ELECTRONIC C ITATION: 2003 FED App. 0005P (6th C ir.) File Name: 03 b0005p.06
BA NKRUPTC Y A PPELLA TE PA NEL OF TH E SIXTH CIR CUIT
In re: DAVID A. BEVER , SR. and ) SHERRY L. BEVER , ) ) Debtors. )

____________________________________ ) ) BANK ONE, NATIONAL ASSOCIAT ION, ) ) Appellant, ) ) v. ) No. 03-8004 ) DAVID A. BEVER , SR. and ) SHERRY L. BEVER, ) ) Appellees. )

____________________________________ )

Appeal from the Unite d States Bankruptcy Court for the Northern Di strict of Ohi o, Eastern Div ision at Akr on

. No. 01-50308

. Argued : August 6, 2003
Decided and Fi led: October 23, 2003
Before: AUG, HOW ARD , and LATTA, Ba nkruptcy Appellate Panel Judges.

____________________ COUNSEL
ARGUED: Cynthia M. Rosell e, LERNER, SA MPSON & ROTH FUSS, Cinc innati, Ohio, for Appellant. Mar

vin A. Sicherman, DETTEL BACH, SICH ERMAN & BAU MGART, Cleveland, Ohio , for A ppellee. ON BRIEF: Cynth ia M. R osel le, Ri ck D. D eBla sis, R omi T . Fox, LERNER, SAMPSON & R OTHFUSS, Ci ncinnati, Ohi o, for Appellant

. Marvi n A. Sicherman, DETTELBACH, SIC HERMAN & BAUMGART, C leveland, O hio, for Appellee.____________________ OPINION

____________________ WI LLIAM S. HOWARD, Bankruptcy Appel late Panel Judg e. Creditor Bank One, National Association (“Bank One”) appeals the bankruptcy court’s or

der denying its motion to vacate the t rustee’s sal e of the Debtors’ residence bac k to the Debtor s due to insufficien t service of the trustee’s notice of the proposed sale, and th e substantial diff erence between the sale price and the Debtors’ es timated valueof the property . For the r easons set out below, we AFFIRM the bankruptcy court’s dec ision.

I. IS SU ES ON APP EAL The issue s bef ore t he Pa nel a re (1) wh e ther the bankrup tcy court abused its discretion in denying Bank One relief under Rule 60(b) of the Federal Rules of Civil Procedure, and (2) w hether the bankr uptcy cour t erred in concludi ng that the trustee had complied with the requirements of pertinent ba nkruptcy rules, including Rules 2002, 6004, 7004, 9014 and 9021 (or that certain of those rules were not applicable), and that he r sale of t he Debtors’ r

esidence to them for a price of $15,000 free and clear of al l lien s wa s proper.

II. JURISD ICTION A ND STA NDA RD OF REVI EW The Bankruptcy

Appellate Panel has jurisdiction over appeals from the final orde rs of bankruptcy courts in the Northern District of Ohio beca use that district has authoriz ed app e als to this Panel. The final ordersof a bankruptcy court are appea lable orders . 28 U.S.C. § 158(a)(1) . For purpos es of appeal, an order

is final if it

“ends the li tigation on the merits and leaves nothing for thecourts to do b ut execute thejudgment.” Midland Asphalt Corp. v. United St

ates , 489 U.S. 794, 798 , 109 S. Ct. 1494, 1497 (1989) (i nternal quotations and citations om itted). The bankruptcy

court’s deni al of rel ief under Rule 60(b) is revi ewed for abuse of discretion. Pruzinsky v. Gianetti (In re Walter) , 282 F.3d 434, 440 (6th Cir

. 2002), cert. denied sub n om. Giannetti v. Pruzinsky , 537 U.S . 885, 1 23 S.Ct. 118 (200 2)(citing Kocher
v. Dow Chem. Co., 132 F.3d 1225, 1229 (8th Cir. 1997)). “An abuse of discretion occurs3

onlywhen the [bank ruptcy] court ‘reli es upon clearly erroneous findings of f act or when it improperly applies the law or uses an err oneous le gal standard.’” Corzin v. Fordu (In re Fordu), 209 B.R. 854, 85 7-58 (B. A.P. 6t h Cir. 199 7)(quotin g Mapother v. Mapother, P.S.C. v. Cooper (In re Downs) , 103 F.3d 472, 480-81 (6th Cir. 1996)). A trial court also abuses its di scretion if thereview ing court has a definite and fir m convicti on that the tri al court committed a clear err or of judgment i n the conclusi on it reached bas ed on all of the appropriate factors. Belfance v. Black River Petroleum, Inc. (In re Hess) , 209 B.R. 79, 80 (B.A.P. 6th Ci r. 1997)(c itation omitted)

