Susan Ellis v. Ronald Ellis ( 1995 )

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No. 95-1020
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In re: Ronald Ellis, *
*
Debtor. *
*
_____________________________ *
* Appeal from the United States
Susan Ellis, * District Court for the Eastern
* District of Missouri.
Appellee, *
*
v. *
*
Ronald Ellis, *
*
Appellant. *
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Submitted: May 18, 1995
Filed: December 18, 1995
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Before BOWMAN, MAGILL, and LOKEN, Circuit Judges.
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BOWMAN, Circuit Judge.
Ronald Ellis appeals from the decision of the District Court
affirming the Bankruptcy Court's decision holding nondischargeable in
bankruptcy a $300,000 obligation Ronald owed to his former wife Susan Ellis
by virtue of a dissolution decree. We reverse.
Susan and Ronald Ellis were divorced in November 1989. At issue here
is paragraph 1 of the attachment to the Ellises' Decree of Dissolution,
which reads as follows:
As and for her partial share of the parties' marital
property, Petitioner [Susan] is awarded Three Hundred Thousand
Dollars ($300,000.00) to be paid to her by Respondent [Ronald],
as her interest in Respondent's pension and profit sharing plan
with Vantage Footwear, Inc., and Vantage Footwear, Inc. Said
award shall be deemed a judgment lien against Respondent's
interest in said plan and his interest in the stock of Vantage
Footwear, Inc., which is held in or by said plan. Respondent
shall execute a Qualified Domestic Relations Order consistent
with this Decree and the Court retains jurisdiction thereof.
On February 7, 1990, the above language was modified, for reasons not in
the record, on Ronald's motion to alter and amend the judgment. The only
change of substance was the deletion of the last sentence requiring Ronald
to execute a Qualified Domestic Relations Order (QDRO).
In an opinion filed January 22, 1991, the Missouri Court of Appeals
found that the $300,000 award was not an abuse of discretion. Ellis v.
Ellis, 802 S.W.2d 546, 549 (Mo. Ct. App. 1991). The court of appeals
modified the award, at Ronald's request, so that $50,000 was to be paid to
Susan on July 1, 1991; thereafter, every six months, Ronald was to pay
Susan $50,000 plus interest "until the amount is paid in full." Id. The
court apparently took this action after being persuaded by Ronald of
"possible tax consequences," and that "the value of the plan would be
substantially reduced if liquidated at one time." Id. On June 7, 1991,
less than one month before the first payment was due, Ronald filed a
voluntary petition in bankruptcy. On October 11, 1991, Susan filed this
adversary proceeding challenging the dischargeability of various
obligations Ronald owed to her pursuant to the dissolution decree
(including his maintenance and child support obligations, which Ronald had
listed as dischargeable debts), arguing they were not dischargeable as they
were in the nature of maintenance and support.
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On January 28, 1993, the Bankruptcy Court held that the $300,000
award to Susan was a property settlement not intended as support, and
therefore was a dischargeable debt in Ronald's bankruptcy. On February 24,
1993, Susan filed a "Motion for Leave to Alter or Amend Court's Judgment"1
or, alternatively, leave to file a late notice of appeal. Susan's attorney
averred that she did not receive the Bankruptcy Court order from the court,
and only learned of it on February 11 from opposing counsel. She asked the
court for leave to file a motion to alter or amend the judgment outside the
ten-day limit set forth in Federal Rule of Civil Procedure 59(e) (made
applicable in the bankruptcy courts by Bankruptcy Rule 9023). On April 15,
the court granted Susan leave to file an untimely motion to alter or amend,
relying on Federal Rule of Civil Procedure 60(b) (made applicable in the
bankruptcy courts by Bankruptcy Rule 9024) and finding that excusable
neglect explained her tardy filing. In the same order, the court extended
the time within which Susan could file her notice of appeal. In a separate
order filed on the same day, the Bankruptcy Court amended its judgment and
held that the $300,000 Ronald owed to Susan was nondischargeable under the
law as set forth in this Court's opinion in Bush v. Taylor, 912 F.2d 989
(8th Cir. 1990) (en banc). The District Court affirmed. Ronald Ellis
appeals.
For his first issue on appeal, Ronald Ellis contends that the
Bankruptcy Court abused its discretion by reopening its judgment pursuant
to Federal Rule of Civil Procedure 60(b), and that the District Court erred
in affirming that decision. He focuses his argument on the rules
concerning a motion for leave to file a late
1
Presumably, the caption of the motion was inaccurate.
Susan did not seek leave to alter or amend the judgment; only the
court could alter or amend its own judgment. She states in
paragraph 4 of her motion that she wanted leave to file an
untimely motion to alter or amend under Rule 59(e) (Rule 59(e)
motions are required to be filed within ten days of entry of the
judgment) and, in case the court granted the motion for untimely
filing, she included the motion to alter or amend and her
arguments on the merits.
