FILED
JUL 11 2018
NOT FOR PUBLICATION
SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP No. AZ-17-1310-SBaF
HARRY DELBERT DALTON, Bk. No. 0:17-bk-06058-PS
Debtor.
HARRY DELBERT DALTON,
Appellant, MEMORANDUM*
v.
LAWRENCE J. WARFIELD, Chapter 7
Trustee,
Appellee.
Argued and Submitted on June 21, 2018
at Phoenix, Arizona
Filed – July 11, 2018
*
This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
Appeal from the United States Bankruptcy Court
for the District of Arizona
Honorable Paul Sala, Bankruptcy Judge, Presiding
Appearances: Appellant Harry Delbert Dalton argued pro se; Terry A.
Dake argued for appellee.
Before: SPRAKER, BASON,** and FARIS, Bankruptcy Judges.
INTRODUCTION
Chapter 71 debtor Harry Delbert Dalton appeals from an order
authorizing the chapter 7 trustee to enter into a compromise under Rule 9019
to settle Dalton’s prepetition claims against his former insurance agent, Wade
Atchison, for payment of $5,000. At the time of his chapter 7 petition filing,
Dalton’s claims against Atchison already had been disposed of by summary
judgment in favor of Atchison. Shortly after Dalton commenced his
bankruptcy case, Dalton filed a notice of appeal from the summary judgment,
but the notice of appeal was untimely, and the district court presiding over
**
Hon. Neil W. Bason, United States Bankruptcy Judge for the Central District of
California, sitting by designation.
1
Unless specified otherwise, all chapter and section references are to the Bankruptcy
Code, 11 U.S.C. §§ 101-1532, and all “Rule” references are to the Federal Rules of
Bankruptcy Procedure. All “Appellate Rule” references are to the Federal Rules of
Appellate Procedure.
2
Dalton's claims denied Dalton's motion for an extension of time to appeal.
Under these circumstances, we agree with the bankruptcy court that
there were considerable obstacles to any recovery on the prepetition claims.
In light of these considerations, the bankruptcy court did not err in concluding
that the estate’s creditors would be best served by approval of the
compromise. Accordingly, we AFFIRM the bankruptcy court’s order
authorizing the compromise.
FACTS2
A. Dalton’s Litigation Against Atchison.
In December 2015, Dalton filed, pro se, a verified civil complaint against
Atchison and other unidentified defendants in the Mohave County Superior
2
This recitation of facts is based, in part, on our review of court documents filed in
Dalton’s bankruptcy case and in his civil lawsuit against Atchison. Even though the parties
did not include all of these documents in their excerpts of record, we can take judicial
notice of the filing and contents of these documents. See Fed. R. Evid. 201; Lee v. City of L.A.,
250 F.3d 668, 690 (9th Cir. 2001); Woods & Erickson, LLP v. Leonard (In re AVI, Inc.),
389 B.R.
721, 725 n.2 (9th Cir. BAP 2008). Additionally, Dalton has filed motions requesting that we
permit him to supplement the record on appeal by taking into consideration all of the
papers filed in his civil lawsuit and some of the papers filed in his appeal from the
disposition of the civil lawsuit. These motions are hereby ORDERED GRANTED IN PART
AND DENIED IN PART. To the extent we already have reviewed these papers for
purposes of framing this recitation of facts, or to the extent the papers were presented to
the bankruptcy court at or before the time of the bankruptcy court’s ruling on the
compromise motion, the motions are GRANTED. But, to the extent Dalton is asking us to
consider papers not presented to the bankruptcy court for consideration, the motions are
DENIED. See Oyama v. Sheehan (In re Sheehan),
253 F.3d 507, 512 n.5 (9th Cir. 2001); Kirschner
v. Uniden Corp. of Am.,
842 F.2d 1074, 1077–78 (9th Cir. 1988).
3
Court for breach of contract and intentional infliction of emotional distress.3
Generally, Dalton alleged that in April 2013, Atchison, acting as his insurance
agent, provided him with an insurance policy covering Dalton’s residence
then under construction in Arkansas. According to Dalton, he asked Atchison
to obtain for him a “builders’ risk policy” insuring all contractors and laborers
working on the property, including himself, from accident and loss. Dalton
claimed that the policy as originally written did not insure either him or any
of his workers against bodily injury occurring while building the house.
