In re Miller

In re Miller, Case No. 12-9008 (B.A.P. 6th Cir. December 27, 2012) (limited precedential effect pursuant to 6th Cir. BAP LBR 8013-1(b))
The Bankruptcy Appellate Panel for the Sixth Circuit (the “BAP”) held that the appellants, a chapter 7 debtor and his heir, were not “persons aggrieved” by the bankruptcy court’s order authorizing the sale of real property and, therefore, they lacked standing to appeal that order. The debtor did not show that the sale order would affect his discharge. Also, because the secured claims against the property far exceeded the value of the real property, the debtor could not show that a successful appeal of the sale order would yield any surplus to which he would be entitled. Similarly, the debtor’s heir could not show that the successful appeal of the sale order would have any pecuniary impact on whatever inheritance the debtor’s heir may receive from the debtor.
Procedural context:
Appeal from the United States Bankruptcy Court for the Northern District of Ohio of an order authorizing the chapter 7 trustee to sell real property and retain an auctioneer.
Less than five months prior to filing his chapter 7 bankruptcy petition, a debtor transferred three parcels of real estate to his daughter for no consideration. Those parcels were heavily encumbered by liens far in excess of the properties’ value. The chapter 7 trustee filed an adversary proceeding to, among other things, avoid the debtor’s transfer of the properties to his daughter as fraudulent transfer and to sell the properties. The bankruptcy court granted summary judgment to the chapter 7 trustee on his fraudulent transfer claim but dismissed without prejudice the remaining counts of the adversary proceeding. The chapter 7 trustee then filed a motion seeking to sell the properties and retain an auctioneer. The debtor and his daughter (as heir) objected to the motion on several grounds. The bankruptcy court entered an order granting the motion, and the debtor and his daughter appealed that order to the Bankruptcy Appellate Panel for the Sixth Circuit (the “BAP”). The BAP raised, sua sponte, the issue of the appellants’ standing to appeal the sale order. The BAP first noted that a chapter 7 debtor rarely is found to have standing to appeal an order regarding the disposition of estate property. The BAP then reviewed and applied the two exceptions to a chapter 7 debtor’s limited standing regarding sale orders, asking whether (i) the debtor can show that a successful appeal would generate a surplus, entitling the debtor to a distribution or (ii) the order appealed from affects the terms of the debtor’s discharge in bankruptcy. Concluding that neither exception was met, the BAP found that the debtor lacked standing. The BAP then determined that the debtor’s heir’s claim of standing was essentially derivative to the debtor’s standing and consequently lacking: if the debtor would receive no surplus and the sale order would not affect his liabilities via impairing his discharge, then the sale order would have no effect on the heir’s inheritance from the debtor.
Emerson, Fulton, and Preston, Bankruptcy Appellate Panel Judges

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