Corcoran v. Holley (In re Holley)
| Decision Date | 29 October 2018 |
| Docket Number | Case No. 18-10880 |
| Parties | IN RE: Ralph HOLLEY and Melonee Monson-Holley, Debtors. Collene K. Corcoran, Chapter 7 Trustee, Appellants v. Ralph Holley and Melonee Monson-Holley, Appellees. |
| Court | U.S. District Court — Eastern District of Michigan |
Thomas L. Beadle, Beadle Smith, PLC, Rochester Hills, MI, for Appellants.
Melonee L. Monson-Holley, Imlay City, MI, for Debtors, pro se.
This is a bankruptcy appeal from a Chapter 7 proceeding. Trustee Collene K. Corcoran appeals an order that requires her to turn over $20,036.68 in administrative fees that she retained from the sale of the debtors' home. For the reasons below, the Court will AFFIRM the bankruptcy court's order.
On September 25, 2012, Debtor Ralph Holley filed a Chapter 7 voluntary petition for bankruptcy, as an individual, in the United States Bankruptcy Court for the Eastern District of Michigan. He was represented by his wife, Melonee Monson-Holley, an attorney. The action was assigned to the Honorable Daniel Opperman.
On Holley's bankruptcy schedule, he listed his house ("the Property") as his most valuable asset. He claimed that the property was exempt under Michigan's tenancy by the entireties (TBE) exemption. See Mich. Comp. Law § 600.5451(1)(o) (2006)
Later, Monson-Holley filed her own bankruptcy petition, also ranking the Property as her most valuable asset and claiming Michigan's TBE exemption. The two cases were joined and administered by Judge Opperman pursuant to a June 3, 2013 Order for Joint Administration. Collene K. Corcoran ("Trustee") was appointed trustee in both of these cases.
In September 2013, Trustee arranged to sell the Property to satisfy creditor claims. She filed a motion for authority to sell it free and clear under 11 U.S.C. § 363, averring that a third-party offered to purchase the house for $451,000. The Debtors initially objected to the proposed sale, but later petitioned the bankruptcy court for a reduced sales price so that they could arrange for their own third-party purchaser. They also stipulated to an order granting the Trustee's motion to sell, conditioned on the Debtors having an opportunity to seek their own preferred purchaser. In December 2013, the bankruptcy court granted Trustee's motion to sell and then, per Debtors' request, entered a separate order reducing the sales price to $315,000. Thereafter, Trustee sold the Property to Debtors' chosen purchaser and retained the proceeds. Debtors then signed a lease-option that allowed them to continue living at the Property.
In January 2015, Trustee filed a final report and account of her administration of Debtors' estates. She showed gross receipts of $330,698.41 from the Debtor's assets, approximately $320,000 of which came from the Property's sale, and a balance of $101,486.65 after paying the secured creditors' claims. From that sum, Trustee proposed paying herself $97,734.32.
Debtors objected to Trustee's final report and account, contending that the sale proceeds were unavailable to pay administrative fees because they were exempt under Michigan's TBE law. The bankruptcy court denied Debtors' objections, and awarded administrative expenses and fees, most of which came from the proceeds of the Property sale. On appeal, this Court affirmed that award. Debtors appealed to the United States Court of Appeals for the Sixth Circuit.
The Sixth Circuit vacated the bankruptcy court's order to pay Trustee's administrative fees from the sale proceeds. After determining that Debtors had properly claimed the TBE exemption, the Court noted that " 11 U.S.C. § 522(k) prohibits a bankruptcy court from charging exempt property for administrative expenses (with exceptions not relevant here)." In re Holley , 661 Fed.App'x 391, 396 (6th Cir. 2016). Micigan's TBE exemption "protected the entire value of this couple's property—which in this case would be the cash proceeds from the Property's liquidation at the sale—minus deductions for those sums due to joint creditors." Id. (emphasis in original). The Sixth Circuit concluded that the bankruptcy court "could not lawfully award any of the exempt Property's equity to pay the Trustee's fees" and remanded for "proceedings consistent with this opinion." Id. at 396-397.
On June 16, 2017, the bankruptcy court ordered Trustee to "pay all proceeds from the sale of [the Property], after payment of joint creditors, to the Debtors." (D.E. 3, PageID 35). Trustee tendered $75,918.65, which she believed to be the proper amount based on the Sixth Circuit's opinion. Debtors objected, arguing that the correct amount was $84,204.32, which was the total of fees and expenses paid to Trustee, her attorneys, and her accountant. (D.E. 3, PageID 41). The bankruptcy court agreed with Debtors and ordered Trustee to pay the $8,285.67 difference. (D.E. 3, PageID 43). Trustee paid this amount, but both Trustee and the Debtor filed a motion for reconsideration of that order.
