FI LED U.S. COURT OF APPEALS ELEV ENT H CI RCUI T FEB 3, 2 011
J OHN LEY [DO NOT PUBLISH]

IN THE UN ITED STATES COURT OF APPEALS

FOR THE ELE VENTH CIRCUIT

__ __ __ __ __ __ __ __ __ __ __ __
No. 0 9- 15 73 2

__ __ __ __ __ __ __ __ __ __ __ __
D. C. Dock et Nos . 08 -0 23 21 -CV-T-2 7, 0 7- BK-0 43 94 -KRM

In Re: J.H. INVESTMENT SERVICES, INC., f/k /a . Jac ks on Hewit t In ve st m en t Se rv ic es , Inc
.,

Deb to r.

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __
MIC HAEL Z UPPARDO,

P l a i n t i f f

- A p p el la nt , ve rs us

BC PR OPERTIES LIMITED, LLC, STEVEN S. OSCHER, Ch ap te r 11 Trus te e,

Defen da nt s- App el le es

.

__ __ __ __ __ __ __ __ __ __ __ __ App eal fro m

th e Uni te d S ta te s Di st ric t Co ur t fo r th e Mi dd le Dis tri ct of F lo rid a

__ __ __ __ __ __ __ __ __ __ __ __ (Feb ru ary 3, 2 01 1)Befo re BARKETT an d M ARTIN, Cir cu it Ju dg es , and HUNT, Sen io r Ju dg e, *

PER CURI AM:

Mi ch ael Zup pa rd o ap pe al s fro m th e di st ric t co ur t’s or de r affi rm in g ru li ng s by

th e ba nk ru pt cy co ur t whi ch av oi de d hi s in te res t in a co m m erci al co nd om in iu m un it
,

fro m whi ch he ha d op erat ed a ha ir sa lo n, as well as th e pr oc eed s fro m th e sa le of th at

co nd om in iu m

. Alt ho ug h Zup pa rd o had pu rch as ed th is un it in fu ll fro m ba nk ru pt cy

de bt or Ja ck so n Hewit t In ve st m en t Se rv ic es (“ JHIS ”), J HIS la te r ag ai n s ol d t he un it

to BC Pro pert ie s L im ite d (“ BC Pro pe rti es ”). Afte r cred it or s fil ed in vo lu nt ary Ch ap te r

11 pe ti ti on s ag ai ns t JHIS
, th e pr oc eed s fro m th e la tt er sa le be cam e pa rt of th e es ta te

.

The ba nk ru pt c y c o u r t gr an te d su m m ary jud gm en t to St ev en S. Osc he r, th e Ch ap te r

11 Trus te e (“ Trus te e”), al lo win g hi m , pu rs ua nt to th e Trus te e’s “ st ro ng arm ” po wers

un de r 11 U.S.C. § 54 4( a), to ex ti ng ui sh (o r “ av oi d” as th e st at ut e pu ts it ) Zup pa rd o’s

in te res t i n t he co nd om in iu m un it

.

On ap pe al
, Zup pa rd o ch al le ng es th e di st ric t co ur t’s or de r affi rm in g th at ru li ng

an d ot he r rel at ed r u l in gs by th e ba nk ru pt cy co ur t. Fo r th e fo ll owi ng reas on s, we

affi rm in pa rt a nd rev ers e in pa rt.

Honora ble Wil lis B. Hunt, J r., Senior United States District J udg e for the Norther n District * of Ge org ia, sitting by

desig nation.

2I. BACK GROUND

On Sep te m

be r 1, 19 99
, Zup pa rd o en te red in to an in st al lm en t co nt ract wit h

JHIS an d it s Vice Pres id en t Dan ie l L. Prewe tt , in whi ch Zup pa rd o ag reed to pu rch as e

Co m mer ci al Co nd om in iu m Uni t 19 in Ben ev a Cl ark Pl aza (th e “ co m pl ex ”) in

Sara so ta , Fl or id a. In ad di ti on to th e co nt ract , Zup pa rd o a n d J H I S e n t ered in to a

p u rch as e m on ey no te an d a pu rch as e m on ey m or tg ag e. Pu rs ua nt to th e in st al l men t

co nt ract , Zup pa rd o ack no wled ge d th at Uni t 19 was su bjec t to an ex is ti ng m or tg ag e 1

on th e c o mple x an d ex pr es sl y ag reed th at th e no te an d m or tg ag e wou ld no t be

reco rd ed an d th at ti tl e wou ld be he ld in es cro w by Prewe tt

. Upo n fu ll sa ti sf act io n of

hi s paym en t ob li ga ti on s, ho wev er, Z up pa rd o wou ld ob ta in fu ll ti tl e to Uni t 19 fro m

JHIS

. Alt ho ug h it is no t en ti rel y cl ear fro m th e reco rd
, at or al arg um en t, co un se l fo r

Zup pa rd o in di cat ed
, an d co un se l fo r th e Trus te e di d no t di sp ut e, th at Zup pa rd o fu ll y

sa ti sf ie d hi s pa y m en t ob li ga ti on s un de r th e in st al lm en t co nt ract be fo re Feb ru ary 20
,

20 07

.

On Feb ru ary 20
, 20 07
, JHIS an d rel at ed en ti ti es so ld 14 co nd om in iu m un it s in

th e co m pl ex to BC Pro pe rti es , res ul ti ng in ne t sa le pr oc eed s of $3 02 ,37 6.3 7 (th e “ sa le

pr oc eed s” ). Not wit hs ta nd in g JHIS ’s co nt ract wit h Zup pa rd o, JHIS in cl ud ed Uni t 19

Acc ording to the rec ord, AmSouth Ba nk held the mortg ag e on the complex including Unit 1 19. That mortg ag e was satisfied from the proce eds of the Fe bruar y 20, 2007, sale to BC Properties descr ibed infra

.

