In re Atkins, BAP No. EC-91-1304-RJP
| Decision Date | 07 January 1992 |
| Docket Number | Bankruptcy No. 287-00156-A-7,BAP No. EC-91-1304-RJP,Adv. No. 287-0153/CLB-1. |
| Citation | 134 BR 936 |
| Parties | In re Dale ATKINS and Anna Atkins, Debtors. Dale D. ATKINS, Appellant, v. FIBERGLASS REPRESENTATIVES, INC., a California Corporation, Appellee. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
Clarence L. Baker, Sacramento, Cal., for appellant.
Richard A. Frankel, Danville, Cal., for appellee.
Before RUSSELL, JONES and PERRIS, Bankruptcy Judges.
An earnings withholding order was issued against the debtor's community property wages to satisfy a nondischargeable debt incurred by his spouse. The debtor later filed a motion for relief from the withholding order alleging that since his marriage had subsequently been dissolved, his wages were no longer community property. The bankruptcy court found the dissolution to be a sham and denied the motion. The debtor appealed. We affirm.
Dale and Anna Atkins filed a joint Chapter 7 petition.1 On November 15, 1988, the bankruptcy court found the debt owed by debtor Anna Atkins to Appellees Fiberglass Representatives, Inc., (hereinafter "FRI") to be nondischargeable.2 On October 19, 1989, the bankruptcy court granted FRI's motion for the issuance of an earnings withholding order against Dale Atkins. The court determined that because Dale and Anna Atkins were married, Dale's earnings were community property subject to satisfaction of FRI's judgment. Dale and Anna obtained a judgment of dissolution from the California Superior Court on August 8, 1990, terminating their marriage of seventeen years.
On October 15, 1990, Dale Atkins filed a motion for relief from the earnings withholding order because of the marriage dissolution and requested that FRI be required to restore to him all funds withheld as of the dissolution date. Dale Atkins argued that the termination of his status as married terminated the characterization of his earnings as community property under California law. Alternatively, Dale Atkins requested that the bankruptcy court vacate the October 19, 1989 withholding order as void and restore all funds withheld after that date. This relief was sought under Bankruptcy Rule 9024 and Federal Rule of Civil Procedure 60(b)(5) and (b)(6)(hereafter "Rule 60(b)").
FRI responded by arguing that the attack on the October 19, 1989 order was not timely and that the marriage dissolution was a sham transaction entered into for the sole purpose of defeating FRI's claim against the community property. The bankruptcy court agreed and denied Dale Atkins' motion in an order entered on March 27, 1991.
The bankruptcy court indicated in its Findings of Fact and Conclusions of Law that the dissolution was indeed a sham intended to defeat the FRI's right to enforce its judgment and, as such, Rule 60(b)(5) and (b)(6) could not be used to grant Dale Atkins relief. Further, the court held that Dale Atkins was precluded from raising the community claim issue because both the judgment of nondischargeability and the earnings withholding order had become final.
1. Whether the merits underlying the issuance of an earnings withholding order may be challenged and the order vacated as void under Bankruptcy Rule 9024 and Fed.R.Civ.P. 60(b) after the time for appeal has expired.
2. Whether the bankruptcy court abused its discretion in denying the motion for relief from a judgment where the marriage dissolution was declared to be a sham leaving no reason to justify the granting of relief from an earnings withholding order.
We review a motion for relief from judgment under Rule 60(b) for an abuse of discretion. Matter of Roach, 660 F.2d 1316, 1318 (9th Cir.1981). Findings of fact are reviewed under the clearly erroneous standard, while conclusions of law are reviewed de novo. In re Holm, 931 F.2d 620, 622 (9th Cir.1991); Bankruptcy Rule 8013.
Dale Atkins' appeal is essentially based on two grounds. First, that the original earnings withholding order was erroneous because of a misapplication of California community property law. Second, that the changed circumstances of the dissolution of marriage justifies relief from the judgment under Bankruptcy Rule 9024 and Rule 60(b). We find neither argument affords a basis to set aside the bankruptcy court's ruling.
