In re Scrimpsher

• Decision Date: 05 March 1982
• Docket Number: Bankruptcy No. 80 01549,Adv. No. 80 0201.
• Citation: 17 BR 999
• Parties: In re Dwayne SCRIMPSHER and Karen Scrimpsher, Debtors. WEGMANS FOOD MARKETS, INC., Plaintiff, v. Karen SCRIMPSHER, Defendant, Eustrah, Inc., d/b/a Continental Collection Bureau, Additional Defendant on Counterclaim.
• Court: U.S. Bankruptcy Court — Northern District of New York

17 B.R. 999 (1982)

In re Dwayne SCRIMPSHER and Karen Scrimpsher, Debtors WEGMANS FOOD MARKETS, INC., Plaintiff, v. Karen SCRIMPSHER, Defendant Eustrah, Inc., d/b/a Continental Collection Bureau, Additional Defendant on Counterclaim.

Bankruptcy No. 80 01549, Adv. No. 80 0201.

United States Bankruptcy Court, N.D. New York.

March 5, 1982.

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Mackenzie, Smith, Lewis, Michell & Hughes, Syracuse, N.Y., for plaintiff; Kenneth E. Ackerman, Syracuse, N.Y., of counsel.

Baker & Clark, Syracuse, N.Y., for defendant, Karen Scrimpsher; James M. Baker, Syracuse, N.Y., of counsel.

Mousaw, Vigdor, Reeves, Herbronner, & Kroll, Rochester, N.Y., for defendant, Eustrah, Inc.; Thomas E. Goldman, Rochester, N.Y., of counsel.

MEMORANDUM-DECISION, FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER

LEON J. MARKETOS, Bankruptcy Judge.

Statement of the Case

On October 16, 1980, Dwayne and Karen Scrimpsher filed a joint petition for relief under Chapter 7 of the Bankruptcy Code, 11 U.S.C. § 701 et seq. (Supp. IV 1980) (hereinafter, the Code). On December 23, 1980, Wegmans Food Markets, Inc. (hereinafter, Wegmans) filed a complaint objecting to the discharge of certain "NSF" (not sufficient funds) checks uttered by Karen Scrimpsher (hereinafter, the Debtor) to Wegmans. Those NSF checks were a listed debt in the Debtor's bankruptcy schedules. The Debtor interposed an "ANSWER AND COUNTERCLAIMS". The Debtor's counterclaims are premised on alleged violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (Supp. IV 1980) (hereinafter, FDCPA or the Act)¹ and § 349(a) of the New York General Business Law (hereinafter, N.Y. counterclaim).²

Although the parties proceeded to file cross-motions for summary judgment, the Debtor also moved pursuant to Rules 713, 715, 719(a), and 720 of Bankruptcy Procedure³ and Rules 13(h), 15(a), 19(a)(1) and 20 of the Federal Rules of Civil Procedure to join Eustrah, Inc., d/b/a Continental Collection Bureau (hereinafter, C.C.B.) as an additional defendant on the Debtor's two counterclaims. On May 8, 1981, an order was entered granting the Debtor leave to serve an amended answer and counterclaims on both Wegmans and C.C.B. which was filed May 13, 1981. On June 16, 1981, the Debtor amended her Schedule B-3(b) and her Schedule B-4 "Property Claimed Exempt" pursuant to the federal exemptions list, see 11 U.S.C. § 522(d)(5), to include the Debtor's counterclaims⁴ against C.C.B. and Wegmans at a valuation of "$2,100.00 (maximum)".

Both Wegmans and C.C.B. responded to the Debtor's new responsive pleadings by Reply and Answer, respectively. Thereafter, C.C.B. duly served an amended answer which added to its denials an affirmative defense of lack of subject matter jurisdiction in the bankruptcy court to the Debtor's FDCPA counterclaim. All parties made cross-motions for whole or partial summary judgment pursuant to Rules 56 and 56(d) of the Federal Rules of Civil Procedure.⁵

MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION

In both C.C.B.'s amended answer to the Debtor's counterclaims and its motion papers for summary judgment the threshold question of this Court's subject matter jurisdiction is raised.⁶ Although no party had moved to dismiss on the ground of lack of subject matter jurisdiction, the Court requested memoranda of law on the issue.⁷ The sum of C.C.B.'s argument is that, for purposes of the Debtor's FDCPA claim, this federal bankruptcy court is not a court with jurisdiction that qualifies under § 813(d) of the FDCPA.⁸ This contention is erroneous because a federal bankruptcy court operating under the Bankruptcy Reform Act of 1978 obtains jurisdiction from § 1471 of Title 28 of the United States Code. Bankruptcy Reform Act of 1978, Title II, § 241(a), Pub.L.No.95-598, 92 Stat. 2668-69 (1978). Yet, it is a well-established principle that federal courts, as opposed to state trial courts of general jurisdiction, are courts of limited jurisdiction marked out by Congress. Aldinger v. Howard, 427 U.S. 1, 15, 96 S.Ct. 2413, 2420, 49 L.Ed.2d 276 (1976); see County Court of Ulster County, New York v. Allen, 442 U.S. 140, 154, 99 S.Ct. 2213, 2223, 60 L.Ed.2d 777 (1979). See generally C. Wright, Law of Federal Courts, § 7 (3d ed. 1976).