3in th is sa le

. On Feb ru ary 26
, 20 07
, BC Pro pe rti es reco rd ed a warra nt y de ed

ev id en ci ng th is tra ns act io n i n t he pu bl ic reco rd s o f Sara so ta Co un ty.

The cl os i n g f

i r m ha nd li ng th e sa le to BC Pro pe rti es , Du nl ap & Mo ran , P .A.,

in it ia ll y he ld th e sa le pr oc eed s. Dun la p & Mo ran was un ab le to lo cat e an of fic er of

JHIS to who m to di st rib ut e th e sa le pr oc eed s. Du nl ap & Mo ran al so be cam e aware

of se ve ral cl ai m s be in g m ad e to th e sa le pr oc eed s, in cl ud in g on e by Zup pa rd o. As 2

a res ul t, on Mar ch 7, 20 07 , Du nl ap & Mo ran fil ed a s t at e co ur t in te rp le ad er act io n,

de po si ti ng th e sa le pro ceed s i nt o t he reg is try of t ha t co ur t.

O n Ma rc h 29, 2007
, Z upp ard o reco rd ed an “ Am en de d an d Rev is ed Sat is fact ion

of Mo rtg ag e” in th e pu bl ic reco r d s o f Sara so ta Co un ty. In th is do cu m en t, JHIS

“ ack no wled ge [d ] fu ll pa y m en t an d sa ti sf

act io n of al l ob li ga ti on s of Mi ch a e l G.

Zup pa rd o un de r

. . . [th e] Co nt ract of Sal e of Co m m erci al C o n d om in iu m Uni t [1 9]

(d at ed Sep te m

be r 1, 19 99 ), Pu rch as e Mo ne y Mo rtg ag e (d at e d S e pt em be r 1, 19 99 ),

an d Pu rch as e Mo ne y Not e (d at ed Sep te m be r 1, 19 99 ).” The do cu m en t was wit ne ss ed

a n d no ta riz ed
, an d si gn ed by Eli zab et h Geo rg e Prewe tt (act in g un de r a po wer o f

at to rn ey fo r he r hu sb an d Dan ie l Prewe t t , t h e JHIS of fic er who ha d ex ecu te d th e

After lear ning of the completed sale to BC Properties, Z uppardo’ s lawy er contac ted Dunlap 2 & Moran and asser

ted Zuppar do’s i ntere st in Un i t 19. Z uppardo then filed a lawsuit on Marc h 2, 2007 in state court ag ainst J HI S and Dunlap & Moran, seeking a writ of attachme nt on a portion of the sale pr ocee ds. The re cord doe s not indicate the re solution of this lawsuit.

4ag reem en t wit h Zup pa rd o)

. On May 17
, 20 07
, Zup pa rd o al so reco rd ed a “ Not ic e of

Red em pt io n Ri gh ts ” in th e P u b l i c Rec or ds of Sara so ta Co un ty, in whi ch Zup pa rd o

an no un ced
, in te r a li a , th at he was “ th e eq ui ta bl e o wne r of Uni t 1 9 at Bene va -Cl ark

Pl aza . . . .”

O n Ma y 25, 2007
, se ve ra l cred it or s in it ia te d in vo lu nt ary Ch ap te r 11 ba nkr upt cy

pe ti ti o n s a ga in st JHIS an d Prewe tt

. The ba nk ru pt cy co ur t ap po in te d Osc he r as th e

Trus te e, an d he rem ov ed Dun la p & Mo ran ’s in te rp le ad er act io n to th e b a n k r u pt cy

co ur t, whe re it be cam e an ad ve rs ary pr oc eed in g wit hi n th e Ch ap te r 11 cas e. Dun la p

& Mo ran th en tu rn ed th e sa le pr oc eed s ov er to th e Trus te e pu rs ua nt to an or de r by th e

ba nk ru pt cy

co ur t. 3

In th e ad ve rs ary pr oc eed in g/ in te rp le ad er act io n, th e Trus te e fil ed a cro ss -cl ai m

an d a mo t i on fo r su m

m ary jud gm en t ag ai ns t Zup pa rd o, arg ui ng th at be cau se

Zup pa rd o ne ve r reco rd ed an y in te res t in Uni t 19
, th e Trus te e co ul d av oi d Zup pa rd o’s

un reco rd ed in te res t in th e sa le pr oc eed s, pu rs ua nt to th e Trus te e’s “ st r o n g a r m”

po wers un de r 11 U.S.C. § 54 4( a). In res po n s e , Zu p p a r d o arg ue d (1 ) th at he ha d in

fact reco rd ed hi s in te res t in Uni t 19 be fo re th e co m m en cem en t of th e Ch ap te r 11

I t also appea

rs that, on April 5, 2007, BC Properties filed an eviction, ejec tment and quiet 3 title action ag ainst Z uppardo in Sarasota County Circuit Court. Howeve r, we could locate nothing in t h e re co rd t h at indicates the result of that proce eding or whether it was dropped beca use of, or subsumed by , the bankr

uptcy proce eding

.

5pr oc eed in g, po in ti ng to hi s “ Am en de d an d Rev is e d Sat is fact io n of Mo rtg ag e,” (2 )

th at BC P r o p e r t i e s di d no t ha ve a pr op erl y reco rd ed in te res t in Uni t 19 be cau se , in

pu rch as in g th e co nd om in iu m s, BC Pro pe rti es ha d no t co m pl ie d wit h th e no ti ce

p r ov is io ns of th e co m

pl ex ’s Decl arat io n of Co nd om in iu m (“ bylaws ”), an d (3 ) th a t

Zup pa rd o ha d a rig h t of red em pt io n in al l of th e co nd om in iu m un it s so ld to BC

Pro pe rti es

.

