In Re: Leonard Otto Wallace

Filing 21

MEMORANDUM DECISION AND ORDER denying 4 Mr. Wallaces Request for Order and Tolling of Applicable Due Dates; finding as moot 6 The Hayes' Motion to Dismiss Appeal; granting 7 The Hayes' Motion for Attorney Fees and Costs. The Court AFFIRMS the Bankruptcy Courts 1/21/2015 Order denying Mr. Wallaces Motion (Dkt. 1-2) in its entirety. The Bankruptcy Courts 2/2/2015 Order denying reconsideration (Dkt. 1-3) is also AFFIRMED in its entirety. 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)(Sent to TLM, sh, and ar at the Bankruptcy Court by cjs.)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

In re:
LEONARD O. WALLACE and
PAMELA WALLACE,
Debtors,
_________________________________
LEORNARD O. WALLACE,

Bankruptcy Case No. 11-21077-TLM

MEMORANDUM DECISION AND
ORDER

Appellant,
Case No. 2:15-CV-0054-EJL
v.
NORMAN HAYES and RODNEY
HAYES, et al.,
Appellees.

Pro Se Appellant Leonard O. Wallace (“Mr. Wallace”) appeals the “Summary
Order On ‘Motion and Request for Court to Conduct Hearing, Examine Evidence, and
Determine Bankruptcy Court Jurisdiction of Subject Matter” (Dkt. 1-2) and Order
Denying Reconsideration of the Summary Order (Dkt. 1-3) entered by the United States
Bankruptcy Court for the District of Idaho in 11-21077-TLM. Appellees and creditors
Norman and Rodney Hayes (the “Hayes”) have responded to the appeal (Dkt. 18) and
Mr. Wallace has replied (Dkt. 20). The Hayes also filed a Motion to Dismiss the Appeal
(Dkt. 6) and a Motion for Attorney Fees and Costs (Dkt. 7).

The Court has jurisdiction under 28 U.S.C. § 158 and affirms the Orders of the
Bankruptcy Court.1
BACKGROUND
The history of this case is outlined in the decision rejecting Mr. Wallace’s former
appeal, 2:14-cv-00229-EJL, as well as in countless decisions by the Bankruptcy Court,
and will not be repeated here.2 See. e.g., (Dkt. 19-1, pp. 5-85.) In brief, Mr. Wallace and
his wife filed the current bankruptcy case on August 15, 2011.3 The Hayes filed a proof
of claim in Mr. Wallace’s bankruptcy case based on a judgment they obtained against Mr.
Wallace in a 2003 arbitration.4 The state court for Yellowstone County, Montana,
confirmed the Arbitrator’s award on May 21, 2004. (Dkt. 19-2, pp. 50-77.) The state
court entered an Amended Judgment against Mr. Wallace on August 3, 2004 (“Amended
Judgment”). (Dkt. 19-3, pp. 6-9.) The Amended Judgment was subsequently affirmed by
the Montana Supreme Court. Wallace v. Hayes, 124 P.3d 110 (Mont. 2005). The

1

Having reviewed and considered all the briefing of the parties, the Court
concludes that oral argument is not necessary. Fed.R.Civ.Proc. 78; Willis v. Pacific
Maritime Ass’n, 244 F.3d 675, 684 n. 2 (9th Cir. 2001).
2

Unless otherwise reference, docket citations are to the record in this appeal, 2:15cv-00054.
3

Mr. Wallace’s wife, Pamela R. Wallace, is not identified as an appellant on the
Notice of Appeal, and has requested that past appeals be withdrawn. (2:14-cv-00229,
Dkt. 11.) For ease of reference, and because Ms. Wallace does not appear to join in the
instant appeal, the Court will refer to only Mr. Wallace as appellant.
4

Mr. Wallace’s Chapter 11 bankruptcy was converted to Chapter 7 on March 22,
2012. (Dkt. 19-1, p. 1.)

