In re: AFY, also known as Ainsworth Feed Yards Company, Inc., Debtor Robert A. Sears; Sears Cattle Co.; Korley B. Sears, Appellants v. U.S. Trustee, U.S. Trustee Joseph H. Badami, Trustee-Appellee Rolling Stone Land & Cattle, LLC, Interested party-Appellee.
No. 11-2282
United States Court of Appeals, Eighth Circuit
October 23, 2013
Rehearing and Rehearing En Banc Denied Jan. 9, 2014
734 F.3d 810
Clayborn‘s other cases are not persuasive. The officers did not disregard “plainly exculpatory” evidence, as occurred in Kuehl where the arresting officer ignored the only witness to the entire altercation even after that witness tried to explain the scene. Kuehl, 173 F.3d at 648-50. The witnesses here did not base their allegations on video the officers themselves had viewed. Baptiste v. J.C. Penney Co., 147 F.3d 1252, 1256-57 (10th Cir.1998). The officers’ suspicion also would not have been dispelled by briefly questioning anyone at the scene. Eubanks v. Lawson, 122 F.3d 639, 642 (8th Cir.1997).
Based on the totality of the circumstances, the officers had arguable probable cause to arrest Clayborn. The officers’ conduct did not show plain incompetence or a knowing violation of the law. The officers are entitled to qualified immunity.
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The judgment of the district court is affirmed.
Monica L. Freeman, argued, Omaha, NE, (Krista L. Kester and James A. Overcash, on the brief, both of Lincoln, NE) for appellee Joseph H. Badami.
Russell Allan Westerhold, on the brief, Omaha, NE, for Rolling Stone Land & Cattle, LLC.
Before RILEY, Chiеf Judge, LOKEN and SHEPHERD, Circuit Judges.
RILEY, Chief Judge.
Robert A. Sears and Korley B. Sears (collectively, the Sears) claim to be the sole shareholders, officers, and directors of AFY, Inc. (AFY), a debtor in bankruptcy, and Sears Cattle Co. (Sears Cattle). On February 9, 2010, AFY and Sears Cattle contracted to sell jointly-owned property, including Tracts 1 and 4,1 at auction. In March 2010, AFY voluntarily filed for bankruptcy under Chapter 11,
On May 14, 2010, the bankruptcy court2 granted Badami‘s motions to assume the
The bankruptcy court also granted Badami‘s motions to pay all of the Tract 4 proceeds to Farm Credit Services of America (Farm Credit), a secured creditor of AFY, (order to pay funds) and to cоnvert AFY‘s Chapter 11 reorganization to a Chapter 7 liquidation,
The Sears and Sears Cattle (collectively, appellants) appeal the district court‘s dismissal of all three appeals and the underlying bankruptcy court orders. Because the district court properly dismissed the appeals, we affirm.
I. BACKGROUND
Robert and Korley claim to be the sole shareholders, officers, and directors of AFY and Sears Cattle. Before bankruptсy, AFY owned and operated a cattle feed yard and raised crops. AFY also owned certain real estate, including Tracts 1 and 4, jointly with Sears Cattle. On May 29, 2008, AFY and Sears Cattle executed a deed of trust on Tract 4 in favor of Farm Credit. On February 9, 2010, AFY and Sears Cattle sold jointly-owned property, including Tract 1 and Tract 4,4 at auction. Rolling Stone Land & Cattle, LLC (Rolling Stone) was the highest bidder for Tract 1 and entered into an agreement to purchase Tract 1 with AFY and Sears Cattle that day. ConsAg bought Tract 4. Though AFY arguably owned a 25% interest in Tract 4, only Sears Cattle executed a purchase agreement with ConsAg.
On March 25, 2010, AFY voluntarily filed for Chapter 11 bankruptcy.5 Badami was appointed trustee for AFY‘s estate on May 6, 2010.
A. Tract 1 Orders
On May 7, 2010, Badami moved the bankruptcy court for the authority to assume the February 9 purchase agreements as executory contracts and sell the underlying property. See
On June 1, 2010, Robert and Sears Cattle appealed the sale order and the enforcement order to the district court. The next day, they moved in the district court to stay the orders pending appeal. The district court denied the stay on June 3, 2010.
