Monday, July 29, 2002
Bankruptcy Trustee Not Liable for Noticing Wrong Hearing Date—Court
By ROBERT GREENE, Staff Writer
A Chapter 13 bankruptcy trustee is immune from liability for noticing the wrong day for a hearing, the Ninth U.S. Circuit Court of Appeals ruled Friday.
Bankruptcy trustees are hybrid officials who have both administrative and judicial duties and enjoy absolute quasi-judicial immunity for scheduling and noticing a bankruptcy confirmation hearing, the court ruled.
“Fundamental fairness to the parties before the court requires notice of proceedings; notice is an essential part of the adjudicatory process,” Judge Kim Wardlaw wrote. “Therefore, we find immunity extends to the giving—or failure to give—notice, as well as to the scheduling of a hearing.”
The ruling upholds a Bankruptcy Appellate Panel decision that immunized trustee Nancy Curry for her calendaring mistake but goes further, extending the immunity to the notice.
At the basis of the ruling is a long history of immunity from liability given judges for acts they perform as part of the judicial process. Judicial immunity is so sweeping it protects judges from suits alleging malicious or corrupt motives.
Absolute judicial immunity also protects nonjudicial officers from claims related to exercise of judicial functions and can take in jurors, tax assessors, administrative law judges and, in some cases, prosecutors.
But the U.S. Supreme Court declined to extend judicial immunity to a court reporter who failed to deliver a complete transcript of a criminal trial on appeal. That 1993 case, Antoine v. Byers & Anderson, Inc., is the gauge on which courts test for judicial functions.
Curry was the trustee in the Chapter 13 case of Cherry Barbara Castillo and decided at an Oct. 29, 1997 hearing that a creditors’ meeting should be put off to Jan. 20, 1998.
But due to a clerical error, Curry’s office actually set the hearing for Dec. 3, 1997. Castillo was not notified of the December date, and it went forward without Castillo and without proof that she made her plan payments as required for confirmation of her bankruptcy.
Castillo has made a payment under her plan, although she filed it late. But it was not recorded in Curry’s books, and Curry told the bankruptcy judge that no payment had been made.
As a result, Curry’s Chapter 13 case was dismissed on Dec. 16, 1997, and the mortgage on Curry’s home—no longer subject to the bankruptcy stay—was foreclosed upon. Curry’s lawyer moved to vacate the dismissal, but by then the home had been sold to a third party, and the bankruptcy court refused to set aside the sale.
Castillo then sought permission from the bankruptcy court to sue her lawyer for failing to act in time to stop the foreclosure sale and Curry for negligence in setting a hearing without due notice.
The bankruptcy court permitted the suit and denied Curry’s motion for reconsideration.
The Bankruptcy Appellate Panel found quasi-judicial immunity for damages relating to the miscalendaring of the confirmation hearing, but not for damages resulting from failure to give notice.
Wardlaw said Congress created bankruptcy trustees as hybrid officials whose administrative functions are difficult to separate from the judicial ones. But she said scheduling and giving notice of hearings are part of the judicial function because both are “unquestionably discretionary in nature.”
“We do not hold that all the Trustee’s many functions are covered by absolute quasi-judicial immunity,” Wardlaw said. “We merely hold that the common law, legislative history, and grant of immunity to bankruptcy trustees and similar judicial officers in analogous cases compel us to conclude that Curry is entitled to quasi-judicial immunity for both scheduling and noticing the conformation hearing.”
The case is Curry v. Castillo, 00-55846.
Copyright 2002, Metropolitan News Company