Dale Atkins contends that the bankruptcy court misapplied the relevant California law concerning community property as to the original withholding order and seeks to recover all funds paid out to FRI. This challenge should have been raised at the hearing or subsequently by appeal. Atkins' motion amounts to an attempted appeal of the order on the merits. The time allowed for appeal of this order has long since passed. Dale Atkins cannot now be allowed to relitigate the merits.
Bankruptcy Rule 8002(a), which governs the time allowed for the appeal of a bankruptcy court judgment, order or decree, states:
On October 19, 1989, the bankruptcy court entered the order granting FRI's motion for the issuance of the earnings withholding order against Dale Atkins. Dale Atkins failed to object to that determination and failed to appeal the order within ten days. This panel does not have jurisdiction to reconsider the merits underlying the order.
Atkins argues that his appeal rights never began to run because he was never a party to the judgment of nondischargeability: essentially, that he has not had his day in court. This argument, however, ignores the basic fact that he was a party to the proceeding culminating in the October 19, 1989 earnings withholding order.
California Code of Civil Procedure § 706.109 (West Supp.1991) provides that an earnings withholding order may not be issued against the earnings of a spouse of a judgment debtor except by court order upon noticed motion. On October 16, 1989, the bankruptcy court held a hearing on the motion for the earnings withholding order pursuant to this California law. Atkins was afforded an opportunity to assert opposition and argue the merits at that hearing. He was duly noticed and appeared at that hearing through counsel. He prepared opposition papers to the motion, but they were stricken by the court as being untimely filed. Dale Atkins did not appeal this order. Hence, Atkins has been afforded the opportunity to present his case. Any defense that the debt was not a community claim should have been raised at that time. Principles of res judicata and collateral estoppel preclude raising the issue at this time. Almost one year later, Dale Atkins seeks to challenge this determination on the merits.3
Bankruptcy Rule 9024 adopts Rule 60 with exceptions not applicable here. Dale Atkins may not use Rule 60(b) as an alternative to an appeal to obtain a reconsideration of the merits and declare the original judgment void. Ninth Circuit decisions have settled that Rule 60(b) is not a substitute avenue for appeal: "Rule 60(b) was not intended to provide relief for error on the part of the court or to afford a substitute for appeal." Title v. United States, 263 F.2d 28, 31 (9th Cir.1959), cert. denied, 359 U.S. 989, 79 S.Ct. 1118, 3 L.Ed.2d 978 (1959). "An appeal from a denial of a Fed.R.Civ.P. 60(b) motion does not bring up the underlying judgment for review." Matter of Roach, 660 F.2d 1316, 1318 (9th Cir.1981) (); In re Martinelli, 96 B.R. 1011, 1013 (9th Cir. BAP 1988).
The provisions of Rule 60(b)(6) were not intended to benefit the unsuccessful litigant who long after the time during which an appeal from a final judgment could have been perfected first seeks to express his dissatisfaction. The procedure provided by rule 60(b) is not a substitute for an appeal.
Twentieth Century-Fox Film Corp. v. Dunnahoo, 637 F.2d 1338, 1341 (9th Cir. 1981) (quoting Morse-Starrett Products Co. v. Steccone, 205 F.2d 244, 249 (9th Cir.1953)). Determinations of law and fact made by the bankruptcy court that should have been challenged by the appellate process are final under the principles of res judicata and collateral estoppel and cannot be reexamined here. These findings include the determination of nondischargeability, the determination of Dale Atkins' earnings as community property and all issues relating to the validity of the initial wage withholding order.
Relief from the order due to a changed circumstance, however, is an entirely different matter, examined in Section B below.
Although Dale Atkins may not reargue the merits of a final order under Rule 60, relief from the order may be obtained if certain circumstances apply. Atkins seeks relief under subsections (b)(5) and (b)(6) of Rule 60 which states in relevant part:
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