Unpublished Disposition, 846 F.2d 1382 (9th Cir. 1981)

No. 86-1758.

United States Court of Appeals, Ninth Circuit.

Before NELSON and NORRIS^** , Circuit Judges, and ALAN C. KAY, District Judge.^*** 

MEMORANDUM^* 

Appellee Rodger L. McAfee brought a quiet title action with regard to property which he and his former wife, Appellant Darlene McAfee, had deeded to their Appellant sons. Because Appellee was then under the jurisdiction of the bankruptcy court, the quiet title action was heard by the bankruptcy court as a related proceeding under 28 U.S.C. § 156(a). Trial was held before Bankruptcy Judge J.W. Hedrick on December 26-28, 1984. The court held in favor of Appellee, imposing a constructive and resulting trust on the property, and assessing damages for conversion. Appellee prepared proposed Findings of Fact and Conclusions of Law, and Appellants timely filed their objections to such. It is not clear whether these objections were considered by the bankruptcy court, but they were not considered by the district court to whom the proposed Findings of Fact and Conclusions of Law were submitted for approval. On appeal the Ninth Circuit remanded to the district court for the limited purpose of giving the district court jurisdiction to entertain Appellant's motion under Fed. R. Civ. P. 60(b) for relief from judgment. The district court ordered the Findings of Fact and Conclusions of Law stricken, and directed the bankruptcy court make new Findings of Fact and Conclusions of Law which would indicate whether Appellant's objections had been considered. The bankruptcy court held a hearing to consider Appellant's objections, and then made new Findings of Fact and Conclusions of Law. Appellants then filed objections to these new findings. The new Findings of Fact and Conclusions of Law were then submitted to the district court, which reviewed and adopted them.

Appellants appeal the Findings of Fact and Conclusions of Law based on their assertion that these findings were never properly reviewed by the district court as required by Article III of the Constitution. Appellants also dispute the substance of the bankruptcy court's findings, contending 1) that a prior state court judgment regarding the property in the divorce proceedings of the McAfees was not beyond the jurisdiction of that court, 2) that a ruling on the property in the present case is barred by the operation of res judicata and collateral estoppel, and 3) that the imposition of a resulting trust or constructive trust is not supported by sufficient evidence. We reverse and remand for further proceedings consistent with this memorandum.

FACTS

In March, 1978, Appellee Rodger McAfee and Appellant Darlene McAfee were owners of a family residence located at 790 Bear Creek Road, Merced, California (Merced property), and approximately 321 acres of farm land located in Raisin City, California (Raisin City property). Rodger was also the owner of 1.2 acres of commercial property located in Kerman, California (Kerman property). At that time, Rodger and Darlene were married, and all parties were living at the Bear Creek residence. A drought was adversely affecting other property holdings of the McAfees, and in order to obtain funds needed to generate water sources for the affected property, Rodger applied for a loan from the Farmer's Home Administration (FmHA). Rodger and Darlene were unable to qualify for a loan because of their extensive property holdings. In March and April of 1978, Rodger and Darlene deeded the Merced property and the Raisin City property to their sons, and Rodger also deeded his individually owned Kerman property to the sons. These transfers were all made without consideration, and the bankruptcy court found that the properties had been deeded to the sons in trust for Rodger and Darlene, to be reconveyed back to Rodger and Darlene upon request, in accordance with the prior ownership of the properties.

On August 11, 1980, Darlene filed for dissolution of the marriage. On December 4, 1980, Darlene and Rodger executed a Property Settlement Agreement, which stated in regard to the properties in issue:

Husband and wife have in the past had some community interest in the following real property:

1. Family home located at 790 South Bear Creek.

2. 321.76 acres in Raisin City, Fresno County.

3. 1.2 acres of commercial property in Kerman, California.

Husband and wife have deeded any interest they might have in the above said property to their four (4) children. Husband and wife make no claim to the above property and affirm any and all transfers of said property to their four (4) children.

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Husband and wife have placed real property in the names of their minor children which presently has an income of $400.00 a month. The parties agree that wife shall not ask this court for any support of the minor children. Husband presently has no income.

