Opinion
NOT FOR PUBLICATION
Argued and Submitted at Seattle, Washington: September 13, 2006
Appeal from the United States Bankruptcy Court for the Western District of Washington. Hon. Thomas T. Glover, Bankruptcy Judge, Presiding. Bk. No. 05-15099.
Before: DUNN, McMANUS[ and KLEIN, Bankruptcy Judges.
Hon. Michael S. McManus, Chief Bankruptcy Judge for the Eastern District of California, sitting by designation.
MEMORANDUM
The instant appeal involves the disallowance of certain claims filed by Richard MacGibbon (" Richard"), the ex-husband of the debtor, Deborah MacGibbon (" Deborah"). As the bankruptcy court noted, the continuing court proceedings stemming from the divorce of Richard and Deborah have initiated " all kinds of bad faith . . . and [the] dumping [of] garbage on everybody's lawn."
Both Richard and Deborah have filed individual bankruptcy cases before. The instant appeal involves the latest bankruptcy filing by Deborah, a chapter 11 case. Prior to confirmation of her plan, Richard had filed (and later amended) six proofs of claim, making various allegations as the bases for his claims. Specifically, Richard alleged that: (1) Deborah owed him a refund or he had a right to set off certain of her claims against him due to overpayments on past child support and spousal maintenance; (2) Deborah owed him sums for failing to return to work or to school, pursuant to the dissolution decree; (3) Deborah owed him for penalties and interest arising from a joint federal income tax return that should have been filed; and (4) he had negotiated and paid a debt on a car, which actually belonged to Deborah, and suffered harm therefrom.
Deborah objected to all of Richard's claims. The bankruptcy court sustained her objections and disallowed the claims.
Based on the reasons set forth below, we AFFIRM the bankruptcy court's order.
I. FACTS
A. Richard and Deborah's divorce
Prior to the filing of the underlying bankruptcy case, Deborah and Richard divorced. On or about February 28, 2000, the King County (Washington) Superior Court (the " Superior Court") entered the decree of dissolution (the " Decree"), ending the MacGibbons' twenty-year marriage and requiring Richard to pay child support and spousal maintenance.
Specifically, under the Decree, after paying child support and federal income taxes, Richard must pay half of his remaining income to Deborah as spousal maintenance.
Richard did not, however, make the full spousal maintenance payments to Deborah as required under the Decree. On or about April 7, 2004, Deborah obtained a judgment against Richard in the amount of $90,777.55 for unpaid spousal maintenance during 2000 (the " Spousal Maintenance Judgement").
Richard later appealed the Spousal Maintenance Judgment. August 26, 2005 Hr'g Tr. at 38:8-16, Bankruptcy Court Docket No. 129. The Washington State appellate court affirmed the lower court's decision on or about July 5, 2005. August 26, 2005 Hr'g Tr. at 38:11-15, Bankruptcy Court Docket No. 129.
B. Richard's chapter 11 bankruptcy
On or about April 13, 2004, Richard filed for chapter 11 bankruptcy protection pursuant to 11 U.S.C. § 1101 et seq. Jerome Shulkin represented Richard in his chapter 11 case and in the instant chapter 11 case filed by Deborah. In Richard's chapter 11 case, Deborah filed a priority claim in the approximate amount of $289,000, which included the Spousal Maintenance Judgment.
Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. § § 101-1330, and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9036, as enacted and promulgated prior to the effective date, October 17, 2005, of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, April 20, 2005, 119 Stat. 23.
Lawrence Engel is the attorney currently representing Richard in the appeal before us.
The claim also included unpaid child support and spousal maintenance for 2004, deficiencies in spousal maintenance for 2001 through 2003 and various state court judgments against Richard for contempt, attorney's fees and costs on appeal. Subsequently, sometime in September 2004, Deborah obtained an order from the Superior Court, enabling her to recover approximately $168,700 from Richard's retirement account. Even with the $168,700 recovery, Deborah asserted that, as of April 20, 2005, Richard still owed an additional $186,000 in back child support and spousal maintenance.
On or about November 22, 2004, an administrative judge awarded Deborah $55,948.74 in additional spousal maintenance for 2001 (the " Administrative Award"). Richard appealed the Administrative Award to the Superior Court, with the hearing on the appeal set for September 12, 2005. Richard also has appealed the Superior Court's awards of spousal maintenance for 2002 and 2003.
Neither Richard nor Deborah mentioned whether the hearing on the appeal took place or, if such a hearing took place and concluded, what the Superior Court ruled on the appeal.
See August 1, 2005 Disclosure Statement at 3, Bankruptcy Court Docket No. 56.
During the course of his chapter 11 case, with the bankruptcy court's approval, Richard sold his residence and deposited approximately $170,000 in proceeds into Jerome Shulkin's trust account (the " Trust Account").
C. Deborah's bankruptcy
On April 20, 2005, Deborah filed for chapter 11 bankruptcy protection, allegedly in order to stop a sheriff's execution sale of her claims against Richard.
Marsele Burns was the executing creditor, to whom Deborah owed $57,047.37. Marsele Burns earlier filed an appeal of the chapter 11 plan confirmation, which was before a separate Panel. The Panel recently affirmed the bankruptcy court's confirmation of the plan in an unpublished memorandum decision, Burns v. MacGibbon (In re MacGibbon), BAP No. WW- 05-1422-PaNK (9th Cir. BAP August 14, 2006).
On June 24, 2005, the bankruptcy court dismissed Richard's chapter 11 case. At the time of the dismissal, the amount in the Trust Account had fallen to $145,000, reduced by the costs of sale of the residence and attorney's fees and costs. Immediately after the dismissal of Richard's chapter 11 case, the State of Washington sought to recover $125,906.44 from the Trust Account for past due child support and spousal maintenance by serving an order to withhold and deliver on Jerome Shulkin. Richard then filed a chapter 13 bankruptcy petition on July 5, 2005. According to the schedules filed in that case, the amount in the Trust Account had dwindled to approximately $125,000, reduced by further fees paid to Jerome Shulkin.
The court later dismissed Richard's chapter 13 case on August 30, 2005.
At the July 15, 2005 hearing on a motion to dismiss or convert Deborah's chapter 11 case, the bankruptcy court set August 1, 2005, as the date for filing the plan and disclosure statement and the bar date for filing proofs of claim. The bankruptcy court also set a hearing on August 26, 2005, for final approval of the disclosure statement and confirmation of the plan.
On July 8, 2005, the bankruptcy court entered an order setting the claims bar date at August 31, 2005. At the July 15, 2005 hearing, Richard moved to set aside the order. July 15, 2005 Hr'g Tr. at 12:4-5, Bankruptcy Court Docket No. 91. The bankruptcy court granted the motion, setting the claims bar date at August 1, 2005. July 15, 2006 Hr'g Tr. at 12:6-10, Bankruptcy Court Docket No. 91. Looking at the docket, it appears that the bankruptcy court did not enter a separate order setting the deadline for filing the plan and disclosure statement nor did the bankruptcy court include the deadline in its order setting the claims bar date.
D. Richard's original proofs of claim
On July 28, 2005, Richard filed six proofs of claim (collectively, the " Original Claims"), numbered 14 through 19 on the claims register. All six of the claims listed " [t]he Marital Community of Richard D. and Marie C. Lucas-MacGibbon" as the name of the creditor and had the same supporting documents attached: to wit, pages one, four and eight of the Decree and a certification of the Decree issued by the state court clerk. None of the Original Claims stated whether they were secured or unsecured claims.
