Preblich v. Battley

• Citation: 181 F.3d 1048
• Decision Date: 07 February 1997
• Docket Number: No. 95-35630,No. CV-94-00442-HRH,CV-94-00442-HRH,95-35630
• Parties: (9th Cir. 1999) EVALYN PREBLICH, APPELLANT, v. KENNETH BATTLEY, APPELLEE. D.C
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1048

181 F.3d 1048 (9th Cir. 1999)

EVALYN PREBLICH, APPELLANT, v. KENNETH BATTLEY, APPELLEE. D.C. No. CV-94-00442-HRH

No. 95-35630

U.S. Court of Appeals, Ninth Circuit

Argued as to Appellant

Submitted as to Appellee February 7, 1997¹ Seattle, Washington

Submission Withdrawn February 18, 1997

Resubmitted July 3, 1997

Memorandum filed July 7, 1997

Memorandum withdrawn June 15, 1999

Filed June 15, 1999

[Copyrighted Material Omitted]

Evalyn L. Preblich, Pro per, Anchorage, Alaska, for the appellant.

Michelle L. Boutin, Bundy & Christianson, Anchorage, Alaska, for the appellee.

Appeal from the United States District Court for the District of Alaska H. Russel Holland, Chief District Judge, Presiding

William Bates III and Kevin M. Epstein, McCutchen, Doyle, Brown & Enersen, Llp, San Francisco, California, pro bono amicus curiae.

Before: James R. Browning, Pamela Ann Rymer, and Thomas G. Nelson, Circuit Judges.

ORDER

T.G. Nelson, Circuit Judge

The Memorandum Disposition filed July 7, 1997, is withdrawn.

The appellee's petition for rehearing is DENIED.

OPINION

Evalyn Preblich, a debtor in bankruptcy, appeals the district court's affirmance of the bankruptcy court's denial of Preblich's motions to reopen the hearing on the trustee's objections to creditors' claims and for return of proceeds from certain escrow accounts. We have jurisdiction under 28 U.S.C. S 1291. We affirm.

I.

Until the late 1980's, Evalyn Preblich was engaged in buying, selling and financing real estate. She filed for bankruptcy in October 1987 during a real estate crash that hit Anchorage in the mid-1980's. Preblich originally filed for bankruptcy under Chapter 11, but her case was converted to Chapter 7 on November 8, 1988. The appellee, Kenneth W. Battley, was appointed trustee of the bankrupt estate on November 9, 1988. Preblich was granted a discharge on May 20, 1991.

In January 1993, Preblich moved the bankruptcy court for a return of payments that had been received by the trustee on certain escrow accounts.² Preblich claimed that these proceeds were exempt under the state exemption statute, Alaska Stat. S 09.38.030(b). On February 10, 1993, the trustee filed an objection to Preblich's claim of exemption in the escrow proceeds. On February 24, 1993, the bankruptcy court denied Preblich's motion, finding that "to the extent Ms. Preblich was entitled to any exemption under this state exemption statute, she has already received the proceeds."

On June 22, 1994, the trustee filed a notice of motion objecting to claims that certain creditors had made against the bankrupt estate. The bankruptcy court held a hearing on the trustee's objections on August 1, 1994, and on August 2, 1994, sustained the trustee's objections.

On July 29, 1994, Preblich again moved the bankruptcy court for return of the escrow proceeds. On August 30, 1994, Preblich also moved the bankruptcy court to vacate its order sustaining the trustee's objections to the creditors' claims. Preblich alleged that she had not been notified of the trustee's objections or the hearing on the objections and that her due process rights had therefore been violated.

The bankruptcy court denied both of Preblich's pending motions on September 6, 1994. The district court affirmed the bankruptcy court's denial of Preblich's motions on April 18, 1995. Preblich timely appeals.

II.

We review the district court's decision on appeal from a bankruptcy court de novo. In re Siragusa, 27 F.3d 406, 407 (9th Cir. 1994). "We independently review the bankruptcy court's decision and do not give deference to the district court's determinations." In re Weisman, 5 F.3d 417, 419 (9th Cir. 1993). "We apply a clearly erroneous standard to the bankruptcy court's findings of fact and review its Conclusions of law de novo." Id.

III.

Preblich contends that she was deprived of a property interest without due process of law, and that the local bankruptcy rules were violated, because she did not receive notice of the trustee's objections to the creditors' claims or of the hearing on the trustee's objections. Preblich seeks to have the bankruptcy court's order sustaining the trustee's objections vacated and another hearing held so that she may participate in the hearing.

