FILED
OCT 8 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NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK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. CC-19-1037-FSTa
RONALD MARTINEZ, Bk. No. 2:17-bk-24424-NB
Debtor.
RONALD MARTINEZ,
Appellant,
v. MEMORANDUM*
WELLS FARGO BANK, N.A.,
Appellee.
Submitted Without Argument on September 26, 2019
Filed – October 8, 2019
Appeal from the United States Bankruptcy Court
for the Central District of California
Honorable Neil W. Bason, Bankruptcy Judge, Presiding
*
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.
Appearances: Moises A. Aviles of Aviles & Associates on the brief for
appellant Ronald Martinez.
Before: FARIS, SPRAKER, and TAYLOR, Bankruptcy Judges.
INTRODUCTION
Chapter 131 debtor Ronald Martinez fell behind on postpetition
payments to appellee Wells Fargo Bank, N.A. (“Wells Fargo”), and the
bankruptcy court required him to cure the postpetition default. On appeal,
Mr. Martinez argues that Wells Fargo was barred from complaining about
his missed payments because it did not object to plan confirmation. He also
argues that he was current with payments because Wells Fargo misapplied
certain of them.
Mr. Martinez’s arguments are meritless. Accordingly, we AFFIRM.
FACTUAL BACKGROUND2
A. Mr. Martinez’s chapter 13 petition and plan
Mr. Martinez filed a chapter 13 petition. He scheduled residential real
property in Pomona, California (the “Property”). He valued the Property at
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
We exercise our discretion to review the bankruptcy court’s docket, as
appropriate. See Woods & Erickson, LLP v. Leonard (In re AVI, Inc.),
389 B.R. 721, 725 n.2
(9th Cir. BAP 2008).
2
$265,000 and scheduled three debts secured by the Property: (1) a first
mortgage (“First Lien”) in favor of Wells Fargo Home Mortgage totaling
$89,545.97, (2) a home equity line of credit (the “Second Lien”) in favor of
Wells Fargo totaling $69,157.55, and (3) a lien (“Third Lien”) in favor of the
City of Pomona, Housing Division totaling $48,714.13.
Wells Fargo filed a timely proof of claim for $66,689.47 pertaining to
the Second Lien. It represented that, as of the petition date, Mr. Martinez
was $8,307.90 in arrears and had not made any payment since June 2016.
Mr. Martinez filed a series of chapter 13 plans. The plan that is at
issue in this appeal dealt solely with the arrears under the Second Lien.
That plan (the “Plan”) proposed “cure and maintenance” of the Second
Lien. He proposed to make his regular monthly contractual payments (the
“maintenance payments”) directly to Wells Fargo and to make sixty
monthly payments of $138.47 (the “cure payments”) to cure the $8,307.90 in
prepetition arrears. Wells Fargo did not object to the Plan.
The bankruptcy court entered an order confirming the Plan
(“Confirmation Order”). The Confirmation Order required Mr. Martinez to
pay: $176.84 per month from the first through the fourth months; $153.70 in
the fifth month; $154.70 in the sixth and seventh months; and $154.00 per
month for the remainder of the Plan term. As is noted above, the Plan also
required Mr. Martinez to make his maintenance payments.
Wells Fargo did not appeal the Confirmation Order.
3
B. Wells Fargo’s motion for relief from stay
Two months later, Wells Fargo filed a motion for relief from the
automatic stay (“Stay Relief Motion”). It argued that its interest in the
Property was not adequately protected under § 362(d)(1) because
Mr. Martinez had failed to make the required maintenance payments. It
identified a total postpetition delinquency of $3,485.61. It represented that
it received Mr. Martinez’s last payment on July 31, 2018 and applied it
toward his January 2018 payment:
Due date Amount due Payment date Payment amount
12/15/17 $470.08 6/27/18 $512.81
1/15/18 $494.85 7/31/18 $508.84
2/15/18 $505.63
3/15/18 $486.55
4/15/18 $489.87
5/15/18 $501.10
6/15/18 $512.81
7/15/18 $508.84
8/15/18 $537.43
Total $4,507.26 $1,021.65 $3,485.61
In response, Mr. Martinez represented that he was current on his
First Lien, his Plan payments, and his maintenance payments. He alleged
that a Wells Fargo employee told him that some of the maintenance
payments went to the First Lien instead of the Second Lien. He also stated
4
that when he attempted to make the August 2018 maintenance payment on
October 1, 2018, a Wells Fargo employee told him that Wells Fargo had
closed the account for the Second Lien. He argued that it was not his fault if
Wells Fargo misapplied his payments.
He listed his purported maintenance payments between April 2018
and September 2018, which were applied to either the First Lien or the
Second Lien:
Payment date Amount Paid to
4/30/18 $489.87 First Lien
5/30/18 $501.10 First Lien
6/27/18 $512.81 Second Lien
7/31/18 $508.84 Second Lien
8/xx/18 $537.43 First Lien
9/1/18 $508.51 First Lien
9/27/18 $486.55 Second Lien
He attached copies of the deposit receipts evidencing his payments.
At the hearing on the Stay Relief Motion, counsel for Wells Fargo
pointed out that, although Mr. Martinez claimed that he timely made all of
his maintenance payments, most of them were applied to his First Lien, as
noted in the opposition. Counsel for Wells Fargo stated that, if
Mr. Martinez intended to pay the Second Lien, Wells Fargo could redirect
the payments, but it would likely result in a default on the First Lien. He
5
suggested that the court continue the hearing for thirty days to allow the
attorneys to work out a solution. Mr. Martinez’s counsel agreed to the
continuance.
At the continued hearing, counsel for Wells Fargo said that
Mr. Martinez’s counsel had been unresponsive to his multiple
communications regarding the application of Mr. Martinez’s payments. He
also stated, “Perhaps, Judge, most troubling is since we have filed our
motion we have no payments for September, October and November and
that is troubling.” Counsel suggested that the court issue an adequate
protection order whereby Mr. Martinez would make an initial payment of
$1,500, followed by regular payments (in addition to his cure payments
and maintenance payments) to cure his postpetition default on the
maintenance payments.
Mr. Martinez’s counsel apparently3 said that Wells Fargo had
refunded Mr. Martinez approximately $1,500 for the funds that were
misapplied to the First Lien. He agreed to the terms of Wells Fargo’s
proposed adequate protection order.
The bankruptcy court explained to Mr. Martinez, “[Y]ou have the
ability to make a payment of $1500 on or before December 1. And then
starting December 14 you would not only be making your regular
3
Mr. Martinez’s counsel appeared by telephone; the connection was bad, so both
the court and the transcriber had difficulty understanding him.
6
payments on whatever date they’re regularly due, but you’d also be
catching up on the – on the payments for – that are still owed on this
matter.” Mr. Martinez indicated that he understood.
Counsel for Wells Fargo drafted a proposed stipulation and order for
adequate protection per the court’s direction, but Mr. Martinez’s counsel
refused to sign the stipulation and order. Wells Fargo filed an ex parte
application requesting that the court enter the order granting the Stay
Relief Motion and ordering adequate protection.
The bankruptcy court entered the order (“Stay Relief Order”), which
attached and incorporated an adequate protection order (“APO”).
The APO first provided that Mr. Martinez must continue making his
monthly maintenance payments toward the Second Lien and directed him
to “make regular monthly payments in the amount of $519.56 (variable)
commencing 12/15/2018.”
The APO additionally provided that Mr. Martinez must cure the
postpetition default on maintenance payments (totaling $4,569.37 through
November 2018) by: (1) paying $1,500 by December 1, 2018; and (2) paying
equal monthly installments of approximately $341.04 through September
2019, in addition to his regular monthly maintenance payments.
Finally, the APO provided that Mr. Martinez was entitled to a
maximum of three notices of default; thereafter, Wells Fargo would be
entitled to request termination of the automatic stay.
