48 F. 3d 1231 - Canady Sandlin v. L Canady L Smith

After examining the briefs and appellate record, this panel has determined unanimously that oral argument would not materially assist the determination of this appeal. See Fed. R.App. P. 34(a); 10th Cir. R. 34.1.9. This cause is therefore ordered submitted without oral argument.

Glen K. Sandlin, pro se, appeals several bankruptcy court orders issued during his adversary proceeding. We affirm.

In June 1990, Sandlin obtained a judgment in the district court against Corporate Interiors, Inc. for $142,226.00 plus interest, attorneys fees, and costs. While Sandlin's post-judgment collection proceedings were pending, Douglas L. Canady filed for personal bankruptcy. Canady is the president, sole director, and sole shareholder of Interior Services, Inc., which Sandlin claims commenced business operations in November 1989 as a successor in interest of Corporate Interiors, Inc.

On January 14, 1991, Sandlin commenced an adversary proceeding in the bankruptcy court alleging that he was a creditor of Canady with respect to the judgment obtained in federal court. In his adversary proceeding, Sandlin objected to Canady's discharge on the grounds that Canady (1) knowingly made a false oath or account in connection with his bankruptcy case in violation of 11 U.S.C. 727(a)(4)(A), and (2) refused to obey a subpoena in violation of 11 U.S.C. 727(a)(6)(A). In addition, in the event the bankruptcy court granted Canady's petition, Sandlin sought to exclude his claim against Canady's estate from the order of discharge pursuant to 11 U.S.C. 523(a), on the ground that Canady wrongfully diverted corporate funds and property from Interior Services for his personal benefit, knowing that the corporation was undercapitalized or insolvent. Sandlin maintained that this conduct by Canady (1) constituted "fraud or defalcation while acting in a fiduciary capacity" for the purpose of 11 U.S.C. 523(a)(4), and (2) resulted in a "willful and malicious injury" to Interior Services within the meaning of 11 U.S.C. 523(a)(6).

On September 27, 1991, the bankruptcy court dismissed Sandlin's 11 U.S.C. 727(a) claims and granted defendant Canady summary judgment as to Sandlin's 523(a) claims. On appeal, the district court affirmed the dismissal of Sandlin's 727(a) claims, but reversed and remanded his 523(a) claims for further proceedings. Sandlin appealed to the Tenth Circuit contending that the district court erred in affirming the bankruptcy court's dismissal of his 727(a) claims. On June 24, 1992, we dismissed the appeal for lack of jurisdiction because the order appealed from remanded the case for further proceedings and therefore had not disposed of the entire controversy between the creditor and debtor. See Sandlin v. Canady, No. 92-1100 (10th Cir. June 24, 1992); see also Sandlin v. Canady, No. 92-1169, 1993 WL 141203 (10th Cir. Apr. 27, 1993).

In the interim, on February 5, 1992, the bankruptcy court imposed monetary sanctions of $1000 against Mr. Sandlin's attorney, David L. Smith, pursuant to Fed. R. Bankr.P. 9011. On appeal, the district court upheld $730 in sanctions for filing and pursuing the 727(a) claims and reversed $270 for pursuing the 523(a) claims. Sandlin and Smith appealed to the Tenth Circuit, and after initially affirming the district court's decision, see Sandlin v. Canady, No. 92-1169, 1993 WL 26722 (10th Cir. Feb. 4, 1993), on April 27, 1993, we dismissed the appeal sua sponte for lack of jurisdiction and vacated our prior order. Sandlin v. Canady, No. 92-1169, 1993 WL 141203 (10th Cir. Apr. 27, 1993).

Shortly after the district court remanded Sandlin's case, he filed the first of several motions and appeals in an attempt to avoid trial in the bankruptcy court on his 523(a) claims. On March 8, 1993, Sandlin filed a motion for abstention on the ground that his 523(a) claims required resolution of certain unsettled state-law issues. Sandlin argued that these issues would be resolved in a case scheduled for jury trial in state court on August 23, 1993. The bankruptcy court, however, summarily denied Sandlin's motion for abstention, stating that it was "untimely [and] without merit." See Appellant's Br., No. 94-1391, attach. 1 at 4. On appeal, the district court rejected Sandlin's abstention argument as moot because the state court had dismissed Sandlin's related case. The district court also denied Sandlin's motion for stay of the trial in bankruptcy court pending his further appeal to the Tenth Circuit. Still unsatisfied, Sandlin directly requested the Tenth Circuit to stay or enjoin the trial in bankruptcy court pending his appeal of the district court decision. We denied Sandlin's motion.2