. Conclusionsof

law are reviewed de novo. Nicholson v. Isaacm an ( In re Isaacm an ), 26 F.3d 629, 631 (6th Cir. 1994). “De novo rev iew req uires the Panel to review questi ons of law independent of the bankruptcy court’s determination.” First Uni on Mortgage Cor

p. v. Eubanks (In re Eubanks) , 219 B.R. 468, 469 ( B.A.P. 6th Cir . 1998). Inter pretations of federal rules of civil and bankruptcy procedure are conclusi ons of law w hich are rev iewed de novo. See Slutsk

y v. American Express Travel Related Servs. Co. (In re Cargile Contractor, Inc.) , 209 B.R. 435 (B.A.P. 6th Cir. 1997 ).

III. FACTS BankOne appeals the bankruptcy court’s deni al of its motion to vacate the s ale of the Debtors’ r

esidence. The motio n does not seek tohave an order vacated as there was
no order entered. The record before the Panel shows that the Debtors fil ed their Chapter 7 case on Februar

y 7, 2001. On March 30, 2001, notice was sent, pursuant to the trustee’s r

equest, of the need to file proofs of clai m in the case by July 2, 2 001. The De bto rs’ sched ules liste d an $88 ,000 m ortgage he ld by Old Ke nt Mortgage Company

(“Old Kent” ) on their r

esidence w hich they

valued at $10 0,000. Althoug h not a party to this appeal, Be nef icial Ohio, Inc. d/b/a Benef icial Mortgage Co. of Ohio (“Beneficial”) w a s also list ed on th e debto r’s sched ules as a creditor holding a mortgage claim in the amoun t of $19,329.70. According to Bank One, Old Kent was a s ubsidiary of Old Kent Financ ial. In April 2001, Old Kent Fina ncial wa s acquire d by Fifth Thir d Bancorp, as w

ere all of its subsidiaries. In July 2001 B ank One apparentl y acqui red the Debtors’ mortgage, but no4

assignment w

as recorded. No proof of claim w as filed in regard to t he subje ct mortga ge until Bank One filed one in September 2002, as set out below. On September 18, 2001, t he trustee filed a n adversar y proceedi ng against

the Debtors, Old Kent and Benefic ial challeng ing the validity of the mortgages on the basis th at onlyone witnes s was pr esent when themortgageswere executed. The summons and complaint

were served on old Kent and Beneficial via ce rtifie d mail, and the trustee received return receipts ev idencing del ivery . When neither party answered or otherwise responded to the adversarycomplaint, the b ankruptcy court gran ted the trustee’s mot ion for default judgment on January 10, 2002, thereby av oiding the mortgages on the Debtors’ residence. Notice of the motion f or default judgment an d also a copy of the court’s order granting default judgment were sent to Old Kent in care of its pr esident. Nei ther mortgag ee appealed the default j udgment. The trustee filed a notice of proposed s ale and motion to s ell free and cl ear of liens
on April 5, 2002 (a copy was sent to Old Kent, Beneficial, and others by regular mail), and thereafter

sold the proper

ty to the Debtors for $15,00 0, a sum that paid all a llowed cla ims and expenses i n full. A state court foreclosure pr oceeding was apparently filed by a l ocal government

entity i n August 2002 ag a inst the Debtor s, Old Kent and B eneficial. On September

9, 2002, more than 14 months after the deadline for filing pro ofs of claim had expired, Bank One filed w hat it charac terized as

a secured cl aim in the amount of $98,296.74. There is nothi ng in the r ecord to indicate that

there wasany objecti on to Bank One’s claim. Bank One filed itsmotion to vacate the sale on October 7, 2002. The trustee testified that at the time Bank One fil ed its motion, t he case wasready for di stribution an d her final repor

t was bein g prepared for submission. BankOne’s motion to vacate the sale is bas ed on three content ions: 1) that it w as notequitable for the trustee to sel l property valued at $10 0,000 to the debtors for $15,000; 2) that servi ce of the notice and motion to sell did not comply with the Federal Rules o f Bankruptcy Procedure; and 3) that the motion to sel l did not comply w ith Fifth Amendment due process req uirements. The bank ruptcy co urt conducted a h earing on the matter on December

4, 2002. The court construe d Bank One’s motion as a motion for reli ef from a court judgment, ord er or proceed ing under Rule 60(b), made applicable in bankruptcy by5

