The opinion of the court was delivered by: Wolin, District Judge
Bank's appeal denied and Order affirmed.
ALFRED M. WOLIN, U.S.D.J.
The opinion of the court was delivered by: ALFRED M. WOLIN
The current case is before the Court on creditor appellant Brunswick Bank and Trust Company's (the "Bank") appeal of the July 11, 1997 Opinion and Order ("the Order") of the Honorable William F. Tuohey, Bankruptcy Court Judge, denying the Bank's motion to reopen the above-captioned case in order to setoff debtor Robert Atanasov's claim. Debtors appellees Robert and Marisa Atanasov oppose the appeal. Appellee Jeffrey A. Lester, Esq., the Chapter 7 Trustee (the "Trustee"), has taken no position on the appeal. The Court has considered the appeal under Federal Rule of Civil Procedure 78. For the reasons stated herein, the Bank's appeal will be denied and the Order affirmed.
During January of 1988, Robert Atanasov ("Atanasov") applied to the Bank for a $500,000 loan. Pursuant to the Bank's request, Atanasov provided Statements of Financial Condition ("SFCs"); such SFCs were provided before and after the Bank approved Atanasov's line of credit. The Bank approved Atanasov's loan application on February 22, 1988, and granted an increase to $1,250,000 in May of 1988. Atanasov signed a promissory note in favor of the Bank on May 16, 1988 in the amount of $1,250,000. Thereafter, Atanasov defaulted on the loan. On April 5, 1991, the Bank filed a Civil Complaint regarding this default and was awarded a default judgment in the amount of $1,577,833.18.
On September 2, 1992, Richard Klugherz, Senior Vice President of the Bank and loan officer in charge of the Atanasov loan, testified in State Court that Atanasov's SFCs provided to the Bank were inaccurate. *fn1 An indictment was returned charging Atanasov with the crimes of theft by deception and falsifying financial records. The indictment was filed on September 23, 1992 and Atanasov was arrested.
Atanasov and Marisa Atanasov filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court, District of New Jersey, on February 2, 1993. An amended petition was filed on March 4, 1993 and the Bank was listed as a secured creditor *fn2 in the amount of $1,123,000 on the debtors' schedules and statements of affairs. *fn3
On April, 16, 1993, Atanasov filed a motion to dismiss his indictment in State Court. The criminal indictment was dismissed on May 10, 1993, more than three months after the bankruptcy petition was filed.
On June 1, 1993, the Bankruptcy Court granted Atanasov's motion to convert the Chapter 11 bankruptcy to a Chapter 7 bankruptcy. An order for discharge, dated October 14, 1993, was entered by the Bankruptcy Court, which, by operation of law, discharged the Bank's judgment.
On May 9, 1995, Atanasov filed a complaint in Bankruptcy Court against the Bank and Klugherz based upon Klugherz's September 2, 1992 grand jury testimony; the action is essentially one for malicious prosecution, among other claims. *fn4 The Bank and Klugherz moved on May 12, 1997 to reopen the bankruptcy case in order to setoff Atanasov's claim. The Trustee appeared at the June 9, 1997 hearing, but took no position on the pending motion. The Bankruptcy Court denied the motion by way of a July 11, 1997 Opinion and Order. The Bank filed a motion for reconsideration on the basis that the Order purportedly did not address any of the issues or case law raised by creditor. The Bank argued that Atanasov's malicious prosecution claim is an asset of the bankruptcy estate, even though it technically accrued post-petition, because it is predicated upon conduct that occurred pre-petition. The Bankruptcy Court denied the reconsideration motion at a September 2, 1997 oral hearing. Thereafter, the Bank appealed the Order to this Court.
United States District Courts have mandatory jurisdiction to hear appeals from final orders of bankruptcy judges. See 28 U.S.C. at 158(a). If the order is interlocutory, i.e., provisional, the district court has discretion to grant or deny leave to appeal. See id.; Century Glove, Inc. v. First American Bank, 860 F.2d 94, 97 (3d Cir. 1988) (noting that a district court may review both final and interlocutory ...