7
C. The motion for reconsideration
Shortly thereafter, Mr. Martinez filed a motion to alter or amend the
Stay Relief Order under Rule 9023 (“Reconsideration Motion”). He argued
that Wells Fargo did not have the right to seek “modifications” to the Plan
in the guise of adequate protection. He requested that the bankruptcy court
vacate the Stay Relief Order.
The bankruptcy court entered an order (“Reconsideration Order”)
denying the Reconsideration Motion on February 7, 2019. It noted that the
Reconsideration Motion was rife with procedural defects. As to the merits
of the motion, the court stated that “[t]he Plan deals with prepetition debts.
The APO dealt with Debtor’s postpetition failure to pay ongoing monthly
obligations.” It noted that it had stated in the Confirmation Order that the
“confirmation of the Plan [was] without prejudice to the rights of secured
creditors with respect to post-petition defaults by the debtor(s).”
Alternatively, the court held that Mr. Martinez forfeited this
argument because he failed to raise it in opposition to the Stay Relief
Motion or at the hearing on that motion.
Finally, the court held that there was no equitable basis to grant
Mr. Martinez relief.
Mr. Martinez timely appealed from both the Stay Relief Order and
the Reconsideration Order.
8
JURISDICTION
The bankruptcy court had jurisdiction pursuant to
28 U.S.C. §§ 1334
and 157(b)(2)(G). We have jurisdiction under
28 U.S.C. § 158.
ISSUES
(1) Whether the bankruptcy court erred in granting the Stay Relief
Motion and ordering Mr. Martinez to make adequate protection payments.
(2) Whether the bankruptcy court erred in denying the
Reconsideration Motion.
STANDARD OF REVIEW
“A bankruptcy court’s determinations regarding stay relief are
reviewed for an abuse of discretion[.]” Veal v. Am. Home Mortg. Servicing,
Inc. (In re Veal),
450 B.R. 897, 915 (9th Cir. BAP 2011) (citing Kronemyer v.
Am. Contractors Indem. Co. (In re Kronemyer),
405 B.R. 915, 919 (9th Cir. BAP
2009)).
Similarly, we review for abuse of discretion a bankruptcy court’s
denial of a motion for reconsideration. 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).
To determine whether the bankruptcy court has abused its discretion,
we conduct a two-step inquiry: (1) we review de novo whether the
bankruptcy court “identified the correct legal rule to apply to the relief
requested” and (2) if it did, whether the bankruptcy court’s application of
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the legal standard was illogical, implausible, or without support in
inferences that may be drawn from the facts in the record. United States v.
Hinkson,
585 F.3d 1247, 1262-63 & n.21 (9th Cir. 2009) (en banc).
DISCUSSION
A. Mr. Martinez waived his argument that Wells Fargo was barred
from seeking adequate protection payments.
The bankruptcy court held that Mr. Martinez failed to raise his
argument concerning claim preclusion in connection with the Stay Relief
Motion, so he could not move for reconsideration on that basis. We agree.
Although the federal rules do not acknowledge a reconsideration
motion, “[a] ‘motion for reconsideration’ is treated as a motion to alter or
amend judgment under [Civil Rule] 59(e) if it is filed within [fourteen] days
of entry of judgment. Otherwise, it is treated as a [Civil] Rule 60(b) motion
for relief from a judgment or order.” See Am. Ironworks & Erectors, Inc. v. N.
Am. Constr. Corp.,
248 F.3d 892, 898-99 (9th Cir. 2001) (citation omitted).
The Ninth Circuit has instructed that a “[Civil] Rule 59(e) motion
may not be used to raise arguments or present evidence for the first time
when they could reasonably have been raised earlier in the litigation.” Kona
Enters., Inc. v. Estate of Bishop,
229 F.3d 877, 890 (9th Cir. 2000).
The bankruptcy court correctly noted that Mr. Martinez failed to raise
the argument that Wells Fargo is precluded from seeking stay relief either
in his opposition to the Stay Relief Motion or at the hearing on that motion.
10
In fact, at the hearing, Mr. Martinez and his counsel did not even object to
the APO. He presented the bankruptcy court with no reason why it should
reconsider its earlier ruling.
