In re: Gary Olyn Armstrong, 9th Cir. BAP (2013)

7/25/2019 In re: Gary Olyn Armstrong, 9th Cir. BAP (2013)

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Thi s di sposi t i on i s not appr opr i at e f or publ i cat i on.Al t hough i t may be ci t ed f or whatever persuasi ve val ue i t may have( see Fed. R. App. P. 32. 1) , i t has no pr ecedent i al val ue. See 9t hCi r . BAP Rul e 8013- 1.

2 I n an or der ent er ed on J ul y 6, 2012, t he Panel det er mi nedt hat t hi s mat t er was sui t abl e f or di sposi t i on wi t hout or alar gument . Fed. R. Bankr . P. 8012; 9t h Ci r . BAP Rul e 8012- 1.

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

I n r e: ) BAP Nos. CC- 11- 1554- Ki RnPa) CC- 11- 1476- Ki RnPa

GARY OLYN ARMSTRONG, ) ( Consol i dat ed))

Debt or . ) Bk. No. 11- 35606- BB )

) Adv. No. 11- 02358- BBGARY OLYN ARMSTRONG, )

)Appel l ant , )

)v. ) M E M O R A N D U M1

)I NTERNAL REVENUE SERVI CE; )MOTI ON PI CTURE I NDUSTRY )PENSI ON & HEALTH PLANS; )MOTI ON PI CTURE I NDUSTRY )PENSI ON & I NDI VI DUAL ACCOUNT )PLAN; STATE OF CALI FORNI A )FRANCHI SE TAX BOARD, )

)Appel l ees. )

______________________________)

Submi t t ed Wi t hout Or al Ar gumenton September 20, 20122

Fi l ed - Apr i l 8, 2013

Appeal f r om t he Uni t ed St at es Bankrupt cy Cour tf or t he Cent r al Di str i ct of Cal i f or ni a

Honor abl e Sher i Bl uebond, Bankrupt cy J udge, Presi di ng

Appear ances: Appel l ant Gar y Ol yn Ar mst r ong pr o se on br i ef ;

FILEDAPR 08 2013

SUSAN M SPRAUL, CLERKU.S. BKCY. APP. PANELOF THE NINTH CIRCUIT


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3 Hon. Thomas M. Renn, Bankr upt cy J udge f or t he Di st r i ct of

Or egon, si t t i ng by desi gnat i on.4 Unl ess speci f i ed ot her wi se, al l chapt er , code and r ul e

r ef er ences ar e t o t he Bankrupt cy Code, 11 U. S. C. 101- 1532, andt he Federal Rul es of Bankr upt cy Procedur e, Rul es 1001- 9037. TheFeder al Rul es of Ci vi l Pr ocedur e ar e r ef er r ed t o as Ci vi l Rul es.

5 The I RS has not appear ed i n t hi s appeal .

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Kamal a C. Harr i s, Paul D. Gi f f ord, W. Dean Fr eeman,and Mar l a K. Markman on br i ef f or Appel l eeCal i f or ni a Fr anchi se Tax Boar d; J oseph A. Hokanskiand Mel vi n Yee of Bush Got t l i eb et al ALC on br i eff or Appel l ee Mot i on Pi ct ur e I ndust r y Pensi on andHeal t h Pl ans.

Bef ore: KI RSCHER, RENN3 and PAPPAS, Bankr upt cy J udges.

I n t hese consol i dat ed appeal s, appel l ant , chapt er 74 debt or

Gar y Ol yn Ar mst r ong ( Ar mst r ong) , appeal s t hr ee or der s f r om t he

bankr upt cy cour t : ( 1) t he or der di smi ssi ng hi s f i r st chapt er 7

case f or f ai l ur e t o obt ai n pr epet i t i on counsel i ng under 109( h)

( Bankr upt cy Di smi ssal Or der ) ; ( 2) t he or der di smi ssi ng hi s f i r stadver sary pr oceedi ng ( Adver sary Di smi ssal Or der ) agai nst t he

I nt er nal Revenue Ser vi ce ( I RS) , 5 t he Cal i f or ni a Franchi se Tax

Boar d ( FTB) , and t he Mot i on Pi ct ur e I ndust r y Pensi on & Heal t h

Pl ans and Mot i on Pi ct ur e I ndust r y Pensi on & I ndi vi dual Account

Pl an ( col l ect i vel y MPI PHP) ( al l t hr ee def endant s col l ect i vel y

Def endant s) ; and ( 3) t he or der denyi ng hi s mot i on t o r econsi der

t he Adver sary Di smi ssal Or der ( t he Reconsi der at i on Or der ) .

Because t he appeal of t he Bankr upt cy Di smi ssal Or der i s

unt i mel y, we DI SMI SS i t f or l ack of j ur i sdi ct i on. As f or t he

Adver sary Di smi ssal Or der , al t hough t he bankrupt cy cour t appl i ed

an i ncor r ect st andar d of l aw when i t di smi ssed t he f i r st adver sar y


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pr oceedi ng, such err or was harml ess because t he recor d support s

t he cour t s deci si on not t o r et ai n j ur i sdi ct i on over Ar mst r ong s

r el at ed cl ai ms agai nst Def endant s, and we t her ef or e AFFI RM.

However , as expl ai ned more thoroughl y bel ow, t he appeal of t he

Adver sar y Di smi ssal Or der as t o MPI PHP i s DI SMI SSED as MOOT.

Fi nal l y, as f or t he Reconsi der at i on Or der , despi t e t he l egal er r or

by t he bankrupt cy cour t i n di smi ssi ng Ar mst r ong s f i r st adver sary

pr oceedi ng, we AFFI RM.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

A. The first bankruptcy case (11-35606)

Ar mst r ong worked i n t he mot i on pi ct ur e and ent er t ai nmenti ndust r y f r om 1943 unt i l 1999. Appear i ng pr o se, Ar mst r ong f i l ed

a skel et al chapt er 7 bankrupt cy case on J une 14, 2011. Al l

r equi r ed document s not f i l ed wi t h t he pet i t i on, i ncl udi ng t he

Cer t i f i cat e of Cr edi t Counsel i ng, wer e due by J une 28, 2011.

