Chorney v. Weingarten

Opinion

USCA1 Opinion

September 23, 1993    [NOT FOR PUBLICATION]

                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                 ___________________

No. 93-1094

HAROLD F. CHORNEY,

                                      Appellant,

                                          v.

                             MICHAEL WEINGARTEN, ET AL.,

                                      Appellees.

__________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                           FOR THE DISTRICT OF RHODE ISLAND

[Hon. Ernest C. Torres, U.S. District Judge]
                                             ___________________

                                 ___________________

                                        Before

                                 Breyer, Chief Judge,
                                         ___________
                          Selya and Boudin, Circuit Judges.
                                            ______________

                                 ___________________

               Harold F. Chorney on brief pro se.
               _________________
               Edward J. Bertozzi, Jr.  and Edwards & Angell, on  brief for
               ______________________       ________________
          appellee John F. Cullen, Trustee.

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                                  __________________

Per  Curiam.    Harold  F. Chorney  challenges  the
                      ___________

            district court's  affirmance of  a bankruptcy court  order of

            July  2,   1992,  finding  him   in  civil  contempt   for  a

            "continuous,  deliberate,  and unjustified  interference with

            the orderly  progress of this bankruptcy  case," and ordering

            him  to  pay  $200,000  compensation  to  the  trustee.    We

            affirm.1

                      The  bankruptcy proceeding  from which  the instant

            appeal arises has  a long  and tangled history.   The  docket

            entries alone consume almost  79 pages as of the  date of the

            contempt  order challenged here.  On this appeal we have been

            provided with a partial record consisting primarily of select

            materials  generated  in  1991   and  1992.    The  following

            background  facts are  culled  from  three earlier  published

            opinions of the courts  below.  In re Cumberland  Inv. Corp.,
                                            ____________________________

            116  B.R. 353  (Bankr. D.R.I.  1990); In  re  Cumberland Inv.
                                                  _______________________

            Corp., 118 B.R. 3,  4 (Bankr. D.R.I. 1990); In  re Cumberland
            _____                                       _________________

            Inv. Corp., 133 B.R. 275 (D. R. I. 1991).
            __________

                      Debtor, Cumberland  Investment Corporation ("CIC"),

            a  wholly  owned  Rhode   Island  subsidiary  of  a  Canadian

            corporation, Wescap Enterprises, Ltd., was in the business of

____________________

            1.  Chorney's notice of appeal refers to the district court's
            order of  January 8, 1993  in the  singular.  There  were two
            orders entered that  day, one  dismissing the  appeal on  the
            merits,  the other  dismissing a  motion for  reconsideration
            based on  "new evidence."   The issues  designated show  that
            only the first order is contested.  

                                         -3-

buying and selling numismatic coins and  stamps.  Chorney was

            a principal  of CIC  and chief executive  officer of  Wescap.

            Eastland Bank was the major secured creditor.    

                      In November, 1989, Eastland and two other creditors

            petitioned CIC  into bankruptcy.   About  a month  later, CIC

            converted the Chapter 7 involuntary petition into a voluntary

            Chapter 11  proceeding.   Judge Votolato initially  denied an

            Eastland  motion for  appointment  of a  Chapter 11  trustee,

            instead authorizing appointment of  an examiner.  Pending the

            outcome of  the examiner's investigation,  CIC was restrained

            from selling any coins without court approval.  

                      There  ensued  seven  months  of  investigation,  a

            series of five  reports from  the examiner, and  at least  11

            days of contested hearings and motions by both sides.  On the

            basis  of  the evidence  thus  generated,  which reflected  a

            "pervasive,  broad  course  of  debtor  misconduct"  and  the

            debtor's  "repeated  failure  to  respond  adequately  to  an

            overwhelming amount of negative evidence," the judge reversed

            course.  In re Cumberland Inv. Corp., 118 B.R. at 4-5, 6.  He
                     ___________________________

            granted  a  renewed  motion  for appointment  of  a  trustee,

            expressing regret that he had earlier denied it.  

