FILED FEB 10 2020 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY.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. AZ-18-1323-SFB
DAVID ANDREW CROW and RENEE 2:18-bk-04677-EPB TOINETTE CROW,
Debtors.
DAVID ANDREW CROW; RENEE TOINETTE CROW, MEMORANDUM*
Appellants,
v.
EDWARD JOHN MANEY, Chapter 13 Trustee,
Appellee.
Argued and Submitted on January 30, 2020 at Phoenix, Arizona
Filed – February 10, 2020
* 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. Appeal from the United States Bankruptcy Court for the District of Arizona
Honorable Eddward P. Ballinger, Bankruptcy Judge, Presiding
Appearances: David Allegrucci argued for appellants; Ross Mumme argued for appellee.
Before: SPRAKER, FARIS, and BRAND, Bankruptcy Judges.
INTRODUCTION
Chapter 131 debtors David Andrew Crow and Renee Toinette Crow
appeal from a stipulated order confirming their chapter 13 plan. The Crows
challenge the court’s decision to strike a footnote they added to their
proposed confirmation order. Footnote 2 to the order attempted to
accomplish two things. The Crows sought to: (1) preserve their argument
that any subsequent attempt by chapter 13 trustee Edward John Maney to
increase their plan payments by way of a plan modification constituted
involuntary servitude in violation of the Constitution’s Thirteenth
Amendment; and (2) challenge the requirement that they “assist the
1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and all “Rule” references are to the Federal Rules of Bankruptcy Procedure. All “Local Rule” references are to the Local Bankruptcy Rules for the District of Arizona.
2 trustee” by submitting to him their post-petition tax returns.
The Thirteenth Amendment argument is not ripe for review. As for
the requirement to turn over their tax returns, the Crows failed to perfect
this issue for appeal. And even if they had properly raised this issue, their
argument has no merit.
Accordingly, we AFFIRM.
FACTS
The Crows filed their voluntary chapter 13 petition and proposed a
plan on the form required by the Local Rules. The form chapter 13 plan
adopted in Arizona requires debtors to provide the trustee copies of their
post-petition income tax returns for the duration of the chapter 13 case. In
response to this provision, the Crows added the following language to their
plan: “Disputed per In re Romeo AZ-17-1215-BLKu and pursuant to final
appeallable [sic] order from case 2-16-bk-12633.”
Maney filed a response to the plan recommending confirmation but
subject to certain generic and specific conditions. One of the generic
conditions to confirmation stated: “The Debtors are required to provide
directly to the Trustee, within 30 days after their filing, copies of their
federal and state income tax returns for every year during the duration of
the Chapter 13 Plan. This requirement is to be included in any Order
Confirming.”
Maney and the Crows submitted to the court a stipulated order
3 confirming the Crows’ chapter 13 plan. The proposed order reiterated the
requirement that the Crows submit their post-petition tax returns to
Maney: “The Debtor(s) shall provide to the Trustee copies of their federal
and state income tax returns for post-petition years 2018 - 2022 within 30
days of filing them. The purpose is to assist the Trustee in determining any
change in Debtor(s)’ annual disposable income.” However, the Crows
added two footnotes onto the confirmation order. The first indicated that
this provision was subject to an appeal in an unrelated case. See Reichard v.
Brown (In re Reichard), BAP No. AZ-18-1194 (Appeal dismissed Oct. 24,
2018).
The second footnote contained a reservation of rights, and an
objection, as follows:
Petitioner(s) expressly reserve the right to assert their Thirteenth Amendment privilege from the U.S. Constitution against involuntary servitude, should the Chapter 13 Trustee attempt to modify their plan unilaterally and increase their monthly plan payments. The Petitioners assert that they have not waived their Constitutional Right against involuntary servitude by voluntarily filing their bankruptcy petition. In re Clemente, 409 B.R. 288, 293 (Bankr. D. NJ 2009). Petitioners further assert, a Chapter 13 Trustee demanding debtors assist him in determining changes to their annual disposable income, is barred by In re Anderson, 21 F.3d 355, 358 (9th Cir. 1994).
The bankruptcy court entered the stipulated order on November 16,
2018. However, the court struck the Crows’ second footnote containing the
4 reservation and the objection.
The Crows timely appealed.
JURISDICTION
The bankruptcy court had jurisdiction pursuant to 28 U.S.C. §§ 1334
and 157(b)(2)(L). Subject to the ripeness discussion set forth below, we have
jurisdiction under 28 U.S.C. § 158.
ISSUE
Did the bankruptcy court commit reversible error when it struck
footnote 2 from the parties’ stipulated proposed confirmation order?
STANDARD OF REVIEW
Most of footnote 2 was devoted to the Crows’ Thirteenth Amendment
argument. Since that argument in effect challenges a potential future plan
modification motion that Maney has not actually made, the Crows’
Thirteenth Amendment argument might not yet be ripe for appeal.
