Miller v. Snavely ( 2005 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: DOUGLAS E. MILLER, 
Debtor.
No. 03-35894
BONNIE G. SNAVELY,
Defendant-Appellant,  D.C. No.
CV-02-00079-DWM
v. OPINION
DOUGLAS E. MILLER,
Debtor-Appellee.

Appeal from the United States District Court
for the District of Montana
Donald W. Molloy, Chief District Judge, Presiding
Argued and Submitted
November 3, 2004—Seattle, Washington
Filed February 2, 2005
Before: Arthur L. Alarcón, William A. Fletcher, and
Johnnie B. Rawlinson, Circuit Judges.
Opinion by Judge Alarcón
1425
1428 IN RE MILLER
COUNSEL
Jay T. Jorgensen, Sidley Austin Brown & Wood LLP, Wash-
ington, D.C.; Deborah L. Carstens (on the briefs), Bullivant
Houser Bailey PC, Seattle, Washington; Ann T. Wilson (on
the briefs), Law Offices of Ann T. Wilson, Seattle, Washing-
ton; James A. Patten (on the briefs), Patten, Peterman, Bekke-
dahl & Green PLLC, Billings, Montana; Michele G.
Radosevich (on the briefs), Davis Wright & Tremaine, Seat-
tle, Washington, for the appellant.
Jon R. Binney and Lon J. Dale (on the brief), Milodragovich,
Dale, Steinbrenner & Binney PC, Missoula, Montana, for the
appellee.
IN RE MILLER 1429
OPINION
ALARCÓN, Senior Circuit Judge:
Appellant Bonnie Snavely appeals from the order of the
district court for the District of Montana affirming the order
of the bankruptcy court for the District of Montana (“Montana
bankruptcy court”) awarding debtor-in-possession Douglas
Miller $90,000 in attorney’s fees based on Ms. Snavely’s
breach of her fiduciary duties as trustee of a trust of which
Mr. Miller was a beneficiary. Ms. Snavely filed a petition for
bankruptcy in the bankruptcy court for the Western District of
Washington (“Washington bankruptcy court”) on March 15,
2002. She argues that the Montana bankruptcy court’s order,
issued on March 26, 2002, violated the automatic stay trig-
gered by the earlier filing of her bankruptcy petition in the
Washington bankruptcy court. We reverse because we con-
clude that the automatic stay enjoined the Montana bank-
ruptcy court from entering an award of attorney’s fees until
after the expiration or lifting of the stay.
I
On March 19, 2001, Douglas E. Miller filed for protection
under Chapter 11 of the Bankruptcy Code in the Montana
bankruptcy court. On July 19, 2001, Ms. Snavely filed a proof
of claim in Mr. Miller’s chapter 11 case in the amount of
$603,906.12 on behalf of the Margueritte Miller Living Trust
(“Trust”), of which she was trustee and Mr. Miller was a one-
third beneficiary. Mr. Miller filed objections to the proof of
claim and asserted counterclaims, including a claim for
breach of fiduciary duty against Ms. Snavely as trustee.
Following trial on Mr. Miller’s objections and counter-
claims to the proof of claim, the Montana bankruptcy court
issued a detailed order allowing a portion of the Trust’s proof
of claim against Mr. Miller, subject to offset of a judgment in
favor of Mr. Miller and against Ms. Snavely on Mr. Miller’s
1430 IN RE MILLER
counterclaims. On January 31, 2002, Mr. Miller filed a
motion for attorney’s fees and costs against Ms. Snavely in
the Montana bankruptcy court. The Montana bankruptcy court
denied this motion on March 12, 2002.
On March 14, 2002, Mr. Miller filed a motion for reconsid-
eration of the Montana bankruptcy court’s denial of his
motion for attorney’s fees. The next day, March 15, 2002, Ms.
Snavely filed a chapter 11 petition for bankruptcy in the
Washington bankruptcy court. On March 19, 2002, she filed
a notice in the Montana bankruptcy court stating that she had
filed for bankruptcy protection in the Washington bankruptcy
court.
