Spitz v. Nitschke et al

Filing 7

ORDER signed by Judge J P Stadtmueller on 4/14/15 DISMISSING this appeal for lack of standing. See Order. (cc: all counsel)(nm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
JOHN C. SPITZ,
Appellant,
v.

Case No. 14-CV-1149-JPS

DONALD F. NITSCHKE,
KRISTAL R. NITSCHKE, and
J & T LENDING LLC,

ORDER

Appellees.
This bankruptcy appeal arises from three of Judge Susan V. Kelley’s
orders in Donald F. Nitschke and Kristal R. Nitschke’s (collectively “the
Debtors”) Chapter 7 bankruptcy case. Those orders: (1) denied the motion of
the Trustee to sell property of the Estate pursuant to 11 U.S.C. § 363(b)
(Docket # 1-3 at 137); (2) granted relief from the automatic stay to permit
state court proceedings, id. at 139-40; and (3) granted the Debtors’ motion for
abandonment of property of the Estate, id. at 145-147.
Notably, the Chapter 7 Trustee did not appeal these orders; instead,
John C. Spitz (“Spitz”), a prospective buyer1 of property of the estate brings
this appeal. The Court will dismiss this appeal because Spitz lacks standing
to appeal the bankruptcy court’s orders.
1.

BACKGROUND
The genesis of this case is the falling out of three business partners,

Donald Nitschke (“Nitschke”), Spitz, and Timothy Zignego (“Zignego”).
(Docket #5 at 7); (Docket #4 at 8). In 2006, the three business partners

1

Spitz, in his reply brief, argues that he was “more than [a] mere bidder” or
prospective purchaser; he alleges that he also brings this appeal as a secured
creditor. (Docket #6 at 5).

intended to buy three apartment buildings and convert them to
condominiums. Id. To do so, they created three LLCs (collectively, “the Oak
Leaf LLCs”), one for each apartment building they purchased in Oak Creek,
Wisconsin. Id. The Oak Leaf LLCs borrowed just shy of five million dollars
from Park Bank to purchase the apartment buildings. (Docket #1-3 at 157158). Ultimately, the Oak Leaf LLCs had four notes from Park Bank: a note
on each of the three buildings and an additional $1.5 million note that the
bank required after the economic downturn in 2007 and 2008. Id. at 157. To
secure the $1.5 million note the bank required additional collateral from each
business partner. Id. Nitschke, Spitz, and Zignego each pledged property
valued at $500,000.00 to satisfy the bank, id.; and, as relevant here, Nitschke’s
pledge was 240 acres of hunting land he owned in Shawano County,
Wisconsin, together with a cabin located on the property (hereinafter, “the
Aniwa Property”). (Docket #5 at 4).
In late January 2014, the Park Bank loans were coming due and the
bank demanded a $700,000.00 pay down in order to renew the loans. (Docket
#5 at 8-9). At a mid-January meeting between Spitz, Zignego, and Nitschke,
they voted to obtain the money necessary for the pay down by borrowing
from themselves; they also decided to refinance the Park Bank notes with a
different bank.2 Id. Nitschke, however, declined to put in new capital. (Docket
#4 at 9).
Without Nitschke, Spitz and Zignego forged ahead and established
J & T Lending LLC (“J & T”); Spitz and Zignego fronted J & T the $700,000.00
for the pay down. Id. Thereafter, J & T refinanced the Oak Leaf LLCs using
the $700,000.00 to buy out the Park Bank loan; J & T refinanced with Home

2

Nitschke abstained from these votes. (Docket #5 at 9).

