FILED APR 03 2012 1 SUSAN M SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT 2 UNITED STATES BANKRUPTCY APPELLATE PANEL 3 OF THE NINTH CIRCUIT 4 5 In re: ) BAP No. CC-11-1514-MkHKi ) 6 MICHAEL G. SEIFERT and ) Bk. No. LA 10-25453-RN ROBIN J. SEIFERT, ) 7 ) Adv. No. LA 10-02359-RN Debtors. ) 8 ______________________________) ) 9 MATTHEW TYE, ) ) 10 Appellant, ) ) 11 v. ) MEMORANDUM* ) 12 MICHAEL G. SEIFERT; ) ROBIN J. SEIFERT, ) 13 ) Appellees. ) 14 ______________________________) 15 Argued and Submitted on February 24, 2012 at Pasadena, California 16 Filed - April 3, 2012 17 Appeal from the United States Bankruptcy Court 18 for the Central District of California 19 Honorable Richard M. Neiter, Bankruptcy Judge, Presiding 20 Appearances: Appellant Matthew Tye, in propria persona, argued 21 on his own behalf; RoseAnn Frazee of the Frazee Law Group argued on behalf of Appellees Michael 22 and Robin Seifert. 23 Before: MARKELL, HOLLOWELL and KIRSCHER, Bankruptcy Judges. 24 25 26 * 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 INTRODUCTION 2 Debtors Michael and Robin Seifert (the “Seiferts”) sought 3 and obtained from the bankruptcy court an order approving their 4 settlement with Matthew Tye (“Tye”). Tye moved to vacate the 5 settlement order, but the bankruptcy court denied Tye’s motion. 6 Tye appealed. We VACATE and REMAND. 7 FACTS 8 In 2008, Tye, a licensed California attorney, represented 9 the Seiferts. The Seiferts’ mortgage lender had commenced 10 foreclosure proceedings against their home in La Canada 11 Flintridge, California; Tye defended the Seiferts in the 12 foreclosure proceedings. Tye allegedly preformed over 160 hours 13 of services for the Seiferts and sought payment of roughly 14 $60,000 in attorneys fees, but the Seiferts never paid him. 15 Representing himself, Tye sued the Seiferts in Orange County 16 Superior Court (OCSC Case No. 30-2008-00115073) for fraud, breach 17 of contract and quantum meruit. In relevant part, Tye alleged 18 that the Seiferts lied to him about, among other things, the 19 value of their home, their ability to pay their mortgage, their 20 ability to pay his fees, and their intent to pay his fees. 21 On April 21, 2010, the Seiferts filed a chapter 71 22 bankruptcy case, and John Menchaca was appointed to serve as the 23 chapter 7 trustee (“Trustee”). The Seiferts listed Tye in their 24 bankruptcy schedules as an unsecured creditor holding a disputed 25 1 26 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and 27 all "Rule" references are to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. All "Civil Rule" references are to 28 the Federal Rules of Civil Procedure.
2 1 claim in the amount of $58,240.00. 2 On July 26, 2010, Tye commenced an adversary proceeding 3 against the Seiferts objecting to their discharge, and seeking to 4 have the fees they allegedly owed him declared nondischargeable 5 (“Complaint”).2 Whereas his nondischargeability claims (“§ 523 6 Claims”) were based on the same allegations as included in his 7 state court complaint, Tye’s claim objecting to the Seiferts’ 8 discharge (“§ 727 Claim”) was primarily based on his allegation 9 that the Seiferts were improperly using their massive mortgage 10 payment – a mortgage on which they never actually had paid 11 anything and never intended to pay anything – to shelter large 12 amounts of income from their unsecured creditors. 13 In addition to his Complaint, Tye filed a motion pursuant to 14 § 707(b)(2) and (3) asking the court to dismiss the Seiferts’ 15 entire bankruptcy case (“Case Dismissal Motion”). Tye based his 16 Case Dismissal Motion on essentially the same alleged facts as he 17 based his § 727 Claim.3 18 2 19 Tye did not expressly state in his Complaint which paragraphs of § 523(a) he was relying upon to support his 20 nondischargeability claims for relief, but the text of his Complaint makes reasonably clear that the grounds for his 21 nondischargeability claims were “fraud” (covered by § 523(a)(2)) 22 and “willful and malicious” injury (covered by § 523(a)(6)). 3 23 More specifically, Tye alleged in the motion to dismiss:
24 The Seifert bankruptcy is based on two overwhelming factors: (1) a massive gross income of $29,999.65, and 25 (2) a massive mortgage of $13,393.00 per month that, 26 having never been paid in the 39 months since the Seiferts obtained the mortgage, is now more than 27 $522,327.00 in arrears. Debtors used this mortgage, in addition to the 1/60 arrears payment, which comes to 28 (continued...)
