In re Moss

Decision Date13 August 2013
Docket NumberCase No. 12-61093-7
PartiesIn re DARREL LINN MOSS, Debtor.
CourtU.S. Bankruptcy Court — District of Montana

At Butte in said District this 13th day of August, 2013.

Pending in this Chapter 7 case are: (1) Motion to remove void judgment against Creditors' property (Docket No. 60) filed on March 26, 2013, by Sharon Boyce ("Boyce") and Kyeann Sayer ("Sayer"), members of former Tupi Plain, LLC ("Tupi Plain") (together referred to as the "Creditors"), which replaced the Creditors' Motion to remove lis pendens (Dkt. 35); (2) Trustee's Objection (Dkt. 38/40/45/51) to allowance of Creditors' amended Proof of Claim No. 6 based on the res judicata and collateral estoppel effect of Montana state court orders and judgment entered against Creditors in the Montana Fourth Judicial District Court, Cause No. DV-10-961; (3) Trustee's motion (Dkt. 48) requesting the Court take judicial notice of pleadings, orders and notice of judgment entered in case DV-10-961, and Creditors' objections thereto; and (3) Trustee's amended motion (Dkt. 64) to strike Creditors' objection to the Trustee's motion to take judicial notice as moot and untimely. After a hearing on these contested matters, review of the parties' Exhibits ("Ex."), briefs, and applicable law, these matters are ready for decision. For the reasons set forth below the Trustee's Objection to Creditors' claim will be sustained and amended Proof of Claim 6 will be disallowed. The Trustee's motion to strike will be denied andCreditors' objection to Trustee's motion to take judicial notice is moot; and Creditors' motion to remove void judgment will be denied.

This Court has jurisdiction in this Chapter 7 case under 28 U.S.C. § 1334(a). Allowance of claims, determination of the validity of liens and matters concerning the administration of the estate are core proceedings under 28 U.S.C. § 157(b)(2). This Memorandum includes the Court's findings of fact and conclusions of law.

The hearing on these contested matters was held at Missoula on April 11, 2013. The Trustee Richard J. Samson appeared. Sharon Boyce appeared pro se. The parties stipulated to the admission of all exhibits, an d Exhibits ("Ex.") A, B, C, D, E, F, G, H, I, and 1 - through - 29 all were admitted into evidence without objection1 . At the conclusion of the hearing the Court granted the parties time to filed memoranda of law, which have been filed and reviewed by the Court, together with the record and applicable law.


The relevant facts are not subject to reasonable dispute. Darrel Linn Moss ("Moss" or "Debtor") practiced law in Montana through Moss & Associates, LLC ("Moss & Associates"). Among Moss & Associates' clients was Tupi Plain, the members of which were Boyce and Sayer. Moss & Associates commenced Case DV-10-961 against Creditors to recover for nonpayment of legal services provided on behalf of Tupi Plain. Boyce moved to dismiss for insufficiency of process. Ex. 1.

Plaintiff requested a default against Tupi Plain, then moved for entry of a judgment by default on November 10, 2010. Ex. 4. On December 30, 2010, Boyce and Sayer signed a members' resolution to dissolve Tupi Plain. Ex. 5. They then filed articles of termination for Tupi Plain on January 13, 2011. Ex. 6. The state court entered an order in DV-10-961 on March 15, 2011, denying Creditors' motion to dismiss and granting plaintiff's motion for entry of judgment against Tupi Plain. Ex. 7. A default judgment was entered against Tupi Plain in the amount of $49,267.87 on March 15, 2011. Ex. 8.

Plaintiff in DV-10-961 filed an amended complaint dated March 17, 2011, after Moss learned of a transfer of real property from Tupi Plain to Boyce and Sayer, to recover a fraudulent transfer. Ex. 9, C. Sayer and Boyce filed counterclaims against third-party defendant Moss in DV-10-961 on August 8, 2011. Ex. 10 is Creditors' amended counterclaim, and it avers claims against Moss based on breach of contract, malpractice, breach of fiduciary duty, fraud, and intentional infliction of emotional distress.

Moss was transferred to inactive status by the State Bar of Montana on August 29, 2011, for noncompliance with the Montana Supreme Court's Rules of Continuing Education. Ex. 11. Ex. 12 shows that Moss & Associates was involuntarily dissolved as of December 1, 2011. However, Moss continued to file motions and other documents in DV-10-961 after he was transferred to inactive status, including filling motions for summary judgment, motion for judgment on the pleadings and motions to compel discovery responses. Ex. 13. Moss has now been disbarred from the practice of law by the Montana Supreme Court and the U.S. District Court for the District of Montana.

