Appellants Scott N. Reisland ("Reisland") and James R. Szender ("Szender") appealed the bankruptcy court's (I) Judgment of Dismissal, (ii) denial of debtor's motion for reconsideration, and (iii) imposition of sanctions. In their briefs neither Reisland nor Szender presented any argument to support reversing the Judgment of Dismissal or denial of debtor's motion for reconsideration. This court deems these issues to have been abandoned. See D.AK.LR. 7.1(d). Accordingly, this court affirms the Judgment of Dismissal.

The one contested issue is the bankruptcy court's order granting sanctions against Reisland and Szender jointly and severally for the full amount of attorney's fees and costs incurred by Appellee Nenana Heating Services ("Nenana") as a result of the filing of Reisland's Chapter 13 petition. Reisland and Nenana recently stipulated to dismiss the appeal as to Reisland. Therefore, Szender, Reisland's bankruptcy attorney, remains the only Appellant. The parties have not requested oral argument and it would not be of material aid to the court. This court has jurisdiction pursuant to 28 U.S.C. § 158(a).

In December 1991, Reisland was severely injured after being electrocuted while cleaning a chimney pipe. Reisland brought suit against Golden Valley Electric Assoc., Inc. (GVEA) and Nenana in state court. GVEA settled with Reisland for $1,450,000. The proceeds of the GVEA settlement were used to establish a trust, pay attorney's 5 ABR 177      fees, and purchase an annuity from G.E. Capital Assignment Company. Reisland proceeded to trial against Nenana. Following a unanimous jury verdict returned in favor of Nenana, the court entered a judgment of dismissal and awarded Nenana approximately $170,000 in attorney's fees and costs. Reisland appealed the judgment, but did not post a supersedeas bond. When Nenana attempted to collect on the judgment, Reisland filed a Chapter 13 petition which stayed collection.

On March 12, 1997, the bankruptcy court granted Nenana's motion to dismiss Reisland's Chapter 13 petition, finding that the petition was filed in bad faith. The bankruptcy court retained jurisdiction to enter sanctions. Nenana filed a motion for sanctions on March 24, 1997. On March 28, 1997, Szender filed a motion for reconsideration and on March 30, 1997, a notice of appeal. The motion for reconsideration was denied on May 20, 1997. On July 15, 1997, the bankruptcy court heard arguments regarding the imposition of sanctions before imposing sanctions pursuant to Bankr. Rule 9011⁽¹⁾

against Reisland and Szender jointly and severally for 5 ABR 178      the full amount of attorney's fees and costs incurred by Nenana due to the filing of Reisland's Chapter 13 petition.

A. Bankruptcy Court's Jurisdiction

Szender, relying on In re Wonder Corp. of America, 81 B.R. 221 (Bankr. D. Conn. 1988), contends that the "Filing of a notice of appeal to District Court divests the Bankruptcy Court of Jurisdiction to proceed with regard to matters raised by such appeal, including sanctions based on the rulings appealed." However, the Ninth Circuit Bankruptcy Appellate Panel explained in In re Eighty South Lake, Inc., 81 B.R. 580, 582 (B.A.P. 9th Cir. 1987), that Bankr. Rule 9011 requires a bankruptcy court to impose sanctions upon a finding of bad faith. See also In re Chisum, 847 F.2d 597, 599 (9th Cir. 1988). In relevant part Rule 9011 states, "If a document is signed in violation of this rule, the court on motion or on its own initiative, shall impose on the person who signed it, the represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the document, including a reasonable attorney's fee." Bankr. Rule 9011(a) (emphasis added). Before holding that the bankruptcy court retained jurisdiction to enter the order of sanctions against the appellants, the Bankruptcy Appellate Panel explained:

To hold that the bankruptcy court did not have jurisdiction to enter ... [ s] anctions would require all bankruptcy judges to postpone the filing of a dismissal order until the process of preparing the Memorandum Decision had been completed. Considering the ever increasing number of cases being brought before the bankruptcy courts, the unwarranted delay in the entering of the dismissal order would elevate form over substance, and could result in parties' rights being jeopardized.

Id. Although in Eighty South Lake the motion for sanctions was brought before the court as part of the initial motion to dismiss, that difference does not render the reasoning in Eighty South Lake inapplicable here. The bankruptcy court retained jurisdiction to impose sanctions.

B. Scope of Review

The Bankruptcy Appellate Panel for the Ninth Circuit has explained that:

We apply an abuse of discretion standard in reviewing all aspects of a bankruptcy court's imposition of sanctions under Rule 9011. In re Grantham Brothers, 922 F.2d 1438, 1441 (9th Cir.1991); Cooter & Gell v. 5 ABR 179      Hartmarx Corp., 496 U.S. 384, 110 S.Ct. 2447, 2461, 110 L.Ed.2d 359 (1990). A bankruptcy court would necessarily abuse its discretion if it bases its ruling upon an erroneous view of the law or a clearly erroneous assessment of the evidence. Id.

