United Student Aid Funds Inc v. Carla Rober

Case: 09-30754 Document: 00511091646 Page: 1 Date Filed: 04/26/2010
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
April 26, 2010
No. 09-30754 Lyle W. Cayce
Clerk
In the Matter of: CARLA ROBERTS,
Debtor
UNITED STUDENT AID FUNDS INC.; SALLIE MAE GUARANTEE
SERVICES, INC.,
Appellants
v.
CARLA ROBERTS,
Appellee
Appeal from the United States District Court
for the Western District of Louisiana
USDC 6:08-CV-1971
Before KING, WIENER, and DENNIS, Circuit Judges.
PER CURIAM:*
Rule 60(b)(3) of the Federal Rules of Civil Procedure allows a party to
obtain relief from a judgment that was obtained by fraud, misrepresentation, or
*
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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .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.
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No. 09-30754
other misconduct. F ED. R. C IV. P. 60(b)(3). United Student Aid Funds Inc. and
Sallie Mae Guarantee Services, Inc., appeal the denial of their Rule 60(b)(3)
motion seeking relief from the bankruptcy court’s judgment disallowing their
proof of claim against Carla Roberts, an individual debtor. After reviewing the
briefs and the record, we affirm for essentially the reasons given by the district
court in its careful and thoughtful opinion, U.S. Aid Funds, Inc. v. Roberts, Civ.
No. 08-1971, 2009 WL 2222943 (W.D. La. July 24, 2009).
I. BACKGROUND
This case centers on a student loan incurred by the debtor, Carla Roberts,
from United Student Aid Funds, Inc. (USA Funds). The debt is evidenced by a
promissory note signed in 1991 when Roberts consolidated and refinanced her
debts. In 2001, Roberts applied for a second consolidation. Sallie Mae
Guarantee Services, Inc. (Sallie Mae), the servicer of the debt, processed that
application and obtained payment from a third-party purchaser of the debt; at
that point, Sallie Mae stamped the promissory note, “PAID IN FULL,” and
forwarded paperwork to Roberts for completion. Roberts then changed her mind,
however, and insisted that the consolidation be reversed. Sallie Mae complied,
but the stamp remained on the promissory note. Later that year, Roberts
requested a copy of the promissory note, which Sallie Mae furnished.
In 2004, Roberts filed a petition for relief under Chapter 13 of the
Bankruptcy Code in the United States Bankruptcy Court for the Western
District of Louisiana. In her bankruptcy schedules, she listed USA Funds as a
creditor with a claim in the amount of $91,001.38. Shortly thereafter, Sallie Mae
filed a proof of claim on behalf of USA Funds, listing an amount of $92,665.57.
Roberts’s case was later converted to a liquidation under Chapter 7. On March
24, 2006, Roberts filed an objection to Sallie Mae’s proof of claim, alleging that
she had already paid more than $50,000 on the underlying debt. After a
hearing, the bankruptcy court granted Roberts’s objection and disallowed Sallie
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Mae’s proof of claim; however, the court vacated its order when Sallie Mae
explained that it did not receive notice of either the objection or the hearing.
A hearing on the objection was scheduled for May 1, 2007, but it was
continued until July 10, 2007, on Sallie Mae’s motion. In the interim, on June
20, 2007, Roberts requested discovery from Sallie Mae, including interrogatories,
requests for production, and requests for admission, seeking proof of the correct
amount of the debt owed. The hearing was continued again until July 31, 2007.
Sallie Mae failed to respond to the interrogatories or the requests for admission,
but it produced some documents at the hearing. Because the time for responding
had passed, Sallie Mae was deemed to have admitted the requests for admission,
including that the debt owed by Roberts to USA Funds was paid in full.
At the July 31 hearing, the bankruptcy court was presented with several
documents relating to Sallie Mae’s proof of claim that conflicted drastically
regarding the amount owed on the debt. Sallie Mae presented only a
spreadsheet with Roberts’s name on it; the highest figure on the spreadsheet
was $64,698.37. Sallie Mae did not present a promissory note evidencing the
debt. Roberts presented, without objection, the following documents: the
promissory note marked “PAID IN FULL”; a document entitled “Statement of
Purchased Account” that listed a balance due of $109,403.62; a letter from Sallie
Mae to Roberts dated December 6, 2001, stating that no payments had been
made; and a credit report on Roberts dated December 20, 2006, that listed Sallie
Mae as a creditor, the original amount of the debt as $51,182, the recent balance
as “NA,” and a “Creditor’s Statement” that the “Debt [was] being paid through
insurance.” At the time, neither Roberts nor counsel for either side explained
why the promissory note was stamped “PAID IN FULL.”
