Court Opinion

ID: 9373909
Source: CourtListenerOpinion
Date Created: 2023-02-22 16:10:27.115645+00
Date Added: 2024-06-11T17:16:49.433599
License: Public Domain

FILED
                                                                                    DEC 7 2022
                          NOT FOR PUBLICATION                                  SUSAN M. SPRAUL, CLERK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. NC-22-1071-TBF
 DANIELA M. FARINA,
              Debtor.                                Bk. No. 22-10021-RLE

 DANIELA M. FARINA,
                Appellant,
 v.                                                  MEMORANDUM*
 JANINA M. HOSKINS, Chapter 7
 Trustee; SAN MATEO CREDIT UNION;
 WELLS FARGO BANK, N.A.; VICTOR
 ALAM,
                Appellees.

               Appeal from the United States Bankruptcy Court
                   for the Northern District of California
               Roger L. Efremsky, Bankruptcy Judge, Presiding

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

                                 INTRODUCTION

       Appellant Daniela M. Farina (“Debtor”) appeals from an order

granting the chapter 7 1 trustee’s motion to approve compromise of

       *
         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
controversy with creditor, Victor Alam (the “Compromise Motion”).

Approval of the compromise was supported by sufficient evidence, and the

bankruptcy court did not abuse its discretion in granting the Compromise

Motion. Thus, we AFFIRM.

                                         FACTS 2

A.     Background of the relationship between Debtor and Mr. Alam

       Mr. Alam is a California attorney who had a two-year personal and

business relationship with Debtor. During that time, they formed a joint

venture real estate partnership which purchased two properties in Napa,

California: the Euclid Avenue Property and the First Avenue Property

(collectively, the “Properties”). While they initially agreed to make equal

contributions to purchase the Properties, Mr. Alam became the sole obligor

on the purchase money loans, and he contributed roughly $290,000 while

Debtor contributed only $175,000. Despite these disparities, they took joint

title to the Properties with each holding a 50% interest.

       When the relationship ended, litigation began with a fury in multiple

courts. For his part, Mr. Alam filed an action seeking partition, an

accounting, and appointment of a receiver with respect to the Properties.

Once appointed, the receiver found a buyer for the Euclid Avenue Property

but was unable to close the sale because Debtor filed two bankruptcies.

of Bankruptcy Procedure.
        2 We exercise our discretion to take judicial notice of documents electronically

filed in the case. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227,
233 n.9 (9th Cir. BAP 2003).
                                             2
      Promptly after the filing of the second bankruptcy (the case from

which this appeal arises), Mr. Alam obtained an order: (1) granting stay

relief to allow him to prosecute vexatious litigant and domestic violence

related motions in state court; and (2) excusing turnover of the Euclid

Avenue Property, allowing the receiver to complete the pending sale, and

requiring the deposit of sale proceeds with the chapter 7 trustee.3 Debtor’s

appeal from this order was dismissed as untimely, and the Euclid Avenue

Property sale closed.

B.    The chapter 7 petition and Debtor’s motion to dismiss

      Debtor alleges that her second bankruptcy, a pro per chapter 7 case,

was filed by a third person masquerading as an attorney who prepared the

case initiation documents. She admitted, however, that she retained this

person to file a bankruptcy case for her but claimed that she wanted a

chapter 13 case.

      Based on this assertion, she filed an unsuccessful dismissal motion

and argued that the bankruptcy court lacked jurisdiction. Debtor appealed

the denial of the motion but later dismissed the appeal.4

      3  Four days later, the superior court designated Debtor as a vexatious litigant in
case no. 20-CV-001250.
       4 That ruling denying dismissal based on the facts presented in Debtor’s motion

is now the law of the case and will not be disturbed or revisited by the Panel. See Rebel
Oil Co. v. Atl. Richfield Co., 146 F.3d 1088, 1093 (9th Cir. 1998) (a court is generally
precluded from reconsidering an issue that has already been decided by the same court,
or a higher court in the identical case.)
       Debtor argues that the denial order was not final therefore the dismissed appeal
and underlying decision should be ignored. We disagree. In Aspen Skiing Co. v. Cherrett
                                            3
C.     The settlement and the Compromise Motion

