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IN RE ROSE COLOR

November 3, 2005.

In re: ROSE COLOR, INC., Debtor. SYED IRSHAD RAZA, Appellant,
v.
DONALD BIASE, Appellee.



The opinion of the court was delivered by: DENNIS CAVANAUGH, District Judge

OPINION

This matter comes before the Court upon two appeals from two Orders of the United States Bankruptcy Court for the District of New Jersey ("Bankruptcy Court") by Syed Irshad Raza ("Appellant"). The first appeal (Docket number 05-3437) is an appeal of the Bankruptcy Court's August 19, 2004, Order denying Appellant's motion to order the Trustee to disclose result of public sale of Debtor's personalty property and to prohibit removal of unsold property without the court's permission in the interim ("August 19 Order"). The second and third appeals (Docket number 05-2291 and 04-4972) are appealing the Orders adjudicated by the Bankruptcy Court during an August 31, 2004, hearing ("August 31 Order").*fn1 The August 31 Order converted Debtor's Chapter 11 reorganization proceeding to a Chapter 7 liquidation proceeding, approved the Chapter 11 Trustee's sale of real property free and clear of all liens, claims, and interests, and denied Appellant's cross-motion to terminate Trustee. The Bankruptcy Court heard oral arguments on August 16, 2004, before entering the August 19 Order, and it heard oral arguments on August 31, 2004, before entering the August 31 Order. For the reasons stated below, the Court affirms the decisions of the Bankruptcy Court and dismisses Appellant's motions for relief pending the appeals as moot.

I. BACKGROUND

  A. Procedural History

  Rose Color, Inc. ("Debtor") was a business engaged in dye manufacturing. Appellant served as Debtor's President. (8/31 Transcript ("Tr.") at 66). Debtor filed a petition under Chapter 11 of the United States Bankruptcy Code on April 24, 2003. (8/31 Tr. at 65-66). On November 20, 2003, the Bankruptcy Court authorized the appointment of a Chapter 11 Trustee, and on November 25, 2003, the Bankruptcy Court approved the appointment of Donald Biase ("Trustee") for this position. (8/31 Tr. at 66). On May 17, 2004, the Trustee filed notice with the Bankruptcy Court indicating his intention to conduct a sale of Debtor's personal property. A fact-finding hearing was held before Judge Rosemary Gambardella, Chief Judge of the United States Bankruptcy Court, on June 24, 2004, and the Bankruptcy Court entered an Order on June 25, 2004, authorizing the Trustee to conduct the public sale while denying Appellant's request for a stay of the Order pending appeal. The public sale was carried out on June 29, 2004. (8/31 Tr. at 66). Appellant was not present at the sale, nor did he make any bids on the sale. (8/16 Tr. at 35).

  On July 8, 2004, the Trustee moved to convert Debtor's Chapter 11 bankruptcy to a Chapter 7 bankruptcy. On August 3, 2004, Appellant filed an "Urgent Motion" to order the Trustee to disclose results of the public sale and to enter an interim order prohibiting removal of unsold property without permission of the Court. On August 8, 2004, the Trustee moved to enter an Order approving Trustee's sale of Debtor's real property.

  B. August 19 Order

  At the hearing held on August 16, 2004, Appellant presented a number of grievances in support of his motion, including fraud, improper auction procedures, and collusion between Trustee and purchasers. (8/16 Tr. at 4-10). Specifically, Appellant referred to Trustee's rejection of Appellant's offer to purchase the auction items as evidence of Trustee's improper conduct. (8/16 Tr. at 27). Counsel for the Trustee responded that the auction was properly carried out and adequately advertised. (8/16 Tr. at 11-12). Moreover, the Trustee asserted that the actions sought in the Appellant's motion had already been carried out, namely, that Trustee had already filed the results of the motion and that Trustee had no intention to remove any unsold property, which is forbidden under the law. (8/16 Tr. at 11-12). Finally, the Trustee sought sanctions against Appellant for repeatedly bringing issues before the Court that had already been adjudicated. (8/16 Tr. at 29-32). Judge Gambarella heard testimony by the auctioneer, Michael Sklar, before making her decision.

