Todd McNally v. United States Bankruptcy Court for the District of Colorado

FILED
U.S. Bankruptcy Appellate Panel
of the Tenth Circuit
NOT FOR PUBLICATION *
September 15, 2017
UNITED STATES BANKRUPTCY APPELLATE PANEL
Blaine F. Bates
OF THE TENTH CIRCUIT Clerk
_________________________________
IN RE TODD J. MCNALLY, BAP No. CO-17-001
Debtor.
__________________________________
MICHAEL CARNS, Bankr. No. 14-20844
Adv. No. 15-01445
Plaintiff - Appellant, Chapter 7
v.
TODD J. MCNALLY, OPINION
Defendant - Appellee.
_________________________________
Appeal from the United States Bankruptcy Court
for the District of Colorado
_________________________________
Before MICHAEL, HALL, and THUMA, ** Bankruptcy Judges.
_________________________________
THUMA, Bankruptcy Judge.
_________________________________
After the Debtor, Todd J. McNally, received his Chapter 7 discharge in November
2014, Appellant Michael Carns got the bankruptcy case reopened and brought an
*
This unpublished opinion may be cited for its persuasive value, but is not
precedential, except under the doctrines of law of the case, claim preclusion, and issue
preclusion. 10th Cir. BAP L.R. 8026-6.
**
Honorable David Thuma, U.S. Bankruptcy Judge, United States Bankruptcy Court
for the District of New Mexico, sitting by designation.
adversary proceeding seeking to revoke the Debtor’s discharge and have the Debtor’s
obligation to him declared nondischargeable. The bankruptcy court tried the proceeding
and ruled against Appellant on both claims. This appeal followed. Finding no error, we
affirm the bankruptcy court.
I. FACTUAL AND PROCEDURAL HISTORY 1
In 2006, Appellant responded to a newspaper ad placed by the Debtor seeking
investors in the Southbridge shopping center in Sarasota, Florida. After speaking with the
Debtor, Appellant decided to invest $700,000.00 in a company called VH Holdings,
LLC, to finance the purchase of the center. Within a few months, the Debtor attempted to
“flip” the center for a profit. 2 There were many potential buyers but no sale occurred
because one of the Debtor’s creditors had filed a notice of lis pendens against the Debtor,
encumbering Southbridge. The Debtor could not “clear the lis pendens or raise additional
funds to satisfy the property’s secured debt, and [Southbridge] was lost to foreclosure.” 3
Appellant, understandably unhappy to have lost his entire investment to one of the
Debtor’s creditors, retained attorney James D. Gibson and sued the Debtor for fraud in
1
This factual background is substantially drawn from the bankruptcy court’s
findings. Findings of Fact and Conclusions of Law, in Appellant’s App. at 119.
2
Id. at 1, in Appellant’s App. at 119.
3
Id. at 1, in Appellant’s App. at 119.
2
the Florida state court in 2007. 4 Appellant was awarded a $700,000 default judgment on
February 6, 2008. 5
Meanwhile, the Debtor divided his time between Florida and Colorado, operating
numerous ventures. 6 With a new investor, Jeffrey Hernandez, he formed several new
companies, including TheeLife.com, LLC; Vestor, LLC, aka Theelife; and Vestor Auto
Lease, LLC (“VAL”). 7 The companies had no assets but their checking accounts. 8 The
Debtor also engaged in foreign currency trading through accounts funded by Hernandez. 9
Finally, the Debtor wrote two books, Jock Itch and Success Right Now. 10
In about 2010, Gibson took the Debtor’s deposition in aid of execution, 11 but was
unable to find a source of recovery. There is no evidence Gibson ever withdrew from
representing Appellant in his efforts to collect the $700,000 Florida judgment.
4
Id., at 2, in Appellant’s App. at 120.
5
Exhibit 1 to Complaint to Revoke Discharge, Final Default Judgment, in
Appellant’s App. at 8.
6
Findings of Fact and Conclusions of Law at 2, in Appellant’s App. at 120.