Ripeness is a jurisdictional issue subject to de novo review. Principal Life
Ins. Co. v. Robinson, 394 F.3d 665, 669 (9th Cir. 2006).
In the remainder of footnote 2, the Crows asserted that the
requirement to submit their post-petition tax returns was inconsistent with
Anderson, 21 F.3d at 358. The Crows’ argument based on Anderson raises
questions regarding the construction of various statutes and Rules, which
we review de novo. de la Salle v. U.S. Bank, N.A. (In re de la Salle), 461 B.R.
593, 601 (9th Cir. BAP 2011).
5 DISCUSSION
The Crows’ appeal focuses on footnote 2 of the proposed
confirmation order, which the bankruptcy court struck. The Crows assert
that there was no justification for the bankruptcy court to strike the
footnote. The Crows alternately argue that the bankruptcy court violated
their due process rights by striking the footnote without advance notice
and a prior opportunity to be heard. However, there are jurisdictional and
procedural impediments to our appellate review.
A. The Crows’ Challenge To Plan Modification Is Not Ripe For Appeal.
Most of the stricken footnote pertains to the Crows’ attempt to
“reserve” their argument that modification of the debtors’ chapter 13 plan
to increase plan payments would constitute involuntary servitude in
violation of the Thirteenth Amendment of the Constitution. But no plan
modification has been sought. The Crows’ Thirteenth Amendment
argument does not present a justiciable case or controversy within the
scope of Article III of the Constitution because the dispute is not ripe for
adjudication. Unless the matter is ripe, we lack jurisdiction to consider it.
Principal Life Ins. Co., 394 F.3d at 669; Southern Pac. Transp. Co. v. City of Los
Angeles, 922 F.2d 498, 502 (9th Cir. 1990).
In Romeo v. Maney (In re Romeo), BAP No. AZ-17-1215-BLKu, 2018 WL
1463850, at *5 (9th Cir. BAP Mar. 23, 2018), we held that a similar
6 Thirteenth Amendment argument was not ripe for appeal. In Romeo, we
pointed out that the chapter 13 trustee had not sought to modify the
debtor’s chapter 13 plan and might never do so, even though the trustee
sought future tax returns to determine whether the confirmed plan should
be modified. Id. We explained that, under these circumstances, any
decision by this panel on the Thirteenth Amendment argument would be
advisory because the question was still hypothetical. Id. We further
explained:
In measuring whether the litigant has asserted an injury that is real and concrete rather than speculative and hypothetical, the ripeness inquiry merges almost completely with standing. As a prudential matter, we will not consider a claim to be ripe for judicial resolution if it rests upon contingent future events that may not occur as anticipated, or indeed may not occur at all . . . . The prudential considerations of ripeness are amplified where constitutional issues are concerned.
Id. (quoting Scott v. Pasadena Unified Sch. Dist., 306 F.3d 646, 662 (9th Cir.
2002)).
Exactly as in Romeo, the Crows’ Thirteenth Amendment argument
remains hypothetical at confirmation. Maney might never seek to modify
the Crows’ chapter 13 plan. Until the chapter 13 trustee does so, the
constitutional question is not ripe. We, therefore, lack jurisdiction.
B. The Crows Were Not Harmed When The Court Struck Their Reservation Of Their Thirteenth Amendment Argument.
The Crows admit that their Thirteenth Amendment argument is not
7 ripe. Nonetheless, they claim that the striking of the footnote should be
reversed because they were entitled to preserve the argument. According
to the Crows, absent such preservation, the binding effect of their
confirmed chapter 13 plan and the accompanying confirmation order
might preclude them from later raising their Thirteenth Amendment
argument. They further claim that the court’s striking of footnote 2 without
first conducting a hearing violated their due process rights.
The Crows’ concern over the potential preclusive effect of the
confirmed plan is unfounded. Though the plan terms are binding on the
Crows and their creditors as specified in § 1327(a), neither the plan nor the
confirmation order addressed the conditions under which a plan
modification could occur. To the contrary, § 1327(a) and the principles of
res judicata do not limit the parties’ rights to seek plan modification. Max
Recovery, Inc. v. Than (In re Than), 215 B.R. 430, 435 (9th Cir. BAP 1997).
Instead, the propriety of a proposed plan modification is governed by
§ 1329. Id. In short, the deletion of the Crows’ reservation of rights did not
harm them.
Because the Crows did not need to preserve their Thirteenth
Amendment argument, their due process claim fails. The Ninth Circuit
routinely rejects due process claims when the record establishes that the
alleged absence of due process did not harm the appellant. See, e.g., Rosson
v. Fitzgerald (In re Rosson), 545 F.3d 764, 776–77 (9th Cir. 2008); City Equities
8 Anaheim, Ltd. v. Lincoln Plaza Dev. Co. (In re City Equities Anaheim, Ltd.), 22
F.3d 954, 959 (9th Cir. 1994).
