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*

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.

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. CC-11-1657-MkDKi

 )

VALLEY HEALTH SYSTEM, ) Bk. No. 07-18293-PC

 )

Debtor. )

_______________________________)

 )

JESSICA LOPEZ, )

 )

Appellant, )

 )

v. ) MEMORANDUM*

 )

POST-EFFECTIVE DATE COMMITTEE )

OF CREDITORS; ALVAREZ & MARSAL )

HEALTHCARE INDUSTRY GROUP, LLC,)

as Disbursing Agent, )

 )

Appellees. )

_______________________________)

Argued and Submitted on July 19, 2012

at Pasadena, California

Filed – August 3, 2012

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Peter H. Carroll, Chief Bankruptcy Judge, Presiding Appearances: John D. Darling of Hunt Ortmann Palffy Nieves

Lubka Darling & Mah, Inc. argued for Appellant

Jessica Lopez; Jeffrey L. Kandel of Pachulski

Stang Ziehl & Jones LLP argued for Appellees the

Post-Effective Date Committee of Creditors and

Alvarez & Marsal Healthcare Industry Group, LLC,

as Disbursing Agent. 

Before: MARKELL, DUNN and KIRSCHER, Bankruptcy Judges.

FILED

AUG 03 2012

SUSAN M SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT
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1The parties have a serious and sincere disagreement over

whether VHS and VHS Retirement Plan are separate entities. We

refer to “VHS Retirement Plan” separately for ease of reference,

and not as the result of any legal analysis.

2

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

INTRODUCTION

Jessica Lopez (“Lopez”) is a former employee of Valley

Health System (“VHS”) and was a participant in the Valley Health

System Retirement Plan (“VHS Retirement Plan”).1

 Lopez filed a

proof of claim in VHS’s bankruptcy case seeking a distribution

from that bankruptcy based on her claimed entitlement to benefits

under or from the VHS Retirement Plan. But VHS’s confirmed

chapter 92 plan of adjustment (“Chapter 9 Plan”) specified, among

other things, that any claims held by VHS Retirement Plan

participants (“Participants”) against VHS would “not be entitled

to receive any distributions” under the Chapter 9 Plan.

A Post-Effective Date Committee of Creditors and a

disbursing agent appointed under the Chapter 9 Plan (jointly, the

“Committee Parties”) objected to Lopez’s proof of claim. The

bankruptcy court sustained the objection and entered an order

disallowing Lopez’s claim. Lopez appealed, and we AFFIRM.

//

//

//

//

//
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3

This is the second appeal originating from VHS’s bankruptcy

case this Panel has heard. The first appeal, Kirton v. Valley

Health Sys. (In re Valley Health Sys.), 471 B.R. 555 (9th Cir.

BAP 2012), appeal docketed, No. 12-60019 (9th Cir. March 21,

2012), concerned a petition for writ of mandamus filed in state

court by two other Participants, Peggy Kirton and Diana Agnello,

seeking to enforce their alleged VHS Retirement Plan entitlements

against VHS and others. VHS removed that petition to the

bankruptcy court, and the bankruptcy court dismissed the petition

under Civil Rule 12(b)(6). Id. at 558. 

We vacated the bankruptcy court’s dismissal order, holding

that the bankruptcy court lacked subject matter jurisdiction over

the petition. Id. at 569. We draw most of the facts regarding

VHS, its bankruptcy case and its Chapter 9 Plan from our prior

decision.

3

FACTS3

A. VHS, its bankruptcy case, and its Chapter 9 Plan.

VHS is a public agency and a local healthcare district

formed in 1946, under the California Local Health Care District

Law, Cal. Health & Safety Code § 32000, et seq. VHS owned and

operated one skilled nursing facility and three acute health care

facilities in Riverside County, California. VHS filed a

chapter 9 bankruptcy petition in December 2007, and the

bankruptcy court entered an order for relief in February 2008.

