In re Jordana
| Decision Date | 16 April 1999 |
| Docket Number | Bankruptcy No. 97-17566,Adversary No. 97-1400.,BAP No. WO-98-051 |
| Parties | In Re Jonn M. JORDANA, doing business as Mediline Service Corporation, doing business as Intercorp Investment, Debtor. Magdelena Moretta McCart, Plaintiff-Appellee, v. John H. Jordana, doing business as Mediline Service Corporation, doing business as Intercorp Investment, Defendant-Appellant. |
| Court | U.S. Bankruptcy Appellate Panel, Tenth Circuit |
COPYRIGHT MATERIAL OMITTED
Duane N. Rasmussen (Stanley S. Parsons with him on the brief), Oklahoma City, Oklahoma, for Defendant — Appellant.
Mark W. Kuehling of Lamun, Mock, Featherly, Kuehling & Cunnyngham, Oklahoma City, Oklahoma, for Plaintiff — Appellee.
Before CLARK, PEARSON, and ROBINSON, Bankruptcy Judges.
Jonn M. Jordana appeals two orders of the United States Bankruptcy Court for the Western District of Oklahoma. The first order denied his motion to avoid McCart's lien against his homestead. The second order granted summary judgment in favor of McCart, holding that her claim against the Debtor is nondischargeable under 11 U.S.C. § 523(a)(2)(A) and (B). See In re Jordana, 221 B.R. 950 (Bankr. W.D.Okla.1998). For the reasons discussed below, this Court affirms the bankruptcy court's rulings.
This Court, with the consent of the parties, has jurisdiction to hear appeals from final judgments, orders, and decrees, and with leave of the Court, from interlocutory orders and decrees of bankruptcy judges within this circuit. 28 U.S.C. § 158(a), (b)(1). The Bankruptcy Appellate Panel may affirm, modify, or reverse a bankruptcy court's judgment, order, or decree, or remand with instructions for further proceedings. Findings of fact are not to be set aside unless clearly erroneous. Fed. R. Bankr.P. 8013. See First Bank v. Reid (In re Reid), 757 F.2d 230, 233-4 (10th Cir.1985). Conclusions of law are reviewed de novo. Pierce v. Underwood, 487 U.S. 552, 558, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988).
On August 1, 1997, the Debtor filed a petition for relief under Chapter 7. On October 1, 1997, McCart timely filed a Complaint Objecting to the Dischargeability of Debt seeking to prevent the Debtor from discharging the default judgment she had obtained against him in the United States District Court for the Western District of Missouri ("District Court"). The Debtor filed an answer on October 31, 1997.
The District Court entered a default judgment against the Debtor in McCart's suit against him for fraudulently inducing her to invest in worthless securities. The Debtor's attorney withdrew from that case early in the proceedings. The District Court advised the Debtor to obtain new counsel but the Debtor refused, stating that God was his counsel. In its Minute Order, the court repeated its advice that the Debtor not attempt to proceed pro se since a failure to comply with the rules of procedure could lead to a default judgment against him. McCart served the Debtor with a First Amended Complaint on April 12, 1992. The Debtor never filed an answer in spite of repeated admonishments from the District Court that he must comply with the court's rules. The Debtor did not comply with McCart's discovery requests, in spite of receiving six letters from McCart's counsel requesting that he do so. The Debtor absconded with the original copy of his deposition and refused to return it. On February 5, 1993, McCart filed a Motion for Entry of Default Judgment. On February 10, 1993, the District Court filed an order directing the Debtor to show cause in writing why it should not enter default and grant judgment against him. On March 24, 1993, the Debtor responded with a letter in which he alleged that McCart's lawyer had been lying about him, that McCart had told his family that he should not be a party to the suit and that his family knew that he was completely blameless. McCart responded with declarations and exhibits supporting an entry of judgment. The District Court entered a default judgment against the Debtor on August 17, 1994, stating:
further, the Court finds that the facts set forth in the Declaration of Plaintiff\'s counsel and of Evan F. Acker are true and that defendant Jordana has assiduously pursued a policy of obfuscation, refusing to cooperate in discovery and refusing to answer the plaintiff\'s First Amended Complaint, in spite of repeated warnings by both plaintiff\'s counsel and this Court.
(See Appellant's App. at 9.) The District Court entered a judgment of $666,000.00 against the Debtor which included treble damages, as provided for in the Racketeer Influenced and Corrupt Organizations Act (RICO).
