Opinion
3:02-CV-1582-P
March 21, 2003
ORDER
Now before the Court is Texas Workers' Compensation Insurance Fund's Motion for Rehearing, filed February 7, 2003, asking this Court to revisit its Memorandum Opinion and Order signed January 28, 2003, and entered on the docket January 29, 2003, affirming in part and reversing in part the decision of the Bankruptcy Court concerning the Fund's suits against Aharon Chen and Linda Martin for fraud. Chen responded to the motion on February 19, 2003. The Fund filed a Reply on March 4, 2003.
"When the district court is acting as an appellate court in a bankruptcy case, `Bankruptcy Rule 8015 provides the sole mechanism for filing a motion for rehearing.'" In re Butler, Inc., 2 F.3d 154, 155 (5th Cir. 1993) (quoting Matter of Eichelberger, 943 F.2d 536, 538 (5th Cir. 1991)). Rule 8015 provides that "a motion for rehearing maybe filed within 10 days after entry of the judgment of the district court . . ." Under the time-computation rules for bankruptcy cases, the Motion for Rehearing is timely because it was filed before February 10, 2003. See F.R.Bankr.P. 9006(a).
As other courts have noted, "Bankruptcy Rule 8015 is silent as to the standard for granting a rehearing . . ." In re Windiers, 202 B.R. 512, 517 (D. Kan. 1996); Some courts consider the decision to be wholly within the discretion of the court. See id. Others treat a motion for rehearing like a motion brought under Rule 59(e) of the Federal Rules of Civil Procedure. E.g., Matter of Liljeberg Enterps., Inc., No. 97-0456, 1997 U.S.Dist. LEXIS 6352, *4 (E.D. La. May 1, 1997). Still others look to Rule 40(a) of the Federal Rules of Appellate Procedure, relying on the Advisory Committee Notes, which indicate that Rule 8015 was modeled on that appellate rule. See In re Wingspread Corp., 186 B.R. 803 (S.D.N.Y. 1995); Olson v. United States, 162 B.R. 831, 834 (D. Neb. 1993). See also Collier on Bankruptcy ¶ 8015.03(15th ed. 1993). The Court believes that the proper course would be to let Rule 40(a) guide the exercise of its discretion.
Petitions for rehearing submitted under Rule 40(a) "must state with particularity each point of law or fact that the petitioner believes the court has overlooked or misapprehended . . ." Fed.R.App.P. 40(a)(2). A petition for rehearing serves the limited purpose of ensuring that the court "properly considered all relevant information in rendering its decision." Armster v. U.S. Dist. Court for the Cent, Dist. of Cal., 806 F.2d 1347, 1357 (9th Cir. 1986). It provides the court a means by which to "correct its mistakes." Hitchcock v. Wainwright, 111 F.2d 628, 629 (11th Cir. 1985) (Johnson, J., dissenting). A petition for rehearing is not a "crutch for dilatory counsel, nor, in the absence of demonstrable mistake, to permit reargument of the same matters." United States v. Doe, 455 F.2d 753, 762 (1st Cir.), vacated on other grounds sub nom. Gravel v. United States, 408 U.S. 606 (1972)).
