In re Westwood Community Two Ass'n, Inc., No. 01-14473.
| Decision Date | 13 June 2002 |
| Docket Number | No. 01-14473. |
| Citation | 293 F.3d 1332 |
| Parties | In Re: WESTWOOD COMMUNITY TWO ASSOCIATION, INC., Debtor. Westwood Community Two Association, Inc., Unofficial Ad Hoc Committee, Plaintiff-Appellant, v. John P. Barbee, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Ilyse Mindy Horner, Paul Steven Singerman, Berger, Davis & Singerman, Miami, FL, for Plaintiff-Appellant.
Jill Bennett, John L. Walsh, Dzikowski, Walsh & Charbonneau, Fort Lauderdale, FL, for Defendant-Appellee.
Appeal from the United States District Court for the Southern District of Florida.
Before ANDERSON, DUBINA and MARCUS, Circuit Judges.
This is an appeal from a district court's order1 dismissing two appeals from a bankruptcy court for lack of standing. We reverse and remand.
The Westwood Community Two Association ("Debtor") is a not-for-profit homeowners' association located in Tarmac, Florida. All homeowners in the Westwood Community Two subdivision are members of the Debtor, which manages and maintains a clubhouse and swimming pool for use by its members.
In 1997, the Debtor filed a Chapter 7 voluntary bankruptcy petition. Peter Martin, John Lewis, and Mark and Linda Menzano ("Claimants") filed adversarial claims against the Debtor in the bankruptcy proceeding. The adversarial claims stemmed from a federal district court's prior determination that the Debtor had violated both the Federal and the Florida Fair Housing Acts. The district court found that the Debtor had discriminated against the Claimants on the basis of age, and thus entered judgment against the Debtor. Soon thereafter, the Debtor filed bankruptcy.
The Debtor's bankruptcy petition listed as its only assets several tables and a one-half interest in a pool table located in a leased clubhouse, valued at $200. The Debtor claimed that its liability for unsecured debts was $350,000. The bankruptcy court appointed John P. Barber as the Bankruptcy Trustee of the Debtor ("Trustee").
In the adversarial proceeding, the Trustee objected to the Claimants' request for compensatory damages, but did not object to the Claimants' request for punitive damages and attorney's fees. The bankruptcy court held an evidentiary hearing on all claims and subsequently decided to allow all of the claims. The claims consisted of general unsecured claims in the following amounts: (1) Peter Martin — $ 83,386.95 in compensatory damages and $ 150,000 in punitive damages; (2) John Lewis — $ 126,079.70 in compensatory damages and $ 250,000 in punitive damages; and (3) Mark and Linda Menzano — $ 112,372.57 in compensatory damages and $ 500,000 in punitive damages.
The Trustee filed a Motion for Reconsideration of these claims, which the bankruptcy court denied. The Trustee did not appeal the allowance of claims to the district court, despite the fact that the bankruptcy court imposed punitive damages. Instead, to pay these amounts in full, the Trustee assessed each homeowner $ 7,250 ("Special Assessment"), warning the homeowners that he would place a lien on their residences if they failed to pay the assessment. The Trustee claimed authority for this Special Assessment through the Debtor's governing documents.
When the Trustee began collecting the assessment, a group of homeowners filed a Notice of Appearance in the bankruptcy court, calling themselves the Unofficial Ad Hoc Committee for Westwood Community Two Association, Inc. ("Unofficial Committee"). About 100 homeowners formed this Unofficial Committee to challenge the Trustee's imposition of the Special Assessment. The Unofficial Committee filed an adversarial proceeding in the bankruptcy court, claiming that its members did not engage in the wrongful conduct that led to these claims, and therefore, the court should not allow the Trustee's Special Assessment. The bankruptcy court found that the Trustee did have the power to impose the Special Assessment under the Debtor's governing documents and allowed the Special Assessment ("Special Assessment Order"). The Unofficial Committee also filed a motion requesting that the bankruptcy court reconsider its allowance of the claims. The court denied that motion ("Reconsideration Order").
The Unofficial Committee appealed both the Reconsideration Order and the Special Assessment Order to the district court. The court consolidated the appeals, and the Trustee moved to dismiss the appeal, arguing that the Unofficial Committee lacked standing to appeal these orders because the Debtor was the real party in interest with standing to appeal. The district court agreed and dismissed the appeal. The Unofficial Committee timely appealed to this court.
Whether the district court erred in finding that the Unofficial Committee lacked standing to appeal (i) a bankruptcy court order in which the bankruptcy court denied the Unofficial Committee's request to reconsider the bankruptcy court's prior allowance of claims, and (ii) a bankruptcy court order in which the bankruptcy court found that the Trustee had authority to impose an assessment under the Debtor's Articles of Incorporation, Declaration, and By-Laws.
