In re Lawler
| Decision Date | 15 November 1989 |
| Docket Number | CA 3-87-2668-G.,Civ. A. No. CA 3-87-2667-G,Misc. No. 586-501 |
| Citation | 106 BR 943 |
| Parties | In re H. Roger LAWLER, et al., Debtors. H. Roger LAWLER, Plaintiff-Appellant, v. GUILD, HAGEN & CLARK, LTD., Defendant-Appellee. |
| Court | U.S. District Court — Northern District of Texas |
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C. Thomas Wesner, Jr., Wesner Coke Boyd & Clymer, P.C., Dallas, Tex., for plaintiff-appellant.
Judith L. Weaver, Frank Finn, Terry L. Jacobson, Thompson & Knight, Dallas, Tex., for defendant-appellee.
This case is before the court on the appeal of plaintiff H. Roger Lawler ("Lawler") from the United States Bankruptcy Court's July 30, 1987 memorandum opinion and order1 (1) allowing the law firm of Guild, Hagen & Clark, Ltd. ("Guild"), defendant-appellee, to withdraw with prejudice its proof of claim for attorney's fees, and (2) dismissing with prejudice Lawler's objections to Guild's proof of claim.
Lawler seeks reversal of the bankruptcy court's dismissal of his objections joined with what Lawler characterizes as "a compulsory counterclaim" included in his amended objection.2 Specifically, Lawler asks this court to withdraw the case from the bankruptcy court and, after hearing, enter judgment for Lawler on his "counterclaim" or alternatively to reverse and remand the case to the bankruptcy court to determine the damages Lawler is due on his claim. In either event, Lawler seeks affirmance, as a sanction, of Guild's withdrawal of its proof of claim.3 Guild, for its part, seeks affirmance of the bankruptcy court's decision in its entirety.4 After a de novo review of the record, the court is of the opinion, for the reasons stated in this memorandum order, that the bankruptcy court's memorandum opinion and order should be affirmed.5
On January 9, 1976, an involuntary petition against Lawler was filed in the Bankruptcy Court of the United States District Court for the District of Nevada. The case was transferred to the Bankruptcy Court of the Northern District of Texas on June 6, 1976, and Lawler consented to an adjudication of bankruptcy on January 20, 1978. The case was partially administered under Chapter VII of the Bankruptcy Act with L.E. Creel, III as receiver and trustee, and was later converted to a reorganization under Chapter XI of the Bankruptcy Act with Mr. Creel as operating trustee and disbursing agent. Through various actions brought by the trustee, it was determined that Lawler was solvent, and a "New Plan of Arrangement" was confirmed on April 30, 1984. That plan provided in part that unsecured creditors would receive the full amount of their allowed claims with interest from January 9, 1976.6
On February 20, 1976, Guild filed in the Nevada bankruptcy court a proof of claim in the amount of $15,565.40 for unpaid attorney's fees and expenses.7 No supporting itemization of costs and services or other documents was attached to support the claim.8 On March 9, 1978, after the case had been transferred to Dallas, Guild filed the identical claim (again, without supporting documents).9
On May 25, 1982, Lawler filed his first objection to Guild's four year old proof of claim on grounds that it lacked supporting documentation and that Guild had failed to give him credit for a paid retainer.10 On February 15, 1984, Lawler filed an application for an order establishing a procedure for objections to claims. On February 17, 1984, the court issued a claims scheduling order which, in relevant part, set (1) March 1, 1984 as the last date for creditors to file proofs of claim and (2) April 3, 1984 as the date to hear the remaining proofs of claim and related objections. That order also stated that the hearing could be adjourned from time to time without notice other than that given at the hearing.11
On February 29, 1984, Guild filed an amended proof of claim for unpaid attorney's fees and expenses in the increased amount of $16,433.32, with an attached itemization of the services reflected in statements Guild sent to Lawler between December 1974 and April 1975.12 The only differences between this amended proof of claim and Guild's prior proofs of claim were that the amended proof of claim sought interest at 7% per annum from April 23, 1975 (the date services ended) to January 9, 1976 (the date of the involuntary petition) and had supporting documentation attached.13
On April 3, 1984 — the day Guild's proof of claim had been set for hearing by order of February 17, 1984 — Lawler filed an amended objection to Guild's proof of claim asserting, for the first time, that Guild attorney Clark was guilty of malpractice and that Lawler in consequence was entitled to at least $510,000.00 "by way of counterclaim and setoff damages."14 The parties agree that the bankruptcy court adjourned the April 3, 1984 hearing without reaching Guild's claim.15 On May 1, 1984, Guild filed a written response to Lawler's amended objection arguing (1) that it was filed and delivered to Guild in violation of Code Rule 3007 and (2) that the claim for damages or offset was barred by limitations.16
