Matter of Martin

• Decision Date: 29 September 1988
• Docket Number: Bankruptcy No. 87-10209 HCD.
• Citation: 92 BR 364
• Parties: In the Matter of Ronald Earl MARTIN, Evaleah Martin, Debtors.
• Court: U.S. Bankruptcy Court — Northern District of Indiana

92 B.R. 364 (1988)

In the Matter of Ronald Earl MARTIN, Evaleah Martin, Debtors.

Bankruptcy No. 87-10209 HCD.

United States Bankruptcy Court, N.D. Indiana, Fort Wayne Division.

September 29, 1988.

John R. Burns, of Bakers & Daniels & Schoaff, Fort Wayne, Ind., for Federal Land Bank of Louisville.

David Peebles, of Peebles, Thompson, Rogers & Hamilton, Fort Wayne, Ind.

DECISION

HARRY C. DEES, Jr., Bankruptcy Judge.

This matter is before the court on the debtors' MOTION FOR RELIEF FROM ORDER filed February 29, 1988. The issue centers on the debtors' request for relief from the pure lost economic opportunity payments ordered by this court on July 8, 1987¹, in light of the U.S. Supreme Court's decision in United Savings Assn. of Texas v. Timbers of Inwood Forest Assoc., Ltd., 484 U.S. ___, 108 S.Ct. 626, 98 L.Ed.2d 740 (1988). For the reasons set out below, the debtors' motion is GRANTED and the pure lost economic opportunity payments ordered by this court on July 8, 1987, shall cease, beginning with the payments due on or after January 28, 1988.

Procedural History

The debtors, Ronald Earl and Evaleah Martin, filed their petition under chapter 11 of Title 11 of the United States Code on February 20, 1987 and have since remained debtors in possession. On April 9, 1987, the Federal Land Bank of Louisville ("FLB") filed a MOTION FOR RELIEF FROM STAY AND ABANDONMENT OF PROPERTY. In an order dated July 8, 1987, this court modified the automatic stay and awarded the FLB lost economic opportunity compensation of $2,733.33 per month, commencing October 9, 1987. In re American Mariner Indus., Inc., 734 F.2d 426, 432-435 (9th Cir.1984); In the Matter of Deeter, 53 B.R. 623 (Bankr.N.D.Ind. 1985). The order also instructed the FLB to credit those payments to the allowed secured claim of Claim 2 of the FLB.² The debtors did not appeal this order.

On July 17, 1987, the FLB filed its motion to alter or amend the July 8, 1987 order. The FLB contended that the proper date to commence the lost economic opportunity compensation was August 20, 1987, the later of six months after the filing of the debtors' petition or the date of the request for relief from the stay and requesting the court to eliminate the requirement that the payments be applied toward the FLB's secured claim. In the Matter of Deeter, 53 B.R. 623 (Bankr.N.D.Ind.1985). This court granted the FLB motion and in an order dated November 23, 1987, amended the date for commencement of the lost economic opportunity payments from October 9, 1987 to August 20, 1987 and ordered that those payments should not be credited against the FLB's secured claim but instead would act as compensation for the FLB's lost economic opportunity to foreclose on the debtors' land. The debtors appealed this order on December 2, 1987.

Bankruptcy Rule 8002(a) requires that "the notice of appeal shall be filed with the clerk within 10 days of the date of the entry of judgment, order, decree appealed from." The Rule also allows the court to grant an extension of time to file, if timely requested. The debtors failed to timely appeal the July 8, 1987 order but did timely appeal the November 23, 1987 order which acted to modify the July 8, 1987 order only as to the date of commencement and application of lost economic opportunity compensation granted to the FLB, but did not affect the actual award of lost economic opportunity compensation. Because timely filing of the notice of appeal with the bankruptcy court is a jurisdictional matter, untimely filing would deprive the district court of appellate jurisdiction to review the bankruptcy court's order of lost economic opportunity compensation. Mullis v. Zubel (In the Matter of Mullis), 79 B.R. 26, 27 (D.Nev.1987).

The issues preserved by the debtors' timely appeal of the November 23, 1987 order, were properly limited to the modifications of commencement date and application of the compensation originally ordered on July 8, 1987. Therefore, it appears that the debtors have waived their right to contest the award of lost economic opportunity compensation for failure to timely file their appeal of that order. During the pendency of this appeal to the United States District Court for the Northern District of Indiana, the United States Supreme Court decided United Savings Assn of Texas v. Timbers of Inwood Forest Assoc., Ltd., 484 U.S. ___, 108 S.Ct. 626, 98 L.Ed.2d 740 (1988). The Supreme Court held that an undersecured creditor is not entitled to compensation under 11 U.S.C. Section 362(d)(1) for delay caused by the automatic stay in foreclosure on its collateral. The Court effectively, although not expressly, overruled the American Mariner line of cases upon which this court relied in its July 8, 1987 order granting the FLB lost economic opportunity compensation. The Court acknowledged that it was resolving a conflict among the circuit courts in its Timbers decision, but it failed to expressly address the issue of retroactive application of its decision, thereby allowing a new conflict to surface among the circuit courts.