Amended Judgment was then assigned to the Hayes on December 17, 2007. (Dkt. 19-3,
pp. 10-12.)
Mr. Wallace appealed the Montana trial court’s decisions to the Montana Supreme
Court six times. The trial court was affirmed on all six of those appeals. Wallace v.
Hayes, 272 P. 3d 125, 2011 WL 4366899 (Mont. 2011). Undeterred by the Montana
Supreme Court’s numerous decisions against him, Mr. Wallace engaged in collateral
attacks on the Amended Judgment, including an action initiated in the U.S. District Court
for the District of Montana, in which he sought to set aside the Amended Judgment. (Dkt.
19-3, pp. 72-83.) The Montana District Court dismissed Mr. Wallace’s lawsuit and
entered sanctions against him. (Id.) In so holding, the court specifically found Mr.
Wallace’s challenges to the Amended Judgment were barred by the Rooker-Feldman
doctrine, as well as by res judicata. (Id.)
Throughout the course of his bankruptcy case, Mr. Wallace has similarly filed
multiple unsuccessful objections to the Hayes’ proof of claim, as well as various other
motions seeking disallowance of the Hayes’ proof of claim. These objections were denied
or overruled by the Bankruptcy Court. (Dkt. 19-1, pp. 1-66.) Mr. Wallace also initiated an
adversary proceeding against the Hayes and their counsel alleging various crimes, many
of which he invokes in the instant appeal. The adversary proceeding was dismissed and
Mr. Wallace was sanctioned $17,100 by the Bankruptcy Court. (Dkt. 19-1, pp. 68-72.)
In repeatedly denying Mr. Wallace’s objections to the Hayes’ proof of claim, the
Bankruptcy Court has held that Mr. Wallace lacked standing to object to the claim, that
objection to the claim was barred by the Rooker-Feldman doctrine, that objection was

barred by the doctrine of claim preclusion (res judicata), that the Amended Judgment was
entitled to full faith and credit, and that Mr. Wallace has failed to carry his burden of
showing sufficient evidence to rebut the prima facie validity of the Hayes’ claim. (Id., 185.) In addition, the Bankruptcy Court approved a compromise whereby the Chapter 7
Trustee released any and all claims against the Hayes related to the Montana litigation,
and specifically allowed the Hayes’ proof of claim. (Dkt. 19-4, pp. 3-19.) The
Bankruptcy Court’s order approving the compromise is a final order, and is the law of the
case.
Mr. Wallace has also appealed decisions of the Bankruptcy Court to this Court on
two prior occasions. In 2013, he appealed various orders regarding the Hayes’ proof of
claim, but then abandoned the appeal. See generally, Wallace v. Hayes, 13-cv-00238EJL. Mr. Wallace initiated another appeal in 2014, again voicing his disagreement with
the allowance of the Hayes’ proof of claim when his motions for reconsideration were
denied by the Bankruptcy Court. See generally, Wallace v. Hayes, 2:14-cv-00229-EJL.
That appeal was rejected on December 8, 2014. (Id., Dkt. 20.) This Court determined the
appeal was frivolous and awarded the Hayes’ attorney fees. (Id., Dkt. 24.)
Unfazed, Mr. Wallace filed a “Motion and Request for Court to Conduct Hearing,
Examine Evidence, and Determine Bankruptcy Court Jurisdiction of Subject Matter
(Property Rights of Magtrac) for Arbitration Punitive Damages Award” (hereinafter “Mr.
Wallace’s Motion”) before the Bankruptcy Court on January 14, 2015. (Dkt. 19-5, p. 112.) Mr. Wallace’s Motion sought the same relief on the same grounds repeatedly
rejected by every court that has heard him. (Id., 15-19.) The Bankruptcy Court denied

