Muzquiz v. Weissfisch ( 1996 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
___________________
No. 95-20061
Summary Calendar
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IN THE MATTER OF: MOSES MUZQUIZ, JR.,
Debtor.
MOSES MUZQUIZ, JR.,
Appellant,
versus
W. STEVE SMITH,
Appellee.
*********************************
IN THE MATTER OF: MOSES MUZQUIZ, JR.,
Debtor.
W. STEVE SMITH,
Appellee,
versus
MOSES MUZQUIZ, JR.,
Appellant.
________________________________________________
Appeal from the United States District Court for the
Southern District of Texas
________________________________________________
January 16, 1996
Before GARWOOD, WIENER and PARKER, Circuit Judges.*
*
Pursuant to Local Rule 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in Local Rule 47.5.4.
GARWOOD, Circuit Judge:
Defendant-appellant Moses Muzquiz, Jr. (Muzquiz) appeals the
district court’s affirmance of the bankruptcy court’s denial of his
Motion to Set Aside Default Judgment and the award of Rule 11
sanctions against him.
Facts and Proceedings Below
Muzquiz filed for Chapter 7 bankruptcy in Houston, Texas, on
July 12, 1982. W. Steve Smith (Trustee) was appointed trustee of
the Muzquiz estate, and he filed an adversary proceeding against
Muzquiz and several other parties on December 23, 1983. Muzquiz
responded to the adversary proceeding in February 1984. He
thereafter moved to Michigan near the end of 1984.
Trustee attempted to depose Muzquiz in Houston for nearly ten
months, beginning in early February 1985. Trustee first set
Muzquiz’s deposition for February 5, 1985. Muzquiz failed to
appear on that date, and he then filed a motion for a protective
order on February 13, 1985, arguing that the Trustee should have
deposed him while he lived in Houston. After the bankruptcy court
denied his motion for a protective order, Muzquiz, through his
attorney Thomson, consented to being deposed in Houston and to
paying sanctions to Trustee in the amount of $130. Despite this
consent and the bankruptcy court’s order, Muzquiz continued to fail
to appear in Houston for an oral deposition and refused to set a
date for such a deposition. In August 1985, Muzquiz filed another
motion for protective order; this time he argued that he could not
travel to Houston because of health problems. The bankruptcy court
2
specifically found the letter from Muzquiz’s physician regarding
his health problems to be inconclusive and unconvincing. Neither
Muzquiz nor his attorney appeared at a noticed hearing in August
1985 regarding the Trustee’s Second Motion for Contempt and
additional sanctions. Muzquiz offers no excuse for his attorney's
failure to appear at the contempt hearing.
After receiving warning that the failure to pay the sanctions
or to make himself available for deposition in Houston would result
in striking his pleadings and a default judgment, Muzquiz continued
to defy the court. The bankruptcy court entered default judgment
against Muzquiz on June 26, 1986. Because the default judgment did
not contain a sum certain, trial was set to make this
determination. In late 1986, notice of the trial to be held on
September 10, 1987, was sent to Muzquiz individually at two
different addresses in Michigan. He had failed to notify the
court, the Trustee, or his creditors of his new address. Notice
was also sent to his counsel of record, Joe Thomson, at two
addresses; Thomson signed receipts for these notices.1
Additionally, Muzquiz admitted in his deposition testimony that
Thomson informed him of the default judgment at some time in 1986.
Thomson also filed an Emergency Motion for Continuance of
Conference in Chambers on August 14, 1986, indicating that he had
been in contact with the court after default judgment was entered
and six days after the court ordered notice of trial served.
1
Though he is counsel on this appeal, Thomson never attempts
to explain his signature on the returned receipt cards.
3
The trial was held on the date set, and the Trustee put on
evidence. Neither Muzquiz nor Thomson appeared at the trial.
There is evidence that an attorney considering whether or not to
represent Muzquiz attended the trial as an observer and received a
copy of the Trustee’s proposed findings of fact and conclusions of
law. Final judgment, dated January 6, 1988, was entered against
Muzquiz. The docket sheet indicates that the parties were
notified.
On February 28, 1990, Muzquiz, through new counsel, moved to
set aside the default judgment under Rule 60(b) of the Federal
Rules of Civil Procedure. He based his motion on allegations that
the bankruptcy court relied on evidence given by a biased witness,
that he did not receive adequate notice of ongoing activities in
the case, and that he did not receive effective representation.
The bankruptcy court denied his motion and assessed Rule 11
sanctions against him in the amount of $2000 on June 1, 1990.