Al ong wi t h hi s skel et al pet i t i on, Ar mst r ong f i l ed a mot i on

seeki ng an exempt i on f r om pr epet i t i on cr edi t counsel i ng due t o

exi gent ci r cumst ances. I n shor t , Ar mst r ong cont ended t hat he

shoul d be exempt f r om cr edi t counsel i ng because he di d not use

cr edi t and because he had onl y two al l eged cr edi t or s - t he I RS and

FTB. Ar mst r ong al so i ndi cat ed t hat he coul d not af f or d cr edi t

counsel i ng due t o hi s subsi st ent soci al secur i t y i ncome, whi ch di d

not even cover hi s mont hl y r ent . No not i ce of hear i ng was f i l ed.

On J une 27, 2011, t he bankr upt cy cour t i ssued an order t o

show cause ( OSC) as t o why Ar mst r ong' s chapt er 7 case shoul d not

be di smi ssed f or f ai l ur e t o f i l e a Cer t i f i cat e of Cr edi t

Counsel i ng. Accor di ng t o t he OSC, Ar mst r ong had not pr esent ed

suf f i ci ent evi dence t o demonst r at e t hat he was ent i t l ed t o a


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t empor ar y wai ver of , or exempt i on f r om, t he pr epet i t i on cr edi t

counsel i ng r equi r ement under 109( h) . A hear i ng was set f or

J ul y 20, 2011, and any r esponses t o t he OSC wer e due by J ul y 6.

On J ul y 5, 2011, Ar mst r ong f i l ed a r esponse t o t he OSC,

cont endi ng t hat he di d not consent t o t he bankrupt cy cour t ' s

j ur i sdi ct i on t o r esol ve any mat er i al di sput ed f act s, and

r equest i ng t hat t he cour t r evi ew hi s pr evi ousl y- f i l ed mot i on

seeki ng an exempt i on f r om pr epet i t i on cr edi t counsel i ng, whi ch he

t hought woul d be aut omat i cal l y set f or hear i ng or f or war ded t o t he

bankrupt cy j udge f or r evi ew.

On J ul y 6, 2011, t he cl er k i ssued a Fi nal Not i ce i nst r uct i ngAr mst r ong t o f i l e hi s Cer t i f i cat e of Cr edi t Counsel i ng by no l at er

t han J ul y 20, 2011, or hi s case woul d be di smi ssed.

On J ul y 18, 2011, Ar mst r ong f i l ed a Cer t i f i cat e of Cr edi t

Counsel i ng, whi ch st at ed t hat he compl et ed t he r equi r ed cour se vi a

t he I nt er net on J ul y 17, 2011.

The OSC hear i ng went f or war d on J ul y 20, 2011. Accor di ng t o

t he Bankrupt cy Di smi ssal Or der ent er ed on J ul y 28, 2011, t he

bankrupt cy cour t di smi ssed Ar mst r ong' s chapt er 7 case f or t he

r easons set f or t h on t he r ecor d. Ar mst r ong di d not pr ovi de a

copy of t he t r anscr i pt i n t he r ecor d, and i t i s not avai l abl e on

t he el ect r oni c docket . However , we do have a copy of t he cour t ' s

t ent at i ve r ul i ng i ssued on J ul y 20:

Congr ess has draf t ed t he bankr upt cy code i n such a way as

t o r equi r e t hat an i ndi vi dual compl et e a cr edi tcounsel i ng cour se i n or der t o be el i gi bl e t o f i l ebankrupt cy. Ther e ar e a handf ul of except i ons t o t hi sr ul e, none of whi ch appear t o be appl i cabl e her e.Di smi ss case, as debt or f ai l ed t o compl et e pr epet i t i oncredi t counsel i ng cour se and i s t her ef or e i nel i gi bl e t obe a debt or i n t hi s bankrupt cy case.


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assessed and col l ect ed t axes he di d not owe, whi ch vi ol ated hi s

due pr ocess r i ght s. Ar mst r ong al l eged t hat t he I RS was a pr i vat e

cor por at i on and r esi dent of Puer t o Ri co. Ar mst r ong f ur t her

al l eged that t he MPI PHP had been i mpr oper l y gar ni shi ng hi s pensi on

benef i t s si nce Febr uar y 2006. I n hi s at t ached Proposed

J udgment s, Ar mst r ong sought approxi mat el y $20 mi l l i on i n damages,

payabl e i n gol d or si l ver coi ns wi t hi n t hi r t y days of ent r y of

j udgment . Per t he summons i ssued on J une 16, 2011, Def endant s had

t o r espond t o Ar mst r ong s compl ai nt by J ul y 18, 2011.

The compl ai nt and summons wer e sent t o Def endant s on J une 21,

2011. For t he MPI PHP, t he compl ai nt and summons were mai l ed t oPensi on Depar t ment , Mot i on Pi ct ur e I ndust r y Pensi on and Heal t h

Pl ans 11365 Vent ur a Bl vd. #300 St udi o Ci t y, Cal i f or ni a 91604.

For t he I RS, t he compl ai nt and summons were mai l ed t o I nt ernal

Revenue Servi ce 7 Tabonuco St r eet Guaynabo, Puer t o Ri co 00968.

For t he FTB, t he summons and compl ai nt were mai l ed t o St at e of

Cal i f orni a Fr anchi se Tax Boar d 9646 But t er f i el d Way Sacrament o,

Cal i f orni a 95827. When none of t he Def endant s r esponded by

J ul y 18, 2011, on J ul y 19 Ar mst r ong r equest ed and r ecei ved f r om

t he cl er k ent r i es of def aul t agai nst Def endant s under Rul e

7055( a) .

Ar mst r ong moved f or def aul t j udgment agai nst t he Def endant s

on August 8, 2011. I n hi s at t ached decl ar at i on, Ar mst r ong st at ed

t hat al l par t i es wer e pr oper l y ser ved, t hat t hey had f ai l ed t o

t i mel y r espond, and t hat he had obt ai ned a def aul t agai nst each of

t hem. Ar mst r ong cont ended he was ent i t l ed t o appr oxi matel y

$14 mi l l i on i n damages.

