Leanna Peoples v. Stuart Radloff

United States Bankruptcy Appellate Panel
For the Eighth Circuit
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No. 12-6065
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In re: Leanna S. Peoples
lllllllllllllllllllllDebtor
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Leanna S. Peoples
lllllllllllllllllllllDebtor - Appellant
v.
Stuart J. Radloff
lllllllllllllllllllllTrustee - Appellee
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Appeal from United States Bankruptcy Court
for the Eastern District of Missouri - St. Louis
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Submitted: May 14, 2013
Filed: July 2, 2013
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Before KRESSEL, SALADINO and SHODEEN, Bankruptcy Judges.
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SHODEEN, Bankruptcy Judge.
Debtor, Leanna Peoples, appeals from the bankruptcy court’s 1 Order denying her
Motion to Set Aside Compromise. For the reasons that follow, we affirm.
BACKGROUND
Prior to her bankruptcy, Peoples was employed by the City of Maplewood
Police department from March 1999 through July 2009. When her employment
ended, she filed suit against the City of Maplewood alleging constructive
discharge, discrimination on the basis of her race and gender, hostile work
environment, intentional infliction of emotional distress, and retaliation pursuant to
§213.055 R.S.Mo., et seq.
Debtor filed her chapter 7 bankruptcy petition, pro se, on April 29, 2011.
Her petition identified a street address of 1011 Walton Avenue, St. Louis,
Missouri. The pending cause of action against the City of Maplewood was not
disclosed on the schedules. The case was closed as a no-asset filing on June 10,
2011. A motion for summary judgment was then filed in the state court action by
the City of Maplewood seeking dismissal of the litigation on the basis that Peoples
had failed to disclose the claim in her bankruptcy proceeding. On December 16,
2011, the Debtor filed a motion to reopen her bankruptcy case which identified
1011 Walton Avenue as her address. The motion to reopen was granted and
Peoples filed an amended schedule listing the pending litigation.
The chapter 7 trustee determined that the Debtor’s interest in the litigation
was an asset of the estate subject to administration for the benefit of creditors. On
January 25, 2012, the trustee filed an Application to Employ James B. Day as an
attorney, to represent the estate “with regard to the negotiation and recovery of any
proceeds” related to Leanna Peoples v. City of Maplewood, Case No. 10SL-
CC02397. The employment of the trustee’s attorney was approved by the court.
Approximately eight months later, on September 5, 2012, the trustee filed a Motion
1
The Honorable Kathy A. Surratt-States, Chief Judge, United States Bankruptcy
Court for the Eastern District of Missouri.
to Approve Compromise of Claim seeking the bankruptcy court's approval to settle
Peoples’ claim for the amount of $20,000. This filing sets forth the basis for the
settlement and that it was unlikely that any surplus funds would be available for
distribution to the Debtor after the payment of expenses and claims. The motion
also contained notice that September 26, 2012 was the deadline to file any
resistance to the motion and scheduled a hearing for October 1, 2012 at 10:00 a.m.
In capitalized bold type was a warning that unless timely objections were filed, the
court may enter an Order prior to the hearing date. The motion was served upon
all parties in interest, including the Debtor at the address included in her motion to
reopen her case. No objections or other responsive pleadings were filed within the
time period identified on the face of the Motion. The court granted the trustee’s
motion on October 3, 2012 without holding the October 1, 2012 hearing. See 11
U.S.C. § 102(1) (2013).
On October 11, 2012, Peoples filed a Motion for Leave to Object to
Compromise of Claim and a Motion to Set Aside the Order. We construe this
Motion to be one under Rule 60(b) that requests relief from the order approving the
settlement. A hearing was conducted by the bankruptcy court on November 5,
2012 related to the Debtor’s Motion. The Court was informed at the time that the
parties had agreed to stay consummation of the trustee’s settlement pending
resolution of the outstanding issues. No exhibits or witnesses were offered by any
party. During that hearing, Peoples stated she had not received notice of the
trustee’s Motion to Compromise. Debtor’s state court litigation counsel argued
that it was premature to resolve the claim without further discovery and an expert’s
report. He further stated he could not make a reliable representation as to the
amount of any potential damage award. Mr. Day, attorney for the trustee, argued
that the litigation had been investigated and based upon the information obtained,
the trustee decided to pursue settlement of the case. Both Mr. Day and Mr.
