OPINION
INTRODUCTION
In this appeal we consider the standing of subsequent purchasers of property sold
FACTS
In 1990, La Sierra Financial Services, Inc. (“Debtor”) was the holder of a note and deed of trust in real property known as Lot 33, at 1 Rolling View Lane, in Fallbrook, California (the “Property”). In 1991, Debtor purportedly assigned its interest in the deed of trust to appellant Daniel Hasso (“Hasso”).
In 1994, an involuntary bankruptcy was filed against Debtor. An order of relief was entered and the case was then converted to a voluntary chapter 11 1 case, and a trustee (“Trustee”) was appointed. Debtor’s schedules listed the Property as property of the estate, and the estate was subsequently given a deed in lieu of foreclosure. Trustee moved for approval to sell the Property, but did not give Hasso notice of the sale motion. On December 22,1994, the court approved the sale of the Property, free and clear of liens, to Tony and Jude Ann Kempf (“Kempfs”).
In May, 1995, Trustee moved to amend the sale order, in part by reducing the sale price. An order approving the sale, as amended, was entered on June 16, 1995. The sale then closed and the Property was transferred to the Kempfs.
Three years later, in April, 1998, Hasso moved for partial vacatur of the December 22, 1994 and June 16, 1995 sale orders (“Sale Orders”), asserting lack of due process and that the Sale Orders were therefore void in regard to his purported lien interest.
At the hearing, the court found that Hasso’s right to due process was violated by Trustee’s failure properly to serve Has-so with the sale motion. The court also expressed concern about whether Hasso had given proper notice of his motion to the Kempfs, whose ownership rights would be directly affected by the court’s order, and who had not appeared. Hasso assured the court that he had mailed his motion to the Kempfs. He actually had mailed it to the Property address at “1 Rolling View Lane,” instead of to the Kempfs’ residence at “3 Rolling View Lane.”
In its July 15, 1998 order (“Hasso Vaca-tur Order”), the court vacated the Sale Orders “to the extent that [they purported] to affect the rights of Daniel Hasso with respect to any [lien] interest he may have in the Fallbrook Property.” This judgment effectively revived Hasso’s lien. The Kempfs then sold the Property to Judith Brilliant (“Brilliant”).
Two years after obtaining partial relief from the Sale Orders, in June, 2000, Has-so, as beneficiary under the deed of trust, commenced foreclosure against the Property, indicating a debt balance of $886,368.
In July 2000, Brilliant sold the Property to Steven L. Mozsgai and Cecilia A. Moz-sgai, Trustees of the Steven L. Mozsgai and Cecilia A. Mozsgai Revocable Living Trust dated May 4, 1999 (“Mozsgai”), the appellees herein. Mozsgai brought a quiet title action in state court, and posted a bond to stay Hasso’s foreclosure.
Mozsgai then filed, in bankruptcy court, a motion to vacate the Hasso Vacatur Order, supported by the declaration of Anthony Kempf, dated February 23, 2001. Mr. Kempf averred that he and his wife lived at “3 Rolling View Lane,” from May of 1996 to August of 1998, but that “[n]either my wife nor I ever resided at the
Hasso opposed the motion, without alleging that the Kempfs had actual notice of his 1998 motion. However, at a hearing on Mozsgai’s motion, Hasso requested a continuance to conduct discovery concerning the Kempfs actual notice. The court denied the continuance, and found that Moz-sgai had carried the burden of proof that the Kempfs had not been given the required notice of Hasso’s motion.
On August 28, 2001, the court entered its order (“Mozsgai Vacatur Order”) vacating the Hasso Vacatur Order in its entirety. Thus, once again, Hasso found himself without a lien on the Property.
Hasso filed a timely motion for reconsideration. He contended that the court’s finding of lack of notice to the Kempfs was erroneous, and that the court also erred by refusing to continue the matter for discovery and a more extensive evidentiary hearing.
