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In Re: Joseph Anthony Ortola v. Deyanira Ortola; Rod


December 16, 2011


Appeal from the United States Bankruptcy Court for the Central District of California Honorable Meredith A. Jury, Bankruptcy Judge, Presiding Bk. No. 10-34218-MJ

FILED DEC 16 2011




Argued and Submitted on November 17, 2011 at Pasadena, California

Before: KIRSCHER, PAPPAS, and HOLLOWELL, Bankruptcy Judges.

1 Appellant, chapter 13*fn2 debtor Dr. Joseph Ortola ("Ortola"), 2 appeals a bankruptcy court order granting a motion for relief 3 from the automatic stay pursuant to § 362(c)(3)(A) ("Stay Relief 4 Order") filed by Ortola's former spouse, appellee Deyanira Ortola 5 ("Deyanira"). We AFFIRM. However, the order contains an error, 6 which counsel for Deyanira acknowledged at oral argument. The 7 order suggests that the stay in Ortola's second chapter 13 case 8 expired on July 30, 2010 - the date he filed the petition. This 9 is incorrect. The stay did not expire until 30 days after the 10 filing date - August 29, 2010.


12 Ortola filed his first chapter 13 bankruptcy case on May 19, 13 2010. The chapter 13 trustee moved to dismiss for Ortola's 14 failure to provide a copy of his 2009 tax return as required 15 under § 521(e)(2)(A)(I).*fn3 At a June 30, 2010 hearing on the 16 matter, Ortola's counsel stated that he had advised Ortola to 17 provide the tax return to the trustee prior to the § 341 18 creditor's meeting, and he was unsure why Ortola had not 1 complied. The court denied Ortola's request for a 10-day 2 extension and dismissed the case without prejudice. An order 3 dismissing Ortola's first bankruptcy case was entered on July 6, 4 2010.

5 Ortola filed his second chapter 13 bankruptcy case on 6 July 30, 2010. On October 12, 2010, Deyanira moved to confirm 7 termination of the automatic stay under § 362(c)(3) or, 8 alternatively, that no stay was in effect under § 9 362(c)(4)(A)(ii)("Stay Relief Motion"). Deyanira sought stay 10 relief to proceed in state court with pending dissolution 11 proceedings commenced in 2001. According to Deyanira's moving 12 papers, Ortola had filed for divorce in 2001. The case was 13 bifurcated as to marital status and division of property in 2003, 14 and judgment for termination of the marriage was entered at that 15 time. Deyanira contended the stay should be terminated to allow 16 the state court to determine her interest in their community 17 property. She further contended the automatic stay terminated as 18 to Ortola and his estate 30 days after he filed his second 19 chapter 13 case because his first case had been dismissed on 20 July 6, 2010.

21 Ortola opposed the motion, contending that Deyanira was not 22 entitled to relief because she had failed to show why his prior 23 bankruptcy case had been dismissed. Ortola further contended 24 that Deyanira had not shown "cause" for a determination of her 25 interests in what was undividable community property - the 26 building in which Ortola operated his dental practice. In his 27 supporting declaration, Ortola stated that he had dismissed his 28 first chapter 13 case because he did not yet have all the 1 required documents.

2 In her reply, Deyanira explained that Ortola had failed to 3 comply with prior state court orders ordering the sale of their 4 community property, which were issued to satisfy Ortola's 5 domestic support obligations. According to Deyanira, the state 6 court was prepared to issue a ruling granting her exclusive right 7 to sell certain real properties at a July 23, 2010 hearing in the 8 dissolution proceeding, but the matter was continued to September 9 10, 2010. She asserted that Ortola filed his second chapter 13 10 case on July 30 to circumvent entry of the state court orders.

