Co. v. New Images of Beverly Hills, 321 F.3d 878, 880 (9th Cir. 2002); see also Hicks v. Feiock, 485 U.S. 624, 635, 108 S.Ct. 1423, 99 L.Ed.2d 721 (1988) (Incarceration is an appropriate coercive sanction for civil contempt so long as " the contemnor can avoid the sentence imposed on him, or purge himself of it, by complying with the terms of the original order."); Shillitani v. United States, 384 U.S. 364, 368, 86 S.Ct. 1531, 16 L.Ed.2d 622 (1966). In addition, civil contempt powers include the ability to award attorney's fees and assess fines. Birdsell, 387 F.3d at 1027; Dyer, 322 F.3d at 1193; F.J. Hanshaw Enters. v. Emerald River Dev., Inc., 244 F.3d 1128, 1136 (9th Cir. 2001). Compensatory damages are appropriate when the " contumacious behavior significantly contributed to the [harm] and 'such result was foreseeable.'" In re Cent. Eur. Indus. Dev. Co., LLC, 356 B.R. 1, 5 (Bankr. N.D. Cal. 2006) (quoting In re Gen. Motors Corp., 110 F.3d 1003, 1018 (4th Cir. 1997)); see also Dyer, 322 F.3d at 1193; Birdsell, 387 F.3d at 1027.

The bankruptcy court did not cite any particular legal authority for its Contempt Order. However, the court of appeals suggests that § 105(a) is the appropriate authority for contempt for violation of a particular, identifiable order of a bankruptcy court, as in this case. Dyer, 322 F.3d at 1191.

In reviewing a bankruptcy court's finding of contempt and order imposing incarceration, fines and attorney's fees, the Ninth Circuit consults a four-point checklist. The Panel should decide, applying a restrained standard of review, whether the bankruptcy court properly determined (1) that the contemnor violated a particular court order, (2) beyond substantial compliance, (3) not based on good faith or a reasonable interpretation of the order, (4) by clear and convincing evidence. Go-Video, Inc. v. Motion Picture Ass'n of Am. (In re Dual-Deck Video Cassette Recorder Antitrust Litigation), 10 F.3d 693, 695 (9th Cir. 1993).

The court of appeals has explained that, although a finding of civil contempt is a serious matter, and thus the proponent of the contempt is required to prove his assertions by clear and convincing evidence, at the same time, the standard of review of a contempt order is relaxed, an abuse of discretion, such that the appellate court should not reverse unless it has a definite and firm conviction that the trial court committed a clear error of judgment after weighing the relevant factors. Go-Video, 10 F.3d at 695.

Trustee presented evidence to the bankruptcy court that Dardashti violated the Turnover Order by not signing the power of attorney form Trustee had provided to him; by not amending his bankruptcy schedules to reflect the inheritance; by apparently entering into an agreement after the Turnover Order was in effect to develop the Properties; and by not cooperating with Trustee in the identification and recovery of all property of the estate. Trustee also provided evidence that Dardashti's actions in flouting the Turnover Order required Trustee to obtain appointment of an Israeli estate administrator to commence Israeli enforcement proceedings, and to incur substantial attorney's fees and costs. The bankruptcy court entered formal Findings of Fact endorsing each of these points in its decision. The bankruptcy court's findings satisfy the elements on the Ninth Circuit's checklist.

Once Trustee had presented a prima facie case for contempt, the burden shifted to Dardashti to demonstrate why he was unable to comply with the Turnover Order. F.T.C. v. Affordable Media, 179 F.3d 1228, 1239 (9th Cir. 1999). Dardashti argued that he was unable to comply with the order for two reasons: (1) that he had granted irrevocable powers of attorney that stripped him of all powers with respect to the Properties; and (2) that the Israeli Injunction of July 4, 2007, issued by the Israeli District Court, barred him from transferring any interest in the Properties.

The bankruptcy court correctly held that the agreements Dardashti entered into, and the " irrevocable" powers of attorney he executed, did not prevent him from complying with the Turnover Order. The Properties were not listed in Dardashti's bankruptcy schedules, and thus the automatic stay applied to the Properties. Cheng v. K& S Diversified Invs., Inc. (In re Cheng), 308 B.R. 448, 461 (9th Cir. BAP 2004) (" Property of the estate that is not scheduled or otherwise administered by the time the case is closed remains property of the estate forever. The automatic stay continues to protect property of the estate so long as it retains that status."). The automatic stay forbids " any act to obtain possession of the estate . . . or to exercise control over property of the estate." § 362(a)(3). Because it was undisputed that all the agreements and powers of attorney were executed after the petition was filed, and that they purported to impact Dardashti's rights in the Properties, the bankruptcy court correctly ruled that any interests in favor of Dardashti's siblings created by the agreements and powers of attorney were void. 40235 Wash. St. Corp. v. Lusardi, 329 F.3d 1076, 1080 (9th Cir. 2003) (" Transfers in violation of the automatic stay are void.").

