In re Griner, Bankruptcy No. 98-13697-MAM-13. Adversary No. 99-1030.
| Decision Date | 30 July 1999 |
| Docket Number | Bankruptcy No. 98-13697-MAM-13. Adversary No. 99-1030. |
| Citation | 240 BR 432 |
| Parties | In re Sidney Oliver GRINER and Peggy Joann Riley Griner, Debtors. The Travelers Indemnity Company of Illinois, Inc. and Crawford & Company, Inc., Plaintiffs, v. Sidney O. Griner, Defendant. |
| Court | U.S. Bankruptcy Court — Southern District of Alabama |
John A. Lockett, Jr., Selma, Alabama, for debtors.
Michael Leo Hall, Birmingham, Alabama, for Travelers Indemnity Co., et al.
Jeffrey Hartley, Mobile, Alabama, for Chapter 13 Trustee.
ORDER AND JUDGMENT DENYING COMPLAINT FOR PERMANENT INJUNCTION
This matter came before the Court on the trial of the complaint of The Travelers Indemnity Company of Illinois, Inc. and Crawford & Company, Inc. for a permanent injunction. The Court has jurisdiction to hear this matter pursuant to 28 U.S.C. §§ 1334 and 157 and the Order of Reference of the District Court. This is a core proceeding pursuant to 28 U.S.C. § 157(b) and the Court has the authority to enter a final order. For the reasons indicated below, the complaint of The Travelers Indemnity Company and Crawford & Company for a permanent injunction is denied.
Sidney and Peggy Griner filed for relief pursuant to chapter 13 of the Bankruptcy Code on October 15, 1998. Sidney Griner had filed a lawsuit on August 22, 1996 against The Travelers Insurance Company, Crawford & Company and other defendants (collectively referred to as "Travelers"). Sidney O. Griner v. The Travelers Insurance Company, et al., CV-96-1608, Circuit Court for Montgomery County, Alabama. This suit was based on the alleged failure of Travelers to treat Sidney Griner's work related injury. The Griners indicated in their bankruptcy statement of affairs that they were a party in the state court suit. They did not list the state court suit in their bankruptcy schedules as their personal property, as an exempt asset, or in any other way. None of the defendants in the state court suit were creditors of the Griners at the time they filed their bankruptcy case.
The Griners' chapter 13 plan was confirmed on December 29, 1998. Under the plan, the Griners' unsecured creditors were to receive a dividend equaling approximately 1% of their claims over a five-year period.
Sidney Griner's state court suit was set for trial on March 1, 1999. On February 24, 1999, Travelers filed a complaint in this Court to permanently enjoin Sidney Griner from prosecuting his state court suit along with a motion for a preliminary injunction and temporary restraining order. This Court denied the motion of Travelers for a preliminary injunction and temporary restraining order. Sidney Griner's state court suit went to trial and on March 5, 1999, a jury found in his favor. They assessed $300,000 compensatory and $200,000 punitive damages against the defendants.
This Court held a trial on the complaint of Travelers for a permanent injunction on June 24, 1999. On that same date, the Griners filed amendments to their schedules and their chapter 13 plan. In Schedule B they listed the state court suit as their personal property with an unknown value and in Schedule C they elected to exempt the state court suit in an unknown amount. The Griners amended their chapter 13 plan to provide that their creditors may receive a greater dividend depending on the final outcome of the state court suit.
To obtain a permanent injunction, the plaintiff must: (1) succeed on the merits of its claim; (2) show that the public interest will be served; (3) show that it will incur continuing irreparable harm without the protection of an injunction; and (4) show that the relative harm it would incur without the injunction outweighs any harm to the defendant. Zardui-Quintana v. Richard, 768 F.2d 1213 (11th Cir.1985) (); Sierra Club v. U.S. Army Corps of Engineers, 935 F.Supp. 1556, 1570 (S.D.Ala.1996) (). The crucial factor in this case is factor one: does Travelers succeed on the merits of its case. If the Court finds that Traveler's legal arguments are correct, then Travelers "succeeds on the merits of its claim." If factor one is met, the remaining three factors fall in line and Travelers is entitled to a permanent injunction. If factor one is not met, then no permanent injunction is appropriate. Travelers provided two alternative bases for its claim. Both will be addressed below.