Mr. Wallace’s Motion and subsequently denied Mr. Wallace’s request for
reconsideration. (Id., pp. 15-19, 27.) Mr. Wallace thereafter filed the instant appeal.
STANDARD OF REVIEW
The Bankruptcy Court’s orders denying Mr. Wallace’s Motion and denying
reconsideration of the aforementioned order are the subject of the instant appeal. When
reviewing a bankruptcy court’s decision, a district court functions as an appellate court
and applies the standard of review generally applied in federal court appeals.” In re
Crystal Properties, Ltd., 268 F.3d 743, 755 (9th Cir. 2001). Denial of motions under
Federal Rule of Civil Procedure 59 and Federal Rule of Civil Procedure 60 are reviewed
for abuse of discretion. Carter v. U.S., 973 F.2d 1479, 1488 (9th Cir. 1992) (citing
Fiester v. Turner, 783 F.2d 1474, 1475-76 (9th Cir. 1986)). A court abuses its discretion
when it “rests its conclusions on clearly erroneous factual findings or on incorrect legal
standards.” Quackenbush v. Allstate Ins. Co. 121 F.3d 1372, 1377 (9th Cir. 1997). The
district court may affirm the decision of the bankruptcy court on any basis that finds
support in the record. In re Crystal Properties, 268 F.3d at 755.
DISCUSSION
Mr. Wallace’s briefing does not address the reasons the Bankruptcy Court denied
his motions, nor explain why the Bankruptcy Court’s orders were in error. Instead, Mr.
Wallace here seeks essentially the same relief on the same grounds previously rejected by
this Court in 2:14-cv-00229, and repeatedly rejected by the Bankruptcy Court in both Mr.
Wallace’s bankruptcy proceeding, 11-21077-TLM, and in his adversary proceeding
against the Hayes and others, Adv. Proc. 12-07035-TLM. The Court need not repeat this

analysis here. Moreover, Mr. Wallace’s Appellant Brief identifies nine issues for appeal,
but each of the nine issues concern Mr. Wallace’s previously litigated challenges to the
Amended Judgment. None of these issues are properly before this Court.
Where, as here, a party fails to properly assign error, the appellate court cannot
review the issue. See, e.g., Watec Co., Ltd. v. Liu, 403 F.3d 645, 649 (9th Cir. 2005)
(Appellants waived their right to seek review of trial court’s denial of their first judgment
as a matter of law by failing to argue it as a specific assignment of error in their opening
brief); Laboa v. Calderon, 224 F.3d 972, 980 n. 6 (9th Cir. 2000) (“[W]e will not
ordinarily consider matters on appeal that are not specifically and distinctly argued in
appellant’s opening brief). The instant appeal bears no relation to the Bankruptcy Court’s
denial of Mr. Wallace’s motion, and instead represents yet another attempt by Mr.
Wallace to challenge the Amended Judgment based on alleged fraud. Once again, the
Court must reject Mr. Wallace’s attempt to re-litigate his fraud theory. This theory has
been considered and repeatedly rejected by the Montana Supreme Court, the Bankruptcy
Court, and by the Montana federal court. (Dkt. 19-1, pp. 1-85; Dkt. 19-2, pp. 50-77; Dkt.
19-3, pp. 1-3, 72-83); see also Wallace v. Hayes, 272 P.3d 125, 2011 WL 4366899
(Mont. 2011). The Court finds Mr. Wallace’s appeal is frivolous5 and affirms both the
Bankruptcy Court’s denial of Mr. Wallace’s Motion (Dkt. 1-2) and the Bankruptcy
Court’s denial of reconsideration (Dkt. 1-3.)
5

“An appeal is frivolous when the result is obvious or the appellant’s arguments
are wholly without merit.” In re Presidential Corp., 180 B.R. 233, 240 (B.A.P. 9th Cir.
1995).

The Hayes are entitled to their attorney fees and costs associated with responding
to Mr. Wallace’s frivolous appeal. McConnell v. Critchlow, 661 F.2d 116, 118 (9th Cir.
1981). The Hayes are directed to submit an affidavit showing the attorney fees and costs
incurred so that the Court may determine the amount of the award.
ORDER
For the foregoing reasons, the Court AFFIRMS the Bankruptcy Court’s January
21, 2015 Order denying Mr. Wallace’s Motion (Dkt. 1-2) in its entirety. The Bankruptcy
Court’s February 2, 2015 Order denying reconsideration (Dkt. 1-3) is also AFFIRMED
in its entirety.
Mr. Wallace’s Request for Order and Tolling of Applicable Due Dates (Dkt. 4) is,
given the Court’s finding affirming the Bankruptcy Court, DENIED;
The Hayes’ Motion to Dismiss Appeal (Dkt. 6) is MOOT;
The Hayes’ Motion for Attorney Fees and Costs (Dkt. 7) is GRANTED. The
Hayes are directed to submit an affidavit showing their attorney fees and costs so that the
Court may determine the appropriate amount of the award.

DATED: September 21, 2015

_________________________
Edward J. Lodge
United States District Judge