# U ni te d S ta te s B an kr up tc y A pp el la te P an el

For the Eig hth Circu it

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No. 1 2- 60 50

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In re: Raym on d Kel le y ; Kar en Pat ric e Kel le y

ll ll ll ll ll ll ll ll ll ll l Deb to r s

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Raym on d Kel le y ; Kar en Pat ric e Kel le y

ll ll ll ll ll ll ll ll ll ll l Deb to rs - App el la nt s

v.

Cen te nn ia l Ba nk

ll ll ll ll ll ll ll ll ll ll l

Mov an t - Ap

pe ll ee

__

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App eal fro m

Uni te d S ta te s B an kr up tc y Co ur t fo r th e Eas te rn Dis tri ct of Ark an sa s - Li tt le Ro ck

__

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Su bm it te d: Jan ua ry

23 , 20 13
Fil ed : J an ua ry

30 , 20 13

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Befo re SC HERMER, FEDERMAN an d S ALADINO, Bank ru pt cy Ju dg es

.

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SCHERM ER, Ban kr up tc y Ju dg eThe Deb to rs Raym on d Kell ey an d Karen Pa tr ic e K el ley

, (th e “ Deb to rs ”) ap pe al

fro m an Aug us t 31

, 20 1 2 o r d e r o f th e ba nk ru pt cy co ur t req ui rin g th e Deb to rs to 1

co nv ey to Cen te nn ia l Ban k (th e “ Ban k” ) real pr op ert y

. W e ha ve juri sd ic ti on ov er th is

ap pe al fro m th e fin al or de r of th e ba nk ru pt cy co ur t. Se e 28 U.S.C. § 15 8( b)

. Fo r th e

reas on s s et for th be lo w, we affi rm

.

IS SUE

The is su e in th is ap pe al i s whe th er th e ba nk ru pt cy co ur t erre d in it s

in te rp ret at io n of th e ph ras e “ ab an do n th e pr op ert ie s to Cen te nn ia l Ban k,” as us ed in

it s earl ie r or de r an d in th e Deb to rs ’ co nf irmed Ch ap te r 11 pl an , to req ui re th e Deb to rs

to co nv ey real pr op ert y to th e Ban k. W e ho ld th at th e ba nk ru pt cy co ur t act ed wit hi n 2

i t s d i s c r e ti on whe n it in te rp ret ed it s or de r an d th e Ch ap te r 11 pl an to m ean th at th e
Deb to rs were re qu ire d t o c on ve y th e rea l p ro pe rty to t he Ban k.

BACKGRO UND

O n M a y 18

, 20 10

, th e Deb to rs fil ed a pe ti ti on fo r rel ie f un de r Ch ap te r 1 3 o f

Tit le 11 of th e Uni te d St at es Co de (th e “ Ban kr up tc y Co de ”). A few m on th s la te r, th e
Deb to rs ’ cas e was co nv ert ed to Ch ap te r 11

.

The Ban k, a lo ng -ti m e cred it or of th e Deb to rs w i t h a se cu rit y in te res ts in

va rio us pa rcel s of th e Deb to rs ’ real pr op ert y , ob jecte d to co nf

irmatio n of th e Deb to rs ’

The Hon or ab le Aud rey R. Ev an s, Uni te d St at es Ban kr up tc y Ju dg e fo r 1

th e Eas te rn Dis tri ct of Ark an sa s.

The Deb to rs m ad e ad di ti on al arg um en ts be fo re th e ba nk ru pt cy co ur t 2

reg ard in g why t he y sh ou ld no t be req ui red to co nv ey th e real pr op ert y to th e Ban k.

Bec au se th e Deb to rs di d no t ad dr es s an y of th e ad di ti on al arg um en ts in th ei r br ie f on
ap pe al , we do no t co ns id er t he ad di ti on al arg um en ts

.

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-Ch ap te r 11 pl an an d fil ed a m ot io n to di sm is s th ei r ba nk ru pt cy cas e. As pa rt of an

Agr eed Ord er, th e Ban k a gr eed to wit hd raw it s m ot io n to di sm is s an d it s ob jecti on

to co nf irmatio n of th e pl an pr ov id ed th at

, wit hi n a cert ai n pe rio d of ti m e, th e Deb to rs

fil e an am en de d pl an in co rp or a t i n g la ng ua ge fro m th e Agr eed Ord er. The Agr eed

Ord er s ta te s:

