Court Opinion

ID: 65572
Source: CourtListenerOpinion
Date Created: 2010-04-26 06:00:44+00
Date Added: 2024-06-11T17:20:39.455993
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                    Fifth Circuit

                                                 FILED
                                                                            April 14, 2009

                                     Nos. 08-30341 &                   Charles R. Fulbruge III
                                        08-30343                               Clerk

In the Matter of:

CANOCO INC; MERFIN INC; MINORA CORPORATION INC

                                                   Debtors

AVRAM CIMERRING

                                                   Appellant
v.

ORIX CAPITAL MARKETS, LLC, as special servicer for Wells Fargo Bank
NA, Trustee, also known as Wells Fargo Bank NA, as trustee for certificate
holders under that certain pooling service agreement dated and effective
11/1/99, related to the mortgage pass-through certificates series 1999-C1

                                                   Appellee

                    Appeal from the United States District Court
                       for the Western District of Louisiana
                              USDC No. 5:07-CV-670

Before JONES, Chief Judge, JOLLY, Circuit Judge, and MONTALVO, District
Judge.*

      *
          United States District Judge, Western District of Texas, sitting by designation.
                               Nos. 08-30341 & 08-30343

EDITH H. JONES, Chief Judge:**
         To date Avram Cimerring has not made a payment on the approximately
$6.6 million, plus interest, he owes on a 2003 Virginia deficiency judgment
arising from his guarantee of a defaulted mortgage. The mortgage is held in a
securitized pool of mortgages for which Wells Fargo is the trustee and ORIX is
the special servicer. Part of ORIX’s duties in that role is to collect on defaulted
loans.        To this end, ORIX attempted to collect on this judgment by suing
Cimerring, his wife, Cindy, and three entities wholly owned by Cindy Cimerring
in Louisiana court. The three entities, Canoco, Inc., Minora Corporation, Inc.,
and Merfin, Inc. (Debtors), filed Chapter 11 consolidated bankruptcy cases in the
Western District of Louisiana in July 2006, and the state court litigation was
stayed.
         ORIX filed a proof of claim on behalf of the Trust in the bankruptcy
proceedings. Avram Cimerring objected and moved for summary judgment. The
Trust filed a cross motion for summary judgment. Cimerring argued that the
judgment against him is not res judicata and asserted various reasons why the
judgment should be disregarded or reduced.                Treating these motions as a
contested matter, the bankruptcy court allowed the Trust’s claim, granted its
motion for summary judgment, and denied Cimerring’s motion for summary
judgment in three identical orders numbered 229, 230, and 231. The court ruled
the judgment against Cimerring is res judicata and, alternatively, that his
arguments regarding why he is not liable on the judgment are wrong on the
merits. Cimerring appeals these three orders in the appeal numbered 08-30341.

         **
         Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.

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                           Nos. 08-30341 & 08-30343

      The Debtors and the first mortgagee also filed objections. In an additional
order numbered 226, the bankruptcy court granted in part and denied in part
these objections, subordinating the Trust’s claim to both secured and unsecured
creditors and estimating the claim’s value for voting purposes during plan
confirmation. Cimerring also appeals this order in the appeal numbered 08-
30343.
      On appeal, the district court affirmed both of these orders on the grounds
stated orally by the bankruptcy court. In appeal No. 08-30341, Cimerring raises,
in essence, four issues. We need address only two issues, however, because we
do not reach the other two merits-related contentions. First, he argues that the
bankruptcy court did not have the authority to grant summary judgment outside
of an adversary proceeding. We review the bankruptcy court’s application of the
bankruptcy rules for harmless error. In re Tex. Extrusion Corp., 844 F.2d 1142,
1153-54 (5th Cir. 1988).
      The bankruptcy court did not err. Cimerring’s objection to the Trust’s
proof of claim, although it did not initiate an adversary proceeding, created a
contested matter under Bankruptcy Rule 9014. See Notes to Bankr. R. 3007.
Bankruptcy courts can render summary judgment in contested matters. Bankr.
R. 9014(c) (incorporating Bankr. R. 7056).
      Second, Cimerring asserts that the Virginia judgment is not res judicata
against him. If it is not res judicata against him, the judgment would not be
preclusive against the debtors. We apply the same standards of review the
district court applied to the bankruptcy court’s ruling by reviewing factual
findings for clear error and questions of law de novo. In re OCA, Inc., 551 F.3d
359, 366 (5th Cir. 2008). Federal courts apply the preclusion law of the state
that rendered judgment.     Marrese v. Am. Acad. of Orthopaedic Surgeons,
470 U.S. 373, 380, 105 S. Ct. 1327, 1332 (1985); Conn. Bank of Commerce v.
Republic of Congo, 309 F.3d 240, 248 (5th Cir. 2002); see 28 U.S.C. § 1738.

