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Attorney(S)

J. Gregory O'Connor, Knoxville, for defendant-appellant. H. Wayne Graves, Johnson City (Herndon, Coleman, Brading McKee, Johnson City, of counsel), for plaintiff-appellee.

Acts

Bankruptcy — Case Administration — Administrative Powers — Automatic Stay

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Smart Summary

Bryant v. Edwards — Supreme Court of Tennessee (Eastern Section), March 31, 1986

Factual and Procedural Background

This is a worker's compensation action in which Douglas Bryant (plaintiff) sought benefits for injuries sustained while cutting trees for defendant Jerry Edwards's logging business; a falling tree struck the plaintiff, causing severe injuries to his head, shoulder, and ribs. After being served, the defendant retained attorney Charles R. Terry, who entered an appearance and filed an answer. A deposition of a treating physician was noticed by the plaintiff but taken ex parte on June 20, 1984, because neither the defendant nor his attorney appeared. A trial on the merits was held July 17, 1984, at which neither the defendant nor his attorney appeared, and the trial judge awarded benefits and entered a decree on July 24, 1984.

On August 23, 1984, the defendant filed a Rule 59 motion for a new trial asserting (1) he had not been notified of the trial date and therefore had no opportunity to appear, and (2) he had filed a Chapter 11 petition on June 4, 1984, raising issues concerning the effect of the bankruptcy filing. The defendant supported the motion with an affidavit stating that his retained attorney had never notified him of withdrawing and that he received no notice of depositions or the trial. The plaintiff filed an unsworn response. The trial court denied the motion by order dated May 16, 1985, without making specific findings as to notice. The Supreme Court of Tennessee reviewed the matter on appeal.

Legal Issues Presented

Whether the defendant was denied due process because he did not receive notice of the trial date and therefore was entitled to a new trial.
Whether the defendant's Chapter 11 bankruptcy filing (June 4, 1984) rendered the state-court judgment void or otherwise prevented the state court from entering a final judgment in the worker's compensation action.

Arguments of the Parties

Defendant's Arguments

The defendant asserted by motion and affidavit that he had not been notified of the trial date and thus had no opportunity to appear and be heard.
The defendant asserted that he filed a voluntary Chapter 11 petition on June 4, 1984, and therefore the plaintiff's claim should be governed by bankruptcy law (implying the automatic stay or other bankruptcy effects should apply).
Affidavit stated that defendant had retained attorney Charles R. Terry who entered his appearance and filed an answer, that Terry never notified the defendant he was withdrawing, and that the defendant received no notice of depositions or trial; his first notice of the case's resolution was receipt of the final judgment from the clerk.

Plaintiff's Arguments

The plaintiff's unsworn response stated that the defendant and his counsel of record did not appear at depositions and that it was later stated informally to plaintiff's counsel that defendant's counsel had withdrawn, though no formal order of withdrawal had been filed.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Campbell v. Archer, Tenn., 555 S.W.2d 110 (1977)	Cited in connection with the requirement that parties receive notice of hearings and the consequence of failing to provide notice (due process consideration).	The court relied on this precedent to support its conclusion that the trial court erred in denying the defendant's motion for a new trial where the record was deficient as to notice.
Reinshagen v. Larezzo, 2 Tenn.Cas. (Shannon) 139 (1976)	Cited for the same general proposition regarding notice and the entitlement to be heard; used in analysis of due process and procedural notice requirements.	The court invoked this case along with Campbell to conclude the absence of evidence of notice rendered the trial court's denial of a new trial erroneous.
In Re Best Repair Company, Inc., 34 B.R. 664 (E.D. Va. 1983)	Cited in relation to the effect of a bankruptcy court order modifying the automatic stay under 11 U.S.C. § 362 and the jurisdiction of state courts following such modification.	The court cited this authority to support its view that, because the bankruptcy court modified the stay to permit the worker's compensation case to proceed to final judgment, the state court was not deprived of jurisdiction to enter final judgment.
Browning v. Navarro, 37 B.R. 201 (D.C. 1983)	Cited for principles concerning the interplay of bankruptcy stay relief and the ability of state courts to proceed when the bankruptcy court modifies the stay.	Used to reinforce the court's conclusion that the bankruptcy filing did not void the state-court judgment where the bankruptcy court expressly modified the stay to allow the state action to proceed to final judgment.

Court's Reasoning and Analysis

The court examined the record and found no evidence that the defendant or his attorney received notice of the trial date. Although Rule 40, Tennessee Rules of Civil Procedure, contains language described by the Committee Comment as "directory only," the court emphasized that parties are entitled to notice of important hearings and that due process requires notice. Because neither the final judgment nor the trial-court order overruling the motion for a new trial recited that notice was given, and because the record was "fatally deficient" on this point, the court concluded the trial court erred in denying the defendant's timely Rule 59 motion for a new trial. The court relied on Tennessee authority addressing notice requirements to support that conclusion.

As to the bankruptcy issue, the court noted that the defendant had filed a Chapter 11 petition on June 4, 1984, but that, before the state-court judgment became final, the bankruptcy court entered an order modifying the automatic stay under 11 U.S.C. § 362 to permit the worker's compensation case pending in Jefferson County Circuit Court "to proceed to final judgment, but no further." Giving effect to that bankruptcy-court order, the Tennessee Supreme Court concluded the state court was not deprived of jurisdiction to enter a final judgment. The court cited two federal bankruptcy-related decisions to support the legal principle that a bankruptcy court's modification of the stay allows the specified state-court proceedings to continue and thus does not render subsequent state-court judgments void.

Holding and Implications

REVERSIBLE ERROR — JUDGMENT REVERSED AND REMANDED.

Holding: The Supreme Court of Tennessee reversed the trial-court judgment and remanded the case for a new hearing on the defendant's motion for a new trial on the ground that the defendant was not given notice of the time for trial.

Implications and Direct Consequences:

The trial court must conduct a new hearing on the defendant's motion for a new trial and specifically ascertain and find the facts regarding whether the defendant received notice of the trial date.
Because the bankruptcy court had modified the automatic stay to permit the state-court action to proceed to final judgment, the bankruptcy filing did not void the state-court proceedings; the state court was not deprived of jurisdiction to enter final judgment under the circumstances described in the record.
Costs were taxed against the plaintiff-appellee.

The opinion does not announce any broader new legal principle beyond the application of existing Tennessee due-process/notice authority and the acknowledged effect of a bankruptcy-court modification of the stay as applied to this record.

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Douglas BRYANT, Plaintiff-Appellee, v. Jerry EDWARDS, Indi

OPINION

BROCK, Chief Justice.

This is a worker's compensation case in which the defendant appeals from the judgment of the trial court awarding benefits for 60% permanent partial disability to the body as a whole and for certain medical expenses. The plaintiff's injuries occurred while cutting trees for the defendant in his logging business when a tree fell and struck the plaintiff causing severe injuries to his head, shoulder and ribs.

When the defendant was served with process he engaged the services of attorney Charles R. Terry of Morristown, Tennessee, who made an appearance and filed an answer on behalf of the defendant. Thereafter, the plaintiff served a notice upon the defendant's attorney, Terry, of the taking of the deposition of a physician who had treated the plaintiff's injuries but at the appointed time neither the defendant nor his attorney appeared and the deposition was taken, ex parte, on June 20, 1984.

On July 17, 1984, the trial court heard the worker's compensation case on the merits in a trial at which neither the defendant nor his attorney appeared. Following this ex parte trial the trial judge awarded benefits to the plaintiff and entered a decree in his favor on July 24, 1984.

On August 23, 1984, the defendant filed a Rule 59, T.R.C.P., motion for a new trial alleging:

"(1) That he was not notified of the trial date and, therefore, had no opportunity to appear and be heard.

"(2) That on June 4, 1984, he filed a voluntary bankruptcy petition under Chapter 11 of Title 11 of the United States Code. As such, the plaintiff's claim should be resolved under the provisions of the bankruptcy law."

Defendant's motion for a new trial is supported by his affidavit which, in pertinent part, is as follows:

"I was served with a copy of the complaint filed in the Circuit Court for Jefferson County, Tennessee, (caption omitted). After receiving this complaint I hired attorney Charles Terry of Morristown, Tennessee, to represent me and my company in this worker's compensation case. Mr. Terry accepted this employment, entered his name as my attorney and filed an answer on behalf of me and my company. Subsequent to that time, attorney Charles Terry never notified me at any time that he was withdrawing as my attorney in this worker's compensation case. I never received any notice from either the plaintiff's attorney, Mr. Terry, or the Clerk of this Court concerning depositions or the trial of this case. The first information that I received concerning any action in this case was when I received a copy of the final judgment from the Clerk of the Court."

