Bertran v. Barbara Wacker, Individually & Partner of Boot Print Ranch, LP (In re Bertran)

In re MARGARET A. BERTRAN, Debtor(s)

MARGARET A. BERTRAN, Plaintiff(s) v. BARBARA WACKER, individually and as general partner of Boot Print Ranch, LP;

WILLIAM WACKER, individually and as general partner of Boot Print Ranch, LP;

BOOT PRINT RANCH, a Montana Limited Partnership;

LARRY D. COMPTON, Trustee, individually, jointly and severally, Defendant(s)

Case No. F12-00501-HAR

Adv Proc No F14-90019-HAR

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF ALASKA

October 20, 2014

JUDGE HERB ROSS (Recalled)

In Chapter 7

MEMORANDUM GRANTING COURT'S SUA SPONTE MOTION TO DISMISS [ECF No. 6]

Contents Page

1. SUMMARY OF RULING

2. ANALYSIS .................................................................... 2

2.1. Claims Against the Wackers and Boot Print Ranch ........................... 2

2.1.1. Claims Preclusion ............................................... 3

2.1.2. The Complaint Cannot Serve As a Claims Objection ................... 6

2.1.3. No Subject Matter Jurisdiction Regarding the Semi-Trailer ............. 6

2.2. Claim Against Larry D. Compton, Trustee ................................... 7

3. CONCLUSION ................................................................. 8

4. APPENDIX [Excerpt from the OSC] ............................................... 8

1. SUMMARY OF RULING- The complaint seeks to avoid a Montana state court judgment against plaintiff debtor in favor of the Wackers and Boot Print Ranch (BPR): (a) for $137,551. 47; (b) quieting title in a semi-trailer in the name of these parties; and, (c) names trustee Larry Compton, but requests no relief against him. She alleges that the Montana judgment was improperly entered because she did not receive notice of the prove-up hearing after she was defaulted. The court filed a sua sponte order to show cause why the complaint should not be dismissed.

The suit against the Wackers and BPR will be dismissed on claims preclusion grounds (both state and federal) and because it is not subject to collateral attack. Additionally, to the extent the complaint asks for relief from the money judgment against her (as opposed to relief from the judgment against the bankruptcy estate), the monetary claim against her has already been discharged so the court can grant no effective relief and she needs none. If the complaint is really intended to be a claims objection against the Wackers' proof of claim, the court has previously denied debtor's objection to their claim.

To the extent the complaint challenges the quieting of title to the semi-trailer, the court does not have subject matter jurisdiction. That vehicle was not property of the estate and the dispute is between third parties (a partnership, and the Wackers and BPR).

Finally, the suit against trustee Larry Compton will be dismissed because the complaint asks no relief against him, and the plaintiff has not contested the OSC regarding Compton.

2. ANALYSIS-

2.1. Claims Against the Wackers and Boot Print Ranch- The order to show cause (the OSC) with respect to the Wackers and BPR required plaintiff to show cause why:

(b)- summary judgment should not be granted pursuant to Fed. R. Bankr. P. 7056 dismissing the claims against the Wackers and Boot Print Ranch on claims preclusion grounds.

The court may appropriately propose entry of summary judgment itself provided that it gives due process to the respondent.¹

2.1.1. Claims Preclusion- The analysis in the OSC supporting both state and federal claims preclusion is incorporated by reference from the OSC, without restating it here.² A copy of this portion of the OSC is attached as an Appendix in Section 4 of this memorandum.

In her response to the OSC relating to the Wackers and BPR, she says:

¦ (a) there were improprieties in the notice of the default prove-up hearing, raising due process issues;

¦ (b) Exhibits A-C to the response are "newly discovered" (a copy of the order setting the prove-up hearing for the Montana case; a docket sheet for the Montana case; and, Court Minutes of the May 9, 2011 prove-up hearing);

¦ (c) Judge Spraker's previous holding that the Montana judgment could not be avoided as a judgment lien because it was entitled to full faith and credit should not be entitled to claims preclusion because he ruled "without actually looking at the issues of fraud or lack of due process," and in any event that was not necessary to his ruling.³

Plaintiff does not dispute that the Montana court had in personamjurisdiction of her. Her argument that the bankruptcy court can disregard the judgment is based on the plaintiff's allegation that it was wrong on the merits, the judge was biased, and she did not get proper notice of the prove-up hearing.

