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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
| LINDA M. SMITH, Debtor, | ) | ) | USDC APPEAL NO. A95-226 CV(JKS) | Appellant, | ) | BCKY COURT NO. A94-0501-DMD | ) | ) | INITIAL REPORT AND RECOMMENDATION | v. | ) | RE: APPEAL (DOCKET NO. 40) | ) | LARRY D. COMPTON, Trustee | ) | ) | Appellee. | ) | ______________________________ | ) |
Linda Smith has filed an appeal of an interlocutory order by U.S. Bankruptcy Judge Donald MacDonald in a consolidated bankruptcy case approving the Trustee's settlement of an Alaska state court lawsuit by the bankruptcy estate's largest creditor and denying Smith's voluntary dismissal of the consolidated cases. Opposing briefs have been filed by creditor, Bernard N. McCoy, and Trustee/Appellee, Larry D. Compton. This Court has reviewed the briefs, the orders appealed from and transcripts of proceedings before the Bankruptcy Court lodged herein. Based upon the foregoing, this Court now submits its Report and Recommendation.
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FACTUAL AND PROCEDURAL BACKGROUND
1. On August 3, 1994, Linda Smith filed a Chapter 7 Bankruptcy Petition in the Bankruptcy Court for the Federal District of Alaska.
2. The petition was filed five days before the scheduled date of trial in the Alaska State Superior Court for the 1st Judicial District in Sitka, Alaska of a lawsuit brought by Nettie Smith and Bernard McCoy, Trustee of the Irven Leroy Smith Intervivos Trust against Linda Smith, Smith Management Corporation, and Sitka Projects, Ltd. 1SI-91-202 CI. The day before the trial was to begin, Ms. Smith filed another bankruptcy petition under Chapter 11 on behalf of the Smith Management Corporation. Both cases were subsequently consolidated by the Bankruptcy Judge.
3. The Sitka suit involved a claim for restitution of
approximately $3,500,000, plus punitive damages against Linda Smith
for breach of her fiduciary duties as a former Trustee of the Irven
Leroy Smith Intervivos Trust and fraudulent conversion of the Trust
assets to her own use. At the time of the suit, Linda Smith was the
sole trustee of
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her father Irven Leroy Smith's Intervivos Trust.
Nettie Smith was Irven Smith's former wife and
Linda's stepmother. Bernard McCoy is Nettie Smith's son and Irven
Smith's stepson. He is a trust beneficiary.
4. The Trust was established on March 1, 1984, in Reno, Nevada by Irven Smith, a successful independent Alaskan business owner and real estate investor following his retirement and move to Reno, Nevada. In the early 1980s, lrven Smith was afflicted with Huntington's Chorea, an incurable, progressive, degenerative, hereditary disease of the brain characterized by physical and mental deterioration that ultimately leads to the loss of physical functioning and dementia. The principal purpose of the trust was to provide income for the benefit of Irven and Nettie Smith during their lives. Following their deaths, the trust estate was to be divided among the trust beneficiaries, including Linda Smith and Bernard.
5. Smith conveyed the bulk of his property to the trust,
including real property in Sitka, Alaska, an interest in a contract
of sale for a business and a lease, a promissory note from Linda
for $175,000, an undivided 60% interest in Sitka Partnership, Ltd.,
an option contract, a
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contract for real property, an auto sales installment agreement and
shares of stock. The First Interstate Bank of Nevada was named
trustee. Record, vol. I, Exhibit B, Decision On Summary Judgment,
p. 3.
6. On May 24, 1984, the Trust Agreement was modified to include Linda Smith as a co-trustee with the bank, in which capacity, she was to employ her knowledge and experience as a realtor in Anchorage to assist in the management and sale of the Trust's real estate investments. The bank resigned as trustee in 1986.
7. In March of 1984, Linda Smith created Sitka Projects, Ltd, a limited partnership. There were two general partners: Linda Smith and Smith Management Corporation, which was wholly owned by Linda Smith. Between them, the two general partners had a 40% interest in Sitka Projects, Ltd. The remaining 60% interest belonged to the Irven L. Smith Trust, a limited partner.
8. Sitka Projects, Ltd. purchased two lots from the trust
for $40,000. One of the lots was returned to the trust. The
second lot was sold to the Post Office for $1,010,000.00. At the
hearing before Judge MacDonald on McCoy's and Smith's motions,
Linda Smith failed to produce
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an accurate accounting of the proceeds of the sale, although she
admitted that Sitka Projects realized a gain of $773,000.00 and she
took a $100,000.00 commission.
