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BAP No. PR 16-045, Bankruptcy Case No. 13-04232-BKT GUZMAN v. NOREEN WISCOVITCH RENTAS, CH 7 TRUSTEE (1st Circuit, May 17,2017) Published
Auberto Nieves Guzmán and Annette Nazario Rodríguez Debtors appeal from the order denying their motion for reconsideration of the order sustaining the chap objection to certain claimed exemptions. Because we find no abuse of discretion, we AFFIRM.
Procedural context:
The Debtors originally filed a voluntary chapter 11 petition in May 2013 and, at their request, the case was converted to chapter 7 a little over two years later. For purposes of this appeal it is sufficient to note that during the chapter 11 case they filed their first amendment to Schedule C. Shortly after the case conversion, on July 9, 2015, the Debtors again amended Schedule C Second Amended Exemption Schedule to add to their claimed exemptions under § 522(d)(5)2 the funds that had been held in the chapter 11 debtor-in-possession bank accounts. Within 30 days of the filing of the Second Amended Exemption Schedule,3 the Trustee filed an objection to the De the DIP Accounts Exemption Objection. She asserted that the Debtors were not entitled to claim exemptions for those accounts because they were funds earned or acquired post-petition, and as such, were property of the estate to be administered by the Trustee. The objection contained a notice provision incorrectly advising parties in interest, including the Debtors, of a 30-day period in which to object or otherwise respond, or the objection would be deemed unopposed and possibly granted by the court without a hearing. Nineteen days later, the bankruptcy court entered an order sustaining the First Exemption Order. The Debtors filed a motion to reconsider the order on the First Exemption Order. They also amended Schedule C for the third time claiming an exemption in the DIP accounts; they later amended Schedule C again, for a fourth time, to include an apartment they owned. What followed was a series of motions to reconsider and objections by and between the Debtors and the Trustee. Finally, On July 13, 2016, the bankruptcy court entered an order denying the Second Reconsideration Motion July 13 Order Denying the Debtors’ Reconsideration Motion, noting only: “for the reasons stated in the Chapter 7 Trustee’s Opposition.” The Debtors then timely filed their notice of appeal of the July 13 Order Denying Reconsideration, and only that order.
The Debtors intent is unequivocal and plainly limited to an appeal from the July 13 Order Denying Reconsideration. Our review then is confined to that order, and for reasons elucidated below, this limitation significantly impacts the appeal. If the underlying Order Sustaining Second Exemption Objection were before us, we would conduct a de novo review on the merits of the legal issues raised by that order, including whether a new objection period arises as to all claimed exemptions with any amendment of the exemption schedule and whether the DIP Accounts were subject to exemption under § 522(c)(5). But it is not, so our review of the July 13 Order Denying Reconsideration is limited to the abuse of discretion standard. See Rodriguez v. Banco Popular de Puerto Rico (In re Rodriguez), 516 B.R. 177, 183 (BAP 1st Cir. 2014). As a starting point, motions for reconsideration are not recognized by the Federal Rules of Civil Procedure or the Federal Rules of Bankruptcy Procedure. In re Ortiz Arroyo, 544 B.R. 751, 756 (Bankr. D.P.R. 2015) (citation omitted). Bankruptcy courts usually treat a motion for reconsideration as either a motion to alter or amend a judgment under Rule 59(e), made applicable in bankruptcy by Bankruptcy Rule 9023, or as a motion for relief from judgment under Rule 60(b), made applicable in bankruptcy by Bankruptcy Rule 9024. See Surita Acosta v. Reparto Saman Inc. (In re Surita Acosta), 497 B.R. 25, 31 (Bankr. D.P.R. 2013) (citations omitted) (noting motion for reconsideration implicates either Rule 59(e) or 60(b)). These two rules are distinct; they serve different purposes and produce different consequences. In re Ortiz Arroyo, 544 B.R. at 756 (quoting Lopez Jimenez v. Pabon Rodriguez (In re Pabon Rodriguez), 233 B.R. 212, 219 (Bankr. D.P.R. 1999), , 17 F. App x 5 (1st Cir. 2001)). In the Trustee’s Opposition, she contended that under Bankruptcy Rule 4003(b)(1), each amendments to their claimed exemptions started a new 30-day objection period for any exemptions listed in such Amended Exemption Schedules, regardless of whether or not a particular claimed exemption was actually added or modified by the amended schedule. Following this line of reasoning, she argued that the Second Exemption Objection filed on May 3, 2016 was timely, having been filed within 30 days of the filing of the Fourth Amended Exemption Schedule. The bankruptcy court adopted it when it denied the Second Reconsideration Motion. The Debtors advanced a narrower approach, arguing that the bankruptcy court abused its discretion because an amendment starts a new objection period only for those specific exemptions that were added or amended. They contended that because the Fourth Amended Exemption Schedule only added a claimed homestead exemption with respect to the apartment and did not alter or affect the other exemptions which were listed in the prior Amended Exemptions. Neither the Supreme Court nor the First Circuit has addressed this precise issue, and courts are not in agreement. The majority of courts that have considered it have concluded that the filing of an amendment to the list of exemptions does not reopen the time to object to original exemptions not affected by the amendment. In re Walker, 505 B.R. 217, 219 (Bankr. E.D. Tenn. 2014) (quoting In re Larsen, No. 12-30913, 2013 WL 4525214, at *4 (Bankr. D.N.D., Aug. 27, 2013), and citing Bernard v. Coyne (In re Bernard), 40 F.3d 1028, 1032 (9th Cir. 1994); In re Kazi, 985 F.2d 318, 323 (7th Cir. 1993); Grueneich v. Doeling (In re Grueneich), 400 B.R. 680, 684 (B.A.P. 8th Cir. 2009); In re Payton, 73 B.R. 31, 33 (Bankr. W.D. Tex. 1987); In re Gullickson, 39 B.R. 922, 923 (Bankr. W.D. Wis. 1984)); see also Alan N. Resnick & Henry J. Sommer, 9 Collier on Bankruptcy ¶ 4003.03[1][a] (16th ed. 2013). Consequently, the bankruptcy court’s adoption of the Trustee’s position was not a plain and indisputable error that amounted to a complete disregard of the controlling law. Venegas-Hernandez, 370 F.3d at 195 (citation omitted) (internal quotations omitted). Simply stated, there was no manifest error of law. Lastly, the Debtors seek reversal of the court’s denial of their Second Reconsideration Motion on the basis that they are permitted to exempt the funds in the DIP Accounts as a matter of law. According to the Debtors, post-petition earnings in the DIP Accounts are property of their chapter 7 estate which they are entitled to claim as exempt under the wild card exemption of § 522(d)(5). They raise this issue for the first time on appeal, having failed to squarely present this argument in Debtors Second Reconsideration Motion. It is axiomatic that issues not raised below cannot be raised on appeal and such arguments are deemed waived. (In re Benoit), 564 B.R. 799, 805-06 (B.A.P. 1st Cir. 2017).
BAP: Feeney, Finkle and Fagone. USBC-Puerto Rico: Tester

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