Pursuant to § 943, the bankruptcy court confirmed VHS’s

first amended plan of adjustment (“Chapter 9 Plan”) by order

entered April 26, 2010 (“Confirmation Order”). The Chapter 9

Plan was based on the sale of substantially all of VHS’s

remaining assets to another entity known as Physicians for

Healthy Hospitals, Inc. Among other things, the Chapter 9 Plan

provided for the discharge of VHS’s prepetition debts and also

enjoined claimants from pursuing any action or proceeding on

account of such debts.
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4In this regard, the primary assets appear to be those held

under a group annuity contract administered by MetLife Group.

4

The Chapter 9 Plan classified general unsecured claims as

Class 2A claims and generally provided for the pro rata

distribution of $17 million to the holders of allowed Class 2A

claims. The plan then separately classified the Participants as

Class 2C claimants and provided no distribution for them. 

Instead, the Chapter 9 Plan expected the Class 2C claimants to

look to the assets left for them, along with their other rights

and entitlements, under the VHS Retirement Plan.4

The asset sale had expressly excluded all these VHS

Retirement Plan assets. As a consequence, the Chapter 9 Plan

specified that the Participants as Class 2C claimants would not

have recourse as against VHS or its assets, and would not be

entitled to any distribution under the Chapter 9 Plan.

This was expressly stated in the Chapter 9 Plan:

Defined Benefit Plan Participants will be entitled to

the same rights and benefits to which such participants

are currently entitled under the VHS Retirement Plan

and the MetLife Group Annuity Contract, and such

participants shall have no recourse to the District or

to any assets of the District, and shall not be

entitled to receive any distributions under this Plan. 

Instead, all unallocated amounts held by MetLife Group,

pursuant to the VHS Retirement Plan and the MetLife

Group Annuity Contract, will continue to be made

available to provide retirement benefits for

participants in the manner indicated under the

provisions of the VHS Retirement Plan and the MetLife

Group Annuity Contract. Accordingly, the treatment of

Allowed Class 2C claim holders set forth herein shall

not affect any legal, equitable or contractual rights

to which the VHS Retirement Plan participants are

entitled.

Chapter 9 Plan (Dec. 17, 2009) at 16:13-22.
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5

Lopez admits that she and other Participants were informed

by VHS’s representatives at a meeting held on July 7, 2010, that

the VHS Retirement Plan was out of funds and would be terminated. 

It is less than clear why Lopez did not promptly attempt to take

action upon learning of these revelations.

5

Based on this treatment, the Chapter 9 Plan characterized

the Class 2C claimants – the Participants – as unimpaired. As

unimpaired claim holders, they were deemed to have accepted the

Chapter 9 Plan, and were thus not allowed to vote to accept or

reject it. § 1126(f).

The record reflects that Lopez was served with advance

notice of: (1) the claims bar date, (2) the court approval of the

first amended disclosure statement, and (3) the confirmation

hearing on the Chapter 9 Plan. The accuracy of the record is

supported by the fact that Lopez filed her proof of claim on

time, and before the plan confirmation. The record further

indicates that Lopez was sent copies of the Chapter 9 Plan and

the first amended disclosure statement at the same time she was

served with notice of the confirmation hearing.

But Lopez did not object to VHS’s Chapter 9 Plan. According

to Lopez, she and other Participants were lulled into a false

sense of security regarding the VHS Retirement Plan because VHS’s

representatives, and the Chapter 9 Plan itself, indicated that

the VHS Retirement Plan and the Participants would not be

affected by either the bankruptcy case or the Chapter 9 Plan.5

On October 14, 2010, VHS issued a notice that the asset sale

had closed on October 13, 2010, and that October 13, 2010, was

the effective date of the Chapter 9 Plan.
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6

In the proof of claim, Lopez asserted that her claim was

entitled to priority status under § 507(a)(5), but that

Bankruptcy Code section is inapplicable in chapter 9 cases. See

§ 901(a).

7According to both Lopez and the Chapter 9 Plan, in May

1999, the VHS Retirement Plan was “frozen,” in the sense that no

new contributions were to be made by VHS, because the VHS

Retirement Plan was claimed to be overfunded. Lopez and the

other Participants apparently ceased to accrue any new benefits

thereafter.

