Martinez v. Naviscent, LLC

EDWARD J. EMMONS, CLERK L/S U.S. BANKRUPTCY COURT = □□ a NORTHERN DISTRICT OF CALIFORNIA ; Yams Sele Qs □□□□□□□ OES I The following constitutes the order of the Court. 2 Signed: September 6, 2019 3 NM. Fhaime Hamwend 4 M.ElaneHammond = □□□□□□□□□□□□□ U.S. Bankruptcy Judge [7] 3 UNITED STATES BANKRUPTCY COURT 9 NORTHERN DISTRICT OF CALIFORNIA ) Case No. 18-51883 MEH 10 || In re ) ) Chapter 13 & 11 |} LEEANNA DODSON MARTINEZ, ) ) [12] 13 ) 14 Debtor(s). ) □□ 15 ) ) Adv. No. 18-05071 16 || LEEANNA DODSON MARTINEZ, 17 Plaintiff. ) 18 ) ) 19 || NAVISCENT, LLC., ) Date: 06/24/19 ) Time: 1:00 p.m. 20 Defendant. ) Ctrm: 11 (3020) ) 21 ) [22] 23 MEMORANDUM DECISION RE MOTION TO ALTER OR AMEND JUDGMENT 24 Plaintiff Leeanna Martinez (“Plaintiff’ or “Martinez”) brought a motion for summary 25 || judgment against Defendant Naviscent, LLC (“Defendant” or “Naviscent”) seeking a 26 || determination that the Temporary Protective Order (“TPO”) and Writ of Attachment (‘Writ’) 27 || obtained by Defendant prepetition are void ab inito. Defendant opposed the motion. 28 || Following hearing, the court issued an oral ruling denying the request for summary judgment 1 on the basis that the TPO and Writ are voidable, not void. This oral ruling included a 2 statement that modification of the stay to allow the state court to make further findings on the 3 validity of the Writ may be appropriate. 4 Plaintiff then brought this Motion to Alter or Amend Judgment Pursuant to Federal 5 Rule of Bankruptcy Procedure 9023 (the “Motion”), along with a motion seeking relief from 6 stay to return to state court. Defendant opposed the Motion and filed a competing motion for 7 stay relief. At an initial hearing on the Motion, the court determined that further findings on 8 the validity of the Writ are appropriately made by the bankruptcy court, therefore, rendering 9 stay relief unnecessary. Following the initial hearing, the parties filed supplemental briefs 10 incorporating their arguments on (1) altering the prior ruling on the Motion and (2) amending 11 the prior ruling regarding the validity of the Writ. Following hearing, the matter was taken 12 under submission. 13 The court hereby denies the request to alter its prior ruling as to whether the Writ is 14 void or voidable as a matter of law. Further, the court finds that laches bars Plaintiff from 15 voiding the TPO and Writ based on Defendant’s failure to post an undertaking. 16 This court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 . This is a 17 core proceeding pursuant to 28 U.S.C. § 157 (b)(2)(K). [18] 19 Background 20 The facts are well-known to the parties and summarized as follows: 21 1. Prior to Martinez filing her chapter 13 case, Naviscent filed a complaint initiating 22 a state court action against Martinez in Santa Clara Superior Court. On April 24, 23 2018, Naviscent filed an ex parte request for a TPO and writ of attachment. That 24 day, a TPO was issued but the request for a writ of attachment was denied. 25 2. On April 30, 2018, Naviscent filed a second ex parte application and requested 26 that hearing be advanced. The second application was granted and Naviscent was 27 authorized to set a hearing on May 22, 2018. On May 9, 2018, Naviscent filed [28] 1 notice of its application and hearing. On May 22, 2018, the court issued a minute 2 order continuing the hearing to June 19, 2018. 3 3. Naviscent filed a second application for a right to attach order on May 31, 2018. 4 That same day, the state court issued an order denying the request without 5 prejudice and reset the hearing on the second application for a right to attach order 6 to June 28, 2018. 7 4. On June 28, 2018, the state court issued an order authorizing the right to attach and 8 issuance of a writ of attachment (“RTAO”). Following the hearing, the Clerk of 9 the Superior Court for Santa Clara County issued the Writ. Naviscent did not post 10 an undertaking prior to its issuance. The Notice of Attachment was recorded on 11 June 29, 2018. 12 5. Martinez filed the underlying chapter 13 bankruptcy case on August 22, 2018. 