United States Court of Appeals

FOR THE EIGHTH CIRCUIT

_____________

Nos. 97-1221/2300 

_____________

In re: Bishweshwar Rai Mahendra, *

*

Debtor, *

*

------------------------------------------------- *

* 

Eric J. Snyder, * Appeals from the United States

* District Court for the Eastern

Creditor -- Appellant, * District of Missouri.

*

v. *

*

A. Thomas Dewoskin, *

*

Trustee -- Appellee. *

_____________

Submitted: September 10, 1997

Filed: December 17, 1997

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Before BEAM, FLOYD R. GIBSON, and HEANEY, Circuit Judges.

_____________

FLOYD R. GIBSON, Circuit Judge.
The Honorable Donald J. Stohr, United States District Judge for the Eastern

1

District of Missouri.

The Honorable David P. McDonald, United States Bankruptcy Judge for the

2

Eastern District of Missouri.

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These appeals arise from a District Court Order entered November 26, 1996

1

which affirmed the Bankruptcy Court Order dated May 6, 1996 that granted judgment 2

in favor of Appellee A. Thomas Dewoskin ("Trustee") and against Appellant Eric J.

Snyder. Snyder also appeals the District Court Order of March 3, 1997 which

sanctioned Snyder for his frivolous appeal to the district court. For the reasons set forth

below, we affirm these orders.

I. BACKGROUND

On September 22, 1994, Bishweshwar Rai Mahendra ("Debtor") and Snyder

executed a Representation Agreement (the "Agreement"). In pertinent part, the

language of the Agreement provided:

1. WHEREAS, [Debtor] may not have filed income tax returns with

either the IRS or the State of Missouri for the years, 1987, through and

including 1993; and

2. WHEREAS, [Debtor] wishes to have [Snyder] represent him, but does

not have the present cash with which to pay [Snyder]; and

3. WHEREAS, [Snyder] is willing to represent [Debtor] based upon

[Debtor's] proposal to give him a Second Deed of Trust in the property.

. . . 

 * * *

17. [Snyder] agrees to represent [Debtor] regarding his income tax

returns for the years 1987 through and including 1993 both before the
The Deed of Trust provided in pertinent part: 3

[Debtor] has executed a Note to secure future advances for legal services

and costs provided by [Snyder to Debtor]. Such parties have entered into

a Representation Agreement whereby [Snyder] agrees to provide certain

legal services and [Debtor] . . . has agreed to pay for such legal services

by executing a Note for such legal services and costs and by securing the

Note by this Deed of Trust. . . . This security instrument is governed by

V.A.M.S. Section 433.055.

Id. at 109.

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Internal Revenue Service and before the Missouri Department of Revenue.

Snyder's App. at 100, 103. Debtor also signed a Promissory Note (the "Note") in favor

of Snyder for "[a]dvances up to $35,000." Id. at 105. This Note was for Snyder's

"legal services" to be performed on behalf of Debtor. Id. Debtor further executed a

Deed of Trust that pledged his real property located in DeSoto, Missouri (the

3

"property" or "real property") to Snyder as security for the Note.

 

On November 28, 1994, Debtor filed his voluntary petition for relief under

Chapter 7 of the United States Bankruptcy Code. Snyder served as Debtor's attorney

of record. Snyder did not file an application to be employed on behalf of the

bankruptcy estate or an application for compensation. Regarding the fee arrangements

between Snyder and Debtor with respect to the bankruptcy, Snyder stated that "[w]e

considered [the bankruptcy] to be a continuation of the criminal representation

[regarding the tax matters. The] method of paying . . . was [that] I was to be paid from

the proceeds of the sale of his house." Snyder Dep. at 6. As of the date of the

bankruptcy filing, Snyder was a pre-petition creditor of Debtor. Snyder recognized that

he might have a conflict of interest with the bankruptcy estate. See id. at 12-13.
Snyder claims that Debtor and he modified the Agreement by orally agreeing

4

that it extend to bankruptcy services. Snyder and Debtor memorialized this

modification with a compensation statement, Amended Promissory Note, and Amended

Deed of Trust. In addition, Snyder contends that the bankruptcy services were also

independently covered within the scope of the original Agreement. See Snyder's Br.,

No. 97-1221, at 15. 

