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FILED

APR 13 2015

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

ORDERED PUBLISHED

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. NV-14-1115-JuKuD

)

CHARLES G. MAHAKIAN, ) Bk. No. 2:10-bk-17568-MKN

)

Debtor. ) Adv. No. 2:11-ap-01207-MKN

______________________________)

)

CHARLES G. MAHAKIAN, )

)

Appellant, )

v. ) O P I N I O N

)

WILLIAM MAXWELL INVESTMENTS, )

LLC, )

)

Appellee. )

______________________________)

Argued and Submitted on March 19, 2015

at Las Vegas, Nevada

Filed - April 13, 2015

Appeal from the United States Bankruptcy Court

for the District of Nevada

Honorable Mike K. Nakagawa, Chief Bankruptcy Judge, Presiding

_________________________

Appearances: Mark Bruce Segal argued for appellant Charles G.

Mahakian; David V. Wadsworth, of Sender Wasserman

Wadsworth, P.C., argued for appellee William

Maxwell Investments, LLC.

_________________________

Before: JURY, KURTZ, and DUNN, Bankruptcy Judges.
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JURY, Bankruptcy Judge:

Chapter 71 debtor, Charles G. Mahakian (Debtor), omitted

appellee-creditor William Maxwell Investments, LLC (WMI) from

his schedules in what was originally noticed as a no asset case. 

After Debtor received his § 727 discharge, the chapter 7 trustee

(Trustee) filed a notice of assets, a claims bar date was set,

and notice was sent to creditors. WMI did not receive notice of

the claims bar date and never filed a proof of claim (POC) in

this case. WMI foreclosed on the real property which secured

the debt guaranteed by Debtor and then filed a lawsuit against

Debtor in the state court to collect the deficiency.

In the bankruptcy case, Debtor amended his Schedule F to

include WMI as a creditor. Debtor also filed a POC on WMI’s

behalf well past the claims bar date and the additional thirty

days allowed under Rule 3004. Debtor then commenced this

adversary proceeding requesting a determination that his

obligation to WMI had been discharged, and filed a motion

seeking to have the POC filed on WMI’s behalf deemed as timely

filed under § 523(a)(3)(A) based on excusable neglect

(Retroactive POC Motion).

On the parties’ cross-motions for summary judgment in the

adversary proceeding, the bankruptcy court entered a judgment in

favor of WMI and against Debtor, finding that the prepetition

1 Unless otherwise indicated, all chapter and section

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532,

and “Rule” references are to the Federal Rules of Bankruptcy

Procedure.

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debt of WMI had not been discharged because it had never been

scheduled (MSJ Judgment). The bankruptcy court denied Debtor’s

Retroactive POC Motion in a separate order (Retroactive POC

Order). Debtor appeals from the SMJ Judgment and Retroactive

POC Order. For the reasons stated, we AFFIRM.

I. FACTS2

Debtor and his brother were members in Fountain View

Center, LLC (FVC). In May 2006, Union Bank loaned $1,735,000 to

FVC which was evidenced by a promissory note secured by a deed

of trust against real property located in Maricopa County,

Arizona. Debtor and his brother personally guaranteed the FVC

loan.

On April 27, 2010, Debtor filed a skeletal chapter 7. 

Debtor did not include Union Bank in the creditor mailing matrix

attached to the petition.

The bankruptcy clerk sent out the standard § 341 notice

setting June 2, 2010, as the date for the first meeting of

creditors and August 2, 2010, as the last day for filing

complaints under §§ 523 or 727. The court noticed the case as a

no asset case, advising creditors not to file a POC. Union Bank

did not receive this notice.

In June 2010, Union Bank assigned the promissory note and

deed of trust to WMI.

In mid-July 2010, Debtor filed his schedules and statement

2 As noted by the bankruptcy court, the historical and

procedural facts were either stipulated or not disputed by the

parties.

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of financial affairs (SOFA).3 Debtor did not list the debt owed

to Union Bank, which had been assigned to WMI, in his schedules.

On October 19, 2010, Debtor was granted his § 727

discharge.

