Opinion
NOT FOR PUBLICATION
Argued and Submitted at Seattle, Washington: September 13, 2006
Appeal from the United States Bankruptcy Court for the Western District of Washington. Honorable Paul B. Snyder, Bankruptcy Judge, Presiding. Bk. No. 05-40784.
Before: KLEIN, DUNN and McMANUS, [ Bankruptcy Judges.
Hon. Michael S. McManus, Chief Bankruptcy Judge for the Eastern District of California, sitting by designation.
MEMORANDUM
The debtor appeals from an order denying his motion to reconsider an order denying a motion for relief from stay. Although aspects of the underlying situation present the image of ships passing in the night, the court correctly denied the motion for reconsideration. Accordingly, we AFFIRM.
FACTS
On January 28, 2005, the debtor, Franklin Mixon, filed a chapter 13 bankruptcy case. On February 18, the debtor filed his chapter 13 plan. In April, the chapter 13 trustee filed a motion to dismiss the debtor's case for failure to make timely plan payments. On May 31, the debtor's case was dismissed.
All relevant dates are in 2005.
The debtor filed his chapter 13 plan on February 18. The same day the plan was filed, the trustee sent a directive to the debtor's home address to pay $1, 450 on the tenth day of each month starting on March 10. At the 11 U.S.C. § 341 meeting of creditors held on March 3, the debtor testified that he would be making full payment of $1, 450 on March 10. The debtor did not make the March or April plan payments. When the trustee filed its motion to dismiss on April 19, the trustee had received no plan payments from the debtor and the plan was delinquent $2, 900.
As of the date of dismissal, the debtor had made one plan payment of $1, 464 that was received by the trustee on May 10, leaving a delinquency of $2, 886.
At a foreclosure sale on June 3, appellee Twin Assets, LLC, purchased the debtor's residential real property located at 1410 South 23rd Street, Tacoma, Washington. Despite the sale, the debtor remained in possession of the property. Twin Assets filed, on June 25, a complaint for unlawful detainer and monies due with the Pierce County Washington Superior Court.
In the interval between the foreclosure sale and the filing of Twin Assets' unlawful detainer action, the debtor filed, on June 7, a motion to vacate the dismissal and to reinstate his chapter 13 case. On June 30, the court entered an order vacating the dismissal and reinstating the debtor's case.
After the dismissal was vacated, the debtor brought his plan payments current.
Unaware that the debtor's bankruptcy case had been reinstated on June 30, Twin Assets obtained a Writ of Restitution on July 12, and was set to have the Pierce County Sheriff evict the debtor from the property. The eviction was forestalled when the debtor informed Twin Assets that his chapter 13 case had been reinstated and that the automatic stay was in effect.
On July 28, Twin Assets filed a motion for relief from the automatic stay to enable it to evict the debtor from the property it purchased at the foreclosure sale.
The debtor opposed Twin Assets' motion and a hearing was held. At the hearing, the debtor argued that the foreclosure sale was void because he did not receive notice of the chapter 13 trustee's motion to dismiss (and was unaware his case had been dismissed), and because he had been making his plan payments to protect the subject property. The court informed the debtor that the sale that took place after his case had been dismissed, but before his case was reinstated, was valid and that any challenge to the foreclosure sale should be brought in state court. The court then took the motion for relief from stay under submission.
On August 29, the court entered an order denying the motion for relief from stay. The court found that the debtor and his attorney were properly served with notice of the trustee's motion to dismiss and the dismissal order and that no evidence in the record was sufficient to rebut the presumption of proper service. Without addressing the question of the applicability of the automatic stay to protect the debtor's possessory interest, the court denied Twin Assets' motion for relief from stay, ruling that the vacation of the dismissal on June 30, did not retroactively reinstate the stay so as to invalidate the foreclosure sale.
On September 14, the debtor filed a motion for reconsideration.
On September 30, the court denied the motion for reconsideration on the basis that the debtor did not file it within the ten-day time limit for filing reconsideration motions under the local rules of the district court.
The debtor appealed from the order denying the motion for reconsideration.
JURISDICTION
The bankruptcy court had jurisdiction via 28 U.S.C. § 1334. We have jurisdiction under 28 U.S.C. § 158(a)(1).
ISSUE
Whether the court abused its discretion when it denied the debtor's motion to reconsider an order denying a motion for relief from stay.
STANDARD OF REVIEW
The court's denial of a motion for reconsideration is reviewed for an abuse of discretion. Smith v. Pac. Props. & Dev. Corp., 358 F.3d 1097, 1100 (9th Cir. 2004).
