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finding debtor's daughter and sister lacked standing to object to a proposed compromise that would settle a state court lawsuit filed by the debtor prior to declaring bankruptcy
Summary of this case from In re Douglas J. Roger, M.D., Inc.Opinion
RULES OF THE BANKRUPTCY APPELLATE PANEL OF THE TENTH CIRCUIT MAY LIMIT CITATION TO UNPUBLISHED OPINIONS.
Submitted Without Oral Argument: February 21, 2008
Appeal from the United States Bankruptcy Court for the District of Arizona. Bk. No. 05-24758. Honorable James M. Marlar, Bankruptcy Judge, Presiding.
WAYNE ENGRAM, Appellant, Pro se, Phoenix, AZ.
MADELINE ENGRAM, Appellant, Pro se, Phoenix, AZ.
SUSIE ENGRAM, Appellant, Pro se, Phoenix, AZ.
S. WILLIAM MANERA, Trustee, Appellee, Pro se, Phoenix, AZ.
For S. WILLIAM MANERA, Trustee, Appellee: Adam B. Nach, Attorney, LANE & NACH, P.C., Phoenix, AZ.
For SAMUEL ENGRAM, JULIA ENGRAM, Appellees: Robert J. Ducomb, Attorney, Phoenix, AZ.
Before: JURY, KLEIN, and PAPPAS, Bankruptcy Judges.
This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have ( see Fed. R. App. P. 32.1) it has no precedential value. See 9th Cir. BAP Rule 8013-1.
This is an appeal of the order approving the compromise of the chapter 7 estate's interest in a multi-party, intra-family state court quiet title action. Specifically, the debtor, his sister, and his daughter (" Appellants") all appeal the bankruptcy court's order approving the trustee's compromise of the estate's portion of the state court lawsuit. It is but one piece of a larger compromise of the entire state court lawsuit, which is presently the subject of a state court appeal.
Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. § § 101-1330, and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037, as enacted and promulgated prior to the effective date of The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, 119 Stat. 23, because the case from which this appeal arises was filed before its effective date (generally October 17, 2005).
Perceiving no abuse of discretion in the bankruptcy court's approval of the bankruptcy trustee's portion of the compromise, we AFFIRM.
I. FACTS
Lloyd Engram, debtor's father, who died in 2004, owned real property located in Phoenix, Arizona. At some point in time, Samuel Engram, Lloyd Engram's nephew, either claimed title or had acquired title to the property through a tax foreclosure.
On September 2, 2005, the debtor, Wayne Engram, and his sister Madeline Engram, with the assistance of counsel, Barry Becker (" Becker"), commenced a lawsuit against Samuel and Julia Engram (" the Sam Engrams") in Maricopa County, Arizona, Superior Court, Case No. CV2005-0139566 to quiet title to the property. The Sam Engrams filed a third-party complaint against Susie Engram, who is the debtor's daughter, and Sheila Gossett.
A. Debtor's Bankruptcy Filing
Debtor filed his chapter 13 case on October 14, 2005, which case was converted to chapter 7 on April 28, 2006. Appellee S. William Manera is the chapter 7 trustee.
Although the lawsuit No. CV2005-0139566 had been filed only six weeks before the bankruptcy case filing, debtor omitted that action from his schedules of assets and liabilities and did not claim it as exempt. He revealed it in his Statement of Financial Affairs where he described it as " inactive."
On August 2, 2006, the bankruptcy court authorized the trustee to employ general counsel. On November 13, 2006, the bankruptcy court authorized the trustee to hire Becker, Debtor's state court counsel, as special counsel to represent the estate's interest in the state court lawsuit. Debtor did not object to Becker's employment.
Debtor received his chapter 7 discharge on August 30, 2006.
B. Settlement of the State Court Lawsuit
On November 10, 2006, a settlement conference in the state court litigation occurred. The trustee, his general counsel, Becker, debtor, the Sam Engrams, and their counsel Robert J. DuComb attended.
