UNITED STATES DISTRICT COURT FOR THE 

DISTRICT OF NEW HAMPSHIRE

In Re: Global Environmental Solutions, Ltd.

Seaton Gras

v. Civil No. 05-cv-316-JD

Timothy P. Smith, Trustee

O R D E R

Seaton Gras, proceeding pro se, appeals the bankruptcy

court’s decision sustaining the trustee’s objection to certain

claims of creditors. Gras also contends that the bankruptcy

court improperly denied him an opportunity to influence the

court’s decision on whether to disallow the creditors’ claims and

that the trustee’s dual role as a plaintiff in the adversary

action and trustee in the underlying bankruptcy action

constituted an impermissible conflict of interest. Although the

trustee received notice of the appeal, he did not register for

electronic filing in this court or otherwise respond and did not

accept the brief mailed to him by Gras through certified mail. 

Therefore, review of the issues raised on appeal is limited to

the record from the bankruptcy court and Gras’s brief.

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Background

Seaton Gras was an investor in and an employee of Global

Environmental Solutions, Inc. In May of 1996, he filed a wage

claim against the company and was awarded $16,000. The company

ceased doing business at the end of 1996. In January of 1997, a

new company, Global Environmental Services, LLC, was formed by

investors and principals who had been involved with Global

Environmental Solutions, and two other companies were

subsequently formed with the same members.

Gras, as a creditor, filed an involuntary petition in

bankruptcy against Global Environmental Solutions, Ltd., in April

of 1999. Timothy Smith was appointed trustee. Gras discussed

with the trustee certain causes of action on behalf of the

bankruptcy estate against companies and individuals who were

involved with the debtor. Gras suggested theories of fraudulent

transfers, breach of fiduciary duty, alter ego, and successor

liability. The bankruptcy court approved the trustee’s motion to

sell the debtor’s interest in the cause of action to Gras. Under

the terms of the sale, the trustee sold the bankruptcy estate’s

interest in the cause of action to Gras for $5,000, along with

Gras’s waiver of any claim against the estate, and the trustee’s

retention of a fifteen percent interest in any recovery Gras

might be awarded from the defendants. 

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An adversary case was filed on May 11, 2001, with Gras and

the trustee as plaintiffs, alleging seven claims against four

corporations and two individuals. A trial was held on November

4, 2002. The bankruptcy court found in favor of the plaintiffs

on the claim of successor liability, Count II, and denied the

remainder of the claims. The court held that Global

Environmental Services was the successor to Global Environmental

Services and that Polar Refrigerant Technology, LLC, was the

successor to Services. The court awarded damages as follows:

“Damages will be awarded in the amount of the allowed claims in

the instant bankruptcy case of Global Environment Solutions,

Ltd.” Memorandum Op. at 6. Final judgment was entered on May

13, 2004. The plaintiffs moved for reconsideration arguing that

the award of damages should not be contingent on events in the

bankruptcy case and that final judgment should not enter until

the damages were awarded. The motion was denied in July of 2004,

and the case was closed on October 26, 2004.

In May of 2005, the trustee submitted an objection to

certain claims submitted by creditors in the bankruptcy case. 

Gras responded to the trustee’s objection, raising issues of the

trustee’s conflict of interest between his role as a plaintiff in

the adversary action and his role as trustee in reviewing the

creditors’ claims in the bankruptcy action, asking for

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appointment of a different trustee, asking that certain claims

not be disallowed for minor defects, and arguing that many

creditors’ claims were not listed. 

A status hearing was held on June 7, 2005, with the trustee,

counsel for Gras, and counsel for the trustee attending and Gras

participating by telephone. The trustee explained that if his

objections to the creditors’ claims were sustained, there would

be $6,800 in allowed unsecured claims against the estate. Gras’s

claim against the estate was for $35,000. The trustee

acknowledged the “inherent conflict” between his role in the

adversary proceeding with Gras, where their interest was to

maximize the amount of allowed claims for purposes of the damages

award, and his role as trustee of the bankruptcy estate, where

his obligation was to scrutinize and disallow creditors’ claims. 

