Opinion
No. 01-4167-SAC, Bkcy. No. 97-41084-7C.
January 15, 2002
MEMORANDUM AND ORDER
This bankruptcy appeal comes before the court on the Motion to Dismiss Appeal (Dk. 3) filed by Darcy D. Williamson, Chapter 7 Trustee for Thousand Adventures of Kansas, Inc. ("Trustee") and on the Motion to Quash (Dk. 7) the Trustee's Motion filed by the pro se appellants, Kenneth and Rose Webber ("Webbers"). The bankruptcy court issued a "Certificate of Non-Compliance" which was filed in this court on December 12, 2001. (Dk. 4). The certificate notified the district court that the appellants had not filed a designation of record and statement of issues in compliance with F.R.Bankr.P. 8006 and D. Kan. LBR 8006.1. The district court thereafter issued an order for the appellants to show cause in writing on or before January 3, 2002, why this appeal should not be dismissed for lack of prosecution in that the plaintiff's have not filed a designation of record as required by D. Kan. LBR 8006.1(a). On January 3, 2002, the Webbers filed their Motion to Quash.
The bankruptcy court has a practice of issuing such certificates. See, e.g., In re Meuli, 162 B.R. 327, 328 (Bankr.D.Kan. 1993).
BACKGROUND
The Webbers filed their notice of appeal on November 13, 2001, (Dk. 1), and on November 28, 2001, they filed a verified pleading entitled, "This is an appeal from an order granting motion for authority to sell real and personal property located in Brown County, Kansas, free and clear of liens" (Dk. 2). In this latter pleading, the Webbers laid out arguments concerning their ownership interest in certain real property at Sycamore Springs pursuant to a warranty deed and their interest as one of 179 individual landowners in this property and its priority against the claims of mortgagors and creditors of Thousand Adventures. The Webbers also accused the Bankruptcy Court and its clerk of denying them access to court files and of "skewing and changing the docket to fit their purposes." (Dk. 2, ¶¶ 11-18). Finally, the Webbers disputed the Bankruptcy Court's jurisdiction over them, denied the fairness of those proceedings, and contested the ruling that its objection to the sale was not timely filed with the Bankruptcy Court. While it attaches certain exhibits and affidavits and makes reference to notes and mortgages as not being evidence for consideration in this appeal, this pleading does not include any designation of the record for appeal.
On December 7, 2001, the Trustee filed his motion to dismiss the appeal because the Webbers had not timely prosecuted their appeal in having failed to file their designation of record and statement of issues on appeal. (Dk. 3). In his motion, the Trustee recounts the proceedings and events leading to his motion. The Trustee filed in bankruptcy court a motion for order authorizing the sale of certain real and personal property in Brown County, Kansas, and served notice on interested parties to file objections on or before October 22, 2001, and to attend a hearing on October 31, 2001, on the filed objections. The Webbers filed a motion to quash the Trustee's motion to sell on October 30, 2001, and appeared in person at the hearing on October 31, 2001. At the hearing, the bankruptcy court granted the Trustee's motion to sell and directed counsel for Trustee to prepare an order in accordance with the court's ruling. On November 2, 2001, the bankruptcy court entered the order granting the Trustee's motion to sell. Based "upon information and belief," the Trustee represents that "the Webbers have made inquiry, but refused to order a transcript of the hearing on October 31, 2001, of the Court's ruling on the Motion to Sell and their Motion to Quash, apparently alleging a conspiracy between the court reporter and the Bankruptcy Clerk's office." (Dk. 3, ¶ 7). The Trustee notes that the time for filing the designation of record and statement of issues has expired, and Webbers have not requested nor received an extension to file the same.
The bankruptcy court filed its certificate of non-compliance with this court on December 12, 2001, and the district court issued its order to show cause on December 17, 2001. The Webbers filed their motion to quash on January 3, 2002. The Webbers apparently intend for their motion to serve both as their response to the Trustee's motion to dismiss and their response to the court's show cause order. While filed within the deadline given by the show cause order, the Webbers' response is not timely filed in response to the Trustee's motion to dismiss.