6

B. Lopez’s proof of claim and the Committee Parties’ claim

objection

Lopez timely filed her proof of claim in VHS’s bankruptcy

case on August 22, 2008. On its face, the Proof of Claim stated

that it was based on Lopez’s alleged entitlement to a “retirement

benefit.”6 A single page is attached to the Proof of Claim: a

copy of Lopez’s VHS Retirement Plan employee benefit statement

for the year ending December 31, 1996. This statement estimated

that, if Lopez continued her employment with VHS until her

designated retirement date in 2018 and continued to participate

in the VHS Retirement Plan, she would receive a monthly pension

benefit upon retirement of $3,761.43 per month.7

On April 8, 2011, the Committee Parties filed a motion to

disallow Lopez’s proof of claim. According to the the Committee

Parties, Lopez was a Class 2C creditor who was not entitled to

any distribution under the Chapter 9 Plan, and thus her claim was

subject to disallowance.

On September 14, 2011, Lopez filed a voluminous response to

the Committee Parties’ claim objection. Lopez did not contest

that, under the terms of the Chapter 9 Plan, she was not entitled
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to a share of the funds set aside for distribution to other

unsecured creditors of VHS. Indeed, Lopez essentially conceded

that she qualified as a Class 2C creditor under the Chapter 9

Plan and that the Chapter 9 Plan provided for no distribution to

Class 2C creditors.

Rather, Lopez argued that the Chapter 9 Plan was subject to

being set aside under § 1144 or under § 105(a) based on fraud in

the procurement and based on inadequate notice. In essence,

Lopez argued that, in order to lull the Participants into a false

sense of security so that none of them would object to

confirmation of the Chapter 9 Plan, VHS and its representatives

on numerous occasions represented that the Participants did not

need to worry about VHS’s bankruptcy case and would not be

affected by the Chapter 9 Plan. Lopez further claimed that VHS

and its representatives concealed from the Participants the true

state of affairs until the July 7, 2010 meeting held shortly

after confirmation: (1) that VHS had underfunded the VHS

Retirement Plan and/or had raided the monies set aside for

funding the plan; (2) that VHS wrongfully had exercised control

over the VHS Retirement Plan and effectively was preventing the

VHS Retirement Plan’s fiduciaries from fulfilling their duties to

ensure that the VHS Retirement Plan was adequately funded; and

(3) that VHS secretly intended to terminate the VHS Retirement

Plan well before it confirmed its Chapter 9 Plan, but it

concealed this fact in order to avoid any additional impediments

to confirmation of its Chapter 9 Plan.

Meanwhile, Lopez’s contentions regarding inadequate notice

were twofold. On the one hand, Lopez complained that some
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Participants, unlike herself, received no notice whatsoever of

VHS’s bankruptcy. On the other hand, Lopez complained that the

notice she received was ineffective in light of the alleged acts

of concealment and misinformation referenced above.

Lopez also spent a great deal of time and effort outlining

the various alleged statutory and contractual duties VHS

supposedly breached. But Lopez never really tied this discussion

to any relief that Lopez contends she might have been entitled to

on account of her proof of claim, which only sought a

distribution based on her claimed entitlement to retirement

benefits. At most, Lopez argued that the bankruptcy court should

hold in abeyance its decision on Lopez’s proof of claim until

after Lopez and others had commenced and prosecuted an action

against VHS, which in part would have sought modification and/or

revocation of VHS’s Chapter 9 Plan.

Lopez also focused on her allegation that VHS and the VHS

Retirement Plan were separate entities, with separate boards and

separate agents for service of process. According to Lopez, the

VHS Retirement Plan, as a separate entity, was not properly

subject to VHS’s control, and thus her entitlement to benefits

from the VHS Retirement Plan could not have been validly affected

by either VHS or its Chapter 9 Plan. However, Lopez never

explained how this allegation, even if true, would have entitled

her to a distribution from VHS on account of her proof of claim

for retirement benefits, when VHS’s Chapter 9 Plan explicitly

precluded Lopez from receiving such a distribution.

