483 B.R. 363
1st Cir. BAP2012Background
- Forma-tec filed a voluntary Chapter 11 petition in August 2011 and sought to surcharge creditors' collateral under §506(c) for counsel fees related to a proposed sale.
- EquiNet was identified as the purchaser for Forma-tech’s assets; Canaimex bid $690,000 and Canaimex later provided a non-certified $65,000 deposit.
- Auction occurred January 5, 2012; Canaimex won with $1,070,000 bid; Canaimex later defaulted and backup bidders, including EquipNet, closed.
- A February 2, 2012 hearing addressed the surcharge motion and a court-ordered supplement to detail time and the non-certified deposit; same date marks conversion to Chapter 7.
- March 7, 2012, the bankruptcy court denied the surcharge; the court held Forma-tech’s acceptance of a non-certified foreign check was improper and that any benefit to Sovereign was outweighed by losses.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to appeal | Forma-tech had standing as DIP seeking surcharge relief. | Post-conversion, the trustee controls appeal rights and Forma-tech lacks standing. | Dismissed for lack of standing. |
| Person aggrieved status | Forma-tech's counsel was aggrieved and the appeal should be allowed. | Only the trustee may pursue a §506(c) surcharge appeal; Formatech is not aggrieved. | Forma-tech is not a person aggrieved; no standing. |
Key Cases Cited
- In re Beker Indus. Corp., 89 B.R. 336 (S.D.N.Y. 1988) (standing and finality in §506(c) surcharge)
- In re Great Northern Paper, Inc., 299 B.R. 1 (D.Me. 2003) (trustee stands in for debtor in possession after conversion)
- In re Murphy, 288 B.R. 1 (D.Me. 2002) (pecuniary interest required for standing)
- In re Kehoe, 221 B.R. 285 (1st Cir. BAP 1998) (aggrieved party and standing concepts in bankruptcy appeals)
- In re El San Juan Hotel, 809 F.2d 151 (1st Cir. 1987) (standing and scope of appellate review in bankruptcy)
- In re Richman, 104 F.3d 654 (4th Cir. 1997) (trustee as appeal representative post-conversion)
- Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1 (2000) (limits of standing and party in interest)