Court Opinion

ID: 2688454
Source: CourtListenerOpinion
Date Created: 2014-07-31 23:00:42.310971+00
Date Added: 2024-06-11T09:49:09.874435
License: Public Domain

FILED
                                                             JUL 31 2014
 1
                                                        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 No.    CC-13-1329-KuBlPa
                                   )
 6   701 MARIPOSA PROJECT, LLC,    )      Bk. No.    SV 12-11486-MT
                                   )
 7                  Debtor.        )
     ______________________________)
 8                                 )
     SHERRIE KEYS,                 )
 9                                 )
                    Appellant,     )
10                                 )
     v.                            )      OPINION
11                                 )
     701 MARIPOSA PROJECT, LLC,    )
12                                 )
                    Appellee.      )
13   ______________________________)
14
15                   Argued and Submitted on June 26, 2014
                            at Pasadena, California
16
                             Filed – July 31, 2014
17                               _____________
18            Appeal from the United States Bankruptcy Court
                  for the Central District of California
19
          Honorable Maureen A. Tighe, Bankruptcy Judge, Presiding
20
21
22   Appearances:     Appellant Sherrie Keys argued pro se; G. Bryan
                      Brannon argued for appellee 701 Mariposa Project,
23                    LLC.
24
25   Before: KURTZ, BLUMENSTIEL*, and PAPPAS, Bankruptcy Judges.
26
27
          *
           The Honorable Hannah L. Blumenstiel, Bankruptcy Judge for
28   the Northern District of California, sitting by designation.
 1   KURTZ, Bankruptcy Judge:
 2
 3                              INTRODUCTION
 4        Pursuant to Rule 3004,1 debtor 701 Mariposa Project, LLC
 5   filed a proof of claim on behalf of Sherrie Keys.   701 Mariposa
 6   then filed an objection to that claim, which the bankruptcy court
 7   sustained based in part on Keys’ failure to respond to the claim
 8   objection.   Roughly four months later, Keys filed a motion
 9   seeking to set aside the disallowance of her claim, but the
10   bankruptcy court denied that motion.   Keys appeals from the
11   denial of her motion.
12        The bankruptcy court’s order disallowing Keys’ claim is void
13   because the bankruptcy court did not have personal jurisdiction
14   over Keys.   Keys never filed a proof of claim, nor did she
15   participate in any way in the bankruptcy case before she filed
16   her motion to set aside, so she never consented to the bankruptcy
17   court exercising jurisdiction over her or her claim.
18   Furthermore, 701 Mariposa’s service of process by mail on Keys
19   did not comply with Rule 7004(b)(1).
20        As a result, the bankruptcy court should have granted Keys’
21   motion and should have set aside the order disallowing Keys’
22   claim.   Therefore, we REVERSE and REMAND.
23                                  FACTS
24        701 Mariposa is a limited liability company that was formed
25
          1
26           Unless specified otherwise, all chapter and section
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
27   all Rule references are to the Federal Rules of Bankruptcy
     Procedure. All Civil Rule references are to the Federal Rules of
28   Civil Procedure.

                                      2
 1   for the purpose of taking title to a single asset: a twenty-four-
 2   unit apartment building located on Mariposa Avenue in Los
 3   Angeles, California.2   701 Mariposa purchased the property at a
 4   nonjudicial foreclosure sale that took place in July 2011.     701
 5   Mariposa took title subject to the senior liens of Pacific 701
 6   Mariposa, LLC.
 7        Keys is one of the former occupants of the apartment
 8   building.   According to Keys, she duly and timely paid $600
 9   monthly rent to an organization called People in Progress
10   (“PIP”).    In turn, PIP was obligated to pay rent to the prior
11   owner of the apartment building, 709 South Mariposa, Inc.,
12   pursuant to a lease agreement.   At some point, PIP stopped making
13   rent payments to 709 South Mariposa.   In May 2011, PIP vacated
14   the apartment building and notified the other building occupants,
15   including Keys, that it was discontinuing its affordable housing
16   program and that the occupants would need to leave.
17        In August 2011, within days of its acquisition of the
18   apartment building, 701 Mariposa hired a new property manager.
19   According to 701 Mariposa, the new property manager, Pearson
20   Management, immediately was confronted with a number of serious
21   problems including unpaid utility bills, uncollected garbage,
22   unrepaired fixtures and plumbing, and nonpaying occupants.
23   Pearson Management, 701 Mariposa explains, took immediate steps
24
          2
             To facilitate our review and our recitation of facts, the
25   Panel has reviewed the papers the parties filed in Keys’ district
26   court lawsuit and in 701 Mariposa’s bankruptcy cases. While many
     of these papers were not included in the parties’ excerpts of
27   record, we can and do take judicial notice of the filing and
     contents of these papers. See O’Rourke v. Seaboard Sur. Co. (In
28   re E.R. Fegert, Inc.), 887 F.2d 955, 957–58 (9th Cir. 1989).

