In re Shattuck

• Decision Date: 29 July 2009
• Docket Number: Bankruptcy No. 08-11329-SBB.,BAP No. CO-08-073.
• Citation: 411 B.R. 378
• Parties: In re James Ronald SHATTUCK, officer, director, shareholder of Construction Specialists; officer, director, shareholder of Reflections Autowash, LLC; officer, director, shareholder of Sandstone Ridge Properties, LLC; officer, director, shareholder of Plan 4 Design, LLC, and Cynthia Joy Shattuck, also known as Cindy Shattuck, Debtors. James Ronald Shattuck and Cynthia Joy Shattuck, Appellants, v. Larry Bondurant, Reflections Autowash, LLC, Integra Holdings, LLC, a Connecticut Limited Liability Company, and Prospera, LLC, a Connecticut Limited Liability Company, Appellees.
• Court: U.S. Bankruptcy Appellate Panel, Tenth Circuit

411 B.R. 378

In re James Ronald SHATTUCK, officer, director, shareholder of Construction Specialists; officer, director, shareholder of Reflections Autowash, LLC; officer, director, shareholder of Sandstone Ridge Properties, LLC; officer, director, shareholder of Plan 4 Design, LLC, and Cynthia Joy Shattuck, also known as Cindy Shattuck, Debtors.

James Ronald Shattuck and Cynthia Joy Shattuck, Appellants, v. Larry Bondurant, Reflections Autowash, LLC, Integra Holdings, LLC, a Connecticut Limited Liability Company, and Prospera, LLC, a Connecticut Limited Liability Company, Appellees.

BAP No. CO-08-073.

Bankruptcy No. 08-11329-SBB.

United States Bankruptcy Appellate Panel of the Tenth Circuit.

July 29, 2009.

Submitted on the briefs:^*

Stephen E. Berken and Stephen S. Chang of the Law Offices of Stephen Berken, Denver, CO, for Appellants.

Jan L. Hammerman, Centennial, CO, for Appellee Larry Bondurant.

Before CORNISH, Chief Judge, BOHANON and RASURE, Bankruptcy Judges.

OPINION

RASURE, Bankruptcy Judge.

Appellants James Ronald Shattuck and Cynthia Joy Shattuck (the "Shattucks") appeal the order granting the motion to dismiss their Chapter 13 case filed by Appellee Larry Bondurant ("Mr.Bondurant"), the state court appointed receiver for Reflections Autowash, LLC, an entity in which Mr. Shattuck was the sole member (the "LLC"). After an evidentiary hearing, the bankruptcy court concluded that the Shattucks' noncontingent, liquidated, unsecured debt exceeded the statutory Chapter 13 eligibility limits provided in Section 109(e) of the Bankruptcy Code. Because we conclude that Mr. Bondurant's motion should have been stricken because Mr. Bondurant, who was acting in a representative capacity for the receivership estate of the LLC, is not licensed to practice law, we REVERSE the order of dismissal and REMAND for further proceedings.¹

I. BACKGROUND

On February 6, 2008, the Shattucks filed for relief under Chapter 13 of the Bankruptcy Code. After failing to achieve confirmation of their first plan, the Shattucks filed an Amended Chapter 13 Plan.² The bankruptcy court scheduled a confirmation hearing on the Amended Chapter 13 Plan for June 4, 2008.³ On May 28, 2008, Mr. Bondurant filed (1) an Objection to Confirmation of the Chapter 13 Plan and (2) a Motion to Dismiss Chapter 13 Petition Pursuant to 11 U.S.C. 109(e).⁴ On May 29, 2008, Prospera, LLC ("Prospera") and Integra Holdings, LLC ("Integra") filed a Joinder in Objection to Confirmation of Chapter 13 Plan Pursuant to 11 USC Sections 1322 & 1325.⁵

On June 3, 2008, the Shattucks filed a Motion to Strike Objection ("Motion to Strike"), asserting that because Mr. Bondurant was not a licensed attorney, he had no authority to file pleadings on behalf of the LLC.⁶ In the Motion to Strike, the Shattucks cited Rule 11.1(A) of the Local Civil Rules of the United States District Court of Colorado, which provides that "[o]nly pro se individual parties and members of this court's bar may appear or sign pleadings, motions, or other papers. Any pleading, motion, or paper listing in a signature block ... by, any other person, partnership, professional corporation, limited liability company, or other entity may be stricken."⁷

On June 4, 2008, the bankruptcy court convened the confirmation hearing. Neither Mr. Bondurant nor counsel for Prospera and Integra appeared to prosecute their objection to confirmation. The bankruptcy court held a status conference and continued the hearing to confirm the existing plan, or any subsequently filed plan, to July 23, 2008. The court also set the Shattucks' Motion to Strike and Mr. Bondurant's motion to dismiss for hearing on the same date, and required the parties to file and exchange exhibit and witness lists by July 18, 2008.⁸

In his response to the Motion to Strike, filed on June 6, 2008, Mr. Bondurant asserted that he was appointed as receiver for the LLC by the state court, that he "was appointed to be the Receiver as an individual," and as an individual, he believed he had the authority to represent himself pro se.⁹ He further stated that the LLC did not have funds to hire an attorney, and that if the LLC was required to obtain counsel, he requested a period of thirty days after the order granting the Motion to Strike in which to secure such counsel.¹⁰

