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Maiorino v. Branford Savings Bank

decided: October 7, 1982.


Appeal from a judgment of the bankruptcy court sustaining a mortgagee's objection to the Chapter 13 debtors' proposed plan and denying confirmation of the plan. Held, the bankruptcy court's order is not a final order appealable by agreement directly to the court of appeals under 28 U.S.C. § 1293(b). Appeal dismissed.

Lumbard, Oakes, and Pierce, Circuit Judges. Lumbard, Circuit Judge, dissenting.

Author: Oakes

OAKES, Circuit Judge:

This appeal, involving inter alia the state law of Connecticut on strict foreclosures, comes to us without enlightenment from a Connecticut district judge: the parties have agreed to come directly to the court of appeals by virtue of a provision of the new Bankruptcy Code, 28 U.S.C. § 1293(b) (Supp. II 1978).*fn1 A direct appeal from the bankruptcy court by agreement is permitted under this provision*fn2 if, but only if, the order, judgment, or decree of the bankruptcy court is final. See In re Kutner, 656 F.2d 1107, 1112 (5th Cir.), cert. denied, 455 U.S. 945, 102 S. Ct. 1443, 71 L. Ed. 2d 658 (1981) followed in Callister v. Ingersoll-Rand Financial Corp., 673 F.2d 305 (10th Cir. 1982) (per curiam); 1 Collier on Bankruptcy para. 3.03 at 3-308 (15th ed. 1980). If the order is not final, and the court thereby lacks subject-matter jurisdiction, it is axiomatic that the parties cannot by agreement confer jurisdiction. See American Fire & Casualty Co. v. Finn, 341 U.S. 6, 18, 95 L. Ed. 702, 71 S. Ct. 534 (1951). Because we find that the order appealed from is not final, we dismiss the appeal.

The order in question denied confirmation of the Chapter 13 debtors' plan, sustaining a mortgagee's objection thereto. The mortgagee had obtained a judgment of strict foreclosure under Connecticut law, Conn. Gen. Stat. § 49-14, in July 1980, fixing the amount due and ordering that the mortgage be paid by a "law day" set for December 8, 1980, on which day the debtor's equity of redemption was to expire. On December 1, 1980, the judgment was opened under Conn. Gen. Stat. § 49-15 at the debtors' behest and the "law day" was rescheduled for March 17, 1981. On March 13, 1981, the debtors filed for relief under Chapter 13. Their proposed plan sought reinstatement of the foreclosed mortgage on payment of their arrearage. After referring to Butner v. United States, 440 U.S. 48, 55, 59 L. Ed. 2d 136, 99 S. Ct. 914 (1979) (state law governs property rights), the bankruptcy judge held that under Connecticut law the mortgage merged into the judgment of foreclosure and could not be cured under Connecticut law or Bankruptcy Code § 1322(b)(5). Denying confirmation of the debtors' proposed plan, the bankruptcy judge did not dismiss the petition.*fn3 Under these circumstances we conclude that the order denying confirmation of the proposed plan is interlocutory only and hence not appealable by agreement to the court of appeals.

Nothing in the legislative history of the Bankruptcy Reform Act of 1978 bears on this question directly.*fn4 No case that we have been able to find even under the old Bankruptcy Act directly relates to the situation at hand, i.e., where the proposed plan has been rejected but the automatic stay under 11 U.S.C. § 362(a)(2) remains in effect and the petition has not been dismissed. True, the Fifth Circuit, which agrees that interlocutory orders are not appealable, In re Kutner, supra, has taken an appeal from a refusal to confirm a wage-earner plan under Chapter 13. In re Foster, 670 F.2d 478 (5th Cir. 1982). The question of appealability was not discussed in that case, however, and evidently the two-judge panel did not raise the issue sua sponte as the court did in Kutner, a case involving denial of a trustee's standing to move to convert Chapter 13 proceedings to Chapter 7.

Nor do we find it incongruous that orders granting or denying recovery of property from a creditor or rejection or assumption of unexpired leases or executory contracts may have been held sufficiently final to be appealable as of right. Each of these situations involves a determination of a third party's rights on the one hand and the amount of property that is available to or payments that have to be made by the estate. Here, for all we know, the bankruptcy court may very well confirm another plan which does not reinstate the foreclosed mortgage on payment of arrearages but which modifies the mortgage payments to be made. The matter has been left in the air for the moment. The case is distinguishable from In re Taddeo, 685 F.2d 24, 26 n.4 (2d Cir. 1982), since an order granting or denying relief from the automatic stay under 11 U.S.C. § 362(e) is an injunction, note 4 supra.

Nor do we find it strange as a matter of policy that an order confirming a plan which would, we agree, be final, is appealable by an objecting creditor while an order rejecting a proposed plan is not final and not appealable by the Chapter 13 debtor, absent leave from the district court under 28 U.S.C. § 1334(b). So long as the petition is not dismissed, note 3 supra, it is open to the debtor to propose another plan, and for all that an appellate court would know in any given case such a plan might well be acceptable to the parties or bankruptcy judge concerned. From a policy point of view, we believe there is something to be said in a day of burgeoning appellate dockets for taking care not to construe jurisdictional statutes -- particularly those conferring power on the parties to agree to a direct appeal to the court of appeals -- with great liberality. Otherwise, at every stage of the bankruptcy proceedings the parties will run to the court of appeals for higher advice. In any event, there is a safety valve for the occasional unjust situation where grave hardship is involved in that leave to appeal may be sought of the district court under 28 U.S.C. § 1334(b). We simply do not believe that the district judges are or will be unwilling in appropriate cases to grant the leave to appeal permitted by the complex act of Congress.

We note also that the bankruptcy judge did not deal with the automatic-stay provisions of 11 U.S.C. § 362(a) (2) and their effect upon the operation of the law day, or discuss whether the judgment itself could be modified under id. § 1322(b) (2). Any final judgment should address itself to these matters as well.

Were this all there was to the case there would be nothing further for us to do. However, we must deal with In re Riddervold, 647 F.2d 342 (2d Cir. 1981), where a panel looked to § 405(c) (1) of the Bankruptcy Reform Act, 92 Stat. 2685,*fn5 and said simply that "for whatever reason, Congress did not intend the finality requirement of the new § 1293(b) to apply to appeals taken to the courts of appeals from orders of bankruptcy judges by agreement during the transition period." Id. at 344. Two questions are raised by the language of that case.

1. May the parties, by agreement, bring an appeal to the circuit court from an interlocutory decision of the bankruptcy court?

2. Would a negative answer to question 1 require that the holding in Riddervold be overruled, a matter which can be done only en banc?

We answer both in the negative.

Question 1. Quite plainly the language of Riddervold would put the Second Circuit into conflict with the decision of the Fifth Circuit in Kutner, supra, and the Tenth Circuit in Callister, supra. The panel majority agrees with Kutner's and Callister's conclusion that interlocutory orders of bankruptcy courts cannot be appealed to the circuit court by agreement of the parties. It is supported by the language of the new statute, ...

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