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• 9TH CIRCUIT COURT

RE: DWIGHT C. LUNDELL; DINAH F.
LUNDELL, debtors,
Appellants,
No. 98-17090
98-17260
v.
D.C. No.
ANCHOR CONSTRUCTION SPECIALISTS,
CV-96-01452-RGS
INC.; LORAL TERRACOM; FOSHAY
ELECTRIC CO., INC.; U.S. POWER &                      OPINION
TELEPHONE SUPPLY COMPANY,
Appellees.

Appeal from the United States District Court
for the District of Arizona
Roger G. Strand, District Judge, Presiding

Argued and Submitted
April 11, 2000--San Francisco, California

Filed September 11, 2000

Before: Alfred T. Goodwin, Melvin Brunetti and
Sidney R. Thomas, Circuit Judges.

Opinion by Judge Thomas

_________________________________________________________________

COUNSEL

Bradley J. Stevens; Phoenix, AZ; for the appellants and cross-
appellees Anchor Construction Specialists, Inc., Foshay Elec-
tric Co., Inc. and U.S. Power & Telephone Supply Co.

Davide Golia; San Diego, CA; for the appellant and cross-
appellee Loral Terracom, Inc.

Merwin D. Grant; Phoenix, AZ; for the appellee and cross-
appellant Dwight C. Lundell.

_________________________________________________________________

OPINION

THOMAS, Circuit Judge:

We are asked to decide whether, upon objection to a proof
of claim filed pursuant to 11 U.S.C. S 501, a bankruptcy court
improperly allocated the burden of proving the invalidity of
the claim on the objector by discounting in its entirety his tes-
timony in support of his objection. We hold that the bank-
ruptcy court properly allocated the burdens of proof and
persuasion.

I

This action arises out of the failure by West Coast Con-
struction ("West Coast"), a construction company formed by
Ronald and Lloyd Hawkins ("the Hawkins"), to complete sev-
eral federal construction projects awarded to it and to subse-
quently pay subcontractors, including Anchor Construction
Specialists, Inc., and three other claimants (collectively,
"claimants" or "appellants"), for their work.

Debtor Dwight Lundell, a childhood friend of the Hawkins,
became involved in West Coast when the Hawkins sought
financial help in starting West Coast. Lundell initially loaned
several hundred thousand dollars to West Coast and acted as
surety for bonds required to obtain federal construction con-
tracts. The Hawkins and Lundell later entered into a clearly
marked partnership agreement, signed by Lundell and nota-
rized by his secretary.

After West Coast failed to complete the federal projects
and pay claimants, claimants sued the Hawkins and Lundell
for breach of contract under a partnership liability theory.
Faced with numerous lawsuits, Lundell filed for Chapter 11
bankruptcy. His case was converted into a Chapter 7 proceed-
ing.

Claimants filed separate proofs of claim pursuant to Bank-
ruptcy Rule 3001 and 11 U.S.C. S 501. Lundell subsequently
filed objections to the proofs of claim pursuant to Bankruptcy
Rule 3007, in which he maintained that certain proofs of
claim were untimely filed and that he was not a partner of
West Coast and therefore not liable for its debts.

The bankruptcy court conducted an evidentiary hearing
during which both the claimants and Lundell presented signif-
icant evidence in support of their respective positions. The
claimants presented evidence of a signed partnership agree-
ment between Lundell and the Hawkins. In disavowing this
signed partnership agreement, Lundell asserted that the press
of business as a heart surgeon prevented him from fully con-
sidering the agreement and realizing that it contained a part-
nership provision. He also maintained that he obtained an oral
rescission of the agreement from the Hawkins and that he
acted only in the capacity of a lender.

The bankruptcy court overruled Lundell's objections to the
proofs of claim. In an oral decision, the court provided a
lengthy and thorough synopsis of the evidence presented at
trial, but made abbreviated findings of fact. In a brief section
reciting findings of fact in connection with Lundell's testi-
mony, the trial court found "incredible" Lundell's contention
that he, "a highly educated and sophisticated physician" who
had been involved in prior partnerships, signed the West
Coast partnership agreement without realizing that he had
done so and without forming the intent to become a partner.
In light of its findings, the bankruptcy court concluded that
Lundell "failed to meet his burden of proof that the partner-
ship debts asserted in the proof of claims of the creditors is
not an estate liability against him as a partner in West Coast."