Page 2 of 16

Federal. (Docket #1-3 at 161-62). As part of this refinance, J & T obtained the
notes on the three apartment buildings, and the guarantees on the personal
collateral that each member had put up to secure the $1.5 million Park Bank
note. Id. One of those guarantees, as noted above, was Nitschke’s pledge of
the Aniwa Property.
Shortly after the refinance of the Oak Leaf LLCs, the Debtors filed
a voluntary petition under Chapter 7. (Docket #1-2 at 1). The Debtors’
schedules listed a fee simple interest in the Aniwa Property with a value of
$593,000.00, subject to a secured claim of $535,000.00; the secured claim was
listed as a mortgage lien held by Park Bank. Id. at 33. As discussed above, this
lien was transferred to J & T upon the refinancing of the Oak Leaf LLCs. The
Debtors’ schedules also listed a $585,000.00 unsecured, nonpriority claim
held by Spitz for “Judgment on Loans”; that judgment lien was against the
Aniwa Property. Id. at 46.
On April 7, 2014, the Trustee filed a motion to sell the Aniwa Property,
pursuant to 11 U.S.C. § 363(b). (Docket #1-2 at 113-16). The Trustee sought to
sell the property to Spitz for $10,000.00 in a private sale. Id. Spitz would take
the Aniwa Property subject to existing liens; namely, the $535,000.00
mortgage held by J & T lending, and the $585,000.00 judgment lien held by
Spitz himself. Id. The sale would generate $8,250 of equity for the Estate, for
the benefit of unsecured creditors. Id.
On April 18, 2014, the Debtors filed amended schedules, claiming
a $25,450.00 wild card exemption in the Aniwa Property under 11 U.S.C.
§ 522(d)(5). (Docket #1-2 at 139). Since this exemption would swallow any
profit from sale proposed by the Trustee, and the property was fully
encumbered, the Debtors thereafter filed a motion to abandon the Aniwa
Property pursuant to 11 U.S.C. § 554. Id. at 145-49. The Debtors also filed an
Page 3 of 16

objection to the Trustee’s motion to sell, arguing that selling the property
would nullify their wild card exemption. Id. at 170. Subsequently, the Trustee
objected to the Debtor’s wild card exemption, id. at 176, and Spitz and the
Trustee objected to the Debtors’ motion to abandon the Aniwa Property. Id.
at 243; (Docket #1-3 at 18-20).
On May 8, 2014, J & T filed a motion for relief from the automatic stay
to allow it to take action under state law to enforce its interest in the Aniwa
Property, pursuant to the mortgage lien it acquired after the refinance of the
Oak Leaf LLCs. (Docket #1-2 at 189-91). In its motion, J & T asserted that the
debt secured by the Aniwa Property was not the value of the mortgage lien
of $535,000.00, but $4,795,797.91, which was the amount due on the notes
held by J & T for the Oak Leaf LLCs. (See Docket #1-2 at 189-92). The Debtors
objected to the motion for relief from stay because of the overvaluation of the
lien against the Aniwa Property. (Docket #1-3 at 24). However, the Debtors
did agree that the stay should be lifted so that a state court could resolve
claims of “LLC ownership, loan collateral, mortgage, indemnification and
contribution…that the Debtors wish[ed] to pursue” against J & T, Spitz, and
Zignego. Id. at 25.
The Debtors were granted a discharge under 11 U.S.C. § 727 on
June 13, 2014. Id. at 38. This included discharge of the judgment lien that
Spitz held against the Aniwa Property in the amount of $585,000.00. See In re
Nitschke, Case No. 14-20569 (Docket #87); Spitz v. Nitschke, Shawano County
Circuit Court Case No. 2013TJ000006 (noting on the docket that the
“Judgment Status” of Spitz’s judgment lien against Nitschke and the Aniwa
Property was “Satisf of judg due to bankrupt” and this occurred on August 6,
2014).

