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 1997-12

Securities and Exch v. Dahlstrom ( 1997 )


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  •                   UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 95-20591 c/w No. 95-20804
Summary Calendar
SECURITIES AND EXCHANGE COMMISSION
Plaintiff-Appellee
VERSUS
KARL DAHLSTROM ET AL
Defendants
KARL DAHLSTROM
Defendant-Appellant
Appeal from the United States District Court
For the Southern District of Texas
(92-CV-2992)
December 15, 1997
Before DUHÉ, DeMOSS, and DENNIS, Circuit Judges.
PER CURIAM:1
Karl Dahlstrom has appealed the district court’s order denying
his motion for reconsideration of the district court’s nunc pro
tunc order requiring disgorgement of funds received by Dahlstrom as
1
Pursuant to 5TH CIR. R. 47.5, the Court has determined that this
opinion should not be published and is not precedent except under
the limited circumstances set forth in 5TH CIR. R. 47.5.4.
a result of the sale of stock of two corporations in violation of
the securities laws.     Dahlstrom contends that his disgorgement
obligation was discharged in bankruptcy.     The resolution of this
issue involves the interpretation of statutory law and we therefore
review de novo.    See In re Reading Co.,
    115 F.3d 1111
    , 1123-24 (3d
Cir. 1997) (stating that question whether corporation’s obligation
under CERCLA had been discharged in bankruptcy was subject to
plenary review); see also In re Bruner,
    55 F.3d 195
    , 197 (5th Cir.
1995) (district court’s interpretation of Bankruptcy Code on review
of bankruptcy court’s ruling on dischargeability complaint was
reviewed de novo.)    Based upon a careful review of the applicable
law, the arguments of the parties and the record on appeal, we hold
that Dahlstrom’s obligation under the securities laws to disgorge
the funds was not discharged in Dahlstrom’s bankruptcy.
The bankruptcy code provides for the discharge of all debts
that are the personal property of the debtor which arose before
debtor filed for bankruptcy.     See 11 U.S.C. §§ 524   and 727(b).
Debt is defined as “liability on a claim,” 11 U.S.C. § 101(12), and
“claim” is described broadly to include a “right to payment”.    11
U.S.C. § 101(5); see In re Southmark, Inc.,
    88 F.3d 311
    , 317 (5th
Cir. 1996), cert. denied,
    117 S. Ct. 686 
    (1997).          Since the
Bankruptcy Code does not define “right to payment”,       when such
rights arise is determined by non-bankruptcy state or federal
substantive law.     See Lemelle v. Universal Mfg. Corp.,
    18 F.3d 1268
    , 1274 (5th Cir. 1994).      The federal securities laws make
2
clear that the SEC’s “right to payment” for bankruptcy purposes
arose at the time Dahlstrom committed the acts which gave rise to
the claim for disgorgement.
Dahlstrom’s Chapter VII bankruptcy petition was filed on
August 1, 1990.   The SEC’s statement of undisputed facts filed in
connection with the motion for summary judgment provides that the
stock offerings complained of in its complaint were made between
April 10, 1991, and December 5, 1991.   These events occurred after
the filing of the bankruptcy.
Dahlstrom also argues that the district court erred in failing
to stay execution of its nunc pro tunc order pending appellate
review.   Because Dahlstrom’s substantive appeal is without merit,
he cannot show that the district court abused its discretion in
refusing to stay enforcement of the disgorgement order.
AFFIRMED.
3