In re: Crystal Dawn McDowell

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: December 9, 2024
• Docket: 24-1076
• Status: Unpublished

Opinion

FILED DEC 9 2024 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

In re: BAP No. WW-24-1076-BLF CRYSTAL DAWN McDOWELL, Debtor. Bk. No. 3:23-bk-42206-TWD

CRYSTAL DAWN McDOWELL, MEMORANDUM∗ Appellant.

Appeal from the United States Bankruptcy Court for the Western District of Washington Brian D. Lynch, Bankruptcy Judge, Presiding 1

Before: BARASH,** LAFFERTY, and FARIS, and Bankruptcy Judges.

INTRODUCTION

In this appeal Crystal McDowell ("Debtor"), a chapter 7 2 debtor in pro

per, objects to the entry of a discharge in her favor. While Debtor's appeal

∗ 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. ** Hon. Martin R. Barash, United States Bankruptcy Judge for the Central District of California, sitting by designation. 1 Judge Brian D. Lynch presided over the case through the entry of the order

appealed from. The case was subsequently reassigned to Judge Timothy W. Dore on May 13, 2024. 2 Unless specified otherwise, all chapter and section references are to the

Bankruptcy Code, 11 U.S.C. §§ 101–1532, and “Rule” references are to the Federal Rules of Bankruptcy Procedure. 1 is unusual, the facts presented are undisputed and the legal issues are

straightforward. We have reviewed the record and the arguments of

Debtor and we find no reason to vacate the discharge.3

FACTS 4

A. Debtor's petition

Debtor filed a chapter 13 petition on December 14, 2023, and

approximately one month later converted her case to chapter 7. 5 Debtor

scheduled only three claims:

• A 2022 judgment for $762,125 in favor of David Zahradnik

("Zahradnik");

3 Oral argument in this matter was scheduled for November 14, 2024. Shortly before oral argument, Debtor filed a motion to continue the oral argument or file a supplemental brief (the “Motion”). Debtor also lodged with the Panel electronically several supplemental papers, but those papers did not comply with the technical requirements for electronic filing. The Clerk of the Court so advised Debtor but, as of the filing of this Memorandum, those papers have not been provided in the proper electronic format. Debtor’s request to continue oral argument is denied because Debtor had adequate notice of the oral argument and was permitted to participate remotely. Debtor chose not to avail herself of the opportunity and her last-minute request did not demonstrate cause for a continuance. Further, although the Panel has considered the contents of the Motion itself, Debtor did not present additional papers to the Panel in the proper filing format. Debtor’s request to file additional papers is DENIED. 4 Because Debtor filed only an informal opening brief and no excerpts of record,

we exercise our discretion to take judicial notice of the bankruptcy court docket and various documents filed through the electronic docketing system. See O'Rourke v. Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 955, 957-58 (9th Cir. 1989); Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003). 5 Debtor, who is acting in pro per, converted her case to chapter 7 by filing a

Notice of Conversion from Chapter 13 to Chapter 7. 2 • A 2023 judgment in a different proceeding for $5,000 in favor of

Zahradnik; and

• A 2022 judgment for $4,000 in favor of Jacqueline McMahon

("McMahon").

On February 27, 2024, the chapter 7 trustee, filed her "no asset" report

(the "No Asset Report"). Twelve days later, Debtor filed her certification

that she had completed her personal financial management course.

Zahradnik filed a nondischargeability complaint (the "523

Complaint") against Debtor, asserting claims under § 523(a)(4), based on

larceny and embezzlement, and under § 523(a)(15), based on claims arising

under a property settlement agreement entered in a marital dissolution

case. The 523 Complaint alleges that Debtor and Zahradnik were

previously married, divorced in 1997, and were embroiled in state court

litigation from 2020 through February 9, 2022, related to the property

settlement agreement entered in their dissolution proceeding. The 523

Complaint does not assert any causes of action objecting to the entry of

Debtor's discharge under § 727.6

Debtor received her discharge on April 29, 2024, pursuant to the

Order of Discharge (the "Discharge Order").

6 On September 12, 2024, the bankruptcy court entered summary judgment in favor of Zahradnik on his 523 Complaint, finding $536,302.77 of the state court judgment nondischargeable under § 523(a)(4) and § 523(a)(15). Debtor appealed from the nondischargeability judgment on September 26, 2024, which is pending as BAP Case No. 24-1157. 3 B. Debtor's appeal

Debtor timely filed a notice of appeal from the Discharge Order.7

After entry of the No Asset Report and the Discharge Order, Debtor twice

amended her schedules to remove the claims she had previously listed in

favor of Zahradnik and McMahon.

