Mathiason, In re

• Decision Date: 28 January 1994
• Docket Number: No. 93-1022,93-1022
• Citation: 16 F.3d 234
• Parties: Bankr. L. Rep. P 75,672 In re James MATHIASON, Gladys Mathiason, Debtors. Mark C. HALVERSON, Trustee, Appellant, v. ESTATE OF Earl R. CAMERON, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 234

16 F.3d 234

Bankr. L. Rep. P 75,672

In re James MATHIASON, Gladys Mathiason, Debtors Mark C. HALVERSON, Trustee, Appellant, v. ESTATE OF Earl R. CAMERON, Appellee.

No. 93-1022.

United States Court of Appeals,

Eighth Circuit.

Submitted Oct. 14, 1993.

Decided Jan. 28, 1994.

Counsel who presented argument on behalf of the appellant was Mark C. Halverson of Mankato, MN.

Counsel who presented argument on behalf of the appellee was Robert E. Hayes of Sioux Falls, SD.

Before McMILLIAN, Circuit Judge, LAY, Senior Circuit Judge, and MAGILL, Circuit Judge.

McMILLIAN, Circuit Judge.

Mark C. Halverson, trustee of the bankruptcy estate of James and Gladys Mathiason, appeals from a final order entered in the United States District Court ¹ for the District of Minnesota affirming an order entered in the United States Bankruptcy Court ² for the District of Minnesota denying Halverson's motion to review the extent of a secured lien held by the Estate of Earl Cameron (the Cameron estate) and to surcharge collateral. For reversal, Halverson argues that the bankruptcy court erred in holding that (1) he had waived his objection to the Cameron estate's secured claim on grounds that the underlying lien could not encumber Gladys Mathiason's one-half joint tenancy interest in property of the bankruptcy estate, (2) he had not established cause for reconsideration of the joint tenancy objection pursuant to 11 U.S.C. Sec. 502(j), and (3) he had failed to show that his request to surcharge collateral was both reasonable and necessary as required under 11 U.S.C. Sec. 506(c). As the second reviewing court, our standards are the same as the district court's; we review the bankruptcy court's findings of fact for clear error and its conclusions of law de novo. Wegner v. Grunewaldt, 821 F.2d 1317, 1320 (8th Cir.1987). For the reasons discussed below, we affirm.

I. Background

In August of 1985, James and Gladys Mathiason (the Mathiasons) conveyed eighty acres of farmland to their son and his wife, Glen and Patti Mathiason. In December of 1985, the Cameron estate obtained a judgment against James Mathiason, Glen Mathiason, and Mathiason Farms, Inc. The Cameron estate docketed a judgment lien in the amount of approximately $81,000 in February of 1986. In August of 1986, six months after the filing of the Cameron estate lien and just over a year after the Mathiasons' conveyance of the land, the Mathiasons filed for bankruptcy pursuant to Chapter Seven of the United States Bankruptcy Code.

In January of 1988, the Cameron estate initiated adversary proceedings in the Mathiasons' bankruptcy matter to set aside the August 1985 land conveyance. Upon order of the bankruptcy court, Halverson was substituted as plaintiff and eventually obtained a ruling on summary judgment that the conveyance was fraudulent. As a consequence, the property was returned to the bankruptcy estate. Halverson then sold the land for about $88,000.

The Cameron estate filed a claim as a secured creditor, asserting lien rights against the real estate proceeds. An unsecured creditor, Farm Credit Bank of St. Paul (FCB), moved for disallowance of the Cameron estate's claim. FCB argued, among other things, that "any purported lien by the Earl Cameron Estate was of no effect and constituted an unsecured claim pursuant to 11 U.S.C. Sec. 506." In its demand for relief, FCB requested that the bankruptcy court enter an order "disallowing the claim of the Estate of Earl Cameron as a secured claim, determining that such claim is in fact an unsecured claim and providing for that claim to be treated on a basis equal to the other unsecured claims in this case, including that of FCB." Halverson filed a "response" in which he agreed with the substance of FCB's objection and, in his demand for relief, requested that the bankruptcy court "determin[e] the status of the claim of the Earl Cameron Estate." Halverson also applied for attorney's fees of over $39,000 based upon a court-approved contingency fee agreement between himself, as trustee, and the bankruptcy estate. The Cameron estate objected to FCB's unsecured claim and also opposed Halverson's fee request on grounds that it was excessive and improper in light of his inherent conflict of interest.