This court reviews the district court's legal conclusions de novo. In re Club Assoc., 951 F.2d 1223, 1228 (11th Cir.1992).
Generally, only the bankruptcy trustee may appeal an order from a bankruptcy court. "This general rule was developed as a means to control, in an orderly manner, proceedings that often involve numerous creditors who are dissatisfied with any compromise that jeopardizes the full payment of their outstanding claims against the bankrupt." In re Carbide Cutoff, Inc., 703 F.2d 259, 264 (7th Cir.1983). Over time, courts have allowed exceptions to this rule "when the purposes of restricting the standing requirements are not apposite." Id.
Unlike the prior law, the Bankruptcy Reform Act of 1978 ("Bankruptcy Code") does not define who has standing to appeal an order of a bankruptcy court. In addition, neither the Supreme Court nor this court has defined who may appeal a bankruptcy order under the Bankruptcy Code. Our sister circuit's have agreed that, although Congress did not define who has standing to appeal in the Bankruptcy Code, no evidence exists that Congress intended to alter the definition set forth in the prior law, the Bankruptcy Act of 1898. See Travelers Ins. Co. v. H.K. Porter Co., 45 F.3d 737, 741 (3d Cir.1995); Depoister v. Mary M. Holloway Found., 36 F.3d 582, 585 (7th Cir.1994); Holmes v. Silver Wings Aviation, Inc., 881 F.2d 939, 940 (10th Cir.1989); Kane v. Johns-Manville Corp., 843 F.2d 636, 641-42 (2d Cir.1988); In re El San Juan Hotel, 809 F.2d 151, 154 (1st Cir.1987); In re L.T. Ruth Coal Co., 803 F.2d 720 (6th Cir.1986)(unpublished table opinion, No. 85-5990); In re Fondiller, 707 F.2d 441, 442-43 (9th Cir.1983). This prior rule, commonly known as the "person aggrieved" doctrine, holds that only a person aggrieved has standing to appeal a bankruptcy court's order.2 Since Congress passed the Bankruptcy Code, every circuit court to consider the issue of who may appeal a bankruptcy court's order has applied this person aggrieved standard as a prudential standing requirement. We agree with our sister circuits' reasoning and adopt this standard to determine whether an individual has standing to appeal a bankruptcy court's order.3
The person aggrieved doctrine is widely established in bankruptcy law. Our predecessor, the former Fifth Circuit,4 defined "aggrieved" parties in the bankruptcy context as "those parties having a `direct and substantial interest in the question' being appealed." In re Odom, 702 F.2d 962, 963 (11th Cir.1983)(quoting In re First Colonial Corp. of Am., 544 F.2d 1291, 1296 (5th Cir.1977)(superceded by statute on other grounds)). Bankruptcy's person aggrieved doctrine restricts standing more than Article III standing, as it allows a person to appeal only when they are "directly and adversely affected pecuniarily by the order." In re Troutman Enter., Inc., 286 F.3d 359, 364 (6th Cir.2002)(citing Fidelity Bank, Nat'l Ass'n v. M.M. Group, Inc., 77 F.3d 880, 882 (6th Cir.1996)). Courts have widely agreed that the person aggrieved doctrine limits standing to appeal a bankruptcy court order to those individuals who have a financial stake in the order being appealed. Troutman, 286 F.3d at 364; see also Spenlinhauer v. O'Donnell, 261 F.3d 113, 117-18 (1st Cir.2001); Travelers Ins. Co., 45 F.3d at 741; Fondiller, 707 F.2d at 442. A person has a financial stake in the order when that order "diminishes their property, increases their burdens or impairs their rights." Troutman, 286 F.3d at 364.
In this case, a review of the bankruptcy proceedings reveals that both orders "directly and adversely affect pecuniarily" the Unofficial Committee. Thus, we conclude the Unofficial Committee, as a person aggrieved, has standing to appeal both orders to the district court.
In our view, the district court erred by applying a "real party in interest" standard to determine whether the Unofficial Committee had standing to appeal the Reconsideration Order. While the court correctly noted that the Debtor is the real party in interest in this case, standing to appeal a bankruptcy order is not limited to a real party in interest.5 Rather than focusing on the real party in interest, the proper inquiry is whether the party seeking to appeal is a person aggrieved by the bankruptcy court's order.
After reviewing the record, we conclude that the Unofficial Committee has standing to appeal the Reconsideration Order because it is a person aggrieved. This order, in which the bankruptcy court denied reconsidering the allowed claims, directly and adversely affects pecuniarily the Unofficial Committee because the Trustee assessed the Unofficial Committee's members to satisfy these claims. The Unofficial Committee's members each must pay thousands of...
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