It is clear that under the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure and the local bankruptcy rules, the trustee was required to give Preblich notice of his objections to the creditors' claims and of the hearing on those objections. See 11 U.S.C. S 502(b); Fed. R. Bankr. P. 3007; U.S. Bankr. Ct. for Dist. of Alaska Local Rule 70. See also In re New Concept Housing, Inc., 951 F.2d 932, 937 (8th Cir. 1991) (finding that Fed. R. Bankr. P. 3007 requires a trustee to notify a debtor of disputed claims and of the hearing on the claims). It is also clear that the trustee failed to give Preblich the required notice and that he therefore violated the bankruptcy rules' notice requirements.

"We do not condone violations of the Bankruptcy Rules' notice requirements." In re New Concept Housing, 951 F.2d at 937. Every effort should be made to comply with these notice requirements, and the failure to give the proper notice may, in some situations, require a second hearing or other appropriate remedy. We hold, however, that in the pres ent case, the failure to give Preblich the required notice was harmless and does not require us to vacate the bankruptcy court's order sustaining the trustee's objections. See id. at 937-38.

First, the trustee's failure to give Preblich notice of the objections and the hearing on those objections did not violate Preblich's due process rights. The Due Process Clause guarantees only that an individual will not "be deprived of life, liberty, or property, without due process of law. " U.S. Const. amend. V. Thus, to show a violation of the Due Process Clause, an individual must first show that he or she was "deprived of life, liberty, or property." Preblich cannot meet this requirement.

Preblich claims that she was deprived of a property interest because the stay on a piece of property was lifted at the hearing. She fails, however, to provide any evidence to support this claim. Although the bankruptcy court docket sheet states that the Municipality of Anchorage and the trustee stipulated that certain property was subject to relief from the stay, Preblich does not dispute the trustee's assertion that the stay has not been lifted on this property. Until, and unless, an attempt is made to actually lift the stay that was apparently discussed at the hearing, Preblich has not been deprived of a property interest and the lack of notice was therefore harmless.³ See Logan v. Zimmerman Brush Co., 455 U.S. 422, 428 (1982) ("We must [first] determine whether[plaintiff] was deprived of a protected interest."); In re New Concept, 951 F.2d at 937 n.7 (holding that no due process violation occurred because the debtor had not been deprived of a protected property interest).

Second, Local Bankruptcy Rule 70 does not provide the relief Preblich seeks. Rule 70 provides that parties who do not receive notice "shall not be bound by the results of any proceeding noticed, unless the Court in a separate contested matter determines otherwise." U.S. Bankr. Ct. for Dist. of Alaska Local Rule 70(d)(3). The bankruptcy court determined, in a separate contested matter, that Preblich was not entitled to challenge the order disallowing certain claims. Moreover, Preblich is not being "bound" to anything. The only "result" of the proceeding was that all of the trustee's objections to the creditors' claims were sustained.

The bankruptcy court's refusal to vacate its order sustaining the trustee's objections and hold another hearing was not erroneous.

IV.

Preblich argues that her claim of exemption in the escrow proceeds should be allowed because the trustee failed to file a timely objection to her claim and has therefore waived any argument that the proceeds are not exempt.

A debtor claiming property as "exempt" must file a list of that property with the bankruptcy court. See 11 U.S.C. S 522(l). Unless a "party in interest" files a "timely" objection to the debtor's claim of exemption, the property claimed as exempt on such list is deemed exempt and any argument that the property is not exempt is waived. See id.; Fed. R. Bankr. P. 4003(b); Taylor v. Freeland & Kronz, 503 U.S. 638, 644 (1992) (holding that after time to file objection has run, exemption cannot be contested, "whether or not[the debtor] had a colorable statutory basis for claiming it"). An objection to a claim of exemption is "timely" only if it is filed within thirty days after the Conclusion of the meeting of creditors held pursuant to Federal Bankruptcy Rule 2003(a), or the filing of an amendment to the list of exemptions. See Fed. R. Bankr. P. 4003(b).

To start the thirty-day objection period running, the debtor's list ("schedule") of exemptions must be sufficient to notify the creditors and the trustee exactly what property the debtor is claiming as exempt. See Fed. R. Bankr. P. 4003; In re Hyman, 967 F.2d 1316, 1319 (9th Cir. 1992); In re Woodson, 839 F.2d 610, 615 (9th Cir. 1988). If the schedule of exemptions is insufficient to put the trustee and/or creditors on notice as to the property that the debtor is claiming as exempt, the thirty-day objection period begins to run only upon the debtor's amendment to the schedule of exemptions, or upon receipt of actual notice by the trustee or the creditor objecting to the claim of exemption. See Woodson, 839 F.2d at 614-15 (finding objection filed thirty-one days after amendment to schedule of exemptions timely where debtor failed to serve creditor with amended schedule of exemptions); In re Peterson, 929 F.2d 385, 388 (8th Cir. 1991) (finding untimely a creditor's objection filed more than thirty days after the creditor received actual notice of the claim of exemption despite the failure of the debtor to send the...