Hipp, Inc., Matter of, 88-1663

Citation895 F.2d 1503
Decision Date16 March 1990
Docket NumberNo. 88-1663,88-1663
Parties, 22 Collier Bankr.Cas.2d 876, 20 Bankr.Ct.Dec. 418, Bankr. L. Rep. P 73,293 In the Matter of HIPP, INC., Debtor. Thomas J. GRIFFITH, Trustee, Appellee, v. David OLES, Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Kent Frank Brooks, Linda N. Coffee, Dallas, Tex., for appellant.

Floyd Holder, Jr., Lubbock, Tex., for appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before KING, GARWOOD, and DAVIS, Circuit Judges.

GARWOOD, Circuit Judge:

This case presents important issues respecting bankruptcy court criminal contempt proceedings and powers.

Following an evidentiary hearing held pursuant to a show cause order issued on motion of the trustee of a Chapter 11 debtor, the bankruptcy court entered an order dated April 8, 1988 convicting defendant-appellant David Oles (Oles) of criminal contempt, 18 U.S.C. Sec. 401(3), for filing five lis pendens notices respecting property of the estate in violation of a November 9, 1987 order of that court, and sentenced him to five concurrent terms of six months' confinement and five cumulative $500 fines. 1 Oles filed objections to the April 8 order as provided in Bankruptcy Rules 9020 and 9033. Pursuant to these rules, the district court thereafter reviewed the bankruptcy court's April 8 order de novo, though solely on the basis of the record, the transcript of the bankruptcy court contempt hearing, and the written objections and briefs, and without any further hearing of any kind or any additional evidence. The district court's action on such review is reflected only in its August 26, 1988 fifty-three page "Memorandum Opinion and Contempt Order." This document recites that the bankruptcy court's "contempt order is presently before this Court for de novo review" 2; makes findings of fact and conclusions of law in substance as found by the bankruptcy court in its April 8 order; rejects all of Oles' objections to the bankruptcy court's April 8 order except respecting the sentence thereby imposed, as to which it recites that "[t]he fines imposed are hereby vacated" 3; and concludes by adjudging Oles to have committed willful contempt of the bankruptcy court on the same five occasions as determined in the bankruptcy court's April 8 order and by sentencing him to five concurrent six-month terms of imprisonment. 4

Oles then filed a timely notice of appeal. 5

Because this criminal contempt was prosecuted by the bankruptcy trustee (and his attorney), rather than a disinterested representative of the United States, we reverse Oles' conviction and sentence and remand to the district court for further proceedings. Young v. United States ex rel. Vuitton et Fils S.A., 481 U.S. 787, 107 S.Ct. 2124, 95 L.Ed.2d 740 (1987). We further hold that the trial and determination of criminal contempt, at least one such as this which is of the kind governed by 18 U.S.C. Sec. 401(3) and Fed.R.Crim.P. 42(b), must be before and by the district court and not the bankruptcy court.

To put our holdings in context, we initially summarize the history of these proceedings.

Facts and Proceedings Below

On April 4, 1984, Hipp, Inc. (Hipp) filed under Chapter 11 in the bankruptcy court. Thomas J. Griffith (Griffith) was appointed trustee. On October 2, 1987, Griffith filed an adversary proceeding against Phoenix Grain, Oles, and Redonda Cotter for turnover of property to the Hipp estate and for damages. In the bankruptcy, Griffith gave notice of his intent to sell all the estate's real and personal property in Swisher and Castro Counties free and clear of liens. At a hearing on this notice, at which Oles was represented by counsel, the bankruptcy court entered an order on October 16 allowing Griffith to go forward with the sale. The court found that Oles was not a creditor of the Hipp estate and did not hold a lien on its property.

On November 3, 1987, in a separate action against Oles and others, Griffith asked the bankruptcy court to order Oles and others to withdraw lis pendens notices filed against the Hipp estate property on August 20, 1987 and October 22, 1987. On November 9, the bankruptcy court held a hearing on this motion and also on Griffith's complaint. During that hearing, the court orally ordered Oles and others to withdraw all such notices of lis pendens by noon, November 12, and, according to the bankruptcy court's findings in its April 8, 1988 order, to file no further lis pendens notices on the properties. 6