Deb to r an d Cen te nn ia l wil l joi nt ly m ark et th e fo ll owi ng pr op ert ie s fo r

on e y ear fro m th e effe ct iv e da te of th e Pl an

. In th e ev en t th e pr op ert ie s do no t se ll wit hi n th at pe rio d of ti m e, Deb to r wil l ab an do n th e pr op ert ie s
to Cen te nn ia l Ba nk :

a. 80 acre s o f la nd on Fri en ds hi p R oa d;

b. 3 0 a cres of l an d o n F rie nd sh ip Ro ad ; c. Mayflo wer Car W as h, M il le r St reet , Mayflowe r, AR;

d. Vaca nt lo t n ex t t o M ay flo wer Car W as h;

e. Gol d C reek Car Wash , Mayflowe r, AR;

f. Vacan t l ot 63 9 Hwy . 36 5, M ay flo wer, AR.

The Deb to rs fil ed an am en de d Ch ap te r 11 pl an th at in co rp or at es as i t s Para gr ap h

2.0 8.5 th e la ng ua ge se t fo rth ab ov e. The am en de d pl an al so in co r p o r a t es ot he r

req ui red la ng ua ge fro m th e Agr eed Or d e r

. The ba nk ru pt cy co ur t co nf irmed th e

am en de d p la n (t he “ Co nf irmed Pl an ”).

The Agr eed Ord er an d Co nf irmed Pl an ad dr es s de ta il s reg ard in g th e sa le of th e

pr op ert ie s li st ed in Para gr ap h 2.0 8.5 of th e Co nf irmed Pl an , in cl ud in g co nt in ge nc ie s

th at co ul d ari se , su ch as di sa gr eem en t ab ou t pr ic e. In ad di ti on , th e Agr eed Ord er an d

Co nf irmed Pl an m ak e se pa rat e pr ov is io ns fo r ti m es whe n th e Ban k m ay fil e ex pa rte

m ot io ns fo r rel ie f fro m th e au to m at ic st ay fo r th e Deb to r’s fai lu re to co m pl y wit h

th ei r ot he r ob li g a t i o n s u n d er th e Co nf irmed Pl an , su ch as fai lu re by th e Deb to rs to

ke ep tax an d i ns ur an ce o n v ari ou s p ro pe rti es cu rren t.

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-The on e y ear pe rio d in th e Agr eed Ord er an d in Par a g r a p h 2.0 8.5 of th e

Co nf irmed Pl an ex pi re d wit ho ut a sa le of th e pr op ert ie s an d th e Deb to rs di d no t

co nv ey th e pr op ert ie s to th e Ban k. The reaf te r, th e Ban k fil ed a “ Pet it io n” wit h th e
ba nk ru pt cy co ur t, se ek in g an or de r di rect in g th e Deb to rs to co nv ey th e pr op ert ie s to

th e Ban k. The Deb to rs ob jecte d t o t h e B a n k’s Pet it io n. Afte r a he ari ng , th e
ba nk ru pt cy co ur t st at ed it s po si ti on on th e reco rd an d in a writ te n or de r da te d Aug us t

31

, 20 12 (th e “ Aug us t 31

, 20 12 Ord er”)

, no ti ng th at th e e v i d e nc e pr od uc ed at th e
he ari ng sh owe d th at th e Deb to rs ha d no t co op erat ed wit h th e Ban k’s effo rts to m ark et

an d se ll th e p r o p e rti es an d th at th e pr op ert ie s ha d no t be en so ld

. The ba nk ru pt cy

co ur t in te rp ret ed th e ph ras e “ ab an do n th e pr op ert ie s to Cen te nn ia l Ban k” us ed in th e Agr eed Ord er an d in Para gr ap h 2.0 8.5 of th e Co nf irmed Pl an an d en fo rced it s Agr eed

Ord er an d Co nf

irmed Pl an

. The Deb t o r s w ere req ui red to “ ex ecu te th e ne ces sa ry
do c u men ts to co nv ey to Cen te nn ia l th e pa rcel s of real pr op ert y refe rred to in th e

. .

. Agr eed Ord er, an d in cl ud ed in Para gr ap h 2.0 8.5 of th e Deb to r’s co nf irmed Ch ap te r

11 pl an .”

