Walter v. PruzinskyWalter v. Pruzinsky
NATHANIEL R. JONES, Circuit Judge. Appellant Jerry Pruzinsky appeals the district court‘s determination that his Motion for Clarification of Judgment, construed as one seeking relief from judgment pursuant to
I. BACKGROUND
A. The Wayne County Agreement
The debtor, Anna Marie Walter, was formerly married to the appellant, Jerry Pruzinsky. Before the bankruptcy proceedings commenced, the appellee, Gianetti, obtained a default judgment against Walter and Pruzinsky in the Wayne County Circuit Court for $629,400. Gianetti‘s complaint alleged that Walter and Pruzinsky embezzled funds belonging to several of Gianetti‘s companies. The parties entered into a settlement agreement in satisfaction of the judgment (the “Wayne County Agreement“). Under the terms of the
B. The Federal Agreement
Prior to the completion of the valuation process called for in the Wayne County Agreement, Walter filed her bankruptcy petition in the bankruptcy court, which automatically stayed the proceedings against her in the Wayne County action. When he received notice of this action, Gianetti pursued in the bankruptcy court his claim against the Walter estate for the unsatisfied judgment. The trustee in bankruptcy subsequently reached an agreement with Gianetti to settle the claim (the “Federal Agreement“). Walter and Pruzinsky were divorced at the time she initiated the bankruptcy proceedings. Therefore, Pruzinsky was neither a party to nor did he participate in the negotiation of this agreement. Pruzinsky was, however, like Gianetti, a creditor of the Walter bankruptcy estate and, as such, was entitled to receive notice of the proposed settlement. After receiving notice, Pruzinsky filed a written objection to certain language in the proposed order which Gianetti and the trustee had drafted to settle the claim. The objection stated:
Now comes Jerry Pruzinsky, creditor in the above captioned matter and objects to the entry of the proposed order approving settlement and particularly the final paragraph of the same for the reason that this paragraph seeks to adjudicate matters not before this Court (a dispute between Jerry Pruzinsky and Silvo Gianetti
concerning claims between these parties which is pending in the Wayne Country Circuit Court #92-230961-CK).
Objection To Entry Of Order Approving Settlement. February 12, 1998. J.A. at 70 (emphasis added). The proposed order, memorializing the Federal Agreement between Gianetti and the trustee in bankruptcy, read in relevant part as follows (the parties refer to these two paragraphs as “paragraphs three and four“):
It is further ordered that the Wayne County Circuit Court Default Judgment obtained by [Gianetti] against Debtor Anna Marie Walter and her ex-husband, Jerry Pruzinsky . . . as well as a certain Settlement Agreement Order of the Wayne County Circuit Court . . . are hereby satisfied and forever discharged.
It is further ordered that any contingent liens by the Debtor and/or her ex-husband Jerry Pruzinsky, arising under the Wayne County Settlement and Order . . . [are] hereby released, discharged, and void.
Order Approving Settlement of Secured Claim. April 20, 1998. J.A. 71-72 (emphasis added).
C. The April 1998 Order
At a hearing on March 27, 1998, the bankruptcy court heard Pruzinsky‘s objections to the Federal Agreement. Pruzinsky explained that he was not a party to the Federal Agreement and that he did not participate in the negotiations that produced the proposed order. He further explained that the proposed order drafted by Gianetti and the bankruptcy trustee purported to extinguish his right under the Wayne County Agreement to a refund if the appraised value of the property exceeded the value of the debt owed to Gianetti. Pruzinsky maintained that it was unfair to allow the bankruptcy trustee and Gianetti to bargain away his rights when he was not a party to their agreement. The following exchange took place:
MR. FELLRATH [Counsel for Pruzinsky]: The order . . . provides that contingent claims and liens by Jerry Pruzinsky against the letter [sic] - - excuse me, against the lender - - are released, discharged and void. My client objects to that language.
THE COURT: Well, we‘re talking now about the last paragraph only of the proposed order; am I right, Mr. Fellrath?
MR. FELLRATH: That‘s correct . . . .
THE COURT: All right.
