Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-91-04204/USCOURTS-ca10-91-04204-0/pdf.json

Nature of Suit Code: 423
Nature of Suit: Bankruptcy Withdrawal 28 USC 157
Cause of Action: 

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UNITED STATES COURT OF APPEALS F I L 4• .LJ 

United S~tes Court of AppealP 

FOR THE TENTH CIRCUIT "lenth Circuit 

IN RE: BONO DEVELOPMENT, INC. , ) 

) 

Debtor. ) 

) 

) 

) 

CECO CORPORATION, ) 

) 

Plaintiff-Appellee, ) 

) 

v. ) 

) 

UNIFIED CAPITAL CORPORATION; M & J ) 

CONSTRUCTION, INC.; BONO DEVELOPMENT, ) 

INC.; ASSOCIATED TITLE COMPANY; TITLE ) 

INSURANCE AGENCY OF UTAH; CARLSON ) 

CONSTRUCTION, INC.; WATERWORKS ) 

EQUIPMENT COMPANY; O'BRIEN GLASS ) 

PRODUCTS; KAY LANGSTON CONSTRUCTION; ) 

WHEALAN INC., also known as Whealan ) 

Corp.; FORREST'S CONCRETE PUMPING, INC.;) 

ECONOMY BUILDERS SUPPLY; DEE SUPPLY, ) 

INC.; DAN R. FOGLE RED-E-MIX, INC.; ) 

FAMILIAN PIPE AND SUPPLY COMPANY; ) 

SCHOLZEN PRODUCTS, INC.; MIDGLEY-HUBER, ) 

INC.; SWANSON BUILDING MATERIALS, INC.; ) 

KIRK MAYER; ASPEN PERSONNEL CONTRACTORS,) 

INC.; DURA-CRETE INC.; LUND MACHINERY ) 

COMPANY; ANDERSON LUMBER COMPANY; RENT- ) 

IT-CENTER; PIONEER DOOR SALES; BOWMAN & ) 

KEMP STEEL AND SUPPLY COMPANY; DOVER ) 

ELEVATOR COMPANY; D & R OLSEN ) 

ENTERPRISES; INTERWEST NAIL AND STAPLES;) 

R & M CONSULTANTS, INC.; RENTMEISTER ) 

AND COMPANY INC.; PACIFIC COAST ) 

BUILDING PRODUCTS, INC . ; GUARDIAN ) 

SAVINGS & LOAN ASSOCIATION; EMPIRE ) 

STAPLE COMPANY; U.S. TEMPORARIES; ) 

STEVE SALES & SERVICE; CLIFF ROSE ) 

ELECTRIC; JHR DEVELOPMENT, ) 

) 

Defendants-Appellees, ) 

) 

and ) 

) 

APR 2 8 1993 

ROBERT L. HOECKER 

Clerk 

No. 91-4204 

(D.C. No. 89-C-692-G) 

(D. Utah) 

Appellate Case: 91-4204 Document: 010110220217 Date Filed: 04/28/1993 Page: 1 
Appellate Case: 91-4204 Document: 010110220217 Date Filed: 04/28/1993 Page: 2 
THE FIRST NATIONAL BANK OF SHREVEPORT, ) 

) 

Defendant. ) 

) 

) 

) 

BONO DEVELOPMENT CORPORATION; UNIFIED ) 

CAPITAL CORPORATION; STEVEN P. ) 

TETRICK; BONNIE L. TETRICK, ) 

) 

Third-Party-Plaintiffs- ) 

Appellees, ) 

v. ) 

) 

) 

STEVEN TETRICK; JAMES J. KEEFE; ) 

MERCANTILE CAPITAL CORPORATION; ) 

IMPERIAL SECURITIES CORPORATION; ) 

IRA MCCOWAN; DONALDSON, LUFKIN & ) 

JENRETTE; JAMES W. NEWMAN, JR.; ) 

STUBBEMAN, MCRAE, SEALY, LAUGHLIN & ) 

BROWDER; TRAVELERS INSURANCE COMPANY; ) 

MERCANTILE CAPITAL CORPORATION #35; ) 

SOUTHWEST CAPITAL CORPORATION; ) 

JOHN NIKOLS; STEPHEN P. BRUNO; ) 

GARY B. ROUTH; EDWIN M. HIGLEY; ) 

MARK HIGLEY; HAROLD R. STEPHENS, ) 

) 

Third-Party-Defendants- ) 

Appellees, ) 

) 

and ) 

) 

J. KEVIN BIRD, ) 

) 

Trustee. ) 

) 

) 

) 

LYNN JENKINS, ) 

) 

Claimant-Appellant. ) 

ORDER AND JUDGMENT* 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

2 

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Appellate Case: 91-4204 Document: 010110220217 Date Filed: 04/28/1993 Page: 4 
Before 

District 

MOORE and 

Judge. 

BRORBY, Circuit Judges, and VAN BEBBER,** 

**Honorable G. Thomas Van Bebber, District Judge, United States 

District Court for the District of Kansas, sitting by designation. 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App. P. 

34(a); 10th Cir. R. 34.1.9. The case is therefore ordered 

submitted without oral argument. 

Lynn A. Jenkins, "as holder of the stock of BoNo Development 

Inc., and as joinder in M & J Construction Inc.'s cause of action" 

appeals from an order denying Jenkins' motions challenging the 

district court's dismissal order. Defendant First National Bank 

1 of Shreveport, joined by several other appellees, moves to 

dismiss the appeal. We grant the motion. 

BoNo was the developer of the Pioneer Village Estates. M & J 

Construction was the original contractor on the project . 

Following the commencement of actions to foreclose mechanic's 

liens for work done on the property, BoNo filed a Chapter 11 

petition for bankruptcy. The foreclosure actions were removed to 

the bankruptcy court and consolidated as Adversary Proceeding No. 

87PA-0961 in BoNo's bankruptcy case . 

1 Pursuant to the parties' stipulation, and following the 

filing of its motion to dismiss, we dismissed the appeal as t o 

First National Bank of Shreveport. 

3 

Appellate Case: 91-4204 Document: 010110220217 Date Filed: 04/28/1993 Page: 5 
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Numerous cross-claims, counterclaims, and BoNo's third-party 

action alleging fraud and other claims in connection with the 

issuance of municipal bonds to finance the project were filed in 

the adversary proceeding. On July 27, 1989, the district court 

withdrew its reference of the adversary proceeding to the 

bankruptcy court pursuant to 28 U.S.C. § 157 (d). 

The bankruptcy court converted the bankruptcy case into a 

Chapter 7 liquidation proceeding, and a trustee was appointed for 

the estate. The bankruptcy court authorized sale of the Pioneer 

Village Estates. The district court granted the motion of certain 

mechanic's lien claimants to equitably subordinate the claim and 

lien of Unified Capital Corporation

2 to those of the moving lien 

claimants. It later determined the validity and priority of other 

liens, and ordered that they attach to the sale proceeds. It 

further determined that M & J's lien was junior to the other liens 

pursuant to Utah Code Ann. § 38-1 - 103 because M & J was the 

original contractor on the project. The bankruptcy court then 

approved a settlement as to distribution of the sale proceeds. 

On September 28 , 1990, the district court dismissed three 

counts in BoNo's third-party complaint with leave to replead 

certain claims, and provided the trustee until October 22, 1990, 

to file a notice of appearance in the adversary proceeding. On 

November 5 , 1990, the trustee filed a "nonappearance" and moved 

2 Unified is the bailee and custodian of the fund generat ed 

from the sale of the municipal bonds to finance the project. 

3 

Ann. 

lien. 

We assume the district court intended to rel y on Utah Code 

§ 38-1-14, which addresses the priority of a contractor's 

4 

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Appellate Case: 91-4204 Document: 010110220217 Date Filed: 04/28/1993 Page: 8 
for an extension of time to file a notice of appearance, which the 

district court denied without prejudice. On November 13, 1990, 

BoNo filed a second amended third-party complaint. The bankruptcy 

court granted the trustee authority to settle the third-party 

claim. Pursuant to a settlement agreement, the district court 

dismissed BoNo's second amended third-party complaint. 

Jenkins, asserting he was BoNo's sole stockholder and that he 

had in his possession M & J's lien on the Pioneer Village project, 

but who was never made a party to the action, filed a "notice of 

joinder" in BoNo's third-party complaint and M & J's answer, 

counterclaim, and cross-claim, and moved to set aside the 

dismissal order. The district court denied the motions, and 

Jenkins appeals. 

The motions to dismiss assert that Jenkins lacks standing to 

appeal because he was not a party of record in the district court, 

and because he cannot show an actual or threatened injury likely 

to be redressed by a favorable decision by this court. In a 

bankruptcy case, "the right to appellate review is limited to 

'persons aggrieved,' i.e., to those persons whose rights or 

interests are 'directly and adversely affected pecuniarily' by the 

decree or order." Holmes v. Silver Wings Aviation, Inc., 881 F.2d 

939, 940 (10th Cir. 1989). 

Jenkins' ownership of BoNo's stock does not give him standing 

to contest the dismissal of BoNo's third-party complaint. Jenkins 

could not prosecute the third-party action because a shareholder 

lacks standing to redress injuries to the corporation in which he 

holds stock. K-B Trucking Co. v. Riss Int'l Corp., 763 F . 2d 1148, 

5 

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Appellate Case: 91-4204 Document: 010110220217 Date Filed: 04/28/1993 Page: 10 
1154 n.7 (10th Cir. 1985). The third-party action was part of 

BoNo's bankruptcy estate, and the trustee had the right to pursue 

the claims. Amazing Enters. v. Jobin (In re M & L Business Mach . 

