FILED
APR 5 2019
NOT FOR PUBLICATION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-18-1003-LBTa
ANTHONY HUGGER, Bk. No. 3:17-bk-00167-DPC
Debtor.
ANTHONY HUGGER,
Appellant,
v. MEMORANDUM*
LAWRENCE J. WARFIELD, Chapter 7
Trustee; ARIZONA DEPARTMENT OF
REVENUE,
Appellees.
Argued and Submitted on March 22, 2019
at Phoenix, Arizona
Filed – April 5, 2019
Appeal from the United States Bankruptcy Court
for the District of Arizona
*
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.
Honorable Daniel P. Collins, Bankruptcy Judge, Presiding
Appearances: Dean O’Connor argued for Appellant; Terry A. Dake
argued for Appellee Lawrence J. Warfield, Chapter 7
Trustee; Christopher J. Dylla of the Arizona Attorney
General’s Office argued for Appellee Arizona Department
of Revenue.
Before: LAFFERTY, BRAND, and TAYLOR, Bankruptcy Judges.
INTRODUCTION
After receiving his chapter 71 discharge, Debtor Anthony Hugger
moved the bankruptcy court to revoke his discharge and dismiss his case
because he had mistakenly filed his chapter 7 case too soon to discharge
certain tax debts. The bankruptcy court denied the motion primarily
because Debtor had not shown any grounds under Civil Rule 60(b)
(applicable via Rule 9024) for vacating the discharge and because it found
that creditors would be prejudiced by a dismissal and subsequent refiling.
The bankruptcy court also denied Debtor’s timely motion for relief from
judgment.
We AFFIRM the bankruptcy court with respect to both matters.
1
Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, all “Rule” references are to the Federal Rules
of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of
Civil Procedure.
2
FACTUAL BACKGROUND
Debtor filed a chapter 7 bankruptcy case on January 9, 2017. He listed
on his schedules three nonpriority unsecured debts: (1) an $80,000 debt to
the Internal Revenue Service (“IRS”); (2) an “unknown” debt to the
Arizona Department of Revenue (“ADOR”); and (3) $569 owed to
“Enhanced Recovery Co L [sic].” Appellee Lawrence Warfield was
appointed chapter 7 trustee (“Trustee”). Trustee filed a Report of No
Distribution, a discharge was entered May 9, 2017, and the case was closed
a few days later.
A few months later, in September 2017, Debtor filed a motion to
vacate the discharge and dismiss the case. The factual basis for the motion
was that Debtor had mistakenly filed his chapter 7 case too early for certain
tax debts to be discharged. According to the motion, he filed his tax returns
for 2001, 2002, 2005, 2006, 2009, 2010, and 2012 in September 2015. In order
to discharge the approximately $40,000 in taxes owed for those years, he
should have waited until two years after the date he filed those returns, or
approximately September 2017. Because the chapter 7 case had been filed
to deal with Debtor’s tax obligations, he argued that he had not obtained a
fresh start. He contended that the bankruptcy court had the equitable
power under § 105 to vacate the discharge and dismiss the case and that
the equities supported the requested relief. Debtor did not cite any case law
or other authorities supporting his requested relief.
3
Trustee filed an objection, pointing out that under § 727(d) and (e), a
debtor lacks standing to revoke his or her discharge. ADOR also filed an
objection, citing the same grounds. In addition, ADOR argued that, to the
extent the court had any equitable power to vacate a discharge at the
request of a debtor, Debtor could not demonstrate that dismissing the
chapter 7 case would not prejudice creditors.
At the hearing on the motion, Debtor’s counsel admitted that he had
erred in filing the case too early to discharge the taxes. He conceded that
the purpose of the motion was to permit Debtor to file a new chapter 7 case
to discharge the taxes. He asserted for the first time at the hearing that the
court could vacate the discharge under Civil Rule 60 (applicable via Rule
9024), citing case law that had not been included in the motion papers.2
Finally, Debtor’s counsel argued that dismissal would not prejudice the tax
creditors because they were “currently in the process of collecting.”
The bankruptcy court denied the motion on the grounds that:
(1) Debtor lacked standing under § 727(d) and (e) to revoke his discharge,
and the bankruptcy court could not use its § 105 equitable powers to
circumvent the Bankruptcy Code (citing Law v. Siegel, 571 U.S. 415 (2014));
(2) Debtor had not established any grounds for relief under Civil Rule 60
2
Cisneros v. United States (In re Cisneros), 994 F.2d 1462 (9th Cir. 1993); In re
Estrada, 568 B.R. 533 (Bankr. C.D. Cal. 2017); and Loos v. Ayers (In re Loos), Nos. BAP EC-
06-1443-MoPaMk, BAP EC-06-1444-MoPaMk, 2008 WL 8448070 (9th Cir. BAP Apr. 25,
2008).