Muzquiz appealed the denial and the sanctions to the district
court. The district court affirmed the bankruptcy court’s orders
on December 22, 1994. On January 6, 1995, Joe Thomson began filing
a flurry of motions in the district court, apparently2 on behalf of
Muzquiz. The district court eventually denied all of his motions
except the one to allow substitution of counsel. Muzquiz filed a
notice of appeal to this Court on January 23, 1995. He filed his
First Amended Notice of Appeal in February 1995, and his Second
2
The District Court granted a later Motion for Approval of
Substitution of Appellant’s Counsel on January 27, 1995.
4
Amended Notice of Appeal was filed on March 29, 1995.
Discussion
I. Denial of Appellant’s Rule 60(b) Motion.
This Court reviews the denial of a Rule 60(b) motion for
relief from judgment under an abuse of discretion standard, which
only requires that the denying court’s3 decision be reasonable.
Edward H. Bohlin Co. v. Banning Co., 6 F.3d 350, 353 (5th Cir.
1993).
Rule 60(b) sets forth specific grounds for relief. In this
case, Muzquiz must show that he is entitled to relief either under
one of the particular grounds in subsection one (i.e., mistake,
inadvertence, surprise, or excusable neglect) or by proving “any
other reason justifying relief” under subsection six. All motions
made under Rule 60(b) must be made within a reasonable time, and
motions based on 60(b)(1) must be made not more than one year after
the final judgment was entered. Fed.R.Civ.P. 60(b). Because
Muzquiz filed his Rule 60(b) motion more than two years after final
judgment was entered against him, he cannot rely on Rule 60(b)(1).4
3
In an appeal from a district court review of a bankruptcy
court order, this Court independently reviews the bankruptcy
court’s decision. In re Precision Steel Shearing, Inc., 57 F.3d
321, 324 (3d Cir. 1995); see In re Holloway, 955 F.2d 1008, 1009-10
(5th Cir. 1992).
4
Muzquiz argues that lack of notice should extend this time
period, but the utter groundlessness of his claim of lack of notice
renders this argument wholly without merit. Muzquiz’s complaints
that he did not receive notice of the default judgment, the trial
setting to determine the sum certain, or of the final judgment are
without merit. It is clear from the record that Thomson received
notice of the default judgment and the trial setting. A litigant
“is deemed bound by the acts of his lawyer-agent and is considered
to have ‘notice of all facts, notice of which can be charged upon
5
Consequently, Muzquiz must prove that the bankruptcy court abused
its discretion in denying his motion under Rule 60(b)(6).
To be eligible to have a motion granted under Rule 60(b)(6),
a movant must show the initial judgment to have been manifestly
unjust and that there are “exceptional circumstances” justifying
relief. Edward H. Bohlin Co., 6 F.3d at 357. Muzquiz fails to
meet either of these requirements. The bankruptcy court did not
abuse its discretion in denying his Rule 60(b) motion.
II. Sanctions for Contempt
Muzquiz also appeals the district court’s affirmance of the
$2000 Rule 11 sanction imposed by the bankruptcy court in
connection with his filing of the Motion to Set Aside Default
Judgment. A lower court’s imposition of Rule 11 sanctions will be
reversed only for abuse of discretion. Thomas v. Capital Sec.
Servs., Inc., 836 F.2d 866, 872 (5th Cir. 1988) (en banc). Muzquiz
attacks the bankruptcy court’s award of sanctions on three grounds:
he argues the award should be reversed because (1) the court
failed to state findings of fact and conclusions of law; (2) it
violated due process by failing to consider his response to the
motion for sanctions; and (3) Trustee provided no evidence of costs
associated with the motion.
A. Findings of Fact and the Merits of the Sanction
the attorney.’” Link v. Wabash R.R. Co., 82 S. Ct. at 1390 (citation
omitted).
Even if Muzquiz was entitled to personal notice, he received
it. He admits to being informed of the default judgment in 1986,
and the mailing of notice to the two Michigan addresses afforded
him notice of the trial setting. See In re Eagle Bus Mfg., Inc.,
62 F3d 730, 735-36 (5th Cir. 1995).
6
This Court only requires a court to issue specific findings of
fact and conclusions of law in support of a Rule 11 sanction if
“the basis and justification for [the] decision is not readily
discernible on the record.” Thomas, 836 F.2d at 883. It is
clear from the record in the instant case that the basis and
justification for the sanctions was that the Rule 60(b) motion was
not well-grounded in law or fact.
