Opinion
NOT TO BE PUBLISHED
Monterey County Super. Ct. No. DR45596
ELIA, J.After the dissolution of his marriage to respondent Evangelina Grigsby (Evangelina), appellant James Grigsby (James) filed a petition for bankruptcy. Subsequently the superior court completed the division of the parties' military retirement benefits. Sixteen months later, James sought an order declaring this division void as a violation of the automatic bankruptcy stay that had become effective under 11 United States Code section 362 upon James's filing for bankruptcy. The superior court denied his motion, and James brought this appeal. We reverse.
Evangelina Grigsby subsequently changed her last name to Mozqueda. In the interests of clarity and convenience, we will refer to the parties by their first names.
We describe the factual and procedural history of this case without the benefit of either party's assistance. Both have related the background of their dispute without any citation whatsoever to the appellate record, although James at least refers to the record in his argument. Because the parties have not complied with California Rules of Court, rule 8.204(a)(C), we will disregard entirely their statements of facts.
The parties' 21-year marriage was dissolved by a status-only judgment filed December 20, 2007, made retroactive to November 2, 2007. The judgment contained the statement that jurisdiction was "reserved over all other issues." Three weeks earlier the court had recited the terms of a settlement determining custody of and expenses for their minor child and disposition of specific items of personal property. The same November 27 minute order stated that the court "reserves jurisdiction over community portion of retirement and survivor benefits."
According to the parties' representation on appeal, James filed a Chapter 7 petition for bankruptcy on March 10, 2008. That petition activated a stay of judicial proceedings described in 11 United States Code section 362, subdivisions (a) and (b).
The parties cite nothing in the record to confirm this fact; only a Bankruptcy Court docket entry supplied with James's Order to Show Cause supports the representation that James filed a petition under Title 11, Chapter 7, of the United States Code on March 10, 2008. We further note that the record does not contain all of the documents necessary for an accurate review of the events that transpired.
On May 2, 2008, the court granted a motion by James's attorney to be relieved as his counsel. Six days later the court entered "Judgment on [R]eserved [I]ssues, " to which was attached a "Stipulated Judgment." Among the terms of that document was the following paragraph: "Retirements and survivor benefits. With regard to the military retirement benefits of each party and the survivor benefits of each party, jurisdiction is reserved. Wife is entitled to all of her community property share of all retirement benefits and survivor benefits of Husband until final determination thereof. Husband is entitled to all of his community property share of all retirement benefits and survivor benefits of Wife until final determination thereof. The parties will meet and confer with their experts to draft the appropriate language that will divide the community portion of their retirements. The expert will also make sure the issue of the survivor benefits is taken care of and if there is going to be a premium charged for the survivor benefits, then the Court will decide whose responsibility it will be to pay the policy. Unless there is a written stipulation between the parties or until further order of the Court, there shall be no transfers or changes to the status quo of the retirement."
Evangelina and her attorney had signed this stipulated judgment in April 2008. The judgment was filed May 8, 2008, and the Notice of Entry of Judgment was mailed the same day to Evangelina's attorney and James's former attorney.
On June 13, 2008, the court filed a "United States Military Retirement Division Order- Amended, " which was expressly deemed to be an order "dividing the military retirement of the Husband, and awarding the Wife survivor benefits." The eight-page order recited the details of the provisions for Evangelina's share of James's retirement benefit. The court also retained jurisdiction to enforce the award to Evangelina or recharacterize it as support if James failed to cooperate with the payment provisions in the order. Six days later, the Bankruptcy Court entered an "Order Discharging Debtor and Final Decree."
On October 30, 2009, having obtained new counsel, James filed an Order to Show Cause, requesting a determination that the May 8, 2008 Judgment on Reserved Issues and the June 13, 2008 military retirement division order (hereafter, "Division Order") were void. In his supporting points and authorities he argued that both judicial acts had occurred while the automatic stay applicable to James's bankruptcy proceeding was in place, and therefore both were void.
The caption to this argument stated that these judicial acts were voidable; the text of the assertion was that both were void.
In response, Evangelina submitted a declaration in which she stated that she had never received written notice of James's bankruptcy proceeding, and she had not learned of it until August or September of 2009 when they spoke on the telephone. Evangelina argued that the protection of the automatic stay was unavailable to James because he had unfairly withheld notice of the stay from her. She further asserted that the May 8, 2008 Notice of Entry of Judgment was a ministerial act by the court clerk which fell outside the scope of the automatic stay.