4
because all of the relevant information was known before the bankruptcy
case was filed, and Debtor had proffered no excuse why his or his counsel’s
error had not been addressed earlier; (3) the cases cited to the court were
distinguishable; and (4) the tax creditors would be harmed if the court were
to grant the requested relief.
After the bankruptcy court entered its order denying the motion,
Debtor filed a timely motion for a new trial under Rule 9023 and/or for
relief from judgment under Rule 9024 (“Motion for Reconsideration”).3 In
the Motion for Reconsideration, Debtor argued that the cases cited at the
hearing should control the outcome of the motion. He also argued that he
was entitled to relief under Civil Rule 60(b)(6)–“any other reason that
justifies relief”–because extraordinary circumstances existed. Specifically,
those circumstances were that: (1) Debtor’s counsel had given him
inaccurate or incomplete advice regarding the deadlines for filing; (2) no
creditors had participated in the case before the motion to vacate discharge
was filed; and (3) there would be no prejudice to creditors because the IRS
and ADOR could continue to collect, while Debtor would be prejudiced by
having to wait to file a new bankruptcy case.
3
Debtor filed an amended motion on November 15 because the original filing
was missing several pages. At the hearing on the motion, the bankruptcy court
commented that the motion was untimely as to relief under Civil Rule 59, but it was
not. Accordingly, we have jurisdiction to review both the denial of the motion to vacate
the discharge and the Motion for Reconsideration.
5
After hearing argument, the bankruptcy court denied the Motion for
Reconsideration because Debtor had presented nothing new that could not
have been presented at the original hearing. The bankruptcy court entered
its written order on December 18, 2017, and Debtor timely appealed.
JURISDICTION
The bankruptcy court had jurisdiction pursuant to 28 U.S.C. §§ 1334
and 157(b)(2)(A) and (O). We have jurisdiction under 28 U.S.C. § 158.
ISSUES
Did the bankruptcy court abuse its discretion in denying Debtor’s
motion to vacate the discharge and dismiss his chapter 7 case?
Did the bankruptcy court abuse its discretion in denying Debtor’s
Motion for Reconsideration?
STANDARDS OF REVIEW
A debtor’s standing to seek revocation of his discharge under
§ 727(d) and the bankruptcy court’s refusal to apply equity principles to
revoke a debtor’s discharge are questions of law that we review de novo.
Markovich v. Samson (In re Markovich), 207 B.R. 909, 911 (9th Cir. BAP 1997).
We review for abuse of discretion a bankruptcy court’s denial of a
motion for relief from judgment or order under Civil Rule 60(b). See
Ahanchian v. Xenon Pictures, Inc., 624 F.3d 1253, 1258 (9th Cir. 2010); Tennant
v. Rojas (In re Tennant), 318 B.R. 860, 866 (9th Cir. BAP 2004). A bankruptcy
court abuses its discretion if it applies the wrong legal standard, misapplies
6
the correct legal standard, or if its factual findings are illogical, implausible,
or without support in inferences that may be drawn from the facts in the
record. TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011)
(citing United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en
banc)).
DISCUSSION
A. The bankruptcy court did not abuse its discretion in denying
Debtor’s motion to vacate the discharge and dismiss the chapter 7
case.
Debtor does not dispute that he lacks standing to revoke his own
discharge under § 727(d) or that the bankruptcy court lacks the equitable
power under § 105(a) to revoke a discharge on request of the debtor. See In
re Markovich, 207 B.R. at 912-13.
There is also no dispute that a bankruptcy court may vacate a
discharge order under Civil Rule 60(b) when the order was entered because
of a mistake of fact. Cisneros v. United States (In re Cisneros), 994 F.2d 1462
(9th Cir. 1993). In Cisneros, the debtors received their chapter 13 discharge
after the chapter 13 trustee had issued a final report and accounting
indicating all claims had been paid; however, the trustee had not received
notice of the filing of the IRS’s claim and had not paid it. The IRS moved to
reopen the case and vacate the discharge. The bankruptcy court granted the
motion pursuant to Civil Rule 60(b)(1) . On appeal, the Ninth Circuit held
that Civil Rule 60(b)(1) permits the court to correct its own mistakes, noting
7
that the court had entered the discharge under a misapprehension of the
facts of the case. Id. at 1467.
