Summary of a Recent
Judicial Development in
Bankruptcy

Bankruptcy Appellate Panel Rules that It Lacks Jurisdiction

Gaby R. Jabbour
National AgLaw Center Research Assistant

The Bankruptcy Appellate Panel (BAP) for the Eighth Circuit has ruled that it did not have jurisdiction over an appeal brought by two debtors because the debtors' appeal was closely interwoven with a creditor's appeal from the same bankruptcy court order and the creditor's appeal had been timely filed with the district court. In re Brown, 273 B.R. 194, 194 (B.A.P. 8th Cir. 2002). The BAP also ruled that it lacked jurisdiction to hear the debtors' appeal because the debtors filed their appeal one day after the expiration of the ten-day appeals deadline and did not file a postjudgment motion that would have been sufficient to extend the ten-day deadline. See id. at 197.

On February 18, 1999, William S. Brown and Gayle Brown, debtors, filed a Chapter 12 bankruptcy petition that was later dismissed at their request. See id. at 195. While the debtors' Chapter 12 case was pending, they borrowed money from FarmPro Services, Inc. (FarmPro), and from Ag Acceptance Corporation (Ag Acceptance). See id. The loans were approved by the bankruptcy court and were properly perfected. See id.

On September 29, 2000, the debtors filed a Chapter 13 bankruptcy petition. See id. On October 28, 2000, Congress enacted legislation "which provided certain disaster relief payments for the 2000 crop year." Id. The debtors converted to a Chapter 11 bankruptcy on December 29, 2000 and to a Chapter 12 bankruptcy on June 4, 2001. See id.

In July, 2001, the USDA issued two checks made payable to FarmPro totaling $80,000.00, which was the debtors' entitlement under the disaster relief that Congress had enacted. See id. Two adversary proceedings were commenced to determine the validity and priority of FarmPro's and Ag Acceptance's security interests in the two disaster relief payments. See id.

On June 5, 2001, the first adversary proceeding was commenced by FarmPro against the debtors and WSB Trucking. See id. at 196. FarmPro requested that the court "determine, as among the parties to that adversary proceeding, the right to the disaster payments." Id. On June 28, 2001, a second adversary proceeding was brought by the debtors against Ag Acceptance. See id. The debtors did not bring Ag Acceptance into the FarmPro adversary proceeding as third-party defendants, and none of the parties filed a motion to have the two adversary proceedings consolidated. See id. at 197.

On September 3, 2001, the bankruptcy court issued a joint opinion in which it discussed the issues raised in both adversary proceedings and ruled that "both FarmPro and Ag Acceptance had valid security interests in the disaster payments and that Ag Acceptance's interest was ahead of FarmPro's." Id. at 196. Although the court issued a joint opinion, it also issued a separate judgment for each adversary proceeding. See id. On the first adversary proceeding, the bankruptcy court's judgment "read simply '[t]hat the security interest of FarmPro Services, Inc. in the crop disaster payment is not defeated by the event of the bankruptcy filing.'" Id. For the second adversary proceeding, the bankruptcy court dismissed the debtors' complaint against Ag Acceptance. See id. at 197.

On September 13, 2001, FarmPro filed a motion to alter or amend the order and judgment of the first adversary proceeding. See id. at 196. The debtors appealed the judgment relating to the first adversary proceeding on the following day. See id. Although the debtors' appeal "was filed 11 days after entry of the judgment, one day after the last day of the appeal period, the pendency of FarmPro's timely motion extended the appeal period until the bankruptcy court's entry of an order disposing of the motion." Id. (citation omitted). The bankruptcy court subsequently denied FarmPro's motion to alter or amend the judgment, and ten days later it extended the period of time that FarmPro had to appeal the order denying its motion. See id. This order did not extend the time for appealing the judgment issued on September 3, 2001. See id.

On November 13, 2001, FarmPro filed an appeal from the September 3, 2001, judgment, along with a proper election to have its appeal heard by the district court. See id. On November 27, 2001, FarmPro filed an amended notice of appeal, along with another election to have its appeal heard by the district court that indicated "that it was instead appealing from the order denying its motion to alter or amend." Id.

The BAP stated that "[w]hile the parties seem to assume that we have jurisdiction over the debtors' appeal from the September 3rd judgment and the district court has jurisdiction over FarmPro's appeal from the bankruptcy court's September 3rd opinion and order for judgment, we disagree." Id. at 197. It also stated that "[t]he issues in the two appeals are from closely interwoven, if not identical, determinations by the bankruptcy court." Id. It concluded that

[t]he fact that FarmPro tries to characterize its appeal as being from the opinion and order for judgment or from the order denying FarmPro's motion to alter or amend, while the debtors' is from the judgment, is a distinction that has no meaning in this context. Since FarmPro's election to have its appeal heard by the district court was timely, we conclude that we have been divested of jurisdiction over the debtors' appeal from the September 3rd judgment. We will thus dismiss that appeal with direction to return it to the clerk of the bankruptcy court for transmission to the district court.

Id.

Next, the BAP examined the debtors' appeal of the second adversary proceeding involving the debtors' action against Ag Acceptance. See id. The BAP noted that although the debtors had the option of bringing Ag Acceptance into the first adversary proceeding as third-party defendants, they chose not to do so. See id. at 196-97. It also noted that none of the parties filed a motion to have the two adversary proceedings consolidated. See id. The BAP stated that

Ag Acceptance answered [the claim against it] and the issues raised in this adversary proceeding were also addressed by the bankruptcy court in its September 3, 2001, opinion and order for judgment. Pursuant to its opinion and order, on September 3, 2001, the bankruptcy court entered a separate judgment in this adversary proceeding, dismissing the debtors' complaint against Ag Acceptance. Also, as discussed earlier, the debtors filed their notice of appeal from the two judgments on September 14, 2001, one day late. Since there were no timely post judgment motions made in this adversary proceeding, the notice of appeal is simply untimely. We therefore lack jurisdiction over the appeal from the judgment in this adversary proceeding.

Id. (citations omitted).

The case was decided on Feb. 7, 2002; this summary was posted in June, 2003