Court Opinion

ID: 9373964
Source: CourtListenerOpinion
Date Created: 2023-02-22 16:10:48.874555+00
Date Added: 2024-06-11T17:16:49.868599
License: Public Domain

FILED
                                                                               APR 14 2022
                                                                           SUSAN M. SPRAUL, CLERK
                          NOT FOR PUBLICATION                                U.S. BKCY. APP. PANEL
                                                                             OF THE NINTH CIRCUIT

          UNITED STATES BANKRUPTCY APPELLATE PANEL
                    OF THE NINTH CIRCUIT

In re:                                              BAP No. ID-21-1150-SFB
CHRISTINA GREENFIELD,
             Debtor.                                Bk. No. 19-20785-NGH

CHRISTINA GREENFIELD,
                 Appellant,
v.                                                  MEMORANDUM*
KELLY L. GREENFIELD SHELEY;
DWIGHT GREENFIELD; ERIC
WURMLINGER; ROSALYND
WURMLINGER; DAVID P GARDNER,
Chapter 7 Trustee,
                 Appellees.

               Appeal from the United States Bankruptcy Court
                          for the District of Idaho
                Noah G. Hillen, Bankruptcy Judge, Presiding

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

                                 INTRODUCTION

      Debtor Christina Greenfield and creditors Eric and Rosalynd

Wurmlinger are former neighbors who have been fighting with each other

      *
        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.
                                            1
for over a decade. The dispute escalated into a state court lawsuit that

resulted in a judgment in favor of the Wurmlingers. That judgment has

been amended from time to time as the state court awarded the

Wurmlingers their costs and attorney’s fees incurred in the trial court and

on appeal. The Wurmlingers have recorded each version of their judgment

in the county where Greenfield resided, thereby giving them a judgment

lien against her residence.

       In her bankruptcy case, Greenfield objected to the Wurmlingers’

claim, primarily arguing that the Wurmlingers had not timely or properly

renewed their judgment. But the bankruptcy court overruled her objection

on the merits. It ruled in the alternative that Greenfield lacked standing to

object to any claims because the estate was insolvent. Though Greenfield

contends that her estate is solvent, the record does not support her

contention. To the contrary, the amount of estate expenses and creditors’

claims exceeds the amount of funds available for distribution to such an

extent that Greenfield has not established that she has been injured by the

order appealed. Accordingly, we DISMISS for lack of standing.

                                        FACTS 1

       In December 2019, Greenfield commenced her chapter 7 2 case. In her

initial schedules, she listed her residence as an asset, and disclosed a

       1  We exercise our discretion to take judicial notice of documents electronically
filed in Greenfield’s bankruptcy case. See Atwood v. Chase Manhattan Mortg. Co. (In re
Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).
        2 Unless specified otherwise, all chapter and section references are to the

                                             2
mortgage. Greenfield claimed a homestead exemption in the amount of

$100,000 in her residence.

      The Wurmlingers timely filed a proof of claim for $261,083.21,

including interest. They identified $170,000.00 of that amount as secured

and the remaining $91,083.21 as unsecured based on a valuation of

Greenfield’s residence at $400,000.00 They also attached to their claim an

itemization, describing the judgments entered in their favor against

Greenfield beginning with a $103,000.00 judgment dated March 26, 2013,

which accrued interest at 5.250% per annum. (“Original Judgment”). The

Wurmlingers calculated the accrued interest through the petition date, on

the principal amount of the judgment, to be $36,326.55. The state court

entered a first amended judgment (“First Amended Judgment”) dated July

8, 2013, adding $65,755.37 in costs and attorney’s fees to the Original

Judgment. According to the proof of claim itemization, the Wurmlingers

calculated that the trial costs and fees accrued $22,207.30 in prepetition

interest at the statutory rate of 5.250% from the date of the First Amended

Judgment to the bankruptcy filing. After Greenfield lost her appeal from

the Original Judgment, the state court entered a separate judgment for

appellate fees and costs dated July 22, 2015, adding $27,582.00 in costs and

attorney’s fees. The Wurmlingers stated that the appellate fees and costs

accrued $6,212.00 in prepetition interest at the statutory rate of 5.125% from

the date of this judgment to the date of the bankruptcy filing (“Appellate

Bankruptcy Code, 11 U.S.C. §§ 101–1532.
                                          3
Fees and Costs Judgment”). Finally, on September 20, 2015, the state court

entered its Second Amended Judgment to incorporate the monetary

awards from the Original Judgment, the First Amended Judgment, and the

Appellate Fees and Costs Judgment (“Second Amended Judgment”).

