Transouth Financial Corp. v. Murry
| Decision Date | 02 June 2004 |
| Docket Number | Civ.A. No. 3:03CV1184.,Civ.A. No. 3:03CV1183. |
| Citation | 311 B.R. 99 |
| Parties | TRANSOUTH FINANCIAL CORP., et al., Appellants, v. Victor MURRY, Appellee. |
| Court | U.S. District Court — Middle District of Alabama |
Glenn E. Glover, Michael Leo Hall, Reid S. Manley, Richard C. Keller, Burr & Forman LLP, Birmingham, AL, for Appellants.
Charles M. Ingrum, Jr., Charles M. Ingrum, Attorney at Law, Opelika, AL, Robert Simms Thompson, Robert Sims Thompson PC, Tuskegee, AL, for Appellee.
Curtis C. Reding, Montgomery, AL, for Trustee.
This case is before the court on appeal from the United States Bankruptcy Court for the Middle District of Alabama (3:03cv1183 and 3:03cv1184); the court consolidated these appeals. On September 25, 2003, the Bankruptcy Court issued orders dismissing the independent action (3:03cv1184) filed by Transouth Financial Corporation ("Transouth") and Linda Booth (collectively "Creditors") and remanding Civil Action No. 3:03cv1183 to the Circuit Court of Macon County, Alabama. The Creditors appeal the bankruptcy court's decisions to this court pursuant to 28 U.S.C. § 158(a) and FED. R. BANKR. P. 8001. For the reasons stated below, the court finds that the bankruptcy court's orders are due to be AFFIRMED.
The facts in this case appear to be undisputed; neither party has argued that the bankruptcy court reached inaccurate factual findings.
The court's discussion of the facts of this case is divided into two parts: first, the facts as they relate to the Transouth mortgage and the problems that arose from Transouth's failure to timely release it, and second, Victor Murry's ("Debtor") two bankruptcy filings.
In 1994, Murry mortgaged his home to Transouth. At that time, Transouth recorded its mortgage in Macon County, which is where the home is located. Murry refinanced his mortgage in 1997 with another lender; the Transouth mortgage was paid off. A release of the mortgage was prepared but erroneously filed by Transouth in Lee County rather than Macon County. In 1998, Murry again refinanced his mortgage, this time with Wells Fargo Financial ("Wells Fargo"), which did not make the original loan but acquired the mortgage prior to foreclosure. When Murry refinanced this time he learned that the Transouth mortgage, which was paid off, had not been released. He went to the Transouth office in the Auburn-Opelika area and spoke with Linda Booth, who was then the branch manager. Booth gave Murry a handwritten note indicating that the mortgage had been paid off. This note apparently satisfied Wells Fargo, as a new mortgage was made even though Transouth's mortgage had not been officially released in Macon County.
Murry defaulted on the Wells Fargo mortgage in 2001; Wells Fargo began foreclosure proceedings. In an effort to redeem, Murry applied for yet another mortgage, at the First Tuskegee Bank. His intention was to borrow enough money from First Tuskegee to pay off the Wells Fargo loan, thereby saving his home from foreclosure. The loan was approved by First Tuskegee, but funds could not be advanced because First Tuskegee learned that the Transouth mortgage still had not been released of record. Murry again approached Transouth to have his 1994 mortgage with it released. The Transouth mortgage file, however, was not readily available, and apparently Transouth was not able to determine promptly that the mortgage had been paid off. Therefore, by the time that matter was sorted out, Murry was unable to redeem his home.
In January of 2002, Murry filed suit against Transouth in the Circuit Court of Macon County, Alabama. The complaint seeks money damages under various lender liability theories. Murry's complaint in the civil suit in Macon County is predicated wholly upon causes of action arising under Alabama state law. On November 13, 2002, Transouth removed Murry's civil action from the Circuit Court of Macon County to the bankruptcy court.
On January 24, 2000, Murry filed a petition in bankruptcy pursuant to Chapter 13 of the Bankruptcy Code, initiating Case No. 00-387. One who files bankruptcy must disclose all of his assets, including causes of action, lawsuits, or potential lawsuits. Murry filed these schedules as required by law. As of the date of filing bankruptcy, January 24, 2000, Murry was under the impression that the Transouth mortgage had been released. He did not know that he had a potential cause of action against Transouth for its failure to release the mortgage. Accordingly, he did not list such a cause of action as an asset in his schedules, nor did his Chapter 13 plan make any mention of the cause of action. On April 14, 2000, the court confirmed Murry's Chapter 13 Plan.2 The first Chapter 13 case was subsequently dismissed on March 14, 2002.
