Steven D. Molasky v. Augustine Bustos

FILED

NOT FOR PUBLICATION SEP 13 2012

MOLLY C. DWYER, CLERK

UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS

FOR THE NINTH CIRCUIT

In the Matter of: STEVEN D. MOLASKY, No. 11-15060

Debtor, D.C. No. 2:10-cv-00781-JCM-

PAL

STEVEN D. MOLASKY,

MEMORANDUM *

Appellant,

v.

AUGUSTINE C. BUSTOS,

Appellee.

Appeal from the United States District Court for the District of Nevada James C. Mahan, District Judge, Presiding

Argued April 20, 2012 Re-Submitted September 11, 2012 San Francisco, California

* This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3. Before: NOONAN and MURGUIA, Circuit Judges, and TIMLIN, Senior District Judge.**

Steven D. Molasky (“Molasky”) filed a voluntary bankruptcy petition in

which One Cap Holding Corporation (“OneCap”) commenced an adversary

proceeding under 11 U.S.C. § 523. Augustine C. Bustos (“Bustos”) intervened in

the § 523 complaint. After OneCap was dismissed for failure to prosecute, the

bankruptcy court dismissed Bustos. The district court reversed the bankruptcy

court’s…

Dissenting opinion filed by Circuit Judge MURGUIA.

MEMORANDUM **

Steven D. Molasky (“Molasky”) filed a voluntary bankruptcy petition in which One Cap Holding Corporation (“OneCap”) commenced an adversary proceeding under 11 U.S.C. § 523 . Augustine C. Bustos (“Bustos”) intervened in the § 523 complaint. After OneCap was dismissed for failure to prosecute, the bankruptcy court dismissed Bustos. The district court reversed the bankruptcy court’s dismissal. We vacate the district court’s order and remand to the bankruptcy court for proceedings consistent with the discussion below.

An intervenor can proceed after dismissal of the original party if 1) there is an independent basis for jurisdiction, and 2) unnecessary delay would otherwise result. See Benavidez v. Eu, 34 F.3d 825, 830 (9th Cir.1994). The bankruptcy court summarily found no independent basis for jurisdiction for Bustos because Bustos failed to file a timely § 523 complaint. The bankruptcy court erred as a matter of law, however, in failing to recognize that the § 523 deadline is discretionary and may be extended with cause. See Fed. R. BankrP. 4007. Failure to meet the § 523 deadline is not a mandatory jurisdictional…

dissenting.

I respectfully dissent. Bustos failed to file an adversary action before the applicable statute of limitations ran. Rather than seek an extension of the statute of limitations, Bustos reached an agreement with the debtor, Molasky, to intervene in One-Cap’s case. The scope of Bustos’s intervention was expressly limited by the bankruptcy court, so that intervention would not serve as a means of defeating the time bar. Following the dismissal of OneCap, the bankruptcy court properly determined that Bustos could not proceed since his claims were time barred. A court can only retain jurisdiction over an intervenor’s claims after dismissal of the original plaintiff if “the court can avoid the senseless delay and expense of a new suit, which at long last will merely bring the parties to the point where they now are.” Benavidez v. Eu, 34 F.3d 825, 830 (9th Cir.1994) (internal quotations omitted). Bustos does not pass the Benavidez test because dismissing his time-barred claims will not simply postpone the inevitable filing of a new suit.

Bustos does not claim the bankruptcy court abused its discretion in failing to extend the statute of limitations, nor does he seek the…