Novack v. Gardner

639 F.2d 1274, 7 Bankr. Ct. Dec. (CRR) 839
CourtCourt of Appeals for the Fifth Circuit
DecidedMarch 19, 1981
DocketNos. 79-1726, 79-1729, 79-1733, 79-1734
StatusPublished
Cited by1 cases

This text of 639 F.2d 1274 (Novack v. Gardner) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Novack v. Gardner, 639 F.2d 1274, 7 Bankr. Ct. Dec. (CRR) 839 (5th Cir. 1981).

Opinion

GEWIN, Circuit Judge:

This is an appeal1 from a district court’s dismissal order, which served to effectively uphold a bankruptcy court order authorizing settlement of pending deficiency litigation. We affirm.

Most of the facts involved in this court’s recent decision in Bleaufontaine, Inc., et al. v. Roland International et al.2 have a direct bearing on this appeal. Consequently, only those factual matters which differ from that earlier holding will be outlined below.3

[1276]*1276On September 2, 1977, Bankruptcy Judge Thomas C. Britton, for the Southern District of Florida, authorized Roland International, as a secured creditor of Bluevack, Incorporated, to proceed with a foreclosure sale of certain Bluevack real property in order to satisfy Roland’s state court judgment against Bluevack in the amount of $5,208,877.33. Thereafter, Roland purchased the property at the foreclosure sale for $1,000,000 and asserted a deficiency claim against the Bluevack estate for $4,208,877.33. However, Bankruptcy Judge Britton had imposed one condition on his authorization order. If Roland were to purchase the property at the foreclosure sale, its total deficiency claim would be set by the bankruptcy court regardless of the actual purchase price paid.

Thus, when the bankruptcy court, on December 7, 1977, approved the sale of the Fontainebleau Hotel and Spa to Hotelerama Corporation, in which Roland had a twenty-five percent shareholder interest, the sale terms were structured in order to provide the trustees with an option as to how they could resolve all matters in dispute with Roland. They could either accept a settlement whereby Roland would pay them $1,000,000, and in effect withdraw its deficiency claim or they could choose to litigate.

Opting for the later alternative, an adversary complaint was filed in bankruptcy court on March 20, 1978, however, prior to trial a settlement was reached whereby Roland agreed to pay the trustees $1,550,000. Realistically, this meant Roland was also willing to withdraw its deficiency claim. On May 18,1978, the bankruptcy court held a hearing to determine why the proposed settlement should not be approved. Although the appellants-bankrupts received notice of this hearing just as did the creditors, they failed to attend. At this hearing, the court and the creditors were advised that Roland had expressly conditioned its offer of settlement upon the subsequent consummation of a collateral settlement between Roland and the individual bankrupt, Ben Novack. Thereafter, pursuant to Roland’s request and since no objections had been raised at the hearing, the settlement was tentatively approved by Bankruptcy Judge Britton until such time as he would grant final approval when the Novack contingency was resolved.

Subsequently, the Novack settlement fell through. Despite this disappointment, Roland changed from its earlier posture and agreed to go ahead with the settlement herein at issue. Accordingly, the bankruptcy court, without a hearing, issued an order on August 4, 1978 approving the final settlement.

Appellants thereafter sought relief in district court thereby making their first objection to the settlement’s terms while unsuccessfully attempting to stay its implementation.4 Although the appellees had already moved to dismiss the bankrupts’ appeals, the district court considered appellants’ contentions at a status conference on January 26, 1979. Three days later, on January 29, 1979, that same court granted the appellees’ motion to dismiss. It is from this dismissal order that appellants now appeal.

As a general rule, appellate courts refuse to consider an issue raised for the first time on appeal. Adams v. Askew, 511 F.2d 700, 705 (5th Cir. 1975); Commercial Credit Business Loans, Inc. v. St. Louis Terminal Field Warehouse Co., 514 F.2d 75, 77 (5th Cir. 1975). However, an exception is sometimes made in one of the following three instances: (1) when the issue raises a pure question of law and refusal to consider it results in a miscarriage of justice, Guerra [1277]*1277v. Manchester Terminal Corp., 498 F.2d 641, 658 n.47 (5th Cir. 1974); American Surety Co. of New York v. Coblentz, 381 F.2d 185, 189 n.5 (5th Cir. 1967); (2) where the interest of substantial justice is at stake, Response of Carolina, Inc. v. Leasco Response, Inc., 537 F.2d 1307, 1324 (5th Cir. 1976); Edwards v. Sears, Roebuck & Co., 512 F.2d 276, 286 (5th Cir. 1975); and (3) when there is no opportunity to object to an order at the time of its issuance. Fed.R.Civ.P. 46.5

The district court’s dismissal order6 concluded that appellants had been afforded adequate opportunity to object to the terms of the settlement. Consequently, their appeal was discovered to be representative of nothing more than a blatant attempt to question the settlement’s fairness for the first time before a reviewing tribunal. In any event, the district court also determined that the bankrupts were not persons aggrieved under Section 39(c) of the Bankruptcy Act, 11 U.S.C. § 67(c), and therefore were without standing to appeal from the bankruptcy court’s approval of the settlement. Inasmuch as the appellees have subsequently conceded at oral argument before this court that the appellants were persons aggrieved, then standing is no longer in issue.7 Consequently, the sole inquiry of this court must be whether the district court properly found that the bankrupts were raising an issue for the first time on appeal.

The district court’s analysis necessarily turned on whether the final settlement approved by the bankruptcy court’s August 4, 1978 order was the same as the settlement proposed at the May 18,1978 hearing before Bankruptcy Judge Britton. If found to be the same, dismissal was fitting since the appellants had been provided ample opportunity to object to its terms. If such were the case, they not only had an opportunity to express their displeasure with the settlement at the hearing to which it is undisputed they had notice but they also had approximately two and one half months between the date of the hearing and the order in question during which they could have objected. On the other hand, if the final settlement was found to be different from the one originally proposed, dismissal was error. If instead this were the situation, the bankrupts lacked a chance to voice their disagreement to the final settlement since no hearing was held on that specific settlement before the August 4, 1978 order was issued.

After examining the bankruptcy court proceedings8

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639 F.2d 1274, 7 Bankr. Ct. Dec. (CRR) 839, Counsel Stack Legal Research, https://law.counselstack.com/opinion/novack-v-gardner-ca5-1981.