Beery, Matter of, s. 77-1991

Citation680 F.2d 705
Decision Date14 May 1982
Docket Number78-1758 and 80-1577,Nos. 77-1991,s. 77-1991
Parties11 Fed. R. Evid. Serv. 260 In the Matter of Jerome G. BEERY, d/b/a Jerome G. Beery, Brownville Grain Co., Debtor. Jerome G. BEERY, Appellant, v. Dan E. TURNER, Trustee, Appellee. Jerome G. BEERY, Petitioner, v. Dan E. TURNER, Trustee and Honorable James A. Pusateri, Bankruptcy Judge, Respondents.
CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)

Jerome G. Beery, pro se.

Dan E. Turner, Topeka, Kan., for appellee and respondent, Dan E. Turner, Trustee.

Stephen K. Lester, Asst. U. S. Atty., Wichita, Kan., for respondent, Honorable James A. Pusateri, Bankruptcy Judge.

Before HOLLOWAY, BARRETT and DOYLE, Circuit Judges.

HOLLOWAY, Circuit Judge.

Appellant Beery brought separate appeals from two orders entered in this bankruptcy proceeding in Nos. 77-1991 and 78-1758. In addition, Beery filed a "Complaint and Petition for Injunctive Relief," in No. 80-1577 in this court by which he sought to have us enjoin the disposition or transfer of Beery's interests in certain property until the appeals are resolved. The two appeals and the complaint were consolidated here.

I

Beery originally filed a voluntary petition seeking relief under Chapter XI of the Bankruptcy Act on January 16, 1976. The case was automatically referred to the bankruptcy judge. Beery then filed a plan for an arrangement under Chapter XI, but during a hearing in April 1976, Beery refused to file verified schedules and statements pursuant to Bankruptcy Rules 11-11 and 11-12. Beery also stated that he was withdrawing his plan of arrangement and his Chapter XI petition.

Later during the same hearing on April 15, the bankruptcy judge converted the proceeding to one of straight bankruptcy, stating that Beery had failed to file the required verified statements and schedules and that Beery was effectively adjudicated a bankrupt. These rulings were memorialized in an order by the bankruptcy judge filed April 20 concluding that Beery was adjudicated a bankrupt and that the case proceed as a bankruptcy case.

Beery then filed a motion to reconsider the adjudication of bankruptcy. He apparently claimed that he was a farmer, 1 as defined by the Bankruptcy Act, and as such could not be adjudicated a bankrupt without his written consent. See 11 U.S.C. § 779 (1976); Bankruptcy Rule 11-42(e). In July 1977 the bankruptcy judge entered an order vacating his order of April 1976 insofar as necessary to have a de novo determination of the factual issue of whether Beery was a farmer when he filed his petition under Chapter XI. In August 1977 the bankruptcy judge recommended to the district court that the case be partially withdrawn for a de novo trial before the district court on this factual issue. The district judge entered an order partially withdrawing the case from the bankruptcy judge and an evidentiary hearing was held (hereinafter the "September 1977 hearing"). The district judge entered an order concluding that Beery was not a farmer as defined by the Bankruptcy Act and overruling Beery's motion for reconsideration of the bankruptcy judge's orders converting the case to a straight bankruptcy proceeding and adjudicating Beery a bankrupt. Beery timely appealed from this order.

Beery also timely appealed an order entered by the district court in March 1978 affirming another order of the bankruptcy judge. The bankruptcy judge had denied Beery's motion for a jury trial on the issues of insolvency and commission of an act of bankruptcy and also denied Beery's motion for dismissal of Beery's Chapter XI petition as moot. 2

On this appeal Beery asserts that numerous errors were committed by the bankruptcy judge, the district judge, or both, and seeks injunctive relief. We have considered all of Beery's claims and find them to be without merit. Our reasons follow.

II

Beery first claims that the bankruptcy judge erred in converting his Chapter XI proceeding to a straight bankruptcy. He argues that the court was without jurisdiction to take any further action after Beery withdrew his Chapter XI petition, stating that once the petition was withdrawn, there was nothing to convert. (Brief of Appellant at 13-15, 23-24, 43).

We disagree. Jurisdiction of a Chapter XI proceeding is not lost upon the voluntary withdrawal of the petition. Bankruptcy Rule 11-42(a) prescribes the procedure to be taken when the debtor files a motion to dismiss. If the Chapter XI petition was originally filed under Rule 11-6, as was the case here, the court should "enter an order after hearing on notice dismissing the case or adjudicating him a bankrupt whichever may be in the best interest of the estate." Rule 11-42(a)(2). Beery's voluntary withdrawal, while not proffered in the form of a motion to dismiss, is considered as such. Thus on the withdrawal, the bankruptcy court did not lose jurisdiction but was required to enter an order dismissing the proceeding or adjudicating Beery a bankrupt after proper notice and hearing.

