Espiefs v. Settle
| Decision Date | 18 September 1981 |
| Docket Number | No. 80-446-L.,80-446-L. |
| Parties | Peter S. ESPIEFS v. John Alden SETTLE, Jr., et al. |
| Court | U.S. District Court — District of New Hampshire |
Philip Mangones, Keene, N.H., for Sheriff Kenneth Lysitt.
Peter Espiefs, Keene, N.H., is the Trustee of Bankrupt John Alden Settle, Jr. individually and d/b/a Springfield Electronics (Bankrupt).
Ernest L. Bell, III, Esq., Keene, N.H., for Peter S. Espiefs.
John Alden Settle, Jr., pro se.
ORDER ON APPEAL TO DISTRICT COURT
Presently pending in this court is an appeal which was filed by defendants on March 18, 1981. The procedural history of this case is quite complex. The court will not attempt in this order to entirely review that history. The court rather refers the parties to its Order on Preliminary Findings From the Record as Available, which was issued on January 21, 1981. In that order, this court requested the Bankruptcy Court to advise it of the disposition of the pending motions before the Bankruptcy Court, particularly the defendants' Motion to Reconsider. The Bankruptcy Court was also requested to furnish this court with its Findings of Fact and Rulings of Law as made on January 4, 1981.
By order dated March 6, 1981, the Bankruptcy Judge denied defendants' Motion for Reconsideration. The Bankruptcy Court in that order of March 6, 1981 also issued decisions on several other pending motions. (See Docket Marking # 51). In an order issued April 20, 1981, the Bankruptcy Court granted plaintiff, Trustee Espiefs', Motion Re Contempt. In an order also issued on April 20, 1981, the Bankruptcy Court granted plaintiff's Motion for Supersedeas Bond in the amount of $50,000.00. The bond was to be posted on or before May 7, 1981.
In its ten page order dated March 5, 1981 (see Docket Marking # 52) the Bankruptcy Court set forth the testimony which was given and exhibits which were presented and the three day hearing which took place December 30, 1980 through January 2, 1981. The order also sets forth as per the request of this court the Findings of Fact and Rulings of Law which the Bankruptcy Court made as a result of this hearing, culminating in the Bankruptcy Court's issuance of a default judgment at the close of the hearing on January 2, 1981. The Bankruptcy Court issued a decree in favor of Peter Espiefs, Trustee on January 6, 1981. The order also sets forth as per the request of this court the Findings of Fact and Rulings of Law which the Bankruptcy Court made as a result of this hearing, culminating in the Bankruptcy Court's issuance of a default judgment at the close of the hearing on January 2, 1981. The Bankruptcy Court issued a decree in favor of Peter Espiefs, Trustee on January 6, 1981.
This court has read and reviewed the transcript comprising over four hundred pages. In addition, the court has reviewed the findings and rulings of the Bankruptcy Court relative to the disputed assets. The court has also been provided with and has reviewed a copy of the decree of the Bankruptcy Court issued on January 6, 1981. That decree granted all of Trustee's Requests for Findings of Fact and all of Trustee's Requests for Rulings. In their Notice of Appeal to the District Court filed on March 18, 1981 (see Docket # 53), defendants designate the entire record as the record on appeal and specifically raise the issues of the absence of a transcript, whether the findings are contrary to the weight of evidence and erroneous whether possession is equivalent to title for bankruptcy purposes and whether irreparable harm has been caused defendants because of the disposition of their personal property. This court provided the defendants a copy of the transcript without charge.
It should be noted at this time that subsequent to this court's order of January 21, 1981 defendants appealed parts of that order to the First Circuit Court of Appeals. In a judgment entered on March 23, 1981 by the First Circuit and filed in this court on April 14, 1981 (See Docket # 55), the Circuit Court affirmed this court's order dated November 21, 1980 which had ordered that the scheduled hearing before the Bankruptcy Judge on the proper ownership of property subject to turnover orders should go forward. This resulted in the hearing previously alluded to on December 30, 1980 through January 2, 1981. The First Circuit had previously in a Memorandum and Order entered December 29, 1980 (See Docket # 36) denied without prejudice the defendants' request for a stay of bankruptcy proceedings pending appeal and denied the defendants' request for summary reversal of this court's November 21, 1980 order. In the December 29, 1980 order the First Circuit stated:
Appellants assert they will suffer irreparable harm if their property is sold or disposed of pending appeal, but a hearing on whether such sale or disposition should be ordered will not be held until December 30, 1980. If the bankruptcy judge orders such measures at that time, appellants will be free then to seek relief, should such be appropriate, to avert the irreparable harm they allege. Furthermore, many if not all of appellants\' claims can be presented to the bankruptcy judge at the December 30 hearing, thus creating a more meaningful record and allowing the entry of reviewable findings and rulings, now lacking.