W it ho ut ad dr es si ng Zup pa rd o’s arg um en t reg ard in g th e fact th at Zup pa rd o ha d

fil ed hi s sa ti sf

act io n of m or tg ag e pr io r to th e in st it ut io n of th e Ch ap te r 11

pr oc eed in gs , th e ba nk ru p t c y co ur t gr an te d su m m ary jud gm en t to th e Trus te e,

co nc lu di ng th at Zup pa rd o ha d on l y an un reco rd ed eq ui ta bl e in te res t in Uni t 19

.

The refo re, “ [a]ny in te res t whic h Zup pa rd o clai m s in th e Sal e Pro ceed s is in feri or to

th e Trus te e’s st at us as a jud ic ia l li en ho ld er an d bo na fid e pu rch as er fo r va lu e” un de r

11 U.S.C. § 54 4( a)(l ) an d (a)(3 ), res pe ct iv el y

. The ba nk ru pt cy co ur t ent ered a fin al

jud gm en t av oi di ng Zup pa rd o’s in te res t in Uni t 19 an d de em in g th e sa le pr oc eed s

pr op ert y of th e es ta te

. The ba nk ru pt cy co ur t de ci de d th at th e Trus te e ha d “ th e ab il it y

to av oi d an y po ss ib le un reco rd ed eq ui ta bl e in te res t of Zup pa rd o in Uni t 19 ” an d th at

“ [a]ny cl ai m s by Zup pa rd o to Uni t 19 an d th e Sal e Pro ceed s are in feri or to th e rig ht s

an d in te res ts of th e Trus te e.” The ba n k r u pt cy co ur t th en or de red th at “ [a]ny

6un reco rd ed eq ui ta bl e in te res t of Zup pa rd o in Uni t 19 an d th e Sal e Pro ceed s is he reb y

av oi de d b y

th e Tru st ee an d i s o f no for ce o r effe ct .”

The ba nk ru pt c y co ur t al so he ld th at th e fact th at BC Pro pe rti es ha d no t

co m pl ie d wit h th e co m

pl ex ’s bylaws di d no t affe ct it s ti tl e an d th at , whi le Zup pa rd o

m ay ha ve en

joy ed red em

pt io n rig ht s un de r th e te rm s of th e bylaws
, he ha d no t pu t up

th e fu nd s n eces sa ry

to ex erci se th os e ri gh ts

.

Als o in th e ad ve rs ary pr oc eed in g/ in te rp le ad er act io n, BC Pro pe rti es fil ed a

cro ss cl ai m ag ai ns t JHIS
, cl ai m in g, in te r al ia
, th at JHIS ha d m ad e frau d u l e nt

m is rep res en ta ti on s reg ard in g th e co m pl ex an d th e nu m

be r of un it s at th e co m

pl ex th at

were un de r le as e, th at BC Pro pe rti es ha d su ffer ed in ju r y b e c au se of th os e

m is rep res en ta ti on s, an d t ha t J HIS h ad be en un jus tl y en ric he d. On M arch 25 , 20 08
,

in th e m ai n Ch ap te r 11 pr oc eed in g, th e ba nk ru pt cy co ur t ap pr ov ed
, ov er Zup pa rd o’s

ob jecti on , a se t t l e men t ag reem en t reac he d be twee n th e Trus te e an d BC Pro pe rti es

r eg ard in g BC Pro pe rti es ’ cro ss cl ai m

. The ag reem en t pr ov id ed th at BC Pr o p e r t i e s

wou ld rece iv e $1 00 ,00 0 of th e sa le p r o c e e d s , th e Trus te e wou ld co nf irm BC

Pro pe rti es ’ own ers hi p of th e real pr op ert y , in cl ud in g Uni t 19
, an d th e Trus te e wou ld

ex ecu te an y ad di ti on al do cu m en ts reas on ab ly req ue st ed by BC Pro pe rti es to co nf irm

BC Pr op ert ie s’ own ers hi p o f an d t it le in th e rea l p ro pe rty.

7In ap pr ov in g t h e s e t tl em en t ag reem en t, th e ba nk ru pt cy co ur t fo un d it ha d

“ pr ev io us ly av oi de d Mi ch ael Zup pa rd o’s as se rte d eq ui ta bl e in te res t in Uni t 19

. The

Co ur t h ereb y

qu ie ts ti tl e in BC Prop ert ie s as to all 14 of t he co nd om in iu m un it s . . .

.” The c ou rt c on se qu en tl y ord ered Zup pa rd o t o v acat e Uni t 1 9.

Zup pa r d o a ls o fil ed a cl ai m in th e ad ve rs ary pr oc eed in g, se ek in g to reco ve r

at to rn ey ’s fees fro m th e sa le pr oc eed s un de r th e co m m on fu nd do ct rin e. He arg ue d

th a t h e w a s e nt it le d to reco ve ry be cau se hi s Mar ch 2, 20 07
, la wsu it in st at e co ur t

e f f ect iv el y pr es erv ed th e sa le pr oc eed s, th us co nf erri ng a su bs ta nt ia l be ne fit on t h e

Trus te e an d ot he r cred it or s. The ba nk ru pt cy co ur t gr an te d su m m ary jud gm en t to th e

Trus te e on th is cl ai m , fin di ng th at Zup pa rd o ha d fai le d to “ sa ti sf y al l of th e co m

m on

fu nd do ct rin e req ui rem en ts .” Alt ern at iv el y , th e ba nk ru pt cy co ur t fo un d th at , ev en if

