Court Opinion

ID: 4537886
Source: CourtListenerOpinion
Date Created: 2020-05-29 22:01:05.045185+00
Date Added: 2024-06-11T12:43:23.776979
License: Public Domain

FILED
                                                                           MAY 29 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                           NOT FOR PUBLICATION                         SUSAN M. SPRAUL, CLERK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 Nos. WW-19-1251-FSTa
                                                              WW-19-1277-FSTa
SHELLEY ANN ERICKSON,                                         (Consolidated)

                     Debtor.                         Bk. No.      2:19-bk-12026-TWD

SHELLEY ANN ERICKSON,

                     Appellant,

v.                                                   MEMORANDUM*

JASON WILSON-AGUILAR, Chapter 13
Trustee,

                     Appellee.

                  Submitted Without Argument on May 20, 2020

                                 Filed – May 29, 2020

                 Appeal from the United States Bankruptcy Court
                     for the Western District of Washington

             Honorable Timothy W. Dore, Bankruptcy Judge, Presiding

         *
        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.
Appearances:        Appellant Shelley Ann Erickson, pro se, on the brief;
                    Appellee Jason Wilson-Aguilar, Chapter 13 Trustee, pro
                    se, on the brief.

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

                                 INTRODUCTION

      Chapter 131 debtor Shelley Ann Erickson failed to make her mortgage

payments for ten years and was facing foreclosure in state court. As a last-

ditch effort to save her property, she filed for bankruptcy protection. The

bankruptcy court denied plan confirmation and dismissed her case.

      Ms. Erickson appeals, arguing that she did not have notice of the

hearing on the motion to dismiss. She also argues that the state court

foreclosure proceeding was flawed.

      The record shows that Ms. Erickson had notice of the hearing and

that cause existed to dismiss her case. Furthermore, the bankruptcy court

was correct in refusing to review the state court’s decisions. We AFFIRM.

      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
                            FACTUAL BACKGROUND2

A.     The state court proceedings

       Ms. Erickson and her husband own real property located in Auburn,

Washington (the “Property”) worth approximately $700,000. Deutsche

Bank National Trust Company, as Trustee, in trust for registered Holders

of Long Beach Mortgage Loan Trust 2006-4, Asset-Backed Certificates,

Series 2006-04 (“Deutsche Bank”), holds a first-position lien against the

Property to secure a debt of about $923,193.

       Deutsche Bank sought to foreclose on its lien. At Ms. Erickson’s

request, the state court issued a temporary restraining order halting

foreclosure. It declined to convert the temporary restraining order to a

preliminary injunction, and it expired.

B.     Ms. Erickson’s bankruptcy petition and proposed plan

       Ms. Erickson filed a chapter 13 bankruptcy petition and scheduled

Deutsche Bank’s lien. She reported that she and her husband had a

combined gross monthly income of $4,126.19 and monthly disposable

income of $1,182.02.

       Her initial chapter 13 plan (“Plan”) proposed that she would pay

$1,182.02 per month for the first three months while she attempted to

       2
         We exercise our discretion to review the bankruptcy court’s docket, as
appropriate. See Woods & Erickson, LLP v. Leonard (In re AVI, Inc.), 389 B.R. 721, 725 n.2
(9th Cir. BAP 2008).

                                             3
modify the loan. Thereafter, the monthly plan payments would increase to

$12,949.98, unless she could secure a loan modification and modify the

Plan. Elsewhere in the Plan, she proposed to sell the Property if the loan

modification was unsuccessful.

     Deutsche Bank objected to plan confirmation. It argued that the Plan

failed to meet the confirmation requirements in § 1325(a), primarily

because Ms. Erickson could not afford the cure and maintenance payments

totaling over $14,000 per month.

     In response, Ms. Erickson filed an objection to Deutsche Bank’s

objection and an application for a Rule 2004 examination of Deutsche Bank.

She took the position that she did not owe Deutsche Bank anything because

it was a “fraudulent creditor.”

     Separately, chapter 13 trustee Jason Wilson-Aguilar (“Trustee”) filed

an objection to plan confirmation. He argued that the Plan was not feasible,

most notably because Ms. Erickson lacked sufficient income and proposed

paying significantly less than what she owed her creditors.

C.   The Trustee’s motion to dismiss

     The Trustee also filed a motion to dismiss Ms. Erickson’s case

(“Motion to Dismiss”) under § 1307(c). He argued (among other things)

that Ms. Erickson could not afford the monthly plan payments necessary to

confirm her Plan and that she did not propose the Plan in good faith. He

also argued that she probably could not obtain refinancing, given that the

                                      4
mortgage arrears totaled nearly $600,000, or sell the Property, because

Deutsche Bank’s secured claim greatly exceeded the value of the Property.

