Opinion ID: 3034719
Heading Depth: 3
Heading Rank: 1

Heading: The First Appeal (Appeal from the Order

Text: Approving the Settlement Agreement)
The trustee contends that we lack jurisdiction over Rains’s appeal from the order approving the settlement agreement because the order was interlocutory. Thus, as a threshold matter, we must determine whether we have jurisdiction over the first appeal. See Jeff D. v. Kempthorne, 365 F.3d 844, 849-50 (9th Cir. 2004). We conclude that we do. Jurisdiction over an appeal from an order of a bankruptcy court is governed by 28 U.S.C. § 158. That section vests jurisdiction in the district court to hear appeals from “final judgments, orders, and decrees . . . and, with leave of the court, from interlocutory orders and decrees, of bankruptcy judges.” Id. § 158(a). The courts of appeals are granted jurisdiction over “appeals from all final decisions, judgments, orders, and decrees entered” by the district courts in their bankruptcy appellate capacity. Id. § 158(d) (emphasis added). “Whether a bankruptcy court’s decision is final . . . is a question of law IN RE: RAINS 15219 reviewed de novo.” Silver Sage Partners, Ltd. v. City of Desert Hot Springs (In re City of Desert Hot Springs) 339 F.3d 782, 787 (9th Cir. 2003) (citation omitted). [1] Although district courts have discretion to hear interlocutory appeals from bankruptcy courts, § 158(d) does not grant courts of appeals similar discretion to review interlocutory decisions. “The courts of appeals do not have jurisdiction to hear interlocutory appeals in bankruptcy cases.” Silver Sage, 339 F.3d at 787. “Under 28 U.S.C. § 158(d), appellate jurisdiction exists when the bankruptcy court order and the decision of the district court acting in its bankruptcy appellate capacity are both final orders.” In re Bonham, 229 F.3d at 761 (citations and footnote omitted). However, even if the order approving the settlement agreement were interlocutory, we are not necessarily deprived of jurisdiction, because “subsequent events can validate a prematurely filed appeal.” Ethridge v. Harbor House Restaurant, 861 F.2d 1389, 1402 (9th Cir. 1988) (citation omitted). “[T]he rule in this circuit [is] that once a final judgment is entered, an appeal from an order that otherwise would have been interlocutory is then appealable.” Eastport Assocs. v. City of Los Angeles (In re Eastport Assocs.), 935 F.2d 1071, 1075 (9th Cir. 1991); see also Special Investments Inc. v. Aero Air Inc., 360 F.3d 989, 993 (9th Cir. 2004) (“a prematurely filed notice of appeal can be cured if the rest of the claims are disposed of in a subsequent final decision terminating the litigation”) (citation omitted). Whatever prematurity existed in Rains’s appeal from the order approving the settlement agreement was cured by the subsequent entry of a final judgment. See In re Eastport Assocs., 935 F.2d at 1075. We therefore have jurisdiction to consider Rains’s first appeal.
Settlement Agreement [2] The parties agree that California state law applies to the issue of the validity of the settlement. See Houston v. Holder 15220 IN RE: RAINS (In re Omni Video, Inc.), 60 F.3d 230, 232 (5th Cir. 1995) (holding that the validity of settlements in bankruptcy cases is best resolved by reference to state contracts law); see also Raleigh v. Illinois Dep’t of Revenue, 530 U.S. 15, 20 (2000) (observing the “basic federal rule . . . that state law governs the substance of claims [in bankruptcy cases]”) (citation and internal quotation marks omitted). California law provides that “[a] conveyance or other contract of a person of unsound mind, but not entirely without understanding, made before the incapacity of the person has been judicially determined, is subject to rescission . . . .” Cal. Civ. Code § 39(a). Pursuant to this statute, “a party is entitled to rescission of a contract if, when he entered into the contract, he was not mentally competent to deal with the subject before him with a full understanding of his rights . . .” Smalley v. Baker, 262 Cal. App. 2d 824, 832 (1968), overruled on other grounds by Weiner v. Fleischman, 54 Cal. 3d 476 (1991). “[T]he test . . . in each instance [ ] [is] whether he understood the nature, purpose and effect of what he did.” Smalley, 262 Cal. App. 2d at 832 (citations omitted). [3] Rains argues that the bankruptcy court clearly erred in finding him mentally competent to enter into the settlement agreement. However, the record contained sufficient evidence to support a finding that Rains understood the nature, purpose and effect of his actions when he agreed to settle with the trustee and the creditor. Witnesses who personally observed Rains during the negotiations reported that Rains participated actively and appeared to have a full understanding of what was transpiring and of the terms of the settlement. Rains argued over certain terms and suggested alternatives to those he disliked. After the settlement was negotiated, Rains reviewed the written agreement and asked his attorney questions about it. [4] Rains does not seriously dispute the veracity of the witness statements offered by the trustee. Rather, he relies heavily on the opinions of his treating physician and psychologist IN RE: RAINS 15221 that a person with his diagnosis would not have had the mental capacity to conduct business affairs at the time of the negotiations. However, the weight to be given expert medical testimony is within the discretion of the trier of fact. Wong Ho v. Dulles, 261 F.2d 456, 460 (9th Cir. 1958). The bankruptcy court was not bound to follow these expert opinions. See United States v. Honolulu Plantation Co., 182 F.2d 172, 178 (9th Cir. 1950). In the face of conflicting testimony, the bankruptcy court did not clearly err in discounting the theoretical speculation of Rains’s experts, or in finding that Rains was mentally competent to enter into the settlement agreement. See Prescod v. AMR, Inc., 383 F.3d 861, 869 (9th Cir. 2004) (observing that the trier of fact is in the best position to resolve conflicts in the evidence).
