Brown v. Schlossberg (In re Burruss)

90 B.R. 142, 62 A.F.T.R.2d (RIA) 5090, 1988 U.S. Dist. LEXIS 9836
CourtDistrict Court, D. Maryland
DecidedJune 1, 1988
DocketBankruptcy No. 83-A-1608; Civ. No. S 88-857
StatusPublished

This text of 90 B.R. 142 (Brown v. Schlossberg (In re Burruss)) is published on Counsel Stack Legal Research, covering District Court, D. Maryland primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Brown v. Schlossberg (In re Burruss), 90 B.R. 142, 62 A.F.T.R.2d (RIA) 5090, 1988 U.S. Dist. LEXIS 9836 (D. Md. 1988).

Opinion

MEMORANDUM

SMALKIN, District Judge.

This is an appeal from a decision of Bankruptcy Judge Mannes holding that a declaratory judgment action brought by the appellant was not timely filed. The complaint was filed pursuant to 28 U.S.C. § 2201. In it, appellant Commissioner, solely on behalf of defrauded individual investors (i.e., not asserting any claim on her own behalf), sought to have the Bankruptcy Court impose a constructive trust upon assets of the debtor’s estate. Two individual investors are also named plaintiffs. Of course, the trustee in bankruptcy was named as a defendant, and the United States was also named as a defendant, because it asserts a tax lien against assets of the debtor’s estate that would defeat the individual investors’ claim to those assets unless a constructive trust were imposed. The Bankruptcy Court, applying the three year statute of limitations of Md. Cts. & Jud. Proc. Code Ann. § 5-101 (1984 Repl. Yol.), held the complaint to be time-barred. The issues have been fully briefed, and no oral argument appears necessary. Bankr. Rule 8012.

The Court, after careful review, has concluded that there is no subject-matter jurisdiction over the appellant’s claim against the United States. The appellant has pointed to no provision of federal law effectively waiving the United States’ im[144]*144munity to suit on this claim.1

Because appellant’s attempts to characterize this action as one authorized by 28 U.S.C. § 2410 (and as to which sovereign immunity is expressly waived) are devoid of merit, sovereign immunity bars this suit as against the United States. In that the appellant lacks possession of the funds in question, this is not a suit to quiet title under 28 U.S.C. § 2410(a)(1). Kasdon v. G. W Zierden Landscaping, Inc., 541 F.Supp. 991, 994 (D.Md.1982), aff'd, 707 F.2d 820 (4th Cir.1983). Because the appellant is not a stakeholder/possessor, but merely a representative of creditor/claimants, this is not an interpleader action (or an action in the nature of interpleader) as to which sovereign immunity is waived by 28 U.S.C. § 2410(a)(5). See, e.g., Ky. ex rel. U. Pac. I. Co. v. Laurel County, 805 F.2d 628, 636 (6th Cir.1986), cert. denied, — U.S. -, 108 S.Ct. 72, 98 L.Ed.2d 36 (1987). If all lawsuits in which conflicting claims to property of a debtor’s estate are sought to be resolved were categorized as interpleaders or in the nature of interpleader, this limited remedy would be expanded out of all proportion. Nothing in section 2410(a)(5) suggests such an unwarranted expansion of the interpleader remedy. As noted in 7 C. Wright, A. Miller, and M. Kane, Federal Practice & Procedure: Civil 2d § 1721 (1986) at 656, “Section 2410(a) will not apply unless ‘a viable interpleader action is filed naming the United States as a party defendant.’ In the absence of a bona fide interpleader, the court lacks subject matter jurisdiction.” None of the other subsections of Section 2410 furnishes any possible foundation for this suit,2 and, thus, this Court is without subject-matter jurisdiction.

Because any court of the United States must dismiss a case that is outside its subject-matter jurisdiction, Fed.R.Civ.P. 12(h)(3), this case must be remanded to the Bankruptcy Judge, with, at a minimum, instructions to dismiss the complaint as against the United States, for lack of subject matter jurisdiction.

