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In re Marcus Hook Development Park Inc.

argued: May 16, 1991.


On Appeal from the United States District Court for the Western District of Pennsylvania; D.C. Civ. No. 90-01330.

Hutchinson, Cowen and Garth, Circuit Judges. Hutchinson, Circuit Judge, Concurring.

Author: Cowen


COWEN, Circuit Judge

This appeal follows an order of the district court affirming the bankruptcy court's denial of an objection to a motion for final decree. The objection was filed by Marcus Hook Business and Commerce Center Limited ("MHBCC"), Marcus Hook Corporation ("MHC"), Bell Savings Bank ("Bell"), and T.A. Title Company ("T.A. Title") (collectively the "Purchaser") in response to a motion for final decree filed by the debtor, Marcus Hook Development Park, Inc. ("MHDP"). At the center of the dispute are conflicting orders of the bankruptcy court which alternately approved the sale of a piece of property, free of any liens, to the Purchaser's predecessor in interest, and then reimposed a lien after the sale had been made. We will reverse the district court and order it to remand the case to the bankruptcy court so that the bankruptcy court may resolve this controversy.


In December, 1983, MHDP filed a petition for relief under Chapter 11 of the Bankruptcy Code. 11 U.S.C. ยงยง 1101-74 (1988). MHDP's sole asset was 35 acres of developed industrial real estate located in the Borough of Marcus Hook, Delaware County, Pennsylvania (the "property"). Delaware County (the "County") held a $125,000 tax lien against that property. By order of the bankruptcy court, one acre of the property was subsequently sold at a public bankruptcy sale on June 4, 1985.

Thereafter, MHDP began negotiations with Dennis Marchuk regarding the sale of the other thirty-four acres. On July 17, 1986, MHDP filed a motion to sell its remaining acreage to Marchuk free and clear of liens and encumbrances. All creditors, including the County, were served with a notice of the proposed sale. After receiving notice, the County advised MHDP that it would waive its priority tax claim and agreed to be treated as an unsecured creditor. No objection to the sale was ever filed by the County.

An order confirming the sale to Marchuk was entered by the bankruptcy court on August 14, 1986. That order expressly stated that "said sale is free and clear of all mortgages, judgments, liens and encumbrances." In addition, the August 14 order provided that the sale was duly advertised, that proof of publication and service had been filed with the bankruptcy court, and that notice of the sale had been given to creditors and other parties in interest.

Before the closing, Marchuk assigned his rights in the property to MHBCC. On November 24, 1986, closing was held, pursuant to which MHBCC received a special warranty deed for $560,000. MHBCC granted a mortgage upon the property to Bell. T.A. Title held the $560,000 in escrow, and provided title insurance to both MHBCC and Bell. MHC is the successor in title to MHBCC.

A month-and-a-half after the closing, MHDP and the Official Unsecured Creditor's Committee filed a disclosure statement in support of the proposed plan for reorganization. The disclosure statement provided that the "Debtor's real estate was sold under and subject to the continuing lien of the County of Delaware. The County's taxes shall therefore be dealt with by the purchaser of the property and the County shall not receive any dividend on account of its claims against the estate." Moreover, it stated that the County "shall continue to hold a lien against the property after the sale of the real estate. This claim will be dealt with by the purchaser. The County of Delaware will not receive any dividend from the estate." Despite the conflict between the August 14 order and the disclosure statement, the bankruptcy court entered an order on February 11, 1987, which approved the disclosure statement. The February 11 order required that all parties in interest be served with the disclosure statement, but it is not clear from the record if the Purchaser was so served.

On May 7, 1990, more than three years after the February 11 order, MHDP filed a motion for final decree. Upon being served with this motion, the Purchaser filed a timely objection. Specifically, the Purchaser pointed out that the August 14 order and the February 11 order were inconsistent with each other, and requested that the bankruptcy court remedy the problem. After a hearing, the bankruptcy court granted MHDP's motion for final decree. The bankruptcy court overruled the Purchaser's objection for two stated reasons. First, it characterized the basis for the objection as a dispute between non-debtors, and held that such a dispute was neither a core proceeding nor a related proceeding. Second, the bankruptcy court held that it had no authority to vacate the February 11 order at this late stage of the proceedings. Thus, the bankruptcy court never dealt with the merits of the Purchaser's objection, denying relief on the grounds that it had no jurisdiction.

The Purchaser then appealed to the district court. Reasoning that the bankruptcy court's findings were not clearly erroneous, even though no such findings appear in the bankruptcy court's orders, the district court affirmed the final decree. It would therefore seem that the district court affirmed on the merits although the ...

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