State Savings & Loan Ass'n v. Rendon

STOWERS, Justice,

specially concurring and dissenting.

I concur in part in the majority’s opinion and dissent in part. I concur in the majority’s affirmance of the trial court’s denial of State Savings’s motion for summary judgment and in its holding that the doctrine of res judicata does not operate in this case to bar the Rendons’ counterclaims. I believe, however, that any defenses challenging the validity, priority, and extent of State Savings’s deed of trust interest in the real property it seeks to foreclose, whether raised by the Rendons’ original answer or by their amended answer, are barred by the decision of the bankruptcy court.

Whether the claims objection hearing held in the bankruptcy court constituted the adjudication of a “contested matter” or an “adversary hearing” is not dispositive of this appeal. Under either characterization, the Rendons were not compelled to assert their counterclaims against State Savings. Under either characterization, however, the bankruptcy court had jurisdiction to determine the validity and extent of State Savings’s claim, and its determination after a trial on the merits precludes either party from relitigating that issue in the district court foreclosure action.

The majority in fact hold that this was an adversary proceeding to which Bankruptcy Rule 7013, and therefore Federal Rule of Civil Procedure 13(a), applies. Accord Palombo Farms of Colorado, Inc. v. National Acceptance Corporation of America (In re Palombo Farms of Colorado, Inc.), 43 B.R. 709 (Bkrtcy.D.Colo.1984). See also Stair v. Shumate (In re Shumate), 42 B.R. 462 (Bkrtcy.D.Tenn.1984). The majority further hold that the counterclaims asserted here were not compulsory in bankruptcy court because they fall within the “pending action” exception of Rule 13(a). Although the various disclosure statute violations which form the basis of the Rendons’ counterclaims had not been pleaded in district court at the time of the bankruptcy court adjudication, the majority hold that the Rendons’ amended pleadings “relate back” to the date of the original pleading, pursuant to NMSA 1978, Civ.P.Rule 15(c) (Repl. Pamp.1980). The extension of the “relation back” doctrine to these counterclaims is supported both by the strong liberal amendment policy behind Rule 15 and by the rule’s concern with statutes of limitations, for some of the Rendons’ nondisclosure counterclaims might otherwise be barred. See, e.g., NMSA 1978, § 56-8-13 (two-year limitations period).

On the other hand, several courts have concluded that, in the absence of a complaint brought to determine the validity, priority, or extent of a claim, a hearing held following the filing of a proof of claim and the debtor’s written objection to its allowance constitutes a “contested matter,” not an “adversary proceeding.” See, e.g., Twinton Properties Partnership v. Nidiffer (In re Twinton Properties Partnership), 44 B.R. 426 (Bkrtcy.M.D.Tenn.1984); In re Farmers’ Co-op of Arkansas and Oklahoma, Inc., 43 B.R. 619 (Bkrtcy.W.D.Ark.1984). See also Bankr.R. 3007, 7001. The record in this case fails to make clear the precise nature of the bankruptcy court proceedings. Had the majority held instead that it was merely a contested matter, the proceeding would not have been subject to the compulsory counterclaim pleading requirement of Federal Rule of Civil Procedure 13(a). See Bankr.R. 9014.

Whether this hearing is characterized as an adversary proceeding or a contested matter, the Rendons’ counterclaims were not compulsory in the bankruptcy court. The district court therefore acted within its discretion in granting the Rendons leave to amend and in denying State Savings’s motion for summary judgment.

While the majority's decision today permits the Rendons to raise defenses to the foreclosure action in district court and to assert various counterclaims against State Savings, it should not authorize the relitigation of questions resolved in the bankruptcy court. The parties had their opportunity to litigate the validity and the amount of the deed of trust and promissory note they executed, and should be bound by the decision of the bankruptcy court. Under the doctrine of res judicata, the parties are precluded from relitigating the same cause of action. Three Rivers Land Co. v. Maddoux, 98 N.M. 690, 652 P.2d 240 (1982); City of Santa Fe v. Velarde, 90 N.M. 444, 564 P.2d 1326 (1977). More significantly in this case, the parties are barred under the doctrine of collateral estoppel from relitigating in district court ultimate facts and issues actually and necessarily decided in the prior bankruptcy court proceedings. Adams v. United Steelworkers of America, AFL-CIO, 97 N.M. 369, 640 P.2d 475 (1982).

Three purposes underlay res judicata and collateral estoppel: protecting parties from the burden of repetitive litigation, conserving judicial resources, and encouraging reliance on adjudication by preventing inconsistent judgments. Three Rivers Land Co. v. Maddoux, 98 N.M. at 694, 652 P.2d at 244; International Paper Co. v. Farrar, 102 N.M. 739, 741, 700 P.2d 642, 649 (1985). I believe that the district court bears responsibility for furthering these purposes, and should not allow the Rendons to engage in protracted relitigation seemingly designed to prevent the resolution of a foreclosure suit initiated two and one-half years ago.

Having expressed the foregoing concerns that the majority’s opinion opens the way for improper relitigation of issues previously determined in bankruptcy court, I respectfully concur in part and dissent in part.