                                       3
                          Nos. 08-30341 & 08-30343

Accordingly, Virginia preclusion law applies to the deficiency judgment against
Cimerring rendered in a Virginia state court. Under Virginia law, a judgment
is res judicata if “the prior adjudication was between the same parties or their
privies and a valid final judgment was entered which resolved the claim on its
merits.” Waterfront Marine Constr., Inc. v. N. End 49ers Sandbridge Bulkhead
Groups A, B, and C, 468 S.E.2d 894, 902 (Va. 1996).
      On June 26, 2002, a Virginia court found Cimerring personally liable on
the defaulted mortgage. On February 18, 2003, the court entered a deficiency
judgment, which Cimerring did not appeal. This was a final judgment on the
merits, and under Virginia law, a judgment, when entered and no appeal is
taken, is conclusive even if erroneous. Patterson v. Saunders, 74 S.E.2d 204, 207
(Va. 1953); Slagle v. Slagle, 398 S.E.2d 346, 349 (Va. Ct. App. 1990).
      Under certain circumstances, final judgments may be set aside.         See
Charles v. Precision Tune, Inc., 414 S.E.2d 831 (Va. 1992). In September 2005,
Cimerring filed a separate suit in Virginia seeking to set aside the deficiency
judgment, and on May 3, 2006, the trial court denied relief. Cimerring’s appeal
to the Virginia Supreme Court was granted and a decision was still pending
when the bankruptcy court ruled in February 2007. Cimerring claims this
granted appeal renders the original judgment not final. He is wrong, because
a judgment is entitled to preclusive effect until it is set aside. Mayes v. Mann,
180 S.E. 425, 430 (Va. 1935) cited in 8B Michie’s Jurisprudence, Former
Adjudication or Res Judicata § 10, (2007). In any event, on September 14, 2007,
the Virginia Supreme Court denied Cimerring relief in an unpublished order.
      The original deficiency judgment is therefore unquestionably res judicata
against Cimerring. Consequently, we affirm the district court’s affirmance of the
bankrupcty court’s orders numbered 229, 230, and 231 appealed in this court’s
No. 08-30341. Because res judicata protects even erroneous judgments, we
decline to address yet another attempt to set aside this deficiency judgment, and

                                       4
                          Nos. 08-30341 & 08-30343

accordingly, we do not address Cimerring’s substantive arguments regarding the
judgment’s alleged infirmity.
      In the appeal numbered 08-30343, Cimerring appeals the order numbered
226, in which the bankruptcy court ruled on objections to claims filed by the
Debtors and the first mortgagee and ORIX’s opposition to those objections.
Cimerring does not have standing to assert the rights of these unrelated parties.
See Bonds v. Tandy, 457 F.3d 409, 416 n.11 (5th Cir. 2006). Consequently, the
appeal numbered 08-30343 is dismissed for lack of jurisdiction.
      For the foregoing reasons, the appeal numbered 08-30341 is AFFIRMED
and the appeal numbered 08-30343 is DISMISSED.

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