On March 26, 2002, the Montana bankruptcy court granted
Mr. Miller’s motion for reconsideration and awarded Mr. Mil-
ler attorney’s fees and costs in the amount of $90,000. The
Montana bankruptcy court concluded that the automatic stay
triggered by Ms. Snavely’s chapter 11 case in Washington did
not apply to Mr. Miller’s request for attorney’s fees in the
Montana bankruptcy court because the “attorney fee request
is part of Snavely’s proof of claim which was prosecuted by
her.” The Montana bankruptcy court also concluded that Mr.
Miller was entitled to an award of attorney’s fees under Wash.
Rev. Code § 11.96A.150 based on Ms. Snavely’s breach of
her fiduciary duties and awarded Mr. Miller $90,000 in attor-
ney’s fees.
On April 5, 2002, Ms. Snavely appealed from the Montana
bankruptcy court’s order to the district court for the District
of Montana. On September 30, 2003, the district court
affirmed the Montana bankruptcy court’s award of attorney’s
fees to Mr. Miller.
II
This Court has jurisdiction over this appeal pursuant to 28
U.S.C. §§ 158(d) and 1291. We review a district court’s deci-
IN RE MILLER 1431
sion on appeal from a bankruptcy court de novo. Preblich v.
Battley, 181 F.3d 1048, 1051 (9th Cir. 1999). We apply a
clearly erroneous standard to a bankruptcy court’s findings of
fact and review de novo its conclusions of law. Id.A
During the argument in this matter, Ms. Snavely’s counsel
asserted, for the first time, that under Washington state law,
the Superior Court’s oral ruling on March 7, 2001, in In re the
Margueritte Miller Living Trust, No. 00-2-21981-4, that Ms.
Snavely did not breach her fiduciary duties as trustee of the
Trust was binding on the Montana bankruptcy court under the
doctrines of res judicata and collateral estoppel. We ordered
counsel to file supplemental briefs addressing this question.
None of the cases cited by Ms. Snavely in her supplemental
brief supports her contention that an oral ruling of a Washing-
ton trial court can serve as a final judgment triggering the
doctrines of res judicata and collateral estoppel. See Cunning-
ham v. Washington, 811 P.2d 225, 228-29 (Wash. Ct. App.
1991) (holding that partial summary judgment was suffi-
ciently final to invoke collateral estoppel where judge issued
a written opinion); Bull v. Fenich, 661 P.2d 1012, 1014
(Wash. Ct. App. 1983) (holding that probate court’s order was
a final judgment because it represented the final adjudication
of the parties’ rights); Chau v. City of Seattle, 802 P.2d 822,
823, 825 (Wash. Ct. App. 1991) (holding that a judgment on
verdict entered by the trial court regarding damages against a
codefendant satisfies the finality requirement for collateral
estoppel purposes).
[1] Under Washington state law, “a trial court’s oral [rul-
ing] . . . has no final or” binding effect unless formally incor-
porated into the findings, conclusions, and judgment. State v.
Mallory, 419 P.2d 324, 325 (Wash. 1996) (citations omitted).
The Washington Superior Court’s oral ruling was not for-
mally incorporated into the findings, conclusions, and judg-
1432 IN RE MILLER
ment until March 23, 2001, four days after Mr. Miller filed for
bankruptcy on March 19, 2001. Accordingly, the oral ruling
had no final or binding effect on the proceedings pending
before the Montana bankruptcy court. The Washington Supe-
rior Court’s entry of its order and judgment is void because
it violated the automatic stay resulting from the filing of the
petition for bankruptcy. See Parker v. Bain, 68 F.3d 1131,
1138 (9th Cir. 1995) (holding that any act taken in violation
of an automatic stay is void).
B
Ms. Snavely argues that because she filed for bankruptcy
in the Washington bankruptcy court on March 15, 2002, any
proceedings pending against her in the Montana bankruptcy
court, including Mr. Miller’s motion for reconsideration of his
request for attorney’s fees, were subject to an automatic stay
under 11 U.S.C. § 362(a). Ms. Snavely contends that the
March 26, 2002 Montana bankruptcy court order awarding
attorney’s fees to Mr. Miller is therefore void.