7
Id., in Appellant’s App. at 120. VAL operated by leasing purchased cars. After
VAL closed the same operation was continued by Vestor LLC. Trial Tr. at 32-34, in
Appellant’s App. at 249-251.
8
The record indicates these are the only assets mentioned at trial.
9
Findings of Fact and Conclusions of Law at 2, in Appellant’s App. at 120; Trial
Tr. at 66, in Appellant’s App. at 283.
10
Findings of Fact and Conclusions of Law at 2, in Appellant’s App. at 120.
11
Trial Tr. at 93, in Appellant’s App. at 310.
3
On August 6, 2014, the Debtor filed this Chapter 7 bankruptcy case in Colorado. 12
The Debtor listed Appellant as an unsecured creditor (claim amount “unknown”), but did
not include an address. 13 As a result, Appellant did not receive the original notice of the
bankruptcy filing. On August 18, 2014, the Debtor amended his Schedule F to include
Appellant as follows:
Michael Carns
C/O James D. Gibson
400 Burns Ct
Sarasota, FL 34236
The claim amount was still listed as “unknown.” Along with the Amended Schedule F,
the Debtor filed a Rule 1009-1.1 Notice of Amendment to Schedule. 14 The notice listed
Appellant and included a certificate of service, which provided that on August 18, 2014,
the Debtor mailed the Amended Schedule F, the notice, a 11 U.S.C. § 341 15 Notice, and a
Proof of Claim form, all by first class mail, to Appellant c/o Gibson, at the 400 Burns
Court address. Gibson claimed he did not receive the documents, and so did not forward
them to Appellant. The deadline to file an objection to discharge or to the
dischargeability of certain types of debt passed on November 7, 2014. 16 No objections
12
Findings of Fact and Conclusions of Law at 2, in Appellant’s App. at 120.
13
Appellant was not included in the Debtor’s creditor mailing matrix.
14
Notice of Amendment of Schedules of Debts and/or Addition of Creditor, in
Appellant’s App. at 191.
15
All references to “Code,” “Section,” and “§” are to the Bankruptcy Code, Title 11
of the United States Code, unless otherwise indicated.
16
Findings of Fact and Conclusions of Law at 2, in Appellant’s App. at 120.
4
were timely filed. On November 13, 2014, the bankruptcy court granted the Debtor a
discharge and closed the case.
In December 2014, Appellant contacted an aggressive, national collection agency
to pursue collection of the Default Judgment. 17 The collection agency told Appellant of
the Debtor’s bankruptcy case. 18 On August 10, 2015, Appellant moved the bankruptcy
court to reopen the case, alleging he had not received notice of the bankruptcy. The
bankruptcy court granted the motion. On November 4, 2015, Appellant commenced an
adversary proceeding, 19 asserting claims under §§ 727(d)(1) (revocation of discharge)
and 523(a)(2)(A) (nondischargeable debt based on fraud). 20
On October 13, 2016, the bankruptcy court tried the matter. 21 The bankruptcy
court entered its Findings of Fact and Conclusions of Law (the “Order”) 22 on December
19, 2016, ruling Appellant had not met his burden of proof under either claim. On the
§ 727(d)(1) claim, the bankruptcy court found the Debtor had no fraudulent intent for
omitting any assets in his bankruptcy schedules, so there was no basis to revoke the
17
Trial Tr. at 94, in Appellant’s App. at 311.
18
Id. at 95, in Appellant’s App. at 312.
19
Findings of Fact and Conclusions of Law at 2-3, in Appellant’s App. at 120-21.
20
Complaint to Revoke Discharge at 6, in Appellant’s App. at 6. The claim was not
timely. Fed. R. Bankr. P. 4007(c) requires such complaints to be filed within sixty days
after the first date set for the § 341 meeting of creditors.
21
Trial Tr. at 1, in Appellant’s App. at 218.
22
Order, in Appellant’s App. at 119.
