In re Johnson

564 B.R. 653

IN RE Jeffrey Brian JOHNSON, Appellant.

No. 2:15–cv–00990–JAM

United States District Court, E.D. California.

Signed January 3, 2017

Filed January 4, 2017

Jeffrey Brian Johnson, Stockton, CA, pro se.

ORDER AFFIRMING BANKRUPTCY COURT'S JUDGMENT

JOHN A. MENDEZ, UNITED STATES DISTRICT JUDGE

This appeal arose from Jeffrey Brian Johnson's Chapter 7 bankruptcy. After the Chapter 7 Trustee filed a Report of No Distribution, the bankruptcy court discharged Johnson's debt ("Discharge Order"). Surprised by the Discharge Order, Johnson moved to set it aside. After the bankruptcy court denied his motion, Johnson filed an appeal with this Court.¹ ECF No. 1. Although his appeal is unopposed² the Court is required to and has considered this appeal on its merits.

I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

Johnson filed for bankruptcy on November 18, 2013. App., ECF No. 19–1, at 3–4. Three days later, Johnson received a Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors & Deadlines ("Deadline Notice"). Certificate of Mailing, located at Case No. 2:13–bk–34696, ECF No. 18. That document contained important dates, including the filing deadline to object to a debtor's discharge: February 10, 2014 ("Filing Deadline"). Deadline Notice, located at Case No. 2:13–bk–34696, ECF No. 8. About one month later, the Chapter 7 Trustee filed a Report of No Distribution, concluding that Johnson had "no funds available from the estate for distribution to creditors." App. at 7.

Because Johnson's estate had been fully administered, the only remaining issue before the bankruptcy court was whether it should discharge Johnson's debt. Meanwhile, Johnson moved to convert his bankruptcy from Chapter 7 to Chapter 13. App. at 13–15. The bankruptcy court denied Johnson's motion without prejudice on procedural grounds. See id. at 23–24. Then, on March 4, 2014, the bankruptcy court discharged Johnson's debt. Id. at 25–26. The next day, the bankruptcy court clerk entered Johnson's second motion to convert from Chapter 7 to Chapter 13. See id. at 27–28, 175.

Eight days later, Johnson moved to set aside the Discharge Order ("Motion to Set Aside Discharge"). App. at 44–45. The bankruptcy court denied Johnson's motion and dismissed Johnson's second conversion motion. See id. at 73–77. Johnson appealed to the United States District Court for the Eastern District of California. The district court vacated the bankruptcy court's order denying Johnson's motion and remanded the case so the bankruptcy court could determine (1) whether the bankruptcy court committed a clerical error under Fed. R. Civ. P. 60(a) when it discharged Johnson's debt, and (2) whether Johnson's medical treatment between February and March of 2014 constituted excusable neglect under Fed. R. Civ. P. 60(b)(1). See Johnson v. Edmonds, No. 2:14-cv-00889, 2015 WL 430697, at *3 (E.D. Cal. Feb. 2, 2015).

On remand, the bankruptcy court addressed these questions and again denied Johnson's Motion to Set Aside Discharge. See App. at 109–116. Johnson now appeals.

II. OPINION

A. Jurisdiction

District courts have appellate jurisdiction over a bankruptcy court's final judgments, orders, and decrees. See 28 U.S.C. § 158(a)(1). Bankruptcy court decisions denying motions to set aside a prior judgment are "final." See, e.g., Johnson, 2015 WL 430697 at *1 ; In re Federico, No. 2:08-cv-2182, 2009 WL 2905855, at *1 (E.D. Cal. Sept. 8, 2009). Because Johnson's appeal pertains to a final judgment, this Court has jurisdiction.

B. Standard of Review

When reviewing a bankruptcy court's decision, a district court functions as an appellate court and applies the standard of review generally applied in federal appellate courts. See In re Crystal Props., Ltd., L.P., 268 F.3d 743, 755 (9th Cir. 2001) (internal citations omitted). Appellate courts apply a "de novo review of legal conclusions and clear error review of factual findings" when reviewing discharge orders. See In re Bammer, 131 F.3d 788, 792 (9th Cir. 1997).

C. Legal Standard

1. Federal Rule of Civil Procedure 60(a)

A "court may correct a clerical mistake or a mistake arising from oversight or omission whenever one is found in a judgment, order, or other part of the record." Fed. R. Civ. P. 60(a). In other words, Rule 60(a)"empowers a [c]ourt to correct its own clerical mistakes." In re Burke, 95 B.R. 716, 718 n.1 (9th Cir. B.A.P. 1989). Bankruptcy Rule 9024 makes Rule 60(a) applicable to bankruptcy cases. See Fed. R. Bankr. P. 9024 ; In re Burke, 95 B.R. at 718.

