United States Bankruptcy Appellate Panel of the First Circuit
AUBERTO NIEVES GUZMÁN and ANNETTE NAZARIO RODRÍGUEZ, Debtors.
NOREEN WISCOVITCH RENTAS, Chapter 7 Trustee, Appellee. AUBERTO NIEVES GUZMÁN and ANNETTE NAZARIO RODRÍGUEZ, Appellants,
from the United States Bankruptcy Court for the District of
Puerto Rico (Hon. Brian K. Tester, U.S. Bankruptcy Judge)
Gerardo Santiago Puig, Esq., on brief for Appellants.
Vilariño Santiago, Esq., on brief for Appellee.
Feeney, Finkle, and Fagone, United States Bankruptcy
Appellate Panel Judges.
FINKLE, U.S. BANKRUPTCY APPELLATE PANEL JUDGE.
Nieves Guzmán and Annette Nazario Rodríguez
("Debtors") appeal from the bankruptcy court's
order denying their motion for reconsideration of the
court's order sustaining the chapter 7 trustee's (the
"Trustee") objection to certain claimed exemptions.
Because we find no abuse of discretion, we
AFFIRM the bankruptcy court's order.
muddled procedural history of this case results from the
Debtors' multiple amendments to their asset and
exemptions schedules, the Trustee's objections to such
amendments, the Debtors' failure to timely respond to
those objections, and delays by the parties.
Debtors originally filed a voluntary chapter 11 petition in
May 2013 and, at their request, the case was converted to
chapter 7 a little over two years later. For purposes of this
appeal it is sufficient to note that during the chapter 11
case they filed their first amendment to Schedule C-Property
Claimed as Exempt ("Schedule C"). Shortly after the
case conversion, on July 9, 2015, the Debtors again amended
Schedule C ("Second Amended Exemption Schedule") to
add to their claimed exemptions under §
522(d)(5) the funds that had been held in the
chapter 11 debtor-in-possession bank accounts ("DIP
30 days of the filing of the Second Amended Exemption
Schedule,  the Trustee filed an objection to the
Debtors' claimed exemptions to the DIP Accounts
("First Exemption Objection"). She asserted that
the Debtors were not entitled to claim exemptions for those
accounts because they were funds earned or acquired
post-petition, and as such, were property of the estate to be
administered by the Trustee. The objection contained a notice
provision incorrectly advising parties in interest, including
the Debtors, of a 30-day period in which to object or
otherwise respond, or the objection would be deemed unopposed
and possibly granted by the court without a
hearing. Nineteen days later, the bankruptcy court
entered an order sustaining the Trustee's objection as
unopposed ("First Exemption Order").
thereafter, the Debtors filed a motion requesting
reconsideration of the First Exemption Order and also
presenting their opposition to the First Exemption Objection.
As grounds for reconsideration, the Debtors asserted that the
30-day response period provided by the Trustee in the
objection was misleading and led to their admittedly
"erroneous" belief that they had 30 days to respond
when, in fact, the appropriate response period was only 14
days. As to the merits of their claimed exemption, they
maintained that the First Exemption Objection should not be
sustained because the funds in the DIP Accounts were property
of the estate in which they can properly claim an exemption
under § 522(d)(5). The Trustee did not file any
opposition to the reconsideration motion.
September 9, 2015, before the court acted on this motion, the
Debtors filed their third amended Schedule C ("Third
Amended Exemption Schedule"). The pertinent change to
the schedule updated the balance in the DIP Accounts claimed
as exempt. Without conducting a hearing (or referencing the
reconsideration motion), by order entered on October 1, 2015,
the bankruptcy court vacated the First Exemption Order
("Vacating Order") as "improvidently
entered." On that same day, the court also entered a
separate order overruling the Trustee's First Exemption
Objection ("Order Overruling First Exemption
Objection"). No explanation for the court's ruling
was given. The Trustee did not appeal either of these orders,
but a few days after their entry, she filed a motion
requesting a 30-day extension of time to seek reconsideration
of the orders. The bankruptcy court did not rule on the
extension request for many months and, for unexplained
reasons, the Trustee did not file a motion for
reconsideration of the orders until almost six months
later-March 29, 2016. As grounds she argued that the Order
Overruling First Exemption Objection was a manifest error of
law. On May 3, 2016, again without explanation, the
bankruptcy court denied the Trustee's extension request
filed months earlier ("Order Denying Extension"),
but it did not acknowledge or rule on the Trustee's
motion for reconsideration.
on April 4, 2016, the Debtors amended Schedule C for the
fourth time ("Fourth Amended Exemption Schedule"),
to include an exemption for an apartment they owned. The
Debtors made no other additions or changes to their other
claimed exemptions. Within 30 days of the filing of this
amendment, the Trustee filed a "Second Objection to
Claimed Exemption and, in the Alternative for Turnover of
Property of the Estate" ("Second Exemption
Objection"). She maintained that the Vacating Order and
the Order Overruling First Exemption Objection only related
to the First and Second Amended Exemption Schedules, and the
Debtors' subsequent filings of the Third and Fourth
Amended Exemption Schedules rendered those prior orders moot.