Judge Ford retired in September 1985 without hearing Guild's disputed claim. The case was subsequently reassigned to Judge John C. Akard of the Lubbock Division of the Northern District of Texas.17 By notice of June 17, 1986, Judge Akard set Lawler's objections for hearing on October 14, 1986 and required that a proposed joint pretrial order be filed by October 1, 1986.18
On August 22, 1986, Guild filed a motion for summary judgment urging that the statute of limitations barred Lawler's amended objection.19 On October 1, 1986, the parties filed a joint pretrial order, in which Lawler set out his malpractice claim and Guild again argued not only the bar of limitations but also that Lawler had raised the malpractice claim in bad faith.20
On October 8, 1986, Lawler filed a motion for expedited hearing or continuance of hearing on Guild's motion for summary judgment, asserting as grounds that Lawler needed the testimony of an out of town witness and Clark's deposition to prepare for the hearing.21See note 5 above. It appears that the bankruptcy court denied this motion, because at a late evening hearing on October 14, 1986, Judge Akard denied the motion for summary judgment (without discussing its merits on the record) and proceeded to trial on the amended claim and objections.22 He then heard testimony from Clark on the merits of the amended objection until 11:30 p.m., at which time he called a recess until December 8, 1986.23 When trial was recessed, Guild had completed its direct examination of Clark but Lawler had not finished his cross-examination.24 Lawler claims that he also had witnesses of his own to present after Clark concluded his testimony.25
On November 26, 1986, before the bankruptcy court heard any further evidence concerning Guild's claim, Guild filed a motion for leave to withdraw its proof of claim and a motion for continuance containing a request for expedited hearing in light of the motion to withdraw proof of claim.26 In its brief supporting that motion, Guild moved the court to reconsider its October 14, 1986 denial of Guild's motion for summary judgment and "reurged" that motion in light of Guild's motion to withdraw proof of claim.27 Guild also renewed its argument that Lawler could not recover because he had not brought his counterclaim as an adversary proceeding.28 The continuance was granted, a hearing on the motion was set for December 8, 1986 (the same date previously set for resumption of trial), and the issues raised on this appeal (including the issues that were the subject of the motion for summary judgment) were briefed for the bankruptcy court.29
In its motion, Guild sought to withdraw its proof of claim, but only on the condition that Lawler's objections, including counterclaims or offsets, also be dismissed. The bankruptcy court heard argument on the motion on December 8, 1986 and on July 30, 1987 entered its opinion and order allowing withdrawal of Guild's claim with prejudice and dismissing Lawler's objections with prejudice.30 That opinion and order are the main subject of this appeal. Compare note 5 above.
The parties agree that this case, which was commenced on January 9, 1976, is governed by the Bankruptcy Act of 1898. See Act of Nov. 6, 1978 (Bankruptcy Reform Act of 1978), Pub.L. No. 95-598, § 403(a), 92 Stat. 2549, 2683. Lawler argues, however, that the bankruptcy court erred in applying the Rules of Practice and Procedure in Bankruptcy ("Code Rules") (prescribed by the Supreme Court on April 25, 198331 and effective on August 1, 1983) rather than the former Rules of Bankruptcy Procedure ("Act Rules") (prescribed by the Supreme Court on April 24, 1973,32 March 18, 1974,33 April 28, 197534 and April 26, 197635). While Guild does not contest the issue, it argues that the result of the appeal and much of the analysis is the same whether the Act Rules or the Code Rules apply. The court agrees with Guild and finds no merit in Lawler's position.
The bankruptcy court held that the Code Rules govern procedural matters in cases pending on August 1, 1983, when the rules became effective. Lawler, 75 B.R. at 981 (quoting Supreme Court order of April 25, 1983). See 11 U.S.C. Bankruptcy Rules at XIII:
The . . . Bankruptcy Rules shall take effect on August 1, 1983, and shall be applicable to proceedings then pending, except to the extent that in the opinion of the court their application in a pending proceeding would not be feasible or would work injustice, in which event the former procedure applies.
It noted, however, that "only slight differences exist" between the Act and Code Rules applicable to this case and that the result would be the same under either set of rules. Lawler, 75 B.R. at 981-83 and nn. 3, 4, 5, 7 and 9. This court agrees that ...
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