13 Naviscent filed a proof of claim asserting a secured claim based on the pre-petition 14 TPO and Writ. 15 6. Martinez filed this adversary proceeding on December 27, 2018, asserting seven 16 causes of action against Naviscent. The first two causes of action are the subject 17 of the motion for summary judgment. [18] 19 Analysis 20 Plaintiff seeks to alter or amend the court’s Order Denying Summary Judgment 21 pursuant to Federal Rule of Civil Procedure 59(e), made applicable by Federal Rule of 22 Bankruptcy Procedure 9023. There are four grounds upon which a Rule 59(e) motion may be 23 granted: 24 (1) the motion is “necessary to correct manifest errors of law or fact upon which a 25 judgment is based,” 26 (2) the moving party presents “newly discovered or previously unavailable evidence,” 27 (3) the motion is necessary “to prevent manifest injustice,” [28] 1 (4) there is an “intervening change in controlling law.” Turner v. Burlington Northern 2 Santa Fe. R. Co., 338 F.3d 1058, 1063 (9th Cir. 2003). 3 A party may not use a motion to amend as a vehicle “to present a new legal theory for 4 the first time,” “to raise legal arguments which could have been raised in connection with the 5 original motion,” or “to rehash the same arguments presented the first time or simply express 6 the opinion that the court was wrong.” In re JSJF Corp., 344 B.R. 94, 103 (9th Cir. BAP 7 2006), aff’d and remanded, 277 Fed. Appx. 718 (9th Cir. 2008). 8 As one bankruptcy judge summarized: "initial arguments are not to be treated as a dress 9 rehearsal for a second attempt to prevail on the same matter. Counsel is also expected to 'get it 10 right' the first time and to present all the arguments which counsel believes support its 11 position. Arguments which counsel did not present the first time or which counsel elects to 12 hold in abeyance until the next time will not be considered." In re Armstrong Store Fixtures 13 Corp., 139 B.R. 347, 350 (Bankr. W.D.Pa. 1992). [14] 15 1. Order Denying Summary Judgment 16 In her motion for summary judgment, Plaintiff sought declaratory relief that the TPO 17 and Writ obtained by Defendant prepetition were void as a matter of law. Plaintiff relied 18 upon California Code of Civil Procedure § 489.210 and Vershbow v. Reiner, 231 Cal. App. 3d 19 879 (Cal. Ct. App. 1991). California Code of Civil Procedure § 489.210 requires the 20 requesting party to post an undertaking prior to issuance of the TPO or Writ. The court in 21 Vershbow held that strict compliance with the attachment statutes is required and a party’s 22 failure to satisfy the prerequisite of posting an undertaking rendered the writ of attachment 23 void ab inito. Id. at 883-84. Defendant does not dispute that an undertaking was not posted 24 prior to issuance of the TPO or Writ. 25 In its opposition, Defendant asserted that as a result of the California Supreme Court’s 26 subsequent decision in People v. American Contractors Indemnity Co., 33 Cal. 4th 653 27 (2004), the continuing viability of Vershbow was in question. It argued that the TPO and Writ [28] 1 are not void but voidable and that equitable defenses should result in continuing viability of 2 the TPO and Writ. 3 After taking the matter under submission, the court issued an oral ruling denying 4 summary judgment as incorporated herein. 5 The ruling was based upon the California Supreme Court’s holding in American 6 Contractors that there are two forms of judicial error. First, judicial error based on a lack of 7 “fundamental jurisdiction” is void ab initio. See American Contractors, 33 Cal. 4th at 661 8 (“Lack of jurisdiction in its most fundamental or strict sense means an entire absence of 9 power to hear or determine the case, an absence of authority over the subject matter or the 10 parties.”) “When a court lacks jurisdiction in a fundamental sense, the ensuing judgment is 11 void and, ‘vulnerable to direct or collateral attack at any time.’ (Barquis v. Merchants 12 Collection Assn. (1972) 7 Cal.3d 94, 119 ).” Id. at 660. The second type of error, “[w]hen a 13 court has fundamental jurisdiction, but acts in excess of its jurisdiction,” renders its act or 14 judgment voidable. Id. at 661 (citing In re Marriage of Goddard 33 Cal.4th 49 , 55 (2003); 15 Conservatorship of O'Connor, 48 Cal.App.4th 1076, 1088 (1996)). 