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In the Matter of: C.W. Mining Company, A/K/A Co-Op Mining Company v. Aquila

February 14, 2011

IN THE MATTER OF: C.W. MINING COMPANY, A/K/A CO-OP MINING COMPANY, DEBTOR.
C.W. MINING COMPANY, APPELLANT/CROSS-APPELLEE,
v.
AQUILA, INC.; OWELL PRECAST, LLC, APPELLEES, KENNETH A. RUSHTON, TRUSTEE, INTERVENOR -- APPELLEE/CROSS-APPELLANT.



Appeals from the Opinion of the United States Bankruptcy Appellate Panel of the Tenth Circuit (BAP No. UT-08-102)

The opinion of the court was delivered by: Lucero, Circuit Judge.

PUBLISH

Clerk of Court Elisabeth A. Shumaker

United States Court of Appeals Tenth Circuit

FILED

Before LUCERO, HARTZ,and HOLMES, Circuit Judges.

C.W. Mining Corporation ("C.W.") is the debtor in this involuntary Chapter 7 bankruptcy proceeding. On summary judgment, the bankruptcy court determined that the creditors who filed the involuntary petition were "qualifying creditors" as required to trigger involuntary bankruptcy. C.W.'s former managers ("the Managers"),*fn1 purporting to act on C.W.'s behalf, appealed the grant of summary judgment to the Tenth Circuit Bankruptcy Appellate Panel ("BAP"), which affirmed.

A threshold question before the BAP was whether the Managers could bring C.W.'s appeal over the Chapter 7 trustee's objection. Reasoning that "[a] putative debtor must have standing to bring a bankruptcy court's involuntary order for relief before an appellate court," the BAP heard the appeal. But this case is about the Managers' authority, not about C.W.'s standing. C.W. had standing to appeal. However, the Chapter 7 trustee was the only person authorized to bring the appeal. The Managers were divested of their authority to appeal by the appointment of the Chapter 7 trustee, which they did not challenge. Exercising jurisdiction under 28 U.S.C. § 158(d)(1), we therefore reverse and remand with the instruction to dismiss.

I

C.W. operated a coal mine in Emery County, Utah. On January 8, 2008, Aquila, Inc. ("Aquila"), Owell Precast, LLC ("Owell") and House of Pumps, Inc.*fn2 (collectively, "the Creditors") filed an involuntary Chapter 11 bankruptcy petition against C.W.*fn3

Aquila filed a motion for partial summary judgment on July 15, 2008, seeking a ruling that Aquila and Owell were qualifying petitioning creditors.*fn4 C.W. opposed the motion. On September 17, 2008, the bankruptcy court granted Aquila's motion and shortly thereafter ordered involuntary Chapter 11 relief against C.W. On September 29, 2008,C.W. filed a motion to reconsider the summary judgment ruling. But before the bankruptcy court ruled on that motion, Aquila moved to appoint a Chapter 11 trustee or convert the case to Chapter 7. At the hearing on the motion, C.W.'s attorney stated that the only Chapter 11 plan that it could propose would be a liquidating plan, and C.W.'s president testified that he wished to convert to Chapter 7 and that "C.W. Mining has no assets. It has no other operating cash, or any way to operate anything at all." The bankruptcy court granted Aquila's motion on November 13, 2008, and appointed Kenneth Rushton ("the Trustee") Chapter 7 interim trustee on November 19, 2008. On November 26, 2008, the bankruptcy court denied the pending motion to reconsider, and onDecember 8, 2008, Russell Walker, C.W.'s former counsel, purporting to act on behalf of the corporation, appealed to the BAP.

On appeal to the BAP the Trustee filed a motion to dismiss on two grounds: (1) C.W., as a hopelessly insolvent corporation, lacked standing to appeal after the Trustee was appointed; and (2) Walker was not authorized to file C.W.'s appeal. The BAP denied the Trustee's motion to dismiss but affirmed the grant of summary judgment on the merits, holding that the Creditors were bona fide creditors as a matter of law. In this appeal, the Managers argue (on C.W.'s behalf) that Owell was not a qualifying creditor. The Trustee cross-appeals, repeating the standing arguments presented in his motion to dismiss before the BAP.

II

We review the BAP's grant of summary judgment de novo, applying the same legal standard used by the BAP. In re Holytex Carpet Mills, Inc., 73 F.3d 1516, 1518 (10th Cir. 1996). Summary judgment is proper only "if the movant shows there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "We examine the factual record and reasonable inferences therefrom in the light most favorable to [the Managers], who opposed summary judgment." Thomas v. Int'l Bus. Machs., 48 F.3d 478, 484 (10th Cir. 1995).

This case turns on a simple question-following appointment of a Chapter 7 trustee in a corporate debtor's bankruptcy, may former management appeal an adverse bankruptcy court ruling on the debtor's behalf? Supreme Court precedent and ...


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