The United States Ninth Circuit Court of Appeals ratified the use of the federal bankruptcy court ‘s contempt powers to enforce its orders to a party to cooperate in conveying property located in Mexico. Foreign individuals who purchase property in Mexico within a certain range of the border with America cannot buy property out right so as to hold it as a fee simple interest. Instead they can merely hold the beneficial interest in a fideicomiso trust – an arrangement wherein a Mexican bank holds title to property and a foreign national is granted the right to its use subject to approval by the Mexican Ministry of Foreign Affairs.
After the debtor in In re Icenhower, No. 12-56329, 12-56418 (9th Cir. 2014) transferred property to a shell company, the bankruptcy trustee in this case sued the debtor and other entities contending the conveyance was fraudulent. Eventually the court found in contempt particular parties, Alejandro Diaz-Barba and Martha Margarita Barba De La Torre (collectively, the “Diazes”) for failing to transfer a Mexican coastal villa to plaintiff Kismet Acquisition, LLC as the judge had ordered. On appeal to the Ninth Circuit the Diazes argued that the bankruptcy court overstepped its authority citing seven grounds: (1) the bankruptcy court lacked jurisdiction to substitute another individual as transferee, (2) the bankruptcy court violated due process in imposing certain sanctions, (3) the court’s findings were not sufficiently specific to support a finding of contempt, (4) Mexican law rendered compliance with the order impossible, (5) the bankruptcy court’s findings of contempt for the period up to November 25 were clearly erroneous, (6) the bankruptcy court lacked jurisdiction to quantify fees and costs in its order of December 18, 2008, and (7) the bankruptcy court improperly abrogated attorney-client privilege.
The Ninth Circuit affirmed the bankruptcy court’s contempt powers by rejecting all but one of these seven grounds. It did find the bankruptcy court’s order of December 18, 2008 was improper but it upheld the balance of the bankruptcy court’s contempt rulings. The Diazes had contended that Mexican law prohibited the property conveyance but the bankruptcy judge found that the Diazes had failed to present any evidence which supported this view. This case is particularly fascinating as it addresses how a bankruptcy court in the United States possesses authority to issue contempt orders requiring parties to effectuate legal transactions in another country affecting property located there.
In Albuquerque, Giddens & Gatton Law, PC has bankruptcy attorneys who offer expert handling of Chapter 7, Chapter 11, Chapter 12 and Chapter 13 bankruptcy cases and can provide advice over which type of bankruptcy action fits one’s particular needs. The firm represents many debtors and creditors in Albuquerque, Santa Fe, Taos, Raton, Farmington, Gallup, Grants, Roswell, Los Lunas, Placitas, Belen and the rest of New Mexico. Contact Giddens & Gatton Law, PC at (505) 633-6298 to set up an appointment or visit the firm’s website at giddenslaw.com. Giddens & Gatton Law, PC is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico.