In re Golf 255, Inc.

Summary

The Seventh Circuit affirmed the district court's judgment upholding the bankruptcy court's refusal to rescind a sale of a golf course or reopen the bankruptcy case. The court held that the alleged conduct by a creditor did not constitute fraud on the court under Federal Rule of Civil Procedure 60(d)(3), and it rejected the appellants' requests for further discovery and investigation. The court also granted the trustee's motion for sanctions under Federal Rule of Appellate Procedure 38, characterizing the appeal as frivolous and abusive.

Holdings

1. Fraud on the court is a narrow category of fraud involving conduct that defiles the court itself or fraud by officers of the court that prevents the judicial machinery from performing its impartial adjudicative function. A creditor's alleged submission or encouragement of inflated claims, without participation by a lawyer acting as such, is ordinary fraud or witness-like misconduct, not fraud on the court.
2. The bankruptcy sale could not properly be rescinded absent evidence that the purchaser, the recreation district, was a party to the alleged fraud.
3. The appeal was frivolous, and the trustee was entitled to sanctions under Federal Rule of Appellate Procedure 38.

Questions Presented

1. Whether the alleged conduct by creditor Michael Kielty constituted fraud on the court warranting relief from the bankruptcy and sale orders under Federal Rule of Civil Procedure 60(d)(3).
2. Whether Jakich and Dunlap were entitled to further discovery or investigation into their fraud allegations.
3. Whether the bankruptcy sale could be rescinded under 11 U.S.C. § 363(m).
4. Whether the appeal was frivolous and warranted sanctions under Federal Rule of Appellate Procedure 38.

Disposition

affirmed