In re: Jesse Butch Torres

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: June 1, 2012
• Docket: WW-11-1479-HKiJu
• Status: Unpublished

Opinion

FILED JUN 01 2012 1 SUSAN M SPRAUL, CLERK U.S. BKCY. APP. PANEL 2 OF THE NINTH CIRCUIT

3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. WW-11-1479-HKiJu ) 6 JESSE BUTCH TORRES, ) Bk. No. 11-12943 ) 7 Debtor. ) ______________________________) 8 ) JESSE BUTCH TORRES, ) 9 ) Appellant, ) 10 ) v. ) M E M O R A N D U M1 11 ) K. MICHAEL FITZGERALD, ) 12 Chapter 13 Trustee; WHIDBEY ) ISLAND REAL ESTATE, LLC, ) 13 ) Appellees. ) 14 ______________________________) 15 Argued and Submitted on March 23, 2012 at Seattle, Washington 16 Filed - June 1, 2012 17 Appeal from the United States Bankruptcy Court 18 for the Western District of Washington 19 Honorabble Karen A. Overstreet, Bankruptcy Judge, Presiding 20 Appearances: Mary Elizabeth Schmitt, Esq. argued for appellant Jesse Butch Torres; Jason Wilson-Aguilar, Esq. 21 argued for appellee K. Michael Fitzgerald, Chapter 13 Trustee; Christon C. Skinner, Esq. of 22 the Law Office of Skinner & Saar, PS argued for appellee Whidbey Island Real Estate, LLC. 23 24 Before: HOLLOWELL, KIRSCHER, and JURY, Bankruptcy Judges. 25 26 1 This disposition is not appropriate for publication. 27 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 28 See 9th Cir. BAP Rule 8013-1. 1 Jesse Butch Torres (the Debtor) appeals the dismissal of his 2 chapter 132 bankruptcy case. We DISMISS the appeal as moot. 3 I. FACTS 4 On March 17, 2011, the day before a scheduled foreclosure of 5 the Debtor’s real property, a commercial building in Oak Harbor, 6 Washington (the Property), a chapter 13 bankruptcy petition 7 (Petition) was filed in the name of the Debtor. The Petition was 8 electronically filed by the Debtor’s counsel, Mary Schmitt 9 (Schmitt), and included the electronic signature of the Debtor. 10 A certificate that indicated the Debtor personally completed 11 required credit counseling on March 11, 2011, was filed with the 12 Petition, along with a list of creditors. However, no 13 accompanying bankruptcy schedules, statements, or chapter 13 plan 14 were filed on March 17, 2011. 15 The deadline for submitting the schedules, statements and 16 chapter 13 plan was March 31, 2011. On March 25, 2011, the 17 Debtor filed an ex-parte motion to extend the deadline. The 18 bankruptcy court granted the motion, extending the deadline to 19 April 22, 2011. On April 22, 2011, the Debtor filed a second ex- 20 parte motion to extend the deadline to file the schedules, 21 statements and chapter 13 plan. The second extension motion was 22 granted and the deadline was extended to May 6, 2011. 23 On May 5, 2011, the Debtor filed a “Durable General Power of 24 25 2 Unless otherwise indicated, all chapter, section 26 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532. 27 All “Rule” references are to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. The local bankruptcy rules for the 28 Western District of Washington are referred to as “Local Rules.”

-2- 1 Attorney of Jesse Butch Torres” (POA). The POA was executed two 2 years earlier on May 22, 2009. By its terms, it appointed 3 Christopher Torres (Torres) as the Debtor’s lawful attorney-in- 4 fact authorized “to do and perform all acts in the Principal’s 5 place and stead as fully as the Principal might do and perform 6 such acts as Principal,” and listed several non-exclusive powers 7 that Torres was authorized to undertake on behalf of the Debtor. 8 Filing a bankruptcy petition was not listed as a specific power 9 that Torres was authorized to perform. 10 Also on May 5, 2011, the Debtor filed his schedules, 11 statements and chapter 13 plan, along with an amended petition 12 (Amended Petition). The “Declaration Concerning Debtor’s 13 Schedules” was signed with the Debtor’s electronic signature 14 dated May 4, 2011. The Amended Petition contained Schmitt’s 15 handwritten signature dated March 15, 2011, and a handwritten 16 signature, “Jesse Butch Torres by Christopher Scott Torres,” 17 underneath which was typed, “Christopher Scott Torres as his 18 attorney-in-fact and not in my individual capacity.” It was 19 dated March 12, 2011. 20 According to the Debtor’s bankruptcy schedules, the Property 21 was worth $488,261.00 and had various secured claims against it 22 in the amount of $429,297.72. The Debtor’s chapter 13 plan 23 proposed to market and sell the Property within nine months to 24 pay the liens against it. 25 The § 341 meeting of creditors was scheduled for May 19, 26 2011. Schmitt attended the meeting with Torres. However, 27 K. Michael Fitzgerald, the chapter 13 trustee (the Trustee) 28 declined to take Torres’ testimony because the Debtor had not