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notice of appeal, arguing that the court's decision under Rule 60(b)
effectively granted Susan an appeal. That argument misses the mark. The
real procedural issue is the court's use of Rule 60(b) as a vehicle to
overcome the untimeliness of Susan's Rule 59(e) motion to alter or amend.
Susan's motion for leave to file a notice of appeal out of time was granted
in a separate ruling, but became irrelevant when the Bankruptcy Court
amended its judgment so as to find in Susan's favor on the merits of the
dischargeability question.
As the Bankruptcy Court noted, enlargement of the ten days allowed
for filing a Rule 59(e) motion to alter or amend the judgment, regardless
of the reason, is expressly prohibited by Bankruptcy Rule 9006(b)(2). The
court also rejected Susan's argument that "unusual circumstances" excused
her failure to file her motion within ten days.2 The court therefore was
without jurisdiction to consider Susan's Rule 59(e) motion. See Townsend
v. Terminal Packaging Co., 853 F.2d 623, 624 (8th Cir. 1988). But the
Bankruptcy Court then turned to Rule 60(b), which allows a reasonable time
(but not more than one year) within which to file a motion for relief from
judgment based on excusable neglect, and
2
For its authority to consider Susan's claim of "unusual
circumstances," the Bankruptcy Court relied on the judicially-
created doctrine pursuant to which a court may allow the filing
of an untimely notice of appeal, where the filing is untimely
because of reasonable reliance on the erroneous actions of the
court. We do not decide whether this doctrine is applicable to
an untimely Rule 59(e) motion to alter or amend a judgment. Cf.
Thompson v. INS, 375 U.S. 384, 387 (1964) (per curiam) (holding
that lower court's representation that Rule 59(b) motion for new
trial was timely, when it was not, constituted "unique
circumstances" to excuse untimely notice of appeal); Osterneck v.
Ernst & Whinney, 489 U.S. 169, 179 (1989) ("By its terms,
Thompson applies only where a party has performed an act which,
if properly done, would postpone the deadline for filing his
appeal and has received specific assurance by a judicial officer
that this act has been properly done."). The question is of no
moment here, as the court found no "unusual circumstances"
existed to excuse Susan's untimely filing of her Rule 59(e)
motion.
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found the requisite excusable neglect for Susan's failure to make timely
post-judgment motions.
In the context of excusable neglect as a ground for relief from a
judgment or order, Rule 60(b) is appropriately invoked to offer excuses for
neglect leading up to the judgment in the first place, not excuses for
neglect for failure to file post-judgment motions to alter or amend.
Sanders v. Clemco Indus., 862 F.2d 161, 168 n.14 (8th Cir. 1988); see,
e.g., In re Freightway Corp., 170 B.R. 108 (Bankr. N.D. Ohio 1994) (seeking
reconsideration under Rule 60(b) of order denying creditor's claim for
failure of creditor to appear); In re King, 165 B.R. 296 (Bankr. M.D. Fla.
1994) (seeking rehearing under Rule 60(b) for order granting motion to
value collateral where creditor failed to respond); Elliot v. Hancock (In
re Hancock), 160 B.R. 677 (Bankr. M.D. Fla. 1993) (seeking relief under
Rule 60(b) from default judgment entered when no answer was filed); cf. In
re Gray, 156 B.R. 707 (Bankr. D. Maine 1993) (holding creditors could not
attack debtor's discharge as it applied to them by characterizing motion
as under Rule 60(b) where procedure to challenge discharge was provided by
statute); In re Bowden, 138 B.R. 584 (Bankr. E.D. Ark. 1992) (assuming that
motion seeking reinstatement of bankruptcy case that was dismissed after
debtors' failure to file the required documents was made pursuant to Rule
60(b)); In re Fuller, 111 B.R. 660 (Bankr. S.D. Ohio 1989) (assuming that
motion seeking reinstatement of automatic stay where debtor failed to file
responsive pleading to motion for relief from stay was made pursuant to
Rule 60(b)). A Rule 60(b) motion alleging excusable neglect is
appropriately used when seeking relief from judgment for excusable neglect,
not when seeking relief from the deadlines set by the rules for post-
judgment motions, even if those deadlines are not met because of excusable
neglect. Contrary to Susan's arguments, Pioneer Investment Services v.
Brunswick Associates Limited Partnership, ___ U.S. ___, 113 S. Ct. 1489
(1993), is inapplicable to this case. The issue in that case was the
interpretation of the term "excusable neglect" in a case
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where a creditor failed to timely file a proof of claim. Pioneer had
nothing to do with deciding whether excusable neglect under Rule 60(b) can
be used to grant leave to file an untimely motion to alter or amend, which
implicates Rule 59(e).
