McIntyre v. Fangman (In re McIntyre)
| Decision Date | 30 December 2022 |
| Docket Number | BAP CO-22-003,Bankr. 19-15069 |
| Parties | IN RE FRANK MCINTYRE, Debtor. v. DENNIS FANGMAN, DAVID MCCONAUGHY, KEN OLSON, SOL ENERGY, LLC, and CHARLES WILLMAN, Defendants - Appellees. FRANK MCINTYRE, Plaintiff - Appellant, Adv. No. 19-01245 |
| Court | U.S. Bankruptcy Appellate Panel, Tenth Circuit |
NOT FOR PUBLICATION[1]
Appeal from the United States Bankruptcy Court for the District of Colorado
Before HALL, LOYD, and THURMAN, Bankruptcy Judges.
Before this Court is Appellant Frank William McIntyre's ("McIntyre") attempt to take yet another bite of the apple after certain state court proceedings did not go his way. After a dispute arose between McIntyre and Appellees as to who should receive certain payments under a solar installation agreement, the party to the contract owing the money filed a state court interpleader action. McIntyre and Appellees filed counter and cross claims, and the state court found in favor of Appellees. Shortly after, McIntyre filed a chapter 13 petition and then an adversary proceeding based on the same causes of action he previously asserted in state court. McIntyre also filed a motion for leave to amend his complaint in the adversary proceeding. Ultimately, the Bankruptcy Court abstained from hearing the adversary proceeding and denied McIntyre leave to amend his complaint. McIntyre appealed, and we affirm.
Glenwood Clean Energy, LTD ("GCE") entered into an installation agreement (the "Agreement") with property owner Dennis Fangman and engaged SoL Energy, LLC ("SoL") as a subcontractor on the project.[2] Shortly before the project was completed, a contract dispute arose between GCE and McIntyre (together the "GCE Parties")[3] and SoL and its owner Ken Olson (together the "SoL Parties").[4] Although the Agreement required Fangman to pay GCE, the SoL Parties submitted invoices to Fangman seeking payment in the amount of $39,480.78.[5]
In response, Fangman initiated an interpleader proceeding in state court (the "State Court Action") naming, among others, the SoL and GCE Parties as defendants and deposited the remaining amount owed under the Agreement in the state court registry.[6] The SoL and GCE Parties then asserted counter and cross claims against one another and Fangman related to the Agreement.[7] On March 13, 2019, the state court entered an order of default judgment against GCE[8]-who failed to appear-and entered a separate order (the "State Court Judgment") granting SoL's motion for judgment on the pleadings in the amount of $39,480.78.[9] The state court did not release the amounts owed to the SoL Parties from the court registry (the "Funds") at that time because other claims remained pending.[10]
On June 12, 2019, McIntyre filed a voluntary petition for relief under chapter 13 (the "Bankruptcy Case").[11] A few months later, McIntyre filed an adversary proceeding (the "Adversary Proceeding") against Dennis Fangman, the SoL Parties, Charles Willman, and David McConaughy asserting (i) essentially the same claims McIntyre asserted in state court (the "State Law Claims"), and (ii) objections to the SoL Parties' proofs of claim filed in his Bankruptcy Case (the "Claim Objections").[12] Later, McIntyre filed leave to amend the adversary complaint (the "Complaint") to add a claim under 42 U.S.C. § 1983,[13] and Appellees filed motions to dismiss the Adversary Proceeding.[14]
The Bankruptcy Court entered an order (the "January 23, 2020 Order") dismissing the State Law Claims.[15] The Bankruptcy Court concluded it lacked jurisdiction under 28 U.S.C. § 1334 because the State Law Claims did not arise under the Bankruptcy Code, nor did they arise in the Bankruptcy Case. And, even if the State Law Claims were "related to" the Bankruptcy Case, discretionary abstention under 28 U.S.C. § 1334(c) was appropriate because the claims had been adjudicated, or remained pending, before the state court and, therefore, would have little effect on the efficient administration of the bankruptcy estate.[16] The Bankruptcy Court also denied McIntyre's motion for leave to amend the Complaint and held the Claim Objections in abeyance pending resolution of the remaining claims in the State Court Action.[17] McIntyre filed a motion seeking reconsideration of the January 23, 2020 Order,[18]and the SoL Parties filed a motion to clarify[19] asking the Bankruptcy Court for relief from the automatic stay to continue the State Court Action. On April 16, 2020, the Bankruptcy Court entered an order (the "April 16, 2020 Order") denying McIntyre's motion to reconsider and explicitly stating the SoL Parties were granted relief from the automatic stay to proceed in state court on the remaining claims in the State Court Action.[20] In January 2021, the state court adjudicated the remaining claims and disbursed the Funds to the SoL Parties.[21] McIntyre notified the state court that the Funds should not have been released and argued the April 16, 2020 Order precluded the SoL Parties from collecting judgments with respect to prepetition claims.[22] The state court then required the SoL Parties to return the Funds.[23]
