In re: Charity Mae Seymour

Opinion

FILED NOV 09 2017

1 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK

2 U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT

3 UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

4 5 In re: ) BAP No. EC-17-1075-KuFS ) EC-17-1106-KuFS 6 CHARITY MAE SEYMOUR, ) (consolidated)

)

7 Debtor. ) Bk. No. 16-bk-27693-RSB ______________________________)

8 CHARITY MAE SEYMOUR, )

)

9 Appellant, )

)

10 v. ) M E M O R A N D U M* )

11 RUSSEL D GREER, Chapter 13 )

Trustee; U.S. BANK, NATIONAL )

12 ASSOCIATION; FORD MOTOR )

COMPANY LLC, )

13 )

Appellees. )

14 ______________________________) 15 Submitted Without Argument on October 26, 2017**

16 Filed - November 9, 2017

17 Appeal from the United States Bankruptcy Court 18 for the Eastern District of California 19 Honorable Robert S. Bardwil, Bankruptcy Judge, Presiding

_____________________________________

20 Appearances: Charity M. Seymour, pro se on brief; Lee S.

21 Raphael and Cassandra J. Richey of Prober & Raphael on brief for appellee U.S. Bank, N.A.

22 ______________________________________ 23 24 * This disposition is not appropriate for publication.

Although it may be cited for whatever persuasive value it may 25 have (see Fed. R. App. P. 32.1), it has no precedential value. 26 See 9th Cir. BAP Rule 8013-1.

**

27 By order entered on September 25, 2017, a motions panel determined these appeals suitable for submission on the briefs 28 and record without oral argument.

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1 Before: KURTZ, FARIS, and SPRAKER, Bankruptcy Judges. 2 Charity Mae Seymour (Debtor) appeals from the bankruptcy 3 court’s orders: (1) dismissing her chapter 131 case under 4 § 1307(c)(4) because her plan payments were insufficient (BAP 5 No. EC-17-1075); and (2) denying her motion for reconsideration 6 of an order sustaining the objection of appellee, U.S. Bank 7 National Association (Bank), to Debtor’s chapter 13 plan on the 8 ground that the motion was moot because the order dismissing her 9 case was entered and there was no stay pending appeal (BAP 10 No. EC-17-1106). For the reasons explained below, we AFFIRM 11 both orders. 12 I. FACTS 13 A. The Dispute Between Debtor And Bank2 14 In August 2006, Debtor borrowed $582,250 (Loan) from Remae 15 Mortgage Corporation. In exchange for the Loan, Debtor executed 16 an Adjustable Rate Note (Note) and a Deed of Trust (Deed of 17 Trust) against real property located on Magnolia Street in 18 Stockton, California (Property). In April 2008, Debtor 19 defaulted under the Loan documents. Foreclosure proceedings 20 21 1 Unless otherwise indicated, all chapter and section 22 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532.

“Rule” references are to the Federal Rules of Bankruptcy 23 Procedure and “Civil Rule” references are to the Federal Rules of Civil Procedure. 24 2 Some of the background facts are taken from a previous 25 case involving Debtor and her dispute with Bank of America, N.A. 26 and others with respect to the foreclosure of her property.

Seymour v. Bank of Am., N.A. (In re Seymour), BAP No. EC-11-1669- 27 MkDJu, 2013 WL 1736471 (9th Cir. BAP April 23, 2013). Bank, as trustee, is the successor in interest to the mortgagee’s 28 interest.

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1 were commenced and a trustee’s sale was scheduled. 2 In response to the commencement of the foreclosure 3 proceedings, Debtor filed a civil action in the United States 4 District Court for the Eastern District of California against 5 her mortgage lender (Bank’s predecessor) alleging, among other 6 things, violations of the Truth in Lending Act, wrongful 7 foreclosure, mortgage origination fraud, and fraudulent 8 assignment. The district court dismissed the action as against 9 certain defendants in June 2010 with prejudice, and Debtor 10 stipulated to dismissal of the remaining defendants in December 11 2010. Debtor’s motion for relief from the dismissal was denied 12 in June 2011. The Ninth Circuit Court of Appeals affirmed the 13 district court’s order in November 2011. 14 In conjunction with her civil action, Debtor used the 15 bankruptcy process to avoid foreclosure. She filed a chapter 13 16 case in the bankruptcy court for the Eastern District of 17 California, followed by a chapter 11 case. Both cases were 18 dismissed. 19 Debtor also filed a chapter 7 case in June 2011 and 20 initiated an adversary proceeding against Bank and others, 21 seeking to enjoin them from foreclosing on her residence. Bank 22 moved to dismiss her complaint, which the bankruptcy court 23 granted without leave to amend in November 2011. The bankruptcy 24 court held, among other things, that Debtor lacked standing to 25 prosecute the adversary complaint, explaining that the complaint 26 raised claims that arose prior to the filing of her bankruptcy 27 case and thus those claims were property of her bankruptcy 28 estate which could be only pursued by her chapter 7 trustee.

