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Summarizing by Bradley Pearce

Wendy Adelson v. Ocwen Loan Servicing, LLC

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Pineda v. Bank of America, N.A. (In re Pineda)

BAP No. EC-11-1719-MkDJu (B.A.P. 9th Cir., April 23, 2013)
The Bankruptcy Appellate Panel for the Ninth Circuit Court of Appeal ("9th Cir. BAP") affirmed the Bankruptcy Court order abstaining from exercising jurisdiction over a Chapter 7 debtor's ("Debtor") adversary proceeding, which was commenced after the Chapter 7 trustee ("Trustee") filed his final report in the Chapter 7 case reflecting there were no non-exempt assets to be administered, liquidated or distributed in the Chapter 7 Case.
Procedural context:
The Debtor filed an appeal of the Bankruptcy Court's dismissal of an adversary proceeding he instituted in his own name (v. on behalf of the estate) without prejudice and without leave to amend ("Dismissal Order"). The Bankruptcy Court simultaneously issued an Order to Show Cause why it should not abstain should the Debtor seek to re-file the adversary proceeding, which ultimately resulted in the entry of an order abstaining from hearing any further proceedings filed by the Debtor in the matter ("Abstention Order"). The Debtor did not appeal the Abstention Order until prompted by communication from the 9th Cir BAP, and even then only filed a motion for leave to appeal the Abstention Order. The 9th Cir BAP ultimately elected to treat the motion for leave to appeal as a notice of appeal, finding that if the Debtor were found to have failed to timely appeal the Abstention Order his appeal of the Dismissal Order would be moot.
After the Trustee filed his final report in the Debtor's Chapter 7 Case, the Debtor sought the abandonment of his cause of action against Bank of America and others ("Defendants") with respect to the origination, securitization and ultimate foreclosure on his home mortgage. The Bankruptcy Court never entered an order permitting the abandonment. Regardless, the Debtor commenced an adversary proceeding in the Bankruptcy Court against the Defendants. The Bankruptcy Court dismissed Debtor's first amended complaint with leave to amend due to deficiencies in the pleading. The Debtor filed a second amended complaint, which, on the motion of the Defendants, was granted by the Bankruptcy Court's Dismissal Order, which provided that the entire adversary proceeding was dismissed without prejudice and without leave to amend. The Bankruptcy Court issued an Order to Show Cause, prohibiting the Debtor from filing a motion to amend or filing a further amended complaint unless the Debtor could demonstrate that the Bankruptcy Court should not abstain from adjudicating the matter. The Debtor appealed the Dismissal Order. The Debtor also filed a brief in response to the Order to Show Cause, and his arguments were universally rejected by the Bankruptcy Court, which issued the Abstention Order providing that it would abstain from hearing the matter. The Bankruptcy Court determined that the Debtor's case was complete when the Trustee filed his final report, that the Trustee and the Debtor's creditors had shown no interest in the cause of action, that the Trustee had not formally abandoned the estate's cause of action, and that the Debtor was pursuing the action for his own personal benefit and, therefore, that there was no legitimate reason for the Bankruptcy Court not to abstain from hearing the matter. Initially, the Debtor did not appeal the Abstention Order, but after the 9th Cir BAP issued an Order questioning the finality of the Dismissal Order the Debtor filed a motion for leave to appeal the Abstention Order. Although the Debtor never filed a Notice of Appeal with respect to the Abstention Order or an Amended Notice of Appeal adding the Abstention Order, and therefore failed to comply with the requirements of Bankruptcy Rules 8001 and 8002 regarding the filing of appeals, the 9th Cir BAP determined that the requirements of Rule 8001(a) do not necessarily apply to an Amended Notice of Appeal and therefore the 9th Cir BAP chose to treat the motion for leave to appeal as an Amended Notice of Appeal seeking review of the Abstention Order. On the merits, the 9th Cir BAP held that the Bankruptcy Court did not abuse its discretion when it entered the Abstention Order. The 9th Cir BAP held that the Bankruptcy Court applied the correct law and that its findings were not "illogical, implausible or without support in the record." The 9th Cir BAP also concurred with the Bankruptcy Court's "assessment that the Adversary Proceeding would not have any impact on either the bankruptcy estate or the bankruptcy case, given that Pineda already had received his discharge and given that the Trustee had clearly demonstrated that he had no interest in administering either the Property or the Adversary Proceeding claims on behalf of and for the benefit of the estate." Finding no reversible error, the 9th Cir BAP affirmed the Bankruptcy Court's Abstention Order. The 9th Cir BAP also rejected the other arguments made on appeal by the Debtor, namely that (a) the Bankruptcy Court erred in entering the Abstention Order because it failed to acknowledge that his Adversary Proceeding in part sought a determination of the validity of liens against the property (holding that permissive abstention is appropriate even when nominally core matters may be involved); (b) that the Bankruptcy Court erred because he has a claim for violation of the stay against the Defendants (holding that the Debtor never included any such claim for relief); (c) that the Debtor was denied due process because of the Bankruptcy Court's bias against him (holding that he had more than sufficient notice and opportunity to be heard on the abstention issue); and (d) that it was improper for the Bankruptcy Court to prohibit any future filings in the Bankruptcy Court (holding that the prohibition only applied to the adversary proceeding and claims pled therein, which was a reasonable restriction under the circumstances).
Bankruptcy Judges Markell, Dunn and Jury

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