FILED
U.S. Bankruptcy Appellate Panel
of the Tenth Circuit
March 7, 2016
Blaine F. Bates
PUBLISH Clerk
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE TENTH CIRCUIT
IN RE ROBERT M. LANE, also known BAP No. WY-15-023
as Bob Lane,
Debtor.
ROBERT M. LANE, Bankr. No. 11-20398
Chapter 7
Appellant,
v. OPINION
GARY A. BARNEY, Chapter 7
Trustee,
Appellee.
Appeal from the United States Bankruptcy Court
for the District of Wyoming
Robert M. Lane, pro se Appellant.
John C. Smiley, (Theodore J. Hartl with him on the brief) of Lindquist & Vennum
LLP, Denver, Colorado, for Appellee.
Before KARLIN, Chief Judge, CORNISH, and MICHAEL, Bankruptcy Judges.
KARLIN, Chief Judge.
Robert Lane appeals an order of the bankruptcy court imposing monetary
sanctions against him for interfering with the sale of estate assets. The order
required that the sanctions be deducted from the money that would otherwise be
available to distribute to Lane after payment of all claims and completion of final
administration of his bankruptcy estate. The issue is whether the bankruptcy court
abused its discretion in imposing sanctions, notwithstanding Lane’s main
argument that he does not have the present ability to pay those sanctions.
I. Background
When Robert Lane filed his Chapter 7 bankruptcy petition in April 2011,
his statements and schedules disclosed no nonexempt assets for the Trustee to
administer. Over the next (almost) five years, following a tip received from
Lane’s former wife detailing significant undisclosed assets, the Trustee uncovered
millions of dollars of assets including numerous pieces of art, valuable coins, and
two multi-million dollar homes located in California and Wyoming. Lane now
admits it is a “40+ million bankruptcy estate.” 1
The Trustee filed multiple adversary proceedings against Lane, his family
members, and family-controlled entities, seeking to revoke Lane’s discharge and
to recover assets for the benefit of the estate. In April 2013, the Trustee reached
two settlements (collectively, the “Settlement Agreements”). One was with Lane
and the other with several close family members. The Settlement Agreements
allowed Lane to retain significant assets, including retirement accounts in an
amount up to $2.5 million; continued use of both homes until the Trustee could
sell them; and retention of some artwork, valuable coins, furnishings, and three
automobiles.
One term of the Settlement Agreement with Lane that was especially
valuable to the Trustee was a requirement that Lane stand down and stop
interfering with the further administration of the estate. The purpose of this
provision was to allow the Trustee to more expeditiously liquidate significant
1
Appellant’s [sic] Opposition to Trustee’s Bill of Costs at 2, in Appellee’s
Appendix (the “Supp. App.”) at 954. In this pleading, which Lane filed in his
bankruptcy case (not in one of his appeals), Lane incorrectly refers to himself as
the “appellant” instead of as the “debtor.”
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assets and pay creditors without further litigation and interference from Lane. 2
That “no interference” promise came in the form of a paragraph where Lane
expressly waived standing in his bankruptcy and further agreed to “not take any
action, directly or indirectly, to obtain standing . . . .” 3 Lane also agreed that he
would
not have any standing to object, join, or otherwise be heard on any
matter or proceeding in any pending or future matter in connection
with administering Debtor’s Bankruptcy Case; this shall include,
but not be limited to, approval of settlements, sale of assets,
allowance or payment of administrative expenses, and allowance or
payment of claims. 4
But Lane did not stand down. Instead, Lane filed numerous pro se
pleadings (to which the Trustee had an obligation to respond), including a
pleading essentially objecting to the Trustee’s compromise of a creditor’s claim,
objecting to the sale of estate property, objecting to the Trustee’s fees, objecting
to the sale of art, and objecting to relief regarding the sale of assets located in
2
As this Court previously stated in another decision emanating from this
bankruptcy, “Lane’s waiver of standing to object was valuable to the Trustee and
the estate, as Lane has filed numerous objections and other pleadings that have
apparently slowed down asset sales and increased administrative costs for the
estate. See, e.g., docket for Case No. 11-20398 (“Docket”), Lane’s supplemental
appendix (“Lane App. 2") at PDF pp. 23 (Docket No. 981—Opposition to
Trustee’s Motion to Sell Estate’s Interest in Bullion Coins Free and Clear); 33
(Docket No. 889—Objection to Application for Writ of Execution for Possession
of Real Property); 46 (No. 778—Objection to Trustee’s Motion to Sell Wilson,
Wyoming Property Free and Clear); 60 (Docket No. 650—Opposition to Trustee’s
Motion to Turnover Post-Petition Insurance Proceeds on Debtor’s Post-Petition
State Farm Insurance Coverages); 68 (Docket No. 589—Opposition to Proposed
Sale of Art); 112 (Docket No. 229—Opposition to Proposed [Family]
Settlement).”In re Lane, Nos. WY–14–053, WY–14–054,
2015 WL 1285976, at
*1 n.5 (10th Cir. BAP Mar. 20, 2015).
