In re Union Home and Indus., Inc.

• Decision Date: 10 October 2007
• Docket Number: BAP No. NM-06-074,,Bankruptcy No. 11-04-15755 SR.
• Citation: 375 B.R. 912
• Parties: In re UNION HOME AND INDUSTRIAL, INC., Debtor. Union Home and Industrial, Inc., Appellant.
• Court: U.S. Bankruptcy Appellate Panel, Tenth Circuit

375 B.R. 912

In re UNION HOME AND INDUSTRIAL, INC., Debtor Union Home and Industrial, Inc., Appellant.

BAP No. NM-06-074,

Bankruptcy No. 11-04-15755 SR.

United States Bankruptcy Appellate Panel of the Tenth Circuit.

October 10, 2007.

COPYRIGHT MATERIAL OMITTED

Submitted on the briefs:^* Jennie Deden Behles of the Behles Law Firm P.C., Albuquerque, NM, for Appellant.

Before MICHAEL, NUGENT, and BROWN, Bankruptcy Judges.

OPINION

BROWN, Bankruptcy Judge.

Appellant Union Home and Industrial, Inc. appeals an order of the bankruptcy court denying its application for entry of a final decree in a Chapter 11 case. The bankruptcy court found the case had not been fully administered and refused to enter the final decree because final fee applications had not yet been submitted or determined. In the absence of any abuse of discretion, we AFFIRM.

I. Appellate Jurisdiction

The Appellant has consented to the Court's jurisdiction by opting not to have the appeal heard by the United States District Court for the District of New Mexico. 28 U.S.C. § 158(c). With consent of the parties, the Court has jurisdiction to hear appeals from final judgments, orders, or decrees of the bankruptcy courts in this Circuit. 28 U.S.C. §§ 158(a)(1), (b)(1), and (c)(1). An order is final, and therefore immediately appealable under 28 U.S.C. § 158(a)(1), if it ends the dispute on the merits and leaves the court with nothing to do but execute the judgment. In re Hatcher, 208 B.R. 959, 966 (10th Cir. BAP 1997), aff'd, 133 F.3d 932 (10th Cir.1998). Whether the denial of an application for a final decree is a final order for the purposes of appellate review is a matter of first impression. In this case, the Appellant's only options are to sit in perpetual limbo or comply with the bankruptcy court. If the Appellant does nothing, the trustee's fees will continue to accrue. If the Appellant complies, the final decree will eventually enter and the case will close, but this dispute will become moot, effectively denying the Appellant review of the bankruptcy court's order. Thus, the Court treats this order as final.

In the alternative, the Court concludes that the collateral order exception is applicable. A non-final order may be immediately reviewable under the collateral order exception if the order (1) conclusively determines a disputed question; (2) resolves an important issue separate from the merits of the action; and (3) if the appellant would suffer irreparable harm if immediate appeal is not granted. Richardson-Merrell, Inc. v. Koller, 472 U.S. 424, 430-31, 105 S.Ct. 2757, 86 L.Ed.2d 340 (1985). The bankruptcy court conclusively denied the application. Resolution of this appeal will provide guidance in this case and beyond by further defining the term "fully administered." If leave to appeal is not granted, the Appellant will suffer the continued accrual of trustee's fees without any possibility of recompense. Therefore, the Court determines that it has jurisdiction to hear this appeal.

II. Factual Background

The Appellant filed its voluntary petition under Chapter 11 on August 9, 2004. Prior to plan confirmation, the bankruptcy court granted the employment applications of the Behles Law Firm, P.C., as counsel to the debtor-in-possession, and Mr. Charles R. Jones, as accountant. Neither one has filed a fee application with the bankruptcy court, despite the fact that the Chapter 11 plan was confirmed on August 8, 2005 ("Plan"), and, according to the Appellant, all professional work has been completed in this case. The plan specifically provided for the court's retention of jurisdiction to rule on fee applications.

On March 31, 2006, the Debtor filed its Motion for Final Decree. The Motion stated that: (1) the Plan of Reorganization had been confirmed; (2) substantial consummation had occurred because Note distribution was accomplished as of March 30, 2006, and distributions to all creditors had commenced; (3) all claims or interests required to be surrendered or released under the Plan had been surrendered or released; and (4) that the estate had been fully administered. The application specifically sought to reserve post-closing jurisdiction to the court in order to decide fee applications. The Appellant seeks an entry of final decree primarily in order to stop the accrual of quarterly fees to the United States trustee under 28 U.S.C. § 1930(a)(6).

