Schultz Mfg. Fabricating Co., Matter of

• Citation: 956 F.2d 686
• Decision Date: 12 December 1991
• Docket Number: Nos. 90-1576,90-3657,90-3611 and 91-2519,s. 90-1576
• Parties: Bankr. L. Rep. P 74,475 In the Matter of SCHULTZ MANUFACTURING FABRICATING COMPANY, Debtor. Appeal of Daryl A. SCHULTZ and Norita Schultz. In the Matter of PARR ELEVATOR, INCORPORATED, Debtor. Appeal of Daryl A. SCHULTZ and Norita Schultz. In the Matter of Daryl A. SCHULTZ and Norita J. Schultz, Debtors-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 686

956 F.2d 686

Bankr. L. Rep. P 74,475

In the Matter of SCHULTZ MANUFACTURING FABRICATING COMPANY, Debtor.

Appeal of Daryl A. SCHULTZ and Norita Schultz.

In the Matter of PARR ELEVATOR, INCORPORATED, Debtor.

Appeal of Daryl A. SCHULTZ and Norita Schultz.

In the Matter of Daryl A. SCHULTZ and Norita J. Schultz,

Debtors-Appellants.

Nos. 90-1576, 90-3657, 90-3611 and 91-2519.

United States Court of Appeals,

Seventh Circuit.

Submitted Dec. 12, 1991. ^*

Decided Feb. 10, 1992.

Rehearing Denied April 2, 1992.

Jim B. Brown, Crown Point, Ind., for Daryl and Norita Schultz and Schultz Mfg. & Fabricating Co. in Nos. 90-1576, 90-3657.

Daryl A. Schultz, pro se.

Norita J. Schultz, pro se.

Lynn C. Tyler, David M. Powlen, Edward A. Keirn, Barnes & Thornburg, Indianapolis, Ind., Cynthia L. Garwood, Cooke, Bache, Laszynski & Moore, Lafayette, Ind., for John Hancock Mut. Life Ins. Co., Inc. and Margret G. Robb, trustee.

Margret G. Robb, Bartlett, Robb & Sabol, Lafayette, Ind., trustee.

David A. Rosenthal, Lafayette, Ind., for Parr Elevator, Inc.

Before BAUER, Chief Judge, and CUMMINGS and CUDAHY, Circuit Judges.

CUDAHY, Circuit Judge.

In these four consolidated appeals, the Schultzes, proceeding pro se, challenge several orders of the bankruptcy court affecting the bankrupt estate of their company, Schultz Manufacturing and Fabricating Company (SMFC). ¹ As explained in the following discussion, we affirm.

The Settlement Appeal: Appeal No. 90-1576

This appeal concerns two orders of the bankruptcy court entered in the Chapter 11 bankruptcy case of Parr Elevator, Inc. (Parr). Both orders arose out of an adversary complaint filed by Parr and John Hancock Mutual Life Insurance Company (Hancock) seeking authority for Parr to sell Hancock a grain elevator free and clear of all liens. Named as a defendant was SMFC which claimed a mechanic's lien against the elevator. SMFC disputed Hancock's allegation in the complaint that its mortgage lien against the elevator had priority over SMFC's mechanic's lien.

The first order, styled "Memorandum Opinion and Order" and entered June 30, 1987 (the "Settlement Determination Order"), found that SMFC had settled its mechanic's lien claim with Hancock. The second order, styled "Order with Respect to Settlement of Mechanic's Lien Claim Asserted by Schultz Manufacturing and Fabricating Company, Inc.," and entered August 17, 1988 (the "Settlement Approval Order"), approved the settlement agreement, finding that it was in the best interests of Parr, SMFC and their creditors. The district court concluded that it had no jurisdiction to review the merits of these orders, see In re Schultz Mfg. & Fabricating Co., 110 B.R. 384 (Bankr.N.D.Ind.1990), and we agree.

The Schultzes' appeal of the Settlement Determination Order was untimely. As noted above, the bankruptcy court entered the Settlement Determination Order on June 30, 1987. Ten days later, on July 10, 1987, SMFC served a Fed.R.Civ.P. 59(e) motion to alter or amend the Settlement Determination Order. See Bankruptcy Rule 9023 (incorporating Fed.R.Civ.P. 59). By order entered on July 16, 1987, the bankruptcy court, using the date of filing rather than the date of service as the relevant date, mistakenly denied the motion as untimely. See Fed.R.Civ.P. 59(e) (motion to alter or amend judgment must be served, not filed, within ten days of entry of judgment) (emphasis added); cf. Sinett Inc. v. Blairex Lab., Inc., 909 F.2d 253 (7th Cir.1990) (Fed.R.Civ.P. 59(b)); Sadowski v. Bombardier Ltd., 527 F.2d 1132, 1135 (7th Cir.1975) (same). Despite this mistake, SMFC had ten days from the denial of its Rule 59(e) motion in which to appeal the Settlement Determination Order to the district court. See Bankruptcy Rule 8002 (incorporating Fed.R.App.P. 4/timely Rule 59(e) motion tolls running of ten-day period for bankruptcy appeals until entry of order disposing of motion). This it did not do. Instead, SMFC filed a second Rule 59(e) motion to reconsider the July 16, 1987, order and a Rule 60(b) motion to reinstate the first Rule 59(e) motion based on "excusable neglect." By order entered on October 22, 1987, the bankruptcy court denied both motions. Undeterred, SMFC, on November 23, 1987, filed an "Application for Extension of Time for Filing of Notice of Appeal and to Allow Filing of Notice of Appeal Instanter." By order entered on December 29, 1987, the bankruptcy court denied the application because the Notice of Appeal was untimely and there was no showing of "excusable neglect" to warrant an extension of the appeals period. After this order, SMFC made no further request for relief and filed no appeal. While the Schultzes, as creditors and shareholders of SMFC, filed a Notice of Appeal from the December 29th order on January 9, 1989, this was more than one year after entry of the order and long past the ten-day appeals period for any of the 1987 orders. As a result, the district court was without jurisdiction to consider the merits of the Settlement Determination Order, and its dismissal of the Schultzes' appeal was proper.

