Court Opinion

ID: 3064151
Source: CourtListenerOpinion
Date Created: 2015-10-14 21:20:59.60848+00
Date Added: 2024-06-11T11:49:38.640179
License: Public Domain

[DO NOT PUBLISH]

            IN THE UNITED STATES COURT OF APPEALS
                                                                  FILED
                   FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
                     ________________________ ELEVENTH CIRCUIT
                                                           JAN 15, 2009
                            No. 08-11228                 THOMAS K. KAHN
                        Non-Argument Calendar                CLERK
                      ________________________

                  D. C. Docket No. 07-60893-CV-ASG
                     BKCY No. 06-14202 BKC-JK

IN RE: BRUCE DONALD MACNEAL,

                                                              Debtor.
__________________________________________________

BRUCE DONALD MACNEAL,
JAMES A. BONFIGLIO,
SHERRI B. SIMPSON,

                                                        Plaintiffs-Appellants,

                                 versus

EQUINAMICS, CORP.,

                                                         Defendant-Appellee.

                      ________________________

               Appeal from the United States District Court
                   for the Southern District of Florida
                     _________________________

                           (January 15, 2009)
Before CARNES, WILSON and PRYOR, Circuit Judges.

PER CURIAM:

      Bruce MacNeal and his attorneys, Sherri Simpson and James Bonfiglio,

appeal the denial of relief from orders of the bankruptcy court. The district court

dismissed as moot MacNeal’s appeal from an order in an adversary proceeding and

affirmed the sanction against MacNeal and his attorneys for discovery abuses. We

affirm.

                                I. BACKGROUND

      To understand the context of this appeal, we review three matters. First, we

address MacNeal’s adversary proceeding. Second, we address the sanction in the

adversary proceeding. Third, we address the appeals to the district court.

      A. MacNeal’s Bankruptcy and Adversary Proceedings

      In September 2006, one month after MacNeal filed a bankruptcy petition

under Chapter 13, he filed an adversary complaint against Equinamics Corporation.

MacNeal complained that the company had violated the federal Truth In Lending

Act and Florida usury law in conjunction with a loan made by Equinamics to

MacNeal and secured by MacNeal’s home. MacNeal alleged that the claims under

the Truth In Lending Act against Equinamics qualified for the Florida homestead

exemption because he sought “rescission and damages for the transaction

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[involving] homestead property.” MacNeal listed the claims as exempt from the

bankruptcy estate on his schedule of property and as non-exempt personal property

on a separate schedule. Equinamics objected and argued that the claims did not

qualify for the homestead exemption and any alleged damages would be exempt

only as personal property.

      MacNeal amended both schedules to reflect that the claims were exempt

under the homestead exemption. MacNeal explained that he sought as relief

rescission, recoupment, and damages, and that his challenge to the loan had not

ripened when he filed for bankruptcy because he had not given notice of his intent

to rescind the loan. MacNeal later converted to a Chapter 7 bankruptcy.

Equinamics and the bankruptcy trustee objected to the amended schedules and

argued that the claims were non-exempt assets of the bankruptcy estate.

      On March 22, 2007, the bankruptcy court sustained the objections. The

court concluded that the claims under the Truth in Lending Act were “independent

rights under federal law” and could not “be subsumed into MacNeal’s homestead

rights arising under state law.” The court stated that MacNeal had never sought to

exempt the claims as personal property probably because “the maximum litigation

recovery he could retain as exempt would be $250.” The court did not address

MacNeal’s argument that the claims were exempt as post-petition assets. The court

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concluded that the claims were “property of the estate subject to administration by

the Trustee” and instructed the trustee to “substitute herself as the sole party

plaintiff” in the adversary proceeding.

      The trustee moved to settle the adversary proceeding and sell the claims to

Equinamics. The written agreement between the trustee and Equinamics provided

that each party would assume their “respective attorneys’ fees, costs and expenses

incurred in the prosecution or defense of this adversary proceeding[.]” After a

hearing, the bankruptcy court granted the motion in July 2007 and approved the

settlement and sale. The court found that the sale had been made with sufficient

notice, in good faith, and was in the best interest of the bankruptcy estate; the

trustee had made a “fair, open, and reasonable” sale, 11 U.S.C. § 363(b); and

Equinamics was a purchaser in good faith, 11 U.S.C. § 363(m). After the trustee

stipulated to a voluntary dismissal of the adversary proceeding, the bankruptcy

court dismissed the action with prejudice and ordered the parties to assume their

own costs “[o]ther than fees and costs awarded pursuant to pending motions and

orders awarding sanctions in this action[.]”

