Hope 7 Monroe Street LP v. Riaso, LLC (In the Matter of Hope 7 Monroe Street LP)

Citation:
Hope 7 Monroe Street LP, U.S. Court of Appeals D.C. Cir., No. 12-7054 [February 28, 2014]
Tag(s):
Ruling:
The Court of Appeals for the District of Columbia, held that the district court did not err in affirming the bankruptcy courts rulings. The district court's decision affirmed the ruling by the bankruptcy court to deny, appellants, Hope 7's motion to vacate all orders rendered in favor of RIASO, which were (1) the order approving the motion to sell Hope 7’s legal claims against RIASO, (2) the order overruling the objection to RIASO’s proof of claim, and (3) the order directing payment of RIASO’s claim from the proceeds of the sale of Hope 7’s real property. /p/ The specific issue on appeal was whether appellant, Hope 7, had the standing to appeal these issues and whether the U.S. Court of Appeals has the jurisdiction to decide this case. The U.S. Court of Appeals held that they did have jurisdiction to decide all issue in the case and the supplemental briefing by appellant, Hope 7, did establish that they had standing to consider the appeal with regards to the order allowing RIASO's proof of claim and the order requiring proceeds from the sale of the estate to be paid to RIASO. However, their briefing failed to demonstrate that appellant had standing to appeal the courts ruling granting the motion to settle appellant's claims against RIASO. As the appellants did not have standing to challenge the courts order settling their claim against RIASO, the Court of Appeals dismissed this portion of the action and affirmed the district courts ruling on the remaining claims.
Procedural context:
Hope 7 petitioned the bankruptcy court pursuant to FRBP 9024 to vacate all orders rendered in favor of RIASO, which referred to (1) the order approving the motion to sell Hope 7’s legal claims against RIASO, (2) the order overruling the objection to RIASO’s proof of claim, and (3) the order directing payment of RIASO’s claim from the proceeds of the sale of Hope 7’s real property. The bankruptcy court denied the motion. Hope 7 appealed to the district court, which affirmed the bankruptcy court’s decision on May 3, 2012. Hope 7 timely appealed to this court.
Facts:
Hope 7 owned apartment units appraised for approximately $3.3 million that it wanted to convert to condominiums. The partnership asked Musse Leakemariam to help it obtain funds for the conversion. Leakemariam arranged for RIASO to lend $1.6 million to Hope 7 to refinance the partnership’s mortgage and serve as a bridge loan until a permanent construction loan could be arranged. The permanent financing never materialized, and Hope 7 was unable to repay the bridge loan to RIASO. After RIASO initiated foreclosure proceedings, Hope 7 filed a voluntary petition for Chapter 11 bankruptcy on April 2, 2009. The bankruptcy court converted the case to a Chapter 7 action and appointed a trustee. During a bankruptcy hearing in August 2009, Hope 7 learned Leakemariam was both the loan broker and the lender. In re Hope 7 Monroe St. Ltd. P’ship (Hope 7), No. 09-00273, 2011 WL 2619537, at *1, *7 (Bankr. D.D.C. July 1, 2011). Leakemariam had formed RIASO, made up of ten trusts benefitting Leakemariam’s family members, about a week before the bridge loan was made. RIASO’s only purpose was to make that loan. On November 6, 2009, Hope 7, along with Lenan and Pauline Cappel, its sole limited partners, filed a complaint against Leakemariam, RIASO, and Richard Boddie, RIASO’s attorney, in D.C. Superior Court. The plaintiffs alleged, inter alia, breach of fiduciary duty, fraud, and misrepresentation. /p/ RIASO filed a proof of claim in the bankruptcy court claiming Hope 7 owed it about $3 million. Hope 7 objected, arguing, among other grounds, RIASO and Leakemariam had engaged in fraudulent inducement to contract and had breached their fiduciary duty. The bankruptcy court overruled Hope 7’s objection and ordered the claim paid from the debtor’s estate. The trustee proposed to sell the estate’s interest in the Superior Court action to Boddie as a compromise of the claims, and the bankruptcy court approved the sale of the claims to Boddie for $30,000. On November 22, 2010, the court directed final distribution of the estate’s funds. On April 12, 2011, Hope 7 filed a motion pursuant to Federal Rule of Civil Procedure 60(b).
Judge(s):
Ginsburg, Henderson and Brown

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