9. In September of 1986, Linda Smith purchased all of the trust's real property, including the trust's partnership interest in Sitka Projects, Ltd. She executed a note for $741,000.00 to the trust and assumed $165,000.00 of indebtedness, securing her obligations by the real estate she had purchased. Thereafter, she encumbered the trust's property to the Rainier Bank for $950,000.00 and subordinated the Trust's security interest to the bank's.
10. In the winter of 1989, Irven was hospitalized in a Utah nursing home, where he remained until his death in September of 1990.
11. In March of 1989, Linda Smith sent a fax message to Irven Smith's attorney, Jeff Woodbury, in which she stated that her father was incompetent.
12. Linda Smith defaulted on the Rainier Bank loan in the fall of 1989. She gave the bank a deed in lieu of foreclosure on the remaining Sitka properties and obtained free and clear title to an Anchorage Warehouse in her own name.
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13. On January 1, 1990, Linda Smith created a "global
agreement" relieving her of her $950,000.00 liability to the trust.
She signed the agreement in four separate capacities:
individually, as attorney-in-fact for the trust, as trustee, and as
managing general partner for the partnership.
14. Irven Smith died at the Utah rest home in September of 1990, having never been permitted to return to his home in Nevada, or to have visits from his wife, Nettie.
15. Nettie was also ill. She apparently received little in the way of support from Linda and had to depend upon her Social Security payments to stay alive.
16. Concerned about the health and living conditions of Irven and Nettie, Shirley and Bernard McCoy investigated the Trust assets and found that Linda owned most of the property belonging to the trust. They subsequently filed a probate action in the Superior Court in Sitka Alaska to protect Trust assets and to provide for Nettie. In the Matter of Nettie Smith, Case No. ISI-90-7 PR. Linda Smith appeared and contested the allegations, without revealing the "global agreement" to the court.
17. Sitka Superior Court Judge Duane Craske, after
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finding that lrven and Nettie should have been receiving a
substantial income and that neither of their
needs were being met, held: (1) Linda Smith was in a conflict of
interest position as a major debtor of the Trust; (2) Linda Smith
breached her fiduciary duty to the trust; (3) The assets of the
Trust need to be examined due to the needs of Irven and Nettie
Smith; (4) Linda Smith, as Trustee had failed to provide an
accounting to Nettie Smith as requested; and, (5) a full accounting
of the acts of Linda Smith with regard to Irven and Nettie Smith
should be ordered. In the Matter of Nettie Smith, Case No. ISI-90-7
PR. Record, vol. 11, Exhibit #62, Findings of Fact and
Conclusions of Law, March 5, 1990.
18. Linda Smith failed to provide a true accounting as ordered. On August 9, 1990, she was removed as Trustee and Bernard McCoy was appointed in her place. Record, vol. 11, Exhibit #l, Order.
19. In 1991, Bernard McCoy filed a separate civil action in the Superior Court of Alaska in Sitka against Linda Smith claiming breach of fiduciary duties and fraudulent conversion of Trust Assets. ISI 91-202 Cl.
20. In response to the Sitka suit, Linda Smith sued
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the Trust and McCoy both individually and as trustee in the Nevada
State court. As relief, she sought McCoy's removal as Trustee and the
recovery of over a million dollars that she claimed was owing to her both
on the following grounds: (1) quantum meruit; (2) an implied contract
for her services on behalf of the Trust; and, (3) for loans to
the Trust.
21. The case was tried before Nevada District Judge Deborah A. Agosti. The Court determined Smith had no legitimate claims either against the trust or against McCoy individually. The Court further found that Linda Smith "provided no benefit to the trust . . . [and] acted in conflict with the interests of the trust and its legitimate purpose, and placed her own interests ahead of all else . . .". Record, vol. 1, #11, Exhibit A, Tr. p. 4. The Judge rendered a decision in favor of the Defendants on all claims and entered judgment on July 14, 1993, awarding Defendants $19,175.00 in attorneys fees with interest at 12% per annum. See Record, vol 11, Exhibit 26.
