In re Fox Bros., Inc.

• Decision Date: 12 June 1992
• Docket Number: Bankruptcy No. 89-50115,Adv. No. 90-5013.
• Citation: 142 BR 320
• Parties: In re FOX BROTHERS, INC. Walter M. DICKINSON, Trustee, Plaintiff, v. CROCKETT & BROWN, P.A., Defendant, National Bank of Commerce, Intervenor.
• Court: U.S. Bankruptcy Court — Eastern District of Arkansas

142 B.R. 320 (1992)

In re FOX BROTHERS, INC. Walter M. DICKINSON, Trustee, Plaintiff, v. CROCKETT & BROWN, P.A., Defendant National Bank of Commerce, Intervenor.

Bankruptcy No. 89-50115, Adv. No. 90-5013.

United States Bankruptcy Court, E.D. Arkansas, Pine Bluff Division.

June 12, 1992.

Frederick Wetzel, Little Rock, Ark., for plaintiff.

William Owen, Little Rock, Ark., for defendant.

Judy Simmons Henry, Little Rock, Ark., for intervenor.

ORDER STRIKING DEMAND FOR JURY TRIAL

MARY D. SCOTT, Bankruptcy Judge.

THIS CAUSE is before the Court upon the Demand for Trial by Jury filed by the defendant, Crockett & Brown, P.A. on May 29, 1992. The intervenor, National Bank of Commerce filed an objection to the jury demand on June 2, 1992. The defendant's demand for jury trial, filed nearly two years after the "last pleading directed to such issue," will be stricken as untimely. This cause will proceed, as scheduled, for trial before the United States Bankruptcy Court.

I. PROCEDURAL HISTORY

The initial Complaint in this matter was filed by the trustee over two years ago, on March 13, 1990. The defendant answered the complaint on April 19, 1990. On April 24, 1990, the intervenor filed its motion to intervene in the action and submitted a proposed complaint. The Court granted permission to intervene whereupon the intervenor filed its complaint of record on June 28, 1990, to which the defendant filed its answer on July 19, 1990. Thereafter, the Court scheduled trial for May 16, 1991.

On May 10, 1991, the trustee filed an application to settle the case to which the intervenor objected. A status conference was held on July 3, 1991, at which time the trustee plaintiff and defendant were permitted an additional amount of time to file responses to the intervenor's objection. On September 19, 1991, the Court sustained the intervenor's objection.

Thereafter, the trustee filed an application to abandon the cause of action set forth in the complaint initiating this adversary proceeding, to which the intervenor objected. The parties entered into an agreement on the record and submitted an Order. The defendant later objected to the proposed order, which objection was overruled¹ and an order entered permitting the trustee to abandon the cause of action to the intervenor. The intervenor was granted leave to proceed ex rel the trustee. Thereafter, the Court issued a lengthy order, setting the matter for trial, permitting additional pretrial filings,² and specifically advised the parties that no further delays, continuances, or extensions would be tolerated.

Due to the realignment of parties, both the intervenor and the defendant requested, and were granted, permission to file amended pleadings. The amended complaint in intervention, filed on April 28, 1992, incorporated the trustee's turnover action in the pleading. The defendant filed its answer to the amended complaint on May 29, 1992, twenty-five months after its answer to the trustee's complaint and twenty-two months after its answer to the intervenor's complaint. On the same date, the defendant filed a demand for jury trial.³ No previous demands for jury trial had been made by the defendant.

II. THE JURY DEMAND

The issue before the Court is whether the defendant is entitled to trial by jury.⁴ The heart of this proceeding is a request to obtain funds from the defendant. Although cloaked in the language and procedure of equitable bankruptcy proceedings, the matter is essentially legal in nature. See Clairmont Transfer Company v. Rice, Rice, Gilbert & Marston (In re Clairmont Transfer Company), 117 B.R. 288 (Bankr.W.D.Mich.1990); In re Rheuban, 124 B.R. 301, 301 (C.D.Cal.1990). This is true despite the fact that the intervenor also requests equitable subordination and determination of lien priority. Parties to such legal proceedings are generally entitled to jury trials on such issues. This right, however, is not without limitations.

A. Timeliness of the Jury Demand

In order to retain the right to a jury trial, a party must make a timely demand to trial by jury. The failure to do so waives the right to trial by jury. Ingram River Equipment, Inc. v. Pott Industries, Inc., 816 F.2d 1231, 1235 (8th Cir.1987); Williams v. Farmers & Merchants Insurance Co., 457 F.2d 37, 38 (8th Cir.1972). Under the Federal Rules of Civil Procedure, such a demand must be made within ten days after "service of the last pleading directed to such issue." Fed.R.Civ.Proc. 38(b). The rule specifically states that failure to timely serve and file a demand for jury "constitutes a waiver by the party of trial by jury." Fed.R.Civ.Proc. 38(d). This waiver is "complete even though it was inadvertent, unintended and regardless of the explanation or excuse." Scharnhorst v. Independent School District No. 710, 686 F.2d 637, 641 (8th Cir.1982), cert. denied, 462 U.S. 1109, 103 S.Ct. 2459, 77 L.Ed.2d 1337 (1983).

