Moody, Matter of

• Decision Date: 25 August 1987
• Docket Number: No. 87-2205,87-2205
• Citation: 825 F.2d 81
• Parties: Bankr. L. Rep. P 71,941 In the Matter of Shearn MOODY, Jr., Debtor. W. Steve SMITH, Trustee of the Estate of Shearn Moody, Jr., Plaintiff-Appellee, v. SEASIDE LANES, et al., Defendants, Robert Moody and Frances Moody Newman, Defendants-Appellants. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 81

825 F.2d 81

Bankr. L. Rep. P 71,941

In the Matter of Shearn MOODY, Jr., Debtor W. Steve SMITH, Trustee of the Estate of Shearn Moody, Jr. Plaintiff-Appellee, v. SEASIDE LANES, et al., Defendants Robert Moody and Frances Moody Newman, Defendants-Appellants.

No. 87-2205

Summary Calendar.

United States Court of Appeals, Fifth Circuit.

Aug. 25, 1987.

Rehearing Denied Sept. 23, 1987.

John A. Buckley, Andrew J. Mytelka, Galveston, Tex., for defendants-appellants.

Ben B. Floyd, E. Ann Dickerson, Houston, Tex., for plaintiff-appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before CLARK, Chief Judge, and GARWOOD and HILL, Circuit Judges.

GARWOOD, Circuit Judge:

This appeal stems from an adversary proceeding brought by the trustee of the bankruptcy estate of Shearn Moody, Jr. against Seaside Lanes, a Texas partnership, and its general partners, Shearn Moody, Jr., Robert Moody, and Frances Moody Newman. The trustee sued to compel Seaside Lanes to turn over the cash value of Shearn Moody, Jr.'s alleged interest in the partnership, to dissolve and wind up the affairs of the partnership, and to render an accounting of the partnership's assets and liabilities. The partners appealed from a bankruptcy court order declaring that the partnership had been dissolved by the bankruptcy filing of Shearn Moody, Jr. and purportedly granting the trustee's request for an accounting and winding up, which the court stated "should proceed in accordance with the Texas Uniform Partnership Act," but further providing that "if the Trustee, Mrs. Newman, and Robert Moody cannot arrive at a suitable resolution, they may seek a court order on the winding up and accounting." The district court dismissed the appeal as interlocutory. Partners Robert Moody and Frances Moody Newman now appeal from the district court's dismissal, arguing that the bankruptcy court's order was a final order appealable as of right. We disagree with the appellants and therefore affirm the district court's dismissal of their appeal.

Facts and Proceedings Below

In December 1963, Shearn Moody, Jr. entered a written partnership agreement with Robert Moody, his brother, and Frances Moody Newman, his mother. The agreement stated that the parties had formed a partnership, Seaside Lanes, to own and manage real estate acquired by them as a function of their status as beneficiaries under the last will and testament of Shearn Moody, Sr. According to the partnership agreement, Shearn Moody, Jr. and Robert Moody each held a 37.5 percent interest in the partnership profits, and Frances Moody Newman had a 25 percent interest.

At the time of its formation, the sole asset of Seaside Lanes consisted of real property and improvements located on "Outlot 162" in Galveston County, Texas. On Outlot 162 were a bowling alley, a service station, and an office building. On May 14, 1984, Seaside Lanes sold the bowling alley, its most valuable asset, for approximately $500,000. The partners deposited the sale proceeds in a certificate of deposit at Moody National Bank. After that certificate of deposit and a subsequent one (into which it had been "rolled") matured, in December 1984 the funds were transferred into the Seaside Lanes checking account at the Bank of Galveston to be available for making periodic disbursements to the partners. On December 24, 1984, Shearn Moody, Jr. withdrew $201,000 from the Seaside Lanes checking account, which represented his 37.5 percent share of the partnership profits for 1984. Later that month, Robert Moody and Frances Moody Newman also withdrew their respective shares of the partnership's 1984 profits.

Meanwhile, on June 6, 1983, Shearn Moody, Jr., had filed a Chapter 13 petition for bankruptcy in the United States Bankruptcy Court for the Southern District of Texas. He subsequently dismissed that proceeding and on November 13, 1983, filed another Chapter 13 petition in North Carolina. After this proceeding was converted to a Chapter 11 bankruptcy and a trustee was appointed, venue was transferred to the Southern District of Texas. Thereafter, on March 13, 1985, the bankruptcy court in Texas appointed plaintiff-appellee W. Steve Smith (trustee) as successor trustee for Shearn Moody, Jr.'s bankruptcy estate.

