FILED
U.S. Bankruptcy Appellate Panel
of the Tenth Circuit
NOT FOR PUBLICATION
March 5, 2019
UNITED STATES BANKRUPTCY APPELLATE PANEL
Blaine F. Bates
OF THE TENTH CIRCUIT Clerk
________________________________
IN RE HOLLY MACINTYRE, BAP No. CO-18-085
Debtor.
___________________________________
HOLLY MACINTYRE, Bankr. No. 10-32946
Chapter 7
Appellant,
v.
OPINION *
JP MORGAN CHASE BANK, N.A.,
Appellee.
_________________________________
Appeal from the United States Bankruptcy Court
for the District of Colorado
_________________________________
Submitted on the briefs. 1
_________________________________
Before CORNISH, JACOBVITZ, and MOSIER, Bankruptcy Judges.
_________________________________
*
This unpublished opinion may be cited for its persuasive value, but is not
precedential, except under the doctrines of law of the case, claim preclusion, and issue
preclusion. 10th Cir. BAP L.R. 8026-6.
1
After examining the briefs and appellate record, the Court has determined
unanimously that oral argument would not materially assist in the determination of this
appeal, and therefore grants the parties’ request for a decision on the briefs without oral
argument. See Fed. R. Bankr. P. 8019(b). The case is therefore submitted without oral
argument.
PER CURIAM.
Pro se Chapter 7 debtor Holly MacIntyre (the “Debtor”) filed a Motion to Reopen
the Case to Determine Discharge Violation, Civil Contempt, and Damages L.B.R. 5010-1
(the “Motion to Reopen”) on July 5, 2018, approximately seven and a half years after
entry of her discharge in order to pursue claims against a secured creditor for violation of
the discharge injunction. 2 After determining that, under the circumstances, it would not
be appropriate to grant any relief to the Debtor even if the case were reopened, the
bankruptcy court denied the Motion to Reopen. Because the record before the bankruptcy
court was insufficient to support that determination, we REVERSE and REMAND for
further proceedings consistent with this opinion.
I. Facts
The Debtor filed a voluntary Chapter 7 petition on September 9, 2010. On the
petition date, the Debtor resided at 13025 West 63rd Place, Unit E, Arvada, Colorado (the
“Residence”). The bankruptcy court entered a Discharge of Debtor on January 6, 2011,
and the Chapter 7 case closed on February 23, 2011.
The Motion to Reopen included a recitation of the following alleged facts: 3 J.P.
Morgan Chase Bank, N.A. (“Chase”) held first and second deeds of trust secured by the
2
All future references to “Code,” “Section,” and “§” are to the Bankruptcy Code,
Title 11 of the United States Code, unless otherwise indicated.
3
We are reciting facts as alleged by the Debtor in the Motion to Reopen without
expressing any view regarding whether any of the alleged facts are true. When the
bankruptcy court denied the Motion to Reopen the only facts before the court were those
2
Residence. Chase foreclosed its liens against the Residence and obtained an in rem
foreclosure judgment on December 16, 2014. The Debtor appealed the foreclosure
judgment to the Colorado Court of Appeals. The Debtor unsuccessfully sought a stay
pending appeal, which Chase had opposed. Absent a stay pending appeal, the Residence
sold at foreclosure auction on January 21, 2016. The Debtor’s appeal of the foreclosure
judgment continued in state court after the sale.
In its answer brief on appeal to the Colorado Court of Appeals filed on October
27, 2015, Chase made a pre-foreclosure sale request to obtain a post-sale award of
attorneys’ fees for defending the appeal, pursuant to the terms of a promissory note and
deed of trust, in violation of the bankruptcy court’s discharge order. When Chase made
the request for attorneys’ fees it was aware that the foreclosure sale would be held before
any fee award could be added to Chase’s foreclosure bid at a sale. The Colorado Court of
Appeals affirmed the foreclosure judgment and on April 28, 2016 awarded Chase its
attorneys’ fees and costs incurred in the appeal. On January 4, 2017, the Colorado Court
of Appeals remanded the case to the State District Court, County of Jefferson (“State
District Court”) to determine the amount of attorneys’ fees and costs. On January 24,
2017, Chase notified the State District Court it would not seek the attorneys’ fees and
costs. 4
alleged in the Motion to Reopen. Chase did not respond or object to the Motion to
Reopen and the bankruptcy court denied the Motion without a hearing.
