Simon v. Navon

Opinion

USCA1 Opinion

United States Court of Appeals

                                For the First Circuit



                                 ____________________


No. 96-2314



                                   FRANK SIMON, II,



                                 Plaintiff, Appellee,



                                          v.



                                    GERSHON NAVON,



                                Defendant, Appellant.



                                 ____________________


APPEAL FROM THE UNITED STATES DISTRICT COURT



                              FOR THE DISTRICT OF MAINE



                     [Hon. Morton A. Brody, U.S. District Judge]
                                            ___________________



                                 ____________________



                                        Before



                                Selya, Circuit Judge,
                                       _____________



                      Coffin and Bownes, Senior Circuit Judges.
                                         _____________________



                                 ____________________


James D. Poliquin for appellant.
               _________________

               Philip P. Mancini for appellee.
               _________________



                                 ____________________



                                     June 2, 1997



                                 ____________________



COFFIN,  Senior Circuit Judge.   This appeal is  a sequel to
                        ____________________



          Simon v. Navon, 71 F.3d 9 (1st Cir. 1995), in which we affirmed a
          _____    _____



          May 19,  1994 judgment for  plaintiff Simon against  Jonathan and



          Gershon Navon on a breach of contract action, reversed a judgment



          on  an abuse  of  process  claim,  and  vacated  and  remanded  a



          defamation  claim.  After the  case was returned  to the district



          court, both Navons then  being debtors in bankruptcy proceedings,



          further  action was  suspended  until the  bankruptcy cases  were



          terminated, Jonathan's by  a discharge in April  and Gershon's by



          dismissal in June of 1996.



               Subsequently, defendant Gershon Navon, on the basis of newly



          acquired information,  on September 6,  1996, filed a  motion for



          relief from the breach of contract judgment under Fed. R. Civ. P.



          60(b)(3) and (6),1 claiming that Simon had  given false testimony



          at trial and had withheld documents during discovery.



               The district  court, without  granting further  discovery or



          hearing, denied the motion for relief, ruling as follows:


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               1  In relevant part, Rules 60(b)(3) and (6) state:



                    On motion . . . the court may relieve a party . .

               . from a final judgment . . . for the following

               reasons: . . . (3) fraud . . . , misrepresentation, or

               other misconduct of an adverse party; . . . or (6) any

               other reason justifying relief from the operation of

               the judgment.  The motion shall be made within a

               reasonable time, and for reasons (1), (2), and (3) not

               more than one year after the judgment . . . .  This

               rule does not limit the power of a court to entertain

               an independent action to relieve a party from a

               judgment . . . or to set aside a judgment for fraud

               upon the court.



                                         -2-



1.  Defendant's motion  is untimely in that it  was not

               filed within one year  following judgment of this case,

               in accordance with Rule 60(b)(3).



               2.  Even if  timely filed, the defendant has  failed to

               make  out a showing  of fraud, in  accordance with Rule

               60(b)(6).



               We  are  confronted  with  three questions.    The  first is



          whether  the court erred in  ruling that the  60(b)(3) motion was



          untimely filed, i.e., after the expiration  of the maximum period



          of  one  year.   More precisely,  we  must consider  the implicit



          ruling that the  pendency of bankruptcy proceedings  did not toll



          the running  of the  one year  period.   The  second question  is



          whether  the  court erred  in  ruling  that appellant  failed  to



          demonstrate  a 60(b)(6)  claim for  "any other  reason justifying



          relief," a claim  not subject to  a specific limitations  period.



          And finally, we address the  subset of 60(b)(6), the denial of  a



          claim asserting fraud upon the court.



               These questions turn out to raise purely legal issues, as to



          which our standard of review  is plenary.  We take the  facts "as



          the  moving party alleges, to see whether those facts, if proven,



          would warrant  relief."   Teamsters,  Chauffers Local  No. 59  v.
                                    ___________________________________



          Superline Transportation  Co., 953  F.2d 17,  18 (1st  Cir. 1992)
          _____________________________



          (citing  United States  v. Baus,  834 F.2d  1114, 1121  (1st Cir.
                   ______________________



          1987)).  We conclude that the district court did not err.



                      I. Timeliness of the Rule 60(b)(3) Filing



               The motion for relief  was filed on September 6,  1996, some



          two years, three and a half months after  the amended judgment of


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May 19, 1994.   This, of course,  exceeded the maximum period  of



          one year allowed by the rule for (b)(3) claims.  