Subsequently, the SoL Parties filed a motion with the Bankruptcy Court requesting any relief from the automatic stay necessary to allow them to recover the Funds.[24] On March 11, 2021, the Bankruptcy Court entered an order (the "Enforcement Order") concluding the bankruptcy estate did not have an interest in the Funds, so the automatic stay did not prevent disbursement.[25] McIntyre filed a motion to set aside the Enforcement Order,[26] which the Bankruptcy Court denied.[27]
Finally, on January 31, 2022, the Bankruptcy Court entered an order (the "Final Order"), sua sponte, dismissing the Claim Objections without prejudice to McIntyre later reasserting the objections if he was ultimately successful in state court and dismissing the Adversary Proceeding.[28] McIntyre appealed.[29]
This Court has jurisdiction to hear timely filed appeals from "final judgments, orders, and decrees" of bankruptcy courts within the Tenth Circuit unless a party elects to have the district court hear the appeal.[30] McIntyre filed a timely notice of appeal after the Bankruptcy Court entered the Final Order.[31] No party elected to have the district court hear the appeal. This Court, therefore, has jurisdiction over this appeal.
We address four issues on appeal. The first issue is whether the Bankruptcy Court erred in concluding the Funds were not property of the bankruptcy estate and, thus, not subject to the automatic stay, which we review de novo.
The second and third issues stem from McIntyre's challenges to the Bankruptcy Court's dismissal of the State Law Claims and Claim Objections. We first analyze whether the Bankruptcy Court erred by concluding it lacked subject matter jurisdiction over the State Law Claims, which we review de novo.[32] We then consider whether the Bankruptcy Court erred by abstaining from adjudicating the State Law Claims and Claim Objections, which we review for an abuse of discretion.[33]
Fourth, we address whether the Bankruptcy Court erred in denying McIntyre leave to amend the Complaint by determining such an amendment would be futile. We review denial of a motion to amend a pleading for abuse of discretion[34] and the underlying legal determination of futility de novo.[35] On de novo review, we give no deference to a bankruptcy court's decision and apply the same standard as the bankruptcy court.[36] Whereas, under the abuse of discretion standard, we will not disturb the bankruptcy court's decision unless the bankruptcy court "made a clear error of judgment or exceeded the bounds of permissible choice in the circumstances."[37]
Section 541(a) provides that property of the estate consists of all legal and equitable interests a debtor had at the time the debtor filed the bankruptcy petition.[38] Section 362(a)(3) operates as a stay of any act to obtain possession of or exercise control over property of the estate.[39]
Construing McIntyre's argument liberally, he takes issue with the Bankruptcy Court's decision to allow the state court to disburse the Funds to the SoL Parties. He contends the Funds-that existed by virtue of his account receivable-were property of the estate and, thus, the Bankruptcy Court erred by "further lifting" the automatic stay and concluding the Funds did not belong to the bankruptcy estate.
Appellees contend the Bankruptcy Court did not "further lift" the automatic stay when it entered the Enforcement Order. Rather, the Bankruptcy Court properly concluded the bankruptcy estate did not have an interest in the Funds so the automatic stay did not prevent disbursement.
Neither the Tenth Circuit nor this Court has ruled on whether interpleaded funds claimed by a debtor are property of the bankruptcy estate. Accordingly, we turn to courts in other circuits for guidance in analyzing the interplay between interpleader actions and bankruptcy law.
Several courts have analyzed whether an interpleader action filed after a bankruptcy violates the automatic stay under § 362 when the debtor (or bankruptcy estate) is a claimant to the interpleaded property. In doing so, these courts concluded the automatic stay does not prevent a non-bankruptcy court from overseeing an interpleader action to determine what might become property of the estate because such proceeding is not a proceeding to obtain property of the estate.[40] This reasoning strongly suggests ...
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