Court Opinion

ID: 9918720
Source: CourtListenerOpinion
Date Created: 2024-01-16 16:01:21.021365+00
Date Added: 2024-06-11T08:04:48.393147
License: Public Domain

FILED
                           NOT FOR PUBLICATION                                      JAN 16 2024
                                                                               SUSAN M. SPRAUL, CLERK
                                                                                  U.S. BKCY. APP. PANEL
          UNITED STATES BANKRUPTCY APPELLATE PANEL                                OF THE NINTH CIRCUIT

                    OF THE NINTH CIRCUIT

 In re:                                              BAP No. EC-23-1004-BCF
 MOHAMMAD KHAN,
           Debtor.                                   Bk. No. 20-13855

 MOHAMMAD KHAN,                                      Adv. No. 21-01026
             Appellant,
 v.                                                  MEMORANDUM∗
 WILMINGTON TRUST N.A.,
             Appellee.

               Appeal from the United States Bankruptcy Court
                    for the Eastern District of California
                Rene Lastreto II, Bankruptcy Judge, Presiding

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

                                   INTRODUCTION

      Appellant Mohammad Khan appeals an order denying his motion

under Civil Rule 60(b),1 applicable here by Rule 9024, to vacate the order

dismissing his adversary complaint against Wilmington Trust N.A.

("Wilmington"). We AFFIRM. 2

      ∗ 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 Unless specified otherwise, all chapter and section references are to the Bankruptcy

Code, 11 U.S.C. §§ 101-1532, all "Rule" references are to the Federal Rules of Bankruptcy
Procedure, and all "Civil Rule" references are to the Federal Rules of Civil Procedure.
       2 We exercise our discretion to take judicial notice of documents electronically filed

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                                          FACTS

A.    Events leading to Khan's adversary complaint against Wilmington

      Khan is no stranger to the bankruptcy court, or the Napa County

Superior Court where he has been deemed to be a vexatious litigant. Khan

filed eleven bankruptcy cases between 2011 and 2020, ten of which were filed

between 2016 and 2020. Khan's business partner, Bruce Chadbourne, also filed

multiple bankruptcy cases during this time, and Khan's wife filed at least one.

      At the center of the serial bankruptcy filings was a real property known

as the Mora Property, which may or may not have been Khan's residence. In

2015, Chadbourne was the owner of the Mora Property and in default on a

deed of trust owed to Wilmington. Fractional interests in the Mora Property

were granted to Khan and his wife, who then assisted Chadbourne in the

filing scheme to invoke the automatic stay and avoid foreclosure.

      Ultimately, on July 8, 2019, in one of Chadbourne's bankruptcy cases,

the court entered an in rem order in favor of Wilmington under § 362(d)(4)

affecting the Mora Property for two years – until July 8, 2021. Appeals of the

in rem order were unsuccessful.3

      Khan filed the instant chapter 11 case on December 15, 2020. Prior to the

filing, Wilmington conducted a foreclosure sale of the Mora Property, was

in the bankruptcy court, where appropriate. See Atwood v. Chase Manhattan Mortg. Co. (In re
Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).
       3 On March 17, 2023, after this appeal was filed, the Ninth Circuit affirmed the BAP's

dismissal of Chadbourne's appeal and refused to consider his challenges to the bankruptcy
court's decision. See Chadbourne v. Wilmington Tr. Nat'l Ass'n (In re Chadboune), No. 20-
60054, 2023 WL 2555706 (9th Cir. Mar. 17, 2023).
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awarded an unlawful detainer judgment against Khan by default, and, in

October 2020, obtained a writ of possession. On December 22, 2020, the

sheriff's department evicted Khan by locking him out of the Mora Property.

      Khan's chapter 11 case was dismissed with prejudice as a bad faith filing

in February 2021, and he was barred from filing a petition in the district for

180 days. The bankruptcy court denied Khan's motion to vacate the case

dismissal order. The United States Trustee then obtained a default judgment

against Khan barring him from filing for bankruptcy for two years – until July

7, 2023 – without permission from the Chief Bankruptcy Judge.

