Filing 25

ORDER signed by District Judge John A. Mendez on 1/3/2017 AFFIRMING the Bankruptcy Court's judgment denying the appellant's Motion to Set Aside Discharge. CASE CLOSED. (Michel, G.)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 In re 12 Jeffrey Brian Johnson, No. 13 Appellant. 2:15-cv-00990-JAM ORDER AFFIRMING BANKRUPTCY COURT’S JUDGMENT 14 This appeal arose from Jeffrey Brian Johnson’s Chapter 7 15 16 bankruptcy. After the Chapter 7 Trustee filed a Report of No 17 Distribution, the bankruptcy court discharged Johnson’s debt 18 (“Discharge Order”). 19 moved to set it aside. 20 motion, Johnson filed an appeal with this Court. 1 21 Although his appeal is unopposed 22 has considered this appeal on its merits. 23 /// 24 /// Surprised by the Discharge Order, Johnson After the bankruptcy court denied his 2 ECF No. 1. the Court is required to and 25 1 26 27 28 This appeal was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). 2 The Chapter 7 Trustee is no longer a party to this case. Min. Order, ECF No. 17. And the United States Trustee filed a Statement of Non-Participation. ECF No. 22. 1 1 I. 2 FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND Johnson filed for bankruptcy on November 18, 2013. App., 3 ECF No. 19-1, at 3-4. Three days later, Johnson received a 4 Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors & 5 Deadlines (“Deadline Notice”). 6 at Case No. 2:13-bk-34696, ECF No. 18. 7 important dates, including the filing deadline to object to a 8 debtor’s discharge: 9 Deadline Notice, located at Case No. 2:13-bk-34696, ECF No. 8. Certificate of Mailing, located That document contained February 10, 2014 (“Filing Deadline”). 10 About one month later, the Chapter 7 Trustee filed a Report of No 11 Distribution, concluding that Johnson had “no funds available 12 from the estate for distribution to creditors.” 13 App. at 7. Because Johnson’s estate had been fully administered, the 14 only remaining issue before the bankruptcy court was whether it 15 should discharge Johnson’s debt. 16 convert his bankruptcy from Chapter 7 to Chapter 13. 17 15. 18 prejudice on procedural grounds. 19 March 4, 2014, the bankruptcy court discharged Johnson’s debt. 20 Id. at 25-26. 21 Johnson’s second motion to convert from Chapter 7 to Chapter 13. 22 See id. at 27-28, 175. 23 Meanwhile, Johnson moved to App. at 13- The bankruptcy court denied Johnson’s motion without See id. at 23-24. Then, on The next day, the bankruptcy court clerk entered Eight days later, Johnson moved to set aside the Discharge 24 Order (“Motion to Set Aside Discharge”). App. at 44-45. 25 bankruptcy court denied Johnson’s motion and dismissed Johnson’s 26 second conversion motion. 27 the United States District Court for the Eastern District of 28 California. See id. at 73-77. The Johnson appealed to The district court vacated the bankruptcy court’s 2 1 order denying Johnson’s motion and remanded the case so the 2 bankruptcy court could determine (1) whether the bankruptcy court 3 committed a clerical error under Fed. R. Civ. P. 60(a) when it 4 discharged Johnson’s debt, and (2) whether Johnson’s medical 5 treatment between February and March of 2014 constituted 6 excusable neglect under Fed. R. Civ. P. 60(b)(1). 7 Edmonds, No. 2:14-cv-00889, 2015 WL 430697, at *3 (E.D. Cal. Feb. 8 2, 2015). 9 See Johnson v. On remand, the bankruptcy court addressed these questions 10 and again denied Johnson’s Motion to Set Aside Discharge. 11 App. at 109-116. See Johnson now appeals. 12 13 II. OPINION 14 A. Jurisdiction 15 District courts have appellate jurisdiction over a 16 bankruptcy court’s final judgments, orders, and decrees. See 28 17 U.S.C. § 158(a)(1). 18 to set aside a prior judgment are “final.” 19 2015 WL 430697 at *1; In re Federico, No. 2:08-cv-2182, 2009 WL 20 2905855, at *1 (E.D. Cal. Sept. 8, 2009). 21 appeal pertains to a final judgment, this Court has 22 jurisdiction. 23 B. 24 When reviewing a bankruptcy court’s decision, a district Bankruptcy court decisions denying motions See, e.g., Johnson, Because Johnson’s Standard of Review 25 court functions as an appellate court and applies the standard 26 of review generally applied in federal appellate courts. 