5
Debtor’s discharge. The bankruptcy court also made explicit and implicit findings that
some of the alleged omissions were not material.
With respect to the nondischargeability claim, the bankruptcy court correctly
noted that the relevant section was not § 523(a)(2)(A), 23 pleaded by Appellant, but
§ 523(a)(3). The latter section provides a discharge exception for debts
neither listed nor scheduled under section 521(a)(1) of this title, with the
name, if known to the debtor, of the creditor to whom such debt is owed, in
time to permit—
...
(B) if such debt is of a kind specified in paragraph (2), (4), or (6) of this
subsection, timely filing of a proof of claim and timely request for a
determination of dischargeability of such debt under one of such
paragraphs, unless such creditor had notice or actual knowledge of the case
in time for such timely filing and request. 24
The bankruptcy court ruled that Appellant was given timely notice of the
bankruptcy case by the August 18, 2014 notice served on Gibson. Because notice was
timely, the bankruptcy court ruled that Appellant’s § 523(a)(3) claim failed.
III. STANDARD OF REVIEW
23
Id. at 5, in Appellant’s App. at 123. Had the bankruptcy court held Appellant
strictly to his pleading, Appellant would have lost as a matter of law, since the claim was
untimely.
24
11 U.S.C. § 532(a)(3). This section “enforces the performance of the debtor’s
duties under § 521(1) which, in turn, insures creditors receive notice of a case and, thus,
due process.” In re Schicke, 290 B.R. 792, 799 (10th Cir. BAP 2003), aff’d, 97 F. App’x
249 (10th Cir. 2004). When a debtor fails to schedule or incorrectly schedules a creditor,
“the creditor’s right to object to the dischargeability of a debt cannot be time-barred
under Fed. R. Bankr. P. 4007(c).” Id. at 800.
6
Appellant argues the bankruptcy court erred in its materiality findings on the
§ 727(d)(1) claim. Appellant also argues the bankruptcy court erred in finding that he
received timely notice of the bankruptcy case because there was no “continued attorney-
client relationship between [Appellant and Gibson]” 25 when the August 18, 2014 notice
was mailed. Whether Gibson was still Appellant’s attorney in the Florida action is a
question of fact. 26 Challenged fact findings are reviewed for clear error. 27 A fact finding
is “clearly erroneous” when “it is without factual support in the record, or if the appellate
court, after reviewing all the evidence, is left with the definite and firm conviction that a
mistake has been made.” 28
Finally, Appellant argues that notice to Gibson was insufficient to afford due
process to Appellant. This is a question of law reviewed de novo. 29
IV. DISCUSSION
The bankruptcy court did not err in denying the Appellant’s § 727(d)(1) claim.
25
Appellant’s Br. 11.
26
Villazon v. Prudential Health Care Plan, Inc., 843 So. 2d 842, 853 (Fla. 2003)
(“[T]he existence and scope of an agency relationship are generally questions of fact.”).
27
Wagner v. Wagner (In re Wagner), 527 B.R. 416, 429 (10th Cir. BAP 2015)
(applying, without comment, clear error review to findings of fact regarding false oaths
within the meaning of § 727(a)(4)(A)).
28
LeMaire ex. rel. LeMaire v. United States, 826 F.2d 949, 953 (10th Cir. 1987)
(citing Cowles v. Dow Keith Oil & Gas, Inc., 752 F.2d 508, 510-11 (10th Cir. 1985)).
29
Secs. Inv’r Prot. Corp. v. Stellatos (In re Blinder, Robinson & Co.), 124 F.3d
1238, 1242 (10th Cir. 1997) (whether due process is provided is a “purely legal issue”);
Parks v. FIA Card Servs. N.A. (In re Marshall), 550 F.3d 1251, 1254 (10th Cir. 2008)
(stating legal issues reviewed de novo).