STANDARD OF REVIEW

The ba nk ru pt cy co ur t’s Aug us t 31

, 20 12 Ord er r e qu ire d it to in te rp ret th e
ph ras e “ ab an do n th e pr op ert ie s to Cen te nn ia l Ban k” fro m th e Agr eed Ord er an d th e

Co nf irmed Pl an

. A ba nk ru pt cy co ur t’s in te rp ret at io n of it s own or de r is rev ie wed fo r

an ab us e of di sc ret io n. Tr il og y Dev. Co

., LLC v. J.E. Dun n Co ns t. Co

. (In re Tr il og y

Dev. Co .), 46 8 B.R. 83 5, 83 7 (B.A.P. 8t h Ci r. 20 12 ) (ci ta ti on om it te d)

. A ba nk ru pt cy

co u r t’s “ in te rp ret at io n of th e co nf irmed pl an is en ti tl ed to de fere nc e as an

in te rp ret at io n of it s own or de r an d ‘sho ul d be rev ie wed un de r th e ab us e of di sc ret io n

s t a n d a rd .’ ” JCB, In c. v. Uni on Pla nt er s Ban k, N.A.

, 53 9 F.3 d 86 2, 86 9 (8 t h C i r

. 20 0 8 ) ( qu ot in g Gen

. Elec

. Ca pi ta l Co rp

. v. Dia l Bus

. For ms, In c. (In re Dia l Bus

. For ms, In c.), 34 1 F. 3 d 7 3 8, 74 4 (8 th Ci r. 20 03 )). “ An ab us e of di sc ret io n wil l be

fo un d on ly if th e co ur t’s ju d g m en t was ba se d on cl earl y erro ne ou s fact ua l fin di ng s

-4

-or on erro ne ou s le ga l co nc lu si on s.” Tr il og y Dev. Co

., LLC

, 46 8 B.R. at 83 7 (ci ta ti on

om it t e d )

. The ab us e of di sc ret io n st an da rd an d th e cl earl y erro ne ou s st an da rd are

al m os t th e sa m e in th ei r ap pl ic at io n. Boy he r v. Rad lo ff (In re Boy he r)

, 46 7 B.R. 67 2,

67 5 (B.A.P. 8t h Ci r. 20 12 ) (ci ta ti on om it te d)

. “ A fin di ng is ‘clear ly erro ne ou s' whe n

al th ou gh th ere is ev id en ce to su pp or t it

, th e rev ie win g co ur t on th e en ti re ev id en ce is

le ft wit h th e de fin it e an d fir m co nv ic ti on th at a m is ta ke h a s b e e n c om m it te d.”

And er so n v. Bess emer Ci ty

, 47 0 U.S. 56 4, 57 3 (1 98 5) (q uo ti ng U.S. v. U.S. Gyp su m

Co

. , 33 3 U.S. 3 64 , 39 5 (1 94 8) ).

DISCUSS IO N

The Deb to rs arg u e th at th e te rm “ ab an do n,” in th e ph ras e “ ab an do n th e

pr op ert ie s to Cen te nn ia l Ban k” as us ed in th e Agr eed Ord er an d th e Co nf irmed Pl an , sh ou ld no t be in te rp ret ed to req ui re th e Deb to rs to co nv ey th e pr op ert ie s to th e Ban k.

Rat he r, th e Deb to rs m ai nt ai n th at th e b an kr up tc y co ur t sh ou ld ha ve in te rp ret ed

“ ab an do n” as a te rm of art un de r Ban kr up tc y Co de § 5 5 4 to m ean to ab an do n fro m

th e ba nk ru pt cy es ta te an d rev ert to it s pr e-p et it io n st at us as pr op ert y of th e Deb to rs ,

acco rd in gl y , th e Ban k m ig ht be al l o w e d

, a t m os t, rel ie f fro m th e au to m at ic st ay to

pu rs ue it s s ta te law re m ed ie s. 3

The Agre ed Orde r an d t he Co nf irmed Pl an do no t d efi ne th e te rm “ ab an do n”

as us ed in th e ph ras e “ ab an do n t h e p r op ert ie s to Cen te nn ia l Ban k.” Bu t th e
ba nk ru pt cy co ur t is in th e be s t p o s i t io n to in te rp ret th e m ean in g of it s own or de rs

.

The Deb to rs al so arg ue t h a t th e ba nk ru pt cy co ur t’s ru li ng was wro ng 3

be cau se th e or di na ry di ct io na ry de fin it io n of th e te rm “ ab an do n” m ean s “ ‘to gi ve up ’,
‘to wit hd raw fro m ’, ‘to ceas e fro m m ai nt ai ni ng , pr act ic in g or us in g’ .” As ex pl ai ne d,
th e on ly m ean in g rel ev an t he re is th e m ean in g us ed by th e ba nk ru pt cy co ur t whe n it
in te rp ret ed th e ag reem en t of th e pa rti es as s et fo rth in th e Agr eed Ord er an d th e Co nf irmed Pl an

.