By order dated June 10, 1991, the bankruptcy court denied the objections of FCB and Halverson to the classification of the Cameron estate as a secured creditor and ruled "the objections of [FCB] and [Halverson] to the nature of [the Cameron estate's] claim must be overruled. The claim, filed in the amount of $81,000.00, together with accruing interest, must be allowed as a secured claim against the proceeds from sale of the recovered property." In re Mathiason, 129 B.R. 173, 177-178 (Bankr.D.Minn.1991). The bankruptcy court further denied Halverson's fee request without prejudice to his right to seek payment pursuant to 11 U.S.C. Sec. 506(c). ³ Id. Halverson had ten days from the date of the entry of the order to file a notice of appeal under Bankruptcy Rule 8002. He did not appeal the order.

On August 12, 1991, Halverson moved for a determination of the extent of the Cameron estate's secured claim, arguing for the first time that because the Cameron estate's judgment was not against Gladys Mathiason, the lien did not extend to proceeds from the land sale traceable to her one-half joint tenancy interest in the recovered property. Halverson also moved to surcharge collateral under 11 U.S.C. Sec. 506(c).

By order dated September 6, 1991, the bankruptcy court denied Halverson's requests based upon findings of fact and conclusions of law previously stated by the bankruptcy court at a hearing on August 23, 1991. Id. (Sept. 6, 1991). The bankruptcy court held that Halverson had waived his argument regarding Gladys Mathiason's one-half interest by failing to raise it when the court earlier determined the rights of the parties with respect to the Cameron estate's claim and the underlying security upon which that claim was based. Treating Halverson's motion for a determination of the extent of the Cameron estate's judgment lien as a motion for reconsideration, the bankruptcy court denied the motion. The bankruptcy court also held that Halverson's motion to surcharge collateral under 11 U.S.C. Sec. 506(c) failed to meet the statutory requirements of reasonableness and necessity.

Halverson appealed the bankruptcy court's September 6, 1991, order to the district court. The district court considered whether the bankruptcy court had abused its discretion in declining to reconsider its June 10, 1991, order. The district court agreed with the bankruptcy court's determination that Halverson had waived the joint tenancy argument and found no extraordinary circumstances to justify reconsideration. On Halverson's Sec. 506(c) claim, the district court held that the bankruptcy court correctly found that reasonableness and necessity of the fee request had not been shown. By order dated November 18, 1992, the district court affirmed the bankruptcy court's September 6, 1991, order in all respects. In re Mathiason, No. 4-91-820 (D.Minn. Nov. 18, 1992). This appeal followed.

II. Discussion

Waiver of joint tenancy objection

The bankruptcy court found that the original litigation over the status of the Cameron estate's claim, leading up to the bankruptcy court's June 10, 1991, order, resolved questions concerning the validity and priority of the claim and the extent of the judgment lien as the underlying security. The bankruptcy court found that Halverson had been given a full and fair opportunity to raise all of his legal and equitable objections to the Cameron estate's claim, including his objection that the judgment lien could not encumber a nonjudgment debtor's joint tenancy interest. The bankruptcy court concluded that Halverson's failure to assert this objection as to Gladys Mathiason's one-half joint tenancy interest constituted a waiver.

In challenging the bankruptcy court's findings, Halverson maintains that FCB's objection to the Cameron estate's claim, which initiated the proceedings leading to the June 10, 1991, decision, was originally brought as a contested matter pursuant to Rule 3007 ⁴ of the Bankruptcy Rules and only addressed whether the claim would be allowed under 11 U.S.C. Sec. 502, not as an adversary proceeding pursuant to Rule 7001 ⁵ to determine the secured status of the claim under 11 U.S.C. Sec. 506. Halverson argues that the bankruptcy court's June 10, 1991, ruling therefore could not have addressed issues such as the extent of the Cameron estate's lien. Similarly, Halverson argues that the bankruptcy court's June 10, 1991, ruling only referred to "allowing" the Cameron estate's claim. Specifically, the order states "the claim, filed in the amount of $81,000, together with accruing interest, must be allowed as a secured claim against the proceeds from sale of the recovered property." 129 B.R. at 178 (1991). Halverson argues that it is unclear from this language that the extent of the lien, particularly as to Gladys Mathiason's one-half interest in the recovered property, had been decided. He argues that he reasonably believed that the bankruptcy court intended to provide the parties further opportunity to litigate the secured status of the claim. He also contends that, for these same reasons, he did not appeal the June 10, 1991, order.

In response, the Cameron estate notes that Bankruptcy Rule 3007, governing objections, provides in part "[i]f an objection to a claim is joined with a demand for relief of the kind specified in Rule 7001, it becomes an adversary proceeding." The Cameron estate argues that Halverson, by his own actions, transformed the litigation over FCB's objection to the Cameron estate's secured claim into an adversary proceeding. The Cameron estate emphasizes that its claim was specifically filed as a secured claim. FCB objected to the Cameron estate's claim on grounds that the judgment lien "was of no...