On August 18, 2011, counsel f or MPI PHP, onl y r ecent l y


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8 The Panel can t ake j udi ci al not i ce of document s f i l ed wi t ht he bankrupt cy cour t t hr ough t he el ect r oni c docket i ng syst em.O Rour ke v. Seaboar d Sur . Co. ( I n r e E. R. Feger t , I nc. ) , 887 F. 2d955, 957- 58 ( 9t h Ci r . 1989) .

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becomi ng aware of Ar mst r ong' s sui t , at t empt ed t o cont act Ar mst r ong

t o i nf or m hi m t hat hi s compl ai nt and summons wer e not pr oper l y

served, and t o ask hi m t o set asi de t he def aul t so the mat t er

coul d be adj udi cated on t he mer i t s. Despi t e at t empt s t o r each

Ar mst r ong by phone, messenger and FedEx, counsel r ecei ved no

r esponse f r om Ar mst r ong.

On August 22, 2011, MPI PHP f i l ed a uni l at er al st at us r epor t

st at i ng t hat i t woul d f i l e a mot i on t o set asi de t he def aul t f or

def ect i ve ser vi ce, l ack of subj ect mat t er j ur i sdi ct i on, and

because Ar mst r ong' s chapt er 7 case had been di smi ssed on J ul y 28,

2011. MPI PHP f ur t her i nt ended t o f i l e a mot i on t o di smi ss t headver sary pr oceedi ng under Ci vi l Rul e 12( b) ( 6) .

The bankrupt cy cour t hel d a st at us conf er ence on August 23,

2011. Accor di ng t o t he cour t ' s t ent at i ve r ul i ng, i t was pr epar ed

t o di smi ss t he adver sary pr oceedi ng:

I t appear s t hat def aul t s wer e ent er ed i n er r or , as t hedocket does not r ef l ect evi dence t hat def endant s wer eser ved wi t h copi es of t he summons and compl ai nt .Under l yi ng bankr upt cy case was di smi ssed on J ul y 28,2011, based on debt or ' s f ai l ur e t o obt ai n pr epet i t i oncredi t counsel i ng. I n l i ght of t he nat ur e of t hi scompl ai nt , di smi ssal of t he under l yi ng bankrupt cy casedepr i ves t hi s cour t of j ur i sdi ct i on t o adj udi cat e t her el evant cl ai ms. Ent er or der di smi ssi ng adver sar ypr oceedi ng.

Tent at i ve Rul i ng ( Aug. 23, 2011) . We have no t r anscr i pt f r om t he

August 23 hear i ng i n t he r ecor d, but i t i s avai l abl e on t he

bankrupt cy cour t ' s el ect r oni c docket . 8 Ar mst r ong, t he MPI PHP and

t he FTB appear ed. The bankrupt cy cour t expl ai ned t hat i t s


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j ur i sdi ct i on was l i mi t ed and, because Ar mst r ong' s chapt er 7 case

had been di smi ssed, i t no l onger had j ur i sdi ct i on t o adj udi cat e

t he sui t . The cour t t hen di smi ssed t he adver sary pr oceedi ng f or

l ack of j ur i sdi ct i on, but t ol d Ar mst r ong t hat he coul d f i l e a

second bankr upt cy case and a second adver sar y compl ai nt :

So t he Cour t wi l l pr epar e - - an or der di smi ssi ng act i onf or l ack of subj ect mat t er j ur i sdi cti on.

I f you br i ng a new bankr upt cy, f i l e a new bankr upt cy andt hat one st i cks, you coul d f i l e a new l awsui t . But i nt hi s bankrupt cy, t hi s l awsui t has t o go away because Idon' t have a bankr upt cy anymore. I don' t have any morej ur i sdi ct i on.

Ther e ar e cer t ai n t hi ngs t hat I keep af t er cases have

been di smi ssed. Thi s i sn' t one of t hem.Hr ' g Tr . ( Aug. 23, 2011) 5: 13- 21. The bankrupt cy cour t ent er ed

t he Adver sar y Di smi ssal Or der on Sept ember 2, 2011.

Meanwhi l e, on Sept ember 1, 2011, Ar mst r ong had f i l ed hi s

Fi r st Not i ce of Appeal af t er t he cour t ' s or al r ul i ng, whi ch

ment i oned t he Adver sar y Di smi ssal Or der but i ncl uded onl y a copy

of t he Bankrupt cy Di smi ssal Or der . Under Rul e 8002( b) , t he

pr emat ur e Fi r st Not i ce of Appeal appeal i ng t he Adver sary Di smi ssal

Or der was cured when t hat order was ent ered on September 2.

However , Ar mst r ong wi t hdr ew t he Fi r st Not i ce of Appeal .

Deci di ng t o pur sue an al t er nat i ve cour se, Ar mst r ong f i l ed a

t i mel y mot i on t o r econsi der t he Adver sary Di smi ssal Or der on

September 14, 2011. Ar mst r ong argued t hat when t he bankrupt cy

cour t di smi ssed hi s chapt er 7 case and t he adver sar y pr oceedi ng,

i t vi ol at ed t he U. S. and Cal i f or ni a const i t ut i ons, t he J udi ci ar y

Act of 1789, sect i ons of Ti t l e 18 and var i ous J udi ci al Cannons.

Ar mst r ong al so chal l enged t he const i t ut i onal i t y of 109( h) .

The bankrupt cy cour t ent er ed t he Reconsi der at i on Or der


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9 MPI PHP has f i l ed a r equest aski ng t he Panel t o t akej udi ci al not i ce of Ar mst r ong s second bankrupt cy case and secondadver sary pr oceedi ng. I t ems not bef or e t he bankrupt cy cour tgener al l y wi l l not be consi der ed unl ess t hey per t ai n t o moot nesst hat ar ose af t er t he or der on appeal . See Gr aves v. Myrvang( I n r e Myrvang) , 232 F. 3d 1116, 1119 ( 9t h Ci r . 2000) ; Ki r shner v.Uni den Corp. of Am. , 842 F. 2d 1074, 1077 ( 9t h Ci r . 1988) . Becauset hese subsequent event s have r endered at l east some of t he appeal sat i ssue moot , we exer ci se our di scr et i on t o consi der t hem.Accor di ngl y, MPI PHP s r equest i s GRANTED t o t he extent t hat t he

Panel wi l l t ake not i ce of t he f act of t he f i l i ngs and document scont ai ned i n t he second bankr upt cy case and second adver sar ypr oceedi ng. However , no ext r aj udi ci al f act s ment i oned i n t hosedocument s shal l be deemed concl usi vel y est abl i shed as a r esul t ofgr ant i ng t hi s r equest . See Wet her bee v. Wi l l ow Lane, I nc.( I n r e Best way Pr ods. , I nc. ) , 151 B. R. 530, 540- 41 n. 3 ( Bankr.E. D. Cal . 1993) ; cf . Lee v. Ci t y of L. A. , 250 F. 3d 668, 690 ( 9t hCi r . 2001) .