Snyder claims that neither party consented to "submission" of the case and that 5

the parties never agreed to the facts. After reviewing this issue, we find Snyder's

contention to be without merit. By submitting a motion for summary judgment, Snyder

stated that "the pleadings, depositions, answers to interrogatories, and admissions on

file, together with the affidavits, if any, show that there is no genuine issue as to any

material fact." Fed. R. Civ. P. 56; see also Fed R. Bankr. P. 7056. Therefore, by

submitting his motion for summary judgment and stating that no genuine issue of

material fact existed, Snyder agreed to submit the case.

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On April 28, 1995, Trustee closed the sale of Debtor's real property in DeSoto

for the purchase price of $165,500. After priority claims were paid, Trustee deposited

the sum of $17,171.64 into the bankruptcy estate's bank account. Snyder sought

compensation from the sale proceeds of the real property for legal services in the

amount of $13,484.68. Snyder maintained that he was entitled to compensation for his

services rendered both pre-petition and post-petition.4

Trustee filed a Complaint to Determine the Validity, Priority, and Extent of the

Lien on June 6, 1995; a Motion for Review of Attorney Fees on July 20, 1995; and a

Motion for Imposition of Sanctions Pursuant to Rule 9011 of the Federal Rules of

Bankruptcy Procedure on August 31, 1995. These motions named Snyder as the

defendant in each matter. The parties "submitted" these contested matters to the

5

bankruptcy court pursuant to uncontested facts, Snyder's Motion for Summary

Judgment, and legal briefs. 

On May 6, 1996, the Bankruptcy Court entered an Order determining that: (1)

to the extent Snyder's lien was valid, it did not cover representation beyond tax matters
The apparent conflict of interest arose from Snyder's assertion of a lien which 6

would decrease the amount of back taxes Debtor paid to the Internal Revenue Service

out of the estate. As a creditor of the bankruptcy estate, the larger the amount of

attorney fees that Snyder would have received would leave less estate funds for

distribution to the taxing authorities and a larger non-dischargeable debt claim for

Debtor. 

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set forth in the Agreement; (2) to the extent that Snyder's lien was valid, it was

extinguished on the petition date with respect to any further future advances; (3) Snyder

was not entitled to receive compensation from the assets of the estate for post-petition

legal services; (4) legal services rendered for pre-petition tax and other non-bankruptcy

matters would be awarded in the amount of $4,348.80; and (5) compensation for legal

services rendered for pre-petition bankruptcy matters would be awarded in the amount

of $1,000 but reduced by the same amount as sanctions for Snyder's conflict of

interest. The bankruptcy court entered this order without a hearing or trial. This order 6

also did not award interest on the pre-petition lien nor any protection and collection

costs.

On June 24, 1996, Snyder filed his Notice of Appeal to contest the Bankruptcy

Court's Order. On November 25, 1996, the District Court entered its Judgment,

affirming the Bankruptcy Court's Order in its entirety. Snyder filed his Notice of

Appeal to this court on December 26, 1997.

On January 9, 1997, Trustee filed a Motion for Sanctions against Snyder

pursuant to Fed. R. Bankr. P. 9011 for Snyder's alleged frivolous appeal to the district

court. Snyder did not file a response. On March 3, 1997, the District Court entered

an Order assessing sanctions against Snyder in favor of Trustee in the amount of

$4,352.80. The district court denied Snyder's request to set aside this order on March

17, 1997. Accordingly, Snyder also appeals to this court arguing that the district court

erred in assessing sanctions against him for filing an alleged frivolous appeal.
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II. DISCUSSION

In a case originating in bankruptcy court, the court of appeals functions as a

second court of review and reviews the bankruptcy court's conclusions under the same

standards that the district court applied. We review the bankruptcy court's findings of

fact under the clearly erroneous standard and consider legal issues de novo. See

Gourley v. Usery (In re Usery), 123 F.3d 1089, 1093 (8th Cir. 1997).

A. The Unencumbered Portion of Debtor's Real Property Became Estate

Property on the Petition Date.

Snyder argues that the bankruptcy court erred as a matter of law in finding that

11 U.S.C. § 542 (1994) extinguished his lien interest. Snyder also contests Trustee's

position that 11 U.S.C. § 541 (1994) extinguished Snyder's lien interest. Snyder

maintains that his right to be secured as to future advances and future obligations

constitutes a present lien on Debtor's property. Snyder claims that, under Mo. Rev.