Although the Trustee had not raised in the Bankruptcy Court any defense of limitations, and the parties to this appeal dispute whether or not he has thus waived this defense, it is apparent that the Bankruptcy Judge, by directing dismissal of the entire complaint as to all parties but the two individual plaintiffs (Mem.Dec. (Paper No. 28) at 5), held the appellant’s action time-barred as against the Trustee, as well as against the United States, applying the statute of limitations found in Md.Cts. & Jud.Proc.Code Ann. § 5-101 (1984 Repl. Vol.). This aspect of the ruling below is troublesome, both because of the question of assertion and/or waiver of the defense by the Trustee and because of the application of a statute of limitations, rather than the doctrine of laches, to a complaint seeking equitable relief. See, e.g., Saggese v. Saggese, 15 Md.App. 378, 387-88, 290 A.2d 794, 798-99 (1972) (test of timeliness in equity is doctrine of laches).

It is not necessary, however, to review these matters on appeal, because the dismissal of the United States for the reasons stated above will result in a total want of federal jurisdiction. This is so because, on [145]*145remand, there will be no adversary case or controversy extant between the plaintiff and the remaining defendant, the Trustee. The Bankruptcy Judge has explicitly and implicitly found (see Mem.Dec. (Paper No. 28) at 3), and the parties apparently agree: that the Trustee has taken the “selfless” position that the funds in question are not property of the estate; that he has in fact opposed the claim of the United States to the funds; that he has “join[ed) in the request of the Securities Commissioner”; and that he does not, therefore, oppose the imposition of a constructive trust on the funds or any other relief that would defeat the United States’ claim to the funds as an asset of the debtor’s estate.

Therefore, there being no adversary contest between the remaining parties (the plaintiffs and the Trustee), there exists no case or controversy within the Article III subject-matter jurisdiction of the federal courts. It is clear that there must be an actual adversary contest between the nominal parties in a declaratory judgment suit under 28 U.S.C. § 2201, or the court is without subject matter jurisdiction. See, e.g., Graham v. Hill, 444 F.Supp. 584, 588 (W.D.Tx.1978). The federal courts will not entertain “friendly suits” under the Declaratory Judgment Act. See, e.g., Guillory v. Administrators of Tulane University of LA, 203 F.Supp. 855, 864 (E.D.La.1962). Of course, because the two individual plaintiffs are no more adverse vis-a-vis the Trustee than is the appellant, there remains no viable claim to be pressed by them in a declaratory judgment suit.

For the reasons stated, an order will be entered separately, remanding this case to Bankruptcy Judge Mannes, with instructions that an order be entered dismissing the entire complaint for lack of federal subject-matter jurisdiction.

MEMORANDUM OPINION ON MOTION FOR RECONSIDERATION

The Court has before it the Motion for Reconsideration and Amendment or Clarification filed by the appellant herein, directed towards this Court’s Memorandum Opinion of June 1, 1988.

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Related

Thomas v. Pierce
662 F. Supp. 519 (D. Kansas, 1987)
Matter of Johnson
55 B.R. 800 (E.D. Virginia, 1985)
Graham v. Hill
444 F. Supp. 584 (W.D. Texas, 1978)
Kasdon v. G. W. Zierden Landscaping, Inc.
541 F. Supp. 991 (D. Maryland, 1982)
Citizens Bank & Trust Co. of Maryland v. United States
344 F. Supp. 866 (D. Maryland, 1972)
Saggese v. Saggese
290 A.2d 794 (Court of Special Appeals of Maryland, 1972)
United Pacific Insurance v. Laurel County
484 U.S. 817 (Supreme Court, 1987)

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Bluebook (online)
90 B.R. 142, 62 A.F.T.R.2d (RIA) 5090, 1988 U.S. Dist. LEXIS 9836, Counsel Stack Legal Research, https://law.counselstack.com/opinion/brown-v-schlossberg-in-re-burruss-mdd-1988.