      The Wurmlingers recorded each of the judgments in Kootenai

County, where Greenfield resided.

      In November 2017, the Wurmlingers moved to renew their judgment

against Greenfield. Shortly thereafter, the state court entered its “Order

Renewing Judgment,” which stated that “the Judgment entered in this case

on March 26, 2013 [the Original Judgment] is renewed” (“Renewal Order”).

The Wurmlingers eventually recorded the Renewal Order with the

Kootenai County Recorder on September 4, 2018.

      In May 2020, the bankruptcy court entered its order discharging

Greenfield from her prepetition debts.

      In April 2021, the trustee filed a motion to sell Greenfield’s residence.

As part of the motion, the trustee also sought to pay the first deed of trust

and the Wurmlingers’ judgment lien at closing. Greenfield opposed the

sale motion on a variety of grounds, most of which she has not pursued on

appeal. Her opposition also objected to payment of the Wurmlingers’

claim. She argued that the Wurmlingers had not renewed their judgment

according to appropriate Idaho procedures and that the judgment therefore

should be treated as void. The bankruptcy court granted the motion to sell

and set Greenfield’s claim objection for hearing.

                                       4
       Three days before the claim objection hearing, Greenfield filed her

“supplemental” objection to the Wurmlingers’ claim. In addition to her

continuing arguments about the procedures the Wurmlingers followed in

renewing the Original Judgment, Greenfield maintained that their ten-

month delay in recording the Renewal Order rendered the Renewal Order

untimely. Hence, she claimed that the Original Judgment (and not merely

the judgment lien) became ineffective and unenforceable under I.C. §§ 10-

1110 and 10-1111. According to her, both entry of the Renewal Order and

its recordation had to occur before the five-year renewal period expired.

Finally, Greenfield asserted that the Original Judgment was procured by

fraud.

       The bankruptcy court rendered an oral decision overruling

Greenfield’s claim objection.3 In overruling her objection, the bankruptcy

court addressed each of Greenfield’s arguments and determined that they

lacked merit, constituted an impermissible collateral attack on the state

court’s orders and judgments, or both. The bankruptcy court ruled in the

alternative that Greenfield lacked standing to object to any of the claims

       3
        Two creditors related to Greenfield, Dwight Greenfield and Kelly L. Greenfield
Sheley, also objected to Wurmlingers’ claim, largely mirroring Greenfield’s claim
objection. The bankruptcy court overruled their claim objections at the same time and
on the same grounds as it overruled Greenfield’s claim objection. Neither of the
objecting creditors appealed the order overruling their claim objections. Though listed
as appellees in Greenfield’s appeal, they have not participated in this appeal. Indeed,
each objecting creditor filed a letter in response to the BAP Clerk’s Office’s Conditional
Order of Waiver specifically electing to not file a brief.
                                            5
asserted against the estate. As the bankruptcy court explained, the estate

was hopelessly insolvent.

      Greenfield timely appealed from the bankruptcy court’s written

order overruling her claim objection.

                               JURISDICTION

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

157(b)(2)(B). Subject to the standing analysis in the Discussion section,

below, we have jurisdiction under 28 U.S.C. § 158.

                                     ISSUE

      Did Greenfield establish her standing?

                          STANDARD OF REVIEW

      We review jurisdictional issues de novo. Menk v. LaPaglia (In re

Menk), 241 B.R. 896, 903 (9th Cir. BAP 1999). When we review a matter de

novo, we give no deference to the bankruptcy court’s decision. Francis v.

Wallace (In re Francis), 505 B.R. 914, 917 (9th Cir. BAP 2014).