The Debtor filed a Motion to Amend Findings of Fact and Judgment Pursuant to Fed.R.Civ.P. 52(b), to Amend Judgment Pursuant to Fed.R.Civ.P. 59(e), to Set Aside Default Judgment Pursuant to Fed. R.Civ.P. 55(c), and for Relief from Judgment Pursuant to Fed.R.Civ.P. 60(b). The District Court denied the Motion to Amend Findings of Fact, stating that it had entered default against the Debtor because he had failed to answer McCart's complaint or provide the court with a good reason for his failure to answer. The District Court denied the motion to amend the amount of the judgment because the Debtor failed to provide it with any reason for such an amendment.
At some point following the litigation, the Debtor moved to Edmond, Oklahoma, and purchased a house. McCart filed the judgment in the Office of the County Clerk where the Debtor's real property is located, thus creating a lien on all of the Debtor's real property within that county. On August 1, 1997, the Debtor filed a petition for relief under Chapter 7. On October 2, 1997, McCart timely filed a complaint against dischargeability of the debt under § 523(a)(2)(A) and (B). On October 31, 1997, the Debtor filed an answer denying the allegations in the complaint and contending that the bankruptcy court was not bound by the findings of fact in the District Court default judgment. On March 31, 1998, the Debtor filed a motion to avoid McCart's lien against his homestead under 11 U.S.C. § 522(f)(1). McCart filed an objection to the motion on April 15, 1998. On April 16, 1998, McCart filed a motion for summary judgment on the complaint against dischargeability. The bankruptcy court entered an order denying the Debtor's lien avoidance motion on June 15, 1998, and entered an order granting McCart's motion for summary judgment on June 19, 1998.
The Debtor alleges that the bankruptcy court committed several errors: (1) the court erred when it held that judicial liens against the homestead are not avoidable; (2) the court erred when it gave preclusive effect to the District Court default judgment; (3) the court failed to place the burden of proof on the party seeking summary judgment; (4) the court erred when it failed to find that trebled damages are dischargeable; and (5) the bankruptcy court's errors amount to a violation of due process. The Court will address the lien avoidance issue first.
In its order denying the Debtor's Motion to Avoid Lien, the bankruptcy court applied the newly amended version of Okla. Stat. tit. 12 § 706 and held that although the lien attached to the homestead under the statute, the Debtor could not avoid it because the lien did not impair the homestead exemption. The bankruptcy court reasoned that McCart's lien did not impair the homestead exemption since Oklahoma law provides that a judicial lienholder can not force the sale of homestead property to satisfy the lien. The Debtor contends that the bankruptcy court erred when it applied the newly amended version of Okla. Stat. tit. 12 § 706 and held that he could not avoid McCart's lien against his homestead under § 522(f)(1).
Whether a judicial lien is avoidable is a question of law reviewed de novo. Nelson v. Barnes (In re Barnes), 198 B.R. 779, 781 (9th Cir. BAP 1996); Yerrington v. Yerrington (In re Yerrington), 144 B.R. 96, 98 (9th Cir. BAP 1992), aff'd without opinion, 19 F.3d 32 (9th Cir.1994). Section 522(f)(1) provides:
Notwithstanding any waiver of exemptions but subject to paragraph 3, the debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b) of this section, if such lien is — (A) a judicial lien. . . .
Although state law controls the availability of the homestead exemption, § 522(f) controls the availability of lien avoidance. David Dorsey Distrib., Inc. v. Sanders (In re Sanders), 39 F.3d 258 (10th Cir.1994); Coats v. Ogg (In re Coats), 232 B.R. 209 (10th Cir. BAP 1999). In order for a debtor to avoid the lien under § 522(f)(1), the debtor must show: "(1) that the lien is a judicial lien; (2) that the lien is fixed against an interest of the debtor in property; and (3) that the lien impairs an exemption to which the debtor would otherwise be entitled." Henderson v. Belknap (In re Henderson), 18 F.3d 1305, 1308 (5th Cir. 1994) (citing Hart v. Hart (In re Hart), 50 B.R. 956, 960 (Bankr.D.Nev.1985)), cert. denied, 513 U.S. 1014, 115 S.Ct. 573, 130 L.Ed.2d 490 (1994).
The Debtor does not dispute that McCart holds a judicial lien. At issue is whether McCart's lien attached to the Debtor's interest in property since in order for a Debtor to avoid a judicial lien on the homestead, the lien must attach thereto. The Debtor argues that it did not attach to the homestead, while McCart maintains that it did. The controversy centers around which version of Okla. Stat. tit. 12 § 706 applies and how it is to be interpreted.
Prior to the amendment of Okla. Stat. tit. 12 § 706,1 Oklahoma courts consistently held that a judgment lien did not attach to a judgment debtor's homestead. See Sooner Federal Sav. & Loan Ass'n v. Mobley, 645 P.2d 1000 (Okla.1981); Kelough v. Neff, 382 P.2d 135...
To continue reading
Request your trial