Having apparently exhausted his efforts in the district court and Tenth Circuit, Sandlin returned to the bankruptcy court and filed several other motions in an effort to avoid trial. On August 18, 1993, Sandlin filed a verified motion in bankruptcy court seeking to continue the trial of the adversary proceeding pending resolution of his appeal to the Tenth Circuit. Sandlin argued that the denial of his request for a continuation would pose a "threat of irreparable harm to Mr. Sandlin and his Seventh Amendment right to a jury trial." Id. On August 24, 1993, the bankruptcy court denied Sandlin's verified motion and ordered the case to proceed to trial before the court on October 6 and 7, 1993. Sandlin subsequently filed a verified motion requesting the bankruptcy court to stay its August 24 order pending appeal on the grounds that (1) Sandlin did not waive his Seventh Amendment right to jury trial, and (2) the bankruptcy court abused its discretion by refusing to abstain from hearing Sandlin's 523(a) claims. On September 8, 1993, the bankruptcy court ordered as follows:

The Plaintiff also seeks to stay the trial in this case while he prosecutes his singularly meritless appeal. Having already denied the Plaintiff's motion to vacate the trial herein, and for the same reasons, the motion to stay these proceedings is denied. The matter shall go forward to trial as scheduled on October 6 and 7, 1993.

Appellant's Br., No. 94-1391, attach. 1 at 5.

Based on these bankruptcy court rulings, Sandlin, once again, appealed to district court. On September 16, 1993, Sandlin filed an interlocutory appeal concerning the bankruptcy court's denial of his motion to vacate the trial setting and his motion to stay. Sandlin also filed a motion to stay pending the appeal in district court. The district court summarily denied Sandlin's interlocutory appeal as well as his motion for stay. Thus, it was not until after Sandlin had filed "at least eight motions and appeals, involving no fewer than four district judges and the Tenth Circuit, all for the sole purpose of avoiding trial in the bankruptcy court," that the case proceeded to trial on October 6 and 7, 1993. See id.

Following the two-day trial of Sandlin's 523(a) claims, the bankruptcy court concluded that Interior Services was not the successor to Corporate Interiors, and therefore Canady was not liable for Sandlin's federal court judgment. The bankruptcy court also determined that, even if Interior Services succeeded to the rights and obligations of Corporate Interiors, Sandlin was not entitled to an exception from Canady's discharge under 523(a). Sandlin appealed these findings, and asserted, once again, that the bankruptcy court erred rejecting Sandlin's request for abstention or a jury trial. On July 25, 1994, the district court affirmed the bankruptcy court's orders.

In this consolidated appeal, Sandlin raises all of the issues that we previously dismissed for lack of jurisdiction and also appeals the district court's July 24, 1994, order. In sum, Sandlin argues that the bankruptcy court erred in (1) dismissing his claims under 11 U.S.C. 727(a); (2) imposing sanctions against his attorney for filing and pursuing Sandlin's 727(a)(4)(A) claims; (3) denying his request for abstention, or in the alternative, for jury trial; (4) concluding that Interior Services, Inc. is not a successor in interest to Corporate Interiors, Inc.; and (5) concluding that Canady is not liable for the federal court judgment debt and related debts owed by Corporate Interiors, Inc.

On appeal from the district court, we review the bankruptcy court's decision according to the same standards of review as those that governed the district court. Tanaka Bros. Farms, Inc. v. Berger, 36 F.3d 996, 998 (10th Cir.1994); Investment Bankers, Inc. v. Davis, Gillenwater & Lynch, 4 F.3d 1556, 1560 (10th Cir.1993), cert. denied, 114 S.Ct. 1061 (1994); Robinson v. Tenantry, 987 F.2d 665, 667 (10th Cir.1993). We review the bankruptcy court's factual findings for clear error and its legal determinations de novo. Robinson Bros. Drilling, Inc. v. ABB Vetco Gray, Inc., 9 F.3d 871, 872 (10th Cir.1993); Clark v. Valley Federal Sav. & Loan Ass'n, 966 F.2d 1338, 1340 (10th Cir.1992).

Sandlin asserts that the bankruptcy court improperly dismissed his claims under 11 U.S.C. 727(a). After reviewing the record on appeal, we agree with the district court's April 8, 1992, conclusion that the bankruptcy court did not err in deciding the legal and factual issues regarding Sandlin's 727(a) claims. See Appellant's Br., No. 91-1390, attach. 1 at 2. Accordingly, we affirm the bankruptcy court's orders dismissing Sandlin's claims under 11 U.S.C. 727(a)(4)(A) and 747(a)(6)(A).

