United States District Court, D. Alaska
MARGARET A. BERTRAN, et al., Appellants,
v.
LARRY D. COMPTON, TRUSTEE, et al., Appellees.
Appeal
from Bankruptcy Case No. F12-00501-HAR
DECISION & ORDER ON APPEAL
SHARON
L. GLEASON UNITED STATES DISTRICT JUDGE.
Before
the Court is an appeal pursuant to 28 U.S.C. § 158(a)
from the United States Bankruptcy Court for the District of
Alaska (the “Bankruptcy Court”).[1] Appellants
Margaret A. Bertran, Barbara Tangwall, and Donald Tangwall,
in their individual capacities and as trustee or trustor of
the Toni 1 Trust, appeal the Bankruptcy Court's Order
Granting Trustee's Motion for Authority to Sell Ranch By
Auction, and To Sell or Dispose of Personal Property on
Site.[2] The appeal has been fully
briefed.[3] Also before the Court at Docket 44 is
Appellants' Motion to Deny Barbara Wacker, William Wacker
and Their Attorney Erik LeRoy from Participating in this
Appeal; at Docket 49 is Appellants' Motion for Extension
of Time to File Reply Brief; and at Docket 54 is Trustee
Larry Compton's Motion for Leave to File Trustee's
Response to Reply Brief Concerning the Record on Appeal.
These additional motions have also been
briefed.[4] Oral argument was not requested and was
not necessary to the Court's determinations.
BACKGROUND
The
facts of this longstanding dispute are well known to the
parties. The following facts are relevant to this appeal:
Appellant
Margaret Bertran and her daughter, Appellant Barbara
Tangwall, owned a parcel of property in Roundup, Montana
(“the Ranch”). Appellant Donald Tangwall, Barbara
Tangwall's husband, sued Barbara and William Wacker
(“the Wackers”) in Montana state court over a
dispute concerning a trucking enterprise and a cattle
trailer. The Wackers filed a third party complaint in that
action against Ms. Bertran, the Tangwalls, and others to
recover on a debt. While that suit was pending, Ms. Bertran
and Ms. Tangwall transferred the Ranch, and Ms. Tangwall
transferred a commercial property (“the
Properties”) to a purported trust called the Toni 1
Trust.[5] On May 17, 2011, the Wackers obtained a
judgment against Ms. Tangwall and Ms. Bertran in the Montana
case (the “2011 Judgment”), in the amount of
$137, 551.47.[6] The Wackers then brought a fraudulent
transfer suit in Montana state court under the Montana
Uniform Fraudulent Transfer Act against the Toni 1 Trust, Ms.
Bertran and Ms. Tangwall.[7] On May 7, 2012, the Montana state court
entered an order, which held that the transfers of the
Properties to the trust were fraudulent, set them aside, and
permitted the Wackers to levy execution on the Properties
(the “2012 Judgment”). The 2012 Judgment also
expressly authorized the Wackers to sell the Properties at
public auction and apply the proceeds to the
judgment.[8] No appeal was taken from either judgment.
On July 17, 2012, the County Clerk for the Montana state
court issued a writ of execution, and a notice of sale of the
Properties by public auction was sent to Ms. Bertran and Ms.
