In re: Ruth M. Marroquin

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: May 22, 2013
• Docket: CC-12-1451-MoMkTa
• Status: Unpublished

Opinion

FILED MAY 22 2013 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 6 In re: ) BAP No. CC-12-1451-MoMkTa ) 7 RUTH M. MARROQUIN, ) Bk. No. LA 11-30683-VZ ) 8 Debtor. ) ______________________________) 9 ) RUTH M. MARROQUIN, ) M E M O R A N D U M1 10 ) Appellant. ) 11 ______________________________) 12 Argued and Submitted on February 21, 2013 at Pasadena, California 13 Filed - May 22, 2013 14 Appeal from the United States Bankruptcy Court 15 for the Central District of California 16 Honorable Vincent P. Zurzolo, Bankruptcy Judge, Presiding 17 Appearances: William Harold Brownstein, Esq. argued for 18 Appellant Ruth M. Marroquin. 19 Before: MONTALI,2 MARKELL and TAYLOR, Bankruptcy Judges. 20 Memorandum by Judge Markell 21 Dissent by Judge Montali 22 23 24 1 25 This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may 26 have (see Fed. R. App. P. 32.1), it has no precedential value. See 9th Cir. BAP Rule 8013-1. 27 2 Hon. Dennis Montali, Bankruptcy Judge for the Northern 28 District of California, sitting by designation. 1 2 Debtor-Appellant Ruth M. Marroquin (“Marroquin”), whose 3 prior bankruptcy case was dismissed with a bar on future filings 4 absent leave of court, appeals an order denying her request to 5 file a new bankruptcy case. Because Marroquin no longer desires 6 bankruptcy relief, the matter before us is moot and we will 7 dismiss this appeal. 8 I. BACKGROUND 9 Since 2009, Marroquin has filed four bankruptcy petitions. 10 She filed the first case under chapter 73 on March 17, 2009, and 11 received a discharge on September 14, 2009. The case was closed 12 on October 5, 2009. 13 Following the discharge, Marroquin lost her family residence 14 and her investment property, retaining a condominium (the 15 “Condo”) in Santa Monica. She filed her second case on April 15, 16 2010, as a foreclosure sale of the Condo was pending. This 17 chapter 13 case was dismissed on May 24, 2010, for failure to 18 file schedules. In a declaration filed in support of her motion 19 for leave to file a new case, Marroquin stated that she opted not 20 to continue prosecution of this 2010 case because a relative had 21 provided her with funds to cure the arrearages on the loans 22 secured by the Condo and the foreclosure sale had been cancelled. 23 Marroquin filed her third case (chapter 13) on February 16, 24 2011, which was dismissed on March 30, 2011, for failure to file 25 schedules. In her declaration in support of her motion for leave 26 3 27 Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and 28 to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. - 2 - 1 2 to file a new case, Marroquin stated that she had provided the 3 required documentation to her attorney, Siamek Nehoray 4 (“Nehoray”), but he failed to file it. Nehoray informed her of 5 his error and thereafter filed another chapter 13 case on May 12, 6 2011. Nehoray timely filed the plan, schedules and other 7 required documents, but did not file a motion to value the liens 8 on the Condo. 9 On May 20, 2011, the chapter 13 trustee served on Marroquin 10 and her counsel a notice setting forth performance and payment 11 requirements; the notice cautioned that if those requirements 12 were not met by the July 12, 2011, meeting of creditors, the 13 trustee would ask the court to dismiss the case. Such a 14 dismissal could have included a 180-day bar against refiling, as 15 the notice stated: 16 The Court may dismiss your case and restrict your ability to file any future bankruptcy case pursuant to Local Bankruptcy 17 Rule 3015-1 and 11 U.S.C. Sections 109(g)(1) and 349.4 18 Marroquin filed her chapter 13 plan on May 26, 2011. The 19 chapter 13 plan on its face noted that the court would hold a 20 confirmation hearing at 9:00 a.m. on February 13, 2012. The same 21 date and time for the confirmation hearing appeared in the notice 22 of creditors meeting and confirmation hearing filed and served by 23 24 4 Local Bankruptcy Rule 3015-1(c)(6) warns that failure to 25 comply with the requirements of subsection (c) could result in 26 dismissal of the case either (i) without prejudice or (ii) with a 180-day bar to refiling pursuant to 11 U.S.C. 27 § 109(g), if the court finds willful failure of the debtor to abide by orders of the court or to appear before the 28 court in proper prosecution of the case. - 3 - 1 2 Nehoray on July 10, 2011. That notice also warned of a possible 3 180-day bar, as it cautioned that: 4 Unexcused failure by the debtor(s) to appear at either the Section 341(a) meeting or the confirmation hearing may 5 result in dismissal of the case. The dismissal order may include a prohibition on filing any other bankruptcy case 6 for a period of 180 days pursuant to 11 U.S.C. § 109(g). 7 That notice was signed by Marroquin’s counsel. 8 The chapter 13 trustee filed an objection to confirmation of 9 Marroquin’s plan, warning again that failure to appear at the 10 confirmation hearing “may result in dismissal or conversion of 11 the case.” The objection enumerated five different grounds for 12 the trustee’s objection. U.S. National Bank also filed an 13 objection to confirmation, observing that Marroquin had filed 14 four cases since 2009 and had failed to provide for or include 15 its claim in her plan. 16 Marroquin’s case was called on the 9:00 a.m. calendar on 17 February 13, 2012. Nehoray was not present. Counsel for the 18 trustee stated: 19 In this matter, your Honor, Debtor is deficient one plan payment. We haven’t seen any mortgage declarations on the 20 two pieces of real property, and Debtor is ineligible for Chapter 13. 21 22 Transcript of February 13 Hearing at 1:8-11. 23 After the court observed that Marroquin had filed three 24 bankruptcy cases, trustee’s counsel and counsel for U.S. Bank 25 noted that the case was her fourth one, but her third within a 26 year. The court replied “O.K. I order the case dismissed under 27 section 349.” 28 - 4 - 1 2 The transcript reflects that other matters were then heard 3 by the court, after which Marroquin’s case was called again, with 4 Nehoray appearing. The court questioned why Nehoray had not been 5 on time previously and Nehoray replied that he had been running 6 late. 7 Thereafter the court and Nehoray engaged in a brief 8 colloquy, the essence of which was that Nehoray may have been 9 outside the courtroom when Marroquin’s case was called earlier 10 and that Nehoray had not checked in with the court reporter. The 11 court expressed concern that trustee’s counsel had arrived at 12 7:00 a.m., but Nehoray had not. 13 Trustee’s counsel then repeated his contentions about a plan 14 payment deficiency, the absence of mortgage declarations, and a 15 failure to provide 2009/2010 tax returns and to file the required 16 “rights and responsibilities” form.5 He also questioned 17 Marroquin’s eligibility to file this chapter 13 case. 18 Both counsel for the trustee and for U.S. Bank repeated to 19 the court that this was Marroquin’s fourth case. Nehoray stated 20 that Marroquin did not even know about one of the prior 21 bankruptcies. In response to the court’s query about the 22 untimeliness of the plan payments, Nehoray replied that Marroquin 23 had lost her husband and “wasn’t providing everything to me, but 24 she has made all the mortgage payments.” 