               Appellant devotes one paragraph of his brief to the argument



          that the one year period does not begin  to run from the entry of



          judgment following trial, but rather from November  27, 1995, the



          date  of our  decision  in the  prior  appeal.   This  is so,  he



          asserts, because we "substantially altered" the earlier judgment,



          and  he cites  as  support 11  Charles Alan  Wright  & Arthur  R.



          Miller, Federal Practice and Procedure,   2866, at 390-91 (2d ed.
                  ______________________________



          1995).   But  the breach  of contract  ruling, the  only judgment



          placed in  issue by the motion for relief, was not altered in any



          way.  As the Supreme Court stated in a similar context: 



               The test is a  practical one.  The question  is whether

               the .  . . court .  . . has disturbed  or revised legal

               rights and  obligations which, by [the] prior judgment,

               had been plainly and properly settled with finality.



          FTC  v. Minneapolis-Honeywell  Regulator Co.,  344 U.S.  206, 212
          ___     ____________________________________



          (1952) (timeliness  of petition  for certiorari).   The situation



          here is  legally indistinguishable from that  in Transit Casualty
                                                           ________________



          Co. v. Security Trust  Co., 441 F.2d 788, 790-91 (5th Cir. 1971),
          ___    ___________________



          where an amended judgment  merely changed a dismissal from  "with



          prejudice" to "without  prejudice," and the  court noted that  in



          the suit at  issue, "plaintiffs  stood in the  exact position  as



          they  did [after the original  order]."  See  also Gegenheimer v.
                                                   _________ ___________



          Galan, 920 F.2d 307, 309-310  (5th Cir. 1991).  This  argument is
          _____



          therefore unavailing.



               Appellant's more  labored argument focuses on  the effect of



          bankruptcy proceedings in extending time limits in non-bankruptcy



                                         -4-



cases involving  the bankruptcy debtor.   An involuntary petition



          in  bankruptcy was filed against  Gershon Navon on  May 14, 1994,



          and was dismissed on June  11, 1996.  Appellant makes a  two-step



          argument.   He first invokes 11 U.S.C.   108(c) of the Bankruptcy



          Code, which states in part:



               [I]f applicable  nonbankruptcy law . . . fixes a period

               for commencing or continuing a civil action . . . on  a

               claim against the debtor, . . . and such period has not

               expired before the date of the filing of  the petition,

               then such period does not expire until the later of --



                    (1)  the end  of such  period, including  any

                    suspension of  such  period occurring  on  or

                    after the commencement of the case; or



                    (2)  30 days after  notice of the termination

                    or expiration of the stay under section 362 .



                    . .



               This section is  applicable, appellant  argues, because  his



          motion for relief sought to continue the civil action on  a claim



          originally filed against the debtor.  Then, relying on subsection



          (1),  he  assumes,  without   citation  of  authority,  that  the



          "suspension  of such period" was  triggered by the automatic stay



          provision  of the Bankruptcy  Code, 11 U.S.C.    362(a)(1), which



          states:



               [A bankruptcy petition] . . . operates as a stay  . . .

               of .  . . the commencement  or continuation . .  . of a

               judicial  . . . action or proceeding against the debtor

               . . . .



               Appellee  counters with  three  arguments.   He first  urges



          that,  given the  passage of  27 months  from the  date  of final



          judgment,  the district court did  not abuse its  discretion.  He



          next argues that the automatic stay of   362 is inapplicable when


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a debtor in possession undertakes affirmative action for his  own



          benefit, citing  Autoskill, Inc. v. National  Educ. Support Sys.,
                           _______________    ____________________________



          994  F.2d 1476 (10th  Cir. 1993).   Finally,  he asserts  that 11



          U.S.C.   108(c) is inapplicable to actions brought by the debtor.



          Instead,  he invokes     108(a), concerning  the commencement  of



          actions by debtors,  which in  his view would  impose an  outside



          limit of two years from the May 1994 judgment.