Stat. § 443.055.2 (1994), his lien embodied the full extent of the face amount of the

security instrument for future advances and obligations at the time the security

instrument was created. Here, the Deed of Trust's face amount is $35,000 and was

established on September 22, 1994. Therefore, Snyder concludes that this lien existed

prior to the commencement of the bankruptcy filing--November 28, 1994--and that the

bankruptcy estate takes its interest in the Debtor's real estate subject to Snyder's

interest, regardless of how much Debtor owed Snyder on the petition date. We

disagree.

Determining whether an interest is part of the bankruptcy estate requires a threepart query. First, the court must decide whether the item constitutes "property" under

§ 541(a)(1). See C.T. Dev. Corp. v. Barnes (In re Oxford Dev., Ltd.), 67 F.3d 683,

685 (8th Cir. 1995). Second, the court should look to state law to ascertain the debtor's

interest in the property because "[p]roperty interests are created and defined by state
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law . . . [u]nless some federal interest requires a different result." Id. (quotation and

citation omitted). Third, the court must find that the debtor had the property interest

at the time of filing the bankruptcy petition. See Davis v. Moon (In re Usery), 158

B.R. 470, 472 (Bankr. W.D. Mo. 1993).

Under § 541(a)(1), the bankruptcy estate consists of all of the debtor's legal and

equitable property interests that existed as of the time that the bankruptcy petition is

filed. See § 541(a)(1). The property of the bankruptcy estate is broadly defined by §

541(a)(1). See United States v. Whiting Pools, Inc., 462 U.S. 198, 204-05 (1983).

"Any portion of a debtor's property that is unencumbered by mortgage--the equity--is

part of the bankrupt's estate." United States v. Rauer, 963 F.2d 1332, 1337 (10th Cir.),

cert. denied, 506 U.S. 886 (1992).

Pursuant to § 541, Debtor's legal and equitable interests in the real property

became property of the estate as of the petition date. Thus, the estate possessed

Debtor's unencumbered portion, or Debtor's equity, in the property. At that point,

Debtor lost the right to authorize Snyder's legal services which could potentially further

encumber this asset of the bankruptcy estate. Only the bankruptcy court could control

the further encumbrance of the estate property. Neither Debtor nor Snyder sought or

obtained the bankruptcy court's approval to continue to draw upon the future advance

clause contained in the Agreement, Note, and Deed of Trust. To the extent that Debtor

and Snyder have attempted to continue to draw upon the future advance clause after the

petition's filing, such attempts constitute unauthorized post-petition transfers pursuant

to 11 U.S.C. § 549 (1994). "[T]he trustee may avoid a transfer of property of the estate

. . . that occurs after the commencement of the case; and . . . that is not authorized . .

. by the court." 11 U.S.C. § 549; see also Brown v. Harris (In re Auxano, Inc.), 96

B.R. 957, 960 (Bankr. W.D. Mo. 1989) ("Taking a security interest in real estate is a

'transfer' as that term is defined in 11 U.S.C. Section 101(50).").
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Turning to Missouri state law's determination of the extent of Debtor's interest in

the property, Snyder misapprehends § 443.055's effect in the present case. Section

443.005.1(1) defines "borrower" to include a "successor in interest" to the "mortgagor,

deed of trust grantor, or debtor." Section 443.055.6 allows the owner of the interest in

the real property encumbered by the security instrument to give notice to the lender,

electing to terminate the operation of the instrument as security for future advances

made or incurred after the date the lender receives notice. We find that the filing of

Debtor's bankruptcy petition, in the present case, comported with § 443.055.6's notice

requirement to Snyder and effectively terminated the operation of the Note and Deed

of Trust as security for future advances incurred after the date of filing the bankruptcy

petition. Here, Snyder himself prepared and filed Debtor's bankruptcy petition and,

thus, had actual notice of Debtor's relinquishment to the estate of his interest in the real

property. Moreover, the Trustee, as the representative for the bankruptcy estate and

successor in interest to the real property, did not authorize any further legal services to

be performed by Snyder.

Such a result is analogous to the legal effect of a cash security retainer. Snyder's

security agreement with a future advance clause, like a cash security retainer, was held

by Snyder to secure payment of professional fees and costs yet to be rendered. Under

the ethical rules applicable in most jurisdictions, the security retainer monies remain

property of the client until counsel applies them to legal services actually performed.

