Mayer v. Beaulieu

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________________
No. 98-30233
_______________________
In The Matter Of: LINDA V. MAYER,
Debtor.
LINDA VENUS MAYER,
Appellant,
v.
LOIS SHEPARD; MICHAEL F. ADOUE; JAMES A. NUGENT;
WILLIAM WARD MAYER; BERNARD J. RICE III; HOME INSURANCE COMPANY;
CYNTHIA LEE TRAINA,
Appellees.
_________________________________________________________________
Appeal from the United States District Court
for the Eastern District of Louisiana
(96-CV-3223-C)
_________________________________________________________________
August 16, 1999
Before HIGGINBOTHAM, JONES, and DENNIS, Circuit Judges.
PER CURIAM:*
In her second trip to this court, Debtor-Appellant Linda
Mayer has appealed four decisions related to her bankruptcy
proceedings. We discuss them seriatim and, finding no error by the
lower courts, affirm.
I. Objections to Exemptions
Mayer appeals the bankruptcy court’s decision to sustain
the Chapter 7 trustee’s objections to Mayer’s claimed exemptions.
*
Pursuant to 5TH CIR. R. 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this opinion should not be published and is not precedent except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 5TH CIR. R. 47.5.4.
She argues (1) that the trustee, Cynthia Traina, had no standing to
object, and (2) that Traina’s objections were void because they
were not properly served on Mayer.
This bankruptcy originated in Chapter 7 in August 1995.
The first meeting of creditors occurred on October 20, 1995.
According to Bankruptcy Rule 4003(b), “[t]he trustee or any
creditor” had 30 days after the first meeting to file objections to
Mayer’s claimed exemptions. Yet, on November 8 -- before the 30
days expired -- the bankruptcy court’s order to convert the case to
Chapter 13 was docketed. Although Traina’s authority as Chapter 7
trustee expired then, see 11 U.S.C. § 348(e), Traina timely filed
objections to Mayer’s list of exemptions on November 13. In March
1996, after several months of extensions and unsuccessfully
proposed repayment plans, the bankruptcy court granted Traina’s
motion to convert Mayer’s bankruptcy back to Chapter 7, and Traina
was reappointed as Chapter 7 trustee.
In June 1996, the bankruptcy court determined that
Traina’s objections to exemptions were not barred by lack of
standing or lack of notice. The bankruptcy court reiterated these
determinations in a written opinion signed and docketed on July 16.
A hearing was held on the merits of Traina’s objections on July 31.
On August 12, the bankruptcy court sustained Traina’s objections.
The district court later found no error in the bankruptcy court’s
ruling.
Although Traina was not a Chapter 7 trustee when she
filed objections, she was still a “creditor” allowed to file
objections under Rule 4003(b). In the infant Chapter 13 case, she
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had claims against the estate for the administrative expenses she
had incurred while she was trustee.1 See 5 WILLIAM L. NORTON JR.,
NORTON BANKRUPTCY LAW & PRACTICE § 125:8, at n.88 (2d ed. 1993 & Supp.
Feb. 1999) (citing cases allowing postpetition, preconversion
administrative expenses for former trustees). Thus, Traina did
have standing to object to Mayer’s claimed exemptions.
The question of notice is made unusual by the
circumstances of this case. Mayer claims that Traina never served
her with a copy of her objections when they were filed in November
1995, even though Rule 4003(b) requires that “[c]opies of the
objections shall be delivered or mailed to the ... person filing
the list [of exemptions].” That Rule, however, does not place a
time limit on delivering copies.2 Nor do the rules governing
service of a motion in a contested matter, except “reasonable
notice and opportunity for a hearing.” See BANKR. R. 9014, 7004.
Thus, the bankruptcy court did not err in determining that service
at the time the matter was set for hearing would be adequate. The
fact that a hearing on exemptions was not set earlier was due to
the detour the case took into Chapter 13 -- which was made at
Mayer’s request and later found to have been made without good
faith.
