United States District Court, D. Idaho
In re ALLEN L. WISDOM, Debtor,
JEREMY J. GUGINO, Appellee. ALLEN L. WISDOM Appellant,
MEMORANDUM DECISION AND ORDER
C. NYE U.S. DISTRICT COURT JUDGE.
matter comes before the Court on Debtor-Appellant Allen L.
Wisdom's appeal from the United States Bankruptcy Court
for the District of Idaho. The appeal is fully briefed and
ripe for the Court's review. Having fully reviewed the
record herein, the Court finds the parties have adequately
presented the facts and legal arguments in the briefs and
record. Accordingly, in the interest of avoiding further
delay, and because the Court finds that the decisional
process would not be significantly aided by oral argument,
the Court decides this appeal without oral argument. For the
reasons set forth below, the Court hereby AFFIRMS the
April 19, 2011, Wisdom filed for chapter 7 bankruptcy in the
District of Idaho. Case No. 1:11-bk-01135-JDP. Judge Jim D.
Pappas was assigned the case. Id. Among other
things, Wisdom claimed an exemption in his life insurance
policies. On May 24, 2011, Appellee Jeremy J. Gugino, acting
as a chapter 7 trustee, objected to this exemption.
Id., Dkt. 23. On June 29, 2011, Judge Pappas ruled that
the Bankruptcy Court would not permit Wisdom to claim an
exemption in his life insurance policies. Id., Dkt.
5, 2012, Gugino filed his Final Report in Wisdom's
bankruptcy case. Id., Dkt. 144. Shortly
thereafter, Wisdom objected to the Final Report arguing, in
part, that Gugino employed fraud to liquidate the life
insurance policies in violation of his fiduciary duties and
that Gugino improperly used the Court's appointment
authority to fraudulently liquidate exempt assets.
Id., Dkt. 150. On September 11, 2012, Judge Pappas
issued a memorandum decision approving Gugino's Final
Report and rejecting Wisdom's arguments. Id.,
Dkt. 156. Wisdom then appealed to the District of Idaho. Case
No. 1:12-cv-530-BLW. Chief District Court Judge B. Lynn
Winmill affirmed Judge Pappas's decision on April 18,
2013. Id., Dkt. 13. The Ninth Circuit Court of
Appeals would eventually affirm Judge Pappas and Judge
Winmill on May 11, 2016. Id., Dkt. 21.
in December of 2013, Wisdom filed an adversary
proceeding against Gugino, Francis Stern and Anthony
Pantera (attorneys), New York Life Insurance Company, and Doe
Surety. Case No. 1:13-ap-06045-TLM. Wisdom's claims in
the adversary proceeding related to Wisdom's underlying
bankruptcy case. Judge Pappas was originally assigned to the
case. Id. However, Judge Pappas sua sponte recused
himself on February 5, 2014. Id., Dkt. 19. Chief
Bankruptcy Judge Terry L. Myers was then assigned to the
status conference on March 24, 2014, Wisdom made an oral
motion to have Judge Myers recuse himself. Id., Dkt.
24. Judge Myers gave the parties an opportunity to brief the
motion. Id. Wisdom argued that Judge Myers should
recuse himself because Gugino was Judge Myers's term law
clerk seven years prior, and, therefore, Judge Myers had a
conflict of interest. Id., Dkt. 39. Wisdom also
asserted that Gugino never had the authority to take any
official acts as a chapter 7 trustee because he never filed a
bond with the court as required by 11 U.S.C. § 322(a).
Myers denied the recusal motion in a detailed opinion and
concluded that Wisdom's arguments as to Gugino's
authority to act as chapter 7 trustee had no bearing on the
recusal motion. Id., Dkt. 59, 60. Wisdom then filed
a motion for leave to appeal Judge Myers's decision.
Id., Dkt. 62. On December 10, 2014, Judge Winmill
denied that motion, noting that there was nothing in the
record that suggested Judge Myers was required to recuse
himself. Case No. 1:14-cv-279-BLW, Dkt. 8. Wisdom appealed
Judge Winmill's decision to the Ninth Circuit. Case No.
15-35013. On March 26, 2015, the Ninth Circuit summarily
affirmed. Id., Dkt. 14.
the adversary proceeding was ongoing, the bankruptcy case
continued to advance. On June 3, 2014, Wisdom filed a Motion
asking the Court to order Gugino to turnover funds Gugino had
allegedly obtained by fraud, i.e., the life insurance
policies (“the first turnover motion”). Case No.