16 Errors in excess of jurisdiction should be challenged directly, “for example by motion 17 to vacate the judgment, or on appeal, and are generally not subject to collateral attack once the 18 judgment is final unless ‘unusual circumstances were present which prevented an earlier and 19 more appropriate attack.’” Id.; citing Pacific Mut. Life Ins. Co. v. McConnell (1955). 20 However, American Contractors arose in the context of statutory bail requirements, 21 not writs of attachment. Thus, this court analyzed how broadly American Contractors has 22 been applied by subsequent courts. Of the 60 most relevant cases citing American 23 Contractors, a dozen are outside of the bail requirements. Most of the cases may not be 24 relied upon as they are unpublished decisions of the California Court of Appeals but review of 25 the analysis applied by these courts is appropriate. The decisions also include Avery v. 26 County of Santa Clara, 2012 WL 5522554 (N.D. Cal. Nov. 13, 2012), whereby American 27 Contractors was applied to determine that the improper classification of a limited civil case 28 did not render the judgment void for purposes of claim preclusion. 1 Decisions applying American Contractors in non-bail areas included cases examining: 2 ● Entry of default judgments; 3 ● Application of judgment issued in excess of court’s civil jurisdiction limits; 4 ● Entry of final judgments for dismissal, or pursuant to terms of a settlement 5 agreement, or where condition precedent not met; 6 ● Court’s ability to set aside a void judgment or correct a void judgment nunc 7 pro tunc; and 8 ● Court’s ability to modify a prior order. 9 These cases span the range of litigation, including marital settlements, medical malpractice, 10 and business disputes. 11 The defining element of each case is that it adopted and applied the American 12 Contractors’s analysis to a determination of whether the trial court’s actions were void based 13 on a lack of fundamental jurisdiction or voidable for exceeding their jurisdiction. Multiple 14 cases involved the court’s rejection of prior authority that found an order to be void, without 15 consideration of the distinction between void and voidable. In fact, only one case declined to 16 apply American Contractors. In Airs Aromatics, LLC v. CBL Data Recovery Technologies, 17 Inc., 23 Cal. App 5th 1013 (2018), the competing prior authority was from the California 18 Supreme Court. As noted in footnote 4 of that decision, when faced with competing decisions 19 from the highest court, the appeals court was constrained to follow the specific holdings of the 20 decision most directly on point – and to the extent that the logic of American Contractors is 21 inconsistent with earlier precedent, that argument is properly directed to the Supreme Court. 22 It is against this development in California law that the question arose of whether 23 Vershbow remained good law for the proposition that a writ issued without the posting of an 24 undertaking is void ab inito. Based on the clarification and direction provided by the 25 California Supreme Court 13 years after Vershbow was issued, this court held that it does not. 26 Neither party disputes that the Superior Court had jurisdiction to determine whether the TPO 27 or Writ should be issued in the case before it. After determining issuance was appropriate, the 28 order entered left blank the amount of undertaking required. Whether intentional or 1 accidental, this is inconsistent with the requirements of California Code of Civil Procedure 2 § 489.210. As such, the court exceeded its jurisdiction, rendering the TPO and Writ voidable. 3 Further American Contractors provides that errors in excess of jurisdiction should be 4 challenged directly. Debtor became aware of the TPO on or about April 28, 2018 and was 5 personally served the TPO on April 30, 2018. Debtor did not file an ex parte application or a 6 motion to modify or vacate the TPO pursuant to California Code of Civil Procedure §486.100 7 at any time. Further, she did not file a motion to set aside the RTAO or the writ, which she 8 could have done pursuant to California Code of Civil Procedure §485.240, nor did she file an 9 appeal. Cal. Code Civ. Proc. §904.1(a)(5). Debtor allowed the TPO to be extended twice 10 without objecting to the lack of an undertaking. Debtor did not present any unusual 