Richard filed both the Original Claims and the amendments thereto without the aid of an attorney.
Claim No. 14 claimed $8,000 and asserted " Support Overpay 2001" as the basis for the claim. Claim No. 15 claimed $20,000 and asserted " Hold Harmless Repo [sic], Et Al [sic]" as the basis for the claim. Claim Nos. 16 through 18 all listed the same claim amount of $40,000, but stated different bases for the claims. Claim No. 16 listed " Order to Work, " Claim No. 17 listed " Order to Re-Educate, " and Claim No. 18 listed " 1999 JTTR" as their bases, respectively. Claim No. 19 claimed $60,000 and asserted " 2004 Overpay" as the basis for the claim. All six claims noted that the listed claim amounts were estimates, with final amounts pending at state and federal courts and agencies.
The response filed by Richard to the Objection indicated that the claim allegedly arose out of the repossession of a 1997 Subaru Legacy, financed by Flying Tiger Employees Federal Credit Union.
Richard stated " JTTR" on Claim Nos. 18 and 32, and based on other documents in the record, we understand " 1999 JTTR" to mean the " Joint Income Tax Return" for 1999.
On August 1, 2005, Deborah filed her disclosure statement and plan. The plan listed two separate classes of unsecured creditors' claims. Richard's claims were the only claims in Class 2. The plan proposed to pay Class 1 unsecured creditors with funds recovered by the State of Washington from the Trust Account. The plan also provided that, although Richard would not receive any distribution from the funds recovered from the Trust Account, to the extent permitted by state law and approved by the bankruptcy court, he would have the right to offset any allowed claims against any amounts he owed to Deborah.
Specifically, the plan provides: " To the extent permitted by state law and to the extent approved by the Bankruptcy Court, [Richard] shall be entitled to offset any claim allowed by the Bankruptcy Court (whether determined by the Bankruptcy Court or by the King County Superior Court) against sums that the creditor owes to [Deborah], excluding any sums owed for child support, provided, however, that no offset shall be asserted against the funds garnished by the State of Washington on June 24, 2005, or otherwise used to establish the Dividend Fund." August 1, 2005 Disclosure Statement, App. A at 5:23-26, 6:1-3 (Plan of Reorganization), Bankruptcy Court Docket No. 56.
E. Deborah's objection to Richard's claims
On August 12, 2005, Deborah filed an objection to the Original Claims (the " Objection"). She served the Objection on Richard on the same day. In the Objection, Deborah asserted that Richard failed to provide adequate proof explaining the legal and factual basis for each claim. She further contended that Richard owed matured debts that constituted property of the estate, which, under Section 502(d), would provide a separate basis to disallow his claims.
Although the parties did not provide it in the record, according to the Request for Special Notice filed by Richard MacGibbon, available on the bankruptcy court's docket, Richard listed his address as PMB 3281, P.O. Box 257, Olympia, Washington 98507-0257 - the same address on Richard's proofs of claim. The address listed in the Declaration of Service filed by Deborah regarding service of the Objection matched this address.
Deborah also objected to each claim on individual grounds. With respect to Claim No. 14, she asserted that, as the issue of overpayment on child support was on appeal before the Superior Court, the bankruptcy court should only allow Claim No. 14 to the extent allowed by the Superior Court or the Department. With respect to Claim No. 15, Deborah contended that there was no evidence that Richard had paid the debt to the lienholder or that the lienholder had filed a claim against him.
With respect to Claim Nos. 16 and 17, Deborah contended that the Decree did not contain an order to work or to re-educate. With respect to Claim No. 18, Deborah contended that the bankruptcy court should disallow the claim, unless Richard provided evidence that he owed penalties and interest or evidence that he had paid the IRS.
With respect to Claim No. 19, Deborah asserted that, under the Decree, Richard must provide his 2004 federal income tax return in order to determine whether he had overpaid support in 2004 and that the Decree provided the mechanism by which any such overpayment would be corrected, i.e., as a deduction from future spousal maintenance payments. Deborah's position was that Richard owed approximately $10,662.40 for unpaid child support and spousal maintenance for 2004. As Richard failed to provide his 2004 federal income tax return, there was no way to determine whether Richard had overpaid or underpaid child support and spousal maintenance for 2004.
Deborah then moved, ex parte, for an order shortening time for the hearing on the Objection, requesting that the hearing on the Objection be held on August 26, 2005, at the same time as the hearing on confirmation of the plan and other related matters. Richard did not object to the motion shortening time for the hearing on the Objection. On August 12, 2005, the court entered an order shortening time for the hearing on the Objection (" Shortening Time Objection Order"). On the same day, Deborah served the Shortening Time Objection Order on Richard.
According to the Declaration of Service filed by Deborah, she served both the Objection and Shortening Time Objection Order concurrently. Deborah served the Shortening Time Objection Order on Richard at the address listed on his proofs of claim and on his Request for Special Notice. See supra note 17.
F. Richard's amended proofs of claim
Richard filed seven amendments to the Original Claims (collectively, the " Amended Claims"), numbered 27 through 33 on the claims register. Richard filed Claim No. 27 on August 12, 2005, and the remaining Amended Claims on August 18, 2005.
It appears that Claim No. 33 amended Claim No. 27. As Claim No. 33 has not been made part of the record in the instant appeal before us, we will not address it here.
All of the Amended Claims listed " [t]he Marital Community of Richard D. and Marie C. Lucas-MacGibbon" as the name of the creditor and included either portions of the Decree or the entire Decree. Nearly all of the Amended Claims had a number of additional documents attached in support. All of the Amended Claims, except Claim No. 27, included a letter, seemingly directed to the bankruptcy court, stating that the attached documents were in response to the Objection.
Claim No. 27 amended Claim No. 19. Claim No. 27 claimed $147,405.95 and asserted " 2004 Overpay" as the basis for the claim. The claim did not list whether it was a secured or unsecured or priority claim. In addition to pages 4 and 5 of the Decree, Richard attached various correspondence, dated between August 2 and 12, 2005, between himself and Jim Burkhead, a support enforcement officer with the child support division of the Department of Social and Health Services (the " Department"), regarding the accounting of spousal maintenance and child support payments, a debt calculation from the Department on such payments made, a table keeping track of his child support payments to the Department and a table calculating adjustments to the spousal maintenance payments.
Both tables were presumably created by Richard.
Claim No. 28 amended Claim No. 14. It claimed an unsecured priority claim of $7,644.30 under Section 507(a)(7), based on " Support Overpay 2001 [name omitted]." Along with a copy of the Decree, Richard attached various correspondence, dated between January 20 and September 16, 2004, between himself and the Department, regarding alleged overpayments on child support for a child who was allegedly no longer a minor dependent. Richard also provided various documents which he had sent to the Department in support of his allegations, including the child's school transcripts, a table listing alleged overpayments during 2001, a case payment history from the Department, and notes from a juvenile court hearing regarding the child.
Claim No. 29 amended Claim No. 15. It claimed $20,000 for debt incurred from 2001 to 2005, and asserted " Hold Harmless Provision/TFCU/Decree (DCD) [and] Court Order Decree (DCD)" as the basis for the claim. The claim did not list whether it was a secured or unsecured or priority claim. Again, Richard attached a copy of the Decree in support. He also attached two letters. The first letter, dated July 2, 2003, and written by the Department, notified Richard that the payroll deduction notice to his employer had been released. The second letter, dated January 25, 2004, written by Richard and addressed to the Department, requested a " lift of garnishment" of his wages and discussed alleged misrepresentations in a declaration filed by Deborah, in connection with a motion under Rule 60 of the Federal Rules of Civil Procedure brought by Richard in Superior Court.
