Scarff Bros., Inc. v. ACNB Bank et al

Filing 16

ORDER - IT IS ORDERED that the 7 Appellee's Motion to Dismiss is GRANTED. Signed by Chief Judge Yvette Kane on Nov. 1, 2011. (sc)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

SCARFF BROS., INC.,
Appellant
v.
ACNB BANK, et al.,
Appellees

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No. 1:11-cv-01318
Bankruptcy Appeal
(Chief Judge Kane)

MEMORANDUM ORDER
Presently pending before the Court is Appellant Scarff Bros., Inc.’s appeal of the decision
of the Bankruptcy Court valuing Debtors Thomas H. McElwee, Jr. and Becky S. McElwee’s
property (Doc. No. 2-11) as well as Appellee AgChoice Farm Credit, ACA’s motion to dismiss
Appellant’s appeal (Doc. No. 7). Appellant argues that the Bankruptcy Court erred as a matter
of law in determining the fair market value of Debtors’ property located at 2807 Wayne Road,
Chambersburg, Pennsylvania (“Wayne Road Property”). (Doc No. 9.) Appellee contends that
the decision of the Bankruptcy Court is not a final order and, therefore, appellate review is
inappropriate at this time. (Doc. No. 8 at 11.) For the reasons stated below, the Court will grant
Appellee’s motion to dismiss Appellant’s appeal. (Doc. No. 7.)
I. BACKGROUND
On March 30, 2010, Debtors filed a Voluntary Chapter 12 Petition in the United States
Bankruptcy Court for the Middle District of Pennsylvania. (Doc. No. 2-11 at 2.) At that time,
Debtors owned three pieces of real property, including the Wayne Road Property.1 (Id.)

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The Bankruptcy Court also determined the value of Debtors’ property located at 250
Jumper Road, Newburg, Pennsylvania and 653 Big Spring Road, Newville, Pennsylvania (Doc.
No. 2-11 at 2), but Appellant’s appeal “relate[s] exclusively to the Bankruptcy Court’s fair
market value valuation of the ‘Wayne Road Property.’” (Doc. No. 9 at 5.)
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On June 25, 2010, Debtors filed their Original Chapter 12 Plan (“Original Plan”). (Id.)
After several objections to the Original Plan were filed, Debtors filed an Amended Chapter 12
Plan (“Amended Plan”) on December 7, 2010. (Id.) Both Appellant and Appellee filed
objections to the confirmation of the Amended Plan. (Id.)
On October 13, 2010, prior to the filing of the Amended Plan, Debtors filed a motion
under Federal Rule of Bankruptcy Procedure 3012 to determine the value of the collateral
securing at least a portion of Appellants’ claims against Debtors’ real property. (Id.) An
evidentiary hearing on the motion was held on January 13, 2011. (Id.) Expert testimony was
heard from three real estate appraisers concerning the value of the Wayne Road Property: (1)
Thomas R. Donahue, on behalf of Debtors; (2) David Coletta, on behalf of Appellee; and (3)
Don Paul Shearer, on behalf of Appellant. (Id. at 6-12.) Mr. Donahue and Mr. Shearer testified
only as to the fair market value of the Wayne Road Property, valuing the property at $350,000.00
and $400,000.00, respectively. (Id. at 6-7, 10-12.) Mr. Coletta testified only as to the
liquidation value of the Wayne Road Property, valuing the property at $220,000.00. (Id. at 710.)
On June 6, 2011, the Bankruptcy Court issued its opinion and order setting forth
valuations for Debtors’ properties. (Doc. Nos. 2-11, 2-12.) The Bankruptcy Court found that the
liquidation value of Debtors’ Wayne Road Property, if surrendered to a secured creditor, was
$239,680.00 and that the value of the property, if retained by Debtors, was $299,600.00. (Doc.
No. 2-12 at 1.)
On June 17, 2011, Appellant filed a notice of appeal (Doc. No. 1), contending that the
Bankruptcy Court erred as a matter of law in determining the fair market value of the Wayne

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Road Property (Doc No. 9 at 4). Appellee filed a motion to dismiss the appeal on July 22, 2011,
arguing that the Bankruptcy Court’s order is interlocutory in nature and that appellate review of
the order is, therefore, inappropriate at this time. (Doc No. 7.)
II. JURISDICTION
Pursuant to 28 U.S.C. § 158(a)(1), district courts have appellate jurisdiction over final
judgments, orders, and decrees of the bankruptcy court. With leave of court, district courts also
have jurisdiction over interlocutory orders and decrees. 28 U.S.C. § 158(a)(3). The parties
dispute whether the order at issue here constitutes a final order. (Doc Nos. 8, 10.) Thus, the
Court will first consider whether it may properly exercise jurisdiction over the appeal.
The United States Court of Appeals for the Third Circuit has recognized that finality
must be interpreted “pragmatically in bankruptcy cases because these proceedings often are
protracted and involve numerous parties with different claims.” In re Natale, 295 F.3d 375, 378
(3d Cir. 2002); see also In re Amatex Corp., 755 F.2d 1034, 1039 (3d Cir. 1985) (“[W]e have
consistently considered finality in a more pragmatic and less technical way in bankruptcy cases
than in other situations.”). In order to avoid the inefficiency that would result from insisting
upon the approval of a plan prior to any appeal, the Third Circuit has “permitted appellate review
of orders that in other contexts might be considered interlocutory.” Amatex Corp., 755 F.2d at
1039.
In spite of the “relaxed view of finality in the bankruptcy setting as a whole,” not every
order of a bankruptcy court is appealable as a final order. Natale, 295 F.3d at 378; see also
United States v. Nicolet, Inc., 857 F.2d 202, 206 (3d Cir. 1988) (“[E]ven in bankruptcy appeals
the concept of finality is not open-ended.”). Rather, only orders of a bankruptcy court that

