Case Type:
Case Status:
BAP No. EC-21-1159-SLB (9th Circuit, Oct 28,2022) Not Published
The Bankruptcy Appellate Panel of the Ninth Circuit found a bankruptcy court did not abuse its discretion in denying a chapter 13 debtor's motion to reconsider an order denying her contempt motion. The majority (1) held the debtor did not present proper grounds for reconsideration, (2) explained the debtor did not appeal from the contempt order, and (3) stated the panel could not review the contempt ruling anyway as the record lacked the hearing transcript containing the findings of fact and conclusions of law referenced in the contempt order.
Procedural context:
After the bankruptcy court denied the debtor's motion for contempt, she moved for reconsideration. She argued the bankruptcy court made a factual error in its contempt ruling; she reiterated a legal argument that the bankruptcy court had rejected in denying the contempt motion; and she contended new evidence warranted reconsideration. The bankruptcy court heard argument, orally denied the motion for reconsideration, and entered an order. The debtor appealed to the panel from the reconsideration order alone. The debtor did not include a transcript of the hearing on the motion for contempt in the appellate record. Thus, the panel explained, "[d]etermining whether the bankruptcy court here abused its discretion in denying reconsideration is problematic when we do not know the basis for its denial of the contempt motion." The appellate record did include a transcript of the hearing on the reconsideration motion. Ultimately, the panel upheld the bankruptcy court's denial of the reconsideration motion. It found the debtor waived her merits argument on appeal as she did not (1) "assert any specific argument for why the bankruptcy court erred in denying reconsideration[,]" (2) cite the applicable legal basis for the motion or standard of appellate review, or (3) use the terms "reconsider" or "reconsideration" in her opening brief. The panel also found, based solely on the debtor's representations on appeal of what the bankruptcy court said at the contempt hearing, that "the arguments [the debtor] raised in her reconsideration motion were either irrelevant to the ultimate issue of contempt or were simply an improper rehash of previous arguments." The dissent, however, would have reversed the bankruptcy court’s reconsideration order "based on the court’s refusal to apply Espinosa to [the debtor's] confirmed plan[,]" stating (1) the "bankruptcy court committed clear error by not enforcing the entry of discharge resulting from [the debtor's] performance of her confirmed chapter 13 plan," (2) the creditor’s “post-discharge actions violated [the debtor's] discharge as a matter of law, (3) "the reasoning the bankruptcy court expressed at the reconsideration hearing for denying [the] motion for contempt was clear legal error," and (4) "[t]hese errors of law incorrectly led the bankruptcy court to deny [the] reconsideration motion." The dissent would have remanded for further consideration of whether a "fair ground of doubt" existed as to the wrongfulness of the USDA's post-discharge conduct in accordance with Taggart v. Lorenzen.
Marilyn Theresa Paventy, the debtor/appellant, obtained a loan to buy a residence from appellee/creditor USDA Rural Housing Service in 1991. The note's principal amount was to be paid over 33 years at 8.75% interest and was secured by a deed of trust against the residence. In 2014, the debtor filed a chapter 13 bankruptcy petition in the U.S. Bankruptcy Court for the Eastern District of California. Even though the USDA loan's term extended for 10 more years, the debtor's plan proposed to pay the full amount of the USDA’s claim over 60 months, with 4.75% interest on the outstanding principal due. The plan also stated that a creditor's "proof of claim, not this plan or the schedules, shall determine the amount and classification of a claim unless the court's disposition of a claim objection, valuation motion, or lien avoidance motion affects the amount or classification of the claim." And, the plan expressly prohibited the debtor "from modifying the rights of a holder of a claim secured only by a security interest in real property that is Debtor's principal residence." The USDA's proof of claim stated that its secured claim accrued interest at an 8.75% annual rate. The bankruptcy court confirmed the plan; the USDA did not object to confirmation. In 2020, the debtor received a discharge after completing her plan payments. Post-discharge, the USDA sought payment from the debtor for an unpaid balance on the loan, contending a portion of the debt survived her discharge as she made payments to the USDA during the plan term based on interest at 4.75% rather than 8.75%, the term of the loan extended beyond the 60-month plan term, and the plan prohibited the debtor from modifying the USDA's claim. The debtor moved the bankruptcy court to find the USDA in contempt, arguing that its conduct violated the discharge injunction. The bankruptcy court heard argument on the contempt motion and provided oral findings and conclusions supporting its denial of the motion. It then issued a written order incorporating its statements on the record. The debtor moved the bankruptcy court to reconsider that order.
Brand, Lafferty, and Spraker (dissenting)

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