Estate of Stern

Filed 6/18/08 Estate of Stern CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from an order of the Superior Court of Orange County, Marjorie Laird Carter, Judge. Affirmed.

Law Offices of Michael G. York and Michael G. York for Petitioner and Appellant.

Murtaugh Meyer Nelson & Treglia and W. Rod Stern for Objector and Respondent.

* * *

Introduction

A receivable of a dissolved partnership was included as an asset in the confirmed bankruptcy reorganization plan of one of the former partners. The receivable was finally collected after that partners death. The other former partner petitioned the probate court for one‑half of the amount collected. The probate court found the entire receivable was a part of the bankruptcy estate, and therefore denied the other former partners claim to one‑half the amount collected. We affirm. The entire receivable was listed as a bankruptcy estate asset in the confirmed reorganization plan. Even if each of the former partners had claim to a one‑half share of the receivable (and there is no evidence in the appellate record supporting such an assumption), the final reorganization plan vested the entire asset in the bankruptcy estate. The claim in the probate court for one‑half of the amount collected is merely an improper collateral attack on a federal bankruptcy courts order.

Statement of Facts and Procedural History

Wolf H. Stern and Barry P. Goldstock were partners in the law firm of Stern & Goldstock (the partnership) for many years; the partnership was dissolved on February 1, 1988, and the assets were divided between Stern and Goldstock. The appellate record does not show how the assets were divided. On January 11, 1991, the partnership obtained a judgment against Maria Lawrence in the amount of $55,002.07 (the Lawrence judgment).

In August 1992, Stern filed a voluntary chapter 11 bankruptcy petition. The Lawrence judgment was listed in the petition. In August 1993, Stern filed a disclosure statement regarding a plan of reorganization, which included the following: With respect to assets of the partnership, the partnership is also in the process of collecting certain accounts receivable. The major outstanding accounts receivable are as follows: . . . Collection of an outstanding balance against Maria Lawrence. The partnership has a judgment against her of approximately $60,000, and is in the process of collecting the receivable. . . .  The Plan provides that pursuant to an agreement with Barry Goldstock all money received from the collection of partnership receivables . . . would be paid to [Stern]s estate . . . . This would depend upon approval of both Mr. Goldstocks and [Stern]s Plans of Reorganization. All partnership debt would be paid through this estate, and cross‑claims against each others estates would be resolved. The plan of reorganization was filed the same day.

A modification to the reorganization plan was filed in October 1993. The modification included the following additional paragraph: Collection of partnership receivables of the partnership STERN & GOLDSTOCK shall be th[r]ough the estate of W. HARRY STERN, and all debts of STERN & GOLDSTOCK partnership shall be paid by this debtors estate. All cross‑claims against the estate of BARRY GOLDSTOCK and W. HARRY STERN by estate of BARRY GOLDSTOCK shall be resolved with no cross‑payments.

The bankruptcy court approved the plan of reorganization on December 22, 1993. An order closing Sterns bankruptcy case was entered on October 14, 1997. The order provided, in relevant part: [T]he provisions of the confirmed plan bind the debtor, and any creditor of the debtor, whether or not the claim of such creditor is impaired under the plan, and whether or not such creditor has accepted the plan. [] . . . [E]xcept as may be otherwise provided in the plan or the order confirming the plan, all property of the estate is vested in the Debtor. [] . . . [E]xcept as provided in the plan or in the order confirming the plan, the property dealt with by the plan is free and clear of all claims and interest of creditors of the Debtor.

Stern died on August 11, 1999. Alban Ann Stern was appointed executor of Sterns estate.

On December 23, 2003, the Lawrence judgment was satisfied. On July 8, 2005, Goldstock filed a petition in the probate court, seeking one-half of the amount received in satisfaction of the Lawrence judgment. Alban Stern responded with a petition for an order that the entire amount of the Lawrence judgment belonged to Stern.

The two petitions were heard together by the probate court. The parties submitted stipulated facts and exhibits, as well as written briefs. The court took the matter under submission following oral argument by the parties. In a minute order, the probate court stated: The Lawrence judgment was listed in the bankruptcy plan of decedent, Wolf H. Stern, as agreed by Stern and Goldstock. Confirmation of the plan by the bankruptcy court vested that property in the estate of the debtor (Stern). Without a specific provision otherwise, the judgment remains an asset of Sterns estate following the close of bankruptcy. [] The estate of Wolf H. Stern is entitled to possession of all funds collected on the Lawrence judgment. A formal order, entered August 13, 2007, provides, the Estate of Wolf H. Stern is entitled to possession of all funds collected on the Lawrence judgment. Goldstock timely appealed from the August 13 order.

Discussion

Probate Code section 11700 permits a personal representative or anyone claiming entitlement to a share of a decedents estate to file a petition asking the court to determine who is entitled to distribution. The probate courts order granting or refusing to grant a petition to determine to whom distribution should be made, or granting or refusing to grant a petition to direct the distribution of property, is appealable. (Prob. Code,  1303, subds. (f), (g).)

