UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
September 28, 2012
IN RE: JUAN CARLOS ZAPATA AND PATRICIA ULTRERAS, DEBTORS. JUAN CARLOS ZAPATA; PATRICIA ULTRERAS, APPELLANTS,
UNITED STATES TRUSTEE,*FN1 APPELLEE.
Appeal from the United States Bankruptcy Court for the Central District of California Honorable Robin Riblet, Bankruptcy Judge, Presiding Bk. No. 10-14200-RR
SUSAN M SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
Submitted Without Oral Argument on September 20, 2012*fn3
Filed - September 28, 2012
Before: PAPPAS, KIRSCHER and NOVACK,*fn4 Bankruptcy Judges.
Appellants Juan Carlos Zapata and Patricia Ultreras
("Debtors") appeal the orders of the bankruptcy court granting relief from the stay to Aurora Loan Services, LLC ("Aurora"), dismissing their chapter 13*fn5 case, denying recusal of the
bankruptcy judge, and denying removal of the chapter 13 trustee, Elizabeth F. Rojas ("Trustee").
Debtors filed a chapter 13 petition on August 13, 2010. The petition was not accompanied by required schedules and statements, and Debtors were directed to provide the missing documents by
August 27, 2010.
The § 341(a) meeting of creditors was scheduled for September 15; a plan confirmation hearing was set for October 29, 2010. On the Notice of Chapter 13 Bankruptcy Case Meeting to Creditors & Deadlines, Debtors were cautioned that:
Appearance by debtor(s) and the attorney for the debtor(s) is required at both the Section 341(a) meeting and the confirmation hearing. Unexcused failure by the debtor(s) to appear at either the Section 341(a) meeting and/or the confirmation hearing may result in dismissal of the case.
2 Debtors filed a request for additional time to file the 3 missing schedules, statements and other documents on August 25, 4 2010. The bankruptcy court granted the request on September 1, 5 allowing Debtors until September 10 to submit the missing 6 documents. Later in the bankruptcy case, in the court's 7 Memorandum Decision of April 4, 2011 (the "Memorandum Decision"), 8 the court acknowledged that all required documents, including the 9 Chapter 13 Plan, were submitted by September 10, 2010. Debtors 10 filed the plan on September 10, 2010, in which they proposed to 11 make thirty-six monthly payments to the trustee of $154.17 each.
12 Aurora filed a motion for relief from stay on August 31, 13 2010. Aurora alleged that it had acquired title to Debtors' 14 residential real property in Ventura, California (the "Property") 15 via a foreclosure sale and recorded trustee's deed. By its relief 16 from stay motion, Aurora sought authority to evict Debtors from 17 the Property. The bankruptcy court would later observe that, 18 "according to the bankruptcy docket," Debtors did not file an 19 opposition to Aurora's motion. Memorandum Decision at 3. 20 However, while incorrectly docketed as a "Motion to Extend Time," 21 Debtors informed the court in a pleading on September 15, 2010, 22 that they opposed Aurora's motion, and sought additional time to 23 respond. Even so, their request indicated in the caption: "Oral 24 argument not required."*fn7
The docket reflects that a contested hearing was held on September 21, 2010. The bankruptcy court entered its order granting relief from stay to Aurora on September 24, 2010. The relief from stay order was not timely appealed.
The chapter 13 trustee sent the parties in Debtors' case a notice on September 28, 2010, rescheduling the § 341(a) meeting to October 13, 2010 and, on September 29, 2010, sent a notice resetting the confirmation hearing to November 19, 2010.
The bankruptcy court dismissed the Debtors' chapter 13 case on October 19, 2010 for their failure to attend the § 341(a) meeting and/or failure to make payments required by § 1326. In its Memorandum Decision, the court would later state that Debtors had provided no evidence, by affidavit or declaration, that they attended the meeting or provided the documents required by Local Bankr. R. 3015-1(c) (evidence of current income, including pay stubs, tax returns or other equivalent documentation).
Additionally, the court would also observe that debtors had never provided evidence that they were current in making the plan payments required by § 1326.
