In re Hamel, No. AZ-08-1290-PaDJu. (B.A.P. 9th Cir. 4/16/2009)
| Decision Date | 16 April 2009 |
| Docket Number | Adv. No. 07-00517.,No. 08-1300-PaDJu.,BAP No. AZ-08-1290-PaDJu.,Bk. No. 03-05432.,08-1300-PaDJu. |
| Parties | In re: BRET JAMES HAMEL, Debtor. JAMES HAMEL and DIANE HAMEL, Appellants/Cross-Appellees, v. LINDA LALLISS, fka LINDA HAMEL, Appellee/Cross-Appellant. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
Appeal from the United States Bankruptcy Court for the District of Arizona, Hon. Randolph Haines, United States Bankruptcy Judge, Presiding.
Before: PAPPAS, DUNN and JURY, Bankruptcy Judges.
Because we are unable to ascertain and review the bankruptcy court's reasons for granting summary judgment based on its apparent interpretation of its own orders, we summarily affirm the court's entry of summary judgments holding that appellants have no right to recover certain real and personal property from appellee. In the cross-appeal, we reverse the bankruptcy court's imposition of sanctions against appellants and dismiss appellee's request that additional sanctions be awarded.
Bret James Hamel ("Bret" or "Debtor") filed a chapter 72 bankruptcy petition on April 2, 2003. At the time Debtor was married to Linda Lalliss ("Lalliss"), who did not join the bankruptcy petition. The couple was involved in divorce proceedings in Maricopa County, Arizona, Superior Court. The other interested parties in this appeal are Debtor's parents, James ("James") and Diane Hamel (collectively "Parents"), and the chapter 7 trustee in Debtor's bankruptcy case, Charles L. Riley ("Trustee").
Debtor's schedules listed an ownership interest in a house (the "Residence") valued at $196,000, subject to a mortgage balance of $96,000. Debtor claimed the Residence exempt as his homestead in the amount of $100,000. The schedules also listed his interests in various family corporations and partnerships, valued by Debtor at approximately $25,000 as of 2001, and household goods, owned jointly with Lalliss, worth $8,070, for which he claimed an exemption of $8,000. Among the household goods, Debtor listed a "piano."
The initial disputes in the bankruptcy case involved Debtor's exemption claims. Trustee objected to the total amount of exemptions Debtor had claimed for the household goods. The bankruptcy court sustained Trustee's objection to the household goods exemptions in an order entered on July 15, 2003, limiting Debtor's overall household goods exemption to $4,000 and the exemption for the piano to $250.
On May 30, 2003, Trustee moved to assume certain executory contracts as to which Debtor was a party, consisting principally of the family partnership interests. Trustee's motion was granted by the bankruptcy court as to the partnership interests on July 3, 2003. Trustee then filed a Notice of Sale proposing to sell two of the partnership interests to Alan Travis. However, James provided certain information to Travis about the partnership interests causing him to withdraw his bid. The bankruptcy court approved the rescission of this sale on September 16, 2003.
Trustee next apparently commenced negotiations with Ascending Star, LLC, to sell it "the remaining non-exempt, noncash assets of the bankruptcy estate." The agreement between Trustee and Ascending Star provided that:
Parents objected to this sale, arguing that they held liens on all the family-related businesses and that Debtor's interests in those businesses were valueless. Because Parents wished to avoid litigation, they instead offered $10,000 to Trustee for the purchase of these assets.
The bankruptcy court conducted a hearing concerning the proposed sale to ALS on December 17, 2003. Debtor, Trustee, ALS and Parents were represented by counsel at the hearing. Parents indicated to the court that they were seeking to purchase 100 percent of Debtor's interests in the family businesses and were prepared to increase their $10,000 offer, if necessary. ALS also offered to increase its bid. The court granted a continuance to allow the parties to continue negotiations. Hr'g Tr. 31: 23-24 (December 17, 2003).
At the February 17, 2004 continued hearing, Debtor, Trustee, ALS, and Parents again appeared. Trustee recommended that the bankruptcy court accept the increased bid of Parents for $60,000 for purchase of the assets of the estate, together with an additional $10,000 to be paid by Parents as consideration for Trustee's agreement to dismiss an adversary proceeding he had filed against Debtor and Parents concerning the family business interests. Hr'g Tr. 3:3-8 (February 17, 2004).
