Filed: Mar. 30, 2021
Latest Update: Mar. 31, 2021
FILED
MAR 30 2021
SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
NOT FOR PUBLICATION
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP No. NV-20-1238-TLB
CHRISTINA STACEYMARIE HILLYER,
Debtor. Bk. No. 2:20-bk-10318-BTB
SSA ARCHITECTURE; SMALL STUDIO Adv. No. 2:20-ap-01041-BTB
ASSOCIATES, LLC; KEN SMALL,
Appellants,
v. MEMORANDUM*
CHRISTINA STACEYMARIE HILLYER,
Appellee.
Appeal from the United States Bankruptcy Court
for the District of Nevada
Bruce T. Beesley, Bankruptcy Judge, Presiding
Before: TAYLOR, LAFFERTY, and BRAND, Bankruptcy Judges.
*
This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
I. INTRODUCTION
SSA Architecture, Small Studio Associates, LLC, and Ken Small
(collectively, “SSA”) appeal from the bankruptcy court’s order dismissing
their adversary proceeding against chapter 7 1 debtor Christina Staceymarie
Hillyer for SSA’s failure to effect service of the summons and complaint.
We AFFIRM.
II. FACTS 2
A. The bankruptcy case and adversary proceeding
In January of 2020, Hillyer filed a petition for chapter 13 relief. The
case was subsequently converted to chapter 7.
The first § 341(a) meeting of creditors in the converted case was
scheduled for April 1, 2020, making June 1, 2020 the last day for creditors to
file a §§ 523(a)(2), (4), or (6) complaint by operation of Rules 1019(2)(A),
4007(c), and 9006(a)(1)(C). The bankruptcy court also set May 14, 2020, as
the deadline for general creditors to file a proof of claim.
On March 19, 2020, SSA filed its only adversary complaint against
Hillyer. It alleged causes of action based on contract, tort, and Civil RICO
pursuant to the Nevada Civil RICO Acts. It prayed for injunctive relief to
1 Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, all “Rule” references are to the Federal Rules
of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of
Civil Procedure
2 We exercise our discretion to take judicial notice of documents electronically
filed in the bankruptcy court’s dockets. See Atwood v. Chase Manhattan Mortg. Co. (In re
Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).
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prevent Hillyer from competing with it, various damages, and attorney’s
fees and costs. But the complaint did not include a cause of action under
§ 523, and its prayer for relief did not seek a determination of
nondischargeability.
SSA did not file a proof of claim by the claims bar date.
The chapter 7 trustee filed a report of no distribution on May 7, 2020,
and the bankruptcy court entered an order of discharge on June 22, 2020.
B. Hillyer’s motion to dismiss the adversary proceeding for insufficient
service of process
On March 20, 2020, the bankruptcy court issued a summons in the
adversary proceeding. The ninety-day period under Civil Rule 4(m), made
applicable by Rule 7004(a)(1), in which SSA was required to effect service
of the summons and complaint, expired on June 18, 2020.
On June 22, 2020, Hillyer filed a motion to dismiss the complaint for
insufficient service of process under Civil Rule 12(b)(5), made applicable by
Rule 7012(b) (“Motion”).
SSA opposed the Motion. It contended that it had served the
summons and complaint on Hillyer. In support of this contention,
however, it attached a declaration in which its counsel’s employee stated
that she had served the complaint on Hillyer’s counsel by first class mail on
April 30, 2020. The declaration made no mention of any service of the
summons on Hillyer’s counsel. Nor did it mention any service of the
summons or complaint on Hillyer.
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SSA also argued that good cause existed to extend the deadline to
serve the summons and complaint because it believed that it effectuated
service when it mailed the complaint to Hillyer’s counsel. It further argued
that there was no prejudice to Hillyer for any failure to serve the summons
and complaint because, it alleged, her counsel received actual notice of the
complaint long before the time for service elapsed. According to SSA,
Hillyer’s counsel referenced the complaint during a session of the § 341(a)
meeting of creditors.
In reply to the opposition to the Motion, Hillyer pointed out that the
declaration filed in support of the opposition only evidenced service of the
complaint on her counsel. She argued that even if her counsel had actual
knowledge of the adversary proceeding, such knowledge could not be
imputed to her and would not excuse compliance with Rule 7004 and Civil
Rule 4(m).