11 Deyanira asked the bankruptcy court to take judicial notice of 12 her recently-filed adversary proceeding against Ortola that 13 sought to have these and other debts declared non-dischargeable.*fn4

14 At a hearing on December 1, 2010, the bankruptcy court 15 denied the Stay Relief Motion without prejudice. Without 16 controlling Ninth Circuit authority on the matter, the court 17 reasoned that under In re Jumpp, a case from the First Circuit 18 BAP, the automatic stay under § 362(c)(3)(A) terminated only as 19 to the debtor and debtor's property, not property of the estate.

20 The court concluded that the issues Deyanira raised in her 21 motion, which were the same issues raised in her adversary 22 complaint, would be better addressed by the bankruptcy court. 23 The court further noted that any orders entered by the state 24 court after July 30, 2010, violated the automatic stay and were 25 void. No order was ever entered on the Stay Relief Motion.

1 Deyanira subsequently filed a motion seeking to dismiss 2 Ortola's second bankruptcy case for exceeding debt limitations 3 under § 109(e). A hearing on that matter was held on 4 February 28, 2011. After discussing the pending matters in the 5 dissolution proceeding, the bankruptcy court inquired:

COURT: Did you get the stay continued in this case . .. Mr. Chien?

MR. CHIEN: There's no -- this was addressed at the 9 previous hearing, your Honor. There is an automatic stay with respect to the court.

COURT: No there isn't. The recent Resnick [sic] case, 11 BAP case, which I will follow, said there is no automatic stay as to the estate, or the debtor in the second case, 12 unless it has been extended within 30 days of the filing.

So there is no automatic stay, which means that the state 13 court probably didn't violate anything when it had a hearing on September the 10th.

COUNSEL FOR DEYANIRA: I filed a motion to carve out 16 relief from stay. Your Honor ruled that there was a stay in place at that time.

COURT: Yeah. That was before the Resnick [sic] case came 18 down. I've had to change my precedent.

20 COURT: [I]f there's an order out there by which I deny the request for relief from automatic stay, I would sua 21 sponte, based on the now new, precedential law -- or I recognize it as precedent anyway from the BAP, I would 22 sign an amended order that would make it clear to the family court they could proceed. I think -- I mean, I 23 think the law compels me to do that. So, somebody can send me an order on that.

25 Hr'g Tr. (Feb. 28, 2011) 15:10-11, 15:25-16:10, 18:14-19, 26 25:15-22.

27 On March 16, 2011, the bankruptcy court entered the Stay 28 Relief Order under § 362(c)(3)(A), effectively reversing its December 1, 2010 ruling denying the Stay Relief Motion.

According to the Stay Relief Order, any actions or orders issued by the state court after July 30, 2010, were determined not void or a violation of the automatic stay.

Ortola, appearing pro se, moved to reconsider the Stay Relief Order on March 28, 2011, thus tolling the appeal time. See Rule 8002(b). Deyanira opposed the motion. On April 20, 2011, Ortola filed a proposed motion to continue the stay under § 362(c)(3)(B). The bankruptcy court denied both motions at a hearing on April 25, 2011. The court reasoned that even if it had not raised its own motion to reconsider its ruling denying the Stay Relief Motion, it would have granted such a motion had anyone filed one after Reswick.

Although no order had yet been entered on the motion to reconsider, Ortola filed his notice of appeal on May 6, 2011, seeking to appeal the Stay Relief Order and the "order" denying his motion to reconsider. Subsequently, on June 2, 2011, the bankruptcy court entered an order denying the motion to reconsider, thus curing Ortola's ineffective appeal of the Stay Relief Order. See Rule 8002(b).


The bankruptcy court had jurisdiction under 28 U.S.C. §§ 157(b)(2)(G) and 1334. We have jurisdiction under 28 U.S.C. § 158.*fn5


2 1. Did the bankruptcy court abuse its discretion when it 3 reversed its prior ruling and granted the Stay Relief Motion 4 under § 362(c)(3)(A)?

5 2. Did the bankruptcy court abuse its discretion in denying the 6 motion to reconsider?


8 We review the bankruptcy court's findings of fact for clear 9 error and its conclusions of law de novo. Hoopai v. Countrywide 10 Home Loans, Inc. (In re Hoopai), 369 B.R. 506, 509 (9th Cir. BAP 11 2007).