The next day, Trustee filed a notice that assets would be

administered for the payment of creditors claims. The clerk

then sent notice to all matrix-identified creditors which set a

deadline of January 24, 2011, for the filing of proofs of claim. 

Neither Union Bank nor WMI received this notice.

The Internal Revenue Service (IRS) timely filed a POC in

the secured amount of $109,205.90, priority unsecured amount of

$38,002.40, and nonpriority unsecured amount of $1,046.65.

In early December 2010, FVC had defaulted on the FVC loan. 

A notice of sale under the deed of trust was recorded and on

April 2, 2011, WMI purchased the property for $1,350,000 at a

non-judicial foreclosure sale. At some point, WMI’s counsel

informed Debtor’s counsel that WMI was owed a prepetition debt

based on a deficiency due to Debtor’s personal guarantee.

On May 24, 2011, Debtor filed an amended Schedule F that

added Union Bank and WMI as unsecured creditors having a

disputed claim in an “unknown” amount based on the loan to FVC. 

Two days later, Debtor served Union Bank and WMI with a copy of

the § 341 notice by mail.

On June 28, 2011, WMI commenced a lawsuit against Debtor,

his brother, and others in the Superior Court for Maricopa

County, Arizona (Case No. CV-2011-053051). Based upon their

3 The bankruptcy court entered two orders extending the

time for Debtor to file his schedules and SOFA.

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personal guarantees of the FVC loan, WMI sought to recover from

Debtor and his brother the balance of the FVC loan in the amount

of $446,516.14. Debtor filed an answer to WMI’s complaint, but

it is unclear whether he asserted his discharge as a defense.

On August 2, 2011, Debtor filed a POC on WMI’s behalf in

his bankruptcy case in the nonpriority amount of $446,516.14. 

Since the claims bar date was January 24, 2011, Debtor had

thirty days under Rule 3004, or until February 23, 2011, to file

a POC on WMI’s behalf.

Debtor then commenced this adversary proceeding against

WMI, seeking a determination that any debt owed to WMI was

discharged under § 727 and requesting injunctive relief to

prevent WMI from collecting the debt in the state court action. 

Debtor amended the complaint to include a claim for attorney’s

fees and costs allegedly based on a violation of the discharge

injunction arising under § 524.

On August 17, 2011, Debtor filed the Retroactive POC Motion

in the bankruptcy case asking the court to “retroactively”

approve his filing of a POC on WMI’s behalf under Rule 3004

based on Rule 9006(b)(1) and the excusable neglect standard

applied in Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd.

P’ship, 507 U.S. 380 (1993). The Pioneer court set forth four

factors for determining whether a party’s neglect of a bar date

was excusable: “the danger of prejudice to the [non-moving

party], the length of the delay and its potential impact on

judicial proceedings, the reason for the delay, including

whether it was within the reasonable control of the movant, and

whether the movant acted in good faith.” Id. at 395.

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Debtor argued that all four factors weighed in favor of the

bankruptcy court finding excusable neglect. First, Debtor

asserted that he would be prejudiced if WMI’s claim passed

through the bankruptcy without being discharged. Debtor argued

that he filed a POC on WMI’s behalf in time to permit payment of

the claim under § 726(a)(2)(C)(ii). Second, Debtor maintained

that the length of delay in filing the POC was only thirty-five

days after WMI sued debtor in Arizona. According to Debtor, it

was not clear until that time that WMI would disagree with his

position that the debt had been discharged. Third, Debtor

contended that there was no sinister motive on his part and he

was under the mistaken impression that, based on an agreement

with his brother, he was no longer obligated under the personal

guaranty to Union Bank. Finally, Debtor argued that he acted in

good faith by filing the POC soon after WMI sued him in Arizona.

WMI opposed Debtor’s motion, contending that under the

plain language of §§ 523(a)(3) and 727(b) the debt was excepted

from discharge because it was neither listed nor scheduled and

WMI had no notice or actual knowledge of the bankruptcy case in

time to timely file a POC. WMI also argued that the excusable

neglect standard under the Pioneer factors was not met in this

case.

