IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA

O R D E R

DECISION ON APPEAL

Kenneth and Joseph Preblich appeal the denial in bankruptcy court of their motions to set aside judgments and to reopen adversary proceedings.⁽¹⁾ The bankruptcy trustee, Kenneth W. Battley, submits an appellee's brief in opposition to appellant's request.⁽²⁾

FACTS

This case presents an appeal of a denial in bankruptcy court of motions to reopen an adversary proceeding and to set aside 5 ABR 368      a final judgment, filed by Kenneth J. Preblich and Joseph Preblich on April 2, 1997. The motions sought to set aside final judgments entered almost eight years ago.

Background facts are as follows. The bankruptcy debtor, Evalyn Preblich ("debtor"), filed her bankruptcy petition on October 14, 1987. The case was converted from Chapter 11 to Chapter 7 on November 8, 1988, and Kenneth W. Battley was appointed as trustee. On September 29, 1989, the trustee commenced an adversary action (No. 3-87-00863-002) to recover several parcels of real property the debtor had transferred to her son (Kenneth Preblich) and her husband (Joseph Preblich) within one year of her bankruptcy petition. The trustee sued Kenneth and Joseph Preblich, pursuant to 11 U.S.C. § 548 (a), as transferees of fraudulent conveyances. Kenneth and Joseph Preblich were properly served and a courtesy copy of the complaint was served upon the debtor's attorney.

Joseph Preblich answered the complaint by sending a letter to the Trustee's counsel, which the Trustee filed with the court. On October 30, 1989, the Trustee moved for summary judgment against Joseph Preblich. On November 22, 1989, the Trustee moved for summary judgment against Kenneth Preblich. Both Kenneth and Joseph Preblich were served the motions; neither opposed summary judgment. The court granted the Trustee's motion as to Joseph Preblich on December 1, 1989. The debtor filed a motion for reconsideration concerning the final judgment against Joseph Preblich, which was denied on December 15, 1989. Final judgment against Joseph Preblich was first entered on December 21, 1989, and then amended on 5 ABR 369      January 30, 1990. Final judgment against Kenneth Preblich was entered on December 28, 1989.

On September 6, 1991, the bankruptcy court entered an order authorizing the sale of the property that was recovered for the estate. However, on July 29, 1991, the court had already entered an oral order authorizing the sale of property recovered from Kenneth Preblich. The debtor filed a notice of appeal from the oral order on August 8, 1991. This district court held a hearing on the issue of mootness and dismissed the appeal on June 30, 1992, because the debtor failed to obtain a stay of the sale of the property pending the appeal. The debtor appealed the dismissal to the Ninth Circuit Court of Appeals, which, on August 24, 1993, affirmed the dismissal.

On June 30, 1992, almost two and one-half years after the bankruptcy court entered final judgments against Kenneth and Joseph Preblich, the debtor filed a motion to reopen adversary action No. 3-87-00863-002, claiming that she was never insolvent at the time of the conveyances to her husband and son. The trustee opposed the motion on the grounds that the debtor had no standing. Following a hearing on the matter, the bankruptcy court denied the motion to reopen by order entered August 5, 1992. The debtor filed a notice of appeal on August 13, 1992. The matter was referred to the Bankruptcy Appellate Panel (BAP) for the Ninth Circuit. The BAP affirmed the bankruptcy court's decision on August 3, 1993. The debtor appealed to the Ninth Circuit. On February 1, 1995, the Ninth Circuit affirmed the BAP's decision. The debtor filed a petition for 5 ABR 370      a writ of certiorari to the Supreme Court of the United States. The Supreme Court denied the petition.

Shortly after the trustee's opposition to the debtor's motion to reopen, Joseph Preblich filed a motion to reopen on July 31, 1992. Joseph Preblich asked for relief from judgment under Rule 60(b) on the grounds of mistake and lack of proof of insolvency at the time of transfers. The bankruptcy court denied this motion on August 17, 1992, stating that should the estate prove solvent, the affected properties would not be sold and no harm would be suffered. On September 5, 1992, Joseph Preblich filed a notice of appeal. The appeal was assigned to a BAP, which, on December 10, 1992, dismissed the appeal as untimely filed. A motion for reconsideration of the BAP's dismissal of the appealed was also denied.

On July 1, 1993, Kenneth J. Preblich filed a motion to reopen the adversary proceeding, also on the ground that the debtor was not insolvent at the time of the transfers. The bankruptcy court denied this motion on July 6, 1993. Kenneth Preblich appealed the denial, and the BAP, on September 2, 1992, dismissed the appeal as untimely filed. A motion for reconsideration was made and denied.

Over four years after Kenneth Preblich's motion to vacate judgment, on April 2, 1997, Kenneth Preblich and Joseph Preblich jointly filed motions to vacate judgments and to reopen the case. The appellants argued below that the judgments are void because the trustee failed to present proof of insolvency and because a fraud was committed upon the court when securing the judgments. The trustee filed an opposition, arguing: (1) the motions are barred by the 5 ABR 371      doctrines of res judicata and collateral estoppel; (2) the motions are untimely and void of facts to support relief under Rule 60 (b); and (3) policy favors preserving the finality of judgments. On May 8, 1997, Bankruptcy Judge Herbert Ross denied the motions for the reasons stated in the opposition of the plaintiff-trustee. The notice of appeal was filed on May 15, 1997, and referred to the BAP. The trustee timely objected, under 28 U.S.C. § 158 (b), and the matter was referred to this court.