Hasso filed a copy of a United States Postal Service guideline, which stated its policy to deliver mail to known addressees even if it is otherwise undeliverable at the address given. Hasso also filed declarations stating that the motion, which was mailed to the Kempfs at “1 Rolling View Lane,” had not been returned as undeliverable.
Mozsgai filed an opposition, and then, just days before the hearing, Hasso filed a reply, to which he attached Mr. Kempfs new September 30, 2001, declaration, in which Mr. Kempf stated:
3. I informed counsel for Mozsgais that we had received mail from [Hasso’s attorney] in 1998 that had not been properly addressed to us. It was my position, and remains my position, that such mailing with the wrong address did not constitute proper service, and we did not need to respond.
When the motion for reconsideration was heard, the court stated that the tardy declaration was “iffy at best” with regard to what mail Mr. Kempf received and when he was served. (Transcript, October 9, 2001, at 4:13-14.) The court further stated that this evidence could have been presented in the hearing on the original motion. 2
Hasso again requested a continuance for discovery. The court denied the motion, without prejudice to Hasso’s filing a renewed motion to vacate with proper notice. The order denying the motion for reconsideration was entered on October 30, 2001. Instead of refiling a motion to vacate, Hasso filed this appeal.
ISSUES
1. Whether subsequent nonparty purchasers of property sold by a bankruptcy estate have standing to appear in cases and seek relief from orders which may affect their property interests.
2. Whether the Hasso Vacatur Order was void for lack of due process, and whether the court abused its discretion in denying Hasso’s motion for reconsideration.
3. Whether the court abused its discretion in denying Hasso’s request for a continuance to discover whether the Kempfs had actual notice of his 1998 motion to vacate the Sale Orders and restore his lien.
STANDARDS OF REVIEW
Standing and the bankruptcy court’s jurisdiction are legal issues, which we review
de novo. Culver, LLC v. Chiu (In re Chiu),
The decision to set aside a judgment as void is reviewed
de novo. See Export Group v. Reef Indus., Inc.,
The bankruptcy court’s denial of a continuance and its discovery decisions are reviewed for an abuse of discretion.
United States ex rel. Hawaiian Rock Prods. Corp. v. A.E. Lopez Enters., Ltd.,
DISCUSSION
A. Property Owners Have Standing to Appear in and Initiate Rule 60(b) 3 Motions which Affect their Interests
The bankruptcy court found that both the Kempfs and Mozsgai, respectively, were pecuniarily affected by the Rule 60(b) hearings in bankruptcy court and thus had standing to appear therein. Hasso disagrees, maintaining that they were not parties to the Sale Orders, and that Moz-sgai cannot assert the Kempfs’ due process rights.
The doctrine of standing encompasses both constitutional limitations on federal court jurisdiction, i.e., the “case” or “controversy” requirement of Article III, and prudential limitations on a court’s exercise of that jurisdiction. The party asserting standing bears the burden of proving it.
Bennett v. Spear,
Constitutional standing requires:
(1) that the plaintiff have suffered an “injury in fact” — an invasion of a judicially cognizable interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) that there be a causal connection between the injury and the conduct complained of — the injury must be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court; and (3) thatit be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.
Id.
at 167,
Prudential standing requires that a plaintiffs grievance must fall within the “zone of interest” protected by the statute or constitutional right invoked and that a litigant must assert his or her own rights or interests and not those of a third party.
Bennett,
Rule 60(b) states, in relevant part:
On motion and upon such terms as are just, the court may relieve a party or a party’s legal representative from a final judgment, order, or proceeding for the following reasons: ... (4) the judgment is void.
“Rule 60(b) does not
grant
anyone standing to bring an independent action; it merely does not restrict any standing a party otherwise has.”