The matter finally was set for hearing in July 1996.
Mayer asserts that before that hearing, Traina served her only with
1
Traina had already filed an interim application for fees at
the time of conversion to Chapter 11. It was later granted after
reconversion to Chapter 7.
2
This is unlike the pre-1983 Rule 403, which required a copy
to be mailed to the debtor and his attorney “forthwith.”
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a notice of hearing and not a copy of the objections. In response,
Traina claims that “Mayer was appropriately served ... and she
filed a memorandum opposing and appeared for oral argument on the
issue.” The record contains a certificate of service showing that,
on June 11, Traina mailed to Mayer a memorandum opposing her
claimed exemptions and included a copy of the original November
objections. A hearing on the objections was held six weeks later.
The bankruptcy court and district court did not err in
granting Traina’s objections to Mayer’s claimed exemptions.
II. Compromise and Dismissal
Mayer argues that the bankruptcy court improperly
approved a compromise of several of the estate’s claims. The
district court held that Mayer’s appeal of the compromise was
untimely.
The compromise was reached by the trustee and several of
the parties against whom Mayer had made claims. On July 10, 1996,
the bankruptcy court held a hearing on the motion for authority to
compromise and settle litigation. The motion included a proposed
settlement agreement, and it specified that the parties against
whom the estate had claims had already tendered a check for $1,000
to the trustee, who awaited only “court approval,” the execution of
“receipt and releases,” and “consent judgments ... signed by the
various courts involved.”
The bankruptcy judge gave oral reasons for granting the
motion, and, in part of a signed order docketed on July 18, ordered
as follows: “IT IS FURTHER ORDERED that the motion of Cynthia Lee
Traina, et al. for authority to compromise and settle litigation is
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GRANTED. Counsel are to file the appropriate order regarding this
motion.”
On July 31, Traina filed with the bankruptcy court a
receipt and release of the estate’s claims. On that day, the
bankruptcy judge signed an order dismissing those claims. The
dismissal order was docketed on August 1. It was not until August
12 that Mayer filed her notice of appeal from the order “dismissing
and compromising debtor’s claims ... and also the Orders orally
rendered on July 31, 1996.”
The district court held that Mayer’s appeal of the
compromise was untimely because it was not filed “within 10 days of
the date of the entry of judgment,” BANKR. R. 8002(a), which the
district court determined was on the date that the order approving
the compromise was docketed. Mayer’s timely appeal of the August
1 dismissal order could not be used as a belated attack against the
July 18 compromise order.
Under the “liberalized final judgment rule” in
bankruptcy, an order is appealable if it finally disposes of claims
by the trustee against third parties. Official Comm. of Unsecured
Creds. v. Cajun Elec. Power Coop. (In re Cajun Elec. Power Coop.),
119 F.3d 349, 354 (5th Cir. 1997). An order approving a compromise
can be a final, appealable order. See, e.g., id.; Expeditors Int’l
v. Citicorp N. Am., Inc. (In re Colortran, Inc.), 218 B.R. 507, 510
(B.A.P. 9th Cir. 1997); Hill v. Burdick (In re Moorhead Corp.), 208
B.R. 87, 89 (B.A.P. 1st Cir. 1997).
Here, the bankruptcy court’s language ordering counsel to
“file the appropriate order” did not reveal any intent to retain
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jurisdiction over the compromised claims, or to do anything non-
ministerial in dismissing the claims. As the district court
recognized, the bankruptcy court order made clear that it had
approved the compromise and rendered its final judgment on such
issues as whether the compromise was fair and equitable. To allow
Mayer to raise those issues by challenging the subsequent dismissal
order would permit a collateral attack. Cf. Former Frontier Pilot
Litig. Steering Comm., Inc. v. Frontier Airlines, Inc. (In re
Frontier Airlines, Inc.), 117 B.R. 588, 592 (D. Col. 1990) (“the
Committee may not appeal the bankruptcy court’s order confirming
the plan as a way to attack collaterally the bankruptcy court’s
order approving [a settlement]”).
