MURPHY RAY KITTRELL

Dated: October 6, 2020 I □□ Benn Perf — 3 Brenda Moody Whinery, Chief Bankruptcy . [6] 7 UNITED STATES BANKRUPTCY COURT 8 DISTRICT OF ARIZONA 9 In re: Chapter 11 10] MURPHY RAY KITTRELL, Jr., Case No. 4:09-bk-08537-BMW 11 Debtor. RULING AND ORDER REGARDING MOTION TO REOPEN CASE [13] 14 This matter is before the Court pursuant to the Motion to Reopen Case to Void Judgment 15 (the “Motion to Reopen’’) (Dkt. 435) filed by Murphy Ray Kittrell, Jr. (“Mr. Kittrell’’), the Debto in this dismissed case, on July 1, 2020; the Judgment Assignee’s Objection to Debtor Murph: Kittrell’s Motion to Reopen Case (Dkt. 442) filed by Carol Thiesen (“Ms. Thiesen’”’) on July 16 18 | 2020; the Reply in Support of Debtor’s Motion to Reopen Case (Dkt. 444) filed by Mr. Kittrel 19] on July 30, 2020; the Declaration in Support of Motion to Reopen Case and Motion to Voi 20 || Judgments (Dkt. 446) filed by Mr. Kittrell on July 30, 2020; the Declaration in Support of □□□□□□ to Reopen Case and Motion to Void Judgments (Dkt. 447) filed by Mr. Kittrell on July 30, 2020 and all filings related thereto. 23 Mr. Kittrell moves the Court to reopen this bankruptcy case for the sole purpose o 24 || pursuing a Motion to Void Judgments (the “Motion to Void”) (Dkt. 437), in which Mr. Kittrel 25|| asks the Court to void judgments obtained against him by Baron Financial, LLC □□□□□□ Financial’) and Baron Partners, LLC (“Baron Partners,” and collectively with Baron Financial 27 || the “Baron Creditors’) on the basis that they were entered in violation of the automatic stay. 28 Ms. Thiesen is the assignee of the Baron Judgments and opposes the Motion to □□□□□□ 1 on the basis that the motion is procedurally improper, the underlying litigation was settled, and 2 the doctrines of laches and unclean hands bar Mr. Kittrell from attempting to reopen this case to 3 pursue the Motion to Void. 4 The Court held a hearing on the Motion to Reopen on September 16, 2020, at which time 5 counsel presented oral argument. At the conclusion of the hearing, the Court took this matter 6 under advisement. 7 Based upon the pleadings, arguments of counsel, and entire record before the Court, the 8 Court now issues its ruling. 9 I. Jurisdiction 10 The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. 11 II. Facts & Procedural Background 12 The following facts and background are undisputed or indisputable. 13 In or about 2006, Mr. Kittrell executed personal guarantees to secure loans made by the 14 Baron Creditors. 15 This bankruptcy case was filed on April 27, 2009, when Mr. Kittrell filed a voluntary 16 petition for relief under chapter 11 of the Bankruptcy Code. 17 On May 4, 2009, Mr. Kittrell filed the required master mailing list. (Dkt. 12). The Baron 18 Creditors were not listed on the master mailing list or ever added to the master mailing list. 19 On May 13, 2009, Mr. Kittrell filed his schedules. (Dkt. 17). The Baron Creditors were 20 not listed on Mr. Kittrell’s schedules. 21 On or about January 27, 2010 and March 23, 2010, the Baron Creditors filed lawsuits 22 against Mr. Kittrell and others in Maricopa County Superior Court (the “State Court”) to enforce 23 pre-petition loan agreements and the personal guarantees on those loan agreements executed by 24 Mr. Kittrell and others.1 25 On or about March 12, 2010 and May 19, 2010, Mr. Kittrell filed answers in the State [26] 27 1 Baron Financial filed Maricopa County Case No. CV2010-050758 on or about January 27, 2010, and Baron Partners filed Maricopa County Case No. CV2010-051334 on or about March 23, 2010 [28] (collectively, the “State Court Proceedings”). The Court will take judicial notice of the dockets in the 1 Court Proceedings. (See Dkt. 442 at Ex. 1-2). 2 On April 21, 2010, this Court confirmed Mr. Kittrell’s chapter 11 plan. At no time prior 3 to or during the confirmation proceedings did Mr. Kittrell inform the Court of the State Court 4 Proceedings. 5 On or about January 27, 2011, the State Court entered a judgment in favor of Baron 6 Financial against Mr. Kittrell and others in the amount of $385,921.25, plus interest, costs, and 7 attorneys’ fees (the “Baron Financial Judgment”). On the same date, the State Court entered a 8 judgment in favor of Baron Partners against Mr. Kittrell and others in the amount of 9 $1,115,625.00, plus interests, costs, and attorneys’ fees (the “Baron Partners Judgment,” and 10 together with the Baron Financial Judgment, the “Baron Judgments”). 