At the initial hearing on the Retroactive POC Motion, the

bankruptcy court continued the matter to allow Debtor to file an

additional response to WMI’s opposition. On October 5, 2011,

Debtor filed a supplemental reply. There, Debtor asserted that

§ 726(a)(2)(C) makes timely an otherwise “tardy” claim for

purposes of deeming a claim to have been filed in time to permit

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its payment. In other words, § 523(a)(3)(A)’s timely-filed

requirement includes “tardily” filed claims under

§ 726(a)(2)(C). Debtor also stated that he was not seeking to

have the POC allowed nunc pro tunc as of February 23, 2011,

which was the deadline to file the POC under Rule 3004.

In November 2011, WMI filed a motion to dismiss the amended

complaint for lack of subject matter jurisdiction or,

alternatively, based on a request for abstention. The

bankruptcy court heard WMI’s motion on January 17, 2012, and

took the matter under submission. Pending the outcome of the

dismissal and abstention motion, the Retroactive POC Motion,

which was scheduled to be heard on the same day, was vacated

from the court’s calendar. In July 2012, the bankruptcy court

denied WMI’s dismissal and abstention motion in a memorandum

decision and order. The Retroactive POC Motion was not recalendared.

On June 8, 2012, Trustee filed a notice of final report and

proposed distribution. The final report indicated that the IRS

would receive a payment on a portion of its secured claim, but

that no distribution would be made to nonpriority unsecured

claims in the case. No one filed an objection to Trustee’s

proposed distribution.

On September 24, 2012, Trustee filed his final distribution

report setting forth the payments he had made to creditors in

the case.

In mid-November 2012, the bankruptcy court entered an order

setting a trial in this adversary proceeding. Thereafter, the

parties filed a joint stipulation of facts and cross motions for

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summary judgment. After a hearing on January 16, 2013, the

bankruptcy court took the matter under submission.

On February 28, 2014, the bankruptcy court issued a

memorandum decision denying Debtor’s motion for summary judgment

(MSJ) and granting WMI’s MSJ. In its ruling, the court adopted

the reasoning in Purcell v. Khan (In re Purcell), 362 B.R. 465

(Bankr. E.D. Cal. 2007), a case factually similar to this case. 

The court in In re Purcell cited to Laczko v. Gentran, Inc.

(In re Laczko), 37 B.R. 676, 678-79 (9th Cir. BAP 1984), aff’d

without opinion, 772 F.2d 912 (9th Cir. 1985) (table), which

stated that when a bar date is set and an unscheduled creditor

is deprived of the right to file a timely proof of claim, the

plain language of § 523(a)(3)(A) should be followed - courts had

no power to disregard the clear language of § 523(a)(3)(A). In

the end, the Purcell bankruptcy court concluded that there were

no equitable exceptions to § 523(a)(3)(A) and that its plain

language controlled. Following Purcell, the bankruptcy court

here applied the plain language of § 523(a)(3)(A) to the

undisputed facts and found that all elements for an exception to

discharge were met. On the same day, the bankruptcy court

entered the MSJ Judgment finding that WMI’s debt was excepted

from Debtor’s discharge.

Also on February 28, 2014, the bankruptcy court entered the

Retroactive POC Order denying the motion. The bankruptcy court

construed Debtor’s motion to seek a determination that the

Retroactive POC Motion was filed on August 2, 2011, the same day

as the POC was filed. Indeed, the bankruptcy court found in its

memorandum decision that “it is not entirely clear why the

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Debtor labels the Retroactive POC Motion as seeking relief ‘nunc

pro tunc’.” As a result, the court found that the “relief

requested in the Retroactive POC Motion was immaterial to the

dischargeability of the obligation owed by the Debtor to WMI.” 

Thus, the bankruptcy court did not consider the excusable

neglect standards under Pioneer.

Debtor filed a timely notice of appeal (NOA) from the

“judgment, order, or decree” of the bankruptcy court entered on

February 28, 2014. WMI contends that Debtor’s NOA does not

include an appeal from the Retroactive POC Order. We discuss

the scope of the appeal below.

II. JURISDICTION

The bankruptcy court had jurisdiction pursuant to 28 U.S.C.

§§ 1334 and 157(b)(2)(I). We have jurisdiction under 28 U.S.C.

