Indian Wells Estates, Inc., In re

Decision Date03 September 1996
Docket NumberNo. 95-55000,95-55000
Parties-6465, 96-2 USTC P 50,521 NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel. In re INDIAN WELLS ESTATES, INC., a California corporation; Indian Mountain Meadows, Inc., a California corporation; KEM, Inc., a California corporation; VEK, Inc., a California corporation, Debtors. David A. GILL, Chapter 11 Trustee; Committee of Creditors Holding Unsecured Claims, Appellants, v. INDIAN WELLS ESTATES, INC., a California corporation; United States of America, et al., Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Before: HALL, O'SCANNLAIN, and KLEINFELD, Circuit Judges.

MEMORANDUM *

The Committee of Creditors Holding Unsecured Claims in the Indian Wells Estates, Inc. bankruptcy case (the "Committee") appeals the district court's order, which (1) reversed the bankruptcy court's order denying the United States' motion to reconsider the court's prior order disallowing the entire amount of prepetition interest claimed by the Internal Revenue Service ("IRS"), and (2) remanded to the bankruptcy court to determine the correct amount of interest. The action arose out of the objection filed by Chapter 11 Trustee David Gill to the IRS' proofs of claims for prepetition interest against the bankruptcy estates of Indian Wells and KEM, Inc.

I

Although the parties do not dispute our subject matter jurisdiction over the appeal, we must consider sua sponte whether we have jurisdiction over this district court judgment, which reverses a bankruptcy court order and remands for further proceedings. See In re Dominguez, 51 F.3d 1502, 1506 (9th Cir.1995) ("this court must consider sua sponte whether it has jurisdiction over this [bankruptcy] appeal"); see also Vylene Enterprises, Inc. v. Naugles, 968 F.2d 887, 889 (9th Cir.1992).

In order for this court to assert jurisdiction under 28 U.S.C. § 158(d), 1 the orders of both the bankruptcy court and the district court must be final. In re Stanton, 766 F.2d 1283, 1285 (9th Cir.1985); see also In re Kelly, 841 F.2d 908, 911 (9th Cir.1988). Here, the bankruptcy court's order (allowing the tax claims as unsecured priority claims and disallowing prepetition interest) was final because it "left nothing to be resolved" and "ended the adversary proceeding." Stanton, 766 F.2d at 1286. The more difficult question is whether the district court's reversal and remand constituted a final order that may be appealed to this court. Id.

To determine the finality of an order under 28 U.S.C. § 158(d), this court balances the following considerations: (1) need to avoid piecemeal litigation; (2) judicial efficiency; (3) systemic interest in preserving bankruptcy court's role as fact-finder; and (4) whether delaying review would cause either party irreparable harm. In re Lakeshore Village Resort, Ltd., 81 F.3d 103, 106 (9th Cir.1996) (citing Vylene, 968 F.2d at 895-96); see In re Stanton, 766 F.2d 1283, 1287 (9th Cir.1985) ("[if] we take jurisdiction before [the remand for factual development] is concluded, we interfere with the bankruptcy court's fact-finding role.... [and] we are likely to be faced with an inadequate factual record, making it difficult to identify the controlling legal issues").

A district court's order is ordinarily not final " 'when the district court remands for further factual findings related to a central issue raised on appeal.' " In re United Ins. Mgmt., Inc., 14 F.3d 1380, 1384 (9th Cir.1994) (quoting Bonner Mall Partnership v. U.S. Bancorp Mortgage Co., 2 F.3d 899, 904 (9th Cir.1993), dismissed as moot, 115 S.Ct. 386 (1994) (dismissing as moot, but declining to vacate Ninth Circuit opinion)). However, we will " 'assert jurisdiction even though a district court has remanded a matter for factual findings on a central issue if that issue is legal in nature and its resolution either (1) could dispose of the case or proceedings and obviate the need for factfinding; or (2) would materially aid the bankruptcy court in reaching its disposition on remand.' " Id. (quoting Bonner, 2 F.3d at 904).

Here, the bankruptcy court eventually received the information it needed to determine the amount of interest; the legal issue presented on appeal is whether the bankruptcy court erred in disallowing statutorily mandated prepetition interest on the ground that the IRS submitted its explanation of the interest computations in a motion for reconsideration. The remand to the bankruptcy court is limited to the determination of the correct amount of interest. See David G. Epstein et al., Bankruptcy § 12-12, at 884 (West 1993) (footnote omitted) ("examples of final orders [include] an order allowing a claim, even if the actual amount to be realized by the claim is undetermined").

