FILED
JAN 04 2018
1 NOT FOR PUBLICATION
2 SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
4
5 In re: ) BAP No. HI-16-1391-TaLB
)
6 DAVID JOSEPH RYAN and ) Bk. No. 09-01604
MELISSA ANN RYAN )
7 )
Debtors. )
8 ______________________________)
)
9 CIT BANK, N.A., )
)
10 Appellant, )
)
11 v. ) MEMORANDUM*
)
12 DAVID JOSEPH RYAN; )
MELISSA ANN RYAN, )
13 )
Appellees. )
14 ______________________________)
15 Argued and Submitted on October 26, 2017
at Honolulu, Hawaii
16
Filed – January 4, 2017
17
Appeal from the United States Bankruptcy Court
18 for the District of Hawaii
19 Honorable Robert J. Faris, Chief Bankruptcy Judge, Presiding
20
Appearances: Christopher James Muzzi of Mosely Biehl Tsugawa
21 Lau & Muzzi argued for appellant; Van-Alan H.
Shima argued for appellees.
22
23 Before: TAYLOR, LAFFERTY, and BRAND, 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 8024-1(c)(2).
1 INTRODUCTION
2 During their chapter 71 bankruptcy, debtors David and
3 Melissa Ryan filed a statement of intent to “surrender” their
4 house in Kihei, Hawaii (the “Property”). The secured lender
5 later non-judicially foreclosed on the Property.
6 Post-foreclosure, Debtors brought a state court wrongful
7 foreclosure action against the secured lender’s successor-in-
8 interest, CIT Bank, N.A. (“CIT”). Debtors alleged serious non-
9 compliance with the Hawaii foreclosure law. CIT moved to
10 dismiss and argued, in part, that Debtors’ bankruptcy case
11 statement of intent to surrender estopped them from asserting a
12 wrongful foreclosure action. Debtors responded by reopening
13 their bankruptcy case and seeking a clarifying order from the
14 bankruptcy court and an order allowing amendment of their
15 statement of intention. The bankruptcy court provided the
16 requested relief; its clarifying order did not support CIT’s
17 positions in the state court litigation.
18 CIT appeals; it disagrees with the bankruptcy court’s
19 analysis and argues that the bankruptcy court improperly issued
20 an advisory opinion and allowed amendment of the statement of
21 intention.
22 The state court eventually dismissed the wrongful
23 foreclosure action based solely on a state law statute of
24 limitations affirmative defense. Because the state court action
25
26 1
Unless otherwise indicated, all chapter and section
27 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532.
All “Rule” references are to the Federal Rules of Bankruptcy
28 Procedure.
2
1 was dismissed on state law grounds, and notwithstanding a
2 pending state court appeal, we conclude that this appeal is
3 moot. Accordingly, we DISMISS the appeal, VACATE the bankruptcy
4 court’s order, and REMAND with instructions to close the
5 bankruptcy case.
6 FACTS
7 In 2004, Debtors purchased the Property. They later
8 obtained a loan and secured repayment with a mortgage on the
9 Property.
10 In 2009, Debtors filed a chapter 7 petition. They
11 scheduled their ownership interest in the Property and on their
12 statement of intention stated an intent to surrender the
13 Property. They also filed a separate “Declaration of Debtor Re:
14 Surrender of Property.” In it, they declared “that they have
15 surrendered” the Property and “hereby relinquish[] any and all
16 legal, equitable and possessory interests to same. I/We declare
17 under penalty of perjury that the foregoing is true and
18 correct.” Consistent with their statement of intention, they
19 did not oppose the secured lender’s stay relief motion, and at
20 no time did they question or impede their secured lender’s right
21 to foreclose on the Property.
22 Debtors received their discharge, and the bankruptcy court
23 closed the case.