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1 Debtor appealed the dismissal ruling to this Panel. The 2 Panel modified the bankruptcy court’s dismissal order to clarify 3 that the adversary proceeding was dismissed based on Debtor’s 4 lack of standing, as the chapter 7 trustee had the exclusive 5 right to sue on behalf of the estate. The Panel affirmed the 6 dismissal order, as modified. See In re Seymour, 2013 WL 7 1736471. The Ninth Circuit Court of Appeals affirmed the 8 Panel’s decision in May 2015. 601 F. App’x 572 (9th Cir. May 4, 9 2015). Debtor received her chapter 7 discharge on October 13, 10 2011. 11 To date, no foreclosure sale has occurred, and Debtor has 12 made no payments for almost nine years. 13 B. Bankruptcy Events 14 Debtor filed this chapter 13 case on November 18, 2016. In 15 her opening brief, Debtor states that she filed this case to 16 challenge the security interest and validity of Bank’s in rem 17 lien rights. 18 1. Debtor’s Chapter 13 Plan And Amended Plan 19 Debtor filed her chapter 13 plan on December 2, 2016. The 20 plan provided for monthly payments of $1,260.39 to the 21 chapter 13 trustee (Trustee) for 36 months. Debtor’s plan did 22 not provide for mortgage payments, instead stating that Debtor 23 would avoid Bank’s lien on her Property via an adversary 24 proceeding. Debtor listed Bank’s claim as unsecured in the 25 amount of $45,374.07 (this amount apparently was for property 26 taxes that Bank had advanced on her behalf). Her plan also 27 provided for a 90% dividend to class 7 unsecured claims which 28 totaled approximately $45,374.07 - the same amount of Bank’s

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1 claim. 2 In an additional provision to the plan, Debtor contended 3 that the plan was feasible dependent on filing an adversary 4 proceeding to void Bank’s mortgage. Debtor maintained that 5 although she lacked standing to bring her adversary complaint 6 against Bank in her chapter 7 case, she now intended to quiet 7 title by asking Trustee or the bankruptcy court to disallow 8 Bank’s claim in rem, as part of a plan to repay the property 9 taxes improperly paid by Bank and quiet her title to the real 10 property. Debtor cited numerous authorities, including Johnson 11 v. Home State Bank, 501 U.S. 78 (1991), which she argued stood 12 for the proposition that a chapter 13 debtor could use the lien 13 avoidance provisions in the Bankruptcy Code. Debtor asserted 14 that her standing to pursue the avoidance of Bank’s lien had 15 been “restored.” 16 Bank objected to the plan, contending that Debtor failed to 17 provide for the maintenance of post-petition payments, used an 18 improper procedure for avoidance of Bank’s lien, and filed the 19 case in bad faith. Bank also argued that the plan was not 20 feasible and that Debtor’s plan attempted to modify its original 21 Note and Trust Deed/Mortgage in direct violation of 22 § 1322(b)(2). Finally, Bank asserted that it was owed the 23 amount of $580,000 and arrears in about the same amount. 24 Ford Motor Credit Company LLC (FMCC) also objected to the 25 plan since it did not provide for any payments to FMCC in 26 relation to Debtor’s car debt. 27 Finally, Trustee objected, contending that the plan: 28 (1) failed the liquidation test since Debtor’s schedules showed

