Maxwell v. HSBC Mortg. Corp. (In re Maxwell), CASE NO. 10-79479-CRM
| Decision Date | 22 August 2012 |
| Docket Number | CASE NO. 10-79479-CRM,NO. 12-5284,12-5284 |
| Parties | In re: CHRISTOPHER MAXWELL, Debtor. CHRISTOPHER MAXWELL, Plaintiff, v. HSBC MORTGAGE CORPORATION (USA) AND JOHN DOE DEFENDANT, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Georgia |
IT IS ORDERED as set forth below:
______________________
C. Ray Mullins
THIS MATTER is before the Court on Defendant's Motion to Dismiss (the "Motion").
Debtor filed for relief under chapter 7 of the Bankruptcy Code on July 3, 2010. On March 6, 2012, Debtor filed a Motion to Compel Abandonment of Property pursuant to Rule 6007(b).1 On April 12, 2012, the Court held a hearing on the motion to compel abandonment of property. No party responded to the motion or otherwise opposed the motion. Accordingly, the Court entered an order granting Debtor' motion to compel abandonment of property on April 13, 2012.
On May 25, 2012, Plaintiff filed a Complaint against HSBC Mortgage Corporation to determine the validity, priority or extent of lien or other interest in real property located at 774 Piedmont Avenue NE, Unit Number 6, Atlanta, Georgia 30308. On November 27, 2001, Plaintiff had executed a promissory note in the amount of $311,200 in favor of Unity Mortgage Corporation. Unity Mortgage Corporation then assigned the security deed to HSBC. In the Complaint, Plaintiff claims that the assignment was invalid and seeks a declaration as to the validity of HSBC's interest in the property.
On June 25, 2012, Defendant filed the Motion. Defendant states that the Complaint should be dismissed for lack of subject matter jurisdiction. More specifically, Defendant states that the relief sought is not a core proceeding and does not relate to Plaintiff's pending bankruptcy case. On July 12, 2012, Plaintiff filed a Response to the Motion and, on July 26, 2012, Defendant filed a reply in further support of its Motion.
Having read and considered the submissions, the Court finds that dismissal is appropriate. The Court will grant the Motion for the reasons stated below.
Federal Rule of Civil Procedure 12(b), made applicable by Federal Rule of Bankruptcy Procedure 7012(b), governs motions to dismiss. Under Rule 12(b)(1), a defendant may move to dismiss a complaint for lack of subject-matter jurisdiction. When ruling on a motion to dismiss for lack of subject matter jurisdiction, "[a] court must accept the material factual allegations in the complaint as true, but need not draw inferences favorable to the plaintiff." Penthouse Media Grp. v. Guccione (In re Gen. Media, Inc.), 335 B.R. 66, 71-72 (Bankr. S.D.N.Y. 2005). The Court may consider "materials outside of the pleadings to resolve any jurisdictional disputes, but cannot rely on conclusory or hearsay evidence." Id. at 72. The plaintiff has the burden of proving the Court's subject matter jurisdiction by a preponderance of the evidence. Id.
Bankruptcy court jurisdiction is codified in 28 U.S.C. § 1334(b) and 28 U.S.C. § 157. Pursuant to 28 U.S.C. § 1334, "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." 28 U.S.C. § 1334(b). The bankruptcy court's jurisdiction is derivative of and dependent upon these bases. Cont'l Nat'l Bank of Miami v. Sanchez (In re Toledo), 170 F.3d 1340, 1344 (11th Cir. 1999) (citing Celotex Corp. v. Edwards, 514 U.S. 300 (1995)). Thus, pursuant to 28 U.S.C. § 1334(b) and 28 U.S.C. § 157(b), this Court may exercise jurisdiction in three categories of civil proceedings: those that arise under title 11, those that arise in cases under title 11, and those that relate to cases under title 11. Toledo, 170 F.3d at 1344. The first category of cases, "arising under" proceedings, are matters invoking a substantive right created by the Bankruptcy Code. Id. at 1345. Such matters are considered core proceedings. Id. at 1348 (citing Wood v. Wood (In re Wood), 825 F.2d 90, 97 (5th Cir. 1987)). The second category, "arising in a case under title 11", is thought to involve administrative-type matters or matters that could arise only in bankruptcy, such as filing a proof of claim or an objection to the discharge of a particular debt. See id.; see also 28 U.S.C. § 157(b)(2).These matters also constitute core proceedings. Alternatively, "[i]f the proceeding does not invoke a substantive right created by the federal bankruptcy law and is one that could exist outside of bankruptcy it is not a core proceeding." Toledo, 170 F.3d at 1348 (citing Wood, 825 F.2d at 97). A bankruptcy court may still have jurisdiction over a non-core matter if it is otherwise related to the bankruptcy proceeding. 28 U.S.C. § 157(c)(1).
