FILED MAR 11 2019 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT

UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

In re: BAP No. CC-18-1267-SFL

MINON MILLER, Bk. No. 2:13-bk-35116-RK

Debtor.

MINON MILLER,

Appellant,

v. MEMORANDUM*

EDWARD GILLIAM; VIC RODRIGUEZ,

Appellees.

Submitted Without Oral Argument on February 21, 2019

Filed – March 11, 2019

Appeal from the United States Bankruptcy Court for the Central District of California

* This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value. See 9th Cir. BAP Rule 8024-1. Honorable Robert N. Kwan, Bankruptcy Judge, Presiding

Appearances: Appellant Minon Miller, pro se, on brief; Vic Rodriguez on brief for appellees.

Before: SPRAKER, FARIS, and LAFFERTY, Bankruptcy Judges.

INTRODUCTION

Minon Miller appeals from an order granting in part Edward

Gilliam’s motion for sanctions under Rule 9011.1 By way of the motion,

Gilliam sought to recover $77,200 in attorney’s fees he incurred obtaining

an order dismissing Miller’s sixth bankruptcy case based on bad faith and

improper purpose. The bankruptcy court awarded $50,875 in fees and

disallowed the rest as unreasonable.

Miller contends that the bankruptcy court erred in granting the

motion because Gilliam lacked standing. Miller is correct. Gilliam’s claim

for fees was property of his chapter 7 bankruptcy estate. Because Gilliam

never scheduled this claim as an asset in his bankruptcy case, it continued

to be estate property when his bankruptcy case was closed. As a result,

only his chapter 7 trustee had standing to pursue recovery of the fees.

1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code,

, and all “Rule” references are to the Federal Rules of Bankruptcy Procedure.

2 Because the bankruptcy court should have denied the motion for lack of

standing, we REVERSE.

FACTS

Miller and Gilliam have been litigating against each other for over ten

years. The litigation originally arose from a 2007 real property lease, with a

purchase option, covering Gilliam’s residence in Carson, California. As a

result of the litigation, the Orange County Superior Court entered

judgment against Miller for roughly $53,000.00. The state court later

entered a separate judgment for the same amount against Miller’s wholly-

owned tax return preparation business, Nonim, LLC.

There have been numerous additional actions in state court, some

brought by Gilliam, and some brought by Miller. Each party also has filed

multiple voluntary bankruptcy petitions. Gilliam commenced three chapter

13 bankruptcy cases in 2008. He also filed a chapter 7 bankruptcy petition

in 2017. The chapter 7 trustee in that case filed a no asset report, and the

bankruptcy court entered a discharge order in Gilliam’s favor on July 3,

2017.

For her part, Miller has commenced six bankruptcy cases. The only

one relevant to this appeal is the sixth and final case, which she

commenced in 2013. Shortly after commencement, Gilliam moved to

dismiss this case on the ground that the bankruptcy was filed in bad faith

and solely for the purpose of impeding him from collecting on his

3 judgments. Gilliam additionally alleged that Miller had grossly

understated her income in her bankruptcy schedules. After holding a trial

on the motion to dismiss, the bankruptcy court ruled in favor of Gilliam

and entered an order dismissing the case in September 2015.

Miller appealed the dismissal order to this Panel. Miller v. Gilliam (In

re Miller), BAP No. CC-15-1328-KiTaKu,

, at *1 (9th Cir.

BAP Oct. 13, 2016). We affirmed, holding that the bankruptcy court’s

dismissal of the bankruptcy case on the ground of bad faith was not an

abuse of discretion.

. Miller then appealed our decision to the

Ninth Circuit Court of Appeals, which also affirmed. Miller v. Gilliam (In re

Miller),

(9th Cir. 2017).

On October 29, 2015, while Miller’s appeal to this Panel was pending,

Gilliam filed a motion for sanctions under § 105 and Rule 9011. According

to Gilliam, Miller’s latest bankruptcy filing was one in a series of abusive

and improper bad faith bankruptcy filings Miller had initiated as part of

her campaign to defeat his judgment collection efforts. Gilliam also relied

on Miller’s understatement of her gross income, as the bankruptcy court

had found when it dismissed her bankruptcy case.

On November 16, 2015, Miller responded to Gilliam’s sanctions

motion. She once again denied that she had filed her sixth bankruptcy

petition for an improper purpose or that she had misstated her gross

income. After receiving Gilliam’s sanctions motion and Miller’s response,

4 the bankruptcy court decided to hold the sanctions motion in abeyance

pending the disposition of Miller’s appeals from the case dismissal order.

On May 2, 2018, after the Court of Appeals issued its mandate, the

bankruptcy court reset the matter for hearing on May 30, 2018.