In re Rainbow Magazine, Inc., 136 B.R. 545, 550 (B.A.P. 9th Cir. 1992).In the case at bar, the bankruptcy court imposed sanctions pursuant to bankruptcy Rule 9011 based on its determination that Reisland filed his Chapter 13 petition in "bad faith"; a factual determination reviewed for clear error.

C. Sanctions

1. Imposition of Sanctions

Bankruptcy Rule 9011 states that the signature of an attorney or party, which is required on every petition, pleading, motion, and other paper filed before the court, constitutes a certification that, after reasonable inquiry, the pleading is not frivolous, i.e., that "it is well-grounded in fact and is warranted by existing law or a good faith argument for the extension, modification or reversal of existing law" and has not been imposed "for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation." Bankr. R. 9011(a). In In re Marsch, 36 F.3d 825 (9th Cir. 1994), the Ninth Circuit adopted a sliding scale approach to the application of Rule 9011. More specifically, the court found that before imposing sanctions "bankruptcy courts must consider both frivolousness and improper purpose on a sliding scale, where the more compelling the showing as to one element, the less decisive need be the showing as to the other." Id. at 830.

The thrust of Nenana's motion to dismiss was that Reisland was a solvent debtor who filed his Chapter 13 petition to avoid filing a supersedeas bond. The weight of authority supports Nenana's request. See In re Marsch, 36 F.3d at 830-31 (Although petition was not completely without legal foundation, the fact that debtor had the ability to satisfy the judgment with nonbusiness assets demonstrated debtor's transparent attempt to use Chapter 11 as a substitute for filing a supersedeas bond.); In re Chinichian, 784 F.2d 1440, 1445 (9th Cir. 1986) (The real purpose of filing the Chapter 13 plan "was to defeat the state court litigation and that . . . purpose violate[ s] the 'spirit of the chapter'".); In re Roberts, 117 B.R. 677, 678 (Bankr. N.D. Okla.1990) (Court dismissed Chapter 13 petition after finding, among other things, that debtor filed his petition to avoid posting a supersedeas bond.); In re Karum Group, Inc., 66 B.R. 436, 438 (Bankr. W.D. Wash. 1986) (". . . a debtor may not use a 5 ABR 180      Chapter 11 filing as a litigation tactic to avoid the posting of a supersedeas bond. . . ."); In re Smith, 58 B.R. 448, 450 (Bankr. W.D. Ky.1986) ( A Chapter 11 filing may not be used as the functional equivalent of a supersedeas bond.); In re Wally Findlay Galleries (New York), Inc., 36 B.R. 849, 851 (Bankr. S.D.N.Y. 1984) ("It is clear that the debtor did not file its petition to reorganize, but rather as a litigating tactic. . . . This court should not, and will not, act as a substitute for a supersedeas bond of state court proceedings."). However, in its Memorandum Regarding Dismissal, the bankruptcy court acknowledged that other courts have permitted the filing of a petition in lieu of a supersedeas bond. See In re Holm, 75 B.R. 86, 87-88 (Bankr. N.D. Cal. 1987) ("Where the debtor is insolvent or would be rendered insolvent if a judgment against it is confirmed on appeal, an appeal bond should not be required of the debtor. . . . On the other hand . . . the debtor who has the clear ability to pay all of his debts is required to post a bond before prosecuting an appeal."); In re Corey, 46 B.R. 31, 34 (Bankr. D. Haw. 1984) (Movants failed to establish sufficient grounds, including lack of good faith, to lift automatic stay); In re McLaury, 25 B.R. 30, 32 (Bankr. N.D. Tex. 1982) (". . . on the assumption that the schedules filed by the debtor are substantially accurate . . . the 'economic condition' necessary to justify bankruptcy proceedings exist. In that event the filing itself is in 'good faith'"); In re Alton Tel. Printing Co., 14 B.R. 238, 241 (Bankr. S.D. Ill. 1981) (Court found that petitioner had filed petition in good faith because petitioner had filed a plan of reorganization, attended all meetings, and had cooperated with the court.) The bankruptcy court also noted that "The primary rationale behind cases refusing to dismiss on bad faith grounds has been to protect the business of the debtor from liquidation." Although Szender argues that the payments Reisland receives under the annuity contract are analogous to business assets protected from liquidation, Reisland is not involved in a business venture, therefore, satisfaction of the judgment did not threaten any business assets. Nevertheless, with respect to frivolousness, it cannot be concluded that Reisland's petition was completely without legal merit.