               All  of appellee's arguments  misfire.  To  begin, the issue



          being purely  legal, abuse of  discretion is not  the appropriate



          standard of review.  Secondly, the  fact that it was the  debtor,



          rather than a creditor, who took this particular step of filing a



          motion,  does   not  alter  the   fact  that  it   constitutes  a



          "continuation" of  an "action  or proceeding against  the debtor"



          within the terms of   362.  The Ninth Circuit, in Parker v. Bain,
                                                            ______    ____



          68  F.3d   1131,  1135-36  (9th   Cir.  1995),  dealt   with  the



          applicability of   362 to an appeal by a debtor, raising the same



          issue.   It said that it  did not need to "spill  a great deal of



          ink"  on the  assertion  "that an  appeal  by the  debtor  cannot
                                                     __



          constitute the continuation of an action against the debtor."  It
                                                   _______



          observed that  seven other circuits had  rejected that rationale.



          We now make the number nine.



               Parker v. Bain  also noted  Autoskill, see 68  F.3d at  1136
               ______    ____              _________  ___



          n.8,  which had held that Bankruptcy Rule 6009, allowing a debtor



          in possession  "[w]ith or  without court approval"  to "prosecute



          any action or proceeding  in behalf of the estate,"  obviated any



          need  to obtain leave of court or release of stay before bringing


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an appeal.  994 F.2d at 1486.  The Parker court was crystal clear
                                             ______



          that "Rule 6009 does  not trump the code's  automatic stay."   It



          relied on the analysis of Rule 6009's history  and purpose by the



          Bankruptcy Court in In  re Capgro Leasing Assocs., 169  B.R. 305,
                              _____________________________



          309-313 (Bankr.  E.D.N.Y.  1994), which  held  that a  debtor  in



          possession  may not proceed with  an appeal of  an action brought



          against him "absent an  order granting relief from  the automatic



          stay,"  id. at 313.   The Bankruptcy Court  concluded that, while
                  ___



          Rule 6009 means  that a trustee  (or debtor in possession)  is no



          longer required  to have  the  approval of  the bankruptcy  judge



          before deciding to commence or defend an  action on behalf of the



          estate, the bankruptcy judge retains power under section  362 "to



          decide  when to  let such  action go  forward."   Id.   The Ninth
                                                            __



          Circuit therefore parted company from Autoskill, and so do we.2
                                                _________



               As  for the applicability of    108(a), our  short answer is



          that by its terms it refers only to periods within which a debtor



          may  "commence an  action";  here, the  action  is one  that  was



          commenced against the debtor.



               But  while  appellee  has  not  come  close  to  the target,



          appellant's thrusts have also fallen short.  As we have noted, he



          has assumed that  the mere existence of an automatic stay under  



          362 triggers the "suspension" referred to in    108(c).  This may


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               2 Indeed, the court in Capgro noted that eight of the twelve
                                      ______

          circuits at that time had held that the automatic stay prevents a

          debtor from appealing the decision of a non-bankruptcy forum,

          where that action was originally commenced against the debtor. 

          169 B.R. at 310.



                                         -7-



be a  common sense  reading,  but it  is not  the  law.   Collier
                                                                    _______



          Bankruptcy Manual setsforth the vital caveatto "such suspension":
          _________________



               Such  a  suspension may  result  from  either state  or

               federal law. . . .

                    . . .  In some jurisdictions state law may dictate

               suspension  of   a  statute   of  limitations   when  a

               bankruptcy or  another court proceeding  has stayed the

               initiation  of  an  action.     Such  suspension  would

               presumably  be  included within  the  terms of  section

               108(c),  adding  the entire  duration of  the automatic

               stay to the applicable time period. [Footnote omitted.]



                    However, absent  such a provision in  state law, a

               statute of limitations or  other deadline for an action

               against a debtor . . . is extended for only  the second

               period  set  forth in  section  108(c),  30 days  after

               notice  of  the   termination  or  expiration  of   the

               automatic stay . . . .



          Lawrence P. King, ed.,  1 Collier Bankruptcy Manual,    108.04 at
                                    _________________________



          108-14, 15 (3d ed. 1996).



               This  interpretation also  accords with  the contemporaneous



          analysis of the section in the House Report accompanying the 1977



          Bankruptcy Code revision.  After stating that subsection (c) of  



          108  extends the statute of limitations  for creditors (which, as



          we have pointed out, it also does for debtors in possession), the



          report states: 



               [I]f a creditor is stayed from commencing or continuing

               an action against the  debtor because of the bankruptcy

               case, then  the creditor is permitted  an additional 30

               days after notice  of the  event by which  the stay  is

               terminated,  whether  that  event  be  relief from  the

               automatic  stay  .   .  .  ,  [or]the  closing  of  the

               bankruptcy case (which terminates the stay) . . . .



