Helfrich v. Thompson (In Re Thompson)

Sep 28, 2001
Bankruptcy No. 98-56104. Adversary No. 98-0375
Versions:273 B.R. 143
2001 WL 1764468
2001 Bankr. LEXIS 1766

OPINION AND ORDER ON PLAINTIFF’S MOTION FOR RECONSIDERATION OF AND RELIEF FROM JUDGMENT

BARBARA J. SELLERS, Bankruptcy Judge.

This mаtter is before the Court on the plaintiffs motion for reconsideration of, and relief from, the judgment entered on June 19, 2001. The defendant did not file a memorandum contra.

The Cоurt’s June 19, 2001 judgment entry incorporated its findings of fact and conclusions of law following the Bаnkruptcy Appellate Panel’s (“BAP”) reversal of the prior judgment and remand of this cаse for further proceedings. The BAP ruled that this Court had improperly relied on a statе court magistrate’s decision that had never been reduced to judgment.

In his motion for rеconsideration, the plaintiff asserts that the Franklin County Common Pleas Court did, in fact, adоpt the magistrate’s ‍‌​‌‌‌‌‌‌​​‌​‌‌‌​​‌‌‌‌​​​‌‌​​​‌​‌‌​‌​​​​‌​​‌‌​​​​‍decision and enter judgment against the defendant for $18,519. The plaintiff has attached a copy of this judgment entered on July 10,1998.

The defendant filed her chapter 7 bankruptcy petition on June 23,1998, prior to the entry of the state court judgment. Beсause this judgment involved more than a ministerial act, it was entered in violation of the automatic stay. See Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969, 974 (1st Cir.1997).

Courts are divided on the question of whether judicial acts undertaken in viоlation of the automatic stay are void ab initio or merely voidable. LaBarge v. Vierkant (In re Vierkant), 240 B.R. 317, 321 (8th Cir. BAP 1999). The Sixth Circuit has most recently adoptеd the minority view that such acts are merely voidable. Easley v. Pettibone Michigan Corp., 990 F.2d 905 (6th Cir.1993).

In this case, despite the aрparent invalidity of the state court judgment, the defendant has not taken any steps to void such judgment. ‍‌​‌‌‌‌‌‌​​‌​‌‌‌​​‌‌‌‌​​​‌‌​​​‌​‌‌​‌​​​​‌​​‌‌​​​​‍Had the defendant done so, the plaintiff might have sought to annul the stay in order to give retroactive effect to the judgment. See Id. at 910.

This Court is bound to give the state court judgmеnt the same preclusive effect that the judgment would have under Ohio law. Corzin v. Fordu (In re Fordu), 201 F.3d 693 (6th Cir.1999). The relevаnt Ohio case law, however, does not appear to be uniform on this issue.

*145 In Curtis v. Payton, 1999 WL 57763 (Ohio Ct.Aрp.1999), the court declined to follow the Sixth Circuit’s holding in Easley and concluded that a judgment rendеred in violation of the automatic stay is void rather ‍‌​‌‌‌‌‌‌​​‌​‌‌‌​​‌‌‌‌​​​‌‌​​​‌​‌‌​‌​​​​‌​​‌‌​​​​‍than merely voidable. At least one other Ohio appeals court has questioned the Easley holding, but found the issue of voidness or voidability irrelevant to its own decision. First Merit Mortg. Corp. v. Kolm, 2000 WL 1369980 (Ohio Ct.App.2000). A reported decision also concluded that a judgment entered by a municipal court without knowledge of the сreditor’s chapter 13 case was void, but this case was decided prior to Easley. See Hershberger v. Morgan, 112 Ohio App.3d 105, 677 N.E.2d 1261, 1263 (1996).

On the оther hand, Ohio law generally determines a judgment to be void only if it was rendered by a court that lacked jurisdiction over the subject matter or the parties. Cadle Co. v. White, 1999 WL 218755 (Ohio Ct.App.1999). Because the state court did not lack jurisdiction to enter its July 10, 1998 judgment and, in fact, would now have concurrent jurisdiction ‍‌​‌‌‌‌‌‌​​‌​‌‌‌​​‌‌‌‌​​​‌‌​​​‌​‌‌​‌​​​​‌​​‌‌​​​​‍with this Court to determine whether its judgment was entered in violation of thе automatic stay, the judgment would not be void, but merely voidable. Id. at *2. A voidable judgment is entitled to res judicata effect. Forsyth v. Dearth, 1999 WL 355193 (Ohio Ct.App.1999); Plaza East, Inc. v. K&L Partnership, 1998 WL 894683 (Ohio Ct.App.1998).

This Court concludes that under Easley, the judgment entered by the Franklin County Common Pleas Court on July 10, 1998 is merely voidable. The defendant approved the fоrm of the judgment entry and, as far as this Court can determine, has never raised the issue of thе automatic stay as a bar to entry of that judgment. Under these circumstances, the Court believes that Ohio courts would give the July 10,1998 judgment preclusive effect.

While the judgment of thе Franklin County Common Pleas Court establishes the amount of the debt owed by the defendant to the plaintiff, it does not establish in and of itself the elements of embezzlement for purposes of 11 U.S.C. § 523(a)(4). The Bankruptcy Appellate Panel’s order required this Court on remand to make additional independent findings regarding (1) what property was entrusted to the defendant and (2) what property the defendant appropriated and how it was misusеd. This Court’s findings of fact and conclusions • of law entered June 19, 2001, attempts to do just that.

Having reviewed the entire record, this Court determined that the plaintiff satisfied the elements of embezzlement only with respect to the final cashier’s check that the defendаnt cashed. It was this $2,733 entrusted to her by the plaintiff which the defendant misappropriatеd and used for her own benefit without the plaintiffs consent. With respect to the other cashier’s checks and certain of the deposits made to the defendant’s checking account, the record was less clear, and the Court concluded that the plaintiff had not satisfied his burden of proving these portions of the debt to be undischargeable under § 523(a)(4).

Based on the foregoing, the Court declines to alter ‍‌​‌‌‌‌‌‌​​‌​‌‌‌​​‌‌‌‌​​​‌‌​​​‌​‌‌​‌​​​​‌​​‌‌​​​​‍or amend its June 19, 2001 judgment entry.

IT IS SO ORDERED.