In re Wilborn

• Decision Date: 21 November 1996
• Docket Number: BAP No. SC-95-1943-OAsJ,Bankruptcy No. 94-02867-H7.
• Citation: 205 BR 202
• Parties: In re Bill WILBORN and Lucy Wilborn, Debtors. Bill WILBORN and Lucy Wilborn, Appellants, v. Lori GALLAGHER and Richard Names, Appellees.
• Court: U.S. Bankruptcy Appellate Panel, Ninth Circuit

205 B.R. 202 (1996)

In re Bill WILBORN and Lucy Wilborn, Debtors Bill WILBORN and Lucy Wilborn, Appellants, v. Lori GALLAGHER and Richard Names, Appellees.

BAP No. SC-95-1943-OAsJ, Bankruptcy No. 94-02867-H7.

United States Bankruptcy Appellate Panel of the Ninth Circuit.

Argued and Submitted September 20, 1996.

Decided November 21, 1996.

COPYRIGHT MATERIAL OMITTED

John D. Rittenhouse, San Diego, CA, for Bill & Lucy Wilborn.

Michael R. McCabe, Law Offices of Michael R. McCabe, El Cajon, CA, for Lori Gallagher and Richard Names.

Before: OLLASON, ASHLAND and JONES, Bankruptcy Judges.

OPINION

OLLASON, Bankruptcy Judge:

Bill and Lucy Wilborn ("Debtors") have appealed the bankruptcy court's decision to reopen their bankruptcy case to allow creditors Lori Gallagher and Richard Names ("Appellees") to file a complaint to determine dischargeability of a debt.

We AFFIRM.

STATEMENT OF FACTS

Debtors filed a voluntary Chapter 7¹ petition on March 16, 1994. Prior to the bankruptcy, Appellees notified Debtors of potential litigation against Bill Wilborn for alleged fraud in connection with a purchase of real estate in which Wilborn was their broker. Nevertheless, Debtors did not list Appellees as creditors on their bankruptcy schedules, nor include them on the master mailing list.

The meeting of creditors was held on April 18, 1994. The notice of the § 341 meeting stated that it was a no asset case, and that the last day to file complaints to determine dischargeability of a debt was June 17, 1994. On September 18, 1994, Debtors' discharge was entered.

Approximately two weeks after their discharge, Debtors amended their Schedule F to include Appellees. A Notice to Creditors Added by Amendment ("Notice") was filed on September 29, 1994. The Notice consisted of standard form CSD 1101 for the United States Bankruptcy Court for the Southern District of California, which stated in pertinent part:

You are hereby notified that the debtor is filing with the above-entitled case an amendment to the debtor\'s list of debts to include you as creditor of this estate. If you have questions concerning the legal effect of this filing upon you as a creditor, please consult your own legal counsel. Neither the Court nor the undersigned may advise you on legal matters.

The Notice informed Appellees of Debtors' bankruptcy filing, and indicated that the § 341 meeting was concluded. Attached to the Notice were copies of the notice of the § 341 meeting and the discharge order.² The standard § 341 meeting form indicated that the last day for filing complaints to determine nondischargeability was June 17, 1994, which had passed. The standard discharge form stated that Debtors were released from all dischargeable debts. It also stated:

Any judgment heretofore or hereafter obtained in any court other than this court is null and void as a determination of the personal liability of the debtor with respect to any of the following:

(a) debts dischargeable under 11 U.S.C. § 523;

(b) unless heretofore or hereafter determined by order of this court to be nondischargeable, debts alleged to be excepted from discharge under clauses (2), (4) and (6) and 11 U.S.C. § 523(a);

(c) debts determined by this court to be discharged.

It further stated:

All creditors whose debts are discharged by this order and all creditors whose judgments are declared null and void in paragraph 2 above are enjoined from instituting or continuing any action or employing any process or engaging in any act to collect such debts as personal liabilities of the above-named debtor.

Official Form No. 18.

On the reverse side of the Notice, Debtors' attorney completed and signed the Certificate of Service, averring that service was completed to Appellees. The certificate stated, in pertinent part:

That on 29th day of Sept., 1994, I served a true copy of the within notice by . . . UNITED STATES FIRST CLASS MAIL on the following persons. . . .

. . . .

I certify under penalty of perjury that the foregoing is true and correct.

Dated on: Sept. 29, 1994.

Also filed was a Declaration of Service by Mail completed and signed by Lynn Williams ("Williams"), an employee of Debtors' attorney. Williams certified that on September 29, 1994, she mailed a copy of the Amendment to Schedule F to the Chapter 7 Trustee.

On March 14, 1995, Appellees filed a motion to reopen Debtor's bankruptcy case for the purpose of filing a nondischargeability complaint, and also filed the complaint. Appellees filed the complaint some 165 days, or five and one-half months, after September 29, 1994, when the Notice was allegedly served on them. Debtors filed their opposition on April 12, 1995. Appellees filed their Reply on April 25, 1995, including identical declarations averring at paragraph 3:

3. I did not receive any mailings or other notice relating to this bankruptcy case until approximately January 11, 1995. I was previously unaware of the bankruptcy, and learned we had been added as claimants for the first time in January 1995.