          H.R. Rep. No. 95-595, at 318 (1977).



               The  only Maine  statute we  have found  that bears  on this



          issue  is Me.  Rev. Stat. Ann.  tit. 14,    5803,  which mandates



          continuance  of  actions for  recovery  of  a  debt  provable  in



                                         -8-



bankruptcy during  bankruptcy proceedings, but only  "on petition



          of  .  . .  creditors before  or  after the  commencement  of the



          action."  This is of no avail to appellant.



               We have, however,  conclusive evidence of the absence of any



          suspension-extending provision of Maine  law in a recent decision



          of the Maine Supreme Judicial Court, Duprey v. Eagle Lake Water &
                                               ______    __________________



          Sewer Dist., 615 A.2d 600, 603-604 (Me. 1992).  In that case, the
          ___________



          court made  known its views  as to  the meaning of  the identical



          "any suspension" language  of 11 U.S.C.    108(b).   It chose  to



          adopt the reasoning of  the Bankruptcy Court for the  District of



          Maine that    362 "does not stay the running of any time period,"



          but  only prevents  an entity  from exercising  a power,  such as



          enforcing a judgment.  In re Thom, 95 B.R. 261, 262-63 (Bankr. D.
                                 __________



          Me. 1989).



               The  motion for relief having  been filed more  than 30 days



          after notice  of the termination of  bankruptcy proceedings,3 and



          there  having  been  no suspension  of  the  one  year period  of



          limitations,  we  hold that  the district  court  did not  err in



          declaring it untimely.



                       II. Viability of the Rule 60(b)(6) Claim



               Appellant faces  formidable hurdles  in pursuing a  60(b)(6)



          claim.  There must exist "exceptional" circumstances that justify



          "extraordinary" relief.   Valley Citizens for  a Safe Environment
                                    _______________________________________



          v. Aldridge, 969 F.2d 1315, 1317 (1st Cir. 1992).
             ________


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               3 We discuss infra at page 11 our assumption of notice.
                            _____



                                         -9-



We  begin by  accepting for purposes  of our  legal analysis



          appellant's  summary,  in his  reply  brief,  of his  motion  for



          relief,   which   he   contends   describes   both   "exceptional



          circumstances" and a "fraud upon the court":



               For the purposes of this appeal, Simon has acknowledged

               that he  deceived not only Gershon Navon,  but also the

               judicial  system, including  both the  bankruptcy court

               and  the federal  district court,  with respect  to the

               nature  and  extent  of  his interest  in  ACI's  claim

               against Maine Coast.  Simon not only consciously failed

               to  reveal to  Gershon Navon  [a fellow  stockholder in

               Maine Coast], the creditors of Maine Coast, the Trustee

               in the Maine Coast  bankruptcy and the Bankruptcy Court

               that  he  held  100%  of the  interest  in  ACI's claim

               against Maine Coast while  professing at all times that

               his  interest was  indirect  and negligible.   He  even

               testified  at  the  trial   that  ACI  was  still  owed

               considerable sums of money, when he previously had paid

               to  ACI  the  amount owed  to  the  penny  and took  an

               assignment of ACI's claim.  No wonder Simon always took

               the position Maine  Coast had no  defense or offset  to

               ACI's claim.



               Appellant's first hurdle is  the rule of mutual exclusivity,



          that is, that a  motion under Rule 60(b)(6) "is  only appropriate



          when none of the first five subsections pertain," Cotto v. United
                                                            _____    ______



          States, 993 F.2d 274, 278 (1st Cir. 1993); see also Liljeberg  v.
          ______                                     ___ ____ _________



          Health Services  Acquisition  Corp., 486  U.S.  847, 863  &  n.11
          ___________________________________



          (1988);  Wright & Miller, supra,   2864 at 357.  One rationale of
                                    _____



          this  rule is obvious and  relevant here:   were Rule 60(b)(6) to



          allow a second out-of-time bite at the same apple, the stringent,



          finality-enforcing  limitation period  of  60(b)(1)-(3) would  be



          eviscerated.  This rule, however, does have a small escape hatch,



          in  the event  of  "extraordinary  circumstances."  Ackermann  v.
                                                              _________



          United States, 340 U.S.  193, 197-202 (1950); Cotto, 993  F.2d at
          _____________                                 _____



          278; Wright & Miller, supra,   2864 at 365.
                                _____



                                         -10-



Here, however,  nothing which  could fall under  that rubric



          has been suggested.   The 60(b)(6) claim is one solely for deceit



          and fraud on the part  of one party toward another, with  nothing



          to distinguish it from a timely 60(b)(3) claim except that it was



          filed some two months beyond the 30 days after the termination of



          bankruptcy proceedings allowed by   108(c).