Page 4 of 16

On August 5, 2014, the bankruptcy court held an evidentiary hearing
to address the Trustee’s motion to sell the Aniwa Property, the Debtors’
motion to abandon the Property, and J & T’s motion for relief from stay to
pursue state court remedies. Id. at 151. Judge Kelley denied the Trustee’s
motion to sell, stating that the Debtors’ objection to the sale “should be
sustained” because the Aniwa Property “shouldn’t be sold to Mr. Spitz with
all these swirling, disputed unknowns as to what is the appropriate amount
of encumbrance to J & T.” Id. at 195. The bankruptcy court issued a formal
order denying the Trustee’s motion to sell on August 8, 2014. Id. at 138.
Judge Kelley granted J & T’s motion for relief from the automatic stay
to “get this all sorted out in state court.” Id. at 195. In her formal August 10,
2014 order lifting the stay, the bankruptcy court stated that the stay should
be terminated “so that, in an appropriate proceeding, a State Court can
determine the amount of J & T’s lien.” Id. at 139. And, the order also stated
that “[t]o the extent the State Court deems it appropriate, the stay is
terminated to enable the State Court to order foreclosure or other remedies
as to all or part of the Aniwa [p]roperty.” Id. at 140.
Finally, Judge Kelley granted the Debtors’ motion to abandon “except
as to any surplus which may be remaining after the foreclosure sale” and
“reserving [the Debtors’]…rights[] to argue that that surplus is not property
of the estate.” Id. at 205. The formal order granting the Debtors’ motion to
abandon the Aniwa Property was entered on August 21, 2014; in it, the court
stated that the motion was granted “subject to additional Order of the Court
to protect the Bankruptcy Estate’s interest in the Aniwa Property, if any.” Id.
at 146. The order went on to state that, “[i]n the event that the State Court
determines the amount of J & T Lending’s [l]ien is an amount that results in
equity in the Aniwa [P]roperty above the Debtors’ claimed exemptions, any
Page 5 of 16

such surplus is not abandoned from the Bankruptcy Estate.” Id. In addition
the order stated that “the Court recognizes the right of the Debtors to argue
that such a surplus (if any) was created post-petition and/or is property that
is not included in the Bankruptcy Estate of the Debtors.” Id.
Spitz filed a notice of appeal on August 20, 2014—which was later
amended on August 26, 2014, to include the August 21, 2014 order granting
the Debtors’ motion for abandonment. See id. at 143. In Spitz’s brief, he
argues that the bankruptcy court abused its discretion by sustaining the
Debtors’ objection to the motion to sell; this was error, Spitz avers, because
the Debtors had no standing—i.e., no pecuniary interest in the Aniwa
Property— to make such an objection. (Docket #4 at 11-16). Additionally,
Spitz argues that the bankruptcy court abused its discretion by “not
allow[ing] all parties to present evidence and make arguments” at the
August 5, 2014 hearing on all three motions discussed above. Id. at 6, 16-18.
Regarding the denial of the Trustee’s motion to sell, the relief Spitz
requests is that this Court should “vacate[] [all three of the bankruptcy
court’s orders] and…remand[] with instructions to approve the Trustee’s
sale of the [E]state’s interest in the Aniwa [P]roperty to Mr. Spitz.” Id. at 16.
Spitz argues, alternatively, that if this Court finds that the Debtors’ objection
to the motion to sell was properly sustained, the Court should nonetheless
“vacate the orders of the bankruptcy court and remand with instructions to
hold a new evidentiary hearing” where all parties are given an opportunity
to present evidence and argue their position. Id. at 18.
2.

ANALYSIS
This Court is granted jurisdiction to hear an appeal of a bankruptcy

court’s order under 28 U.S.C. § 158(a); that is, appeals of, inter alia, “final
judgments, orders and decrees,” or “ interlocutory orders and decrees” if the
Page 6 of 16

party has been granted leave of the court to appeal. Id. A bankruptcy court’s
findings of fact are reviewed for clear error, and its conclusions of law are
reviewed de novo. See In re Smith, 286 F.3d 461, 464-65 (7th Cir. 2002); Meyer
v. Rigdon, 36 F.3d 1375, 1378 (7th Cir. 1994).
2.1

