In re Popkin & Stern
| Decision Date | 27 June 2001 |
| Docket Number | No. 01-6003EM.,01-6003EM. |
| Citation | 263 BR 885 |
| Court | U.S. Bankruptcy Appellate Panel, Eighth Circuit |
| Parties | In re POPKIN & STERN, Debtor. Robert J. Blackwell, Plaintiff-Appellee, v. Michael Lurie and Ryan Lurie, Defendants-Appellants, Ronald U. Lurie, Defendant. |
Stanley Goldstein, St. Louis, MO, for Appellant.
Serall Chezem, O'Fallon, MO, for appellee.
Before KRESSEL, WILLIAM A. HILL and O'BRIEN,1 Bankruptcy Judges.
The defendants, Michael Lurie and Ryan Lurie, appeal from the order of the bankruptcy court2 which awarded the defendants restitution for their interest in property that was sold at an execution sale pursuant to a fraudulent transfer judgment which was subsequently reversed. The bankruptcy court determined that, upon a reversal of judgment, an appellant is entitled to restitution in the amount actually received by the appellee, plus interest and taxable costs. Defendants argue that they are entitled to damages in the form of the fair market value of the property sold, plus interest and attorney fees. We affirm the decision of the bankruptcy court.
The history of this case is set forth in the court of appeals' opinion in Blackwell v. Lurie (In re Popkin & Stern), 223 F.3d 764 (8th Cir.2000). In brief, Popkin & Stern was a law firm of which Ronald Lurie was a general partner. In 1992, an involuntary Chapter 7 bankruptcy petition was filed against Popkin & Stern. The case was converted to Chapter 11 and the appellee herein, Robert J. Blackwell, was appointed as the Chapter 11 trustee. In 1993, Blackwell was appointed the liquidating trustee under a Chapter 11 plan confirmed by the court.
On October 20, 1994, the trustee obtained a judgment against Ronald Lurie in the approximate amount of $1.1 million. Subsequently, the trustee brought a fraudulent transfer complaint against Ronald Lurie and his children, Michael Lurie and Ryan Lurie, seeking to avoid the transfer of real estate that Ronald Lurie was to have inherited from his mother, but for his disclaimer of the property which caused it to pass to the appellants instead. On August 18, 1998, the bankruptcy court entered judgment in favor of the trustee and set aside the transfer of the property to the appellants. We affirmed the bankruptcy court's decision.3 However, the Eighth Circuit Court of Appeals reversed and remanded.4
At no time while the appeal was pending did the appellants seek a stay pending appeal, nor did they seek a supersedeas bond to stay execution on the property.5 Thus, in December 1998, the trustee filed a writ of execution under the $1.1 million judgment against Ronald Lurie, and the sheriff sold his interest in the property to a disinterested third party for $420,500. After the sheriff's commission and expenses ($16,825) were deducted, the trustee received $403,675 from the sale.
The reversal by the Eighth Circuit occurred after the property was sold. In reversing, the court stated that the case was remanded "for further proceedings . . . to determine the amount of damages owed to Michael and Ryan for the loss" of their interest in the property.6 On remand, the bankruptcy court agreed with the trustee that, under Missouri law, appellants' "damages" were limited to all benefits the trustee acquired under the erroneous judgment. Therefore, the court awarded appellants the amount the trustee actually received from the sale, $403,675, plus interest and taxable costs. Appellants argue on appeal that the bankruptcy court erred in failing to award them the fair market value of the property and their attorney fees.
We review the bankruptcy court's factual findings for clear error and its conclusions of law de novo. Blackwell v. Lurie (In re Popkin & Stern), 223 F.3d 764, 765 (8th Cir.2000); Wendover Fin. Servs. v. Hervey (In re Hervey), 252 B.R. 763, 765 (8th Cir. BAP 2000).
The trustee's action against the appellants, and thus the resulting judgment, was brought under Missouri's Uniform Fraudulent Transfer Act. The bankruptcy court and the parties assumed that Missouri law controls appellants' remedy for the reversal of that judgment. We need not determine whether federal or Missouri state law applies, as the result under either is the same.