[2] Section 362(a)(1) provides in relevant part:
(a) Except as provided in subsection (b) of this
section, a petition filed under section 301, 302, or
303 of this title . . . operates as a stay, applicable to
all entities of —
(1) the commencement or continuation, including
the issuance or employment of process, 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; . . .
Although the plain language of § 362(a) appears to apply
the stay to all court proceedings, courts have generally limited
IN RE MILLER 1433
the application of the stay in bankruptcy court proceedings.
Prewitt v. North Coast Village, Ltd. (In re North Coast Vil-
lage, Ltd.) 135 B.R. 641, 643 (B.A.P. 9th Cir. 1992). The
automatic stay is applicable only to proceedings against the
debtor. See Parker, 68 F.3d at 1136 (“ ‘[S]ection 362 should
be read to stay all appeals in proceedings that were originally
brought against the debtor . . . .’ ”) (emphasis omitted) (alter-
ation in original) (parallel citation omitted) (quoting
Ingersoll-Rand Fin. Corp. v. Miller Mining Co., 817 F.2d
1424, 1426 (9th Cir. 1987)). “This rule finds its source in the
language of section 362, which extends the automatic stay to
the continuation, as well as the commencement, of an action
against the debtor.” Id. (emphasis in the original).
[3] The automatic stay does not apply to proceedings initi-
ated against the debtor if the proceedings are initiated in the
same bankruptcy court where the debtor’s bankruptcy pro-
ceedings are pending. Teerlink v. Lambert (In re Teerlink
Ranch Ltd.), 886 F.2d 1233, 1237 (9th Cir. 1989) (automatic
stay is inapplicable to a suit commenced in the same court
where the bankruptcy is pending); Civic Center Square, Inc.
v. Ford (In re Roxford Foods, Inc.), 12 F.3d 875, 878 (9th Cir.
1993) (same). In In re North Coast Village, Ltd., the Bank-
ruptcy Appellate Panel explained the reasoning behind this
exception:
We agree that the stay does not apply to proceedings
commenced against the debtor in the bankruptcy
court where the debtor’s bankruptcy is pending.
Although the statutory language does not differenti-
ate between proceedings in bankruptcy courts and
proceedings in other courts, the application of the
stay to proceedings against the debtor in the home
bankruptcy court would be illogical and would not
serve the purposes underlying the automatic stay.
. . . The automatic stay is designed (1) to provide the
debtor a breathing spell from his or her creditors by
stopping all collection efforts, (2) to protect creditors
1434 IN RE MILLER
from each other by stopping the race for the debtor’s
assets and preserving the assets for the benefit of all
creditors and (3) to provide for an orderly liquidation
of administration of the estate. . . . Declining to
apply the stay to proceedings in the home bank-
ruptcy court will not interfere with these purposes.
135 B.R. at 643. For purposes of the automatic stay, the
“home bankruptcy court” is the bankruptcy court in which the
stay originates. See In re Shared Technologies Cellular, Inc.,
293 B.R. 89, 95 (D. Conn. 2003) (holding that the home court
for purposes of the stay and any modifications thereof is the
bankruptcy court in which the stay originates).
[4] Section 362(a) provides that the automatic stay trig-
gered by the filing of a bankruptcy petition is applicable to
“all entities.” “[T]he interpretation of a statute ‘begins with
the plain meaning of its language.’ ” Alaska, Dept. of Envi-
ronmental Conservation v. E.P.A., 298 F.3d 814, 818 (9th Cir.
2002) (quoting In re Bonner Mall Partnership, 2 F.3d 899,
908 (9th Cir. 1993)). “Our task is to give effect to the will of
Congress, and where its will has been expressed in reasonably
plain terms, that language must ordinarily be regarded as con-
clusive.” Id. (quoting Griffin v. Oceanic Contractors, Inc.,
458 U.S. 564, 570 (1982)).
[5] 11 U.S.C. § 101(15) defines an “entity” to include a
“governmental unit.” A “governmental unit” is defined in 11
U.S.C. § 101(27) to include a department, agency or instru-
mentality of the United States. Bankruptcy courts are “enti-
ties” within the meaning of § 362(a) because they are
governmental units.
