In re: First Korean Christian Church of San Jose

Filing 32

ORDER denying 14 Motion to Stay. Signed by Judge Edward J. Davila on 1/26/2018. (ejdlc1S, COURT STAFF) (Filed on 1/26/2018)

1
2
3
4

UNITED STATES DISTRICT COURT

5

NORTHERN DISTRICT OF CALIFORNIA

6

SAN JOSE DIVISION

7
8
9

IN RE

Case No. 5:17-cv-00953-EJD

FIRST KOREAN CHRISTIAN CHURCH
OF SAN JOSE,

10

Debtor.

Re: Dkt. No. 14

11
United States District Court
Northern District of California

ORDER DENYING APPELLANTS’
MOTION FOR STAY PENDING
APPEAL

12
13

FIRST KOREAN CHRISTIAN CHURCH
OF SAN JOSE,
Plaintiff/Appellee,

14
v.

15
16

DONG WUK KIM, MYUNG IL YOUM,

17

Defendants/Appellants,

18
19
20

and
FIRST EVANGELICAL CHURCH OF
AMERICA,
Appellee.

21
22
23

I.

INTRODUCTION
This action is one of several appeals from the Chapter 11 bankruptcy proceedings of the

24

First Korean Christian Church of San Jose (the “Debtor”), initiated under authority of its current

25

pastor. The Bankruptcy Court permitted Debtor and its co-borrower, Korean Evangelical Church

26
27
28

Case No.: 5:17-cv-00953-EJD
ORDER DENYING APPELLANTS’ MOTION FOR STAY PENDING APPEAL
1

1

of America,1 to sell real property located in Sunnyvale for $6,650,000 and ordered the net

2

proceeds from the sale deposited into an interest-bearing joint account, disbursement from which

3

requires the written consent of all parties or a judicial determination of the parties’ respective

4

rights in the funds.

5

Though that sale would otherwise be a routine matter in the administration of a bankruptcy

6

estate, here it represents just one part of a larger controversy concerning just who has the authority

7

act for Debtor. Appellants Dong Wuk Kim, the Debtor’s former pastor, and Myung Il Youm, a

8

church elder, contend they have that authority. Debtor initiated this adversary proceeding against

9

Appellants and Korean Evangelical Church of America to resolve the parties’ respective claims to
the sales funds. The Bankruptcy Court found on summary judgment there was no dispute of

11
United States District Court
Northern District of California

10

material fact that Debtor’s current pastor has control of the funds, and later denied Appellants’

12

motion for a stay of that decision pending appeal.

13

Appellants now renew their stay request before this court. Dkt. No. 14. Having

14

considered the record,2 the court concurs with the Bankruptcy’s Court decision to decline relief.

15

Appellants’ motion will therefore be denied for the reasons explained below.

16

II.

STANDARD OF REVIEW

17

Pursuant to Federal Rule of Bankruptcy Procedure 8007(b), a motion for stay pending

18

appeal may be made to the district court sitting in review. The district court applies the same

19

standard as would the court of appeals. See In re Crystal Props. Ltd., L.P., 268 F.3d 743, 755 (9th

20

Cir. 2001) (noting that the district court functions as an appellate court in reviewing a bankruptcy

21

court’s decision). When a bankruptcy court denies a stay in the first instance under Rule 8007(a),

22
23
24
25
26
27
28

1

First Korean Christian Church of San Jose and Korean Evangelical Church of America are
referred to collectively as “Appellees.”
2

When coupled with the 9-page “Supplemental Brief on Equitable Mootness,” Appellants’ 35page motion far exceeds the page limitation imposed by Federal Rule of Bankruptcy Procedure
8013(f)(3). Though the court has considered all of the relevant pleadings for this particular matter,
Appellants are advised the court may not do so in the future. Instead, compliance with all
procedural rules is expected and any deviations should be sought by leave of court in advance of
filing any non-conforming pleadings.
Case No.: 5:17-cv-00953-EJD
ORDER DENYING APPELLANTS’ MOTION FOR STAY PENDING APPEAL
2

1

the district court’s review is “limited to a determination of whether the bankruptcy court abused its

2

discretion.” Advanced Discovery, Inc. v. Diamond (In re Howrey LLP), No. 14-cv-03062-JD,

3

2014 WL 3427304, at *2 (N.D. Cal. July 14, 2014).
A bankruptcy court abuses its discretion when its decision is based on an erroneous

4
5

conclusion of law or when the record contains no evidence on which the court rationally could

6

have based that decision. In re Conejo Enters., 96 F.3d 346, 351 (9th Cir. 1996). “The abuse of

7

discretion standard on review of the bankruptcy court’s order denying a stay encompasses a de

8

novo review of the law and a clearly erroneous review of the facts with respect to the underlying

9

issues.” Dynamic Fin. Corp. v. Kipperman (In re North Plaza, LLC), 395 B.R. 113, 119 (S.D Cal.
2008).

