In Re: v. Unanue Casal,etc.

• Court: Court of Appeals for the First Circuit
• Decided: July 7, 1993
• Docket: 92-2220
• Status: Published

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                 ____________________
        No. 92-2220

                             IN RE ULPIANO UNANUE CASAL,

                                       Debtor,
                                               
                                       ________

GERARDO A. QUIROS LOPEZ, ET AL.,

                                Plaintiffs, Appellees,

                                          v.

                            ULPIANO UNANUE CASAL, ET AL.,

                                Defendants, Appellees,

________

                       LILIANE UNANUE, EMPEROR EQUITIES, INC.,

                               Defendants, Appellants.

                                 ____________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

                           FOR THE DISTRICT OF PUERTO RICO

                    [Hon. Jos  Antonio Fust , U.S. District Judge]
                                              ___________________

                                 ____________________

                                        Before

                                 Breyer, Chief Judge,
                                         ___________

                                    Selya and Cyr,

                                   Circuit Judges.
                                   ______________

                                 ____________________

             Andr s  Guillemard-Noble, with whom Harvey B. Nachman and The Law
             ________________________            _________________     _______
        Offices of Harvey B. Nachman were on brief for defendants, appellants.
        ____________________________

Arturo J. Garc a-Sol , with whom Dora M. Penagar cano, McConnell,
             _____________________            ____________________  __________
        Vald s,  Kelley, Sifre, Griggs &  Ruiz-Suria were on  brief for plain-
        ____________________________________________
        tiffs, appellees.
             Carlos Lugo  Fiol,  Assistant Solicitor  General,  Department  of
             _________________
        Justice, with whom Reina Colon De Rodr guez, Acting Solicitor General,
                           ________________________
        was on brief for intervenor.

____________________

                                     July 7, 1993
                                 ____________________

CYR,  Circuit Judge.   Liliane  Unanue ("Liliane")  and
                    CYR,  Circuit Judge.
                          _____________

          Emperor Equities, Inc.  ("Emperor") challenge the constitutional-

          ity of various provisional remedies imposed by a bankruptcy court

          pursuant to P.R.  Laws Ann. tit. 32  App. III, R.56  et seq.   We
                                                               __ ____

          lack jurisdiction over most of their claims, and find no merit in

          the others.

I
                                          I

                                      BACKGROUND
                                      BACKGROUND
                                      __________

Ulpiano Unanue Casal ("Unanue"), a former  chief execu-

          tive  officer of Goya Foods ("Goya"), filed a voluntary chapter 7

          petition in  August 1990,  scheduling  liabilities totaling  $1.1

          million and assets of  nominal value.  Goya, a  creditor, charged

          that  Unanue was continuing to  lead a life  of luxury, traveling

          between  seven "fabulously  furnished"  apartments  which he  had

          fraudulently transferred to Liliane, his wife, prior to bankrupt-

          cy.   After extensive discovery, Goya moved for leave to commence

          an adversary proceeding, in the name  and behalf of the chapter 7

          estate,  see  11 U.S.C.   503(b)(3)(B),  against  Liliane and  E-
                   ___

          mperor,  a shell  corporation apparently  controlled  by Liliane.

          Although  Liliane and Emperor were served with the Goya motion in

          July 1991, neither responded.

                    On August  24, 1991, Goya learned that Emperor had sold

          one of Unanue's former  condominium apartments some months earli-

          er, in May  1991, netting approximately $400,000.   Goya promptly

3

renewed its motion for leave to commence adversary proceedings on

          behalf of the chapter  7 estate, and sought an immediate ex parte
                                                                   __ _____

          order of attachment on the apartment-sale proceeds, alleging that

          the  proceeds were assets of the chapter  7 estate and at risk of

          removal from the jurisdiction.   On September 4, 1991, the  bank-

          ruptcy court authorized Goya to commence an adversary proceeding,

          and  issued an  ex parte order  of attachment under  P.R. Rule 56
                          __ _____

          ("September 4  order").1   On September 9,  Goya provided  appel-

          lants  with copies  of  the summons,  complaint,  and motion  for

          provisional remedies.

