Opinion ID: 202863
Heading Depth: 2
Heading Rank: 2

Heading: Later Procedural Background

Text: In a non-evidentiary hearing on the creditors' opposition to the homestead exemption, the bankruptcy court probed the trust claim, asking whether they had already ha[d] the opportunity in the state court litigation to argue that the debtor held funds in a fiduciary capacity, suggesting that claim preclusion might bar such an argument here. Without clearly explaining the role that preclusion principles played in its decision, the bankruptcy court ruled against the creditors from the bench: With respect to the request for exemptions, however, I think that the debtor has the better argument here. I'm familiar with the cases that you have cited in support of your contention, but I think the Homestead Exemption under Chapter 188 tends to be, but for its stated exceptions, inviolate; and I think the status of title which I must take as is, as of the date of the filing of the petition, indicates that these spouses indeed have legal title, nothing having been done to disturb that legal title. There has been no contention that the Declaration of Homestead was itself defective in any way, and accordingly, I'm going to deny the objection to the exemption. . . . The creditors appealed the bankruptcy court's decision to the district court, arguing in relevant part that the bankruptcy court committed reversible error by: (1) holding a non-evidentiary hearing rather than an evidentiary hearing; (2) failing to set forth particularized findings of fact and rulings of law, as required by Federal Rule of Civil Procedure 52(a); [6] and (3) failing to find a constructive trust on the property, and, consequently, in denying the creditors' opposition to the exemption. [7] The district court rejected the creditors' arguments, ruling that, where the underlying facts are not in dispute, it is not error for a judge to conduct a non-evidentiary hearing. It also held that the creditors were barred from raising this issue on appeal because they failed to request an evidentiary hearing before the bankruptcy court. While it agreed that Rule 52 applied to the bankruptcy proceeding and that the bankruptcy court should have provided particularized findings of fact and rulings of law, the district court ultimately determined that the court's failure to provide such findings in this case is not reversible error because the undisputed facts of the case demonstrated that the bankruptcy court's ruling should be affirmed. Finally, in ruling on the creditors' constructive trust argument, the district court determined that their claim was barred by principles of claim preclusion [s]ince appellants pursued a breach of contract theory, and not a constructive trust theory in the state court. Nevertheless, the district court went on to conclude  without an evidentiary hearing  that the creditors could not establish the necessary prerequisites for a constructive trust under Massachusetts law: either that Chew had engaged in sufficient wrongdoing . . . in acquiring the property or that a fiduciary relationship existed between Chew and the creditors. [8] On appeal to this court, the creditors raise three issues. First, they argue that claim preclusion does not bar their constructive trust claim because the Supreme Court's decision in Brown v. Felsen, 442 U.S. 127, 99 S.Ct. 2205, 60 L.Ed.2d 767 (1979), precludes the application of claim preclusion in federal bankruptcy proceedings. [9] Second, they contend that the bankruptcy court and the district court committed clear error in rejecting their constructive trust claim because they ignored relevant law and did not afford the creditors an opportunity to present evidence. Finally, they argue that the bankruptcy court and the district court committed reversible error by not setting forth sufficient findings of fact and rulings of law under Rule 52(a).