USCA1 Opinion
February 24, 1995 [NOT FOR PUBLICATION]
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 94-1448
IN RE WYNCO DISTRIBUTORS, INC.,
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HENRY B. WYNN AND ALBERT WYNN,
Appellants,
v.
JOSEPH BRAUNSTEIN, TRUSTEE IN BANKRUPTCY
OF WYNCO DISTRIBUTORS, INC.
Appellee.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Joseph L. Tauro, U.S. District Judge]
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Torruella, Chief Judge,
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Bownes, Senior Circuit Judge,
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and and Cyr, Circuit Judge.
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Richard H. Wynn for appellant Albert Wynn.
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Henry B. Wynn on brief pro se.
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Charles R. Bennett, Jr., with whom Isaac H. Peres and Riemer &
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Braunstein were on brief for appellee.
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Per Curiam. Appellants challenge a bankruptcy court
Per Curiam.
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order, affirmed on intermediate appeal to the district court,
authorizing the chapter 11 trustee to sell substantially all the
corporate debtor's assets. As appellants neither alleged nor
established cognizable injury from the challenged order, we
affirm the district court judgment.
The present litigation has survived the demise of Wynco
Distributors, Inc. ("Wynco" or "debtor"), a corporation once
closely held by the Wynn family. Paul, Henry, Albert and Irene
Wynn were beneficiaries of the Wynn Family Trust [hereinafter:
"Family Trust"], the sole shareholder in Wynco. Paul and Irene
Wynn served on the Wynco board of directors. Paul, Henry and
Albert Wynn were the designated trustees of the Family Trust.
Paul alone was authorized to vote Family Trust shares in matters
affecting Wynco.
On December 17, 1990, Henry and Albert Wynn, appellants
in the present action, unsuccessfully brought suit in a
Massachusetts court to relieve Paul Wynn as a trustee, for
alleged mental incompetence. Nevertheless, ten days after the
state superior court ruled against them, Henry and Albert pur-
portedly removed Paul as a trustee and installed themselves as
officers and directors of Wynco.1 In response, Paul and Irene
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1Ultimately, the superior court concluded that Henry and
Albert Wynn had no authority to displace Paul as a trustee and
that Paul possessed the requisite authority under Massachusetts
law to initiate these chapter 11 proceedings in behalf of Wynco.
Wynn v. Wynn, No. 90-03357 (Mass. Super. Ct. 1990). The Massa-
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chusetts Appeals Court affirmed in Wynn v. Wynn, No. 93-P-29
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(Mass. App. Ct. 1994).
2
Wynn promptly filed a chapter 11 petition in behalf of Wynco in
the United States Bankruptcy Court for the District of
Massachusetts.
Henry and Albert correctly point out on appeal that
they challenged the Wynco chapter 11 petition in the bankruptcy
court, based on their allegations that Paul was incompetent.2
They also insist, however, that Paul's alleged incompetency was
fraudulently concealed from the bankruptcy court. We can accord
no weight to the latter contention in light of the fact that the
bankruptcy court though by appellants' own admission well
aware of their allegations of incompetency elected to defer to
the state court on the matter. See supra p. 2. There can have
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been no actual concealment of Paul's alleged incompetency from
the bankruptcy court, which was apprised of the allegations and
appropriately elected to defer to the state court.
The sole remaining issue, to which we now turn, is
whether appellants alleged or established any cognizable injury
resulting from the challenged sale. Eleven months after the
chapter 11 petition was filed, no reorganization plan having been
submitted, the chapter 11 trustee proposed to sell the Wynco
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2The record reflects that the matter of Paul's competency
was raised at a bankruptcy court hearing on the debtor's motion
to restrain and enjoin appellants from operating Wynco; in appel-
lants' motion for leave to appeal the bankruptcy court's denial
of their motion to dismiss the chapter 11 petition; and in appel-
lants' district court appeal from the bankruptcy court order
authorizing the sale of Wynco's assets. Significantly, though
not surprisingly in light of the record below, no allegations of
fraud on the court were ever raised by appellants prior to their
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appeal to the district court from the bankruptcy court order
approving the sale of assets.
3
business as a going concern, together with substantially all its
assets, to Susan Wynn, Paul Wynn's daughter, for $100,000.3 The
trustee projected that the $100,000 in cash generated from the
sale to Susan Wynn, together with $164,000 in cash already on
hand and the anticipated proceeds from $210,000 in accounts
receivable retained by the debtor estate, would enable all Wynco
creditors and costs of administration (a combined total of
$395,000) to be satisfied in full. Any surplus was to be re-
tained to cover the costs of defending against appellants'
challenges to the order of sale.
Appellants advanced four arguments in support of their
opposition to the sale. First, the sale would be premature, as
the state court had not yet decided who was entitled to control
Wynco. Second, the purchaser was an insider. Third, the pur-
chaser chilled the sale, deflating the purchase price. Fourth,
the proposed sale would contravene chapter 11 by permitting a
sale of going-concern assets without the protections afforded by
a disclosure statement or a plan of reorganization. See Bank-
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ruptcy Code 1106, 1121-25, 11 U.S.C. 1106, 1121-25 (1993).
The bankruptcy court rejected these contentions for the
following reasons. First, the case had been pending longer than
most bankruptcy cases, and awaiting a state court decision would
necessitate further, indefinite delay. Second, the purchaser's
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3The appraised value was between $69,000 and $86,500.
Excluded from the sale were Wynco accounts receivable predating
the October 1, 1991 sale agreement, approximating $210,000 in
face amount, which were to be collected for the benefit of the
debtor estate either by the buyer or the trustee.
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"insider" status had been fully disclosed. Third, appellants
failed to present competent evidence (or to pursue discovery) in
support of their allegation that the purchaser chilled the sale.
Fourth, the court found that the chapter 11 trustee had complied
with Bankruptcy Code 1106, 11 U.S.C. 1106.4
Undeterred, appellants reiterate their contentions that
the chapter 11 proceedings amounted to a fraud on the bankruptcy
court because Paul Wynn was incompetent to initiate the chapter
11 proceedings and his incompetency was concealed from the
bankruptcy court by Paul's attorneys and by Susan Wynn, the
purchaser. As noted above, see supra p. 3, their ostensible
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concern for the integrity of the chapter 11 proceedings rings
hollow. Furthermore, appellants neither point to error in the
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bankruptcy court rulings relating to the order of sale, see supra
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pp. 4-5, nor allege any cognizable injury sustained as a conse-
quence of the order of sale. Finally, absent any developed
argumentation as to appellate standing, whatever potential harm
might conceivably be visited upon appellants as minority Wynco
shareholders is too speculative to support the required showing
that appellants are "aggrieved parties." See In re El San Juan
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Hotel, 809 F.2d 151, 154 (1st Cir. 1987).
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4In the latter regard, the court found that it was in the
best interests of creditors to continue to operate Wynco pending
sale, in order to capitalize on its going-concern value, rather
than suspend business operations and liquidate the remnants under
chapter 7. Moreover, the court concluded that the trustee
fulfilled his responsibility under Bankruptcy Code 1106(5), 11
U.S.C. 1106(5), by indicating his intention to convert the
proceedings to chapter 7 upon consummation of the sale.
5
The district court judgment is affirmed; costs to
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appellee.
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