Bote v. Derham-Burk
Filing
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ORDER ON BANKRUPTCY APPEAL - The bankruptcy court's order of dismissal is AFFIRMED. Signed by Judge William H. Orrick on 10/29/2018. (jmdS, COURT STAFF) (Filed on 10/29/2018)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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BOTE,
Case No. 3:18-cv-02246-WHO
Plaintiff,
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DERHAM-BURK,
Defendant.
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United States District Court
Northern District of California
ORDER ON BANKRUPTCY APPEAL
v.
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INTRODUCTION
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Appellant Caroline Bote (“Bote”) was due to complete her chapter 13 bankruptcy plan on
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February 11, 2018. Less than two months after her plan was finalized in 2013, one creditor filed a
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proof of claim that converted a $14,368.19 claim from nonpriority to priority. Accordingly, it
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became payable under the plan. Bote did not object to the classification until December 13, 2017,
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one month after receiving a notice of final payment due with a remaining balance of $15,695.00.
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She did not set the objection for hearing until March 2, 2018, after the 60th month of her plan had
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elapsed.
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On March 9, 2018, the Trustee filed a motion to dismiss Bote’s case because of material
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default. Bote failed to timely object, and on April 4 the bankruptcy court dismissed her case
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without a hearing. Bote now brings this appeal, arguing that the bankruptcy court abused its
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discretion in vacating a hearing on her claim objection, refusing to consider her untimely
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opposition to the motion to dismiss, and dismissing the case without a hearing. The bankruptcy
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court did not abuse its discretion, and I AFFIRM the dismissal of Bote’s case.
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BACKGROUND
Caroline Bote filed for chapter 13 bankruptcy on January 11, 2013. Bankruptcy Case (13-
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bk-50174) Chapter 13 Petition (“Petition”) [Bk. Dkt. No. 1]. The bankruptcy court confirmed her
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plan on March 26, 2013. Order Confirming Plan [Bk. Dkt. No. 23]. The plan called for her to pay
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$75 to the Trustee each month for the 60-month duration of the plan. Order Confirming Plan ¶¶
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4–5. Based on the dates of the petition and the first payment, the plan ended on February 11,
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2018. See id.; Appellee Brief [Dkt. No. 12] 2.
In Bote’s plan, she listed a $14,136.52 debt owed to the California Franchise Tax Board
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(“FTB”). Chapter 13 Petition 26. She categorized it as an unsecured nonpriority claim that would
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receive 0% distribution. Id. 17. Accordingly, that claim was not projected to impact her ability to
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complete the plan within five years with $75-per-month payments. See Appellant Brief 4;
Appellee Brief 2. On May 14, 2013, prior to the deadline for doing so, the FTB filed proof of
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United States District Court
Northern District of California
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claim asserting a $14,368.19 priority unsecured claim. Proof of Claim [Bk. Dkt. No. 32-2]. The
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Trustee proceeded to make payments toward it as provided under Bote’s plan. Appellee Brief 3.
On November 13, 2017, the Trustee filed and Bote received a notice of final payment due,
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which reflected a remaining balance of approximately $15,935.00. Notice of Default [Bk. Dkt.
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No. 31] ¶ 1. The notice informed Bote that the plan was due to be completed on February 11,
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2018, and that failure to complete or modify it could result in dismissal without further notice or
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hearing. Id. ¶ 3.
Bote determined that the outstanding balance was due to the classification of the
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$14,368.19 FTB claim. Appellant Brief 4. She filed a claim objection on December 13, 2017 on
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the grounds that the priority classification was invalid. Objection to Claim [Bk. Dkt. No. 32-1] 1.
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The FTB opposed on January 3, 2018. Opposition to Claim Objection [Bk. Dkt. No. 33]. On
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March 2, 2018, Bote scheduled the matter for an April 4 hearing. Notice of Hearing [Bk. Dkt. No.
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37].
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On March 9, the Trustee filed a motion to dismiss the bankruptcy plan because of Bote’s
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material default under section 1307(c)(6) of the Bankruptcy Code. Motion to Dismiss (“MTD”)
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[Bk. Dkt. No. 38]. The Trustee did not set the matter for hearing but provided notice that any
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objection or request for a hearing should be requested within 21 days as required by Bankruptcy
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Local Rule 9014-1(b)(3)(A). See Notice and Opportunity for Hearing [Bk. Dkt. No. 39] 1–2;
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Appellant Brief 5. Bote failed to timely object or request a hearing. See Request for Entry of
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Order by Default [Bk. Dkt. No. 40] ¶ 3.
