292 B.R. 188 | D. Neb. | 2003
MEMORANDUM AND ORDER
As directed by the court in its previous memorandum and order (filing 4), the appellant, Farmers State Bank of Nebraska (“FSB”), has filed a motion for leave to appeal (filing 7), together with a supporting brief (filing 8).
I find that the bankruptcy court has not issued a certification under Bankruptcy Rule 7054 (or Fed.R.Civ.P. 54(b)) which would permit this appeal to be heard under 28 U.S.C. § 158(a)(1), and also find that there has been no showing by FSB that the bankruptcy court’s orders involve a controlling question of law for which a discretionary appeal may be allowed under 28 U.S.C. § 158(a)(3). Consequently, FSB’s motion will be denied and the appeal will be dismissed for lack of jurisdiction.
I. Background
The debtor in bankruptcy, BTR Partnership (“BTR”), is an Iowa partnership that is engaged in the business of buying, raising, and selling livestock. Financing for its operations was provided by a series of loans from State Savings Bank (“State Savings”), one of which is subject to a participation interest that was purchased by Citizens Bank. FSB loaned money to Timothy and Carolyn Shirley (“the Shir-leys”), which allegedly was used to purchase cattle on behalf of BTR.
FSB initiated an adversary proceeding against State Savings, Citizens Bank, and BTR for the purpose of determining that it has a purchase money security interest in the BTR cattle, or in their sale proceeds, which has priority over any security interest that is held by the other financial institutions. State Savings and Citizens Bank counterclaimed for a determination that FSB does not have a security interest in the BTR cattle, and they also filed a third-party complaint for a determination that the Shirleys have no ownership interest in the BTR cattle. The Trustee was permitted to intervene in the adversary proceeding and to file a third-party complaint against all the other parties in which it is alleged, among other things, that a preferential transfer occurred when some BTR cattle were sold before the bankruptcy and the proceeds were applied by FSB to the Shirleys’ loan. Citizens Bank was then permitted to file an amended counterclaim against FSB to allege that such payment instead amounted to a wrongful conversion of collateral securing the State Savings loans.
FSB filed a motion for summary judgment (bankruptcy court filing 17) on its adversary complaint. State Savings and
On January 30, 2003, the bankruptcy court entered a “memorandum” (bankruptcy court filing 101) and a “judgment” (bankruptcy court filing 102). The judgment specifically denied FSB’s motion for summary judgment (bankruptcy court filing 17), granted the cross-motions of State Savings and Citizens Bank (bankruptcy court filings 30, 34), granted “in part” the Trustee’s motion for summary judgment on its third-party complaint (bankruptcy court filing 51), and denied the banks’ motion for summary judgment on the third-party complaint against the Shirleys (bankruptcy court filing 57). The judgment further states:
Farmers State Bank has no security interest in the cattle or the proceeds thereof which are the subject matter of this adversary proceeding. Judgment is hereby entered against Farmers State Bank and in favor of State Savings Bank and Citizens Bank on this issue. The preference issues raised by the trustee are not ruled on and are preserved for further development at trial.
See Order entered this date.
(Bankruptcy court filing 102, at 2.) The bankruptcy court’s memorandum, which presumably is the “order” that is referenced in the judgment, also indicates that no ruling was being made on the conversion claim that was asserted by Citizens Bank in its amended counterclaim (filed several months after its cross-motion for summary judgment). Thus, the bankruptcy court stated:
There remain issues among all of the parties concerning the amount of the payments to Farmers State Bank from proceeds of cattle which were subject to the lien of State Savings Bank; whether State Savings Bank knew of the payments by BTR Partnership to Farmers State Bank from the proceeds of the cattle, acquiesced in or consented to such payment; whether, if there was no knowledge nor consent, there is a statute of limitations bar to recovery under a conversion theory or some or all of the payments; whether some payments made to Farmers State Bank were made by Timothy and Carolyn Shirley from their own funds, and if so, to what extent; and whether, as between State Savings Bank and the trustee, the lien rights and conversion claim held by State Savings Bank take priority over the preference avoidance rights of the trustee in bankruptcy. For these, and perhaps other reasons, summary judgment shall not be entered on the preference/conversion portion of this adversary proceeding.