24 The wrongful foreclosure action. The secured lender non-
25 judicially foreclosed in 2010. In 2016, Debtors eventually
26 brought a wrongful foreclosure action in Hawaii state court
27 against CIT. They asserted that the secured lender, CIT’s
28 predecessor-in-interest, failed to comply with Hawaii
3
1 foreclosure law. Among other things, they alleged serious
2 noncompliance with the publication notice provisions of Hawaii
3 law.
4 CIT moved to dismiss the state court action and argued that
5 Debtors were judicially estopped from pursuing their claims
6 because the bankruptcy court relied on the statement of
7 intention and surrender declaration when it entered the
8 discharge. It further argued that Debtors lacked standing to
9 bring the claims because they surrendered the Property in the
10 bankruptcy case. It finally argued that the action was barred
11 by the relevant statute of limitations.
12 Debtors reopen their bankruptcy case and seek bankruptcy
13 court relief. In response, Debtors moved to reopen their
14 chapter 7 case;2 the bankruptcy court granted their motion.
15 Debtors then asked the bankruptcy court for: (1) an order
16 clarifying that their discharge did not compel them to transfer
17 the Property or prevent them from arguing that the foreclosure
18 was wrongful; or, alternatively, (2) an order permitting them to
19 amend their statement of intention and surrender declaration to
20 clarify that they surrendered the Property to the chapter 7
21 trustee and did not intend to relinquish state-law protections.
22 CIT opposed, raising a number of issues. The bankruptcy
23 court took the matter under submission after hearing oral
24 argument. While the matter was under submission, the Eleventh
25
26 2
We exercise our discretion to take judicial notice of
27 documents electronically filed in the underlying bankruptcy
case. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood),
28
293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).
4
1 Circuit decided Failla v. Citibank, N.A. (In re Failla),
2
838 F.3d 1170 (11th Cir. 2016) and determined that a debtor’s
3 surrender of real property in a bankruptcy case estopped the
4 debtor from subsequently opposing foreclosure.
5 The bankruptcy court’s memorandum decision. When the
6 bankruptcy court issued its memorandum decision, it concluded
7 that: (1) the matter was justiciable and a decision would not be
8 an advisory opinion because there was a live controversy between
9 the parties; (2) it had subject matter jurisdiction over the
10 matter in part; (3) it would not abstain from deciding the
11 matter; (4) reopening the case was proper; (5) as a matter of
12 bankruptcy law, Debtors’ “surrender” of the Property under § 521
13 and surrender declaration did not prevent them from defending
14 against a foreclosure or asserting wrongful foreclosure; (6) as
15 a matter of bankruptcy law, Debtors’ discharge was independent
16 of their “surrender” of the Property; and (7) Debtors would be
17 permitted to amend their statement of intention. The bankruptcy
18 court also acknowledged Failla but disagreed with it in most
19 respects.
20 Debtors’ wrongful foreclosure action is dismissed on non-
21 bankruptcy grounds. The day after issuance of the bankruptcy
22 court’s memorandum of decision, the state court heard and
23 granted CIT’s motion to dismiss the wrongful foreclosure action
24 as barred by the statute of limitations.3 After entry of a
25
26 3
Appellants ask us to take judicial notice of: (1) the
27 state court’s order granting CIT’s motion to dismiss; (2) the
accompanying final judgment in the state court; (3) the
28 (continued...)
5
1 final judgment, Debtors appealed this decision to the Hawaii
2 Intermediate Court of Appeals, where the matter remains pending.
3 The bankruptcy court’s separate order. Eventually, the
4 bankruptcy court entered a separate order granting Debtors’
5 post-reopening motion for the reasons contained in its
6 memorandum decision. CIT timely appealed to the Panel.