On the other hand, the Schultzes' appeal of the Settlement Approval Order was timely. As noted above, the bankruptcy court entered the Settlement Approval Order on August 17, 1988. Within ten days of this order, on August 26, 1988, the Schultzes moved the bankruptcy court to reconsider its approval of the settlement agreement pursuant to Rule 59(e). On December 29, 1988, the bankruptcy court denied the motion. Thereafter, on January 9, 1989, the Schultzes noted an appeal from this denial to the district court. Since their notice of appeal fell within the ten-day period following the denial of the Rule 59(e) motion, see Bankruptcy Rules 8002 and 9006, it was timely filed and the Settlement Approval Order was properly before the district court unless there was some other obstacle to the exercise of jurisdiction by the district court.

We conclude that there was indeed another obstacle, one of standing to appeal. The record shows that on March 2, 1988 the bankruptcy court held a hearing on whether to approve the settlement agreement. At the hearing, the Schultzes orally withdrew their objections to the agreement and expressly assented to its terms. The day after the hearing, the Schultzes moved to reinstate their objections, but the bankruptcy court denied the motion on the ground that the Schultzes unconditionally withdrew their objections to the agreement, and there was no evidence of fraud, duress, mutual mistake or undue influence in their so doing. We need not decide if this denial was proper, because only the Chapter 7 trustee of SMFC's bankrupt estate had standing to contest the Settlement Approval Order on behalf of the Schultzes in their capacity as unsecured creditors and shareholders of SMFC. See Fox Valley AMC/Jeep, Inc. v. AM Credit Corp., 836 F.2d 366, 367-68 (7th Cir.1988); Koch Ref. v. Farmers Union Cent. Exch. Inc., 831 F.2d 1339, 1342-43 (7th Cir.1987), cert. denied, 485 U.S. 906, 108 S.Ct. 1077, 99 L.Ed.2d 237 (1988); Matter of Carbide Cutoff, Inc., 703 F.2d 259, 264 (7th Cir.1983); Matter of Central Ice Cream Co., 62 B.R. 357, 359-60 (Bankr.N.D.Ill.1986), aff'd in part, dismissed in part on other grounds, 836 F.2d 1068 (7th Cir.1987).

We reject the Schultzes' argument that the bankruptcy court had no authority to enter the Settlement Determination and Approval Orders because The First Bank of Whiting held the beneficial interest in the property. As the appellees point out, it was Parr which held the beneficial interest in the property. The "Trust as Collateral Security" agreement merely gave the bank a collateral security interest in the property and not an absolute assignment of Parr's beneficial interest. See In re Drewry, 99 B.R. 906, 913 (Bankr.N.D.Ind.1989). As "sole and only beneficiary" under the trust, Parr held an equitable interest in the property under Indiana law, Ind.Code Ann. § 30-4-2-7(a) (West 1979 & Cum.Supp.1991); Tait v. Anderson Banking Co., 171 F.Supp. 3 (S.D.Ind.1959); Colbo v. Buyer, 235 Ind. 518, 134 N.E.2d 45 (1956), and this interest constituted "property of the estate" within the meaning of 11 U.S.C. § 541(a)(1), see Butner v. United States, 440 U.S. 48, 54-55, 99 S.Ct. 914, 917-18, 59 L.Ed.2d 136 (1979); Koch Ref., 831 F.2d at 1343. The bankruptcy court accordingly had jurisdiction pursuant to 28 U.S.C. § 1334(d) and the district court's order of reference under 28 U.S.C. § 157.

The Sale Order Appeal: Appeal No. 90-3611

This appeal concerns the May 24, 1990, order of the bankruptcy court entered in Parr's Chapter 11 bankruptcy case and styled "Order of Sale and Transfer of Property from Parr Elevator, Inc. and Bank of Whiting, Trustee under a Trust Agreement dated June 1, 1982, and known as Trust No. 1707, as Vendors, to John Hancock Mutual Life Insurance Company, as Vendee" (the "Sale Order"). This order authorized Parr to sell the elevator to Hancock free and clear of all liens and implemented the terms of the settlement agreement between Hancock and SMFC. The district court concluded that the Schultzes had no standing to appeal the Sale Order, and we agree.

Only a "person aggrieved" has standing to appeal an order of the bankruptcy court. Matter of UNR Indus., Inc., 725 F.2d 1111, 1120 (7th Cir.1984); Matter of Carbide Cutoff, Inc., 703 F.2d 259, 264 (7th Cir.1983); Unsecured Creditors Comm. v. Leavitt Structural Tubing Co., 55 B.R. 710, 711 (Bankr.N.D.Ill.1985), aff'd without opinion, 796 F.2d 477 (7th Cir.1986). Prerequisites for being a "person aggrieved" are attendance and objection at a bankruptcy court proceeding. In re Commercial W. Fin. Corp., 761 F.2d 1329, 1334-35 (9th Cir.1985). These prerequisites, however, are excused "if the objecting party did not receive proper notice of the proceedings below and of his opportunity to object to the action proposed to be taken. In that case, the requirements of due process outweigh those of judicial efficiency and...