27 re Crystal Props., Ltd., L.P., 268 F.3d 743, 755 (9th Cir. 2001) 28 (internal citations omitted). See In Appellate courts apply a “de novo 3 1 review of legal conclusions and clear error review of factual 2 findings” when reviewing discharge orders. 3 131 F.3d 788, 792 (9th Cir. 1997). 4 C. See In re Bammer, Legal Standard 5 1. Federal Rule of Civil Procedure 60(a) 6 A “court may correct a clerical mistake or a mistake 7 arising from oversight or omission whenever one is found in a 8 judgment, order, or other part of the record.” 9 60(a). Fed. R. Civ. P. In other words, Rule 60(a) “empowers a [c]ourt to 10 correct its own clerical mistakes.” 11 718 n.1 (B.A.P. 9th Cir. 1989). 12 60(a) applicable to bankruptcy cases. 13 9024; In re Burke, 95 B.R. at 718. 14 15 2. In re Burke, 95 B.R. 716, Bankruptcy Rule 9024 makes Rule See Fed. R. Bankr. P. Federal Rule of Civil Procedure 60(b)(1) A “court may relieve a party or its legal representative 16 from a final judgment, order, or proceeding for . . . mistake, 17 inadvertence, surprise, or excusable neglect.” 18 60(b)(1). 19 factor test to assess whether missing a filing deadline 20 constitutes excusable neglect. 21 Brunswick Assocs. Ltd., 507 U.S. 380 (1993). 22 assessment is “an equitable one, taking account of all relevant 23 circumstances surrounding the party’s omission. 24 . . .the danger of prejudice to the debtor, the length of the 25 delay and its potential impact on judicial proceedings, the 26 reason for the delay, including whether it was within the 27 reasonable control of the movant, and whether the movant acted 28 in good faith.” Fed. R. Civ. P. The United States Supreme Court established a four- See Pioneer Inv. Servs. Co. v. “[A]t bottom,” the These include Id. at 395 (internal citation omitted). 4 The 1 Supreme Court emphasized that “inadvertence, ignorance of the 2 rules, or mistakes construing the rules do not usually 3 constitute ‘excusable’ neglect.” See id. at 392. 4 Although Pioneer discussed excusable neglect under 5 Bankruptcy Rule 9006(b), the Ninth Circuit has held that the 6 Pioneer standard applies to Rule 60(b)(1). 7 Riviera Hotel & Casino, 116 F.3d 379, 381 (9th Cir. 1997). 8 short, Pioneer sets an equitable framework from which courts 9 should examine all circumstances involved rather than holding See Briones v. In 10 that any single circumstance compels a particular result despite 11 other factors. See Briones, 116 F.3d at 382 n.2. 12 D. Analysis 13 Johnson makes two arguments to support his appeal. First, 14 Johnson says that the bankruptcy court made a clerical mistake 15 under Rule 60(a) when it discharged his debt. 16 Br., ECF No. 19, at 15. 17 filing constituted excusable neglect under Rule 60(b)(1). 18 id. at 17. 19 court’s decision to deny his Motion to Set Aside Discharge and 20 (2) to vacate the Discharge Order. 21 22 See Appellant Second, Johnson argues that his late See Johnson asks this Court to (1) vacate the bankruptcy 1. See id. at 23. Rule 60(a) Johnson argues that the bankruptcy court made a clerical 23 mistake when it entered his second conversion motion the day 24 after the court discharged his debt. 25 maintains that had the bankruptcy court entered his second 26 conversion motion a day earlier, the court would not have 27 discharged his debt. 28 Appellant Br. at 15. He See id. The bankruptcy court did not make a clerical mistake when 5 1 it discharged Johnson’s debt. 2 prescribes the conditions for triggering a Chapter 7 discharge: 3 “In a chapter 7 case, on expiration of the times fixed for 4 objecting to discharge and for filing a motion to dismiss the 5 case under Rule 1017(e), the court shall forthwith grant the 6 discharge.” 