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In re Wisdom

United States District Court, D. Idaho

March 21, 2017

In re ALLEN L. WISDOM, Debtor.
v.
JEREMY J. GUGINO and LIBERTY MUTUAL INSURANCE COMPANY, et al., Appellees. ALLEN L. WISDOM, Appellant, Bk. No. 1:11-01135-JDP Adv. No. 13-06045-TLM

          MEMORANDUM DECISION AND ORDER

          Edward J. Lodge United States District Judge

         INTRODUCTION

         Pending before the Court in the above-entitled matter is Appellant's appeal of Chief Bankruptcy Judge Terry L. Myers' decision denying his Motions to Recuse and Application for Default Judgment and granting the Appellees' Motion for Summary Judgment. The matter is ripe for the Court's review. Having fully reviewed the record, the Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the court conclusively finds that the decisional process would not be significantly aided by oral argument, this matter is decided on the record before this Court without oral argument.

         FACTUAL BACKGROUND

         1. The Underlying Bankruptcy Case

         On April 19, 2011, Debtor-Appellant Allen L. Wisdom filed a Chapter 7 bankruptcy petition. (BK Case No. 11-01135-JDP.) Included in the list of claimed exemptions were certain life insurance policies. The Appellee, the United States Trustee appointed to this case, Jeremy Gugino (the “Trustee”), objected to the claimed exemptions in the life insurance policies.[1] United States Bankruptcy Court Judge Jim D. Pappas sustained the Trustee's objection and ordered that the claimed exemptions in the life insurance policies be disallowed. The Trustee then liquidated the policies and filed the Trustee's Final Report (“TFR”) in the Chapter 7 bankruptcy proceeding. Mr. Wisdom objected to the Final Report arguing the Trustee fraudulently and unlawfully liquidated the life insurance policies, breached his fiduciary duties, and engaged in misrepresentations and criminal misconduct. Judge Pappas overruled those objections and approved the TFR. (Dkt. 156, BK Case No. 11-01135-JDP.) Mr. Wisdom appealed that decision to the United States District Court and the Ninth Circuit, both of whom affirmed the lower courts' rulings and, in doing so, found Mr. Wisdom's claims lacked merit. (Dkt. 13, DC Case No. 1:12-cv-00530-BLW); (9th Cir. Case No. 13-35409.)[2]

         2. The Adversary Proceeding

         On December 3, 2013, Mr. Wisdom filed an adversary proceeding in the Bankruptcy Court against the Trustee, his bankruptcy attorneys, and New York Life Insurance Company (“N.Y. Life”). (Adv. Case No. 13-06045-TLM.) Mr. Wisdom raised claims of breach of contract, breach of fiduciary duty, negligence, tortious interference with contract, constructive fraud, legal malpractice, intentional and negligent infliction of emotional distress, slander per se, and civil conspiracy. The claims allege the Trustee improperly liquidated the insurance policies in the underlying bankruptcy proceeding and that the Trustee committed fraud and violated the fiduciary duty he owed to Mr. Wisdom. The adversary case was ultimately assigned to Chief Bankruptcy Judge Terry L. Myers.

         In April of 2014, Mr. Wisdom filed a Motion to Recuse Judge Myers arguing the Trustee assigned to the underlying bankruptcy matter had been Judge Myers' law clerk several years prior. Judge Myers denied the Motion to Recuse. (Dkt. 59, Adv. Case No. 13-06045-TLM.) Mr. Wisdom then filed a Motion for Leave to File an Interlocutory Appeal of Judge Myers' decision which Judge Winmill denied. (Dkt. 8, DC Case No. 1:14-00279-BLW.) The Ninth Circuit affirmed. (Dkt. 14, 9th Cir. Case No. 15-35013.)

         3. The Turnover Motion and Motions to Recuse in the Bankruptcy Case

         In June of 2014, Mr. Wisdom filed a Motion for Order to Turnover Estate Funds (“Turnover Motion”) in the underlying bankruptcy case which again challenged the Trustee's liquidation of the life insurance policies. (Dkt. 199, BK Case No. 11-01135-JDP.) Since Judge Pappas had recused himself, the Turnover Motion was assigned to Judge Myers. Mr. Wisdom then filed a second Motion to Recuse Judge Myers based upon the same arguments as his first motion. (Dkt. 214, BK Case No. 11-01135-JDP.) On September 26, 2014, Judge Myers issued a decision denying both the second Motion to Recuse and the Turnover Motion. (Dkt. 217, BK Case No. 11-01135-JDP.) Mr. Wisdom appealed that ruling to this Court which affirmed the Bankruptcy Court's decision. (D.C. Case No. 14-00497-EJL.)

         Mr. Wisdom filed another Motion to Recuse Judge Myers in the bankruptcy case on August 17, 2016. (Dkt. 251, BK Case No. 11-01135-JDP.) The Bankruptcy Court again denied the motion. (Dkt. 253, BK Case No. 11-01135-JDP.)

         4. The Motion for Summary Judgement in the Adversary Case

         After amending his complaint in the adversary case, Mr. Wisdom filed an Application for Default Judgment. (Dkt. 89, Adv. Case No. 13-06045-TLM.) Judge Myers orally denied the Application for Default Judgment on January 26, 2015. (Dkt. 105, Adv. Case No. 13-06045-TLM.) Thereafter, on March 15, 2016, Judge Myers granted the Trustee's Motion for Summary Judgement as to all of the claims in the First Amended Complaint. (Dkt. 160, Adv. Case No. 13-06045-TLM.)

         5. This Appeal

         In this appeal, Mr. Wisdom challenges the Bankruptcy Court's rulings 1) denying his Motions to Recuse, 2) denying his Application for Default Judgment, and 3) granting the Appellees' Motion for Summary Judgment. (Dkt. 1.)

         STANDARD OF REVIEW

         In general, this Court applies the “clearly erroneous” standard of review to the Bankruptcy Court's factual findings and its legal conclusions are subject to de novo review. See Fed. R. Bankr. P. 8013. The Court does not consider an issue raised for the first time on appeal. United States v. Robinson, 20 F.3d 1030 (9th Cir. 1994).

         The Bankruptcy Court's rulings on the Motions to Recuse and Application for Default Judgement are reviewed for abuse of discretion. In re Goodwin, 194 B.R. 214, 220 (9th Cir. 1996); In re Beltran, 182 B.R. 820, 823 (9th Cir. BAP 1995). “A bankruptcy court abuses its discretion if it applies law incorrectly or if it rests its decision on a clearly erroneous finding of material fact.” In re Brothby, 303 B.R. 177, 184 (9th Cir. BAP 2003) (citation omitted). The ruling on the Motion for Summary Judgment is reviewed de novo. Carpenter v. Universal Star Shipping, S.A., 924 F.2d 1539, 1542 (9th Cir. 1991).

         ANALYSIS

         1. Preliminary Issue: Recusal of This Court

         Mr. Wisdom has again raised a preliminary issue in his opening brief arguing this Court should recuse itself in this matter because it has a conflict based on its “stake in the outcome of the appeal, ” the Trustee being a former co-employee of the Court, and the facts surrounding the Trustee's appointment. (Dkt. 9 at 3-7.) Appellees assert this argument is not properly before the Court as it was not raised in the ...


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