C. The Crows Failed to Perfect For Appeal Their Challenge To Their Plan.
The Crows’ advance only one other argument. They contend that the
deleted footnote challenged the mandatory provision of Maney’s
confirmation order “requiring [the Crows] to assist [Maney] in determining
changes to their annual disposable income.” Aplt. Opn. Br. at p. 9.2
According to the Crows, this requirement is at odds with the Ninth
Circuit’s holding in Anderson v. Satterlee (In re Anderson), 21 F.3d 355, 358
(9th Cir. 1994).
The only time the Crows raised Anderson in the bankruptcy court was
as part of their footnote 2 of the proposed stipulated confirmation order.
However, the proposed order, with which the Crows agreed, specifically
required the actions the Crows contended were contrary to Anderson -
provision of future tax returns to the trustee during the pendency of their
plan. The Crows never properly opposed the form plan, the confirmation
order, or the requirements concerning their post-petition tax returns.
Arizona’s form plan requires chapter 13 debtors to provide their post-
2 Pursuant to Local Rule 2084-13(b), the Crows were required to use Maney’s chapter 13 confirmation order, which included the provision requiring the Crows to submit to Maney their post-petition state and federal income tax returns filed with the taxing authorities during the pendency of the case.
9 petition tax returns to the chapter 13 trustee while the case is pending. The
Crows were required to utilize the local form plan pursuant to Local Rule
2084-4(a).3 They used the local form, but in the section for debtors to list
unfiled tax returns the Crows wrote “Disputed per In re Romeo AZ-17-
1215 BLKu and pursuant to final appealable order from 2-16-bk-12633.”
If the Crows wanted to deviate from the language of the form plan,
they could have proposed a non-conforming or nonstandard plan
provision to state that they would not be providing the trustee with post-
petition tax returns. See In re Reichard, Case No. 2:16-BK-12633-BMW, 2018
WL 3323870, at *1 (Bankr. D. Ariz. July 5, 2018). In turn, Maney then could
have opposed the varying provision by filing an adverse plan
recommendation, an objection to confirmation, or both. See id.; see also Local
Rule 2084-10(a), (b).4 The Crows did disclose a nonstandard provision in
3 Local Rule 2084-4(a) provides: “Local Form 2084-4 (Chapter 13 Plan) must be used for all original, amended, or modified plans. All sections of the plan must be completed, or if not applicable marked with N/A or NONE. The treatment of all known secured or priority creditors must be disclosed in the plan. Varying provisions must be specific and not inconsistent with the Code, FRBP or Local Rules.” 4 Local Rule 2084-10(a) and (b) provide:
(a) Trustee Recommendation/Objection. The trustee will file a recommendation / objection within twenty-eight (28) days after the last date set for creditor objections to a plan.
(b) Debtor Compliance or Dismissal. Within thirty (30) days after the trustee files the recommendation/objection, the debtor must either (continued...)
10 their plan, though it had nothing to do with the obligation to provide
future tax returns. Their statement of “dispute” as to providing the trustee
with their post-petition tax returns, however, did not comply with the
requirements for nonstandard chapter 13 plan provisions set forth in Rules
3015(c) and 3015.1(e). These rules suggest that noncompliant nonstandard
plan provisions should be treated as void and ineffective. Cf. In re Parkman,
589 B.R. 567, 578–79 (Bankr. S.D. Miss. 2018) (examining scope of
permissible nonstandard provisions for chapter 13 plans).
The Crows had a second opportunity to place at issue the postpetiton
tax return requirement. When Maney included within his plan
recommendation a generic provision reiterating the plan’s post-petition tax
return requirement, the Crows could have filed an objection and sought a
hearing date from the court pursuant to Local Rule 2084-10(b). But they did
not do so. Instead, they submitted to the court a proposed stipulated
confirmation order that specifically required production of the post-
4 (...continued) comply with the trustee’s requests or file an objection and obtain a hearing date. The Court may summarily overrule any objection that fails to identify an issue or other impediment to plan confirmation. A request for additional time to respond does not constitute an objection. If the debtor does not timely comply, the trustee may file and serve a notice of intent to lodge a form of order dismissing the case, with a copy of the order attached. Ten (10) calendar days after serving the notice, the trustee may lodge an order dismissing the case without further notice or hearing.
(Emphasis added.)
11 petition tax returns, but also contained the footnote the bankruptcy court
eventually struck purporting to “preserve” their Thirteenth Amendment
issue and to “assert” that the confirmation order was at odds with
Anderson, supra.