Richard also attached a declaration by his current wife, Marie MacGibbon (" Marie"), which seemingly attempted to counter the statements made by Deborah in her declaration filed in the Superior Court. Richard also attached a promissory note made by Deborah to her divorce attorneys and a timeline summarizing Deborah's prior bankruptcies and child support and spousal maintenance payments made by Richard between 2000 and 2004.
The timeline was, presumably, generated by Richard.
Claim No. 30 amended Claim No. 16. It claimed an unsecured priority claim of $40,000 under Section 507(a)(7), based on an " Order to Return to Work/Decree (DCD) [and] Court Order Decree (DCD)." In support of the claim, Richard attached pages 4 and 5 of the Decree and an entire copy of the Decree. He did not include any other documents.
Claim No. 31 amended Claim No. 17. It claimed an unsecured priority claim of $40,000 pursuant to Section 507(a)(7) and an " Order to Re-Educate/Decree (DCD) [and] Court Order Decree (DCD)" as the basis for the claim. Along with a copy of the Decree, Richard attached several e-mails, of a personal nature, between Deborah and Philip Walter.
According to documents filed with Claim No. 32, it appears that Philip Walter was the accountant for Deborah and Richard during their marriage and the accountant for Deborah after their divorce.
Claim No. 32, consisting of documents totaling 130 pages, amended Claim No. 18. It claimed an unsecured priority claim of $40,000 under Section 507(a)(8), based on a " 1999 JTTR/Decree (DCD) [and] Court Order Decree." In addition to a copy of the entire Decree, Richard attached a declaration from Devon Sloan, the ex-wife of Philip Walter, which Richard filed in state court. He also attached a table tracking alleged overpayments on child support.
See supra note 15.
The table was, presumably, created by Richard.
Richard also included various correspondence between Deborah and Philip Walter, Deborah and Camden Hall, her divorce attorney, Philip Walter, Deborah and himself, himself and Philip Walter, and himself and the Department, in support of his claim. The bulk of the correspondence between Deborah and Philip Walter involved the preparation and filing of her 1999 federal income tax return and the calculations he had made on spousal maintenance payments. The correspondence between Philip Walter and Richard and Deborah addressed attempts by both Richard and Deborah at preparing and filing a joint income tax return, as required under the Decree. The correspondence between Richard and the Department discussed alleged overpayments on child support and his requests for a setoff to be applied to spousal maintenance payments.
Richard also included e-mail correspondence, of a personal nature, between Deborah and Philip Walter - some of which were the same e-mail correspondence he had attached to Claim No. 31.
See supra p. 11.
Richard also filed a response to the Objection on August 22, 2005 (the " Response"). In the Response, Richard argued that his Amended Claims provided sufficient evidence to support Deborah's legal liability. He also contended that, contrary to Deborah's assertion, the debts he owed to Deborah had not matured because she had not reduced them to judgment.
Richard also set forth arguments to counter the individual objections to each of his claims as follows:
Denial of Claim No. 14 would be premature because he has appealed the Administrative Order, with his appeal set for hearing before the Superior Court on September 12, 2005.
Although the lienholder did not file a claim in Richard's previous bankruptcies, Claim No. 15 should be allowed because the lienholder did pursue Richard for payment, requiring Richard to employ an attorney and harming Richard by filing negative reports with credit bureaus.
With respect to Claim Nos. 16 and 17, Richard admitted that the Decree did not contain an order to work or to re-educate, but stated that the findings of fact and conclusions of law related to the Decree (the " Findings") referred to such goals, which he believed Deborah must achieve.
With respect to Claim No. 18, Richard asserted that the Decree required both parties to file a joint income tax return, but Deborah, not Richard, refused to do so.
With respect to Claim No. 19, Richard argued that he has a right to a refund of the amounts he overpaid. The Decree required him to pay 50% of his income. After paying Deborah $168,000 pursuant to a qualified domestic relations order and making the monthly spousal maintenance payments, Richard had paid over and above the required 50% during 2004.
G. Richard's ballots and objection to confirmation
Prior to the August 26, 2005 hearing, Deborah sent copies of the plan and the disclosure statement and ballots for voting to accept or reject the plan to the creditors. On August 19, 2005, Richard and Marie submitted 24 ballots, purporting each to vote a one half-interest of the marital community claims in both Class 1 and Class 2. All 24 ballots rejected confirmation of the plan. On August 22, 2005, Deborah filed a motion to designate the ballots as improperly voted pursuant to Section 1126(e) (the " Ballot Motion"). She also moved, ex parte, to shorten time for a hearing on the Ballot Motion, requesting that the hearing be set for August 26, 2005. On August 22, 2005, the court entered an order shortening time on the hearing for the Ballot Motion.
On August 24, 2005, Richard filed an objection to confirmation of the plan. On the same day, Richard filed an amended objection to confirmation of the plan. Richard did not contest the classification of his claims or the treatment of his claims under the plan in either his objection or amended objection to confirmation.
H. The August 26, 2005 hearing
On August 26, 2005, the bankruptcy court held the hearing on final approval of the disclosure statement, plan confirmation, the Ballot Motion and the Objection. As part of the hearing on plan confirmation, the court heard arguments regarding the classification of Richard's claims under the plan. The bankruptcy court also listened to testimony from Deborah. The bankruptcy court allowed Richard and another creditor, Marsele Burns, who also objected to the disclosure statement and plan confirmation, to cross-examine Deborah. Twice, before moving on to its ruling, the bankruptcy court asked the parties whether they had any further evidence to present that day. Neither Richard nor Marsele Burns presented further evidence nor called any witnesses to testify, although Richard was present at the hearing. Nor did they introduce any new issues or arguments at the hearing.
See supra note 10.
The bankruptcy court first asked whether the parties had any further evidence after Deborah stepped down from the witness stand. August 26, 2005 Hr'g. Tr. at 66:10-12, Bankruptcy Court Docket No. 129. The bankruptcy court then asked, a second time, whether the parties had " other evidence that [the court] need[ed] to look at today?" August 26, 2005 Hr'g. Tr. at 67:19-20, Bankruptcy Court Docket No. 129.
At the August 26, 2005 hearing, the bankruptcy court approved the disclosure statement and confirmed the plan. As part of its confirmation of the plan, the bankruptcy court found that Marie had no interest in Richard's claims against Deborah and disallowed her alleged half-interest in the claims. The bankruptcy court then disallowed the ballots that Richard and Marie submitted as purported Class 1 creditors and restricted Richard's remaining ballots to Class 2 for voting purposes only, assuming that his claims were allowed. Later, on September 13, 2005, the bankruptcy court entered an order approving the disclosure statement and confirming the plan. Richard did not appeal the Confirmation Order.
See supra note 10.
In conjunction with its ruling on plan confirmation, the bankruptcy court also ruled on the Objection. It sustained Deborah's objections to all of Richard's claims. Although the bankruptcy court addressed each claim in its ruling, it did not refer to the specific claim numbers. Rather, the bankruptcy court referred to each claim by its subject.