Whether the Bankruptcy Court’s Orders Were Final

To begin, while neither party addresses the jurisdiction of this Court
in any detail, the Court will raise the issue sua sponte. See Smoot v. Mazda
Motors of Am., 469 F.3d 675, 678 (7th Cir. 2006) (noting that “federal courts are
required to police their jurisdiction” which is a duty courts “are not at liberty
to shirk”). The Court notes, first, that while Spitz filed a notice of appeal
citing all three orders of the bankruptcy court, his arguments address solely
the error of the bankruptcy court in denying the Trustee’s motion to sell and
the unfairness of the hearing regarding that motion. As such, the Court must
determine whether the denial of the Trustee’s motion to sell is a “final order”
under § 158(a). See In re Bank of New England Corp., 218 B.R. 643, 647 (1st Cir.
BAP 1998) (“A decision is final if it ‘ends the ligation on the merits and
leaves nothing for the court to do but execute the judgment.’”) (quoting
Catlin v. United States, 324 U.S. 229, 233 (1945)). If it is not—and thus it
is an interlocutory order—Spitz’s appeal could be dismissed for lack of
jurisdiction, given that the appellant has not asked for the Court’s leave to
appeal and entertaining such appeals is discretionary. See In re Riggsby, 745
F.2d 1153, 1154 (7th Cir. 1984); McCallan v. Hamm, 502 B.R. 245, 248 (M.D.
Ala. 2013).
Alas, determining whether Judge Kelley’s order denying the Trustee’s
motion to sell is a final order is a complicated matter. See Dutch Lake Knoll
Holdings, LLC v. Sunnybrook Homeowners Ass’n, Inc., No. 13-CV-538, 2013 WL
3338783, at *1 (D. Minn. July 2, 2013) (“Although it is well established that an
Page 7 of 16

order approving the sale of property of the bankruptcy estate is final, it is less
clear whether an order denying approval of the sale of property is final.”)
(internal citations omitted). Now, to be sure, the Seventh Circuit has stated
that “[o]rders approving or failing to approve the sale of a debtor's property
are considered final decisions and are immediately appealable.” In re Sax, 796
F.2d 994, 996 (7th Cir. 1986); accord In re Vlaskek, 325 F.3d 955, 961 (7th Cir.
2003) (quoting In re Sax for the same proposition, without analysis on the
denial issue). However, as the Dutch Lake court notes, the Seventh Circuit’s
words were “without analysis” and other courts have held just the opposite.
See Dutch Lake, 2013 WL 3338783, at *1 (concluding that the denial of a motion
to sell is interlocutory); Big Shanty Land Corp. v. Comer Props. Inc., 61 B.R. 272,
277 (N.D. Ga. 1985) (finding an order denying a debtor’s motion to sell
interlocutory (albeit without much analysis), and denying leave to appeal
because such an order is a “‘weak candidate for interlocutory review’”)
(quoting Providers Benefit Life Ins. Co. v. Tidewater Grp., Inc., 22 B.R. 500, 506
(N.D. Ga. 1982)); In re Buerge, No. 11-20325, 2014 WL 1309694, at *8 n.59
(10th Cir. BAP Apr. 2, 2014) (unpublished) (noting that “an order denying
approval of sale of property may be deemed interlocutory…”). The
appellant’s decision to appeal all three orders of the bankruptcy court adds
another slight wrinkle, given that if a non-final order “is issued in
conjunction with a final order it becomes a final order.” In re Buerge, 2014 WL

Page 8 of 16

1309694, at *8 n.59. This begs the question: were Judge Kelley’s other two
orders final?3
To be sure, whether this Court has jurisdiction is a muddled issue.
Nevertheless, the Court is inclined to agree with the Dutch Lake court that
orders denying motions to sell are interlocutory. And, given the open-ended
nature of Judge Kelley’s other two orders, it is unlikely that those orders
were final either.
While these jurisdictional failings alone would be sufficient to dismiss
this appeal, the Court will assume it has jurisdiction and proceed to the
parties’ arguments for the sake of clarity and completeness. Proceeding to the
parties’ arguments, however, only makes it that much clearer that this appeal
must be dismissed. This is so because, as will be discussed below, Spitz lacks
standing to appeal any of the bankruptcy court’s orders.
2.2

