In Re: Anton Andrew Rivera; Denise Ann Rivera

Filing 26

ORDER Affirming Bankruptcy Court Order Dismissing Debtors' Chapter 13 Bankruptcy. Signed by Judge Edward J. Davila on 09/15/2017. In light of ORDER, 24 Motion to Expedite and 25 Motion to Expedite are moot. THE CLERK SHALL CLOSE THIS FILE. (ejdlc3, COURT STAFF) (Filed on 9/15/2017) Modified on 9/15/2017 (ejdlc1S, COURT STAFF).

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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ANTON A. RIVERA and DENISE A.
RIVERA,
Debtors/Appellants.

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United States District Court
Northern District of California

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Case No. 5:15-cv-04402-EJD
ORDER AFFIRMING BANKRUPTCY
COURT ORDER DISMISSING
DEBTORS’ CHAPTER 13
BANKRUPTCY

v.

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DEUTSCHE BANK NATIONAL TRUST
COMPANY, AS TRUSTEE OF
CERTIFICATE-HOLDERS OF THE
WAMU MORTGAGE PASS THROUOGH
CERTIFICATE SERIES 2005-AR6,

DOCKET NOS. 24, 25

Appellee.
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I. INTRODUCTION

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Appellants Anton A. Rivera and Denise A. Rivera (“Appellants”) appeal from a

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Bankruptcy Court order dismissing their chapter 13 bankruptcy pursuant to 11 U.S.C. §1307(c).

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Claimant Deutsche Bank National Trust Company, as trustee of certificate-holders of the WaMu

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Mortgage Pass Through Certificate Series 2005-AR6 (“Deutsche Bank”), has filed an answering

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brief, asserting that the dismissal was proper and should be affirmed. For the reasons set forth

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below, the Court affirms the decision of the bankruptcy court dismissing Appellants’ chapter 13

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bankruptcy.

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Case No.: 5:15-cv-04402-EJD
ORDER AFFIRMING BANKRUPTCY COURT’S ORDER DISMISSING DEBTORS’
BANKRUPTCY

II. BACKGROUND

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In 2004, Appellants obtained a mortgage on their home located at 1689 Taylor Road,

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Bethel Island, California (the “property”). Appellants executed a noted with Washington Mutual

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Bank, FA., in the principle amount of $440,000 (the “loan”). The loan was later assigned to the

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WaMu Mortgage Pass Through Certificates Series 2005-AR6 investment trust (the “trust”), and

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Deutsche Bank was appointed trustee of the trust to, among other things, manage payments by the

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servicers of the loans assigned to the trust. JP Morgan Chase Bank, N.A. (“Chase”) serviced the

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loan on behalf of Deutsche Bank. Appellants’ last payment to Chase and Deutsche Bank on the

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loan was made in December of 2009.
Appellants filed for protection under Chapter 13 of the Bankruptcy Code on December 7,

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United States District Court
Northern District of California

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2012. Deutsche Bank filed a timely Proof of Claim as the noteholder of Appellants’ mortgage,

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asserting a secured claim in the amount of $532,272.10 and arrearages in the amount of

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$106,389.03.1 Appellants subsequently filed an objection to Deutsche Bank’s Proof of Claim.
In January of 2013, Appellants initiated an adversary proceeding against Deutsche Bank

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challenging its standing to file a Proof of Claim and to enforce the note and deed of trust. In July

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of 2013, the Bankruptcy Court held an initial hearing on Appellants’ objection to Deutsche Bank’s

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Proof of Claim, and continued the matter several times to allow for additional briefing, and for

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other reasons not relevant to this appeal.
On December 10, 2013, the Bankruptcy Court dismissed Appellants’ adversary proceeding

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with prejudice. The Bankruptcy Appellate Panel (“BAP”) reversed the dismissal in part, and

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remanded the case to the Bankruptcy Court for further proceedings.2 Specifically, the BAP

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affirmed the dismissal of claims challenging Deutsche Bank’s right to proceed with a non-judicial

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foreclosure sale against Appellants’ property based on the note and deed of trust, returning to the

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Deutsche Bank’s Answering Brief states that the arrearages totaled $108,389.03. Answering
Brief, p. 3.
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See In re Rivera, No. NC-13-1615-KuPaJu, 2014 Bankr. LEXIS 4842, 2014 WL 6675693
(B.A.P. 9th Cir. Nov. 24, 2014).
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Case No.: 5:15-cv-04402-EJD
ORDER AFFIRMING BANKRUPTCY COURT’S ORDER DISMISSING DEBTORS’
BANKRUPTCY

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Bankruptcy Court only those claims related to Deutsche Bank’s standing to file a claim in

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Appellants’ bankruptcy.

