Jartran, Inc., In re

• Decision Date: 28 September 1989
• Docket Number: No. 88-2166,88-2166
• Parties: , 21 Collier Bankr.Cas.2d 1141, 19 Bankr.Ct.Dec. 1407, Bankr. L. Rep. P 73,085 IN RE JARTRAN, INC., Debtor. FRUEHAUF CORPORATION, Appellant. v. JARTRAN, INC., Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 859

886 F.2d 859

58 USLW 2190, 21 Collier Bankr.Cas.2d 1141,

19 Bankr.Ct.Dec. 1407, Bankr. L. Rep. P 73,085

IN RE JARTRAN, INC., Debtor FRUEHAUF CORPORATION, Appellant. v. JARTRAN, INC., Appellee.

No. 88-2166.

United States Court of Appeals Seventh Circuit.

Argued Jan. 19, 1989.

Decided Sept. 26, 1989.

As Amended Sept. 28, 1989.

Gerald F. Munitz, Cory Lipoff, Winston & Strawn, Chicago, Ill., for appellant.

Christine L. Olson, Sara E. Cook, James P. DeNardo, McKenna, Storer, Rowe, White & Farrug, Chicago, Ill., for appellee.

Jack Penca, Asst. U.S. Atty., Chicago, Ill., for U.S.

Before CUDAHY, COFFEY, and EASTERBROOK, Circuit Judges.

CUDAHY, Circuit Judge.

In this case we are asked to determine the novel question of the propriety of serial Chapter 11 bankruptcy filings. The debtor originally filed a petition for reorganization under Chapter 11, which was confirmed and substantially consummated. Less than one and a half years later, the debtor filed a second Chapter 11 petition, which had as its goal the liquidation of the reorganized entity. If the second Chapter 11 filing is proper, the original plan for reorganization approved as a result of the first Chapter 11 petition will presumably be superseded by a new plan. One of the creditors under the original plan objects to this potential alteration of its rights and claims. The bankruptcy court, however, ruled that the serial filing was permissible and that the creditor was not automatically entitled to an administrative priority in the second case by virtue of guarantees in the original reorganization plan. In re Jartran, Inc., 71 B.R. 938 (Bankr.N.D.Ill.1987). The district court affirmed, In re Jartran, Inc., 87 B.R. 525 (N.D.Ill. 1988), and we do likewise.

I.

In 1981 Jartran, Inc. ("Jartran"), a company that rented and leased trucks on a nationwide basis, filed a petition in bankruptcy under Chapter 11 (Jartran I ). Jartran's Fifth Amended Plan of Reorganization was confirmed in its third modified form ("Plan") on September 29, 1984, and was subsequently substantially consummated. On March 4, 1986, the reorganized Jartran filed a second Chapter 11 petition, this time with the aim of liquidating rather than reorganizing the company (Jartran II ). ¹ Fruehauf Corporation ("Fruehauf"), a creditor under the original Chapter 11 Plan, argues that this second Chapter 11 filing was improper and should be dismissed. Alternatively, Fruehauf argues that it is entitled to an administrative priority in the current proceedings. We will address these contentions after consideration of the jurisdictional situation of the case.

A.

At oral argument, the panel expressed doubt whether the district court's order in this case was a "final order" suitable for mandatory appeal under 28 U.S.C. section 158(d); the parties have submitted supplemental briefs on this issue. Subsequent to oral argument, the district court certified its original order in this case for discretionary review under 28 U.S.C. section 1292(b), and this court granted Fruehauf's Petition for Permission to Appeal from an Interlocutory Order of the District Court. No. 88-2166 (7th Cir. Feb. 2, 1989). We conclude that the order was not final and that the original notice of appeal therefore did not transfer jurisdiction to this court; the district court retained jurisdiction and certified the order for interlocutory appeal after we had held oral argument in this court. We now have jurisdiction on an interlocutory basis.

The district court's order affirmed the bankruptcy court's order, which (1) denied Fruehauf's motion for administrative priority and (2) denied Fruehauf's motion to dismiss. ² Neither the bankruptcy court order nor the district court order affirming it was a final order.

It is true that a "somewhat relaxed sense of finality ... traditionally characterizes bankruptcy appeals." In re J. Catton Farms, Inc., 779 F.2d 1242, 1250 (7th Cir.1985). Thus, orders that might not be final by ordinary appeals' standards under 28 U.S.C. section 1291 may qualify as final under the provisions for appeal in bankruptcy cases under section 158(d) (or its predecessor, section 1293(b)). ³ As we explained in In re Morse Electric Co., 805 F.2d 262 (7th Cir.1986):

A disposition of a creditor's claim in a bankruptcy is "final" for purposes of Sec. 158(d) when the claim has been accepted and valued, even though the court has not yet established how much of the claim can be paid given other, unresolved claims.... When one creditor's position is finally determined (subject only to proration at the end of the case to reflect the amount of assets and other allowed claims), the disposition is final.