See Indian Motocycle Assocs. III Ltd. Partnership v. Massachusetts Hous. Fin. Agency,

66 F.3d 1246, 1255 (1st Cir. 1995). The debtor's equitable interest in the unearned

portion of the retainer becomes property of the estate upon the filing of the bankruptcy

petition. See id. To withdraw the retainer, counsel is required to file a fee application

with the bankruptcy court pursuant to 11 U.S.C. § 330 (1994), and the court could

require the debtor's counsel to surrender the unearned portion as "property of the estate"

pursuant to § 542. See id.; see also Meeker v. Germeraad (In re Quincy Air Cargo,

Inc.), 155 B.R. 193, 197 (Bankr. C.D. Ill. 1993) (security interest in property as a

"security retainer" was estate property which can only be used by the professional
Snyder also argues, in the alternative, that the Agreement with Debtor

7

constitutes an executory agreement because, if Snyder is not secured for his postpetition services, then Debtor has not fully performed the contract on Debtor's part.

After carefully considering this issue, we find it to be without merit. Snyder further

claims that Snyder and Debtor orally amended the Agreement to cover bankruptcy

services. However, whether Snyder and Debtor orally amended the Agreement to

cover bankruptcy matters is irrelevant because Snyder's lien was extinguished on the

petition date and does not secure any post-petition legal services. 

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upon compliance with the entire fee application process, including court approval); In

re Fitzsimmons Trucking Inc., 124 B.R. 556, 560 (Bankr. Minn. 1991) (an attorney's

retainer held in trust is property of the bankruptcy estate).

In sum, at the time of filing the bankruptcy petition, Debtor still retained equity

in the portion of the real estate unencumbered by Snyder's post-petition legal services.

The filing of the petition transferred Debtor's equity in the real estate to the bankruptcy

estate. Although we find that § 541, as opposed to § 542 (as the bankruptcy court

found), is the more appropriate section for evaluating the relevant property interests, we

affirm, under § 541's three-part query, the bankruptcy court's and district court's

conclusions that the unencumbered portion of Debtor's real property became estate

property on the petition date. See Cooksey v. Delo, 94 F.3d 1214, 1218 (8th Cir. 1996)

(appellate court may affirm on any basis supported by the record).

B. Snyder Is Not Entitled to Receive Compensation From the Estate's Assets for

His Post-Petition Legal Services.

Snyder's contention that he is entitled to compensation for his post-petition legal

services rests primarily on his belief that his lien interest was not extinguished by

Debtor's filing of a bankruptcy petition because these legal services constituted future

advances pursuant to § 443.055. However, we reject this argument. As we explained 7

supra in Section A of this Opinion, Snyder's lien--to the extent it was valid--was

extinguished on the petition date with respect to any future advances. Snyder's only
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avenue for post-petition compensation would have been to seek such compensation

pursuant to § 330 as an administrative expense. See In re Quincy Air Cargo, Inc., 155

B.R. at 197 (professional must comply with entire fee application process, including

court approval, in order to be paid from estate property even when the professional has

a lien on such property).

Here, Snyder did not seek permission to be employed by the estate, and no officer

of the estate asked Snyder to perform services on behalf of the estate. In fact, Snyder

would not have been eligible to be employed by the estate because he is not

"disinterested" in accordance with 11 U.S.C. § 327 (1994). See Pierce v. Aetna Life

Ins. Co. (In re Pierce), 809 F.2d 1356, 1363 (8th Cir. 1987) ("[U]nder Section 327(a),

an attorney may be disqualified not only because he or she is not disinterested, but also

because the attorney holds an 'interest adverse to the estate.' 11 U.S.C. § 327(a). . . .

[A]n attorney's pre-petition mortgage on the debtor's real estate constitutes an 'adverse

interest' under Section 327(a)."). Therefore, because denial of compensation is within

the court's discretion, see id.; 11 U.S.C. § 328(c) (1994), and because we perceive no

abuse of discretion, we affirm the bankruptcy court's and district court's decisions that

Snyder is not entitled to compensation for services rendered post-petition.

C. The Bankruptcy Court Did Not Err in Awarding Snyder Compensation in the

Amount of $4,348.80 for Pre-Petition Nonbankruptcy Legal Services.