The parties present entered into a " global" settlement that was reduced to writing in apparent compliance with Ariz. R. Civ. P. 80(d). The settlement provided that the Sam Engrams would pay the estate $ 5, 000, with approximately $ 250 going towards a lien held against debtor. The Sam Engrams were also required to pay $ 3, 500 to a savings account for Madeline, and the parties' counsel were to work towards a mutually accepted settlement release and agreement. Lastly, the settlement was subject to the bankruptcy court's approval of terms applicable to the trustee.
The Arizona rule provides: " No agreement or consent between parties or attorneys in any matter is binding if disputed, unless it is in writing, or made orally in open court, and entered in the minutes."
Debtor agreed to the terms and signed the agreement on behalf of himself and Madeline, representing that he had authority to sign on her behalf. Becker also signed the settlement as state court counsel for debtor, Madeline, Susie and Sheila Gossett. Madeline, Susie and Sheila Gossett were not present at the settlement conference nor did they sign the settlement agreement individually.
C. Approval of the Compromise Pursuant to Rule 9019
On December 5, 2006, the trustee sought the bankruptcy court's approval of the settlement by filing a " Stipulated Application to Compromise Claim and Compensate Special Counsel." Madeline objected to the compromise, contending that she was not advised of the settlement hearing and her father, Lloyd, wanted her and her two brothers and niece (Susie) to have the property. Susie objected on the grounds that she did not know about the settlement conference, she was an interest holder in the property, and her grandfather, Lloyd, wanted her to have an interest in the property. Debtor also filed an objection to the stipulation, asserting for the first time that the state court lawsuit was not property of the estate.
On January 18, 2007, the bankruptcy court heard the matter. After the hearing, the bankruptcy court filed its Memorandum Decision on January 19, 2007, and entered an order on the same date overruling Appellants' objections. The bankruptcy court found that neither Madeline nor Susie were creditors and, therefore, they lacked standing to object to the compromise. The bankruptcy court also found the state court lawsuit was property of the estate and ruled the compromise fair and equitable.
The bankruptcy court entered a separate order on January 22, 2007, approving the stipulation, directing payment of the settlement sum, and authorizing the trustee to enforce the settlement terms, execute documents related to the settlement and compensate Becker as special counsel.
Appellants timely appealed.
II. JURISDICTION
The bankruptcy court had subject matter jurisdiction pursuant to 28 U.S.C. § § 1334 over this core proceeding under 157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.
III. ISSUES
Although the pro se Appellants' brief appears to state a large number of issues, they boil down to the three that we here restate.
A. Whether Madeline Engram and Susie Engram had standing to object to the compromise.
B. Whether debtor's interest in the state court lawsuit was property of the estate under § 541(a).
C. Whether the bankruptcy court abused its discretion in approving the compromise.
IV. STANDARDS OF REVIEW
We review the bankruptcy court's determination of standing de novo. Brown v. Sobczak (In re Sobczak), 369 B.R. 512, 516 (9th Cir. BAP 2007) citing Arakaki v. Lingle, 477 F.3d 1048, 1056 (9th Cir. 2007).
Whether property is included in a bankruptcy estate is a question of law subject to de novo review. Gaughan v. Smith (In re Smith), 342 B.R. 801, 805 (9th Cir. BAP 2006).
We review a bankruptcy court's order approving a trustee's application to compromise a controversy for abuse of discretion. Martin v. Kane (In re A & C Props.), 784 F.2d 1377, 1380 (9th Cir. 1986).
V. DISCUSSION
A. Madeline Engram and Susie Engram Lacked Standing to Object to the Compromise
The bankruptcy court correctly ruled that Madeline and Susie lacked standing. It noted that they were not creditors; they were not scheduled as such, nor, not having filed proofs of claim, did they contend that they were creditors.
Only persons who are directly or adversely affected pecuniarily by the compromise have standing to object. Fondiller v. Robertson (In re Fondiller), 707 F.2d 441, 442 (9th Cir. 1983). The bankruptcy court's approval of the compromise between the trustee, who represented the estate's interests, and the Sam Engrams did not have any adverse effect on Madeline or Susie. The matters Madeline and Susie present in their objections to the compromise appear to relate to whether the " global" settlement of the state court litigation is effective as to them. As they are parties in that lawsuit and have appealed the Arizona judgment enforcing that settlement, whatever rights they may have in the property, or issues relating to the enforceability of the underlying settlement signed in apparent compliance with Ariz. R. Civ. P. 80(d), are appropriately addressed in the state court.