After taking the matter under advisement, the bankruptcy court granted
Roberts’s objection and disallowed Sallie Mae’s proof of claim. The bankruptcy
court elected not to rely on Sallie Mae’s deemed admission that the debt had
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been paid in full but instead held that Sallie Mae had failed “to do what, in this
Court’s view, is a pretty basic task of providing the documents that support its
[proof of] claim.” Sallie Mae filed a notice of appeal to the district court, but it
voluntarily withdrew that appeal when Roberts objected to it as untimely. The
bankruptcy court subsequently granted Sallie Mae’s motion to reopen Roberts’s
bankruptcy case and considered Sallie Mae’s motion for relief from judgment
under Rule 60(b)(3).1
The bankruptcy court held a hearing on the motion, at which Sallie Mae
asserted that Roberts, through omission and silence, had misrepresented that
the note had been paid in full or transferred to another lender. After taking the
matter under advisement, the bankruptcy court denied Sallie Mae’s motion. The
bankruptcy court pretermitted discussing whether Roberts had committed fraud,
misrepresentation, or other misconduct, and held that Sallie Mae had failed to
establish the requisite prejudice to warrant relief under Rule 60(b)(3). On
appeal, the district court affirmed, finding that Sallie Mae’s arguments on
appeal “ignore[d] the essential conclusion reached by the Bankruptcy Judge, . . .
that—the circumstances of the Promissory Note notwithstanding—Sallie Mae
failed to prove the elements of its claim and its rights to recover the amounts it
alleged were due.” U.S. Aid Funds, 2009 WL 2222943, at *11. The district court
continued:
Significantly, it appears the sole and only issue for the
Bankruptcy Court’s consideration at the July 31, 2007 hearing was
the presentation of Sallie Mae’s evidence to prove its claim. Yet, in
spite of all of its foregoing failures to cooperate in the discovery
process—including a prior dismissal of its claim against the debtor
for failure to respond to Ms. Roberts’s objection—Sallie Mae chose to
1
Rule 60(b)(3) provides that “[o]n motion and just terms, the court may relieve a party
or its legal representative from a final judgment, order, or proceeding for . . . fraud (whether
previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing
party.” FED . R. CIV . P. 60(b)(3). Subject to exceptions not applicable here, Rule 60 applies in
bankruptcy cases. FED . R. BANKR . P. 9024.
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present its case against Ms. Roberts without a witness and without
providing responses to discovery. At that hearing, Sallie Mae also
chose to proceed without its own copy of the Promissory Note,
instead relying on Ms. Roberts to introduce her copy of the Note. . . .
What is clear to this Court is that Sallie Mae’s current argument
that it could not accurately present its case to the Bankruptcy Court
because of Ms. Roberts’s alleged actions is meritless. . . .
Id. Sallie Mae timely appealed the district court’s judgment.
II. DISCUSSION
We review the bankruptcy court’s denial of a Rule 60(b) motion as the
district court did, for abuse of discretion. Pettle v. Bickham (In re Pettle), 410
F.3d 189, 191 (5th Cir. 2005). “Under this standard, ‘it is not enough that the
granting of relief might have been permissible, or even warranted—denial must
have been so unwarranted as to constitute an abuse of discretion.’” Id.(alteration omitted) (quoting Seven Elves, Inc. v. Eskenazi, 635 F.2d 396, 402
(5th Cir. Unit A Jan. 1981)). “We apply this deferential standard ‘to ensure that
[Rule] 60(b) motions do not undermine the requirement of a timely appeal.’”
Gov’t Fin. Servs. One Ltd. P’ship v. Peyton Place, Inc., 62 F.3d 767, 770 (5th Cir.
1995) (quoting First Nationwide Bank v. Summer House Joint Venture, 902 F.2d
1197, 1200–01 (5th Cir. 1990)); cf. United Student Aid Funds, Inc. v. Espinosa,
78 U.S.L.W. 4207, 4210 (U.S. Mar. 23, 2010) (“[A] motion under Rule 60(b)(4) [for
relief on the grounds that the judgment is void] is not a substitute for a timely
appeal.”).2 Factual findings underlying a ruling on a Rule 60(b) motion are
reviewed for clear error, see Jenkens & Gilchrist v. Groia & Co., 542 F.3d 114,
118 (5th Cir. 2008), cert. denied sub nom. Felderhof v. Jenkens & Gilchrist, 129
S. Ct. 1585 (2009), while questions of law are reviewed de novo, Frazar v. Ladd,
457 F.3d 432, 435 (5th Cir. 2006) (citing Ran–Nan, Inc. v. Gen. Accident Ins. Co.
of Am., 252 F.3d 738, 739 (5th Cir. 2001) (per curiam)).
2
Although it does not affect our disposition, we note that Sallie Mae sought Rule
60(b)(3) relief shortly after Roberts objected to its direct appeal as untimely filed.
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Rule 60(b)(3), applicable to bankruptcy cases through Bankruptcy Rule
9024, permits a court to provide relief from a final judgment obtained through
fraud, misrepresentation, or other misconduct by an opposing party. F ED. R. C IV.
P. 60(b)(3). “A party making a Rule 60(b)(3) motion must establish (1) that the
adverse party engaged in fraud or other misconduct, and (2) that this misconduct
prevented the moving party from fully and fairly presenting his case.” Hesling
v. CSX Transp., Inc., 396 F.3d 632, 641 (5th Cir. 2005) (citing Gov’t Fin. Servs.