On June 17, 2010, the bankruptcy court informed the district court that Badami had reported closing all sales of AFY‘s real estate. On September 15, 2010, the district court dismissed the Tract 1 appeal on the ground that it was moot under
B. Order to Pay Funds and Conversion Order
Badami moved to pay the proceeds from selling Tract 4 to Farm Credit because AFY‘s debt to Farm Credit, secured by Tract 4, exceeded the amount of the proceeds from selling Tract 4. Robert and Korley, “individually and on behalf of Sears Cattle,” objected on the ground that Sears Cattle was entitled to 75% of the proceeds, commensurate with its 75% ownership interest in Tract 4 before the sale. On July 22, 2010, the bankruptcy court granted Badami‘s motion in the order to pay funds.
The notice of appeal to the district court stated “Robert A. Sears and Korley B. Sears, individually and on behalf of Sears Cattle Co., of which they are the sole directors, officers, and shareholders, and the Objectors in the proceedings below” appeal the order to pay funds. The notice then listed “[t]he names of all parties to the contested matter in which the order was entered that is appealed from and the names and addresses of their respective attorneys” as “Korley B. Sears and Robert A. Sears,” Badami, the United States Trustee, and оther individuals and trusts not involved in this appeal. The notice did not list Sears Cattle. The notice was signed by counsel for “Robert A. Sears and Korley B. Sears, Appellants.” Nothing in the signature block indicated any affiliation with Sears Cattle.
On September 2, 2010, the bankruptcy court granted Badami‘s motion to convert AFY‘s Chapter 11 reorganization to a Chapter 7 liquidation, over Robert‘s and Korley‘s objection. Robert and Korley appealed this conversion order to the district court.
On February 14, 2011, the district court entered an order to show cause why the appeals from the order to pay funds and conversion order should not be dismissed for lack of jurisdiction. On May 11, 2011, the district court dismissеd these appeals for lack of jurisdiction because (1) Sears Cattle did not object to the motion to pay funds; (2) if Sears Cattle had objected to the motion to pay funds, Sears Cattle did not appeal the order to pay funds; and (3) Robert and Korley did not have standing
II. DISCUSSION
We review the bankruptcy court‘s findings of fact for clear error and its legal conclusions de novo. Wetzel v. Regions Bank, 649 F.3d 831, 834 (8th Cir.2011). “We review a dismissal for mootness de novo.” Midwest Farmworker Emp. & Training, Inc. v. U.S. Dep‘t of Labor, 200 F.3d 1198, 1201 (8th Cir.2000); accord In re Strong, 138 Fed.Appx. 870 (8th Cir. 2005) (unpublished per curiam) (citing Midwest Farmworker with approval in a bankruptcy case).
A. Tract 1 Appeal
The district court dismissed the Tract 1 appeal as moot under
The reversal or modification on appeal of an authorization under subsection (b) or (c) of this section of a sale or lease of property does not affect the validity of a sale or lease under such authorization to an entity that purchased or leased such property in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale or lease were stayed pending appeal.
“Section 363(m) moots any challenge to an order approving the sale of assets to a good faith purchaser where (1) no party obtained a stay of the sale pending appeal, and (2) reversing or modifying the authorization to sell would affect the validity of thе sale or lease.” In re Polaroid Corp., 611 F.3d 438, 440-41 (8th Cir.2010) (footnote omitted).
