Laura Marie Jaap

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UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF OREGON
In re
Laura Marie Jaap,
Debtor.
Case No. 23-62108-dwh7
MEMORANDUM DECISION
DENYING TRUSTEE’S
MOTION TO APPROVE
SETTLEMENT WITH
DEBTOR1
I. Introduction
The chapter 7 trustee, Kenneth Eiler, has moved for authority to settle
with debtor, Laura Jaap.2 A creditor, Bruce Nelson, objects.3
In the motion, Eiler moves for approval of a transaction in which he
would sell Jaap the estate property, including the estate’s claims against
1 This disposition is specific to this action. It may be cited for whatever
persuasive value it may have.
2 ECF No. 567.
3 ECF No. 572.
Below is an opinion of the court.
_______________________________________
DAVID W. HERCHER
U.S. Bankruptcy Judge
DISTRICT OF OREGON
F I L E D
July 31, 2026
Clerk, U.S. Bankruptcy Court
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others (whom I will call targets). The transaction is not a settlement; it is a
sale. Because Eiler has not solicited purchase offers from targets, his
proposed sale of the claims would not satisfy his duty to maximize the claims’
proceeds.
I will deny the motion.
II. Facts
At the February 12, 2026, hearing, I heard testimony from Eiler, and I
admitted Exhibits 1 through 5, A, B, F, and G. Exhibits 1 through 4 were filed
as ECF No. 643. Exhibit 5 is filed as ECF No. 648. Exhibits A, B, F, and G
were filed as ECF No. 646. I credit Eiler’s testimony described below and
otherwise find each of the following facts.
A. Bankruptcy-case filings before settlement motion
On November 13, 2023, Jaap filed her petition under chapter 11,
subchapter V, of title 11, U.S. Code. Eiler was appointed subchapter V
trustee.4 On February 12, 2024, Jaap filed her chapter 11 plan.5
Jaap’s original lawyer in this case, Ted Troutman of Troutman Law
Firm, PC, was permitted to withdraw on September 25, 2024.6 On
November 22, 2024, confirmation of Jaap’s proposed second amended plan
was denied, this case was converted to chapter 7, and Eiler was appointed
4 ECF No. 5.
5 ECF No. 103.
6 ECF No. 386.
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chapter 7 trustee.7 Jaap filed postconversion schedules and a statement of
financial affairs (SoFA).8
Among the assets Jaap scheduled are several parcels of real estate, a
beneficial interest in a trust, and claims against targets. The trust is
described as “The Medford Family Trust – Spend Thrift Trust – Excluded
from Estate,” which she valued at $0.9 She claimed the trust as exempt.10
The claims against others are listed in the asset schedule in item 33,
entitled “claims against third parties,” and in item 34, entitled “other
contingent and unliquidated claims.” In item 33, Jaap listed “potential
malpractice complaint” against Troutman, with the value unknown.11 In
response to item 34, “other contingent and unliquidated claims,” she listed
19 names.12 Two of the 19 are listed in one entry, so the claims appear as
18 entries in item 34. The item 34 targets are Caroline Anthony, Anna Black,
Brightstar Partners LLC, Shannon Cao, Jeannette Cerna, Brian Gene
Coughran, Ellen Marie Coughran, Jessica Eldridge, Fairfield Financial
Services, Michael Garcia, Dakota Griesel, Sharon Jabari, Bruce Moore,
Nelson, Dallis Rohde, Rick Peichenberger, Gary Rinne, Troy Slonecker, and
Val Zavekyuk.
7 ECF Nos. 441, 444.
8 Ex. 2, ECF Nos. 476, 643.
9 Ex. 2, ECF Nos. 476, 643-2, Sched. A/B item 26.
10 Ex. 2, ECF Nos. 476, 643-2, Sched. C item 2.
11 Ex. 2, ECF Nos. 476, 643-2, Sched. A/B item 33.
12 Ex. 2, ECF Nos. 476, 643-2, Sched. A/B item 34.
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With the one item 33 claim and the 19 item 34 claims, there are
20 potential claims against targets.
B. Medford trust
The trustors of the Medford trust were Billy Medford and Beverly
Medford. The original trustees were the trustors and Denise Barnum.