                    In the course  of executing the writ  of attachment, it

          was discovered  that Liliane had  transferred most of  the apart-

          ment-sale proceeds  to a  Swiss bank  account.  On  September 12,

          1991, alarmed by the  apparent removal of the sale  proceeds from

          the  jurisdiction, Goya  sought  additional provisional  remedies

          under Rule 56, including  "cautionary notices" and a "prohibition

          against alienation" of  Liliane's remaining properties in  Puerto

          Rico,  Paris, New  York and Spain.   After notice  to Liliane and

          Emperor, and a hearing  on appellants' constitutional claims, the

          bankruptcy  court authorized the  additional provisional remedies

          on September 26 ("September 26 orders").

____________________

               1Federal Rule  of Civil Procedure 64 is applicable in adver-
          sary proceedings.  See Fed. R. Bankr. P. 7064.  Thus, provisional
                             ___
          remedies are available in an adversary proceeding, see id. 7001 &
                                                             ___ ___
          7064,  "under the circumstances and in the manner provided by the
          law of  the state in which  the district court is  held," Fed. R.
          Civ. P. 64.

                                          4

The September 4 and  September 26 orders were  appealed

          to the district court on the ground that the provisional remedies

          imposed  by  the  bankruptcy  court were  unconstitutional  under

          Connecticut v. Doehr, 111  S. Ct. 2105 (1991).   The Commonwealth
          ___________    _____

          of Puerto  Rico intervened.  See  28 U.S.C.   2403(b).   The dis-
                                       ___

          trict court upheld the challenged provisional remedies, see In re
                                                                  ___ _____

          Unanue  Casal, 144 B.R. 604 (D.P.R. 1992), and the present appeal
          _____________

          followed.

II
                                          II

                                THE SEPTEMBER 4 ORDER
                                THE SEPTEMBER 4 ORDER
                                _____________________

                    Although the parties have not done  so, we inquire into

          our  jurisdiction to entertain the interlocutory appeal of the ex
                                                                         __

          parte order entered on September 4.  See In re Spillane, 884 F.2d
          _____                                ___ ______________

          642, 644 (1st  Cir. 1989); In  re Recticel Foam  Corp., 859  F.2d
                                     ___________________________

          1000, 1002 (1st Cir. 1988) ("a court has an obligation to inquire

          sua sponte into its subject matter jurisdiction").  The courts of
          ___ ______

          appeals  may  derive  jurisdiction  to review  a  district  court

          appellate order in a bankruptcy case from either of two statutory

          sources:  (1)  the bankruptcy  appeal provisions of  28 U.S.C.   

          158(d); or (2) the  interlocutory appeal provisions in  28 U.S.C.

            1292 applicable  to civil  actions generally.   See Connecticut
                                                            ___ ___________

          Nat'l Bank v.  Germain, 112 S. Ct. 1146 (1992).2   We trace these
          __________     _______

          avenues of appeal in turn.
                              
          ____________________

               2Germain  rejected  the widely  held view  that 28  U.S.C.  
                _______
          158(d)  affords the only avenue  of appeal from  a district court
          appellate order in a  bankruptcy case.  Compare, e.g.,  In re GSF
                                                  _______  ____   _________
          Corp., 938 F.2d 1467, 1473 n.4 (1st Cir. 1991).
          _____

                                          5

6

A.   Section 158(d)
          A.   Section 158(d)
               ______________

                    Section 158(d) affords a right  of appeal to the courts

          of  appeals from  all  "final decisions,  judgments, orders  [or]
                                  _____

          decrees"  entered by district courts in bankruptcy cases.  See 28
                                                                     ___

          U.S.C.   158(d)  (emphasis  added).   It  is often  difficult  to

          determine  what constitutes  a  "final" judgment  or order  under

          section 158(d).  There is somewhat less difficulty in doing so in

          an adversary  proceeding, however, as the  finality determination

          in  such proceedings  "closely resembles  [that] in  'an ordinary

          case [between  the parties]  in a district  court.'"  In  re Har-
                                                                ___________

          rington, No.  92-2212 (1st Cir. Apr. 26, 1993), slip op. at 4 n.3
          _______

          (quoting In re Public Serv. Co.,  898 F.2d 1, 2 (1st Cir. 1990)).
                   ______________________