Spitz Lacks Standing to Appeal the Bankruptcy Court’s
Orders
Bankruptcy standing “is narrower than Article III standing.” In re Ray,
597 F.3d 871, 874 (7th Cir. 2010); see also In re Andreuccetti, 975 F.2d 413, 416
(7th Cir. 1992) (noting that the standing requirement in bankruptcy “is more
exacting than the requirements for general Article III standing”). “Because
the Bankruptcy Code does not expressly define appellate standing, courts
3

Of course, normally orders granting abandonment and relief from stay are
final orders. But, when Judge Kelley issued those orders, she expressly noted their
resolution was dependent on other matters; namely, determining whether there
was indeed a surplus, and whether that surplus was property of the bankruptcy
estate or a post-petition accrual. (See Docket #1-3 at 195, 205). This, in turn, required
keeping the bankruptcy estate open while those matters were litigated in state
court. Thus, whether the orders were final is not an easy question to answer. Cf. In
re McKinney, 610 F.3d 399, 401-402 (7th Cir. 2010) (noting that in the bankruptcy
context, courts “deal with the concept of ‘flexible finality,’” but the law regarding
the issue of finality lacks clarity, and “the hard part is figuring out what stage of
these proceedings must be terminated for finality to attach”).

Page 9 of 16

have consistently applied a standard ‘derived from former section 39(c) of
the Bankruptcy Act of 1898, which permitted only a person aggrieved to appeal
an order of the bankruptcy court.’” In re Colony Hill Assocs., 111 F.3d 269, 273
(2d Cir. 1997) (quoting Kane v. Johns-Manville Corp., 843 F.2d 636, 641-42 (2d
Cir. 1988)) (emphasis added) (internal quotation marks omitted); see In re
Harwald, 497 F.2d 443, 444 (7th Cir. 1974).
To be a “person aggrieved” by a bankruptcy order, a party “must
demonstrate that the order diminishes the person’s property, increases the
person’s burdens, or impairs the person’s rights.” In re DuPage Boiler Works,
Inc., 965 F.2d 296, 297 (7th Cir. 1992); see also In re El San Juan Hotel, 809 F.2d
151, 154 (1st Cir. 1987) (“[T]he right of appellate review in bankruptcy
proceedings has historically been limited to ‘persons aggrieved,’ i.e., to those
persons who rights or interests are ‘directly and adversely affected
pecuniarily’ by the order or decree of the bankruptcy court.”) (quoting In re
Fondiller, 707 F.2d 441, 442-43 (9th Cir. 1983)).
And, speculative harm is insufficient to confer standing. Rather, to be
considered a “person aggrieved,” an appellant must establish both “injury
in fact as well as that the interest which he seeks to protect…is an interest
which the Bankruptcy Act seeks to protect or regulate.” In re Harwald, 497
F.2d at 444; see also Dick’s Clothing & Sporting Goods, Inc. v. Phar-Mor, Inc., 212
B.R. 283, 289 (N.D. Ohio 1997) (noting that courts also apply the “zone of
interest” test to determine bankruptcy standing, which “examines ‘whether
the interest sought to be protected by the complainant is arguably within the
zone of interests to be protected or regulated by the statute or constitutional
guarantee in question.’”) (quoting Bennett v. Spear, 520 U.S. 154, 163 (1997)).
“This rule of appellate standing is necessary to insure that bankruptcy
proceedings are not unreasonably delayed by protracted litigation that does
Page 10 of 16

