1The Honorable Richard W. Goldberg, Judge, United States Court of

International Trade, sitting by designation.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

________________

No. 97-3104

________________

In re: T. G. Morgan, Inc., Debtor

John R. Stoebner, Trustee of the

Bankruptcy Estate of T. G. Morgan,

Inc.,

Appellant,

v.

Parry, Murray, Ward & Cannon,

Appellees.

*

*

*

*

*

*

*

*

*

*

*

*

*

*

Appeal from the United States

District Court for the 

District of Minnesota.

________________

Submitted: March 13, 1998

 Filed: April 5, 1999

________________

Before WOLLMAN and HANSEN, Circuit Judges, and GOLDBERG,1 Judge. 

________________

HANSEN, Circuit Judge.
2

This rather convoluted bankruptcy appeal comes to us for the second time. Mr.

Stoebner, the Appellant, is the Chapter 7 Trustee of the corporate debtor, T. G.

Morgan, Inc. (TGM). Stoebner brought an adversary action in bankruptcy court

pursuant to 11 U.S.C. § 549(a) against the Appellee, Parry, Murray, Ward & Cannon

(Parry Murray), a Utah law firm. Stoebner sought to recover for the bankruptcy estate

money which had been transferred to the law firm by a Federal Trade Commission

receiver at the direction of one Michael Blodgett, the principal officer of the bankrupt

debtor corporation, to pay the attorney's fees for Blodgett's wife, Diane, who was

represented by Parry Murray. The bankruptcy court granted summary judgment to the

law firm on the basis that Stoebner was collaterally estopped from asserting the claim

by virtue of a decision rendered in a related case by the United States District Court for

the District of Minnesota. The district court affirmed the bankruptcy court's disposition

of Stoebner's section 549(a) claim, and Stoebner appealed to this court. We determined

that collateral estoppel did not bar the claim, and we reversed the district court's

judgment and remanded the case for further proceedings. See Stoebner v. Parry,

Murray, Ward & Cannon, 91 F.3d 1091 (8th Cir. 1996) (Stoebner I). Our prior panel

opinion sets forth many of the underlying operative facts and we will not repeat all of

them here, but some of them are necessary for an understanding of the present posture

of the case. 

The debtor corporation was engaged in a Ponzi-type fraudulent scheme involving

the sale and resale of rare coins to the tune of some $50 million. Id. at 1092 n.1. In

August 1991, the Federal Trade Commission (FTC) sued TGM and Mr. Blodgett for

injunctive relief and to recover for the victims of the scheme. Id. at 1092. While the

FTC suit was pending, creditors of TGM forced it into involuntary bankruptcy in early

1992, and Mr. Stoebner was eventually appointed as the Chapter 7 Trustee for the

debtor in late May 1992. Before Mr. Stoebner's appointment however, the FTC,

Blodgett, his wife Diane, and TGM reached a settlement of the FTC litigation, which

settlement was approved by the district court in a final judgment entered on March 4,

1992. Id. The settlement agreement provided for the transfer of property by TGM and
3

the Blodgetts to the FTC as receiver to create two different "entities": one called the

"Settlement Estate," the proceeds of which would be used to pay the claims of the fraud

victims; and the second, called the "Litigation Estate," which was to fund the legal

expenses (including the anticipated criminal defense fees) for Mr. and Mrs. Blodgett.

(App. at 1-42.) The "Litigation Estate" was funded with $300,000. The settlement

agreement as approved by the final judgment in the FTC case provided that any excess

funds advanced from the Litigation Estate were to be returned to that Estate to be

subsequently distributed by the FTC receiver at the direction of Mr. Blodgett. (App.

at 18-19.) 

When Stoebner was appointed Trustee of the debtor, TGM, he immediately

applied to the district court and received an order requiring the FTC receiver to turn

over to him all of the assets in the "Settlement Estate" on the ground that the assets

were rightfully the property of the bankruptcy estate. (App. at 42-47.) The turnover

order, dated August 21, 1992, made no mention of the "Litigation Estate" because by

that time its funds had been disbursed by advances of $250,000 to the law firm of

Meshbesher & Spence (Meshbesher) which was representing TGM and Mr. Blodgett,

and $50,000 to attorney Douglas Kelly who represented Mrs. Blodgett. (App. at 63.)

