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Horowitz v. Sulla

United States District Court, D. Hawaii

April 11, 2017

LEONARD G. HOROWITZ, Appellant,
v.
PAUL J. SULLA, JR., et al ., Appellees. Bankr. No. 16-00239 Adv. No. 16-90015

          ORDER DISMISSING APPEAL

          Derrick K. Watson, Judge

         INTRODUCTION

         Appellant Leonard G. Horowitz, proceeding pro se, filed an interlocutory appeal from a bankruptcy court order denying his motion for reconsideration of the earlier denial of his motion seeking attorneys' fees and sanctions against Appellee Paul J. Sulla, Jr. Horowitz and Sulla have for years engaged in protracted litigation in multiple venues concerning a real property dispute. In the present appeal, Horowitz contends that the bankruptcy judge erred by finding no misconduct on the part of Sulla, an attorney, for violation of the automatic stay and denying his request for Sulla's disqualification.

         Because Horowitz fails to make a threshold showing of any apparent need for immediate review of the bankruptcy court's interlocutory order, the Court denies leave to file an interlocutory appeal pursuant to 28 U.S.C. § 158(a)(3) and Federal Rule of Bankruptcy Procedure 8004. Appellees' Motion to Dismiss is accordingly GRANTED. Horowitz's Motion for Judicial Notice is DENIED.[1]

         BACKGROUND

         I. Bankruptcy Proceedings

         Horowitz is the debtor in the underlying Chapter 13 bankruptcy proceeding initiated on March 9, 2016. See Bankr. No. 16-00239, Dkt. No. 1. Sulla is a creditor. Horowitz and Sherri Kane were also Plaintiffs in a bankruptcy adversary proceeding involving Sulla, Adv. No. 16-90015, and Horowitz was a party in numerous other federal and state cases involving the same persons and/or property.[2]In the Adversary Proceeding, Horowitz sought monetary and injunctive relief regarding real property located at 13-3775 Pahoa-Kalapana Road, Pahoa, Hawaii 96778 (the “Property”). Horowitz and Kane alleged an assortment of misconduct on the part of Sulla, Sulla's client Jason Hester, and the judges who presided over several state court lawsuits, among others. See Complaint, Adv. No. 16-90015, Dkt. No. 2.

         Horowitz acquired the Property in 2004, but lost it via nonjudicial foreclosure to Hester in 2010. See Complaint, Adv. No. 16-90015. In 2014, Hester filed a quiet title action against Horowitz and others, which eventually resulted in the state court issuing a writ of ejectment against Horowitz and Kane on March 1, 2016. See Hester v. Horowitz, Civ. No. 14-1-0304, on appeal as Case No. CAAP-16-000163. About a week later, on March 9, 2016, Horowitz filed for bankruptcy protection. On April 15, 2016, the bankruptcy court granted relief from the automatic stay to permit enforcement of the writ. See 4/15/16 Order Granting Relief, Bankr. No. 16-00239, Dkt. No. 32.

         Several Defendants moved in bankruptcy court for dismissal of the Adversary Proceeding and alternatively asked the bankruptcy court to abstain pursuant to 28 U.S.C. § 1334(c). The bankruptcy court granted the motion, and on July 26, 2016, denied the motion for reconsideration, concluding that discretionary abstention was justified because Plaintiffs' Adversary Complaint improperly sought to overturn final judgments of Hawaii state courts. See Adv. No. 16-90015, Dkt. Nos. 104 and 111.

         Following the bankruptcy court's denial of confirmation of his initial and second Chapter 13 plans, Horowitz filed a third plan on August 5, 2016. Bankr. No. 16-00239, Dkt. No. 115. In a September 16, 2016 Order, the bankruptcy court denied the third plan and dismissed the Chapter 13 case. See 9/16/16 Mem.