      B. Sanction Imposed During the Adversary Proceeding

      While the parties were litigating whether the claims were included in the

bankruptcy estate, the bankruptcy court addressed a discovery dispute. Thirty-five

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days after Equinamics served its interrogatories and requests for production, it

moved to compel MacNeal to respond and alleged that MacNeal was engaging in

“gamesmanship” that would require Equinamics to complete MacNeal’s deposition

after it received the requested documents. In a supplement to the motion,

Equinamics requested the bankruptcy court sanction MacNeal and his counsel for

the costs and expenses of the motion and a second deposition. Equinamics argued

that MacNeal had received notice of his deposition and offered in support of the

argument the following documents: notice for the depositions of MacNeal and his

wife transmitted by facsimile; emails from the MacNeals stating that they were

available on the scheduled dates; and a letter sent by U.S. mail that enclosed the

deposition notices. Equinamics also argued that MacNeal had abused the

discovery process and offered in support of the argument a series of emails

exchanged between it and MacNeal’s counsel, Bonfiglio, on January 29, 2007. In

those emails, Equinamics asked why MacNeal and his counsel did not attend his

deposition and inquired if McNeal’s wife would appear for her deposition;

Bonfiglio responded that he did not schedule the depositions because Equinamics

did not provide formal notice or file a notice with the court and that he did not

represent and would not advise MacNeal’s wife regarding her deposition;

Equinamics replied that the MacNeals had been “served, on multiple times and

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occasions, with notice”; and Bonfiglio responded that there was a difference

between a “notice” and “notice of taking deposition.”

      At a hearing on the parties’ motions to extend time to respond to discovery

requests, the bankruptcy court addressed Equinamics’s motions to compel. The

court stated that there were “credibility issues” regarding Bonfiglio’s argument that

he had not received the notice of taking deposition. Bonfiglio stated that, although

it was “probably a technicality,” he did not represent MacNeal’s wife and “had

nothing to do with” her failure to appear. Bonfiglio attempted to excuse

MacNeal’s failure to appear on grounds that Equinamics sought to depose

MacNeal before he obtained discovery and that, when Equinamics failed to file a

notice of taking deposition with the court, MacNeal’s testimony would be

voluntary and he could not assert a Fifth Amendment privilege. Bonfiglio gave

equivocal answers when asked if Equinamics had given notice of taking

MacNeal’s deposition by fax, email, and mail.

      The bankruptcy court found that Equinamics “served” a notice of taking

deposition and that MacNeal had failed to appear at counsel’s behest. Bonfiglio

apologized to the court and counsel for Equinamics. When asked why the court

should not impose a sanction of costs and attorney’s fees for the deposition,

Bonfiglio responded, “If that’s the Court’s finding, then it should probably be the

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appropriate award.” The bankruptcy court granted Equinamics’s motions to

compel and awarded Equinamics the fees and costs incurred for the depositions

and the motions. The court gave MacNeal and counsel three days after Equinamics

filed its affidavit of fees and costs to object to the ruling, but they did not object.

       MacNeal and his counsel later moved for rehearing. MacNeal and his

counsel challenged the decision to impose the sanction and the amount of expenses

sought by Equinamics. The bankruptcy court refused to reconsider the sanction

because MacNeal and his counsel were “merely attempting to reargue matters,”

which was not a valid ground for relief under Federal Rule of Civil Procedure

59(e). The court found reasonable the fees and expenses requested by Equinamics

and imposed a sanction of $14,352.90.

       C. Proceedings in the District Court

       MacNeal and his counsel appealed separately the order that the claims were

not exempt from the bankruptcy estate and the award of sanctions. As to the

exemption, MacNeal argued that the bankruptcy court lacked jurisdiction over the

claims because they qualified for the homestead exemption and were excluded

from the bankruptcy estate. As to the sanction, MacNeal and his counsel

challenged the factual findings of the bankruptcy court and argued that the award

was excessive.

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      The district court consolidated the two appeals. The district court dismissed

as moot the appeal of the order about the homestead exemption because MacNeal

had not sought a stay or appealed the sale of the claims and he was barred from

challenging the validity of the sale under section 363(m). The district court also

affirmed the sanction against MacNeal and his counsel.

                          II. STANDARDS OF REVIEW

      “[A]s [the] second court of review,” we “examine[] independently the

factual and legal determinations of the bankruptcy court and employ[] the same

standard of review as the district court.” In re Optical Techologies, Inc., 425 F.3d

1294, 1299–1300 (11th Cir. 2005). We review de novo the legal conclusions of

the bankruptcy court and examine its factual findings for clear error. Id. We also

review de novo issues of subject-matter jurisdiction. AT&T Mobility, LLC v.

Nat’l Ass’n for Stock Car Auto Racing, Inc., 494 F.3d 1356, 1359–60 (11th Cir.

2007). We review the award of sanctions for abuse of discretion. Mutual Serv.

Ins. Co. v. Frit Indus., Inc., 358 F.3d 1312, 1326 (11th Cir. 2004).

                                 III. DISCUSSION

      This appeal raises three issues for our consideration. First, we consider

MacNeal’s argument that the district court erred when it dismissed as moot his

appeal of the order that denied his homestead exemption. Second, we consider

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whether we have jurisdiction to review the award of sanction by the bankruptcy

court. Third, we consider whether the bankruptcy court abused its discretion when

it awarded the sanction against MacNeal and his counsel.

      A. MacNeal’s Appeal About the Exemption of His Claims Is Moot.

      MacNeal contends that his claims under the Truth in Lending Act qualify for

the homestead exemption and he can challenge the treatment of the claims by the

bankruptcy court. MacNeal argues that Equinamics had acquired an interest in a

“consumer credit transaction,” 11 U.S.C. § 363(o), when it purchased the claims

from the trustee and the purchase is not barred from review under section 363(m).

