Smith-Scott v. Howard Bank et al

Filing 15

MEMORANDUM OPINION Signed by Judge Richard D Bennett on 3/18/2016. (cags, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
ARLENE A. SMITH-SCOTT,

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Appellant,

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v.

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HOWARD BANK,

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Appellee.
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Civil Action No. RDB-15-3423
Bankruptcy No. 14-25022

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MEMORANDUM OPINION
Debtor Arlene A. Smith-Scott brings this appeal from two orders of United States
Bankruptcy Judge James F. Schneider: (1) the Order Approving Trustee’s Motion for Sale of
10 Stanley Drive, Catonsville, Free and Clear of Liens and Encumbrances (“Order
Approving Trustee’s Motion for Sale”) (ECF No. 1-1, B.R. Doc. 273); and (2) the Order
Denying the Debtor’s Motion to Alter or Amend Order Converting Chapter 11 Case to
Chapter 7 (“Order Denying Motion to Alter or Amend”) (ECF No. 1-2, B.R. Doc. 274).
Both Orders were entered on November 6, 2015. Id.
Currently pending before this Court are: (1) Appellee George W. Liebmann, Chapter
7 Trustee’s Motion to Strike Notice of Appeal Insofar as It Relates to Order Denying
Amended Motion to Alter or Amend Order Converting Case to Chapter 7 (“Motion to
Strike”) (ECF No. 2); Appellee George W. Liebmann, Chapter 7 Trustee’s Motion to
Dismiss Appeal (“Motion to Dismiss”) (ECF No. 3); Appellant Arlene A. Smith-Scott’s
Opposition to the Motion to Dismiss Appeal (“Opposition”) (ECF No. 5); Appellant’s

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Motion for Stay Pending Appeal (“Motion to Stay”) (ECF No. 11); and Appellee’s Second
Motion to Dismiss Appeal (“Second Motion to Dismiss”) (ECF No. 13).
This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 158(a), as SmithScott’s appeal arises from final orders entered by the United States Bankruptcy Court for the
District of Maryland and is brought pursuant to Local Rule 404(1)(a) (D. Md. 2014). Oral
argument is deemed unnecessary because the facts and legal arguments are adequately
presented in the briefs and record, and the decisional process would not be significantly
aided by oral argument. See Fed. R. Bankr. P. 8019(b)(3); see also Local Rule 105.6 (D. Md.
2014).

For the reasons stated below, Appellee’s Motion to Dismiss (ECF No. 3) is

GRANTED, all other pending motions (ECF Nos. 2, 11, and 13) are MOOT, and the
Orders of Bankruptcy Judge James F. Schneider (ECF No. 1-1, B.R. Doc. 273; ECF No. 1-2,
B.R. Doc. 274) are AFFIRMED.1
BACKGROUND
I.

Appeal of Order Approving Trustee’s Motion for Sale
On October 1, 2015, Appellee filed a Motion for Sale of 10 Stanley Drive, Catonsville

Free and Clear of Liens and Encumbrances.2 (B.R. Doc. 257.) The Motion for Sale was
fully briefed, and on November 6, 2015, Judge Schneider issued the Order Approving
Trustee’s Motion for Sale. (B.R. Doc. 273.) The Order stated that buyers were already
under contract to purchase the property, and that they are a “good faith purchaser” within

1 It should be noted that Appellant failed to file a brief in support of her Appeal within 30 days of the
transmission of the record to this Court (December 8, 2015) in violation of Fed. R. Bankr. P. 8018(a)(1). (See
ECF Nos. 7, 8, 9, and 10.) Although this fact alone constitutes sufficient grounds to dismiss the Appeal, it
shall be dismissed on substantive grounds as explained herein.
The Stanley Drive property was among the real property listed as part of Appellant’s bankruptcy estate.
(B.R. Doc. 63 at 12.)

