UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
__________________
No. 98-40079
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In The Matter Of: LEO ROGER DUGAS,
Debtor.
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LEO ROGER DUGAS; VALERIE DARLENE DUGAS,
Appellants,
versus
CLARON CORPORATION; CLAMONT ENERGY CORPORATION INC, formerly
known as United States Texas Corporation Inc., formerly known
as United Texas Petroleum Inc.,
Appellees.
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Appeal from the United States District Court
for the Eastern District of Texas
(1:95-CV-1132)
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March 3, 1999
Before KING, Chief Judge, and REAVLEY and BENAVIDES, Circuit
Judges.
PER CURIAM:*
Debtors, Leo Roger Dugas and Valerie Darlene Dugas, appeal
from an order of the district court affirming the bankruptcy
court’s denial of a disgorgement motion filed by the Dugas in
their chapter 13 bankruptcy case. Unfortunately, neither of the
*
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this opinion should not be published and is not precedent except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.
appellees have assisted this Court by filing a brief responding
to the issues raised by the Dugas on appeal. Upon consideration
of the Dugas’s brief and a review of the record, we reverse the
district court and remand to the bankruptcy court for further
proceedings.
BACKGROUND
The Dugas filed a petition for relief under chapter 13 of
the Bankruptcy Code in the U.S. Bankruptcy Court for the Eastern
District of Texas, Beaumont Division, on January 10, 1994.
Nineteen months later, on August 22, 1995, the Dugas commenced
this adversary proceeding by filing a motion titled “Motion to
Disgorge Funds into the Registry of the Court” with the
bankruptcy court. The motion alleged that one of the appellees,
Claron Corporation, had improperly removed funds in which the
Dugas’s estate held an interest from the registry of the Harris
County Civil Court at Law Number 1 in Harris County, Texas. The
Dugas also alleged that the other appellee, Clamont Energy
Corporation, had failed in its responsibility to protect the
funds. The motion requested that Claron be ordered to turn over
the removed funds to the Beaumont bankruptcy court and that the
bankruptcy court take control over any similar funds remaining in
the registry of the state court.
The funds that were the subject of the Dugas’s motion were
related to a well-traveled and procedurally complex interpleader
action that had been filed in the Harris County court in December
1992. Originally styled Howell Crude Oil Co. v. JSB Petroleum,
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Inc., Cause No. 611,156, that case involved numerous parties,
including Claron and the Dugas, who claimed an ownership interest
in oil and gas leases located in Chambers County, Texas. During
the pendency of that action, the proceeds from those leases were
being deposited into the registry of the Harris County court,
awaiting the court’s determination of which party owned them.
The leases that were the subject of Howell had originally
been owned by Clamont Energy Corporation but had been transferred
to other parties shortly before Clamont was forced into
bankruptcy in 1989. As those transfers may have constituted
avoidable preferences under 11 U.S.C. § 547, however, the Clamont
bankruptcy estate still held a potential claim to the leases when
Howell was commenced. Based upon the Clamont estate’s interest,
one of the Howell defendants removed the case in May 1993 to the
U.S. Bankruptcy Court for the Southern District of Texas, Houston
Division. There, it was docketed as adversary proceeding number
93-4250 under the Clamont bankruptcy case.
Despite the Clamont estate’s interest in the oil and gas
leases, it had never been named as party to Howell. Therefore,
in June 1993, Jason Searcy, the trustee for the Clamont
bankruptcy estate, filed a complaint in the Beaumont bankruptcy
court seeking to have all of Clamont’s oil and gas lease
transfers canceled, and the accumulated proceeds turned over the
estate. Styled Searcy v. J.S.B. Petroleum, Inc., that case was
also docketed under the Clamont bankruptcy case, as adversary
proceeding number 93-1031S.
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The Clamont estate’s interest in Howell and Searcy was
short-lived. In December 1993, Jason Searcy entered into a
settlement agreement with Claron through which Claron received
all of the interest held by the Clamont estate in any of the
disputed oil leases and the interplead funds. In exchange,
Claron paid the estate $18,750. In February 1994, Howell was
transferred to the Beaumont bankruptcy court and consolidated
into Searcy. One day later, the court approved the settlement
agreement in Searcy, thereby extinguishing all of the Clamont
estate’s remaining interest in both cases.
Although the settlement agreement ceded all of the Clamont
estate’s interest in the disputed leases and funds to Claron, it
did not purport to resolve what interest Claron then held vis-à-
vis the Dugas or any of the other original parties in Howell. In
fact, because there still remained unresolved state law issues
concerning the ownership over the leases and interplead funds,
the Beaumont bankruptcy court, in May 1996, entered an order
remanding Searcy to the Harris County court where Howell had
begun four years previous.