Tangwall. Appellants Margaret Bertran and Barbara Tangwall
filed a motion to quash the execution of the writ and a
motion to set aside the 2012 Judgment with the Montana state
court, but at no time did any Appellant in this case argue to
the Montana state court that Montana lacked jurisdiction over
the Toni 1 Trust.[9] The Montana state court denied both
motions.[10]
On
August 17, 2012, Ms. Bertran filed for Chapter 7 Bankruptcy
in the District of Alaska, Case No. A12-00501.[11] Larry Compton
was appointed as Trustee. On December 20, 2012, Donald
Tangwall, as trustee of the Toni 1 Trust, initiated an
adversary proceeding against the Trustee and the Wackers in
the Alaska Bankruptcy Court (the “Adversary
Action”). Among other claims, Mr. Tangwall argued that
service of process on the Toni 1 Trust in the 2012 Montana
fraudulent transfer case was so defective as to make the 2012
Judgment against the Toni 1 Trust void.[12] On August 16,
2013, after a hearing on the issue, the Bankruptcy Court
dismissed Mr. Tangwall's complaint, and held that the
Toni 1 Trust was required to appear through an attorney and
Mr. Tangwall as trustee could not file pro per papers or
pleadings on behalf of the Toni 1 Trust.[13]
The
Trustee then brought his own fraudulent transfer claims in
the Adversary Action seeking to invalidate the 2011 transfers
of the Properties to the Toni 1 Trust.[14] On October
15, 2013, the Bankruptcy Court held that the Trustee had
shown that “the two real property transfers were made
to keep the property out of the hands of the Wackers, who
were on the verge of obtaining a $137, 000 judgment against
the debtor, ” and that the real property transfers
thereby violated 11 U.S.C. § 548(a)(1)(A).[15] Accordingly,
on October 16, 2013, the Bankruptcy Court entered a final
judgment holding that Ms. Bertran's conveyances of her
interest in the Properties were fraudulent and that the
Trustee's rights to Ms. Bertran's interest in the
Properties was superior to those of both Mr. Tangwall, as
trustee of the Toni 1 Trust, and the Toni 1 Trust itself (the
“2013 Final Judgment”). The 2013 Final Judgment
also dismissed Mr. Tangwall's Adversary Action and held
that Ms. Bertran's interest in the Properties became the
property of her Bankruptcy Estate.[16] The 2013 Final Judgment
did not address Ms. Tangwall's interest in the
Ranch.[17]
Mr.
Tangwall, in his capacity as trustee of the Toni 1 Trust,
then filed two appeals to the Bankruptcy Appellate Panel
(“BAP”) on November 18, 2013 and on December 2,
2013. The BAP dismissed both appeals as untimely. Mr.
Tangwall then appealed to the Ninth Circuit, which dismissed
one of the appeals for failure to perfect the appeal and one
for being frivolous.[18]
On May
11, 2016, the Trustee filed a motion in the main bankruptcy
case seeking an order permitting him to sell the bankruptcy
estate's half interest in the Ranch. The Wackers joined
in the motion, so that the entire Ranch property was the
subject of the motion.[19] A hearing on the motion was held on
June 6, 2016. The Tangwalls, the Trustee and his attorney,
and Attorney Eric LeRoy for the Wackers all attended the
hearing.[20] On June 7, 2016, the Bankruptcy Court
granted the Trustee's motion (the “Order Approving
Sale”) and made the following findings: (1) the
Bankruptcy Court has subject matter jurisdiction over the
Trustee's motion as it constitutes a core proceeding
pursuant to 28 U.S.C. § 157(b)(2)(A) and (N); (2) the
Bankruptcy Court has personal jurisdiction over Donald
Tangwall both in his individual capacity and as the
“alleged trustee of the Toni 1 Trust”; (3) the
Bankruptcy Court has personal jurisdiction over the Toni 1
Trust; (4) the Bankruptcy Court has personal jurisdiction
over Barbara Tangwall and Margaret Bertran; (5) the Trustee
may sell the Bankruptcy Estate's 50% undivided interest
in the Ranch by auction; (6) because the Wackers joined in
the Trustee's motion, the sale of the Ranch shall be for
the Ranch as a whole; (7) proper notice of the motion had
been given to all parties involved in the Bertran bankruptcy
proceedings, and all persons claiming through them; and (8)
the sale of the Ranch would be free and clear of the claims
and liens of all persons who received notice of the
motion.[21]
On June
13, 2016, Ms. Bertran filed a Notice of Appeal from the
Bankruptcy Court's Order Approving Sale. On June 20,
2016, Ms. Bertran and the Tangwalls filed a request for an
evidentiary hearing in the main bankruptcy case, in which
they asserted that the Bankruptcy Court lacked jurisdiction
“over the Toni 1 Trust.” They also maintained
that all “orders, memorandum and judgments entered by
[the Bankruptcy] Court should be deemed null and
void.”[22] The Bankruptcy Court denied the motion
because it concluded that the notice of appeal filed on June
13, 2016 divested the Bankruptcy Court of
jurisdiction.[23]
Ms.
