Galaz v. Galaz (In Re Galaz) ( 2016 )

Case: 15-51151 Document: 00513792256 Page: 1 Date Filed: 12/12/2016
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
No. 15-51151
Fif h Circuit
FILED
December 12, 2016
In the Matter of: LISA ANN GALAZ Lyle W. Cayce
Clerk
Debtor
RAUL GALAZ,
Appellant
v.
LISA ANN GALAZ,
Appellee
Appeal from the United States District Court
for the Western District of Texas
USDC No. 5:15-CV-349
Before WIENER, CLEMENT, and COSTA, Circuit Judges.
PER CURIAM:*
Raul and Lisa Ann Galaz divorced in 2002. The divorce decree required
Lisa to maintain health insurance for her and Raul’s children, pay the
premiums required to maintain that insurance, and pay certain medical
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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expenses not covered by insurance. Initially, Lisa complied with the divorce
decree. In December 2007, however, she filed for Chapter 13 bankruptcy. And
in January 2008, she ceased making payments for the children’s health
insurance and other medical expenses.
In 2009, Raul brought an action against Lisa in state court seeking
unpaid child support expenses. The parties submitted to binding arbitration.
Raul was ultimately awarded $6,727.00 “for child support arrearage” plus
$3,000.00 for attorney’s fees, amounting to a total award of $9,727.00. The
state court entered this order (the “2009 Order”) on November 17, 2009. Raul
then moved for the bankruptcy court to direct payment to him from the
bankruptcy estate under the 2009 Order. Lisa responded that this amount
should be offset against any judgment that she might obtain in her pending
adversarial proceeding against Raul. See Galaz v. Galaz (In re Galaz I), 480 F.
App’x 790, 792 (5th Cir. 2012). The adversarial proceeding concerned Raul’s
fraudulent transfer of assets from a company—that Lisa partially owned—to
Segundo Suenos, LLC, a company controlled by Raul and his father (the
“Segundo proceeding”). See Galaz v. Galaz (In re Galaz II), 765 F.3d 426, 428-
29 (5th Cir. 2014). The district court took the matter under advisement, and
Raul later renewed his motion to direct payment. Id. The bankruptcy court
denied the renewed motion, explaining that if Lisa was successful in her
adversary claim, Raul’s claim could be offset against the damages that she
might recover. Raul appealed that decision to the district court and this court,
both of which affirmed. See In re Galaz I, 480 F. App’x at 791.
On November 17, 2011, the state court entered a second order (the “2011
Order”) requiring, among other things, that Lisa pay half of her daughter’s
future medical premiums and unreimbursed medical costs until she reached
the age of majority.
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Ultimately, Lisa was successful in the Segundo proceeding. The
bankruptcy court awarded her $241,309.10 in actual damages and $250,000.00
in exemplary damages. See In re Galaz II, 765 F.3d at 429. Raul appealed.
While the Segundo proceeding was being appealed, Lisa completed the terms
of her Chapter 13 plan and was granted a discharge in January 2012. The
district court affirmed Lisa’s judgment in the Segundo proceeding. But this
court vacated the bankruptcy court’s judgment because the bankruptcy court
did not have authority to enter a final judgment on a “non-core” bankruptcy
proceeding. In re Galaz II, 765 F.3d at 432-34. Thus, this court remanded the
Segundo proceeding so that the district court could refer the case to the
bankruptcy court for proposed findings of fact and conclusions of law. Id. at
434. On January 23, 2015, the bankruptcy court issued its proposed findings
of fact and conclusions of law in the Segundo proceeding, recommending that
judgment be entered in favor of Lisa for $491,309.10. The district court adopted
the bankruptcy court’s proposed findings of fact and conclusions of law and
entered judgment in Lisa’s favor. Raul again appealed to this court. Galaz v.
Galaz (In re Galaz III), No. 15-51194. 1
On February 24, 2015, Raul moved in state court to enforce the 2009 and
2011 Orders, seeking $9,727.00 and $1,429.00, respectively. Raul alleged,
among other things, that Lisa failed to make the regular medical premium
payments and expense reimbursements required by the 2011 Order, which as
of filing amounted to $1,429.00. In response, Lisa filed a Motion to Enforce
Stay or Prior Order in the bankruptcy court. The bankruptcy court entered an
order preliminarily enjoining Raul from collecting the child support obligations
in the state court proceeding, finding that Lisa had a right to offset the amount
owed under the 2009 and 2011 Orders against any potential judgment in Lisa’s
1 As of 7/20/16, briefing is still ongoing in this appeal.
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favor in the Segundo proceeding. The preliminary injunction would
automatically dissolve if the Segundo proceeding did not result in an award to
Lisa exceeding $11,156.00, so that Raul could pursue enforcement and
collection in state court. The district court affirmed the bankruptcy court’s
order, noting that the district court had entered judgment in favor of Lisa for
$491,309.10, and therefore “Raul’s judgment against Lisa in the amount of
$11,156.00 may now operate as a setoff against the damages awarded to Lisa
in that judgment.” Raul filed this appeal, arguing that the bankruptcy court
lacked subject matter jurisdiction to enjoin him from enforcing his orders and,
alternatively, that the child support obligations arising from the 2009 and 2011
Orders are ineligible for setoff against the Segundo judgment.
