Opinion
Alejandro Diaz Barba ("Alex Diaz") and Martha Margarita De La Torre (aka "Mrs. Diaz") (collectively "Diaz Defendants"):
ORDER TO SHOW CAUSE RE: CONTEMPT FOR VIOLATION OF CONTINUING PRELIMINARY INJUNCTION
Louise DeCarl Adler, Judge
IT IS HEREBY ORDERED, and notice is given, that pursuant to 11 U.S.C. § 105 and Fed.R.Bankr.P. 9020:
The Diaz Defendants shall appear on December 11, 2008 at 10:00 a.m., in Department 2 of the United States Bankruptcy Court, 325 West "F" Street, San Diego, California, to show cause why the Diaz Defendants should not be held in contempt for violating this Court's continuing Preliminary Injunction incorporated into its Amended Consolidated Judgment, and ordered to immediately cease and desist from taking all such actions ("OSC re: Contempt").
Adv. Proc. 04-90392, D.E. # 504,514 and 530; Adv. Proc. 06-90369, D.E. #213,223 and239. Hereinafter, all docket references shall refer to Adv. Proc. 04-90392, unless otherwise specified.
The Preliminary Injunction provides, inter alia:
the Diaz Defendants, and each of them, and their respective agents, servants, employees, partners, representatives, independent contractors, lessees, assigns, attorneys and all other persons in active concert and/or participation with any of them, are hereby restrained and enjoined from doing, directly or indirectly, any of the following:
a. Expending, disbursing, transferring, assigning, selling, conveying, devising, pledging, mortgaging, creating a security interest in, encumbering, concealing, disposing of, secreting, or in any other way diverting, using or making unavailable, or in any manner whatsoever dealing m or disposing of the whole or any part of the Villa Property and/or of any interest in the Villa Property Trust...."
[D.E. 72]
The acts constituting "cause" for this OSC re: Contempt are set forth in the Response of Kismet Acquisition, LLC ("Kismet") to the Declaration of Patrick Martin Regarding the Status of the Diaz Defendants' Compliance with the Amended Consolidated Judgment ("Kismet Response"), and the accompanying Declaration of Ali M.M. Mojdehi filed in support of the Kismet Response ("Mojdehi Decl."). Specifically, the Court directs the Diaz Defendants to the Kismet Response, Part II.C. at pages 11-13 ("The Storming of the Gate"), and Part III at pages 13-15 ("The Signing Ceremony"), and the evidence offered in support thereof.
D.E. # 703.
D.E. # 707.
The evidence shows that prior to executing the documents performing the transfer of the Villa Property ordered in the Amended Consolidated Judgment ("Transfer Documents"), the Diaz Defendants, through their agent Mr. Guillermo Alejandro Rivera Gonzalez ("Rivera"), forcibly broke through the guarded gate of the road leading to the Villa Property and seized possession of the Villa Property.Rivera's seizure of the Villa Property was assisted by four armed men and a guard dog ("Armed Guards").
Mojdehi Decl. at ¶ 29 (indicating these events occurred approximately one half hour prior to the scheduled closing); see also Ex. KK (Certification of Fact, Notarial Instrument No. 18, 116, Vol. L, Book 6th (certifying the damage to the gate entrance caused by Rivera's truck and certifying the logbook showing the time of Rivera's entrance).
Thereafter, when Mr. Gabriel Luis Gallo Reynosa ("Gallo"), in his capacity as attorney-in-fact to Axolotl Inmobiliaria S. de R.L. De C.V. ("Axiolotl"), the entity designated by Kismet in the Transfer Documents to hold the beneficial trust interest, attempted to take possession of the Villa Property, he encountered Rivera and his Armed Guards. Additionally, he encountered two men in police uniform who identified themselves as "Officer Meleno" and "Officer Martin," but who refused to show their official police badges and refused to disclose their last names to evidence they were acting in an official police capacity.