Although Fondiller sets forth the " aggrieved person" test, which limits bankruptcy appeals to those persons whose rights or interests are directly and adversely affected pecuniarily, Madeline's and Susie's standing to object to the compromise would also not pass muster under the broader standing principles applicable to parties in interest at the trial level. See Sobczak, 369 B.R. at 517-18 (noting that a party in interest may be one who has actual pecuniary interest in the case, one who has a practical stake in the outcome of the case, or one who will be impacted in any significant way in the case).
On February 20, 2007, the state court entered a judgment enforcing the settlement.
B. Debtor's Interest in the State Court Lawsuit Was Property of the Estate
When debtor filed his bankruptcy petition, all the " legal or equitable interests" he had in property became property of the bankruptcy estate and were represented by the bankruptcy trustee. § 541(a). " Causes of action are among such legal or equitable interests." Turner v. Cook, 362 F.3d 1219, 1226 (9 nth Cir. 2004). All causes of action embodied in the lawsuit that the debtor filed six weeks before his bankruptcy petition qualify as such " legal or equitable interests." Accordingly, the bankruptcy court correctly ruled that debtor's interest in the state court lawsuit was estate property.
C. The Compromise Was Fair and Equitable
The approval of a compromise involves application of a four factor test: (a) the probability of success in the litigation; (b) the difficulties, if any, to be encountered in the matter of collection; (c) the complexity of the litigation involved, and the expenses, inconvenience and delay necessarily attending it; and (d) the paramount interest of the creditors and a proper deference to their reasonable views in the premises. Fireman's Fund Ins. Co. v. Woodson (In re Woodson), 839 F.2d 610, 620 (9th Cir. 1988); A& C Props., 784 F.2d at 1381.
Although the bankruptcy court's ruling approving the compromise was not accompanied by a slavish reiteration of the four factors set forth in A& C Props., we may affirm the bankruptcy court if the record supports approval of the compromise. Id. at 1383. The record establishes that the bankruptcy court did apply the requisite factors for determining whether to approve a proposed compromise. First, the motion to approve the compromise actually articulated the A& C Props./Woodson factors. Stipulated Motion to Approve Compromise of Claim with Samuel and Julian Engram (12/5/06) at 4. Second, in its Memorandum Decision explaining its ruling approving the compromise, the bankruptcy court noted that " the trustee satisfied the Ninth Circuit's standards, as set forth in In re Woodson ." Mem. Decision (1/19/07) at 1-2. It is, thus, apparent that the court considered and applied the requisite factors when approving the compromise.
It is also significant that Appellants have neither contended nor argued that the bankruptcy court applied an incorrect legal standard when assessing the compromise as fair and equitable. Nonjurisdictional issues not raised and argued by an appellant are deemed waived. United States v. Montoya, 45 F.3d 1286, 1300 (9th Cir. 1995); Law Offices of Neil Vincent Wake v. Sedona Inst. (In re Sedona Inst.), 220 B.R. 74, 76 (9th Cir. BAP 1998).
In sum, after close analysis of the record as a whole we are persuaded that the compromise is fair and equitable and conclude that the bankruptcy court did not abuse its discretion in approving it.
D. Attorneys' Fees And Expenses
The Sam Engrams request their attorneys' fees and expenses against the Appellants in connection with this appeal pursuant to Ariz. Rev. Stat. § 12-341.01. They contend that this appeal arises out of the settlement agreement reached in the state court lawsuit, which is a signed contract.
The statute relied upon provides that in any contested action arising out of a contract, express or implied, the court may award the successful party reasonable attorneys' fees. This appeal, however, involves an appeal of the bankruptcy court's order approving a compromise of the estate's interest in the state court lawsuit under Rule 9019 and not the judgment enforcing the underlying settlement agreement pursuant to Ariz. R. Civ. P. 80(d). Therefore, the Sam Engrams are not entitled to their attorneys' fees in this appeal pursuant to the statute cited. Whether they will be entitled to fees in connection with the state court appeal is left to the appellate court in that matter.
VI. CONCLUSION
For the reasons set forth herein, we AFFIRM.