  Judge Gambarella noted the Trustee conducted a public sale on June 29, 2004, and subsequently submitted a report of the sale as well as a fee application setting forth the results of the sale. (8/16 Tr. at 33-34). The Judge's decision also noted items were offered in bulk before offered individually, that the sale was advertised in three major publications and more than 700 notices of the sale were sent out, that some 13 items received no bids, that there were approximately 30 active bidders, and Appellant was not present at the auction. (8/16 Tr. at 333-5). Among the evidence discussed by Judge Gambarella were the report of the sale, the fee application from the sale, and a letter from Lehman, Lehman & Gruber to Trustee's counsel containing an offer from Appellant to purchase certain assets from Debtor through Appellant's personal credit cards. (8/16 Tr. at 34-37).

  Based on the evidence before her, Judge Gambardella found the sale "was conducted in conformance with the Court's local rules and in conformance with the Orders of this Court." (8/16 Tr. at 35). She dismissed allegations of "inappropriate actions on behalf of the professionals in the conduct of [the] sale," citing lack of evidence for those allegations. (8/16 Tr. at 36). To the contrary, Judge Gambardella found "the sale was conducted in conformance with the Rules of this Court in this District." (8/16 Tr. at 36). Regarding Appellant's offer to purchase the auctioned items, Judge Gambardella found "there's absolutely no verification or other information, financial or otherwise as to the bona fides of this offer." (8/16 Tr. at 37). Based on the record as a whole then, she found nothing in the record to indicate Appellant's bid was not seriously considered. (8/16 Tr. at 37).

  Regarding the results of the sale, Judge Gambardella found that the sale was "actively advertised . . . actively attended . . . [and] the amounts that were obtained were appropriate under the circumstances." (8/16 Tr. at 36). The judge further found that "Trustee has fully complied with an accounting for the property sold. The allegations . . . assert[ing] that professionals have ignored evidence or have falsified evidence to this court remain unsubstantiated." (8/16 Tr. at 38). Even though one bidder had not at the time of the hearing removed its items from the premises, the judge found that the terms of the auction sale "should [not] reasonably be interpreted to take away any and all discretion from the Trustee . . . in enlarging the amount of time necessary to remove the equipment if warranted." (8/16 Tr. at 38). Therefore she denied to order that no further removals take place of items successfully bid-upon. (8/16 Tr. at 39).

  Judge Gambarella found that the motion to set aside the Order to conduct a sale was untimely, since it was filed after the ten-day period to appeal the original Order authorizing the public sale. (8/16 Tr. at 38-39). Even if the motion was timely, the Bankruptcy Court found Appellant failed to meet the standard required to grant a motion for reconsideration. (8/16 Tr. at 39). Specifically, the Judge did not believe there existed an intervening change in controlling law, new evidence available which was not available at the time of the original hearing, the need to correct a clear error of law or to prevent manifest injustice that warranted reconsideration. (8/16 Tr. at 39). Finally, Judge Gambarella denied the Trustee's cross motion to impose sanctions on Appellant. She noted that Appellant's behavior came close to violating Rule 11 of the Federal Rules of Civil Procedure. However, since Appellant appeared pro se, the Judge issued a warning repeating the charges previously been ruled upon. (8/16 Tr. at 41). Judge Gambardella entered her order on August 19, 2004, denying Appellant's motion for disclosure of the public sale's results.*fn2 (Docket number 04-4972). On August 30, 2004, Appellant appealed the Bankruptcy Court's denial of his motion

  C. August 31 Order

  On August 31, 2004, the Bankruptcy Court heard oral argument on the Trustee's motion to convert Debtor's Chapter 11 bankruptcy to a Chapter 7 bankruptcy and Appellant's cross-motion to terminate Trustee pursuant to Section 324 of the Bankruptcy Code.*fn3 The Court found Appellant did not proffer sufficient proof for the Court to terminate the Trustee. The Bankruptcy Court also denied Appellant's motion for a stay of the Order to Convert. Appellant did not seek a stay pending appeal of the Approval of Sale. On September 2, 2004, ...


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