7 Bankruptcy Rule 4004(c)(1) Fed. R. Bankr. P. 4004(c)(1) (emphasis added). But, like with most general rules, there are several 8 exceptions. A bankruptcy court “shall not grant” a Chapter 7 9 discharge when, for instance, the debtor is not an individual; 10 when someone files a complaint or motion under § 727(a)(8) or 11 (a)(9); when the debtor files a waiver under § 727(a)(10); when 12 a motion to dismiss the case under § 707 is pending; when a 13 motion to extend the time to object to a discharge or to dismiss 14 the case is pending; when the debtor has not filed a statement 15 showing that he completed a personal financial management 16 course; or when a motion to delay or postpone discharge under 17 § 727(a)(12) is pending. 18 (F), (H)-(I). 3 19 See Fed. R. Bankr. P. 4004(c)(1)(A)- Here, all requisite conditions for entering a discharge 20 were satisfied, and no exception applies. Johnson is an 21 individual. 22 a discharge. 23 motions to dismiss or to extend time to object to or delay 24 discharge. 25 a personal financial management course. 26 Management Course Certificate, located at Case No. 2:13-bk- He did not file a complaint or motion objecting to He did not file a waiver. There were no pending And Johnson filed a certificate showing he completed See Financial 27 3 28 This rule contains several more exceptions inapplicable here. See generally Fed. R. Bankr. P. 4004(c)(1)(A)-(L). 6 1 2 34696, ECF No. 60. This case differs from Burke, where the Ninth Circuit 3 B.A.P. found a clerical mistake under Rule 60(a). 4 In Burke, the bankruptcy court clerk initially scheduled the 5 wrong date for the creditors’ meeting, but then issued another 6 order rescheduling the meeting for the proper date, explaining 7 that the first order was incorrect “[d]ue to inadvertence and 8 clerical error.” 9 ocurred here. Id. at 716-17. Id. at 718. No such scheduling error Johnson could have objected to a discharge, but 10 he did not. 11 7 to Chapter 13. 12 convert is not an enumerated exception under Bankruptcy Rule 13 4004(c)(1). 14 So, once the Filing Deadline expired, the bankruptcy court 15 properly discharged Johnson’s debt because no enumerated 16 exception applied. 17 Instead, he moved to convert his case from Chapter See App. at 13-15. A pending motion to See generally Fed. R. Bankr. P. 4004(c)(1)(A)-(L). Johnson also maintains that the bankruptcy court “confuses 18 the law to the facts” because it cited irrelevant bankruptcy 19 rules like Rule 4004(c)(1). 20 Johnson who is confused. 21 other statute or rule it cites, provides the relevant context 22 upon which to analyze whether entering the discharge was a 23 clerical mistake under Rule 60(a). 24 bankruptcy court included these rules in its Order to explain 25 how a Chapter 7 discharge occurs, and then applied that 26 procedural framework to Johnson’s case to show why entering the 27 discharge was not a clerical mistake under Rule 60(a). 28 See Appellant Br. at 16. But it is Bankruptcy Rule 4004(c)(1), and any In other words, the In sum, the bankruptcy court did not make a clerical 7 1 mistake when it discharged Johnson’s debt but did what the law 2 requires. 3 4 2. Rule 60(b)(1) Johnson offers Rule 60(b)(1) as another basis to vacate the 5 bankruptcy court’s decision to deny his Motion to Set Aside 6 Discharge. 7 medical injury on February 18, 2014 made him “not cognitive” of 8 the relevant bankruptcy rules detailing the procedure to convert 9 from Chapter 7 to Chapter 13. 10 11 See Appellant Br. at 17-23. For the reasons discussed below, Johnson’s medical issues do not constitute excusable neglect. 12 13 Specifically, Johnson argues that an unexpected a. Prejudice Prejudice requires greater harm than simply that relief 14 would delay a case’s resolution. 15 F.3d 1188, 1196 (9th Cir. 2009) (internal citation omitted). 16 Yet Johnson maintains that he cannot obtain the relief he wants 17 (a Chapter 13 conversion) until this Court vacates his Chapter 7 18 discharge. 19 Lemoge v. United States, 587 See Appellant Br. at 17. The Discharge Order has not prejudiced Johnson because he 20 can still move to convert to Chapter 13. 21 allows a Chapter 7 debtor to “convert a case under this chapter 22 to a case under chapter . . . 13 of this title at any time.” 23 U.S.C. § 706(a) (emphasis added). 24 absolute right to convert to Chapter 13. 25 Citizens Bank of Massachusetts, 549 U.S. 365, 372-73 (2007) 26 (holding that a debtor’s bad faith could stop him from 27 qualifying as a debtor under Chapter 13); In re Rosson, 545 F.3d 28 764, 767-68 (9th Cir. 2008) (same). 8 The Bankruptcy Code 11 But a debtor does not have an See Marrama v. Nevertheless, as long as 1 Johnson follows procedural rules and establishes his eligibility 2 for a Chapter 13 conversion, his Chapter 7 discharge will not 3 preclude him from obtaining a Chapter 13 conversion which is the 4 relief he apparently wants. 5 See 11 U.S.C. § 706(a). Johnson’s creditors, however, would suffer prejudice if 6 this Court vacated the Discharge Order. Discharging a debt 7 effectively ends the case. 8 noted, “[t]he creditors have relied on [Johnson’s] discharge to 9 finalize their accounts with [him] and make appropriate credit As the bankruptcy court correctly 10 reporting of [him].” 11 “would require notifying the creditors that the discharge of 12 [Johnson’s] debts has been reversed, necessitating their 13 reopening of [Johnson’s] accounts, revisiting collection 14 activities and reversing their credit reporting of [Johnson].” 15 Id. 16 App. at 113. Vacating the Discharge Order In short, Johnson has not shown that he would suffer 17 prejudice if this Court affirmed the bankruptcy court’s 18 decision. 19 See 11 U.S.C. § 706(a). 20 transcript, the bankruptcy court may grant Johnson’s conversion 21 motion, provided Johnson satisfies the requisite conditions. 22 See App. at 146 (“I will convert it, if I get that motion and 23 it’s properly noticed to your creditors and you establish your 24 eligibility for Chapter 13.”). 25 26 A discharge does not necessarily preclude conversion. b. And, as evidenced by the hearing Length of Delay and Resulting Effect Rule 60(c)(1) requires that a Rule 60(b) motion be made 27 “within a reasonable time” and “no more than a year after the 28 entry of the judgment or order or the date of the preceding 9 1 year.” 2 1196. 3 of each case, taking into consideration the interest in 4 finality, the reason for delay, the practical ability of the 5 litigant to learn earlier of the grounds relied upon, and 6 prejudice to the other parties.” 7 (citing Ashford v. Steuart, 657 F.2d 1053, 1055 (9th Cir. 1981) 8 (per curiam) (internal quotation marks omitted)). 9 Fed. R. Civ. P. 60(c)(1). See also Lemoges, 587 F.3d at “What constitutes reasonable time depends upon the facts Lemoges, 587 F.3d at 1196-97 Johnson never filed a motion to object to, delay, or waive 10 discharge. 11 after the court entered it. 12 falls within the “one year” limit, the Lemoges’s factors show 13 that Johnson did not object within a “reasonable time.” 14 the same reliance argument outlined above supports two factors 15 that favor affirming the discharge: 16 parties (here, Johnson’s creditors) and (2) the interest in 17 finality. 18 Johnson had the practical ability to know about the Filing 19 Deadline, and his medical issues do not justify missing that 20 deadline. 21 The first time he opposed discharge came 8 days Although this First, (1) prejudice to other Second, the last two factors favor affirmance because c. 22 See App. at 44-45. Reason for Delay Johnson cites his medical problems for missing the Filing 23 Deadline, arguing that his medical issues made him “not 24 cognitive” of the relevant legal rules. 25 19. 26 Lemoges. 27 attorney’s medical problems explained why he did not respond to 28 the court’s order to show cause and why he did not file the See Appellant Br. at Johnson parallels his situation to the attorney’s in In that case, the Ninth Circuit concluded that the 10 1 motion to set aside the dismissal until 7 months later. 2 at 1197. 3 attorney’s medical issues and his late filing. 4 See id. The Ninth Circuit found a causal link between the No such causal link exists here. Johnson had known about 5 the February 10, 2014 deadline since November 21, 2013. See 6 Certificate of Mailing, located at Case No. 2:13-bk-34696, ECF 7 No. 18. 8 Filing Deadline. 