Even if all these things were true, the plaintiff cites no authority to refute the cases cited by the court in its OSC explaining why both state and federal claims preclusion bar the relief she seeks, except to cite a 1970 Second Circuit case⁴ for a proposition which the case does not support.

Plaintiff cited the case to support the proposition that Judge Spraker's ruling⁵ is not entitled to issue preclusion, but the actual holding is that summary judgment can't be based on a prior ruling where the earlier ruling was on two or more independent grounds; it wasn't conclusive which issues were necessarily found. But, the judgment Judge Spraker was alluding to was a fraudulent transfer judgment by the Montana court for conveyances made priorto the $137,000 judgment at issue, so I agree with plaintiff that it is not dispositive in this adversary proceeding.

But the plaintiff fails to address the court's (Judge Ross's) ruling that denying the debtor's objection to the Wackers' proof of claim on the basis the Wackers' judgment lien was based on an invalid judgment (the same judgment that is at issue in this adversary). This court overruled the exact same arguments that plaintiff makes in this adversary when it ruled on her claims objection.⁶

Also, any irregularity in the noticing of the prove-up hearing, if there is one, is not something that this bankruptcy court can correct by denying full faith and credit to the Montana judgment. That is something that must be addressed by the Montana court. As long as that court had in personam jurisdiction of the debtor, the judgment is valid for full faith and credit purposes.

And, the plaintiff debtor cannot collaterally attack the Montana judgment under the Rooker-Feldman doctrine.⁷ Under that doctrine, this bankruptcy court lacks jurisdiction to modify the Montana judgment.⁸ The doctrine is explained in the following quotation:

The Rooker-Feldman doctrine applies to "cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments." Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 283, 125 S.Ct. 1517, 161 L.Ed.2d 454 (2005). "The purpose of the doctrine is to protect state judgments from collateral federal attack. Because district courts lack power to hear direct appeals from state court decisions, they must decline jurisdiction whenever they are 'in essence being called upon to review the state court decision.' " Doe & Assocs. Law Offices v. Napolitano, 252 F.3d 1026, 1030 (9th Cir.2001) (quoting Feldman, 460 U.S. at 482 n. 16, 103 S.Ct. 1303). The doctrine applies "not only to claims that were actually raised before the state court, but also to claims that are inextricably intertwined with state court determinations." Kelley v. Med-1 Solutions, LLC, 548 F.3d 600, 603 (7th Cir.2008). Claims are "inextricably intertwined" with a state court decision if "the adjudication of the federal claims would undercut the state ruling or require the district court to interpret the application of state laws or procedural rules...." Reusser v. Wachovia Bank, N.A., 525 F.3d 855, 859 (9th Cir.2008). See also Napolitano, 252 F.3d at 1030 ("Where the district court must hold that the state court was wrong in order to find in favor of the plaintiff, the issues presented to both courts are inextricably intertwined.").⁹

"[T]he Rooker-Feldman doctrine prevents litigants from collaterally attacking a state court judgment 'no matter how erroneous or unconstitutional the state court judgment may be.' "¹⁰

Plaintiff also makes the following argument:

For these reasons stated above, the Debtor is requesting a complete review of the judgment obtained without due process and without merit in a court where the judge should have recused himself due to bias and inability to remain impartial. Rule 60 b of FRCP permit a court to set aside a judgment based on mistake, newly discovered evidence, a void judgment, fraud or any other reason justifying relief.

Here is the debtor has presented several theories wherein relief can and should be granted to her.¹¹

This argument seems to be a suggestion that the court use FRCP 60(b) to reopen the issues addressed in the Montana judgment. It is misplaced. First of all, it is a Montana judgment that debtor says that needs to be corrected, not a federal judgment, and the Montana version of Rule 60 is the one that should be used to address the issue. Secondly, it is the Montana courts, not the bankruptcy court, that has to correct its own errors. That judgment cannot be collaterally attacked in bankruptcy court on the fact of this case. And, even if I had jurisdiction to "fix" the problem under FRCP 60(b)(2)¹² based on "newly discovered evidence," the documents that ae claimed to be "newly discovered" were from the Montana state court's docket in 2011 and hardly qualify as newly discovered.¹³

Finally, if the complaint is to avoid the $137,000 money judgment against the debtor in personam, it is unnecessary. Plaintiff already has a discharge from the judgment.¹⁴

2.1.2. The Complaint Cannot Serve As a Claims Objection- If the complaint is really meant to serve as a claims objection to the Wackers' Proof of Claim No. 2, that objection has already been...