3 1 The Seiferts filed a Civil Rule 12(b)(6) motion to dismiss 2 Tye’s adversary proceeding (“Adversary Dismissal Motion”) and 3 filed an opposition to Tye’s Case Dismissal Motion. The 4 Adversary Dismissal Motion was set to be heard on October 7, 5 2010. The Case Dismissal Motion initially was set to be heard on 6 September 15, 2010, but the court continued that hearing to 7 October 21, 2010, to give Tye an opportunity to support his 8 motion with admissible evidence and to give the Trustee and the 9 United States Trustee an opportunity to take a position on the 10 Case Dismissal Motion.4 11 3 12 (...continued) 8,705.45, to pad their debt burden by a total of 13 $22,098.45, even though they have never paid the mortgage in over three years, even though they clearly 14 do not intend to pay the mortgage, and even though they 15 could not afford to pay the mortgage even if they wanted to. Once this mortgage is properly excluded 16 from the calculations, Debtors have a tremendous amount of expendable income with which to pay their unsecured 17 claims. 18 Case Dismissal Motion (Aug 10, 2010) at 2:4-14. 19 4 The United States Trustee filed a response to Tye’s Case 20 Dismissal Motion on October 14, 2010, in which it essentially joined in the motion. The United States Trustee concluded that 21 the presumption of abuse under § 707(b)(2) did not apply to the Seiferts’ chapter 7 bankruptcy filing because the Seiferts 22 mathematically could satisfy § 707(b)(2)’s “means test.” 23 However, the United State Trustee also concluded that the Seiferts’ financial condition demonstrated their chapter 7 filing 24 was abusive under § 707(b)(3)(B). According to the United States Trustee, if the Seiferts removed from their budget discretionary, 25 excessive and unnecessary spending, instead of their listed 26 monthly deficit of expenses over income in the amount of $7,354.00, the Seiferts would have no less than $5,560.00 in 27 available monthly disposable income. While beyond the scope of this appeal, we further note that 28 (continued...)
4 1 On October 5, 2010, two days before the hearing on the 2 Adversary Dismissal Motion and several days before the hearing on 3 the Case Dismissal Motion, Tye drafted and signed a document 4 entitled “Notice of Settlement of Case & Dismissal of Creditor’s 5 § 727 Claim” (“Settlement Notice”).5 The entire text of the 6 Settlement Notice states: 7 Plaintiff Matthew Tye and Debtors / Defendants Michael & Robin Seifert hereby notify the Court that 8 they have settled their dispute and wish to take all motions and hearings off calendar. The parties will 9 settle the § 523 portion of the complaint and submit a dismissal for that portion once the settlement 10 performance is complete. 11 Pursuant to FRBP 7041 and FRCP 41(a)(1)(A)(I), Creditor Matthew Tye seeks to dismiss the 11 U.S.C. 12 § 727 claims in this Adversary proceeding, as to all parties. 13 14 Settlement Notice (Oct. 5, 2010) at p.1. 15 Based on the Settlement Notice, the court issued, on 16 October 6, 2010, a tentative ruling waiving the parties 17 appearances at the October 7, 2010 hearing. As the court put it, 18 19 4 (...continued) 20 the Seiferts purported to address the United States Trustee’s concerns by agreeing to convert their case to chapter 11; 21 however, the Seiferts immediately defaulted on their chapter 11 22 duties and were able to persuade the court to reconvert their case back to chapter 7. After reconversion of their case back to 23 chapter 7, the Seiferts ultimately stipulated with the United States Trustee to the dismissal of their bankruptcy case. The 24 bankruptcy court entered the agreed-upon dismissal order on February 27, 2012, just three days after oral argument in this 25 appeal. 26 5 The Seiferts’ counsel also signed the Settlement Notice. 27 The Seiferts’ counsel then filed the document with the court and, according to the attached proof of service, served it on both 28 the Trustee and the United States Trustee.
