United Student Aid Funds Inc, et al v. Carla Roberts

Filing 511091646

Case: 09-30754

Document: 00511091646

Page: 1

Date Filed: 04/26/2010

IN THE UNITED STATES COURT OF APPEALS United States Court of Appeals FOR THE FIFTH CIRCUIT Fifth Circuit FILED
April 26, 2010 N o . 09-30754 Lyle W. Cayce Clerk

I n the Matter of: CARLA ROBERTS, D eb tor

U N I T E D STUDENT AID FUNDS INC.; SALLIE MAE GUARANTEE S E R V IC E S , INC., A p p e lla n ts v. C A R L A ROBERTS, A p p e lle e

A p p e a l from the United States District Court fo r the Western District of Louisiana U S D C 6:08-CV-1971

B e fo r e KING, WIENER, and DENNIS, Circuit Judges. P E R CURIAM:* R u le 60(b)(3) of the Federal Rules of Civil Procedure allows a party to o b t a in relief from a judgment that was obtained by fraud, misrepresentation, or

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 R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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.

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No. 09-30754 o th e r misconduct. FED. R. CIV. P. 60(b)(3). United Student Aid Funds Inc. and S a llie Mae Guarantee Services, Inc., appeal the denial of their Rule 60(b)(3) m o tio n seeking relief from the bankruptcy court's judgment disallowing their p r o o f of claim against Carla Roberts, an individual debtor. After reviewing the b r ie fs and the record, we affirm for essentially the reasons given by the district c o u r t in its careful and thoughtful opinion, U.S. Aid Funds, Inc. v. Roberts, Civ. N o . 08-1971, 2009 WL 2222943 (W.D. La. July 24, 2009). I . BACKGROUND T h is case centers on a student loan incurred by the debtor, Carla Roberts, fr o m United Student Aid Funds, Inc. (USA Funds). The debt is evidenced by a p r o m is s o r y note signed in 1991 when Roberts consolidated and refinanced her d e b ts . In 2001, Roberts applied for a second consolidation. Sallie Mae

G u a r a n te e Services, Inc. (Sallie Mae), the servicer of the debt, processed that a p p lic a tio n and obtained payment from a third-party purchaser of the debt; at t h a t point, Sallie Mae stamped the promissory note, "PAID IN FULL," and fo r w a rd e d paperwork to Roberts for completion. Roberts then changed her mind, h o w e v e r , and insisted that the consolidation be reversed. Sallie Mae complied, b u t the stamp remained on the promissory note. Later that year, Roberts r e q u e s t e d a copy of the promissory note, which Sallie Mae furnished. I n 2004, Roberts filed a petition for relief under Chapter 13 of the B a n k r u p t c y Code in the United States Bankruptcy Court for the Western D is tr ic t of Louisiana. In her bankruptcy schedules, she listed USA Funds as a c r e d it o r with a claim in the amount of $91,001.38. Shortly thereafter, Sallie Mae file d a proof of claim on behalf of USA Funds, listing an amount of $92,665.57. R o b e r t s 's case was later converted to a liquidation under Chapter 7. On March 2 4 , 2006, Roberts filed an objection to Sallie Mae's proof of claim, alleging that s h e had already paid more than $50,000 on the underlying debt. After a

h e a r in g , the bankruptcy court granted Roberts's objection and disallowed Sallie 2

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No. 09-30754 M a e 's proof of claim; however, the court vacated its order when Sallie Mae e x p la in e d that it did not receive notice of either the objection or the hearing. A hearing on the objection was scheduled for May 1, 2007, but it was c o n tin u e d until July 10, 2007, on Sallie Mae's motion. In the interim, on June 20, 2007, Roberts requested discovery from Sallie Mae, including interrogatories, r e q u e s ts for production, and requests for admission, seeking proof of the correct a m o u n t of the debt owed. The hearing was continued again until July 31, 2007. S a llie Mae failed to respond to the interrogatories or the requests for admission, b u t it produced some documents at the hearing. Because the time for responding h a d passed, Sallie Mae was deemed to have admitted the requests for admission, in c lu d in g that the debt owed by Roberts to USA Funds was paid in full. A t the July 31 hearing, the bankruptcy court was presented with several d o c u m e n ts relating to Sallie Mae's proof of claim that conflicted drastically r e g a rd in g the amount owed on the debt. Sallie Mae presented only a