7 What the parties want us to do on appeal. The bankruptcy
8 court elected to publish its memorandum decision. In re Ryan,
9
560 B.R. 339 (Bankr. D. Haw. 2016). And, perhaps given the
10 bankruptcy court’s commentary on Failla, this appeal drew
11 outsized attention; we allowed the National Consumer Bankruptcy
12 Rights Center and National Association of Consumer Bankruptcy
13 Attorneys to file amici curiae briefs.
14 The parties and amici want us to take a position on the
15 issues decided by the bankruptcy court and by the Eleventh
16 Circuit in Failla. We briefly observe that Failla is neither
17 factually or legally applicable.4 Otherwise, we decline the
18
19 3
(...continued)
transcript of the hearing on the motion to dismiss; and
20
(4) Debtors’ appeal from the dismissal. We grant the request.
21 4
In Failla, as is the case here, the debtors executed a
22 statement of intent to surrender real property encumbered by a
mortgage. After this point of commonality, the cases diverge
23 substantially. The debtors in Failla actively opposed
24 foreclosure at every step of the
way. 838 F.3d at 1173-74.
Here, Debtors did not oppose stay relief and, as CIT’s counsel
25 conceded at oral argument, never opposed their lender’s right to
foreclose.
26
27 On appeal, CIT asks us both to adopt and then extend Failla
to hold that a debtor who states an intent to surrender cannot
28 (continued...)
6
1 invitation to do so; as we discuss below, the appeal is moot.
2 JURISDICTION
3 Subject to the mootness discussion below, the bankruptcy
4 court had jurisdiction under 28 U.S.C. §§ 1334 and 157(b)(2)(A).
5 Also subject to the mootness discussion below, we have
6 jurisdiction under 28 U.S.C. § 158.
7 ISSUE
8 Whether the appeal is moot.
9 STANDARD OF REVIEW
10 We review our own jurisdiction and mootness de novo.
11 Wilson v. Lynch,
835 F.3d 1083, 1091 (9th Cir. 2016); Ellis v.
12 Yu (In re Ellis),
523 B.R. 673, 677 (9th Cir. BAP 2014).
13 DISCUSSION
14 A. Jurisdiction: Scope of Review
15 Debtors argue that the time to appeal the bankruptcy
16 court’s separate order lapsed. We disagree. The bankruptcy
17 court issued its memorandum decision on October 19, 2016, and
18 that decision directed Debtors to submit a proposed order. CIT
19
20 4
(...continued)
21 bring a wrongful foreclosure action based on the foreclosing
lenders’ subsequent noncompliance with state foreclosure laws.
22 Put differently, CIT wants us to read Failla and to interpret
relevant law as completely immunizing secured lenders from
23 liability for violation of state foreclosure law if a debtor
24 surrenders real property in a pre-foreclosure bankruptcy. But
Failla, even if otherwise correct (a determination we do not
25 make), does not suggest that a secured creditor no longer needs
to comply with state foreclosure law.
Id. at 1177.
26
27 In short, even if the case was not moot we would not
“follow” Failla in deciding this appeal because we cannot
28 stretch it so far as to cover the facts of this case.
7
1 filed its notice of appeal on November 2, 2016. The bankruptcy
2 court entered its separate order on January 4, 2017.
3 Rule 8002(a)(2) addresses this exact situation: “A notice
4 of appeal filed after the bankruptcy court announces a decision
5 or order—but before entry of the judgment, order, or decree—is
6 treated as filed on the date of and after the entry.” Fed. R.
7 Bankr. P. 8002(a)(2). CIT’s notice of appeal is treated as
8 filed on January 4, 2017, and is timely. See Fed. R. Bankr.
9 P. 8002(a)(1).
10 Debtors also argue that we lack jurisdiction over the order
11 reopening the bankruptcy case. The bankruptcy court entered its
12 order reopening the bankruptcy case in June 2016; CIT filed its
13 notice of appeal in November of 2016, well beyond the 14-day
14 appeal window. But a reopening order is “simply a mechanical
15 device . . . . [that] has no independent legal significance and
16 determines nothing with respect to the merits of the case.”
