Court Opinion

ID: 20226
Source: CourtListenerOpinion
Date Created: 2010-04-25 07:32:20+00
Date Added: 2024-06-11T11:49:41.836222
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS
                       FOR THE FIFTH CIRCUIT

                       _____________________

                            No. 99-20303
                          Summary Calendar
                       _____________________

IN THE MATTER OF:   DZOANH NGUYEN TRINH,

                                                            Debtor.

DZOANH NGUYEN TRINH,

                                                         Appellant,

                                versus

INTERTEX, INC.; GLEN CREEK, Constable Precinct 5,

                                                       Appellees.
_________________________________________________________________

          Appeal from the United States District Court
                for the Southern District of Texas
                       USDC No. H-97-CV-375
_________________________________________________________________
                         February 25, 2000

Before JOLLY, JONES, and BENAVIDES, Circuit Judges.

PER CURIAM:*

     Dzoanh Nguyen Trinh appeals the district court’s denial of his

adversary proceeding under 11 U.S.C. § 544 and the award of

attorney’s fees to Intertex, Inc.    For the reasons stated herein,

we affirm the district court.

     *
      Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
                                   I

     In 1978, deed restrictions were recorded with respect to the

Mission Bend Subdivision in Houston, Texas, that provided for an

assessment lien on real property and for judicial foreclosure of

such a lien.   In 1992, Trinh purchased property in the subdivision

subject to those restrictions.         He later neglected to pay his

association fees, and by 1995, he owed over $1,200 to the Mission

Bend Civic Association.     So the association took him to court.

     In June of 1995, the state district court ruled in favor of

the association, and in September, the association recorded an

abstract of the judgment.    On October 3, 1995, Intertex bought the

property for $26,536.20 at a constable’s sale.        On October 11,

however, before the constable had signed or delivered the deed,

Trinh filed for Chapter 13 bankruptcy. Trinh then filed an adverse

proceeding under 11 U.S.C. § 544 to avoid the transfer of the

property to Intertex.    Intertex filed a counterclaim under Texas’

Declaratory Judgment Act, asking the bankruptcy court to declare

the constable’s sale valid and to award Intertex attorney’s fees

from the proceeds of the foreclosure sale.

     In March of 1996, the bankruptcy court dismissed Trinh’s

Chapter 13 proceeding.      In May, the bankruptcy court heard the

adversary proceeding concerning the disposition of the property.

Trinh did not personally appear at the hearing, and his counsel did

not present any evidence.       His counsel did, however, obtain a

stipulation from Intertex that the constable’s deed had not been

                                   2
recorded before Trinh’s bankruptcy filing. Intertex then presented

evidence establishing:

     1.    The 1978 restrictions on the property;

     2.    the record abstract of the judgment;

     3.    the recorded deed to Trinh;

     4.    the execution, order of sale, and final judgment from the
           state district court; and

     5.    Intertex’s purchase of the property.

In its June 13 final judgment, the bankruptcy court ordered the

automatic stay on disposition of the property terminated under 11

U.S.C. § 362.     The bankruptcy court also ordered that $8,684 in

Intertex’s    attorney’s    fees    be     paid      from     the   proceeds    of    the

foreclosure     sale,   along     with    $3,000       if     Trinh    unsuccessfully

appealed   in   district    court,       and    an     additional      $5,000    if   he

unsuccessfully appealed in the Fifth Circuit.

     Trinh did appeal to the district court unsuccessfully, which

affirmed the bankruptcy court in all respects.                      Specifically, the

district court     held    that    Trinh       could    not    avoid    the    property

transfer under § 544 of the bankruptcy code, and that even if he

could, the question was moot because of the bankruptcy court’s

dismissal of the bankruptcy proceeding.                     Moreover, the district

court concluded that the attorney’s fees award was within the

court’s discretion. Finally, the district court allowed payment of

the fees from proceeds of the foreclosure sale because Trinh had

failed to challenge that ruling before the bankruptcy court,

                                         3
because Trinh did not have Chapter 13 protection, and because he

had failed to establish that the property was his homestead. Trinh

appealed.