§ 158.

III. ISSUES

A. What is the scope of this appeal?

B. Did the bankruptcy court abuse its discretion by not

applying the excusable neglect standards to Debtor’s untimely

filed POC?

C. Did the bankruptcy court err by finding that the plain

language of § 523(a)(3)(A) precluded Debtor’s discharge of WMI’s

unscheduled claim?

IV. STANDARDS OF REVIEW

We address the question of our jurisdiction de novo. Menk

v. LaPaglia (In re Menk), 241 B.R. 896, 903 (9th Cir. BAP 1999).

The bankruptcy court’s denial of a request for an extension

of time under Rule 9006 is reviewed for abuse of discretion. 

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Foster v. Double R Ranch Ass’n (In re Foster), 435 B.R. 650, 655

(9th Cir. BAP 2010) (citing Nunez v. Nunez (In re Nunez), 196

B.R. 150, 155 (9th Cir. BAP 1996)). In applying the abuse of

discretion standard, we first “determine de novo whether the

[bankruptcy] court identified the correct legal rule to apply to

the relief requested.” United States v. Hinkson, 585 F.3d 1247,

1261-62 (9th Cir. 2009) (en banc). If the correct legal rule

was applied, we then consider whether its application of the

correct legal standard “was illogical, implausible, or without

support in inferences that may be drawn from the facts in the

record.” Id. at 1263. Only in the event that one of these

three apply are we then able to find that the lower court abused

its discretion. Id. at 1262.

We review the bankruptcy court’s decision to grant or deny

a motion for summary judgment de novo. In re Foster, 435 B.R.

at 655. We also review issues of statutory construction and

conclusions of law de novo. Id.

V. DISCUSSION

A. The Scope of the Appeal

Before reaching the merits, we briefly address the scope of

the appeal. Debtor’s main argument on appeal is that the

bankruptcy court erred by declining to address whether the

excusable neglect standards under Pioneer were met as applied to

Debtor’s tardily filed POC. Debtor maintains that once it is

determined a tardy filing was due to excusable neglect, the

filing is deemed timely for discharge purposes under

§ 523(a)(3)(A) so long as the claim was filed in time for the

creditor to receive payment from the chapter 7 trustee under

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§ 726(a)(2)(C).

WMI contends that Debtor did not raise Rule 9006 and

excusable neglect in his MSJ and his NOA only challenged the MSJ

Judgment. Relying on Shevchynski v. Christiansen, 122 F. App’x

359 (9th Cir. 2005), WMI maintains that we lack jurisdiction to

review an order not identified in the NOA. We disagree.

While it is true that Debtor did not list any specific

judgment or order in his NOA, at the time he filed his appeal,

Rule 8001(a) did not require him to do so. United States v.

Arkison (In re Cascade Roads, Inc.), 34 F.3d 756 (9th Cir.

1994). Since then, the Rules have been amended effective

December 1, 2014, and Rule 8003 now governs the content of a

NOA. In addition, Debtor fully briefed the Rule 9006 and

excusable neglect issue before the bankruptcy court and in his

opening brief before this Panel. WMI responded to those

arguments. The bankruptcy court also addressed the Retroactive

POC Motion in its memorandum decision on the parties’ cross

motions for summary judgment. Finally, Debtor’s submissions in

this appeal show that he also is challenging the Retroactive POC

Order entered on the same date as the MSJ Judgment. Because we

interpret notices of appeal liberally, and WMI has not been

prejudiced or misled by the contents of Debtor’s NOA, we

construe the NOA as covering both the MSJ Judgment and the

Retroactive POC Order. See In re Cascade Roads, Inc., 34 F.3d

at 761–62.

B. The Merits

Our resolution of this case turns on the interpretation of

§ 523(a)(3)(A). Questions of statutory interpretation begin

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with the plain language of the statute. Lamie v. U.S. Tr., 540

U.S. 526, 534 (2004). Section 727 provides that a chapter 7

debtor is discharged from all debts, subject to the exception in

§ 523(a)(3)(A). Section 523(a)(3)(A) states in relevant part:

A discharge under [§] 727 . . . of this title does not

discharge an individual debtor from any debt— . . .