s p r e a d s h e e t with Roberts's name on it; the highest figure on the spreadsheet w a s $64,698.37. Sallie Mae did not present a promissory note evidencing the d e b t. Roberts presented, without objection, the following documents: the

p r o m is s o r y note marked "PAID IN FULL"; a document entitled "Statement of P u r c h a s e d Account" that listed a balance due of $109,403.62; a letter from Sallie M a e to Roberts dated December 6, 2001, stating that no payments had been m a d e ; and a credit report on Roberts dated December 20, 2006, that listed Sallie M a e as a creditor, the original amount of the debt as $51,182, the recent balance a s "NA," and a "Creditor's Statement" that the "Debt [was] being paid through in s u r a n c e . " At the time, neither Roberts nor counsel for either side explained w h y the promissory note was stamped "PAID IN FULL." A ft e r taking the matter under advisement, the bankruptcy court granted R o b e r t s 's objection and disallowed Sallie Mae's proof of claim. The bankruptcy c o u r t elected not to rely on Sallie Mae's deemed admission that the debt had 3

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No. 09-30754 b e e n paid in full but instead held that Sallie Mae had failed "to do what, in this C o u r t 's view, is a pretty basic task of providing the documents that support its [p r o o f of] claim." Sallie Mae filed a notice of appeal to the district court, but it v o lu n ta rily withdrew that appeal when Roberts objected to it as untimely. The b a n k r u p t c y court subsequently granted Sallie Mae's motion to reopen Roberts's b a n k r u p tc y case and considered Sallie Mae's motion for relief from judgment u n d e r Rule 60(b)(3).1 T h e bankruptcy court held a hearing on the motion, at which Sallie Mae a s s e r t e d that Roberts, through omission and silence, had misrepresented that t h e note had been paid in full or transferred to another lender. After taking the m a tt e r under advisement, the bankruptcy court denied Sallie Mae's motion. The b an k ru p tcy court pretermitted discussing whether Roberts had committed fraud, m is r e p r e s e n t a t io n , or other misconduct, and held that Sallie Mae had failed to e s t a b lis h the requisite prejudice to warrant relief under Rule 60(b)(3). On a p p e a l, the district court affirmed, finding that Sallie Mae's arguments on a p p e a l "ignore[d] the essential conclusion reached by the Bankruptcy Judge, . . . t h a t -- th e circumstances of the Promissory Note notwithstanding--Sallie Mae fa ile d to prove the elements of its claim and its rights to recover the amounts it a lle g e d were due." U.S. Aid Funds, 2009 WL 2222943, at *11. The district court c o n tin u e d : S ig n ific a n tly , it appears the sole and only issue for the B a n k r u p t c y Court's consideration at the July 31, 2007 hearing was th e presentation of Sallie Mae's evidence to prove its claim. Yet, in s p it e of all of its foregoing failures to cooperate in the discovery p r o c e s s -- in c lu d in g a prior dismissal of its claim against the debtor fo r failure to respond to Ms. Roberts's objection--Sallie Mae chose to
Rule 60(b)(3) provides that "[o]n motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding for . . . fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party." FED. R. CIV. P. 60(b)(3). Subject to exceptions not applicable here, Rule 60 applies in bankruptcy cases. FED. R. BANKR. P. 9024.
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No. 09-30754 p r e s e n t its case against Ms. Roberts without a witness and without p r o v i d i n g responses to discovery. At that hearing, Sallie Mae also c h o s e to proceed without its own copy of the Promissory Note, in s te a d relying on Ms. Roberts to introduce her copy of the Note. . . . W h a t is clear to this Court is that Sallie Mae's current argument t h a t it could not accurately present its case to the Bankruptcy Court b e c a u s e of Ms. Roberts's alleged actions is meritless. . . . I d . Sallie Mae timely appealed the district court's judgment. I I . DISCUSSION W e review the bankruptcy court's denial of a Rule 60(b) motion as the d is tr ic t court did, for abuse of discretion. Pettle v. Bickham (In re Pettle), 410 F .3 d 189, 191 (5th Cir. 2005). "Under this standard, `it is not enough that the g r a n t in g of relief might have been permissible, or even warranted--denial must h a v e been so unwarranted as to constitute an abuse of discretion.'" Id.