-3- 1 requested an alternate appearance as required by the Local 2 Rules.3 3 On May 20, 2011, the Debtor filed a motion to allow Torres 4 to act for the Debtor under the POA (POA Motion). The POA Motion 5 explained that: “Debtor is incarcerated and was unable to sign 6 the petition, schedules and Chapter 13 Plan and is unable to 7 attend the meeting of creditors. Debtor has turned over the 8 administration to his son, Chris Torres by the way of a Durable 9 Power of Attorney.” No declaration was filed in support of the 10 POA Motion. 11 The Trustee filed an objection to the POA Motion.4 The 12 Trustee was concerned that Schmitt filed the Petition when the 13 Debtor had not actually signed it. The Trustee pointed out that 14 the Amended Petition was also problematic because it was signed 15 by Torres and dated March 12, while the accompanying schedules 16 17 3 Local Rule 2003-1(b) provides that a debtor’s personal 18 appearance is required at the § 341 meeting. There is an 19 exception to this requirement only if the bankruptcy court permits an alternative method for examination, after requested by 20 motion filed 14 days prior to the scheduled meeting. Id. The motion must be supported by the debtor’s affidavit “providing a 21 detailed factual explanation of the exceptional circumstances 22 preventing the debtor from appearing in person.” Id. at (b)(1), (b)(3)(A). 23 4 The Trustee also filed, the same day, an Objection to 24 Confirmation of Plan, Motion to Dismiss (Plan Objection). The 25 Plan Objection was identical to the objection to the POA Motion. Appellee, Whidbey Island Real Estate, LLC (WIRE) also filed an 26 objection to plan confirmation, as well as a motion for relief 27 from stay in order to foreclose on the Property. WIRE did not file an objection to the POA Motion. All matters were set for 28 hearing on the same day.

-4- 1 and statements were signed by the Debtor and dated May 4. The 2 Trustee questioned whether the Debtor had actually approved the 3 bankruptcy filing. The Trustee also objected to Torres appearing 4 as attorney-in-fact because Torres was a creditor5 of the Debtor 5 and because the Debtor had failed to obtain approval for Torres 6 to appear for the Debtor at the § 341 meeting. 7 In reply to the Trustee’s objection, Schmitt and her 8 paralegal filed declarations in an attempt to explain the 9 irregularities in the filing of the Petition. They both stated 10 that the Petition was inadvertently filed electronically with the 11 Debtor’s signature. They stated they contacted the bankruptcy 12 court clerk’s office for instruction on how to correct the error 13 and were told to file an amended petition, but that they did not 14 need to file a motion to allow Torres to act as attorney-in-fact 15 since the POA had been filed. 16 A hearing on the POA Motion was held June 22, 2011 17 (Dismissal Hearing).6 At the Dismissal Hearing, Schmitt 18 acknowledged that she had not communicated with the Debtor, but 19 was called by his criminal attorney and directed to file the 20 bankruptcy in order to try to avoid the pending foreclosure of 21 the Property. Because the Petition was not signed by the Debtor, 22 and because the bankruptcy court found that there was no evidence 23 in the record that the Debtor authorized or directed Torres to 24 5 25 On May 18, 2011, Torres filed a proof of secured claim in the amount of $93,139.48 for wages from acting as power of 26 attorney. 27 6 Also at the Dismissal Hearing, the bankruptcy court heard 28 WIRE’s motion for relief from stay.

