In re: JAMES L. GERARD, Jr. and JULIE S. GERARD

FILED
DEC 08 2014
1 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK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. CC-14-1028-KiTaD
)
6 JAMES L. GERARD, Jr. and ) Bk. No. 10-13508-GM
JULIE S. GERARD, )
7 ) Adv. No. 1:10-1261
Debtors. )
8 )
)
9 DIANE GOLDMAN, )
)
10 Appellant, )
)
11 v. ) M E M O R A N D U M1
)
12 JULIE S. GERARD, )
)
13 Appellee. )
______________________________)
14
Argued and Submitted on October 23, 2014,
15 at Malibu, California
16 Filed - December 8, 2014
17 Appeal from the United States Bankruptcy Court
for the Central District of California
18
Honorable Geraldine Mund, Bankruptcy Judge, Presiding
19
20 Appearances: Diane Goldman, appellant, argued pro se; Anthony
Daniel Zinnanti argued for appellee, Julie S.
21 Gerard.
22
Before: KIRSCHER, TAYLOR and DUNN, Bankruptcy Judges.
23
24
25
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 8013-1.
1 Creditor Diane Goldman ("Goldman") appeals an order granting
2 the motion of debtor Julie S. Gerard ("Debtor") to reopen an
3 adversary proceeding and determining that Debtor did not breach a
4 settlement agreement related to a nondischargeability judgment
5 entered previously in Goldman's favor. Two other issues raised in
6 Debtor's motion were not (and still have not been) decided in the
7 instant order. Because the order on appeal is not final, we
8 DISMISS for lack of jurisdiction.
9 I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
10 Goldman and Debtor were law partners until November 2007.
11 After termination of their partnership, Goldman sued Debtor in
12 state court for breach of fiduciary duty, breach of written
13 contract and other claims. In short, Goldman contended Debtor had
14 taken funds in excess of her one-half share allowed under the
15 partnership agreement.
16 After trial, the state court entered a judgment in favor of
17 Goldman for $93,354.46 plus interest, costs and attorney's fees.
18 The amount of attorney's fees was to be determined at a later
19 hearing, but that matter was taken off calendar once Debtor and
20 her husband filed their chapter 72 bankruptcy case. Goldman
21 incurred approximately $147,000 in attorney's fees in the state
22 court litigation.
23 A. The adversary proceeding
24 Goldman timely filed a nondischargeability complaint seeking
25 to except her debt of approximately $240,000 ($93,354.64 plus an
26
2
Unless specified otherwise, all chapter, code and rule
27 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. The
28 Federal Rules of Civil Procedure are referred to as “Civil Rules.”
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1 estimated $147,000 in fees and costs) from Debtor's discharge
2 under § 523(a)(2)(A), (a)(4) and (a)(6).3 The parties settled the
3 matter at mediation.
4 A Settlement and Release Agreement ("Settlement Agreement")
5 was executed in connection with the nondischargeability action.
6 According to the Settlement Agreement, Debtor agreed to pay
7 Goldman $25,000 on or before March 1, 2011. She also agreed to
8 assign to Goldman a beneficial interest of $125,000 in her
9 existing $500,000 whole life insurance policy, as Debtor had just
10 been diagnosed with Stage IV colon cancer. In lieu of the
11 insurance interest, Debtor could also satisfy her obligation to
12 Goldman if she paid Goldman $85,000 or before March 1, 2016.
13 Goldman would receive a nondischargeability judgment for $240,000,
14 reduced to $215,000 upon Debtor's timely payment of $25,000, which
15 Goldman agreed not to enforce unless Debtor defaulted under the
16 terms of the Settlement Agreement. Debtor could default by:
17 (1) failing to "make any payment when the same shall become due;"
18 (2) failing to "make any premium payment when due;" (3) the lapse
19 of any coverage provided under the life insurance policy; or
20 (4) breaching any other terms or conditions.
21 In Paragraph 3 of the Settlement Agreement, the parties
22 agreed the bankruptcy court "would retain jurisdiction over the
23 terms of the [Settlement Agreement] and its enforcement," and
24 further agreed in Paragraph 17 that all actions or proceedings
25 arising in connection with the Settlement Agreement would be
26 "tried and litigated only in the Bankruptcy Court of the Central
27
3
Goldman also plead § 727 claims against Debtor, but these
28 claims were later dismissed.
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1 District of California."