not serve the interests of either the bankrupt’s estate or its creditors.” In re El
San Juan Hotel, 809 F.2d at 154; In re Andreuccetti, 975 F.2d at 416-17; In re Du
Page Boiler Works, Inc., 965 F.2d at 297; In re Carbide Cutoff, Inc., 703 F.2d 259,
264 (7th Cir. 1983).
In general, “absent some other meritorious ground for appeal,” an
appellant lacks standing to appeal if he is “merely an unsuccessful bidder
and not an ‘aggrieved person.’” In re Broadmoor Place Invs., L.P., 994 F.2d 744,
746 n.2 (10th Cir. 1993); In re Moran, 566 F.3d 676, 681 (6th Cir. 2009)
(“Generally, ‘[f]rustrated bidders do not have standing to object to the sale
of property.’”) (quoting In re Squire, 282 Fed. Appx. 413, 416 (6th Cir. 2008));
Big Shanty Land Corp., 61 B.R. at 278 n.8 (“The Court agrees that normally a
frustrated bidder lacks standing to object to a sale of assets.”) (citing In re
NEPSCO, Inc., 36 B.R. 25, 26-27 (Bankr. D. Me. 1983)); see In re Colony Hill, 111
F.3d at 273; In re CFLC, Inc., 89 F.3d 673, 675 (9th Cir. 1996).
This is so because “the provisions of the Bankruptcy Code regarding
sales of property ‘are intended to protect the creditors of such estates and
not prospective purchasers’” and thus “unsuccessful bidders generally lack
standing to challenge an order of sale under the zone of interests test.” Dick’s
Clothing & Sporting Goods, 212 B.R. at 289 (quoting In re HST Gathering Co.,
125 B.R. 466, 468 (W.D. Tex. 1991)); In re NEPSCO, 36 B.R. at 27 (“The Court
finds nothing to indicate that prospective purchasers are within the zone of
interests intended to be protected [by the bankruptcy statutes].”).
Here, the appellees argue that Spitz lacks standing to appeal because
he has “no ownership and no financial or security interest in the Aniwa
Property” and, “[e]ven if [he] planned to buy the [property] from the Trustee,
that fact would not create standing.” (Docket #5 at 12). Spitz argues,
conversely, that “[a]t the time the motion to sell was brought, [his] judgment
Page 11 of 16

lien was in full force and effect” and thus the lien “gave [him] a significant
interest as a secured creditor in the property.” (Docket #6 at 4). And, the
bankruptcy court’s failure to approve the sale “caused Mr. Spitz direct harm
by negatively affecting his secured status as a creditor in the Aniwa
[P]roperty.” Id. Thus, according to Spitz, he is “clearly an ‘aggrieved person’
with standing to appeal.’” Id.
The Court agrees with the appellees that Spitz lacks standing to
appeal the bankruptcy court’s denial of the Trustee’s motion to sell. First, as
merely a frustrated bidder, the cases noted above clearly lead to the
conclusion that Spitz lacks standing. And, while Spitz argues that he was
more than a bidder because he had a judgment lien against the property “[a]t
the time the motion to sell was brought,” (Docket #6 at 4), standing is not
measured by the appellant’s interests at the time a motion is filed, but by the
effect of the bankruptcy court’s order on the appellant’s interests. And,
Spitz’s judgment lien was extinguished before the bankruptcy court ruled on
the Trustee’s motion to sell, so he had no pecuniary interest whatsoever. In
addition, Spitz’s argument that he was a secured creditor—whether or not he
was—further undermines his position, given that sales are for the benefit of
unsecured creditors. See, e.g., In re Dockweiler, No. 13-1157, 2014 WL 1273695,
at *4 (9th Cir. BAP Mar. 28, 2014) (unpublished) (“A chapter 7 trustee may
sell property under § 363, but such a sale is generally for the benefit of
unsecured creditors and not for the benefit of secured creditors of the
debtor.”) (citing In re Gallagher, 283 B.R. 342, 344 (Bankr. M.D. Fla. 2002) and
In re Tobin, 202 B.R. 339, 340 (Bankr. D.R.I. 1996)).
The same holds true for Judge Kelley’s other two orders. Spitz lacks
standing—and thus cannot appeal—the abandonment of a property he has
no pecuniary interest in, and he surely cannot object to the court’s order
Page 12 of 16

