In re Karpe, Bankruptcy No. 5-81-00384

• Decision Date: 04 May 1988
• Docket Number: 5-81-00385 and 5-81-00418.,Bankruptcy No. 5-81-00384
• Citation: 84 BR 926
• Parties: In re Irving S. KARPE and Eileen L. Karpe (t/a Yellow Cab Company and Lee Sales) Para-Transit Corporation Karpe Insurance Service Company, Debtors.
• Court: U.S. Bankruptcy Court — Middle District of Pennsylvania

84 B.R. 926 (1988)

In re Irving S. KARPE and Eileen L. Karpe (t/a Yellow Cab Company and Lee Sales) Para-Transit Corporation Karpe Insurance Service Company, Debtors.

Bankruptcy Nos. 5-81-00384, 5-81-00385 and 5-81-00418.

United States Bankruptcy Court, M.D. Pennsylvania.

March 25, 1988.

As Amended May 4, 1988.

David S. Hope, Schader, Harrison, Segal & Lewis, Philadelphia, Pa., for debtors (Karpe).

John J. Thomas, Thomas & Pulaski, Wilkes-Barre, Pa., for Bradley Oliver, et ux.

Myles R. Wren, Nogi, Appleton, Weinberger & Wren, Scranton, Pa., for R.K.R. Hess Associates.

MEMORANDUM AND ORDER

THOMAS C. GIBBONS, Bankruptcy Judge:

In this reorganization proceeding we have for consideration a "Motion for Hearing on a Higher Bid" filed by R.K.R. Hess Associates and its real estate entity, 304 Real Estate Partnership.

Following a hearing on November 17, 1987 counsel were directed to submit briefs. From the procedural history outlined therein, there appears to be no dispute regarding the essential facts. The question thus presented deals with the issue of whether the acceptance of a higher bid for property of the estate submitted by a third party who is neither a creditor or party-in-interest is proper under the Code.

Hereinafter set forth is a chronological accounting of the significant developments in this proceeding.

1. On May 12, 1981, Irving S. Karpe and Eileen L. Karpe, his wife, filed a proceeding under Chapter 11 of the Bankruptcy Code.

2. In May of 1984, Bradley and Rosalie Oliver negotiated a sales agreement with the Karpes for the sale of property located in the Borough of Stroudsburg (hereinafter the First Agreement) for the sum of $62,910.00.

3. On July 2, 1986, counsel for the debtors filed a Motion for Free and Clear Sale pursuant to the First Agreement.

4. Hearings were scheduled on July 25, 1986 and August 29, 1986 on the Motion for Free and Clear Sale, but were continued at the request of counsel for the debtors.

5. Counsel for the debtors indicated to the Olivers that the First Agreement was defective and the debtors considered themselves not to be bound by its terms by letter dated March 16, 1987.

6. On or about April 3, 1987, counsel for the Olivers moved to compel transfer of the property pursuant to the First Agreement. No decision was entered on this motion, as the parties sought to reach an agreement as to the issues raised by debtor's counsel.

7. On July 2, 1987, this court approved a Stipulation which modified the First Agreement to provide for consideration in the amount of $105,000 to be paid by the Olivers to the Karpes and the settlement of disputed issues raised by counsel for the Olivers (Second Agreement).

8. Notice of the second Agreement was provided to all creditors and parties in interest by mail on July 13, 1987, setting a final date for objections of August 3, 1987. The notice provided by counsel for the debtor at paragraph 7 contained the following language "Any creditor or party in interest may submit a higher offer in writing three (3) days prior to the proposed Sale at the office of the Debtor's counsel, whose address appears below and submit a copy to the Office of the Clerk of the Bankruptcy Court." This notice of sale was provided prior to approval of the Court of the motion to sell free and clear. A motion was not filed until August 19, 1987.

9. No objections were filed on or before August 3, 1987.

10. Debtor's Motion to sell real estate free and clear of liens to the Olivers for the sum of $105,000.00 was filed on August 19, 1987.

11. An order was entered on August 21, 1987 setting an objection date of September 8, 1987 and a hearing date of September 10, 1987 on the Motion to sell free and clear dated August 19, 1987. No objections were filed in regard to this order.

12. The order of August 21, 1987 was re-entered due to the lack of service on the part of the movant on September 14, 1987. This order set an answer date of September 29, 1987 and a hearing date of October 5, 1987. No objections were filed in regard to this order.

13. The order of September 14, 1987 was re-entered on September 29, 1987 for the lack of timely service on the part of the movant. This order set an answer date of October 14, 1987 and a hearing date of October 26, 1987. No objections were filed in regard to this order.

14. R.K.R. Hess Associates presented counsel for the debtors by letter dated September 17, 1987 an offer to purchase the real estate in question for the sum of $125,000.

15. Counsel for the debtors requested a continuance of the hearing on its Motion for the approval of the sale of property under the provisions of the Second Agreement so that R.K.R. Hess Associates could set forth its position in this matter.

