Opposition Brief — Bauer v. Waldschmidt, 109 S. Ct. 1531 (1989) (No. 88-1209)

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No. FEB +f 1989

CLERK

_JOSEPH F. SPANIOL, JR.

aes

IN THE i

Supreme Court of the United States

OCTOBER TERM, 1988

CHARLES W. and NELLIE P. BAUER,

Petitioners,

VS.

ROBERT H. WALDSCHMIDT as Trustee of the Bankruptcy

Estate of Charles W. and Nellie P. Bauer,

SOVRAN BANK/CENTRAL SOUTH (formerly known as Commerce

Union Bank of Clarksville, Tennessee), KENNETH C. BAINES,

and MICHAEL BiGGs,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals For the Sixth Circuit

RESPONSE TO

PETITION FOR WRIT OF CERTIORARI

CraiG J. DONALDSON

Grecory D. SMITH

L. Wess CAMPBELL, II

DEARBORN & EWING

Suite 1200, One Commerce Place

Nashville, TN 37239

(615) 259-3560

Attorneys for Respondents

St. Louis Law Printing Co., Inc., 13305 Manchester Road 63131 314-231-4477

$i, Wn

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QUESTION PRESENTED

1. Whether this Court should grant certiorari to

review a decision of the United States Court of Ap-

peals for the Sixth Circuit which affirmed a District

Court order substituting the Petitioners’ Chapter 7

Trustee as party-plaintiff in an action brought by

the Petitioners against Sovran Bank/Central South

and two of its employees.

TABLE OF CONTENTS

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I.

II.

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deb pe didleas

Summary of Argument Against Granting the Writ

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TABLE OF AUTHORITIES

Cohen v. Beneficial Industrial Loan Corp., 337 U.S.

541 (1949), 93 L.Ed 1528, 69 S.Ct. 1221 (1949) ....

R.J. Enstrom Corp. v. Interceptor Corp., 555 F.2d 277,

ee es EN oh n.d on bone aah en as ke ss

Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368,

66 L.Ed 2d 571, 101 S.Ct. 669 (1981) ............

Jefferson v. Mississippi Gulf Coast YMCA, 73 Bankr.

ee Ft a | errr ere er ere

Layne & Bowler Corp. v. Western Well Works, Inc.,

261 U.S. 387, 392-393, 43 S.Ct. 422, 423-424, 67

ake awa

Liddell v. Board of Education of Ciiy of St. Louis, 693

ys ee RPT | le me, || eee

Metalock Repair Service v. Harman, 216 F.2d 611,

ee ls SIE baca cau sd sdvenancdseces

Prop-Jets, Inc. v. Chandler, 575 F.2d 1322, 1325 (10th

Se eed caren ha eke ee ase ake ws eae

Sierra Switchboard Co. v. Westinghouse Electric Corp.,

789 F.2d 705, 709 (9th Cir. 1986)................

Tignor v. Parkinson, 729 F.2d 977, 981 (4th Cir. 1984) .

Virginia Land Co. v. Miami Shipbuilding Corp., 201

Pad Hy ee ells HOE 4 oso ceedaaceedeasee

In re McCorhill Publishing, Inc., 89 B.R. 393 (Bankr.

2 8 8 2 ee re a er

In re Sylvania Electric Products, Inc., 220 F.2d 423,

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Page

11

11

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8,9

Constitution, Statutes, Rules and Regulations:

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Fe Res Rs bis iu ceaone sana sannsen es keene 1]

IES. 6 0 on hh 4A 0d oak d wa ee 2,4,6

oe eer Sid Rane 1]

Federal Rules of Civil Procedure 25.................. 3,10

Federal Rules of Civil Procedure 25(c) ............... 3

we EL BPOPPEETETT Cee ee eee eee 5,8,9,10

Other Authorities:

4 Collier on Bankruptcy, 4704.02 (15th Ed. 1982)...... 11

Federal Practice and Procedure, 7C C. Wright, A.