~' 136 B.R. 271, 275 (Bankr. D. Colo. 1992). 

Jenkins cites Gollust v. Mendell, 111 S. Ct. 2173, 2179 

(1991), for its holding that an owner of a security has standing 

to sue. Gollust addressed standing under section 16 (b) of the 

Securities Exchange Act, 15 U.S.C. § 78p(b). 111 S. Ct. at 2176. 

As no claim has been brought under this provision, Gollust is 

inapplicable. 4 

Jenkins argues that he falls within the rule of ANR Ltd. Inc. 

v. Chattin, 89 B.R. 898 (Bankr. D. Utah 1988). ANR Ltd. held that 

a claim based on harm primarily to a corporation and only 

incidentally to a credit or is part of the corporation's bankruptcy 

estate, while a claim based on harm that is personal to a creditor 

is not part of the estate. Id. at 902. Although Jenkins is the 

sole shareholder of BoNo, the injury alleged in the third-party 

complaint is to BoNo, not Jenkins. 

Jenkins suggests that the third-party claim is "derivative." 

A derivative action to enforce a right of a corporati on becomes 

property of the estate upon the corporation's filing of a 

bankruptcy petition, and the trustee stands in the debtor's shoes 

in prosecuting the claim. Delgado Oil Co. v. Torres, 785 F.2d 

4 The other case on which Jenkins relies, King Fisher Marine 

Serv. , Inc. v. 21st Phoenix Corp ., 893 F.2d 1155 (10th Cir.), 

cert . denied, 496 U.S. 912 (199 0), is also inapplicable. The 

issue in that case was whe ther settlement of the main claim 

deprives a district court of discretion to retain an a ncillary 

third-party claim over which it had acquired jurisdiction. Id. at 

1172 . It does not address the issue in this appeal . 6 

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857, 861 n.11 {10th Cir. 1986). Thus, if the claim is derivative, 

it became property of the estate, and the trustee stood in BoNo's 

shoes in prosecuting it. 

Jenkins apparently claims the trustee abandoned the thirdparty claim under 11 U.S.C. § 108 (b) (2) by failing to file a 

notice of appearance within the time period set forth in the 

district court's September 28, 1990, order. Section 108{b) 

provides that if nonbankruptcy law, an order entered in a 

nonbankruptcy proceeding, or an agreement fixes the time period 

within which the debtor is required to perform certain acts, and 

the time has not expired before the filing of the petition, the 

trustee may perform t he act within the later of the applicable 

time period or sixty days after the order for relief. This 

section is intended to give the trustee, when he steps into the 

debtor's shoes, an extension of time for taking some action 

required to preserve the debtor's rights. First Nat'l Bank v. 

L.H. & A. Realty Co. (In re L.H. & A. Realty Co.), 57 B.R. 265, 

268 {Bankr. D. Vt. 1986 ) . It does not require the trustee to do 

anything, and if the trustee chooses not to act, he foregoes the 

debtor's option or choice. Id. The trustee did not abandon the 

third-party claim by failing to file a notice of appearance within 

the time ordered. 

Jenkins also c laims standing based on his alleged possession 

of M & J's lien. The only issue he raises that arguably relates 

to any interest of M & J is that the June 24, 1991, dismissal 

order erroneously provided that the equitable subordination order 

was no longer effective, resulting in Unified's interest being 

7 

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granted priority over M & J's interest. It is argued in the 

motion to dismiss that any issue relating to M & J's lien is moot 

because the property to which the lien attached was sold and the 

proceeds distributed. We agree. Pursuant to 11 U.S.C. § 363 (m) , 

this court could not affect the validity of the sale because the 

sale was not stayed pending appeal, and no contention is made that 

t he purchaser did not act in good faith. Jenkins has not 

identified any other way in which a decision by this court c ould 

a ffect his inte rest i n M & J's lie n, and we are not required t o 

make this argument for him. Sil-Fl o . Inc. v. SFHC. Inc., 917 F . 2d 

15 07, 1513 (10th Cir. 1990) .

5 

The appeal is DISMISSED. The mandate shall issue forthwith. 

Entered for the Court 

G. Thomas Van Bebber 

District Judge 

5 In any ev e n t , J enkins is mistaken that t he equi table 

s ubordinati on o rder applied to M & J's lien. The order on l y 

a pplied to t h e mech a nic's lie n c laimants ide ntifie d on p a g e on e o f 

the or d e r. M & J is no t inc lude d in the l ist . 

8 

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