F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
NOV 12 1998
TENTH CIRCUIT
PATRICK FISHER
Clerk
In re: BTS INC.,
Debtor.
VALLEY NATIONAL BANK,
Appellant,
v. No. 97-5245
BTS INC., (D.C. No. 97-C-745-K(W))
(N.D. Okla.)
Appellee.
ORDER AND JUDGMENT*
Before ANDERSON, HOLLOWAY, and BALDOCK, Circuit Judges.
Appellee BTS Inc. provides technical services and training equipment to
commercial and military aviation operations. On May 18, 1995, BTS filed a petition
seeking protection under Chapter 11 of the United States Bankruptcy Code. Appellant
Valley National Bank was a secured creditor of BTS. The most valuable piece of
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court generally
disfavors the citation of orders and judgments; nevertheless, an order and judgment may
be cited under the terms and conditions of 10th Cir. R. 36.3.
collateral securing Valley’s loan was an “FAA Level B Certified B727-200adv Flight
Simulator.” During the bankruptcy proceedings, the parties offered evidence valuing the
simulator between $170,000 and $2.5 million. Prior to the hearing on its proof of claim,
Valley sold the simulator for $250,000.
At the hearing, the bankruptcy court calculated Valley’s claim against BTS at
$1,609,995.00. The bankruptcy court then determined the value of the secured assets so
their value could be subtracted from Valley’s total claim to determine the amount Valley
could claim as an unsecured creditor.1 Considering the evidence offered at the hearing,
the bankruptcy court valued the simulator at $910,000, not the $250,000 for which Valley
actually sold the simulator. By placing this higher value on the simulator, the bankruptcy
court effectively reduced Valley’s unsecured claim by $660,000 (the difference between
910,000 and 250,000). The bankruptcy court also disallowed a portion of the attorney’s
fees Valley requested. Valley appealed to the district court arguing that the bankrupcty
court erroneously arrived at the flight simulator’s value and improperly reduced its
attorney’s fees. The district court affirmed the bankruptcy court.
On appeal to this court, Valley essentially repeats the arguments made to the
district court and for the first time urges reversal on the basis that the bankruptcy court
failed to make a finding that the simulator was not sold in a commercially reasonable
1
The value of the collateral securing Valley’s loan to BTS was less than the
amount of the loan. Thus, to the extent the loan amount exceeded the value of the
collateral, Valley found itself in the unsecured creditor pool.
2
manner. Our jurisdiction arises under 28 U.S.C. § 1291. We affirm.
I.
A commercially reasonable sale of an asset establishes the market value of that
asset. Matter of Excello Press, Inc., 890 F.2d 896, 905 (7th Cir. 1989). In evaluating
Valley’s proof of claim, the bankruptcy court considered evidence regarding the flight
simulator’s market value including appraisals, expert testimony, and the actual sale price
of the simulator. Without determining whether Valley sold the simulator in a
commercially reasonable manner, the bankruptcy court concluded that the simulator had a
market value of $910,000. Valley argues that because a commercially reasonable sale
establishes market value, the bankruptcy court was required to make a determination that
its sale of the simulator for $250,000 was not commercially reasonable before it could
arrive at a higher market value. Valley contends that such a finding was outcome
determinative and that the bankruptcy court’s failure to make the finding requires that we
remand for determination of commercial reasonableness.
Valley raised the issue of commercial reasonableness in the pretrial conference
before the bankruptcy court. Valley did not raise the issue once the proof of claim
hearing began, nor did it raise the issue on appeal to the district court. “It is a general rule
that a federal appellate court will not consider an issue which was not presented to,
considered or decided by the trial court.” Cavic v. Pioneer Astro Industries, Inc., 825
3
F.2d 1421, 1425 (10th Cir. 1987) (internal quotations omitted). In this case, Valley not
only failed to properly preserve the issue before the bankruptcy court, it failed to raise the
issue on appeal to the district court. Thus, although we recognize an appreciable
difference in the bankruptcy court’s valuation of the simulator and the price Valley
received for the asset in what in contends was a commercially reasonable sale, we decline
to consider the issue for the first time on appeal.
II.
Valley next claims that the bankruptcy court’s findings do not satisfy Rule 7052.
Specifically, Valley claims the bankruptcy court’s decision must be reversed because the
court: (1) did not make a finding on the commercial reasonableness of the simulator sale;
(2) relied on an erroneous incorporation by reference in making material findings of fact;
and (3) made only a broad general statement regarding the value of the simulator without
any underlying analysis or justification. We reject Valley’s arguments.