Miller & M. Kane, §1962 (2d Ed. 1986) .......... 3,4

vi

INDEX TO APPENDIX

Sovran incorporates by reference the Appendix set forth in

the Petition for Writ of Certiorari. References to materials

within Petitioners’ Appendix shall be made as follows:

** Appendix to Petition for Writ of Certiorari at

= Sag

In addition, Sovran includes the following document as Ap-

pendix | to its Brief:

Order of the United States Bankruptcy Court for

the Middle District of Tennessee entered May

Me CET 606 000006444%0604085450000 sR A-|l

No.

IN THE

Supreme Court of the United States

OCTOBER TERM, 1988

CHARLES W. and Ne.tit P. BAUER,

Petitioners,

VS.

RoBERT H. WALDSCHMIDT as Trustee of the Bankruptcy

Estate of Charles W. and Nellie P. Bauer,

SOVRAN BANK/CENTRAL SOUTH (formerly known as Commerce

Union Bank of Clarksville, Tennessee), KENNETH C. BAINES,

and MICHAEL BiGGs,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals For the Sixth Circuit

RESPONSE TO

PETITION FOR WRIT OF CERTIORARI

OPINIONS BELOW

Sovran incorporates by reference the statement of the Peti-

tioners in their Petition for a Writ of Certiorari regarding the

opinions of the District Court and the United States Court of

Appeals for the Sixth Circuit.

_— Fo

JURISDICTION

Sovran incorporates by reference the statement of the Peti-

tioners in their Petition for a Writ of Certiorari regarding the

timely filing of their petition, but asserts that this Court does

not have the jurisdiction to consider the petition because the

case is not ‘‘in the court of appeals’’ as required by 28 U.S.C.

§1254.

I, STATEMENT OF THE CASE

Respondent Sovran Bank/Central South (‘‘Sovran’’) accepts

the Statement of the Case presented by the Petitioners with the

following exceptions and clarifications:

1. The Petitioners set forth as fact certain allegations in their

Statement of the Case which are not supported by the record.

The Petitioners state that, ‘‘the former Trustee [Mr. Robert H.

Waldschmidt] authorized the Petitioners to proceed on behalf

of the estate and to account to him for any judgment

proceeds.’’ See Petition for Writ of Certiorari at 9, referencing

letter dated November 25, 1985. At the time this letter was writ-

ten, the Petitioners’ bankruptcy case had been closed; the Peti-

tioners had received a discharge; and Mr. Waldschmidt had

been discharged as Trustee for the Petitioners’ bankruptcy

estate. Accordingly, Mr. Waldschmidt had no authority to

authorize the Petitioners to proceed on behalf of an estate

which did not exist. In fact, the letter from Mr. Waldschmidt to

the attorney for the Petitioners clearly states that he could ‘‘pro-

ceed at your own risk.’’ See letter from Robert H. Waldschmidt

to Michael A. Meyer dated November 25, 1985, Appendix K to

Petition for Writ of Certiorari, at A-41.

2. The Petitioners fail to state in their statement of the Case

that the Bankruptcy Court approved the proposed settlement

between the Trustee and Sovran only after a hearing at which

the Petitioners appeared with counsel and presented proof as to

=

the alleged inadequacy of the settlement. See Order entered

May 29, 1987 by the United States Bankruptcy Court for the

Middle District of Tennessee, Appendix 1. In that order, the

Bankruptcy Court found, infer alia, that (1) the Petitioners had

failed to disclose their cause of action against Sovran to the

Trustee; (2) the Petitioners had failed to list the cause of action

as an asset on their bankruptcy petition; and (3) that the propos-

ed settlement was reasonable and in the best interests of

creditors and the estate. /d. The Petitioners appealed the

Bankruptcy Court order to the District Court, which presentiy

has the appeal under advisement.