11 On September 17, 2013, this bankruptcy case was dismissed because Mr. Kittrell failed to 12 file required post-confirmation reports and failed to pay required U.S. Trustee fees. (Dkt. 421). 13 Mr. Kittrell does not dispute that he defaulted under the terms of his confirmed plan, and neither 14 a final decree nor a discharge was ever entered in this case. 15 On or about November 4, 2016, Mr. Kittrell filed a motion in the Baron Partners State 16 Court case seeking to vacate the Baron Partners Judgment. 17 On January 18, 2017, the State Court denied Mr. Kittrell’s motion to vacate the Baron 18 Partners Judgment. During the proceedings, Mr. Kittrell did not dispute that Baron Partners was 19 unaware of this bankruptcy case. (Dkt. 442 at Ex. 3). The State Court found that Mr. Kittrell had 20 not told Baron Partners or the State Court about the stay when the State Court action was filed, 21 at any time during the litigation, when the State Court entered the Baron Partners Judgment, or 22 when the Baron Partners Judgment was renewed five years after it was entered. (Dkt. 442 at Ex. 23 3). Mr. Kittrell appealed the State Court’s ruling. 24 In or about March 2017, while the appeal was pending, the Baron Creditors, Mr. Kittrell, 25 and the other judgment debtors executed an Agreement and Covenant Not to Execute and Mutual 26 Release (the “Settlement Agreement”) (Dkt. 442 at Ex. 4). In the Settlement Agreement, Mr. 27 Kittrell and the other judgment debtors expressly agreed that the Baron Judgments were valid 28 and that they would take no further legal action to challenge the enforceability of the Baron 1 Judgments. Pursuant to the Settlement Agreement, the parties agreed to settle the Baron 2 Judgments entered in the Baron State Court Proceedings for $700,000, to be paid over three 3 years, in full satisfaction of the Baron Judgments. 4 On October 22, 2018, Mr. Kittrell filed another bankruptcy case (the “2018 Case”),2 his 5 fifth in this District.3 In the 2018 Case, Mr. Kittrell scheduled Baron Financial as holding a 6 contingent, unliquidated, disputed claim, and described the claim as a “Guaranty Claim” 7 pertaining to a “CV2010-050758 Judgment.” Mr. Kittrell disclosed the Baron Financial lawsuit 8 on his statement of financial affairs and indicated that the lawsuit was concluded. Mr. Kittrell did 9 not schedule any claims against third parties on his schedule of personal property, and notably, 10 he did not list any claim against the Baron Creditors for violation of the stay in this case. 11 On April 4, 2019, the 2018 Case was dismissed at Mr. Kittrell’s request. 12 On July 1, 2020, Mr. Kittrell filed the Motion to Reopen. 13 During the hearing on the Motion to Reopen, counsel for Mr. Kittrell confirmed that Mr. 14 Kittrell is engaged in and/or profiting from the medical marijuana industry. (9/26/2020 Hearing 15 Tr. 18:17-25). 16 III. Legal Analysis & Conclusions of Law 17 Section 350(b)4 provides that “[a] case may be reopened in the court in which such case 18 was closed to administer assets, to accord relief to the debtor, or for other cause.” See also Fed. 19 R. Bankr. P. 5010. However, “an order dismissing a bankruptcy proceeding is not an order 20 closing it [and] . . . a motion to vacate a dismissal is not a motion to reopen . . . .” In re Income 21 Prop. Builders, Inc., 699 F.2d 963, 965 (9th Cir. 1982). “A ‘dismissed’ case cannot be reopened 22 under § 350(b) because it was not ‘closed’ under § 350(a) following the administration of the 23 estate.” In re Papazov, BAP No. CC-12-1584-KICLD, 2013 WL 2367802 , at *9 (B.A.P. 9th Cir. 24 May 30, 2013), aff’d, 610 F. App’x 700 (9th Cir. 2015); see also In re Hashiman, BAP No. CC25 20-1107-TaLS (B.A.P. 9th Cir. Oct. 5, 2020). “[A] case dismissal can only be undone through [26] 27 2 Case number 4:18-bk-12869-BMW. 3 Mr. Kittrell was represented by counsel in the 2018 Case. 28 4 Unless otherwise indicated, statutory references are to the Bankruptcy Code, title 11 of the United States 1 an appeal or a motion under Rules 9023 or 9024.” In re Hashiman, BAP No. CC-20-1107-TaLS 2 at *4. 