Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_06-cv-02860/USCOURTS-azd-2_06-cv-02860-1/pdf.json

Nature of Suit Code: 423
Nature of Suit: Bankruptcy Withdrawal 28 USC 157
Cause of Action: 28:0157 Motion for Withdrawal of Reference

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

In re Lonny and Lisa Draper, 

Debtors., 

Lonny and Lisa Draper,

Petitioners,

vs.

Roger W. Brown, Trustee, 

Respondent. 

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No. CV 06-2860-PHX-DGC

ORDER

Petitioners have filed motions to “Reopen Further Proceedings Regarding the Court’s

February 20, 2007 Order” (Dkt. #15) and to “Limit Entry Into Homestead to Confirmed

Purchaser of That Property” (Dkt. #11). The Court has reviewed the memoranda submitted

by the parties. Dkt. ##11, 13, 15. The Court will grant Petitioners’ motion to reopen further

proceedings. For the reasons set forth below, the Court will deny Petitioners’ motion to limit

entry into their homestead. 

I. Background.

After the first auction involving this property, Respondent sought permission from the

Court to allow the high bidder and an agent for the estate to conduct a walk-through

inspection of the property. The Court granted Respondent’s motion and rejected Petitioners’

arguments that allowing a walk-through inspection would violate Petitioners’ Fourth

Amendment rights or constitute a taking without due process of law. Dkt. #9. The Court did

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not decide whether to permit open-house viewings of the property prior to the auction.

Although the Bankruptcy Court had previously allowed open-house viewings for prospective

buyers, Respondent decided only to seek permission for a post-auction viewing by the

winning bidder, whose deposit would be returned if the sale did not become final.

After conducting an inspection of the house, the winning bidder decided not to

purchase the property. Contingent upon Bankruptcy Court approval, Respondent has

scheduled another auction on April 21, 2007, preceded by open-house viewings by

prospective bidders on April 14, 2007, between the hours of 12:00 p.m. and 4:00 p.m.

Petitioners have asked the Court not to allow the pre-sale open-house viewings, but rather

to limit entry into their home to the high bidder on the property.

II. Discussion.

Petitioners concede that the Court reasonably decided to allow the previous high

bidder to conduct a walk-through inspection of their home. Dkt. #11 at 2-3. They propose

that the Court permit future inspections only by a high bidder who agrees to forfeit his

deposit of 10% of the purchase price if he does not close the sale of the property for reasons

other than waste to the property. Id. at 4-5. Petitioners contend that Respondent can provide

potential bidders information on the property based on the previous walk-through. Id. 

Respondent argues that it has attempted to sell the property with minimal intrusion on

Petitioners, but that “[i]t is unreasonable in this market to assume that a final sale can be

consummated without a walk-through inspection by a purchaser.” Dkt. #13 at 2. The Court

agrees that Respondent has attempted to sell the property in the least disruptive manner.

Although the Bankruptcy Court permitted open-house viewings before the first sale,

Respondent agreed to make an inspection available only to the high bidder. That process did

not work, and the property remains unsold. As the owner of the legal interests in Petitioners’

property (Dkt. #9 at 4), Respondent is reasonable in proposing open-house viewings prior

to the auction. Respondent has decided that open-house viewings are the best way to

discharge his legal duty to dispose of the property in the best interests of both the debtor and

the bankruptcy estate. See 11 U.S.C. § 704(1); Dkt. #9 at 3.

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Although Petitioners have not argued in this motion that open-house viewings prior

to sale violate their constitutional rights, the Court sees no constitutional distinction between

open-house viewings and the post-auction inspection it previously determined would not

violate Petitioners’ constitutional rights. See Dkt. #9.

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Respondent states that allowing open-house viewings would eliminate the need for

a walk-through contingency at auction and would allow the auction to proceed “AS

IS/WHERE IS.” Dkt. #13 at 3. The Court agrees, but notes that Respondent should not

attempt to modify the terms to allow post-auction viewing or to return a high bidder’s nonrefundable deposit if the bidder decides not to purchase the property.

This order does not permit open-house viewings, but rather declines to limit entry into

the property in the way Petitioners suggest. The open-house viewings and the second public

auction are still subject to approval by the Bankruptcy Court. 

IT IS ORDERED:

1. Petitioner’s Motion for Limited Entry into Homestead (Dkt. #11) is denied.

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2. Petitioner’s Motion to Reopen Case for Further Proceedings (Dkt. #15) is

granted.

DATED this 26th day of March, 2007.

 

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