11
United States District Court
Northern District of California

10

III.

DISCUSSION

12

The Bankruptcy Court properly identified the standard that applies for a stay requested

13

under Rule 8007. It has “been distilled into consideration of four factors: ‘(1) whether the stay

14

applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the

15

applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will

16

substantially injure the other parties interested in the proceeding; and (4) where the public interest

17

lies.’” Nken v. Holder, 556 U.S. 418, 434 (2009) (quoting Hilton v. Braunskill, 481 U.S. 770, 776

18

(1987)). “The party requesting a stay bears the burden of showing that the circumstances justify

19

an exercise of that discretion.” Id. at 433-34.
“The first two factors . . . are the most critical.” Id. However, a failure on any one factor

20
21

“dooms the motion.” In re Irwin, 338 B.R. 839, 843 (E.D. Cal. 2006) (quoting In re Deep, 288

22

B.R. 27, 30 (N.D.N.Y. 2003)). Moreover, because a stay pending appeal is an extraordinary

23

remedy, the court must examine the factors with obligatory restraint. See In re Smith, 397 B.R.

24

134, 136 (Bankr. D. Nev. 2008) (citing In re Fullmer, 323 B.R. 287, 293 (Bankr. D. Nev. 2005));

25

see also Nken, 556 U.S. at 427 (observing a stay is an “intrusion into the ordinary processes of

26

administration and judicial review” and not a “matter of right” even if irreparable injury would

27

result).

28

Case No.: 5:17-cv-00953-EJD
ORDER DENYING APPELLANTS’ MOTION FOR STAY PENDING APPEAL
3

1

The court examines Appellants’ motion under this same framework.

2

A.

3

For a stay pending appeal, the “likelihood of success” element requires the moving party to

Likelihood of Success

4

establish “at a minimum, that she has a substantial case for relief on the merits.” Leiva-Perez v.

5

Holder, 640 F.3d 962, 968 (9th Cir. 2011). “[I]t is not enough that the likelihood of success on the

6

merits is ‘better than negligible’ or that there is a ‘mere possibility of relief.’” Lair v. Bullock, 697

7

F.3d 1200, 1204 (9th Cir. 2012) (quoting Nken, 556 U.S. at 434).

8
9

In order to prevail on this motion, the applicable legal standard requires Appellants to
successfully show a “substantial case” for reversal of the summary judge order in favor of
Appellees. “Summary judgment is to be granted if the pleadings and supporting documents,

11
United States District Court
Northern District of California

10

viewed in the light most favorable to the non-moving party, show that there is no genuine issue as

12

to a material fact and the moving party is entitled to judgment as a matter of law.” Suncrest

13

Healthcare Ctr. LLC v. Omega Healthcare Inv’rs (In re Raintree Healthcare Corp.), 431 F.3d 685,

14

687 (9th Cir. 2005).

15

As the court understands the pleadings, Appellants’ argument for success on the merits has

16

three subparts. They are: (1) the Bankruptcy court erred by finding no dispute of material fact on

17

the issue of control by not sufficiently considering Appellants’ submissions; (2) the Bankruptcy

18

Court was without jurisdiction to decide the control, and erred by not applying state corporate law

19

to its decision if it did have jurisdiction; and (3) the Bankruptcy Court erred by deciding the

20

control issue on summary judgment rather than referring it for jury trial.

21

In its order denying a stay pending appeal, the Bankruptcy court determined that

22

Appellants’ failed to present a substantial case for relief on the merits. This court has reached the

23

same conclusion for this motion.

24

For the first subpart, Appellants contend the Bankruptcy Court misapplied the summary

25

judgment standard and “ignored the Defendants’ Statement of Genuine Issues of Disputed

26

Evidence,” which they claim identified 35 disputed facts. Appellants then go on to focus on one

27

particular fact, Dong Wuk Kim’s excommunication and removal from church management, which

28

Case No.: 5:17-cv-00953-EJD
ORDER DENYING APPELLANTS’ MOTION FOR STAY PENDING APPEAL
4

1

they believe was ineffective and overturned. But the Bankruptcy Court’s summary judgment

2

order laid out the correct standard in detail and then applied it by first examining whether the

3

moving party met its initial burden, and then shifting the burden to Appellants to show a genuinely

4

disputed fact. The Bankruptcy Court also specifically addressed the excommunication argument

5

and the evidence it relies on, and found it insufficient to satisfy Appellants’ burden. Appellants’

6

bare contention that facts are in dispute, no matter how numerous, does not mean the facts are

7

actually disputed, or that those facts are material for the purposes of avoiding summary judgment.