2 The bankruptcy court entered the parties' signed Stipulation
3 for Judgment of Nondischargeability of Debt (the "Stipulation")
4 and the Judgment for Nondischargeability of Indebtedness (the
5 "Judgment") in February 2011. The Stipulation referenced the
6 Settlement Agreement and set forth its essential terms. The
7 parties agreed that Goldman was entitled to a nondischargeability
8 judgment of $240,000 under § 523(a)(2)(A), (a)(2)(B) and (a)(6),
9 which was enforceable only if Debtor failed to comply with the
10 terms of the Settlement Agreement. The Judgment stated that the
11 court had approved the terms and content of the Stipulation.
12 Debtor made the initial $25,000 payment to Goldman. She also
13 executed an assignment of the beneficial interest in her life
14 insurance policy to Goldman.
15 Debtor received a discharge, and the bankruptcy case was
16 closed on March 1, 2011. The adversary proceeding was dismissed
17 by a clerk's entry on November 19, 2012.
18 B. Events leading to the motion to reopen the adversary
proceeding
19
20 On or about December 4, 2012, Goldman received a notice from
21 New York Life that Debtor had failed to pay the policy premium due
22 on November 3, 2012. To "keep the coverage in force," Debtor was
23 to make the premium payment by no later than January 3, 2013. If
24 payment was received by that date, New York Life would "promptly
25 reinstate [Debtor's] coverage, provided all persons covered under
26 the policy are living when payment is received." In addition to
27 paying by cash, Debtor could also pay the premium via the
28 company's Automatic Premium Loan ("APL") option (take out a loan
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1 against the policy to make the payment) or the Default Premium
2 Payment option, where the company would apply Debtor's dividend
3 credits to pay the "overdue premium."
4 Counsel for Goldman, Susan L. Vaage ("Vaage"), sent a letter
5 to Debtor's counsel concerning the nonpayment of the premium and
6 advised counsel that Debtor was in default of the Settlement
7 Agreement. Vaage claimed she heard nothing further from Debtor's
8 counsel. Debtor eventually paid the premium on December 20, 2012,
9 using the APL option.
10 Believing that Debtor had breached the Settlement Agreement,
11 Goldman filed an abstract of judgment for $240,000 ("Abstract"),
12 which was recorded on January 17, 2013. The Abstract listed
13 Debtor's home address incorrectly in both places on the form.
14 Debtor claimed she never received notice of the Abstract.
15 Goldman received similar notices of Debtor's failure to pay
16 the insurance premiums when due on July 3 and August 3 of 2013.
17 The notices referenced a grace period and stated that failure to
18 pay the premiums within 62 days "may result in your policy
19 lapsing." The notices further explained that allowing the policy
20 to lapse would result in no payment of death benefits. In
21 response to the July notice, Vaage sent a letter to Debtor's
22 counsel stating that Debtor's nonpayment of the premium was a
23 default under the Settlement Agreement and entitled Goldman to the
24 entire $240,000 Judgment, less the $25,000 received. Notably,
25 Vaage made no mention of the Abstract recorded in January 2013.
26 The July 3 premium was eventually paid by check on August 1, 2013,
27 and the August 3 premium was paid on October 9, 2013, by the APL
28 option. Both premiums appear to have been paid within the 62-day
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1 grace period.
2 In December 2013, Debtor's counsel sent a letter to Vaage
3 inquiring why the Abstract was recorded in January 2013, since
4 Debtor's insurance premiums had always been maintained and were
5 current. Apparently, Debtor was trying to sell her current home
6 in Calabasas and purchase another one in Ojai and Goldman's lien
7 was hindering that process. In reply, Vaage explained that Debtor
8 had defaulted "when she allowed the premium payments to lapse" and
9 Debtor only later reinstated the policy. Vaage explained that
10 when she did not hear anything from Debtor or Debtor's counsel in
11 response to her default notice letter in December 2012, she
12 applied for the writ of execution and Abstract.
13 C. Motion to reopen the adversary proceeding and related relief
14 On January 9, 2014, Debtor filed her Ex Parte Motion to
15 Reopen Adversary Proceeding to Interpret Court's Judgment and
16 Settlement Agreement Incorporated Therein, To Rescind Unauthorized
17 Issuance of Abstract of Judgment, and to Hold Diane Goldman in
18 Contempt of Court (the "Motion"). Debtor requested that the
19 Motion be heard on shortened notice because the escrows for the
20 home sale and purchase were scheduled to close on January 20.
21 Debtor denied defaulting under the Settlement Agreement. She
22 contended that the language "when due" with respect to premium
23 payments was not defined and never specified that payment must be
24 made when first due. She further denied the policy ever lapsed.
