In re Schwarten
| Decision Date | 28 February 1996 |
| Docket Number | No. 95-4105-SAC. Bankruptcy No. 92-42199-7. Adv. No. 93-7029.,95-4105-SAC. Bankruptcy No. 92-42199-7. Adv. No. 93-7029. |
| Parties | In re Raymond Paul SCHWARTEN, and Susan Renee Schwarten, Debtors. MARK TWAIN KANSAS CITY BANK, Plaintiffs, v. Raymond Paul SCHWARTEN, and Susan Renee Schwarten, Defendants. |
| Court | U.S. District Court — District of Kansas |
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Robert L. Lundblad, Kansas City, KS, Robert N. Calbi, Kansas City, MO, for Raymond P. Schwarten and Susan R. Schwarten.
Gregory M. Garvin, Neil S. Sader, Brown, Nachman & Sader, P.C., Kansas City, MO, for Mark Twain Kansas City Bank.
On December 2, 1992, Raymond Paul and Susan Renee Schwarten filed for protection under Chapter 7 of the Bankruptcy Code. In an adversary proceeding, the bankruptcy court granted Mark Twain Kansas City Bank's (Mark Twain) motion for summary judgment, finding that the Schwartens were collaterally estopped from relitigating the issue of whether they had committed fraud in obtaining a $100,000 loan from Mark Twain. Based upon that ruling, the bankruptcy court concluded that the Schwartens' debt to Mark Twain was nondischargeable under 11 U.S.C. § 523(a)(2)(A) or (B). The Schwartens timely appeal that decision of the bankruptcy court.
"The question of whether summary judgment was appropriately granted is generally a question of law to be reviewed de novo." Miller v. Gentry, 169 B.R. 715, 719 (D.Kan.1994), aff'd, 55 F.3d 1487 (10th Cir.), cert. denied, ___ U.S. ___, 116 S.Ct. 305, 133 L.Ed.2d 210 (1995). See Oulds v. Principal Mut. Life Ins. Co., 6 F.3d 1431, 1436 (10th Cir.1993) (). "This same standard applies when the district court, sitting as an appellate court to the bankruptcy court, reviews an order by the bankruptcy court granting summary judgment." Miller, 169 B.R. at 719; see generally Citizens Nat'l Bank & Trust Co. v. Serelson (In re Burkart Farm & Livestock), 938 F.2d 1114, 1115 (10th Cir.1991) ().
A court grants a motion for summary judgment if a genuine issue of material fact does not exist and if the movant is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). The substantive law governing the suit dictates which facts are material or not. Id. at 248, 106 S.Ct. at 2510. "Only disputes over facts that might affect the outcome of the suit under the governing law will . . . preclude summary judgment." Id. There are no genuine issues for trial if the record taken as a whole would not persuade a rational trier of fact to find for the nonmoving party. Matsushita Elec. Indust. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). "There are cases where the evidence is so weak that the case does not raise a genuine issue of fact." Burnette v. Dow Chemical Co., 849 F.2d 1269, 1273 (10th Cir.1988).
At the outset, the court must address Mark Twain's contention that the court does not have jurisdiction to consider this appeal. Although the Schwartens' notice of appeal was timely filed, the notice of appeal was not signed by an attorney admitted to practice in the District of Kansas. Instead, the notice of appeal was signed by an attorney admitted to practice in Missouri. Apparently, the appellants' attorney from Missouri also signed the signature of their Kansas local counsel. In their reply brief the Schwartens explain:
Counsel for Debtors is in total disagreement with the Bank\'s assertion that this Court does not have jurisdiction and takes great exception to this tactic taken by the Bank. The Notice of Appeal was "signed" by a member of the Bar of this Court. Mr. Calbi affixed the signature of Mr. Lunblad to the pleading with the consent and permission of Mr. Lunblad. A document signed with the permission and consent of an attorney is adequate and proper and therefore, the Notice of Appeal was properly effectuated. Mr. Lunblad was not available to affix his own signature to the document when it needed to be filed and gave his consent and permission for Mr. Calbi to affix his signature for him.
Schwartens' Reply Brief (Dk. 13) at 1-2.
