1. FRANK MCQUEARY IS A SECURED CREDITOR OF DEBTOR'S BANKRUPTCY ESTATE-

1.1. The Bankruptcy Court Must Give Full Faith and Credit to the State Court's Judgment, Right or Wrong- Frank McQueary, the plaintiff and ex-husband of the debtor, brought a motion for summary judgment to establish that a June 24, 1996, judgment by the Honorable Rene Gonzales in the Superior Court domestic relations action, Linda Leigh McQueary v. Frank McQueary, Civil Case No. 88-9533, created a valid judgment lien on the real property where the Diamond H Ranch on O'Malley Road is located, thus resulting in an enforceable, unavoidable secured claim in the bankruptcy.

The motion also seeks to establish, based on the valuations found by the Superior Court judge, that Frank's claim is fully secured. The judgment was in the amount of $138,811, payable at $25,000 down by June 17, 1996, and the balance of $113,811 to be amortized over 25 years, with interest at 10½% per year from June 6, 1996. See, Exhibit 6 to Docket Entry 10, which contains plaintiff's motion for summary judgment regarding validity and extent of lien. Part 2 of this Memorandum Decision addresses the valuation issue.

The McQuearys were divorced in December, 1988. The property division was tried later over a period of several years from 1992-1994. The trial judge's 1994 decision was appealed and reversed. See, McQueary 5 ABR 2       v McQueary, 902 P2d 1326 (AK 1995). The trial court entered its Judgment dated June 24, 1996, after the remand. There is apparently a further appeal going on. Frank is appealing the decision to give all the property to the debtor. See, plaintiff's opening brief on summary judgment.

Prior to the entry of the June 6, 1996, judgment, Frank McQueary filed a lis pendens on the real property. I am uncertain whether or not he recorded the judgment after that, but by the terms of the judgment itself and the lis pendens, it is apparent that a judgment lien does attach to the real property.

The debtor argued that the business that Frank and Linda McQueary used to operate was a partnership. The partnership initially was comprised of Linda's mother, (Sammye Taplin, now Seawell), and the two McQuearys. The McQuearys bought Ms. Taplin out but still operated as a partnership, notwithstanding a divorce in 1988, until Frank left the business. Some time in 1994, Mr. McQueary claims that the partnership terminated.

The debtor contends that the business should be treated as a partnership in dissolution, and that Frank's claim should not be a direct judgment lien on Linda's interest in the partnership property. She argues that Frank's only remedy is to obtain a charging lien on Linda's partnership interest pursuant to AS 32.05.230. See, Blake v Gilbert, 702 P2d 631, 641, fn 19 (AK 1985); In re Raiton, 139 BR 931, 935 (9^th Cir BAP 1992) (California partnership law). Her point is that the partnership's creditors prime her individual creditors (including Frank). Parenthetically, the "partnership's" unsecured creditors are nominal. Linda's unsecured creditors (other than Frank's claim), including "partnership" debts, were scheduled at slightly over $500. Other than the proofs of claim filed by Frank and the SBA, the only other proof of claim is an unsecured claim for only $145.10. The claims bar date has passed.

I do not need to address the issue of whether Mr. McQueary should or should not have proceeded by way of a charging lien as opposed to a judgment against the property or whether Judge Gonzales providently granted a direct charge on the Diamond H real property. It is sufficient that Judge Gonzalez did grant a judgment in favor of Frank against Linda 5 ABR 3       McQueary directly (and not the partnership) and tied it to the Diamond H land. Even if this is an incorrect interpretation or application of Alaska law (and I do not say that it is), I am bound by that interpretation by the doctrine of full faith and credit. See, In re Brady, Texas, Municipal Gas Corp., 936 F2d 212, 219 (5^th Cir 1991). Even if the state court trial judge is wrong, I am bound to give full faith and credit to that decision. See, 28 USC § 1738.

1.2. The Pending Appeal Makes No Difference- If the Alaska Supreme Court reverses the trial court's decision that granted the real property only to Linda as a result of the pending appeal, the June 6, 1996, judgment could be modified. What effect should the fact that there is an appeal have on my decision?