Rule 9024 of the Federal Rul es of Bankruptcy

Procedure, even though no orde r approvi ng the trustee’s sale of the property had be en entered. Rule 60(b), in pertinent par t, applies to relief from final j udgments, order s, or proceedi ngs due to ina dverten ce, su rprise or excusable neglect on the part of the movant, or any other reason justi fying rel ief from the operation of the judg ment. The court therefore had to decide w hether Rule 60( b) provided any basis for disturbing the trustee’s administration of the case. After a recitation of the facts emphasizing Bank One’s del ay in appear ance in the case , the bankruptcy court decided there w as no support for a findi ng of excusabl e neglect pur suant to Rule 60 (b)(1). The court rejected Bank

One’s contenti on that the assi gnment of the mortgagewas an excuse for the failure of the mor tgagee to appe ar. The court po inted out that it was the mortgagee’s responsibility to keep the court info rmed of its status. As for Rule 60(b)(6 ), whic h provides relief based on “ any other r eason,” the bankruptcy court reasone d thatthe failure of Ban k One and/or Old Kent to get involved in the bankrupt cy case after being presented w ith that opportun ity on several occasi ons militated against disturbing the trustee’s administrati on of the case. The bankruptcy court also found compelling the f act that Bank One fa iled to act on th e trustee’s n otice of proposed sa l e until the sal e transaction had been wholl y concluded, which di d not meet Rule 60(b)’s r

equirement that Ba nk One’s motion should be f iled within a “reasonable time.” BankOne raised theissue of compliance with Ru le 6004 in reg ard to serv ice of the notice of proposed sale and motion to sel l free and clear of liens, and thebankruptcy court stated in the cou rse of the hearing its opinion that servi ce had been sufficient. The bankruptcy court then concluded th at there wa s no support for o verturni ng the sale of the property under either Rule 60(b)( 1) or (b)(6). At the conclusion of the he aring the court ruled from the b ench th at Bank One’s moti on should be denied. This timely appeal followed.6 IV. DISCUS SION As set out above, Bank One , and its prede cessor Old Kent, had numerous opportunitiesto assert their interests in this case, but did not . Bank One did n ot even iden tify itself as a cr

editor until many months after the deadline for filing pr oofs of claim had passed as well as the entry of default judg me nt against Old Kent in the adversary procee ding. W hen Bank One f iled its mo tion to vac ate t he sa le of the p rope rty, the subject mortgage had been avoide d by the entr y of that default j udgment almost a y ear before, and ithad no mortg age lien on the subj ect property . At best Bank One was an uns ecured creditor w ith no more ri ghts than any other simil arly si tuated creditor

. BankOne argueson appeal that the bank ruptcy co urt erred i n denying its motion to vacate because the cour t failed to rev iew

the merits of the t rustee’s noti ce and motion to sell, and determined tha t the servic e of the trustee’s notice a nd motion suff iciently complied with the feder al and local rules, as w ell as w ith due process requirements. In addition, Bank One alleg es that the bankruptcy court erred in applying Rule 60(b) because there was no cour

t order approv ing the tru stee’s sale, an d that ev en if Rule 60(b) is applicable, Bank One’s failure to file a timely objection to t he trustee’s notice and motion to sell was excusabl e neglect due to insufficient noti ce. The trustee contends

that, in li ght of the defau lt judgment avoiding the mor tgage, judicial estoppel appli es to prevent Bank One from alleging any inter est in the prop erty at issue. Further, pu rsuant to 11 U.S.C. § 363(b)(1) it was unn ecessary for the trustee tofile
a motion and to obtai n an order appr oving the sale becaus e there wer e no remaining l iens
on the property

and service of such a motion was ir relevant. In addition, th e trustee arg ues thatthere wasno Fifth Amendment due pr ocess vi olation because Bank One lacke d any property rights, and that all requir ements of due process were met when t he trustee commenced the adversary proceeding to avoid the mortgag es. Further , the trustee poi nts outthat at the heari ng before the bankruptcy cour t, Bank One agr

eed with thecourt that R ule 60(b) was applicable. In now alleging that it was error for the bankruptcy court t o applyRule 60(b), Bank One’s stance on ap peal is inco nsistent. Because Bank One unequivocallyagreed that R ule 60(b) was appli cable to its motion, its argu ment on appeal that Rule 60(b)

is inappli cable is w ithout merit and has been wai ved.7

Rule 60(b) s tates in perti nent part: On motion and upon such terms as are just, the court may relie ve a party or a party’s legal re pres entative from a final judgment, order, or proceeding fo r the following reasons: (1) mistake, inadvertence, surprise, or excusa b le neglect

