9th Circuit - Federal Bar Association

9th Circuit In re Cummings, 2012 WL 4747218 (9th Cir. B.A.P.) On October 3, 2012, the Bankruptcy Appellate Panel of the Ninth Circuit upheld the bankruptcy court’s decision denying Cummings’ Chapter 7 discharge under Section 727(a)(4)(A). The Panel found that the Cummings knowingly and fraudulently made multiple false oaths relating to the source and amount of their income. The debtors consented to admission of all records from case, and the court may properly rule on all evidence before it. In re Mathon Fund, LLC, 2012 WL 4800196 (9th Cir. B.A.P.) On October 9, 2012, the Bankruptcy Appellate Panel for the Ninth Circuit affirmed the bankruptcy court’s order denying the appellants’ motion for retroactive relief from an automatic stay of proceedings pursuant to Section 362(d)(1). Appellants did not move for relief until five years after litigation began and three years after the original obligor stipulated to effect of the automatic stay, i.e., that the default judgment entered against the original obligor in another adversarial action was void. In re Diepholz, 2012 WL 4747238 (9th Cir. B.A.P.) On October 4, 2012, the Bankruptcy Appellate Panel for the Ninth Circuit vacated and remanded the bankruptcy court’s denial of the debtor appellants’ motion to dismiss the plaintiff creditors’ adversary proceeding seeking to determine the nondischargeability of a default judgment debt under Section 523(a). Debtors’ name was misspelled on their Chapter 7 petition, and neither creditors nor their counsel appeared on the original mailing matrix so creditors received no mail notice. Debtors filed an amended petition to correct the spelling of their name and an amended mailing matrix, which included creditors and their attorneys. However, debtors counsel waited several months before filing a certificate of notice. First, the Panel determined that the bankruptcy court did not make specific findings of fact and conclusions of law on the question of whether the mailbox rule applied to impute notice to creditors. The mailbox rule, if applied, may have warranted dismissal of creditors’ action. Secondly, the Panel held that while misspelling one’s name on a petition is not fatal to satisfaction of Rule 1005, the bankruptcy court did not err in finding that creditors did not received sufficient notice before the deadline to file the action. But because creditors waited over 100 days to file an action, the Panel remanded to the bankruptcy court for findings of whether such delay was reasonable. In re Bishay, 2012 WL 5236169 (9th Cir. B.A.P.) On October 24, 2012, the Bankruptcy Appellate Panel for the Ninth Circuit affirmed the bankruptcy court’s decision, holding that appellant waived his right to dispute the equitable subrogation applied when he failed to raise the issue at any time prior to appeal, that the bankruptcy court correctly found that an actual agreement to subordinate existed based on the evidence before it, that it bound appellant, and that it was unnecessary for the bankruptcy court to determine the complete terms of the subordination agreement in connection with its ruling. Appellant was beneficiary to a trust deed recorded against debtor’s real property, and the bankruptcy court determined that his trust deed was junior to another subsequently records trust deed.

In re Oliver, 2012 WL 5232201 (9th Cir. B.A.P.) On October 23, 2012, the Bankruptcy Appellate Panel of the Ninth Circuit affirmed the bankruptcy court’s order dismissing debtor’s Chapter 13 case on the grounds that debtor failed to attend the first Section 341(a) meeting. Despite missing the mandatory first meeting, debtor was given an opportunity to explain her failure to attend the meeting and advised that the court, in its discretion, might grant a new hearing date for the creditor’s meeting. She was timely notified of the fourth section 341(a) meeting date, but waited until the day before that meeting to request a continuance. Finally, she delayed reporting her unexcused absence to the bankruptcy court for another week. Under these facts and circumstances, the bankruptcy court did not abuse its discretion in dismissing debtor’s case. In re Green, 2012 WL 4857552 (9th Cir. B.A.P.) On October 15, 2012, the Bankruptcy Appellate Panel for the Ninth Circuit affirmed the bankruptcy court’s overruling debtor’s objection to a creditor’s proof of claim filed in her Chapter 11 case. Debtor object to the proof of claim on grounds that it did not satisfy Rule 3001(d) because there was insufficient evidence demonstrating perfection of creditor’s alleged lien on debtor’s property. The Panel determined that the bankruptcy court properly applied UCC Article 3 to determine that creditor had standing and that its lien was perfected. See Attachment: In re Cummings (p. 115); In re Mathon Fund, LLC (p.1522); In re Diepholz (p.2334); In re Bishay (p.3545); In re Green (p.4656); In re Oliver (p.5762) Submitted by: Bianca S. Watts Wilke, Fleury, Hoffelt, Gould & Birney, LLP 400 Capitol Mall, Twenty‐Second Floor | Sacramento, California 95814 Telephone: 916.441.2430 | Facsimile: 916.442.6664 www.wilkefleury.com In re Leafty, 579 B.R. 545 On October 10, 2012, the United States Bankruptcy Appellate Panel of the Ninth Circuit affirmed the Bankruptcy Court’s orders dismissing the debtor’s second bankruptcy case as proper because the debtor was ineligible to file under 11 U.S.C. § 109(g)(2) and there was no reason to suspend the application of the statute under the circumstances of the case. As a result of the debtor’s ineligibility to file, the automatic stay was not in effect with respect to a creditor’s trustee sale of the debtor’s real property under § 362(b)(21)(A). Notable Points: The BAP made four notable points: (1) 11 U.S.C. § 109(g)(2) limits a debtor’s ability to file successive bankruptcy petitions and was not jurisdictional; however, the Bankruptcy Court had discretion to suspend the application of the statute; (2) changes in Arizona law respecting notice requirements for a deed of trust foreclosure sale was not the kind of “changed

circumstances” that would allow a debtor, after dismissing its prior case when the deed of trust creditor moved for relief from stay to conduct a foreclosure sale, to file a successive chapter 13 petition; (3) successive chapter 13 petition filed by debtor less than 180 days after the debtor had voluntarily dismissed its prior case in which a deed of trust creditor had moved for relief from stay did not give rise to a stay; and (4) the Bankruptcy Court did not abuse its discretion in denying the debtor’s motion for reconsideration. In re Bashas’ Inc., 2012 WL 5289501 (D. Ariz.) On October 25, 2012 the United States District Court for the District of Arizona denied Bashas’ motion to dismiss an appeal pending in the Ninth Circuit and affirmed the order of the Bankruptcy Court declining to approve a proposed settlement between St. Joseph’s Foundation and Bashas. Notable Points: St. Joseph’s made a decision to appeal the Bankruptcy Court’s order declining to approve its accord. However, the Bankruptcy Court had state that the accord was “blackmail and just because the debtor wants to get it all behind it doesn’t mean it should cave in to extortion.” In appealing the Bankruptcy Court’s order, St. Joseph’s incurred the wrath of the District Court Judge whereby the Judge stated:

[W]e state at the outset that in filing this latest appeal, St. Joseph’s or its lawyers are exercising abysmal judgment. Who would ever want to make a charitable pledge to St. Joseph’s if one thought St. Joseph’s would chase you to the end of the world even after a change in circumstance makes fulfillment of the pledge unjust?

One may pull from Hon. Martone’s order that a client and its attorneys should be careful in how they choose to litigate a matter. In re Reyes, 2012 WL 4932652 (D. Ariz.) On October 16, 2012, the United States District Court for the District of Arizona denied in part five of the debtors’ objections to the seven objections and recommendations made by the Trustee and granted in part one of the Debtors’ objections and remanded to the Bankruptcy Court for further consideration as to the one objection. In re Quarterman, 2012 WL 4965159 (Bkrtcy. D. Ariz.) On October 17, 2012, the United States Bankruptcy Court for the District of Arizona issued its Memorandum Decision denying the debtor’s motion for summary judgment that the divorce decree had merged into a subsequent arbitration award judgment and, therefore, was not within the parameters of discharge under 11 U.S.C. § 523(a)(15) and granted the plaintiff’s cross‐motion for summary judgment that the plaintiff’s State Court judgment had retained its character as a debt in connection with a divorce decree and was nondischargeable. Notable Points: Even assuming that the divorce decree debt had in fact merged with the subsequent State Court Judgment on that debt, the State Court Judgment retains the character of the underlying debt since it was incurred by the debtor in the course of a divorce and was pursuant to a divorce

decree and therefore the plaintiff’s State Court Judgment retains its character as a debt in connection with the divorce decree and is nondischargeable. In re Eckerdt, 2012 WL 4906511 (Bkrtcy. D. Ariz.) On October 15, 2012, the United States Bankruptcy Court for the District of Arizona issued its Memorandum Decision finding and concluding that the plaintiff had failed to prove a case of a nondischargeable act under 11 U.S.C. § 523(a)(2) by a preponderance of the evidence. In re McCarthy, 2012 WL 4912075 (C.A. 9) On October 9, 2012, the United States Court of Appeals for the Ninth Circuit affirmed the Bankruptcy Court’s order granting summary judgment on the basis of issue preclusion because of prior, final state court decision between the parties necessarily decided that McCarthy committed “defalcation while acting in a fiduciary capacity” with respect to Nature’s Wing. This case was not selected for publication in the Federal Reporter. In re McCarthy, 2012 WL 4917327 On October 9, 2012, the United States Court of Appeals for the Ninth Circuit affirmed the District Court’s order denying the debtor’s application to proceed in forma pauperis. This case was not selected for publication in the Federal Reporter. In re McCarthy, 2012 WL 4917592 On October 9, 2012, the United States Court of Appeals for the Ninth Circuit dismissed Appellee/Intervenor’s request for judicial notice as moot. In re ISE Corporation, 2012 WL 4917327 (S.D. Cal.) On October 9, 2012, the United States District Court for the Southern District of California issued its Order granting appellee’s motion to dismiss the appeal. Notable Points: Appellant timely brought two appeals; however, in each instance, appellant did not seek a stay of the Bankruptcy Court’s orders pending their appeal. The Court found that, since Appellant had made no effort to obtain a stay of either of his appeals, his appeals were equitably moot. The Bankruptcy Court would have had to unravel a complex bankruptcy plan and effective relief could not have been afforded; therefore, the doctrine of equitable mootness was applicable. In re Jimenez, 2012 WL 4905264 (Bkrtcy. S.D. Cal.) On October 12, 2012, the United States Bankruptcy Court for the Southern District of California issued its memorandum decision granting the debtors’ motion to treat the lender as completely unsecured and allow a lien strip. Note: this opinion was not intended for publication.

In re Trevett, 2012 WL 5258879 (Bkrtcy. D. Idaho) On October 24, 2012, the United States Bankruptcy Court for the District of Idaho overruled the debtors’ objection to a creditor’s proof of claim. In re Root, 2012 WL 5193840 (Bkrtcy. D. Idaho) On October 19, 2012 the United States Bankruptcy Court for the District of Idaho issued its Memorandum of Decisions determining that confirmation will be denied for debtors’ failure to establish their Plan satisfies the confirmation requirements of 11 U.S.C. § 1129(a) and (b). In re Kempkers, 2012 WL 4953076 (Bkrtcy. D. Idaho) On October 16, 2012, the United States Bankruptcy Court for the District of Idaho issued its Memorandum of Decision granting creditors’ summary judgment dismissing the Chapter 7 Trustee’s claim that prepetition payment of $5,346.00 was an avoidable preference. Notable Points: Because the debtor’s debts are not primarily consumer debts and because 11 U.S.C. § 547(c)(9) prevents a Trustee from recovering a transfer amounting to less than $5,850.00 where the debtor’s debts are primarily non‐consumer debts, the $5,346.00 transfer made by the debtor to the defendant could not be avoided by the Trustee. In re Christian, 2012 WL 4830473 (Bkrtcy. D. Idaho) On October 10, 2012, the United States Bankruptcy Court for the District of Idaho issued its Memorandum of Decision finding that the debtor’s motion to compel abandonment of his interest in a pending legal action was appropriate. In re Davis, 2012 WL 4831494 (Bkrtcy. D. Idaho) On October 10, 2012, the United States Bankruptcy Court for the District of Idaho issued its Memorandum of Decision granting plaintiffs’ motion for summary judgment that their claim against the Chapter 7 debtor was nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A). Submitted by: John Smith Gerald K. Smith and John C. Smith Law Offices, PLLC 6720 E. Camino Principal, Suite 202 Tucson, AZ 85715 Tel: (520) 722‐1605 Fax: (520) 722‐9096 [email protected]

In re Cummings, Slip Copy (2012)

© 2012 Thomson Reuters. No claim to original U.S. Government Works. 1

2012 WL 4747218Only the Westlaw citation

is currently available.United States Bankruptcy Appellate Panel

of the Ninth Circuit.

In re Clarence Thomas CUMMINGSand Pamela K. Cummings, Debtors.

Clarence Thomas Cummings;Pamela K. Cummings, Appellants,

v.United States Trustee, Appellee.

No. AZ–12–1114–DJuHl. |Bankruptcy No. 09–10576–RTB.

| Adversary No. 09–01383–RTB.| Argued and Submitted Sept.

20, 2012. | Filed Oct. 3, 2012.

Appeal from the United States BankruptcyCourt for the District of Arizona, HonorableRedfield T. Baum, Sr., Bankruptcy Judge,Presiding.

Attorneys and Law Firms

Wesley Denton Ray, Esq. of PolsinelliShughart PC, for Appellants.

Jennifer A. Giaimo, Esq., for Appellee.

Before: DUNN, JURY and HOULE, 1

Bankruptcy Judges.

Opinion

MEMORANDUM 2

*1 The debtors, Clarence Thomas (“Thomas”)and Pamela K. Cummings (“Pamela”)

(collectively, “the Cummings”), appeal thebankruptcy court's order denying their chapter

7 discharge 3 under § 727(a)(4)(A). 4 WeAFFIRM.

FACTS

Thomas has worked in real estate managementfor over forty years. Thirty-two yearsago, Thomas became owner of All State

Management Co ., Inc. (“All State”), 5 whichmanaged various apartment complexes andsmall commercial buildings in several states,

including Arizona. 6 All State continued to

operate until June 2009. 7

On March 2, 2009, approximately two monthsbefore the Cummings filed for bankruptcy,Thomas formed First Beacon Management Co.,LLC (“First Beacon”), another real property

management company. 8 Thomas held a 45%member interest and Pamela held a 50%member interest in First Beacon. JeannieWetzel, president of All State (and later ofFirst Beacon), held the remaining 5% memberinterest. Thomas entered into a managementagreement with First Beacon on May 1, 2009.

According to Thomas, First Beacon

commenced operations in June 2009. 9 He laterrevealed, however, that First Beacon alreadywas operating when he received and reviewedan initial draft of the Cummings' bankruptcyschedules sometime before May 2009.

As part of setting up First Beacon, Thomastransferred client accounts, including escrow

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accounts, 10 from All State to First Beacon. 11

He also opened a bank account for First Beaconin March 2009.

First Beacon's bank account had a closingbalance of $1,100, as of March 31, 2009, aclosing balance of $121,618.33, as of April 30,2009, and a closing balance of $130,810, as ofMay 29, 2009. On May 15, 2009, First Beacon'sbank account had a balance of $169,238.98.Five deposits totaling $137,871.66 were madeinto First Beacon's bank account between May6 and May 19, 2009.

The funds in First Beacon's bank accountrapidly dwindled. It had a closing balance of$94,387.54, as of June 30, 2009, a closingbalance $1,090.32, as of July 31, 2009, and aclosing balance of $7,155.56, as of August 31,2009.

Thomas initially claimed that he did notknow the source of the deposits in FirstBeacon's bank account. He later explained thatsome of the funds in First Beacon's bankaccount had belonged to Nottingham PlaceApartments, one of First Beacon's clients.Thomas acknowledged that he had an interestin Nottingham Place Apartments. He stated,however, that First Beacon returned the funds

to Nottingham Place Apartments. 12

Thomas leased an office space on FirstBeacon's behalf in April 2009; All Stateformerly had occupied the office space. He alsoentered into lease agreements with First Beaconon May 1, 2009, as to two Lincoln Navigators, aMercury Mountaineer and a “Toyota SUV” foruse by First Beacon's employees (“First Beacon

vehicle leases”). 13

The Cummings filed their chapter 7 petitionon May 15, 2009. They filed their originalschedules and statement of financial affairs(“SOFA”) on June 1, 2009. They did notdisclose in their original schedules theirinterests in First Beacon or the First Beaconvehicle leases. In fact, the Cummings didnot mention First Beacon at all in the twoamendments to their Schedule B filed on June15, 2009, and June 22, 2009. They finallydisclosed Thomas's interest in First Beacon intheir third amended Schedule B and secondamended SOFA filed on August 20, 2009.Notably, the Cummings did not ever mentionPatricia's interest in First Beacon in any of theSchedule B's they filed.

*2 The Cummings did disclose in theirSchedule G, however, leases with Ford MotorCredit and Toyota Financial Services as to a2008 Lincoln Navigator and a 2008 ToyotaHighlander, respectively. The Cummings alsoreported in their Schedule I that they mademonthly installment payments of $533.46 for alease on a Toyota.

They later disclosed in their second amendedSchedule G filed on June 15, 2009, leases withFord Motor Credit as to two 2008 LincolnNavigators and a 2008 Mercury Mountaineer,and a lease with Toyota Financial Services asto a 2008 Toyota Highlander. The Cummingsagain failed to mention the First Beacon vehicleleases in the second amended Schedule G.

Although Thomas had reviewed the originalschedules, he stated that did not notice that theydid not mention his interest in First Beacon. Heassumed that the original schedules disclosed



his interest in First Beacon because hisattorneys at Polsinelli Shughart PC (“Polsinellilaw firm”), who knew of First Beacon andin fact, had helped him prepare its operatingagreement, would have “picked up on the factthat First Beacon should have been—shouldhave been added to the schedules.” Tr. ofJanuary 5, 2012 hr'g, 39:24–25, 40:1.

Thomas believed that his attorneys wouldinclude his interest in First Beacon in theoriginal schedules so as to place the chapter7 trustee on notice. He moreover maintainedthat though the original schedules failed todisclose his interest in First Beacon, it had beendisclosed and discussed by his attorneys withthe chapter 7 trustee before the filing of thethird amended Schedule B. In fact, Thomasaverred, he and his attorneys discussed FirstBeacon with the chapter 7 trustee at a meetingwith him that took place sometime in June2009.

In their original and in all of their amendmentsto Schedule B, the Cummings disclosed thatthe value of Thomas's interest in All State was“unknown.” Thomas explained that he did sobecause

[he] didn't know what it was—what [he] could get—[he]didn't think [he] could getanything for it, cause [sic] wewere losing money, so—but[he] didn't know, so [he] justused “unknown.”

Tr. of January 5, 2012 hr'g, 37:22–25. Hecontended that it was difficult to determinethe value of his interest in All State becausethe prospect for All State's “future revenues

[was] questionable.” Tr. of January 5, 2012hr'g, 38:9–10. He explained that All State

had no fixed assets, plusthe management agreementswere only 30 days. Soanybody that's going to lookat buying a managementcompany would not—wouldn't do so with a 30–day contract. This would—you know, that's the nature ofthe business.

Tr. of January 5, 2012 hr'g, 38:4–8. Thomasfurther explained that though All State hadfunds in its bank account, those funds wereearmarked for expenses, such as propertytaxes and insurance escrows. Moreover, AllState's liabilities exceeded the funds in its bankaccount. The Cummings asserted the same“unknown” value for Thomas's interest in FirstBeacon.

*3 Despite the fact that the Cummings hadvalued Thomas's interests in All State andFirst Beacon as “unknown,” they offered topurchase them from the bankruptcy estate. Ina letter dated July 21, 2009 (“offer letter”), theCummings advised the chapter 7 trustee thatAll State and First Beacon

[were] of essentially no valueabsent [Thomas's] ongoinginvolvement. All State ...and now First BeaconManagement Company,LLC, [were] managementcompanies which provide aservice and [had] no intrinsicvalue. The management



contracts [were] by theirterms, terminable by oneparty on thirty days' notice,which [made] the serviceprovided even more fragile.All of those managementrelationships [were] basedmore on [Thomas] than theentity....

They concluded that, based on thecircumstances, the value of the bankruptcyestate's interests in All State and First Beacon“[did] not exceed $2,500.”

In the Disclosure of Compensation of Attorneyfor Debtors (“attorney fee disclosure”), one ofthe Cummings' attorneys, Arturo Thompson,reported that, on May 20, 2009, All Statepaid the Polsinelli law firm $50,000 “forthe purpose of supplying the Cummings withpostpetition legal services” (“law firm funds”).Thomas explained that the law firm fundsrepresented his postpetition wages for serviceshe performed for All State. The Cummingsreported in their Declaration of Evidenceof Employers' Payments within 60 Days(“employer payment declaration”)(main casedocket no. 16) that they had not received anypayment advices, pay stubs or other evidenceof payment from any employer within 60 daysprepetition.

Interestingly, Thomas later testified at the one-day trial on January 5, 2012, that he had“borrowed from friends” some of the law firmfunds. Tr. of January 5, 2012 hr'g, 53:7–9. Hedeposited these borrowed funds into All State'sbank account and then “wrote the check fromAll State.” Tr. of January 5, 2012 hr'g, 53:13–17.

Thomas initially represented that he was notdrawing a salary from All State but fromFirst Beacon in April 2009. He later claimed,however, that in May 2009, at the time he andPatricia filed for bankruptcy, he was earning$8,000 per month income as property managerfor All State, “still performing some functionsfor All State because of the bankruptcy.” Tr. ofJanuary 5, 2012 hr'g, 16:2–3.

He explained:

There were many, many,many schedules and a lotof information that wasrequired from All StateManagement. And as youcan imagine I had to payemployees and I had to put ina lot of time myself, so I didget money for that from AllState.

Tr. of January 5, 2012 hr'g, 16:3–7. Thomasalso claimed that he was not receiving anyincome from First Beacon at that time.

The UST filed the complaint on October 22,2009 (“UST adversary proceeding”). It soughtto deny the Cummings their discharge under §727(a)(2)(B) for concealing postpetition theirinterests in First Beacon and the values oftheir interests in All State and First Beacon bynot disclosing them in their original schedules.The UST also alleged that the Cummingstransferred the law firm funds with the intentto hinder, delay or defraud creditors and/or officers of the estate under § 727(a)(2)(B). It further sought to deny the Cummingstheir discharge under § 727(a)(4)(A) for not



disclosing their interest in First Beacon and thevalues of their interests in All State and FirstBeacon in their original Schedule B.

*4 The Cummings filed an answer tothe complaint, generally denying the UST'sallegations and asserting several affirmativedefenses. They ultimately contended that they“did not commit any material improper act oromission and that any act or omission wastimely cured.”