Since the resolution of whether a bankruptcy court has the discretion to disallow prepetition interest on allowed tax claims involves a purely legal issue that is not dependent on the factual determinations required by the remand, the "policies of avoiding piecemeal appeals and enhancing judicial economy" weigh in favor of our assertion of jurisdiction. See In re DeMarah, 62 F.3d 1248, 1250 (9th Cir.1995) (quoting In re Kelly, 841 F.2d 908, 911 (9th Cir.1988)) ("If the matters on remand concern primarily factual issues about which there is no dispute, and the appeal concerns primarily a question of law, then the 'policies of judicial efficiency and finality are best served by our resolving the question now.' "); see also In re Fox, 762 F.2d 54, 55 (7th Cir.1985) (citations omitted) (district court's remand order is final "if all that remains to do on remand is a purely mechanical, computational, or in short 'ministerial' task, whose performance is unlikely either to generate a new appeal or to affect the issue that the disappointed party wants to raise on appeal from the order of remand").

In short, we conclude that the district court's order is final and appealable.

II

The bankruptcy court denied the IRS' motion for reconsideration of the court's interest ruling, concluding that a motion for reconsideration was not the appropriate means of explaining the interest computations. The district court reversed, holding that the bankruptcy court abused its discretion in denying prepetition interest because (1) the IRS' motion for reconsideration properly sought the correction of a clear error of law; (2) IRC section 6601 mandates the award of prepetition interest as a matter of law (citing Purcell v. United States, 1 F.3d 932, 943 (9th Cir.1993)); and (3) the bankruptcy court had before it all the information necessary to verify the amounts of interest claimed. 2

On appeal, the Committee argues that (1) the bankruptcy court did not abuse its discretion in denying the motion for reconsideration; (2) the district court's reliance on Purcell is misplaced; and (3) the IRS did not meet its burden of proving liability for the interest claimed. We are not persuaded.

A

As a threshold matter, contrary to the bankruptcy court's characterization of the IRS' motion as arising under Federal Rule of Civil Procedure 60 (relief from order), the IRS' motion was actually brought under Bankruptcy Rule 9023, which provides that Federal Rule of Civil Procedure 59 governs motions for a new trial and amendment of judgment. 3 See Lavespere v. Niagara Mach. & Tool Works, Inc., 910 F.2d 167, 174 (5th Cir.) (in contrast to Rule 60, "in order to reopen a case under Rule 59(e) on the basis of evidentiary materials that were not timely submitted, the mover need not first show that her default was the result of mistake, inadvertence, surprise, or excusable neglect or that the evidence is such as to show that the judgment was manifestly wrong"), reh'g denied with opinion, 920 F.2d 259 (5th Cir.1990), cert. denied, 114 S.Ct. 171 (1993). The IRS sought correction of a clear error of law and Rule 59 empowers a court to "take additional testimony, amend findings of fact and conclusions of law or make new findings and conclusions, and direct the entry of a new judgment." Fed.R.Civ.P. 59(a).

Despite protesting that the IRS' motion was not an appropriate means of challenging the court's prior rulings on the interest award, the court nonetheless considered the motion appropriate as a means of correcting the court's erroneous ruling on the priority status of the tax claims. The bankruptcy judge stated: "I find that I did make a mistake of law with regards to priority, and it should be allowed as a priority claim."

The Committee argues that the bankruptcy court was simply not persuaded by the explanation of the interest calculations provided by the IRS in its motion for reconsideration. In contrast, the IRS contends that the bankruptcy court did not even consider the supplementary information contained in its motion for reconsideration. The language of the bankruptcy court's order supports the IRS' position. In explaining its ruling, the bankruptcy court makes no mention of the merits of the materials submitted by the IRS regarding interest:

The government had two chances to provide that--those interest calculations to me the first time and at the second hearing, and they didn't do it. And this is not an appropriate wa[y] of getting a third bite at the apple. So ... I am not modifying the amount of the claim with regards to interest.

Furthermore, the supplemental materials contained in the IRS' motion for reconsideration are responsive to the bankruptcy court's request for substantiation of the IRS' computation of the interest amounts. The computer printouts and Martin's accompanying explanation indicate (1) the applicable interest rates for each time period under 26 U.S.C. § 6621(a)(2); (2) the original amounts subjected to the rates; and...

To continue reading

Request your trial
2 cases
  • United States v. Shearer
    • United States
    • U.S. District Court — Eastern District of California
    • August 6, 2018
    ...retrieved from IDRS. (ECF No. 37-3 ¶¶ 10-22; ECF No. 40 Exs. J-P.) Plaintiff has met its initial burden. See In re Indian Wells Estates, Inc., 96 F .3d 1451, *4 (9th Cir. 1996) (rejecting an argument "the IRS failed to meet its burden of proof on the award of interest" in part because the I......
  • United States v. Martin (In re in Revocable Trust Agreement Dated January 10, 1991, Anna Anh Martin)
    • United States
    • U.S. District Court — District of Hawaii
    • September 25, 2014
    ...to her declaration used "to compute up-to-date interest and penalty calculations on the balances owed"); cf. In re Indian Wells Estates, Inc., 96 F.3d 1451 (9th Cir. 1996) (in bankruptcy case, rejecting argument that "the IRS failed to meet its burden of proof on the award of interest" in p......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT