Church Joint Venture, L.P. v. Blasingame (In re Blasingame)
585 B.R. 850
6th Cir. BAP2018Background
- Debtors filed Chapter 7; Trustee and Church Joint Venture, L.P. (Creditor) filed a 2009 adversary complaint seeking (inter alia) to treat assets of non-debtor entities (including The Blasingame Family Business Investment Trust, "BIT") as estate property.
- In 2011 Trustee sold to Creditor for consideration “all claims and/or causes of action asserted by Trustee in the Adversary Action, except those relating to the Debtors’ discharge,” via a § 363 Sale Order listing illustrative theories (alter-ego, reverse-piercing, § 544(b)) and using “including but not limited to.”
- After the sale the Trustee’s non-discharge claims were dismissed from the 2009 action for lack of jurisdiction; Creditor thereafter litigated similar claims in district court and lost on the merits as to reverse-piercing.
- In 2017 Creditor (on behalf of Trustee via a later derivative-standing order) filed a new adversary complaint in bankruptcy court seeking a declaration that the BIT is a self-settled trust and turnover of its assets to the estate.
- Defendants moved to dismiss under Rule 12(b)(1), arguing Trustee had assigned away the claims and thus Creditor could not pursue them derivatively; the bankruptcy court interpreted the Sale Order to include the 2017 theories and dismissed for lack of standing.
- The BAP affirmed, applying abuse-of-discretion review to the bankruptcy court’s interpretation of its own sale order and de novo review to the standing dismissal legal issue.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper standard of review for a bankruptcy court’s interpretation of its § 363 Sale Order | Sale Order is like a consent/agreement or raises pure legal questions; interpretation should be reviewed de novo | Court’s interpretation of its own prior order deserves deference; review for abuse of discretion | Abuse of discretion applies (court best positioned to construe its own sale order) |
| Whether the Sale Order transferred claims that the BIT is a self-settled trust (scope of sale) | Sale covered only claims "which have been asserted by Trustee" in 2009 Complaint and did not include a standalone self-settled trust claim | Sale transferred all non-discharge-related claims in the 2009 Complaint; phrase "including but not limited to" shows breadth | Sale Order unambiguously conveyed all non-discharge claims alleged in 2009 Complaint, including self-settled-trust theory; no abuse of discretion in that construction |
| Whether extrinsic materials (prior hearing remarks; grant of derivative standing) can alter Sale Order scope | Extrinsic evidence and prior court statements show the Sale Order was narrower; grant of derivative standing implies claims remained with Trustee | Sale Order is not a contract; extrinsic evidence (bench remarks, later ministerial standing order) is inapt and does not change the plain order | Extrinsic evidence unpersuasive; bench remarks concerned different claims; derivative-standing approval was ministerial and doesn’t undermine Sale Order interpretation |
| Whether Creditor could pursue the claims derivatively after Trustee sold them (standing/subject-matter jurisdiction) | Creditor contends Trustee never sold the specific self-settled-trust claim and thus derivative standing was proper | Trustee assigned away the non-discharge claims; one cannot press another’s rights derivatively once assignor transferred them | Dismissal affirmed: Trustee lacked the underlying right after assignment, so Creditor could not pursue those claims derivatively; dismissal for lack of standing proper |
Key Cases Cited
- Winget v. JP Morgan Chase Bank, N.A., 537 F.3d 565 (6th Cir.) (court need not accept nonmovant's legal conclusions; interpretation of sale orders treated as legal question in that context)
- Brady v. McAllister, 101 F.3d 1165 (6th Cir.) (district court’s interpretation of its own extension order entitled to deference)
- Terex Corp. v. Metropolitan Life Ins. Co., 984 F.2d 170 (6th Cir.) (distinguishes legal conclusions from equitable interpretations of court’s own orders; deferential review appropriate)
- Travelers Indem. Co. v. Bailey, 557 U.S. 137 (Sup. Ct.) (a court’s interpretation of its own confirmation or similar orders is entitled to substantial deference)
- Wilkins v. Jakeway, 183 F.3d 528 (6th Cir.) (doctrine against claim-splitting; join all claims from same facts)
- Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (Sup. Ct.) (litigant must assert its own legal rights; standing limits)