Cook v. Wells Fargo Bank, N.A. et al

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UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
DANIEL WILLIAM COOK and
YOLANDA T. COOK,
Debtor(s). 	Case No. 7-04-17704 SA
DANIEL WILLIAM COOK,
Plaintiff(s),
v. 	Adversary No. 11-1074 S
WELLS FARGO BANK, N.A.,
Successor to Wells Fargo Bank New Mexico, N.A.,
SCOTT GARRETT, Individually,
THE SCOTT GARRETT AND PAMELA JANE GARRETT TRUST
Dated June 14, 1999,and
State of New Mexico, Second Judicial District
Alan M Malott, Hon., or assigns,
in their official capacity in
State Court Case #CV-2003-08008,
Defendant(s).
SUPPLEMENTAL AND AMENDED MEMORANDUM OPINION
IN SUPPORT OF SECOND ORDER DENYING INJUNCTIVE RELIEF
Plaintiff Daniel Cook filed this adversary proceeding on
April 25, 2011 (doc 1). 	The adversary proceeding requests in
part that the Court issue injunctive relief of varying degrees,
starting with a temporary restraining order, to stay further
proceedings in that certain civil action pending in the Second
Judicial District Court, Bernalillo County, New Mexico, styled
and numbered Trenchless Infrastructure Technologies, Inc. a/k/a
Hydroscope Group, Inc., the Scott and Pamela Garrett Trust v.
Daniel W. And Yolanda T. Cook, Hydroscope Group, and Wells Fargo
Bank, Case No. CV-2003-0800 (“State Court Case”). 	In addition,
Plaintiff has filed his Emergency Motion for Temporary
Restraining Order and for Preliminary Injunction. 	Doc 8. 	Prior
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1 As was apparent from Plaintiff’s e-mail to the Court and
parties, which was sent April 25, 2011 at 1.38 pm, before the
complaint had been filed, Plaintiff anticipated filing a motion
for emergency injunctive relief (consistent with Count I of the
complaint) the following morning, on April 26. 	The emergency
motion was in fact filed at 3.42 pm. 	In the meantime the Court
issued the memorandum opinion and order denying injunctive
relief, thinking that the State Court and the parties needed a
decision as soon as reasonably possible that would let them know
whether or not to continue to prepare for, and to appear at, the
State Court hearing scheduled for Thursday, April 28, as
described in the complaint and the emergency motion. 	Having now
received and reviewed the emergency motion, including the Amended
Affidavit of Daniel W. Cook (doc 902-1), the Court issues this
supplemental and amended memorandum opinion.
2 The emergency motion has the following wording immediately
below the title of the motion: “(Emergency Hearing Requested for
April 27, 2011 – w/ at least 3-hour notice - P:352-9700)”. 	This
notation is clearly a request for a hearing on the emergency
motion to be conducted the day before the State Court hearing was
scheduled to take place. 	However, this Court had the entire day
scheduled for a trial on April 27, and in fact spent the entire
day conducting the scheduled trial and a related matter. 	More to
the point, however, is that the Court is able to make the
decision on the merits of the request based on the available
record, without the need for a hearing.
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to the docketing of the Emergency Motion, the Court issued a
memorandum opinion and order denying the request for injunctive
relief contained in the complaint. 	Docs 5 and 6 respectively.
The Court has now also reviewed the Emergency Motion. 1 	For the
reasons set forth below, the Court still denies the request for
injunctive relief. 2
This adversary proceeding, and particularly the request for
injunctive relief contained in both the complaint and the
emergency motion, names as defendants (or respondents) the State
of New Mexico and the Honorable Alan M. Malott, who is presiding
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3 Given the disposition of the requested relief, the Court
need not rule on the necessity or propriety of naming the
district court judge presiding over the State Court Case or the
State of New Mexico.
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over the State Court Case 3, as well as Wells Fargo Bank and the
Garretts and the Garrett Trust. 	The complaint recites in part as
follows:
State of New Mexico, Second Judicial District (the
“State”) and the Honorable Alan M. Malott in his
official capacity (“Judge Malott”), and or his assigns,
are named as defendants in this Adversary for the sole
purpose of prohibiting the State and Judge Malott or
his assigns from adjudicating any and all matters in
the State Court case, CV-2003-08008, on April 28, 2011
and thereafter that may affect Debtor’s and creditors’
interest in the Cooks Bankruptcy estate.
Id. at 2, ¶ 2 (emphasis in original). 	See also Count I request
for relief. 	Id. at 18-19. 	In other words, Plaintiff asserts
that the State Court Case cannot go forward because to do so
violates the automatic stay imposed by 11 U.S.C. §362 with
respect to property of the estate as well as property of
Plaintiff.
