Court Opinion

ID: 6347559
Source: CourtListenerOpinion
Date Created: 2022-06-07 15:01:15.539046+00
Date Added: 2024-06-11T13:38:32.689334
License: Public Domain

Appellate Case: 21-8056            Document: 010110693653   Date Filed: 06/07/2022   Page: 1
                                                                                    FILED
                                                                        United States Court of Appeals
                                             PUBLISH                            Tenth Circuit

                           UNITED STATES COURT OF APPEALS                       June 7, 2022

                                                                            Christopher M. Wolpert
                                 FOR THE TENTH CIRCUIT                          Clerk of Court
                             _________________________________

  In re: BEAR CREEK TRAIL, LLC,

          Debtor.

  ------------------------------

  BEAR CREEK TRAIL, LLC,                                         No. 21-8056

         Appellant,

  v.

  BOKF, N.A., f/k/a Bank of Texas;
  THOMAS MCCLINTOCK,

         Appellees.
                             _________________________________

                         Appeal from the United States District Court
                                 for the District of Wyoming
                              (D.C. No. 0:21-CV-00079-SWS)
                           _________________________________

 Richard D. Gaines, Law Offices of Richard D. Gaines, Greentown, Pennsylvania (Ken
 McCartney, The Law Offices of Ken McCartney, P.C., Cheyenne, Wyoming on the
 briefs) for Debtor – Appellant.

 Jennifer Salisbury, Markus Williams Young & Hunsicker, LLC, Denver, Colorado, for
 Appellees.
                         _________________________________

 Before HOLMES, MATHESON, and ROSSMAN, Circuit Judges.
                  _________________________________

 MATHESON, Circuit Judge.
                    _________________________________
Appellate Case: 21-8056      Document: 010110693653         Date Filed: 06/07/2022     Page: 2

       Bear Creek Trail, LLC, (“the Debtor” or “Bear Creek”) filed for Chapter 11

 reorganization. The bankruptcy court granted a motion to convert the proceeding to a

 Chapter 7 liquidation and appointed a trustee. Bear Creek’s attorney in the

 bankruptcy proceedings asked the district court to review the bankruptcy court’s

 conversion order. The district court dismissed, holding that only the trustee could

 seek review. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.

                                     I. BACKGROUND

                                  A. Texas State Court Case

       Marvin Keith failed to repay a mortgage loan from BOKF, N.A. d/b/a Bank of

 Texas (“the Bank”). In 2009, the Bank obtained a Texas state court judgment against

 Mr. Keith for about $1.3 million.

       Several years later, Mr. Keith formed Pine Tree Capital, LLC (“Pine Tree”);

 Elk Mountain, Inc.;1 Bear Creek Trail, LLC; and Bear Trail, LLC (“Bear Trail”). Mr.

 Keith controls all four entities.2 The Debtor owns a Range Rover and a yacht.

       The Texas state court appointed a receiver, Thomas McClintock, to take

 possession of and sell all of Mr. Keith’s leviable assets. The court later ordered

 Mr. Keith to turn over to Receiver McClintock his interests in Pine Tree, Bear Trail,

       1
           Elk Mountain purports to be an appellant here, but as explained below, it is not.
       2
         Mr. Keith owns Pine Tree, which owns Elk Mountain, which owns Bear Creek,
 the Debtor. Mr. Keith is also the President of Elk Mountain and CEO of Bear Trail,
 which is the manager of the Debtor. App., Vol. III at 204; App., Vol. IV at 19-20. As
 noted above, Bear Trail and Bear Creek are different entities.

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Appellate Case: 21-8056    Document: 010110693653         Date Filed: 06/07/2022      Page: 3

 and the Debtor; all accounts in the name of these entities and their affiliates; and the

 Range Rover and yacht. The turnover order granted the receiver authority to take

 exclusive control of and to exercise all of Mr. Keith’s powers and rights over the

 foregoing turnover assets.3

                                   B. Bankruptcy Case

       The Debtor filed a Chapter 11 voluntary bankruptcy petition. Receiver

 McClintock moved on behalf of Elk Mountain to convert the bankruptcy case to

 Chapter 7. The motion stated he could do so because the turnover order granted him

 authority over Pine Tree, which owns Elk Mountain. The Bank joined Elk

 Mountain’s motion to convert.

       The bankruptcy court granted the conversion motion. In a separate order, it

 appointed an interim trustee, Randy Royal, over the Debtor’s estate. The Debtor and

 Elk Mountain then moved for a stay of the conversion and appointment orders. The

 bankruptcy court denied the motion and a follow-up motion for reconsideration.