(Bankruptcy court filing 101, at 12-13.) The memorandum does not discuss why the bankruptcy court denied summary judgment on the third-party complaint that was filed against the Shirleys (who deny having any ownership interest in the cattle).
FSB argues that the bankruptcy court’s memorandum and judgment are final, ap-pealable orders, or, if not, that an interlocutory appeal should be allowed because a reversal would eliminate any need for the bankruptcy court to proceed to trial on the “conversion” or “preference” claims that are being made against FSB in Citizens Bank’s amended counterclaim and the Trustee’s third-party complaint. The
II. Discussion
The district courts have jurisdiction under 28 U.S.C. § 158(a)(1) to hear appeals “from final judgments, orders, and decrees” of bankruptcy judges. Finality for bankruptcy purposes is a complex subject, see In re Popkin & Stern, 289 F.Bd 554, 556 (8th Cir.2002),
When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim, or when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment. In the absence of such determination and direction, any order or other form of decision, however designated, which adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties shall not terminate the action as to any of the claims or parties, and the order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties.
Although the bankruptcy judge’s “memorandum” (bankruptcy court filing 101) concluded with the statement that “tjjudgment will be entered against Farmers State Bank and in favor of State Savings Bank and Citizens Bank on this issue [of whether FSB has a security in the cattle or proceeds],” and a separate “judgment” (bankruptcy court filing 102) was, in fact, entered, in neither of these filings did the bankruptcy judge make “an express determination that there is no just reason for delay.” In the absence of such a determination, the “memorandum” and “judgment” are not final, appealable orders.
The Eighth Circuit has not had occasion to consider whether Rule 54(b)’s stringent jurisdictional requirements might be relaxed when a district court is asked to review a bankruptcy court’s partial disposition of an adversary proceeding under 28 U.S.C. § 158(a)(1) (or, for that matter, when a subsequent review by the Court of Appeals is sought under 28 U.S.C. § 158(d)), but several other circuits have held that Rule 54(b) certification, including an express determination of no just reason for delay and an express direction for entry of judgment, is a jurisdictional requirement. See In re Boca Arena, Inc., 184 F.3d 1285, 1286-87 (11th Cir.1999) (“[A]c-cording to a plain reading of the Bankruptcy Rules, a bankruptcy order that disposes of fewer than all claims or parties in an adversary proceeding is not immediately appealable unless the bankruptcy judge certifies the order for immediate review pursuant to Bankruptcy Rule 7054, which incorporates Fed.R.Civ.P. 54(b).”); In re Millers Cove Energy Co., Inc., 128 F.3d 449, 450-52 (6th Cir.1997) (strict application of Rule 54(b) is appropriate given that adversary proceedings can be viewed as “stand-alone lawsuits”); In re Harrington, 992 F.2d 3, 6 n. 3 (1st Cir.1993) (“Just as an appeal in a civil action normally may not be taken under section 1291 until all claims of all parties to the action have been finally resolved, see Fed.R.Civ.P. 54(b), so too must some special justification be shown for departing from the finality rule relating to adversary proceedings .... ”); In re Chateaugay Corp., 922 F.2d 86, 90-91 (2nd Cir.1990) (no jurisdiction to hear appeal from orders granting partial summary judgment in adversary proceeding where parties did not petition bankruptcy court for determination and direction under Rule 54(b)); In re Durability, Inc., 893 F.2d 264, 265-66 (10th Cir.1990) (jurisdictional inquiry focuses on dispositional status of matters comprising the adversary proceeding; interlocutory order granting partial summary judgment not appealable absent certification); In re Wood and Locker, Inc., 868 F.2d 139, 142-45 (5th Cir.1989) (“[G]iven the clear mandate of Bankruptcy Rule 7054, no appeal may be taken from a bankruptcy court order that adjudicates fewer than all of the claims or the rights and liabilities of fewer than all
The record in this case does not contain a clear indication that the bankruptcy judge intended his denial of FSB’s motion for summary judgment, or his granting of the cross-motions for summary judgment filed by State Savings and Citizens Bank, or his partial granting of the Trustee’s motion for summary judgment, to be subject to immediate review. He did not make an express determination that there was no just reason for delay in entering judgment finally deciding that FSB has no security interest in the cattle, nor does it appear that he engaged in any Rule 54(b) analysis before entering the “judgment.” As a matter of law, therefore, the bankruptcy judge’s decision regarding FSB’s claimed security interest will remain subject to revision until the adversary proceeding is concluded in its entirety.
