FILED
1 JUL 31 2013
SUSAN M SPRAUL, CLERK
2 U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL
4 OF THE NINTH CIRCUIT
5
In re: ) BAP No. NV-12-1512-DKiCo
6 )
RENO SNAX SALES, LLC, ) Bk. No. 11-53130-BTB
7 )
Debtor. )
8 ______________________________)
)
9 RENO SNAX SALES, LLC, )
)
10 Appellant, )
)
11 v. ) M E M O R A N D U M1
)
12 HERITAGE BANK OF NEVADA, )
)
13 Appellee. )
______________________________)
14
Argued and Submitted on July 19, 2013
15 at Las Vegas, Nevada
16 Filed - July 31, 2013
17 Appeal from the United States Bankruptcy Court
for the District of Nevada
18
Honorable Bruce T. Beesley, Bankruptcy Judge, Presiding
19
20 Appearances: Michael Lehners, Esq. for appellant, Reno Snax
Sales, LLC; Louis M. Bubala, III, Esq. of
21 Armstrong Teasdale LLP for appellee, Heritage Bank
of Nevada
22
23 Before: DUNN, KIRSCHER and COLLINS,2 Bankruptcy Judges.
24
25
1
This disposition is not appropriate for publication.
26 Although it may be cited for whatever persuasive value it may
27 have (see Fed. R. App. P. 32.1), it has no precedential value.
See 9th Cir. BAP Rule 8013-1.
28
2
The Hon. Daniel P. Collins, Bankruptcy Judge for the
District of Arizona, sitting by designation.
1 Reno Snax Sales, LLC (“Reno Snax”) appeals the bankruptcy
2 court’s order overruling its objection to the proof of claim
3 filed by Heritage Bank of Nevada (“Heritage Bank”).3 We AFFIRM.
4
5 FACTS
6 On October 4, 2011, Reno Snax and Coffee & Coolers Etc.,
7 Inc. (“Coffee & Coolers”), a related entity, each filed chapter 7
8 bankruptcy petitions.4 Separate trustees were duly appointed,
9 one for Coffee & Coolers (“Coffee & Coolers trustee”) and another
10 for Reno Snax (“Reno Snax trustee”). The Reno Snax trustee and
11 the Coffee & Coolers trustee each operated the businesses of Reno
12 Snax and Coffee & Coolers, respectively, postpetition.
13 Reno Snax and Coffee & Coolers were co-obligors on debt owed
14 to Heritage Bank,5 which was secured by nearly all of their
15 assets (i.e., inventory, accounts receivable and equipment).
16 Heritage Bank filed a proof of claim in each of the bankruptcy
17
18
19
20 3
Unless otherwise indicated, all chapter, section and rule
21 references are to the Bankruptcy Code,
11 U.S.C. §§ 101-1532, and
to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.
22
4
Reno Snax supplied food and snacks in approximately 500
23 vending machines in various businesses throughout the Reno-Sparks
24 area. Coffee & Coolers supplied coffee machines and related
products to businesses in the Reno-Sparks area.
25 Reno Snax and Coffee & Coolers had a common ownership;
Ronald and Brenda Bevers were managing members of Reno Snax and
26 officers of Coffee & Coolers.
27 5
Reno Snax scheduled Coffee & Coolers as a co-debtor to
28 Heritage Bank.
2
1 cases of Reno Snax and Coffee & Coolers.6
2 The Coffee & Coolers trustee soon sold substantially all of
3 Coffee & Coolers’ assets to a third-party (“Coffee & Coolers
4 sale”) for $322,000 cash (“Coffee & Coolers sale proceeds”) under
5 § 363. Four delivery vans and miscellaneous automobiles
6 (collectively, “vehicles”) were among the assets sold in the
7 Coffee & Coolers sale.
8 Out of the Coffee & Coolers sale proceeds, Heritage Bank
9 received $6,881.01 for costs advanced at the beginning of the
10 bankruptcy case. It also received $252,095.19 on its secured
11 claim, the amount remaining after the Coffee & Coolers trustee
12 took $63,023.80, a 20% carveout for the bankruptcy estate arising
13 out of her negotiations with Heritage Bank.