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The parties agree that they have listed and divided all of their community assets.

This Property Settlement Agreement was approved by the state court on February 9, 1981. The state court entered a Final Judgment of Dissolution of Marriage on February 26, 1981, and entered an Order approving the Property Settlement Agreement on April 15, 1981.

DISCUSSION

Fed.R.Civ.Pro. 58 provides that a judgment is effective only when docketed as required by Fed. R. Civ. P. 79(a). In this case, the final judgment appealed from was only docketed in the bankruptcy court, which does not have jurisdiction to enter a final judgment. Although the final judgment was signed by the district court, it was not entered in the district court docket. Thus it is arguably not effective because it is not entered in the docket of the court which is empowered to enter judgment. Without a valid final judgment, the court of appeals has no jurisdiction. 28 U.S.C. § 1291; see Bankers Trust Co. v. Mallis, 435 U.S. 381, 384 n. 4 (1978) (" [I]t is arguable that a decision must be entered on the civil docket before it may constitute a 'final decision' for purposes of ... [Title 28 U.S.C.] Sec. 1291.") In this case, however, the judgment was entered on the bankruptcy court docket, thus fulfilling the purposes of the docket, that of giving notice to the parties and the public. Although the better practice would be to enter the judgment on the docket of the court empowered to render the judgment, this technical oversight in this case is not serious enough to deprive this Court of jurisdiction to hear the appeal. This Court finds it is in the interests of justice to consider the appeal now, rather than just remanding for entry of final judgment and then re-hearing this appeal. On remand, the district court is directed to enter the final judgment on its own docket.

28 U.S.C. § 157 outlines the procedures whereby a bankruptcy court may hear non-core or "related" proceedings. Unless both parties consent to the jurisdiction of the bankruptcy court (in which case the bankruptcy court enters judgment itself), Sec. 157(c) (1) provides that:

the bankruptcy judge shall submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district judge after considering the bankruptcy judge's proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected.

The district court's de novo review of the proposed findings and conclusions is required by the Federal Constitution. Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982); In re Castlerock Properties, 781 F.2d 159, 162 (9th Cir. 1986).

In the present case, the required procedure was not followed initially, and the case was remanded once before by this Court on this very issue. On remand, the district court directed the bankruptcy court to consider appellant's objections first, since it was not clear whether those objections had been considered initially. Some of these objections were accepted, and the revised findings and conclusions were then submitted to the district court. Although the district court's order accepting the findings and conclusions submitted by the bankruptcy court does not clearly state that the district court conducted a de novo review, the order does state that the proposed findings and conclusions had been "reviewed." It is not unequivocally stated in the order that the district court also reviewed the appellant's objections as required, but where there is ambiguity, this Court is hesitant to assume that the district court failed to perform a duty that it had been directed to perform on an earlier remand of the same case. Although the transcript indicates that the district court made reference to its adoption of the proposed findings and conclusions as a "comfort order," this does not indicate that the court failed to conduct a proper review of the decision. Since there is nothing which unambiguously indicates that the district court did not conduct the required review as directed by this Court's remand and as recited in the district court's own order, this Court assumes that the proper procedures were followed.

A. Jurisdiction of the divorce court.

The trial court concluded that the judgment incorporating the property settlement agreement was void to the extent it purported to confirm the transfer of the properties to the sons because that portion of the judgment was in excess of the divorce court's jurisdiction. The court held that a judgment rendered in excess of the court's jurisdiction should not be given res judicata effect, and thus the property settlement's disposition of the property need not be accepted.

