Court Opinion

ID: 27597
Source: CourtListenerOpinion
Date Created: 2010-04-25 09:10:15+00
Date Added: 2024-06-11T09:02:51.510819
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS

                           FOR THE FIFTH CIRCUIT

                    ________________________________

                              No. 00–60764
                    ________________________________

In The Matter Of: DOUBLE J OPERATING COMPANY, INC.

                                                  Debtor.

- - - - - - - - - - - - - - - - - - - -

DOUBLE J OPERATING COMPANY, INC. &
JOHN B. ECHOLS,
                                                  Appellants,

                                     versus

MARY MAUDE BIRMINGHAM NICHOLS &
MARY ASHLEY NICHOLS, Executrixes of the Estate
of Robert G. Nichols, Jr. & FIDELITY AND DEPOSIT
COMPANY OF MARYLAND,
                                        Appellees.

                    ________________________________

             Appeal from the United States District Court
               for the Southern District of Mississippi
                   ________________________________

                                 May 13, 2002

Before HIGGINBOTHAM and EMILIO M. GARZA, Circuit Judges, and DOWD,
District Judge.*

     *
         District Judge of the Northern District of Ohio, sitting by designation.

                                        1
PER CURIAM:**

      Appellants Double J Operating Company and John B. Echols

(collectively the "Appellants") appealed an order of the Bankruptcy

Court for the Southern District of Mississippi denying their motion

to reopen the bankruptcy case in order to bring an adversarial

proceeding against the trustee and his surety on the trustee's bond

pursuant to Federal Rule of Bankruptcy Procedure 2010(b).                    The

district court affirmed the bankruptcy court’s decision, and an

appeal to this court followed.1              We REVERSE and REMAND with

instructions.

      The bankruptcy and district court focused on the necessity of

the motion to reopen in order for Appellants to file their proposed

action against the trustee and his surety.               In particular, the

bankruptcy court’s order provided:

           For the reasons expressed orally in open Court
      following the conclusion of the hearing, including the
      Court’s findings that:

      **
         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should not be published and is not precedent except under the limited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.
      1
         The district court’s opinion concluded as follows:
            For the foregoing reasons, this Court finds that the
      bankruptcy court correctly concluded that the debtor’s motion to
      reopen was unnecessary; thus, the bankruptcy judge did not abuse his
      discretion in denying the debtor’s motion to reopen its bankruptcy
      case. Accordingly,
            IT IS HEREBY ORDERED that the appellants’s [sic] appeal is
      without merit and is hereby dismissed with prejudice.
(emphasis added). Sitting as a court of appeal, the district court should have
affirmed the bankruptcy court’s decision. When a court of appeal affirms a lower
court’s decision, the court of appeal affirms that the judgment of the lower
court is correct and should stand. Although a dismissal of an appeal acts as a
confirmation of the judgment below, it suggests that the merits of the appeal
were not considered.

                                       2
           1) the Motion to Reopen the Bankruptcy Case was
      filed unnecessarily as leave of the bankruptcy court is
      not required to file a lawsuit against the trustee,
           2) no benefit would be derived from reopening the
      bankruptcy case as the Court could not afford the
      substantive relief requested by plaintiff because the
      two-year statute of limitations period for filing suit
      against the trustee began to run on March 7, 1994, and
      thereby expired on March 7, 1996, and
           3) the plaintiffs’ allegation that their Complaint
      was "filed" on July 21, 1995, when it was submitted to
      the Court as an Exhibit to the Motion to Reopen
      Bankruptcy Case is unpersuasive,
      the Court finds that the Motion to Reopen Bankruptcy Case
      is not well taken and should be denied.2

