Clark v. Murphy Land Company

Filing 13

MEMORANDUM DECISION AND ORDER. The 11/4/2014 Order of the Bankruptcy Court is AFFIRMED. Appellee is entitled to reasonable attorneys fees and costs on appeal. Signed by Judge Edward J. Lodge. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjs)(Emailed to TLM, sh, and ar at Bankruptcy Court.)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
In re:
Bk. Case No. 12-00649-TLM
Jay P. Clark,
Debtor.

JAY P. CLARK,
Appellant,

MEMORANDUM DECISION
AND ORDER

vs.
Case No. 1:14-cv-00502-EJL
MURPHY LAND COMPANY,
Appellee.

Pending before the Court in the above-entitled matter is an appeal by Debtor
Jay P. Clark regarding the Bankruptcy Court’s Order Granting Motion to Strike and
Overruling Objection to Claim (Dkt. 565) which was entered on November 4, 2014. The
Notice of Appeal was timely filed on November 19, 2014 (Dkt. 1). Having fully reviewed
the record, the Court finds that the facts and legal arguments are adequately presented in
the briefs and record. Accordingly, in the interest of avoiding further delay, and because
the Court conclusively finds that the decisional process would not be significantly aided
by oral argument, this matter shall be decided on the record before this Court without oral
argument.

MEMORANDUM DECISION AND ORDER - 1

JURISDICTION
This Court has jurisdiction to resolve this appeal pursuant to 28 U.S.C. § 158(a)
and Fed. R. Bank. P. 8013.

FACTUAL BACKGROUND
Debtor filed his voluntary petition for Chapter 12 bankruptcy on March 27, 2012.
The bankruptcy was later converted to a Chapter 7 proceeding. On October 10, 2013,
Murphy Land Company filed its Amended Claim in the amount of $3,618,534.79. Debtor
filed a pro se Objection to the claim pursuant to § 502 on October 21, 2013. While Clark
appeared pro se, the Bankruptcy Court noted he was a trained, licensed and practicing
attorney until his suspension from the bar, so Debtor was familiar with the procedural and
legal requirements for his objection.
The Bankruptcy Court held a hearing on Debtor’s Objection on December 9,
2013. The Bankruptcy Court noted that pursuant to Rule 3001(f) the filing of the claim by
Murphy Land was prima facie evidence of the validity of the claim and once an objection
was filed by Debtor under § 502, the claim remains sufficient absent evidence of the
claim’s invalidity. The Court continued that the burden of proof was on the objector to
produce evidence sufficient to rebut the presumption of validity and that evidence must
be presented a ta hearing from the witness stand with competent evidence submitted and

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admitted by the Court under the Federal Rules of Evidence. Declarations or affidavits
only suffice if the parties stipulate to them.
Debtor failed to submit any competent evidence under the Federal Rules of
Evidence to rebut the presumption of validity of Murphy Land’s claim. The affidavits
were not stipulated to by the parties and could not be considered to satisfy Debtor’s
burden to produce evidence. Therefore, the Bankruptcy Court overruled the Objection.
The Bankruptcy Court’s ruling was not appealed.
On June 16, 2014, Debtor, this time through counsel, filed a second Objection to
Murphy Land’s Proof of Claim. Murphy Land responded on July 16, 2014. Debtor
noticed a hearing on the Second Objection. Murphy Land moved to vacate the hearing,
strike the Second Objection and, in the alternative, for Summary Judgment on the Second
Objection. Counsel agreed to vacate Debtor’s evidentiary hearing. Three days later,
Debtor filed an Amended Second Objection and Murphy Land moved to strike the
Amended Second Objection.
The Bankruptcy Court heard argument on October 28, 2014 on Murphy Land’s
Motions to Strike and for Summary Judgment and Debtor’s Second Objection and
Amended Second Objection. On November 3, 2014, the Bankruptcy Court orally granted
Murphy Land’s motions to strike and overruled Debtor’s Second Objection and Amended
Second Objection. A written order was entered by the Bankruptcy Court on
November 4, 2014.