11-bk-1135, Dkt. 199. On June 23, 2014, before ruling on the
pending motion, Judge Pappas recused himself from any further
proceedings concerning Debtor's first turnover motion for
the same reason he recused himself in the adversary
proceeding. Id., Dkt. 203. When Judge Myers was
assigned to the case, Wisdom filed another motion to have
Judge Myers recuse himself. Id., Dkt. 214. On
September 26, 2014, Judge Myers denied the recusal motion and
the first turnover motion. Id., Dkt. 217. Judge
Myers noted that the recusal motion was identical to the
recusal motion Wisdom filed in the adversary proceeding-which
he had already denied and Wisdom had appealed. He also noted
that the turnover motion echoed the arguments made in
Wisdom's objection to the Trustee's Final
Report-arguments that Judge Pappas had previously rejected
and were then on appeal.
October of 2014, Wisdom appealed Judge Myers's decision
in the bankruptcy case denying the recusal motion and the
turnover motion. Id., Dkt. 220. The appeal went to
the District Court and Judge Edward J. Lodge was assigned the
case. Case No. 1:14-cv-497-EJL. On appeal, Wisdom argued that
Judge Lodge should recuse himself from the case because he
“has a stake in the outcome of th[e] appeal” and
was participating in a “systematic fraud that has
prevailed in the District of Idaho Chapter 7 bankruptcy
system.” Id., Dkt. 4. Judge Lodge declined to
recuse himself and affirmed Judge Myers's decision on the
recusal motion. Id., Dkt. 10. However, he dismissed
the appeal on the first turnover motion, without prejudice,
because “the arguments raised in th[e] appeal
concerning the Turnover Motion [were] the same as those
pending on appeal in the matter before the Ninth
Circuit.” Id. at 9-10.
August of 2015, Gugino moved for summary judgment in the
adversary proceeding. Case No. 1:13-ap-6045, Dkt. 117. Judge
Myers granted this motion in March of 2016. Id.,
Dkt. 160. In May of 2016, Wisdom appealed this decision.
Id., Dkt. 166. The appeal went to the District Court
and was assigned to Judge Lodge. Case No. 1:16-cv-251-EJL.
Wisdom again moved to have Judge Lodge recuse himself. Judge
Lodge denied this motion and affirmed the grant of summary
judgment in March of 2017. Id., Dkt. 12. Wisdom has
appealed this decision to the Ninth Circuit. Id.,
Dkt. 15. This appeal is currently pending.
in May of 2016, the Ninth Circuit issued its decision
affirming Judge Pappas's approval of Gugino's Final
Report in the bankruptcy case. Despite the Ninth
Circuit's affirmance, Wisdom filed another turnover
motion that challenged Gugino's liquidation of the life
insurance policies (“the second turnover
motion”). Case No. 1:11-bk-1135, Dkt. 241. Judge Pappas
reviewed the motion and “conclude[d] that the
allegations of, and the relief requested in, the [second
turnover motion] potentially raised issues of fact and law
closely related to the matters previously brought before the
Court for resolution in connection with Debtor's Motion
for Order to Turn Over Estate Funds to Debtor Obtained by
Fraud and Surcharge Trustee.” Id., Dkt. 245.
As Judge Pappas had recused himself from considering this
first turnover motion, Judge Pappas also recused himself from
considering the second turnover motion. Id.
Wisdom filed a request that the Bankruptcy Court appoint a
new judge to hear the pending motion, the Court assigned
Judge Myers to the case. Id., Dkt. 249. Wisdom again
moved for Judge Myers to recuse himself. Id., Dkt.
251. Judge Myers again denied the recusal motion.
Id., Dkts. 253, 254. Then, on April 17, 2017, Judge
Myers denied the second turnover motion. Id., Dkt.
281. Wisdom appealed this denial and the denial of the
recusal motion. Id. at 285. The appeal went to the
District of Idaho and Judge Winmill was assigned the case.
Case No. 1:17-cv-254-DCN. Judge Winmill then transferred the
appeal to the undersigned on August 2, 2017. Id.,
Dkt. 6. This is the appeal that is currently before the
STANDARD OF REVIEW
courts review bankruptcy court decisions in the same manner
as would the Ninth Circuit. See George v. City of Morro
Bay (In re George), 177 F.3d 885, 887 (9th Cir. 1999).
Thus, the Court reviews the bankruptcy court's
conclusions of law de novo and the bankruptcy court's
factual findings for clear error. Id.
Court reviews a bankruptcy court's denial of a motion to
recuse for an abuse of discretion. Hale v. United States
Trustee (In re Basham), 208 B.R. 926, 930
(B.A.P. 9th Cir. 1997). “A bankruptcy court abuses its
discretion if it applies the law incorrectly or if it rests
its decision on a clearly erroneous finding of a material