Muller, Matter of, 87-1727

• Decision Date: 13 September 1988
• Docket Number: No. 87-1727,87-1727
• Citation: 851 F.2d 916
• Parties: In the Matter of Alvin S. MULLER and Phyllis H. Muller, Debtors. FIRST NATIONAL BANK OF PEORIA, a National Banking Association, Plaintiff- Appellee, v. Alvin S. MULLER, Phyllis H. Muller, Glen Rogers, Robert E. Rice, Myrtle R. Rice, Charles C. Covey, Trustee, and Daniel M. Harrod, Defendants-Appellants. Appeal of Glen ROGERS, Defendant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 916

851 F.2d 916

In the Matter of Alvin S. MULLER and Phyllis H. Muller, Debtors FIRST NATIONAL BANK OF PEORIA, a National Banking Association, Plaintiff- Appellee, v. Alvin S. MULLER, Phyllis H. Muller, Glen Rogers, Robert E Rice, Myrtle R. Rice, Charles C. Covey, Trustee and Daniel M. Harrod, Defendants-Appellants Appeal of Glen ROGERS, Defendant.

No. 87-1727.

United States Court of Appeals, Seventh Circuit.

Argued April 21, 1988.

Decided July 7, 1988.

Rehearing and Rehearing In Banc Denied Sept. 13, 1988.

James P. Kellstedt, Peoria Heights, Ill., for defendants-appellants.

David B. Radley, Baymiller, Christison & Radley, Peoria, Ill., for plaintiff-appellee.

Before WOOD, JR. and KANNE, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

HARLINGTON WOOD, Jr., Circuit Judge.

This is the appeal of an adversary proceeding in bankruptcy, which not only questions the decision by the bankruptcy judge on the merits but particularly the conduct of the proceedings in reaching that decision. The judgment of the bankruptcy court was affirmed by the district court. 72 B.R. 280 (C.D.Ill.1987).

I. BACKGROUND

Involved is a disagreement among the various parties about a farm real estate transaction, and in particular, the rights of the parties to a certified check for $126,539.23, allegedly tendered as either full or partial payment for the farm.

This bankruptcy phase of the controversy was preceded by two separate state court proceedings. The first was filed in 1987 by Alvin and Phyllis Muller, initially the sole owners of the farm and the debtors here, and Glen Rogers, as plaintiffs, against defendants Robert E. Rice and Myrtle R. Rice. The plaintiffs claimed to be partners in the farm with defendants and were seeking to rescind their alleged partnership agreement and to require the Rices to return the farm to the Mullers and Rogers. Rogers was described by the Mullers as a "silent partner." It appears to have been the position of the Mullers and Rogers that they, along with the Rices, each owned an undivided one-third interest in the farm. The Rices, however, claimed to be the sole owners following the subsequent conveyance of title to them in 1977 and their tendering of the certified check to the Mullers. The Mullers claimed they had previously deeded the property to the Rices only for zoning purposes in accordance with an unwritten partnership agreement, which the Rices denied. The certified check was dated November 16, 1979, and stated on its face that it was in full settlement of the purchase price. The Mullers held the certified check without negotiating it. Rogers' name did not appear in the chain of title, and he did not join in the conveyance by the Mullers to the Rices.

In the second state proceeding in 1983 the National Bank of Peoria had obtained a personal judgment against the Mullers in the amount of $231,642.64. In its efforts to collect on the judgment the bank discovered the certified check being held by the Mullers. The bank's judgment was made a lien on the certified check, and the state court ordered the Mullers to deliver the check to the attorney for the bank.

Thereafter, on May 30, 1984, the Mullers filed a voluntary petition under Chapter 7 of the Bankruptcy Code. The bank filed a claim as a secured creditor by virtue of its judgment lien and then filed this adversary proceeding seeking a declaration that the bank's lien on the certified check was superior to all other possible interests. Named as having or claiming to have some adverse interest in the certified check were the Mullers, the Rices, Rogers, Charles Covey, trustee, and Daniel Harrod, an attorney who claimed a lien for attorney's fees. In response, Rogers, the appellant here, claimed to be a silent partner in the farm venture and entitled to one-half of the proceeds of the certified check free of the bank's lien.