3. This petition for a writ of certiorari involves the issue of

whether the District Court erred in substituting the Petitioner’s

Chapter 7 bankruptcy trustee as party-plaintiff in an action

brought by the Petitioners against Sovran, which action is based

upon operative facts that occurred prior to the Petitioners’

bankruptcy filing. The District Court ordered the substitution

based upon Rule 25 of the Federal Rules of Civil Procedure,

which provides in relevant part that

‘*In case of any transfer of interest, the action may be con-

tinued by or against the original party, unless the court

upon motion directs the person to whom the interest is

transferred to be substituted in the action or joined with

the original party.’

Fed. R. Civ. Proc. 25(c). The Court of Appeals held that the

order of the District Court allowing the substitution of the

Chapter 7 Trustee as party-plaintiff was interlocutory and

nonappealable. The Court of Appeals noted that such orders

are reviewed only for abuse of discretion. Order Entered by

Sixth Circuit Court of Appeals on October 20, 1988, Appendix

A to Petition for Writ of Certiorari at A-6, citing R.J. Enstrom

Corp. v. Interceptor Corp., 555 F.2d 277, 281 (10th Cir. 1977)

and 7C C. Wright, A. Miller & M. Kane, Federal Practice and

ae yer

Procedure, §1962 (2d Ed. 1986). The Court stated that ‘‘Even if

the order of substitution were immediateiy appealable, we

would be unable to detect so much as hint of any abuse of

discretion here.’’ Appendix A to Petition for Writ of Certiorari

at A-6.

The Court of Appeals further held that the District Court

order did not come with the purview of the collateral order doc-

trine announced in Cohen v. Beneficial Industrial Loan Corp.,

337 U.S. 541 (1949), because the decision did not involve an

‘‘important”’ issue. Appendix A to Petition for Writ of Cer-

tiorari at A-4. Specifically, the Court of Appeals stated that

**We are not persuaded that the question is an ‘important’

one, because . . . the argument that substitution was im-

proper appears to border on the frivolous. Questions that

obviously admit of only one answer . . . are not important

enough to justify consideration in separate interlocutory

appeals.”’

Id. at A-4. The Petitioners now present the same argument to

this Court.

Il. SUMMARY OF ARGUMENT AGAINST GRANTING

THE WRIT OF CERTIORARI

The issue presented is whether this Court should grant cer-

tiorari to review the decision of United States Court of Appeals

for the Sixth Circuit which affirmed a District Court order

substituting the Petitioners’ Chapter 7 Trustee as party-plaintiff

in an action brought by the Petitioners against Sovran and two

of its employees.

Sovran submits that this Court does not have jurisdiction to

decide this case because it was not properly in the Court of Ap-

peals, as required by 28 U.S.C. §1254. The order complained of

by Petitioners is not a final order or a reviewable collateral

order and therefore the Court of Appeals properly dismissed the

appeal for lack of jurisdiction.

— oo

Sovran submits further that the Petitioners fail to set forth

**special and important’’ reasons for granting the writ of cer-

tiorari as required by Supreme Court Rule 17. The Petitioners

do not assert that the decision of the Court of Appeals conflicts

with decisions of other courts of appeal. Nor do the Petitioners

allege misconduct by either the District Court or the Court of

Appeals. Finally, the Petitioners cannot establish that the

Court of Appeals decided an ‘‘important’’ question of federal

law either not previously addressed by this Court or in conflict

with a decision by this Court.

ey ee

Ill. ARGUMENT

A. The Decision of the District Court is Not a Final

Order and Therefore this Court Does Not Have

Jurisdiction to Review the Decision by Certiorari. |

The authority of the Supreme Court to review decisions of h

lower courts by certiorari is established by 28 U.S.C. §1254,

which provides, in relevant part, that

*“Cases in the courts of appeal may be reviewed by the

Supreme Court by the following methods:

(1) By writ of Certiorari granted upon the petition of

any party to any civil or criminal case, before or after

rendition of judgment or decree.”’