The Federal Rules of Bankruptcy Procedure do not incorporate Rule 38. However, numerous bankruptcy courts have indicated that this rule is applicable in bankruptcy proceedings. See, e.g., Yoder v. T.E.L. Leasing, Inc. (In re Suburban Motor Freight, Inc.), 114 B.R. 943, 954 (Bankr.S.D.Ohio 1990). While Rule 38 has not been incorporated by the Federal Rules of Bankruptcy Procedure, this Court holds that, in the absence of an otherwise controlling rule, a party must make a jury demand within a reasonable time after service of the "last pleading directed to such issue."⁵ The Court believes that the ten-day time set forth in Rule 38 would constitute a good basis for measuring timeliness of the demand. Thus, the first issue for the Court is whether the demand, filed on the same date as the answer to the amended complaint in intervention is timely.

The term "last pleading directed to such issue" does not simply mean the "last pleading filed." It is well-settled that the "last pleading" referenced in Rule 38(b) requires a new issue for which the party is demanding a jury trial.⁶ Williams v. Farmers & Merchants Insurance Co., 457 F.2d 37, 38 (8th Cir.1972). A jury demand made in an amended pleading, or in response to an amended pleading, creates a right to jury trial only "as to new issues of fact raised by the amended complaint." Communications Maintenance, Inc. v. Motorola, Inc., 761 F.2d 1202, 1208 (7th Cir.1985). Accord Clement v. American Greetings Corporation, 636 F.Supp. 1326, 1334 (S.D.Cal.1986); Yoder v. T.E.L. Leasing, Inc. (In re Suburban Motor Freight, Inc.), 114 B.R. 943, 955 (Bankr.S.D.Ohio 1990); Cedars-Sinai Medical Center v. Revlon, Inc., 111 F.R.D. 24, 30 (D.Del. 1986). "The mere assertion of new legal theories based on facts previously pleaded does not constitute the presentation of a new issue on which a jury trial should be granted under Fed.R.Civ.P. 38(b), and thus would not revive the pleader's right to jury trial." Clement, 636 F.Supp. at 1334. Mere submission of more detailed statements of the previously submitted claims likewise does not confer anew the right to jury trial. Revlon, 111 F.R.D. at 30-31; Clement, 636 F.Supp. at 1335.

A comparison of the two original complaints with the amended complaint indicates that no new factual issues have been raised. The initial complaint filed by the trustee stated a cause of action for turnover of property of the estate. The complaint was much lengthier than the average turnover complaint due to the nature and extent of the facts pleaded. Essentially, the trustee asserted that the defendant, attorneys of the debtor, had obtained a large retainer from the debtor prior to the filing of the petition in bankruptcy, which fees were unreasonable or improper for numerous and defined reasons.⁷ The complaint further alleged that the defendants retained funds, for which they had performed no work, such that those unearned funds should be turned over to the trustee. Finally, an important issue was raised regarding the filing of disclosures of attorney's fees paid to defendant. The complaint alleges that the defendant misstated the amount it received in pleadings filed before the Court.

The original complaint in intervention raised numerous issues in addition to those raised by the trustee. In addition to alleging other improprieties regarding the fees collected and services rendered, the intervenor requested determination of lien priority and imposition of constructive trust or equitable lien with regard to the funds held by defendant. The intervenor also requested that any claim of defendant be disallowed⁸ or equitably subordinated. In support of its thirty-five paragraph complaint, the intervenor also delineated alleged instances of misconduct.⁹

While different in organization, the amended complaint in intervention raises no new facts. The amended complaint sets forth seven counts as follows: (1) disgorgement of fees due to false oath by defendant; (2) disgorgement of fees due to conflicts of interest and false oaths by defendant; (3) turnover of attorneys fees improperly billed and paid, 11 U.S.C. §§ 542, 549; (4) turnover of fees received in excess of charges made, 11 U.S.C. §§ 542, 549; (5) turnover of unreasonable attorneys fees; (6) a request for determination of intervenor's security interest such that all funds ordered turned over be remitted to intervenor; and (7) equitable subordination.

The answers filed by the defendants raise no new issues for which jury trial is permitted. The only additional issues raised in the answer to the amended complaint in intervention relate to the substitution of parties made by the Court's previous orders. To the extent these are even new issues, they are legal and procedural issues for which jury trial is not appropriate.

While the organization and recitation of facts were more methodical in the amended complaint, the facts and issues pleaded remain essentially the same as those pleaded in the trustee's complaint and the intervenor's initial complaint. No new factual issues have been raised. The...