Reinbold v. Beck
Filing
3
OPINION entered by Judge Sue E. Myerscough on 7/9/2015. The Successor Trustee's Motion for Leave to Appeal d/e 1 the Bankruptcy Court's January 29, 2015 and April 17, 2015 Orders is DENIED. (MAS, ilcd)
E-FILED
Tuesday, 14 July, 2015 11:32:57 AM
Clerk, U.S. District Court, ILCD
IN THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
In re:
STEVEN J. BARFIELD,
)
)
)
)
Debtor.
Case No. 15-3131
OPINION
SUE E. MYERSCOUGH, U.S. District Judge.
Jeana K. Reinbold, Successor Chapter 7 Trustee to the Estate of
Steven J. Barfield (“Successor Trustee”), filed a Motion for Leave to
Appeal (d/e 1) the Bankruptcy Court’s January 29, 2015 and April
17, 2015 Orders. The January Order denied the Successor
Trustee’s Motion to Confirm and Pay. The April 2015 Order denied
the Successor Trustee’s Motion to Amend or Alter Judgment or for
New Trial.
The Court finds that the Bankruptcy Court’s Orders are not
final orders. Moreover, because the Successor Trustee has not
demonstrated that there are controlling questions of law as to which
there is substantial ground for dispute and that an immediate appeal
may materially advance the ultimate termination of the litigation, the
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Motion for Leave to Appeal is denied.
I. BACKGROUND
On March 21, 2012, the original bankruptcy trustee filed a
Notice of Intent to Sell the Debtor’s tools and equipment, 2008 Dodge
truck, and other items of personal property on April 21, 2012 at a
public sale. (The original trustee had earlier obtained an agreed
order giving him until March 2012 to sell the Dodge truck). On April
13, 2012, Dustin Beck filed an objection alleging that many of the
tools and equipment scheduled to be sold were the property of
Quality Turbine, Inc., a corporation co-owned by the Debtor and Mr.
Beck, and not the Debtor individually.
On April 16, 2012, the Bankruptcy Court entered an order
setting the Notice of Intent to Sell and the objection for a hearing on
April 26, 2012. The court was unable to schedule a hearing before
the scheduled sale. The court also specifically noted that assets
owned by a corporation are not to be included in an individual
shareholder’s bankruptcy estate.
On April 18, 2012, the original trustee and the attorney for Mr.
Beck uploaded an agreed order purporting to settle the issues raised
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by Mr. Beck’s objection. The proposed order sought to authorize the
original trustee to sell all of the property listed on the Notice of Intent
to Sell. If any of the property sold was shown to not be property of
the bankruptcy estate, the sale proceeds would be turned over to Mr.
Beck’s counsel.
The Bankruptcy Court did not accept the agreed order. The
court advised the parties that the agreed order would not be signed
because it granted relief not available based on the documents
previously filed.
On April 21, 2012, the original trustee nonetheless conducted
the public sale, and the property was sold. Thereafter, the original
trustee filed a Report of Sale for the April 2012 sale and sought
compensation for the auctioneer. He later withdrew the Motion,
acknowledging that he had no authority for the requested relief.
In September 2012, the original trustee filed a second Report of
Sale pertaining only to the sale of the 2008 Dodge truck. The
original trustee reported that the truck had been sold for $20,000,
and he sought to compensate the auctioneer $2,500. The Report of
Sale did not disclose any amount paid to the creditor holding a lien
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on the truck or payment of the Debtor’s claimed exemption in the
truck. The court approved the $2,500 payment to the auctioneer.
The original trustee made additional attempts to have the sale
approved, resolve the issue pertaining to the ownership of the tools
and equipment, and distribute the sale proceeds. Ultimately, the
original trustee was removed from the case, and the Successor
Trustee was appointed.
On June 27, 2014, the Successor Trustee filed a Motion to
Confirm and Pay. The Successor Trustee asked the court to confirm
the sale and allow her to pay Quality Turbine, Inc. $2,238.50 for its
assets which were sold and to pay the Debtor $7,650 for his
exemptions. The Successor Trustee claimed the original trustee was
fully authorized to proceed with the sale and that the proposed
distributions should be approved.
On January 29, 2015, the Bankruptcy Court denied the Motion
to Confirm and Pay. The court found that the original trustee was
not authorized to proceed with the sale of the property listed in Mr.