Appellants admit that, if
1. Jurisdiction to Determine Mootness
Appellants assert the district court lacked subject matter jurisdiction to find the Tract 1 appeal moot because the bankruptcy court did not have subject matter jurisdiction to enter the sale and enforcement orders. When a lower federal court lacks jurisdiction, the appellate court has “‘jurisdiction on appeal, not on the merits but merely for the purpose of correcting the error of the lower court in entertaining the suit.‘” Steel Co. v. Citizens for a Better Env‘t, 523 U.S. 83, 95, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) (quoting United States v. Corrick, 298 U.S. 435, 440, 56 S.Ct. 829, 80 L.Ed. 1263 (1936)). A court faced with more than one jurisdictional issue may decide these jurisdictional questions in any order. See id. at 100 n. 3, 118 S.Ct. 1003 (discussing cases applying this rule and acknowledging courts may decide “a discretionary jurisdiction question before a nondiscretionary jurisdictional question“); Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 577-78, 119 S.Ct. 1563, 143 L.Ed.2d 760 (1999) (holding a court may decide a personal jurisdiction issue before reaching arguments concerning subject matter jurisdiction). Because “[m]ootness is a jurisdictional question,” North Carolina v. Rice, 404 U.S. 244, 245-46, 92 S.Ct. 402, 30 L.Ed.2d 413 (1971) (per curiam), the district court did not err in disposing of the Tract 1 appeal based on mootness, regardless of whether or not the bankruptcy court had subject matter jurisdiction. See Adkins v. Elggren, 42 Fed.Appx. 252, 254 (10th Cir.2002) (unpublished) (explaining
2. Applicability of § 363(m)
On its face
Appellants cite Weingarten Nostat, Inc. v. Service Merchandise Company, 396 F.3d 737, 743 (6th Cir.2005), and In re Rickel Home Centers, Inc., 209 F.3d 291, 300 (3d Cir.2000), for the proposition that
Appellants alternatively argue
Finally, appellants maintain
Appellants have not alleged fraud, collusion, or “an attempt to take grossly unfair advantage of other bidders.” Id. Appellants, citing In re Willemain, 764 F.2d 1019, 1023 (4th Cir.1985), claim Rolling Stone was not a good faith purchaser because it knew Sears Cattle owned an interest in Tract 1 at the time it signed the purchase agreement and knew of Sears Cattle‘s, Robert‘s, and Korley‘s adverse claims when the sale closed. See In re Willemain, 764 F.2d at 1023 (defining a good faith purchaser as “one who purchases the assets for value, in good faith, and without notice of adverse claims” (quoting In re Rock Indus. Mach. Corp., 572 F.2d at 1197)). Some tension exists between the good faith definitions in Burgess and in Willemain. But we need not choose a definition now because appellants’ argument fails under either definition.
Rolling Stone‘s knowledge, at the time it signed the purchase agreement, of Sears Cattle‘s interest in Tract 1 does not make Rolling Stone‘s actions in bad faith. Any argument it does is rejected because Sears Cattle signed the purchase agreement, in which Sears Cattle agreed to convey its interest in Tract 1 to Rolling Stone.
In addition,
The district court correctly determined
B. Order to Pay Funds Appeal
Appellants claim (1) the district court erred in dismissing the order to pay funds appeal for lack of subject matter jurisdiction; and (2) the bankruptcy court erred in granting Badami‘s order to pay funds. The district court determined it lacked subject matter jurisdiction because (1) Sears Cattle did not object to the motion to pay funds; (2) if Sears Cattle had so objected, it did not appeal the order to pay funds; (3) the Sears did not have standing to appeal the order; and (4) the Sears could not represent Sears Cattle. Because we conclude the district court correctly determined it lacked subject matter jurisdiction to decide the order to pay funds appeal, we need not reach the merits of the bankruptcy court‘s decision.
In dismissing the order to pay funds appeal, the district court first concluded Sears Cattle had not objected to Badami‘s motion to pay funds. The district court reasoned (1) Sears Cattle, as a corporation, could “appear in the federal courts only through licensed counsel,” Rowland v. Cal. Men‘s Colony, Unit II Men‘s Advisory Council, 506 U.S. 194, 201-02, 113 S.Ct. 716, 121 L.Ed.2d 656 (1993); and (2) “the record [did] not establish” that the Sears’ attorney “also entered an appearance on behalf of Sears Cattle Co. at the hearing on [Badami‘s] motion.” The district court then held that even if Sears Cattle had objected to Badami‘s motion to pay funds, it had not appealed the order to pay funds to the district court because the notice of appeal did not “manifest[ ] a clear intent to include Sears Cattle Co. as a party.”
