In re Johnson, Bankruptcy No. 3-80-1261.
| Decision Date | 20 August 1981 |
| Docket Number | Bankruptcy No. 3-80-1261. |
| Citation | 13 BR 342 |
| Parties | In re Richard J. JOHNSON, Debtor. |
| Court | U.S. Bankruptcy Court — District of Minnesota |
COPYRIGHT MATERIAL OMITTED
Galen W. Pittman of Johnson, Flaherty & Gillette, La Crosse, Wis., for debtor, Richard J. Johnson.
David L. Mitchell of Kutak, Rock & Huie of Minneapolis, Minn., for petitioning creditors.
Timothy Moratzka of Moratzka, Dillon & Kukel, Hastings, Minn., for the trustee of the estate of Richard J. Johnson.
ORDER FOR SUMMARY JUDGMENT
The above entitled case came on for hearing before the Honorable Jacob Dim on July 28, 1981 on the motion of the debtor objecting to the jurisdiction of the bankruptcy court and vacating the order of the bankruptcy court placing the debtor in involuntary bankruptcy. Prior to the hearing, the petitioning creditors served a motion for summary judgment on the debtor on July 23, 1981. Debtor claims this court lacks jurisdiction because he was (is) a farmer, did not reside in the District of Minnesota, and service was improper.
On August 1, 1980 the petitioning creditors filed an involuntary petition seeking an order for relief under chapter 7 of title 11. A summons was issued and served on the debtor by leaving a copy of the summons and the petition at the debtor's farm at Rushford, Minnesota with the debtor's son, Scott Johnson.
An answer was filed on August 22, 1980 by David Joerg of Joerg & Benson. The answer alleged that the debtor did not reside in Rushford, Minnesota. It also denied the allegations of the involuntary petition. The answer affirmatively pled that the court lacked jurisdiction over the debtor and that service of process was insufficient.
On August 29, 1980, the petitioning creditors filed and served a notice of taking deposition on the debtor and his attorney by mail. The deposition was scheduled for September 8, 1980. Neither the debtor nor his attorney contacted the petitioning creditors. Both the debtor and his attorney failed to appear at the deposition on September 8, 1980.
On September 9, 1980, the petitioning creditors filed an application for a Rule 205 hearing and a motion for sanctions under Rule 737 for the debtor's failure to comply with discovery. The court issued an order requiring the debtor to appear at a Rule 205 hearing on September 22, 1980. The motion under Rule 737 was continued until that date.
Neither the debtor nor his attorney appeared at the Rule 205 hearing on September 22, 1980. The petitioning creditors renewed the motion for sanctions and the court issued an order striking the answer of the debtor and entering an order for relief under chapter 7 of title 11.
A pretrial on the original petition and answer was scheduled for October 14, 1980. Neither the debtor nor his attorney appeared at the pretrial. The debtor telephoned the court on October 14, 1980 indicating that he would not appear and that he had never been served. The court, in view of the previous actions, held that the pretrial was moot and that the debtor file schedules on or before November 10, 1980.
On December 5, 1980, the trustee filed a petition for contempt. The debtor had failed to file schedules as required by order of the court. On December 5, 1980, the court issued an order to show cause why the debtor should not be certified for contempt to the district court. The order to show cause required that the debtor appear on December 18, 1980. The debtor failed to appear on December 18, 1980.
On December 18, 1980, the court issued an order certifying the debtor for contempt to the district court. Due to the inability of the United States Marshall to affect service upon the debtor, the hearing on the contempt of the debtor did not occur until May 29, 1981.
The attorney for the debtor, David Joerg, on December 4, 1980 filed a notice of withdrawal as attorney. Mr. Joerg in his attached affidavit indicated that Mr. Johnson, the debtor, did not ever contact him after August 20, 1980.
The debtor filed a motion on June 9, 1981 to object to the jurisdiction of this court pursuant to Rule 915 of the Rules of Bankruptcy Procedure; to vacate the order of September 23, 1980 entering an order for relief under chapter 7 of title 11; to extend the time to answer; and, to stay all proceedings in the bankruptcy case.