17 Abbott v. Daff (In re Abbott),
183 B.R. 198, 200 (9th Cir. BAP
18 1995). Accordingly, the order granting the motion to reopen the
19 case was interlocutory because it did not resolve the merits of
20 the underlying dispute; instead, it was a preliminary step in
21 the process. See Wilborn v. Gallagher (In re Wilborn),
205 B.R.
22 202, 206 (9th Cir. BAP 1996). The process ended with the
23 January 4, 2017 final order; subject to our mootness analysis,
24 we have jurisdiction to review the reopening order.
25 B. Jurisdiction: Mootness
26 1. The appeal is moot.
27 “It is not enough that a dispute was very much alive when
28 suit was filed; the parties must continue to have a ‘personal
8
1 stake’ in the ultimate disposition of the lawsuit.” Chafin v.
2 Chafin,
568 U.S. 165, 172 (2013) (internal quotation marks
3 omitted) (citations omitted). A case, thus, may become moot
4 during appeal.
5 “A case is moot if the issues presented are no longer live
6 and there fails to be a ‘case or controversy’ under Article III
7 of the Constitution.” Pilate v. Burrell (In re Burrell),
8
415 F.3d 994, 998 (9th Cir. 2005). Determining constitutional
9 mootness turns on whether “the appellate court can give the
10 appellant any effective relief in the event that it decides the
11 matter on the merits in [its] favor.” Id.;
Chafin, 568 U.S. at
12 172 (“But a case becomes moot only when it is impossible for a
13 court to grant any effectual relief whatever to the prevailing
14 party.” (internal quotation marks omitted)). A case is not moot
15 if the parties have a “concrete interest, however small, in the
16 outcome of the litigation . . . .”
Chafin, 568 U.S. at 172.
17 The question, here, is whether we can grant any effective
18 relief. At present, we cannot.
19 The Hawaii state court dismissed the wrongful foreclosure
20 action based solely on the Hawaii statute of limitations. It
21 did not consider or rely on bankruptcy law or the bankruptcy
22 court’s decision.5 As a result, even if we conclude that the
23 bankruptcy court erred, reversal would not change the status
24 quo.
25
5
See Transcript of Proceedings in Hawaii Circuit Court
26 (Oct. 20, 2016) at 20:3-7 (“While the Court appreciates Judge
27 Faris’ well-reasoned decision that came out yesterday on this
issue, this matter merits dismissal regardless of Plaintiffs’
28 statement of intent to surrender.”).
9
1 We acknowledge that Debtors appealed the state court’s
2 judgment of dismissal. And on appeal, an appellate court will
3 either reverse or affirm the dismissal. If the dismissal
4 remains intact, the matter would remain moot.
5 On the other hand, if the dismissal is reversed, then the
6 wrongful foreclosure action would proceed and the state court
7 may consider CIT’s bankruptcy related defenses and may agree or
8 disagree with the bankruptcy court’s analysis. At oral
9 argument, CIT’s counsel argued that the case was not moot for
10 this reason. But this is merely a contingent interest that
11 does not create jurisdiction on this appeal. See Alcoa, Inc. v.
12 Bonneville Power Admin.,
698 F.3d 774, 793 (9th Cir. 2012)
13 (“Specifically, ‘[a] claim is not ripe for adjudication if it
14 rests upon contingent future events that may not occur as
15 anticipated, or indeed may not occur at all.’” (internal
16 quotation marks omitted) (quoting Texas v. United States,
17
523 U.S. 296, 300 (1998)). Similarly, Debtors’ counsel argued
18 that the appeal is not moot because the Hawaii appellate court
19 could affirm the state court dismissal on separate grounds, that
20 is, the bankruptcy grounds. But, that is yet another contingent
21 future event; it is insufficient to establish jurisdiction on
22 appeal.6
23 This mootness analysis is supported by case law arising in
24 cases where a federal court must review a decision of a state
25
6
We also note that “[n]o matter what we conclude, the
26 opinion of the [bankruptcy] court will not be ripped from [the
27 Bankruptcy Reporter].” NASD Dispute Resolution, Inc. v.
Judicial Council of State of Cal.,
488 F.3d 1065, 1069 (9th Cir.
28 2007).
