UNITED STATES COURT OF APPEALS Tenth Circuit Byron White United States Courthouse

1823 Stout Street Denver, Colorado 80294 (303) 844-3157 Patrick J. Fisher, Jr. Elisabeth A. Shumaker Clerk Chief Deputy Clerk
December 2, 1999

TO: ALL RECIPIENTS OF THE OPINION
RE: No. 98-6276, Payne v. Claredon Nat’l Ins. Co. (In re: Sunset Sales, Inc.) Filed on October 26, 1999
The court’s slip opinion contains a typographical e rror on page one. The bankruptcy court case number is corrected to read: “Bankr. No. 92-16745-BH.” A corrected copy of page one is attached. Sincerely, Patrick Fisher, Clerk of Court

By: Keith Nelson Deputy Clerk

encl.

## F I L E D United States Court of Appeals Tenth Circuit 

### OCT 26 1999 

### PATRICK FISHER Clerk PUBLISH
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

In re: SUNSET SALES, INC., doing business as K&R Coal Company, doing business as Sans Bois Coal Company, Debtor.

DAVID PAYNE,

Plaintiff-Appellee,

v. CLARENDON NATIONAL INSURANCE COMPANY; U.S. CAPITAL INSURANCE, COMPANY; VAN AMERICAN INSURANCE CO., INC., Defendants-Appellants. No. 98-6276

APPEAL FROM THE UNITED STATES BANKRUPTCY APPELLATE PANEL FOR THE TENTH CIRCUIT (BAP No. WO-97-100) (Bankr. No. 92-16745-BH) (Adv. No. 95-1012-BH)-2-

Submitted on the briefs: G. Patrick Garrett, Oklahoma City, Oklahoma, for De fendants-Appellants. Lyle S. Vaughn, Karen Eby of Lyle S. Vaughn, P.C., Oklahoma City, Oklahoma, for Plaintiff-Appellee.

Before BALDOCK , BARRETT , and BRORBY , Circuit Judges.

BALDOCK , Circuit Judge.

After examining the briefs and appellate record, th is panel has determined unanimously to grant the parties’ request for a dec ision on the briefs without oral argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore ordered submitted without oral argument. This appeal arises out of the efforts of the liquid ating trustee in the Chapter 11 bankruptcy of Sunset Sales, Inc., to avo id as preferential transfers various payments made to Clarendon National Insuran ce Co., U.S. Capital Insurance Co., and Van-American Insurance Co. (coll ectively, “the Bonding Companies”) by Sunset’s predecessor in interest, K& R Coal Co. The bankruptcy court determined that the transfers at issue were avoidable under 11 U.S.C. § 547(b), and entered judgment in favor of the trus tee and against the Bonding Companies. The Bonding Companies appealed the bankruptcy court’s judgment to the Tenth Circuit Bankruptcy Appellate Panel (“t he BAP”), which affirmed.-3-

See Payne v. Clarendon Nat’l Ins. Co. (In re Sunset Sales, Inc.) , 220 B.R. 1005, 1022 (B.A.P. 10th Cir. 1998). The Bonding Companie s now appeal to this court, arguing that the bankruptcy court erred in finding that the transfers were preferential and avoidable.
The Motion for Stay Before considering the merits of the Bonding Compan ies’ appeal, we must first address their request for a stay pending appe al. On February 18, 1998, while their appeal of the bankruptcy court’s judgment was pending with the BAP, the Bonding Companies posted a supersedeas bond with th e bankruptcy court and received a stay of that court’s judgment. Although the conditions of the bond contemplated an appeal to both the BAP and to this court, the bankruptcy court’s stay order apparently did not stay its judgment bey ond an appeal to the BAP. The BAP issued its opinion affirming the bankruptcycourt on June 4, 1998, and issued its mandate on June 22, which the bankruptcy court received on June 25. On June 26, the Bonding Companies filed w ith the BAP an “Emergency Motion for Stay of Judgment Pending Appeal Combinedwith Motion for Recall or Stay of Mandate Pending Appeal,” in which they s ought a stay of the BAP’s judgment and its mandate pending appeal to this cou rt. The Bonding Companies argued that the BAP had jurisdiction to grant the s tay under Fed. R. Bankr. P. 8017 even though it had already issued its mandate and that the supersedeas bond-4-

