Boone, In re

• Decision Date: 23 May 1995
• Docket Number: No. 94-4252,94-4252
• Citation: 52 F.3d 958
• Parties: , Bankr. L. Rep. P 76,509 In re Daniel BOONE and Sara Boone, Debtors. COMMUNITY BANK OF HOMESTEAD, Plaintiff-Appellant, v. Daniel BOONE, Sara Boone, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 958

52 F.3d 958

27 Bankr.Ct.Dec. 372, Bankr. L. Rep. P 76,509

In re Daniel BOONE and Sara Boone, Debtors COMMUNITY BANK OF HOMESTEAD, Plaintiff-Appellant, v. Daniel BOONE, Sara Boone, Defendants-Appellees.

No. 94-4252.

United States Court of Appeals Eleventh Circuit.

May 23, 1995.

Robert M. Hustead, P.A., Homestead, FL, for appellant.

Barbara Lynn Phillips, Phillips & Phillips, P.A., Miami, FL, for appellees.

Appeal from the United States District Court for the Southern District of Florida.

Before COX and BLACK, Circuit Judges, and FAY, Senior Circuit Judge.

PER CURIAM:

Daniel and Sara Boone (the Boones) brought a bankruptcy adversary proceeding against Community Bank (the Bank), claiming that the Bank had tortiously interfered with the sale of the Boones' house. The bankruptcy court awarded the Boones actual and punitive damages. The district court affirmed the judgment, and the Bank appeals. Concluding that there is no federal jurisdiction over the claim, we reverse and remand with instructions to vacate the bankruptcy court's judgment and dismiss the claim for want of jurisdiction.

Background

In 1985, the Boones purchased a house in Homestead, Florida, with a $59,000 mortgage loan from the Bank. Three years later, the Bank lent $45,000 to the Boones' wholly owned corporation, Daniel Boone Farms, Inc. The Boones guaranteed the corporate loan. The guarantee was unsecured, but the home mortgage agreement contained a "dragnet clause" that purported to secure not only the mortgage debt but also all future debts the Boones would owe the Bank. In June 1989, Daniel Boone Farms defaulted on the Bank's loan, making the Boones individually liable for the corporate debt.

Also in June 1989, the Boones contracted to sell their house to Mr. and Mrs. Douglas Ulmer for $91,000. A closing date was set for late July. A week after entering the contract to sell their house, the Boones individually filed a petition in bankruptcy under chapter 7. The mortgage debt at the time of filing was $53,000, and the Boones owed $45,783 on the guarantee.

Shortly before the scheduled closing on the sale of the Boones' house, the Bank sent the closing agent an "estoppel letter" informing the agent of the outstanding balance on the mortgage. Two days later, and only four days before closing, the Bank sent a second estoppel letter claiming $97,664 of the proceeds from the sale. The higher figure represented the sum of the mortgage debt and the debt on the corporate guarantee. The Bank claimed that the dragnet clause of the mortgage agreement effectively secured the debt owed on the guarantee.

Because it appeared from the estoppel letter that the Boones would receive no proceeds from the sale of their house, they refused to complete the closing. At the time of trial in the bankruptcy court, the house remained unsold, and the Boones continued to make mortgage payments on it. To that time, the Boones had paid about $10,000 in additional mortgage payments, homeowners' insurance, and property taxes because they had not sold the house as scheduled.

The Boones brought a bankruptcy adversary proceeding against the Bank, seeking a determination of the extent of the Bank's lien on their house, an order compelling the Bank to accept that amount in satisfaction of the lien, and compensatory and punitive damages for the Bank's tortious interference with the contract for the sale of their house. The tortious interference claim rests on Florida law. The bankruptcy court rejected the Bank's challenge to its jurisdiction over the state-law claim and conducted separate trials on liability and damages. The court awarded the Boones $10,199 in compensatory damages and $30,596 in punitive damages on their tortious interference claim.

The Bank appealed to the district court, challenging the bankruptcy court's jurisdiction to render judgment on the tort claim. Concluding that the tortious interference claim was a core matter "arising in a case under title 11," 28 U.S.C. Secs. 157(b)(1), 1334(b), the district court affirmed. The court reasoned that the claim arose in a title 11 case because the claim arose after the Boones filed a petition in bankruptcy. The Bank appeals.

Issue and Standard of Review

The Bank contends that the district court had no bankruptcy jurisdiction over the Boones' state-law tort claim. ¹ This court reviews de novo the district court's conclusions of law. Miller v. Kemira, Inc. (In re Lemco Gypsum, Inc.), 910 F.2d 784, 786 (11th Cir.1990).

Discussion

Title 28, section 1334(b) creates federal jurisdiction over "civil proceedings arising under title 11 or arising in or related to a case under title 11." Thus, for federal bankruptcy jurisdiction to exist, a case must at minimum "relate to" a case under title 11. Wood v. Wood (In re Wood), 825 F.2d 90, 93 (5th Cir.1987).

The usual articulation of the test for determining whether a civil proceeding is related to bankruptcy is whether the outcome of the proceeding could conceivably have an effect on the estate being administered in bankruptcy.... An action is related to bankruptcy if the outcome could alter the debtor's rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate.

In re Lemco, 910 F.2d at 788 (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.1984)); see also Celotex Corp. v. Edwards, --- U.S. ----, ----, 115 S.Ct. 1493, 1499, 131 L.Ed.2d 403 (1995) (citing Pacor, Inc. with approval, although not explicitly adopting its relatedness test).

The Boones' claim against the Bank for intentional interference with the sale of their house falls outside even the broad sweep of section 1334(b) related-to jurisdiction. The Boones fail to proffer any effect that the outcome of the tortious interference claim could have on their bankruptcy estate. The conduct giving rise to the claim occurred after the petition in bankruptcy, and therefore the cause of action is not property of the estate. See 11 U.S.C. Sec. 541(a). Accordingly, any damages would belong solely to the Boones. Moreover, because the Boones sought liquidation under chapter 7 rather than reorganization under chapter 11 or 13, the financial boon provided by any damage...