Simon v. Navon

• Decision Date: 08 May 1997
• Docket Number: No. 96-2314,96-2314
• Citation: 116 F.3d 1
• Parties: 38 Collier Bankr.Cas.2d 38, 37 Fed.R.Serv.3d 1248, 30 Bankr.Ct.Dec. 1196, Bankr. L. Rep. P 77,395 Frank SIMON, II, Plaintiff, Appellee, v. Gershon NAVON, Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 1

116 F.3d 1

38 Collier Bankr.Cas.2d 38, 37 Fed.R.Serv.3d 1248,

30 Bankr.Ct.Dec. 1196, Bankr. L. Rep. P 77,395

Frank SIMON, II, Plaintiff, Appellee, v. Gershon NAVON, Defendant, Appellant.

No. 96-2314.

United States Court of Appeals First Circuit.

Heard May 8, 1997.

Decided June 2, 1997.

James D. Poliquin, Portland, ME, for defendant, appellant.

Philip P. Mancini, Rockport, ME, for plaintiff, appellee.

Before SELYA, Circuit Judge, COFFIN and BOWNES, Senior Circuit Judges.

COFFIN, Senior Circuit Judge.

This appeal is a sequel to Simon v. Navon, 71 F.3d 9 (1st Cir.1995), in which we affirmed a May 19, 1994 judgment for plaintiff Simon against Jonathan and Gershon Navon on a breach of contract action, reversed a judgment on an abuse of process claim, and vacated and remanded a defamation claim. After the case was returned to the district court, both Navons then being debtors in bankruptcy proceedings, further action was suspended until the bankruptcy cases were terminated, Jonathan's by a discharge in April and Gershon's by dismissal in June of 1996.

Subsequently, defendant Gershon Navon, on the basis of newly acquired information, on September 6, 1996, filed a motion for relief from the breach of contract judgment under Fed.R.Civ.P. 60(b)(3) and (6), ¹ claiming that Simon had given false testimony at trial and had withheld documents during discovery.

The district court, without granting further discovery or hearing, denied the motion for relief, ruling as follows:

1. Defendant's motion is untimely in that it was not filed within one year following judgment of this case, in accordance with Rule 60(b)(3).

2. Even if timely filed, the defendant has failed to make out a showing of fraud, in accordance with Rule 60(b)(6).

We are confronted with three questions. The first is whether the court erred in ruling that the 60(b)(3) motion was untimely filed, i.e., after the expiration of the maximum period of one year. More precisely, we must consider the implicit ruling that the pendency of bankruptcy proceedings did not toll the running of the one year period. The second question is whether the court erred in ruling that appellant failed to demonstrate a 60(b)(6) claim for "any other reason justifying relief," a claim not subject to a specific limitations period. And finally, we address the subset of 60(b)(6), the denial of a claim asserting fraud upon the court.

These questions turn out to raise purely legal issues, as to which our standard of review is plenary. We take the facts "as the moving party alleges, to see whether those facts, if proven, would warrant relief." Teamsters, Chauffeurs Local No. 59 v. Superline Transportation Co., 953 F.2d 17, 18 (1st Cir.1992) (citing United States v. Baus, 834 F.2d 1114, 1121 (1st Cir.1987)). We conclude that the district court did not err.

I. Timeliness of the Rule 60(b)(3) Filing

The motion for relief was filed on September 6, 1996, some two years, three and a half months after the amended judgment of May 19, 1994. This, of course, exceeded the maximum period of one year allowed by the rule for (b)(3) claims.

Appellant devotes one paragraph of his brief to the argument that the one year period does not begin to run from the entry of judgment following trial, but rather from November 27, 1995, the date of our decision in the prior appeal. This is so, he asserts, because we "substantially altered" the earlier judgment, and he cites as support 11 Charles Alan Wright & Arthur R. Miller, Mary Kay Kane, Federal Practice and Procedure, § 2866, at 390-91 (2d ed.1995). But the breach of contract ruling, the only judgment placed in issue by the motion for relief, was not altered in any way. As the Supreme Court stated in a similar context:

The test is a practical one. The question is whether the ... court ... has disturbed or revised legal rights and obligations which, by [the] prior judgment, had been plainly and properly settled with finality.

FTC v. Minneapolis-Honeywell Regulator Co., 344 U.S. 206, 212, 73 S.Ct. 245, 249, 97 L.Ed. 245 (1952) (timeliness of petition for certiorari). The situation here is legally indistinguishable from that in Transit Casualty Co. v. Security Trust Co., 441 F.2d 788, 790-91 (5th Cir.1971), where an amended judgment merely changed a dismissal from "with prejudice" to "without prejudice," and the court noted that in the suit at issue, "plaintiffs stood in the exact position as they did [after the original order]." See also Gegenheimer v. Galan, 920 F.2d 307, 309-310 (5th Cir.1991). This argument is therefore unavailing.

