Case Type:
Case Status:
BAP No. CC-21-1255-TLS (9th Circuit, Sep 22,2022) Not Published
The Bankruptcy Appellate Panel for the Ninth Circuit (1) upheld a bankruptcy court's determination that it had jurisdiction to approve a trustee's motion to sell real property in accordance with the terms of a confirmed chapter 11 plan notwithstanding a pending appeal in a related adversary proceeding, and (2) dismissed the debtor/appellant's appeal from the sale order for a lack of constitutional (Art. III) standing and prudential appellate standing.
Procedural context:
Debtor/Appellant Catherine Trinh appealed from a bankruptcy court's order approving the sale of her residence in accordance with her confirmed chapter 11 plan, arguing that (a) the "divestiture of jurisdiction" rule barred the bankruptcy court from approving the sale owing to a pending appeal by her non-debtor spouse in a related adversary proceeding, and (b) the sale could cause harm to her spouse and others. The Bankruptcy Appellate Panel disagreed that the appeal in the adversary proceeding had divested the bankruptcy court of jurisdiction to address the motion to sell in Debtor's main case because the appeal in the adversary proceeding (concerning who owned the residence) did not address the issue presented in the motion to sell (whether the terms of the confirmed plan and the plan trust permitted the trustee to sell the residence). After finding the bankruptcy court had jurisdiction to decide the sale motion, the Bankruptcy Appellate Panel dismissed the appeal from the sale order because Debtor did not satisfy her burden to establish appellate standing. The Bankruptcy Appellate Panel concluded that Debtor neither suffered an injury in fact that could be addressed on appeal (as is required to demonstrate constitutional (Art. III) standing) nor was she directly and adversely affected pecuniarily by the entry of the sale order (as is required to satisfy the "person aggrieved" test for prudential standing in bankruptcy appeals).
Debtor filed a chapter 11 petition in the U.S. Bankruptcy Court for the Central District of California and scheduled a 15% interest in her residence. Her non-debtor husband, Kevin Voong, filed an adversary proceeding thereafter, asking the bankruptcy court to conclude that 85% of the residence was his separate property. The bankruptcy court found the residence was 100% community property and, thus, property of the estate in full. Mr. Voong appealed the bankruptcy court's judgment and the district court affirmed. A subsequent appeal is pending before the Ninth Circuit Court of Appeals. During the pendency of Mr. Voong's adversary proceeding, Debtor filed a reorganization plan that created a post-confirmation plan trust to hold and liquidate non-exempt assets, including the bankruptcy estate’s interest in the residence. The plan directed a trustee to administer plan trust assets with bankruptcy court approval. Mr. Voong did not object to plan confirmation. The bankruptcy court confirmed Debtor's plan. The trustee of the plan trust then sought bankruptcy court approval to sell the residence in accordance with the plan's and plan trust's terms. Debtor objected, arguing (1) Mr. Voong's pending appeal in the adversary proceeding divested the bankruptcy court of jurisdiction to approve the sale, (2) the sale would result in adverse tax consequences for Mr. Voong, and (3) unspecified parties would suffer adverse health effects if they had to vacate the residence. Mr. Voong did not oppose the trustee's motion to sell the residence. The bankruptcy court overruled Debtor's objection and approved the motion to sell, finding it had jurisdiction to do so. Debtor, but not Mr. Voong, appealed from the bankruptcy court's sale order.

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