In re Calliste

• Decision Date: 18 January 2017
• Docket Number: Case No. 13-00500,Case No. 10-00685
• Parties: In re GEMMA CALLISTE EARL CALLISTE, Debtors.
• Court: United States Bankruptcy Courts – District of Columbia Circuit

In re GEMMA CALLISTE EARL CALLISTE, Debtors.

Case No. 10-00685

Case No. 13-00500

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF COLUMBIA

January 18, 2017

(Chapter 11)

(Jointly Administered Under Case No. 10-00685)

Not for publication in West's Bankruptcy Reporter.

MEMORANDUM DECISION RE OBJECTION TO JOHN MALACHI'S CLAIMS

Earl Calliste, one of the debtors in these jointly administered cases, has objected to the proofs of claim filed by John Malachi (Dkt. No. 217). The court heard evidence and argument on November 21, 2016, and decides the issues as follows.

I

As a preliminary matter, the court will address the issue of res judicata. Malachi filed a post-trial memorandum in support of his opposition to Calliste's objection to claim (Dkt. No. 274). In that memorandum, Malachi raises for the first time the argument that the debtor's challenges to Malachi's charging of a 15% interest rate are barred under the doctrine of res judicata. In support of this argument, Malachi alleges the entry by the Superior Court of an order in the case of Malachi v. Calliste, 12 CA 004666 R (RP) granting partial summary judgment in Malachi's favor on the issue of liability as to certain loans. That order was not attached to any of the proofs of claim filed in this case, it was not mentioned in the opposition to the objection to claim filed by Malachi (Dkt. No. 218), and it was not offered into evidence at trial as a basis for defeating the debtor's objection to claim. For purposes of disposing of Malachi's res judicata argument, I take notice that the order Malachi is referring to appears to be the document that was attached as an exhibit to Malachi's Emergency Motion for Relief of Automatic Stay filed in the case of Earl Calliste, Dkt. No. 8, Case No. 13-00500.¹

As previously summarized by this court:

The doctrine of res judicata encompasses issue preclusion and claim preclusion. See Taylor v. Sturgell, 553 U.S. 880, 128 S.Ct. 2161, 2171, 171 L.Ed.2d 155 (2008); I.A.M. Nat. Pension Fund, Ben. Plan A v. Indus. Gear Mfg. Co., 723 F.2d 944, 946-47 (D.C. Cir. 1983). Issue preclusion prevents a party from re-litigating an issue of law or fact that has already actually been decided by a court of valid jurisdiction, whereas claim preclusion prevents re-litigation of the same claim, regardless of whether that re-litigation would raise the same issues. Id. As such, claim preclusion prevents litigation of issues of fact or law which should have been raised in previous litigation, even when they were not raised. See, e.g., Captiol Hill Group v. Pillsbury Winthrop Shaw Pittman, LLP ("CHG"), 574 F. Supp. 2d 143, 148 (D.D.C. 2008). "[P]reclud[ing] parties from contesting matters that they have had a full and fair opportunity to litigate protects their adversaries from the expense and vexation attending multiple lawsuits, conserves judicial resources, and fosters reliance on judicial action by minimizing the possibility of inconsistent decisions." Montana v. United States, 440 U.S. 147, 153-54, 99 S.Ct. 970, 59 L.Ed.2d 210 (1979).

The four elements considered in a motion for claim preclusion are: (1) an identity of parties; (2) a judgment from a court of competent jurisdiction; (3) a final judgment on the merits; and (4) an identity of the cause of action.

In re Linton Properties, LLC, 410 B.R. 1, 11 (Bankr. D.D.C. 2009). The order, on its face and by Malachi's own description, granted only partial summary judgment and reserved issues for later adjudication as to all claims. Likewise, the Superior Court did not, in its order, invoke the procedure of D.C. Superior Court Rule of Civil Procedure 54(b) by "direct[ing] the entry of a final judgment as to one or more but fewer than all of the claims or parties . . . upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment." Accordingly, pursuant to D.C. Superior Court Rule of Civil Procedure 54(b), the order in question did "not terminate the action as to any of the claims or parties, and the order . . . [was] subject to revision at anytime before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties." It is unclear whether it would be appropriate to treat such an order as final for purposes of res judicata. See RF Del., Inc. v. Pac. Keystone Technologies, Inc., 326 F.3d 1255, 1262 (Fed. Cir. 2003) (interlocutory orders of Virginia district court granting partial summary judgment were "not sufficiently firm to have preclusive effect" in subsequent patent infringement case); Avondale Shipyards, Inc. v. Insured Lloyd's, 786 F.2d 1265, 1270 (5th Cir. 1986).