Under federal law, a federal judgment is entitled to collateral estoppel or res judicata effect, despite a pending appeal. Eichman v Fotomat Corp., 759 F2d 1434, 1439 (9th Cir 1985). I am bound, however, by the law of Alaska in determining what effect to give to a state court judgement under appeal. In re Nourbakhsh, 67 F3d 798, 801 (9^th Cir 1995); In re Bugna, 33 F3d 1054, 1057 (9^th Cir 1994). Alaska law appears to be similar to the federal law. In Rapoport v Tesoro Alaska Petroleum Co., 794 P2d 949, 952 (AK 1990), the court held:

The irrelevance of a pending appeal is also supported by our other collateral estoppel cases. See Pletnikoff v. Johnson, 765 P.2d 973, 976 (Alaska 1988) ("[o]nce a judgment has been reversed by an appellate court, the finality requirement is no longer satisfied") (emphasis added); Briggs v. State, Dep't of Pub. Safety, 732 P.2d 1078, 1082 (Alaska 1987) ("[f]actors supporting a conclusion that a decision is final for this purpose are `that the parties were fully heard, that the court supported its decision with a reasoned opinion, that the decision was subject to appeal or was in fact reviewed on appeal.'") (emphasis added), quoting Restatement (Second) of Judgments § 13 comment g (1982); Pennington, 471 P.2d at 374 ("[issue preclusion] is founded upon the principle that parties are not to be permitted to litigate the same issue more than once and that when a right or fact has been judicially determined by a court of competent jurisdiction or an opportunity for such trial has been given, the judgment of the court, so long as it remains unreversed, should be conclusive upon the parties....") (emphasis added), quoting State v. Baker, 393 P.2d 893, 896-97 (Alaska 1964).

2.5 ABR 4       THE VALUATION IS TOO STALE TO BE GIVEN RES JUDICATA EFFECT- Frank also asked that I give res judicata effect to the valuation found by Judge Gonzalez. He found that the value of the land as of December 2, 1992, was $470,323. On remand, he found that the present value of the loan obligation to SBA was $192,701, leaving an equity of $277,622. One-half of this amount, $138,811, was the amount awarded to Frank as a judgment representing his monetary share of the real property and other Ranch property awarded to Linda.

There is authority both for and against the proposition that the court should give res judicata effect to a valuation found in state court. See, In re O'Brien, 153 BR 305, 308 (D Ore 1992), and In re Bohrer, 19 BR 958 (Bankr ED Penn 1982) supporting an application of collateral estoppel, and In re Vacuum Cleaner Corp. Of America, 33 BR 701 (Bankr ED Penn 1983) indicating that, based on 11 USC § 506(a), valuations are rarely res judicata. In the present case, it is only necessary to allude to the fact that Judge Gonzalez's valuation is circa the end of 1992, and the bankruptcy was filed over 3½ years later. Even though res judicata might be applicable to a bankruptcy valuation that was close to the time of the state court valuation, too much time has passed to apply it to the present facts. The elements of collateral estoppel in Alaska are discussed in Campion v State, 876 P2d 1096, 1098 (AK 1994):

1. The plea of collateral estoppel must be asserted against a party or one in privity with a party to the first action;

2. The issue to be precluded from relitigation by operation of the doctrine must be identical to that decided in the first action;

3. The issue in the first action must have been resolved by a final judgment on the merits.

The question of the value of the real property at the time this chapter 13 case was filed, September 19, 1996, is not resolved by a determination of value as of December 2, 1992, by the Superior Court. Collateral estoppel does not apply to the value issue.

Nonetheless, the debtor has indicated in her schedules that the value of the real property is $375,000. The debt to the SBA, at present value, is paid down somewhat from June 1996. Thus, there appears to be 5 ABR 5       a substantial equity to cover the amount of Frank McQueary's judgment in any event, even if a homestead exemption is applicable. The exact amount of Frank's secured claim must, however, be established in the bankruptcy case.

3. CONCLUSION- I hold that there is a valid judgment or judicial lien on the property. The value of the secured claim created by this lien must be established in bankruptcy court since the Superior Court's determination is for a date that is too remote to bind this court.

Neither party, it appears, contests the primacy of the SBA lien on the real property. There are virtually no other significant creditors than Frank McQueary and the SBA.

It is unnecessary to discuss the implication of In re Yerrington, 144 BR 96, 98 (9^th Cir BAP 1992), aff'd without opin, 19 F3d 32 (9^th Cir 1994), or Farrey v. Sanderfoot, 111 SCt 1825 (1991) which concern 11 USC § 522(f). Debtor has withdrawn her § 522(f) motion in the main case.

DATED:    June 25, 1997

HERBERT A. ROSS
Bankruptcy Judge