                                 II

     We begin with an analysis of Trinh’s appeal of the denial of

relief under 11 U.S.C. § 544.     That provision normally allows a

trustee in a bankruptcy proceeding to avoid the transfer of real

property that is not perfected and would not be enforceable against

a hypothetical bona fide purchaser at the time the bankruptcy

petition is filed.   In re Elam, 194 B.R. 412, 416 (Bankr. E.D. Tex.

1996).   It reads:

     (a) The trustee shall have, as of the commencement of the
     case, and without regard to any knowledge of the trustee
     or of any creditor, the rights and powers of, or may
     avoid any transfer of property of the debtor or any
     obligation incurred by the debtor that is voidable by --
     (3) a bona fide purchaser of real property, other than
     fixtures, from the debtor, against whom applicable law
     permits such transfer to be perfected, that obtains the
     status of a bona fide purchaser and had perfected such
     transfer at the time of the commencement of the case,
     whether or not such a purchaser exists.

11 U.S.C. § 544 (emphasis added).       This provision allows the

trustee to protect the potential assets of the bankrupt estate.

Zetta v. Babin, 103 F.3d 1195, 1200 (5th Cir. 1997).        In some

limited situations, the debtor may stand in the shoes of an

inactive trustee to protect the estate.        Trinh contends, and

Intertex apparently does not dispute, that he stands in the shoes

of the trustee pursuant to 11 U.S.C. § 522(h).       That provision

allows the debtor to act as a trustee for purposes of § 544 in the

                                  4
following situation: when the property was his homestead; the

transfer was involuntary; and a Chapter 13 trustee did not attempt

to avoid the transfer.    See Hamilton v. Realty Portfolio, Inc., 125
F.3d 292, 298 (5th Cir. 1997).

       Assuming that Trinh may act as a trustee for purposes of

§ 544(a)(3), he may only avoid the transfer to Intertex if a

hypothetical purchaser could have obtained the status of a bona

fide purchaser by buying the property from Trinh at the time of the

bankruptcy filing.     Texas state law would determine whether this

purchaser would be a bona fide purchaser.          Hamilton v. Realty

Portfolio, Inc., 125 F.3d at 298.        Under Texas law, a bona fide

purchaser is one who acquires apparent legal title to property in

good   faith   for   valuable   consideration   without   notice   of   an

infirmity in the title.    Williams v. Jennings, 755 S.W.2d 874, 881

(Tex. App. -- Houston, 1988).       The key question here is whether

there would have been notice of infirmity in the title, that is,

whether a hypothetical purchaser would have known that Intertex had

bought Trinh’s property.

       As we explained in Hamilton, to determine what notice a bona

fide purchaser of the property would have, certain knowledge

concerning title to the property is attributed to the purchaser

under the twin doctrines of constructive notice and inquiry notice.

Hamilton, 125 F.3d at 299-300.          First, under the doctrine of

constructive notice, the purchaser is assumed to have notice of any

properly recorded instrument--here, the lien of the Mission Bend

                                    5
homeowners’ association.     Id. at 299.     The doctrine of inquiry

notice, moreover, presumes that the purchaser also has notice of

facts that would be discovered by a reasonably prudent inquiry--

here, for example, whether a reasonably prudent inquiry would have

revealed that Intertex had purchased Trinh’s property.           Id.

      The facts in Hamilton are similar to those in the case before

us.   A foreclosure sale was held for property that was subject to

a properly recorded lien.1   After the sale, but before the purchase

was recorded, the former owner filed for Chapter 13 bankruptcy and

tried to void the transfer under § 544.

      Because the facts in that case are so similar, the Hamilton

panel’s legal analysis is instructive.       In determining whether a

hypothetical   purchaser   would   have   qualified   as   a    bona   fide

purchaser under Texas law, the panel attributed knowledge of the

lien to the purchaser under the constructive notice doctrine.           Id.

at 299.    Once the hypothetical purchaser had notice of the lien,

the duty was triggered to conduct a reasonable inquiry into the

status of that lien under the doctrine of inquiry.             Id. at 300.

But the Hamilton panel explained that what facts reasonably would

be gathered was a factual question.        Id. at 301.     So the panel

remanded for a determination of whether a reasonable inquiry into

       1
       In Hamilton, the lien in question was a “deed of trust.”
Generally, a “deed of trust” is a mortgage with a power to sell on
default. Successors to the Interest of Rea-Glass, Inc. v. Allied
Corp., 704 S.W.2d 387, 389 (Tex.App.--Houston 1985). That is very
much like the lien in question in the case before us.

