In re Saint Michael Motor Express, Case No. 08-11838-E
| Decision Date | 09 March 2016 |
| Docket Number | Case No. 08-11838-E |
| Parties | In re: SAINT MICHAEL MOTOR EXPRESS, Debtor. |
| Court | U.S. Bankruptcy Court — Western District of Tennessee |
This matter is before the Court on motion of Saint Michael Motor Express ("Debtor/Corporation") to reopen this Chapter 7 Case for the sole purpose of filing a motion for relief from this Court's Memorandum Opinion and Order, entered in Adversary Proceeding No. 13-05148, on August 21, 2015. A joint objection to the motion to reopen was filed in the main bankruptcy case (Chapter 7 Case No. 08-11838) by Flying J, Inc., FJ Management, Inc. d/b/a Flying J, Inc., Flying J Insurance Services, Inc. or its successor, the Buckner Company, Transportation Alliance Bank, Inc., Transportation Alliance Leasing, LLC, Jagjit "J.J." Singh, and Stephen Parker (the "Defendants") to which Debtor/Corporation has now replied. A joint objection to the motion to reopen the Adversary Proceeding has also been filed by the Defendants, with a separate response in opposition to the motion to reopen having been filed by Gresham & Associates, LLC, Gresham & Associates, Inc., and Gresham & Associates of Indiana, Inc. (the "Gresham & Associates Defendants"). Debtor/Corporation has also filed a reply to the joint objection in the Adversary Proceeding. Debtor/Corporation attached the proposed motion for relief from judgment to the motion to reopen. The motion for relief from judgment also contained Exhibit D, the affidavit of Louis P. Saia, III, ("Mr. Saia") Debtor/Corporation's sole-shareholder, president and chief executive officer. Mr. Saia is not the Debtor in this case and was not a party to the Adversary Proceeding.
The Court previously set forth the procedural history of Debtor/Corporation's bankruptcy case, which ultimately culminated with the conversion of Debtor/Corporation's Chapter 11 case to a case under Chapter 7 on October 13, 2009. (See Mem. Op. at 3-5, Adv. Proc. No. 13-05148, ECF No.84). Unfortunately, since that time Debtor/Corporation's Chapter 7 case has been reopened twice (once in error) and reclosed twice and now Debtor/Corporation seeks to reopen the case yet again.
Briefly, the Court will explain the previous two reincarnations of this no-asset Chapter 7 case:
On September 11, 2012, the United States Trustee filed a motion to reopen this case, appoint a Chapter 7 Trustee "to administer assets," and defer the reopening fee. The motion was set for a hearing, was unopposed, and the case was reopened by order entered on October 16, 2012. Chapter 7 Trustee Marianna Williams ("Trustee") was reappointed and, on October 18, 2013, the Trustee filed suit against the Defendants alleging fraud on the Debtor/Corporation, fraud on the bankruptcy court, fraudulent transfers and/or conveyances, conversion, tortious conspiracy, and violations ofthe Racketeer Influenced and Corrupt Organizations Act ("RICO"). (Complaint, Adv. Proc. No. 13-05148, ECF No. 1).
The Defendants filed motions to dismiss the Trustee's complaint, which were responded to by counsel for the Trustee and, after the issues were fully briefed and oral arguments were heard, this Court dismissed the Adversary Proceeding in its entirety by the Memorandum Opinion and Order that were entered on the Court's docket on August 21, 2015. The Court's decision was based on the Plaintiff's failure to plead several counts with the required specificity, Plaintiff's failure to state claims upon which the Court could grant relief, and Plaintiff's failure to bring several of the counts within the requisite statute of limitations.
The Trustee did not appeal the Court's Memorandum Opinion and Order. On September 21, 2015, the Trustee entered a report of no distribution requesting to be discharged from further duties as Trustee. On October 7, 2015, Adversary Proceeding No. 13-05148 was closed and on October 9, 2015, Chapter 7 Bankruptcy Case No. 08-11838 was closed.
On October 25, 2015, Debtor/Corporation herein, by counsel of record, filed a motion to reopen this Chapter 7 Case, No. 08-11838, and uploaded an order granting the motion to reopen, which was inadvertently signed and docketed on October 29, 2015, without having been set for a hearing or otherwise providing notice and an opportunity for creditors or interested parties to object. On November 10, 2015, the Court entered an order vacating the order reopening the case and subsequently set the motion to reopen for a hearing and set a deadline for interested parties to respond to the motion. On November 10, 2015, immediately prior to the entry of the Court's order vacating the order reopening the case in error, the Chapter 7 Trustee filed a notice of proposed abandonment of any interest the estate might have in Adversary Proceeding No. 13-05148. Thenotice of proposed abandonment also indicated that interested parties had fifteen (15) days to object to the proposed abandonment.