Approximately a year before the January 5,2012 trial in the UST adversary proceeding,the chapter 7 trustee filed a complaint againstAll State, First Beacon and the Cummings(“chapter 7 trustee complaint” or “chapter 7trustee adversary proceeding”) (adv.proc. no.10–00247). He contended that First Beaconwas an asset belonging to the bankruptcyestate. The chapter 7 trustee alleged thatthe Cummings were using All State andFirst Beacon to place bankruptcy estateassets beyond his reach. He therefore soughtappointment of a receiver to operate FirstBeacon.

The chapter 7 trustee further sought atemporary restraining order and/or preliminaryinjunction against the Cummings to stop themfrom transferring any accounts and/or fundsbelonging to All State and/or First Beacon.He also sought to substantively consolidate theCummings' bankruptcy case with All State'sbankruptcy case to enable him to proceed withliquidating All State's assets and recoveringthem for the benefit of the creditors in both AllState and the Cummings' bankruptcy cases.

The chapter 7 trustee and the Cummingseventually entered into a settlement agreement(main case docket no. 313). Under thesettlement agreement, the chapter 7 trusteeagreed to dismiss with prejudice the chapter7 trustee complaint against the Cummings inexchange for payments totaling $115,000 fromthe Cummings. He also agreed to release hisclaims to All State and First Beacon. Thechapter 7 trustee further agreed not to opposethe Cummings' discharge unless he foundadditional undisclosed assets or determinedthat a disclosed asset had been materiallymisrepresented to him. He and the Cummingsalso agreed that the settlement agreementwould not bind “any person or entity who [was]not a party” to it.

Before the trial in the UST adversaryproceeding, the UST and the Cummingssubmitted a joint pretrial statement whereinthey stipulated to certain facts. Among theundisputed facts, the Cummings conceded thefollowing: (1) they did not disclose theirinterest in First Beacon in their originalSchedule B and original SOFA filed on June 1,2009, and in the second amended Schedule Bfiled on June 22, 2009; (2) they disclosed theirinterest in First Beacon in the third amendedSchedule B and second amended SOFA, bothfiled on August 20, 2009; (3) they valuedtheir interest in First Beacon as “unknown” intheir third amended Schedule B and secondamended SOFA filed on August 20, 2009; (4)they disclosed Thomas's interest in All Statein the original Schedule B and original SOFA,though they valued his interest as “unknown”;and (5) All State remitted the law firm fundspostpetition as a retainer for legal services to berendered to the Cummings.



*5 The UST and the Cummings also includedin the joint pretrial statement a list of exhibitsthey intended to present at trial. Amongthem, the UST submitted the entire file inthe Cummings' bankruptcy case, the employerpayment declaration and First Beacon's bank

account statements 14 as evidence to beconsidered by the bankruptcy court at trial.

The UST and the Cummings also provided alist of witnesses in the joint pretrial statement.Among its witnesses, the UST had the chapter7 trustee, Larry Warfield, testify at trial.

Thomas testified extensively. When asked whyhe decided to form First Beacon, Thomasexplained that he did it to “start clean witha new management company,” free from the“stigma of [his personal] bankruptcy” that hebelieved had attached to All State. Tr. ofJanuary 5, 2012 hr'g, 13:22–25.

Thomas insisted that he did not intentionallyomit his interest in First Beacon from theschedules and SOFA. He further claimed thathe intended neither to include false informationin the schedules and SOFA nor to conceal hisinterest in First Beacon. He claimed that hedid not intend to hide First Beacon's existence;he intended for its existence to be knownthroughout the course of the bankruptcy.Thomas explained that he had delayed filingfor bankruptcy until First Beacon was formed“so it could be part of the schedules that[the Cummings] provided to the [chapter 7trustee] .... and [to] make sure everything wasout in the open,” because he knew First Beaconto be an asset. Tr. of January 5, 2012 hr'g,23:17–18, 24:6–7.

Thomas also contended that he never intendedto hinder or defraud creditors by authorizing thetransfer of the law firm funds.

He further insisted that he never intendedto hinder or defraud creditors by delayinginclusion of his interest in First Beacon in theschedules and SOFA or by valuing his interestsin First Beacon and All State as “unknown.”Thomas averred that he did not know the valueof his interests in First Beacon and All Stateat the time he and Patricia filed their originalschedules and SOFA.

At the end of the trial, the bankruptcy courtinstructed counsel for the Cummings andcounsel for the UST to submit closing briefs byJanuary 20, 2012. The bankruptcy court theninformed them that it would take the matterunder advisement on January 23, 2012.

A month after trial, the bankruptcy court issuedits minute order, which set forth its factualfindings and legal conclusions. The bankruptcycourt denied the Cummings' discharge based onits factual findings and legal conclusions.

The bankruptcy court found that the Cummingsknowingly and fraudulently made multiplefalse oaths relating to their bankruptcy caseunder § 727(a)(4)(A), based on Thomas'stestimony at trial and the information (or lackthereof) in their schedules.

It highlighted the various actions taken byThomas and his attorneys prepetition. Thebankruptcy court noted that, in an emaildated April 15, 2009, to Arturo Thompson,Thomas stressed that the timing of the



Cummings' bankruptcy filing “[was] criticalbased upon First Beacon Management [would]be officially taking over the managementof various apartment communities May 1st,2009.” Two weeks later, Thomas entered intoa management agreement with First Beacon,leased several of his vehicles to First Beaconand opened a new bank account on its behalf.The bankruptcy court therefore concluded thatthe Cummings' omission of First Beacon fromtheir original Schedule B and SOFA was not“an innocent mistake,” given the great andhurried lengths Thomas and his attorneys tookprepetition to form First Beacon to facilitate theCummings' “post-bankruptcy fresh start.”

*6 The bankruptcy court further determinedthat Thomas's testimony lacked credibility. Forexample, with respect to the law firm funds,Thomas testified at trial that they representedfuture earnings for his services to All State. Butthe bankruptcy court pointed out that he neverdisclosed that the law firm funds representedfuture income, even though § 521(a)(1)(vi)required the Cummings to disclose “ ‘anyreasonably anticipated increase in income’ forthe year after they filed for bankruptcy.”

The bankruptcy court also noted theCummings' omission of the First Beacon leasesfrom their schedules. The Cummings claimedin their original schedules that they owned novehicles, even though they had leased them toFirst Beacon in May 2009.

In addition, the bankruptcy court found suspectthe low August 2009 closing balance of FirstBeacon's bank account. It pointed out thatfrom April 2009 to June 2009, First Beacon'sbank account had more than $100,000; by

August 2009, however, First Beacon's bankaccount held but a few thousand dollars. Thebankruptcy court believed that the Cummingshad a prepetition interest in the funds in FirstBeacon's bank account but did not disclose theirinterest in the funds in their schedules.

On February 29, 2012, the bankruptcy courtentered an order denying the Cummings theirchapter 7 discharge. The Cummings timelyappealed.

JURISDICTION

The bankruptcy court had jurisdiction under28 U.S.C. §§ 1334 and 157(b)(2)(J). We havejurisdiction under 28 U.S.C. § 158.

ISSUE

Did the bankruptcy court err in denying theCummings their chapter 7 discharge?

STANDARD OF REVIEW

We review the bankruptcy court's factualfindings for clear error and its legal conclusionsde novo. See Retz v. Samson (In re Retz), 606F.3d 1189, 1196 (9th Cir.2010). We review denovo mixed questions of fact and law, wherethe historical facts are established, the legalrules are undisputed, and the issue is whetherthe facts satisfy the legal rule. See id.

A bankruptcy court's fact determination isclearly erroneous if it is illogical, implausible

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or without support in the record. Id . (citingUnited States v. Hinkson, 585 F.3d 1247, 1261–62 & n. 21 (9th Cir.2009)(en banc)). If thebankruptcy court's “account of the evidence isplausible in light of the record viewed in itsentirety,” we may not reverse it, “even thoughconvinced that had [we] been sitting as the trierof fact, [we] would have weighed the evidencedifferently.” Anderson v. City of Bessemer City,N.C., 470 U.S. 564, 573–74 (1985). “Wherethere are two permissible views of the evidence,the factfinder's choice between them cannot beclearly erroneous.” Id. at 574.

We give great deference to the bankruptcycourt's determinations regarding the credibilityof witnesses because the bankruptcy court, asthe trier of fact, had the opportunity to note“variations in demeanor and tone of voice thatbear so heavily on the listener's understandingof and belief in what is said.” Id. at 575 (internalquotation marks omitted).

*7 We may affirm on any ground supportedby the record. Shanks, 540 F.3d at 1086.

DISCUSSION

The Cummings raise two main arguments onappeal: (1) the bankruptcy court improperlyconsidered and based its ruling on allegationsnot presented in the complaint as grounds forthe denial of their discharge, and (2) the USTfailed to prove elements under § 727(a)(4)(A).Before we address their arguments, we firstneed to outline the general principles that guideour review of denials of chapter 7 discharges.

“In keeping with the ‘fresh start’ purposesbehind the Bankruptcy Code, courts shouldconstrue § 727 liberally in favor of debtors andstrictly against parties objecting to discharge.”Retz v. Samson (In re Retz), 606 F.3d1189, 1196 (9th Cir.2010). We are mindful,however, that the Bankruptcy Code “limits theopportunity for a completely unencumberednew beginning [provided by the discharge]to the honest but unfortunate debtor.” Inre Boyajian, 564 F.3d 1088, 1092 (9thCir.2009)(quoting Grogan v. Garner, 498 U.S.279, 286–87 (1991)(quotation marks omitted)).

The party objecting to the debtor's dischargemust prove, by a preponderance of theevidence, that the debtor's actions or conductfalls within one of the exceptions to dischargeunder § 727. See Grogan v. Garner, 498 U.S.at 287 (establishing preponderance of evidencestandard for parties objecting to dischargeunder § 523). The objecting party thereforemust show that the debtor acted with “actual,rather than constructive, intent.” Retz, 608 F.3dat 1196 (quoting Khalil v. Developers Surety &Indem. Co. (In re Khalil), 379 B.R. 163, 172(9th Cir.BAP2007)(quotation marks omitted)).

A. The bankruptcy court properly consideredthe UST's allegations and properly applied

the burden of proof 15

1. Factual allegationsThe Cummings complain that the bankruptcycourt considered allegations not presented bythe UST in the complaint as grounds for denialof their discharge under § 727(a)(4)(A). Theytarget the bankruptcy court's reliance on theirnon-disclosures of: (1) the law firm funds





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as Thomas's postpetition wages to be earnedas All State's property manager, and (2) theFirst Beacon vehicle leases, as support for itsruling. The Cummings contend that they didnot have a sufficient opportunity to addressthese allegations at trial because they were notset forth in the complaint.

As the UST points out, however, the Cummingshad agreed in the joint pretrial statementto allow the UST to submit the employerpayment declaration, as well as the entire filein their bankruptcy case, as evidence at trial.The bankruptcy court was entitled to considerany evidence presented to it at trial and tobase its decision on any grounds within theclaims alleged, supported by the evidence.See Tevis v. Wilke, Fleury, Hoffelt, Gould& Birney, LLP (In re Tevis), 347 B.R. 679,695 (9th Cir.BAP2006)(“It is the bankruptcycourt's responsibility to evaluate the evidencepresented .... [for][it] has an obligation toconsider all of the evidence properly presented,and to give it the weight that it deserves.”).The bankruptcy court therefore did not err inconsidering and relying on these documentsin making its ruling because the Cummingsexplicitly agreed to allow them to be submittedinto evidence.

*8 The Cummings argue that had they knownthat the omission of the First Beacon vehicleleases from their schedules would be at issue attrial, they would have directed the bankruptcycourt to consider their amended ScheduleG. The Cummings claim that the amendedSchedule G “identified each of the contractsapplicable to these vehicles as an unexpiredlease.”

But, as the UST points out, the Cummings didnot disclose the First Beacon vehicle leases intheir original or amended Schedule G. Rather,they listed their own leases with the variousvehicle dealerships; they made no reference toFirst Beacon at all in their original or amendedSchedule G. The Cummings only disclosed theFirst Beacon vehicle leases through Thomas'stestimony at trial.

2. Burden of proofThe Cummings claim that the bankruptcycourt shifted the burden of proof to them,instead of the UST. Instead of basingthe denial of the Cummings' discharge onevidence provided by the UST, the bankruptcycourt interpreted the uncontested facts as “acalculated fraud [i.e., actual fraudulent intent]”rather than as “an innocent collection ofcircumstances.” Appellants' Opening Brief at17. The bankruptcy court also based its ruling,in large part, on Thomas's testimony at trial,which it found unconvincing.

“Proof by the preponderance of the evidencemeans that it is sufficient to persuade the finderof fact that the proposition is more likely truethan not.” United States v. Arnold & BakerFarms (In re Arnold & Baker Farms), 177 B.R.648, 654 (9th Cir.BAP1994), aff'd 85 F.3d 1415(9th Cir.1996), cert. denied sub nom., Arnold& Baker Farms v. United States, 519 U.S.1054 (1997). Here, the UST had the burden ofpresenting evidence sufficient to show that theCummings knowingly and fraudulently madefalse oaths as to material facts relating to theircase under § 727(a)(4)(A).

The bankruptcy court did not shift theburden of proof to the Cummings by







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considering the circumstantial evidence ofthe undisputed facts and the conflicting (andoften contradictory) testimony of Thomasin making its determination. The Cummingsthemselves agreed to the undisputed factsin the joint pretrial statement. Thomas alsowillingly proffered his testimony to counterthe UST's allegations; the bankruptcy courtsimply found his testimony not credible. Moreimportant, there is ample evidence to supportthe bankruptcy court's findings under § 727(a)(4)(A).

B. The bankruptcy court did not err indenying the Cummings' discharge underSection 727(a)(4)(A)Under § 727(a)(4)(A), the bankruptcy courtshall grant a discharge to the debtor unlesshe or she “knowingly and fraudulently, inor in connection with the case ... made afalse oath or account.” “A false statementor an omission in the debtor's bankruptcyschedules or statement of financial affairs canconstitute a false oath.” Retz, 606 F.3d at1196 (quoting Khalil, 379 B.R. at 172, aff'd,578 F.3d 1167, 1168 (9th Cir.2009)(expresslyadopting BAP's statement of applicable law)(quotation marks omitted)). A false oath mayinvolve either “an affirmatively false statementor an omission from the debtor's schedules.”Searles v. Riley (In re Searles), 317 B.R. 368,377 (9th Cir.BAP2004) (citations omitted). “Afalse oath is complete when made. The fact ofprompt correction of an inaccuracy or omissionmay be evidence probative of lack of fraudulentintent.” Id. The purpose of § 727(a)(4)(A) is tomake sure “that the trustee and creditors haveaccurate information without having to conductcostly investigation.” Id. (quoting Khalil, 606F.3d at 1196)(quotation marks omitted)).

*9 To prevail on a § 727(a)(4)(A) claim, theplaintiff must show that: “(1) the debtor madea false oath in connection with the case; (2) theoath related to a material fact; (3) the oath wasmade knowingly; and (4) the oath was madefraudulently.” Id. at 1197 (quoting Roberts v.Erhard (In re Roberts), 331 B.R. 876, 882 (9thCir.BAP2005)(quotation marks omitted)).

1. False oathThe Cummings contend that their delayeddisclosure of Thomas's interest in First Beacondoes not constitute a false oath under § 727(a)(4)(A). They acknowledge that they did omitThomas's interest in First Beacon in theiroriginal and second amended Schedule B. TheCummings claim, however, that they believedthat it had been included in the original andsecond amended Schedule B at the time offiling.

As the UST points out, whether the Cummingsknew about the omission concerns the thirdelement under § 727(a)(4)(A). The fact that theCummings omitted this information from theirschedules is enough to satisfy the first element.See Searles, 317 B.R. at 377 (“A false oath iscomplete when made.”).

Moreover, this is not the only omission theCummings made in their schedules. Althoughthe Cummings eventually disclosed Thomas'sinterest in First Beacon, they did not disclosePatricia's interest in it; in every iteration oftheir Schedule B, they maintained that onlyThomas had an ownership interest in First

Beacon. 16 They also did not disclose theFirst Beacon vehicle leases; they simply listed
















their own leases with the various vehicledealerships. The Cummings further did notdisclose that the law firm funds transferpurportedly represented Thomas's postpetitionwages as property manager for All State. Itemnumber 17 on Schedule I requires the debtor to“[d]escribe any increase or decrease in incomereasonably anticipated to occur within the yearfollowing the filing of this document....” TheCummings left item number 17 blank in theirSchedule I. They never filed an amendedSchedule I in their bankruptcy case.

The Cummings also made false statementsin their schedules. They maintained in everyiteration of their Schedule B that Thomas'sinterests in First Beacon and All State had“unknown” values. Thomas even testified thathe had characterized the value of his interestin All State as “unknown” because he “didn'tthink [he] could get anything for it” and thatit was difficult to determine the value of hisinterest in All State because the prospect ofits “future revenues was questionable.” But inthe offer letter, the Cummings claimed thatThomas's interests in First Beacon and All State“did not exceed $2,500,” and they ultimatelysettled with the chapter 7 trustee for $115,000.Despite his assertions to the contrary, Thomaswas able to determine that his interests in AllState and First Beacon had at least some value.

2. Material fact“A fact is material if it bears a relationshipto the debtor's business transactions or estate,or concerns the discovery of assets, businessdealings, or the existence and dispositionof the debtor's property.” Retz, 606 F.3dat 1198 (quoting Khalil, 379 B.R. at 173).A false statement or omission may be

material even if creditors do not suffer directfinancial prejudice from it. Fogel Legware ofSwitzerland, Inc. v. Wills (In re Wills), 243B.R. 58, 63 (9th Cir.1999). An omission ormisstatement is material if it “detrimentallyaffects administration of the estate.” Id.(quoting Wills, 243 B.R. at 63 (quotation marksomitted)). More specifically, if the omissionor misstatement “adversely affects the trustee'sor creditors' ability to discover other assets orto fully investigate the debtor's pre-bankruptcydealing and financial condition,” then theomission or misstatement may be consideredmaterial. Wills, 243 B.R. at 63 (quoting 6 King,Collier on Bankruptcy ¶ 727.04[1][b] ).

*10 The Cummings contend that the omissionof their interest in First Beacon fromtheir schedules did not materially harm theadministration of their bankruptcy estate,especially as they quickly amended theirschedules to correct the omission. Moreover,they believe that even if they had disclosedtheir interest in First Beacon in their originalSchedule B, “nothing would have happeneddifferently in the administration of [theirbankruptcy] estate.” The chapter 7 trusteestill would have entered into the settlementagreement with the Cummings, they assert, asit provided a benefit to the bankruptcy estate.

Contrary to their assertions, the Cummings'omissions and misstatements did adverselyaffect the chapter 7 trustee's administration ofthe bankruptcy estate. At trial, the chapter 7trustee testified that the Cummings' omissionsand subsequent amendments to their schedulescreated a “cat and mouse game, or [the gameof] go fish.” Tr. of January 5, 2012 hr'g, 57:22–23. The chapter 7 trustee explained that











[E]very time we woulddiscover an asset that [theCummings] failed to list,they would amend theschedules again. And whenthey did the amendmentthey didn't do just theamendment as relates to thatone issue, they would thenfully amend their schedules,which caused us to have togo through the comparisonof what was on the original,what was on the amended.And then when it wasamended again we'd have togo do that again.

Tr. of January 5, 2012 hr'g, 57:8–15.

The chapter 7 trustee also testified that theCummings' omission of Thomas's interest inFirst Beacon and the value of his interestraised concerns for him; namely “whether ornot First Beacon was going to be a bustout for All State .... [b]ecause there was noreference to First Beacon on the petitions andschedules.” Tr. of January 5, 2012 hr'g, 61:4–6. He stated that he faced difficulties in tryingto “get an understanding of what was goingon;” he explained that he was “constantly beingbombarded with walls being placed up forknowledge [he was] trying to gain.” Tr. ofJanuary 5, 2012 hr'g, 64:8–11. Despite hisefforts, the chapter 7 trustee was unable to makeany determination to his satisfaction as to thevalue of First Beacon.

The Cummings contend that “nothingdifferent” would have happened in the

administration of their bankruptcy case, evenif they had disclosed Thomas's interest in FirstBeacon and the value of his interests in FirstBeacon and All State. They further claim thatthe settlement agreement actually provided abenefit to the bankruptcy estate by adding to thefunds available for distribution to creditors.

The Cummings' characterization of thesettlement agreement is disingenuous. Hadthey fully disclosed their interest in FirstBeacon and the value of their interests inAll State and First Beacon, the chapter 7trustee would not have had to initiate theadversary proceeding. The chapter 7 trustee hadinitiated the adversary proceeding against theCummings, All State and First Beacon, in part,to help him proceed with liquidation of AllState's assets, if any, and recovery of the samefor the benefit of creditors.

*11 The chapter 7 trustee also characterizedthe settlement agreement as a “surrender.” Heexplained that he entered into the settlementagreement with the Cummings mainly becausehe would never realize enough funds to satisfyeven the administrative claims as he was “justgetting eaten alive with attorney's fees.” Tr. ofJanuary 5, 2012 hr'g, 66:13–14.

Based on the chapter 7 trustee's testimony,the Cummings' omissions and misstatementsindeed adversely affected the administration oftheir bankruptcy estate. We therefore concludethat the bankruptcy court did not err indetermining that the Cummings' omissions andmisstatements concerned material facts withinthe meaning of § 727(a)(4)(A).

3. Knowingly made



A debtor “acts knowingly if he or sheacts deliberately and consciously.” Retz,606 F.3d at 1198 (quoting Khalil, 379B.R. at 173)(quotation marks omitted)). TheCummings assert that they did not deliberatelyand consciously omit from their schedules theirinterests in First Beacon and the value of theirinterests in First Beacon and All State. Theyraise the same defense for their misstatementsconcerning the law firm funds.

The Cummings would like us to believethat they had overlooked these omissions andmisstatements when they filed their schedules.We discern no error in the bankruptcycourt's conclusion that these omissions andmisstatements did not result from “an innocentmistake.” At trial, Thomas testified that he hadreviewed the original schedules. He also hadsigned the original schedules under penalty ofperjury, attesting that he had reviewed them andthat they were true and correct. Given the flurryof activity that took place prepetition aroundFirst Beacon, we agree with the bankruptcycourt that First Beacon would be “clearly andconsistently on their minds.”