previously posted in the bankruptcy court was suffi cient to protect the trustee’s interests during an appeal to this court. The Bond ing Companies asked that the BAP also recall or stay its mandate. On July 8, 1998, the BAP entered an order denying the motions. See Payne v. Clarendon Nat’l Ins. Co. (In re Sunset Sales, Inc.) , 222 B.R. 914, 918 (B.A.P. 10th Cir. 1998). The BAP concluded that it did nothave jurisdiction to enter a stay pursuant to Bankruptcy Rule 8017 unless it f irst recalled its mandate. Id. at 917. The BAP considered the standards for reca lling a mandate expressed by this and other circuit courts, and concluded that the facts of the case before it did not justify recalling the mandate. Id. at 917-18. Therefore, the BAP denied the motions to recall the mandate and to enter a st ay, and noted that the Bonding Companies could seek a stay pending appeal from the Tenth Circuit. Id. at 918. On July 13, 1998, the Bonding Companies filed a mot ion with this court seeking a stay pending appeal and approval of a sup ersedeas bond. They argued that the BAP erred in concluding that it had no jur isdiction to enter a stay unless it first recalled its mandate. The Bonding Compani es asked that we so rule and then permit them to renew their stay motion before the BAP. In the event we agreed with the BAP that it had no jurisdiction to enter a stay, the Bonding Companies asked that we grant them a stay under Fed . R. App. P. 8(a).-5-

On August 19, 1998, we entered an order granting th e Bonding Companies a temporary stay and directing the parties to submi t supplemental briefs addressing the BAP’s authority to grant a stay pend ing appeal after it had issued its mandate. Based upon our review of the parties’ supplemental briefs and the pertinent law, we conclude that the BAP correctly d etermined it had no jurisdiction to enter the stay unless it first reca lled its mandate. The Bonding Companies contend that the BAP should b e treated like a district court and imbued with the same power to enter a stay pending appeal to a higher court as a district court has under Fed. R . Civ. P. 62. Although a district court and a BAP serve some similar functions, they have distinct differences, the chief of them being that a district court is also acourt of original jurisdiction. The BAP is exclusively an appellate court, however, and is therefore more analogous to a circuit court. While the Bonding Companies are correct that the Ba nkruptcy Rules incorporate Fed. R. Civ. P. 62, they do so in Part VII of the rules, which relates solely to adversary proceedings at the trial level (i.e., the bankruptcy court or the district court acting in its trial capacity). See Fed. R. Bankr. P. 7062. Thus, when the Bonding Companies posted their supersedeas bondand secured a stay pending appeal from the bankruptcy court, they did so underFed. R. Bankr. P. 7062.-6-

The rules governing appeals to and from intermediat e tribunals (i.e., the BAP or the district court acting in its appellate c apacity) are contained in Part VIII of the Bankruptcy Rules. Bankruptcy Rule 8005 governs stays pending appeal to an intermediate appellate tribunal. Like Fed. R. App. P. 8, relating to stays pending appeal to a circuit court, BankruptcyRule 8005 contemplates that the trial court will be the primary court to stay amatter pending appeal. Bankruptcy Rule 8005 expressly recognizes the trial court’s power to enter a stay pursuant to Bankruptcy Rule 7062, and it giv es the intermediate appellate tribunal power to enter a stay or to terminate or m odify one entered by the bankruptcy court. Stays pending appeal from an intermediate appellate tribunal are governed by Bankruptcy Rule 8017. It provides that the judg ment of the intermediate appellate tribunal shall automatically be stayed fo r ten days after entry, unless otherwise ordered by the court. Fed. R. Bankr. P. 8017(a). This gives a party time in which to decide whether to pursue an appeal , akin to Fed. R. Civ. P. 62(a), which automatically stays enforcement of district c ourt judgments in civil cases for ten days, and Fed. R. App. P. 41(a), which prov ides that the mandate of the circuit court shall not issue for a certain period of time. See Fed. R. Bankr. P. 8017 advisory committee’s note. Bankruptcy Rule 80 17(b) empowers the intermediate appellate tribunal to enter a further stay of its judgment pending1 The Bankruptcy Rules do not specifically address th e issuance of the BAP’s