11 circumstances that prevented her from an earlier, direct challenge to the TPO or Writ of 12 Attachment. [13] 14 2. Whether Court should alter its prior ruling regarding void or voidability of 15 Writ? 16 Plaintiff asserts three arguments for amendment of the prior ruling. First, that the 17 court erred in applying American Contractors instead of Vershbow. Second, in issuing the 18 Writ, it was the clerk not the court that acted in excess of its jurisdiction. Third, the TPO 19 expired prior to issuance of the Writ, so the Writ does not relate back and the attachment lien 20 is void. [21] 22 a. Application of California law to interpretation of attachment statutes. 23 Plaintiff asserts the court committed clear error in applying American Contractors 24 instead of Vershbow to determine whether the Writ is void. As recognized in Vershbow, prior 25 to issuance of a writ of attachment, California Code of Civil Procedure § 489.210 requires a 26 plaintiff to “file an undertaking to pay the defendant any amount the defendant may recover 27 for any wrongful attachment by the plaintiff in the action.” In Vershbow, the defendant 28 obtained a writ of attachment without first providing the undertaking. Unlike here, the right 1 to attach order issued in Vershbow required posting of an undertaking prior to issuance of the 2 writ. When the validity of the writ was subsequently challenged, the court found “that the 3 Attachment Law statutes are subject to strict construction because they are purely the creation 4 of the Legislature.” Vershbow, 231 Cal. App. 3d at 882. Rejecting arguments presented by 5 the plaintiff, the court found that the plaintiff “violated section 489.210, and ignored a court 6 order expressly requiring the posting of an undertaking,” resulting in a writ that was void ab 7 inito. Id. at 882. Since Vershbow was published in 1991 it has been followed without 8 disagreement and is referenced by numerous treatises. A review of the cases decided after the 9 California Supreme Court’s 2004 decision in American Contractors shows that none of those 10 cases considered whether American Contractors should apply – and that none of the parties 11 raised the question. 12 Upon further review of this argument, the court finds that Vershbow is factually 13 distinguishable from the case presented. In Vershbow, the court issued an order requiring 14 posting of an undertaking in a designated amount prior to issuance of the writ. There is no 15 dispute that the court acted within its jurisdiction in issuing an order in compliance with the 16 statutory requirements. Despite applicant’s failure to comply with the court order requiring 17 an undertaking, the clerk issued the writ. 18 Here, neither the TPO nor RTAO designated the undertaking required. Instead, the 19 applicable sections in these orders were unchecked and the dollar amounts left blank. See 20 TPO ¶ 2.h., RTAO ¶ 2.i. Thus, whether American Contractors impliedly overruled Vershbow 21 or not, the factual and legal issues presented are consistent with the California Supreme 22 Court’s analysis in American Contractors. The parties agree that the state court had 23 fundamental jurisdiction to issue the TPO and RTAO. However, the court acted in excess of 24 its jurisdiction by ordering either without requiring an undertaking to be posted. As such, the 25 court amends its prior order to distinguish Vershbow. The determination remains that the 26 Writ is voidable, not void. 27 As a corollary to her argument, Plaintiff asserts that she should have been provided an 28 opportunity for additional briefing on this issue. In its opposition to summary judgment, 1 Defendant asserted that the court did not require an undertaking as the superior court judge 2 left a blank space in the TPO and RTAO. Thus, notwithstanding the statutory requirements, 3 the arguments revolved around what impact, if any, should follow from the court having not 4 stated the amount of an undertaking. Within this context, Defendant identified American 5 Contractors as providing the appropriate analysis as the superior court acted within its 6 jurisdiction, while issuing an order that did not provide a requirement for all the statutory 7 requirements. Plaintiff did not respond to this argument in her reply brief. 