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After remand, the Bankruptcy Court scheduled a trial on the Appellants’ objection to

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Deutsch Bank’s Proof of Claim. Deutsche Bank’s trial brief addressed both the standing issue and

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the calculation for the Bank’s Proof of Claim. Appellants, however, filed a motion to exclude any

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evidence on the issue of standing, asserting that the issue should be addressed separately in the

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context of the adversary proceedings. At the trial held on February 25, 2015, the Bankruptcy

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Court offered the parties the opportunity to address the standing issue, but Appellants declined.

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On March 30, 2015, the Bankruptcy Court established Deutsche Bank’s claim in the amount of
$532,272.10, subject to further determinations as to the disputed validity of the claim. On appeal,

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United States District Court
Northern District of California

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the BAP affirmed the March 30, 2015 order.

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While the March 30, 2015 order was on appeal to the BAP, the trustee made a motion to

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dismiss the chapter 13 case pursuant to 11 U.S.C. §1307(c), asserting that the Appellants had been

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litigating the Deutsche Bank Proof of Claim for over twenty-six months, during which none of the

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creditors had been paid. The trustee also asserted that Appellants could not propose a plan capable

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of confirmation that would pay Deutsche Bank and other priority creditors in full over the

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remaining thirty-two months. Deutsche Bank joined the trustee’s motion.

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On June 4, 2015, the Bankruptcy Court heard argument on the trustee’s motion, and

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thereafter ordered Appellants to file an amended plan by July 8, 2015, scheduled a confirmation

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hearing for July 23, 2015, and continued the trustee’s motion to dismiss to the same date.

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On July 8, 2015, Appellants filed a document captioned “Debtors 4th Amended Chapter 13

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Plan,” in which Appellants asserted, among other things, that it was impossible to provide an

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amended plan because of certain errors in the trustee’s “Final Report” and the ongoing legal issues

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regarding the validity and amount of Deutsche Bank’s Proof of Claim. In response, the trustee

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submitted a Declaration and Request for Dismissal, and Deutsche Bank filed an objection to

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Appellants’ purported plan.

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Case No.: 5:15-cv-04402-EJD
ORDER AFFIRMING BANKRUPTCY COURT’S ORDER DISMISSING DEBTORS’
BANKRUPTCY

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After conducting a hearing on the trustee’s motion to dismiss, the Bankruptcy Court issued

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an order on July 27, 2015, directing Appellants to tender ongoing monthly payments to Deutsche

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Bank in the amount of $2,670. The Bankruptcy Court advised that in the event Appellants failed

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to make the monthly payments, Deutsche Bank may lodge an order granting the trustee’s motion

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to dismiss.

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The Appellants failed to make the first payment. Instead, Appellants filed a motion for

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relief from the July 27, 2015 order in which they acknowledged that they could not make the

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payments ordered by the Bankruptcy Court.
On August 13, 2015, the Bankruptcy Court held a hearing on the trustee’s motion to

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dismiss the Appellants’ bankruptcy. At the conclusion of the hearing, the Bankruptcy Court

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United States District Court
Northern District of California

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stated: “This case is not currently proceeding towards a reorganization. It’s been pending for

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approximately two and a half years with no sign of confirmation at this time. The debtors have

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effectively stated that they can’t reorganize if required to make ongoing payments. I find that

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dismissal is appropriate at this time.” See Appellee’s Supplemental Excerpts of Record, p. 400.