On June 19, 2008, the Shattucks filed a third amended Chapter 13 Plan,¹¹ which again drew an objection from Mr. Bondurant,¹² with Prospera and Integra joining in Mr. Bondurant's objection.¹³ Mr. Bondurant also filed a fresh Motion to Dismiss Chapter 13 Petition Pursuant to 11 USC 109(e) ("Motion to Dismiss"),¹⁴ which was joined by Prospera and Integra.¹⁵ In the Motion to Dismiss, Mr. Bondurant asserted that the Shattucks' "unliquidated [sic] and contingent [sic] debt is in excess of $800,352.53, which exceeds the statutory limit of $336,900 for Chapter 13 relief provided under 11 USC 109(e)."¹⁶ On July 18, 2008, the Shattucks and Mr. Bondurant filed witness and exhibit lists in compliance with the bankruptcy court's order.

At the hearing held on July 23, 2008, counsel for the Shattucks argued that the issue of the Shattucks' eligibility to file Chapter 13, raised by Mr. Bondurant's Motion to Dismiss, was not properly before the court because Mr. Bondurant, as a non-lawyer representative of the receivership estate of the LLC, had no authority to file the motion, a witness list, or an exhibit list, or to elicit and present evidence in support of the motion.¹⁷ Although Prospera and Integra filed a joinder in Mr. Bondurant's Motion to Dismiss, their counsel had not filed a witness or exhibit list, and thus Prospera's and Integra's counsel was not prepared to offer any evidence in support of Mr. Bondurant's motion or their joinder.¹⁸

At the hearing, Mr. Bondurant admitted that he was not an attorney and advised the bankruptcy court: "I am appearing pro se. I was appointed by the ... Adams County District Court, individually, as a receiver for Reflections Autowash, LLC" in connection with a lawsuit filed against Mr. Shattuck and the LLC by Prospera and Integra.¹⁹ After inquiring about Mr. Bondurant's background and experience, the bankruptcy court concluded that Colorado District Court Local Civil Rule 11.1(A) granted the court discretion to allow a non-lawyer to file pleadings and appear in court on behalf of an entity, and further concluded that the circumstances in this case justified permitting Mr. Bondurant to do so.²⁰

Mr. Bondurant presented an opening statement, called and examined his three witnesses, obtained the admission of six exhibits, and made a closing legal argument, all on behalf of the receivership estate of the LLC.²¹ Counsel for Prospera and Integra presented an opening statement and closing arguments based on evidence from witnesses and exhibits presented by Mr. Bondurant, and conducted limited examination of Mr. Bondurant's witnesses.

In its oral ruling on the Motion to Dismiss, the bankruptcy court tentatively revisited its ruling on the Motion to Strike, but solely to point out that its decision to allow Mr. Bondurant to proceed was "not the wisest decision" because the quality of Mr. Bondurant's pleadings and presentation of evidence reflected his lack of legal education and experience.²² However, the court did not strike Mr. Bondurant's Motion to Dismiss or his presentation of evidence or legal argument. The court ultimately concluded from the exhibits introduced by Mr. Bondurant and the testimony elicited from Mr. Bondurant's witnesses that the Shattucks owed noncontingent, liquidated, unsecured debt exceeding $336,900—the maximum amount of such debt allowed in order to be eligible to file under Chapter 13.²³ An Order Dismissing Chapter 13 Prior to Confirmation of Plan was entered on July 25, 2008,²⁴ which the Shattucks timely appealed.

The issues presented on appeal are (1) whether the bankruptcy court erred in permitting Mr. Bondurant to file and prosecute the Motion to Dismiss on behalf of the receivership estate of the LLC and (2) whether the bankruptcy court erred in determining that the Shattucks' noncontingent, liquidated, unsecured debt exceeded the limits of Section 109(e).

II. APPELLATE JURISDICTION

This Court has jurisdiction to hear timely filed appeals from "final judgments, orders, and decrees" of bankruptcy courts within the Tenth Circuit unless one of the parties elects to have the district court hear the appeal.²⁵ The order dismissing the Shattucks' Chapter 13 case is a final order. Neither party elected to have this appeal heard by the United States District Court for the District of Colorado. The parties have therefore consented to appellate review by this Court.

III. STANDARD OF REVIEW

Whether the bankruptcy court possessed discretion to allow Mr. Bondurant to file and litigate the Motion to Dismiss on behalf of the receivership estate of the LLC is an issue of law that is reviewed de novo.²⁶ If the bankruptcy court had such discretion, the Court will review the decision to allow Mr. Bondurant to represent the interests of the estate of the LLC for an abuse of discretion.²⁷ A bankruptcy court's interpretation of Section 109(e) is reviewed de novo.²⁸ Finally, a bankruptcy court's findings of fact with respect to the amount of a debtor's noncontingent, liquidated, unsecured debt is reviewed for clear error.²⁹

IV. DISCUSSION

This Court concludes that the bankruptcy court did not have discretion to allow Mr. Bondurant to appear for and practice law on behalf of the receivership estate of the LLC. Section 1654 of Title 28 of the United States Code provides: "In all courts of the United States the parties may plead and conduct their own cases personally or by counsel as, by the rules of such courts, respectively, are permitted to manage and conduct causes therein."³⁰ This provision allows an individual to represent his or her own interests before a court, but it is well settled that a lay person may not represent the rights or...