The bankruptcy court reconsidered its order. Applying the Sixth Circuit's mandate and Law v. Siegel , 571 U.S. 415, 134 S.Ct. 1188, 188 L.Ed.2d 146 (2014), the court held that "[t]he realtor commissions and related costs of the sale of the subject real property are administrative expenses, which must be accounted for and which must not be charged against the Debtors' validly allowed exemption." (D.E. 3, PageID 66). The bankruptcy court also reiterated that $9,971 in tax refunds—which the Sixth Circuit had not addressed—were exempt per the bankruptcy court's July 18, 2014 order denying Trustee's objections to exemptions. The bankruptcy court then employed an "easier method to calculate the amount that must be turned over to Debtors:"
Proceeds from [sale of the Property] $320,727.26
Tax Refunds + $9,971.15
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$330,698.41
Liens on [the Property] - $207,373.63
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$123,324.78
Amounts previously paid to Debtors - $93,956.65
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Amount to be turned over to Debtor $29,368.13
(D.E. 3, PageID 67).1
The bankruptcy court ordered Debtors to prepare an order consistent with its opinion. (D.E. 3, PageID 67). Debtors submitted a "Debtor's Calculations of Additional Exempt Property Being Held by the Chapter 7 Trustee." (D.E. 3, PageID 206). Debtor's calculation was substantially similar to the Court's formula, except Debtors subtracted $9,431.50 that was paid at closing for real estate taxes, water bills, and water escrow, and added a $100 water credit. (D.E. 3, PageID 206). In the end, Debtors submitted a proposed order that required Trustee to turn over $20,036.68. (D.E. 3, PageID 207). The bankruptcy court entered this order, which is the subject of this appeal. (D.E. 3, PageID 73).
Trustee appeals from the bankruptcy court's "Order Regarding the Parties Cross Motions to Reconsider this Court's June 16, 2017 Opinion and Order." (D.E. 1, PageID 2). Although this order does not purport to grant or deny any motion, it effectively granted Debtor's motion for reconsideration. (D.E. 3, PageID 73 and 206). An order that grants or denies a motion for reconsideration is reviewed for abuse of discretion, except that any aspect of the ruling that relies upon issues of law is subject to de novo review. Greenwell v. Parsley , 541 F.3d 401, 403 (6th Cir. 2008). The interpretation of an appellate mandate is an issue of law. United States v. Parks , 700 F.3d 775, 777 (6th Cir. 2012).
Trustee raises four arguments on appeal. First, she argues that the bankruptcy court erred in its interpretation of the Sixth Circuit's mandate ("the Mandate") by addressing and granting the Debtor's motion for turnover of the tax refund money. Second, she argues that the bankruptcy court erred in its interpretation of the Mandate by including the sale expenses in its calculation of the turnover amount. Third, she argues that, under the doctrine of equitable mootness as to third parties, the bankruptcy court erred in ordering her to turnover money (that she no longer controls) because Debtors never filed a stay pending appeal in their original appeal. Fourth, she argues that the bankruptcy court erred by failing to address that the estate was administratively insolvent and, therefore, unable to turnover any additional money.
Trustee asserts that "the Bankruptcy Court unilaterally acknowledged that the tax refund issue was not within the scope of the [Sixth Circuit's] mandate but it needed to be addressed despite the fact that it was not addressed in the mandate which dealt solely with the sale proceeds for the real estate." (D.E. 5, PageID 220) (internal citations omitted). Trustee further asserts that "[t]he Bankruptcy Court's decision to implement the recovery of the tax refund monies was simply incorrect and not within the mandate and led to a confusion of the issues in the case."Id.
Contrary to Trustee's assertions, the bankruptcy court did not purport to interpret the Mandate or grant a motion from Debtor when it considered the tax refund issue on remand. Rather, the bankruptcy court simply acknowledged that "this Court previously ruled that the Debtor's exemptions were proper regarding the 2009-2012 refunds, so it appears that the issue did not need to be addressed by the Sixth Circuit Court of Appeals." (D.E. 3, PageID 41) (referring to Order Denying the Chapter 7 Trustee's Options to Debtor's claim of exemptions and vacating October 29, 2013 Order Granting the Trustee's Objection to the Debtors' Amended Claim of Exemption (D.E. 3, PageID 140) and accompanying Opinion (D.E. 3, PageID 131-139) ). The bankruptcy court was not interpreting the Mandate; it was applying its own previous...
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Holley v. Corcoran (In re Holley), Case No. 20-11096
...Trustee to turn over an additional $20,036.68 to the Debtors. The Trustee appealed, and the district court affirmed. In re Holley, 594 B.R. 872, 879 (E.D. Mich. 2018).(Id. at 1-2). In its July 17, 2019 Order, the Sixth Circuit rejected the Trustee's arguments that were properly before it2 a......