Opinion ID: 2976350
Heading Depth: 2
Heading Rank: 3

Heading: facts

Text: On December 6, 2001, the Debtor filed a petition for relief under chapter 7 of the U.S. Bankruptcy Code;1 on April 25, 2002, a discharge order was entered; and on May 15, 2002, the 1 Since the Debtor filed his bankruptcy petition prior to October 17, 2005, the case is governed by the Bankruptcy Code without regard to the amendments made to the Bankruptcy Code by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. All statutory references are to the Bankruptcy Code, 11 U.S.C. §§ 101 to 1330 (2004), unless otherwise specifically noted. 3 Debtor’s bankruptcy case was closed as a no-asset case. On July 15, 2005, the Debtor filed an action in state court against the Appellant and Airpack, Inc. (“Airpack”), alleging that he was wrongfully deprived of his investment in and employment at Airpack. The Appellant then advised the Trustee and the U.S. Trustee that the Debtor had not disclosed his ownership of stock in Airpack during his bankruptcy case. On April 12, 2006, the trustee moved to reopen the Debtor’s bankruptcy case. The case was reopened. After investigation, the Trustee determined that the Debtor’s failure to disclose his ownership of stock in Airpack was not in bad faith, that he did not gain financial benefit from his failure to disclosure, and that he had no motive for his failure to disclose. Indeed, we note that no action, civil or criminal, was brought against the Debtor for failing to disclose the Airpack stock. In the intervening years, the stock increased in value. The dispute here centers around the fact that the Debtor offered to pay $32,493.55 to the Trustee for his minority share of stock in Airpack, an amount which pays all claims against the bankruptcy estate in full, including administrative costs, and the Appellant offered $37,500 for the stock, which exceeds the amount offered by the Debtor, with the excess being paid to the Debtor. On January 29, 2007, the Trustee filed his motion for “Authority to Compromise the Bankruptcy Estate’s Claim to the Debtor’s Equitable Interest in Airpack, Inc. and to Abandon any Remaining Interest in Airpack, Inc,” to which the Appellant, and only the Appellant, filed an objection. A hearing was conducted, and on June 26, 2007, the bankruptcy court entered its Memorandum of Opinion and Order and Judgment, granting the Trustee’s motion in large part.2 As concerns the Trustee’s motion for authority to compromise, the court held: “[T]he proposed 2 Based on insufficient evidence in the record, the court declined to make findings that the Debtor’s failure to disclose the stock was inadvertent, was not in bad faith, and did not result in financial benefit to the Debtor. The opinion and judgment refer to payment by the Debtor of $27,794.85 for the stock; however, the amount paid by the Debtor to the Trustee in order to cover all claims against and all administrative costs of the estate is $32,493.55, still less than the amount offered by the Appellant. 4 settlement is fair and equitable and is in the best interest of the estate, because all creditors and administrative expenses will be paid in full.” (Appellant’s App. at 97.) Even though the bankruptcy court concluded that the Appellant had failed to meet his burden of proof to show that he had standing to object to the motion, the court analyzed whether his objection was well-taken and stated: “[T]he estate does not benefit by an open bidding process because the Motion is not a judicial sale and the Debtor’s proposed settlement payment pays all creditors and administrative expenses in full.” (Appellant’s App. at 100.) The court then authorized the trustee to abandon the Airpack stock, finding that the consequence of abandonment is nunc pro tunc. In other words, the court determined that abandonment puts the parties where they were before bankruptcy, thus permitting the Debtor and the Appellant to proceed with the state court litigation unaffected by the Debtor’s bankruptcy case. Three days after entry of the court’s opinion and judgment, on June 29, 2007, the Appellant filed his Notice of Appeal.