The Complaint basically reiterates arguments and requests
for relief that have been presented to the Court in the context
of the underlying bankruptcy case as well as a number of related
adversary proceedings. 	The Court will not now repeat the unduly
lengthy and tangled procedural and substantive history of the
long-running disputes between Plaintiff and the parties with whom
he has been at war for the better part of a decade now.
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4 The Court shortly will be entering a memorandum opinion
denying Plaintiff’s April 20, 2011 Amended Motion to Reconsider
Dismissal of Sanctions Motions Against Well [sic] Fargo Bank and
Garrett et al (Doc’s 885 and 886). 	Doc 902. 	The Court had been
preparing a ruling on the Motion to Reconsider (doc 898) when the
Amended motion to reconsider (doc 902) was filed two days later.
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However, the Court notes that it entered its Memorandum Opinion
(doc 884) in the chapter 7 case on April 6, 2011, disposing of
several motions that Plaintiff as debtor had filed in the
bankruptcy case 4, two of which addressed the same underlying
claim that Plaintiff asserts in this adversary proceeding: that
the other parties (and now District Judge Malott together with
the State of New Mexico) will be in violation of the automatic
stay if the parties and Judge Malott (continue to) adjudicate the
claims of the estate or of Plaintiff.
This Court entered numerous memorandum opinions
and orders terminating and annulling the automatic
stay, and orders confirming and clarifying the intent
of those orders that all parties were free to pursue
anything against anyone in the state court case, and
validating all actions previously taken in the state
court case. 	E.g., Doc 642, Order Resulting from
Preliminary Hearing on Debtors’ Motion for Sanctions
and Damages for Willful Violation of the Automatic Stay
... , January 23, 2008 (Ruling that the actions
complained of “do not violate the automatic stay.”);
doc 740, Order Granting Stay Relief (docs 679 and 712)
... , April 21, 2008 (Ordering that “[t]he automatic
stay is both annulled, with respect to any proceedings
that have taken place before the State District Court,
and modified, with respect to any property in which
either the estate or the Debtors claim an interest,
such that any party is entitled to seek, or to continue
to seek, whatever state law or other remedies it wishes
with respect to the property, including but not limited
to adjudications of liability, lien rights and amounts
owed.”) This latter order did reserve the issue of
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whether there had been previous stay violations, as the
parties were in the midst of briefing the issues.
However, the Court later entered a September 15, 2008
Memorandum Opinion finding no violations of the
automatic stay, and that the parties filing the three
motions involved had no standing to pursue stay
violations. 	Doc 798. (Memorandum Opinion on [three]
Motions for Sanctions for Violation of the Automatic
Stay).
Id. at 12-13.
The Memorandum Opinion also ruled that Plaintiff had no
standing to assert a violation of the stay on behalf of the
bankruptcy estate. 	Id. at 7-12.
Plaintiff also objects to the adjudication in the State
Court Case of his interests in the estate, which is to say, of
his property interests which would include any property that he
exempted from the estate. 	Plaintiff asserts that there can be no
adjudication with respect to his personal property until the
bankruptcy case is closed.
The Automatic Stay protects the debtors’ [sic] interest
in property until the Court enters a dismissal of the
Cooks [sic] bankruptcy case.
This Court has not entered a dismissal of the Cooks
[sic] Bankruptcy case.
Id. at 15, ¶¶79 and 80. 	See also id. at 16, ¶83.
Plaintiff is mistaken. 	Section 362(c) provides in relevant
part as follows:
(1) the stay of an act against property of the estate
under subsection (a) of this section continues
until such property is no longer property of the
estate;
(2) the stay of any other act under subsection (a) of
this section continues until the earliest of –
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(A) the time the case is closed;
(B) the time the case is dismissed; or
(C) if the case is a case under chapter 7 of this
title concerning an individual ..., the time
a discharge is granted or denied; ....
(Emphasis added.)
Plaintiff was granted a discharge on April 2, 2009 (doc
834). 	In consequence, it has been the case for at least a little
more than two years now, based on the statute alone, that parties
were free from the constraints of the automatic stay to contest
with Debtor what rights he had to the property that he claimed as
exempt.
Beyond that, however, see docket entries 740 (Order Granting
Stay Relief, filed April 21,2008), which ordered:
The automatic stay is both annulled ... and modified,
with respect to any property in which either the estate
or the Debtors claim an interest, such that any party
is entitled to seek, or to continue to seek, whatever
state law or other remedies it wishes with respect to
the property, including but not limited to
adjudications of liability, lien rights and amounts
owed.);
741 (Minutes of April 17, 2008 hearing at which automatic stay
was modified and annulled); 773 (Order Reiterating, Clarifying
and Expanding As Needed April 21, 2008 Order Granting Stay Relief
and Other Relief, filed August 5, 2008); 819 (Order Denying
Motion for Reconsideration of Order Granting Relief from Stay,
filed October 8, 2008). 	In other words, no later than April 21,
2008, the stay had been modified and annulled completely so that
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5 The effect of annulling the stay is to retroactively
validate actions that would or might otherwise be void by virtue
of violating the automatic stay.