                                       3
 1   to rectify these problems.
 2           Apparently, Pearson Management’s initial management efforts
 3   included an attempt to evict Keys.     While Pearson’s initial
 4   eviction attempt was not successful, Keys eventually was evicted
 5   in September 2012.
 6           In July 2012, Keys filed a lawsuit in the United States
 7   District Court against Pearson, 701 Mariposa and others seeking
 8   over $4.5 million in compensatory and punitive damages.
 9   According to Keys, the defendants’ alternate efforts to evict her
10   or to persuade her to relocate were all part of a pattern and
11   practice designed to force out of the building the occupants
12   brought in by PIP, who were predominantly minorities paying
13   below-market-rate rent, and to replace them with white tenants
14   willing and able to pay market-rate rents of double or triple
15   what the PIP tenants were paying.      Keys asserted that this
16   pattern and practice violated local, state and federal law.
17           Meanwhile, 701 Mariposa filed its first chapter 11
18   bankruptcy case in August 2011, which was dismissed in February
19   2012.    701 Mariposa filed its second chapter 11 case later that
20   same month.    As reflected in 701 Mariposa’s schedules, its only
21   significant asset was the apartment building.
22           In April 2012, the bankruptcy court set a claims bar date of
23   June 10, 2012.    701 Mariposa served notice of the claims bar date
24   on its scheduled creditors, but Keys did not receive this notice
25   because she was not a scheduled creditor.     701 Mariposa did not
26   initially list Keys as creditor in its bankruptcy schedules, nor
27   did 701 Mariposa amend its schedules either before or after Keys
28   filed her $4.5 million district court lawsuit.

                                        4
 1           However, 701 Mariposa did file a notice of bankruptcy filing
 2   in the district court lawsuit in August 2012, which was served on
 3   Keys.    In addition, pursuant to Rule 3004, 701 Mariposa filed
 4   that same month a $4.5 million proof of claim on Keys’ behalf.
 5   701 Mariposa attached to the proof of claim a copy of Keys’
 6   district court complaint.
 7           701 Mariposa then filed, in October 2012, an objection to
 8   the proof of claim.    In that objection, 701 Mariposa asserted
 9   that Keys’ claim should be disallowed not only as untimely but
10   also because the claim had no merit factually or legally.      701
11   Mariposa further asserted that the claim should be disallowed
12   because Keys was suing 701 Mariposa in the district court in
13   violation of the automatic stay.
14           Based on 701 Mariposa’s notice of bankruptcy filing, the
15   district court entered an order directing Keys to file either a
16   request for voluntary dismissal of 701 Mariposa from the district
17   court lawsuit or a motion for relief from stay seeking permission
18   from the bankruptcy court to proceed with the district court
19   lawsuit as against 701 Mariposa.
20           Keys never complied with the district court’s order.
21   Instead, on November 5, 2012, she filed a motion seeking an
22   extension of time to comply with the district court’s order.       In
23   the process of requesting this relief, Keys admitted that she had
24   received email notice of 701 Mariposa’s claim objection and that
25   she was aware the claim objection had been set for hearing on
26   November 29, 2012.    Furthermore, she attached to her district
27   court extension motion a copy of 701 Mariposa’s claim objection.
28           Keys never filed a response to 701 Mariposa’s claim