3
Order Approving Settlement Agreement Between the Trustee and the
Debtor (the “Settlement Order”) at 9, in Appellant’s Appendix (“Appellant’s
App.”) at 70.
4
Id. at 9-10, in Appellant’s App. at 70-71.
-3-
California. 5 In addition, Lane proceeded to file seventeen appeals from orders of
the bankruptcy court, and then nine appeals to the Tenth Circuit Court of
Appeals—all of which the Trustee was required to defend. 6 This is one of those
appeals, and it centers around just two of his efforts to interfere with the smooth
administration of his estate.
To give context to this dispute, it is important to note that on April 4,
2014, the Trustee, understandably fatigued with Lane’s attempts to interfere with
the estate’s administration, filed his first motion for contempt (the “First
Contempt Motion”). He alleged that the estate had suffered $16,897 in fees and
costs as a result of the breach of Lane’s promise, contained in the Settlement
5
Opinion on Trustee’s Motion for Contempt Sanctions Against Robert M.
Lane (the “First Contempt Decision”) at 4, in Supp. App. at 344. The bankruptcy
court cited these additional pleadings Lane filed that “violated the order
approving the Debtor Settlement Agreement:” (1) Status Report on Proposed
Settlement Agreement Between Trustee Gary Barney and Dr. Galo Tan and
Request to Reject Settlement (Dkt. #391); (2) Opposition to Proposed Sale of
Coins (Dkt. # 409); (3) Debtor’s Objection to Trustee’s Counsel’s Excessive Fee
Request (Dkt. # 479); (4) Debtor’s Opposition to Trustee’s Motion to Strike
Debtor’s Opposition to Proposed Sale of Art (Dkt. # 655); and (5) Debtor’s
Response to Trustee’s Motion for Turnover of California Assets (Dkt # 601).
6
BAP Cases 11-99 (filed 10/2011); 14-7 (filed 02/2014); 14-30 (filed
07/2014); 14-36 (filed 07/2014); 14-39 (filed 07/2014); 14-53 (10/2014); 14-54
(filed 10/2014); 14-61 (filed 11/2014); 15-7 (filed 01/2015); 15-9 (filed 2/2015);
15-23 (filed 06/2015); 15-49 (filed 11/2015); 15-50 (filed 11/2015); 15-51 (filed
11/2015); 15-52 (filed 11/2015); 15-53 (filed 11/2015); and Wyoming District
Court Case No. 15-114 (filed 07/2015). Lane filed all these appeals pro se except
for three. The two attorneys who brought those three appeals withdrew from
representing Lane at the early stages of those appeals. Although final orders have
not been issued in all appeals, to date, the vast majority have been dismissed or
relief denied to Lane. The one exception is In re Lane, Nos. WY–14–053,
WY–14–054,
2015 WL 1285976 (10th Cir. BAP Mar. 20, 2015), in which this
Court remanded to eliminate $3,013 of the $26,139 in fees and costs the
bankruptcy court had allowed the Trustee when he was required to enforce a writ
of execution to evict Lane from the two homes he had been allowed to use
pending their sale.
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Agreement. 7 The Trustee requested the bankruptcy court award $12,000 as an
“appropriate sanction[ ].” 8 Lane defended by saying he did not have $12,000.
