In re: Ilia Charov

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: December 20, 2016
• Docket: NV-16-1024-KiLDo
• Status: Unpublished

Opinion

FILED DEC 20 2016 1 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT 2 3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. NV-16-1024-KiLDo ) 6 ILIA CHAROV, ) Bk. No. 15-13297-mkn ) 7 Debtor. ) Adv. No. 15-01107-mkn ) 8 ) ILIA CHAROV, ) 9 ) Appellant, ) 10 ) M E M O R A N D U M1 v. ) 11 ) BANK OF NEW YORK MELLON, ) 12 SELECT PORTFOLIO SERVICING, ) INC., ) 13 ) Appellees. ) 14 ______________________________) 15 Submitted Without Oral Argument on October 21, 2016, 16 Filed - December 20, 2016 17 Appeal from the United States Bankruptcy Court 18 for the District of Nevada 19 Honorable Mike K. Nakagawa, Bankruptcy Judge, Presiding 20 Appearances: Appellant Ilia Charov, pro se, on brief; Chelsea A. 21 Crowton of Wright, Finlay & Zak, LLP on brief for appellees Bank of New York Mellon and Select 22 Portfolio Servicing, Inc. 23 Before: KIRSCHER, LAFFERTY and DORE,2 Bankruptcy Judges. 24 25 1 26 This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may 27 have, it has no precedential value. See 9th Cir. BAP Rule 8024-1. 2 28 Hon. Timothy W. Dore, Bankruptcy Judge for the Western District of Washington, sitting by designation. 1 Former chapter 133 debtor, Ilia Charov ("Charov"), appeals an 2 order dismissing his adversary complaint against appellees, the 3 Bank of New York Mellon, f/k/a/ Bank of New York, as Trustee for 4 the Certificate Holders CWALT, Inc., Alternative Loan Trust 5 2006-OC2, Mortgage Pass-through Certificates Series 2006-OC2 6 ("BONY") and Select Portfolio Servicing, Inc. ("Select"). For the 7 reasons explained below, we AFFIRM. 8 I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY 9 A. Prepetition events 10 1. Charov's loan with BONY's predecessor 11 In 2005, Charov obtained a loan for $247,100 from GreenPoint 12 Mortgage Funding, Inc. to purchase real property located in 13 Maricopa County, Arizona ("Property"). As a condition of the 14 loan, Charov signed a note and deed of trust ("DOT"), which was 15 secured by the Property. The note and DOT were ultimately 16 assigned through several recorded assignments to BONY in or about 17 2010. Select services the loan. Charov has admittedly not made a 18 payment on the loan since August 2008.4 19 2. Charov's prior bankruptcy filings 20 Between April 13, 2009, and June 5, 2015, Charov filed five 21 chapter 13 bankruptcy cases in the District of Nevada. The 22 bankruptcy court dismissed these cases for various reasons, 23 including the failure to file required documents, schedules and a 24 25 3 Unless specified otherwise, all chapter, code and rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and 26 the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. The Federal Rules of Civil Procedure are referred to as “Civil Rules.” 27 4 According to the proof of claim filed by BONY, the 28 prepetition arrearages on the loan were $81,498.97.

-2- 1 statement of financial affairs, to pay filing fees, to attend the 2 § 341(a) meeting, to commence plan payments and to file chapter 13 3 plans. On June 5, 2015, Charov filed his fifth case within three 4 months of filing his fourth case and within seven days of the 5 dismissal of the fourth case. 6 B. Postpetition events 7 On June 30, 2015, Charov, pro se, filed an adversary 8 complaint against BONY and Select to determine the validity or 9 extent of their claims against the Property. Charov alleged that 10 he initiated the adversary proceeding to “determine the validity 11 or extent of [BONY’s and Select’s] claim against the [Property]” 12 and to determine whether Select by acting on behalf of BONY “is 13 liable for being negligent per se under state and federal 14 statutes[]” in asserting “aggressive claims against my property 15 without first proving those claims adequately under state and 16 federal law.” (emphasis in original). 17 That same day, Charov filed an "Application for Preliminary 18 Injunction" in the adversary proceeding, which sought an 19 injunction to prevent a nonjudicial foreclosure of the Property 20 apparently scheduled for July 8, 2015.5 However, Charov never 21 noticed the Application for hearing and no proof of service exists 22 showing that BONY or Select were served with the Application. 23 On July 7, 2015, BONY moved for a comfort order in the main 24 case stating that no stay was in effect under § 362(c)(3) due to 25 Charov's instant case being his second bankruptcy case filed 26 within the last year. Charov opposed the motion. The bankruptcy 27 5 After the bankruptcy court dismissed the bankruptcy case, 28 the record does not indicate whether any foreclosure occurred.