Beck’s objection (the tools and equipment) without a court order
because an objection to the sale was pending and the court had
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refused to sign the agreed order purportedly resolving the objection.
The agreed order was defective, in part, because the order alleged
that certain property was not property of the estate, and a
bankruptcy court cannot authorize a trustee to sell property that is
not property of the estate. The agreed order was also deficient
because notice was not provided to the other parties and Mr. Beck’s
counsel lacked authority to enter into a binding agreement for the
sale of Quality Turbine, Inc. property.
The Bankruptcy Court also found that the Successor Trustee
was not entitled to an order authorizing her to pay the debtor’s
vehicle exemption. The court had previously found that the sale of
the truck was separate from the sale of the disputed tools and
equipment. The court noted that, if the Successor Trustee held
funds from the sale of the truck from which the Debtor’s exemption
could be paid, the Successor Trustee would not need an additional
order from the court to pay the exemption. However, it appeared
that she was not holding enough money from the truck sale to make
the payment and was actually seeking authority to use proceeds from
the unauthorized tool and equipment sale to make the Debtor whole
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on the sale of his truck.
The Bankruptcy Court ultimately concluded that the Successor
Trustee needed to make a thorough review and accounting of the
April 2012 sale and determine whether she could justify continuing
with the administration of the estate. The court noted it was
unlikely the Successor Trustee could obtain approval for the
unauthorized sale or the distribution of the proceeds and that “she
must consider her limited options and make the best decision to
maximize value to the estate.” January Order at p. 32.
Thereafter, the Successor Trustee filed a timely Motion to
Amend or Alter Judgment or for New Trial. The Successor Trustee
argued that the Bankruptcy Court improperly found that some of the
property sold at the April 2012 sale was not property of the estate and
that an evidentiary hearing must be held to correct that error. She
argued (contrary to her previous position) that Quality Turbine, Inc.
did not have any interest in the tools and equipment sold. If she
could prove that fact, then the unauthorized sale could be approved.
She also argued that she should not be bound by the acts of her
predecessor and should be able to “wipe the slate clean” and obtain
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approval of the sale of the property. April Order at p. 7.
On April 17, 2015, the Bankruptcy Court denied the Successor
Trustee’s Motion to Amend or Alter Judgment for New Trial. The
Bankruptcy Court found that the original trustee had no authority to
proceed with the public sale regardless of the merits of the pending
objection to the sale. Therefore, there was no reason to hold an
evidentiary hearing to determine whether the tools and equipment
were property of the estate. Moreover, the Bankruptcy Court
rejected the Successor Trustee’s argument that she was not bound by
the actions of her predecessor. The Bankruptcy Court found that
the Successor Trustee could not use her appointment “to create the
fiction that her predecessor’s unauthorized actions never occurred.”
April Order at p. 10.
On April 30, 2015, the Successor Trustee filed a Notice of
Appeal appealing the January 29, 2015 order denying the Trustee’s
Motion to Confirm and Pay and the April 17, 2015 Order denying the
Trustee’s Motion to Amend or Alter Judgment or for New Trial. See
Notice of Appeal (d/e 2). In the Notice of Appeal, the Successor
Trustee acknowledges that the orders may not be final. She
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concurrently filed a Motion for Leave to Appeal pursuant to 28 U.S.C.
§ 158(a)(3). See Motion (d/e1).
In her Motion for Leave to Appeal, the Successor Trustee asserts
that the question presented is “whether the Bankruptcy Court erred
as a matter of law or abused its discretion in declining to approve the
Successor Trustee’s request to confirm the sale as a matter of law or
equity or accept evidence concerning that ruling.” Motion at p. 1.
She asks that this Court direct the Bankruptcy Court to conduct an
evidentiary hearing. Id. at p. 2. In the alternative, if the facts are
not dispositive, this Court should require that the Bankruptcy Court
limit its ruling “to the legal rule on which it is based, and not be based
on any facts.” Id.
II. ANALYSIS
The Successor Trustee does not argue that the Bankruptcy
Court’s orders are final orders. The Court concludes the orders are
not final.
In a bankruptcy case, an order may be final even though the
entire bankruptcy proceeding has not been terminated. See In re
UAL Corp., 411 F.3d 818, 821 (7th Cir.2005). Instead, an order is
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final in a bankruptcy case if it “resolves a discrete dispute that, but
for the continuing bankruptcy, would have been a stand-alone suit
by or against the trustee.” Zedan v. Habash, 529 F.3d 398, 402 (7th
Cir. 2008) (as modified June 24, 2008).