On February 16, 2012, the state court entered an opinion and order, Ex. A/Ex. 142 . The Court found that Boyce and Sayer failed to comply with discovery, and further found that Tupi Plain remained a business entity for purposes of winding up its affairs following dissolution. Ex. A. In Ex. A the court granted Moss's motion for judgment on the pleadings against Boyce and Sayer on all counts of their counterclaims, finding that Boyce and Sayer could not assert claims of Tupi Plain in their own name or on their own behalf against Moss.

In addition, the court granted plaintiff's motion for partial summary judgment against Boyce and Sayer, finding that they operated Tupi Plan as their alter ego with the purpose and intent to defraud and hinder creditors. The Court granted plaintiff summary judgment against Boyce and Sayer on plaintiff's claims in the amount of $49,267.87 plus interest, costs and attorney fees, for a total award in the amount of $55,950.37. Ex. A. The court also granted plaintiff's motion for summary judgment dismissing Boyce and Sayer's counterclaims against the plaintiff, again because Boyce and Sayer were not parties to the agreement with Moss & Associates for representation. Ex. A. Lastly, the court granted plaintiff's motion for summary judgment on its fraudulent transfer claim based upon a quit claim deed of real property from Tupi Plain to Boyce and Sayer for no consideration. Ex. A. The court granted plaintiff time to submit proof of fees and costs to be added to the judgment. Ex. A.

On March 16, 2012, Boyce and Sayer filed objections to the court's opinion and order alleging errors, one of the most notable of which they stated "that it is predicated on a void judgment." Ex. 15. Boyce and Sayer filed a petition for writ of supervisory control with theMontana Supreme Court. On July 3, 2012, the Montana Supreme Court issued an order denying the petition for writ of supervisory control. Ex. B. The Montana Supreme Court found that the factors for supervisory control had not been met and that an ordinary appeal would afford an adequate remedy. Ex. B3 .

Debtor Darrel Linn Moss ("Moss" or "Debtor") filed his Chapter 7 petition on July 3, 2012, with his Schedules and Statement of Financial Affairs ("SOFA") which he signed under penalty of perjury. Richard J. Samson was appointed Chapter 7 Trustee. A discharge of the Debtor was entered on December 5, 2012.

Creditors filed notice of Debtor's bankruptcy in DV-10-961. Ex. 17. Despite the bankruptcy filing, activity continued in DV-10-961. On July 19, 2012, the court in DV-10-961 entered an order, Ex. C/18, awarding plaintiff fees and costs and characterizing Boyce's and Sayer's actions throughout the proceedings "both fraudulent and frivolous." The court awarded plaintiff attorneys' fees in the amount of $43,584.00 and costs of $1,646.97. On July 26, 2012, the state court entered judgment against Creditors, jointly and severally, in the sum of $101,181.34. EX. D/19. Notice of the judgment was served on Creditors by Moss on July 30, 2012. Ex. E/20. Moss recorded notice of entry of the judgment on July 30, 2012. Ex. 21.

On August 14, 2012, in Moss's disciplinary proceedings in the Montana Supreme Court, the court suspended Moss for at least seven months effective that date. Ex. 22. As noted above, Moss has subsequently been disbarred. On August 20, 2012, Creditors filed in DV-10-961 a "Notice of Issues" alerting the state court of Moss's inactive status, disciplinary proceedings,malpractice insurance, bankruptcy, and dissolution of the plaintiff, which they argued were grounds rendering the court's orders and judgment void. Ex. 23.

Boyce and Sayer filed a notice of appeal of the state court judgment on August 27, 2012, Ex. F, without requesting or obtaining relief from this Court from the automatic stay. Moss filed a motion to dismiss the appeal of Tupi Plain, Ex. 26, and the Trustee filed a notice of the filing of the above-captioned bankruptcy case, Ex. 27. On September 20, 2012, Creditors moved to voluntarily dismiss their appeal, Ex. G, and their appeal was dismissed by the Montana Supreme Court on September 24, 2012, Ex. H.

On September 17, 2012, the state court entered an order, Ex. I/Ex. 28, denying all relief requested by Creditors in Ex. 23, and determining that the July 26, 2012, judgment was a final and enforceable order. The court rejected Creditors' new theories because none of the new theories were raised before entry of the final judgment, Ex. D/19.

Debtor's Schedule B lists personal property, including Debtor's stock and interests in Moss & Associates, described as a dissolved corporation winding up its affairs through which Moss practiced law, valued at $0. Schedule F lists Boyce, Sayer and Tupi Plain as creditors holding unliquidated, disputed, unsecured nonpriority claims claim incurred from September 2009 through March 2010 described as alleged tort claims of a "Member of former LLC client" or "former client."

Debtor's SOFA, at the continuation sheets, states that the Debtor earned income through Moss & Associates in 2010 and 2011, and since then his income was from monthly plasma donations. Among lawsuits listed at item 4, the SOFA lists Cause No. DV-10-961,...

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