In re Miller
| Decision Date | 27 December 2012 |
| Docket Number | No. 12–8004.,12–8004. |
| Citation | 485 B.R. 478 |
| Parties | In re Cecil H. MILLER, Debtor. |
| Court | U.S. Bankruptcy Appellate Panel, Sixth Circuit |
OPINION TEXT STARTS HEREAppeal from the United States Bankruptcy Court for the Northern District of Ohio, No. 09–42411.
ON BRIEF: Thomas N. Michaels, Youngstown, OH, for Appellants. Michael J. McGee, Harrington, Hoppe & Mitchell, Ltd., Warren, OH, for Appellee.
Before: EMERSON, FULTON, and PRESTON, Bankruptcy Appellate Panel Judges.
By order of the Bankruptcy Appellate Pan el, the precedential effect of this decision is limited to the case and parties pursuant to 6th Cir. BAP LBR 8013–1(b). See also 6th Cir. BAP LBR 8010–1©.
In this appeal Cecil H. Miller (the Debtor) and his daughter Latrese Hyshaw (“Hyshaw”) (collectively “the Appellants”) appeal January 10, 2012 orders of the United States Bankruptcy Court of the Northern District of Ohio authorizing the trustee in the Debtor's chapter 7 bankruptcy (the “Trustee”) to employ an auctioneer and sell at public auction three pieces of real property (the “Properties”) free and clear of liens.
For the reasons that follow, the panel affirms the bankruptcy court's January 10, 2012 orders authorizing the Trustee to employ an auctioneer and sell the Properties.
The issues in this appeal are as follows: (1) whether the Appellants have standing to appeal the court's order granting the Trustee's motion to sell the Properties; (2) whether the Trustee's proposed sale complies with the requirements of 11 U.S.C. § 363(f) governing sales of estate property free and clear of interests; and (3) whether Federal Rule of Bankruptcy Procedure 6004(c) required the Trustee to serve Hyshaw or the Debtor's widow, Latraill Miller (“Latraill Miller”), with notice of the motion to sell the Properties.
The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this appeal. The United States District Court for the Northern District of Ohio has authorized appeals to the Panel, and no party has timely elected to have this appeal heard by the district court. 28 U.S.C. § 158(b)(6), (c)(1). A final order of the bankruptcy court may be appealed as of right pursuant to 28 U.S.C. § 158(a)(1). For purposes of appeal, a final order “ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.” Midland Asphalt Corp. v. United States, 489 U.S. 794, 798, 109 S.Ct. 1494, 1497 (1989) (citations omitted). A bankruptcy court's order authorizing the sale of property of the estate is an appealable final order. Winget v. J.P. Morgan Chase Bank, N.A., 537 F.3d 565, 578 (6th Cir.2008).
A bankruptcy court's order authorizing the sale of assets under 11 U.S.C § 363(b) is reviewed under an abuse of discretion standard. Stephens Industries, Inc. v. McClung, 789 F.2d 386, 388–89 (6th Cir.1986). “An abuse of discretion occurs only when the [trial] court relies upon clearly erroneous findings of fact or when it improperly applies the law or uses an erroneous legal standard.” Kaye v. Agripool, SRL (In re Murray, Inc.), 392 B.R. 288 (B .A.P. 6th Cir.2008). The bankruptcy court's decision, under this standard, will only be disturbed if it “relied upon clearly erroneous findings of fact, improperly applied the governing law, or used an erroneous legal standard.” Elec. Workers Pension Trust Fund of Local Union # 58, IBEW v. Gary's Elec. Serv. Co., 340 F.3d 373, 378 (6th Cir.2003) (citing Blue Cross & Blue Shield Mut. v. Blue Cross & Blue Shield Ass'n, 110 F.3d 318, 322 (6th Cir.1997)). See also Mayor and City Council of Baltimore, Md. v. W. Va. (In re Eagle–Picher Indus., Inc.), 285 F.3d 522, 529 (6th Cir.2002) () “The question is not how the reviewing court would have ruled, but rather whether a reasonable person could agree with the bankruptcy court's decision; if reasonable persons could differ as to the issue, then there is no abuse of discretion.” Barlow v. M.J. Waterman & Assocs. Inc. ( In re M.J. Waterman & Assocs., Inc.), 227 F.3d 604, 608 (6th Cir.2000).
The factual and procedural background of this case is essentially undisputed. On February 9, 2009, the Debtor granted his daughter Hyshaw three pieces of real property for no consideration. (Appellee's Br. at 5). Several months later, on June 29, 2009, the Debtor filed a voluntary chapter 7 bankruptcy petition. The Debtor received his chapter 7 discharge on February 22, 2010.