-3- 1 court entered the comfort order stating that the stay had expired 2 and was no longer in effect as to the Property. The order 3 dismissing Charov’s adversary proceeding states that the stay 4 expired as to Charov and the Property on July 5, 2015, by 5 operation of law under § 362(c)(3)(A). 6 On July 22, 2015, the chapter 13 trustee moved to dismiss 7 Charov's bankruptcy case under § 1307(c)(3) for failure to timely 8 file a plan; the deadline to file a plan expired on June 19, 2015. 9 A hearing on the dismissal motion was set for August 27, 2015.6 10 On July 28, 2015, BONY filed its proof of claim for 11 $327,806.46 based on its debt secured by the Property. BONY 12 asserted that its debt was fully secured, even though Charov had 13 valued the Property at $314,000 in his Schedule A. 14 On August 12, 2015, Charov filed an objection to BONY's 15 claim, but never noticed the matter for hearing.7 It also appears 16 he never served the objection on BONY or Select. Charov 17 questioned BONY's standing as a creditor, alleging that BONY had 18 failed to bring forth an authenticated copy of the note and DOT. 19 On September 1, 2015, the bankruptcy court entered an order 20 dismissing Charov's bankruptcy case. He did not appeal the 21 dismissal order. Subsequently, the court closed the case. Later 22 the court administratively reopened the case solely with respect 23 to Charov’s remaining adversary proceeding against BONY and 24 25 6 Charov did not oppose the trustee's motion to dismiss or appear at the hearing on August 27, 2015. 26 7 Based on his asserted claim that English is his second 27 language, Charov requested that no hearing be held. Unfortunately for Charov, claim objections require hearings per Rule 3007(a) and 28 Local Bankruptcy Rule 3007(b).

-4- 1 Select. 2 On November 13, 2015, BONY and Select moved to dismiss 3 Charov's adversary complaint under Civil Rule 12(b)(6), 4 incorporated in Rule 7012(b), for its failure to state a claim or, 5 alternatively, for a more definite statement under Civil 6 Rule 12(e), incorporated in Rule 7012(b). Defendants contended 7 that BONY had a valid lien against the Property as evidenced by 8 the recorded DOT and assignments. To the extent Charov was asking 9 defendants to present the original note prior to any nonjudicial 10 foreclosure, defendants contended they were not required to do so 11 under Arizona law. 12 Charov opposed BONY and Select's motion to dismiss the 13 adversary complaint. Besides his repeated standing argument, much 14 of Charov's argument was based on his erroneous view of civil 15 procedure or substantive law. BONY and Select noted these 16 deficiencies in their reply.8 17 Charov did not appear at the hearing on the motion to dismiss 18 the adversary complaint on January 14, 2016. We do not have a 19 transcript from that hearing and it is not available on the 20 docket. The bankruptcy court took the matter under submission. 21 On January 15, 2016, the bankruptcy court entered an order 22 denying BONY and Select's motion to dismiss under Civil 23 Rule 12(b)(6), but nevertheless dismissed the adversary complaint. 24 Specifically, the court determined: 25 8 BONY and Select spent a great deal of time in their reply 26 discussing Nevada nonjudicial foreclosure law. However, because the Property is located in Arizona and the DOT states that Arizona 27 law governs, Arizona law governs. In any event, it does not matter because the bankruptcy court dismissed the adversary 28 proceeding on an entirely different basis.

-5- 1 Because the Debtor's Chapter 13 proceeding has been dismissed, no bankruptcy relief presently is being 2 sought. The order dismissing the Debtor's case has not been appealed. No distribution will be made on the 3 [proof of claim]. Thus, the validity, extent or priority of Defendants' interest in the Arizona Property has no 4 relationship to any bankruptcy matter or case before this court. 5 . . . . 6 Absent any connection with a bankruptcy matter before 7 this court, the claims set forth in the Complaint reflect only a two-party dispute governed by Arizona law 8 involving real property located in Maricopa County, Arizona. 9 Under these circumstances, dismissal of the Complaint is 10 appropriate. Such dismissal, however, will be without prejudice to the Debtor presenting his claims, if any, in 11 an appropriate non-bankruptcy forum. No further adversary proceedings may be commenced in connection with 12 Case No. 15-13297. 13 Charov timely appealed. 14 II. JURISDICTION 15 The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 16 and 157(b)(2)(A) and (K). We have jurisdiction under 28 U.S.C. 17 § 158. 18 III. ISSUES 19 Did the bankruptcy court abuse its discretion in dismissing 20 Charov's adversary complaint given that his underlying bankruptcy 21 case had been dismissed? 22 IV. STANDARDS OF REVIEW 23 We review a bankruptcy court's decision not to exercise 24 jurisdiction over an adversary proceeding following the dismissal 25 of the underlying bankruptcy case for an abuse of discretion. 26 Carraher v. Morgan Elec., Inc. (In re Carraher), 971 F.2d 327, 328 27 (9th Cir. 1992); Davis v. C.G. Courington (In re Davis), 177 B.R. 28 907, 910-11 (9th Cir. BAP 1995). Likewise, we review the