8

See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) (explaining

9

that when the moving party has carried its burden on summary judgment, “its opponent must do
more than simply show that there is some metaphysical doubt as to the material facts”).

11
United States District Court
Northern District of California

10

Consequently, Appellants have not shown a substantial case for reversal based on unconsidered or

12

disputed material evidence. Other than disagreeing with the Bankruptcy Court and restating their

13

version of the facts, Appellants do not convincingly explain how their position is any more likely

14

to prevail on appeal than the one adopted by the Bankruptcy Court.

15

For the second subpart, Appellants believe the Bankruptcy Court was without jurisdiction

16

to sort out divergent claims to the sale funds. The Bankruptcy Court determined otherwise, noting

17

its core jurisdiction over turnover actions and actions to determine the extent of estate property.

18

See 11 U.S.C. §§ 157(b)(2)(E), 541(a). Much like their prior argument, Appellants provide their

19

own view of the issue but fail to demonstrate why the Bankruptcy Court’s characterization was

20

mistaken or unsound. Furthermore, Appellants include no cogent argument explaining why the

21

Erie Doctrine required the Bankruptcy Court to apply state corporate law to a decision it

22

determined arose under federal law.

23

For the third subpart, Appellants suggest summary judgment was an improper procedural

24

mechanism because they were entitled to a jury determination on the control issue. Whether or

25

not Appellants have a jury trial right overlaps with the basis for bankruptcy jurisdiction. See

26

Exec. Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165, 2172 (2014) (“If a matter is core, the

27

statute empowers the bankruptcy judge to enter final judgment on the claim, subject to appellate

28

Case No.: 5:17-cv-00953-EJD
ORDER DENYING APPELLANTS’ MOTION FOR STAY PENDING APPEAL
5

1

review by the district court.”). Since the Bankruptcy Court found it was exercising core

2

jurisdiction over the ownership issue, and since Appellants have not made out a substantial case

3

for why that decision was incorrect, this argument also fails. In any event, the Bankruptcy Court

4

observed it was empowered to rule on summary judgment even in jury cases because that

5

determination does not affect the right to a jury trial. Sigma Micro Corp. v. Healthcentral.com (In

6

re Healthcentral.com), 504 F.3d 775, (9th Cir. 2007). Appellants offer no legitimate response to

7

the application of that rule to this case.

8
9

In sum, Appellants have failed to demonstrate the Bankruptcy Court’s decision on the
“likelihood of success” element was an abuse of discretion.
B.

11
United States District Court
Northern District of California

10

The Supreme Court has held that when it comes to satisfying the irreparable injury

12

element, “simply showing some ‘possibility of irreparable injury’” is not enough. Nken, 556 U.S.

13

at 434-35 (quoting Abassi v. Immigration & Naturalization Serv., 143 F.3d 513, 514 (9th Cir.

14

1998)). “[T]he ‘possibility standard is too lenient.’” Id. at 435 (quoting Winter v. Nat. Res. Def.

15

Council, Inc., 555 U.S. 7, 22 (2008)). In light of this language, the Ninth Circuit has “interpreted

16

Nken as requiring the applicant to show under the second factor that there is a probability of

17

irreparable injury if the stay is not granted.” Lair, 697 F.3d at 1214 (emphasis in original). The

18

Ninth Circuit also emphasized that the probability analysis focuses “on the individualized nature

19

of irreparable harm and not whether it is ‘categorically irreparable.’” Id. (quoting Leiva-Perez,

20

640 F.3d at 969).

21

Irreparable Injury

Appellants argue this appeal may become moot. More specifically, Appellants represent

22

that “the bankruptcy court may allow [Appellees] and other interested parties to make withdrawals

23

from the secured funds.” They also indicate that “[i]f the parties are allowed to liquidate the funds

24

during the appeal the appellant will be left with no alternative to resort to for security of the church

25

assets.”

26

“The test for mootness of an appeal is whether the appellate court can give the appellant

27

any effective relief in the event that it decides the matter on the merits in his favor.” Felster

28

Case No.: 5:17-cv-00953-EJD
ORDER DENYING APPELLANTS’ MOTION FOR STAY PENDING APPEAL
6

1

Publ’g v. Burrell (In re Burrell), 415 F.3d 994, 998 (9th Cir. 2005). “If it can grant such relief, the

2

matter is not moot.” Id. (quoting Garcia v. Lawn, 805 F.2d 1400, 1402 (9th Cir. 1986)).

