Court Opinion

ID: 4192889
Source: CourtListenerOpinion
Date Created: 2017-08-03 17:03:10.552703+00
Date Added: 2024-06-11T14:40:20.331587
License: Public Domain

FILED
                                                               MAY 29 2015
 1                         NOT FOR PUBLICATION
                                                          SUSAN M. SPRAUL, CLERK
                                                            U.S. BKCY. APP. PANEL
 2                                                          OF THE NINTH CIRCUIT

 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )      BAP Nos.   EC-13-1409-KuPaJu
                                   )                 EC-13-1410-KuPaJu
 6   DDJ, INC.,                    )
                                   )      Bk. No.    05-10001
 7                   Debtor.       )
     ______________________________)
 8                                 )
     JOE FLORES; CONNIE FLORES,    )
 9                                 )
                     Appellants,   )
10                                 )
     v.                            )      MEMORANDUM*
11                                 )
     JAMES E. SALVEN, Chapter 7    )
12   Trustee; DDJ, INC.; ROBERT    )
     ROSE; STATE OF CALIFORNIA     )
13   FRANCHISE TAX BOARD; UNITED   )
     STATES TRUSTEE,               )
14                                 )
                     Appellees.    )
15   ______________________________)
16                      Submitted Without Oral Argument
                               on May 14, 2015**
17
                              Filed – May 29, 2015
18
               Appeal from the United States Bankruptcy Court
19                 for the Eastern District of California
20      Honorable Fredrick E. Clement, Bankruptcy Judge, Presiding
21   Appearances:     Appellants Joe Flores and Connie Flores, pro se,
                      on brief; Thomas H. Armstrong, on brief, for
22                    Appellee James E. Salven, chapter 7 trustee
23
     Before: KURTZ, PAPPAS and JURY, Bankruptcy Judges.
24
25        *
           This disposition is not appropriate for publication.
26   Although it may be cited for whatever persuasive value it may
     have (see Fed. R. App. P. 32.1), it has no precedential value.
27   See 9th Cir. BAP Rule 8024-1.
          **
28         By order entered on August 15, 2014, a motions panel
     determined these appeals suitable for submission on the briefs
     and record without oral argument.
 1                               INTRODUCTION
 2        Joe and Connie Flores appeal pro se from an order of the
 3   bankruptcy court overruling their objections to chapter 71
 4   trustee James Salven’s final report in the DDJ, Inc. bankruptcy
 5   case.    Because none of the Floreses’ factual or legal contentions
 6   on appeal have any merit, we AFFIRM.
 7                                   FACTS
 8        In 2004, the Floreses obtained a judgment after a jury trial
 9   against DDJ, Inc. and its affiliate DDJ, LLC.   Since that time,
10   the Floreses have been attempting, unsuccessfully, to collect on
11   that judgment.   In 2005, both DDJ, Inc. and DDJ, LLC commenced
12   their chapter 7 bankruptcy cases, and Salven was duly appointed
13   to serve as the chapter 7 trustee in the DDJ, Inc. bankruptcy
14   case.2   Both before and after the bankruptcy filings, the
15   Floreses in furtherance of their collection efforts have sued a
16   host of individuals and entities related to the debtors.     The
17   specifics of this litigation and the parties involved are not
18   material to our resolution of this appeal, except to note that
19   none of the litigation has resulted in the Floreses successfully
20   collecting on their judgment.
21        A dispute arose between the debtors, their bankruptcy
22
          1
23         Unless specified otherwise, all chapter and section
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
24   all "Rule" references are to the Federal Rules of Bankruptcy
     Procedure, Rules 1001-9037.
25
          2
26         Even though someone other than Salven was appointed to
     serve as the chapter 7 trustee for DDJ, LLC, Salven effectively
27   became responsible for the assets of both estates as a result of
     a September 2007 settlement between the Floreses and Salven,
28   among others, as described infra.