The court stated that it hoped the trustee and Gras, with their

counsel, could work out the issues concerning the trustee’s

objections to creditors’ claims.

A hearing on the trustee’s objection to the creditors’

claims was held on July 12, 2005. The trustee and counsel who

had been local counsel for Gras and the trustee in the adversary

proceeding attended, and Gras participated by telephone. Gras

and his former counsel argued that a different trustee should be

appointed to avoid a conflict of interest. Gras also wanted the

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opportunity to find replacement counsel to represent him in the

process of responding to the trustee’s objections to creditors’

claims. The court ruled that Gras was not properly part of the

proceeding to consider the trustee’s objections to creditors’

claims and allowed the trustee’s objections.

Discussion

Gras raises thirteen points of error as to the bankruptcy

court’s decision to allow the trustee’s objections to the

creditors’ claims. In summary, he challenges the bankruptcy

court’s decision that he was not a proper party to the proceeding 

and the court’s failure to recognize and remedy the trustee’s and

counsel’s conflicts. On appeal from the bankruptcy court, this

court reviews the bankruptcy court’s findings of fact for clear

error and its conclusions of law de novo. In re Boston Reg’l

Med. Ctr., Inc., 410 F.3d 100, 108 (1st Cir. 2005).

As a preliminary matter, Gras did not appeal the bankruptcy

court’s award of damages in the adversary proceeding. Therefore,

that decision is not before the court here.

Gras argues that the nature of the damages award gave him

standing to participate in the review of the creditors’ claims in

order to maximize the size of this recovery. Gras cites no cases

to support that theory. Instead, “[a]s a general rule, absent

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leave of court, the chapter 7 trustee alone may interpose

objections to proofs of claim. Leave to object is not generally

accorded an individual creditor unless the chapter 7 trustee

refuses to object, notwithstanding a request to do so, and the

bankruptcy court permits the creditor to object in the trustee's

stead.” In re Thompson, 965 F.2d 1136, 1147 (1st Cir. 1992). 

The bankruptcy court stated that it was the court’s practice not

to allow third parties to interpose their opinions on claims

filed by creditors, which is a matter decided between the trustee

and the court. That is a sustainable position.

With respect to the conflict of interest issue, the

bankruptcy court noted that any trustee would have the same

potential conflict between on one hand the interest in maximizing

the recovery from the damages award in the adversary action and

the interest on behalf of the bankruptcy estate in the bankruptcy

proceeding to minimize the allowed claims. The bankruptcy court

concluded that given the trustee’s minimal participation in the

adversary proceeding and his demonstrated ability to act as

trustee in the bankruptcy proceeding, no conflict of interest

existed to support the objections raised by Gras and his former

counsel. 

Nothing in the record here suggests that the trustee acted

under a conflict of interest. The trustee had no duty to allow

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objectionable claims of creditors in order to maximize the award

in the adversary proceeding. On the other hand, he did have a

duty to scrutinize the claims filed on behalf of the bankruptcy

estate. The trustee apparently upheld his obligation to

scrutinize the claims and disallowed those he deemed

objectionable. Therefore, it does not appear that the trustee

here acted under a conflict of interest or that the bankruptcy

judge improperly ignored a material conflict. Cf. Pearson v.

Fist NH Mortgage Corp., 200 F.3d 30 (1st Cir. 1999); Rome v.

Braunstein, 19 F.3d 54, 57 (1st Cir. 1994).

Conclusion

For the foregoing reasons, the bankruptcy court’s decision

approving the trustee’s objections to creditors’ claims is

affirmed.

SO ORDERED.

Joseph A. DiClerico, Jr.

United States District Judge

March 17, 2006

cc: Timothy P. Smith, Esquire

Mark F. Sullivan, Esquire

Seaton Gras, pro se

U.S. Trustee

Clerk, USBC-NH

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