JURISDICTION

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

157(b)(2)(A), (J) and (O). We have jurisdiction under 28 U.S.C. § 158.

ISSUE

Was the Discharge Order entered in error?

STANDARDS OF REVIEW

Because the underlying facts are not disputed, the question before the

Panel is one in which legal issues predominate and is thus subject to de

novo review. Zolg v. Kelly (In re Kelly), 841 F.2d 908, 911 (9th Cir.1988); U. S.

Tr., v. Joseph (In re Joseph), 208 B.R. 55, 58 (9th Cir. BAP 1997). On de novo

review, the issue is decided as if it had not been heard before, and the

Panel gives no deference to the bankruptcy court's conclusions. Barclay v.

Mackenzie (In re AFI Holding, Inc.), 525 F.2d 700, 702 (9th Cir. 2008). We may

affirm on any basis supported by the record. Caviata Attached Homes, LLC v.

U.S. Bank, Nat'l. Ass'n. (In re Caviata Attached Homes, LLC), 481 B.R. 34, 44

(9th Cir. BAP 2012).

7 No other parties to the appeal are identified and no other parties have appeared. 4 DISCUSSION

Debtor appeals from the entry of a chapter 7 discharge in her favor

and asserts two arguments. First, she contends that she filed her

bankruptcy petition and subsequent filings under duress. Second, Debtor

argues that entry of the Discharge Order violated Rule 4004(c) based on the

filing of the 523 Complaint by Zahradnik.

A. Filing of the petition

Debtor states she has "rescinded" her petition, which she filed under

duress without the advice of counsel, and she has no debts to discharge.

Debtor does not elaborate on the circumstances that placed her under

duress, causing her to file her voluntary bankruptcy petition. Her amended

designation of record filed in connection with this appeal states she filed

her petition in response to threats against her person and her property

from unidentified individuals but that she rescinded her petition and no

debts exist to discharge. As a result, she seeks no discharge and contends

she will not tolerate entry of a discharge in her favor.

Debtor apparently believes that when she amended her Schedule E/F

to remove the claims of Zahradnik and McMahon following the entry of

the Discharge Order, she eliminated them as creditors and rendered the

Discharge Order a nullity. But the Discharge Order was entered before she

amended her schedules. The debts were already discharged prior to the

filing of the amendments.

5 More importantly, § 727(b) expressly discharges "all debts" that arose

before the petition was filed, even if the creditor does not file a proof of

claim, § 727(b), 8 and in a "no asset" case such as this, even if the debtor did

not list the debt in the debtor's schedules, see Beezley v. Cal. Land Title Co. (In

re Beezley), 994 F.2d 1433, 1436 (9th Cir. 1993). In other words, the existence

of the debt, and whether it is discharged, is not dependent upon the debt

being scheduled. Thus, Debtor's amendments of her schedules to remove

all debts had no effect on the scope of her chapter 7 discharge.

Debtor voluntarily filed her petition, converted her case to chapter 7,

completed her postpetition financial management course, and received her

discharge. At some point during this process, it appears Debtor regretted

her decision to voluntarily submit herself to the jurisdiction of the

bankruptcy court. Debtor's remedy was to move for dismissal of her case.

Initially, prior to conversion, she could have moved under § 1307, which

provides that upon "request of the debtor at any time, if the case has not

been converted . . . the court shall dismiss a case under this chapter."

§ 1307(b); see Tico Constr. Co. v. Van Meter (In re Powell), 119 F.4th 597, 603

(9th Cir. 2024) (affirming that a chapter 13 "debtor has an absolute right to

voluntarily dismiss that case under § 1307(b), and the bankruptcy court is

8 Because Debtor initially filed her petition under chapter 13, her chapter 7 discharge applies to all debts arising before the date of conversion of her case to chapter 7. § 348(b). 6 not required to conclusively resolve any disputes about the debtor's

Chapter 13 eligibility before granting a dismissal request").

Following conversion of her case to chapter 7, Debtor could have

moved for dismissal under § 707(a). The grounds for dismissal enumerated

in § 707(a) "are illustrative and not exhaustive." Neary v. Padilla (In re

Padilla), 222 F.3d 1184, 1191 (9th Cir. 2000). Debtor, therefore, could have

sought dismissal at an earlier time based on her claims of duress. Debtor,

however, did not move for dismissal of her case and instead completed her

postpetition financial management course required by Rule 1007(b)(7) and

Rule 4004(c)(1)(H), demonstrating she wished to proceed with her case and

receive a discharge of debts. Having completed the requirements for entry

of discharge, Debtor cannot now complain that the entry of the Discharge

Order was in error.