12 We review a bankruptcy court's order granting relief from 13 the automatic stay for an abuse of discretion. Arneson v. 14 Farmers Ins. Exch. (In re Arneson), 282 B.R. 883, 887 (9th Cir. 15 BAP 2002). Denial of a motion to amend or alter judgment under 16 FRCP 59(e) or for relief from judgment under FRCP 60(b) is also 17 reviewed for an abuse of discretion. Dixon v. Wallowa Cty., 18 336 F.3d 1013, 1022 (9th Cir. 2003). To determine whether the 19 bankruptcy court abused its discretion, we conduct a two-step 20 inquiry: (1) we review de novo whether the bankruptcy court 21 "identified the correct legal rule to apply to the relief 22 requested" and (2) if it did, whether the bankruptcy court's 23 application of the legal standard was illogical, implausible or 24 "without support in inferences that may be drawn from the facts 25 in the record." United States v. Hinkson, 585 F.3d 1247, 1261-62 1 (9th Cir. 2009)(en banc).


3 A. The bankruptcy court did not abuse its discretion in granting the Stay Relief Motion under § 362(c)(3)(A).

5 Ortola first contends that § 362(c)(3)(A) is inapplicable 6 because Deyanira failed to carry her burden to prove why his 7 first chapter 13 case was dismissed - i.e., that he filed it in 8 "bad faith." Contrary to Ortola's belief, no such requirement 9 for moving parties exists under § 362(c)(3)(A). The only time a 10 "good faith/bad faith" determination comes into play is when a 11 party in interest timely moves for a continuation of the 12 automatic stay in compliance with § 362(c)(3)(B), and these 13 statutes apply to the second case filed, not the first. No such 14 motion occurred here. Even if it had, Ortola's second chapter 13 15 case was presumptively filed in bad faith because, by his own 16 admission and his attorney's statement, Ortola's first case was 17 dismissed for his failure to timely provide the trustee with a 18 copy of his 2009 tax return. See § 362(c)(3)(C)(i)(II)(aa).*fn6

19 Despite Ortola's argument to the contrary, § 362(c)(3)(A) 20 applies because he filed a second bankruptcy case within less 21 than one year from when his first bankruptcy case had been 22 dismissed for failing to comply with § 521(e)(2)(A)(I), and no 23 order had been timely entered to continue the stay under § 24 362(c)(3)(B). Section 362(c)(3)(A) provides:

(3) if a single or joint case is filed by or against debtor who is an individual in a case under chapter 7, 2 11, or 13, and if a single or joint case of the debtor was pending within the preceding 1-year period but was 3 dismissed, other than a case refiled under a chapter other than chapter 7 after dismissal under section 4 707(b) - 5 (A) the stay under subsection (a) with respect to any action taken with respect to a debt or property 6 securing such debt or with respect to any lease shall terminate with respect to the debtor on the 30th day 7 after the filing of the later case . . . ." (emphasis added).

Since this provision was added to the Bankruptcy Code as 10 part of the Bankruptcy Abuse Prevention and Consumer Protection 11 Act of 2005 ("BAPCPA"), courts have been divided on whether the 12 phrase "with respect to the debtor" means that on the 30th day 13 after the petition date the automatic stay terminates only with 14 respect to the debtor and the debtor's property, or whether that 15 also includes property of the estate. The parties agreed that 16 the subject community property was property of the estate.

17 In its initial decision to deny Deyanira's motion for relief 18 from stay on December 1, 2010, the bankruptcy court, 19 acknowledging the lack of any Ninth Circuit precedent on this 20 issue, relied upon Jumpp v. Chase Home Finance, LLC (In re 21 Jumpp), 356 B.R. 789 (1st Cir. BAP 2006), which adopted the 22 majority view that the stay terminates only with the respect to 23 the debtor and the debtor's property. On February 4, 2011, the 24 Panel issued Reswick v. Reswick (In re Reswick), 446 B.R. 362, 25 373 (9th Cir. BAP 2011),*fn7 which adopted the minority view, 1 holding that § 362(c)(3)(A) terminates the automatic stay in its 2 entirety - including property of the estate - on the 30th day 3 after the petition date.