She asserted that this objection was timely because it was
filed within the 30-day period for objection to the Fourth
Amended Exemption Schedule. As to the merits, the Trustee
primarily pressed her position that as a matter of law the
Debtors were not entitled to claim an exemption in the DIP
Accounts upon conversion of the case to chapter 7.
to the procedural mishmash of this case, the Trustee's
Second Exemption Objection contained the same notice error as
the First Exemption Objection, stating a 30-day response
period. The bankruptcy case docket, however, reflected that
the actual response period was 14 days. Once again the
bankruptcy court acted on this objection prior to the
expiration of the incorrectly stated response period,
treating it as "unopposed, " and on May 20, 2016,
entered an order sustaining the Trustee's objection
("Order Sustaining Second Exemption Objection").
time the Debtors reacted swiftly and on that same date filed
a motion seeking reconsideration of that order and also
opposing the Second Exemption Objection ("Debtors'
Second Reconsideration Motion"). First, they asserted that
the Trustee misled them by providing "inadequate and
improper notice" of the appropriate response period for
the Second Exemption Objection, and, because they filed their
opposition within the 30-day period stated in the objection,
the court should consider their opposition on the merits.
Second, they challenged this objection as "unwarranted
as a matter of law" because: (1) the 30-day time frame
for objections to the Fourth Amended Exemption Schedule only
applied to newly listed exemptions not previously claimed,
and thus, did not apply to the DIP Accounts which were not
modified by the Fourth Exemption Schedule; and (2) the
Trustee could not reassert her objection to the exemption in
the DIP Accounts because the bankruptcy court had already
overruled the First Exemption Objection which had raised the
same objection, and the court "ended the
discussion" when it entered the Order Denying Extension.
Trustee filed an opposition to the Debtors' Second
Reconsideration Motion ("Trustee's
Opposition"), contending that: (1) the Debtors knew of
the appropriate response date, which was clearly noted in the
bankruptcy court's docket as a 14-day response period,
and they had previously acknowledged this time frame as the
appropriate response period in connection with the First
Exemption Objection; (2) the Second Exemption Objection was
timely because a new 30-day objection period as to
all listed exemptions arose upon the filing of the
Fourth Amended Exemption Schedule; and (3) the Order
Overruling First Exemption Objection and the Order Denying
Extension only pertained to the First and Second Amended
Exemption Schedules, and the subsequent filings of the Third
and Fourth Amended Exemption Schedules rendered those
previous orders moot. Finally, the Trustee reasserted her
substantive argument that as a matter of law the Debtors
could not claim an exemption in the funds in the DIP
13, 2016, the bankruptcy court entered an order denying the
Debtors' Second Reconsideration Motion ("July 13
Order Denying Reconsideration"), noting only: "for
the reasons state[d] in the Chapter 7 Trustee's
Opposition." The Debtors then timely filed their notice
of appeal of the July 13 Order Denying Reconsideration, and
only that order.
bankruptcy appellate panel is "duty-bound" to
determine its jurisdiction before proceeding to the merits,
even if not raised by the litigants. Rivera Siaca v. DCC
Operating, Inc. (In re Olympic Mills Corp.), 333 B.R.
540, 546-47 (B.A.P. 1st Cir. 2005) (citing Boylan v.
George E. Bumpus, Jr. Constr. Co. (In re George E. Bumpus,
Jr. Constr. Co.), 226 B.R. 724, 725-26 (B.A.P. 1st Cir.
1998)). In order to assess our jurisdiction, we must first
identify the order or orders on appeal.
Scope of Appeal
their notice of appeal, the Debtors only identified the July
13 Order Denying Reconsideration. An appeal from an order
denying reconsideration is "generally not considered to
be an appeal from the underlying judgment." Batiz
Chamorro v. Puerto Rican Cars, Inc., 304 F.3d 1, 3 (1st
Cir. 2002) (citation omitted). Notwithstanding this general
rule, we have, on occasion, reviewed both the order denying
reconsideration and the underlying judgment itself where two
conditions have been met. First, both orders may be reviewed
when the appeal involves a post-judgment motion filed within
14 days of the judgment, thereby tolling the appeal period
for the underlying order by operation of Bankruptcy Rule
8002(b)(1). See Ross v. Garcia (In re Garcia), 532
B.R. 173, 180 (B.A.P. 1st Cir. 2015) (citing Municipality
of Carolina v. Baker González (In re Baker
González), 490 B.R. 642, 646 (B.A.P. 1st Cir.