7
Section 727(d)(1) provides the bankruptcy court shall revoke a discharge if (1)
“such discharge was obtained through the fraud of the debtor;” and (2) “the requesting
party did not know of such fraud until after the granting of such discharge.” 30 In ruling on
§ 727(d)(1) claims, bankruptcy courts consider whether the debtor “committed a fraud in
fact which would have barred the discharge had the fraud been known.” 31 Courts
therefore incorporate the grounds for denying the discharge under §§ 727(a)(2)-(5) when
ruling on § 727(d)(1) discharge revocation claims. 32
To deny a debtor’s discharge under § 727(a)(4)(A), a trustee or creditor must
demonstrate by a preponderance of the evidence that the debtor made a false oath in
connection with the case “willfully with intent to defraud,” and that the oath related to a
material matter. 33 The Tenth Circuit has held that a material omission from a bankruptcy
statement or schedule can constitute such a false oath because the debtor has a duty to
30
11 U.S.C § 727(d)(1).
31
Lawrence Nat’l Bank v. Edmonds (In re Edmonds), 924 F.2d 176, 180 (10th Cir.
1991) (citing Artinian v. Peli (In re Peli), 31 B.R. 952, 955 (Bankr. E.D.N.Y. 1983)).
32
See generally J&R Inv. v. Anthony (In re Anthony), 658 F. App’x. 924, 927 (10th
Cir. 2016); Lawrence Nat’l Bank v. Edmonds (In re Edmonds), 924 F.2d 176, 180-81
(10th Cir. 1991); Lincoln Nat’l Life Ins. Co. v. Silver (In re Silver), 367 B.R. 795, 806
n.14 (Bankr. D.N.M. 2007) (quoting David G. Epstein, Bankruptcy and Related Law in a
Nutshell 340 (7th ed. 2005)) (Subsections (2)-(5) “have as their foundation some form of
dishonesty or lack of cooperation by the individual debtor.”); Marshall v. Wilson (In re
Wilson), No. 99-13695-JMD, 2002 WL 1067450, at *5 (Bankr. D.N.H. May 28, 2002)
(Section 727(d)(1) claim based on § 727(a)(2)); Walton v. Staub (In re Staub), 208 B.R.
602, 604 (Bankr. S.D. Ga. 1997) (Section 727(d)(1) revocation based on § 727(a)(4) false
oath or account).
33
In re Calder, 907 F.2d 953, 955 (10th Cir. 1990) (citing 4 Collier on Bankruptcy,
¶ 727.04[1] at 727-54 to -57 (15th ed. 1987)).
8
make a true and full disclosure in scheduling assets and completing a statement of
financial affairs. 34
Appellant argues the Debtor made the false oaths by omitting several material
assets from his bankruptcy schedules, including his interest in VAL; a prepetition transfer
of $5,117 to VAL; his income from VAL; his interest in the foreign exchange trading
accounts; and his interest in the two books he wrote. 35
Both the Tenth Circuit and its Bankruptcy Appellate Panel (“BAP”) have
recognized the problem in “ascertaining whether a debtor acted with fraudulent intent” is
that the “debtor will be the only person able to testify directly concerning his intent,” and
such testimony may be self-serving. 36 Thus, bankruptcy courts may infer fraudulent
intent “by circumstantial evidence, or by . . . [the debtor’s] course of conduct.” 37 A false
34
Id.; 11 U.S.C. § 521(a)(1); see In re Marrama, 430 F.3d 474, 478 (1st Cir. 2005)
(“The [bankruptcy] statutes are designed to insure that complete, truthful, and reliable
information is put forward at the outset of the proceedings . . . . [T]he successful
functioning of the bankruptcy act hinges both upon the bankrupt’s veracity and his
willingness to make a full disclosure.” (internal quotation marks omitted)), aff'd sub
nom., Marrama v. Citizens Bank of Mass., 549 U.S. 365 (2007).