The bankruptcy court nevertheless, after a hearing, entered its First
Contempt Decision listing six separate acts that justified the finding of contempt
and the finding that the Trustee had been harmed as a result of Lane’s violation
of the Settlement Order. The bankruptcy court noted that the Trustee and his
counsel had been required to address Lane’s “numerous pleadings rather than
pursue assets of the estate” and that the estate had, as a result, incurred
unnecessary expenses. 9 The bankruptcy court awarded a $12,000 money judgment
against Lane. “Taking [Lane’s] financial condition into consideration,” 10 the
bankruptcy court further ordered the sanctions be deducted from any surplus
distribution that might be payable to Lane at the conclusion of estate
administration or from further undisclosed assets the Trustee might find, rather
than ordering Lane to immediately pay.
The bankruptcy court found “incredulous” Lane’s testimony that he was
not intentionally being obstructive and was only trying to “help.” 11 The
bankruptcy court then ordered filing restrictions be placed on Lane similar to
those that had been placed on him by the United States District Court for the
District of Wyoming 12 (in an order dismissing one of his numerous appeals). Lane
7
Settlement Order, Exhibit 1, in Appellant’s App. at 72.
8
First Contempt Motion at 6, in Supp. App. at 110.
9
First Contempt Decision at 4, in Supp. App. at 344.
10
Id. at 5, in Appellant’s App. at 345.
11
Id. at 6, in Appellant’s App. at 346.
12
Order Granting Motions to Dismiss of Gary A. Barney, As Chapter 7
Trustee and Vikki Lane at 3, in Supp. App. at 357 (stating that Lane had waived
(continued...)
-5-
did not appeal the First Contempt Decision.
Although the Trustee had filed his First Contempt Motion in early April,
2014, thus officially putting Lane on notice that similar actions in violation of the
Settlement Agreement could result in sanctions against him, this did not stop
Lane. On April 11, 2014, following an evidentiary hearing, the bankruptcy court
entered an order (the “Art Sale Order”) authorizing the sale of artwork (“the
Estate Art”) that had not been set over to Lane in the Settlement Agreements. The
Art Sale Order specifically noted the Estate Art would be sold free and clear of
liens, and the court had previously authorized the employment of Heather James
Fine Art (“Heather James”) to effectuate the sale. 13 As Heather James was
attempting to market the Estate Art, in May 2015, Lane emailed Heather James
stating, “If you cho[o]se to sell any of this art between now and the Court’s
ruling (for which a has not yet been determined), you may be required to
purchase it back . . . . I do not think this would be advisable.” 14
After receiving this email, representatives of Heather James contacted the
Trustee and expressed concern about the legal ramifications if they continued to
market and sell the Estate Art. After consulting with the Trustee and confirming
that the bankruptcy court had, in fact, approved the sale of the Estate Art,
Heather James continued its work. Lane then sent Heather James a second email.
This time he indicated that the Estate Art was subject to numerous liens and
12
(...continued)
standing to contest the bankruptcy court order he appealed, noting that Lane “has
a history of abusive and frivolous filings with the Bankruptcy Court and the
District Court, as well as various state courts,” recounting some of Lane’s
“prolonged history of abusing the judicial process,” and incorporating discussions
of “Lane’s abusive history of vexatious and frivolous litigation” from other
litigation).
13
Art Sale Order at 3, in Supp. App. at 196.
14
Trustee’s Second Contempt Motion, Exhibit E, at 2, in Supp. App. at 211.
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falsely stated that the Art Sale Order did not permit the sale free and clear of
liens. He also suggested that the sale would create “unnecessary liability for your
firm or yourself personally.” 15
Lane’s interference with the Trustee’s attempts to sell estate assets did not
end there. In July 2014, the bankruptcy court entered its order authorizing the
sale of the California property for $6.9 million. Before the sale closed, Lane filed
a notice of lis pendens in the California real estate records. As a result of the
notice, the purchaser refused to close. Ultimately, following further negotiations
and a loss of several months, the purchaser closed on the sale but at a purchase
price of $6.5 million, or $400,000 less than the original purchase price.
Immediately upon learning of the second of the two emails in late May
2014, the Trustee filed his second motion for contempt seeking monetary
sanctions in an amount to be determined after the Trustee provided an accounting
of fees and costs incurred. After hearing evidence, the bankruptcy court found
that Lane had interfered both with the sale of the Estate Art by sending the May
2015 email to Heather James and with the sale of the California property by
recording the lis pendens.