I.
“Subject-matter jurisdiction is a question of law which we review de
novo.” In re OCA, Inc., 551 F.3d 359, 366 (5th Cir. 2008). “In reviewing the
rulings of the bankruptcy court, this court applies the same standards of
review as applied by the district court.” In re ASARCO, LLC., 702 F.3d 250,
257 (5th Cir. 2012). “In conducting this review, we analyze the legal
conclusions that guided the awarding court’s determinations de novo and that
court’s findings of fact for clear error.” Id. (emphasis added).
II.
Raul argues that the bankruptcy court lacked subject matter jurisdiction
to enjoin him from taking action in state court on the 2009 and 2011 Orders
because Lisa’s bankruptcy estate had been closed for nearly three years when
he filed his state court action in 2015. Alternatively, Raul argues that if the
bankruptcy court had jurisdiction, offsetting the child support award is
improper because Texas law does not allow offset against child support
obligations and because the obligations lack mutuality. Lisa counters that the
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district court had either arising under, arising in, or related to jurisdiction, and
that Raul waived his offset arguments.
“Bankruptcy courts find their source of jurisdiction in 28 U.S.C. §§ 157and 1334.” In re Baker, 593 F. App’x 416, 417 (5th Cir. 2015) (unpublished).
Section 1334(a)-(b) confers to district courts “original and exclusive
jurisdiction” over “all cases under title 11” and “original but not exclusive
jurisdiction of all civil proceedings arising under title 11, or arising in or
related to cases under title 11.” Section 157 provides for the referral of certain
cases from district courts to bankruptcy courts. In re Baker, 593 F. App’x at
417 n.2.
Proceedings “‘arising under title 11’ . . . describe those proceedings that
involve a cause of action created or determined by a statutory provision of title
11.” In re Wood, 825 F.2d 90, 96 (5th Cir. 1987). “‘[A]rising in’ proceedings . . .
[refer] to those ‘administrative’ matters that arise only in bankruptcy cases. In
other words, ‘arising in’ proceedings are those that are not based on any right
expressly created by title 11, but nevertheless, would have no existence outside
of the bankruptcy.” Id. at 97. A matter is related to a bankruptcy proceeding if
“the outcome of that proceeding could conceivably have any effect on the estate
being administered in bankruptcy.” Id. at 93 (quoting Pacor, Inc. v. Higgins,
743 F.2d 984, 994 (3d Cir. 1984)).
To decide whether the district court had jurisdiction to enjoin Raul from
enforcing his 2009 and 2011 Orders, we must decide if this dispute arises
under, arises in, or relates to Lisa’s bankruptcy proceeding. We address the
2009 and 2011 Orders in turn.
A. 2009 Order
Raul’s arguments that the bankruptcy court had no subject matter
jurisdiction to enjoin him from seeking to enforce his 2009 Order in state court
are meritless. He contends that the bankruptcy court lacked jurisdiction
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because Lisa’s plan had been confirmed, fully implemented, and executed by
2012. Raul maintains that “[a]fter a debtor’s reorganization plan has been
confirmed, the debtor’s estate, and thus bankruptcy jurisdiction, ceases to
exist, other than for matters pertaining to the implementation or execution of
the plan.” In re Baker, 593 F. App’x at 417 (alteration in original) (quoting
Craig’s Stores of Tex., Inc. v. Bank of La., 266 F.3d 388, 390 (5th Cir. 2001)).
According to Raul, because the estate was fully administered when he filed his
state court action in 2015, this matter does not pertain to the implementation
or execution of Lisa’s plan, and thus the district court lacked jurisdiction to
issue the injunction.
But Raul’s argument ignores the fact that “a bankruptcy court plainly
ha[s] jurisdiction to interpret and enforce its own prior orders.” Id. (alteration
in original) (quoting Travelers Indem. Co. v. Bailey, 557 U.S. 137, 151 (2009)).
Here, Raul previously moved for the bankruptcy court to direct payment to him
for the amount owed under the 2009 Order. The bankruptcy court denied this
motion, acknowledging that Raul could offset this amount against any
judgment that Lisa obtained in the Segundo proceeding. The district court and
this court affirmed. See In re Galaz I, 480 F. App’x at 791. To allow Raul to
enforce his 2009 Order in state court now, outside of the proceeding where he
was ordered to pursue such enforcement (i.e., the Segundo proceeding), would
create an end run around the bankruptcy court’s previous ruling. 2 The
bankruptcy court’s injunction was necessary to enforce its previous order. See
In re Nat’l Ass’n of the Christian Church (Disciples of Christ), 333 F. App’x 822,
827 (5th Cir. 2009) (unpublished) (“A final decree closing the case after the
2 Raul’s contention that the original bankruptcy court order did not prevent him from
enforcing the child-support obligations against non-bankruptcy assets or collecting the child
support outside of the bankruptcy process is misguided. Raul is merely attempting to
collaterally attack the bankruptcy court’s previous order.
