Bankruptcy attorneys have the ability to pick which procedure to use. However, the choice can be fraught with peril if the bankruptcy attorney is not experienced. Whether a particular procedure comports with Due Process is a legal question that is reviewed de novo. Garner v. Shier (In re Garner), 246 B.R. 617, 619 (9th Cir. BAP 2000); Alonso v. Summerville (In re Summerville), 361 B.R. 133, 139 (9th Cir. BAP 2007).Further, an Appellate court decides, de novo, whether the Bankruptcy Court applied the correct legal standard. See, Siegel v. Federal Home Loan Mortg. Corp., 143 F.3d 525, 528 (9th Cir.1998).
It is well-established in the 9th Circuit that ” [a] motion procedure cannot be used to circumvent the requirement of an adversary proceeding.”In re Loloee, 241 B.R. 655, 660(9th Cir. BAP) citing Bear v. Coben (In re Golden Plan) 829 F. 2d 705, 711-12 (9th Cir. 1986). Other circuits have cited and followed Bear v. Coben. Feld v. Zale Corp. (In reZale Corp.), 62 F.3d 746 (5th Cir. 1995); Havoco of America, Ltd. V. Hill, 197 F.3d 1135 (11th Cir. 1999). Moreover, Bear v. Coben was hardly novel. It merely followed the plain language of the Bankruptcy Rules as well as the 9th Circuit’s earlier case of In re Commercial W.Fin. Corp., 761 F.2d 1329 (9th Cir. 1985). In re Commercial W.Fin. Corp. also cogently pointed out that if a party wants the benefits of a proper ruling from the bankruptcy court it “must carry the burden of following the mandated procedures.” Id. at 1337 accord Feld v. Zale Corp. (In reZale Corp.), 62 F.3d 746, 765 (5th Cir. 1995) and cases cited therein.
Bankruptcy Rule 7001 (1) requires an adversary proceeding to recover money or property. Further, Bankruptcy Rule 7001 (2) requires an adversary proceeding “to determine the validity, priority, or extent of a lien or interest in property…” Both rules plainly required an adversary proceeding in order for the bankruptcy court to determine an interest in property. glaringly defective in several respects. First Bankruptcy Rule 7001(1) plainly and explicitly provides that “a proceeding to recover money or property” is an adversary proceeding.
The requirement of Due Process, whether found in the Bankruptcy Rules 7001 et. cet.. or the Fifth Amendment, is not a mere procedural triviality. It is an ancient and venerable right recognized in Magna Carta of 1245. Indeed, its inclusion in Magna Carta was an acknowledgment of an ancient legal principal whose origins go back even earlier than the available written record.
The concept of Due Process is the embodiment of how we, as a civilized society, agree to treat litigants fairly and respectfully. It further is designed to help the Courts arrive at fair and correct conclusions. The written rules requiring a complaint, summons, discovery and evidentiary proceedings all are designed provide Due Process in order to arrive at a fair and just adjudication. Long ago it was established and understood that these are not mere trivialities to be dispensed with whenever it might happen to be expedient. No, these are the bedrock and the foundations of justice and fairness. It is upon this foundation that our entire court systems rests. It cannot be ignored.
The United States Supreme Court has repeatedly pronounced that “Due Process Clauses protect civil litigants who seek recourse in the courts, either as defendants hoping to protect their property or as plaintiffs attempting to redress grievances.” Logan v. Zimmerman Brush Co., 455 U.S. 422, 429, (U.S. 1982) citing Societe Internationale v. Rogers, 357 U.S. 197, 78 S.Ct. 1087, 2 L.Ed. 1255 (1958). The Supreme Court has made is clear that the 5th Amendment Due Process Clause imposes “constitutional limitations upon the power of courts, even in aid of their own valid processes” preventing resolution of an action without first “affording a party the opportunity for a hearing on the merits of his cause” Societe Internationale v. Rogers, at 209 see also Hammond Packing Co. v. Arkansas, 212 U.S. 322, 349-351, 29 S.Ct. 370, 379-380, 53 L.Ed. 530 (1909) (power to enter default); Hovery v. Elliott, 167, U.S. 409, 17 S.Ct. 841, 42 L.Ed. 215 (1897) (same); Windsor v. McVeigh, 93 U.S. 274, 23 L.Ed. 914 (1876) (same). Cf. Wolff v. McDonnell, 418 U.S. 539, 558, 94 S.Ct. 2963, 2975, 41 L.Ed2d 935 (1974).
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