Bertran and the Tangwalls then moved to stay the execution of
the Order Approving Sale. On June 30, 2016, the Bankruptcy
Court denied the motion.[24] Ms. Bertran and the Tangwalls then
appealed to this Court, which also denied the motion to
stay.[25] There is no indication in the record
that the Ranch has since been sold.[26]
On
appeal to this Court, Appellants argue the
following:[27] (1) “the Montana [state] [c]ourt
is in want of [. . .] personal jurisdiction in failing to
name a trustee of the Toni 1 Trust and in failing to serve
the same with a summons and complaint[, and] [i]n want of
subject matter jurisdiction because the issue of Toni 1 Trust
assets are administered in Alaska by qualified trustees [and]
[e]xclusive jurisdiction lies with the courts of Alaska; (2)
the Bankruptcy Court lacks personal and subject matter
jurisdiction “over Toni 1 Trust [because that court]
never named a trustee of the Toni 1 Trust as a defendant and
never served the same with a summons and complaint”;
(3) the Bankruptcy Court improperly granted full faith and
credit to the Montana state court ruling when it ordered the
sale of the Ranch in its Order Approving Sale because
“full faith and credit cannot be given to judgments
which are void on their face”; (4) the Bankruptcy Court
“lost jurisdiction to enter [the Order Approving Sale]
[. . .] when the [C]ourt refused to set an evidentiary
hearing on the issue of jurisdiction”; and (5)
“Trustee Compton violated the stay on all bankruptcy
orders when he executed [the Order Approving Sale]” on
the same day it was issued.[28]
JURISDICTION
The
Court has jurisdiction over this appeal pursuant to 28 U.S.C.
§ 158.
STANDARD
OF REVIEW
The
Court reviews legal conclusions reached by the Bankruptcy
Court de novo.[29]Findings of fact are review for clear
error. Findings of fact are clearly erroneous only if they
are illogical, implausible, or lacking support in the
record.[30] Whether the Bankruptcy Court has
jurisdiction to hear and decide a matter is a legal question
that is reviewed de novo.
DISCUSSION
This
appeal challenges the Bankruptcy Court's jurisdiction
over Ms. Bertran and the Toni 1 Trust, as well as its
jurisdiction to issue the Order Approving Sale. Appellants
challenge the Order Approving Sale specifically because the
order authorized the sale of the entire Ranch, including the
Wackers' half interest. Appellants argue that the
Wackers' half interest was created by a Montana state
court judgment that is void for lack of jurisdiction.
1.
The Tangwalls' Participation
As a
preliminary matter, the Court addresses whether Donald
Tangwall and Barbara Tangwall should be dismissed from this
appeal. The Tangwalls appear before the Court in their
individual capacities; Mr. Tangwall also appears as trustee
of the Toni 1 Trust. Neither Mr. Tangwall nor Ms. Tangwall in
their individual capacities are parties to the main
bankruptcy case or the Adversary Action. Accordingly, they
have no grounds upon which to challenge the Bankruptcy
Court's jurisdiction or the Order Approving
Sale.[31] And in Mr. Tangwall's position as
trustee, the Bankruptcy Court ordered Mr. Tangwall to procure
legal representation but he failed to do so.[32] The Ninth
Circuit prohibits non-attorneys from appearing in a federal
court on behalf of another person or a legal entity such as a
trust.[33] Therefore, Mr. Tangwall lacked the
authority to file a notice of appeal in the Bankruptcy Case
on behalf of the Toni 1 Trust as he is not an attorney.
Accordingly, the Court will dismiss from this appeal the
Tangwalls in their individual capacities and Mr. Tangwall as
trustee of the Toni 1 Trust.[34]
2.
The Bankruptcy Court's Jurisdiction
Ms.
Bertran argues that the Bankruptcy Court lacked both subject
matter jurisdiction and personal jurisdiction over the Toni 1
Trust to issue the Order Approving Sale, which granted the
Trustee's motion for authority to sell the Ranch and
other personal property. Ms. Bertran also argues that the
Bankruptcy Court “lost jurisdiction” when it
“refused to set an evidentiary hearing on the issue of
jurisdiction [as] requested at the June 6, 2016
hearing.”[35]
A.
