United States Court of Appeals

For the Eighth Circuit

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No. 12-1305

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In re: AFY, also known as Ainsworth Feed Yards Company, Inc.

lllllllllllllllllllllDebtor

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Robert A. Sears; Korley B. Sears

lllllllllllllllllllllAppellants

v.

Ronald H. Sears; Ron H. Sears Trust; Rhett R. Sears; Rhett Sears Revocable Trust;

Dane Sears

lllllllllllllllllllllAppellees

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Appeal from the United States Bankruptcy

 Appellate Panel for the Eighth Circuit

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 Submitted: February 13, 2013

 Filed: October 23, 2013

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Before RILEY, Chief Judge, LOKEN and SHEPHERD, Circuit Judges.

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RILEY, Chief Judge.
Robert A. Sears and Korley B. Sears (collectively, appellants) claim to be the

only present shareholders of AFY, Inc. (AFY), a debtor in bankruptcy. Rhett R.

Sears, the Rhett R. Sears Revocable Trust, Ronald H. Sears, the Ron H. Sears Trust,

and Dane R. Sears (collectively, appellees) made claims on AFY’s bankruptcy estate

in connection with the sale of appellees’ former interests in AFY. The bankruptcy

court denied appellants’ objections to the claims on June 8, 2011. The United States 1

Bankruptcy Appellate Panel for the Eighth Circuit (BAP) affirmed on January 23,

2012, see In re AFY, Inc. (Sears v. Sears), 463 B.R. 483, 492 (8th Cir. B.A.P. 2012),

and appellants now appeal. Because appellants lack standing to appeal the

bankruptcy court’s order, we dismiss their appeal.

I. BACKGROUND

Appellees sold their ownership interests in AFY in June 2007 pursuant to a

Stock Sale Agreement (Agreement), which they claim jointly obligated Korley and

AFY to pay for appellees’ shares. Appellants maintain that “[a]lthough AFY was a

party to that [A]greement,” only Korley was liable for the price of the shares.

On March 25, 2010, AFY filed for bankruptcy under Chapter 11, 11 U.S.C.

§§ 1101-1174. In response to appellees’ motion to appoint a trustee, the bankruptcy

court appointed Joseph H. Badami as trustee in May 2010.

On April 27, 2010, appellees filed proofs of Claims 8, 9, and 10 in the

bankruptcy court, seeking payment from AFY’s estate for the purchase price of the

stock they sold in the Agreement. Appellants objected to these proofs of claim. 

Badami did not object. 

The Honorable Thomas L. Saladino, Chief Judge, United States Bankruptcy

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Court for the District of Nebraska.

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After denying appellants’ motions to postpone the hearing on Claims 8, 9, and

10, and for a hearing with live testimony and cross-examination of witnesses, the

bankruptcy court held a hearing on May 18, 2011, with the affidavits concerning

these claims. On June 8, 2011, the bankruptcy court denied appellants’ objections to

Claims 8, 9, and 10, holding AFY clearly was a “buyer” under the Agreement and

rejecting the affirmative defenses raised by appellants. Appellants appealed to the

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BAP, which affirmed the bankruptcy court on January 23, 2012. See Sears v. Sears,

463 B.R. at 492.

Appellants now appeal the bankruptcy court’s denials of (1) their objections

to Claims 8, 9, and 10, and (2) their motions for a continuance and a hearing with live

witnesses.

II. DISCUSSION

Appellees assert appellants lack standing to appeal the bankruptcy court’s

order. “‘Appellate standing in bankruptcy cases is more limited than Article III

standing or the prudential standing requirements associated therewith.’” In re AFY,

Inc. (Sears v. Badami), ___ F.3d ___, ___, No. 11-2282 slip op. at 13 (8th Cir. 2013)

(quoting In re Troutman Enters., Inc., 286 F.3d 359, 364 (6th Cir. 2002)). “[T]he

person aggrieved doctrine limits standing to persons with a financial stake in the

bankruptcy court’s order, meaning they were directly and adversely affected

pecuniarily by the order.” Id. at __, slip op. at 12 (quoting In re Marlar, 252 B.R.

743, 748 (8th Cir. B.A.P. 2000)) (internal marks omitted). 

AFY, which isthe only party directly and adversely affected by the bankruptcy

court’s order allowing Claims 8, 9, and 10, is not a party to this appeal. Any effect

In the same order, the bankruptcy court also granted appellees’ objections to 2

a proof of claim, Claim 26, filed by Korley. On appeal, appellants do not argue

against the bankruptcy court’s order with respect to Claim 26.

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on appellants is indirect, based on their status as shareholders of AFY. Shareholders

may not “‘appeal a bankruptcy court decision where they assert[] only a derivative

interest.’” Id. at ___, slip op. at 14 (quoting In re Troutman Enters., Inc., 286 F.3d

at 365). This “rule, which applies to even a sole shareholder, ‘recognizes that

corporations are entities separate from their shareholders in contradistinction with

partnerships or other unincorporated associations.’” Id. (quoting Smith Setzer &

Sons, Inc. v. S.C. Procurement Review Panel, 20 F.3d 1311, 1317 (4th Cir. 1994)).

Appellants contend they have standing because they will only receive

distributions from AFY’s estate if AFY’s estate is solvent, and Claims 8, 9, and 10

determine the solvency of AFY’s estate. We rejected this argument for standing in

Sears v. Badami, ___ F.3d at ___, slip op. at 18-21, because the issue derives from

appellants’ status as shareholders.

Alternatively, appellants claim they have standing under Singleton v. Wulff,

428 U.S. 106, 114-16 (1976), because they are the only parties who can assert the

rights of AFY, which “has been stripped of all its assets by the appointment of a

Trustee.” As we explained in Sears v. Badami, ___ F.3d at ___, slip op. at 15,

“Singleton only addresses general prudential standing requirements. . . . It does not

confer appellate standing in the bankruptcy context—which involves a stricter

standard.” Singleton therefore does not help appellants. See id.

Finally, to the extent appellants argue that they have standing because Badami

acted in bad faith, we are not persuaded by this argument. Cf. Franchise Tax Bd. of

Cal. v. Alcan AluminumLtd., 493 U.S. 331, 336 (1990)(acknowledging an exception

to the shareholder standing rule where a “corporation’s management has refused to

pursue the same action for reasons other than good-faith business judgment”). 

Appellants appear to argue—although their reasoning is far from clear—that

Badami’s decision not to object to Claims 8, 9, and 10 was in bad faith because (1)

Badami’s “interests are allied with those of” appellees, who filed the motion to have

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a trustee appointed; and (2) appellants are involved in ongoing litigation with

Badami. Neither assertion is sufficiently supported to establish Badami refused to

object to Claims 8, 9, and 10 for any reason other than good faith business judgment. 

The exception to the shareholder standing rule acknowledged in Franchise TaxBoard

of California does not apply here. See id. 

Because appellantslack standing to appeal the bankruptcy court’s order, we do

not reach the merits of their appeal.

III. CONCLUSION

We dismiss appellants’ appeal from the bankruptcy court’s order overruling

appellants’ objections to Claims 8, 9, and 10.

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