IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
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No. 00–60764
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In The Matter Of: DOUBLE J OPERATING COMPANY, INC.
Debtor.
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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.
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Appeal from the United States District Court
for the Southern District of Mississippi
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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should not be published and is not precedent except under the limited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