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Debtor claims the Bankruptcy Court has improperly terminated Debtor’s rights to
an evidentiary hearing or otherwise object to Murphy Land’s proof of claim.
This Court notes that approximately $3,000,000 of the claim appears to have been
resolved in July 2015 by the Idaho Supreme Court’s ruling in Hilliard v. Murphy Land
Company, 351 P.3d 1195 (Idaho 2015) as Murphy Land’s counsel repeated represented to
the Bankruptcy Court that should the Idaho Supreme Court uphold the trial court’s award
of damages, the claim would be reduced by the amount recovered from the Hilliards. At
the time the Bankruptcy Court ruled in December 2013, the state court trial between the
Hilliards and Murphy Land had not been resolved and the Bankruptcy Court declined to
adjust the claim since the state court judgment was not final. At the time the Bankruptcy
Court ruled in November of 2014, the state district court judgment entered on March 14,
2014 was on appeal and was not final. This Court assumes Murphy Land will or has
moved to amend their proof of claim and/or the Trustee will seek to have the claim
amended pursuant to the representations of counsel for Murphy Land. The Idaho Supreme
Court ruling does not affect this Court’s analysis on the pending appeal, but does shed
some light on one of the reasons the Bankruptcy Court overruled the Objection in
December 2013.

ANALYSIS
For purposes of this appeal, “[t]he bankruptcy court’s conclusions of law and
interpretation of the Bankruptcy Code are reviewed de novo and its factual findings for
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clear error.” In re Green, 583 F.3d 614, 618 (9th cir. 2009). This Court “must accept the
bankruptcy court’s findings of fact unless, upon review, the court is left with the definite
and firm conviction that a mistake has been committed by the bankruptcy judge.” Id.
The Bankruptcy’s Court’s decision on a motion for reconsideration of its order is
reviewed for an abuse of discretion. Hammer v. Drago (In re Hammer), 112 B.R. 341,
345 (9th Cir. B.A.P. 1990), aff’d, 940 F.2d 524 (9th Cir. 1991).

1. December 9, 2013 Hearing and Order
Debtor argues he was not given an evidentiary hearing and his Objection was
overruled on technicalities. The Court respectfully disagrees. Debtor, as a trained
attorney, knew or should have known the procedural and legal requirements for his
Objection and appealing or seeking reconsideration of the Order overruling the Objection.
Moreover, pro se litigants are held to same procedural rules as counseled litigants. King
v. Atiyeh, 814 F.2d 565, 567 (9th Cir. 1987).
The record in this matter is clear. Debtor was granted an evidentiary hearing on his
Objection on December 9, 2013. Debtor had an opportunity to present evidence and failed
to provide any competent evidence at the hearing on the Objection to rebut the
presumption of the validity of Murphy Land’s proof of claim. Debtor also failed to
comply with Rule 3007.1 of the Local Rules to indicate his intent to present evidence and
disclose such evidence. Moreover, Debtor knew or should have known that affidavits are
an insufficient form of evidence for purposes of a hearing on an objection unless
MEMORANDUM DECISION AND ORDER - 5

stipulated to by the parties and there was no such stipulation in this case. In re Caviata
Attached Homes, LLC, 481 B.R. 34, 44 (9th Cir. B.A. P. 2012); B.R. 9014. Because
Debtor did not provide any evidence, he did not carry his burden to rebut the presumption
of validity of the claim and the Bankruptcy Court properly overruled the Objection. In re
Pugh, 157 B.R. 898. 901 (B.A.P. 9th Cir. 1993).
The Bankruptcy Court’s Order of December 9, 2013 overruling the Objection was
a final order. See In re Garner, 246 B.R. 617, 619 (9th Cir. B.A.P. 2000). Debtor did not
appeal the final order or file a timely motion for reconsideration with the Bankruptcy
Court prior to the expiration of the appeal period.

2. Second Objection and Amended Second Objection
Debtor filed a Second Objection and an Amended Second Objection months later.
In viewing the Second Objection and the Amended Second Objection leniently and in
favor of Debtor, the Bankruptcy Court deemed the Second Objection and Amended
Second Objection as a motion for reconsideration of its December 9, 2013 final order.
The Court understands the claim and disputes between the parties have gone on for
years, but challenging claims in court requires that parties comply with the applicable
rules of evidence and procedure. Without compliance with the rules, a court’s hands are
tied. As Justice Jones’ recognized in his concurring opinion in Hilliard v. Murphy Land
Company, 351 P.3d 1195, 1203 (Idaho 2015):