In their motion to quash, the Webbers make several points. First, they refer to 11 U.S.C. § 363(h) recognizing that the bankruptcy court may have the authority to sell the property but disagreeing that the benefits of this sale outweigh the detriment to the co-owners. Second, they essentially repeat many of their arguments found in the pleading filed November 28, 2001. Third, they assert that their filing on November 28th is their "designation of record and statement of issues." Fourth, they deny that a transcript of the bankruptcy court's hearing is necessary as they challenge the bankruptcy court's jurisdiction over them and their property. Fifth, they ask the district court to consider their affidavits and the exhibits attached to their filings in proof of their "priority of interest." Sixth, they explain that they are not seeking a stay of the sale but an investigation and determination of the validity of the notes and mortgages listed by the Trustee and for "recovery of the value of their undivided 1/1250th interest in the real property as first and prior lien holders." (Dk. 7, pp. 7-8).
ANALYSIS AND HOLDING
Rule 8001(a) of the Federal Rules of Bankruptcy Procedure give a district court the discretion to dismiss a bankruptcy appeal for failure to take a step necessary to perfect an appeal. Rule 8006 requires an appellant to file both a designation of the items to be included in the record on appeal and a statement of the issues presented within ten days after the filing of the notice of appeal. Thus, the district court has the discretion to dismiss a bankruptcy appeal for failure to prosecute because the appellant fails to designate the record on appeal. Nielsen v. Price, 17 F.3d 1276, 1277 (10th Cir. 1994); see, e.g. Oaks v. Zeman, 134 F.3d 383, 1998 WL 31439 (10th Cir. Jan. 28, 1998).
The requirement of a record designation in Rule 8006 serves "to provide the reviewing court with an adequate basis for evaluating the appellant's claims" on a bankruptcy appeal. In re CPDC Inc., 221 F.3d 693, 698 (5th Cir. 2000) (citing 10 Collier on Bankruptcy ¶ 8006.03[1] (15th ed. 2000)). The requirement further serves "to put the appellee on notice as to which issues it must defend against and whether the appellant's designation of issues will produce a record adequate for the appellate court." In re Winders, 202 B.R. 512, 516 (D.Kan. 1996) (citation omitted). It follows that "[t]he burden of creating an adequate record rests with the appellant, who may not urge an issue on appeal if he has failed to provide the appellate court with the requisite record excerpts." In re CPDC Inc., 221 F.3d at 698; see also In re Winders, 202 B.R. at 516; see In re Winslow, 121 B.R. 598, 599 (D.Colo. 1990) (A court may dismiss an appeal or affirm the basis of the bankruptcy court's decision when an appellant fails to designate critical parts of the record).
Though certainly within a court's discretion, "[d]ismissal is a harsh and drastic sanction that is not appropriate in all cases." In re CPDC Inc., 221 F.3d at 699; In re Comer, 716 F.2d 168, 177 (3d Cir. 1983) ("Not every failure to follow procedural rules mandates dismissal of the appeal."). Courts from other circuits have looked at a number of factors as relevant in deciding whether dismissal is warranted. Id. These factors have included the appellant's bad faith, the prejudice to others, effectiveness of alternative sanctions, and the appellant's opportunity to explain. See Id.; In re Winders, 202 B.R. at 516. In addition, the Tenth Circuit has observed that in these circumstances dismissal is appropriate particularly "where the merits of the appeal, if not frivolous, are so lacking in substance." In re Bush, 17 F.3d 1436, 1994 WL 55598, at *1 (10th Cir. Feb. 23, 1994) (Table), cert. denied, 513 U.S. 884 (1994).