                                 C. District Court Appeal

       Attorney Ken McCartney, who represented Bear Creek in the bankruptcy

 proceedings, filed a timely notice of appeal to the district court challenging the

       3
          Pine Tree, Elk Mountain, Bear Creek, and Bear Trail sued the Bank and Receiver
 McClintock in Wyoming state court seeking to enjoin enforcement of the Texas turnover
 order. Pine Tree Cap., LLC v. BOKF, N.A., 2021 WL 4521352, at *1 (10th Cir. Oct. 4,
 2021) (unpublished). The Bank and Receiver McClintock removed the case to the
 federal district court, which dismissed it for lack of personal jurisdiction, and in the
 alternative, under federal abstention doctrines. Id. We affirmed the district court’s
 dismissal. Id. at *2.

                                             3
Appellate Case: 21-8056    Document: 010110693653        Date Filed: 06/07/2022      Page: 4

 conversion order. The notice listed the appellant as “Bear Creek Trail, LLC, Debtor

 in Possession.” App., Vol. III at 218-20. The Bank and Elk Mountain (by Receiver

 McClintock) moved to dismiss the appeal. They argued (1) the conversion order and

 trustee appointment ousted the Debtor’s management and attorney from acting on the

 Debtor’s behalf, and (2) the trustee had not authorized the appeal. Even though he

 had not listed Elk Mountain as an appellant in the notice of appeal, Mr. McCartney

 filed a response brief on behalf of the Debtor and Elk Mountain. In that filing, the

 Debtor and Elk Mountain also asked the district court to stay the bankruptcy court’s

 conversion order and appointment of the Chapter 7 trustee.

       The district court dismissed the appeal. It held that under Tenth Circuit

 precedent, only the Chapter 7 trustee had authority to file the appeal. The court

 explained that “[o]ther individuals, such as Mr. Keith, may have standing to appeal

 the conversion order . . . on their own behalf, but that was not done here.” App.,

 Vol. IV at 141.

                                D. Tenth Circuit Appeal

       Mr. McCartney filed a timely notice of appeal to this court on behalf of the

 Debtor and Elk Mountain challenging the district court’s dismissal. The Debtor and

 Elk Mountain further moved for a stay pending appeal of the conversion order and

 appointment of the Chapter 7 trustee, which we denied. This court ordered the

 parties to file briefs addressing Elk Mountain’s status in this appeal because (1) Elk

                                            4
Appellate Case: 21-8056     Document: 010110693653         Date Filed: 06/07/2022      Page: 5

 Mountain requested the conversion to Chapter 7 in bankruptcy court, and (2) Elk

 Mountain was not listed as a party in the district court.4

                                     II. DISCUSSION

                                   A. Standard of Review

        “This appeal presents a purely legal question, which we review de novo.”

 In re S. Star Foods, Inc., 144 F.3d 712, 713 (10th Cir. 1998).

                                   B. Legal Background

        “When a corporate bankruptcy is converted from Chapter 11 to Chapter 7, a

 sea change takes place.” In re C.W. Mining Co., 636 F.3d 1257, 1265 (10th Cir.

 2011). Once a corporate entity “enters Chapter 7 bankruptcy and a trustee is

 appointed . . . its legal purpose becomes vastly different.” Id. at 1264. Unlike

 Chapter 11, which aims to “reorganiz[e] the bankruptcy estate for the shareholders as

 well as the creditors,” “Chapter 7 shifts the focus to creditors” alone “and protects

 the creditors by appointing a trustee to control the estate.” Id. at 1265 (citation

 omitted).

        “After [the debtor] enter[s] into Chapter 7 bankruptcy and a trustee [i]s

 appointed, [the debtor’s] former management’s only role [i]s ‘to turn over the

 corporation’s property to the trustee and to provide certain information to the trustee

 and to the creditors.’” Id. at 1263 (quoting Commodity Futures Trading Comm’n v.

        4
         After receiving the briefs, this court ordered that Elk Mountain could be listed as
 an appellant on pleadings in this court for procedural purposes only, with the merits panel
 to determine whether it is a proper appellant.

                                             5
Appellate Case: 21-8056    Document: 010110693653         Date Filed: 06/07/2022     Page: 6

 Weintraub, 471 U.S. 343, 352 (1985)). “Authority to make legal decisions, like all

 other business decisions, passe[s] to the Trustee alone.” Id. “[C]orporate officers are

 ‘completely ousted’ once a trustee has been appointed.” Id. (quoting Weintraub, 471

 U.S. at 353).