Debtors filed an objection to dismissal on October 25, 2010. Debtors stated that they did, indeed, attend the creditors meeting 1 on October 13, although they did not support their allegation with 2 a sworn statement. They did not assert that they had begun making 3 plan payments, even though the first payment under their plan was 4 due no later than September 13, 2010. § 1326. Finally, Debtors 5 demanded the recusal of the bankruptcy judge and removal of 6 Trustee. The objection to dismissal was captioned "No oral 7 argument requested." An identical copy of the October 25 8 objection was filed with the bankruptcy court on November 8, 2010.
9 Debtors' bankruptcy case was closed on December 8, 2010. 10 Debtors moved to reopen the case on March 16, 2011 (the 11 "Reopening Motion"). The Reopening Motion is missing from the 12 bankruptcy docket, and no copy was provided to the Panel. 13 According to the bankruptcy court's Memorandum Decision, Debtors' 14 Reopening Motion asked the court to consider Debtors' October 25 15 objection as a Rule 9023 reconsideration motion, and to reopen the 16 case to allow Debtors to prosecute that reconsideration motion, as 17 well as to provide Debtors an opportunity to convert their case to 18 chapter 7. According to the court, Debtors sought reconsideration 19 because, in their view, there had been a clear error by the court 20 because Debtors did attend the § 341(a) creditors meeting, because 21 the court failed to provide "notice and a hearing" of the 22 impending dismissal of the bankruptcy case as required by 23 § 1307(c), and because the court's failure to comply with 24 § 1307(c) deprived them of the opportunity to convert their case 25 to chapter 7. The bankruptcy court granted the request to reopen 26 the bankruptcy case on April 6, 2011 (the "Reopening Order"). The 27 Reopening Order referred to the court's Memorandum Decision of the 28 same date for its findings and conclusions regarding the court's -5- 1 reasons for dismissal, and reopened the case to allow Debtors to 2 convert their case to chapter 7 no later than twenty-one days from 3 entry of the Reopening Order. Also on April 6, the bankruptcy 4 court entered orders denying Debtors' request that the bankruptcy 5 court recuse itself, and denying their request to remove Trustee 6 (the "Recusal Order").
7 The court's Memorandum Decision at the center of this appeal 8 consists of a nine-page explanation of the history of the 9 bankruptcy case and a presentation of the court's findings in 10 support of its decisions to deny reconsideration of the dismissal 11 order and in support of the Recusal Order. In the Memorandum 12 Decision, the bankruptcy court observed that Debtors' October 25 13 objection could properly be viewed as a motion to alter or amend a 14 judgment under Rule 9023 (Civil Rule 59(e)), which was timely 15 submitted within fourteen days of the court's dismissal order. 16 The court denied reconsideration of the dismissal order because 17 the court had made no error in its dismissal order: there was no 18 evidence submitted that Debtors attended the § 341(a) meeting or 19 that they had begun payments required by § 1326. And as to 20 Debtors' assertion that they had no opportunity to convert their 21 case to a case under chapter 7, the court ruled that it had 22 reopened the case and Debtors would be allowed to convert the case 23 to chapter 7 within twenty-one days of entry of the Reopen Order 24 or the case would again be dismissed.
25 As to Debtors' demand that the bankruptcy judge recuse, the 26 court observed that Debtors had not presented any credible 27 evidence that the bankruptcy judge had acted in a manner in which 28 impartiality could be questioned, nor any evidence to show bias or -6- 1 prejudice. The court denied the recusal request. 2 The bankruptcy court also noted that, once assigned, a 3 chapter 13 trustee can be removed only if the court finds "cause" 4 for removal after notice and a hearing. Debtors did not provide 5 notice to Trustee of their request for Trustee's removal. 6 Further, Debtors provided no evidence that would support a finding 7 of cause for removal of Trustee. The court denied the removal 8 motion.
9 On April 6, 2011, the bankruptcy court entered an order 10 denying reconsideration of the dismissal order, except that it 11 would be modified for the limited purpose of allowing Debtors to 12 request conversion of the case to chapter 7, and denying Debtors' 13 request to recuse the bankruptcy judge and remove Trustee (the 14 "Order Denying Reconsideration"). 15 Debtors filed a timely appeal on April 20, 2011.
17 The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 18 and 157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158. 19 ISSUE 20 Whether the bankruptcy court abused its discretion in denying 21 reconsideration of its dismissal order. 22 Whether the bankruptcy court abused its discretion in denying 23 Debtors' request for recusal of the bankruptcy court and removal 24 of Trustee.