On September 9, 1985, the appellee trustee filed an adversary "Complaint and Application for Accounting and Turnover of Funds" against Seaside Lanes and its partners. The complaint alleged that Shearn Moody, Jr.'s interest in the Seaside Lanes partnership was property of the bankruptcy estate and requested the court to order (1) a dissolution and winding up of the affairs of the partnership, (2) an accounting of the partnership's assets and liabilities, and (3) a turnover of the net value of Shearn Moody, Jr.'s interest in the partnership to the trustee. In opposition, the defendants asserted that Shearn Moody, Jr. had on April 1, 1980 transferred all of his interest in Seaside Lanes to a trust created by him on that date (April 1, 1980 Trust) and with respect to which he was the sole trustee, but not a beneficiary; that he had received the Seaside Lanes profits for 1984 solely in his capacity as trustee of the April 1, 1980 Trust; and that he therefore had no ownership interest in Seaside Lanes to which the bankruptcy trustee could succeed. The defendants also took the position that by agreement of the partners, subsequent to the May 1984 sale of the bowling alley the Seaside Lanes partnership had been dissolved and its affairs wound up, and, consequently, that a court order for an accounting and winding up of partnership affairs would be inappropriate.

Following a hearing, on October 27, 1986, the bankruptcy judge in a document entitled "Memorandum and Order" issued written "Findings of Fact" and "Discussion and Conclusions of Law," in which she concluded that Shearn Moody, Jr. had conveyed neither his interest in the Seaside Lanes partnership nor any of the partnership's property to the April 1, 1980 Trust and that his interest in the partnership was therefore property of his bankruptcy estate. She further concluded that by virtue of the Texas Uniform Partnership Act, dissolution of the Seaside Lanes partnership had commenced upon the bankruptcy filing of Shearn Moody, Jr. rather than upon the subsequent sale of the bowling alley, as the defendants had argued, but that in any event the winding up of the affairs of Seaside Lanes remained uncompleted. The October 27, 1986, "Memorandum and Order" contains the only order or decree of the bankruptcy court sought to be appealed in this case. The only portion of this "Memorandum and Order" that can be said to constitute a judgment, order, or decree is the last paragraph thereof, reading as follows:

"The dissolution of the partnership occurred upon Debtor's filing of the petition in bankruptcy. Texas Uniform Partnership Act, Art. 6132b-31. The Trustee's request for accounting and winding up is granted and should proceed in accordance with the Texas Uniform Partnership Act. If the Trustee, Mrs. Newman, and Robert Moody cannot arrive at a suitable resolution, they may seek a court order on the winding up and accounting of the Seaside Lanes partnership affairs.

"It is so Ordered."

The defendants filed a notice of appeal from the bankruptcy judge's "Memorandum and Order," which the bankruptcy trustee opposed in a motion to dismiss the appeal as interlocutory. Robert Moody and Frances Moody Newman (but not Shearn Moody, Jr.) countered by filing a memorandum in response to the trustee's motion to dismiss and, in the alternative, a motion for leave to file an appeal of an interlocutory order. In an order dated February 12, 1987, the district court dismissed the appeal on the grounds that the bankruptcy court's Memorandum and Order sought to be appealed from was an interlocutory order, not appealable as of right, and that "no grounds exist[ed] sufficient for the Court to grant leave" for an interlocutory appeal. From that dismissal, Robert Moody and Frances Moody Newman (collectively appellants) have timely appealed to this Court.

Discussion

The sole issue raised on this appeal is whether the district court erred in dismissing the partners' appeal from the October 27, 1986, Memorandum and Order of the bankruptcy court as an interlocutory order not appealable as of right. ¹ The appellate jurisdiction of a district court over an appeal from a bankruptcy court order is prescribed by 28 U.S.C. Sec. 158(a). This section gives "[t]he district courts of the United States ... jurisdiction to hear appeals from final judgments, orders, and decrees, and, with leave of the court, from interlocutory orders and decrees, of bankruptcy judges entered in cases and proceedings referred to the bankruptcy judges under section 157 of ... title ." Section 158(a) thus makes finality a prerequisite to appealability as a matter of right to a district court from a bankruptcy court order. Consequently, to determine whether the district court properly dismissed the partners' appeal, ² we must determine whether the bankruptcy court's October 27 order was final for purposes of taking an appeal under 28 U.S.C. Sec. 158(a).

We recognize that courts properly view finality for purposes of appellate jurisdiction more flexibly in the context of bankruptcy cases than in ordinary civil proceedings. ³ See, e.g., ITT Diversified Credit Corp. v. Lift & Equip. Serv., Inc. (In re Lift & Equip. Serv., Inc.), 816 F.2d 1013, 1015-16 (5th Cir.1987); Foster Securities, Inc. v. Sandoz (In re Delta Servs. Indus.), 782 F.2d 1267, 1269 (5th Cir.1986). In accordance with this approach, it is generally held that a separate adversary proceeding within the framework of the overall bankruptcy case is an appropriate "judicial unit" for determining finality pursuant to section 158(a). See Smith v. Revie (In re Moody), 817 F.2d 365 (5th Cir.1987); see also 16 C. Wright, A. Miller, E. Cooper & E. Gressman,...