In Re: Max E. Salas

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

) ) In Re: ) ) MAX E. SALAS, ) Bankruptcy Case No.: 18-260 ) Debtor. ) Chapter 11 ) ) ) NICOLAAS J. BREKELMANS, et al., ) ) Appellants, ) ) v. ) No. 18-cv-2318 (KBJ) ) MAX E. SALAS, ) ) Appellee. ) )

MEMORANDUM OPINION

Nicolaas J. Brekelmans, Gail Gregory Brekelmans, Michael McLoughlin, and

Martha Johnson (collectively, “Appellants”) have appealed from a decision of the

United States Bankruptcy Court for the District of Columbia regarding real property

that is also the subject of another, related bankruptcy proceeding in the Middle District

of Tennessee. (See Appellants’ Opening Br., ECF No. 6.) Before this Court at present

is Appellants’ motion to stay the bankruptcy court’s order pending the resolution of this

appeal, which Appellants have filed in an attempt

to protect the Appellants[’] interest in the Property, protect the Appellants’ claims against the Debtor/Appellee and the Property in the Tennessee Bankruptcy Case[,] and avoid the unfair and inequitable result that the length of time in which this appeal is pending (and not decided) will threaten the Appellants[’] rights to recover substantial assets in the pending bankruptcy matters.

(Appellants’ Mot. to Stay the J. & Order of the Bankr. Ct. (“Appellants’ Mot.”), ECF

No. 24, at 3.) 1 Appellants’ motion makes clear that they are primarily seeking a stay of

the bankruptcy court’s order to preserve the claims that are at issue in the Tennessee

case, but as the bankruptcy court below has already informed Appellants, staying the

bankruptcy court’s order would have no impact on the proceedings in Tennessee. (See

Ex. A to Appellants’ Mot. (“Bankr. Ct. Dec.”), ECF No. 24-1, at 2, 6, 7.) Thus, this

Court agrees with and will adopt the bankruptcy court’s analysis with respect to the stay

request, for the reasons explained below. As a result, Appellants’ stay motion will be

DENIED. A separate Order consistent with this Memorandum Opinion will follow.

I. FACTUAL AND PROCEDURAL BACKGROUND

On April 18, 2018, Appellee Max E. Salas (“Salas” or “Appellee”) filed for

Chapter 11 bankruptcy in the District of Columbia. (See Mem. in Supp. of Appellants’

Mot. (“Appellants’ Mem.”), ECF No. 24-2 at 5.) His son, Len Salas, filed his own,

separate Chapter 11 proceedings in the Middle District of Tennessee. (See id.)

Appellants are creditors of both father and son. (See id.) When Salas filed his petition

for bankruptcy, he claimed an exemption for the real property that the motion to stay

addresses, claiming that he owned and lived at the property, and that, therefore, the

property is subject to the so-called Homestead Exemption and thus should not to be

1 Page-number citations to the documents that the parties have filed refer to the page numbers that the Court’s electronic filing system automatically assigns.

2 included in his bankruptcy estate. (See id. at 6.) Appellants objected to this claimed

exemption. (See id.)

On September 25, 2018, the United States Bankruptcy Court for the District of

Columbia (Judge S. Martin Teel, Jr., presiding) overruled Appellants’ objection, and

determined that Salas is entitled to the Homestead Exemption. (See id.; see also

Appendix to Appellants’ Br., ECF No. 6-1, at 5.) On October 9, 2018, Appellants filed

a notice of appeal in this Court. (See Not. of Appeal from Bankr. Ct., ECF No. 1.)

On April 10, 2019, the trustee of the bankruptcy estate in Len Salas’s bankruptcy

proceedings in the Middle District of Tennessee filed a motion with that bankruptcy

court seeking the authority to sell the bankruptcy estate’s interest in all claims related

to the property. (See Appellant’s Mem. at 7.) More than one month later, on May 13,

2019, Appellants filed in this Court a motion to stay Judge Teel’s decision regarding

the Homestead Exemption pending appeal. (See ECF No. 16.) This Court issued an

Order to Show Cause why the Court should not deny the motion to stay for failure to

comply with Federal Rule of Bankruptcy Procedure 8007 (see ECF No. 18; see also

Fed. R. Bankr. P. 8007(a)(1), (b)(2) (requiring a party seeking a stay pending appeal to

“move first in the bankruptcy court[,]” or “show that moving first in the bankruptcy

court would be impracticable”), and Appellants withdrew their motion (see ECF No.

