In re Martin
| Decision Date | 23 September 1997 |
| Docket Number | BAP No. 97-6039. |
| Citation | 212 BR 316 |
| Parties | In re Burma Jean MARTIN, Debtor. Burma Jean MARTIN, Appellant, v. Richard L. COX, Trustee, Appellee. |
| Court | U.S. Bankruptcy Appellate Panel, Eighth Circuit |
Burma Jean Martin, Sherwood, AR, pro se.
James Franklin Dowden, Grobmeyer & Ramsay, Little Rock, AR, Richard Lee Cox, Henry & Cox, Hot Springs, AR, for Richard L. Cox.
Before KOGER, Chief Judge, and DREHER and SCHERMER, Bankruptcy Judges.
Burma Jean Martin (the "Debtor") appeals from the bankruptcy court's order approving a settlement of litigation between the Debtor and Barrent Goodstein("Goodstein"). This settlement resolved claims asserted by Goodstein against the Debtor for unpaid legal fees, as well as claims by the Debtor against Goodstein for fraud, breach of contract and other related causes of action. We affirm the order of the bankruptcy court approving the settlement.
Burma Jean Martin filed a voluntary petition for relief under Chapter 7 of the United States Bankruptcy Code on September 20, 1995. At the time of the voluntary petition, the Debtor was involved in two pending state court proceedings with her former counsel and his law firm, Goodstein & Starr, P.C. (The "Goodstein Litigation")1. In the first action, the Debtor defended against claims of counsel for recovery of outstanding legal fees in the amount of $37,181.02. In the second action, the Debtor as plaintiff, sought recovery against Goodstein on the basis of fraud and other theories stemming from an alleged promise by Goodstein that his law firm would not charge the Debtor for its legal services after the Debtor and Goodstein became romantically involved in early 1985. Upon termination of the romantic relationship, Goodstein began collection activity and the Debtor responded with her lawsuit.
After the Debtor filed her petition in bankruptcy, she removed the Goodstein Litigation to the bankruptcy court where the Chapter 7 Trustee, Richard L. Cox, (the "Trustee") intervened. After independent investigation, the Trustee was of the opinion that it was in the best interest of the estate to settle the Goodstein Litigation and Goodstein's claim against the estate. The record reveals that the Trustee initially reached an agreement with Goodstein, (the "Initial Settlement") whereby Goodstein would release all claims against the estate (for fees in the amount of $37,181.02) and would pay the estate $8,500.00 in full resolution of the Debtor's claims against Goodstein. Trustee provided notice of the Initial Settlement on or about May 16, 1997, but the Debtor, together with her parents, objected. The Debtor asserted that the offer of $8,500.00 was insufficient and therefore was not reasonable. Her parents contended that the claim against Goodstein had been assigned to them by the Debtor pre-petition and therefore, the estate had no interest in the claim.
Although the parents' objection was overruled, the court did not approve the Initial Settlement, concluding that the Debtor's parents should be allowed an opportunity to bid an amount in excess of the Goodstein offer of $8,500.00. The Trustee then issued a second Notice of Compromise Settlement, (the "Second Settlement") reciting the same offer from Goodstein and indicating that the Debtor's parents were afforded an opportunity to bid on the claim. The Debtor then filed an objection to the Second Settlement, again contesting the reasonableness of the Goodstein offer, and the Debtor's parents then bid $10,000.00 to purchase the Goodstein claim. Goodstein thereafter increased his offer to $10,500.00, and the Trustee provided notice of this, the third settlement (the "Third Settlement"). Again, the Debtor reiterated her prior objection. The court considered approval of the Third Settlement on April 17, 1997, almost a full year after the Initial Settlement had been noticed for approval and nearly ten years after the Goodstein Litigation commenced.
Debtor appeared and testified at the hearing as did the Trustee. After careful consideration of the reasonableness of the settlement in light of the evidence offered, the bankruptcy court approved the Third Settlement, finding that the compromise with Goodstein was in the best interest of the estate. In reaching this decision, the court considered the merits of the Debtor's underlying fraud claim2, as well as the extent to which rejection of the settlement would expose the trustee to lesser recovery and subject the estate to "undue waste or needless expense." In re Burma Jean Martin, 208 B.R. 463, 466 (Bankr.E.D.Ark.1997). Addressing the merits of the Debtor's fraud claim, the court looked to the elements of fraud under applicable Texas law and concluded that the facts offered by the Debtor could not support a finding that Goodstein made a false representation, nor that he intended the Debtor to rely upon, or take any specific action in response to, any statements or assertions he had made. Additionally, the court found that the debtor offered no evidence concerning the value of her lawsuit against Goodstein to refute the reasonableness of the Third Settlement. Accordingly, the bankruptcy court held that the Debtor failed to establish by any credible evidence, that the Trustee would be able to effect recovery in excess of the proffered settlement of $10,500.00 together with elimination of Goodstein's claims against the estate. In considering the evidence and testimony offered, the court also carefully weighed the credibility of the Trustee and the Debtor as witnesses, finding on one occasion that the Debtor's tearful presentation was disingenuous.
The Debtor enumerates several issues on appeal, all of which derive from a basic challenge to the court's conclusion that the $10,500.00 cash settlement and waiver of claims was reasonable and was in the best interest of the estate. The Debtor submits that the court failed to properly consider the Trustee's "motives" for settlement; that it failed to consider the validity of Goodstein's claim; that the court's findings of facts were clearly erroneous; and that its legal conclusions constituted an abuse of discretion.
A bankruptcy appellate panel shall not set aside findings of fact unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witness. Fed. R.Bankr.P. 8013. First Nat'l Bank of Olathe Kansas v. Pontow, 111 F.3d 604, 609 (8th Cir.1997). "A finding is `clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Anderson v. City of Bessemer, 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985) (quoting U.S. v. U.S. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 541-42, 92 L.Ed. 746 (1948)). We review the legal conclusions of the bankruptcy court de novo. First Nat'l Bank of Olathe Kansas, 111 F.3d at 609; Estate of Sholdan v. Dietz, (In re Sholdan), 108 F.3d 886, 888 (8th Cir.1997). A bankruptcy court's approval of a settlement will not be set aside unless there is plain error or abuse of discretion. New Concept Housing, Inc. v. Arl W. Poindexter, (In re New Concept Housing, Inc.) 951 F.2d 932, 939 (8th Cir.1991).
"The standard for compromise and approval of a settlement is whether the settlement is `fair and equitable' and `in the best interests of the estate.'" In re Apex Oil Company, et al., 92 B.R. 847, 867 (Bankr. E.D.Mo.1988), quoting, Protective Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424, 88 S.Ct. 1157, 1163, 20 L.Ed.2d 1, (1968). "The purpose of a compromise is to `allow the trustee and creditors to avoid the expenses and burdens associated with litigating sharply contested and dubious claims.'" Apex Oil Company, 92 B.R. at 866, quoting, United States v. Alaska Nat'l Bank, (In re Walsh Constr., Inc.) 669 F.2d...
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