* * *

28 U.S.C. §1254. The fundamental requirement of the statute

— that cases be ‘‘in the court of appeals’’ — is not satisfied in

this case. The Court of Appeals properly dismissed the appeal

from the District Court for lack of jurisdiction because it held

the decision of the District Court was neither a final order nor

an appealable collateral order. The Petitioners do not argue

that the order of the District Court, substituting Petitioner’s

Chapter 7 bankruptcy trustee as party-plaintiff in an action

brought by Petitioners against Sovran and two of its employees,

is a final order. Instead, the Petitioners contend that the order

is a collateral order within the meaning of Cohen v. Beneficial

Industrial Loan Corp., 337 U.S. 541, 93 L.Ed. 1528, 69 S.Ct.

1221 (1949) and Firestone Tire & Rubber Co. v. Risjord, 449

U.S. 368, 66 L.Ed. 2d 571, 101 S.Ct. 669 (1981).

There appears to be no conflict within the Courts of Appeal

on the issue that a substitution order is interlocutory and non-

appealable, and there is no authority for the proposition that

such an order is a collateral order within the meaning of Cohen.

See, e.g., Virginia Land Co. v. Miami Shipbuilding Corp., 201

owes

F.2d 506, 508 (Sth Cir. 1953) (order denying substitution of par-

ties, which rested in the discretion of the District Court, was not

appealable); Liddell v. Board of Education of City of St. Louis,

693 F.2d 721, 723, n.6 (8th Cir. 1981) (portion of district court

order which added school district as defendant in desegregation

suit not appealable); Metalock Repair Service v. Harman, 216

F.2d 611, 611-612 (6th Cir. 1954) (order directing joinder of adi-

tional parties defendant was interlocutory and non-appealable);

Prop-Jets, Inc. v. Chandler, 575 F.2d 1322, 1325 (10th Cir.

1978) (order joining second corporation as a party-defendant

was interlocutory and non-appealable); /n re Sylvania Electric

Products, Inc., 220 F.2d 423, 425 (Ist Cir. 1955) (court denied

petitioner’s motion for leave to file petition for writ of man-

damus directing district court to vacate unappealable in-

terlocutory order allowing substitution of party-plaintiff). In

Sylvania Electric Products, the Court stated that Congress, in

following a policy against allowing ‘‘piecemeal appellate

review’’ has in general provided for judicial review only of final

decisions. 220 F.2d at 424. The Court noted that this policy

was adhered to even in cases in which appellate review of an in-

terlocutory decision might prevent a lengthy trial. /d. at 425.

The Petitioners assert that the substitution order has the ef-

fect of deciding the case on the merits; however, Petitioners

acknowledge that they can object and be heard with regard to

any settlement of the action proposed by the Trustee. Indeed,

the present case is rife with the sort of ‘‘piecemeal review’’ of

which the court in Sy/vania Electric Products warned: the Peti-

tioners have appealed the substitution order from the District

Court to the Court of Appeals, and now attempt appeal to this

Court, while at the same time challenging on appeal to the

District Court the decision of the Bankruptcy Court approving

the proposed compromise and settlement of the action. As the

Court of Appeals specifically noted, the Petitioners can appeal

the Bankruptcy Court order to the Court of Appeals if un-

satisfied with the result in District Court. See Appendix A to

Petition for Writ of Certiorari at A-5. At that time, the Court

— vo

of Appeals can decide the correctness of the final judgment and

all interlocutory orders in this case. Thus, the Petitioners can-

not establish an important element of the Cohen test: that if the

present order were not appealable, then the order would effec-

tively be beyond review.

B. The Petitioners Have Failed to Set Forth Special and

Important Reasons for the Granting of a Writ of Cer-

tiorari as Required by Supreme Court Rule 17.