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denyi ng Ar mst r ong s mot i on on Sept ember 30, 2011. Al t hough

Ar mst r ong' s r econsi der at i on mot i on at t empt ed t o chal l enge t he

Bankrupt cy Di smi ssal Or der and t he Adver sary Di smi ssal Or der , t he

Reconsi derat i on Or der addr essed onl y t he Adver sar y Di smi ssal

Or der . The cour t deni ed r econsi der at i on f or Ar mst r ong' s f ai l ur e

t o asser t gr ounds t o gr ant i t . Ar mst r ong appeal ed t he Adver sary

Di smi ssal Or der and t he Reconsi derat i on Or der on Oct ober 11, 2011

( Second Not i ce of Appeal ) . Al t hough t he not i ce appear s t o al so

appeal t he Bankr upt cy Di smi ssal Or der by ref er ence, i t sought

appeal onl y f or t he or der ent ered on Sept ember 30, 2011" - t he

dat e of t he Reconsi der at i on Or der . To f ur t her compl i cat e mat t er s,onl y a copy of t he Reconsi derat i on Or der was at t ached.

C. The second bankruptcy case (11-46301) and second adversaryproceeding (11-2693)9

On August 25, 2011, pr i or t o f i l i ng hi s Second Not i ce of

Appeal and af t er ent r y of t he Bankrupt cy Di smi ssal Or der ,

Ar mst r ong f i l ed a second chapt er 7 case. Thi s f i l i ng i ncl uded a

copy of t he Cer t i f i cat e of Cr edi t Counsel i ng Ar mst r ong had f i l ed


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i n hi s f i r st case on J ul y 18, 2011. Al so, pr i or t o f i l i ng hi s

Second Not i ce of Appeal but af t er t he f i r st adver sary pr oceedi ng

had been di smi ssed ( al t hough t he Adversar y Di smi ssal Or der had not

yet been ent ered) , Ar mst r ong f i l ed a second adver sar y compl ai nt

asser t i ng t he same cl ai ms agai nst t he same Def endant s. FTB was

t he onl y par t y t o f i l e an answer . No par t y f i l ed a mot i on f or

summar y j udgment .

On Oct ober 25, 2011, MPI PHP moved to be di smi ssed f r om t he

second adver sary pr oceedi ng under Ci vi l Rul e 12( b) ( 6) . Accor di ng

t o MPI PHP, i n J anuary 2006 i t r ecei ved a Not i ce of Levy on Wages,

Sal ar y, and Ot her I ncome di r ect i ng i t t o t ur n over Ar mst r ong' sent i r e pensi on benef i t t o t he I RS. MPI PHP has compl i ed wi t h t he

I RS l evy si nce t hat t i me, r epeat edl y not i f yi ng Ar mst r ong t hat i t

was r equi r ed under f eder al l aw t o honor t he l evy and suggest i ng t o

Ar mst r ong t hat he r esol ve t he mat t er wi t h t he I RS. MPI PHP

cont ended t hat 26 U. S. C. 6332( e) pr ovi des br oad i mmuni t y f r om

l i abi l i t y t o t hi r d par t i es act i ng i n accor dance wi t h an I RS l evy.

Ther ef or e, Ar mst r ong had no cogni zabl e cl ai m agai nst MPI PHP or i t s

empl oyees f or honor i ng t he l evy and t ur ni ng over Ar mst r ong' s

pensi on benef i t s t o t he I RS. Af t er a hear i ng on December 13,

2011, t he bankr upt cy cour t ent ered an order gr ant i ng MPI PHP' s

mot i on t o di smi ss , wi t h pr ej udi ce, on December 15, 2011.

Meanwhi l e, on November 17, 2011, t he I RS f i l ed i t s own mot i on

t o di smi ss t he second adver sary pr oceedi ng under Ci vi l

Rul e 12( b) ( 1) , ( 2) , ( 5) and ( 6) cont endi ng: ( 1) l ack of per sonal

and subj ect mat t er j ur i sdi ct i on due to Ar mst r ong' s f ai l ur e t o

serve t he compl ai nt and summons i n accor dance wi t h Rul e 7004 and

Ci vi l Rul e 4( i ) ; ( 2) i nj unct i ve rel i ef f rom t he col l ect i on of


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10 For r easons unknown, Ar mst r ong' s di smi ssal not i ce di d notget docket ed i n t he second adver sar y pr oceedi ng unt i l December 21,2011. Thi s not i ce was never f i l ed i n t he second bankrupt cy case.

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t axes was bar r ed by t he Ant i - I nj unct i on Act ; and ( 3) Ar mst r ong

f ai l ed t o al l ege any f act s t o show he was ent i t l ed t o r el i ef .

However , bef ore any or der coul d be ent ered on t he I RS' s mot i on t o

di smi ss, Ar mst r ong f i l ed a vol unt ar y not i ce of di smi ssal of t he

second bankr upt cy case and t he second adver sar y proceedi ng on

November 22, 2011. 10 The FTB, t he onl y def endant t o f i l e an

answer , f i l ed a st i pul at i on gi vi ng consent t o t he di smi ssal on

December 19, 2011.

Af t er a hear i ng on December 13, 2011, on December 22, 2011,

t he bankrupt cy cour t ent er ed an or der di smi ssi ng the second

adver sary pr oceedi ng, wi t h pr ej udi ce, as t o t he r emai ni ngdef endant s - t he I RS and FTB. An order di smi ss i ng t he second

bankr upt cy case was ent ered on t hat same date. These orders were

not appeal ed.

