In re Marshall
| Citation | 257 BR 35 |
| Decision Date | 29 December 2000 |
| Docket Number | Bankruptcy No. LA 96-12510-SB. Adversary No. 96-01838-SB. |
| Parties | In re Vicki Lynn MARSHALL, Debtor. E. Pierce Marshall, Plaintiff, v. Vicki Lynn Marshall, Defendant. Vicki Lynn Marshall, Counterclaimant, v. E. Pierce Marshall, Counterdefendant. |
| Court | United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — Central District of California |
John P. Melko, Verner, Liipfert, Bernhard, McPherson and Hand, Chartered, Houston, TX.
Joseph A. Eisenberg P.C., Jeffer, Mangels, Butler & Marmaro LLP, Los Angeles, CA.
Philip W. Boesch, Jr., Gregory J. Aldisert, Joshua A. Meyer, Kinsella, Boesch, Fujikawa & Towle, LLP, Los Angeles, CA.
Rex S. Heinke, Greines, Martin, Stein & Richard LLP, Beverly Hills, CA.
ORDER ON MOTION FOR ENTRY OF JUDGMENT
Trial in this adversary proceeding took place in October and November, 1999. It has come time to resolve the remaining issues in this adversary proceeding, and to issue a judgment. This opinion addresses three issues: (1) whether the alleged probate exception to federal jurisdiction applies to this adversary proceeding; (2) whether this is a "core proceeding" within the meaning of 28 U.S.C. § 157(b); and (3) what form the judgment in this adversary proceeding should take.
E. Pierce Marshall continues to complain that this court lacks jurisdiction over this adversary proceeding because this claim belongs in the probate case now in trial in Texas. Notably, however, he has never brought a motion on this subject on proper notice pursuant to this court's motion rules. For this reason alone this issue has never been properly brought before this court, and E. Pierce Marshall is entitled to no relief on this subject.
In addition, by filing his claim in this bankruptcy case and by filing this adversary proceeding against Vicki Marshall, E. Pierce Marshall voluntarily submitted to the jurisdiction of this bankruptcy court. He cannot now complain of the consequences thereof, especially after the court has ruled on the merits of his dispute with Vicki Marshall.
The extent of the equity jurisdiction of the bankruptcy court in this case is governed by United States Supreme Court precedent. The Supreme Court has stated, "by filing a claim against a bankruptcy estate the creditor triggers the process of allowance and disallowance of claims, thereby subjecting himself to the bankruptcy court's equitable power." Langenkamp v. Culp, 498 U.S. 42, 44, 111 S.Ct. 330, 331, 112 L.Ed.2d 343 (1990) (internal quotes omitted).
This equity jurisdiction of the bankruptcy court includes both claims by the creditor against the estate and claims against the creditor by the estate's representative. In Langenkamp, for example, the Supreme Court found that a preference action filed against a creditor who had filed a claim was "a part of the claims-allowance process," and that the filing of the claim waived the right to a jury trial in the preferential transfer adversary proceeding. Id. "In other words," the Supreme Court said, "the creditor's claim and the ensuing preference action by the trustee become integral to the restructuring of the debtor-creditor relationship through the bankruptcy court's equity jurisdiction." Id.
By contrast, in an earlier case the Supreme Court found that a fraudulent transfer adversary proceeding did not come within the "process of allowance and disallowance of claims." Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 57-59, 109 S.Ct. 2782, 2799, 106 L.Ed.2d 26 (1989) (). The Supreme Court reached this result, however, only because the defendants had not filed claims in the bankruptcy case. See Langenkamp, 498 U.S. at 44-45, 111 S.Ct. at 331. Indeed, the purpose of Langenkamp was to eliminate any speculation that the right to a jury trial might survive the filing of a claim in the bankruptcy case, and to make clear that the equity jurisdiction of the bankruptcy court extended to all claims between a creditor and the estate, once the creditor files a claim.
Similarly, in Hong Kong & Shanghai Banking Corp. v. Simon (In re Simon), 153 F.3d 991 (9th Cir.1998), the Ninth Circuit found that, by filing a claim, the bank "forfeited any right it had to claim that the court lacked the power to enjoin it from commencing a post-bankruptcy collection proceeding against the debtor" in Hong Kong. Id. at 997.
The teaching of Langenkamp, Granfinanciera and Simon is that the filing of a claim in a bankruptcy case has substantial procedural consequences for the claimant. By filing a claim, a claimant voluntarily submits to the equity jurisdiction of the bankruptcy court for the allowance and disallowance of all claims made by the claimant against the bankruptcy estate or made against the claimant by the bankruptcy estate's representative.
