Macintyre v. JP Morgan Chase Bank, N.A. (In re Macintyre)

• Decision Date: 05 March 2019
• Docket Number: Bankr. No. 10-32946,BAP No. CO-18-085
• Parties: IN RE HOLLY MACINTYRE, Debtor. HOLLY MACINTYRE, Appellant, v. JP MORGAN CHASE BANK, N.A., Appellee.
• Court: U.S. Bankruptcy Appellate Panel, Tenth Circuit

IN RE HOLLY MACINTYRE, Debtor.HOLLY MACINTYRE, Appellant, v. JP MORGAN CHASE BANK, N.A., Appellee.

BAP No. CO-18-085

Bankr. No. 10-32946

UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE TENTH CIRCUIT

March 5, 2019

NOT FOR PUBLICATION

Chapter 7

OPINION^*

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

Submitted on the briefs.¹

Before CORNISH, JACOBVITZ, and MOSIER, Bankruptcy Judges.

PER CURIAM.

Pro se Chapter 7 debtor Holly MacIntyre (the "Debtor") filed a Motion to Reopen the Case to Determine Discharge Violation, Civil Contempt, and Damages L.B.R. 5010-1 (the "Motion to Reopen") on July 5, 2018, approximately seven and a half years after entry of her discharge in order to pursue claims against a secured creditor for violation of the discharge injunction.² After determining that, under the circumstances, it would not be appropriate to grant any relief to the Debtor even if the case were reopened, the bankruptcy court denied the Motion to Reopen. Because the record before the bankruptcy court was insufficient to support that determination, we REVERSE and REMAND for further proceedings consistent with this opinion.

I. Facts

The Debtor filed a voluntary Chapter 7 petition on September 9, 2010. On the petition date, the Debtor resided at 13025 West 63rd Place, Unit E, Arvada, Colorado (the "Residence"). The bankruptcy court entered a Discharge of Debtor on January 6, 2011, and the Chapter 7 case closed on February 23, 2011.

The Motion to Reopen included a recitation of the following alleged facts:³ J.P. Morgan Chase Bank, N.A. ("Chase") held first and second deeds of trust secured by theResidence. Chase foreclosed its liens against the Residence and obtained an in rem foreclosure judgment on December 16, 2014. The Debtor appealed the foreclosure judgment to the Colorado Court of Appeals. The Debtor unsuccessfully sought a stay pending appeal, which Chase had opposed. Absent a stay pending appeal, the Residence sold at foreclosure auction on January 21, 2016. The Debtor's appeal of the foreclosure judgment continued in state court after the sale.

In its answer brief on appeal to the Colorado Court of Appeals filed on October 27, 2015, Chase made a pre-foreclosure sale request to obtain a post-sale award of attorneys' fees for defending the appeal, pursuant to the terms of a promissory note and deed of trust, in violation of the bankruptcy court's discharge order. When Chase made the request for attorneys' fees it was aware that the foreclosure sale would be held before any fee award could be added to Chase's foreclosure bid at a sale. The Colorado Court of Appeals affirmed the foreclosure judgment and on April 28, 2016 awarded Chase its attorneys' fees and costs incurred in the appeal. On January 4, 2017, the Colorado Court of Appeals remanded the case to the State District Court, County of Jefferson ("State District Court") to determine the amount of attorneys' fees and costs. On January 24, 2017, Chase notified the State District Court it would not seek the attorneys' fees and costs.⁴

In the Motion to Reopen, the Debtor also complains that the Colorado Court of Appeals affirmed the foreclosure judgment entered by the State District Court after the foreclosure sale, even though the appeal was moot, and that Chase refused to cooperate with the Debtor to recall the mandate and ask the Colorado Court of Appeals to vacate its decision.

II. Procedural History

The Debtor filed her Motion to Reopen on July 5, 2018. In the Motion to Reopen, the Debtor alleged that Chase violated the § 524 discharge injunction by: (1) pursuing attorneys' fees and costs on appeal under its note and deed of trust even though the January 2016 foreclosure sale mooted the appeal; and (2) refusing to cooperate with the Debtor to obtain an order vacating the attorneys' fee award.⁵ The Debtor asked the bankruptcy court to reopen her case so she could prosecute the alleged violation of the discharge injunction. In a reopened case, the Debtor intended to seek: (1) actual damages; (2) punitive damages; and (3) an order directing Chase's attorneys, among other things, to seek an order correcting the opinion of the Colorado Court of Appeals that included the award of attorneys' fees and costs.