II. JURISDICTION

The bankrupt cy cour t had j ur i sdi ct i on under 28 U. S. C. 1334

and 157( b) ( 2) ( A) , ( c) ( 1) . We addr ess her ei n our j ur i sdi ct i on

under 28 U. S. C. 158.

III. ISSUES

1. I s t he appeal of t he Bankr upt cy Di smi ssal Or der unt i mel y?

2. Di d t he bankr upt cy cour t er r i n di smi ssi ng t he f i r st

adver sar y pr oceedi ng f or l ack of subj ect mat t er j ur i sdi ct i on?

3. Di d t he bankr upt cy cour t abuse i t s di scr et i on i n not gr ant i ng

Ar mst r ong' s mot i on t o reconsi der t he Adver sary Di smi ssal Or der ?


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IV. STANDARDS OF REVIEW

The t i mel i ness of a not i ce of appeal i s a quest i on of l aw we

r evi ew de novo. Saunders v. Band Pl us Mor t g. Corp.

( I n r e Saunder s) , 31 F. 3d 767 ( 9t h Ci r . 1994) ( per cur i am) .

Moot ness i s al so a quest i on of l aw r evi ewed de novo. S. Or e.

Bar t er Fai r v. J ackson Cnt y. Or e. , 372 F. 3d 1128, 1133 ( 9t h Ci r .

2004) ( ci t i ng Or e. Advocacy Ct r . v. Mi nk, 322 F. 3d 1101, 1116 ( 9t h

Ci r . 2003) ) . The basi c quest i on i n det er mi ni ng moot ness i s

whet her t her e i s a pr esent cont r over sy as t o whi ch ef f ect i ve

r el i ef can be gr ant ed. Fel dman v. Bomar, 518 F. 3d 637, 642 ( 9t h

Ci r . 2008) ( ci t at i on omi t t ed) .We r evi ew de novo a di smi ssal of a compl ai nt f or l ack of

subj ect mat t er j ur i sdi ct i on under Ci vi l Rul e 12( b) ( 1) . Davi s v.

Cour i ngt on ( I n r e Davi s) , 177 B. R. 907, 910 ( 9t h Ci r . BAP 1995) .

A bankrupt cy cour t s deci si on t o decl i ne t o exer ci se

j ur i sdi ct i on over r el at ed proceedi ngs f ol l owi ng di smi ssal of t he

under l yi ng bankrupt cy case i s r evi ewed f or an abuse of di scr et i on.

I d. Li kewi se, deni al of a mot i on f or r econsi der at i on i s revi ewed

f or an abuse of di scr et i on. Ta Chong Bank Lt d. v. Hi t achi Hi gh

Techs. Am. , I nc. , 610 F. 3d 1063, 1066 ( 9th Ci r . 2010) . A

bankr upt cy cour t abuses i t s di scret i on i f i t appl i ed t he wr ong

l egal st andar d or i t s f i ndi ngs wer e i l l ogi cal , i mpl ausi bl e, or

wi t hout suppor t i n t he r ecor d. Tr af f i cSchool . com, I nc. v. Edr i ver

I nc. , 653 F. 3d 820, 832 ( 9t h Ci r . 2011) .

We may af f i r m a di smi ssal on any basi s f ai r l y suppor t ed by

t he r ecor d. Cor r i e v. Cat er pi l l ar , I nc. , 503 F. 3d 974, 979 ( 9t h

Ci r . 2007) .


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V. DISCUSSION

Ar mst r ong r ai ses f or t y- seven i ssues on appeal ( wi t h

r eser vat i on t o r ai se f i ve mor e at a l at er dat e) , near l y al l of

whi ch go t o t he mer i t s of hi s cl ai ms agai nst t he Def endant s. None

of t hose i ssues are pr oper l y bef or e us. What we must deci de i s

whet her t he recor d suppor t s t he bankrupt cy cour t s deci si on wi t h

r espect t o each of t he t hr ee orders on appeal . We addr ess each

or der i n t ur n.

A. The appeal of the Bankruptcy Dismissal Order is untimely.

The FTB and MPI PHP cont end t hat Ar mst r ong' s appeal of t he

Bankrupt cy Di smi ssal Or der i s unt i mel y and t hat we l ackj ur i sdi ct i on over t he mat t er . We agree.

Under Rul e 8002( a) , a not i ce of appeal must be f i l ed wi t hi n

14 days of t he ent r y of t he or der bei ng appeal ed. The pr ovi si ons

of Rul e 8002 ar e j ur i sdi ct i onal , and t he unt i mel y f i l i ng of a

not i ce of appeal depr i ves t he appel l at e cour t of j ur i sdi ct i on t o

r evi ew t he bankr upt cy cour t s or der . Ander son v. Mour adi ck

( I n r e Mour adi ck) , 13 F. 3d 326, 327 ( 9t h Ci r . 1994) .

The Bankr upt cy Di smi ssal Or der was ent er ed on J ul y 28, 2011.

Ar mst r ong di d not f i l e hi s Fi r st Not i ce of Appeal unt i l

Sept ember 1, 2011 - f or t y- f i ve days l at er . Mor e i mpor t ant l y, t he

Fi r st Not i ce of Appeal made no di r ect r ef er ence t o t he Bankrupt cy

Di smi ssal Or der of J ul y 28; i t r ef er r ed onl y to t he Adver sar y

Di smi ssal Or der , whi ch had not yet been ent er ed. Nonet hel ess, a

copy of t he Bankr upt cy Di smi ssal Or der was at t ached t o t he Fi r st

Not i ce of Appeal . Even i f t hat somehow "cur ed" any pot ent i al

def ect s i n t he Fi r st Not i ce of Appeal , t he appeal of t he

Bankrupt cy Di smi ssal Or der was st i l l unt i mel y.


