In re Pitts
| Citation | 241 BR 862 |
| Decision Date | 09 September 1999 |
| Docket Number | Bankruptcy No. 98-3134. |
| Parties | In re Lisa Diana PITTS, Debtor. Lisa Diana Pitts, Plaintiff, v. Ohio Department of Taxation, Defendant. |
| Court | United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Northern District of Ohio |
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Lisa Diana Pitts, Lima, OH, pro se.
David R. Taylor, III, Toledo, OH, for plaintiff.
Ohio Dept. of Taxation, Columbus, OH, pro se.
Raymond L. Beebe, Timothy R. Reynolds, Toledo, OH, for defendant.
This case comes before the Court upon the Plaintiff's Amended Complaint to Discharge Tax Debts owed to the Defendant, and to Avoid the Liens created thereby. The Defendant filed an Answer to the Plaintiff's Amended Complaint admitting the substantive allegations contained therein. However, the Defendant denied that the Court had the jurisdictional authority to hear the case pursuant to the Eleventh Amendment of the United States Constitution. On November 24, 1998, a pretrial was held on the matter at which time the Court ordered the Parties to report to the Court by December 18, 1998. This deadline was subsequently extended to December 24, 1998, upon the Court granting a Motion for an Extension of time submitted by the Plaintiff. On December 23, 1998, the Plaintiff submitted to the Court a Memorandum in Support of Jurisdiction. However, the Defendant failed to submit any memorandum in opposition to jurisdiction within the time allocated by the Court. Accordingly, the Court will rule on the merits of the case based upon the evidence and arguments which are presently before it. Based upon this review, and for the following reasons, the Court finds that it lacks the jurisdictional basis on which to adjudicate the Plaintiff's claim, and thus the Plaintiff's case is Dismissed.
The Parties do not dispute the underlying facts of this case. Hence, the Court will accept as accurate the facts enumerated by the Plaintiff, Lisa D. Pitts (hereinafter Plaintiff), in her Memorandum in Support of Jurisdiction.
In 1992 and 1993, the Plaintiff, along with her former husband, filed joint tax returns with the Ohio Department of Taxation (hereinafter Defendant). The tax liability of the Parties on these tax returns totaled Six Thousand Three Hundred Eighty-one and 57/100 Dollars ($6,381.57). The Plaintiff's former husband, however, neglected to actually pay the tax debt, and thus the Ohio Department of Taxation filed liens against all the real property owned by the Plaintiff. Thereafter, on May 1, 1998, the Plaintiff filed for relief under Chapter 7 of the United States Bankruptcy Code, listing as an unsecured liability the tax debt she owed to the Defendant. The Defendant, however, did not file a proof of claim on this debt.
As a part of her bankruptcy case, the Plaintiff brought a Complaint against the Defendant seeking a determination that the tax debt at issue was dischargeable pursuant to 11 U.S.C. § 523(a)(1), and that any liens placed by the Defendant against the Plaintiff's real property were avoidable pursuant to 11 U.S.C. § 522(f). The Defendant, acting through its Special Counsel to the Ohio Attorney General, responded to the Plaintiff's Complaint by asserting that regardless of the merits of the Plaintiff's action, this Court lacked the jurisdictional basis to hear the case pursuant to the Eleventh Amendment of the United States Constitution. Specifically, the Defendant contends that in light of the Supreme Court's decision in Seminole Tribe of Florida v. Florida, 517 U.S. 44, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996), the authority of this Court to bind the State of Ohio in a bankruptcy proceeding is limited to those occasions when the State has consented to the Court's jurisdiction. The Plaintiff, however, implores this Court to adopt the view espoused by Justice Stevens in his dissent in the Seminole Tribe case.
It is a fundamental principle of law that a court must have a valid jurisdictional basis over both the subject matter and the parties involved in the proceeding in order to issue any enforceable order therefrom. Stoll v. Gottlieb, 305 U.S. 165, 171-172, 59 S.Ct. 134, 137-138, 83 L.Ed. 104 (1938); Toumajian v. Frailey, 135 F.3d 648, 652 (9th Cir.1998); citing Marbury v. Madison, 5 U.S. (1 Cranch) 137, 2 L.Ed. 60 (1803). It is also axiomatic that the federal courts are of limited jurisdiction, being circumscribed in their authority by both the Federal Constitution, and the laws duly enacted by the Congress of the United States. The Belfast, 74 U.S. 624, 19 L.Ed. 266, 7 Wall. 624 (1868); Flast v. Cohen, 392 U.S. 83, 94, 88 S.Ct. 1942, 1949 1950, 20 L.Ed.2d 947, 958 (1968); Ulster County Court v. Allen, 442 U.S. 140, 156, 99 S.Ct. 2213, 2223, 60 L.Ed.2d 777 (1979). In this case, the Defendant has asserted that the United States Constitution deprives this Court, as a federal court,1 of any jurisdictional basis to hear the claim brought against it by the Plaintiff. Hence, the Defendant maintains that any order issuing from this Court against the Defendant would have no legal effect.