25 Debtor also disputed whether taking loans against the policy
26 constituted a default. Debtor contended the Abstract should be
27 rescinded because: (1) she did not breach the Settlement
28 Agreement; (2) the dollar amount was wrong and should be $215,000
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1 instead of $240,000 due to her $25,000 payment; and (3) it failed
2 to state Debtor's correct address as required by California law.
3 Finally, Debtor contended that Goldman should be held in contempt
4 for secretly enforcing a judgment to which she was not entitled.
5 The bankruptcy court granted the order shortening time and
6 set the Motion for hearing on January 14, 2014. Goldman could
7 oppose the Motion orally at the hearing.
8 In her written opposition to the Motion, Goldman contended
9 the bankruptcy court lacked jurisdiction to determine whether
10 Debtor defaulted under the Settlement Agreement. She further
11 argued that Debtor had breached the Settlement Agreement by:
12 (1) taking out loans against the insurance policy that impaired
13 Goldman from being paid first on the policy as the parties agreed;
14 (2) allowing the policy to lapse in December 2012 for nonpayment
15 of premium; and (3) failing to pay the premiums "when due" on at
16 least three occasions. Even though Debtor eventually paid the
17 premium after the December 2012 default and the policy was
18 reinstated, Goldman argued that the Settlement Agreement did not
19 contemplate such cures. Further, no benefits would have been paid
20 to Goldman had Debtor died while the policy was not in effect.
21 Thus, Goldman believed she was entitled to the nondischargeability
22 judgment of $240,000 because of Debtor's multiple defaults.
23 On the evening before the hearing, Debtor filed a declaration
24 from her insurance agent, Cary Richman ("Richman"). Richman
25 testified that Debtor's life insurance policy could not have
26 lapsed because sufficient cash existed in December 2012 to make
27 the payment via the APL option.
28 At the start of the hearing, the bankruptcy court expressed
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1 its reluctance to decide anything other than how to get the
2 escrows to close on time. Debtor's alleged breach of the
3 Settlement Agreement, the propriety of the recorded Abstract or
4 Goldman's alleged contempt could be decided at a later date. When
5 counsel for the parties expressed a desire to have all matters
6 raised in the Motion decided that day, the bankruptcy court agreed
7 and accommodated them.
8 After hearing argument from the parties, the bankruptcy court
9 ruled on the Motion. It granted relief to reopen the adversary
10 proceeding and to interpret the Settlement Agreement and Judgment.
11 The court found that the type of borrowing that occurred against
12 the insurance policy — i.e., to pay premiums — was not the type of
13 borrowing contemplated by the Settlement Agreement, so Debtor's
14 loans to pay premiums were not a violation.
15 The court then considered whether Debtor allowed the policy
16 to lapse. After carefully reviewing the evidence, the bankruptcy
17 court stated that it could not make that determination based on
18 what was before it; additional evidence was needed. Hr'g Tr.
19 (Jan. 14, 2014) 40:24-47:16. It then went on to conclude that use
20 of the term "reinstate" in the late payment notices could mean the
21 policy lapsed, but that it could also mean the policy was only
22 suspended unless the premium was paid by January 3, 2013, which it
23 was. Id. at 47:18-48:14.
24 Ultimately, the bankruptcy court did not rule on whether or
25 not the insurance policy lapsed. Vaage then reiterated that
26 failure to make premium payments "when due" was also a default
27 under the Settlement Agreement. On that issue, the court ruled:
28 THE COURT: Okay. All right. I'm just going to rule.
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1 I'm going to rule that she has not breached the agreement
and you're entitled to your $85,000 and it's to be paid
2 out of this escrow and it's over with. And if it's not
paid out of the escrow, then we're going to go back and
3 retool all of this to make sure that it gets -- that
actually, I'm going to say if it's not paid out of the
4 escrow, then you get your judgment for the . . . whole
thing.
5
6 Id. at 49:8-16.
7 The bankruptcy court entered an order granting the Motion on
8 January 16, 2014 ("Order"), which Goldman timely appealed. The
9 Order included a finding that Debtor "did not breach the
10 Settlement Agreement incorporated into this Court's Judgment
11 entered in this adversary proceeding on February 8, 2011[.]" The
12 Order directed that payment of $85,000 to Goldman from the escrow
13 would fully satisfy the Judgment. If the $85,000 was not paid,
14 Goldman was entitled to $215,000, the $240,000 Judgment minus the
15 $25,000 already paid.