As the district court found, Sears Cattle did not object to the motion to pay funds because no attorney appeared on its behalf in the bankruptcy court. On appeal, appellants’ only reference to this finding of fact is the passing statement that “Robert and Korley, individually and on ‘behalf of Sears Cattle,’ filed an ‘Objection to Motion to Pay Funds.‘” Not only do appellants fail to support this statement with any argument or citation to legal authority, appellants do not even allude to the fact that the district court found otherwise. By failing to argue meaningfully that this finding was erroneous, appellants waived their right to appeal the issue. See In re Reuter, 686 F.3d 511, 515 n. 3 (8th Cir.2012) (explaining that issues not meaningfully raised in the opening brief are waived).
This waiver affects Sears Cattle‘s standing to appeal. “[T]he person aggrieved doctrine[ ] limits standing to persons with a financial stake in the bankruptcy court‘s order,” meaning they were “directly and adversely affected pecuniarily by the order.”10 In re Marlar, 252 B.R. 743, 748 (8th Cir.BAP 2000) (quoting Fidelity Bank, Nat‘l Ass‘n v. M.M. Grp., Inc., 77 F.3d 880, 882 (6th Cir.1996)) (internal quotation marks omitted); see In re Zahn, 526 F.3d 1140, 1142 (8th Cir.2008). “Appellate standing in bankruptcy cases is more limited than Article III standing or the prudential standing requirements associated therewith.” In re Troutman Enters., Inc., 286 F.3d 359, 364 (6th Cir.2002); see also In re Cult Awareness Network, Inc., 151 F.3d 605, 607 (7th Cir.1998) (“Bаnkruptcy standing is narrower than Article III standing.“).
Some circuits considering the issue hold that “[p]rerequisites for being a ‘person aggrieved’ are attendance and objection at a bankruptcy court proceeding.”11 In re Weston, 18 F.3d 860, 864 (10th Cir.1994) (quoting) In re Schultz Mfg. Fabricating Co., 956 F.2d 686, 690 (7th Cir. 1992); accord In re Comm. W. Fin. Corp., 761 F.2d 1329, 1334-35 (9th Cir. 1985); see also In re The Watch Ltd., 257 Fed.Appx. 748, 750 (5th Cir.2007) (unpublished) (referring to “the cogent reasoning employed by the majority of circuits addressing this issue” without deciding the issue). But see In re Urban Broad. Corp., 401 F.3d 236, 244 (4th Cir.2005); Int‘l Trade Admin. v. Rensselaer Polytechnic Instit., 936 F.2d 744, 747-48 (2d Cir.1991). The Fifth Circuit explained “[t]his requirement recognizes the need for economy and efficiency.” In re The Watch Ltd., 257 Fed.Appx. at 750. The Weston approach comports with the “general rule that one who is not a party or has not been treated as a party to a judgment has no right to appeal therefrom.” Karcher v. May, 484 U.S. 72, 77, 108 S.Ct. 388, 98 L.Ed.2d 327 (1987).
We do not pick sides, because appellants’ failure to preserve their appeal of the district court‘s holding that Sears Cattle did not object to the motion to pay funds precludes us from addressing Sears Cattle‘s appeal of the order to pay funds to the district court. We affirm the district court‘s holding that Sears Cattle could not appeal the order.
Appellants claim the district court erred in holding the Sears did not have standing to appeal from the order to pay funds. The notice of appeal to the district court stated the Sears were appealing the order to pay funds “individually and on behalf of Sears Cattle Co., of which they are the sole directors, officers, and shareholders, and the Objectors in the proceedings below.” The district court explained the Sears did not have standing because they were not “persons aggrieved” by the order.
“In the bankruptcy context, courts have relied on the shareholder standing rule in holding that shareholders could not appeal a bankruptcy court decision where they asserted only a derivative interest.” In re Troutman Enters., Inc., 286 F.3d 359, 365 (6th Cir.2002); accord In re Dein Host, Inc., 835 F.2d 402, 405-06 (1st Cir.1987). The shareholder standing rule, which applies to even a sole shareholder, “recognizes that corporations are entities separate from their shareholders in contradistinction with partnerships or other unincorporated associations.” Smith Setzer & Sons, Inc. v. S.C. Procurement Review Panel, 20 F.3d 1311, 1317 (4th Cir.1994); see Potthoff v. Morin, 245 F.3d 710, 716-17 (8th Cir. 2001).