       In C.W. Mining, the creditors moved to appoint a Chapter 11 trustee or to

 convert the case to Chapter 7. 636 F.3d at 1259. After the debtor’s manager testified

 that he supported the conversion to Chapter 7, the bankruptcy court granted the

 conversion motion and appointed a trustee. Id. We held that once a Chapter 7 trustee

 was appointed, the debtor’s former management could no longer appeal on the

 debtor’s behalf. Id. at 1260. The “Chapter 7 trustee was the only person authorized to

 bring the appeal,” and “[t]he Managers were divested of their authority to appeal by the

 appointment of the Chapter 7 trustee, which they did not challenge.” Id. at 1259. “The

 rule that only the bankruptcy trustee may appeal an order from a bankruptcy court

 was created as a means to control, in an orderly manner, proceedings that often

 involve numerous creditors who are dissatisfied with any compromise that

 jeopardizes the full payment of their outstanding claims against the bankrupt.”

 Id. at 1262 (quotations omitted).

       We further explained that after a trustee has been appointed, former

 management may still “appeal a bankruptcy court order in their own right.”

 Id. at 1266. “If [the debtor’s] managers themselves have been injured pecuniarily,

                                             6
Appellate Case: 21-8056    Document: 010110693653         Date Filed: 06/07/2022    Page: 7

 they can appeal as ‘persons aggrieved.’” Id.5 But “[s]uch an appeal must be brought

 on their own behalf, not on behalf of [the debtor].” Id.

                                       C. Analysis

       The district court correctly dismissed the Debtor’s appeal. The Debtor’s

 former management, Mr. Keith and Bear Trail, and Mr. McCartney, the attorney who

 filed the appeal to the district court, lacked authority to seek review of the conversion

 order on the Debtor’s behalf. See id. at 1265.6 C.W. Mining controls. Once the

 bankruptcy court converted the case to Chapter 7 and appointed Mr. Royal as trustee,

 only he could appeal on the Debtor’s behalf. See id. at 1264.7 “[The Bankruptcy]

 Code makes no provision within the structure of Chapter 7 for ‘former management’

       5
         “[T]his circuit has adopted the rule, derived from the Bankruptcy Act of
 1898, that appellate review of a bankruptcy court order is limited to persons
 aggrieved by that order.” C.W. Mining, 636 F.3d at 1260 (quotations omitted). “To
 qualify as a person aggrieved, a person’s rights or interests must be directly and
 adversely affected pecuniarily by the decree or order of the bankruptcy court.”
 Id. (quotations omitted).
       6
         Because the appointment of Mr. Royal as trustee transferred authority to him to
 act on behalf of the Debtor, Bear Creek, we refer to Mr. Keith and Bear Trail as “former
 management” of Bear Creek. See C.W. Mining, 636 F.3d at 1258 n.1, 1263.
       7
         Courts have uniformly followed C.W. Mining. See In re Pub.-Sector Sols., Inc.,
 602 F. App’x 929, 930 (4th Cir. 2015) (unpublished) (affirming dismissal of bankruptcy
 appeal based on reasoning of the district court, which had cited C.W. Mining to support
 dismissal of the bankruptcy appeal); S. Edge LLC v. JPMorgan Chase Bank, N.A., 2011
 WL 1626567, at *5-6 (D. Nev. Apr. 28, 2011) (unpublished); Quest Ventures, Ltd. v. IPA
 Mgmt. IV, LLC, 2018 WL 922145, at *2-3 (E.D.N.Y. Feb. 15, 2018) (unpublished);
 Hardes Holding, LLC v. Sandton Credit Sols. Master Fund, III, LP, 2019 WL 6347775,
 at *3 (D.S.D. Nov. 27, 2019) (unpublished); In re Cmty. Translator Network LLC, 2018
 WL 734403, at *2 (D. Utah Feb. 6, 2018) (unpublished).

                                             7
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 to appear in the proceeding and attempt to . . . assert a separate interest on behalf of

 the Debtor.” Log Furniture, Inc. v. Call, 180 F. App’x 785, 787-88 (10th Cir. 2006)

 (unpublished).8

        Appellant Bear Creek’s counterarguments are not persuasive.

        First, Mr. McCartney, joined now by Richard Gaines,9 argues for Bear Creek

 that C.W. Mining is distinguishable because the debtor there, unlike here, never

 objected to the conversion. Here, they contend, “the conversion order is made

 unappealable, as a practical matter” because “[t]here is no chance any Trustee will

 challenge the very order by which he or she becomes trustee.” Aplt. Br. at 22. As

 the Bank and Receiver McClintock explain, however, “Appellant confuses Debtor’s

 right to appeal with former management’s right to assert an appeal on behalf of the

 Debtor.” Aplee. Br. at 17.

