Court Opinion

ID: 2963189
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:07:26.891711+00
Date Added: 2024-06-11T15:01:24.694629
License: Public Domain

USCA1 Opinion

	

          February 24, 1995     [NOT FOR PUBLICATION]                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                                     
                                 ____________________        No. 94-1448                           IN RE WYNCO DISTRIBUTORS, INC.,                                                
                                      __________                            HENRY B. WYNN AND ALBERT WYNN,                                     Appellants,                                          v.                       JOSEPH BRAUNSTEIN, TRUSTEE IN BANKRUPTCY                             OF WYNCO DISTRIBUTORS, INC.                                      Appellee.                                                     
                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                     [Hon. Joseph L. Tauro, U.S. District Judge]
                                            ___________________                                                     
                                 ____________________                               Torruella, Chief Judge,
                                          ___________                            Bownes, Senior Circuit Judge,
                                    ____________________                             and and Cyr, Circuit Judge.
                                          _____________                                                     
                                 ____________________             Richard H. Wynn for appellant Albert Wynn.
             _______________             Henry B. Wynn on brief pro se. 
             _____________             Charles R. Bennett, Jr.,  with whom Isaac  H. Peres and Riemer  &
             _______________________             _______________     _________        Braunstein were on brief for appellee.
        __________                                                     
                                 ____________________                                                     
                                 ____________________

                    Per Curiam.   Appellants  challenge a  bankruptcy court
                    Per Curiam.
                    __________          order,  affirmed on  intermediate appeal  to the  district court,          authorizing the chapter 11 trustee to sell substantially  all the          corporate  debtor's assets.   As  appellants neither  alleged nor          established  cognizable  injury  from  the  challenged  order, we          affirm the district court judgment.                     The present litigation has survived the demise of Wynco          Distributors,  Inc. ("Wynco"  or  "debtor"),  a corporation  once          closely held  by the Wynn family.   Paul, Henry, Albert and Irene          Wynn were  beneficiaries of  the Wynn Family  Trust [hereinafter:          "Family Trust"], the sole  shareholder in Wynco.  Paul  and Irene          Wynn  served on the  Wynco board of  directors.  Paul,  Henry and          Albert Wynn  were the  designated trustees  of the Family  Trust.          Paul  alone was authorized to vote Family Trust shares in matters          affecting Wynco.                    On December 17, 1990, Henry and Albert Wynn, appellants          in  the   present  action,  unsuccessfully  brought   suit  in  a          Massachusetts  court  to relieve  Paul  Wynn  as a  trustee,  for          alleged mental  incompetence.   Nevertheless, ten days  after the          state superior  court ruled against  them, Henry and  Albert pur-          portedly removed  Paul as a  trustee and installed  themselves as          officers  and directors of Wynco.1   In response,  Paul and Irene                              
          ____________________               1Ultimately, the  superior court  concluded  that Henry  and          Albert Wynn had no  authority to displace Paul  as a trustee  and          that Paul possessed the  requisite authority under  Massachusetts          law  to initiate these chapter 11 proceedings in behalf of Wynco.          Wynn v.  Wynn, No. 90-03357 (Mass. Super.  Ct. 1990).  The Massa-
          ____     ____          chusetts  Appeals Court  affirmed in  Wynn  v. Wynn,  No. 93-P-29
                                                ____     ____          (Mass. App. Ct. 1994).                                          2

          Wynn promptly filed  a chapter 11 petition in  behalf of Wynco in          the  United   States  Bankruptcy   Court  for  the   District  of          Massachusetts.                    Henry  and Albert  correctly point  out on  appeal that          they challenged the Wynco chapter  11 petition in the  bankruptcy          court,  based on  their allegations  that Paul  was incompetent.2          They also  insist, however, that Paul's  alleged incompetency was          fraudulently  concealed from the bankruptcy court.  We can accord          no weight to the latter contention  in light of the fact that the          bankruptcy  court     though  by appellants'  own admission  well          aware of their allegations of incompetency    elected to defer to          the state court on the matter.   See supra p. 2.  There can  have
                                           ___ _____          been no  actual concealment  of Paul's alleged  incompetency from          the bankruptcy court, which was  apprised of the allegations  and          appropriately elected to defer to the state court.                      The  sole  remaining issue,  to which  we now  turn, is          whether appellants alleged  or established any cognizable  injury          resulting  from the  challenged sale.   Eleven  months after  the          chapter 11 petition was filed, no reorganization plan having been          submitted,  the chapter  11 trustee  proposed to  sell the  Wynco                              
          ____________________               2The record  reflects that  the matter of  Paul's competency          was raised at a  bankruptcy court hearing on the  debtor's motion          to restrain and enjoin appellants from operating Wynco; in appel-          lants' motion for leave to  appeal the bankruptcy court's  denial          of their motion to dismiss the chapter 11 petition; and in appel-          lants'  district court  appeal  from the  bankruptcy court  order          authorizing the  sale of  Wynco's assets.   Significantly, though          not  surprisingly in light of the record below, no allegations of          fraud on the court were ever raised by appellants prior  to their
          _____ __ ___ _____          appeal  to the  district court  from  the bankruptcy  court order          approving the sale of assets.                                            3

