Court Opinion

ID: 2964676
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Date Created: 2015-09-21 21:29:22.874+00
Date Added: 2024-06-11T11:21:07.929387
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USCA1 Opinion

	

                            United States Court of Appeals
                                For the First Circuit

                                 ____________________

          No. 96-2314

                                   FRANK SIMON, II,

                                 Plaintiff, Appellee,

                                          v.

                                    GERSHON NAVON,

                                Defendant, Appellant.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                              FOR THE DISTRICT OF MAINE

                     [Hon. Morton A. Brody, U.S. District Judge]
                                            ___________________

                                 ____________________

                                        Before

                                Selya, Circuit Judge,
                                       _____________

                      Coffin and Bownes, Senior Circuit Judges.
                                         _____________________

                                 ____________________

               James D. Poliquin for appellant.
               _________________
               Philip P. Mancini for appellee.
               _________________

                                 ____________________

                                     June 2, 1997

                                 ____________________

               COFFIN,  Senior Circuit Judge.   This appeal is  a sequel to
                        ____________________

          Simon v. Navon, 71 F.3d 9 (1st Cir. 1995), in which we affirmed a
          _____    _____

          May 19,  1994 judgment for  plaintiff Simon against  Jonathan and

          Gershon Navon on a breach of contract action, reversed a judgment

          on  an abuse  of  process  claim,  and  vacated  and  remanded  a

          defamation  claim.  After the  case was returned  to the district

          court, both Navons then  being debtors in bankruptcy proceedings,

          further  action was  suspended  until the  bankruptcy cases  were

          terminated, Jonathan's by  a discharge in April  and Gershon's by

          dismissal in June of 1996.

               Subsequently, defendant Gershon Navon, on the basis of newly

          acquired information,  on September 6,  1996, filed a  motion for

          relief from the breach of contract judgment under Fed. R. Civ. P.

          60(b)(3) and (6),1 claiming that Simon had  given false testimony

          at trial and had withheld documents during discovery.

               The district  court, without  granting further  discovery or

          hearing, denied the motion for relief, ruling as follows:

                              
          ____________________

               1  In relevant part, Rules 60(b)(3) and (6) state:

                    On motion . . . the court may relieve a party . .
               . from a final judgment . . . for the following
               reasons: . . . (3) fraud . . . , misrepresentation, or
               other misconduct of an adverse party; . . . or (6) any
               other reason justifying relief from the operation of
               the judgment.  The motion shall be made within a
               reasonable time, and for reasons (1), (2), and (3) not
               more than one year after the judgment . . . .  This
               rule does not limit the power of a court to entertain
               an independent action to relieve a party from a
               judgment . . . or to set aside a judgment for fraud
               upon the court.

                                         -2-

               1.  Defendant's motion  is untimely in that it  was not
               filed within one year  following judgment of this case,
               in accordance with Rule 60(b)(3).

               2.  Even if  timely filed, the defendant has  failed to
               make  out a showing  of fraud, in  accordance with Rule
               60(b)(6).

               We  are  confronted  with  three questions.    The  first is

          whether  the court erred in  ruling that the  60(b)(3) motion was

          untimely filed, i.e., after the expiration  of the maximum period

          of  one  year.   More precisely,  we  must consider  the implicit

          ruling that the  pendency of bankruptcy proceedings  did not toll

          the running  of the  one year  period.   The  second question  is

          whether  the  court erred  in  ruling  that appellant  failed  to

          demonstrate  a 60(b)(6)  claim for  "any other  reason justifying

          relief," a claim  not subject to  a specific limitations  period.

          And finally, we address the  subset of 60(b)(6), the denial of  a

          claim asserting fraud upon the court.

               These questions turn out to raise purely legal issues, as to

          which our standard of review  is plenary.  We take the  facts "as

          the  moving party alleges, to see whether those facts, if proven,

          would warrant  relief."   Teamsters,  Chauffers Local  No. 59  v.
                                    ___________________________________

          Superline Transportation  Co., 953  F.2d 17,  18 (1st  Cir. 1992)
          _____________________________

          (citing  United States  v. Baus,  834 F.2d  1114, 1121  (1st Cir.
                   ______________________

          1987)).  We conclude that the district court did not err.

                      I. Timeliness of the Rule 60(b)(3) Filing

               The motion for relief  was filed on September 6,  1996, some

          two years, three and a half months after  the amended judgment of

                                         -3-

          May 19, 1994.   This, of course,  exceeded the maximum period  of

          one year allowed by the rule for (b)(3) claims.  