22. By the time Linda Smith filed her Petition in Bankruptcy,
the Sitka Court already had granted partial summary judgment in
favor of Plaintiffs on the following claims: the duty and breach
elements of the breach of
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fiduciary duty claim; (2) one of three
conversion claims; and, (3) Linda Smith's counterclaims. With regard to the fiduciary duty
claim, the Sitka Court held that Judge Agosti's findings
collaterally estopped Linda Smith from denying that she breached
her fiduciary duty as a trustee. Summary Judgment on the remaining
conversion claims and on remedies and punitive damages was denied
and these issues were reserved for trial. Record, vol. 1, #11,
Exhibit B.
23. Judge McDonald conducted 4 days of hearings on the
proposed settlement of the remaining issues in the Sitka case, on
the issue of the Debtor's voluntary dismissal of the bankruptcy
petition, and on various other motions not at issue here. Ms.
Smith was represented at the hearing by attorneys Helen Simpson and
Roger Smith. The Court heard extensive testimony from McCoy,
Compton, and Linda Smith. Eight witnesses testified for Ms. Smith.
The Bankruptcy Trustee, Larry Compton, was questioned at length
about his settlement evaluation. Record, vol. 7, Tr. 1-104 to
1-173. During his testimony, he introduced over 60 exhibits
relating to the history of the previous litigation of the case.
Record, vol. 7, Tr. 4-3 (admission of exhibits). He was questioned
about the reliability of Linda Smith's
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testimony:
Q: If it was necessary to go to trial, do you feel comfortable relying on the testimony of Linda Smith to defend against McCoy's claim?
A: No.
Q: And why not?
A: After spending 15 hours in creditors' meeting (sic) of which I have done hundreds of, I have found her not to be forthright. I have evidence that she's perjured herself in those creditors' meetings and [it is] very difficult to establish any credibility in her testimony.
Q: You're aware of some technical defenses. Are you aware of any equities that would mitigate in her favor?
A: No.
Q: And I say her favor. I really mean in the favor of the estate.
A: In the favor of the estate?
Q: In defending against McCoy's claims. Judge
Zervos found, in his decision on summary judgment,
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that the roughly million dollars from the 1985 post
office sale did not benefit the trust.
Do you have any evidence that would refute the
finding that the million dollars did not -
A: Do I have any evidence that it benefitted the trust?
Q: I guess that's the right way of saying it, yes. We're talking about -
A: No, I don't.
Record, vol. 7, tr. 1-136, 1-137, 138.
The Bankruptcy Trustee was questioned repeatedly about the basis of his settlement evaluation:
Q: From what you've seen, do you have any reason to believe that the decision that Judge Zervos entered is not correct as a matter of fact?
A: No.
Record, vol. 7, Trl 1-137.
Q: And in your review of the file and of the evidence, do you believe that settlement is supported by the record?
A: Well, yeah, Linda was obligated to the trust for
those two notes. Through her own actions,
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she-and
the trust had first positions of security
on the property and through her own actions, she
subordinated those notes to the bank and Linda
obtained the benefit of the whole transaction and
the -- the trust actually went backwards by
$900,000.
Record, vol. 7, Tr. 1-141.
Q: Are you in a position to make any sort of estimate as to what you believe the chances of success on the merits might be:
A: On the merits of the disputed claim?
Q: Yeah, if you were to defend against the McCoy trust, what are your chances of defeating their claim, zeroing them out?
I would say [we] would have no success
Record, vol. 7, Tr. 1-143.
Q: Are you aware that Linda Smith has an argument that the time for appeal has not run based on her claim that the Clerk didn't send her a copy of the judgment?
A: I'm aware of that claim.
Q: And did you factor that possible defense into
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your decision to recommend a settlement of this case?
A: No. I read the document and took it at its face.
Q: So do you give any weight to the fact that it might possibly be something that you as Trustee could take up and appeal and set aside and perhaps defeat the claims of the trust?
A. As Trustee, I believe that is--would be the responsibility of the estate and for the estate to take on that appeal would be--would lead nowhere, it'd be very expensive. I don't believe that we would have the merits to succeed and that there'd be no benefit to the estate to make that appeal.
Record, vol. 7, Tr. 1-130.