5 1 the Settlement Notice “indicated that [the parties] have arrived 2 at a settlement of the Sec. 523 portion of the complaint and 3 Plaintiff seeks to dismiss the Sec. 727 portion of the complaint 4 . . . .” In addition, the October 6, 2010 tentative ruling 5 directed the Seiferts’ counsel to prepare an order dismissing the 6 § 727 Claim and continuing the hearing on the § 523 Claim. 7 The next day, the Seiferts lodged a proposed order with the 8 court based on the court’s direction in the October 6, 2010 9 tentative ruling. The proposed order, entitled “[Proposed] Order 10 Dismissing § 727 Causes of Action; Approving Settlement of § 523 11 Causes of Action & Withdrawing § 707 Motion,” provided as 12 follows: 13 1. In satisfaction of the §523 causes of action in the Adversary Complaint, the Debtors agree to pay the 14 Creditor $15,000.00 in fifteen (15) monthly installment payments of $1,000.00 each, commencing November 1, 2010 15 and ending January 1, 2012 (hereinafter, the “Settlement Amount”); 16 2. The Debtors shall stipulate to a $30,000.00 Judgment 17 to the Creditor on the § 523 causes of action in the Adversary Complaint, which the Plaintiff will hold and 18 not file with the Court, unless the Debtors default on the Settlement Amount, and fail to cure the default 19 after 5 days written notice to Debtors’ counsel, Baruch Cohen at bcc4929@gmail.com); 20 3. The §727 causes of action in the Adversary 21 Complaint are hereby dismissed; 22 4. The Creditor’s § 707 Motion is hereby withdrawn and the October 21, 2010 hearing date is hereby vacated; 23 5. The Creditor’s State Court Complaint is hereby 24 dismissed; and 25 6. The court retains jurisdiction over the parties to enforce this settlement until performance in full of 26 the terms of the settlement. 27 Proposed Order (Oct. 7, 2010) at pp. 2-3. Making only minor, 28 non-substantive modifications, the bankruptcy court entered the
6 1 order as proposed on November 2, 2010 (“Settlement Order”).6 2 On November 15, 2010, Tye filed a motion to vacate the 3 Settlement Order. Tye claimed that the Settlement Notice 4 reflected only a tentative (as opposed to final) settlement 5 reached by the parties. According to Tye, the day after he filed 6 the Settlement Notice, he and Cohen reached an impasse as to 7 whether the settlement provided for immediate dismissals of all 8 of Tye’s claims and motions. Tye further claimed that, despite 9 the settlement impasse, Cohen lodged the proposed Settlement 10 Order without serving or otherwise notifying Tye. Tye argued 11 that, in order to be enforceable, his settlement with the 12 Seiferts needed to be reduced to a writing signed by both parties 13 (or agreed to in open court). Tye cited no legal authority to 14 support this argument; rather, his argument was fact-based. He 15 claimed, as a factual matter, that the parties intended that the 16 settlement only would be binding once it was reduced to a final 17 writing signed by both parties.7 18 Tye further asserted that Cohen had defrauded the court by 19 20 6 The proofs of service attached to the Settlement Order indicate that the Trustee was served both when the Settlement 21 Order was lodged and when the court entered it. Apparently, the 22 Settlement Order was not served at all on the United States Trustee, but the United States Trustee (as noted above) was 23 served with the Settlement Notice. 7 24 “Whether the parties intended only to be bound upon the execution of a written, signed agreement is a factual issue.” 25 Callie v. Near, 829 F.2d 888, 890-91 (9th Cir. 1987); see also 26 Andreyev v. First Nat. Bank of Omaha (In re Andreyev), 313 B.R. 302, 304-05 (9th Cir. BAP 2004) (holding that bankruptcy court 27 erred in approving unwritten settlement because the party seeking to enforce the settlement submitted no evidence showing that the 28 debtor had actually agreed to the settlement).
