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Provident Bank v. Manor Steel Corp.

*fn* decided: August 15, 1989.


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 81 C 6894, Thomas R. McMillen, Judge.

Cummings, Easterbrook, and Ripple, Circuit Judges.

Author: Ripple

RIPPLE, Circuit Judge.

Howard M. Feather, the president of defendant Manor Steel Corporation (Manor), appeals from an order of the district court holding him in contempt for violating the prohibitions of a Citation to Discover Assets. That citation was served against Manor in an attempt to satisfy appellee Provident Bank's (Provident's) judgment in the underlying action. The district court referred the case to a magistrate, acting as a special master pursuant to the guidelines established in 28 U.S.C. § 636(b)(2) and Rule 53 of the Federal Rules of Civil Procedure, for a hearing on the factual issues supporting the contempt citation. After holding a hearing, the magistrate issued a written report recommending to the district court that Mr. Feather be held in contempt of court. Since Mr. Feather did not file any objections to that report, the district judge adopted the magistrate's recommendation in its entirety. This appeal followed.

Although Mr. Feather has raised issues regarding the conduct of the magistrate's evidentiary hearing and the correctness of her decision, we find that, under the circumstances of this case, we do not need to reach the merits of this appeal. Rather, because Mr. Feather failed to object in a timely fashion to the magistrates report, we hold that he has waived his right to appeal the district court's judgment. Accordingly, the appeal is dismissed.


On February 7, 1983, the district court entered a judgment against Manor and in favor of Provident for $39,864.13. In an attempt to collect on that judgment, Provident filed with the district court, and served upon the defendant, a Citation to Discover Assets in accordance with Illinois Supreme Court Rule 277. Pursuant to that citation, Manor, and all of its agents, were prohibited from "making or allowing any transfer or other disposition of, or interfering with, any property . . . belonging to" Provident. R.101 at 2. Mr. Feather, Manor's president, admitted receipt of that citation and acknowledged its prohibitions.

On February 16, 1986, Provident filed a motion in the district court seeking to hold Mr. Feather in contempt for violating the prohibitions contained in the citation. Specifically, Provident alleged that Mr. Feather, as president of Manor, transferred funds out of Manor's corporate accounts and, therefore, made them inaccessible to Manor's judgment creditors. Mr. Feather responded by alleging that all of the transferred funds were drawn from accounts belonging to Manor's profit-sharing plan. Therefore, according to Mr. Feather, he did not interfere with Manor's corporate accounts and, thus, could not be liable for violating the citation's provisions.

After reviewing both the motion and Mr. Feather's response, the district court decided that Mr. Feather was entitled to an evidentiary hearing on the question of fact which he raised (i.e. were the funds transferred from Manor's corporate accounts or were they transferred from Manor's profit-sharing accounts). The court further determined that "the most expeditious way in which to handle this matter, with the least expenditure of time on the part of the parties and the court, is to refer it to a magistrate for a recommendation." R.80. Accordingly, an order was entered referring this case to a magistrate to "serve as a Special Master subject to the provisions of 28 U.S.C. § 636(b)(2) and Rule 53, F.R.C.P. . . ." R.81.*fn1 The magistrate was required to hold an evidentiary hearing on Mr. Feather's question of fact and, thereafter, to file a report and recommendation with the district court within thirty days.

The magistrate held the evidentiary hearing and filed a report and recommendation with the district court on March 7, 1985. In her report, the magistrate found that the transferred funds were drawn from accounts belonging to Manor Steel Corporation, not Manor's profit-sharing plan. Therefore, the magistrate recommended that the district court hold Mr. Feather in contempt and order him to pay personally the $39,864.13 judgment entered in favor of Provident. Furthermore, the magistrate specifically admonished both parties that:

Written objection to any finding of fact, conclusion of law, or the recommendation for disposition of this matter must be filed with the Honorable Thomas R. McMillen within ten days after service of this Report and Recommendation. See Fed.R.Civ.P. 72(b). Failure to object may constitute a waiver of objections on appeal.

R.101 at 4-5 (emphasis added). Despite this very plain warning, Mr. Feather failed to file objections to the magistrate's report.*fn2 Accordingly, on March 20, 1985, the district court adopted the magistrate's recommendations. Foregoing any attempt at reconsideration in the district court, Mr. Feather filed this appeal.

Oral argument was heard in this appeal on May 27, 1986. On August 12, 1986, while this appeal was sub judice, these proceedings were stayed by order of this court because the pendency of bankruptcy proceedings initiated by Mr. Feather activated the automatic stay provision of the Bankruptcy Code, 11 U.S.C. § 362. On June 23, 1989, the bankruptcy court permitted the stay to be lifted so that this appeal could be decided.

On appeal, Mr. Feather challenges the district court's judgment by first arguing that the magistrate's evidentiary hearing denied him due process of law. According to Mr. Feather, he was unprepared for the hearing and did not have the assistance of counsel; therefore, he contends that, by conducting the hearing in light of these adverse circumstances, the magistrate denied him a full and fair opportunity to present his case. Second, Mr. Feather contends that, even if the magistrate's evidentiary hearing was adequate, the magistrate assessed an excessive amount of damages. Provident submits responses to both of these arguments. However, it also questions, as a threshold issue, whether the appeal in this case was properly taken. Referring to this court's earlier decision in Hudson v. Nabisco Brands, Inc., 758 F.2d 1237 (7th Cir. 1985), Provident argues that, since, ...

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