Gbby Ewa Limited Partnership v. Finance Factors, Limited

FILED
NOT FOR PUBLICATION JUL 30 2014

MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

GBBY EWA LIMITED PARTNERSHIP, No. 11-16063

Appellant, D.C. No. 1:10-cv-00623-JMS-
KSC
v.

FINANCE FACTORS, LIMITED, MEMORANDUM*

Appellee.

Appeal from the United States District Court
for the District of Hawaii
J. Michael Seabright, District Judge, Presiding

Argued and Submitted June 13, 2013
Honolulu, Hawaii

Before: FARRIS, D.W. NELSON, and NGUYEN, Circuit Judges.

GBBY appeals the district court’s affirmance of the bankruptcy court’s

handling of Finance Factors’ foreclosure action. As part of this appeal, GBBY

contends that the bankruptcy court lacked subject matter jurisdiction over this

action. Since subject matter jurisdiction can be raised at any time, we must address

*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
GBBY’s eleventh-hour argument. See Sebelius v. Auburn Reg’l Med. Ctr., 133 S.

Ct. 817, 824 (2013).

This action was triggered by Summit Creditors’ Trust’s action in the

bankruptcy court, which was brought, in part, to enforce a settlement agreement

approved by the bankruptcy court in connection with its dismissal of an earlier

bankruptcy proceeding. The Stipulation and Order approving the agreement and

dismissing the action incorporated the settlement agreement by reference. This

was sufficient to give the bankruptcy court ancillary jurisdiction over Summit

Creditors’ action. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375,

381 (1994). Since the bankruptcy court had ancillary jurisdiction over Summit

Creditors’ action, it also had ancillary jurisdiction over Finance Factors’ action as a

“factually interdependent” claim. See id. at 379–80. Therefore, we have subject

matter jurisdiction pursuant to 28 U.S.C. § 158(d)(1).

GBBY also argues that the bankruptcy court lacked authority to decide this

case in light of the Supreme Court’s decision in Stern v. Marshall, 131 S. Ct. 2594

(2011). However, unlike subject matter jurisdiction, the guarantee of an Article III

hearing is “subject to waiver” because the right “protect[s] primarily personal,

rather than structural, interests.” Commodity Futures Trading Comm’n v. Schor,

478 U.S. 833, 848 (1986). When “the allocation of authority between bankruptcy

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courts and district courts” is in question, the issue of consent is dispositive. See

Exec. Benefits Ins. Agency, Inc. v. Arkison (In re Bellingham Ins. Agency, Inc.),

702 F.3d 553, 567 & n.9 (9th Cir. 2012) (“The only question, then, is whether

EBIA did in fact consent to the bankruptcy court’s jurisdiction.”), aff’d, 134 S. Ct.

2165 (2014). Since GBBY consented to the bankruptcy court’s authority to enter

final orders or judgment, there was no constitutional infirmity in the bankruptcy

court entertaining this action. See id.

GBBY’s final two arguments pertain to the bankruptcy court’s calculation of

interest following its foreclosure judgment. First, this judgment was not a “money

judgment” as defined by 28 U.S.C. § 1961. “A money judgment is one which

adjudges the payment of a sum of money,” U.S. Fid. & Guar. Co. v. Ft. Misery

Highway Dist., 22 F.2d 369, 372 (9th Cir. 1927), on which a party can collect by

obtaining a writ of execution. See Hilao v. Estate of Marcos, 95 F.3d 848, 854 (9th

Cir. 1996). Under Hawaii law, foreclosure process entails two final, appealable

orders: (1) a decree of foreclosure and (2) a deficiency judgment, if a deficiency

exists following the foreclosure sale. See City Bank v. Abad, 105 P.3d 1212, 1219

(Haw. Ct. App. 2005). Only the latter is a money judgment. Although a

foreclosure decree may or may not determine what a mortgagee is entitled to

collect from a foreclosure sale, it “[does] not direct the payment of money and

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[does] not find an amount of money to be due from the defendant to the plaintiff.”

See Harada v. Ellis, 591 P.2d 1060, 1065 (Haw. 1979). Consequently, the interest

rate specified by 28 U.S.C. § 1961 did not apply to the bankruptcy court’s

foreclosure judgment.

Nor did the mortgage terms merge into the judgment under Hawaii law. The

Hawaii Supreme Court has only held that, upon judgment, promissory notes merge

with the judgment such that their “negotiability, as commercial paper, cease[d].”

Realty Fin., Inc. v. Schmidt, 86 P.3d 1000, No. 23441, 2004 WL 541878, at *6

(Haw. Mar. 18, 2004) (unpublished table opinion). Schmidt did not hold that the

interest rate on a note ceases to operate when the note merges into the judgment,

and it does not overrule earlier Hawaii Supreme Court opinions to the contrary.

See, e.g., Kamaole Resort Twenty-One v. Ficke Hawaiian Invs., Inc., 591 P.2d 104,

109 (Haw. 1979). The bankruptcy court did not err in applying the contract rate of

interest following its foreclosure judgment.

AFFIRMED.

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