[6] 11 U.S.C. § 362(b) provides 17 exceptions to the auto-
matic stay provision. It does not exclude bankruptcy courts,
however, from the application of an automatic stay. “The stay
of section 362 is extremely broad in scope and, aside from the
limited exception[s] of subsection (b), should apply to almost
IN RE MILLER 1435
any type of formal or informal action against the debtor or
property of the estate.” Stringer v. Huet (In re Stringer), 847
F.2d 549, 552 n.4 (9th Cir. 1988) (quoting 2 L. King, Collier
on Bankruptcy para. 362.04, at 362-31 (15th ed. 1988)).
Accordingly, we hold that an automatic stay issued by a home
bankruptcy court applies to all other bankruptcy courts.
III
Ms. Snavely filed a proof of claim on behalf of the Trust
against Mr. Miller in his chapter 11 case pending in the Mon-
tana bankruptcy court. Mr. Miller, in turn, asserted counter-
claims against Ms. Snavely alleging, inter alia, a claim for
breach of fiduciary duty. Mr. Miller’s motion for attorney’s
fees stemmed from the Montana bankruptcy court’s finding
that Ms. Snavely breached her fiduciary duties as trustee of
the Trust.
Mr. Miller filed his motion for attorney’s fees before Ms.
Snavely filed for bankruptcy in the Washington bankruptcy
court on March 15, 2002. The Montana bankruptcy court did
not issue its order granting the award of attorney’s fees until
March 26, 2002. Thus, we must decide whether Mr. Miller’s
request for attorney’s fees, which stemmed from his counter-
claim against Ms. Snavely, constituted the “continuation of an
action or proceeding” against Ms. Snavely to which the auto-
matic stay applied. Parker, 68 F.3d at 1135.
The Montana bankruptcy court found that “[s]ince this
attorney fee request is part of Snavely’s proof of claim which
was prosecuted by her, I determine a decision on the matter
for reconsideration is not subject to the automatic stay arising
out of Snavely’s recent chapter 11 filing.” Although the proof
of claim Ms. Snavely filed and prosecuted on behalf of the
Trust included a request for attorney’s fees, these requests
related to legal services allegedly rendered on behalf of the
Trust for which Ms. Snavely claimed Mr. Miller was partly
liable.
1436 IN RE MILLER
[7] By contrast, Mr. Miller’s request for attorney’s fees,
and the bankruptcy court’s ensuing award, was based on Mr.
Miller’s counterclaim against Ms. Snavely for breach of fidu-
ciary duty, which Mr. Miller prosecuted. In concluding that
“this attorney fee request is part of Snavely’s proof of claim,”
the Montana bankruptcy court apparently aggregated Mr. Mil-
ler’s request for attorney’s fees with Ms. Snavely’s request for
attorney’s fees. This is contrary to our instruction in Parker:
All proceedings in a single case are not lumped
together for purposes of automatic stay analysis.
. . . Within a single case, some actions may be
stayed, others not. Multiple claim and multiple party
litigation must be disaggregated so that particular
claims, counterclaims, cross claims and third-party
claims are treated independently when determining
which of their respective proceedings are subject to
the bankruptcy stay.
68 F.3d at 1137 (citation omitted). The Montana bankruptcy
court erred in failing to disaggregate Ms. Snavely’s request
for attorney’s fees from Mr. Miller’s request when it con-
cluded that the “attorney fee request is part of Snavely’s proof
of claim which was prosecuted by her.” Mr. Miller’s attor-
ney’s fees request was not part of Ms. Snavely’s proof of
claim, nor did she prosecute it.
In Parker, we considered whether a counterclaim against a
debtor “constitutes an action or proceeding that is subject to
the automatic stay.” 68 F.3d at 1137 (internal quotation marks
omitted). Parker filed a complaint against his company’s pen-
sion plan (“Pension Plan”), to which Pension Plan asserted
counterclaims. Id. at 1134. The district court granted sum-
mary judgment in favor of Pension Plan on its counterclaims
against Parker. Id. Parker then filed a bankruptcy petition and
a notice of appeal of the district court’s summary judgment
order. Id. at 1135.
