Elias v. Zeller (In Re Zeller)

38 B.R. 739, 1984 Bankr. LEXIS 5787
United States Bankruptcy Appellate Panel for the Ninth Circuit·Decided April 30, 1984·No. BAP No. NC-83-1053VEAS, Bankruptcy No. 582-02700-M, Adv. No. 821630·Published·Cited by 9 cases

Opinion

OPINION

SIDNEY C. VOLINN, Bankruptcy Judge:

FACTS

Appellee/debtor, Heidi M. Zeller, purchased from appellants Burton and Carolyn Elias a dog-grooming business named The Pink Poodle. She signed a purchase agreement on December 22, 1980, promising to pay $65,000 plus cash for inventory. Ms. Zeller contended that the Eliases made certain oral representations to her about the profitability of the business. She did not inspect the books and records, nor obtain an accounting because the accountant who had agreed to assist her suffered a heart attack. The agreement provided that, as security for the balance owed, “Sellers agree to accept a Second Deed of Trust on the Buyer’s house.”

Ms. Zeller took possession of the business in January 1981. After operating the business for approximately one-and-a-half years, Ms. Zeller concluded that it would not bring her enough money to make payments required by the agreement. She retained an attorney and they demanded and reviewed the business records. Her counsel then sent a letter, dated February 24, 1981, to the Eliases stating that Ms. Zeller chose to rescind the purchase agreement on grounds which included fraud, duress and misrepresentation.

The Eliases sued in superior court for specific performance of the purchase agreement. The superior court issued a judgment on June 25, 1982, which ordered Ms. Zeller to “forthwith” execute a deed of trust on her house for the remaining balance of $68,108.44 due on the purchase price of the dog-grooming business.

On July 9, 1982, before the judgment became final, Ms. Zeller filed a Chapter 13 petition in bankruptcy. On July 15, 1982, she sent the Eliases a notice of rejection of the purchase agreement under 11 U.S.C. § 1322(b)(7) and offered to return the business to them. They refused to accept it.

The Eliases filed a complaint for relief from the automatic stay. On November 17, 1982, the bankruptcy court signed an order denying their claim as secured and allowing it as an unsecured claim in the full amount of $68,108.44. A copy of the order was served on the Eliases by mail on November 18, 1982 and the order was entered on the docket on November 22, 1982.

*741 Counsel for the Eliases filed a Notice of Appeal and Application for Extension of Time on December 3, 1982, eleven days after the order was entered on the docket. Ms. Zeller filed a memorandum opposing the request for extension under Bankruptcy Rule 802, on the basis that it was untimely. At a hearing on December 8, 1982, the bankruptcy court granted the motion.

Appellants ’ Contentions

Appellants, the Eliases, contend that:

1. They hold an equitable lien on Ms. Zeller’s house, and the bankruptcy court erred by refusing to enforce it.
2. The bankruptcy court erred by failing to hold that the principle of collateral estoppel required a judgment in the Eli-ases’ favor.
3. The bankruptcy court further erred by refusing to grant full faith and credit to the superior court’s judgment.

Debtor/Appellee’s Contentions

Ms. Zeller contends that:

1. This Panel is without jurisdiction to hear the appeal because the Eliases failed to show that excusable negligence was the cause for late filing of the notice of appeal.
2. The bankruptcy court did not err by refusing to recognize the Eliases’ claim for an equitable lien.
3. An unperformed decree of specific performance is defined by the Bankruptcy Code as an unsecured debt discharge-able in bankruptcy.

Appellants’ Reply Brief

The Eliases contend in their reply brief that the bankruptcy court did not err in holding that the reason for tardiness of the appeal notice — counsel’s vacation out of town — constituted excusable neglect.

DISCUSSION

Timeliness of the Appeal

Bankruptcy Rule of Procedure 8002(a) provides that the notice of appeal shall be filed with the clerk of the bankruptcy court within 10 days of the date of entry of the judgment order or decree. The bankruptcy court entered its judgment on November 22, 1982, and the last day for a timely appeal was therefore December 2, 1983. The Eliases did not file their notice of appeal to the Bankruptcy Appellate Panel until December 3, 1982. At the hearing on the Eliases’ motion for an extension, the bankruptcy court expressed his reason for granting the extension. “I can save you a lot of time if I just give you my philosophy about vacations. Vacations are sacred as far as I’m concerned, and I’m going to deny your motion [to dismiss], counsel.” (Reporter’s Transcript, p. 18, 1.24-25; p. 19, 1.1-2.) Other dialogue on the record obliquely suggests that Mr. Madden did not file a timely notice of appeal because the Eliases had not paid him to do so.

As Ms. Zeller has pointed out, the Ninth Circuit Court of Appeals set strict standards for reviewing an application for a time extension, in Matter of Butler’s Tire & Battery Co., Inc., 592 F.2d 1028 (9th Cir.1979). In Butler, as in the case before us, the appellant/creditor did not file a request for extension within the 10-day period following the judgment. The bankruptcy judge concluded that appellant’s late request was excusable because counsel did not know of the time limit until after the 10-day period had expired, and the decision to appeal could not be made while creditor’s president was out of the state. The Court of Appeals held that the bankruptcy court abused its discretion by finding excusable neglect. It held that a finding of excusable neglect under Fed.Bankruptcy Rule 802 is justified only if appellant shows “failure to learn of the entry of judgment or ‘extraordinary’ circumstances *742 where injustice would otherwise result if the untimely appeal is not heard.” 592 F.2d at 1034, citing 9 Moore’s Federal Practice § 204.13[1] at 973 (2d ed. 1975), quoting Committee Note of 1966 to, Fed.R. Civ.Pro. 73(a). The Court of Appeals’ discussion indicates that by “failure to learn of the entry of judgment” which would except late filing, it meant that “there is jurisdiction to hear an appeal when it is the fault of the lower court that notice was not earlier filed.” 592 F.2d at 1032. Such is not the case here, where the bankruptcy court timely informed Mr. Madden’s office that judgment had been entered.

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Elias v. Zeller (In Re Zeller), 38 B.R. 739, 1984 Bankr. LEXIS 5787 (bap9 1984).

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