2:08-ap-01568•Beristain v. D'alfonso et al
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1T FOR PUBLICAT
#
1). pep
VER 10 ol] [UNKTED STATES BANKRUPTCY COUREZcz;
3 CENTRAL BcTRe oe ay oop
- ‘SUS, BANRRUP ECT COURT CENTRAL DISTRICT OF CALIFO Deputy bie
4 Get sa oF CAL eM
LOS ANGELES DIVISION
5
In re: ) Case No. 2:05-bk-17843-PC
6 )
ARNALDO D’ALFANSO and ) Chapter 7
7 | LIBUSA D’ALFANSO, )
) Adversary No. 2:08-ap-01568-PC
8 Debtors. )
)
9 } MEMORANDUM DECISION RE:
LUISA BERISTAIN, ) MOTION TO ALTER JUDGMENT
10 ) OR IN THE ALTERNATIVE, FOR
Plaintiff, ) A MOTION TRIAL (9023 MOTION)
1] )
v. ) Date: March 29, 2011
12 ) Time: 9:30 a.m.
ARNALDO D’ALFANSO and ) Place: United States Bankruptcy Court
13 | LIBUSA D’ALFANSO, ) Courtroom # 1539
) 255 East Temple Street
14 Defendants. ) Los Angeles, CA 90012
)
15
16 Before the court is the motion of Plaintiff, Luisa Beristain to alter the Judgment entered in
17 | the above referenced adversary proceeding on February 18, 2011 (“Judgment”) or, in the
18 | alternative for a new trial (“Motion”). Having considered the grounds for reconsideration stated
19 | in Plaintiff's Motion in light of the court’s findings of fact and conclusions of law stated orally
20 | and recorded in open court at the trial of the adversary proceeding on February 18, 2011, which
21 | form the basis for the Judgment, the court dispenses with oral argument and denies the relief
22 | requested in the Motion based upon the following findings of fact and conclusions of law! made
23 | pursuant to F.R.Civ.P. 52(a)(1),’ as incorporated into FRBP 7052, and applied to contested
24
¥ To the extent that any finding of fact is construed to be a conclusion of law, it is hereby
adopted as such. To the extent that any conclusion of law is construed to be a finding of fact, it 1s
26 | hereby adopted as such.
25
27 | ¥ Unless otherwise indicated, all “Code,” “chapter” and “section” references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1330 after its amendment by the Bankruptcy Abuse
OS
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matters by FRBP 9014(c).
I, STATEMENT OF FACTS
On April 12, 2005, Arnaldo D’ Alfanso and Libusa D’ Alfanso (“Defendants”) filed their
voluntary petition for relief under chapter 7 of the Bankruptcy Code. The deadline to object to
the Defendants’ discharge or to the non-dischargeability of a particular debt expired without a
complaint being filed. Defendants received a discharge on January 6, 2006. The trustee filed a
report of no assets on April 14, 2006, and the case was closed on April 21, 2006.
On January 31, 2008, Defendants filed a motion to reopen their bankruptcy case for the
sole purpose of amending Schedule F to add certain creditors holding unsecured non-priority
claims on the petition date. The case was reopened on April 4, 2008, and Defendants filed an
amended Schedule F listing Plaintiff as the holder of an unliquidated unsecured non-priority
claim in the amount of $0.00.’
On June 30, 2008, Plaintiff filed her complaint in this adversary proceeding alleging fraud
in conjunction with her purchase of certain real property from the Defendants in 2003 and
seeking a determination that her claim for damages in an undetermined amount attributable to
Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, 119 Stat. 23 (2005). “Rule”
references are to the Federal Rules of Bankruptcy Procedure (“FRBP”), which make applicable
certain Federal Rules of Civil Procedure (“F.R.Civ.P.”).
¥ There was no need to reopen the case. In In re Beezley, 994 F.2d 1433 (9" Cir. 1993), the
Ninth Circuit held that bankruptcy court’s denial of a debtor’s motion to reopen a no-asset 7 case
to add an omitted creditor was not an abuse of discretion. In a no-asset chapter 7 case in which
no claims bar date is ever set, all prepetition debts are discharged, whether scheduled or
unscheduled. Because no deadline is set for the filing of claims, the time for filing a proof of
claim does not expire and lack of notice to a creditor does not deprive the creditor of the
opportunity to file a timely proof of claim. All debts, other than those falling within §
523(a)(2), (4) or (6) are discharged. If the debt falls within § 523(a)(2), (4) or (6), the debt is
not discharged by virtue of § 523(a)(3)(B). Scheduling makes no difference in the outcome.
