In re Castillo
| Decision Date | 26 July 2002 |
| Docket Number | No. 00-55851.,No. 00-55846.,00-55846.,00-55851. |
| Citation | 297 F.3d 940 |
| Parties | In re Cherry Barbara CASTILLO, Debtor, Nancy Curry, Chapter 13 Trustee, Appellant, v. Cherry Barbara Castillo; G. Thomas Leonard, Appellees. In re Cherry Barbara Castillo, Debtor, Nancy Curry, Chapter 13 Trustee, Appellant, v. Cherry Barbara Castillo; G. Thomas Leonard, Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Elmer Dean Martin III, Diamond Bar, CA, for the appellant.
Bruce A. Lindsay, Moss, Hovden & Lindsay, Whittier, CA, for the debtor-appellee.
G. Thomas Leonard, Attorney Propria Persona, Fullerton, CA, appellee.
E. Roy Hawkens, United States Department of Justice, Civil Division, Washington, DC, for the amicus.
Appeal from the Ninth Circuit Bankruptcy Appellate Panel, Carlson, Perris and Meyers, Bankruptcy Judges, Presiding. BAP Nos. CC-99-01353-PCMe, CC-99-01439-PCMe.
Before: BRUNETTI, RYMER and WARDLAW, Circuit Judges.
We must decide whether a standing Chapter 13 Bankruptcy Trustee enjoys absolute quasi-judicial immunity for scheduling and noticing a bankruptcy confirmation hearing. We agree with the Bankruptcy Appellate Panel ("BAP") that the Trustee and her assistant enjoy absolute quasi-judicial immunity from liability for the decision to schedule the bankruptcy confirmation hearing. Because we further conclude that the giving of notice is a part of the discretionary scheduling function, however, we reject the BAP's holding that immunity does not extend to the failure to give notice of the hearing.
Cherry Barbara Castillo filed this Chapter 13 bankruptcy case on September 18, 1997. Nancy Curry was appointed as Trustee in Castillo's case. A staff attorney employed by her, Julie Feder, assisted Curry with certain matters in the case. After Castillo's petition was filed, Curry conducted an 11 U.S.C. § 341(a) meeting of creditors on October 29, 1997. At the meeting, Curry decided on the basis of various irregularities in the petition that the § 341(a) meeting should be continued to January 20, 1998. She believed that she could not determine the feasibility of Castillo's proposed plan until the court adjudicated objections to the plan on December 4, 1997. As Curry conceded in her briefs to the Bankruptcy Court, due to a clerical error in her office, the confirmation hearing was actually set for December 3, 1997. Neither Castillo nor her counsel was notified of the rescheduled confirmation hearing date. Nevertheless, on December 3, 1997, a confirmation hearing was held. Castillo did not appear, and therefore did not provide proof that she had made the plan payments as required for confirmation. The Trustee informed the court that a plan payment had not been made because one had not been recorded on the Trustee's books, even though Castillo had in fact mailed a late payment to the Trustee sometime after November 22, 1997. As a result, the debtor's Chapter 13 case was dismissed on December 16, 1997.
Castillo's counsel, G. Thomas Leonard, received notice of the dismissal sometime after it was served on December 19, 1997, but did not take any action during the seven days before the mortgagee took advantage of the dismissal to foreclose on Castillo's residence on December 26, 1997. Leonard then successfully moved to vacate the dismissal, as Curry did not oppose the debtor's motion to vacate. Because Castillo's residence had been sold to a third party, however, the bankruptcy court refused to set aside the foreclosure sale. On January 25, 1999, Castillo sought leave of the bankruptcy court to prosecute suit against the Trustee and her staff attorney in Los Angeles County Superior Court. Castillo also named her attorney, Leonard, as a defendant, based on the fact that despite receiving timely notice of the dismissal, Leonard's office failed to file a motion to vacate the dismissal before the foreclosure sale date of December 26, 1997.
Before the bankruptcy court, Castillo contended that (1) the Trustee was negligent in scheduling the December 3, 1997 confirmation hearing without due notice to Castillo or her counsel; (2) the Trustee was not immune from suit; and (3) the requirement that Castillo bring her state law claim against her bankruptcy attorney for any malpractice on his part in state court created a danger of conflicting rulings. The bankruptcy court granted Castillo's motion after hearing on February 16, 1999, by order entered March 23, 1999. The court reasoned that the Trustee had a duty to "provide due process to the debtor" and that "in this case debtor and debtor's counsel were not given the proper ... due process," which resulted in "serious" consequences. The court also noted that the debtor had complied with her Chapter 13 requirements.
