Wednesday, November 9, 2005
Ex-Lawmaker Mentally Competent to Settle Dispute, Court Says
Ninth Circuit Rejects Bid by Rains, Who Once Ran for Attorney General, to Overturn Agreement in Bankruptcy Case
By KENNETH OFGANG, Staff Writer/Appellate Courts
The Ninth U.S. Circuit Court of Appeals yesterday upheld a bankruptcy judge’s ruling that a former legislator who once ran for California attorney general was mentally competent to settle a dispute with a bankruptcy trustee.
Judge Johnnie Rawlinson, writing for the appellate panel, said that Omer L. Rains failed to show that the judge’s finding, which was based on sworn declarations from other attendees at the settlement conference, was clearly erroneous.
Rains, a member of the State Bar since 1966, represented parts of Santa Barbara and Ventura County in the state Senate, where he once chaired the Judiciary Committee. He ran for attorney general in 1982, but lost to then-Los Angeles District Attorney John K. Van de Kamp by a wide margin in the Democratic primary.
In the 1980s, he petitioned the Superior Court to change his first name to “Senator,” but withdrew his petition in the face of a formal objection by the Senate Rules Committee.
Rains later relocated from Placer County to Incline Village, Nev., just across the state line in the Lake Tahoe area. He was admitted to a hospital immediately after the September 2002 settlement conference and claims he has no recollection of what preceded his hospitalization.
Doctors said he suffered an aneurysm and a stroke. A psychologist and neurologist signed declarations opining that he could not have been mentally competent at the time of the settlement conference.
An agreement reached at the conference required Rains and his wife, who also declared bankruptcy, to pay the trustee $250,000 by the end of March 2003 in exchange for the dismissal of adversary proceedings and the withdrawal of objections to certain exemption claims. Part of the dispute centered on Rains’ contention that his interest in an American Bar Association-sponsored retirement plan was exempt from claims of creditors.
The settlement agreement provided that if Rains did not pay the $250,000 or post collateral by the due date, the trustee would be able to collect that amount from the retirement plan and the exemption claim would be denied to that extent.
When Rains tried to back out of the agreement after undergoing medical treatment, the trustee moved to have the deal approved and enforced by the court. After Rains opposed the motion and filed the doctors’ declarations, the trustee’s counsel countered with declarations by the trustee, the creditor, and the creditor’s counsel stating that Rains appeared to be in full control of his faculties during the settlement conference and actively participated in it.
The bankruptcy judge approved the settlement in February 2003, finding that the ex-lawmaker had the capacity to enter into it. After Rains failed to make the payment or post collateral, another hearing was held and the bankruptcy judge ordered him to withdraw the $250,000 from the retirement plan and pay it to the trustee.
U.S. District Judge Garland Burrell of the Eastern District of California affirmed both orders, and the Ninth Circuit yesterday said the bankruptcy judge and district judge were correct.
Rawlinson explained that the validity of a settlement in a bankruptcy dispute is determined by applicable state contract law. Under California law, she concluded, Rains entered into a binding contract.
“Rains argues that the bankruptcy court clearly erred in finding him mentally competent to enter into the settlement agreement,” the judge explained. “However, the record contained sufficient evidence to support a finding that Rains understood the nature, purpose and effect of his actions when he agreed to settle with the trustee and the creditor. Witnesses who personally observed Rains during the negotiations reported that Rains participated actively and appeared to have a full understanding of what was transpiring....Rains argued over certain terms and suggested alternatives to those he disliked. After the settlement was negotiated, Rains reviewed the written agreement and asked his attorney questions about it.”
The bankruptcy judge, Rawlinson went on to say, had discretion to weigh the lay testimony of the attendees at the conference against the expert opinions offered by Rains. “In the face of conflicting testimony, the bankruptcy court did not clearly err in discounting the theoretical speculation of Rains’s experts, or in finding that Rains wasmentally competent to enter into the settlement agreement,” the appellate jurist wrote.
Judge Jay S. Bybee and Senior Judge Clifford Wallace concurred in the opinion.
The case is In re Rains, 03-16538.
Copyright 2005, Metropolitan News Company