      The Motion to Dismiss was set for hearing on September 18, 2019.

The Trustee served Ms. Erickson with a copy of the Motion to Dismiss and

notice of hearing by U.S. mail.

D.    Hearing on plan confirmation

      Ms. Erickson appeared at the hearing on plan confirmation on

August 7, 2019. Ms. Erickson stated that she did not want to pursue

confirmation of the existing Plan. The bankruptcy court agreed that the

Plan as proposed was not confirmable, in part because there was no

indication that she had the ability to make the minimum necessary plan

payments. The court allowed Ms. Erickson to file an amended plan and

said that it would hold a continued confirmation hearing on October 2.

      When the court held the August 7 confirmation hearing, the Motion

to Dismiss was on file and set for hearing on September 18. The parties did

not discuss that hearing date, Ms. Erickson did not inquire about that

hearing date, and the court did not change that date.

      The bankruptcy court issued an order (“Order Denying

Confirmation”) denying confirmation of the Plan, allowing Ms. Erickson to

file an amended plan, and continuing the hearing. It provided that “This

order is without prejudice to the Trustee’s Motion to Dismiss Case . . .

which may be heard on the Court’s September 18, 2019 calendar[.]”

                                      5
      Ms. Erickson filed an amended plan that decreased her monthly

payment to $1,140. She asserted that she did not have any mortgage debt.

      She also filed a document styled as an “Objection to Motion to Object

to Objection Dismiss Confirmation” (“Omnibus Objection”). She stated that

she was opposing the Motion to Dismiss and argued that she did not owe

Deutsche Bank any money.

E.    Hearing on the Motion to Dismiss

      The bankruptcy court held a hearing on the Trustee’s Motion to

Dismiss on September 18, 2019. Ms. Erickson did not appear.

      The bankruptcy court found cause to dismiss her case under

§ 1307(c). It held that her income was insufficient to fund a confirmable

plan. It further held that the amended plan was unconfirmable on its face

and that there was prejudicial delay to her creditors. The court issued an

order dismissing the case (“Dismissal Order”).

F.    The motions to vacate

      Ms. Erickson filed a “Motion for Appeal” and asserted that she “was

not told about this hearing . . . . The hearing was set to be October 2, 2019.”

The following day, she filed a motion to vacate the Dismissal Order that

repeated the same argument.

      The bankruptcy court denied the motion to vacate. It stated that

Ms. Erickson did not provide any legally sufficient reason to vacate the

dismissal. It also rejected Ms. Erickson’s argument that she did not have

                                       6
notice of the September 18 hearing.

      Ms. Erickson filed a notice of appeal from the Dismissal Order. She

also filed a second motion to vacate, which the bankruptcy court denied.

Ms. Erickson amended her notice of appeal to include the order denying

the second motion to vacate.

                                JURISDICTION

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

and 157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.

                                     ISSUE

      Whether the bankruptcy court erred in dismissing Ms. Erickson’s

bankruptcy case.

                         STANDARDS OF REVIEW

      We review for abuse of discretion the bankruptcy court’s decision to

dismiss a case. Leavitt v. Soto (In re Leavitt), 171 F.3d 1219, 1223 (9th Cir.

1999). Similarly, we review for abuse of discretion the court’s ruling on a

motion for reconsideration. Determan v. Sandoval (In re Sandoval), 186 B.R.

490, 493 (9th Cir. BAP 1995).

      To determine whether the bankruptcy court has abused its discretion,

we conduct a two-step inquiry: (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 bankruptcy court’s

application of the legal standard was illogical, implausible, or without

                                         7
support in inferences that may be drawn from the facts in the record.

United States v. Hinkson, 585 F.3d 1247, 1262-63 & n.21 (9th Cir. 2009) (en

banc).

      Ms. Erickson argues that the bankruptcy court violated her due

process rights because she did not have notice of the hearing on the Motion

to Dismiss. We review this aspect of the decision de novo. See HSBC Bank

USA, Nat’l Ass’n v. Blendheim (In re Blendheim), 803 F.3d 477, 497 (9th Cir.

2015). “De novo review requires that we consider a matter anew, as if no

decision had been made previously.” Francis v. Wallace (In re Francis), 505

B.R. 914, 917 (9th Cir. BAP 2014) (citations omitted).

