Dahlquist, In re
| Decision Date | 02 January 1985 |
| Docket Number | No. 84-1639,84-1639 |
| Parties | Bankr. L. Rep. P 70,198 In re Marlyn Verle DAHLQUIST, Robert Dean Dahlquist, James Marlyn Dahlquist, Debtors. Marlyn Verle DAHLQUIST; Robert Dean Dahlquist; James Marlyn Dahlquist, Appellees, v. FIRST NATIONAL BANK IN SIOUX CITY, IOWA, Appellant. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Edward J. Leahy, Sioux Falls, S.D., for appellant.
Celia Miner, Yankton, S.D., for appellees.
Before ARNOLD, FAGG and BOWMAN, Circuit Judges.
On July 5, 1983, Marlyn Dahlquist filed for relief under Chapter 11 of Title 11 of the United States Code in the Bankruptcy Court for the District of South Dakota. Three days later Dahlquist's sons, Robert and James, also filed Chapter 11 petitions in the same court.
On August 26, 1983, John Harmelink and John Kabeiseman, counsel for the Dahlquists, filed a request for interim compensation under 11 U.S.C. Secs. 330 and 331. First National Bank in Sioux City B filed an objection to the request and asked for a hearing. The Bankruptcy Court held a hearing on the request on September 22, 1983 and ordered that interim compensation be paid on October 20, 1983. FNB appealed this order to the United States District Court for the District of South Dakota on November 7, 1983.
In the meantime, also on October 20, 1983, venue for the Dahlquist bankruptcy proceedings was transferred to the Bankruptcy Court for the District of Nebraska, although the District Court of South Dakota retained jurisdiction of the pending appeal. On March 9, 1984, the Dahlquist bankruptcy proceedings were dismissed by the Bankruptcy Court for the District of Nebraska. 1 On March 15, 1984, the District Court 2 for the District of South Dakota affirmed the October 20, 1983 order of the Bankruptcy Court granting interim compensation. FNB now appeals the order of the District Court to this Court. 3 We affirm except as to a minor computational error, and we remand the case to the District Court for correction of that error.
Initially, attorneys Harmelink and Kabeiseman argue that this Court is without jurisdiction to hear FNB's appeal because an order granting interim compensation is one which is interlocutory and therefore not reviewable under 28 U.S.C. Sec. 1293(b). While orders granting interim compensation in an ongoing bankruptcy proceeding generally are considered to be interlocutory in nature, see In re Callister, 673 F.2d 305, 307 (10th Cir.1982), the question of whether a particular order granting compensation is interlocutory or final necessarily depends upon the circumstances of the case. Thus, in In re Yermakov, 718 F.2d 1465 (9th Cir.1983), an order for an interim allowance in an ongoing bankruptcy proceeding was considered to constitute " 'a final judgment, order or decree' appealable under 28 U.S.C. Sec. 1293(b)" where the attorneys for the debtors had been discharged from further representation. Id. at 1469. We believe the same to be true where the dismissal includes not only the attorneys for the debtors, but the underlying action itself. Thus, we hold that the dismissal of the underlying bankruptcy proceeding in this case prior to the District Court's order affirming the payment of interim compensation makes the order of the District Court one which is final and appealable under 28 U.S.C. Sec. 1293(b).
Harmelink and Kabeiseman next contend that this appeal, if not interlocutory, is moot because the underlying bankruptcy proceeding has been dismissed. In support of this contention, counsel point to this Court's recent decision in Dahlquist v. First National Bank, 737 F.2d 733 (8th Cir.1984) (Dahlquist I ) and also point to In re S.L.E., Inc., 674 F.2d 359 (5th Cir.1982).
In Dahlquist I, which involved the parties currently before this Court, FNB had appealed from that part of an order of the District Court, issued on approximately the same date as that order here appealed from, which affirmed a cash collateral order of the Bankruptcy Court authorizing the debtors to sell off certain livestock to provide for family living and farm operational expenses. In the same appeal, the debtors challenged that part of the order of the District Court that reversed an order of the Bankruptcy Court finding FNB in contempt and requiring FNB to pay certain of the debtors' attorneys' fees. On appeal, this Court dismissed as moot the appeal of the cash collateral order authorizing the livestock sale, but affirmed that part of the decision of the District Court which reversed the Bankruptcy Court's finding of contempt and award of attorneys' fees.
In In re S.L.E., Inc., S.L.E. (a corporation created by the debtor) had appealed to the Fifth Circuit a decision by the district court authorizing the receiver to execute certain consent agreements on behalf of S.L.E. While the appeal was pending, S.L.E. entered a series of settlements with the receiver and the trustee which were approved by the bankruptcy court. Following the settlements, the district court dismissed the receiver and also dismissed the underlying bankruptcy proceeding.
The order dismissing the case included language reserving to S.L.E. whatever rights it had under its appeal to the Fifth Circuit. The Fifth Circuit, however, determined S.L.E.'s appeal to be moot, since the receiver had been fully released by S.L.E. and had been discharged by the court, and since all disputes between S.L.E. and the trustee had been fully compromised. 4
We do not believe that either of the two cases counsel have cited supports the proposition that the issue before this Court is moot. In S.L.E., the issue determined by the Fifth Circuit to be moot was that of the extent of the powers of the receiver to reorganize certain property holdings. Not only did the compromise agreements reached by the parties completely release the receiver from all claims by S.L.E., but the underlying bankruptcy claim, which had as its central goal the reorganization of the estate by the receiver, also had been dismissed. In Dahlquist I, this Court held that, following dismissal of the underlying bankruptcy claim, the issue of the propriety of certain sales made pursuant to a reorganization was moot. Other claims in Dahlquist I that were only collaterally related to the bankruptcy claim, such as the payment of certain attorneys' fees and a contempt citation, were not held by this Court to be moot, but rather were decided on the merits.
The principle which we find operative in these cases and others is this: while the dismissal of a bankruptcy action indicates discontinuation of the attempt to restructure the debtor's financial affairs under the auspices of a federal court, it does not necessarily moot all issues collateral or ancillary to the bankruptcy proceedings. Dismissal of the underlying bankruptcy proceeding may indicate that no case or controversy remains with respect to issues directly involving the reorganization of the estate, but it does not necessarily indicate that no controversy exists with respect to any collateral or ancillary issues.
In U.S.A. Motel Corporation v. Danning, 521 F.2d 117 (9th Cir.1975), the dismissal of a petition in bankruptcy did not bar an application for compensation for services rendered in connection with the bankruptcy proceedings, nor did the dismissal bar an appeal to the circuit court for review of the compensation actually awarded. In the instant appeal, no issue directly related to any decision by the Bankruptcy Court in reorganizing the estate is presented, such as the cash collateral order held by this Court in Dahlquist I to be moot. The only issue presented is that of reasonable compensation for the attorneys who represented the debtors. We believe the question of reasonable compensation as presented in this appeal is an ancillary matter and that it has not been rendered moot by the dismissal of the underlying bankruptcy proceeding.
Counsel for the Dahlquists further contend that this issue is moot because FNB failed to obtain a stay of the order awarding interim compensation. Alternatively, they contend...
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