Court Opinion

ID: 4548048
Source: CourtListenerOpinion
Date Created: 2020-07-14 00:00:47.48352+00
Date Added: 2024-06-11T09:03:49.811526
License: Public Domain

FILED
                                                                            JUL 8 2020
                           NOT FOR PUBLICATION                        SUSAN M. SPRAUL, CLERK
                                                                         U.S. BKCY. APP. PANEL
                                                                         OF THE NINTH CIRCUIT

          UNITED STATES BANKRUPTCY APPELLATE PANEL
                    OF THE NINTH CIRCUIT

In re:                                               BAP No. HI-18-1197-GBS
SARAH MARGARET TAYLOR,
           Debtor.
                                                     Bk. No. 1:16-bk-1101-RJH
SARAH MARGARET TAYLOR,
               Appellant,
v.                                                   MEMORANDUM*
U.S. BANK, NATIONAL ASSOCIATION;
DEPARTMENT OF TAXATION, STATE
OF HAWAII; ELIZABETH A. KANE,
Trustee; SUSAN LEE FENTON;
CHRISTIAN FENTON; DAVID E.
MCALLISTER,
               Appellees.

               Appeal from the United States Bankruptcy Court
                            for the District of Hawaii
               Robert J. Faris, Chief Bankruptcy Judge, Presiding

Before: GAN, BRAND, and SPRAKER, Bankruptcy Judges.

      *
        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 8024-1.
                                   INTRODUCTION

       Chapter 71 debtor Sarah Taylor (“Debtor”) appeals the bankruptcy

court’s order approving a settlement between the chapter 7 trustee,

Elizabeth A. Kane (the “Trustee”), and the Hawaii State Department of

Taxation, Hawaii State Judiciary, Hawaii State Public Utilities Commission,

and Hawaii State Bureau of Conveyances, Department of Land Natural

Resources (together the “State Parties”). The settlement provided for the

release of claims asserted by Debtor against the State Parties and for the

withdrawal of proofs of claim filed by the Department of Taxation against

the estate.

       Debtor offers no argument why the bankruptcy court abused its

discretion in approving the settlement, and we discern no error.

Accordingly, we AFFIRM.

                                          FACTS2

       In July 2014, creditor U.S. Bank, N.A. (“US Bank”) filed an action

against Debtor in Hawaii state court (the “Foreclosure Action”) seeking to

foreclose the mortgage on Debtor’s residential property (the “Property”). In

       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.
       2
         We exercise our discretion to review the bankruptcy court’s docket and
relevant proceedings. See Rivera v. Curry (In re Rivera), 517 B.R. 140, 143 n.2 (9th Cir.
BAP 2014), aff’d in part & dismissed in part, 675 F. App’x 781 (9th Cir. 2017).

                                              2
the Foreclosure Action, Debtor filed a counter-complaint against US Bank,

and a cross-complaint for various claims against the State Parties and other

defendants.3 Debtor did not serve the cross-complaint on the State Parties,

and eventually it was dismissed. In July 2015, Debtor filed suit in the

district court, asserting the same causes of action against the State Parties,

US Bank, and other defendants. The district court dismissed Debtor’s

complaint in September 2016.

      In October 2016, Debtor filed a chapter 13 petition. After the

bankruptcy court denied confirmation of Debtor’s chapter 13 plan, she

voluntarily converted the case to chapter 7, and the Trustee was appointed.

      In April 2019, the Trustee filed a motion seeking approval to settle

estate claims against US Bank (the “US Bank Settlement”). The US Bank

Settlement provided that the Trustee would sell the Property, pay the

estate $50,000, and pay the remaining proceeds to US Bank in satisfaction

of its secured claim. The parties agreed to dismiss the Foreclosure Action

      3
        Debtor asserted claims for: (1) Disability Discrimination; (2) Torture;
(3) Conspiracy to Torture to Take Home & Employment; (4) Violations of Hawaii Rules
of Professional Conduct ‘Candor’; (5) Violation of Foreclosure Mediation Laws;
(6) Deception on Courts; (7) Storm Policy Fraud; (8) Failure of Hawaii Courts, State and
County of Hawaii, and Mayor to Preserve Federal ADAA, FHA, EEOC, EECC, & Many
Federal and State Laws; (9) Failure to Provide Equal Access to Federal Courts &
Protections Giving No Way for Timely Filing; (10) Violation of Rights to Rehab and
Employment; (11) Robotic Loan Servicing in Violation of ADAA rights; (12) Fraud on
Bureau of Conveyances; (13) Deceptive: Lending, Servicing, Accounting, Loan
Modification violation of US Constitution; (14) Failure to Provide Law Enforcement of
Bureau of Conveyances; and (15) Violation of the US Constitution.

