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LLC v. Tapang

United States District Court, N.D. California, San Jose Division

July 11, 2014

523 BURLINGAME AVE., LLC, et al., Appellant,



In this bankruptcy appeal, appellant creditor 523 Burlingame Ave., LLC ("Appellant") seeks review of an order of the Bankruptcy Court preliminarily enjoining Appellant from proceeding with a trustee's sale of a property in the bankruptcy estate. For the reasons stated herein, the Court finds that the order at issue is not an appealable final order within the meaning of 28 U.S.C. § 158(a)(1), nor is it appropriate for review as an interlocutory order pursuant to 28 U.S.C. § 158(a)(3). As such, the Court must DISMISS this appeal for lack of jurisdiction.


A. Bankruptcy Court Proceedings

This is an appeal from an individual Chapter 11 bankruptcy case filed by appellee debtor Esterlita Cortes Tapang ("Appellee"). Appellant holds a loan partially secured by one of Appellee's properties located at 523 Burlingame Ave, Capitola, CA 95010 ("Subject Property"), which is now part of the bankruptcy estate. In May 2012, the Bankruptcy Court lifted the automatic stay on the Subject Property and Appellant commenced non-judicial foreclosure proceedings. (Appellant's Br., 3:8-15, ECF 7) Thereafter, Appellee instituted an adversary proceeding against Appellant, challenging its standing to foreclose on the Subject Property. ( Id. 3:24-28) Appellee also filed an emergency application for Temporary Restraining Order against the impending trustee's sale, which the Bankruptcy Court granted, and moved for a preliminary injunction against the sale, which the Bankruptcy Court set for briefing and a merits hearing. ( Id. 4:1-5) Following a series of delays and continuances, the Bankruptcy Court on March 29, 2013 issued a "Tentative Ruling on Motion for Preliminary Injunction" and conducted a hearing on the motion that same day. ( Id. 4:23-5:6; see also Excerpts of Record on Appeal, at ER1720-25, ECF Nos. 9-13 (hereinafter "Record")) At the hearing, the Bankruptcy Court granted the preliminary injunction and, on April 7, 2013, issued the injunction order that is the subject of this appeal ("April 7 Order"). (Not. Of Appeal Exh. 1, ECF 1 (hereinafter, "April 7 Order"))

The Bankruptcy Court's April 7 Order preliminarily enjoined Appellant from proceeding with a trustee's sale of the Subject Property "through May 30, 2013." (April 7 Order, 2:3) In granting the injunction, the Bankruptcy Court found that Appellee debtor was "unlikely to succeed on the merits of the adversary proceeding challenging [Appellant's] standing, " but she had a "reasonable likelihood of a successful reorganization" though her March 26, 2013 First Amended Plan did not appear to be confirmable. ( Id. 2:18-22) The Bankruptcy Court reasoned that finding that the First Amended Plan was not confirmable did "not mean Debtor cannot confirm any plan, " and suggested actions Appellee could take to confirm a reorganization plan that would permit her to keep the Subject Property. ( Id. 4:22-5:11) The Bankruptcy Court also opined, based upon a ruling of the Ninth Circuit Bankruptcy Appellate Panel ("BAP"), that "the absolute priority rule does not apply to individual Chapter 11 debtors" and, as such "is not likely an obstacle to confirmation. ( Id. 5:12-16 (citing In re Friedman, 466 B.R. 471 (9th Cir. B.A.P. 2012))) The Bankruptcy Court further found that Appellee faced irreparable injury from losing her investment property, which also provided her employment, and that the balance of hardships weighed in Appellee's favor. ( Id. 5:19-6:9)

The bankruptcy proceedings continued after the filing of the instant appeal on April 16, 2013. Appellee submitted a Second Amended Plan on April 30, 2013, and on May 30, 2013 the Bankruptcy Court issued an "Order Continuing Preliminary Injunction of Limited Duration" assessing the likelihood of a successful reorganization based on the Second Amended Plan. (Appellee's Renewed Mot. to Dismiss Exh. 2, ECF 47-1 (hereinafter, "May 30 Order"))[1] It appears that the Bankruptcy Court has continued to enjoin Appellant from selling the Subject Property, though the parties have not provided the complete record of continuing injunctions.[2]

B. District Court Proceedings

Appellant filed the instant appeal on April 16, 2013, contending that the Bankruptcy Court erred in finding that Appellee's First Amended Plan demonstrated a reasonable likelihood of a successful reorganization and that the court had erred in following the Ninth Circuit BAP to conclude that the absolute priority rule would not be a barrier to Appellee's successful individual Chapter 11 reorganization. ( See Appellant's Br.) Appellee did not timely respond and instead filed on July 5, 2013 an Ex Parte Motion to Dismiss with Alternative Enlargement of Time Request, which Appellant vehemently opposed. ( See Appellee's Mot. to Dismiss, ECF 17; Appellant's Opp. to Mot. to Dismiss, ECF 18) The Court summarily denied Appellee's motion to dismiss but granted an extension of time, allowing Appellee to file her responsive brief on or before August 6, 2013. ( See ECF 20) Although the Court granted a further extension to August 20, 2013, Appellee did not file her responsive brief until September 26, 2013. (Appellee's Br., ECF 29) Appellant promptly moved to strike Appellee's untimely filing. (ECF 30)

On April 17, 2014, this appeal was reassigned to the undersigned, and this Court conducted a case management conference on May 7, 2014 during which Appellant agreed to withdraw its Motion to Strike and instead file a substantive reply to Appellee's responsive brief. (CMC Order, ECF 43) Appellant timely filed its reply on May 14, 2014. (Appellant's Reply, ECF 45) Thereafter, Appellee filed a Renewed Ex Parte Motion to Dismiss, which Appellant again opposed. (Appellee's Renewed Mot. to Dismiss, ECF 47; Appellant's Opp. to Renewed Mot. to Dismiss, ECF 48) Because this Court finds that it lacks jurisdiction to review the April 7 Order, Appellee's Renewed Motion to Dismiss is DENIED as moot.


"Jurisdiction over an appeal from an order of a bankruptcy court is governed by 28 U.S.C. § 158." In re Frontier Properties, Inc., 979 F.2d 1358, 1362 (9th Cir. 1992). Section 158 enumerates three circumstances under which the district court has jurisdiction over appeals from the Bankruptcy Court: (1) appeals "from final judgments, orders, and decrees, " 28 U.S.C. § 158(a)(1); (2) appeals from "interlocutory orders and decrees issued under section 1121(d) of title 11 increasing or reducing the time periods referred to in section 1121 of such title, " id. § 158(a)(2); and (3) appeals "with leave of court, from other interlocutory orders and decrees, " id. § 158(a)(3). Because this appeal concerns a preliminary injunction, only §§ 158(a)(1) and (3) are applicable here.

A. Section 158(a)(1)

If an order of the Bankruptcy Court is final within the definition of 28 U.S.C. § 158(a)(1), the district court must hear the appeal. In re City of Desert Hot Springs, 339 F.3d 782, 787 (9th Cir. 2003). Interim orders are not subject to automatic appeal. The Bankruptcy Court has the authority to "issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this [bankruptcy] title." 11 U.S.C. § 105(a). A preliminary injunction order issued pursuant to the Bankruptcy Court's § 105(a) authority is considered final and appealable if that court "contemplates no further hearings on the merits of the injunction, apart from the outcome of the reorganization." Shugrue v. Air ...

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