Lundell appealed the bankruptcy court decision to federal
district court, arguing that the trial court had wrongly placed
upon him the burden of proving that he had not entered into
a partnership agreement with the Hawkins. The district court
agreed. It held that the bankruptcy court "erred in placing the
burden of proof on the debtor" by requiring him not only to
"rebut the presumption of a valid claim but . . . also required
[him] to prove that he had not formed the requisite intent to
form a partnership." It also noted that it had been "hampered
in considering this matter by the lack of specific findings of
fact" in the bankruptcy court's oral decision. The district court
remanded the action to bankruptcy court for more specific
findings of fact and for further proceedings to apply the cor-
rect burden of proof. Claimants appealed.

II

We have jurisdiction to review final orders of a district
court acting in its bankruptcy appellate capacity under either
28 U.S.C. S 158(d) or 28 U.S.C. S 1291. 1 See Stanley v.
Crossland, Crossland, Chambers, MacArthur & Lastreto  (In
re Lakeshore Village Resort, Ltd.), 81 F.3d 103, 105 (9th Cir.
1996). A district court renders a final order when it affirms or
reverses a bankruptcy court's final order. See Vylene Enter-
prises, Inc. v. Naugles, Inc. (In re Vylene Enterprises, Inc.),
968 F.2d 887, 895 (9th Cir. 1992).

However, a district court's order is ordinarily not final
"when the district court remands for further factual findings
related to a central issue raised on appeal." Bonner Mall Part-
nership v. U.S. Bancorp Mortgage Co. (In re Bonner Mall
Partnership), 2 F.3d 899, 904 (9th Cir. 1993). Nevertheless,
we have taken a "pragmatic approach" in determining finality
in light of the "unique nature" of bankruptcy proceedings
where a district court reverses a bankruptcy court decision
and remands for further proceedings. See id. at 903-04. In
such cases, we have balanced several policies in determining
whether a remand order may be considered final:"(1) the
need to avoid piecemeal litigation; (2) judicial efficiency; (3)
systemic interest in preserving the bankruptcy court's role as
the finder of fact; and (4) whether delaying review would
cause either party irreparable harm." Walthall v. U.S., 131
F.3d 1289, 1293 (9th Cir. 1997) (internal quotation marks and
citations omitted).

We have oft considered in the context of the Vylene analy-
sis two narrow exceptions to the finality rule as set forth in
Bonner Mall. See, e.g., Walthall, 131 F.3d at 1293; Foothill
Capital Corp. v. Clare's Food Market (In re Coupon Clearing
Service, Inc.), 113 F.3d 1091, 1098 (9th Cir. 1997). In Bonner
Mall, we held that we could assert jurisdiction even though a
district court has remanded a matter for factual findings on a
central issue if that issue is legal in nature and its resolution
either (1) could dispose of the case or proceedings and obviate
the need for factfinding; or (2) would materially aid the bank-
ruptcy court in reaching its disposition on remand. See In re
Bonner Mall, 2 F.3d at 904 (citing King v. Stanton (In re
Stanton), 766 F.2d 1283, 1288 n.8 (9th Cir. 1985)); see also
Dominguez v. Miller (In re Dominguez), 51 F.3d 1502, 1506-
07 (9th Cir. 1995).

The central issue on appeal is whether the bankruptcy court
wrongly allocated to Lundell the burden of proving that he
was not a general partner of West Coast. Because the resolu-
tion of this issue -- a purely legal issue -- in favor of claim-
ants would both obviate the need for further factfinding and
end the case, we find that our assertion of jurisdiction over
this appeal is proper. Consideration of the Vylene factors does
not dictate otherwise.

III

We review de novo the decision of a district court which
has acted as an appellate court in reviewing a bankruptcy
court's decision on appeal. See Feder v. Lazar  (In re Lazar),
83 F.3d 306, 308 (9th Cir. 1996). We apply the same standard
of review as the district court applied to the bankruptcy
court's decision: findings of fact are reviewed under a clearly
erroneous standard and conclusions of law are reviewed de
novo. See id.