       As of the petition date, Debtor had seven lawsuits against Mr. Alam

in various stages of litigation. Five were unresolved, while two were

resolved in Mr. Alam’s favor. He obtained a substantial fee award in one

case, and Debtor appealed. In the other, his fee request was pending on the

petition date. His proof of claim asserted a claim of “$264,988 plus

unknown amount” based on the awarded and requested fees and costs.

       The trustee and Mr. Alam reached a settlement early in the case

which provided as follows:

       1. Mr. Alam agreed to release an abstract of judgment he filed

          against the Properties.

       2. Mr. Alam agreed to waive any ownership or other claim to the

          Properties or their proceeds.

(In re Cherrett), 873 F.3d 1060, 1065 (9th Cir. 2017), the Ninth Circuit found that denial of
the creditor’s motion to dismiss the debtor’s chapter 7 case under § 707(b) was final;
“the bankruptcy court’s order resolved the Cherretts’ ability to file a Chapter 7
bankruptcy petition.” See also Ritzen Group, Inc. v. Jackson Masonry, LLC, 140 S.Ct. 582,
587 (2020). While some orders denying a motion to dismiss a chapter 7 may be
interlocutory, we believe the order here – finding jurisdiction to proceed – is akin to
Cherrett and Ritzen and therefore final.
        Further, Debtor’s argument that the bankruptcy court had no jurisdiction
because she intended to file chapter 13 instead of chapter 7 is frivolous because, either
way, she clearly intended to submit herself and her property to the jurisdiction of the
bankruptcy court. Counsel conceded at oral argument that she intended to file
bankruptcy when she did.
                                              4
     3. Mr. Alam agreed to waive any claim he had against the estate to

        allow payment of administrative expenses. If proceeds remained,

        however, he retained the right to a claim against them.

     4. The trustee agreed to prosecute any necessary lien avoidance

        actions relating to disputed liens on the Properties.

     5. The trustee agreed to a full release of estate claims against

        Mr. Alam, his relatives, and other related parties.

     6. The trustee agreed to dismiss all Debtor’s pending litigation

        against Mr. Alam and his related parties to the fullest extent

        possible.

     The trustee filed her Compromise Motion and concurrently sought a

hearing on shortened notice. Debtor filed a 21-page opposition, but the

bankruptcy court granted the request and scheduled the hearing on the

approval of the settlement to be heard concurrently with Debtor’s motions

to dismiss and to convert to chapter 13. The bankruptcy court’s order

shortening time (“OST”) required service on Debtor by email and by mail

to the mailbox address on her petition, shortened the response time to

13 days, but allowed written opposition in advance of the hearing or oral

opposition at the hearing.

     Debtor filed a written response to the Compromise Motion (the

“Response”) and a motion for continuance of the hearing (“Motion for

                                      5
Continuance”) three days before the hearing.5 The Response largely

repeated arguments made in opposing the request to shorten time:

      1) that the bankruptcy court lacked jurisdiction because a third party

          filed her case as a chapter 7 not a chapter 13;

      2) that the compromise was not fair, reasonable, or adequate;

      3) that the compromise was not supported by appropriate evidence;