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estate is fully administered does not deprive the court of jurisdiction to enforce
or interpret its own orders.” (quoting In re 350 Encinitas Invs., LLC, 313 F.
App’x 70, 72 (9th Cir. 2009))). Even though the estate had been fully
administered, the bankruptcy court had subject matter jurisdiction regarding
the child support claims from the 2009 Order because it needed to enforce its
previous order. 3
Raul’s arguments that Texas law does not allow offset against child
support obligations and that the obligations here lack mutuality also fail. Raul
did not timely raise these arguments before the bankruptcy court. See Galaz I,
480 F. App’x 790 at 792-94 (holding that Raul had waived his mutuality
argument by failing to raise it in the bankruptcy court); see also In re OCA,
Inc., 552 F.3d 413, 424 (5th Cir. 2008) (“Since this issue was not properly
presented to the bankruptcy court, it cannot be raised now for the first time on
appeal.”). Thus, the bankruptcy court did not err in enjoining Raul from
enforcing his 2009 Order in state court. 4
B. 2011 Order
Conversely, Raul’s arguments that the bankruptcy court had no subject
matter jurisdiction to enjoin him from seeking to enforce his 2011 Order in
state court have merit. Raul again points out that Lisa’s bankruptcy case
closed when she was granted a discharge in January 2012. But here, he argues
3 Cabining this exercise of jurisdiction under § 1334(b)’s arising under, arising in, or
related to framework is not without its challenges. Nevertheless, this exercise of jurisdiction
falls within the “arising in” framework because this issue would not have arisen absent Lisa’s
bankruptcy case. See Lothian Cassidy, LLC v. Lothian Expl. & Dev. II, L.P., 487 B.R. 158,
162 (S.D.N.Y. 2013) (“‘Arising in’ claims may include [m]atters involving the enforcement or
construction of a bankruptcy court order . . . .” (internal quotation marks omitted)).
4 Raul contends that both the bankruptcy court and the district court failed to apply
the $9,727.00 offset to the judgment obtained by Lisa against him in the Segundo proceeding.
He contends that this obligation still exists. Lisa counters that Raul chose not to assert his
claim to offset. Because this panel will not decide the merits of In re Galaz III, No. 15-51194,
we defer to that panel to decide the issue.
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that because the bankruptcy court never previously considered the 2011 Order,
it had no jurisdiction to enjoin him from enforcing this order in state court.
Again, we must determine whether the bankruptcy court’s action falls
within arising under, arising in, or related to jurisdiction. Because this action
by the bankruptcy court was not “created or determined by a statutory
provision of title 11,” it does not fall within arising under jurisdiction. In re
Wood, 825 F.2d at 96. Likewise, arising in jurisdiction is inapplicable here
because, unlike the 2009 Order, the bankruptcy court has no prior order to
enforce with respect to the 2011 Order. Thus, the bankruptcy court cannot rely
on its authority to enforce its prior order to exercise jurisdiction. Similarly,
related to jurisdiction is inapplicable.
As explained above, a matter is related to a bankruptcy proceeding when
“the outcome of that proceeding could conceivably have any effect on the estate
being administered in bankruptcy.” Id. (quoting Pacor, Inc. v. Higgins, 743
F.2d 984, 994 (3d Cir. 1984)). After confirmation of the bankruptcy plan,
however, this circuit has adopted a “more exacting theory of post-confirmation
bankruptcy jurisdiction.” In re Craig’s Stores of Tex., Inc., 266 F.3d 388, 391
(5th Cir. 2001). “After a debtor’s reorganization plan has been confirmed, the
debtor’s estate, and thus bankruptcy jurisdiction, cease to exist, other than for
matters pertaining to the implementation or execution of the plan.” Id. at 390.
Here, the child support obligations under the 2011 Order began to accrue in
December 2011 and each month thereafter. Lisa’s bankruptcy plan was
confirmed in 2008, and the bankruptcy case was closed in 2012. Clearly, the
obligations under the 2011 Order, nearly all of which arose after her
bankruptcy case was closed, did not pertain to the implementation or execution
of her bankruptcy plan. Even if we applied the less exacting pre-conformation
approach to related to jurisdiction, whether Raul is successful in proving that
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Lisa owes him money under the 2011 Order would have no conceivable effect
on Lisa’s bankruptcy estate.
Thus, the district court lacked jurisdiction to enjoin Raul from seeking
to enforce Lisa’s obligations under the 2011 Order.
III.
For the foregoing reasons, we AFFIRM in part, REVERSE in part, and
REMAND to the district court.
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