14 The Reno Snax trustee also sought to sell substantially all
15 of Reno Snax’s assets (“Reno Snax sale”) to a third-party for
16 $400,000 (“Reno Snax sale proceeds”) under § 363. Reno Snax
17 objected to any distribution of the Reno Snax sale proceeds to
18 Heritage Bank (“sale objection”). Reno Snax contended that
19 Heritage Bank was required to comply with the notice provisions
20 of N.R.S. 482.516 when it sold the vehicles as part of the Coffee
21
22
6
On March 7, 2012, Heritage Bank filed nearly identical
23 proofs of claim, each in the amount of $1,502,508.49, secured by
accounts receivable, inventory and equipment, in both of the
24
bankruptcy cases of Reno Snax and Coffee & Coolers.
25 On June 13, 2012, Heritage Bank filed amended proofs of
claim, both in the amount of $953,733.72, in the bankruptcy cases
26 of Reno Snax and Coffee & Coolers. Heritage Bank amended its
27 proofs of claim to reflect the unsecured portion of the debt that
remained after the sale of Reno Snax’s and Coffee & Coolers’
28 assets.
3
1 & Coolers sale.7 According to Reno Snax, N.R.S. 482.516 required
2
3 7
N.R.S. 482.516 provides:
4
1. Any provision in any security agreement for the sale
5 or lease of a vehicle to the contrary notwithstanding,
6 at least 10 days’ written notice of intent to sell or
again lease a repossessed vehicle must be given to all
7 persons liable on the security agreement. The notice
must be given in person or sent by mail directed to the
8
address of the persons shown on the security agreement,
9 unless such persons have notified the holder in writing
of a different address.
10
11 2. The notice:
12 (a) Must set forth that there is a right to redeem
the vehicle and the total amount required as of
13 the date of the notice to redeem;
14 (b) May inform such persons of their privilege of
reinstatement of the security agreement, if the
15 holder extends such a privilege;
(c) Must give notice of the holders’ intent to
16
resell or again lease the vehicle at the
17 expiration of 10 days from the date of giving or
mailing the notice;
18 (d) Must disclose the place at which the vehicle
19 will be returned to the buyer or lessee upon
redemption or reinstatement; and
20 (e) Must designate the name and address of the
person to whom payment must be made.
21
22 3. During the period provided under the notice, the
person or persons liable on the security agreement may
23 pay in full the indebtedness evidenced by the security
agreement. Such persons are liable for any deficiency
24
after sale or lease of the repossessed vehicle only if
25 the notice prescribed by this section is given within
60 days after repossession and includes an itemization
26 of the balance and of any costs or fees for
27 delinquency, collection or repossession. In addition,
the notice must either set forth the computation or
28 (continued...)
4
1 strict compliance with its notice provisions; failure to do so
2 would eliminate any deficiency debt owed. Here, Reno Snax
3 argued, Heritage Bank failed to provide Reno Snax notice pursuant
4 to N.R.S. 482.516. Reno Snax therefore no longer owed Heritage
5 Bank any deficiency debt.
6 Reno Snax also objected to Heritage Bank’s proof of claim
7 (“claim objection”), repeating its arguments from the sale
8 objection. It contended that Heritage Bank had no valid claim
9 against it because Heritage Bank was prohibited from recovering
10 any deficiency debt out of the Reno Snax sale proceeds when it
11 failed to comply with N.R.S. 482.516. Heritage Bank therefore
12 was limited in its recovery to the Coffee & Coolers sale
13 proceeds.
14 Heritage Bank countered that N.R.S. 482.516 did not apply.
15 It asserted that N.R.S. 482.516 only applied to secured creditors
16 repossessing and selling their collateral. Here, the
17 Coffee & Coolers trustee conducted the Coffee & Coolers sale,
18 exercising her right to sell bankruptcy estate assets as
19 representative of the bankruptcy estate. Because it was the
20 Coffee & Coolers trustee who sold the vehicles and not Heritage
21 Bank, and there was no repossession or sale by Heritage Bank,
22 Heritage Bank was not required to comply with the notice
23 provisions of N.R.S. 482.516.
