In re Plumlee
| Decision Date | 29 July 1999 |
| Docket Number | No. 2:99CV503.,2:99CV503. |
| Citation | 236 BR 606 |
| Court | U.S. District Court — Eastern District of Virginia |
| Parties | In re Douglas C. PLUMLEE, Debtor/Appellant. R. Clinton Stackhouse, Jr., Trustee, Plaintiff/Appellee, v. Douglas Plumlee, Foremost Marine Enterprises, Inc., Helen S. Plumlee, D. Todd Plumlee, and Alisa G. Plumlee, Defendants. |
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Robert V. Roussos, Roussos, Langhorne and Carlson, P.L.C., Norfolk, VA, for appellant.
Ann B. Brogan, Marcus, Santoro, Kozak & Melvin, P.C., Portsmouth, VA, for appellee.
This matter is before the court on Debtor Douglas C. Plumlee's appeal, pursuant to 28 U.S.C. § 158(a), from two orders of the United States Bankruptcy Court for the Eastern District of Virginia. On February 18, 1998, the bankruptcy court reopened Plumlee's case, which was closed on September 15, 1992, to determine whether proceeds that he received from the settlement of a lawsuit are property of the bankruptcy estate. On March 3, 1999, the court ruled that the settlement proceeds are property of the estate. For the reasons stated below, the bankruptcy court's orders are AFFIRMED.
The facts in this case are not in dispute. Plumlee filed his original bankruptcy petition under Chapter Seven of the Bankruptcy Code on December 27, 1991. Prior to filing his petition, he was president of Commercial Building Services, Inc. ("CBS"). However, in July, 1991, he and Richard Cheng, President of Eastern Computers, Inc. ("ECI"), agreed that ECI and CBS would merge. As part of the agreement, ECI would employ Plumlee as vice-president of manufacturing, and assume CBS's debts. Plumlee had pledged personal assets to guarantee some of CBS's debts, the largest of which was a $700,000 loan from Crestar Bank. Plumlee began working for ECI in July, 1991, but by the end of 1991, the merger had not occurred, and one of CBS's creditors initiated foreclosure proceedings. Plumlee filed his bankruptcy petition to protect his personal assets. On January 23, 1992, Cheng fired Plumlee, and on January 29, 1992, he told Plumlee that ECI was abandoning the merger with CBS.
Alexander P. Smith was appointed trustee of Plumlee's bankruptcy estate. On August 18, 1992, the bankruptcy court discharged Plumlee, and on September 15, 1992, it closed his case. On August 2, 1993, Plumlee filed a motion for judgment in the Circuit Court for the City of Norfolk against ECI and Cheng. Plumlee's complaint alleged breach of the merger agreement, breach of Plumlee's employment contract, and fraud. During the course of the litigation, Plumlee's attorney contacted Mr. Smith and asked whether he believed the bankruptcy estate had any interest in Plumlee's cause of action against ECI and Cheng. In a letter dated September 26, 1996, Smith stated that, based on his understanding that Plumlee's claim was for breach of the merger agreement and for breach of Plumlee's employment contract, the estate had no interest in the claim. In April, 1997, Plumlee's suit proceeded to trial, and on May 5, 1997, the jury returned a verdict for Plumlee, but only on his fraud claim. The jury found no breach of contract as to either the merger agreement or Plumlee's employment contract. The jury awarded Plumlee $500,000 in compensatory damages, but on June 12, 1997, the parties reached a post-judgment settlement agreement under which Cheng and ECI agreed to pay CBS and Plumlee $225,000 each.
On October 21, 1997, Crestar Bank filed with the bankruptcy court a motion to reopen Plumlee's case. After a February 9, 1998, hearing, the court granted Crestar's motion on February 18, 1998. R. Clinton Stackhouse, Jr. was appointed the new trustee of Plumlee's bankruptcy estate. On September 15, 1998, Stackhouse filed a complaint on behalf of the estate seeking to recover Plumlee's settlement proceeds. Count I of the complaint sought an order declaring that the proceeds were property of the estate and requiring Plumlee to turn $225,000 over to Stackhouse.1 On December 22, 1998, Plumlee filed a motion to dismiss the complaint or, in the alternative, a motion for summary judgment. On January 12, 1999, Stackhouse filed a motion for summary judgment on Count I of the complaint. The bankruptcy court held a hearing on the parties' motions on January 28, 1999, and by order dated March 3, 1999, it denied Plumlee's motions and granted Stackhouse's motion.
On March 12, 1999, Plumlee filed a notice of appeal of the bankruptcy court's March 3, 1999, summary judgment order. He filed a brief in support of his appeal on April 27, 1999. On May 18, 1999, Stackhouse filed an opposing brief, and on May 27, 1999, Plumlee filed a reply brief. Accordingly, this matter is ripe for decision.