Rule 17 of the Supreme Court Rules sets forth several factors

to be considered by the Court in determining whether to grant

certiorari in a particular case. These considerations include (1)

whether a federal court of appeals has rendered a decision in

conflict with another federal court of appeals on the same ques-

tion; (2) whether a federal court of appeals has so far departed

from the accepted and usual course of judicial proceedings or so

far sanctioned such a departure by a lower court, as to call for

an exercise of this Court’s power of supervision; and (3)

whether a federal court of appeals has decided an important

question of federal law which has not been, but should be, settl-

ed by the Supreme Court, or has decided a federal question in a

way in conflict with applicable decisions of the Supreme Court.

Supreme Court Rule 17. The remaining factors outlined in Rule

17 are concerned with conflicts between state law and federal

law, or state court resolutions of federal questions, and are not

applicable of this case.

The Petitioners fail to state any special or important reason

for granting the writ of certiorari in this case. First, the decision

of the Sixth Circuit Court of Appeals does not conflict with the

decision of any other federal court of appeals on the same ques-

tion. Indeed, the Petitioners do not even allege such a conflict.

The Petitioners assert only that the Sixth Circuit’s decision con-

flicts with the decision of a Bankruptcy Court in the Second Cir-

cuit, Jn re McCorhill Publishing, Inc., 89 B.R. 393 (Bankr. S.D.

N.Y. 1988). Even if true, a conflict between a Court of Appeals

onl hte

and a bankruptcy court does not satisfy the requirements of

Rule 17. This is particularly significant in light of this Court’s

previous statement that

**{I]t is very important that we be consistent in not granting

the writ of certiorari except in cases the settlement of which

is of importance to the public as distinguished from that of

the parties, and in cases where there is a real and embar-

rassing conflict of opinion and authority between the cir-

cuit courts of appeal.’’

Layne & Bowler Corp. v. Western Well Works, Inc., 261 U.S.

387, 392-393, 43 S.Ct. 422, 423-424, 67 L.Ed. 712 (1923) (em-

phasis added).

Sovran asserts not only that Petitioners’ reliance on Mc-

Corhill, as evidence of a split among circuits, is misplaced, but

also that McCorhill does not conflict with the decision of the

Sixth Circuit in the present case. In McCorhill, the Bankruptcy

Court held that a Chapter 11 debtor had standing to object toa

claim filed by a creditor, and to assert counterclaims against

that creditor, even though a trustee had been appointed in the

case. Id. at 396. The Court relied largely on the fact that the

Trustee supported the Debtor’s standing to pursue a

counterclaim against its creditor. /d. In the present case, unlike

McCorhill, the Trustee does not support participation by the

Petitioners in the control of the lawsuit against Sovran. While

Sovran cannot speak for the Trustee, this is apparently based on

the fact that the Trustee does not care to trade a certain return

to the creditors of the Petitioners’ estate (based upon the settle-

ment approved by the Bankruptcy Court) for a speculative

recovery on a difficult and costly lawsuit. Thus, unlike Mc-

Corhill, the creditors in this case bear the risks of going forward

— arisk the Trustee, acting on behalf of the creditors, was not

prepared to take.

Second, the Petitioners do not assert that the Sixth Circuit

departed from or sanctioned a departure from the usual course

iia i

of judicial proceedings. The District Court certainly acted

within its authority in substituting the Trustee as party-plaintiff.

Such substitutions are specifically contemplated by the Federal

Rules of Civil Procedure. See Fed. R. Civ. Proc. 25. Neither

the District Court nor the Sixth Circuit have acted in such a way

as to require the supervision of this Court.