We also find no error in the bankruptcy court'sconclusion that the Cummings deliberatelyand consciously misstated their income intheir Schedule I. Thomas offered contradictorytestimony as to the source of the law firmfunds. He first testified at trial that the lawfirm funds represented his postpetition wagesfor his services as All State's property manager.Thomas later testified that he had obtainedloans from friends to put together some of thelaw firm funds. Notably, though the Cummingsamended their Schedule B numerous times,they did not amend their Schedule I to include

this information. Based on the record beforeus, we conclude that the bankruptcy court didnot err in finding that the Cummings knowinglymade false oaths in connection with theirbankruptcy case.

4. Fraudulent intentTo establish fraudulent intent, the UST mustprove that the Cummings: (1) made omissionsor misstatements in their schedules; (2) thatthey knew were false at the time they madethem; and (3) made them with the intention andpurpose of deceiving their creditors. Retz, 606F.3d at 1199 (quoting Khalil, 379 B.R. at 173(quotation marks omitted)). “Intent is usuallyproven by circumstantial evidence or byinferences drawn from the debtor's conduct.”Id. (citing Devers v. Bank of Sheridan, Mont.(In re Devers), 759 F.2d 751, 753–54 (9thCir.1985)). Reckless indifference or disregardfor the truth may be circumstantial evidence ofintent, but are not enough alone to constitutefraudulent intent. Id. (citing Khalil, 379 B.R. at173–75).

*12 The Cummings cite their promptnotification of the formation of First Beacon totheir attorneys as proof that they did not intendto conceal Thomas's interest in First Beacon.They also claim that they furnished the chapter7 trustee with copies of First Beacon's leaseagreement concerning the office space. Theycontend that they took these actions all beforethey filed their third amended Schedule B.When the Cummings realized their omission,they “promptly” filed amendments to theirschedules.

It took the Cummings until August 2009 andtwo amendments in the meantime to “rectify”















their omissions in their Schedule B. Even then,they still did not list Patricia's interest in FirstBeacon in the second amended Schedule B andthe following amendments to Schedule B. Wedo not consider three months as necessarilya short period of time in which to fileamendments to schedules to correct materialnon-disclosures. If the Cummings realized thatthey omitted from their schedules their interestin First Beacon, it should not have taken themthree months to “rectify” their mistake. Ofcourse, the omission of Patricia's interest inFirst Beacon never was rectified.

Even more telling as to the Cummings'fraudulent intent is Thomas's contradictorytestimony regarding the source of the lawfirm funds. The Cummings did not amendtheir Schedule I to reflect the increase intheir income from the alleged postpetitionwage advance. They did not mention the FirstBeacon vehicle leases in their Schedule G, eventhough they entered into the leases two weeksbefore they filed for bankruptcy protection. The

Cummings ultimately disclosed that they haddirectly leased the vehicles from the vehicledealerships, but they never mentioned that theyleased those same vehicles to First Beacon, asThomas later testified at trial.

Given these circumstances, we conclude thatthe bankruptcy court's finding as to theCummings' fraudulent intent was not illogical,implausible or unsupported by the record. Wetherefore conclude that the bankruptcy courtdid not err in denying the Cummings' dischargeunder § 727(a)(4)(A).

CONCLUSION

Based on our review of the record, we concludethat sufficient evidence exists to supportthe bankruptcy court's determination under §727(a)(4)(a). The bankruptcy court thus did noterr in denying the Cummings' discharge. Wetherefore AFFIRM.

Footnotes1 Hon. Mark D. Houle, U.S. Bankruptcy Judge for the Central District of California, sitting by designation.

2 This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have (see Fed.

R.App. P. 32.1), it has no precedential value. See 9th Cir. BAP Rule 8013–1.

3 Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532, and to the

Federal Rules of Bankruptcy Procedure, Rules 1001–9037.

4 The United States Trustee (“UST”) sought denial of the Cummings' discharge under § 727(a)(2)(B) and (a)(4)(A) in its complaint

against the Cummings (“complaint”). The bankruptcy court apparently denied the Cummings their discharge under § 727(a)(2)(A)

and (B) and (a)(4)(A). The bankruptcy court did not cite, however, the specific subsections of § 727(a)(2) in its “Minute Entry/Order

for Matter Taken Under Advisement” (“minute entry order”) wherein it set forth its factual findings and legal conclusions.

The Cummings appeal the bankruptcy court's determinations under § 727(a)(2)(A) and (B) and (a)(4)(A). Because we conclude

that the bankruptcy court's determination to deny the Cummings' discharge under § 727(a)(4)(A) was sufficiently supported by the

record, we need not examine its determinations under § 727(a)(2)(A) and (B). See Shanks v. Dressel, 540 F.3d 1082, 1086 (9th

Cir.2008)(“We may affirm on any ground supported by the record”).

5 The Cummings filed their original Schedule B on June 1, 2009 (main case docket no. 11). They amended their Schedule B five times,

filing an amended Schedule B on June 15, 2009 (main case docket no. 29), June 22, 2009 (main case docket no. 39), August 20,

2009 (main case docket no. 122), September 24, 2009 (main case docket no. 160), and September 20, 2010 (main case docket no.

323). In the original Schedule B and in each amended Schedule B, the Cummings disclosed that only Thomas had an interest in All

State, with the value of his interest “unknown.”

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6 Thomas created numerous entities, with each entity typically owning a particular parcel of real property. Thomas would locate a

parcel of real property, usually an apartment complex, and then would seek investors who would put up the equity to purchase the

real property. When the parcel of real property was sold, Thomas received a certain percentage commission between 15% and 25%,

and the investors were repaid their investments plus a return. All State usually managed the real property on behalf of the entity.

7 All State filed its own chapter 7 bankruptcy petition on October 7, 2010 (bankruptcy case no. 10–32401). The chapter 7 trustee

apparently filed an asset report on December 8, 2010 (main case docket no. 16) and a final account report on April 6, 2012 (main

case docket no. 64). He also sought to be discharged as trustee (main case docket no. 64), to which the UST did not object (main case

docket no. 65). To date, All State's chapter 7 bankruptcy case remains open.

8 Thomas filed First Beacon's Articles of Organization on March 2, 2009.

9 Thomas testified at trial that All State terminated most, if not all, of its management agreements. He further testified that a group of

clients canceled their management agreements with All State but subsequently became clients of First Beacon.

10 According to Thomas, these escrow accounts were created and maintained “to pay property taxes, insurance escrows, payroll

deductions, things of that nature.” Tr. of January 5, 2012 hr'g, 19:15–16.

11 At trial, Thomas testified to the following:

Q: So monies going into this account [of First Beacon] wouldn't have been from clients of First Beacon? A: Well, they were

either the clients or they were escrow accounts that were being maintained to pay property taxes, insurance escrows, payroll

deductions, things of that nature.

Q: Were those escrow accounts, would they have been accounts that were [formerly] held in a bank account for All State?

A: When All State was managing, operating, the answer's yes, and then they eventually were transferred to First Beacon—

Q: Okay.

A:—later on. Or they would have been.

Tr. of January 5, 2012 hr'g, 19:12–22.

12 The UST referenced an affidavit by Thomas that was filed in support of his motion for summary judgment (adv. proc. docket no.

24) in the adversary proceeding commenced by the UST. Neither the UST nor the Cummings included a copy of the affidavit in

the record before us. We obtained a copy of the affidavit from the bankruptcy court's electronic adversary proceeding docket. See

O'Rourke v. Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 955, 957–58 (9th Cir.1988); Atwood v. Chase Manhattan Mortg.

Co. (In re Atwood), 293 B.R. 227, 233 n. 9 (9th Cir.BAP2003).

13 Thomas testified at trial that he did not own the vehicles. Instead he leased them from the vehicle dealerships, then “subleased” the

vehicles to First Beacon for use by its employees, as he was unable to get First Beacon and/or All State to lease them directly from

the vehicle dealerships.

14 The UST submitted bank statements for the periods ending March 31, 2009, April 30, 2009, May 29, 2009, June 29, 2009, June 30,

2009, July 31, 2009, and August 31, 2009.

15 The Cummings also contend that the bankruptcy court erred in basing the denial of their discharge under § 727(a)(2)(A) and (B), in

part, on the assumption that they had taken funds out of First Beacon's bank account. They argue that there is no evidence in the record

indicating that the funds belonged to them and that they had withdrawn and transferred the funds out of First Beacon's bank account.

Reviewing the record before us, we agree that there is no evidence showing that they owned any of the funds in First Beacon's

bank account or that they withdrew and transferred funds out of it. The only evidence pertaining to First Beacon's bank account

consists of the bank statements submitted by the UST. The bank statements simply list the dates and amounts of various deposits

and withdrawals, various check numbers and balance amounts. The bank statements do not identify any person who owns, deposits

or withdraws the funds. However, as noted in fn. 4 supra, we need not examine the bankruptcy court's determinations under §

727(a)(2)(A) and (B).

16 The instructions on Schedule B state that if “the debtor is married, state whether husband, wife, both or the marital community

own the property by placing an ‘H,’ ‘W,’ ‘J,’ or ‘C’ in the column labeled ‘Husband, Wife, Joint or Community.’ “ The Cummings

consistently listed “H” in the original and the amendments to Schedule B.

End of Document © 2012 Thomson Reuters. No claim to original U.S. Government Works.




In re Mathon Fund, LLC, Slip Copy (2012)



is currently available.NOT FOR PUBLICATIONUnited States Bankruptcy

Appellate Panel,of the Ninth Circuit.

In re MATHON FUND,LLC, et al., Debtor.

George and Susan Tindall, Appellants,v.

Mathon Fund, LLC, et al., Appellee.

No. AZ–11–1633–JuHlD. |Bankruptcy No. 2:05–bk–27993–

GNB. | Argued and Submitted onSept. 20, 2012. | Filed Oct. 9, 2012.

Appeal from the United States BankruptcyCourt, for the District of Arizona, HonorableGeorge B. Nielsen, Jr., Bankruptcy Judge,Presiding.


Sean Patrick O'Brien, Esq. of Gust RosenfeldPLC argued for appellants George and SusanTindall.

Neal H. Bookspan, Esq. of Jaburg & Wilk, P.C.argued for appellee Mathon Fund, LLC.

Before: JURY, HOULE * , and DUNNBankruptcy Judges.

Opinion

MEMORANDUM **

NIELSEN.

*1 George and Susan Tindall appeal from thebankruptcy court's order denying their Motionto Confirm that the Automatic Stay Does NotApply, or in the Alternative, to Allow for NuncPro Tunc Relief From the Automatic Stay (the“Motion for Relief”). We AFFIRM.

I. FACTS

On July 14, 2003, Aircraft Seal & GasketCorporation (“ASGC”), as maker, entered intoa promissory note (the “Note”) with MathonFund, LLC (“Mathon” or “Debtor”) in theprincipal amount of $500,000. The repaymentterms provided for payment of $625,000in four months. Herbert Menold (“Herbert”)and Wilbur Hanley (“Wilbur”), principals ofASGC, personally guaranteed the loan. Theloan was secured with business assets ofASGC, and Herbert's guarantee was secured byreal property owned by Herbert.

In addition, Herbert's wife, Rene Role Menold(“Rene”), executed a Deed of Trust datedJuly 16, 2003 (the “Mathon Deed of Trust”),pledging her sole and separate property locatedin Corona del Mar, California (the “Property”)as collateral for the Note. On August 12,2003, the Mathon Deed of Trust was filedas Instrument No. 2003–000970041 with theRecorder's Office for the County of Orange,California.

ASGC defaulted on the loan. Herbert andWilbur executed an extension agreement on

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March 26, 2004, increasing the repaymentamount to $771,250.

In February 2005, Rene contracted to sellthe Property to the Tindalls. In March 2005,Mathon received a letter from Chicago TitleInsurance Company advising that the Menoldswere selling the Property to the Tindalls andrequesting that Mathon release the MathonDeed of Trust. Mathon declined the requestbecause the Note had not been paid off.

During this time frame, the ArizonaCorporation Commission commenced a statecourt action against Mathon. On April 5,2005, James Sell (“Sell”) was appointed as thereceiver for Mathon in that action.

The California Action

On July 20, 2005, Rene filed suit againstMathon in the United States District Court,Central District of California (Case No.SACV05–698–AHS), alleging that Mathon'slien against the Property was invalid andrequesting, among other things, an orderrescinding the lien (the “California Action”).

Rene applied for permission to serveMathon pursuant to Civil Rule 4(h)

(1) 1 which authorizes service of processon a limited liability company under

the law of the state in which the federaldistrict is located. Cal. Corp.Code §

17061(c)(1) 2 authorizes service on aforeign limited liability company by

and through service on the California

Secretary of State. The district courtentered an order granting Rene's request.

Mathon failed to appear or respond to Rene'scomplaint. Accordingly, the clerk entered adefault against it on September 13, 2005.Rene subsequently moved the district courtto enter a default judgment against Mathondeclaring its lien against the Property invalid.The district court entered a default judgmentagainst Mathon on November 28, 2005. Renerecorded the default judgment in the countyrecords, which cleared Mathon's purported lienfrom the Property's title record.

The Sale of the Property to the Tindalls

*2 The Tindalls, relying on a clear titlereport, proceeded to purchase the Propertyfor $1,750,000. In December 2005, Renetransferred the Property to the Tindalls.

The Tindalls financed their purchase of theProperty through Provident Savings Bank(“Provident”), which recorded its Deed ofTrust against the property on that same date.Provident paid off the first deed of trust ofWashington Mutual, but did not pay off theMathon Deed of Trust. In December 2005,Provident sold the loan and deed of trustrelating to the Property to Countrywide HomeLoans (“Countrywide”).

The Bankruptcy Filing

Unbeknownst to Rene, before the district courtentered the default judgment in the CaliforniaAction, Mathon filed a voluntary petition under

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chapter 11 on November 13, 2005. Sell, whowas acting as receiver, was appointed asconservator for Mathon.

The Adversary Proceeding

On August 25, 2006, Countrywide filed anadversary complaint against Mathon seekinga determination as to its legal interestin the Property vis-a-vis Mathon. Mathonanswered the complaint on September 26,2006. On that same date, Mathon filedits third-party complaint against Ticor TitleInsurance Company of California, Ticor Title,and United Title Company (collectively, the“Title Companies”), Herbert and Rene, andthe Tindalls, as well as a counterclaimagainst Countrywide. In its counterclaimand third-party complaint, Mathon sought adetermination as to whether the Mathon Deedof Trust was valid and remained a lien againstthe Property and whether the Mathon Deedof Trust, which had been recorded prior intime to Countrywide's lien, had priority overCountrywide's lien.

In Count Five, asserted only against Rene,Mathon alleged that entry of the defaultjudgment in the California Action violatedthe automatic stay. In connection with CountFive, Mathon requested a declaration that thejudgment was void and also sought damages forthe stay violation.

Counsel representing both the Title Companiesand the Tindalls filed an answer to the third-party complaint on October 20, 2006. Herbertand Rene answered on November 6, 2006.

On May 30, 2008, Mathon filed a motionfor partial summary judgment on Count Fiveof its third-party complaint. On August 14,2008, the Menolds responded by filing astipulation wherein Rene agreed that thejudgment obtained in the California Actionwas void. As part of the stipulation, Renewas dismissed from the adversary proceedingwithout prejudice.

On August 15, 2008, the bankruptcycourt entered an order stating that thedefault judgment entered against Mathon onNovember 28, 2005 by the district court wasvoid.

The Tindalls' Motion for Relief

Over three years later, on August 25, 2011,the Tindalls filed the Motion for Relief.The Tindalls argued that the prepetitionentry of default against Mathon in theCalifornia Action rendered Mathon's claimedlien invalid under Ninth Circuit law. TheTindalls reasoned that because a defaultingparty has no right to dispute the issue ofliability after entry of default, it followedthat the mere entry of default conclusivelyand irrevocably established that Mathon's lienwas invalid. Alternatively, the Tindalls soughtnunc pro tunc relief from stay for entry ofthe default judgment based on essentially thesame reasoning. In their reply, the Tindallsmaintained that nunc pro tunc relief wasappropriate under the factors set forth inFjeldsted v. Lien (In re Fjeldsted), 293 B.R. 12(9th Cir.BAP2003).





*3 On October 25, 2011, the bankruptcycourt held a hearing on the Motion for Relief.Debtor argued that it was inequitable togrant the relief requested because the motionwas untimely. Debtor maintained that theTindalls had been parties to the adversaryproceeding since 2006 but waited more thanthree years after the stipulation was enteredinto and more than five years into the litigationto bring their motion. Debtor argued thatit would be “very prejudicial” to it andto the remaining creditors when numerousout-of-state depositions had been taken, thedeadline for filing summary judgment motionshad passed, and the parties had engaged inextensive briefing on subrogation.

The bankruptcy court determined that it wasnot appropriate to grant nunc pro tunc reliefunder the circumstances of the case. The courtfound that the Tindalls, who were not partiesto the California Action, were in essenceseeking to set aside the stipulation enteredinto between Rene and Sells stating that thedefault judgment was void. The court observedthat the Tindalls waited more than three yearsafter the stipulation was entered into and morethan five years after the adversary proceedingwas filed to seek retroactive relief from thestay. In addition, the court considered that theunwinding of the stipulation at that late datewould have a negative effect on the creditorsof the estate. In the end, the bankruptcy courtstated that “the relief requested here really is anend run around the stipulation and that's whyI'm going to deny it.” Hr'g Tr. at 16:23–24, Oct.25, 2011.

The bankruptcy court entered the order denyingthe Tindalls' Motion for Relief on October 26,2011. The Tindalls timely appealed.

II. JURISDICTION

The bankruptcy court had jurisdiction over thisproceeding under 28 U.S.C. §§ 1334 and 157(b)(2)(G). We have jurisdiction under 28 U .S.C.§ 158.

III. ISSUE

Whether the bankruptcy court abused itsdiscretion in denying the Tindalls' motion forthe retroactive annulment of the stay.

IV. STANDARD OF REVIEW

A bankruptcy court's decision to denyretroactive relief from the automatic stay isreviewed for an abuse of discretion. Nat'lEnvtl. Waste Corp. v. City of Riverside(In re Nat'l Envtl. Waste Corp.), 129 F.3d1052 (9th Cir.1997). A bankruptcy courtabuses its discretion if it applied the wronglegal standard or its findings were illogical,implausible or without support in the record.TrafficSchool.com, Inc. v. Edriver Inc., 653F.3d 820, 832 (9th Cir.2011).

V. DISCUSSION

When Mathon filed its bankruptcy petition theautomatic stay under § 362(a) went into effect.

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“The automatic stay is self-executing” and“sweeps broadly, enjoining the commencementor continuation of any judicial ... proceedingsagainst the debtor....” Gruntz v. Cnty. of L.A.(In re Gruntz), 202 F.3d 1074, 1081–82 (9thCir.2000) (en banc). Here, the district court'sentry of the default judgment after Mathon hadfiled its bankruptcy case was a continuation ofa judicial proceeding in violation of the stay.§ 362(a)(1). Actions “taken in violation of theautomatic stay are void.” Id. at 1082 (citingSchwartz v. United States (In re Schwartz), 954F.2d 569, 571 (9th Cir.1992)).

*4 However, under § 362(d)(1), thebankruptcy court has wide discretion to declarea default judgment taken in violation of the stayvalid if “cause” exists for retroactive annulmentof the stay. In re Schwartz, 954 F.2d at 572. Inanalyzing whether “cause” exists to annul thestay under § 362(d)(1), the bankruptcy court isrequired to balance the equities of the creditor'sposition in comparison with that of the debtor.In re Nat'l Envtl. Waste Corp., 129 F.3d at1055. Under this approach, the bankruptcycourt considers (1) whether the creditor wasaware of the bankruptcy petition and automaticstay; and (2) whether the debtor engaged inunreasonable or inequitable conduct. Id. at1055–56.

Additional factors for consideration include thenumber of bankruptcy filings by the debtor; theextent of any prejudice, including to a bonafide purchaser; the debtor's overall good faith;the debtor's compliance with the Code; therelative ease of restoring parties to the statusquo ante; the costs of annulment to debtorsand creditors; how quickly the creditor movedfor annulment; whether annulment will cause

irreparable injury to the debtor; and whetherstay relief will promote judicial economy orother efficiencies. In re Fjeldsted, 293 B.R.at 25. “In any given case, one factor may sooutweigh the others as to be dispositive.” Id.;see also Williams v. Levi

(In re Williams), 323 B.R. 691 (9thCir.BAP2005). Balancing the equities of thecase requires the bankruptcy court to reachan equitable conclusion rather than a factualor legal one. See Graves v. Myrvang (In reMyrvang), 232 F.3d 1116, 1121 (9th Cir.2000)(citing Bank of Honolulu v. Anderson (In reAnderson), 833 F.2d 834, 836 (9th Cir.1987)(per curiam) (appellate courts use the abuseof discretion standard to review bankruptcycourt's equitable actions)).

On appeal, the Tindalls argue that thebankruptcy court incorrectly determined that:(1) their Motion for Relief was an attempt tooverturn the stipulation; (2) the stipulation wasbinding on the Tindalls; and (3) as a result, theTindalls were foreclosed from requesting nuncpro tunc relief. They also maintain that the courterred by refusing to recognize the effect of theprepetition entry of default which establishedthat Mathon's lien was invalid and provided anadditional ground for granting nunc pro tuncrelief. We disagree with these contentions.

We first note that the Tindalls concede what thestipulation says, i.e., that the default judgmentagainst Mathon was obtained in violation of thestay and is void. Hr'g Tr. at 3:4–6, Oct. 25,2011. Therefore, it is not particularly relevantwhether the stipulation was binding on theTindalls for purposes of this appeal.






















By the time the Tindalls' annulment requestwas made, the balance of equities had tippedheavily against the Tindalls because of theirdelay in seeking relief. The record shows thatthe Tindalls were parties to the third-partycomplaint and counterclaim filed by Mathonsince 2006. Yet, the Tindalls waited until fiveyears into the litigation and three years afterthe court-approved stipulation to move forretroactive annulment of the stay. Why theTindalls failed to take any action prior to when

they did remains unexplained . 3

*5 The record shows that the bankruptcy courtproperly balanced the Tindalls' delay againstthe interests of Debtor and the other parties tothe litigation. Since the beginning of the case,the parties expended fees and costs by takingout-of-state depositions and by engaging inextensive briefing on subrogation issues beforethe bankruptcy court. These actions were costlyto the bankruptcy estate. The progression ofthe litigation for three years after the entry ofthe stipulation implicitly demonstrates that theparties relied on its declaration that the defaultjudgment was void. Therefore, according to thebankruptcy court, under these circumstances,it was simply too late to allow the Tindalls tooverride the stipulation. We cannot say that thecourt abused its discretion in this analysis.

