Lyon v. Aguilar (In re Aguilar)

• Decision Date: 13 March 2012
• Docket Number: Adversary No. 11–1212 S.,Bankruptcy No. 7–08–13642 SA.
• Citation: 470 B.R. 606
• Parties: In re Esteban Angel AGUILAR and Dena Denise Robinson, Debtors. Gary J. Lyon and Jeanne G. Lyon, Plaintiffs, v. Esteban Angel Aguilar, Defendant.
• Court: U.S. Bankruptcy Court — District of New Mexico

470 B.R. 606

In re Esteban Angel AGUILAR and Dena Denise Robinson, Debtors.Gary J. Lyon and Jeanne G. Lyon, Plaintiffs,

v.Esteban Angel Aguilar, Defendant.

Bankruptcy No. 7–08–13642 SA.

Adversary No. 11–1212 S.

United States Bankruptcy Court, D. New Mexico.

March 13, 2012.

Gary J. Lyon, Reno, NV, pro se.

Jeanne G. Lyon, Reno, NV, pro se.

M. Eliza Stewart, Madison & Mroz PA, Albuquerque, NM, for Defendant.

MEMORANDUM OPINION REGARDING PLAINTIFFS' MOTION FOR RECONSIDERATION

JAMES S. STARZYNSKI, Bankruptcy Judge.

This matter is before the Court on Plaintiffs' Motion for Reconsideration of Order Dismissing Complaint (“Motion”) (doc. 12). Plaintiffs are self-represented. Defendant filed a Response (doc. 14). The Court will in fact reconsider its prior decision, but finds that the dismissal order was appropriate not only for the reasons stated, but for additional reasons as well. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I).

Neither the Federal Rules of Civil Procedure nor the Bankruptcy Rules recognize a motion for reconsideration. Dimeff v. Good (In re Good), 281 B.R. 689, 699 (10th Cir. BAP 2002). Although, when filed [m]otions for “reconsideration” of a judgment should be treated as motions to alter or amend judgment under Rule 59(e) F.R.C.P., made applicable to bankruptcy by Rule 9023 Fed.R.Bankr.P. Under those rules, a party seeking to alter or vacate a judgment has 10 days from entry of the judgment to file a motion for such relief. Such motions will only be granted if there has been a mistake of law or fact or there is newly discovered evidence not previously available.

In re Bushman, 311 B.R. 91, 95 n. 5 (Bankr.D.Utah 2004) (Citation omitted). Rule 59 was amended in 2009 to increase the 10–day time periods to 28 days. Fed.R.Civ.P. 59 Advisory Notes. Relief may also be available under Rule 59 if there has been an intervening change in the controlling law. Sussman v. Salem, Saxon & Nielsen, P.A., 153 F.R.D. 689, 694 (M.D.Fla.1994); 11 Wright, Miller and Kane, Fed. Prac. & Proc. Civ. § 2810.1 (2d ed. 1995). Reconsideration of a judgment after its entry is an extraordinary remedy which should be used sparingly. Id. See also Palmer v. Champion Mortgage, 465 F.3d 24, 30 (1st Cir.2006). Rule 59 may not be used to relitigate old matters or reargue theories previously advanced and rejected. Id. Nor may Rule 59 be used to raise arguments or present evidence that could have been raised prior to the entry of the judgment.

Obriecht v. Raemisch, 517 F.3d 489, 494 (7th Cir.2008), cert. denied,555 U.S. 953, 129 S.Ct. 417, 172 L.Ed.2d 303 (2008) (old evidence); Pacific Ins. Co. v. American Nat'l Fire Ins. Co., 148 F.3d 396, 404 (4th Cir.1998) (new arguments or novel legal theories that could have been raised prior to judgment).

BACKGROUND

The Debtor (husband) in the bankruptcy case related to this adversary proceeding is an attorney that formerly represented the Plaintiffs. The Debtors filed their bankruptcy as a Chapter 11 on October 29, 2008 and then moved to convert to Chapter 7 on November 21, 2008. The deadline for complaints objecting to discharge or dischargeability was March 10, 2009.

Debtor's law practice, Aguilar Law Offices, P.C., filed a Chapter 11 case on October 16, 2008. The United States Trustee moved to convert or dismiss the case on June 18, 2009, and the Court converted it to a Chapter 7 on July 20, 2009.

On November 24, 2008 Plaintiffs filed a complaint in the United States District Court for the District of New Mexico against the Debtor (husband), the law firm, and John Does I–X. The Debtors' attorney filed a notice of bankruptcy in this District Court case on December 9, 2008, and the presiding judge statistically closed it on December 11, 2008.

