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Rindlesbach v. Jones (In re Rindlesbach)

Rindlesbach v. Jones, et al. (In re Rindlesbach), Case No. 15-4088 (10th Cir. August 30, 2016). Unpublished
A person must be aggrieved by a bankruptcy court order to be able to seek appellate review of that order and to be aggrieved, that person’s rights or interests must be directly and adversely affected pecuniarily by the decree or order of the bankruptcy court. For a debtor to be aggrieved, the estate must be solvent and excess will eventually go to the debtor, or the matter involves rights unique to the debtor such as discharge of debts or exemption of property from the estate.
Procedural context:
The bankruptcy court approved a settlement between the chapter 7 trustee and a creditor over debtor’s objection and debtor appealed. The bankruptcy court dismissed holding the debtor lacked standing and the controversy was equitably moot. The 10th Circuit affirmed finding the debtor lacked standing and as a result, did not address equitable mootness.
Lenders loaned $3.3 million to an LLC to develop property in Utah. Debtor, as trustee of a profit sharing plan (the “Plan”), guaranteed the loan. The borrower defaulted and lenders sued the Plan and debtor personally. The state court ruled in favor of debtor that he was not personally liable but the lenders won a jury verdict against the Plan in the amount of over $6.3 million. Subsequently, lenders sued debtor for fraudulently transferring Plan assets after the jury verdict. Debtor was ordered but failed to deposit a full $2.2 million into the state court and was held in contempt. He filed bankruptcy. The chapter 7 trustee and lenders reached a settlement that modified the automatic stay so the lenders could seek recovery of the fraudulently transferred assets and authorized the trustee, standing in the shoes of debtor, to stipulate to a reversal of the decision that debtor was not personally liable. The settlement also called for the trustee to sell all the estate assets, including all claims and causes of action available to the trustee or the estate, to the lenders so they could pursue avoidance actions against third parties.
Hartz, O’Brien, Phillips

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