24. In its determination of fairness, reasonableness and
accuracy of the proposed settlement, the Bankruptcy Court
considered the following criteria adopted by the 9th Circuit:
(a) the probability of success in the litigation; (b) the
difficulties, if any, to be encountered in the matter of
collection; (c) the complexity of the litigation involved, and
the expense, inconvenience and delay
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necessarily attending
it; and, (d) the paramount interest of the creditors and a
proper deference to their reasonable views in the premises.
In re A&C Properties, 784 F.2d 1377, 1381 (9th Cir. 1986),
cert. denied, 479 U.S. 854 (1986); In re Woodson, 839 F.2d
610, 620 (9th Cir. 1988).
25. Judge MacDonald rated the overall probability of the bankruptcy estate's success at trial in the Sitka Case on liability issues as less than 5% for the following reasons: (1) every time Smith presented her side of these issues to a court she has lost in what appeared to the court to be obviously correct "black and white" decisions; (2) after listening to Linda Smith's version of her administration of the Trust, it appeared to the Court that she had no credibility; (3) no one corroborated her testimony; (4) she did not produced any documentary evidence that could absolve her of wrongdoing; and, (4) she had no defense to the Trust's liability claims against her. See Record, vol. 4, #237, Memorandum Regarding Pending Motions, pp. 11, 12.
26. The Court next considered the potential for damages to be awarded against the estate:
I conclude that the trust claims have a
settlement
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value of $3,820,000. This includes:
(1) $606,000 for damages from the Post office transaction;
(2) $916,000 for damages from
the global agreement; (3) interest of $1,000,000;
and (4) punitive damages of $1,500,000. I have
multiplied these amounts by a liability factor of
.95 to determine a settlement value for the trust
claims. The settlement value I have given the
trust claims exceeds the trustee's proposed
settlement by nearly $1.5 million, without any
allowance for costs and attorney's fees allowable
under Alaska Civil Rule 82. The proposed
settlement is reasonable in amount. I also
conclude that the probability of success for the
consolidated bankruptcy estates in defending the
trust claims in the pending state court litigation
is very low.
Id. at p. 16.
27. Judge MacDonald did not consider the difficulty of collection since this consideration does not apply to cases in which the estate is not the plaintiff. Id. at p. 16.
28. After a review of the state court proceeding in
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Sitka, the court concluded that
the issues in the case were complex and that their resolution
would involve considerable inconvenience and delay. In
support of this conclusion, Judge MacDonald noted the
following: that Ms. Smith had delayed the Sitka proceedings
several times; that substantial attorney's fees had accrued
and would continue to increase if the case continued; that the
trustee would be forced to depend on the testimony of Linda
Smith; that several hundred thousand dollars in attorney's
fees and costs could be spent in the defense of the case; and,
that the probability of success for the consolidated
bankruptcy estates in defending the case would be very low.
Id. at pp. 16, 17.
29. Finally, Judge MacDonald noted that Bernard McCoy was the largest single creditor actively pursuing redress from the debtor, and that it was obvious that he preferred the settlement to continued litigation in hope of salvaging some benefit to the beneficiaries of the trust. Id. at p. 17.
30. The Court carefully considered the same factors in
evaluating the proposed settlement of the Nettie Smith estate
claim arising out of Linda Smith's neglect and
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reached similar conclusions. Id. at pp. 17, 18.
31. Based upon its review of the In re A & C Properties factors, having concluded that the motion for the settlement of the trust claims for the sum of $2,272,065 and the proposed settlement of the Nettie Smith estate claims against the estate for $150,000 were reasonable and justified, the Court granted the motions for approval of settlement. Id. at pp. 17, 18.
32. Larry Compton moved for additional findings of fact (Record, vol. 4, #245), and opposed Linda Smith's Amended Exemptions (Record, vol. 4, #253). Linda Smith moved for reconsideration of the decision. Record, vol. 4, #247. A hearing on these motions was held by Judge MacDonald on May 12, 1995. Linda Smith, who had previously been unable to account specifically for the disposition of funds from the sale (see Record, vol. 9, tr. pp. 3-160 to 3-165) and had stoutly denied any interest in any overseas property in the March hearing (see Record, vol. 9, tr. p. 3-165), supplemented her earlier testimony.
On March 24, 1995, Linda Smith was questioned about a
$500,000 insurance policy mentioned in records she had
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submitted:
Q: Okay. And then on page 108, there's some kind of a reference to a life insurance policy with a value of $500,000? What's that?