8 At the hearing on the motion, the court began with a tentative ruling following 9 Vershbow. Defendant argued American Contractors at length and Plaintiff sought to rebut the 10 argument based on Vershbow. After taking the matter under submission the court followed 11 American Contractors. Plaintiff argues that as the decision changed following the statement 12 of a tentative decision, she should have been granted a further opportunity to brief the issue. 13 This argument is without merit and would result in unwieldy never-ending motion practice. [14] 15 b. Additional grounds to alter the prior ruling. 16 In this Motion, Plaintiff asserts for the first time that issuance of the Writ without first 17 requiring an undertaking was clerk error as opposed to an error of the court. Plaintiff relies 18 extensively on the analysis provided in Baird v. Smith, 216 Cal. 408 (1932) (en banc). Baird 19 v. Smith is not directly on point as it involved premature entry of a clerk’s default. More 20 importantly, Plaintiff neither cited Baird v. Smith, nor raised the argument of clerk error in its 21 briefing on summary judgment. 22 Plaintiff also raised for the first time the argument that the TPO expired. Her position 23 is that the TPO expired on June 4, 2018, prior to issuance of the Writ. As a result, the Writ 24 does not relate back and the attachment lien is void. (Dkt. # 34, Sec. III.H.) 25 Neither of these arguments was included in the summary judgment motion. Thus, they 26 are not properly considered on a motion to alter or amend. See In re JSJF Corp., 344 B.R. at 27 103 (legal theory should not be presented for first time on motion to amend). [28] 1 3. Whether equitable defenses should be applied? 2 The prior ruling that the TPO and Writ are voidable, not void stands. However, at the 3 time of the initial ruling, the court asserted that stay relief should be considered to allow the 4 state court to determine whether equitable arguments should be applied to excuse Defendant’s 5 error or allow Defendant an opportunity to cure it. Contemporaneous with Plaintiff’s Motion, 6 each party filed a motion seeking stay relief to return to state court for further proceedings on 7 this question – albeit the terms of stay relief conflicted. In reviewing this Motion and the stay 8 relief motions, the court determined that amendment of the summary judgment order was 9 appropriate, and the bankruptcy court should address these secondary arguments. Each side 10 was provided an opportunity to submit additional briefs, followed by hearing on the Motion.1 11 As the court finds that the TPO and Writ are voidable, not void, they are valid until set 12 aside. This may be precluded by equitable principles such as “estoppel, disfavor of collateral 13 attack or res judicata.” American Contractors, 33 Cal. 4th at 661 . Defendant asserts several 14 equitable arguments apply. Plaintiff disagrees. [15] 16 a. Waiver due to failure to challenge TPO or Writ prior to bankruptcy filing. 17 Defendant asserts that since Plaintiff failed to challenge the TPO or Writ before the 18 Superior Court she is precluded from doing so now. Initially, the TPO was issued on April 19 24, 2018, and served upon Plaintiff on April 28 and 30, 2018. It was further extended twice 20 during the state court proceedings. Following application by Defendant the RTAO was issued 21 on June 28, 2018, which authorized the issuance of a Writ of Attachment by the clerk of 22 court. That same date, the Clerk issued the Writ without Defendant posting an undertaking. 23 On June 29, 2018, the Writ was recorded. Plaintiff filed her chapter 13 bankruptcy case on 24 August 22, 2018. Defendant argues that as Plaintiff did not challenge the TPO or Writ prior 25 to filing this adversary proceeding she is precluded from doing so now. [26] 1 The underlying complaint does not include a claim to set aside the lien pursuant to 11 U.S.C. 27 § 544(b). Although the parties anticipate future litigation on this point, it is not a matter for this Motion. [28] 1 “Waiver is the intentional relinquishment of a known right after knowledge of the 2 facts. . . .The burden . . . is on the party claiming a waiver of a right to prove it by clear and 3 convincing evidence that does not leave the matter to speculation, and doubtful cases will be 4 decided against a waiver.” Waller v. Truck Ins. Exchange, Inc., 11 Cal. 4th 1, 31 (1995) 5 (citations omitted). The undisputed facts upon which Defendant relies are that Plaintiff did 6 not challenge Defendant’s failure to post an undertaking in relation to the TPO at hearings on 7 May 22 and 31, 2018. No substantive rulings were made at either of the May hearings. Each 8 resulted in a continuance to allow Plaintiff more time to oppose Defendant’s request for relief. 9 Debtor ultimately filed an opposition to the Writ on June 24, 2018, which did not address the 10 undertaking. The reason it was not included is unknown. Following issuance of the Writ on 11 June 28, 2019, Plaintiff first addressed the failure to post an undertaking in the complaint 12 initiating this adversary proceeding. These facts do not establish by clear and convincing 13 evidence that Plaintiff intentionally relinquished her right to assert that the Writ was void or 14 voidable based on the failure to post an undertaking. This is particularly so where the 15 automatic stay prohibited any act to collect by Defendant during four of the six months 16 between issuance of the Writ and filing the complaint. 17 American Contractors is not to the contrary. There the court focused on the “rule that 18 collateral attack on a voidable but final judgment is not available absent unusual 19 circumstances . . . that precluded earlier challenge of the judgment. Rather, a voidable 20 judgment must be challenged while the trial court or Court of Appeal can still correct the 21 mistake.” 33 Cal. 4th at 665 . Neither party contends that the TPO or Writ is a final judgment. 22 Finally, in ABBA Rubber Co. v. Seaquist 235 Cal. App. 3d 1, 11-13 (Cal. Ct. App. 1991), the 23 court determined that substantial compliance with statutory procedure did not result in waiver. 24 This is consistent with Waller and does not reduce Defendant’s burden in order to establish 25 waiver. Accordingly, the court finds that waiver does not prohibit Plaintiff from challenging 26 the voidability of the TPO and Writ. [28] 1 b. Laches 2 “The defense of laches requires unreasonable delay plus either acquiescence in the act 3 about which plaintiff complains or prejudice to the defendant resulting from the delay.” Conti 4 v. Board of Civil Service Commissioners, 1 Cal. 3d 351, 360 (1969). California law places the 5 burden of proving laches on the defendant “in aid of the salient policy favoring resolution of 6 controversies on their merits.” Id. at 361 . Parties dispute whether unreasonable delay 7 occurred due to differing statements of the available statutory remedies. [8] 9 (1) Plaintiff’s analysis of unreasonable delay 10 Plaintiff asserts that laches does not apply because she has until August 21, 2020 to set 11 aside the TPO and Writ. Her argument relies upon California Code of Civil Procedure 12 § 473(b) and Bankruptcy Code2 § 108. Section 473(b) authorizes the court to “relieve a party 13 or his or her legal representative from [an] . . . order or other proceeding taken against him or 14 her through his or her mistake, inadvertence, surprise, or excusable neglect.”3 Relief pursuant 15 to this provision must be requested within a reasonable time, and in no case to exceed six 16 months. As the TPO and Writ were issued within six months of the petition date, Debtor 17 asserts this six-month period is extended for two years from the petition date by Bankruptcy 18 Code § 108(a). 19 Plaintiff’s application of § 473(b) is incorrect, rendering Bankruptcy Code § 108(a) 20 inapplicable. Throughout the pleadings, Plaintiff contends Defendant failed to satisfy the 21 requirements for a TPO or Writ by not providing an undertaking prior to their issuance. Her 22 arguments focus solely on the error of Defendant, the court, or the clerk. But § 473(b) is 23 limited to errors by the moving party. Don v. Cruz, 131 Cal. App. 3d 695, 792 (Cal. Ct. App. 24 1982) (Section 473 “has no application to judicial mistakes but only to mistake, inadvertence, [2] 11 U.S.C. §§ 101 et seq. (“Bankruptcy Code”). [26] 3 In objecting to application of the American Contractor’s analysis, Plaintiff relies on the 27 position that the Writ is not a final order. An order authorizing a writ of attachment is an appealable order. See Cal. Code Civ. Proc. §904.1(a)(5); California Retail Portfolio Fund 28 GMBH & Co. KG v. Hopkins Real Estate Group, 193 Cal. App. 4th 849 (Cal. Ct. App. 2011). 