7 1 lodging the proposed Settlement Order without serving Tye. Even 2 though a proof of service showing email service on Tye was 3 attached to the proposed Settlement Order, Tye claimed: (1) he 4 never received his service copy of the proposed order, and 5 (2) Cohen did not actually serve him.8 6 Tye further claimed that Cohen defrauded the court by 7 supposedly modifying the settlement terms. According to Tye, 8 under the parties’ tentative settlement, the parties were to 9 defer dismissal of his § 523 Claims until the Seiferts had made 10 all required settlement payments. In contrast, Tye asserted that 11 the Settlement Order as drafted by Cohen provided for immediate 12 dismissal of his entire adversary proceeding, including the § 523 13 Claims.9 14 On November 18, 2010, Cohen filed a declaration in 15 opposition to Tye’s motion to vacate. In relevant part, Cohen 16 stated that he lodged the proposed Settlement Order because the 17 court had directed him to, and before his settlement-related 18 discussions with Tye completely fell apart. Cohen further 19 maintained that Tye drafted and sent him a written settlement 20 agreement, which Cohen and his clients signed and returned to 21 8 22 The only evidence that Tye offered in support of his claim that he was not served was his own declaration stating that Cohen 23 never served him with anything except for an opposition to Tye’s Case Dismissal Motion. According to Tye, all of Cohen’s proofs 24 of service amounted to perjury (except for the one attached to the opposition to the Case Dismissal Motion). 25 9 26 As it turned out, Tye later admitted in open court that he had misinterpreted the Settlement Order, that nothing in the 27 Settlement Order actually provided either for the dismissal of the entire adversary proceeding or specifically for the dismissal 28 of the § 523 Claims. See Hr’g Tr. (Dec. 9, 2010) at 11:12-13:7.
8 1 Tye. Even though Tye never signed the written settlement 2 agreement, Cohen asserted that it was binding on Tye because the 3 written, unsigned settlement agreement constituted Tye’s 4 settlement offer, which the Seiferts accepted by signing and 5 returning before Tye attempted to withdraw the offer. 6 Cohen attached to his declaration a long string of emails 7 between himself and Tye regarding their settlement discussions. 8 The colloquy took place between October 7 and October 12, 2010, 9 and as a factual matter demonstrates some doubt as to whether the 10 parties manifested their mutual assent to settle and, if so, what 11 constituted the material terms of their settlement. There were 12 several bones of contention discussed (collectively, “Settlement 13 Issues”): (1) whether the settlement should provide for immediate 14 dismissal of all claims in the Complaint as well as the Case 15 Dismissal Motion; (2) whether at some point Tye agreed to let the 16 bankruptcy court decide for the parties whether the adversary 17 proceeding should be immediately dismissed rather than held in 18 abeyance pending completion of the settlement payments; 19 (3) whether the Seiferts accepted Tye’s settlement offer by 20 signing and returning the written settlement agreement; 21 (4) whether the Seiferts rejected Tye’s settlement offer by 22 making a counteroffer before they signed and returned the written 23 settlement agreement; (5) whether Tye orally withdrew his 24 settlement offer before the Seiferts signed and returned the 25 written settlement agreement; and (6) whether the written 26 settlement agreement was enforceable even though Tye never signed 27 it. 28 Notwithstanding the above, the other basic terms of
9 1 settlement never were in dispute. The undisputed settlement 2 terms included, among other things, satisfaction of Tye’s fee 3 claim by the Seiferts timely making 15 monthly payments of 4 $1,000.00 each, and Tye’s entitlement to a stipulated 5 nondischargeable judgment in the amount of $30,000.00 if the 6 Seiferts defaulted on the settlement payments. 7 At a hearing held on December 9, 2010, the court denied 8 Tye’s motion to vacate. Tye attempted to argue that the parties 9 never reached a binding, enforceable settlement agreement. 10 However, the court rejected that argument. In pertinent part, 11 the court stated: “I think you have an enforceable settlement 12 when you submitted to me the [Settlement Notice].” Hr’g Tr. 13 (Dec. 9, 2010) at 9:8-11. Tye attempted to characterize the 14 Settlement Notice as merely notifying the court of a tentative 15 settlement between the parties, focusing on a single phrase in 16 the Settlement Notice, which used the future tense: “the parties 17 will settle the 523 claim.” Id. at 9:14-15. But the court 18 rejected Tye’s attempted characterization, essentially reasoning 19 that Tye’s characterization of that single phrase was 20 inconsistent with the Settlement Notice as whole, which 21 represented to the court that a settlement had been reached. Id. 22 at 9:19-25; see also id. at 2:10-3:15. 23 The bankruptcy court entered its order denying Tye’s motion 24 to vacate on September 7, 2011, and Tye timely appealed on 25 September 21, 2011. 26 JURISDICTION 27 The bankruptcy court had jurisdiction under 28 U.S.C. 28 § 157(b)(2)(I), (J) and (O), and we have jurisdiction under
10 1 28 U.S.C. § 158.10 2 ISSUE 3 Did the bankruptcy court abuse its discretion when it denied 4 Tye’s motion to vacate the Settlement Order? 5 STANDARDS OF REVIEW 6 “We review the bankruptcy court's decision on a motion to 7 vacate its judgment or order for an abuse of discretion.” United 8 Student Funds, Inc. v. Wylie (In re Wylie), 349 B.R. 204, 208 9 (9th Cir. BAP 2006) (citing Hammer v. Drago (In re Hammer), 10 112 B.R. 341, 345 (9th Cir. BAP 1990), aff'd, 940 F.2d 524 (9th 11 Cir. 1991)). 12 Under the abuse of discretion standard of review, we first 13 "determine de novo whether the [bankruptcy] court identified the 14 correct legal rule to apply to the relief requested." United 15 States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir.2009) (en banc). 16 And if the bankruptcy court identified the correct legal rule, we 17 then determine under the clearly erroneous standard whether its 18 factual findings and its application of the facts to the relevant 19 law were: "(1) illogical, (2) implausible, or (3) without support 20 in inferences that may be drawn from the facts in the record." 21 Id. (internal quotation marks omitted). 22 23 24 25 10 While the Settlement Order did not immediately and fully 26 dispose of Tye’s adversary proceeding, orders approving settlements are themselves typically considered final orders over 27 which we have jurisdiction. See, e.g., Goodwin v. Mickey Thompson Entm't Group, Inc. (In re Mickey Thompson Entm't Group, 28 Inc.), 292 B.R. 415, 419-20 (9th Cir. BAP 2003).
11 1 DISCUSSION 2 A. The bankruptcy court abused its discretion when it denied 3 Tye's motion to vacate the Settlement Order. 4 As a court of equity, a bankruptcy court may summarily 5 enforce a settlement agreement resolving a dispute that was 6 pending before that court. See Rains v. Finn (In re Rains), 7 428 F.3d 893, 907 (9th Cir. 2005)(citing City Equities Anaheim, 8 Ltd. v. Lincoln Plaza Dev. Co. (In re City Equities Anaheim, 9 Ltd.), 22 F.3d 954, 958 (9th Cir. 1994)). But before the court 10 may enforce the settlement, there must be a proper determination 11 that the parties entered into a binding settlement agreement. 12 Callie, 829 F.2d at 890. When the existence and/or the terms of 13 the settlement are in dispute, “the parties must be allowed an 14 evidentiary hearing.” Id.; see also In re Andreyev, 15 313 B.R. at 305 (holding that party seeking to enforce the 16 settlement has the burden of proof to establish that the 17 agreement existed). 18 Andreyev is particularly instructive. There, the creditor 19 filed a nondischargeability complaint against the debtor, and 20 trial was continued several times based on the parties’ 21 settlement discussions. The creditor filed a motion for approval 22 of the settlement, in which the creditor represented that the 23 parties had agreed to settle based on debtor’s promise to pay 24 $1,000 but that debtor had failed to sign a proposed stipulated 25 judgment and had failed to respond to the creditor’s inquiries. 26 Debtor did not respond to the settlement motion and did not 27 appear at the settlement motion hearing; however, after the court 28 granted the motion and entered the “stipulated” judgment, the