Beverly was the mother of Barnum and Jaap.13 Under the trust instrument,
all tangible personal property is to be distributed to the trustors’ children,
including Jaap,14 after which the trustee may distribute 10 percent of the
remainder of the Medford trust estate as the trustee decides in the trustee’s
sole discretion.15 The remainder of the trust estate is to be divided among
beneficiaries, including Jaap, who is entitled to receive 20 percent.16 Under a
paragraph entitled “Spendthrift Protection,” no beneficiary can transfer the
beneficiary’s interest in the trust or income produced thereby.17
C. State-court action
On March 25, 2025, after this case was converted to chapter 7, Jaap
and two entities filed an action in Lane County, Oregon, Circuit Court,
against 23 defendants.18 Jaap’s participation in the action had not been
approved by Eiler or this court. The plaintiffs are represented by Christopher
Cauble.
13 Ex. 1, ECF No. 643-1 at 1, Art. II.
14 Ex. 1, ECF No. 643-1, at 7–8, Art. XI.A.
15 Ex. 1, ECF No. 643-1 at 8, Art. XI.B.
16 Ex. 1, ECF No. 643-1 at 8, ¶ XI.C.4.
17 Ex. 1, ECF No. 643-1 at 14 ¶ XX.E.
18 Ex. 4, ECF No. 643-4.
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Seven of the targets, including Nelson, were defendants in the state-
court action when Jaap was a plaintiff.19 The plaintiffs filed an amended
complaint on April 24, 2025, removing one defendant, and they filed a second
amended complaint on June 20, 2025, removing Jaap as a plaintiff and two
targets as defendants. Nelson remains a defendant.20
In a motion Cauble filed September 29, 2025, the plaintiffs asked the
state court to continue the action as pending. As grounds for the motion,
Cauble referred to “amending the Operative Complaint for service with
individual’s claims,” and he said, “[a]s soon as the Bankruptcy Court releases
our client, we will be filing the third amended complaint and serving all the
involved defendants.”21 The motion implies that, if Jaap acquires the estate
assets, Cauble expects the complaint to be further amended to add her back
as a plaintiff and to add back Brightstar and Cao as defendants.
D. Real estate
Eiler is unable to monetize Jaap’s real estate. Secured creditors have
said, in stay-relief motions or otherwise, that the properties have no equity or
are undevelopable. Most of the properties are held indirectly through entities.
Cao asserts a judgment lien on all real and personal estate property.
Eiler has explored possible short sales of real property, but there have
been multiple owners, so it would be difficult to determine the properties’ tax
19 Ex. 2, ECF Nos. 476 & 643, Sched. A/B item 34.
20 Ex. 4, ECF No. 643, at 2.
21 Ex. G, ECF No. 646-7, at 2:15–18, 3:7–9.
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bases and depreciation, and capital-gain tax and accountant fees could be
“way more” than any small amount that the estate could net from any short-
sale carveouts from the property sales.
E. Settlement motion
1. Background
On May 5, 2025, after Eiler learned of the state-court action, he asked
whether Cauble would pursue Jaap’s claims for the estate on a contingency-
fee basis; Cauble declined. Eiler received the same answer to that question
asked of the law firm representing him in this case.
Eiler said Jaap has a poor reputation for credibility, which would
dissuade potential contingency-fee counsel from handling the claims for Eiler.
The estate has no funds to pay for an hourly-rate lawyer, so Eiler decided
that he would have to take some action to stop Cauble from purporting to
prosecute a prepetition claim on behalf of the debtor. But Eiler preferred to
resolve the claims asserted by Jaap in a way that would benefit the estate.
After deciding on the form of the proposed transaction with Jaap that
appears in the settlement motion, Eiler encouraged Barnum’s lawyer to focus
on listing and selling the Medford trust’s real property, the former residence
of Beverly, who is deceased. Eiler chose July 23, 2025, as the date to file the
motion because he was concerned about the possibility of losing the
settlement if he had delayed filing the motion.
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2. Contents
(a) Relief sought
In the motion, Eiler proposes to abandon the estate’s ownership of all
nonexempt assets described in the conversion schedules in exchange for “50%
of the distribution that the debtor will eventually receive from the Medford
Trust.”22
(b) Narrative
In an exhibit to the motion, Eiler added information about the Medford
trust, scheduled assets, the state-court litigation, and Jaap’s personal
belongings and vehicles.
When the motion was filed, the trust held cash and the residence. The
residence was being liquidated by Barnum, who had retained a realtor to list
the residence for sale.
