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Heritage Enterprises v. Silverio

filed: January 22, 1993.


Appeal from the United States District Court for the District of Oregon. D.C. No. CV-91-6033-JO. Robert E. Jones, District Judge, Presiding

Before: D.w. Nelson, Trott, and T.g. Nelson, Circuit Judges.


Debtor Heritage Enterprises ("Heritage") appeals the district court's order affirming the bankruptcy court's holding that a particular piece of real property located in Lancaster, California ("the property"), is not property of the Heritage bankruptcy estate. The district court affirmed the judgment of the bankruptcy court holding title to the property belonged to Lancaster Properties of Oregon ("LPO"), an Oregon partnership formed by Heritage and Ricardo C. Silverio ("Silverio"), as principal of Silcor (USA), Inc. ("Silcor"). We have jurisdiction under 28 U.S.C. § 158(d) (1988), and we affirm.


Heritage contends the doctrine of res judicata, in the form of claim preclusion, bars the claims of Silverio and Silcor. The preclusive effect of a prior judgment is a question of law which we review de novo. Guild Wineries and Distilleries v. Whitehall Co., 853 F.2d 755, 758 (9th Cir. 1988). We are required to give the same preclusive effect to the judgments and records of state courts as they would be given by the state in which they were rendered. Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 380 (1985).

Generally, under the doctrine of claim preclusion, "[a] final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action." Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 398 (1981). Claim preclusion applies equally to both plaintiffs and defendants. Drews v. EBI Companies, 795 P.2d 531, 535 (Or. 1990).

Claim preclusion does not require actual litigation of an issue of fact or law, as does issue preclusion. Nor does it require that the determination of the issue be essential to the final or end result reached in the action, claim, or proceeding. However, claim preclusion requires that specified characteristics be present in the former action or proceeding before the determination is conclusive on the parties in the future. The opportunity to litigate is required, whether or not it is used. Finality is also required.

Id. (emphasis supplied).

Under the Oregon law of claim preclusion, Heritage's argument fails for two reasons. First, "claim preclusion does not apply when the procedural system does not permit a plaintiff to claim all possible remedies in one action." Fisher v. Bowman, 776 P.2d 575, 576 (Or. App.), review denied, 784 P.2d 441 (Or. 1989). Due to the automatic stay imposed in the bankruptcy proceedings, 11 U.S.C. § 362, Silcor and Silverio were not allowed to pursue their counterclaims in the state court proceeding. See Heritage Enterprises v. Silverio, 809 P.2d 703, 704 (Or. App. 1991) ("We conclude that the dismissal with prejudice [of the counterclaims] was beyond the court's authority under the circumstances and was reversible error.").

Second, claim preclusion requires the prior action to follow "through to a final judgment." Drews, 795 P.2d at 535. Here, the Oregon Court of Appeals reversed and remanded the state trial court's determination of Silverio and Silcor's counterclaims. Heritage Enterprises, 809 P.2d at 704. "Upon reversal of the judgment in [the prior] case and its remand for a new trial, [the prior case] ceased to have any potential res judicata . . . effect." Community Bank v. Vassil, 570 P.2d 66, 68 (Or. 1977). Therefore, without a final judgment in the prior case, Heritage cannot assert claim preclusion in the instant case.


Heritage makes three arguments alleging the district court erred in upholding the bankruptcy court's Conclusion that the property was owned by LPO and not the debtor, Heritage.

A. Weight of the Evidence

Heritage argues the bankruptcy court's finding of fact that Silverio was a partner in LPO even after July 31, 1987, was clearly erroneous. "Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to Judge of the credibility of the witnesses." Fed. R. Civ. P. 52(a).

If the [factfinder's] account of the evidence is plausible in light of the record viewed in its entirety, the court of appeals may not reverse it even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently. Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous.

Anderson v. City of Bessemer City, 470 U.S. 564, 573-75 (1985).

Despite the deferential standard of review, Heritage nevertheless contends five particular facts demonstrate the bankruptcy court's finding was contrary to the overwhelming weight of evidence. First, Heritage argues the Dissolution Agreement is an unambiguous, integrated document reflecting the whole agreement among the parties. This argument directly contradicts the findings of the bankruptcy court. In support of its finding that the Dissolution Agreement was "not an integrated document," the bankruptcy court noted the months of planning and work by the parties which preceded the signing of the Agreement on July 31, 1987, the subsequent meeting held one month later in which the parties prepared a new set of documents, and the fact that the Agreement was only one of five documents making up the total agreement of the parties. Moreover, the bankruptcy court pointed to numerous inconsistencies in the ...

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