35
Appellant also alleged before the bankruptcy court that the Debtor was not a
Colorado resident. Appellant did not press the point at trial, nor argue it on appeal. In his
brief, Appellant also complains about the Debtor’s “failure[s] to disclose” during
discovery. Appellant’s Br. 18, 21. All discovery disputes were resolved by the
bankruptcy court and are not, in any event, relevant to Appellant’s claims under
§ 727(d)(1). No discovery disputes were mentioned in Appellant’s statement of issues on
appeal.
36
United States Tr. v. Garland (In re Garland), 417 B.R. 805, 815 (10th Cir. BAP
2009) (quoting Calder, 907 F.2d at 955-56).
37
Calder, 907 F.2d at 956 (quoting Farmers Co-op. Ass’n v. Strunk, 671 F.2d 391,
395 (10th Cir. 1982)).
9
statement caused by mere inaccuracy or inadvertence does not warrant discharge denial. 38
The BAP recognizes certain “badges of fraud,” relied upon to determine fraudulent intent
including, but not limited to, (1) concealment of prebankruptcy conversions; (2)
conversion of assets immediately before the filing of the bankruptcy petition; and (3) the
monetary value of the assets converted. 39
Here, the bankruptcy court found no badges of fraud and made a general finding
that the Debtor’s failures to disclose assets were without fraudulent intent. 40 We interpret
this finding to include all of the allegedly omitted assets. Appellant’s statement of issues
on appeal does not seek review of the bankruptcy court “no fraudulent intent” finding. 41
Appellant therefore waived his right to challenge the finding.
Even if Appellant had not waived the issue, we would find no error. The
bankruptcy court heard the Debtor’s testimony and found his denial of fraudulent intent
credible. Similarly, the bankruptcy court reviewed Appellant’s documentary evidence
38
Garrett v. Vaughan (In re Vaughan), No. WO-05-028, 2006 WL 751388, at *4
(10th Cir. BAP Mar. 22, 2006) (citing Gullickson v. Brown (In re Brown), 108 F.3d 1290,
1294-95 (10th Cir. 1997)).
39
Garland, 417 B.R. at 815 (quoting Quicken Loans, Inc. v. Splawn (In re Splawn),
376 B.R. 747, 755 (Bankr. D.N.M. 2007)).
40
Order at 4, in Appellant’s App. at 122.
41
While Appellant says in his brief that “[f]raudulent intent can further be inferred
from the Debtor’s failure to disclose numerous assets on his Schedule B,” Appellant’s Br.
21, this statement is not enough to preserve the argument. Adams-Arapahoe Joint Sch.
Dist. No. 28-J v. Cont’l Ins. Co., 891 F.2d 772, 776 (10th Cir. 1989) (“Merely mentioning
inherent defects in another context is not enough.”); Exum v. United States Olympic
Comm., 389 F.3d 1130, 1133 n.4 (10th Cir. 2004) (“Scattered statements in the
appellant’s brief are not enough to preserve an issue for appeal.”).
10
and determined it did not support a finding of fraudulent intent. Trial courts generally
should be given some leeway to determine the credibility of witnesses and the proper
weight of evidence. 42 Having reviewed the record, we cannot say the bankruptcy court
clearly erred in finding no fraudulent intent.
Appellant only assigned error to the bankruptcy court’s findings about the
materiality of allegedly omitted assets. 43 Because fraudulent intent is a prerequisite to any
materiality inquiry under § 727(a)(4)(A), 44 our decision not to disturb the bankruptcy
court’s “no fraudulent intent” finding ends the inquiry. We therefore affirm the judgment
against Appellant on his § 727(d)(1) claim.
The bankruptcy court did not err in concluding that Appellant received timely
notice of the bankruptcy case.
The bankruptcy court found Appellant “received notice of [the bankruptcy]
through his attorney, Gibson.” 45 The bankruptcy court further found Gibson was
42
In re Muth, No. CO-13-055, 2014 WL 1712527, at *6 (10th Cir. BAP May 1,
2014) (“Where there are two permissible views of the evidence, the factfinder’s choice
between them cannot be clearly erroneous.”) (quoting Lone Star Steel Co. v. United Mine
Workers of Am., 851 F.2d 1239, 1242 (10th Cir. 1988)).