          and

      5
        Debtor filed the following pleadings between March 2, 2022 (the day after the
Compromise Motion was filed) and March 14, 2022 (the day of the hearing on the
Compromise Motion):
           • an opposition to application for shortened time re Compromise Motion
              (Doc. 139) (3/2/22);
           • a motion for new hearing date for contempt motion (Doc. 140) (3/2/22);
           • a fourth motion to dismiss (Doc. 148) (3/3/22);
           • a supplement to motion to dismiss (Doc. 169) (3/7/22);
           • a motion for order enforcing automatic stay (Doc. 172) (3/7/22);
           • a motion to recuse Judge Efremsky (Doc. 173) (3/7/22);
           • an application for shortened notice re motion to dismiss (Doc. 174)
              (3/7/22);
           • a motion for stay relief to excuse turnover for limited purpose of
              determining ownership of First Avenue Property (Doc. 177) (3/8/22);
           • an application for shortened notice re stay relief (Doc. 184) (3/8/22);
           • a motion for stay pending appeal of further appeals (Doc. 185) (3/8/22);
           • a motion to convert the case to chapter 13 (Doc. 190) (3/9/22);
           • an “ex-parte application for stay of order of possession and writ of
              assistance pending motion to dismiss bankruptcy case” (Doc. 205)
              (3/10/22);
           • a response to Compromise Motion (Doc. 224) (3/11/22);
           • a motion for continuance of Compromise Motion (Doc. 225) (3/11/22);
           • a motion for stay pending appeal of recusal motion (Doc. 246) (3/14/22).
       In addition, from the petition date through March 14, 2022, Debtor filed seven
notices of appeal to the BAP in this case; and 13 through April 6, 2022, the date of the
hearing on the Compromise Motion.
                                            6
      4) that the bankruptcy court violated her due process rights by

         hearing the matter on shortened notice, finding service proper,

         and failing to provide reasonable accommodations for her alleged

         visual disabilities.

      More particularly, she argued that she did not receive the

Compromise Motion asserting that the trustee falsified the proof of service

intentionally to “disadvantage” her. The Motion for Continuance repeated

that she has a visual disability and claimed that she did not receive an

additional 1000 pages of documents filed on March 10 and 11.

D.    The hearing on the Compromise Motion

      At the hearing, Debtor appeared and spoke at length. She largely

focused on her motion to dismiss and withdrew her then-pending request

to convert the case to chapter 13. The bankruptcy court denied her request

for dismissal.

      As to the Compromise Motion, she repeated the arguments already

made in writing and alleged her inability to respond. But she never

explained what evidence or argument she intended to muster if allowed

more time.

      The bankruptcy court granted the Compromise Motion with one or

two non-substantive modifications, 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.

                                      7
                                    ISSUES

   1. Whether Debtor has standing to object to the proposed compromise?

   2. Whether the bankruptcy court’s approval of the Compromise Motion

was an abuse of discretion?

   3. Whether the bankruptcy court’s approval of the trustee’s application

for order shortening time, refusal to give Debtor additional time to oppose

the motion, and refusal to make special accommodations to Debtor based

on her visual disability was an abuse of discretion?

                         STANDARDS OF REVIEW

      A bankruptcy court’s decision as to whether it has subject matter

jurisdiction is reviewed de novo. Vylene Enters., Inc. v. Naugles, Inc. (In re

Vylene Enters., Inc.), 90 F.3d 1472, 1475 (9th Cir.1996).

      Standing is an issue of law which we review de novo. Palmdale Hills

Prop., LLC v. Lehman Com. Paper, Inc. (In re Palmdale Hills Prop., LLC), 654

F.3d 868, 873 (9th Cir. 2011). Whether Debtor satisfies the “person

aggrieved” test is a question of fact that is reviewed for clear error. Id.

      The standard of review for the approval of a settlement is abuse of

discretion. Martin v. Kane (In re A & C Properties), 784 F.2d 1377, 1380 (9th

Cir. 1986).

      As to abuse of discretion: “(1) we review de novo whether the

bankruptcy court ‘identified the correct legal rule to apply to the relief

requested’ and (2) if it did, we consider whether the . . . application of the

legal standard was illogical, implausible, or without support in inferences

                                        8
that may be drawn from the facts in the record.” Spark Factor Design, Inc. v.

Hjelmeset (In re Open Med. Inst., Inc.), 639 B.R. 169, 180 (BAP 9th Cir. 2022),

appeals docketed, No. 22-60017 (9th Cir. June 27, 2022), No. 22-60018 (9th Cir.

June 27, 2022) (quoting United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir.

