Pizza of Hawaii, Inc., Matter of

• Decision Date: 24 May 1985
• Docket Number: No. 84-2392,84-2392
• Citation: 761 F.2d 1374,12 C.B.C.2d 1227
• Parties: 12 Collier Bankr.Cas.2d 1227, 13 Bankr.Ct.Dec. 338, Bankr. L. Rep. P 70,565 In the Matter of PIZZA OF HAWAII, INC., Debtor. PIZZA OF HAWAII, INC., Appellant, v. SHAKEY'S, INC., Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1374

761 F.2d 1374

12 Collier Bankr.Cas.2d 1227, 13 Bankr.Ct.Dec. 338,

Bankr. L. Rep. P 70,565

In the Matter of PIZZA OF HAWAII, INC., Debtor PIZZA OF HAWAII, INC., Appellant, v. SHAKEY'S, INC., Appellee.

No. 84-2392.

United States Court of Appeals Ninth Circuit.

Argued and Submitted April 2, 1985.

Decided May 24, 1985.

John Channin, James Y. Agena, Honolulu, Hawaii, for appellant.

James N. Duca, Woo, Kessner & Duca, Honolulu, Hawaii, for appellee.

An Appeal from United States District Court for the District of Hawaii.

Before FARRIS, PREGERSON, and BEEZER, Circuit Judges.

PREGERSON, Circuit Judge:

FACTS

Shakey's, a national franchisor of fast-food outlets, entered into dealer agreements with Jack Leibert, David A. Dawes, and David F. Dawes, the principals of Pizza of Hawaii, Inc. (Pizza), in 1977. On September 25, 1980, Shakey's filed suit in the U.S. District Court against Leibert, Dawes, and Dawes, seeking injunctive relief and damages for breach of contract and trademark infringement. (Civ. No. 80-0517). On September 31, Leibert, Dawes, and Dawes executed an instrument purporting to assign their interests in the dealer agreement to Pizza. The following day, Pizza filed a chapter 11 petition in the United States Bankruptcy Court. (Bk. No. 80-00629). The filing stayed further proceedings against Pizza (but not against Pizza's principals) pursuant to Bankruptcy Code section 362, 11 U.S.C. Sec. 362. ¹

Shakey's filed a request for relief from the automatic stay so that it could join Pizza as a defendant in the civil case. (Bk. Adv. No. 80-0078). On November 12, the bankruptcy court denied the request for relief, but entered an order which stated that it would "not entertain a plan of reorganization under the provisions of Chapter XI until such time as the question of the termination of the franchise has been litigated in Civil No. 80-0517, currently pending in the United States District Court for the District of Hawaii."

Shakey's then proceeded with its case against Leibert, Dawes, and Dawes in the district court. In May of 1982, Shakey's became aware that Pizza was purportedly violating Shakey's contractual and trademark rights. Therefore, Shakey's amended its complaint to include these new violations. Arguing that the amended complaint affected Pizza's estate, Pizza successfully petitioned the district court for leave to intervene and to transfer the civil case to the bankruptcy court as an adversary proceeding ² on July 13, 1982. (Bk. Adv. No. 82-0136).

On May 4, 1983, Pizza filed its first amended plan of reorganization, and on May 20, 1983, its first amended disclosure statement. On May 24, 1983, the bankruptcy court issued an order approving the disclosure statement and effectively vacating its order of November 12, 1980, in which it had indicated that it would not entertain a plan of reorganization until the civil case had been terminated. The bankruptcy court confirmed Pizza's plan on June 29, 1983. The next day, the bankruptcy court remanded Adv. No. 82-0136 to the district court as Civ. No. 80-0517, where it is still pending.

Shakey's appealed the order confirming the plan to the district court, ³ arguing that the plan was not feasible because it did not make sufficient provision for the enormous debt that Pizza would owe Shakey's if the district court found Pizza liable in the civil case. Pizza argued in defense that Shakey's did not have standing to object to the plan because Shakey's had not filed a formal proof of claim in the bankruptcy court covering the damages sued for in the civil case.

The district court, 40 B.R. 1014, ruled that although Shakey's had not filed a formal proof of claim, the documents Shakey's filed in the bankruptcy court while the civil case was pending in that court (July 13, 1982, to June 30, 1983), together with its active participation in the bankruptcy case, constituted an amendable informal proof of claim. Consequently, the district court remanded, ordering the bankruptcy court to grant Shakey's leave to file a formal proof of claim. The district court also ordered the bankruptcy court to estimate the value of Shakey's claim pursuant to 11 U.S.C. Sec. 502(c) ⁴ because waiting for the ultimate resolution of Shakey's civil claim would unduly delay Pizza's reorganization. Finally, the district court vacated the plan, directing the bankruptcy court to reconsider the plan's feasibility in light of the estimated value of Shakey's claim.

Pizza appealed to this court, arguing that the district court improperly granted Shakey's leave to amend and, consequently, improperly vacated the plan.