On appeal, a district court reviews a bankruptcy court's findings of fact under the clearly erroneous standard, while a bankruptcy court's conclusions of law are reviewed de novo. In re Johnson, 960 F.2d 396, 399 (4th Cir.1992). Since summary judgment constitutes judgment as a matter of law, this court reviews the bankruptcy court's summary judgment order de novo. Pursuant to Bankruptcy Rule 7056, Rule 56 of the Federal Rules of Civil Procedure applies to adversarial bankruptcy proceedings. Thus, as with summary judgment in a district court proceeding, summary judgment in a bankruptcy proceeding is appropriate only when the court, viewing the record as a whole and in the light most favorable to the nonmoving party, finds that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); see, e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Terry's Floor Fashions, Inc. v. Burlington Indus., 763 F.2d 604, 610 (4th Cir.1985). However, the bankruptcy court's decision to reopen Plumlee's case is committed to the court's sound discretion, so this court reviews that decision under an abuse of discretion standard. In re Thompson, 16 F.3d 576, 581 (4th Cir.1994).
As a preliminary matter, Stackhouse argues that Plumlee is barred from appealing the bankruptcy court's order to reopen his case because he failed to appeal within ten days of the order, as required by Bankruptcy Rule 8002(a). In response, Plumlee asserts that the order reopening his case was not a final judgment, order or decree, see 28 U.S.C. § 158(a)(1), so it was not appealable at the time that the bankruptcy court issued it. Stackhouse maintains that the order was a final order, so Plumlee's appeal is untimely. He cites a Seventh Circuit decision for the proposition that an order to reopen a debtor's estate is "judicial, final and binding upon all the parties." In re Joslyn's Estate, 171 F.2d 159, 164 (7th Cir.1948). However, the Seventh Circuit stated this proposition in the context of a discussion as to whether one bankruptcy court could review another's decision to reopen an estate, not in the context of an appeal. Contrary to Stackhouse's assertions, courts do not regard an order reopening a debtor's estate as a final determination adverse to any party. See, e.g., Gerber v. Fruchter, 147 F.2d 120, 122 (2d Cir.1945); Doyle v. Ponsford, 136 F.2d 401, 403 (8th Cir.1943); In re Snyder, 4 F.2d 627, 628 (9th Cir.1925). In fact, some courts have indicated that no party would have standing to challenge such an order at the time it is issued because the party would not yet have suffered an injury. See, e.g., Gerber, 147 F.2d at 122; Williams v. Rice, 30 F.2d 814, 815 (5th Cir.1929); In re Leigh, 272 F. 678, 679 (7th Cir.1921). One option a party may follow if it wishes an immediate appeal of an order reopening an estate is to file a motion to vacate the order, and then appeal the ruling denying its motion. See, e.g., In re Fair Creamery Co., 193 F.2d 5, 6 (6th Cir.1952); Duggan v. Franklin Square Nat'l Bank, 170 F.2d 922, 923 (2d Cir. 1948); Doyle, 136 F.2d at 403; Hunter v. Commerce Trust Co., 55 F.2d 1, 2 (8th Cir.1932). In this case, Plumlee did not file a motion to vacate, but that does not then convert the bankruptcy court's order to reopen his estate into a final order. Since the order to reopen is not a final one, Plumlee is not barred from appealing at this time, as he has now suffered an injury as a result of the reopening of his case.
Turning to the substance of Plumlee's appeal, he argues that the bankruptcy court abused its discretion by reopening his estate. On motion of "the debtor or other party in interest," Bankruptcy Rule 5010, a bankruptcy court may reopen any closed case "to administer assets, to accord relief to the debtor, or for other cause." 11 U.S.C. § 350(b). As indicated above, the decision to reopen a case is within the bankruptcy court's discretion. See, e.g., In re Thompson, 16 F.3d at 581. Courts "have been rather liberal in permitting reopening." In re Reid, 198 F.Supp. 689, 693 (W.D.Va.1961), aff'd sub nom. Reid v. Richardson, 304 F.2d 351, 355 (4th Cir. 1962) ().
Many courts have held that a bankruptcy court does not abuse its discretion when it reopens a closed case to administer newly-discovered assets. See, e.g., In re Mullendore, 741 F.2d 306, 308 (10th Cir.1984); In re Berg, 45 B.R. 899, 902-03 (9th Cir. BAP 1984); Scharmer v. Carrollton Mfg. Co., 525 F.2d 95, 98 (6th Cir. 1975); Doyle, 136 F.2d at 403; In re Joslyn's Estate, 171 F.2d at 164; Williams, 30 F.2d at 815. In fact, some courts have stated that "it is the duty of the court to reopen an estate whenever prima facie proof is made that it has not been fully administered." In re Mullendore, 741 F.2d at 308; accord Doyle...
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