Court Opinion

ID: 2803331
Source: CourtListenerOpinion
Date Created: 2015-05-26 17:02:21.410236+00
Date Added: 2024-06-11T11:29:47.815889
License: Public Domain

FILED
                                                         MAY 22 2015
 1                         NOT FOR PUBLICATION
 2                                                   SUSAN M. SPRAUL, CLERK
                                                        U.S. BKCY. APP. PANEL
                                                        OF THE NINTH CIRCUIT
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )      BAP No.    NC-14-1030-TaDKi
                                   )
 6   NORTH OXFORD BRIGHT HORIZONS )       Bk. No.    11-33749
     GROUP LLC,                    )
 7                                 )
                    Debtor.        )
 8   ______________________________)
                                   )
 9   MONICA HUJAZI,                )
                                   )
10                  Appellant,     )
                                   )
11   v.                            )      MEMORANDUM*
                                   )
12   ANDREA A. WIRUM, Chapter 7    )
     Trustee,                      )
13                                 )
                    Appellee.      )
14   ______________________________)
15                    Argued and Submitted on May 14, 2015
                          at San Francisco, California
16
                              Filed - May 22, 2015
17
               Appeal from the United States Bankruptcy Court
18                 for the Northern District of California
19     Honorable Hannah L. Blumenstiel, Bankruptcy Judge, Presiding
20
     Appearances:     Bradley Kass of Kass & Kass Law Offices argued
21                    for appellant Monica Hujazi; Charles Patrick
                      Maher of McKenna Long & Alridge LLP argued for
22                    appellee Andrea A. Wirum, Chapter 7 Trustee.
23
     Before:   TAYLOR, DUNN, and KIRSCHER, Bankruptcy Judges.
24
25
26        *
             This disposition is not appropriate for publication.
27   Although it may be cited for whatever persuasive value it may
     have (see Fed. R. App. P. 32.1), it has no precedential value.
28   See 9th Cir. BAP Rule 8024-1(c)(2).
 1        Monica Hujazi appeals from the entry of the final decree
 2   discharging the chapter 71 trustee and closing the chapter 7
 3   case of North Oxford Bright Horizons Group, LLC.
 4        We AFFIRM the bankruptcy court.
 5                                   FACTS
 6                                 Background
 7        The Debtor, a California LLC, was formed in September of
 8   2011.     The Zuercher Trust of 1999 (the “Zuercher Trust”)2 is the
 9   sole member of the Debtor; at all relevant times, Hujazi, as
10   Trustee of the Zuercher Trust, was an affiliate of the Debtor.
11            A month after the Debtor’s formation, the Zuercher Trust
12   conveyed a 32-unit apartment building (the “Property”) to the
13   Debtor.     Four days later, on October 17, 2011, the Debtor
14   commenced a chapter 7 case through a skeletal filing that
15   included neither schedules nor the other documents required by
16   Rule 1007.     Andrea A. Wirum became the chapter 7 trustee.   It is
17   uncontested that the Property was the Debtor’s sole asset.
18        The Debtor’s lack of Rule 1007 documents prompted a
19   bankruptcy court order requiring the filing of required
20
          1
21           Unless otherwise indicated, all chapter and section
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532.
22   “Rule” references are to the Federal Rules of Bankruptcy
     Procedure.
23
          2
24           The Zuercher Trust is currently in chapter 7 bankruptcy
     (converted from chapter 11 in December 2014), also filed in the
25   Northern District of California. See 12-32747-HLB. In its own
     case, the Zuercher Trust appealed from an order approving two
26   § 363 sales as to different real properties; the BAP affirmed.
27   See The Zuercher Trust of 1999 v. Kravitz, Chapter 11 Trustee
     (In re Zuercher Trust of 1999), 2014 WL 7191348 (9th Cir. BAP
28   Dec. 17, 2014).

