In re Barsness

• Decision Date: 19 December 2008
• Docket Number: Adversary No. 08-3063.,Bankruptcy No. 08-31465.
• Citation: 398 B.R. 655
• Parties: In re: Pamela Rae BARSNESS, Debtor. Pamela Rae Barsness, Plaintiff, v. Wilshire Credit Corporation, formerly identified as "Wilshire Mortgage," Defendant.
• Court: U.S. Bankruptcy Court — District of Minnesota

Page 655

398 B.R. 655

In re: Pamela Rae BARSNESS, Debtor Pamela Rae Barsness, Plaintiff, v. Wilshire Credit Corporation, formerly identified as "Wilshire Mortgage," Defendant.

Bankruptcy No. 08-31465.

Adversary No. 08-3063.

United States Bankruptcy Court, D. Minnesota.

December 19, 2008.

Pamela Rae Barsness, pro se.

ORDER DISMISSING ADVERSARY PROCEEDING WITHOUT PREJUDICE, FOR WANT OF JURISDICTION UNDER 28 U.S.C. §§ 1334(a)-(b)

GREGORY F. KISHEL, Bankruptcy Judge.

This adversary proceeding was brought in a bankruptcy case under Chapter 7 that had been commenced by Pamela Rae Barsness ("the Debtor"). Acting pro se, the Debtor had filed a voluntary petition on March 31, 2008. On April 23, 2008, the Debtor, again acting pro se, submitted a document to the Court, entitled "Injunctive relief request to the courts and Statement of Intention." In the text of that document, the Debtor "pray[ed] to the court for injunctive relief from the court to stop Wilshire Mortgage and/or its successors and/or assigns from any foreclosure proceeding in regards to" certain real estate. In the balance of that document, the Debtor complained that "Wilshire Mortgage" had failed to give her proper notice in connection with a foreclosure proceeding, had "refused to work with her situation," and had not given her any "communications to resolve payment issues" despite her having "on many occasions ... tried to work with Wilshire." Near the end of the document she stated:

It is Pamela Rae Barsness [sic] desire to redeem her home or liquidate the home and requests 24 month stay to do so from the courts.

The Clerk of Bankruptcy Court treated this document as a complaint to commence an adversary proceeding, FED. R. BANKR. P. 7001, filed it, and issued a summons.

On June 17, 2008, an answer to the Debtor's complaint was filed, naming "Wilshire Credit Corporation" as the answering defendant.¹ A scheduling conference under FED. R. BANKR. P. 7016 was conducted on June 18, 2008. During the conference, Wilshire's counsel advised that her client had held a mortgage against the Debtor's home and that a sheriff's sale in foreclosure of the mortgage had been conducted on October 4, 2007. She also stated that the deadline under Minnesota law for the Debtor to redeem from the sale had been April 4, 2008. Finally, she maintained that any extension of the redemption period granted under bankruptcy law, i.e., 11 U.S.C. § 108(b), had run out six weeks earlier.

Wilshire's counsel stated that she intended to make a motion for summary judgment as to the legal sufficiency of the foreclosure proceedings and the Debtor's request for an extension of her redemption period. The Debtor requested additional time to retain an attorney. She was granted that by an order entered on June 19, 2008. Wilshire's counsel was instructed to defer the preparation and service of her motion until the Debtor had had an opportunity to retain counsel. A notice of appearance by an attorney on behalf of the Debtor was not timely filed. A scheduling order was entered on July 30, 2008, setting deadlines for the completion of discovery and the filing of dispositive motions.

Wilshire's counsel filed a motion for summary judgment on October 3, 2008, giving notice of a hearing to be held on November 19, 2008. On October 31, 2008, the Debtor filed a document purporting to unilaterally dismiss this adversary proceeding. Via an order entered on November 4, 2008, the Court declined to dismiss, citing the requirement of FED. R. CIV. P. 41(a) that dismissal be sought via stipulation or formal motion. When the Court called for hearing on Wilshire's motion as scheduled, there was no response to the motion on file. Wilshire appeared by its attorney, Rebecca F. Schiller. The Debtor appeared pro se.²

In their initial remarks, both participants referred to a "motion for dismissal" made by the Debtor. No such document appeared in the electronic-format court file for this adversary proceeding, as of then. During a recess, a search revealed that the Debtor had presented a document entitled "Plaintiffs [sic] Motion for Dismissal" in hard-copy format to a clerk at the front desk of the Bankruptcy Court in St. Paul at 2:49 p.m. on November 18. For reasons not immediately clear, the document had not been scanned, filed, or brought to the attention of the undersigned.

After reviewing the tersely-worded "Motion for Dismissal" and hearing the parties' positions on it, the Court denied it as to all of the Debtor's stated bases for dismissal, but one. That one, "Improper Jurisdiction," was reserved and taken under advisement. This was done because of the protected nature of this issue, in the federal courts, and the especial sensitivity it posed for the substantive issues at bar, the alignment of the two parties, and their posture in the context of a now-closed bankruptcy case under Chapter 7.

