In re Sisson; Case No. 06-10676-SSM; January 28th, 2008
The Debtor was an individual involved in the buying and selling of real estate. In the course of this Chapter 11, a Creditor filed two claims in the amount of $1.06 million. The present order was the ruling on a motion for summary judgment on behalf of the creditor who claimed that res judicata barred the debtors objections to her claims.
The claimed amount was the result of an 8 day bench trial in the District of Columbia. That award was appealed and upheld. The appeal for the award of attorneys fees is currently pending.
A proof of claim executed and filed in accordance with FRBP constitutes “prima facie evidence of the validity and amount of the claim.” FRBP 3002(f). As a result the objecting party has the initial burden of presenting sufficient probative evidence to overcome such prima facie effect. In re C-4 Media Cable South, L.P., 150 B.R. 374, 377(Bank. E.D.Va. 1992). Once the debtor has done so, the burden of proof then shifts to the creditor to establish the validity and amount of its claim unless the debtor would have the burden outside of bankruptcy.
The court noted that the validity of a claim based on a state court judgment may be attacked in bankruptcy court on the ground of lack of jurisdiction or that the judgment was procured by fraud; however, if the contention that the judgment had been obtained by fraud had already been previously litigated in state court, it could not be relitigated in the bankruptcy case.
In the prior case in DC, the debtor filed a 60(b) motion for relief from a judgment or order and a Rule 59(e) motion, supported by deposition testimony, to alter or amend the order denying Rule 60(b) relief. The court pointed out that mere refusal to grant an evidentiary hearing does not mean that the issue has not been litigated.
The court noted that a claim based on a judgment may be attacked on any ground that would be available outside bankruptcy, including ground s that could be asserted in an independent action to set aside the judgment. However, the court did not agree that an independent action may be brought to address the same grounds that were already raised on rejected in a Rule 60(b) motion.
Rule 60(b) enables a court to grant relief from a judgment, by determining the need for truth and justice outweighs the need for finality. Rule 60(b)(3) permits the court, on motion made within one year of the entry of judgment, to relieve a party from a final judgment arising from fraud, misrepresentation, or other misconduct of an adverse party.
As to the applicability of res judicata, surely it would not apply where an independent action raised different grounds than those asserted in a prior Rule 60(b) motion. Nor would an independent action be barred is Rule 60(b) relief were denied solely on other non-substantive grounds not relating to the merit of the challenge. However, it is quite another thing to allow an independent action when the grounds for challenging he judgment has already been considered on a Rule 60(b) motion.
The creditor’s claim for summary judgment was sustained.