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the meaning of 11 U.S.C. § 363(m). (ECF No. 1-1, B.R. Doc. 273 at ¶ A, ¶ E.) The sale of
the property was completed on November 24, 2015. (ECF No. 13-4, B.R. Doc. 313.)
Appellant now challenges the Order Approving Trustee’s Motion for Sale.
II.

Appeal of Order Denying Motion to Alter or Amend
The background of the second basis for this Appeal is set forth in this Court’s

Memorandum Opinion dated October 8, 2015 (“Memorandum Opinion”). Smith-Scott v.
Patapsco Bank, Civ. No. RDB-15-1013 (ECF No. 10), B.R. No. 14-25022, 2015 WL 5921028
(D. Md. Oct. 8, 2015). In the Memorandum Opinion and accompanying Order, this Court
affirmed the Amended Order Converting Appellant’s Case from Chapter 11 to Chapter 7
(“Conversion Order”) (B.R. Doc. 141).3 On October 8, 2015, the same day that the
Memorandum Opinion and Order were issued, however, Appellant filed in the Bankruptcy
Court a Motion to Alter or Amend the Conversion Order. (B.R. Doc. 260.) With this Court
having already affirmed the Bankruptcy Court’s Conversion Order, Judge Schneider denied
Appellant’s Motion to Alter or Amend.

(B.R. Doc. 274.)

It is this Order Denying

Appellant’s Motion to Alter or Amend the Conversion Order that Appellant now challenges.
STANDARD OF REVIEW
This appeal is brought pursuant to Rule 8001 of the Federal Rules of Bankruptcy
Procedure. On appeal from the United States Bankruptcy Court, this Court acts as an
appellate court and reviews the Bankruptcy Court’s findings of fact for clear error and
conclusions of law de novo. In re Merry–Go–Round Enterprises, Inc., 400 F.3d 219, 224 (4th Cir.

3 Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. § 1101 et seq., provides an individual or
corporate debtor the opportunity to reorganize and pay off creditors over time. The relief provided under
Chapter 7, 11 U.S.C. §§ 701 et seq., is liquidation. In a Chapter 7 bankruptcy case, the bankruptcy trustee
liquidates the debtor’s assets, which involves selling the debtor’s nonexempt property and distributing the
proceeds from that sale to the creditors.

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2005); In re Kielisch, 258 F.3d 315, 319 (4th Cir. 2001). A factual finding is clearly erroneous
“when although there is evidence to support it, the reviewing court on the entire evidence is
left with a firm and definite conviction that a mistake has been committed.” United States v.
U.S. Gypsum Co., 333 U.S. 364, 395 (1948). “Under the clearly erroneous standard, if the
bankruptcy court’s factual findings are plausible in light of the record viewed in its entirety, a
reviewing court may not reverse even if it would have weighed the evidence differently.” In
re Frushour, 433 F.3d 393, 406 (4th Cir. 2005) (citing Mungo v. Taylor, 355 F.3d 969, 974 (7th
Cir. 2004)).
A distinct standard of review applies to Appellant’s challenge to the Order Denying
Appellant’s Motion to Alter or Amend the Conversion Order. “An abuse of discretion
standard applies to a bankruptcy court’s orders denying either a Rule 60(b) motion, Nat’l Org.
for Women v. Operation Rescue, 47 F.3d 667, 669 (4th Cir. 1995), or a Rule 59(e) motion, see
EEOC v. Lockheed Martin Corp., 116 F.3d 110, 112 (4th Cir. 1997).” In re Xiaolan Zhang, Civ.
No. DKC 12-1287, 2012 WL 5200072, at *2 (D. Md. Oct. 19, 2012) (citations in original).
“The brief of the appellant shall contain . . . [a]n argument . . . with citations to the
authorities, statutes and parts of the record relied on.” In re Rood, 482 B.R. 132, 143 (D. Md.
2012) (citing Fed. R. Bankr. P. 8010(a)(1)(E)). “It is not for this court to scour the record in
search of potential bases for his arguments.” Id. The district court may affirm, modify, or
reverse a bankruptcy judge’s order, or remand with instructions for further proceedings. See
Fed. R. Bankr. P. 8013; see also In re White, 128 F. App’x. 994, 999 (4th Cir. 2005); Suntrust
Bank v. Johnson, 2006 U.S. Dist. LEXIS 87622, at *6, 2006 WL 3498411 (D. Md. Dec.4,
2006).
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ANALYSIS
I.