. . . or (6 ) any oth er reason jus tifying r elief from the operati on of the judgment. The motion shall be made within a reasonable time, and for reason[ ] (1) . . . not more than one year after t he judgment, order, or proceeding was enter ed or taken. . . . This rule does not lim it the power of a cour t to entertain an independent

action to relieve a party from a judgment, order, or proceeding

. . . . Fed. R. Civ. P. 60(b). Bank One argues that Rule 60(b) is inapplicab le because the court
never entered a final or

der approvi ng the sale. Howev er, as the language of R ule 60(b) indicates, it is als o designed to relieve the movant from theeffect ofa “proceeding” such
as the trustee’s notice and motion to sell. The bankruptcy court’s appl ication of Rule 60(b)
was corr ect. Bank One also al leges that, if Rule 60(b)( 1) is appli cable, its fail ure to oppose the trustee’s notice and motion was due toexcusable neglect based on the insuff icient notice of the proc eeding; specificall y, Bank One a lleges that the notice was sent vi a regular, firstclass mail rather than by certified mail. Rule 6004 g overns ser vice of a noti ce of proposed sale and a motion to sel l property free and clear

of other liens and interests, and provid es in relevant part as follows:

(a) Notice of

a proposed use, sale, or lease of property, other t han cash collateral, not in the ordinary course of busine s s shall be gi ven pursuant to Rule 2002(a) (2)[and] (c )(1) . . .

. (c) A motion for author ity to sel l property free and clear of liens or other interes ts shall be made in accordance with Rule 9014 a nd shall be served on the parties who have liens or othe r interestsin the property to be sold. The notic e requi red by subdivis ion (1) . . . s hall includethe date of the hearing on t he motion and the time wit hin whic h objections may be filed and served on t he . . . trustee. Fed. R. Bankr. P. 6004 (a) and (c) . Bank One speci fically contends that serv ice of the motion to sell free and clear of liens sho uld ther efo re ha ve been pursuant to R ule 9014(b)8

which requires that “[t]he motion shall be serv ed in the mann er p rov ided for s erv ice of a
summons and complaint by Rule 7004.” Bank One is corr e ct in reg ard to how a motion pursuant to Rule 9014 i s to be served. See In re J.B. Winchells, Inc. , 106 B.R. 384, 394 (Bankr. E.D . Pa. 1989). The service requirement in Rule 6004(c), however, applies only to “parties w ho have lien s or other i nterests in t he property to be sold. ” At the ti me the trustee filed the motion to sell free and cl ear of liens, nei ther Old Kent nor any other party had a lien on or other interest in the property. For all intents and pu rposes, the estate owned the property “free and c lear.” Ther e was no con tested matter w hich requi red application of

Rule 7004 (or Rule 9021 which incorporates Federal Rule of Civil Procedure 58 requiring the entry of a separate judgment). In a related arg ument, Bank One conten ds that the ser vice i t mai ntains was insufficient

deprived it of its property without due process . BankOne argues that Old Kent’s mortgage w

as still “ of

recor d” and had not been re leased at the time the trustee fil ed the motion to sell free and clear ofliens. Th is argume nt ignore s the fa ct that t he mort gage had already be en avoided, and neither Old Kent nor i ts assigne e Bank One had any property interest to be afforded due process protection. This argument al so demonstrates the inconsistenc

y of Bank One’s

contention set out below th a t the trust ee sh ould have inquired as to wheth er

Old Kent was still t he mortgage ho lder of record before she sold the prop erty. BankOne also all eges that ser vice shoul d have been via certified mail because Old Kentwas a federal ly insur ed depository

institution . The trustee, how ever, conte nds that at all pertinent

times, Old Kent

was a subs idiary of a holding company , and n ot i tsel f a federally ins ured ins tit utio n. B ank O ne ha s offe red no evidence tosupport its allegation regarding the federally insured status of Old Kent and regardless, as indicated ab ove, Old Kentdid not meet the “ party w ith an interes t in the property”status req uired for serv ice of the trustee’s notice and motion to sell. The same reasoning may be app lied to Bank One’s argument

that the O hio proced ural rulesrequire that out-of-state servicebe via cer tified mail, and that a F ifth Amendment due proces s violat ion has occur red. Fina lly, regarding service, Bank One does not allege tha t service of t he trustee’s notice and motion to sell was not receiv ed, and the trustee testi fied that none of the mail9

she sent to Old Kent

was retu rned to her. The t rustee had no means of discerning that the Debtors’ mortgage ha d been sold or as signed in an unrecorded document, or that Old Kent merged with another company, all subsequent to the b ankruptcy filing. The t rustee states that, pursuant to theholding i n Pinney v. Mer chants’ Nat. Bank, 72 N.E. 884 (O hio 1904) she had no duty to look beyond t he record or inv estig ate Old Kent’s status, particularly when certified mail was in fact deliver ed to it (ser

vice of the adv

ersary complaint on Ol d Kent was stip ulat ed at the December 4, 2002 hearing ). The Pinney court observed in regard to a statutory provisi on for the record ation of the assig nment of a mortgage :

