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In re Lipin

United States District Court, D. Arizona

July 15, 2016

In re Niles Lipin, Debtor.
v.
The Estate of Robert W. Walker and Eve F. Walker, Appellees. Niles Lipin, Appellant, Bk. No. 2:11-bk-26500-GBN Adv. No. 2:11-ap-02323-GBN

          ORDER

          Neil V. Wake Senior United States District Judge

         Niles Lipin defaulted on a loan secured by a deed of trust on land. The land was sold at a sheriff’s sale, but the sale price did not satisfy all of Lipin’s debt. Lipin then filed for bankruptcy. In bankruptcy court, Lipin argued that his remaining debt should be reduced by the value of improvements he made to the land prior to the sheriff’s sale. The bankruptcy court deemed this argument untimely under A.R.S. § 12-1566(C). For the reasons that follow, the bankruptcy court’s ruling will be affirmed.

         I. BACKGROUND

         In 2002, Lipin’s company AWD Ranch, LLC executed a promissory note in favor of Robert and Eve Walker. (See Doc. 12-2 at 6.[1]) The note was secured by a deed of trust on approximately 240 acres of desert land in Pinal County (“the Land”). (Id.)

         In 2004, Lipin stopped making payments on the note, and the parties became embroiled in a lawsuit in Pinal County Superior Court. (See Doc. 8-1 at 13-14.) In August 2009, near the end of the lawsuit, the Walkers’ attorney emailed Lipin’s attorney about what Lipin should do before vacating the Land. (Doc. 8-2 at 47.) The email urged the removal of “all debris, garbage and anything at all that is movable, ” but not “any fixtures” such as “fencing, ” “buildings, ” “dams, ” “channels, ” “berms, ” “impoundments, ” and “ponds.” (Id.)

         In December 2009, the Superior Court adjudged Lipin in default of his payment obligation, foreclosed the deed of trust, and ordered a sheriff’s sale of the Land. (Doc. 11-1 at 3-5.) In April 2010, the Walkers bought the Land at the sheriff’s sale for $1, 100, 000. (See Doc. 11-1 at 16.) Lipin’s debt exceeded that amount, so in May 2010 the court ordered Lipin to pay the difference, plus various costs and fees. (Id. at 16-17.) In September 2011, Lipin filed for bankruptcy. (Doc. 8-1 at 6-10.)

         In bankruptcy proceedings, the Walkers claimed that Lipin still owed them $1, 040, 832. (See Doc. 8-1 at 13.) Lipin then filed a Motion for Offsets against the Walkers’ claim, pointing out that he had made improvements to the Land prior to the sheriff’s sale. (Doc. 8-1 at 233, 236-37.)[2] Specifically, he had added “wells, buildings, [plant] nurseries, warehouses, fencing, septic systems, roads, culverts and other assets affixed to the land, ” at a cost of “more than $2.6 million.” (Id. at 237.) According to Lipin, these “fixed assets attached to the land” were worth far more than the price the Walkers paid at the sheriff’s sale, yet the Walkers “refused to allow” him to re-acquire or sell these assets. (Id. at 237, 239.) Thus, Lipin concluded that the Walkers enjoyed “undeniable financial benefits” for which he “received no offset.” (Id. at 237.)

         At oral argument, the bankruptcy judge denied Lipin’s motion as untimely. (Doc. 8-1 at 137, 181, 189.) The judge reasoned as follows: Lipin seeks offsets related to the Land’s value. (Id. at 179-180.) But under state law, Lipin could have asked the Superior Court to determine the Land’s fair market value within thirty days of the sheriff’s sale. (Id. (citing A.R.S. § 12-1566(C)).) If the fair market value was higher than the sale price, Lipin’s debt would have been reduced by that value instead. (Id.) Thus, Lipin had an opportunity to seek offsets in Superior Court. (Id. at 181.) By failing to do so, he waived the argument. (Id.)

         Lipin then filed a Motion for Reconsideration, reiterating that he spent more than $2.6 million in “property improvement” and that the Walkers stood to receive “a double recovery.” (Doc. 8-1 at 331-33.) The bankruptcy judge declined to reconsider, noting that Lipin failed to address the timeliness problem. (Doc. 8-1 at 340, 356, 359.) The judge then issued a written order denying Lipin’s motion for offsets and motion for reconsideration “with prejudice.” (Doc. 8-1 at 375-76.)

         Lipin appeals these rulings. (Doc. 1 at 5.) He argues that the state law procedure cited by the bankruptcy judge did not apply to his motion for offsets, because his motion rested on broader legal principles and did not challenge the sale price of the Land. (Doc. 8.) He also objects to the bankruptcy judge’s decision to deny offsets “with prejudice, ” because he might be entitled to other offsets later. (Id.)

         The Walkers argue that this Court lacks jurisdiction over this appeal, that the bankruptcy judge’s rulings were correct, and that this appeal is so frivolous that they deserve attorneys’ fees and costs. (Doc. 11.) Lipin criticizes these arguments and requests attorneys’ fees and costs of his own. (Doc. 12.)

         II. JURISDICTION

         Federal district courts have jurisdiction to hear appeals from “final” bankruptcy court orders. 28 U.S.C. § 158(a)(1). Finality is a “flexible concept” in the bankruptcy context. In re Perl, 811 F.3d 1120, 1126 (9th Cir. 2016). A bankruptcy court order is “final” if it (1) “resolves and seriously affects substantive rights” and (2) “finally determines the discrete issue to which it is addressed.” In re SK Foods, L.P., 676 F.3d 798, 802 (9th Cir. 2012) (quoting In re AFI Holding, 530 F.3d 832, 836 (9th Cir. 2008)).

         The order denying Lipin’s motion for offsets and motion for reconsideration was final. It rejected one of Lipin’s main defenses against the Walkers’ claim, thereby resolving and seriously affecting his substantive rights. And it did so “with prejudice, ” thereby finally determining the issue. This Court has jurisdiction under § 158(a)(1).

         Even if the order were interlocutory, the Court would grant to leave to appeal under § 158(a)(3) because the order foreclosed a ...


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