Herring v. F.D.I.C.,
1. The Kempfs were Interested Parties in Hasso’s Motion
The basis for Mozsgai’s motion to set aside the Hasso Vacatur Order was that the Kempfs had not been afforded due process because notice to them was defective. Hasso maintains that the Kempfs did not come within the zone of interests for his 1998 motion because they were not parties to the Sale Orders which he was seeking to vacate in part. Therefore, we first examine the notice requirement for Hasso’s motion.
Rule 9013 provides that written motions “shall be served by the moving party on the trustee or debtor in possession and on those entities specified by these rules, or if service is not required or the entities to be served are not specified by these rules, the moving party shall serve the entities the court directs.” Fed. R. Bankr.P. 9013.
The Kempfs, being third-party buyers, were not entitled to statutory notice of Trustee’s sale motions. See Fed. R. Bankr.P. 2002(a), 6004. However, when Hasso sought to vacate the Sale Orders two years later and to reassert his $800,000 lien in what was then the Kempfs’ property, his motion directly affected the Kempfs. The Kempfs were faced with an “injury in fact” sufficient to confer upon them constitutional standing.
The bankruptcy court further deemed the Kempfs interested parties in Hasso’s motion and ruled that they should be given notice:
THE COURT: What about question of the present . the — this service on .. owners?
MR. BLANK: The present owners. But we served them because we figured they’d want to know about it, and I was surprised that they didn’t attempt to respond to it.
THE COURT: Well, doesn’t this affect their rights?
MR. BLANK: Yes, I think it does.
THE COURT: Directly, it does.
MR. BLANK: Yes.
Transcript, June 30,1998, at 37-39.
Section 1109(b) provides that a party in interest “may raise and may appear and be heard on any issue in a case under this
Section 1109(b) is implemented by Rule 2018, which provides that “... for cause shown, the court may permit any interested entity to intervene generally or with respect to any specified matter.” Fed. R. Bankr.P. 2018(a). “Cause” may be an economic interest or the fact that no other entity exists to adequately protect the interested entity’s position. 9 Collier on Bankruptcy ¶ 2018.04[3] (Alan N. Resnick & Henry J. Sommer, eds., 15th ed. rev. 2002). This rule also permits the court to require that notice be given to such interested parties. Fed. R. Bankr.P. 2018(e).
Here, the court not only deemed the Kempfs to be interested parties, but in addition required Hasso to serve them with his motion to vacate, in part, the Sale Orders and reimpose his lien, which motion affected them directly and pecuniarily.
Hasso did not appeal the bankruptcy court’s use of its discretion in this matter; thus he waived any objection to the Kempfs’ status as interested parties. Indeed, in order to obtain relief at the 1998 hearing, Hasso, through his attorney, admitted that the Kempfs were interested parties. Therefore, Hasso is also judicially estopped from now asserting that the Kempfs were not entitled to notice.
Hamilton v. State Farm Fire & Cas. Co.,
2. Mozsgai has Standing to Seek Vacatur
Hasso contends Mozsgai lacks standing to assert a violation of the Kempfs’ rights in the current proceeding. We disagree, and conclude that Mozsgai has standing, both as the Kempfs’ privy and independently.
A judgment may be set aside as void under Rule 60(b)(4) if the court acted in a manner inconsistent with due process of law.
Owens-Coming Fiberglas Corp. v. Center Wholesale, Inc. (In re Center Wholesale, Inc.),
A party in privity is bound in the same way the party is bound.
See Rivet v. Regions Bank of La.,
Mozsgai’s interest is precisely the same property interest which the Kempfs had in 1998. Since the Kempfs were interested parties in Hasso’s motion, so, too, is Mozsgai. Mozsgai is therefore in “privity” with the Kempfs, who were interested parties in the Hasso Vacatur Order, but were denied the opportunity to become formal parties for lack of notice.
Mozsgai also has independent standing to move to set aside the Hasso Vacatur Order because Mozsgai would be adversely affected if the court did not modify or vacate the Hasso Vacatur Order.