Subject Matter Jurisdiction
A
bankruptcy court's authority “depends on whether
Congress has classified the matter as a “core
proceeding” or a “non-core proceeding”
under the Bankruptcy Code. Congress has given bankruptcy
courts the power to “hear and determine core
proceedings and to enter appropriate orders and judgments,
subject to appellate review by the district
court.”[36] “Approving the sale of property,
” which includes approving sale by auction, is one such
“core proceeding” listed in 28 U.S.C. §
157(b).[37]
In this
case, the Bankruptcy Court had subject matter jurisdiction
over the Estate's half interest in the Ranch because it
became the property of the Bankruptcy Estate in 2013 by
virtue of the 2013 Final Judgment in the Adversary
Action.[38] After issuing the 2013 Final Judgment,
the Bankruptcy Court retained jurisdiction to administer the
Bankruptcy Estate and ensure that its orders were executed as
intended.[39] Accordingly, pursuant to § 157(b),
the Bankruptcy Court had subject matter jurisdiction to enter
its order granting the Trustee's motion to sell Ms.
Bertran's interest in the Ranch.
As for
the Bankruptcy Court's authority to authorize the sale of
the Wackers' half interest, 11 U.S.C. § 363(f)
authorizes a bankruptcy trustee to sell property “free
and clear of any interest in such property of an entity of
the estate only if . . . (2) such entity consents.” At
the time of the Order Approving Sale, the Bankruptcy Court
determined that the Wackers owned a 50% undivided interest in
the Ranch. Because the Wackers joined in the Trustee's
motion for authorization to sell the Ranch by auction, the
Bankruptcy Court properly determined that the Wackers had
consented to the sale.[40]
B.
Personal Jurisdiction
To the
extent Ms. Bertran argues that the Bankruptcy Court did not
have personal jurisdiction over her, she has waived any such
argument by filing a Chapter 7 bankruptcy petition in the
District of Alaska, Bankruptcy Court.[41] Likewise, the
Toni 1 Trust's asserted trustee, Mr. Tangwall, filed the
Adversary Action in the Bankruptcy Court. Moreover, the Toni
1 Trust is allegedly an Alaskan trust.[42] The Court
finds the Bankruptcy Court properly exercised personal
jurisdiction over both Ms. Bertran and the Toni 1
Trust.[43]
C.
Evidentiary Hearing Requirement
On June
20, 2016, after the entry of the Order Approving Sale, the
Tangwalls filed a request for evidentiary hearing, in which
they argued that the Bankruptcy Court lacked personal
jurisdiction over the Toni 1 Trust and subject matter
jurisdiction over the proceedings against the Toni 1 Trust
because the proceedings are non-core proceedings, and an
evidentiary hearing on the motion was necessary. But by that
point, a Notice of Appeal had already been filed, divesting
the Bankruptcy Court of jurisdiction to consider the
request.[44] And, in any event, the factual record
was adequately developed and demonstrated that the Bankruptcy
Court had properly determined that it had subject matter
jurisdiction to authorize the sale of the Ranch by auction
and that it had personal jurisdiction over the Toni 1 Trust.
3.
The Montana Court's Jurisdiction
The
Bankruptcy Court's Order Approving Sale authorized the
sale of the entire Ranch, including the Wackers' half
interest. Ms. Bertran challenges the Bankruptcy Court's
authority to approve a sale of the Wackers' half interest
in the Ranch, because in her view, the Montana state
court's 2012 Judgment, which led to the creation of the
Wackers' half interest in the Ranch, is void for lack of
jurisdiction. According to Ms. Bertran, the Bankruptcy Court
thus had no authority to authorize the sale of the entire
Ranch because the Wackers do not own a 50% interest in the
Ranch.
Ms.
Bertran advances three rationales in furtherance of her
argument that the Montana state court 2012 Judgment is void
on its face: (1) “the Montana default judgment . . .
fail[ed] to name the trustee of the Toni 1 Trust and to serve
the same”; (2) “[the] Toni 1 Trust is an Alaskan
trust [and therefore] . . . [e]xclusive jurisdiction over the
Toni 1 Trust . . . lies with the Courts of Alaska”; and
(3) the Wackers ...