4
Chase included multiple documents from the State District Court and Colorado
Court of Appeals proceedings in its Addendum. BAP ECF No. 34. These documents were
not before the bankruptcy court. Because we review the bankruptcy court’s order for
3
In the Motion to Reopen, the Debtor also complains that the Colorado Court of
Appeals affirmed the foreclosure judgment entered by the State District Court after the
foreclosure sale, even though the appeal was moot, and that Chase refused to cooperate
with the Debtor to recall the mandate and ask the Colorado Court of Appeals to vacate its
decision.
II. Procedural History
The Debtor filed her Motion to Reopen on July 5, 2018. In the Motion to Reopen,
the Debtor alleged that Chase violated the § 524 discharge injunction by: (1) pursuing
attorneys’ fees and costs on appeal under its note and deed of trust even though the
January 2016 foreclosure sale mooted the appeal; and (2) refusing to cooperate with the
Debtor to obtain an order vacating the attorneys’ fee award. 5 The Debtor asked the
bankruptcy court to reopen her case so she could prosecute the alleged violation of the
discharge injunction. In a reopened case, the Debtor intended to seek: (1) actual damages;
(2) punitive damages; and (3) an order directing Chase’s attorneys, among other things,
to seek an order correcting the opinion of the Colorado Court of Appeals that included
the award of attorneys’ fees and costs.
abuse of discretion, we decline to consider as part of the record on appeal documents not
before or relied upon by the bankruptcy court. See Delta W. Grp., LLC v. Ruth’s Chris
Steak Houses, 24 F. App’x 957, 959 (10th Cir. 2001) (“This court will not consider
material outside the record before the district court.”) (quoting United States v. Kennedy,
225 F.3d 1187, 1191 (10th Cir. 2000)).
5
Appellant’s App. at 46.
4
The Debtor served the Motion to Reopen on counsel of record for Chase and
Chase’s general counsel at its corporate office. Chase did not respond to the Motion to
Reopen. The bankruptcy court did not hold a hearing on the Motion to Reopen. The
bankruptcy court entered its Order Denying Motion to Reopen Case to Determine
Discharge Violation, Civil Contempt, and Damages L.B.R. 5010-1 (the “Order Denying
Motion to Reopen”) on August 1, 2018. 6
III. Jurisdiction and Standard of Review
“With the consent of the parties, this Court has jurisdiction to hear timely-filed
appeals from ‘final judgments, orders, and decrees’ of bankruptcy courts within the Tenth
Circuit.” 7 An order denying a motion to reopen a Chapter 7 bankruptcy case is final for
purposes of 28 U.S.C. § 158(a)(3). 8 Neither party in this case elected for these appeals to
be heard by the United States District Court pursuant to 28 U.S.C. § 158(c). Accordingly,
this Court has jurisdiction over this appeal.
6
Appellant’s App. at 55.
7
Straight v. Wyo. Dep’t of Trans. (In re Straight), 248 B.R. 403, 409 (10th Cir.
BAP 2000) (first quoting 28 U.S.C. § 158(a)(1), and then citing 28 U.S.C. § 158(b)(1),
(c)(1) and Fed. R. Bankr. P. 8002).
8
In re Razuddin, 363 B.R. 177, 182 (10th Cir. BAP 2007) (citing In re Schicke, 290
B.R. 792, 798 (10th Cir. BAP 2003), aff’d, No. 03-3114, 2004 WL 790295 (10th Cir. Apr.
14, 2004)).
5
An order denying a motion to reopen a bankruptcy case is reviewed for abuse of
discretion. 9 Applying the abuse of discretion standard, “‘a trial court’s decision will not
be disturbed unless the appellate court has a definite and firm conviction that the lower
court made a clear error of judgment or exceeded the bounds of permissible choice in the
circumstances.’” 10 Abuse of discretion occurs when a trial court “makes an ‘arbitrary,
capricious or whimsical,’ or ‘manifestly unreasonable judgment.’” 11 A trial court abuses
its discretion when it “fails to consider the applicable legal standard or the facts upon
which the exercise of its discretionary judgment is based.” 12
IV. Analysis
The issue on appeal is whether the bankruptcy court erred by denying the Debtor’s
motion to reopen her Chapter 7 bankruptcy case to enable her to seek relief from an
alleged violation of the discharge injunction. Bankruptcy Code § 350(b) provides “[a]
case may be reopened . . . to administer assets, to accord relief to the debtor, or for other
cause.” 13 Federal Rule of Bankruptcy Procedure 5010 states “[a] case may be reopened
9
In re Woods, 173 F.3d 770, 778 (10th Cir. 1999) (first citing In re Alpex Comput.
