Wirum v. Root-Hyler et al

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UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
In re
FLETCHER HARTWELL HYLER,
Debtor.
ANDREA A WIRUM, chapter 7
trustee,
Plaintiff,
vs.
SHERYL S. ROOT-HYLER, aka SHERYL
ROOT, A.R. WILSON, JR. aka
RAYDON WILSON, FLETCHER HARTWELL
HYLER, aka BUD HYLER, and EXTRA
STORAGE,
Defendants.
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Case No. 04-32952 TEC 7
Chapter 7
Adv. Proc. No. 07-3110
MEMORANDUM RE DEBTOR’S MOTION TO SET ASIDE STIPULATION
FILED APRIL 22, 2008, ORDER FILED APRIL 30, 2008,
AND ORDER FILED OCTOBER 24, 2008
Signed and Filed: April 22, 2009
________________________________________
THOMAS E. CARLSON
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
April 22, 2009
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 07-03110 Doc# 42 Filed: 04/22/09 Entered: 04/22/09 15:15:46 Page 1 of 9

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For the following reasons, I determine that Debtor has not
established a legal basis to set aside from the April 22, 2008
stipulation, the April 20, 2008 order, or the October 24, 2008
order. 	This memorandum constitutes the court’s findings of fact
and conclusions of law.
FACTS
On October 2, 2007, the chapter 7 trustee filed a complaint
against Debtor, Sheryl Root-Hyler (Debtor’s wife), and A.R. Wilson,
Jr. (Ms. Root-Hyler’s father) for declaratory relief, turnover, and
an injunction regarding the estate’s interest in artwork, jewelry,
and furniture specifically identified in forty-nine pages of
exhibits to the complaint (the Personal Property). 	The complaint
alleges, inter alia, that Ms. Root claims the personal property as
her separate property, and that Defendants placed the Personal
Property in a storage facility in Redwood City.
On October 10, 2007, the court entered an order granting
permanent injunction, pursuant to which Defendants are enjoined
from transferring the Personal Property.
In April 2008, after negotiation between the trustee and
Defendants, all of the parties to the adversary proceeding and
their counsel executed a stipulation (Stipulation). 	(Linchey
Decl., Exhs. C-J). 	The Stipulation defines personal property as
“the personal property identified in the complaint. . . including
the personal property located at [the storage unit].” 	The
Stipulation provides that, following entry of an order approving
the Stipulation, “the Trustee shall take custody of the personal
property”. 	(¶ 3). 	The Stipulation authorizes the trustee, after
Case: 07-03110 Doc# 42 Filed: 04/22/09 Entered: 04/22/09 15:15:46 Page 2 of 9

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court approval upon proper notice, to sell the Personal Property
“free and clear of any interest therein of the Defendants with such
interest . . . to attach to the net proceeds of sale to the same
nature, extent, validity, and priority as such interest holds with
regard to the Personal Property.” 	(Id., ¶3). 	The Stipulation
provides that the trustee may employ, with court approval,
auctioneers or other professionals to liquidate the Personal
Property. 	(Id.) The Stipulation further provides that the trustee
shall hold the sale proceeds until disposition of the adversary
proceeding. 	(Id.) 	The Stipulation requires the trustee to sell
the Personal Property at a public or private auction, and provides
Defendants with the right to overbid at either type of auction.
(Id., ¶ 4).
The court signed an order approving the Stipulation on April
30, 2008.
On September 26, 2008, the trustee filed and served a motion
for sanctions and to enforce the Stipulation and related order.
The motion was served on Debtor and Ms. Root by mail at 16
Arastradero Road, Portola Valley, CA 94028. 	The motion alleges
that, in July 2008, the trustee found a prospective wine auctioneer
and notified the storage facility that the trustee was ready to
take custody of the wine located in the storage unit. 	The motion
alleges that Debtor’s counsel agreed to turnover the storage unit
keys to trustee’s counsel, but that the keys were never turned
over.
The motion was not contested. 	On October 24, 2008, the court
signed an Order Granting Trustee’s Motion to Enforce Stipulation.
Case: 07-03110 Doc# 42 Filed: 04/22/09 Entered: 04/22/09 15:15:46 Page 3 of 9