                                       2
 1   trustees and the Floreses regarding, among other things, who was
 2   entitled to pursue claims against third parties.    One of the
 3   critical issues was whether the claims in question belonged to
 4   the debtors’ bankruptcy estates or to the Floreses.    The
 5   Floreses, Salven and the DDJ, LLC trustee entered into a
 6   settlement, which was approved by the bankruptcy court in
 7   September 2007, and which cleared the way for Salven to sell the
 8   estates’ interest in the litigation to a group of defendant
 9   entities.   As one of the settlement terms, the parties agreed
10   that all of DDJ, LLC’s rights were to be assigned to DDJ, Inc.
11   Another settlement term provided that Salven as the chapter 7
12   trustee for DDJ, Inc. would pursue all claims on behalf of both
13   DDJ, Inc. and DDJ, LLC.3
14        The Floreses later sought to vacate the order approving the
15   settlement, but the bankruptcy denied the Floreses’ motion to
16   vacate that order and all other attempts by the Floreses to undo
17   the settlement and Salven’s claims sale.
18        After extensive and repetitive disputes with the Floreses,
19   Salven sought and obtained from the bankruptcy court an order
20   declaring the Floreses to be vexatious litigants.    Before
21   entering that order in February 2012, the court issued detailed
22   and comprehensive findings of fact addressing each of the
23
          3
24         In addition to reviewing the record presented by the
     parties, we also have reviewed the bankruptcy court’s electronic
25   docket in the underlying bankruptcy case and the imaged documents
26   attached thereto. We can take judicial notice of the filing and
     content of those documents. See O'Rourke v. Seaboard Sur. Co.
27   (In re E.R. Fegert, Inc.), 887 F.2d 955, 957–58 (9th Cir. 1989);
     Atwood v. Chase Manhattan Mrtg. Co. (In re Atwood), 293 B.R. 227,
28   233 n.9 (9th Cir. BAP 2003).

                                      3
 1   vexatious litigant standards articulated by the Ninth Circuit
 2   Court of Appeals.   Among other things, the court’s analysis
 3   included an examination of the myriad motions the Floreses had
 4   filed since the beginning of 2011 in both debtors’ bankruptcy
 5   cases and concluded that all of the Floreses’ motions since at
 6   least the beginning of 2011 were frivolous.
 7        The bankruptcy court narrowly tailored its vexatious
 8   litigant order to address the specific problem it perceived – the
 9   Floreses’ frivolous filings in the debtors’ bankruptcy cases.
10   The order in relevant part required the Floreses to obtain
11   advance approval from any bankruptcy court in the Eastern
12   District of California before filing any additional papers in the
13   debtors’ bankruptcy cases.   The order also set forth specific
14   procedures the Floreses needed to follow if they sought to obtain
15   such approval.
16        The vexatious litigant order is a final order.    The Floreses
17   have exhausted all of their appeal rights with respect to that
18   order and have not obtained its vacatur or reversal.   More
19   specifically, the BAP entered an order dismissing as moot roughly
20   twenty of the Floreses’ appeals, including their appeals from the
21   vexatious litigant order, because the sole remaining asset of the
22   bankruptcy estates over which the parties were litigating – their
23   claimed interests in a state court lawsuit – had become
24   valueless: the state court lawsuit had been dismissed and that
25   dismissal had been affirmed on appeal.
26        In turn, the Floreses appealed the BAP dismissals to the
27   Court of Appeals, but the Court of Appeals denied the Floreses’
28   request to pursue their appeals in forma pauperis and ultimately

                                      4
 1   dismissed their appeals for nonpayment of the filing fees.    The
 2   Court of Appeals issued mandates returning full jurisdiction to
 3   the bankruptcy court during the first week of August 2013.
 4        In April 2013, the bankruptcy court entered an order in DDJ,
 5   Inc.’s bankruptcy case approving the final fee application of
 6   Thomas Armstrong, Salven’s general counsel.    That application was
 7   unopposed, and no timely appeal was taken from the order.
 8        In June 2013, Salven filed his final report, and notice was
 9   issued to the estate’s creditors and interested parties advising
10   them that, if they objected to the final report, they needed to
11   file a written objection within twenty-one days.    In July 2013,
12   the Floreses filed several papers with the court in opposition to
13   Salven’s final report.   The Floreses asserted that the bankruptcy
14   court lacked jurisdiction to approve the final report while their
15   appeals to the Ninth Circuit were pending.    The Floreses also
16   asserted that the court should not approve the final report
17   because many of the prior orders of the bankruptcy court were
18   void and invalid.   In this respect, the Floreses’ opposition
19   papers largely reiterated the arguments they had made in the
20   bankruptcy court in 2011 and before.   More importantly, before
21   filing their opposition papers, the Floreses did not make any
22   attempt to comply with the pre-filing procedures imposed on them
23   by the vexatious litigant order.
24        After Salven filed a reply and the Floreses filed a sur-
25   reply (again without complying with the vexatious litigant
26   order), the bankruptcy court held a hearing on the Trustee’s
27   final report, at which time it concluded that there was no
28   remaining jurisdictional impediment to it considering Salven’s

