Yelverton v. Dist. of Columbia Dept. of Pub. Works (In re Yelverton), Case No. 09-00414

Decision Date10 June 2015
Docket NumberAdversary Proceeding No. 14-10046,Case No. 09-00414
PartiesIn re STEPHEN THOMAS YELVERTON, Debtor. STEPHEN THOMAS YELVERTON, Plaintiff, v. DISTRICT OF COLUMBIA DEPT. OF PUBLIC WORKS, Defendant.
CourtUnited States Bankruptcy Courts – District of Columbia Circuit

(Chapter 7)

Not for Publication in West's Bankruptcy Reporter.

MEMORANDUM DECISION AND ORDER DENYING MOTION TO ALTER OR AMEND DECISION PER FRCP, RULE 59(e)

The plaintiff Yelverton's Motion to Alter or Amend Decision Per FRCP, Rule 59(e) (Dkt. No. 16) must be denied for the reasons elucidated in my decision dismissing this adversary proceeding and as explained herein. In dismissing this adversaryproceeding, I held that Yelverton had failed to obtain permission to pursue the proceeding as required by the Opinion and Order entered on August 6, 2014, in Stephen Thomas Yelverton v. Wendell W. Webster, et al. (In Re Yelverton), Case No. 1:13-cv-1544, reported at 526 B.R. 429. Alternatively, I held that: (1) the claim for relief under 11 U.S.C. § 544 (i.e., avoidance of liens against Yelverton's Mercedes vehicle) was time-barred; and (2) the District Court's bankruptcy subject matter jurisdiction under 28 U.S.C. § 1334(b), exercised by this court pursuant to referral by the District Court under District Court Local Bankruptcy Rule 5011-1, did not extend to the nonbankruptcy law claims Yelverton was pursuing (i.e., his claims for compensatory and punitive damages for the alleged unlawful conversion, taking, and use of the vehicle).

The harm that Yelverton clamors to litigate occurred long ago: his vehicle was impounded by the District of Columbia in December 2008 and sold in March 2009. The District of Columbia ought not be required to defend such stale claims; indeed, it is clear, as described later in this decision, that the statute of limitations bars Yelverton's claims. In his motion, Yelverton advances facts not pled in his complaint in favor of finding subject matter jurisdiction. However, as will be seen, Yelverton has still failed to advance adequate facts to establish subject matter jurisdiction, and, in any event, any possible impact onthe estate is so remote, speculative, and unlikely to occur that abstention would be appropriate.

I

THE COURT PROPERLY VIEWED THE COMPLAINT AS BARRED BASED ON

YELVERTON'S FAILURE TO OBTAIN PERMISSION TO FILE THE COMPLAINT

Yelverton contends that I have misinterpreted the District Court's Opinion and Order entered on August 6, 2014, in Case No. 1:13-cv-1544, reported at 526 B.R. 429. This court, by statute, is a unit of the District Court and exercises the bankruptcy subject matter jurisdiction of the District Court. I adhere to my interpretation of the District Court's Opinion and Order, requiring pre-filing authorization, as extending to adversary proceeding complaints filed by Yelverton in this court.

If Yelverton had moved this court to permit the filing of the complaint, the motion would have been deemed referred to this court to address in the first instance pursuant to District Court Local Bankruptcy Rule 5011-1, and I would have denied the request (or, if Fed. R. Bankr. P. 9033 were determined to apply, I would have recommended to the District Court that the request be denied) because of the alternative grounds I set forth that would require dismissal of the proceeding.

IITHE CLAIMS UNDER 11 U.S.C. § 544(a) ARE TIME-BARRED

The complaint asserts a claim under 11 U.S.C. § 544(a) to avoid the District's lien and the receipt of the proceeds of thatlien, and it sought a recovery of the transferred property under 11 U.S.C. § 550 upon those transfers being avoided. As noted in the prior decision, Yelverton is barred by the expiration of the limitations period of 11 U.S.C. § 546(a) from pursuing his § 544(a) claim.1 As stated in Shawhan v. Shawhan (In re Shawhan), Nos. NV-08-1049-JuKuK, NV-08-1052-JuKuK, 04-10196, 2008 WL 8462964 at *10 (9th Cir. BAP July 7, 2008):

If the trustee would be barred by the passage of the § 546(a)(1) limitations period, debtor is too as debtor does not get greater rights that those of the trustee. See Verner v. Verner (In re Verner), 318 B.R. 778, 792 (Bankr. W.D. Pa. 2005); In re Steck, 298 B.R. 244, 248 (Bankr. D.N.J. 2003); Schroeder v. First Union Nat'l Bank (In re Schroeder), 173 B.R. 93, 94 (Bankr. D. Md. 1994), rev'd on other grounds, 183 B.R. 723 (D. Md. 1995).

Because Yelverton is barred from avoiding the transfers, his request to recover the transferred property must fail as well.2

Yelverton also contends:

The Decision, at pp. 7-8, erroneously finds that the Debtor's claims under 11 U.S.C. 544 are beyond the statute of limitations. However, such claims may be filed after the statute of limitations where they are "defensive." In Re McKensie, 757 F.3d 1034, 1041 (8th Cir. 2013); In Re Mclean, 196 B.R. 679, 676 (Bkrtcy. S.D.N.Y. 1996).

