In re Ewing, BAP No. UT-07-074 (B.A.P. 10th Cir. 3/24/2008)

• Decision Date: 24 March 2008
• Docket Number: Bankr. No. 05-29650.,BAP No. UT-07-074.
• Parties: IN RE LANCE J. EWING and PATRICIA L. EWING, Debtors. STEPHEN W. RUPP, Trustee, Chapter 13, Appellant, v. LANCE J. EWING and PATRICIA L. EWING, Appellees.
• Court: U.S. Bankruptcy Appellate Panel, Tenth Circuit

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IN RE LANCE J. EWING and PATRICIA L. EWING, Debtors STEPHEN W. RUPP, Trustee, Chapter 13, Appellant, v. LANCE J. EWING and PATRICIA L. EWING, Appellees.

BAP No. UT-07-074.

Bankr. No. 05-29650.

United States Bankruptcy Appellate Panel of the Tenth Circuit

March 24, 2008.

Appeal from the United States Bankruptcy Court for the District of Utah

Before BROWN, McNIFF, and RASURE¹, Bankruptcy Judge

ORDER AND JUDGMENT^*

RASURE, Bankruptcy Judge.

The Appellant, Stephen W. Rupp ("Rupp"), served as the Chapter 7 Trustee of the bankruptcy estate of Appellees Lance J. and Patricia L. Ewing (the "Ewings") before their Chapter 7 case was converted to a case under Chapter 13. The Ewings' Chapter 13 case was eventually dismissed because they failed to propose a confirmable plan. Approximately nine months after the Chapter 13 case was dismissed, Rupp filed a motion requesting the bankruptcy court to reopen the case, reconvert the case to Chapter 7, and set a scheduling conference in an adversary proceeding that Rupp, as Chapter 7 Trustee, had filed prior to conversion of the case to Chapter 13. In the adversary proceeding, Rupp had objected to the Ewings' discharge and sought to recover from the Ewings certain alleged unscheduled assets.

Treating Rupp's motion as a motion to vacate dismissal of the Chapter 13 case pursuant to Rule 60(b) of the Federal Rules of Civil Procedure ("Rule 60(b)"), the United States Bankruptcy Court for the District of Utah entered the Order Denying Motion to Reopen and Reconvert Case and Motion for Pre-Trial Scheduling Order in Adversary Proceeding No. 05-2776 (the "Order"). Rupp has timely appealed the Order.

Because we conclude that Rupp lacked standing to request the relief sought below, and therefore the bankruptcy court lacked jurisdiction to adjudicate Rupp's motion, the Order must be vacated and this proceeding remanded to the bankruptcy court with instructions to deny the motion for lack of jurisdiction.

I. APPELLATE JURISDICTION

The Bankruptcy Appellate Panel has jurisdiction to hear timely-filed appeals from "final judgments, orders, and decrees" of bankruptcy courts within the Tenth Circuit, unless one of the parties elects to have the district court hear the appeal.² Neither party has elected to proceed before the district court.

A decision is considered final "if it `ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.'"³ An order denying Rule 60(b) relief is a final, appealable order.⁴ Here, the bankruptcy court refused to vacate the dismissal of the Chapter 13 case pursuant to Rule 60(b), and consequently refused to reopen and reconvert the case to Chapter 7. No post-judgment motion is pending. The Order is final for purposes of review.

II. STANDARD OF REVIEW

Because granting relief under Rule 60(b) is highly discretionary, denial of Rule 60(b) relief is generally reviewed for abuse of discretion.⁵ A bankruptcy court's denial of a motion to reopen a case is also reviewed under an abuse of discretion standard.⁶

Although neither the parties nor the bankruptcy court addressed below whether Rupp had standing to seek to vacate the dismissal of the Chapter 13 case in order to reopen the case and reconvert it to Chapter 7 so that Rupp could pursue administration of the estate for the benefit of Ewings' creditors, "[s]tanding . . . raises jurisdictional questions and we are required to consider `the issue sua sponte to ensure that there is an Article III case or controversy' before us."⁷ "[E]very federal appellate court has a special obligation to satisfy itself not only of its own jurisdiction, but also that of the lower courts in a cause under review, even though the parties are prepared to concede it."⁸ "It is a long-settled principle that standing cannot be inferred argumentatively from averments in the pleadings, but must affirmatively appear in the record."⁹

As a threshold jurisdictional matter, we must determine whether Rupp had standing to seek vacation of the dismissal of the Chapter 13 case in order to prosecute the adversary proceeding to recover assets for the benefit of the Ewings' creditors.¹⁰

III. BACKGROUND

The relevant facts were not contested. On June 20, 2005, the Ewings filed a petition for relief under Chapter 7, and Rupp was appointed Chapter 7 Trustee.¹¹ On October 24, 2005, Rupp obtained an order requiring the Ewings to turn over personal and business books and records, tax returns, and certain tax refunds (the "Turnover Order"). The Ewings did not comply with the Turnover Order. On December 12, 2005, Rupp filed a complaint in Adversary Proceeding No. 05-2776 GEC (the "Adversary Proceeding"), requesting that the bankruptcy court deny the Ewings' discharge pursuant to various subsections of Section 727(a)¹² of the Bankruptcy Code for failing to comply with the Turnover Order, failing to keep records, failing to explain losses, and failing to report and turn over property of the estate (the "Complaint"). In addition, Rupp sought a money judgment against the Ewings in the amount of the tax refunds that had been the subject of the Turnover Order and the value of a receivable that Rupp alleged was owed to the Ewings by their wholly owned business entity. These assets had not been listed by the Ewings on their schedules.