The plaintiff filed no counter-affidavits but did file a "Response to Motion for a New Trial" which contains the following:

"1. The defendant alleges that he was not notified of the trial date and, therefore, had no opportunity to appear and to be heard. The plaintiff filed a complaint for worker's compensation benefits and an answer was filed on behalf of the defendant by his counsel of record, and the cause was set for trial on July 17, 1984. Shortly thereafter the plaintiff filed notice of depositions with the defendant's counsel of record, however, neither the defendant nor his counsel of record appeared at the depositions. It was later stated informally to the plaintiff's counsel that the defendant's attorney of record was withdrawing from the case, but no formal order was filed by the defendant's attorney of record withdrawing himself from this cause."

This "Response to Motion for A New Trial" filed by the plaintiff is not sworn to.

The defendant's motion for a new trial was overruled and an Order was entered dated May 16, 1985, which was as follows:

"ORDER

"This matter came to be heard on the 29th day of April, 1985, on defendant's motion for new trial. The defendant, Jerry Edwards, was present and represented by attorney J. Gregory O'Connor, in support of the motion and H. Wayne Graves represented the plaintiff in opposition thereto.

"The merits involved in the motion for a new trial were fully argued and submitted, and given consideration by the court.

"Defendant's motion for a new trial is overruled.

"Enter pursuant to Rule 58 of the Tennessee Rules of Civil Procedure.

William R. Holt, Jr. (s) Judge"

The failure of the trial court in this Order to make any specific findings is all too obvious. Neither this Order overruling the motion for a new trial nor the final judgment in the worker's compensation case recites that any notice was given to the defendant or his counsel of the trial date. In fact, there is no evidence anywhere in the record that the defendant or his attorney was notified of the date set for the trial, despite the fact that Rule 40, Tennessee Rules of Civil Procedure, provides:

"The courts shall provide by rule for the setting of cases for trial (a) without request of the parties but upon notice to the parties, or (b) upon request of a party and notice to other parties. Precedence shall be given to actions entitled thereto by any statute of the state of Tennessee."

The Committee Comment to Rule 40 states that "the provisions of this Rule are directory only." Nevertheless, it is axiomatic that all parties to litigation are entitled to receive notice of important hearings and other proceedings; due process requires it. The record before us is fatally deficient in this important respect. This being the case we conclude that the trial court erred in denying the defendant's timely motion for a new trial. Campbell v. Archer, Tenn., 555 S.W.2d 110 (1977); Reinshagen v. Larezzo, 2 Tenn.Cas. (Shannon) 139 (1976).

The defendant also asserts that the judgment in favor of the plaintiff in this case was voided by reason of the defendant's filing a petition in bankruptcy on June 4, 1984. We find no merit in this contention because the record shows that before this worker's compensation judgment became final the bankruptcy court entered an order as follows:

"It appearing to the court that Douglas Bryant had a worker's compensation lawsuit pending against the debtor in the Circuit Court for Jefferson County, Tennessee, at the time of the filing of the debtor's petition, and that the parties have agreed that the appropriate forum to litigate the case is the Jefferson County Circuit Court, it is, accordingly, ORDERED that the stay of 11 U.S.C. § 362 is hereby modified to permit the worker's compensation case pending in the Jefferson County Circuit Court against the debtor to proceed to final judgment, but no further."

Giving effect to this order of the bankruptcy court, the state court was not deprived of jurisdiction in this case. See: In Re Best Repair Company, Inc., 34 B.R. 664 (E.D. Va. 1983); Browning v. Navarro, 37 B.R. 201 (D.C. 1983).

The judgment of the trial court in this case is reversed and the case is remanded to that court for a new hearing on the defendant's motion for a new trial upon the ground that defendant was not given notice of the time for the trial of his case. At this hearing on remand the trial court is directed to ascertain the facts respecting whether or not the defendant received notice and will make specific findings with respect to that issue. Costs are taxed against plaintiff-appellee.

FONES, COOPER, HARBISON, JJ., and FRANKS, Special Justice, concur.

BRYANT v. EDWARDS