Gentile v. DeGiacomo (In re Gentile)

Citation:
Gentile v. DeGiacomo (In re Gentile), BAP No. MB 12-071 (1st Cir. BAP, May 20, 2013)
Tag(s):
Ruling:
By 2-1 decision, the Panel dismissed the debtors’ appeal of a bankruptcy court order granting the chapter 7 trustee’s motion to sell real estate fully-encumbered by a disputed lien for lack of appellate standing. The majority concluded the debtors failed to meet their burden of demonstrating that nullification of the sale would be likely to result in an overall surplus in the chapter 7 estate to which the debtors, qua individuals, would become entitled once the bankruptcy case is closed. The dissent disagreed and determined the chapter 7 trustee should have abandoned the fully-encumbered property back to the debtors which, in turn, provide them with a pecuniary interest sufficient to convey appellate standing.
Procedural context:
After a hearing without witnesses or documents offered by the chapter 7 trustee or the debtors, the bankruptcy court – over the debtors’ objection – approved the chapter 7 trustee’s motion to sell certain real property fully-encumbered by a disputed judgment lien pursuant to 11 U.S.C. § 363. The debtors’ motion to reconsider the sale order was denied, but a stay of the order pending appeal was granted.
Facts:
The guardian for two individuals who sustained injuries in an automobile accident caused by the debtors’ grandson while he was operating a vehicle owned by the debtors brought a civil action against both debtors in state court and obtained a pretrial attachment. In due course, the guardian received jury verdicts against both debtors. The debtors appealed the jury verdict. While their appeal was pending in state court, the debtors filed a petition under chapter 7 of the Code. The debtors identified the guardian as the holder of the only secured claim on their residence and four investment properties in an amount in excess of the value of those properties. Almost one year after filing, the chapter 7 trustee sought to sell each of the four fully-encumbered investment properties at public auction under § 363. The debtors objected and asked the bankruptcy court to suspend the section 363 sales pending the outcome of their state court appeal. The trustee, asserting his duties under § 704 to reduce property of the estate to cash, pressed for an immediate sale. In overruling the objections and entering the sale order, the bankruptcy court concluded that debtors commenced the chapter 7 case voluntarily and there was no reason to suspend the chapter 7 trustee’s duties pending the appeal of the state court order.
Judge(s):
Lamoutte (dissenting), Kornreich (writing for the majority), and Cabán

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