                    The  court  simultaneously   ordered  the   immediate

            discharge   of  all  CIC   employees  and  three  principals,

            including  Chorney.  In re Cumberland Inv. Corp., 118 B.R. at
                                 ___________________________

            7-8.  Among the misdeeds leading to the discharges, the court

-4-

found that Chorney and  his agents had purposely  delayed the

            bankruptcy process through shifting  misrepresentations about

            corporate assets, unauthorized  and transparently  fraudulent

            business  operations,  and   circumvention  of  the   court's

            injunction against  coin sales. In re  Cumberland Inv. Corp.,
                                            ____________________________

            118 B.R. at 4-7.

                      Shortly before  the decision to appoint  a trustee,

            the court had also  held hearings over a five-day period on a

            CIC motion to strike one of the examiner's  reports.  In that

            motion,  Chorney  had  alleged  examiner  bias,  conflict  of

            interest,  slander,  a conspiracy  between  the examiner  and

            Eastland  to   misrepresent  CIC's  affairs,   and  inventory

            switches by Eastland.  From the evidence presented there, the

            court  questioned the  debtor's good  faith, concluding  that

            Chorney's    allegations   were    "totally   unsupportable,"

            "fabricated,"  and  "out of  touch  with  reality."    In  re
                                                                   ______

            Cumberland Inv. Corp., 116  B.R. at 354.  The  district court
            _____________________

            affirmed both orders, finding the bankruptcy judge's analysis

            "well  supported"  by the  evidence.   In re  Cumberland Inv.
                                                   ______________________

            Corp., 133 B.R. at 279, 280.  In  the  nine months  following
            _____

            the trustee's appointment, the  bankruptcy court docket sheet

            shows  234  entries.   Among them  are  a variety  of motions

            brought by the trustee, examiner, and Eastland seeking orders

            directing   Chorney  to   cooperate   or  to   refrain   from

            interference with the bankruptcy process.  

-5-

The  proceedings   immediately  precipitating  this

            appeal began on May  21, 1991, when Chorney moved  to adjudge

            the examiner in contempt.  The sole basis for this motion was

            an allegation that the  examiner had failed to use  his "best

            efforts" to  obtain agreement among  the parties on  a method

            for sale of assets as required  by an earlier court order.  A

            hearing was held  and testimony taken which showed the motion

            to be unfounded and wholly frivolous.  

                      On  July  3,  1991,  in  an  order  dismissing  the

            examiner contempt  motion, Judge Votolato  observed that over

            the  course  of   the  bankruptcy  proceedings   Chorney  had

            "deliberately and continuously acted in bad faith to obstruct

            and to  hinder the  efficient administration of  the estate."

            He sua sponte ordered Chorney to show cause why he should not
               ___ ______

            be adjudged in contempt for his "wilful interference with the

            orderly and economic administration  of this estate and [his]

            unjustified waste of the  time of this Court and  of numerous

            parties."2   

                      A  hearing  on the  show  cause order  was  held on

            September 17,  1991.   Testimony  at  that hearing  spans  80

            transcript  pages.    Judge  Votolato  continued  the  matter

            without  a finding  in the  hope that  a change  in Chorney's

____________________

            2.  The order also barred Chorney from  further participation
            or  intervention  in  judicial proceedings  relating  to  the
            disposition  of the  estate, except  on the  same basis  as a
            general creditor.      

                                         -6-

behavior  or  attitude might  warrant  further consideration.

            After  a  status conference  on  June  18,  1992 revealed  no

            change,3 the  court issued the contempt  order appealed here.

            In addition to the  entire record as reflected in  the docket

            entries, the court relied on  the trustee's summary of recent

            events at the show cause hearing.

                 [T]he  Trustee, John  Cullen, Esq.,  described what
                 was unfortunately an  already too familiar  pattern

                 of obstructionist behavior by Mr. Chorney [footnote
                 omitted].    For  example:    he  continued,  post-

                 petition,  to  advertise  fraudulently  after  both
                 agreeing to and being ordered to desist; to cure  a

                 glaring security problem, the Trustee moved for and
                 obtained a Court order  to physically eject Chorney

                 from the  Debtor's business premises (where  he was
                 actually living,[*] after repeated  broken promises

                 to vacate;[**] CIC records were allegedly concealed

____________________

            3.   At the status  conference the judge learned that  in the
            intervening  months Chorney,  through Wescap,  filed  a state
            court  lawsuit reciting  the  same alleged  coin switches  by
            Eastland which the bankruptcy court had earlier determined to
            be  a fabricated  charge.   The suit  was removed  to federal
            court  and Eastland advised that it was preparing a motion to
            dismiss the suit on collateral  estoppel grounds.  Hearing of
            June  18,  1992, Tr.  at 2-4.    Further, liquidation  of the
            estate had been  forced to a halt  due to a  pending criminal
            investigation into Chorney's conduct. Tr. at 6-8.  