A: That is not a -- anything. It doesn't exist. It would've been nice to have -- for instance, I placed the $500,000 in '85 into a CD just to earn some interest but I knew it was a debt structure that all the money was going to be used up [. . . .]
Q: So was there a policy or not?
A: There was a -- an insurance -- a medical insurance policy required -- Q: And it no longer exits? (sp)
A: no, it's not.
Record, vol. 7, pp. 1-209.
In her testimony at the May 12, 1995 hearing, when confronted with documentary evidence she had previously failed to produce, Smith admitted the following facts for the first time:
(1) on September 15, 1985, she paid the $500,000 to
Ticino Life Insurance Company to buy a single premium Swiss
franc endowment policy. Supplemental Record,
vol 1, Tr. vol.
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III, p. 3-10. (2) The policy earned 4-1/2%
compounded annually, payable in 10 years. Supplemental Record,
vol. 1, Tr. vol. III, pp. 3-15, 3-16. (3) Smith borrowed
almost the entire amount as a policy loan the same year,
reducing the value of the policy to approximately 29,000 Swiss
Francs. Supplemental Record, vol. I, Tr. vol. Ill, pp. 3-24 to
3-26. (4) On December 20, 1988 Smith, signing as a general
partner of Sitka Projects Limited, instructed Ticino Life to
change the ownership of the policy from Sitka Projects Limited
to Mrs. Linda Smith, 1455 Hillcrest Drive, Anchorage, Alaska
99503 and changed the beneficiary to her sister, L. Diana
Smith. Supplemental Record, vol. I, Tr. vol. Ill, p. 3-27.
(5) She made interest payments on the loan through her
insurance agent in Zurich, employing a bank account she had in
Zurich, which account was still in existence and still had a
cash value at the time Smith filed for bankruptcy.
Supplemental Record, vol. I, Tr. vol. Ill, pp. 3-30 to 3-34.
(6) Smith purchased stock in Mocaplan, Inc., a Panamanian
corporation which owned a $700,000 condominium in Monte Carlo.
Supplemental Record, vol. I, Tr. vol.Ill, pp. 3-37 to 3-38.
33. Linda Smith's statements at the May 12, 1996
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hearing directly contradicted previous testimony in which she claimed
she had no overseas investments, property, stock interests or
bank accounts. See Record, vol. 7, Tr. pp. 1209; vol. 9, Tr.
pp. 3-165.
34. Following the May 12, 1996 hearing, Judge MacDonald issued an order denying the motion for reconsideration and making additional findings of fact as requested by the Trustee. Included among the findings were the following statements of fact pertaining to Ms. Smith's credibility:
35. The Court gave the debtor until May 22, 1995 within which to file a response to the trustee's objections to her claims of exempt property. Record, vol 5, #264, p. 2. Her response was filed on the 23rd of May, 1995. Record Vol. 5, #266. On May 24, 1995, Ms. Smith filed a notice of appeal to the Ninth Circuit Bankruptcy Appellate Panel.
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STANDARD OF REVIEW
In reviewing Judge MacDonald's determination regarding
the compromise and settlement proposed by the Bankruptcy
Trustee, this Court considers findings of fact under the
"clearly erroneous" standard and conclusions of law de novo.
Bankr. R. 8013, In re A&C Properties, 784 F.2d 1377, 1380,
citing In re Global Western, 759 F.2d at 726. In reviewing a
bankruptcy court's determination concerning a compromise and
settlement proposed by a trustee in bankruptcy, a federal
district court considers findings of fact under the clearly
erroneous standard of review and reviews conclusions of law de
novo, but reviews the order approving the compromise and
settlement only for abuse of discretion. Fed.Rules
Bankr.Proc.Rule 8013, 11 U.S.C.A. In re A&C Properties, 784
F.2d 1377, 1380 (9th Cir.), [citing In re Transcontinental
Energy Corp., 764 F.2d 1296, 1298-99 (9th Cir. 1985); Matter
of Walsh Construction, Inc., 669 F.2d 1325, 1328 (9th Cir.
1982); In re Blair, 538 F.2d 849, 851 (9th Cir. 1976)], cert.
denied, 479 U.S. 854 (1986). The same standard of review
applies to a bankruptcy court's denial of a debtor's voluntary
motion to dismiss a Chapter 7
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proceeding. In re Leach, 130
B.R. 855 (9th Cir. BAP 1991).
