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In re Griffus

United States District Court, E.D. Michigan, Southern Division

August 6, 2019

IN RE GRIFFUS et al., Debtors.
WILDFIRE CREDIT UNION, Appellee. THOMAS W. McDONALD, as Trustee of the Estate of GRIFFUS et al., Appellant,


          Hon. Gershwin A. Drain United States District Court Judge.

         I. Introduction

         Before the Court is Appellant Thomas W. McDonald's appeal of a final order entered by the Bankruptcy Court denying Appellant's Motion to Alter/Amend Judgment or for Reconsideration. Dkt. No. 5. Appellant asserts that the Bankruptcy Court erred by 1) excluding from its motion for sanctions order its finding that Appellee Karl Wenzloff was not authorized to sign a creditor's Proof of Claim; 2) failing to order sanctions against opposing counsel for signing and filing an unauthorized proof of claim; and 3) allowing opposing counsel to inform the Bankruptcy Court about a pending grievance and altering deadlines to accommodate opposing counsel's request for an order without sanctions to help him in his grievance proceeding. For the reasons discussed below, the Court will affirm the Bankruptcy Court's denial of Appellant's motion for reconsideration.

         II. Factual Background

         In July of 2014, Debtor Elizabeth Lara-Griffus obtained a loan from Appellee Wildfire Credit Union (“Wildfire”). Dkt. No. 6, pg. 5 (Pg. ID 382). A 2004 Chevrolet Trailblazer secured the loan, such that Wildfire could take possession of the vehicle in the event of a default. Id. The Debtor defaulted on making payments on the loan, and Wildfire repossessed the Trailblazer on April 8, 2017. Id. Best Recovery Storages in Saginaw stored the vehicle. Id.

         The Debtor filed for bankruptcy on May 17, 2017. Dkt. No. 5, pg. 10 (Pg. ID 347). Appellant Thomas W. McDonald was appointed to administer the Chapter 13 bankruptcy case for the Debtor. Id. Mr. McDonald contacted Wildfire and requested the Debtor's vehicle be returned. Id. Wildfire was willing to comply, but Best Recovery Services would not release the vehicle until the Debtor paid $1.035.00 in storage fees. Id. Wildfire arranged with Best Recovery Services for immediate release of the Trailblazer in order to avoid a stay violation action. Id. at pg. 6 (Pg. ID 383). Wildfire would then file a claim in the bankruptcy case for the storage fees, which could be recovered from the estate. Id. Best Recovery Services sent an invoice to Wildfire Credit Union totaling $1, 035.00 for the Trailblazer storage fees. Id.

         Wildfire then advised its attorney, Karl Wenzloff, about the agreement reached with Best Recovery Services for release of the Trailblazer. Id. Wildfire forwarded Mr. Wenzloff the invoice it received from Best Recovery Services so that he could file a Proof of Claim[1] on behalf of Best Recovery Services. Id. Mr. Wenzloff believed that Best Recovery Services agreed to release the Trailblazer immediately before any payment of storage fees, and Wildfire would file a Proof of Claim on behalf of Best Recovery Services. Id. at pgs. 6-7 (Pg. ID 383-384). Therefore, Mr. Wenzloff prepared and filed a Proof of Claim on September 27, 2017. Id. at pg. 7 (Pg. ID 384). Mr. McDonald, the Chapter 13, Trustee, filed an objection to the claim on October 23, 2017. Id. Mr. Wenzloff withdrew the claim on November 30, 2017 after talking to Wildfire and learning that Wildfire would pay the storage fee directly to Best Recovery Services. Id. Mr. McDonald then withdrew his objection to the Proof of Claim. Id.

         One year later, on November 1, 2018, Appellant, Mr. McDonald, filed a motion for sanctions against Karl Wenzloff, Paul Wenzloff, and Wildfire. Id. at pgs. 7-8 (Pg. ID 384-85). The motion alleged that Wildfire had not given Mr. Wenzloff authority to file a Proof of Claim on its behalf. Id. at pg. 8 (Pg. ID 385). The motion argued that filing a Proof of Claim without authority to do so constituted perjury and fraud. Id. On December 21, 2018, the Bankruptcy Court held a hearing on the motion for sanctions and Appellant agreed to dismiss Wildfire as a defendant to the motion. Id. The Bankruptcy Court concluded that Mr. Wenzloff did not have authorization from Best Recovery to file a Proof of Claim. Dkt. No. 3, pg. 214 (Pg. ID 255). However, the court noted that “he ha[d] authorization through [Wildfire] which had an agency relationship and a contract relationship with Best Recovery[.]” Id. Therefore, the court did not issue any sanctions against Mr. Wenzloff, other than admonishing him for signing the Proof of Claim. Id.

         On January 4, 2019, Appellant contends that the Bankruptcy Court held an in-chambers, off-the-record meeting in an unrelated case between the parties. Dkt. No. 5, pg. 13 (Pg. ID 350). During the meeting, Appellee Paul Wenzloff informed the court about a grievance filed against him and requested the court expedite an entry of an order in the Griffus matter so that Mr. Wenzloff could include it in his response to the grievance commission's investigation. Id. Appellant then states that the court entered an order on January 9, 2019 with an accelerated deadline for the parties to submit proposed orders on the court's motion for sanctions in order to accommodate Mr. Wenzloff's request. Id.

         On January 10, 2019, the Bankruptcy Court denied the Appellant's Motion for Sanctions. Dkt. No. 3, pgs. 250-51 (Pg. ID 264-65). The order denying sanctions stated that the Court directed both parties to submit proposed orders on the motion for sanctions. Id. at pg. 250 (Pg. ID 264). The order further stated that the parties could not agree on the language for the order, so the Bankruptcy Court entered its own order. See Id. The order concluded that Wildfire Credit Union was dismissed from the motion for sanctions and that no sanctions would be awarded for the reasons stated in court. Id. On January 23, 2019, Appellant filed a motion to alter, amend judgment or for reconsideration of the Court's January 10, 2019 order denying sanctions. Dkt. No. 3, pg. 252 (Pg. ID 266). The Bankruptcy Court denied Appellant's reconsideration motion on February 13, 2019, stating that any additional findings requested by the Appellant were not relevant to the case. Dkt. No. 1, pg. 8-9 (Pg. ID 8-9).

         Appellant filed a Notice of Appeal with this Court on February 26, 2019. Dkt. No. 1. Appellant filed his appeal brief on April 26, 2019, requesting that this Court review the Bankruptcy Court's denial of Appellant's motion for reconsideration. Dkt. No. 5. Appellees Wildfire Credit Union, Paul Wenzloff, and Karl Wenzloff filed their response brief on May 23, 2019. Dkt. No. 6.

         III. Legal Standard

         This Court reviews the denial of a motion for reconsideration filed pursuant to Fed.R.Civ.P. 59(e) under the abuse of discretion standard. In re J & M Salupo Dev. Co., 388 B.R. 795, 800 (B.A.P. 6th Cir. 2008). The abuse of discretion standard requires that the lower court's decision making process be “reasonable.” Id. Motions for relief from a final judgment or order pursuant to Fed.R.Civ.P. 60(b) are also reviewed for abuse of discretion. Id. at 801.

         IV. ...

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