Stoecker, Matter of
| Decision Date | 14 December 1993 |
| Docket Number | No. 92-3505,92-3505 |
| Citation | 5 F.3d 1022 |
| Parties | , 24 Bankr.Ct.Dec. 1143, Bankr. L. Rep. P 75,441 In the Matter of William J. STOECKER, Debtor. Appeal of Thomas E. RALEIGH, as Chapter 7 Trustee for the Estate of William J. Stoecker. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Robert Radasevich (argued), James H. Bowhay, Tracy L. Potter, Neal, Gerber & Eisenberg, Chicago, IL, for appellant.
Kenneth W. Bley, Keevan D. Morgan, Durkin, Morgan, Roberts, Barnett & Bley, Chicago, IL, for appellee.
Before POSNER and RIPPLE, Circuit Judges, and TIMBERS, Senior Circuit Judge. *
This bankruptcy appeal presents difficult questions concerning the interpretation of a settlement agreement and the application of the doctrine of res judicata in bankruptcy. There is also an issue of appellate jurisdiction.
The parties are the Bank of Bellwood and the trustee in bankruptcy of William J. Stoecker, a substantial businessman to whom the bank had lent $750,000 on his unsecured promissory note. In December 1988 and January 1989, Stoecker paid the bank a total of some $16,000 in interest. The loan came due on February 1, 1989. When Stoecker failed to pay it by the end of that day, the bank sought and on February 6 obtained a judgment against him by confession for $750,000. Realizing that Stoecker was on the verge of bankruptcy, the bank filed its judgment as a lien against as many different assets of his as it could find. Stoecker was petitioned into bankruptcy on February 21, and in August of that year the bank filed with the bankruptcy court a proof of secured claim for $750,000, reciting that the bank had various judgment liens against the assets of the bankrupt estate.
The bankruptcy proceeding was complex and protracted, and had not been completed when in 1991 the trustee filed an adversary complaint against the bank, seeking to recover for the bankrupt estate, as a preferential transfer, the $16,000 in interest, which had been paid within 90 days before the declaration of bankruptcy. 11 U.S.C. Sec. 547(b). Before the bank filed its answer to the complaint, the parties settled. In exchange for $11,000 and the bank's release of all "claims, demands, or causes of action" that it might have against the bankrupt estate except its proof of secured claim, upon which no action had been taken as yet by the bankruptcy court, the trustee agreed to release all "claims, demands, or causes of action" that he might have against the bank. The bankruptcy court approved the settlement in June.
Several months later the trustee filed objections to the bank's proof of secured claim, arguing that any judgment liens that the bank had obtained back in February 1989 were preferential transfers made within 90 days before bankruptcy and therefore invalid; alternatively that the proof of claim was invalid because filed without the documentation required by Rule 3001 of the Bankruptcy Rules of Procedure. The bank replied that the trustee's objection was a "claim" that had been released by the settlement agreement and that in any event the settlement barred the objection by operation of the doctrine of res judicata because the objection grew out of the same transaction as the trustee's adversary complaint to recover the interest payments. The bankruptcy judge agreed with the bank on both points but then on his own initiative threw out the bank's proof of claim because the bank had failed to attach the requisite documentation (primarily the judgment liens themselves). 143 B.R. 118 (Bankr.N.D.Ill.1992). On appeal the district judge reversed the bankruptcy judge's action on the proof of claim, agreed that the trustee's objection was barred by the settlement agreement, found it unnecessary to decide whether it was also barred by res judicata, and remanded the case to the bankruptcy court to enable the bank to submit the required documents. 143 B.R. 879 (N.D.Ill.1992).
