Power Recovery Systems, Inc., In re, Nos. 91-1397

• Decision Date: 07 October 1991
• Docket Number: 91-1398,Nos. 91-1397
• Citation: 950 F.2d 798
• Parties: , Bankr. L. Rep. P 74,345 In re POWER RECOVERY SYSTEMS, INC., Debtor (Two Cases). David W. ECK, Appellee, v. DODGE CHEMICAL COMPANY, Appellant. David W. ECK, Appellant, v. DODGE CHEMICAL COMPANY, Appellee. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 798

950 F.2d 798

60 USLW 2419, Bankr. L. Rep. P 74,345

In re POWER RECOVERY SYSTEMS, INC., Debtor (Two Cases).

David W. ECK, Appellee, v. DODGE CHEMICAL COMPANY, Appellant.

David W. ECK, Appellant, v. DODGE CHEMICAL COMPANY, Appellee.

Nos. 91-1397, 91-1398.

United States Court of Appeals, First Circuit.

Heard Oct. 7, 1991.

Decided Nov. 27, 1991.

Blake J. Godbout with whom Blake J. Godbout & Associates, Boston, Mass., was on brief for David W. Eck.

Brian C. Levey with whom Kenneth R. Berman and Sherin and Lodgen, Boston, Mass., were on brief for The Dodge Chemical Co., Inc.

Before BREYER, Chief Judge, BROWN, ^* Senior Circuit Judge, and TORRUELLA, Circuit Judge.

JOHN R. BROWN, Senior Circuit Judge:

This imbroglio arises from David Eck's failure to remove heavy equipment from Dodge Chemical Company's property. Eck purchased the equipment at the auction sale held in connection with Debtor's bankruptcy proceedings. ¹ After Eck refused to adhere to the bankruptcy court's order compelling removal of the equipment, the bankruptcy court held him in contempt. The district court affirmed the bankruptcy court's contempt order, but remitted part of the contempt penalty imposed. At bottom, is Eck's failure to file a timely appeal from the bankruptcy's court order compelling removal of the purchased property. We affirm.

Eck claims that the bankruptcy court erred by 1) denying his request to extend the time for filing an appeal of the January order compelling removal; 2) holding him in contempt and awarding punitive damages in a civil contempt proceeding; and 3) denying his motion for a stay pending this appeal.

You Buy It, You Remove It

Power Recovery Systems, Inc. ("Debtor") leased the Cambridge premises from Dodge Chemical Company in order to conduct its waste energy systems research business. In Debtor's Chapter 11 bankruptcy proceeding, Debtor gave notice that it would sell its equipment, inventory, and fixtures located on these leased premises. ² The property was huge, heavy and difficult to move. ³ The bankruptcy court authorized a sale by public auction, which was held on June 29, 1988.

Eck purchased this equipment for $40,000.00. The express terms of the sale required the buyer to remove the property from the premises within 30 days.

Tardiness Sets In

Six months later, Eck's equipment continued to occupy Dodge's property. On January 18, 1989, Dodge filed a motion with the bankruptcy court seeking an order to enforce the removal terms of the auction sale. At the hearing on this motion on January 25th, the court found that Eck failed to remove the property within the required 30 days, and ordered that Eck "must remove the property forthwith and ... must make arrangement for occupancy of [the] premises until the date the property is removed from the premises." ⁴

Eck complains, without offering supporting evidence, that he did not attend the January hearing; that he was given insufficient notice of the hearing; and unfairly denied a continuance by opposing counsel. Despite Eck's absence, it is uncontradicted that Eck's attorney received timely notice of the hearing, notified Eck prior to the hearing and was at all times present at the hearing on Eck's behalf. This is sufficient.

Failure to Appeal

Although Eck has timely appealed the bankruptcy court's contempt order, and the district court's denial of his motion to excuse his untimely appeal, discussed infra, he has thus far failed to preserve for appeal whether the bankruptcy court's January order compelling compliance with the terms of the auction sale is vulnerable.

Instead, on February 9, 1989, Eck filed with the bankruptcy court a motion for reconsideration of the January order. Like a notice of appeal, a motion for rehearing is required to be filed within 10 days after the entry of an order. ⁵ Because the order was entered January 25, 1989, Eck's motion for reconsideration had to be filed February 6, 1989 and thus was three days late.

a. No excuse

Nevertheless, Eck did request the bankruptcy court to grant him an extension to file an appeal of the January 25th order to the district court. He claims that it was an abuse of discretion for either or both the bankruptcy court and district court to have denied his request. We disagree.

