Pasley v. Keats (In re Pasley)

Case Type:
Case Status:
Case No. 18-8048; File Name: 19b0007p.06 (6th Circuit, Aug 06,2019) Published
Sixth Circuit Bankruptcy Appellate Panel (BAP) dismissed a Debtor's appeal of a bankruptcy court order which granted the Chapter 7 Trustee's motion to sell real estate owned by a single member limited liability company of which the Debtor was the sole member. The BAP found that the Chapter 7 Debtor did not have standing to appeal the order in question as he could not demonstrate that a successful appeal would generate assets in excess of liabilities (surplus). Without that showing the Debtor is not an aggrieved party and lacks standing to appeal.
Procedural context:
Debtor filed a Chapter 7 bankruptcy and listed in his schedules a 100% membership interest in a limited liability company (LLC). He did not claim an exemption in the membership interest. He valued the membership interest at $50,000. The Trustee discovered the LLC owned real estate and the Trustee filed a motion under 11 U.S.C. 363 to sell the LLC owned real estate claiming that the Debtor was deemed to have assigned his membership interest in the LLC to the Trustee upon filing. The bankruptcy court held two hearings on the Trustee's motion and granted the motion at the second hearing. The court found that the law in the Sixth Circuit was clear that the Trustee was allowed to sell the real estate. The Debtor had objected to the motion and timely filed a notice of appeal.
The BAP concluded that the order approving the sale was a final order and could be appealed. Although no one raised the issue of standing, the BAP stated it could review standing sua sponte. The BAP stated that a party may only appeal a bankruptcy court order when it diminishes their property, increases their burdens or impairs their rights. Chapter 7 debtors rarely have the requisite pecuniary interest because no matter how the estate's assets are disbursed by the trustee, no assets will revert to the debtor. Without a reasonable chance of a surplus the debtor has no pecuniary interest in the outcome of the appeal. No decision by the BAP would affect this Debtor's estate and this Debtor is not an "aggrieved party".
Harrison, Price Smith and Wise, Bankruptcy Appellate Panel Judges

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