Id. at 264 (citations omitted). Although both bankruptcy court and district court orders must be final if jurisdiction under section 158(d) is to lie, In re Riggsby, 745 F.2d 1153, 1155-56 (7th Cir.1984), even a district court order remanding the case to the bankruptcy court may qualify as final if "all that remains to do on remand is a purely mechanical, computational, or in short 'ministerial' task, whose performance is unlikely either to generate a new appeal or to affect the issue that the disappointed party wants to raise on appeal from the order of remand." In re Fox, 762 F.2d 54, 55 (7th Cir.1985).

After oral argument, the parties submitted a stipulation as to the amount of the administrative claim at issue in this appeal. Fruehauf argues that, given this stipulation, the only remaining issue with respect to this claim would be "the determination of Fruehauf's pro rata share of recovery," a purely "ministerial" task. Supp. Brief of Appellant at 10. Even granting that this is the case (note that an order denying an administrative claim does not necessarily affirmatively establish a creditor's position in the way that an order allowing a claim or priority would), the balance due under the assumed lease is not the only issue remaining to be resolved between Fruehauf and Jartran. The stipulation itself demonstrates that more than this particular administrative claim remains for resolution:

Nothing herein shall be construed as affecting any other claim of Fruehauf or the right of any other creditor of Jartran, pursuant to 11 USC 502(a), to object to Fruehauf's claim. The parties agree that all other claims by Fruehauf relate to matters other than the balance due under assumed leases. The parties further agree that nothing herein shall affect any right of Jartran to proceed with its preference claim against Fruehauf ... or the right of Fruehauf to assert any resulting claim for disgorged preferential funds and the right of Jartran to assert claims under 11 USC 506(c).

Stipulation between Fruehauf, Inc. and Jartran, Inc., Debtor and Debtor in Possession re Fruehauf Claim No. F-121 at 2, p 6. Thus a considerable number of potential disputes between Jartran and Fruehauf remain unresolved at this point in the case. Resolution of these claims will be more than a mere "ministerial" matter, as one might expect given the stage at which this second Chapter 11 proceeding rests; we are not reviewing objections to a fully developed reorganization or liquidation plan. ⁴

Fruehauf points us to In re Saco Local Development Co., in which the court concluded that "as long as an order allowing a claim or priority effectively settles the amount due the creditor, the order is 'final'." 711 F.2d 441, 448 (1st Cir.1983). The order in the case before us does not effectively settle the amount due Fruehauf in the second Chapter 11 proceeding. This is true not only because the denial by the courts below of an administrative priority fails to affirmatively establish Fruehauf's position in the second proceeding but also because even a final conclusion as to this particular claim would not "effectively settle" the total amount due Fruehauf. This is also why In re J. Catton Farms is inapposite; there the bankruptcy court had adduced a "bottom-line" total amount owed the creditor by the debtor, and all that remained was determination of the creditor's relative priority. 779 F.2d at 1244-45. Similarly, the decisions of the bankruptcy and district courts in Morse Electric fixed the precise total amount due a particular creditor on its secured and unsecured claims. 804 F.2d at 263. It seems clear that a denial of a request for administrative priority as to a portion of a creditor's claim, particularly where the affirmative contents of a Chapter 11 plan in this case have not been firmly established or confirmed, lacks similar finality. This is not to say that denials of requests for administrative priority can never be final orders, for where courts review cases in which fully developed plans for reorganization or liquidation have been established, if all other issues have been settled, a denial of priority might finally conclude all issues as to the creditor's position. However, that is not this case.

Fruehauf admits that it has pending in this bankruptcy "other disputes with Jartran unrelated to" the administrative priority claim at issue here, but would have us treat individual "claims" within a bankruptcy case as distinct for purposes of the finality doctrine. As authority, Fruehauf cites a footnote in In re Xonics, 813 F.2d 127 (7th Cir.1987), which notes that although the two parties were "not involved in any additional disputes in the bankruptcy case," they were parties to a distinct equitable subordination case. Id. at 130 n. 1. The parties here have expressly noted that they are involved in additional disputes in this bankruptcy case, so In re Xonics does not help them. In re Allen, 816 F.2d 325 (7th Cir.1987), held that a portion of the bankruptcy court's order voiding a foreclosure sale was a final order even though another portion of the order, dealing with deacceleration of the debtors' defaulted mortgage, was not. It is true that in that case other issues remained to be resolved between the creditor and debtor, but the separable...