Zup pa rd o di d sa ti sf

y th e req ui rem en ts , a co m m on -fu nd cl ai m was an un se cu red cl ai m

th at co ul d n ot tru m

p t he pri or it y

sch em e se t o ut in th e Ban kr up tc y Co de

.
Zup pa rd o ap pe al ed th e ba nk ru pt cy co ur t’s ru li ng to th e di st ric t co ur t. Afte r

co nc lu di ng th at it en

joy ed juri sd ic ti on ov er Zup pa rd o’s ap pe al
, t h e di st ric t co ur t

affi rm ed th e ba nk ru pt cy co ur t. The di st ric t co ur t no te d th at Fl or id a la w req ui red th at

“ a d eed m

us t b e rec or de d i n o rd er t o p ro te ct th e gr an te e’s in te res t in real pr op ert y ,”

an d c on cl ud ed :

8It is un di s p u te d th at Zup pa rd o ne ve r reco rd ed a de ed or an y ot he r

do cu m en t ev id en ci ng hi s pu rch as e of Uni t 19 be fo re Mar ch 29
, 20 07

. The re was no ev id en ce th at BC Pro pe rti es ha d act ua l no t ic e of Zup pa rd o’s in te res t in Uni t 19 be fo re it s tra ns act io n wit h JHIS cl os ed on Feb ru ary 20 ,20 0 7

. I n acco rd an ce wit h § 69 5.0 1( 1)
, BC Pro pe rti es ’ 4 5

warra nt y de ed
, reco rd ed on Feb ru ary 26 ,20 07
, ve st ed it wit h ti tl e to Uni t 19 su pe rio r to Zup pa rd o’s i nt eres t i n Un it 19 . S ee Ri ce v. Green e, 94 1 So

. 2d 12 30
, 12 30 -3 2 (Fl a. 5t h DCA 20 06 ) (wh ere two bu y ers pu rch as ed

sa m e pr op ert y wit ho ut no ti ce, th e fir st to reco rd he ld su pe rio r ti tl e to pr op ert y ). The do cu m en ts Zup p a r d o reco rd ed aft er th e reco rd at io n of BC Pro pe rti es ’ warra nt y de ed were in effe ct iv e as to BC Pro pe rti es ’ ti tl e to Uni t 1 9. Se e id

.

The di st ric t co ur t th en he ld th at , un de r th e st ro ng -arm pr ov is io ns of 11 U.S.C.

§ 54 4, th e ba nk ru pt cy tru st ee “ ha s th e po wer to av oi d cert ai n in te res ts th at bu rd en th e

pr op ert y of t he est at e.” Aft er fi nd in g t ha t “ th e Trus te e’s in te res t i n Un it 19 an d t he

Howeve r, the rec ord indicates that Z uppardo was in exclusive possession of the hair salon 4

at the time of the sale. I n Waldorff I ns. & Bonding I nc. v. Eg lin Na t. B ank, 453 So.2d 1383, 1385 (F la. App. 1st Dist. 1984) (q u o t i n g Bl ackburn v. Venice I nlet Co., 38 So. 2d 43 (F la. 1948)), the court stated:

I t i s s et t led law in Florida that actua l possession is constructive notice to all t h e world, o r an y o ne having knowledg e of said possession of whateve r rig ht the
occupa nts have in the land. Such possession, when open, visible and exclusive, will put upon inquiry those acquir ing any t i t l e t o or a lien upon the l and so occupie d to

asce rtain the na ture of the rig hts the occupa nts really have in the pr emises.

See also Kroitzsch v. Steele, 768 So.2d 514, 517 (F la.App. 2 Dist.,2000); Ates v. Yellow Pine L and Co., 310 So. 2d 772 (F la. App. 1st Dist. 1975); Carolina Portland Cement Co. v. Roper, 67 So. 115, 116 (F la. 1914).

Florida Statute § 695.01 (1), provides: “[n] o convey ance , transfe r, or mortg ag e of rea l 5
proper ty , or of any interest therein, nor any lease for a term o f 1 y ea r o r l ong er, shall be good and eff ectua l in law or equity ag ainst cre ditors or subsequent purcha sers for a valuable consideration and without notice, unless the same be rec orded a ccor ding to law .”

9Sal e Pro ceed s was su pe rio r to Zup pa rd o’s un reco rd ed eq ui ta bl e in te res t,” th e di st ric t

co ur t co nc lu de d t ha t Zu pp ard o’s i nt eres t “ was av oi da bl e u nd er Se ct io n 5 44 .”

The di st ric t co ur t al so di sc ou nt ed Zup pa rd o’ s cl ai m s ba se d on (1 ) th e pu rp or te d

fai lu re of BC Pro pe rti es to co m pl y wit h th e co nd om in iu m as so ci at io n’s bylaws wit h

res pe c t t o th e sa le of th e co nd om in iu m un it s, (2 ) Zup pa rd o’s su pp os ed red em pt io n

rig ht s se t fo rth in th e bylaws , a nd (3 ) Zup pa rd o’s arg um en ts th at he was en t i t le d to

a p or ti on of t he sal e p ro ceed s u nd er a co m m on fun d t he or y

.