16 D. Events after entry of the Order and notice of appeal
17 In her motion for stay pending appeal, Goldman contended that
18 the alleged $400,000 equity in Debtor's Calabasas home, which was
19 being sold, was the only source of recovery to satisfy the
20 Judgment should she prevail on appeal. Thus, a stay was needed to
21 preserve the funds, particularly the $130,000 balance that would
22 be owed to her if she succeeded in reversing the Order.
23 Debtor responded within twenty-four hours with her emergency
24 motion to: (1) issue an OSC for why Goldman should not be held in
25 contempt for new actions which violated the Order; (2) enjoin
26 Goldman to comply with the Order; (3) authorize others to act on
27 Goldman's behalf to effectuate the home sale; (4) order the clerk
28 to issue a certificate of satisfaction of the Judgment; and
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1 (5) relieve Debtor of the Judgment under Civil Rule 60(b). Debtor
2 contended that Goldman had violated the Order by recording a new
3 abstract of judgment for $215,000 and making a demand upon escrow
4 for just over $215,000, instead of the $85,000 directed in the
5 Order. Debtor simultaneously filed an adversary complaint seeking
6 the same relief as in the emergency motion.
7 The bankruptcy court granted both parties' requests for a
8 hearing on shortened time. At the January 24, 2014 hearing,
9 Goldman agreed to withdraw her motion for stay pending appeal
10 based on the following relief stipulated by the parties:
11 (1) Goldman would receive the $85,000 cash payment from escrow;
12 (2) Goldman would remove the new abstract of judgment for $215,000
13 on Debtor's Calabasas home to facilitate the sale; and (3) Goldman
14 could then file a new abstract of judgment for $130,000 on
15 Debtor's new home in Ojai once the sale closed. The court entered
16 an order approving the parties' stipulated relief that same day.
17 II. JURISDICTION
18 Goldman contends the bankruptcy court lacked jurisdiction to
19 reopen the adversary proceeding and interpret the Judgment and
20 Settlement Agreement. Debtor contends we lack jurisdiction to
21 review the Order because the appeal is moot. We independently
22 question whether the Order on appeal is final. These
23 jurisdictional issues are addressed below.
24 III. ISSUES
25 1. Did the bankruptcy court have jurisdiction to reopen the
26 adversary proceeding and interpret the Judgment and Settlement
27 Agreement?
28 2. Is the Order final and appealable?
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1 IV. STANDARDS OF REVIEW
2 We review de novo questions of subject matter jurisdiction.
3 Wilshire Courtyard v. Cal. Franchise Tax Bd. (In re Wilshire
4 Courtyard), 729 F.3d 1279, 1284 (9th Cir. 2013).
5 We review our own jurisdiction, including questions of
6 finality, de novo. Silver Sage Partners, Ltd. v. City of Desert
7 Hot Springs (In re City of Desert Hot Springs), 339 F.3d 782, 787
8 (9th Cir. 2003).
9 V. DISCUSSION
10 A. The bankruptcy court had jurisdiction to reopen the adversary
proceeding and interpret the Judgment and Settlement
11 Agreement.
12 The bankruptcy court had exclusive jurisdiction over the
13 particular nondischargeability claims at issue here. Rein v.
14 Providian Fin. Corp., 270 F.3d 895, 904 (9th Cir. 2001)(bankruptcy
15 courts have exclusive jurisdiction over nondischargeability
16 actions brought under § 523(a)(2), (4) and (6)); § 523(c).
17 Goldman disputes whether the bankruptcy court had subject matter
18 jurisdiction to consider the Motion, which sought to reopen the
19 adversary proceeding and to interpret the Judgment and Settlement
20 Agreement. The bankruptcy court never addressed Goldman's
21 concerns on this issue, but we can presume based on the record
22 that the court believed it had jurisdiction. We must satisfy
23 ourselves of the bankruptcy court's subject matter jurisdiction.
24 Huse v. Huse-Sporsem, A.S. (In re Birting Fisheries, Inc.),
25 300 B.R. 489, 497 (9th Cir. BAP 2003)(citing Arizonans For
26 Official English v. Ariz., 520 U.S. 43, 73 (1997)).
27 Debtor contends that subject matter jurisdiction was
28 conferred pursuant to § 105(a). However, § 105(a) does not confer
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1 subject matter jurisdiction on the bankruptcy court.