                 During the same period Chorney also took four appeals to
            the  district court from  bankruptcy orders.   All  four were
            dismissed  with prejudice  on  the merits.   Cumberland  Inv.
                                                         ________________
            Corp., Nos. 91-0594, 91-0595,  91-0596, 91-0604, slip op. (D.
            _____
            R.  I., June  5, 1992).   Chorney  then attempted  to further
            appeal three of  the orders  to this  court, which  dismissed
            them as improperly taken  from interlocutory orders.  Chorney
                                                                  _______
            v. Eastland Bank, Nos.  92-1780, 81, 82, slip. op.  (1st Cir.
               _____________
            Feb. 5, 1993).

                                         -7-

and/or destroyed; coin  and other inventory  values
                 were  grossly  and fraudulently  overstated  to the

                 Court,   the  Trustee,   and  to   creditors;  many
                 frivolous  pleadings  were  filed  and  extensively

                 litigated, with the  intent and effect  of impeding
                 the  administration of  an  estate already  left in

                 shambles  by  Chorney;  information concerning  the
                 identity  of redemption coin holders was wrongfully

                 withheld    on    the     baseless    ground     of
                 `confidentiality,'   even   after  disclosure   was

                 ordered by the Court, and so on.     
                      The  most  damaging  consequence of  Chorney's

                 incomprehensible   behavior,    however,   is   the
                 incredible amount of needless expense that has been

                 heaped upon the estate, and  ultimately, of course,
                 upon the  creditors.  The Trustee's  and Examiner's

                 duties  (and their  fees  and  expenses) have  been
                 increased;   secured  creditors,   long-delayed  in

                 exercising  their  rights, have  seen  the interest
                 part of  their claims escalate;  and the likelihood

                 of  a  meaningful   distribution  to  hundreds   of
                 unsecured creditors and redemption coin holders has

                 been practically eliminated.  All of this waste has
                 been caused unnecessarily by Harold Chorney. 

                 _____________
                 *   Chorney's  apartment  was  literally  surrounded  by
                 inventory,   allowing  a   real-life  "fox-guarding-the-
                 chicken-coup" scenario.   His  bed was literally  within
                 inches of the vault and its contents.

                 ** The Court order was ignored, however, and the Trustee
                 ended  up,  instead,  moving   the  assets  to   another
                 location,  at  a cost  to  the  estate of  approximately
                 $95,000.

            In  re Cumberland Inv. Corp.,  No. 89-11051, slip  op. at 2-3
            ____________________________

            (Bankr. D.R.I. July 2, 1992).

-8-

On the basis of  time records submitted by  the trustee,

            the  examiner and Eastland  Bank, showing  "expenses directly

            attributable to unnecessary  litigation and/or extra judicial
                            ___________

            work generated by Mr. Chorney," the court ordered Chorney  to

            pay $200,000 to the trustee as "partial reimbursement for the

            deliberate post-petition  damage he  has done  to creditors."

            In re Cumberland  Inv. Corp.,  No. 89-11051, slip  op. at  4.
            ____________________________

            The court said that its order was "purposefully crafted to be

            compensatory and not punitive in nature."  Id. at 4.
                                                       ___

                      Chorney's  brief here  denies  the accuracy  of the

            judge's  factual conclusions and argues that he is the victim

            of  retaliation for  his criticisms  of improprieties  by the

            judge, trustee and examiner.   In support of his  denials and

            blame shifting, however, he points only to previous appellate

            briefs  in this  court  and elsewhere  which recite  the same

            conclusions, and to  selected excerpts from  the record.   We

            have read the briefs and  the record references as  liberally

            as possible in his favor, given his pro se status.   However,
                                                ___ __

            the material he offers barely provides  even a glancing basis

            for his  factual  denials and  no  concrete support  for  his

            accusations.  The selectivity of his citations, incoherent or

            indistinct  purpose  for  many  record  references,  and  his

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repeated blurring of temporally distinct  events, only serves

            to confuse and obfuscate the issues.4 

                      "We  must  uphold  the  factual  findings  of   the

            bankruptcy court,  as affirmed by the  district court, unless

            they  are clearly  erroneous."   In re  Power Recovery  Sys.,
                                             ____________________________

