Matter of Nichols

• Court: Court of Appeals for the Fifth Circuit
• Decided: May 31, 1994
• Docket: 93-02394
• Status: Published

Opinion

United States Court of Appeals,

Fifth Circuit.

No. 93-2394.

In the Matter of John Floyd NICHOLS and Deena Counts Nichols, Debtors.

CONROE OFFICE BUILDING LTD., et al., Appellants,

v.

John Floyd NICHOLS, et al., Appellees.

May 31, 1994.

Appeal from the United States District Court for the Southern District of Texas.

Before WISDOM and BARKSDALE, Circuit Judges, and HARMON,* District Judge.

WISDOM, Circuit Judge.

This case presents the question whether a district court's

order reversing a bankruptcy judge and remanding the case to the

bankruptcy court for significant further proceedings is appealable.

This Court has previously held that such an order is not appealable

under 28 U.S.C. § 158(d).1 Today we hold that the order in this

case is not appealable under 28 U.S.C. §§ 1291-1292, either.

Accordingly, we have no jurisdiction to decide the merits of the

appellant's appeal, and we DISMISS the appeal.

I.

Appellees John Floyd Nichols, an attorney, and his wife Deena

Counts Nichols (collectively, "the debtors") are the debtors in the

* District Judge of the Southern District of Texas, sitting by designation. 1 See In re Bowman, 821 F.2d 245 (5th Cir.1987).

1 Chapter 7 bankruptcy proceeding underlying this appeal. Appellant

Conroe Office Building Ltd. ("Conroe") is a limited partnership in

which appellant Joe Izen, Jr. is a limited partner. Izen had

control over Conroe's bank account.

John Floyd Nichols represented Martha Mackin Izen, the wife of

Joe Izen, Jr., in a divorce action. Martha Mackin Izen, without

authorization from Joe Izen, Jr., allegedly paid Nichols a retainer

with funds she had withdrawn from Conroe's bank account. Upon

learning of the unauthorized withdrawal, Joe Izen sued his wife and

Nichols for conversion. Conroe intervened as a plaintiff in the

state conversion proceeding.

The debtors, John Floyd Nichols and Deena Counts Nichols, then

filed a bankruptcy petition. Their schedules listed Joe Izen, Jr.

and Conroe as creditors with this claim described as "disputed".

Izen and Conroe requested that the bankruptcy court lift the

automatic stay to permit them to continue prosecuting their

conversion claim against Nichols in state court. The bankruptcy

court granted their motion to lift the stay. Martha Mackin Izen

then crossclaimed against Nichols in the state court lawsuit for

legal malpractice in connection with his representation of her in

the divorce action. Martha Mackin Izen assigned Joe Izen, Jr. 507

of her malpractice claim against Nichols. Nichols never listed

Martha Mackin Izen as a creditor on his bankruptcy schedules.

The bankruptcy court granted the debtors a discharge on May 4,

1988. Izen and Conroe had never objected to the discharge or

challenged the dischargeability of the Nichols's debt to them, but

2 had merely continued to prosecute their conversion lawsuit in state

court.

After obtaining his discharge in bankruptcy, Nichols moved for

summary judgment in the state court proceeding on the grounds that

any liability to which he had been subject had been discharged.

The state court denied his motion. The debtors then petitioned the

bankruptcy court to reopen their bankruptcy proceeding. The

bankruptcy court did so on October 22, 1991. The bankruptcy judge,

after an evidentiary hearing, determined that the conversion claim

and legal malpractice crossclaim were pre-petition claims that had

been discharged. The bankruptcy judge then enjoined the appellants

"from further pursuing any means of holding John Floyd Nichols or

his wife, Deena Counts Nichols, personally liable for the claims

..., including the claim for conversion and the claim of legal

malpractice based on debtor John Floyd Nichols' prepetition acts".

Izen and Conroe appealed to the district court. The district

court rejected their argument that the bankruptcy court abused its

discretion in reopening the bankruptcy more than three years after

the discharge. It reversed and remanded, however, on the question

whether the legal malpractice crossclaim had arisen pre-petition,

given that some factual allegations had been made concerning

Nichols's post-petition conduct. The district court remanded the

malpractice claim to the bankruptcy judge because the debtors had

not listed Martha Mackin Izen as a creditor on their schedules and

the bankruptcy court's opinion did not discuss whether she had

notice or actual knowledge of the bankruptcy. The district court

3 also remanded a claim against Nichols for wrongful interference

with Conroe's funds, finding that the bankruptcy court had not

addressed that claim. Finally, the district court remanded this

case to the bankruptcy court for an explanation why the bankruptcy

judge denied the appellants' request to modify the injunction to

allow them to seek recovery from the debtors' insurance carrier

despite a proffered stipulation that they would not seek recovery

from the debtors' estate. The district court affirmed the

bankruptcy judge in all other respects.

The appellants appealed the district court's order to this

Court, challenging the district court's affirmance of most of the

bankruptcy judge's ruling. We raised the question of our own

jurisdiction sua sponte and ordered supplemental briefing on the

issue. After reviewing the supplemental briefs, we conclude that

the district court's order remanding the case to the bankruptcy

court was neither a final appealable order nor an appealable

interlocutory order, and thus we have no jurisdiction to review it.

II.