                                       2
 1   documents and allowing for case dismissal if the filing did not
 2   occur.    The Debtor filed nothing in response, but the Trustee
 3   successfully obtained a reprieve.    Over the Zuercher Trust’s
 4   opposition, she also obtained authorization to attempt a sale of
 5   the Property.
 6        The Trustee eventually received an offer in the amount of
 7   $2,350,000, gave Hujazi appropriate notice of her intent to sell
 8   at this amount, and moved for an order authorizing the sale.
 9   Neither Hujazi nor the Debtor (nor anyone else) objected to the
10   sale.    As a result, the bankruptcy court entered an order that
11   authorized the sale of the Property and payment from the sale
12   proceeds to the secured trust deed holder, three judgment lien
13   creditors, and the parties’ brokers.    No one objected to the
14   form of order or appealed from that decision.
15        Thereafter, in June of 2012, the Debtor finally filed its
16   schedules and other Rule 1007 documents.    Both the newly filed
17   schedules and the Trustee’s prior due diligence confirmed that
18   the sale of the Property yielded proceeds in excess of pre-
19   petition and administrative claims.    The Trustee, thus, obtained
20   authorization, pursuant to § 726(a)(6), to distribute $1,000,000
21   to Hujazi, as trustee of the Zuercher Trust.
22        Having sold the Debtor’s only asset and after largely
23   distributing the sale proceeds, the Trustee began to conclude
24   the bankruptcy case.    In compliance with 28 C.F.R. § 58.7, she
25   initially filed both a Trustee’s Final Report (“Final Report”)
26   and a Notice of Trustee’s Final Report and Applications for
27   Compensation and Deadline to Object (“TFR Notice”).    The Trustee
28   and her professionals also filed final fee applications.    The

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 1   Debtor objected both to the payment of creditors and fees as
 2   outlined in the Final Report and to the payment of fees as
 3   requested in the final fee applications.
 4        The bankruptcy court heard the matters on August 1, 2013,
 5   and, after arguments were presented, approved the Final Report
 6   and all of the fees as requested.    It subsequently entered three
 7   orders.   No one appealed from these orders, and they are now
 8   final.
 9        On December 23, 2013, the Trustee filed the last document
10   required by 28 C.F.R. § 58.7, her Chapter 7 Trustee’s Final
11   Account and Distribution Report Certification that Estate Has
12   Been Fully Administered and Application to be Discharged (“Final
13   Account”).   Just four days later, the bankruptcy court entered
14   the final decree, which acknowledged full administration of the
15   estate, discharged the Trustee, and closed the case.   Hujazi
16   timely appealed from the final decree.3
17                               JURISDICTION
18        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
19   §§ 1334 and 157(b)(2)(A).   We have jurisdiction under 28 U.S.C.
20   § 158.
21                                  ISSUES
22   1.   Whether Hujazi has standing to appeal from the final
23        decree.
24   2.   Whether the bankruptcy court erred in entering the final
25
26        3
             The Debtor and then Hujazi filed a motion to set aside
27   the final decree and then, to reopen the case, in early January
     2014. Eventually, following an order from this Panel, the
28   bankruptcy court denied Hujazi’s motions.

                                      4
 1         decree less than 30 days after the filing of the Final
 2         Account.
 3                             STANDARD OF REVIEW
 4         As legal questions, we review de novo interpretations of
 5   statutes and rules.   de la Salle v. U.S. Bank, N.A. (In re de la
 6   Salle), 461 B.R. 593, 601 (9th Cir. BAP 2011).    “Whether
 7   compliance with a given statute or rule has been established is
 8   generally a question of fact, which we review for clear error.”
 9   Id.   A factual finding is clearly erroneous if illogical,
10   implausible, or without support in inferences that may be drawn
11   from the facts in the record.    See TrafficSchool.com, Inc. v.
12   Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011) (citing United
13   States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en
14   banc)).
15                                 DISCUSSION
16   A.    Hujazi’s standing to appeal.
17         The Trustee argues that Hujazi lacks standing to appeal
18   from the final decree because she is not a “person aggrieved” in
19   the Debtor’s case and has not shown that the Zuercher Trust’s
20   bankruptcy is a surplus case.    Hujazi responds that, as the
21   principal of the Zuercher Trust, she is entitled to any surplus
22   funds from that estate.    She, thus, avers that the final decree
23   “directly [affected] her rights to surplus monies out of the
24   [Zuercher Trust’s] estate.”
25         Whether a party has standing to appeal from a bankruptcy
26   court order is determined according to the “person aggrieved”
27   test.   “An appellant is aggrieved if ‘directly and adversely
28   affected pecuniarily by an order of the bankruptcy court’; in