-5- 1 file the bankruptcy case, the bankruptcy court concluded the 2 Petition was invalid. The bankruptcy court subsequently entered 3 an order dismissing the Debtor’s chapter 13 case on June 23, 2011 4 (the Dismissal Order). 5 On July 7, 2011, the Debtor filed a motion for 6 reconsideration (Reconsideration Motion). The Debtor argued that 7 the Debtor qualified as a debtor under § 109(e), the POA 8 authorized Torres to file the Debtor’s bankruptcy case, the 9 Debtor’s chapter 13 plan was filed in good faith and, that it was 10 a technical mistake that the Petition containing the Debtor’s 11 signature, rather than the Amended Petition containing Torres’ 12 signature as attorney-in-fact, was initially filed. 13 In support of the Reconsideration Motion, Schmitt filed two 14 declarations. In the first, Schmitt stated that since the last 15 week of May 2011, she had experienced difficulty in communicating 16 with the Debtor, either by telephone or in person. The second 17 declaration from Schmitt stated that Torres had signed a 18 declaration when he signed the Amended Petition on March 12, 19 2011. Attached to her declaration were two declarations from 20 Torres dated March 12, 2011, and June 22, 2011, each stating that 21 Torres had signed a bankruptcy petition on behalf of the Debtor 22 as his attorney-in-fact. The June 22 declaration provided the 23 additional information that the Debtor wanted to file bankruptcy 24 to stop the pending foreclosure of the Property and that Torres 25 filed the petition with the Debtor’s authorization. There was no 26 explanation provided by Schmitt as to why the March 12, 2011 27 declaration was not submitted with the Amended Petition or POA. 28

-6- 1 In addition, the Debtor submitted his own declaration, dated 2 July 6, 2011, ratifying the bankruptcy filing. The Debtor stated 3 that he had directed Torres to file bankruptcy to stop the 4 scheduled foreclosure of the Property. 5 The Trustee objected to the Reconsideration Motion,7 6 asserting that Schmitt did not verify directly from the Debtor 7 any information she received or conduct a reasonable inquiry as 8 required by Rule 9011. The Trustee noted that there was no 9 evidence at the time of the Dismissal Hearing that the Debtor 10 knew of or authorized the bankruptcy filing, and that it was only 11 after the Dismissal Hearing that Schmitt spoke with the Debtor in 12 an attempt to ratify the filing. 13 The bankruptcy court considered the language in the POA and 14 determined that Torres failed to meet the minimum standards for 15 filing a case under a power of attorney in Washington state. 16 Furthermore, the bankruptcy court found that there were no 17 exceptional circumstances that warranted the subsequent 18 ratification by the Debtor after the Dismissal Order had been 19 entered. Therefore, the bankruptcy court denied the 20 Reconsideration Motion by written decision entered on August 22, 21 2011 (Reconsideration Order). The Debtor timely appealed.8 22 23 7 WIRE also objected to the Reconsideration Motion, but the 24 bankruptcy court did not consider the objection because WIRE had not objected to the POA Motion. In its appellate brief, WIRE 25 argues only that the appeal is moot. 26 8 The Debtor filed the Reconsideration Motion within 14 days 27 of the bankruptcy court’s Dismissal Order. Therefore, it tolled the time for appeal until 14 days from the final order disposing 28 (continued...)