(a lt e r a tio n omitted) (quoting Seven Elves, Inc. v. Eskenazi, 635 F.2d 396, 402 (5 th Cir. Unit A Jan. 1981)). "We apply this deferential standard `to ensure that [R u le ] 60(b) motions do not undermine the requirement of a timely appeal.'" G o v 't Fin. Servs. One Ltd. P'ship v. Peyton Place, Inc., 62 F.3d 767, 770 (5th Cir. 1 9 9 5 ) (quoting First Nationwide Bank v. Summer House Joint Venture, 902 F.2d 1 1 9 7 , 1200­01 (5th Cir. 1990)); cf. United Student Aid Funds, Inc. v. Espinosa, 7 8 U.S.L.W. 4207, 4210 (U.S. Mar. 23, 2010) ("[A] motion under Rule 60(b)(4) [for r e lie f on the grounds that the judgment is void] is not a substitute for a timely a p p e a l." ).2 Factual findings underlying a ruling on a Rule 60(b) motion are r e v ie w e d for clear error, see Jenkens & Gilchrist v. Groia & Co., 542 F.3d 114, 1 1 8 (5th Cir. 2008), cert. denied sub nom. Felderhof v. Jenkens & Gilchrist, 129 S . Ct. 1585 (2009), while questions of law are reviewed de novo, Frazar v. Ladd, 4 5 7 F.3d 432, 435 (5th Cir. 2006) (citing Ran­Nan, Inc. v. Gen. Accident Ins. Co. o f Am., 252 F.3d 738, 739 (5th Cir. 2001) (per curiam)).
Although it does not affect our disposition, we note that Sallie Mae sought Rule 60(b)(3) relief shortly after Roberts objected to its direct appeal as untimely filed.
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No. 09-30754 R u le 60(b)(3), applicable to bankruptcy cases through Bankruptcy Rule 9 0 2 4 , permits a court to provide relief from a final judgment obtained through fr a u d , misrepresentation, or other misconduct by an opposing party. FED. R. CIV. P . 60(b)(3). "A party making a Rule 60(b)(3) motion must establish (1) that the a d v e r s e party engaged in fraud or other misconduct, and (2) that this misconduct p r e v e n t e d the moving party from fully and fairly presenting his case." Hesling v . CSX Transp., Inc., 396 F.3d 632, 641 (5th Cir. 2005) (citing Gov't Fin. Servs. O n e , 62 F.3d at 772). "Rule 60(b)(3) `is aimed at judgments which were unfairly o b t a i n e d , not at those which are factually incorrect.'" Id. (quoting Rozier v. Ford M o to r Co., 573 F.2d 1332, 1339 (5th Cir. 1978)). We agree with the conclusions o f both the bankruptcy court and the district court that Sallie Mae has failed to s h o w that it was prevented from fully and fairly presenting its case. W e find our decision in Diaz v. Methodist Hospital, 46 F.3d 492 (5th Cir. 1 9 9 5 ), to be instructive. In that case, Diaz--who was injured in a car

c r a s h -- s u e d a hospital and treating physicians for medical malpractice. Id. at 4 9 4 . During trial, the defendant physicians testified that a particular laboratory te s t was unavailable during weekends. Id. at 494­95. Following a jury verdict fo r the defendants, Diaz obtained an affidavit from another doctor that such t e s tin g was indeed available during weekends, and she moved for relief from ju d g m e n t, claiming that the defendants' testimony amounted to perjury. Id. at 4 9 5 . Assuming, arguendo, that Diaz's assertions of perjury were true, we held t h a t she was not prevented from fully and fairly presenting her case: I n the case at hand, [Diaz] had independent access to information c o n c e r n in g the availability of [the laboratory] testing . . . . [The p o s t -t r ia l] affidavit proves that this information was not under the e x c lu s iv e control of the [physicians]. It is likely that a more focused e ffo r t by [Diaz] could have uncovered this evidence prior to trial. I d . at 497; see also Williams v. Thaler, -- F.3d --, 2010 WL 1039450, at *17 (5th C i r . Mar. 23, 2010) (concluding that a prisoner was not prevented from fully and 6