24
25
7
(...continued)
26 estimate of the amount of any credit for unearned
27 finance charges or cancelled insurance as of the date
of the notice or state that such a credit may be
28 available against the amount due.
5
1 In its reply to Heritage Bank’s opposition, Reno Snax
2 bolstered its earlier arguments by referencing certain provisions
3 of Article 9 of the U.C.C., adopted in N.R.S. Chapter 104
4 (“Article 9").8 Specifically, Reno Snax contended that
5 repossession of the vehicles was not necessary for the notice
6 requirements of N.R.S. 482.516 to become operative. Under
7 Article 9, no matter who takes possession of and sells
8 collateral, a secured creditor must provide notice, unless it
9 assigns its security interest to another or transfers the
10 collateral, with the transferee agreeing to undertake the secured
11 creditor’s duties. Here, Heritage Bank neither transferred its
12 security interest nor transferred the vehicles to the Coffee &
13 Coolers trustee. Yet, Reno Snax argued, Heritage Bank still had
14 a duty to provide notice, even though the Coffee & Coolers
15 trustee sold the vehicles.
16 At the May 9, 2012 hearing on the Reno Snax sale, Reno Snax
17 withdrew its sale objection in light of its pending claim
18 objection. Reno Snax agreed to Heritage Bank receiving a
19 distribution of the Reno Snax sale proceeds, subject to
20 disgorgement in the event that the bankruptcy court sustained the
21 claim objection.
22
23 8
Reno Snax switches between references to a number of
provisions in N.R.S. Chapter 104 and U.C.C. Article 9. We refer
24
to these provisions collectively as “Article 9.” Reno Snax
25 specifically relies on U.C.C. 9-611(b), essentially incorporated
in N.R.S. 104-9611(2). U.C.C. 9-611(b) provides: “Except as
26 otherwise provided in subsection (d), a secured party that
27 disposes of collateral under Section 9-610 shall send to the
persons specified in subsection (c) a reasonable authenticated
28 notification of disposition.”
6
1 Out of the Reno Snax sale proceeds, Heritage Bank received
2 $29,150.53 for costs advanced at the beginning of the bankruptcy
3 case. It also received $296,679.57, the amount remaining after
4 the Reno Snax trustee took $74,169,90, a 20% carveout for the
5 bankruptcy estate arising out of her negotiations with Heritage
6 Bank.
7 Following a hearing, on July 13, 2012, the bankruptcy court
8 issued an order (“claim order”) overruling the claim objection.
9 It determined that Heritage Bank was not required to comply with
10 the notice requirements of N.R.S. 482.516 or Article 9 of the
11 U.C.C. because the Coffee & Coolers trustee sold the assets in
12 her capacity as representative of the bankruptcy estate. The
13 bankruptcy court found that the requirements of those provisions
14 did not apply to the Coffee & Coolers sale because it did not
15 fall “within the statutory provisions of [a] disposition of
16 collateral by a secured party.”
17 Reno Snax timely appealed.9
18
9
19 Reno Snax later moved to amend the findings in the claim
order (“motion to amend”), contending that the bankruptcy court
20 incorrectly found that a chapter 7 trustee’s powers of sale under
the Bankruptcy Code preempted Heritage Bank’s duty to comply with
21 N.R.S. 482.516. Reno Snax argued that Heritage Bank’s
22 non-compliance with N.R.S. 482.516 was not excused simply because
the Coffee & Coolers trustee sold the vehicles.
23 At the September 25, 2012 hearing on the motion to amend,
the bankruptcy court stated that the “[Coffee & Coolers trustee]
24
was the one who sold the property, not the Bank. [She], by the
25 supremacy clause of the United States and the Bankruptcy Rules[,]
[was] not subject to those notice rules. [Therefore, the
26 bankruptcy court was] not reconsidering.” Tr. of September 25,
27 2012 hr’g, 2:12-15.
The bankruptcy court issued an order denying the motion to
28 (continued...)
7
1 JURISDICTION
2 The bankruptcy court had jurisdiction under 28 U.S.C.
3 §§ 1334 and 157(b)(2)(B). We have jurisdiction under 28 U.S.C.
4 § 158.
5
6 ISSUE
7 Did the bankruptcy court err in overruling Reno Snax’s claim
8 objection?