Fed. R. Bankr. P. 7052 requires a bankruptcy court to make findings of fact and
conclusions of law on all actions tried to the court. The rule is designed to furnish a
reviewing court with a clear understanding of the basis for the bankruptcy court’s
decision. See Colorado Flying Academy, Inc. v. United States, 724 F.2d 871, 877 (10th
Cir. 1984). Findings of fact satisfy Rule 7052 if they clearly show an appellate court the
basis for the bankruptcy court’s decision. See Bell v. AT&T, 946 F.2d 1507, 1510 (10th
Cir. 1991). The bankruptcy court’s findings do not have to be in a specific form,
4
Featherstone v. Barash, 345 F.2d 246, 250 (10th Cir. 1965); Okaw Drainage Dist. v.
National Distillers and Chemical Corp., 882 F.2d 1241, 1244 (7th Cir. 1989), and need
not be detailed.2 Colorado Flying Academy, 724 F.2d at 878. A court may satisfy the
requirement that facts be found specially by orally pronouncing its findings of fact and
conclusions of law from the bench. See Chandler v. City of Dallas, 958 F.2d 85, 89 (5th
Cir. 1992); Okaw Drainage Dist., 882 F.2d at 1244.
As stated above, Valley failed to raise the issue of commercial reasonableness at
the proof of claim hearing and before the district court. We will not address it now.
Secondly, as BTS aptly points out, the bankruptcy court’s erroneous incorporation by
reference is an obvious scrivener’s error. Although the bankruptcy court stated that it was
considering the evidence contained in “the Court’s Order of August 30, 1996” (which did
not exist), the record clearly shows that it intended to incorporate by reference evidence
presented at a hearing on August 29, 1995. Finally, the bankruptcy court’s order,
although brief, provides sufficient detail for this court to understand the basis of its ruling.
The references in the court’s order to the prior hearings in which it accepted evidence
regarding value and the information contained in the May 31, 1997, order sufficiently
2
“Although there must be sufficient record evidence to support the findings, they
need not state the evidence or any of the reasoning upon the evidence, nor assert the
negative of rejected propositions. Rather, the judge need only make brief, definite,
peritnent findings and conclusions upon contested matters; there is no necessity for
overelaboration of detail or particularization of facts.” Stock Equipment Co. v. TVA, 906
F.2d 583, 592 (11th Cir. 1990).
5
demonstrate how the bankruptcy court reached its conclusion.
III.
Valley argues that the bankruptcy court’s valuation of the flight simulator was
clearly erroneous. We review the bankruptcy court’s factual finding that the simulator
had a fair market value of $910,000 for clear error. See In re Craddock, 149 F.3d 1249,
1255 (10th Cir. 1998). “A factual finding is clearly erroneous when, although there is
some evidence to support it, upon review of the entire record the appellate court is left
with the definite and firm conviction that a mistake has been made.” Id. at 1256. In
determining whether a factual finding is clearly erroneous, we view the facts in a light
most favorable to the trial court’s determination and leave the “credibility of the witnesses
and the weight to be given the evidence, together with the inferences, deductions and
conclusions to be drawn from the evidence” to the sound discretion of the trial judge.
United States v. McKneely, 6 F.3d 1447, 1452-53 (10th Cir. 1993).
The parties presented numerous exhibits and several witnesses’ testimony to the
bankruptcy court relating to the market value of the flight simulator. The values
presented ranged from $170,000 to $2.5 million and contained many figures in between.
The bankruptcy court weighed the conflicting evidence and valued the simulator at
$910,000. Considering the wide range of values presented and viewing the evidence in a
light most favorable to the bankruptcy court’s finding, we are not left with a definite and
6
firm conviction that the court made a mistake. Accordingly, we conclude the bankruptcy
court’s determination that the flight simulator had a market value of $910,000 was not
clearly erroneous.
IV.
Admitting that it failed to object to its admission at trial, Valley next argues that
the bankruptcy court erred by admitting and considering hearsay evidence on the value of
the flight simulator. Valley asserts that because the bankruptcy court overruled the same
objection at a hearing approximately one year prior, further objection would have been
futile. Therefore, Valley contends that no further objection was necessary to preserve the
error.
