New Concept Housing, Inc., In re, 90-3024
| Decision Date | 20 December 1991 |
| Docket Number | No. 90-3024,90-3024 |
| Citation | 951 F.2d 932 |
| Parties | , 26 Collier Bankr.Cas.2d 287, Bankr. L. Rep. P 74,386 In re NEW CONCEPT HOUSING, INC., Debtor. NEW CONCEPT HOUSING, INC., Appellant, v. Arl W. POINDEXTER, Jr.; Elva M. Poindexter, Thomas J. Carlson, Trustee in Bankruptcy, Appellees. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Ted Von Willer, Jr., Springfield, Mo., argued (Theodore C. Salveter, III and Thomas J. Carlson, on brief), for appellant.
Thomas J. Carlson, Springfield, Mo., argued, for appellees.
Before LAY, Chief Judge, HENLEY, Senior Circuit Judge, and MAGILL, Circuit Judge.
This appeal concerns bankruptcy procedure. Appellant, New Concept Housing, Inc., seeks review of the district court's 1 decision affirming an order by the bankruptcy court that allowed a claim by appellees, Arl and Elva Poindexter, and approved a settlement of that claim entered into by the Poindexters and the estate trustee, Thomas Carlson, also an appellee.
New Concept Housing also seeks review of the district court's decision affirming the bankruptcy court's dismissal of its motion for a rehearing. We affirm the district court's decisions
New Concept Housing, Inc. (Debtor), through its principal Paul Johnson and others, filed a voluntary petition for a Chapter 7 liquidation on April 22, 1988. On July 24, 1989, Arl and Elva Poindexter (Claimants) filed a proof of claim for $103,476.14 or $185,436.16 (Claim). J.A. at 5. This Claim represented the deficiency remaining after Claimants foreclosed on two separate properties owned by the Debtor. On one of the properties, located at 318 South Campbell, Springfield, Missouri (Campbell Property), Claimants had held a first deed of trust. On the other property, located at 1001 East St. Louis Street, Springfield, Missouri (St. Louis Property), Claimants had held a first and second deed of trust. The alternative amounts listed by Claimants reflected a dispute over payments on the St. Louis Property that were the subject of a related adversary proceeding.
The Debtor subsequently told the estate trustee, Thomas Carlson (Trustee), that the Claim was not accurate because Claimants were not crediting the note relating to the St. Louis Property correctly. J.A. at 21. The Trustee agreed to object to the Claim on this ground, leaving to the Debtor the responsibility of objecting on any other grounds. Id. The resulting objection to the Claim dated December 13, 1989, and filed December 21, 1989, reads as follows:
The trustee objects to the amount of this claim, as the creditor is not crediting the note correctly. The creditor purchased the property in question at a foreclosure on the note and second deed of trust. By buying in at the foreclosure, the creditors extinguished any claim they had on the first deed of trust. The trustee's calculation of the deficiency from said sale is $16,234.23 plus the deficiency on the South Campbell property of $10,798.97 totals $27,033.20. The trustee does not object to this claim in the amount of $27,033.20.
J.A. at 60. Because the Trustee did not object to a $16,234.23 deficiency on the St. Louis Property, the objection related only to the debt secured by the first deed of trust. 2 The Debtor did not file a separate objection. On December 18, 1989, Claimants filed a response to the Trustee's objection that summarily stated that the "note has been credited properly" and that "[f]oreclosure of a second deed of trust does not extinguish the first deed of trust and certainly does not extinguish the underlying debt." J.A. at 61.
Without holding a hearing on the Trustee's objection, the bankruptcy court "ordered that the ... claim be disallowed as recommended by the trustee, subject to modification upon written application made within ten (10) days from [December 21, 1989]." J.A. at 60. On the following day, December 22, 1989, Claimants' attorney sent a letter to the bankruptcy court stating that:
Today I received your Order Disallowing Claim dated December 21, 1989. I assume that the Response I filed on December 15 [sic], 1989 is sufficient for you to set that order aside or to modify it. I believe that we might need a brief hearing. Thank you.