On April 20, 2006, the Ewings filed a motion to convert their Chapter 7 case to a case under Chapter 13. Rupp did not object to the motion.¹³ On April 24, 2006, the Ewings filed an answer in the Adversary Proceeding generally denying the allegations in the Complaint. On April 28, 2006, the bankruptcy court entered an order converting the Chapter 7 case to one under Chapter 13.

On July 11, 2006, after a contested confirmation hearing, the bankruptcy court dismissed the Ewings' Chapter 13 case due to their failure to propose a confirmable plan. Although Rupp contended that the Ewings converted the case to Chapter 13 to avoid turning over property of the estate to him as the Chapter 7 Trustee, and that they purposefully failed to prosecute the Chapter 13 case so that their case would be dismissed, neither Rupp nor the Chapter 13 trustee sought reconversion of the case to a Chapter 7 prior to its dismissal.¹⁴

The Bankruptcy Case Docket Sheet and Adversary Proceeding Docket Sheet both contain a docket entry dated July 18, 2006, reflecting that the Adversary Proceeding was "[d]isposed."¹⁵ The Adversary Proceeding Docket Sheet also indicates the status of the proceeding as "terminated" as of July 18, 2006.¹⁶ However, it does not appear that any order had been entered dismissing or otherwise disposing of the Complaint.

The Order dismissing the Chapter 13 case was filed on July 21, 2006, and the Chapter 13 Trustee filed the Trustee's Chapter 13 Final Report and Account on October 25, 2006.¹⁷ On or about November 28, 2006, the bankruptcy court clerk requested that Rupp file the accounting a Chapter 7 Trustee is required to file after the conversion of a case to Chapter 13, apparently to complete the record so the case could be administratively closed. On December 15, 2006, Rupp filed a "Trustee's No Asset Report," in which Rupp declared, among other things, that he "received neither money nor property of this estate," that there were minimal or no non-exempt assets, that "if the case has converted to a case under Chapter 13, . . . any assets collected by the Trustee have been delivered to the Chapter 13 Standing Trustee," and that "any non-exempt real or personal property listed by the debtor, if not previously abandoned by the Trustee, is hereby abandoned."¹⁸ Rupp further stated that "[p]ursuant to FRBP 5009, the Trustee hereby certifies that the estate of the above-named debtor has been fully administered."¹⁹ On December 18, 2006, the Chapter 13 bankruptcy case was closed.²⁰

In the meantime, on October 27, 2006, three months after the Chapter 13 case was dismissed, the Ewings filed another Chapter 7 petition. That case was dismissed on December 19, 2006, for failure to timely file all required documents. Rupp was not the Chapter 7 Trustee in that case. However, during the month of December 2006, Rupp contacted the Ewings' counsel advising him of his intention to continue prosecuting the Adversary Proceeding to recover the tax refunds and the alleged receivable because Rupp believed that the Ewings were abusing the bankruptcy system.²¹

On April 10, 2007, Rupp filed a Motion to Reopen and Reconvert Case and Motion for Pre-Trial Scheduling Order in Adversary Proceeding No. 05-2776 (the "Motion to Reopen"). As cause to reopen the dismissed Chapter 13 case, Rupp contended that the Adversary Proceeding had never been resolved and that the tax refunds and the receivable had never been administered for the benefit of the Ewings' creditors. Thus, Rupp requested the court to reopen the Chapter 13 case, reconvert it to a Chapter 7 case, and allow Rupp to prosecute his objection to discharge and his claim for a money judgment against the Ewings on behalf of the Ewings' creditors.

The Ewings objected to the Motion to Reopen. The Ewings argued that the motion constituted a request under Rule 60(b) to vacate the dismissal of the Chapter 13 case²² that occurred nine months earlier, and the motion was therefore untimely.²³ In addition, the Ewings contended that Rupp's claim for denial of discharge was mooted by the dismissal of their Chapter 13 case. Finally, the Ewings argued that they, and their creditors, should be able to rely on the finality of the dismissal order, and Rupp failed to show circumstances to warrant upsetting such finality.

Rupp responded that the Ewings had acted in bad faith in procuring the conversion and dismissal of their case in order to conceal assets from the prying eyes of their Chapter 7 Trustee. Rupp also argued that his Motion to Reopen was timely because any delay in filing it was occasioned by Rupp's attempts in December 2006 to persuade the Ewings to confess a money...