FILED
JUL 31 2018
NOT FOR PUBLICATION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. EC-17-1036-BHKu
AIAD SAMUEL and HODA SAMUEL, Bk. No. 2:16-bk-21585
Debtors.
HODA SAMUEL,
Appellant,
v. MEMORANDUM*
JPMORGAN CHASE BANK, N.A.;
SCOTT M. SACKETT, Trustee;
FAIRVIEW HOLDINGS II, LLC; U.S.
TRUSTEE; AIAD SAMUEL,
Appellees.
Submitted Without Oral Argument on June 21, 2018
Filed – July 31, 2018
Appeal from the United States Bankruptcy Court
for the Eastern District of California
*
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 Michael S. McManus, Bankruptcy Judge, Presiding
Appearances: Appellant Hoda Samuel, pro se on brief; Donald W.
Fitzgerald, Jason E. Rios and Jennifer E. Niemann of
Felderstein Fitzgerald Willoughby & Pascuzzi LLP on
brief for Appellee Scott M. Sackett, Trustee.**
Before: BRAND, HURSH***and KURTZ, Bankruptcy Judges.
INTRODUCTION
Chapter 111 debtor, Hoda Samuel2, appeals an order granting the
trustee's motion for (1) use of cash collateral, (2) authorizing replacement
liens, and (3) authorizing adequate protection payments for the period
February 1, 2017 through April 30, 2017. We DISMISS the appeal as MOOT.
**
Appellees JPMorgan Chase Bank, N.A., Fairview Holdings II, LLC, the U.S.
Trustee and Aiad Samuel did not appear in this appeal.
***
Hon. Benjamin P. Hursh, Chief Bankruptcy Judge for the District of Montana,
sitting by designation.
1
Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code,
11 U.S.C. §§ 101-1532, and all "Rule" references are to the Federal
Rules of Bankruptcy Procedure.
2
Because Mrs. Samuel filed a joint chapter 11 case with her husband, we refer to
Mr. Samuel as Aiad and Mrs. Samuel as Hoda to avoid any confusion. No disrespect is
intended.
2
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
A. The bankruptcy filing and appointment of trustee
Aiad and Hoda filed a chapter 11 bankruptcy case on March 15, 2016.
Thereafter, they filed an amended petition and amended Schedules A/B
and J. Only Aiad claimed an ownership interest in the nine investment
properties listed on Schedule A. On May 10, 2016, the bankruptcy court
appointed Scott M. Sackett ("Trustee") as the chapter 11 trustee for Aiad's
and Hoda's bankruptcy estate.
B. Aiad's and Hoda's properties
1. Shopping Centers
The amended schedules identified Aiad's ownership interest in three
shopping centers known as the West Sacramento Center, the Power Inn
Center and the Stockton Blvd. Center (collectively, "Shopping Centers").
Although Aiad and Hoda failed to list any secured creditors for their real
properties in Schedule D, Fairview Holdings II, LLC asserted a security
interest in the West Sacramento Center and the rents generated from that
center as cash collateral; JPMorgan Chase Bank, N.A. asserted a security
interest in the Power Inn Center and the rents generated from that center as
cash collateral; and the United States of America, which held a criminal
restitution judgment lien for $3,029,412.64, asserted a security interest in all
of the Shopping Centers and the rents generated from each center as cash
collateral.
3
2. Residential Properties
The amended schedules also identified six residential rental
properties. Only four of the six properties were rented around the time of
the bankruptcy filing, and four of the six had been abandoned by the time
the motion at issue was heard. The two remaining residential rental
properties belonging to the estate were the 209 Prairie Circle property and
the 148 Estes Way property (the "Residential Properties"), which rented for
$825 and $1000, respectively. JPMorgan, Bank of America, N.A. and the
Bank of New York Mellon fka The Bank of New York, as Trustee for the
Certificateholders of the CWALT, Inc., Alternative Loan Trust 2006-OA10
Mortgage Pass-Through Certificates, Series 2006-OA10, asserted a security
interest in one or more of the Residential Properties and the rents
therefrom. We refer to the secured creditors of the Shopping Centers and
the Residential Properties collectively as the "Secured Creditors."
