In re Heape, 90-1446-C

• Decision Date: 27 November 1991
• Docket Number: No. 90-1446-C,Adv. No. 89-5170.,Bankruptcy No. 86-10096,90-1446-C
• Citation: 134 BR 20
• Court: U.S. District Court — District of Kansas
• Parties: In re Curtis Neal HEAPE and Billie Jean Heape, Debtors. Curtis Neal HEAPE and Billie Jean Heape, Plaintiffs, v. FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF INDEPENDENCE, KANSAS, Defendant.

134 B.R. 20 (1991)

In re Curtis Neal HEAPE and Billie Jean Heape, Debtors Curtis Neal HEAPE and Billie Jean Heape, Plaintiffs, v. FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF INDEPENDENCE, KANSAS, Defendant.

No. 90-1446-C, Bankruptcy No. 86-10096, Adv. No. 89-5170.

United States District Court, D. Kansas.

November 27, 1991.

Donald B. Clark, Wichita, Kan., for appellants.

Mary P. Hesse, Redmond, Redmond & Nazar, Wichita, Kan., for appellee.

MEMORANDUM AND ORDER

CROW, District Judge.

This case comes before the court upon Curtis Neal Heape and Billie Jean Heape's appeal from the decision of the bankruptcy court. The Heapes received a discharge of their debts under Chapter 7 on February 2, 1987. The Heapes subsequently divorced. Following the Heapes' divorce, a dispute developed between Billie Heape and First Federal Savings and Loan Association of Independence, Kansas (First Federal) over $4,647.53 deposited in a savings account at First Federal. The Heapes initiated an adversary action in bankruptcy to determine whether First Federal's refusal to release the funds in the account constituted a violation of 11 U.S.C. § 524(a)(2). The bankruptcy court, considering stipulated facts, dismissed the Heapes' complaint, concluding that it did not have jurisdiction to consider the case as the dispute involved assets outside the bankruptcy estate or post-petition obligations.

Stipulated Facts

The parties have stipulated to the following facts:

1. The debtors filed for relief in bankruptcy under Chapter 7 of the Bankruptcy Code on January 16, 1986.

2. First Federal was scheduled as a secured creditor with a lien on the debtors' homestead. The debtors claimed the homestead as exempt.

3. On March 12, 1986 First Federal filed a motion to lift the automatic stay. This was granted on May 6, 1986.

4. Debtor Billie Heape sent a letter addressed to Chester Woel at First Federal. It stated in part that:

This letter is to inform you that we have opened up a saving account with you. Your house payments will be but sic in this account until this bankruptcy sic is over. We are keeping up the insurance sic on the house. The payment that we are putting in the account will show you our good faith.

We would like to have the same interest sic rate as we have now. The reason for this is that we can\'t afford higher payments.

5. On March 24, 1986 the debtors opened the account with First Federal. They made various deposits and withdrawals until July 29, 1986 at which time there was a balance of $4,244.27.

6. The debtors made both deposits to, and withdrawals from, the account. All transactions were made after the filing of the bankruptcy petition.

7. An order of discharge was entered on February 2, 1987.

8. The debtors were orally informed that First Federal intended to file a foreclosure action to wipe out other junior lienholders in anticipation of refinancing the loan.

9. On October 7, 1987 First Federal filed a suit in state court to foreclose on the property. The journal entry of judgment in the foreclosure case was entered on December 22, 1987.

10. The property was sold at a sheriff's sale on February 4, 1988. First Federal was the successful bidder. The foreclosure action and the sale extinguished several junior liens and encumbrances on the property.

11. Gary L. Overfield, vice president of First Federal, wrote the debtors on February 12, 1988. The letter stated in part:

I want to inform you of the progress that has been made in clearing the title to your home.

Our sheriff\'s sale was held on February 4, 1988. First Federal was the successful bidder at the sale which translates into the simple fact that First Federal and you are the only parties with an interest remaining in the home and real estate.

Now is the time for you to get in contact with us to renegotiate your loan. Please contact us as soon as possible.

12. The debtors have subsequently divorced. The divorce court awarded the account in issue to debtor Billie Heape.

13. Billie Heape wrote a demand letter to First Federal requesting the account be released to her. When she attempted to withdraw the money from the account, First Federal froze the account. The savings account had a balance of $4,647.53 when it was frozen.

14. First Federal never asked the debtors to reaffirm the debt and no written reaffirmation agreement was executed by the debtors.

15. The parties stipulated to the jurisdiction of the Bankruptcy Court and consent to the trial and entry of a final order by the Bankruptcy Court.