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A written order granting the motion to dismiss was filed the next day. In the written order, the

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Bankruptcy Court stated that Appellants had not complied with the Court’s order requiring

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submission of a confirmable plan by July 8, 2015. Further, the Bankruptcy Court order stated, in

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pertinent part:

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The court ordered Debtors to propose a confirmable plan by July 8,
2015 for a confirmation hearing on July 23, 2015. The hearing on
the Trustee’s motion to dismiss was continued to the same date. On
July 8, Debtors filed a document that was an amended plan in title
alone. As such, the confirmation hearing did not go forward. At the
continued hearing on the Trustee’s motion, the court ordered
Debtors [to] continue making payments to the Chapter 13 Trustee in
the amount proposed by Debtors and to make post-petition mortgage
payments to Deutsche Bank beginning on August 1, 2015 [footnote
omitted], and providing that the case would be dismissed if such
payments were not made.
On August 13, 2015, Deutsche Bank’s counsel filed a declaration
stating that Debtors had not tendered the monthly payment as
required. A continued hearing on the motion to dismiss was held
later that day. . . . At the continued hearing, debtors admitted that the
payments were not made.
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Case No.: 5:15-cv-04402-EJD
ORDER AFFIRMING BANKRUPTCY COURT’S ORDER DISMISSING DEBTORS’
BANKRUPTCY

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For the reasons set forth more fully on the record, it is hereby
ORDERED that

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(1) The above-captioned Chapter 13 case is dismissed.

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Appellee’s Supplemental Excerpts of Record, pp. 374-376. Appellants now appeal the

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Bankruptcy Court’s order of dismissal. In November of 2015, Appellants filed a new state court

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action against Deutsche Bank and Chase seeking to enjoin the foreclosure of the property. The

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foreclosure sale, however, went forward.

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III. LEGAL STANDARDS
The dismissal of a Chapter 13 case is reviewed for an abuse of discretion. In re Schlegel,
526 B.R. 333, 338 (B.A.P. 9th Cir. 2015); see also In re Nelson, 343 B.R. 671, 674 (B.A.P. 9th

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United States District Court
Northern District of California

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Cir. 2006). “A court abuses its discretion if it does not apply the correct law or if it rests its

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decision on a clearly erroneous finding of material fact.” In re Ho, 274 B.R. 867, 871 (B.A.P. 9th

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Cir. 2002). A district court may affirm an order of a bankruptcy court on any ground supported by

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the record. Thrifty Oil Co. v. Bank of Am., Nat’l Trust and Sav. Ass’n, 332 F.3d 1039, 1046 (9th

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Cir. 2003).

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IV. DISCUSSION
In ruling on Appellants’ motion to stay pending appeal, this Court concluded that

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Appellants failed to demonstrate likelihood of success on the merits because the Bankruptcy

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Court’s stated reasons for dismissal, namely Appellants’ inability to propose a viable plan and

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failure to comply with an order to make payments to the trustee and to make mortgage payments

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to Deutsche Bank, provided sufficient cause to dismiss Appellants’ bankruptcy pursuant to 11

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U.S.C. §1307(c). It is well settled that a debtor’s failure to make post-petition mortgage payments

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constitutes “cause” under section 1307(c) for dismissal of a chapter 13 case or for conversion to

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chapter 7. See e.g. De La Salle v. U.S. Bank, N.A., 461 B.R. 593, 606 (B.A.P. 9th Cir. 2011)

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(affirming order converting case under §1307(c) because debtors ignored bankruptcy court’s

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instruction to include post-petition mortgage payments for their secured creditors in their amended

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Case No.: 5:15-cv-04402-EJD
ORDER AFFIRMING BANKRUPTCY COURT’S ORDER DISMISSING DEBTORS’
BANKRUPTCY

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plan and chose not to file a third amended plan); Schnall v. Fitzgerald (In re Schnall), 2012 WL

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1888144 at *7 (B.A.P. 9th Cir. 2012) (affirming dismissal of chapter 13 case under §1307(c) as

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debtor’s plan was not confirmable because, among other things, it did not provide for monthly

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payment or for arrearages to be cured within a reasonable time).
Appellants now raise several arguments challenging the dismissal, many of which were

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either not raised during the bankruptcy proceedings or have no relevance to the Bankruptcy

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Court’s stated reasons for dismissal of Appellants’ bankruptcy. For instance, Appellants contend

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that dismissal was premature because they were not given an opportunity to propose a new or

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modified plan following the denial of a plan confirmation. Id. at p.7. Appellants, however, did
not raise this argument during the bankruptcy proceedings, and therefore are precluded from

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United States District Court
Northern District of California

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making the argument in this appeal. See e.g. In re S&B Surgery Center LFMG-S & B v. Fortress

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Credit Corp., 2014 WL 10755272, *5 (C.D. Cal. 2014) (in general, issue not presented to the trial

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court cannot be raised for the first time on appeal), citing United States v. Flores-Payon, 942 F.2d

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556, 558 (9th Cir. 1991) and Holder v. Holder, 305 F.3d 854, 867 (9th Cir. 2002) (“Arguments not

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asserted in the trial court are waived and will not be considered for the first time on appeal.”).