Snyder argues that the bankruptcy court erred by (1) only awarding him

$4,348.80 for his pre-petition nonbankruptcy legal services; (2) not awarding him

interest and protection/collection fees and costs under 11 U.S.C. § 506(b) (1994); and

(3) not attaching his lien, to the extent it is valid, to Debtor's $8,000 homestead

exemption in the real property. We disagree.

First, we find no reason to disturb the bankruptcy court's finding of fact that

Snyder was entitled to $4,348.80 for pre-petition tax work. Snyder's time records
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reflect this amount and support that the bankruptcy court did not clearly err in awarding

this sum. We also affirm the bankruptcy court's conclusion that Snyder's lien in the real

property was limited to the pre-petition tax services as the plain language of the

Agreement so stipulated. See Snyder's App. at 103, ¶ ¶ 1-3, 17.

Second, we find that the bankruptcy court did not err in refusing to award Snyder

interest and protection/collection costs on his pre-petition lien despite the Note and

Deed of Trust's provision for such costs. The Bankruptcy Code provides that:

(a) Any attorney representing a debtor in a case under this title, or in

connection with such a case, . . . shall file with the court a statement of the

compensation paid or agreed to be paid, if such payment or agreement was

made after one year before the date of the filing of the petition. . . .

(b) If such compensation exceeds the reasonable value of any such

services, the court may cancel any such agreement. . . .

11 U.S.C. § 329 (1994). Section 329 requires the attorney to show that the agreed

compensation for the legal services is reasonable. See In re Rheuban, 121 B.R. 368,

385 (Bankr. C.D. Calf. 1990). We conclude that § 329 authorized the bankruptcy court

to award Snyder the fee it deemed appropriate for the pre-petition legal services

performed in connection with Debtor's bankruptcy proceeding regardless of the

existence of the Agreement, Note, and Deed of Trust and the provision for interest and

protection/collection costs. Accordingly, because Snyder has failed to make the required

showing, we find that allowing Snyder any further compensation would exceed the

reasonable value of his services. 

Third, we turn to the issue of Snyder's claimed interest in Debtor's homestead

exemption. As of the petition date, the rights in Debtor's exemption were determined.

See Armstrong v. Peterson (In re Peterson), 897 F.2d 935, 937 (8th Cir. 1990). Neither

party disputes that Debtor was entitled to an $8,000 homestead exemption
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pursuant to Mo. Rev. Stat. § 513.475 (1994). However, Snyder apparently contends

that Debtor's homestead exemption is valid against all creditors except Snyder. We

disagree. Pursuant to Fed. R. Bankr. P. 4003(b), the trustee and creditors have the right

to object to the claimed exemptions within thirty days after the conclusion of the first

creditors' meeting. Unless such an objection is filed, the property claimed as exempt

by the debtor is exempt. See In re Stanley, 143 B.R. 900, 903 (Bankr. W.D. Mo.

1992). In the present case, the first meeting of creditors concluded on December 31,

1994; therefore, Snyder is time-barred from objecting to Debtor's homestead exemption

as applied against Snyder.

D. The Bankruptcy Court Did Not Err in Awarding Snyder $1000 for Prepetition Bankruptcy Matters and in Reducing This Award in the Same Amount

Because of Snyder's Conflict of Interest with the Debtor.

From our best analysis of Snyder's convoluted argument, we discern that Snyder

contends that the bankruptcy court erred in only awarding him $1000 in compensation

for his pre-petition bankruptcy services. Apparently, Snyder claims that a majority of

his pre- and post-petition bankruptcy services also constitute "tax matters," are

reasonable and necessary expenses, and are secured by the Note and Deed of Trust as

Snyder has previously argued. Therefore, pursuant to the Bankruptcy Compensation

Statement that provides that Snyder be paid at the rate of $120 per hour, Snyder claims

that he should have received compensation based on this hourly rate. However, we find

Snyder's argument to be without merit.

