Mason, In re

Decision Date06 July 1983
Docket NumberNo. 82-5312,82-5312
Parties9 Collier Bankr.Cas.2d 115, 11 Bankr.Ct.Dec. 226, Bankr. L. Rep. P 69,288, Bankr. L. Rep. P 69,595 In re Robert J. MASON, Debtor. Robert J. MASON, Appellant, v. INTEGRITY INSURANCE COMPANY and Sherwood & Roberts, Inc., Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Robert J. Mason, in pro. per.

Kirstina Pickering, Lionel, Sawyer & Collins, Reno, Nev., for appellees.

Appeal from the United States Bankruptcy Appellate Panels for the Ninth Circuit.

Before ANDERSON, SKOPIL, and NORRIS, Circuit Judges.

J. BLAINE ANDERSON, Circuit Judge:

Mason appeals from the denial of his motion to vacate an order for relief entered on an involuntary petition under the 1978 Bankruptcy Reform Act, 11 U.S.C. Sec. 101, et seq. The bankruptcy court held that Mason waived his right to object to the order for relief. In re Mason, 12 B.R. 316 (Bkrtcy.D.Nev.1981). Mason appealed to a Ninth Circuit Bankruptcy Appellate Panel which affirmed. 20 B.R. 650 (Bkrtcy.App. 9th Cir.1982). We conclude that we have jurisdiction over this appeal and agree that the bankruptcy court properly denied Mason's motion to vacate.


On June 30, 1980, the appellees, Integrity Insurance and Sherwood & Roberts, filed a petition under 11 U.S.C. Sec. 303 to begin involuntary bankruptcy proceedings against Mason. Mason did not respond to the petition and the bankruptcy court entered an order for relief on August 25, 1980. Mason states that he did not respond to the petition because he believed the bankruptcy court did not have jurisdiction, only two creditors having commenced the case instead of three as required by 11 U.S.C. Sec. 303(b)(1) and (2). On this ground he moved to vacate the order. The bankruptcy court denied the motion, finding that this "jurisdictional" defect could be waived if not specifically objected to prior to the entry of the order for relief. The court also found that Mason's failure to show that another creditor would not join the petition if the order were vacated precluded relief. The bankruptcy panel affirmed for the same reasons.

Two questions are presented by the appeal to this court. Is an order for relief, and concomitantly, a denial of a motion to vacate such an order, "final" and appealable as of right to the court of appeals? If so, did Mason fail to adduce sufficient grounds to support his motion to vacate?

A. Jurisdiction

Appellees contend that we lack jurisdiction over Mason's appeal. This argument has substantial merit, but, in the end analysis, we disagree.

The court of appeals has jurisdiction only over final orders, judgments or decrees of the bankruptcy courts, whether these orders are first reviewed by a district court or, as in the Ninth Circuit, a bankruptcy appellate panel. In re Rubin, 693 F.2d 73, 76-77 (9th Cir.1982). Interlocutory orders are not appealable as of right. They may be reviewed at the discretion of the district courts, 28 U.S.C. Sec. 1334(b), and bankruptcy panels, 28 U.S.C. Sec. 1482(b), but they are not appealable to the courts of appeals under 28 U.S.C. Sec. 1293. Id. 1

The jurisdictional question, then, is a simple one: is the denial of a motion to vacate an order for relief a final order, or is it interlocutory? The question is simple, but the answer is not so easily contrived. Apparently, no other court has directly decided the question. The Seventh and Second Circuits have accepted appeals from district court review of the grant of an order for relief on an involuntary petition, but they did so without discussion of the jurisdictional issue. In re Covey, 650 F.2d 877 (7th Cir.1981); In re B.D. International Discount Corp., 701 F.2d 1071 (2d Cir.1983).

The answer must be found by analyzing the nature of an order for relief, notwithstanding that the order actually on appeal is one denying a motion to vacate the order for relief. In the bankruptcy area a motion to vacate is treated in substantially the same manner as motions made under Fed.R.Civ.P. 60(b). See Fed.R.Bankr.P. 924; In re Magouirk, 693 F.2d 948, 950-951 (9th Cir.1982). Orders denying relief on Rule 60(b) motions are generally considered to be final and appealable. J. Moore, B. Ward and J. Lucas, 9 Moore's Federal Practice p 110.14 (2d ed. 1983). We think it self-evident, however, that the finality of such orders derives from the finality of the underlying judgment upon which such relief is sought. While it is true that our review will be of the denial of the motion to vacate, id., our jurisdiction must be predicated on the nature of the "judgment," in this case the order for relief.

