United States District Court, D. Colorado
ORDER AFFIRMING BANKRUPTCY COURT'S ORDER APPROVING SALE OF ASSETS
WILLIAM J. MARTINEZ, District Judge.
Appellant Donald Harry Allen ("Debtor") appeals from the May 23, 2013 Order of the U.S. Bankruptcy Court for the District of Colorado ("Bankruptcy Court") approving the sale of his shareholder interest in two oil companies under 11 U.S.C. § 363(b). (ECF No. 19 at 6; see also ECF No. 20-1.) For the reasons set forth below, the Bankruptcy Court's Order is AFFIRMED.
The Debtor is the Owner and CEO of American Energy Resources Corporation ("AERC") and H&M Petroleum Corporation ("H&M"), which jointly operate an oil production enterprise. (R. (ECF No. 10) at 7, 60-61.) On January 18, 2012, AERC and H&M were placed in receivership by a state court, and a receiver, Karen Absher ("Receiver"), was appointed. (R. at 48.) On April 2, 2012, both AERC and H&M filed Chapter 11 bankruptcy cases in the Bankruptcy Court without the assistance of counsel. ( Id. ) Both cases were dismissed on June 7, 2012 for failure to obtain counsel. (Bk. Case No. 12-16438-ABC (AERC), ECF No. 105; Bk. Case No. 12-16439-ABC (H&M), ECF No. 100.)
The Debtor filed his individual petition for Chapter 7 bankruptcy on July 10, 2012. (Bk. ECF No. 2.) Defendant Robertson B. Cohen (the "Trustee") was appointed as Chapter 7 Trustee. ( Id. )
On January 24, 2013, the Trustee filed a Motion to Approve Shareholder Interest Purchase Agreement Free and Clear of Liens Pursuant to 11 U.S.C. § 363(b) and (f). (Bk. ECF No. 118.) The Trustee moved for approval of the sale of the Debtor's shareholder interests in both AERC and H&M to Defendant Delanghe/Buysse, LLC (the "Purchaser") for a purchase price of $664, 566.38, consisting of $50, 000.00 in cash and a credit in the amount of $614, 566.38 resulting from two loans previously made by the Purchaser to the Debtor in the amounts of $400, 000.00 and $157, 403.04. ( Id. at 2.) The subject shareholder interest consisted of either 80% or 100% of the ownership of AERC and H&M. ( Id. at 1.) The Bankruptcy Court denied the initial motion without prejudice, requesting that the Trustee further demonstrate due diligence in seeking to sell the shares, and further identification of the terms of the transaction. (Transcript of May 20, 2013 hearing ("Tr. 5-20-13") (ECF No. 29-2) at 4-5.)
The Trustee filed an Amended Motion to approve the sale on March 18, 2013. (Bk. ECF No. 170.) The Amended Motion included additional information regarding AERC's and H&M's liabilities, assets, and income, and described the Trustee's efforts to find a buyer for the shares. ( Id. ) The Debtor objected to the Amended Motion, asserting that the sale price was inadequate based on the leased mineral rights, reserves, and undeveloped acreage owned by AERC and H&M. (ECF No. 29 at 5-6.)
A hearing on the proposed sale and the Amended Motion was held on May 20 and 21, 2013. (Tr. 5-20-13; Transcript of May 21, 2013 hearing ("Tr. 5-21-13") (ECF No. 29-1).) The Trustee presented evidence and testimony from the Receiver; Clark Absher, the Receiver's husband and an accountant and financial manager; Paul Cadorette, an expert in forensic accounting and business valuation; and Kendor Jones, an oil and gas attorney. (Tr. 5-20-13.) The Debtor presented evidence and testified himself. (Tr. 5-21-13.) At the close of the hearing, the Bankruptcy Court issued an oral ruling approving the sale, stating that "[t]he Court finds that on the evidence before it, that the Trustee's proposed sale is within the Trustee's discretion and business judgment, that the Trustee has exercised his business judgment and while the proposed sale will net very little for this estate, it will on the evidence before the Court net less rather than more with further time." ( Id. at 162.) The Bankruptcy Court further stated:
Finally, on the basis of the record before me, I am not going to make a [§] 363(m) finding of good faith or the absence of good faith and my not making a finding should not be, by implication mean that the Court finds that there isn't good faith. Neither the Trustee nor the purchasers appeared and testified to the negotiations between them and this is somebody who has dealt with this estate as an estate and dealt with this stock before there was a bankruptcy so under those circumstances, I do not have a record on which to make a [§] 363(m) good faith finding but as I say, the record should also be clear that there's no basis to make a finding one way or the other and there's no implication that-there's no implication that the-there is either good or bad faith in connection or no implication that the absence of the finding means that the Court has found that there isn't good faith.
( Id. at 163-64.) On May 23, 2013, the Bankruptcy Court issued a written order approving the sale based on the findings stated on the record. (ECF No. 20-1.)
On June 6, 2013, the Debtor filed his Notice of Appeal and Election to have the case heard by the District Court. (ECF Nos. 2 & 3.) The Debtor's Opening Brief was filed on September 18, 2013. (ECF No. 19.) The Trustee's Opposition Brief was filed on November 1, 2013. (ECF No. 29.) The Receiver joined in the Trustee's Response Brief. (ECF No. 30.) The Debtor's Reply Brief was filed on November 18, 2013. (ECF No. 31.) This matter is now fully briefed and ripe for disposition.
II. LEGAL STANDARD
In reviewing a bankruptcy court's decision, the district court functions as an appellate court and is authorized to affirm, reverse, modify, or remand the bankruptcy court's ruling. 28 U.S.C. § 158(a); Fed.R.Bankr.P. 8013. As the appellate court, the district court has discretion to affirm "on any ground adequately supported by the record, so long as the parties have had a fair opportunity to address that ground." Maldonado v. City of Altus, 433 F.3d 1294, 1302-03 (10th Cir. 2006).
A bankruptcy court's legal conclusions are reviewed de novo, while its factual findings are reviewed for clear error. In re Warren, 512 F.3d 1241, 1248 (10th Cir. 2008). On mixed questions of law and fact, the Court reviews de novo any question that primarily involves the consideration of legal principles, and applies the clearly erroneous standard if the mixed ...