Mackey, attorney for the City of Maplewood, contended that the Debtor held no
pecuniary interest in the pending litigation. The Court denied the Debtor’s motion
and Peoples has appealed this final order.
STANDARD OF REVIEW
We review the bankruptcy court’s order for an abuse of discretion. Sanders
v. Clemco Indus., 862 F.2d 161, 169-70 (8th Cir. 1988). The conclusion that such
an abuse occurred can only be reached if the court’s ruling was clearly erroneous
as to factual findings or legal conclusions. Yates v. Forker (In re Patriot Co.), 303
B.R. 811, 814 (B.A.P. 8th Cir. 2004).
DISCUSSION
The threshold issue to be determined is whether the Debtor has standing as
an aggrieved party to the bankruptcy court’s order. See Nangle v. Surratt-States
(In re Nangle), 288 B.R. 213, 216 (B.A.P. 8th Cir. 2003) (citations omitted). We
are required to make this determination whether or not the issue was specifically
addressed or decided by the bankruptcy court. See Berger Levee Dist., Franklin
County, Mo. v. United States, 128 F.3d 679, 680 (8th Cir. 1997); Sioux Falls Cable
Television v. State of South Dakota, 838 F.2d 249, 251 (8th Cir. 1988). To
establish standing by way of a pecuniary interest there must be a showing of a
direct injury resulting from the order. See Yukon Energy Corp. v. Brandon Invs.,
Inc. (In re Yukon Energy Corp.), 138 F.3d 1254, 1259 (8th Cir. 1998); Fidelity
Bank, Nat'l Assn. v. M.M. Group, Inc., 77 F.3d 880, 882 (6th Cir. 1996). “This
principle limits standing to persons with a financial stake in the bankruptcy court’s
order.” In re Nangle, 288 B.R. at 216 (citing In re Marlar, 252 B.R. 743, 748 (8th
Cir. BAP 2001)).
By commencing a voluntary bankruptcy case, a debtor’s assets become
property of the bankruptcy estate, over which a trustee has control of their
disposition. See 11 U.S.C. §§ 541(a), 704 (2013). Consequently, a chapter 7
debtor cannot normally establish a pecuniary interest in property of the estate.
Spenlinhauer v. O’Donnell, 261 F. 3d. 113, 118 (1st Cir. 2001). To meet the
pecuniary interest requirement, Peoples bears the burden to show that after
payment of all claims, there would be a surplus of funds to be paid pursuant to 11
U.S.C. section 726(a)(6). See In re Nangle, 288 B.R. at 216; see also In re
Depoister (Depoister v. Mary M. Holloway Foundation), 36 F.3d 582, 585 (7th
Cir.1994); In re Willemain (Willemain v. Kivitz), 764 F.2d 1019, 1023 (4th
Cir.1985); In re Cosmopolitan Aviation Corp. (Cosmopolitan Aviation Corp. v.
New York State Dep't of Transp.), 763 F.2d 507, 513 (2d Cir.1985); In re Alfaro
(Alfaro v. Vazquez ), 221 B.R. 927, 931-32 (B.A.P. 1st Cir.1998).
The trustee argues that administrative expenses and the amounts owed
according to proofs of claim that were filed exceed the amount of the proposed
settlement, which results in no pecuniary interest being held by the Debtor.
Peoples counters this argument by asserting that the potential value of the claim
against the City of Maplewood should be the basis of determining whether she has
standing to appeal. Standing may not be conferred when the interest alleged is
speculative or contingent. Gentile v. DeGiacomo (In re Gentile), No. MB 12-071,
2013 WL 2221496, at *3 (B.A.P. 1st Cir. May 20, 2013). To demonstrate the
inadequate amount of the trustee’s settlement, in her Reply Brief, Peoples recites
verdicts against the City of Maplewood in other proceedings that range in amounts
of $50,000 up to $479,000. This information was not provided to the bankruptcy
court, and we do not consider it on appeal.
The chapter 7 trustee investigated the pending litigation and made a
determination that the proposed compromise was in the best interest of the estate.
The court granted the trustee’s motion by default because no resistances were
timely filed. Peoples has failed to meet her burden to show a pecuniary interest to
establish her standing to object to the trustee’s Motion to Compromise or to pursue
this appeal.
CONCLUSION
Accordingly, we affirm the decision of the bankruptcy court.
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