Commercial & Residential Maintenance, Inc. v. Abblitt (In re Abblitt)

Commercial & Residential Maintenance, Inc. v. Abblitt (In re Abblitt)

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In Commercial and Residential Maintenance, Inc. v. Abblitt (In re Abblitt), 2009 Bankr. LEXIS 4084 (Bankr. D. Or. Dec. 21, 2009), the bankruptcy court was confronted with whether an award of treble damages under a state RICO statue could be the basis for a nondischargeable debt. Even though the treble damages had been awarded pursuant to a default judgment, the debt was nondischargeable pursuant to section 523 of the Bankruptcy Code.


A. Subject Matter Jurisdiction of the Oregon Circuit Court

Oregon Circuit Courts "have subject matter jurisdiction over all actions unless a statute or rule of law divests them of jurisdiction." Oregon v. Daniel, 222 Ore. App. 362, 368, 193 P.3d 1021, 1025 (2008) (internal citation omitted). "Subject matter jurisdiction depends on whether a court has constitutional or statutory authority to make an inquiry." Matter of Marriage of Watanabe, 140 Ore. App. 85, 88, 914 P.2d 701, 702 (1996). A judgment issued from a court lacking subject matter jurisdiction is said to be void and is subject to collateral attack; however, "when a trial court has both subject-matter and personal jurisdiction, a judgment issued in excess of the court's authority is voidable, not void." Oregon v. McDonnell, 343 Ore. 557, 562, 176 P.3d 1236, 1240 (2007). See also Wood v. White, 28 Ore. App. 175, 178-79, 558 P.2d 1289, 1291 (1977) ("[T]here is a fundamental distinction between the absence of jurisdiction and the erroneous exercise of that jurisdiction."). A voidable judgment is subject only to direct attack. Oregon v. McDonnell at 562.

Debtor argued that C&R filed its O[regon] RICO [(RICO)] action prematurely because the lawsuit was filed prior to Debtor's September 19, 2005 conviction for first degree theft, in which case the state circuit court did not have subject matter jurisdiction. If true, the judgment would be void. C&R countered that the actual civil judgment was not obtained until after the conviction, thus meeting the requirements of ORS 166.725(7)(a)(A). Moreover, according to C&R, the complaint filed in Circuit Court listed independent instances of racketeering conduct, thus allowing the filing of the ORICO complaint under subsection (B). Although the issue of whether an ORICO action can be filed prior to conviction if the judgment itself was obtained after conviction was one of first impression, the bankruptcy court found a statement by the Oregon Supreme Court, in dicta, that the phrase "has been obtained" states a condition that must exist when a plaintiff files an ORICO claim. Black v. Arizala, 337 Ore. 250, 271, 95 P.3d 1109, 1119-20 (2004). Even in light of this, however, the bankruptcy court determined that this in itself would not be sufficient to find that the Circuit Court lacked subject matter jurisdiction over the ORICO claim. According to the bankruptcy court, the Circuit Court had jurisdiction over the ORICO claim at the moment of filing, and the Circuit Court had the statutory and constitutional authority to make an inquiry into the merits of the ORICO claim. If the claim had not yet accrued under ORICO, it was Debtor's responsibility to bring it to the Circuit Court's attention through a motion to dismiss or an affirmative defense. Once the Circuit Court obtained subject matter and personal jurisdiction, any judgment awarded in excess of the court's jurisdiction would render the judgment only voidable, not void. For that reason, the ORICO judgment could not be subject to collateral attack in any court, including the bankruptcy court.

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