2009)). If a court “bases its ruling upon an erroneous view of the law or a

clearly erroneous assessment of the evidence[,]” abuse of discretion exists.

United States v. Levoy (In re Levoy), 182 B.R. 827, 831 (BAP 9th Cir. 1995)

(citation omitted).

                                 DISCUSSION

A.    Debtor has standing in this appeal.

      “A federal court may exercise jurisdiction over a litigant only when

that litigant meets constitutional and prudential standing requirements.”

Veal v. Am. Home Mortg. Servicing, Inc. (In re Veal), 450 B.R. 897, 906 (9th Cir.

BAP 2011) (citation omitted). “Constitutional standing requires an injury in

fact, which is caused by or fairly traceable to some conduct, and which the

requested relief will likely redress.” Id. (citing Sprint Commc’ns Co., L.P. v.

APCC Servs., Inc., 554 U.S. 269, 273-74 (2008); additional citations omitted).

“The prudential standing doctrine or the ‘person aggrieved test’ provides

that ‘[o]nly those persons who are directly and adversely affected

pecuniarily by an order of the bankruptcy court . . . have standing to

appeal that order.’” Palmdale Hills Prop., 654 F.3d at 874 (quoting Fondiller v.

Robertson (In re Fondiller), 707 F.2d 441, 442 (9th Cir. 1983)). It is Debtor’s

burden to establish standing. Hasso v. Mozsgai (In re La Sierra Fin. Servs.,

                                         9
Inc.), 290 B.R. 718, 726 (9th Cir. BAP 2002) (citing Bennett v. Spear, 520 U.S.

154, 167-68 (1997)).

       Debtor erroneously claims standing based on Rule 9019(a) which

required that she receive notice of the motion. That, she reasons,

contemplates her as a “potential objector to a compromise motion,

particularly when the debtor is the party most adversely affected.” We

disagree. Requiring notice does not, by itself, give standing to every person

receiving notice.

       The trustee raised the standing issue at the hearing and again in her

opening brief arguing that this is not a surplus estate. But she offered no

facts or evidence to support that statement. In her opening brief she simply

states without support that “[t]he record shows that this is not a surplus

estate.”

       The bankruptcy court noted when making its ruling that the issue of

whether this is a solvent estate was still open. On this record, we, like the

bankruptcy court, accept the possibility that a surplus estate exists and,

thus, we cannot determine that Debtor lacks standing in this appeal.6

       6
         Debtor argues in her Reply Brief that the loss of the Properties is an irreparable
injury that provides standing on appeal. We reject that argument because she “lost” the
property when she voluntarily filed her bankruptcy petition and the real property
interests became property of the estate.

                                            10
B.    The bankruptcy court did not abuse its discretion in approving the
      Compromise Motion under the A & C Properties factors.

      Debtor argues (1) that the compromise was not fair, reasonable or

“adequate”; 2) that it was not supported by appropriate evidence; and 3)

that the bankruptcy court violated her due process rights by hearing the

matter on shortened notice, finding that she had been properly served, and

failing to provide reasonable accommodations for her alleged visual

disabilities. We disagree.

      1. The bankruptcy court’s application of the A & C Properties
         factors was sufficient to find that the Compromise Motion was
         fair, reasonable, and adequate.

      Courts analyze the propriety of a settlement agreement under the

rule announced by the Ninth Circuit in A & C Properties. It is based on the

bedrock principal that “[t]he law favors compromise” in order “to allow

the trustee and the creditors to avoid the expenses and burdens associated

with litigating sharply contested and dubious claims.” 784 F.2d at 1380–81.

“[A]s long as the bankruptcy court amply considered the various factors

that determined the reasonableness of the compromise, the court’s decision

must be affirmed.” Id.

