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In re Consolidated Freightways Corp.

United States District Court, C.D. California, Eastern Division

June 28, 2016

IN RE CONSOLIDATED FREIGHTWAYS CORP. ET AL.

          OPINION AFFIRMING THE BANKRUPTCY COURT’S 2016 ORDER

          MICHAEL W. FITZGERALD, UNITED STATES DISTRICT JUDGE

         Before the Court is a bankruptcy appeal from the United States Bankruptcy Court (the Honorable Wayne Johnson, United States Bankruptcy Judge) (the “Bankruptcy Court”). Appellants Crown Enterprises and Hayward Property, LLC appeal from the Bankruptcy Court’s January 2016 Order Denying Motion to Reopen Case for the Limited Purpose of Correcting Sale Order and Defective Deed (the “2016 Order”). (Excerpts of Record (“ER”) Ex. A (Docket No. 10-3)).

         On April 27, 2016, Appellants filed their Opening Brief. (Docket No. 10). No Appellee has appeared in this case, although XPO Logistics Freight, Inc. has appeared as an Interested Party. On June 24, 2016, XPO filed an Objection to Bankruptcy Appeal or Alternatively Request for Continuance (“Request”). (Docket No. 17).

         The Court has reviewed the papers filed in this appeal and held a hearing on June 27, 2016. Counsel for Appellants as well as XPO appeared at the hearing.

         For the reasons stated below, the Court AFFIRMS the 2016 Order. The Bankruptcy Court did not abuse its discretion by refusing to reopen the bankruptcy proceeding. The Bankruptcy Court applied the correct law, and its application of the law to the facts of the case was neither illogical, implausible, nor unsupported by facts in the record.

         Because the Court affirms the Bankruptcy Court’s decision, the Court DENIES as moot XPO’s Request to continue the oral argument.

         I. BACKGROUND

         In 2002, Consolidated Freightways filed for bankruptcy protection. (ER Ex. E at 333 (Docket No. 10-7)). In the bankruptcy sale, Appellants purchased the real property located at 2256 Claremont Ct., Hayward, CA 94545 (the “Hayward Property”). (Id. at 340, 356). In the Bankruptcy Court’s order authorizing the sale (“Sale Order”), the Bankruptcy Court retained jurisdiction to “resolve any disputes, controversies or claims arising out of or relating to the Agreement.” (Id. at 361).

         Somehow, when the Quitclaim Deed was recorded, the Quitclaim Deed reflected a different property in Emeryville, rather than Hayward, California. (ER Ex. C at 137 (Docket No. 10-5)). In addition, according to Appellants, the metes and bounds description in the purchase agreement memorializing the sale, which was attached as Exhibit A to the Sale Order, failed to “fully” describe the Hayward Property. (Id. at 131).

         Appellants did not discover these defects until approximately September 2015, when a prospective purchaser expressed interest in the Hayward Property. (Id. at 132). Appellants attempted to remedy this issue by contacting counsel for the Trust, but counsel for the Trust indicated that the Trust was dissolved in 2012. (ER Ex. D at 227 (Docket No. 10-6) (“We no longer have a client that we can discuss this with, as there is no longer any Trust in existence and the Trustee’s authority and services terminated in late 2012.”)).

         In December 2015, Appellants filed a Motion to Reopen Case for the Limited Purpose of Correcting Sale Order and Defective Deed (the “Motion”) with the Bankruptcy Court. (See generally ER Ex. B (Docket No. 10-4)). Notice of the Motion was served by email to 104 recipients who had participated in the bankruptcy proceeding, and no oppositions to the Motion were filed. (ER Ex. H at 411 (Docket No. 10-10); ER Ex. I at 420-25 (Docket Nos. 10-11)). The Bankruptcy Court held a hearing on January 12, 2016, and denied the Motion. (ER Ex. F at 399 (Docket No. 10-8)). Appellants then filed a timely Notice of Appeal to this Court on January 22, 2016. (Id. at 389).

         On June 17, 2016, Appellants filed a supplemental brief notifying the Court that XPO Logistics Freight, Inc. has come forward and “asserted that it, and not Appellants, owns one of the parcels of [Hayward] [P]roperty.” (Notice of Disclosure of Newly-Discovered Claims Relevant to Appeal ¶ 4 (Docket No. 15)). Appellants dispute XPO’s claim and contend that XPO owns only a neighboring property to the Hayward Property. (Id.).

         II. DISCUSSION

         Denial of a motion to reopen a bankruptcy case is reviewed for an abuse of discretion. Lopez v. Specialty Res. Corp. (In re Lopez), 283 B.R. 22, 26 (B.A.P. 9th Cir. 2002). To determine whether the Bankruptcy Court abused its discretion, the Court conducts a two-step inquiry: (1) the Court reviews de novo whether the Bankruptcy Court “identified the correct legal rule to apply to the relief requested”; and (2) if it did, the Court considers whether the Bankruptcy Court’s application of the legal standard was illogical, implausible, or “without support in inferences that may be drawn from the facts in the record.” United States v. Hinkson, 585 F.3d 1247, 1261-62 & n.21 (9th Cir. 2009) (en banc).

         “Application to have the estate reopened may be made by an ‘interested party’ who would be benefitted by the reopening.” In re Welch, No. BK 11-18277-LBR, 2015 WL 65307, at *4 (B.A.P. 9th Cir. Jan. 5, 2015) (citation omitted). The Bankruptcy Court’s decision to reopen or not is discretionary and governed by 11 U.S.C. § 350. Id. In exercising this discretion, the Bankruptcy Court may consider numerous factors, including (1) the benefit to creditors, (2) the benefit to debtor, (3) the prejudice to affected parties, (4) the availability of relief in other forums, (5) whether the estate has been fully administered, (6) the length of time between the closing of the case and the motion to reopen, and (7) good faith. See In re Arana, 456 B.R. 161, 172-73 (Bankr. E.D.N.Y. 2011); accord In re Welch, 2015 WL 65307, at *4 (“[A] bankruptcy court may consider a number of nonexclusive factors in determining whether to reopen, including (1) the length of time that the case has been closed; whether the debtor would be ...


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