One, 62 F.3d at 772). “Rule 60(b)(3) ‘is aimed at judgments which were unfairly
obtained, not at those which are factually incorrect.’” Id. (quoting Rozier v. Ford
Motor Co., 573 F.2d 1332, 1339 (5th Cir. 1978)). We agree with the conclusions
of both the bankruptcy court and the district court that Sallie Mae has failed to
show that it was prevented from fully and fairly presenting its case.
We find our decision in Diaz v. Methodist Hospital, 46 F.3d 492 (5th Cir.
1995), to be instructive. In that case, Diaz—who was injured in a car
crash—sued a hospital and treating physicians for medical malpractice. Id. at
494. During trial, the defendant physicians testified that a particular laboratory
test was unavailable during weekends. Id. at 494–95. Following a jury verdict
for the defendants, Diaz obtained an affidavit from another doctor that such
testing was indeed available during weekends, and she moved for relief from
judgment, claiming that the defendants’ testimony amounted to perjury. Id. at
495. Assuming, arguendo, that Diaz’s assertions of perjury were true, we held
that she was not prevented from fully and fairly presenting her case:
In the case at hand, [Diaz] had independent access to information
concerning the availability of [the laboratory] testing . . . . [The
post-trial] affidavit proves that this information was not under the
exclusive control of the [physicians]. It is likely that a more focused
effort by [Diaz] could have uncovered this evidence prior to trial.
Id. at 497; see also Williams v. Thaler, — F.3d —, 2010 WL 1039450, at *17 (5th
Cir. Mar. 23, 2010) (concluding that a prisoner was not prevented from fully and
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fairly presenting his case where the prosecution withheld subpoenas requesting
documents to which “Williams had equal—if not greater—access”).
The concerns at issue in Diaz apply with equal force here. Sallie Mae had
independent access to the promissory note,3 and a cursory glance at the
promissory note would have revealed the “PAID IN FULL” stamp. During its
appeal to the district court and to this court, Sallie Mae has had no trouble
explaining the circumstances surrounding the stamp, but it has not offered a
satisfying excuse for its inability to present the same explanation to the
bankruptcy court at the hearing on July 31, 2007—a hearing convened for the
very purpose of determining the validity of the proof of claim for the debt
evidenced by the promissory note. We have little trouble concluding that Sallie
Mae was not prevented from fully and fairly presenting its case at that hearing,
and we agree with the district court that the bankruptcy court did not abuse its
discretion in denying Sallie Mae’s Rule 60(b)(3) motion.4
3
Indeed, Roberts had a copy of the promissory note bearing the “PAID IN FULL” stamp
only because Sallie Mae furnished it to her.
4
Sallie Mae presents several additional arguments, none of which has any merit.
First, Sallie Mae urges that Roberts’s introduction of the promissory note constituted
assertion of the affirmative defense of accord and satisfaction outside of a responsive pleading,
in violation of Rule 8. Regardless of whether Roberts asserted such an affirmative defense,
the bankruptcy court’s determination was not that the debt was satisfied but that Sallie Mae
had failed to adduce sufficient proof of the validity of its proof of claim.
Second, Sallie Mae argues that Roberts violated her duty of candor as a debtor by not
alerting the bankruptcy court to the circumstances of the “PAID IN FULL” stamp. The cases
cited in support deal with a debtor’s duty to be forthright in disclosing assets, see, e.g.,
Browning Mfg. v. Mims (In re Coastal Plains, Inc.), 179 F.3d 197, 207–08 (5th Cir. 1999), and
we question the logic of requiring a debtor to prove its creditor’s proof of claim when the
Bankruptcy Code permits the debtor to file an objection to that proof of claim, see 11 U.S.C.
§ 502. More importantly, we note that the relevant information was equally within Sallie
Mae’s possession, and it was therefore not prevented from fully and fairly presenting its case.
Third, Sallie Mae claims that the bankruptcy court relied on an erroneous belief that
the promissory note had been entered in the bankruptcy court’s records prior to the hearing
on July 31, 2007. Sallie Mae failed to raise this argument on appeal to the district court, and
we do not consider it now. See Bradley v. Ingalls (In re Bradley), 501 F.3d 421, 433 (5th Cir.
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III. CONCLUSION
For the foregoing reasons, the judgment of the district court, which
affirmed the judgment of the bankruptcy court, is AFFIRMED.
2007) (“Even if an issue is raised and considered in the bankruptcy court, this court will deem
the issue waived if the party seeking review failed to raise it in the district court.” (citing Rush
Truck Ctrs. of Tex. L.P. v. Bouchie (In re Bouchie), 324 F.3d 780, 782 n.6 (5th Cir. 2003) (per
curiam); United States v. Olson, 4 F.3d 562, 567 (8th Cir. 1993))).
Finally, Sallie Mae asserts that the bankruptcy court ignored the equities in opting for
the interests of finality. Balancing the equities in deciding a Rule 60(b)(3) motion is within
the sound discretion of the lower court, see Seven Elves, 635 F.2d at 401–02 (explaining that
balancing the interests of finality and justice under Rule 60(b) is within the lower court’s
exercise of discretion), and our review of the record reveals that the bankruptcy court did not
abuse that discretion in reaching its balance.
8