IN RE MILLER 1437
In determining whether Parker’s bankruptcy filing stayed
his appeal, we considered whether the appeal was a continua-
tion of litigation that constituted an action or proceeding
against Parker, namely, Pension Plan’s counterclaim giving
rise to the appeal:
We acknowledge that Parker fired the first shot in
this round of civil litigation by filing a complaint for
declaratory relief, which clearly is not an action
against the debtor. The Plan, however, quickly shot
back with a counterclaim for breach of fiduciary
duty . . . . Had the Plan acted faster and filed a com-
plaint against Parker before Parker filed suit against
it, we would have no difficulty concluding that the
Plan’s claims constituted actions against the debtor.
Because of the actual order of events, however, we
face a question of first impression in this circuit:
whether a counterclaim against a debtor constitutes
an “action of [sic] proceeding” that is subject to the
automatic stay.
Id. at 1137 (emphasis in the original). Although Parker had
initiated the proceedings against Pension Plan, we held that
Pension Plan’s “counterclaim was, ‘at its inception,’ an action
against Parker, who is now a Chapter 11 debtor” and con-
cluded that Parker’s appeal from the grant of summary judg-
ment on Pension Plan’s counterclaim was stayed because it
was a continuation of the action against Parker. Id. (citation
omitted).
[8] Although Ms. Snavely “fired the first shot” when she
filed a proof of claim for over $600,000 against Mr. Miller in
his chapter 11 proceedings, Mr. Miller’s counterclaim for
breach of fiduciary duty and related claims constitute “an
action or proceeding” against Ms. Snavely. Mr. Miller’s
motion for attorney’s fees, based on Ms. Snavely’s breach of
her fiduciary duties as trustee, was a continuation of the coun-
terclaim against Ms. Snavely, notwithstanding the fact that
1438 IN RE MILLER
Ms. Snavely initiated the proceedings by filing the proof of
claim first. Parker, 68 F.3d at 1137; see Koolik v. Markowitz,
40 F.3d 567, 568 (2d Cir. 1994) (“[A]n answer that asserts a
counterclaim against a plaintiff who becomes a bankruptcy
debtor is an ‘action or proceeding against the debtor’ within
the meaning of § 362(a)(1), notwithstanding the fact that the
plaintiff initiated the lawsuit.”).
Mr. Miller did not initiate his request for attorney’s fees in
the Washington bankruptcy court. Instead, Mr. Miller initiated
his request in the Montana bankruptcy court where his chapter
11 proceedings were pending. Mr. Miller did not seek or
obtain relief from the automatic stay pursuant to 11 U.S.C.
§ 362(d) from the Washington bankruptcy court, nor did he
request a change of venue pursuant to Rule 1014 of the Fed-
eral Rules of Bankruptcy Procedure of Ms. Snavely’s bank-
ruptcy case to the Montana bankruptcy court.1
[9] Because the proceeding relating to Mr. Miller’s motion
for attorney’s fees was a continuation of Mr. Miller’s counter-
claim against Ms. Snavely, it was subject to the automatic
stay under § 362(a)(1). Accordingly, the Montana bankruptcy
court erred in concluding that the automatic stay did not apply
and its order granting Mr. Miller’s request for attorney’s fees
violated the stay and is void. See Parker, 68 F.3d at 1138(holding that any act taken in violation of the automatic stay
is void).
In light of our decision that the order of the Montana bank-
ruptcy court awarding attorney’s fees is void because it was
issued in violation of the automatic stay resulting from Ms.
Snavely’s filing of a petition for bankruptcy in the Washing-
ton bankruptcy court, we do not address her remaining con-
tention that the Montana bankruptcy court abused its
discretion in awarding Mr. Miller $90,000 in attorney’s fees.
1
Federal Rule of Bankruptcy Procedure 1014(a)(1) provides “[O]n
timely motion of a party in interest . . . the case may be transferred to any
other district if the court determines that the transfer is in the interest of
justice or for the convenience of the parties.”
IN RE MILLER 1439
We express no view regarding the merits of the award of
attorney’s fees.
REVERSED.