On February 9, 1988, Griffith filed with the bankruptcy court in the Hipp bankruptcy a "Motion to Avoid Notice Lis Pendens and for Contempt of Court" against Oles, alleging that he had filed three lis pendens notices on November 13, 1987 in Swisher County, and also similar notices in Castro County, and had on January 14, 1988 filed such a notice in Swisher County, all as to Hipp estate property. The bankruptcy court entered an order on March 23, 1988, directing Oles to show cause on April 5 why he should not be held in contempt "as sought by" Griffith. At the conclusion of the hearing on the contempt motion conducted before the bankruptcy court on April 5, 1988, after Oles had filed his response to the motion, 7 the bankruptcy court orally found Oles in criminal contempt of its November 9, 1987 order. On April 8, 1988, the bankruptcy court's written order for contempt was signed and entered of record. 8 Oles timely filed, pro se, objections to the order of contempt under Bankruptcy Rule 9020. These objections included assertions that the bankruptcy court lacked statutory and constitutional authority to determine guilt of and punish for criminal contempt, especially that not committed in its presence or for which imprisonment was imposed, and that "it was not proper to be prosecuted by a party-in-interest, but only by the court itself, or the district attorney, or a U.S. attorney, or an attorney especially appointed by the court." 9 Oles filed a pro se supporting brief, and Griffith's counsel filed a brief in response. Finally, without holding any hearing of its own or taking any further evidence, the district court entered its above-noted August 26, 1988 "Memorandum Opinion and Contempt Order" from which Oles brings this appeal.


Disinterested Prosecutor

We first turn to the issue under Young.

It is clear that this criminal contempt was prosecuted by the Hipp estate trustee and the trustee's attorney as such. The trustee personally signed, swore to and served the "Motion to Avoid Notice Lis Pendens and for Contempt of Court" which charged Oles with violating the bankruptcy court's November 9 order by filing the November 13 and January lis pendens notices. That motion, the show cause order, the bankruptcy court's April 8 order convicting and sentencing Oles, the trustee's brief in the district court, and that court's August 26, 1988 opinion-order, are all styled essentially as follows: "In re: Hipp, Inc., Debtor, Thomas J. Griffith, Trustee vs. David Oles, Bankruptcy No. 285-20080, Adversary No. 287-7084." 10 The contempt hearing was called by the clerk as "Case Number 287-7084, Thomas J. Griffith, Trustee for Hipp, Inc. versus Phoenix Grain Company, Inc., Redonda Cotter, and David Oles, on a motion to avoid Notice Lis Pendens and for Contempt of Court, brought by the Plaintiff." Cf. Gompers v. Bucks Stove & R. Co., 221 U.S. 418, 31 S.Ct. 492, 500, 55 L.Ed. 797 (1910).

When the bankruptcy court called for appearances at the April 5 hearing, the trustee's attorney announced, "Floyd Holder, attorney for Tom Griffith, the Petitioner in this case. Ready." After certain preliminary matters were disposed of, the bankruptcy court announced, "I believe that takes care of the preliminary matters. Mr. Holder, you may proceed on the Motion for Contempt." 11 Shortly thereafter, Oles interrupted Holder, and the bankruptcy court remarked, "Mr. Holder will present his case; then you will have your turn." (Emphasis added.) Holder then proceeded to present all the evidence supporting the contempt alleged in the trustee's "Motion to Avoid Notice Lis Pendens and for Contempt of Court," which was the only document referring to any contemptuous conduct. 12 Holder, inter alia, called Oles to the stand and asked if he would take the Fifth Amendment "with respect to any question I might ask you concerning the transactions alleged in the pleadings," the only "pleading" being the mentioned motion of the trustee. 13 Holder also introduced certified copies of the lis pendens notices, called Griffith to testify, and introduced other evidence tending to show that the November 13 lis pendens notices had frustrated a pending sale of Hipp estate property and at least suggesting that Oles had a hand in their being filed. The only evidence not presented by Holder was that which Oles presented, representing himself. The bankruptcy court called no witnesses, and no other attorney participated. After Oles had presented his evidence, the bankruptcy court asked if he had any further evidence, Oles said he did not, and the bankruptcy court stated: "Very well. I will hear the Trustee's argument, and then I will hear yours. Mr. Holder." (Emphasis added.) The trustee's counsel, Holder, then proceeded to argue why the evidence showed Oles was guilty of contempt. After Holder concluded, Oles argued, asserting, inter alia, that there was no proof he filed or caused to be filed the lis pendens notices in question. When Oles finished, the bankruptcy court stated: "Thank you. Mr. Holder, you get to close." Holder then made a brief closing argument, including assertions that "we don't simply allege in the Complaint that he filed; we said he executed these instruments and filed them. We proved ... that they were caused to be filed by Mr. Oles." Holder also filed with the district court, on behalf of "Thomas J. Griffith, Trustee," a brief in response to Oles' Rule...

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