As a result of its findings that Lane had violated the Lane Settlement
Agreement, the Art Sale Order, and his duties as a debtor under 11 U.S.C. § 521,
the bankruptcy court held that monetary sanctions were necessary (the “Second
Contempt Decision”). The bankruptcy court stated that Lane “displays a complete
disregard for the Bankruptcy Code and procedures. The court finds his actions to
be in bad faith, reckless, abusive and grossly disobedient.” 16 It also noted that
15
Trustee’s Exhibit 7 at 2, in Supp. App. at 271.
16
Second Contempt Decision at 7, in Appellant’s App. at 255.
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Lane’s email to Heather James reflected “a pattern of intimidation.” 17 The
bankruptcy court directed the Trustee to submit a Bill of Costs.
The Trustee’s Bill of Costs requested $455,125 in attorneys’ fees plus
$400,000 in additional damages (the “Sale Reduction Damages”) based on the
alleged diminution in value of the California property that resulted after Lane
filed the lis pendens notice. After Lane objected to the Bill of Costs, the
bankruptcy court conducted another evidentiary hearing (the “Sanctions
Hearing”) to determine the appropriate amount of sanctions. 18
During the trial, the court inquired whether the attorneys’ fees sought as a
sanction would ultimately become part of the administrative claims, thus possibly
reducing the recovery of Lane’s prepetition unsecured creditors, or whether the
Trustee was asking for Lane to pay it, personally. The Trustee’s counsel agreed
that the sanctions would be payable only from any surplus funds that Lane might
be entitled to receive, after payment of all claims, and not from assets of the
estate needed to pay other claims. 19
At trial, Lane’s main defense to the award of sanctions was that he was
17
Id. at 6, in Appellant’s App. at 254.
18
During opening arguments at the Sanctions Hearing, the Trustee’s counsel
specifically requested a judgment in favor of the estate for the Sale Reduction
Damages but asked for a judgment in favor of Lindquist & Vennum (the law firm
retained by the Trustee) for the requested attorneys’ fees. It appears Lindquist &
Vennum sought a judgment in its favor (rather than in the estate’s favor) both
because its fees were capped by agreement and because sanctions paid to the
estate would create no deterrence against further sanctionable conduct. For
example, if the surplus was $400,000 and Lane was required to repay the estate
$321,659 from that sum, he would receive $78,341 of the surplus funds. Lane’s
$321,659 payment to the estate would then create a new surplus, since by
definition all claims would have already been paid in order for a surplus to exist.
He would then be entitled to the newly created surplus he had just paid to the
estate.
19
Tr. at 51, in Appellant’s App. at 702.
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unable to pay any amount. He argued that any award would, therefore, be
improper. He also claimed that because he was “sorry” 20 his actions had caused
damages and because he is not an attorney, no sanctions should be awarded.
The bankruptcy court awarded the requested sanctions for attorneys’ fees,
but reduced the amount to $321,659. The bankruptcy court denied approximately
$133,466 in fees it determined that the Trustee had either failed to prove were
directly attributable to Lane’s contemptible conduct, or that were not adequately
described in the Bill of Costs. The bankruptcy court also denied the Trustee’s
request for the Sale Reduction Damages, finding that the Trustee failed to meet
his burden to prove that Lane’s actions (in filing the lis pendens notice) caused
the reduction in the sale price of the California property.
Although the order awarding sanctions (the “Second Sanctions Decision”)
did not make specific findings regarding Lane’s ability to pay, it expressly noted
that Lane had “argued monetary sanctions may not be entered against him due to
his lack of income.” 21 In addition, the bankruptcy court had, just six months
earlier in its First Contempt Decision, discussed Lane’s financial circumstances.
The Second Sanctions Decision stated that, despite Lane’s alleged inability
to pay, his “behavior is not without ramifications and the Court finds the
sanctions appropriate.” 22 It then prohibited the Trustee from collecting the
sanctions from Lane personally, without further order of the court—just as it had
done earlier for the $12,000 sanctions award. It instead again ordered that the
sanctions could be deducted from any surplus ultimately available to Lane at the
conclusion of the administration of his estate or from any further undisclosed
20
Appellant’s Br. at 38.
21
Second Sanctions Decision at 4, in Appellant’s App. at 940.
22
Id.
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assets that might be recovered. 23
II. Standard of Review
We review a bankruptcy court’s decision to issue monetary sanctions under
an abuse of discretion standard. 24
III. Discussion
A. The bankruptcy court did not abuse its discretion in ordering
sanctions against Lane notwithstanding his claim he has no
present ability to pay them.