The Dugas’s disgorgement motion that is the subject of this
case concerns the interplead oil and gas lease proceeds that were
supposed to follow Howell, and then Searcy, as it shuffled
through the string of state and federal courts. When Howell was
removed to the Houston bankruptcy court in May 1993, all of the
interplead oil and gas lease proceeds being held by the Harris
Count court, then totaling $25,866.85, were transferred from the
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registry of the Harris County court to the registry of the
Houston bankruptcy court. Those funds, supplemented by other
proceeds as they arose, traveled with the case and were
eventually transferred back to the registry of the Harris County
court in May 1996 after the order of remand. Thus, from May 1993
when the case was removed until May 1996 when it was remanded, no
more proceeds from the disputed leases should have been deposited
into the registry of the Harris County court as the entire case
was closed at the state level. The Harris County court’s docket
sheet reveals, however, that two deposits were made into its
registry during that period. Both of those payments, one for
$13,278.89 on June 3, 1993, and the other for $23,716.43 on
August 31, 1993, were made by Statewide Crude, a company that had
purchased oil under the disputed leases. Thus, a portion of the
interplead funds traveled with the case in the federal bankruptcy
courts while another portion improperly remained in the state
court registry.
Among the evidence presented to the bankruptcy court by the
Dugas were copies of a court order and a payment authorization
from the Harris County court that indicate that Claron received
part of the mistakenly deposited Statewide Crude funds from the
Harris County court in October 1994. The order, docketed under
Howell’s original state case number, 611,156, stated that it was
“on the motion of Claron Corporation” and directed the clerk of
the Harris County court to pay Claron “$23,716.43 with accrued
interest, held in the registry of the Court.” In describing the
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basis for this release of funds, the order found:
The funds held in the Registry of the County Civil Court at
Law No. 1 are the property of Claron Corporation through the
compromise and settlement agreement in Adversary Action
under Case No. 93-4250 [the Howell adversary proceeding] and
the subsequent Trustee’s Assignment of all of Clamont Energy
Corporation’s interest in and to Adversary Case No. 93-4250
and any funds on deposit in the Registry of the Court in
Adversary No. 93-4250 and all related cases to Claron
Corporation, Assignee.
The payment authorization indicates that a check for $24,658.33,
which was the $23,716.43 with accrued interest, was issued to
Claron by the registry of the Harris County court on October 14,
1994.
Although it was this removal of funds that formed the basis
of the Dugas’s disgorgement motion, that was not apparent on its
face. In the motion, the Dugas asserted that a portion of their
estate “consists of an interest in case # 611,156” and described
that case’s removal and docketing under the Clamont adversary
proceedings. Then it alleged that “Claron Corporation removed
$24,658.33 . . . under adversary 93-1031.” Finally, it requested
that the “court order Claron Corporation to disgorge the
$24,658.33 plus accrued interest back into adversary 93-1031. . .
. [and] ask[ed] the court to transfer remaining funds in Harris
County to the registry of the court in Tyler, Texas under
adversary 93-1031.” Nowhere in their motion, however, do the
Dugas indicate that the funds with which they were concerned had
been mistakenly deposited in the closed state proceeding.
During a short hearing, the bankruptcy court attempted to
elicit a coherent description of the basis for the Dugas’s
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motion. Although Mr. Dugas, representing himself pro se, was
unsuccessful in concisely explaining his argument, he did manage
to enter thirteen exhibits into evidence, including the Harris
County court documents described above. Shortly after the
hearing, the court denied the motion in a one sentence order that
found the Dugas had “totally failed to produce any evidence in
support of the Motion.”
On appeal of the bankruptcy court’s order denying the
disgorgement motion, the district court affirmed the bankruptcy
court’s ruling, but on different grounds. It found that, even if
the Dugas had a basis for their motion, it was improper for them
to have filed it in their personal chapter 13 bankruptcy case.
According to the district court, the only place that the Dugas
could properly have filed their disgorgement motion was in the
Searcy adversary proceeding under which the rights associated
with the settlement agreement could be litigated with notice to
all interested parties.
The Dugas timely appealed the district court’s decision.
DISCUSSION
In reviewing a bankruptcy court’s findings of fact and
conclusions of law, we apply the same standard of review as the
district court. See Compuadd Corp. v. Texas Instruments Inc. (In
re Compuadd Corp), 137 F.3d 880, 881 (5th Cir. 1998). Findings
of fact are reviewed for clear error and conclusions of law are
reviewed de novo. See id.
We discern from the district court’s silence as to the
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bankruptcy court’s only asserted reason for denying the Dugas’s
disgorgement motion–that the Dugas “totally failed to produce any
evidence in support of the motion”–at least a doubt, if not a
rejection, of the basis for the bankruptcy court’s ruling. It is
clear to us that the Dugas did present the bankruptcy court with
evidence relating to Claron’s removal of funds from the registry
of the Harris County court. Furthermore, based upon the facts
that the case was closed at the state level when the removal
occurred, and that the basis for the removal was a settlement
agreement that did not purport to provide Claron with undisputed
rights to the funds removed, Claron’s removal of the funds was
ostensibly improper. Although it is possible that this evidence
was not sufficient for the Dugas to have ultimately succeeded in
forcing Claron to disgorge the funds it had received, it
nonetheless did support their motion. The bankruptcy court’s
finding that the Dugas failed to produce any evidence was
erroneous.