mandate. Therefore, the subject is governed by local rule. See Fed. R. Bankr. P. 8018(b). -7- appeal to a higher court. The advisory committee n ote explains that subdivision (b) gives the district courts and the B APs the same authority that Fed. R. App. P. 41(b) gives the circuit courts to s tay their judgments pending appeal, thereby indicating that the stay provisions of Bankruptcy Rule 8017(b) are modeled after those governing circuit courts, r ather than those governing district courts. Indeed, the rules governing the BAP’s issuance of the mandate and entry of a stay pending further appeal parallel those gov erning similar acts of a circuit court. The Tenth Circuit’s BAP must issue its mand ate seven days after the expiration of the time for filing a motion for rehe aring. 10th Cir. BAP L.R. 8016-3(a). 1 A party has ten days from the entry of judgment t o file a motion for rehearing, see Fed. R. Bankr. P. 8015, so if no petition for rehe aring is filed, the BAP’s mandate must issue seventeen days after entryof judgment. “Issuance of the mandate formally marks the end of appellate jur isdiction. Jurisdiction returns to the tribunal to which the mandate is directed, f or such proceedings as may be appropriate . . . .” Johnson v. Bechtel Assocs. Professional Corp. , 801 F.2d 412, 415 (D.C. Cir. 1986). A party has thirty days in w hich to file a notice of appeal to the circuit court, however. See Fed. R. App. P. 4(a)(1) and 6(b)(1). Therefore,2 Of course, if the mandate required the bankruptcy c ourt to take further

significant proceedings in the case, the BAP’s judg ment would not be appealable to the circuit court anyway. See, e.g., Cascade Energy & Metals Corp. v. Banks (In re Cascade Energy & Metals Corp.) , 956 F.2d 935, 937 (10th Cir. 1992). -8- unless the party obtains a stay of the BAP’s mandat e, the mandate could issue and the bankruptcy court could act on it before the party has an opportunity to file a timely appeal. 2 Bankruptcy Rule 8017(b) permits a party to obtain a stay of the BAP’s judgment pending appeal to the circuit court, but it limits the length of the stay, unless a timely appeal is filed during the pe ndency of the stay. If the BAP refuses to enter a stay, the party may seek a stay from the circuit court pursuant to Bankruptcy Rule 8017(c) and Fed. R. App. P. 8. Similarly, a circuit court must issue its mandate s even days after the time to file a petition for rehearing has expired or wit hin seven days after a timely petition for rehearing is denied. See Fed. R. App. P. 41(b). Therefore, if no petition for rehearing is filed, the court’s mandat e must issue either twenty-one or fifty-two days after entry of judgment, dependin g on whether the U.S. is a party in the case. See Fed. R. App. P. 40(a)(1) and 41(b). A party has ninety days from the entry of judgment to file a petition for certiorari, see Sup. Ct. R. 13, so unless the party obtains a stay of the circuit court’s mandate, the mandate could issue and the lower court could a ct on it before the party has an opportunity to file a timely petition for certio rari. A party may move for a stay-9-

of the circuit court’s mandate pending the filing o f a petition for certiorari to the Supreme Court under Fed. R. App. P. 41(d)(2). As i n Bankruptcy Rule 8017(b), the length of the stay is limited unless the party files a timely petition for certiorari during the pendency of the stay. See Fed. R. App. P. 41(d)(2)

. If the circuit court refuses to enter a stay, the party may seek a stay from the Supreme
Court. See, e.g., John Doe Agency v. John Doe Corp. , 488 U.S. 1306, 1310 (Marshall, Circuit Justice 1989) (granting Solicito r General’s motion to recall and stay Second Circuit’s mandate and to stay order of district court enforcing that mandate pending certiorari); Cities Serv. Gas Co. v. Mobil Oil Corp. , 486 U.S. 1051, 1051 (1988) (granting application to recall a nd stay Tenth Circuit’s mandate pending Court’s action on petition for cert iorari). Thus, both sets of rules create a gap between the t ime the court’s mandate must issue and the time the party must seek redress from a higher court, and both sets of rules permit a party to obtain a stay pendi ng appeal to a higher court. Both sets of rules are silent, however, as to what happe ns if the party does not seek the stay until the gap period. Cases addressing a party’s attempt to secure a stay from a circuit court after it has issued its mandate est ablish that the circuit court must first recall its mandate before it can enter the stay. See, e.g., United States v. Holland , 1 F.3d 454, 455 (7th Cir. 1993) (Ripple, J.) (hol ding that party who sought stay after mandate had issued first had to s how that mandate ought to be-10-

