In re Terry
| Citation | 543 B.R. 173 |
| Decision Date | 21 December 2015 |
| Docket Number | CIVIL ACTION NO. 15–0913,CIVIL ACTION NO. 14–6195,BANKRUPTCY NO. 13–14780 |
| Parties | In re: Otis W. Terry, Jr. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
James C. Vandermark, Jeremiah Vandermark, City of Philadelphia Law Dept., Philadelphia, PA, for City of Philadelphia.
Otis W. Terry, Jr., Philadelphia, PA, pro se.
Irwin Lee Trauss, Jane P. Nylund, Philadelphia Legal Services, Philadelphia, PA, for Otis W. Terry, Jr.
The City of Philadelphia appeals from the bankruptcy court's orders approving a settlement between the debtor and the purchaser of the debtor's real estate at a Sheriff's tax sale, and confirming the debtor's Chapter 13 plan which enabled the debtor to redeem his real estate. The City's central contention is that the bankruptcy court's avoiding the Sheriff's deed conveying the debtor's property to the purchaser at the Sheriff's sale impermissibly allowed the debtor to redeem the property in contravention of Pennsylvania law. The City contends that the avoidance deprived it of the transfer tax paid on the Sheriff's conveyance to the purchaser and the transfer tax that would have been due on the purchaser's conveyance back to the debtor.
The threshold issue is whether the City, a creditor whose claim has been paid in full, can appeal the orders, which may, but not necessarily, affect its interest. We conclude that because the orders have no direct and immediate impact on the City, it lacks standing to appeal. Therefore, we shall dismiss the appeals.
Debtor Otis W. Terry, Jr.'s real property, 7128 Mount Airy Place, Philadelphia ("Property"), was sold at Sheriff's sale to 2013 N. 16th St., LLC ("2013 LLC") for $120,000.00 on September 19, 2012. After 2013 LLC paid the bid price, the Sheriff signed and delivered a deed conveying the Property to 2013 LLC on December 11, 2012. After recording the deed, 2013 LLC filed a complaint in ejectment in the Philadelphia Court of Common Pleas. Default judgment was entered on April 2, 2013. The next day, 2013 LLC filed a praecipe for writ of possession.
To stave off ejectment, Terry filed a voluntary petition for relief under Chapter 13 of the Bankruptcy Code on May 30, 2013. Five days later, 2013 LLC filed a motion for relief from the automatic stay to allow the ejectment process to continue. After holding a hearing, the bankruptcy court denied the motion because it determined that Terry's right to redeem the Property had not yet expired. 2013 LLC filed a second motion on October 7, 2013, arguing that Terry's right of redemption had expired when he failed to pay the redemption amount on or before September 12, 2013, the last day of the redemption period under 53 P.S. § 7293. The bankruptcy court denied 2013 LLC's second motion. It held that Terry had exercised his right of redemption when he filed his Chapter 13 Plan within the redemption period even though his proposed plan called for payment of the redemption amount over time.1
Terry and 2013 LLC filed a Stipulation of Settlement, requesting a consent order designating 2013 LLC as the holder of an allowed claim for $125,624.66, secured by Terry's interest in the Property. The stipulation called for the Sheriff to pay Terry $64,000.00 from the sale proceeds. From this amount, Terry was required to pay $14,000.00 to 2013 LLC upon entry of the consent order, followed by forty-four monthly payments of $1,200.00 to commence twenty days after confirmation of the plan. It also called for the bankruptcy court to order the Sheriff to turn over to Terry the balance of the sale proceeds and to declare the Sheriff's deed conveying the Property to 2013 LLC void. The stipulation did not affect the Sheriff's distribution to the City from the sale proceeds.
At a hearing on its objection to the Stipulation of Settlement, the City argued that the Rooker–Feldman doctrine divested the bankruptcy court of jurisdiction to grant the relief sought in the Stipulation of Settlement. It also asserted that the bankruptcy court could not enter the proposed consent order without joining the Sheriff.2
The bankruptcy court determined that the Rooker–Feldman doctrine did not apply. The court made clear that it was not reviewing or rejecting the judgment that instigated the Sheriff's sale. To moot the joinder issue, it directed removal from the proposed consent order of any reference directing the Sheriff to take action. The court entered a Consent Order, which incorporated the Stipulation of Settlement, with the revised language, on September 18, 2014.
On February 6, 2015, the bankruptcy court entered an order (the "Confirmation Order") confirming the First Amended Chapter 13 Plan (the "Plan") submitted on June 25, 2014. The Plan provided for payment in full of all allowed claims, including 2013 LLC's claim, and the priority claims of the City and the Commonwealth of Pennsylvania for unpaid taxes.
The City had moved to dismiss Terry's Chapter 13 case on the basis that Terry's petition was filed in bad faith and that it constituted an impermissible exercise of Terry's redemption rights under Pennsylvania law. It also argued that Terry's death on November 10, 2014 prevented confirmation of the Plan under Federal Rule of Bankruptcy Procedure 1016. The bankruptcy court denied the motion on February 10, 2015.
