In re La Sierra Financial Services, Inc.
| Decision Date | 29 November 2002 |
| Docket Number | BAP No. CC-01-1541-MAMOB.,Bankruptcy No. SA 94-13774-JB. |
| Citation | 290 B.R. 718 |
| Parties | In re LA SIERRA FINANCIAL SERVICES, INC., Debtor. Daniel Hasso, Appellant, v. Steven L. Mozsgai and Cecilia A. Mozsgai, Trustees of the Steven L. Mozsgai and Cecilia A. Mozsgai Revocable Living Trust dated May 4, 1999, Appellees. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
Stephen W. Johnson, Santa Ana, CA, for Daniel Hasso.
Kirk S. Rense, Irvine, CA, for Steven Mozsgai and Cecilia Mozsgai.
Before: MARLAR, MONTALI and BRANDT, Bankruptcy Judges.
In this appeal we consider the standing of subsequent purchasers of property sold by a bankruptcy estate to appear in cases and seek relief from orders which may affect their property interests. We AFFIRM the relief granted to them by the bankruptcy court.
In 1990, La Sierra Financial Services, Inc. ("Debtor") was the holder of a note and deed of trust in real property known as Lot 33, at 1 Rolling View Lane, in Fallbrook, California (the "Property"). In 1991, Debtor purportedly assigned its interest in the deed of trust to appellant Daniel Hasso ("Hasso").
In 1994, an involuntary bankruptcy was filed against Debtor. An order of relief was entered and the case was then converted to a voluntary chapter 111 case, and a trustee ("Trustee") was appointed. Debtor's schedules listed the Property as property of the estate, and the estate was subsequently given a deed in lieu of foreclosure. Trustee moved for approval to sell the Property, but did not give Hasso notice of the sale motion. On December 22, 1994, the court approved the sale of the Property, free and clear of liens, to Tony and Jude Ann Kempf ("Kempfs").
In May, 1995, Trustee moved to amend the sale order, in part by reducing the sale price. An order approving the sale, as amended, was entered on June 16, 1995. The sale then closed and the Property was transferred to the Kempfs.
Three years later, in April, 1998, Hasso moved for partial vacatur of the December 22, 1994 and June 16, 1995 sale orders ("Sale Orders"), asserting lack of due process and that the Sale Orders were therefore void in regard to his purported lien interest.
At the hearing, the court found that Hasso's right to due process was violated by Trustee's failure properly to serve Hasso with the sale motion. The court also expressed concern about whether Hasso had given proper notice of his motion to the Kempfs, whose ownership rights would be directly affected by the court's order, and who had not appeared. Hasso assured the court that he had mailed his motion to the Kempfs. He actually had mailed it to the Property address at "1 Rolling View Lane," instead of to the Kempfs' residence at "3 Rolling View Lane."
In its July 15, 1998 order ("Hasso Vacatur Order"), the court vacated the Sale Orders "to the extent that [they purported] to affect the rights of Daniel Hasso with respect to any [lien] interest he may have in the Fallbrook Property." This judgment effectively revived Hasso's lien. The Kempfs then sold the Property to Judith Brilliant ("Brilliant").
Two years after obtaining partial relief from the Sale Orders, in June, 2000, Hasso, as beneficiary under the deed of trust, commenced foreclosure against the Property, indicating a debt balance of $886,368.
In July 2000, Brilliant sold the Property to Steven L. Mozsgai and Cecilia A. Mozsgai, Trustees of the Steven L. Mozsgai and Cecilia A. Mozsgai Revocable Living Trust dated May 4, 1999 ("Mozsgai"), the appellees herein. Mozsgai brought a quiet title action in state court, and posted a bond to stay Hasso's foreclosure.
Mozsgai then filed, in bankruptcy court, a motion to vacate the Hasso Vacatur Order, supported by the declaration of Anthony Kempf, dated February 23, 2001. Mr. Kempf averred that he and his wife lived at "3 Rolling View Lane," from May of 1996 to August of 1998, but that "[n]either my wife nor I ever resided at the property at 1 Rolling View Lane." Mozsgai thus asserted that, since Hasso's motion was sent to the wrong address, the Hasso Vacatur Order was void for lack of due process.
Hasso opposed the motion, without alleging that the Kempfs had actual notice of his 1998 motion. However, at a hearing on Mozsgai's motion, Hasso requested a continuance to conduct discovery concerning the Kempf's actual notice. The court denied the continuance, and found that Mozsgai had carried the burden of proof that the Kempfs had not been given the required notice of Hasso's motion.