      In conducting the A & C Properties analysis, the court “determin[es]

the fairness, reasonableness and adequacy of a proposed settlement

agreement” through mandatory consideration of four factors: “(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

                                         11
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.” Id. at 1381. In engaging in its

analysis, courts need not conduct a mini trial on the merits, and merely

need to canvass the issues. Open Med. Inst., Inc., 639 B.R. at 180. Further, the

factors need not be treated in a vacuum; rather, they should be considered

as a whole to determine whether the settlement compares favorably with

the expected rewards of litigation. Id.

      Therefore, the bankruptcy court can make general findings

supporting the settlement when the record clearly reflects that application

of these factors weighs in favor of the settlement. And the reviewing court

should affirm where the record supports approval of the compromise, even

if the findings are general. Id. at 181. In short, the absence of specific

findings as to each of the A & C Properties factors does not by itself justify

reversal.

      2. The bankruptcy court’s findings were adequate.

      While the bankruptcy court did not make extensive and hyper-

specific findings on the record, it expressly recognized A & C Properties as

outlining the proper standard and made clear that it applied its factors in

approving the Compromise Motion. Again, its failure to be more specific is

not a basis for reversible error when the record supports its holding. Id. at

181. Here it does.

                                        12
      Debtor also argues that the trustee’s declaration supporting the

motion was not sufficient evidence to permit the bankruptcy court to make

the required findings and analysis. Again, we disagree.

      The evidence establishes that the settlement was within the range of

reasonableness such that it was fair and equitable. Mr. Alam’s waiver of

any claims to the Properties provided the estate with 100% of their net

value rather than only Debtor’s 50% interest. This waiver constituted

significant consideration in exchange for the releases of claims deemed

dubious by the trustee.

      Debtor does not address or refute this evidence. She was in a position

to explain why her litigation had merit and achievable value in excess of

Mr. Alam’s contribution of his interest in the Properties, but she offered

nothing. In short, there is no evidence at all opposing that which the trustee

offered.

      3. The A & C Properties factors have been met.

               a. Probability of success

      As described in the Compromise Motion and the trustee’s

accompanying declaration, the trustee reviewed the extensive

documentation provided by Mr. Alam in his motion for relief as well other

pleadings related to the litigation. She formed the opinion that the claims

against Mr. Alam were not meritorious and that the probability of

establishing liability on any such claims was low. She noted that the Santa

Clara Superior Court stated on the record that Debtor was not credible and

                                      13
that “the evidence did not support her claims, especially as to the eye

injury.” The same court found Mr. Alam to be credible and issued him a

five-year restraining order to protect him from Debtor.

      We acknowledge that the litigation between the parties exists in

multiple courts, but Debtor’s lack of litigation success to date, and

statements from a state trial court add support to the trustee’s general

conclusions regarding a lack of probable litigation success.

      The record contains sufficient evidence to enable the bankruptcy

court to make a finding that the litigation against Mr. Alam had a low

probability of success, especially given Debtor’s failure to provide any

meaningful evidence either in her oppositions or otherwise.7

                b. Difficulty in collection

      The trustee acknowledged that this factor is not of particular concern.

                c. Complexity, expense, inconvenience, and delay in the
                litigation involved

      It is beyond cavil that pursuing seven pending lawsuits in multiple

courts and two counties with multiple parties, including on appeal, will be

complex and expensive and would significantly delay closing the estate.

Further, the trustee noted that the estate lacked funds to continue the

litigation even if she thought there might be some merit. The record

demonstrates that this factor strongly favors approval of the settlement.

      7
        We note that Debtor did not appear at any of the nine scheduled meetings of
creditors.
                                          14
                  d. Paramount interest of the creditors and deference to
                  their reasonable views

      The settlement with Mr. Alam ended significant litigation quickly

and with virtually no cost to the estate. And in turn, the estate received a

50% interest in the Properties without any costs of litigation or risk of

litigation loss. One of the Properties has already brought funds into the

estate.

      In short, the record clearly reflects that application of these factors

weighs in favor of the settlement.

          We cannot find on this record that the bankruptcy court abused its

discretion in approving this compromise.