Dalton also claimed that Atchison persuaded him to change his insurance
coverage in May 2013. As a result of this change, Dalton asserted, he and his
workers were left uncovered for any injury occurring while working on the
home construction.4
Apparently, sometime in May 2013, Dalton was injured while operating
a bulldozer on the property. While recuperating from that injury, Dalton
alleges that roughly $1,200 in wiring was stripped from the interior of the
3
Dalton never amended his complaint to specifically identify any other defendants.
Nor did he ever serve them. Consequently, the district court dismissed all other unnamed
defendants from the action.
4
The documentary evidence accompanying Atchison’s court papers indicates that
Allstate Insurance did not modify Dalton’s insurance coverage until June 11, 2013. As
Dalton has alleged, the accident and the theft from which his claims against Atchison arose
both occurred before the end of May 2013. Consequently, the modification of the insurance
coverage does not appear relevant to the merits of Dalton’s claims against Atchison.
4
house and stolen. In December 2013, Dalton’s insurer, Allstate Insurance,
denied his claims resulting from both the bulldozer accident and the wiring
theft. According to Dalton, his insurance claims were denied because Atchison
sold him the wrong type of insurance or because Atchison wrongly advised
him to change his insurance.
Dalton, then living in Arizona, sued Atchinson in the state court of
Arizona. In his initial complaint, Dalton claimed, among other things, $54,000
in damages resulting from his eventual loss of his real property, as well as
another $41,000 in unspecified bills he was unable to pay allegedly as a result
of Atchison’s conduct. In addition, Dalton claimed an unspecified amount of
damages for pain and suffering and sought punitive damages. In his second
amendment to the complaint, Dalton requested recovery of a drastically
increased amount of damages, including but not limited to: (1) $247,000 for
the loss of his home, his truck, and his tools; (2) $750,000 in medical costs;
(3) $300,000 for damage to his credit rating; and (4) $750,000 in punitive
damages.
Atchison removed the civil lawsuit to the United States District Court
for the District of Arizona. The Arizona district court then ordered the case
transferred to the United States District Court for the Eastern District of
Arkansas, where Atchison resided. The Arkansas district court eventually
disposed of the lawsuit based on Atchison’s motion for summary judgment.
Citing Scott–Huff Insurance Agency v. Sandusky,
887 S.W.2d 516 (Ark. 1994), and
5
Buelow v. Madlock,
206 S.W.3d 890, 893 (Ark. App. 2005), the district court
ruled that: (1) absent a “special relationship,” Atchison did not owe Dalton
any duty, contractual or otherwise, to provide Dalton with adequate or correct
advice or assistance in obtaining insurance for his coverage needs; and (2)
under the undisputed facts as presented to the court, there was no special
relationship between Dalton and Atchison from which a higher duty could
have arisen.
As for the intentional infliction of emotional distress claim, the district
court explained that Arkansas requires extreme and outrageous conduct
going “beyond all possible bounds of decency” before an intentional infliction
of emotional distress claim will arise. The court pointed out that Dalton had
neither alleged nor set forth facts demonstrating this type of conduct on the
part of Atchison.
The Arkansas district court entered judgment in favor of Atchison and
against Dalton on May 15, 2017. Dalton mailed his notice of appeal to the
Arkansas district court on June 14, 2017, but the district court did not receive
and file it until June 19, 2017.
On June 30, 2017, Dalton filed a motion for leave to appeal in forma
pauperis and a motion to extend the time to appeal, because he did not file his
notice of appeal within thirty days of entry of the judgment. The district court
denied both of these motions by order entered September 15, 2017.