43
Appellant’s Br. 17.
44
A false oath under § 727(a)(4)(A) must relate to a material matter. In re Calder,
907 F.2d 953, 955 (10th Cir. 1990) (citing 4 Collier on Bankruptcy, ¶ 727.04[1] at 727-
54 to -57 (15th ed. 1987)). The subject matter of a false oath is material, and “thus
sufficient to bar discharge if it bears a relationship to the bankrupt’s business transactions
or estate, or concerns the discovery of assets, business dealings, or the existence and
disposition of his property.” Id. (quoting In re Chalik, 748 F.2d 616, 618 (11th Cir.
1984)).
45
Order at 5, in Appellant’s App. at 123.
11
Appellant’s agent, 46 and “had represented [Appellant] in obtaining the Default Judgment
and . . . continued to represent [Appellant] in attempts to collect the Default Judgment.” 47
Finally, the bankruptcy court found that Gibson was Appellant’s “agent in regards to the
Default Judgment.” 48
Appellant argues that the bankruptcy court erred because Gibson was his former
counsel when the August 18, 2014 notice was mailed, and that Appellant did not receive
notice of the bankruptcy case in time to file a nondischargeability complaint. Appellant
contends that notice mailed to Gibson was insufficient to provide him with his
constitutional right to due process or to comply with § 342(a). 49
Neither § 342(a) 50 nor the due process clause requires the “best” notice, only
notice “appropriate” and “reasonably calculated” to apprise creditors of a case. 51 The
Supreme Court has held due process requires “notice reasonably calculated, under all the
46
Id. at 6, in Appellant’s App. at 124
47
Id., in Appellant’s App. at 124.
48
Id., in Appellant’s App. at 124.
49
Appellant’s Br. 9-10. The parties do not dispute that Appellant had no actual
knowledge of the Bankruptcy.
50
Section 342(a) provides that notice of a Bankruptcy shall be given “as is
appropriate.”
51
In re Schicke, 290 B.R. 792, 803 (10th Cir. BAP 2003), aff’d, 97 F. App’x 249,
250 (10th Cir. 2004); see also Schicke, 97 F. App’x. 249, 250 (10th Cir. 2004) (quoting
Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 306, 314 (1950)).
12
circumstances, to apprise interested parties of the pendency of the action and afford them
an opportunity to present their objections.” 52
Generally, given a collection attorney’s duties to a client, notice provided to the
attorney is “reasonably calculated” to be relayed to the client. 53 The Tenth Circuit has
held that “notice to a creditor's attorney . . . is ordinarily considered sufficient if the
attorney received knowledge of the case while representing the creditor in enforcing the
creditor’s claim against the debtor.” 54 Similarly, the BAP has held that scheduling a
creditor in care of an attorney will be reasonably calculated to apprise the creditor of the
bankruptcy if “the attorney listed was its agent in matters related to” 55 the judgment
subject to discharge in the bankruptcy or the attorney assisted in “matters against a debtor
prepetition.” 56 The BAP has required “some nexus between the creditor’s retention of the
attorney and the creditor’s issues with the debtor.” 57
52
Mullane, 339 U.S. at 314 (citing multiple Supreme Court cases supporting this
premise).
53
Id.; see also Fla. R. Prof. Conduct 1-4.4(a)(3) (“a lawyer shall . . . keep the client
reasonably informed about the status of the matter”), (a)(2) (“a lawyer shall . . .
reasonably consult with the client about the means by which the client's objectives are to
be accomplished”); see also Fla. R. Prof. Conduct 4-4.2 (“a lawyer must not
communicate about the subject of the representation with a person the lawyer knows to
be represented by another lawyer in the matter, unless the lawyer has the consent of the
other lawyer” or is authorized to do so by law or a court order.).
54
Schicke, 97 F. App’x at 251 (quoting 4 Collier on Bankruptcy § 523.09[4][a] (15th
ed. 2003)).