Next, Sandlin argues that he presented a colorable claim under 727(a)(4)(A) and therefore the bankruptcy court incorrectly imposed sanctions against his attorney. Sandlin previously appealed this identical issue, and our February 4, 1993, Order and Judgment affirmed the bankruptcy court's order. See Sandlin v. Canady, 986 F.2d 1426, 1993 WL 26772 (10th Cir. Feb. 4, 1993). Although that Order and Judgment was vacated on jurisdictional grounds, all jurisdictional defects have since been resolved. Sandlin's arguments have remained the same and neither the facts nor the law have changed since his previous appeal. Accordingly, we incorporate the reasoning of our February 6, 1993, decision and affirm the bankruptcy court's imposition of sanctions for the reasons set forth therein.

We need not address the merits of Sandlin's argument that the bankruptcy court erred in denying his motion to abstain. Our resolution of this issue is governed by the law of the case. Sandlin previously appealed the denial of this motion, and we affirmed the dismissal of that appeal on mootness grounds. See Sandlin v. Canady, 9 F.3d 116, 1993 WL 432567 (10th Cir. Oct. 27, 1993).

In its order of July 23, 1994, the district court addressed Sandlin's three remaining arguments: that the bankruptcy court improperly denied his request for jury trial; that the bankruptcy court erroneously found Interior Services was not the successor to Corporate Interiors; and that the bankruptcy court improperly refused to grant Sandlin's request for an exception to the discharge of the judgment debt under 11 U.S.C. 523(a). We have reviewed the record and conclude the district court did not err. The district court's judgment is therefore affirmed for the reasons cited in its July 23, 1994 order.

Canady alleges that Sandlin's arguments on appeal are frivolous and requests an order awarding him costs and attorneys' fees incurred in defending Sandlin's related appeals. An appellate court may assess just damages, including attorneys' fees and single or double costs, when an appeal is frivolous or brought for purposes of delay. Fed. R.App. P. 38; Doyle v. Oklahoma State Bar Ass'n, 998 F.2d 1559, 1571 (10th Cir.1993); Olson v. Coleman, 997 F.2d 726, 728 (10th Cir.1993); Braley v. Campbell, 832 F.2d 1504, 1510 (10th Cir.1987). "An appeal is frivolous when the result is obvious, or the appellant's arguments of error are wholly without merit.' " Braley, 832 F.2d at 1510 (quoting Taylor v. Sentry Life Ins. Co., 729 F.2d 652, 656 (9th Cir.1984)). We have previously expressed our opinion that "Rule 38 should doubtless be more often enforced than ignored in the face of a frivolous appeal.' " Id. at 1511 (quoting WSM, Inc. v. Tennessee Sales Co., 709 F.2d 1084, 1088 (6th Cir.1983)).

Sandlin's pro se status certainly does not prohibit us from sanctioning him for a frivolously filed appeal. See Olson, 997 F.2d at 728. We and our sister circuits have not hesitated to impose sanctions "where even a non-lawyer should have been aware that his conduct was frivolous." Finch v. Hughes Aircraft Co., 926 F.2d 1574, 1579 (Fed. Cir.1991); see, e.g., Anderson v. Steers, Sullivan, McNamar & Rogers, 998 F.2d 495, 496 (7th Cir.1993), cert. denied, 114 S.Ct. 1060 (1994); Maisano v. United States, 908 F.2d 408, 411 (9th Cir.1990). Such is unquestionably the case here.

Sandlin has a long history of litigation and relitigation of the same issues and he has persisted in appealing arguments which are utterly baseless. More importantly, Sandlin has repeatedly been warned that his prior conduct was frivolous. Given such warnings there is no escaping the conclusion that any reasonable person in Sandlin's position, even though a non-lawyer, would understand that the filing of these related appeals is improper conduct which could subject him to sanctions.

Because of the frivolous nature of this appeal, therefore, we propose to assess double costs and $1500 in attorneys fees as partial reimbursement pursuant to Fed. R.App. P. 38 and 28 U.S.C.1912. Sandlin is ordered to show cause within 15 days why double costs and attorneys fees should not be assessed against him under the statute and rule just cited. See Braley v. Campbell, 832 F.2d 1504, 1515 (10th Cir.1987).