ISSUES

I. Whether this court has jurisdiction over the district court's order vacating II. Whether the district court abused its discretion in ruling that Shakey's had established an amendable informal proof of claim when the bankruptcy court had not ruled on the issue.

the plan, remanding this matter to the bankruptcy court to permit Shakey's to amend its informal proof of claim, and directing the bankruptcy court to estimate the value of that claim.

III. Whether Shakey's actions and the documents Shakey's filed in the bankruptcy court constitute an amendable informal proof of claim.

IV. Whether the plan is not feasible and, therefore, cannot be confirmed.

STANDARDS OF REVIEW

In Diamond National Corp. v. Lee, 333 F.2d 517, 528 (9th Cir.1964), we indicated that it is within the district court's discretion whether to consider issues not presented to the bankruptcy court. Cf. Abex Corp. v. Ski's Enterprises, Inc., 748 F.2d 513, 516 (9th Cir.1984) (although rule that circuit court should not consider arguments appellant failed to raise in district court is discretionary, it may be dispensed with altogether if issue is purely legal and central to case). Consequently, we review the district court's decision to consider whether Shakey's had established an amendable informal proof of claim under an abuse of discretion standard.

Because we are in as good a position as the district court to review the findings of the bankruptcy court, we independently review the bankruptcy court's decision. See, e.g., In re Mellor, 734 F.2d 1396, 1399 (9th Cir.1984); In re Comer, 723 F.2d 737, 739 (9th Cir.1984); In re Bialac, 712 F.2d 426, 429 (9th Cir.1983). ⁵ We review the bankruptcy court's findings of fact under the clearly erroneous standard and its conclusions of law de novo. In re American Mariner Industries, Inc., 734 F.2d 426, 429 (9th Cir.1984). The issue whether the documents a creditor filed, considered in conjunction with the creditor's conduct, constitute an amendable informal proof of claim is one of law, which we review de novo. In re Sambo's Restaurants, Inc., 754 F.2d 811, 815 (9th Cir.1985). The issue whether a plan is feasible--is not likely to be followed by liquidation or further reorganization--is one of fact, which we review under the clearly erroneous standard. See United Properties, Inc. v. Emporium Department Stores, Inc., 379 F.2d 55, 63-64 (8th Cir.1967).

DISCUSSION

I. This court has jurisdiction over the district court's order vacating the plan, remanding this matter to the bankruptcy court to permit Shakey's to amend its informal proof of claim, and directing the bankruptcy court to estimate the value of that claim.

Before we address the merits of this appeal, we must determine whether we have appellate jurisdiction. Although neither party raised the issue, a federal court must determine sua sponte its proper jurisdiction. In re Martinez, 721 F.2d 262, 264 (9th Cir.1983). Section 158(d) of Title 28 gives this court jurisdiction to hear appeals "from all final decisions, judgments, orders, and decrees" entered by a district court or a bankruptcy appellate panel on appeal from a bankruptcy court. Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub.L. No. 98-353, Sec. 104(a), 98 Stat. 333, 341 (to be codified at 28 U.S.C. Sec. 158). Interlocutory orders are not appealable as of right. They may be reviewed at the discretion of the district courts, 28 U.S.C. Sec. 158(a), but they are not appealable to the court of appeals under 28 U.S.C. Sec. 158(d). See In re King City Transit Mix, Inc., 738 F.2d 1065, 1066 (9th Cir.1984) (per curiam); In re Mason, 709 F.2d 1313, 1315 (9th Cir.1983); In re Rubin, 693 F.2d 73, 76 (9th Cir.1982). ⁶

Pizza appeals from an order of the district court that reverses the bankruptcy court's order confirming Pizza's plan, remands to permit Shakey's to amend its informal proof of claim, and directs the bankruptcy court to estimate the value of that claim. The jurisdictional question, then, is a simple one: is this order final or interlocutory?

We recently addressed the issue of our jurisdiction to review a similar order in In re Sambo's Restaurants, Inc., 754 F.2d 811 (9th Cir.1985). In Sambo's, the creditor first moved in the bankruptcy court for leave to amend what she characterized as an informal proof of claim. The bankruptcy court denied the motion and the creditor appealed to the district court. The district court reversed the bankruptcy court and granted the creditor fifteen days in which to file an amended proof of claim. The debtor then appealed to the Ninth Circuit.

We found that we had jurisdiction to review the district court's order reversing the bankruptcy court and granting leave to amend. Id. at 813-15. In reaching this conclusion, we agreed with the Third and Eighth Circuits that " 'when the bankruptcy court issues what is indisputably a final order, and the district court issues an order affirming or reversing, the district court's order is also a final order ....' " Id. at 814 (quoting In re Marin Motor Oil, Inc., 689 F.2d 445, 449 (3d Cir.1982), cert. denied, 459 U.S. 1207, 103 S.Ct. 1196, 75 L.Ed.2d 440 (1983), and citing In re Bestmann, 720 F.2d 484, 485-86 (8th Cir.1983)).

In the instant case, the district court was reviewing the bankruptcy court's order confirming Pizza's proposed plan. Of all...