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In re Underhill

United States Bankruptcy Appellate Panel of the Sixth Circuit

September 16, 2013

In re Robert D. UNDERHILL and Beth Underhill, Debtors.

Submitted: Aug. 20, 2013.

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[Copyrighted Material Omitted]

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ON BRIEF:

David S. Blessing, The Blessing Law Firm, Cincinnati, OH, for Appellants.

Jody Michelle Oster, The Huntington National Bank, Columbus, OH, for Appellee.

Before: EMERSON, LLOYD, and McIVOR, Bankruptcy Appellate Panel Judges.

OPINION

MARCI B. McIVOR, Chief Judge.

Robert and Beth Underhill (" Debtors" ) appeal the bankruptcy court's order granting Huntington National Bank's motion to reopen Debtors' bankruptcy case. After Debtors received their discharge, Golf Chic Boutique, LLC, (" Golf Chic, LLC" ) an LLC in which Debtor Beth Underhill was the sole member, filed a claim for tortious interference against several entities. The lawsuit was settled and $80,000 was awarded to the plaintiff LLC. However, the settlement check was made payable to Debtor Beth Underhill and her attorney, rather than to the LLC. Huntington National Bank discovered that Debtor Beth Underhill had received the settlement proceeds and moved to reopen the Debtors' case so that the proceeds of the settlement could be administered as an asset of the bankruptcy estate. For the reasons that follow, the Panel affirms the bankruptcy court's order granting Huntington

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National Bank's motion to reopen the Debtors' bankruptcy case. The Panel also remands this matter to the bankruptcy court for a determination as to the value of Debtor Beth Underhill's membership interest in Golf Chic, LLC, based on Golf Chic LLC's recovery on its lawsuit.

STATEMENT OF ISSUES

There are two issues on appeal. The first issue is whether the bankruptcy court abused its discretion in granting Huntington National Bank's motion to reopen. The second issue is whether the bankruptcy court erred in ruling that all of the settlement proceeds received by Debtor Beth Underhill, as the sole member of Golf Chic, LLC were property of the Debtors' bankruptcy estate.

JURISDICTION AND STANDARD OF REVIEW

The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this appeal. The United States District Court for the Southern District of Ohio has authorized appeals to the Bankruptcy Appellate Panel, and none of the parties has timely elected to have this appeal heard by the district court. 28 U.S.C. §§ 158(b)(6), (c)(1). A bankruptcy court's final order may be appealed as of right pursuant to 28 U.S.C. § 158(a)(1). For purposes of appeal, an order is final if it " ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Midland Asphalt Corp. v. United States, 489 U.S. 794, 798, 109 S.Ct. 1494, 1497, 103 L.Ed.2d 879 (1989) (citation and quotation marks omitted). An order granting a motion to reopen the bankruptcy case to administer an asset is a final and appealable order, because the determination that the trustee may administer the asset as property of the estate is conclusive on the merits. See, e.g., Bonner v. Sicherman (In re Bonner), 330 B.R. 880 (6th Cir. BAP 2005) (table).

A decision on a motion to reopen is within the sound discretion of the bankruptcy court. The reviewing court should not set aside the bankruptcy court's decision, absent an abuse of discretion. Smyth v. Edamerica, Inc. (In re Smyth), 470 B.R. 459, 461 (6th Cir. BAP 2012). An abuse of discretion occurs when the bankruptcy court " applies the incorrect legal standard, misapplies the correct legal standard, or relies upon clearly erroneous findings of fact." Id. (citing Schenck v. City of Hudson, 114 F.3d 590, 593 (6th Cir.1997)). " The question is not how the reviewing court would have ruled, but rather whether a reasonable person could agree with the bankruptcy court's decision; if reasonable persons could differ as to the issue, then there is no abuse of discretion." Barlow v. M.J. Waterman & Assocs., Inc. (In re M.J. Waterman & Assocs., Inc.), 227 F.3d 604, 608 (6th Cir.2000).

Determinations as to whether property forms a part of the bankruptcy estate are conclusions of law that are reviewed de novo. Mueller v. Hall (In re Parker), No. 06-8053, 2007 WL 1376081, at *2 (6th Cir. BAP May 10, 2007) (table). " Under a de novo standard of review, the reviewing court decides an issue independently of, and without deference to, the trial court's determination." Menninger v. Accredited Home Lenders (In re Morgeson), 371 B.R. 798, 800 (6th Cir. BAP 2007) (citation omitted). Essentially, the reviewing court decides the issue " as if it had not been heard before." Mktg. & Creative Solutions, Inc. v. Scripps Howard Broad. Co. (In re Mktg. & Creative Solutions, Inc.), 338 B.R. 300, 302 (6th Cir. BAP 2006). " No deference is given to the trial court's conclusions of law." Id.

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FACTS

On January 6, 2010, David R. Underhill and Beth Underhill filed a voluntary petition under Chapter 7 of the Bankruptcy Code. Harold Jarnicki was appointed Chapter 7 Trustee.

On January 26, 2010, the Debtors filed their bankruptcy schedules. On Schedule B, the Debtors listed their 100% interest in a number of businesses including Golf Chic Boutique, LLC.[1] Golf Chic, LLC is not a debtor in bankruptcy. Schedule B states that the Debtors have a 100% ownership and membership interest in Golf Chic, LLC and that Golf Chic, LLC has no value. The Debtors also listed all secured and unsecured claims of Golf Chic, LLC. The Debtors further represented that they held no contingent or unliquidated ...


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