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“finally dispose of discrete disputes within the larger case are considered final for purposes of a
bankruptcy appeal.” In re Travelers Motor Inn, Inc., 181 B.R. 6, 7 (N.D.N.Y. 1995) (citation
and quotation marks omitted); see also In re Sullivan, No. 91-5501, 1992 WL 68613 at *3 (E.D.
Pa. Mar. 31, 1992) (“[Bankruptcy court] orders that do not fully adjudicate a specific adversary
proceeding or that require further factual development are governed by the ordinary finality
precepts of routine civil litigation.”). The Third Circuit has identified three factors to consider in
making a decision on finality: “the impact of the matter on the assets of the bankruptcy estate,
the preclusive effect of a decision on the merits, and whether the interests of judicial economy
will be furthered. F/S Airlease II, Inc. v. Simon, 844 F.2d 99, 104 (3d Cir. 1988).
III. DISCUSSION
In the present matter, the threshold issue is whether the Bankruptcy Court’s order
resolving the Rule 3012 motion is an order that “finally dispose[d] of discrete disputes within the
larger case,” or whether it is, as Appellee argues, a decision subject to modification in the course
of further proceedings and, thus, not appropriate for review at this time.
In this case, the Bankruptcy Court’s order does not fully adjudicate a specific adversary
proceeding. Additionally, the order sets forth the valuation of Debtors’ real property but does
not contain legal resolutions, such as a determination of the precise method of calculation that
should be used to assess the value of the Wayne Road Property. The United States District Court
for the Eastern District of Pennsylvania addressed the issue of finality of bankruptcy court orders
in In re Jablonski, 88 B.R. 652, 655-56 (E.D. Pa. 1998), and drew a distinction between the legal
conclusions and preliminary findings of fact reached by the bankruptcy court. Specifically, the
court concluded that the portions of the bankruptcy court’s order containing final resolutions of

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legal issues constituted a final order for purposes of appeal, while the portions that set specific
dollar amounts on the creditor’s claim were “not only not final, but . . . [that] review at this time
would serve no useful purpose.” Id.
Relying on the Jablonski court’s distinction between the finality of bankruptcy court
orders that dispose of legal issues and the interlocutory nature of orders that make preliminary
findings, the United States District Court for the District of Connecticut, in In re Rodriguez, 272
B.R. 54, 57 (D. Conn. 2002), determined that a bankruptcy court order, to the extent that it set
forth valuations as well as “a legal conclusion about how the value . . . should be calculated,”
was a final, appealable order, even though subsequent plan confirmation could alter the specific
valuations made in the order.
Unlike in Rodriguez, the Court finds that the Bankruptcy Court here did not “state a legal
conclusion about how the value” of the Wayne Road Property should be calculated. Although
the Bankruptcy Court set forth a two-step approach to the valuation of the property in its order, it
merely stated that, in determining the applicable value of the property, it would consider: (1)
Debtors’ proposed disposition of the property under the Amended Plan; and (2) the evidence,
including appraisal testimony. (Doc No. 2-11 at 6.) Ultimately, the Bankruptcy Court
determined that the liquidation value of the Wayne Road Property was $239,680.00 and that the
fair market value was $299,600.00, but it set forth no specific method of calculation used to
reach those valuations. (Id. at 12.) Rather, the Bankruptcy Court simply stated that its valuation
was “[b]ased upon the record presented.” (Id.) Accordingly, this Court finds that the
Bankruptcy Court’s order merely set forth preliminary findings of value, which are interlocutory
in nature.

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IV. CONCLUSION
Despite viewing finality in a “more pragmatic and less technical way,” the Court declines
to exercise its jurisdiction over this matter. Further, if the subsequent plan confirmation alters
the monetary amounts set forth in the Bankruptcy Court’s order, Appellant will have the
opportunity to appeal any of the Bankruptcy Court’s findings at that time. See Rodriguez, 272
B.R. at 57 (“The subsequent plan confirmation might alter the dollar amounts set at the time of
the 506(a) order . . . .”). Therefore, the interests of judicial economy would not be served by
addressing the issues raised by Appellant at this time.
ACCORDINGLY, on this 1st day of November 2011, IT IS HEREBY ORDERED
THAT Appellee’s motion to dismiss (Doc No. 7) is GRANTED.

S/ Yvette Kane
Yvette Kane, Chief Judge
United States District Court
Middle District of Pennsylvania

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