In re: Ruben Gonzalez Cuevas, CC-15-1032-KuKiTa CC-15-1353-KuKiTa

Ruben Gonzalez Cuevas (70+, limited income) lived in a house owned by the Juliana Cuevas Living Trust; title disputes with his sister Grace Dibble led to prolonged probate and bankruptcy litigation.
Cuevas filed chapter 7 in 2007; the chapter 7 trustee recovered title for the trust and pursued eviction and sale; the homestead exemption claim by Cuevas was denied in the chapter 7 case.
In December 2014, while the chapter 7 case remained open and an unlawful detainer trial was imminent, Cuevas filed a chapter 13 petition that stayed the eviction.
The bankruptcy court sua sponte issued an order to show cause, found Cuevas filed chapter 13 in bad faith to delay eviction and increase opponents’ costs, dismissed the chapter 13 case, and barred refiling for two years.
The court also issued substantial sanctions against Cuevas’ counsel Philip Koebel under Rule 9011 and the court’s inherent authority (monetary awards and referral for disciplinary action).
Cuevas and Koebel appealed; the Panel reviewed the dismissal for abuse of discretion (bad faith under the totality of circumstances) and sanctions for abuse of discretion, and found appellants forfeited arguments on sanctions for failure to brief them properly.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether chapter 13 case should be dismissed for debtor bad faith	Cuevas: petition filed in good faith to address post-chapter 7 debts and potential trust distribution/exemption	Bankruptcy court: petition filed to delay eviction, with no realistic ability to fund plan or obtain discharge	Dismissal affirmed; bad faith finding supported by record and totality-of-circumstances review
Whether court exceeded authority by sua sponte dismissing	Cuevas: court lacked authority to dismiss on its own motion	Court/Trustee: §105(a) and §1307(c) permit sua sponte dismissal for cause	Court acted within authority; dismissal proper under §§105/1307
Whether debtor was denied due process in bad-faith proceedings	Cuevas: surprised by bad-faith focus and by opposing party’s late filing	Court: bad-faith issue was clear from order and filings; appellants had opportunity to be heard and later file motion to correct; no prejudice shown	No due process violation shown; no prejudice; claim denied
Whether sanctions against counsel were improper	Koebel: (not substantively briefed on appeal)	Court: counsel acted unreasonably and in subjective bad faith, justifying Rule 9011 and inherent authority sanctions	Sanctions upheld; appellants forfeited appellate challenge by failing to brief the sanctions issues

Leavitt v. Soto (In re Leavitt), 171 F.3d 1219 (9th Cir. 1999) (bad-faith dismissal of chapter 13 analyzed under totality-of-circumstances and Leavitt factors)
Retz v. Samson (In re Retz), 606 F.3d 1189 (9th Cir. 2010) (standard for reviewing bankruptcy factual findings)
U.S. v. Hinkson, 585 F.3d 1247 (9th Cir. 2009) (abuse-of-discretion and clearly-erroneous standards)
Wolfe v. Jacobson (In re Jacobson), 676 F.3d 1193 (9th Cir. 2012) (petition-date controls exemption rights)
Law v. Siegel, 134 S. Ct. 1188 (2014) (limits on bankruptcy court’s power over exemptions)
Frealy v. Reynolds, 779 F.3d 1028 (9th Cir. 2015) (debtor-beneficiary interests in spendthrift trusts)
Price v. Lehtinen (In re Lehtinen), 564 F.3d 1052 (9th Cir. 2009) (standards for appellate review of bankruptcy sanctions)
Grantham Bros. (In re Grantham Bros.), 922 F.2d 1438 (9th Cir. 1991) (collateral attack on prior final bankruptcy orders is improper)