II . DISCUSSI ON 6

A. Zup pa rd o’ s C la im t o Un it

19

Fo r reas on s th at wil l so on be co m e ap pa ren t, Zup pa rd o’s cl ai m to Uni t 19 an d

hi s cl ai m to th e sa le pr oc eed s m us t be ad dr es se d se pa rat el y

. R e g a r d i n g Uni t 19
,
Zup pa rd o arg ue s th at th e di st ric t co ur t erre d by affi rm in g th e b a n k r u p t cy co ur t’s

su m m ary jud gm en t or de r au th or iz in g th e Trus te e to av oi d Zup pa rd o’s in te res t in Uni t

19

. Zup pa rd o em

ph as iz es th at su ch av oi da nc e was st at ut or i l y im pr op er be cau se

Zup pa rd o reco rd ed hi s in te res t in Uni t 19 be fo re th e co m m en cem en t of th e

We revie w leg al conclusions by either the bankruptc y court or the district court de novo and 6 find ings of fac t for clea

r err or. I n re Optical Tec hnologie s., I nc., 425 F.3d 1294, 1300 (11th Cir. 2005)

10ba nk ru pt cy pr o c e e d i ng at whi ch ti m e th e Trus te e’s po wer to st ep in to th e de bt or ’s

sh oe s i s m eas ur ed

.

Befo re ad dr es si ng Zup pa rd o’s arg um en t, th is Co ur t is co m pe ll ed to fir st

in ve st ig at e whe th er th e cl ai m reg ard in g own ers hi p of Uni t 19 co nc ern ed pr op ert y of

th e ba nk ru pt cy es ta te so th at th e Trus te e en joy ed st an di ng to se ek to av oi d

Zup pa rd o’s in te res t. Thi s Co ur t rev ie ws de no vo th e qu es ti on of la w whe th er cert ai n

as se ts are pr op ert y of th e ba nk ru pt cy es ta te

. In re W it ko
, 37 4 F.3 d 10 40
, 10 42 (1 1t h

Ci r. 20 04 ). Fu rth er, be cau se st an di ng is a juri sd ic ti on al req ui rem en t, we m us t ad dr es s

it su a sp on te , an d Zup pa rd o’s fai lu re to rai se th e st an di ng is su e do es no t im pe de ou r

ab il it y to co ns id er th e is su e fo r th e f i r s t t i m e on ap pe al

. See Reg io n 8 Fo res t Serv

.

Tim be r Pu rch as ers Co un ci l v . Alco ck , 99 3 F .2d 80 0, 8 07 n.9 (11 th Cir . 19 93 ).

St an di ng pr es en ts a “ th res ho ld juri sd ic ti on al qu es ti on of whe th er a co ur t m ay

co ns id er th e m eri ts of a di sp ut e.” Elen d v. Bas ha m , 47 1 F.3 d 1 1 9 9
, 1 2 0 4 ( 20 06 ).

“ [T]he qu es ti on is whe th er th e pe rs on who se st an di ng is ch al le ng ed is a pr op er pa rty

to req ue st an ad

jud ic a t i o n o f a p art ic ul ar is su e an d no t whe th er th e is su e it se lf is

jus ti ci ab le .” Fl as t v. Co he n, 39 2 U.S. 83
, 99
, 88 S. Ct

. 19 42
, 19 52
, 20 L. Ed. 2d 94 7

(1 96 8)

.

Giv en th e fact s de sc rib ed ab ov e, Zup pa rd o ha d pu rch as ed an d di d own Uni t 19

pr io r to F e b r u a r y 20
, 20 07
, ev en th ou gh he ha d fai le d to reco rd hi s in te res t. His

11own ers hi p in te res t was , at le as t pr io r to BC Pro pe rti es ’ reco rd in g of it s de ed
, su pe rio r

to al l ot he rs ’ ex cep t th e m or tg ag e ho ld er Am So ut h Ban k, an d th at m or tg ag e in te res t

was ul ti m at el y sa ti sf

ie d. See su

pr a no te 2. JHIS was , of co ur se , reco rd own er, bu t,

ha vi ng pa id JHIS ful ly und er t he ter m s o f hi s in st al lm en t co nt ract , pu rch as e m on ey

no te , an d pu rch as e m on ey m or tg ag e, it is cl ear th at Zup pa rd o wou ld ha ve pr ev ai le d

in an y di sp ut e wit h J HIS reg ard in g o wne rs hi p o f Uni t 1 9.

On Feb ru ary 2 0, 20 07 , J HIS pu r p o r te d to se ll Uni t 19 to BC Pro pe rti es , a nd
,

in a cl as si c race to th e co ur th ou se , BC Prop ert ie s was ab le to reco rd it s d eed be fo re

Zup pa rd o reco rd ed hi s sa ti sf act io n of m or tg ag e. At th at po in t, as it is cl ear th at ei th er

Zup pa rd o or BC Pro pe rti es wou ld qu al ify as bo na fid e pu rch as ers un de r th e

Ban kr up tc y Co de an d th e Trus te e la ck ed au th or it y t o u n do ei th er sa le tra ns act io n

reg ard in g Uni t 19
, th e di sp ut e ab ou t who own ed Uni t 19 was be twee n Zup pa rd o an d

BC Pro p e r t i e s on ly. The Trus te e, pe rh ap s in an effo rt to reac h a se tt le m en t of BC

Pro pe rti es ’ cro ss -cl ai m in th e ad ve rs ary pr oc eed in g, ch ose to ta ke BC Pro pe rti es ’ si de

in th at di sp ut e. Howev er, be cau se Uni t 19 ha d be en so ld twi ce to bo na fid e pu rch as ers

pr io r to th e in st it ut io n of th e Ch ap te r 11 pr oc eed in gs , Un it 19 w a s n o t a pa rt of th e

ba nk ru pt cy es ta te

. Alt ho ug h b ot h Zu pp ard o and BC Prop ert ie s rais ed cl ai m s in th e

ba nk ru pt cy co ur t rela te d to Uni t 19
, th e ul ti m at e di sp os it io n of Unit 19 – whet he r it

12en de d up in th e ha nd s of Zup pa r d o o r BC Pro pe rti es – co ul d no t ha ve affe ct ed th e

es ta te or t he cla im s o f an y ot he r cre di to r.