Appellant's more labored argument focuses on the effect of bankruptcy proceedings in extending time limits in non-bankruptcy cases involving the bankruptcy debtor. An involuntary petition in bankruptcy was filed against Gershon Navon on May 14, 1994, and was dismissed on June 11, 1996. Appellant makes a two-step argument. He first invokes 11 U.S.C. § 108(c) of the Bankruptcy Code, which states in part:

[I]f applicable nonbankruptcy law ... fixes a period for commencing or continuing a civil action ... on a claim against the debtor, ... and such period has not expired before the date of the filing of the petition, then such period does not expire until the later of--

(1) the end of such period, including any suspension of such period occurring on or after the commencement of the case; or

(2) 30 days after notice of the termination or expiration of the stay under section 362 ...

This section is applicable, appellant argues, because his motion for relief sought to continue the civil action on a claim originally filed against the debtor. Then, relying on subsection (1), he assumes, without citation of authority, that the "suspension of such period" was triggered by the automatic stay provision of the Bankruptcy Code, 11 U.S.C. § 362(a)(1), which states:

[A bankruptcy petition] ... operates as a stay ... of ... the commencement or continuation ... of a judicial ... action or proceeding against the debtor....

Appellee counters with three arguments. He first urges that, given the passage of 27 months from the date of final judgment, the district court did not abuse its discretion. He next argues that the automatic stay of § 362 is inapplicable when a debtor in possession undertakes affirmative action for his own benefit, citing Autoskill, Inc. v. National Educ. Support Systems, 994 F.2d 1476 (10th Cir.1993). Finally, he asserts that 11 U.S.C. § 108(c) is inapplicable to actions brought by the debtor. Instead, he invokes § 108(a), concerning the commencement of actions by debtors, which in his view would impose an outside limit of two years from the May 1994 judgment.

All of appellee's arguments misfire. To begin, the issue being purely legal, abuse of discretion is not the appropriate standard of review. Secondly, the fact that it was the debtor, rather than a creditor, who took this particular step of filing a motion, does not alter the fact that it constitutes a "continuation" of an "action or proceeding against the debtor" within the terms of § 362. The Ninth Circuit, in Parker v. Bain, 68 F.3d 1131, 1135-36 (9th Cir.1995), dealt with the applicability of § 362 to an appeal by a debtor, raising the same issue. It said that it did not need to "spill a great deal of ink" on the assertion "that an appeal by the debtor cannot constitute the continuation of an action against the debtor." It observed that seven other circuits had rejected that rationale. We now make the number nine.

Parker v. Bain also noted Autoskill, see 68 F.3d at 1136 n. 8, which had held that Bankruptcy Rule 6009, allowing a debtor in possession "[w]ith or without court approval" to "prosecute any action or proceeding in behalf of the estate," obviated any need to obtain leave of court or release of stay before bringing an appeal. 994 F.2d at 1486. The Parker court was crystal clear that "Rule 6009 does not trump the code's automatic stay." It relied on the analysis of Rule 6009's history and purpose by the Bankruptcy Court in In re Capgro Leasing Assocs., 169 B.R. 305, 309-313 (Bankr.E.D.N.Y.1994), which held that a debtor in possession may not proceed with an appeal of an action brought against him "absent an order granting relief from the automatic stay," id. at 313. The Bankruptcy Court concluded that, while Rule 6009 means that a trustee (or debtor in possession) is no longer required to have the approval of the bankruptcy judge before deciding to commence or defend an action on behalf of the estate, the bankruptcy judge retains power under section 362 "to decide when to let such action go forward." Id. The Ninth Circuit therefore parted company from Autoskill, and so do we. ²

As for the applicability of § 108(a), our short answer is that by its terms it refers only to periods within which a debtor may "commence an action"; here, the action is one that was commenced against the debtor.

But while appellee has not come close to the target, appellant's thrusts have also fallen short. As we have noted, he has assumed that the mere existence of an automatic stay under § 362 triggers the "suspension" referred to in § 108(c). This may be a common sense reading, but it is not the law. Collier Bankruptcy Manual sets forth the vital caveat to "such suspension":

Such a suspension may result from either state or federal law....

... In some jurisdictions state law may dictate suspension of a statute of limitations when a bankruptcy or another court proceeding has stayed the initiation of an action. Such suspension would presumably be included within the terms of section 108(c), adding the entire duration of the automatic stay to the applicable time period. [Footnote omitted.]

However, absent such a provision in state law, a statute of limitations or other deadline for an action against a debtor ... is extended for only the second period set forth in section 108(c), 30 days after notice of the termination or expiration of the automatic stay....

...