Stanton, In re

• Decision Date: 26 July 1985
• Docket Number: No. 84-6135,84-6135
• Citation: 766 F.2d 1283
• Parties: Bankr. L. Rep. P 70,650 In re Karen Virginia STANTON, Debtor. T.O. KING, Plaintiff-Appellant, v. Karen Virginia STANTON, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1283

766 F.2d 1283

Bankr. L. Rep. P 70,650

In re Karen Virginia STANTON, Debtor T.O. KING, Plaintiff-Appellant, v. Karen Virginia STANTON, Defendant-Appellee.

No. 84-6135.

United States Court of Appeals, Ninth Circuit.

Argued Feb. 7, 1985.

Submitted March 12, 1985.

Decided July 18, 1985.

As Amended July 26, 1985.

Hugh J. Haferkamp, Santa Barbara, Cal., for plaintiff-appellant.

John S. Poucher, Hollister & Brace, Santa Barbara, Cal., for defendant-appellee.

Appeal from the Bankruptcy Appellate Panel for the Ninth Circuit.

Before SCHROEDER, FLETCHER, and FARRIS, Circuit Judges.

ORDER

King appeals from a decision of the Bankruptcy Appellate Panel, affirming in part and reversing and remanding in part a decision of the bankruptcy court. We dismiss the appeal for lack of jurisdiction.

I. BACKGROUND AND PROCEEDINGS BELOW

In April 1977, Karen Stanton and T.O. King formed a partnership to purchase and resell a mansion in Montecito, California, called "Tara" (after the mansion in "Gone With the Wind"). Under the partnership agreement, King and Stanton each had equal ownership in the property. Stanton received rent-free occupancy of Tara, and was obligated to make the debt, tax, and insurance payments on it. The agreement further provided that if Stanton failed to make these payments, King had the option of making them himself, with his percentage ownership increased by 1.4% for every $1,000 he paid out.

In July 1977, King advanced Stanton $3,000, the parties agreeing that partnership interests would be adjusted accordingly. In August, Stanton notified King that she would not be able to make her payments for the month, so King made them. During this time, Stanton told King that she felt the time and money she was putting into improving the property were worth more than payment of the debt, tax, and insurance obligations. Stanton contends, and the bankruptcy court found, that the parties orally agreed that she would make the improvements required and that King would pay the obligations without any further reduction in Stanton's partnership interest.

After August, King made all the payments on the property, without notifying Stanton that he was doing so. Finally, in May 1978, King announced to Stanton that, because of the payments he had been making, he had acquired 100% ownership of the Tara property. Stanton denied this.

In March 1978, Stanton offered to buy out King's interest in the partnership, but King did not respond. After May, King refused several offers from third parties to buy Tara, although he did agree to accept one offer for $576,000, if Stanton would agree that she was entitled to only $31,470 of the proceeds. Stanton refused these terms, and the property remained unsold.

King filed suit in state court, seeking dissolution of the partnership and an accounting. Stanton filed a counterclaim, contending that King's refusal to accept the buy-out offer she made and his rejection of the other offers to purchase the property constituted fraud and breach of the partnership agreement. Later, Stanton filed for bankruptcy, and the case was removed from state court to the bankruptcy court.

The bankruptcy court found that the parties had orally modified the partnership agreement. The court dissolved the partnership, declaring that King had a 57.72% interest and Stanton had a 42.28% interest. The court also denied Stanton's counterclaim, but it did so without any findings or discussion. ¹

Both parties appealed to the Bankruptcy Appellate Panel ("BAP"). The BAP affirmed the trial court's judgment concerning the partnership interests, but reversed and remanded the dismissal of Stanton's counterclaim. In re Stanton, 38 B.R. 746 (Bankr. 9th Cir.1984). The BAP concluded that Stanton's counterclaim had support in the record. Id. at 753-54. It remanded for further consideration by the bankruptcy court. ² Id. at 754.

King then timely appealed to this court.

II. DISCUSSION

Under section 158(d) of Title 28, we have jurisdiction to hear appeals "from all final decisions, judgments, orders, and decrees" entered by a district court or a bankruptcy appellate panel on appeal from a bankruptcy court. ³ The issue before us in this case is whether the decision of the BAP was final.