Although FSB argues that the district court should exercise its discretionary authority under 28 U.S.C. § 158(a)(3) to hear the appeal in “the interests of saving the parties time and additional expense plus judicial economy” (filing 17, at 4), these are considerations that should be addressed by the bankruptcy court in the first instance where Rule 54(b) applies. Thus, in a case such as this, it is particularly appropriate to adopt the approach that typically has been used by the Eighth Circuit Bankruptcy Appellate Panel in deciding whether to grant a motion for leave to appeal, that is, to apply the standards found in 28 U.S.C. § 1292(b) for certification of interlocutory orders for appeal.
FSB’s motion for leave to appeal does not contain a statement of the questions to be presented by the appeal, as required by Bankruptcy Rule 8003(a), nor does the record on appeal contain such a statement, as required by Bankruptcy Rule 8006. FSB’s briefs merely indicate that the appeal will involve whether it has a perfected purchase money security interest, which, as demonstrated by the bankruptcy court’s memorandum opinion, is a fact-intensive inquiry. Because there has
Accordingly,
IT IS ORDERED that:
1. Plaintiffs motion for leave to appeal (filing 7) is denied;
2. Plaintiffs appeal is dismissed for lack of jurisdiction; and
3. Judgment shall be entered by separate document.
. The court’s previous memorandum and order was entered pursuant to Bankruptcy Rule 8003(c).
. FSB has also filed a reply brief (filing 17), which has been considered despite FSB's failure to obtain leave of court prior to its filing. See NELR 7.1(c) ("No reply brief or evidence shall be permitted, except upon order of the court.”).
.The Eighth Circuit has adopted a three-factor test to determine whether a bankruptcy court order is final for purposes of 28 U.S.C. § 158(d), considering "the extent to which (1) the order leaves the bankruptcy court nothing to do but execute the order, (2) delay in obtaining review would prevent the aggrieved party from obtaining effective relief, and (3) a later reversal on that issue would require recommencement of the entire proceeding." First National Bank v. Allen, 118 F.3d 1289, 1293 (8th Cir.1997). The Eighth Circuit Bankruptcy Appellate Panel has also applied this test for determining finality under 28 U.S.C. § 158(a)(1). See, e.g., In re Coleman Enterprises, Inc., 275 B.R. 533, 538 (8th Cir. BAP 2002).
. The lack of certification under Rule 54(b) was specifically cited in the court’s previous memorandum and order (filing 4) as a reason for requiring FSB to file a motion for leave to appeal. Despite receiving this notice, neither FSB nor the Trustee have briefed the Rule 54(b) certification issue.
. The function of the trial court under Rule 54(b) is to act as a "dispatcher” by determining the "appropriate time" when each final decision in a multiple claims action is ready for appeal, considering both the equities of the situation and "judicial administrative interests,” particularly the interest in preventing piecemeal appeals. See Curtiss-Wright Corp. v. General Electric Co., 446 U.S. 1, 8,
. While most courts look to § 1292(b) for guidance when considering motions for leave to appeal under § 158(a)(3), a few courts have criticized this approach. See, e.g., In re Hayes Bankruptcy, 220 B.R. 57, 59 (N.D.Iowa 1998) (observing that nothing in the text of § 158(a)(3) indicates a limit on the district court’s discretion, and that since the bankruptcy court is a "unit of the district court” under 28 U.S.C. § 151, the district court may review decisions of the bankruptcy court as freely as it may review its own decisions). I have previously aligned myself with the majority position. See Matter of Zech, 185 B.R. 334, 336-37 (D.Neb.1995) (also stating that interlocutory appeals in bankruptcy are not favored).