                                 DISCUSSION

      Standing is a threshold jurisdictional issue arising from Article III of

the Constitution In re Sisk, 962 F.3d 1133, 1141 (9th Cir. 2020) (citing Lujan v.

Defs. of Wildlife, 504 U.S. 555, 560 (1992)). Pursuant to Article III’s case and

controversy requirement, a party must establish its standing by

demonstrating: “(1) an injury in fact, (2) a causal connection between the

injury and the conduct complained of, and (3) a likelihood that the injury

will be redressed by a favorable decision.” Id. In the context of an appeal

                                        6
from a bankruptcy court order, appellants must demonstrate injury in fact

by showing that the order on appeal caused them injury that is “concrete

and particularized” and “actual or imminent.” Id. at 1141-43. This means

that the order appealed must have detrimentally impaired their rights or

increased their economic burdens. Id.

       In the context of whether a chapter 7 debtor has standing to object to

claims, the debtor must show that the estate is not hopelessly insolvent.4

See Wellman v. Ziino (In re Wellman), BAP No. NC-07-1154-CaKD, 2007 WL

4105275, at *1 n.5 (9th Cir. BAP Nov. 9, 2007); see also Fondiller v. Robertson

(In re Fondiller), 707 F.2d 441, 442 (9th Cir. 1983). If it is, the debtor will not

be affected by the outcome of the claims litigation and thus lacks standing.

See An-Tze Cheng v. K&S Diversified Invs., Inc. (In re Cheng), 308 B.R. 448, 454

(9th Cir. BAP 2004), aff'd, 160 F. App’x 644 (9th Cir. 2005) (“A debtor, in its

individual capacity, lacks standing to object unless it demonstrates that it

would be ‘injured in fact’ by the allowance of the claim.”).

       In this instance, Greenfield has not demonstrated that there is a

sufficient likelihood of a surplus estate. Absent a surplus estate, the order

       4 When the debtor has been denied a discharge, or an exception to discharge has
been granted, the amount distributed to creditors in satisfaction of their debts can have
a direct impact on the debtor’s post-bankruptcy liabilities. In such a case, debtors
typically have standing with respect to all matters that might affect the size of the estate
and the claims against the estate. See Koshkalda v. Schoenmann (In re Koshkalda), 622 B.R.
749, 764 n.7 (9th Cir. BAP 2020). That is not the situation in this case as Greenfield has
received her discharge.
                                             7
overruling Greenfield’s claim objection did not cause her to suffer an injury

in fact. Without some proof of such injury, Greenfield lacks standing.

      Greenfield insists that the bankruptcy estate is solvent. But the record

does not support her position. According to the Report of Sale filed by the

trustee, the estate has received $600,000, paid $400,111.95 to secured

creditors including the Wurmlingers, and paid $41,505.58 for the real estate

commission and closing costs. The estate also paid Greenfield her

homestead exemption in the amount of $100,000.00. The parties have not

suggested that other assets exist. As a result, after the sale closed, the estate

held $58,382.47 in funds to distribute.5

      On appeal, Greenfield still challenges the Wurmlingers’ $261,083.21

secured claim. But she now concedes that in light of their renewal of the

Original Judgment, the Wurmlingers have a $103,000.00 unsecured claim.

Nor has Greenfield disputed the $36,326.55 in prepetition interest that

accrued on the $103,000.00.6 This is critical because even if their claim is

limited to an unsecured claim in the amount of $139,326.55, the estate

      5
            A preliminary, unserved version of the Trustee’s Final Report filed in the
bankruptcy court on November 30, 2021, reflects an additional disbursement for bank
service fees of $201.64, which would reduce the amount available for distribution to
$58,180.83. The preliminary Final Report further includes the Trustee’s commission of
$28,250.00 and expenses of $721.30 to be paid as administrative expenses. These
amounts would further reduce the remainder available for unsecured creditors from
$58,180.83 to $29,209.53. But even without these additional estate liabilities, the estate
still is insolvent, as set forth in the remainder of this decision.
          6 Greenfield conceded during oral argument that the Wurmlingers are entitled to

post-judgment interest on the Original Judgment, from the date of its entry in 2013.