Reopening does not extend the time to file complaints to determine dischargeability. Either the
creditor had actual, timely notice of the case or not.
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1 | such fraud was non-dischargeable under § 523(a)(2)(A).* Plaintiff's complaint was dismissed for
2 | want of prosecution at a status conference on August 26, 2008, but no order of dismissal was
3 | entered after the status conference. Notwithstanding the dismissal, Defendants filed an answer to
4 | the complaint on September 5, 2008. The adversary proceeding languished until July 16, 2009,
5 | at which time Plaintiff filed a motion secking to set aside the dismissal. According to Plaintiff's
counsel, the motion was granted by the court and the dismissal was set aside upon Plaintiff's
payment of the sum of $3,000 to Defendants for attorneys fees and costs. These facts are not
evident from the docket. No order was entered granting Plaintiff's motion and vacating the
Oo CO sD DH
dismissal. Nor was there any significant activity in the adversary proceeding after the dismissal
10 | was vacated until August 23, 2010.°
11 On December 21, 2010, counsel for Plaintiff and Defendants attended a status conference
12 | in the adversary proceeding. Based on the representations of counsel at the status conference, the
13 | court set the matter for trial at 10:00 a.m. on February 18, 2011. On December 22, 2010, an
14 | Order Setting Trial Date and Establishing Procedures for the Conduct of Trial (“Trial Order”)
15 | was entered in the adversary proceeding setting deadlines for the exchange and filing of witness
16 | declarations, exhibits, and a joint pre-trial order. The Trial Order specifically provided, in
17 | pertinent part:
18 1. Trial dates are not continued or vacated absent good cause, on noticed motion,
supported by competent evidence.°
19
2. Not later than 4:00 p.m. on February 11, 2011, all such witness declarations and
20 exhibits, together with any written objections to the admission of any exhibit or to
21
22
23 | # At this point, Plaintiff should have alleged that her debt was non-dischargeable by virtue of §
74 §23(a)(3)(B).
95 | 7 By Administrative Order 10-09 dated August 11, 2010, the adversary proceeding was
transferred from Judge Samuel L. Bufford to Judge Peter H. Carroll.
26
# Trial Order, 1:16-17.
27
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any of the declarations or any portion thereof, must be lodged with chambers.’
3. The parties must prepare and file a written joint pre-trial order pursuant to LBR
7016-1(b) through (f) not later than February 11, 2011.°
4, Not later than February 11, 2011, counsel for Plaintiff must telephone the judge’s
law clerk [(213) 894-4185] and report (a) whether the parties intend to go forward
with trial as scheduled; (b) if settlement is likely; (c) whether the time reserved for
trial is realistic; and (d) any other relevant information.
Stipulations for settlement must be in writing executed by each party or their
counsel and delivered to chambers before the date of trial.
If time restraints prevent reducing a settlement to writing prior to trial, all the
parties, or their counsel, must (a) advise chambers of the settlement and (b) appear
at the time set for trial to recite the stipulation on the record.
Failure to comply with this order may result in the imposition of sanctions .. . .”
Notwithstanding the specific provisions of the Trial Order, Plaintiff filed a document
entitled “Notice of Settlement; Request to Take Trial Off Calendared; Request for OSC Re
Settlement” (“Notice”) on January 24, 2011. In the Notice, Plaintiff stated that the parties had
settled the claims made the basis of Plaintiff's complaint “wherein the plaintiff shall take a
stipulated judgment of $100,000.00 against both defendants, which amount is stipulated to be
non-dischargeable.”'’ Plaintiff requested “that the trial be taken of calendared” and that “an OSC
re Settlement be set in 30 days,” and represented that the settlement documents would be
finalized and filed with the court “within 30 days of the date of [the] notice.”'’ On January 27,
2011, the court left Plaintiff's counsel a voice mail message at the telephone number given on the
Notice referring Plaintiff's counsel to the settlement provisions of the Trial Order and advising
¥ Id., 3:20-22.
¥ Id., 5:2-3.
+ Id. 5:9-18,
44 Notice, 1:25-26.
WId., 1:27 - 2:2.
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Plaintiffs counsel that trial would not be taken off calendar nor would the court set an OSC
regarding settlement.
The witness declarations, exhibits, and joint pre-trial order were not filed with the court
on or before February 11, 2011, as required by the Trial Order. Plaintiff did not file a motion for
continuance in accordance with the Trial Order nor did Plaintiff's counsel contact the court by
February 11, 2011, regarding the status of the adversary proceeding, as required by the Trial
Order. On February 17, 2011, the court left another voice mail message with Plaintiff's counsel
stating that the adversary proceeding would be dismissed if there was no appearance at trial and
the terms of the settlement were not dictated into the record by the parties or their counsel, as
required by the Trial Order. Later that day, Plaintiff filed a Declaration of Luisa Beristain for
Trial on Nondischargeable Debt and Declaration of John Fu, Esq. For Trial on Nondischargeable
Debt and Settlement.