The Trustee sought reconsideration of the bankruptcy court's orders. In addition, attorney Leonard moved the bankruptcy court for leave to cross-complain against Curry and Feder in state court. The bankruptcy court denied Curry's motion for reconsideration after hearing on May 6, 1999, by order entered May 20, 1999. It also granted Leonard's motion for leave to sue Curry and Feder on July 23, 1999.
The BAP granted leave to appeal what it viewed as the interlocutory bankruptcy court decision, citing In re Kashani, 190 B.R. 875 (B.A.P. 9th Cir.1995). It then extended quasi-judicial immunity for damages relating to the miscalendaring of the confirmation hearing, but not for damages resulting from the failure to give notice of the hearing. Further ruling that the failure to give notice violated a duty imposed by law upon the Trustee, the BAP held that the suit could proceed under our decision in In re Cochise College Park, 703 F.2d 1339 (9th Cir.1983).
Curry challenges the bankruptcy court's jurisdiction to grant Castillo and Leonard leave to sue and, in turn, appellate jurisdiction of the BAP and our court to review those orders.
Curry asserts that the bankruptcy court lacked jurisdiction to hear Castillo's and Leonard's motion for leave to file suit against the Trustee because the case had previously been dismissed and a bankruptcy court may not sua sponte reopen a dismissed bankruptcy case. Curry has couched her argument as a challenge to the bankruptcy court's power to "reopen" a previously dismissed case. However, as the bankruptcy judge noted, although the Chapter 13 case had been dismissed, it had not been closed. Thus there was no need to reopen the case to hear the motion. In any event, a bankruptcy court has broad discretion to reopen a case sua sponte:
The court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. No provision of this title providing for the raising of an issue by a party in interest shall be construed to preclude the court from, sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process.
11 U.S.C. § 105(a); see also 11 U.S.C. § 350(b) ().
A bankruptcy In re Elias, 215 B.R. 600, 604 (B.A.P. 9th Cir.1997), citing In re Rosinski, 759 F.2d 539, 540-41 (6th Cir.1985); Citizens Bank & Trust Co. v. Case, 937 F.2d 1014, 1018(5th Cir.1991); In re Rediker, 25 B.R. 71, 73 (Bankr.M.D.Tenn. 1982). As the Seventh Circuit has stated:
[N]umerous courts have ruled that jurisdiction is not automatically terminated with the dismissal of the underlying bankruptcy case, and that bankruptcy courts have discretion to retain jurisdiction over adversary proceedings. The rationale for retention of jurisdiction over an adversary proceeding is that some cases "have progressed so far that judicial interference is needed to unravel or reserve the rights of parties."
In re Statistical Tabulating Corp., Inc., 60 F.3d 1286, 1289 (7th Cir.1995) (quoting In re Morris, 950 F.2d 1531, 1534-35 (11th Cir.1992)).
Even if the bankruptcy court had reopened a dismissed case, its decision could only be set aside for an abuse of discretion. In re Slyman, 234 F.3d 1081, 1086 (9th Cir.2000). The trial court's exercise of its discretion will not be disturbed unless there is "a definite and firm conviction that the court below committed a clear error of judgment in the conclusion it reached upon a weighing of the relevant factors." In re Eisen, 31 F.3d 1447, 1451 (9th Cir.1994) (internal quotations omitted).
Regardless of whether the dismissal constituted some sort of constructive closure, we do not believe that the bankruptcy court abused its discretion by sua sponte setting aside the dismissal for the limited purpose of allowing the hearing on the motion to proceed, and allowing the entry of an order granting the motion. It was appropriate for the bankruptcy court to reopen the case to determine whether to grant leave because:
it is generally held that without leave of the bankruptcy court, no suit may be maintained against a trustee for actions taken in the administration of the estate. A court other than the appointing court has no jurisdiction to entertain an action against the trustee for acts within the trustee's authority as an officer of the court without leave of the appointing court.
3 COLLIER ON BANKRUPTCY¶ 323.03[3] (15th ed. rev.2001). The requirement of obtaining leave from the appointing court to sue a trustee is long-standing. See Barton v. Barbour, 104 U.S. 126, 129, 26 L.Ed. 672 (1881) (...
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