                                       5
 1   other words, the order must diminish the appellant’s property,
 2   increase its burdens, or detrimentally affect its rights.”
 3   Duckor Spradling & Metzger v. Baum Trust (In re P.R.T.C., Inc.),
 4   177 F.3d 774, 777 (9th Cir. 1999) (citing Fondiller v. Robertson
 5   (In Matter of Fondiller), 707 F.2d 441, 442 (9th Cir. 1983)).
 6   Generally, an appellant bears the burden of showing that
 7   standing to appeal exists.    See In Matter of Fondiller, 707 F.2d
8   at 443.
 9        Here, we must sort through two bankruptcies in order to
10   determine whether appellate standing exists.   If we look solely
11   at the Debtor’s chapter 7 case, standing exists because it is a
12   surplus case.   Hujazi’s goal is to reduce claims payable by the
13   Debtor’s bankruptcy estate.    This has the natural consequence of
14   increasing money flowing to the Debtor and then to its sole
15   member, the Zuercher Trust, and then, perhaps, to Hujazi.
16        We, however, must also consider the fact that the Zuercher
17   Trust is a chapter 7 debtor.   Thus, unless the Zuercher Trust
18   case is also a surplus case, Hujazi will receive nothing from
19   the Debtor’s estate; consequently, she would lack standing.
20        Here, Hujazi offers only argument in support of her
21   position and, thus, we cannot conclusively determine whether the
22   Zuercher Trust estate will generate a surplus after payment of
23   administrative and pre-petition claims.   The likelihood of a
24   surplus, however, is enhanced as the amount available from
25   liquidation of the Debtor increases.   A cursory review of the
26   schedules and docket in the Zuercher Trust bankruptcy does not
27   establish the impossibility of a surplus.   While it is a close
28   call, we conclude that Hujazi has standing to appeal from the

                                      6
 1   final decree.
 2   B.   The bankruptcy court did not commit reversible error when
 3        it entered the final decree.
 4        Hujazi argues that the bankruptcy court erred in entering
 5   the final decree just four days after the Trustee’s filing of
 6   the Final Account.    On this record, we disagree.
 7        Rule 5009(a) supplies a conclusive evidentiary presumption
 8   that the chapter 7 estate is fully administered in the absence
 9   of an objection by the United States Trustee or any other party
10   in interest within 30 days of a trustee’s filing of a final
11   account.   Fed. R. Bankr. P. 5009(a).       Rule 5009 is procedurally
12   implemented by 28 C.F.R. § 58.7.
13        Under 28 C.F.R. § 58.7, a chapter 7 trustee files the final
14   report in the bankruptcy case following review by the United
15   States Trustee.    Id. § 58.7(a)-(b).      To the extent the estate
16   realizes a certain amount in net proceeds,4 the chapter 7
17   trustee must then file and send to all creditors a notice of
18   final report.   Id. § 58.7(b).   The notice “must identify the
19   procedures for objecting to any fee application or to the
20   [trustee’s final report].”    Id.       Then, after all of the estate
21   funds are distributed, the chapter 7 trustee is required to file
22   a final account.    Id. § 58.7(c).      The final account “must
23   contain the trustee’s certification, under penalty of perjury,
24   that the estate has been fully administered and the trustee’s
25   request to be discharged as trustee.”        Id.
26
27        4
             The dollar amount is determined pursuant to
28   Rule 2002(f)(8).

                                         7
 1        Here, the Trustee followed the uniform procedures required
 2   by 28 C.F.R. § 58.7 prior to entry of the final decree and case
 3   closure.   No one disputes that she properly filed and noticed
 4   her Final Report and final fee applications for administrative
 5   creditors.    No one disputes that Debtor had an opportunity for
 6   objection and, as a result, timely objected and raised many of
 7   the same objections now before us on appeal.    And no one
 8   disputes that the bankruptcy court orally overruled all of the
 9   objections, approved the Final Report, and entered orders
10   consistent with its oral ruling.     No appeal was taken from those
11   orders, and they are now final and nonappealable.
12        Having successfully obtained approval of her Final Report,
13   the Trustee made the payments it detailed.    Once these final
14   acts of administration were complete and after all estate funds
15   were distributed, she again complied with 28 C.F.R. § 58.7 and
16   filed the Final Account in the bankruptcy case.    The Final
17   Account included the required certification under penalty of
18   perjury that the Debtor’s estate was fully administered and the
19   required request that the Trustee be discharged.
20        Hujazi does not question the content of the Final Account
21   and, in particular, does not argue that case administration is
22   incomplete.   Instead, she argues that entry of the final decree
23   was premature because she did not have 30 days in which to again
24   raise the objections asserted by the Debtor in connection with
25   the Final Report.   Hujazi’s position lacks merit for two
26   reasons.
27        First, Rule 5009(a) does not require a 30 day opportunity
28   for objection.   It simply provides an evidentiary presumption as

