Dodson v. Huff (In re Smyth)

Dodson v. Huff (In re Smyth)

Opinion

 [*759]  ROBERT M. PARKER, Circuit Judge.

W. Patrick Dodson appeals the order of the district court affirming the bankruptcy court's Final Decree. In a consolidated action, Dodson appeals the district court's order dismissing for lack of jurisdiction his challenge to the bankruptcy court's order  [*760]  approving the Trustee's application to retain counsel for appeal. We affirm the district court in both matters.

I. FACTS AND PROCEDURAL HISTORY

In August of 1991, Dodson and other creditors filed an involuntary Chapter 7 bankruptcy, later converted to a Chapter 11 reorganization, against Lewis Smyth, III, a real estate developer and investor. In November 1992, the bankruptcy court approved a reorganization plan and appointed Ken Huff trustee. With permission of the bankruptcy court, Huff, a certified public accountant, employed himself as accountant for the estate. This suit involves the question [**2]  of what, if any, personal liability Huff incurred in his capacity as Trustee for damages to the estate caused by various alleged errors in the estate's tax returns.

On February 18, 1997, the Trustee filed an application for final decree seeking to close the case and a motion for final payment of his commission. Dodson objected to both motions, identifying various alleged errors in the Trustee's handling of the estate's federal income taxes. Dodson urged the bankruptcy court to deny the Trustee's request for a final decree until Huff filed amended tax returns to reclaim the estate's disputed taxes.

In June 1997, at the hearing on his objections, Dodson expanded his claims to allege additional errors in the Trustee's handling of the estate's taxes and to assert that the Trustee should be required to personally reimburse the estate for damages occasioned by his errors in preparing the tax returns. At the conclusion of the hearing, the bankruptcy court found that, while Huff had made errors in handling the taxes, those errors should be balanced against concessions Huff had obtained from the IRS on other issues, with the result that the "the estate [was] probably as well off as it would [**3]  have been had someone else handled it in a very meticulous fashion." Nevertheless, because of the Trustee's admitted oversight in failing to file the estate's 1994 tax return on time, the court denied his final application for commission. The bankruptcy court then entered a final decree and Dobson appealed to the district court.

In July 1997, the Trustee filed a motion seeking to retain the law firm of Jeffers & Banack, Inc. to represent him on appeal, which the bankruptcy court granted. In August 1997, Dodson objected to the appointment and requested a hearing. Dodson argued that the employment of counsel was inappropriate because it provided no benefit to the estate and because the law firm selected had a disqualifying conflict of interest. The bankruptcy court overruled the objections and reaffirmed its approval of the Trustee's counsel for appeal.

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