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Appellants also contend that the Bankruptcy Court should not have dismissed the chapter

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13 case because any delay in the proceedings resulted from errors committed by the Bankruptcy

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Court, the reversal and remand by the BAP to the Bankruptcy Court, and the failure of Appellee to

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comply with the Bankruptcy Court’s directive to submit an accounting. Appellants’ Opening

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Brief, pp. 6, 9. Appellants also contend that dismissal was improper because there was no

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evidence to show that the delay in filing a plan was prejudicial to a creditor3, nor evidence of any

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bad faith by Appellants. Id. at 8. The Bankruptcy Court, however, did not dismiss Appellants’

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bankruptcy because of delays or bad faith. Instead, the Bankruptcy Court’s dismissal order was

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based on Appellants’ admitted inability to submit a confirmable plan and Appellants’ failure to

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Appellants contend that the purported delays actually benefited Deutsche Bank because the value
of the Appellants’ real property eventually exceeded the amount of Appellants’ mortgage.
Appellants’ Reply Brief, pp. 3-4.
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Case No.: 5:15-cv-04402-EJD
ORDER AFFIRMING BANKRUPTCY COURT’S ORDER DISMISSING DEBTORS’
BANKRUPTCY

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make post-petition payments.
Appellants next argue that dismissal was premature because the BAP remanded the issue

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of standing, and the Bankruptcy Court never addressed the issue. Id. at pp. 6, 10. The BAP

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remand order, however, did not include any express or implied directive to decide the standing

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issue before Defendants’ bankruptcy could be dismissed. Furthermore, Appellants’ argument is

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contrary to established precedent. See e.g. De la Salle, 461 B.R. at 602-03 (no merit to debtor’s

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contention that they were prejudice by the conversion of their case prior to the resolution of an

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objection to a creditor’s proof of claim); Schnall, 2012 WL 1888144 *6 (“Schnall’s desire to

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litigate Deutsche’s or BAC’s ‘standing’ did not excuse his obligation to make any payments to

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Trustee on account of the secured loans, or to propose a plan providing for any payments on the

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United States District Court
Northern District of California

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secured loans.”); In re Tornheim, 239 B.R. 677, 687 (Bankr. E.D.N.Y. 1999) (notwithstanding

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debtor’s repeated assertion that he does not know who holds the mortgage or how much to pay,

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debtor must make mortgage payments until the mortgage is actually modified). Furthermore,

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Appellants filed a motion in limine to exclude evidence regarding standing, and later at the

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commencement of the February 25, 2015 trial, the Bankruptcy Court offered the parties the

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opportunity to address the standing issue, but Appellants declined. Therefore, Appellants cannot

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claim in good faith that the standing issue should have been resolved before dismissal.
Lastly, Appellants also contend that it was improper for the Bankruptcy Court to dismiss

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the chapter 13 case based upon Appellants’ failure to make payments because the trustee’s motion

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to dismiss was predicated solely upon a failure to propose a plan capable of confirmation, and not

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a failure to make payments. Appellants contend that they were not given fair warning of the

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potential for dismissal on grounds not asserted in the trustee’s motion. Appellants’ argument is

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baseless. The Bankruptcy Court’s July 27, 2015 order clearly put Appellants on notice of the

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potential for dismissal for failure to make the ordered payment.4

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In light of the foregoing analysis, it is unnecessary to consider Deutsche Bank’s argument that
the appeal is moot due to the foreclosure sale.
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Case No.: 5:15-cv-04402-EJD
ORDER AFFIRMING BANKRUPTCY COURT’S ORDER DISMISSING DEBTORS’
BANKRUPTCY

V. CONCLUSION

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For the reasons set forth above, the Bankruptcy Court’s order dismissing Appellants’

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chapter 13 bankruptcy is AFFIRMED.

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IT IS SO ORDERED.

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Dated: September 15, 2017
______________________________________
EDWARD J. DAVILA
United States District Judge

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United States District Court
Northern District of California

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Case No.: 5:15-cv-04402-EJD
ORDER AFFIRMING BANKRUPTCY COURT’S ORDER DISMISSING DEBTORS’
BANKRUPTCY