                                           3
and release all claims. After a hearing on the motion, the bankruptcy court

approved the US Bank Settlement over Debtor’s objection. Debtor did not

appeal.

      The Trustee then filed a motion to approve a separate settlement with

the State Parties (the “State Parties Settlement”). The State Parties

Settlement provided for the estate to release all claims against the State

Parties and for the Department of Taxation to withdraw its proofs of claim

against the estate without prejudice to its right to assert non-discharged

claims against Debtor or to collect on such claims outside of bankruptcy.4

The Trustee stated that she believed the estate’s claims against the State

Parties were frivolous. She argued that the settlement was fair and

equitable, and in the best interests of the estate.

      In July 2018, the bankruptcy court conducted a hearing on the

Trustee’s motion to approve the State Parties Settlement. Debtor argued

that she was discriminated against by the State Parties and the Trustee, and

requested additional time to respond to the motion and to appeal. The

bankruptcy court reasoned that additional time would not change the fact

that the settlement provided a tremendous benefit to the estate. The court

considered the factors listed in Martin v. Kane (In re A & C Properties), 784

      4
        The Department of Taxation filed two proofs of claim against the estate for
unknown income, general excise, and transient accommodations taxes for several years
in which Debtor failed to file returns.

                                         4
F.2d 1377 (9th Cir. 1986) and approved the settlement. The court entered an

order granting the Trustee’s motion and Debtor timely appealed.

                               JURISDICTION

      The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.

                                     ISSUE

      Did the bankruptcy court abuse its discretion by approving the

settlement between the Trustee and the State Parties?

                          STANDARD OF REVIEW

      We review an order approving a compromise for abuse of discretion.

Goodwin v. Mickey Thompson Entm't Grp., Inc. (In re Mickey Thompson Entm't

Grp., Inc.), 292 B.R. 415, 420 (9th Cir. BAP 2003).

      A bankruptcy court abuses its discretion if it applies the wrong legal

standard, or misapplies the correct legal standard, or if it makes factual

findings that are illogical, implausible, or without support in inferences

that may be drawn from the facts in the record. See TrafficSchool.com, Inc. v.

Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011) (citing United States v. Hinkson,

585 F.3d 1247, 1262 (9th Cir. 2009) (en banc)).

                                 DISCUSSION

      Pursuant to Rule 9019, “[o]n motion by the trustee and after notice

and a hearing, the court may approve a compromise or settlement.” The

bankruptcy court can approve a settlement only if it is “fair and equitable,”

                                        5
and “reasonable, given the particular circumstances of the case.” In re

A & C Props., 784 F.2d at 1381 (citations omitted). The bankruptcy court is

not required to conduct a mini trial on the merits of the claims. United

States v. Alaska Nat’l Bank of the N. (In re Walsh Constr., Inc.), 669 F.2d 1325,

1328 (9th Cir. 1982). In deciding whether a settlement is fair and equitable,

the court must consider:

            (a) The probability of success in the litigation;
            (b) the difficulties, if any, to be encountered in the
            matter of collection;
            (c) the complexity of the litigation involved, and the
            expense, inconvenience and delay necessarily
            attending it;
            (d) the paramount interest of the creditors and a
            proper deference to their reasonable views in the
            premises.

In re A & C Props., 784 F.2d at 1381. These factors “should be considered as

a whole to determine whether the settlement compares favorably with the

expected rewards of litigation.” Greif & Co. v. Shapiro (In re W. Funding,

Inc.), 550 B.R. 841, 851 (9th Cir. BAP 2016).

      On appeal, Debtor does not provide any argument relevant to the

bankruptcy court’s approval of the State Parties Settlement. Instead she

argues the merits of her claims against US Bank. Those claims became

property of the estate upon Debtor’s bankruptcy filing and they were

settled by the Trustee in the US Bank Settlement. Debtor did not appeal the

                                         6
order approving the US Bank Settlement and we therefore lack jurisdiction

to review it. See Wilkins v. Menchaca (In re Wilkins), 587 B.R. 97, 107 (9th Cir.

BAP 2018) (“the 14-day time deadline in Rule 8002(a) is a jurisdictional

requirement that acts as an immutable constraint on our authority to

consider and hear appeals”).

      With regard to the State Parties Settlement, the bankruptcy court

correctly applied the A & C Properties factors and determined that (1) the

estate would be unlikely to prevail on the claims, (2) litigation would be

expensive, and (3) creditors would benefit from the Tax Department’s

withdrawal of claims. Although Debtor might indirectly benefit from

allowance of non-dischargeable tax claims, withdrawal of those claims is

clearly in the “paramount interest of the creditors.” In re A & C Props. 784

F.2d at 1381. The court did not abuse its discretion in approving the State

Parties Settlement.

                                CONCLUSION

      For the reasons set forth above, we AFFIRM the bankruptcy court's

order approving the State Parties Settlement.

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