Pioneer Inv. Services Co., In re

• Decision Date: 14 April 1994
• Docket Number: Nos. 92-6090,s. 92-6090
• Citation: 21 F.3d 428
• Parties: NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit. In re PIONEER INVESTMENT SERVICES COMPANY, Debtor. The CAIN PARTNERSHIP, LTD., Plaintiff-Appellant, v. PIONEER INVESTMENT SERVICES COMPANY, Defendant-Appellee. to 92-6092.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 428

21 F.3d 428

NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit.

In re PIONEER INVESTMENT SERVICES COMPANY, Debtor The CAIN PARTNERSHIP, LTD., Plaintiff-Appellant, v. PIONEER INVESTMENT SERVICES COMPANY, Defendant-Appellee.

Nos. 92-6090 to 92-6092.

United States Court of Appeals, Sixth Circuit.

April 14, 1994.

Before: JONES and BATCHELDER, Circuit Judges, and ENGEL, Senior Circuit Judge.

PER CURIAM.

These three bankruptcy cases, consolidated for our disposition, arise from disputes over the rights to some 95 acres of leased property in Knox County, Tennessee. In 1974, appellants, the Cain Partnership (the Partnership), holders of a long-term lease, sublet the land to Colonial Enterprises (Colonial) for a term of twenty years. ¹ Terms were $1,500 per month plus any applicable taxes. The Colonial Lease contained the following provision, the meaning of which is at issue in this case:

This lease may be assigned or the leased premises may be sublet in whole or in part for any lawful purpose at the will of the Lessee. However, the Lessee shall remain liable to the Lessor for lease payment and payment of taxes.

On July 17, 1984, Colonial assigned the Lease to Premiere Investment Properties, Inc. (Premiere). On April 13, 1987, Premiere assigned the Lease to Pioneer Investment Services Co. (Pioneer, or the Debtor). On April 16, 1987, Pioneer and the Partnership signed a "Lease Assumption and Attornment Agreement" in which the Partnership recognized Pioneer as the tenant under the Lease.

The land, apparently undeveloped at the time the Lease was originally made, now boasts two shopping malls, (Towne & Country Shopping Center and the Commons at Towne & Country) plus "commercially valuable undeveloped acreage"; the appraised value of the Debtor's interest is some $27 million. Pioneer filed a voluntary Chapter 11 petition in April 1989; the Bankruptcy Court approved a plan of reorganization in October 1990.

A. Postpetition financing order

The first of these appeals involves the Partnership's belated attempt to undo a postpetition financing arrangement, including a superpriority lien in favor of Fleet Bank, approved by the Bankruptcy Court in March 1990. On February 2, 1990, the Debtor filed a motion to enter into secured debt in the amount of $847,000 in order to pay off some of its creditors. The Debtor indicated its intention to use the value of its leased property and the shopping center as security for the loan. Proper notice of the motion was sent to all parties; the Partnership neither objected to the motion nor attended the hearing on the matter. By written order issued on March 1, 1990, the Bankruptcy Court granted its permission for the Debtor to borrow an amount not to exceed $847,000 from Fleet Bank (Fleet), on the terms specified in the Debtor's motion. The Order granted superpriority to Fleet for the amount of the new loan. The Partnership did not seek leave to appeal.

On September 28, 1990, the Partnership filed a motion to reconsider the Order, citing Bankruptcy Rule 9024 and Fed.R.Civ.P. 60(b). ² After a hearing, the Bankruptcy Court denied the motion from the bench. The Partnership appealed; the District Court affirmed the Bankruptcy Court's decision.

The Partnership argues first that the Bankruptcy Court's Order granting the Debtor permission to enter into the postpetition loan agreement is void for vagueness and thus unenforceable, and second, that New York Life Ins. Co. v. Revco D.S., Inc. (In re Revco D.S., Inc.), 901 F.2d 1359 (6th Cir.1990), requires that any bankruptcy court order granting permission for a debtor to obtain postpetition financing must include an explicit finding that the financing is being obtained, and the loan extended, in good faith.

We review denial of a Rule 60(b) motion for abuse of discretion. Davis by Davis v. Jellico Community Hosp., Inc., 912 F.2d 129, 132-33 (6th Cir.1990). "Abuse of discretion is defined as a definite and firm conviction that the trial court committed a clear error of judgment." Logan v. Dayton Hudson Corp., 865 F.2d 789, 790 (6th Cir.1989). The rule may not be invoked to obtain substantive review of an underlying decision or final judgment from which the movant did not appeal in the first instance. Jensen v. Klecker, 702 F.2d 131, 132 (8th Cir.1983). Appealing the denial of a Rule 60(b) motion "does not bring up the underlying judgment for review." Peake v. First Nat'l Bank and Trust Co., 717 F.2d 1016, 1020 (6th Cir.1983).