The bankruptcy court also balanced the impactof the Tindalls' relief request on the othercreditors of the estate. The Tindalls argued thatthey were bona-fide purchasers of the Propertyand should not be “punished” to pay theother defrauded creditors of the Ponzi schemeimplemented by Debtor. The court observedthat in Ponzi scheme cases, the bankruptcy lawsought to treat all the victims approximately the

same. The court noted that this policy would beupset if it granted the Tindalls retroactive relief.Again, we cannot say that the court abused itsdiscretion in this analysis.

Finally, the Tindalls sought retroactiveannulment of the stay on the ground that theclerk's prepetition entry of default establishedDebtor's liability, and thus retroactive reliefwould allow the Tindalls to go back to thedistrict court to seek reentry of the defaultjudgment, which would be nothing more than

a mere formality and ministerial act. 4 Inconsidering the Tindalls' argument, the recordshows that the bankruptcy court balanced theprejudice to Debtor of allowing strangers to theCalifornia Action to go back into the districtcourt to seek reentry of the default judgment.The court was also concerned with whether theestate would have the ability to go before thedistrict court and ask for entry of the defaultto be withdrawn. Accordingly, the bankruptcycourt did not find retroactive annulment ofthe stay was appropriate in light of the factthat the Tindalls were not involved in theCalifornia Action and Rene, the violator of thestay, agreed that the default judgment was voidthrough a stipulation signed three years prior tothe Tindalls' Motion for Relief.

In sum, a bankruptcy court has “wide latitude”in granting or denying a request for retroactiveannulment of the stay. In re Schwartz, 954F.2d at 572; In re Fjeldsted, 293 B.R. at21. The record shows that the bankruptcycourt properly balanced the equities in refusingto annul the stay retroactively. Indeed, thecourt considered the Tindalls' delay in bringingtheir Motion for Relief to be an almostdispositive factor. In reality, a consequence







of overturning the bankruptcy court's decisionwould only perpetuate the delay in resolvingthis proceeding.

VI. CONCLUSION

*6 Accordingly, we conclude that thebankruptcy court did not err in denying theTindalls' Motion for Relief and AFFIRM.

Footnotes* Hon. Mark D. Houle, Bankruptcy Judge for the Central District of California, sitting by designation.

** This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have (see Fed.


1 Unless otherwise indicated, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532, “Rule” references

are to the Federal Rules of Bankruptcy Procedure, and “Civil Rule” references are to the Federal Rules of Civil Procedure.

2 This section provides in relevant part:

If an agent for service of process has resigned and has not been replaced or if the designated agent cannot with reasonable

diligence be found at the address designated for personal delivery of the process, and it is shown by affidavit to the satisfaction of

the court that process against a limited liability company or foreign limited liability company cannot be served with reasonable

diligence upon the designated agent by hand in the manner provided in Section 415.10, subdivision (a) of Section 415.20, or

subdivision (a) of Section 415.30 of the Code of Civil Procedure, the court may make an order that the service shall be made

upon a domestic limited liability company or upon a registered foreign limited liability company by delivering by hand to the

Secretary of State, or to any person employed in the Secretary of State's office in the capacity of assistant or deputy, one copy

of the process for each defendant to be served, together with a copy of the order authorizing the service. Service in this manner

shall be deemed complete on the 10th day after delivery of the process to the Secretary of State.

3 At the hearing on this matter, the Tindalls' attorney made an offer of proof that the delay was based on a number of pending motions

that would obviate the need for their motion. As none of the relevant documents are in the record on appeal, we are unable to determine

whether the Tindalls' delay was warranted, even assuming it was raised in the bankruptcy court and properly before us.

4 Although entry of default may establish liability, contrary to the Tindalls' assertion, the entry of a default judgment by the court is

not simply a ministerial act. Under Civil Rule 55(b), a federal court may enter a default judgment against a party who has failed to

plead or otherwise defend. Under the rule, “[t]he court may conduct hearings or make referrals ... when, to effectuate judgment, it

needs to: (A) conduct an accounting; (B) determine the amount of damages; (C) establish the truth of any allegation by evidence;

or investigate any other matter.” Civil Rule 55(b)(2). Thus, entry of a default judgment is discretionary, Aldabe v. Aldabe, 616 F.2d

1089, 1092 (9th Cir.1980), and “may be refused where the court determines no justifiable claim has been alleged or that a default

judgment is inappropriate for other reasons.” Doe v. Qi, 349 F.Supp.2d 1258, 1271 (N.D.Cal.2004).



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In re Diepholz, Slip Copy (2012)



is currently available.NOT FOR PUBLICATION

United States Bankruptcy Appellate Panelof the Ninth Circuit.

In re Bradley Dean DIEPHOLZ andKaren Louise Diepholz, Debtors.Bradley Dean Diepholz; KarenLouise Diepholz, Appellants,

v.Walter Zahlmann; Twin

Enterprises Consulting, Appellees.

No. AZ–11–1581–DJuHl. |Bankruptcy No. 10–22054–CGC.

| Adversary No. 11–00271–CGC.| Argued and Submitted on Sept.20, 2012. | Filed Oct. 4, 2012.

Appeal from the United States BankruptcyCourt for the District of Arizona, HonorableCharles G. Case II, Bankruptcy Judge,Presiding.


Donald J. Lawrence, Jr., Esq. for theAppellants, Bradley and Karen Diepholz; BrianM. Blum, Esq. of Rosenstein Law Group PLLCfor the Appellees, Walter Zahlmann and TwinEnterprises Consulting.

Before DUNN, JURY, and

HOULE, 1 Bankruptcy Judges.

Opinion

MEMORANDUM 2

*1 The debtor appellants Bradley and KarenDiepholz (the “Debtors”) filed a motion (the“Motion”) to dismiss the plaintiff creditors'Walter Zahlmann (“Zahlmann”) and TwinEnterprises, LLC's (collectively, “Creditors”)adversary proceeding seeking to determine thenondischargeability of a default judgment debt

under § 523(a) of the Bankruptcy Code. 3 Thebankruptcy court denied the motion to dismiss.The Debtors appeal the denial of their dismissalmotion, and the motions panel granted leaveto hear the interlocutory appeal. We VACATEand REMAND for further findings consistentwith this memorandum decision.

I. FACTS

The too few facts before the Panel which arerelevant in this appeal tempt us to compare thiscase to the fates of certain star-crossed partiesfor whom the question ultimately to be decidedwas—“What is in a name?”

The Debtors filed a chapter 7 bankruptcypetition on July 14, 2010. The Debtors'bankruptcy counsel at all relevant times wasDonald J. Lawrence, Jr. (“Lawrence”). Thebankruptcy filing apparently was precipitatedby the Debtors' desire to preempt a wagegarnishment order in the first of two Arizonastate court collection cases pending againstthem. In the first case, Lawrence filed anotice of bankruptcy for the Debtors on July

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30, 2010. 4 The second of the two statecases is the Creditors' action filed in 2008seeking to collect from the Debtors on adefault judgment which Creditors obtained inApril 2006 against Logo Lines Corporationfor allegedly knowingly presenting a check

with no intention of payment. 5 The adversaryproceeding underlying this appeal seeks anexception to discharge for fraud based on the2006 default judgment against Logo LinesCorporation.

The misadventure truly begins for our purposeswhen the Debtors' name was misspelled as“Diepholtz” on the Debtors' chapter 7 petition.On July 15, 2010, the bankruptcy courtsent a notice of the meeting of creditorsto all scheduled creditors, not including theCreditors, which showed October 18, 2010, asthe bar date (“Bar Date”) for filing objectionsto discharge.

Neither the Creditors nor their counsel in thestate litigation were included on the originalmailing matrix. On August 12, 2010, theDebtors filed an amended petition to correctthe misspelling of the Debtors' name, anamended Schedule F, as well as an amended

mailing matrix, which included Creditors 6

and their attorney, Mayes Telles, PLLC. 7

Despite the amendment and Lawrence's allegednotification of the corrected name to the Clerkof Court, the caption of the case was notchanged in the court's electronic records toreflect the correct spelling of the Debtors' name

until June 15, 2011. 8 Lawrence alleges thaton August 12, 2010, the same day that theamended documents were filed, Lawrence'sfirm sent notice of the bankruptcy bearing the

correct spelling of the Debtors' name by mail toCreditors and Mayes Telles, PLLC. For reasonsunexplained in any declaration in the record, acertificate of notice for these mailings was notfiled by Debtors' counsel until January 6, 2011.

*2 On August 20, 2010, Zahlmann sent anemail directly to Mr. Ehringer (“Ehringer”),the Debtors' state court counsel in thecollection case, offering to settle and informingEhringer that Zahlmann's address had changed.Ehringer notified Mr. Blake Mayes (“Mayes”),Creditors' state court attorney, that Zahlmannhad contacted Ehringer directly and thatEhringer had not read the email because thecommunication was improper since Zahlmannwas represented. Further, Ehringer asked ifEhringer should delete the email, to whichMayes responded that Ehringer should deletethe email. Ehringer alleges that because henever read and immediately deleted the email,Ehringer never saw Zahlmann's notificationof a new address. The only fact explicitlydisputed by the parties at the hearing beforethe bankruptcy court appears to be whetherCreditors actually received the August 12,2010 corrected notice with the Debtors' namecorrectly spelled.

On August 10, 2010, Ehringer emailed Mayessaying that, “I have been told that Mr. andMrs. Diepholz have filed bankruptcy, but Ihave not seen any paperwork to confirmthat filing.” Mayes alleges that beginning onAugust 22, 2010, and on subsequent occasions,Mayes “conducted research on PACER,” tolocate the Debtors' filing, but could not findany information. On August 25, 2010, Mayesasked Ehringer by email for the name of the



Debtors' bankruptcy counsel, but Ehringer didnot immediately respond.

Neither Ehringer nor Mayes communicatedagain as to the name of the Debtors'bankruptcy counsel until October 11, 2010,when Mayes requested further informationabout the bankruptcy because Mayes allegedlystill could not find any information about theDebtors' bankruptcy on PACER. On October11, 2010, the same day, and seven days beforethe Bar Date, Ehringer provided Lawrence'sname to Mayes in response to Mayes' emailrequest. Ehringer alleges that Ehringer didnot feel it was necessary to respond to theearlier August 25, 2010 request for bankruptcycounsel's name because Ehringer believed thatMayes and Lawrence were in direct contactafter Ehringer was advised by Lawrenceon September 4, 2010, that notice of thebankruptcy was sent to Mayes.

Mayes emailed Ehringer on October 25, 2010,eight days after the Bar Date, asking for“[a]ny word on bankruptcy,” to which Ehringerresponded that the bankruptcy assuredly hadbeen filed and provided not only Lawrence'sname, but also Lawrence's email address,“teamlaw—[email protected].” However,in the same October 25, 2010, email, Ehringersympathized with Mayes' hard luck in hisname search for the Debtors' bankruptcy filingadmitting that, “I just don't know how to runa PACER search, since I got the same resultsthat you did.” Finally, on October 27, 2010,Lawrence emailed Mayes advising Mayes ofthe bankruptcy case number.

On February 7, 2011, Creditors filed anadversary complaint seeking an exception to

discharge for their claim. On March 11,2011, Debtors filed a motion to dismiss(“Motion to Dismiss”) the complaint forfailure to file the complaint timely under Rule4007(c). On June 9, 2011, the bankruptcycourt heard argument from counsel forboth parties on the Motion to Dismiss andtook the matter under advisement. On July18, 2011, the bankruptcy court issued itsUnder Advisement Decision Denying Motionto Dismiss Complaint (“Under AdvisementDecision”), finding that Creditors lackedadequate notice of the bankruptcy case andtimely filed the complaint under Rule 4007(b).On August 17, 2011, the bankruptcy courtissued its Order Denying Defendants' Motionto Dismiss.

*3 On August 1, 2011, Debtors filed a Motionfor Reconsideration of the bankruptcy court'sdecision on the Motion to Dismiss, which thebankruptcy court denied by order entered onOctober 6, 2011.

On October 18, 2011, Debtors filed their Noticeof Appeal of the denial of their Motion toDismiss. On December 30, 2011, the Clerkof the Bankruptcy Appellate Panel issued anorder requiring appellants either to file awritten response explaining why the Panel hasjurisdiction given the interlocutory nature ofthe denial of a motion to dismiss, or file amotion for leave to appeal. On January 12,2012, Debtors filed a Motion for Leave toAppeal, which was granted by the motionspanel on February 9, 2011.

II. JURISDICTION



The bankruptcy court had jurisdiction under 28U.S.C. §§ 1334 and 157(b)(2)(I). The Panel hasjurisdiction under 28 U.S.C. § 158.

III. ISSUES

Did the bankruptcy court fail to make sufficientfindings of fact and conclusions of law on thequestion of whether the mailbox rule applies toimpute receipt of notice by the Creditors.

Did the bankruptcy court err when it held thatfailure to comply with Rule 1005 implicates §523(a)(3)(B) and Rule 4007(b), where there isa misspelling of debtor's name in the court'srecords.

Did the court err when it held that a properlyscheduled creditor without proper notice mayfile a complaint pursuant to section § 523(a)(3)(B) at any time.

IV. STANDARDS OF REVIEW

We review the bankruptcy court's denial ofthe Motion to Dismiss, a legal question, denovo, but we must accept the bankruptcycourt's factual findings unless they are clearlyerroneous. United States v. Ziskin, 360 F.3d934, 942 (9th Cir.2003). Findings of factregarding receipt of notice are reviewed forclear error. Rule 8013; Moody v. Bucknum (Inre Bucknum), 951 F.2d 204, 206 (9th Cir.1991).

We must affirm the bankruptcy court'sfactual findings under the clear error standardunless those findings are “(1) ‘illogical,’ (2)‘implausible,’ or (3) without ‘support in

inferences that may be drawn from the factsin the record.’ “ United States v. Hinkson, 585F.3d 1247, 1262 (9th Cir.2009) (en banc).

A mixed question exists when the facts areestablished, the rule of law is undisputed, andthe issue is whether facts satisfy the legalrule. Murray v. Bammer (In re Bammer), 131F.3d 788, 792 (9th Cir.1997). Mixed questionsrequire consideration of legal concepts andthe exercise of judgment about the values thatanimate legal principles. Id. We review mixedquestions of law and fact de novo. Wechsler v.Macke Int'l Trade, Inc. (In re Macke Int'l Trade,Inc.), 370 B.R. 236, 245 (9th Cir.BAP2007).

De novo means review is independent, with nodeference given to the trial court's conclusion.See First Ave. W. Bldg., LLC v. James (In reOnecast Media, Inc.), 439 F.3d 558, 561 (9thCir.2006).

A motion to dismiss an adversary proceedingis subject to Civil Rule 52(a) by incorporationunder Rules 7052 and 9014, which require thebankruptcy court to find the facts specificallyand state its conclusions of law separately. Inthe absence of sufficient fact findings, the Panelmay vacate a decision and remand the case tothe bankruptcy court to make further findings.First Yorkshire Holdings, Inc. v. Pacifica L22, LLC (In re First Yorkshire Holdings, Inc.),470 B.R. 864, 871 (9th Cir.BAP2012)(citingUnited States. v. Ameline, 409 F.3d 1073 (9thCir.2005)).

V. DISCUSSION






























A. The bankruptcy court failed to makespecific findings of fact and conclusions oflaw on the question of whether the mailboxrule applies to impute receipt of notice byCreditors.*4 In this case, the “rule of law” governingthe mailbox rule for notice is articulated bythe Panel's decision in Cuna Mut. Ins. Groupv. Williams (In re Williams), 185 B.R. 598(9th Cir.BAP1995). The Williams Panel madeclear that, “Proof of mailing creates a rebuttablepresumption of its receipt.” Id. at 599 (citingIn re Bucknum, 951 F.2d at 206–07; Osbornv. Ricketts (In re Ricketts), 80 B.R. 495, 497(9th Cir.BAP1987)). Further, “the law in thiscircuit is that denial of receipt does not rebutthe presumption.” In re Bucknum, 951 F.2d at207; In re Ricketts, 80 B.R. at 497. The Rickettscourt reasoned that, “If a party were permittedto defeat the presumption of receipt of noticeresulting from the certificate of mailing by asimple affidavit to the contrary, the scheme ofdeadlines and bar dates under the BankruptcyCode would come unraveled.” Id. at 497.

Although an affidavit alleging nonreceipt aloneis not sufficient to defeat the presumption, suchan affidavit should be considered along withother submitted evidence. Williams, 185 B.R.at 600. In order to overcome the presumption,specific objective evidence showing nonreceiptis required. Id. For example, the Williams Panelsuggested several kinds of evidence that coulddefeat the presumption including “testimonyof a clerk's office employee that notice wasnot sent” (citing Ricketts, 80 B.R. at 489–99),or proof that the mail was returned unclaimed(citing Herndon v. De la Cruz (In re De laCruz), 176 B.R. 19, 22 (9th Cir.BAP1994)).

The Williams Panel held that evidence of aparty's business routine regarding receipt ofmail is merely another form of a statement ofnonreceipt which may not, by itself, defeat thepresumption. Id.

Because we review a fact determination asto whether notice was adequate for clearerror, we must determine whether the evidenceconsidered by the bankruptcy court supports afinding that Creditors did not have adequatenotice of the Debtors' bankruptcy. Specifically,the factual question before the bankruptcycourt was whether Creditors put forwardsufficient evidence to overcome the receiptpresumption of the alleged August 12, 2010,mailing of notice bearing the correct spellingof the Debtors' name (the “Corrected Notice”).Since the bankruptcy court did not make anyreference to the mailbox rule or the casesgoverning the presumption of notice receiptin its Under Advisement Decision, nor in its

final order denying the Motion to Dismiss, 9

it is unclear from the record whether, or towhat degree, the bankruptcy court consideredthe Corrected Notice or the nonreceipt of theCorrected Notice alleged by Creditors.

However, at oral argument on the Motion toDismiss, the bankruptcy court acknowledgedthat “we have a mailbox-rule problem,” notingthat the reason for the mailbox rule is to avoid“an unfortunate circumstance when you havea he said she said.” Tr. of June 9, 2011 H'ring144:4–11.

*5 Lawrence argued to the bankruptcy courtthat the certificate of service confirming theCorrected Notice should be sufficient evidenceof receipt because both the Debtors' name


















and the addresses of Creditors, as well astheir attorney, were correct at the time ofmailing despite any possible move by Creditors

“around the same time” of the notice. 10

Tr. of June 9, 2011 H'ring 137:3–4, 8–9. LaShawn Jenkins, bankruptcy counsel forCreditors, argued that despite Mayes Telleshaving standard mail handling procedures,Mayes Telles never received the CorrectedNotice. Tr. of June 9, 2011 H'ring 144:18–19.

In declining to make oral findings on therecord at the hearing, the bankruptcy courtcited the fact intensive nature of the case andthe court's intent to take the matter undersubmission for a later ruling. Tr. of June 9,2011 H'ring 148:23–25—149:1–2. No findingswith respect to application of the mailbox rulewere made subsequently in the bankruptcycourt's Under Advisement Decision. Becausedefeating the presumption of receipt requiresspecific objective evidence of nonreceipt,additional findings are necessary to clarify therecord for review.

It is clear from the Under Advisement Decisionthat the bankruptcy court found that noticewas inadequate because of the misspelling ofDebtors' name in the original petition and court

records. 11 However, it is unclear whether thebankruptcy court intended to find that Creditorsor their attorney never received adequatenotice via the alleged Corrected Notice withthe correct spelling of the Debtors' name.The Panel could infer a finding from thebankruptcy court's silence that the presumptionwas rebutted as to the Corrected Notice beingreceived by either the Creditors or theirattorneys. However, the lack of any referenceat all to the mailbox rule and related findings

in the Under Advisement Decision makes thatinferential leap inappropriate.

We note that a bankruptcy court's failure tomake factual findings as required by Civil Rule52(a) does not require vacating and remandunless a full understanding of the issues underreview is not possible without the aid of suchfindings. See Simeonoff v. Hiner, 249 F.3d883, 891 (9th Cir.2001). Here, it is not clearwithout further findings from the bankruptcycourt whether the Corrected Notice gaveadequate notice to the Creditors of the Debtors'bankruptcy filing. Had the bankruptcy courtmade a determination that either Creditorsor their attorney had received actual orpresumptive notice with the correct spelling ofthe Debtors' name, then the bankruptcy court'sholding based on Rule 1005 would be mootwith respect to whether the misspelling in thecourt's records failed to provide adequate noticein and of itself. Accordingly, we VACATE thedenial of the Motion to Dismiss and REMANDto the bankruptcy court for further proceedingsand findings of fact.

B. Whether failure to comply with Rule 1005implicates § 523(a)(3)(B) and Rule 4007(b)where there is misspelling of debtor's namein court records.

1. Bankruptcy Court's Holdings*6 The bankruptcy court found that theDebtors' name was misspelled on the originalpetition and court records, and thereforeCreditors' attorney could not find the Debtors'bankruptcy filing on PACER using onlythe Debtors' name as a search criterion.The bankruptcy court held that notice wasinadequate to allow for Creditors to file a timely






objection to discharge, triggering § 523(a)(3)(B) because the PACER searches by namefailed, and Creditors' attorney did not receivethe case number until October 27, 2010.

The bankruptcy court further held, despiteCreditors' filing of the adversary complaint onFebruary 7, 2011, 103 days after the October27, 2010, actual notice date, that becauseRule 4007(b) governing complaints under §523(a)(3)(B) allows for filing at any time, theCreditors' complaint should not be dismissed asuntimely. The bankruptcy court reasoned thatthe burden was on the Debtors to provide noticebecause the Debtors were in the best position tospell their name correctly on the petition.

Finally, despite the correction of the Debtor'sname in the amended petition, because theDebtors' own negligence caused the failedPACER searches, the bankruptcy court heldthat the harm resulting from the lack of noticeshould not be held against the Creditors.

2. Ellet v. StanislausTo support its holding, the bankruptcy courtrelied primarily on the reasoning in Elletv. Stanislaus, 506 F.3d 774 (9th Cir.2007),a case of first impression in the NinthCircuit. In Ellet, the California Franchise TaxBoard (“FTB”) was scheduled as a creditorand actually received notice by mail of thedebtor's bankruptcy filing. However, althoughthe debtor's name was spelled correctly, thelast four digits of the debtor's social securitynumber (“SSN”) were misstated on the notice.The Ellet court held that the notice wasinadequate because the debtor's identity couldnot be discovered without undue burden to theFTB, thereby preventing the taxing authority

from timely filing a claim for the debtor'sdelinquent taxes. Id. at 778, 781.