A bankruptcy trustee, with the approval of the court may compromise or settle "any controversy arising in the administration of the estate upon such terms as he may deem for the best interest of the estate." In re A&C Properties, 784 F.2d at 1380, citing in re Transcontinental, 764 F.2d 1296 (9th Cir. 1985); In re Media Central, Inc., 190 B.R. 316, 320 (E.D. Tenn. 1994) ("The trustee is empowered to compromise causes of action belonging to the bankruptcy estate."); See also 11 U.S.C. Bankruptcy Rule 9019.
Compromises are favored in bankruptcy, and a decision to approve or disapprove a compromise rests in the court's sound discretion. In re Sassalos, 160 B.R. 646, (D. Or. 1993).
The bankruptcy court is given great, albeit not
unlimited, latitude in its approval of compromise agreements.
It may approve a compromise only if it is "fair and
equitable." In re A&C Properties, supra, at 1380-1381.
However, in its consideration of a proposed compromise, the
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court must consider:
A & C Properties, 784 F.2d at 1381 (citation omitted).
With the exception of (b) above, which was inapplicable
because the estate was the defendant, Judge MacDonald gave
ample consideration to each of these factors in light of the
evidence before him. His findings are supported by the
Record. The estate would have to rely upon the credibility of
Linda Smith in order to defend against the claims of the
beneficiaries in the upcoming litigation. Judge MacDonald had
the opportunity to see and hear Linda Smith testify. Her
credibility was destroyed by the evasions, omissions and lies
in her testimony. Her witnesses failed to support her claims.
Ms. Smith was unable to produce documentary
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evidence that would absolve her of
wrongdoing. The Bankruptcy Trustee shared the Court's opinion
that Ms. Smith's credibility was essentially worthless and
testified that the probability of success in defending the
claims of the beneficiaries against the estate approached
zero. Judge MacDonald reviewed the results of Ms. Smith's
previous court appearances in Nevada and Sitka, noting that
every time she presented her version of the facts she lost.
From his review, these previous decisions were "black and
white" and appeared to be obviously correct. Judge Mac Donald
determined that Linda Smith had no defense against the
liability claims against her and rated the overall probability
of success at trial on the liability issues as less than 5%.
Judge MacDonald next considered the complexity of the issues and the probable cost of litigation. Based upon the track record of the litigation to date, the Court found that the issues were complex, and the litigation was unlikely to be resolved without considerable delay and unnecessary expense, considering the improbability of a successful defense.
The Court considered the interest of the creditors, in
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particular, that of Bernard McCoy as the largest single
creditor of the estate, noting that it was obvious that he
preferred settlement to wasting whatever monies were available
from the estate on what appeared to be fruitless litigation
based on frivolous defenses.
The Court explained in detail its methodology for arriving at the potential for damages that could be awarded against the estate and concluded that the trust claims have a settlement value approximately 1.5 million dollars more than the proposed settlement amount without any allowance for attorneys fees and costs under Rule 82.
It is apparent from the text of the Court's Memorandum Decision (Record, vol. 4, #237) that Judge MacDonald gave painstaking, meticulous consideration to all of the necessary factors with regard to both the lrven Smith and the Nettie Smith estate settlements, including all of Linda Smith's arguments in opposition to the settlements, which he found to be unsupported by facts or law and without merit. Record, vol. 4, #237, p. 18-21.
Having met the evaluation criteria set out in re A&C
Properties, the Court ruled these settlements are fair and
equitable. The record amply supports Judge MacDonald's
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approval of the proposed settlement.
Judge MacDonald also denied Linda Smith's motion to dismiss the consolidated bankruptcy proceedings. Dismissal of a bankruptcy proceeding may only occur after a hearing on notice and only for cause. 11 U.S.C. § 707(a); Bankruptcy Rule 1017 (a). The Court found no cause for dismissal and no legitimate reasons to impose a stay - indeed, he found that dismissal would result in more delay and prejudice to the primary creditors of the estate. Record, vol. 4, #237, pp. 21, 22. Judge MacDonald did not abuse his discretion in denying Smith's voluntary motion to dismiss. See In Re Leach, 130 B.R. 855 (9th Cir. BAP 1991).
RECOMMENDATION
Based upon the foregoing, IT IS HEREBY RECOMMENDED that Judge MacDonald's decision be AFFIRMED.