Shortly thereafter, Miller filed a request for judicial notice in support

of her opposition to the sanctions motion. In relevant part, Miller asked the

bankruptcy court to take judicial notice of the filing of Gilliam’s 2017

bankruptcy case and Gilliam’s receipt of a discharge therein. She further

pointed out that Gilliam’s bankruptcy schedules did not list his pending

sanctions motion or his claim for attorney’s fees under Rule 9011.

Consequently, Miller reasoned, Gilliam’s entitlement (if any) to recover his

fees remained property of his bankruptcy estate, and he lacked standing to

pursue them on behalf of his estate.

Gilliam filed a declaration in response to Miller’s request for judicial

notice. Gilliam noted that he had listed one of his judgments against Miller

in his amended bankruptcy schedules.2 He also noted that his amended

schedules mentioned Miller’s latest bankruptcy filing. But Gilliam’s

amended schedules did not list his claim against Miller for attorney’s fees

as an asset in his bankruptcy case. In fact, Gilliam stated in his schedules

2 Gilliam has not disputed that his original schedules, filed in March 2017, did not list any of his claims against Miller. Gilliam did not file his amended schedules until August 2017, after he received his discharge and after his chapter trustee issued a no asset report.

5 only that Miller’s 2013 bankruptcy case prevented him from collecting on

his judgment. This was not true, inasmuch as Miller’s case already had

been ordered dismissed as a bad faith and improper bankruptcy filing.

The bankruptcy court heard Gilliam’s sanctions motion on May 30,

2018. The bankruptcy court acknowledged that Gilliam did not schedule

his claim for attorney’s fees against Miller. But the court was not concerned

that this presented an obstacle to Gilliam’s sanctions motion. The court

reasoned that Gilliam’s entitlement to fees really belonged to his attorney,

Victor Rodriguez, since Rodriguez ultimately was the one who needed to

be paid his fees. At the same time, the court seemed to be aware that

Rodriguez held only a claim for fees against Gilliam, not Miller, and that

Rodriguez’s claim against Gilliam had been discharged in Gilliam’s no-

asset bankruptcy case. The court explained that, to the extent Gilliam

already had paid Rodriguez, Gilliam could directly recover the fees from

Miller, and to the extent Gilliam never paid the fees and his obligations to

Rodriguez had been discharged, Gilliam only could recover them if he

agreed to pay them to Rodriguez going forward. The court then took the

matter under submission.

After the hearing, Gilliam filed a supplemental declaration. In it, he

represented that, before he filed his 2017 bankruptcy case, he had paid

Rodriguez $25,678 of the roughly $78,000 Rodriguez billed for prosecuting

the motion to dismiss Miller’s sixth bankruptcy case. As for the fees Gilliam

6 had not paid before he received his discharge in his 2017 bankruptcy case,

Gilliam agreed to pay any awarded fees in excess of the $25,678 to

Rodriguez.

The bankruptcy court then issued on September 21, 2018, a

memorandum decision and a separate order granting in part Gilliam’s

sanctions motion. The bankruptcy court found that Miller’s sixth

bankruptcy petition violated Rule 9011 for much the same reason it had

dismissed the case: because Miller filed it in bad faith and for an improper

purpose. The court also relied on Miller’s misstatement of her gross

income. The bankruptcy court allowed $50,875 in fees and disallowed the

remaining fees requested as excessive or as improperly presented in a

“lumped” format. The court also was concerned that counsel charged

Gilliam for clerical tasks. The court ordered $25,678 paid to Gilliam and the

remaining balance of allowed fees of $25,197 paid to Rodriguez. Miller

timely appealed.

JURISDICTION

Subject to the standing analysis set forth below, the bankruptcy court

had jurisdiction pursuant to

and 157(b)(2)(A) and (O). We

have jurisdiction under

.

7 ISSUE

Did Gilliam have standing to prosecute his Rule 9011 sanctions

motion?

STANDARD OF REVIEW

Standing is a jurisdictional issue, which we review de novo. Palmdale

Hills Prop., LLC v. Lehman Comm. Paper, Inc. (In re Palmdale Hills Prop., LLC),

(9th Cir. 2011). When we review an issue under the de

novo standard, we consider it anew, without any deference to the

bankruptcy court’s decision. Francis v. Wallace (In re Francis),

(9th Cir. BAP 2014)

DISCUSSION

Miller insists that Gilliam lacked standing to seek recovery from her

of the fees he incurred prosecuting his motion to dismiss Miller’s sixth

bankruptcy case. According to Miller, as a result of the chapter 7 case

Gilliam commenced in 2017, his claim for attorney’s fees became an asset of

his bankruptcy estate. Because Gilliam never listed the claim on his

bankruptcy schedules, Miller reasons that the claim continued to be

property of the estate even after Gilliam received his discharge and his case

was closed. Consequently, Miller contends that only Gilliam’s chapter 7

trustee had the right to prosecute his Rule 9011 sanctions motion to recover

the fees.