          Accordingly, a district court order in an adversary proceeding is

          not  appealable as of  right under section 158(d)  unless it ends

          the entire adversary proceeding "on the merits and leaves nothing

          for the court to do but enter the judgment."  See Stringfellow v.
                                                        ___ ____________

          Concerned  Neighbors in Action, 480 U.S. 370, 375 (1987) (quoting
          ______________________________

          Catlin v. United States, 324 U.S. 229, 233 (1945)).
          ______    _____________

                    Even though  a somewhat loosened  standard of  finality

          obtains in bankruptcy appeals, on  a showing of "special justifi-

          cation," see Harrington, supra,  at 3, 4 n.3, the  exceptions are
                   ___ __________  _____

          narrowly  limited in order to  avoid piecemeal review.  Neverthe-

          less, as  in  an ordinary  civil action,  the "collateral  order"

          doctrine established in Cohen v. Beneficial Industrial Loan Corp,
                                  _____    _______________________________

          337  U.S. 541 (1949),  is applicable to an  appeal from an inter-

          locutory  order entered  in an  adversary  proceeding, see  In re
                                                                 ___  _____

7

Martin,  817 F.2d 175, 178  (1st Cir. 1987),  where the non-final
          ______

          order is, inter alia, "effectively  unreviewable on appeal from a
                    _____ ____

          final  judgment," see In  re Newport Sav. &  Loan Assn., 928 F.2d
                            ___ _________________________________

          472,  474 (1st Cir. 1991) (quoting Van Cauwenberghe v. Biard, 486
                                             ________________    _____

          U.S. 517 (1988)).

                    On  this  reasoning,  we  must decline  review  of  the

          September  4  order, as  "non-final"  under section  158(d).   We

          adhere  to our earlier holding that an interlocutory order allow-

          ing an  attachment to remain in place  is not an appealable "col-

          lateral order," since  "'the rights  of all parties  can be  ade-

          quately protected  while the  litigation on  the main  claim pro-

          ceeds.'"   Lowell Fruit Co. v. Alexander's Market, Inc., 842 F.2d
                     ________________    ________________________

          567,  569 (1st  Cir.  1988) (per  curiam)  (quoting Swift  &  Co.
                                                              _____________

          Packers  v. Compania Colombiana  del Caribe, S.A.,  339 U.S. 684,
          _______     _____________________________________

          689 (1950));  the district court provided  adequate protection of

          appellants'  rights  in  the  present case  by  conditioning  its

          September 4  attachment  order on  Goya's  posting  of a  $50,000

          surety bond, and there is no indication that appellants' property

          is  at further significant risk or peril.  Moreover, the validity

          of the  September 4 attachments  remains subject to  challenge on

          eventual  appeal from  a  final judgment,  even  if the  claimant

          prevails.  See Lowell  Fruit, 842 F.2d at 570 (citing  Drys Ship-
                     ___ _____________                           __________

          ping  Corp. v.  Freights,  Sub-Freights, Charter  Hire, 558  F.2d
          ___________     ______________________________________

          1050,  1052 (2d  Cir. 1977)).   In  the meantime,  appellants can

          secure  release of the attached property by posting a surety bond

          of their own, see P.R. Rule 56.3, its cost presumably recoverable
                        ___

8

from  the claimant  in the  event the  defendant prevails  on the

          underlying claim.  Cf.  Lowell Fruit, 842 F.2d at  570 (Massachu-
                             ___  ____________

          setts law).  Given these procedural and remedial  safeguards, the

          present  case  clearly falls  within  the rule  in  Lowell Fruit:
                                                              ____________

          "'[a]lthough the imposition of  provisional remedies may impose a

          hardship    an unjust  hardship if the imposition is  improper   

          the hardship is not so substantial as to justify wasting judicial

          resources  through  piecemeal  appeal.'"   Id.  at  569  (quoting
                                                     ___

          Trustees  of HMG  v.  Compania  Aseguradora Inter-Americana  S.A.
          ________________      ___________________________________________