According to Appellees' declaration, the complaint was filed some 62 days after they received the Notice on January 11, 1995.

Appellees' exhibits showed that the copy of the Certificate of Service accompanying the Notice to Appellees had been signed by Debtors' attorney before it was mailed to them.

The hearing on Appellees' motion began on May 12, 1995, and was continued to July 7, 1995 to allow both sides to file supplemental points and authorities. The court found that Appellees received the Notice in January, 1995. It based its finding on a distinction between cases where a creditor never receives the mailing and this case where the mailing was received late. In the latter, the presumption of service could be rebutted by such evidence as that presented by Appellees, the court held.

The court also determined that Appellees' delay in filing a motion to reopen was justifiable because the notices were confusing. The Notice and forms did not inform Appellees of their rights that had not been eliminated, yet they advised Appellees that the time for filing was passed, and the debt was discharged. Appellees' counsel told the court that they consulted with him in January, 1995, after they received the Notice, and it took several weeks thereafter to obtain the documentation to file the motion and complaint.

The court was persuaded by evidence that the Certificate of Service received by Appellees had been signed prior to the Notice being mailed. The court also found that Debtors knew about the alleged fraud claim, and they did not provide a satisfactory answer for failing to list Appellees on the original schedules. This finding implicitly was that Debtors intentionally omitted Appellees.³

The bankruptcy court's order reopening the case was entered on August 29, 1995, and was timely appealed.

ISSUE

Whether the bankruptcy court erred by determining that it had authority to extend the expired bar date to allow omitted Appellees to file a dischargeability complaint five and one-half months after the creditors allegedly were given notice of the bankruptcy, and two months after they admittedly received notice.

STANDARD OF REVIEW

A trial court's decision to reopen a bankruptcy case and grant relief to a debtor is reviewed for an abuse of discretion. In re Cisneros, 994 F.2d 1462, 1464-65 (9th Cir. 1993). Likewise, a bankruptcy court's exercise of its equitable power is reviewed for an abuse of discretion. Baker v. Delta Air Lines, Inc., 6 F.3d 632, 639 (9th Cir.1993). The court abuses its discretion if it bases its ruling upon an erroneous view of the law or a clearly erroneous assessment of the evidence. In re Halstead, 158 B.R. 485, 487 (9th Cir. BAP 1993), aff'd, 53 F.3d 253 (9th Cir.1995).

Interpretation of the Bankruptcy Rules and Code is a matter of law, subject to de novo review. In re Price, 871 F.2d 97, 98 (9th Cir.1989); In re Lopez, 192 B.R. 539, 543 (9th Cir. BAP 1996). The facts surrounding notice of bar dates and the filing of a bankruptcy petition are factual matters reviewed under the clearly erroneous standard. In re De la Cruz, 176 B.R. 19, 22 (9th Cir. BAP 1994). Whether an individual's due process rights have been violated is a mixed question of law and fact, reviewed de novo. Rose v. United States, 905 F.2d 1257, 1259 (9th Cir. 1990).

DISCUSSION

A. The Panel's Jurisdiction

The Panel determines its proper jurisdiction sua sponte. In re Vylene Enterprises, Inc., 968 F.2d 887, 889 (9th Cir.1992). The order granting the motion to reopen the case is interlocutory, because it did not resolve the merits of the nondischargeability complaint, but constituted a preliminary step in the nondischargeability process. See In re Frontier Properties, Inc., 979 F.2d 1358, 1363 (9th Cir.1992); see also In re Nichols, 21 F.3d 690, 693 (5th Cir.) (appeal of order inter alia affirming bankruptcy court's order granting motion to reopen to determine dischargeability of debts was interlocutory), cert. denied sub nom. Izen v. Nichols, 513 U.S. 962, 115 S.Ct. 422, 130 L.Ed.2d 337 (1994); In re Orlan, 138 B.R. 374, 376-77 (E.D.N.Y.1992) (an order which reopens a hearing on a motion to appoint a trustee, or alternatively to convert a Chapter 11 case to Chapter 7 is interlocutory); Home Life Ins. Co. v. Abrams Square II, Ltd., 95 B.R. 51, 53 (N.D.Tex.1988) ("The court will next address the Bankruptcy Court's finding that it does not have jurisdiction to reopen the bankruptcy case.") Compare In re Ricks, 89 B.R. 73, 75 (9th Cir. BAP 1988) (appellate court had jurisdiction over order granting both motion to reopen and motion to avoid liens).

Neither party moved for leave to appeal; however, the Panel has authority under Fed.R.Bank.P. 8003 to treat a Notice of Appeal as a Motion for Leave to Appeal. The standard for granting leave to appeal has been articulated by the Panel in In re NSB Film Corp., 167 B.R. 176, 180 (9th Cir. BAP 1994), as follows:

Leave to appeal should not be granted

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