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Orr v. Brooke Corp. Bankruptcy Estate

United States District Court, D. Kansas

February 22, 2017

ROBERT D. ORR, Appellant,
v.
BROOK CORPORATION BANKRUPTCY ESTATE et al., Appellees. ROBERT D. ORR, Appellant,
v.
BROOK CORPORATION BANKRUPTCY ESTATE, et al., Appellees.

          MEMORANDUM AND ORDER

          CARLOS MURGUIA United States District Judge

         Appellant Robert D. Orr appeals from an order of the bankruptcy court filed April 19, 2016, which sustained the trustee's objection to Claim #924-1. The related bankruptcy appeals are now before the court on identical motions:

• Appellee's Motion to Dismiss Appeal (Doc. 7 in 16-2273 and Doc. 6 in 16-2274);
• Motion to Include Two Additional Documents in the Record on Appeal (Doc. 8 in both cases);
• Motion to File Appendices on or before July 29, 2016 (Doc. 18 in both cases); and
• Appellant's Motion for Leave to File Sur-Reply (Doc. 26 in both cases).

         Appellee Christopher J. Redmond, in his capacity as Chapter 7 Trustee of Brooke Corporation, Brooke Capital, Corp. and Brooke Investments, Inc., argues that the appeals should be dismissed because appellant lacks standing to bring them. The court first addresses appellant's motion to file a sur-reply and the motion to dismiss. Because the court denies the motion to dismiss, the court then addresses the remaining motions relating to the appeal itself.

         I. Factual Background

         In 2008, Brooke Corporation filed a bankruptcy petition under Chapter 11. The bankruptcy was later converted to a Chapter 7 proceeding and appellee was appointed trustee of the bankruptcy estate. As part of the bankruptcy proceeding, Brooke Holdings, Inc. filed Claim #924-1 in 2009. In November of 2013, Brooke Holdings, Inc. filed a notice of transfer of claim under Fed.R.Bankr.P. 3001(e)(2), purporting to transfer Claim #924-1 to appellant (its president and largest shareholder). No objections to the transfer were filed, and it became effective twenty-one days later.

         In 2010, the estate brought an adversary proceeding against multiple defendants-including Brooke Holdings-for claims of preferential transfer (Count I), constructive fraudulent conveyance (Count II), recovery of avoided transfers under § 550 (Count III), disallowance of claim under § 502 (Count IV), and subordination/recharacterization of the claim (Count V). The bankruptcy court granted summary judgment in favor of the estate and against Brooke Holdings on Counts I-III, finding $5, 100, 800.00 in preferential transfers, $13, 143, 980.77 in fraudulent transfers, and that such amounts were recoverable under § 550. Eventually, the trustee and Brooke Holdings agreed to consolidate Count IV with the claim objection in the main bankruptcy proceeding and to dismiss Count V, and they submitted to the bankruptcy court an Agreed Final Judgment as to Counts I-III confirming the judgment against Brooke Holdings. The Agreed Final Judgment was entered on January 5, 2016, and was not appealed.

         Based on the Agreed Final Judgment, the bankruptcy court entered a memorandum opinion and judgment sustaining the trustee's objection to Claim #924-1. In doing so, the bankruptcy court found that because neither Brooke Holdings nor appellant had paid to the estate the final judgment amount and because the Agreed Final Judgment was final and non-appealable, § 502(d) required disallowance of Claim #924-1 in the bankruptcy proceeding.

         II. Discussion

         A. Appellant's Motions for Leave to File Sur-Reply

         After appellee filed a reply brief to his motion to dismiss, appellant filed a motion for leave to file a sur-reply in both cases, arguing that appellee introduced a new legal argument in his reply brief. The court disagrees that appellee improperly raised new arguments. To the contrary, appellee's arguments properly addressed issues raised in ...


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