J.A. at 121. Claimants' attorney also sent a copy of this letter to the Trustee. Id. The bankruptcy court subsequently scheduled a hearing on the Trustee's objections. J.A. at 54. On the day of the hearing, February 6, 1990, Claimants filed with the court suggestions in support of their Claim. These suggestions cited Missouri law supporting Claimants' argument that they did not forfeit their first deed of trust on the St. Louis Property by buying the property at the foreclosure on the second deed of trust. J.A. at 64-69. These suggestions also stated that Claimants were seeking only $103,476.14, implying that the related litigation concerning the difference between a $185,436.16 claim and a $103,476.14 At the February 6 hearing, the Trustee and Claimants presented to the court a settlement they had reached on the Claim. Claimants had agreed to accept one-half of the disputed amount. The court entered an order on February 15, 1990, allowing the Claim and approving the settlement. J.A. at 17.
claim was resolved against Claimants. J.A. at 64
Neither the Debtor's statutory trustee, Paul Johnson, 3 nor the Debtor's attorney, Richard Bender, received notice of the February 6 hearing. Appellant's Br. at 16. The Trustee specifically noted at the hearing that "I thought he [Johnson] got notice of the hearing today but he did not." J.A. at 45. After some confusion at the hearing as to who was representing the Debtor, the court concluded that the Debtor did not have an attorney present and thus told the Trustee to send a copy of the "proposed order" to Johnson and "see if he'll file something." J.A. at 47. Johnson did not receive notice of this order until February 25, 1990, ten days after it was filed. Appellant's Br. at 23.
On February 26, 1990, Johnson, on behalf of the Debtor, filed a pro se motion for a rehearing on the order allowing the Claim. J.A. at 19. Claimants then filed a motion to dismiss the Debtor's motion for rehearing, arguing that, as a corporation, the Debtor cannot act without counsel. J.A. at 40. The court agreed and dismissed the Debtor's motion. J.A. at 42.
Debtor raises four issues on appeal: (1) whether the bankruptcy court erred in treating Claimants' December 22 letter as a sufficient "written application" for modification of its order disallowing the Claim; (2) whether the bankruptcy court erred in entering its February 6 order allowing the Claim and approving the settlement of the Claim when the Debtor had not received notice of the hearing on the Trustee's objection to the Claim; (3) whether the bankruptcy court erred in approving the proposed settlement of the Claim; and (4) whether the bankruptcy court erred in dismissing the Debtor's motion for rehearing. The district court held that the bankruptcy court did not err. We affirm.
We first address whether the bankruptcy court erred in treating Claimants' December 22 letter as a sufficient "written application" for modification of its order disallowing the Claim. The Debtor argues that Bankruptcy Rule 3008 governs a motion for reconsideration of an order disallowing a claim and that Claimants' letter to the bankruptcy court does not satisfy the requirements of this rule. Bankruptcy Rule 3008 provides that This rule has been interpreted to require a showing of cause for reconsideration. See, e.g., In re Motor Freight Exp., 91 B.R. 705, 709-11 (Bankr.E.D.Pa.1988). The Debtor also contends that a Rule 3008 motion must satisfy certain procedural requirements such as filing and service. The Trustee and Claimants primarily contend that the requirements of Bankruptcy Rule 3008 were not applicable in this case. 4 Because we conclude that the bankruptcy court's order disallowing the Claim was not intended as a final order, we hold that Claimants' "written application for modification" did not need to satisfy the requirements of Bankruptcy Rule 3008.
Numerous factors indicate that the court did not intend its order disallowing the Claim to be subject to Bankruptcy Rule 3008. The court entered the order disallowing the Claim without first holding a hearing as required by Bankruptcy Rules 3007 and 9014. Although some objections may be excepted from this hearing requirement, see Bankr.R. 3007 editors' comment, the Trustee's objection was not such an instance. At the time the court entered its order, it had neither the factual nor the legal knowledge necessary to resolve the conflicting assertions contained in Trustee's Objections to the Claim and in Claimants' Response to Objections. 5 The court thus did not have any basis for making a reasoned ruling on the Trustee's objections.
The language of both the order and the notice to Claimants indicates that the court recognized this fact and intended its order to be conditional. The order itself states that the Claim is disallowed "subject to modification upon written application within ten (10) days from this date" and the notice to Claimants states that "unless application to modify such Order is filed within the ten (10) days from the date thereof, it will become final." If the court intended its order to be final, subject only to a Bankruptcy Rule 3008 motion, expressly subjecting the order to modification on written application does not make sense. Even if the court's order had read "[t]he claim is disallowed" with no further qualifying language, Claimants could have brought a Rule 3008 motion for reconsideration. Furthermore, the ten-day time limit does not coincide with the time for bringing a Rule 3008 motion. See Bankr.R....
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