In the judgment entered on March 23, 1981 the First Circuit also dismissed for lack of appellate jurisdiction the claim raised by defendants February 2, 1981 notice of appeal to the First Circuit. The court granted defendants motion to consolidate the notice of appeal filed February 2, 1981 with the notice filed on December 17, 1980. In that order the Circuit Court stated:
Both of appellant\'s notices of appeal are directed in one form or another toward the underlying claim that the bankruptcy court has erred in its rulings on the disputed assets. However, no aspect of this claim has been ruled upon by the district court. The record clearly reveals that most of those claims, if not all, have not yet been fully presented to that court. We further find that the first notice of appeal — from the district court\'s denial of the preliminary injunction — is, if not moot, than certainly lacking in overall merit. The central predicate for the debtor\'s injunctive request (prohibiting the trustee from disposing of the property) was that in the original actions taken against him he was entirely deprived of the opportunity to be heard. Despite the appellant\'s new claims that the procedure which was followed in the subsequent hearings is also defective, the truth is that a hearing has in fact been held. This factor undercuts the foundation of appellant\'s initial premise and demonstrates that the district court did not abuse its discretion in denying the request. In any event the district court has informed the trustee that he is expected not to dispose of the disputed property until it has been placed in a position to review the propriety of such action. See Order of February 19, 1981. As a consequence of all these developments, there is no reason to disturb the district court\'s order of November 21, 1980.
The First Circuit has clearly stated that whether the hearing was held properly, whether the conclusions reached therein were correct and whether it is the debtor or the trustee who is correct on the status of the disputed assets are matters which are properly the subject of the appeal to this court. There are no appeals in this action presently pending before the First Circuit.
The basic underlying complaint in this appeal is that the Bankruptcy Court has erred relating to rulings on disputed assets, the ruling being adverse to the interests of defendant and intervenors. Defendants filed the voluntary bankruptcy petition (BK # 79-138) on March 30, 1979. Thus, the Bankruptcy Act prior to the 1978 Amendments to the Act governs this action or is apposite to this case. Rule 810 of the Bankruptcy Procedure Rules states:
Upon an appeal the district court may affirm, modify or reverse a referee\'s judgment or order, or remand with instructions for further proceedings. The court shall accept the referee\'s findings of fact unless they are clearly erroneous, and shall give due regard to the opportunity of the referee to judge of the credibility of the witnesses.
Rules Bankr.Proc. Rule 810, 11 U.S.C.A.
The burden of showing a bankruptcy referee's findings to be clearly erroneous has been found to be a stringent one and to be convinced the court must be left with a definite and firm conviction that mistake has been committed, that is the court must find that no testimony exists for support of referee's order, or that he has acted arbitrarily or capriciously. In re Knight, 421 F.Supp. 1387, 1390 (M.D.La.1976); aff'd 551 F.2d 861, 862 (1977); See United States v. United States Gypsum Co., 333 U.S. 364, 68 S.Ct. 525, 92 L.Ed. 746 (1947).
This court recognizes, however, that while it is bound to accept the bankruptcy judge's findings of fact unless they are clearly erroneous, the clearly erroneous rule does not apply to questions of law or to mixed questions of fact and law. The court in this action makes an independent determination of the law. In re Werth, 443 F.Supp. 738, 739 (D.Kan.1977).
Turnover orders must be supported by "clear and convincing evidence". Oriel v. Russell, 278 U.S. 358, 49 S.Ct. 173, 73 L.Ed. 419 (1929). That includes proof that the property has been abstracted from the bankrupt estate and that it is in the possession of the party proceeded against. The burden is upon the trustee to produce this evidence. Maggio v. Zeitz, 333 U.S. 56, 64, 68 S.Ct. 401, 405, 92 L.Ed. 476 (1948).
However, in appealing an order of the Bankruptcy Court, the burden of proof is upon the party seeking reversal of the findings of the bankruptcy court, here the defendant-appellant. Defendant must show that the findings were clearly erroneous and not merely that the bankruptcy...
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