A panel of Tenth Circuit judges disagreed about the extent of flexibility in deciding whether a bankruptcy court order is final and therefore appealable.
Two judges believe that simply finding an asset to be exempt makes the order appealable. The third judge believes that an order is not final and not appealable until the bankruptcy judge rules on the extent or amount of the exempt asset.
Before bankruptcy, a husband and wife established a brokerage account in Wyoming in their names as tenants by the entireties.
Several years later, a creditor obtained a $2.8 million judgment against the husband. He responded by filing a chapter 7 petition. The husband claimed that some $2 million in the entireties account was exempt under Wyoming law. The wife did not resort to bankruptcy.
Wyoming is among the minority of states allowing a married couple to hold personal property by the entireties. Over objections by the chapter 7 trustee and the judgment creditor, the bankruptcy judge ruled that the account was validly held by the couple as tenants by the entireties and was therefore exempt. However, the bankruptcy judge decided that there must be an adversary proceeding to decide the extent or amount of the exemption.
The Bankruptcy Appellate Panel affirmed the order finding the account to be exempt, and the creditor appealed to the Tenth Circuit. Evidently, the husband died while the appeal was pending in the Court of Appeals.
In his opinion on February 12, Circuit Judge Timothy M. Tymkovich upheld the finding that the brokerage account was validly held by the couple as tenants by the entireties under Wyoming law.
The couple had filed a motion to dismiss, contending that the order of the bankruptcy court was not final.
Judge Tymkovich denied the motion. He relied on Tenth Circuit authority holding that an order granting or denying an exemption is final and appealable. In re Brayshaw, 912 F.2d 1255, 1256 (10th Cir. 1990).
Because the bankruptcy court had ruled that the husband was entitled to a tenancy by the entireties exemption, Judge Tymkovich held that the order was “immediately appealable,” even though the bankruptcy court had not decided the amount of the exemption.
Circuit Judge Mary Beck Briscoe concurred in the result. She agreed on the merits and agreed that the order was final, but only as a consequence of the husband’s death while the appeal was pending.
Judge Briscoe did not believe that the finding of an exemption was final at the time it was made, because the bankruptcy court had not ruled on the extent or amount of the exemption. She said that “this case initially fell under our general rule that the BAP’s decision is interlocutory when it affirms an interlocutory order by the bankruptcy court.”
The husband’s death changed the circumstances. While the appeal was pending, the bankruptcy judge granted summary judgment, saying that the deceased husband’s bankrupt estate held no interest in the entireties account once the husband died.
In Judge Briscoe’s view, the ruling that the estate had no interest in the account gave the circuit court appellate jurisdiction over a final order.
Although the “finality rules are indeed ‘different in bankruptcy,’ . . . they are not so flexible as to permit review while the parties’ dispute is simultaneously litigated in an adversary proceeding,” Judge Briscoe said. The creditor’s “appeal of the exemption issue only ripened when the adversary proceeding concluded as to that issue.”
A panel of Tenth Circuit judges disagreed about the extent of flexibility in deciding whether a bankruptcy court order is final and therefore appealable.
Two judges believe that simply finding an asset to be exempt makes the order appealable. The third judge believes that an order is not final and not appealable until the bankruptcy judge rules on the extent or amount of the exempt asset.
Before bankruptcy, a husband and wife established a brokerage account in Wyoming in their names as tenants by the entireties.
Several years later, a creditor obtained a $2.8 million judgment against the husband. He responded by filing a chapter 7 petition. The husband claimed that some $2 million in the entireties account was exempt under Wyoming law. The wife did not resort to bankruptcy.
Wyoming is among the minority of states allowing a married couple to hold personal property by the entireties. Over objections by the chapter 7 trustee and the judgment creditor, the bankruptcy judge ruled that the account was validly held by the couple as tenants by the entireties and was therefore exempt. However, the bankruptcy judge decided that there must be an adversary proceeding to decide the extent or amount of the exemption.