Kleibrink v. Kleibrink

Case: 07-11190 Document: 00511240152 Page: 1 Date Filed: 09/21/2010
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
September 21, 2010
No. 07-11190 Lyle W. Cayce
Clerk
In The Matter Of: RICKY KLEIBRINK
Debtor
________________________________________________________________________
RICKY KLEIBRINK
Appellant
v.
ELLEN KLEIBRINK; MID STATE TRUST VII
Appellees
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:07-CV-88
Before DAVIS, STEWART, and DENNIS, Circuit Judges.
PER CURIAM:*
In this bankruptcy appeal, debtor Ricky Kleibrink challenges the district
court’s affirmance of the bankruptcy court’s ruling that creditor Mid State Trust
VII holds an enforceable security interest in a property of his, despite his having
*
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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .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.
Case: 07-11190 Document: 00511240152 Page: 2 Date Filed: 09/21/2010
received a discharge in an earlier bankruptcy proceeding. The debtor filed the
instant bankruptcy proceeding in order to avoid the creditor’s attempt to
foreclose on the property. The bankruptcy court ruled that the earlier
bankruptcy proceeding did not extinguish the creditor’s lien against the
property, because the claim objection filed by the debtor in the earlier proceeding
did not afford the creditor due process in two ways. First, the claim objection
was not accompanied by clear notice that the debtor was challenging the
validity, priority, or extent of the lien, and that the debtor sought to abrogate the
creditor’s right to look to its collateral. Second, the debtor did not comply with
the procedural safeguards set forth in Part VII of the Federal Rules of
Bankruptcy Procedure. Accordingly, the bankruptcy court concluded that the
claim objection filed by the debtor could not substitute for the adversary
proceeding that is ordinarily required by the bankruptcy rules for extinguishing
a lien under the circumstances of the case. The debtor appealed to the district
court, which affirmed for substantially the same reasons.
In the time since the lower courts addressed the merits of this case, the
Supreme Court issued its decision in United Student Aid Funds, Inc. v.
Espinosa, 130 S. Ct. 1367 (2010). Espinosa held that a judgment discharging
debt in a bankruptcy proceeding is void under Rule 60(b)(4) where the creditor
did not receive notice that satisfied the requirements of due process. Id. at 1378.
“‘An elementary and fundamental requirement of due process in any proceeding
which is to be accorded finality is notice reasonably calculated, under all the
circumstances, to apprise interested parties of the pendency of the action and
afford them an opportunity to present their objections.’” Id. at 1378 (quoting
Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950)).
Although the procedural posture of the instant case is different from that of
Espinosa, the dispositive issue is the same: whether a creditor in a bankruptcy
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Case: 07-11190 Document: 00511240152 Page: 3 Date Filed: 09/21/2010
proceeding received notice, satisfying the requirements of due process, that its
interest could be extinguished in that proceeding.
Here, the lower courts explained in detail why the debtor’s confusing claim
objection filings in the earlier bankruptcy proceeding did not give the creditor
clear or sufficient notice that its lien could be extinguished. The district court
summarized its findings as follows:
The Court agrees with the bankruptcy court’s conclusion that . . .
the [debtor’s] Claim Objection in the [earlier bankruptcy proceeding]
did not clearly notify [the creditor] that its secured claim was at
risk[,] nor did the Claim Objection notify [the creditor] that [the
debtor] sought to extinguish its ability to look to its collateral . . . .
[T]he Claim Objection did not seek to “disallow” [the creditor’s]
claim, but rather, it sought to allow the claim at a zero amount.
Only after reading the [debtor’s] “objection codes” does it become
clear that [the debtor] sought to allow the claim only as an
unsecured claim, thereby arguably extinguishing the lien . . . .
Particularly in light of the fact that the confirmed Plan provided
that [the creditor] would retain its lien, the Court concludes that
the bankruptcy court properly held that the Claim Objection did not
provide adequate notice to [the creditor] that [the debtor] sought to
extinguish its lien.
In re Kleibrink, 2007 WL 2438359 at *7 (N.D. Tex. 2007). We conclude that the
notice given to the creditor here did not satisfy the due process standard for
notice set forth in Mullane. Accordingly, we AFFIRM the district court’s
judgment that the creditor’s lien survived the earlier bankruptcy proceeding.1
1
The debtor fails to raise any argument appealing the district court’s holding that the
the lien is valid as to the debtor’s former wife, his co-debtor. Therefore, that issue is waived.
Fed. R. App. P. 28(a)(9)(A) (appellate briefs must contain “contentions and the reasons for
them, with citations to the authorities and parts of the record on which the appellant relies”);
United States v. Thames, 214 F.3d 608, 612 n.3 (5th Cir. 2000) (where a party fails to
adequately brief an issue, the issue is waived).
3