Lane argues that the bankruptcy court abused its discretion in ordering
sanctions because it failed to consider his ability to pay and failed to make
express findings on that issue. 25 The Trustee counters that the bankruptcy court
admitted—and obviously considered—the evidence of Lane’s alleged inability to
pay, as it ultimately declined to require Lane to pay the sanctions forthwith but
23
Neither the Second Sanctions Decision nor the Amended Judgment on
Trustee’s Bill of Costs mentions Lindquist & Vennum’s request for a separate
judgment in its favor. Instead, judgment is simply granted on the “Trustee’s
request for monetary sanctions against Debtor [ ] in the amount of $321,659.”
Amended Judgment on Trustee’s Bill of Costs at 1, in Appellant’s App. at 941.
24
In re Nursery Land Dev., Inc.,
91 F.3d 1414, 1415 (10th Cir. 1996)
(bankruptcy court’s decision to impose sanctions reviewed for abuse of
discretion).
25
Lane also raises on appeal that the Second Sanctions Decision was
erroneous because it conflicted with an order issued by a Wyoming state court
that had recently found him insolvent in a matter involving child support. The
record indicates that the bankruptcy court did admit into evidence and consider
the state court’s order finding him insolvent. The bankruptcy court was obviously
not bound by the insolvency finding because the issues were not identical in the
two cases, and more importantly, the Trustee was not a party to the state court
litigation. Sierra Club v. Two Elk Generation Partners, Ltd. P’ship,
646 F.3d
1258, 1265 (10th Cir. 2011) (collateral estoppel applies to preclude litigation of
factual issues only if (1) the same issues were necessary to a prior final judgment
on the merits, and (2) the party against whom estoppel is sought was a party to
the prior proceeding and had a full and fair opportunity to litigate).
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instead only required they be paid from any estate surplus or newly discovered
assets.
In support of his position, Lane relies almost entirely on case law
addressing sanctions imposed under Federal Rule of Civil Procedure 11 (“Rule
11"). Case law interpreting Rule 11 provides that courts must consider (1) the
opposing party’s reasonable expenses incurred as a result of the violation,
including reasonable attorneys’ fees; (2) the minimum amount necessary to
adequately deter future misconduct; (3) and “[t]he offender’s ability to
pay . . . .” 26 At the time the bankruptcy court issued the Second Sanctions
Decision, however, the Tenth Circuit had declined to apply the Rule 11
requirements to other available sanctions specifically authorized by rule or
statute, or sanctions that a court may impose inherent to its authority. 27
Approximately one month after the Second Sanctions Decision was issued,
however, the Tenth Circuit decided Farmer v. Banco Popular of North America. 28
For the first time, the Tenth Circuit applied the Rule 11 factors set forth in White
26
White v. Gen. Motors Corp.,
908 F.2d 675, 685 (10th Cir. 1990). Although
the bankruptcy court did not specify under which rule or by what authority it was
assessing sanctions in the Sanctions Decision, we note the decision quickly
followed the First Contempt Decision, which clearly indicated the sanction was
based on the court’s inherent power to hold a party in civil contempt and to award
sanctions under 11 U.S.C. § 105(a). In addition, the record demonstrates that the
sanctions clearly were neither requested nor assessed pursuant to Rule 11.
27
See Hamilton v. Boise Cascade Express,
519 F.3d 1197, 1205 (10th Cir.
2008) (noting that precedents concerning Rule 11 would not be applied to the
context of sanction awards under 28 U.S.C. § 1927); Hutchison v. Pfeil,
208 F.3d
1180, 1186 (10th Cir. 2000) (recognizing that sanctions under the court’s inherent
powers and the court’s authority under 28 U.S.C. § 1927 are not governed by the
same standards as Rule 11).
28
791 F.3d 1246, 1259 (10th Cir. 2015).
-11-
v. Gen. Motors Corp. 29 to an award of sanctions made under 28 U.S.C. § 1927 or
the court’s inherent powers. The Tenth Circuit specifically held that, as in White,
[f]irst, the amount of fees and costs awarded must be reasonable.