Regarding the second element of Rule 9011, improper purpose, Szender contends that Reisland had no alternative but to file a Chapter 13 petition after attempts to post a supersedeas bond failed. William Brattain, Reisland's counsel for the trial against Nenana, avers that following the entry of judgment for Nenana he diligently investigated the availability of a supersedeas bond, but that such a bond was not available to 5 ABR 181      Reisland because he owns insufficient property to collateralize the bond. The Ninth Circuit affirmed the dismissal of a petition in In re Marsch where the debtor was financially able to post a bond to stay enforcement of a judgment. In re Marsch, 36 F.3d at 829. See also In re Smith, 58 B.R. at 451-52. (Court dismissed a financially sound debtor's attempt to avoid the bond requirement and pointed out that the supersedeas bond "acts as a disincentive to abuse the legal process through frivolous or capricious appeals."). However, rulings have not been as consistent in cases where the debtor is unable to post a bond. See In re Corey, 46 B.R. at 34. (Movants failed to establish that Chapter 11 petition was not filed in good faith by debtor unable to post a supersedeas bond); In re Karum, 66 B.R. at 438. (Court dismissed petition for bad faith despite debtor's inability to post a supersedeas bond); In re Wally Findlay Galleries (New York), Inc., 36 B.R. at 851. (Despite debtor's lack of sufficient assets to post a bond in order to stay judgments pending appeal, court dismissed petition for bad faith).

To determine whether a petition is filed in good faith, courts are required to examine all of the particular facts and circumstances in each case. In re Thirtieth Place, Inc., 30 B.R. 503, 505 (B.A.P. 9th Cir. 1983). While the availability of a supersedeas bond is certainly a relevant factor, the bankruptcy court based its finding of improper purpose on other factors as well. At the hearing for sanctions on July 15, 1997, the bankruptcy court, incorporating by reference its prior findings of bad faith, concluded that the petition "was imposed for an improper purpose, and that was an action by a solvent debtor to defer or to delay or harass a creditor that had received a judgment against him. I think that the petition for relief was interposed improperly for the delay of Nenana Heating Services, Inc., and its insurer, Fireman's Fund Insurance Company, to harass and cause unnecessary delay in the collection of its judgment." Among other things, the bankruptcy court found that: 1) Reisland had substantially overstated his expenditures and understated his amount of surplus income; 2) although Reisland's ability to earn a substantial income was minimal, his unearned income potential was significant due to the annuity; 3) while the statements of debts in the bankruptcy plan appear accurate, errors in the analyses of nonexempt equity in personal property and liquidation resulted in the presentation of a very distorted financial picture; and 4) Reisland substantially overstated his recurring medical expenses. The court also considered Reisland's motivation and sincerity in seeking Chapter 13 relief and found:

5 ABR 182      The motivation and sincerity of this debtor in seeking Chapter 13 relief is highly questionable. He has filed misleading schedules that overstate his expenses and understate his assets. He has knowingly filed a plan that does not meet the confirmation requirements of the Bankruptcy Code, particularly 11 U.S.C. § 1325(a)(3). He has not noticed the plan for confirmation. It appears that the debtor's motivation is simply to obstruct and delay the collection efforts of a disputed creditor. Given the size of the debtor's assets, he could easily have proposed a 100% payment plan over sixty months. Payments to disputed creditors could have been escrowed by the trustee until completion of litigation. The proposed 1.47% distribution to unsecured creditors is a joke. The debtor took a two week vacation in Mexico with his family after filing for bankruptcy.

With the exception of the contingent, unliquidated debts to [ Child Support Enforcement Division] , and the contingent debt to Nenana Heating, debtor intends to reaffirm all of his other debts and pay them outside the plan. At such time as the contingencies are removed and the amounts due to CSED and Nenana Heating are finally determined, debtor will probably need to either amend this plan or dismiss the case in accordance with such determinations.

Finally, Szender disputes the bankruptcy court's finding of improper purpose because when the bankruptcy petition was filed there was a legitimate question as to whether Reisland's greatest asset, the annuity, belonged in the bankruptcy estate. Szender, relying on the language of the annuity contract, advanced the position that the annuity might be a spendthrift trust which would not be subject to the bankruptcy estate. The annuity contract provides, in relevant part:

5 ABR 183      Spendthrift Trust. Payments to be made under the Contract are held in trust for the Payee and, to the extent allowed by law, are not subject to the claims of creditors of any Payee or to any legal process against payee.

Any Payments to be made to a Payee may not be transferred, commuted, or encumbered by such Payee. (Emphasis added).

A trust is defined in the Restatement as "a fiduciary relationship with respect to property, subjecting the person by whom the title to the property is held to equitable duties to deal with the property for the benefit of another person, which arises as a result of a manifestation of an intention to create it." Restatement (Second) of Trusts § 2 (1959). Comment h of section 2 describes the elements of a trust. They are:


(1) a trustee, who holds the trust property and is subject to equitable duties to deal with it for the benefit of another;
(2) a beneficiary, to whom the trustee owes equitable duties to deal with the trust property for his benefit;
(3) trust property, which is held by the trustee for the beneficiary.