Appellants first assert the Sеars were aggrieved parties because Sears Cattle is an S corporation with flow-through taxation, and selling Tract 4 “generated a substantial personal federal tax liability for Robert and Korley.” See
Appellants next contend the Sears have standing based on Singleton v. Wulff, 428 U.S. 106, 96 S.Ct. 2868, 49 L.Ed.2d 826 (1976). In Singleton, the United States Supreme Court decided a litigant has general prudential standing to assert a legal
Singleton only addresses general prudential standing requirements. See id. at 113-16, 96 S.Ct. 2868. It does not confer appellate standing in the bankruptcy context—which involves a stricter standard. See id.; In re Troutman Enters., Inc., 286 F.3d at 364. The cases cited by appellants are not contrary. Both cases mentioned Singleton only with regard to general prudential standing.12 See In re Troutman Enters., Inc., 286 F.3d at 364; Kane v. Johns-Manville Corp., 843 F.2d 636, 643-44 (2d Cir.1988).
Because the Sears cannot assert a direct interest in the litigation, they lack appellate standing for bankruptcy purposes under the shareholder standing rule. The district court did not err in finding the Sears lacked standing to appeal the order to pay funds.
C. Conversion Order Appeal
1. Badami‘s Standing
Appellants claim Badami lacked standing to file the motion to convert because AFY is a farmer and
The court may not convert a case under [Chapter 11] to a case under chapter 7 of this title if the debtor is a farmer ... unless the debtor requests such conversion.
“Where a statute names the parties granted [the] right to invoke its provisions such parties only may act.” Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 6-7, 120 S.Ct. 1942, 147 L.Ed.2d 1 (2000) (quoting 2A N. Singer, Sutherland on Statutory Construction § 47.23 p. 217 (5th ed. 1992)). The parties agree that AFY, which owned and operated a cattle feed yard and raised crops, is a farmer. See
The Bankruptcy Code defines a debtor as a “person ... concerning which a case under this title has been commenced.”
Reading “debtor” in subsection (c) of
Because AFY was not a debtor-in-possession, Badami had standing to move to convert.
2. The Sears’ Standing
The district court found the Sears lacked standing to appeal from the conversion order because they were not persons aggrieved by the order. Under the shareholder standing rulе, the Sears do not have standing to appeal the conversion order if their only interest in the appeal is derivative of AFY. See, e.g., In re Troutman Enters., Inc., 286 F.3d at 365. Appellants claim the conversion order “directly and adversely affects [the Sears] pecuniarily” because (1) the conversion order changes distributions they might receive from a surplus; (2) AFY is worth less in a Chapter 7 liquidation; (3) Singleton, 428 U.S. 106, 96 S.Ct. 2868, gives them standing; (4) Franchise Tax Board of California v. Alcan Aluminium Ltd., 493 U.S. 331, 336, 110 S.Ct. 661, 107 L.Ed.2d 696 (1990), allows them to base their standing on Badami‘s bad faith; and (5)
a. Effect on Distributions
Appellants contend the conversion order directly affects the Sears pecuniarily because (1) distributions to stockholders are made from different sources, at different times, and in different amounts under Chapters 7 and 11; (2) AFY‘s estate would be solvent if this court reverses, in a separate appeal, the bankruptcy court‘s decision allowing certain claims against AFY‘s estate; and (3) “[w]here the debtor is solvent and there is a surplus for shareholders, the shareholders have standing to appeal from orders affecting the surplus.”
Based on the rule that “shareholders [cannot] appeal a bankruptcy court decision where they assert[ ] only a derivative interest,” In re Troutman Enters., Inc., 286 F.3d at 365; accord In re Dein Host, Inc., 835 F.2d at 405-06, the District Court for the Northern District of Illinois held that the fact bankruptcy litigation could result in a surplus to a corporate debtor does not confer appellate standing on the corporation‘s shareholders, explaining
this surplus would belong to [the corporation] and not to [its] shareholders. [The corporation], through its officers and directors, will decide whether to retain the capital or distribute it to shareholders. The shareholders themselves have no immediate right to the surplus.