          business as a going concern, together with substantially all  its          assets,  to Susan Wynn, Paul Wynn's daughter, for $100,000.3  The          trustee projected  that the $100,000  in cash generated  from the          sale to Susan  Wynn, together  with $164,000 in  cash already  on          hand  and  the anticipated  proceeds  from  $210,000 in  accounts          receivable retained  by the debtor estate, would enable all Wynco          creditors  and  costs  of  administration (a  combined  total  of          $395,000)  to be satisfied  in full.   Any surplus was  to be re-          tained  to  cover  the  costs of  defending  against  appellants'          challenges to the order of sale.                    Appellants advanced four arguments in support  of their          opposition to the  sale.  First, the sale  would be premature, as          the  state court had not yet decided  who was entitled to control          Wynco.   Second, the  purchaser was an insider.   Third, the pur-          chaser chilled the sale,  deflating the purchase price.   Fourth,          the proposed sale  would contravene  chapter 11  by permitting  a          sale of going-concern assets  without the protections afforded by          a  disclosure statement or a  plan of reorganization.   See Bank-
                                                                  ___          ruptcy Code    1106, 1121-25, 11 U.S.C.    1106, 1121-25 (1993).                     The bankruptcy court rejected these contentions for the          following  reasons.  First, the case had been pending longer than          most bankruptcy cases,  and awaiting a state court decision would          necessitate further,  indefinite delay.  Second,  the purchaser's                              
          ____________________               3The  appraised  value  was  between  $69,000  and  $86,500.          Excluded from  the sale were Wynco  accounts receivable predating          the  October 1,  1991 sale  agreement, approximating  $210,000 in          face  amount, which were to  be collected for  the benefit of the          debtor estate either by the buyer or the trustee.                                           4

          "insider"  status had  been fully  disclosed.   Third, appellants          failed to present competent evidence  (or to pursue discovery) in          support of their allegation that the purchaser chilled  the sale.          Fourth,  the court found that the chapter 11 trustee had complied          with Bankruptcy Code   1106, 11 U.S.C.   1106.4                        Undeterred, appellants reiterate their contentions that          the  chapter 11 proceedings amounted to a fraud on the bankruptcy          court because Paul  Wynn was incompetent to initiate  the chapter          11  proceedings  and  his  incompetency was  concealed  from  the          bankruptcy  court  by Paul's  attorneys  and by  Susan  Wynn, the          purchaser.   As  noted above,  see supra  p. 3,  their ostensible
                                         ___ _____          concern for  the integrity of  the chapter  11 proceedings  rings          hollow.  Furthermore,  appellants neither point  to error in  the
                                                              _____          bankruptcy court rulings relating to the order of sale, see supra
                                                                  ___ _____          pp. 4-5, nor allege  any cognizable injury sustained as  a conse-          quence  of  the order  of sale.    Finally, absent  any developed          argumentation as to  appellate standing, whatever potential  harm          might conceivably  be visited  upon appellants as  minority Wynco          shareholders is  too speculative to support  the required showing          that appellants  are "aggrieved parties."  See  In re El San Juan
                                                     ___  _________________          Hotel, 809 F.2d 151, 154 (1st Cir. 1987).
          _____                              
          ____________________               4In the latter regard,  the court found  that it was in  the          best interests of creditors to continue to operate Wynco  pending          sale, in order to  capitalize on its going-concern value,  rather          than suspend business operations and liquidate the remnants under          chapter  7.    Moreover, the  court  concluded  that the  trustee          fulfilled his responsibility under  Bankruptcy Code   1106(5), 11          U.S.C.    1106(5), by  indicating  his intention  to convert  the          proceedings to chapter 7 upon consummation of the sale.                                            5

                    The  district  court  judgment is  affirmed;  costs  to
                    _______________________________________________________          appellee. 
          ________                                          6