-7- 1 II. ISSUES 2 Whether the appeal is moot. 3 If it is not moot, whether the bankruptcy court abused its 4 discretion in dismissing the Debtor’s bankruptcy case and denying 5 the Reconsideration Motion. 6 III. JURISDICTION 7 The bankruptcy court had jurisdiction under 28 U.S.C. 8 §§ 157(b)(2)(A) and 1334. We have jurisdiction over final orders 9 under 28 U.S.C. § 158, but address our jurisdiction over this 10 appeal more fully below. 11 IV. STANDARDS OF REVIEW 12 We have an independent obligation to determine our 13 jurisdiction. Felton Pilate v. Burrell (In re Burrell), 415 F.3d 14 994, 997 (9th Cir. 2005). We lack jurisdiction to hear moot 15 appeals. I.R.S. v. Pattullo (In re Pattullo), 271 F.3d 898, 901 16 (9th Cir. 2001). If an appeal becomes moot while it is pending 17 before us, we must dismiss it. Id. 18 We review an order dismissing a chapter 13 bankruptcy case 19 for an abuse of discretion. Sherman v. SEC (In re Sherman), 20 441 F.3d 794, 813 (9th Cir. 2006); Brown v. Sobczak (In re 21 Sobczak), 369 B.R. 512, 516 (9th Cir. BAP 2007). Additionally, 22 the bankruptcy court’s denial of a motion for reconsideration is 23 reviewed for an abuse of discretion. Arrow Electr., Inc. v. 24 25 8 (...continued) 26 of the Reconsideration Motion. Dicker v. Dye (In re Edelman), 27 237 B.R. 146, 151 (9th Cir. BAP 1999). Because the Debtor filed his notice of appeal within 14 days of Reconsideration Order, the 28 Debtor’s appeal was timely. Rule 8002(b)(2).

-8- 1 Justus (In re Kaypro), 218 F.3d 1070, 1073 (9th Cir. 2000); 2 Sewell v. MGF Funding, Inc. (In re Sewell), 345 B.R. 174, 178 3 (9th Cir. BAP 2006). A bankruptcy court abuses its discretion if 4 it bases a decision on an incorrect legal rule, or if its 5 application of the law was illogical, implausible, or without 6 support in inferences that may be drawn from the facts in the 7 record. United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 8 2009) (en banc); Ellsworth v. Lifescape Med. Assocs., P.C. (In re 9 Ellsworth), 455 B.R. 904, 914 (9th Cir. BAP 2011). 10 V. DISCUSSION 11 A. Jurisdiction 12 The appellees assert that this appeal is moot because the 13 Debtor did not seek a stay pending appeal and the Debtor’s 14 Property, that he had hoped to save from foreclosure, has now 15 been foreclosed on and sold. 16 Constitutional mootness is derived from Article III of the 17 U.S. Constitution, which provides that the exercise of judicial 18 power depends on the existence of a case or controversy. DeFunis 19 v. Odegaard, 416 U.S. 312, 316 (1974); Clear Channel Outdoor, 20 Inc. v. Knupfer (In re PW, LLC), 391 B.R. 25, 33 (9th Cir. BAP 21 2008). The mootness doctrine applies when events occur during 22 the pendency of the appeal that make it impossible for the 23 appellate court to grant effective relief. Id. The determining 24 issue is “whether there exists a ‘present controversy as to which 25 effective relief can be granted.’” People of Village of Gambell 26 v. Babbitt, 999 F.2d 403, 406 (9th Cir. 1993) (quoting NW Envtl. 27 v. Gordon, 849 F.2d 1241, 1244 (9th Cir. 1988)). If no effective 28 relief is possible, we must dismiss for lack of jurisdiction.

-9- 1 United States v. Arkison (In re Cascade Rds., Inc.), 34 F.3d 756, 2 759 (9th Cir. 1994). 3 Our review of the record leads us to conclude that we cannot 4 provide effective relief to the Debtor in this case even if we 5 were to reverse the Dismissal Order. The Debtor represented to 6 the bankruptcy court at the Dismissal Hearing that the bankruptcy 7 filing was an emergency filing to stop the foreclosure of the 8 Property. Torres and the Debtor both stated in their 9 declarations (submitted with the Reconsideration Motion) that the 10 purpose for the bankruptcy filing was to delay the pending 11 foreclosure on the Property. Moreover, the marketing and sale of 12 the Property was the cornerstone of the Debtor’s chapter 13 plan. 13 Because the Property has been foreclosed on and now sold, 14 the Debtor no longer owns or has an interest in the Property. 15 Consequently, a reversal of the Dismissal Order would not provide 16 the Debtor the relief he sought. Therefore, the controversy is 17 moot and we lack jurisdiction of the appeal. In re Burrell, 18 415 F.3d at 998. 19 B. Merits 20 Because we have determined that the appeal is moot, we do 21 not reach the merits of the appeal. 22 VI. CONCLUSION 23 We DISMISS the appeal for lack of jurisdiction. 24 25 26 27 28

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