In resolving the issue of the sufficiency of the evidence, we are bound by the established rules of appellate review that all factual matters will be viewed most favorably to the prevailing party [citations] and in support of the judgment . . . . (Estate of Baker (1982) 131 Cal.App.3d 471, 476‑477.) All conflicts in the evidence must be resolved in favor of the respondent. (Ibid.) When the facts are undisputed, we review the matter de novo. (Estate of Mowry (2003) 107 Cal.App.4th 338, 341.) Where, as here, no statement of decision was requested, we presume the probate court found every fact necessary to support its decision; we infer all findings in favor of the probate courts order; and we review the findings under a substantial evidence standard. (In re Marriage of Sabine & Toshio M. (2007) 153 Cal.App.4th 1203, 1219.)

The underlying premise for all of Goldstocks arguments is that he owned a one‑half share of all of the partnerships assets. There is no factual support for this proposition in the appellate record, however. The evidence before the probate court was that the parties divided the assets of the partnership when it dissolved, and that there was an agreement between Stern and Goldstock that all money obtained by collection on the partnerships accounts receivable would be paid to Stern, and Stern would pay the partnerships debts. The agreement itself does not appear in the appellate record, so we cannot determine exactly what it provided. The Uniform Partnership Act of 1994, which has been codified at Corporations Code section 16100 et seq., provides that when a partnership is dissolved, its assets must initially be applied to discharge its obligations to its creditors, including partners who are creditors (Corp. Code,  16807), and that after dissolution, all partners are liable to the other partners for their share of the partnerships liability (id.,  16806). Goldstock fails to address the lack of evidence in the record of the parties agreement to distribute the partnerships assets, and also fails to address the applicability of the Uniform Partnership Act of 1994. In short, Goldstock has failed to establish that he had any interest in the Lawrence judgment at any point in time after the partnership was dissolved.

Goldstocks petition is a collateral attack on a final order of the federal bankruptcy court. Title 11 United States Code section 1141 provides that, with certain exceptions inapplicable here, the provisions of a confirmed plan bind the debtor, . . . and any creditor . . . whether or not the claim or interest of such creditor . . . is impaired under the plan and whether or not such creditor . . . has accepted the plan. [] . . . Except as otherwise provided in the plan or the order confirming the plan, the confirmation of a plan vests all of the property of the estate in the debtor. [] . . . [E]xcept as otherwise provided in the plan or in the order confirming the plan, after confirmation of a plan, the property dealt with by the plan is free and clear of all claims and interests of creditors . . . . As a creditor, Goldstock was bound by the provisions of Sterns confirmed reorganization plan. The plan dealt with the entirety of the Lawrence judgment, not merely one‑half of it. The Lawrence judgment became vested in Sterns bankruptcy estate by virtue of the confirmed plan. No matter what share of the Lawrence judgment Stern had an interest in at the time the partnership dissolved, by virtue of the bankruptcy courts order confirming the reorganization plan, the Lawrence judgment became a part of Sterns bankruptcy estate. As noted, the bankruptcy order also stated that all property of the estate would be vested in the debtor Stern.

The bankruptcy laws do not readily permit challenge. An order confirming a reorganization plan is akin to a judgment, which is binding on all parties and entitled to res judicata effect. (Miller v. United States (9th Cir. 2004) 363 F.3d 999, 1004.) Such an order may only be revoked if it was procured by fraud, and the party seeking revocation must do so in the bankruptcy court within 180 days after entry of the confirmation order. (11 U.S.C.  1144.) Goldstock did not challenge Sterns reorganization plan in the bankruptcy court at any time, and certainly not within 180 days after entry of the order.

Goldstock argues he cannot be bound by the order confirming Sterns reorganization plan because the disclosure statement and the modification to the disclosure statement were not served on him. Title 11 United States Code section 1125(b) requires that a disclosure statement be transmitted to the holder of a claim or interest before a reorganization plan may be approved. Goldstock admits the order confirming the plan was served on him. Given the clear language of Title 11 United States Code section 1141 as to the binding effect of a confirmed bankruptcy plan, it was incumbent upon Goldstock to, at a minimum, educate himself as to the contents of the disclosure statement and any modifications thereto once he received notice of the plans confirmation. He could have made a timely challenge to the plan in the bankruptcy court. Instead, without any authority, he asks the probate court and now this state appellate court to overturn a final order of the United States Bankruptcy Court.

Finally, Goldstock makes a convoluted argument that Sterns reorganization plan only gave Stern the power to collect the Lawrence judgment, and, therefore, once that judgment was collected, it would pass through the estate to Goldstock. Goldstock alternatively argues Sterns ability to collect the Lawrence judgment terminated when the bankruptcy proceeding ended. Goldstock fails to acknowledge that Sterns bankruptcy plan called for Stern to pay the entirety of the partnerships debts and that the estate property becomes the debtors property. It defies the bankruptcy laws and the bankruptcy courts order to burden Sterns bankruptcy estate with the entirety of the partnerships debts, while failing to also assign to it one of only two significant assets of the partnership.

Disposition

The order is affirmed. Respondent to recover costs on appeal.

FYBEL, J.

WE CONCUR:

RYLAARSDAM, ACTING P. J.

ARONSON, J.

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