SHOEMAKER et al

Filing 14

ORDER AFFRIRMING BANKRUPTCY COURT'S ORDER re 1 Bankruptcy Transmittal and Docket Sheet. Signed by SENIOR JUDGE LACEY A COLLIER on May 3, 2011. (copy of order mailed to U.S. Bankruptcy Court, 100 North Palafox St., Pensacola, FL 32502) (kvg)

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF FLORIDA
PENSACOLA DIVISION
IN RE:
DAVID and PATRICIA SHOEMAKER,
Debtors/Appellants
v.

Case No. 3:10-cv-543/LAC
Bankruptcy Case No. 00-40626-LMK

SQUARE RING, INC., and
LEIGH D. HART, Trustee,
Appellees,
___________________/

ORDER AFFIRMING BANKRUPTCY COURT’S ORDER
THIS CAUSE comes before the Court on appeal from the United States
Bankruptcy Court for the Northern District of Florida. See 28 U.S.C.A. § 158(a);
FED. R. BANKR. P. 8001.

Debtors/Appellants David and Patricia Shoemaker

challenge the Bankruptcy Court’s Order of November 9, 2010, approving the sale of
the Shoemakers’ state cause of action to Square Ring, Inc. for the sum of $10,000.

Following a review of the Bankruptcy Court’s Order, the record on appeal, and the
briefs of the parties, this Court concludes that the Bankruptcy Court’s Order should
be AFFIRMED.

A district court reviewing the decision of its bankruptcy unit functions as an
appellate court. In re Sublett, 895 F.2d 1381, 1383 (11th Cir. 1990). Determinations
of law are subject to de novo review, while findings of fact are subject to the clearly
erroneous standard of review. In re Williamson, 15 F.3d 1037, 1038 (11th Cir. 1994)
(citing Fed.R.Bankr.Proc. 8013 and In re Club Associates, 956 F.2d 1065, 1069 (11th
Cir. 1992)). The district court, when sitting in its appellate capacity, does not make
independent factual findings. Id. Findings of fact are only subject to reversal when
“the reviewing court is left with the definite and firm conviction that a mistake has
been committed.” United States v. United States Gypsum Co., 333 U.S. 364, 395, 68
S. Ct. 525, 541–42, 92 L. Ed. 746 (1948). The burden is on the appellant to show that
the bankruptcy court’s factual findings are clearly erroneous. Gibson Group, Ltd. of
Pinellas County, Inc. v. Cooper, 197 B.R. 698, 699 (M.D. Fla. 1996).
On March 30, 2000, the Shoemakers filed for bankruptcy under Chapter 13 in
the United States Bankruptcy Court. The Shoemakers’ bankruptcy petition contained
a schedule of assets, which did not identify that they had any ownership of stock or
any other interest in Square Ring, Inc.

The bankruptcy plan was confirmed on

October 17, 2000.
On September 11, 2008, David Shoemaker filed a civil action in the Circuit
Court in and for Escambia County, Florida, seeking a declaratory judgment against
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Square Ring, Inc. (“Square Ring”), based on his claim that he held a shareholder
interest in Square Ring. Square Ring asserted that no such interest had existed since
1995 when Square Ring was reorganized and the shares belonging to Shoemaker,
among others, were relinquished.
The Trustee, upon being informed of the Shoemakers’ state action by Square
Ring, notified the Bankruptcy Court and moved to reopen the case, which the Court
did on March 12, 2010. The stockholder claim was held to belong to the bankruptcy
estate, and on October 21, 2010, a hearing was held on the matter, wherein the Court
was informed that Square Ring had reached an agreement to purchase the claim for
$10,000. Noting that the Shoemakers had not procured counsel who would come
forth and assert that the claim, after costs and fees, would exceed $10,000, the Court
found the sale to be in the best interests of the estate and approved the settlement by
written order dated November 9, 2010. The order provided that the sale was “to a
good faith purchaser and the Buyer is afforded the protection of 11 U.S.C. § 363(m).”
Doc. 1, ex. 14. This appeal followed. The Shoemakers did not seek a stay of the
Bankruptcy Court’s sale order nor post bond pending the appeal.
As Square Ring and the Trustee assert, once a sale is approved by the
bankruptcy court and consummated by the parties, the bankruptcy court ruling cannot
be modified on appeal. Pursuant to United States Code Title 11, Section 363(m):
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The reversal or modification on appeal of an authorization
. . . of a sale or lease of property does not affect the validity
of a sale or lease under such authorization to an entity that
purchased or leased such property in good faith, whether or
not such entity knew of the pendency of the appeal, unless
such authorization and such sale or lease were stayed
pending appeal.
Thus, a trustee has authority to sell property of the bankruptcy estate, and an
approved sale may not be invalidated unless it is stayed pending appeal. See In re
MacNeal, 308 Fed. Appx. 311, 316 (11th Cir. 2009). The failure to obtain such a stay
renders the appeal moot. See In re The Charter Co., 829 F.2d 1054, 1056 (11th Cir.
1987).
Additionally, this Court considers that Appellants have failed to establish that
the Bankruptcy Court’s decision was clearly erroneous. The Bankruptcy Judge
provided ample opportunity for Appellants to come forward and establish that their
state claim was worth more than $10,000 figure settled upon. Appellants point only
to an “Executive Summary” drafted by an accountant that offers no direct opinion on
their specific shareholder situation, but only performs the calculations of what a 0.8%
interest in Square Ring, at its current earnings, would be valued at.1 More important
was the fact that Appellants could find no counsel during the bankruptcy proceedings
who would be willing to “buy” the claim at an amount greater than $10,000 in order
1

Moreover, the greater evidence in the case demonstrates that Appellants had either a
.008 or even a .004% shareholder interest in Square Ring.
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to pursue the state action.2 Based upon these circumstances, the Bankruptcy Judge
found the $10,000 to be a fair settlement of the claim. This Court finds no reason to
upset that conclusion.
As Appellant have failed to establish a basis for reversible error, the decision
of the Bankruptcy Court is AFFIRMED.
Accordingly, it is hereby ORDERED:
1.

The Bankruptcy Court’s Order dated November 9, 2010, is
AFFIRMED.

ORDERED on this 3rd day of May, 2011.

s/L.A. Collier
Lacey A. Collier
Senior United States District Judge

2

As Appellees point out, the state court action was at risk of being foreclosed on grounds
of estoppel because of Appellants’ failure to list the shareholder interest on their bankruptcy
petition. See Robinson v. Tyson Foods, Inc., 595 F3d 1269 (11th Cir. 2010).
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