951 F.2d 242 (9th Cir. 1991), 89-15815, In re Pecan Groves of Arizona

Docket Nº:89-15815.
Citation:951 F.2d 242
Party Name:In re PECAN GROVES OF ARIZONA, Debtor. Clarence TILLEY, B & C Equities, Appellants, v. Robert VUCUREVICH, Trustee; Skousen; Jay Davis; Allen Eide; Ron Offutt; Mel Clayton; Gerie Clayton; Ralph Thomas, Appellees.
Case Date:December 16, 1991
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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951 F.2d 242 (9th Cir. 1991)

In re PECAN GROVES OF ARIZONA, Debtor.

Clarence TILLEY, B & C Equities, Appellants,

v.

Robert VUCUREVICH, Trustee; Skousen; Jay Davis; Allen

Eide; Ron Offutt; Mel Clayton; Gerie Clayton;

Ralph Thomas, Appellees.

No. 89-15815.

United States Court of Appeals, Ninth Circuit

December 16, 1991

Argued and Submitted Dec. 11, 1990.

Thomas M. Swift, Mesa, Ariz., for appellants.

James M. Marlar, Phoenix, Ariz., for appellees.

Appeal from the Ninth Circuit Bankruptcy Appellate Panel.

Before CHOY, TANG and FLETCHER, Circuit Judges.

TANG, Circuit Judge:

OVERVIEW

In the third bankruptcy proceeding brought by or on behalf of Pecan Groves, the Chapter 7 Trustee sought to avoid a trustee's sale which took place in violation of the automatic stay under the first bankruptcy proceeding. Clarence Tilley and B & C Equities were allowed to intervene with the trustee. After the Trustee, Tilley, and B & C had presented their case, the bankruptcy court granted judgment for Skousen and the Clayton Group and against the trustee. Tilley and B & C appealed; the trustee did not. The Bankruptcy Appellate Panel ("BAP") affirmed. Tilley and B & C appeal. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

On October 6, 1978, Pecan Groves purchased a pecan grove located in Pinal County, Arizona from Pecan Centers of Arizona, Inc., a corporation in which Jerry Skousen was the sole or majority shareholder. As part of the purchase transaction, Pecan Groves executed a promissory note in the

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amount of $1,030,000 payable to Skousen and Pecan Centers of Arizona. The note was secured by a deed of trust on the property. John Hancock Life Insurance Company held a senior lien on the property.

After Pecan Groves defaulted on the promissory note, Commonwealth Title of Arizona in connection with the Pecan Centers of Arizona, Inc. and Skousen deed of trust caused a Notice of Trustee's sale to be set for August 23, 1982. Ten days before the sale, on August 13, Pecan Groves filed a petition for relief under Chapter 11 of the Bankruptcy Code in the District of Utah. Despite the filing of the petition and Skousen's knowledge of the petition, the trustee's sale was held as scheduled. Skousen himself purchased the property with a credit bid of $650,000, and recorded a trustee's deed evidencing the sale in Pinal County on August 30, 1982. Skousen then transferred the property to a trust he created.

Pecan Groves' responsible officers became aware of the trustee's sale shortly after the sale had been conducted, but were not aware that the trustee's deed had been recorded or that Skousen had transferred the property to a trust. At no time during the Utah Chapter 11 case did Pecan Groves make a demand for the return of the property sold at the trustee's sale or attempt to set aside the trustee's sale.

Nevertheless, during the Utah Chapter 11 case, Pecan Groves and Skousen acted as if Pecan Groves owned the property. Pecan Groves proposed a Chapter 11 plan that provided, in essence, that it would obtain a $2.2 million dollar loan secured by the property and that a portion of the property would be transferred free and clear of liens to Skousen. Skousen and his attorney, Forrest Gressley ("Gressley"), agreed to the terms of the proposed plan.

In the spring of 1983, Pecan Groves sought financing to provide irrigation and horticultural care for the property. Appellant Clarence...

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