Grantham Bros. v. Valley National Bank (In re Grantham Bros.)

68 B.R. 642, 1986 Bankr. LEXIS 4756, 15 Bankr. Ct. Dec. (CRR) 739
CourtUnited States Bankruptcy Court, D. Arizona
DecidedDecember 18, 1986
DocketBankruptcy Nos. B-83-2882 PHX RGM, B-85-1798 PCT RGM and B-85-1797 PCT RGM; Adv. No. 86-281
StatusPublished
Cited by4 cases

This text of 68 B.R. 642 (Grantham Bros. v. Valley National Bank (In re Grantham Bros.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Arizona primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Grantham Bros. v. Valley National Bank (In re Grantham Bros.), 68 B.R. 642, 1986 Bankr. LEXIS 4756, 15 Bankr. Ct. Dec. (CRR) 739 (Ark. 1986).

Opinion

ORDER GRANTING RULE 11 SANCTIONS AGAINST ATTORNEY WILLIAM NEEDLER

ROBERT G. MOOREMAN, Chief Judge.

Having had the issue of sanctions under advisement since September 9, 1986 and having fully reviewed the record in this matter and the pleadings and arguments of counsel regarding the imposition of sanctions, this Court finds and concludes as follows:

FACTS

On March 2, 1986, this Court approved the sale by the trustee of the OSO ranch, which was part of the bankruptcy estate in this matter. Although objections had been made by the debtors to the sale, those objections were withdrawn prior to the approval of the sale. See Order For Sale of Real Property Free and Clear of Liens, filed March 2, 1986, B-83-2882, Docket #496. No motions for reconsideration or notices of appeal were filed after the issuance of the above Order.

Ninety days later, newly-appointed counsel for the debtor William Needier filed the complaint giving rise to this adversary proceeding. Named in the complaint are the trustee, John Anderson; Edward Quinif, the purchaser of the OSO ranch; Robert Riter, Harold Christopherson, potential purchasers of other properties of the estate at the time of the complaint, and the Valley National Bank. The complaint requested in part the removal of the trustee as well as an injunction against any sales of property of the estate. The contentions in the complaint address the issues of whether the trustee qualified as a disinterested party as well as whether he had performed his duties properly, referring in part to the sale of the OSO ranch. The complaint also alleged that the trustee is not a disinterested party entitled to remain in his position; that the trustee is attempting to liquidate the debtors in violation of the bankruptcy code provisions relating to farmers; and that the trustee has failed to consider the tax implications of the sales of the property of the estate.

The defendants to this adversary complaint moved for dismissal based upon the failure to state a claim upon which relief could be granted pursuant to Bankruptcy Rule 7012(B) and Rule 12(b)(6), F.R.C.P. At the hearing on the motions to dismiss, this Court found them to well-taken and thereby dismissed the adversary action. In addition, the moving parties requested that attorneys’ fees be awarded based upon a violation of Rule 11, F.R.C.P., Bankruptcy Rule 9011, as well as 28 U.S.C. Section 1927. For the reasons set forth below, this Court will award sanctions against the debtors’ counsel, Mr. William L. Needier of William L. Needier & Associates, Ltd.

DISCUSSION

Bankruptcy Rule 9011, which incorporates the language set forth in Rule 11, F.R.C.P., provides in part as follows:

[645]*645The signature of an attorney or a party constitutes a certificate by him that he has read the document; that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and that it is not interposed for any improper purpose, such as to harass, to cause delay, or to increase the cost of litigation. * * * If a document is signed in violation of this rule, the court on motion or on its own initiative, shall impose on the person who signed it, the represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the document, including a reasonable attorney’s fee.

Bankruptcy Rule 9011 (emphasis added). The standards to be applied under this rule were discussed in Zaldivar v. City of Los Angeles, 780 F.2d 823 (9th Cir.1986). As set forth in Zaldivar, there are two separate determinations contained in this provision: frivolousness and improper purpose. Id., 830-832. As will be shown below, Mr. Needler’s actions in this matter meet both requirements of Bankruptcy Rule 9011, thereby requiring the imposition of sanctions.

FRIVOLOUSNESS

Pursuant to this portion of the rule:

[Sanctions shall be assessed if the paper filed in [bankruptcy] court and signed by an attorney or an unrepresented party is frivolous, legally unreasonable, or without factual foundation, even though the paper was not filed in bad faith.

Id., at 831. As set forth in the facts above, this Court found in its Order of March 2, 1986 that all objections to the sale of the OSO ranch property by the trustee had been withdrawn. Debtors did not seek a motion for reconsideration or leave to appeal. No stay of that action was sought.

This Court approved Mr. Needler’s application for limited admission on May 23, 1986. Notwithstanding the fact that the debtors did not seek review of the sale, approximately ninety days after the entry of the March 2nd Order, and after only one week of obtaining limited admission in the case, Mr. Needier filed an adversary complaint naming both the trustee and the purchaser of the OSO ranch, requesting, in part, replacement of the trustee and a stay of the sale based upon his contention that the sale price was too low and made for the benefit of one of the creditors.

This portion of the adversary complaint can only be described as an impermissible collateral attack upon the March 2, 1986 Order authorizing the sale of the OSO ranch. It is clear from the record that all objections to the sale of the OSO ranch, including that of the debtor, were withdrawn prior to the occurrence of the sale. Had Mr. Needier made the reasonable inquiry necessary under this rule, it would have been clear that the opportunity to object to the sale had not only passed but that the debtors had withdrawn their objection, thereby removing the basis for any further challenges to the sale. The filing of this adversary complaint was therefore without legal basis, factual foundation and is therefore frivolous in this regard. Notwithstanding Mr. Needler’s delayed appearance in this matter, he is as a matter of law familiar with the standards imposed upon counsel under Rule 11, F.R.C.P. See In re TCI LTD., 769 F.2d 441 (7th Cir.1985) (affirming the imposition of sanctions upon Mr. Needler’s firm for violations of Rule 11, F.R.C.P. and 28 U.S.C. Section 1927). His admission to this Court after the original filing of this matter does not excuse his responsibility to comply with Bankruptcy Rule 9011. In addition, the facts in TCI are substantially similar to those presented herein, i.e. that a member of Mr. Needler’s firm was attempting to set aside a previous sale without setting forth a sufficient legal basis to support such a finding despite the allowance of several amendments to the pleadings and that he acted with sufficient notice or knowledge of the problems he was creating.

[646]*646IMPROPER PURPOSE

Under this provision of the rule, the attorney must certify that the pleading filed “is not interposed for any improper purpose, such as to harass, to cause delay, or to increase the cost of litigation.” The Court in Zaldivar made the following statement in this regard:

Free access — add to your briefcase to read the full text and ask questions with AI

Related

In Re Grantham Brothers
922 F.2d 1438 (Ninth Circuit, 1991)
Styler v. Tall Oaks, Inc. (In Re Hatch)
93 B.R. 263 (D. Utah, 1988)
Needler v. Quiniff (In re Grantham Bros.)
84 B.R. 172 (D. Arizona, 1988)

Cite This Page — Counsel Stack

Bluebook (online)
68 B.R. 642, 1986 Bankr. LEXIS 4756, 15 Bankr. Ct. Dec. (CRR) 739, Counsel Stack Legal Research, https://law.counselstack.com/opinion/grantham-bros-v-valley-national-bank-in-re-grantham-bros-arb-1986.