The fil in g of a ba nk ru pt cy pe ti ti on crea te s an es ta te th at is co m pr is ed of
, am on g

ot he r th in gs , “ al l le ga l or eq ui ta bl e in te res ts of th e de b t o r in pr op ert y as of th e

co m m en cem en t of th e cas e.” 11 U.S.C. § 54 1( a)(1 ). “ Thi s in cl ud es le ga l cau se s of

act io n th e de bt or ha d ag ai ns t ot he rs at th e co m m en cem en t of th e ba nk ru pt cy cas e.”

In re Icar us Hol di ng , LLC, 39 1 F.3 d 13 15
, 13 19 (1 1t h Ci r. 20 04 ). Pu rs ua nt t o 1 1

U.S.C. § 32 3, if a cl ai m be lo ng s to th e es ta te , th en th e ba nk ru pt cy t r u s t ee ha s

ex cl us iv e st an di n g t o as se rt it

. Barg er v. Ci ty of Cart ers vi ll e, Ga., 34 8 F.3 d 12 89
,

12 92 (1 1t h Ci r. 20 03 ). Howev er, th e tru st ee ge ne ral ly la ck s st an di ng to br in g cl ai m s

th at be lo ng so le ly to th e es ta te ’s cred it or s, th e ou tc om e of whi ch wou ld no t affe ct th e

ba nk ru pt cy es ta te or th e rig ht s of all ot he r cred it or s. See Cap li n v. Mar in e Mi dl an d

Grace Trus t Co ., 40 6 U.S. 4 16 , 92 S. Ct. 1 67 8, 3 2 L. Ed. 2 d 1 95 (19 72 ).

Thi s Co ur t ha s no t br oa dl y de fin ed un de r whi ch ci rcu m s t a n c es a ba nk ru pt cy

tru st ee m ay as se rt cred it or s’ cl ai m s in ad di ti on to cl ai m s of th e es ta te

. O'Hall or an v.

Fi rs t Uni on Nat. Ban k of F l o r i d a, 35 0 F.3 d 11 97
, 12 02 n.3 (1 1t h Ci r. 20 03 ).

Howev er, in E.F. Hut to n & Co

. v. Had le y , 90 1 F.2 d 97 9, 98 5- 87 (1 1t h Ci r. 19 90 ), we

he ld
, in a de ci si on ex pr es sl y li m it ed to th e sp eci fic fact s of th at cas e , th at a tru st ee

la ck ed st a n di ng to br in g an act io n ag ai ns t a br ok erag e fir m on be ha lf of th e

13cu st om er/ cred it or s of a ba nk ru pt se cu rit ie s de a l e r

. In Had le y , th e de bt or so ld

m or tg ag e-b ack ed se cu rit i e s t o i ts cu st om ers , an d th en pu rch as ed th e se cu rit ie s

th ro ug h a br ok erag e ho us e un de r th e te rm s of a m arg in acco un t th at th e de bt or he ld

at th e b r o ke rag e ho us e. The cu st om ers pa id th e de bt or fu ll pr ic e fo r th e se cu rit ie s,

bu t, in a Po nz i sc he m e, th e d e b t o r on ly pa rti al ly pa id th e br ok erag e ho us e fo r th e

se cu rit ie s an d ret ai ne d th e rem ai nd er of th e fu nd s fo r it s own us e. Und er t he te rm s

of th e de bt or ’s m arg in acco un t, th e br ok erag e ho us e he ld th e se cu rit ie s as col la te ral

fo r th e am ou nt th at th e de bt or owe d th e br ok erag e ho us e on th e se cu rit ie s, an d whe n

pa y m en t of th at de bt was no t m ad e, th e br ok erag e ho us e so ld th e se cu rit ie s to reco up

it s lo ss es

. The de bt or fil ed fo r ba nk ru pt cy , an d t h e b a n k ru pt cy tru st ee su ed th e

br ok erag e ho us e un de r a va rie ty of le ga l th eo rie s to r e c o up th e cu st om er’s

ex pe nd it ur es on th e se cu rit ie s. 7

Und er th es e fact s, we he ld th at th e ba nk ru pt cy tru st ee di d no t ha ve st an di ng to

as se rt t he cla im s o f th e cre di to r cu st om ers . Id. at 98 5. In reac hi ng th is co nc lu si on ,

we rel ie d he av il y on th e Su pr em e Co ur t’s re a s on in g in Cap li n, su pr a , no ti ng th at ,

si m il ar t o th e ci rcu m st an ces in Cap li n, th e Had le y de bt or ha d no cl ai m ag ai ns t th e

b r o k e rag e ho us e an d th e cl ai m s th at were as se rte d were th os e of cert ai n of th e

de bt or ’s cred it or s o nl y . Id. at 98 7.

The fa cts and proc edura l history of Ha dley

are detailed a t 901 F.2d at 980- 83. 7

14Lik ewis e, in th is m at te r, JHIS ha s no cl ai m ag ai ns t Zup pa rd o or to Uni t 19
, an d

th e av oi da nc e of Zup pa rd o’s in te res t in Uni t 19 be ne fit te d on ly BC Prop ert ie s. See

al so In re Sev en S e a s Pet ro le um , In c., 52 2 F.3 d 57 5, 58 4 (5 th Ci r. 20 08 ) (ci ti ng

Cap li n f o r t he pr op os it io n th at “ th e tru st ee ha s no rig ht to br in g cl ai m s th at be lo ng

so le ly to th e es ta te ’s cred it or s” ); In re Brad le y , 32 6 F e d

. A pp x. 83 8, 83 9 (5 th Ci r.

