Case Type:
Case Status:
Affirmed in part and Reversed in part
CC_21-1224-SGF (9th Circuit, Jul 26,2022) Not Published
The Ninth Circuit Bankruptcy Appellate Panel affirmed the bankruptcy court's order denying recusal as well as the court's order granting defendants' motion to dismiss plaintiff debtor's adversary complaint as to two of the three claims but reversed as to the third claim for a determination of dischargeability.
Procedural context:
Debtor had objected to the proof of claim filed by the estate of his ex-wife on account of a dissolution judgment entered in the estate's favor in state court. Debtor also objected to a settlement between the estate and the chapter 7 trustee. The bankruptcy overruled both objections, Debtor also filed an adversary proceeding against the representatives of the estate. In the adversary proceeding, the debtor asserted three claims in his original complaint. He then filed an amended complaint asserting the same counts one and three but changing count two to a claim for a determination of dischargeability under section 523(a)(15). Defendants filed a motion to dismiss without addressing the new dischargeability cause of action. The bankruptcy court dismissed the amended complaint in its entirety.
Pre-petition, a California state court had entered a dissolution judgment in favor of the estate of debtor's ex-wife in August 2020. The judgment required the sale of three properties and ordered the debtor to pay rent for each property until each property was sold. One of the properties was sold pre-petition and debtor asserted a homestead exemption. Debtor filed bankruptcy in January 2021. After the filing, the chapter 7 trustee and the ex-wife's probate estate agreed to a compromise on the disposition of the remaining two properties and division of funds. The United States Trustee and debtor objected to the settlement on the basis that the court first needed to rule on debtor's claimed exemption. The debtor also objected on other grounds, including that the state court lacked jurisdiction because it failed to comply with California's Covid-19 regulations. The court overruled the objections, including the assertion of a homestead exemption by debtor, and approved the settlement. The court also overruled debtor's objection to the ex-wife's estate's claim, holding that the Rooker-Feldman doctrine barred debtor's claim objection as a collateral attack on the state court judgment. Prior to the resolution of the claim objection and settlement, the debtor also filed an adversary complaint against the representative's of the ex-wife's estate. The original complaint asserted claims for (1) a claim objection to the probate estate's proof of claim, (2) avoidance of the prepetition sale of property, and (3) avoidance of a lien placed on a property by his former spouse. Debtor filed an amended complaint replacing the second cause of action with a claim to determine dischargeability of the dissolution judgment under section 523(a)(15). Even though there was apparently no dispute that section 523(a)(15) did not apply to bar the discharge (because the judgment was held by the estate and not debtor's former spouse), the BAP reversed and held that debtor had stated a viable claim and the bankruptcy court needed to rule on the claim.
Gary A. Spraker; Scott H. Gan; and Robert J. Faris

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