Eiler has determined that Jaap’s interest in the trust is shielded from
creditor claims by the spendthrift provision, so the trust is not property of the
bankruptcy estate. Nelson does not challenge that determination. The trust
holds “roughly $900,000 in cash,” various personal belongings of the decedent
to be divided among the beneficiaries, and the decedent’s former residence
with an “estimated fmv per Zillow” of $445,000. Before making distributions
from the trust, the trust will need to pay its administrative expenses that
22 ECF No. 567 at 1.
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Barnum has incurred, after which Jaap will be entitled to receive 20 percent
of the distribution.23
Jaap’s interest in her scheduled real properties has been a matter of
dispute, and some creditors believe the properties belong not to her but
instead to “her various LLC entities” and that the prepetition transfers of
those properties to her are void or voidable; Jaap disagrees. Secured creditors
claim that the properties are over-encumbered and that their liens attach to
income from the properties; Jaap again disagrees. One creditor claims that
its judgment lien has priority over previously recorded trust deeds. Litigation
to resolve those claims would be costly and time-consuming, the outcome
would be uncertain, and the estate lacks funds to retain counsel to pursue the
claims. Some of the targets are also creditors, and some are lawyers who
represent targets or who previously represented Jaap.24
It is clear to Eiler that the allegations against the defendants will be
vigorously disputed and costly to litigate.25
Jaap’s personal belongings and vehicles do not have significant
nonexempt value more than liquidation costs, and she has sometimes
maintained that those assets belong to others. Some creditors have also
maintained that those assets belong to her entities, not her.
23 ECF No. 567 at 3–4.
24 ECF No. 567 at 4.
25 ECF No. 567 at 4–5.
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3. Settlement agreement form
Eiler has prepared a form of settlement agreement among himself,
Jaap, and Barnum. Eiler’s conveyance to Jaap would be conditioned upon
receipt of Jaap’s payment to him.26
F. Medford trust distribution
During the chapter 11 phase of this case, Jaap mentioned to Eiler that
she expected to receive $200,000 from the Medford trust, half of which would
have been $100,000. No one has ever offered to pay him anything for the
right to receive the trust distribution.
On February 6, 2026, Barnum filed in the circuit court a petition to
approve distribution of the trust estate.27 According to that petition, the trust
estate holds cash of $1,402,652.4328 and no longer owns the residence. The
tangible personal property, including jewelry, has been distributed to the
trustors’ children, including Jaap.29 The trust owes no debts other than for
winding-up fees of professionals and “some possible” income tax liability to be
determined when fiduciary income-tax returns are prepared.30 Barnum
requests a reserve “in the approximate amount of $70,000” for payment of
“final fiduciary income taxes yet to be determined” and “final expenses of
administration.”31 She later says that the cash on hand less the reserve is
26 Ex. 3, ECF No. 643-3 at 3 ¶ 2.
27 Ex. 5, ECF No. 648.
28 Ex. 5, ECF No. 648, at 2:5–8.
29 Ex. 5, ECF No. 648, at 2:21–25.
30 Ex. 5, ECF No. 648, at 2:9–14.
31 Ex. 5, ECF No. 648, at 2:14, 5:1–3.
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$1,335,000,32 which implies that the actual reserve amount is $67,652.43. Of
the remaining $1,335,000, Barnum would exercise the power of appointment
to distribute 10 percent, or $133,500.33 The balance of $1,201,500 would be
distributed among the beneficiaries, with 20 percent, or $240,300, to be paid
to Jaap.34 The income-tax returns are yet to be prepared.35 Any portion of the
reserve not expended on final administration expenses would be distributed
in proportion to their shares under the trust.36
If the amount distributed to Jaap in fact turns out to be $240,300,
Eiler’s one-half would be $120,150. He expects the payment to be $120,000.
G. Eiler’s ability to monetize nonclaim assets
I accept Eiler’s assessment that the likelihood that he could monetize
any nonexempt equity in the real estate and tangible personalty is so remote
as not to warrant any further effort.