On September 21, 2011, the Committee Parties filed a reply

in support of their claim objection. In it, the Committee
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Parties emphasized (1) that Lopez had notice of the VHS

bankruptcy and an opportunity to object to its Chapter 9 Plan,

(2) that the Chapter 9 Plan, which the bankruptcy court had

confirmed, specified that Class 2C creditors would not be

entitled to any distribution, and (3) that Lopez’s claim

constituted a Class 2C claim, a claim seeking a distribution on

account of Lopez’s alleged entitlement to benefits under the VHS

Retirement Plan. According to the Committee Parties, the

doctrine of claim preclusion barred Lopez from collaterally

attacking the Chapter 9 Plan, and neither § 1144 nor § 105(a)

afforded Lopez with a proper basis to seek either modification or

revocation of the Chapter 9 Plan.

After holding a hearing on the claim objection, the

bankruptcy court issued a memorandum decision in which it

essentially agreed with the Committee Parties’ arguments. 

Accordingly, on November 8, 2011, the bankruptcy court entered an

order sustaining the Committee Parties’ claim objection and

disallowing Lopez’s claim. Lopez timely filed a notice of appeal

on November 18, 2011.

JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C.

§ 157(b)(2)(B), and we have jurisdiction under 28 U.S.C. § 158(b)

as this is a final order from the resolution of a proof of claim.

ISSUE

Whether the bankruptcy court erred when it disallowed

Lopez’s proof of claim.

STANDARDS OF REVIEW

Orders resolving claims objections can raise legal issues,
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8Lopez contends that the bankruptcy court lacked

jurisdiction to consider and disallow her proof of claim, but

this contention has no merit. It is well settled that the claims

allowance process is “integral to the restructuring of the

debtor-creditor relationship” and hence is subject to the

bankruptcy court’s jurisdiction. Langenkamp v. Culp, 498 U.S.

42, 44, 111 S.Ct. 330, 331, 112 L.Ed.2d 343 (1990) (per curiam)

(citing Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 57-58, 109

S.Ct. 2782, 2798-99, 106 L.Ed.2d 26 (1989)).

10

which we review de novo, as well as factual issues, which we

review under the clearly erroneous standard. See Veal v. Am.

Home Mortg. Servicing, Inc. (In re Veal), 450 B.R. 897, 918 (9th

Cir. BAP 2011).

DISCUSSION 

The key to this appeal is Lopez’s proof of claim. The

principal purpose of that proof of claim, as with any proof of

claim, is to assert an entitlement to a share of any assets

designated for distribution. See 4 Collier on Bankruptcy

¶ 501.01[1] (Alan N. Resnick & Henry J. Sommer, eds., 16th ed.

2012).8

Here, Lopez based her proof of claim on her claimed

entitlement to benefits under the VHS Retirement Plan, but VHS’s

Chapter 9 Plan specified that Participants under the VHS

Retirement Plan would have no recourse against either VHS or its

assets and would not be entitled to any distribution under the

Chapter 9 Plan. Lopez indisputably had actual notice of the

Chapter 9 Plan and its contents, and had an opportunity to

object, but did not do so before the plan was confirmed.

Under these circumstances, Lopez is precluded from now

objecting to how VHS’s Chapter 9 Plan treated her retirement
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benefits claim. See § 944(a); see also United Student Aid Funds,

Inc. v. Espinosa, ––– U.S. ––––, 130 S.Ct. 1367, 1374-75, 176

L.Ed.2d 158 (2010) (confirmed chapter 13 plan discharged student

loan debt); Stratosphere Litigation L.L.C. v. Grand Casinos,

Inc., 298 F.3d 1137, 1143 (9th Cir. 2002) (confirmed chapter 11

plan released third party from funding obligation arguably owed

to debtor); Great Lakes Higher Educ. Corp. v. Pardee (In re

Pardee), 193 F.3d 1083, 1086-87 (9th Cir. 1999) (confirmed

chapter 13 plan discharged postpetition interest on student

loan); Trulis v. Barton, 107 F.3d 685, 691 (9th Cir. 1995)

(confirmed chapter 11 plan released all claims of country club

members against debtor country club's founders, directors and

attorneys).