On March 26, 2002, Murry filed a second Chapter 13 case before the bankruptcy court, which was dismissed on October 22, 2002. In that case, Murry listed his cause of action against Transouth in his schedules. Also, the Chapter 13 Plan proposed to pay the proceeds of the suit, if any, to the Chapter 13 Trustee.
On November 13, 2002, the same day it removed the state court action, Transouth filed the independent federal court action seeking an injunction to prevent the Debtor from prosecuting his civil suit. Murry moved to remand the removed action to the Macon County Circuit Court. He also moved to dismiss the independent action for lack of jurisdiction.
On March 4, 2003, the bankruptcy court conducted a hearing on all pending motions in the removed suit and the independent action. On May 1, 2003, the bankruptcy court entered an order denying Murry's motion to remand the removed action to Macon County and denying Murry's motion to dismiss the independent action. On June 26, 2003, however, the court heard evidence and took the independent action under advisement. Having heard the evidence and having considered the arguments of counsel, the bankruptcy court concluded that it lacked subject matter jurisdiction over both the removed suit and the independent action. On September 25, 2003, the bankruptcy court, having reconsidered its prior orders, dismissed the independent action and remanded the removed action to the Circuit Court for Macon County, Alabama.
A district court reviews a bankruptcy court's factual findings under the clearly erroneous standard. In re Thomas, 883 F.2d 991, 994 (11th Cir.1989). "For a factual finding to be clearly erroneous, this court, after reviewing all of the evidence, must be left with the definite and firm conviction that a mistake has been committed." General Trading, Inc. v. Yale Materials Handling Corp., 119 F.3d 1485, 1494 (11th Cir.1997). In contrast, a district court reviews de novo a bankruptcy court's conclusions of law. In re Simmons, 200 F.3d 738, 741 (11th Cir.2000). Equitable determinations by a bankruptcy court are subject to review under an abuse of discretion standard. In re General Dev. Corp., 84 F.3d 1364, 1367 (11th Cir.1996).
The Creditors contend that the bankruptcy court has jurisdiction over the independent Tippins action3 and the removed action because these proceedings "arise under", "arise in", and are "related to" Title 11, the independent action is a core bankruptcy proceeding, and the court has inherent power to enforce its prior judgments under the relitigation exception to the Anti-Injunction Act.
Pursuant to 28 U.S.C. § 1334(b), "[n]otwithstanding 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." 28 U.S.C. § 157. Congress, in turn, authorized district courts to refer to the bankruptcy judges for that district "any or all cases under title 11 and any or all proceedings arising under title 11 or arising in or related to a case under title 11 ...." 28 U.S.C. § 157; see also Celotex Corp. v. Edwards, 514 U.S. 300, 307, 115 S.Ct. 1493, 131 L.Ed.2d 403 (1995). The Eleventh Circuit noted that a "bankruptcy court's jurisdiction is derivative of and dependent upon these three bases." In re Toledo, 170 F.3d 1340, 1344 (11th Cir.1999).
The Creditors contend that these proceedings arise under Title 11. "`Arising under' proceedings are matters invoking a substantive right created by the Bankruptcy Code." In re Toledo, 170 F.3d at 1345. COLLIER ON BANKRUPTCY, a leading treatise, interpreting "the House Report that accompanied H.R. 8200, which led to the Bankruptcy Reform Act of 1978," specifically the explanation in that report of the phrase "civil proceedings arising under title 11," notes that the arising under language "seems to mean ... that, when a cause of action is one which is created by Title 11, then that civil proceeding is one `arising under title 11.'" 1 LAWRENCE P. KING, COLLIER ON BANKRUPTCY, ¶ 3.01[4][c][i] (15th rev. ed.2003); 9 AM. JUR.2d Bankruptcy § 563 (2003) (). For example, in In re Harris, the bankruptcy court noted that the debtor in the removed civil action asserted claims arising from a loan transaction with the defendants and that these claims arose under state law. In re Harris, 298 B.R. 897, 900 (Bankr.M.D.Ala.2003). Because the lender liability claims arise under state law and "do not invoke a `substantive right' or `cause of action' created by the Bankruptcy Code[,] ... the action does not `arise under' title 11." Id.
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