In this case, the orders from which the Successor Trustee
appeals do not resolve a discrete segment of the proceedings and do
not determine a substantial right of a party. The Bankruptcy Court
did not make a final determination regarding the proceeds of the
unauthorized sale. The Successor Trustee still holds the proceeds of
the unauthorized sale, no full accounting has been provided to the
Bankruptcy Court, and no determination has been made what to do
with the proceeds of the unauthorized sale. In addition, the
Bankruptcy Court clearly anticipated further proceedings on the
issue when the Bankruptcy Court noted that the Successor Trustee
would have to provide a complete accounting of the sale and
determine whether she could justify continuing to administer the
estate. See, e.g., Dutch Lake Knoll Holdings, LLC v. Sunnybrook
Homeowners Ass’n Inc., No. 13-538, 2013 WL 3338783, at *1 (D.
Minn. July 2, 2013) (finding that the bankruptcy court’s denial of the
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motion to sell property free and clear of interests was not a final order
because it did not leave the court with anything to do but execute the
order and left open other possibilities for the debtor to pursue).
Moreover, the Bankruptcy Court did not determine that the sale was
void, which may have constituted a final order. See January 2015
Opinion at 30-31 (noting that one of the Successor Trustee’s options
is to have the unauthorized sale declared void, although the
Bankruptcy Court thought such action would not be prudent);
Matter of Allen, 816 F.2d 325, 327 (7th Cir. 1987) (finding that order
declaring foreclosure order void was a final order because the order
determined a substantial right of the purported purchaser).
The Court recognizes that the Seventh Circuit has held that an
order denying a motion to confirm a sale is a final order. See In re
Vlasek, 325 F.3d 955, 961 (7th Cir. 2003), citing In re Sax, 796 F.2d
994, 996 (7th Cir. 1986) (remarking that an order failing to approval
a sale of the debtor’s property is a final order). However, neither of
these cases actually involves an order denying a motion to confirm a
sale. See Vlasek, 325 F.3d 955 (finding that a motion to dismiss the
bankruptcy petition is not a final order); Sax, 796 F.2d at 995
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(involving an order approving the sale of a yacht). In addition, the
Seventh Circuit provided no basis for the statement, and other courts
have held that an order denying a motion to confirm a sale is not a
final order. See Spitz v. Nitschke, 528 B.R. 874, 880 (E.D. Wisc.
2015) (citing cases and noting that the court was likely to agree with
cases holding that orders denying motions to sell are interlocutory);
cf: Bullard v. Blue Hills Bank, 135 S. Ct. 1686, 1692 (2015) (holding
that an order denying confirmation of a proposed Chapter 13
repayment plan was not a final order because only plan confirmation
altered the status quo and the rights of the parties).
Therefore, for the reasons stated, this Court finds that the
Bankruptcy Court’s orders denying the Successor Trustee’s Motion
to Confirm and Pay are not final.
However, even if the orders are not final, this Court has the
discretion to review interlocutory orders of the bankruptcy court
under 28 U.S.C. § 158(a)(3). See In re Jartran, Inc., 886 F.2d 859,
866 (7th Cir. 1989) (“review of interlocutory appeals from the
bankruptcy court is in the district court’s discretion”). Although
§ 158 does not set forth the standard for granting interlocutory
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appeals, other district courts have applied the statute governing
interlocutory appeals from district courts to circuit courts, 28 U.S.C.
§ 1292(b). See Gouveia v. I.R.S., 228 B.R. 412, 413 (N.D. Ind. 1988);
In re Capen Wholesale, Inc., 184 B.R. 547, 549 (N.D. Ill. 1995).
Under § 1292(b), an interlocutory appeal is appropriate when it
(1) involves a controlling question of law, (2) over which there is
substantial ground for difference of opinion, and (3) an immediate
appeal from the order may materially advance the ultimate
termination of the litigation. Gouveia, 228 B.R. at 413. All three
requirements must be satisfied. Ahrenholz v. Bd. of Trs. of Univ. of
Ill., 219 F.3d 674, 676 (7th Cir. 2000); In re Archdiocese of
Milwaukee, 482 B.R. 792, 797 (E.D. Wisc. 2012). Moreover, “leave
to appeal an interlocutory order will not be granted absent
exceptional circumstances.” In re Pullman Constr. Indus., Inc., 143
B.R. 497, 498 (N.D. Ill. 1992) (quotations and citations omitted).