During this hearing, the discussion of what assets were to be sold, with one exception, dealt solely with the business interests of Debtor. The only reference during the hearing to the Residence or household goods was a comment by the attorney representing both Debtor and Parents:
The Debtor, in this case, Your Honor, has absolutely no assets whatsoever as a result of the divorce action. Any assets the Trustee has not been interested in, and frankly, Your Honor, the[y] are considerable, remain in the custody of Linda Hamel. For example, there is substantial equity in the former community home; she has that. There's a very expensive piano; she has that.
Hr'g Tr. 20:20-24 (February 17, 2004) (emphasis added).
After listening to the parties' presentations, the bankruptcy court approved the sale to Parents, summarizing:
This is the Trustee's motion for authority to sell estate assets. Basically, the standard for the Court's approval of such a motion is the business judgment rule, whether the Trustee properly exercised his business judgment and whether the result[] of the exercise of that judgment is within a range of reasonableness. I understand the nature of the asset; it's much more akin to settling litigation than simply selling an asset. That's inherent in the nature of any asset that's in a partnership, because all you really get when you acquire a partner's interest is a charging lien, which is effectively an invitation to litigation. . . . I find that Trustee has properly exercised his business judgment and that the sale as recommended by the Trustee is a reasonable result for the sale of these assets, based on all the facts and circumstances known to the Trustee and this Court. On that basis, I'll approve the sale to [Parents] on the terms set forth on the record.
Hr'g Tr. 26:16-27:13 (February 17, 2004) (emphasis added).
The bankruptcy court entered an order approving the sale to Parents on February 17, 2004. The order does not individually list any particular assets included in the sale, but rather refers to a sale by Trustee of "all of the remaining non-cash, non-exempt assets of the estate to James and Linda Hamel for a payment of $60,000 [which were to be] conveyed `as is, where is' and are subject to any and all liens, claims and adverse interests."
On June 4, 2004, Lalliss filed a motion for an order deeming any exempt assets remaining in the bankruptcy estate abandoned so that the state divorce court could distribute them between Lalliss and Debtor. Parents objected to this motion on two grounds, contending that: (1) Lalliss' motion did not specify the assets to be abandoned; and (2) Lalliss' motion implied that the assets were to be abandoned to her, rather than jointly with Debtor.
The hearing on Lalliss' motion to abandon was held on October 26, 2004. A transcript of this hearing is not in the excerpts of record, nor could we locate one in the bankruptcy court's docket. According to the order entered by the bankruptcy court October 26, 2004, Debtor, Parents and Lalliss were present at the hearing. The bankruptcy court granted the abandonment motion. Its order included, inter alia, the following terms:
— "Any property sold to [Parents] shall be excepted from this order."
— "The property listed by the Debtor in his schedules shall be the only property subject to this order: to wit:
"Household goods ARS § 33-125 $8,000 $8,070
and furnishings
including audio
video, and
computer
equipment"
"Residence" ARS § 33-1101 $100,000 $196,000
— "The above listed property shall be abandoned to the Debtor and to [Lalliss] to the extent that any of the property is community property under the laws of the State of Arizona."3 The order granting the Lalliss motion to abandon property was not appealed.
On December 8, 2004, Lalliss filed her own chapter 7 petition. Her schedule A listed the current market value of the Residence as $210,000, and her schedule C listed the value of household goods in her possession as $1,350. The bankruptcy court in the Lalliss bankruptcy case would later grant her trustee's motion to abandon to Lalliss all the non-exempt property in her bankruptcy estate on December 10, 2004.
Almost three years later, on September 24, 2007, Parents commenced an adversary proceeding against Lalliss in connection with Debtor's bankruptcy case. In their complaint, Parents sought an order directing Lalliss to turn over the household goods Parents allege they purchased from Debtors' estate on February 17, 2004. Parents also requested the right to sell the Residence and to retain any equity in excess of liens and the homestead exemption.
On January 17, 2008, Lalliss filed her First Summary Judgment Motion in the adversary proceeding. In it, Lalliss argued that the sole issue in the adversary proceeding was whether Parents had purchased any equity in the Residence from the estate. According to Lalliss, any equity in the Residence was fully exempt in Debtor's bankruptcy case, and as a result, that...
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