1 surprise or excusable neglect of the moving party.” (emphasis added)). Further, the party 2 asserting mistake under § 473(b) carries the burden of identifying his or her error justifying 3 relief. See Hopkins & Carley v. Gens, 200 Cal. App. 4th 1401, 1410 (Cal. Ct. App. 2011). At 4 no point does Plaintiff allege mistake, inadvertence, surprise or excusable neglect by herself 5 or her counsel. Thus, § 473(b) does not provide a means for Plaintiff to obtain relief from the 6 TPO or Writ. 7 Alternatively, Plaintiff argues in her supplemental briefs [Dkt. # 34 and 36] that the 8 clerk’s office erred. Arguably, she could seek to amend the Writ on this basis pursuant to 9 § 473(d); which allows the court to correct clerical mistakes in judgments or orders, or to set 10 aside any void judgment. However, the authority to correct a clerical mistake pursuant to this 11 subsection only applies to an order that is void, not voidable. See Lee v. An, 168 Cal. App. 4th 12 558, 563 (Cal. Ct. App. 2008) (applying American Contractors to find order voidable, thus 13 not eligible for amendment pursuant to § 473(d)). 14 Without the ability to seek relief pursuant to § 473, Plaintiff has not established a 15 period within which she may commence an action that did not expire prior to her bankruptcy 16 filing. As such, Bankruptcy Code § 108 does not apply to provide a further extension. See 17 USACM Liquidating Trust v. Deloitte & Touche, 754 F.3d 645 (9th Cir. 2014). [18] 19 (2) Defendant’s analysis of unreasonable delay 20 In contrast, Defendant asserts that to the extent Plaintiff seeks to challenge the TPO or 21 Writ it should have occurred through filing an appeal.4 See Cal. Civ. Proc. § 904.1(a)(5) 22 (authorizing appeal from an order granting a right to attach order). California Rule of Court 23 8.406 limits the period for filing an appeal to 60 days. The orders granting the TPO and 24 further extending it were entered more than 60 days prior to the petition date. The RTAO was 25 entered on June 28, 2019. The time for filing an appeal thus expired on August 27, 2018 – [26] 27 4 In its Opposition to Supplemental Brief [Dkt. # 35], p. 7, l. 8-13, Defendant addressed the expiration of the time to file an appeal from the orders extending the TPO. The same analysis 28 is applied to the Writ in the interest of judicial efficiency. 1 five days after Plaintiff filed her bankruptcy petition. As the time for filing an appeal did not 2 expire prepetition, Bankruptcy Code § 108(b) applies. Section 108(b) extends the time for 3 doing certain acts, including filing an appeal, to the later of 60 days after the petition or the 4 end of the period provided by other applicable law. See Local Union No. 38 v. Custom Air 5 Systems, Inc., 333 F.3d 345, 346-48 (2d Cir. 2003). Therefore, Plaintiff had until October 21, 6 2018 to file an appeal or other similar act. No appeal of the RTAO was taken during this 7 period nor did the filing of this adversary proceeding occur during it. As such, I find that that 8 Plaintiff unreasonably delayed in challenging the RTAO or Writ. 9 Further, Defendant sets forth that the second requirement is also met – that Defendant 10 was prejudiced by the delay. Specifically, since Plaintiff first asserted the issue post11 bankruptcy Defendant was not able to cure it prior to the bankruptcy filing. As a result, 12 Defendant’s secured claim is under attack. 13 As Defendant satisfies both elements of a laches claim, the court finds that the 14 equitable defense of laches applies to bar Plaintiff from asserting the TPO and Writ are void. [15] 16 c. Plaintiff’s Unclean Hands 17 Defendant asserts that Plaintiff comes to the bankruptcy court with unclean hands, and 18 as such, she should be prohibited from asserting Defendant’s Writ is voidable. Defendant 19 asserts that the TPO and Writ were issued based on Defendant’s claim that Plaintiff 20 embezzled significant funds from it. Plaintiff asserts that Defendant applies unclean hands too 21 broadly and would use it to bar Plaintiff relief provided for in bankruptcy. 