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In re Clark

United States District Court, E.D. California

July 25, 2016

In re PATRICK AND SUZANNE CLARK, Appellants,
v.
S&J ADVERTISING, INC., Appellee.

          ORDER

          Troy L. Nundey United States District Judge

         This matter is before the Court pursuant to Appellee S&J Advertising’s (hereinafter referred to as “Appellee” or “Corporation”) Motion to Dismiss Appellants Patrick and Suzanne Clark’s (“Appellants” or “Debtors”) Notice of Bankruptcy Appeal.[1] (Appellee’s Mot. to Diss., ECF No. 6.) Appellants oppose the motion. (Appellant’s Opp’n. to Mot. to Diss., ECF No. 7.) For the reasons set forth below, Appellee’s Motion to Dismiss is GRANTED IN PART and DENIED IN PART.

         Appellee also submits a Motion for Reconsideration moving the Court to reconsider its previous Order granting the consolidation of three appeals by the Appellant. (Appellee’s Mot. to Recon., ECF No. 14.) Appellants oppose the motion. (Appellant’s Opp’n. to Mot. to Recon., ECF No. 17.) For the reasons set forth below, Appellee’s Motion to Reconsider is DENIED.

         I. FACTUAL BACKGROUND

         As the Court understands, Appellant Debtors and Appellee Corporation have been involved in bankruptcy proceedings regarding Appellants’ 50% interest in the Appellee Corporation. Appellants filed their Chapter 13 bankruptcy case in February of 2014 and subsequently filed a Certificate of “Election to Wind Up and Dissolve” the Corporation with the California Secretary of State in June of 2014. (ECF No. 6 at 2.) In response to this bankruptcy filing, Appellee Corporation filed a “Petition to Stay the Dissolution and Ascertain the Value of the Dissolving Shareholder’s Shares” as provided under California Corporate Code Section 2000 (hereafter “§2000”) which was granted by the Solano Superior Court. (ECF No. 6 at 2.) The bankruptcy court then issued an Order allowing the parties to continue within its jurisdiction and under §2000 guidelines as ordered by the state court. (ECF No. 6 at 2.) The bankruptcy court approved the Chapter 13 plan to provide for the sale of the Appellants’ 50% interest to Appellee under §2000, with the sale proceeds to fund the plan. (ECF No. 6 at 2.)

         Appellee and Appellants chose their respective appraisers. Together, the two appraisers spent several months investigating and reviewing the case, eventually issuing a detailed 27-page report of the valuation of the Appellants’ shares. (ECF No. 6 at 3.) Appellants presented a sworn valuation of their shares at $42, 250. (Appellee’s Reply, ECF No. 8 at 2.) In contrast, the joint appraisers valued Appellants’ shares at $247, 000. (ECF No. 6 at 3.) Appellee filed a “Motion to Approve Valuations and Transfer” to request that the bankruptcy court approve the joint appraisers’ valuation. In response, Appellants filed 273 pages of opposition. (ECF No. 6 at 3.)

         The bankruptcy court held a hearing on September 9, 2015 at which it stated oral findings regarding Appellee’s “Motion to Approve Valuations and Transfer” as well as the extensive objections made by Appellants. (ECF No. 6 at 3.) Continuing on the same matter on September 11, 2015, the court issued an order sustaining certain objections of Appellants and overruling others. (ECF No. 6 at 3.) The court also set a date for an evidentiary hearing to further address the merits of the Appellants’ objections to the appraisal. (ECF No. 6 at 3.)

         In response to a “Motion to Clarify” filed by Appellee, the bankruptcy court held another hearing on October 20, 2015 to clarify the previous September hearings. At this hearing, the court issued a detailed “Memorandum Decision” determining that the valuation of the Appellants’ shares would be governed by California state law and §2000 guidelines. (ECF No. 14 at 2-3.) Here again, the court set a date for an evidentiary hearing to further address the merits of Appellants’ lengthy objections. (ECF No. 14 at 2-3.)

         In a separate proceeding on February 3, 2016, the bankruptcy court granted Appellee’s “Motion to Convert Debtor’s Chapter 13 Case to Chapter 7.” (ECF No. 14 at 3.) In this order, the bankruptcy court explained that the case was converted, among other reasons, for Appellants’ “intentional disobedience of the court’s orders and deceitful conduct toward the court and creditors for misrepresenting the value of [their] shares.” (ECF No. 14 at 3.)

         II. PROCEDURAL BACKGROUND

         Appellants have moved this Court to appeal three orders issued by the bankruptcy court. Appellants’ First Notice of Appeal, Case No. 2:15-CV-02021 TLN, to this Court was made on September 23, 2015, appealing the bankruptcy court’s September 9th and 11th, 2015 orders. These hearings regarded the court’s findings on Appellee’s “Motion to Approve Valuations and Transfer.” (Appellant’s First Not. of Appeal, ECF No. 1.)

         Appellants then filed their Second Notice of Appeal on October 22, 2015, Case No. 2:15- CV-02228 TLN, again appealing the bankruptcy court’s September hearings in addition to the October 2015 “Memorandum Decision.” (Appellant’s Sec. Not. of Appeal, ECF No. 12.)

         Consequently, Appellee filed a Notice of Related Cases for the two aforementioned appeals on January 7, 2016, stating that “the two cases are related because they are both an appeal of the same bankruptcy court minute order dated September 11, 2015.” (Appellee’s Not. of Rel.’d Cases, ECF No. 5 at 1.) (The First and Second Appeals will hereafter be referred to as the “valuation-related” appeals.)

         In response to these two valuation-related appeals, Appellee filed a Motion to Dismiss on January 8, 2016. (ECF No. 6.) Appellee asserts, and the bankruptcy court agrees, that these first two valuation appeals are interlocutory and therefore not appealable to the District Court.[2] (ECF No. 6 at 5.) Appellants opposed the motion on January 29, 2016, arguing that the appeals were in fact final judgements and thus appealable. (ECF No. 7.) Appellee filed a Reply to the Opposition on February 1, 2016. (ECF No. 8.)

         Subsequently, on February 9, 2016, Appellants filed yet another Notice of Related Cases for a third appeal. The Third Appeal moves this Court to appeal the February 2016 “Conversion Order” issued by the bankruptcy court which converted Appellants’ case from a Chapter 13 to a Chapter 7 plan.[3] (See generally Appellant’s Not. of Rel.’d Cases, ECF No. 10.) This Third Appeal was filed with this Court as case number 2:15-CV-00250. Upon receipt of the second Notice of Related Cases, this Court ...


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