In re Abblitt, Bankruptcy Case No. 09-61935-fra (Bankr.Or. 12/21/2009)

• Decision Date: 21 December 2009
• Docket Number: Adversary Proceeding No. 09-6094-fra.,Bankruptcy Case No. 09-61935-fra.
• Parties: In Re: DEVON MICHAEL ABBLITT, Debtor. COMMERCIAL AND RESIDENTIAL MAINTENANCE, Inc., Plaintiff, v. DEVON MICHAEL ABBLITT, Defendant.
• Court: U.S. Bankruptcy Court — District of Oregon

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In Re: DEVON MICHAEL ABBLITT, Debtor COMMERCIAL AND RESIDENTIAL MAINTENANCE, Inc., Plaintiff, v. DEVON MICHAEL ABBLITT, Defendant.

Bankruptcy Case No. 09-61935-fra.

Adversary Proceeding No. 09-6094-fra.

United States Bankruptcy Court, D. Oregon.

December 21, 2009.

MEMORANDUM OPINION¹

FRANK R. ALLEY, III, Bankruptcy Judge

Plaintiff filed a Complaint objecting to the discharge of a debt owed to it by Debtor/Defendant, pursuant to 11 U.S.C. §§ 523(a)(2), (4), (6) and/or (7), and the Defendant filed an Answer denying its nondischargeability. Plaintiff thereafter filed a motion for summary judgment. Neither party having asked for oral argument, the Court will decide the matter without hearing. I find that there are no material contested facts and, for the reasons that follow, Plaintiff's motion will be granted.

FACTS

The Defendant was employed by the Plaintiff, dba C & R Maintenance, and was in charge of inventory and purchasing. Between January and July 2005, Defendant ordered goods and equipment from various sources on Plaintiff's account and converted them to his own benefit. In July 2005, Defendant was arrested and admitted to the unauthorized purchases for his own benefit.

On July 19, 2005, the Jackson County District Attorney filed an indictment against Defendant for aggravated theft in the first degree. Defendant pleaded guilty on September 19 of that year and was convicted of theft in the first degree on that date. The Jackson County Circuit Court, as part of its sentencing, ordered Defendant to pay restitution to Plaintiff in the amount of $23,714.36.

On July 27, 2005, Plaintiff filed a civil complaint in Jackson County Circuit Court for fraud, conversion, unjust enrichment, and for ORICO violations.² Defendant failed to appear and a general money judgment in the amount of $63,792.33 was entered on October 5, 2005 on Plaintiff's motion for default judgment. The judgment is based on ORICO violations which provide for three times the actual damages pursuant to ORS 166.725(7)(a). Defendant filed a chapter 7 bankruptcy petition in this court on April 21, 2009.

SUMMARY JUDGMENT

Summary judgment is appropriate when the pleadings depositions, answers to interrogatories, admissions, and affidavits, if any, show that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56, made applicable by Fed. R. Bankr. P. 7056. The movant has the burden of establishing that there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The court must view the facts and draw all inferences in the light most favorable to the nonmoving party. T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630-31 (9^th Cir. 1987). The primary inquiry is whether the evidence presents a sufficient disagreement to require a trial, or whether it is so one-sided that one party must prevail as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986).

A party opposing a properly supported motion for summary judgment must present affirmative evidence of a disputed material fact from which a factfinder might return a verdict in its favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986). Bankruptcy Rule 7056, which incorporates Federal Rule of Civil Procedure 56(e), provides that the nonmoving party may not rest upon mere allegations or denials in the pleadings, but must respond with specific facts showing there is a genuine issue of material fact for trial. Absent such response, summary judgment shall be granted if appropriate. See Celotex Corp. v. Catrett, 477 U.S. 317, 326-27 (1986).

DISCUSSION

Defendant concedes that the court-directed restitution claim based on actual damages is nondischargeable under 11 USC § 523³, but disputes the viability of the civil judgment of treble damages awarded for Plaintiff's ORICO claim. Defendant argues that the default judgment is void, as the treble-damage ORICO claim had not yet accrued when the civil action was filed, thus depriving the Circuit Court of subject matter jurisdiction.