See Cheadle v. Appleatchee Riders Ass’n (In re Lovitt),
In
Lovitt,
the unnoticed purchaser of mineral leases objected on the grounds that the movant lacked standing to set aside the sale because it was a nonparty. The Ninth Circuit found that Rule 60(b) did not govern the motion because the movant was neither a party, nor in privity with, a party to the
ex parte
sale order. It then looked to the
Restatement (Second) of
In
Center Wholesale,
a creditor, who was not a party to a cash collateral order, was found to have standing to make a Rule 60(b)(4) motion to vacate the order on due process grounds because its property rights were adversely affected by the challenged order.
Center Wholesale,
The Ninth Circuit has held that “[a] nonparty may seek relief from a judgment procured by fraud if the nonparty’s interests are directly affected.”
Eyak Native Village v. Exxon Corp.,
Hasso argues that breaking the general rule against nonparties seeking relief from a judgment would open the floodgates of litigation by allowing nonparties, even those far removed from the litigation by time and space, to revisit a final judgment. We agree that nonparties who would not be directly affected by the outcome of the action do not have the right to seek relief under Rule 60(b).
See Thomas, Head & Greisen Employees Trust v. Bust
In contrast, Mozsgai has a direct pecuniary interest in the Hasso Vacatur Order because the order arguably reinstated an $800,000 hen on the Property. In addition, Mozsgai is in privity with the Kempfs, whose due process rights were violated. We therefore hold that real property owners, like Mozsgai, who have standing based on their affected property interests, may move pursuant to Rule 60(b)(4) to vacate orders that may directly and pecuniarily affect their interests. 8
3. Bankruptcy Court had Subject Matter Jurisdiction
In granting the Mozsgai Vacatur Order, the bankruptcy court set aside its previous Hasso Vacatur Order, which, in turn, revived the partially voided Sale Orders. Hasso’s argument challenges the bankruptcy court’s subject matter jurisdiction to resurrect the Sale Orders, because a void order is a “legal nullity.”
Watts v. Pinckney,
A bankruptcy court always has the “power to reconsider, modify or vacate” its previous orders “so long as no intervening rights have become vested in reliance on the orders.”
Lenox,
Thus, when the bankruptcy court vacated the Hasso Vacatur Order, it revisited the Sale Orders insofar as they may have affected Hasso’s alleged hen. Jurisdiction was present as necessary to afford all affected parties any relief to which they were entitled. We conclude, therefore, that the bankruptcy court had subject matter jurisdiction for its ruling.
B. Service on the Kempfs did not Satisfy Due Process
The bankruptcy court ruled that the Hasso Vacatur Order was void for insufficient notice to the Kempfs. “[T]here is no discretion to refuse to vacate a judgment if it is void.”
Kaczmarczik v. Van Meter (In re Van Meter),
Under Rule 60(b)(4), a judgment is void “only if the court that rendered judgment lacked jurisdiction of the subject matter, or of the parties, or if the court acted in a manner inconsistent with due process of law.”
Center Wholesale,
The standard for notice which complies with the Due Process Clause is “notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.”
Mullane v. Central Hanover Bank & Trust Co.,
Motions such as those filed by Hasso and Mozsgai, which resulted in the Hasso Vacatur Order and the Mozsgai Vacatur Order, commence contested matters under Rule 9014. Under that rule there must be reasonable notice and an opportunity for a hearing on the matter.
See Duff v. U.S. Trustee (In re Cal. Fidelity, Inc.),
Mailing a timely notice by first class mail to a party’s last known address is sufficient to satisfy due process.
DeVore v. Marshack (In re DeVore),
Hasso mailed the motion to “1 Rolling View Lane” instead of the correct address of “3 Rolling View Lane.” Therefore, Hasso was not entitled to the presumption of service, but rather had to prove that the Kempfs had actual notice and a reasonable opportunity to be heard.