Finally, the Sixth Circuit did not decide an ‘‘important’’

question of federal law either not previously addressed by this

Court or in conflict with a decision by this Court. The Sixth

Circuit decided that the decision to substitute the Trustee as

party-plaintiff was not a final order and therefore dismissed the

appeal for lack of jurisdiction. The Sixth Circuit further

specifically held that the decision was not a collateral order

under the Cohen doctrine because it did not implicate an ‘‘im-

portant’’ issue of law. In addition, the Court held that the deci-

sion whether to substitute a party-plaintiff lies within the discre-

tion of the trial court, and that there was ‘‘not a hint of abuse of

discretion’”’ in this case. None of these holdings from which the

Petitioners seek to appeal are important issues of law within the

meaning of Rule 17. Contrary to the Petitioners’ assertions,

these decisions do not pertain to the right of trial by jury or the

power of non-Article III Courts to adjudicate certain controver-

sies. The District Court simply abided by the Rules of Civil pro-

cedure and the clear mandate of the Bankruptcy Code by

substituting as party-plaintiff the true owner of the cause of ac-

tion — the Chapter 7 Trustee to which ownership cf the action

passed at the time of the Petitioners’ bankruptcy filing.

C. The Petitioners’ Remaining Arguments Regarding the

Right to Trial by Jury and Due Process are also

Without Merit.

The Petitioners also assert that the trial court and the Court

of Appeals erred by denying the Petitioners their right to trial by

jury, and further violated their rights to due process. Not only

are these arguments without merit, they have no bearing on the

ie se

issue of whether this Court should grant certiorari to review an

interlocutory order of the District Court. In this case, the

District Court was guided by the United States Bankruptcy

Code, which provides that ‘‘all legal and equitable interests’”’ of

debtors in property, including causes of action, become proper-

ty of the estate. See 11 U.S.C. §541(a) and supporting

Legislative History. The Bankruptcy Code further provides

that che Trustee is the representative of the estate, with the

capacity to sue and be sued. 11 U.S.C. §323(b) and Bankruptcy

Rule 6009. The right to pursue causes of action formerly owned

by the Debtor vests in the Trustee for the benefit of the estate.

Sierra Switchboard Co. v. Westinghouse Electric Corp., 789

F.2d 705, 709 (9th Cir. 1986); Tignor v. Parkinson, 729 F.2d

977, 981 (4th Cir. 1984); Jefferson v. Mississippi Gulf Coast

YMCA, 73 Bakr. 179, 181-82 (S.D. Miss. 1986); see also 4 Col-

lier on Bankruptcy, 4704.02 (15th Ed. 1982). In considering the

Trustee’s role in controlling all property of the estate, including

causes of action, it is clear that the District Court did not abuse

its discretion in substituting the Trustee as party-plaintiff in the

instant lawsuit.

The Petitioners’ argument that the Court of Appeals decision

has deprived them of the right to a jury trial and to due process

under the law is misplaced. First, for the reasons stated above,

the Petitioners do not own or control the cause of action against

Sovran and therefore have no right to demand a jury trial. Se-

cond, none of the cases cited by the Petitioners held that a deb-

tor in a Chapter 7 case has the right to demand a jury trial on

any sort of claim, personal injury or otherwise, which has pass-

ed to the Trustee. Third, the Petitioners take the illogical posi-

tion that a Trustee cannot even seft/e a personal injury claim in

Bankruptcy Court.' However, the mere fact that personal in-

' The Petitioners ignore the fact that the Bankruptcy Court approv-

ed the compromise and settlement but directed the Trustee ‘‘to take all

steps necessary to fully conclude this proceeding and (fo finally settle in

the District Court the cause of action held by the estate against [the

Bank]’’. Bankruptcy Court order entered May 29, 1987. Exhibit 1 at

A-4. (emphasis added).

=e

jury claims should be ‘ried in the District Court does not deprive

the Bankruptcy Court of the authority to approve a com-

promise and settlement of the claim. Finally, the Petitioners

have not been deprived of their right to due process by the

Trustee’s election to settle the claim against Sovran: the

Bankruptcy Code and the Bankruptcy Rules provide them with

the opportunity to appear and object to any settlement propos-

ed by the Trustee. In this case, the Petitioners have objected to

the settlement, and have presented evidence in opposition, and

the Bankruptcy Court has approved the settlement over the

Petitioners’ objections.