A. Subject Matter Jurisdiction of Circuit Court

Oregon Circuit Courts "have subject matter jurisdiction over all actions unless a statute or rule of law divests them of jurisdiction." Oregon v. Daniel, 222 Or.App. 362, 368, 193 P.3d 1021, 1025 (2008)(internal citation omitted)." Subject matter jurisdiction depends on whether a court has constitutional or statutory authority to make an inquiry." Matter of Marriage of Watanabe, 140 Or.App. 85, 88, 914 P.2d 701, 702 (1996). A judgment issued from a court lacking subject matter jurisdiction is said to be void and is subject to collateral attack. However, "when a trial court has both subject-matter and personal jurisdiction, a judgment issued in excess of the court's authority is voidable, not void." Oregon v. McDonnell, 343 Or. 557, 562, 176 P.3d 1236, 1240 (2007). See also Wood v. White, 28 Or.App. 175, 178-79, 558 P. 2d 1289, 1291 (1977) ("[T]here is a fundamental distinction between the absence of jurisdiction and the erroneous exercise of that jurisdiction."). A voidable judgment is subject only to direct attack. Oregon v. McDonnell at 562.

B. The ORICO Action

ORS 166.725 (7) (a) reads as follows:

(7)(a) Any person who is injured by reason of any violation of the provisions of ORS 166.720 (1) to (4) shall have a cause of action for three-fold the actual damages sustained and, when appropriate, punitive damages:

(A) If a criminal conviction for the racketeering activity that is the basis of the violation has been obtained, any rights of appeal have expired and the action is against the individual convicted of the racketeering activity; or

(B) If the violation is based on racketeering activity as defined in ORS 166.715 (6)(a)(B) to (J), (K) as it relates to burglary and criminal trespass, (L) to (P), (S), (T), (U), (V), (X) to (Z), (AA) to (DD), (KK), (LL) or (OO) to (VV).

Defendant argues that the ORICO action was filed prematurely because it was filed prior to Defendant's September 19, 2005 conviction for first degree theft, and that the court was thus deprived of subject matter jurisdiction. Plaintiff counters that the actual civil judgment was not obtained until after the conviction and the requirements of ORS 166.725(7)(a)(A) were thus met. Moreover, Plaintiff states, the complaint filed in Circuit Court listed independent instances of racketeering conduct, thus allowing the filing of the ORICO complaint under subsection (B).

The arguments and counter-arguments discussed above are not" disputed material facts," but, rather, questions of interpretation of law based on undisputed facts. As such, the issues are amenable to resolution in the context of this summary judgment proceeding. The question of whether the ORICO action can be filed prior to conviction if the judgment itself is obtained after conviction seems to be one that Oregon courts have not yet decided. In dicta, however, the Oregon Supreme Court has stated that the phrase "has been obtained" states a condition that must exist when a plaintiff files an ORICO claim. Black v. Arizala, 337 Or. 250, 271, 95 P.3d 1109, 1119-20 (2004).

It is true, as Plaintiff claims, that it listed in its state-court complaint at ¶ 16 independent instances of conduct constituting racketeering as defined under ORS 166.715(6). Two of those offences, ORS 165.007 and 165.013, both relating to forgery, are found at ORS 166.715(6) (a) (P), thus providing the alternate basis for filing the ORICO action under ORS 165.725(7) (a) (B) . Because I find that the ORICO claim was properly filed under subsection (B) of ORS 165.725(7)(a) and that, in any case, the Plaintiff had subject matter jurisdiction over the ORICO claim when it was filed, it is not necessary to determine whether the claim was properly filed under subsection (A).

C. The Circuit Court Had Subject Matter Jurisdiction

Even if I were to find that the complaint filed in the Jackson County Circuit Court had been filed prematurely,⁴ that in itself would not be sufficient to find that the Circuit Court lacked subject matter jurisdiction over the ORICO claim. The Circuit Court had jurisdiction over the ORICO claim when it was filed and had the statutory and constitutional authority to make an inquiry into the merits of the claim. If the claim had not yet accrued under the ORICO provisions, it was up to the Defendant to bring that to the attention of the court through a motion to dismiss or an affirmative defense. Once the Circuit Court obtained subject matter and personal jurisdiction, any judgment awarded in excess of the court's jurisdiction would render the judgment voidable, not void. As such, it would not be, and is not, subject to collateral attack in this court or in any other.

D. ORICO Judgment is Nondischargeable

The Court of Appeals for the Ninth Circuit, in a case involving nondischargeability under Code §523(a) (2) (A), stated that

The preclusive effect of a state court judgment in a subsequent federal lawsuit generally is determined by the full faith and credit statute [28 U.S.C. 1738], which provides that state judicial proceedings `shall have the same full faith and credit in every court within the United States...as they have by law or usage in the courts of such...state from which they are taken.

Gavden v. Nourbakhsh (In re Nourbakhsh) 67 F.3d 798, 800 (9th Cir. 1995).

Oregon courts give collateral estoppel effect to prior judgments when the issues in the two proceedings are identical, were actually litigated and were essential to a final decision in the prior proceeding. Nelson v. Emerald Peoples' Utility District, 318 Or 103, 104, 862 P.2d 1293 (1993). The...