IN RE: LAKE MATHEWS MINERAL PROPERTIES (2021)

United States Court of Appeals, Ninth Circuit.2021-08-06No. No. 20-55276

Summary · law.co

Holding. The court affirmed the district court's order upholding the bankruptcy court's disallowance of Merritt's proof of claim and affirmed the denial of his motion for reconsideration, because Merritt failed to prove the validity of his claim by a preponderance of the evidence, having only an equity interest rather than a qualifying creditor claim.

Paul Merritt appealed the district court's affirmation of a bankruptcy court order that rejected his proof of claim in a bankruptcy proceeding. Merritt failed to establish the validity of his claimed interest through adequate evidence. The court found that Merritt possessed at most an equity stake in the debtor entity, which is insufficient to support an allowed proof of claim; a creditor must demonstrate more than mere ownership interest to succeed in such a claim.

The appellate court reviewed the district court's legal conclusions without deference and examined factual findings for clear error. Finding no deficiency in the district court's reasoning, the court affirmed both the disallowance of the proof of claim and the district court's rejection of Merritt's subsequent motion for reconsideration.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether a proof of claim based solely on equity ownership in a debtor entity is sufficient to establish a valid claim
Whether the district court erred in affirming the bankruptcy court's disallowance of the claim
Whether reconsideration was warranted when no underlying error existed

Procedural posture

Merritt appealed pro se from the district court's affirmation of the bankruptcy court's disallowance of his proof of claim, and the appellate court reviewed the matter de novo as to legal conclusions and for clear error as to factual findings.

Authorities cited

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Opinion · public domain

MEMORANDUM **

Paul Merritt appeals pro se from the district courts order affirming the bankruptcy courts order disallowing his proof of claim. We have jurisdiction pursuant to 28 U.S.C. § 158(d). We review de novo a district courts judgment on appeal from a bankruptcy court. In re First T.D. & Inv., Inc., 253 F.3d 520, 526 (9th Cir. 2001). We apply the same standard of review applied by the district court, reviewing the bankruptcy courts legal conclusions de novo and its factual determinations for clear error. Id. We affirm.

The bankruptcy court properly disallowed Merritts proof of claim because he failed to prove its validity by a preponderance of the evidence. See Lundell v. Anchor Const. Specialists, Inc., 223 F.3d 1035, 1039 (9th Cir. 2000). The record demonstrates that Merritt has at most an equity interest in the debtor. “It is axiomatic that an allowed proof of claim requires something more than mere equity ownership.” In re USA Com. Mortg. Co., 377 B.R. 608, 615 (B.A.P. 9th Cir. 2007). The district court thus did not err in affirming the bankruptcy courts disallowance of Merritts proof of claim.

Because the district court did not err in affirming the bankruptcy courts disallowance of Merritts proof of claim, there was no error for the district court to correct on Merritts motion for reconsideration. Thus, the district court did not abuse its discretion in denying that motion.

Sch. Dist. No. 1J, Multnomah Cnty. v. ACandS, Inc., 5 F.3d 1255, 1262 (9th Cir. 1993).

We do not consider matters not specifically and distinctly raised and argued in the opening brief or arguments raised for the first time on appeal. See Padgett v. Wright, 587 F.3d 983, 985 n.2 (9th Cir. 2009) (per curiam).

AFFIRMED.

FOOTNOTES

. Appellee argues that the scope of this appeal is limited to review of the district courts order denying Merritts motion for reconsideration. However, because Merritt timely filed a reconsideration motion—which we construe as a motion for rehearing under Rule 8022 of the Federal Rules of Bankruptcy Procedure—and subsequently timely filed a notice of appeal following the district courts denial of his reconsideration motion, we have jurisdiction to review both the district courts order affirming the bankruptcy courts order disallowing Merritts proof of claim and the district courts order denying Merritts motion for reconsideration. See Fed. R. App. P. 6; Fed. R. Bankr. P. 8022.