The trustee appeals, and we must first decide whether the decision from which he is appealing is final, 28 U.S.C. Sec. 158(d), notwithstanding the remand by the district court. Interlocutory orders of district courts sitting as appellate courts in bankruptcy are appealable if they meet the standards of 28 U.S.C. Sec. 1292, see Connecticut National Bank v. Germain, --- U.S. ----, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992), but the district court's order in this case does not meet those standards. Nevertheless we think it is appealable because final--though not on the ground that if the order of the bankruptcy court is final the order by the district court disposing of the appeal from the bankruptcy court's order is automatically final as well no matter what the district court does. That is the view of some circuits, In re Pizza of Hawaii, Inc., 761 F.2d 1374, 1378 (9th Cir.1985), but not of this one. In re Klein, 940 F.2d 1075, 1077 (7th Cir.1991); In re Weber, 892 F.2d 534, 537-38 (7th Cir.1989); In re Boomgarden, 780 F.2d 657, 659-60 (7th Cir.1985); In re Riggsby, 745 F.2d 1153 (7th Cir.1984). No matter. The district court's decision in this case was final in the conventional sense, notwithstanding the remand. By establishing that the bank has a secured claim for $750,000 against the assets of the bankrupt estate, the decision resolved the dispute between creditor and debtor and is therefore final. In re Szekely, 936 F.2d 897, 899-900 (7th Cir.1991); Home Ins. Co. v. Cooper & Cooper, Ltd., 889 F.2d 746, 748 (7th Cir.1989). The remand is purely ministerial, as there is no doubt that the requisite documentation exists--indeed, the district court's reason for reversing the bankruptcy judge's disallowance of the claim is that the documents had long been part of the record of the bankruptcy proceeding and were known by the trustee. No one had been harmed by the omission to staple them to the proof of claim. The bankruptcy judge's ruling disallowing the proof of claim without leave to amend had thus been hypertechnical. A remand to correct a purely formal defect is the quintessential ministerial remand, for it is exceedingly unlikely to generate a further appeal and therefore raise the specter, against which the final-decision rule is aimed, of piecemeal appeals. In re Fox, 762 F.2d 54, 55 (7th Cir.1985); Parks v. Pavkovic, 753 F.2d 1397, 1402 (7th Cir.1985).
There is a further wrinkle, though: the amended proof of claim that the bank has filed on remand pursuant to the district judge's order is for more than twice the $750,000 face amount of the original loan. The reason is that the new proof of claim includes claims for interest and for attorney's fees. The latter is not at all troublesome from the standpoint of finality. The determination of attorney's fees is a collateral matter which, even when as in this case they are claimed by virtue of contract rather than statute, does not affect the appealability of the underlying claim. Herzog Contracting Corp. v. McGowen Corp., 976 F.2d 1062, 1065 (7th Cir.1992); see also In re Colon, 941 F.2d 242, 244-45 (3d Cir.1991). This is not because a claim of attorney's fees is unlikely to give rise to an appeal--we see a vast number of such appeals--but because, if it does, the issues presented by the appeal will be unrelated (or largely so) to the issues presented by and decided in the original appeal. The appellate court will thus be spared the burden of duplicative appeals, the burden that the term "piecemeal appeals" denotes. Budinich v. Becton Dickinson & Co., 486 U.S. 196, 202, 108 S.Ct. 1717, 1721, 100 L.Ed.2d 178 (1988).
The question whether the bank's demand for interest renders the judgment nonfinal is dicier. Osterneck v. Ernst & Whinney, 489 U.S. 169, 109 S.Ct. 987, 103 L.Ed.2d 146 (1988), holds that a postjudgment motion for prejudgment interest destroys finality. The Court's reasoning was that prejudgment interest is part of the relief sought by the plaintiff to rectify the defendant's wrong. Postjudgment interest, however, is compensation for delay in the collection of the judgment, and is therefore collateral, like the award of attorney's fees. We have a mixed bag here. The bank is seeking postpetition interest, 11 U.S.C. Sec. 506(b), which runs from the date of the filing of the bankruptcy petition to the satisfaction of the claim in the final distribution of the bankrupt's assets, Kathryn R. Heidt, "Interest under Section 506(b) of the Bankruptcy Code: The Right, the Rate and the Relationship to Bankruptcy Policy," 1991 Utah L.Rev. 361, 365 and n. 19 (1991), thus straddling the judgment allowing the claim. But to make the appeal on the merits of the claim therefore await the end of the entire bankruptcy proceeding would be inconsistent with the basic approach that we and the other courts of appeals take to bankruptcy appeals, which is to treat each adversary proceeding within the overall bankruptcy proceeding as a separate, stand-alone litigation.
If there were issues kicking around the bankruptcy court concerning the bank's entitlement to postpetition interest or the rate at which that interest would be computed or the amount of principal to which it would be added, the disposition of the bank's claim by the district court could hardly be considered final. The trial court would not be through with the case (except for ministerial details), which is the pertinent meaning of finality. But so far as we can determine, there are no such issues. The bank's entitlement to interest under section 506(b) is not questioned, United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989); nor that the interest runs from the date when the petition for bankruptcy was filed to the date when the bank's claim is paid or it gets its collateral back, 11 U.S.C. Sec. 506(b) and Heidt, supra, at 365 and n. 19; nor that the interest rate is the Illinois statutory rate of interest...
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