                               DISCUSSION

A.    Ms. Erickson had proper notice of the hearing on the Motion to
      Dismiss.

      Ms. Erickson argues that she was “tricked” and told that there was no

hearing set for September 18, 2019, which caused her to miss the hearing.

We reject her argument, because the record shows that she had proper

notice of the hearing on the Motion to Dismiss.

      Generally speaking, a court must give sufficient notice of its intention

to dismiss a case and the opportunity for interested parties to be heard. See

Tennant v. Rojas (In re Tennant), 318 B.R. 860, 870 (9th Cir. BAP 2004) (“[T]he

concept of procedural due process requires a notice and an opportunity to

be heard.” (citation omitted)). “The notice must be of such nature as

                                       8
reasonably to convey the required information . . . and it must afford a

reasonable time for those interested to make their appearance.” Mullane v.

Cent. Hanover Bank & Tr. Co., 339 U.S. 306, 314 (1950) (citations omitted).

      Section 1307(c) provides that, “[o]n request of a party in interest or

the United States trustee and after notice and a hearing, the court . . . may

dismiss a case under this chapter . . . .” Section 102(1) defines the phrase

“after notice and a hearing” to include “after such notice as is appropriate

in the particular circumstances, and such opportunity for a hearing as is

appropriate in the particular circumstances[,]” or even in some situations

without any formal notice. Under this broad definition, “the concept of

notice and a hearing is flexible and depends on what is appropriate in the

particular circumstance.” In re Tennant, 318 B.R. at 870 (citing Great Pac.

Money Markets, Inc. v. Krueger (In re Krueger), 88 B.R. 238, 241 (9th Cir. BAP

1988)).

      Ms. Erickson argues that she did not know that the hearing on the

Motion to Dismiss was scheduled for September 18, 2019. But the record

shows that the Trustee sent Ms. Erickson a copy of the Motion to Dismiss

and notice of hearing by U.S. mail. Ms. Erickson does not deny receiving

the document. She also does not deny receiving a copy of the Order

Denying Confirmation, which specifically stated that the hearing on the

Motion to Dismiss was set for September 18.

      Ms. Erickson contends that, at the hearing on plan confirmation, she

                                       9
told the court that the Trustee had sent her a notice of hearing for

September 18, but “Judge Dore looked down at this desk and then looked

up at me and said there is no hearing set for 9,18,2019 [sic].”

      Ms. Erickson’s misrepresents the record. The hearing transcript does

not contain any such exchange.3 The September 18 hearing date simply did

not come up at the hearing.

      She also argues that the Order Denying Confirmation only indicated

that the hearing on the Motion to Dismiss “may be” held on September 18.

She claims that, because no one confirmed that date, she assumed there

was no hearing scheduled for that day.

      The phrase “may be heard” in the Order Denying Confirmation is

unfortunate; it would have been better to use the words “will” or “shall”

that appear elsewhere in the same order. But Ms. Erickson had previously

received an unequivocal notice that the Motion to Dismiss would be heard

on September 18, and there is nothing in the record that could reasonably

have led Ms. Erickson to believe that the hearing was canceled or moved.

      Even if the notice were less than perfect, it did not prejudice her,

      3
         The only date Ms. Erickson discussed with the court was the deadline to file
the amended plan; she thought the deadline was September 11 (the deadline to oppose
the Motion to Dismiss). The court responded that it had not yet set any deadline for the
amended plan and that she might have “a response to a different motion due September
11th.” Ms. Erickson also wanted to argue a motion that she had just filed a few days
prior, but the court informed her that the motion had not yet been noticed for hearing
and was “just sitting on the docket.”

                                          10
because she has not given us any reason to think that the bankruptcy court

would have reached a different result if she had appeared. See Rosson v.

Fitzgerald (In re Rosson), 545 F.3d 764, 776-77 (9th Cir. 2008). She has not

addressed any of the bankruptcy court’s reasons for dismissing her case or

explained what she would have argued that would have averted dismissal.

B.    The bankruptcy court properly found cause to dismiss
      Ms. Erickson’s case.

      Ms. Erickson does not challenge any of the bankruptcy court’s actual

reasons for dismissing her case. We hold that it did not err.

      Section 1307(c) allows the bankruptcy court to dismiss a case “for

cause.” “Cause” may include “unreasonable delay by the debtor that is

prejudicial to creditors[,]” § 1307(c)(1), but it is not limited to the

circumstances enumerated in the statute. “The decision to dismiss a

chapter 13 case under § 1307(c) is a discretionary decision of the trial

court.” Schlegel v. Billingslea (In re Schlegel), 526 B.R. 333, 339 (9th Cir. BAP

2015) (citation omitted).