16. On August 23, 1990, the bankruptcy court filed its memorandum opinion denying the Heapes' complaint to recover monies held by First Federal. After first discussing the limited jurisdiction of the bankruptcy court, the bankruptcy court concluded:

The controversy concerns the parties sic rights to monies in a savings account opened over two months after the debtors filed their petition in bankruptcy. (Stipulations of Facts 1, 5 and 6.) This property is clearly no part of the bankruptcy estate and its disposition has no effect upon the bankruptcy estate. 11 U.S.C. § 541. Further, First Federal\'s tenuous claim to the monies is premised on a claim for fair rental value for the alleged postpetition occupancy of the homestead. (Defendant\'s Memorandum Brief, p. 12-13, 21-22.) Based upon the facts and allegations, any obligation for rent is a postpetition obligation. The debtors\' obligation to pay reasonable postpetition rent to First Federal has no impact upon the handling and administration of the debtors\' estate.

While this controversy has roots in the prebankruptcy relationship between the parties, that slender connection is insufficient to confer jurisdiction on the Court. Were the creditor attempting to offset the postpetition deposits against a deficiency from foreclosure of the homestead, this Court would clearly have jurisdiction. Conversely, if a creditor were attempting to enforce a postpetition obligation against prepetition assets exempted by the debtor, the Court would lack jurisdiction. The Court\'s jurisdiction does not attach to every action affecting a debtor postpetition, but only to those which involve both prepetition liabilities and assets.

The Court\'s limited subject matter jurisdiction does not encompass assets outside the bankruptcy estate or postpetition obligations. Accordingly, the Court must dismiss the complaint.

17. The Heapes timely appeal.

Standard of Review

On appeal from the bankruptcy court, the district court sits as an appellate court. See 28 U.S.C. § 1334(a). Findings of fact are not to be set aside unless clearly erroneous; conclusions of law are reviewed de novo. Virginia Beach Federal Sav. and Loan Ass'n v. Wood, 901 F.2d 849, 851 (10th Cir.1990); In re Schneider, 864 F.2d 683, 865 (10th Cir.1988); see Bankruptcy Rules 7052 and 8013.

Discussion

On appeal, the Heapes primarily raise one argument in an effort to demonstrate that the bankruptcy court erred. The Heapes contend that the bankruptcy court's statement that "First Federal's tenuous claim to the monies is premised on a claim for a fair rental value of the alleged post-petition occupancy of the homestead" is a finding unsupported by the stipulated facts, and thus is clearly erroneous. In the event that the court concludes that the bankruptcy court did have jurisdiction, the Heapes urge the court to review the stipulations of fact and decide this case without remanding the case to bankruptcy court. The Heapes contend that any purported "agreement" between themselves and First Federal was in reality a reaffirmation. The Heapes argue that because the "reaffirmation agreement" did not comply with 11 U.S.C. § 524(c), the agreement is unenforceable.

First Federal responds that the bankruptcy court did not error in its conclusion that it did not have jurisdiction. First Federal contends that the bankruptcy court properly concluded that the issues in dispute concerned postpetition activities of the debtors and did not affect any property of the bankruptcy estate. Therefore the bankruptcy court did not have jurisdiction and First Federal's actions did not violate 11 U.S.C. § 524(a)(2).¹ First Federal directs the court's attention to In re Gardner, 913 F.2d 1515 (10th Cir.1990). First Federal contends that In re Gardner is direct authority for the bankruptcy court's decision in this case.

While In re Gardner is factually distinguishable from the case at bar, the case is instructive. In In re Gardner, Mrs. Gardner commenced a divorce action in Kansas state court. The Internal Revenue Service subsequently filed a tax lien against Mr. Gardner. Two days later Mr. Gardner filed for bankruptcy under Chapter 7. The bankruptcy court subsequently lifted the stay to allow the divorce proceedings, including the distribution of property, to continue. Later, the divorce decree was entered, awarding Mrs. Gardner nearly all of the property. At that time, all but the exempt property was held by the trustee. Id. at 1517.

Mrs. Gardner brought an adversary action against the bankruptcy trustee to obtain the bankruptcy estate property awarded to her in the divorce action. The bankruptcy court concluded that the divorce decree divested Mr. Gardner's interest in the property. Because Mr. Gardner's interest in the property was severed by the final divorce decree, the bankruptcy court held that any interest the government claimed to the property as a result of the tax lien was extinguished. The I.R.S. appealed, contending that the bankruptcy court lacked jurisdiction to determine the priority of two competing third-party lienors over property that was exempt from the bankruptcy estate. The court of appeals concluded that the bankruptcy court lacked jurisdiction to determine whether Mrs. Gardner's interests were superior to those of the government after concluding that Mr. Gardner had no interest in the property.

The court of appeals first reviewed the jurisdiction of the bankruptcy...