As already discussed, we determined that Snyder's lien was only valid as to his

pre-petition tax services. The bankruptcy court properly concluded that any other nontax services constituted unsecured pre-petition debt. The bankruptcy court, under §

329(a), had the power to review Debtor's transactions with his attorney Snyder. If the

bankruptcy court found that such compensation paid or promised to be paid to the

attorney exceeded the reasonable value of such services, the court could cancel any
Snyder also argues that, as the attorney for a debtor in a Chapter 7 case as

8

opposed to an attorney for the estate or a debtor-in-possession, the Bankruptcy Code's

ethical standards should not apply to him. However, we reject this position. As we

previously determined, upon filing of the bankruptcy petition, the unencumbered

portion of Debtor's real property became estate property. Therefore, Snyder must

comply with the applicable Code guidelines in order to receive compensation for his

post-petition legal services from estate assets. See In re Independent Sales Corp., 73

B.R. 772, 774-775 (Bankr. S.D. Iowa 1987) (noting that a retainer obtained by the

debtor's attorney prior to filing the petition for relief is held in trust to the extent it is for

services to be rendered during the case and until allowed by the court and ordered paid

pursuant to sections 330 and 331, and further indicating that section 330(a) applies to

a Chapter 7 case). See also Sturgeon State Bank v. Perkey (In re Perkey), 194 B.R.

846, 849-50 (Bankr. W.D. Mo. 1996) (finding, in a Chapter 7 case, that the debtor's

attorney must satisfy both the ethical requirements set forth in the Model Rules of

Professional Conduct and § 327 of the Bankruptcy Code). 

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such agreement or order the return of any such payment to the extent the payment was

excessive. See § 329(b). Considering the lack of complexity and the customary legal

fees that are awarded in this community for planning, preparing, and filing the necessary

schedules and petition for a Chapter 7 case, the bankruptcy court did not err in awarding

Snyder $1000 as a reasonable fee for his pre-petition bankruptcy services.

Snyder also disputes the bankruptcy court's imposition of sanctions against him

in the amount of $1000 for a conflict of interest with Debtor pursuant to Rule 9011.

Snyder contends that the bankruptcy court never informed him of this apparent conflict

of interest and never gave Snyder an opportunity to defend against this charge, which

allegedly violated Snyder's due process rights. Snyder also contests the court's finding

that a conflict of interest existed. Once again, we disagree. 8

First, we find that Snyder did have notice that the bankruptcy court could

potentially award sanctions against Snyder for a conflict of interest with Debtor. At the

August 24, 1995 hearing before the bankruptcy court, Trustee informed the court and

Snyder that he was "investigat[ing] whether grounds exist to file a motion for
We note that Rule 9011 was amended on April 11, 1997, with the amendments 9

having an effective date of December 1, 1997. See 28 U.S.C. 2075, H.R.Doc. No. 70,

105th Cong., 1st Sess. 87- 96 (1997). Because the relevant sanction orders arose under

former Rule 9011, amended Rule 9011 does not have implications in the present case.

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sanctions." Bankr. Hr'g Tr. of August 24, 1995 at 6. On August 31, 1995, Trustee filed

a Rule 9011 Motion for Imposition of Sanctions. Finally, Snyder himself admitted in

his deposition that he might have an adverse interest with the bankruptcy estate. See

Snyder Dep. at 12-13. Therefore, as Snyder clearly had notice and an opportunity to

defend against the potential sanctions charge, Snyder's due process rights were not

violated.

Turning to the propriety of the bankruptcy court's $1000 sanction against Snyder

for his conflict of interest, Rule 9011(a) provides: 9

Every petition . . . filed in a case under the Code on behalf of a

party represented by an attorney . . . shall be signed by at least one

attorney of record. . . . The signature of an attorney or a party constitutes

. . . that to the best of the attorney's . . . knowledge, information, and belief

formed after reasonable inquiry it is well grounded in fact and is warranted

by existing law or a good faith argument for the extension, modification,

or reversal of existing law. . . . If a document is signed in violation of this

rule, the court on motion or on its own initiative, shall impose on the

person who signed it . . . an appropriate sanction, which may include an

order to pay to the other party or parties the amount of the reasonable

expenses incurred because of the filing of the document, including a

reasonable attorney's fee.

The language of Rule 9011 closely tracks the language of Fed. R. Civ. P. 11, and cases

interpreting Rule 11 are applicable to Rule 9011 cases. See Grunewaldt v. Mutual Life

Ins. Co. of New York (In re Coones Ranch, Inc.), 7 F.3d 740, 742 n.4 (8th Cir. 1993).

"[T]he established standard for imposing sanctions is an objective determination of

whether a party's conduct was reasonable under the circumstances." In re Armwood,
Snyder also attempts to characterize Trustee's motion and the district court's

10

order as a "motion and order for attorney's fees and costs" as opposed to a "motion and

order for sanctions." However, we reject this argument as completely lacking any merit

and not warranting further discussion.

