Aja v. Fitzgerald (In Re Aja)
441 B.R. 173
1st Cir. BAP2011Background
- Debtor Dora L. Aja filed chapter 11 in December 2009; U.S. Trustee moved to convert to chapter 7 in January 2010 for lack of property insurance and failure to open a debtor-in-possession account.
- Conversion hearing was scheduled, then sua sponte rescheduled to January 21, 2010; Debtor did not appear at the hearing.
- Bankruptcy court granted the conversion due to use of cash collateral without authority, absence of required insurance, and no likelihood of rehabilitation based in part on a mathematically incorrect operating report.
- Debtor sought reconsideration arguing inadequate notice; the court denied, stating Debtor received timely telephonic notice.
- Debtor later moved to reconvert during stay-relief proceedings; the court denied, finding no basis to reconvert and noting Debtor’s failure to attend the 341 meeting and to turnover estate property.
- Panel dismissed the appeal as moot because the chapter 7 case had progressed to liquidation with property under relief from stay and abandonment of the trustee’s interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was the notice of the Conversion Motion adequate? | Aja contends notice for the hearing was inadequate. | UST contends telephonic notice was adequate given circumstances. | Notice adequate; no reversible error; mootness discussed. |
| Whether reconsideration under Rule 59/60 was proper and timely | Aja argued reconsideration based on notice, insurance, and new evidence. | UST argues timely filing under Rule 60(b); standard is strict; no abuse of discretion. | Timely under Rule 60(b); no abuse; merits weak. |
| Whether the denial of reconversion constituted an abuse of discretion | Aja asserts misapplication of law and facts affecting reorganization prospects. | UST asserts court afforded opportunity and found prospects were infeasible and duties unmet. | No abuse; factual/conduct findings not clearly erroneous. |
| If reversed, would reversal affect the substantive outcome in light of mootness | Aja seeks relief on merits if reconsideration were reversed. | Panel: case status and liquidation render relief ineffective; moot. | Appeal dismissed as moot; alternative merits lack merit. |
Key Cases Cited
- Pioneer Investment Services Co. v. Brunswick Associates, L.P., 507 U.S. 380 (1993) (establishes factors for excusable neglect under Rule 60(b))
- Karak v. Bursaw Oil Corp., 288 F.3d 15 (1st Cir. 2002) (convincing explanation required for Rule 60(b)(2) evidence)
- Davila-Alvarez v. Escuela de Medicina Universidad Central del Caribe, 257 F.3d 58 (1st Cir. 2001) (high standard for Rule 60(b) relief)
- In re LaFata, 483 F.3d 13 (1st Cir. 2007) (extraordinary circumstances for Rule 60(b)(6) relief; fault affects availability)
- In re Sasso, 409 B.R. 251 (1st Cir. BAP 2009) (review of reconsideration and related proceedings in BAP)
- In re Rosson, 545 F.3d 764 (9th Cir. 2008) (courts may adjust notice periods for cause shown)
- In re Shepherds Hill Dev. Co., LLC, 316 B.R. 406 (1st Cir. BAP 2004) (finality and appealability of reconsideration-related orders)
- Eastern Savings Bank, FSB v. LaFata, 483 F.3d 13 (1st Cir. 2007) (new evidence and reconsideration standards in bankruptcy)