                                        5
 1   final report because the Court of Appeals by that time had
 2   disposed of all of the Floreses’ appeals.      The court proceeded to
 3   overrule the Floreses’ opposition to the final report because the
 4   Floreses had not complied with the vexatious litigant order.     The
 5   court entered an order memorializing this ruling on August 20,
 6   2013.
 7        On August 22, 2013, the Floreses timely filed a notice of
 8   appeal from the order overruling their opposition to Salven’s
 9   final report.
10                               JURISDICTION
11        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
12   §§ 1334 and 157(b)(2)(A) and (B).     Except as noted in the
13   jurisdiction discussion set forth below, we have jurisdiction
14   under 28 U.S.C. § 158.
15                                  ISSUES
16   1.   Do we have jurisdiction over the portions of the Floreses’
17        appeal challenging the order approving Armstrong’s final fee
18        application?
19   2.   Did the bankruptcy court abuse its discretion when it
20        overruled the Floreses’ objections to Salven’s final report?
21                            STANDARDS OF REVIEW
22        We review jurisdictional issues de novo.     See Wilshire
23   Courtyard v. Cal. Franchise Tax Bd. (In re Wilshire Courtyard),
24   729 F.3d 1279, 1284 (9th Cir. 2013).
25        As with most rulings concerning estate administration, we
26   review the bankruptcy court’s order on the trustee’s final report
27   for an abuse of discretion.   See, e.g., Goodwin v. Mickey
28   Thompson Entm't. Grp., Inc. (In re Mickey Thompson Entm't. Grp.,

                                       6
 1   Inc.), 292 B.R. 415, 420 (9th Cir. BAP 2003) (reviewing
 2   compromise order for abuse of discretion); Vu v. Kendall
 3   (In re Vu), 245 B.R. 644, 647 (9th Cir. BAP 2000) (reviewing
 4   abandonment order for abuse of discretion).
 5        The bankruptcy court abuses its discretion when it applies
 6   an incorrect legal standard or when its findings are illogical,
 7   implausible or without support in the record.    See United States
 8   v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc).
 9                               DISCUSSION
10        While the Floreses timely appealed the order overruling
11   their objections to Salven’s final report, the Floreses also seek
12   by way of this appeal to challenge the court’s order approving
13   Armstrong’s final fee application.    The court entered that order
14   in April 2013, but the Floreses did not file their notice of
15   appeal until August 2013.   The order disposing of Armstrong’s
16   final fee application was a final order subject to immediate
17   appellate review.   See, e.g., Circle K Corp. v. Houlihan, Lokey,
18   Howard & Zukin, Inc., (In re Circle K Corp.), 279 F.3d 669 (9th
19   Cir. 2002).   As such, the Floreses needed to appeal that order
20   within the fourteen-day time period set forth in Rule 8002(a).
21   See Anderson v. Kalashian (In re Mouradick), 13 F.3d 326, 327
22   (9th Cir. 1994).
23        Rule 8002 is jurisdictional.    The untimely filing of the
24   notice of appeal deprives this Panel of jurisdiction to review
25   the bankruptcy court's order granting the fee application.    Id.;
26   see also Bowles v. Russell, 551 U.S. 205, 214 (2007) (“The timely
27   filing of a notice of appeal in a civil case is a jurisdictional
28   requirement.”).

