Hailey, Matter of, 78-3412

• Decision Date: 10 July 1980
• Docket Number: No. 78-3412,78-3412
• Citation: 621 F.2d 169,6 B.C.D. 878
• Parties: , Bankr. L. Rep. P 67,585 In the Matter of Donald W. HAILEY. Martha L. ALDER, Plaintiff-Appellant, v. Donald W. HAILEY and Brown & Root, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 169

621 F.2d 169

6 Bankr.Ct.Dec. 878, Bankr. L. Rep. P 67,585

In the Matter of Donald W. HAILEY.

Martha L. ALDER, Plaintiff-Appellant, v. Donald W. HAILEY and Brown & Root, Inc., Defendants-Appellees.

No. 78-3412.

United States Court of Appeals, Fifth Circuit.

July 10, 1980.

Michael B. Wallace, Biloxi, Miss., for plaintiff-appellant.

Samuel L. Tucker, Ocean Springs, Miss., James O. Dukes, Gulfport, Miss., for defendants-appellees.

Appeal from the United States District Court for the Southern District of Mississippi.

Before BROWN, AINSWORTH and FRANK M. JOHNSON, Jr., Circuit Judges.

AINSWORTH, Circuit Judge:

Appellant Martha L. Alder appeals from a judgment of the United States District Court for the Southern District of Mississippi affirming a summary judgment and injunction of the bankruptcy court against her and in favor of appellees Donald W. Hailey and Brown & Root, Inc. In this judgment the district court also sustained a motion to dismiss by Brown & Root on a complaint filed against it by Alder and entered summary judgment in favor of Hailey on this same complaint. Alder appeals these rulings as well.

On April 5, 1977, Donald W. Hailey filed a petition for voluntary bankruptcy. Included in his statement of affairs was a recital by the bankrupt that a judgment in the amount of $4,344.22 had been rendered against him in the County Court for the Second Judicial District of Harrison County, Mississippi on October 18, 1976 in favor of Martha L. Alder. Listed on the schedule of debts filed with the petition as a creditor with a claim reduced to judgment was "Mrs. Martha L. Alder, Biloxi, Mississippi 39533." No street address was included. On April 7, 1977, the bankruptcy court entered an order adjudging Hailey bankrupt, and scheduled the first meeting of creditors for May 4, 1977. ¹ Alder received no notice of these proceedings.

On April 29, 1977, Alder, through her attorney, requested the clerk of the County Court for Harrison County to issue a writ of execution on the judgment obtained by Alder against Hailey. On May 4, Alder filed a suggestion for writ of garnishment in the County Court, and a writ was served on Brown & Root, Hailey's employer, two days later. Upon learning that the deputy sheriff of Harrison County had filed a return "nulla bona" on the writ of execution issued against Hailey, Alder's attorney on July 22, 1977 requested the clerk to issue a new writ.

On August 1, Alder learned that Hailey had been adjudged bankrupt. Her attorney on August 3 notified the County Clerk of this fact; however, since Alder had received no formal notice of the bankruptcy proceedings, she continued to pursue her remedies in state court. On September 8, 1977, she moved for a default judgment against Brown & Root for failure to answer the writ of garnishment and four days later the County Court rendered judgment against Brown & Root in the amount of $4,344.22. On September 16, 1977, the bankruptcy court issued an order discharging the bankrupt Hailey.

On November 8, 1977, Alder moved the County Court for issuance of a writ of execution on the judgment she had obtained against Brown & Root and the writ was issued on November 9. Then, on February 3, 1978, Alder secured a writ of garnishment against Brown & Root which resulted in the impounding of funds in the Pascagoula-Moss Point Bank to satisfy her judgment. Brown & Root appeared in the County Court for the first time on February 13, 1978, requesting that the garnishment be set aside, relying on the order of the bankruptcy court as a bar to enforcement of the state court judgment. A hearing was held on March 1, and the County Court judge took the matter under advisement. Hailey never entered an appearance in state court.

On March 3, 1978, Hailey filed a petition in bankruptcy court and attached copies of documents taken from the file in the County Court proceedings, requesting that Alder be held in contempt of court for failing to remove the garnishments and further that she be enjoined from proceeding further in her efforts to execute on her judgment in the County Court. On March 9, Brown & Root filed a petition in bankruptcy court seeking similar relief. Then, on March 17, 1978, Alder attempted to file a complaint in the bankruptcy court against Hailey and Brown & Root seeking to have Hailey's discharge set aside for fraud, but the bankruptcy judge refused to permit its filing. On April 3, Alder filed answers to the petitions of Hailey and Brown & Root. No other pleadings were filed by any of the parties to the proceeding. The bankruptcy judge then held a pretrial conference on April 5 and on April 10, with no motion before him and without holding an evidentiary hearing, he entered a summary judgment and injunction against Alder, fining her $250 for contempt of court, ordering her to have all proceedings in the County Court since April 7, 1977 set aside and dismissing all garnishments filed in the case. She was also enjoined from taking any further action in the County Court pursuant to her cause of action.

Alder appealed this judgment to the district court and also filed a complaint against Hailey and Brown & Root, seeking to have Hailey's discharge in bankruptcy set aside for fraud. The district court permitted the filing of the complaint on June 20, 1978 and on July 28, Hailey filed an answer to this complaint. On August 2, Brown & Root also filed an answer to Alder's complaint and on September 15 filed a motion to dismiss the complaint or alternatively for summary judgment, alleging that Alder's complaint failed to state a claim upon which relief could be granted against Brown & Root. Hailey filed no similar motion. On October 19, 1978, pursuant to its memorandum of law of October 4, the district court entered a judgment affirming the summary judgment and injunction of the bankruptcy court, thereby dispensing with Alder's appeal. The district court's judgment also granted Brown & Root's motion to dismiss Alder's complaint and entered summary judgment in favor of Hailey on this same complaint.

In her appeal to this court from the decision of the court below, Alder alleges that the district court erred in affirming the judgment of the bankruptcy judge and in denying her an evidentiary hearing on her complaint to set aside the bankrupt Hailey's discharge for fraud. We hold that because of procedural irregularities regarding the summary judgment of the bankruptcy court, the district court erred in affirming the bankruptcy court's judgment on appeal. We also hold for similar procedural errors that the district court erroneously granted summary judgment in favor of Hailey on Alder's complaint to set aside Hailey's discharge. We therefore reverse and remand for a proper determination of the underlying issues. As to the bankruptcy court's finding of contempt against Alder, affirmed by the district court, we disagree and...