               Appellant devotes one paragraph of his brief to the argument

          that the one year period does not begin  to run from the entry of

          judgment following trial, but rather from November  27, 1995, the

          date  of our  decision  in the  prior  appeal.   This  is so,  he

          asserts, because we "substantially altered" the earlier judgment,

          and  he cites  as  support 11  Charles Alan  Wright  & Arthur  R.

          Miller, Federal Practice and Procedure,   2866, at 390-91 (2d ed.
                  ______________________________

          1995).   But  the breach  of contract  ruling, the  only judgment

          placed in  issue by the motion for relief, was not altered in any

          way.  As the Supreme Court stated in a similar context: 

               The test is a  practical one.  The question  is whether
               the .  . . court .  . . has disturbed  or revised legal
               rights and  obligations which, by [the] prior judgment,
               had been plainly and properly settled with finality.

          FTC  v. Minneapolis-Honeywell  Regulator Co.,  344 U.S.  206, 212
          ___     ____________________________________

          (1952) (timeliness  of petition  for certiorari).   The situation

          here is  legally indistinguishable from that  in Transit Casualty
                                                           ________________

          Co. v. Security Trust  Co., 441 F.2d 788, 790-91 (5th Cir. 1971),
          ___    ___________________

          where an amended judgment  merely changed a dismissal from  "with

          prejudice" to "without  prejudice," and the  court noted that  in

          the suit at  issue, "plaintiffs  stood in the  exact position  as

          they  did [after the original  order]."  See  also Gegenheimer v.
                                                   _________ ___________

          Galan, 920 F.2d 307, 309-310  (5th Cir. 1991).  This  argument is
          _____

          therefore unavailing.

               Appellant's more  labored argument focuses on  the effect of

          bankruptcy proceedings in extending time limits in non-bankruptcy

                                         -4-

          cases involving  the bankruptcy debtor.   An involuntary petition

          in  bankruptcy was filed against  Gershon Navon on  May 14, 1994,

          and was dismissed on June  11, 1996.  Appellant makes a  two-step

          argument.   He first invokes 11 U.S.C.   108(c) of the Bankruptcy

          Code, which states in part:

               [I]f applicable  nonbankruptcy law . . . fixes a period
               for commencing or continuing a civil action . . . on  a
               claim against the debtor, . . . and such period has not
               expired before the date of the filing of  the petition,
               then such period does not expire until the later of --

                    (1)  the end  of such  period, including  any
                    suspension of  such  period occurring  on  or
                    after the commencement of the case; or

                    (2)  30 days after  notice of the termination
                    or expiration of the stay under section 362 .

                    . .

               This section is  applicable, appellant  argues, because  his

          motion for relief sought to continue the civil action on  a claim

          originally filed against the debtor.  Then, relying on subsection

          (1),  he  assumes,  without   citation  of  authority,  that  the

          "suspension  of such period" was  triggered by the automatic stay

          provision  of the Bankruptcy  Code, 11 U.S.C.    362(a)(1), which

          states:

               [A bankruptcy petition] . . . operates as a stay  . . .
               of .  . . the commencement  or continuation . .  . of a
               judicial  . . . action or proceeding against the debtor
               . . . .

               Appellee  counters with  three  arguments.   He first  urges

          that,  given the  passage of  27 months  from the  date  of final

          judgment,  the district court did  not abuse its  discretion.  He

          next argues that the automatic stay of   362 is inapplicable when

                                         -5-

          a debtor in possession undertakes affirmative action for his  own

          benefit, citing  Autoskill, Inc. v. National  Educ. Support Sys.,
                           _______________    ____________________________

          994  F.2d 1476 (10th  Cir. 1993).   Finally,  he asserts  that 11

          U.S.C.   108(c) is inapplicable to actions brought by the debtor.

          Instead,  he invokes     108(a), concerning  the commencement  of

          actions by debtors,  which in  his view would  impose an  outside

          limit of two years from the May 1994 judgment.