2 In re Birting Fisheries, Inc., 300 B.R. at 497. "'Subject matter
3 jurisdiction and power are separate prerequisites to the court's
4 capacity to act. Subject matter jurisdiction is the court's
5 authority to entertain an action between the parties before it.
6 Power under section 105 is the scope and forms of relief the court
7 may order in an action in which it has jurisdiction.'" Id.
8 (quoting Am. Hardwoods, Inc. v. Deutsche Credit Corp. (In re Am.
9 Hardwoods, Inc.), 885 F.2d 621, 624 (9th Cir. 1989)).
10 We conclude, nonetheless, that the bankruptcy court had
11 subject matter jurisdiction on the basis of statutory ("arising
12 under") jurisdiction and/or ancillary jurisdiction.
13 The adversary proceeding involves the dischargeability of a
14 debt. Such a proceeding "arises under" the Bankruptcy Code,
15 because it is a cause of action created by § 523 and is a "core"
16 proceeding the bankruptcy court may hear and determine. McCowan
17 v. Fraley (In re McCowan), 296 B.R. 1, 3 (9th Cir. BAP 2003);
18 28 U.S.C. § 157(b)(1), (b)(2)(I). The bankruptcy court also has
19 jurisdiction to enter a money judgment that fixes the amount of
20 the nondischargeable debt. In re McCowan, 296 B.R. at 3 (citing
21 Cowen v. Kennedy (In re Kennedy), 108 F.3d 1015, 1017 (9th Cir.
22 1997)).
23 It has been long settled that process in aid of and to
effectuate an adjudication and order entered by a federal
24 court may be enforced by that court "irrespective of
whether the court would have jurisdiction if the
25 proceeding were an original one" and that these
principles apply in bankruptcy. Local Loan Co. v. Hunt,
26 292 U.S. 234, 239–40 (1934); accord Thomas, Head &
Greisen Emps. Trust v. Buster, 95 F.3d 1449, 1453–54 (9th
27 Cir. 1996).
28 The rationale is that a federal court has "ancillary
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1 enforcement jurisdiction" that is automatically available
for use "in subsequent proceedings for the exercise of a
2 federal court's inherent power to enforce its judgments."
Peacock v. Thomas, 516 U.S. 349, 356 (1996). Accord
3 Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 379–81
(1994); Riggs v. Johnson Cnty., 73 U.S. (6 Wall.) 166,
4 187 (1867). Such ancillary enforcement jurisdiction is
regarded as fundamentally a creature of necessity.
5 Peacock, 516 U.S. at 359; Kokkonen, 511 U.S. at 380;
Riggs, 73 U.S. at 187.
6
7 Id. (holding that bankruptcy court does not lack jurisdiction to
8 enforce its own money judgments after bankruptcy case is closed).
9 Accordingly, actions brought to effectuate a judgment entered
10 in the prior suit are ancillary to the original action; they are
11 in essence a continuation of the original suit. Id. at 4 (citing
12 Lawson v. Tilem (In re Lawson), 156 B.R. 43, 46 (9th Cir. BAP
13 1993); Jones v. Nat'l Bank of Commerce of El Dorado, 157 F.2d 214,
14 215 (8th Cir. 1946)). Thus, where a proceeding is brought to
15 effectuate a judgment entered by the bankruptcy court, the
16 proceeding is a continuation of the original proceeding, and
17 jurisdiction depends on whether the original proceeding was within
18 the bankruptcy court's jurisdiction. Id. (citing Peacock,
19 516 U.S. at 356).
20 The original proceeding to determine the dischargeability of
21 a debt under § 523(a)(2) and (a)(6) was within the exclusive
22 jurisdiction of the bankruptcy court, as was the Stipulation and
23 Judgment entered regarding the debt. Therefore, Debtor's Motion,
24 which sought to reopen the adversary proceeding and interpret the
25 Judgment and related Settlement Agreement, continued to be a
26 matter that "arises under" the Bankruptcy Code, and the bankruptcy
27 court had jurisdiction to hear it. Id. at 5; In re Birting
28 Fisheries, Inc., 300 B.R. at 499 (bankruptcy court's "core"
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1 jurisdiction continues in order for it to enforce its orders, even
2 after the case has been closed).