Jurisdiction over bankruptcy cases and proceedings is granted to the federal courts by 28 U.S.C. §§ 1334(a)-(b). Specialty Mills, Inc. v. Citizens State Bank, 51 F.3d 770, 773 (8th Cir.1995). The statute vests the original jurisdiction in the district court. In turn, the district court is empowered to refer "any or all cases under [the Bankruptcy Code] and any or all proceedings arising under [the Bankruptcy Code] or arising in or related to a case under" the Bankruptcy Code to the bankruptcy judges for the district. 28 U.S.C. § 157(a). (In this district, the reference is accomplished by LOC. R. BANKR.P. (D.MINN.) 1070-1.) The bankruptcy judges for a district collectively "constitute a unit of the district court to be known as the bankruptcy court for that district." 28 U.S.C. § 151. The bankruptcy judges, then, act under the jurisdiction of the district court to preside over all cases and proceedings referred by the district court to them. Specialty Mills, 51 F.3d at 773. The bankruptcy judges' exercise of that jurisdiction is subject to the limitations on the authority to order entry of a final judgment that are imposed by 28 U.S.C. §§ 157(b)-(c). Those limitations are outlined by a statutory distinction between "core proceedings" and "related proceedings" in bankruptcy, which are assumed to correspond to the categories identified in 28 U.S.C. § 1334(b).

Since this framework was created in the Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub.L. No. 98-353, the courts have usually analyzed jurisdictional issues in a sequential manner, by ascertaining the status of a proceeding as "core" or "related."

"Core proceedings ... are those which arise only in bankruptcy or involve a right created by federal bankruptcy law." Specialty Mills, 51 F.3d at 773. See also In re McAlpin, 278 F.3d 866, 868 (8th Cir.2002). Almost inevitably, they arise directly out of one of the two central functions of bankruptcy: the administration of a bankruptcy estate—the trustee's recovery and amassing of assets, and the determination of which claimants will receive the value of the estate and in which measure—or the grant of discharge to the debtor. See enumeration in 28 U.S.C. §§ 157(b)(2)(A)-(P).

The requests for relief in the Debtor's letter-complaint did not commence a core proceeding in her bankruptcy case. Any challenge she made to Wilshire's compliance with governing law during its foreclosure proceedings was to be decided exclusively with reference to Minnesota authority, under statute and case law. The Bankruptcy Code, Title 11 of the United States Code, does not speak at all to the foreclosure process here. Wilshire's foreclosure procedure was commenced under state law months before the Debtor filed for bankruptcy. Federal bankruptcy law contains no provision under which a court could grant the Debtor's request for a "24 month stay" of Wilshire's efforts to vindicate its status as foreclosing mortgagee, either.³

Under the current posture of the Debtor's bankruptcy case, neither of her requests for relief constitute a "related proceeding" either. Status as "related to" a bankruptcy case turns on "whether the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy." Celotex Corp. v. Edwards, 514 U.S. 300, 308, 115 S.Ct. 1493, 131 L.Ed.2d 403 (1995) (emphasis added). The statute has been construed as a grant of fairly broad jurisdiction. In re Farmland Indus., Inc., 378 B.R. 829, 833 (8th Cir. BAP 2007) (citing Specialty Mills, 51 F.3d at 773). Nonetheless, to qualify as "related" and thus within the bankruptcy jurisdiction, a proceeding must portend an outcome that in some way "impacts upon the handling and administration of the bankrupt estate." Celotex Corp. v. Edwards, 514 U.S. at 308, 115 S.Ct. 1493.

The outcome of this adversary proceeding could have no such impact, because there is no bankruptcy estate in existence or under administration at this time. When she filed for Chapter 7, the Debtor claimed all of her scheduled assets as exempt, including her interest in the real estate that had been subject to Wilshire's mortgage. No party in interest objected to those claims of exemption, so the exemptions were allowed. This, in turn, revested the Debtor with her interest in the real estate, if any she had; it was not property of the bankruptcy estate thereafter.⁴

After that, on May 30, 2008, the trustee of the Debtor's bankruptcy estate filed a notice of no-asset case, signifying that she had found no assets for administration. The Debtor then received a discharge of debt on July 11, 2008. On July 25, 2008, the Court closed the case and discharged the trustee. The closing resulted in the estate's abandonment of all other assets scheduled for the case, by operation of law, and their revesting in the Debtor. 11 U.S.C. § 554(c).

A proceeding in which a debtor in bankruptcy is challenging the enforceability of a mortgagee's rights in relation to its real property collateral can be a related proceeding for the purposes of the bankruptcy jurisdiction. However,...