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In Re James Keenan, D.B.A. Data v. Ross M. Pyle

March 3, 2011


The opinion of the court was delivered by: M. James Lorenz United States District Court Judge

Bankruptcy No. 96-00871-B11


This is an appeal from an order of the United States Bankruptcy Court for the Southern District of California. James Keenan ("Debtor") filed a voluntary Chapter 11 bankruptcy case in 1996. Appellee Ross M. Pyle was appointed Chapter 11 Trustee. A joint plan of reorganization was confirmed in 1998 and Mr. Pyle was appointed as the Liquidating Trustee ("Trustee"). The Debtor objected to the Trustee's request for approval of a Rescission and Compromise Agreement ("Agreement") between the Estate and Thomas Curtin, the Debtor's purported partner. After briefing and a hearing, the Bankruptcy Court overruled the Debtor's objection and approved the Agreement. The Debtor appealed.

The Debtor's brief does not state the statutory basis for this court's appellate jurisdiction, as required by Federal Rule of Bankruptcy Procedure 8010(a)(1)(B).*fn1 The Trustee, while declining to speculate on what basis the Debtor may have intended to assert appellate jurisdiction, argues that the appeal should be dismissed.

As the Appellant, the Debtor bears the burden to establish jurisdiction. South Dakota v. Neville, 459 U.S. 553, 569 n.4. The Debtor has not carried this burden.

This court has jurisdiction over final orders of the bankruptcy court. 28 U.S.C. § 158(a)(1); see also in re Lievsay (Lievsay v. W. Fin. Sav. Bank), 118 F.3d 661, 662 (9th Cir. 1997). The court also has appellate jurisdiction over interlocutory orders, provided the appellant has obtained leave of court. 28 U.S.C. § 158(a). From the record it does not appear that the Debtor sought leave of the Bankruptcy Court before filing the notice of appeal. He has not sought leave from this court. Accordingly, the court must look to the nature of the underlying order to determine whether it was final or interlocutory. Lievsay, 118 F.3d at 662.

"An order is final if it constitutes a complete adjudication of the issues at bar and clearly evidences the judge's intention that it be final." In re Wiersma (Wiersma v. Bank of the West), 483 F.3d 933, 938 (9th Cir. 2007). "Furthermore, a bankruptcy order is appealable where it 1) resolves and seriously affects substantive rights and 2) finally determines the discrete issue to which it is addressed." Id. at 939 (internal quotation marks and citation omitted); see also In re Frontier Properties, Inc. (Elliott v. Four Seasons Properties), 979 F.2d 1358, 1363 (9th Cir. 1992).

Although the Agreement approved by the Bankruptcy Court was referred to as a compromise, it by no means adjudicated the issues between the Estate and Mr. Curtin, and the order approving it was not a final order. The Debtor agrees with this conclusion. (See Appellant's Opening Brief at 3.) The events leading up to the Agreement provide relevant context for determining whether the order was final or interlocutory.

Unless noted otherwise, the facts below are taken from the Declaration of Ross M. Pyle in Support of Liquidating Trustee's Reply to Objection of Debtor James W. Keenan to Notice of Intended Action Re: Approval of Rescission and Compromise Agreement with Thomas Curtin [Loma Alta Indus. Park] (Record on Appeal ("ROA"), Exh. 3.) They were undisputed below and remain undisputed on appeal.

The Debtor and his wife hold an 85% share*fn2 in real property known as the Loma Alta Industrial Park ("Property"). Mr. Curtin owns a 9% share, and the remainder is owned by a third party. The Property is allegedly owned by a partnership comprised of the Debtor, his wife, Mr. Curtin and the third party ("Partnership"). The rights of the parties relative to the Partnership are the subject of an adversary proceeding, which is not a part of this appeal.*fn3 In the adversary proceeding, the Trustee contends he is entitled to quiet title, surrender of the Property, avoidance of interests in the Property and recovery of avoided transfers and/or unrecorded ownership interests in the Property. Among other issues, the extent of Mr. Curtin's share in the Partnership and the Property is disputed. While his 9% share is undisputed, he claims he has an additional 28% share for a total of 37%.

Pursuant to a June 13, 1997 Bankruptcy Court order, the Trustee is the successor to the Debtor's right, title and interest in the Partnership, including his right to participate in Partnership management, and ownership of the Partnership property. Specifically, the Trustee is entitled to possession of the Property with powers to manage it and collect rents, issues and profits therefrom.

Under a September 10, 1997 Bankruptcy Court order ("Initial Distribution Order"), the Trustee was authorized to make a distribution of excess funds from the Partnership of 55% to the Estate and 9% to Mr. Curtin, with authority to make such distributions on an ongoing basis according to the same percentages. Under the Initial Distribution Order, Mr. Curtin did not receive a distribution for the disputed portion of his share. Those funds were deposited in a blocked account. He contended that he was entitled to earn 7% interest per year on the disputed portion of his share, rather than a lesser rate the funds earned in the blocked account.

Because over time a large amount of funds had accumulated on account of Mr. Curtin's disputed share, and because the interest on such funds could be substantial (see ROA Ex. 9, Reporter's Transcript of Proceedings ("Transcript") at 4), the Trustee entered into an agreement with Mr. Curtin, whereby a substantial portion of the accumulated funds could be distributed to Mr. Curtin with a complete reservation of rights as between Mr. Curtin and the Trustee ("Interim Distribution Agreement"). Under the Interim Distribution Agreement, Mr. Curtin received a distribution of excess funds as of July 31, 2001 based on a 37% share with interest at the rate they earned in the blocked account. Beginning with July 31, 2001, Mr. Curtin would be entitled to regular distributions based on a 37% share until the extent of his ownership share is resolved. All unresolved claims and issues between the Trustee and Mr. Curtin were reserved. The Interim Distribution Agreement was approved by the Bankruptcy Court by order dated January 14, 2003.

Pursuant to the Initial Distribution Order and the Interim Distribution Agreement, Mr. Curtin received $2,365,384.28. The Trustee held back $229,405.31, representing an interim distribution accrued as of October 31, 2008, to which Mr. Curtin would have otherwise ...

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