Those requirements are not met here.
First, the Successor Trustee does not identify a controlling
question of law. A question of law “has reference to a question of the
meaning of a statutory or constitutional provision, regulation, or
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common law doctrine rather than to whether the party opposing
summary judgment had raised a genuine issue of material fact.”
Ahrenholz, 219 F.3d at 676. The appeal must present a “pure
question of law, something the [district court] could decide quickly
and cleanly without having to study the record.” Id. at 676-77. A
question of law is controlling when “its resolution is quite likely to
affect the outcome or the further course of litigation, even if it is not
certain to do so.” Tr. of Jartran, Inc. v. Winston & Strawn, 208 B.R.
898, 900 (N.D. Ill. 1997).
The issue identified here is simply not a controlling question of
law. The Successor Trustee identifies the question presented as
“whether the Bankruptcy Court erred as a matter of law or abused its
discretion in declining to approve the Successor Trustee’s request to
confirm the sale as a matter of law or equity or accept evidence
concerning that ruling.” Motion at p. 1. Nothing about this issue
pertains to the type of pure question of law that this Court could
decide quickly and cleanly without have to study the record. The
Successor Trustee is not asking the Court to clarify a legal principle.
See In re Eastern Livestock Co. LLC, No. 4:12-cv-00126, 2013 WL
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4479080, at *6 (S.D. Ind. Aug. 20, 2013) (finding that the “decision to
remove a bankruptcy trustee is not an abstract issue of law”).
Essentially, the Successor Trustee argues that the Bankruptcy Court
failed to consider relevant facts and misapplied the facts to the law.
Therefore, the Successor Trustee has failed to show a controlling
question of law that would warrant an interlocutory appeal.
The Successor Trustee does not fare any better on the other two
requirements. The Successor Trustee argues that there is a
substantial likelihood that a reviewing court would conclude that the
Bankruptcy Court abused its discretion by not sufficiently
considering its equitable powers and because the Bankruptcy
Court’s factual conclusions do not have evidentiary support. Motion
at p. 2. However, the Bankruptcy Court repeatedly asked the
Successor Trustee for case law that would support the relief
requested, and the Successor Trustee failed to do so. The Successor
Trustee likewise does not provide such support in her Motion for
Leave to Appeal. She has not shown that a substantial ground for a
difference of opinion exists but merely shows that she disagrees with
the Bankruptcy Court’s application of the facts to the law in this
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case. See, e.g., Eastern Livestock Co., 2013 WL 4479080, at *6
(finding no substantial ground for difference of opinion where the
parties did not disagree as to what controlling law applied).
Finally, an immediate appeal would not materially advance the
ultimate termination of the case, as demonstrated by the relief the
Successor Trustee seeks. Even if this Court reversed the
Bankruptcy Court, the Successor Trustee asks that this Court
require the Bankruptcy Court to conduct an evidentiary
hearing—which would only further delay the ultimate termination of
the case—or limit the decision to “the legal rule on which it is based,
and not be based on any facts”—which would not advance the
ultimate termination of the case either. Motion at 2. Moreover,
whether the Bankruptcy Court’s orders are affirmed or reversed,
issues would remain relating to the appropriateness of conducting
the sale of the truck, the proceeds of the sale because no full
accounting has been conducted, and whether enough money exists
to pay the Debtor’s exemptions. Consequently, an interlocutory
appeal will not address these issues and will not materially advance
the ultimate termination of the case. See Gouveia, 228 B.R. at 414
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(concluding that the review of an order that makes no final
determination regarding the rights to the funds would not materially
advance the termination of the litigation and would, in fact, prolong
the litigation by expending time on issues that may ultimately be
irrelevant to the litigation).
III. CONCLUSION
For the reasons stated, the Successor Trustee’s Motion for
Leave to Appeal (d/e 1) the Bankruptcy Court’s January 29, 2015
and April 17, 2015 Orders is DENIED.
ENTER: July 9, 2015
FOR THE COURT:
s/Sue E. Myerscough
SUE E. MYERSCOUGH
UNITED STATES DISTRICT JUDGE
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