C. Cash collateral motions and orders
Shortly after his appointment, Trustee filed his first motion for
authority to use cash collateral and other relief, requesting authority to use
cash collateral of the Secured Creditors related to the Shopping Centers and
the Residential Properties through July 31, 2016. Specifically, Trustee
sought to use the cash collateral to maintain the monthly operations of the
Shopping Centers and Residential Properties and to preserve their going
concern value. Trustee also sought to grant like-kind replacement liens to
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the Secured Creditors in the cash collateral account balance to secure any
decline in value in their respective interest in the collateral resulting from
the use of the cash collateral. As further adequate protection for the
Secured Creditors, Trustee requested authorization to pay any stipulating
creditors adequate protection payments each month up to $5,000. Hoda did
not oppose the first cash collateral motion. The bankruptcy court granted
the first cash collateral motion, authorizing the use of cash collateral
through July 31, 2016.
Thereafter, Trustee filed three more motions for further use of cash
collateral on the same terms and conditions as in his first motion. The
bankruptcy court granted all three motions. The record shows that Hoda
was served with these motions, but she never filed a written opposition or
appeared at any of the hearings. It is only the last order — the Fourth Cash
Collateral Order for the period February 1, 2017 through April 30, 2017—
that Hoda appeals. Although Aiad appeared at the January 23, 2017
hearing related to the Fourth Cash Collateral Order, he made no objections
to the motion.
D. Sale of the Shopping Centers
Several weeks prior to entry of the Fourth Cash Collateral Order,
Trustee filed motions for authority to sell each of the Shopping Centers.
The bankruptcy court approved the sales. The sales for the Shopping
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Centers closed in March 2017, after this appeal was filed.3
II. JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(M). We explain our jurisdiction below.
III. ISSUES
1. Does Hoda have standing to appeal even though she failed to object
to the cash collateral motion?
2. Is the appeal equitably moot?
IV. STANDARDS OF REVIEW
Mootness and standing are questions of law reviewed de novo. Motor
Veh. Cas. Co. v. Thorpe Insulation Co. (In re Thorpe Insulation Co.),
677 F.3d
869, 879 (9th Cir. 2012) (standing); Nelson v. George Wong Pension Tr. (In re
Nelson),
391 B.R. 437, 442 (9th Cir. BAP 2008) (mootness).
V. DISCUSSION
A. Hoda has standing to appeal.
Trustee contends that Hoda lacks standing to appeal the Fourth Cash
Collateral Order because she was given proper notice and failed to attend
the hearing or file an objection. See Brady v. Andrew (In re Commercial W. Fin.
Corp.),
761 F.2d 1329, 1334-35 (9th Cir. 1985) (stating in dicta that
3
We disagree with Trustee that the sale of the Shopping Centers moots the
appeal of the Fourth Cash Collateral Order. While the majority of the funds subject to
that order were used for the Shopping Centers, some were used for the Residential
Properties. It is unclear whether those properties have been sold, and Trustee does not
assert that they have.
6
attendance and objection should usually be prerequisites to fulfilling the
"person aggrieved" standard in bankruptcy appeals). Although notice to
Hoda appears proper, she asserts that she has received virtually no mail
from the bankruptcy court while in prison. Therefore, it is possible she did
not receive timely (or any) notice of the motion and hearing, although she
does not say that is the case. In any event, we reject Trustee's argument.
"Bankruptcy standing concerns whether an individual or entity is
'aggrieved,' not whether one makes that known to the bankruptcy court."
Harkey v. Grobstein (In re Point Ctr. Fin., Inc.),
890 F.3d 1188, 1193 (9th Cir.
2018) (reversing district court's dismissal of appeal for appellant's lack of
standing based on failure to object before the bankruptcy court). In Harkey,
the Ninth Circuit Court of Appeals recognized the nuance of bankruptcy
cases, in that a party need not have attended the hearing and made
objections to be directly and adversely affected by the bankruptcy court's
decision. Agreeing with the Fourth Circuit case of White v. Univision of
Virginia Inc. (In re Urban Broadcasting Corporation),
401 F.3d 236, 244 (4th Cir.
2005), the Harkey court held that "an appellant's failure to attend and object
at a bankruptcy court hearing has no bearing on the question of whether
that appellant has standing to appeal a bankruptcy court order."
Id.
Therefore, Hoda's failure to attend the hearing and object does not affect
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her standing to appeal.4
B. The appeal is equitably moot.
Trustee argues that the appeal is equitably moot and therefore should
be dismissed. We ordered Hoda to address this in her reply brief, but her
arguments regarding mootness do not concern the use of cash collateral,
the only issue in this appeal.
We lack jurisdiction over a moot appeal. United States v. Pattullo (In re
Pattullo),
271 F.3d 898, 900 (9th Cir. 2001). We must dismiss the appeal if it
is constitutionally moot and may dismiss if we deem it equitably moot. See
Clear Channel Outdoor, Inc. v. Knupfer (In re PW, LLC),
391 B.R. 25, 33-35 (9th
Cir. BAP 2008).