Ellet turned on evidence showing that whenthe FTB searched for the debtor's incorrectSSN in the FTB's own databases, an incorrectrecord of another person showing no taxliability was found instead of the debtor's taxrecords. Id. at 776. Therefore, although the FTBarguably could have used the debtor's nameas a cross-reference to find the debtor's taxrecords by using a labor intensive alternativeprocess, the FTB was unable to identifythe debtor correctly until after the bar date.Id. Rule 1005 is implicated under Ellet'sreasoning because that rule imposes a dutyon the debtor to provide correct identifyinginformation, including name and SSN, tocreditors receiving notice so that the creditorscan discover the debtor's true identity without

independent investigation. 12 Id. at 781. Afailure to list correct identifying informationon a petition fails “to notify creditor aboutthe relevance of the bankruptcy proceeding tosome of its claims.” Id. (citing In re Anderson,159 B.R. 830, 837–38 (Bankr.N.D.Ill.1993)).Specifically, the Ellet court reasoned thatplacing the burden on the debtor to providecorrect identifying information under Rule1005 was reasonable where “[r]equiring acreditor to ferret out a debtor's correct identitywhen incorrect identifying information isprovided would be overly burdensome andinappropriate.” Id. at 781.

*7 In reasoning in Ellet that the burden shouldbe on the debtor to give correct identifyinginformation to the FTB, the court distinguishedother cases supporting the debtor's positionin which notice was found sufficient even











though errors existed in the notice “becausein each [case] the creditor was aware of thedebtor's identity.” Id. at 779. In fact, the NinthCircuit distinguished a case where, though thedebtor's name was misspelled in the captionof the petition, the creditor learned of thebankruptcy independently of the petition. Id.at 779–80 (citing Lagniappe Inn of Nashville,Ltd. v. Washington Nat'l Ins. Co. (In reLagniappe Inn of Nashville, Ltd.), 50 B.R.47, 50 (Bankr.M.D.Tenn.1985)). Similarly, acase finding adequate notice was distinguishedon the ground that the identity of the debtorwas not truly at issue in that case because,even though the creditor was not listed at allin court documents and received no noticeby mail, the creditor was informed of thebankruptcy by the debtor's attorney. Ellet, 506F.3d at 780 (citing Zidell, Inc. v. Forsch (Inre Coastal Alaska Lines, Inc.), 920 F.2d 1428,1431 (9th Cir.1990)). Inquiry notice alone wassufficient in Coastal Alaska Lines to defeat thecreditor's due process based notice challengewhere the creditor received some informationabout the existence of bankruptcy proceedingsof a known debtor. Coastal Alaska Lines, 920

F.2d at 1431. 13

Thus, the Ellet court distinguished betweencases where the creditor could discover whothe debtor was, and what claims the creditorhad against that debtor, without burdensomesearching of its records, from cases like the onebefore the Ellet court where the creditor neededto perform a burdensome search through thecreditor's own records merely to figure out ifthe creditor had any claims against the debtordescribed in the notice.

There are three steps to the notice analysis: first,whether a party can identify the debtor basedon receipt of notice; second, whether there hasbeen actual notice based on the informationexchanged and conduct of the parties; and third,after actual notice is received, whether therewas enough time to file a complaint or a motionfor extension. Ellet addresses only the first partof the analysis where a notice actually had been

provided. 14

Given the Ellet court's emphasis on knowledgeof the debtor's identity, it would be difficult toargue that Ellet stands for the proposition thata creditor does not have adequate notice of abankruptcy filing when the creditor is aware ofthe debtor's identity and that a bankruptcy casehas been filed despite having little information

about the bankruptcy case, 15 including notknowing the bar date.

Here, the undisputed facts in the record showthat the only notice which was ever possiblysent to Creditors or their attorneys in advanceof the Bar Date was the Corrected Noticeallegedly sent by Lawrence's office on August12, 2010. This conclusion is supported bythe undisputed fact that the Creditors andtheir attorney did not receive the only othernotice ever sent, which was the court's initialnotice of the bankruptcy case, sent before theCorrected Notice. On the record before us,subject to findings as to application of themailbox rule, as discussed supra, we cannotconclude that the bankruptcy court clearly erredin the factual findings supporting its conclusionthat Creditors were not provided with sufficientnotice before the Bar Date to make them awarethat the Debtors in fact had filed a bankruptcycase.














C. Whether a scheduled creditor withoutproper notice may file a complaint pursuantto § 523(a)(3)(B) at any time.*8 Even an unscheduled or unlisted creditorwho has either received formal notice or gainsactual knowledge of the bankruptcy case has an“obligation to take timely action to protect [its]claim.” Lompa v. Price (In re Price), 871 F.2d97, 99 (9th Cir.1989) (reasoning that “[t]hestatutory language [of § 523(a)(3)(B) ] clearlycontemplates that mere knowledge of a pendingbankruptcy proceeding is sufficient to bar theclaim of a creditor who took no action, whetheror not that creditor received official notice fromthe court of various pertinent dates.”)(internalcitations omitted). In Price, a creditor whosecounsel received actual notice of the debtor'sbankruptcy filing 58 days before the bar dateand failed to file an exception to dischargecomplaint or a motion for extension beforethe bar date deadline passed was held to havefailed to object timely to discharge under Rule

4007(c). 16 Id . at 99.

In Dewalt, the 9th Circuit laid out theparameters for the timely filing of a complaintafter actual notice, stating that there is a 30–day presumptive minimum time for a creditorto file a complaint or request an extension bymotion unless, in an extreme case, the creditorintentionally refrained from filing a complaint.Dewalt, 961 F.2d at 851. The creditor in Dewaltwas not included in the schedules as a creditorbut was listed with an inaccurate address inthe debtor's Statement of Intent. Id. at 849.Notice of the debtor's bankruptcy filing wasnot given to the creditor until “the secretaryfor the debtor's counsel telephoned the office

of the creditor's counsel and left a crypticmessage with the secretary that the debtor hadpreviously filed for bankruptcy,” only sevendays before the bar date. Id. The Ninth Circuitreversed this Panel's determination that thecreditor's complaint to except its debt fromthe debtor's discharge was untimely, havingbeen filed approximately 140 days after the bardate, holding that requiring a creditor in suchcircumstances to file a motion for extensionbefore the bar date ran would “unfairlypunish[ ] creditors, holding them to the higheststandards of diligence in a situation caused bynegligence of the debtor, and rewarding thedebtor, in effect, for negligent filing.” Id. at850.

In dicta, the Ninth Circuit stated in Dewaltthat, “In no event ... could the reasonable timeperiod contemplated by section 523(a)(3)(B)be greater than the 80 days advance noticea properly scheduled creditor will ordinarily

receive.” Id. at 851 n. 4. 17 That statementis interesting in light of the fact that theholding in Dewalt effectively blessed as timelyan exception to discharge complaint filedapproximately 140 days after the creditor wasnotified of the debtor's bankruptcy filing, asnoted above. As discussed at oral argument,a “bright line” deadline of 80 days to filean exception to discharge or a denial ofdischarge complaint once notice is received bythe creditor does not necessarily make sense inlight of the reality that the § 341(a) meetingthat triggers the 60–day deadline under Rule4007(c) often is scheduled and noticed morethan twenty days after the bankruptcy filingdate.











*9 Synthesizing the reasoning of Price andDewalt leads to the conclusion that once acreditor gains actual notice of a bankruptcy,such notice triggers a deadline by which thecreditor must protect its rights or its claimwill be subject to discharge. Under Dewalt,a minimum 30–day deadline is presumptivelyreasonable, and the application of somedeadline also is presumed, but no particularoutside deadline is mandated.

Rule 4007(b) specifies no time limit for anunlisted creditor without notice under § 523(a)(3)(B) to file a nondischargeability complaint.In Ellet, the Ninth Circuit did not addressRule 4007. However, in Ellet, the FTB wasscheduled as a creditor, but its claim wasdetermined not subject to the claims bar date, soit can be inferred from Ellet's outcome that thefact that the FTB was scheduled as a creditorhad no effect on the allowance or discharge ofits claim in the absence of effective due processnotice.

The Debtors argue chiefly that the distinctionbetween § 523(a)(3) applicable to unlistedcreditors and § 523(c)(1) applicable to listedcreditors is “not merely technical.” Appellants'Opening Brief at p. 12 (citing McGhan v. Rutz,288 F.3d 1172, 1181 (9th Cir.2002)). Instead,the Debtors contend that the Bankruptcy Codeand Rules place the burden on scheduledcreditors without notice to file a motion forextension of time to file a complaint once theybecome aware of a debtor's bankruptcy, whichCreditors did not do.

In rebuttal, Creditors argue that “the codedoes not seem to contemplate the situationwhere a claimant is listed on the schedule of

liabilities, but yet does not receive notice ofthe bankruptcy filing.” Appellees' Brief at p.11. For support, Creditors cite a concurrencein In re Bucknum in which Judge O'Scannlainopined that “[t]he Bankruptcy Code and Rulesthemselves articulate no appreciable distinctionbetween scheduled and unscheduled creditorsfor purposes of determining what constitutessufficient notice of the filing deadline fornondischargeability complaints. If Congresshad intended to make such a distinction, itcertainly could have done so.” Appellee's Briefat pp. 11–12 (quoting In re Bucknum, 951 F.2dat 209–10 (O'Scannlain concurring)). Creditorsalso offer several cases from bankruptcy courtsin other circuits, but chiefly In re Lyman, wherethe court reasoned that “when a creditor isomitted from the matrix, that creditor is not‘scheduled’ within the meaning of 523(a)(3)(B).” Appellee's Brief at p. 13; In re Lyman, 166B.R. 333, 337 (Bankr.S.D.Ill.1994).

While the bankruptcy court did not explicitlyfind that Creditors received actual notice at thelatest via Mayes on October 27, 2010, whenLawrence sent Mayes the bankruptcy casenumber by email, that fact was not disputed,and the bankruptcy court reported that fact inits Under Advisement Decision.

The bankruptcy court ultimately held thatCreditors did not receive adequate noticebecause Creditors could not access PACERrecords by name. Therefore, the complaint fellunder § 523(a)(3)(B), and Rule 4007(b) appliedto allow Creditors to file the complaint “at anytime,” without further analysis or fact finding.

*10 Accepting that the Creditors receivedactual notice of the Debtors' bankruptcy














filing on October 27, 2010, they filedtheir exception to discharge complaint 103days later. In light of the Ninth Circuit'sdecisions in Price and Dewalt, in order toallow the Creditors' adversary proceedingto proceed, the bankruptcy court neededto determine that Creditors' delay in filingtheir complaint was reasonable or appropriatein the circumstances of this case. Nosuch factual determination is reflected inthe bankruptcy court's Under AdvisementDecision. Accordingly, on remand, if thebankruptcy court holds to its determinationthat Rule 4007(b) applies, the bankruptcy courtshould make a specific determination as towhether the 103–day delay in filing Creditors'complaint after the Creditors learned of the

Debtors' bankruptcy filing was reasonable orappropriate.

VI. CONCLUSION

The bankruptcy court failed to make specificfindings of fact and conclusions of law on therecord sufficient to review its denial of themotion to dismiss when it made no reference tothe mailbox rule and evidence relevant theretoin its findings and conclusions. We VACATEand REMAND for further findings of factand conclusions of law consistent with thisMemorandum decision.

Footnotes1 Hon. Mark D. Houle, Bankruptcy Judge for the Central District of California, sitting by designation.



3 Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532, and the

Federal Rules of Bankruptcy Procedure, Rules 1001–9037. The Federal Rules of Civil Procedure are referred to as “Civil Rules.”

4 Appellees cite to the dockets of these state court cases for the notice of bankruptcy at tabs 3 and 4 of “Appellee's Supplemental

Excerpts of Record,” but no such supplemental record was ever filed on the appeal docket. However, the allegation that such a notice

was filed in the first state court case is never disputed anywhere in the record.

5 Creditors allege that the Debtors own Logo Lines Corporation, a contention which the Debtors vehemently contest.

6 With the address: c/o Twin Enterprises Consulting, 4236 E. Whitney Lane, Phoenix, AZ 85032.

7 With the address: 331 North First Avenue, St. 107, Phoenix, AZ 85003.

8 The bankruptcy court's Under Advisement Decision notes that because the amendment was titled, “Amendment to Petition,” the

Clerk's Office did not automatically review the filing and make the appropriate change, but the bankruptcy court made no specific

finding regarding Lawrence's allegation that the Clerk's Office was specifically informed of the name change.

9 The Order Denying the Motion to Dismiss incorporates the findings and conclusions of law from the Under Advisement Decision.

10 Lawrence conceded that Zahlmann's attorney Mayes, but not Zahlmann himself, may have put forward sufficient evidence supporting

nonreceipt of the August 20, 2010, notice by describing Mayes' firm's mail handling procedures. Tr. of June 9, 2011 H'ring 137:5–

8. As noted above, this evidence by itself may not be sufficient to overcome the presumption. See Williams, 185 B.R. at 600.

Further, Lawrence conceded that although creditors have a duty to file a change of address in order to receive notices after a move,

“[Zahlmann's move] may actually be the reason why Mr. Zahlmann never received the notice that we mailed out because he did

move.” Tr. of June 9, 2011 H'ring 148:6–11.

11 See infra Section B of the Discussion.

12 Rule 1005 states the following:

The caption of a petition commencing a case under the Code shall contain the name of the court, the title of the case, and the

docket number. The title of the case shall include the following information about the debtor: name, employer identification

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number, last four digits of the social security number, any other federal tax identification number, and all other names used

within six years before filing the petition. If the petition is not filed by the debtor, it shall include all names used by the debtor

which are known to the petitioners.

13 Not only a scheduled creditor, but even “an unscheduled creditor with actual notice of the bankruptcy has the burden to inquire as to

the bar date for filing a nondischargeability complaint.” Manufacturers Hanover v. DeWalt (In re Dewalt), 107 B.R. 719, 721 (9th

Cir.BAP1989) (citing In re Alton, 64 B.R. 221, 224 (Bankr.M.D.Fla.1986)), rev'd on other grounds, 961 F.2d 848 (9th Cir.1992).

14 See infra Section C of the Discussion with respect to timing.

15 Dewalt, one of the cases on which Ellet relies, turned on whether there was adequate time to file a complaint after sufficient notice

was given, not whether there was sufficient notice as such. Ellet, 506 F.3d at 778.

16 Rule 4007(c) provides that:

A complaint to determine the dischargeability of any debt pursuant to § 523(c) of the Code shall be filed not later than 60 days

following the first date set for the meeting of creditors held pursuant to § 341(a). The court shall give all creditors not less than 30

days notice of the time so fixed in the manner provided in Rule 2002. On motion of any party in interest, after hearing on notice,

the court may for cause extend the time fixed under this subdivision. The motion shall be made before the time has expired.

17 The suggested eighty-day maximum time assumes that ordinarily, creditors will receive at least twenty days' notice in advance of the

§ 341(a) meeting, with sixty days following the meeting date set as the bar date for the filing of nondischargeability complaints.








In re Bishay, Slip Copy (2012)



is currently available.NOT FOR PUBLICATION

United States Bankruptcy AppellatePanel of the Ninth Circuit.

In re James F. BISHAY,James F. Bishay, Appellant,

v.Richard A. Marshack; Jp

Morgan Chase, Appellees.

BAP No. CC–12–1143–TaMkH. |Bankruptcy No. 8:08–bk–11374–

ES. | Adversary No. 8:10–ap–01142–ES. | Argued and Submitted on

Sept. 21, 2012. | Filed Oct. 24, 2012.

Appeal from the United States BankruptcyCourt for the Central District of California,Erithe A. Smith, Bankruptcy Judge, Presiding.


Alan Leigh Armstrong for Appellant James F.Bishay.

Donald W. Sieveke for Appellee Richard A.Marshack.

Before: TAYLOR, 1 MARKELL, andHOLLOWELL, Bankruptcy Judges.

Opinion

MEMORANDUM 2

*1 The appellant, Joseph Bishay, is thebeneficiary of a trust deed recorded against

the debtor's real property. He appeals fromthe bankruptcy court's judgment after trialdetermining that his trust deed was junior toanother subsequently recorded trust deed. Thebankruptcy court based its decision first on thefinding that there was a contractual agreementto subordinate. The bankruptcy court reachedthis determination notwithstanding that awritten subordination agreement was neverintroduced into evidence. The bankruptcycourt, alternatively, based its ruling on anoral determination that equitable subrogation

applied. 3 The appellant only raised issuesrelating to the contractual subordinationdetermination in his statement of issues onappeal and in his opening brief. He discussedequitable subrogation only in his reply brief.

After a careful consideration of the parties'briefs and oral argument, review of therecord provided, and independent analysis andapplication of the law, we hold that theappellant waived his right to dispute thatequitable subrogation applied when he failedto raise this issue at any point on appeal priorto his reply, and, thus, we affirm on thisbasis. We further affirm on the grounds thatthe bankruptcy court correctly found that anactual agreement to subordinate existed, that itbound appellant, and that it was unnecessaryfor the bankruptcy court to determine thecomplete terms of the subordination agreementin connection with its ruling.

FACTS

On February 10, 2006, debtor James F.Bishay (the “Debtor”) purchased a house inHuntington Beach, California (the “Property”)

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and acquired title as his sole and separateproperty. On February 14, 2006, his wife,Deborah Westfield, also known as DeborahBishay, quitclaimed her interest in the Propertyto the Debtor. On this same date, Citimortgagerecorded a trust deed against the Propertysecuring an obligation in the original principalamount of $1,000,000. Thereafter, on April 5,2006, Citibank recorded a second trust deedsecuring an obligation in the original principalamount of $169,990.

On December 27, 2006, for no consideration,the Debtor transferred the Property to theBishay Irrevocable Trust, James F. Bishay asTrustee (the “Bishay Trust”). On February 15,2007, the Debtor, in his capacity as trustee ofthe Bishay Trust, executed and delivered a notein the original principal amount of $320,000in favor of his brother and appellant, Joseph

Bishay (“Joseph” 4 ) and The Rock of Ages,a suspended California corporation owned orcontrolled by Joseph (the “Bishay Note”).Joseph and Rock of Ages recorded a trustdeed (the “Bishay Trust Deed”) securing theBishay Note on March 16, 2007. The BishayTrust Deed, thus, was subordinate to both theCitibank and Citimortgage trust deeds, andJoseph knew this was the case.

On November 6, 2007, and again for noconsideration, the Bishay Trust transferred theProperty to the Alpha and Omega IrrevocableTrust, Deborah Westfield as Trustee. OnFebruary 4, 2008, the Debtor's mother, MarsilBishay, now acting as trustee of the Alphaand Omega Irrevocable Trust (“Alpha &Omega Trust”), borrowed $1,260,000 fromWashington Mutual Bank (“WaMu”) and usedthe proceeds in significant part to repay the

Citibank and Citimortgage loans. On April1, 2008, WaMu recorded a deed of trust(the “WaMu Trust Deed”) securing the noteevidencing this loan. There is no dispute thatthe parties to this transaction intended that theWaMu Trust Deed create a first priority lienagainst the Property.

*2 On March 22, 2008, the Debtor filed hispetition and initiated this chapter 7 bankruptcy.

On September 1, 2008, Richard A. Marshack,the chapter 7 trustee (“Trustee”), filedadversary proceeding 8:08–ap–01338 ESseeking to avoid the transfers of the Propertyto the Bishay Trust and to the Alpha & OmegaTrust as fraudulent conveyances. The Trusteeobtained a judgment avoiding these transfersand preserving the transferred asset for thebenefit of the estate on April 19, 2010.

The Trustee initiated the subject adversaryproceeding on March 19, 2010. The originalcomplaint is not part of the record onappeal, but we have taken judicial noticeof the bankruptcy court docket and variousdocuments filed through the electronicdocketing system. See O'Rourke v. SeaboardSur. Co. (In re E.R. Fegert, Inc .), 887 F.2d955, 957–58 (9th Cir.1989); Atwood v. ChaseManhattan Mortg. Co. (In re Atwood), 293B.R. 227, 233 n.9 (9th Cir.BAP2003). Thedocket in this proceeding evidences that theTrustee originally named only WaMu andMarsil Bishay as trustee of the Alpha & OmegaTrust as defendants, but also included 10 Doedefendants. Thereafter, he added JP MorganChase Bank, National Association, successorin interest to WaMu (“Chase”), CaliforniaReconveyance Company (“Cal Recon”), as the








Trustee named in the WaMu Trust Deed, TheRock of Ages, and Joseph as defendants inplace of Does 1 through 4.

The bankruptcy court eventually entered asummary judgment order adverse to MarsilBishay as Trustee of the Alpha & Omega Trustand determined that she had no interest inthe Property. The Trustee obtained a defaultjudgment resolving the claims against TheRock of Ages and entered into a settlementagreement with Chase. The resolution of theChase claims also resolved all claims againstCal Recon, as Cal Recon was sued only as thetrustee under the WaMu Trust Deed.

Thus, as of the trial date, the only unresolvedissues pertained to Joseph's claim based on the

alleged priority of the Bishay Trust Deed. 5

Originally, the Trustee also objected to Joseph'sclaim, but the Trustee abandoned this issuebefore trial.

Prior to the trial, the Trustee and Joseph enteredinto a Pre–Trial Order and agreed, among otherthings, on the following facts:

18. Joseph Bishay testified in his depositionthat on an unknown date, he subordinated histrust deed to the Washington Mutual Deed oftrust. The subordination agreement was notrecorded and has not been found.

...

21. Joseph Bishay has testified that heunderstood that his deed of trust was insecond position, behind the new deed oftrust obtained by Marsil Bishay, in favor ofWashington Mutual.

22. Prior to the recordation of his deed oftrust, Joseph Bishay understood that MarsilBishay intended to obtain a loan against [theProperty], and that such deed of trust wouldbe in first position.

23. Marsil Bishay negotiated and obtainedthe subordination of Joseph Bishay's deedof trust to the new deed of trust issued toWAMU against the [Property].

*3 Pre–Trial Order, Dkt. 62, at 4.

The Pre–Trial Order also included a judicialrequirement that the parties provide directtestimony (exclusive of adverse or rebuttaltestimony) only by declaration. Finally, thePre–Trial Order established the witnesses to becalled at trial and the exhibits to be introducedat trial. Joseph's exhibits were the Bishay TrustDeed, the WaMu Trust Deed, and an equitypurchase agreement dated March 8, 2007. TheTrustee submitted a trial brief; Joseph did not.Neither party submitted declaratory evidence.