In re Cent. Ice Cream Co., 62 B.R. 357, 359-60 (N.D.Ill.1986) (internal citation omitted). We find this reasoning persuasive.
We have held that a debtor may have standing to appeal from an order of the bankruptcy court in certain circumstances. See Kapp v. Naturelle, Inc., 611 F.2d 703, 707 (8th Cir.1979); see also In re El San Juan Hotel, 809 F.2d 151, 155 & n. 6 (1st Cir.1987) (noting that an exception to the “general rule ... that only the trustee has standing to appeal from a bankruptcy court order” is “if a successful appeal by the debtor would create an estate that has assets in excess of liabilities“) (emphasis added). Because AFY is the debtor in this case, these cases do not suggest the Sears have standing to appeal the conversion order.
The Ninth Circuit adopted a more expansive approach. Although In re International Environmental Dynamics, Inc., 718 F.2d 322, 326 (9th Cir.1983), includes broad language that “in a case involving competing claims to a limited fund, a claimant has standing to appeal an order disposing of assets from which the claim
Our review of the relevant case law discloses two cases holding a debtor‘s shareholders had standing to appeal an order of the bankruptcy court. In In re First Colonial Corp. of America, 544 F.2d 1291, 1296-97 (5th Cir.1977), conferred appellate standing on a solvent corporate debtor‘s shareholders to challenge an award of attorney fees to the trustee, who also was acting as the bankruptcy estate‘s attorney. The present case is distinguishable because First Colonial based standing in part on the fact that the trustee there had “a personal financial stake” in the outcome of the same proceeding that was adverse to the debtors. Id. at 1297. Appellants here have not asserted—nor can we discern—that Badami has “a personal financial stake” in whether the disputed claims are allowed. As the Fifth Circuit acknowledged, In re First Colonial Corp. of America was “hardly the usual case.” Id.
The best support for appellants’ argument comes from In re Patriot Co., 311 B.R. 71, 74 (8th Cir.BAP 2004), which extended appellatе standing to the debtor‘s shareholders, reasoning “[i]f a party can show a reasonable possibility of a surplus after satisfying all priority and general unsecured claims, then that party has shown a pecuniary interest and has standing to appeal.”
Under the shareholder standing rule, appellants do not have standing because the interest they assert is indirect and derivative of AFY. Any “surplus would belong to [AFY] and not to [appellants, its] shareholders. [AFY], through its officers and directors, will decide whether to retain the capital or distribute it to shareholders.” In re Cent. Ice Cream Co., 62 B.R. at 359-60 (internal citation omitted). In re Patriot Co. and In re International Environmental Dynamics Inc. and In re First Colonial Corp. of America, to the extent they support appellants’ argument—are unpersuasive outliers. We hold in this case that the possible solvеncy of AFY‘s estate does not give the Sears standing, regardless of the outcome of the appeal involving the claims against AFY‘s estate.
b. Remaining Standing Arguments
Nor are we persuaded by appellants’ remaining arguments for standing. Appellants claim, without reference to any supporting statute or case, the Sears are aggrieved parties because AFY‘s assets are worth less in a Chapter 7 case than in a case under Chapter 11. Because the Sears’ interest in the value of AFY‘s assets derives from their status as shareholders, any injury to that interest is not sufficiently direct to confer standing on the Sears to appeal from the conversion order.
Appellants altеrnatively assert that they have standing because Badami acted in bad faith. See Franchise Tax Bd. of Cal., 493 U.S. at 336, 110 S.Ct. 661 (acknowl
We also reject appellants’ argument for standing based on Singleton, 428 U.S. 106, 96 S.Ct. 2868, for the same reasons we find it unpersuasive with regard to the Sears’ standing to appeal from the order to pay funds.
Finally, appellants assert the Sears have standing, even if they are not aggrieved parties, because
The district court correctly concluded the Sears lacked standing to appeal the conversion order.
III. CONCLUSION
We affirm.13
RILEY
Chief Judge.