          Panama, 672 F.2d 250, 251 (1st  Cir. 1982) (per curiam)).
          ______

B.   Section 1292
          B.   Section 1292
               ____________

                    We also  lack jurisdiction  over the  September 4 order

          under 28 U.S.C.   1292(a)(1), which permits interlocutory appeals

          of   district  court  orders  "granting,  continuing,  modifying,

          refusing  or  dissolving  injunctions."    Traditionally, section

          1292(a)(1) has been construed narrowly, in light of  its language

          and  its potential  for eroding  the "finality"  doctrine.   See,
                                                                       ___

          e.g.,  Carson v. American Brands,  Inc., 450 U.S.  79, 84 (1981);
          ____   ______    ______________________

          Kartell  v. Blue Shield of Massachusetts, Inc., 687 F.2d 543, 551
          _______     __________________________________

          (1st Cir. 1982); see also Sierra Club v. Marsh, 907 F.2d 210, 214
                           ___ ____ ___________    _____

          (1st  Cir. 1990)  ("we are  unwilling to  adopt a  more expansive

          reading of  section 1292(a)(1) than is  logically required"); see
                                                                        ___

          generally  16  Charles A.  Wright  et al.,  Federal  Practice and
          _________                          __ ___   _____________________

          Procedure  (1977 & 1992 supp.) [hereinafter:  Wright & Miller] at
          _________                                     _______________

            3921  n.10.   Thus,  "[f]or  historical reasons,  court-ordered

          'attachments,'  even  where  coercive  and  designed  to  protect

                                          9

ultimate  relief, are  typically  considered to  be 'legal,'  not

          'equitable' in  nature, and  therefore are not  'injunctions' for

            1292(a)(1) purposes."   Bogosian v.  Woloohojian Realty  Corp.,
                                    ________     _________________________

          923 F.2d  898, 901  (1st Cir.  1991);  see also  Wright &  Miller
                                                 ___ ____  ________________

            3922 n.46.   Moreover, where  the challenged order  is not  ex-

          pressly  captioned  as  an  injunction, see  Feinstein  v.  Space
                                                  ___  _________      _____

          Ventures, Inc., 989 F.2d  49 (1st Cir. 1993), "a  litigant [must]
          ______________

          show that an interlocutory order of the district court might have

          a 'serious, perhaps irreparable  consequence,' and that the order

          can  be  'effectually  challenged'  only  by  immediate  appeal."

          Carson, 450  U.S. at 84  (quoting Baltimore Contractors,  Inc. v.
          ______                            ____________________________

          Bodinger, 384 U.S. 176,  181 (1955)); see also Kartell,  687 F.2d
          ________                              ___ ____ _______

          at 551; Bogosian,  923 F.2d at 901 (noting "serious consequences"
                  ________

          necessary for appealability).

                    In the  present case, the September 4  order, captioned

          as an "attachment," possesses all essential characteristics of an

          "attachment"  under Puerto Rico law:   it is directed to the U.S.

          Marshal, rather  than appellants, and its  execution subjects the

          attached  property to the jurisdiction of the court.  We conclude

          that the September 4 order  comes within the "attachments" excep-

          tion to  appealability under  section 1292(a)(1).   See Bogosian,
                                                              ___ ________

          923 F.2d at 901.  Moreover, even were we to treat the September 4

          order  as an  "injunction" under  section 1291(a)(1),  appellants

          have  not shown  that  the order  is  insusceptible of  effective

          vindication following final judgment,  see Lowell Fruit, 842 F.2d
                                                 ___ ____________

          at 569-70, and therefore  have not made the showing  of "serious,

10

perhaps  irreparable  consequences"  required  for  interlocutory

          review.  See Carson, supra;  see also Navarro-Ayala v. Hernandez-
                   ___ ______  _____   ___ ____ _____________    __________

          Colon, 956 F.2d 348, 350 (1st  Cir. 1992) ("Even if we assume the
          _____

          dubious proposition  that [the  challenged] order . . .  could be

          considered  an injunction,  for an  injunction to  be immediately

          appealable it  must have  a 'serious, perhaps  irreparable conse-

          quence'") (citation omitted); Chronicle  Pub. Co. v. Hantzis, 902
                                        ___________________    _______

          F.2d  1028, 1031 (1st  Cir. 1990) ("[e]ven  were the [challenged]

          order to be deemed an injunction under   1292(a)(1), interlocuto-

          ry review would be permissible only upon a showing that the order

          will have a 'serious,  perhaps irreparable consequence,' and that

          the  order  can be  'effectually  challenged'  only by  immediate

          appeal") (citation omitted).