On appeal, the district court reviewed the bankruptcy court’s

decision denying Appellants’ motion to reopen for an abuse of

discretion.      The district court correctly stated the law with

regard to this standard of review, as the decision to reopen a

bankruptcy     case    is   committed       to    the   sound   discretion   of    the

bankruptcy     judge    and   will    not       be   overturned   absent   abuse    of

discretion.3    Well and good, but, in concluding that the motion to

reopen was not necessary, the bankruptcy court did not address the

merits of the motion to reopen or discuss factors often considered

with motions to reopen.4             Indeed, the bankruptcy court was not

      2
          Although the bankruptcy court expressed its reasons for denying
Appellants’ motion in open court following a hearing, no record was made of that
hearing. Accordingly, all the district court had to rely upon in reviewing the
bankruptcy court’s decision was this two-page order.
      3
         See Faden v. Ins. Co. of N. Am. (In re Faden), 96 F.3d 792, 796 (5th
Cir. 1996).
      4
         See, e.g., Batstone v. Emmerling (In re Emmerling), 223 B.R. 860, 864–69
(B.A.P. 2d Cir. 1997) (stating various factors to be considered, including the
delay between the closing of the case and the motion to reopen, whether reopening
a case would prejudice the adversary, and other equitable concerns).

                                            3
called upon to exercise its discretion at all, because it decided

that the motion to reopen was unnecessary as a matter of law

because leave to file was not required to proceed with a suit on

the bond.

     This conclusion misses the point of the decision required by

the motion that was filed--a motion to reopen, which 11 U.S.C. §

350(b) allows Appellants to file. The question of whether leave to

file was required or even whether Appellants could seek to recover

on the trustee's bond outside of an adversary proceeding on the

trustee's bond pursuant to Rule 2010(b) was not the question before

the bankruptcy court or the district court nor the question before

this court. The question presented is whether Appellants should be

allowed to proceed as they wished.

     The    bankruptcy   court's   consideration        of    the   utility   of

reopening     never   moved    beyond       the   threshold    decision   that

Appellants' proposed suit on the bond was time-barred. Pursuant to

11 U.S.C. § 322(d), a proceeding to recover on a trustee’s bond

must be commenced within two years after the trustee has been

discharged.      Appellants,    however,      argue   that    the   statute   of

limitations should have been tolled with the filing of their motion

to reopen, which attached, as an exhibit, their complaint against

the trustee and his surety on the trustee’s bond.

     The district court did not review the issue of whether the

bankruptcy court erred in finding that the statute of limitations

for Appellants’ suit against the trustee had run.                   Appellants,

                                        4
however, saved this issue for appeal by raising it before the

district    court.        The   questions     of   whether      the   statute    of

limitations had run and whether equitable tolling applies to the

undisputed facts of this case present questions of law for the

court.     Although this court could properly review the bankruptcy

court’s conclusion that the statute of limitations had run, we are

of the opinion that this issue should be remanded for the district

court to determine.

     The district court should consider the following procedural

history of this case.       Appellants filed their motion to reopen on

July 21, 1995, and attached to this motion was their complaint

against the trustee and his surety on the trustee’s bond.                 Through

numerous discovery delays, due, in part, to the trustee’s illness,

discovery was not complete until November 5, 1997.                Subsequently,

the trustee died, and a suggestion of death was filed on April 14,

1998.    Nothing appears on the docket of the bankruptcy case until

October 8, 1998 when another suggestion of death was filed.                      On

November    30,   1998,    Appellants       then   moved   to    substitute     the

Executrixes of the trustee’s estate as the proper parties.                      This

motion was granted, and the case remained stagnant until December

of 1998 when Appellees moved for a hearing on the motion to reopen.

While we agree that the plaintiff bears some responsibility to keep

a case progressing, the district court should consider whether the

bankruptcy court should have initiated action, whether in the form

of holding a conference or scheduling the motion for hearing.

                                        5
      In sum, that reopening of the bankruptcy case was not the sole

avenue for the suit does not answer Appellants' motion to reopen.

Regardless of whether leave was required, Appellants sought to

bring suit against the trustee and his surety as an adversary

proceeding in an open bankruptcy case. That objective is supported

by practical considerations such as the necessity of reconstructing

the bankruptcy proceeding in order to prove Appellants' breach of

fiduciary obligations claim.

      Whether the statute of limitations had run and whether the

doctrine of equitable tolling applies to the facts of this case are

for   the   district    court   to   resolve.    If    the   district   court

determines    that     Appellants'   proposed   suit   is    not   barred    by

limitations, the district court should remand in turn to allow the

bankruptcy    court    to   decide   whether,   in   the   exercise   of    its

discretion, it should reopen the bankruptcy case.            Accordingly, we

reverse the decision of the district court affirming the bankruptcy

court's denial of the motion to reopen.

      REVERSED AND REMANDED.

                                       6