There was no spendthrift trust formed here. Reisland entered into a settlement agreement with GVEA and it's insurers. In return for his release of claims, GVEA agreed to purchase an annuity for his benefit. The payment obligations under the settlement were transferred to GNA. GNA is not a trustee. Neither GNA or GVEA owe equitable duties to Reisland. They have legal duties that are clearly spelled out in the settlement agreement. There is no trust property held by GVEA or GNA for Reisland's benefit. GNA is free to do what it wishes with the annuity fees received. It can invest them cautiously or speculatively. It need not account for them. Regardless of GNA's return on investment, it retains a fixed obligation to Reisland. The annuity is not a trust. It simply creates a debtor-creditor relationship.

"Determining whether the debtor's filing for relief is in good faith depends largely upon the bankruptcy court's on-the-spot evaluation of the debtor's financial condition, motives, and the local financial realities." Matter of Little Creek Development Co., 779 5 ABR 184      F.2d 1068, 1072 (5th Cir. 1986). The bankruptcy court's conclusion that the petition was filed for an improper purpose is not based on clearly erroneous factual findings or an erroneous understanding of the law. The bankruptcy judge did not abuse his discretion in deciding that sanctions should be imposed..

2. Amount of Sanction

"A bankruptcy court has wide discretion to determine the appropriate sanction under Rule 9011." In re Rainbow Magazine, Inc., 136 B.R. 545, 555 (B.A.P. 9th Cir. 1992). "The measure of sanctions . . . is not the actual fees and expenses incurred, but those that the court determines to be reasonable. Another factor guiding a court's discretion is that a court should impose the least severe sanction likely to serve . . . [ the] principal goal -- deterrence." Id. Here, the bankruptcy court determined the amount of sanctions based on Nenana's attorney's fees and costs incurred as a result of the filing of the Chapter 13 petition. The bankruptcy court is not required to make explicit findings, see In re Rainbow Magazine, Inc., 136 B.R. at 555; however, in the case at bar, the bankruptcy court did note that "the minimum should be an award of attorney's fees. And I think it is appropriate here. Fees in the sum of $14,170 were incurred. While I can quibble with some of them, most of these fees were incurred long ago and appear well deserved here. Costs are $1,691.21." While the bankruptcy court did not elaborate on its reasons, the record demonstrates that the court considered the reasonableness of the amount claimed as sanctions. As a result, this court finds that the bankruptcy court did not abuse its discretion in determining the amount of the sanction.

3. Joint and Several Liability

If a document is signed in violation of this rule, the court on motion or on its own initiative, shall impose on the person who signed it, the represented party, or both, an appropriate sanction . . .

Where the client is unsophisticated and the sanctions arise from a misreading 5 ABR 185      of or failure to research the applicable law, sanctions have been imposed solely on counsel. Where, however, the client is knowledgeable about bankruptcy law or where the attorney and client share responsibility for the litigation strategy, courts can impose sanctions upon the client or upon the client and the lawyer jointly and severally.

A review of the record reveals that the bankruptcy court made note of the fact that the "debtor has a Master's degree" and appears "intelligent based upon the examinations of him" before imposing sanctions. Although the bankruptcy court made no explicit findings on the degree of culpability of either Reisland or Szender, respectively, the bankruptcy court's statements support the conclusion that in the instant case "where the attorney and client share responsibility for the litigation strategy, courts can impose sanctions upon the client or upon the client and the lawyer jointly and severally." Id. Therefore, the bankruptcy court did not abuse its discretion by imposing sanctions jointly and severally.

For the reasons set forth above, the bankruptcy court's order imposing sanctions on appellant Szender is AFFIRMED.

DATED at Anchorage, Alaska, this 31^st day of March 1998.

JOHN W. SEDWICK
UNITED STATES DISTRICT JUDGE

1. 5 ABR 177      Rule 9011 provides in relevant part:

(a) Signature. Every petition, pleading, motion and other paper served or filed in a case under the Code on behalf of a party represented by an attorney, except a list, schedule, or statement, or amendments thereto, shall be signed by at least one attorney of record in the attorney's individual name, whose office address and telephone number shall be stated. A party who is not represented by an attorney shall sign all papers and state the party's address and telephone number. The signature of an attorney or a party constitutes a certificate that the attorney or party has read the document; that to the best of the attorney's or party's knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation or administration of the case. If a document is not signed, it shall be stricken unless it is signed promptly after the omission is called to the attention of the person whose signature is required. If a document is signed in violation of this rule, the court on motion or on its own initiative, shall impose on the person who signed it, the represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the document, including a reasonable attorney's fee. Bankr. Rule 9011(a).