In re Levitt

340 B.R. 103, 2006 Bankr. LEXIS 502, 2006 WL 787086
CourtUnited States Bankruptcy Court, M.D. Florida
DecidedMarch 3, 2006
DocketNo. 6:03 BK 06687
StatusPublished

This text of 340 B.R. 103 (In re Levitt) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, M.D. Florida primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Levitt, 340 B.R. 103, 2006 Bankr. LEXIS 502, 2006 WL 787086 (Fla. 2006).

Opinion

MEMORANDUM OPINION DENYING DEBTOR’S MOTION FOR DISAL-LOWANCE OF CLAIM AND MOTION FOR DETERMINATION THAT THIS IS A NON CORE PROCEEDING AND OVERRULING DEBTOR’S OBJECTION TO CLAIM NO. 36 FILED BY KATIE ZENO-VICH

KAREN S. JENNEMANN, Bankruptcy Judge.

This case came on for hearing on January 24, 2006, to consider the Debtor’s Mo[105]*105tion for Disallowance of Claim No. 361 filed by Katie Zenovich (Doc. No. 154), the Debtor’s Objection to the Purported Secured Status of Ms. Zenovich’s Claim (Doc. No. 157), and the Debtor’s Motion for Determination that this is a Non-Core Proceeding (Doe. No. 158). The debtor, who is an attorney, also filed a Memorandum in Support of his position as well as an Affidavit (Doc. Nos. 155 and 156). Ms. Zenovich objects to the relief requested by the debtor and has filed pleadings (Doc. Nos. 157 and 172) opposing the debtor’s position. After considering the positions of the parties, the debtor’s objection to Ms. Zenovich’s claim is overruled, and the motions are denied.

Donald Levitt, the debtor, filed this Chapter 7 case on June 10, 2003. The primary dispute in the case revolved around the probate action involving his mother’s estate. Eventually, the Chapter 7 trustee, Leigh Meininger, settled the probate litigation. He now holds sufficient monies to pay all pending claims with interest and still pay a portion of the funds to the Chapter 7 debtor.

The debtor, however, has objected to several claims filed by creditors, including Claim Number 36 by Katie Zenovich.2 The debtor raises two objections to the claim. First, the debtor asserts that the damages of $75,000 awarded against him and in favor of Ms. Zenovich by a California state court are unconstitutional and “shock the conscience.” Second, the debt- or asserts that the claim is not secured to the extent of approximately $15,000, which sum is being held by a state court registry in California.

Ms. Zenovich received a personal injury judgment against the debtor in a California state case, Zenovich v. Levitz, Case No. 01 CE CG 02061. No party has supplied any detailed information on the basis of the underlying personal injury claim. A jury, however, certainly returned a verdict for actual and punitive damages in the amount of $75,000. Of this amount, $25,000 was awarded for actual damages and $50,000 was awarded for punitive damages. The California state court then entered a judgment for the damages awarded by the jury together with interest at 10% per annum plus costs of $2,752.37 (Claimant’s Ex. No. 3). The debtor did not appeal the judgment, which is now final.

To secure payment upon the judgment, Ms. Zenovich subsequently filed various pleadings in another lawsuit pending in the California courts in which the debtor, as plaintiff, had filed a wrongful death action arising from his mother’s death against Louis Pardini, the alleged wrongdoer. Mr. Pardini settled this lawsuit by paying $15,000 into the registry of the California state court. In order to reach these funds to pay her judgment, Ms. Zenovich filed a notice of lien and proof of money judgment in the Pardini/Levitt litigation (Claimant’s Ex. Nos. 4 and 5). The California state court then entered an order finding that the debtor’s wife had no interest in the funds and directing that the entire $15,000 settlement payment was to be paid directly to Ms. Zenovich (Claimant’s Ex. No. 8). This order was entered on June 9, 2003.

The next day, June 10, 2003, the debtor filed this Chapter 7 case. As such, the registry of the California state court is still holding the Pardini settlement funds of [106]*106$15,000 (the “Registry Funds”). In her claim for $86,794.37, Ms. Zenovich asserts that she has a security interest in the Registry Funds. The balance of the claim is unsecured.

In bankruptcy, a claim or interest is allowed unless a creditor or party in interest objects. 11 U.S.C. § 502(a). Here, the debtor raises two objections—that the amount of the awarded damages are unconstitutional and that the claimant has no security interest in the Registry Funds. In response, Ms. Zenovich contends that: (1) collateral estoppel precludes an attack on the issue of damages because it was already decided in state court; and (2) that she does have a valid security interest in the Registry Funds.

As to the debtor’s first objection, collateral estoppel is a doctrine that prevents a party to a lawsuit from raising a fact or issue which was already decided against him in another lawsuit. Ferenc v. Dugger, 867 F.2d 1301, 1303 (11th Cir.1989) (citing Ashe v. Swenson, 397 U.S. 436, 90 S.Ct. 1189, 25 L.Ed.2d 469 (1970)). The United States Supreme Court has made clear that the issue to be precluded must be “an issue of ultimate fact” that “has once been determined by a valid and final judgment.” 397 U.S. at 443, 90 S.Ct. at 1194, 25 L.Ed.2d at 475.

Federal courts must apply the state collateral estoppel law if the prior judgment that is to be accorded collateral estoppel effect was entered in state court. Hackler v. Indianapolis & Southeastern Trailways, Inc., 437 F.2d 360 (6th Cir.1971); See also Farred v. Hicks, 915 F.2d 1530, 1533 (11th Cir.1990). In this case, the prior judgment was rendered in California, and thus the law of California’s collateral estoppel doctrine should apply.

In California, the doctrine of collateral estoppel is effective if: “(1) the issue necessarily decided at the previous trial is identical to the one which is sought to be relitigated; (2) the previous trial resulted in a final judgment on the merits; and, (3) the party against whom collateral estoppel is asserted was a party or in privity with a party at the prior trial.” People v. Taylor, 12 Cal.3d 686, 117 Cal.Rptr. 70, 527 P.2d 622 (1974); See also Gikas v. Zolin, 6 Cal.4th 841, 25 Cal.Rptr.2d 500, 863 P.2d 745 (1993).

The facts of this case support Ms. Zenovich’s claim of collateral estoppel. As to the first factor, whether the amount of damages sought to be relitigated here was actually decided in the prior litigation, the California state court awarded the amount of $75,000 in damages against the debtor, consistent with the verdict of the jury. The debtor now contends this damage award “shocks the conscience” and is “unconstitutional.” However, he has failed to demonstrate why these claims were not, or could not have been, raised back in the state court action. As stated above, a total judgment of $75,000 ($25,000 for actual damages and $50,000 for punitive damages) was entered after a full jury trial and jury verdict. The state court judge then entered a Final Judgment (Claimant Ex. No. 3). The debtor had a full and fair opportunity to oppose the award of the damages before the California state court. Moreover, the debtor could have appealed the judgment, yet did not.

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Related

Ashe v. Swenson
397 U.S. 436 (Supreme Court, 1970)
People v. Taylor
527 P.2d 622 (California Supreme Court, 1974)
Gikas v. Zolin
863 P.2d 745 (California Supreme Court, 1993)
In Re Del Grosso
111 B.R. 178 (N.D. Illinois, 1990)
Wood v. Wood
825 F.2d 90 (Fifth Circuit, 1987)

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Bluebook (online)
340 B.R. 103, 2006 Bankr. LEXIS 502, 2006 WL 787086, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-levitt-flmb-2006.