In Re Ronald L. Natale Janet L. Natale. Ronald Natale and Janet Natale v. French & Pickering Creeks Conservation Trust, Inc. Lester W. Schwartz Frederick L. Reigle, Standing Chapter 13 Trustee. French & Pickering Creeks Conservation Trust, Inc.

Citations: 295 F.3d 375; 2002 U.S. App. LEXIS 12660Docket: 01-2022

Court: Court of Appeals for the Third Circuit; June 26, 2002; Federal Appellate Court

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The case involves Ronald L. Natale and Janet L. Natale, who filed an adversary proceeding against French and Pickering Creeks Conservation Trust, Inc., contesting the Trust's judgment lien on their Chester County property, which they argued impaired their exemption rights. The Natales claimed that their property value was less than their obligations to First Financial Savings Bank and Commercial Credit Corporation, asserting that those banks' liens were superior to the Trust's lien. The Trust's appeal to the district court was dismissed due to lack of jurisdiction, as the appeal was deemed untimely.

The underlying dispute stemmed from the Natales constructing a residence in violation of a recorded covenant imposed by the Trust, leading to a state court ruling that enforced the covenant and required the residence's demolition. The Trust obtained a $100,000 judgment for potential removal costs after the Natales failed to comply. The bankruptcy court, in Adversary No. 99-0231, granted summary judgment favoring the Natales, concluding that the Trust's judicial lien, established in 1998, did not have priority over the mortgages recorded in 1990 and 1992. The bankruptcy court indicated that further hearings would address remaining issues such as property valuation and lien avoidance.

The Court determined that the Defendants' judicial lien does not have priority over the mortgages held by First Financial Savings Bank and Commercial Credit Corporation, instead ranking behind them. An evidentiary hearing is scheduled for September 16, 1999, to address remaining issues, including the valuation of the real property and the potential avoidability of the Defendant's lien under 11 U.S.C. § 506. No appeals were filed regarding the August 6, 1999 order. The court later consolidated two adversary proceedings, where debtors sought to establish the secured status of First Financial's mortgage lien and to avoid the lien under 11 U.S.C. § 506(d) based on the property's value. Following a hearing on November 29, 1999, the court valued the property at $102,422.00, ruling that First Financial's mortgage lien of $206,073 is completely unsecured and thus void against the Debtor's share of the property under 11 U.S.C. § 506(d). Additionally, the Trust's judgment lien was deemed avoidable under 11 U.S.C. § 522(f) due to the impairment of the Debtors' exemption in the real estate. The court's orders on January 31, 2000, confirmed these findings and concluded the adversary proceedings. The Trust subsequently appealed to the district court on February 9, 2000, specifically targeting the August 26, 1999 order regarding the lien priority, which was dismissed by the district court in a memorandum opinion dated March 20, 2001.

Fed. R. Bankr. P. 8002(a) mandates that a notice of appeal must be filed within ten days of the relevant order's entry. The August 26, 1999 summary judgment, which prioritized the mortgage lien over the Trust's judgment lien, was deemed a final order and the sole order referenced in the Trust's notice of appeal. Consequently, the district court determined that the appeal, filed on February 9, 2000, was untimely because it exceeded the ten-day limit, resulting in a lack of jurisdiction. The Trust subsequently appealed to a higher court, which conducted a plenary review.

Debtors argued that decisions impacting creditor claim priorities in bankruptcy warrant immediate review, supporting the district court's timing assessment based on the August 26 date. However, precedent indicates that while finality in bankruptcy is often assessed pragmatically due to the complex nature of proceedings, the preference against piecemeal appeals remains significant in individual adversary actions. A specific adversary proceeding must reach a final resolution for appeal purposes.

The court has previously recognized certain bankruptcy court orders as final and appealable, such as expunging a creditor's claim or lifting an automatic stay for foreclosure. In contrast, orders that do not fully determine liabilities or penalties are not considered final. Applying these principles, the court concluded that the Trust could not appeal the August 26 order until the conclusion of related adversary proceedings on January 31, 2000, as the August 26 order did not fully resolve Adversary No. 99-0231. Thus, an order concluding a separate adversary proceeding is deemed final for appeal, even if it does not resolve the entire bankruptcy case.

A bankruptcy court's partial summary judgment order that established the priority between creditors but did not fully resolve the adversary proceeding was deemed interlocutory and not directly appealable. The court emphasized that until all significant elements of a claim in the adversary proceeding are settled, a final order cannot be recognized based solely on the priority determination. The ruling in *Saco* was distinguished; in that case, the priority determination was deemed final and appealable because it effectively settled the creditor's claim amount, even if further adjustments were possible. However, in the present case, the ongoing nature of the adversary proceeding and its unresolved issues precluded a determination of finality. As a result, the district court's March 21, 2001 order was reversed, and the matter was remanded for further consideration of the Trust's appeal on its merits. Additional notes clarified the involvement of associated parties and highlighted that certain provisions for interlocutory appeals were not applicable in this context.