de Jong v. JLE-04 Parker, L.L.C.

Case Type:
Case Status:
Reversed and Remanded
AZ-17-1280-FSBa and AZ-17-1292-FSBa (9th Circuit, Aug 03,2018) Published
The "rule of mandate," which requires that a trial court quote adhere to the appellate court's decision, does not prohibit a trial court from addressing issues that were not decided by the appellate court or made part of the mandate. The bankruptcy court's decision to strike a pre-petition claim for silage, which was not addressed in the remand, thus was appropriate. The bankruptcy court, however, erred when it determined that the remand precluded the bankruptcy court from recomputing the debtors' profits and thus the amounts of the allowed claims.
Procedural context:
This appeal arose after the BAP remanded the case to the bankruptcy court with instructions regarding the calculation of damages and thus the amount of allowed pre-petition and administrative expense claims. Upon remand, the bankruptcy court significantly reduced the creditor's administrative expense claim. Nonetheless, the debtors appealed and the creditor cross-appealed.
The debtors ran a dairy farm on leased property. The lease terminated and, separately, the leased property was foreclosed. The debtors refused to leave the leased property. The new owner (JLE) began a forcible entry and detainer action in state court (the FED Action). The day before the scheduled trial of the FED Action, the debtors filed a chapter 11 petition. The bankruptcy court modified the automatic stay to allow the FED Action to proceed, but barred JLE from taking affirmative actions to evict the debtors without the bankruptcy court's permission. Following the trial of the FED Action, the state court found that the foreclosure terminated the debtors' leasehold interest and that the debtors had no right to remain on the property. The bankruptcy court, acting on JLE's motion, ordered the debtors to leave the property. JLE filed a proof of claim for more than $8.8 million in pre-petition damages, and a claim for $7.9 million in adminstrative expenses. After a trial, the bankruptcy court found that the debtors were "conscious trespassers" after the foreclosure sale, and determined that 39.71% of the debtors' net profit from dairy operations resulted from the trespass. The bankruptcy court also ruled that the debtors were liable for the use of silage on the property during the period of trespass, both before and after the petition date. The bankruptcy court allowed JLE a prepetition claim of $558,716.24 and an administrative expense claim of $1,517,069.64. The bankruptcy court subsequently increased the allowed claims amounts. The debtors appealed the damages order, and the BAP remanded the case with respect to damages for silage. The bankruptcy court then issued a new order significantly reducing JLE's administrative expense claim (to $437,280.59). The debtors and JLE cross-appealed. The debtors probably regret appealing the bankruptcy court's order.
FARIS, SPRAKER, and BASON (sitting by designation)

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