The delegated and direct grants of jurisdiction to bankruptcy courts operating under the Bankruptcy Code are set out under 28 U.S.C. § 1471(b), (c), and (e). They state:

(b) Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11 or arising in or related to cases under title 11.

(c) The bankruptcy court for the district in which a case under title 11 is commenced shall exercise all of the jurisdiction conferred by this section on the district courts.

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(e) The bankruptcy court in which a case under title 11 is commenced shall have exclusive jurisdiction of all of the property, wherever located, of the debtor, as of the commencement of such case.

Id. (Emphasis added). The Debtor's counterclaims, both federal and state, cannot be said to be claims which are "arising under title 11" in that there are no allegations of need to construe or implement any provision of title 11 to determine the merits of the Debtor's counterclaims. See H.R.Rep. No.595, 95th Cong., 1st Sess. 445 (1977), reprinted in 1978 U.S.Code Cong. & Ad. News 5963, 6401. The counterclaims are now exempt property under § 522(d)(1) and (5), and their status as exempt property is not in dispute. The next inquiry is whether the Debtor's counterclaims can be said to be "civil proceedings . . . arising in or related to cases under title 11." 28 U.S.C. § 1471(b).

The exact meaning of "arising in or related to cases under title 11" is not given by the legislative history. For illustrative purposes, the House Report states:

Examples of matters that the bankruptcy court will be able to hear include all items listed by the Bankruptcy Commission in its proposed bill, H.R. 31, 94th Cong., 1st Sess. §§ 2-201(a), 2-201(b) (1975), or the equivalents to those items under title 11 as proposed by H.R. 8200, as well as all items that the bankruptcy courts are now able to hear under the Bankruptcy Act 2a(2A).

H.R.Rep.No.595, 95th Cong., 1st Sess. 446 (1977), reprinted in 1978 U.S.Code Cong. & Ad.News 5963, 6401. The pertinent provisions in the "Commission Bill" concerning the bankruptcy court's jurisdiction and a relationship to exemptions read:

Section 2-201. Jurisdiction of the Bankruptcy Courts.

(a) Controversies Arising out of a Case. The jurisdiction of the bankruptcy courts shall extend to the determination of all controversies that arise out of a case commenced under this Act, including, without limitation, the following:

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(2) controversies involving property set apart to the debtor as exempt, including the enforcement of claims, whether or not secured, against such property;

Report of the Commission on the Bankruptcy Laws of the United States, H.R.Doc. 137, 93rd Cong., 1st Sess. Part II, 30 (July, 1973) (Emphasis added). Earlier in the Commission's Report (Part I) among the particular recommendations concerning consumer bankrupts was that "(5) The bankruptcy court be given jurisdiction of disputes between the debtor and his creditors involving the property set apart to him as exempt." Id., Part I, at 11. These comments appear to speak to instances when the debtor's exemption is to be impaired by some type of creditor conduct.

Although the Debtor's counterclaim is interposed in an adversary proceeding in his Chapter 7 bankruptcy case, the interpretative issue is whether that fact alone meets the "arising in" language of 28 U.S.C. § 1471(b)'s jurisdictional grant. Remembering the "limited jurisdiction" of all federal courts, I believe one must find a reasonable nexus between the Debtor's civil proceeding for affirmative relief and this Court's particularized function of implementing the bankruptcy laws. The inquiry must find an impact serving the purposes of the bankruptcy laws sufficient to warrant this Court to decide the merits of the Debtor's counterclaims.

This is an instance when the pre-petition causes of action are not being litigated for any subsequent benefit to the property of the estate which will be distributed to unsecured creditors. Also, the Debtor's counterclaims do not speak to resolving a dispute or interference with the designated exempt property. Yet, despite the absence of clear guidance from legislative history, there is a basis to find jurisdiction over the Debtor's counterclaims and support the reasoning that such a controversy arises in the Debtor's case under Title 11. The ability to fully utilize an exemption as claimed is concomitant with providing those exemptions for a debtor's post-petition "fresh start". The Congressional intent to provide to the trustee in bankruptcy a single forum that can expeditiously assist in litigating his several rights and remedies under the Bankruptcy Code is equally applicable to the "fresh start" needs of a debtor. If the bankruptcy laws have accorded an exemption of such contingent nature to the debtor, when appropriate, the laws logically should assist in the necessary litigation intrinsic to the exemption's use during the bankruptcy case. Burdening the debtor with more delay and expense in other forums runs antithetical to a prompt rehabilitation of the debtor. I find the Debtor's counterclaims necessarily arise in his case under Title 11.⁹

Is there an alternative ground for bankruptcy court jurisdiction over the Debtor's exempt counterclaims? Looking towards the exclusive grant of jurisdiction under 28 U.S.C. § 1471(e), it appears that causes of action which accrue prior to the filing of the bankruptcy petition qualify as "property of the...