In re Burley

• Decision Date: 28 December 1982
• Docket Number: Bankruptcy No. LA 80-08761-RO.,BAP No. CC-81-1150-KHG
• Citation: 27 BR 603
• Parties: In re James A. BURLEY and Elsie M. Burley, Debtors. B.H. BRINEY and Lucile Briney, Appellants, v. James A. BURLEY and Elsie M. Burley, Appellees.
• Court: U.S. Bankruptcy Appellate Panel, Ninth Circuit

27 B.R. 603 (1982)

In re James A. BURLEY and Elsie M. Burley, Debtors B.H. BRINEY and Lucile Briney, Appellants, v. James A. BURLEY and Elsie M. Burley, Appellees.

BAP No. CC-81-1150-KHG, Bankruptcy No. LA 80-08761-RO.

United States Bankruptcy Appellate Panels of the Ninth Circuit.

Argued January 21, 1982.

Decided December 28, 1982.

Yale M. Harlow, Law Offices of Richard M. Moneymaker, Los Angeles, Cal., for appellants.

No appearance for appellees.

Before KATZ, HUGHES and GEORGE, Bankruptcy Judges.

OPINION

KATZ, Bankruptcy Judge:

Appellants appeal from an order of the bankruptcy court denying their motion to vacate the order of discharge entered in the bankruptcy proceedings filed by the Burleys.

The salient facts are that the Burleys filed a Petition for Relief Under Chapter 7 of the Bankruptcy Code in the Central District of California.

The Brineys are creditors of the debtors as a result of a judgment having been entered in their favor in the state courts of Colorado and are the debtors' only creditors.

Upon receiving notice of the filing of the bankruptcy, which advised them of the time within which to file complaints objecting to the discharge or to determine dischargeability of debt, the Brineys timely filed such a complaint in the bankruptcy court for the District of Colorado. The clerk of the bankruptcy court in the Central District of California was notified of the timely filing of the complaint.

Thereafter, the Burleys moved in the Colorado court to dismiss the complaint for improper venue or in the alternative to transfer the proceeding to the California court. The motions were denied and the matters were set for trial.

Subsequently the California bankruptcy court entered the discharge of the Burleys. A motion under F.R.C.P. 60(b) and Bankruptcy Rule 924 to vacate the order of discharge was made by appellants and denied. The court below denied the motion on the grounds that the Colorado court had no authority to retain the proceedings under applicable law.

In its decision, In re Burley, 11 B.R. 369, the court concluded that it was free to grant the debtors a discharge despite the timely filed complaints pending in Colorado. The court below recognized that the Colorado court had jurisdiction to accept, process and file the creditors' complaint, but that venue was improper and therefore the Colorado court could not have retained the proceedings for ultimate disposition.

We agree with the trial court on the determination that the Colorado court had jurisdiction over the Brineys' complaint. We disagree on the venue issue and therefore REVERSE and REMAND with instructions to grant the motion of appellants to vacate the Order of Discharge.

In determining the venue issue, one must look to 28 U.S.C. §§ 1473, 1475 and 1477, as well as legislative history.

28 U.S.C. § 1473 provides, in subdivision (a) thereof:

"Except as provided in subsections (b) and (d) of this section, a proceeding arising in or related to a case under title 11 may be commenced in the bankruptcy court in which such case is pending." Emphasis added.

The word "may" is permissive, indicating that while a proceeding may be filed in the court wherein the case is pending it may also be filed in another court.

The term "proceeding" in the Code is used in its broadest terms to include anything that occurs in a case. H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 445 (1977), U.S.Code Cong. & Admin.News 1978, p. 5787.

28 U.S.C. § 1477(a) states:

"The bankruptcy court of a district in which is filed a case or proceeding laying venue in the wrong division or district may, in the interest of justice and for the convenience of the parties, retain such case or proceeding, or may transfer, under section 1475 of this title, such case or proceeding to any other district or division."

These matters, taken together, indicate that any proceeding which includes disputes relating to administrative matters may be heard in a bankruptcy court other than the court in which the case is pending if it is in the interest of justice and for the convenience of the parties to do so.

We do not have before us the record of the Colorado court of the hearing on the motion to dismiss filed by the Burleys. Hence, whether the Colorado court abused its discretion in not granting that motion, thereby retaining venue, is not before us.

What is before us is the question of whether the California court abused its discretion in refusing to set aside the discharge. In basing its ruling on its belief that venue was improper, we think the court below was in error.

REVERSED and REMANDED with instructions.

HUGHES, Bankruptcy Judge, dissenting:

I respectfully dissent because I believe the trial court properly denied the creditors' motion to vacate the debtors' order of discharge.