On appeal, the appellants argue that the bankruptcy court should be reversed below because: (1) collateral estoppel should not control since it was not discussed below; and (2) there is no time limit to a Rule 60 (b) motion to set aside a void judgment or where a judgment was secured where fraud was committed on the court. Appellants then devote the remainder of their brief to the merits of their claims. The appellee (trustee) asserts that the bankruptcy court's order should be upheld for the same reasons that it was granted and because there is no showing of an abuse of discretion on the part of the bankruptcy court when rejecting appellants' motions below. The appellee further asserts that this appeal and the underlying motions are in violation of Rule 11 as there is no basis in law or fact for the same.

ISSUE PRESENTED

Did the United States Bankruptcy Court err when it denied appellants' motions to set aside judgments and to reopen adversary proceedings?

STANDARD OF REVIEW

A motion to reopen a proceeding is a Rule 59 motion for a new trial, which may be filed by any party in interest within ten days after entry of judgment. Fed. R. Civ. P. 59(b); Fed. R. Bankr. P. 9023. An untimely motion under Rule 59 may be construed as a Federal Rule of Civil Procedure 60 (b) motion for relief from judgment. Fiester v. Turner, 783 F.2d 1474, 1476 (9th Cir. 1986). Disposition of Rule 60 (b) motions is reviewed for abuse of discretion.
Id.

Rule 60(b), Federal Rules of Civil Procedure

Rule 60(b) states:

On motion and upon such terms as are just, the court may relieve a party . . . from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether heretofore denominated intrinsic or extrinsic) , misrepresentation, or other misconduct of an adverse party . . . or (6) any other reason justifying release from the operation of the judgment. The motion shall be made in a reasonable time, and for reasons (1), (2), and (3) not more than one year after the judgment, order, or proceeding was entered or taken. . . .This rule does not limit the power of a court . . . to set aside a judgment for fraud upon the court.

If Rule 60 (b) (6) were at issue, controlling case law allows for exercise of the authority to provide relief from judgment only in the most extraordinary circumstances. Ackerman v. United States, 340 U.S. 193, 202 (1950). The court concluded that no extraordinary circumstances were presented.

The only extraordinary aspects of appellants' overtures to the court were the appellants' persistence in the face of adverse rulings and the long delay before presenting their latest motions to the bankruptcy court. That court did not abuse its discretion in finding no justification for release from operation of the judgment. Moreover, the four-year delay in bringing the instant motions was patently unreasonable.

Finally, the court concluded that no facts supported appellants' claim that a fraud was committed upon the court. Absent evidence of fraud or extraordinary circumstances, the court concluded that the policy favoring finality of judgments should be followed. There was indeed no substantial evidence of any fraud upon the bankruptcy court.

The bankruptcy court's decision is affirmed on the foregoing grounds.

Collateral Estoppel and Res Judicata

The bankruptcy court also denied, on res judicata and collateral estoppel grounds, the appellants' motions to vacate judgment and to reopen proceedings. Facts are accepted as found below, 5 ABR 374      absent clear error. The application of law to the facts is reviewed de novo. In re Daniels-Head & Associates, 819 F.2d 914, 918 (9th Cir. 1987).

The appellants argue on appeal that collateral estoppel was never addressed below. The appellants are incorrect. In adopting the trustee's reasons as its reasons for rejecting the motions, the bankruptcy court found:

[T]he Final Judgments were entered in 1989, over seven years ago. Motions for reconsideration have already been considered and denied. Motions to reopen adversary -002 have already been considered and denied. Appeals from the same were already taken and dismissed. . . . .

The appellants next argue that these doctrines should not apply because the courts that have heard the various motions never reached the merits of appellants' claim that the debtor was not insolvent at the time of the transfers. However, the doctrine of res judicata (claim preference) refers to the preclusive effect of a judgment in foreclosing claims that were or should have been raised in the earlier proceeding. Migra v. Warren City School Dist., 465 U.S. 75, 77 n.l (1984). The doctrine of collateral estoppel (or issue preclusion) refers to the preclusive effect of a judgment in foreclosing litigation of issues that have been actually litigated and necessarily decided. Id. Res judicata bars further litigation between the parties or their privies. This doctrine applies here. Collateral estoppel bars re-litigation of issues that were actually adjudicated and that were essential to the 5 ABR 375      prior judgment. Collateral estoppel applies to the bankruptcy court's finding that the debtor was insolvent at the time of the transfers. Both appellants had the opportunity to oppose the trustee's summary judgment motion on this issue. They did not. Collateral estoppel and res judicata bar them from litigating it now.

CONCLUSION

The decision of the bankruptcy court is affirmed. The appellants' motions before the bankruptcy court were totally without merit, and this appeal was frivolous.

DATED at Anchorage, Alaska, this 14^th day of January, 1998.

H. Russel Holland, Judge
District of Alaska

1. 5 ABR 367      Clerk's Docket No. 6.

2. 5 ABR 367      Clerk's Docket No. 7.