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On April 2, after 24 days had passed, the bankruptcy court vacated the April 4, hearing on
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Bote’s objection to the FTB claim. See 04/02/2018 Bankruptcy Docket Entry. That same day, the
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Trustee filed a request for entry of default, noting that Bote had not filed a timely objection or
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otherwise contacted the Trustee to oppose the motion to dismiss. Request for Entry of Order by
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Default ¶ 3. On April 3, Bote filed an objection to the Trustee’s motion to dismiss and requested a
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hearing. Objection to MTD [Bk. Dkt. No. 41]. She separately moved to modify her plan to
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extend it by six months, but she did not initiate notice and opportunity for a hearing on the
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United States District Court
Northern District of California
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proposed modification. Motion to Modify Plan [Bk. Dkt. No. 42].
On April 4, the bankruptcy court dismissed the case. Order Dismissing Case [Bk. Dkt. No.
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43]. Judge Blumenstiel noted that after the FTB opposed her claim objection on January 3, Bote
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“demonstrated zero interest in prosecuting her objection” until March 2, when she set it for a
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hearing. Id. 1. Based on that delay and Bote’s failure to timely oppose the Trustee’s motion to
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dismiss, the court concluded that she “[had] shown very little interest in successfully completing
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her case.” Id. 2. The court declined to consider Bote’s opposition to the motion to dismiss. Id.
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Bote gave notice to the Trustee and requested a hearing on her motion to modify the plan on April
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5. Notice and Opportunity for a Hearing [Dkt. No. 44]. She filed a notice of appeal to this court
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on April 12, 2018. Notice of Appeal [Bk. Dkt. No. 46].
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Throughout these proceedings, Bote was represented by counsel. Petition page 1.
LEGAL STANDARD
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This court has jurisdiction to hear appeals from a bankruptcy court pursuant to
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28 U.S.C. § 158(a). Educ. Credit Mgmt. Corp. v. Pope, 308 B.R. 55, 59 (N.D. Cal. 2004). “A
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court’s interpretation and application of local rule is reviewed for an abuse of discretion.” In re
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Schlegel, 526 B.R. 333, 338 (B.A.P. 9th Cir. 2015). Dismissal of a chapter 13 bankruptcy is also
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reviewed for an abuse of discretion. Id. A court “necessarily abuses its discretion when it bases
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its decision on an erroneous legal standard or on clearly erroneous findings of fact.” Farris v.
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Seabrook, 677 F.3d 858, 864 (9th Cir. 2012) (citing Flexible Lifeline Sys., Inc. v. Precision Lift,
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Inc., 654 F.3d 989, 994 (9th Cir. 2011)).
DISCUSSION
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I. VACATING THE CLAIM OBJECTION HEARING
Bote argues that the bankruptcy court denied her due process rights and abused its
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discretion when it vacated the hearing for her claim objection. She argues that the case was not
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ripe for dismissal when the bankruptcy court vacated the hearing because the Trustee had not yet
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filed a request for entry of default. Appellant Brief 12.
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Courts “have the inherent authority to manage their dockets.” See Dietz v. Bouldin, 136 S.
Ct. 1885, 1892 (2016). I cannot say that the bankruptcy court abused its discretion when it
vacated the hearing on the claim objection, which Bote did not set until after the 60th month of her
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United States District Court
Northern District of California
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plan had elapsed. Bote’s plan was in default past its deadline, the Trustee had filed a motion to
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dismiss, and the time to oppose that motion had passed. The court had every reason to consider
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the motion to dismiss on the merits prior to entertaining the merits of the claim objection.
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Bote’s over-four-year delay in objecting to the FTB’s claim provides even more support
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for the bankruptcy court’s decision. The FTB filed its proof of claim on May 14, 2013, and Bote
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waited until December 13, 2017 to object. Even after she did object, she waited almost two
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months after the FTB filed its opposition to set the matter for hearing. Given the lapse in time and
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the pending unopposed motion to dismiss, the bankruptcy court acted within its discretion when it
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vacated the hearing.
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II. DISMISSING THE CASE
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Bote argues that the bankruptcy court abused its discretion by dismissing her case without
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a hearing and without considering her late opposition to the Trustee’s motion.
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A. The Bankruptcy Court Was Not Required to Have a Hearing
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Relying on the Ninth Circuit case In re Eliapo, Bote argues that the bankruptcy court was
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required to have a hearing on the motion to dismiss because it took an adverse position to her and
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because doing so was a denial of due process. Appellant Brief 15–16; In re Eliapo, 468 F.3d 592,
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602 (9th Cir. 2006). In that case, the bankruptcy court decided an unopposed motion for attorney
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fees without a hearing. In re Eliapo, 468 F.3d at 595. The Ninth Circuit held that if the court had
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granted the fee request in full, no hearing would have been required under Bankruptcy Rule
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2017(b). Id. at 602. But because the court had “materially reduced” the amount of attorney fees,
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it had taken on the role of the adversary and was therefore required to provide a hearing to the
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requesting party under Rule 2017(b). Id. The Ninth Circuit wrote that because its decision was
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based on the rule, it did “not need to reach the question whether the Due Process Clause also
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required notice and a prior hearing.” Id. at 603.