[1] Section 501 of Title 11 of the United States Code
allows creditors a means to present their claims against a
debtor to the bankruptcy court by filing a proof of claim. See
11 U.S.C. S 501. Whether such a claim for which a proper
proof has been filed is "allowable" is a matter for determina-
tion pursuant to 11 U.S.C. S 502 and the procedural rules gov-
erning the bankruptcy courts. These rules and our case law
have put in a place a general procedure to allocate the burdens
of proof and persuasion in determining whether a claim is
allowable.

A proof of claim is deemed allowed unless a party in inter-
est objects under 11 U.S.C. S 502(a) and constitutes "prima
facie evidence of the validity and amount of the claim" pursu-
ant to Bankruptcy Rule 3001(f). See also Fed. R. Bankr. P.
3007. The filing of an objection to a proof of claim "creates
a dispute which is a contested matter" within the meaning of
Bankruptcy Rule 9014 and must be resolved after notice and
opportunity for hearing upon a motion for relief. See Adv.
Comm. Notes to Fed. R. Bankr. P. 9014.

Upon objection, the proof of claim provides "some evi-
dence as to its validity and amount" and is "strong enough to
carry over a mere formal objection without more. " Wright v.
Holm (In re Holm), 931 F.2d 620, 623 (9th Cir. 1991) (quot-
ing 3 L. King, Collier on Bankruptcy S 502.02, at 502-22
(15th ed. 1991)); see also Ashford v. Consolidated Pioneer
Mort. (In re Consol. Pioneer Mort.), 178 B.R. 222, 226
(Bankr. 9th Cir. 1995), aff'd, 91 F.3d 151 (9th Cir. 1996). To
defeat the claim, the objector must come forward with suffi-
cient evidence and "show facts tending to defeat the claim by
probative force equal to that of the allegations of the proofs
of claim themselves." In re Holm, 931 F.2d at 623.

For example, in Holm, we allocated to the debtor-objector
the "initial burden of proof to demonstrate facts tending to
demonstrate [that the claim included unmatured interest
excluded from allowable claims under 11 U.S.C.
S 502(b)(2)]." In re Holm, 931 F.2d at 623. We concluded
that the objector "ha[d] not met this burden" because he had
presented no evidence bearing on the issue of unmatured
interest. Id.

"If the objector produces sufficient evidence to negate one
or more of the sworn facts in the proof of claim, the burden
reverts to the claimant to prove the validity of the claim by a
preponderance of the evidence." In re Consol. Pioneer, 178
B.R. at 226 (quoting In re Allegheny Int'l, Inc. , 954 F.2d 167,
173-74 (3d Cir. 1992)). The ultimate burden of persuasion
remains at all times upon the claimant. See In re Holm, 931
F.2d at 623.

[2] The bankruptcy court did not impermissibly shift the
burden of proof to Lundell to prove that he was not a West
Coast general partner. Indeed, in its oral decision, the bank-
ruptcy court correctly memorialized our prior pronounce-
ments on the allocation of the burdens of proof and persuasion
in determining whether a claim is allowable. The bankruptcy
court created some unnecessary confusion on this issue by
indicating that Lundell had "failed to meet his burden of
proof." However, in context, the bankruptcy court was refer-
ring to Lundell's burden of producing sufficient evidence to
negate one or more of the sworn facts in the proof of claim;
the court was not misallocating the respective burdens of
proof. The record indicates that at all times, the bankruptcy
court understood that the ultimate burden of persuasion was
on the creditor.

The bankruptcy court's findings were not clearly erroneous.
Claimants alleged in their proofs of claim that Lundell was a
West Coast general partner, which is prima facie  valid. The
sole objection raised by Lundell at trial was that he was not
a West Coast partner despite the signed partnership agree-
ment.