3 This case was dismissed because Mr. Kittrell failed to file required reports and pay 4 required fees. Mr. Kittrell does not dispute that he defaulted under the terms of his confirmed 5 plan, and a final decree was never entered in this case. This case was closed, not because the 6 estate was fully administered, but because the case was dismissed. Further, Mr. Kittrell has not 7 sought to vacate the dismissal order in this case, and there is nothing in the record that indicates 8 that there are any circumstances that would constitute grounds to vacate the dismissal order.5 9 Given that this case was dismissed and not closed pursuant to § 350(a), this case cannot be 10 reopened pursuant to § 350(b). 11 Even if this case could be reopened pursuant to § 350(b), a motion to reopen must be filed 12 “within a ‘reasonable’ time[.]” In re Welch, BAP No. NV-14-1079-HlPaJu, 2015 WL 65307 , at 13 *4 (B.A.P. 9th Cir. Jan. 5, 2015). “The longer a party waits to file a motion to reopen a closed 14 bankruptcy case, the more compelling the reason to reopen must be.” Id. at *5 (quoting Redmond 15 v. Fifth Third Bank, 624 F.3d 793, 799 (7th Cir. 2010)). 16 Whether a request to reopen has been made within a reasonable amount of time is 17 determined based on the totality of the circumstances. Id. at *4. Courts may consider, among 18 other things, the diligence of the moving party, as well as the prejudice, if any, to the nonmoving 19 party caused by the delay. Id. at *5 (quoting Redmond, 624 F.3d at 799 ). “[E]quity assists the 20 vigilant and diligent, not those who sleep on their rights.” Id. (quoting Matter of Pagan, 59 B.R. 21 394, 397 (D.P.R. 1986)). 22 The State Court Proceedings were filed in 2010, and Mr. Kittrell was aware or should 23 have been aware of any stay violation claims no later than early 2010, when he filed answers in 24 the State Court Proceedings. The Baron Judgments were then entered in 2011, while Mr. 25 Kittrell’s bankruptcy case was open and pending before the Court. Mr. Kittrell does not dispute 26 that at no point before he filed the Motion to Reopen on July 1, 2020, did he bring the Baron [27] 28 5 Mr. Kittrell’s counsel conceded that he was not asking to reorganize or otherwise proceed with this 1 Judgments to this Court’s attention. Mr. Kittrell simply sat on his rights, eventually settled with 2 the Baron Creditors, and brought the matter to the attention of this Court only when he was faced 3 with collection actions for failure to abide by the terms of the Settlement Agreement. 4 Mr. Kittrell may have been self-represented from time to time, but Mr. Kittrell, who has 5 been represented by numerous attorneys over the course of the last decade, is not entitled to 6 leniency on the basis that he proceeded without counsel for some period of time. See In re Stober, [7] 193 B.R. 5, 9 (Bankr. D. Ariz. 1996) (“Laymen who insist on representing themselves are held to 8 the same standards as attorneys.”). 9 Based upon the foregoing, and the totality of the circumstances, the Court finds and 10 concludes that the Motion to Reopen was not filed within a reasonable amount of time. 11 Further, whether to reopen a bankruptcy case is in the sound discretion of the Court. In re 12 Castillo, 297 F.3d 940 , 945 (9th Cir. 2002), as amended (Sept. 6, 2002) (quoting In re Elias, 215 13 B.R. 600, 604 (B.A.P. 9th Cir. 1997)). When determining whether to reopen a bankruptcy case, 14 courts may consider the following non-exclusive factors, among others: (1) “the length of time 15 that the case has been closed;” (2) “whether the debtor would be entitled to relief if the case were 16 reopened;” (3) “the availability of nonbankruptcy courts, such as state courts, to entertain the 17 claims[;]” and (4) “whether any parties would be prejudiced were the case reopened or not.” In 18 re Welch, No. 2015 WL 65307 , at *4. 19 Analyzing these factors as they apply to the facts of this case: 20 1. Length of Time Case Has Been Closed 21 This case was closed on December 19, 2013, almost seven years ago. For the reasons 22 discussed above, this factor weighs against reopening the case. 23 2. Entitlement to Relief 24 Although courts should not ordinarily consider the merits of the dispute underlying the 25 motion to reopen when determining whether to reopen a case, “when the undisputed facts in the 26 record unequivocally establish that reopening the case would be a ‘pointless exercise,’ the 27 bankruptcy court may deny the motion to reopen on that basis.” In re Copeland, BAP No. CC28 16-1343-LTaKu, 2017 WL 2843305 , at *3 (B.A.P. 9th Cir. July 3, 2017); see also In re Ritter, 1 BAP No. NC-17-1001-FBJU, 2017 WL 3392671 , at *2 (B.A.P. 9th Cir. Aug. 8, 2017), aff’d, 730 2 F. App’x 529 (9th Cir. 2018). 