20). Appellants then filed a motion to stay with the bankruptcy court (see Appellants’

Resp. to the Court’s Order to Show Cause, ECF No. 19, at 2), and on June 5, 2019, the

bankruptcy court denied Appellants’ motion to stay as moot (see Bankr. Ct. Dec. at 2, 6

(concluding that “a stay would serve no purpose” because, even if the bankruptcy

court’s order were stayed, the “trustee in Len’s bankruptcy case[] [would be] free to

3 press forward with attempting to obtain court authorization for a sale of whatever

interest Len has in the Property”)). Appellants then filed a second motion to stay in this

Court. (See Appellants’ Mot.).

In their motion to stay, Appellants maintain that because the trustee of Len

Salas’s bankruptcy estate invoked section 363(m) of Title 11 of the United States Code

in the Middle District of Tennessee when seeking authority to sell that bankruptcy

estate’s interest in the real property at issue, any sale of that bankruptcy estate’s

interest—if allowed to proceed—would potentially moot the appeal pending before this

Court. (See Appellants’ Mem. at 8.) 2 Appellants further insist that this Court’s stay of

the bankruptcy court’s decision below would “protect the Appellants’ claims to the

equity in the Property”; protect “the Appellants’ claims in the Len’s Bankruptcy against

[Appellee] and the Property”; and “avoid the unfair and inequitable result that the

length of time in which this appeal is pending (and not decided) will threaten the

Appellants’ rights to recover substantial assets in the pending bankruptcy matters.”

(Id.) Finally, Appellants argue that a stay is justified because they are likely to succeed

on the merits of their appeal (see id. at 11); they will suffer irreparable harm if a stay is

not granted (see id. at 11–12); the balance of equities tips in their favor (see id. at 13);

and public policy supports granting a stay (see id. at 13–14). Appellants’ motion to

stay Judge Teel’s order is now ripe for this Court’s review. (See Appellee’s Opp’n to

Appellants’ Mot., ECF No. 26.)

2 11 U.S.C. § 363(m) provides: “[t]he reversal or modification on appeal of an authorization under subsection (b) or (c) of this section of a sale or lease of property does not affect the validity of a sale or lease under such authorization to an entity that purchased or leased such property in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale or lease were stayed pending appeal.”

4 II. LEGAL STANDARD

A court may grant a stay pending appeal upon consideration of the following

factors:

(1) the likelihood that the party seeking the stay will prevail on the merits of the appeal; (2) the likelihood that the moving party will be irreparably harmed absent a stay; (3) the prospect that others will be harmed if the Court grants the stay; and (4) the public interest in granting the stay.

Cuomo v. U.S. Nuclear Regulatory Comm’n, 772 F.2d 972, 974 (D.C. Cir. 1985) (per

curiam) (citation omitted); see also In re Sabine Oil & Gas Corp., 551 B.R. 132, 142

(S.D.N.Y. 2016) (applying factors in bankruptcy context). When seeking a stay, “it is

the movant’s obligation to justify the court’s exercise of such an extraordinary

remedy.” Id. at 978.

III. ANALYSIS

This Court has reviewed Appellants’ motion and Judge Teel’s decision denying

the motion to stay that Appellants filed in bankruptcy court, and it agrees with Judge

Teel’s thorough analysis and conclusion. As explained above, Judge Teel determined,

essentially, that “[t]he Stay Motion makes no sense” (Bankr. Ct. Dec. at 6), because

staying the order regarding the Homestead Exemption has no bearing whatsoever on the

parties’ various interests and objectives concerning Len Salas’s bankruptcy estate (see

id. at 2 (noting that “a stay would serve no purpose”).