2013)); see also Haddock Rivera v. ASUME (In re Haddock
Rivera), 486 B.R. 574, 577 n.4 (1st Cir. B.A.P. 2013).
Here, the Debtors' Second Reconsideration Motion was
filed within 14 days of the entry of the Order Sustaining
Second Exemption Objection, and tolled the appeal period.
Hence, this timeliness requirement is satisfied.
both orders may be reviewed only "when it is clear that
the appellant intended to appeal both orders, and where both
parties brief issues relating to the underlying
judgment." In re Baker González, 490
B.R. at 646 (citing Bellas Pavers, LLC v. Stewart (In re
Stewart), No. MB 12-017, 2012 WL 5189048, at *4-5
(B.A.P. 1st Cir. Oct. 18, 2012); Vicenty v. San Miguel
Sandoval (In re San Miguel Sandoval), 327 B.R. 493, 504
(B.A.P. 1st Cir. 2005). "Where the appellant's
intent to appeal the underlying judgment is clear, appellate
courts in this circuit generally treat the appeal as
encompassing both orders." In re Stewart, 2012
WL 5189048, at *4 (citing Marie v. Allied Home Mortgage
Corp., 402 F.3d 1, 8 (1st Cir. 2005); Wilson v.
Wells Fargo Bank, N.A. (In re Wilson), 402 B.R. 66, 69
(B.A.P. 1st Cir. 2009); In re San Miguel Sandoval,
327 B.R. at 504).
the Debtors' intent is unequivocal and plainly limited to
an appeal from the July 13 Order Denying Reconsideration. Not
only was this the sole order identified in their notice of
appeal and in their statement of the issues on appeal, they
posed each of the stated issues solely in the context of
whether the bankruptcy court erred in denying the
Debtors' Second Reconsideration Motion. Precluding any
doubts of their intention, at oral argument the Debtors'
counsel confirmed that the appeal is only from the July 13
Order Denying Reconsideration. Our review then is confined to
that order, and for reasons elucidated below, this limitation
significantly impacts the appeal.
jurisdiction to hear appeals from final judgments, orders and
decrees of the bankruptcy court. See 28 U.S.C.
§ 158(a)(1), (b)(1). "'[A]n order denying
reconsideration is final if the underlying order is final and
together the orders end the litigation on the
merits.'" United States v. Monahan (In re
Monahan), 497 B.R. 642, 646 (B.A.P. 1st Cir. 2013)
(quoting Garcia Matos v. Oliveras Rivera (In re Garcia
Matos), 478 B.R. 506, 511 (B.A.P. 1st Cir. 2012)). A
bankruptcy court's order sustaining an objection to a
debtor's claimed exemption is a final, appealable order.
Massey v. Pappalardo (In re Massey), 465 B.R. 720,
723 (B.A.P. 1st Cir. 2012) (citations omitted); Newman v.
White (In re Newman), 428 B.R. 257, 261 (B.A.P. 1st Cir.
2010) (citations omitted). Accordingly, the July 13 Order
Denying Reconsideration is also a final order, and we have
jurisdiction to hear this appeal.
review a bankruptcy court's findings of fact for clear
error and its conclusions of law de novo. Jeffrey P.
White & Assocs., P.C. v. Fessenden (In re Wheaton),
547 B.R. 490, 496 (B.A.P. 1st Cir. 2016) (citation omitted).
If the underlying Order Sustaining Second Exemption Objection
were before us, we would conduct a de novo review on the
merits of the legal issues raised by that order, including
whether a new objection period arises as to all claimed
exemptions with any amendment of the exemption schedule and
whether the DIP Accounts were subject to exemption under
§ 522(c)(5). But it is not, so our review of the July 13
Order Denying Reconsideration is limited to the abuse of
discretion standard. See Rodriguez v. Banco
Popular de Puerto Rico (In re Rodriguez), 516 B.R.
177, 183 (B.A.P. 1st Cir. 2014) ("We review a bankruptcy
court's order denying a motion for reconsideration of a
previous judgment for manifest abuse of discretion.").
"The abuse of discretion standard is quite
deferential[.]" Berliner v. Pappalardo (In re
Sullivan), 674 F.3d 65, 68 (1st Cir. 2012). The First
Circuit's explanation of the implications of this type of
limited review is instructive:
On appeal from a denial of a [reconsideration] motion, the
movant faces a further hurdle. The [bankruptcy] court
typically has an intimate, first-hand knowledge of the case,
and, thus, is best positioned to determine whether the
justification proffered in support of a [reconsideration]
motion should serve to override the opposing party's
rights and the law's institutional interest in finality.
Consequently, we defer broadly to the [bankruptcy]
court's informed ...