The bankruptcy court did not explicitly state that it was addressing the Amended Claims. In discussing the claim involving the joint income tax return, however, the bankruptcy court did state that, " [I]t appear[ed] to [the bankruptcy court], from what [Richard] has submitted, that he [was] the perpetrator of the problem with respect to that." August 26, 2005 Hr'g Tr. at 4:11-13, Bankruptcy Court Docket No. 90. Claim No. 18 had only pages one, four and eight of the Decree attached as evidence. Claim No. 32, the amendment to Claim No. 18, had 130 pages attached, all of which provided a history of the interaction between the parties regarding the joint federal income tax return. Thus, it can be inferred that the bankruptcy court was addressing the Amended Claims at the August 26, 2005 hearing. The order on the Objection included the claim amounts stated in the Amended Claims as well.
The bankruptcy court disallowed the " indemnity claim" (i.e., Claim Nos. 15 and 29) because Richard had no proof that he had to make any indemnity payments. The bankruptcy court disallowed the claim based on the alleged failure to file the 1999 joint federal income tax return (i.e., Claim Nos. 18 and 32) on the ground that Richard presented no evidence on any damages he had allegedly suffered. The bankruptcy court disallowed the claim on the " order to work" (i.e., Claim Nos. 16 and 30) and the " order to re-educate" (i.e., Claim Nos. 17 and 31) because the Decree mandated no such obligations. The bankruptcy court also disallowed the claims on the alleged overpayments made in 2004 (i.e., Claim Nos. 19 and 27) and in 2001 (i.e., Claim Nos. 14 and 28) on the ground that the state court's orders regarding the claims were " res judicata" (i.e., claim preclusive).
August 26, 2005 Hr'g. Tr. at 4:5-7, Bankruptcy Court Docket No. 90.
August 26, 2005 Hr'g. Tr. at 4:8-11, Bankruptcy Court Docket No. 90.
August 26, 2005 Hr'g. Tr. at 3:25, 4:1-4, Bankruptcy Court Docket No. 90.
At the August 26, 2005 hearing, the bankruptcy court referred to a claim as " the No. 6 claim." August 26, 2005 Hr'g. Tr. at 4:17-20, Bankruptcy Court Docket No. 90. Given the context surrounding the claim and looking over the Objection, which listed Claim No. 19 (plus the amount of the amended claim) as the sixth claim therein, it appears that the bankruptcy court was referring to Claim Nos. 19 and 27.
I. The bankruptcy court's order sustaining Deborah's Objection
On September 9, 2005, Deborah filed a notice of presentation of the order on the Objection (the " Objection Order"), stating that the Objection Order would be presented for entry before the bankruptcy court on September 30, 2005 at 9:30 a.m. On September 27, 2005, a notice of intent to argue was noted on the bankruptcy court's docket, which was electronically mailed to Jerome Shulkin, among others.
Although the parties did not include the notice of intent to argue in the record, we obtained this information from our review of the bankruptcy court's docket.
On September 30, 2005, Deborah presented the Objection Order for entry before the bankruptcy court. Although not included in the record submitted by the parties, according to the minutes entered on the bankruptcy court's public docket, neither Richard nor Jerome Shulkin appeared or filed an objection to entry of the Objection Order.
On October 3, 2005, the bankruptcy court entered the Objection Order, sustaining the objections to and disallowing Richard's claims. The Objection Order summarized the alleged amounts and bases of both the Original Claims and Amended Claims. The Objection Order then, for the most part, repeated each of the grounds that the bankruptcy court had stated in disallowing the claims at the August 26, 2005 hearing. The Objection Order differed from the ruling given at the August 26, 2005 hearing with respect to Claim Nos. 19 and 27. In its ruling at the August 26, 2005 hearing, the bankruptcy court stated claim preclusion as the ground for disallowing Claim Nos. 19 and 27. The Objection Order provided that the bankruptcy court disallowed Claim Nos. 19 and 27 on the grounds that Richard failed to provide a verified copy of his 2004 income tax return as required under the Decree and otherwise failed to provide sufficient evidence in support of his claim.
According to her brief, Deborah also believed that the bankruptcy court had included Claim Nos. 19 and 27 in its ruling on Claim Nos. 14 and 28. Thus, in the Objection Order, Deborah attempted to " clarify the issue." Appellee's Br. at 11.
Richard timely filed his notice of appeal on October 7, 2005.
II. ISSUES
(1) Whether the bankruptcy court lacked jurisdiction to determine the allowance or disallowance of Richard's claims.
(2) Whether the bankruptcy court failed to provide Richard an adequate opportunity for hearing on his claims.
In his brief, Richard stated two similar issues: 1) whether the bankruptcy court erred in failing to afford him an opportunity for hearing and 2) whether the bankruptcy court erred in failing to hold an evidentiary hearing on the Objection. We believe that these two issues are essentially the same and have addressed them as such.
(3) Whether the bankruptcy court erred in disallowing Richard's claims.
(4) Whether we need to address the issue of recoupment raised by Richard for the first time on appeal.
III. STANDARD OF REVIEW
We review questions of jurisdiction de novo. Tucker Plastics v. Pay 'N Pak Stores, Inc. (In re PNP Holdings Corp.), 184 B.R. 805, 806 (9th Cir. BAP 1995), aff'd, 99 F.3d 910 (9th Cir. 1996). Whether a particular procedure comports with the requirements of due process is a question of law, which we review de novo. Garner v. Shier (In re Garner), 246 B.R. 617, 619 (9th Cir. BAP 2000).
We review the bankruptcy court's legal conclusions and its interpretations of statutes and rules de novo. Wall St. Plaza, LLC v. JSJF Corp. (In re JSJF Corp.), 344 B.R. 94, 99 (9th Cir. BAP 2006). Whether the bankruptcy court's compliance with a given statute or rule has been established is a question of fact, which we review for clear error. Id.
We review the factual determinations of the bankruptcy court for clear error. Id. A factual determination is clearly erroneous if, after viewing the record, the appellate court firmly and definitively believes that a mistake has been made. Id. We may view a factual determination as clearly erroneous if it was without adequate evidentiary support or was induced by an erroneous view of the law. Id.
Whether a proof of claim is executed and filed in accordance with the Federal Rules of Bankruptcy Procedure constitutes a question of fact, which we review for clear error. Garner, 246 B.R. at 619.
IV. DISCUSSION
A. Bankruptcy Court's Jurisdiction
Richard argues that the bankruptcy court had no jurisdiction to disallow his claims because, once the bankruptcy court determined that his claims did not fall within Class 1 of the plan, where such creditors would receive a distribution from the bankruptcy estate's funds, and that his claims, under Class 2, could be set off against any amounts owed to Deborah, his claims ceased to have any relation or connection to Deborah's bankruptcy case.
Specifically, Richard believes that the bankruptcy court may only assert its jurisdiction over creditors whose claims directly affect the administration of the bankruptcy estate. Once the bankruptcy court determined that Richard only could pursue allowed claims through setoff, Richard's claims fell outside the scope of Deborah's bankruptcy - his claims then only would involve Deborah, personally, and not the bankruptcy estate - and thus were beyond the bankruptcy court's jurisdiction. Richard contends the bankruptcy court, in proceeding to disallow his claims, exceeded the jurisdiction allocated to it under 28 U.S.C. § § 157(b) and 1334.
Since at least the Bankruptcy Act of 1898, bankruptcy courts have had the authority to adjudicate matters involving claims. 9 Collier on Bankruptcy ¶ 3.03[3][a] (15th ed. 2006).