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In re Eliapo case has no application to these facts. Bote did not make an unopposed
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request that the bankruptcy court altered without a hearing, essentially taking on the adversary’s
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role. Instead, the Trustee requested dismissal, which the bankruptcy court granted in full. Under
the very rule articulated by the Ninth Circuit in In re Eliapo, no hearing was required on this
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United States District Court
Northern District of California
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unopposed motion. See In re Eliapo, 468 F.3d at 602. Bote provides no support for her Due
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Process Clause arguments given that the Ninth Circuit declined to reach that question in the only
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case she cites.
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Bote adds that the bankruptcy court took an adverse position to her motion to modify when
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it dismissed the case despite its awareness of her motion. But the court did not decide the merits
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of the motion to modify, which had not yet been noticed and set for hearing. Rather, it decided the
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merits of the Trustee’s motion to dismiss, which Bote had failed to timely oppose.
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B. The Bankruptcy Court Did Not Abuse Its Discretion in Deeming the Motion Unopposed
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Bote argues that the bankruptcy court abused its discretion when it ignored her untimely
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objection and request for a hearing in response to the Trustee’s motion to dismiss and instead
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treated the motion as unopposed.
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Bote’s opposition to the motion to dismiss was untimely. The Bankruptcy Local Rules
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require that “[a]ny objection to the requested relief, or a request for hearing on the matter, must be
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filed and served upon the initiating party within 21 days of mailing the notice.” BANKR. L. R.
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9014-1(b)(3)(A). Bote argues that her motion was timely under the Federal Rules of Bankruptcy
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Procedure, and that those should win out over the local rules when there is a conflict between
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them. Appellant Brief 20–23. But there is no conflict between the two rules; rather, the federal
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rules explicitly allow courts to specify the time for filing written motions. See FED. R. BANKR. P.
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9006(d) (“A written motion . . . and notice of any hearing shall be served not later than seven days
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before the time specified for such hearing, unless a different period is fixed by these rules or by
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order of the court.”).
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The bankruptcy court acted within its discretion when it declined to consider Bote’s
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untimely motion and instead deemed the motion to dismiss uncontested. In In re Schlegel, the
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Ninth Circuit Bankruptcy Appellate Panel held that a bankruptcy court had discretion to deem a
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motion to dismiss uncontested when the debtors failed to submit a written opposition. 526 B.R. at
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339. It was within the court’s discretion to consider debtors’ silence to be consent, “as long as
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[the motion to dismiss] was meritorious.” Id. The only remaining question is whether the
bankruptcy court abused its discretion when it found the motion to dismiss meritorious.
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Northern District of California
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C. The Bankruptcy Court Did Not Abuse Its Discretion in Dismissing the Case
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Bote challenges the court’s decision to dismiss her case, arguing that she had timely made
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all payments and that a delay in setting her claim objection for a hearing is insufficient grounds for
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the court’s conclusion that she showed little interest in successfully completing her case.
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Appellant Brief 25. In addition, dismissal was not in the best interest of the creditors and the
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estate. Id. 26.
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I am sympathetic to Bote, who timely paid under her bankruptcy plan for five years. The
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unfortunate fact is that she (by and through her counsel) had years to object to the FTB’s proof of
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claim and yet failed to do so. Even when she initiated the process of objecting to the claim, the
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bankruptcy court found that she “demonstrated zero interest” in prosecuting it. Order of Dismissal
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1. Given Bote’s many delays, I cannot say that this finding of fact was “clearly erroneous.” See
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Farris, 677 F.3d at 864. The bankruptcy court also acted within its discretion when it found
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dismissal in the best interest of creditors and the estate, especially given that most creditors went
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more than five years without any payment on the debt or any ability to pursue other remedies
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against Bote.
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CONCLUSION
Given the nearly four-and-a-half years Bote had to object to the FTB’s claim, her delay in
prosecuting the eventual objection, and her failure to timely oppose the Trustee’s motion to
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dismiss, I cannot say the bankruptcy court abused its discretion when it dismissed her case. The
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bankruptcy court’s order of dismissal is AFFIRMED.
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IT IS SO ORDERED.
Dated: October 29, 2018
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William H. Orrick
United States District Judge
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United States District Court
Northern District of California
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