As Judge Teel rightly observes, the trustee of the bankruptcy estate in the Middle

District of Tennessee “is free to press forward with attempting to obtain court

authorization for a sale of whatever interest Len has in the Property” regardless of

5 whether his order pertaining to the Homestead Exemption is stayed. (Id. at 6.) In other

words, as far as this Court can tell, nothing about a stay of the bankruptcy court’s

characterization of the property as subject to the Homestead Exemption prevents the

potential sale of Len Salas’s bankruptcy estate’s interest in the property, and nothing

about any such sale moots the instant appeal of the bankruptcy court’s order. Thus, if

Appellants somehow discern that the proposed sale of Len Salas’s bankruptcy estate’s

interest is disadvantageous, “[i]t is to the U.S. Bankruptcy Court for the Middle District

of Tennessee that [Appellants] must turn to seek disapproval of any sale unfavorable to

their interests, and to obtain a stay of any sale order which they view as unfavorable to

them and that they consequently seek to appeal.” (Id. at 7.) 3 And as Judge Teel noted,

they must abide by that court’s determination about the propriety of any sale, for “it is

for the bankruptcy court in Len’s bankruptcy case, not this court, to rule on the

Trustee’s Motion to Sell Property and the objections thereto.” (Id. at 5 (emphasis

omitted).)

Oddly, Appellants have not provided any response whatsoever to Judge Teel’s

reasoning and conclusion. The instant motion to stay is simply a verbatim copy of the

motion that they filed in this Court on May 13, 2019, prior to Judge Teel’s ruling

(compare Appellants’ Mem. with Appellants’ Mem. in Support of Mot. to Stay the J. &

Order of the Bankr. Ct., Dated Sept. 25, 2018, ECF No. 16-1), and it should go without

saying that Appellants’ mere regurgitation of particular arguments that Judge Teel

3 Apparently, Appellants have already gone that route by “object[ing] in Len’s bankruptcy case to the proposed sale” in that court. (Bankr. Ct. Dec. at 4.)

6 squarely rejected will not carry the day. 4

What is more, Appellants’ apparent concern that the invocation by Len’s

bankruptcy estate’s trustee of section 363(m) of Title 11 of the United States Code,

which “effectively preclude[s] any challenge to the proposed sale in Tennessee and,

therefore, any right to prevent the Tennessee trustee from issuing a confirmatory deed

of the Property to [Appellee]” (Appellants’ Mem. at 12), is of no moment with respect

to the instant stay request. Again, as Judge Teel ably explained, “[s]ection 363(m)

might result in [Appellants’] not being able to succeed in an appeal challenging an

order authorizing the sale of Len’s interest in the Property, but that is merely a

reflection of the rights a purchaser will have under the Bankruptcy Code incident to a

sale in Len’s bankruptcy case.” (Bankr. Ct. Dec. at 8 (emphasis added).) Indeed, even

if section 363(m) “would effectively preclude any challenge to the proposed sale in

Tennessee” (Appellants’ Mem. at 12), it is unclear to this Court how a stay of Judge

Teel’s ruling would do anything to prevent that harm. Consequently, this Court agrees

with Judge Teel that “[t]he existence of [section] 363(m) has no bearing on whether this

[C]ourt should grant the Stay Motion.” (Bankr. Ct. Dec. at 8.)

Appellants have raised one other possible injury that Judge Teel did not address:

that “[Appellee’s] counsel represented to the [bankruptcy court] that [the] intention was

to seek a confirmatory deed once the sale [of Len’s bankruptcy estate’s interest in the

4 For example, Appellants maintain that they will be irreparably harmed absent a stay because, if the trustee of Len’s bankruptcy estate is allowed to sell “all actual or potential interests in that estate’s claims related to the Property[,]” then “all recovery actions to recover the Property, or its equity, and all claims against [Appellee’s] estate related to the Property” will be precluded. (Appellants’ Mem. at 12.) But Len’s bankruptcy and his estate’s interest in the property is not before this Court. As Judge Teel explained, if Appellants wish to object to the sale of Len’s bankruptcy estate’s interest in the property, they must raise that issue in the Middle District of Tennessee. (See Bankr. Ct. Dec. at 7.)