On February 2, 2009 Plaintiffs filed one adversary proceeding, No. 09–1013, against both the Debtors and Aguilar Law Offices, P.C., seeking a declaration that their claims were nondischargeable under sections 523(a)(2), (a)(4) and (a)(6). At the initial pretrial conference the Court and parties discussed the District Court lawsuit and its relation to the adversary. The minutes of that hearing (doc. 8) and resulting Order (doc. 9) show that the Court ordered the parties to discuss whether stay relief could be fashioned to try the case in the District Court, including the dischargeability issues, or whether the parties should ask that the reference be withdrawn, or, failing that the Plaintiff must file an amended complaint by April 27, 2009 that had to be a “short and plain statement” of the facts that complied with the “particularity” requirements of fraud pleading. On April 13, 2009 Plaintiffs filed a Motion for Relief from Automatic Stay in the adversary case (doc. 12) ¹. On April 27, 2009 the Court conducted a status conference and entered an Order on April 28, 2009 granting an extension until May 27, 2009 for Plaintiffs to file the amended complaint (doc. 14). On May 4, 2009 Plaintiffs filed another Motion for Relief from Automatic Stay in the adversary case (doc. 17). On May 4, 2009 Plaintiffs also withdrew the first stay motion stating that they had been informed it needed to be filed in the main bankruptcy case (doc. 18). On May 8, 2009 Plaintiffs withdrew the second stay motion for the same reason (doc. 19).² Plaintiffs filed the First Amended Complainton May 11, 2009 (doc. 20). The Amended Complaint named only the law office as a defendant, and the related bankruptcy case listed in the caption was the law office's bankruptcy case. The Court issued an alias summons on May 14, 2009 for service upon defendant “Aguilar Law Offices, P.C.” with an answer due date of June 15, 2009 (doc. 21). On May 18, 2009 the Plaintiffs filed a motion requesting that the Court stay the adversary proceeding, stating as grounds:

The Plaintiffs are requesting the Court stay the Adversary Proceeding because, if the Court grants the MOTION FOR RELIEF FROM AUTOMATIC STAY in Case No. 08–13478–SA [the law office bankruptcy], the Lyons would request that the Adversary proceedings be dismissed without prejudice.

(doc. 23). On May 26, 2009 Plaintiffs filed a certificate of service of the Alias Summons stating that service was made on the law office on May 22, 2009 (doc. 24). Aguilar Law Office did not file an answer to the complaint. See docket. On June 18, 2009 Plaintiffs filed a Motion to Dismiss the Adversary Proceeding without prejudice (doc. 28). The Plaintiffs then drafted and obtained the signature of Debtors' attorney, but not the signature of the law office's attorney, on an Order Granting Motion to Dismiss Adversary Proceeding without Prejudice, which was entered by the Court on July 9, 2009 (doc. 30).

Plaintiffs' next contact with the Bankruptcy Court was on December 5, 2011 when they filed the instant adversary proceeding, No. 11–1213–S against Debtor (husband). It is styled as a Complaint for Money Damages and Determination Excepting this Complaint's 11 U.S.C. §§ 523(a)(2), (a)(4) and (a)(6) Claims from Dischargeability. All facts alleged in the complaint deal with the time period of 2004 to 2006, except for one. In the introduction to the complaint Plaintiffs state:

The claims of this complaint stem from new information in documents produced February, 2010 by Debtor as a Defendant in U.S. District Court Case 1:08–cv–01114–LFG–DJS. Plaintiffs contend Defendant fraudulently concealed this document causing damage to the Plaintiffs that is covered more fully in this complaint's Count 1—Breach of Contract (Paragraph 92). The proceedings for District Court Case 1:08–cv01114–LFG–DJS ended on October 3, 2011.

(Doc. 1) ³. Defendant filed a Motion to Dismiss based on res judicata and lack of subject matter jurisdiction (doc. 5). Defendantalso requested an injunction barring future filings regarding the same subject matter. Id. Plaintiffs filed a response (doc. 6). The Court conducted the initial pretrial conference on January 23, 2012 and allowed Plaintiffs to file a statement of factual and legal issues (doc. 7) and then took the Motion to Dismiss under advisement. Plaintiffs filed a statement of Factual and Legal Issues (doc. 7). This statement discusses the fraudulent concealment doctrine, behavior by an attorney that conflicts with established rules of professional conduct, and fraudulent misrepresentations to the Court. On February 9, 2011 the Court entered an Order Granting the Motion to Dismiss (doc. 10). The Court did not bar future filings or assess sanctions. On February 17, 2012 Plaintiffs filed the Motion for Reconsideration. (Doc. 12).

Plaintiffs' Motion seeks reconsideration of the Order Dismissing this adversary proceeding. In the Motion's Introduction section, it refers to 11 U.S.C. § 523(a)(2), (a)(4) and (a)(6)⁴, 11 U.S.C. § 350(b)⁵, Fed.R.Bankr.P. 4007(a), (b) and (e)⁶, and Fed.R.Civ.P. 60(b)⁷ as grounds for the reconsideration. The Motion then lists 9 “legal doctrines” that call for reconsideration:

FRAUDULENT CONCEALMENT

Plaintiffs put forth their fraudulent concealment claims in the introduction to their second adversary complaint. It was quite clear that they based their claimed right to proceed upon new information. And, the Court specifically addressed that argument in the Order Dismissing Complaint (doc. 10). The Order refers to their allegation that on February 1, 2010 they first received a July 13, 2006 memorandum which was, figuratively, the smoking gun. The Order then acknowledges the theory of tolling a statute of limitations for reasons of fraud, but found that it should not apply because, in fact, Plaintiffs had already assumed, probably from other evidence in their possession, fraud, breach of fiduciary duty and willful and malicious injury when they actually filed the original adversary complaint alleging those causes of action. Had Plaintiffs done any discovery in that adversary proceeding they could have uncovered the smoking gun ⁸. Instead, they voluntarily dismissed that adversary proceeding probably expecting to...