        Under our rationale in C.W. Mining, it is immaterial whether the debtor’s

 manager supported or objected to the Chapter 7 conversion. We stated without

 qualification “that following the appointment of a trustee in a corporate Chapter 7

 bankruptcy, the corporation’s former managers are not authorized to bring the

 corporation’s appeal.” C.W. Mining, 636 F.3d at 1265. Permitting someone other

        8
          Although not precedential, we find the reasoning of unpublished decisions cited
 in this opinion instructive. See 10th Cir. R. 32.1 (“Unpublished decisions are not
 precedential, but may be cited for their persuasive value.”); see also Fed. R. App. P. 32.1.
        9
         Mr. Gaines has served as Mr. Keith’s personal attorney since 2004 and helped set
 up Mr. Keith’s entities, including Bear Creek.

                                              8
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 than the trustee to litigate or appeal on behalf of the debtor would threaten the

 “orderly manner” of bankruptcy proceedings. Id. at 1262. “Instead of an orderly

 liquidation of the estate, every move by the Trustee, and every adverse court

 decision, could be contested and appealed,” id. at 1265, risking confusion about who

 represents the debtor.

        District courts have applied C.W. Mining when the debtor’s manager opposed

 conversion to Chapter 7 in bankruptcy court. See, e.g., Quest Ventures, 2018 WL

 922145, at *1-2 (dismissing appeal of conversion order and citing C.W. Mining in

 support). As the district court explained in Community Translator Network, 2018

 WL 734403 (D. Utah), our analysis in C.W. Mining “was based solely upon the fact

 that the former managers had no authority to act on behalf of the debtor at the point

 in time when they filed the notice of appeal. Whether the Chapter 7 trustee was

 voluntarily or involuntarily appointed does not affect the reasoning of C.W. Mining.”

 Id. at *2.

        Also, C.W. Mining and the district court here explained that, even after a

 trustee appointment, former managers such as Bear Trail or Mr. Keith still have the

 authority to appeal the conversion order on their own behalf. See C.W. Mining,

 636 F.3d at 1266. But they did not bring their own appeal. Instead, their counsel,

 Mr. McCartney, attempted to appeal to the district court on behalf of the Debtor.

        Second, Bear Creek’s attorneys argue that “[s]ince Debtor is solvent, it has

 standing as an aggrieved party to challenge the conversion order and appeal that

 order.” Aplt. Br. at 24. But “the determinative question in this case is not whether

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Appellate Case: 21-8056      Document: 010110693653           Date Filed: 06/07/2022   Page: 10

  [the Debtor] has standing as a ‘person aggrieved’ to appeal, but whether the [the

  Debtor’s former management] have authority to appeal on [the Debtor’s] behalf.”

  C.W. Mining, 636 F.3d at 1261. They do not.

        Third, Bear Creek counsel argue that Elk Mountain is an aggrieved party and

  entitled to appeal. Aplt. Br. at 24-28. They contend that despite the omission of Elk

  Mountain’s name from the notice of appeal to the district court, “its characteristics

  were described” in the notice. Id. at 26. They also say that Elk Mountain is an

  appellant because the Debtor and Elk Mountain jointly filed their opposition to the

  motion to dismiss the appeal and moved in both bankruptcy court and district court

  for a stay of the conversion order. Id. at 26-27; Aplt. Br. Addressing Status of Elk

  Mountain, at 7-9.

        This third argument fails. Federal Rule of Bankruptcy Procedure 8003(a)(3),

  which governs appeals from bankruptcy court orders, states that “[t]he notice of

  appeal must: . . . conform substantially to the appropriate Official Form.” The

  relevant Official Form here asks to “Identify the appellant(s)” and has a line for

  “Name(s) of appellant(s).” App., Vol. III at 218. The notice listed only “Bear Creek

  Trail, LLC, Debtor in Possession.” Id. Under the “[p]osition of appellant(s)”

  description on the form, Mr. McCartney checked “Creditor,” “Debtor,” and “Other”

  and then wrote “Equity Holder.” Id. Nowhere did the notice specify or describe Elk

  Mountain as an appellant.10 Even assuming Mr. McCartney could represent Elk

        10
             Here is an excerpted reproduction of the form:
                                               10
Appellate Case: 21-8056     Document: 010110693653        Date Filed: 06/07/2022    Page: 11

  Mountain despite the turnover order, the notice did not comply with Rule 8003(a).

  Elk Mountain was thus not an appellant in district court, nor is it an appellant in this

  court.

                                    III. CONCLUSION

           Bear Creek’s former management and Mr. McCartney lacked authority to

  challenge the conversion order in district court on behalf of the Debtor. We affirm

  the district court’s judgment dismissing the appeal.

  App., Vol. III at 218.
                                             11