The FTC receiver held no "Litigation Estate" monies. Mrs. Blodgett terminated her

employment of Mr. Kelly and hired Philip Resnick as her counsel. She then terminated

Mr. Resnick's employment and hired the present appellee, Parry Murray. At the time

of his termination, Mr. Resnick had some $25,649.71 of the original $50,000 litigation

fund money in his control, having received it as a retainer from Mrs. Blodgett's prior

counsel, Mr. Kelly. Mr. Resnick applied to the district court for directions as to whom

he should deliver the money. The district court ordered him to pay it back to the FTC

receiver for disbursement according to the final judgment approved FTC settlement

agreement. (App. at 48.) Parry Murray, concerned that a return of the $25,649.71 to

the FTC receiver would result in it then being turned over to the Bankruptcy Trustee,

Stoebner, pursuant to the previously issued turnover order, asked the court on behalf

of Diane Blodgett to reconsider its order directing Resnick to pay the money to the 
4

FTC receiver. (App. 49-50.) Indeed, in a response to the motion, Stoebner did file a

memorandum with the district court arguing that any Litigation Estate monies in the

possession of the FTC receiver should be turned over to him as Bankruptcy Trustee

pursuant to the existing turnover order. (App. at 51-61.) In its June 15, 1993, order,

the district court (then Chief Judge Diana E. Murphy) denied Parry Murray's motion for

reconsideration and also rejected Stoebner's turn over argument noting that turning over

the litigation funds would undermine the final judgment entered in the previous FTC

action (App. at 64-65), which had established the two "estates" and which had

specifically provided that the "Litigation Estate" would be used to pay attorney's fees

which were still owed and being incurred. In crucial recitations, then Chief Judge

Murphy stated that during the earlier turnover proceeding in 1992 (when Stoebner

successfully sought the proceeds of the "Settlement Estate" then in the hands of the

FTC receiver) Stoebner had agreed to abide by the terms of the final judgment entered

in the FTC case. (App. at 63, 64.) Accordingly, Resnick transferred the $25,649.71

to the FTC receiver, who, pursuant to Mr. Blodgett's directions and in conformity with

the terms of the settlement agreement's final judgment in the FTC case, then transferred

the funds to Parry Murray to fund Mrs. Blodgett's defense costs. Stoebner then filed

the instant adversary action against Parry Murray seeking to recover the $25,649.71.

After the district court rejected Stoebner's argument to turn over the $25,649.71

of litigation fund money, finding that Stoebner had previously represented to the court

at the time he obtained the turnover order that he would abide by the terms of the final

judgment in the FTC case, Stoebner asked the district court to correct or delete the

recitations that he had previously agreed to abide by the final FTC judgment. (App. at

66-73.) The district court refused to change its order to remove the statement and

representation it found Mr. Stoebner had made. (App. at 74-76.) 

In a parallel proceeding, Trustee Stoebner was also suing to recover the

$250,000 which had been advanced out of the Litigation Estate to Meshbesher &
5

Spence, the law firm which represented TGM and Mr. Blodgett. His lawsuit against

Meshbesher was also based, as is the one at bar, on 11 U.S.C. § 549(a), which

generally prohibits unauthorized transfers of bankruptcy estate property after the

bankruptcy petition is filed. The district court granted judgment to the law firm, and

Stoebner appealed. Our court affirmed in an unpublished opinion, and held that

Stoebner was judicially estopped from seeking the $250,000 because of the

representation he had made to then Chief Judge Murphy during the initial turnover

proceeding that he would abide by the terms of the final judgment in the FTC case. See

Stoebner v. Meshbesher & Spence, 72 F.3d 134 (table), 1995 WL 723560 (8th Cir.

1995) ("The $250,000 payment was made under the final judgment in the FTC action,

however, and Stoebner agreed to follow the terms of that judgment. Having given his

word that he would follow the judgment's terms, Stoebner cannot now undermine the

judgment by recovering the $250,000 payment.") 

