In re: Rick David Belcastro

United States Bankruptcy Appellate Panel for the Ninth Circuit·Decided October 15, 2019·No. NV-19-1008-LBKu·Unpublished

Opinion

FILED

OCT 15 2019

NOT FOR PUBLICATION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. NV-19-1008-LBKu RICK DAVID BELCASTRO, Bk. No. 2:17-bk-11115-abl Debtor. Adv. No. 2:17-ap-01197-abl

GREGORY KELLY, MEMORANDUM*

Appellant.

Argued and Submitted on September 26, 2019 at Pasadena, California

Filed – October 15, 2019

Appeal from the United States Bankruptcy Court for the District of Nevada

Honorable August B. Landis, Bankruptcy Judge, Presiding

Appearances: Appellant Gregory Kelly argued pro se.

*

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.

Before: LAFFERTY, BRAND, and KURTZ, Bankruptcy Judges.

INTRODUCTION

Gregory Kelly appeals the bankruptcy court’s dismissal of his adversary proceeding against Debtor under §§ 523 and 727.1 Debtor died during the pendency of that proceeding, and Mr. Kelly was formally served with a notice of death. Mr. Kelly admits he was aware of Civil Rule 25, which requires a motion to substitute a successor to be filed within 90 days of the notice of death. He did not timely file such a motion or request an extension of the time to do so. The bankruptcy court thus dismissed the adversary proceeding with prejudice and denied Mr. Kelly’s subsequent motion for reconsideration.

Finding no error in the bankruptcy court’s interpretation of Civil Rule 25 or abuse of discretion in its denial of reconsideration, we AFFIRM.

FACTUAL BACKGROUND 2

Debtor Rick David Belcastro filed a chapter 7 petition in March 2017.

1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532. All “Rule” references are to the Federal Rules of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of Civil Procedure.

2 Mr. Kelly did not provide a complete record on appeal. We have thus exercised our discretion to review the bankruptcy court’s electronic docket and pleadings. 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).

Mr. Kelly, as assignee of a $36,083 unsecured debt owed by Debtor, filed a timely complaint objecting to dischargeability of that debt under § 523(a)(2)(A) and seeking denial of Debtor’s discharge under §§ 727(a)(2)(A), (a)(3), and (a)(4)(A). Debtor filed an answer, and the matter was set for trial.

In January 2018, during the pendency of the adversary proceeding, Debtor passed away. On March 30, 2018, Debtor’s counsel, Scott Cantor, filed a Suggestion of Death informing the court that Mr. Belcastro was deceased. It is undisputed that the parties to the adversary proceeding, including Mr. Kelly, were served electronically with the Suggestion of Death. Thereafter, Mr. Cantor moved to withdraw as counsel for the Debtor; the bankruptcy court entered an order granting the motion on August 30, 2018.

In the meantime, Mr. Kelly filed a motion for partial summary judgment seeking entry of judgment on the § 727(a)(4) claim for false oath. No opposition was filed, and at the initial hearing on the motion on September 4, 2018, the bankruptcy court deemed the matter submitted and indicated it would announce its oral ruling on September 24, 2018, the date set for trial. The court also commented: “The Court notes that . . . the only substantive issue that’s raised by this adversary proceeding and the motion for summary judgment is whether or not a decedent ought to get a chapter 7 discharge in his bankruptcy case. I'll deal with that on the date and time

that I’ve referenced on the record.” Hr’g Tr. (Sept. 4, 2018) at 4:7-11.

At the September 24 hearing, the bankruptcy court found that Mr. Kelly’s summary judgment evidence established by a preponderance of the evidence the elements of the § 727(a)(4)(A) claim and that no genuine issue of material fact remained for trial.3 The court, however, declined to enter an order granting summary judgment on that claim. The court instead dismissed the entire complaint with prejudice because Mr. Kelly had failed to move for substitution of a proper party within 90 days after being served with the Suggestion of Death as required by Civil Rule 25(a), applicable in bankruptcy via Rule 7025.4 The court entered an order dismissing the adversary proceeding on September 25, 2018.

Thereafter, Mr. Kelly filed three motions. First, he filed a timely motion for reconsideration. In the motion, Mr. Kelly stated that he had been aware of Civil Rule 25 since March 30, 2018 (the date the Suggestion of Death was filed). He indicated that he chose not to file a motion for substitution because: (1) the Suggestion of Death had not been served on nonparties as required by Civil Rule 25, so he believed the 90-day time period had not been triggered; and (2) he had been unable to identify a

3 A § 727 claim is not extinguished upon the death of a chapter 7 debtor. KOB v.

Brand (In re Brand), 545 B.R. 37, 39 (Bankr. C.D. Cal. 2016) (citing Hawkins v. Eads (In re Eads), 135 B.R. 380, 385-86 (Bankr. E.D. Cal. 1991)).

4 As the Suggestion of Death had been filed and served on March 30, 2018, the court found that the 90-day deadline expired June 28, 2018.

“legitimate substitute party” to represent Debtor’s probate estate in the adversary proceeding. He noted that neither the original nor the successor personal representative, nor the attorney for the Debtor’s probate estate, had been served with the Suggestion of Death,5 and, in any event, none of those individuals wanted to be involved in the adversary proceeding, so he believed they would have opposed any motion to substitute. He attached a copy of an email he had sent to the attorney for the probate estate on March 31, 2018, and her response dated April 2, 2018, in which she indicated that the probate estate would not be involved in the bankruptcy unless so directed by the chapter 7 trustee. He asserted that his failure to file a motion to substitute was due to excusable neglect such that the bankruptcy court should extend the 90-day deadline.

Mr. Kelly also complained that he had been unfairly blindsided by the court’s ruling because the bankruptcy court never mentioned Civil Rule 25 at the September 4 hearing or a September 12 pre-trial conference,6 so he never had an opportunity to present his arguments regarding his noncompliance with the rule.

Mr. Kelly also filed a timely motion for a new trial or an amendment

5 Copies of Nevada state court documents attached to the motion for reconsideration indicated that the first personal representative was appointed on March 23, 2018, and the successor personal representative on July 25, 2018.

6 For reasons that are not clear, there is no record of such a pre-trial conference on the court’s docket.

to the judgment under Civil Rule 59 and a motion to extend the time to file a motion to substitute the proper party.

The court denied all three motions on the record at a hearing on December 18, 2018, entering a written order on December 27, 2018. Mr. Kelly timely appealed.

JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and 157(b)(2)(I) and (J). We have jurisdiction under 28 U.S.C. § 158.

ISSUES

Did the bankruptcy court err in dismissing the adversary proceeding for Mr. Kelly’s failure timely to substitute a party in accordance with Civil Rule 25 after the death of Debtor-Defendant?

Did the bankruptcy court abuse its discretion in denying reconsideration?

STANDARDS OF REVIEW

“The proper interpretation of Rule 25(a) is a question of law that we review de novo. Factual findings relevant to the application of Rule 25(a) are reviewed for clear error.” Barlow v. Ground, 39 F.3d 231, 233 (9th Cir. 1994) (citations omitted).

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