The bankruptcy court has jurisdiction over core proceedings. 28 U.S.C. § 1334(b); Durkin v. Benedor Corp. (In re G.I. Indus., Inc.), 204 F.3d 1276, 1279 (9th Cir. 2000). The allowance or disallowance of claims and the estimation of claims for the purposes of chapter 11 plan confirmation are just two of the kinds of core proceedings over which the bankruptcy court has jurisdiction. 28 U.S.C. § 157(b)(2)(B). See also Durkin, 204 F.3d at 1279-80; Benedor Corp. v. Conejo Enter., Inc. (In re Conejo Enter., Inc.), 96 F.3d 346, 353 (9th Cir. 1996).
" [A] proof of claim provides the basis of creditor participation in a case." 9 Collier on Bankruptcy ¶ 3001.02 (15th ed. 2006)(citation omitted). Once a creditor files a proof of claim, he voluntarily submits himself to the core jurisdiction of the bankruptcy court. Langenkamp v. Culp, 498 U.S. 42, 44, 111 S.Ct. 330, 112 L.Ed.2d 343 (1990)(stating that " by filing a claim against a bankruptcy estate the creditor triggers the process of 'allowance and disallowance of claims, ' thereby subjecting himself to the bankruptcy court's equitable power")(citing Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 58-59 n.14, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1989)); Durkin, 204 F.3d at 1280; Benedor, 96 F.3d at 353 (stating that, as the allowance and disallowance of claims is a core proceeding under Section 157(b)(2)(B), once the creditor filed its proof of claim, it subjected itself to the bankruptcy court's core jurisdiction); PNP Holdings Corp., 184 B.R. at 806.
Here, Richard willingly subjected himself to the bankruptcy court's jurisdiction by filing his claims. Once he had done so, he triggered the claims allowance process, thereby submitting himself to the bankruptcy court's authority. Simply because Richard would not receive a share of the distribution under the plan from funds recovered from the Trust Account does not mean that the bankruptcy court's jurisdiction suddenly terminated.
Further, under the confirmed plan, the bankruptcy court expressly retained its jurisdiction over Richard. Specifically, the confirmed plan provided that the bankruptcy court had jurisdiction over any objection to claims, any hearing or determination involving " all causes of action, controversies, disputes or conflicts between or among [Deborah] and any other party, including those that were pending prior to confirmation, " and any hearing or determination on " any dispute relating to the terms or implementation of the Plan or order of Confirmation, or to the rights or obligations of any parties in interest with respect thereto." August 1, 2005 Disclosure Statement, App. A, 10:11-12, 10:16-17, 11:1-2 (Plan of Reorganization), Bankruptcy Court Docket No. 56. Thus, Richard's argument that the bankruptcy court lacked jurisdiction fails.
B. Adequate Opportunity for Hearing
Richard contends that the bankruptcy court did not afford him an opportunity for a fair hearing and to present evidence on his claims. Richard claims that the bankruptcy court only " made superficial inquiries of [Jerome] Shulkin and then ruled." Appellant's Br. at 23-24. He also alleges that the bankruptcy court was biased; according to Richard, the bankruptcy court had " already made [its] decision on the claims issues, without holding any hearing" and had " truly wanted to hear no more from [Richard]." Appellant's Reply Br. at 9. As the bankruptcy court had " already berated [Jerome] Shulkin on the record on a number of occasions, [Richard] had no reason to believe that he would have an opportunity to proceed with any claims evidence." Appellant's Reply Br. at 9. He asserts that, although his claims required a full evidentiary hearing, the bankruptcy court only considered his claims as " an afterthought after Plan confirmation proceedings." Appellant's Reply Br. at 10.
We determine, to the contrary, that the bankruptcy court afforded Richard an adequate opportunity for hearing and to present evidence on his claims.
Under Rule 9014, the filing of an objection to a proof of claim creates a dispute which constitutes a contested matter and must be resolved after notice and opportunity for hearing. Lundell v. Anchor Constr. Specialists, Inc. (In re Lundell), 223 F.3d 1035, 1039 (9th Cir. 2000); Garner, 246 B.R. at 624. " Section 102(1)(A) defines 'after notice and a hearing' and similar phrases to mean 'after such notice as is appropriate in the particular circumstances . . . .'" Highland Fed. Bank v. Maynard (In re Maynard), 264 B.R. 209, 215 (9th Cir. BAP 2001)(citing United States v. Yochum (In re Yochum), 89 F.3d 661, 672 (9th Cir. 1996)). Similarly, due process requires that when a property interest is at stake, there be notice and an opportunity for hearing appropriate to the nature of the case. Id.
Richard had ample opportunity for a hearing on the Objection. Deborah served the Objection and the Shortening Time Objection Order on Richard at his known address. Given that Richard's claims had a substantial potential impact on the confirmation of Deborah's plan, we do not find the hearing on the Objection on shortened time to have been inappropriate. Further, though Deborah moved to hold the hearing on the Objection on shortened time, Richard did not object. There is nothing in the record, nor in Richard's brief, challenging the notice of Deborah's motion to shorten time on the hearing on the Objection, the Shortening Time Objection Order, the entry of the Objection Order, or the Objection Order itself.
See supra note 17.
Richard also had ample opportunity to present evidence at the hearing on the Objection. At the hearing, the bankruptcy court twice asked the parties whether they had any further evidence to present that day. The bankruptcy court allowed Jerome Shulkin to cross-examine Deborah, which he did at length, and a chance to follow up with additional questions, which Jerome Shulkin did. A number of the questions he asked during both examinations focused not only on the feasibility of the plan, but on the payments that Deborah had received from Richard for child support and maintenance, which allegedly formed the basis of Richard's claims. The bankruptcy court also afforded Richard another opportunity to object to the entry of the Objection Order by setting a hearing; neither Richard nor Jerome Shulkin appeared at that hearing.
See supra note 28.
Richard complains of the bankruptcy court's bias against him, but we find nothing in the transcript or on the record indicating any unfair prejudice. Though the bankruptcy court questioned Richard's standing to participate in Deborah's bankruptcy, the bankruptcy court eventually concluded that Richard " [was] a party in interest at [the confirmation] hearing in the sense that certain things that [Jerome Shulkin's] going to be claiming [Richard's] going to say, hey, that's not right. I've got a different claim to this." July 15, 2005 Hr'g Tr. 10:6-10, Bankruptcy Court Docket No. 91. The bankruptcy court allowed Richard to file an objection to the plan and to appear at the confirmation hearing.
Further, given the obvious experience of Jerome Shulkin and his familiarity with the bankruptcy court, it is difficult to believe that he would be intimidated into silence, as Richard claims. Even if the bankruptcy court had " berated" Jerome Shulkin (and we find no evidence of this), Richard should have presented his evidence nonetheless. Though the bankruptcy court expressly invited the parties to present evidence, Richard and his counsel did not avail themselves of this opportunity.
At the July 15, 2005 hearing, when the bankruptcy court told Jerome Shulkin that, " I'm not trying to lecture you on this. You and I have been in this business for longer than either one of us wants to admit at this point, " Jerome Shulkin agreed. July 15, 2005 Hr'g Tr. at 9:3-5, Bankruptcy Court Docket No. 91.
We find no evidence that the bankruptcy court denied due process to Richard or that the bankruptcy court harbored any unfair prejudice against him.