E. Pierce Marshall filed his claim against the bankruptcy estate in this case. He thus voluntarily submitted himself to the bankruptcy court's equity jurisdiction as to all claims by the estate against him, including the claims asserted in this adversary proceeding.
E. Pierce Marshall also argues that this court has no jurisdiction over debtor's counterclaim because it essentially involves a probate matter pending in a Texas court that is subject to a probate exception to federal jurisdiction.
While there is a probate exception to federal jurisdiction, it is applicable principally to diversity jurisdiction under 28 U.S.C. § 1332 (2000). See, e.g., Georges v. Glick, 856 F.2d 971 (7th Cir.1988) (); Goerg v. Parungao (In re Goerg), 844 F.2d 1562 (11th Cir.1988) (same).1 As the court in Goerg specifically stated, "that exception relates only to 28 U.S.C. § 1332 (1982), and has no bearing on federal question jurisdiction, the jurisdiction invoked in bankruptcy cases." Id. at 1565 (footnote omitted). The court in Goerg further warned: "care should be taken not to confuse the question of the breadth of Congress' bankruptcy power with the so-called "probate exception" to statutory diversity jurisdiction." Id. Furthermore, the probate exception to diversity jurisdiction must be narrowly construed. Georges, 856 F.2d at 973. The court in Goerg declared generally: "owing to the supremacy clause, federal bankruptcy law preempts state law; as one of Congress' enumerated powers, the power to enact bankruptcy laws is limited only by the substantive guarantees contained in the Constitution." Goerg, 844 F.2d at 1565.
Virtually all of the cases that E. Pierce Marshall cites in support of his argument are diversity cases, and thus are inapplicable in this case. As in the Goerg case, this court's jurisdiction over this adversary proceeding rests on the federal question jurisdiction applicable in bankruptcy cases.
Goerg and Georges may overstate the lack of a probate exception to federal jurisdiction. In Markham v. Allen, 326 U.S. 490, 66 S.Ct. 296, 90 L.Ed. 256 (1946)2, the Supreme Court held that a federal court may property exercise jurisdiction over a case brought against the executor and resident heirs of a decedent's estate that was in the course of probate administration in state court. Federal jurisdiction arose under the Trading With the Enemy Act, where the plaintiff was a federal officer authorized to receive inheritances in place of German heirs during World War II.
The Supreme Court in Markham found that the probate limitation on federal jurisdiction only prohibits a federal court from probating a will, administering a decedent's estate, or assuming control of property in the custody of the state court. See id. at 494, 66 S.Ct. 296. The Supreme Court found that a federal court may properly adjudicate rights in probate property, so long as its final judgment does not undertake to interfere with the state court's possession of the property. Id. The Supreme Court held that the lower court's ruling that the plaintiff was entitled to all of the net probate estate after payment of debts, taxes and expenses of administration was a proper exercise of federal jurisdiction. Id. at 495, 66 S.Ct. 296.
The Markham rationale would permit this court to determine (if appropriate on the merits) that Vicki Marshall is entitled to all (or a portion) of the net assets in the possession of the Texas probate court (except as to any parties over whom this court has not had jurisdiction). However, this court's rulings do not affect the disposition of the Texas probate assets.
E. Pierce Marshall relies particularly on Beren v. Ropfogel, 24 F.3d 1226 (10th Cir.1994), which involved a claim for an expectation of inter vivos gifts or testamentary dispositions. This case, which also appears to be a diversity case, provides no assistance to E. Pierce Marshall. The court sustained the dismissal of claim for an expectation of a gift or testamentary devise on the grounds of failure to state a claim for relief, not on jurisdictional grounds. See id. at 1229-30.
Furthermore, the "probate exception" issue has never been properly brought before this court. This issue was first raised by Pierce Marshall in a motion in limine that was filed on October 18, 1999, and set for hearing on the first day of trial on October 28, 1999. This procedure violated the court's motion rule, Local Rule 9013-1, which requires 21 days notice of a motion (24 days if served by mail). The court finds that this issue was raised at that time principally for the purpose of delaying the trial.
Pierce Marshall waived his right to make this argument by waiting until several rounds of sanctions had been imposed on him before raising it. Ninth Circuit law holds that a party cannot wait until trial, after the case is going badly for that party, to raise a jurisdictional issue. See Hill v. Blind Industries & Services, 179 F.3d 754 (9th Cir.1999).
The court finds that the "probate exception" argument...
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