H. Alternatives to proposed transaction with Jaap
Neither Nelson nor any other target had offered to buy the claims
against them. Nelson’s lawyer said Eiler had reached out to Nelson through
the lawyer, and Nelson made neither a “bid on the asset” nor a settlement
proposal. Nelson’s lawyer “did not know what [Nelson] would have done” had
Eiler specifically solicited from Nelson an offer to buy the claim against
32 Ex. 5, ECF No. 648, at 3:26.
33 Ex. 5, ECF No. 648, at 3:1–7.
34 Ex. 5, ECF No. 648, at 4:16–17.
35 Ex. 5, ECF No. 648, at 4:3–4.
36 Ex. 5, ECF No. 648, at 4:3–8.
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Nelson. The lawyer said, “there was certainly some incentive to settle, but
that process didn’t play out.”
Eiler has not reached out to any target other than Nelson. In
explanation, Eiler said, “there’s a lot of bad feeling” and “some pretty bad
feelings” by creditors toward Jaap, mostly due to her “attempts to keep assets
away from creditors and to challenge creditors’ claims and rights,” and he
could not imagine any targets paying anything for the claims against
themselves, and none had offered.
If the motion is not granted, Eiler expects that he will abandon all
estate assets, leaving the estate with nothing to distribute and Jaap with the
entire trust distribution.
III. Jurisdiction and authority
The district court has jurisdiction over the settlement motion, which is
a civil proceeding arising in this case.37
The district court has referred to this court all bankruptcy cases and
proceedings in this district.38 The motion is a core proceeding,39 which this
court may hear and determine.40
37 28 U.S.C. § 1334(b).
38 LR 2100-(2)(a)(1).
39 28 U.S.C. § 157(b)(2)(N), (O).
40 28 U.S.C. § 157(b)(1).
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IV. Analysis
A. Eiler’s proposed transaction is not a settlement; it is a
sale.
A compromise is “[a]n arrangement . . . for settling a dispute . . .”41 or
“[a]n agreement between two or more persons to settle matters in dispute
between them.”42 A settlement is “an agreement by which parties having
disputed matters between them reach or ascertain what is coming from one
to the other”43 or “[a]n agreement ending a dispute or lawsuit.”44
Eiler’s proposed transaction would not settle any dispute between the
estate and Jaap; no lawsuits are pending or threatened between them, and
the targets are not parties to the settlement agreement. In that way, this case
is like the Ninth Circuit Bankruptcy Appellate Panel’s 2022 decision in Do v.
Eiler (In re Portland Injury Institute, LLC),45 in which the court held that a
chapter 7 trustee’s sale of claims need not be “analyze[d] . . . under the
settlement standard when such claims are sold to a third party who is not a
potential defendant.” Eiler’s motion uses the “release” as a synonym for
“convey.” He would “release” to Jaap the scheduled estate assets; no claims
against Jaap herself are scheduled. The transaction thus does not fit the
definition of either compromise or settlement.
41 Black’s Law Dictionary (4th rev. ed. 1968).
42 Black’s Law Dictionary (12th ed. 2024) (def. 1).
43 Black’s Law Dictionary (4th rev. ed. 1968).
44 Black’s Law Dictionary (12th ed. 2024) (def. 2).
45 BAP No. OR-21-1138-GTB, 2022 WL 263490, at *4 (B.A.P. 9th Cir. 2022).
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Ownership of abandoned estate property reverts to the debtor,46
ordinarily because the property is burdensome or of inconsequential value
and benefit to the estate and thus without payment by the debtor.47 Because
Jaap will pay for the property, what Eiler describes in the notice as
abandonment is actually a sale to her.
Although the parties’ papers have framed the issue as whether Eiler’s
proposed transaction should be approved as a settlement, Nelson’s lawyer
argued at the hearing that the transaction is “not just a settlement, but . . . a
sale of claims” and “a sale of assets to” Jaap, and “this sale should be looked
at under [section] 363 [of title 11] as well.” In response, Eiler’s lawyer argued
that the transaction is “more in the nature of a [Federal Rule of Bankruptcy
Procedure] 9019 [settlement] than it is a 363 sale,” without objecting to any
consideration of whether the transaction is a sale. But he later conceded that
the transaction “doesn’t fit squarely” in the factors governing settlement
approval. Accordingly, whether the transaction should be approved as a sale
was added to the framing of the question presented by the motion by the
parties themselves.
Because the proposed transaction is a sale out of the ordinary course of
business, section 363(b)(1) permits it only after notice and a hearing—such
notice and hearing opportunity as is appropriate in the circumstances.48 The
46 Milkovich v. United States, 28 F.4th 1, 4 (9th Cir. 2022).
47 11 U.S.C. § 554(a).