The Fund first contends that this Court "erred in holding that limitations can run in the absence of legal injury." Mot. at 3. It is suggested that this Court misread Quinn v. Press, 140 S.W.2d 438, 439 (Tex. 1940) and drew "a distinction without a difference" with respect to Atkins v. Crosland, 417 S.W.2d 150 (Tex. 1967) and Randolph v. RTC, 995 F.2d 611 (5th Cir. 1993). In effect, the Fund argues that the Court misapprehended the law the first time the issue was joined. The Fund continues to press its view that its cause of action for fraud against Chen does not accrue until damages from A.C. Painting's breach of contract are determinable. To the extent that the Fund merely rehashes arguments previously considered and rejected by the Court, the motion is not well founded. In its Reply, the Fund suggests that the Court's Order overlooks the single-action rule followed by Texas courts. Reply at ¶¶ 13-14 (citing Pustejovsky v. Rapid-American Corp., 35 S.W.3d 643 (Tex. 2000)). The Court did not overlook this aspect of the law. The single-action rule simply has no application where two distinct wrongful acts are at issue. Though factually connected, Chen's fraud is a legal wrong distinct from any breach of contract by A.C. Painting. Cf. Gideon v. Johns-Manville Sales Corp., 761 F.2d 1129, 1136 (5th Cir. 1985) (applying single-action rule where defendant committed one legal wrong). The Fund's reference to the "transactional approach" to res judicata taken by Texas courts is also inapposite. The question whether the fraud claim would be barred if not raised along with the breach of contract claim, or vice versa, is not relevant to the question of whether the act giving rise to the fraud claim is distinct from the act giving rise to the breach claim. The Fund has presented the Court no reason to believe it has overlooked or misapprehended the factual or legal issues pertinent to its identification of the legal standard for fixing the start date for the running of the statute of limitations.
In its discretion, the Court recognizes the Reply, even though Rule 40(a)(3) does not contemplate a reply-type brief from the party petitioning for rehearing and the Fund did not seek leave to make such a submission.
The Fund also suggests that this Court "improperly substituted its fact finding for that of the Bankruptcy Court." Mot. at 4. The Fund suggests that this Court — in applying the rule for fixing the start date for the running of the statute of limitations — overlooked a finding of fact by the Bankruptcy Court: "This Court has improperly ignored or disagreed with the Bankruptcy Court's fact findings, which are not clearly erroneous, as to when the Fund in the exercise of reasonable diligence should have discovered the fraud with respect to the second policy." Reply ¶ 8. The Fund misapprehends the nature of the Bankruptcy Court's decision on this matter. When the Bankruptcy Court (erroneously) determined that the statute of limitations did not begin to run until January 17 or February 10, 1997, it was not making a factual determination. It was applying a legal principle to the facts it had already determined.
The Fund's argument is premised on the fact that Texas law holds that the issue of "whether conduct is reasonable is ordinarily a question of fact." Adam Dante Corp. v. Sharpe, 483 S.W.2d 452 (Tex. 1972) (emphasis added). And whether reasonable diligence was actually exercised to discover a fraud is usually a question of fact. See Seniguar v. Ford Motor Co., 222 F. Supp.2d 829, 832 (E.D. Tex. 2002) (citing Wakefield v. Bevly, 704 S.W.2d 339, 346 (Tex.App.-Corpus Christi 1985)). But whether someone should have discovered a fraud, in the exercise of reasonable diligence, is a question of law for the court to decide. See Willis v. Maverick, 760 S.W.2d 642, 644 (Tex. 1998). Because whether the Fund, knowing what it knew, should have discovered the fraud in the exercise of reasonable diligence is a question of law, it is reviewable de novo. For this Court to find erroneous the Bankruptcy Court's legal conclusion about when the statute of limitations began to run is not to substitute its fact finding for that of the Bankruptcy Court.
Citing this Court's statement that "most of the unchallenged facts that compelled the Bankruptcy Court to find the first fraud to be barred by the statute of limitations would have led the Fund (in the exercise of reasonable diligence) to discover the second fraud as well," the Fund also suggests that this Court overlooked some other facts found by the Bankruptcy Court. Mot. at 7. This argument is without merit. All that can be inferred from the quoted statement is that some of the unchallenged facts that compelled the Bankruptcy Court to find the first fraud to be time barred would not have led a reasonably diligent Fund to discover the second fraud. The Fund points to no fact found by the Bankruptcy Court that would change this Court's analysis of the key question: when did the Fund know of facts that should have put the Fund on notice of possible fraud?
In sum, the Fund has identified no law or fact that it overlooked or misapprehended in deciding the appeal. The Fund's Motion for Rehearing is DENIED.