                                        5
 1   objection.   After the November 29, 2012 hearing date, the
 2   bankruptcy court sustained the claim objection and disallowed
 3   Keys’ claim for the reasons stated in the claim objection and
 4   based on Keys’ failure to respond.    The court entered its order
 5   disallowing Keys’ claim on December 4, 2012.
 6        The docket from the district court lawsuit and the documents
 7   filed therein demonstrate that Keys was aware of the bankruptcy
 8   court’s order disallowing her claim by no later than December 12,
 9   2012, when she replied to a December 6, 2012 opposition and a
10   December 6, 2012 judicial notice request filed by 701 Mariposa in
11   the district court lawsuit.    701 Mariposa’s December 6, 2012
12   district court filings specifically refer to and attach a copy of
13   the bankruptcy court’s December 4, 2012 order disallowing Keys’
14   claim.
15        Even so, Keys did not seek relief from the bankruptcy
16   court’s December 4, 2012 claim disallowance order until over four
17   months later, when she filed her motion to set aside that order.
18   Keys once again admitted in that motion that she had actual
19   notice of 701 Mariposa’s claim objection and the date set for the
20   hearing thereon.   The only relevant grounds Keys stated in
21   support of the motion were insufficient service of process and
22   the violation of her due process rights.
23        After 701 Mariposa responded to the reconsideration motion,
24   the bankruptcy court held a hearing on the motion on June 28,
25   2013, at which the court adopted its tentative ruling as its
26   final ruling.   The court found that Keys’ actual notice of the
27   claim objection was sufficient to satisfy the minimal
28   requirements of due process.   As for the asserted defective

                                       6
 1   service of process, the bankruptcy court found that Keys was
 2   evicted from the apartment building in September 2012.    The court
 3   further found that the apartment building no longer was Keys’
 4   “dwelling house or usual place of abode” as specified in Rule
 5   7004(b)(1) and therefore 701 Mariposa’s service of process was
 6   defective.    Nonetheless, the court found that 701 Mariposa’s
 7   service of process, in conjunction with Keys’ actual notice, met
 8   the “substantial compliance standard” for service of process and
 9   thus was sufficient to give the bankruptcy court personal
10   jurisdiction over Keys.    Consequently, the bankruptcy court
11   denied Keys’ motion to set aside, and Keys timely appealed.
12                                JURISDICTION
13           The bankruptcy court had subject matter jurisdiction
14   pursuant to 28 U.S.C. §§ 1334 and 157(b)(2)(B).    We have
15   appellate jurisdiction under 28 U.S.C. § 158.    We discuss below
16   the bankruptcy court’s personal jurisdiction over Keys.
17                                    ISSUE
18           Was the order disallowing Keys’ claim void either because
19   Keys was denied due process or because the bankruptcy court
20   lacked personal jurisdiction over Keys?
21                             STANDARDS OF REVIEW
22           Whether notice was sufficient for due process purposes is
23   reviewed de novo.    See Frates v. Wells Fargo Bank, N.A. (In re
24   Frates), 507 B.R. 298, 301 (9th Cir. BAP 2014).     To the extent
25   the underlying facts are undisputed, the bankruptcy court’s
26   determination regarding personal jurisdiction also is reviewed de
27   novo.    See Travelers Cas. & Sur. Co. of Am. v. Brenneke, 551 F.3d
28   1132, 1135 (9th Cir. 2009).    To the extent certain facts

                                        7
 1   regarding service of process are disputed, those facts are
 2   reviewed under the clearly erroneous standard.   See S.E.C. v.
 3   Internet Solutions for Business Inc., 509 F.3d 1161, 1165 (9th
 4   Cir. 2007).
 5        Findings of fact are clearly erroneous if they are
 6   “illogical, implausible, or without support in the record.”    Retz
 7   v. Samson (In re Retz), 606 F.3d 1189, 1196 (9th Cir. 2010).
 8                               DISCUSSION
 9        Keys has argued in relevant part that 701 Mariposa’s service
10   of the claim objection was defective.    Keys presses this argument
11   on appeal even though she has admitted (a number of times) that
12   she actually knew of the claim objection well before November 29,
13   2012 – the date set for the hearing on the claim objection.
14   According to Keys’ own declaration testimony, she found out about
15   the claim objection and the hearing date from an email that she
16   received from 701 Mariposa’s counsel on October 15, 2012.
17   Furthermore, the record establishes that she had received a full
18   copy of the claim objection by no later than November 8, 2012.
19   On that date, she filed papers in the district court lawsuit to
20   which she attached a copy of the claim objection.
21        As Keys notes and the bankruptcy court found, 701 Mariposa
22   served Keys at her address in the apartment building, but Keys no
23   longer was living in the apartment building at that time because
24   she had been evicted in September 2012.   These factual findings
25   have not been challenged on appeal, so we accept them as true.
26   See Sachan v. Huh (In re Huh), 506 B.R. 257, 272 (9th Cir. BAP
27   2014) (en banc).   Because 701 Mariposa did not serve Keys at her
28   “dwelling house or usual place of abode,” 701 Mariposa’s

                                      8
 1   attempted service of process by mail did not comply with the
 2   requirements of Rule 7004(b)(1).
 3           Based on this defective service of process, Keys in essence
 4   asserts two things: (1) that she was denied due process; and (2)
 5   that, as a result of 701 Mariposa’s defective service of process,
 6   the bankruptcy court did not have personal jurisdiction over
 7   her.3
 8           Both of Keys’ assertions – lack of due process and lack of
 9   personal jurisdiction – implicate Rule 60(b)(4), which applies to
10   Keys’ motion to set aside.    See United Student Funds, Inc. v.
11   Wylie (In re Wylie), 349 B.R. 204, 209 (9th Cir. BAP 2006) (“when
12   reconsideration under Rule 3008 is sought after the . . . appeal
13   period has expired, the motion is subject to the constraints of
14   FRCP 60(b) as incorporated by Rule 9024.”).    If either of Keys’
15   assertions is true, then the December 2012 claim disallowance
16   order was void, and the bankruptcy court should have granted
17   Keys’ motion to set aside.    See Owens–Corning Fiberglas Corp. v.
18   Ctr. Wholesale, Inc. (In re Ctr. Wholesale, Inc.), 759 F.2d 1440,
19   1448 (9th Cir. 1985); see also S.E.C. v. Ross, 504 F.3d 1130,
20   1139 (9th Cir 2007) (“A judgment entered without jurisdiction
21   over the defendant is void.”).    We will address each of Keys’
22   assertions in turn.
23   1.   Lack of Due Process
24           The due process requirements for notice are relatively
25
26           3
             We have construed Keys’ pro se appeal briefs liberally,
27   in accordance with Balistreri v. Pacifica Police Dep't, 901 F.2d
696, 699 (9th Cir. 1990), partially overruled on other grounds
28   by, Bell Atl. Corp. v. Twombly, 550 U.S. 544, 562–63 (2007).

                                        9
 1   minimal; they merely require notice “reasonably calculated, under
 2   all the circumstances, to apprise interested parties of the
 3   pendency of the action and afford them an opportunity to present
 4   their objections.”    Mullane v. Cent. Hanover Bank & Trust Co.,
 5   339 U.S. 306, 314 (1950).
 6         We understand that Keys may not have received all of the
 7   notices regarding the commencement of the bankruptcy case and the
 8   claims bar date contemplated under the Bankruptcy Code and the
 9   Rules, but Keys simply cannot parlay these procedural defects
10   into a due process violation concerning 701 Mariposa’s claim
11   objection.   Keys has admitted that she had actual notice of the
12   claim objection and the hearing thereon.   Furthermore, she had a
13   full copy of the claim objection papers at least three weeks
14   before the date set for the claim objection hearing.   These facts
15   are more than sufficient to satisfy the due process requirements
16   with respect to the claim objection proceedings.    See generally
17   United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 272
18   (2010).   Thus, Keys’ due process argument lacks merit.
19   2.   Lack of Personal Jurisdiction
20         Effective service of process, made in compliance with Rule
21   7004 and Civil Rule 4, is a prerequisite to the bankruptcy court
22   exercising personal jurisdiction over a litigant.   Marciano v.
23   Fahs (In re Marciano), 459 B.R. 27, 37 (9th Cir. BAP 2011);
24   Morris Motors v. Peralta (In re Peralta), 317 B.R. 381, 386 (9th
25   Cir. BAP 2004).   As the Ninth Circuit has put it, “[b]efore a
26   federal court may exercise personal jurisdiction over a
27   defendant, the procedural requirement of service of [process]
28   must be satisfied.”   Rubin v. Pringle (In re Focus Media Inc.),

                                      10
 1   387 F.3d 1077, 1081 (9th Cir. 2004) (quoting Omni Capital Int’l,
 2   Ltd. v. Rudolf Wolff & Co., 484 U.S. 97, 104 (1987)).
 3        Generally speaking, the service of process prerequisite to
 4   personal jurisdiction applies in contested matters the same as
 5   it does in adversary proceedings.     See Rule 9014(b)(requiring
 6   service of contested matter motions in the same manner that a
 7   summons and complaint must be served under Rule 7004); see also
 8   In re Frates, 507 B.R. at 302 (stating that, “when a particular
 9   creditor’s rights are at issue,” the bankruptcy rules require
10   more than the minimal notice required to satisfy due process
11   concerns).    Accord, Beneficial Cal., Inc. v. Villar (In re
12   Villar), 317 B.R. 88, 93-94 (9th Cir. BAP 2004).
13        Claims objections undoubtedly are contested matters subject
14   to the requirements of Rule 9014.     See Advisory Committee Notes
15   accompanying Rules 3007 and 9014.     However, unlike most contested
16   matters, claims objections are subject to a specific Rule stating
17   in part as follows: “A copy of the objection [to claim] with
18   notice of the hearing thereon shall be mailed or otherwise
19   delivered to the claimant . . . at least 30 days prior to the
20   hearing.”    Rule 3007(a).
21        In the past, the Panel has offered conflicting views
22   regarding whether Rule 3007(a)’s mailing/delivery requirements
23   are in addition to or in lieu of Rule 7004’s service
24   requirements.   Compare United States v. Levoy (In re Levoy), 182
25 B.R. 827, 834 (9th Cir. BAP 1995), with Jorgenson v. State Line
26   Hotel, Inc. (In re State Line Hotel, Inc.), 323 B.R. 703, 711-12
27   (9th Cir. BAP 2005), vacated as moot, 242 Fed.Appx. 460, 462 (9th
28   Cir. 2007).   Nonetheless, regardless of whether Rule 7004’s

                                      11
 1   service requirements ordinarily apply when a creditor files a
 2   proof of claim and an interested party objects thereto, we hold
 3   that they do apply when, as here, the creditor has not filed a
 4   proof of claim, has not otherwise participated in the bankruptcy
 5   case, and has not otherwise engaged in any conduct that could be
 6   construed as consent to the bankruptcy court’s personal
 7   jurisdiction.   We further hold that when, as here, Rule 7004’s
 8   service requirements have been contravened, the bankruptcy court
 9   lacks personal jurisdiction over the creditor.
10        In the vast majority of cases, it is beyond dispute that the
11   bankruptcy court has personal jurisdiction over any creditor
12   whose proof of claim has been objected to because the creditor
13   consents to the bankruptcy court’s personal jurisdiction by
14   filing a proof of claim, thereby enabling the bankruptcy court to
15   allow or disallow the claim and to determine the creditor’s
16   entitlement (if any) to share in distributions from the
17   bankruptcy estate.   See Katchen v. Landy, 382 U.S. 323, 334-35
18   (1966) (stating that “[b]y presenting their claims respondents
19   subjected themselves to all the consequences that attach to an
20   appearance” and that “a creditor who offers a proof of claim and
21   demands its allowance is bound by what is judicially
22   determined”); Tucker Plastics, Inc. v. Pay’N Pak Stores, Inc. (In
23   re PNP Holdings Corp.), 99 F.3d 910, 911 (9th Cir. 1996) (holding
24   that creditor consented to bankruptcy’s personal jurisdiction by
25   filing proof of claim).
26        But when, as here, the creditor has not filed a proof of
27   claim, has not otherwise participated in the bankruptcy case, and
28   has not otherwise engaged in any conduct that could be construed