               The   circumstances   of  this   delay   demonstrate  rather



          forcefully   the   absence   of   any    special   justification.



          Commendably,  appellant's counsel  has  candidly acknowledged  by



          affidavit  that he  first learned  in December  1995 of  leads to



          information that Simon  had misled defendants, and  that over the



          next  couple  of months  he  received  documents and  information



          supportive of a motion for relief from judgment.  His reasons for



          not filing such  a motion  earlier were that  (1) he  anticipated



          that  more  information  would  be forthcoming,  and  thought  it



          "prudent  to  collect  as  much information  as  possible  before



          filing"; (2) that he considered that all activity in the case was



          stayed by the bankruptcy  proceedings of the two Navons;  and (3)



          that he had no notice of the dismissal of his client's bankruptcy



          proceedings  until late July or  early August when  he was orally



          informed by counsel for Simon.



               On this state of  the record, we must assume  that appellant



          received notice  of the  dismissal of his  involuntary bankruptcy



          case.  Bankruptcy  Rule 2002(f)  requires that the  clerk of  the



          bankruptcy court "or some  other person as the Court  may direct,



          shall give the debtor . . . notice by mail of . . . (2) dismissal


-11-



of the case .  . . ."  There  is no suggestion that this  was not



          done.



               In  effect, appellant  asks  us to  allow  a tardy  60(b)(3)



          motion to parade under the raiment of 60(b)(6), where the reasons



          for  the  tardiness lay  in  counsel's  strategic preference  and



          mistaken legal  assumption concerning the effect  of an automatic



          stay,  and  the  failure  of  communication  between  client  and



          counsel.  These are not the kind of "extraordinary circumstances"



          justifying departure  from the normal maximum  limitations period



          required by Rule 60(b)(3).



                              III.  Fraud Upon the Court



               Rule 60(b),  after delineating the  six bases  of a  motion,



          goes  on to  state that  the  power of  a  court to  set aside  a



          judgment for fraud upon the court is not limited by the rule.  It



          is an explicit recognition of the traditional inherent power of a



          court to protect its own essential functioning and integrity.  It



          is, however, a power rarely to be used. 



               We  recently had occasion to review the scope of "fraud upon



          the  court" in connection with the parallel provision of the rule



          allowing  a court to entertain an independent action to relieve a



          party from a judgment for fraud upon the court.  Geo. P. Reintjes
                                                           ________________



          Co. v. Riley Stoker Corp., 71 F.3d 44, 46-49 (1st Cir. 1995).  In
          ___    __________________



          that opinion, we  noted the  effect of Hazel-Atlas  Glass Co.  v.
                                                 ______________________



          Hartford-Empire  Co., 322  U.S.  238 (1944),  overruled on  other
          ____________________                          ___________________



          grounds, Standard Oil Co. of  Cal. v. United States, 429 U.S.  17
          __________________________________    _____________



          (1976), in expanding the  range of fraud not subject  to the one-


-12-



year limitation  to "include fraud committed by  `officers of the



          court.'"  Id.  at 47-48.   We also  characterized our concept  of
                    __



          fraud upon the court in Aoude  v. Mobil Oil Corp., 892 F.2d 1115,
                                  _____     _______________



          1118 (1st Cir. 1989), as consisting of an "`unconscionable scheme



          calculated  to  interfere  with  the  judicial  system's  ability



          impartially to adjudicate a  matter' involving an officer of  the



          court."  Reintjes,  71  F.3d  at  48  n.5.    We  noted  a  sharp
                   ________



          demarcation, saying, "In sum, perjury alone, absent allegation of



          involvement  by an  officer of  the court  . .  . has  never been



          sufficient."  Id. at 49.
                        __



               In  the  case at  bar, nothing  has  been suggested  or even



          insinuated  that takes  this  case beyond  allegations of  garden



          variety  deceit  and fraud  by  a party.    As a  matter  of law,



          appellant's  allegations do  not  rise to  the  level of  a  Rule



          60(b)(6)  claim or to fraud  upon the court.   The district court



          did not err in denying the motion for relief.



               Affirmed.
               ________


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