On February 18, 2011, the matter came on for trial. There was no appearance by or on
behalf of the Defendants. After a trial on the merits, the Judgment was entered dismissing the
adversary proceeding with prejudice. Plaintiff now seeks reconsideration of the Judgment.
II. DISCUSSION
This court has jurisdiction over this contested matter pursuant to 28 U.S.C. §§ 157(a) and
1334(b). This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (B), (), (L) and (O).
Venue is appropriate in this court. 28 U.S.C. § 1409(a).
A. Standard for Reconsideration Under Rule 9023
Rule 9023 makes Rule 59(e) of the Federal Rules of Civil Procedure applicable in
bankruptcy cases. FRBP 9023. Rule 59(e) authorizes the filing of a motion to alter or amend a
judgment not later than 14 days after entry of the judgment. F.R.Civ.P. 59(e). Reconsideration is
“an ‘extraordinary remedy, to be used sparingly in the interests of finality and conservation of
judicial resources.” Carroll v. Nakatani, 342 F.3d 934, 945 (9th Cir. 2003) (citation omitted);
Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 890 (9th Cir. 2000) (citation omitted). In
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the Ninth Circuit, “‘a motion for reconsideration should not be granted, absent highly unusual
circumstances, unless the district court is presented with newly discovered evidence, committed
clear error, or if there is an intervening change in the controlling law.’” Kona Enters,, 229 F.3d
at 890 (quoting 389 Orange Street Partners v. Armold, 179 F.3d 656, 665 (9th Cir. 1999)),
Reconsideration may also be granted “as necessary to prevent manifest injustice.” Navajo Nation
vy. Confederated Tribes & Bands of the Yakima Indian Nation, 331 F.3d 1041, 1046 (9th Cir.
2003).
In this case, the Judgment was entered on February 18, 2011. Plaintiff's motion was filed
on February 28, 2011 — within 14 days of entry of the Judgment. Plaintiffs motion is timely
under Rule 9023. Plaintiff's motion does not allege newly discovered evidence nor an
intervening change in controlling law. Nor does Plaintiffs motion allege that reconsideration is
necessary to prevent manifest injustice. Plaintiff alleges the Judgment should be vacated because
“the case was settled between parties for $100,000.00, nondischargeable debt and, in the
alternative, Plaintiff did establish her prima-facie case for nondischargeable debt at trial on
February 18, 2011.”"
B. The Adversary Proceeding Was Not Settled Between Plaintiff and Defendants.
With respect to the first grounds for reconsideration, the court properly proceeded to a
trial on the merits of the claim made the basis of Plaintiff's complaint because the adversary
proceeding was not settled on the date of trial. Plaintiff argues, in effect, that she was prejudiced
by her counsel’s detrimental reliance on settlement discussions with Defendants’ counsel:
By initiating settlement talk, entering into a settlement and later on leaving a telephone
message on plaintiff's counsel’s phone, defense counsel and defendants knew or should
have known that plaintiff would rely upon the promise. And indeed plaintiff did rely
upon the promise to settle, for she would have timely filed all declarations and evidence
had defendants not proposed a settlement."
2 Motion, 2:2-4.
8 Id., 5:4-8.
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A settlement of disputed claims is not effective unless the material terms of the settlement
are reduced to writing and signed by the parties to the settlement, or the material terms of the
settlement agreement are dictated into the record and the parties state their intention to be bound
by the agreement on the record.'* The Trial Order stated specifically that “[s]tipulations for
settlement must be in writing executed by each party or their counsel and delivered to chambers
before the date of trial” or “[i]f time restraints prevent reducing a settlement to writing prior to
trial, all the parties, or their counsel, must (a) advise chambers of the settlement and (b) appear at
the time set for trial to recite the stipulation on the record.”