A. Appealability Under 28 U.S.C. § 158(d)

28 U.S.C. § 158(d) lodges jurisdiction in the courts of

appeals over appeals from "final decisions, judgments, orders, and

decrees" in bankruptcy matters entered under § 158(a) and (b). It

does not, however, confer jurisdiction over appeals from

4 interlocutory orders of district courts.2 In In re Bowman3 we held

that when a district court sitting as a court of appeals in

bankruptcy remands a case to the bankruptcy court for significant

further proceedings, the remand order is not "final" and therefore

not appealable under § 158(d). We explained that "[a] final order

is one in which nothing remains to be done but the mechanical entry

of judgment by the trial court".4 The order remanding the case to

the bankruptcy court for significant further proceedings was not

"final" under that standard. It is therefore unappealable under §

158(d).

B. Appealability Under 28 U.S.C. § 1291

The appellants' supplemental brief relies also on 28 U.S.C. §

1291, which governs appeals from final decisions of district

courts. This argument, however, fails for the same reason the

appellants' § 158(d) argument failed: a district court order

reversing and remanding a case for significant further proceedings

in the bankruptcy court is not considered "final" for purposes of

appellate review. For purposes of § 1291, a final judgment is a

decision that "ends the litigation on the merits and leaves nothing

for the district court to do but execute the judgment".5 The

2 See In re Topco, Inc., 894 F.2d 727, 735-36 n. 12 (5th Cir.), reh'g en banc denied, 902 F.2d 955 (5th Cir.1990), and cases collected therein. 3 821 F.2d 245 (5th Cir.1987). 4 Id. at 247 (internal quotations omitted). 5 Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 373, 101 S.Ct. 669, 672-73, 66 L.Ed.2d 571 (1981) (internal quotations and citation omitted); In re England, 975 F.2d 1168, 1171 (5th

5 district court remanded this case to the bankruptcy court for

consideration of several significant issues the resolution of which

might cause an amendment of the bankruptcy court's decision and

modification of the bankruptcy injunction. The district court

determined that the bankruptcy judge's decision is currently

incomplete and not ready for execution until previously unaddressed

issues are adjudicated. Thus, the district court's order and the

bankruptcy court's order are not "final" within the meaning of §

1291.

The Supreme Court's recent decision in Connecticut Nat'l Bank

v. Germain6 does not change this result. Germain noted that

"[s]ections 1291 and 158(d) do overlap, therefore, but each section

confers jurisdiction over other cases that the other section does

not reach".7 It is precisely in that area of overlap, however,

that jurisdiction fails in this case. The district court's order

is not "final" under either § 158(d) or § 1291.8

Cir.1992). 6 503 U.S. ----, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992). 7 Id. at ----, 112 S.Ct. at 1149, 117 L.Ed.2d at 397. 8 We have previously observed that "finality" may be a stricter requirement under § 1291 than under § 158. See, e.g., In re Wood & Locker, Inc., 868 F.2d 139, 144 (5th Cir.1989). We need not consider in this case whether the Supreme Court's holding in Germain calls that line of cases into doubt. Other circuits have acknowledged possible tension between Germain and the prior lines of authority without finding it necessary to resolve them. See, e.g., In re Bonner Mall Partnership, 2 F.3d 899, 904 n. 11 (9th Cir.1993), cert. granted sub nom. U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership, --- U.S. ----, 114 S.Ct. 681, 126 L.Ed.2d 648 (1994), removed from oral argument calendar, --- U.S. ----, 114 S.Ct. 1367, 128 L.Ed.2d 44 (1994); In re Gould, 977 F.2d 1038, 1040-41 & n. 2 (7th Cir.1992).

6 C. Appealability Under 28 U.S.C. § 1292

The Supreme Court in Connecticut Nat'l Bank v. Germain held

that an interlocutory order in a bankruptcy case which fails to

meet the requirements of 28 U.S.C. § 158(d) may still be appealable

if it meets the independent requirements of § 1292, which governs

interlocutory appeals.9 We must, therefore, consider whether §

1292 confers jurisdiction over this appeal.

We first conclude that the district court's remand order does

not fall within § 1292(a)(1)'s provision allowing interlocutory

appeals from orders "granting, continuing, modifying, refusing or

dissolving injunctions". The district court's order did none of

those things. The bankruptcy court may modify its own injunction

after the remand, or it may not, but the district court here did

not do so. Accordingly, § 1292(a)(1) provides no basis for an

interlocutory appeal to this court. The remaining provisions of §

1292(a) are plainly inapplicable to this case. Finally, § 1292(b)

provides no basis for appellate jurisdiction because the district

court did not certify its decision for appeal.

III.

Whether we define "finality" under § 158 less stringently than under § 1291 or not, however, plainly the district court's remand order in this case fails either test. 9 503 U.S. at ----, 112 S.Ct. at 1150, 117 L.Ed.2d at 398 ("So long as a party to a proceeding or case in bankruptcy meets the conditions imposed by § 1292, a court of appeals may rely on that statute as a basis for jurisdiction".). Germain abrogated our holding in In re Hester, 899 F.2d 361, 365 (5th Cir.1990), and the cases cited therein, that "the bankruptcy appellate scheme embedded in 28 U.S.C. § 158 clearly supersedes 28 U.S.C. § 1291, and, by inference, also supersedes section 1292".

7 We conclude that the appellants' attempt to involve the court

of appeals in this dispute is premature. The bankruptcy court is

the appropriate forum in which to resolve those issues remanded to

it by the district court, following which the ordinary appeals

process to the district court and to this court will become

available. For now, however, jurisdiction is lacking.

Accordingly, we DISMISS this appeal.