               All  of appellee's arguments  misfire.  To  begin, the issue

          being purely  legal, abuse of  discretion is not  the appropriate

          standard of review.  Secondly, the  fact that it was the  debtor,

          rather than a creditor, who took this particular step of filing a

          motion,  does   not  alter  the   fact  that  it   constitutes  a

          "continuation" of  an "action  or proceeding against  the debtor"

          within the terms of   362.  The Ninth Circuit, in Parker v. Bain,
                                                            ______    ____

          68  F.3d   1131,  1135-36  (9th   Cir.  1995),  dealt   with  the

          applicability of   362 to an appeal by a debtor, raising the same

          issue.   It said that it  did not need to "spill  a great deal of

          ink"  on the  assertion  "that an  appeal  by the  debtor  cannot
                                                     __

          constitute the continuation of an action against the debtor."  It
                                                   _______

          observed that  seven other circuits had  rejected that rationale.

          We now make the number nine.

               Parker v. Bain  also noted  Autoskill, see 68  F.3d at  1136
               ______    ____              _________  ___

          n.8,  which had held that Bankruptcy Rule 6009, allowing a debtor

          in possession  "[w]ith or  without court approval"  to "prosecute

          any action or proceeding  in behalf of the estate,"  obviated any

          need  to obtain leave of court or release of stay before bringing

                                         -6-

          an appeal.  994 F.2d at 1486.  The Parker court was crystal clear
                                             ______

          that "Rule 6009 does  not trump the code's  automatic stay."   It

          relied on the analysis of Rule 6009's history  and purpose by the

          Bankruptcy Court in In  re Capgro Leasing Assocs., 169  B.R. 305,
                              _____________________________

          309-313 (Bankr.  E.D.N.Y.  1994), which  held  that a  debtor  in

          possession  may not proceed with  an appeal of  an action brought

          against him "absent an  order granting relief from  the automatic

          stay,"  id. at 313.   The Bankruptcy Court  concluded that, while
                  ___

          Rule 6009 means  that a trustee  (or debtor in possession)  is no

          longer required  to have  the  approval of  the bankruptcy  judge

          before deciding to commence or defend an  action on behalf of the

          estate, the bankruptcy judge retains power under section  362 "to

          decide  when to  let such  action go  forward."   Id.   The Ninth
                                                            __

          Circuit therefore parted company from Autoskill, and so do we.2
                                                _________

               As  for the applicability of    108(a), our  short answer is

          that by its terms it refers only to periods within which a debtor

          may  "commence an  action";  here, the  action  is one  that  was

          commenced against the debtor.

               But  while  appellee  has  not  come  close  to  the target,

          appellant's thrusts have also fallen short.  As we have noted, he

          has assumed that  the mere existence of an automatic stay under  

          362 triggers the "suspension" referred to in    108(c).  This may

                              
          ____________________

               2 Indeed, the court in Capgro noted that eight of the twelve
                                      ______
          circuits at that time had held that the automatic stay prevents a
          debtor from appealing the decision of a non-bankruptcy forum,
          where that action was originally commenced against the debtor. 
          169 B.R. at 310.

                                         -7-

          be a  common sense  reading,  but it  is not  the  law.   Collier
                                                                    _______

          Bankruptcy Manual setsforth the vital caveatto "such suspension":
          _________________

               Such  a  suspension may  result  from  either state  or
               federal law. . . .
                    . . .  In some jurisdictions state law may dictate
               suspension  of   a  statute   of  limitations   when  a
               bankruptcy or  another court proceeding  has stayed the
               initiation  of  an  action.     Such  suspension  would
               presumably  be  included within  the  terms of  section
               108(c),  adding  the entire  duration of  the automatic
               stay to the applicable time period. [Footnote omitted.]

                    However, absent  such a provision in  state law, a
               statute of limitations or  other deadline for an action
               against a debtor . . . is extended for only  the second
               period  set  forth in  section  108(c),  30 days  after
               notice  of  the   termination  or  expiration  of   the
               automatic stay . . . .

          Lawrence P. King, ed.,  1 Collier Bankruptcy Manual,    108.04 at
                                    _________________________

          108-14, 15 (3d ed. 1996).

               This  interpretation also  accords with  the contemporaneous

          analysis of the section in the House Report accompanying the 1977

          Bankruptcy Code revision.  After stating that subsection (c) of  

          108  extends the statute of limitations  for creditors (which, as

          we have pointed out, it also does for debtors in possession), the

          report states: 

               [I]f a creditor is stayed from commencing or continuing
               an action against the  debtor because of the bankruptcy
               case, then  the creditor is permitted  an additional 30
               days after notice  of the  event by which  the stay  is
               terminated,  whether  that  event  be  relief from  the
               automatic  stay  .   .  .  ,  [or]the  closing  of  the
               bankruptcy case (which terminates the stay) . . . .

