Lofstedt v. Kendall (In re Kendall)

510 B.R. 356, 2014 WL 1672581, 2014 Bankr. LEXIS 1893
CourtUnited States Bankruptcy Court, D. Colorado
DecidedApril 25, 2014
DocketCase No. 10-29564 MER; Adversary No. 10-1710 MER
StatusPublished
Cited by2 cases

This text of 510 B.R. 356 (Lofstedt v. Kendall (In re Kendall)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Colorado primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lofstedt v. Kendall (In re Kendall), 510 B.R. 356, 2014 WL 1672581, 2014 Bankr. LEXIS 1893 (Colo. 2014).

Opinion

Michael E. Romero, United States Bankruptcy Judge

ORDER

The Court previously entered a judgment against the Defendants in this proceeding. After notice and a hearing, the Court stayed execution of the judgment pending Defendants’ appeal pursuant to Fed. R. BaNKR. P. 8005 (“Rule 8005”). The United States Bankruptcy Appellate Panel of the Tenth Circuit (“BAP”) affirmed this Court’s trial order and judgment, and Defendants timely appealed the matter to the United States Court of Appeals for the Tenth Circuit (“Tenth Circuit”). There are no disputed facts concerning this matter, and the sole issue is whether the stay pending appeal imposed by this Court under Rule 8005 terminated at the conclusion of the BAP appeal, or whether the stay continues through the entire appeal process, including a subsequent appeal from the BAP to the Tenth Circuit.

BACKGROUND

Debtor Mark A. Kendall (“Debtor”) filed for relief under Chapter 7 of Title 11 of the United States Code on August 2, 2010. On September 30, 2010, the former Chapter 7 trustee commenced this adversary proceeding by filing a Complaint against Defendants Janet K. Kendall (“Ms. Kendall”) and The J.K. Family Trust (collectively with Ms. Kendall, the “Defendants”) for the avoidance and recovery of certain assets transferred by the Debtor. Following a trial on the merits, the Court entered its Order dated August 6, 2012 (“Trial Order”) with a judgment in favor of the former trustee (“Judgment”),1 avoiding three fraudulent conveyances. Further, the Trial Order authorized the former Chapter 7 trustee to pursue recovery of assets within the limitations of 11 U.S.C. § 550(d), including but not limited to certain real property located at 5436 West 7th Street Road in Greeley, Colorado (“Property”).

On August 20, 2012, Defendants appealed the Trial Order and Judgment to the BAP,2 primarily asserting this Court erred in 1) determining the value of the Debtor’s business based on a liquidation rather than “going concern” basis, and 2) using the lower liquidation value to conclude the Debtor was insolvent at the time he made the subject transfers. Three days later, the Defendants filed their Motion to Stay [358]*358Judgment, requesting a stay pending appeal pursuant to Rule 8005, or in the alternative, to stay the judgment for a reasonable time — between 90 and 180 days — to allow Ms. Kendall to obtain another residence.3 The former Chapter 7 trustee opposed the Motion to Stay Judgment. Following a hearing on the matter, the Court entered a Minute Order dated September 7, 2012, providing, inter alia, as follows:

Based upon the representations and arguments of counsel, and for the reasons stated on the record, the Court shall stay execution of the Judgment (Docket No. 75) pending appeal, on the following conditions:
With respect to the house and surrounding real property, the Court will stay execution of the Judgment pending the appeal provided: (1) the Defendants maintain the property; (2) the Defendants maintain all insurance coverage against the property; (3) the Defendants maintain the current condition of the property, as may be supervised by the Trustee; (4) the Defendants cure any and all outstanding real property taxes against the property by October 1, 2012; and (5) so long as the Defendants are in possession of the property as a result of the stay, the Defendants must pay any and all real property taxes timely going forward. If Defendants fail to comply with any of these conditions, the stay of execution with respect to the property shall be lifted.4

The parties do not dispute Defendants have complied with the above enumerated conditions with respect to the Property. The parties further agree that during the pendency of the appeal to the BAP, Rule 8005 stayed the Trial Order and execution of the Judgment and the parties never requested a modification or termination of the stay from either this Court or the BAP as provided for in Rule 8005.

During the BAP appeal, Joli A. Lofstedt (“Trustee”) was substituted for Charles Schlosser as Chapter 7 trustee. On May 7, 2013, the BAP issued a written opinion affirming the Trial Order (“BAP Order ”)5 and the BAP issued the mandate on May 22, 2013. In the interim, on May 20, 2013, Defendants filed a Notice of Appeal to the Tenth Circuit.6 The Tenth Circuit appeal is still pending.

DISCUSSION

Other than the stay pending appeal granted by this Court under Rule 8005, the Defendants failed to seek any further stay of the Trial Order and Judgment, despite several opportunities to do so. Specifically, Defendants never sought a stay pending appeal of the BAP Order with the BAP pursuant to Fed. R. Bankr. P. 8017 (“Rule 8017”). Defendants did not seek a stay of the BAP mandate from the BAP pursuant to 10th Cm. BAP L.R. 8016-6(b).7 Further, Defendants never re[359]*359quested a stay pending appeal of the BAP Order from the BAP or the Tenth Circuit pursuant to Federal Rule of Appellate Procedure 8(a).8

About three months into the Tenth Circuit appeal, counsel for the Trustee conferred with counsel for the Defendants, seeking to conduct an orderly sale of the Property. The Trustee asserts the Rule 8005 stay pending appeal regarding the Property terminated when the BAP issued its mandate. Defendants, opposing any sale of the Property, argue the stay pending appeal issued by this Court continues throughout the entire appellate process, including the Tenth Circuit appeal. The failure to seek any additional stay was a heavy gamble for the Defendants given the Property — where the Debtor and Ms. Kendall currently reside — -hangs in the balance. If this Court’s stay pending appeal terminated, the Trustee may proceed with the sale of the Property, orderly or not. Such a sale would create potential problems if Defendants prevail in their Tenth Circuit appeal. However, if the stay pending appeal continues through the Tenth Circuit appeal, the Debtor and Ms. Kendall may continue to reside at the Property until the Tenth Circuit appeal concludes (or the stay is modified or terminated).

Thus, the parties’ dispute regarding the proposed sale of the Property was the catalyst for the Trustee’s Motion for Determination of Law Regarding Continuation of Fed. R. BankR. P. 8005 Stay of Execution or, in the Alternative, to Vacate Stay (“Motion to Determine Stay”). The Court reviewed the record from the hearing regarding Defendants’ Motion to Stay Judgment, and there was no discussion of whether the stay pending appeal would continue after conclusion of the BAP appeal. As a matter of first impression, the Court must determine just how long a bankruptcy court’s Rule 8005 “stay pending appeal” remains in effect.

A. Bankruptcy Rules Governing Stays Pending Appeal

A stay pending appeal temporarily suspends proceedings or the effect of a judgment. The Court begins its analysis with the applicable Federal Rules of Bankruptcy Procedure.

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Cite This Page — Counsel Stack

Bluebook (online)
510 B.R. 356, 2014 WL 1672581, 2014 Bankr. LEXIS 1893, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lofstedt-v-kendall-in-re-kendall-cob-2014.