We find that the Bankruptcy Court cannot be viewed as having abused its discretion by denying the Motion to Reconsider. The essence of the Partnership's argument is that the Bankruptcy Court's order was erroneous as a matter of law, that the errors rendered the order void, and that therefore, the Partnership is entitled to have the order vacated. This is patent nonsense. If the Bankruptcy Court's order was erroneous as a matter of law, it was incumbent upon the Partnership to bring a direct appeal. Rule 60(b) is not, as we have already indicated, a substitute for such appeal, and judicial error is not the kind of mistake which Rule 60(b) encompasses. See 11 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure Sec. 2858 (1973). In any case, judicial errors do not render orders void. Id. Sec. 2862; Otte v. Manufacturers Hanover Commercial Corp. (In re Texlon Corp.), 596 F.2d 1092, 1099 (2d Cir.1979). Orders are void only if the court that rendered them lacked jurisdiction over the subject matter or the parties, or if the court acted in a manner inconsistent with due process. Id. The Partnership can demonstrate neither a lack of jurisdiction nor a denial of due process here.

To the extent that the Partnership's first argument, that the order is void for vagueness, is intended as an attack on the subject matter jurisdiction of the Bankruptcy Court, it is clear from the order itself, the Bankruptcy Court's reasons for denying the Motion to Reconsider and the District Court's order affirming that denial that there is no merit to this contention. "The power to interpret a prior judgment is within the inherent equitable powers of the Court issuing the judgment." Coca-Cola Bottling Co. v. Coca-Cola Co., 98 F.R.D. 254, 273 (D.Del.1983) (citing United States v. Swift & Co., 286 U.S. 106, 114 (1932)). Whether a judgment is impermissibly vague is determined by the issuing judge, and his determination of his own intent controls. United States v. 60.22 Acres of Land, 638 F.2d 1176, 1178 (9th Cir.1980), cert. denied, 451 U.S. 985 (1981). We concur with the District Court's observation that "counsel for the Cain Partnership is the only one who has experienced difficulty in understanding the [financing] order." District Court Opinion filed August 10, 1992 at 10. The Bankruptcy Court experienced no such difficulty; there the question ends.

Included in the Partnership's argument that the order is void for vagueness is the additional contention that as a matter of Tennessee law, the Debtor had lost all rights in part of the property included in the superpriority lien securing the post-petition debt which the order purports to approve, and that, as a result, the Bankruptcy Court lacked jurisdiction to determine any rights as to that property. This contention has even less merit. A court has jurisdiction to determine its own jurisdiction, and a finding that subject matter jurisdiction exists is res judicata as to that issue, see Durfee v. Duke, 375 U.S. 106 (1963); the Partnership cannot claim that the determination of the status of that property was outside the Bankruptcy Court's jurisdiction since, as is set forth in subsection (2) of this opinion, that issue was decided and affirmed in other branches of this very litigation. The Partnership makes no claim that the Bankruptcy Court lacked jurisdiction over the parties, and the Partnership candidly admits that it had notice and the opportunity to be heard in regard to the financing order and declined to take advantage of that opportunity or even to appeal the result.

The Partnership's second argument, that the order is void and must be vacated pursuant to Rule 60(b) because it lacks an explicit finding of good faith on the part of the postpetition lender, is likewise devoid of merit. In Revco, we noted that either a failure to seek a stay against execution of an objectionable financing order or a failure to object in a timely fashion to the original motion or to the order "may ... constitute a waiver." Revco, 901 F.2d at 1366-67. The Bankruptcy Code provides for notice and hearing prior to the issuance of the court's permission to enter into a postpetition loan which may affect creditors' claims, 11 U.S.C. Sec. 364(b), and for direct appeal of the order, id.

The record shows that the Partnership received actual notice of the pending motion, but neither filed any objection, participated in the hearing, nor appealed the resulting Order directly. Instead, the Partnership challenged the validity of the Order on several grounds, the question of good faith not among them, in its Rule 9024/Rule 60(b) motion brought several months after the Order was issued. If the failure to include an explicit finding of good faith was error, it does not affect the jurisdiction of the Bankruptcy Court, it does not render the order void, it was waived by the Partnership, and it certainly cannot be raised for the first time on appeal of the District Court's order affirming the Bankruptcy Court's denial of the Motion to Reconsider. Unless we, in our discretion, believe that a "plain miscarriage of justice" would result from our refusal to address an issue never properly raised before the court of first instance, we will not consider such an issue an appellant raises before us. Pinney...