MacNeal argues that the claims relate to his homestead and were defenses to

Equinamics’s claims against his homestead and, if he were to prevail on his Truth

In Lending Act claims, he would be entitled to rescission, profits from the sale of

his home, and related damages, all of which would be exempt from the bankruptcy

estate. We disagree.

      MacNeal’s appeal is moot. A trustee has authority to sell property of the

bankruptcy estate, 11 U.S.C. § 363(b), and after a sale is approved by the

bankruptcy court and consummated by the parties, the sale may not be invalidated

unless it is stayed pending appeal, id. § 363(m). The district court could not give

MacNeal meaningful relief from the judgment. Soliman v. United States ex rel.

                                          9
INS, 296 F.3d 1237, 1242 (11th Cir. 2002). MacNeal did not obtain a stay of the

sale of his claims, and his arguments that Equinamics is not a bona fide purchaser

and that the claims are not part of the bankruptcy estate challenge the validity of

the sale. “Because [section 363(m)] prevents an appellate court from granting

effective relief if a sale is not stayed, the failure to obtain a stay render[ed]

[McNeal’s] appeal moot.” In re The Charter Co., 829 F.2d 1054, 1056 (11th Cir.

1987).

         Section 363(o) does not provide MacNeal relief. Section 363(o) provides

that the purchaser of “any interest in a consumer credit transaction that is subject to

the Truth in Lending Act or any interest in a consumer credit contract . . . shall

remain subject to all claims and defenses that are related to” the asset. 11 U.S.C. §

363(o). Because Equinamics purchased MacNeal’s claims under the Act, not an

interest in the underlying credit transaction, the exception provided in section

363(o) does not apply to the sale. We affirm the dismissal as moot of MacNeal’s

appeal of the order about his purported exemption.

         B. We Have Jurisdiction to Consider the Sanction.

         Although a district court has jurisdiction over appeals from interlocutory

orders of a bankruptcy court, we have jurisdiction over final orders and judgments

of a district court sitting in review of a bankruptcy court. 28 U.S.C. § 158(a), (d);

                                            10
Lockwood v. Snookies, Inc. (In re F.D.R. Hickory House, Inc.), 60 F.3d 724, 725

(11th Cir. 1995). In general, “orders imposing sanctions for abuses of discovery

are not appealable until after final judgment except under limited circumstances.”

Robinson v. Tanner, 798 F.2d 1378, 1380 (11th Cir. 1986). Among the exceptions

is the circumstance in which “the sanction was against a non-party who might not

be able to obtain review from a final judgment.” Id. at 1381.

      MacNeal could not appeal the final judgment that dismissed the adversary

proceeding. MacNeal was not a “person aggrieved” because he has no direct

financial stake in the resolution of the claims that belonged to the bankruptcy estate

after the bankruptcy trustee was substituted as the proper party plaintiff. In re

Westwood Cmty. Two Ass’n, Inc., 293 F.3d 1332, 1335 (11th Cir. 2002). Because

MacNeal did not have standing to appeal the final disposition of the adversary

proceeding, the order that imposed a sanction was immediately appealable and we

have jurisdiction to review that judgment.

      C. The Sanction Is Not An Abuse of Discretion.

      MacNeal and his counsel argue that the settlement agreement between

Equinamics and the bankruptcy trustee waived the sanction, but this argument

fails. The settlement agreement stated that Equinamics purchased MacNeal’s

claims to settle “all claims referenced below,” which were pre-petition issues that

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could have been brought against Equinamics. Use of the language “all claims” did

not apply to the post-petition motion for sanctions and did not preclude the

sanction by the bankruptcy court.

      MacNeal and his counsel also complain that the district court should have

reversed the sanction because they did not receive “proper due process,” but we

disagree. A party receives due process if the court holds a hearing “at which both

sides are entitled to present arguments as to the propriety and the type of sanctions

to be awarded.” Pesaplastic, C.A. v. Cincinnati Milacron Co., 799 F.2d 1510, 1522

(11th Cir. 1986). We have held that the “adequacy of notice and hearing . . . turns,

to a considerable extent, on the knowledge which the circumstances show [the]

party . . . [knows about] the consequences of his own conduct.” Carlucci v. Piper

Aircraft Corp., Inc., 775 F.2d 1440, 1452 (11th Cir. 1985). MacNeal and his

counsel were aware of the basis for sanction and were afforded a hearing.

Although he was given the opportunity to object to the sanction, MacNeal and his

counsel declined to do so. The bankruptcy court did not clearly err by finding that

MacNeal and his counsel were served with notice and failed to appear without

good cause. The bankruptcy court did not abuse its discretion when it awarded the

sanction.

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                              IV. CONCLUSION

      We AFFIRM the order of the district court that dismissed as moot

MacNeal’s appeal about the exemption of his claims, and we AFFIRM the order

of the bankruptcy court that imposed sanctions against MacNeal and his counsel.

      AFFIRMED.

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