B.    Khan's adversary complaint against Wilmington

      Khan, pro se, filed an adversary complaint against Wilmington four

months after his chapter 11 case was dismissed. The gravamen of Khan's

complaint was that Wilmington violated the automatic stay when it directed

the sheriff to lock him out of the Mora Property a week after he filed his

chapter 11 case. Khan also asserted a claim against Wilmington under

"§ 523(a)(6)" for "fraud," alleging that Wilmington provided the sheriff with a

fraudulent order for the lockout, and a claim under § 542 for turnover of the

Mora Property and personal property that was removed. Khan requested a

temporary restraining order to prevent a sale of his removed belongings set

for the next day on June 22, 2021. In addition to the above relief, Khan prayed

for $3 million in punitive damages.4

      4
        Weeks after filing his complaint, Khan requested a temporary restraining order to
enjoin the sale of his personal property which had already occurred and moved for
turnover of the Mora Property – the same relief he sought in his complaint. Khan failed to
                                              3
      The bankruptcy court entered an order to show cause ("OSC") why

Khan's adversary complaint should not be dismissed for insufficient service of

process, lack of subject matter jurisdiction, and failure to state a claim for

relief. The court warned that Khan's complaint would be dismissed without

further notice if he failed to file and serve a written response to the OSC.

      Khan did not file a response to the OSC or appear at the scheduled

hearing, and the bankruptcy court dismissed the adversary complaint on

September 24, 2021 ("AP Dismissal Order"). The court found that Khan had

not properly served Wilmington and that he failed to establish the court's

subject matter jurisdiction over his claims for turnover and fraudulent transfer

because the complaint was filed after his chapter 11 case had been dismissed.

Further, although the automatic stay was in effect for 30 days after Khan filed

his chapter 11 case, Wilmington had not violated the automatic stay as a

matter of law respecting the Mora Property because of the in rem order. As to

any personal property, the court found that a request to enjoin the completed

sale was stale and that Khan was given an opportunity to retrieve his

belongings but failed to do so.

      One year later to the day, Khan moved to vacate the AP Dismissal Order

under Civil Rule 60(b), citing error by the court and new evidence. Khan

maintained that he was unable to attend the OSC hearing in September 2021

because he was hospitalized – his usual reason for why he misses hearings or

filing deadlines. Khan continued to argue that Wilmington violated the

appear at the scheduled hearing. The bankruptcy court denied all relief.
                                           4
automatic stay as to the Mora Property and that the bankruptcy court erred in

holding that the stay was not in effect at the time of the lockout because the

appeal of the in rem order in Chadbourne's case was still pending before the

Ninth Circuit.

      Khan failed to appear at the scheduled hearing for his Civil Rule 60(b)

motion. The bankruptcy court denied the motion for procedural and notice

deficiencies, and because Khan failed to provide any grounds for relief. This

timely appeal followed.

                                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 in denying Khan's Civil

Rule 60(b) motion?

                           STANDARD OF REVIEW

      We review the denial of a motion under Civil Rule 60(b) for abuse of

discretion. Tennant v. Rojas (In re Tennant), 318 B.R. 860, 866 (9th Cir. BAP

2004). A bankruptcy court abuses its discretion if it applies the wrong legal

standard, misapplies the correct legal standard, or if its factual findings are

illogical, implausible, or without support in the record. United States v.

Hinkson, 585 F.3d 1247, 1261-62 (9th Cir. 2009) (en banc).

                                 DISCUSSION

                                        5
      Our review is limited to the bankruptcy court's denial of Khan's Civil

Rule 60(b) motion to vacate the AP Dismissal Order. Civil Rule 60(b) permits a

bankruptcy court to grant relief from a final order or judgment on six separate

grounds. See Civil Rule 60(b)(1)-(6). Other than a reference to "Rule 60," Khan

did not articulate under which clause he was seeking relief, and the

bankruptcy court did not articulate which clause it applied to deny the

motion. Since Khan asserted legal error by the court and new evidence, he

apparently was seeking relief under (b)(1) for mistake, inadvertence, surprise,

or excusable neglect, and (b)(2) for newly discovered evidence.