We agree. Because all of the subject attorney’s fees were incurred

8 before Gilliam commenced his 2017 bankruptcy case, his claim (if any) to

recover the fees constituted a prepetition asset that became property of his

bankruptcy estate upon the filing of his petition. The Bankruptcy Code

broadly defines property of the estate to include “all legal or equitable

interests of the debtor in property as of the commencement of the case.”

§ 541(a)(1); see also Cusano v. Klein,

(9th Cir. 2001). This

includes all litigation claims and causes of action existing as of the petition

date. Cusano,

(citing Sierra Switchboard Co. v. Westinghouse

Elec. Corp.,

, 708 (9th Cir. 1986)).

Unless otherwise ordered, scheduled assets are deemed abandoned

to the debtor upon the closing of a chapter 7 bankruptcy case if not

otherwise administered by the chapter 7 trustee. § 554(c); see also Diamond Z

Trailer, Inc. v. JZ L.L.C. (In re JZ L.L.C.),

(9th Cir. BAP

2007). However, when estate property is not scheduled and not

administered by the chapter 7 trustee, it is not deemed abandoned. Rather,

such undisclosed property remains property of the estate even after the

bankruptcy case is closed. § 554(d); In re JZ L.L.C.,

. Thus,

Gilliam’s claim against Miller for fees remained property of his bankruptcy

estate even after his case was closed because he failed to list the claim in his

bankruptcy schedules.

Debtors lack standing to prosecute claims belonging to their chapter 7

bankruptcy estate. Only the chapter 7 trustee may pursue such claims on

9 behalf of the estate. See Spirtos v. One San Bernardino Cty. Super. Ct. Case,

, 1175-76 (9th Cir. 2006); Cusano,

; In re JZ L.L.C.,

.

On appeal, Gilliam has not disputed that his fee entitlement became

property of his bankruptcy estate when he commenced his 2017

bankruptcy case. He does claim that his fee entitlement against Miller was

adequately scheduled. He points to the fact he mentioned Miller’s

bankruptcy case in his schedules. But he did not list the bankruptcy case or

the fee entitlement as an asset. He merely mentioned the case as an

impediment to collecting on a different asset: one of his judgments against

Miller. This did not constitute proper or adequate scheduling of the fee

entitlement. See Cusano,

.

Therefore, the claim for attorney’s fees was an unscheduled asset that

remained property of Gilliam’s chapter 7 estate. The bankruptcy court

erred by permitting Gilliam to prosecute his sanctions motion to conclusion

(over Miller’s standing objection) when the fees he sought to recover

belonged to his bankruptcy estate.

At the final sanctions motion hearing, the bankruptcy court

expressed the view that the ultimate right to payment of fees belonged to

Gilliam’s attorney Rodriguez rather than to Gilliam. This view apparently

led the bankruptcy court to conclude that the fee entitlement was not an

asset of Gilliam’s bankruptcy estate. This was incorrect. With certain

10 exceptions not raised or addressed below, all legal and equitable interests

of the debtor become property of the estate. § 541(a)(1). Gilliam was the

movant in both the motion to dismiss and the subsequent sanctions

motion, not his attorney. Gilliam’s bankruptcy, and the failure to disclose

his attorney’s fee claim, divested him of standing to pursue that recovery.

Finally, there is nothing in the record to suggest that Rodriguez had

any right to recover his fees directly from Miller. To the contrary, the

record reflects a standard fees for services attorney-client relationship

between Gilliam and Rodriguez under which only Gilliam was indebted to

Rodriguez for the services he provided to Gilliam. More importantly, it was

Gilliam who sought an award of attorney’s fees, not Rodriguez. Gilliam

lacks standing to recover property of his 2017 bankruptcy estate.

Additionally, it is unclear how Gilliam could assert any right that

Rodriquez might have to the direct payment of his unpaid attorney’s fees.3

On this record, we cannot uphold the bankruptcy court’s view of Gilliam’s

fee entitlement as if it actually belonged to Rodriguez.

3 Even if we were to accept the bankruptcy court’s reasoning that Rodriguez was the real party in interest in the motion for sanctions, that would apply only to his unpaid fees. Gilliam previously paid $25,678 to Rodriguez. We are not aware of any legal theory that would justify payment of this amount to Rodriguez. Indisputably, Miller’s reimbursement of legal fees Gilliam already paid was owed to Gilliam or, more accurately, his bankruptcy estate.

11 CONCLUSION

For the reasons set forth above, we REVERSE the bankruptcy court’s

Rule 9011 sanctions order.

12