12 1 debtor filed a motion for reconsideration, saying that she missed 2 the hearing because of a medical condition and that she wanted to 3 litigate the nondischargeability action. Id. at 304. At the 4 hearing on the reconsideration motion, the debtor told the court 5 that she never agreed to the settlement. The court nonetheless 6 denied the reconsideration motion. 7 On appeal to this panel, we reversed and remanded, holding 8 that the bankruptcy court had abused its discretion in enforcing 9 the settlement. Id. at 304-05. The creditor argued that the 10 debtor had waived any objection to the settlement motion by not 11 filing a written opposition and by not appearing at the 12 settlement hearing, but we rejected that argument. Id. at 305. 13 As we explained there, “[t]he court has no discretion to enforce 14 a settlement where there are facts in dispute; the court must 15 hold [an evidentiary] hearing.” Id. at 304 (citing In re City 16 Equities Anaheim, Ltd., 22 F.3d at 958). 17 Here, Tye’s motion to vacate and the Seiferts’ opposition 18 thereto demonstrated that a dispute existed between the parties 19 regarding the existence and terms of their settlement agreement. 20 The parties disagreed whether the written settlement agreement 21 was binding given that it only was signed by the Seiferts and 22 their counsel, and disagreed whether the parties intended to be 23 bound by their other settlement communications in the absence of 24 a fully-executed formal written settlement agreement. They also 25 disagreed whether dismissal of Tye’s lawsuits (both in state 26 court and federal court) should be immediate or deferred pending 27 the completion of the settlement payments. 28 Here, the bankruptcy court did not hold an evidentiary
13 1 hearing. Moreover, it is clear from a fair reading of the entire 2 December 9, 2010 hearing transcript that the court only 3 considered the Settlement Notice and the Settlement Order in 4 determining that the parties had entered into a binding 5 settlement agreement.11 6 Consequently, the court erred in determining, without an 7 evidentiary hearing, that the parties had entered into a final 8 and binding settlement agreement, and in denying Tye’s motion to 9 10 11 When the bankruptcy court decided that a settlement had been reached based exclusively on the Settlement Notice and 11 Settlement Order, and refused to consider any of the parties’ 12 evidence submitted regarding the existence and the terms of that settlement, the bankruptcy court’s decision arguably could be 13 construed as the application of judicial estoppel against Tye. More specifically, because Tye represented to the court in the 14 Settlement Notice that a settlement had been reached, and because 15 the court relied on the Settlement Notice in entering the Settlement Order, it seems as if the bankruptcy court sub 16 silentio concluded that Tye should be judicially estopped from asserting that there was no settlement. 17 But this panel has held that judicial estoppel should not be applied when the remedy to be imposed could adversely impact the 18 rights of innocent third parties. See Cheng v. K & S Diversified 19 Invs., Inc. (In re Cheng), 308 B.R. 448, 454 (9th Cir. BAP 2004). Here, the so-called settlement purported not only to resolve 20 Tye’s § 523 Claims but also to dismiss the § 727 Claim, which implicated the rights of all of the Seiferts’ creditors and not 21 just Tye’s rights. See Rule 7041 and accompanying Advisory Committee Notes (giving bankruptcy court discretion, before 22 approving the dismissal of a § 727 action, to impose terms and 23 conditions on that dismissal in order to ensure that debtor would not “buy” his discharge from the plaintiff to the detriment of 24 his entire bankruptcy estate); Bank One v. Kallstrom (In re Kallstrom), 298 B.R. 753, 759 (10th Cir. BAP 2003) (noting that 25 Rule 7041 enables bankruptcy courts to prevent the “trafficking 26 of discharges”). In short, to the extent the bankruptcy court sub silentio applied judicial estoppel to conclude that a 27 settlement had been reached, such application was improper in light of the potential impact of the settlement on the Seiferts’ 28 bankruptcy estate as a whole.