48 11 U.S.C. § 102(1)(A).
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notice of and opportunity for hearing on a proposed sale out of the ordinary.
course of business is prescribed by Rule 2002. Rule 2002(a)(2) requires that a
sale notice be mailed to creditors and the debtor and include a 21-day
objection deadline; the same requirement applies to notice of a proposed
settlement,49 and Eiler complied with it.
B. I agree with Nelson that Eiler should solicit bids from
targets other than Nelson.
Nelson argues that “inviting offers from parties in Schedule [A/]B [the
targets] . . . would likely result in immediate and concrete recovery.”50 At the
hearing, Nelson’s lawyer conceded that Eiler had reached out to Nelson
(through the lawyer), and Nelson had not made an overbid. The lawyer
argued that Eiler should “take another crack at it and also open up
communication with Mr. Nelson and other potential claim defendants as to
acquisition of individual claims . . ..”
Eiler’s lawyer argued that the settlement motion was sufficient notice
of the opportunity to present Eiler with an overbid. The lawyer also pointed
to Eiler’s testimony that he has not solicited offers from the targets other
than Nelson to buy the claims against them because the targets, or at least
those who are creditors in this case, are so upset with Jaap that he cannot
imagine them paying anything for the claims against them.
49 Fed. R. Bankr. P. 2002(a)(3).
50 ECF No. 572 at 5.
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Section 704(a)(1) requires a trustee to “collect and reduce to money the
property of the estate for which such trustee serves, and close such estate as
expeditiously as is compatible with the best interests of the parties in interest
. . ..” In the Fourth Circuit’s 1993 decision in Yadkin Valley Bank & Trust
Co. v. McGee (In re Hutchinson), the court held that the section protects
“pecuniary interests . . . directly affected by the bankruptcy proceedings.”51
The statute imposes on the trustee two duties that are in tension with each
other. On one hand, the trustee must monetize property quickly so that the
estate can be closed quickly; on the other hand, the monetization speed must
be “compatible with” the estate stakeholders’ pecuniary interests. The
Supreme Court has cited the statute for the proposition that a trustee must
“maximize the value of the estate”52 The Hutchinson court held that, because
the interests in speed and value maximization are in tension, they must be
balanced.53 Implicit in section 704(a)(1) is the trustee’s duty to consider an
asset’s monetization options and each option’s relevant attributes, including
the likely price, time before closing, cost of negotiating and documenting the
transaction, and risk that the transaction will fail to close. The discretion to
select among monetization options is not the discretion to decline to consider
51 5 F.3d 750, 756 (4th Cir. 1993) (cleaned up) (citing 11 U.S.C. § 704(1),
redesignated § 704(a)(1), Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005, Pub. L. No. 109-8, § 102(c)(1), 119 Stat. 23, 32 (2005)).
52 Commodity Futures Trading Comm’n v. Weintraub, 471 U.S. 343, 352
(1985) (citing section 704(1)).
53 Hutchinson, 5 F.3d at 754.
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options beyond the first one that presents itself. The trustee need not always
solicit offers from every conceivable buyer of an asset. But when there is an
obvious alternative to a buyer initially identified by the trustee, and
solicitation of a bid from the alternative buyer would be quick and
inexpensive, the trustee may not pursue just the first option without
investigating whether the second option would, under all the circumstances,
better serve the dual interests that the trustee must balance to comply with
the statute.
The two most likely buyers of an estate’s claim are the debtor and the
target. Even if the target is convinced that it would successfully defend the
claim in litigation, its defense of litigation by the debtor would impose some
cost and inconvenience on the target, giving it an economic incentive to pay
the trustee something to acquire the claim for itself. That incentive is
strongest for a target who has already been sued by the debtor. If the trustee
receives a purchase offer from the debtor, the trustee usually can quickly and
inexpensively contact the target to solicit an overbid. In making that
solicitation, the trustee need not even implicitly ratify or endorse the debtor’s
claimed factual or legal bases for the claim; instead, the trustee can explain
that, unless the target buys the claim or settles with Eiler, the claim is likely
to be conveyed to the debtor by sale or abandonment. To satisfy the
solicitation duty before selling to the debtor, the trustee can demonstrate that
the target could not be reached or declined to bid or that the target’s bid,
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under all the circumstances, is not better than the amount the trustee would
receive from the debtor.