Evidentiary Record Rains contends that the bankruptcy court committed reversible error by “denying [his] verbal request at the preliminary hearing . . . to supplement the evidentiary record to challenge [Flinn’s] lay witness declaration testimony submitted in support of [Flinn’s] [reply].” He further asserts that the bankruptcy court’s “decision to deny Rains’ request to file evidentiary objections” to the reply declarations violated his procedural due process rights. [5] Rains’s arguments are not persuasive for five reasons. First, Rains waived his due process claim by failing to raise it properly before either the bankruptcy court or the district court. In general, this Court does not consider an issue raised for the first time on appeal. Cold Mountain v. Garber, 375 F.3d 884, 891 (9th Cir. 2004).4 Rains did not raise the issue 4 There are three recognized exceptions pursuant to which we may exercise discretion to hear previously unconsidered claims: “(1) In the ‘exceptional’ case in which review is necessary to prevent a miscarriage of justice or to preserve the integrity of the judicial process, (2) when a new 15222 IN RE: RAINS at all before the bankruptcy court. He did not raise it before the district court until he filed his reply brief. The district court did not address the due process claim in its subsequent order, undoubtedly relying on the principle that “issues cannot be raised for the first time in a reply brief.” Coleman v. Quaker Oats Co., 232 F.3d 1271, 1289 n.4 (9th Cir. 2000) (citation omitted). [6] Second, Rains never articulated his requests with sufficient clarity to preserve the alleged error for review. For an argument to be considered on appeal, it generally “must be raised sufficiently for the trial court to rule on it.” Broad v. Sealaska Corp., 85 F.3d 422, 430 (9th Cir. 1996) (citation omitted). The closest Rains’s counsel came to asking for expansion of the record was to complain that “[w]e get no chance to take a whack at the reply declarations. I mean, are you going to do that sua sponte, or should I file something or —.” This vague statement did not adequately apprise the bankruptcy court of the nature of Rains’s request such that the court had an opportunity to rule on it. [7] Third, nothing prevented Rains from orally objecting to the reply declarations at the hearing on the motion to approve. However, he failed to so. At one point, Rains’s counsel stated that “several of the declarations are replete with hearsay statements which are completely inadmissible,” but he never articulated any clear objections to specific statements made in the declarations. Absent a contemporaneous objection, we will review for plain error “where the integrity or fundamental fairness of the proceedings . . . is called into serious question.” Bird v. Glacier Elec. Coop., Inc., 255 F.3d 1136, 1148 (9th Cir. 2001). That is not the case here. issues arises while appeal is pending because of a change in the law, (3) or when the issue presented is purely one of law and either does not depend on the factual record developed below, or the pertinent record has been fully developed.” Id. (citation and alterations omitted). None of these exceptions apply. IN RE: RAINS 15223 [8] Fourth, as a substantive matter, the main authority Rains cites in support of his allegation of a due process violation is Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306 (1950).5 That case simply stands for the proposition that “[t]he fundamental requisite of due process of law is the opportunity to be heard.” Id. at 314 (citation omitted). In that sense, Rains was accorded his full due process rights with respect to the motion. The declarations of the trustee and his attorney (Flinn declarations) were filed well in advance of the hearing. Although the declarations of the creditor and her attorney were filed only one day before the hearing, Rains’s counsel had received and read them by the time the hearing took place, and they were substantially similar in substance to the Flinn declarations. Rains had adequate opportunity to challenge the declarations at the hearing before the bankruptcy court. [9] Fifth and finally, Rains expressly waived his right to a separate evidentiary hearing when he filed his opposition to the motion to approve the settlement.6 [10] For these reasons, the bankruptcy court did not err in declining to allow Rains to supplement the evidentiary record. 5 The only other authority Rains cites in conjunction with his due process claim is inapposite. See Ake v. Oklahoma, 470 U.S. 68, 74 (1985) (holding that due process requires states to provide indigent defendants with psychiatric assistance where sanity is likely to be a significant factor at trial). 6 Rains did so pursuant to E.D. Cal. Bankr. 9014-1(f)(1)(ii), which requires an opposition to a motion to “specify whether the responding party consents to the Court’s resolution of the disputed material factual issues pursuant to FRCivP 43(e) as made applicable by FRBP 9017.” 15224 IN RE: RAINS