The parties presented their arguments on November 20, 2009. At the hearing the Honorable Marla O. Anderson expressed the view that the May 8, 2008 Judgment on Reserved Issues was "nothing more than a signing of a signature [sic] of a stipulated agreement on the record on the 27th of November of 2007." The court regarded the actual judgment as having been made on that prior occasion, before the bankruptcy filing, whereas on May 8, 2008 the court merely "signed the written reflection of their agreement." The court queried James’s attorney as to why he had not given notice of the bankruptcy filing to Evangelina or the court. Counsel represented that Evangelina had been listed as a creditor for purposes of child support; her name and address were provided in the bankruptcy schedules. The trustee was the one who mailed out notices, counsel explained, and the Ninth Circuit, where James had filed, did not require notice for the judgment to be void. Counsel also advised the court that the May 2008 judgment had not been served on James, and there had been no conversation with the expert who prepared the Division Order. The court then asked counsel why it could not make a different order when equity required it; counsel replied that "[t]he equitable portion of [section] 362 is that if it is done willfully, with knowing violation of the law, sanctions will be imposed." Counsel maintained that the parties needed to prepare a new order, and she insisted that James had "complete intent" to cooperate in the division of their retirement benefits "consistent with the stipulation in the judgment."
The record before us discloses no evidence or factual finding as to whether Evangelina was listed as a creditor in the bankruptcy proceedings.
The court allowed the May 2008 judgment to stand and continued the issue of the division of retirement benefits. The court directed the parties to (a) consult the military to determine the impact of the prior termination of the marital status on survivor benefits and (b) determine whether a new order can be made retroactive to the date of retirement.
The continued hearing took place on December 18, 2009. The resulting order, issued by the assigned judge pro tempore, reflected the view expressed by Judge Anderson at the November 20, 2009 hearing. In the order the pro tem judge denied the request to declare the May 8, 2008 judgment on reserved issues and the Division Order void. Both decisions, the court stated, were "ministerial" acts which were consistent with the stipulation recited and approved by the court on November 27, 2007, and thus were not subject to the automatic stay of the bankruptcy court. The court further noted that James had "participated extensively in the negotiations leading up to the November 27, 2007 stipulation. He unreasonably withheld notice of the bankruptcy proceeding, and he waited more than eighteen months after filing the bankruptcy petition before filing the underlying Order to Show Cause. By the time of the filing of [James's] Order to Show Cause, he was in the process of retiring. The result of this delay may be that Petitioner has lost her right to obtain her community property share of the Survivor Benefit Plan, especially if the Division Order is declared void. [¶] The actions of [James] cited above are grounds for equitable relief for [sic] the automatic stay."
James filed a motion for reconsideration on December 31, 2009. In his points and authorities he conceded (as he had at the November hearing) that the Judgment on Reserved Issues was ministerial, but he maintained that the Division Order was void, as it had been entered without first securing relief from the bankruptcy stay. A different judge of the superior court denied the motion, followed by James's timely notice of appeal.
Discussion
On appeal, James renews his argument that the Division Order of June 13, 2008 was void, because it violated the automatic stay in place as of March 10, 2008 under 11 United States Code section 362, subdivision (a). In response, Evangelina maintains that (1) James lacks standing to appeal from the May 8, 2008 Judgment on Reserved Issues; (2) the division of benefits was merely a ministerial act in a "non-core" proceeding; (3) James’s failure to notify the court of the bankruptcy proceeding operated as consent to the superior court’s authority to divide the assets; (4) James’s motion to set aside the order was untimely; and (5) Evangelina’s community property share of the retirement benefits was her separate property that was not subject to the bankruptcy proceeding.
Further references to 11 United States Code section 362, subdivisions (a) and (b) will be abbreviated as section 362(a) and section 362(b), respectively.
Evangelina’s assertion that James has no standing here confuses standing to proceed in superior court with standing to appeal, and she misidentifies the object of James's appeal. She insists that there is no evidence that the bankruptcy trustee abandoned any of the non-exempt assets, including the military retirement benefits; consequently, only the trustee has any "standing to appeal an order that was made while the trustee held title to the assets." This appeal, however, is not from the May 8, 2008 judgment. Nor are we concerned with the right to bring a lawsuit while a bankruptcy proceeding is pending. His motion in superior court having been denied, James is an aggrieved party, and as such has standing to appeal from an order directly and injuriously affecting him. (Cf. County of Alameda v. Carleson (1971) 5 Cal.3d 730, 737; Sabi v. Sterling (2010) 183 Cal.App.4th 916, 947.)
Evangelina’s other procedural arguments also miss the mark. She offers no support, in either the facts or the law, for her assertion that this appeal "should be denied [sic]" because James "tacitly consented to the state court's ruling." In re Garcia (N.D.Ill. 1982) 23 B.R. 266, 267 does not offer assistance. There the appellant bank withdrew money from the debtor's checking account to set off his debt to the bank, in violation of an automatic bankruptcy stay. The stay was held to apply even though the bank was unaware of the stay, and even though it might have been entitled to the setoff before the bankruptcy filing. (Ibid.) The quotation offered by Evangelina to support her position is misattributed to Garcia. Evangelina offers no reasoning beyond the unfounded conclusion that because Garcia is distinguishable on its facts, James "cannot now belatedly attempt to undo the order that the trial court issued in ignorance of the bankruptcy proceeding." (Cf. In re Weatherford (Bkrtcy. D.S.C. 2009) 413 B.R. 273, 283 [once in place, stay " 'protects all property of the estate regardless of whether or not notice has been given of the pendency of the case' "].)