An order for relief is the equivalent of an "adjudication" under the Bankruptcy Act of 1898. See S.Rep. No. 989, 95th Cong., 2d Sess. 31 (1978) and H.Rep. No. 595, 95th Cong., 1st Sess. 321 (1977), reprinted in 1978 U.S.Code Cong. & Ad.News 5787. An adjudication was appealable as of right under Sec. 24 of the 1898 Bankruptcy Act. But, being a "proceeding in bankruptcy," Taylor v. Voss, 271 U.S. 176, 181-182, 46 S.Ct. 461, 463-464, 70 L.Ed. 889, 892 (1926), it fell within that class of orders which were appealable whether they were considered interlocutory or not. See In re Brissette, 561 F.2d 779, 781 (9th Cir.1977); see also Diamond Door Co. v. Lane-Stanton Lumber Co., 505 F.2d 1199, 1202 n. 4 (9th Cir.1974).

No cases have been found which classify an adjudication as final or interlocutory. An adjudication, and concomitantly an order for relief, is, however, a judgment in rem, a conclusive determination of the debtor's status in bankruptcy, and res judicata etween the actual parties to the proceeding to all the facts and subsidiary questions of law on which it is based. Gratiot County State Bank v. Johnson, 249 U.S. 246, 248, 39 S.Ct. 263, 63 L.Ed. 587, 588 (1919); In re Centre de Tricots De Gaspe, Ltee., 10 B.R. 148, 149 (Bkrtcy.S.D.Fla.1981); L. King, 2 Collier on Bankruptcy, p 301.07-.08 (15th ed. 1983). Recently, one bankruptcy judge described the proceeding on an involuntary petition as "in essence a civil suit requesting a judgment that an order for relief be entered ...." In re Alpine Lumber and Nursery, 13 B.R. 977, 979 (Bkrtcy.S.D.Cal.1981). An order for relief is, therefore, an important step in bankruptcy procedure. But, admittedly, it does not meet the usual standard of finality, i.e., a decision "which ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 633, 89 L.Ed. 911, 916 (1945). On the contrary, an order for relief can be viewed as merely a decision that a bankruptcy case can continue. In fact, the only truly final order in a bankruptcy proceeding occurs when the order closing the case is filed. 11 U.S.C. Sec. 350.

Nevertheless, the nature of bankruptcy cases in general and orders for relief in particular convince us that we have jurisdiction. Two highly-respected authorities offer support for this conclusion. 1 Collier on Bankruptcy, supra, at p 3.03[d][iii] n. 213; R. Levin, Bankruptcy Appeals, N.C.L.Rev. 967, 985 & n. 140 (1980). 2 Collier's support is minimal, however, for it offers no specific reasons for reaching its conclusion. Mr. Levin, on the other hand, presents a convincing argument that orders for relief and other final decisions in "proceedings in bankruptcy" should be treated as final and appealable as of right. Proceedings in bankruptcy include "everything that was formerly known as an adversary proceeding, contested matter, administrative matter, proceeding in bankruptcy or controversy arising in a proceeding in bankruptcy." Id.; see H.Rep. No. 595, supra, at 444-445. Rulings on orders for relief would surely fall within this class of proceedings. Although we do not necessarily adhere to Levin's broad reading of final orders in all bankruptcy matters, see C. Wright, A. Miller and E. Cooper, 16 Federal Practice and Procedure, Sec. 3926 n. 0.3 (1982 Supp.), we are convinced that orders for relief should be considered final for purposes of appeal because they "may determine and seriously affect substantive rights" and "cause irreparable harm to the losing party if he had to wait to appeal to the end of the bankruptcy case." R. Levin, supra, at 985-986 & n. 140.

The thrust of Levin's argument is that one should determine if an order is final in light of the unique nature of bankruptcy procedure and not with blind adherence to the rules of finality developed under 28 U.S.C. Sec. 1291. Other circuit courts have followed this approach when determining the scope of their jurisdiction over appeals that have proceeded from the bankruptcy courts through the district courts. See, e.g., Universal Minerals, Inc. v. C.A. Hughes & Co., 669 F.2d 98, 101 & n. 3 (3d Cir.1981); In re Marin Motor Oil, Inc., 689 F.2d 445, 447 (3d Cir.1982); cert. denied, --- U.S. ----, 103 S.Ct. 1196, 75 L.Ed.2d 440 (1983); see also Maiorino v. Branford Savings Bank, 691 F.2d 89, 93 (2d Cir.1982). Some other decisions have more closely relied on the finality rules developed under Sec. 1291 but appear to be willing to use the "exceptions" thereto somewhat liberally. See In re Taddeo, 685 F.2d 24, 26 n. 4 (2d Cir.1982) and Borg-Warner Acceptance Corp. v. Hall, 685 F.2d 1306, 1309 (11th Cir.1982) (denial of relief from automatic stay is the same as granting a permanent injunction and therefore is a final order); In re Regency Woods Apartments, Ltd., 686 F.2d 899, 902 (11th Cir.1982) (the Forgay-Conrad rule and the collateral order doctrine apply to bankruptcy proceedings); cf. In re Callister, 673 F.2d 305, 307 (10th Cir.1982) (while seemingly recognizing that certain orders besides those closing the case should be appealable the court refuses to apply either the collateral order exception or the death knell doctrine to an order providing an interim award of attorney fees to debtor's counsel). While these...

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