United States District Court, D. Arizona
IN THE MATTER OF Duan C. Copeland, et al., Debtors.
v.
Duan C. Copeland, et al., Appellees. Diane M. Mann, Appellant,
ORDER
HONORABLE STEVEN P. LOGAN UNITED STATES DISTRICT JUDGE
Trustee
Diane M. Mann (“Appellant”) appeals the denial of
a motion to compel the turnover of estate property in the
underlying bankruptcy case, In re Copeland
2:14-bk-10119-MCW. (Doc. 3) Appellant seeks a reversal of the
bankruptcy court's order and a mandate for the bankruptcy
court to consider the motion on the merits without regard to
the Ninth Circuit Bankruptcy Appellate Panel's
(“BAP”) decision in In re Markosian, 506
B.R. 273 (B.A.P. 9th Cir. 2014). For the following reasons,
this Court vacates the bankruptcy court's order and
remands for consideration of the motion to compel consistent
with this Order.
I.
Background
In
reviewing the bankruptcy court's findings of fact,
“[t]his court must accept the bankruptcy court's
findings of fact unless, upon review, the court is left with
the definite and firm conviction that a mistake has been
committed by the bankruptcy judge.” In re
Greene, 583 F.3d 614, 618 (9th Cir. 2009) (internal
citation omitted). Appellant contends that there are no
issues of fact to be decided in this appeal, however,
Appellant and Dr. Duan C. Copeland and Lily E. Copeland
(“Appellees”) recite different facts in their
appellate briefing. (Docs. 3 and 7) For example, Appellant
asserts that the vehicles at issue in this appeal were all
acquired by Appellees while in a Chapter 11
case.[1] (Doc. 3 at 5) Yet Appellees assert that at
least some of the vehicles were purchased prior to their
conversion from Chapter 7 to Chapter 11. (Doc. 7 at 13-14) In
the order denying the motion to compel, the facts are not
clear regarding when Appellees acquired their vehicles. (Doc.
4-9 at 1-2) Therefore, this Court has searched the record on
appeal and compiled the facts as represented by the
parties' in their past filings in the bankruptcy court.
Appellees
filed for a voluntary Chapter 7 bankruptcy on June 30, 2014.
(Doc. 4-1 at 1) In their petition, Appellees listed one
vehicle, a 2008 Nissan Rogue, as part of their personal
property. (Doc. 4-1 at 8) While in Chapter 7, Appellees
traded the Nissan Rogue and purchased a 2007 Porsche Cayman
using income Appellees received from Dr. Copeland's job.
(Doc. 4-10 at 22-23) Appellees then traded the Porsche Cayman
for a 2006 Lexus GX470 and also purchased a 2010 Kawaski
Z-1000 motorcycle, again using post-petition income received
from Dr. Copeland's job. (Docs. 4-10 at 22-23; 4-7 at
1-2) In September 2015, Appellees converted from Chapter 7 to
Chapter 11. (Doc. 4-9 at 1) Subsequently, Appellees purchased
a 2014 Nissan Leaf. (Doc. 4-7 at 2) In July 2017, Appellees
reconverted back to Chapter 7. (Doc. 4-9 at 1)
On
January 26, 2018, Appellant filed a motion to compel
Appellees to turn over the Lexus GX470, Kawaski Z-1000, and
Nissan Leaf as property belonging to the bankruptcy estate
pursuant to 11 U.S.C. § 521[2] of the Code. (Doc. 4-6 at 1)
Appellees objected, arguing that they purchased the vehicles
with post-petition earnings, and therefore, the vehicles did
not become part of the Chapter 7 bankruptcy estate upon
reconversion to Chapter 7 pursuant to 11 U.S.C. §
541.[3]
(Doc. 4-7 at 1-2)
On
September 28, 2018, the bankruptcy court denied
Appellant's motion to compel. (Doc. 4-9) In denying the
motion, the bankruptcy court stated that the BAP's
decision in Markosian was controlling. (Doc. 4-9 at
4) Specifically, the bankruptcy court stated that it would
follow the BAP's decisions, unless “[the] Court
conclude[d] that a [BAP] decision clearly misinterpreted the
Code or other law and so long as the District Court of
Arizona ha[d] not published a contrary opinion.” (Doc.
4-9 at 4) On October 12, 2018, Appellant timely filed a
notice of appeal and elected to have the appeal transferred
to this Court. (Doc. 1 at 1)
Appellant
raises two issues on appeal. First, Appellant argues that the
bankruptcy court committed reversible error by denying the
motion to compel. (Doc. 3 at 4) Second, Appellant argues that
the ruling in Markosian is erroneous. (Doc. 3 at 4)
Appellant requests that this Court reverse the bankruptcy
court's order and direct the bankruptcy court to consider
the motion to compel on the merits without regard to
Markosian. (Doc. 3 at 9)
II.
Discussion
A.
Standard of Review
District
courts have jurisdiction to review an appeal from the
bankruptcy court's “final judgments, orders, and
decrees.” 28 U.S.C. § 158. This court reviews the
bankruptcy court's legal conclusions de novo.
See In re D'Arco, 587 B.R. 722, 726 (Bankr. C.D.
Cal. 2018) (internal citation omitted).
B.
The Bankruptcy Court Did Not Commit Reversible Error
Appellant
argues that the bankruptcy court committed reversible error
by relying on the flawed holding in Markosian when
denying the motion to compel. (Doc. 3 at 8-9) In response,
Appellees argue that the holding in Markosian was an
accurate interpretation of the statute governing conversions
of cases from one chapter to another, 11 U.S.C. §
348(a), [4]and therefore, the bankruptcy court made no
error in relying on Markosian. (Doc. 7 at 15-17)
Where
there is a clear split between courts on an issue, it cannot
be said that a bankruptcy court commits a reversible error by
choosing to follow the view adopted within its own circuit
rather than the view of another circuit. Indeed, courts in
the Ninth Circuit generally adhere to the belief that Ninth
Circuit BAP decisions should be given deference absent any
other controlling authority. See In re Muskin, Inc.,
151 B.R. 252, 253-55 (Bankr. N.D. Cal. 1993); see also In
re Sawicki, No. 2-07-bk-3493-CGC, 2008 WL ...