STANDARD OF REVIEW
26 The bankruptcy court's denial of reconsideration under 27 Rule 9023 (Civil Rule 59(e)) is reviewed for abuse of discretion. 28 Determan v. Sandoval (In re Sandoval), 186 B.R. 490, 493 (9th Cir. -7- 1 BAP 1995). 2 A court's denial of a motion for recusal of the court is 3 reviewed for abuse of discretion. United States v. Martin, 4 278 F.3d 988, 1005 (9th Cir 2002). 5 A bankruptcy court's denial of a motion to remove a trustee 6 is reviewed for abuse of discretion. Dye v. Brown (In re AFI 7 Holding, Inc.), 530 F.3d 832, 838 (9th Cir. 2008). 8 In determining whether a bankruptcy court abused its 9 discretion, we review whether the bankruptcy court applied the 10 correct rule of law. United States v. Hinkson, 585 F.3d 1247, 11 1262 (9th Cir. 2009) (en banc). We then determine whether the 12 court's application of that rule was illogical, implausible, or 13 without support in inferences that may be drawn from the facts in 14 the record. Id. (quoting Anderson v. City of Bessemer City, N.C., 15 470 U.S. 564, 577 (1985)).
17 As a preliminary matter, we note that Debtors appear to seek 18 review in this appeal of the bankruptcy court's order granting 19 relief from stay to Aurora to proceed with their eviction. This 20 matter is not properly before the Panel. Orders granting relief 21 from stay are final orders. As such, they must be appealed within 22 the fourteen-day period prescribed in Rule 8002(a). Groshong v. 23 Sapp (In re MILA, Inc.), 423 B.R. 537, 542 (9th Cir. BAP 2010). 24 The order granting relief from stay was entered on September 24, 25 2010. Debtors did not appeal that order within the fourteen-day 26 period that expired on October 8, 2010. In any case, such an 27 appeal would likely be moot, in that Debtors informed the 28 bankruptcy court on December 8, 2010, that Aurora had carried out -8- 1 the eviction.
2 I. The bankruptcy court did not abuse its discretion in denying Debtor's Rule 9023 motion to reconsider its dismissal order. 3 4 Debtors filed their objection to the dismissal order on 5 October 25, 2010, six days after the bankruptcy court entered the 6 order on October 19, 2010. Although it was too late to consider 7 the objection before the bankruptcy court dismissed the case, the 8 court was seemingly aware of its responsibility to treat pro se 9 litigants and their pleadings with liberality. Kashani v. Fulton 10 (In re Kashani), 190 B.R. 875, 883 (9th Cir. BAP 1995).
11 Consequently, the bankruptcy court could properly treat Debtors' 12 objection as a motion for reconsideration of the dismissal order. 13 Rule 9023 (incorporating Civil Rule 59(e)) (which authorizes a 14 motion to alter or amend a judgment filed not later than fourteen 15 days after entry of judgment). 16 Reconsideration under Civil Rule 59(e) is an extraordinary 17 remedy to be used sparingly "in the interests of finality and 18 conservation of judicial resources." Carroll v. Nakatani, 19 342 F.3d 934, 945 (9th Cir. 2003). Courts in the Ninth Circuit 20 should not allow reconsideration simply to allow the litigant a 21 "second bite of the apple." Alexander v. Bleau (In re Negrete), 22 183 B.R. 195, 198 (9th Cir. BAP 1995). According to our Court of 23 Appeals, courts should not reconsider their earlier orders unless 24 there is "newly discovered evidence, [the court] committed clear 25 error, or if there is an intervening change in the controlling 26 law." Kona Enters. v. Estate of Bishop, 229 F.3d 877, 890 (9th 27 Cir. 2000).
28 Debtors assert that the bankruptcy court committed error 1 because the dismissal order was: (1) "based on a falsehood" 2 because, contrary to the dismissal order, Debtors did attend the 3 § 341(a) creditors meeting; and (2) the dismissal order was 4 "against the law" because the case was not dismissed "after notice 5 and a hearing" as required by § 1307, which in turn deprived 6 Debtors of their right to convert the case to chapter 7. Debtors 7 arguments are without merit.