16. R.K.R. Associates filed the motion, which is the subject of this opinion, on November 2, 1987.

DISCUSSION

Before we reach the central issue in this Chapter 11 proceeding, the conveyance of the real estate involved, we must first address the threshold procedural matter facing R.K.R. Hess Associates and its real estate holding entity, 304 Real Estate Partnership. Does R.K.R. Hess Associates have standing to present its Motion? We find it does not for the reasons hereinafter stated.

This action also requires our attention as to its conformity to 11 U.S.C. § 363 and Rules of Bankruptcy Procedure 6004 and 2002. Additionally, we find that the sales agreement between the Karpes and the Olivers is clearly within the guidelines adopted by the Third Circuit Court of Appeals in In re Abbotts Dairies of Pennsylvania, Inc., 788 F.2d 143 (3d Cir.1986). It also supports the concept of "finality" in this type of a proceeding, which is the third item that warrants our attention.

I. STANDING

All parties to this matter in briefs submitted have raised and discussed the issue of standing as it relates to the Motion of R.K.R. Hess Associates. It is sufficient to state that there exists no clear guidance to direct our resolution on this issue. Counsel for Debtors is correct in his statement (Brief, p. 10), that it is clear the list of suggested "parties in interest" in Section 1109 of the Bankruptcy Code is not exclusive and that it is an issue for the Court to determine. Debtors' counsel, however, provides no legal basis for his position, in which he urges this court to grant standing to R.K.R. Hess Associates.

The following language found in the Bankruptcy Service, Lawyers Edition, at § 3:25 entitled "Parties in Interest" in pertinent part advances the following theory in determining who might be granted standing:

"The term `party in interest\' is not comprehensively defined in the Bankruptcy Code. Rather, nonexhaustive lists of those entities falling within the scope of the term are provided in certain of the statutory provisions, while, as to other instances, the legislative history suggests that the scope of term be left to the Rules of Bankruptcy Procedure or to local rules of the court.

Other indications in the legislative history support the view that it is for the court to determine who is a `party in interest\' in particular circumstances. (See H.Rept. No. 95-595, pp. 108-109). This would seem to be in accord with the law under the Bankruptcy Act of 1898, which also used the phrase `party in interest\' See former 11 USCS § 93(d); under the predecessor provisions it had been held that the phrase included all persons who have an interest in the res which is to be administered and distributed in the proceeding, and did not include, for example, those who were merely debtors, or alleged debtors, of the bankrupt. See In re Sully (1907, CA2 NY) 152 F.619, cert. den., 206 U.S. 566, 51 L.Ed. 1191, 27 S.Ct. 793; Rosenbaum v. Dutton (1913, CA8 Mo.) 203 F. 838."

If the logic advanced above is applied to the Motion of R.K.R. Hess Associates, it is clear that they are not a "party in interest" in this proceeding. R.K.R. Hess Associates has no interest in the res being created in this Chapter 11 proceeding, a res that would be created due to the execution of the sales agreement between the Olivers and Karpes. R.K.R. Hess Associates is an outsider to the agreement, who now desires to enter and increase the res, but not to benefit from it. R.K.R. Hess makes no claim to any portion of the res that is to be administered or distributed in this matter. The question of standing of parties to bring an action is a topic which has received extensive attention by the federal judiciary. It is from this treatment that we also find support for our conclusion that R.K.R. Hess Associates lacks standing to present this matter.

"The federal judiciary has . . . adhered to a set of prudential principles that bear on the question of standing. . . . The court has required the plaintiff fall within the `zone of interests to be protected or regulated by the statute or constitutional guarantee in question'." Valley Forge Christian College v. Americans for Separation of Church and State, Inc., 454 U.S. 464, 474-475, 102 S.Ct. 752, 759-760, 70 L.Ed.2d 700 (1982) quoting Association of Data Processing Services Orgs. v. Camp, 397 U.S. 150, 153, 90 S.Ct. 827, 829, 25 L.Ed.2d 184 (1970).

It must be stated at this point that it is the belief of this court that with the passage of the 1984 Act, the historical basis established under the Act of 1898 is again valid guidance and requires our attention when faced with similar matters.

As stated above, R.K.R. Hess Associates is not a creditor of the estate. Its only interest in this proceeding is that it wishes to purchase an asset of the estate. Thus, we must turn to the language of the relevant statute and rules to determine whether R.K.R. Hess Associates is one intended to be protected or regulated thereunder. See Control Data Corp. v. Baldrige, 655 F.2d 283, 293-294 (D.C.Cir.), cert. denied, 454 U.S. 881, 102 S.Ct. 363, 70 L.Ed 2d 190 (1981).

II. SECTION 363 AND RULES 6004 and 2002

The Bankruptcy Code of 1978 brought to bankruptcy practice...