The bankruptcy court held a hearing on the Motion, which SSA did
not attend. Thereafter, the bankruptcy court entered an order: (1) finding
that the summons and complaint had not been served on Hillyer;
(2) finding that SSA had not demonstrated cause to extend the service
deadline; and (3) granting the Motion. This appeal followed.
III. JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
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157(b)(2)(B). We have jurisdiction under 28 U.S.C. § 158.3
IV. ISSUE
Did the bankruptcy court abuse its discretion in dismissing the
adversary proceeding for insufficient service of process?
V. STANDARD OF REVIEW
We review the bankruptcy court’s order dismissing the adversary
proceeding for failure to properly serve the summons and complaint for an
abuse of discretion. Oyama v. Sheehan (In re Sheehan), 253 F.3d 507, 511
(9th Cir. 2001). The bankruptcy court abuses its discretion if it applies the
wrong legal standard or its findings are illogical, implausible, or without
support in the record. See TrafficSchool.com, Inc. v. Edriver Inc.,
653 F.3d 820,
832 (9th Cir. 2011).
We may affirm on any ground fairly supported by the record.
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The order on appeal, which dismissed the adversary proceeding without
prejudice, was a final order, not an interlocutory order. An order granting dismissal is
final and appealable “if it (1) is a full adjudication of the issues, and (2) clearly evidences
the judge’s intention that it be the court’s final act in the matter.” Nat’l Distrib. Agency v.
Nationwide Mut. Ins. Co., 117 F.3d 432, 433 (9th Cir. 1997) (internal citation and quotation
marks omitted). On the face of the complaint and as characterized by SSA in briefing
and during oral argument, the complaint strictly sought monetary damages and
injunctive relief under state law claims. As explained infra, SSA’s continued pursuit of
damages against the estate is now barred by the bankruptcy discharge and SSA’s failure
to file a proof of claim. And the injunctive relief SSA sought against Hillyer can and
should be resolved in state court. Therefore, the dismissal was, in effect, “with
prejudice.” See Montes v. United States,
37 F.3d 1347, 1350 (9th Cir. 1994) (“[T]he effect of
a dismissal without prejudice may be to end the litigation in the court involved, but not
to act as an adjudication on the merits or to bar the filing of a similar action in another
court. In such a case, the dismissal would be final and appealable.” (internal citation
and quotation marks omitted)).
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Leavitt v. Soto (In re Leavitt), 171 F.3d 1219, 1223 (9th Cir. 1999).
VI. DISCUSSION
Rule 7004 sets forth the procedure for serving a summons in an
adversary proceeding. If jurisdiction is consistent with the Constitution and
laws of the United States, personal jurisdiction over a defendant may be
obtained by serving a summons or filing a waiver of service in accordance
with Rule 7004 and the subdivisions of Civil Rule 4 made applicable to
adversary proceedings. Rule 7004(f). When the defendant is a debtor in an
open bankruptcy case, service of the summons may be made through first
class mail postage prepaid “by mailing a copy of the summons and
complaint to the debtor at the address shown in the petition or to such
other address as the debtor may designate in a filed writing.” Rule
7004(b)(9). In addition, if the debtor is represented by an attorney, then
service must also be made on the debtor’s attorney by means authorized
under Civil Rule 5(b). Rule 7004(g).
Rule 7004(a) incorporates Civil Rule (4)(m), which provides in
pertinent part that:
[i]f a defendant is not served within 90 days after the complaint
is filed, the court--on motion or on its own after notice to the
plaintiff--must dismiss the action without prejudice against that
defendant or order that service be made within a specified time.
But if the plaintiff shows good cause for the failure, the court
must extend the time for service for an appropriate period.
Civil Rule (4)(m).
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SSA asserts that the bankruptcy court erred in determining that SSA
failed to serve Hillyer with the summons and complaint. But the only
evidence before the bankruptcy court and on appeal establishes the
contrary. SSA neither argued nor presented any evidence that it timely
mailed a copy of the summons and complaint to Hillyer as required by
Rule 7004(b) and Civil Rule 4(m). Nor did it present any evidence that it
mailed a copy of the summons to Hillyer’s counsel in compliance with Rule
7004(g). Thus, there is no merit to SSA’s argument that the bankruptcy
court improperly determined that SSA failed to timely serve Hillyer.