It was a California court that made the statement Evangelina attributed to the federal court in Garcia. In Tarakjian v. Krone (1987) 196 Cal.App.3d 1243, the Second District, Division Five, distinguished Garcia on its facts and held that the debtor's silence, combined with his failure to list a known creditor in his bankruptcy petition, "led respondents to proceed in ignorance to a final judgment in state court. Because of his tacit consent to the state court judgment, appellant may not now assert the automatic bankruptcy stay provision in a belated attempt to bar respondents' collection efforts...." (Id. at p. 1247.) Notably, the effect of the proceeding was only to amend a default judgment against the debtor in order to correct the spelling of his name. In contrast to Garcia, the appellate court noted, "Respondents are not attempting to seize funds from appellant while his business affairs are in the process of being reorganized in bankruptcy." (Ibid.)
Evangelina’s further argument that James’s motion was untimely under Code of Civil Procedure section 473 is also without consequence. If the Division Order was in fact void, then the parties could not have consented to the court's jurisdiction; "a judgment rendered in the absence of fundamental jurisdiction [over the parties or subject matter] is simply a nullity." (Thompson Pacific Construction, Inc. v. City of Sunnyvale (2007) 155 Cal.App.4th 525, 538.) "Judgments or orders by a court that lacks jurisdiction in this fundamental sense are void... [and] [o]bjection may be raised at any time...." (Ibid.)
Finally, Evangelina contends that James’s appeal "should be denied [sic]" because "the Judgment on Reserved Issues was read into the record on November 27, 2007 before the bankruptcy stay took effect." This "Judgment, " Evangelina insists, was "res judicata with respect to the retirement accounts because it became a final judgment before Mr. Grigsby filed his appeal." Evangelina thus concludes that her share of the community interest in the retirement benefits had already become her separate property when James filed for bankruptcy and therefore was outside the bankruptcy estate.
Evangelina suggests that James "could have argued that the method of dividing the accounts constituted an abuse of discretion by the trial court. But he did not raise this argument at the trial level nor in his appeal and thus this argument is waived." She is correct; James did not raise this argument on appeal. Her suggestion of an issue benefits neither party, and we need not address it.
The premise of this argument is faulty, however. Contrary to Evangelina’s representation, the November 27, 2007 minute order did not divide the parties’ retirement benefits; the court on that occasion expressly reserved jurisdiction to do so, knowing that it had insufficient information before it to determine the parties’ respective shares of the community entitlement to these assets. The May 8, 2008 judgment again reserved jurisdiction to complete that task, pending the collection of evidence and a suggested outcome provided by the experts for each party. The very purpose of the subsequent Division Order was to use the language drafted by the experts to make the "final determination" anticipated by the prior two orders. Only then, on June 13, 2008, did the division of assets finally occur -- during the period of the automatic stay.
This distinction renders In re Paderewski (9th Cir. 1977) 564 F.2d 1353, on which Evangelina relies, of no benefit to her. That case merely reaffirms the rule that the bankruptcy trustee has no greater interest in property than the debtor had at the moment he or she filed for bankruptcy. (Id. at p. 1356.) The challenged ruling in Paderewski was an interlocutory judgment of dissolution which became final before the wife filed for bankruptcy. Thus, res judicata applied to that judgment, and the wife's interest was fixed and limited accordingly. In the subsequent bankruptcy proceeding, the debtor wife could not transfer any greater interest to the trustee than she had been awarded in the divorce decree; and correspondingly, her creditors were not entitled to "levy upon or attach a one-half interest in the property after the divorce decree." (Id. at p. 1357.) In this case, by contrast, the November 27, 2007 minute order did not constitute a final judgment or even a resolution of the property issue before the court; consequently, the bar of res judicata is unavailable.