(3) neither listed nor scheduled . . . with the name .

. . of the creditor to whom such debt is owed, in time

to permit— . . . timely filing of a proof of claim,

unless such creditor had notice or actual knowledge of

the case in time for such timely filing . . . .

The language contained in § 523(a)(3)(A) is clear and not

ambiguous: a debt is excepted from discharge if the creditor

was neither listed nor scheduled and did not otherwise know of

the bankruptcy case in time to file a timely POC. As there is

nothing for us to interpret, we must enforce the statute

according to its terms. United States v. Ron Pair Enters.,

Inc., 489 U.S. 235, 241 (1989). The undisputed facts show that

Debtor did not list or schedule the debt owed to WMI prior to

the claims bar date and that WMI did not have notice or actual

knowledge of the case in time to file a timely POC. Thus, the

bankruptcy court properly found that all the elements under

§ 523(a)(3)(A) for an exception to Debtor’s discharge were met.

Nonetheless, Debtor argues on appeal that our decision on

the dischargeability of WMI’s debt lies somewhere outside the

plain language of § 523(a)(3)(A). Debtor maintains that he was

authorized under § 501(c) to file a POC on behalf of WMI and

although his filing of the POC was untimely, Rule 9006(b)(1) and

the excusable neglect standards under Pioneer apply and are met

in this case. Without citation to any binding authority, Debtor

asserts that once the excusable neglect standards are met, his

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tardily filed POC under Rule 3004 is deemed to be “timely” for

discharge purposes so long as it was made at a time when the

creditor would have been able to receive payment from the

chapter 7 trustee under § 726(a)(2)(C).4 We are not persuaded.

Debtor is correct that in chapter 7 cases, some untimely

filed proofs of claim are “allowed.” Section 502(b)(9) provides

that an untimely claim should be disallowed “except to the

extent tardily filed as permitted under paragraph (1), (2), or

(3) of [§] 726(a).” Section 726(a)(2)(C) allows payments to

unsecured creditors who submit “tardily filed” proofs of claim

if the creditor had no notice or actual knowledge of the

bankruptcy case to permit a timely filing. The tardy claim must

be filed in time to permit payment, i.e., before the

distribution of the bankruptcy estate. § 726(a)(2)(C)(ii). 

These payments are allowed the same priority as timely filed

claims.

These statutes do not support Debtor’s position. Section

502(b)(9) addresses the circumstances under which an untimely

claim is allowed and § 726(a)(2)(C) addresses the priority of

distributions to unsecured creditors who submit tardily filed

proofs of claim. The scope and aim of §§ 502(b)(9) and

726(a)(2)(C) is thus distinct from and not connected to the

dischargeability of a debt. Here, Debtor’s conduct falls within

4 Some courts have approached § 523(a)(3)(A) by focusing on

whether a party has an opportunity to participate in

distributions rather than by focusing on the plain language of

the statute. See Lott Furniture, Inc. v. Ricks (In re Ricks),

253 B.R. 734 (Bankr. M.D. La. 2000); Eglin Fed. Credit Union v.

Horlacher (In re Horlacher), 2009 WL 903620 (N.D. Fla. Mar. 31,

2009).

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the particular circumstances addressed in § 523(a)(3)(A) and not

the other statutes relied upon. Section 726(a)(2)(C) is also

inapplicable to this case by its plain terms. This section

applies only to “tardily filed” claims filed under § 501(a). 

Section 501(a) refers to claims filed by creditors and indenture

trustees. WMI did not submit a “tardily filed” POC in this

case.

Debtor’s reliance on the excusable neglect standards to

override the plain language of § 523(a)(3)(A) is also misplaced. 

While excusable neglect might be relevant to determine whether a

late-filed POC under Rule 3004 should be deemed timely filed,

such a finding does not translate into a timely filed claim for

purposes of § 523(a)(3)(A).5 As Debtor would have it, if he can

establish excusable neglect for filing an untimely POC on the

creditor’s behalf prior to distributions in the case, we should

simply ignore the language in § 523(a)(3)(A) pertaining to

unscheduled debts and notice and find the debt discharged. 