C.   Section 1292(b)
          C.   Section 1292(b)
               _______________

                    Finally, appellants' challenge to the September 4 order

          presents  no occasion  for interlocutory  review under  28 U.S.C.

            1292(b), which permits  the courts of  appeals to entertain  an

          interlocutory appeal  on a  district court's  certification "that

          [the challenged]  order involves a controlling question of law as

          to which there  is substantial ground  for difference of  opinion

          and  that  an immediate  appeal  from  the  order may  materially

          advance the  ultimate termination of  the litigation."   The dis-

          trict  court did not purport to certify the September 4 order for

11

immediate appeal,3 and,  in any case, a court  of appeals may not

          exercise  its discretion  to  entertain  an interlocutory  appeal

          under section 1292(b) unless  the appellant requests it to  do so

          within  ten days  after entry  of the  district court  order from
                  ___ ____

          which  appeal is  sought.   No such  timely request  was made  by

          appellants.   "[T]he  statute's ten-day limit  is jurisdictional,

          which is  to say  that the law  does not  permit us to  forgive a

          party's failure to comply."  Rodriguez v. Banco Central, 917 F.2d
                                       _________    _____________

          664, 668 (1st Cir. 1990).

III
                                         III

                               THE SEPTEMBER 26 ORDERS
                               THE SEPTEMBER 26 ORDERS
                               _______________________

The  September 26 orders,  authorizing  the  filing  of

          "cautionary notices"  against  appellants' real  properties,  and

          prohibiting their  alienation by  appellants, present  a somewhat

          closer question.   On the  one hand, the  "cautionary notice,"  a

          creature of Puerto Rico  law, is roughly analogous to  the Anglo-

____________________

               3The district court opinion  stated:  "should the bankruptcy
          court's  orders be  deemed interlocutory,  we would  have granted
                                                        _____  ____
          leave to appeal  these orders because of  the important constitu-
          tional  issues they  raise."   144  B.R.  at 608,  n.4  (emphasis
          added).  The quoted statement appears in a footnote discussion of
          the  district court's interlocutory  appellate jurisdiction under
               ________ _______
          28 U.S.C.   158(a).  See also 28 U.S.C.   157.  In relevant part,
                               ___ ____
            158(a) states:  "The district courts . . . shall have jurisdic-
          tion . . ., with leave of the [district] court, from interlocuto-
          ry orders and decrees[] of bankruptcy judges entered in cases and
          proceedings referred  to the bankruptcy judges  under section 157
          of  this title."  Thus, in context, the district court's footnote
          did  not  purport to  be a    1292(b)  certification, nor  did it
          certify that "an immediate  appeal [to the court of  appeals] may
          materially  advance the  ultimate  termination of  the litigation
          . . . ."  28 U.S.C.   1292(b).

                                          12

American  notice  of lis  pendens, see  Cruz  La Corte  v. Mojica
                               ___  _______  ___  ______________     ______

          Sandoz,  109 D.P.R. 354 (1980); see also Correa Sanchez v. Regis-
          ______                          ___ ____ ______________    ______

          trar, 113  D.P.R.  581,  13  O.T. 750,  760  (1982)  ("cautionary
          ____

          notice"  is recorded in Registry  of Property for primary purpose

          of  subjecting property to the remedy obtained in a pending legal

          proceeding).   Orders  imposing lis  pendens have been  viewed as
                                          ___  _______

          "attachments" for  section 1292(a)  purposes.  See  Rosenfeldt v.
                                                         ___  __________

          Comprehensive Acctg. Serv. Corp., 514 F.2d 607, 609 n.2 (7th Cir.
          ________________________________

          1975)  (Stevens, J.); but cf.  Beefy King Int'l,  Inc. v. Veigle,
                                ___ ___  _______________________    ______

          464 F.2d 1102,  1104 (5th  Cir. 1972) (per  curiam) (holding  lis
                                                                        ___

          pendens analogous to injunction under Florida law).  On the other
          _______

          hand, a "prohibition against alienation" seems closely akin to an

          injunction;  it is directed to appellants personally, enforceable

          by contempt, and "'designed to accord or protect,  some or all of

          the  substantive relief  sought' in  the action."   Bogosian, 923
                                                              ________