22 The doctrine of unclean hands requires that a party seeking relief “shall have acted 23 fairly and without fraud or deceipt as to the controversy in issue.” Ellenburg v. Brockway, 24 Inc., 763 F.2d 1091, 1097 (9th Cir. 1985). “[D]etermining whether the doctrine of unclean 25 hands precludes relief requires balancing the alleged wrongdoing of the [party seeking relief] 26 against that of the [party opposing], and ‘weigh[ing] the substance of the right asserted by [the 27 party seeking relief] against the transgression which, it is contended, serves to foreclosure that [28] 1 right.’” Northbay Wellness Group, Inc. v. Beyries, 789 F. 3d 956, 960 (9th Cir. 2015) (quoting 2 Republic Molding Corp. v. B.W. Photo Utils., 319 F.2d 347 , 350 (9th Cir. 1963)). 3 The issue here is how to define the controversy in issue. In its broadest form, the 4 controversy pits Plaintiff’s alleged embezzlement from Defendant against Defendant’s 5 attempt to ensure recovery from Plaintiff. In this context, Plaintiff’s alleged embezzlement 6 over multiple years is the greater wrong than Defendant’s failure to satisfy the statutory 7 requirement of posting an undertaking prior to issuance of the Writ. Yet, to view the analysis 8 in this manner draws too large of a circle because it would also call into question whether a 9 debtor who commits bad acts harmful to a creditor could obtain bankruptcy relief where that 10 creditor’s recovery might be reduced. It also ignores the fact that a bankruptcy case is not 11 binary. Changes to the classification or amount of a claim often affect other creditors in the 12 case more than it does the debtor. Thus, defining the controversy in this manner is too broad.5 13 The controversy in interest should therefore be framed more narrowly. “The 14 misconduct that brings the clean hands doctrine into play must relate directly to the cause at 15 issue. Past improper conduct or prior misconduct that only indirectly affects the problem 16 before the court does not suffice.” Kendall-Jackson Winery, Ltd. V. Superior Court, 76 Cal. 17 App. 4th 970, 979 (Cal. Ct. App. 1999). As a result of Plaintiff’s alleged embezzlement, the 18 state court issued a TPO and Writ in Defendant’s favor. But Defendant did not provide the 19 required undertaking prior to issuance of the TPO or Writ. Defendant seeks to protect the 20 Writ from Plaintiff’s challenge based on Plaintiff’s actions prior to suit. But Plaintiff took no 21 action that prohibited Defendant from posting the undertaking, nor from seeking authorization 22 to post an undertaking after the fact. Further, Plaintiff’s challenge based on the undertaking is 23 just one of multiple claims within this case that seek to limit Defendant’s claim by type or 24 amount. Viewed with this narrowed lens, Plaintiff’s inaction regarding the undertaking does 25 not outweigh Defendant’s error in its posting. Accordingly, the court finds that Plaintiff’s [27] 5 Whether a debtor should obtain a discharge of all debts or a particular debt is a different 28 question from the debtor’s ability to participate in the bankruptcy process. 1 actions during the state court case and bankruptcy case do not outweigh Defendant’s such that 2 Defendant’s error should be excused on the basis of Plaintiff’s unclean hands. [3] 4 d. Estoppel 5 In its supplemental brief [Dkt. #33], Defendant asserts that estoppel should apply and 6 states the concept underlying the doctrine. No argument is made for relief on grounds other 7 than those addressed above, so further analysis is not required by the court. [8] 9 Conclusion 10 For the reasons stated herein, the court denies Plaintiff’s request to alter the prior 11 ruling to find that the TPO and Writ obtained by Defendant are void and grants the parties’ 12 request to amend the prior ruling to determine whether equitable grounds prohibit Plaintiff 13 from seeking to set aside the voidable TPO and Writ. The court further finds that laches 14 applies to bar Plaintiff from voiding the TPO and Writ based on the failure to post an 15 undertaking. 16 An order consistent with this memorandum is issued contemporaneously herewith. 17 ***END OF MEMORANDUM DECISION*** [28] 1 COURT SERVICE LIST [2] 3 All ECF Participants