Court Opinion

ID: 9963649
Source: CourtListenerOpinion
Date Created: 2024-04-26 00:00:50.513351+00
Date Added: 2024-06-11T08:24:55.401937
License: Public Domain

Case: 23-50288           Document: 51-1         Page: 1      Date Filed: 04/25/2024

          United States Court of Appeals
               for the Fifth Circuit
                                  ____________
                                                                            United States Court of Appeals
                                                                                     Fifth Circuit
                                   No. 23-50288
                                  ____________                                      FILED
                                                                               April 25, 2024
In the Matter of Salubrio, L.L.C.,                                            Lyle W. Cayce
                                                                                   Clerk
                                                                                   Debtor,

Douglas K. Smith, Creditor,

                                                                             Appellant,

                                         versus

Eric Terry, Trustee,

                                                                                  Appellee.
                  ______________________________

                  Appeal from the United States District Court
                       for the Western District of Texas
                           USDC No. 5:20-CV-1437
                  ______________________________

Before Smith, Haynes, and Douglas, Circuit Judges.
Per Curiam: *
      Appellant Dr. Douglas Smith sought to prevent Eric Terry, a Chapter
7 bankruptcy trustee, from liquidating certain medical accounts receivable
held in a bankruptcy estate. For years, Dr. Smith has claimed that the

      _____________________
      *
          This opinion is not designated for publication. See 5th Cir. R. 47.5.
Case: 23-50288         Document: 51-1     Page: 2   Date Filed: 04/25/2024

                                 No. 23-50288

accounts are his personal property. Despite his tenacious advocacy, however,
Dr. Smith has yet to find success in any legal forum. Indeed, the bankruptcy
court has routinely overruled his objections and dismissed several of his
lawsuits. For our part, we have affirmed two of those dismissals on appeal.
See, e.g., In re Smith, No. 22-50999, 2023 WL 4992835, at *1 (5th Cir. Aug.
4, 2023); In re Salubrio, L.L.C., No. 22-50453, 2023 WL 3143686, at *4 (5th
Cir. Apr. 28, 2023). In this most recent attempt to stymie the trustee’s
liquidation efforts, Dr. Smith filed an adversary proceeding, asserting
fraudulent conveyance claims under the Bankruptcy Code and Texas law. He
specifically alleged that Mr. Terry was not receiving full value when
recovering payments from unpaid medical bills. According to Dr. Smith,
these bill reductions represented “gifts” from the bankruptcy estate
“without any equitable value return.” To remedy that perceived inequity,
Dr. Smith sought an injunction to prevent the trustee from taking further
action.
          In response to those allegations, Mr. Terry moved to enforce the
automatic stay, dismiss Dr. Smith’s proceeding, hold Dr. Smith in contempt,
and enjoin Dr. Smith from filing further litigation without court approval.
The bankruptcy court found these arguments convincing; it agreed that the
adversary proceeding violated the automatic stay because Dr. Smith sought
“to appropriate or enforce rights which are owned by the Trustee as the
representative of the bankruptcy estate.” And because Dr. Smith “lacked
standing to pursue [the fraudulent conveyance] causes of action,” the
bankruptcy court granted Mr. Terry’s motion and dismissed Dr. Smith’s
complaint. Although the court did not sanction Dr. Smith for the stay
violation, it issued a “gatekeeper order.” The order required court approval
before Dr. Smith could file any future litigation against the individuals and
entities involved in the main bankruptcy proceeding. Dissatisfied, Dr. Smith

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 Case: 23-50288          Document: 51-1          Page: 3      Date Filed: 04/25/2024

                                      No. 23-50288

appealed to the district court. But again, he was unsuccessful: The district
court affirmed the bankruptcy ruling in all respects.
        Dr. Smith now seeks additional review from this court. In this second
appeal, Dr. Smith does not dispute whether his complaint raises allegations
under 11 U.S.C. § 548 or the Texas Uniform Fraudulent Transfer Act, see
Tex. Bus. & Comm. Code § 24.001. Nor does Dr. Smith claim that he
has the authority to raise such allegations against the trustee. That is perhaps
for good reason, for both legal claims exclusively belong to the debtor’s
estate, and only the Chapter 7 trustee has standing to pursue them. See 11
U.S.C. § 548(a)(1) (“The trustee may avoid any transfer . . . of an interest of
the debtor in property, or any obligation . . . incurred by the debtor.”
(emphasis added)); In re MortgageAmerica Corp., 714 F.2d 1266, 1275 (5th
Cir. 1983) (“An action under the Fraudulent Transfers Act is essentially one
for property that properly belongs to the debtor and which the debtor has
fraudulently transferred in an effort to put it out of the reach of creditors.”).
        What Dr. Smith requests instead is that we overlook the express
language in his complaint and interpret his adversary proceeding as one
pursuing different relief altogether. 1 In Dr. Smith’s telling, he owns the
medical accounts tied up in the estate, and he filed this action to determine
his property rights. Even if true, however, Dr. Smith is judicially estopped
from claiming ownership of the accounts. Indeed, the district court said as
much two years ago when addressing an appeal of another adversary
proceeding filed by Dr. Smith. In affirming the bankruptcy ruling there, the
district court was unequivocal: “Dr. Smith is judicially estopped from