            Inc., 950 F.2d  798 (1st Cir. 1991).  Based  on a full review
            ___

            of  the  record  before  us,  including  transcripts  of  the

            hearings  of May 7, 1991,  May 22, 1991,  September 17, 1991,

            June 18, 1992, and July 17, 1992, it clearly appears that the

            bankruptcy court had more than ample  evidence to support the

            contempt order.

                      We also  reject Chorney's procedural  challenges to

            the hearing  and order.  While Chorney claims now that he was

            never  notified of  the order,  nor given  time to  prepare a

            defense,  the record shows that he  received ample notice and

            specification  of the issues in  the court's Show Cause order

            of July 3, 1991.   That order fully complied  with Bankruptcy

            Rule 9020(b).  Chorney had more than two months to prepare  a

            defense, was  present without objection at  the September 17,

            1991  hearing,   represented by  counsel, testified,  and was

            well prepared on all the issues raised.   

____________________

            4.  We also reviewed the videotape quoted in Chorney's brief,
            and conditionally accepted by  this court on Chorney's motion
            to  supplement the record.   We are unable  to determine from
            the scanty information given whether the tape was in evidence
            below and might thus be a proper part of this record.  In any
            event,  the tape  does not  support Chorney's  assignments of
            error. 

                                         -10-

Equally meritless is  Chorney's claim  that he  was

            unconstitutionally  deprived  of a  right  to  a jury  trial.

            Absent an express statute, there is  no right to a jury trial

            in civil contempt proceedings.   Shillitani v. United States,
                                             __________    _____________

            384 U.S. 364 (1966); cf. United  States v. Pina, 844 F.2d  1,
                                 ___ ______________    ____

            11-12  (1st Cir.  1988)  (even in  some  classes of  criminal

            contempt cases  there is no right  to a jury).   And while it

            may  not always be  easy to distinguish  between criminal and

            civil contempt,  there is no  difficulty where, as  here, the

            ultimate  object  is to  compensate the  injured party.   See
                                                                      ___

            generally,  In re Power Recovery Sys., Inc., 950 F.2d at 802-
            _________   _______________________________

            03 (defining  criminal and civil contempt sanctions); Charles

            A. Wright et. al.,  11 Federal Practice and Procedure    2960
                                   ______________________________

            at nn. 59-60 (1973 & supp. 1992) (same).

                      At  least  two  of   the  other  issues  raised  in

            Chorney's  brief  merely  reiterate  arguments  he raised  in

            earlier  appeals,  which  were  dismissed by  this  court  as

-11-

improperly  taken  from  interlocutory  orders.5    Chorney's

            remaining arguments are frivolous.  

                       For  the  reasons  stated,  the  judgment  of  the

            district court is affirmed.  Appellee's request for sanctions
                              ________

            is  denied without prejudice to renewal of the request in the

            future should events so warrant.  

____________________

            5.  See  supra note 3.  Chorney reiterates that he was denied
                ___  _____
            due  process when  Judge Votolato  both recused  himself from
            hearing an  Eastland motion to  hold Chorney in  contempt and
            ruled that there was no right to a jury trial on the Eastland
            motion.    The Eastland  motion  was  transferred to  another
            judge,  and eventually  withdrawn.   If  by reasserting  this
            argument  Chorney is  suggesting that  Judge Votolato  should
            have recused  himself from the instant  contempt hearing, the
            argument fails  for want of  any facts creating  a reasonable
            doubt  as to  the  judge's impartiality.    United States  v.
                                                        _____________
            Lopez,  944 F.2d  33,  327 (1st  Cir.  1991).   Chorney  also
            _____
            attempts   to   reargue   the  contentions   underlying   his
            interlocutory  appeal from denial  of his motion  to hold the
            examiner in contempt.     

                                         -12-