When Gallo identified himself as the agent of the new owner of the Villa Property and requested Rivera to give him possession, Rivera refused to turn over possession, stating that "he was in possession of the VILLA VISTA HERMOSA and that he will not give access to anybody." Further, Rivera identified himself as a personal friend of Alex Diaz, and asked: "Mr. Notary does a judge acting in the United States of America ha[ve] jurisdiction to resolve the status of a property in Mexico, as it is the case of Villa Vista Hermosa? " (emphasis added). In response to being told that Axolotl is the new owner of the Villa Property pursuant to the executed Transfer Documents, Rivera stated, "he did not care, that he was in possession of the property...." The denial of possession was witnessed by a notary (an official acting on behalf of the Mexican government) and others who had accompanied Gallo to formally witness the turning over of possession of the Villa Property. The witness statements are contained in a notarized Certification of Facts, Notarial Instrument No. 18, 117, Vol L, Book 6.
Mojdehi Decl. at Ex. JJ.
At the closing ceremony in Guadalajara, Mexico, the Diaz Defendants and their attorney, Patrick Martin ("Mr. Martin") of Procopio, Cory, Hargreaves & Savitch LLP ("Procopio Firm"), were informed of Rivera's seizure of the Villa Property prior to the closing, Mr. Martin was asked to instruct the Diaz Defendants to tell Rivera to vacate the Villa Property immediately. Mr. Martin declined to issue the instruction stating, "I cannot give advice to my client on Mexican Law issues ...." Thus, Kismet directly asked the Diaz Defendants to instruct Rivera to vacate the Villa Property. Mr. Diaz stated, "I am here to comply with the order of Judge Adler.... Let's leave." Mr. Martin affirmatively agreed, and they left. The refusal of Mr. Martin and the Diaz Defendants to instruct Rivera to vacate the Villa Property was video taped.
The Court observes that the Procopio Firm is familiar with the terms of the Continuing Preliminary Injunction, which involves United States law. Just a few days prior to the closing ceremonies, the Procopio Firm represented Mr. Diaz at a contempt hearing involving multiple actions in violation of the Continuing Preliminary Injunction. [D.E. #712] Further, Mr. Martin and his Procopio Firm colleague, Enrique Hernandez Pulido ("Mr. Hernandez"), have advised Mr. Diaz on the "illegality" of the Amended Consolidated Judgment and the "legal impossibility" of performing the transfer ordered by the Amended Consolidated Judgment, and Mr. Hernandez has filed a declaration in support of the Diaz Defendants "legal impossibility" defense purporting expertise on Mexican real estate issue and advising the Court as to what Mexican law says. D.E. #582] In light of these facts, Mr. Martin's sudden position that he cannot advise his clients on Mexican law issues is disingenuous.
Mojdehi Decl. at Ex. II (transcript).
The seizure of possession was brought to the Court's attention at a continued contempt hearing on December 4, 2008 and was discussed in detail. Mr. Diaz personally attended this hearing along with Mr. Jeffrey Isaacs ("Mr. Isaacs") of the Procopio Firm. Neither Mr. Isaacs nor Mr. Diaz stepped forward to state that they had instructed Rivera and his Armed Guards to vacate the Villa Property.
The December 4,2008 contempt hearing was a follow up hearing to determine whether compulsory sanctions should issue for the Diaz Defendants' failure to perform the transfer ordered by the Amended Consolidated Judgment at the closing ceremonies scheduled in Tijuana, Mexico on November 19,2008. [D.E. #712] Additionally, on November 20,2008 the Court heard a separate contempt hearing for (other) actions taken in violation of the Continuing Preliminary Injunction which the Court, discussed in note 7, supra. [Id.]
At the December 4, 2008 hearing, the Court announced that Rivera's pre-closing seizure of the Property and his continuing refusal to turn over possession, if established at evidentiary hearing, constitute actions by the Diaz Defendants in violation of the Continuing Preliminary Injunction. Further, the Court announced that compensatory and coercive sanctions would continue to accrue at the rate previously awarded in connection with its prior Order to Show Cause re: Contempt until possession is restored to Kismet's designee, Axolotl.
D.E. # 399; D.E. # 420 (amended).
The hearing on this OSC re: Contempt shall be for the purposes of hearing live testimony from the Kismet's witnesses authenticating their statements, and from the Diaz Defendants' witnesses responding to facts set forth above. No additional pleadings are authorized.