4 On February 28, 2011, at the hearing on Deyanira's § 109(e) 5 motion, the issue regarding the stay was raised. The bankruptcy 6 court recognized the BAP's decision in In re Reswick and decided 7 to reverse its prior ruling denying the Stay Relief Motion and 8 grant it under § 362(c)(3)(A). Ortola contends the court erred 9 in applying In re Reswick retroactively because it unfairly, and 10 without notice, denied him the right to pursue continuing the 11 stay under § 362(c)(3)(B). For the reasons stated below, we 12 disagree.

13 As courts of equity, bankruptcy courts have broad discretion 14 under FRCP 59(e) and 60(b), made applicable here by Rules 9023 15 and 9024, to sua sponte reconsider, vacate, or modify past orders 16 so long as no intervening rights have become vested in reliance 17 on the order. Meyer v. Lenox (In re Lenox), 902 F.2d 737, 739-40 18 (9th Cir. 1990). No party's intervening rights became vested in 19 relying on the bankruptcy court's initial decision to deny the 20 Stay Relief Motion because the decision was not a final order.

21 FRCP 59(e) refers to "judgments." "Judgment" is defined in FRCP 22 54(a) as "a decree and any order from which an appeal lies." In 23 other words - a judgment is a "final" order. FRCP 60(b) also 24 refers to relief from "final" orders. All that exists in this 25 case is the docket entry which states: "Hearing Held - [Stay 1 Relief Motion] denied without prejudice." Even under local rule, 2 this mere docket entry does not constitute entry of a judgment or 3 final order.*fn8

4 Accordingly, the bankruptcy court's ruling denying the Stay 5 Relief Motion never became a final order. As such, the court had 6 inherent power to modify, alter, or vacate it. United States v. 7 Martin, 226 F.3d 1042, 1048-49 (9th Cir. 2000)(authority of 8 district courts to reconsider their own orders before they become 9 final absent some contrary rule or statute allows them to correct 10 decisions based on shifting precedent). The bankruptcy court was 11 free to recognize the holding of In re Reswick and reverse its 12 prior ruling denying the Stay Relief Motion.

13 We reject Ortola's argument that the court's application of 14 In re Reswick unfairly denied him the right to pursue continuing 15 the stay under § 362(c)(3)(B). Any motion under § 362(c)(3)(B) 16 must have been filed, heard, and ruled upon before expiration of 17 the 30-day period. In this case, that date was August 29, 2010.

18 Ortola's proposed motion to continue the stay, filed on April 20, 19 2011, was grossly untimely. Even if Ortola had timely sought to 20 continue the stay under § 362(c)(3)(B) and it was granted, the 21 bankruptcy court made it clear at the hearing on Ortola's motion 22 to reconsider that it would have lifted the stay if a motion had been filed after In re Reswick. Thus, the result is the same - 2 no stay exists as to the subject property.*fn9

B. Ortola waived his appeal of the reconsideration order.

Even though in his notice of appeal Ortola appealed the 5 order denying his motion to reconsider, he failed to provide any 6 argument on the issue in his brief. An appellate court in this 7 circuit "will not review issues which are not argued specifically 8 and distinctly in a party's opening brief." City of Emeryville 9 v. Robinson, 621 F.3d 1251, 1261 (9th Cir. 2010). Even if we did 10 review the matter, we see no abuse of discretion by the 11 bankruptcy court in denying it.


13 We conclude that the bankruptcy court did not abuse its 14 discretion in reversing its prior ruling denying the Stay Relief 15 Motion and granting it under § 362(c)(3)(A). Accordingly, we 16 AFFIRM, but we REMAND for a corrected order reflecting the stay 17 termination date of August 29, 2010.

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