14 1 vacate on that basis.12 2 B. Other considerations. 3 1. Mootness and Other Jurisdictional Issues 4 Citing Clear Channel Outdoor, Inc. v. Knupfer (In re PW, 5 LLC), 391 B.R. 25, 33 (9th Cir. BAP 2008), the Seiferts argued in 6 their appeal brief that this appeal is equitably moot. According 7 to the Seiferts, they have paid the full $15,000.00 in settlement 8 payments in reliance on the settlement, and it is not practicable 9 to unwind the settlement. But the burden of proof is on the 10 party claiming mootness to establish that circumstances have 11 occurred which have rendered the matter equitably moot. See 12 Palmdale Hills Prop., LLC v. Lehman Commercial Paper, Inc. (In re 13 Palmdale Hills Prop., LLC), 654 F.3d 868, 874 (9th Cir. 2011). 14 The Seiferts have not met this burden, because they have not 15 established that the bankruptcy court on remand could not order 16 Tye, if it determines it to be necessary and appropriate, to 17 disgorge the $15,000.00 in fees paid. See Focus Media, Inc. v. 18 Nat'l Broad. Co., Inc. (In re Focus Media, Inc.), 378 F.3d 916, 19 923-24 (9th Cir. 2004) (stating that appeal is not equitably moot 20 21 12 We note that Tye did not challenge the settlement as an improper dismissal of a § 727 action under Rule 7041. See 22 generally In re Kallstrom, 298 B.R. at 760 (upholding bankruptcy 23 court’s refusal to approve settlement and dismissal of § 727 action in quid pro quo exchange for payments to plaintiff). We 24 also note that neither the Trustee nor the United States Trustee objected to the settlement or participated in this appeal even 25 though both had at least some notice of both matters. Because no 26 one raised the argument, it has been waived for purposes of this appeal. See Barnes v. Belice (In re Belice), 461 B.R. 564, 569 27 n.4 (9th Cir. BAP 2011). But this does not mean that, on remand, the bankruptcy court is necessarily precluded from considering 28 the issue.
15 1 when court can return parties to status quo by ordering one party 2 to disgorge funds). 3 The Seiferts further contended at oral argument that, by 4 operation of Cal. Civil Code § 1473,13 this appeal has been 5 rendered moot because the “full performance” of their obligations 6 to Tye extinguished their obligations and those obligations 7 cannot be reinstated. But in making this argument, the Seiferts 8 are groundlessly assuming that the Settlement Order will not be 9 vacated on remand. Absent the settlement, the Seiferts would 10 need to show that Tye somehow waived any additional performance 11 beyond the Seiferts’ payment of the $15,000.00. See Sosin v. 12 Richardson 26 Cal.Rptr. 610, 613 (Cal. App. 1963) (stating that 13 party invoking Cal Civil Code § 1439 must allege and prove full 14 performance or waiver of full performance). 15 After oral argument, during a routine review of the 16 bankruptcy case docket, we discovered for the first time that the 17 underlying bankruptcy case had been dismissed as of February 27, 18 2012, based on a stipulation between the Seiferts and the United 19 States Trustee. 20 We note that the dismissal of the underlying bankruptcy case 21 does not render this appeal moot, because there still is a live 22 controversy between the parties regarding whether the settlement 23 13 24 Cal. Civil Code § 1473 provides: 25 Obligation extinguished by performance. Full 26 performance of an obligation, by the party whose duty it is to perform it, or by any other person on his 27 behalf, and with his assent, if accepted by the creditor, extinguishes it. 28
16 1 is binding. We further note that, notwithstanding the case 2 dismissal, the bankruptcy court retains jurisdiction to interpret 3 the Settlement Order and to determine whether it should be 4 enforced. See Aheong v. Mellon Mortg. Co. (In re Aheong), 5 276 B.R. 233, 242 (9th Cir. BAP 2002); Pavelich v. McCormick, 6 Barstow, Sheppard, Wayte & Carruth LLP (In re Pavelich), 229 B.R. 7 777, 780-81 (9th Cir. BAP 1999). 8 Finally, we note that nothing in § 349 requires a different 9 conclusion regarding the effect of the case dismissal on either 10 our jurisdiction or the bankruptcy court’s jurisdiction. A 11 number of courts have held that § 349 does not necessarily 12 invalidate or render moot bankruptcy court rulings not explicitly 13 referenced in the statute. See, e.g., In re Pavelich, 229 B.R. 14 at 780 (holding that § 349 did not invalidate discharge order); 15 Tri-River Chem. Co., Inc. v. TNT Farms (In re TNT Farms), 226 16 B.R. 436, 441-42 (Bankr. D. Idaho 1998) (holding that § 349 did 17 not invalidate lien granted in § 363 cash collateral order, and 18 citing Wytch v. Pac. Reconveyance (In re Wytch), 223 B.R. 190 19 (9th Cir. BAP 1998), rev'd on other grounds, 213 F.3d 645 (9th 20 Cir. mem. dec. March 24, 2000)). 21 2. Statute of Frauds 22 Both parties devoted a significant portion of their briefs 23 on appeal to the issue of whether the settlement was 24 unenforceable by virtue of California’s statute of frauds, Cal. 25 Civil Code § 1624(a)(1).14 26 14 27 Cal Civil Code § 1624(a)(1) provides:
28 (continued...)