Here, Plaintiff's claims do not arise under the Bankruptcy Code or in a case under title 11. Plaintiff seeks declaratory relief to determine the validity or extent of Defendant's lien or interest in property. This is not a cause of action created by the Bankruptcy Code and does not arise only in bankruptcy proceedings. Indeed, actions to determine the validity or extent of liens can and do exist outside the bankruptcy context. This is demonstrated by the fact that Plaintiff extensively cites Georgia law on conveyances in the Complaint. Accordingly, this matter does not fall within either of the first two categories under § 1334 and the Court lacks jurisdiction over Plaintiff's claims if they are not "related to" his bankruptcy case.2
Matters relate to a case under title 11 "where resolution of the same could have a material effect on the administration of the case or claims against the bankruptcy estate, but such a claim could exist outside of bankruptcy." See Customized Distrib., LLC v. Coastal Bank & Trust (In re Lee's Famous Recipes, Inc.), Adv. No. 11-5482, 2011 Bankr. LEXIS 5250, at *3 (Bankr. N.D. Ga. Dec. 12, 2011) ). In Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984), the Third Circuit Court of Appeals announced a test for determining if "related to" jurisdiction exists. The court explained that a civil proceeding is related to a bankruptcy case if "the outcome of the proceeding could conceivably have an effect on the estate being administered in bankruptcy." Id. at 994. The Eleventh Circuit has adopted the Pacor test with little or no variation. Celotex, 514 U.S. at 308; see e.g., Miller v. Kemira, Inc. (In re Lemco Gypsum, Inc.), 910 F.2d 784, 788 (11th Cir. 1990); see also Toledo, 170 F.3d at 1345 ().3 Under this test, a proceeding does not necessarily need to "be against the debtor or the debtor's property." Pacor, 743 F.2d at 994. It is enough "if the outcome could alter the debtor's rights, liabilities, options or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate." Id.
However, "related to" jurisdiction is not boundless. "Bankruptcy jurisdiction is designed to provide a single forum for dealing with all claims to the bankrupt's assets, but it cannot be extended beyond its purpose." Lemco Gypsum, 910 F.2d at 789. As explained by one court, "'[r]elated to' jurisdiction is not so broad as to encompass litigation of claims arising under state law or non-bankruptcy Federal law that will not have an effect on the bankruptcy estate, simply because one of the litigants filed a petition in bankruptcy." Harlan v. Rosenberg & Assocs., LLC (In re Harlan), 402 B.R. 703, 711 (Bankr. W.D. Va. 2009) (citations omitted). A case that has common issues of fact with a bankruptcy case does not automatically establish related to jurisdiction; the resolution must also affect the bankruptcy estate. See HOC, Inc. v. McAllister (In re McAllister), 216 B.R. 957, 966 (Bankr. N.D. Ala. 1998) (). Thus, "bankruptcy courts have nojurisdiction over proceedings that have no effect on the estate of the debtor." Celotex, 514 U.S. at 308.
This adversary proceeding does not relate to Debtor's bankruptcy case because the property at issue has been abandoned and is no longer part of the bankruptcy estate. Additionally, any issues relating to the extent and priority of the lien(s) at issue can be resolved in another forum.
Section 554 of the Bankruptcy Code provides that a trustee or a party in interest may request the court to order abandonment of particular property. 11 U.S.C. § 554. When property is abandoned, it ceases to be property of the estate and reverts back to the debtor as if no bankruptcy petition had been filed. See Dewsnup v. Timm (In re Dewsnup), 908 F.2d 588, 590 (10th Cir. 1990) (citing Brown v. O'Keefe, 300 U.S. 598, 602 (1937)), aff'd 502 U.S. 410 (1992). Further, once property leaves the estate, a bankruptcy court loses jurisdiction to determine disputes concerning that property, unless the result of the dispute could have some effect on the bankruptcy case. See 4 COLLIER ON BANKRUPTCY ¶ 554.02[3] (15th ed. rev. 2003); see also In re Fedpak Sys., Inc., 80 F.3d 207, 214 (7th Cir. 1996) (); Reed v. Phila. Housing Auth. (In re Reed), 94 B.R. 48, 52 (E.D. Pa. 1988) (). Therefore, abandonment of property will usually end the court's jurisdiction to determine disputes concerning that property. 4 COLLIER ON BANKRUPTCY ¶ 554.02 ...
To continue reading
Request your trial