                                      8
 1   to full estate administration.   Here, the bankruptcy court
 2   entered the final decree just four days after the Trustee filed
 3   the Final Account; it did not permit the evidentiary presumption
 4   to become conclusive.   But, Rule 5009 did not bar the bankruptcy
 5   court from entry of the final decree prior to the expiration of
 6   30 days.
 7        Second, Hujazi does not identify any unpaid creditor,
 8   unadministered asset, or unperformed requirement for case
 9   completion such that the bankruptcy court erroneously relied on
10   the Final Report’s certification of full administration of the
11   case and erroneously entered the final decree.    Hujazi does not
12   dispute that the estate was fully administered; instead, she
13   argues that the administration did not work out as she wished.
14   And that argument, in whole and in part, has already failed.
15   Thus, Hujazi’s attack on the final decree is entirely off point.
16        The timing, also, makes no difference because even if we
17   vacated the final decree, Hujazi could not pursue what she truly
18   seeks on appeal: to collaterally attack the bankruptcy court
19   orders approving the fee applications and the Final Report.
20   Contrary to Hujazi’s argument, these orders were not interim
21   orders subsumed into the final decree.    These orders finally
22   resolved the Debtor’s objections to the Final Report and the
23   contested final fee applications on the merits (to the extent
24   not already decided in earlier orders).
25        Each order following the Final Report contained reference
26   to the Debtor’s objections to the Final Report, noted the
27   bankruptcy court’s tentative ruling approving the Final Report,
28   and incorporated that tentative and its oral ruling consistent

                                      9
 1   with the tentative into the order generally.    Each order then
 2   overruled a single undefined “objection” and awarded fees to a
 3   particular claimant.   We have no doubt that the bankruptcy court
 4   intended to incorporate its approval of the Final Report into
 5   one or all of these orders, thus commencing the time for appeal
 6   of those decisions.5   See, e.g., Carter v. Beverly Hills Sav. &
 7   Loan Ass’n, 884 F.2d 1186, 1189 (9th Cir. 1989); see also
 8   Fiataruolo v. United States, 8 F.3d 930, 937 (2d Cir. 1993).
 9        The Trustee argued that the Final Report triggered the
10   Rule 5009 presumption period.   This is incorrect.   The Final
11   Report did not and could not do so because it did not “[certify]
12   that the estate has been fully administered.”    The Final Report
13   included an outline of intended, rather than completed,
14   distributions of estate assets.    As the Trustee correctly points
15   out, her actions following the Final Report were entirely
16   ministerial, but they still constituted estate administration.
17   Only the Final Account certified that administration was
18   complete as the distributions outlined in the Final Report were
19   now complete.
20        Moreover, once a case is fully administered, the bankruptcy
21   court is required to close the case.   See 11 U.S.C. § 350(a).
22   Accepting the Trustee’s reasoning would result in illogical
23   consequences: the closing of the bankruptcy case prior to the
24   trustee’s distribution of liquidated estate assets to creditors.
25
26        5
             In addition to the fee awards, Hujazi objects only to
27   the payment of liens secured by the Property. The propriety of
     these payments was decided by the bankruptcy court under the
28   much earlier and unopposed order approving the Property sale.

                                       10
 1   It is clear that the 30 day period in Rule 5009 begins to run
 2   only upon the filing of the trustee’s final account.
 3        Finally, Hujazi argues that the amount of fees awarded to
 4   Trustee and Trustee’s counsel are unconscionable and
 5   unreasonable under § 330(a)(3)(A).   Again, the bankruptcy court
 6   entered the orders approving these fees months before entry of
 7   the final decree and Hujazi’s notice of appeal.   Neither the
 8   Debtor nor Hujazi appealed from those orders, and they are now
 9   final and nonappealable.
10                              CONCLUSION
11        Based on the foregoing, we AFFIRM the bankruptcy court.
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