Mark St. Angelo, Acting U.S. Trustee for Region 17 v. Victoria Farms, Inc.

Opinion by Judge REINHARDT; Partial Concurrence and Partial Dissent by Judge POOLE.

I. Facts

In 1979, debtor Victoria Farms, Inc. (“Victoria Farms”) mortgaged its farm to Equitable Life Assurance Society of the United States (“Equitable”). See S.E.R. tab 1, Ex. A, at 7. The mortgage took the form of a “deed of trust,” which simply granted Equitable a lien on the property. In return, Victoria Farms received $350,000.00.

In 1988, Victoria Farms mortgaged its farm to a second creditor, Visalia Production Credit Association (“Visalia”). See id. at 9. This second mortgage also took the form of a “deed of trust.” In return, Victoria Farms received $376,720.00 from Visalia.

II. Prior Proceedings

A. Bankruptcy Court. In 1990, Victoria Farms voluntarily filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. Pursuant to the bankruptcy court’s approval, Victoria Farms sold the farm in the fourth quarter of 1991 for $594,804.60. Of this amount, $421,447.57 was paid to the first mortgagee (Equitable) by the escrow agent, and $37,150.05 was paid for various closing costs.

The remainder ($136,206.98) was placed in an impound account, which was administered by Victoria…

concurring in part, dissenting in part.

I concur in Sections III.B. and III.C. of the majority’s decision. I dissent with regard to Section III.A.

As a general rule, we will not consider an issue raised for the first time on appeal. See, e.g., Crane v. The Arizona Republic, 972 F.2d 1511, 1520 (9th Cir.1992); Bolker v. Commissioner, 760 F.2d 1039, 1042 (9th Cir.1985). Victoria Farms, Inc. first challenged the constitutionality of the United States Trustee program when the United States Trustee appealed the decision of the bankruptcy court to the district court. The district court refused to consider the issue for the first time on appeal. Presumably the district court thought that the appellate process is best aided by having the issues related to the particular controversy at hand fully contested below, rather than allow the parties to muddy the appellate process with new and untested claims.

Appellee, hoping to avoid $4,250.00 in U.S. Trustee fees has asked us to invalidate the entire U.S. Trustee system as unconstitutionally disuniform. Instead of simply refusing to hear an issue raised for the first time on appeal, the majority entertains appellee’s claim. The majority,…

38 F.3d 1525 63 USLW 2335 , 31 Collier Bankr.Cas.2d 1166 , 26 Bankr.Ct.Dec. 247 , Bankr. L. Rep. P 76,190 Mark St. ANGELO, Acting U.S. Trustee for Region 17, Plaintiff-Appellant, v. VICTORIA FARMS, INC., Defendant-Appellee. No. 93-15254. United States Court of Appeals, Ninth Circuit. Argued and Submitted May 10, 1994. Decided Nov. 1, 1994. T. Patrick Tinker, Executive Office for the U.S. Trustee, Washington, DC, for plaintiff-appellant. Riley C. Walter & Gordon R. Ladwig, McCormick, Barstow, Sheppard, Wayte & Carruth, Fresno, CA, for defendant-appellee. Appeal from the United States District Court for the Eastern District of California. Before CHOY, POOLE, and REINHARDT, Circuit Judges. Opinion by Judge REINHARDT; Partial Concurrence and Partial Dissent by Judge POOLE. REINHARDT, Circuit Judge: I. Facts 1 In 1979, debtor Victoria Farms, Inc. ("Victoria Farms") mortgaged its farm to Equitable Life Assurance Society of the United States ("Equitable"). See S.E.R. tab 1, Ex. A, at 7. The mortgage took the form of a "deed of trust," which simply granted Equitable a lien on the property. In return, Victoria Farms received $350,000.00. 2 In 1988, Victoria Farms mortgaged its farm…