55
Schicke, 290 B.R. at 800.
56
Id. at 803.
57
Id.13
While we agree that mailing notice to a creditor’s former counsel is problematic, 58
the record supports the bankruptcy court’s finding that Gibson was Appellant’s current
counsel on August 18, 2014. Nothing indicates that Gibson ever withdrew his
representation. Gibson took the Debtor’s deposition in aid of execution “a couple [of]
years into it,” which presumably means several years postjudgment. 59 In December 2014,
Appellant hired an aggressive collection firm to pursue collection of his judgment outside
of Florida. 60 Appellant told Gibson of this decision. Gibson apparently approved of it, or
at least voiced no opposition, saying “I don't think we can do anything for you because
this stuff [the Debtor's business dealings] [are] [] all over the place.” 61 These facts
support the bankruptcy court’s finding that Gibson was Appellant’s current counsel on
August 18, 2014, not his former counsel, and that the scope of representation included
collection of the Florida judgment.
Further, Gibson assured Appellant that he would have “got[ten] a hold of
[Appellant] immediately” had he received a bankruptcy filing notice. 62 Papers sent by
United States mail are presumed received by the addressee, absent evidence to the
58
See, e.g., Lampe v. Kash, 735 F.3d 942, 944 (6th Cir. 2013) (notice mailed to
counsel who had not represented the creditor for eight years did not comply with due
process).
59
Trial Tr. at 93, in Appellant’s App. at 310.
60
Trial Tr. at 94, in Appellant’s App. at 311.
61
Id., in Appellant’s App. at 311.
62
Trial Tr. at 97, in Appellant’s App. at 314.
14
contrary. 63 The Debtor had Gibson’s correct mailing address; 64 nothing indicates the
notice mailed to Gibson was returned. Denial of receipt is not enough to rebut the
“mailbox” presumption. 65 Because there is no evidence in the record to rebut the
“mailbox” presumption, Gibson is presumed to have received notice. 66
The issue of apparent authority should be mentioned. The authority of an agent
may be actual or apparent. While former counsel has no actual authority to act on behalf
of a former client, she may retain apparent authority to do so. “Apparent authority
originates with expressive conduct by the principal toward a third party through which
the principal manifests assent to action by the agent with legal consequences for the
63
Hagner v. United States, 285 U.S. 427, 430 (1932) (citing Rosenthal v. Walker,
111 U.S. 185, 193, (1884)) (“[P]roof that a letter properly directed was placed in a post
office creates a presumption that it reached its destination in usual time and was actually
received by the person to whom it was addressed.”); see, e.g., Rosenthal, 111 U.S. at 193;
In re Eagle Bus Mfg., Inc., 62 F.3d 730, 735 (5th Cir. 1995); Moody v. Bucknum (In re
Bucknum), 951 F.2d 204, 206-07 (9th Cir. 1991); Denmon v. Runyon, 208 B.R. 225 (D.
Kan. 1997); In re The Grand Union Co., 204 B.R. 864 (Bankr. D. Del. 1997).
64
Trial Tr. at 95- 97, in Appellant’s App. at 312-14.
65
In re Loomas, No. CO-13-017, 2013 WL 5615943 at *4 (10th Cir. BAP Oct. 15,
2013); In re Eagle Bus. Mfr., Inc., 62 F.3d 730, 736 (5th Cir. 1995); see also Gonzales v.
Montoya, No. 96-2207, 1997 WL 290945, at *1 (10th Cir. May 29, 1997) (holding mere
assertion of nonreceipt of a complaint is insufficient to show that the magistrate judge’s
finding of service is clearly erroneous).