3 Based on the undisputed record in this case, the Court would not be able to grant Mr. 4 Kittrell the relief he requests in the underlying Motion to Void. In the Motion to Void, Mr. Kittrell 5 asks the Court to void the Baron Judgments and, in effect, any settlements related thereto 6 pursuant to § 362 of the Bankruptcy Code. However, a claim for damages from violation of the 7 stay can be settled, and in this case, the stay violation claims at issue were settled by virtue of the 8 Settlement Agreement. Mr. Kittrell does not contend that he did not enter into the Settlement 9 Agreement or that the Settlement Agreement resolved the Baron Judgments entered in the State 10 Court Proceedings. Contrary to Mr. Kittrell’s argument that no consideration was given in 11 connection with the Settlement Agreement, the terms of the Settlement Agreement reflect a 12 significant reduction in the amount to be paid to satisfy the Baron Judgments, and Mr. Kittrell 13 avoided the costs and risks of continued and/or future litigation as a result of the Settlement 14 Agreement. 15 Further, it is undisputed that Mr. Kittrell is actively engaged in and/or profiting from the 16 medical marijuana industry in violation of federal law. A person cannot choose to engage in 17 behavior that is criminal under federal law and then expect to receive relief under the federal 18 Bankruptcy Code. See, In re Johnson, 532 B.R. 53, 56-57 (Bankr. W.D. Mich. 2015); see also In 19 re Burton, 610 B.R. 633 , 638 (B.A.P. 9th Cir. 2020). Likewise, bankruptcy courts cannot place 20 themselves in positions of condoning criminal activity by affording those who are engaged in 21 criminal activity relief under the Code. See, e.g., In re Rent-Rite Super Kegs W. Ltd., 484 B.R. 22 799, 805 (Bankr. D. Colo. 2012) (recognizing that “a federal court cannot be asked to enforce 23 the protections of the Bankruptcy Code in aid of a Debtor whose activities constitute a continuing 24 federal crime”). Accordingly, this Court cannot enforce the protections of the Code to aid Mr. 25 Kittrell, who is actively engaged in activity that is illegal under the federal Controlled Substances 26 Act, and who is the only party that could potentially benefit from the reopening of this case and 27 litigation of the Motion to Void. 28 Given the foregoing, Mr. Kittrell would not be entitled to the underlying relief he is 1 seeking were this case to be reopened. Reopening this case would therefore be a futile exercise 2 and waste of resources. 3 3. Availability of Non-Bankruptcy Forum 4 Although this would ordinarily be a proper forum in which to adjudicate Mr. Kittrell’s 5 stay violation claims, until now, Mr. Kittrell has opted to seek relief from the State Court that 6 entered the Baron Judgments. The circumstances strongly suggest that Mr. Kittrell is forum 7 shopping in an attempt to get an additional bite at the apple.6 8 4. Prejudice 9 Ms. Thiesen would be prejudiced if this case were to be reopened. Ms. Thiesen, who was 10 not an original party to the Baron Creditors’ lawsuits, but rather is the assignee of the Baron 11 Judgments, would be forced to litigate a nearly decade-old stay violation claim. Further, 12 reopening this case would provide no direct benefit to any creditors in this case given that this 13 case was and remains dismissed. 14 Based upon the foregoing, even if this case could be reopened pursuant to § 350(b), and 15 even if the Motion to Reopen had been timely filed, the Court does not find it appropriate to 16 exercise its discretion to reopen this case. 17 IV. Conclusion 18 This case cannot be reopened pursuant to § 350(b) because it was dismissed, not closed 19 pursuant to § 350(a), and because the Motion to Reopen was not timely filed. Even if this case 20 could be reopened pursuant to § 350(b), the Court declines to exercise its discretion to reopen 21 this case given the length of time that has elapsed since this case was closed, and given that 22 reopening this case would be a futile exercise that would serve only to prejudice Ms. Thiesen. 23 Based upon the foregoing, upon consideration of the record before the Court, given the 24 totality of the circumstances, and for good cause shown; 25 IT IS HEREBY ORDERED that the Motion to Reopen is denied. 26 DATED AND SIGNED ABOVE.