The case came on for trial before Bankruptcy Judge Max J. Lipkin, now deceased. The bank's evidence established its judgment and its enforcement procedure used to perfect its judgment lien on the certified check.

Muller, in his testimony, explained his view that the certified check, contrary to what it said on its face, was intended only to be a partial payment. Therefore he had refused to negotiate it. He explained that he had already deeded the farm to the Rices and had done so merely to accommodate contemplated zoning changes. Rogers, he explained, was his silent partner and was entitled to a share of the certified check proceeds. Muller testified further that Rogers had given the Mullers a quit claim deed of any interest he had in the farm property. Why that had allegedly been done was not explained. Nothing more is known about that alleged partnership.

Contrary to Muller's testimony, the attorney for the Rices in the real estate transaction testified that he delivered the certified check to the Mullers as full payment of the balance of the purchase price remaining after the assumption by the Rices of an outstanding mortgage on the farm. Thereafter, the Rices made payments on that mortgage.

When the bench trial began neither Rogers nor his attorney was present. The attorney did appear later and participate, but Rogers did not. Judge Lipkin ruled in favor of the bank and later signed a final judgment order containing findings of fact and conclusions of law. The certified check, it was held, belonged to the Mullers alone, but the check was subject to the perfected lien of the bank. The Mullers then, as ordered, endorsed the check to the bank.

The Mullers and Rogers appealed to the district court, which affirmed the judgment of the bankruptcy court. Only Rogers, however, appeals to this court.

II. DISCUSSION

Rogers in his brief states the basis for his appeal in these words:

The district court erred in holding that substantial justice and due process rights of defendant Rogers were not violated by the bankruptcy judge's management and conduct of the case, including his bias and characterization of Rogers. Inadequate notice, misunderstanding of pleadings, no pretrial conference or jury trial, unreasonable hearing scheduling, accelerated hearings, discourtesy to attorneys including unreasonable time limitations and opportunity to be heard.

At a preliminary hearing August 20, 1984, Judge Lipkin expressed his view that since he had had Rogers in court once before he would not be able to believe anything Rogers might say in the present case. Rogers' attorney objected to what he labelled the bankruptcy judge's prejudgment.

At the subsequent evidentiary trial on February 4, 1985, which resulted in the order now being appealed, this exchange took place between Judge Lipkin and Mr. James P. Kellstedt, the attorney for Rogers:

MR. KELLSTEDT: On behalf of Mr. Rogers, who has, as Mr. Muller testified today, an interest in the property and the proceeds in that check since 1976--.

THE COURT: He has no interest anymore because Mr. Radley's client got the money. You are out of order.

MR. KELLSTEDT: We are not out of order. We are a party to this lawsuit.

THE COURT: I am not going to listen to you anymore.

MR. KELLSTEDT: You have not considered the case of the claim of Mr. Rogers at all in this case.

THE COURT: You didn't file a proper response.

MR. KELLSTEDT: I filed them. They are in the court records.

THE COURT: I am not going to argue with you.

MR. KELLSTEDT: I wish to call it to your attention that you never considered fairly and fully Mr. Rogers'--.

THE COURT: I am not going to hear anymore in this case.

Rogers argues on appeal that the bankruptcy court would not listen to his argument in behalf of Rogers and prevented him from presenting Rogers' claims or introducing any evidence. He also objects that the proceeding had not been noticed as a trial and that it was hurriedly conducted without adequate opportunity for him to represent his client.

Rogers also makes a series of challenges to the bankruptcy proceeding, but as Rogers admits, he failed to raise these issues in that court. He thus has waived any challenge. Ohio Casualty Ins. Co. v. Bazzi Constr. Co., 815 F.2d 1146, 1149 (7th Cir.1987). Rogers concedes his waiver and asks only that we review the challenged issues under a plain error analysis. It is dubious whether this circuit recognizes plain error in a civil proceeding, such as the case here. If invocable at all, "[o]nly in most exceptional circumstances we will allow a civil appellant to make a nonjurisdictional argument for the first time on appeal...." Walker v. Maccabees Mut. Life Ins. Co., 753 F.2d 599, 602 (7th Cir.1985). We are not persuaded that this case represents an exceptional circumstance.

The preliminary hearing at which Judge Lipkin expressed his view about Rogers' veracity was about five and one- half months...