Even if the court were to conclude that an order for partial summary judgment that lacks a Rule 54(b) determination of finality by the D.C. Superior Court could be treated as final for purposes of preclusion, such an order could only have preclusive effect if it has not been set aside. I take judicial notice that on July 15, 2016, the D.C. Superior Court case was dismissed for want of prosecution after no parties appeared for a status hearing. The electronic docket also includes a July 14, 2016 entry reflecting the filing by the parties of a stipulation of dismissal without prejudice. See D.C. Superior Court Electronic Docket, Malachi v. Calliste, Case No. 2012 CA 004666 R (RP). Thus, even if the order could otherwise have had preclusive effect, if the dismissal of the Superior Court proceeding is valid, the order granting partial summary judgment entered inthat proceeding has, in effect, been set aside and can no longer be considered final. See Restatement (Second) of Judgments § 13, cmt. f (1982) (acknowledging that a judgment is not deprived of finality merely because time still permits commencement of proceedings in the trial court to set aside the judgment, nor is it deprived of its finality merely because such a motion is pending, but "[t]he judgment ceases to be final if [the order] is in fact set aside by the trial court, as it would be upon the granting of a motion for a new trial."); Knox v. Lederle Laboratories 4 F.3d 875, 880 (10th Cir. 1993) ("[t]he order on summary judgment was set aside by the dismissal of the action without prejudice . . . . [and] [t]he order would therefore not be a final judgment for purposes of issue preclusion.") (relying on Restatement (Second) of Judgments § 13, cmt. f (1982) in concluding that the dismissal of the action caused the summary judgment order to be set aside).

To the extent Malachi sought to rely on the Superior Court order granting partial summary judgment as establishing the amount or validity of his claims in this proceeding, it was his burden to establish the preclusive effect of the order. Malachi having failed to carry that burden, the court rejects Malachi's res judicata argument.

II

The debtor correctly contends that after maturity the amountlent under each unpaid matured note bears interest at 6% per annum. See Osayande v. Momoh (In re Momoh), Adv. Pro. No. 14-10034, 2016 WL 270155, at *6 (Bankr. D.D.C. Jan. 20, 2016):

In the District of Columbia, when a contract recites a rate of interest until maturity but is silent regarding the rate after maturity, the legal rate applies. Holden v. Savings & Trust Co., 100 U.S. 72 (1879). See also Brewster v. Wakefield, 63 U.S. 118, 127 (22 How.) (1859); Richards v. Bippus, 18 App. D.C. 293, 303 (D.C.Cir.1901); Sullivan v. Snell, 8 D.C. 585 (1 MacArth.) (D.C.1874). Under D.C. Code § 28-3302(a), "[t]he rate of interest in the District upon the loan or forbearance of money, goods, or things in action in the absence of expressed contract, is 6% per annum." Accordingly, . . . the debt Momoh owes Osayande is [the amount owed on the maturity date] . . . plus interest after [the maturity date], on [the amount lent] at 6% per annum.

The parties should be able to compute the amount owed as of the petition date on each unpaid note that had matured prior to the petition date and file a proposed stipulated order in that regard. The promissory notes did not provide for compounding of interest. Accordingly, after the maturity date, interest runs only on the principal amount then owed at 6% per annum; there is no compounding of interest via the 6% interest running on the 15% interest that had accrued as of the maturity date. See In re Brown, No. 10-00777, 2011 WL 482727, at *2 (Bankr. D.D.C. 2011), citing Giant Food, Inc. v. Jack I. Bender & Sons, 399 A.2d 1293, 1304 (D.C. 1979).

In at least one instance the deed of trust securing a promissory note referred to the note as bearing interest of 15% per annum until paid. That is too ambiguous to amount to anamendment of the note itself, which clearly provided for interest of 15% per annum to be paid until maturity, not afterwards.

The debtor sometimes entered into a promissory note for the amount deemed necessary to satisfy a prior note (or notes) that had matured. The debtor agrees that any error in the parties' calculating the amount owed under the prior note (or notes) that was to be included in the new note cannot be re-visited: if the parties erroneously used the pre-maturity rate of interest in calculating the amount owed to be included in the new note, it is too late to undo that error.

III

The debtor similarly correctly contends that the notes' provision for late fees did not apply after the notes matured. Again, the parties should be able to submit an agreed order regarding late fees that have been claimed to have accrued after a currently unpaid note had matured.

IV

The debtor contends that he has not been given full credit for the payments he made on the notes pursuant to a plan in Mrs. Calliste's bankruptcy case. In support of this contention, Mrs. Calliste testified that she made several payments to her attorney for the purpose of making quarterly payments under her confirmed plan, and that she believed her attorney would use those funds to pay Malachi. However, it is not clear from Mrs. Calliste's...