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1 $161,000 in nonexempt assets for distribution; (2) was not 2 proposed in good faith since it failed to provide for payment to 3 FMCC; and (3) was not feasible since Debtor failed to provide 4 for amounts owing to Bank. 5 After these objections, Debtor “re-noticed” the 6 confirmation hearing to a later date and filed an amended plan 7 on February 1, 2017. Her amended plan provided for installments 8 to FMCC directly by Debtor and increased plan payments to 9 $1,396.96. No significant changes were made to the treatment of 10 Bank. 11 2. Trustee’s Motion To Dismiss 12 On February 14, 2017, Trustee filed a motion to dismiss 13 (MTD) Debtor’s case and filed notice of the hearing scheduled 14 for February 28, 2017. Trustee’s dismissal request was based on 15 § 1307(c)(1) - unreasonable delay that was prejudicial to 16 creditors - and § 1307(c)(4) - payments were not current under 17 the plan. Trustee submitted the declaration of his employee, 18 Leticia Macias, who declared that as of February 14, 2017, 19 Debtor was in default of her plan payments by $273.14.3 20 3. The Bankruptcy Court’s Ruling On Bank’s Objection To Debtor’s Original Plan

21 22 Two weeks prior to the scheduled February 28, 2017 hearing 23 on Trustee’s MTD, the bankruptcy court sustained Bank’s 24 objection to Debtor’s original plan. In a detailed ruling, the 25 court reviewed the history of Debtor’s court filings and the 26 3 27 The difference between Debtor’s original plan payments and her amended plan payments was $136.57. Therefore, Debtor was two 28 months in arrears based on the $273.14 used by Trustee.

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1 lack of merit in her positions. The bankruptcy court noted: 2 With this latest bankruptcy case, the debtor seeks exactly what she sought in her district court action 3 and her adversary proceeding in her chapter 7 case -

she seeks to extinguish the Bank’s lien against her 4 residence without paying anything to the Bank except, apparently, property taxes the Bank appears to have 5 advanced on her behalf. . . . The Bank, on the other hand has submitted evidence that the Bank is owed 6 pre-petition arrears of $560,484. The Bank contends, and the debtor does not deny, she has made no payments 7 in almost nine years. 8 The court further discussed Debtor’s additional provision 9 to her plan by refuting her authorities that allegedly stood for 10 the proposition that she could avoid Bank’s lien in her 11 chapter 13 case. The court noted that Debtor’s standing to 12 pursue her claims against Bank for violations of the Trust in 13 Lending Act, Wrongful Foreclosure, and so on was not magically 14 revived simply because she filed a chapter 13 case. Rather, 15 Debtor failed to schedule her claims against Bank in her chapter 16 7 case and, therefore, the claims remained property of the 17 estate in that case, even though the case was closed. § 554(d); 18 Cheng v. K&S Diversified Invs., Inc. (In re Cheng), 308 B.R. 19 448, 461 (9th Cir. BAP 2004) (“Property of the estate that is 20 not scheduled or otherwise administered by the time the case is 21 closed remains property of the estate forever.”). 22 The bankruptcy court concluded that Debtor had no standing 23 to challenge Bank’s in rem rights; that is, its right to 24 foreclose on its collateral if it is not paid. Therefore, 25 Debtor’s chapter 13 plan could not be confirmed. The bankruptcy 26 court held that: “The proposed plan violates § 1325(a)(5) and 27 is not proposed in good faith, as required by § 1325(a)(3).” 28 In a footnote, the court noted that although Debtor had filed an

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1 amended plan, Bank’s treatment was essentially the same in the 2 two plans. Therefore, the amended plan did not moot the present 3 objection. 4 On February 14, 2017, the bankruptcy court entered a minute 5 order sustaining Bank’s objection. 6 On February 28, 2017, Debtor filed a motion for 7 reconsideration of the bankruptcy court’s order. She argued, 8 among other things, that the findings in the district court case 9 and her chapter 7 case did not preclude her from pursuing her 10 claims against Bank. 11 4. The Bankruptcy Court’s Ruling On Trustee’s MTD 12 Also on February 28, 2017, the bankruptcy court heard 13 Trustee’s MTD. Debtor did not file an opposition to the MTD or 14 appear at the hearing. The bankruptcy court ruled: “Plan 15 delinquency is cause for dismissal. Accordingly, the motion 16 will be granted, the case is dismissed.” The court entered an 17 order dismissing the case on March 1, 2017. Debtor filed a 18 notice of appeal on March 14, 2017, thereby commencing BAP 19 No. 17-1075. 20 5. The Bankruptcy Court’s Ruling On Debtor’s Motion for Reconsideration