Here, Eiler has not solicited bids from 19 of the 20 targets (everyone
but Nelson). Eiler’s only explanation is, in essence, that doing so would be
futile because creditor-targets are too upset with Jaap for how she has
behaved toward them to pay anything for the claims. Although it is plausible
that the creditor-targets are upset with her, it is not plausible that all of them
are so upset that they are irrationally unwilling to consider the benefit of
paying something to acquire the claims and thus avoid the potentially greater
risk, delay, and inconvenience of defending her litigation over the claims.
Even if no one target would choose to pay Eiler more than $120,150 to avoid
being sued by Jaap, two or more of the 20 targets might make a joint offer or
separate offers in a total amount that exceeds $120,150 by a sufficient
margin to offset the additional cost, inconvenience, and risk of his pursuit of a
sale to a group of targets rather than the package sale to Jaap. Eiler did not
say that he had considered those factors and decided that the amounts the
targets might agree to pay would be insufficient; he just said he could not
imagine them agreeing to pay anything. All targets have an incentive to buy
the claims against themselves; if Eiler were to sell fewer than all claims,
Eiler could sell or abandon the unsold claims to Jaap. He did not argue that it
would be difficult for him to contact the targets; for all but one of them
(Brightstar), addresses have been filed in this case, either by Jaap in the
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postconversion schedules54 or earlier schedules55 or by the targets themselves
in proofs of claim filed by them as creditors56 or signed by them as lawyers for
creditors.57
I do not find that it is necessarily likely that targets other than Nelson
would offer Eiler enough to warrant the conclusion that a sale to the targets
is preferable to the proposed sale to Jaap. But I hold that Eiler should ask
whether they would do so.
Because Eiler has not solicited offers from the targets, other than
Nelson, to buy the claims against them, Eiler’s proposed sale to Jaap would
not satisfy his duty to maximize the proceeds of the claims. I do not hold that
he cannot now do that solicitation and, if the circumstances warrant, renew
the motion.
54 Ex. 2, ECF Nos. 476 & 643, Sched. E/F item 4.3 (Anthony); Ex. 2, ECF Nos.
476 & 643, Sched. D item 2.56 (Cao); Ex. 2, ECF Nos. 476 & 643, Sched. E/F
item 4.8 (Cerna); Ex. 2, ECF Nos. 476 & 643, Sched. D item 2.1 (Coughrans);
Ex. 2, ECF Nos. 476 & 643, Sched. D item 2.11 (Fairfield); Ex. 2, ECF Nos.
476 & 643, Sched. D item 2.9 (Nelson); Ex. 2, ECF Nos. 476 & 643, Sched. E/F
item 4.15 (Peichenberger, spelled Reichenberger in the schedule); Ex. 2, ECF
Nos. 476 & 643, Sched. E/F item 4.5 (Rinne, spelled Renne in the schedule);
Ex. 2, ECF Nos. 476 & 643, Sched. E/F item 4.20 (Troutman, listed as
Troutman Law Firm, PC, in the schedule); Ex. 2, ECF Nos. 476 & 643,
Sched. E/F item 4.23 (Zavekyuk, spelled Zavedyuk in the schedule).
55 ECF No. 19, Sched. G item 2.1 (Black); ECF No. 19, Sched. G item 2.6
(Griesel).
56 Proof of claim 44-1 (Eldridge); Proof of claim 8-1 (Garcia); Proof of claim 30-
1 (Jabari).
57 Proof of claim 8-1 (Moore for Garcia); Proof of claim 34-1 (Rohde for Cao);
Proof of claim 45-1 (Slonecker for Eldridge).
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C. I disagree with Nelson’s other arguments.
1. The motion adequately describes the property to be
conveyed.
Nelson argues that the settlement motion does not “adequately
describe . . . Debtor’s purported claims against various individuals and
entities,” which Eiler proposes to convey to Jaap.58 Nelson also argues that
the motion does not “clearly specify whether it includes claims Debtor
asserted in the state court action but failed to disclose in her schedules”59 or
“claims the estate might have” against Jaap herself based on her filing of the
state-court action without Eiler’s consent.60
Rule 2002(c)(1)(A) requires that a sale notice include “a general
description of the property” to be sold. The motion defines the assets to be
conveyed as “all nonexempt assets described in the conversion schedules filed
at Dkt.#476,” a publicly available document. Any unscheduled estate claim,
including any claim against a present or future defendant who is not a target
or any claim against Jaap herself, would not be conveyed.