C. Presumption of Prima Facie Validity of Proofs of Claim
Richard complains that the bankruptcy court erred in failing to treat his claims as presumptively valid pursuant to Section 502 and Rule 3001(f). Though Deborah had objected to the Original Claims on the ground that he failed to attach sufficient documentation, Richard asserts that he corrected the deficiencies by filing his Amended Claims, which attached " extensive" evidence. Once he had done so, Richard further asserts that Deborah had the burden of providing evidence to defeat their prima facie validity. Richard argues that both Deborah and the bankruptcy court disregarded the evidence attached to the Amended Claims.
Richard did not cite to the applicable statute and rule.
Richard misses the essence of the Objection and the grounds set forth by the bankruptcy court in sustaining it. The facts that Richard alleged and the evidence that he submitted in support of his claims were insufficient to establish his claims.
Under Section 501(a), a creditor may file a proof of claim. 11 U.S.C. § 501(a); Garner, 246 B.R. at 620. A proof of claim is a written statement setting forth a creditor's claim. Fed.R.Bankr.P. 3001(a). The claimant must allege facts sufficient to support a legal liability to the claimant in the proof of claim. Wright v. Holm (In re Holm), 931 F.2d 620, 623 (9th Cir. 1991); Ashford v. Consol. Pioneer Mortgage (In re Consol. Pioneer Mortgage), 178 B.R. 222, 226 (9th Cir. BAP 1995); Hardin v. Gianni (In re King St. Inv., Inc.), 219 B.R. 848, 858 (9th Cir. BAP 1998)(citing Holm, 931 F.2d at 623). A proof of claim executed and filed in accordance with the rules constitutes prima facie evidence of the validity and amount of the claim. Fed.R.Bankr.P. 3001(f). For a proof of claim to have prima facie validity, it must comply with the rules and set forth all the necessary facts to establish the claim. Holm, 931 F.2d at 623; Ashford, 178 B.R. at 226; Hardin, 219 B.R. at 858. See also 9 Collier on Bankruptcy ¶ 3001.09[1] (15th ed. 2006); 4 Collier on Bankruptcy ¶ 502.03[3][f] (15th ed. 2006).
Under Section 502(a), a proof of claim is deemed allowed, unless a party-in-interest objects. 11 U.S.C. § 502(a); Siegel v. Fed. Home Loan Mortgage Corp. (In re Siegel), 143 F.3d 525, 530 (9th Cir. 1998); Garner, 246 B.R. at 620. If a party in interest objects, he or she must provide evidence and show facts sufficient to refute the claim. Holm, 931 F.2d at 623; Ashford, 178 B.R. at 226; Hardin, 219 at 858. If the objecting party in interest has provided sufficient evidence and facts to refute the claim, the claimant must prove the validity of the claim by a preponderance of the evidence. Holm, 931 F.2d at 623; Ashford, 178 B.R. at 226; Hardin, 219 at 858. " But the ultimate burden of persuasion is always on the claimant." Holm, 931 F.2d at 623 (quoting 3 Collier on Bankruptcy ¶ 502.02 (15th ed. 1991)).
Here, neither the Original Claims nor the Amended Claims have prima facie validity because they fail to set forth facts sufficient to show that Deborah was legally liable to Richard for any of the alleged debts. In both the Original Claims and Amended Claims, Richard asserted that: 1) Richard made overpayments on child support and spousal maintenance during 2001 and 2004 and that Deborah owed him refunds for the alleged overpayments; 2) Deborah owed penalties and interest arising from their 1999 joint income tax return (which they did not actually file jointly); 3) Richard paid the debt owed to Flying Tiger Employees Federal Credit Union on the 1997 Subaru Legacy and suffered financial harm from negotiating the debt, though Deborah owned the vehicle; and 4) Deborah owed Richard for failing to return to school or to work. None of the claims filed with the bankruptcy court nor any of the attached evidence provide any facts demonstrating that Deborah incurred any liability to Richard.
1. No presumption of prima facie validity on the Original Claims
With respect to the Original Claims, as we have noted earlier, Richard attached only portions of the Decree as evidence in support of his claims. The Decree does not, however, provide any facts demonstrating Deborah's liability to Richard for the alleged debts. The Decree merely sets out the method for payment of any refunds that Deborah may owe to Richard and establishes the party responsible for payment of any additional assessments, penalties and interest in the event of a tax audit. The Decree also contains no provision indicating that Deborah must pay Richard if she fails to return to work or to school. In short, neither the Original Claims nor the Decree itself establishes any facts explaining why and how Richard has a claim against Deborah.
In fact, the Decree specifically states that " [i]f there are any tax audits for 1999 . . . Mr. MacGibbon shall hold Ms. MacGibbon harmless for any expense, including without limitation, accounting or attorney fees, and from any tax, additional assessments, penalties and interest." Objection to Claims of Richard MacGibbon, Exh. A at 8:10-11 (Decree of Dissolution), Bankruptcy Court Docket No. 63.
2. No presumption of prima facie validity on the Amended Claims
With respect to the Amended Claims, we have noted that Richard attached numerous documents, in addition to copies of the Decree or portions thereof, in an attempt to bolster his claims. Though the number of documents increased, the Amended Claims still did not set forth sufficient facts to establish Richard's claims.
a. Claim No. 27 and Claims Nos. 29 through 32
Claim No. 27 fails to set forth sufficient facts and evidence showing that Richard had a right to offset future spousal maintenance payments for alleged overpayments on spousal maintenance and child support in 2004. In fact, the Decree provides certain conditions precedent in order for Richard to have a right to a refund or offset.
Specifically, under the Decree, " [i]n any year in which a change in [Richard's] income would result in an adjustment to the base [spousal] maintenance of 10 percent or more, such adjustment must be made . . . based upon [Richard's] prior year's tax return." Objection to Claims of Richard MacGibbon, Exh. A at 4:24-26 (Decree of Dissolution), Bankruptcy Court Docket No. 63. Richard is eligible only for a refund from Deborah for spousal maintenance payments when he provides written notice " at the end of the fifth month following any four months in a calendar year in which his anticipated net income (after child support and tax payments) is less than two times the established base monthly maintenance payment rate." Objection to Claims of Richard MacGibbon, Exh. A at 4:25-26, 5:2-4 (Decree of Dissolution), Bankruptcy Court Docket No. 63. Richard must also provide Deborah with a verified copy of his prior year's tax return. Objection to Claims of Richard MacGibbon, Exh. A at 5:3-4 (Decree of Dissolution), Bankruptcy Court Docket No. 63. Though Richard provided tables, calculations and an accounting with the claim, none of these documents indicate that the conditions precedent were met. Further, and most important, Richard did not provide a verified copy of his 2004 federal income tax return to Deborah as required under the Decree to show that he was eligible for a refund or offset. In addition, he did not include a copy of his 2004 federal income tax return with his amended proof of claim. Accordingly, neither the amended proof of claim nor the documents attached demonstrate that the conditions precedent had occurred, giving Richard no right to an offset against future spousal maintenance payments for the alleged overpayments of spousal maintenance for 2004.
Claim No. 29 also does not provide sufficient facts and evidence demonstrating that Deborah owed Richard for his payment of the debt to Flying Tiger Employees Federal Credit Union and that Richard had suffered financial harm from negotiating the debt. Though the Decree contained a provision stating that neither party can hold the other accountable for any liabilities or collection actions relating to their separate or community debts, Richard does not show that he paid Deborah's debt for the 1997 Subaru Legacy. The documents that Richard did attach, concerning the " lift of garnishment, " the Rule 60 motion, and the promissory note, had no relevance to this particular claim. He further included no evidence of his specific damages.