          H.R. Rep. No. 95-595, at 318 (1977).

               The  only Maine  statute we  have found  that bears  on this

          issue  is Me.  Rev. Stat. Ann.  tit. 14,    5803,  which mandates

          continuance  of  actions for  recovery  of  a  debt  provable  in

                                         -8-

          bankruptcy during  bankruptcy proceedings, but only  "on petition

          of  .  . .  creditors before  or  after the  commencement  of the

          action."  This is of no avail to appellant.

               We have, however,  conclusive evidence of the absence of any

          suspension-extending provision of Maine  law in a recent decision

          of the Maine Supreme Judicial Court, Duprey v. Eagle Lake Water &
                                               ______    __________________

          Sewer Dist., 615 A.2d 600, 603-604 (Me. 1992).  In that case, the
          ___________

          court made  known its views  as to  the meaning of  the identical

          "any suspension" language  of 11 U.S.C.    108(b).   It chose  to

          adopt the reasoning of  the Bankruptcy Court for the  District of

          Maine that    362 "does not stay the running of any time period,"

          but  only prevents  an entity  from exercising  a power,  such as

          enforcing a judgment.  In re Thom, 95 B.R. 261, 262-63 (Bankr. D.
                                 __________

          Me. 1989).

               The  motion for relief having  been filed more  than 30 days

          after notice  of the termination of  bankruptcy proceedings,3 and

          there  having  been  no suspension  of  the  one  year period  of

          limitations,  we  hold that  the district  court  did not  err in

          declaring it untimely.

                       II. Viability of the Rule 60(b)(6) Claim

               Appellant faces  formidable hurdles  in pursuing a  60(b)(6)

          claim.  There must exist "exceptional" circumstances that justify

          "extraordinary" relief.   Valley Citizens for  a Safe Environment
                                    _______________________________________

          v. Aldridge, 969 F.2d 1315, 1317 (1st Cir. 1992).
             ________

                              
          ____________________

               3 We discuss infra at page 11 our assumption of notice.
                            _____

                                         -9-

               We  begin by  accepting for purposes  of our  legal analysis

          appellant's  summary,  in his  reply  brief,  of his  motion  for

          relief,   which   he   contends   describes   both   "exceptional

          circumstances" and a "fraud upon the court":

               For the purposes of this appeal, Simon has acknowledged
               that he  deceived not only Gershon Navon,  but also the
               judicial  system, including  both the  bankruptcy court
               and  the federal  district court,  with respect  to the
               nature  and  extent  of  his interest  in  ACI's  claim
               against Maine Coast.  Simon not only consciously failed
               to  reveal to  Gershon Navon  [a fellow  stockholder in
               Maine Coast], the creditors of Maine Coast, the Trustee
               in the Maine Coast  bankruptcy and the Bankruptcy Court
               that  he  held  100%  of the  interest  in  ACI's claim
               against Maine Coast while  professing at all times that
               his  interest was  indirect  and negligible.   He  even
               testified  at  the  trial   that  ACI  was  still  owed
               considerable sums of money, when he previously had paid
               to  ACI  the  amount owed  to  the  penny  and took  an
               assignment of ACI's claim.  No wonder Simon always took
               the position Maine  Coast had no  defense or offset  to
               ACI's claim.

               Appellant's first hurdle is  the rule of mutual exclusivity,

          that is, that a  motion under Rule 60(b)(6) "is  only appropriate

          when none of the first five subsections pertain," Cotto v. United
                                                            _____    ______

          States, 993 F.2d 274, 278 (1st Cir. 1993); see also Liljeberg  v.
          ______                                     ___ ____ _________

          Health Services  Acquisition  Corp., 486  U.S.  847, 863  &  n.11
          ___________________________________

          (1988);  Wright & Miller, supra,   2864 at 357.  One rationale of
                                    _____

          this  rule is obvious and  relevant here:   were Rule 60(b)(6) to

          allow a second out-of-time bite at the same apple, the stringent,

          finality-enforcing  limitation period  of  60(b)(1)-(3) would  be

          eviscerated.  This rule, however, does have a small escape hatch,

          in  the event  of  "extraordinary  circumstances."  Ackermann  v.
                                                              _________

          United States, 340 U.S.  193, 197-202 (1950); Cotto, 993  F.2d at
          _____________                                 _____

          278; Wright & Miller, supra,   2864 at 365.
                                _____

                                         -10-

               Here, however,  nothing which  could fall under  that rubric

          has been suggested.   The 60(b)(6) claim is one solely for deceit

          and fraud on the part  of one party toward another, with  nothing

          to distinguish it from a timely 60(b)(3) claim except that it was

          filed some two months beyond the 30 days after the termination of

          bankruptcy proceedings allowed by   108(c).