9
10 STANDARDS OF REVIEW
11 “An order overruling a claim objection can raise legal
12 issues (such as the proper construction of statutes and rules),
13 which we review de novo, as well as factual issues (such as
14 whether the facts establish compliance with particular statutes
15 or rules), which we review for clear error.” Veal v. Am. Home
16 Mortg. Srvc., Inc. (In re Veal),
450 B.R. 897, 918 (9th Cir. BAP
17 2011).
18 Under de novo review, we give no deference to the bankruptcy
19 court’s decision. Barclay v. Mackenzie (In re AFI Holding,
20 Inc.),
525 F.3d 700, 702 (9th Cir. 2008). Under the clearly
21 erroneous standard, we give significant deference to the
22 bankruptcy court’s decision, only reversing when we have a
23 “definite and firm conviction that a mistake has been committed.”
24 Easley v. Cromartie,
532 U.S. 234, 242 (2001). That is, “[a
25 bankruptcy] court’s factual determination is clearly erroneous if
26
9
27 (...continued)
amend (“motion to amend order”). Reno Snax did not appeal the
28 motion to amend order.
8
1 it is illogical, implausible, or without support in the record.”
2 Retz v. Samson (In re Retz),
606 F.3d 1189, 1196 (9th Cir.
3 2010)(citation omitted).
4 We may affirm on any ground supported by the record. Shanks
5 v. Dressel,
540 F.3d 1082, 1086 (9th Cir. 2008).
6
7 DISCUSSION
8 Reno Snax insists that Heritage Bank was required to comply
9 with the notice provisions of N.R.S. 482.516 and Article 9 of the
10 U.C.C., even though it was the Coffee & Coolers trustee who had
11 taken possession of and sold the vehicles. It presumes that the
12 notice provisions of N.R.S. 482.516 apply. Given the plain
13 language of N.R.S. 482.516, we agree with the bankruptcy court
14 that it is inapplicable.
15 N.R.S. 482.516 by its terms establishes two triggers for the
16 notice requirements to kick in: 1) repossession and 2) a secured
17 creditor disposing of the subject assets.
18 Heritage Bank never repossessed the vehicles. As it pointed
19 out, Heritage Bank did not attempt to exercise its state law
20 right of repossession; it did not seek relief from the automatic
21 stay and instead deferred to the Coffee & Coolers trustee in her
22 administration of the bankruptcy estate.
23 Also, the Coffee & Coolers trustee is not a secured
24 creditor. She does not qualify as a creditor because she has no
25 prepetition claim to property of the bankruptcy estate. See
26 United States v. Lowell,
256 F.3d 463, 466 (7th Cir. 2000)
27 (quoting United States v. Shadduck,
112 F.3d 523, 531 (1st Cir.
28 1997)).
9
1 More importantly, N.R.S. 482.516 runs counter to the schema
2 of the Bankruptcy Code. When a debtor files a chapter 7
3 bankruptcy petition, all of the debtor’s property becomes part of
4 the bankruptcy estate. § 541(a). The property of the bankruptcy
5 estate “includes property in which a creditor has a security
6 interest.” Dewhirst v. Citibank (In re Contractors Equip. Supply
7 Co.),
861 F.2d 241, 244 (9th Cir. 1988)(citing United States v.
8 Whiting Pools, Inc.,
462 U.S. 198, 203 (1983)). See also
9 5 Collier on Bankruptcy (“Collier on Bankruptcy”) ¶ 541.05[2]
10 (Alan N. Resnick & Henry J. Sommer, eds., 16th ed. rev. 2012)
11 (“[T]he debtor’s estate succeeds to the debtor’s interest in
12 goods subject to a security interest.”).
13 As representative of the bankruptcy estate, the chapter 7
14 trustee controls the property of the bankruptcy estate. See
15 § 323(a). See also In re Bunn-Rodemann,
491 B.R. 132, 133
16 (Bankr. E.D. Cal. 2013)(“One of the immediate results of electing
17 to file a Chapter 7 case is that all of the property of the
18 estate is placed under the exclusive control of the Chapter 7
19 Trustee.”). In this capacity, the chapter 7 trustee has the duty
20 to “collect and reduce to money the property of the estate for
21 which such trustee serves . . . as is compatible with the best
22 interests of parties in interest.” § 704(a)(1).