                                      7
 1        Consequently, we cannot consider any of the Floreses’
 2   arguments challenging the order granting Armstrong’s fee
 3   application.    It does not matter whether the Floreses assert that
 4   the order is void or merely wrong.    We have no authority to
 5   review or consider the order given the untimeliness of the
 6   Floreses’ appeal.
 7        Nonetheless, we can and will review the bankruptcy court’s
 8   order overruling the Floreses’ opposition to Salven’s final
 9   report.    The Floreses’ main argument is that the order is void
10   because the bankruptcy court lacked jurisdiction to approve the
11   final report.    According to the Floreses, in light of their Ninth
12   Circuit appeals, the court could not rule upon Salven’s final
13   report.
14        Generally speaking, when an appeal is taken from a trial
15   court’s final judgment or order, the trial court is divested of
16   most of its authority to hear and decide matters in that same
17   case.    Rains v. Flinn (In re Rains), 428 F.3d 893, 903 (9th Cir.
18   2005).    However, the rule regarding the effect of an appeal on
19   trial court jurisdiction is a judge-made prudential doctrine and
20   is far from absolute.    Id. at 904 (citing Neary v. Padilla
21   (In re Padilla), 222 F.3d 1184, 1190 (9th Cir. 2000)).    While an
22   appeal is pending, the trial court can still take certain actions
23   and decide certain matters, so long as the trial court does not
24   interfere with the status quo of the order on appeal.    See
25   Hill & Sanford, LLP v. Mirzai (In re Mirzai), 236 B.R. 8, 10 (9th
26   Cir. BAP 1999) (stating that, while appeal is pending, trial
27   court may still “correct clerical errors, take steps to maintain
28   the status quo, take steps that aid in the appeal, award

                                       8
 1   attorney's fees, impose sanctions, and proceed with matters not
 2   involved in the appeal.”).
 3        As a matter of necessity, a bankruptcy court often needs to
 4   continue to preside over the administration of a bankruptcy case,
 5   even while appeals from prior, discrete orders are pending.      A
 6   pending appeal does not preclude a bankruptcy court from doing
 7   so, as long as the bankruptcy court’s subsequent actions and
 8   orders do not interfere with the status quo of the matters on
 9   appeal.   See id.   The Floreses have not identified any impact the
10   bankruptcy court’s order on Salven’s final report had on their
11   appeals, nor are we aware of any such impact.
12        Even if we were to assume that the bankruptcy court’s order
13   on the final report somehow could have affected matters on
14   appeal, the Floreses’ argument regarding exclusive appellate
15   jurisdiction is fatally flawed as a factual matter.      By virtue of
16   the mandates the Court of Appeals issued during the first week of
17   August 2013, all of the Floreses’ appeals were disposed of and
18   full jurisdiction was returned to the bankruptcy court before the
19   bankruptcy court ruled on the final report.      See Sgaraglino v.
20   State Farm Fire & Cas. Co., 896 F.2d 420, 421 (9th Cir. 1990);
21   In re Mirzai, 236 B.R. at 10-11.       Accordingly, we reject on both
22   factual and legal grounds the Floreses’ argument regarding
23   exclusive appellate jurisdiction.
24        The Floreses also assert that this Panel’s dismissal of
25   their prior appeals as moot automatically voided or invalidated
26
27
28

                                        9
 1   the bankruptcy court’s vexatious litigant order.4         This assertion
 2   is simply wrong.       In the absence of an order explicitly vacating
 3   the orders on appeal, the dismissal of the appeals as moot did
 4   not automatically vacate the orders appealed.          See U.S. Bancorp
 5   Mortg. Co. v. Bonner Mall P'ship, 513 U.S. 18, 22-24 (1994).
 6   Instead, upon learning that their appeals might be dismissed as
 7   moot, it was incumbent on the Floreses to request vacatur of the
 8   orders appealed on mootness grounds if that is what they desired.
 9   See United States v. Munsingwear, Inc., 340 U.S. 36, 39-41
10   (1950).       Because they never requested a Munsingwear vacatur
11   order, they forfeited any entitlement they otherwise might have
12   held to such an order.        Id.    We cannot go back now into the prior
13   appeals and fix the Floreses’ omission.          Id.
14          The Floreses claim that this result – the dismissal of their
15   appeals as moot followed by the continued enforcement of the
16   vexatious litigant order – effectively denied them due process of
17   law.       We disagree.   The Floreses’ due process argument is
18   inconsistent with Munsingwear, which held that an appellant
19   desiring vacatur of an order on appeal that has become moot must
20   timely ask for vacatur.        Id.    In the prior appeals, the Floreses
21   filed voluminous papers addressing the mootness issue both before
22   and after this Panel ruled.          Thus, the Floreses had ample
23   opportunity to request a Munsingwear vacatur order in the prior
24
            4
           The Floreses do not otherwise challenge the bankruptcy
25   court’s finding that their conduct violated the vexatious
26   litigant order or its decision to disregard their opposition.
     Consequently, we decline to address any other issues potentially
27   arising from these rulings. See Christian Legal Soc'y v. Wu,
     626 F.3d 483, 487–88 (9th Cir. 2010); Brownfield v. City of
28   Yakima, 612 F.3d 1140, 1149 n.4 (9th Cir. 2010).