Order Approving Trustee’s Motion for Sale
Appellee argues that Appellant does not have standing to challenge the Order

Approving Trustee’s Motion for Sale, and, moreover, that the Appeal is moot. (ECF No. 3
at ¶ 7.)

Appellant offers no specific argument in opposition, but presents a merely

hypothetical assertion that there may be a defect in the chain of title to the Stanley Drive
property. (ECF No. 5 at ¶ 5.III.)
The United States Court of Appeals for the Fourth Circuit has long held that that a
debtor who lacks a pecuniary interest in the property to be sold has no standing to bring an
appeal. Willemain v. Kivitz, 764 F. 2d 1019, 1022-23 (4th Cir. 1985). Moreover, in reviewing a
bankruptcy sale which has been consummated, this Court is limited to determining whether
the sale was made to a “good faith purchaser” under § 363(m) of the Bankruptcy Code.
Ready v. Rice, Civ. No. BEL-05-3358, 2006 WL 4550188, at *2 (D. Md. Sept. 26, 2006). The
Fourth Circuit has defined a “good faith purchaser” as “one who purchases the assets for
value, in good faith, and without notice of adverse claims.” Willemain, 764 F. 2d at 1023. “If
the Court finds that the property was sold to a good faith purchaser, then the Court goes no
further than dismissing the appeal as moot.”

Ready, 2006 WL 4550188, at *2 (citing

Willemain, 764 F. 2d at 1023).
Here, it is evident that Appellant is insolvent and has no pecuniary interest in the
Stanley Drive property. (ECF No. 13-5 at 10, B.R. Doc. 64 at 10.) As Appellant has “failed
to demonstrate that an alternative sale of the [property] would return solvency to [the]
estate,” or that an alternative sale might provide her with a surplus, she lacks standing to
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bring this Appeal. Willemain, 764 F.2d at 1023. This fact alone warrants a dismissal of the
Appeal.
Moreover, the Stanley Drive property was sold on November 24, 2015 in accordance
with Judge Schneider’s Order. (ECF No. 13-4, B.R. Doc. 313.) The buyers, as stated in the
Order, are a “good faith purchaser” under 11 U.S.C. § 363(m). (ECF No. 1-1 at ¶ E, B.R.
Doc. 273 at ¶ E.) Appellant does not challenge whether the buyers were a good faith
purchaser. Nor is there reason to do so: the stipulation in the Order that the buyers are
good faith purchasers, coupled with the fact that the order was “free and clear of liens and
encumbrances” (ECF No. 1-1) and the fact that the buyers purchased the property for value
($655,000.00) (ECF No. 13-4, B.R. Doc. 313) make it clear that the buyers were indeed good
faith purchasers. Accordingly, the pending appeal is moot and must be dismissed.4 Ready,
2006 WL 4550188, at *2
II.

Order Denying Motion to Alter or Amend
Appellee argues that Appellant’s challenge to the Judge Schneider’s Order Denying

Debtor’s Motion to Alter or Amend the Conversion Order is barred as res judicata. (ECF
No. 3 ¶¶ 2-6.) Appellant asserts, however, that principles of res judicata do not apply because
the Motion to Alter or Amend relied upon new evidence—the Affidavit of Paula Rush—
which, under Levy v. Kindred, 854 F. 2d 682, 685 (4th Cir. 1988), this Court declined to

4 It bears mention that Appellant’s Motion for Stay Pending Appeal was not filed until January 19, 2016,
nearly two months after the sale was consummated. (ECF No. 11.) The Motion for Stay is thus immaterial
to the validity of the sale. “Where a sale of a bankrupt’s assets has not been stayed, an appeal challenging the
sale’s validity is moot because ‘the court has no remedy that it can fashion even if it would have determined
the issues differently.’” In re Minh Vu Hoang, Civ. No. DKC 13-2637, 2014 WL 1125371, at *2 (D. Md. Mar.
19, 2014) (quoting In re Rare Earth Minerals, 445 F.3d 359, 363 (4th Cir.2006)).

