Nugent v. American Broadcasting Systems, Inc.

Citation: 1 F. App'x 633Docket: No. 99-17444; B.A.P. No. AZ-98-01704-PRyK

Court: Court of Appeals for the Ninth Circuit; January 4, 2001; Federal Appellate Court

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Patrick and Anita Nugent (the “Nugents”) appeal a Bankruptcy Appellate Panel's affirmation of a bankruptcy court's order, which determined that the Debtors’ confirmed reorganization plan precludes the Nugents from asserting a constructive trust claim in federal district court. The appellate court rejects the Debtors’ argument that subsequent district court orders render the Nugents’ appeal moot, noting that a final judgment has not been entered in the district court litigation, and the Nugents' claim could still be addressed regarding the remaining $2.9 million in the bankruptcy estate.

The bankruptcy court ruled that under 11 U.S.C. § 1141, the confirmed Plan is final and binding on all parties, with res judicata barring the Nugents’ claim. Once a bankruptcy plan is confirmed, all parties must adhere to it, and any issues not directly contested during confirmation cannot be raised later. The Nugents did not challenge the Plan's confirmation or raise their constructive trust claim in the bankruptcy court, despite the Plan addressing the proceeds from the sale of radio stations, which the Nugents now seek to claim. The Plan established a Recovery Fund for distributing proceeds among creditors and did not reserve the entire proceeds for the Nugents. Imposing a constructive trust would unfairly disadvantage other creditors and is thus barred by res judicata due to the Nugents' failure to directly appeal the Plan.

The Nugents contend that their constructive trust claim does not constitute an impermissible collateral attack on the confirmed bankruptcy Plan, citing *Torres v. Eastlick* to assert that the claim merely seeks to identify assets in the estate. However, this argument is rejected, as the case indicates that property subject to a constructive trust may still be part of the bankruptcy estate. Additionally, *North American Coin* addressed a pre-confirmation claim and does not resolve whether the confirmed Plan bars their claim post-confirmation.

The Nugents also assert that their claim is not subject to res judicata since it was pending before confirmation. They reference a 1999 Summary Judgment Order related to a Fifth Amended Complaint, which was filed post-confirmation, undermining their position. The bankruptcy court noted that the Fourth Amended Complaint did not seek a constructive trust on bankruptcy estate assets.

Furthermore, while the Nugents argue that their claim was contemplated in a 1995 Stay Modification Order, the court concluded that the stay was modified only for claims pending at the time of the order. The operative Third Amended Complaint sought only damages and did not mention a constructive trust, leaving the court unaware of such a claim.

The Bankruptcy Appellate Panel's affirmation of the bankruptcy court's order is upheld, and the case's disposition is deemed non-publishable per circuit rules. The Nugents' collateral estoppel argument is also dismissed as waived since it was not raised before the bankruptcy court. Judicial notice is taken of three related district court orders that may impact jurisdiction regarding the appeal.

The Nugents contend that the bankruptcy court erred in determining that they had agreed to withdraw their constructive trust claim from the Fourth Amended Complaint. However, the court did not find such an agreement but instead referenced communications between the Nugents' and Debtors' counsel to clarify whether the constructive trust claim was indeed included in the Fourth Amended Complaint. The court also ruled that it was not required to hold an evidentiary hearing on the matter, as the Nugents had the chance to present evidence during a prior hearing. Although the Nugents argue that their constructive trust claim relates back to a previous complaint under Federal Rule of Civil Procedure 15(c), allowing it to fall under the Stay Modification Order, they did not provide adequate legal support for their assertion that this relation back applies to relief from an automatic stay.