66
See also Velasquez v. Delta Airlines Inc., No. 2:07-CV-796 TS, 2008 WL
2225832, at *2 (D. Utah May 29, 2008) (finding plaintiff’s denial of receipt did not rebut
the presumption that the mailed notice had been received); Eagle Bus Mfg., 62 F.3d at
735 (to the same effect); Denmon, 208 B.R. at 227-28 (same); Loomas, 2013 WL
5615943 at *4 n.38 (“as the bankruptcy court correctly pointed out, evidence of proper
mailing [by the court] raises a rebuttable presumption of delivery . . . mere denial of
receipt alone does not rebut the presumption that the mailed item was received”)
(citations omitted).
15
principal.” 67 “Apparent authority is a form of estoppel [which arises] from ‘the authority
a principal . . . by his actions or words holds the agent out as possessing.’” 68 “‘[A]pparent
authority’ exists only where the principal creates the appearance of an agency
relationship.” 69 Even if the authority is not actual, it may still be binding upon the
principal if apparent. 70
“The termination of actual authority does not by itself end any apparent authority
held by an agent.” 71 Rather, “[a]pparent authority ends when it is no longer reasonable
for the third party with whom an agent deals to believe that the agent continues to act
with actual authority.” 72
67
Restatement (Third) of Agency, § 3.03, cmt b (Am. Law Inst. 2006); see also
Regions Bank v. Maroone Chevrolet, L.L.C., 118 So. 3d 251, 255 (Fla. 3d Dist. Ct. App.
2013); City Nat’l Bank of Detroit v. Basic Food Indus., Inc., 520 F.2d 336, 337 (5th Cir.
1975) (“[A]n agent’s authority need not be conferred in express terms, but may be
implied under justifying circumstances.”); Roessler v. Novak, 858 So. 2d 1158, 1162 (Fla.
2d Dist. Ct. App. 2003) (“Although some agencies are based upon an express agreement,
a principal may be liable to a third party for acts of its agent which are within the agent’s
apparent authority.”); Robbins v. Hess, 659 So. 2d 424, 427 (Fla.1st Dist. Ct. App. 1995)
(“The party alleging the agency relationship bears the burden to prove it . . . .”).
68
Regions, 118 So. 3d at 255.
69
Ocana v. Ford Motor Co., 992 So. 2d 319, 326 (Fla. 3d Dist. Ct. App. 2008)
(quoting Izquierdo v. Haileah Hosp. Inc., 709 So. 2d 187, 188 (Fla. 3d Dist. Ct. App.
1998)); Jackson Hewitt, Inc. v. Kaman, 100 So. 3d 19, 31 (Fla. 2d Dist. Ct. App. 2011)
(quoting Owen Indus., Inc. v. Taylor, 354 So. 2d 1259, 1261 (Fla. 2d Dist. Ct. App.
1978)).
70
Sapp v. City of Tallahassee, 348 So. 2d 363, 367 (Fla. 1st Dist. Ct. App. 1977)
(citing Mercury Cab Owners’ Assoc. v. Jones, 79 So. 2d 782 (Fla. 1955)).
71
Restatement (Third) of Agency § 3.11 (Am. Law Inst. 2006).
72
Id.
16
Given the facts of this case, the Debtor could argue that he reasonably believed
Gibson represented Appellant on August 18, 2014. As the parties did not raise the issue
of apparent authority, however, we will not decide whether Gibson had apparent
authority to act for the Debtor on August 18, 2014. We will only note that the
reasonableness of a party’s belief about a continued attorney-client relationship is fact
specific, and depends on the length of time since the last contact with the attorney and/or
client, the nature and collection status of the claim, whether any notice of termination or
withdrawal had been given, whether either party had moved, and the like.
Based on the foregoing, we hold the bankruptcy court did not err in concluding
that the August 18, 2014 notice mailed to Gibson was sufficient under § 342(a) and did
not violate Appellant’s due process rights. Therefore, the bankruptcy court properly
denied Appellant’s § 523(a)(3).
V. CONCLUSION
The bankruptcy court’s determination that Appellant did not meet his burden of
proof under §§ 727(d)(1) or 523(a)(3) was not in error. Accordingly, the bankruptcy
court’s findings, conclusions, and judgment are AFFIRMED.
17