In summary, the Petitioners complain that the District Court

failed to abide by the ‘‘plain meaning”’ of certain statutes, and

then proceed to ignore the plain meaning of others. More im-

portantly, the Petitioners have failed to satisfactorily explain

why this Court should grant certiorari to review an interlocutory

decision of the District Court.

IV. CONCLUSION

For the reasons set out above, Sovran requests this Court to

deny the Petition for a Writ of Certiorari. Sovran also requests

such other relief as is just and proper.

Respectfully submitted,

DEARBORN & EWING

By: Craig J. Donaldson, Esq.

By: Gregory D. Smith, Esq.

By: L. Webb Campbell, II, Esq.

Suite 1200, One Commerce Place

Nashville, TN 37239

(615) 259-3560

Attorneys for Sovran Bank

APPENDIX

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE MIDDLE DISTRICT OF TENNESSEE

Case No. 385-00421

Chapter 7 Proceedings

Judge George C. Paine, Il

In Re:

Charles W. Bauer, a/k/a Charles W. Bauer, Jr.,;

and Nellie P. Bauer, a/k/a Nellie Patrick Bauer,

Debtors.

ORDER

(May 29, 1987)

This case came before the Court on the motion of the Debtors

to set aside the Order entered by this Court on February 19,

1987, denying confirmation of the Debtors’ Chapter 13 Plan

and converting the case to Chapter 7, and the motion by Robert

H. Waldschmidt, Trustee, to dispose of the Debtors’ objection

to the proposed compromise and settlement of the estate’s cause

of action against Commerce Union Bank. Also before the

Court was the Debtors’ renewed motion for equitable relief

from the conditions imposed upon conversion to Chapter 13

and for an extension of the sixty (60) day deadline for confirma-

tion of their Chapter 13 Plan. This motion was previously

denied by this Court. Upon consideration of these motions, the

entire record before this Court, the evidence presented by the

Debtors, the Trustee, and Commerce Union Bank of Clarks-

ville, and the arguments of counsel, the Court finds as follows:

1. The Debtors filed for relief under Chapter 7 of the

Bankruptcy Code on February 25, 1985. They received a

discharge of all debts on June 4, 1985. Their case was closed on

June 21, 1985.

a Sn

2. Subsequent to receiving a discharge and the closing of

their bankruptcy case, the Debtors brought an action in the

United States District Court for the Middle District of Ten-

nessee against Commerce Union Bank of Clarksville for con-

duct which allegedly occurred prior to the date of their Chapter

7 petition. The Debtors sought Five Million and 00/100ths

Dollars ($5,000,000.00) in damages in this action. However, the

Debtors had failed to disclose this cause of action as an asset on

their bankruptcy petition or the underlying facts which occurred

prior to the filing of their petition. The Debtors also failed to

inform the Chapter 7 Trustee of this potential cause of action at

any time during the pendency of their bankruptcy case. Based

upon their failure to disclose this asset, the District Court stayed

the District Court proceedings pending reopening of the Deb-

tors’ bankruptcy case.

3. The Debtors then moved this Court to reopen their

bankruptcy case to allow the administration of this asset. The

former Trustee, Robert H. Waldschmidt, joined in this motion

and the case was reopened over the objections of Commerce

Union Bank of Clarksville. Robert H. Waldschmidt was reap-

pointed as Trustee.