         Decision Regarding Plan Confirmation, Bankr. No. 16-00239, Dkt. No. 138. The bankruptcy judge based his decision on the following conclusions:

It is abundantly clear that Dr. Horowitz filed this case in order to secure a forum in which he can litigate and attack state court decisions against him and in favor of Mr. Sulla, Mr. Sulla's client, and others. All of Dr. Horowitz's papers and oral presentations are filled to the brim with argument, accusations, and invective concerning the foreclosure of property in which Dr. Horowitz had an interest, the state court proceedings that validated it, and cases brought by Dr. Horowitz in federal district court to attack it. According to his schedules, Dr. Horowitz's most valuable asset by far is his legal case against Sulla et al.
Simply put, Dr. Horowitz has no need for relief under chapter 13. He has filed this case for the sole purpose of mounting a collateral attack on adverse state court decisions. Considering the totality of the circumstances, Dr. Horowitz has not carried his burden of proving that he filed this case and his plan in good faith.
It is hard to imagine how Dr. Horowitz could propose a confirmable plan that would also serve his overriding goal of relitigating his dispute with Sulla et al. in this court. Therefore, this case should not be prolonged any further and is dismissed.

9/16/16 Mem. Decision Regarding Plan Confirmation, Bankr. No. 16-00239 at 5.

         That same day, the bankruptcy court issued an Order to Show Cause why the Adversary Proceeding should not be dismissed, based on the dismissal of the underlying bankruptcy case. See 9/16/16 OSC, Adv. No. 16-90015, Dkt. No. 122. The bankruptcy court thereafter dismissed the Adversary Proceeding on October 14, 2016. See Adv. No. 16-90015, Dkt. Nos. 128 (Order of Dismissal) and 129 (Final Judgment).

         On September 19, 2016, the bankruptcy court entered an Order Denying Confirmation and Dismissing Case. See Bankr. No. 16-00239, Dkt. No. 143.

         II. Issues On Appeal To District Court

         A. Memorandum Of Decision On Alleged Misconduct By Sulla

         On September 16, 2016, the same day it issued its Memorandum of Decision Regarding Plan Confirmation, the bankruptcy court also issued a Memorandum of Decision on Debtor's Alleged Misconduct by Paul Sulla, Jr. See 9/16/16 Order, Bankr. No. 16-00239, Dkt. No. 139. That order denied Horowitz's Motion to Show Cause for Violations of Automatic Stay, Defying Disqualification Order and Bad Faith Pleadings in Judgment Creditor Paul Sulla, Jr.'s Objection to Confirmation of Amended Plan of Debtor (“Motion To Show Cause”), filed on June 27, 2016, in the Chapter 13 case. See Bankr. No. 16-00239, Dkt. No. 97. The bankruptcy court found that Sulla (1) did not violate the automatic stay; (2) should not be disqualified from representing Hester in the bankruptcy matter; and (3) is not liable to Horowitz for sanctions under Federal Rule of Civil Procedure 11 or its bankruptcy counterpart.

         1. No Violation Of The Automatic Stay

         The bankruptcy court observed that Horowitz commenced his Chapter 13 case on March 9, 2016-shortly after the state court issued the writ of ejectment on March 1, 2016. On March 11, 2016, the Bankruptcy Noticing Center mailed notice of the bankruptcy filing to Hester and Sulla. At some point prior to 7:24 p.m. on March 12, 2016, a copy of the writ of ejectment was taped to the front gate of the Property. See 9/16/16 Order at 2. On March 18, 2016, Sulla filed a motion for relief from the automatic stay to permit enforcement of the writ of ejectment, which the bankruptcy court granted on April 15, 2016. On June 10, 2016, the writ of ejectment was enforced and Horowitz was evicted from the property. See 9/16/16 Order at 2-3.

         For purposes of Horowitz's Motion To Show Cause, the relevant time period was between March 9, 2016 and April 15, 2016. The bankruptcy court explained that “the only conduct during the relevant period that might amount to a stay violation was the affixing of the writ of ejectment to the front gate of the Property, presumably by a process server acting for Sulla.” 9/16/16 Order at 2-3. The bankruptcy judge concluded that this conduct did not amount to a violation of the automatic stay. Citing a controlling Ninth Circuit decision, In re Perl, 811 F.3d 1120 (9th Cir. 2016), involving similar facts, the bankruptcy judge found no stay violation.[3] See 9/16/16 Order at 3-4. Moreover, the bankruptcy judge concluded that, even if there had been a violation, Horowitz did not establish that the violation was willful by proving that Sulla had actual knowledge of the bankruptcy filing when the writ was affixed to the gate. See 9/16/16 Order at 4 (“A violation is ‘willful' if the creditor knew of the automatic stay and its actions that violate the stay were intentional.”) (quoting Eskanos & Adler, P .C. v. Roman (In re Roman), 283 B.R. 1, 7-8 (B.A.P. 9th Cir.), aff'd, 309 F.3d 1210, 1215 (9th Cir. 2002)).