granting J & T’s motion for relief from the automatic stay since he is a member
of J & T—whose motion it was—and that order could be argued to be
advantageous to Spitz.4
As an aside, even if the Court were to proceed to the merits, the Court
finds that the bankruptcy court did not abuse its discretion by denying the
Trustee’s motion to sell. As the court in Big Shanty noted,“[a]bsent clear
justification,…it would seem unwise to second-guess a bankruptcy court’s
refusal to approve a sale of substantial assets under § 363(b).” 61 B.R. at 278.
This is a high bar that Spitz cannot meet. Spitz’s main contention is that the
bankruptcy court abused its discretion by sustaining the Debtors’ objection
to the Trustee’ motion to sell because the Debtors lacked standing to make
such an objection. And, to be sure, the standing requirements noted above
are equally applicable to Debtors—i.e., to have standing to object, the Debtors
must have a pecuniary interest in the Aniwa Property. But, Spitz’s argument
that the Debtors lacked a pecuniary interest in the property—and thus
standing—lacks merit because the bankruptcy court left open the possibility
that any surplus from the Aniwa Property might be a post-petition accrual.
Thus, the Debtors had some pecuniary interest in the property.
2.3

Spitz’s Allegation of an Unfair Hearing is Insufficient to
Confer Standing

Now, the general rule that “unsuccessful bidders…are not considered
to be aggrieved persons or to be within the zone of interests of the
Bankruptcy Code for purposes of standing” is not without exceptions. Dick’s
Clothing & Sporting Goods, 212 B.R. at 289; In re Colony Hill Assocs., 111 F.3d

4

Indeed, after this appeal was filed, J & T foreclosed on the Aniwa Property.
See Shawano Circuit Court Case No. 2014CV000215. The total amount of that
foreclosure was $ 5,020,573.28. Id.

Page 13 of 16

at 273 (noting that “the rule denying standing to unsuccessful bidders is not
absolute” and collecting cases). “[C]ourts have recognized an exception in
cases where the unsuccessful bidder challenges the underlying fairness of the
sale.” Dick’s Clothing & Sporting Goods, 212 B.R. at 289; see In re Moran, 566
F.3d at 681-82 (noting “[a]n exception to [the] general rule…‘where an
unsuccessful bidder challenges the intrinsic structure of the sale because it is
tainted by fraud, mistake, or unfairness’”) (quoting In re Squire, 282 Fed
Appx. at 416). As the Seventh Circuit has instructed:
Courts…properly entertain suits challenging the equity of a
bankruptcy sale transaction, on the assumption that sales
tinged by fraud, mistake, or unfairness would generally result
in an accepted bid below that which might have been expected
in a fair, free market situation. Thus, when an unsuccessful
bidder attacks a bankruptcy sale on equitable grounds related
to the intrinsic structure of the sale, he brings himself within
the zone of interests which the Bankruptcy Act seeks to protect
and regulate.
In re Harwald, 497 F.2d at 444-45.
The fundamental problem with Spitz’s attempt to sweep himself
within this exception is that the bankruptcy court denied the Trustee’s motion
to sell, and thus any arguments about a transaction involving fraud, mistake,
or unfairness ring hollow. Ring hollow, that is, because no transaction
occurred whatsoever. It certainly makes sense, in light of the purpose
underlying the bankruptcy code, to permit an unsuccessful bidder to appeal
a consummated sale of Estate property on equitable grounds when there is
evidence calling the propriety of the sale into question. However, there
simply is no such evidence, here, nor a sale to begin with.
Spitz only argues that he was not given a sufficient opportunity to
present evidence and raise arguments in favor of the sale. This, in the Court’s
view, is insufficient to confer standing on Spitz. Allowing every frustrated
Page 14 of 16