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-Tr il og

y Dev. Co

., LLC

, 46 8 B.R. at 83 8 (ci ta ti on om it te d)

. And th e ba nk ru pt cy co ur t

di d n ot ab us e it s d is cret io n i n i ts in te rp ret at io n.

The an al y si s pr o v i d e d by th e ba nk ru pt cy co ur t is lo gi cal

, th or ou gh an d

su pp or te d by th e reco rd

. The co ur t de te rm in ed th at t h e Ban k refr ai ne d fro m

ex erci si ng it s rig ht s at the ti m e of th e pa rti es ’ se tt le m en t i n e xc ha ng e fo r it s rig ht to

ge t th e pr op ert ie s ba ck aft er a y ear if th ey were no t so ld

, an d it in te rp ret ed th e Agr eed

Ord er an d Co nf

irmed Pl an to m ean th at th e Deb to rs wou ld co op er a t e i n g i v i ng th e

pr op ert ie s to th e Ban k. The co ur t read th e Agr eed Ord er an d th e Co nf irmed Pl an as

a who le

, no ti ng th e th or ou gh de ta il s an d fin d i n g n o t hi ng am bi gu ou s ab ou t th e

ag reem en t of th e pa rte s. It st at ed at th e he ari ng on th e Pet it io n: “ Aba nd on m en t is no t

to be co ns id ered as so m e co nc ep t in th e [Ban kr up tc y ] Co de or th e co m m on la w. Thi s
is an ag reem en t be twee n two pa rti es

. It sa y s if th e pr op ert ie s do no t se ll

, qu ot e: ‘T he
[D]ebt or wil l ab an do n t he pro pe rti es to Cen te nn ia l.’ That ’s just ve ry cle ar.”

In it s Aug us t 31

, 20 12 Ord er, th e ba nk ru pt cy co ur t cl as si fie d th e Deb to rs ’

arg um en t th at th e te rm “ ab an do n” di d no t req ui re a co nv ey an ce of the pr op ert ie s by

th e Deb to rs , as an arg um en t th at “ el ev at es fo rm ov er sub st an ce.” Poi nt in g o ut th at

th e p art ie s h ad pro vi de d lan gu ag e al lo win g th e Ban k t o re cei ve ex pa rte rel ie f fro m

th e st ay if th e Deb to rs di d no t m eet ot he r ob li ga ti on s un de r th e Co nf irmed Pl an , th e

co ur t sta te d th at “ if t ha t wer e wha t t he pa rti es ha d bar ga in ed fo r in th ei r ag reem en t,

th at la ng ua ge wou ld ha ve be en pr ov id ed fo r in th e Agr eed Ord er a n d c h a pt er 11
pl an .” The co ur t no te d th at

, in st ead

, th e pa rti es ag reed th at th e pr op ert ie s wou ld be

“ ab an do ne d to Cen te nn ia l .”

Rec og ni zi ng th at it wou ld ha ve be en cl eare r if th e pa rti es h ad us ed th e te rm

“ co nv ey ed ,” t h e c o ur t st at ed th at “ th e pr ov is io ns of th e Agr eed Ord er, ta ke n as a
who le

, cl earl y co nt em

pl at e th at if th e pr op ert ie s di d no t se ll

, Cen te nn ia l wou ld ob ta in

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-th e pr op ert ie s.” W it h res pe ct to “ ab an do nm en t” as a te rm of art un de r th e Ban kr up tc y

Co de

, th e co ur t, st at ed th at “ [t]he re is no ev id en ce th e pa rti es in te nd ed to us e th e te rm
‘aban do n’ to refe r on ly to ‘aban d o n men t ’ b y th e es ta te as th at te rm is us ed in 11

U.S.C. § 55 4 (wh ic h wou ld no t mak e se ns e in th e co nt ex t of th e Agr eed Ord er).”

And we ag ree th at a b a n d o n men t un de r § 55 4 do es no t m ak e se ns e he re whe re th e

pr op ert ie s wer e to be ab an do ne d s pe ci fic al ly to Cen te nn ia l

.

The ba nk ru pt cy co ur t’s de ci si on is n o t ba se d on cl earl y erro ne ou s fact ua l

fin di ng s o r erro ne ou s l eg al co nc lu si on s. Th e co ur t ac te d wi th in it s d is cret io n.

CONCLUSI ON

The de ci si on of t he ba nk ru pt cy co ur t i s AFF IRM ED.

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