[3] To go forward, Lundell was required at trial to produce
evidence sufficient to negate the prima facie  validity of the
filed claim. "In practice, the objector must produce evidence
which, if believed, would refute at least one of the allegations
that is essential to the claim's legal sufficiency. " In re Alle-
gheny Int'l, Inc., 954 F.2d 167, 173-74 (3d Cir. 1992)
(emphasis added); In re Holm, 931 F.2d at 623. Lundell's
case was based on his testimony that he never had intended
to enter into a partnership, had never behaved as though he
were a West Coast partner, and had subsequently rescinded
the partnership agreement. However, the existence of a signed
partnership agreement setting forth both an agreement to
share profits and losses and management of the undertaking
supports claimants' contention that Lundell was a West Coast
general partner. See Security Pac. Nat'l Bank v. Matek, 175
Cal. App. 3d 1071, 1075, 223 Cal. Rptr. 288, 291 (Cal. App.
1986) (where there is written partnership agreement, whether
partnership exists "should be ascertained primarily from the
terms of the agreement"); People v. Park, 87 Cal. App. 3d
550, 564, 151 Cal. Rptr. 146, 151 (Cal. App. 1979) (whether
partnership formed is a "factual issue" determined from the
intent of the parties ascertained from the "terms of the agree-
ment and the surrounding circumstances"); Constans v. Ross,
106 Cal. App. 2d 381, 386-87, 235 P.2d 113, 116-17 (1951).

Such evidence was clearly sufficient to "prove the validity of
the claim by a preponderance of the evidence." See California
State Bd. of Equalization v. Official Unsecured Creditors'
Comm. (In re Fidelity Holding Co., Ltd.), 837 F.2d 696, 698
(5th Cir. 1988).

[4] On cross-examination, Lundell was unable to remember
any of the details of the rescission agreement or conversations
with the Hawkins during which he expressed his desire to
withdraw from the partnership agreement. Thus, the bank-
ruptcy court was justified in discounting Lundell's testimony,
finding "incredible" his claim that he received, signed and
notarized the partnership agreement "without clearly forming
the intention in his mind that he was thereby becoming a part-
ner in West Coast Construction."2

Thus, based on the evidence, the bankruptcy court did not
err in concluding that Lundell failed to bear his burden of
coming forward with facts sufficient to rebut the allegations
in the claims and truncating the burden-shifting analysis at
that juncture.3 See In re Allegheny, 954 F.2d at 173-74; In re
Holm, 931 F.2d at 623. In the absence of any credible testi-
mony refuting the validity of the signed partnership agree-
ment, claimants did not bear any further burden to present
additional evidence to prove the validity of the partnership
between Lundell and the Hawkins. See, e.g., Starnes v. U.S.
(In re Starnes), 231 B.R. 903, 912 (N.D. Tex. 1998).

In light of the evidence presented at trial and the parties'
arguments, the bankruptcy court properly overruled Lundell's
objections to claimants' filed proofs of claim. We therefore
reverse the decision of the district court and remand with
instructions to reinstate the order of the bankruptcy court
overruling Lundell's objections to the proofs of claim.

REVERSED
_______________________________________________________________

FOOTNOTES

1 Under 28 U.S.C. S 158(d), the panel has jurisdiction over "appeals
from all final decisions, judgments, orders and decrees entered" under sec-
tions 158(a) or (b). Similarly, 28 U.S.C. S 1291 provides that "[t]he courts
of appeals . . . shall have jurisdiction of appeals from all final decisions
of the district courts of the United States, . . . except where a direct review
may be had in the Supreme Court."2 It was not improper for the bankruptcy court to evaluate the credibility
of Lundell's testimony. Courts have noted that "[i]n practice, the objector
must produce evidence which, if believed, would refute at least one of the
allegations" that is the basis of the proof of claim. See In re Consol. Pio-
neer, 178 B.R. at 226 (quoting In re Allegheny, 954 F.2d at 173-74); In
re Holm, 931 F.2d at 623. However, such language does not translate into
a command that the trial court accept as true all evidence submitted by the
objector, especially if presented in an evidentiary hearing in which both
parties are provided with ample opportunity to present evidence.
3 Lundell also claims that the bankruptcy court's findings of fact were
insufficient to support its decision. However, the trial court's findings of
fact, combined with its lengthy synopsis of the trial testimony, was suffi-
cient. See Unt v. Aerospace Corp., 765 F.2d 1440, 1444 (9th Cir. 1985)
(findings must be "explicit enough to give the appellate court a clear
understanding of the basis of the trial court's decision, and to enable it to
determine the ground on which the trial court reached its decision"); Fed.
R. Civ. P. 52(a). As in Unt, while the bankruptcy court's findings are "cer-
tainly not well done," the record, combined with the factual findings made
by the court, are sufficient to determine the basis for the trial court's deci-
sion. See id.