Plaintiff had notice that the matter would go to trial on February 18, 2011, absent a
settlement of the claims made the basis of the complaint documented in accordance with the
Trial Order. This was not done. Plaintiff ignored the specific terms of the Trial Order and failed
to either timely submit witness declarations, exhibits, and other documents required by the Trial
Order or to properly document an alleged settlement of the claims made the basis of the
4 California state law applies to the issue of the validity of a settlement. In re Rains, 428 F.3d
893, 901 (9th Cir. 2005) (citing Houston v. Holder (In re Omni Video, Inc.), 60 F.3d 230, 232
(5th Cir.1995) (holding that the validity of settlements in bankruptcy cases is best resolved by
reference to state contracts law)), An oral agreement made in open court on the record as to the
material terms is a binding agreement. See Doi v. Halekulani Corp., 276 F.3d 1131, 1134 (9th
Cir. 2002). “The principles of contract formation are the same in both the settlement and the
nonsettlement context.” Terry v. Conlan, 131 Cal.App.4th 1445, 1458, 33 Cal.Rptr.3d 603
(2005). “In order for acceptance of a proposal to result in the formation of a contract, the
proposal must be sufficiently definite, or must call for such definite terms in the acceptance, that
the performed promised is reasonably certain.” Weddington Prod., Inc. v. Flick, 60 Cal.App.4th
793, 811, 71 Cal.Rptr.2d 265 (1998) (citation omitted). “In particular, a provision that some
matter shall be settled by future agreement, has often caused a promise to be too indefinite for
enforcement.” Id, at 812, 71 Cal. Rptr.2d 265. “[MlJany settlements are reached by an initial
agreement on the goals of the settlement. However, agreement to the goals alone may not result
in a judicially enforceable settlement agreement.” Terry, 131 Cal.App.4th at 1458 n.3, 33
Cal.Rptr.3d 603. “Here, the parties’ assenting to the goals of the settlement, without agreeing to
the means that were material to the settlement, demonstrates that the parties never formed an
enforceable contract.” Id. at 1459, 33 Cal.Rptr.3d 603,
4 Trial Order, 5:13-17.
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complaint in accordance with the Trial Order. See Johnson v. Mammoth Recreations, Inc., 975
F.2d 604, 610 (9th Cir. 1992) (“A scheduling order ‘is not a frivolous piece of paper, idly
entered, which can be cavalierly disregarded by counsel, without peril.’... Disregard of the
order would undermine the court’s ability to control its docket, disrupt the agreed-upon course of
the litigation, and reward the indolent and the cavalier.”). Plaintiffs culpable conduct does not
form the basis for reconsideration of the Judgment entered in the adversary proceeding.
C. The Court Properly Dismissed Plaintiff's Complaint for Failure to Establish a Prima
Facie Case for Non-Dischargeability.
Plaintiff argues that she established a prima facie case for the non-dischargeability of her
debt because she produced some evidence and there was no evidence to the contrary, Le., “[t]his
was [] a one sided fight.”!® Plaintiff argues that the court erred in dismissing the complaint
because the admissible evidence supported a finding that Defendants sold Plaintiff a house that
had “a history of water leakage problems,” Defendants knew about it, and “[t]he nondisclosure
led [Plaintiff] to purchase . .. a defective house at $675,000.’
Plaintiff's evidence at trial consisted of the declarations of Plaintiff and her attorney, John
Fu. Plaintiff was not present for trial. Because the Defendants did not appear for trial, the court
waived the requirement under the Trial Order that Plaintiff be present and subject to cross-
examination and accepted Plaintiffs declaration into evidence for its full probative value.'* In
her declaration, Plaintiff testified in pertinent part:
2. In or about 2003, I purchased a property located at 436 S. Gibson Court, Burbank,
4 Motion, 3:16.
7 ¥d., 6:1-1; 17.
‘8 However, the court gave no weight to the faxed copy of the document entitled “Declaration of
Adrian Mercado” dated February 21, 2008, attached as an exhibit to Plaintiff's declaration. The
document was hearsay. Nor did the court give weight to the other exhibit attached to Plaintiff's
declaration which was a document purporting to be pages 1 and 5 of a complaint filed in Case
No. NCC26601B, D’ Alfonso v. J.C.C. Enterprises, in the Superior Court of California, County
of Los Angeles, on February 15, 1985. The document was unauthenticated and incomplete.
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California from defendants D’Alfonsos. At no time before or during the sale had I been
informed that the property had water leakage problems.
3. Asa result of the non-disclosure, I] purchased the property for $675,000, I would
never have done that had I known that the property had major water leakage problems.
4. Then beginning in 2005, there were severe and continuing water floodings and leakage
in the subject property. In fact, the leakage was so severe such that the water would fill
up a standard recycling bucket within 30 minutes. The leakage was continuous.”
The concealment or omission of material facts that a party has a duty to disclose can
support the nondischargeability of a debt on the grounds of actual fraud. In re Apte, 96 F.3d
1319, 1323-24 (9th Cir. 1996). A “concealed fact” is material if “a reasonable man would attach
importance to the alleged omissions in determining his course of action.” In re Miller, 310 B.R.