Neither do we agree with the district court’s conclusion
that the bankruptcy court’s order can be affirmed on other
grounds. Although it may well have been more efficient for the
Dugas to have made their disgorgement motion in the Howell and
Searcy adversary proceedings, we find, contrary to the district
court’s decision, that it was also permissible for the motion to
have been made in their personal chapter 13 case.
Under the Bankruptcy Code’s automatic stay provision, 11
U.S.C. § 362(a), Claron was prohibited from commencing,
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continuing, or taking any action to obtain or impair any property
of the Dugas’s estate during the pendency of their chapter 13
case. To the extent that Claron’s removal of the funds from
Harris County court illegally impaired the Dugas’s interest to
the same funds, that removal may have constituted a violation of
the § 362(a) stay provisions. Moreover, the Dugas had standing
to bring an action for stay violations. See 11 U.S.C. § 362(h);
Pettit v. Baker, 876 F.2d 456, 457-58 (5th Cir. 1989) (finding
that § 362(h) provides a remedy for an individual injured by a
willful violation of a § 362(a) stay). Thus, because the Dugas’s
disgorgement motion constituted an action against Claron for
violating the stay, it was properly brought before the bankruptcy
court in their chapter 13 case.
The district court specifically rejected the Dugas’s
argument on appeal that their motion was a valid claim that
Claron had violated the Dugas’s chapter 13 stay. First, it found
that this argument was not before it as it had not been properly
raised in the bankruptcy court. Second, the district court found
that even if it had been raised, the Dugas’s argument lacked
merit because the automatic stay does not operate against
proceedings in the court which has jurisdiction over the
bankrupt.
We find both of the district court’s reasons for rejecting
the Dugas’s argument unavailing. As to the first reason, we find
that the Dugas did make this argument to the bankruptcy court and
that the district court should have found the argument properly
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raised. In the Dugas’s motion to the bankruptcy court, they
asserted that “a portion of the debtors’ estate consists of an
interest in” the removed Howell case. They also listed the funds
that had been interplead into that case and the funds that Claron
had removed. Although the motion did not lay out with
specificity the Dugas’s statutory basis for seeking disgorgement
of the funds removed by Claron, we find that a suit seeking
relief from acts that impair the property of a bankruptcy estate
is presumptively an action to enforce the automatic stay. On
that basis, the Dugas’s automatic stay argument was made to the
bankruptcy court and thus was properly before the district court
on appeal.
We also find unconvincing the district court’s second
argument, that Claron was not stayed from removing the funds held
by the Harris County court because § 362(a) does not stay other
proceedings in the same court that has jurisdiction over the
bankrupt. While this Court has never considered whether
proceedings before the court which has jurisdiction over the
bankrupt are exempted from the ambit of the automatic stay, even
if we were to join the courts from outside this circuit which
have so held, it would not affect our decision in this case. All
of the decisions cited by the district court merely state that
the stay does not operate against the court where the bankruptcy
case is pending. See, e.g., Civic Center Square, Inc. v. Ford
(In re Roxford Foods, Inc.), 12 F.3d 875, 878 (9th Cir. 1993)
(“‘[t]he stay does not operate against the court with
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jurisdiction over the bankrupt’” (quoting Teerlink v. Lambert (In
re Teerlink Ranch Ltd.), 886 F.2d 1233, 1237 (9th Cir. 1989)));
In re Redburn, 193 B.R. 249, 260 n.17 (W.D.Mich. 1996) (citing
cases for the proposition that “the creditor is not prohibited
[by the automatic stay] from commencing or continuing actions in
the bankruptcy court in which the bankruptcy is pending”). Here,
the issue was whether the stay was violated when the Harris
County court, a court unconnected to the bankruptcy court where
the Dugas’s case was pending, released funds to Claron. That the
state court professed to release those funds on the basis of
terms in a settlement agreement approved by the same bankruptcy
court with jurisdiction over the Dugas does not exempt the state
court or Claron from the reaches of the stay in the Dugas’s
bankruptcy case. We are moreover troubled that these funds were
released to Claron given that neither the settlement agreement
nor any other determination of the bankruptcy court appeared to
extinguish or resolve the Dugas’s claimed interest to the same
funds.
We thus find that it was an error for the bankruptcy court
to have failed to reach the merits of the Dugas’s disgorgement
motion. We remand to the bankruptcy court for further
proceedings consistent with this decision.
REVERSED and REMANDED.
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