DISCUSSION
This appeal focuses on a denial of a motion for reconsideration in which the debtor contended that the reinstatement of the bankruptcy case retroactively invalidated the foreclosure sale. The court's stated procedural reason for denying the motion as untimely was error. Nevertheless, since the court was correct in its original ruling that the foreclosure sale was not invalidated by the revival of the bankruptcy, the procedural error was harmless.
I
The bankruptcy court denied the debtor's motion because he did not file it within the ten-day rule prescribed by a local rule of the district court regarding a " motion for reconsideration." This local rule presents a problem of construction.
United States District Court, Western District of Washington, Civil Rule 7(h)(2) provides:
Despite the common generic usage of " reconsideration" to connote a request to have a court revisit a ruling, the term " motion for reconsideration" is not mentioned in the Federal Rules of Civil Procedure. It is used in the Federal Rules of Bankruptcy Procedure only in reference to the statutory provision of 11 U.S.C. § 502(j) that permits a ruling on a claim to be " reconsidered" at any time.
The jurisprudence of " reconsideration" motions, however, is straightforward. When a " motion for reconsideration" of a judgment that does not invoke a specific rule of procedure is presented, its construction depends upon whether it is made within or after ten days of the entry of the order to be reconsidered. If filed within ten days, it is deemed to be a motion under either Civil Rule 52(b) or 59(e). If filed after ten days of such entry, then it is deemed to be a motion for relief from judgment under Rule 60. Am. Ironworks & Erectors, Inc. v. N. Am. Constr. Corp., 248 F.3d 892, 898-99 (9th Cir. 2001); Captain Blythers, Inc. v. Thompson (In re Captain Blythers, Inc.), 311 B.R. 530, 539 (9th Cir. BAP 2004), aff'd mem., 182 Fed.Appx. 708, 2006 WL 1478849 (9th Cir. 2006). It is in this context that one must assess the district court's local rule requiring " motions for reconsideration" to be made within ten days.
It is apodictic that a local rule must be consistent with the Federal Rules of Civil Procedure. Fed.R.Civ.P. 83(a). Because Rule 60(b) motions must be brought within a " reasonable time" and, in the case of three of the six subcategories for relief permitted by Rule 60(b), within one year, it follows that the district court's local rule, with its ten-day limitation, cannot be applicable to Rule 60(b) motions.
A
The debtor's motion for reconsideration was filed within sixteen days of entry of the August 29 order denying the motion for relief from stay. As a general rule, a motion brought within ten days of entry of an order is treated as a motion for reconsideration governed by Federal Rule of Civil Procedure 52 and/or 59. Am. Ironworks & Erectors, Inc., 248 F.3d at 898-99; Captain Blythers, 311 B.R. at 539. A motion filed after the ten-day period of entry of an order is construed as a motion for relief from judgment governed by Federal Rule of Civil Procedure 60(b). Id.
Even though a court has wide discretion in deciding whether to reconsider its own orders, the court in this instance should have entertained the debtor's motion at least as one brought timely under Rule 60(b).
B
The preceding analysis assumes that the order in question would have triggered the running of the ten-day timer of Rules 52(b) and 59(e) in the first instance. Here, however, a review of the record indicates that the ten-day timer did not start because the court's order on the motion for relief from stay violated the separate order doctrine of Federal Rule of Bankruptcy Procedure 9021 and Federal Rule of Civil Procedure 58(a)(1). Garland v. Maloney (In re Garland), 295 B.R. 347, 350 (9th Cir. BAP 2003).
" Every judgment entered in an adversary proceeding or contested matter shall be set forth in a separate document." Fed.R.Bankr.P. 9021. A motion for relief from stay is a contested matter. Fed.R.Bankr.P. 4001(a). Thus, the order resolving the motion for relief from stay in this case should have been a separate document that included no findings of fact and conclusions of law. Garland, 295 B.R. at 350.
The court's August 29 order did not comply with the separate document requirement of Rules 58 and 9021. The two-page order states the procedural history of the case, and includes findings of fact and conclusions of law. It ends with a statement that the motion for relief from stay is denied because " the stay was not reinstated retroactive upon vacation of the dismissal."
Because the order is not in the form of a " separate judgment", nor was a separate document later filed, it did not become final until 150 days after it was entered on the docket. Fed.R.Civ.P. 58(b); Garland, 295 B.R. at 351.
Therefore, the debtor's motion for reconsideration was timely filed even within a ten-day regime, and should have been considered by the court.
