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In re Salas

United States District Court, District of Columbia

July 3, 2019

In Re MAX E. SALAS, Debtor.
v.
MAX E. SALAS, Appellee. NICOLAAS J. BREKELMANS, et al., Appellants,

          MEMORANDUM OPINION

          Ketanji Brown Jackson United States District Judge.

         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 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 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.)

         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. ...


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