Court Opinion

ID: 4514525
Source: CourtListenerOpinion
Date Created: 2020-03-11 00:00:56.962305+00
Date Added: 2024-06-11T09:49:11.074849
License: Public Domain

FILED
                                                                           FEB 10 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                           NOT FOR PUBLICATION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. AZ-18-1323-SFB

DAVID ANDREW CROW and RENEE                          2:18-bk-04677-EPB
TOINETTE CROW,

                    Debtors.

DAVID ANDREW CROW; RENEE
TOINETTE CROW,                                        MEMORANDUM*

                    Appellants,

v.

EDWARD JOHN MANEY, Chapter 13
Trustee,

                    Appellee.

                   Argued and Submitted on January 30, 2020
                             at Phoenix, Arizona

                              Filed – February 10, 2020

         *
        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.
                Appeal from the United States Bankruptcy Court
                          for the District of Arizona

          Honorable Eddward P. Ballinger, Bankruptcy Judge, Presiding

Appearances:        David Allegrucci argued for appellants; Ross Mumme
                    argued for appellee.

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

                                INTRODUCTION

      Chapter 131 debtors David Andrew Crow and Renee Toinette Crow

appeal from a stipulated order confirming their chapter 13 plan. The Crows

challenge the court’s decision to strike a footnote they added to their

proposed confirmation order. Footnote 2 to the order attempted to

accomplish two things. The Crows sought to: (1) preserve their argument

that any subsequent attempt by chapter 13 trustee Edward John Maney to

increase their plan payments by way of a plan modification constituted

involuntary servitude in violation of the Constitution’s Thirteenth

Amendment; and (2) challenge the requirement that they “assist the

      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. All “Local Rule” references are to the Local Bankruptcy
Rules for the District of Arizona.

                                          2
trustee” by submitting to him their post-petition tax returns.

      The Thirteenth Amendment argument is not ripe for review. As for

the requirement to turn over their tax returns, the Crows failed to perfect

this issue for appeal. And even if they had properly raised this issue, their

argument has no merit.

      Accordingly, we AFFIRM.

                                    FACTS

      The Crows filed their voluntary chapter 13 petition and proposed a

plan on the form required by the Local Rules. The form chapter 13 plan

adopted in Arizona requires debtors to provide the trustee copies of their

post-petition income tax returns for the duration of the chapter 13 case. In

response to this provision, the Crows added the following language to their

plan: “Disputed per In re Romeo AZ-17-1215-BLKu and pursuant to final

appeallable [sic] order from case 2-16-bk-12633.”

      Maney filed a response to the plan recommending confirmation but

subject to certain generic and specific conditions. One of the generic

conditions to confirmation stated: “The Debtors are required to provide

directly to the Trustee, within 30 days after their filing, copies of their

federal and state income tax returns for every year during the duration of

the Chapter 13 Plan. This requirement is to be included in any Order

Confirming.”

      Maney and the Crows submitted to the court a stipulated order

                                        3
confirming the Crows’ chapter 13 plan. The proposed order reiterated the

requirement that the Crows submit their post-petition tax returns to

Maney: “The Debtor(s) shall provide to the Trustee copies of their federal

and state income tax returns for post-petition years 2018 - 2022 within 30

days of filing them. The purpose is to assist the Trustee in determining any

change in Debtor(s)’ annual disposable income.” However, the Crows

added two footnotes onto the confirmation order. The first indicated that

this provision was subject to an appeal in an unrelated case. See Reichard v.

Brown (In re Reichard), BAP No. AZ-18-1194 (Appeal dismissed Oct. 24,

2018).

      The second footnote contained a reservation of rights, and an

objection, as follows:

      Petitioner(s) expressly reserve the right to assert their
      Thirteenth Amendment privilege from the U.S. Constitution
      against involuntary servitude, should the Chapter 13 Trustee
      attempt to modify their plan unilaterally and increase their
      monthly plan payments. The Petitioners assert that they have
      not waived their Constitutional Right against involuntary
      servitude by voluntarily filing their bankruptcy petition. In re
      Clemente, 409 B.R. 288, 293 (Bankr. D. NJ 2009). Petitioners
      further assert, a Chapter 13 Trustee demanding debtors assist
      him in determining changes to their annual disposable income,
      is barred by In re Anderson, 21 F.3d 355, 358 (9th Cir. 1994).

      The bankruptcy court entered the stipulated order on November 16,

2018. However, the court struck the Crows’ second footnote containing the

                                      4
reservation and the objection.

      The Crows timely appealed.

                                JURISDICTION

      The bankruptcy court had jurisdiction pursuant to 28 U.S.C. §§ 1334

and 157(b)(2)(L). Subject to the ripeness discussion set forth below, we have

jurisdiction under 28 U.S.C. § 158.

                                      ISSUE

      Did the bankruptcy court commit reversible error when it struck

footnote 2 from the parties’ stipulated proposed confirmation order?

                          STANDARD OF REVIEW

      Most of footnote 2 was devoted to the Crows’ Thirteenth Amendment

argument. Since that argument in effect challenges a potential future plan

modification motion that Maney has not actually made, the Crows’

Thirteenth Amendment argument might not yet be ripe for appeal.

Ripeness is a jurisdictional issue subject to de novo review. Principal Life

Ins. Co. v. Robinson, 394 F.3d 665, 669 (9th Cir. 2006).

      In the remainder of footnote 2, the Crows asserted that the

requirement to submit their post-petition tax returns was inconsistent with

Anderson, 21 F.3d at 358. The Crows’ argument based on Anderson raises

questions regarding the construction of various statutes and Rules, which

we review de novo. de la Salle v. U.S. Bank, N.A. (In re de la Salle), 461 B.R.

593, 601 (9th Cir. BAP 2011).

                                        5
                                 DISCUSSION

      The Crows’ appeal focuses on footnote 2 of the proposed

confirmation order, which the bankruptcy court struck. The Crows assert

that there was no justification for the bankruptcy court to strike the

footnote. The Crows alternately argue that the bankruptcy court violated

their due process rights by striking the footnote without advance notice

and a prior opportunity to be heard. However, there are jurisdictional and

procedural impediments to our appellate review.

A.    The Crows’ Challenge To Plan Modification Is Not Ripe For
      Appeal.

      Most of the stricken footnote pertains to the Crows’ attempt to

“reserve” their argument that modification of the debtors’ chapter 13 plan

to increase plan payments would constitute involuntary servitude in

violation of the Thirteenth Amendment of the Constitution. But no plan

modification has been sought. The Crows’ Thirteenth Amendment

argument does not present a justiciable case or controversy within the

scope of Article III of the Constitution because the dispute is not ripe for

adjudication. Unless the matter is ripe, we lack jurisdiction to consider it.

Principal Life Ins. Co., 394 F.3d at 669; Southern Pac. Transp. Co. v. City of Los

Angeles, 922 F.2d 498, 502 (9th Cir. 1990).

      In Romeo v. Maney (In re Romeo), BAP No. AZ-17-1215-BLKu, 2018 WL

1463850, at *5 (9th Cir. BAP Mar. 23, 2018), we held that a similar

                                         6
Thirteenth Amendment argument was not ripe for appeal. In Romeo, we

pointed out that the chapter 13 trustee had not sought to modify the

debtor’s chapter 13 plan and might never do so, even though the trustee

sought future tax returns to determine whether the confirmed plan should

be modified. Id. We explained that, under these circumstances, any

decision by this panel on the Thirteenth Amendment argument would be

advisory because the question was still hypothetical. Id. We further

explained:

      In measuring whether the litigant has asserted an injury that is
      real and concrete rather than speculative and hypothetical, the
      ripeness inquiry merges almost completely with standing. As a
      prudential matter, we will not consider a claim to be ripe for
      judicial resolution if it rests upon contingent future events that
      may not occur as anticipated, or indeed may not occur at all
      . . . . The prudential considerations of ripeness are amplified
      where constitutional issues are concerned.

Id. (quoting Scott v. Pasadena Unified Sch. Dist., 306 F.3d 646, 662 (9th Cir.

2002)).

      Exactly as in Romeo, the Crows’ Thirteenth Amendment argument

remains hypothetical at confirmation. Maney might never seek to modify

the Crows’ chapter 13 plan. Until the chapter 13 trustee does so, the

constitutional question is not ripe. We, therefore, lack jurisdiction.

B.    The Crows Were Not Harmed When The Court Struck Their
      Reservation Of Their Thirteenth Amendment Argument.

      The Crows admit that their Thirteenth Amendment argument is not

                                        7
ripe. Nonetheless, they claim that the striking of the footnote should be

reversed because they were entitled to preserve the argument. According

to the Crows, absent such preservation, the binding effect of their

confirmed chapter 13 plan and the accompanying confirmation order

might preclude them from later raising their Thirteenth Amendment

argument. They further claim that the court’s striking of footnote 2 without

first conducting a hearing violated their due process rights.

      The Crows’ concern over the potential preclusive effect of the

confirmed plan is unfounded. Though the plan terms are binding on the

Crows and their creditors as specified in § 1327(a), neither the plan nor the

confirmation order addressed the conditions under which a plan

modification could occur. To the contrary, § 1327(a) and the principles of

res judicata do not limit the parties’ rights to seek plan modification. Max

Recovery, Inc. v. Than (In re Than), 215 B.R. 430, 435 (9th Cir. BAP 1997).

Instead, the propriety of a proposed plan modification is governed by

§ 1329. Id. In short, the deletion of the Crows’ reservation of rights did not

harm them.

      Because the Crows did not need to preserve their Thirteenth

Amendment argument, their due process claim fails. The Ninth Circuit

routinely rejects due process claims when the record establishes that the

alleged absence of due process did not harm the appellant. See, e.g., Rosson

v. Fitzgerald (In re Rosson), 545 F.3d 764, 776–77 (9th Cir. 2008); City Equities

                                        8
Anaheim, Ltd. v. Lincoln Plaza Dev. Co. (In re City Equities Anaheim, Ltd.), 22

F.3d 954, 959 (9th Cir. 1994).

C.    The Crows Failed to Perfect For Appeal Their Challenge To Their
      Plan.

      The Crows’ advance only one other argument. They contend that the

deleted footnote challenged the mandatory provision of Maney’s

confirmation order “requiring [the Crows] to assist [Maney] in determining

changes to their annual disposable income.” Aplt. Opn. Br. at p. 9.2

According to the Crows, this requirement is at odds with the Ninth

Circuit’s holding in Anderson v. Satterlee (In re Anderson), 21 F.3d 355, 358

(9th Cir. 1994).

      The only time the Crows raised Anderson in the bankruptcy court was

as part of their footnote 2 of the proposed stipulated confirmation order.

However, the proposed order, with which the Crows agreed, specifically

required the actions the Crows contended were contrary to Anderson -

provision of future tax returns to the trustee during the pendency of their

plan. The Crows never properly opposed the form plan, the confirmation

order, or the requirements concerning their post-petition tax returns.

      Arizona’s form plan requires chapter 13 debtors to provide their post-

      2
        Pursuant to Local Rule 2084-13(b), the Crows were required to use Maney’s
chapter 13 confirmation order, which included the provision requiring the Crows to
submit to Maney their post-petition state and federal income tax returns filed with the
taxing authorities during the pendency of the case.

                                            9
petition tax returns to the chapter 13 trustee while the case is pending. The

Crows were required to utilize the local form plan pursuant to Local Rule

2084-4(a).3 They used the local form, but in the section for debtors to list

unfiled tax returns the Crows wrote “Disputed per In re Romeo AZ-17-

1215 BLKu and pursuant to final appealable order from 2-16-bk-12633.”

      If the Crows wanted to deviate from the language of the form plan,

they could have proposed a non-conforming or nonstandard plan

provision to state that they would not be providing the trustee with post-

petition tax returns. See In re Reichard, Case No. 2:16-BK-12633-BMW, 2018

WL 3323870, at *1 (Bankr. D. Ariz. July 5, 2018). In turn, Maney then could

have opposed the varying provision by filing an adverse plan

recommendation, an objection to confirmation, or both. See id.; see also Local

Rule 2084-10(a), (b).4 The Crows did disclose a nonstandard provision in

      3
         Local Rule 2084-4(a) provides: “Local Form 2084-4 (Chapter 13 Plan) must be
used for all original, amended, or modified plans. All sections of the plan must be
completed, or if not applicable marked with N/A or NONE. The treatment of all known
secured or priority creditors must be disclosed in the plan. Varying provisions must be
specific and not inconsistent with the Code, FRBP or Local Rules.”
      4
          Local Rule 2084-10(a) and (b) provide:

      (a) Trustee Recommendation/Objection. The trustee will file a
      recommendation / objection within twenty-eight (28) days after the last
      date set for creditor objections to a plan.

      (b) Debtor Compliance or Dismissal. Within thirty (30) days after the
      trustee files the recommendation/objection, the debtor must either
                                                                         (continued...)

                                            10
their plan, though it had nothing to do with the obligation to provide

future tax returns. Their statement of “dispute” as to providing the trustee

with their post-petition tax returns, however, did not comply with the

requirements for nonstandard chapter 13 plan provisions set forth in Rules

3015(c) and 3015.1(e). These rules suggest that noncompliant nonstandard

plan provisions should be treated as void and ineffective. Cf. In re Parkman,

589 B.R. 567, 578–79 (Bankr. S.D. Miss. 2018) (examining scope of

permissible nonstandard provisions for chapter 13 plans).

      The Crows had a second opportunity to place at issue the postpetiton

tax return requirement. When Maney included within his plan

recommendation a generic provision reiterating the plan’s post-petition tax

return requirement, the Crows could have filed an objection and sought a

hearing date from the court pursuant to Local Rule 2084-10(b). But they did

not do so. Instead, they submitted to the court a proposed stipulated

confirmation order that specifically required production of the post-

      4
       (...continued)
      comply with the trustee’s requests or file an objection and obtain a
      hearing date. The Court may summarily overrule any objection that fails
      to identify an issue or other impediment to plan confirmation. A request
      for additional time to respond does not constitute an objection. If the
      debtor does not timely comply, the trustee may file and serve a notice of
      intent to lodge a form of order dismissing the case, with a copy of the
      order attached. Ten (10) calendar days after serving the notice, the trustee
      may lodge an order dismissing the case without further notice or hearing.

(Emphasis added.)

                                           11
petition tax returns, but also contained the footnote the bankruptcy court

eventually struck purporting to “preserve” their Thirteenth Amendment

issue and to “assert” that the confirmation order was at odds with

Anderson, supra.

      At bottom, the Crows could not challenge the tax return requirement

for the first time based on a footnote in a stipulated order confirming a plan

they proposed that required such actions. They have not identified any

practice, procedure, Rule, or Local Rule, that permitted them to preserve a

dispute while also obtaining confirmation pursuant to an order that

specifically required them to provide their future tax returns to the trustee.

Nor have they persuaded us that the bankruptcy court was obliged to

consider the footnote as an objection to confirmation given this procedural

posture.

D.    The Confirmed Plan Is Not Contrary to Anderson.

      Even if we were to consider whether the bankruptcy court erred by

striking the footnote concerning the application of Anderson, we find the

Crows’ argument to be without merit. In Anderson, the chapter 13 trustee

objected to the debtors’ proposed plan because the debtors refused to sign

a “Best Efforts Certification” as required by the trustee. If signed, the

Certification would have bound the debtors to pay to the trustee all of their

actual disposable income, as opposed to their projected disposable income as

required by § 1325(b)(1)(B). 21 F.3d at 356-57. Morever, the trustee would

                                       12
then be able to automatically adjust their plan payments without further

order of the court. Id. At the confirmation hearing, the trustee argued that

the court could not confirm the debtors’ plan unless the debtors signed the

Certification and pledged all of their actual disposable income for

distribution to their creditors. Id. at 357. The bankruptcy court agreed with

the trustee and denied confirmation. Id. On appeal to the district court, the

debtors asserted that they were only required to commit their projected –

and not their actual – disposable income to their plan. Id. But the district

court agreed with the trustee and affirmed the bankruptcy court’s order. Id.

      The Ninth Circuit reversed. Id. at 359. The Ninth Circuit held that the

effect of the Certification was inconsistent with the plain language of

§ 1325(b)(1)(B), which only required that the debtors commit their

projected disposable income to their plan at confirmation. Id. at 357.

Moreover, the Ninth Circuit reasoned that the Certification amounted to an

impermissible grant of unilateral authority to the trustee to adjust the

debtors’ plan payments in contravention of the Code’s plan modification

provisions set forth in § 1329. Id. at 358.

      The Crows misapprehend the import of Anderson. There, the

challenged Certification was used “as a means of vesting the Trustee with

the authority to unilaterally adjust the Andersons’ payments without a

court order.” Id. This contravened the statutory requirements for

modification. Anderson did not absolve chapter 13 debtors from providing

                                        13
additional financial information to trustees during their plan terms. Indeed,

§ 521(a)(3) generally requires that every debtor “cooperate with the trustee

as necessary to enable the trustee to perform the trustee's duties under this

title.” Moreover, upon request debtors are required to file with the court

copies of each federal tax return for each tax year ending while the case is

pending. § 521(f)(1). And chapter 13 debtors, also upon request, are

required after confirmation to file annually “a statement under penalty of

perjury, of the income and expenditures of the debtor during the tax year

of the debtor most recently concluded before such statement is filed under

this paragraph, and of the monthly income of the debtor, that shows how

income, expenditures, and monthly income are calculated.” § 521(f)(4)(B).

      These requirements are designed to facilitate a chapter 13 trustee’s

ability to monitor a debtor’s postconfirmation financial condition for

purposes of (among other things) evaluating the need for potential plan

modifications under §1329(a) – for either increases or decreases in plan

payments. With respect to the reporting requirements imposed under §§

521(f) - (g), we have previously noted that:

      The obvious purpose of this self-reporting obligation is to
      provide information needed by a trustee or holder of an
      allowed unsecured claim in order to decide whether to propose
      hostile § 1329 plan modifications.

      This power of the trustee and of creditors holding allowed
      unsecured claims to request that a confirmed plan be modified

                                      14
      by increasing payments in order to capture material increases
      in net income that occur during the life of the plan is an
      important feature of chapter 13. See 11 U.S.C. § 1329(a)(1). The
      addition in 2005 of post-petition reporting requirements at
      §§ 521(f) and (g) operates to bolster the efficacy of § 1329
      modifications.

Fridley v. Forsythe (In re Fridley), 380 B.R. 538, 544 (9th Cir. BAP 2007); see

also Romeo, 2018 WL 1463850, at *4 (collecting cases).

      Absolutely nothing in Anderson concerns chapter 13 debtors’

obligation to provide tax returns to the chapter 13 trustee during the

pendency of their confirmed plan. Accordingly, even assuming that the

Crows’ arguments based on Anderson were properly raised, they lacked

merit, and the striking of footnote 2 did not constitute reversible error.

      In sum, the Crows’ challenge to the confirmation order based on

Anderson not only lacks substantive merit but also was never properly

presented to the bankruptcy court. Meanwhile, the Crows’ only other

argument set forth in their opening brief – their Thirteenth Amendment

argument – is not ripe for appeal. Thus, none of the Crows’ arguments on

appeal justify reversal.

                                CONCLUSION

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

confirmation order.

                                        15