Corp., 71 F.3d 353, 356 (10th Cir. 1995), then citing In re Bianucci, 4 F.3d 526, 528 (7th
Cir. 1993)).
10
In re Arenas, 535 B.R. 845, 849 (10th Cir. BAP 2015) (quoting Moothart v. Bell,
21 F.2d 1499, 1504 (10th Cir. 1994)).
11
Id. (quoting Moothart v. Bell, 21 F.2d at 1504-05).
12
Jackson v. Los Lunas Cmty. Program, 880 F.3d 1176, 1191 (10th Cir. 2018)
(quoting Ohlander v. Larson, 114 F.3d 1531, 1537 (10th Cir. 1997)).
13
11 U.S.C. § 350(b).
6
on motion of the debtor or other party in interest pursuant to § 350(b).” 14 “The ‘phrase
“or for other cause” is a broad term which gives the bankruptcy court discretion to reopen
a closed case or proceeding when cause for such reopening has been shown.’” 15
The party moving to reopen a bankruptcy case has the burden of proof. 16 A motion
to reopen should be liberally granted. 17 The decision whether to reopen “should
emphasize substance over technical considerations.” 18 Reopening a closed bankruptcy
case is a ministerial act that does not grant any substantive relief. 19
In deciding whether to reopen a case to allow a debtor to seek sanctions for an
alleged violation of the discharge injunction, the bankruptcy court may deny the motion
if: (1) it is clear at the outset that reopening the case could not afford the movant any
14
Fed. R. Bankr. P. 5010.
15
Williams v. Lemmons, No. 92-4015, 1992 WL 289885, at *2 (10th Cir. Oct. 8,
1992) (quoting In re Case, 937 F.2d 1014, 1018 (5th Cir. 1991)).
16
In re Eastep, 562 B.R. 783, 787 (W.D. Okla. 2017 (citing In re Cloninger III, 209
B.R. 125, 126 (Bankr. E.D. Ark. 1997)).
17
In re Covelli, 550 B.R. 256, 263 (Bankr. S.D.N.Y. 2016) (quoting In re Potes, 336
B.R. 731, 732 (Bankr. E.D. Va. 2005)); In re Collis, 223 B.R. 814, 815 (Bankr. M.D. Fla.
1997) (“Motions to reopen are liberally granted to accord a debtor’s relief . . . .”) (citing
In re Rosinski, 759 F.2d 539, 542 (6th Cir. 1985)).
18
In re Flores, No. 00-69, 2001 WL 543677 at *2 (10th Cir. BAP May 21, 2001).
19
In re Petroleum Prod. Mgmt., Inc., 282 B.R. 9, 14 (10th Cir. BAP 2002) (citing In
re Woods, 173 F.3d 770, 777 (10th Cir. 1999)).
7
relief such that reopening would be futile and a waste of judicial resources; 20 or (2) the
debtor has unduly delayed filing the motion to reopen to the prejudice of the creditor. 21
The bankruptcy court may also be guided by other equitable considerations, such as
whether the debtor has acted in bad faith or engaged in other inequitable conduct. 22 But
the bankruptcy court ordinarily should not require the movant to prove the matter for
which reopening is sought twice, once to reopen the case and then again at the hearing on
the merits. 23
In the matter before us, the bankruptcy court premised its denial of the Motion to
Reopen to determine whether a violation of the discharge injunction occurred on four
considerations. We will address each consideration in turn.
First, the bankruptcy court considered whether reopening the case provided a
benefit to creditors. While this may be relevant to whether a case should be reopened for
20
In re Schicke, 290 B.R. 792, 798 (10th Cir. BAP 2003) (explaining bankruptcy
court that denies reopening a case “will not abuse its discretion if it cannot afford the
moving party any relief in the reopened case.”). See also cases cited infra note 29.
21
In re Parker, 264 B.R. 685, 692 (10th Cir. BAP 2001), aff’d, 313 F.3d 1267 (10th
Cir. 2002) (“[B]ankruptcy courts have found that when an unreasonable delay has
prejudiced the party opposing reopening, laches is a valid reason to deny motions
to reopen.”); In re McCoy, 560 B.R. 684, 688 (6th Cir. BAP 2016) (“[T]he appropriate
inquiry is ‘whether the delay associated with the reopening of the case is accompanied by
a demonstration of prejudice to the creditor as a result of the debtor’s conduct.’”) (citing
In re Tarkington, 301 B.R. 502, 506 (Bankr. E.D. Tenn. 2003).