Adopting Debtor’s argument would make a nullity of

§ 523(a)(3)(A) concerning the consequence of not properly

listing or scheduling such a debt. It would also be inequitable

to allow Debtor the benefit of dischargeability and treat the

debt as if it had been listed when WMI, who was not at fault, is

5 Debtor’s reliance on In re Sprague, 2013 WL 6670576

(Bankr. D. Idaho Dec. 18, 2013), is misplaced. Sprague is a

chapter 13 case where the bankruptcy court deemed a late-filed

POC under Rule 3004 as timely filed after finding the standards

for excusable neglect had been met. The bankruptcy court

briefly discussed § 523(a)(3)(A) in a footnote which was mostly

dicta. The court concluded by noting that the discharge issue

was not before it. Id. at *4 n.7.

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deprived of valuable rights in the bankruptcy.

A strict construction of § 523(a)(3)(A) is supported by

Judge O’Scannlain’s concurring opinion in Beezley v. Cal. Land

Title Co. (In re Beezley), 994 F.2d 1433 (9th Cir. 1993),6

which was later adopted by the Ninth Circuit in White v. Nielsen

(In re Nielsen, 383 F.3d 922, 926 (9th Cir. 2004). While the

actual holding of Beezley is irrelevant to an asset case such as

this, Judge O’Scannlain’s reasoning lends support to the plain

language approach we apply today.

In examining the legislative history of § 523(a)(3), Judge

O’Scannlain observed that “Congress has expressly disapproved

the importation of equitable notions of a debtor’s good faith or

a creditor’s fair opportunity to participate in the bankruptcy

process into the interpretation and analysis of section

523(a)(3).” In re Beezley, 954 F.2d at 1439 n.4. At another

point, Judge O’Scannlain emphasized that “[n]owhere in section

523(a)(3) is the reason why a debt was omitted from the

bankruptcy schedules made relevant to the discharge of that

debt. Courts are not free to condition the relief Congress has

made available in the Bankruptcy Code on factors Congress has

deliberately excluded from consideration.” Id. at 1439

6 There, the debtor Beezley sought to reopen his bankruptcy

case for the purpose of amending his schedules to include an

omitted creditor so that the debt could be discharged. The

bankruptcy court denied the motion and the Ninth Circuit

affirmed. The court observed that after a case has been closed,

dischargeability is unaffected by scheduling. Therefore,

amendment of Beezley’s schedules would have been a pointless

exercise. In a concurring opinion, Judge O’Scannlain noted that

§ 523(a)(3)(A) is not triggered in a no asset, no bar date

bankruptcy case because there is no time limit for “timely

filing of a proof of claim,” so none are untimely.

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(footnotes omitted). Finally, Judge O’Scannlain stated that “we

have only to apply the law as Congress has written it. What

Congress deemed a proper balancing of the equities as between

debtor and creditor with respect to unlisted debts it has

enacted in section 523(a)(3) of the Bankruptcy Code. It is not

for the courts to restrike that balance according to their own

lights.” Id. at 1440.

Taken together, Judge O’Scannlain’s observations support a

plain reading of § 523(a)(3)(A) which does not contain any

equitable exceptions. Therefore, the bankruptcy court had no

need to examine Debtor’s professed good faith which he

characterized as a Pioneer factor. That Debtor may have filed a

POC on WMI’s behalf before Trustee made the distributions in the

case is also irrelevant for purposes of § 523(a)(3)(A). Again,

discussed as a Pioneer factor for excusable neglect, Debtor

stated that the reason he omitted WMI from his schedules was

some agreement with his brother. However, in the § 523(a)(3)(A)

plain language analysis, the reason for the omission is

irrelevant.

We have previously stated that the court has no power to

disregard the clear language of § 523(a)(3)(A). See In re

Laczko, 37 B.R. 676. Although application of the plain text of

§ 523(a)(3)(A) may lead to harsh results, courts may not “soften

the import of Congress’ chosen words.” Lamie v. U.S. Tr., 540

U.S. at 538.

VI. CONCLUSION

For the reasons stated, we AFFIRM.

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