In addition, the bankruptcy court found that the agreements and powers of attorney were known to Dardashti at the time the Turnover Motion was filed and the Turnover Order entered. Dardashti did not oppose the Turnover Motion, nor did he seek reconsideration or appeal of the Turnover Order, based on these alleged agreements or powers of attorney. He therefore cannot rely upon the existence of these agreements or powers of attorney to defend his failure to comply with the Turnover Order at this late date.

Dardashti's argument that the Israeli Injunction prohibited him from transferring his interest in the Properties, and therefore cooperating with Trustee, is also unpersuasive. As the bankruptcy court properly concluded, " The injunction obtained by the Trustee in Israel does not prevent the Debtor from complying with the Turnover Order (the purpose of the injunction is to prevent the Debtor from taking any act that is contradictory to his obligations pursuant to the Turnover Order)." Conclusion of Law 11, Memorandum at 6.

Both the original Hebrew and a certified English translation of the Israeli Injunction is included in the excerpts of record before the Panel. A careful reading of this document supports the bankruptcy court's conclusion that the purpose of the Israeli Injunction was to prevent Dardashti from thwarting the Turnover Order. The Israeli court first noted that the purpose of Trustee's lawsuit was to seek enforcement of the Turnover Order in Israel:

The Trustee and [his] Attorney Dror Vigdor . . . sued for the enforcement of the [Turnover Order] and to order [Dardashti] to transfer to the Trustee his rights in the Land and to prohibit the Debtor from executing any transaction and/or taking any action regarding his rights in the Land and the Companies.

The Israeli court then ruled that the Turnover Order, although possibly inconsistent with Israeli law, was not contrary to the basic social values and public order interests of Israeli law and that the court was convinced that Trustee had a good chance of prevailing in the proceedings to enforce the Turnover Order.

Dardashti cites one paragraph of the Israeli Injunction to support his position that the Israeli Injunction insulates him from Trustee's efforts to enforce the Turnover Order:

The Debtor's rights in the Land are interwoven with the rights of other parties by virtue of obligations that Logman [sic] Dardashti undertook prior to his death and/or the provisions of Logman Dardashti's Will and/or contracts made between Dardashti brothers and Heftsiba. When the debtor does not own a certain portion of the land, the significance of the requested temporary relief is to negate any possibility of exercising the respondent's rights in the land, and there is no justification for this.

However, Dardashti's selection from the injunction deletes the last two lines of this paragraph, which add:

Accordingly, it would be right to grant temporary relief to ensure that [Dardashti's] portion in the Land and/or in the proceeds therefrom will reach the bankruptcy fund, should [Trustee] be awarded his claim, without prejudicing the rights of other holders of rights in the land to do with their portion of the Land as they please.

Moreover, the Israeli Injunction preserves the right of Trustee, through Attorney Vigdor, to object to any transaction involving the Properties. And under this provision, Trustee is the only party with this authority. Therefore, the bankruptcy court could properly conclude that the Israeli Injunction actually supports, not prevents, enforcement of the Turnover Order.

Trustee presented ample evidence to show that Dardashti had willfully violated the Turnover Order. Dardashti failed to establish that he was unable to comply with the Turnover Order. For all the above reasons, we conclude that the bankruptcy court did not clearly err in finding that Dardashti's failure to obey the Turnover Order was willful and not in good faith, and that the bankruptcy court did not abuse its discretion in entering the Contempt Order.

CONCLUSION

The bankruptcy court's Contempt Order, including its imposition of sanctions, is AFFIRMED.


Summaries of

In re Dardashti

United States Bankruptcy Appellate Panel of the Ninth Circuit
Feb 12, 2008
BAP CC-07-1311-PaDMo (B.A.P. 9th Cir. Feb. 12, 2008)
Case details for

In re Dardashti

Case Details

Full title:In re: HOUSHANG DARDASHTI, Debtor. v. JEFFREY I. GOLDEN, Chapter 7…

Court:United States Bankruptcy Appellate Panel of the Ninth Circuit

Date published: Feb 12, 2008

Citations

BAP CC-07-1311-PaDMo (B.A.P. 9th Cir. Feb. 12, 2008)

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