This argument fails. Yelverton appears to have mis-cited Grant, Konvalinka & Harrison, P.C. v. Still (In re McKenzie), 737 F.3d 1034, 1041 (6th Cir. 2013), and United States Lines, Inc. v. United States (In re McLean Indus., Inc.), 196 B.R. 670, 676 (S.D.N.Y. 1996).

McKenzie and McLean Industries dealt with the use of a trustee's avoidance power in invoking the estate's defense to a proof of claim under 11 U.S.C. § 502(d).3 Section 502(d) essentially provides for disallowance of a claim if the creditor has not undone an avoidable transfer. The majority position (exemplified by McKenzie and McLean Industries) holds that in objecting to a claim pursuant to § 502(d), the trustee may invoke the avoidability of the claim even though the trustee would beunable to avoid and recover the transfer at issue because the statute of limitations contained in 11 U.S.C. § 546(a)(1) bars avoidance of the transfer.

Unlike the trustees in McKenzie and McLean Industries, Yelverton is not using an avoidance power defensively under 11 U.S.C. § 502(d) in objecting to a proof of claim. Instead, Yelverton's complaint seeks affirmative relief: avoidance of all liens against the vehicle and compensatory damages. Yelverton's § 544(a) claims are barred by the statute of limitations because they seek affirmative relief, not defensive relief under § 502(d).

III

YELVERTON'S CONTENTIONS REGARDING

HIS NONBANKRUPTCY LAW CLAIMS ARE MERITLESS

Yelverton next contends:

The Decision, at pp. 7-8, erroneously finds that the Debtor's state law claims are unrelated to the Bankruptcy and are beyond the statute of limitations. However, they are claims for continuing Torts for damages to property of the Estate, and thereby the proceeds would go to the Estate to pay Creditors. Although the Debtor filed for an Exemption of this property from the Estate, the Exemption was never recognized by the Bankruptcy Court. But as Exempt property, the proceeds would nevertheless go to a coowner of the property, Alexandra Senyi de Nagy-Unyom, who is a Creditor of the Estate as to the property.

These contentions include erroneous statements that can be readily brushed aside:

The court specifically did not decide whether thenonbankruptcy law claims were untimely;4 instead, it held that the court lacked subject matter jurisdiction over the nonbankruptcy law claims.
• It is untrue that an exemption claim "was never recognized by the Bankruptcy Court."5
The state law claims have been abandoned in toto to Yelverton and thereby ceased to be property of the estate being administered by the chapter 7 trustee. In turn, the proceeds of those claims will not belong to the estate, and thus they are not proceeds that the chapter 7 trustee would potentially distribute to creditors after paying administrative claims. Any recovery in this proceeding would belong to Yelverton, and it is thus untrue that "the proceeds would go to the Estate to pay Creditors."

That leaves Yelverton's contention that the court erred in finding no subject matter jurisdiction over the nonbankruptcy lawclaims and specifically erred in that regard because "the proceeds would nevertheless go to a coowner of the property, Alexandra Senyi de Nagy-Unyom, who is a Creditor of the Estate as to the property." In part IV, below, I address why, despite this contention, I did not err in concluding that the complaint failed to establish subject matter jurisdiction, and I note that even if there were subject matter jurisdiction, Yelverton's nonbankruptcy law claims against the District of Columbia would appropriately be claims as to which the court should abstain.

In part V, below, I observe that Yelverton has failed to allege facts establishing that he has any enforceable nonbankruptcy claims against the District. This presents another reason why (pursuant to the Opinion and Order entered on August 6, 2014, in Stephen Thomas Yelverton v. Wendell W. Webster, et al. (In Re Yelverton), Case No. 1:13-cv-1544) permission should not be given to Yelverton to file the complaint.

Finally, in part VI, below, I address why the abandonment to Yelverton of the claims against the District of Columbia had no retroactive effect on the statutes of limitations that bar his claims.

IV

THERE WAS NO ERROR IN CONCLUDING THAT THE COMPLAINT DID NOT

ESTABLISH SUBJECT MATTER JURISDICTION, AND ABSTENTION WOULD
BE APPROPRIATE EVEN IT THERE WERE SUBJECT MATTER JURISDICTION

The court appropriately concluded that the complaint failed to establish subject matter jurisdiction. None of the additional facts he now advances would establish such jurisdiction, and, in any event abstention would be appropriate if there were jurisdiction.

A.

YELVERTON DID NOT PLEAD FACTS

ESTABLISHING SUBJECT MATTER JURISDICTION

Under Fed. R. Civ. P. 8(a), Yelverton was required to plead in his complaint facts establishing that this court had subject matter jurisdiction over his claims. See McNutt v. Gen. Motors Acceptance Corp. of Ind., 298 U.S. 178, 189 (1936) ("[The plaintiff] must allege in his pleading the facts essential to show jurisdiction."). This he failed to do.

Yelverton's complaint did not plead what he now alleges, namely,...

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