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Ar mst r ong' s mot i on t o reconsi der , f i l ed on Sept ember 14,

2011, does not save t hi s unt i mel y appeal ei t her . I n hi s mot i on,

Ar mst r ong chal l enged both t he Adver sar y Di smi ssal Or der and t he

Bankrupt cy Di smi ssal Or der . I n i t s Reconsi der at i on Or der ent er ed

on Sept ember 30, 2011, t he bankr upt cy cour t addr essed onl y t he

Adver sary Di smi ssal Or der . Ar mst r ong' s Second Not i ce of Appeal ,

f i l ed on Oct ober 11, 2011, made r ef erence to t he Bankr upt cy

Di smi ssal Or der , t he Adver sary Di smi ssal Or der , and t he

Reconsi der at i on Or der , but he at t ached onl y a copy of t he

Reconsi der at i on Or der t o t he not i ce. At best , Ar mst r ong' s at t empt

t o chal l enge the Bankrupt cy Di smi ssal Or der i n hi s mot i on t or econsi der coul d onl y be t r eat ed as a mot i on f or r el i ef f r om

j udgment under Ci vi l Rul e 60( b) , i ncor por at ed by Rul e 9024,

because i t was not f i l ed wi t hi n 14 days of ent r y of t he Bankrupt cy

Di smi ssal Or der . See Ci vi l Rul e 59( e) , i ncor por at ed by Rul e 9023.

Under Rul e 8002( b) ( 4) , a mot i on under Rul e 9024 onl y t ol l s

t he appeal t i me of t he under l yi ng or der when i t i s f i l ed wi t hi n

14 days af t er ent r y of t he or der . Whi l e Ar mst r ong s mot i on t o

r econsi der t ol l ed t he appeal t i me of t he Adver sary Di smi ssal Or der

because i t was f i l ed j ust t wel ve days af t er ent r y of t hat or der ,

i t di d not t ol l t he appeal t i me of t he Bankrupt cy Di smi ssal Or der

because t he mot i on was f i l ed some 49 days af t er ent r y of t hat

or der .

Accor di ngl y, because Ar mst r ong' s appeal of t he Bankrupt cy

Di smi ssal Or der i s unt i mel y, we must DI SMI SS i t f or l ack of

j ur i sdi ct i on. As a r esul t , we cannot consi der any of t he

ar gument s Ar mst r ong r ai ses wi t h r espect t o di smi ssal of t he f i r st

bankrupt cy case, i ncl udi ng t he pr opr i et y of 109( h) .


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B. The bankruptcy court erred in assuming that it lacked subjectmatter jurisdiction over the first adversary proceeding dueto the dismissal of the first bankruptcy case, but such errorwas harmless.

Bankr upt cy cour t s have j ur i sdi ct i on over al l ci vi l

pr oceedi ngs ar i si ng under Ti t l e 11, or ar i si ng i n or r el at ed t o

cases under Ti t l e 11. 28 U. S. C. 1334( b) . Her e, t he sui t at

i ssue i nvol ved a mi x of cl ai ms based on bot h f eder al and st at e

l aw. However , because none of t he cl ai ms i nvoke a subst ant i ve

r i ght cr eat ed by f eder al bankrupt cy l aw, t hey do not ar i se under

Ti t l e 11. East port Assocs. v. Ci t y of L. A. ( I n r e East port

Assocs. ) , 935 F. 2d 1071, 1076 ( 9t h Ci r . 1991) . Si mi l ar l y, becauseal l of t hese cl ai ms coul d exi st out si de of bankrupt cy, t hey do not

ar i se i n Ti t l e 11. I d. Ther ef or e, any j ur i sdi cti on t he

bankrupt cy cour t had over Ar mst r ong s cl ai ms coul d onl y consi st of

rel at ed t o j ur i sdi ct i on.

An act i on i s r el at ed t o bankrupt cy i f t he out come coul d

al t er t he debt or ' s r i ght s, l i abi l i t i es, opt i ons, or f r eedom of

act i on ( ei t her posi t i vel y or negat i vel y) and whi ch i n any way

i mpact s upon t he handl i ng and admi ni st r at i on of t he bankr upt

est at e. Gr eat W. Sav. v. Gor don ( I n r e Fi et z) , 852 F. 2d 455, 457

( 9t h Ci r . 1988) ( quot i ng Pacor , I nc. v. Hi ggi ns, 743 F. 2d 984, 994

( 3d Ci r . 1984) ) ; Li nkway I nv. Co. v. Ol sen ( I n r e Casamont

I nvest or s, Lt d. ) , 196 B. R. 517, 521 ( 9t h Ci r . BAP 1996) .

Concei vabl y, t he out come of Ar mst r ong s cl ai ms coul d have al t er ed

hi s r i ght s and l i abi l i t i es. As a r esul t , t he bankr upt cy cour t had

r el at ed t o j ur i sdi ct i on over t he f i r st adver sar y pr oceedi ng.

Based on the bankrupt cy cour t s s t at ement s at t he st at us

conf erence on August 23, 2011, and i n t he Adver sar y Di smi ssal


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Or der , i t concl uded t hat i t l acked subj ect mat t er j ur i sdi ct i on

over t he f i r st adver sary pr oceedi ng because Ar mst r ong s f i r st

bankr upt cy case had been di smi ssed. Thi s was err oneous.

Bot h t he Ni nt h Ci r cui t and t hi s Panel have hel d t hat

bankr upt cy cour t s ar e not aut omat i cal l y di vest ed of j ur i sdi ct i on

over r el ated t o cl ai ms when t he under l yi ng bankr upt cy case has

been di smi ssed. Car r aher v. Mor gan El ecs. , I nc. ( I n r e Car r aher ) ,

971 F. 2d 327, 328 ( 9t h Ci r . 1992) ; I n r e Casamont I nvest or s, Lt d. ,

196 B. R. at 525. I n t hat ci r cumst ance, t he bankrupt cy cour t

shoul d consi der whet her or not i t shoul d r et ai n j ur i sdi ct i on. I d.