I.

The essential facts, which are few, bear reiteration. The Burleys filed a petition under Chapter 7 of the Bankruptcy Code in the Central District of California. Their only creditors, the Brineys, filed a two-count complaint (1) objecting to discharge and (2) seeking an order holding their judgment nondischargeable in bankruptcy. The Brineys' complaint was filed in the District of Colorado.

The Burleys appeared before the Colorado bankruptcy court on a motion to dismiss or to change venue to California. The motion was denied by the Colorado court and the Burleys answered the complaint.

Meanwhile, the California court fixed the last date for filing objections to discharge. Bankruptcy Rule 404(a). A copy of the complaint filed in Colorado was lodged with the California court before the bar date, and the Brineys' attorney wrote to the California court requesting that entry of discharge be delayed, but no objection to discharge was ever filed in California.

Orders of discharge were entered by the California court pursuant to 11 U.S.C. § 727 on March 19, 1981 and the Brineys' moved that court to vacate those orders pursuant to Rule 60(b), Fed.R.Civ.P., on March 27, 1981. The trial court denied the motion and the Brineys appealed.

That part of the Colorado complaint seeking an order holding the Brineys' judgment to be nondischargeable pursuant to 11 U.S.C. § 523 was not affected by the motion below and is not before us.

II.

The trial court summarized its reasons for denying the motion to vacate the Burleys' discharge orders. I summarize the summary:

The Colorado Court (1) had jurisdiction over the complaint objecting to discharge, but (2) lacked proper venue. Therefore, the trial court concluded, the motion should be denied. It also held that the facts did not justify exercise of discretion "to permit continuation of the `proceeding' in Colorado."

I would affirm the order appealed on the ground that appellants have failed to establish that the trial judge abused his discretion, the standard of review for orders made on Rule 60(b) motions. Plotkin v. Pacific Tel. and Tel. Co., 688 F.2d 1291 (9th Cir.1982). I would affirm notwithstanding my conclusion that the premises for the order were erroneous. Unlike the trial court, I would hold that the Colorado court lacked jurisdiction over the Burleys' discharge in bankruptcy. Furthermore, I believe that the trial court was not competent to question the Colorado court's venue rulings. Unlike the majority of this panel, I believe that the appeal ultimately turns on jurisdiction rather than venue.

I attempt to show in Part III that the Brineys failed to justify the relief they sought, in Part IV that the conflicting venue analyses of the trial court and the panel are beside the point; and in Part V that, contrary to the assumptions of the trial court and the panel, the Colorado court did not acquire jurisdiction to deny discharge to the Burleys.

III.

The Brineys did not articulate a legal theory that would justify any interference with the Burleys' order of discharge in California, whether before or after it was entered. The Brineys first sought delay of entry of the discharge order and then vacation of the order on the following grounds: 1. The objection to discharge was timely filed in Colorado and notice of the Colorado filing was timely given to the California court. 2. The Colorado court had jurisdiction over the objection to discharge. 3. The Colorado court had denied a motion to dismiss or change venue. I am unable to determine why the foregoing factors, accepted as true, affect the Burleys' discharge in California.

It is arguable that a Colorado judgment denying discharge to the Burleys would preclude the California court from entering discharge on res judicata grounds. Bluthenthal v. Jones, 208 U.S. 64, 28 S.Ct. 192, 52 L.Ed. 390 (1908). There was no judgment, however, so res judicata does not apply.

It is also arguable that the doctrine of federal comity is applicable. See, generally Pacesetter Systems, Inc. v. Medtronic, Inc., 678 F.2d 93 (9th Cir.1982) but rulings under that doctrine are reversed only for an abuse of discretion. 678 F.2d at 95.

I conclude that there is no showing that the trial court should have withheld entry of discharge or that it abused its discretion in denying the motion to vacate the order after entry.

Nevertheless, I address the issues of venue and jurisdiction because the panel majority rests its decision of reversal on them.

IV.

The panel and the trial court both consider venue determinative and both assume that the judgment of a court of improper venue may be ignored. (They differ in their conclusions, the panel holding that the Colorado venue ruling was correct). Both analyses are flawed because they treat rulings on venue as subject to collateral attack. To the contrary, venue is of concern only to the court whose venue is challenged, and to an appellate court on direct appeal.

Judgments may be collaterally attacked only for want of jurisdiction. Windsor v. McVeigh, 93 U.S. 274, 282-83, 23 L.Ed. 914 (1876). As was stated in Yale v. National Indemnity Co., 602 F.2d 642 (4th Cir.1979), at 644,...