6
B. Dalton’s Bankruptcy Case And Warfield’s Compromise Motion.
Meanwhile, on May 31, 2017, after the Arkansas district court entered
judgment but before the 30-day appeal period ran, Dalton commenced his
bankruptcy case in the United States Bankruptcy Court for the District of
Arizona by filing a voluntary petition for relief under chapter 7 of the Code.
Lawrence J. Warfield was appointed to serve as the chapter 7 trustee. Shortly
after his appointment, Warfield sought and obtained the bankruptcy court’s
authorization to employ bankruptcy counsel, Terry Dake, to assist him in
administering Dalton’s bankruptcy estate.
Within days of his retention as bankruptcy counsel, Dake moved for
court approval of a settlement Warfield had reached with Atchison. Pursuant
to the settlement, Atchison agreed to pay the bankruptcy estate $5,000 to fully
and finally resolve Dalton’s claims against Atchison. Warfield asserted that,
based on his review of the pleadings in the litigation and the Arkansas District
Court’s summary judgment ruling, the settlement was reasonable and in the
best interests of the estate’s creditors. As Warfield put it, there was no
likelihood of success in the litigation, and the costs and uncertainties of
continued litigation far exceeded any likely recovery therefrom. The
compromise motion was less than three pages long and was not accompanied
by any evidence.
In response, Dalton filed a variety of papers pertaining to his lawsuit
against Atchison. On these papers, Dalton interlineated comments. The papers
7
and the interlineated comments comprise Dalton’s opposition to Warfield’s
compromise motion. In large part, Dalton asserted that the compromise
undervalued his claims and that approval of the compromise would violate
his due process rights by not giving him a full and fair chance to litigate his
claims. At the heart of Dalton’s assertions was his contention that the
Arkansas district court committed reversible error when it granted summary
judgment in Atchison’s favor. According to Dalton, the district court
impermissibly accepted Atchison’s asserted facts as true, ignored Dalton’s
asserted facts, and did not read the papers Dalton submitted in opposition to
Atchison’s summary judgment motion, as reflected by the numerous errors
the district court supposedly made in reciting the basic chronology of events
leading up to the dispute between Dalton and Atchison.
In support of his reversible error contention, Dalton presented an
account of Atchison’s alleged misconduct that differed from what he
presented in his initial Complaint against Atchison. According to Dalton,
Atchison said he was providing Dalton with builder’s risk insurance but
instead provided him with a homeowner’s policy with a dwelling under
construction endorsement. As explained by Atchison, the homeowner’s policy
covered persons injured on the property other than the insured.
As Dalton now puts it, Atchison had a duty to tell Dalton the true name
of the policy, and if Dalton actually had received a copy of the policy stating
that it was a homeowner’s policy with a dwelling under construction
8
endorsement, he would have realized immediately that the policy Atchison
procured did not meet his insurance needs with respect to the risk of bodily
injury.5 Citing Lawrence v. Francis,
267 S.W.2d 306 (Ark. 1954), and Derby v.
Blankenship,
230 S.W.2d 481 (Ark. 1950), Dalton in effect asserts that Atchison
agreed to provide him with insurance to cover his risk of bodily injury and
that Atchison breached his contractual duty by not actually providing him
with the requested insurance coverage. Dalton further asserts that the
Arkansas district court erred because it ignored Atchison’s breach of this
contractual duty.
On October 12, 2017, the bankruptcy court held a hearing on the
compromise motion. Warfield and Dalton reiterated their positions. The
bankruptcy court largely agreed with Warfield. The bankruptcy court
acknowledged that, in assessing the desirability of the compromise to the
bankruptcy estate, the court needed to consider the factors set forth in Martin
v. Kane (In re A & C Properties),
784 F.2d 1377 (9th Cir. 1986). The court then
addressed the first A & C Properties factor, the probability of success in the
litigation. The court found, based on the papers submitted by both parties,
5
Dalton also refined his argument regarding modification of the policy, now
claiming that Atchison committed fraud against him by modifying and changing his policy
without Dalton having signed an application requesting such a change. As explained in
footnote 4 above, because Dalton’s losses occurred in May 2013, and the policy was not
modified until June 2013, the modification of the policy does not seem to have caused a
change in coverage that would have affected Dalton’s rights at the time the subject losses
occurred.