We hold that the Bankruptcy Court was without jurisdiction to
consider Susan's Rule 59(e) motion (and we note that the court, in at least
a formal sense, did reject that motion). We further hold that the
Bankruptcy Court erred in relying upon Rule 60(b) to grant Susan leave to
file an untimely motion to alter or amend the judgment, and the District
Court erred in affirming that decision. We need not and do not consider
what now becomes of the Bankruptcy Court's order granting Susan's motion
to file her notice of appeal out of time because the issue is moot, and has
been since the entry of the amended judgment in Susan's favor, issued the
same day as the ruling on her motion for leave to file an untimely Rule
59(e) motion, made it unnecessary for her to appeal. Instead, the appeal
to the District Court from the amended judgment was taken by Ronald.
We conclude that Ronald is correct that the amended judgment must be
reversed for the procedural reasons we already have discussed. Moreover,
even if we are mistaken in our conclusions as to the convoluted procedural
history of this case, our resolution of the case on the merits of the
dischargeability question results in judgment for Ronald in any case.3
Relying on our opinion in Bush v. Taylor, the Bankruptcy Court
summarily reversed its original decision adjudging Ronald's
3
Because of our resolution of the procedural question, and
our alternate holding on the merits of the dischargeability
question, we do not consider Ronald's argument that the
Bankruptcy Court abused its discretion in altering its judgment
based on a legal theory (derived from Bush v. Taylor, 912 F.2d
989 (8th Cir. 1990) (en banc)) that was raised for the first time
in Susan's motion to alter or amend.
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$300,000 obligation dischargeable. The District Court, in its de novo
review and affirmance, elaborated somewhat, concluding that the installment
payments for the $300,000 obligation were debts not incurred until payment
was due, and thus were not dischargeable under Bush. After our own de novo
review, we find that we must disagree with the application of Bush by the
lower courts in this case.
In Bush, the debtor, pursuant to a decree of dissolution entered
before the days of QDROs, was required to pay a portion of his pension
benefits, as he received them, to his former wife as her "sole and separate
property." The district court, affirming the bankruptcy court, refused to
discharge the obligation in the debtor's bankruptcy proceedings. This
Court affirmed, holding that the obligation was not pre-petition debt
dischargeable in bankruptcy. Instead, we held, the amount due was the
former wife's "sole and separate property," to be paid to her by the debtor
only because the pension plan administrator did not pay her share of the
pension to her directly. Moreover, as we noted, the pension payments would
continue to flow to the debtor for as long as he lived, and if his
obligation to pay his former wife a portion of these payments as he
received them were discharged in bankruptcy, she thereby would be deprived
of the "sole and separate property" in these payments that the state
divorce court had awarded her.
Here, Susan was not awarded a fixed share of payments to be received
by Ronald from his employer's pension and profit sharing plan as her "sole
and separate property," as was the case in Bush. Instead, the divorce
court awarded Susan a sum certain that represented her "interest" in the
plan and in Vantage Footwear, but it was not in any way linked to pension
or profit-sharing payments to be received by Ronald. If the amount was to
have been more than a division of property, that is, if it was based on
actual payments
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due Ronald from an ERISA-regulated4 pension and profit-sharing plan, then
a QDRO should have and presumably would have been executed. But the
installment payments owed to Susan were not Susan's "sole and separate
property" payable by Ronald only when he received payments from his
company's plan. Rather, the $300,000 was a division of marital property
representing the divorce court's determination of Susan's present interest
in the pension and profit-sharing plan and in the company itself. It was
owed to Susan regardless of any later changes in the value of the plan or
of the company.5
Ronald prevailed upon the Missouri Court of Appeals to modify the
award to make it payable in installments, evidently convincing the court
that modification was necessary to protect the plan assets. Ronald filed
his bankruptcy petition before any of the court-ordered payments to Susan
became due. But the installment payments did not become post-petition debt
merely because the dates of payment had not yet arrived. Unlike Bush, in
which the former husband became obligated to pay over his former wife's
portion of his pension checks only as he received them, Ronald's obligation
to Susan was merely unmatured debt. Ronald owed those amounts to Susan
whether or not he ever received a nickel from the pension and profit-
sharing plan or from his interest in the company. The record does not
indicate that he was even drawing--or eligible to draw--any funds from the
plan at the time his marriage to Susan was dissolved. We therefore must
conclude that Susan's interest in the plan and the company was reduced to
an amount certain that Ronald
4
Employee Retirement Income Security Act, Pub. L. No. 93-
406, 88 Stat. 829 (codified as amended at 29 U.S.C. §§ 1001-1461
(1988 & Supp. V 1993), and in scattered sections of the United
States Code).
5
Susan's lien on Ronald's interest in the pension and
profit-sharing plan and Vantage Footwear stock, created by the
explicit language of the divorce decree, is unaffected by our
decision today. The record indicates, however, that the plan and
the stock are now worthless.
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was obligated to pay to her from whatever assets he had, and thus is a pre-
petition debt that, not being in the nature of maintenance and support for
his former wife, see 11 U.S.C. § 523(a)(5) (1994), is dischargeable in
bankruptcy, see id. § 727 (1994) (pre-petition debts shall be discharged);
id. § 101(5), (12) (defining debt and claim under the Bankruptcy Code).
The judgment of the District Court is reversed.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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