22
In re Arana, 456 B.R. 161, 165 (Bankr. E.D.N.Y. 2011) (applying this
consideration where a debtor sought to reopen a case to schedule an omitted asset).
23
In re Covelli, 550 B.R. at 263 (quoting In re Potes, 336 B.R. 731, 732 (Bankr.
E.D. Va. 2005)); In re Jones, 367 B.R. 564, 567 (Bankr. E.D. Va. 2007).
8
other reasons, it is not relevant to whether a case should be reopened to enable a debtor to
seek redress for an alleged violation of the discharge injunction. Section 350(b) provides
that “[a] case may be reopened . . . to accord relief to the debtor.” 24 Issuing sanctions for
violation of the discharge injunction accords relief to a debtor. 25 Where a debtor seeks to
reopen a case to seek redress for a creditor’s violation of the discharge injunction, relief
should not be denied because no creditor would benefit from the reopening the case. 26 If
a bankruptcy case should be reopened only when creditors would benefit from the
reopening, then no bankruptcy case would ever be reopened to allow a debtor to pursue a
remedy for an alleged discharge injunction violation.
Second, the bankruptcy court faulted the Debtor for filing the Motion to Reopen
almost seven and a half years after the case was closed to seek recovery for a discharge
violation that allegedly occurred “in litigation she initiated nearly four years after the
bankruptcy case was closed.” 27 In assessing a debtor’s delay in filing a motion to reopen
to seek relief for violating the discharge injunction the bankruptcy court should consider
24
11 U.S.C. § 350(b).
25
See Paul v. Iglehart (In re Paul), 534 F.3d 1303, 1304 (10th Cir. 2008) (“11
U.S.C. § 524(a)(2) [ ] bars efforts to collect personal debts from debtors after they have
been discharged in bankruptcy.”).
26
In re Covelli, 550 B.R. at 263 (citing McKenzie-Gilyard v. HSBC Bank Nev., N.A.
(In re McKenzie-Gilyard), 388 B.R. 474, 478 (Bankr.E.D.N.Y.2007)); see In re Slater,
573 B.R. 247, 253 (Bankr. D. Utah 2017) (reopening case to allow debtor to seek
sanctions for discharge violation).
27
Order Denying Motion to Reopen at 2, in Appellant’s App. at 56.
9
the time between the alleged violation of the discharge injunction and the filing of the
motion, not how long the alleged violation occurred after the case was closed. Moreover,
[b]ecause there are no statutory time limits on reopening a case . . . , “courts
have dealt with such motions in different ways. The leading approach is
permissive but incorporates an equitable defense akin to laches, so that a
debtor may reopen the bankruptcy case at any time . . . absent a finding of
prejudice to the creditor.” 28
Therefore, while a bankruptcy court may consider the passage of time, “the ‘[p]assage of
time alone . . . does not necessarily constitute prejudice to a creditor sufficient to bar the
reopening of a case.’” 29 Here, Chase did not respond to the Motion to Reopen. The
bankruptcy court focused on the time between when the case was closed and the filing of
the Motion to Reopen instead of the time between the alleged discharge injunction
violation and the filing of the Motion to Reopen, and it made no findings of prejudice to
creditors.
Third, the bankruptcy court observed that although the Debtor alleged the
Colorado Court of Appeals awarded attorneys’ fees under a prepetition promissory note
that was “not necessarily the case, as in certain instances, fees may be awarded as a result
28
Albuquerque Chem. Co. v. Arneson Prod., Inc., No. 98-2336, 1999 WL 1079600,
at *2 (10th Cir. Nov. 30, 1999) (quoting In re Bianucci, 4 F.3d 526, 528 (7th Cir. 1993));
In re Parker, 264 B.R. 685, 692 (10th Cir. BAP 2001) (explaining the doctrine of laches
may apply to an unreasonable delay in reopening where prejudice to creditor exists)
(citing H.R. Rep. No. 95-595, at 338 (1977), reprinted in 1978 U.S.C.C.A.N. 59634,
6294).
29
In re McCoy, 560 B.R. 684, 688 (6th Cir. BAP 2016) (quoting In re Frasier, 294
B.R. 362, 367 Bankr. D. Colo. 2003)); see In re Bianucci, 4 F.3d at 528 (“Passage of time
in itself does not constitute prejudice. But delay may be prejudicial when it is combined
with other factors.”) (internal citations and quotations omitted).