The bankr upt cy cour t shoul d consi der economy, conveni ence,f ai r ness, and comi t y i n det er mi ni ng whet her t o abst ai n f r om

exer ci si ng i t s j ur i sdi cti on. I n r e Davi s, 177 B. R. at 913

( quot i ng I n r e Car r aher , 971 F. 2d at 328) . The wei ghi ng of t hese

f actor s i s di scret i onar y. I n r e Casamont I nvest or s, Ltd. ,

196 B. R. at 522 n. 3.

Whi l e i t i s not compl et el y cl ear f r om t he bankrupt cy j udge s

comment s at t he hear i ng, t he cour t appar ent l y concl uded that i t

must di smi ss t he adver sar y pr oceedi ng because t he j udge thought

er r oneousl y t he di smi ssal of t he under l yi ng bankrupt cy case

depr i ved i t of j ur i sdi ct i on. I t shoul d have consi der ed, but di d

not , t he above f act or s i n maki ng i t s deci si on whet her t o ret ai n

j ur i sdi ct i on over Ar mst r ong s cl ai ms i n t he f i r st adver sar y

pr oceedi ng. However , r at her t han r emandi ng t hi s mat t er t o t he

bankr upt cy cour t f or i t s anal ysi s, we bel i eve t he r ecor d f ai r l y

suppor t s i t s deci si on not t o r et ai n j ur i sdi ct i on over Ar mst r ong s

r el at ed cl ai ms, whi ch we di scuss bel ow.

1. J udi ci al economy. The f i r st adver sar y pr oceedi ng had


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been pendi ng about si x weeks when t he f i r st bankr upt cy case was

di smi ssed. Compar e I n r e Casamont I nvest or s, Lt d. , 196 B. R. at

523 ( adver sar y pr oceedi ng pendi ng t wo mont hs at t i me of di smi ssal

di d not f avor r et ent i on; r et ent i on of j ur i sdi ct i on i s i mpr oper

when t he i ni t i at i on of t he di sput e i s r ecent ) , wi t h

I n r e Car r aher , 971 F. 2d at 327 ( adver sary pr oceedi ng pendi ng si x

year s at t i me of di smi ssal wei ghed i n f avor of r et ent i on) . Dur i ng

t hat t i me, no act i on had been t aken ot her t han f i l i ng t he

compl ai nt , t he ent r y of def aul t s on t he Def endant s ( whi ch wer e

l i kel y ent er ed i n er r or due t o bad ser vi ce) , a mot i on f or def aul t

j udgment and a st at us r epor t . No di scover y had occur r ed, nomot i ons f or summary j udgment had been f i l ed and no t r i al had been

commenced. Compar e I n r e Casamont I nvest ors, Lt d. , 196 B. R. at

520 (no summary j udgment mot i ons f i l ed at t i me of bankr upt cy

di smi ssal ) , wi t h I n r e Car r aher , 971 F. 2d at 327 ( par t i es had

subst ant i al l y l i t i gat ed act i on bef or e di smi ssal and cour t i nvest ed

i t s j udi ci al r esour ces) . Thi s f actor wei ghs i n f avor of not

r et ai ni ng j ur i sdi ct i on over t he f i r st adver sar y pr oceedi ng.

2. Conveni ence. The f i r st adver sar y pr oceedi ng had been

pendi ng onl y si x weeks at t he t i me of di smi ssal of t he f i r st

bankr upt cy case, wi t h l i t t l e act i vi t y. Fur t her , not hi ng pr event ed

Ar mst r ong f r om f i l i ng anot her bankrupt cy case and anot her

adver sar y pr oceedi ng ( whi ch he di d) or f r om f i l i ng hi s compl ai nt

i n st at e or di st r i ct cour t . The i nconveni ence of havi ng t o

r e- f i l e a compl ai nt i n anot her cour t does not war r ant r et ent i on of

j ur i sdi ct i on. I n r e Casamont I nvest or s, Lt d. , 196 B. R. at 524.

Thi s f act or di sf avors r et ent i on.

3. Fai r ness. Agai n, because t he f i r st adver sar y pr oceedi ng


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11 Ar mst r ong has had more t han one chance, t hrough t he mot i onf or r econsi der at i on and t hi s appeal , t o ar t i cul at e a basi s f oropposi ng t he di smi ssal . Hi s ar gument has r el i ed onl y on t he ent r yof t he def aul t s, a l egal l y i nadequat e basi s f or r et ai ni ngj ur i sdi ct i on over t he adver sar y proceedi ng. I n addi t i on, he hadan oppor t uni t y i n t he second adver sar y pr oceedi ng t o asser t t hesame cl ai ms agai nst t he same def endants.

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had been pendi ng onl y si x weeks, t he par t i es wer e not pr ej udi ced

by di smi ssal . See I n r e Car r aher , 971 F. 3d at 328 ( pr oceedi ng

dr agged on f or si x year s) ; Fi d. & Deposi t Co. of Md. v. Mor r i s

( I n r e Mor r i s) , 950 F. 2d 1531, 1534 ( 11t h Ci r . 1992) ( mor e than

f our year s) ; Smi t h v. Commer ci al Banki ng Cor p. ( I n r e Smi t h) ,

866 F. 2d 576, 580 ( 3d Ci r . 1989) ( mor e t han f our year s) . Thi s

f act or al so suppor t s di smi ssal of t he adver sar y pr oceedi ng.

4. Comi t y. To t he ext ent Ar mst r ong chal l enged t he FTB and

MPI PHP under st at e l aw, comi t y wei ghs i n f avor of di smi ssal . As

f or t he I RS, si nce Ar mst r ong s cl ai ms agai nst i t ar e f eder al i n

nat ur e, comi t y i s l ess of an i ssue. However , not hi ng i n t her ecor d suggest s t hat t he bankrupt cy cour t had a speci al i zed

knowl edge of f eder al t ax l aw. Mor eover , no bankrupt cy i ssues wer e

al l eged i n Ar mst r ong' s compl ai nt . Thus, we concl ude t hat t hi s

f act or ei t her di sf avor s r et ent i on or coul d be consi der ed neut r al .

Over al l , t he above f act or s woul d suppor t a bankrupt cy cour t s

deci si on not t o r et ai n j ur i sdi ct i on over t he f i r st adver sar y

pr oceedi ng. Accor di ngl y, i t di d not abuse i t s di scret i on i n

di smi ssi ng i t , and we AFFI RM t he Adver sary Di smi ssal Or der . 11

However , t hi s appeal pr esent s a di f f er ent i ssue when i t comes

t o t he MPI PHP. MPI PHP cont ends t hat t he appeal of t he Adver sar y

Di smi ssal Or der i s moot because i t was di smi ssed i n t he second

adver sar y pr oceedi ng. We agr ee. I n Ar mst r ong s second adver sar y


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12 Al t er nat i vel y, even i f t he appeal agai nst MPI PHP wer e notmoot , we woul d af f i r m t he Adver sary Di smi ssal Or der as t o i t f ort he same reasons st at ed above.