The Defendant's legal argument is based upon the Eleventh Amendment to the United States Constitution which prohibits the federal courts from hearing suits against unconsenting states in federal court which are based upon either diversity of citizenship, or those suits which are brought against an unconsenting state by one of its own citizens as well as by citizens of another state. Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 98, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984); Hans v. Louisiana, 134 U.S. 1, 18-19, 10 S.Ct. 504, 33 L.Ed. 842 (1890). This immunity from suit also extends to any duly created agencies of the state. Pennhurst State School, 465 U.S. at 100, 104 S.Ct. 900; Mt. Healthy City School District Board of Ed. v. Doyle, 429 U.S. 274, 97 S.Ct. 568, 50 L.Ed.2d 471 (1977); Lincoln County v. Luning, 133 U.S. 529, 530, 10 S.Ct. 363, 364, 33 L.Ed. 766 (1890). For example, it is clear that a state taxing authority is afforded the protections contained in the Eleventh Amendment. See, e.g., Ford Motor Co. v. Department of Treasury, 323 U.S. 459, 463, 65 S.Ct. 347, 350, 89 L.Ed. 389 (1945).
Nevertheless, the immunity conferred to the states by the Eleventh Amendment is not absolute, and certain exceptions to its applicability do exist. See, e.g., Ex Parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908). Accordingly, two issues must be addressed by the Court before the Plaintiff's Complaint will be dismissed for want of jurisdiction. First, the Court must determine if the Eleventh Amendment is actually applicable in this case. Second, if the Eleventh Amendment is found to be applicable, the Court must decide whether any exceptions exist to its applicability.
The purpose of the Eleventh Amendment is to protect a state's sovereignty from the reach of the federal judiciary. Seminole Tribe of Florida v. Florida, 517 U.S. 44, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996). However, the Eleventh Amendment, by its specific language, only applies to "suits," and as Chief Justice Marshall noted in the case of Cohens v. Virginia: not all legal actions are suits for purposes of the protection afforded to the states by the Eleventh Amendment. 19 U.S. (6 Wheat.) 264, 407-12, 5 L.Ed. 257 (1821).
In determining whether a legal action is a suit for Eleventh Amendment purposes, it is very well established that any action by a private party against a state, which seeks to impose liability that must be paid from public funds of the state treasury, is a suit for purposes of the Eleventh Amendment. See, e.g., Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 1356, 39 L.Ed.2d 662 (1974). Thus, any action against a state for damages stemming from a violation of the Bankruptcy Code is clearly a suit for Eleventh Amendment purposes. Edelman v. Jordan, 415 U.S. 651, 663, 94 S.Ct. 1347, 1356 39 L.Ed.2d 662 (1974) (); see also In re Lush Lawns, 203 B.R. 418 (Bankr.N.D.Ohio 1996); Nat'l Cattle Congress, Inc. v. Iowa Racing and Gaming Comm'n (In re Nat'l Cattle Congress, Inc.), 91 F.3d 1113, 1114 (8th Cir. 1996); Louis v. Barall (In re Louis), 213 B.R. 796 (Bankr.D.Conn.1997); In re Martinez, 196 B.R. 225 (D.P.R.1996).
Notwithstanding, a bankruptcy case, standing alone, does not necessarily constitute a suit under the Eleventh Amendment, even though a state's pecuniary interests may be inadvertently modified or even eliminated by the bankruptcy court's administration of the debtor's bankruptcy estate. In re Barrett Refining Corporation, 221 B.R. 795, 803 (Bankr. W.D.Okla.1998). This supposition is based upon the very nature of a bankruptcy case. For example, in In re Barrett Refining Corporation, the court stated:
in a bankruptcy case, the only party required to attend is the debtor. Creditors are not compelled to attend. Notice is given to the creditors but they are free to ignore the case. In addition, a petition commencing a bankruptcy case does not assert or prosecute a claim against any other party. The debtor does not demand the presence of other parties to adjudicate a claim. Nor does the debtor, by the petition, `sue\' anyone or demand the restoration of some thing from an opposing party.
221 B.R. at 803. In addition, in Maryland v. Antonelli Creditors' Liquidating Trust, the court observed that, "the power of the bankruptcy court to enter an order confirming a plan ... derives not...
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