As she argued in the bankruptcy court, Lopez argues on

appeal that she was not given adequate notice of the Chapter 9

Plan’s impact on her. According to Lopez, the misleading

statements regarding the effect of the Chapter 9 Plan on

Participants like her amounted to a violation of her due process

rights. Consequently, she argues, she should not be bound by the

terms of the Chapter 9 Plan.

We disagree. The Chapter 9 Plan was not misleading

regarding how the claims of Participants would be treated: it

unequivocally stated that they would receive nothing from VHS,

its assets, or its Chapter 9 Plan. 

Moreover, due process does not require that any notice given

explain the potential legal and practical effects of proposed

judicial action; rather, as long as a party is given notice of

the action and is afforded an opportunity to object, due process
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requirements are satisfied. Espinosa v. United Student Aid

Funds, Inc., 553 F.3d 1193, 1203 (9th Cir. 2008), aff'd, ––– U.S.

––––, 130 S.Ct. 1367; Berry v. U.S. Trustee (In re Sustaita),

438 B.R. 198, 210 (9th Cir. BAP 2010), aff'd, 460 Fed. Appx. 627

(9th Cir. 2011); see also Acequia, Inc. v. Clinton (In re

Acequia, Inc.), 787 F.2d 1352, 1359–60 (9th Cir. 1986)

(concluding that shareholder had adequate notice that evidence of

his misconduct was relevant to, and would be considered at, plan

confirmation hearing, where disclosure statement filed in support

of plan outlined allegations of shareholder's misconduct);

Lawrence Tractor Co. v. Gregory (In re Gregory), 705 F.2d 1118,

1122–23 (9th Cir. 1983) (holding that notice given to unsecured

creditor, even though incomplete and ambiguous, satisfied due

process requirements because it was sufficient to give the

creditor inquiry notice of the actions the debtor sought to take

pursuant to his proposed plan).

Lopez also argues on appeal that the bankruptcy court erred

when it denied her request to continue the hearing on its

disposition of her proof of claim until she brought and

prosecuted an action that in part would seek to modify or revoke

the Chapter 9 Plan. But we agree with the bankruptcy court that,

on the record presented, no delay was necessary because any

action to modify or revoke the Chapter 9 Plan would have been

futile. 

Lopez contended that modification or revocation could have

been granted under either § 1144 or under § 105(a), but neither

of these statutes would have justified either revocation or

modification here. We will address each statute in turn.
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Section 1144 applies in chapter 9 cases. See § 901(a). 

That section is the only remedy available for revocation of an

order confirming a plan, and only permits revocation when

confirmation of the plan was procured by fraud. Dale C. Eckert

Corp. v. Orange Tree Assocs., Ltd. (In re Orange Tree Assocs.,

Ltd.), 961 F.2d 1445, 1447 (9th Cir. 1992). Section 1144(a) sets

a six-month limitation period for seeking plan revocation, and

that limitation period begins to run from plan confirmation. 

Furthermore, even if the grounds for claiming fraud are not

discovered until after the limitations period has run, the Ninth

Circuit has held that such belated discovery of the fraud does

not toll the § 1144(a) limitations period. In re Orange Tree

Assocs., Ltd., 961 F.2d at 1447; see also Duplessis v. Valenti

(In re Valenti), 310 B.R. 138, 145 (9th Cir. BAP 2004) (stating

that cognate statute under chapter 13 similarly limits complaints

to revoke confirmation of a chapter 13 plan). See also Collier,

supra, ¶ 1144.02 (“The 180-day deadline applies even if the fraud

is not discovered until after expiration of the 180-day

period.”); 680 Fifth Ave. Assocs. v. EGI Co. Servs., Inc. (In re

680 Fifth Ave. Assocs.), 209 B.R. 314, 323 (Bankr. S.D.N.Y.

1997).