Second, the award must be the minimum amount reasonably
necessary to deter the undesirable behavior. And third, because the
principal purpose of punitive sanctions is deterrence, the offender’s
ability to pay must be considered. Depending on the circumstances,
the court may consider other factors as well, including the extent to
which bad faith, if any, contributed to the abusive conduct. 30
Under Farmer, courts must now consider ability to pay when considering
sanctions under 28 U.S.C. § 1927 or the court’s inherent powers. 31
The record here indicates the bankruptcy court did properly admit and
consider evidence offered by Lane regarding his ability to pay. The Trustee also
introduced evidence suggesting that Lane might well have the ability to pay. 32
29
White v. Gen. Motors Corp.,
908 F.2d 675, 684-85.
30
Farmer, 791 F.3d at 1259 (citations omitted) (emphasis added).
31
If the person against whom sanctions is sought will not have to pay the
sanctions until assets sufficient to pay them become available to him, as is the
case here, he obviously does (or will) have the ability to pay. As a result, the
court’s obligation to consider the availability of other assets is lessened or
eliminated.
32
For example, the bankruptcy court was well aware that Lane had been
allowed to retain assets valued in excess of $2.5 million as a result of the
Settlement Agreements, which assets included “assets in Lane’s IRA and
Penobscot Pension Plan in an amount not to exceed $2.5 million,” certain
“collectibles” including books, wine, baseball memorabilia, numismatic coins, a
collection of fountain pens, and some art, three automobiles, and furnishings
located in his two multi-million dollar homes. Settlement Order at 4-5, in Supp.
App. at 36-37; Opinion on Debtor’s Motion to Compel Trustee to Comply with
Terms of Settlement at 2-9, in Supp. App. at 279-86 (referencing gold and silver
coins held as pension assets, exchanged postpetition by Lane’s pension for
artwork valued at $470,700 and finding that “Debtor failed to properly disclose
the value of his Pension Assets upon filing his bankruptcy petition and schedules .
. . .”)
Id. at 8, in Supp. App. at 285. In addition, the record before the bankruptcy
(continued...)
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Although the bankruptcy court did not make a specific factual finding regarding
Lane’s ability to pay, the bankruptcy court did state that it had “carefully
considered the applicable pleadings, evidence and legal arguments presented”
before concluding that sanctions were appropriate notwithstanding Lane’s defense
he lacked regular income. In addition—and perhaps the most telling proof that the
bankruptcy court considered Lane’s poverty defense—is that the court specifically
prohibited the Trustee from any attempts to collect the sanctions from Lane
personally, unless it sought and received further order of the court, and directed
that the sanctions be paid only from any surplus distribution or any additional
undisclosed assets recovered by the Trustee.
Finally, consideration of ability to pay is just one factor that a bankruptcy
court must consider in imposing sanctions. The other factors, including the
history of the parties and the severity of the sanctionable conduct, all support the
bankruptcy court’s decision to impose sanctions. As a result, we hold that the
bankruptcy court did not abuse its discretion in imposing sanctions against Lane,
and in deferring collection of those sanctions until surplus estate assets are
available to pay them.
B. The bankruptcy court did not abuse its discretion in ordering
that the sanctions could be paid from any estate surplus or newly
found assets.
Lane next argues that the bankruptcy court abused its discretion in
awarding sanctions because he claims the bankruptcy court “deceived him” when
32
(...continued)
court demonstrated that when Lane wants to buy something, he seems to be able
to raise the money to do so, notwithstanding his claimed impoverished state. For
example, in April 2014, Lane sought to purchase over thirty separate pieces of art
worth $540,740 from the estate, apparently from his retirement funds. Trustee’s
Second Contempt Motion, Exhibit B in Supp. App. at 199-201.
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it elected to order those sanctions be paid from any surplus assets. 33 He apparently
believes the court was required to warn him this was a possibility so he could
more clearly address it. Substantively, Lane’s argument seems to be that the
surplus distribution, if there is one, would be derived from “prepetition” assets,
and that the court cannot satisfy a sanctions award entered against him after the
petition was filed from those assets.