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The order authorizes trustee to take possession of the Personal
Property from two storage units.
DISCUSSION
1. 	Debtor has not established legal basis for setting aside
the Stipulation
The enforceability of a stipulation is analyzed under general
contract principles. 	In re Martinez, 393 B.R. 27, 32 (Bankr. D.
Nev. 2008); Los Angeles City School Dist. of Los Angeles County v.
Landier Mgmt. Co., 177 Cal. App. 2d 744, 750-51 (1960). 	In
California, a party may rescind a contract based upon a unilateral
mistake if “the effect of the mistake is such that enforcement of
the contract would be unconscionable.” 	Donovan v. RRL Corp., 26
Cal. 4th 261, 281 (2001); Cal. Civ. Code § 1689(b)(1). 	Debtor
contends that the Stipulation should be set aside because he
misunderstood what property was to be sold and the manner of sale.
Assuming this is so, Debtor has not established a valid legal basis
for rescinding the Stipulation, because he does not contend that
his mistake makes enforcement of the contract unconscionable, nor
does it appear from the undisputed facts that he could establish
unconscionability.
The Stipulation expressly identifies the property to be sold
and provides that the parties’ ownership interests will attach to
the sale proceeds. 	The Stipulation does not affect any exemption
rights Debtor may have, or deprive Debtor of a property interest.
If trustee sells the Personal Property, Debtor will have the
opportunity to object to the sale and the sale terms. 	Thus,
enforcement of the Stipulation is not unconscionable. 	Donovan, 26
Cal. 4th at 291 (unconscionable contract ordinarily involves
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oppression or surprise due to unequal bargaining power and overly
harsh results).
2. Debtor has not established a basis to set aside the orders
Rule 60(b) applies to determine whether a court may relieve a
party or its legal representative from a final order. 	Fed. R.
Bankr. Proc. 9024. 	Rule 60(b) provides, in pertinent part, that
“[o]n motion and upon such terms as are just, the court may relieve
a party or a party’s legal representative from a final . . . order
for the following reasons: (1) mistake . . . or excusable neglect.”
Rule 60(b) relief is an extraordinary remedy that should be granted
only in exceptional circumstances. 	Sellers v. Mineta, 350 F.3d
706, 716 (8th Cir. 2003); Servants of Paraclete v. Does, 204 F.3d
1005, 1009 (10th Cir. 2000); Jones v. Lincoln Elec. Co., 188 F.3d
709, 732 (7th Cir. 1999).
A party seeking relief from a final order has the burden of
demonstrating such relief is appropriate. 	TCI Group Life Ins. Plan
v. Knoebber, 244 F.3d 691, 696 (9th Cir. 2001). 	In determining
whether relief from a final order is appropriate, a court must
balance the interests of litigants and courts in the finality of
the order with the overriding judicial goal of deciding a case on
its merits. 	Id.
A motion for relief based on mistake (or excusable neglect)
must be brought within a “reasonable time” and if based on Rule
60(b)(1), no more than one year after entry of the judgment. 	Fed.
R. Civ. Proc. 60(b). 	In determining the timeliness of the motion,
the court must consider the interest in finality, the reason for
the delay, the moving party’s ability to have brought the motion
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earlier, and the prejudice to the parties. 	Ashford v. Steuart, 657
F.2d 1053, 1055 (9th Cir. 1981).
a. 	April 30, 2008 order
Debtor contends that the April 30, 2008 order should be set
aside due to Debtor’s unilateral mistake regarding what personal
property would be affected by the Stipulation and sold by the
trustee. 	Debtor’s mistake regarding the effect of the Stipulation
is not a basis under Rule 60(b)(1) for setting aside the order,
because Debtor failed to establish a valid state-law basis for
setting aside the underlying Stipulation. 	Cf. Blair v. Shanahan,
795 F.Supp. 309, 315 (N.D. Cal. 1992), modified on other grounds,
38 F.3d 1514 (9th Cir. 1994) (adopting Sixth Circuit rule that Rule
60(b) will not provide relief for unilateral mistake re consent
decree).
b. October 24, 2008 order
Debtor argues that the October 24, 2008 order should be set
aside because he was not aware of the trustee’s motion and, thus,
did not attend the hearing due to inadvertence or excusable
neglect. 	The determination of whether neglect is excusable is an
equitable one that depends on at least four factors: (1) the danger
of prejudice to the opposing party; (2) the length of delay and its
potential impact on the proceedings; (3) the reason for the delay;
and (4) whether the movant acted in good faith. 	Bateman v. U.S.
Postal Service, 231 F.3d 1220, 1223-34 (9th Cir. 2000).
Debtor has not established that his neglect in failing to
oppose the motion to compel is excusable. 	Trustee served the
motion on Debtor at his last known address. (Linchey Decl., ¶ 41).
Case: 07-03110 Doc# 42 Filed: 04/22/09 Entered: 04/22/09 15:15:46 Page 6 of 9

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1 The numbering of this rule was modified as part of the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
(BAPCPA). 	Because this case was filed before the effective date of
the rule amendment, the court provides the pre-BAPCPA citation.
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Trustee presumably did not serve the motion on the Portola Valley
residence listed as Debtor’s address on his voluntary petition,
because Debtor lost that property through foreclosure. See July 3,
2007 Order Granting Relief from Stay). 	Debtor cannot complain of
his failure to receive notice when, in violation of his duty to
file an address change with the court, he has not filed a change of
address. 	FRBP 4002(5). 1
Nor do the other factors re excusable neglect support relief
from the order under Rule 60(b). 	Six months have elapsed between
entry of the order and the hearing on the motion to set it aside.
Debtor offers no explanation as to why the motion could not have
been filed sooner. 	Furthermore, there may be a danger of prejudice
in returning the parties to the status quo ante, because the market
for fine wine and fine art may have worsened since entry of the
October order.
3. 	Debtor has not standing to assert the property rights of
the other Defendants
Debtor has no standing to assert the property rights of Wilson
or Root-Hyler because the impact of the Stipulation and orders on
these individuals does not directly and adversely affect Debtor.
In re Fondiller, 707 F.2d 441, 443 (9th Cir. 1983).
4. 	Debtor has not asserted a basis to compel the trustee to
release the Personal Property.
The parties’ dispute regarding what of the Personal Property
is property of the estate, and whether such Property is subject to
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a valid claim of exemption will be resolved via this adversary
proceeding, after the Property is sold pursuant to the Stipulation,
and trustee files an amended compliant to include a declaratory
relief claim against Mr. Wilson regarding his alleged ownership
interest in the Property. (Stipulation, ¶ 5).
**END OF MEMORANDUM**
Case: 07-03110 Doc# 42 Filed: 04/22/09 Entered: 04/22/09 15:15:46 Page 8 of 9

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Court Service List
Scott J. Sagaria, Esq.
Patrick Calhou, Esq.
333 W. San Carlos St., Ste. 1625
San Jose, CA 95110
Daniel M. Linchey, Esq.
Goldberg, Stinnett, Meyers and Davis
44 Montgomery Street, Suite 2900
San Francisco, CA 94104
Case: 07-03110 Doc# 42 Filed: 04/22/09 Entered: 04/22/09 15:15:46 Page 9 of 9