MarMc Transportation, Inc.

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF WYOMING
In re
MARMC TRANSPORTATION, INC.,
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)
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Case No. 	10-20653
Chapter 11
Debtor.
OPINION ON OBJECTION TO PROOF OF CLAIM
FILED BY DAVE SUNDEM AND MARCILLE SUNDEM
This matter came before the court for a telephonic hearing on March 15, 2012 on
the Objection to Proof of Claim filed by MarMc Transportation, Inc. ("MarMc") and the
Response filed by Dave Sundem and Marcille Sundem ("Sundems"). At the conclusion
of the hearing the court requested that the parties file briefs. A subsequent hearing was
held on May 24, 2012. At that time, the court took the matter under advisement. Upon a
review of the record, the court determined that it would rule on the pleadings as
dispositive motions after allowing both parties to present supplemental information. 1
Jurisdiction
The court has jurisdiction under 28 U.S.C. §§ 1334 and 157(b)(2)(B) and Fed. R.
Bankr. P. 3007.2
1 Although not related, Debtor's supplemental pleadings contain its arguments supporting this claim
objection and the Debtor's Objection to the claim filed by Summit Electric, LLC.
2 Unless otherwise indicated, all future statutory references are to the Bankruptcy Code, Title 11 of the
United States Code.
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Facts
The following are uncontested facts:
Mr. Sundem worked for MarMc as an independent truck driver through the
business: Dave Sundem and Marcille Sundem, husband and wife, d/b/a Dave Sundem
Trucking, Inc. After attempting to collect for unpaid services, Sundems initiated a civil
action in the District Court for the State of Wyoming. MarMc failed to respond and the
court entered a default judgment on February 8, 2010 in the amount of$154,736.07 with
accruing interest of 10% per annum. On February 26, 2010, Sundems recorded the
judgment in the real estate record ofNatrona County, Wyoming.
Sundems began execution of the Default Judgment by obtaining a Writ of
Garnishments ("Writ") in order to seize MarMc's bank accounts. At that time, MarMc
contacted Sundems requesting release of the Writ. On March 22, 2010, MarMc executed
a Promissory Note with Guaranties ("Note") agreeing to pay the judgment in the amount
of$154,736.07 with 10% interest beginning on February 9, 2010 along with other
conditions. 	Cindy Richardson, vice president ofMarMc, executed the Note on behalf of
MarMc. Ms. Richardson also personally executed a Guaranty of Payment ofNote. Upon
a motion by Sundems, the District Court for the State of Wyoming released the Writ.
MarMc filed its Chapter 11 bankruptcy petition on June 3, 2010. Sundems filed a
proof of claim on August 17, 2010 asserting a secured claim in the amount of
$159,611.32 [consisting of the judgment amount plus interest from February 8, 2010 to
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June 3, 2010 in the amount of$4,875.25]; and an unsecured claim in the amount of
$4,778.93 [consisting of attorneys' fees and costs] for a total claim in the amount of
$164,390.25.
Discussion
MarMc objects to the claim, arguing: (1) the Default Judgment entered in the
District Court for the State of Wyoming does not have a preclusive effect; (2) the Default
Judgment was discharged by novation; (3) the claim is subject to reduction or setoff; and,
(4) the attorney fees and costs have not been approved by the court. Additionally,
MarMc supplemented its objection arguing that the secured portion of the claim is no
longer secured as Sundems failed to file a continuation of their judgment lien as required
under the Wyo. Stat. §1-17-336 and §362(b)(3).
A properly filed proof of claim constitutes prima facie evidence of the validity and
amount of the claim. 3 Such a claim is deemed allowed unless a party-in-interest objects. 4
The objecting party has the burden of going forwarded with evidence supporting the
objection. Such evidence must be of a probative force equal to that of the allegations
contained in the proof of claim. However, an objection raising only legal issues is
sufficient. Once the objecting party has reached this threshold, the creditor has the
3 Fed. R. Bankr. P. 300l(f).
4 11 U.S. C. § 502(a).
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ultimate burden of persuasion as to the validity and amount of the claim. 5 The validity of
a creditor's claim is determined by state law. The bankruptcy court is required to
determine validity or invalidity of the contract by looking to the law of the state which
the court found that the contract was made and primarily payable.