MR. FELLRATH: What we object to is the language in that order which - - the proposed order, that Mr. Gianetti - - the claims of Mr. Pruzinsky against Mr. Gianetti are released, discharged and void . . . .
THE COURT: If the words - - Mr. Fellrath - -
MR. FELLRATH: Yes.
THE COURT: - - if the words, looking now at the proposed order, now - - do you have it in front of you?
MR. FELLRATH: Yes, your Honor, I do.
THE COURT: If the words “and/or her ex-husband, Jerry Pruzinsky” - - so I understand what you‘re saying - - were eliminated from the order, would that solve your problem?
MR. FELLRATH: Yes, your Honor. The - - the - - the reference to my client should be deleted from that portion of the order.
THE COURT: All right. Specifically, would that do the trick from your perspective?
MR. FELLRATH: Yes. Yes.
J.A. at 111-13.
At this point in the hearing, Mr. Watson, counsel for Gianetti, objected to the request to delete the reference to Pruzinsky. He argued that it was fair to dissolve Pruzinsky‘s contingent lien because the terms of the Federal Agreement released Pruzinsky from liability in the event the appraised value of the property was not enough to satisfy the amount owed Gianetti under the default judgment. The bankruptcy court rejected this argument.
THE COURT: How can - - how can the Debtor and yourself, between the two of you, eliminate Mr. Pruzinsky‘s rights?
MR. WATSON: Well, because we are also releasing him from any liability under the settlement . . . .
. . .
THE COURT: All right. So I don‘t see how I can include language in there which, in effect, gives up rights, frankly. So I will sign an order that excises from the proposed order the language I was talking about, the words: ‘And/or her ex-husband Jerry Pruzinsky.’ I‘ll sign that order.
J.A. at 114, 117.
D. The Motion for Clarification
The important point to observe from the foregoing exchange is that while the bankruptcy court intended to fully preserve Pruzinsky‘s rights under the Wayne County Agreement, the settlement order, as modified by the bankruptcy court, does not reflect that intent. It is clear from the record that the objective of the modification was to remove Pruzinsky from the force of the order. This, however, was accomplished only with respect to paragraph four, as Pruzinsky mistakenly told the bankruptcy court that his objection lay only with that section of the order. The April
The oversight came to a head in August 1999, when Pruzinsky filed subpoenas in Wayne County Circuit Court to determine the value of property included in the Wayne County Agreement. Gianetti raised the bankruptcy court‘s April 1998 order as a defense, pointing to paragraph three, the provision of the order stating that, as to Pruzinsky, the Wayne County Agreement was satisfied and forever discharged. The Wayne County Circuit Court, for some reason that remains unexplained, adjourned all motions.1 Pruzinsky then filed a “Motion to Clarify” the April 1998 order with the bankruptcy court, contending that the April 1998 order did not bar his action in Wayne County, and sought an order from the bankruptcy court to that effect.
The bankruptcy court construed Pruzinsky‘s Motion to Clarify as one seeking relief from judgment pursuant to
Gianetti filed an appeal in the United States District Court for the Eastern District of Michigan. The district court disagreed with the bankruptcy court‘s conclusion that the order embodied something more than a mere routine mistake of counsel and held that the extraordinary relief granted under
II. DISCUSSION
The facts of this case and the relevant legal authorities suggest that both courts committed error in their application of
A. Rule 60(b)
The district court was correct in finding unpersuasive the bankruptcy court‘s conclusion that the discrepancy in the order was sufficiently exceptional or extraordinary to trigger the application of
There are few cases elaborating on the ‘something more’ that is required. This may be explained, as the Sixth Circuit has postulated, by the fact that clauses 1-5 of the Rule cover almost every conceivable ground for relief. The ‘something more,’ then, must include unusual or extreme situations where principles of equity mandate relief. The question in this case is whether such equitable circumstances are present.
J.A. at 12 (citation omitted). Indeed, no special circumstances were present in this case to implicate
B. Rule 60(a)
The basic distinction between ‘clerical mistakes’ and mistakes that cannot be corrected pursuant to
Rule 60(a) is that the former consist of ‘blunders in execution’ whereas the latter consists of instances where the court changes its mind, either because it made a legal or factual mistake in making its original determination, or because on second thought it has decided to exercise its discretion in a manner different from the way it was exercised in the original determination.