8 The bankruptcy court's dismissal order of October 19, 2010, 9 was entered because Debtors had not attended the § 341(a) meeting 10 "and/or" had not made the payments to the chapter 13 trustee 11 required by § 1326(a)(1). Although under some circumstances the 12 Panel might consider such an order insufficiently clear regarding 13 grounds on which the bankruptcy court dismissed the case, in this 14 case the court also made detailed findings explaining that Debtors 15 had both failed to attend the meeting and had failed to make the 16 payments.
17 A debtor "must appear and submit to examination under oath at 18 a meeting of creditors under section 341(a) of this title." 19 § 343. A bankruptcy court may dismiss a case for the unexcused 20 failure by the debtor to attend the § 341(a) meeting of creditors.
21 Bernard v. Coyne (In re Bernard), 40 F.3d 1028, 1030 (9th Cir. 22 1994); In re Burgos, 476 B.R. 107, 113 (Bankr. S.D.N.Y.) 23 (chapter 13 debtor's unexcused failure to attend § 341(a) meeting 24 is grounds for dismissal); In re Yensen, 187 B.R. 676, 677-78 25 (Bankr. D. Idaho 1995) (chapter 13 debtor's willful failure to 26 attend § 341(a) meeting was grounds for dismissal). 27 Debtors did not provide the bankruptcy court with evidence 28 that they had attended the meeting. Arguments in pleadings and -10- 1 statements of counsel (or of pro se parties) are not evidence. 2 Runningeagle v. Ryan, 686 F.3d 758, 776 (9th Cir. 2012). Thus, 3 the Panel cannot conclude on the record before us that the 4 bankruptcy court erred when it decided that Debtors had not 5 attended the meeting, or that they had not provided the documents 6 required by local bankruptcy rules. Such failure constituted 7 grounds for dismissal of their chapter 13 case. 8 Moreover, Debtors have never argued before the bankruptcy 9 court, or in this appeal, that they began making payments under 10 their plan within thirty days of filing their petition, as 11 required by the Bankruptcy Code. Section 1326 provides that: 12 "(a)(1) Unless the court orders otherwise, the debtor shall 13 commence making payments not later than 30 days after the date of 14 the filing of the plan or the order for relief, whichever is 15 earlier, in the amount -- (A) proposed by the plan to the 16 trustee[.]" § 1326(a)(1)(A). The order for relief in this case 17 was deemed entered on the date of filing the petition, August 13, 18 2010. § 301(b). Debtors' plan provided that they would make 19 payments of $154.17 for thirty-six months. Debtors have not 20 argued in either the bankruptcy court or in this appeal that they 21 made the payments to Trustee, nor have they provided any excuse 22 for any failure to make the payments. Failure to make the 23 payments required by § 1326(a) is a sufficient ground for 24 dismissal of the chapter 13 case. § 1307(c)(4); In re Maali, 25 452 B.R. 325 (D. Mass. 2010); In re Miller, 2009 WL 174902 * 2 26 (S.D.N.Y. 2009); In re Skinner, 2008 WL 2695650 * 5 (Bankr. D. Or. 27 2008); In re Huerta, 137 B.R. 356, 375 (Bankr. C.D. Cal. 1992) 28 ("Debtors' willful failure to make payments to the Chapter 13 -11- 1 Trustee not only constitutes grounds for dismissal under 11 U.S.C. 2 § 1307(c)(4), but also constituted 'willful failure to appear' 3 before this Court in proper prosecution of the instant case, 4 within the meaning of 11 U.S.C. § 109(g)."). Indeed, the one 5 circuit court to rule on failure to pay under § 1326 held that 6 even a ten-day delay in commencing payments, without an adequate 7 explanation, was grounds for dismissal of a chapter 13 petition. 8 In re MacDonald, 118 F.3d 568, 570 (7th Cir. 1997). 9 Debtors have not shown that there was any error in the 10 bankruptcy court's finding that they had not attended the § 341(a) 11 meeting of creditors or that they had not commenced making timely 12 payments as required by § 1326.
13 Debtors also argue that the bankruptcy court erred by
14 to provide them notice, and opportunity for a hearing,
15 the impending dismissal of the bankruptcy case. Debtors
16 incorrect. As discussed above, the bankruptcy court
17 provided the required notice to Debtors at the time they
18 their petition that the failure to attend the § 341(a) meeting
19 creditors may result in dismissal. And in their objection
20 dismissal, Debtors waived any opportunity for a hearing when
21 captioned their pleading, "No oral argument requested."