        _____________________
        1
          Although Dr. Smith also argues that an adversary proceeding does not violate the
automatic stay, he raises that claim for the first time on appeal. Consequently, we will not
address it. See Ray v. Comm’r of Internal Revenue, 13 F.4th 467, 476 (5th Cir. 2021) (“An
argument not raised before the trial court cannot be raised for the first time on appeal.”).

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 Case: 23-50288           Document: 51-1           Page: 4       Date Filed: 04/25/2024

                                        No. 23-50288

claiming that the accounts receivable at issue in his Complaint are his
personal property, and not the property of the bankruptcy estate.” In re
Smith, No. 21-CV-1135-XR, 2022 WL 16825195, at *4 (W.D. Tex. Nov. 2,
2022), aff’d, In re Smith, 2023 WL 4992835 at *1 (per curiam). In so holding,
the court reasoned that Dr. Smith previously listed the medical accounts as
the debtor’s property under penalty of perjury. So his position that he, rather
than the debtor, now owned such property was “clearly inconsistent” with
his prior representations. The same logic applies here to bar Dr. Smith’s
ownership claims to the extent he raises them. In re Coastal Plains, Inc., 179
F.3d 197, 205 (5th Cir. 1999).
        Without the authority to raise his fraudulent transfer or ownership
allegations, Dr. Smith is unable to pursue this adversary proceeding, and this
court will not address the merits of his claims. While it is true that pro se
“pleadings are . . . construed liberally,” Sama v. Hannigan, 669 F.3d 585, 599
(5th Cir. 2012) (citing Perez v. United States, 312 F.3d 191, 194–95 (5th Cir.
2002)), no degree of judicial leniency could conjure up a viable legal claim in
Dr. Smith’s complaint. We affirm the dismissal on this basis alone.
        Finally, we turn to the gatekeeping order. On appeal, Dr. Smith
characterizes it as an improper injunction, arguing that it was an “extreme
measure[]” of punishment handed down without proper procedure.
Although the order was requested by motion, Dr. Smith said the district court
erred in issuing it without mandating a separate adversary proceeding. Dr.
Smith’s argument is likely waived. 2 Even if it was not, his contention is

        _____________________
        2  Indeed, Smith did not make this specific procedural argument before the
bankruptcy court or district court on his first appeal. He argued instead that the gatekeeping
order was too broad. But Dr. Smith did not address that allegation in his briefing before this
court, so he forfeits it. See Vernon Smith v. Sch. Bd. of Concordia Par., 88 F.4th 588, 594 (5th
Cir. 2023) (a party forfeits an argument on appeal by “failing to cite the provisions at issue

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                                   No. 23-50288

meritless. The Code grants bankruptcy courts significant discretionary
power to manage their docket. See 11 U.S.C. § 105 (giving bankruptcy courts
the authority to “issue any order, process, or judgment that is necessary or
appropriate to carry out” the Code’s provisions). And in exercising such
authority, it is well established that “bankruptcy courts can perform a
gatekeeping function.” In re Highland Cap. Mgmt., L.P., 48 F.4th 419, 439
(5th Cir. 2022).

       Considering that Dr. Smith continues to file procedurally improper
and frivolous filings, the gatekeeping order here is an appropriate exercise of
the bankruptcy court’s inherent power to interpret and enforce its orders. See
11 U.S.C. § 105. To be clear, the order here does not permanently enjoin
litigation; it simply requires Dr. Smith to seek leave before bringing claims
against the trustee, trustee’s counsel, and other named parties. For these
reasons and those above, we AFFIRM.

       _____________________
in the opening brief and ‘explain why the [district] court was wrong about what those
provisions permit’” (quoting SEC v. Hallam, 42 F.4th 316, 326–27 (5th Cir. 2022)).

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