In re: Joseph P. Palmisano and Amy K. Palmisano ( 2015 )


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  •                                                           FILED
    JUN 29 2015
    1                        NOT FOR PUBLICATION          SUSAN M. SPRAUL, CLERK
    U.S. BKCY. APP. PANEL
    OF THE NINTH CIRCUIT
    2
    3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
    4                            OF THE NINTH CIRCUIT
    5   In re:                        )     BAP No.     AZ-14-1402-KiPaJu
    )
    6   JOSEPH P. PALMISANO and       )     Bk. No.     2:09-29570-GBN
    AMY K. PALMISANO,             )
    7                                 )
    Debtors.       )
    8                                 )
    )
    9   JOSEPH P. PALMISANO;          )
    AMY K. PALMISANO,             )
    10                                 )
    Appellants,    )
    11                                 )
    v.                            )     M E M O R A N D U M1
    12                                 )
    THE BANK OF NEW YORK MELLON   )
    13   TRUST COMPANY, N.A., f/k/a    )
    THE BANK OF NEW YORK TRUST    )
    14   COMPANY, N.A., AS TRUSTEE FOR )
    CHASEFLEX TRUST SERIES 2007-2,)
    15                                 )
    Appellee.      )
    16   ______________________________)
    17                  Argued and Submitted on June 19, 2015,
    at Phoenix, Arizona
    18
    Filed - June 29, 2015
    19
    Appeal from the United States Bankruptcy Court
    20                       for the District of Arizona
    21     Honorable George B. Nielsen, Jr., Bankruptcy Judge, Presiding
    22
    Appearances:    Appellant Joseph P. Palmisano argued pro se; Kyle
    23                   S. Hirsch of Bryan Cave LLP argued for appellee,
    The Bank of New York Mellon Trust Company, N.A.
    24
    25   Before: KIRSCHER, PAPPAS and JURY, Bankruptcy Judges.
    26
    1
    This disposition is not appropriate for publication.
    27   Although it may be cited for whatever persuasive value it may have
    (see Fed. R. App. P. 32.1), it has no precedential value. See 9th
    28   Cir. BAP Rule 8024-1.
    1        Appellants, chapter 112 debtors Joseph and Amy Palmisano
    2   ("Debtors"), appeal an order granting the motion of appellee, The
    3   Bank of New York Mellon Trust Company, N.A., f/k/a The Bank of New
    4   York Trust Company, N.A. as Trustee for Chaseflex Trust Series
    5   2007-2 (the "Bank"), for relief from the automatic stay.   The
    6   bankruptcy court determined that Debtors' failure to make multiple
    7   post-confirmation mortgage payments to the Bank constituted
    8   "cause" to terminate the stay under § 362(d)(1).3   We DISMISS the
    9   appeal as MOOT because Debtors' case has since been closed.
    10              I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
    11        Debtors commenced a chapter 11 bankruptcy case on
    12   November 17, 2009.   The property at issue is Debtors' home located
    13   on East Melody Court in Gilbert, Arizona ("Property").    Debtors
    14   obtained a $900,000 loan from JPMorgan Chase Bank ("Chase") for
    15
    16        2
    Unless specified otherwise, all chapter, code and rule
    references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
    17   the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.
    18        3
    Debtors also attempt to appeal the bankruptcy court's order
    denying reconsideration of the stay relief order. Debtors timely
    19   appealed the stay relief order, but then filed a motion to
    reconsider that order. At a hearing on September 24, 2014, the
    20   bankruptcy court determined that it lacked jurisdiction to review
    the motion to reconsider because Debtors had appealed the stay
    21   relief order. On October 6, 2014, we granted limited remand for
    the bankruptcy court to rule on the reconsideration motion. The
    22   bankruptcy court denied that motion on November 6, 2014. Debtors
    did not file an amended notice of appeal.
    23        Consequently, on March 18, 2015, after Debtors had filed
    their opening brief, we issued an order denying the Bank's motion
    24   to dismiss but informing the parties that only the stay relief
    order was the subject of this appeal; we lacked jurisdiction to
    25   review the order denying reconsideration due to Debtors' failure
    to file an amended notice of appeal. See Rule 8002(b)(3).
    26   Therefore, we do not consider the documents submitted in Debtors'
    excerpts of record that were presented to the bankruptcy court for
    27   the motion to reconsider. We also do not consider any of Debtors'
    arguments with respect to the bankruptcy court's denial of that
    28   motion.
    -2-
    1   the Property in January 2007.   In exchange for the funds, Debtors
    2   executed a promissory note and first deed of trust in favor of
    3   Chase to secure the note.
    4        Chase filed a proof of claim for $995,067.90.    In June 2010,
    5   Chase recorded an Assignment of Deed of Trust, assigning its
    6   interest in the note and deed of trust to the Bank.
    7        The bankruptcy court confirmed Debtors' chapter 11 plan in
    8   January 2011 ("Plan").   Under the Plan, Debtors and Chase4 agreed
    9   to value the Property at $600,000 and agreed that Chase held a
    10   secured claim in that amount; the remaining amount of Chase's
    11   claim was treated as an allowed unsecured claim.   The Plan
    12   required Debtors to make monthly payments of $3,207.61 to Chase.
    13        The Bank moved for relief from the automatic stay on
    14   January 2, 2013 ("Stay Relief Motion"), alleging that Debtors had
    15   failed to make post-confirmation mortgage payments in accordance
    16   with the Plan since September 2011.   The Bank argued that Debtors'
    17   default constituted "cause" for relief under § 362(d)(1).     Debtors
    18   opposed the Stay Relief Motion, denying the Bank's allegation of
    19   any missed mortgage payments.   A hearing on the Stay Relief Motion
    20   was continued several times to accommodate the parties' settlement
    21   attempts.
    22        After settlement negotiations failed, the bankruptcy court
    23   held a hearing on the Stay Relief Motion on August 5, 2014.     The
    24   Bank filed a reply brief the day before, reasserting that Debtors
    25   had failed to make monthly mortgage payments per the Plan since
    26
    27        4
    The Plan still referred to Chase as the first-position
    lender on the Property even though its interest in the note and
    28   deed of trust had already been assigned to the Bank.
    -3-
    1   September 2011, rendering them $96,250.00 in default.
    2        Debtors were represented by their proposed new counsel, Alan
    3   Meda.       Mr. Meda admitted he was "still getting up to speed" on the
    4   Stay Relief Motion, but said he could address the issue "at the
    5   appropriate time."      After brief argument by the parties, Mr. Meda
    6   conceded to the court that Debtors had failed to make some of the
    7   payments in accordance with the Plan.         Based on the Bank’s and
    8   Mr. Meda’s representations, the bankruptcy court granted the Stay
    9   Relief Motion.
    10        Debtors, acting pro se, timely appealed the order granting
    11   the Stay Relief Motion for “cause” entered on August 8, 2014
    12   ("Stay Relief Order").5      Per their request, Debtors' chapter 11
    13   case was closed on January 9, 2015.
    14                                II. JURISDICTION
    15        The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334
    16   and 157(b)(2)(G).      Our jurisdiction is based upon 28 U.S.C. § 158,
    17   which we discuss below.
    18                                   III. ISSUES
    19        Is the Stay Relief Order moot?       If not, did the bankruptcy
    20   court abuse its discretion in granting the Stay Relief Motion?
    21                              IV. STANDARD OF REVIEW
    22        We review our own jurisdiction, including questions of
    23   mootness, de novo.      Ellis v. Yu (In re Ellis), 
    523 B.R. 673
    , 677
    24   (9th Cir. BAP 2014)(citing Silver Sage Partners, Ltd. v. City of
    25   Desert Hot Springs (In re City of Desert Hot Springs), 
    339 F.3d 26
    27           5
    The Bank agreed to stay any foreclosure sale pending the
    appeal so long as Debtors tendered monthly mortgage payments of
    28   $2,750.00.
    -4-
    1   782, 787 (9th Cir. 2003)).
    2                                V. DISCUSSION
    3        The appeal of the Stay Relief Order is moot.
    4        We lack jurisdiction to hear moot appeals.     
    Id. (citing 5
      United States v. Pattullo (In re Pattullo), 
    271 F.3d 898
    , 901 (9th
    6   Cir. 2001); GTE Cal., Inc. v. FCC, 
    39 F.3d 940
    , 945 (9th Cir.
    7   1994)).   Federal courts may only adjudicate actual cases and
    8   controversies.   Motor Vehicle Cas. Co. v. Thorpe Insulation Co.
    9   (In re Thorpe Insulation Co.), 
    677 F.3d 869
    , 880 (9th Cir. 2012).
    10   A moot case is one where the issues presented are no longer live
    11   and no case or controversy exists.      In re 
    Ellis, 523 B.R. at 677
    12   (citing Pilate v. Burrell (In re Burrell), 
    415 F.3d 994
    , 998 (9th
    13   Cir. 2005)).   The test for mootness is whether an appellate court
    14   can still grant the appellant effective relief if it decides the
    15   merits in his or her favor.    
    Id. If an
    issue becomes moot while
    16   the appeal is pending, an appellate court must dismiss the appeal.
    17   
    Id. (citing In
    re 
    Pattullo, 271 F.3d at 900
    ).     "We may take
    18   judicial notice of events in the bankruptcy case occurring
    19   subsequent to the filing of an appeal if they resolve the dispute
    20   between the parties."   