Accordingly, the issue in this appeal is whether the bankruptcy court
erred in finding that Debtor had not established any of the grounds for
relief under Civil Rule 60(b)(1). That rule provides in relevant part that a
court may relieve a party from a final judgment or order for “mistake,
inadvertence, surprise, or excusable neglect.”
At the hearing on Debtor’s motion, the court commented:
[i]f you’re saying there was a mistake or that there’s
inadvertence or surprise, or excusable neglect, I don't see it
because all of this information that you’re pointing to was all
well known prior to the bankruptcy filing and should have
been fully accounted for before the bankruptcy itself was filed,
and there’s nothing newly discovered here, there’s no fraud
involved, the judgment’s void . . . or that there’s some other
reason justifying relief.
Hr’g Tr. (Oct. 27, 2017) at 7:13-21.
On appeal, Debtor argues that relief was warranted on grounds of
mistake, inadvertence, and excusable neglect. Debtor urges the Panel to
adopt the analysis of In re Estrada, 568 B.R. 533 (Bankr. C.D. Cal. 2017). In
that case, after the chapter 7 debtor received his discharge, the trustee
indicated he intended to sell Debtor’s real property. Debtor then sought to
vacate his discharge under Civil Rule 60(b) so that he could convert his
case to chapter 13 and pay all creditors. The bankruptcy court ruled that it
8
had authority to vacate a discharge under Civil Rule 60(b) and found that
extraordinary circumstances warranted relief under 60(b)(6): (1) debtor's
original counsel had given him inaccurate and incomplete legal advice
regarding his choices in bankruptcy, specifically regarding the effect
bankruptcy could have on his home; (2) no creditors had participated in the
case, and the only claims were filed by the chapter 7 trustee after entry of
discharge; and (3) debtor had proposed a chapter 13 plan that would pay
creditors 100%. Id. at 542. The court also found that revocation of the
discharge would not meaningfully impair the rights of any other parties,
but would simply be a prerequisite to conversion. Id. The court concluded
that under the facts presented, revocation of the discharge was necessary to
prevent “manifest injustice.” Id. The bankruptcy court noted, however, that
the case before it
represents the rare situation in which (1) no proofs of claim
were timely filed; (2) Debtor has established that he has the
means to pay all creditors in full, including Trustee’s
administrative claim for his professional fees; (3) Debtor acted
promptly in seeking to convert to Chapter 13, minimizing
prejudice to other parties; and (4) Debtor is willing to stipulate
that his case will be reconverted to Chapter 7, rather than
dismissed, if Debtor fails to complete his plan according to its
terms.
Id.
Debtor cites Estrada, seemingly to make the point that Civil Rule 60(b)
provides the authority to vacate a discharge. But that point is not in
9
dispute. The Ninth Circuit has so held, see In re Cisneros, 994 F.2d at 1467, as
did the bankruptcy court here.4 The problem with Estrada (for Debtor) is
that it is factually distinguishable. Here, Debtor seeks relief to discharge his
tax debts, not to pay them. This is not the “rare situation” presented in
Estrada.
As for the application of Rule 60(b)(1) to the facts of this case, Debtor
argues that he is entitled to relief because he filed the chapter 7 case with
the intent to discharge his tax debt, but he filed the case too early to
accomplish this because he had bad advice from his attorney. Accordingly,
he argues that relief is warranted due to mistake, inadvertence, and
excusable neglect. But Civil Rule 60(b)(1) may not be used to remedy
attorney error. See Latshaw v. Trainer Wortham & Co., Inc., 452 F.3d 1097,
1101 (9th Cir. 2006) (“Rule 60(b)(1) is not intended to remedy the effects of
a litigation decision that a party later comes to regret through
4
The bankruptcy court in Estrada rejected Markovich, interpreting that case as
holding that a discharge may not be vacated pursuant to Civil Rule 60(b). 568 B.R. at
536-37. The debtor in Markovich sought to vacate his discharge and convert his case to
chapter 13 after a creditor obtained a judgment of nondischargeability. Under those
facts, the Markovich panel rejected the reasoning of cases holding that Civil Rules 59(e)
or 60(b) could be invoked to vacate a discharge. In re Markovich, 207 B.R. at 912-13
(citing In re Jones, 111 B.R. 674, 675 (Bankr. E.D. Tenn. 1990)), and In re Tuan Tan Dinh, 90
B.R. 743, 745 (Bankr. E.D. Pa. 1988)). The panel focused on the prohibition on the
bankruptcy court’s use of its equitable powers to circumvent specific statutory
language. 207 B.R. at 913. The Panel did not cite Cisneros, nor did it analyze whether
Rules 59 or 60 could be used to correct a mistake (i.e., to carry out the provisions of the
Code rather than thwart them), as had occurred in Cisneros.