25 The court’s disposition was short and to the point: 26 5 27 We assume the trustee’s counsel was referring to a Rights and Responsibilities Agreement between the Chapter 13 Debtor and 28 her counsel. - 5 - 1 2 The court: Yeah, the ruling stands. Case dismissed. Debtor is barred from filing any bankruptcy case - I’m using my 3 discretion under Section 349 - without filing a motion on twenty-one days of notice with admissible evidence served on 4 all creditors establishing cause as to why she should be able to file a bankruptcy case. 5 On February 4, 2012, the court issued an order and notice of 6 dismissal (the “Dismissal Order”) referring to the court’s 7 “findings and conclusions made at the confirmation hearing.” 8 The order provided that 9 (3) pursuant to Bankruptcy Code Section 349, debtor is 10 prohibited from filing any new bankruptcy petition unless: 11 (a) debtor files a motion to request permission to file a new bankruptcy case (‘Motion’), and the Motion is 12 supported by admissible evidence; 13 (b) the Motion is served upon all creditors; 14 (c) the Motion is set for hearing on regular notice; and 15 (d) the court grants the Motion. 16 Id. 17 Curiously, the docket entry for the Dismissal Order states, 18 in part, “Debtor Dismissed for 20 years. Barred Debtor 19 Marroquin, Ruth M. starting 2/14/2012 to 2/16/2032.” Thus, 20 despite the prior notices about a possible 180-day bar, the court 21 barred Marroquin either indefinitely (per the Order), or for 22 twenty years (per the docket), from filing another case without 23 complying with the terms set forth above. Marroquin did not 24 appeal the Dismissal Order and it is now final. 25 On July 9, 2012, Marroquin, represented by new counsel (who 26 represented her in her initial two cases and who represents her 27 in this appeal) filed an application for authority to file a new 28 - 6 - 1 2 bankruptcy case (the “Application”).6 Accompanying the 3 Application was a declaration by Marroquin reciting the history 4 of her prior filings, her employment of Nehoray, and Nehoray’s 5 admission to her of his failure to timely file various papers in 6 the February 2011 case. She explained that “during this time” 7 she had been caring for her bedridden husband (who passed away) 8 and her two children, and that she lost her job. She was 9 attempting to “restart her life,” and explained what she intended 10 to do in her new case if she were allowed to file it, including 11 her commitment to comply fully with the provisions of the 12 Bankruptcy Code, to file all required filings, to appear at all 13 hearings and to diligently pursue her case. Her counsel also 14 filed a declaration explaining his meeting with Marroquin in May 15 2012, and what he committed to do for her in a new chapter 13 16 case. He served all known creditors with the Application, 17 setting it for hearing on August 7, 2012. 18 No one appeared at the August 7 hearing other than 19 Marroquin’s counsel. Counsel repeated the request that the court 20 grant Marroquin authority to file, asking the court to “put a 21 very tight leash on it so that everything is done properly, and 22 this time it will be done right if the court’s kind enough to 23 grant our motion.” 24 The court responded that this was not an issue of kindness, 25 but an issue of whether or not Marroquin had carried her burden 26 6 27 In Marroquin’s Amended Opening Brief on appeal, her counsel describes the Application as a Motion For 28 Reconsideration. - 7 - 1 2 to show that there was a reasonable likelihood that she could 3 reorganize or obtain a discharge, the two legitimate purposes of 4 bankruptcy cases. Without citing to any specifics in Marroquin’s 5 prior cases, the court noted that she had utilized the bankruptcy 6 process in multiple filings primarily to obtain the benefit of 7 the automatic stay, and ignored those cases when it was 8 inconvenient or difficult for her or she just chose not to go 9 forward. The court concluded, in part: 10 [T]he fact that we have four bankruptcy cases prior - and I consider that and I consider the actions of Debtor in those 11 bankruptcy cases, I find that she has not carried her burden to show that she has a legitimate purpose for the filing of 12 this bankruptcy case and that she can mount a reasonable effort to reorganize or to obtain a discharge of debt. 13 14 The court denied the Application and, on August 17, 2012, entered 15 its order denying Marroquin’s motion for permission to file a new 16 bankruptcy case (the “Denial Order”). This timely appeal of that 17 order followed. 18 II. JURISDICTION 19 The bankruptcy court had jurisdiction under 28 U.S.C. § 157, 20 and we would normally have jurisdiction to review the Denial 21 Order under 28 U.S.C. § 158.7 At oral argument, however, counsel 22 stated that even if the panel were to reverse the Denial Order, 23 7 24 In her Amended Opening Brief, Marroquin argued that the Denial Order and the Dismissal Order were both improper, but, as 25 noted above, the Dismissal Order has become final. On January 23, 2013, we issued an order directing Marroquin to file 26 a supplemental brief no later than February 9 to show us why we could review the Dismissal Order. No such brief was filed; 27 counsel stated at oral argument that he had not received the January 23 order. He sought no further relief, nor asked us to 28 review the Dismissal Order, so we do not. - 8 - 1 2 Marroquin has no present intent to prosecute a bankruptcy case. 3 Under the circumstances, as discussed below, we do not have 4 jurisdiction to review the Denial Order. 5 III. ISSUE 6 Is this appeal moot? 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 9 - 1 2 IV. DISCUSSION 3 We must consider whether Marroquin’s counsel’s statement 4 that his client no longer needs bankruptcy relief renders the 5 appeal moot and deprives us of jurisdiction to afford Marroquin 6 any relief. See Motor Vehicle Cas. Co. v. Thorpe Insulation Co. 7 (In re Thorpe Insulation Co.), 677 F.3d 869, 880 (9th Cir. 2012) 8 (citing Felster Publ'g v. Burrell (In re Burrell), 415 F.3d 994, 9 998 (9th Cir. 2005)). 10 An appeal is considered moot, and does not present a live 11 case or controversy, when it would be impossible for us to grant 12 any effective or meaningful relief to an appellant even if it 13 were to prevail on the merits of its appeal. See id. 14 As a threshold matter, the problem for Marroquin here is the 15 Dismissal Order, not the Denial Order. The Dismissal Order is 16 certainly not moot, and it is likely preclusive, but it is final, 17 and not subject to appeal. We may not properly consider in this 18 appeal the wisdom and propriety of the Dismissal Order, which 19 requires Marroquin to comply with prefiling procedures and to 20 demonstrate legitimate need before she files bankruptcy. 21 The Denial Order, in contrast, has been properly appealed, 22 but it is moot; the preclusive effect, if any, of the Denial 23 Order that troubles the dissent is just too attenuated to support 24 a present live controversy, especially given the degree of 25 discretion built into the Dismissal Order upon presentation of 26 new evidence. 27 The fact that a future judge might see the Denial Order and 28 be influenced by it (which is as far as the matter might go