10
1 court. “As the Supreme Court explained in [a] line of
2 federalism cases . . ., federal courts will not review a
3 question of federal law decided by a state court if the decision
4 of that court rests on a state law that is independent of the
5 federal question and adequate to support the judgment.”
6 Cunningham v. Wong,
704 F.3d 1143, 1155 (9th Cir. 2013)
7 (citations and internal quotation marks omitted). When the
8 Supreme Court is directly reviewing a state court judgment, “the
9 independent and adequate state ground doctrine is
10 jurisdictional.” Coleman v. Thompson,
501 U.S. 722, 729 (1991).
11 Coleman continues:
12 Because this Court has no power to review a state law
determination that is sufficient to support the
13 judgment, resolution of any independent federal ground
for the decision could not affect the judgment and
14 would therefore be advisory.
15
Id. See Herb v. Pitcairn,
324 U.S. 117, 126 (1945) (“We are not
16 permitted to render an advisory opinion, and if the same
17 judgment would be rendered by the state court after we corrected
18 its views of federal laws, our review could amount to nothing
19 more than an advisory opinion.”).
20 Accordingly, we conclude that the appeal is moot for all
21 purposes.7
22 2. Because the appeal is moot, we vacate the bankruptcy
court’s order.
23
24 “When a case becomes moot on appeal, the established
25
26 7
In the event of reversal, nothing stops either party
27 from returning to the bankruptcy court and petitioning it for a
new opinion. In the event the bankruptcy court reissues a
28 similar opinion, CIT may then re-appeal.
11
1 practice is to reverse or vacate the decision below with a
2 direction to dismiss.” NASD Dispute Resolution, Inc.,
488 F.3d
3 at 1068 (internal quotation marks omitted); Am. Civil Liberties
4 Union of Nev. v. Masto,
670 F.3d 1046, 1065 (9th Cir. 2012)
5 (“The ‘normal rule’ when a case is mooted is that vacatur of the
6 lower court decision is appropriate.” (citation omitted)).
7 “Vacatur in such a situation eliminates a judgment the loser was
8 stopped from opposing on direct review.” NASD Dispute
9 Resolution,
Inc., 488 F.3d at 1068 (internal quotation marks and
10 alterations omitted). Otherwise, “the lower court’s judgment
11 . . . would escape meaningful appellate review thanks to the
12 happenstance of mootness.”
Id. In the Ninth Circuit when a
13 case becomes moot on appeal, vacatur is generally automatic.
14
Id.
15 Given the circumstances, we conclude that vacatur, the
16 standard practice, is appropriate.8
17
8
18 There are exceptions to the general rule of vacatur, and
“vacatur is not always appropriate when a case becomes moot on
19 appeal.” NASD Dispute Resolution,
Inc., 488 F.3d at 1068;
Masto, 670 F.3d at 1065-66. One exception arises when “the
20 party seeking appellate relief fails to protect itself or is the
21 cause of subsequent mootness.” NASD Dispute Resolution,
Inc.,
488 F.3d at 1069 (emphasis and internal quotation marks
22 omitted). In such a case, the appellate court must consider
principles of equity and the public interest.
Id. Any facial
23 appeal to this exception is insufficient. CIT’s own actions
24 caused the mootness when it prevailed in the state court and
obtained dismissal, but the Ninth Circuit has already reasoned
25 that this is not enough to avoid vacatur.
Id. at 1070
(“[Appellants] were not even parties to those actions [that
26 mooted the case], though it would not matter if they had been,
27 because they could not be required to abandon their consistent
position in other pending litigation merely to avoid mooting out
28 (continued...)
12
1 CONCLUSION
2 Accordingly, we DISMISS the appeal as moot, VACATE the
3 bankruptcy court’s order, and REMAND with instructions to close
4 the case.
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
8
27 (...continued)
another case.”). No other exception is even arguably
28 applicable.
13
