Dawnwood Properties/78 v. United States

53 Fed. Cl. 168, 2002 U.S. Claims LEXIS 196, 2002 WL 1876949
CourtUnited States Court of Federal Claims
DecidedAugust 13, 2002
DocketNo. 95-569 C
StatusPublished
Cited by2 cases

This text of 53 Fed. Cl. 168 (Dawnwood Properties/78 v. United States) is published on Counsel Stack Legal Research, covering United States Court of Federal Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Dawnwood Properties/78 v. United States, 53 Fed. Cl. 168, 2002 U.S. Claims LEXIS 196, 2002 WL 1876949 (uscfc 2002).

Opinion

OPINION AND ORDER

HEWITT, Judge.

The court has before it Defendant’s Supplemental Motion to Dismiss and/or in the Alternative for Summary Judgment (Def.’s Supp.Mot.) and Plaintiffs Supplemental Reply Brief to Defendant’s Supplemental Motion to Dismiss and/or in the Alternative for Summary Judgment (Pl.’s Resp.). In an order dated May 29, 2002, the court granted defendant’s request to file supplemental briefing to the original pending briefing that was filed in 1995 and 1998. This order addresses that supplemental briefing as well as the original pending motions.1

Defendant seeks dismissal on several grounds. Defendant argues that (1) Dawn-wood lacked the legal capacity to file this lawsuit and that, therefore, the court lacks jurisdiction to hear Dawnwood’s complaint; (2) Dawnwood’s claims are barred pursuant to the doctrine of res judicata; and (3) the suit is time-barred. Def.’s Supp.Mot. at 1-2. For the following reasons, defendant’s motion is GRANTED and Dawnwood’s complaint is DISMISSED.

Because standing presents a threshold issue, see Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 102-03, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998), the court first examines whether Dawnwood had the legal capacity to file this lawsuit.

Defendant argues that Dawnwood lacked the legal capacity to file this lawsuit stemming from Dawnwood’s having previously filed a petition for bankruptcy in the United States Bankruptcy Court for the Southern District of New York (Bankruptcy Court) on or about November 3, 1994. Def.’s Supp. Mot. at 4. On February 24, 1995, the Bankruptcy Court appointed a trustee to administer Dawnwood’s estate in bankruptcy on a temporary basis. Def.’s Supp.Mot. at 2.2 On March 16, 1995, the Bankruptcy Court entered an order making the trustee’s appointment permanent. Plaintiff filed its complaint in this court on August 22,1995.

Defendant, relying on 11 U.S.C. § 541(a), argues that “all of the assets of a debtor in bankruptcy, including legal claims, become assets of the bankruptcy estate.” Def.’s Supp.Mot. at 4-5. Citing Tyler House Apartments v. United States, 38 Fed.Cl. 1, 5 (1997), defendant argues that trustees are “the only entities that [have] the right to assert a cause of action that [the] debtors may have....” On August 13, 1997, nearly two years after plaintiff filed its complaint in this court, the trustee for plaintiff in the Bankruptcy Court filed a notice of its intention to abandon to Dawnwood the legal claims that are the subject of this suit. Def.’s Mot. at 3. These claims were deemed abandoned by the trustee 15 days later. Def.’s Supp.Mot. at 4. Based on this sequence of events, defendant argues that until 15 days after the trustee’s abandonment notice, Dawnwood could not have had standing to maintain a cause of action. Def.’s Supp.Mot. at 8.

Plaintiff argues that “trustee absolutism” does not exist and that in some circumstances a court may authorize someone other than the trustee to commence litigation on behalf of the estate. Pl.’s Resp. at 5. To [170]*170support this proposition, plaintiff relies on Section 1109 of the Bankruptcy Code. 11 U.S.C. § 1109. Defendant responds that Section 1109 is not applicable to this case and, even if it were applicable, the Bankruptcy Court never entered an order authorizing Dawnwood to file this lawsuit. Defendant’s Reply to Plaintiffs Opposition to Defendant’s Supplemental Motion to Dismiss and/or in the Alternative for Summary Judgment (Def.’s Reply) at 2. Both of defendant’s arguments appear to be correct.

Section 1109 reads:

§ 1109. Right to be heard
(a) The Securities and Exchange Commission may raise and may appear and be heard on any issue in a case under this chapter, but the Securities and Exchange Commission may not appeal from any judgment, order, or decree entered in the case.
(b) A party in interest, including the debt- or, the trustee, a creditors’ committee, an equity security holders’ committee, a creditor, an equity security holder, or any indenture trustee, may raise and may appear and be heard on any issue in a ease under this chapter.

11 U.S.C. § 1109 (1993). On its face, the text of Section 1109 merely affords debtors and other “part[ies] in interest” the right to be heard in “a case under this chapter,” that is, Chapter 11 bankruptcy eases. See Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 8-9, 120 S.Ct. 1942, 147 L.Ed.2d 1 (2000); In the Matter of Marin Motor Oil, Inc., 689 F.2d 445, 449-50 (3d Cir.1982) (“The words ‘this chapter’ in section 1109(b) denote Chapter 11 of the Bankruptcy Code, the Chapter which deals specifically with reorganizations.”); see also In re Marcus Hook Dev. Park, Inc., 153 B.R. 693, 700 (Bankr.W.D.Pa.1993) (“Section 1109(b) of the Code does not appear to have any bearing on whether one qualifies as a party in interest who may bring an adversary action. The language of Section 1109(b) states that it applies to a case under title 11 — i.e., to the underlying bankruptcy case.”); Daniel R. Cowans, Bankruptcy Law and Practice § 3.18, at 310 (7th ed. 1998) (“Section 1109 rights are confined to bankruptcy cases.”). Thus, Section 1109(b) supplies no authority entitling Dawnwood to bring an action outside of Chapter 11 in this court.

Even if Section 1109 were found to apply to actions outside of Chapter 11, plaintiffs argument that the Bankruptcy Court “authorized” it to bring this action is without merit.

At oral argument, plaintiff pointed to paragraph 7 of John P. Rooney’s affidavit to demonstrate that the Bankruptcy Court authorized Dawnwood to bring this action. Transcript of July 19, 2002 Oral Argument (Oral Arg.Tr.) at 5. Paragraph 7 in full text reads as follows:

On March 8, 1995 I understood from the Bankruptcy Court’s decision making the Trustee’s appointment permanent that I would act as a collection attorney to recover on claims owed to Dawnwood by its lender (defendant herein) and others. My understanding in this regard was based, for example, on statements made from the bench of the Bankruptcy Court in which Bankruptcy Judge Lifland stated:
a. “It has also not been held to the contrary that the Debtor in the form of Mr. Rooney is a quite competent litigator and is quite competent in both defending his interests, and apparently, Mr. Lazarus, in prosecuting his interests, because as you point out one of the main basis for rehabilitating the Debtor will be because of anticipated success in litigation, but this is a rather sad piece of real estate, in that there is some degree of public interest here.”
b. “To the extent that this $716,000 or $500,000 property or maybe even $1 million property can be enhanced by Mr. Rooney’s skills in litigation with respect to Debrino [the project contractor] and the

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Bluebook (online)
53 Fed. Cl. 168, 2002 U.S. Claims LEXIS 196, 2002 WL 1876949, Counsel Stack Legal Research, https://law.counselstack.com/opinion/dawnwood-properties78-v-united-states-uscfc-2002.