The City appeals both the Consent Order and the Confirmation Order. With respect to the Consent Order, the City reiterates its argument that the Rooker–Feldman doctrine prevented the bankruptcy court from avoiding the transfer to 2013 LLC as provided in the Stipulation of Settlement because it disturbed a state court judgment. It also asserts that the bankruptcy court erred when it avoided the transfer of the Property resulting from the tax sale under §§ 544 and 548 of the Bankruptcy Code.
With respect to the Confirmation Order, the City asserts that the Plan rests upon an impermissible exercise of Terry's redemption rights. It reasserts its arguments that Terry's petition was filed in bad faith and that the bankruptcy court should have dismissed the case due to Terry's death under Federal Rule of Bankruptcy Procedure 1016.
A district court reviews a bankruptcy court's "legal determinations de novo, its factual findings for clear error, and its exercise of discretion for abuse thereof." In re Reilly, 534 F.3d 173, 175 (3d Cir.2008) (citing In re Trans World Airlines, Inc., 145 F.3d 124, 130–31 (3d Cir.1998) ), rev'd on other grounds, Schwab v. Reilly, 560 U.S. 770, 130 S.Ct. 2652, 177 L.Ed.2d 234 (2010). Where the bankruptcy court's decision involves a mixed question of law and fact, we must parse the factual and legal determinations, and then apply the appropriate standard of review to each one. In re Montgomery Ward Holding Corp., 326 F.3d 383, 387 (3d Cir.2003).
The bankruptcy court's factual findings will not be disturbed unless they are clearly erroneous. Stern v. Marshall, –––U.S. ––––, 131 S.Ct. 2594, 2611, 180 L.Ed.2d 475 (2011) (quoting Fed. R. Bankr.P. 8013 )); In re IT Grp., Inc., 448 F.3d 661, 667 (3d Cir.2006) ; Fed. R. Bankr.P. 8013 Advisory Committee's Note. A factual finding is clearly erroneous if the district court is firmly convinced, based on all the evidence, that the bankruptcy court made a mistake. Vento v. Dir. of V.I. Bureau of Internal Revenue, 715 F.3d 455, 468 (3d Cir.2013) (citation omitted). The district court may not engage in independent fact finding. Nantucket Investors II v. Cal. Fed. Bank, 61 F.3d 197, 210 n.19 (3d Cir.1995) (citing 28 U.S.C. § 158(a) ).
Although the bankruptcy court accorded the City standing to object to the stipulation of settlement and confirmation of the plan, we still must determine whether it has standing to appeal the orders endorsing the settlement and confirming the plan. The standing requirements at the bankruptcy court and the district court levels are different. In re PWS Holding Corp., 228 F.3d 224, 249 (3d Cir.2000) (quoting Kane v. Johns–Manville Corp., 843 F.2d 636, 641–42 (2d Cir.1988) ). All debtors and creditors, as the City was, are parties to every bankruptcy court order. But, status as a creditor alone does not confer standing to appeal an order.
Only a "person aggrieved" by a bankruptcy court's order may appeal. In re Combustion Eng'g, Inc., 391 F.3d 190, 214 (3d Cir.2004) (citing In re Dykes, 10 F.3d 184, 187 (3d Cir.1993) ). One qualifies as a "person aggrieved" if the order "diminishes [the appellant's] property, increases [its] burdens, or impairs [its] rights." Id. (citing In re PWS Holding Corp., 228 F.3d at 249 ). Thus, the City must demonstrate that it was "directly and adversely affected pecuniarily" by the order. Id. (citing In re Dykes, 10 F.3d at 187 ) (footnote omitted).
More stringent than standing under Article III, standing to appeal in the bankruptcy context is limited to those whose interests are directly affected. In re Combustion Eng'g, 391 F.3d at 215 (citing Travelers Ins. Co. v. H.K. Porter Co., 45 F.3d 737, 741 (3d Cir.1995) ). In other words, the effect must be more than incidental or indirect. The limitation recognizes that bankruptcy litigation often implicates the interests of many persons who are not parties to the litigation. In re P.R.T.C., Inc., 177 F.3d 774, 777 (2d Cir.1999). The bankruptcy standing requirement is necessary to preclude those who are only indirectly affected by an order from appealing. In re Combustion Eng'g, 391 F.3d at 215. Otherwise, any party could appeal, regardless of whether it was directly, indirectly or tangentially affected. 10 Collier on Bankruptcy ¶ 8003.03, p. 8003–4 (16th ed.2015).
A party whose interest may be potentially, but not immediately and directly, harmed has no standing to appeal. In re Combustion Eng'g, 391 F.3d at 215. Injury that is speculative or remote does not confer standing. Travelers, 45 F.3d at 742 ; see In re Barnet, 737 F.3d 238, 243 (2d Cir.2013) ; In...
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