Equitable mootness arises "when there has been a comprehensive
change of circumstances . . . so as to render it inequitable for this court to
consider the merits of the appeal." Rev Op Grp. v. ML Manager LLC (In re
Mortgs., Ltd.),
771 F.3d 1211, 1214 (9th Cir. 2014). For an appeal to be
equitably moot, "[t]he question is whether the case presents transactions
that are so complex or difficult to unwind that the doctrine of equitable
mootness would apply." In re Thorpe Insulation Co.,
677 F.3d at 880 (internal
quotation marks and citation omitted). In other words, "[e]quitable
mootness concerns whether changes to the status quo following the order
4
While failure to attend and object does not present a jurisdictional standing
issue, it may result in waiver or forfeiture of the right to make certain arguments or
object to certain claims. Harkey, 890 F.3d at 1193.
8
being appealed make it impractical or inequitable to unscramble the eggs."
Castaic Partners II, LLC v. Daca-Castaic, LLC (In re Castaic Partners II, LLC),
823 F.3d 966, 968 (9th Cir. 2016) (internal quotation marks and citation
omitted).
To determine whether an appeal is equitably moot, the Ninth Circuit
applies a four-factor test, looking to (1) whether a stay was sought; (2) if a
stay was sought and not gained, whether substantial consummation of the
plan has occurred; (3) what effect a remedy would have on third parties not
before the court; and (4) whether the bankruptcy court can fashion effective
and equitable relief. See JPMCC 2007-C1 Grasslawn Lodging, LLC v.
Transwest Resort Props., Inc. (In re Transwest Resort Props., Inc.),
801 F.3d
1161, 1167-68 (9th Cir. 2015); In re Thorpe Insulation Co.,
677 F.3d at 881.
As for the first and second factors, Hoda did seek a stay from the
Panel, but it was denied. In any case, the Fourth Cash Collateral Order is
more than substantially consummated; it is complete. The Fourth Cash
Collateral Order, which authorized the use of cash collateral for the period
February 1, 2017 through April 30, 2017, passed over a year ago. Without a
stay, Trustee used the cash collateral to pay third parties for the purpose of
operating and maintaining the Shopping Centers and the Residential
Properties. These factors weigh heavily in favor of mootness.
The third and fourth factors require us to consider the effects on third
parties not before the court of any available remedy and whether such
9
remedy would create a difficult and essentially unmanageable situation for
the bankruptcy court. These factors also weigh in favor of mootness. The
third parties who received the cash collateral funds are not before this
court. They have relied on the bankruptcy court's order and presumably
spent the funds long ago. Thus, clawing back money from these third
parties would be largely impracticable, even if possible. That is particularly
true with the Shopping Centers, which have all been sold to third-party,
good faith purchasers. As a result, it is not possible to fashion relief that is
both effective and equitable.
Accordingly, the appeal of the Fourth Cash Collateral Order is
DISMISSED as MOOT. See Dahlquist v. First Nat'l Bank,
737 F.2d 733, 735
(8th Cir. 1984) (holding that an appeal of a cash collateral order is moot if
the funds have been spent); Congress Fin. Corp. v. Shepard Clothing Co. (In re
Shepard Clothing Co.),
2002 WL 1739021, at *1 (D. Mass. July 26, 2002)
(appeal moot where the time period covered by the cash collateral order
has expired and the collateral authorized to be spent has been used);
Bankwest, N.A. v. Todd,
49 B.R. 633, 637-38 (D.S.D. 1985) (court finding cash
collateral order moot to the extent of the amounts already expended by
debtors, but finding appeal still equitably moot as to the unspent funds
because it would be both "economially unwise and inequitable" to reverse
the cash collateral order).
Notwithstanding the mootness of this appeal, we note that Hoda's
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opening brief fails to articulate any argument whatsoever for how the
bankruptcy court erred by entering the Fourth Cash Collateral Order.
Accordingly, she has waived or abandoned any challenge to it. See Nev.
Dep't of Corr. v. Greene,
648 F.3d 1014, 1020 (9th Cir. 2011) (pro se appellant
waived issues not supported by argument in opening brief); Leer v. Murphy,
844 F.2d 628, 634 (9th Cir.1988) (issues not argued on appeal by pro se
litigant are deemed abandoned).
VI. CONCLUSION
For the reasons stated above, we DISMISS the appeal as MOOT.
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