2. Federal Rule of Civil Procedure 60(b)(1)

A "court may relieve a party or its legal representative from a final judgment, order, or proceeding for ... mistake, inadvertence, surprise, or excusable neglect." Fed. R. Civ. P. 60(b)(1). The United States Supreme Court established a four-factor test to assess whether missing a filing deadline constitutes excusable neglect. See Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd., 507 U.S. 380, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993). "[A]t bottom," the assessment is "an equitable one, taking account of all relevant circumstances surrounding the party's omission. These include ... the danger of prejudice to the debtor, the length of the delay and its potential impact on judicial proceedings, the reason for the delay, including whether it was within the reasonable control of the movant, and whether the movant acted in good faith." Id. at 395, 113 S.Ct. 1489 (internal citation omitted). The Supreme Court emphasized that "inadvertence, ignorance of the rules, or mistakes construing the rules do not usually constitute ‘excusable’ neglect." See id. at 392, 113 S.Ct. 1489.

Although Pioneer discussed excusable neglect under Bankruptcy Rule 9006(b), the Ninth Circuit has held that the Pioneer standard applies to Rule 60(b)(1). See Briones v. Riviera Hotel & Casino, 116 F.3d 379, 381 (9th Cir. 1997). In short, Pioneer sets an equitable framework from which courts should examine all circumstances involved rather than holding that any single circumstance compels a particular result despite other factors. See Briones, 116 F.3d at 382 n.2.

D. Analysis

Johnson makes two arguments to support his appeal. First, Johnson says that the bankruptcy court made a clerical mistake under Rule 60(a) when it discharged his debt. See Appellant Br., ECF No. 19, at 15. Second, Johnson argues that his late filing constituted excusable neglect under Rule 60(b)(1). See id. at 17. Johnson asks this Court to (1) vacate the bankruptcy court's decision to deny his Motion to Set Aside Discharge and (2) to vacate the Discharge Order. See id. at 23.

1. Rule 60(a)

Johnson argues that the bankruptcy court made a clerical mistake when it entered his second conversion motion the day after the court discharged his debt. Appellant Br. at 15. He maintains that had the bankruptcy court entered his second conversion motion a day earlier, the court would not have discharged his debt. See id.

The bankruptcy court did not make a clerical mistake when it discharged Johnson's debt. Bankruptcy Rule 4004(c)(1) prescribes the conditions for triggering a Chapter 7 discharge: "In a chapter 7 case, on expiration of the times fixed for objecting to discharge and for filing a motion to dismiss the case under Rule 1017(e), the court shall forthwith grant the discharge." Fed. R. Bankr. P. 4004(c)(1) (emphasis added).

But, like with most general rules, there are several exceptions. A bankruptcy court "shall not grant" a Chapter 7 discharge when, for instance, the debtor is not an individual; when someone files a complaint or motion under § 727(a)(8) or (a)(9); when the debtor files a waiver under § 727(a)(10); when a motion to dismiss the case under § 707 is pending; when a motion to extend the time to object to a discharge or to dismiss the case is pending; when the debtor has not filed a statement showing that he completed a personal financial management course; or when a motion to delay or postpone discharge under § 727(a)(12) is pending. See Fed. R. Bankr. P. 4004(c)(1)(A)-(F), (H)-(I).³

Here, all requisite conditions for entering a discharge were satisfied, and no exception applies. Johnson is an individual. He did not file a complaint or motion objecting to a discharge. He did not file a waiver. There were no pending motions to dismiss or to extend time to object to or delay discharge. And Johnson filed a certificate showing he completed a personal financial management course. See Financial Management Course Certificate, located at Case No. 2:13–bk–34696, ECF No. 60.

This case differs from Burke, where the Ninth Circuit B.A.P. found a clerical mistake under Rule 60(a). Id. at 718. In Burke, the bankruptcy court clerk initially scheduled the wrong date for the creditors' meeting, but then issued another order rescheduling the meeting for the proper date, explaining that the first order was incorrect "[d]ue to inadvertence and clerical error." Id. at 716–17. No such scheduling error ocurred here. Johnson could have objected to a discharge, but he did not. Instead, he moved to convert his case from Chapter 7 to Chapter 13. See App. at 13–15. A pending motion to convert is not an enumerated exception under Bankruptcy Rule 4004(c)(1). See generally Fed. R. Bankr. P. 4004(c)(1)(A)-(L). So, once the Filing Deadline expired, the bankruptcy court properly discharged Johnson's debt because no enumerated exception applied.

Johnson also maintains that the bankruptcy court "confuses the law to the facts" because it cited irrelevant bankruptcy rules like Rule 4004(c)(1). See Appellant Br. at 16. But it is Johnson who is confused. Bankruptcy Rule 4004(c)(1), and any other statute or rule it cites, provides the relevant context upon which to analyze whether entering the discharge was a clerical mistake under Rule 60(a). In other words, the bankruptcy court included these rules in its Order to explain how a Chapter 7 discharge occurs, and then applied that procedural framework to Johnson's case to show why entering the discharge was not...