Memorandum of Decision Re: Horses

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Decisions
IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA
In re J. LYNN SILBERMAN,                                                                                                              No. 93-11634        Debtor. ___________________________/ J. LYNN SILBERMAN,        Plaintiff,      v.                                                                                                                                               A.P. No. 95-1065 MONICA MAXFIELD, et al.,        Defendants. ______________________________/
Memorandum of Decision
I. Introduction      Around late 1991 or early 1992, plaintiff J. Lynn Silberman became unemployed and started to experience serious financial problems. At that time, she was renting a 40-acre ranch where she kept six horses. Silberman did not pay rent for ten months, and eventually was evicted from the property. During this time Silberman was not able to care for the horses properly; they became sickly and malnourished.   &bsp;  After eviction, Silberman made arrangement to board her horses with a stable. She did not pay her stable bills, and the stable threatened to sell her horses pursuant to state law to satisfy the bill. Silberman managed to get the $2,600.00 necessary to pay the stable, and then moved her horses to another stable operated by defendant Monica Maxfield.      Silberman and Maxfield entered into a written contract on April 5, 1993, for the boarding of the horses at the rate of $500.00 per month, payable in advance. Silberman and Maxfield soon had a disagreement as to the care of the horses, and they agreed to terminate the contract as of May 1, 1993. However, Silberman was then without funds to find another stable. The horses remained on Maxfield's property through May and into June with no payment from Silberman. Maxfield then filed a lawsuit in state court seeking an order that the horses be sold.      On June 7, 1993, the state court ordered all six horses to be sold. The order specified that the sale be "by public sale by advertising in the Press Democrat and accepting sealed bids with the highest bidder qualified to care for the horses accepted." Maxfield proceeded to place an ad in the newspaper in accordance with the order.      On June 28, 1993, the state court heard Silberman's motion to set aside its prior order. The court then fixed the amount Silberman owed at $3,333.00, and have her until July 2, 1993, at noon, to pay that sum or the horses were to be sold pursuant to the original order. Silberman did not pay anything by the deadline, and instead filed a Chapter 13 petition in this court on July 2.      Silberman's plan was clearly unconfirmable, and it appeared that she had filed the petition merely to stop the sale of the horses. Nonetheless, since she alleged that her horses were worth more than twenty times the amount she owed Maxfield, the court gave her 30 more days to sell one or more of the horses in order to pay Maxfield. Silberman failed to find a buyer for any of the horses, failed in her attempts to get the court to change its mind, and failed to have the ruling stayed or overturned on appeal. Maxfield then concluded the sale in accordance with the order of the state court.       After the sale, Silberman commenced this adversary proceeding against Maxfield and the purchasers of the horses. In essence, she alleges that the sales were not conducted in accordance with the "California Livestock Lien Law" and that the sales also violated the automatic stay. She alleges that the horses were worth $60,000.00 and seeks judgment in that amount. For the reasons set forth below, the court finds that the sales were lawful and that the actual value of the horses was the amount Maxfield obtained for them. II. Violation of the Automatic Stay      This court heard Maxfield's motion for relief from the automatic stay on August 12, 1996. The court ruled that the stay would be lifted in 30 days if the debt had not been paid in full. A formal order was signed on August 19 and entered on August 20. It stated that relief was granted "in 30 days" instead of specifying a date. Maxfield concluded the sales on September 11, 1993. Silberman argues that the stay was to remain in effect for 30 days from August 19.      Silberman's argument is based on the wording of the formal order submitted by Maxfield's counsel, which failed to state when the 30 days started. However, the intent of the court, expressed clearly to Silberman at the original hearing, was that she had 30 days from then to pay Maxfield. Stay relief orders are usually considered effective when announced from the bench. Noli v. C.I.R., 860 F.2d 1521, 1525 (9th Cir.1988).      It appears that Maxfield did exactly what was ordered: she waited 30 days before selling the horses. The court does not understand defendant Tracht's argument that the sale was one day early; it was conducted on the 30th day after the hearing.      Silberman also alleges that Maxfield violated the stay relief order by obstructing Silberman's efforts to find a buyer. The evidence did not support this allegation. III. Violation of Lien Law      Silberman alleges that Maxfield violated numerous provisions of California's Livestock Service Lien Law (Cal. Civil Code sections 3080 et seq.). However, these allegations are for the most part very vague and seem to ignore the fact that the method of sale was specified by the state court and followed by Maxfield. The sections of the law prescribing the sale (3080.16(a) and (b), section 3080.17) begin "Except as otherwise specified by the order authorizing sale." Where the court has specified the manner of sale, the portions of the law stating how a sale is to be conducted in the absence of an order are irrelevant.      Since the state court specified the manner of sale, the sale provisions of section 3080.16 are irrelevant. However, the court does note that the sale was entirely commercially reasonable, was conducted in good faith, and, as discussed below, realized the fair value of the horses at that time.      The state court was silent as to any notice to be given to Silberman. Since it specified a sealed bid procedure, there was no classic auction to be noticed. However, the state court did specify that the sale might proceed on July 2, 1993, at 12:00 noon. Silberman argues that Maxfield violated Civil Code section 3080.17(a) by not giving her written notice of the date, time and place of the sale.      