Muzquiz’s Motion to Set Aside Default Judgment was meritless
if based on Rule 60(b)(1) because it was made more than a year
late. See Fed.R.Civ.P. 60(b). Although his motion might be
construed to make an argument for applying Rule 60(b)(1) beyond a
year in cases where the litigant was not notified of the judgment,
it is still groundless under Rule 60(b)(1) because the alleged lack
of notice was itself without basis in law or fact. A reasonable
inquiry by counsel would have shown that Muzquiz did receive notice
more than a year before the filing of the motion. Muzquiz asserts
no argument on appeal——other than the frivolous lack of notice
allegations——that the judgment was manifestly unjust or that there
were exceptional circumstances justifying relief. Because
Muzquiz’s Motion to Set Aside Default Judgment necessarily relied
on the alleged lack of notice, it had no basis in fact.
B. Due Process Claims
Muzquiz also complains that the bankruptcy court awarded Rule
11 sanctions against him in violation of the Due Process Clause
because it ruled on the Trustee’s motion for sanctions prior to
receiving his reply brief, afforded him no opportunity to be heard,
7
and held no evidentiary hearing. It is true that Rule 11 sanction
decisions must comport with due process, which means the sanctioned
party must receive notice and an opportunity to be heard. Childs
v. State Farm Mut. Auto. Ins. Co., 29 F.3d 1018, 1026 (5th Cir.
1994). Muzquiz received both.
The notice requirement for Rule 11 sanctions varies depending
on the conduct subject to review. Spiller v. Ella Smithers
Geriatric Center, 919 F.2d 339, 346 (5th Cir. 1990). This Court
has held that the existence of Rule 11 is, standing alone, enough
notice to an attorney who files court papers with no basis in
fact.5 Id.
Neither did the bankruptcy court’s failure to hold a hearing
deprive Muzquiz of his due process rights. See Alizadeh v. Safeway
Stores, Inc., 910 F.2d 234, 236 (5th Cir. 1990). In the instant
case Muzquiz claims that he did not have the opportunity to be
5
In addition to the imputed notice Rule 11 imparts, Trustee
filed a motion for sanctions with its reply brief, explaining the
groundlessness for Muzquiz’s motion. Trustee certified that he
properly sent a copy of the motion and reply brief to Muzquiz.
Muzquiz did not present any evidence that he failed to receive
notice of the motion; he relies solely on a bare allegation in his
brief, neglecting to submit an affidavit to support this
contention. In contrast, Muzquiz also claimed that the bankruptcy
court “inadvertently tipped [him] off” about the Trustee’s motion
in its Certificate of Telephonic Notice, which he admits receiving
some time prior to the entry of sanctions against him.
The bankruptcy court did not rule on the notice of sanctions
issue. The district court impliedly found no merit in Muzquiz’s
claim of lack of notice of the sanctions when it affirmed the
bankruptcy court’s order of sanctions. Considering the history of
appellant’s conduct in this litigation, including repeated
misstatements of the facts, his dilatory tactics, and his
misunderstanding of the concept of notice, the district court did
not abuse its discretion in affirming the sanctions with an implied
determination that Muzquiz’s claim that he did not receive notice
of the sanctions was disingenuous.
8
heard because the bankruptcy court issued sanctions without reading
his response to Trustee’s motion for sanctions. Trustee’s motion
was filed on March 12, 1990. The bankruptcy court did not rule on
the motion for over two and one half months. Muzquiz had the
opportunity to be heard by filing a response during that time. He
did not take advantage of the opportunity. Accordingly, the
district court did not abuse its discretion in affirming the
bankruptcy court order.
C. Amount of Sanctions
Courts are vested with “considerable discretion in determining
the ‘appropriate’ sanction” under Rule 11. Thomas, 836 F.2d at
877. This discretion should be exercised in a manner that fosters
the purpose of Rule 11: “to deter attorneys from violating the
rule.” Id. (emphasis in original); see Spiller, 919 F.2d at 345.
The least severe sanction adequate to serve that purpose should be
imposed. Thomas, 836 F.2d at 878. As previous sanctions of $130
and $3500 did not persuade Muzquiz to comply with bankruptcy court
orders, the sanction in the amount of $2000 was not an abuse of
discretion. See Markwell v. County of Bexar, 878 F.2d 899, 903
(5th Cir. 1989).
Conclusion
For the foregoing reasons, the judgment of the district court
is
AFFIRMED.
9