The motion sufficiently describes the property to be conveyed.
2. The motion adequately describes the price Eiler
expects to receive from Jaap.
Although the settlement motion does not specify a dollar amount that
Jaap will pay, that’s because the source of Jaap’s payment is her future
58 ECF No. 647 at 4 pt. A.
59 ECF No. 647 at 5 pt. A.
60 ECF No. 647 at 6 pt. D.
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Medford trust distribution, which will be in an amount that had not been
fixed when the motion was filed. No principle of law forbids a trustee from
selling estate property for a formula-based price, such as selling a commodity
for the published rate as of the date the sale closes. The only way Eiler could
have eliminated any uncertainty about the price Jaap will pay would have
been to wait to file the settlement motion until she had received her trust
distribution. By filing the motion in July 2025, without waiting for the trust
distribution to be fixed, he created the possibility that the motion could have
been approved as soon as possible, reducing the risk that Jaap would change
her mind due to the passage of time.
A reader of the motion could have determined that, if the residence
was sold for its estimated value, the amount distributable from the Medford
trust would be $1,345,000, less the residence-sale closing costs and the
estate’s administrative expenses, and Eiler would receive 10 percent (half of
Jaap’s 20 percent) of the distribution to trust beneficiaries, or $134,500, less
10 percent of the sum of the residence-sale closing costs and the trust’s
administrative expenses. The reader would have been as able as Eiler to
estimate the net residence-sale proceeds and the trust’s administrative
expenses and thus the amount that Eiler would receive from Jaap.
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3. The motion need not state the value of the assets to
be conveyed.
Nelson argues that the settlement motion “does not specifically
identify the assets’ . . . value . . ..”61
No rule requires that notice of a private sale include the value of the
property to be sold or any other information other than a general description
of the property and the sale’s terms and conditions.62 A statutory requirement
that estate property to be sold first be appraised was part of the Bankruptcy
Act of 189863 but not carried forward to the Bankruptcy Code enacted as part
of the Bankruptcy Reform Act of 1978.64 What matters to the estate’s
stakeholders is not property value in the abstract but the price that can
actually be obtained when the trustee complies with the duty, discussed in
part IV.B above, to compare actual monetization options and select the one
that best serves the estate.
4. Eiler’s failure to further investigate the merits of
the claims is not a reason to deny the motion.
Nelson argues that Eiler should have investigated the merits of the
claims against the targets; by the hearing, that challenge was limited to the
claims against the nondefendant targets, presumably because the other
claims are articulated by Jaap in the state-court complaint. Eiler testified to
61 ECF No. 647 at 4–5, pt. A.
62 Fed. R. Bankr. P. 2002(c)(1)(A), (C).
63 Act of July 1, 1898, ch. 541, 30 Stat. 544, 11 U.S.C. §§ 110(f) (1976, repealed
1978).
64 An Act To establish a uniform Law on the Subject of Bankruptcies, Pub. L.
No. 95-598, § 101, 92 Stat. 2549 (1978).
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circumstances suggesting reasons to be skeptical of the merits of specific
claims, groups of claims, and all claims by Jaap, but he did not recall what he
had been told by Jaap’s lawyer about the claims’ merits.
As is true for estate property generally, what matters to the estate’s
stakeholders is not the objective merits of an estate claim but whether the
trustee has tested the market by soliciting bids from targets.
In any case, it is unlikely that a further investigation by Eiler into the
merits of the claims would provide reliable information. To conduct that
investigation, he would need to obtain testimony and any relevant documents
from both Jaap and the target. The target would have no incentive to
volunteer information, and to compel information from the target, Eiler
would need to obtain a court order, issue and serve a subpoena, and depose
the target. Even with all relevant information from both Jaap and the target,
a useful evaluation of the merits of a claim would require the application of
legal judgment, but this estate lacks funds with which to hire a lawyer, and a
trustee who happens to be a lawyer is not obliged to provide the estate with
legal services for which it cannot pay. And requiring Eiler to reveal
information about the merits of the claims would be contrary to the estate’s
interest; if the information supports the transaction, it does so because it
raises a doubt that the claims are in fact valid and collectable. Revealing that
information to Jaap and the targets could depress bidding.