Contrary to the Schwartens' assertion, the rules of this district do not permit the procedure for signing pleadings which was practiced by their attorney in this case. D.Kan. Rule 83.5.4, titled "Appearance for a Particular Case," formerly D.Kan.Rule 404,1 states as follows:
(c) All pleadings or other papers signed by an attorney admitted pro hac vice shall also be signed by a member of the bar of this court in good standing who shall participate meaningfully in the preparation and trial of the case or proceedings to the extent required by the court. An attorney who applies for admission pro hac vice by doing so consents to the exercise of disciplinary jurisdiction by this court over any alleged misconduct that occurs during the progress of the case in which the attorney so admitted participates.
Zapata v. IBP, Inc., 162 F.R.D. 359, 360 (D.Kan.1995) (Magistrate Judge Rushfelt). Moreover, an attorney who has not reviewed the pleading to which his signature is affixed by proxy has not "meaningfully" participated in that document's preparation.
Notwithstanding this apparent violation of the rules of this district, the court finds that it has jurisdiction to consider this appeal. The primary purpose of Rule 83.5.4 is to provide a mechanism insuring that attorneys practicing in this district are subject to the rules and discipline of this court. The rule serves the primary purpose of requiring compliance with the standards of professional conduct demanded by this court, including adherence to the requirements imposed by Fed.R.Civ.P. 11. Although the court in no way condones the procedure followed by appellants' counsel in this case, dismissal of their appeal on such grounds simply exacts too harsh a penalty. This admonition to counsel serves as an appropriate sanction. The court, in the exercise of its discretion under D.Kan.Rule 1.1,2 finds the appellants' notice of appeal adequate and will consider the appellants' appeal on the merits.
The Schwartens are husband and wife. In 1990, the Schwartens were involved with a corporation called Sonic Technologies, Inc. Susan Schwarten was the sole shareholder and president. Ray Schwarten was the chief executive officer of the corporation and was apparently in charge of the company's day-to-day activities.
On March 8, 1990, Mark Twain extended a $100,000 line of credit to Sonic Technologies. The loan was evidenced by a promissory note, "due on demand, but if no demand is made then on June 6, 1990." Both Susan and Ray Schwarten executed personal guarantees for the promissory note. On March 12, 1990, Sonic Technologies borrowed $94,249.79 on its line of credit with Mark Twain. Sonic Technologies failed to pay the note when due and the Schwartens did not honor their guarantees.
Sonic Technologies subsequently commenced a "lender liability"3 lawsuit in Missouri state court against Mark Twain. In response, Mark Twain sought judgment against both Sonic Technologies and the Schwartens on several theories, including fraud or misrepresentation. The essence of Mark Twain's fraud claims was that Sonic Technologies and the Schwartens, in their written representations to the bank, had exaggerated the business' income, included assets which the business did not own or possess, and indicated that it had entered a joint venture agreement with two other companies. In short, Sonic Technologies and the Schwartens materially overstated the income and assets of their enterprise and the prospects for its success in the future. Mark Twain also alleged that Susan Schwarten made both oral and written fraudulent misrepresentations concerning her own personal assets.
In 1992, Mark Twain sought partial summary judgment on certain issues, including its fraud claims against Sonic Technologies and the Schwartens. In support of its first fraud claim (Fraud I), Mark Twain argued that Sonic Technologies and the Schwartens had overstated the net income of Sonic Technologies by $50,000. In support of its second claim of fraud (Fraud II), Mark Twain argued that Sonic Technologies and the Schwartens fraudulently misrepresented that a joint venture had been formed with two other companies when in fact one had not. On September 25, 1995, the state court issued an order which, inter alia, granted Mark Twain "judgment against both Sonic Technology and the Schwartens for their fraud in inducing the bank to extend a line of credit." The state court's order does not include any additional findings of fact or conclusions of law. The state court subsequently made its order granting partial summary judgment final for purposes of appeal. The Schwartens have apparently appealed the judgment of the Missouri state court.
In the adversary proceeding before the bankruptcy court, Mark Twain sought and was granted summary judgment on its contention that the Schwartens were collaterally estopped from relitigating the issue of whether their debt to Mark Twain was dischargeable under § 523(a)(2)(A) or (B). The Schwartens' arguments notwithstanding, the bankruptcy court concluded that they were collaterally estopped from relitigating the same issues decided by the Missouri state court:
Since Mark Twain alleged facts sufficient to satisfy the...
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