This conclusion further vitiates Evangelina’s argument that the June 13, 2008 order was "merely a ministerial act" that "simply carried out" the court's prior order. (Cf. In re Lobherr (Bankr. C.D.Cal. 2002) 282 B.R. 912, 916 [renewal of judgment not merely a ministerial act but a continuation of judicial proceeding within scope of section 362(a)(1) and thus violative of automatic stay].) In the same vein, she asserts that the superior court was authorized to disregard the stay because this was only a "non-core" proceeding. However, Evangelina, like the appellant in In re Marriage of Sprague & Spiegel-Sprague (2003) 105 Cal.App.4th 215 (Sprague), "wrongly equates concurrent jurisdiction over the family law matter with concurrent jurisdiction over the issue whether the family law matter is excepted from the automatic bankruptcy stay. With some exceptions, all proceedings against the debtor and the debtor's property are stayed during the pendency of the bankruptcy. (11 U.S.C. § 362(a)(1) & (2).) The automatic stay is self-executing and is effective upon filing the bankruptcy petition. (See 11 U.S.C. § 362(a).) Any action, including any judicial proceeding, taken in violation of the automatic stay is void." (Id. at p. 219, citing In re Gruntz (9th Cir. 2000) 202 F.3d 1074, 1082 [Gruntz].) The exceptions to the stay do not include domestic relations proceedings to divide marital property. (§ 362(b)(2)(A)(iv).)
"In general, a ' "core proceeding" ' in bankruptcy is one that ' "invokes a substantive right provided by title 11 or... a proceeding that, by its nature, could arise only in the context of a bankruptcy case." ' [Citation.] ' "Non-core proceedings" are those not integral to the restructuring of debtor-creditor relations and not involving a cause of action arising under title 11.'... Core proceedings are defined to include 'allowance or disallowance of claims against the estate, ' 'motions to terminate, annul, or modify the automatic stay, ' and 'determinations as to the dischargeability of particular debts.' (28 U.S.C. § 157(b).)" (Sprague, supra, 105 Cal.App.4th at pp. 219-220.) "Put another way, claims that arise under or in Title 11 are deemed to be 'core' proceedings, while claims that are related to Title 11 are 'noncore' proceedings." (Maitland v. Mitchell (In re Harris Pine Mills) (9th Cir. Or. 1995) 44 F.3d 1431, 1435.)
The automatic stay triggered by a Chapter 7 bankruptcy filing applies to proceedings that include "(1) the commencement or continuation... of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title; (2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title; (3) 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...." (§ 362(a).) Exceptions to the stay include "the dissolution of a marriage, except to the extent that such proceeding seeks to determine the division of property that is property of the estate." (§ 362(b)(2)(A)(iv.)
"A state court does not have concurrent jurisdiction to determine the scope and applicability of the automatic stay with respect to a core bankruptcy proceeding." (Sprague, supra, 105 Cal.App.4th at p. 219.) "Any state court modification of the automatic stay would constitute an unauthorized infringement upon the bankruptcy court's jurisdiction to enforce the stay." (Gruntz, supra, 202 F.3d at p. 1082.) Thus, once a bankruptcy stay is in place, only the bankruptcy court may modify or grant relief from it. To conclude otherwise "would undermine the principle of a unified federal bankruptcy system, as declared in the Constitution and realized through the Bankruptcy Code. If state courts were empowered to issue binding judgments modifying the federal injunction created by the automatic stay, creditors would be free to rush into friendly courthouses around the nation to garner favorable relief. The bankruptcy court would then be stripped of its ability to distribute the debtor's assets equitably, or to allow the debtor to reorganize financial affairs. 'Such an exercise of authority would be inconsistent with and subvert the exclusive jurisdiction of the federal courts by allowing state courts to create their own standards as to when persons may properly seek relief in cases Congress has specifically precluded those courts from adjudicating.' [Citation.] It is but slight hyperbole to say that chaos would reign in such a system." (Id. at pp. 1083-1084.)
As discussed above, the Division Order did not merely memorialize an allocation of assets that had been determined in a final judgment before James filed his bankruptcy petition; that allocation could not be made without the receipt of evidence based on the opinion of experts. While this order did implement a prior stipulation of the parties and concurrence of the court, that stipulated ruling left the final determination for another day-which occurred on June 13, 2008, during the period of the bankruptcy stay.
We conclude, therefore, that the Division Order constituted an adjudication of substantive rights to property that was part of the bankruptcy estate. The superior court was not authorized to divide the assets while the bankruptcy stay was in place, and its order doing so was without legal effect. Once the stay was triggered, the state court was not permitted to adjudicate rights to estate property. "The automatic stay sweeps broadly, enjoining the commencement or continuation of any judicial, administrative, or other proceedings against the debtor, enforcement of prior judgments, perfection of liens, and 'any act to collect, assess or recover a claim against the debtor that arose before the commencement of the case.' " (Gruntz, supra, 202 F.3d. at pp. 1081-1082, quoting § 362(a)(6).)
Evangelina does not attempt to defend the court's characterization of the Division Order as voidable rather than void. (See In re Schwartz (9th Cir. 1992) 954 F.2d 569, 572 [violations of automatic stay are void, not voidable]; In re Garcia (N.D.Ill. 1989) 109 B.R. 335, 339 [same].)
Disposition
The order is reversed.
WE CONCUR: RUSHING, P. J., PREMO, J.