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175 B.R. 779, 788 (Bankr. N.D. Ga. 1994). "We apply an abuse-of-discretion standard

of review in all aspects of Rule 11 (and by analogy, Rule 9011) cases." In re Coones

Ranch, 7 F.3d at 743.

Applying these standards, we conclude that the bankruptcy court did not abuse

its discretion by sanctioning Snyder for his conflict of interest with Debtor. As we

previously noted, Snyder's security interest was limited to the value of his pre-petition

legal services for tax matters. Snyder's assertion that his lien extended to other matters

was not supported by the law or a good faith argument for its modification or reversal.

When Snyder argued that his lien extended to his other non-tax services, Snyder's

interests directly conflicted with Debtor's interest to pay his non-dischargeable claim to

the Internal Revenue Service. It is appropriate to deny or reduce compensation to a

professional that represents a party (here, Snyder represented himself as a creditor of

Debtor) who has an interest adverse to the bankruptcy estate. See In re Pierce, 809

F.2d at 1362-63. Therefore, we find that the bankruptcy court did not abuse its

discretion in sanctioning Snyder for a conflict of interest as Snyder's actions were not

reasonable under the circumstances.

E. The District Court Did Not Err in Sanctioning Snyder for His Frivolous

Appeal.

Snyder argues that the district court erred in sanctioning him for his alleged

frivolous appeal to the district court, in part, because Trustee's motion failed to

10

comport with Rule 11's requirement that the motion specifically describe the conduct

alleged to have violated such rule, and the district court's order failed to make

sufficiently detailed findings of fact and conclusions of law. In addition, Snyder asserts
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that his preceding legal arguments demonstrate that the appeal was not frivolous. We

disagree.

In the present case, Trustee submitted to the district court a seven page legal brief

entitled "Suggestions in Support of Motion for Sanctions." This brief detailed that

Trustee was pursuing sanctions against Snyder, pursuant to Rule 9011, because the

appeal was not grounded in fact nor by existing law or a good faith argument for an

extension, modification, or reversal of the existing law. The Trustee's brief, in short,

highlights Snyder's conflict of interest in representing Debtor and in attempting to apply

his lien to the non-tax and post-petition legal services. As such, we find that Trustee's

motion and brief fully comply with Rule 9011's specificity requirements.

Similarly, we conclude that the district court did not abuse its discretion in

granting Trustee's unopposed motion and sanctioning Snyder in the amount of $4,352.80

for Trustee's attorney fees and double costs in defending the frivolous appeal in the

district court. Although a more thorough analysis might be illuminating, the district

court order adopted Trustee's rationale for the imposition of sanctions by implication

and provided Snyder with sufficient notice of the rationale underlying the sanctions. In

this case, the district court did not abuse its discretion as sanctions were appropriate

because Snyder's appeal was not supported by the evidence nor in conformance with

applicable law, nor a good faith argument for its extension, modification, or reversal.

As our disposition in this case reveals, Snyder still appears to not understand the law

applicable to his case. Therefore, we affirm the district court's order sanctioning Snyder

for his frivolous appeal.

III. CONCLUSION

We have carefully examined each of the remaining contentions raised by Snyder

on appeal and find them to be without merit. For the reasons set forth in this opinion,

we affirm the bankruptcy court order and district court orders. In addition, we note
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Trustee's request, see Briefs of Appellee at 34 (No. 97-1221) and 12 (No. 97-2300), that

we sanction Snyder further in the amount equal to the attorney fees and costs incurred

by the bankruptcy estate in defense of Snyder's frivolous post-judgment motions and

appeal to this court. Pursuant to Rule 38 Fed. R. App. P., we must provide reasonable

notice to counsel that we are contemplating sanctions and give counsel an opportunity

to respond. See id. (the 1994 Advisory Committee Notes indicate that a statement in

a party's brief moving for sanctions does not provide sufficient notice). Therefore,

Snyder shall submit a response to the question of the propriety of sanctions imposed by

this court against him to the clerk of this court within fifteen days of the date of this

opinion. Trustee shall also submit to the clerk of this court within fifteen days an

accounting of attorney's fees and costs incurred in this appeal.

A true copy.

Attest:

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