We think that the statute justi fies and that fairdealing r equires the rule that w here the recording act authoriz es the assignment of mortgages to be recorded, and the assi gnmen t is duly entered of record, su ch record shall be held to be noti ce to mortgageesand subsequent pu rchasers, but, where such a ssig nmentis not so enter ed, mortgage es and subsequen t purchasers, in the absence of not ice otherw ise, are justified in relying upon the record as they find i t, and in acti ng acco rdin gly. Pinney v. Merchant

s’ N at. Bank , 72 N.E. at 888. While it is not unusual for a trustee t o solicit c laims from known creditors who have not filed a claim where the re are funds i n
excess of claims filed, in the circumst ances of this case, wher e Old Kent

or Bank One had failed to come forwar

d with a c laim despite ampl e opportunity to do so, the trus tee did not
err in not seeking out the creditor. In additi on, there is no thing in the recor d to demonstrate when Old Kent actual ly ceased to be the mortgag ee, although ac cording to the trustee, the records of the Ohio Secretary of Sta te show that Old Kent was not “merged out of existence”until July

10, 2002, six

months after the default judgment was entered. Bank One also takes the position tha t the equiti es favor it, and not the trus tee, i n regard to t he s ale of the property to the deb tors for $15,000. It ma intains that this sale results in the Debtors’ receiving a windfall of $85, 000 in equity - the difference betw

een the value of their home as stated in the ir schedules and the price paid to the trus tee. The trustee testified at the December 4, 2002 hea ring thatafter default judg ment was enter ed in the advers ary proceeding she r eviewe d the claims th at had been f iled in the Debtors’
ca s e and determined that there wer

e approximatel y $9,000 in al lowed cl aims. She1 Even i f Old Kent or any successor party

had fi led an answer i n the adv ersary , t he tr ustee might well have pre vai led, assuming she demonstrat ed that only one wit ness was present at t he closi ng of t he sub ject m ortga ge. See Simon v. Chase Manhatta n Bank (In re Zaptocky) , 250 F.3d 102 0 (6th Cir. 2001). 10 approached the Debtors’ attor ney con cerning whether they would be interested in repurchasing the property for an amount sufficient to cover all claims in full plus adm inist rative expenses and the purchase of a preliminar

y judici al report. The trustee then accepted the offer of $15,000 from th e Debtors. She further testif ied th at she had considered putting the p roperty upfor sale, but w hen she determined that there were only $9,000 in claims, it appeared to be in the best interes ts of the estate to cover all of the claim s and expenses. Any excess of funds from a sale beyond those ne cessary to pay the costs of administration of the estate and satisf y all allowed claim s of cred itors would have been returned to theDebtors in a ny event. The result here was the same with the excepti o n that the debtorsreceived the house instead of cash in the amount of the net remaining after

payment of all c laims and ex penses of administr ation. Without an interest in a valid mortgag e to assert, B ank One has no support for i ts contention that the trustee’s administr ation of the estate i n regard to the sale resulted in
an inequity . There wer e no lien holders whose interests needed to be protected. All the creditors who had filed clai ms by the bar date were apparently paid from the sale proceeds. Any alleged “windfall” to the Debtors is not the result of th e trustee’s failure to properly perf o rm her du ties, but of Old Kent’s f ailure to participate in the bankrup tcy process, file
a timely c laim, respond to the filing of the adversar y proceedi ng challeng ing its mortga ge
or timely s eekrelief from the default judgment entered against i t. 1 BankOne’s arg ument thatthe trustee had a duty to s ell the proper ty for the “highest and best price,” i.e., f or more than $15,000, and to pay all creditors rather than “ return money to the Debtors, ” ignores its own failur

e to record th e assignment of themortgage from Old Kent and to timely assert it s interest i n this case. The Panel is ther efore compelled to ag ree with the trustee tha t BankOne’s attempt to vacate the s ale is simpl y an effort to escape the consequences of the def ault jud gment a gainst Old Kent in t he advers ary procee ding.11 V. CONCLU SION Based on the foregoing the Panel concl udes that the bankruptcy court did not abuse its discretion in denying Bank One relief pursuan t to Rule 60(b), nor did it err in it s interpretati on of other applicable rules of bankruptcy procedure resulting in its deci sion that the trustee’s ad ministration of the estate was proper. The dec ision of the bankruptcy court is therefore AF FIRMED

.