On November 24, 2015, several of the Defendants filed a joint response to the Trustee's notice of proposed abandonment, which was then voided by the bankruptcy clerk because the case was in a closed status at the time of the filing of the joint response. The Defendants apparently anticipated this because in their joint response they indicated that they objected to the notice on the basis that they did not have a proper opportunity to respond because the notice was docketed to a case that was opened in error and then closed.
The Court conducted a telephonic pre-trial conference on Debtor/Corporation's motions to reopen on January 26, 2016, at which time the parties agreed that the motion and responses had been fully briefed and the Court took these matters under advisement.
"The decision on a motion to reopen is committed to the sound discretion of the trial court . . .," Smyth v. Edamerica, Inc. (In re Smyth), 470 B.R. 459, 461 (B.A.P. 6th Cir. 2012). Id. at 462, citing In re Jenkins, 330 B.R. 625, 628 (Bankr. E.D. Tenn. 2005 and Zirnhelt v. Madaj (In re Madaj)149 F.3d 467, 472 (6th Cir. 1998). The burden of establishing "cause" is on the movant. 2 Hon. Barry Russell, Bankruptcy Evidence Manual §301:43 (West 2015-2016 ed.) See also multiple cases cited therein. The Bankruptcy Code does not define "cause" to reopen a case.
The court may consider numerous factors including equitable concerns and ought to emphasize substance over technical considerations. In re Easley-Brooks, 487 B.R. 400, 406-07 (Bankr.S.D.N.Y. 2013)(citing In re Emmerling, 223 B.R. 860, 864 (B.A.P. 2d Cir. 1997). Factors to consider include: (1) the length of time the case was closed; (2) whether a nonbankruptcy forum has jurisdiction to determine the issue which is the basis for reopening the case; (3) whether prior litigation in the bankruptcy court determined that a state court would be the appropriate forum; (4) whether any parties would suffer prejudice should the court grant or deny the motion to reopen; (5) the extent of the benefit to the debtor by reopening; and (6) whether it is clear at the outset that no relief would be forthcoming to the debtor by granting the motion to reopen.
In re Wilson, 492 B.R. 691 (Bankr. S.D.N.Y. 2013). Here, as in the Wilson case, the last factor is particularly applicable. As set forth below, the Court finds that Debtor/Corporation lacks standing to bring the motion for relief from judgment and, even if Debtor/Corporation had standing, Debtor/Corporation should have timely filed a Notice of Appeal and has given the Court no reason which would justify such failure. Debtor/Corporation could not properly bring a motion for relief from judgment in this instance and reopening this case to allow Debtor/Corporation to bring a motion for relief from judgment would be futile.
The Court's initial inquiry is whether or not Debtor/Corporation has standing to bring the motion in the first instance.
Standing is a jurisdictional issue. In re Troutman Enterprises, Inc., 286 F.3d 359, 364 (6th Cir. 2002). "In essence the question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or of particular issues." Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 45 L.Ed. 2d 343 (1975). Standing is a "qualifying hurdle that [a plaintiff] must satisfy even if raised sua sponte by the court." Community First Bank v. Nat'l Credit Union Admin, 41 F.3d 1050, 1053 (6th Cir. 1994); Newsome v. Batavia Local School District, 842 F.2d 920 (6th Cir. 1988)(issues of standing can be raised by this Court sua sponte because standing is "always a "threshold inquir[y]").
Wilhoite v. Suntrust Bank et al. (In re Wilhoite), 11-06339; 13-90362; 2014 WL 505171 (Bankr.M.D. Tenn. Feb. 7, 2014). Further, standing is a jurisdictional bar and every federal court has an independent obligation to satisfy itself of its own jurisdiction and may not entertain an action over which jurisdiction is lacking. Id. (citations omitted).
Debtor/Corporation asserts that the "cause of action dismissed by the [Memorandum Opinion and Order] Judgment reverted to the Debtor." (Mot. to Reopen at 1, 08-11838, ECF No. 416). The Court has examined role of the Trustee and the statutory prerequisites for effective abandonment and has determined that the cause of action did not revert to the Debtor/Corporation.
The Trustee is the only party with authority to bring a Rule 60 motion for relief from judgment. Promptly after the filing of the petition, which constitutes the order for relief pursuant to 11 U.S.C. § 301, a trustee is appointed. See 11 U.S.C. § 701. After appointment, one ofthe many duties of the trustee is to collect and reduce to money the property of the estate and thereafter close the estate as will serve the best interests of pa...
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