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Hope 7 Monroe Street Ltd. Partnership v. Riaso, LLC

United States Court of Appeals, District of Columbia Circuit

February 28, 2014

IN THE MATTER OF: HOPE 7 MONROE STREET LIMITED PARTNERSHIP, HOPE 7 MONROE STREET LIMITED PARTNERSHIP, APPELLANT
v.
RIASO, LLC, APPELLEE

Argued November 18, 2013.

Page 868

Appeal from the United States District Court for the District of Columbia. (No. 1:11-cv-01455).

Donald M. Temple argued the cause and filed the briefs for appellant.

John C. Decker, II argued the cause and filed the brief for appellee.

Before: HENDERSON and BROWN, Circuit Judges, and GINSBURG, Senior Circuit Judge.

OPINION

Page 869

Brown, Circuit Judge :

Hope 7 Monroe Street Limited Partnership (" Hope 7" or " the partnership" ) entered bankruptcy in 2009. RIASO, LLC

Page 870

(" RIASO" ) was Hope 7's largest creditor. During the course of the bankruptcy proceedings, Hope 7 discovered information suggesting RIASO and its agents had engaged in fraud and breached their fiduciary duty to Hope 7. Notwithstanding those allegations, the bankruptcy court approved the settlement of Hope 7's fraud-based claims against RIASO, approved RIASO's proof of claim against Hope 7, and directed the payment of funds from Hope 7's estate to RIASO. When Hope 7 found additional evidence relevant to RIASO's alleged fraud, it moved pursuant to Federal Rule of Civil Procedure 60(b) for relief from judgment and asked the court to reopen its earlier orders. The bankruptcy court denied Hope 7's Rule 60(b) motion; Hope 7 appealed first to the district court and now to us. After this court requested supplemental briefing on the issue, RIASO argued Hope 7 lacks standing to pursue this appeal. We hold Hope 7 has standing to appeal two of the bankruptcy court's orders, but not a third. On the merits of the remaining portion of the appeal, we affirm the lower courts' decisions not to reopen the judgment.

I

Hope 7 owned apartment units appraised for approximately $3.3 million that it wanted to convert to condominiums. The partnership asked Musse Leakemariam to help it obtain funds for the conversion. Leakemariam arranged for RIASO to lend $1.6 million to Hope 7 to refinance the partnership's mortgage and serve as a bridge loan until a permanent construction loan could be arranged. The permanent financing never materialized, and Hope 7 was unable to repay the bridge loan to RIASO.

After RIASO initiated foreclosure proceedings, Hope 7 filed a voluntary petition for Chapter 11 bankruptcy on April 2, 2009. The bankruptcy court converted the case to a Chapter 7 action and appointed a trustee. During a bankruptcy hearing in August 2009, Hope 7 learned Leakemariam was both the loan broker and the lender. In re Hope 7 Monroe St. Ltd. P'ship (Hope 7), No. 09-00273, 2011 WL 2619537, at *1, *7 (Bankr. D.D.C. July 1, 2011). Leakemariam had formed RIASO, made up of ten trusts benefitting Leakemariam's family members, about a week before the bridge loan was made. RIASO's only purpose was to make that loan. On November 6, 2009, Hope 7, along with Lenan and Pauline Cappel, its sole limited partners, filed a complaint against Leakemariam, RIASO, and Richard Boddie, RIASO's attorney, in D.C. Superior Court. The plaintiffs alleged, inter alia, breach of fiduciary duty, fraud, and misrepresentation.

Meanwhile, RIASO filed a proof of claim in the bankruptcy court claiming Hope 7 owed it about $3 million. Hope 7 objected, arguing, among other grounds, RIASO and Leakemariam had engaged in fraudulent inducement to contract and had breached their fiduciary duty. The bankruptcy court overruled Hope 7's objection and ordered the claim paid from the debtor's estate. The trustee proposed to sell the estate's interest in the Superior Court action to Boddie as a compromise of the claims, and the bankruptcy court approved the sale of the claims to Boddie for $30,000. On November 22, 2010, the court directed final distribution of the estate's funds.

On April 12, 2011, Hope 7 filed a motion pursuant to Federal Rule of Civil Procedure 60(b). See Fed. R. Bankr. P. 9024 (extending Federal Rule of Civil Procedure 60 to bankruptcy cases). Hope 7 sought to vacate all orders rendered in favor of RIASO, which the bankruptcy court understood to refer to (1) the order ...


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