                                   6
the    status   of    the     lien   would       have   led   to   knowledge   of    the

foreclosure sale.        Id. at 302.

       Using this same analytical framework as used by the Hamilton

panel would seem to suggest that a remand for the same type of

factual      findings    would       be   appropriate         to   determine   whether

reasonable inquiry here would have led to knowledge that Intertex

had purchased the property.

       But we need not prolong this case in this manner because the

issue is moot.          Under 11 U.S.C. § 349(b), “a dismissal of a

[bankruptcy] case. . . . reinstates . . . any transfer avoided

under section . . . 544.”                 Because the underlying Chapter 13

proceeding was dismissed and Trinh has not appealed that dismissal

in    this   court,     the   transfer     of     the   property     to   Intertex    is

unavoidable.      Even if, at one time, Trinh could have avoided the

transfer, the transfer would necessarily have been reinstated when

the court dismissed his Bankruptcy case.                  We therefore affirm the

denial of § 544 avoidance.

                                           III

                                             A

       We turn now to the attorney’s fees the bankruptcy court

required Trinh to pay under § 37.009 of the Texas Civil Practice

and Remedies Code.          Trinh argues that fees may only be awarded in

bankruptcy proceedings pursuant to 11 U.S.C. § 506, and cites three

cases in support: United States v. Ron Pair Enterprises, Inc., 489
U.S. 235, 109 S. Ct. 1026, 103 L. Ed. 2d 290 (1989); In re Gledhill,

                                             7
164 F.3d 1338 (10th Cir. 1999); and Brentwood Outpatient, Ltd. v.

Bondholder Committee, 43 F.3d 256 (6th Cir. 1994).                     He then

explains why fees are not available under § 506(b).                  But these

authorities do not limit availability of attorney’s fees to § 506;

that       is,   Trinh   cites   no   authority   for   his   proposition   that

attorney’s fees may only be awarded under § 506.2                Thus, Trinh’s

discussion of § 506 is irrelevant to the attorney’s fee question

before us because it is not the provision Intertex relied on in

seeking those fees.         He seeks fees under § 37.009.

       Trinh may have waived his best argument for denying attorney’s

fees by failing to raise it.           We have previously held that § 37.009

is a procedural rule rather than a substantive one, so that

provision is not available in federal court.             See Utica Lloyd’s of

Texas v. Mitchell, 138 F.3d 208, 210 (5th Cir. 1998)(§ 37.009 not

available in case in federal court under diversity jurisdiction).

But, as just mentioned, Trinh failed to suggest this argument in

his appeal to the district court or in his brief to this court.

       We do not hold, therefore, that fees under § 37.009 are

available in federal bankruptcy proceedings, only that Trinh has

       2
      It may be that Trinh’s contention is correct with respect to
provisions of the Bankruptcy Code, but we are reluctant to adopt
that position without supporting legal authority. In addition, the
situation is complicated by the fact that Intertex sought
attorney’s fees as part of its declaratory judgment claim based on
state law, not as part of the Bankruptcy Code. Thus, adopting
Trinh’s conclusion would also require us to rule on the
availability of fees when a state statutory provision separate from
the Code is asserted during bankruptcy proceedings. Trinh does not
even mention this complex issue.

                                          8
failed to raise the unavailability of such fees in bankruptcy

proceedings.   The order that Trinh pay Intertex’s attorney’s fees

is therefore affirmed.

                                 9
                                       B

     The final question before us is whether the bankruptcy court

had the authority to order payment of attorney’s fees from proceeds

of the foreclosure sale.    It is well established, however, that we

do not consider arguments not presented to the bankruptcy court.

Gilchrist v. Wescott, 891 F.2d 559, 561 (5th Cir. 1990).               That is

the case here.    Trinh failed to challenge the bankruptcy court’s

decision   to   order   payment   of       the   attorney’s    fees   from   the

foreclosure proceeds in bankruptcy court. For that reason, we will

not consider this issue on appeal.

                                       IV

     For these reasons, the district court decision is

                                                              A F F I R M E D.

                                       10