9
that there was no likelihood of success in the appeal from the Arkansas
district court’s ruling and that Dalton could not prosecute the claims to
successful resolution. In so finding, the bankruptcy court explained that the
summary judgment ruling against Dalton as well as the denial of Dalton’s
motion to extend the time to appeal were “huge roadblocks” to the estate ever
recovering any more for the claims than would be realized as a result of the
proposed compromise. The court was also concerned that Dalton was the only
person willing to prosecute the claims.
The bankruptcy court specifically mentioned the second and third A &
C Properties factors, difficulty of collection and complexity of litigation. But the
court did not say much about them. In essence, the court determined that
these factors were eclipsed by the complete lack of likelihood of Dalton and
the estate prevailing in the litigation.
As for the fourth and final A & C Properties factor, the paramount
interest of the estate’s creditors and deference to their reasonable views, the
bankruptcy court found that their interest was best served by approving the
settlement and thereby bringing into the estate the $5,000 settlement amount,
which it concluded was as much as the creditors could expect to get from the
litigation.
On October 13, 2017, the bankruptcy court entered its order approving
the compromise. Dalton timely appealed the order.
10
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(A) and (O). We have jurisdiction under 28 U.S.C. § 158.
ISSUE
Did the bankruptcy court abuse its discretion when it approved the
compromise of the appeal rights pursuant to Rule 9019?6
STANDARD OF REVIEW
We review for an abuse of discretion the bankruptcy court’s approval
of the compromise. Goodwin v. Mickey Thompson Entm't Grp., Inc. (In re Mickey
Thompson Entm't Grp., Inc.),
292 B.R. 415, 420 (9th Cir. BAP 2003).
A bankruptcy court abuses its discretion if it applies an incorrect legal
rule or if its factual findings are illogical, implausible or without support in
the record. United States v. Hinkson,
585 F.3d 1247, 1261-62 (9th Cir. 2009) (en
banc).
DISCUSSION
Under Rule 9019, the bankruptcy court is authorized to approve a
compromise of a dispute involving the bankruptcy estate. In re Mickey
Thompson Entm't Grp.,
Inc., 292 B.R. at 420 (citing In re A & C
Props., 784 F.2d
at 1381). The compromise must be fair and equitable.
Id. To determine the
6
At the hearing on the compromise motion, Dalton orally requested that the
bankruptcy court dismiss his bankruptcy case. The court orally denied that request.
Nothing in Dalton’s appeal papers suggests that he is challenging on appeal that denial.
Therefore, we will not address it.
11
fairness and equity of the proposed compromise, the bankruptcy court is
required to analyze the transaction with the following factors in mind:
(a) The probability of success in the litigation; (b) the
difficulties, if any to be encountered in the matter of collection;
(c) the complexity of the litigation involved, and the expense,
inconvenience and delay necessarily attending it; [and] (d) the
paramount interest of the creditors and a proper deference to their
reasonable views in the premise.
In re A & C
Props., 784 F.2d at 1381.
Importantly, so long as the trustee and the bankruptcy court work
within the confines of the above-referenced analytical framework, their
informed decisions and judgment as to what sort of transaction was desirable
and appropriate are entitled to deference and “great latitude.”
Id.
The bankruptcy court correctly identified all four A & C Properties
factors. Furthermore, Dalton only has challenged on appeal the bankruptcy
court’s determination that there is little or no likelihood that Dalton would
prevail on appeal or recover on his claims for the benefit of the estate an
amount greater than what was realized as a result of the $5,000 settlement.7
In support of his argument, Dalton reiterates the same points he raised in the
7
Dalton has not challenged on appeal the bankruptcy court’s analysis concerning
the difficulty of collection, the complexity of the litigation and the paramount interest of
the estate’s creditors. For purposes of this appeal, it suffices for us to say that, if the
bankruptcy court was correct about there being little or no chance of Dalton prevailing,
then the court’s determination that none of the other A & C Properties factors militated
against the compromise was logical, plausible and supported by the record.