9 bk-34696, ECF No. 8 (February 10, 2014 deadline to file And Johnson’s medical problems began 8 days after the See Deadline Notice, located at Case No. 2:13- 10 objection to discharge) (emphasis added); Appellant Br. at 17 11 (“[U]nexpected injury occurred on February 18, 2014, demanding 12 medical attention.”). 13 on February 20, 2014). 14 Johnson has not shown that his medical treatment made him miss a 15 deadline about which he had known for months. 16 Deadline was within Johnson’s “reasonable control.” 17 507 U.S. at 395. 18 rules to waive or delay or object to a discharge, Johnson twice 19 moved to convert—an action that does not affect whether a court 20 discharges a debt. 21 Johnson cannot cite his medical issues for his confusion (and 22 subsequent delay in objecting to discharge) because there exists 23 no causal link between those issues and his late filing. 24 25 d. See also App. at 63 (admitted to hospital Making the Filing Pioneer, But, rather than following the procedural See Fed. R. Bankr. P. 4004(c)(1)(A)-(L). Good Faith “[A] late filing will ordinarily not be excused by 26 negligence. 27 following court rules.” 28 So, unlike the attorney in Lemoges, . . . [and] pro se litigants are not excused from Briones, 116 F.3d at 382. Again, Johnson knew about the Filing Deadline. 11 See 1 Certificate of Mailing, located at Case No. 2:13-bk-34696, ECF 2 No. 18. 3 instead, he filed motions that have no bearing on the issue. 4 App. at 13-15, 27-28 (first and second conversion motions). 5 Johnson does not dispute these facts. 6 medical problems to justify his late filing. 7 at 17-23. 8 Johnson’s medical problems and his late filing. 9 II(D)(2)(c). 10 Yet he did not file any documents that affect discharge; See He relies only on his See Appellant Br. But, as explained above, no causal link exists between Once again, this case differs from Lemoges. See supra Part In Lemoges, no 11 evidence suggested that the attorney had acted with anything less 12 than good faith, given the causal link between his medical 13 problems and his late filing. 14 after the fact, cite his medical issues to justify his late 15 filing. 16 but, under these facts, he cannot argue, in good faith, that it 17 was because of his medical condition. 18 Id. at 1197. Johnson cannot now, He may have been confused about some procedural rules, After applying the Pioneer factors, the Court concludes that 19 Johnson has not shown excusable neglect under Rule 60(b)(1). He 20 knew about the Filing Deadline, but focused instead on converting 21 his case. 22 the deadline to expire. He took steps to accomplish that goal, and he allowed 23 24 25 III. ORDER The Court acknowledges Johnson’s genuine desire to convert 26 his case from Chapter 7 to Chapter 13. 27 blinded Johnson from the real issue. 28 not prevent him from obtaining what he wants—a Chapter 13 12 But that desire has A Chapter 7 discharge does 1 conversion. 2 expertise, rather than blaming the court clerk for making an 3 alleged clerical mistake, rather than invoking excusable neglect, 4 Johnson should simply do what the law requires. 5 judge made that explicitly clear at the hearing: 6 Rather than questioning the bankruptcy judge’s The bankruptcy You seem to believe you’re not going to get a Chapter 13 discharge if you got a Chapter 7 discharge. As long as it’s the same case, you will get a discharge. . . . So you need to notice the motion to convert to Chapter 13. All right. And as long as you do that and you establish that your debts are less than the limits in 109(e) and that you have regular income, such that you meet the definition of a Chapter 13 debtor, also in Section 109, I will grant the motion. And if I grant the motion and you confirm a plan and you complete the payments under the plan, you will get a Chapter 13 discharge. 7 8 9 10 11 12 13 14 15 App. at 149, 153. For the reasons set forth above, the Court AFFIRMS the 16 bankruptcy court’s judgment to deny Johnson’s Motion to Set Aside 17 Discharge. 18 IT IS SO ORDERED. 19 Dated: January 3, 2017 20 21 22 23 24 25 26 27 28 13

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