The bankruptcy court held the trial on February21, 2012. At trial, the Trustee rested afterintroducing the Bishay Trust Deed and theWaMu Trust Deed into evidence. Joseph'scounsel, after attempting to call Joseph as awitness, acknowledged that he was bound bythe Pre–Trial Order and could not introducetestimonial evidence at trial. Consequently,Joseph never testified. Joseph's counsel also didnot seek to admit any documentary evidence.The Trustee then relied on the agreed facts ofthe Pre–Trial Order and requested judgment inhis favor.



The Trustee argued two alternative theories—first, that the Bishay Trust Deed wassubordinate to the WaMu Trust Deed becauseJoseph contractually agreed to subordinatethe Bishay Trust Deed, and, second, that thedoctrine of equitable subrogation operated togrant seniority to the WaMu Trust Deed. Inopposition, counsel for Joseph offered a limitedargument that the terms of the subordinationagreement were unknown and that WaMu wasnegligent.

The bankruptcy court recited the admittedfacts in the Pre–Trial Order and made anoral finding that the admitted facts providedadequate evidence of intent to subordinate andthat, as Joseph advanced no new evidence, ajudgment finding that the WaMu Trust Deedhad priority over the Bishay Trust Deed wasappropriate. The bankruptcy court stated that:

... under the admittedfacts and given that thereis no counter evidence,either factually or legally,then this Court feelscomfortable in making afinding consistent with thetrial briefs submitted thatthere was a subordinationagreement that was in effectat the time the WashingtonMutual loan was made andthat the intent was thatthe Washington Mutual loanwould, in fact, be senior tothe [Bishay Trust Deed].

Trial Tr. (Feb. 21, 2012) at 10:14–21.

The bankruptcy court also made an alternativeoral finding that:

the Plaintiff has alsopresented evidence sufficientto support a finding [ ]that the doctrine of equitablesubordination should applyas well. So, judgment will bein favor of the Plaintiff.

Id. at 13:3–6.

Finally, the bankruptcy court stated its ultimatefinding that, “under either theory, the Courtfinds in favor of the Plaintiff, RichardMarshack that there was a subordinationagreement.” Id. at 12:20–22.

On March 2, 2012, the bankruptcy courtentered a separate written Judgment After Trialwhich stated:

*4 After consideringthe evidence and hearingargument, and for the reasonsset forth in the Court's oralfindings, IT IS HEREBYADJUDGED: 1) Judgmentin favor of the Plaintiff andagainst Defendant JOSEPHBISHAY. 2) The [BishayTrust Deed] is herebydeclared fully subordinate tothe [WaMu Trust Deed].

Judgment After Trial, Dkt. 86, at 2:2–14.

Joseph timely appealed the bankruptcy court'sJudgment After Trial and identified onlyone issue: “Did the bankruptcy court err in



deciding that the [Bishay Trust Deed] was fullysubordinate to the [WaMu Trust Deed] basedon a Subordination Agreement that has notbeen found, without making a finding as tothe wording or contents of that subordinationagreement?” Appellant's Statement of Issueon Appeal (April 2, 2012) at 2. As theTrustee points out in his opening brief, Josephfailed to raise, as an issue on appeal, thebankruptcy court's alternative finding that theBishay Trust Deed was subordinate to theWaMu Trust Deed based on the doctrine ofequitable subrogation. Joseph first addressedthe equitable subrogation issue in his replybrief.

JURISDICTION

The bankruptcy court had jurisdiction under 28U.S.C. §§ 1334 and 157(b)(2)(K). Judgmentwas entered on the issue of the fullsubordination of the Bishay Trust Deed tothe WaMu Trust Deed. The judgment is finalbecause the judgment fully and finally disposedof the priority dispute, the only dispute thenremaining in this adversary proceeding. SeeKashani v. Fulton (In re Kashani), 190 B.R.875, 882 (9th Cir.BAP1995). Because thejudgment underlying Joseph's appeal is final,we have jurisdiction pursuant to 28 U.S.C. §158.

ISSUES

A. Whether Joseph waived his right to appealthe bankruptcy court's application of equitablesubrogation.

B. Whether the bankruptcy court erred, as amatter of law, by finding subordination withoutfirst determining all the terms and conditions ofsubordination.

C. Whether the bankruptcy court erred, as amatter of fact, by finding the Bishay Trust Deedfully subordinate to the WaMu Trust Deed.

STANDARD OF REVIEW

We review “the bankruptcy court's conclusionsof law de novo and factual findings forclear error.” Clear Channel Outdoor, Inc.v.. Knupfer (In re PW, LLC), 391 B.R. 25,32 (9th Cir.BAP2008) (citations omitted). Afactual determination is clearly erroneous if theappellate court, after reviewing the record, hasa definite and firm conviction that a mistake hasbeen committed. Anderson v. Bessemer City,470 U.S. 564, 573 (1985).

We review a bankruptcy court's interpretationof California law de novo in order to determineif it correctly applied the substantive law.Kipperman v. Proulx (In re Burns), 291 B.R.846, 849 (9th Cir.BAP2003); Astaire v. BestFilm & Video Corp., 116 F.3d 1297, 1300 (9thCir.1997)(issues of state law are reviewed denovo). Mixed questions of law and fact are alsoreviewed de novo. Murray v. Bammer (In reBammer), 131 F.3d 788, 792 (9th Cir.1997). “Amixed question of law and fact occurs when thehistorical facts are established; the rule of law isundisputed ... and the issue is whether the factssatisfy the legal rule.” Id.

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DISCUSSION

A. Joseph Waived His Right To Appeal TheBankruptcy Court's Determination BasedOn Equitable Subrogation.

1. The Judgment Based On EquitableSubrogation Was Final.*5 Joseph argues that he was not obligatedto appeal from the bankruptcy court'sdetermination that the theory of equitablesubrogation resulted in a loss of the priorityof his trust deed. He argues, thus, that he didnot waive his right to appeal this determination.He bases his argument on the fact that thepost trial judgment “does not mention equitablesubrogation.” Appellant's Reply Brief (June21, 2012) at 1. He apparently claims thatbecause the written Judgment After Trial didnot expressly state that subordination wasgranted alternatively on the theory of equitablesubrogation, that a judgment was not renderedon that theory.

In the absence of an order allowing aninterlocutory appeal, an appellant may onlyappeal to a Bankruptcy Appellate Panel fromfinal judgments, orders, or decrees of abankruptcy judge. 28 U.S.C. § 158(a). Tobecome final, the decision, order, or decreemust end the litigation or dispose of completeclaims of relief. In re Kashani, 190 B.R. at 882.The Ninth Circuit takes a flexible approachto determining the finality of a judgment ororder such that even a minute order can be afinal, appealable order if it: “fully adjudicatesthe issues and clearly evidences the court'sintent that the order be the court's final act.”Key Bar Invs. v.. Cahn (In re Cahn), 188

B.R. 627, 629 (9th Cir.BAP1995). A court'sintent is evidenced by: “a clear and unequivocalmanifestation by the trial court of its belief thatthe decision made, so far as it is concerned,is the end of the case.” Brown v. WilshireCredit Corp. (In re Brown), 484 F.3d 1116,1122 (9th Cir.2007) (citation omitted). Thisflexible approach is intended to ensure that acase does not make “two complete trips throughthe appellate process.” Lewis v. Law Officesof Nicholas A. Franke (In re Lewis), 113 F.3d1040, 1043 (9th Cir.1997).

Here, the bankruptcy court's written JudgmentAfter Trial does not specifically delineate theindividual legal theories on which it is based.However, the judgment does incorporate byexpress reference, the “reasons set forth in theCourt's oral findings.” Judgment After Trial at2:2–3. The use of the plural “reasons” indicatesmore than one basis for the judgment. Thetrial transcript evidences that those reasonsspecifically included the bankruptcy court'soral finding that “the doctrine of equitablesubordination should apply as well.” Trial Tr.at 13:5. Indeed, the bankruptcy court madethis particular alternative finding “to make acomplete record in the event there is an appeal.”Id. at 11:1–2. Therefore, the oral findingsclearly evidence the bankruptcy court's intent togrant final judgment in favor of the Trustee onthe alternative basis of equitable subrogation.

Joseph's anti-finality argument is not onlyinconsistent with the record, it is alsoinconsistent with his position on appeal. TheJudgment After Trial did not delineate anyspecific theory on which relief was granted.Notwithstanding this silence, Joseph choseto appeal based on the assumption that the

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judgment involved a contractual determination.Nothing in the express language of theJudgment After Trial itself, however, supportsthe assertion that this basis for relief was thesole basis for relief or even a basis for relief.The Judgment After Trial was equally non-specific and silent as to the contract basedsubordination claim.

*6 For these reasons, we conclude that thebankruptcy court granted a final judgment infavor of the Trustee on the alternative theory ofequitable subrogation.

2. Joseph Failed To Timely andAppropriately Raise The EquitableSubrogation Issue On Appeal.An appellant is required to serve and file astatement of issues on appeal. Fed. R. Bankr.P.8006. Issues not included in the statement ofissues may be deemed waived. Woods v. PineMountain, Ltd. (In re Pine Mountain, Ltd.),80 B.R. 171, 173 (9th Cir.BAP1987) (holdingthat appellant waived the issue of bankruptcycourt's refusal to consider parol evidence whenthe issue was not included in the statementof issues). An appellant must also raise andargue an issue in its opening brief or the issuewill be waived. Seven Words LLC v. NetworkSolutions, 260 F.3d 1089, 1097 (9th Cir.2001);see also McLain v. Calderon, 134 F.3d 1383,1384 n.2 (9th Cir.1998) (issue mentioned instatement of issues, but not discussed in briefis considered waived). Further, an argumentwaived by the failure to raise it in an appellant'sopening brief cannot be raised for the first timein the appellant's reply brief. Alaska Ctr. ForEnv't v. United States Forest Serv., 189 F.3d851, 858 n.4 (9th Cir.1999).

Here, Joseph's statement of issues does notmention equitable subrogation. The only issueraised is, “Did the bankruptcy court err indeciding that the [Bishay Trust Deed] was fullysubordinate to the [WaMu Trust Deed] basedon a Subordination Agreement that has notbeen found, without making a finding as tothe wording or contents of that subordinationagreement?” Appellant's Statement of Issue onAppeal at 2. Correspondingly, Joseph's openingbrief discusses the same single issue, slightlyre-phrased as, “The Subordination Agreementhas not been found. Was it error to makethat decision without determining the wordingof that subordination agreement?” Appellant'sOpening Brief (May 21, 2012) at 1. Again, nomention is made of equitable subrogation.

The Trustee raised this omission in his brief.Thus, Joseph, in his reply brief, eventuallycontended that the bankruptcy court erred ingranting judgment on a theory of equitablesubrogation because the elements of equitablesubrogation were not met. Because Josephraises this issue for the first time in hisreply brief, he waived his right to appealthe bankruptcy court's judgment based on thisalternative theory. For this reason alone, thetrial court's judgment must stand.

B. The Bankruptcy Court Did NotErr, As A Matter Of Law, By FindingSubordination Without First DeterminingAll The Terms And Conditions OfSubordination.Joseph contends that the subordinationagreement at issue cannot be located and,therefore, that its terms are unknown. Josephthen argues that when the terms of a

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subordination agreement are not known, thesubordination agreement is void.

In support of this position, Joseph brieflyidentifies cases that he alleges requirecontractual certainty in the subordinationagreement context. This case law, however, iseither distinguishable or declarative of a non-controversial rule of law that is consistent withthe bankruptcy court's legal determinations.

*7 Joseph cites to Resolution Trust Corp v.BVS Dev., Inc., 42 F .3d 1206 (9th Cir.1994)for its statement that “the law is well settledthat rights under an agreement of subordinationextend to and are limited strictly by the expressterms and conditions of the agreement.” Id. at1214. This point is well taken, but Joseph failsto even suggest how his admitted agreementto subordinate is in any way less than anagreement to full subordination to the WaMuTrust Deed.

Similarly, Joseph cites to Weddington Prods.,Inc. v. Flick, 60 Cal.App.4th 793 (1998)(citing White Point Co. v. Herrington, 268Cal.App.2d 458 (1968)) and Roffinella v.Sherinian, 179 Cal.App.3d 230, 239 (1986) tomake the point that subordination provisionsfound to be uncertain, indefinite, and incapableof ascertainment by reference to an objectivestandard, have been deemed void for the

uncertainty of a material provision. Id. at 817. 6

But again, Joseph fails to identify any pointof uncertainty related to his agreement tosubordinate, much less a material one.

Lastly, Joseph relies on Krasley v. SuperiorCourt, 101 Cal.App.3d 425, 430 (1980) tosuggest that when a subordination agreement

is uncertain, trade usage and custom cannotbe used to fill the gaps. The facts of Krasley,however, are far from the facts here. The tradeusage discussion arose in another context andpertained to the court's determination that adocument entitled a “counter counter offer”could not be treated as an acceptance of aprior offer. Id. The subordination discussionin Krasley related to an alternative basis forconcluding that a contract did not arise. TheKrasley court found that inclusion of theterm “Seller to subordinate to a ConstructionLoan ...” was not sufficiently specific to bindthe elderly and ill sellers who responded onlywith a counter offer. Id. Joseph, in contrast,knew the loan as to which his subordinationagreement applied.

In summary, Joseph's cases all concernthe contractual requirement of certainty, insome cases in the subordination agreementsetting. These rules generally apply to denyenforcement of a subordination agreementwhere a party agreed to subordinate in thefuture to an unknown amount of additionalsecurity and where material deal terms ofthat future loan are unknown. The certaintyrequirements then operate to limit the scopeof an otherwise open ended agreement to onlythe amount that was within the subordinatingparties' objective intent at the time ofcontracting. Here, Joseph never states that hisobjective intent was anything other than fullsubordination.

Under California law, contract formationrequires mutual consent of the parties. Cal.Civ.Code § 1561; 1 Witkin Summary ofCalifornia Law (10th ed. 2005) Contracts, §116 p. 155. Such mutual consent may be


















determined based on the reasonable meaningof the words and actions of the parties.Weddington Prods., 60 Cal.App.4th at 811. Thecontract's terms must be certain in materialrespects, but the existence of minor areasof disagreement will not render the contractvoid and entirely unenforceable. Id. at 811–12. Consistent with the general requirementsof California law in the area of contracts, asubordination agreement must be interpretedto enforce the objective intent of the parties.Bratcher v. Buckner, 90 Cal.App.4th 1177,1186 (2001).

*8 Courts are cautious when asked toenforce agreements to subordinate to uncertainand future financing of unknown terms. SeeRoskamp Manley Assocs., Inc. v. Davin Dev.& Inv. Corp., 184 Cal.App.3d 513 (1986).A subordination agreement, notwithstanding,may be enforceable even in the absence ofabsolute certainty as to all contract terms.In Resolution Trust Corp., the subordinatingparty was a seller who took back a loan andsecurity from the buyer and also agreed tosubordinate to future construction financing. 42F.3d at 1210. The Resolution Trust Corp. courtfound the underlying subordination agreementenforceable despite some lack of certaintyas to terms of this financing at the time ofsubordination. Id. at 1214. See also Int'l Mortg.Bank v. Eaton, 39 Cal.App. 39 (1918) (holdingthat an executed agreement to subordinate wasenforceable where there was no specificationof interest rate, subordinated amount, or use ofthe future senior loan proceeds.) In Krasley, incontrast, the court found no contract and nosubordination agreement where the agreementwas entirely open-ended. 101 Cal.App.3d at431. In short, there are situations where the

law will not enforce a subordination agreementbecause the terms are so uncertain that the courtcannot find a meeting of the minds. Californialaw, however, does not require 100% certainty.

Joseph's situation is not analogous to theKrasley facts. The bankruptcy court determinedas a factual matter that Joseph's testimonyevidenced an objective intent to subordinate theBishay Trust Deed to the WaMu Trust Deed.It is clear that Joseph knew that the WaMuloan would be used to repay existing loanssecured by already senior trust deeds. Thus,this determination leaves no real ambiguityregarding its scope.

And, perhaps more importantly, Josephnever specifies any unknown feature ofthis subordination. Having conceded that hesubordinated his trust deed, the burden shiftedto Joseph to specify any area where he did notagree to subordination and where, as a result,subordination cannot be required. He could notremain silent and prevail.

Therefore, the bankruptcy court did noterr in finding that Joseph subordinated theBishay Trust Deed to the WaMu TrustDeed even though he alleges that unspecifiedterms of the subordination agreement remainunclear. Enough is known to make clearthat subordination occurred, and there is noevidence of a material term in dispute.

C. The Bankruptcy Court Did Not Err, AsA Matter Of Fact, By Finding The BishayTrust Deed Fully Subordinate To TheWaMu Trust Deed.The Pre–Trial Order describes the relevant trialissues of fact as:
















3. Whether Joseph Bishay has agreed thathis deed of trust is subordinate to that of theWashington Mutual Bank deed of trust.

4. Whether Joseph Bishay agreed tosubordinate his deed of trust to theWashington Mutual Deed of trust obtainedby Marsil Bishay against the SubjectProperty.

*9 Pre–Trial Order at 6.

It also contained stipulated facts that evidencean agreement to subordinate. Admitted factswhich are agreed upon in a pre-trial ordergive rise to an inference that must be rebuttedby opposing evidence. Harding v. Hall (Inre Hall), 2006 WL 6810950, *2 (9th Cir.BAP Aug. 14, 2006); see also Jaureguiv. City of Glendale, 852 F.2d 1128 (9thCir.1988) (recognizing that facts admitted bythe defendant in a pre-trial order establishedplaintiff's prima facie case which gave rise toa presumption requiring evidentiary rebuttal).Joseph fails to identify any alleged limitationas to the extent of his admitted agreement tosubordinate. Thus, the bankruptcy court did noterr in finding that Joseph entirely subordinatedthe Bishay Trust Deed based on the admittedfacts in the Pre–Trial Order.

On appeal, Joseph does not directly contestany of the bankruptcy court's findings of fact.Indeed, as they are based on his stipulations inthe Pre–Trial Order, it is difficult to see howhe could do so. As the Trustee correctly pointsout, however, Joseph's statement of the issue onappeal can be interpreted in a number of ways,and Joseph may argue that the bankruptcy

court erred in finding that he fully rather thanpartially subordinated.

In particular situations, where a subordinationagreement relates to an unknown futureindebtedness, the subordinating party may beheld to have only partially subordinated to theamount that was within its objective intent atthe time of contracting. See generally WellsFargo Bank v. Neilsen, 178 Cal.App.4th 602,615–17 (2009) (limiting subordination amountto that which was within the objective intent ofthe subordinating lender in a “circuity of liens”context). Here, however, there is no ambiguityin the evidence; the bankruptcy court reliedon Joseph's own testimony and agreement inits determination that Joseph subordinated theBishay Trust Deed and was in second positionbehind the entirety of the WaMu Trust Deed.

This ultimate fact is evidenced by Joseph'sadmitted testimony that: “... he subordinatedhis trust deed to the Washington Mutual Deedof trust,” (Pre–Trial Order at 4:11–12) andthat: “he understood that his deed of trust wasin second position behind the new deed oftrust obtained by Marsil Bishay in favor ofWashington Mutual.” Pre–Trial Order at 4:18–20. Thus, the bankruptcy court correctly foundthat subordination occurred.

It is also clear on this record that Joseph knewin connection with this general agreement tosubordinate that his mother would use theWaMu Loan proceeds to pay off existingsenior liens and that WaMu would, thus,enjoy the same priority over his lien thatwas enjoyed by the prior senior lenders.Joseph offers no counter evidence. Therefore,the record supports the bankruptcy court's












determination that Joseph objectively intendedto fully subordinate. Again, Joseph advances noevidence to the contrary.

CONCLUSION

*10 For the reasons stated above, we AFFIRMthe judgment of the bankruptcy court.

Footnotes1 Hon. Laura S. Taylor, Bankruptcy Judge Southern District of California, sitting by designation.



3 In the record, the parties use both the term “equitable subordination” and the term “equitable subrogation.” Equitable subordination

in the bankruptcy context refers to 11 U.S.C. § 510(c). It requires misconduct and subordination as a result thereof. 4 Collier on

Bankruptcy ¶ 510.05[2], p. 510–18 (Alan N. Resnick & Henry J. Sommer, eds., 16th ed.2012). The record evidences that the parties

here reference the state law theory of equitable subrogation involving effective subordination where, under certain circumstances,

a lender pays an existing lienholder's claim and assumes (is subrogated to) the senior lender's priority. Miller & Starr, California

Real Estate Third Edition, § 11:115, p. 11–355. The Panel will utilize the term “equitable subrogation” herein and will not reference

“equitable subordination.”

4 For the purposes of clarity and simplicity, the appellant will hereinafter be referred to as “Joseph.” We intend no disrespect by this

informality, but hope to avoid the confusion that could result from having both a debtor and a defendant with the last name Bishay

and first names beginning with a “J”.

5 The priority dispute was not directly discussed in any pleading, but the parties clearly contemplated this as an issue in a Pre–

Trial Order, and it apparently arose from the generalized request in the amended complaint that the bankruptcy court determine the

respective interests of the parties in and to the Property.

6 Neither Weddington Prods. nor White Pointe Co. are directly applicable on the facts. They both refer to subordination agreement

cases, but do not analyze the enforceability of a subordination clause.


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In re Green, Slip Copy (2012)



is currently available.NOT FOR PUBLICATIONUnited States Bankruptcy

Appellate Panel,of the Ninth Circuit.

In re Joan Kathleen GREEN, Debtor.Joan Kathleen Green, Appellant,

v.Waterfall Victoria Master Fund 2008–

1 Grantor Trust Series A; QuantumServicing Corporation, Appellees.

Nos. CC–11–1374–MkHHa, ND09–11614–RR. | Submitted

Without Oral Argument on Sept.21, 2012. | Filed Oct. 15, 2012.

Appeal from the United States BankruptcyCourt for the Central District of California,Honorable Robin L. Riblet, Bankruptcy Judge,Presiding.


Appellant Joan Kathleen Green pro se on brief.

Melissa Robbins Coutts of McCarthy &Hotlhus, LLP on brief for appellees WaterfallVictoria Master Fund 2008–1 Grantor TrustSeries A and Quantum Servicing Corporation.

Before MARKELL, HOLLOWELL and

HAMMOND, ** Bankruptcy Judges.

Opinion

MEMORANDUM *

INTRODUCTION

*1 Through an agent, Waterfall VictoriaMaster Fund 2008–1 Grantor Trust Series A(“Waterfall”) filed a proof of claim in thebankruptcy case of debtor Joan K. Green(“Green”). Green objected to Waterfall's proofof claim, but the bankruptcy court overruledthat objection. Green then sought rehearingand reconsideration, which relief the court alsodenied. Green appealed. We AFFIRM.