Blanton, 813 F.2d at 1577 n. 2 (citation omitted) (emphasis in original). Stated differently, a court properly acts under
We have upheld the correction of errors under
It follows then from what we have said that the bankruptcy court was entitled to modify its order under
the Court is concerned, not simply because Pruzinsky was possibly mistaken as to the adequacy of his suggested correction, but that the Order as eventually presented and signed did not fully and properly reflect the intent of the Court . . . . The Court specifically stated that the words ‘and/or her husband Jerry Pruzinsky’ were to be excised from the Order and they were not.
J.A. at 90 (emphasis in original).
The bankruptcy court explained that, read together, the language of paragraphs three and four did not make sense.
When one considers the rationale of the Court‘s ruling, i.e., that without Pruzinsky‘s consent, the Court could not force him to compromise any rights he might have, the face of the Order contains an inconsistency.
. . .
The sole issue at the hearing on the entry of the Order was that Pruzinsky wished to retain his contingent lien, so that he, at some appropriate point in the future, could complete the valuation process and be refunded the difference (assuming that the property was valued higher than the judgment amount).
. . .
[The inconsistency] arises from the fact that on one hand, the Order as finally entered in the fourth paragraph in effect preserved the contingent liens of Pruzinsky (by eliminating the reference to him in the suggested Order), but on the other hand, seemingly satisfying and discharging [in the third paragraph] the very and only claim (the valuation process) that could give rise to the referred to contingent lien.
J.A. at 88-89 (emphasis in original).
The bankruptcy court acknowledged Pruzinsky‘s mistake and its own oversight but proceeded to the erroneous conclusion that together the errors created the exceptional or
III. CONCLUSION
The discrepancy in the April 1998 order calls for a completely ministerial act on the part of the bankruptcy court to modify the order so that it accurately reflects the court‘s stated intent at the time of the hearing. This type of relief is permissible under
DISSENT
DAVID A. NELSON, Circuit Judge, dissenting. This is a close case, in my view, but I am inclined to think that the order of the district court ought to be affirmed.
The crucial question, it seems to me, is whether the mistake in the bankruptcy court‘s original order was one affecting “the substantive rights of the parties.” See Olle v. Henry & Wright Corp., 910 F.2d 357, 363-64 (6th Cir. 1990), where we endorsed caselaw from other circuits teaching that the one-year limitations period prescribed in
The error in Olle, as we pointed out in that case, “certainly affected the rights of the parties in their commercial relationships and other litigation.” Olle, 910 F.2d at 364.
In the case at bar, by the same token, the error “certainly affected the rights of the parties in their commercial relationships and other litigation.” As originally entered, the bankruptcy court order discharged both Gianetti‘s state court judgment against Pruzinsky and the state court order adopting the settlement agreement between Gianetti and Pruzinsky. The settlement order having been “satisfied and forever discharged,” in the words of the bankruptcy court order, there was no longer any need for a determination of the value of Gianetti‘s property under the aegis of the state court;
And I am not persuaded that the original error was a mere “clerical mistake.” The failure to strike Pruzinsky‘s name from paragraph three of the proffered order was not the result of a failure by the bankruptcy court properly to act as an amanuensis; it was the result, rather, of the failure of Pruzinsky‘s lawyer to request that paragraph three be changed. The lawyer was talking “only” about paragraph four, as the bankruptcy court was clearly given to understand, and it was only “that portion of the order“—the portion where Pruzinsky‘s name was preceded by the compound connective “and/or“—in which a change was requested.
When asked specifically whether deletion of Pruzinsky‘s name from “that portion of the order” (i.e. paragraph four) would do the trick, Pruzinsky‘s lawyer responded “Yes. Yes.” The lawyer gave express written approval to the “form and content” of unamended paragraph three, along with amended paragraph four and two other brief paragraphs. This looks to me like the sort of garden variety “mistake” or “inadvertence” covered by