While the parties here dispute whether the alleged fraud was

discovered before or after the § 1144(a) limitations period ran,

that issue is not material to our resolution of Lopez’s

revocation argument. It is undisputed that Lopez did not

commence an action before the limitations period ran, so Lopez

cannot avail herself of any relief under § 1144(a).

Meanwhile, § 105(a) facilitates the authority the Bankruptcy
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Code grants to bankruptcy courts by generally authorizing them to

“issue any order, process, or judgment that is necessary or

appropriate to carry out the provisions of this title.” § 105(a)

(emphasis added). But this authorization does not allow

bankruptcy courts to depart from the Bankruptcy Code’s statutory

scheme or to take acts inconsistent with it. See Saxman v. Educ.

Credit Mgmt. Corp. (In re Saxman), 325 F.3d 1168, 1174-75 (9th

Cir. 2003) (holding that § 105(a) does not give bankruptcy court

a “roving commission to do equity” but rather only authorizes the

court to act within the confines otherwise set by the Bankruptcy

Code); Johnson v. TRE holdings LLC (In re Johnson), 346 B.R.

190, 196 (9th Cir. BAP 2006) (same); In re Valenti, 310 B.R. at

145-46 (holding that § 105(a) “is not an independent basis for

relief beyond the scope of the other sections of the Bankruptcy

Code.”).

Simply put, Congress made it abundantly clear in § 1144(a)

that a revocation action must be brought within six months of

confirmation, and § 105(a) does not permit the bankruptcy court

to depart from the statutory scheme and extend the § 1144(a) time

limit.

The bankruptcy court was exercising its discretion when it

declined to delay its ruling on the claim objection, In re

Sustaita, 438 B.R. at 211, and we will not disturb that exercise

of discretion absent a showing of prejudice. Id. Because

postponing the decision on the claim objection so that Lopez

could pursue relief under § 1144(a) and § 105(a) would have been

futile, the bankruptcy court could not have abused its discretion
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9Sustaita cited four factors relevant to deciding whether

the trial court properly exercised its discretion in denying a

continuance: (1) the appellant’s diligence, (2) the likely

efficacy of granting a continuance in satisfying the articulated

need therefor, (3) inconvenience to the opposing party, and

(4) harm resulting from the denial of the continuance. While the

absence of prejudice is sufficient by itself to end the inquiry,

we note that, based on the circumstances presented here, none of

the cited factors militated in favor of a continuance of the

claim objection proceeding.

10In both her opposition to the claim objection and in her

opening appeal brief, Lopez argued that she is not even a proper

creditor of VHS based on her entitlement to retirement benefits

from the VHS Retirement Plan. Lopez does not seem to appreciate

that, if she is not a creditor of VHS, she cannot be entitled to

an allowed claim against VHS or to a distribution from VHS’s

bankruptcy case.

15

when it declined to delay its decision on the claim objection.9

Lopez makes a number of other arguments in her appeal

briefs, but none of them have any merit. They all hinge on the

premise that the VHS Retirement Plan was a separate entity from

VHS and that neither the bankruptcy court nor VHS properly could

have affected the VHS Retirement Plan’s assets or obligations. 

Even if we were to assume that the VHS Retirement Plan was a

separate entity, nothing that Lopez argues explains why this

would alter Lopez’s rights as against VHS on account of the proof

of claim that Lopez filed against VHS. If, as Lopez contends,

the VHS Retirement Plan is a separate entity and the VHS

Retirement Plan (rather than VHS) is obligated to provide to her

retirement benefits,10 these facts tend to undermine rather than

enhance any argument that Lopez holds an allowable claim for

retirement benefits against VHS. In short, regardless of whether

the VHS Retirement Plan is a separate entity from VHS, none of
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Lopez’s arguments explain why Lopez is entitled to a distribution

for retirement benefits under VHS’s Chapter 9 Plan.

CONCLUSION

For all of the reasons set forth above, we AFFIRM the

bankruptcy court’s order sustaining the Committee Parties’ claim

objection and disallowing Lopez’s claim.