Both Claim Nos. 30 and 31 were not supported by any evidence demonstrating that Deborah owed Richard anything for failing to return to work or to school. In his Response, Richard cites to the Findings on the Decree as evidence that the Superior Court intended that Richard would be entitled to a refund from Deborah on his spousal maintenance payments if she failed to return to work or to school. Richard did not attach a copy of the Findings to the Amended Claims to support his allegations. Richard did attach a copy of the Findings as an exhibit to his Response, but there is nothing in the Findings stating that Richard would have a right to repayment from Deborah if she failed to return to work or to re-educate herself. There is also nothing in the Decree that mandates such a refund under those circumstances. Again, neither the claims nor the evidence set forth facts showing that such a debt exists and that Deborah is liable for it.
Richard MacGibbon's Response to Debtors [sic] Objection to Claims, Exh. C at 6:1-26, 7:1-25 (Findings of Fact and Conclusions of Law), Bankruptcy Docket No. 73.
Claim No. 32 also does not allege facts or present evidence sufficient to show that Deborah owed any taxes or penalties for the failure to file a 1999 joint federal income tax return. Richard and Deborah did not file a joint federal income tax return for 1999. Penalties and interest were assessed against Richard for his individual 1999 federal income tax return. None of the documents show that Deborah was liable for any portion of the penalties and interest. The Decree itself provides that, in the event of an audit, Richard, not Deborah, must pay for any additional assessments, penalties, and interest for the 1999 federal income tax return. As the bankruptcy court pointed out at the August 26, 2005 hearing, " [i]t appear[ed] . . . from what [Richard] has submitted, that he [was] the perpetrator of the problem."
See supra note 42.
See supra note 30.
b. Claim No. 28
As to Claim No. 28, like the other Amended Claims, it fails to set forth sufficient facts and evidence demonstrating that Richard had overpaid child support and/or spousal maintenance for 2001, giving him the right to offset the amount claimed. In his claim, Richard alleged that he had made overpayments on child support in 2001 for one of his children who was no longer a minor. Though Richard provided numerous documents, none of them establishes his allegation that the child had reached legal maturity nor the amount of his claim. Claim No. 28, like the other Amended Claims, lacks sufficient evidence to support its allegations. Thus, Claim No. 28 lacks prima facie validity.
The bankruptcy court, at the August 26, 2005 hearing and in the Objection Order, did not disallow Claim No. 28 on this ground, however. Rather, the bankruptcy court disallowed Claim No. 28 on the ground that the Administrative Order effected claim preclusion. The basis for this determination is not clear from the record.
28 U.S.C. § 1738 provides that judicial proceedings of any court " shall have the same full faith and credit in every court of the United States . . . as they have by law or usage in the courts of such State." Thus, federal courts must accord state court judgments the same preclusive effect that those judgments would enjoy under the law of the state in which they were rendered. Marrese v. Am. Acad. of Orthopaedic Surgeons, 470 U.S. 373, 380, 105 S.Ct. 1327, 84 L.Ed.2d 274 (1985).
Federal courts also may accord the same preclusive effect as the state would impose to the decisions of state administrative agencies " acting in a judicial capacity [to resolve] disputed issues of fact properly before [them] which the parties have had an adequate opportunity to litigate . . . ." United States v. Utah Constr. & Mining Co., 384 U.S. 394, 422, 86 S.Ct. 1545, 16 L.Ed.2d 642, 176 Ct. Cl. 1391 (1966); Univ. of Tenn. v. Elliott, 478 U.S. 788, 799, 106 S.Ct. 3220, 92 L.Ed.2d 635 (1986)(quoting Utah Constr. & Mining Co., 384 U.S. at 422); Miller v. County of Santa Cruz, 39 F.3d 1030, 1032-33 (9th Cir. 1994); Dias v. Elique, 436 F.3d 1125, 1128 (9th Cir. 2006); Restatement (Second) of Judgments § 83 (1982). Federal courts may even accord preclusive effect " to unreviewed [state] administrative findings under federal common law rules of preclusion, " so long as the state administrative proceeding satisfies the fairness requirements set out in Utah Construction. Guild Wineries & Distilleries v. Whitehall Co., 853 F.2d 755, 758-59 (9th Cir. 1988)(stating that " the federal common law rules of preclusion described in Elliott extend to state administrative adjudications of legal as well as factual issues, even if unreviewed, so long as the state proceeding satisfies the requirements of fairness outlined in Utah Construction"); Plaine v. McCabe, 797 F.2d 713, 719 (9th Cir. 1986)(stating that " when an administrative proceeding meets the requirements set forth in Utah Construction, it may rise to the level of a 'judicial proceeding' entitled to preclusive effect by section 1738"); Eilrich v. Remas, 839 F.2d 630, 632 (9th Cir. 1988)(citing Elliott, 478 U.S. at 796-97); Miller v. County of Santa Cruz, 39 F.3d at 1032-33 (quoting Guild Wineries, 853 F.2d at 758). These fairness requirements are: " (1) that the administrative agency act in a judicial capacity, (2) that the agency resolve disputed issues of fact properly before it, and (3) that the parties have an adequate opportunity to litigate." Miller, 39 F.3d at 1033.
In determining whether a state administrative proceeding meets the Utah Construction requirements, the federal court first must ask whether a state administrative proceeding has been " conducted with sufficient safeguards to be equated with a state court judgment." Plaine, 797 F.2d at 719. Such an inquiry demands that the federal court carefully review the administrative record " to ensure that, at a minimum, it meets the state's own criteria necessary to require a court of that state to give preclusive effect to the state agency's decisions." Id. The federal court must consider the relevant state law test in making its determination. Dias v. Elique, 436 F.3d 1125, 1128 (9th Cir. 2006)(quoting Plaine, 797 F.2d at 719). See also Olson v. Morris, 188 F.3d 1083 (9th Cir. 1999)(applying Arizona claim preclusion law to administrative proceedings).
The federal court must apply the state's law of claim preclusion in determining the preclusive effects of a state administrative proceeding. See McInnes v. California, 943 F.2d 1088, 1094 n.5 (9th Cir. 1991); Feminist Women's Health Ctr. v. Codispoti, 63 F.3d 863, 867 (9th Cir. 1995); see also Baldwin v. Kilpatrick (In re Baldwin), 249 F.3d 912, 917 (9th Cir. 2001). Here, Washington law on claim preclusion applies. Under Washington law, claim preclusion forbids re-litigation of " all issues which might have been raised and determined." Shoemaker v. City of Bremerton, 109 Wn.2d 504, 745 P.2d 858, 860 (Wash. 1987). In Washington, claim preclusion applies to the final decisions of administrative agencies. State v. Dupard, 93 Wn.2d 268, 609 P.2d 961, 964 (Wash. 1980)(stating that " [d]ecisions of administrative agencies may be accorded preclusive effect in subsequent litigation"); In re Marriage of Aldrich, 72 Wn.App. 132, 864 P.2d 388, 391 (Wash.Ct.App. 1993)(stating that claim preclusion comes into effect when the decision in question becomes final); Devore v. Dep't of Social & Health Serv., 80 Wn.App. 177, 906 P.2d 1016, 1018 (Wash.Ct.App. 1995). See generally Wash. Rev. Code Ann. § 34.05.010(1) (West 2006)(defining an adjudicative proceeding as " a proceeding before an agency in which an opportunity for hearing before that agency is required by statute or constitution right before or after the entry of an order by the agency"). Washington courts also consider additional factors in applying claim preclusion to administrative proceedings: " (1) whether the agency acting within its competence made a factual decision; (2) agency and court procedural differences; and (3) policy considerations." Dupard, 609 P.2d at 964.