The Debtor served the Motion to Reopen on counsel of record for Chase and Chase's general counsel at its corporate office. Chase did not respond to the Motion to Reopen. The bankruptcy court did not hold a hearing on the Motion to Reopen. The bankruptcy court entered its Order Denying Motion to Reopen Case to Determine Discharge Violation, Civil Contempt, and Damages L.B.R. 5010-1 (the "Order Denying Motion to Reopen") on August 1, 2018.⁶

III. Jurisdiction and Standard of Review

"With the consent of the parties, this Court has jurisdiction to hear timely-filed appeals from 'final judgments, orders, and decrees' of bankruptcy courts within the Tenth Circuit."⁷ An order denying a motion to reopen a Chapter 7 bankruptcy case is final for purposes of 28 U.S.C. § 158(a)(3).⁸ Neither party in this case elected for these appeals to be heard by the United States District Court pursuant to 28 U.S.C. § 158(c). Accordingly, this Court has jurisdiction over this appeal.

An order denying a motion to reopen a bankruptcy case is reviewed for abuse of discretion.⁹ Applying the abuse of discretion standard, "'a trial court's decision will not be disturbed unless the appellate court has a definite and firm conviction that the lower court made a clear error of judgment or exceeded the bounds of permissible choice in the circumstances.'"¹⁰ Abuse of discretion occurs when a trial court "makes an 'arbitrary, capricious or whimsical,' or 'manifestly unreasonable judgment.'"¹¹ A trial court abuses its discretion when it "fails to consider the applicable legal standard or the facts upon which the exercise of its discretionary judgment is based."¹²

IV. Analysis

The issue on appeal is whether the bankruptcy court erred by denying the Debtor's motion to reopen her Chapter 7 bankruptcy case to enable her to seek relief from an alleged violation of the discharge injunction. Bankruptcy Code § 350(b) provides "[a] case may be reopened . . . to administer assets, to accord relief to the debtor, or for other cause."¹³ Federal Rule of Bankruptcy Procedure 5010 states "[a] case may be reopenedon motion of the debtor or other party in interest pursuant to § 350(b)."¹⁴ "The 'phrase "or for other cause" is a broad term which gives the bankruptcy court discretion to reopen a closed case or proceeding when cause for such reopening has been shown.'"¹⁵

The party moving to reopen a bankruptcy case has the burden of proof.¹⁶ A motion to reopen should be liberally granted.¹⁷ The decision whether to reopen "should emphasize substance over technical considerations."¹⁸ Reopening a closed bankruptcy case is a ministerial act that does not grant any substantive relief.¹⁹

In deciding whether to reopen a case to allow a debtor to seek sanctions for an alleged violation of the discharge injunction, the bankruptcy court may deny the motion if: (1) it is clear at the outset that reopening the case could not afford the movant anyrelief such that reopening would be futile and a waste of judicial resources;²⁰ or (2) the debtor has unduly delayed filing the motion to reopen to the prejudice of the creditor.²¹ The bankruptcy court may also be guided by other equitable considerations, such as whether the debtor has acted in bad faith or engaged in other inequitable conduct. ²² But the bankruptcy court ordinarily should not require the movant to prove the matter for which reopening is sought twice, once to reopen the case and then again at the hearing on the merits.²³

In the matter before us, the bankruptcy court premised its denial of the Motion to Reopen to determine whether a violation of the discharge injunction occurred on four considerations. We will address each consideration in turn.

First, the bankruptcy court considered whether reopening the case provided a benefit to creditors. While this may be relevant to whether a case should be reopened forother reasons, it is not relevant to whether a case should be reopened to enable a debtor to seek redress for an alleged violation of the discharge injunction. Section 350(b) provides that "[a] case may be reopened . . . to accord relief to the debtor."²⁴ Issuing sanctions for violation of the discharge injunction accords relief to a debtor.²⁵ Where a debtor seeks to reopen a case to seek redress for a creditor's violation of the discharge injunction, relief should not be denied because no creditor would benefit from the reopening the case.²⁶ If a bankruptcy case should be reopened only when creditors would benefit from the reopening, then no bankruptcy case would ever be reopened to allow a debtor to pursue a remedy for an alleged discharge injunction violation.

Second, the bankruptcy court faulted the Debtor for filing the Motion to Reopen almost seven and a half years after the case was closed to seek recovery for a discharge violation that allegedly occurred "in litigation she initiated nearly four years after the bankruptcy case was closed."²⁷ In assessing a debtor's delay in filing a motion to reopen to seek relief for violating the discharge injunction the bankruptcy court should considerthe time between the alleged violation of the discharge injunction and the filing of the motion, not how long the alleged violation occurred after the case was closed. Moreover,

[b]ecause there are no statutory time limits on reopening a case . . . , "courts have dealt with such motions in different ways. The leading approach is permissive but incorporates an equitable defense akin to laches, so that a debtor may reopen the bankruptcy case at any time . . . absent a finding of prejudice to the creditor."²⁸

Therefore, while a bankruptcy court may consider the passage of time, "the '[p]assage of time alone . . . does not necessarily constitute prejudice to a...