3

Appellants must overcome a difficult burden to show irreparable harm through mootness because

4

“within bankruptcy, a majority of courts have concluded that mootness does not demonstrate

5

irreparable injury.” In re Gardens Regional Hosp. & Med. Ctr., Inc., 567 B.R. 820, 831 (Bankr.

6

C.D. Cal. 2017).

7

The majority view applies to this case. The true injury underlying Appellants’ framing of

8

irreparable harm is financial in nature; that is, Appellants fear there will be nothing for them to

9

recover from the property sale if they ultimately prevail on their appeal and establish a cognizable
interest in the funds. Typically, however, purely monetary injury does not constitute irreparable

11
United States District Court
Northern District of California

10

harm because such losses can be cured with legal remedies. L.A. Mem’l Coliseum Comm’n v.

12

Nat’l Football League, 634 F.2d 1197, 1202 (9th Cir. 1980). And here, Appellants have not

13

explained why the bankruptcy court could not order reimbursement to the estate of any distributed

14

funds if the current decision over control is modified. In that way, these circumstances are entirely

15

distinguishable from the cases cited by Appellants, which involve transfers of real property,

16

distributions of class action settlement funds according to a challenged scheme, and the turnover

17

of confidential documents. In each of these scenarios, the parties moved for stays to avoid

18

irreversible losses that could not be undone if an appeal was successful. Money, in contrast, is a

19

fungible commodity, the loss of which can normally be made up with more money. Thus, the

20

Bankruptcy Court was correct to find that Appellants would not be irreparably injured absent a

21

stay due to potential monetary loss.

22

Appellants’ new argument based on equitable mootness is no more persuasive. “Equitable

23

mootness occurs when a ‘comprehensive change of circumstances’ has occurred so ‘as to render it

24

inequitable for this court to consider the merits of the appeal.’” In re Thorpe Insulation Co., 677

25

F.3d 869, 880 (9th Cir. 2012) (quoting In re Roberts Farms, 652 F.2d 793, 798 (9th Cir. 1981)).

26

“The question is whether the case ‘present[s] transactions that are so complex or difficult to

27

unwind that the doctrine of equitable mootness would apply.’” Id. (quoting Lowenschuss v.

28

Case No.: 5:17-cv-00953-EJD
ORDER DENYING APPELLANTS’ MOTION FOR STAY PENDING APPEAL
7

1

Selnick (In re Lowenschuss), 170 F.3d 923, 933 (9th Cir. 1999)). Four factors are routinely

2

considered: (1) whether the moving party fully pursued its rights by seeking a stay in the lower

3

court, (2) if a stay was sought and not gained, whether substantial consummation of the transaction

4

has occurred, (3) the effect a remedy may have on third parties not before the court, and (4)

5

“whether the bankruptcy court can fashion effective and equitable relief without completely

6

knocking the props out from under the plan and thereby creating an uncontrollable situation for the

7

bankruptcy court.” Id. at 881.
The basic question relevant to equitable mootness is not demonstrated here.

8

Disbursements from the sales proceeds are not “so complex or difficult to unwind” because they

10

can be quantified through a simple accounting exercise. Nor does the attendant four-factor test

11
United States District Court
Northern District of California

9

favor Appellants. Though it cannot be said Appellants sat on any potential rights, the record does

12

not show substantial dissipation or the potential for substantial dissipation. Additionally, the

13

record does not show that effective relief is either impossible or significantly adverse to any third

14

parties not involved in this litigation.
Accordingly, Appellants have not shown that irreparable harm is probable. This finding

15
16

coupled with the one made on for success on the merits means Appellants showing on the final

17

two factors would need to be compellingly strong. It is not. Therefore, the bankruptcy court did

18

not abuse its discretion by denying Appellants’ motion for a stay pending appeal.

19

IV.

20
21

ORDER
The “Motion for Stay of Bankruptcy Court Judgment Pending Appeal to the United States

District Court” (Dkt. No. 14) is DENIED.

22
23
24
25
26

IT IS SO ORDERED.
Dated: January 26, 2018
______________________________________
EDWARD J. DAVILA
United States District Judge

27
28

Case No.: 5:17-cv-00953-EJD
ORDER DENYING APPELLANTS’ MOTION FOR STAY PENDING APPEAL
8