Silberman did not assert that she did not know about the sale. Indeed, she filed her Chapter 13 petition 36 minutes before it. Since the state court order contained all of the terms of the sale, the only important inquiry is whether a copy of the order was served on or mailed to Silberman. The evidence is fuzzy. Silberman obviously knew the sale date, and did not testify that she was not served with a copy of the order. Maxfield testified that she did not serve a notice on Silberman, but was not asked about a copy of the order nor about actions taken by her attorney. The court finds it to be more likely than not that Silberman received a copy of the order.      To the extent it is still relevant, the court finds that the purchasers of the horses from Maxfield acted in good faith, had no knowledge of this or any other alleged defect, and paid fair value for the horses. They had every right to rely on a sale conducted in accordance with a state court order. They therefore have rights superior to those of Silberman pursuant to Civil Code section 3080.19(b). IV. Value of the Horses      The crux of Silberman's case is the value of the horses, which she alleges were worth $60,000.00 or $80,000.00 when Maxfield sold them, according to the procedure set forth by the state court, for $7,500.00. Silberman has failed in her proof of this; the court is convinced that the horses were worth the prices Maxfield obtained, and no more.      Both sides produced competent experts to give testimony as to the value of the horses. By Silberman's motion, they were excluded from court during each other's testimony so that neither had the opportunity to comment on the other's testimony. However, their testimony was not necessarily contradictory. Silberman's expert testified as to the value in a normal sale by the owner of sound, properly trained, healthy horses. These horses were in poor condition, being sold by a lienholder without warranty, papers, or details of training. The two values are entirely different.      The court found the testimony of Maxfield's expert particularly convincing. He was very knowledgeable, and viewed the horses pursuant to Maxfield's sale ad with an eye toward making an investment. If the horses had been worth anything like the values Silberman alleges, he would have certainly sought to buy them. In fact, there were only a couple that he was interested in at all, and his bids for them were not the high bids.      Maxfield received perhaps 100 calls in response to her ad in the Press Democrat. About 30 people came out to examine the horses, including at least one expert who was prepared to purchase the horses for himself. The fact that he found only a few of the horses to be of any value, and that he bid less than the eventual sales price, together with the overwhelming evidence that the horses were in poor condition, leads the court to the conclusion that the sale conducted by Maxfield realized the fair value of the horses at that time. Silberman's complete inability to find buyers at higher prices, despite extra time granted by both the state court and this court, also compels this conclusion. V. Excess Proceeds      Silberman complains that Maxfield sold all six horses when she did not need to sell all of them to satisfy the lien. She also complains that she wrongfully retained possession of the excess proceeds. The court finds neither of these arguments convincing.      The state court order specified that all six horses were to be sold. This made good sense, since Silberman was unable to pay for their boarding anywhere else. Maxfield cannot have any liability for following the express order of the state court.      There was a small amount of excess proceeds. Maxfield did not know what to do with them, since Silberman had filed a bankruptcy. Maxfield tried unsuccessfully to turn the funds over to the Chapter 13 trustee, not realizing that a Chapter 13 trustee does not usually administer estate assets. No demand was ever made for the excess. Under these circumstances, the retention was not wrongful. Since Maxfield has now incurred far more in costs of suit, she will be allowed to retain these funds as an offset. VI. Cross-Complaint      Defendant Tracht has cross-complained against Maxfield for indemnification of her legal expenses. However, since the court finds no wrongdoing on Maxfield's part, there is no basis for a ruling against her. The court does regret not adjudicating this matter summarily, thus forcing the parties to expend considerable sums defending a meritless action, but until the court heard all of the testimony concerning the condition of the horses and their value it could not be certain that defendants were entitled to judgment. VII. Conclusion      The horses in question were clearly valuable to Silberman, and in good condition would have been worth considerably more than the amount for which they were sold. However, Silberman made a serious error in judgment when she decided to try to keep the horses after she was evicted from the ranch. She probably knew when she initially brought the horses to Maxfield that she did not have the means to continue to pay for their board; she just did not want to sell them. The sale was eventually ordered by the state court. Maxfield complied with the order, conducted the sale in good faith, and realized a reasonable price under the circumstances. She also complied with the orders of this court.      For the foregoing reasons, Silberman will take nothing by her complaint and this adversary proceeding will be dismissed, with prejudice. Maxfield shall recover her costs of suit from Silberman, against which the excess sale proceeds shall first be applied. As between Maxfield and Tracht, each shall bear her own costs.      This memorandum constitutes the court's findings and conclusions pursuant to FRCP 52(a) and FRBP 7052. Counsel for Maxfield shall submit an appropriate form of judgment forthwith.
Dated: July 25, 1996                                                                                                  _______________________                                                                                                                                            Alan Jaroslovsky                                                                                                                                            U.S. Bankruptcy