Generally, in a divorce action, the court has jurisdiction over all community property, and any property whose ownership is disputed; in the latter case, the court has jurisdiction to determine whether the property is community or not. California Civil Code Sec. 4800. In this case, the subject properties were properly brought before the divorce court because the pleadings of both sides indicated the existence of the property, but conflicted as to its character. Although the pleadings in the divorce action did not request that the properties be given to the sons, and the issue of the trust arrangement was not raised in the pleadings, such does not deprive the divorce court of jurisdiction over the properties. A judgment that, in fact, the properties were owned by the children was simply a resolution of that dispute between Rodger and Darlene. This is not the case of a divorce court attempting to alter the ownership of separate property by giving it to the other spouse or to the children. Here, the court merely determined (by the settlement agreement) that neither spouse owned the property. Such a determination was necessary to the proper disposition of the community property and support obligations of Rodger and Darlene. Thus, the issue of ownership of the property was properly raised and the order is not void as beyond the divorce court's jurisdiction. Cf. Peery v. Superior Court, 174 Cal. App. 3d 1085, 1093-94, 219 Cal. Rptr. 882 (1985).

B. Res Judicata effect of the Settlement Agreement.

The terms of a consent judgment in a divorce action must be given preclusive effect in any subsequent dispute between the parties. Avery v. Avery, 10 Cal. App. 3d 525, 529-30, 89 Cal. Rptr. 195 (1970); Klinker v. Klinker, 132 Cal. App. 2d 687, 693-94, 283 P.2d 83 (1955) (res judicata bars relitigation of an identical issue when there has been a final judgment and a plea is asserted against a party in the former action or one in privity with a party). The trial court in this case felt that since the sons were not in an adversarial position towards Rodger in the divorce action, they were not entitled to use that judgment against Rodger in this case. However, the divorce court had to consider the Property Settlement with a view to the best interests of the children and their financial support; thus, in approving the Agreement, the divorce court represented the interests of the children in the divorce proceedings. As third-party beneficiaries of the Settlement Agreement, the sons have the right to enforce that agreement against Rodger. Sonnicksen v. Sonnicksen, 45 Cal. App. 2d 46, 52, 113 P.2d 495 (1941); Walsh v. Walsh, 42 Cal. App. 2d 282, 285-86, 108 P.2d 760 (1940).

Regardless, however, of the sons' rights under the Agreement, Darlene was a party to the divorce action, and insofar as the Settlement Agreement represents a final settlement of any dispute over the properties between the parties, Rodger may not now relitigate this issue. Under California law, both Rodger and Darlene had a legal obligation to provide for the support of their children (California Civil Code Sec. 242-43), and the Settlement Agreement's disposition of the properties was clearly intended to fulfil Rodger's obligation. After reciting the amount of income the properties generate, the Agreement then releases Rodger from any obligation to make child support payments to Darlene, indicating that the disposition of the property was a resolution by Rodger and Darlene of his support obligations. In the present action, Rodger is in effect attempting to renegotiate the prior agreement. Since the Settlement Agreement's disposition of the properties represents a compromise resolution of the parties' legal rights and obligations, Darlene has the right to assert that agreement as a defense to the present action.

The Settlement Agreement unambiguously disposes of the properties in question. Although Appellee maintains that a trust arrangement was initially created when the properties were deeded to the sons and that such trust was left unaltered by the Settlement Agreement, the terms of that Agreement do not reasonably indicate the possibility of a trust. The Agreement clearly states that "Husband and wife have in the past had some community interest in [the properties]. Husband and wife have deeded any interest they might have in the above said properties to their four (4) children. Husband and wife make no claim to the above property and affirm any and all transfers of said property...." (emphasis added). This agreement does not leave any room for the trial court in this case to have found the existence of a trust arrangement. The trial court did not make any finding that the Settlement Agreement was obtained through extrinsic fraud or mistake, see, e.g., In re Marriage of Modnick, 33 Cal. App. 3d 897, 904-07, 663 P.2d 187 (1983); Kelley v. Kelley, 73 Cal. App. 3d 672, 677-78, 141 Cal. Rptr. 33 (1977) (no relief for party who has contributed to fraud or mistake), and thus any alteration of any former alleged trust arrangement as a result of the Agreement must be upheld. The trial court's determination that the properties are held by the sons in a constructive or resulting trust must therefore be reversed.

REMANDED for the limited purpose that the district court enter the final judgment on its docket, and REVERSED.