Upon motion by the FLB, the District Court remanded the debtors' appeal back to this court for reconsideration in light of the Timbers decision. The debtors filed a request for instructions with this court on January 28, 1988 and in response this court informed the debtors by February 17, 1988 order, that it would entertain a motion for relief from judgment filed pursuant to Federal Rule of Civil Procedure 60(b). The debtors filed a MOTION FOR RELIEF FROM ORDER on February 29, 1988 and a hearing was held on April 21, 1988. After a briefing period the matter was taken under advisement.

Decision

It has been held that as long as a case is sub judice, a federal court must apply any new and supervening rule of federal law when applicable to the issues in the case. Wasserman v. Mun. Court of Alhambra Jud. Dist., 543 F.2d 723, 724-725 (9th Cir.1976). In this case, the Timbers decision is that new and supervening rule. "Inherent in the jurisdiction of the chancery," United States v. Swift & Co., 286 U.S. 106, 114, 52 S.Ct. 460, 462, 76 L.Ed. 999 (1932), "is the power of a court of equity to modify the prospective effect of its decrees in response to changed circumstances." United States v. Georgia Power Co., 634 F.2d 929, 932-933 (5th Cir. 1981). The Federal Rules of Civil Procedure recognize the existence of this power. Rule 60(b)(5) permits modification of a final judgment upon timely motion, when the court is convinced "it is no longer equitable that the judgment should have prospective application." A change in decisional law is sufficient to invoke relief under Rule 60(b)(5). Travelers Indem. Co. v. Sarkisian, 794 F.2d 754, 757 N. 4 (2nd Cir.1986), cert. denied, 479 U.S. 885, 107 S.Ct. 277, 93 L.Ed.2d 253 (1986).

Likewise, the court in Georgia Power held that given the appropriate circumstances, a significant modification of decisional law would permit the court in its discretion, to prospectively modify a permanent injunction under Rule 60(b)(5). United States v. Georgia Power at 934; see also, United States v. Swift & Co., 286 U.S. 106, 114-115, 52 S.Ct. 460, 462, 76 L.Ed. 999 (1932). Because adequate protection in the form of lost economic opportunity compensation is a flexible concept, it is more analogous to an injunction than a final judgment and thereby susceptible to modification as the result of a change in circumstances warranting the initial order. In the Matter of All-Way Services, Inc., 73 B.R. 556, 565 (Bankr.E.D.Wis.1987); United States v. Swift & Co., 286 U.S. 106, 114, 115, 52 S.Ct. 460, 462, 462, 76 L.Ed. 999 (1932). Rule 60(b)(5) does not allow relitigation of the issues that have been resolved by judgment. Rather, it requires a change in circumstances that make continued enforcement inequitable. De Filippis v. United States, 567 F.2d 341, 343-344 (7th Cir.1977).

The debtors' motion for relief from judgment is generic in form, merely referring to Rule 60(b) without reference to a specific subsection. This court will interpret the motion to be a request for relief based on the third clause of Rule 60(b)(5). That clause states that:

"(b) . . . the court may relieve a party . . . from a final judgment

(5) . . . or when it is no longer equitable that the judgment should have prospective relief."

The general rule in civil cases is that a judicial decision "interpreting the law should be applied retroactively unless it represents a `clean break' with the past and in addition, it would be fundamentally unfair or otherwise burdensome to so apply it." Woollett v. Bankers Life Co., 572 F.Supp. 650, 654 (D.Mich, 1983). The Supreme Court, determining whether or not an issue should be given nonretroactive treatment, has set out three factors to be considered by a court in the determination of prospective only application of decisional law. Any decision which 1) establishes a new principle of law by overruling clear past precedent on which litigants may have relied or by deciding an issue of first impression whose resolution was not clearly foreshadowed, 2) prospective application will serve (or at least not disserve) the operation of the new principle of law and 3) if retroactively applied would lead to inequitable results, is subject to prospective only treatment. Chevron Oil Company v. Huson, 404 U.S. 97, 106-107, 92 S.Ct. 349, 355-356, 30 L.Ed.2d 296 (1971); E.E.O.C. v. Vucitech, 842 F.2d 936, 941 (7th Cir.1988).

By applying the Chevron test to the facts of this case, this court finds that the Timbers decision should not be retroactively applied but should be given prospective application only. In the Matter of Duffers Delight, Inc., No. 86-40277 (Bankr.N.D.Ind. Sept. 23, 1988); Fairfax Savings v. Sherwood Square Associates (In re Sherwood Square Associates), 87 B.R. 388, 393 (Bankr.D.Md.1988); but see, Cimarron Investors v. WYID Properties (In re Cimarron Investors), 848 F.2d 974, 976 (9th Cir.1988). The Tim...