3 Two recent Ninth Circuit cases may arguably have impacted the
4 holding of In re McCowan, the case upon which we rely heavily for
5 our decision. In Sea Hawk Seafoods, Inc. v. Alaska (In re Valdez
6 Fisheries Dev. Ass'n, Inc.), 439 F.3d 545 (9th Cir. 2006), the
7 Ninth Circuit held that the bankruptcy court lacked jurisdiction
8 to interpret a settlement agreement it had approved while the
9 chapter 11 case was pending. The original adversary proceeding
10 and settlement agreement was between debtor and one of its
11 creditors. Id. at 547. After the chapter 11 case was dismissed,
12 the creditor moved to reopen the bankruptcy case and filed an
13 adversary proceeding against a third party, the State of Alaska,
14 to have the bankruptcy court determine whether the settlement
15 agreement released its fraudulent conveyance claim against Alaska.
16 Id. The bankruptcy court determined it had jurisdiction over the
17 second adversary proceeding as one "related to" the bankruptcy.
18 The Ninth Circuit disagreed.
19 Valdez Fisheries is distinguishable on several important
20 facts. First, the claim at issue was not one "arising under" the
21 Bankruptcy Code but rather a state-law fraudulent conveyance claim
22 between two creditors. Thus, "arising under" jurisdiction was not
23 at issue. Further, the second adversary proceeding, unlike here,
24 was not filed while the debtor's chapter 11 case was pending and
25 did not have any direct impact on the debtor or the administration
26 of debtor’s estate. The Ninth Circuit indicated that had it been,
27 the outcome would have been different. Id. at 548-49.
28 We further conclude that Battle Ground Plaza, LLC v. Ray
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1 (In re Ray), 624 F.3d 1124 (9th Cir. 2010), which did address
2 "arising under" jurisdiction, has not overruled In re McCowan.
3 The Ninth Circuit reversed the BAP's ruling that the bankruptcy
4 court had "arising under" jurisdiction over a breach of contract
5 claim the BAP believed impacted the court's prior sale order. Id.6 at 1132-33. There, after the chapter 11 debtor's plan had been
7 confirmed and the case closed, a lawsuit arose over the sale of
8 real property that had been sold with the bankruptcy court's
9 approval to a third party. A would-be purchaser brought suit in
10 state court seeking damages for breach of contract against the
11 debtor, the co-owner and the successful third-party purchaser.
12 The state court thought it appropriate to "remand" the contract
13 action to the bankruptcy court for it to determine whether it had
14 jurisdiction over the matter. The bankruptcy court reopened the
15 case, determined that it had jurisdiction over plaintiff's claims
16 and granted summary judgment in favor of the debtor and co-owner
17 dismissing the suit. Id. at 1129.
18 The Ninth Circuit overruled the BAP, holding that a state-law
19 breach of contract action brought post-confirmation and
20 post-closing arising out of the debtor's and co-owner's alleged
21 failure to comply with the purchaser's right of first refusal was
22 not a suit "arising under" the Bankruptcy Code for jurisdictional
23 purposes. The court did not, however, hold that In re McCowan,
24 which the BAP relied upon for its contrary holding, was no longer
25 good law. In fact, the Ninth Circuit reaffirmed and distinguished
26 In re McCowan, stating that "[t]he action in In re McCowan was for
27 the direct enforcement of the bankruptcy court's order, a very
28 different posture from the case before us." In re Ray, 624 F.3d
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1 at 1132.
2 Arguably, the instant action could be characterized as an
3 action for breach of contract. However, we conclude it is more
4 like the action at issue in In re McCowan than in In re Ray; it
5 was for the interpretation of, and, effectively, the direct
6 enforcement of, the bankruptcy court's order regarding the
7 dischargeability of a debt over which it had exclusive
8 jurisdiction. Accordingly, the bankruptcy court had "arising
9 under" jurisdiction.
10 Alternatively, the bankruptcy court had ancillary
11 jurisdiction to interpret and enforce its prior Judgment and the
12 related Settlement Agreement. "Ancillary jurisdiction may rest on
13 one of two bases: (1) to permit disposition by a single court of
14 factually interdependent claims, and (2) to enable a court to
15 vindicate its authority and effectuate its decrees." In re Ray,
16 624 F.3d at 1135 (quoting In re Valdez Fisheries, 439 F.3d at17 549)(citing Kokkonen, 511 U.S. at 379–80).
