Delannoy v Woodlawn Colonial, L.P.

Case Type:
Case Status:
BAP No. CC-17-1334-SKuL (9th Circuit, Aug 31,2018) Not Published
BAP for 9th Cir. affirmed ruling of bankruptcy court (CD Cal.) granting chapter 7 trustee's sale of debtor's state court appeal rights to appellee. Bankruptcy court did not abuse discretion in determining that sale of appeal rights was in best interest of estate based on all factors, including highly unlikely chance of success of appeal, and quick liquidation of claim. Price bid at auction by appellee exceeded debtor's bid by $500 and was highest and best price, notwithstanding debtor's offer to prosecute appeal for benefit of estate, plus de minimis effect on distribution.
Procedural context:
Bankruptcy court (CD Cal.) granted chapter 7 trustee's motion to sell appeal rights over debtor's objection. Debtor appealed to BAP for 9th Cir.
Delannoy's employer sued him for conversion. While suit was pending, Delannoy pled guilty to grand theft and admitted in his plea that he "did unlawfully and fraudulently appropriate, convert, steal, and embezzle property" belonging to his employer. Notwithstanding the admission, at the civil trial on conversion, Delannoy denied taking his employer's property. The state court generally prohibited Delannoy from offering testimony attempting to explain his check cashing practices. The state court entered its tentative statement of decision holding that Delannoy converted $462,857 of employer's cash and was liable for an additional $259,673 in prejudgment interest, plus an additional approx. $60,000 in other property, plus punitive damages of $60,000 based on findings of fraud and malice. The state court then entered judgment setting forth many of the same findings. Plaintiff's assigned the judgment to third party (Woodlawn). Delannoy appealed judgment and then filed chapter 7 bankruptcy. Woodlawn filed a nondischargeability complaint, and sought to purchase Delannoy's appeal rights from the chapter 7 trustee for $7,500, subject to overbid. The debtor bid $9,500, and Woodlawn bid $10,000. The trustee sought approval for sale to Woodlawn.
Spraker, Kurtz, Lafferty

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