See Cal Fidelity,
When Mozsgai’s motion was heard, Has-so did not produce any evidence of actual notice to the Kempfs. Mozsgai produced evidence that the Kempfs did not reside at the address to which Hasso’s motion was sent. Therefore, the court’s finding that the Kempfs did not receive due process was not erroneous. 10
With his subsequent motion for reconsideration of the Mozsgai Vacatur Order, Hasso, for the first time, presented evidence of the post office guideline to deliver mail to known addressees, as well as declarations stating that the mailing had not been returned as undelivered. In addition, in a reply pleading, Hasso presented a new declaration by Mr. Kempf, dated September 30, 2001, in which he stated that the Kempfs had “received mail” from Hasso’s attorney, in 1998, which “had not been properly addressed to us.”
In order to establish that the court abused its discretion in denying Has-so’s motion for reconsideration on the basis of such newly discovered evidence, Hasso had to show that “(1) the evidence was discovered after trial, (2) the exercise of due diligence would not have resulted in the evidence being discovered at an earlier stage and (3) the newly discovered evidence is of such magnitude that production of it earlier would likely have changed the outcome of the case.”
Defenders of Wildlife v. Bernal,
Hasso’s motion did not meet these requirements. The court expressly found that Mr. Kempfs statement that he received mail in 1998 did not sufficiently identify that mail as Hasso’s motion nor prove that the motion was timely served. That finding was not clearly erroneous. 11
C. Denial of the Continuance was not an Abuse of Discretion
Hasso argues that the court abused its discretion by refusing his motion for a continuance for discovery and further hearing on the issue of whether the Kempfs received actual notice.
A bankruptcy court has wide latitude in controlling discovery.
Mulvania,
We will not disturb a denial of continuance for purposes of discovery unless the party shows “actual and substantial prejudice.”
Martel v. County of Los Angeles,
Hasso did not indicate how additional time and investigation would yield the required evidence. He already had several months to discover the facts, but waited until the very end of the proceedings to produce a document which did not prove his point.
13
Denial of a continuance is appropriate where the complaining party does not commence discovery early enough in the proceedings.
See DeLorean v. Allard (In re DeLorean Motor Co. Litig.),
Hasso cites
Svob v. Bryan (In re Bryan),
Hasso also cites
Nikwei v. Ross School of Aviation, Inc.,
CONCLUSION
Mozsgai had standing to seek relief from the Hasso Vacatur Order which directly and pecuniarily affected Mozsgai’s ownership interest in the Property. Moreover, Mozsgai’s privies, who were interested parties in Hasso’s motion, did not have the opportunity to oppose the motion. Therefore, the court’s conclusion that the Hasso Vacatur Order was void for lack of due process was not erroneous. Lastly, the court did not abuse its discretion in denying Hasso’s motions for reconsideration and for a continuance for discovery and further hearing.
The August 28, 2001 Mozsgai Vacatur Order and October 30, 2001 order denying Hasso’s motion for reconsideration are therefore AFFIRMED.
Notes
. Chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330.
. Mozsgai provided Hasso with the Kempfs' address in discovery responses in the state court action. Hasso then alleged, throughout these proceedings, that he could not locate the Kempfs earlier because the address provided by Mozsgai was incorrect. In light of Hasso's ability to file Mr. Kempfs declaration at the very last minute, the court properly gave little weight to this excuse, which did not rise to the level of an allegation of fraud or estoppel.
. Federal Rule of Civil Procedure 60(b), incorporated by Federal Rule of Bankruptcy Procedure 9024. Unless otherwise indicated, rale references are to the Federal Rules of Bankruptcy Procedure, Rules 1001-9036.
. Section 1109(b), in its entirety, reads:
(b) A party in interest, including the debtor, the trustee, a creditors’ committee, an equity security holders' committee, a creditor, an equity security holder, or any indenture trustee, may raise and may appear and be heard on any issue in a case under this chapter.
