Child v. Foxboro Ranch Estates, LLC (In re Child)

486 B.R. 168
CourtUnited States Bankruptcy Appellate Panel for the Ninth Circuit
DecidedFebruary 1, 2013
DocketBAP No. AZ-11-1496-HIDJu; Bankruptcy No. 09-15935-GBN; Adversary No. 09-01732-GBN
StatusPublished
Cited by13 cases

This text of 486 B.R. 168 (Child v. Foxboro Ranch Estates, LLC (In re Child)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Appellate Panel for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Child v. Foxboro Ranch Estates, LLC (In re Child), 486 B.R. 168 (bap9 2013).

Opinion

OPINION

HOULE, Bankruptcy Judge.

Adam W. Child (“Child”) has appealed a bankruptcy court summary judgment finding a debt nondischargeable in favor of Foxboro Ranch Estates, LLC (“Foxboro”). Child contends that the bankruptcy court erred by giving preclusive effect to an Arizona judgment in favor of Foxboro, arguing that the minimal nature and extent of his participation in the superior court action was not sufficient under Arizona law to allow application of issue preclusion. We agree and REVERSE the summary judgment and REMAND for further proceedings in accordance with this Opinion.

[170]*170I. FACTS

During early summer 2006, Foxboro entered into several agreements with High Country Investors, LLC (“High Country”), an entity owned and controlled by Child, pursuant to which Foxboro agreed to sell two lots in a real property development to High Country. Foxboro subsequently sued Child and his wife in Superior Court of Arizona, Coconino County (“Superior Court”), asserting, inter alia, claims for fraud in connection with the real property purchase agreements (“Superior Court Action”). The procedural time line of the litigation was as follows:

• On August 10, 2007, Foxboro filed its civil complaint;

• On December 24, 2008, Foxboro filed a motion to amend the complaint to add Child’s father as a defendant;

• On February 13, 2009, Foxboro filed its amended complaint, which added Child’s father as a defendant. At no time did Child file an answer to the original or amended complaint;

• On February 23, 2009, Foxboro filed its motion for summary judgment against Child;

• On March 31, 2009, Foxboro filed a request for summary disposition of the motion for summary judgment; and

• On June 8, 2009, the Superior Court granted the motion for summary judgment and entered judgment, including detailed and specific findings of fact, against Child for breach of contract, fraud and racketeering (“Arizona Judgment”). The Arizona Judgment awarded damages against Child in the amount of approximately $3,000,000.

Child’s participation in the Superior Court Action was limited. Prior to entry of the Arizona Judgment, Child made only four appearances before the Superior Court, each for a case management conference, over a period of approximately fourteen months. First, at a March 17, 2008 case management conference, Child appeared through counsel, who represented to the court that the parties had agreed to a mediator and projected the mediation to take place in April. On October 27, 2008, at the second case management conference attended by Child, this time (and at all subsequent times) on his own behalf, Child indicated that he had retained bankruptcy counsel, but would still try to coordinate with Foxboro’s counsel regarding mediation. At a third court conference on March 16, 2009, Child acknowledged receipt of Foxboro’s motion for summary judgment, indicated that he did “need to respond to quite a few of the allegations still,” and inquired further as to what the time line was on the motion for summary judgment. At the same conference, he also stated that he “just completed the process last week of arranging enough money for Larry Hirsch to proceed with [his] bankruptcy,” and that he expected “the filing of that to take place sometime next week.” The Superior Court then continued the conference for sixty days in light of a possible bankruptcy filing. Finally, Child appeared at a fourth case management conference on May 18, 2009, but without any apparent meaningful involvement.2

In addition to his four appearances at case management conferences, in response to Foxboro’s motion to amend, Child sent a six-page letter to the Superior Court dated January 10, 2009, in which he disputed Foxboro’s claims in the Superior Court Action and generally attempted to rechar-[171]*171acterize the nature of the transactions between the parties in his favor, but in which he also restated his intention to file bankruptcy.

These aforementioned activities were the full extent of Child’s participation in the Superior Court Action. On the other hand, it is uncontested that during the Superior Court Action, Child did not (i) file an answer or responsive pleading to either the original complaint or the amended complaint, (ii) file an opposition to the motion to amend the complaint (other than the January 10, 2009 letter to the Superior Court, to the extent that it could be deemed an opposition), (iii) conduct or otherwise participate in discovery, (iv) oppose Foxboro’s motion for summary judgment, or (v) appeal the Arizona judgment. Importantly, as noted above, Child also repeatedly referenced his intent to file bankruptcy during several of the case management conferences and in his January 10, 2009 letter.

On July 9, 2009, Child filed a chapter 7 voluntary petition in the United States Bankruptcy Court for the District of Arizona. Child’s Schedule F listed Foxboro’s litigation claim in the amount of $1,000,000.

On December 23, 2009, Foxboro filed a timely adversary complaint in the bankruptcy court pursuant to 11 U.S.C. § 523(a)(2)(A), (a)(4), and (a)(6) to except the Arizona Judgment from discharge, which Debtor answered on September 10, 2010.3 On October 22, 2010, Foxboro filed a motion for summary judgment, arguing that the Arizona Judgment should be given preclusive effect. After briefing by the parties, at the initial hearing on January 7, 2011, the bankruptcy court acknowledged the difficulty in giving issue preclusive effect to the Arizona Judgment based on the level of Child’s participation in the Superi- or Court Action. The bankruptcy court ultimately continued the hearing to allow Foxboro additional time to supplement the record regarding the full extent of Child’s participation in the Superior Court Action. On February 28, 2011, Foxboro filed a supplement to the record, which included a transcript from the March 16, 2009 state court case management conference.

On May 24, 2011 the bankruptcy court held a continued hearing on the motion for summary judgment. During the hearing the bankruptcy court determined that the Arizona Judgment would be given preclu-sive effect, based in part on Child’s repeated statements that he would file bankruptcy, and the court stated in relevant part that “the Debtor had an opportunity to litigate which he chose not to take.” On August 29, 2011, the bankruptcy court entered a judgment excepting the Arizona Judgment from discharge pursuant to § 523(a)(2)(A), (a)(4), and (a)(6).

On September 9, 2011, Child filed a timely notice of appeal to this Panel.

II.JURISDICTION

The bankruptcy court had jurisdiction pursuant to 28 U.S.C. §§ 1334 and 157(b)(2)(I). We have jurisdiction under 28 U.S.C. § 158.

III.ISSUE

In granting summary judgment, did the bankruptcy court err in finding that the Arizona Judgment satisfied the elements of issue preclusion under Arizona law.

IV.STANDARDS OF REVIEW

A grant of a motion for summary judgment is reviewed de novo. Younie v.

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Bluebook (online)
486 B.R. 168, Counsel Stack Legal Research, https://law.counselstack.com/opinion/child-v-foxboro-ranch-estates-llc-in-re-child-bap9-2013.