21 22 On March 28, 2017, the bankruptcy court issued a final 23 ruling, denying Debtor’s motion for reconsideration of its order 24 sustaining Bank’s objections to confirmation of Debtor’s 25 original plan. The court found the motion moot because Debtor’s 26 case was dismissed and she had not obtained a stay pending

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1 appeal.4 Despite stating that no appearance was necessary, 2 Debtor appeared at the hearing. The bankruptcy court advised 3 her that it had made a final ruling on her motion for 4 reconsideration and no further argument was necessary. Debtor 5 attempted to inform the court that she had filed a motion to 6 vacate/reconsider the dismissal order (as described below). 7 Debtor stated that she intended to appeal the court’s ruling, 8 and the proceedings concluded. 9 The bankruptcy court entered the order denying her motion 10 for reconsideration on March 28, 2017. Debtor filed a notice of 11 appeal from this ruling on April 10, 2017, thereby commencing 12 BAP No. 17-1106. 13 6. Debtor’s Ex Parte Motion To Vacate The Dismissal 14 Also on March 28, 2017, Debtor filed an ex parte motion to 15 vacate the dismissal or for a stay of the dismissal order 16 pending appeal. Debtor argued that her amended plan included a 17 “detailed computation that spread the $273 over the remaining 18 34 payments at the time.” She stated that she assumed that it 19 was clear the $273 was provided for in the amended plan. Debtor 20 also challenged the court’s mootness finding regarding her 21 motion for reconsideration. According to Debtor, the dismissal 22 order was dated March 1, 2017, and her motion for 23 reconsideration was filed February 28, 2017. Debtor asserted 24 that the bankruptcy court had “some days to weigh the erroneous 25 26 4 In separate orders, the bankruptcy court overruled FMCC’s 27 and Trustee’s objections to Debtor’s original plan on the basis of mootness due to the dismissal. The court also denied Debtor’s 28 motion to confirm her plan on mootness grounds.

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1 $273 issue in relation to the magnitude and impact of her motion 2 for reconsideration” where she alleged Bank had committed fraud. 3 The bankruptcy court did not rule on this motion. 4 7. Procedural Matters After Appeal 5 These appeals were subsequently consolidated by a one-judge 6 order on May 23, 2017. Debtor filed a motion to stay the 7 dismissal order in this court because Bank argued in its brief 8 that these appeals would become moot upon the close of the 9 bankruptcy case which was anticipated in the next ten days or 10 so. The Panel denied her motion. 11 II. JURISDICTION 12 The bankruptcy court had jurisdiction over this proceeding 13 under 28 U.S.C. §§ 1334 and 157(b)(2)(A). We have jurisdiction 14 under 28 U.S.C. § 158. 15 III. ISSUES 16 Did the bankruptcy court abuse its discretion in dismissing 17 Debtor’s case? 18 Did the bankruptcy court abuse its discretion in denying 19 Debtor’s motion for reconsideration on the order sustaining 20 Bank’s objection to her original plan? 21 IV. STANDARDS OF REVIEW 22 We review the bankruptcy court’s dismissal of a chapter 13 23 bankruptcy case under any of the enumerated paragraphs of 24 § 1307(c) for abuse of discretion. Ellsworth v. Lifescape Med. 25 Assocs., P.C. (In re Ellsworth), 455 B.R. 904, 914 (9th Cir. BAP 26 2011). 27 Denial of a motion to amend or alter a judgment under Civil 28 Rule 59(e) is reviewed for an abuse of discretion. Dixon v.

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1 Wallowa Cty., 336 F.3d 1013, 1022 (9th Cir. 2003). 2 To determine whether the bankruptcy court abused its 3 discretion, we conduct a two-step inquiry: (1) we review de novo 4 whether the bankruptcy court “identified the correct legal rule 5 to apply to the relief requested” and (2) if it did, whether the 6 bankruptcy court’s application of the legal standard was 7 illogical, implausible or “without support in inferences that 8 may be drawn from the facts in the record.” United States v. 9 Hinkson, 585 F.3d 1247, 1261–62 (9th Cir. 2009) (en banc). 10 We may affirm on any basis sustained by the record. Heers 11 v. Parsons (In re Heers), 529 B.R. 734, 740 (9th Cir. BAP 2015). 12 V. DISCUSSION 13 Section 1307(c) provides that on request of a party in 14 interest and after notice and a hearing, the bankruptcy court 15 may convert a chapter 13 case to chapter 7 or dismiss the case, 16 whichever is in the best interests of creditors and the estate, 17 for cause. The use of the word “may” in § 1307(c) indicates 18 that dismissal of a case is a discretionary decision of the 19 trial court. Sievers v. Green (In re Green), 64 B.R. 530 (9th 20 Cir. BAP 1986). 21 The record shows that Debtor’s plan payments were short in 22 the amount of $273.14. The requirement to make plan payments 23 under § 1307(c)(4) applies when a debtor commences making 24 payments but then pays less than the plan requires. See 25 In re Mallory, 444 B.R. 553, 558 (S.D. Tex. 2011) (citing 26 In re Jenkins, No. 09-36433-H3-13, 2010 WL 56003, at *2 (Bankr. 27 S.D. Tex. Jan. 5, 2010) (finding cause for dismissal of a case 28 in which the debtor commenced making the payments required in

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1 the proposed plan but paid an amount less than required)). 2 There was thus “cause” for dismissal. See § 1307(c)(4). We 3 find no abuse of discretion with the bankruptcy court’s decision 4 to dismiss Debtor’s case.5 5 On appeal, Debtor does not contend that she made the 6 payments. Instead, she maintains that she missed the hearing on 7 Trustee’s MTD because she was busy drafting her motion for 8 reconsideration of the court’s order sustaining Bank’s objection 9 to her plan. Therefore, she “forgot” about the hearing and her 10 forgetfulness should be considered “a mistake or excusable 11 neglect.” In addition, Debtor maintains that the $273 shortfall 12 was immaterial and, in any event, she corrected the deficiency 13 in her first amended plan to make up the missed payments over 14 the next 34 months. 15 Debtor did not properly raise these arguments in the 16 bankruptcy court. Debtor failed to contest Trustee’s MTD and 17 did not appear at the hearing. After the bankruptcy court 18 ruled, she raised the very same arguments she raises now for the 19 first time in her ex parte motion to vacate/reconsider the 20 dismissal order. Arguments raised for the first time in a 21 motion for reconsideration are generally deemed waived. See 22 United States v. Foreman, 369 F.3d 776, 797 n.12 (4th Cir. 2004) 23 (It is a “well-established principle that arguments raised for 24 25 5 Trustee did not request conversion as an alternative under 26 § 1307(c). Therefore, the bankruptcy court did not err in dismissing the case without discussing whether conversion was 27 appropriate. See Velasquez v. Burchard (In re Velasquez), BAP No. NC-15-1175-TaJuKi, 2016 WL 4259952, at *2 n.5 (9th Cir. BAP 28 Aug. 9, 2016).

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1 the first time in a motion for reconsideration are generally 2 deemed waived.”). Furthermore, the bankruptcy court never 3 issued a ruling in connection with her motion. We do not 4 consider Debtor’s arguments for the first time on appeal. See 5 O’Rourke v. Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 6 887 F.2d 955, 957 (9th Cir. 1989) (“The rule in this circuit is 7 that appellate courts will not consider arguments that are not 8 ‘properly raise[d]’ in the trial courts.”). 9 In light of our decision, Debtor’s appeal of the bankruptcy 10 court’s order denying her motion for reconsideration of the 11 order sustaining Bank’s objection to Debtor’s original plan is 12 moot. Since Debtor’s bankruptcy case was dismissed, the goal of 13 rehabilitation through confirmation of Debtor’s plan is no 14 longer at issue. See GTE Cal., Inc. v. FCC, 39 F.3d 940, 945 15 (9th Cir. 1994) (case is moot if the issues presented are no 16 longer live and there fails to be a “case or controversy” under 17 Article III of the Constitution).6 18 Debtor also requested sanctions against Bank in her reply 19 brief, contending that Bank filed its responsive brief one day 20 late. A request for sanctions must be filed as a separate 21 motion. See Rule 8020. 22 VI. CONCLUSION 23 For the reasons stated, we AFFIRM. 24 25 26 27 6 Debtor filed another chapter 13 case on September 14, 2017 28 (Case No. 17-26123).