10
subsequently-gained knowledge that corrects the erroneous legal advice of
counsel.”). See also Casey v. Alberton’s Inc., 362 F.3d 1254, 1259-60 (9th Cir.
2004) (alleged attorney malpractice not generally a basis to set aside a
judgment pursuant to Civil Rule 60(b)(1), citing Pioneer Inv. Servs. Co. v.
Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 397 (1993)).
Moreover, as Appellees point out, a chapter 7 debtor seeking to
dismiss his case has the burden to show that doing so would not result in
“legal prejudice” to creditors. Hickman v. Hana (In re Hickman), 384 B.R. 832,
841 (9th Cir. BAP 2008); Leach v. United States (In re Leach), 130 B.R. 855, 857
(9th Cir. BAP 1991) (citing Schroeder v. Int’l Airport Inn P’ship (In re Int’l
Airport Inn P’ship), 517 F.2d 510, 512 (9th Cir. 1975)). Debtor contends that
there would be no prejudice to the taxing authorities in permitting the
relief requested because those creditors would be able to collect until such
time as Debtor files a new chapter 7 case after enough time has elapsed for
him to discharge the older taxes.5 Debtor’s argument ignores the fact that,
as things stand, the taxing authorities would have much more time to
collect than they would have had the bankruptcy court granted the
requested relief. Debtor has not shown that the bankruptcy court abused its
discretion in denying the motion.
At oral argument, Debtor’s counsel asserted that it would be unfair to
5
As noted, Debtor asserted in his initial motion that, if he were to obtain the
requested relief, he could discharge the taxes in a case filed after September 2017.
11
prohibit Debtor from discharging his tax debts in this case due to an error
in calculating the appropriate time periods set forth in § 523(a)(1). But this
argument ignores the bankruptcy court’s finding that the taxing authorities
would be prejudiced were Debtor permitted a “do-over.” Under the
Debtor’s version of fairness, he should get the result he wants regardless of
its impact upon other parties. But the result here is not inherently unfair;
the taxing authorities are entitled to rely on the requirements set forth in
the Code for discharging taxes, just as Debtor would be entitled to rely on
the deadline for filing objections to discharge, for example. And a
bankruptcy system that would permit one participant to invoke “fairness”
to obtain the benefits he wants, while directly disadvantaging others, and
to skirt rules and deadlines designed to create a level playing field among
all of the participants, would not long maintain the public’s trust.
B. The bankruptcy court did not abuse its discretion in denying
Debtor’s Motion for Reconsideration.
Although Debtor cited both Rules 9023 and 9024 in the caption to his
Motion for Reconsideration, he focused his argument on Civil Rule 60(b)(6)
(applicable via Rule 9024), arguing that he was entitled to relief under the
rule’s catch-all provision, “any other reason that justifies relief.” He argued
that Markovich should not be dispositive and that extraordinary
circumstances justified relief, essentially the same arguments he had
previously made to the bankruptcy court.
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“Motions for reconsideration which merely revisit the same issues
already ruled upon by the trial court, or which advance supporting facts
that were otherwise available when the issues were originally briefed, will
generally not be granted. Such motions may not be used as a substitute for
a timely appeal.”Alexander v. Bleau (In re Negrete), 183 B.R. 195, 197 (9th Cir.
BAP 1995), aff’d, 103 F.3d 139 (9th Cir. 1996) (citations omitted).
As the bankruptcy court found, Debtor presented no facts, law, or
argument that could not have been presented at the hearing on the original
motion. Therefore, the court did not abuse its discretion in denying
reconsideration.
CONCLUSION
Debtor has not demonstrated that the bankruptcy court abused its
discretion in denying his motion to vacate his discharge and dismiss his
case, nor has he demonstrated that the bankruptcy court abused its
discretion in denying reconsideration.
Accordingly, we AFFIRM.
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