17 1 However, the statute of frauds can be waived, and was waived 2 here, because Tye did not raise the statute in the bankruptcy 3 court. See 1 B.E. Witkin, SUMMARY OF CAL. LAW, Contracts (10th ed. 4 2005) § 344 (citing California cases holding that statute must be 5 raised or it is waived); see also Barnes v. Belice (In re 6 Belice), 461 B.R. 564, 569 n.4 (9th Cir. BAP 2011) (holding that 7 arguments not raised in the bankruptcy court can be deemed waived 8 for appeal purposes). 9 3. Declarations and Exhibits Attached to the Parties’ 10 Appeal Briefs; Belated Excerpts of Record 11 Both parties attached to their briefs new declarations in 12 which they attempted to introduce new evidence that was not 13 presented to the bankruptcy court at or before the time the court 14 entered the order appealed. Generally speaking, we cannot 15 consider these new materials. See Oyama v. Sheehan (In re 16 Sheehan), 253 F.3d 507, 512 n. 5 (9th Cir. 2001) ("[E]vidence 17 that was not before the lower court will not generally be 18 considered on appeal."); Kirschner v. Uniden Corp. of Am., 19 842 F.2d 1074, 1077–78 (9th Cir. 1988) (papers not filed or 20 admitted into evidence by the trial court prior to judgment on 21 appeal were not part of the record on appeal and thus stricken). 22 Except to the extent the declarations and the new exhibits 23 14 24 (...continued) (a) The following contracts are invalid, unless they, 25 or some note or memorandum thereof, are in writing and 26 subscribed by the party to be charged or by the party's agent: 27 (1) An agreement that by its terms is not to be 28 performed within a year from the making thereof.
18 1 are relevant to the mootness discussion above, we hereby deem 2 them stricken. 3 In addition, on February 17, 2012, just days before oral 4 argument before this panel, the Seiferts belatedly filed excerpts 5 of record. With the exception of one document, item number 21 in 6 the excerpts (a declaration of Robin Seifert), all of the 7 documents are properly part of the record on appeal. 8 Furthermore, because we previously lacked an appropriate excerpts 9 of record, we exercised our discretion to review the bankruptcy 10 court’s case docket and adversary proceeding docket as part of 11 our review of this appeal. See In re Belice, 461 B.R. at 569 12 n.2. As a result of our independent review, we had already 13 looked at all of the items properly included in the belated 14 excerpts of record. Consequently, Tye has not been prejudiced by 15 the belated filing of the excerpts of record, so we need not take 16 any action with respect thereto. 17 CONCLUSION 18 For all of the reasons set forth above, we VACATE the 19 court’s denial of Tye’s motion to vacate, and we REMAND with 20 instructions for the bankruptcy court to hold an evidentiary 21 hearing on the existence and terms of the parties’ settlement. 22 If the bankruptcy court, after the evidentiary hearing, 23 determines that the parties did not enter into a binding 24 settlement, then the bankruptcy court should vacate the 25 Settlement Order. 26 27 28