United States District Court, W.D. Texas, San Antonio Division
JOSE FRANCISCO ORTIZ-PEREDO and LILIA GUADALUPE LOPEZ, Debtors-Appellants,
MARY K. VIEGELAHN, Standing Trustee, Appellee.
MEMORANDUM OPINION AND ORDER
ORLANDO L. GARCIA CHIEF UNITED STATES DISTRICT JUDGE
in this bankruptcy appeal seek review of three orders entered
by the bankruptcy court. First, on July 18, 2017, the
Bankruptcy Court entered a Memorandum Opinion and Order
sustaining the Chapter 13 Trustee's objections to
confirmation of Appellants' proposed Chapter 13 plan, and
instructing Appellants to submit an amended Chapter 13 plan
within 14 days. Docket no. 9 at 14. Second, on August 1,
2017, the Bankruptcy Court entered an Order Denying
Confirmation of the Plan. Docket no. 9 at 15. Finally, on
August 4, 2017, the Bankruptcy Court entered an Order
dismissing the Chapter 13 case after Appellants did not file
an amended Chapter 13 plan proposal. Docket no. 9 at 15.
filed their notice of appeal as to all three orders on August
18, 2017. Docket no. 9 at 15. Appellee filed a Motion to
Dismiss Appeal (docket no. 2), which argues that this Court
lacks jurisdiction to review the Bankruptcy Court's July
18 and August 1 orders since Appellants did not notice their
appeal within 14 days of the entry of those orders. Docket
no. 2 at 3 (citing Fed.R.Bankr.P. 8002(a)(1)). The Court
finds that the motion to dismiss should be DENIED and that
the Bankruptcy Court's Orders should be AFFIRMED.
a husband and wife, filed a joint Voluntary Petition for
relief under Chapter 13 of the Bankruptcy Code on April 4,
2017. On the same date, they filed a list of their assets,
which included an asset described as "Total Safety
worker's compensation filed in 2014 - pending[.]"
The value of this entry was listed as "Unknown."
Docket no. 9 at 10. Their Schedule C also listed the lawsuit
with a value of "Unknown, " and Appellants entered
"$0.00" as the amount of the exemption they were
claiming under 11 U.S.C. § 522(d)(5). Docket no. 9 at
10-11. Appellee, the Chapter 13 Trustee, objected to
confirmation of Appellant's plan on May 30, 2017. Docket
no. 10 at 9. On June 19, 2017, Appellants filed an Amended
A/B Schedule and an Amended Schedule C, reflecting that the
worker's compensation lawsuit had settled for $22, 500,
yielding a recovery of $8, 632.85 (the settlement funds)
after the payment of litigation costs. Docket no. 11 at
11-12. Appellants filed an Amended Chapter 13 Plan on June
19, 2017, which did not provide for payment of the settlement
funds into the Plan, and subsequently filed a motion seeking
the Bankruptcy Court's approval of the settlement and the
distribution of the settlement funds to the debtor as exempt
and not property of the bankruptcy estate. Docket no. 9 at
14. On July 18, 2017, the Bankruptcy Court issued a
Memorandum Opinion and Order which granted Appellee's
objection to confirmation of Appellants' plan, finding
that the settlement funds were "disposable income"
within the meaning of 11 U.S.C. § 1325(b)(2) and
therefore were required to be applied to make payments to
Appellants' unsecured creditors under 11 U.S.C. §
1325(b)(1)(B). Docket nos. 9 at 14; 10 at 11. That
determination forms the basis for the parties' arguments
on appeal. The Bankruptcy Court granted Appellants fourteen
days to propose a new plan, and denied confirmation of the
plan and dismissed the case when Appellants did not do so.
Docket nos. 9 at 15; 10 at 11.
and Standard of Review
Court has jurisdiction to hear appeals from final judgments,
orders and decrees entered in proceedings before the United
States Bankruptcy Court for the Western District of Texas. 28
U.S.C. § 158(a). On direct appeal of an order of the
bankruptcy court to the district court, findings of fact are
reviewed for clear error, conclusions of law are reviewed
de novo, and missed questions of law and fact are
reviewed de novo. Drive Fin. Services, LP v. Jordan,
521 F.3d 343, 346 (5th Cir. 2008); In re Bass, 171
F.3d 1016, 1021 (5th Cir. 1999).