12
bankruptcy court regarding why he thinks the Arkansas district court’s
summary judgment ruling was wrong. He contends that the district court
impermissibly accepted Atchison’s asserted facts as true, ignored Dalton’s
asserted facts, and did not read all of the papers Dalton submitted in
opposition to Atchison’s summary judgment motion.
Importantly, however, Dalton does not address perhaps the biggest
obstacle he would face in attempting to obtain reversal of the Arkansas district
court’s summary judgment. Dalton’s notice of appeal was not filed within the
30-day time period required under Appellate Rule 4(a)(1)(A). Even though
Dalton filed a motion to extend the time to file his notice of appeal, the
Arkansas district court denied that motion, as well as his motion for leave to
appeal in forma pauperis.
Simply put, Dalton’s appeal of the district court’s judgment is subject to
dismissal by the Eighth Circuit Court of Appeals because the appeal was
untimely filed. The 30-day appeal filing deadline is mandatory and
jurisdictional. See, e.g., Dieser v. Cont'l Cas. Co.,
440 F.3d 920, 923 (8th Cir.
2006); Arnold v. Wood,
238 F.3d 992, 994–95 (8th Cir. 2001).8
8
Because the 30-day appeal period is set forth in both the controlling statute, 28
U.S.C. § 2107(a), and in Appellate Rule 4(a)(1)(A), the recent Supreme Court case of Hamer
v. Neighborhood Housing Services of Chicago,
138 S. Ct. 13 (2017), does not dictate a different
result. See Gordon v. James, ___ F.3d ___,
2018 WL 2386818, at *1 (5th Cir. Mar. 27, 2018);
Evans v. Greentree Servicing, LLC,
2018 WL 1326651, at *1 (unpublished order) (6th Cir. Feb.
8, 2018); see also Wilkins v. Menchaca (In re Wilkins), ___ B.R. ___,
2018 WL 3197481 (9th Cir.
BAP June 28, 2018 ) (post-Hamer decision holding that the time for filing an appeal from a
(continued...)
13
Thus, regardless of the merits of the issues Dalton seeks to raise before
the Eighth Circuit, we agree with the bankruptcy court’s determination
concerning Dalton’s chance of prevailing on appeal. Because his appeal of the
district court’s judgment was untimely filed, Dalton faced a very high hurdle.9
In sum, the bankruptcy court’s assessment of Dalton’s probability of success
was not clearly erroneous, and Dalton has not challenged on appeal any other
aspect of the bankruptcy court’s ruling approving the compromise.
CONCLUSION
For the reasons set forth above, we AFFIRM the bankruptcy court’s
order approving the compromise of Dalton’s appeal rights.
8
(...continued)
bankruptcy court order is mandatory and jurisdictional).
9
Even though Dalton commenced his chapter 7 bankruptcy case before the appeal
period expired, § 108(b) does not help Dalton. That Code section would have given his
chapter 7 trustee an extra sixty days to file a notice of appeal, but the statute on its face does
not apply to chapter 7 debtors. See generally Santa Fe Dev. & Mortg. Corp. v. McCormack (In
re Santa Fe Dev. & Mortg. Corp.),
16 B.R. 165, 167 (9th Cir. BAP 1981) (“The purpose of
section 108 is to permit the trustee, when he steps into the shoes of the debtor an extension
of time for filing an action or doing some other act that is required to preserve the debtor's
rights.”). Some courts have offered reasoned legal analyses for extending the application
of § 108 to chapter 11 debtors in possession, see
id. at n.1, and to chapter 13 debtors, see
Stephenson v. Chase Home Fin. LLC,
2011 WL 2006117, at *5 (S.D. Cal. May 23, 2011). But we
know of no legal or logical basis for extending § 108 to chapter 7 debtors. Nor has Dalton
posited any.
14