“[S]ection 362 gives the bankruptcy court wide latitude
in crafting relief from the automatic stay, including
the power to grant retroactive relief from the stay.”
Schwartz v. United States (In re Schwartz), 954 F.2d
569, 572 (9th Cir.1992). By annulling the automatic
stay, a court can validate an otherwise invalid
transaction. Algeran, Inc. v. Advance Ross Corp., 759
F.2d 1421, 1425 (9th Cir.1985) ( Nunc pro tunc effect
of order of annulment validated foreclosure sale.)
Palm v. Klapperman (In re Cady), 266 B.R. 172, 178 (9 th Cir. BAP
2001).
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there was no bar, and in effect had not been any bar 5 , to
litigating in state court any aspect of any property, whether
owned by Debtor, the estate, or any other party.
What Plaintiff fundamentally ignores, however, is that the
State Court Case was pending before the chapter 11 petition was
filed (state court case no. CV-2003-08008), that after the filing
of the chapter 11 petition (04-17704-11) Plaintiff as debtor in
possession filed an adversary proceeding in this Court (04-1204)
raising the same issues as the pending State Court Case, that the
United States District Court accepted this Court’s recommendation
of abstention, and therefore the State Court Case may go forward
in the Second Judicial District Court. 	Combined with the orders
issued by this Court modifying and annulling the automatic stay
to permit any party to litigate in the State Court Case any issue
with respect to ownership of (including liens on) assets, there
is no impediment to the Second Judicial District Court
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adjudicating all the issues. 	And even though a bankruptcy court,
acting as a unit of the United States District Court, 28 U.S.C.
§151, has “exclusive jurisdiction of all of the property,
wherever located, of the debtor as of the commencement of such
case, and of property of the estate,” 28 U.S.C. §1334(e)(1), the
order for abstention and the orders modifying the stay provided
the requisite authority for the interests of Plaintiff, the
estate and the third parties to be adjudicated in the State Court
Action.
When a bankruptcy court abstains and permits state
courts to handle pending litigation, the parties must
thereafter look to the state courts to handle their
complete dispute and may not drag selected issues back
to the bankruptcy forum years later.
In re Zurn, 290 F.3d 861, 864 (7 th Cir. 2002).
Plaintiff’s request for injunctive relief is also bottomed
on an additional misconception; namely, that there is some
“reorganization” that is ongoing. 	Once the case was converted to
a chapter 7 liquidation case, there was no more reorganization of
the estate or of Debtor’s/Plaintiff’s financial affairs, as that
term is used in bankruptcy practice, including cases such as
Otero Mills, Inc. v. Security Bank & Trust (In re Otero Mills,
Inc.), 25 B.R. 1018 (Bankr. D.N.M. 1982). 	“Reorganization” in
the context of a chapter 11 case means that the estate (under the
control of a debtor in possession or a chapter 11 trustee) over
time makes payments to some or all of the creditors of the
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estate, either by a continued operation of the business of the
reorganized debtor or by a measured liquidation of the estate.
This is no longer a chapter 11 case; it is a chapter 7 case,
under the control of chapter 7 trustee, whose role is to monetize
those non-exempt assets that are worth administering, pay claims
with the funds so acquired (and there usually are none), and then
close the case. 	Plaintiff’s statements about reorganizing his
personal finances may be true as applied to him personally, but
they are not the “reorganization” contemplated by cases such as
Otero Mills. 	And while Plaintiff is perfectly free to repay any
claims of creditors (or other parties) that he wishes to pay, 11
U.S.C. §524(f) (“Nothing contained in subsection (c) or (d) [of
§524, which is titled “Effect of discharge”] prevents a debtor
from voluntarily repaying any debt.”), he most certainly will not
be doing that in the pending bankruptcy case. 	Thus, Plaintiff’s
citations to and analysis of Tenth Circuit law on injunctive
relief, as accurate as they may be, are simply not applicable to
these facts and need not be considered.
In consequence, based on the extensive record in the
underlying bankruptcy case and related adversary proceedings,
there is no basis for issuing any injunctive relief whatever.
Nor is there a basis for conducting an emergency hearing on the
request for injunctive relief. 	An order will enter.
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Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	April 28, 2011
COPY TO:
Daniel William Cook
920 Galeras Street NW
Albuquerque, NM 87120
Michelle Ostrye, Esq.
PO Box 1945
Albuquerque, NM 87103-1945
Chris W Pierce, Esq.
Hunt & Davis, P.C.
P.O. Box 30088
Albuquerque, NM 87190-0088
Philip J. Montoya, Esq.
Trustee
PO Box 159
Albuquerque, NM 87103
The Honorable Alan M. Malott
2nd Judicial District Court, Division XV
PO Box 488
Albuquerque, NM 87103-0488
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