In re: Bernard Ancheta Carbonell

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: August 8, 2023
• Docket: 23-1039
• Status: Unpublished

Opinion

FILED NOT FOR PUBLICATION AUG 8 2023 SUSAN M. SPRAUL, CLERK UNITED STATES BANKRUPTCY APPELLATE PANEL U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT

OF THE NINTH CIRCUIT

In re: BAP No. WW-23-1039-BGC BERNARD ANCHETA CARBONELL, Debtor. Bk. No. 2:22-bk-12081-TWD

NEXT LEVEL PROPERTIES, LLC, Appellant, v. MEMORANDUM∗ BERNARD ANCHETA CARBONELL, Appellee.

Appeal from the United States Bankruptcy Court for the Western District of Washington Timothy W. Dore, Bankruptcy Judge, Presiding

Before: BRAND, GAN, and CORBIT, Bankruptcy Judges.

INTRODUCTION

Appellant, Next Level Properties, LLC ("Next Level"), appeals an

order denying its motion for relief from the automatic stay to complete its

prepetition purchase of the debtor's residence. Next Level was the highest

bidder at a nonjudicial foreclosure sale of the property and tendered the

funds to the foreclosure trustee after the sale. However, before the trustee's

∗ This disposition is not appropriate for publication. Although it may be cited for

whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. 1 deed could be executed and delivered to Next Level, debtor Bernard

Carbonell filed his chapter 131 bankruptcy case.

At oral argument, the parties disclosed that Carbonell has since

confirmed a chapter 13 plan which proposed paying off the secured debt in

full. Next Level did not object to the plan or appeal the plan confirmation

order. The foreclosure sale has now been rescinded, and the foreclosure

trustee has returned the purchase funds to Next Level. Seeing that there is

no longer a live case or controversy for us to decide, the appeal is

constitutionally moot. Accordingly, we must DISMISS.

FACTS

Carbonell was the owner of a condominium in Seattle ("Property").

The Property was subject to a deed of trust. After Carbonell fell behind on

his payments, a foreclosure sale was set for December 30, 2022, at 9:00 A.M.

Carbonell did not take any action to cure his default or enjoin the sale.

The foreclosure sale proceeded as scheduled. Next Level, an

experienced investor in distressed properties, was the highest bidder with

a bid of $245,000. Next Level tendered the funds to the foreclosure trustee.

There were no irregularities with the sale.

Seven hours after the sale, Carbonell filed a skeletal chapter 13

bankruptcy case. His counsel notified the foreclosure trustee of the filing

and advised that he cease and desist from transferring the Property or

Unless specified otherwise, all chapter and section references are to the 1

Bankruptcy Code, 11 U.S.C. §§ 101-1532. 2 completing the foreclosure process due to the automatic stay. The

foreclosure trustee complied with counsel's request.

Next Level moved for relief from stay to complete the foreclosure.

Next Level asserted that "cause" existed for relief under § 362(d)(1), because

it paid $245,000 for the Property and was incurring costs of no less than

$97.30 per day for Carbonell to enjoy the Property without Next Level's

permission. Next Level argued that relief was also warranted under

§ 362(d)(2), because the unchallenged sale was completed prior to the

bankruptcy filing and could not be unwound due to Carbonell's failure to

pursue any pre-sale statutory remedies. Any post-sale efforts to repay the

extinguished debt, argued Next Level, would constitute an unlawful

redemption of the Property. The foreclosure trustee confirmed that he

would execute and deliver the trustee's deed to Next Level once cleared to

do so by the bankruptcy court.

Carbonell argued that Next Level was not entitled to relief because he

was still the owner of the Property. Carbonell argued that Next Level could

seek reimbursement from the foreclosure trustee or the lender, request that

the foreclosure trustee unwind the sale, or file a claim in the bankruptcy.

Carbonell argued that stay relief should also be denied because the lender

was adequately protected given the amount of equity in the Property, and

because the Property was necessary for an effective reorganization.

After a hearing, the bankruptcy court entered an order denying Next

Level's motion for relief from stay. This timely appeal followed.

3 JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b)(2)(G). We discuss our jurisdiction below.

ISSUE

Is the appeal constitutionally moot?

STANDARD OF REVIEW

Our jurisdiction, including whether an appeal is moot, is a question

of law that we address de novo. Menk v. Lapaglia (In re Menk), 241 B.R. 896,

903 (9th Cir. BAP 1999).

DISCUSSION

Article III of the Constitution limits the jurisdiction of the federal

courts to "Cases" or "Controversies." See U.S. CONST. ART. III, § 2, CL. 1. The

doctrine of constitutional mootness requires that an actual, ongoing

controversy exist at all stages of federal court proceedings. See Burke v.

Barnes, 479 U.S. 361, 363 (1987); Clear Channel Outdoor, Inc. v. Knupfer (In re

PW, LLC), 391 B.R. 25, 33 (9th Cir. BAP 2008). A case becomes

constitutionally moot "when the issues presented are no longer 'live' or the

parties lack a legally cognizable interest in the outcome of the litigation."

Pitts v. Terrible Herbst, Inc., 653 F.3d 1081, 1086 (9th Cir. 2011) (cleaned up).

"In other words, if events subsequent to the filing of the case resolve the

parties' dispute, we must dismiss the case as moot, because we do not have

the constitutional authority to decide moot cases." Id. at 1087 (cleaned up);

see also Collect Access LLC v. Hernandez (In re Hernandez), 483 B.R. 713, 719

4 (9th Cir. BAP 2012) ("An appeal is constitutionally moot when events occur

during the pendency of the appeal that make it impossible for the appellate

court to grant effective relief.").

Due to intervening events, there is no longer a live controversy

necessary for Article III jurisdiction. While the appeal was pending,

Carbonell confirmed a chapter 13 plan which proposed paying off the

secured debt in full. Next Level did not object to the plan or appeal the

plan confirmation order. The final confirmation order effectively resolved

any dispute over the parties' legal and equitable ownership interest in the

Property in Carbonell's favor. Further, the foreclosure sale has been

rescinded, and the foreclosure trustee has returned the purchase funds for

the Property to Next Level. Hence, any interest Next Level may have had

in the Property at the time it filed this appeal is gone.

We are unable to grant any effective relief if we reversed the stay

relief order. The purpose of stay relief was to allow Next Level to complete

the foreclosure sale. But the sale has been rescinded. 2 As a result, this

appeal does not present a justiciable case or controversy, and it is therefore

moot.

CONCLUSION

For the reasons stated above, the appeal is DISMISSED.

2 Next Level has not brought a claim for damages for any losses it suffered while Carbonell was

still in the Property, so that issue is not before us.