In their motion to quash, the Webbers say they "deliberately did not request a transcript of the Oct. 31, 2001 hearing or the Nov. 1, 2001 judgment rendered in the Bankruptcy Court because we have always maintained that the Bankruptcy Court has no jurisdiction over us or our free and clear real property." (Dk. 7, pp. 1-2). Rule 8006 requires the record on appeal to include "any opinion, findings of fact, and conclusions of law of the court." The bankruptcy court's oral findings and rulings at the hearing on October 31, 2001, and the order filed November 2, 2001, plainly qualify as an opinion, findings of fact, and conclusions of law within the meaning of Rule 8006. The Webbers' deliberate failure to designate the document and transcript that "would directly identify the manner in which the bankruptcy court exercised its discretion" on the motion to sell, decided the Webbers' objection to the motion and determined its jurisdiction over the property "entitles . . . [this court] to dismiss this appeal." In re McCarthy, 230 B.R. 414, 417 (B.A.P. 9th Cir. 1999) (citing in part Syncom Capital Corp. v. Wade, 924 F.2d 167, 169 (9th Cir. 1991)); see In re Winslow, 121 B.R. at 599. Without a transcript, this court cannot adequately review the issues asserted and is under no obligation to remedy the Webbers' failure to designate an adequate record. Alternatively, the district court also affirms simply on the basis provided in the bankruptcy court's ruling. See id. The court rejects the Webbers' efforts to create a record through exhibits attached to their briefs. An appellate court is to review what happened in the court below; an appeal does not present a party with "a license to build a new record." Anthony v. United States, 667 F.2d 870, 875 (10th Cir. 1981), cert. denied, 457 U.S. 1133 91982); see In re Byrd, 151 B.R. 925, 927 n. 3 (D.S.D. 1993).
Though proceeding pro se, the Webbers are still required to comply with "`the same rules of procedure that govern other litigants.'" Nielsen v. Price, 17 F.3d at 1277 (quoting Green v. Dorrell, 969 F.2d 915, 917 (10th Cir. 1992), cert. denied, U.S. (1993).
The Webbers' deliberate refusal to designate the required record for appeal and their effort to create a different record on appeal approaches, if not constitutes, bad faith on their part.
By statute, 11 U.S.C. § 363(h), the bankruptcy court plainly had jurisdiction to sell this property. Without a transcript of the bankruptcy court hearing, the district court has no basis to question the bankruptcy court's exercise of its discretion under that statute and, in particular, to review the issue whether the benefit to the estate of this sale free and clear of the co-owners' interests outweighs the detriment to any such co-owners. Considering the small interest (1/1,250) as tenant in common ostensibly held by the Webbers, the court cannot fathom any legal or factual detriment to the Webbers from the sale that would outweigh the benefit to the estate. The bankruptcy court's order attached to the Webbers' notice of appeal and apparently challenged on this appeal provides that the interests of co-owners attach to the proceeds from the sale less administrative costs. Thus, the bankruptcy court's order seems to provide the necessary protection to the Webbers' asserted interest as a tenant in common. With regards to the Webbers' various challenges to the claimed interests and priority of mortgagors and creditors, the bankruptcy court's order on appeal does not address such issues. Presumably, these issues will be decided in the subsequent order that distributes the sale proceeds. Finally, as reflected in the bankruptcy court's order, the Webbers' written objection to the Trustee's motion to sell was untimely filed in the bankruptcy court. In sum, the Webbers' appeal is at best insubstantial and the bankruptcy court's order is affirmed on the basis provided in that decision.
Because the appellants have failed to file a timely designation of record, a timely response to the Trustee's motion to dismiss, an extension of time to file either, a reasonable explanation or excuse for their non-compliance and an appeal with issues of any real substance, the court finds that the Trustee's motion to dismiss the appeal should be granted and alternatively affirms the bankruptcy court's order on the grounds and basis provided therein.
IT IS THEREFORE ORDERED that the Trustee's Motion to Dismiss Appeal (Dk. 3) is granted and, alternatively, the bankruptcy court's order is affirmed on the grounds and basis provided in that decision.