The bankruptcy court did enter an order adjudicating Beery a bankrupt but purported to take this action, not under Rule 11-42(a)(2), but under Rule 11-42(b)(1), a different subpart of the same rule, which provides:

The court shall enter an order, after hearing on such notice as it may direct dismissing the case, or adjudicating the debtor a bankrupt if he has not been previously so adjudged, or directing that the bankruptcy case proceed, whichever may be in the best interest of the estate-

(1) for want of prosecution;

The fact that the bankruptcy court entered its order with the finding of lack of prosecution under subpart (b)(1), and did not expressly deal with Beery's motion to withdraw as a motion under (b)(1), is of no consequence. Both subparts (the former dealing with motions to dismiss, inter alia, and the latter dealing with lack of prosecution, inter alia ) require that the court enter an order either adjudicating the debtor a bankrupt or dismissing the case, whichever may be in the best interest of the estate. The necessary finding that adjudication was in the best interest of the estate was made in any event.

The prerequisite for the bankruptcy judge's action under Rule 11-42(b)(1), "for want of prosecution," was clearly satisfied. The term was defined in the Advisory Committee Notes to Rule 11-42 as including, inter alia, the failure to file schedules and statements and the withdrawal or abandonment of a plan. 11 U.S.C. at p. 1483 (1976). During the April 15 hearing Beery stated that he was unwilling to sign and verify the petitions and schedules and that he was withdrawing his arrangement plan and his Chapter XI petition. Beery's actions amounted to a lack of prosecution.

In addition, we cannot say that the bankruptcy court was in error in finding that the best interest of the estate required that Beery be adjudicated a bankrupt. (See I R. 9; V R. 26-27). Beery did not make any argument nor point to any evidence to show that dismissal was in the best interest of the estate. Likewise, Beery now makes no such showing on appeal. Moreover, in the files the bankruptcy judge had before him, there was Beery's admission of his inability to pay his debts as they matured and that his liabilities exceeded his assets by over one million dollars. (I R. 1, 6). We conclude that there was no error in the finding that the best interest of the estate required the adjudication as a bankrupt.

We also reject Beery's argument that he was denied procedural due process by the adjudication. Beery argues that he was involuntarily adjudicated a bankrupt without the procedure required for an involuntary adjudication, including affidavits from alleged creditors that debts are owed to them. (Brief of Appellant at 14-15). As we have shown, the Bankruptcy Act and Rules do not contemplate the use of the involuntary bankruptcy procedure in this situation. The only requirements are proper notice and hearing. This result is compelled not only by the statutes and rules cited, but also by 11 U.S.C. § 778(a)(2), which provides that on the entry of an order that a bankruptcy proceed, as was done here under Rule 11-42(b)(1), the proceeding "shall be conducted, so far as possible, in the same manner and with like effect as if a voluntary petition for adjudication in bankruptcy had been filed ..." Beery cannot complain about this procedure since he voluntarily submitted to it by filing his Chapter XI petition on January 16, 1976, which alleged that he was unable to pay his debts as they matured and that his liabilities exceeded his assets by over one million dollars. (I R. 1, 6). 3 See Case v. Los Angeles Lumber Products Co., 308 U.S. 106, 125, 60 S.Ct. 1, 11, 84 L.Ed. 110; In re Trans-Pacific Corp., 76 F.Supp. 623, 624-25 (S.D.Cal.), aff'd, 166 F.2d 1021 (9th Cir.), cert. denied, 335 U.S. 815, 69 S.Ct. 32, 93 L.Ed. 370.

We conclude that the bankruptcy judge had jurisdiction to adjudicate Beery a bankrupt and to direct that the case proceed in straight bankruptcy, and that there was no error in these rulings.

III

Beery argues further that he was erroneously denied a jury trial on several issues. He claims he was entitled to a jury trial on the issue of whether he was a farmer, that he had a constitutional right to a jury trial even if no statutory right exists, and that resolution of the issue would determine whether he would be deprived of his constitutional right to own property. (Brief of Appellant at 24-25). Beery also claims that it was error to deny his request for a jury trial on the issues of insolvency and commission of an act of bankruptcy. He also says that the court erred in holding that he was insolvent and had committed an act of bankruptcy. (Brief of Appellant at 42-43). We find no merit in any of these arguments.

First, the right to a jury trial in bankruptcy proceedings is purely statutory. There is no constitutional right to such trial as bankruptcy proceedings are...

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