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Eiler’s failure to further investigate the merits of the claims against
the nondefendant targets is not a reason to deny the motion.
5. The proposed package sale to Jaap did not prevent
overbids for the package.
Nelson argues that Eiler’s proposed package sale to Jaap prevented
creditors from overbidding for the package because they could not tell from
the motion how much Jaap would pay and thus what amount would be an
overbid.65
Someone interested in competing with Jaap to buy the package could
have proposed a fixed-price competing bid for the package, to be paid upon
court approval. Eiler could have compared that offer to the amount he expects
Jaap to pay and evaluated the certainty and speed of the competitor’s bid in
deciding whether to treat it as an overbid, which he could have chosen to
accept or at least would have had to report to the court.
But no creditor made a competing offer to buy the package. By the time
of the hearing, Nelson had had the trust’s distribution petition for two days,
showing that if the transaction closes, Eiler will receive $120,150. And even
with that information at the hearing, Nelson still had not overbid, and his
lawyer conceded that “the package as a whole is only something that’s of
interest to the debtor.”
The settlement motion did not prevent overbidding for the package.
65 ECF No. 572 at 2, 5.
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6. Eiler was not required to demonstrate his or Jaap’s
good faith in negotiating the sale.
At the hearing, Nelson’s lawyer argued that “a trustee’s asset sale
must be negotiated and proposed in good faith” and that the entity plaintiffs’
motion to continue the state-court action as pending demonstrated “the
ongoing efforts by Ms. Jaap to delay and cause financial harm to parties” and
thus her bad faith as the asset buyer.
Good faith can be relevant when a bankruptcy court’s order approving
a sale is on appeal. Under section 363(m), reversal or modification of the
approval order does not affect the sale’s validity if the buyer buys in good
faith. But here, Eiler has not requested that I find that Jaap will be a buyer
in good faith. And good faith is not a standalone prerequisite to approval of a
sale by the bankruptcy court.66
Nelson’s lawyer said at the hearing that he did not believe Eiler was
not acting in good faith.
7. That Jaap might not have agreed to the transaction
is not a reason to disapprove it.
Nelson complains that the motion does not state that Jaap has agreed
to Eiler’s proposed transaction.67
The record does not reflect whether Jaap has agreed to the transaction.
But a trustee need not enter into a binding agreement to sell estate property
66 See Thomas v. Namba (In re Thomas), 287 B.R. 782, 785–86 (B.A.P. 9th Cir.
2002).
67 ECF No. 572 at 5; ECF No. 647 at 3, 5 part B.
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out of the ordinary course before giving notice of the intent to sell. At worst, if
the transaction is authorized and Jaap declines afterward to agree to it, the
transaction will not close. But that is not a reason to deny Eiler authority to
perform the transaction if she does agree to it.
8. That Jaap might disclaim her Medford trust
distribution is not a reason to disapprove the
transaction.
Nelson argues that Jaap “could get out of” the transaction “by
disclaiming her inheritance under Oregon law.”68
If Jaap performs the transaction, she will receive half her Medford
trust distribution and all the bankruptcy estate property. By contrast, if she
disclaims the trust distribution, she would receive nothing from the trust,
and because Eiler will condition his conveyance to her on receipt of her
payment to him, she would also receive nothing from Eiler.
The possibility that Jaap might choose to disclaim her trust
distribution is not a reason to disapprove the motion.
9. Eiler need not consider Nelson’s interest in not
being sued by Jaap.
At the hearing, Nelson’s lawyer argued that Eiler’s choice to sell Jaap
all the assets—including all the claims against targets—in a single
transaction deprived the targets of the ability to overbid “as to their specific
claims that were being sold.” He also argued that the proposed sale to Jaap
would enable her to “continue very high-stakes state-court litigation that the
68 ECF No. 647 at 5 pt. B.
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trustee has declined to step into” and would be “just turning the debtor loose
on another round of ability to litigate and . . . make life difficult for her
creditors.”
Eiler owes duties only to the estate and its pecuniary stakeholders,
including creditors and, if the estate is solvent, the debtor; he owes no duty to
targets as targets—even those who are coincidentally creditors. In fact,
Nelson’s interest as a target in not being sued is directly adverse to the estate
and its pecuniary stakeholders.
V. Conclusion
I will prepare a separate order denying the motion.
# # #
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