FACTS

Doing business as Cripple Creek MountainRanch, LLC, Green ran what she described asa hospitality business out of a single familyresidence located on Melody Mountain Lanein Paso Robles, California (“Property”). In herbankruptcy schedules, she listed the Property asworth $1.3 million with roughly $1 million inencumbrances.

On May 1, 2009, she filed her chapter 11 1

bankruptcy petition. Roughly one year later,in May 2010, Waterfall and its servicingagent LoanCare, A Division of FNF Servicing,Inc. (“LoanCare”) filed a motion for relieffrom the automatic stay (“Relief FromStay Motion”), seeking to pursue foreclosureproceedings against the Property. Waterfallasserted, through its servicing agent LoanCare,that as of April 2010 Green owed it over $1.1

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million and that Green's indebtedness (“Loan”)was secured by a first deed of trust against theProperty.

Waterfall attached to its moving papers thefollowing documents as exhibits:

1. A conformed copy of a deed of trust(“Deed of Trust”) dated May 24, 2007(recorded as document no. 2007036626 inthe San Luis Obispo County Recorder'sOffice) identifying Green as borrower,Greenpoint Mortgage Funding, Inc. aslender (“Greenpoint”) and MortgageElectronic Registration Systems, Inc. or

“MERS” 2 as the beneficiary, solely as the“nominee” for the lender Greenpoint; and

2. An Adjustable Rate Note (“Note”)dated May 24, 2007, in the amountof $999,900.00, identifying Green asborrower and Greenpoint as lender.

The bankruptcy court entered an order in July2010 denying Waterfall's Relief From StayMotion “for lack of cause shown.”

Meanwhile, LoanCare had filed in December2009 a proof of claim (“Proof of Claim”)asserting a secured claim based on the sameNote and Deed of Trust. In the proof of claim,LoanCare did not state that it was acting asservicing agent for Waterfall, nor did it evenmention Waterfall's name.

Nonetheless, relying on the informationcontained in the May 2010 Relief FromStay Motion, Green filed in September 2010a motion entitled: “Motion For Proof ofPerfected Ownership Interest and Right toCollect on Proof of Claim” seeking relief

against both LoanCare and Waterfall with

respect to the Proof of Claim. 3 Even thougha conformed copy of the recorded Deed ofTrust was attached to the Proof of Claim, Greenasserted that the Proof of Claim did not satisfythe requirements of Rule 3001(d) because theProof of Claim contained insufficient evidencedemonstrating perfection of Waterfall's allegedlien on the Property. According to Green, therewas nothing recorded in the public recordsfor San Luis Obisbo County indicating thatWaterfall, or anyone else, had taken fromGreenpoint an assignment of the Deed ofTrust. Green argued that any interest Waterfallclaimed to have in the Note and the Deed ofTrust was invalid without a duly executed andrecorded written assignment of the Deed ofTrust.

*2 Alternately, Green argued that MERS'sinvolvement in the Loan transaction renderedunenforceable the lender's rights under the Noteand the Deed of Trust, regardless of whoattempted to assert those rights. It is difficultto follow Green's argument on this point. Onthe one hand, she stated that, for purposes ofthe Claim Objection, she was assuming thatMERS held the original Note. On the otherhand, Green argued:

It is the Debtor's understanding that once anote is registered with MERS, all subsequentassignments are done electronically; MERSnever acquires actual physical possession ofthe note, nor do they acquire any beneficialinterest in the note....

It is the Debtor's contention that MERS hadno beneficial interest in the note and sinceMERS was not the title holder, the chain oftitle was broken and consequently no one



has standing to sue (obviously, the servicingcompany [LoanCare], who filed the Proof ofClaim, has no beneficial interest in the noteeither).

* * *

As held by the Court in the bankruptcycase In re Walker cited above, MERS hasno authority to foreclose on the Debtor'smortgage, since it is a ‘mere nominee’. Andeven more importantly, since MERS hadno beneficial, transferable interest in theMortgage, Waterfall cannot collect on theclaim.

Claim Objection (Sept. 10, 2010) at p. 7 of 28.

Green also generally complained aboutMERS's electronic mortgage registrationsystem. According to Green, MERS'ssystem violates “the California Business andProfessions Code, as well as Unfair andDeceptive Acts and Practices....” Id. at p. 8 of28.

By way of relief, Green essentially assertedthat the court should require Waterfall toestablish its “right to collect on the claim” bydemonstrating its “true ownership” of the Noteand the Deed of Trust. Id.

In October 2010, Waterfall and its newservicing agent Quantum Servicing Corp.(“Quantum”) filed a response to the ClaimObjection, along with a “SupplementalDeclaration” of April Kennedy in support ofthe response. In the Supplemental Declaration,Ms. Kennedy declared that she was anemployee of Quantum, and that Quantum wasWaterfall's new servicing agent. Ms. Kennedy

further stated that she had reviewed “businessrecords” reflecting a chain of transfers of the“beneficial rights” under the Loan. Accordingto Kennedy, the beneficial rights were firstheld by Greenpoint but ultimately ended upwith Waterfall by January 2009. Kennedyalso stated that the same business recordsreflected a chain of transfers of the “servicingrights” under the Loan. Kennedy declaredthat Greenpoint was the first servicer of theLoan, that LoanCare was the second servicerof the Loan and that Quantum was the thirdservicer of the Loan. According to Kennedy,LoanCare was the servicing agent for the Loanbetween August 2008 and September 2010.Kennedy's statements regarding LoanCare andWaterfall are consistent with Waterfall's claimthat LoanCare filed the Proof of Claim inDecember 2009 on behalf of Waterfall as theservicing agent under the Loan.

*3 In addition to Kennedy's declaration,Waterfall relied upon all of the papers filedin support of its prior Relief From StayMotion. Waterfall argued that these itemswere sufficient to establish the standing ofits former servicing agent LoanCare to filethe Proof of Claim on Waterfall's behalf.Alternately, Waterfall requested additionaltime to respond to the Claim Objection sothat its new servicing agent Quantum couldobtain and present additional documentation tosubstantiate Waterfall's interest in the Loan.

Green filed a reply in support of her ClaimObjection (“Reply”). In her Reply, Greenasserted that Waterfall should be required toproduce the Original of both the Note and theDeed of Trust. The remainder of Green's Replygoes into more detail about her complaints



regarding MERS and its electronic registrationsystem. According to Green, MERS generallyis used by lenders to hide their identity fromborrowers, to avoid payment of recording fees,and to turn pools of loans into ponzi schemesthrough the securitization process.

Significantly, for the first time in the Reply,Green claimed: (1) that her Loan amountedto a contract of adhesion; (2) that Waterfallwould be unjustly enriched if it were allowedto enforce its rights (if any) under theLoan; and (3) allowing enforcement of theLoan would be unconscionable (collectively,the “Unconscionability Claims”). But Green'sUnconscionability Claims were based solelyon her general, unsubstantiated allegationsagainst MERS. Green did not in any way tieher Unconscionability Claims to any specificalleged misconduct concerning her particularLoan.

The bankruptcy court held two hearings on theClaim Objection in the Fall of 2010. After thesecond hearing, the court directed Waterfall tofile a supplemental brief by the end of 2010in support of its standing to file the Proof ofClaim, and the continued the hearing on theclaim objection to January 11, 2011.

Waterfall and Quantum filed theirsupplemental brief (“Supplemental Brief”)on December 30, 2010. In it, Waterfalladmitted that written assignments of thebeneficial interest in the Deed of Trustwere never drafted or recorded. Accordingto Waterfall, the registration information onMERS's website was meant to serve as asubstitute for the execution and recordationof written assignments. More importantly,

Waterfall claimed it had standing to file theProof of Claim because it was a “person entitledto enforce” the Note within the meaningof § 3301(a) of the California Commercial

Code. 4 Waterfall argued that it was a “personentitled to enforce” under Cal. Com.Code §3301(a) because it was a “holder” of the Note.As Waterfall explained it, pursuant to Cal.Com.Code § 1201(b)(21)(A), its possession ofthe original Note indorsed in blank made it aholder of the Note. Waterfall further argued thatpaper assignments of the Deed of Trust wereunnecessary either to perfect the lien created bythe Deed of Trust or to convey the beneficialinterest under the Deed of Trust.

*4 Green filed a response to the SupplementalBrief on January 7, 2011, a few days beforethe continued claim objection hearing. Greenclaimed that Cal. Com.Code § 9109(d)(11)rendered Division 3 of the Cal. Com.Codeinapplicable to transactions creating ortransferring liens on real property. According toGreen, the transfer of the lender's rights underthe Deed of Trust was governed by provisionsof California's Civil Code, particularly Cal.Civil Code § 1091, which required a writingsigned by the transferor. Green further arguedthat Waterfall's attempt to rely solely on itsstatus as a holder of the original promissorynote contravened both the California Civil

Code and the “lex situs” doctrine. 5

At the January 11, 2011 continued hearingon the Claim Objection, Waterfall appearedthrough its servicing agent Quantum, whichpresented the original Note, indorsed in blank,and the original Deed of Trust, to Green andto the Court. The bankruptcy court advisedGreen that it did not receive, and had not

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had an opportunity to review, her response tothe Supplemental Brief, but the court allowedGreen to make the same arguments as part ofher oral argument at the hearing.

The bankruptcy court thereafter ruled thatGreenpoint had duly perfected its lien againstthe Property by recording the Deed of Trustin the official records for San Luis ObispoCounty, California. The court further ruled thatWaterfall and its servicing agent Quantum werein possession of the original Note indorsed inblank by Greenpoint, which gave them standingto enforce the Note. Based on these rulings, thecourt held that it was going to overrule Green'sClaim Objection.

Notwithstanding the court's oral ruling atthe January 11, 2011 hearing, there was asubstantial delay before entry of an orderoverruling the Claim Objection because neitherWaterfall nor Quantum lodged a proposedform of order. Ultimately, the bankruptcycourt entered a final order in July 2011. Butbefore that order was entered, a number ofadditional events occurred that are relevantto this appeal. Foremost among them, Greenfiled motions requesting a new hearing andseeking reconsideration of the court's oralruling (collectively, “Post-hearing Motions”).According to Green, the bankruptcy courthad not given her adequate time to respondto the Supplemental Brief. However, therewas nothing particularly new about the Post-hearing Motions. Green merely elaborated onthe arguments she had previously made insupport of her Claim Objection.

Without holding an additional hearing, thebankruptcy court entered an order denying the

Post-hearing Motions, for essentially the samereasons that it had stated when it orally hadoverruled Green's Claim Objection.

Green appealed the order denying her Post-hearing Motions (BAP No. CC–11–1253). Butwe dismissed that appeal on jurisdictionalgrounds, because Green did not timely file hernotice of appeal within fourteen days of entryof that order.

*5 On July 6, 2011, the bankruptcy courtentered an order overruling Green's ClaimObjection. Green filed a notice of appeal fromthat order on July 13, 2011.

JURISDICTION

The bankruptcy court had jurisdiction pursuantto 28 U.S.C. §§ 1334 and 157(b)(2)(A) and (B).We have jurisdiction under 28 U.S.C. § 158,subject to the discussion set forth immediatelybelow.

Before we address the merits of this appeal, wefirst must address a jurisdictional issue raisedby the rather odd procedural history of thismatter. We agree with our prior BAP panelthat Green's appeal of the Post-hearing Motionswas untimely and should have been dismissed.However, we must determine the proper scopeof the appeal now before us, which was timelyfiled after the court entered the order overrulingthe Claim Objection. In this instance, the scopeof this appeal hinges on the finality of thebankruptcy court's orders.

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adjudicates the issues raised and clearlymanifests the court's intent to be its final act inthe matter. Brown v. Wilshire Credit Corp. (Inre Brown), 484 F.3d 1116, 1120 (9th Cir.2007)(quoting Slimick v. Silva (In re Slimick), 928F.2d 304, 307 (9th Cir.1990)). To ascertain thetrial court's intent, we may look to the contentof the order, as well as the judge's and theparties' conduct. In re Brown, 484 F.3d at 1120;In re Slimick, 928 F.2d at 308.

Green's appeal of the order denying herPost-hearing Motions was an appeal froman interlocutory order, not final, because thebankruptcy court did not intend that order tofully and finally dispose of the entire matter—the Claim Objection.

Here, the bankruptcy court's comments at ahearing held on June 29, 2011, reflect thatthe court had expected Waterfall to lodgea proposed order memorializing the court'sJanuary 11, 2011 oral ruling overruling theClaim Objection, but that Waterfall had notdone so. In response to the court's commentsat that hearing, Waterfall and Quantumapparently lodged a proposed form of order,which the court signed and entered on July 6,2011. That was the final order fully disposingof the Claim Objection.

Orders denying motions for new trial andmotions for reconsideration typically are finalorders, but that is in part because they usuallyare entered after entry of an order disposing ofthe underlying dispute. Here, the converse istrue. The May 3, 2011 order denying Green'sPost-hearing Motions was entered before thecourt entered its July 6, 2011 order disposing ofthe underlying Claim Objection. As a result, the

order denying Green's Post-hearing Motionswas interlocutory, not final, at the time it wasentered.

When a litigant files an untimely appeal froman interlocutory order, we must dismiss it. SeeBaldwin v. Redwood City, 540 F.2d 1360, 1364(9th Cir.1976). However, that interlocutoryorder ultimately merges into the final order,when it eventually is entered, and a timelyappeal taken from the final order may coverboth the final order as well as any interlocutoryorder leading up to the entry of the final order.Id.; see also U.S. v. Real Property Located at475 Martin Lane, Beverly Hills, CA, 545 F.3d1134, 1140–41 (9th Cir.2008).

*6 Accordingly, both the order overruling theClaim Objection and the order denying thePost-hearing Motions are within the scope ofthis appeal. To the extent the parties' briefsaddress issues raised by either order, we mayconsider them.

ISSUE

Did the bankruptcy court err when it overruledGreen's Claim Objection?

STANDARDS OF REVIEW

“ ‘An order overruling a claim objectioncan raise legal issues (such as the properconstruction of statutes and rules) which wereview de novo, as well as factual issues(such as whether the facts establish compliancewith particular statutes or rules), which wereview for clear error.’ ... We review de novo














whether a party has standing.” Allen v. U.S.Bank, N.A. (In re Allen), 472 B.R. 559, 565(9th Cir.BAP2012) (quoting Veal v. Am. HomeMortg. Serv., Inc. (In re Veal), 450 B.R. 897,906, 918 (9th Cir.BAP2011)).

DISCUSSION

As a threshold matter, we note certain keyfacts that Green has not disputed. Greenhas not disputed that Greenpoint loaned herroughly $1 million and that she executed theNote and the Deed of Trust in exchange forthe Loan. Green also has not disputed thatGreenpoint recorded the Deed of Trust in theofficial records of San Luis Obispo Countyand that Greenpoint indorsed the Note inblank. Nor has Green disputed that LoanCarewas acting as Waterfall's servicing agent atthe time it filed the Proof of Claim or thatQuantum subsequently succeeded LoanCare asWaterfall's servicing agent.

The sole issue raised in Green's ClaimObjection was Waterfall's standing to file the

Proof of Claim. 6 While there are a number ofdifferent aspects to standing doctrine, Green'sClaim Objection focused on whether Waterfallwas the party entitled to enforce the Note andthe Deed of Trust. This issue implicated theprudential standing requirement that litigantsmust assert their own legal rights and not therights of others. Sprint Commc'ns Co. v. APCCServs., Inc., 554 U.S. 269, 289–90, 128 S.Ct.2531, 2544 (2008); Warth v. Seldin, 422 U.S.490, 499, 95 S.Ct. 2197, 2205 (1975). It alsoimplicated the “real party in interest rule,” CivilRule 17(a), which provides that “[a]n action

must be prosecuted in the name of the real party

in interest.” 7

We have plowed this same ground severaltimes recently, most notably in two publisheddecisions, In re Allen, 472 B.R. 559, and Inre Veal, 450 B.R. 897. In those two decisions,we generally held that a party has standing tofile a proof of claim based on a promissorynote secured by real property if that party isa “person entitled to enforce” the note under§ 3–301 of the Uniform Commercial Code(“UCC”). In re Allen, 472 B.R. at 565; In reVeal, 450 B.R. at 902. In relevant part, a partyis a person entitled to enforce the note if it isa “holder” of the note, as defined in UCC § 1–201(b)(21)(A). In re Allen, 472 B.R. at 565; Inre Veal, 450 B.R. at 910–11. Under UCC § 1–201(b)(21)(A), a “holder” includes a “person

in possession of a negotiable instrument 8 thatis payable ... to bearer....” In turn, a negotiableinstrument is payable to the bearer when it isindorsed in blank. See UCC § 3–205(b) (“Ifan indorsement is made by the holder of aninstrument and it is not a special indorsement,it is a ‘blank indorsement.’ When indorsed inblank, an instrument becomes payable to bearerand may be negotiated by transfer of possessionalone until specially indorsed.”); see also In reAllen, 472 B.R. at 567.

*7 Here, the record indicates that Waterfall'sservicing agent Quantum presented to thebankruptcy court the original Note indorsed in

blank by Greenpoint, 9 thereby demonstratingthat it was in possession of the Note and that theNote was payable to bearer. Based thereon, thebankruptcy court determined that Waterfall hadstanding to file a proof claim based on the Noteand the Deed of Trust. In light of our holdings














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in Allen and Veal, we perceive no error in thebankruptcy court's ruling.

On appeal, Green principally argues that thebankruptcy court should not have applied UCCArticle 3 to determine Waterfall's standing.Green claims that Division 3 of the CaliforniaCommercial Code—California's version ofUCC Article 3 does not apply. Instead,Green claims that a number of provisions ofCalifornia's Civil Code do apply, and that theseprovisions prohibit the transfer of any interestin real property, including the assignmentof a deed of trust, absent an executed andrecorded writing. But Green's legal contentionsare simply wrong.

Green first argues that Cal. Com.Code Division3 does not apply because Cal. Com.Code §9109(d)(11) expressly excepts from Division3's coverage “the creation or transfer of

an interest in or lien on real property.” 10

But Green misreads the statute. On its face,Cal. Com.Code § 9109(d)(11) only governsDivision 9; it simply does not address Division3 and its coverage of negotiable instrumentssuch as the mortgage note at issue here.

Green next argues that Waterfall's standingshould not be based on Cal. Com.Code §3301 because that statute is inconsistent withthe requirements under the Cal. Civil Codefor transferring an interest in California realproperty. In making this argument, Green

invokes the “lex situs” doctrine 11 and statesthat the statutory scheme implemented by theCal. Civil Code, particularly Cal. Civil Code

§ 1091, 12 contemplates that deeds of trustand other transfers of real property cannot bemade except by operation of an executed and

recorded writing memorializing the transfer.According to Green, because Waterfall hasadmitted that there were no written assignmentsof the Deed of Trust executed or recorded, anypurported transfer to Waterfall of the Deed ofTrust was invalid under Cal. Civil Code § 1091,and the purported transfer to Waterfall of theNote consequently was a nullity.

But Green once again misreads the statute.Cal. Civil Code § 1091 on its face explicitlypermits transfers of interests in real property“by operation of law.” And it is settledCalifornia law that a lien on real property isincident to the underlying obligation and that avalid transfer of the underlying obligation alsocarries with it the lien. See Cal. Civil Code §2936 (“The assignment of a debt secured bymortgage carries with it the security.”). Accord,Cockerell v. Title Ins. & Trust Co., 42 Cal.2d284, 291, 267 P.2d 16, 20 (Cal.1954); Marxv. McKinney, 23 Cal.2d 439, 443, 144 P.2d353, 356 (Cal.1944); Lewis v. Booth, 3 Cal.2d345, 349, 44 P.2d 560, 562 (Cal.1935); UnionSupply Co. v. Morris, 220 Cal. 331, 338–40,30 P.2d 394, 397 (Cal.1934); Seidell v. TuxedoLand Co., 216 Cal. 165, 170, 13 P.2d 686,688 (1932); Ord v. McKee 5 Cal. 515, 516(Cal.1855); Domarad v. Fisher & Burke, Inc.,270 Cal.App.2d 543, 553, 76 Cal.Rptr. 529,535 (Cal.App.1969); Santens v. Los AngelesFin., 91 Cal.App.2d 197, 201–02, 204 P.2d619, 621–22 (Cal.App.1949); Poe v. Francis132 Cal.App. 330, 335–36, 22 P.2d 801, 803(Cal.App.1933); see also Cal. Comm'l Code §9203(g) (“The attachment of a security interestin a right to payment or performance securedby a security interest or other lien on personalor real property is also attachment of a securityinterest in the security interest, mortgage, or




































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other lien.”); Carpenter v. Longan, 83 U.S.271, 275 (1872) (“The transfer of the notecarries with it the security, without any formalassignment or delivery, or even mention of thelatter.”).

*8 In short, under long-settled California law,the valid transfer of the Note carried with it anassignment of the Deed of Trust. Because wealready have held above that the Note was dulynegotiated to Waterfall under Cal. Com.Code §3201, Waterfall also qualifies by operation oflaw as the assignee of the Deed of Trust.

Green also incorrectly relies on several other

Cal. Civil Code statutes. 13 As a group, theseother statutes deal with the rights of competingtransferees of the same real property. They donot address the question of who Green must payon account of her Loan obligations, which is thebasic question raised by her Claim Objection.Put another way, it simply is irrelevant tothe resolution of Green's standing issues who,among competing claimants, might be entitledto the economic value underlying the Note andthe Deed of Trust. See In re Veal, 450 B.R.at 912. So long as Green knows that, to theextent she pays Waterfall, her Loan obligationslegally will be considered satisfied under Cal.Com.Code § 3602(a), Green should be content.See id.

Alternately, Green argues that Greenpointimpermissibly “split” the Note and the Deedof Trust, by designating itself as payee in theNote while allowing MERS to be named as the“beneficiary” in the Deed of Trust. Accordingto Green, this split effectively rendered both theNote and the Deed of Trust unenforceable.