                                            8
remains insolvent. Greenfield’s best-case result on appeal would return to

the estate the $261,083.21 already paid to the Wurmlingers as secured

creditors. This would increase the amount held by the estate from the

$58,382.47 held after closing to $319,465.68. But it also would increase the

unsecured debt by $139,326.55 to $389,590.75, still leaving the estate

insolvent:
Description of Amount                     Wurmlingers Included as   Wurmlingers Included as
                                          Secured Creditors         Unsecured Creditors
Sale Price                                $600,000.00               $600,000.00
 Exemption                                (100,000.00)_________     (100,000.00)__________
Net to Estate                             $500,000.00               $500,000.00

Secured Creditors Paid at Closing
 Specialized Loan Servicing               (139,028.74)              (139,028.74)
 Eric and Rosalynd Wurmlinger             (170,000.00)
 Eric and Rosalynd Wurmlinger              (91,083.21)__________    _____________________
Subtotal Secured Creditors                (400,111.95)              (139,028.74)

Administrative Expenses Related to Sale
and Paid at Closing                        (41,505.58)__________     (41,505.58)___________
Balance After Closing                      $58,382.47               $319,465.68

Unsecured Creditors 7
 Global Payments                              (320.00)                  (320.00)
 Calvary SPV I, LLC                        (12,190.94)               (12,190.94)
 Verizon by American InfoSource                (89.77)                   (89.77)
 Pinnacle Credit Services, LLC                (217.00)                  (217.00)
 Chapman Financial Services                 (7,446.49)                (7,446.49)
 Kelly Greenfield Sheley                   (80,000.00)               (80,000.00)
 Dwight Greenfield                        (150,000.00)              (150,000.00)
 Eric and Rosalynd Wurmlinger             ____________________      (139,326.55)__________
Subtotal Unsecured Creditors              (250,264.20)_________     (389,590.75)__________
Estate’s Deficit                          (191,881.73)               (70,125.07)

        As for her unsecured creditors other than her relatives and the Wurmlingers,
         7

Greenfield indicated in her sale objection that she disputed the claims of these other
creditors. But she never objected to these claims. In aggregate, they total $20,264.20, so
once again even if those claims were disallowed, the estate still would be insolvent by
roughly $50,000.00 ($70,125.07-$20,264.20=$49,860.87).
                                                  9
       In short, Greenfield has not demonstrated that the bankruptcy estate

is solvent or that there is any likelihood that she will receive a distribution

from the estate under any scenario—even if she prevails on appeal. As a

result, she has failed to show that the order on appeal caused her any

injury in fact. Consequently, this appeal must be DISMISSED for lack of

standing.8

       8
         While we must dismiss this case for lack of standing, we note that there is
nothing in the record to suggest that the bankruptcy court erred in addressing the
merits of Greenfield’s claim objection. First, the bankruptcy court correctly noted that it
could not examine the propriety of the underlying judgment without contravening the
Full Faith and Credit Act, 28 U.S.C. § 1738, and the Rooker-Feldman doctrine, see Exxon
Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005). Second, Greenfield’s
argument that the Wurmlingers’ delay in recording the Renewal Order limits them to
an unsecured claim is contrary to Alpha Mortgage Fund II v. Drinkard, 497 P.3d 200, 206
(Idaho 2021), and Smith v. Smith, 423 P.3d 998, 1004 (Idaho 2018). Third, the Motion to
Renew Judgment used by the Wurmlingers appears to be a form adopted by Idaho and
requires only that the original judgment amount be stated. Similarly, the form order
used to renew the judgment, which is the document recorded, only references the date
the judgment originally was entered. Idaho law is unclear as to whether every
amendment of a judgment must be recorded in addition to the original judgment.
However, even if the Wurmlingers were required to renew every amendment of their
judgment, the Second Amended Judgment was entered after Idaho had expanded the
period for renewal of judgments from five to ten years, see Smith, 423 P.3d at 1000 n.1,
and the expanded period has not yet expired.
                                            10