- 10 - 1 2 because he or she most certainly would not be bound by it) does 3 not save this appeal from being dismissed as moot. Any potential 4 future preclusive effect is hypothetical and is at most a 5 collateral legal consequence of the bankruptcy court’s decision. 6 When faced with such potential consequences, federal courts 7 generally consider vacatur, dismissing the appeal only after 8 vacating the order being appealed. See, e.g., Camreta v. Greene, 9 131 S.Ct. 2020, 2035-36 (2011); U.S. Bancorp Mortgage Co. v. 10 Bonner Mall Partnership, 513 U.S. 18, 25-28 (1994). Log Cabin 11 Republicans v. U.S., 658 F.3d 1162, 1168 (9th Cir. 2011). To the 12 extent the appeal is moot, such mootness arises from the actions 13 of the appellant (i.e., her choice not to pursue bankruptcy 14 relief even if she prevails). Consequently, vacatur does not 15 appear to be an option. See Bonner Mall 513 U.S. at 24-29, 16 (where mootness results from the voluntary forfeiture of legal 17 remedy by the losing party, the equitable remedy of vacatur is 18 surrendered). As noted by the Ninth Circuit: 19 Vacatur is in order when mootness occurs through happenstance . . . [or] the unilateral action of the 20 party who prevailed in the lower court.” Arizonans for Official English v. Arizona, 520 U.S. 43, 71-72, 117 21 S.Ct. 1055, 137 L.Ed.2d 170 (1997) (citation and internal quotation marks omitted). Vacatur is not 22 necessarily appropriate where mootness arises as a result of the voluntary actions of the party who lost 23 below. 24 United States v. Pattullo (In re Pattullo), 271 F.3d 898, 902 25 (9th Cir. 2001) (citation to Bonner Mall omitted). 26 Even though vacatur is not appropriate here, that does not 27 mean the potential collateral legal consequences of the unvacated 28 judgment make an appeal from that judgment any less moot. There