C.    The bankruptcy court did not violate Debtor’s due process rights
      when it approved the Compromise Motion.

      Debtor argues that the bankruptcy court violated her due process

rights with respect to the Compromise Motion for a myriad of reasons. We

disagree.

            1. The bankruptcy court did not abuse its discretion when it
            granted the trustee’s application for order shortening time to
            hear the Compromise Motion.

      The trustee requested that the bankruptcy court shorten the usual

time to hear the motion under Rule 9019. The basis for the request was that,

as Debtor was the plaintiff, the pending litigation required the trustee’s

immediate attention and substantial effort which was going to cost the

estate dearly in administrative fees and costs.

                                        15
      The bankruptcy court granted the request and shortened the notice

period from 21 days as provided by Rule 2002 to 13 days. The order

provided that Debtor, or any other party, could file a written opposition to

the motion at any time prior to the hearing or simply appear and oppose

the motion orally. That, in effect, gave Debtor 13 days in which to fashion

her opposition.

      While Debtor claimed she did not get the Compromise Motion itself,

she filed a lengthy written opposition to the application to shorten time

and a further opposition to the Compromise Motion two days before the

hearing. She attended the hearing and was permitted to speak at length.

Given her activity in filing at least 31 separate pleadings in the case up to

the March 14 hearing on the Compromise Motion, including 16 pleadings

in the March 1 to March 14 period, she clearly knew how to find and

review documents and make her views known to the parties and to the

bankruptcy court. We disagree that she was denied due process.

      Further, Debtor offered no explanation of what she was unable to do

in those 13 days that she would have been able to do if she had more time

to respond. Debtor explained, with no evidentiary support, that she could

not access emails because of impaired vision and that she had an auxiliary

service that transcribed documents into a format that she could see. She

requested additional time to respond to the Compromise Motion to allow

the auxiliary service to do its job. But she did not offer any evidence of

                                      16
what the additional assistance would accomplish or how she was

prevented from responding without the assistance.

      We discern no abuse of discretion in the decision to shorten time.

         2. The bankruptcy court did not abuse its discretion when it
         determined that Debtor had proper notice of the Compromise
         Motion.

      Notice has been explained by the Supreme Court in Mullane v. Central

Hanover Bank & Trust Co., 339 U.S. 306 (1950): “[a]n elementary and

fundamental requirement of due process in any proceeding which is to be

accorded finality is notice reasonably calculated, under all the

circumstances, to apprise interested parties of the pendency of the action

and afford them an opportunity to present their objections.” Id. at 314

(citations omitted). “The notice must be of such nature as reasonably to

convey the required information . . . and it must afford a reasonable time

for those interested to make their appearance.” Id. (citations omitted).

      The trustee’s counsel stated that she personally “stuffed the

envelope” and mailed the motion to Debtor at the post office box address

on Debtor’s petition. She also spoke to Debtor for 18 minutes on March 1,

2022 and personally confirmed the mailing address.

      In addition, Debtor admits that she had actual knowledge that the

motion had been filed. We cannot agree that she was not apprised of the

pendency of the action and afforded an opportunity to present her

                                      17
objections. The notice reasonably conveyed the required information and

gave her a reasonable time to object.

          3. The bankruptcy court did not abuse its discretion when it
          denied Debtor’s request for special accommodations.

      Debtor requested accommodations based on the Americans with

Disabilities Act and the Rehabilitation Act of 1973 (together “ADA”). The

bankruptcy court denied the request. Debtor’s briefs on appeal, however,

do not discuss the ADA and that issue is waived. See Christian Legal Soc'y v.

Wu, 626 F.3d 483, 487 (9th Cir. 2010).8

                                   CONCLUSION

      Based on the foregoing, we AFFIRM.

      8
         Further, the bankruptcy court denied that request for various reasons which can
be summarized as inapplicability of the ADA to federal court proceedings and a lack of
belief that she had a disability or that it prevented her from meaningfully participating
in the proceedings. We cannot say that the bankruptcy court abused its discretion in
making that ruling.
                                           18