      Recently, the U.S. Supreme Court held that a judge's errors of law are

"mistakes" that can provide a basis for relief under Civil Rule 60(b)(1), but

such motions must be filed "within a reasonable time" and are untimely when

the movant should have challenged the alleged legal error sooner (e.g., in a

timely appeal). Kemp v. United States, 142 S. Ct. 1856, 1860, 1864 (2022) (citing

Mendez v. Republic Bank, 725 F.3d 651, 660 (7th Cir. 2013)). This has long been

the law in the Ninth Circuit. See Gila River Ranch, Inc. v. United States, 368 F.2d

354, 357 (9th Cir. 1966) (when a Civil Rule 60(b)(1) motion is based on the

court's error, it must be filed before the expiration of the time for appeal);

accord Sattler v. Russell (In re Sattler), 840 F. App'x 214, 214-15 (9th Cir. 2021)

("Granting motions to vacate orders involving alleged legal errors on the

merits, 'after a deliberate choice has been made not to appeal, would allow

litigants to circumvent the appeals process and would undermine greatly the

                                          6
policies supporting finality of judgments.'" (quoting Plotkin v. Pac. Tel. & Tel.

Co., 688 F.2d 1291, 1293 (9th Cir. 1982))).

      One exception to this rule is "when the movant can 'establish the

existence of extraordinary circumstances which prevented or rendered him

unable to prosecute an appeal.'" In re Sattler, 840 F. App'x at 215 (quoting

Plotkin, 688 F.2d at 1293); see also id. at 215 n.2 (explaining that Civil Rule

60(b)(1) motions require a showing of extraordinary circumstances when they

are based on alleged legal errors that go to the merits and are brought after

the appeal deadline). In his Civil Rule 60(b) motion, Khan claimed that he was

hospitalized at the time of the OSC hearing and could not attend and that he

attempted to correct this matter when he was released but the court did not

hear his requests. Khan did not provide any details or evidence of this

particular hospitalization. Nor did he elaborate on the efforts he took to

address the issue after the OSC hearing.

      The docket reflects that Khan filed a motion to vacate the AP Dismissal

Order twelve days after it was entered, but he failed to comply with the

clerk's instruction to set and notice it for hearing. So, the motion was never

heard. If Khan was able to file a motion within twelve days, he clearly was

able to file a notice of appeal within fourteen days, or even request an

extension of time to file a notice of appeal if necessary. See Rule 8002(a), (d).

His vague statement that he was hospitalized on the date of the OSC hearing,

and that he filed the unheard motion to vacate the AP Dismissal Order but

not a notice of appeal, does not amount to "extraordinary circumstances" for

                                          7
excusing a timely appeal of the AP Dismissal Order. Thus, the court did not

err in denying relief under Civil Rule 60(b)(1).

       Khan also sought relief based on "newly discovered evidence" under

Civil Rule 60(b)(2), but it is not clear what this new evidence was. To the

extent it was that Chadbourne's appeal had not been dismissed as the

bankruptcy court believed and was still pending, this mattered not because no

stay of the in rem order pending appeal had been granted.5 To the extent it

was Khan's argument that Wilmington lacked standing to foreclose or obtain

a writ of possession because the mortgage arrears had been cured in 2015,

those issues were not properly before the bankruptcy court. In any case, Khan

did not present any reason for why evidence supporting this argument was

not available at the time of the OSC hearing in September 2021. Further,

Wilmington's standing to foreclose and related issues were not even raised in

Khan's adversary complaint. Thus, the court did not err in denying relief

under Civil Rule 60(b)(2).

                                      CONCLUSION

       The bankruptcy court did not abuse its discretion in denying Khan's

Civil Rule 60(b) motion, and we AFFIRM.

       5
        "Unless stayed, a federal judgment retains all of its preclusion effects and may be
enforced during the pendency of an appeal." In re Sunergy Cal. LLC, 646 B.R. 840, 844
(Bankr. E.D. Cal. 2022) (citing Tripati v. Henman, 857 F.2d 1366, 1367 (9th Cir. 1988)), aff'd,
BAP No. EC-22-1230-GCB, 2023 WL 4184860 (9th Cir. BAP June 26, 2023).
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