20 09 ) (u np ub li sh ed ) (“ It is well es ta bl is he d th at a tru st ee ha s no st an di ng to br in g to rt

cl ai m s th at be l o n g e x c l us iv el y to cred it or s of th e ba nk ru pt cy es ta te .”); W il li am s v.

Cal

. 1s t Bank
, 85 9 F.2d 66 4, 66 7 (9t h Cir. 19 88 ); In re Ozark Res t. Equi p. Co., 816

F.2 d 12 22
, 12 26 -3 0 (8 th Ci r. 19 87 ). Acco rd in gl y , as in Had le y, we ho ld th at th e

Trus te e la ck ed st an di ng to se ek av oi da nc e of Zup pa rd o’s in te res t in Uni t 19 be cau se

th e cl ai m ha d no m at eri al rel at io ns hi p to th e JHIS ba nk ru pt cy es ta te an d th e ou tc om e

be ne fit te d on ly BC Pro pe rti es

. Fu rth er, whi le th e ou tc om e of th e di sp ut e be twee n BC

Pro pe rti es an d Zup pa rd o wou ld de te rm in e whi ch of th e pa r t i es ha d an un se cu red

c la im ag ai ns t th e ba nk ru pt cy es ta te fo r th e va lu e of Uni t 19
, th e cl ai m w o u l d b e

es se nt ia ll y

th e sa m e reg ard le ss of wh o p ur su ed it

.

Adm it te dl y , BC Pro pe rti es was a pa rty to th e ad ve rs ary pr oc eed in g an d li ke ly

ad vo ca t e d t h e b a n kr up tc y co ur t’s ru li ng on it s own be ha lf. Howev er, ev en if BC

Pro pe rti es ha d it se lf br ou gh t a qu ie t ti tl e cl ai m in th e ba nk ru pt cy pr oc eed in g, a rev ie w

15of ou r cas e la w rev eal s th at th e ba nk ru pt cy co ur t la ck ed juri sd ic ti on to en te rta in su ch

a cl ai m

.

Ban kr up tc y co ur ts en

joy juri sd ic ti on ov er “ an y or al l ca se s u nd er tit le 11 an d

an y or al l pr oc eed in gs ari si ng un de r ti tl e 11 or ari si ng in or rel at ed to a cas e un de r

ti tl e 11 ,” up on refe rral by a di st ric t co ur t. 28 U.S.C

. § 1 5 7 ( a ). “ Thu s, ba nk ru pt cy

co ur t ju ris di ct io n e xi st s, b y refe ren ce fro m th e di st ric t co ur ts , i n t hr ee ca te go rie s o f

pr oc eed in gs : th os e th at ‘aris e un de r ti tl e 11 ,’ th os e th at ‘aris e in cas es un de r ti tl e 11 ,’

an d th os e ‘relat ed to cas es un de r ti tl e 11 .’ ” In re Trus te d Net Med ia Hol di ng s, LLC,

55 0 F.3 d 10 35
, 10 39 ( 1 1 t h C i r

. 20 08 ) (ci ta ti on an d qu ot at io n om it te d)

. “ ‘A ris in g

un d e r’ pr oc eed in gs are m at te rs in vo ki ng a su bs ta nt iv e rig ht crea te d by th e

Ban kr up tc y Co de

. The ‘aris in g in a cas e un de r cat e g o r y ’ is ge ne ral ly th ou gh t to

in vo lv e ad m in is tra ti ve -type m at te rs .” Co nt ’l Nat’l Ban k of Mi am i v. San ch ez ( In re

Tol ed o) , 17 0 F .3d 13 40 , 13 45 (11 th Cir . 19 99 ) (ci ta ti on s om it te d)

. W it h res pe ct to

th os e cl ai m s th at are “ rel at ed to cas es un de r ti tl e 11 ,” we ha ve ad op te d th e fo ll owi ng

la ng ua ge fro m th e Thi rd Ci rcu it fo r de te rm in in g whet he r a p art ic ul ar clai m fit s in to

th is cat eg or y :

The

. . . te st fo r de te rm in in g whe th er a ci vi l pr oc eed in g is rel at ed to ba nk ru pt cy is whe th er th e ou tc om e of th e pr oc eed in g co ul d co nc ei va bl y ha ve an effe ct on th e es ta te be in g ad m in is te red in ba nk ru pt cy

. Th e pr oc eed in g ne e d n o t ne ces sa ril y be ag ai ns t th e de bt or or ag ai ns t th e de bt or ’s pr op ert y

. An act io n is rel at ed to ba nk ru pt cy i f th e ou tc om e

16co ul d alt er the de bt or ’s rig ht s, lia bi li ti es , op ti on s, o r free do m of act io n (ei th er po si ti ve ly or ne ga ti ve ly) an d whi ch in an y way im pa ct s up on th e ha nd li ng an d a dm in is tra ti on of t he ba nk ru pt est at e.

Mi ll er v. Kem ira
, In c. (In re Lem co Gy ps um , In c.), 91 0 F.2 d 78 4, 78 8 n1 9 (1 1t h Ci r.

19 90 ) (q uo ti ng an d ad op ti n g t h e Thi rd Ci rcu it ’s fo rm ul at io n fro m Paco r In c. v.

Hig gi ns , 74 3 F.2 d 98 4, 99 4 (3 d Ci r. 19 84 )); se e Lawren ce v. Gol db e rg , 57 3 F.3 d

12 65 , 12 70 -7 1 (1 1t h C ir. 2 00 9)

.