When this case was before us the first time, the issue was whether or not

Stoebner was collaterally estopped from making the claim. See Stoebner I, 91 F.3d at

1094 ("Nonetheless we conclude the Bankruptcy Court incorrectly determined that

collateral estoppel barred Stoebner's section 549 claim.") Parry Murray had not yet

pled judicial estoppel as a defense, the bankruptcy judge had not granted summary

judgment to Parry Murray on a judicial estoppel basis, and judicial estoppel was just

not raised in the first appeal. We asked the parties prior to hearing the first appeal to

comment on the effect of Meshbesher, and both of them were emphatic that because

judicial estoppel had not been raised as a defense by Parry Murray below, it was not

involved in this appeal. See Letter Br. of Appellant filed Feb. 9, 1996, in No. 95-2662

("In the present case, . . . unlike Meshbesher, Appellee [Parry Murray] never raised the

issue of purported judicial estoppel, not by affirmative defense, not in its summary

judgment motion, and not in its briefs to this court.") (App. at 107.) Accord,

Appellee's Supp. Br. filed Feb. 9, 1996 in No. 95-2662 ("Thus to the extent that the

basis for the Meshbesher Decision [sic] (judicial estoppel) differs from the basis of the

lower court's decision in this case (collateral estoppel), that decision should have little
6

or no impact upon this appeal . . . .") (App. at 103-04.) At the first oral argument we

pressed the question of why Meshbesher didn't control the appeal, and we were told

by both sides that judicial estoppel had not been raised in this case, and we so noted

in our opinion. See Stoebner I, 91 F.3d at 1093 n.7 ("Neither Stoebner nor Parry,

Murray raise any claim of judicial estoppel in this action, and, at oral argument, both

parties agreed the doctrine is not implicated in this case.") 

When the case at bar was remanded to the bankruptcy court following the first

appeal, Parry Murray applied for and received authority to amend its answer to assert

the defense of judicial estoppel against Stoebner's claim, ala Meshbesher, which had

been decided while this case was awaiting oral argument before us the first time. No

claim is made that the bankruptcy court erred in permitting the amendment. Relying

on the same rationale as our Meshbesher decision, the bankruptcy court found that

Stoebner was judicially estopped from asserting a claim against Parry Murray for the

$25,649.71. (App. at 148.) The district court affirmed, and Stoebner filed the instant

appeal. We affirm. 

In our first opinion, we held that Stoebner was not collaterally estopped in this

case by the district court's order of June 15, 1993, denying reconsideration of her order

authorizing Mr. Resnick to transfer the $25,649.71 unexpended Litigation Estate funds

to the FTC receiver for further distribution according to the final judgment in the FTC

case. Stoebner I, 91 F.3d at 1094. We did so because we concluded that the

reconsideration order did not meet the four requirements for collateral estoppel to

operate in that the order did not determine the "crucial factual issue" of "whether the

money in the Litigation Estate came from the debtor." Id. 

The issue now before us is whether or not Stoebner is judicially estopped from

asserting the present claim in the same way he was judicially estopped in the

Meshbesher case. While Stoebner stoutly maintains he did not make the

representations to then Chief Judge Murphy that both Chief Judge Murphy and the
7

panel which decided Meshbesher determined he did, we conclude that it is too late in

the day to renew the argument. Stoebner took no appeal from the denial of the June 15,

1993, order on reconsideration, and the Meshbesher panel has held that his agreement

to abide by the terms of the final judgment approving the settlement of the FTC

litigation judicially estopped him from pursuing the Litigation Estate funds which were

paid to Meshbesher & Spence. There is no contention made here that the transfer of

the $25,649.71 at issue in this litigation from the FTC receiver to Parry Murray was

done in violation of or contrary to the terms of the final judgment in the FTC case. In

our view, Meshbesher controls the result in this case, and we conclude that Mr.

Stoebner is judicially estopped here from asserting any claim to the $25,649.71 in

Litigation Estate monies paid to Parry Murray for the very same reason he was

judicially estopped from asserting any claim to the $250,000 in Litigation Estate monies

paid to Meshbesher & Spence in the Meshbesher case. 

Accordingly, we affirm the judgment of the district court.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT