In re Bedell

563 B.R. 731, 2017 Bankr. LEXIS 315
CourtUnited States Bankruptcy Court, D. Kansas
DecidedFebruary 2, 2017
DocketCase No. 03-10509
StatusPublished

This text of 563 B.R. 731 (In re Bedell) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Bedell, 563 B.R. 731, 2017 Bankr. LEXIS 315 (Kan. 2017).

Opinion

ORDER DISMISSING MOTION TO REOPEN CASE FOR LACK OF SUBJECT MATTER JURISDICTION

Robert E. Nugent, United States Bankruptcy Judge

Bankruptcy courts have broad discretion to reopen a closed case at a debt- or’s request. But a request to reopen in order to pursue litigation against an estate fiduciary appointed by another bankruptcy court crosses the boundaries of that discretion because the Barton doctrine holds that the appointing court must first authorize the debtor to seek that relief.1 Without it, this Court lacks subject matter jurisdiction to entertain Bedell’s request for relief.

Donald and Janice Bedell completed their confirmed chapter 13 plan and received a discharge in 2006. They later separated and now Mr. Bedell asks that I reopen this chaptér 13 case and “interpret” the discharge order. He asserts that when the discharge order was entered, it operated to strip off a second mortgage that their chapter 13 plan declared to be wholly unsecured. Bedell was prompted to act when Sarsenstone Corporation, the successor servicer of their mortgage, threatened to foreclose the mortgage in 2015. Bedell struck first by suing Sarsenstone in Kansas state court, [733]*733alleging that the threatened foreclosure was a “deceptive act” prohibited by the Kansas Consumer Protection Act.2 That action remains pending. Bedell wants the bankruptcy case reopened so that I can “interpret” the 2006 discharge order to hold that it stripped off the wholly unsecured second mortgage. But Sarsenstone is acting as a liquidating agent for a Master Loan Pool owned by a chapter 7 estate in a case pending in the United States Bankruptcy Court for the Central District of California. Pursuant to an order of that- court, Sarsenstone is the chapter 7 trustee’s agent for the purpose of enforcing and liquidating the loans in the pool. Bedell did not seek the Central California court’s permission to pursue either the state court case or this" motion. Therefore, application of the Barton doctrine requires that this motion to reopen be dismissed.

Facts

The parties stipulated to the facts in this matter.3 They can be summarized as follows. Donald Bedell and his former wife, Janice, filed this chapter 13 case on February 7, 2003. In their chapter 13 plan, they proposed to treat JP Morgan Chase’s (JPMC) $31,055 second mortgage claim against their homestead as being wholly unsecured. Homecomings Financial Network, Inc., was JPMC’s servicer. The plan provided: “The value of the homestead is less than the first mortgage. The debtors consider the claim of this creditor to be totally unsecured pursuant to 11 U.S.C. § 506 and will treat the creditor as unsecured and pay it according to the paragraph entitled ‘Unsecured Creditors.’ ”4 Neither JPMC nor Homecomings objected and the plan was confirmed. The debtors never filed an adversary proceeding or a motion to strip the lien of JPMC. During administration, the second mortgage claim was classified and treated as an unsecured claim and the trustee paid JPMC $4,296.59.5 A discharge order was issued April 28, 2006 and provided, in part, that “a creditor may have the right to enforce a valid lien, such as a mortgage or security interest, against the debtor’s property after the bankruptcy, if that lien was not avoided or eliminated in the bankruptcy case.”6 A final decree closing this case was entered on August 1, 2006.

After discharge, JPMC assigned its mortgage to Old Canal Financial Corporation and, in April of 2007, several of Old Canal’s creditors filed an involuntary bankruptcy proceeding against it in the United States Bankruptcy Court for the Central District of California.7 Two years later, in November of 2009, that court approved a compromise between Old Canal’s chapter 7 trustee and Sarsenstone Corporation, Old Canal’s servicer.8 Under the agreement, all of Old Canal’s mortgages were combined into a Master Loan Pool and Sarsenstone was designated “Master Pool Trustee,” to act as an agent of the chapter 7 trustee in administering, collecting, and liquidating the assets of the pool.9 Under the approved compromise, Sarsen-[734]*734stone was to apply to the bankruptcy court “in all cases in which ... issues shall arise as to the scope of the Master Pool Trustee’s powers.”10 The assets of the Master Loan Pool were deemed to be property of the Old Canal bankruptcy estate.11 The Bedell mortgage was part of the Master Loan Pool.

Sarsenstone sent Bedell three demand letters, the last in January 2015, threatening to commence foreclosure proceedings while acting in its capacity as the Master Pool Trustee.12 In April of 2015, Bedell filed an action against Sarsenstone in the District Court of Sedgwick County, Kansas, seeking recovery against Sarsenstone under the Kansas Consumer Protection Act.13 In that action, Bedell alleged that Sarsenstone was the servicer of the mortgage and therefore a “supplier” under the Act.14 Acting as such, Sarsenstone had attempted to enforce the mortgage which Bedell termed an “illegal lien.” Sarsen-stone’s efforts to collect were, according to Bedell, deceptive and unconscionable acts under §§ 50-626 and 627 of the Act, all of which Sarsenstone committed while Bedell was an elder person entitled to protection under the Act. The status of this lawsuit is unclear from the stipulated record before me.

In April of 2016, Bedell filed this motion to reopen his bankruptcy case to determine whether the combined effects of the confirmed plan and discharge operated to strip the second lien from Bedell’s homestead.15 Now that I have reviewed the stipulated facts, each party’s brief, and the applicable law, I conclude that Bedell’s motion is barred by the Barton doctrine unless and until he obtains leave of the bankruptcy court in the Central District of California to litigate with the chapter 7 trustee or the trustee’s agent, Sarsenstone.

Analysis

Courts have discretion to reopen bankruptcy cases to “accord relief to the debtor.”16 Bedell wants the case reopened for this Court to determine that the combined effect of the confirmed plan and the discharge order stripped off the second mortgage. But this motion, like the Sedg-wick County litigation, is an action against the agent of a chapter 7 trustee appointed by another bankruptcy court. Before reaching its merits, I must consider whether this Court even has subject matter jurisdiction in light of the rule in Barton v. Barbour. In that case, the Supreme Court held that allowing a suit against a receiver appointed by another state’s court without the appointing court’s authority is “an usurpation of the powers and duties which belonged exclusively” to the court administering the estate.17 The Barton rule recognizes that the appointing court has an administrative interest in the receiver’s activities to which other courts should at a minimum defer. This also protects the receiver from a multiplicity of actions in several venues. In most Circuits, [735]

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Barton v. Barbour
104 U.S. 126 (Supreme Court, 1881)
Muratore v. Darr
375 F.3d 140 (First Circuit, 2004)
In Re VistaCare Group, LLC
678 F.3d 218 (Third Circuit, 2012)
Watson v. Parker (In Re Parker)
264 B.R. 685 (Tenth Circuit, 2001)
Satterfield v. Malloy
700 F.3d 1231 (Tenth Circuit, 2012)

Cite This Page — Counsel Stack

Bluebook (online)
563 B.R. 731, 2017 Bankr. LEXIS 315, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-bedell-ksb-2017.