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pr oceedi ng, whi ch asser t ed t he exact same cl ai ms as t he f i r st ,

MPI PHP was successf ul l y di smi ssed, wi t h pr ej udi ce, under Ci vi l

Rul e 12( b) ( 6) based on i mmuni t y gr ounds under 26 U. S. C. 6332( e) .

No one has appeal ed t he or der gr ant i ng MPI PHP s mot i on t o di smi ss

and t he t i me to appeal has l ong si nce run.

We have j ur i sdi ct i on onl y over act ual cases and l i ve

cont r over si es. Pi l at e v. Bur r el l ( I n r e Bur r el l ) , 415 F. 3d 994,

998 ( 9t h Ci r . 2005) . We l ack j ur i sdi ct i on over moot appeal s.

I . R. S. v. Pat t ul l o ( I n r e Pat t ul l o) , 271 F. 3d 898, 901 ( 9t h Ci r .

2001) . I f t he appeal i s moot , we must di smi ss i t . I d. A case i s

moot [ i ] f an event occur s whi l e a case i s pendi ng on appeal t hatmakes i t i mpossi bl e f or t he cour t t o gr ant any ef f ect ual r el i ef

what ever t o a pr evai l i ng par t y . . . . I d. We ar e unabl e t o

gr ant Ar mst r ong any ef f ect i ve f or m of r el i ef wi t h r espect t o

MPI PHP. Even i f we were t o r everse t he Adver sar y Di smi ssal Or der ,

t he bankr upt cy cour t has subsequent l y concl uded t hat Ar mst r ong

pr esent ed no col or abl e cl ai m agai nst MPI PHP, and the or der

di smi ssi ng MPI PHP under Ci vi l Rul e 12( b) ( 6) i s f i nal .

Accor di ngl y, t he appeal of t he Adver sary Di smi ssal Or der as t o the

MPI PHP i s DI SMI SSED as MOOT. 12

C. The bankruptcy court did not abuse its discretion when itdenied the motion to reconsider.

Al t hough t he bankrupt cy cour t di d not ar t i cul at e under whi ch

r ul e i t was t r eat i ng Ar mst r ong' s mot i on t o r econsi der , we concl ude

t hat i t f el l under Ci vi l Rul e 59( e) , i ncor por at ed by Rul e 9023,


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si nce i t was f i l ed wi t hi n t he r equi r ed 14 days.

A mot i on under Ci vi l Rul e 59( e) shoul d not be gr ant ed, absent

hi ghl y unusual ci r cumst ances, unl ess t he cour t i s pr esent ed wi t h

newl y di scover ed evi dence, commi t t ed cl ear er r or , or i f t her e i s

an i nt er veni ng change of cont r ol l i ng l aw. 389 Or ange St . Par t ner s

v. Ar nol d, 179 F. 3d 656, 665 ( 9t h Ci r . 1999) . A mot i on f or

r econsi derat i on i s not f or r ehashi ng the same ar gument s made the

f i r st t i me or t o asser t new l egal t heor i es or new f act s t hat coul d

have been r ai sed at t he i ni t i al hear i ng. I n r e Gr eco, 113 B. R.

658, 664 ( D. Haw. 1990) , af f ' d and r emanded, Gr eco v. Troy Corp. ,

952 F. 2d 406 ( 9t h Ci r . 1991) .The bankrupt cy cour t det er mi ned t hat Ar mst r ong s mot i on t o

r econsi der f ai l ed t o advance any new evi dence, or i dent i f y any

i nt er veni ng change i n t he l aw, or t o suggest any cl ear er r or by

t he cour t i n ent er i ng t he Adver sary Di smi ssal Or der . Ot her t han

cont endi ng t hat t he bankrupt cy cour t f ai l ed t o pr ovi de any

f i ndi ngs or concl usi ons i n al l t hr ee or der s, a cont ent i on we

r ej ect , Ar mst r ong does not set f or t h any r el evant ar gument as t o

why the bankrupt cy cour t abused i t s di scr et i on when i t deni ed hi s

mot i on t o r econsi der .

Because t he bankrupt cy cour t appar ent l y appl i ed an i ncor r ect

st andar d of l aw by assumi ng t hat i t l acked j ur i sdi ct i on over

Ar mst r ong s r el ated cl ai ms once hi s bankr upt cy case had been

di smi ssed, one coul d ar gue that r econsi der at i on shoul d have been

gr ant ed due t o t he cour t s l egal er r or . However , t hi s i ssue was

never r ai sed by Ar mst r ong i n hi s r econsi der at i on mot i on, and,

si nce we have determi ned t hat t he bankr upt cy cour t s er r or was

har ml ess, we concl ude t hat i t di d not abuse i t s di scr et i on i n


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denyi ng reconsi der at i on of t he Adver sary Di smi ssal Or der .

D. We are unable to grant Armstrongs other requests for relief.

I n addi t i on t o hi s r equest t o r ever se t he t hr ee or der s at

i ssue, Ar mst r ong asks t hat we or der t he bankrupt cy cour t t o ent er

j udgment agai nst t he Def endant s as set f or t h i n hi s mot i on f or

def aul t j udgment . Gi ven t he r ecor d, we l ack j ur i sdi ct i on t o gr ant

t he r el i ef t he debt or r equest s.

VI. CONCLUSION

Based on the f oregoi ng reasons, we DI SMI SS the appeal of t he

Bankr upt cy Di smi ssal Or der f or l ack of j ur i sdi ct i on, we AFFI RM t he

Adver sar y Di smi ssal Or der as t o the FTB and I RS and DI SMI SS t heappeal t her eof as MOOT as t o MPI PHP, and we AFFI RM t he

Reconsi der at i on Or der .

In re: Gary Olyn Armstrong, 9th Cir. BAP (2013)

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