recalled and then had to show that recalled mandate should be stayed); Faulkner
v. Jones , 66 F.3d 661, 662 (4th Cir. 1995) (denying motion to recall and stay mandate). The parties have not cited any cases add ressing a party’s attempt to obtain a stay from the BAP after it has issued its mandate, and our research has revealed none. Nonetheless, the parallelism betwee n the rules relating to the two courts counsels that the BAP also must recall its m andate before it can issue a stay. The Bonding Companies contend that the BAP did not need to recall its mandate before entering a stay because (1) Bankrupt cy Rule 8017(b) does not contain a time limit in which a stay motion must be filed; and (2) courts retain the power to grant injunctive relief to maintain the st atus quo during the pendency of an appeal. We are not persuaded by either of these arguments. As to the first, although Bankruptcy Rule 8017(b) does not provide atime limit within which a party must seek a stay pending appeal, the same i s true of Fed. R. App. P. 41, on which Rule 8017(b) is based. Nonetheless, as we di scussed above, when a party seeks a stay under Fed. R. App. P. 41 after the cir cuit court has already issued its mandate, the circuit court must recall its mandate before it can grant the stay. As to the second argument, even if we assume the BAP h as the same power as a circuit court to enter orders necessary to preserve the status quo pending appeal to a higher court, that power simply provides the auth ority for the BAP (or circuit-11-

court) to recall its mandate once issued. See Hawaii Housing Auth. v. Midkiff , 463 U.S. 1323, 1324 (Rehnquist, Circuit Justice 198 3) (concluding that because “a court retains the power to grant injunctive reli ef to a party to preserve the status quo during the pendency of an appeal,” circu it court had authority to recall its mandate and stay proceedings pending further cl arification even after appeal filed with Supreme Court). Recalling the mandate i s still a prerequisite to entering a stay. We conclude that the BAP, like a circuit court, mus t possess the mandate before it can act. Therefore, the BAP properly con cluded that it had to recall its mandate before it could issue a stay pending appeal to this court. The Bonding Companies do not challenge the BAP’s determination that the circumstances of this case did not warrant recalling its mandate. T he only issue still before us, then, is whether to grant a stay pending appeal pur suant to Fed. R. App. P. 8. We have already entered a temporary stay until furt her order of the court, and we are now prepared to rule on the merits of the ap peal, below. Therefore, no further stay is necessary, and the motion for st ay pending appeal is moot.-12- The Merits The Bonding Companies raise six challenges to the b ankruptcy court’s judgment. They assert that the payments at issue w ere not avoidable as preferential transfers under 11 U.S.C. § 547(b) bec ause the trustee failed to prove: (1) that the transfers were of an interest of the d ebtor in property; (2) that the transfers were for or on account of an antecedent d ebt owed by the debtor before the transfers were made; (3) that the transfers wer e made while the debtor was insolvent; or (4) that the transfers made more thanninety days but less than one year before the filing of the bankruptcy petition b enefitted an insider creditor. The Bonding Companies further argue that, even if t he transfers were avoidable under § 547(b), they had a defense to avoidability under § 547(c)(1) and (c)(4), because the transfers were contemporaneous exchange s for new value and they were exceeded by subsequent advances of new value. The BAP considered and rejected each of these argum ents in a detailed and well-reasoned opinion. Based upon our review of th e record, the parties’ briefs, and our independent research, we conclude the BAP p roperly rejected the Bonding Companies’ arguments. Therefore, we affirmthe judgment of the bankruptcy court for substantially the same reasons set forth by the BAP in its opinion in Payne v. Clarendon National Insurance Co. (In re Sunset Sales, Inc.) , 220 B.R. 1005 (B.A.P. 10th Cir. 1998).-13-

The judgment of the Tenth Circuit Bankruptcy Appell ate Panel is AFFIRMED, and appellants’ Application for Stay of J udgment Pending Appeal is DENIED as moot.