The district court did not err in finding that Mayer’s
appeal of the compromise order was untimely.
Mayer also appeals the dismissal order itself on grounds
that it was premature. Her first argument is that it was premature
because the order authorizing the compromise was not yet final when
the dismissal was ordered. This proposition has already been
rejected. Mayer’s second argument is that Traina’s unilateral
release did not constitute a compromise under LA. CIV. CODE art. 3071
(defining a compromise as “an agreement between two or more
persons”). This argument is meritless; it is sufficient to note
that the compromising parties signed the settlement agreement
submitted to the bankruptcy court with the original motion to
compromise.
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III. Protective Order and Stricken Motion
Mayer argues that the bankruptcy court improperly struck
parts of her response to Traina’s motion to compromise. This
action was in the nature of sanctions for scandalous material
included in Mayer’s motion, so it is reviewed for an abuse of
discretion. See Coie v. Sadkin (In re Sadkin), 36 F.3d 473, 475
(5th Cir. 1994).
In her pro se filing opposing Traina’s motion to
compromise, Mayer included almost three pages that accused Traina
and her attorney of incompetence and unprofessional conduct, and
described the proposed compromise as “ridiculous” and “insulting.”
These sections were stricken by the bankruptcy court, which also
ordered Mayer, under the threat of sanctions, not to “make
scandalous, impertinent or irrelevant allegations against” Traina
or her attorney.
The bankruptcy court did not abuse its discretion in
taking these minimal steps to preserve decorum in a proceeding that
was obviously driven in part by Mayer’s strong emotions.
IV. Enforcement of Sanctions
In the order docketed on August 12, the bankruptcy court
also addressed previously-awarded sanctions of $294.14. This
amount was to have been paid by Mayer to Kurt Englehardt, attorney
for one of the creditors, Lois Shephard. In the August 12 order,
the bankruptcy court ordered that Mayer was prohibited from filing
any pleadings about Englehardt until the sanction was paid. The
district court affirmed.
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Mayer does not appeal the underlying award of sanctions.
Rather, she argues that the bankruptcy court’s method of enforcing
the sanctions violates the federal statute precluding the use of
“execution, levy, attachment, garnishment, or other legal process”
against her social security benefits, see 42 U.S.C. § 407(a), which
she claims are her only form of income.
The bankruptcy court’s order did not constitute “other
legal process” within the meaning of § 407(a). Unlike the cases
Mayer cites, there was no execution on a judgment here, cf. Todd v.
Romano, 550 A.2d 111 (N.H. 1988), nor a threat of a lawsuit or
withholding of state tax refunds for refusal to pay over social
security benefits, cf. King v. Schafer, 940 F.2d 1182 (8th Cir.
1991). Mayer was simply prohibited from filing further pleadings
about Englehardt until she paid her sanctions. That she may have
to use social security benefits -- after she receives them -- to do
this, does not violate the statute. See United States v. Eggen,
984 F.2d 848 (7th Cir. 1993) (district court could revoke probation
for defendant’s failure to use social security benefits already
paid to him to make restitution to his victims).
V. Conclusion
Some of the appellants have requested sanctions from this
court against Mayer. Although the litigation tactics surrounding
this bankruptcy have often been no credit to the debtor, the first
two legal issues raised in this appeal were not so frivolous as to
warrant sanctions from this court at this time. Of course, the
bankruptcy and district courts have the power to enter appropriate
sanctions against Mayer for her tactics in those courts. And we
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reiterate that Mayer may not use the federal courts as a vehicle
for baseless or scandalous or repetitive claims.
All appellees except Traina moved to dismiss this appeal
on technical grounds. Those motions are DENIED. The motion of
Appellee Bernard J. Rice III to supplement the record on appeal is
GRANTED.
The judgments of the district court and bankruptcy court
are AFFIRMED.
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