The bankruptcy court correctly determined that, under Missouri law, "upon reversal of a judgment . . . the appellant is entitled to restitution from the respondent of all benefits acquired under the erroneous judgment during the pendency of an appeal." De Mayo v. Lyons, 360 Mo. 512, 228 S.W.2d 691, 692 (1950); see Chaney v. Cooper, 948 S.W.2d 621, 624 (Mo.Ct.App.1997). This right to restitution exists even if it is not expressly ordered by the appellate court. De Mayo, 228 S.W.2d at 692. However, the "damages" which may be given for restitution "are not open-ended." Lancaster v. Simmons, 621 S.W.2d 935, 940-41 (Mo.Ct.App. 1981). Restitution, as a remedy for reversal of an erroneous judgment, is a proceeding in equity. Int'l Ins. Co. v. Metro. St. Louis Sewer Dist., 938 F.Supp. 568, 571-72 (E.D.Mo.1996); Chaney, 948 S.W.2d at 624. Thus, the appellant is not entitled to receive traditional "legal damages." See Metro. St. Louis, 938 F.Supp. at 571-72 ().
Accordingly, in ruling that appellants were entitled to the benefits received by the appellees under the erroneous judgment, the Missouri Supreme Court in De Mayo7 held that appellants could recover the amount realized by the appellees from various sales of whiskey obtained under execution, plus interest from the date of the levy under execution, and taxable costs. See De Mayo, 228 S.W.2d at 692, 694. This is what appellants here were awarded (the amount realized by the trustee, plus interest, plus taxable costs), and that award was proper. Appellants erroneously cite De Mayo for the proposition that they are entitled to the fair market value of the property sold. This is a clear misstatement of De Mayo's holding. The use of a "reasonable market value" by the De Mayo court arose in the context of sales under the execution for which the judgment creditor could not establish the actual sale amounts. See id., 228 S.W.2d at 694. For those sales only, the court held that appellants could recover the reasonable market value of the whiskey sold. See id.
Likewise, in Lancaster,8 the appellant was awarded restitution in the amount actually received by the appellee, for rents, while he was in possession of property pursuant to a judgment that was subsequently reversed. See Lancaster, 621 S.W.2d at 937-39. Appellant argued on appeal that the trial court awarded him inadequate damages, asserting that the mandate of the appellate court required that he "be restored to all things lost by reason of the original judgment." Id. at 940. The appellant sought additional damages and the recovery of his attorney fees. Refuting appellant's arguments and citing De Mayo9 and Hurst Automatic Switch & Signal Co. v. Trust Co.,10 the court held that the appellant was not entitled to recover attorney fees or other litigation expenses which were not taxable as costs, nor was appellant entitled to recover for speculative damages. Lancaster, 621 S.W.2d at 940-41.
Appellants cite one case, Harris v. Desisto, 932 S.W.2d 435 (Mo.Ct.App.1996), in support of the argument that the trustee should pay their attorney fees. That case is inapposite. Harris concerned a party's remedies upon rescission of a contract, not the remedies available upon reversal of an erroneous judgment. See id. Appellants can point to no case where Missouri courts have awarded attorney fees as part of a restitution award following the reversal of a judgment. Indeed, no such case exists.
There is no support in Missouri law for awarding appellants the fair market value of the property sold. Rather, in accordance with well established Missouri law, they are entitled to the benefits actually received by the trustee under the erroneous judgment, together with interest from the date of the levy under execution and taxable costs. We hold that the bankruptcy court properly determined appellants' restitution award pursuant to Missouri law.
Under well-established case law, the outcome under federal law is the same. As stated by the Eighth Circuit Court of Appeals: "It is a long-standing legal principle that `a person who has conferred a benefit upon another in compliance with a judgment, or whose property has been taken thereunder, is entitled to restitution if the judgment is reversed or set aside, unless restitution would be inequitable. . . .'" Mohamed v. Kerr, 91 F.3d 1124, 1126 (8th Cir.1996) (alteration in original) (quoting Restatement of Restitution § 74 (1937)).
As indicated in Mohamed, courts have long looked to the Restatement of Restitution § 74 for guidance. See Mohamed, 91 F.3d at 1126. Comment d to the Restatement provides, in pertinent part:
d. Restitution of money from judgment creditor. . . . If the debtor\'s property has been sold to a stranger and the proceeds paid to the judgment creditor, the judgment debtor is entitled to recover the amount thus received by the judgment creditor with interest; unless the judgment was void, he cannot recover the value of the property sold, if the action was brought in good faith and the sale was properly conducted, since the creditor was acting lawfully.
Restatement (First) of Restitution § 74 cmt. d (1936) (emphasis added). An Illustration to this Comment provides:
A obtains a judgment against B for $3000. Execution is levied on the judgment and B\'s property, to the value of $4000, is sold. Although the sale is properly conducted, the property...
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