    Id. (citing Pitts
    v. Terrible Herbst, Inc.,
    21   
    653 F.3d 1081
    , 1087 (9th Cir. 2011)("[I]f events subsequent to the
    22   filing of the case resolve the parties' dispute, we must dismiss
    23   the case as moot.").
    24        Under § 362(a), when a petition is filed an automatic stay
    25   becomes effective which operates to enjoin, among other things:
    26        (3) any act to obtain possession of property of the estate
    or of property from the estate or to exercise control over
    27        property of the estate;
    28        (4) any act to create, perfect, or enforce any lien
    -5-
    1        against property of the estate;
    2        (5) any act to create, perfect, or enforce against
    property of the debtor any lien to the extent that such
    3        lien secures a claim that arose before the commencement of
    the case under this title[.]
    4
    5   § 362(a)(3)-(5).
    6        However, the stay is not permanent.   Section 362(c) sets
    7   forth the time limitations governing its duration:
    8        (1) the stay of an act against property of the estate
    under subsection (a) of this section continues until such
    9        property is no longer property of the estate;
    10        (2) the stay of any other act under subsection (a) of this
    section continues until the earliest of —
    11
    (A) the time the case is closed;
    12
    (B) the time the case is dismissed; or
    13
    (C) if the case is a case under chapter 7 of this
    14              title concerning an individual or a case under
    chapter 9, 11, or 13 of this title, the time a
    15              discharge is granted or denied.
    16   § 362(c)(1), (2).
    17        The Plan provided that as of the confirmation date, all
    18   property of the estate reverted to Debtors and would no longer be
    19   considered property of the estate as defined in § 541.    Thus, the
    20   stay established by § 362(a)(3) and (4) was terminated upon
    21   confirmation since the Property was no longer "property of the
    22   estate."   Guild Mortg. Co. v. Cornist (In re Cornist), 
    7 B.R. 118
    ,
    23   120 (Bankr. S.D. Cal. 1980); § 362(c)(1); see also Gasprom, Inc.
    24   v. Fateh (In re Gasprom, Inc.), 
    500 B.R. 598
    , 604 (9th Cir. BAP
    25   2013)(title to property reverted to debtor once trustee abandoned
    26   it and was no longer "property of the estate," so the aspect of
    27   the stay protecting estate property no longer applied).
    28        But confirmation of Debtors’ Plan did not by operation of law
    -6-
    1   terminate the aspect of the stay arising from § 362(a)(5), which
    2   protects "property of the debtor."      In re Gasprom, Inc., 
    500 B.R. 3
      at 604 (section 362(a)(5) continued to protect “property of the
    4   debtor” from foreclosure); In re 
    Cornist, 7 B.R. at 120
     5   (section 362(a)(5) automatically stays a wide variety of actions
    6   against the debtor's property, including private foreclosure
    7   sales)(citing 2 COLLIER ON BANKRUPTCY ¶ 362.04(5) at 362-34 (15th
    8   ed.)).     However, the stay under § 362(a)(5) is also one of limited
    9   duration and terminates automatically under § 362(c)(2) when a
    10   discharge is granted or denied or when the case is closed or
    11   dismissed.    In re 
    Cornist, 7 B.R. at 120
    ; see also In re Gasprom,
    12   
    Inc., 500 B.R. at 604
    (absent a ruling granting relief under
    13   § 362(d) to permit foreclosure to occur, § 362(a)(5) continues to
    14   protect debtor’s property from foreclosure, at least until the
    15   bankruptcy court closes debtor's case).     Therefore, no stay has
    16   been in effect since Debtors' case was closed on January 9, 2015.
    17   Consequently, even if we were to reverse the Stay Relief Order
    18   which terminated the automatic stay in the Bank's favor under
    19   § 362(d)(1), that stay has now terminated as a matter of law.6       As
    20   a result, we are unable to provide any effective relief to
    21   Debtors, and therefore the appeal is moot.
    22   ////
    23
    6
    The Bank contends, alternatively, that it was not required
    24   to seek an order terminating the stay because the stay terminated
    by operation of law when Debtors' Plan was confirmed and they
    25   received their discharge. Although the confirmation order states
    that Debtors would receive a discharge upon Plan confirmation, the
    26   Bank is incorrect. Because Debtors are individuals, they will not
    receive a discharge until all plan payments have been made,
    27   sometime around the end of 2016. See § 1141(d)(5). The order
    closing Debtors' case reaffirms that they will not receive a
    28   discharge until all plan payments have been made.
    -7-
    1                        VI. CONCLUSION
    2   For the foregoing reasons, we DISMISS this appeal as MOOT.
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