18 Goldman cites Kokkonen to support her argument that the
19 bankruptcy court did not have ancillary jurisdiction over the
20 Settlement Agreement because it failed to reserve jurisdiction
21 over it. In Kokkonen, the Supreme Court held that a federal
22 district court lacked jurisdiction to enforce a settlement
23 agreement reached in conjunction with dismissal of a lawsuit under
24 Civil Rule 41, where the district court neither reserved
25 jurisdiction nor had independent jurisdiction to enforce the
26 agreement. 511 U.S. at 375. The stipulation and dismissal order
27 did not reserve jurisdiction over the settlement agreement or make
28 any reference to the settlement agreement. The Supreme Court
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1 noted:
2 The situation would be quite different if the parties'
obligation to comply with the terms of the settlement
3 agreement had been made part of the dismissal — either by
separate provision (such as a provision "retaining
4 jurisdiction" over the settlement agreement) or by
incorporating the terms of the settlement agreement in
5 the order. In that event, a breach of the agreement
would be a violation of the order, and ancillary
6 jurisdiction to enforce the agreement would therefore
exist. That, however, was not the case here. The
7 judge's mere awareness and approval of the terms of the
settlement agreement do not suffice to make them part of
8 his order.
9 Id. at 381. Thus, if the court's judgment incorporates the terms
10 of a stipulated settlement or expressly retains jurisdiction over
11 such a settlement, the court has ancillary jurisdiction to enforce
12 the agreed judgment. Otherwise, enforcement of settlement
13 agreements is for state courts. Id. at 382.
14 We distinguish Kokkonen on one critical fact. In that case,
15 no "judgment" was ever entered by the district court. The parties
16 agreed to settle their dispute and voluntarily dismissed the case
17 pursuant to Civil Rule 41. Thus, the district court was never
18 interpreting or enforcing its own order or judgment. Here, the
19 bankruptcy court entered a judgment of nondischargeability of a
20 debt against Debtor. As we have already stated, the bankruptcy
21 court had jurisdiction to interpret and enforce its own judgment.
22 In re McCowan, 296 B.R. at 4-5; In re Birting Fisheries, Inc.,
23 300 B.R. at 499.
24 Further, as prescribed in Kokkonen and contrary to Goldman's
25 contention, the bankruptcy court did reserve jurisdiction over the
26 Settlement Agreement. The Judgment incorporated the Stipulation.
27 The Stipulation incorporated the key terms of the Settlement
28 Agreement. The Judgment also expressly incorporated the
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1 Settlement Agreement:
2 IT IS FURTHER ORDERED that this Judgment shall not be
enforceable so long as [Debtor] performs under the terms
3 of the Settlement Agreement entered into between the
Parties, but that in the event of a default, [Goldman]
4 may enforce this Judgment.
5 Goldman incorrectly asserts that the Settlement Agreement does not
6 contain a provision requiring or allowing the bankruptcy court to
7 determine if Debtor was in default of the Settlement Agreement.
8 Paragraph 3 expressly reserved jurisdiction to the bankruptcy
9 court, stating that it "would retain jurisdiction over the terms
10 of the [Settlement Agreement] and its enforcement."
11 Accordingly, the bankruptcy court had jurisdiction under
12 28 U.S.C. §§ 1334(b) and 157(b)(2)(I). We now address our
13 jurisdiction.
14 B. The Order is not a final appealable order.4
15 Our jurisdiction requires that the order to be reviewed be
16 final. 28 U.S.C. § 158. We generally lack jurisdiction to hear
17 appeals from interlocutory orders. See Giesbrecht v. Fitzgerald
18 (In re Giesbrecht), 429 B.R. 682, 687 (9th Cir. BAP 2010).
19 A disposition is final "if it contains 'a complete act of
20 adjudication,' that is, a full adjudication of the issues at bar,
21 and clearly evidences the judge's intention that it be the court's
22 final act in the matter." Slimick v. Silva (In re Slimick),
23 928 F.2d 304, 307 (9th Cir. 1990)(citation omitted)(emphasis in
24 original). In bankruptcy, a complete act of adjudication does not
25
26 4
Debtor contends the Order is not a final order because the
appeal is moot. We disagree. The jurisdictional concepts of
27 finality and mootness are mutually exclusive. An interlocutory
order does not equate to an appeal being moot, and a moot appeal
28 does not necessarily mean that the order on appeal is not final.
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1 need to end the entire case, but must "end any of the interim
2 disputes from which appeal would lie." Id. at 307 n.1. The Order
3 determined that Debtor did not breach the Settlement Agreement,
4 and that a payment to Goldman of $85,000 out of the escrow would
5 satisfy the nondischargeability Judgment. It did not, however,
6 adjudicate the remaining two issues of whether Goldman properly
7 filed her Abstract or whether she should be held in contempt of
8 court.
9 Because Debtor was found not to have breached the Settlement
10 Agreement, one could argue that the bankruptcy court did
11 implicitly decide Goldman's filing of the Abstract was improper
12 and that she was not entitled to enforce the $240,000 Judgment.