While not challenged on appeal, we note that the bankruptcy court
also properly determined that SSA did not demonstrate that good cause
existed for its noncompliance with Rule 7004 and Civil Rule 4(m). SSA’s
ignorance of service rules “and half-hearted attempts to serve the
defendant do not constitute good cause[.]” Cartage Pac., Inc. v. Waldner (In
re Waldner), 183 B.R. 879, 882 (9th Cir. BAP 1995).
Though good cause had not been shown, the bankruptcy court had
broad discretion to extend the period for service. Efaw v. Williams, 473 F.3d
1038, 1041 (9th Cir. 2007); In re
Sheehan, 253 F.3d at 513. There is no specific
test for a bankruptcy court to employ in determining whether to exercise
its discretion. Among other things, it “may consider factors ‘like a statute of
limitations bar, prejudice to the defendant, actual notice of a lawsuit, and
eventual service.’”
Efaw, 473 F.3d at 1041 (quoting Troxell v. Fedders of N.
Am., Inc.,
160 F.3d 381, 383 (7th Cir. 1998)). Admittedly, the record does not
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indicate that Hillyer suffered meaningful prejudice by SSA’s delay in
service. Nevertheless, and contrary to SSA’s urging, the facts of this case
clearly did not require the exercise of discretion to extend the service
period under Civil Rule 4(m).
SSA did not articulate any cognizable prejudice before the
bankruptcy court or us. Had the bankruptcy court granted SSA an
extension of time to serve Hillyer, Hillyer’s discharge would have
nevertheless enjoined SSA from continuing to seek damages against her.
See § 524(a)(2). In addition, SSA would not be entitled to a distribution
from the bankruptcy estate on its claims because it failed to file a proof of
claim and because the chapter 7 trustee issued a report of no distribution.
Thus, SSA would be limited to its pursuit of injunctive relief.
And as to injunctive relief claims, the majority of courts hold that
these claims survive discharge; Hillyer does not dispute that SSA can refile,
presumably in the state court, to seek such relief. See Kennedy v. Medicap
Pharmacies, Inc., 267 F3d 493, 497-98 (6th Cir. 2001); In re Udell, 18 F.3d 403,
408-09 (7th Cir. 1994); Dent Wizard Int’l Corp. v. Brown (In re Brown),
237 B.R. 740, 745 (Bankr. C.D. Cal. 1999).
We also note that SSA did not assert that its claims would be barred
by a statute of limitations following a dismissal of the adversary
proceeding. But even in such a case, the requirements of “[Civil] Rule 4(m)
are not altered by the intervention of a time bar that precludes refiling,”
such that the bankruptcy court’s authority to dismiss the complaint would
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be eliminated. Herrero v. Guzman (In re Guzman), No. CC-10-1013-HDMk,
2010 WL 6259994, at *5 (9th Cir. BAP Sept. 20, 2010); see also Guerrero v.
Baca, No. 03-57203, 154 F. App’x 601 (9th Cir. 2005); Deluxe Mktg., Inc. v.
Deluxemarketingincscam.wordpress.com, No. CV-13-02144-PHX-SPL,
2014 WL
4162270, at *5 (D. Ariz. Aug. 20, 2014). SSA has waived any such prejudice
argument, and it would not be dispositive if raised.
Finally, we disagree with SSA that it established that Hillyer received
a copy of the complaint or otherwise received actual notice of the
adversary proceeding. Hillyer stated in a declaration that she never
received service of the complaint, and SSA only submitted evidence that it
mailed the complaint to Hillyer’s counsel. A defendant “could not be
presumed to have actual notice merely because the complaint was served
on his attorney.” In re Sheehan, 253 F.3d at 512 n.5. And notice or awareness
is only part of the equation; it is beyond doubt that the bankruptcy court
never acquired jurisdiction over Hillyer in the adversary proceeding
because SSA never served the summons. Indeed, SSA did not serve Hillyer
even after it became aware of the defects in its service attempt.
Based on the foregoing, we discern no abuse of discretion in the
bankruptcy court’s dismissal of the adversary proceeding for failure to
properly serve the summons and complaint.
VII. CONCLUSION
Accordingly, we AFFIRM.
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