Motion to Dismiss Appeal (docket no. 2)
States District Courts have jurisdiction to hear appeals from
final judgments, orders, and decrees issued by United States
Bankruptcy Courts, as well as from interlocutory orders and
decrees issued under 11 U.S.C. § 1121(d) and other
interlocutory order and decrees "with leave of the
court[.]" 28 U.S.C. § 158(a), (c)(2). Appeals
pursuant to this section are subject to the time limits
established by Rule 8002 of the Federal Rules of Bankruptcy
Procedure, which, pertinent to this case, require that
"a notice of appeal must be filed with the bankruptcy
clerk within 14 days after entry of the judgment, order, or
decree being appealed." Fed.R.Bankr.P. 8002(a)(1). The
parties do not dispute that Appellants' appeal was
noticed within 14 days of the August 4 Order Dismissing Case,
but Appellee argues that, because Appellants' notice of
appeal was filed more than 14 days after the Bankruptcy
Court's July 18 Memorandum Opinion and Order and August 1
Order Denying Confirmation of the Plan, the appeal is
untimely under Rule 8002(a)(1). Docket no. 2 at ¶¶
12-13. The parties appear to be in agreement that the orders
of July 18 and August 1 were interlocutory rather than final,
and Appellee further argues that, since Appellants did not
notice their appeal within 14 days of the interlocutory
orders which they seek to have reviewed, and did not seek
leave of the Bankruptcy Court to appeal these interlocutory
orders under 28 U.S.C. § 158(a)(3) and Fed. R Bankr.
P.8004(a), this Court lacks jurisdiction to consider their
appeals. Docket no. 2 at ¶ 16 (citing In re
Berman-Smith, 737 F.3d 997, 1000 (5th Cir. 2013)).
response, Appellants correctly note that "[a]n
interlocutory appeal is permissive, not mandatory" and
that "[a] party does not forfeit its right to appeal a
final judgment for failure to appeal inter locutorily."
Docket no. 3 at ¶ 7 (citing In re Chicken Antitrust
Litig. Am. Poultry, 669 F.2d 228, 236 (5th Cir. 1982)
and Matherne v. Wilson, 851 F.2d 752, 756 (5th Cir.
1988)). The Supreme Court has noted that the policy against
piecemeal appeals that applies in most federal cases, which
allows appeals of right only from final decisions, applies
differently in bankruptcy proceedings, in which the rules
authorize appeals of right not only from final judgments, but
also from orders and decrees "if they finally dispose of
discrete disputes within the larger case." Bullard
v. Blue Hills Bank, 135 S.Ct. 1686, 1692 (2015).
However, the Court in Bullard also made clear-as the
parties in this case do not appear to dispute-that an order
denying confirmation of a Chapter 13 plan is interlocutory,
not a final appealable order or decree within the meaning of
28 U.S.C. § 158(a)(1). Bullard, 135 S.Ct. at
1692. Faced with these interlocutory orders, Appellants had
the opinion of seeking leave of court to undertake an
interlocutory appeal-but nothing in 28 U.S.C. §
158(a)(3) or Fed.R.Bankr.P. 8004 required that they do so.
And, when a party elects not to seek leave to appeal an
interlocutory order, that order "merges in the final
judgment and may be challenged in an appeal from that
judgment." Baldwin v. Redwood City, 540 F.2d
1360, 1364 (9th Cir. 1976); In re O&S Trucking,
Inc., 529 B.R. 711, 716 (B.A.P. 8th Cir. 2015),
aff'd, 811 F.3d 1020 (8th Cir. 2016).
Court therefore concludes that Appellee's Motion to
Dismiss Appeal (docket no. 2) should be DENIED.
Chapter 7 and Chapter 13 cases, the Bankruptcy Code permits
debtors to exempt certain property from the bankruptcy
estate. 11 U.S.C. §§541, 522(b). The debtor may
choose between the exemptions set forth in the Bankruptcy
Code or those set forth in state law, and the debtor must
detail the exemptions claimed pursuant to 11 U.S.C. §
522(1) using a Schedule C. 11 U.S.C. § 522(b), (1). If a
claimed exemption is not timely objected to, even if the
claimed exemption is improper, the exemption is conclusively
established. Fed.R.Bankr.P. 4003(b)(1); Taylor v.
Freeland & Kronz, 503 U.S. 638, 642-43 (1992)
(discussing 11 U.S.C. § 522(1)). Subject to certain
exceptions that the parties agree do not apply,
"property exempted ... is not liable during or after the
case for any debt of the debtor that arose ... before the
commencement of the case[.]" 11 U.S.C. § 522(c);
see also Taylor v. Freeland & Kronz, 503 U.S.
638, 642 (1992) (the effect of an exemption under Section 522
is to "allow the debtor to prevent the distribution
of... property" to the bankruptcy estate). The scope of
the property distributed to the bankruptcy estate if not
exempted is broad, encompassing all property set forth in 11
U.S.C. § 541(a), "wherever located and by whomever
held[, ]" including, inter alia, "all
legal or equitable interests of the debtor in property as of
the commencement of the case" and "[a]ny interest
in property that the estate acquires after the commencement
of the case."
order to be confirmed, a Chapter 13 plan must satisfy several
requirements set forth in 11 U.S.C. § 1325(a) and (b).
In re Stretcher,466 B.R. 891, 893 (Bankr.W.D.Tex.
2011). The proposed plan must satisfy the "Best Interest
of the Creditors" test set forth at 11 U.S.C. ...