Additionally, Mr. Martinez merely repeats on appeal the arguments
raised in the Reconsideration Motion. He does not address the bankruptcy
court’s holding that his argument was untimely. He thus waived any
challenge to the court’s determination that he failed to timely raise this
argument. See Indep. Towers of Wash. v. Washington,
350 F.3d 925, 929 (9th
Cir. 2003) (“[W]e will not consider any claims that were not actually argued
in appellant’s opening brief. Rather, we ‘review only issues which are
argued specifically and distinctly in a party’s opening brief.” (citations
omitted)).
Furthermore, even if the bankruptcy court were required to consider
his arguments raised in connection with the Reconsideration Motion, they
are meritless. For the reasons stated below, the bankruptcy court did not
abuse its discretion in issuing the APO and requiring Mr. Martinez to cure
his failure to make postpetition maintenance payments.
B. Wells Fargo was not precluded from seeking adequate protection
payments postconfirmation.
Mr. Martinez argues that the bankruptcy court erred by granting the
Stay Relief Motion and requiring him to comply with the APO, because
Wells Fargo did not object to or appeal from the plan confirmation. His
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arguments are meritless.
As a general rule, “[w]hen the bankruptcy court confirms a plan, its
terms become binding on debtor and creditor alike. Confirmation has
preclusive effect, foreclosing relitigation of ‘any issue actually litigated by
the parties and any issue necessarily determined by the confirmation
order.’” Bullard v. Blue Hills Bank,
135 S. Ct. 1686, 1692 (2015) (citations
omitted). Put another way, we recently stated that “[a] plan is a contract
between the debtor and the debtor’s creditors. The order confirming a
chapter 13 plan, upon becoming final, represents a binding determination
of the rights and liabilities of the parties as specified by the plan.” Derham-
Burk v. Mrdutt (In re Mrdutt),
600 B.R. 72, 76-77 (9th Cir. BAP 2019) (citing
Max Recovery, Inc. v. Than (In re Than),
215 B.R. 430, 435 (9th Cir. BAP 1997);
8 Collier on Bankruptcy ¶ 1327.02 (Richard Levin & Henry J. Sommer eds.
16th ed. 2019)).
But the confirmation order does not preclude litigation about the
debtor’s post-confirmation defaults. The plan and confirmation order
determine what the debtor must do; they do not decide whether the debtor
has done those things. We have held that “[p]ost-confirmation defaults
would not be considered at the confirmation hearing and are therefore not
subject to res judicata flowing from the order.” Ellis v. Parr (In re Ellis),
60
B.R. 432, 434 (9th Cir. BAP 1985). We noted that “[f]ailure to make
post-confirmation payments can constitute cause for lifting the stay.”
Id. at
12
435.
Mr. Martinez’s basic argument is that Wells Fargo cannot seek to
force him to increase his payments, because the payment terms in the Plan
cannot be contested after confirmation. He contends that, after the
bankruptcy court confirmed the Plan, Wells Fargo had no “right to make
modifications through an insistence of an ‘adequate protection plan’ [sic].”
Mr. Martinez’s argument borders on frivolous. The bankruptcy court
did not require him to pay more than the Plan provided. The problem
arose because Mr. Martinez had paid less than the Plan required. The court
simply gave him a chance to catch up on his postpetition maintenance
payments.
As the bankruptcy court correctly explained, “[t]he Plan deals with
prepetition debts. The APO dealt with the Debtor’s postpetition failure to
pay ongoing monthly obligations.” Importantly, the Confirmation Order
provided that “[c]onfirmation of the Plan is without prejudice to the rights
of secured creditors with respect to post-petition defaults by the
debtor(s).” (Emphasis added.) In other words, the Plan required
Mr. Martinez to make his regular postpetition maintenance payments to
Wells Fargo, and Wells Fargo was entitled to seek a remedy when
Mr. Martinez breached his Plan. See Watson v. Ditech Fin. LLC (In re Watson),
BAP No. HI-17-1012-TaLB,
2017 WL 5196710, at *3 (9th Cir. BAP Nov. 9,
2017), aff’d, 754 F. App’x 599 (9th Cir. 2019) (rejecting the debtor’s argument
13
that stay relief was improper for his failure to make postconfirmation
payments “because [creditor] failed to object to his chapter 13 plan, which
was confirmed, final under § 1327, and thus res judicata as to all issues that
could have been raised”).