                                     12
 1   as consent to the bankruptcy court’s personal jurisdiction,
 2   personal jurisdiction principles dictate that federal courts
 3   cannot exercise jurisdiction over a litigant in the absence of
 4   proper service of process.   See Omni Capital Int’l, Ltd., 484
5 U.S. at 104.
 6        For this reason, “[a] person is not bound by a judgment in a
 7   litigation to which he or she has not been made a party by
 8   service of process.”   Mason v. Genisco Technology Corp., 960 F.2d
9   849, 851 (9th Cir. 1992); see also Taylor v. Sturgell, 553 U.S.
10   880, 884 (2008).   Similarly, when a federal court lacks personal
11   jurisdiction over a litigant, that litigant “is always free to
12   ignore the judicial proceedings, risk a default judgment, and
13   then challenge that judgment on jurisdictional grounds in a
14   collateral proceeding.”   Ins. Corp. of Ir., Ltd. v. Compagnie des
15   Bauxites de Guinee, 456 U.S. 694, 706 (1982).
16        Even though claims objections do not ordinarily generate
17   personal jurisdiction issues, the bankruptcy court here
18   apparently realized that, because Keys had not filed a proof of
19   claim or otherwise participated in the bankruptcy case, the issue
20   Keys raised in her motion about the sufficiency of service of the
21   claims objection implicated the personal jurisdiction of the
22   court.   That is why the bankruptcy court felt compelled to
23   discuss the substantial compliance doctrine, which under certain
24   circumstances excuses minor technical defects in service of
25   process.   See Borzeka v. Heckler, 739 F.2d 444, 446–48 (9th Cir.
26   1984).   Under the substantial compliance doctrine, a federal
27   court need not dismiss a complaint for insufficient service of
28   process based on technical defects in service of process when:

                                     13
 1        (a) the party that had to be served personally received
          actual notice, (b) the defendant would suffer no
 2        prejudice from the defect in service, (c) there is a
          justifiable excuse for the failure to serve properly,
 3        and (d) the plaintiff would be severely prejudiced if
          his complaint were dismissed.
 4
 5   Whale v. United States, 792 F.2d 951, 953 (9th Cir. 1986)
 6   (quoting Borzeka, 739 F.2d at 447).
 7        The bankruptcy court concluded that 701 Mariposa had met the
 8   requirements of the substantial compliance doctrine.    The court
 9   found, based on Keys’ own admissions, that she had actual notice
10   of both the bankruptcy filing and the claim objection
11   proceedings.   In addition, the bankruptcy court found that 701
12   Mariposa had a justifiable excuse for its defective service.     As
13   the court pointed out, well after her eviction in September 2012,
14   Keys continued to state in papers filed in the district court
15   litigation that she lived in the apartment building.    We have no
16   issue with these findings.
17        However, the bankruptcy court’s findings regarding prejudice
18   are problematic.   The court in essence found that each party
19   potentially would be subject to prejudice depending on how it
20   ruled on the reconsideration motion but that the equities tipped
21   in favor of 701 Mariposa because Keys did not take any steps to
22   remedy her automatic stay violation (her continuing prosecution
23   of the district court lawsuit) after she learned of 701
24   Mariposa’s second bankruptcy filing.   This is not the type of
25   assessment the substantial compliance standard calls for.   On its
26   face, the standard requires “no prejudice” to the party subjected
27   to the defective service of process (in this instance, Keys) and
28   “severe prejudice” to the party whose request for relief is

                                     14
 1   subject to dismissal for insufficient service of process (in this
 2   instance, 701 Mariposa).   The bankruptcy court did not find that
 3   these specific criteria had been met, and that by itself should
 4   have prevented the court from applying the substantial compliance
 5   doctrine.
 6        Furthermore, we disagree with the bankruptcy court’s finding
 7   regarding the prejudice to 701 Mariposa that would arise if the
 8   court did not excuse the defective service of process.   The only
 9   prejudice the court found was the obligation 701 Mariposa would
10   have to “administer” Keys’ $4.5 million claim in the absence of
11   the court’s order disallowing Keys’ claim.   In this instance, by
12   “administer” the court in essence meant that 701 Mariposa would
13   be forced to address Keys’ claim on the merits if Keys were
14   allowed to proceed with her challenge to the merits of 701
15   Mariposa’s claim objection.   The Ninth Circuit has held that
16   being denied a “quick victory” and instead having to defend the
17   merits of a claim typically constitutes little or no prejudice.
18   See Bateman v. U.S. Postal Serv., 231 F.3d 1220, 1224–25 (9th
19   Cir. 2000).   In short, we hold that the bankruptcy court’s
20   finding regarding the prejudice to 701 Mariposa was clearly
21   erroneous.
22        The biggest problem with the bankruptcy court’s substantial
23   compliance determination concerns whether the bankruptcy court
24   should have applied the doctrine in this context at all.   From
25   our review of the cases applying the doctrine, it appears that
26   the Ninth Circuit only has permitted the doctrine to be used as a
27   shield to protect plaintiffs from the dismissal of their
28   complaints based on technical defects in service of process.

                                     15
 1   See, e.g., Whale, 792 F.2d at 953; Borzeka, 739 F.2d at 446–48.
 2   The Ninth Circuit has not, based upon our research, permitted
 3   plaintiffs to use the doctrine as a sword against defaulting
 4   defendants who seek to set aside a default judgment based on
 5   defective service of process.
 6        We acknowledge that the Ninth Circuit in other decisions has
 7   stated that, when the defendant receives sufficient notice, the
 8   service of process rules generally should be liberally construed
 9   to uphold service.   See Brenneke, 551 F.3d at 1135 (citing Chan
10   v. Soc’y Expeditions, Inc., 39 F.3d 1398, 1404 (9th Cir. 1994));
11   United Food & Commercial Workers Union v. Alpha Beta Co., 736
12 F.2d 1371, 1382 (9th Cir. 1984).       Nonetheless, the Ninth Circuit
13   also has stated that “neither actual notice nor simply naming the
14   defendant in the complaint will provide personal jurisdiction
15   without substantial compliance with [Civil] Rule 4.”       Brenneke,
16 551 F.3d at 1135 (emphasis added) (quoting Benny v. Pipes, 799
17 F.2d 489, 492 (9th Cir. 1986)).
18        As a matter of law, we do not consider 701 Mariposa’s
19   service by mail of its claim objection at the apartment building
20   from which Keys had been evicted, combined with service by email,
21   sufficient to qualify as substantial compliance with the service
22   by mail requirements set forth in Rule 7004(b)(1), which require
23   service by mail at the “individual’s dwelling house or usual
24   place of abode or to the place where the individual regularly
25   conducts a business or profession.”      In In re Villar, we
26   explained that service of process by mail for the purpose of
27   establishing personal jurisdiction over a litigant is a “rare
28   privilege which should not be abused or taken lightly.”        In re

                                       16
 1   Villar, 317 B.R. at 93.   We further explained that “[w]here the
 2   alternative to service by mail is hiring a process server to
 3   serve the papers in person, it seems like a small burden to
 4   require literal compliance with the rule.”   Id. (quoting In re
 5   Schoon, 153 B.R. 48, 49 (Bankr. N.D. Cal. 1993)).
 6        Under these circumstances, service by mail of Keys at an
 7   address where she used to live simply is not substantial
 8   compliance with Rule 7004(b)(1).
 9        Finally, the Supreme Court has indicated that, when the
10   bankruptcy court has an “arguable basis” for exercising
11   jurisdiction, a defect in that jurisdiction does not render the
12   trial court’s judgment void for purposes of a subsequent motion
13   under Civil Rule 60(b)(4).   Espinosa, 559 U.S. at 271.    But the
14   decisions Espinosa cited in support of the arguable basis
15   doctrine indicate that the doctrine arises in the context of
16   subject matter jurisdiction and not in the context of personal
17   jurisdiction.   We decline to extend the arguable basis doctrine
18   to the bankruptcy court’s determination here that it had personal
19   jurisdiction over Keys.   To do so would bring our decision into
20   conflict with other Supreme Court precedent stating that
21   litigants always may collaterally raise personal jurisdiction
22   defects.   See Compagnie des Bauxites de Guinee, 456 U.S. at 706
23   (“A defendant is always free to ignore the judicial proceedings,
24   risk a default judgment, and then challenge that judgment on
25   jurisdictional grounds in a collateral proceeding.”).
26                                CONCLUSION
27        For the reasons set forth above, we REVERSE and REMAND.     On
28   remand, the bankruptcy court should enter an order granting Keys’

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 1   motion to set aside the court’s claim disallowance order.4
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          4
             In its appeal briefs, 701 Mariposa requested that
25   sanctions be imposed against Keys for filing a frivolous appeal.
26   701 Mariposa’s sanctions request did not comply with Rule 8020,
     which contemplates a separately filed motion. In any event,
27   because Keys has prevailed in this appeal, we would have denied
     701 Mariposa’s sanctions request even if it had been properly
28   brought before us.

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