In McEwen v. City of Norman, 926 F.2d 1545 (10th Cir. 1991), we addressed an
issue similar to the one presented here. In that case, Plaintiff filed a motion in limine
seeking to exclude certain evidence, which the trial court denied. Id. at 1544. Believing
the issue was preserved for appeal, the plaintiff made no objection when the defendant
offered the evidence at trial. Id. On appeal, we refused to consider the issue. We held
that in order for an issue to be preserved for appeal, a party must interpose a
contemporaneous trial objection so that the trial court may “entertain reconsideration in
light of the actual trial testimony and the surrounding circumstances developed at trial.”
Id.
Approximately one year before trial, Valley objected to the admission of the
7
hearsay letters. At the proof of claim hearing, BTS offered the letters into evidence.
Valley did not object. The issue did not surface again until Valley appealed the
bankruptcy court’s determination of value to the district court. In order to preserve the
hearsay issue for appeal, Valley had to object when BTS offered the evidence at the proof
of claim hearing. Id. Valley clearly made no such objection, and as a result we decline to
review the issue on appeal.3
V.
The Bankruptcy Code provides a mechanism for creditors to recover reasonable
attorney’s fees incurred in pursuing a secured claim. See 11 U.S.C. § 503. Valley
complains that the bankruptcy court erroneously reduced its claim for attorney’s fees
when the amount of such fees “was not a part of the pre-trial order and was the subject of
no evidence.” The thrust of this claim is that the bankruptcy court was required to hold a
separate hearing on or give specific notice that it was going to consider whether the
amount of attorney’s fees Valley requested was reasonable. We review the bankruptcy
court’s award of attorney’s fees for abuse of discretion. Daleske v. Fairfield
3
Although neither party urges us to apply it, this circuit recognizes a narrow plain
error exception to the rule that a party must contemporaneously object to evidence at trial
in order the preserve the error for appeal. “We have applied this exception rarely, and
only in the interest of justice.” Melton v. City of Oklahoma City, 879 F.2d 706, 718 n.5
(10th Cir. 1989) (internal quotations omitted). Valley had ample opportunity to object to
the letters when BTS introduced them at the proof of claim hearing. We discern nothing
from the record or Valley’s brief suggesting that Valley was unduly prejudiced by the
letters’ admission. Accordingly, we decline to review for plain error.
8
Communities, Inc., 17 F.3d 321, 323 (10th Cir. 1994).
In its amended proof of claim, Valley requested $120,044 in pre-bankruptcy
attorney’s fees. The bankruptcy court, in its pre-trial order, defined the issues for the
proof of claim hearing as: (1) the reasonableness of the costs and expenses claimed by
Valley National Bank associated with maintenance and upkeep of the 727 Flight
Simulator; and (2) the value of the 727 Flight Simulator. After resolving the factual
issues listed in the pre-trial order, the bankruptcy court, acting sua sponte,4 reduced
Valley’s attorney’s fees claim to $55,000 on the basis that the requested fees were
incurred because Valley had been overly combative. Valley contends that no evidence
supported the bankruptcy court’s finding and that the court could not make such a finding
without holding a separate hearing.
The bankruptcy court presided over the instant dispute for more than two years and
entered more than forty orders in connection with it. Taking into account the nature of
the proceedings and Valley’s lack of cooperativeness, the bankruptcy court exercised its
discretion and determined that $55,000 represented a reasonable amount of attorney’s
4
Valley’s brief also seems to embrace the notion that the bankruptcy court’s
action was improper absent objection from the trustee, BTS, or another interested party.
The Third Circuit and a district court within this circuit have flatly rejected this
proposition. In re Busy Beaver Building Centers, Inc., 19 F.3d 833, 841 (3d Cir. 1994).
In re Cascade Oil Co., 126 B.R. 99, 106 (D. Kan. 1991).
9
fees. The bankruptcy court did not err by not holding a separate hearing on whether the
fees were reasonable, e.g., In re Thirteen Appeals, 56 F.3d 295, 301 (1st Cir. 1995), and
did not abuse its discretion by reducing Valley’s attorney’s fees claim to $55,000. See In
re Martin, 817 F.2d 175, 182 (1st Cir. 1987) (“The bankruptcy judge is on the front line,
in the best position to gauge the ongoing interplay of factors and to make the delicate
judgment calls which [a discretionary] decision entails.”).
For the foregoing reasons the district court’s judgment is AFFIRMED. The
parties’ motions to supplement the record are GRANTED.
Entered for the Court,
Bobby R. Baldock
Circuit Judge
10
Valley National Bank v. BTS Inc.
Combined Opinion