          F.2d  at 901 (quoting 16 Wright & Miller    3922 at 10, 26).  The
                                   _______________

          fact  that the September 26  orders are not  captioned as injunc-

          tions, and that  the district court and  the parties consistently

          treated them  as attachments, is relevant but  not dispositive of

          their appealability  under section  1292(a)(1).   See  Manchester
                                                            ___  __________

          Knitted  Fashions, Inc.  v. Amalgamated  Cotton Garment  & Allied
          _______________________     _____________________________________

          Industries  Fund, 967 F.2d 688, 690 (1st Cir. 1992) ("we consider
          ________________

          the  substantial effect of the order . . . in deciding whether an
               ___________ ______

          appeal is available"  under   1292(a)(1))  (emphasis added);  cf.
                                                                        ___

          Teradyne, Inc. v. Mostek Corp.,  797 F.2d 43, 47 (1st Cir.  1986)
          ______________    ____________

          (where  an  order has  attributes of  both  an attachment  and an

13

injunction, treatment by district court and parties is "factor to

          be  considered" for  purposes of  appealability).   And it  is at

          least  conceivable,  notwithstanding the  $1 million  surety bond

          posted by Goya, that appellants might be able to assert "serious,

          perhaps irreparable" consequences from the prohibition on aliena-

          tion of  properties having a  stated value approximating  $7 mil-

          lion.

                    We need not  delve into the matter, however,  as appel-

          lants' constitutional challenge to  the September 26 orders would

          fail on  the merits even if appealable  under section 1292(a)(1).

          See  Norton v.  Mathews, 427  U.S. 524,  532 (1976)  (where party
          ___  ______     _______

          requesting dismissal based on  lack of jurisdiction clearly would

          prevail  on the  merits,  court may  bypass close  jurisdictional

          question).    Appellants'  constitutional challenge  is  based on

          Connecticut  v. Doehr, 111 S.  Ct. 2105, which  held that, absent
          ___________     _____

          exigent  circumstances,  "[a] plaintiff's  interest  in attaching

          . . .  property does not justify the burdening of [a defendant's]

          ownership rights without a hearing to determine the likelihood of

          recovery."   Id. at 2115.   Here, however,  appellants were given
                       ___

          notice  and a hearing prior  to the issuance  of the September 26

          orders.  At the hearing, Goya demonstrated a  reasonable "likeli-

          hood of recovery," based on (1) the dates of appellants' purchase

          of  the various properties;  (2) sudden  changes in  the debtor's

          cash  position around  the times  of these purchases;  (3) appel-

          lants' repeated refusals to identify other sources of funding for

          their acquisition  of these properties;  (4) appellants' apparent

14

attempt  to remove assets from the jurisdiction at about the time

          Goya  commenced its  investigation into  the debtor's  connection

          with those assets; and (5) the debtor's apparent past involvement

          in appellants'  financial affairs.   Appellants, for  their part,

          presented little  or no rebuttal evidence,  preferring to reserve

          their  right to  present  their case  at trial.   Doehr  does not
                                                            _____

          require  a trial on the merits prior  to the issuance of a provi-

          sional remedy.   Appellants were afforded due process  before the

          September 26  orders issued.  See  id.  We  therefore reserve for
                                        ___  ___

          another day  the question  whether a "cautionary  notice," linked

          with  a "prohibition  against  alienation" of  real property,  is

          appealable as an injunction under 28 U.S.C.   1292(a)(1).

IV
                                          IV

                                      CONCLUSION
                                      CONCLUSION
                                      __________

The appeal  of the  September 4 order of  attachment is

          dismissed for  lack of jurisdiction, without  prejudice to appel-

          lants'  right to  renew their  constitutional challenge  upon the

          conclusion of the pending adversary proceeding.  The due  process

          challenge  to the September 26 orders imposing "cautionary notic-

          es" and a "prohibition against alienation" of appellants' proper-

          ties is denied on the merits.

                    Dismissed, in part, for lack of jurisdiction; affirmed,
                    _______________________________________________________

          in part, on the merits.  Costs to appellees and intervenor.
          __________________________________________________________

15