23 “In performing [her] duties of administration and
24 liquidation under the Bankruptcy Code, the trustee represents all
25 the creditors of the [bankruptcy] estate generally. The trustee
26 does not act for the benefit of any particular creditor.”
27 3 Collier on Bankruptcy ¶ 323.02[1]. See also Hall v. Perry
28 (In re Cochise Coll. Park, Inc.),
703 F.2d 1339, 1357 (9th Cir.
10
1 1983)(the chapter 7 trustee “is a fiduciary of each creditor of
2 the estate . . . . [She therefore] has a duty to treat all
3 creditors fairly . . . .”)(citations omitted).
4 We agree with Heritage Bank that a chapter 7 trustee’s sale
5 of assets under § 363 is not a disposition of collateral by a
6 secured creditor under N.R.S. 482.516 or Article 9. The
7 Coffee & Coolers trustee sold the assets, including the vehicles,
8 as part of her duty in liquidating the property of the bankruptcy
9 estate. And she did so as representative of all the creditors of
10 the bankruptcy estate, not as an agent of Heritage Bank. Cf.
11 Sigmon v. Miller-Sharpe, Inc. (In re Miller),
197 B.R. 810, 815
12 (W.D. N.C. 1996)(stating that § 544 does not make the trustee an
13 agent for the creditors).
14 Reno Snax relies on an unpublished state appellate court
15 decision from Michigan, Dearborn Capital Corp. v. Bravo,
16
2009 WL 3013077 (Mich. App. 2009)(“Dearborn”), in arguing that a
17 chapter 7 trustee’s sale under § 363, after making a carveout
18 deal with the secured creditor, constitutes a disposition within
19 the meaning of N.R.S. 482.516 and Article 9. Reno Snax insists
20 that Dearborn applies here. We disagree.
21 In Dearborn, Dearborn Capital Corp. (“DCC”) earlier had made
22 a loan to a debtor who later filed for bankruptcy protection; the
23 loan had been secured against certain equipment. The bankruptcy
24 court allowed the sale of the debtor’s assets, including the
25 equipment. Some of the sale proceeds were to be held in a
26 segregated account pending a determination of the amount and
27 priority of DCC’s secured claim. DCC eventually entered into a
28 settlement under which a portion of its claim was allowed as
11
1 secured. It was to receive a part of the funds in the segregated
2 account in satisfaction of its secured claim. The balance of its
3 claim was treated as unsecured.
4 Applying Michigan’s version of the U.C.C., the state
5 appellate court determined that the settlement constituted a
6 disposition of a secured interest in collateral. But other than
7 acknowledging the underlying bankruptcy case, the state appellate
8 court did not engage in any analysis or application of the
9 Bankruptcy Code or the Rules. The state appellate court had no
10 evidence as to the adequacy of the notice of the settlement; it
11 simply assumed that the notice of the settlement had not been
12 adequate for Michigan U.C.C. purposes. In this case, Reno Snax
13 concedes that the trustees’ sale notices were adequate and fully
14 satisfied all requirements under the Bankruptcy Code and Rules.
15 We reject the application of Dearborn to the matter before
16 us. Applying Dearborn in the context of this appeal would be a
17 stretch which we are not prepared or obliged to make.
18 N.R.S. 482.516 and Article 9 may apply only if Heritage Bank
19 had obtained relief from the automatic stay and had exercised its
20 rights concerning its collateral. Otherwise, the Bankruptcy Code
21 precluded any such action. See § 362(a)(3) and (5). Without
22 relief from the automatic stay, Heritage Bank could not exercise
23 its right to repossess and dispose of its collateral.
24 Because Heritage Bank was not required to comply with the
25 notice provisions of N.R.S. 482.516 and Article 9 in order to
26 assert a claim to recover any deficiency out of the Reno Snax
27 sale proceeds, the bankruptcy court did not err in overruling the
28 claim objection.
12
1 CONCLUSION
2 For the foregoing reasons, we AFFIRM.
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