B. Rule 4004 and the 523 Complaint

Debtor also argues that the entry of the Discharge Order was in error

because Zahradnik's 523 Complaint was pending. On this basis, she argues

the Discharge Order is "void." She contends that Rule 4004(c) precludes

entry of a discharge if a complaint objecting to discharge has been filed.

Rule 4004(c)(1) provides in pertinent part:

In a chapter 7 case, on expiration of the times fixed for objecting to discharge and for filing a motion to dismiss the case under Rule 1017(e), the court shall forthwith grant the discharge, except that the court shall not grant the discharge if: ....

7 (B) a complaint, or a motion under § 727(a)(8) or (a)(9), objecting to the discharge has been filed and not decided in the debtor’s favor. Rule 4004(c)(1).

Debtor, however, misconstrues Zahradnik's 523 Complaint as a

complaint "objecting to discharge" within the meaning of Rule

4004(c)(1)(B). Objections to discharge are the statutory claims enumerated

in § 727(a). The 523 Complaint does not allege any § 727 causes of action.

The only causes of action asserted against her arise under § 523(a) and seek

a determination that specific debts owed to Zahradnik are

nondischargeable; Zahradnik’s complaint does not object to the discharge

of all debts under § 727(a).

Debtor contends the Discharge Order is void, or should be vacated as

void, based on Kasparian v. Conley (In re Conley), 369 B.R. 67, 71 n.3 (1st Cir.

BAP 2007). In Conley, a creditor filed a complaint objecting to discharge

under § 727(a)(2)(A), and the debtor successfully moved for dismissal of

that complaint. In re Conley, 369 B.R. at 69. The creditor appealed from the

dismissal of his complaint and, while that appeal was pending, the

bankruptcy court entered the debtor's discharge. Id. In considering whether

entry of the discharge rendered the appeal moot, the Bankruptcy Appellate

Panel for the First Circuit noted that the pending appeal rendered the

dismissal not final, such that the "discharge order may be void." Id. at 71

n.3 (citing Rule 4004(c)(1)(B)). The complaint in Conley, unlike Zahradnik's

523 Complaint filed in this case, objected to entry of discharge under

8 § 727(a) and thereby precluded entry of discharge based on Rule

4004(c)(1)(B). Debtor's reliance on Conley is unavailing.

Debtor also quotes Merrill-Colberg v. Schmunk, No. 17-03007-dwh,

2018 WL 1305627, at *6 (Bankr. D. Ore., Mar. 12, 2018) aff'd sub nom. Merrill-

Colberg v. Schmunk (In re Schmunk), BAP No. OR-18-1151-FSKu, 2019 WL

1594019 (9th Cir. BAP Apr. 11, 2019), for the proposition that "Rule 4004(c)

requires the court to withhold the discharge if there is pending . . . a

complaint . . . objecting to discharge . . . ." The bankruptcy court in Merrill-

Colberg addressed whether a § 727(a) complaint filed after entry of the

discharge was viable and concluded it was not. Id. at *4. Because no

creditor has filed a § 727(a) complaint against Debtor, Merrill-Colberg is

inapplicable to the case at bar.

Debtor also quotes a habeas corpus decision of the Supreme Court of

the State of Washington, for the proposition that a constitutional court

"[e]ither has or has not jurisdiction. If it does not have jurisdiction, any

judgment entered is void ab initio and is, in legal effect, no judgment at all."

Wesley v. Schneckloth, 346 P.2d 658, 660 (Wash. 1959). But the case is

inapposite. The bankruptcy court has subject matter jurisdiction over all

matters that arise "under" Title 11. 28 U.S.C. § 1334(b). The chapter 7

discharge is based on § 727(a). Therefore, the bankruptcy court had subject

matter jurisdiction to enter the Discharge Order and that order is not void

for want of jurisdiction.

9 Because no creditor in this case filed an objection to discharge under

§ 727(a), and because none of the enumerated exceptions in Rule 4004(c)(1)

are present, Rule 4004 did not bar entry of the Discharge Order.

CONCLUSION

The discharge in favor of Debtor was not entered in error. We

therefore AFFIRM.