11 U.S.C. § 1109(b).
. Hasso contends that the preclusive effect of the order on Mozsgai is an issue that can be determined in state court, but should not be used to give unnecessary "ancillary jurisdiction” to the bankruptcy court. We disagree. To ascertain whether the Hasso Vacatur Order was void, the bankruptcy court had jurisdiction to examine the due process violation claim brought by Mozsgai.
. Nonparties who have constitutional standing are often allowed to participate in litigation even if they have not followed the appropriate procedures, such as filing a motion to intervene. In the Ninth Circuit, technical defects in motions for intervention may be overlooked if a court is apprised, other than in a compliant pleading, of the grounds for such intervention.
See Beckman Indus., Inc. v. Int’l Ins. Co.,
In our case, Trustee did not take the initiative in this matter, and it fell to Mozsgai to protect its own interest in the property. In effect, Mozsgai's motion was a deemed motion to intervene, pursuant to § 1109(b) and Rule 2018.
. There, the Ninth Circuit also considered the movants' standing in light of the trial court’s inherent power to investigate
sua sponte
a judgment procured by fraud.
Eyak,
See also Wetmore v. Karrick,
. Two cases cited by Hasso are distinguishable.
Western Steel Erection Co. v. United States,
United States v. 5145 N. Golden State Blvd.,
. In addition to the court's ability to grant relief from judgments under Rule 60(b)(l-6), Rule 60(b) also has a separate savings clause for independent actions, which provides: "This rule does not limit the power of a court to entertain an independent action to relieve a party from a judgment, order, or proceeding, ... or to set aside a judgment for fraud upon the court.” Fed.R.Civ.P. 60(b). See generally Wright, Miller & Kane, supra, § 2851.
The independent action is considered to be an exercise of the court’s inherent authority which is preserved in Rule 60(b), as one court explained:
When a court grants relief from a judgment or decree by a new trial or rehearing, or by one of the ancillary common law or equitable remedies or their modern substitute, a motion, it is exercising a supervisory power of that court over its judgment; but the original bill, or independent action, to impeach for fraud, accident, mistake, or other equitable ground is founded upon an independent and substantive equitable jurisdiction.
Brunelle,
The Supreme Court has opined that independent actions are available under the sav
We need not decide, here, the form of the court's subject matter jurisdiction, but only that it had jurisdiction over the void judgment.
. The bankruptcy court stated that it was inferring, "from the evidence before me, all of the evidence, not just the evidence of the one with the burden [of proof], but the evidence of all who presented evidence, that the notice was not adequate.” (Transcript, August 14, 2001, at 12:14-17.)
. Hasso also maintains that the court applied the incorrect legal standard because it failed to view the evidence in the light most favorable to him as the nonmoving party.
See
Fed. R. Bankr.P. 7056/Fed. R. Civ. P. 56;
see also
Fed. R. Bankr.P. 9014 (incorporating summary judgment procedure in contested motion practice). He believes application of
However, this was not a summary judgment proceeding. In a summary judgment motion, the facts are static and judgment is entered as a matter of law. See generally 10A Charles Alan Wright, Arthur R. Miller and Mary Kay Kane, Federal Practice and Procedure: Civil 3d, § 2711 et seq. (1998). Here, judgment resulted from the court’s findings and conclusions concerning due process drawn from the evidence presented at the hearing on Moz-sgai's motion. See Fed. R. Bankr.P. 9014, 7052(a).
. This ruling was consistent with the court’s resolution of Hasso’s motion, in 1998, where the court agreed to vacate, as to Hasso, the Sale Orders because it found no evidence that Hasso had received notice of the sale motion.
. As noted above, Hasso alleged that he was prevented from locating the Kempfs until the last minute. Even if he was provided with an incorrect address in the first instance, we do not see how Hasso was prejudiced by the court's ruling. He obtained a declaration from Mr. Kempf, but it lacked the necessary information to support his claim.