               The   circumstances   of  this   delay   demonstrate  rather

          forcefully   the   absence   of   any    special   justification.

          Commendably,  appellant's counsel  has  candidly acknowledged  by

          affidavit  that he  first learned  in December  1995 of  leads to

          information that Simon  had misled defendants, and  that over the

          next  couple  of months  he  received  documents and  information

          supportive of a motion for relief from judgment.  His reasons for

          not filing such  a motion  earlier were that  (1) he  anticipated

          that  more  information  would  be forthcoming,  and  thought  it

          "prudent  to  collect  as  much information  as  possible  before

          filing"; (2) that he considered that all activity in the case was

          stayed by the bankruptcy  proceedings of the two Navons;  and (3)

          that he had no notice of the dismissal of his client's bankruptcy

          proceedings  until late July or  early August when  he was orally

          informed by counsel for Simon.

               On this state of  the record, we must assume  that appellant

          received notice  of the  dismissal of his  involuntary bankruptcy

          case.  Bankruptcy  Rule 2002(f)  requires that the  clerk of  the

          bankruptcy court "or some  other person as the Court  may direct,

          shall give the debtor . . . notice by mail of . . . (2) dismissal

                                         -11-

          of the case .  . . ."  There  is no suggestion that this  was not

          done.

               In  effect, appellant  asks  us to  allow  a tardy  60(b)(3)

          motion to parade under the raiment of 60(b)(6), where the reasons

          for  the  tardiness lay  in  counsel's  strategic preference  and

          mistaken legal  assumption concerning the effect  of an automatic

          stay,  and  the  failure  of  communication  between  client  and

          counsel.  These are not the kind of "extraordinary circumstances"

          justifying departure  from the normal maximum  limitations period

          required by Rule 60(b)(3).

                              III.  Fraud Upon the Court

               Rule 60(b),  after delineating the  six bases  of a  motion,

          goes  on to  state that  the  power of  a  court to  set aside  a

          judgment for fraud upon the court is not limited by the rule.  It

          is an explicit recognition of the traditional inherent power of a

          court to protect its own essential functioning and integrity.  It

          is, however, a power rarely to be used. 

               We  recently had occasion to review the scope of "fraud upon

          the  court" in connection with the parallel provision of the rule

          allowing  a court to entertain an independent action to relieve a

          party from a judgment for fraud upon the court.  Geo. P. Reintjes
                                                           ________________

          Co. v. Riley Stoker Corp., 71 F.3d 44, 46-49 (1st Cir. 1995).  In
          ___    __________________

          that opinion, we  noted the  effect of Hazel-Atlas  Glass Co.  v.
                                                 ______________________

          Hartford-Empire  Co., 322  U.S.  238 (1944),  overruled on  other
          ____________________                          ___________________

          grounds, Standard Oil Co. of  Cal. v. United States, 429 U.S.  17
          __________________________________    _____________

          (1976), in expanding the  range of fraud not subject  to the one-

                                         -12-

          year limitation  to "include fraud committed by  `officers of the

          court.'"  Id.  at 47-48.   We also  characterized our concept  of
                    __

          fraud upon the court in Aoude  v. Mobil Oil Corp., 892 F.2d 1115,
                                  _____     _______________

          1118 (1st Cir. 1989), as consisting of an "`unconscionable scheme

          calculated  to  interfere  with  the  judicial  system's  ability

          impartially to adjudicate a  matter' involving an officer of  the

          court."  Reintjes,  71  F.3d  at  48  n.5.    We  noted  a  sharp
                   ________

          demarcation, saying, "In sum, perjury alone, absent allegation of

          involvement  by an  officer of  the court  . .  . has  never been

          sufficient."  Id. at 49.
                        __

               In  the  case at  bar, nothing  has  been suggested  or even

          insinuated  that takes  this  case beyond  allegations of  garden

          variety  deceit  and fraud  by  a party.    As a  matter  of law,

          appellant's  allegations do  not  rise to  the  level of  a  Rule

          60(b)(6)  claim or to fraud  upon the court.   The district court

          did not err in denying the motion for relief.

               Affirmed.
               ________

                                         -13-