Sidney Griner's prepetition lawsuit against Travelers is property of the Griners' bankruptcy estate. 11 U.S.C. § 541(a), Miller v. Shallowford Community Hosp., Inc. 767 F.2d 1556, 1559 (11th Cir.1985). Travelers argues that because the suit is property of the Griners' bankruptcy estate, only the chapter 13 trustee has standing to pursue it and Sidney Griner should therefore be permanently enjoined from further litigating the suit.
The cases are divided on whether a chapter 13 debtor has standing to sue or be sued. See, Donato v. Metropolitan Life Ins. Co., 230 B.R. 418, 425 (N.D.Cal.1999) (). For the reasons stated below, this Court holds that chapter 13 debtors have concurrent jurisdiction with the chapter 13 trustee to litigate claims such as Sidney Griner's suit. Travelers asserts that the Court should follow the Alabama case of Cooks v. Jim Walter Homes, Inc., 695 So.2d 19 (Ala.Civ.App.1996). This Court concludes that the Cooks case, relying primarily upon cases dealing with chapter 7 debtors, is incorrect as to chapter 13 debtors and should not be applied to chapter 13 cases. See, Cooks, 695 So.2d at 21 ().1
Chapter 13 debtors are provided certain rights and powers to the exclusion of the chapter 13 trustee pursuant to 11 U.S.C. § 1303.2 In general, these rights pertain to the use, sale and lease of property. Chapter 13 trustees are also given powers under the Bankruptcy Code in § 1302. Some of these powers are also exclusive. For example, the trustee must "be accountable for all property received," and "make a final report and file a final account of the administration of the estate." The trustee also has the power to perform acts which debtors and creditors may also perform, i.e., appear and be heard at any hearing concerning valuation of property or confirmation or modification of a plan or ensure that the debtor makes plan payments timely. As is obvious, the list of powers in §§ 1302 and 1303 does not specifically enumerate all of the powers which might be necessary when a person is in bankruptcy for up to a five-year period. Gaps exist. Who can bring nonbankruptcy federal or state law suits against third parties? Who can defend these suits? Who should file tax returns? Who can avoid liens? Obviously, someone must perform these functions. What is to happen to items not specifically enumerated in sections 1302 or 1303?
There are several possible answers to this question. Either the trustee holds some or all powers not given to the debtor in § 1303; the debtor holds some or all of the powers not given to the trustee in section 1302; or the parties hold these powers concurrently. The Court concludes that the trustee and debtor concurrently hold the power to sue as to nonbankruptcy federal and state law claims such as Mr. Griner's suit.
This result fits the framework of chapter 13 bankruptcy very well. Chapter 13 is a hybrid of chapters 7 and 11. Chapter 13 is more like chapter 11 () than chapter 7 (). Chapter 13 is available to individuals who earn a regular income. Debtors propose a plan by which they will repay some or all of their debts through regular payments to a chapter 13 trustee. The trustee pays the sums collected to creditors according to the plan for a period of up to five years. The trustee is not involved in the daily lives of the debtors. He or she does not take possession of debtors' nonexempt assets or monitor ordinary course usage of assets. The trustee does not receive any of the debtors' earnings except what is paid to him or her as prescribed by the chapter 13 plan.
In chapter 11 cases, unless a trustee has been appointed by the court, there is no trustee. The debtor handles all of his or her own affairs. This includes use, sale or lease of all assets. In chapter 7, a trustee is automatically appointed in each case. The debtor relinquishes all authority over his or her nonexempt assets.
A chapter 7 trustee has one power which is specifically not given to a chapter 13 trustee. Under 11 U.S.C. § 704(l), a chapter 7 trustee "shall collect and reduce to money property of the estate." "Property of the estate" is all nonexempt assets in which the debtor had an interest before bankruptcy, such as a cause of action for a work related injury. 11 U.S.C. § 541. This power therefore compels a chapter 7 trustee to take over all nonexempt lawsuits of the debtor.
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