185, 196 (Bankr. C.D, Cal. 2004). The nondisclosure of a material fact in the face of a duty to
disclose establishes the requisite reliance and causation for actual fraud under the Bankruptcy
Code. Apte, 96 F.3d at 1323.
In this case, there was no evidence at trial establishing the nature and extent of the alleged
water leakage problems that existed on the subject property at the time of the sale in 2003.
Plaintiff's testimony was limited to a description of water flooding and leakage beginning in
2005. Based on such evidence, Plaintiff sought damages of $300,000 for relocation to a new
house and $1.2 million for complications due to severe chronic ashma. Given the dearth of
evidence regarding alleged flooding and leakage prior to the sale in 2003, the court was unable to
make a finding that Defendants’ knew material facts about existing water flooding and leakage
on or in the subject property prior to the sale, that they had a duty to disclose those facts to the
Plaintiff at the time of the sale, and that they failed to disclose such facts despite a duty to do so.
Finally, the court declines to permit Plaintiff to continue litigation of this claim in the
state court. The Defendants have received a discharge and Plaintiff is prohibited by the discharge
injunction from further proceeding in state court. The court has determined the merits of
2 Declaration of Luisa Beristain for Trial on Nondischargeable Debt, 1:24 to 2:3.
9.
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Plaintiff's non-dischargeability claim, and the Defendants’ bankruptcy case has been closed.
Reconsideration under Rule 9023 is not intended to give a litigant a “second bite at the
apple.” See In re Christie, 222 B.R. 64, 67 (Bankr. D.N.J. 1998) (citation omitted); see also
Voelkel v. Gen, Motors Corp., 846 F.Supp. 1482, 1483 (D. Kan. 1994), aff'd, 43 F.3d 1484 (10th
Cir. 1994) (“A motion to reconsider is not a second chance for the losing party to make its
strongest case or to dress up arguments that previously failed.”), U.S. v. Carolina E. Chem. Co.,
639 F. Supp. 1420, 1423 (D.S.C. 1986) (“A party who failed to prove his strongest case is not
entitled to a second opportunity by moving to amend a finding of fact or a conclusion of law.”);
In re Hillis Motors, Inc., 120 B.R. 556, 557 (Bankr. D. Haw. 1990) (Rule 59 does not “give a
disappointed litigant another chance.”(citation omitted)).
Ill. CONCLUSION
For the reasons stated, Plaintiff's motion will be denied.
A separate order will be entered consistent With this mé
DATED: March 10, 2011 ~
“ i
PETER H. CARROLL
United States Bankruptcy Judge
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In re:
CHAPTER:
Debtor(s}. CASE NUMBER:
NOTE TO USERS OF THIS FORM:
1) Attach this form to the last page of a proposed Order or Judgment. Do not file as a separate document.
2) The title of the judgment or order and all service information must be filled in by the party lodging the order.
3) Category |. below: The United States trustee and case trustee (if any) will always be in this category.
4) Category Il. below: List ONLY addresses for debtor (and attorney), movant (or attorney) and person/entity (or attorney) who filed an opposition to the
requested relief. DO NOT list an address if person/entity is listed in category |.
NOTICE OF ENTERED ORDER AND SERVICE LIST
Notice is given by the court that a judgment or order entitled (specify) MEMORANDUM DECISION RE: MOTION TO ALTER
JUDGMENT OR IN THE ALTERNATIVE, FOR A MOTION TRIAL (9023) MOTION was entered on the date indicated as
“Entered” on the first page of this judgment or order and will be served in the manner indicated below:
I. SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (“NEE”) - Pursuant to controlling General Order(s) and
Local Bankruptcy Rule(s), the foregoing document was served on the following person(s) by the court via NEF and hyperlink to
the judgment or order. As of _03/10/11_, the following person(s) are currently on the Electronic Mail Notice List for this
bankruptcy case or adversary proceeding to receive NEF transmission at the email address(es) indicated below.
« William Malcolm — bill@mclaw.org
e United States Trustee (SV) ustpregion16.wh.ecf@usdoj.gov
C1 Service information continued on attached page
{l. SERVED BY THE COURT VIA U.S. MAIL: A copy of this notice and a true copy of this judgment or order was sent by
United States Mail, first class, postage prepaid, to the following person(s) and/or entity(ies) at the address(es) indicated below:
E] Service information continued on attached page
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an “Entered” stamp, the party lodging the judgment or order will serve a complete copy bearing an “Entered” stamp by U.S.
Mail, overnight mail, facsimile transmission or email and file a proof of service of the entered order on the following person(s)
and/or entity(ies) at the address(es), facsimile transmission number(s), and/or email address(es) indicated below:
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