bidder to appeal when no sale occurs would surely undermine the “person
aggrieved” standard, which is grounded in the notion that if courts did not
“limit who can appeal a bankruptcy court’s order [,]…‘bankruptcy litigation
[would] become mired in endless appeals brought by the myriad of parties
who are indirectly affected by every bankruptcy court order.’” In re Ernie
Haire Ford, Inc., 764 F.3d 1321, 1326 (11th Cir. 2014) (quoting Kane, 843 F.2d
at 642); see also In re Cult Awareness Network, 151 F.3d 605, 608 (7th Cir. 1998)
(“Courts consistently have noted a public policy interest in reducing the
number of ancillary suits that can be brought in the bankruptcy context so as
to advance the swift and efficient administration of the bankrupt’s estate.
This goal is achieved primarily by narrowly defining who has standing in a
bankruptcy proceeding.”) (citing In re Richman, 104 F.3d 654, 656-57 (4th Cir.
1997)).
And, even if the Court were to find that Spitz fell within this
exception, his failure to object at the hearing dooms whatever remains of his
argument. As the Seventh Circuit has stated, the “[p]rerequisites for being a
‘person aggrieved’ are attendance and objection at a bankruptcy court
proceeding.” In re Schultz Mfg. Fabricating Co., 956 F.2d 686, 690 (7th Cir.
1992). While Spitz surely attended the bankruptcy court’s hearing on all three
motions discussed above, he uttered not a peep when the court made its
rulings. Spitz’s silence effectively waived any appeal challenging the wide
discretion afforded to a bankruptcy court to conduct hearings as it sees fit.
Moreover, none of the cases the appellant cites actually support his
argument that the bankruptcy court abused its discretion during the hearing;
indeed, most of the cases have nothing to do with bankruptcy hearings at all.
Spitz’s arguments, in large part, merely exhibit his dissatisfaction with the
procedure of the hearing and expresses his lamentation that he did not get
a fair shake to plead his case; however, the hearing was not for the benefit of
Page 15 of 16

Spitz as a potential purchaser, it was held, at bottom, to further the dual
goals of swiftly administering the Debtors’ Estate and providing the
maximum recovery to unsecured creditors. While a party is certainly entitled
to a fair trial, Spitz, as merely a frustrated bidder, was not entitled to a
hearing; that is, of course, so long as the decisions the bankruptcy court made
were within its discretion. And Spitz has fallen woefully short of showing
that any decision of the bankruptcy court, during the hearing or otherwise,
involved an abuse of discretion.
3.

CONCLUSION

For all of the reasons noted above, the Court is obliged to dismiss this
appeal because Spitz lacks standing to appeal the bankruptcy court’s orders.5
Accordingly,
IT IS ORDERED that this appeal be and the same is hereby
DISMISSED for lack of standing.
The Clerk of Court is directed to enter judgment accordingly.
Dated at Milwaukee, Wisconsin, this 14th day of April, 2015.
BY THE COURT:

J.P. Stadtmueller
U.S. District Judge

5

It is also worth pointing out the main relief Spitz requests—that this Court
vacate all three orders and remand this case to the bankruptcy court with
instructions to approve the sale (Docket #4 at 16)—is relief this court likely cannot
grant. See In re Dockweiler, 2014 WL 1273695, at *4 (noting no statutory authority for
a court to order a Trustee to sell property of the Estate). And, it would be doubly
odd for this Court to order the Trustee to sell the Aniwa Property to Spitz when the
Trustee himself chose not to appeal the bankruptcy court’s order denying his
motion to sell. Additionally, granting such relief would arguably usurp the thrust
of the bankruptcy statutory scheme, which “is to provide maximum flexibility to
the trustee, subject to the oversight of those for whose benefit he acts, i.e., the
creditors of the estate.” In re NEPSCO, 36 B.R. at 26.

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