(1) 	Claim Preclusion
This court did an in-depth analysis of the issues of res judicata and collateral
estoppel in the companion objection to the claim filed by Summit Electric, LLC, as
discussed in the Opinion on Objection to Proof of Claim ("Summit Opinion"). 6 As the
facts and circumstances are identical, this court holds that Default Judgment entered by
the District Court for the State of Wyoming is binding on MarMc under the legal premise
of res judicata.
(2) 	Novation
Again, the court's analysis of the applicability of novation in the Summit Opinion
is identical to the facts and circumstances regarding the transaction with the Sundems.
The Note, executed and guaranteed by MarMc's vice president, Cindy Richardson
clearly and unambiguously reflects that the consideration for the Note was Sundems'
release of the Writ of Garnishment issued by the Natrona County District Court. As with
the Summit Opinion, the court finds that the elements required to prove novation were
5 In re Geneva Steel Co., 260 B.R. 517 (1Oth Cir. BAP 2001) and In re Harrison, 987 F.2d 677 (10 1
h Cir.
1993).
6 See docket number 614.
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not met, therefore the Default Judgment was not released or discharged.
(3) 	Set off
This court determined that res judicata applied to preclude MarMc from objecting
to the Wyoming District Court Default Judgment. This eleventh-hour allegations of set-
off is an attempt to make an end-run around that state court judgement. The issue of set-
off was not brought before the state court when the matter was determined, nor was the
amount of the judgement reduced, due to any set-off, upon the execution of the Note for
the release of the writ of garnishment. As this court held that the Default Judgment is
binding on MarMc, MarMc is precluded from alleging a set-off.
(4) 	Pre-petition attorneys' fees and costs
Sundems assert an unsecured claim in the total amount of $4,778.93 for pre-
petition attorneys' fees and costs. The assertion is based upon MarMc's agreement to
pay attorneys' fees associated with the civil action in the District Court for the State of
Wyoming as stated in the Note. Additionally, MarMc agreed to pay all costs of
collection upon executing the Note.
As stated in the Summit Opinion a creditor with an oversecured claim is entitled
to any reasonable fees, costs or charges provided under the agreement under which the
claim arose.7 The four basic requirements for the allowance of attorney fees, costs and
charges, under§ 506 are:
7 § 506(b).
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(1) the claim must be an allowed secured claim; (2) the creditor holding the
claim must be oversecured; (3) the entitlement to fees, costs, or charges
must be provided for under an agreement or state statute under which the
claim arose; and (4) the fees, costs, and charges sought must be reasonable
in amount. 8
As in the court's analysis of the facts and circumstances in the Summit Opinion, this
court's review of"Exhibit F" does not provide the court sufficient information to
determine if the Sundems' attorney fees and costs were reasonable or if the claim is
oversecured. Therefore the court shall schedule an evidentiary hearing on this issue.
(5) 	Failure to comply with Wyoming UCC requirement of filing a continuation ofthe
judgment lien
As discussed in the Summit Opinion, MarMc argues that Sundems' claim is
derived from a default judgment obtained in the District Court for the State of Wyoming
and which was recorded in the real estate records of the County Clerk for Natrona
County, State of Wyoming. MarMc presents that same argument with regard to the
Sundems' secured claim.
As this court found in its analysis in the Summit Opinion, the execution period is
stayed during the period of the bankruptcy automatic stay for execution of a judgment
lien. The Summit claim has not become unsecured.
Conclusion
In conclusion the court finds that: (1) res judicata applies to preclude MarMc from
objecting to the Wyoming District Court Default Judgment; (2) novation does not apply
8 In re Sun 'N Fun Waterpark LLC, 408 B.R. 361 (I 01h Cir. BAP, 2009).
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to extinguish the Wyoming District Court's Default Judgment; (3) as res judicata applies
to preclude MarMc from alleging a set-off; (4) Sunderns' claim has not become
unsecured as the judgment lien has not expired; and, (5) regarding the allowance of pre-
petition attorney fees, the court will require an evidentiary hearing to determine: (1)
whether the creditor holding the claim is oversecured; and (2) the reasonableness of the
attorney's fees and costs.
This opinion constitutes the Court's findings of fact and conclusions of law. A
separate order shall be entered pursuant to Fed. R. Bankr. P. 9021.
DATED this $ 	day of September, 2012
Service to:
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Stephen Winship
Keith Dodson
By the Court
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