As th e own ers hi p of Uni t 19 is res ol ve d en ti rel y un de r s t a t e la w, th e

ba nk ru pt cy co de wou ld no t be in vo lv ed in th e res ol ut io n of th e di sp ut e. W e ha ve

al read y de te rm in ed th at Uni t 19 was no t pa rt of th e es ta te an d th at th e di sp os it io n of

Uni t 19 co ul d no t affe ct th e es ta te o r t h e r i g ht s of cred it or s ou ts id e of th e di sp ut e

be twee n Zup pa rd o an d BC Pro pe rti es

. It is eq ua ll y c l e a r t h a t th e ou tc om e of th e

di sp ut e be twee n Zup pa rd o an d BC Pro pe rti es wou ld in no way al te r JHIS ’ rig ht s,

li ab il it ie s, op ti on s, or free do m of act io n (ei th er po si ti ve ly or ne ga ti ve ly) or in an y way

affe ct th e ha nd li ng an d ad m in is tra ti on of th e ba nk ru pt es ta te

. W e th eref or e co nc lu de

th at th e ba nk ru pt cy co ur t l a c k ed juri sd ic ti on to en te rta in a cl ai m reg ard in g th e

own ers hi p of Uni t 19

. The qu es ti on of th e own ers hi p of Uni t 19 is a m at te r th at m us t

be de ci de d i n s ta te co ur t.

B. Zup pa rd o’ s C la im t o t he Sa le Pro ceed s

17Turn in g n ow t o t he sal e p ro ceed s, wh ic h are clear ly a pa rt of th e b an kr up tc y

es ta te , th is Co ur t fir st no te s th at , ha vi ng r e v i e w e d Zup pa rd o’s arg um en ts an d th e

rel ev an t la w on th e is su e, we ag ree wit h th e di st ric t co ur t th at Zup pa rd o ha s no

co gn iz ab le cl ai m to th e in te rp le ad er fu nd s un de r a co m m on fu nd th eo ry

. W e th us

affi rm th at po rti on of th e b an kr up tc y co ur t’s an d d is tri ct co ur t’s o rd ers an d wi ll no t

fu rth er ad dr es s t ha t i ss ue

.

Add it io na ll y , al th ou gh Zup pa rd o ob jecte d in t h e b a nk ru pt cy co ur t to th e

Trus te e’s $1 00 ,00 0.0 0 se tt le m en t wit h BC Pro pe rti es th at cam e ou t of th e sa le

pr oc eed s, Zup pa rd o ha s no t pr es erv ed th at ob jecti on on ap pe al

. As to th e rem ai nd er

of sa le pr oc eed s, it is no t en ti rel y cl ear fro m th e reco rd whe th er th e ba nk ru pt cy co ur t

av oi de d – un de r Sect io n 54 4 – al l of Zup pa rd o’s in te res t in th os e p r o c e e d s

. I n it s

or de r of Sep te m

be r 30
, 20 09
, affi rm in g th e ba nk ru pt cy co ur t, th e di st ric t co ur t no te d

th at th e ba nk ru pt cy co ur t gr an te d su m m ary jud gm en t i n fa vo r of th e Trus te e on th e

Trus te e’s cro ss cl ai m se ek in g to av oi d Zup pa rd o’s in te res t in Uni t 19 an d in th e sa le

pr oc eed s. Th e d is tri ct co ur t l at er s ta te d, h owe ve r, th at th e ba nk ru pt cy co ur t d en ie d

Zup pa rd o’s co m

m on fu nd cl ai m to th e sa le pr oc eed s “ wit ho ut pr ejud ic e to Zup pa rd o

fil in g a ge ne ral un se cu red cla im .”

W hi ch ev er th e ba nk ru pt cy co ur t in te nd ed
, we ag ree th at Zup pa rd o wou ld no t

ha ve a se cu red cl ai m to fu nd s th at BC Pro pe rti es pa id to JHIS

. Eve n if th e m or tg ag e

18sa ti sf

act io n th at Zup pa rd o reco rd ed was effe ct iv e to pu t th e Trus te e on no ti ce as to

Zup pa rd o’s in te res t in Uni t 19
, it wou ld no t co ve r fu nd s th at th e de bt or rece iv ed fro m

an ot he r so ur ce. Non et he le ss , we st res s t ha t we s ee n o re as on why Zup pa rd o wou ld

no t h a v e an un se cu red cl ai m to th e sa le pr oc eed s an d wha te ve r ot he r fu nd s or

pr op ert y co m pr is e th e b an kr up tc y

est at e.

II I. CONCLUS IO N

The ba nk ru pt cy co ur t’s an d di st ric t co ur t’s or de rs de nyin g Zup pa rd o’s in te res t

in th e in te rp le ad ed sa le pr oc eed s are AFFIR MED, reco gn iz in g th at Zup pa rd o ret ai ns

hi s po si ti on as an un se cu red cred it or

. Howev er, as th e ba nk ru pt c y c o u r t la ck ed

juri sd ic ti on ov er th e di sp os it io n of Uni t 19
, th e or de rs av oi di ng Zup pa rd o’s in te res t

in Uni t 19
, qu ie ti ng ti tl e to Uni t 1 9 i n B C Pro pe rti es , an d req ui rin g Zup pa rd o to

va cat e Uni t 19 are REVERSED. Fi na ll y , Zup pa rd o’s m ot io n to cert ify qu es ti on s to

th e Fl or id a Su pr em e Co ur t, wh i c h q ue st io ns al l rel at e to no ti ce in rel at io n to a real

es ta te co nv ey an ce, i s DENIED as m oo t.

AFFIR MED IN PART, REVERSED IN PART AND REMANDED.

19