The three pieces of real property that the Debtor transferred to Hyshaw (the “Properties”) are and have been heavily encumbered. The U.S. Small Business Administration (the “SBA”) holds liens on the Properties in excess of $118,000. Collectively, the Properties are valued at approximately $23,000.
The Debtor's transfer of the Properties to Hyshaw did not pass unnoticed. On March 15, 2010, the Trustee initiated an adversary proceeding against the Debtor and Hyshaw. The Trustee's complaint contained three counts: it sought to avoid the Debtor's transfer to Hyshaw as a fraudulent transfer, obtain authorization to sell the Properties free and clear of liens, and determine the validity, priority, and extent of liens on the Properties. On June 16, 2010, shortly after the commencement of the adversary proceeding, the Debtor died.
On February 22, 2011, the Trustee and the Appellants moved for summary judgment on the Trustee's fraudulent transfer claim. Together with his motion for summary judgment, the Trustee submitted to the court “Stipulations of Material Fact.” In this document, the Trustee, the Appellants, and the Small Business Administration stipulated that:
The Small Business Administration has consented to the payment of the Chapter 7 Trustee's administrative fees, attorneys' fees, and costs of sale, prior to the payment of the mortgage of the Small Business Administration from the proceeds of any eventual sale in this case.
The Small Business Administration has also consented to the payment of the first $5,000 of proceeds of sale after payment of the administrative fees, attorneys' fees, and costs of sale to the Chapter 7 Trustee, prior to any distribution of sale proceeds on the properties located at 843 Cameron Drive, Youngstown, Ohio; 349 Breaden Street, Youngstown Ohio; and 7489 Brentwood, Youngstown Ohio.
(Stipulations of Material Fact at 2, Adv. Proc. No. 10–04057, ECF No. 60–2).
On June 28, 2011, the bankruptcy court granted the Trustee's summary judgment motion as to the fraudulent transfer claim, ruling that the Properties “constitute property of the Debtor's bankruptcy estate.” (Summary Judgment Order at 13, Adv. Proc. No. 10–40576, ECF No. 72). The bankruptcy court, however, dismissed without prejudice the Trustee's requests to sell the Properties and determine the validity, priority, and extent of liens on the Properties. The court gave its reasoning as follows:
[I]t appears that any potential sale of the properties would provide no benefit to the estate because the amount of the SBA liens far surpasses the combined value of the Properties. As a consequence, no purpose can be served by this Court determining the validity or priority of liens against the Properties because the Properties will come back into the estate fully encumbered by the SBA liens.
( Id. at 13–14). The court did not mention the Trustee's stipulated agreement with the SBA regarding the sale of Properties. Neither party appealed the bankruptcy court's ruling.
On October 18, 2011, the Trustee filed motions to sell the Properties and appoint an auctioneer. In his motion to sell the Properties (“Motion to Sell”), the Trustee again recounted his agreement with the SBA regarding the sale of the Properties-the same agreement described in the Stipulations in the adversary proceeding. The Trustee confirmed that the SBA had “agreed to a carve-out from the sale proceeds to provide funds to the Chapter 7 Trustee to satisfy all the Trustee's fees and costs, the attorney for the Trustee's fees and costs, and the first $5,000 beyond attorney's fees and Trustee's fees, to go to the Trustee for distribution to the unsecured creditors.” ( Id.).
On December 30, 2011, Hyshaw objected to the Trustee's motions. In her Objections, she argued that “it appears any potential sale of the Properties would provide no benefit to the estate because the amount of the SBA liens far surpasses the combined value of the Properties.” ( Id. at 2). Hyshaw then argued that the value of the Properties was so low that it was possible “that the amount of [the Trustee's] combined fees and costs could exceed the value of the properties leaving no money left for unsecured creditors.” ( Id. at 3). Finally, Hyshaw stated that the Debtor's widow, LaTraill Miller had not been given notice of the Motion to Sell, and that the Trustee was “without authority to sell the property” because the titles were recorded in Hyshaw's name. ( Id. at 3). In the filed objections Hyshaw repeatedly implied that, because the court had dismissed without prejudice the Trustee's requests for sale and determination of validity of liens in the adversary proceeding, the court was somehow obligated to deny the Motion to Sell.
The bankruptcy court held the hearing on the Motion to Sell on January 5, 2012. At the hearing, Trustee's counsel explained to the court that the SBA was in agreement as to the sale of the Properties and that the sale of the Properties was expected to pay both expenses and fees as well as $5,000 to unsecured creditors even if the Properties sold for only half their appraised value. Furthermore, the Trustee's counsel assured the court that the Trustee would have the option of abandoning the Properties if the auction failed to produce an acceptable bid. The bankruptcy court then...
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