      The bankruptcy court explained that, with only $1,182 in monthly

disposable income, Ms. Erickson simply did not have enough money to

fund her Plan, even if Deutsche Bank’s mortgage lien was extinguished. It

concluded that cause to dismiss existed because: (1) she could not fund a

plan under any circumstances; (2) her amended plan was unconfirmable on

its face; and (3) there was unreasonable prejudicial delay to creditors.

                                        11
      Ms. Erickson fails to address any of these holdings, and we discern

no abuse of discretion.

      Instead, Ms. Erickson argues on appeal that she should have been

given another chance to amend her plan. However, the bankruptcy court

considered her amended plan (which actually decreased her monthly plan

payments) and stated that it was facially unconfirmable. She had two

chances to propose a confirmable plan but squandered those opportunities.

      Ms. Erickson also argues that the bankruptcy court should have

stayed all proceedings “until RCW 2.44.030 was invoked.” 4 Presumably,

she is arguing that the attorneys representing Deutsche Bank did not have

authority to prosecute the foreclosure action against her.

      This argument is meritless. Even assuming that the state statute

applies, it was the Trustee, not Deutsche Bank, who moved to dismiss, and

the Trustee unquestionably had the authority to do so. Ms. Erickson argues

on appeal that the Trustee lacked standing to appear on behalf of Deutsche

Bank, but the Trustee represents the estate generally and does not

represent Deutsche Bank or any other creditor.

      4
         Revised Code of Washington § 2.44.030 provides that the court may “require
the attorney for the adverse party . . . to produce or prove the authority under which he
or she appears, and until he or she does so, may stay all proceedings by him or her on
behalf of the party for whom he or she assumes to appear.”

                                           12
C.    The bankruptcy court properly declined to review the state court’s
      decisions.

      Most of Ms. Erickson’s arguments focus on the state court’s rulings

regarding Deutsche Bank’s foreclosure. The bankruptcy court was correct

in refusing to consider Ms. Erickson’s arguments, and we similarly will not

entertain any challenges to the state court’s decisions.

      Essentially, Ms. Erickson wanted the bankruptcy court to review the

state court’s rulings. But under the Rooker-Feldman doctrine, “[i]f a federal

plaintiff asserts as a legal wrong an allegedly erroneous decision by a state

court, and seeks relief from a state court judgment based on that decision,

Rooker-Feldman bars subject matter jurisdiction in federal district court.”

Noel v. Hall, 341 F.3d 1148, 1164 (9th Cir. 2003). It is well established that

“federal district courts are courts of original, not appellate, jurisdiction.

Thus, it follows that federal district courts have ‘no authority to review the

final determinations of a state court in judicial proceedings.’” Gruntz v. Cty.

of L.A. (In re Gruntz), 202 F.3d 1074, 1078 (9th Cir. 2000) (citations omitted).

      Ms. Erickson raises a host of reasons why she feels she was wronged

in state court. We will not consider any of these arguments. The federal

bankruptcy court generally lacks power to review state court decisions. If

Ms. Erickson wants to reverse the state court’s decisions, she must seek

recourse in the state appellate courts, not the bankruptcy court.

                                        13
D.    The bankruptcy court did not abuse its discretion in denying the
      motions to vacate.

      Ms. Erickson twice sought to vacate the Dismissal Order but failed to

raise any grounds showing that the bankruptcy court was wrong. The

bankruptcy court properly denied both motions.

      We examine Ms. Erickson’s arguments under Civil Rule 59, made

applicable in bankruptcy cases by Rule 9023. See Am. Ironworks & Erectors,

Inc. v. N. Am. Constr. Corp., 248 F.3d 892, 898-99 (9th Cir. 2001). The Ninth

Circuit has stated that, “[u]nder [Civil] Rule 59(e), a motion for

reconsideration should not be granted, absent highly unusual

circumstances, unless the district court is presented with newly discovered

evidence, committed clear error, or if there is an intervening change in the

controlling law.” 389 Orange St. Partners v. Arnold, 179 F.3d 656, 665 (9th

Cir. 1999) (citation omitted).

      Ms. Erickson argued that she did not have notice of the hearing on

the Motion to Dismiss and that she filed an opposition to that motion.

However, the bankruptcy court properly held that she had notice of the

hearing and considered all of her filings, including the Omnibus Objection.

It did not abuse its discretion in denying both motions to vacate.

                                 CONCLUSION

      The bankruptcy court did not err in dismissing Ms. Erickson’s

bankruptcy case. We AFFIRM.

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