As a preliminary matter, Lane appears not to have been deceived at all; in
fact, he made the identical argument in his initial pleading opposing the Bill of
Costs—months before the conversation he had with the judge who he now
contends deceived him. 34 Second, case law supports the proposition that a
postpetition creditor is entitled to execute against any surplus from the estate of
its debtor to pay its postpetition claim. 35 Accordingly, the bankruptcy court did
33
Appellant’s Br. at 31. Lane alternatively argues that because there may not
be surplus funds, the bankruptcy court was not authorized to order the sanctions
paid from those surplus funds if any exist. At oral argument, the Trustee admitted
that it was more likely than not that there would be money in the estate after
payment of all claims (assuming Lane stops efforts to impede administration), and
as a result, that Lane may well be entitled to receive surplus assets. The Trustee
also committed the estate to never seeking relief against Lane, personally, if it
turns out there are no surplus assets.
34
Appellant’s [sic] Opposition to Trustee’s Bill of Costs, at 9, in Supp. App.
at 961 (Lane argues “no legal authority has been cited for permitting post-petition
sanctions to be paid out of the pre-petition bankruptcy estate.”) He cited no
authority then, and continues to cite no authority for this position.
35
See In re Rocky Mountain Refractories,
208 B.R. 709, 714 (10th Cir. BAP
1997) (if debtor ultimately proves solvent, creditors may receive any surplus,
specifically claims for interest arising postpetition, ahead of payment to debtor);
In re Yan, No. 04–33526 TEC,
2010 WL 4791839, at *3 (Bankr. N.D. Cal. Nov.
18, 2010) aff’d In re Yan, Nos. NC–10–1476–JuHPa,
2011 WL 2923855, at *7
(9th Cir. BAP July 11, 2011) (finding that two postpetition creditors who had
obtained writs of attachment against the estate could collect against a debtor’s
surplus estate assets); cf. Flanders v. Lawrence (In re Flanders),
517 B.R. 245,
(continued...)
-14-
not abuse is discretion in ordering that the sanctions award could be paid from the
amount that Lane will receive if there are surplus funds.
C. The bankruptcy court did not abuse its discretion in imposing
sanctions in spite of Lane’s contention the Trustee’s motion was
filed for an improper purpose.
Lane contends that the bankruptcy court erred in imposing sanctions
because he claims the evidence showed that the Trustee’s efforts to sanction him
were part of a “campaign of harassment.” 36 The Trustee counters that the
bankruptcy court considered Lane’s arguments and testimony presented at the
Sanctions Hearing, and rejected those arguments when it awarded sanctions. We
agree. The record supports a finding that the Trustee sought sanctions due to
Lane’s well-documented history of interference with the Trustee’s sale of estate
assets and administration of the estate, much of which is in direct breach of the
commitment he made in the Settlement Agreement to not interfere with the sale of
estate assets.
In addition, Lane had leveled much the same accusations at the Trustee
earlier in the case, and on November 5, 2014, after an evidentiary hearing, the
court entered an order denying Lane’s motion for sanctions against the Trustee. 37
The bankruptcy court at that time dismissed Lane’s claim that the Trustee
continued to “demonize” him. Accordingly, the bankruptcy court had already
35
(...continued)
251 (Bankr. D. Colo. 2014) aff’d Flanders v. Lawrence (In re Flanders), No.
CO–14–055,
2015 WL 4641697, at *1 (10th Cir. BAP Aug. 5, 2015) (noting that
surplus funds from the estate distributed to the debtor, either actually or
constructively, were no longer estate property and were subject to garnishment for
collection of a postpetition federal criminal judgment).
36
Tr. at 14, in Appellant’s App. at 665.
37
Order Denying Debtor’s Motion for Sanctions Against Trustee Gary Barney
for Making False Statements to the Court at 1, in Supp. App. at 351.
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ruled against Lane on many, if not all of his claims, and the bankruptcy court
simply did not believe that the Trustee, in bringing the sanctions motion, was
proceeding with an improper purpose. The record amply supports that conclusion.
IV. Conclusion
The bankruptcy court did not abuse its discretion in assessing $321,659 in
sanctions against Lane, which amount represented the reasonable attorneys’ fees
incurred by the Trustee caused by Lane’s improper interference in the sale of
estate assets. The bankruptcy court clearly took Lane’s financial situation into
account when ordering the sanctions, and thus did not abuse its discretion in
ordering that these sanctions be paid from any surplus distribution that may be
available at conclusion of the administration of his estate. Finally, the bankruptcy
court did not abuse its discretion in declining to find the Trustee’s request for
sanctions was brought for any improper purpose. Accordingly, the Second
Sanctions Decision is affirmed.
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