-6- 1 bankruptcy court’s sua sponte dismissal of an action for an abuse 2 of discretion. Snell v. Cleveland, Inc., 316 F.3d 822, 825 (9th 3 Cir. 2002). A bankruptcy court abuses its discretion if it 4 applies the wrong legal standard, misapplies the correct legal 5 standard, or if its factual findings are clearly erroneous. 6 TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th 7 Cir. 2011). 8 We may affirm on any ground supported by the record, 9 regardless of whether the bankruptcy court relied upon, rejected 10 or even considered that ground. Fresno Motors, LLC v. Mercedes 11 Benz USA, LLC, 771 F.3d 1119, 1125 (9th Cir. 2014). 12 V. DISCUSSION 13 The bankruptcy court did not abuse its discretion in dismissing the adversary proceeding. 14 15 Charov's argument on appeal consists of two short paragraphs. 16 Interpreting his pro se brief liberally as we must, Balistreri v. 17 Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990), Charov 18 argues that in light of 28 U.S.C. § 157(c)(1),9 because the 19 matters before the bankruptcy court in the adversary proceeding 20 were "non-core," the court lacked authority to enter a final order 21 dismissing the adversary proceeding; rather, it was required to 22 23 9 28 U.S.C. § 157(c)(1) provides: 24 A bankruptcy judge may hear a proceeding that is not a core proceeding but that is otherwise related to a case under 25 title 11. In such proceeding, the bankruptcy judge shall submit proposed findings of fact and conclusions of law to 26 the district court, and any final order or judgment shall be entered by the district judge after considering the 27 bankruptcy judge's proposed findings and conclusions and after reviewing de novo those matters to which any party has 28 timely and specifically objected.

-7- 1 submit proposed findings of fact and conclusions of law to the 2 district court. In other words, he contends the bankruptcy court 3 had no authority or discretion to dismiss the adversary 4 proceeding. 5 We disagree with Charov that the claims at issue in the 6 adversary proceeding were non-core. Among the list of "core" 7 proceedings is the determination of the validity, extent or 8 priority of liens against property of the estate. 28 U.S.C. 9 § 157(b)(2)(K). Additionally, Charov’s allegations stated in his 10 adversary complaint raise claims concerning the extent of BONY’s 11 and Select’s interest in the Property and their standing. Thus, 12 Charov raised issues concerning the allowance or disallowance of 13 any claims asserted by BONY or Select against property of the 14 estate, even though he failed to properly notice his previous 15 objection to BONY’s proof of claim.10 28 U.S.C. § 157(b)(2)(B). 16 Charov’s allegations, even though based on state law claims, arose 17 in his bankruptcy case. 18 Even though the underlying bankruptcy case was later 19 dismissed, the bankruptcy court had "core" jurisdiction over the 20 adversary proceeding when it was filed. See Linkway Inv. Co. v. 21 Olsen (In re Casamont Inv'rs, Ltd.), 196 B.R. 517, 521 (9th Cir. 22 BAP 1996) ("Jurisdiction is determined as of the commencement of 23 the action."). Bankruptcy courts are empowered to enter final 24 judgments in "core proceedings." 28 U.S.C. § 157(b)(2). A matter 25 may be a core proceeding even if state law may affect its outcome. 26 Bronson v. Thompson (In re Bronson), 2016 WL 5956642, at *4 (9th 27 10 The record fails to establish that Charov ever exempted 28 the Property.