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No. 09-30754 fa ir ly presenting his case where the prosecution withheld subpoenas requesting d o cu m e n t s to which "Williams had equal--if not greater--access"). T h e concerns at issue in Diaz apply with equal force here. Sallie Mae had i n d e p e n d e n t access to the promissory note,3 and a cursory glance at the p r o m is s o r y note would have revealed the "PAID IN FULL" stamp. During its a p p e a l to the district court and to this court, Sallie Mae has had no trouble e x p la in in g the circumstances surrounding the stamp, but it has not offered a s a tis fy in g excuse for its inability to present the same explanation to the b a n k r u p tc y court at the hearing on July 31, 2007--a hearing convened for the v e ry purpose of determining the validity of the proof of claim for the debt e v id e n c e d by the promissory note. We have little trouble concluding that Sallie M a e was not prevented from fully and fairly presenting its case at that hearing, a n d we agree with the district court that the bankruptcy court did not abuse its d is c r e t io n in denying Sallie Mae's Rule 60(b)(3) motion.4

Indeed, Roberts had a copy of the promissory note bearing the "PAID IN FULL" stamp only because Sallie Mae furnished it to her.
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Sallie Mae presents several additional arguments, none of which has any merit.

First, Sallie Mae urges that Roberts's introduction of the promissory note constituted assertion of the affirmative defense of accord and satisfaction outside of a responsive pleading, in violation of Rule 8. Regardless of whether Roberts asserted such an affirmative defense, the bankruptcy court's determination was not that the debt was satisfied but that Sallie Mae had failed to adduce sufficient proof of the validity of its proof of claim. Second, Sallie Mae argues that Roberts violated her duty of candor as a debtor by not alerting the bankruptcy court to the circumstances of the "PAID IN FULL" stamp. The cases cited in support deal with a debtor's duty to be forthright in disclosing assets, see, e.g., Browning Mfg. v. Mims (In re Coastal Plains, Inc.), 179 F.3d 197, 207­08 (5th Cir. 1999), and we question the logic of requiring a debtor to prove its creditor's proof of claim when the Bankruptcy Code permits the debtor to file an objection to that proof of claim, see 11 U.S.C. § 502. More importantly, we note that the relevant information was equally within Sallie Mae's possession, and it was therefore not prevented from fully and fairly presenting its case. Third, Sallie Mae claims that the bankruptcy court relied on an erroneous belief that the promissory note had been entered in the bankruptcy court's records prior to the hearing on July 31, 2007. Sallie Mae failed to raise this argument on appeal to the district court, and we do not consider it now. See Bradley v. Ingalls (In re Bradley), 501 F.3d 421, 433 (5th Cir.

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No. 09-30754 I I I . CONCLUSION F o r the foregoing reasons, the judgment of the district court, which a ffir m e d the judgment of the bankruptcy court, is AFFIRMED.

2007) ("Even if an issue is raised and considered in the bankruptcy court, this court will deem the issue waived if the party seeking review failed to raise it in the district court." (citing Rush Truck Ctrs. of Tex. L.P. v. Bouchie (In re Bouchie), 324 F.3d 780, 782 n.6 (5th Cir. 2003) (per curiam); United States v. Olson, 4 F.3d 562, 567 (8th Cir. 1993))). Finally, Sallie Mae asserts that the bankruptcy court ignored the equities in opting for the interests of finality. Balancing the equities in deciding a Rule 60(b)(3) motion is within the sound discretion of the lower court, see Seven Elves, 635 F.2d at 401­02 (explaining that balancing the interests of finality and justice under Rule 60(b) is within the lower court's exercise of discretion), and our review of the record reveals that the bankruptcy court did not abuse that discretion in reaching its balance.

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