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The loss claimed by Murphy Land Company, exceeding $3 million,
certainly appears to be excessive. Had the Hilliards’ case been adequately
presented in the district court and upon appeal, they may have come out
substantially better. Unfortunately, the court can only act upon the evidence
competently presented and are not in a position to rescue litigants from
cases that are inadequately prepared and conducted.
The same can be said of Debtor’s actions regarding his Objection, his Second Objection
and his Amended Second Objection in this case. Failing to comply with legal
requirements and deadlines for motions and/or appeals forces this Court to affirm the
Bankruptcy Court’s rulings.
Debtor’s argument that the Bankruptcy Court improperly failed to consider the
material change in circumstances that occurred after the December 9, 2013 ruling
misstates the legal question presented to the Bankruptcy Court. When Debtor filed his
Second Objection and Amended Second Objection, the Bankruptcy Court construed the
Second Objection and Amended Second Objection as a motion for reconsideration of the
December 9, 2013 Order under 11 U.S.C. § 502(j) which provides that a claim that has
been allowed or disallowed may be reconsidered for cause. The Bankruptcy Court
properly determined that Debtor had again not carried his burden (this time with the aid
of counsel) to establish good cause for reconsideration.
The law is well-settled and the Bankruptcy Court properly applied Fed. R. Civ. P.
60(b) to determine whether good cause existed to reconsider the allowed claim. “When
reconsideration under Rule 3008 is sought after the 10 day appeal period has expired, the
motion is subject to the constraints of FRCP 60(b) as incorporated by Rule 9024.” In re

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Wylie, 349 B. R. 204, 209 (B.A.P. 9th Cir. 2006). “While Rule 3008 permits an order
[allowing] a claim to be reconsidered, the merits of the claim objection are no longer fair
game unless the claimant established a good excuse, cognizable under Fed. R. Civ. P.
60(b) for its failure to timely contest the [order].” Id.
Simply put, in this case the Bankruptcy Court could not reach the merits of
Debtor’s new arguments regarding the Amended Second Objection as the request for
reconsideration was filed after to the expiration of the appeal period so the motion for
reconsideration was subject to the constraints of Rule 60(b). Rule 60(b) “generally
require[s] a showing that events subsequent to the entry of judgment [or a final order]
make its enforcement unfair or inappropriate, or that the party was deprived of a fair
opportunity to appear and be heard in connection with the underlying dispute.” Id.
Appellant has failed to set forth facts or valid legal arguments that would allow for
reconsideration of the December 9, 2013 Order.
This Court finds no abuse of discretion or clear error by the Bankruptcy Court in
determining that Debtor failed to carry his burden at the December 9, 2013 hearing
wherein the Bankruptcy Court entered the Order overruling the Objection. Nor was there
abuse of discretion or clear error by the Bankruptcy Court in its analysis regarding a
motion for reconsideration.
The collateral estoppel argument of Debtor is unpersuasive as this Court finds
Debtor had an opportunity to fully and fairly litigate the original Objection. The fact that
Debtor elected not to provide any competent evidence at the December 9, 2013 hearing
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does not equate to the Debtor not having had an opportunity to fully and fairly litigate his
objection.
The Debtor once again failed to carry his burden and provide the Bankruptcy
Court with a proper legal basis pursuant to the constraints of Rule 60(b) that would allow
the Bankruptcy Court to be able to grant a motion for reconsideration. Debtor did not
show other reasons such as a manifest legal error by the Bankruptcy Court in its
December 9, 2013 ruling or other equitable reasons to justify reconsideration. The alleged
“subsequent events” argued by Debtor were not subsequent events that created good
cause for reconsideration.
Clearly, the state court case between the Hilliards and Murphy Land was still not a
proper basis to grant reconsideration since the matter was on appeal in November 2014
and the representations of Murphy Land’s counsel eliminated the need for the Bankruptcy
Court to make any finding regarding a potential credit for any award under the state court
case in the future. Again, Debtor provided no new evidence regarding the claim. Instead
Debtor merely attempted to argue the merits of the Amended Second Objection instead of
the merits of the motion for reconsideration. The Court disagrees with Debtor that the
merits of the Second Amended Objection are within the constraints of proper reasons for
reconsideration under Rule 60(b) or were new arguments. This Court also finds the
Bankruptcy Court properly determined the compromise between Murphy Land and the
Chapter 7 Trustee did not prohibit Murphy Land’s proof of claim.

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For these reasons, this Court finds under the facts of this case, no abuse of
discretion or clear error by the Bankruptcy Court in its determination Debtor had failed to
provide a valid reason pursuant to Rule 60(b) to allow reconsideration of the Order
overruling the Objection. Therefore, the Bankruptcy Court was without legal authority to
consider the merits of the Second Objection and the Amended Second Objection.
The November 4, 2014 Order of the Bankruptcy Court is AFFIRMED. Appellee
is entitled to reasonable attorneys fees and costs on appeal.
So Ordered.

DATED: September 22, 2015

Honorable Edward J. Lodge
U. S. District Judge

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