22 Debtors' argument that the bankruptcy court failed to allow them
23 hearing under § 1307(c) apparently relates to Debtors' interest
24 converting their case to chapter 7. If so, Debtors suffered
25 prejudice, because the bankruptcy court in its order provided
26 Debtors could request to convert the bankruptcy case to a
27 case within twenty-one days of entry of the order.
28 Because Debtors have not established that the
1 court erred in its dismissal order, the court did not abuse its
2 discretion in denying reconsideration of that dismissal order.
3 II. The bankruptcy court did not abuse its discretion in denying
the motions to recuse the bankruptcy court or remove Trustee.
The general recusal statute for federal judges, 28 U.S.C. 6 § 455(a), provides that "any justice, judge, or magistrate of the 7 United States shall disqualify himself in any proceeding in which 8 his impartiality might reasonably be questioned." A judge is also 9 disqualified if he or she demonstrates "a personal bias or 10 prejudice" concerning a party. 28 U.S.C. § 455(b)(1).
These 11 general provisions apply to recusal demands made regarding 12 bankruptcy judges. Focus Media, Inc. v. NBC (In re Focus Media, 13 Inc.), 378 F.3d 922, 929 (9th Cir. 2004). The terms bias or 14 prejudice "connote a favorable or unfavorable disposition or 15 opinion that is somehow wrongful or inappropriate, either because 16 it is undeserved, or because it rests upon knowledge that the 17 subject ought not to possess." Liteky v. United States, 510 U.S. 18 540, 555 (1993). To gauge the merits of a recusal request, the 19 bankruptcy court, and this Panel, must decide "whether a 20 reasonable person with knowledge of all the facts would conclude 21 that a judge's impartiality might reasonably be questioned."
22 Cordoza v. Pac. States Steel Corp., 320 F.3d 989, 999 (9th Cir. 23 2003) (quoting Milgard Tempering, Inc. v. Selas Corp. of America, 24 902 F.2d 703, 714 (9th Cir. 1990)).
Debtors did not present any evidence in the bankruptcy court, 26 or even reasoned argument in this appeal, that would support 27 recusal of the bankruptcy judge. Instead, in their brief they 28 suggest recusal was appropriate because: "Perhaps the court's -13- 1 standards as expressed by Judge Riblet were far too high and meant 2 to discourage ordinary people like ourselves from seeking relief 3 under this nation's laws." Debtors do not allege that the 4 bankruptcy court was impartial, harbored bias or prejudice, or 5 derived its rulings from extra-judicial sources. Rather, it is 6 apparent that they simply do not agree with the court's rulings.
7 Simply disagreeing with the court is not grounds for recusal of a 8 federal judge. Liteky, 510 U.S. at 555. The bankruptcy court did 9 not abuse its discretion in denying Debtors' recusal motion. 10 Similarly, the case law disfavors attempts to remove a 11 trustee from participation in a bankruptcy case. Indeed, a 12 trustee may only be removed if the bankruptcy court finds cause to 13 do so after notice and a hearing. § 324(a).
14 The BAP has previously examined what constitutes cause for 15 removal of a trustee under § 324(a). Dye v. Brown (In re AFI 16 Holding, Inc.), 355 B.R. 139, 149-51 (9th Cir. BAP 2006), aff'd 17 and adopted, 530 F.3d 832, 838 (9th Cir. 2008). The factors to be 18 considered by the bankruptcy court in determining if a trustee 19 should be removed include: (1) a lack of disinterestedness and 20 potential for conflict of interest, id. at 838; (2) perception of 21 the trustee's activity by creditors, id. at 849; or (3) trustee 22 incompetence, misconduct or failure to perform duties, id. at 845. 23 The test for the existence of cause for removal is based on the 24 totality of the circumstances. Id. at 848.
Debtors do not specifically address their objections to 26 Trustee's service in their brief. Indeed, the only documented 27 charge is contained in Debtors' letter to the U.S. Trustee, where 28 they suggest, without elaboration, that Trustee was somehow -14- 1 instrumental in the sheriff's eviction of Debtors from their 2 Property. Debtors do not argue that Trustee's actions amount to 3 misfeasance.
We conclude that Debtors have not shown that any
5 existed to remove Trustee and, therefore, the bankruptcy court
6 not abuse its discretion in denying their motion to
We AFFIRM the orders of the bankruptcy court.