Richard Gonzales, Juliana Gonzales and Michael Dodge v. Barbara Parks and Jerome Parks

Barbara and Jerome Parks appeal the district court’s affirmance of the bankruptcy court’s grant of summary judgment to Richard and Juliana Gonzales, the debtors in bankruptcy, and to Michael Dodge, their attorney. The Parkses also appeal both courts’ imposition of attorney’s fees and sanctions. We affirm the grant of summary judgment but reverse the imposition of attorney’s fees and sanctions.

I. Facts

Following the Gonzaleses’ default on an obligation, Barbara Parks sought to foreclose a deed of trust she held on certain of their real property, apparently their house. On April 6, 1983, shortly before the scheduled trustee sale, the Gonzaleses filed a Chapter 11 bankruptcy petition. The trustee halted the sale upon notification of the filing. Parks subsequently filed a statutory tort action in California state court against the Gonzaleses and their counsel claiming that the bankruptcy filing consti tuted an abuse of process. The Gonzales-es did not answer the complaint, but Dodge did. The state court entered a default judgment against the Gonzaleses in the amount of $10,000.

In July 1984, the Gonzaleses and Dodge filed an adversary proceeding in the bankruptcy court against…