On August 28, 2001, the court entered its order ("Mozsgai Vacatur Order") vacating the Hasso Vacatur Order in its entirety. Thus, once again, Hasso found himself without a lien on the Property.
Hasso filed a timely motion for reconsideration. He contended that the court's finding of lack of notice to the Kempfs was erroneous, and that the court also erred by refusing to continue the matter for discovery and a more extensive evidentiary hearing.
Hasso filed a copy of a United States Postal Service guideline, which stated its policy to deliver mail to known addressees even if it is otherwise undeliverable at the address given. Hasso also filed declarations stating that the motion, which was mailed to the Kempfs at "1 Rolling View Lane," had not been returned as undeliverable.
Mozsgai filed an opposition, and then, just days before the hearing, Hasso filed a reply, to which he attached Mr. Kempf's new September 30, 2001, declaration, in which Mr. Kempf stated:
3. I informed counsel for Mozsgais that we had received mail from [Hasso's attorney] in 1998 that had not been properly addressed to us. It was my position, and remains my position, that such mailing with the wrong address did not constitute proper service, and we did not need to respond.
When the motion for reconsideration was heard, the court stated that the tardy declaration was "iffy at best" with regard to what mail Mr. Kempf received and when he was served. (Transcript, October 9, 2001, at 4:13-14.) The court further stated that this evidence could have been presented in the hearing on the original motion.2
Hasso again requested a continuance for discovery. The court denied the motion, without prejudice to Hasso's filing a renewed motion to vacate with proper notice. The order denying the motion for reconsideration was entered on October 30, 2001. Instead of refiling a motion to vacate, Hasso filed this appeal.
1. Whether subsequent nonparty purchasers of property sold by a bankruptcy estate have standing to appear in cases and seek relief from orders which may affect their property interests.
2. Whether the Hasso Vacatur Order was void for lack of due process, and whether the court abused its discretion in denying Hasso's motion for reconsideration.
3. Whether the court abused its discretion in denying Hasso's request for a continuance to discover whether the Kempfs had actual notice of his 1998 motion to vacate the Sale Orders and restore his lien.
Standing and the bankruptcy court's jurisdiction are legal issues, which we review de novo. Culver, LLC v. Chiu (In re Chiu), 266 B.R. 743, 747 (9th Cir. BAP 2001), aff'd, 304 F.3d 905 (9th Cir.2002); United States v. 5145 N. Golden State Blvd., 135 F.3d 1312, 1314 (9th Cir.1998).
The decision to set aside a judgment as void is reviewed de novo. See Export Group v. Reef Indus., Inc., 54 F.3d 1466, 1469 (9th Cir.1995). Whether a person's due process rights have been violated is a mixed question of law and fact, which is reviewed de novo. Wilborn v. Gallagher (In re Wilborn), 205 B.R. 202, 206 (9th Cir. BAP 1996).
The bankruptcy court's denial of a continuance and its discovery decisions are reviewed for an abuse of discretion. United States ex rel. Hawaiian Rock Prods. Corp. v. A.E. Lopez Enters., Ltd., 74 F.3d 972, 976 (9th Cir.1996); Paulman v. Gateway Venture Partners III, L.P. (In re Filtercorp, Inc.), 163 F.3d 570, 584 (9th Cir.1998). The court's denial of a motion for reconsideration is reviewed for an abuse of discretion. See Far Out Prods., Inc. v. Oskar, 247 F.3d 986, 992 (9th Cir.2001). "A court abuses its discretion when it bases its decision on an erroneous conclusion of law or when the record contains no evidence on which it could rationally base its decision." United States v. Prairie Pharmacy, Inc., 921 F.2d 211, 212 (9th Cir.1990) (citation omitted).
The bankruptcy court found that both the Kempfs and Mozsgai, respectively, were pecuniarily affected by the Rule 60(b) hearings in bankruptcy court and thus had standing to appear therein. Hasso disagrees, maintaining that they were not parties to the Sale Orders, and that Mozsgai cannot assert the Kempfs' due process rights.
The doctrine of standing encompasses both constitutional limitations on federal court jurisdiction, i.e., the "case" or "controversy" requirement of Article III, and prudential limitations on a court's exercise of that jurisdiction. The party asserting standing bears the burden of proving it. Bennett v. Spear, 520 U.S. 154, 167-68, 117 S.Ct. 1154, 137 L.Ed.2d 281 (1997).
Constitutional standing requires:
(1) that the plaintiff have suffered an "injury in fact" — an invasion of a judicially cognizable interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) that there be a causal connection between the injury and the conduct complained of — the injury must be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court; and (3) that it be likely, as opposed to merely speculative, that the injury...
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