At bottom, the Crows could not challenge the tax return requirement
for the first time based on a footnote in a stipulated order confirming a plan
they proposed that required such actions. They have not identified any
practice, procedure, Rule, or Local Rule, that permitted them to preserve a
dispute while also obtaining confirmation pursuant to an order that
specifically required them to provide their future tax returns to the trustee.
Nor have they persuaded us that the bankruptcy court was obliged to
consider the footnote as an objection to confirmation given this procedural
posture.
D. The Confirmed Plan Is Not Contrary to Anderson.
Even if we were to consider whether the bankruptcy court erred by
striking the footnote concerning the application of Anderson, we find the
Crows’ argument to be without merit. In Anderson, the chapter 13 trustee
objected to the debtors’ proposed plan because the debtors refused to sign
a “Best Efforts Certification” as required by the trustee. If signed, the
Certification would have bound the debtors to pay to the trustee all of their
actual disposable income, as opposed to their projected disposable income as
required by § 1325(b)(1)(B). 21 F.3d at 356-57. Morever, the trustee would
12 then be able to automatically adjust their plan payments without further
order of the court. Id. At the confirmation hearing, the trustee argued that
the court could not confirm the debtors’ plan unless the debtors signed the
Certification and pledged all of their actual disposable income for
distribution to their creditors. Id. at 357. The bankruptcy court agreed with
the trustee and denied confirmation. Id. On appeal to the district court, the
debtors asserted that they were only required to commit their projected –
and not their actual – disposable income to their plan. Id. But the district
court agreed with the trustee and affirmed the bankruptcy court’s order. Id.
The Ninth Circuit reversed. Id. at 359. The Ninth Circuit held that the
effect of the Certification was inconsistent with the plain language of
§ 1325(b)(1)(B), which only required that the debtors commit their
projected disposable income to their plan at confirmation. Id. at 357.
Moreover, the Ninth Circuit reasoned that the Certification amounted to an
impermissible grant of unilateral authority to the trustee to adjust the
debtors’ plan payments in contravention of the Code’s plan modification
provisions set forth in § 1329. Id. at 358.
The Crows misapprehend the import of Anderson. There, the
challenged Certification was used “as a means of vesting the Trustee with
the authority to unilaterally adjust the Andersons’ payments without a
court order.” Id. This contravened the statutory requirements for
modification. Anderson did not absolve chapter 13 debtors from providing
13 additional financial information to trustees during their plan terms. Indeed,
§ 521(a)(3) generally requires that every debtor “cooperate with the trustee
as necessary to enable the trustee to perform the trustee's duties under this
title.” Moreover, upon request debtors are required to file with the court
copies of each federal tax return for each tax year ending while the case is
pending. § 521(f)(1). And chapter 13 debtors, also upon request, are
required after confirmation to file annually “a statement under penalty of
perjury, of the income and expenditures of the debtor during the tax year
of the debtor most recently concluded before such statement is filed under
this paragraph, and of the monthly income of the debtor, that shows how
income, expenditures, and monthly income are calculated.” § 521(f)(4)(B).
These requirements are designed to facilitate a chapter 13 trustee’s
ability to monitor a debtor’s postconfirmation financial condition for
purposes of (among other things) evaluating the need for potential plan
modifications under §1329(a) – for either increases or decreases in plan
payments. With respect to the reporting requirements imposed under §§
521(f) - (g), we have previously noted that:
The obvious purpose of this self-reporting obligation is to provide information needed by a trustee or holder of an allowed unsecured claim in order to decide whether to propose hostile § 1329 plan modifications.
This power of the trustee and of creditors holding allowed unsecured claims to request that a confirmed plan be modified
14 by increasing payments in order to capture material increases in net income that occur during the life of the plan is an important feature of chapter 13. See 11 U.S.C. § 1329(a)(1). The addition in 2005 of post-petition reporting requirements at §§ 521(f) and (g) operates to bolster the efficacy of § 1329 modifications.
Fridley v. Forsythe (In re Fridley), 380 B.R. 538, 544 (9th Cir. BAP 2007); see
also Romeo, 2018 WL 1463850, at *4 (collecting cases).
Absolutely nothing in Anderson concerns chapter 13 debtors’
obligation to provide tax returns to the chapter 13 trustee during the
pendency of their confirmed plan. Accordingly, even assuming that the
Crows’ arguments based on Anderson were properly raised, they lacked
merit, and the striking of footnote 2 did not constitute reversible error.
In sum, the Crows’ challenge to the confirmation order based on
Anderson not only lacks substantive merit but also was never properly
presented to the bankruptcy court. Meanwhile, the Crows’ only other
argument set forth in their opening brief – their Thirteenth Amendment
argument – is not ripe for appeal. Thus, none of the Crows’ arguments on
appeal justify reversal.
CONCLUSION
For the reasons set forth above, we AFFIRM the bankruptcy court’s
confirmation order.