4. Subsequent to the reopening of the Debtors bankruptcy

case, the Trustee moved this Court to allow the compromise and

settlement of the estate’s cause of action against Commerce

Union Bank of Clarksville. By the terms of the proposed settle-

ment, the creditors of the Debtors’ Chapter 7 bankruptcy estate

would receive a dividend of approximately Sixty-five cents (65°)

on the dollar. The Debtors objected to the proposed settlement

and moved to convert their case to a case under Chapter 13 of

the Bankruptcy Code. After a hearing held November 4, 1987,

at which the Court heard evidence on both issues, the Court

entered an order allowing the Debtors to convert their case to

Chapter 13. This order provided, inter alia, that failure of the

Debtors to confirm a Chapter 13 Plan by no later than February

3, 1987 (Sixty (60) days from the date of conversion), would

result in the Debtors’ case being reconverted to Chapter 7.

— < pm

6. The Debtors moved this Court for equitable relief from

the Sixty (60) day deadline for confirmation on January 22,

1987. This motion was denied by this Court on January 23,

1987.

7. The Debtors proposed a Chapter 13 Plan and a meeting of

creditors was held on January 27, 1987. Commerce Union Bank

of Clarksville objected to confirmation of the plan, and a con-

firmation hearing was held January 27, 1987. Based upon the

evidence presented at the hearing, the arguments of counsel,

and the entire record in the case, the Court denied confirmation

and ordered the case to be reconverted to Chapter 7. After the

Court announced its decision, but prior to the entry of the

Order, the Debtors renewed their motion for equitable relief

from the Sixty (60) day deadline imposed by this Court for con-

firmation of a Chapter 13 Plan. Subsequent to the entry of the

Order, the Debtors moved this Court to set aside the Order, and

the Trustee moved the Court to dispose of objections to the pro-

posed compromise and settlement.

8. The Court finds that there is no basis for granting

equitable relief from the Sixty (60) day deadline to the Debtors,

nor is there any reason to set aside the Order entered February

19, 1987. The Court specifically finds that the conditions placed

upon the Debtors upon conversion of their case to Chapter 13

were appropriate under the circumstances of this case.

9. The Court also finds that the proposed compromise and

settlement is reasonable and is in the best interest of creditors

and the estate and should be approved.

Based upon the foregoing findings of fact and conclusions of

law, it is hereby

ORDERED that the Debtors’ motions to set aside the order

entered by this Court on February 19, 1987, is DENIED; It is

further

a ae

ORDERED that the Debtors’ renewed motion for equitable

relief is also DENIED; It is further

ORDERED that the Trustee’s motion to dispose of the Deb-

tors’ objection to the proposed compromise and settlement is

GRANTED; It is further

ORDERED that the Trustee is directed and authorized to

take all steps necessary to fully conclude this proceeding and to

finally settle in the District Court the cause of action held by the

estate against Commerce Union Bank.

Entered this ___._—s day of May, 1987.

/s/ Judge George C. Paine, Il

APPROVED FOR ENTRY:

DEARBORN & EWING

/s/ Craig J. Donaldson

/s/ Gregory D. Smith

Suite 1200

One Commerce Place

Nashville, TN 37239

615/259-3560

Attorneys for Commerce Union

Bank of Clarksville

COSNER & WALDSCHMIDT

/s/ Robert H. Waldschmidt

Chapter 7 Trustee

20th Floor

First American Center

Nashville, TN 37238-0064

615/259-2179

6s tte tana tetiee te

pay eee

CERTIFICATE OF SERVICE

I hereby certify that a true and accurate copy of this docu-

ment has been delivered first class, postage prepaid to Mr.

Robert H. Waldschmidt, Chapter 7 Trustee, 20th Floor, First

American Center, Nashville, TN 37238; Ms. Linda W. Knight

of Gullett, Sanford, Robinson & Martin, Counsel for the Deb-

tors, P.O. Box 2757, Nashville, TN 37219-0757; Mr. David

Burn and Mr. Michael Meyer of Burn & Meyer, 172 Second

Avenue North, Suite 202, Nashville, TN 37201; and Mr. Henry

E. Hildebrand, III, Chapter 13 Trustee, St. Cloud Corner, 500

Church Street, Nashville, TN 37219, this 26th day of May,

1987.

Gregory D. Smith