The procedural error inherent in denying the motion as untimely, however, turns out to have been harmless.
II
We may affirm the order denying the motion for reconsideration for any reason supported by the record. 28 U.S.C. § 2111; Fed.R.Bankr.P. 9005, incorporating Fed.R.Civ.P. 61; Dittman v. California, 191 F.3d 1020, 1027 n. 3 (9th Cir. 1999); Donald v. Curry (In re Donald), 328 B.R. 192, 204 (9th Cir. BAP 2005). The premise of the motion for reconsideration was that the foreclosure sale was voided by the subsequent revival of the bankruptcy case.
The court's underlying order held that the automatic stay did not reinstate retroactively upon vacation of the dismissal. The court found that the foreclosure sale was not void ab initio as a violation of the stay, and any challenge to the sale itself is a matter of state law to be brought in state court. We agree.
While the bankruptcy court arguably had jurisdiction to rule on the validity of the foreclosure, it also had discretion to abstain from hearing such matter under 28 U.S.C. § 1334(c)(1). Directing the parties to resolve any dispute regarding foreclosure validity in state court is tantamount to discretionary abstention. The court did not abuse its discretion in that respect.
The debtor perceives a denial of due process inherent in the conduct of a foreclosure sale within three days after the court ordered that the bankruptcy case be dismissed. He believes that the order was not effective for a period of ten days. The debtor's understanding, however, is mistaken. It is settled that an order dismissing a case is immediately enforceable. Weston v. Cibula (In re Weston), 101 B.R. 202, 204-05 (Bankr. E.D. Cal. 1989), aff'd mem., 123 B.R. 466 (9th Cir. BAP 1991), aff'd mem., 967 F.2d 596 (9th Cir. 1992), cert. denied, 506 U.S. 1051, 113 S.Ct. 973, 122 L.Ed.2d 128 (1993). Specifically, the 10-day stay prescribed by Federal Rule of Civil Procedure 62(a) and incorporated for use in adversary proceedings by Federal Rule of Bankruptcy Procedure 7062 does not apply to " contested matters, " which include motions to dismiss a case, that are governed by Federal Rule of Bankruptcy Procedure 9014. Id. Hence, the dismissal order was immediately effective, and there was no reason based on bankruptcy law why a foreclosure (so long as it complied with governing state law) could not be conducted the next day.
The record also supports the court's finding that the debtor and his attorney were properly served with notice of the trustee's motion to dismiss the debtor's chapter 13 case and the subsequent dismissal order. Thus, appellant's due process challenge is factually unsupported.
CONCLUSION
The bankruptcy court did not err when it held that the stay did not reinstate retroactively to invalidate the foreclosure sale that took place between the dismissal and subsequent reinstatement of the debtor's chapter 13 case.
At the hearing, the court informed Twin Assets' counsel that a relief from stay motion to evict the debtor from the property was not necessary because the debtor was no longer the legal owner of the property. In other words, because the foreclosure sale was valid, the debtor's interest in the property was terminated and he had no interest to be protected by the stay. This is not an accurate statement of law.
Thus, the court did not abuse its discretion when it denied the debtor's motion for reconsideration. AFFIRMED.
A motion for reconsideration shall be plainly labeled as such. The motion shall be filed within ten judicial days following the order to which it relates. . . . Failure to comply with this subsection may be grounds for denial of the motion.
To the contrary, because the debtor was still in possession of the property when his chapter 13 case was reinstated and when the Writ of Restitution was issued, the debtor had a possessory interest in the property. Such possessory interest is an equitable interest in property that is protected by the automatic stay. Williams v. Levi (In re Williams), 323 B.R. 691, 699 (9th Cir. BAP 2005); In re Butler, 271 B.R. 867, 876-77 (Bankr. C.D. Cal. 2002). Thus, the motion by Twin Assets seeking relief from the stay to evict the debtor was, in fact, necessary. The issue has not been raised by the parties in this appeal and, accordingly has been waived. Sallie Mae Servicing Corp. v. Ransom (In re Ransom), 336 B.R. 790, 793 n. 2 (9th Cir. BAP 2005). Any dysfunction that may have ensued as a result of the denial of stay relief on the incorrect theory that it was not necessary may yet be remedied because the court has power to annul the automatic stay retroactively. 40235 Wash. St. Corp. v. Lusardi, 329 F.3d 1076, 1080 n. 2 (9th Cir.), cert. denied, 540 U.S. 983, 124 S.Ct. 469, 157 L.Ed.2d 374 (2003).