With no earlier notice of appeal, Eck, on February 27, 1989, filed a motion to extend time for filing. Bankruptcy rule 8002(c) provides:

The Bankruptcy Court may extend the time for filing the notice of appeal by any party for a period not to exceed 20 days from the expiration of the time otherwise prescribed by this rule. A request to extend the time for filing must be made before the time for filing a notice of appeal has expired, except that a request made no more than 20 days after the expiration of the time for filing a notice of appeal may be granted upon a showing of excusable neglect....

Consistent with his pattern of dilatoriness, Eck's February 27th motion for an extension was more than 20 days late. Thus, Eck's motion for an extension of time to file a notice of appeal could be considered only by a showing of excusable neglect.

Eck cites, among other reasons, ⁶ that he failed timely to file the extension because he focused solely on permanently resolving the dispute. The record, although lacking proffered evidence, is clouded with assertions by both parties that after the January 25th hearing, Dodge and Eck respectively began negotiations to lease the premises and sell the equipment to a third party, Metropolitan P.M.C., Inc. The deal, if there really was a deal, eventually fell through. ⁷

Even if the bankruptcy or district court had accepted Eck's argument about missing the deadline due to his efforts to settle this matter, neither court was required to conclude that this would satisfy the contradictory term "excusable neglect."

Whether it is necessary, wise or even appropriate to confine the obviously discretionary "excusable neglect" to rigid formulae, we need not here declare. ⁸ Other courts have declined to accept as excusable neglect situations more compelling than what Eck urges. ⁹

The question of excusable neglect is by its very nature left to the discretion of the bankruptcy court whose decision should not be set aside unless the reviewing court, a district court or court of appeals, has a definite and firm conviction that the court below committed a clear error of judgment. ¹⁰ The bankruptcy court's decision to deny the extension was well within its discretion and the district court properly affirmed this denial.

Contempt of this Neglected Court

Despite the bankruptcy court's unappealed January order compelling compliance, Eck's equipment continued to sit in Dodge's warehouse in February. On February 3, 1989, Dodge filed a motion to hold Eck in contempt for non-compliance with the court's January 25th order. On February 23, 1989, after notice and hearing, bankruptcy court held Eck in contempt, ¹¹ determining first that Eck had not removed the equipment, nor paid occupancy charges, in violation of its January 25th order. Second, the bankruptcy court found that $330 per day was a reasonable charge for the use of the premises, ¹² and awarded Dodge:

(1) $330 per day from January 30, 1989 through February 13, 1989;

(2) $330 per day from February 13, 1989 through February 28, 1989 if Eck removed the equipment before February 28th; and

(3) $1000 per day from February 13, 1989 until removal if removed after February 28th.

Eck appealed the bankruptcy court's contempt order to the district court. The district court affirmed the contempt order, but modified the monetary sanctions by eliminating the $670 per day portion of the award, for the period beginning March 10, 1989 and ending July 10, 1990. ¹³

We must uphold the factual findings of the bankruptcy court, as affirmed by the district court, unless they are clearly erroneous. ¹⁴ In a record in which Eck failed to either contest the uncontradicted fact of obvious non-compliance or offer to the court acceptable reasons for non-compliance, we have no difficulty in holding the findings well above the Plimsoll Line. ¹⁵

Eck primarily argues that the bankruptcy court abused its discretion in holding him in contempt because (1) he was no longer the legal owner of the equipment, and was thus unable to comply with the January 25th order; and (2) even if the contempt order was supported by the law, the sanction of $1000 per day was excessive, constituting an impermissible punitive penalty, rather than compensatory damages.

It is well-settled law that bankruptcy courts are vested with contempt power. ¹⁶ Bankruptcy rule 9020(b) specifically provides that a bankruptcy court may issue an order of contempt if proper notice of the procedures are given.

In deciding whether a proceeding before a lower court involves civil or criminal contempt, we are required to look to the purpose and character of the sanctions imposed, rather than to the label given to the proceeding by the court below. ¹⁷

Sanctions in a civil contempt proceeding are employed to coerce the defendant into compliance with the court's order or, where appropriate, to compensate the harmed party for losses sustained. ¹⁸ These sanctions are not punitive, but purely remedial. ¹⁹

Where the purpose of a monetary sanction is to make the defendant comply, the court has wide discretion in considering the character and magnitude of the harm threatened by the continued contumacy, and the probable effectiveness of any suggested sanction in bringing about compliance and the like. ²⁰

By all the words and handling, this is a civil contempt case. The bankruptcy court's sanctions were both to compensate Dodge for the rental value of the premise equipment and to coerce Eck, someway, somehow, sometime, to expedite the removal. Because the $330 per day compensatory portion of the award represented the loss to Dodge, we have no basis for disturbing it.

Since Eck did not, in fact, remove the property by ...