Unfortunately, neither the August 26, 2005 hearing transcript nor the Objection Order provides any analysis of claim preclusion issues. At the August 26, 2005 hearing, the bankruptcy court simply stated, " You know, those orders that were already entered in state court are res judicata on those kinds of matters for that period of time." The Objection Order merely reiterated the bankruptcy court's statement.
August 26, 2005 Hr'g Tr. at 4:21-23, Bankruptcy Court Docket No. 129.
Neither Richard nor Deborah submitted any evidence to aid the bankruptcy court in its determination. We are likewise constrained in our review due to the paucity of the record with regard to any prior administrative proceedings. Aside from the summary of administrative proceedings contained in Deborah's disclosure statement, neither Richard nor Deborah have submitted a copy of the record from the administrative proceedings between them, any subsequent order, or the findings of fact and conclusions of law which Washington requires as part of final orders in administrative proceedings. Wash. Rev. Code Ann. § 34.05.461(3) (West 2006).
Confining our review to the August 26, 2005 hearing transcript and the Objection Order, we believe that the bankruptcy court did not have sufficient grounds to support its disallowance of Claim No. 28 on the ground of claim preclusion. However, under the circumstances, any error is harmless because, as we noted previously, Claim No. 28 does not set forth sufficient facts and evidence to establish that Richard had overpaid child support and/or spousal maintenance for 2001.
In sum, after reviewing the Original Claims and the Amended Claims with their supporting " evidence" attached, Richard did not present sufficient evidence to support his claims. As Richard did not set forth facts necessary to establish his claims, his claims had no prima facie validity under Rule 3001 and Section 502. Thus, the bankruptcy court did not err in not treating Claim Nos. 27 through 32 as presumptively valid.
D. Recoupment
For the first time on appeal, Richard requests that we make a determination as to whether his claims for " Support Overpay 2001" (i.e., Claim Nos. 14 and 28) and " 2004 Overpay" (i.e., Claim Nos. 19 and 27) qualify as recoupments or setoffs. Richard cites to Ninth Circuit case law, which allows a reviewing court to consider an issue raised for the first time on appeal in certain exceptional circumstances. See Smyth v. City of Oakland (In re Ralbert Rallington Brooks-Hamilton), 329 B.R. 270, 279 (9th Cir. BAP 2005). One of these exceptions allows the reviewing court to address an issue first brought on appeal if it is purely legal and does not result in prejudice to the opposing party. The issue of recoupment versus setoff, Richard argues, falls within this exception. Thus, Richard asserts, we have the authority to review this issue.
We decline to make such a determination. Generally, the reviewing court will not consider an issue if a party raises it for the first time on appeal. Id.; Milgard Tempering, Inc. v. DaRosa (In re DaRosa), 318 B.R. 871, 878 n.11 (9th Cir. BAP 2004); Franchise Tax Bd. v. Roberts (In re Roberts), 175 B.R. 339, 345 (9th Cir. BAP 1994). A reviewing court may, however, consider an issue raised for the first time on appeal if: (1) exceptional circumstances exist as to why the party failed to raise the issue in the trial court; (2) the new issue arises while the appeal is pending because of a change in the law; or (3) it is purely one of law and the opposing party will not suffer prejudice from the party's failure to raise the issue in the trial court. DaRosa, 318 B.R. at 878 n.11; Roberts, 175 B.R. at 345. A reviewing court " may consent to consider a pure question of law when it does not affect or rely upon the factual record developed by the parties, or where the pertinent record has been fully developed." Roberts, 175 B.R. at 345.
Contrary to Richard's assertion, the issues involving recoupment and setoff do not simply present questions of law. Recoupment, an equitable doctrine, is the right to reduce the amount of a claim. 5 Collier on Bankruptcy ¶ 553.10 (15th ed. 2006). The party asserting the right of recoupment must show that " he or she is not liable in part or in full for the plaintiff's claim due to matters or events arising out of the same transaction." Id. In the Ninth Circuit, this would require a court to apply a test (i.e., the logical relationship test). See Aetna U.S. Healthcare, Inc. v. Madigan (In re Madigan), 270 B.R. 749, 755 (9th Cir. BAP 2001)(applying the " logical relationship test" to determine whether the alleged recoupment arises from the event or matter forming the basis of the opposing party's claim); see also 5 Collier on Bankruptcy ¶ 553.10[1] (15th ed. 2006)(stating that the Ninth Circuit uses the logical relationship test to determine whether the debts arise out of the same transaction).
A determination on whether recoupment or setoff applies would require us to rely on the record and make a factual determination. Further, there is nothing in the record - in any of the documents Richard provided with the Original Claims or the Amended Claims - establishing that Richard overpaid child support and spousal maintenance payments to Deborah, thus entitling him to reduce the amount of Deborah's claims against him. Thus, the exception does not apply and we will not consider this issue.
V. CONCLUSION
Contrary to Richard's assertion, the bankruptcy court had jurisdiction to allow or disallow his claims. By filing his proofs of claim, Richard voluntarily subjected himself to the bankruptcy court's authority. Simply because Richard was not included in the creditor class receiving distributions from funds recovered from the Trust Account under the plan does not mean that the bankruptcy court's jurisdiction terminated.
The bankruptcy court also properly provided Richard with an adequate opportunity for hearing and to present his evidence. Richard was duly notified of the Objection and the bankruptcy court's order shortening time on the hearing on the Objection. Richard did not challenge the adequacy of the notice or the Objection. Richard filed his Response to the Objection, along with his Amended Claims, and was given an adequate opportunity to present evidence in support of his claims at the August 26, 2005 hearing.
The bankruptcy court also did not err in disallowing Richard's claims. Neither the Original Claims nor the Amended Claims were entitled to the presumption of prima facie validity under Rule 3001 and Section 502. None of the claims provided facts and evidence sufficient to demonstrate that Deborah was legally liable to Richard for any of the alleged debts.
In light of the provisions of the confirmed plan and the on-going disputes within the family law proceedings taking place in the Superior Court, however, the bankruptcy court's decision regarding the disallowance of Richard's claims for the purposes of bankruptcy is not preclusive as to the disputes within the family law proceedings. See Restatement (Second) of Judgments § 26(1)(b) (1982) (providing an exception to claim preclusion by allowing the plaintiff to bring another action against the defendant on part or all of a previously-litigated claim when " [t]he court in the first action has expressly reserved the plaintiff's right to maintain the second action"); see also Christopher Klein et al., Principles of Preclusion and Estoppel in Bankruptcy Cases, 79 Am. Bankr. L.J. 839, 850, 875 (2005). Under the terms of the confirmed plan, the Superior Court has continuing jurisdiction to consider Richard's claimed offsets against amounts owing to Deborah.
See supra note 16.
See supra note 16.
With respect to the issue of recoupment, we decline to consider it as Richard did not raise it before the bankruptcy court. The issue does not fall within any of the exceptions under current Ninth Circuit law, despite Richard's assertions to the contrary.
AFFIRMED.