In Re Roger N and Christine E Fearing, No. 2:2007cv05279 - Document 31 (C.D. Cal. 2008)
Court Description: ORDER AFFIRMING BANKRUPTCY COURT'S ORDERS AND DISMISSING APPEAL by Judge Virginia A. Phillips: The Court affirms the Bankruptcy Court's Order denying Appellants' Motion to Alter or Amend Order Granting Chapter 7 Trustee's Motionfor Summary Judgment. (am)
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In Re Roger N and Christine E Fearing Doc. 31 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 IN RE: ROGER N. FEARING AND 12 CHRISTINE E. FEARING DEBTORS, 13 ROGER N. FEARING AND 14 CHRISTINE E. FEARING, 15 16 17 18 19 20 ) ) ) ) ) ) ) ) Plaintiff, ) ) v. ) ) DAVID SEROR, CHAPTER 7 ) TRUSTEE, ) ) Defendants. ) ________________________ ) Case No. CV 07-5279-VAP USBC Case No. SV 00-10940-KT [Motion filed on August 18, 2008] ORDER AFFIRMING BANKRUPTCY COURT'S ORDERS AND DISMISSING APPEAL The Court has received and considered all papers 21 filed in support of and in opposition to the Appeal from 22 the Bankruptcy Court's Orders denying Debtors Roger N. 23 Fearing and Christine E. Fearing's Motion to Alter and 24 Amend the Bankruptcy Court's Order Granting Chapter 7 25 Trustee's Motion for Summary Judgment. This Appeal, 26 filed by Roger N. Fearing and Christine E. Fearing, is 27 appropriate for resolution without hearing. See Fed. R. 28 Dockets.Justia.com 1 Civ. P. 78; Local Rule 7-15. For the reasons set forth 2 below, the Court affirms the Bankruptcy Court's Order. 3 4 5 I. BACKGROUND Debtors Roger N. Fearing and Christine Fearing 6 ("Appellants") filed a petition for protection under 7 Chapter 11, 11 U.S.C. § 1101, et seq., on January 28, 8 2000. (Appellants' Opening Br. Appendix ("Appellants' 9 App.") at 0038-0039.) They claimed as exempt property a 10 "claim against CSUN [California State University 11 Northridge] and others for personal injury (wife)," 12 "which they valued at $100,000, and a claim for "workers 13 compensation benefits – wife's injury," which they valued 14 at $40,000. (Id. at 0047-0048.) On Schedule A attached 15 to their petition, Appellants stated the value of their 16 residence was $500,000 and the amount of secured claims 17 against the house was $912,771. (Id. at 0128.) 18 Appellants filed an amended Schedule A stating the value 19 of the house was $560,000 and the amount of secured 20 claims against it was $944,771. (Id.) In Schedule C 21 attached to their petition, Appellants claimed a 22 homestead exemption of $75,000. (Id.) 23 24 On December 21, 2001, the Bankruptcy Court entered 25 its "Order of Confirmation of First Amended Plan of 26 Reorganization (As Modified)." (Id. at 0204.) 27 pertinent part, the Order stated as follows: 28 2 In 1 "8. Notwithstanding any reference in the PLAN, as 2 filed, to the treatment accorded to the FTB, the PLAN 3 is hereby amended by substituting therefor, the terms 4 of Exhibit "4" hereto, the Letters of August 8, 2001 5 and August 14, 2001 from Anthony Sgherzi, Esq. To 6 Robert Yespan, Inc.1 7 8 9. Notwithstanding any reference in the PLAN, as 9 filed, to the treatment accorded to the IRS, the PLAN 10 is hereby amended by substituting therefor the terms 11 of Exhibit "5" hereto being the Stipulation sent by 12 Mary Schewatz to Robert M. Yaspan, and the 13 modifications contained in the Letter of Robert M. 14 Yaspan to Mary Schewatz, dated October 23, 2001, 15 attached hereto as Exhibit "6"."2 16 0207.) (Id. at 0206- 17 /// 18 19 20 21 22 23 24 25 26 27 28 1 Paragraph 7 of Exhibit 4, referred to by the Bankruptcy Court's Order, stated: "With respect to the Franchise Tax Board's secured claim filed in this case, the total unpaid balance of the claim will be immediately due and payable upon sale or refinance of the property securing the claim, or, transfer to anyone other than one of the debtors." (Appellee's Opening Br. at 5; Appellee's Supplemental Excerpts of Record ("Appellee's App.") 42.) 2 Paragraph 4 of Exhibit 5, referenced by the Bankruptcy Court's Order stated: "[T]he secured claim of the IRS shall be paid in full in cash or certified check within 6 months of the effective date of the Plan. The debtors anticipate that the payment will be made out of the proceeds from the sale of their home. However, the debtors may use other means to pay the secured claim in full within 6 months." (Appellee's Opening Br. at 5-6; Appellee's App. at 47.) 3 1 Under the terms of the approved Plan, the Plan would 2 be funded by several alternative sources, including the 3 sale or refinancing of Appellants' house and Ms. 4 Fearing's potential settlement with the California State 5 University, Northridge, estimated at $100,000. (Id. at 6 0196.) 7 8 On January 28, 2003, the Bankruptcy Court granted the 9 Chapter 7 Trustee's motion for an order approving the 10 sale of the Fearing residence ("Sale Order"). (See 11 Appellant App. at 0241, 0052; Appellee App. at 014.) The 12 order approved the sale of the property to Samuel and 13 Aileen Jones for $775,000.00 "free and clear of all 14 liens, interests and claims; disputed liens, interests 15 and claims; and all liens, interests and claims not of 16 record...." (Id. at 0054.) The Bankruptcy Court also 17 issued an "Order Denying Debtors' Motion to Require 18 Trustee to Abandon Debtors' Home" ("Abandonment Order") 19 on January 28, 2003. (See Appellee App. at 014.) 20 21 Appellants filed a notice of appeal from the sale 22 order on February 7, 2003 with the Bankruptcy Court, as 23 well as an emergency motion for a stay pending appeal. 24 (Id.) The Bankruptcy Court denied the emergency motion 25 on February 11, 2003. (Id.) On February 12, 2003, 26 Appellants filed an emergency motion for a stay pending 27 appeal with the United States Bankruptcy Appellate Panel 28 4 1 of the Ninth Circuit ("BAP"). (Id.) Pursuant to 28 2 U.S.C. § 158(c)(1), the Trustee filed an election to have 3 the appeal heard by the United States District Court, the 4 Honorable Judge Timlin. (Id.) 5 6 Appellants filed a notice of appeal from the Sale 7 Order and an appeal of the Abandonment Order on March 10, 8 2003 and March 12, 2003, respectively, with Judge Timlin. 9 (Id.) The Trustee filed a motion to dismiss the appeal 10 from the Sale Order as moot. (Id.) Judge Timlin denied 11 Appellant's emergency motion for stay pending appeal as 12 moot and granted the Trustee's motion to dismiss the 13 appeal as moot on May 14, 2003. (Id.) 14 15 On June 10, 2003, the Trustee filed a motion to 16 dismiss the Appellants' appeal to the Abandonment Order 17 as moot. (Id.) On September 30, 2003, Judge Timlin 18 granted the motion to dismiss the appeal as moot because 19 the property was already sold to good faith purchasers, 20 pursuant to 11 U.S.C. § 363(m); thus, the property was 21 "no longer the Trustee's property to abandon." (Id. at 22 018.) 23 24 Appellants appealed from the order denying the 25 emergency stay and the dismissal of their appeal of the 26 Bankruptcy Court's order approving the sale of their 27 residence as moot, to the Ninth Circuit Court of Appeals. 28 5 1 (See id. at 020.) On July 18, 2005, the Ninth Circuit 2 affirmed Judge Timlin's September 30, 2003 order 3 dismissing the Appellants' appeal and the abandonment 4 motion as moot. (See id. at 020-023.) The Ninth 5 Circuit's opinion hinged on Appellants' failure to obtain 6 a stay during their appeal, resulting in the sale of the 7 residence. (Id.) The Ninth Circuit declined to 8 dismantle the sale, finding the District Court did not 9 err when it affirmed the Bankruptcy Court's finding that 10 the buyers of the property were "good faith purchasers," 11 within the meaning of 11 U.S.C. § 363(m). (Id.) The 12 Ninth Circuit did not reach the merits of Appellants' 13 arguments about the validity of the Bankruptcy Court's 14 order approving the sale of the residence because it 15 found the underlying appeal moot. (Id.) Appellants 16 filed a petition for a writ of certiorari with the United 17 States Supreme Court; it was denied on January 6, 2006. 18 (See id. at 024.) 19 20 Before the flurry of Appellants' appeals, the Trustee 21 filed a Complaint for Declaratory Relief with the 22 Bankruptcy Court on September 24, 2003. 23 App. at 0001.) (See Appellant The Complaint sought a judicial 24 declaration whether or not Appellants were entitled to be 25 paid any portion of the proceeds from the sale of the 26 residence, specifically the $75,000 the Appellantsclaimed 27 as their homestead exemption. 28 6 (See id. at 0005.) 1 On March 16, 2006, Appellants filed a "Motion for 2 Adequate Protection, and That Trustee be Made to Prove, 3 on the Record, That This Court Has Jurisdiction Over This 4 Proceeding." (Appellant App. at 0189.) The Bankruptcy 5 Court denied Appellants' motion on May 9, 2007. 6 Appellants then filed a motion for reconsideration, which 7 was denied on May 30, 2007. (See Appellant Opening Br. 8 at 5.) 9 10 On July 28, 2006, the Bankruptcy Court granted the 11 Trustee's motion for summary judgment and entered the 12 following declaratory judgment: "Defendants Christine E. 13 Fearing and Roger N. Fearing are not entitled to any 14 portion of the proceeds from the Trustee's sale of the 15 real property located at 23240 Burbank Boulevard, 16 Woodland Hills, California 91367." 17 02.) (Appellee App. at 01- Appellants filed a "Motion to Alter or Amend 18 Judgment" on August 4, 2006. 19 Appellant App. at 0299.) (See id. at 06-07; Finding no basis to alter or 20 amend the judgment, the Bankruptcy Court denied the 21 motion on May 30, 2007. (Id.) 22 23 The Fearings appeal from that Bankruptcy Court 24 judgment. (See Appellants' Opening Br. at 5.) 25 Appellants filed their Opening Brief and Appendices on 26 August 18, 2008. Appellee David Seror filed his Opening 27 Brief and "Supplemental Excerpts of Record" on September 28 7 1 3, 2008. Appellants filed their Reply on September 17, 2 2008. 3 4 5 II. JURISDICTION AND STANDARD OF REVIEW Title 28 U.S.C. § 158(a) governs the jurisdiction of 6 a federal district court to entertain an appeal from a 7 bankruptcy court; it provides in pertinent part: "The 8 district courts of the United States shall have 9 jurisdiction to hear appeals . . . from final judgments, 10 orders, and decrees." 11 12 The reviewing court reviews the bankruptcy court's 13 conclusions of law de novo. See Siriani v. Northwestern 14 Nat'l Ins. Co., 967 F.2d 302, 303-04 (9th Cir. 1992). 15 Findings of fact, however, are reviewed for clear error. 16 See id. Under this standard, "a reviewing court cannot 17 reverse unless it has a definite and firm conviction that 18 the court below committed a clear error of judgment in 19 the conclusion it reached upon a weighing of the relevant 20 factors." See In re Sunnymead Shopping Ctr. Co., 178 21 B.R. 809, 814 (B.A.P. 9th Cir. 1995). 22 23 24 III. DISCUSSION First, Appellants argue that the Bankruptcy Court's 25 "Order Approving Sale" was entered in error and that the 26 Bankruptcy Court did not have jurisdiction to enter the 27 order. (See Appellant's Opening Br. at 20.) 28 8 This Court, 1 the Honorable Robert J. Timlin, already has reviewed 2 these issues, and the Ninth Circuit has affirmed its 3 ruling. (See Appellee's App. at 29-39.) 4 case" doctrine bars Appellants' argument. The "law of the See Moore v. 5 Jas. H. Matthews & Co., 682 F.2d 830, 834 (9th Cir. 6 1982); Disimone v. Browner, 121 F.3d 1262, 1266 (9th Cir. 7 1997); United States v. United States Smelting Refining & 8 Mining Co., 339 U.S. 186, 198 (1950). 9 10 Next, Appellants argue in these appeals that the 11 Bankruptcy Court erred in failing to apply California 12 exemption law procedures for selling property subject to 13 the homestead exemption. 14 28.) (See Appellants' Opening Br. at According to Appellants, they claimed a $75,000 15 homestead exemption when they filed for Chapter 11 16 bankruptcy and they are entitled to recover at least that 17 value from the bankruptcy estate. (Id.) As stated 18 above, the propriety of the sale of the homestead was an 19 issue that has already come before the Court and thus 20 will not be considered again; the law applying to the 21 sale of the homestead falls within the prior ruling on 22 the overall propriety of the sale.3 23 /// 24 3 Appellants also argue the Trustee acted improperly in bringing a "Motion for Approval to Sell" instead of by 26 a "required Adversary Proceeding." (Appellants' Opening Br. at 25-27.) This argument, again asking the Court to 27 re-evaluate an aspect of the propriety of the underlying sale of the residence, also falls under the "law of the 28 case" doctrine and is barred. 25 9 1 In any event, as discussed in the Court's Order 2 regarding Appellants' appeal in Case Number 07-5276, 3 Appellants are not entitled to any proceeds from the 4 bankruptcy estate because there is no remaining value 5 after the order of priority is applied to the 6 distribution of the assets. Furthermore, the Bankruptcy 7 Court correctly and without error found that there was no 8 equity in the Fearing residence at the time the exemption 9 was claimed, and thus the claim was valueless and 10 Appellants are not entitled to proceeds of the sale. See 11 In re Hyman, 123 B.R. 342, 346 (9th Cir. BAP 1991); In re 12 Gavin, 110 B.R. 446, 450 (9th Cir. BAP 1990); In re 13 Bruton, 167 B.R. 923, 926 (Bankr. S.D. Cal. 1994). 14 15 The Court AFFIRMS the Bankruptcy Court's denial of 16 Appellants' Motion to Alter or Amend its Order Granting 17 Trustee's Motion for Summary Judgment and Entry of 18 Declaratory Judgment. 19 20 IV. CONCLUSION 21 For the foregoing reasons, the Court affirms the 22 Bankruptcy Court's Order denying Appellants' Motion to 23 Alter or Amend Order Granting Chapter 7 Trustee's Motion 24 for Summary Judgment. 25 26 Dated: October 21, 2008 27 VIRGINIA A. PHILLIPS United States District Judge 28 10
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