The debtor has not previously made any motions, asked for any relief or taken an appeal from any order. The debtor's appearance is denominated a "limited" appearance.
The petitioning creditors have filed a motion for summary judgment against the debtor on the grounds that the debtor is barred by res judicata and laches. The motion also requested attorney's fees and costs for the debtor's failure to appear for his deposition.
MEMORANDUMThe affidavit of Richard Johnson accompanying the motion of the debtor sets forth the following matters:
The schedules filed by the debtor show that his residence at the time of filing was Rushford, Minnesota. The statement of affairs filed by the debtor indicates that the principal places of business for the debtor were Rushford, Minnesota and Idabel, Oklahoma. The debtor has claimed a homestead exemption for the farm in Rushford, Minnesota. The debtor's present address is the same address as that to which all other previous service has been directed.
The debtor has objected to the jurisdiction of this court over the subject matter of this case on two grounds. The debtor claims to be a farmer and asserts that if proven, this would defeat jurisdiction. The debtor, also, claims not to have been a resident of this district at the time of the filing of the involuntary petition.
Subject matter jurisdiction of the bankruptcy court is set forth in 28 U.S.C. § 1471(a) and (c):
A case under title 11 is commenced by filing a petition pursuant to 11 U.S.C. §§ 301, 302, 303, or 304. Once commenced the bankruptcy court has original and exclusive jurisdiction over the bankruptcy case.
On August 1, 1980 a case under title 11 was commenced pursuant to § 303 against the debtor by the petitioning creditors. § 303(b) sets forth how a case under that section is commenced. In relevant part, it states:
"An involuntary case is commenced by the filing with the bankruptcy court of a petition under chapter 7".
Such a petition was filed and a case commenced under title 11. The requirements of 28 U.S.C. § 1471 had been met and the bankruptcy court had original and exclusive jurisdiction over the bankruptcy case.
In order to retain jurisdiction pursuant to § 303, certain factual and legal determinations must be made. These determinations include whether or not the debtor is a farmer or charitable corporation; whether sufficient creditors with sufficient claims have joined in the petition; and whether the debtor meets the requirements of 11 U.S.C. § 109(b) and (d). If the court finds that any of the required determinations are adverse to the petitioning creditors, the case must be dismissed and damages awarded to the debtor.
These determinations do not give this court jurisdiction. Jurisdiction comes from 28 U.S.C. § 1471. They determine whether or not the court must dismiss the case. They are factual or legal questions which the court must determine. They are the issues raised by the pleadings. They are defenses not jurisdictional requirements.
The debtor filed his answer and, then, in complete disregard of the court and the pendency of this case, failed to appear at two different occasions and disobeyed the lawful order of the court. As a consequence of the debtor's contumacy, the court, under Rule 37 of the Federal Rules of Procedure, struck the debtor's answer. A default judgment was thereupon entered against the debtor and an order for relief was issued.
This court will not now reconsider the propriety of its order of September 23, 1980. This case must proceed as though the debtor never answered. § 303(h) provides that where the petition is not controverted the court shall enter an order for relief against the debtor. This was done, and it becomes the law of the case and may not be challenged here.
Res judicata is a doctrine with three parts: bar; merger; and, collateral estoppel. Bar is the principle that a party may not relitigate a cause of action which has been determined previously. Merger is the principle which unites all claims arising from a cause of action and bars relitigation. Collateral estoppel prohibits a party from disputing an issue already determined against that party. Res judicata prevents a party from relitigating all claims, whether previously litigated or not, which were part of a cause of action previously determined.
Res judicata applies with equal effect and force to judgments by default. The defaulting party, having been given an opportunity for hearing, is not entitled, at a later date, to a hearing on the same cause of action. Res judicata bars all claims based on factual and legal issues whose determination is necessary to support the default judgment. Lockhart v. Mercer Tube & Mfg. Co., 53 F.Supp. 301 (Del.1943).
The petition alleges that the debtor is not a farmer....
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