Our cases addressing appellate jurisdiction in the bankruptcy context suggest that the finality issue must be examined at two levels. We look, first, to see whether the order of the bankruptcy court was final, see, e.g., In re King City Transit Mix, Inc., 738 F.2d 1065, 1066-67 (9th Cir.1984) (per curiam); In re Mason, 709 F.2d 1313, 1315-16 (9th Cir.1983); In re Rubin, 693 F.2d 73, 76 (9th Cir.1982), and second, to whether the decision of the BAP ⁴ is final, see, e.g., In re Teleport Oil Co., 759 F.2d 1376, 1377-78 (9th Cir.1985); In re Sambo's Restaurants, Inc., 754 F.2d 811, 813-15 (9th Cir.1985); In re Martinez, 721 F.2d 262, 264-65 (9th Cir.1983). Both decisions must be final. ⁵

We apply a "pragmatic approach" to decide whether the bankruptcy court's order is final. In re Mason, 709 F.2d at 1318. Recognizing "the unique nature of bankruptcy procedure," id. at 1316, we have concluded that "certain proceedings in a bankruptcy case are so distinctive and conclusive either to the rights of the individuals or the ultimate outcome of the case that final decisions as to them should be appealable as of right," id. at 1317.

In this case, we have no difficulty concluding that the order of the bankruptcy court was final. The court decided King's claims for dissolution of the partnership and settled the accounting between the partners. The court also dismissed Stanton's counterclaim. The bankruptcy court's order left nothing to be resolved between the partners; it ended the adversary proceeding, and was therefore a final order. See In re Four Seas Center, Ltd., 754 F.2d 1416, 1418 (9th Cir.1985); In re Ellsworth, 722 F.2d 1448, 1450 (9th Cir.1984).

The more difficult issue is whether the decision of the BAP was final. The problem is whether the BAP's partial reversal and remand destroys the finality of the bankruptcy court's order. Two recent Ninth Circuit cases, In re Sambo's Restaurants, Inc., 754 F.2d at 811, and In re Martinez, 721 F.2d at 262, inform our decision.

In Sambo's, 754 F.2d at 811, Sambo's filed a Chapter 11 petition, and while the automatic stay was in effect, a wrongful death action was filed against Sambo's in another court. The wrongful death action was dismissed, and the plaintiff failed to file a formal proof of claim against Sambo's in the bankruptcy proceeding before the bar date. She argued, however, that her wrongful death action served as an informal proof of claim. The bankruptcy court rejected this argument, but the district court reversed. On appeal, we concluded that:

Although [a] case-by-case approach may make sense when the original appeal from the bankruptcy court is interlocutory, here we have a final bankruptcy court order which resulted in a non-final district court order on review. Under these circumstances, we embrace the views of the Third and Eighth Circuits which hold that "when the bankruptcy court issues what is indisputably a final order, and the district court issues an order affirming or reversing, the district court's order is also a final order for purposes of section 1293(b)." In re Marin Motor Oil, Inc., 689 F.2d 445, 449 (3d Cir.1982), cert. denied, 459 U.S. 1206 [103 S.Ct. 1196, 75 L.Ed.2d 440] (1983); ... accord In re Bestmann, 720 F.2d 484, 485-86 (8th Cir.1983)....

Id. at 814; accord In re Pizza of Hawaii, Inc., 761 F.2d 1374, 1378 (9th Cir.1985).

In Martinez, 721 F.2d at 262, Dental Capital held a judgment against Mr. Martinez. It recorded the judgment, making it a lien against the Martinez residence. Shortly afterward, Mr. and Mrs. Martinez filed for bankruptcy. Dental Capital brought an adversary proceeding in the bankruptcy court, which held that the lien was postponed to the amount of the Martinez's state and federal homestead exemptions. The court also lifted the stay to permit a forced sale of the Martinez residence. Dental Capital appealed to the BAP, which affirmed the determination of the priorities of the lien and the homestead exemptions. Additionally, the BAP vacated the bankruptcy court's order and remanded for a determination of whether the house was community or joint property, and whether Mr. Martinez's interest in the property was sufficient to allow Dental Capital to foreclose. Dental Capital appealed to this court, and we dismissed for lack of jurisdiction.

We stated that although a "pragmatic approach" to finality is appropriate, "[w]e see no reason not to apply [traditonal] finality standards to remands for factual determinations in the bankruptcy context." Id. at 265 (citations omitted). We noted that the BAP had remanded for clarification of "a central issue in the case," ⁶ and that courts traditionally have not considered remands final decisions because of the policy disfavoring piecemeal appeals. Id.

At first glance, Sambo's and Martinez seem difficult to reconcile, but, in fact, the cases complement one another. Sambo's holds that when a bankruptcy court issues a final order, and the BAP affirms or reverses, its order is final. Sambo's, 754 F.2d at 814. Martinez holds that when the BAP remands for further factual findings related to a central issue raised on appeal, that order is not final, and we lack jurisdiction. Martinez, 721 F.2d at 265. ⁷

In Sambo's, we noted that one purpose of the finality rule is to maintain the proper relationship between trial and appellate courts, Sambo's, 754 F.2d at 814, a relationship that is complicated by interposition of an intermediate appellate tribunal. A principal concern is to maintain the trial court's role as a fact-finder. If the BAP affirms or reverses a bankruptcy court's final order, it presumably has determined that all the necessary fact-findings have been made. The Sambo's result is entirely...