III. Discussion

A. Standard of Review

As a preliminary matter, we must determine the standard of review applicable to a bankruptcy court's order entering or denying a final decree. For purposes of standard of review, decisions by trial courts are traditionally divided into three categories, denominated: (1) questions of law, which are reviewable de novo; (2) questions of fact, which are reviewable for clear error; and, (3) matters of discretion, which are reviewable for abuse of discretion. Pierce v. Underwood, 487 U.S. 552, 558, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988). In some instances, the matter will clearly fall into one of these three categories, making the standard of review easy to determine. In other situations, the question of which of these three standards applies is answered either' by statutory command or by a history of appellate practice. Id. Here, however, the issuance of a final decree does not clearly fall into one of the three categories and neither the Bankruptcy Code, Bankruptcy Rules, nor appellate case law provide us with guidance.¹ In such situations, as noted by the Supreme Court in Pierce, "it is uncommonly difficult to derive from the pattern of appellate review of other questions an analytical framework that will yield the correct answer." Pierce, 487 U.S. at 558, 108 S.Ct. 2541.

Fortunately, the Supreme Court's decision in Pierce does provide us with certain factors to consider in determining the appropriate standard of review. These factors include: (1) the language and structure of the governing statute; (2) whether one judicial actor is better positioned than another to decide the issue in question; (3) the impracticability of formulating a rule of decision for the matter in issue; and (4) whether the consequences flowing from the trial court's decision favor a more intense level of review. Id. at 559-63, 108 S.Ct. 2541. Consideration of these factors in this case leads us to conclude that the bankruptcy court's decision on a final decree should be reviewed under an "abuse of discretion" standard.

First, the language and structure of the governing statute, read in conjunction with the relevant bankruptcy rule and advisory note, indicate the decision concerning entry of a final decree is primarily an administrative decision for the bankruptcy court to determine. Entry of a final decree is governed by 11 U.S.C. § 350(a), which provides that "[a]fter an estate is fully administered and the court has discharged the trustee, the court shall close the case." Similarly, Federal Rule of Bankruptcy Procedure 3022 provides that "[a]fter an estate is fully administered in a chapter 11 reorganization case, the court, on its own motion or on a motion of a party in interest, shall enter a final decree closing the case."

The definition of "fully administered" is not provided anywhere in the Code or Rules. The few courts that have considered the issue have looked to the 1991 Advisory Committee Note for guidance. That Note provides the following list of factors:

Entry of a final decree closing a chapter 11 case should not be delayed solely because the payments required by the plan have not been completed. Factors that the court should consider in determining whether the estate has been fully administered include (1) whether the order confirming the plan has become final, (2) whether deposits required by the plan have been distributed, (3) whether the property proposed by the plan to be transferred has been transferred, (4) whether the debtor or the successor of the debtor under the plan has assumed the business or the management of the property dealt with by the plan, (5) whether payments under the plan have commenced, and (6) whether all motions, contested matters, and adversary proceedings have been finally resolved.

The court should not keep the case open only because of the possibility that the court's jurisdiction may be invoked in the future. A final decree closing the case after the estate is fully administered does not deprive the court of jurisdiction to enforce or interpret its own orders and does not prevent the court from reopening the case for cause pursuant to § 350(b) of the Code. For example, on motion of a party in interest, the court may reopen the case to revoke an order of confirmation procured by fraud under § 1144 of the Code. If the plan or confirmation order provides that the case shall remain open until a certain date or event because of the likelihood that the court's jurisdiction may be required for specific purposes prior thereto, the case should remain open until that date or event.

Fed. R. Bankr.P. 3022 advisory committee's note (1991).

Bankruptcy courts are charged with reviewing each request for entry of a final decree "on a case-by-case basis and analyz[ing] the factors set forth in Rule 3022, along with any other relevant factors, in determining whether an estate has been fully administered." In re Federated Dep't Stores, Inc., 43 Fed.Appx. 820, 822 (6th Cir.2002). The factors listed in the Advisory Note are not considered exhaustive, nor must a party demonstrate all of the factors, before the court may find a case to be fully administered. See In re Mold Makers, Inc., 124 B.R. 766, 768 (Bankr.N.D.Ill.1990). Instead, "Bankruptcy Rule 3022 is intended to allow bankruptcy courts flexibility in determining whether an estate is fully administered." In re Federated Dep't Stores, 43 Fed.Appx. at 822.

This statutory framework illustrates that determining when a case is "fully administered" is a decision for the bankruptcy court based...