-8- 1 Cir. BAP Oct. 12, 2016) (citing 28 U.S.C. § 157(b)(2), (3); 2 Marshall v. Stern (In re Marshall), 600 F.3d 1037, 1054 (9th Cir. 3 2010), aff'd, 564 U.S. 462 (2011)). Thus, Charov is mistaken that 4 the bankruptcy court was required to submit proposed findings and 5 conclusions with respect to his claims to the district court.11 6 While the main case was pending, Charov’s claims asserted in 7 his adversary complaint potentially affected the confirmation of 8 his chapter 13 plan and the treatment of his creditors’ claims in 9 his chapter 13 plan. However, when his case was dismissed, his 10 state law claims remained, but such claims no longer affected 11 confirmation or the treatment of his creditors’ claims. Circuit 12 authority instructs us that dismissal of the main bankruptcy case 13 does not necessarily end an adversary proceeding seeking relief on 14 state law theories. See Carraher, 971 F.2d at 328. 15 In Carraher, the Ninth Circuit recognized the bankruptcy 16 court's discretion to retain jurisdiction over related state law 17 claims once the underlying bankruptcy case has been dismissed. 18 Id. Since Charov’s state law claims may form the bases for either 19 arising in or related to jurisdiction depending on the effect the 20 claims may have had during the pendency of the bankruptcy case, we 21 conclude the four Carraher factors should be applied in this 22 instance. In deciding whether to retain jurisdiction, the 23 bankruptcy court must consider economy, convenience, fairness and 24 25 11 Even if Charov is correct and his claims are non-core, the bankruptcy court had authority to enter an order dismissing the 26 adversary proceeding without prejudice. The bankruptcy court’s decision to decline to retain jurisdiction is a decision not to 27 hear the proceeding and, thus, does not trigger 28 U.S.C. § 157(c)(1)’s requirement to submit the order with proposed 28 findings and conclusions to the district court.

-9- 1 comity. Id. "The [bankruptcy] court's weighing of these factors 2 is discretionary." Id. Although the bankruptcy court did not 3 expressly refer to Carraher or its four factors to dismiss the 4 adversary proceeding, we may affirm on any ground supported by the 5 record. Fresno Motors, LLC, 771 F.3d at 1125. We therefore 6 examine whether the court abused its discretion in dismissing the 7 adversary under Carraher. 8 Judicial Economy. The adversary proceeding had been pending 9 for about six months when the bankruptcy court decided to dismiss 10 it without prejudice.12 Essentially, other than BONY and Select's 11 motion to dismiss Charov's complaint and Charov's opposition to 12 dismissal, no discovery or briefing had occurred; nor was any 13 court time expended on the issues. A state court (or district 14 court if diversity is shown) could just as efficiently determine 15 the validity or extent of BONY's and Select's lien or other 16 interest in the Property under Arizona law. And, the state court 17 is presumed to have more familiarity with such issues. 18 Accordingly, the record supports dismissal under this factor. 19 Convenience. It does not appear on the record that a 20 proceeding in state court would be inconvenient for the parties. 21 Although the Property is located in Arizona, both Charov and 22 counsel for BONY and Select are in Las Vegas. Thus, a state court 23 in Las Vegas would be as convenient as the bankruptcy court. 24 Charov can easily re-file his complaint in state court and BONY 25 and Select can simply re-file their motion to dismiss. This 26 27 12 As noted by the bankruptcy court, it dismissed Charov’s adversary proceeding without prejudice so Charov would be able to 28 commence future litigation in a nonbankruptcy forum.

-10- 1 factor supports dismissal or, at worst, is neutral. 2 Fairness. Nothing in the record indicates that it would be 3 unfair to make Charov pursue his claims against BONY and Select in 4 state court. However, some delay would be involved. Thus, this 5 factor appears neutral or would perhaps weigh in favor of the 6 bankruptcy court retaining jurisdiction. 7 Comity. This factor clearly supports dismissal. As noted by 8 the bankruptcy court, the adversary complaint reflected only a 9 two-party dispute governed by Arizona law involving real property 10 in Arizona. In addition, the bankruptcy estate no longer had any 11 interest in the outcome of Charov's claims against BONY and Select 12 regarding their interest in the Property, as the Property was no 13 longer property of the estate and its disposition would have no 14 impact on the administration of Charov's dismissed chapter 13 15 case. 16 Because the Carraher factors support dismissal, we conclude 17 that the bankruptcy court did not abuse its discretion in 18 dismissing Charov's adversary proceeding.13 19 VI. CONCLUSION 20 For the foregoing reasons, we AFFIRM. 21 22 23 13 It also bears noting, although we are not deciding this 24 matter on this basis, that as a consequence of the Supreme Court's decision in Wellness International Network, Ltd. v. Sharif, 135 S. 25 Ct. 1932, 1948 (2015), which concluded that parties to a dispute could waive an objection to the entry of a dispositive order by a 26 non-Article III Judge by conduct indicating an acquiescence in such a Judge disposing of the matter, Charov may well have waived 27 the grounds for his appeal in this instance by electing to have this appeal determined by this Court, instead of opting for a 28 determination by the District Court.

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