In re Mirzai

In In re Mirzai (C.D.Cal. 2001) 271 B.R. 647, the creditor's claim was disallowed solely on a procedural ground. There, the creditor corporation obtained a judgment in state court against the debtor, and then filed a claim in bankruptcy court pursuant to the state court judgment. The bankruptcy court disallowed the claim because the creditor corporation had earlier been suspended for nonpayment of taxes and thus lacked standing to assert the claim. The debtor thereafter sought to enjoin the creditor from enforcing its state court judgment by asserting the preclusive effect of the bankruptcy court's later disallowance of the creditor's claim. The bankruptcy court denied the debtor's request for preliminary injunction. The United States District Court held that the bankruptcy court's order disallowing the creditor's claim was not entitled to the preclusive effect of res judicata and did not prevent the creditor from collecting on the state court judgment. The court reasoned that the order disallowing the claim was not final for purposes of res judicata because the bankruptcy had been dismissed before discharge. ( In re Mirzai, supra, 271 B.R. at pp. 652-653.)