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consider on the first appeal, but which, Appellant argues, the Court may now properly
consider. (ECF No. 5 at ¶¶ 6-8.)
This Court need not determine whether the prior ruling (the Memorandum Opinion)
makes the pending appeal res judicata. This appeal may be resolved by a determination of
whether Judge Schneider abused his discretion in denying Appellant’s Motion to Alter or
Amend the Conversion Order. Baltrotsky, 2004 WL 2937537 at *10. As stated in the
Memorandum Opinion, Judge Schneider made ample findings in support of his decision to
grant the Conversion Order:
“[E]ven if this Court did consider the findings of Paula Rush, they would not
be grounds for reversing Judge Schneider’s order.
Appellant seems to offer the affidavit of Paula Rush in order to rebut
Judge Schneider’s finding that ‘this case has no chance of being reorganized’
because ‘the debtor is at odds with everyone.’ If U.S. Bank was removed from
the proceedings, Appellant reasons, there would be a greater likelihood of
reorganization. However, the Appellant’s apparent inability to broker
agreement around a reorganization plan was only one of Judge
Schneider’s many reasons for converting her case. Additionally, he lacked
confidence in her ability to ‘manage the properties or to keep the funds
separate or to make the reports that she’s required to make to the Court, in an
accurate and complete way.’ He specifically cited her ‘failure to disclose any
income from her law firm or to disclose whether in fact the law firm ha[d]
been expending time and money in representing [her],’ her ‘clear comingling
of accounts between debtor in possession accounts and accounts of others,
including the law firm,’ her failure ‘to file timely and accurate reports,’ her
‘lack of knowledge of the Bankruptcy Code,’ her ‘questionable answers’ to the
court’s questions, her ‘contradictory and confused statement of the past
events,” and her ‘violation of a court order and the terms of its use of cash
collateral.’”
Memorandum Opinion at 9-10 (emphasis added) (footnotes omitted). Even if this Court
were to accept as true Appellant’s new factual assertions, there still remains substantial
evidence supporting the issuance of the Conversion Order and Judge Schneider’s decision to
uphold it. Thus, Appellant is unable show that Judge Schneider abused his discretion by
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denying Appellant’s Motion to Alter or Amend the Conversion Order.

Accordingly,

Appellant’s argument fails and Judge Schneider’s Order Denying the Motion to Alter or
Amend will be affirmed.

CONCLUSION
For the reasons set forth above, Appellee George W. Liebmann, Chapter 7 Trustee’s
Motion to Dismiss Appeal (ECF No. 3) is GRANTED; Bankruptcy Judge James F.
Schneider’s Order Granting Chapter 7 Trustee’s Motion for Sale of 10 Stanley Drive,
Catonsville, Free and Clear of Liens and Encumbrances (B.R. Doc. 273) is AFFIRMED; and
Judge Schneider’s Order Denying the Debtor’s Motion to Alter or Amend Order Converting
Chapter 11 Case to Chapter 7 (B.R. Doc. 274) is also AFFIRMED.
Appellant’s Motion For Stay Pending Appeal (ECF No. 11) is MOOT. Appellee’s
Motion to Strike (ECF No. 2) and Appellee’s Second Motion to Dismiss Appeal (ECF No.
13) are MOOT.
A separate Order follows.
Dated:

March 18, 2016
/s/
Richard D. Bennett
United States District Judge

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