- 11 - 1 2 still is no live case or controversy. Accordingly, we DISMISS. 3 Dissent begins on next page. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

- 12 - 1 2 Montali, J, dissenting: 3 I respectfully dissent. I agree that an appeal is 4 considered moot, and does not present a live case or controversy, 5 when it would be impossible for us to grant any effective or 6 meaningful relief to Marroquin even if she were to prevail on the 7 merits of its appeal. Here, however, we could provide her with 8 effective relief, notwithstanding the statement of Marroquin’s 9 counsel at oral argument. As the Denial Order remains extant, it 10 precludes Marroquin from filing a case in the future, even the 11 very near future, particularly where the Dismissal Order provided 12 for either a 20 year ban or a lifetime ban. By addressing the 13 merits of Marroquin’s appeal, we would ensure that the Denial 14 Order has no preclusive effect and that she can file a future 15 case without the Denial Order barring such relief. 16 While section 349 does not specifically permit dismissal of 17 a case “with prejudice,” the Ninth Circuit has held that such 18 dismissals are authorized under appropriate circumstances.8 19 Leavitt v. Soto, 171 F.3d 1219 (9th Cir. 1999) (“Leavitt I”), 20 affirming 209 B.R. 935 (9th Cir. BAP 1997); Ellsworth, 455 B.R. 21 at 922. Dismissal with prejudice is a “drastic remedy reserved 22 for ‘extreme situations.’” Ellsworth, 455 B.R. at 922, quoting 23 Colonial Auto Center v. Tomlin (In re Tomlin), 105 F.3d 933, 937 24 (4th Cir. 1997). As BAP stated in Ellsworth: 25 [A] bankruptcy court rarely uses its authority to bar 26 8 In contrast, section 109(g) provides a specific 180-day bar 27 if a debtor’s case was dismissed for willful failure to abide by orders of the court or to appear before the court in proper 28 prosecution of the case.