13 An order can be considered final if the court's ruling as a
14 practical matter effectively "rendered moot" all claims not
15 explicitly disposed of. U.S. v. $5,644,540.00 in U.S. Currency,
16 799 F.2d 1357, 1361 (9th Cir. 1986). Even so, this still leaves
17 the contempt issue, which does not appear to be "rendered moot" by
18 anything decided in the Order. In any event, the bankruptcy court
19 clearly anticipated further proceedings on these issues. If
20 further proceedings in the bankruptcy court will affect the scope
21 of the order, the order is not subject to review under 28 U.S.C.
22 § 158. See Dunkley v. Rega Props., Ltd. (In re Rega Props.,
23 Ltd.), 894 F.2d 1136, 1138 (9th Cir. 1990).
24 The record evidences that this was not the bankruptcy court's
25 final act in the matter. Evidence of intent consists not only of
26 the order's content, but also of the judge's and parties' conduct.
27 In re Slimick, 928 F.2d at 308. Statements by the bankruptcy
28 court at the January 24, 2014 hearing on Goldman's motion for stay
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1 pending appeal indicate that further proceedings are contemplated
2 with respect to the Motion that led to the Order on appeal.
3 Specifically, the bankruptcy court stated that it had not
4 determined whether the Abstract should have been recorded or
5 whether Goldman should be held in contempt, and that those matters
6 would be decided at a later date. Hr'g Tr. (Jan. 24, 2014)
7 18:2-10; 33:5-12; 34:8-12; 47:1-5; 52:2-7. The court also
8 indicated that it had not decided the breach issue conclusively
9 or, at minimum, that it was questioning its prior determination
10 that Debtor had not breached the Settlement Agreement. Precisely,
11 the court stated that the evidence so far was not dispositive and
12 that discovery and more evidence were needed to decide the matter.
13 Id. at 12:3-16; 18:10-19:5; 20:15-21:10; 29:8-30:4; 47:25-48:21;
14 50:21-23; 52:13-16. At one point, Goldman offered to withdraw her
15 appeal if the parties were going to be allowed to relitigate the
16 issue. Id. at 49:5-16; 51:1-5. The court responded that
17 modification of the Order might be appropriate, but the pendency
18 of the appeal likely barred it from making such a modification.
19 Id. at 51:6-10. Goldman again offered to withdraw her appeal if
20 the court was willing to modify the Order. Id. at 51:11-17. The
21 court declined and instead set dates for future status conferences
22 on the original contempt claim and the new contempt claim. Id. at
23 51:18-52:23. Based on the record, we conclude the Order is not a
24 final appealable order.
25 We lack jurisdiction over interlocutory orders unless we
26 grant leave to appeal. In re Giesbrecht, 429 B.R. at 687.
27 Although Goldman has not filed a motion for leave to appeal, we
28 may treat her timely notice of appeal as a motion for leave to
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1 appeal. Rule 8003(c); Kashani v. Fulton (In re Kashani), 190 B.R.
2 875, 882 (9th Cir. BAP 1995). Granting leave is appropriate if
3 the order "involves a controlling question of law as to which
4 there is substantial ground for difference of opinion" and where
5 "an immediate appeal may materially advance the ultimate
6 termination of the litigation." 28 U.S.C. § 1292(b);
7 In re Kashani, 190 B.R. at 882. A substantial ground for
8 difference of opinion exists "when novel legal issues are
9 presented, on which fair-minded jurists might reach contradictory
10 conclusions . . . ." Reese v. BP Exploration (Alaska) Inc.,
11 643 F.3d 681, 688 (9th Cir. 2011).
12 The Order at issue does not meet any of the requirements for
13 granting leave to appeal. Whether Debtor breached the Settlement
14 Agreement is not a controlling question of law which presents a
15 novel issue over which fair-minded jurists might reach
16 contradictory conclusions. Further, deciding the appeal will not
17 materially advance the ultimate termination of the litigation.
18 The issues regarding the Abstract and Goldman's purported contempt
19 still remain to be decided. Once they are, the parties could
20 appeal any subsequent order, which will lead only to piecemeal
21 litigation based on the same facts and conduct. Therefore, we
22 decline to grant leave to appeal.
23 VI. CONCLUSION
24 Because the Order is not a final appealable order and we
25 decline to grant leave to appeal, we lack jurisdiction over this
26 appeal. Accordingly, we DISMISS.
27
28
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