550 B.R. 683
D. Del.2015Background
- Debtors (Appellants) owned fire-damaged mixed-use real property in Delaware encumbered by liens; they filed Chapter 7 on June 27, 2014 and did not claim an exemption for the property.
- Chapter 7 Trustee negotiated an "as-is" sale to creditor Accord for $290,000 after retaining an appraiser (Buckley) valuing the property at $175,000; Trustee advertised the property and solicited bids (no competing bids received).
- Appellants filed a short motion to convert the case to Chapter 13 and objected to the Trustee’s sale and interim fee application for Trustee’s counsel (McCarter & English).
- Bankruptcy Court held hearings, denied conversion, approved the sale (with immediate effectiveness despite Bankruptcy Rule 6004 stay), and approved the fee application; Appellants appealed and moved to stay the orders pending appeal.
- District Court treated fees order as interlocutory (denied leave to appeal) but considered appeals of the Sale and Conversion orders and denied Appellants’ motions to stay those orders.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sale approval under 11 U.S.C. § 363 (business judgment/marketing) | Trustee lacked economic justification, inadequate marketing, no proof of fair price; sale will irreparably harm debtors (loss of residence). | Trustee showed sound business judgment: appraisal, marketing efforts, sale yields full creditor payment and distribution to debtors; delays harm estate and purchaser. | Denied stay; court found Trustee met business-judgment standard, record (declaration + appraisal) supported sale and Appellants failed to show likelihood of success. |
| Right to convert Chapter 7 to Chapter 13 (11 U.S.C. §§ 706, 706(d), 109(e)) | Appellants claimed an absolute right to convert (citing Supreme Court precedent) and alleged they now have income to support Chapter 13. | Right to convert is limited by § 706(d) and eligibility under § 109(e) (must be a Chapter 13 debtor with regular income); Appellants submitted no reliable proof of regular income. | Denied stay; court held conversion is not absolute, Appellants failed to demonstrate likelihood of success or required proof of regular income. |
| Interim fee award to Trustee’s counsel (11 U.S.C. §§ 330, 331) | Fees were excessive, duplicative, conferred no benefit, and possibly motivated by self-interest; payment from estate is irreparable. | Bankruptcy Court reviewed fee application; no evidence contested rates or entries; interim fees can be reviewed later and returned if improper. | Denied leave to appeal interlocutory fee order; court treated fee order as interlocutory and found no controlling legal question warranting immediate appeal. |
| Jurisdiction/finality of orders (appealability) | Appellants appealed all three orders without leave for interlocutory fee order. | Sale and conversion orders are final and appealable; fee order is interlocutory. | Court: Sale and Conversion orders are final and appealable; Fee Order is interlocutory and leave to appeal denied. |
Key Cases Cited
- Marrama v. Citizens Bank of Mass., 549 U.S. 365 (U.S. 2007) (conversion right limited by eligibility and court’s authority to prevent abuse)
- Revel AC, Inc. v. Trustees, 802 F.3d 558 (3d Cir. 2015) (sliding-scale test for stays pending appeal; focus on likelihood of success and irreparable harm)
- Nken v. Holder, 556 U.S. 418 (U.S. 2009) (stay factors and standards referenced by Revel)
- In re Marvel Entm’t Group, Inc., 140 F.3d 463 (3d Cir. 1998) (bankruptcy finality treated flexibly for appealability)
- In re Sax, 796 F.2d 994 (7th Cir. 1986) (orders approving or denying asset sales are final and immediately appealable)