Therefore, Wells Fargo’s failure to object to plan confirmation did not
prevent it from seeking relief from stay or adequate protection when
Mr. Martinez defaulted under the Plan.
C. Mr. Martinez’s argument that Wells Fargo schemed to “create” his
default is meritless.
Mr. Martinez contends that the bankruptcy court should not have
ordered him to make adequate protection payments, because he was not in
default. We reject this argument.
Section 362(d)(1) permits the bankruptcy court to grant relief from
the automatic stay for cause, “including the lack of adequate protection.”
The decision whether to grant or deny relief from the automatic stay is
determined on a case-by-case basis and “is committed to the sound
discretion of the bankruptcy court.” Benedor Corp. v. Conejo Enters., Inc. (In
re Conejo Enters., Inc.),
96 F.3d 346, 351 (9th Cir. 1996).
We have previously instructed that “the bankruptcy court must have
discretion to fix any initial lump sum amount [of adequate protection
payments], the amount payable periodically, the frequency of payments,
and the beginning date, all as dictated by the circumstances of the case and
14
the sound exercise of that discretion.” Paccom Leasing Corp. v. Deico Elecs.,
Inc. (In re Deico Elecs., Inc.),
139 B.R. 945, 947 (9th Cir. BAP 1992). Section
361 “sets forth three non-exclusive examples of what may constitute
adequate protection: 1) periodic cash payments equivalent to decrease in
value, 2) an additional or replacement lien on other property, or 3) other
relief that provides the indubitable equivalent.” Pistole v. Mellor (In re
Mellor),
734 F.2d 1396, 1400 (9th Cir. 1984) (citation omitted).
Mr. Martinez argues that Wells Faro purposefully engineered his
default under the Second Lien. He contends that Wells Fargo failed to
properly apply payments to his account and “tampered with” his account
numbers to cause him to default on the Second Lien.
These arguments are patently untenable. First, Wells Fargo refunded
the allegedly misapplied funds for Mr. Martinez to use as payment toward
the Second Lien. It is unclear why Mr. Martinez is now unwilling to pay
amounts that he was earlier willing to pay.4
Second, there is no question that Mr. Martinez was in default on the
maintenance payments. Wells Fargo’s counsel represented to the court, and
Mr. Martinez did not deny, that Mr. Martinez had not made the September,
4
Mr. Martinez apparently tried to pay the Second Lien with the check that he
received from Wells Fargo for the misapplied funds, but he failed to properly endorse
it. The record is unclear as to the status of that payment.
15
October, or November 2018 maintenance payments.5 Additionally,
although Mr. Martinez asserts that he made the April through August 2018
maintenance payments (some of which were misapplied), he does not
account for the overdue payments between December 2017 and March
2018. There is no genuine dispute that he is in default.
Third, even if Wells Fargo “tampered” with his account number, this
allegedly occurred after the court issued the APO, and it did not cause the
default, as Mr. Martinez alleges. Furthermore, even if Wells Fargo changed
the account number associated with the Second Lien, making it difficult to
make payments at a branch, the APO provided that Mr. Martinez would
send his payments to a P.O. Box address and not make them at a branch.
Therefore, the bankruptcy court did not err when it rejected
Mr. Martinez’s arguments that Wells Fargo “created” a default.
CONCLUSION
The bankruptcy court did not err in granting the Stay Relief Motion,
issuing the APO, or denying the Reconsideration Motion. We AFFIRM.
5
There is some evidence in the record that Mr. Martinez at least attempted to
make the January 2019 payment, albeit at a branch location, rather than at the address
directed by the APO.
16