7 property] was approved in Len’s Bankruptcy and then seek dismissal of this appeal as

moot.” (Appellants’ Mem. at 12.) Appellants thus insist that “absent a stay of the

[Homestead] Exemption Decision, there is immediate danger that the Appellants will

lose the right of appeal [in this case][.]” (Id.) But as explained repeatedly above and in

Judge Teel’s opinion, a stay of the Homestead Exemption decision in this Court will not

thwart the sale of Len’s bankruptcy estate’s interest in the property, and Appellants

make no attempt to explain how the requested stay could possibly affect Appellee’s

ability to seek a confirmatory deed or seek dismissal of this appeal. Appellants have

also failed to demonstrate how Appellee’s stated “intention” to seek a confirmatory

deed and, eventually, “dismissal of this appeal” (id.) means that Appellants face an

“actual and not theoretical” injury absent a stay, Chaplaincy of Full Gospel Churches v.

England, 454 F.3d 290, 297 (D.C. Cir. 2006) (quoting Wisc. Gas Co. v. FERC, 758 F.2d

669, 674 (D.C.Cir.1985) (per curiam)); see also In re Sabine Oil & Gas Corp., 548 B.R.

674, 682 (Bankr. S.D.N.Y. 2016) (“A majority of courts have held that a risk of

mootness, standing alone, does not constitute irreparable harm.”). Therefore, it is clear

to this Court that Appellants have not made the required showing that they face

irreparable injury absent a stay of the bankruptcy court’s Homestead Exemption

decision, and thus have failed to justify this Court’s issuing such a stay. See Nat’l

Ass’n of Mfrs. v. N.L.R.B., No. 11-1629, 2012 WL 1929889, at *1 (D.D.C. Mar. 7,

2012) (“[T]he movant’s failure to make any showing of irreparable harm is grounds for

refusing to grant a stay, even if the other three factors merit relief.” (citing Nken v.

Holder, 556 U.S. 418, 434–35 (2009); Winter v. Nat. Res. Def. Counsel, Inc., 555 U.S.

7, 22 (2008); Wis. Gas Co., 758 F.2d at 674)).

8 As a final note, this Court points out, as Judge Teel did previously, that

Appellants have provided no justification for why they waited as long as they did to

seek to stay the bankruptcy court’s Homestead Exemption decision. Appellants filed

their notice of appeal in this case on October 9, 2018 (see ECF No. 1), but waited until

May 13, 2019, to file the first (procedurally defective) motion to stay the bankruptcy

court’s order (see ECF No. 16). Appellants withdrew that motion on May 23 (see ECF

No. 20); filed their motion to stay with the bankruptcy court on May 28 (see Bankr. Ct.

Dec. at 8); and filed the instant motion (which is substantively identical to the initial

motion to stay) nearly two weeks later, on June 9 (see ECF No. 24). The trustee of

Len’s bankruptcy estate filed its motion for authority to sell Len’s interest in the

property with the bankruptcy court in Tennessee on April 10, 2019, a full forty-eight

days before Appellants filed a procedurally proper motion to stay with the bankruptcy

court here. (See Bankr. Ct. Dec. at 8.) Yet, Appellants filed the motion to stay at issue

here less than 48 hours before the hearing that the Middle District of Tennessee

apparently held concerning Len Salas’s bankruptcy estate’s motion for sale authority.

(See id. at 9.) Thus, even if a stay were somehow justified, which it is not, it is clear

that because of Appellants’ delay, any such stay could not have been issued in time to

prevent the sale that was apparently the impetus for their seeking a stay in the first

place.

IV. CONCLUSION

For the reasons described above, this Court concludes, as the bankruptcy court

did, that a stay of the bankruptcy court’s decision pending this appeal would serve no

9 purpose. Therefore, Appellants’ motion to stay will be DENIED.

DATE: July 3, 2019 Ketanji Brown Jackson KETANJI BROWN JACKSON United States District Judge