In re Pacific Thomas Corporation

Background

Pacific Thomas Corporation was in bankruptcy. The bankruptcy court appointed Kyle Everett as the Chapter 11 trustee. The trustee later received permission to sell two properties on which Pacific operated or owned property; the sales closed in October 2014 and June 2016.

Before those sales, Randall Whitney filed a state-court petition seeking an order directing the City of Oakland to set aside and revoke certificates of compliance for Pacific’s real property. Whitney alleged that he was Pacific’s “debtor representative.” The state-court petition remained pending but was stayed because the state court determined that the bankruptcy law’s automatic stay applied to it.

Whitney twice asked the bankruptcy court for relief from the automatic stay, which is the legal pause that generally prevents certain actions involving a bankruptcy estate from continuing. The bankruptcy court denied his first motion in 2016. The Bankruptcy Appellate Panel affirmed, and the Ninth Circuit dismissed Whitney’s later appeal as moot, stating that the trustee had sold the property and that Whitney had not established standing to pursue the state-court challenge on behalf of Pacific.

The bankruptcy court denied Whitney’s second motion in 2019, both at a hearing and in a written order. Whitney appealed that denial to the district court.

Arguments and analysis

Whitney argued that the bankruptcy court should have accepted a different basis for standing that he raised at the hearing. He asserted that he could pursue the state-court petition as a resident citizen of Oakland and as the owner of adjacent property allegedly affected by the certificates of compliance.

The district court relied on the Bankruptcy Appellate Panel’s earlier reasoning. That panel had found that Whitney did not establish what adjacent property he owned, whether he actually owned it, or how the certificates affected it. It also concluded that any individual rights Whitney might have could be pursued through his own action without seeking relief from the bankruptcy stay, but that he could not pursue those individual rights through a petition filed on behalf of the bankruptcy estate.

The district court found that reasoning persuasive. It determined that Whitney’s petition was filed solely on behalf of Pacific and did not seek relief for Whitney in his individual capacity. The court also noted that Whitney had previously acknowledged that the requested relief would benefit only Pacific’s estate and not him.

Ruling

Judge Maxine M. Chesney concluded that Whitney had not shown that the bankruptcy court erred in denying his second motion. The court therefore AFFIRMED the bankruptcy court’s order denying the motion.