10
of a party’s post-discharge conduct in litigation.” 30 Although that is true, there was no
evidence before the bankruptcy court to support the possibility that attorneys’ fees were
awarded as a sanction as a result of postpetition conduct by the Debtor. The Debtor
alleged otherwise in the Motion to Reopen. The bankruptcy court should not have
speculated about a theoretical possibility in support of the denial of the unopposed
Motion to Reopen.
Finally, the bankruptcy court determined that “[r]egardless, the award of fees is
not being pursued, and no relief is appropriate under the circumstances.” 31 Although the
bankruptcy court did not call it as such, this is an application of the futility doctrine under
which a court may deny a motion to reopen if it is clear at the outset that reopening the
case could not afford the movant any relief. It is well established that a court may refuse
to reopen a case when reopening could not afford the movant any relief and therefore
would be a waste of judicial resources and an unnecessary expense for the litigants, 32
30
Order Denying Motion to Reopen at 2, in Appellant’s App. at 56.
31
Id., in Appellant’s App. at 56.
32
E.g. Redmond v. Fifth Third Bank, 624 F.3d 793, 803 (7th Cir. 2010) (“[A] closed
bankruptcy proceeding should not be reopened where it appears that to do so would be
futile and a waste of judicial resources.”); In re Kinion, 207 F.3d 751, 757 (5th Cir. 2000)
(reopening a case for an obviously futile purpose is an abuse for discretion); In re
Thompson, 16 F.3d 576, 581-82 (4th Cir. 1994) (determining the bankruptcy court did
not abuse its discretion by refusing to reopen a case for a reason that did not permit the
court to afford relief in the reopened case); In re Jester, No. EO-15-002, 2015 WL
6389290, at *11 (10th Cir. BAP Oct. 22, 2015) (“If substantive relief cannot be granted,
then reopening a case would be futile and a waste of judicial resources.”) (citing In re
Carberry, 186 B.R. 401, 402 (Bankr. E.D. Va. 1995), aff’d, 656 F. App’x 425 (10th Cir.
2016).
11
such as when the debtor alleges a violation of the discharge injunction by a creditor
whose claim clearly was not discharged. 33
In the Motion to Reopen the Debtor argued that the bankruptcy court could afford
three types of relief in a reopened case: “first, actual damages; second, punitive damages;
and third, an order to Chase’s attorneys directing them to withdraw their request for
appellate attorney’s fees and costs, to inform the [Colorado] Court of Appeals of the
illegality of that request, and to seek a correction of the court’s Opinion.” 34
We conclude that the bankruptcy court abused its discretion by denying the
Motion to Reopen without considering whether relief could be afforded to the Debtor in a
reopened case in the form of punitive damages. If a creditor has attempted to collect a
debt as a personal liability of the debtor after the debt has been discharged, a potentially
sanctionable discharge violation has occurred regardless of whether the creditor continues
to pursue collection of the debt. 35 While we express no opinion regarding whether any
33
For example, in In re Thompson, 16 F.3d at 581-82, the Fourth Circuit affirmed
the bankruptcy court’s denial of a motion to reopen where the debtor sought to reopen the
case to seek sanctions for violation of the discharge injunction based on a creditor’s
actions to collect a nondischargeable debt for unpaid court costs arising from a criminal
conviction. See also In re Jones, 367 B.R. 564, 568 (Bankr. E.D. Va. 2007) (“a motion to
reopen would typically only be denied if it were clear that the discharge injunction had
not been violated, either because the debt in question was nondischargeable or because
the action complained of would not have constituted a violation, or, if there had been a
violation, it was minor or unintentional, and had been cured.”).
34
Motion to Reopen at 6, in Appellant’s Appendix at 51.
35
See In re Schott, 282 B.R. 1, 5 (10th Cir. BAP 2002) (“A creditor who attempts to
collect a discharged debt is in contempt of the bankruptcy court that issued the discharge
order.”).
12
award of punitive damages would be appropriate, the bankruptcy court erred by not
considering that issue.
V. Conclusion
Based on the record before it, the bankruptcy court abused its discretion in
denying the unopposed Motion to Reopen without affording the Debtor an opportunity
for a hearing. Accordingly, the bankruptcy court’s denial of the Motion to Reopen is
REVERSED and REMANDED for the bankruptcy court to conduct further proceedings
consistent with this opinion. 36
36
As such, the Debtor’s Motion to Strike JP Morgan Chase Bank’s Response Brief
(BAP ECF No. 31) is DENIED as MOOT.
13