         Further, even if there had been a willful violation, the bankruptcy judge concluded that (1) Horowitz failed to establish that the posting of the writ on the front gate caused him to suffer any quantifiable injury; and (2) it would not (except perhaps in extreme circumstances not present here) support an order prohibiting Sulla from objecting to confirmation of a plan. See 9/16/16 Order at 4.

         2. Disqualification Not Warranted

         Horowitz sought Sulla's disqualification based upon a prior ruling by a federal magistrate judge in a different matter, in which Sulla was a necessary witness on several of the claims before the district court. Horowitz argued unsuccessfully before the bankruptcy judge that Sulla violated the district court's unrelated order by appearing in this bankruptcy case. See 9/16/16 Order at 5. The bankruptcy judge instead concluded that “[t]he fact that one court disqualified Mr. Sulla does not require all courts to do so. Further, there is no reason to think, [that] Sulla's testimony will be necessary in this bankruptcy case, [because, in] a separate order entered concurrently with this order, I have dismissed this bankruptcy case for reasons unrelated to any testimony Mr. Sulla might be able to give.” 9/16/16 Order at 5.

         3. Horowitz Did Not Comply With Fed.R.Bankr.P. 9011

         Last, the bankruptcy judge rejected the request for sanctions because Horowitz did not comply with the safe harbor provision of Federal Rule of Bankruptcy Procedure 9011(c)(1). See 9/16/16 Order at 5. Although Horowitz invoked Federal Rule of Civil Procedure 11 at the beginning of his motion, he did not discuss the rule elsewhere in his request for sanctions. Because Horowitz did not serve an unfiled copy of the motion or give the target of the motion 21 days to correct the alleged misconduct, the bankruptcy judge found that he failed to comply with the requirements of Federal Rule of Bankruptcy Procedure 9011. “There is no indication that . . . Horowitz complied with the safe harbor, so sanctions are not available under rule 9011.” 9/16/16 Order at 5.

         B. Order Denying Motion For Reconsideration

         Horowitz filed a Motion for Reconsideration on September 26, 2016. See Bankr. No. 16-00239, Dkt. No. 148 (“Mot. for Recon.”). The Motion for Recon alternatively sought removal of pending claims “of alleged automatic stay violations requiring due process, intertwined with remaining claims in the Adversary Proceeding, to bring long-overdue [sic] trial on the merits.” Mot. for Recon. at 2. Horowitz argued that the bankruptcy court's denial of his Motion To Show Cause violated his due process rights and “unreasonably, inequitably, unjustly and un-Constitutionally helped Sulla convert the estate Property to Sulla/Hester in violation of, inter alia, 42 U.S.C. § 1981.” Mem. in Supp. of Mot. for Recon. at 17. According to Horowitz, “[i]n this spirit of judicial corruption, the [bankruptcy] [c]ourt's Orders reflect abstinence from ‘good behavior' in the face of prima facie evidence of Sulla's forgery(ies) of . . . signatures, perjury, false filings with the State, and wire fraud contributing to real Property conversion.” Mem. in Supp. of Mot. for Recon. at 17.

         The bankruptcy judge denied the Motion for Recon on September 29, 2016. See 9/29/16 Order, Bankr. No. 16-00239, Dkt. No. 150. The Order Denying Debtor's Motion to Reconsider noted that Horowitz sought relief under Federal Rule of Civil Procedure 60, made applicable by Federal Rule of Bankruptcy Procedure 9024. See 9/29/16 Order at 1. Because Horowitz did not specify which subsection of Rule 60(b) formed the basis for his reconsideration request, the bankruptcy court considered each of them, concluding that “there is no support for relief from the [9/16/16] order under any provision of Rule 60(b)(1)-(5).” 9/29/16 Order at 2. The bankruptcy court also specifically found that-

There is no newly discovered evidence that could not have been or was not raised in the underlying motion. The facts stated in the reconsideration motion were also raised numerous times in various motions before this court as well as in the state court actions where debtor lost title to the property. Furthermore, there are no ...

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