                                            10
 1   appeals.    Their failure to do so does not constitute a denial of
 2   due process.
 3        The Floreses’ other arguments on appeal focus on the
 4   bankruptcy court’s order approving Armstrong’s final fee
 5   application.    Indeed, the last seven pages of the Floreses’
 6   appeal brief appear exclusively devoted to the court’s order on
 7   Armstrong’s fees.    Even so, it is conceivable (albeit barely so)
 8   that the Floreses also meant to challenge the order on Salven’s
 9   final report on the same grounds:      based on allegations of fraud
10   on the court.    We must liberally interpret the Floreses’ pro se
11   appeal brief, so we will briefly address their fraud on the court
12   argument.   Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699
13   (9th Cir. 1988), partially overruled on other grounds by     Bell
14   Atl. Corp. v. Twombly, 550 U.S. 544 (2007).
15        The Floreses’ fraud on the court argument is a nonstarter.
16   The argument is premised on the allegation that Salven and his
17   counsel Armstrong made misrepresentations to the bankruptcy court
18   regarding: (1) the scope of their authority to represent the
19   interests of both debtors; and (2) the scope of Armstrong’s work
20   on behalf of both debtors.    More specifically, the Floreses
21   contend that neither Salven nor Armstrong was authorized to do
22   anything on behalf of DDJ, LLC.    As the Floreses explain, Salven
23   only was appointed to serve as chapter 7 trustee for DDJ, Inc.,
24   and Armstrong only was retained to represent Salven as chapter 7
25   trustee in the DDJ, Inc. bankruptcy case.     According to the
26   Floreses, Salven and Armstrong led the court to believe that
27   Armstrong’s services were performed solely for DDJ, Inc. when in
28   fact many of those services actually were performed for DDJ, LLC.

                                       11
 1        The parties’ September 2007 settlement tells a different
 2   story.   The settlement, agreed to by the Floreses and approved by
 3   the bankruptcy court, effectively gave Salven (as trustee for
 4   DDJ, Inc.) ownership and control over all of DDJ, LLC’s claims
 5   against third parties and further provided that Salven (as
 6   trustee for DDJ, Inc.) would pursue the claims of both bankruptcy
 7   estates for the benefit of DDJ, Inc.     Even though the Floreses
 8   might construe the settlement differently or might challenge the
 9   settlement’s validity, it is hard to conceive how Salven’s and
10   Armstrong’s statements to the court regarding their authority and
11   their services could qualify as misrepresentations in light of
12   the explicit terms of the September 2007 settlement.
13        In any event, as a matter of law, the statements Salven and
14   Armstrong made to the court regarding the scope of their
15   authority and the scope of work performed on behalf of the
16   debtors do not constitute fraud on the court, given that the
17   Floreses at all times had the opportunity to challenge any such
18   statements they perceived as false.    See Apotex Corp. v. Merck &
19   Co., 507 F.3d 1357, 1361-62 (Fed. Cir. 2007) (holding that fraud
20   on the court does not include statements made by adverse party
21   that moving party had opportunity to challenge in court).
22                               CONCLUSION
23        For the reasons set forth above, we AFFIRM the bankruptcy
24   court’s order overruling the Floreses’ objections to Salven’s
25   final report.
26
27
28

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