Green's splitting argument ignores the plainlanguage of the Deed of Trust. That languagenominally designates MERS as “beneficiary”but further specifies that MERS serves asbeneficiary “solely as nominee” for the“lender”—in this case Greenpoint and itssuccessors. Based on the same deed oftrust language, the Ninth Circuit has heldthat MERS's nominal beneficiary status, asnominee for the lender, does not irreparablysplit the Note the from the Deed of Trust,so long as MERS continues to serve asthe nominee or agent for the lender orits successors. See Cervantes, 656 F.3d at1044. Cervantes' holding is consistent witha number of published decisions within thiscircuit opining that MERS merely servesas the agent for the true beneficiary. See,e.g., Cedano v. Aurora Loan Servs., LLC(In re Cedano), 470 B.R. 522, 531 (9thCir.BAP2012) (identifying MERS as nominalbeneficiary and agent/nominee for lender);Weingartner v. Chase Home Fin., LLC,702 F.Supp.2d 1276, 1279–81 (D.Nev.2010)(same); see also Gomes v. Countrywide HomeLoans, Inc., 192 Cal.App.4th 1149, 1156 n. 7,121 Cal.Rptr.3d 819, 825 n. 7 (Cal.App.2011)(identifying MERS as the nominee, or agent, ofthe noteholder).

In light of the decisions cited above, we arenot persuaded that the Note and the Deedof Trust have been irreparably split in amanner that would render the Loan documentsunenforceable.

Finally, Green complains that she was notgiven sufficient time to respond to Waterfall'sSupplemental Brief. Green further points outthat the bankruptcy court admitted that it did







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not have an opportunity to review her writtenresponse to the Supplemental Brief before thecourt orally announced its decision to overrulethe Claim Objection, on January 11, 2011.

*9 Nonetheless, the record reflects thatthe bankruptcy court did not enter its finalorder disposing of the Claim Objection untilsix months later, in July 2011. During theintervening six months, Green made the samearguments in her Post-hearing Motions, whichthe court explicitly addressed and rejected in itsMay 3, 2011 order denying the Post–HearingMotions. Under these circumstances, Greencannot establish that she was prejudiced by the

so-called insufficient amount of time she had torespond to Waterfall's Supplemental Brief. Seegenerally Rosson v. Fitzgerald (In re Rosson),545 F.3d 764, 775–77 (9th Cir.2008) (holdingthat inadequate notice was harmless errorunless the appellant demonstrated prejudice).

CONCLUSION

For all of the reasons set forth above,we AFFIRM the bankruptcy court's orderoverruling Green's Claim Objection and itsorder denying Green's Post-hearing Motions.

Footnotes** Hon. M. Elaine Hammond, United States Bankruptcy Judge for the Northern District of California, sitting by designation.

* This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have (see Fed.


1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532, and all “Rule”

references are to the Federal Rules of Bankruptcy Procedure, Rules 1001–9037. All “Civil Rule” references are to the Federal Rules

of Civil Procedure.

2 Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034 (9th Cir.2011), recently described MERS and its general purpose:

MERS is a private electronic database, operated by MERSCORP, Inc ., that tracks the transfer of the “beneficial interest” in

home loans, as well as any changes in loan servicers. After a borrower takes out a home loan, the original lender may sell all

or a portion of its beneficial interest in the loan and change loan servicers. The owner of the beneficial interest is entitled to

repayment of the loan. For simplicity, we will refer to the owner of the beneficial interest as the “lender.” The servicer of the

loan collects payments from the borrower, sends payments to the lender, and handles administrative aspects of the loan. Many

of the companies that participate in the mortgage industry—by originating loans, buying or investing in the beneficial interest

in loans, or servicing loans—are members of MERS and pay a fee to use the tracking system.

* * *

[The process of recording assignments of deeds of trust] became cumbersome to the mortgage industry, particularly as the

trading of loans increased. It has become common for original lenders to bundle the beneficial interest in individual loans and

sell them to investors as mortgage-backed securities, which may themselves be traded. MERS was designed to avoid the need

to record multiple transfers of the deed by serving as the nominal record holder of the deed on behalf of the original lender

and any subsequent lender.

Id. at 1038–39 (citing Jackson v. Mortg. Elec. Reg. Sys., Inc., 770 N.W.2d 487, 490 (Minn.2009), and Robert E. Dordan, Mortgage

Electronic Registration Systems (MERS), Its Recent Legal Battles, and the Chance for a Peaceful Existence, 12 Loy. J. Pub. Int.

L. 177, 178 (2010)).

3 In essence, Green's motion objected to the Proof of Claim. Accordingly, we hereinafter refer to this motion as the “Claim Objection.”

4 Division 3 of the California Commercial Code is California's version of Article 3 of the Uniform Commercial Code.

5 We explain Green's reference to the lex situs doctrine in our merits discussion, infra.

6 In the reply she filed in the bankruptcy court in support of her Claim Objection, Green sought for the first time to add her

Unconscionability Claims for consideration. By way of these claims, Green apparently sought to have the court rule that Waterfall




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should not be permitted to enforce the Note and the Deed of Trust even if Waterfall established its standing. Green has elaborated on

these claims in her appeal briefs. However, in addition to belatedly raising her Unconscionability Claims, Green never offered any

evidence to support them. In fact, these claims were nothing more than unsubstantiated allegations of general misconduct by MERS

and its members, which Green generally failed to connect to her particular Loan. Consequently, Green's Unconscionability Claims

cannot and do not support reversal of the orders on appeal.

7 Rule 9014(c) makes Civil Rule 17 applicable in contested matters, which include claim objections. In re Allen, 472 B.R. at 565 n. 3.

8 The bankruptcy court's ruling indicates that it treated Green's Note as a negotiable instrument. Green has not challenged that aspect

of the bankruptcy court's ruling. In any event, even if we assume that the Note did not meet all the formal requirements to qualify as

a true negotiable instrument under UCC § 3–104, there were sufficient grounds for the court to have treated the Note as if it were a

negotiable instrument for purposes of determining who is entitled to enforce the Note. See In re Veal, 450 B.R. at 909 & nn. 14, 15.

9 Green has not disputed that Greenpoint indorsed the Note in blank, nor is there any evidence in the record which would support a

contrary finding. See generally UCC § 3–308 (providing a presumption that indorsement signature is presumed to be authentic and

authorized); Cal. Com.Code § 3308 (same).

10 The parties to this appeal seem to agree that California law should be applied to resolve their dispute. Given that the Note is silent,

that Green resides in California and that she executed the Note and the Deed of Trust in California, we agree. See Cal. Com.Code

§ 1301(b); see also Barclays Discount Bank Ltd. v. Levy, 743 F.2d 722, 724–25 (9th Cir.1984); In re Veal, 450 B.R. at 921 n. 41

(applying Arizona's counterpart to Cal. Com.Code § 1301(b) under similar circumstances). In any event, Green has not pointed us

to any material distinction for purposes of this appeal between Division 3 of the Cal. Com.Code and Article 3 of the UCC. Nor are

we aware of any.

11 As used by Green, the “lex situs” doctrine generally requires legal issues involving real property to be determined according to the

laws of the state in which the property is situated. See Black's Law Dictionary (9th Cir2009); see also Restatement (Second) of

Conflict of Laws § 223(1) (1971)(“Whether a conveyance transfers an interest in land and the nature of the interest transferred are

determined by the law that would be applied by the courts of the situs.”). Green has not explained why, under the lex situs doctrine,

the Cal. Civil Code would be entitled to any greater deference than the Cal. Com.Code.

12 Cal. Civil Code § 1091 provides:

Requisites for transfer of certain estates. An estate in real property, other than an estate at will or for a term not exceeding one

year, can be transferred only by operation of law, or by an instrument in writing, subscribed by the party disposing of the same,

or by his agent thereunto authorized by writing.

13 These statutes include Cal. Civil Code §§ 1107, 1169, 1214 and 1215. For the sake of completeness, each of these statutes is set

forth below.

Section 1107 provides:

Grant, how far conclusive on purchasers. Every grant of an estate in real property is conclusive against the grantor, also

against every one subsequently claiming under him, except a purchaser or incumbrancer who in good faith and for a valuable

consideration acquires a title or lien by an instrument that is first duly recorded.


In what office. Instruments entitled to be recorded must be recorded by the County Recorder of the county in which the real

property affected thereby is situated.


Every conveyance of real property or an estate for years therein, other than a lease for a term not exceeding one year, is void

as against any subsequent purchaser or mortgagee of the same property, or any part thereof, in good faith and for a valuable

consideration, whose conveyance is first duly recorded, and as against any judgment affecting the title, unless the conveyance

shall have been duly recorded prior to the record of notice of action.


Conveyance defined. The term “conveyance,” as used in Sections 1213 and 1214, embraces every instrument in writing by

which any estate or interest in real property is created, aliened, mortgaged, or incumbered, or by which the title to any real

property may be affected, except wills.






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In re Oliver, Slip Copy (2012)



is currently available.United States Bankruptcy Appellate Panel

of the Ninth Circuit.

In re Paula Marie OLIVER, Debtor.Paula Marie Oliver, Appellant,

v.

United States Trustee, 2 Appellee.

BAP No. CC–11–1482–PaKiRn.| Bankr.No. 11–13132–MT. |

Submitted Without Oral Argument on

Sept. 20, 2012. 3 | Filed Oct. 23, 2012.

Appeal from the United States BankruptcyCourt for the Central District of California,Maureen Tighe, Bankruptcy Judge, Presiding.


Appellant Paula Marie Oliver pro se on brief.

Before PAPPAS, KIRSCHER and

RENN, 4 Bankruptcy Judges.

Opinion

MEMORANDUM 1

*1 Appellant Paula Marie Oliver (“Debtor”)appeals the order of the bankruptcy court

dismissing her chapter 13 5 bankruptcy case.We AFFIRM.

FACTS 6

This appeal arises out of a chapter 13case commenced by Debtor on March 14,2011. Bankr.Case No. 11–13132. However, onJanuary 5, 2010, she had filed an earlier chapter13 petition, Bankr.Case No. 10–10098 (the“First Bankruptcy”). In the Schedule A filedin the First Bankruptcy, Debtor claimed to bethe owner of property in Tarzana, California(the “Property”). The First Bankruptcy wasdismissed on February 15, 2010, for Debtor'sfailure to make required plan payments. Debtordid not appeal that dismissal.

On April 15, 2010, the Property was soldat a foreclosure sale to Bank of NewYork as Trustee for the CertificateholdersCWALT, Inc. Alternative Loan Trust 2006–OA11 Mortgage Pass-through Certificates,Series 2006–OA11 (“BONY”). A trustee'sdeed upon sale conveying title to the Propertyto BONY was recorded on April 26, 2010, inthe Official Records of Los Angeles County.

BONY commenced an unlawful detainer actionagainst Debtor and others on August 17, 2010,seeking, among other things, Debtor's evictionfrom the Property. Bank of New York v. Oliver,et al., Case no. 10B05053 (Superior Court, LosAngeles County, August 17, 2010) (the “StateCourt Proceedings”).

As noted above, Debtor filed the chapter 13petition initiating the bankruptcy case in thisappeal on March 14, 2011 (the “Bankruptcy onAppeal”). Bankr. Case No. 11–13132. Again,on her Schedule A she claimed ownership ofthe Property. Debtor filed a chapter 13 plan on

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March 29, 2011, in which she proposed to makesixty payments of $3,000 per month.

BONY objected to confirmation of the planon April 19, 2011, and moved to dismiss thebankruptcy case, because Debtor no longerowned the Property.

There were a number of deficiencies in Debtor'sbankruptcy petition and schedules and, on April26, 2011, the bankruptcy court set a hearing forMay 5, 2011, to allow Debtor to explain herposition.

In addition, the original § 341(a) meeting ofcreditors in this case was scheduled to occur onApril 20, 2011 (the “First § 341(a) Meeting”).On April 22, 2011, Debtor wrote a letter to thebankruptcy court stating that she was unawareof the creditors' meeting date and requestingthat the § 341(a) meeting be rescheduled.Following the hearing on May 5, 2011, thecourt granted Debtor's request and rescheduledthe § 341(a) meeting for June 15, 2011 (the“Second § 341(a) Meeting”).

Despite having rescheduled it, on May 12,2011, the bankruptcy court improvidentlyentered an order dismissing the case forDebtor's failure to attend the First § 341(a)Meeting. Debtor moved to vacate the dismissal.The bankruptcy court vacated the dismissal byorder entered June 7, 2011, and again reset the§ 341(a) meeting, this time for July 13, 2011(the “Third § 341(a) Meeting”).

On June 29, 2011, the bankruptcy court againimprovidently entered an order dismissing thecase for Debtor's failure to attend the Second§ 341(a) Meeting. The clerk closed the case

on June 30, 2011. Later that same day thebankruptcy court set aside the clerk's order andreopened the case for further administration.On July 7, 2011, the clerk issued a NoticeVacating the Dismissal Order and once againreset the § 341(a) meeting for July 27, 2011(the “Fourth § 341(a) Meeting”). The docketreflects that Debtor was notified of the date forthe Fourth § 341(a) Meeting by mail on July 8,2011.

*2 According to a letter sent by Debtorto the bankruptcy court on August 4, 2011,she had contacted the chapter 13 trustee onJuly 26, 2011, the day before the scheduledFourth § 341(a) Meeting, and requested thatit be postponed because she had anothercourt appearance on that date. Apparentlyanticipating dismissal, Debtor prematurelymoved to vacate the dismissal.

By order entered August 8, 2011, thebankruptcy court dismissed the bankruptcycase for Debtor's failure to attend the Fourth§ 341(a) Meeting and/or failure to make post-petition payments to the chapter 13 trustee. Thebankruptcy court denied the premature motionto vacate dismissal on August 12, 2011.

Debtor filed a timely appeal of the dismissalorder on August 22, 2011.

Events Subsequent to the Appeal

Although an appellate court does not ordinarilyconsider events in the bankruptcy court afterthe appeal is filed, it may do so when“extraordinary circumstances” occur that affectthe relief that may be offered. Brown & Cole




Stores, LLC v. Associated Grocers, Inc. (In reBrown & Cole Stores, LLC), 375 B.R. 873,877 (9th Cir.BAP2007)(quoting Frankfurth v.Cummins (In re Cummins), 20 B.R. 652, 653(9th Cir.BAP1982) (taking judicial notice ofpost-appeal voluntary dismissal of a case));accord Pakootas v. Teck Cominco Metals, Ltd.,452 F.3d 1066, 1071 (9th Cir.2006) (takingjudicial notice of a settlement agreementreached in a case after the appeal was filed).Because we believe this case presents goodcause to do so, the Panel takes judicial notice ofthe following post-appeal events as shown onthe docket of the bankruptcy court.

Even though the dismissal order was notstayed, BONY filed a motion for relief fromstay to proceed to evict Debtor on April 13,2012. The bankruptcy court granted relief fromstay to proceed with eviction by order enteredMay 29, 2012. Debtor did not appeal the May29 order granting stay relief. Instead, she filedyet a third chapter 13 petition on June 4,2012. Bankr.Case No. 12–15188 (the “NewBankruptcy”). BONY again moved for relieffrom stay. The court granted the stay reliefmotion on August 8, 2012, and, further, grantedauthority to the sheriff or marshal to carry outan eviction regardless of any future bankruptcyfiling by Debtor for 180 days. Debtor's motionto vacate the order on August 10, 2012, wasdenied by the court the same day. The time toappeal the relief from stay and reconsideration/vacatur has expired. There is no indication inthe docket of the New Bankruptcy that Debtorattended the § 341(a) meeting or made anypayments to the trustee, although it remainsopen at this time.

JURISDICTION

The bankruptcy court had jurisdiction under28 U.S.C. §§ 1334 and 157(b)(2)(A). We havejurisdiction under 28 U.S.C. § 158.

ISSUE

Whether the bankruptcy court abused itsdiscretion in dismissing Debtor's bankruptcycase for failure to attend the § 341(a) meetingof creditors and/or to make payments to thechapter 13 trustee.

STANDARD OF REVIEW

*3 The bankruptcy court's decision to dismissa chapter 13 case is reviewed for abuseof discretion. Ellsworth v. Lifescape Med.Assocs., PC (In re Ellsworth), 455 B.R. 904,914 (9th Cir.BAP2011).

DISCUSSION

Debtor presumably sought relief in this appealso that she may reorganize her debts, preventeviction from her home and prevent wagegarnishment. But as discussed above, eventsduring the pendency of this appeal renderthe Panel's ability to grant Debtor that reliefunnecessary or futile.

Debtor's New Bankruptcy remains open. Ifpossible, she may propose to reorganize herdebts in that case. Debtor has also had a full









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and fair opportunity in the New Bankruptcyto prevent eviction from her home. Thebankruptcy court in the New Bankruptcygranted relief to BONY to proceed withDebtor's eviction, and prohibited Debtor frominterfering with that eviction for 180 days.Debtor did not appeal that final order.

Although, in theory, the Panel might overturnthe bankruptcy court's dismissal of theBankruptcy on Appeal, clearly, the reliefDebtor seeks in the Bankruptcy on Appeal,because of subsequent events, is now ofno consequence. However, while we couldpossibly dismiss this appeal as moot, we electinstead to dispose of this appeal on the merits.

Debtor objects to the dismissal of theBankruptcy on Appeal based on the numerousclerical errors made in the bankruptcy court.Although it is clear that the first twodismissals of the case were improvident, theywere properly and promptly corrected by thebankruptcy court. However, there were noclerical errors made in connection with theorder dismissing the bankruptcy case for a thirdtime on August 8, 2011, the order that is thesubject of this appeal. The bankruptcy courtdid not abuse its discretion in entering thatdismissal.

The August 8 dismissal was entered becauseDebtor had not attended the Fourth § 341(a)Meeting and/or had not made the payments tothe chapter 13 trustee required by § 1326(a)(1).Because we conclude that the bankruptcy courtdid not abuse its discretion in dismissing thebankruptcy case for failure to attend the Fourth§ 341(a) Meeting, we do not reach the questionwhether the court should have dismissed the

case for failure to make the payments required

by § 1326(a)(1). 7

A chapter 13 debtor “must appear and submitto examination under oath at a meeting ofcreditors under section 341(a) of this title.” §343. A bankruptcy court may dismiss a petitionfor the unexcused failure by the debtor to attendthe § 341(a) meeting of creditors. Bernard v.Coyne (In re Bernard), 40 F.3d 1028, 1030 (9thCir.1994); In re Burgos, 476 B.R. 107, 113(Bankr.S.D.N.Y., 2012) (chapter 13 debtor'sunexcused failure to attend § 341(a) meeting isgrounds for dismissal); In re Yensen, 187 B.R.676, 677–78 (Bankr.D.Idaho 1995) (chapter13 debtor's willful failure to attend § 341(a)meeting was grounds for dismissal).

Debtor missed the First § 341(a) Meetingon April 20, 2011. Two days later, sherequested that the bankruptcy court reschedulethe meeting which, after a hearing on May5, 2011, the court reset for June 15, 2011.The Second § 341(a) Meeting and Third §341(a) Meeting were cancelled as a result ofthe clerical errors discussed above. However,on July 8, 2011, Debtor was notified of thenew date for the Fourth § 341(a) Meeting.She apparently waited until the day beforethe scheduled hearing to request the chapter13 trustee to reschedule that meeting becauseof a conflict with other court proceedings.The trustee's office declined to do so anddirected Debtor to attend the meeting. Debtorelected not to attend the § 341(a) meetingand waited until August 4, 2011, to explainto the bankruptcy court the reasons for herabsence. Under the facts of this case, thebankruptcy court's denial of Debtor's requestfor yet another § 341(a) meeting and dismissal










of her bankruptcy case, in part for failure toattend the Fourth § 341(a) Meeting, was not anabuse of discretion.

*4 Debtor's sole defense to the dismissal forfailing to attend the Fourth § 341(a) Meetingwas that she was not given a hearing beforethe bankruptcy court so she could explain heractions. However, Debtor was notified at thebeginning of the case of the consequencesof failing to attend the § 341(a) meeting. Inparticular, the Notice of Chapter 13 BankruptcyCase Meeting to Creditors & Deadlines sent toDebtor on March 13, 2011, cautioned that:

Appearance by debtor(s) andthe attorney for the debtor(s)is required at both theSection 341(a) meeting andthe confirmation hearing.Unexcused failure by thedebtor(s) to appear at eitherthe Section 341(a) meetingand/or the confirmationhearing may result indismissal of the case.

Despite this notice, Debtor failed to attendthe First § 341(a) Meeting. Even so, Debtorwas given an opportunity at the May 5, 2011,hearing to explain her failure to attend theFirst Meeting, and the court in the exerciseof its discretion granted her a new hearing

date for the creditors' meeting. The subsequentclerical errors in dismissing the case andresetting the hearing dates were regrettable,but should have impressed on Debtor theimportance of attending the § 341(a) meetingand that dismissal would follow for failureto attend. She was notified of the Fourth §341(a) Meeting date in sufficient time to ask tocontinue it, but delayed contacting the chapter13 trustee until the day before the meeting.Debtor did not attend the meeting in directviolation of instructions to do so, and thendelayed reporting her unexcused absence tothe bankruptcy court for another week. Debtorexplained her reasons for the absence in aletter to the bankruptcy court anticipating thather case would be dismissed, but the courtapparently found those reasons unpersuasive.Under these facts and circumstances, we do notsee how she was prejudiced by the lack of ahearing on dismissal.

Simply put, the bankruptcy court did not abuseits discretion in dismissing Debtor's chapter 13case for her failure to attend the Fourth § 341(a)Meeting.

CONCLUSION

We AFFIRM the order of the bankruptcy courtdismissing the Bankruptcy on Appeal.

Footnotes2 Although named as an appellee by appellant, the U.S. Trustee did not appear in the bankruptcy court or in this appeal.

3 Although the Panel advised appellant that oral argument would not be held unless she requested it, appellant, in a letter on June 5,

2012, made a request for argument. Despite this, appellant did not appear at the scheduled argument.

4 The Honorable Thomas M. Renn, United States Bankruptcy Judge for the District of Oregon, sitting by designation.





5 Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532, and to the

Federal Rules of Bankruptcy Procedure, Rules 1001–9037.

6 Debtor is a pro se appellant who provided few excerpts of record and whose brief is difficult to understand. We have exercised our

discretion to consult the bankruptcy court's docket in Debtor's bankruptcy case to assist us in ascertaining the relevant facts. O'Rourke

v. Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 955, 958 (9th Cir.1989).

7 Because of an inadequate record, we are unable to determine if a party in interest had moved for dismissal and if Debtor had notice of

possible dismissal for failure to make the payments, which are requirements for dismissal under § 1307(c)(4) (“failure to commence

making timely payments under section 1326 of this title”). However, there are adequate grounds for dismissal for failure to attend

the Fourth § 341(a) Meeting. We may affirm the bankruptcy court on any basis supported in the record. United States v. Hemmen,

51 F.3d 883, 891 (9th Cir.1995); Leavitt v. Soto (In re Leavitt), 209 B.R. 935, 940 (9th Cir.BAP1997).


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