- 1 - 1 2 the discharge of debts in a later case. In any court, a dismissal order that bars subsequent litigation is a 3 severe sanction warranted only by egregious misconduct. Given that the Bankruptcy Code’s central purpose is 4 remedial, i.e., to afford insolvent debtors an opportunity to enjoy a new opportunity in life with a 5 clear field for future effort, unhampered by the pressure and discouragement of preexisting debt, such 6 an order is particularly devastating in a bankruptcy case. For this reason, a permanent bar to discharge is 7 at times referred to as the capital punishment of bankruptcy, for it removes much of the benefit of the 8 bankruptcy system. 9 Ellsworth, 455 B.R. at 933, quoting Tomlin, 105 F.3d at 937. 10 The transcript of the hearing that led to the Dismissal 11 Order makes obvious that the court was frustrated with Nehoray’s 12 conduct and troubled by yet another case of a repeat filer. But 13 nothing in the record suggests that the court considered any of 14 Marroquin’s conduct egregious and certainly made no findings to 15 that effect. 16 Because section 109(g) provides a specific bar to refiling 17 when a debtor has had a prior case or cases dismissed for willful 18 failure to comply with court order, a dismissal with prejudice 19 requires more than multiple filings. Certainly there must be bad 20 faith. Leavitt I, 171 F.3d at 1224. To determine whether such 21 bad faith exists, the court should consider the following 22 factors: 23 (1) whether the debtor misrepresented facts in his or her petition or plan, unfairly manipulated the 24 Bankruptcy Code, or otherwise filed his or her chapter 13 petition or plan in an inequitable manner; 25 (2) the debtor’s history of filings and dismissals; 26 (3) whether the debtor only intended to defeat state 27 court litigation; and 28 (4) whether egregious behavior is present.

- 2 - 1 2 Id. 3 Although we are not reviewing the Dismissal Order, I note 4 that even though the warnings and notices provided to Marroquin 5 mentioned only the possibility of a 180-day bar, the court barred 6 her indefinitely unless she received court permission to file. 7 Moreover, apart from reciting Marroquin’s history of previous 8 findings, the court did not make any findings as to the other 9 three factors identified in Leavitt I. Implicit in the Dismissal 10 Order is a further requirement of court approval of any 11 subsequent bankruptcy filing, but absent from the order are any 12 standards beyond supporting such a request with admissible 13 evidence, service on all creditors, and setting it for hearing. 14 Marroquin filed exactly what was required by the Dismissal 15 Order, supported it by two sworn declarations, and served it on 16 all creditors with adequate notice. In the Application, she 17 explained the circumstances of her chapter 13 cases in 2010 and 18 2011. In the first instance, she dismissed her case because she 19 was able to reinstate her loan on the Condo and in the second 20 case she had provided the necessary documents to her counsel who 21 failed to file them. She further explained how she had engaged 22 new counsel, intended to deal with existing defaults in a 23 chapter 13 plan, keep the Condo, keep payments current, and cure 24 the arrearages once the correct amount was determined. She 25 stated that she intended to fully comply with the provisions of 26 the Bankruptcy Code, to timely file all required filings, to 27 appear at all hearings, and to diligently pursue her case. She 28 added that there was no current notice of default or foreclosure

- 3 - 1 2 and that she wanted to seek a valuation of the property and to 3 determine arrearages owed to her creditors. 4 The court made no determination of whether she had complied 5 with the Dismissal Order. Clearly she had. Instead, it focused 6 on the existence of the prior cases and reiterated its view of 7 the Debtor’s motivations for filing them. It did not examine 8 whether any of the other “bad faith” factors existed. Debtor, 9 however, did explain the circumstances for filing those cases and 10 did state that she was prepared to prosecute fully her chapter 13 11 case. Given these representations, and given that the court 12 based its denial of leave to file the new case primarily on the 13 existence of the prior cases (when section 109(g) provides the 14 remedy for that particular issue), I believe that the court 15 abused its discretion in entering the Denial Order, especially as 16 nothing in the record demonstrated egregious or other conduct to 17 support a bad faith finding that would justify dismissal of the 18 new case under section 1307. 19 Marroquin should not have suffered the draconian 20 consequences of the 20 year or lifetime ban of the Dismissal 21 Order. Just as any other debtor who endures and outlasts a 22 180-day bar may file again, Marroquin should be able to. We 23 should reverse the Denial Order. Therefore I dissent from the 24 dismissal of this appeal. 25 26 27 28

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