LaROCHE INC. v. BARNETT BANK OF SO. FLA.

661 So. 2d 855, 1995 WL 552375
CourtDistrict Court of Appeal of Florida
DecidedSeptember 20, 1995
Docket94-0212
StatusPublished
Cited by20 cases

This text of 661 So. 2d 855 (LaROCHE INC. v. BARNETT BANK OF SO. FLA.) is published on Counsel Stack Legal Research, covering District Court of Appeal of Florida primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
LaROCHE INC. v. BARNETT BANK OF SO. FLA., 661 So. 2d 855, 1995 WL 552375 (Fla. Ct. App. 1995).

Opinion

661 So.2d 855 (1995)

R.L. LaROCHE, INC., a Florida Corporation; and Ronald L. LaRoche, Appellants,
v.
BARNETT BANK OF SOUTH FLORIDA, N.A.; Robert J. Grimmig, Jr.; Michael Sears; David L. Peterson; Ned R. Nashban; and Nancy Berz Colman, Appellees.

No. 94-0212.

District Court of Appeal of Florida, Fourth District.

September 20, 1995.
Rehearing, Rehearing, and Certification of Question Denied November 9, 1995.

*856 Marjorie Gadarian Graham of Marjorie Gadarian Graham, P.A., Palm Beach Gardens and Robert E. Geisler of Peterson, Bernard, Vandenberg, Fei & Martin, West Palm Beach, for appellants.

Nancy W. Gregoire and Mary F. April of Ruden, Barnett, McCloskey, Smith, Schuster & Russell, P.A., Fort Lauderdale, for appellees Barnett Bank of South Florida, N.A., Grimmig and Sears.

Alvin B. Davis, Lazaro Fernandez, Jr., and Eduardo I. Sanchez of Steel Hector & Davis, Miami, for appellees Peterson, Nashban and Colman.

Rehearing, Rehearing En Banc, and Certification of Question Denied November 9, 1995.

*857 FARMER, Judge.

The controversy at the heart of this appeal is whether a circuit court in Florida has subject matter jurisdiction over a debtor's common law abuse of process and malicious prosecution claims against his creditor for filing in bad faith an involuntary petition for relief under section 303 of the Bankruptcy Code. Viewed from the opposite end of the tunnel, the question is whether the United States Bankruptcy Court has exclusive jurisdiction of such claims, thereby ousting our circuit court. We hold that our circuit court does have jurisdiction and reverse the dismissal of the claim.

In broad brush, the facts are as follows.[1] Barnett Bank (creditor) had for many years made a line-of-credit loan to LaRoche (debtor), a general contractor in the construction industry. The debtor drew on the credit from time to time to bridge the gap between full performance and final payment of a contract. Debtor became a general contractor on a project as to which creditor was the construction lender. During the course of construction, the owner made many change orders, causing the project to exceed the construction loan budget. Creditor induced debtor to forego declaring a default from the owner's failure to pay draws as they became due, but the lack of payment forced debtor to draw on its line of credit when it would otherwise not have had to do so. Debtor and the owner were required to resolve their dispute through arbitration. Creditor refused to grant debtor an extension for payment on the line of credit loan account until the arbitration award became final.

During the course of negotiations to settle the dispute, creditor filed an involuntary petition in the United States Bankruptcy Court for the Southern District of Florida against debtor. See 11 U.S.C. § 303(a). After creditor itself moved to voluntarily dismiss the bankruptcy petition, the bankruptcy court dismissed the title 11 case but reserved jurisdiction to assess costs, fees and punitive damages under section 303(i)(2) of the Bankruptcy Code for bad faith filing.[2]

Debtor later filed a multicount complaint in the circuit court in Broward County suing creditor and several individuals for abuse of process, malicious prosecution and slander arising from the filing of the bankruptcy petition. All defendants moved to dismiss the action on the grounds that the Bankruptcy Court has exclusive jurisdiction over such claims. The circuit judge agreed with the defendants and dismissed the action. Hence the present appeal.

We begin by noting that no United States Supreme Court precedent directly decides the issue we confront. Nor are there any authorities in the United States Courts of Appeals. Actually only two of the circuits have even come close to the issue, and their decisions, though not directly on point, appear to suggest differing views. See Gonzales v. Parks, 830 F.2d 1033 (9th Cir.1987); and Paradise Hotel Corp. v. Bank of Nova Scotia, 842 F.2d 47 (3rd Cir.1988).

In Gonzales, the debtors filed a petition under chapter 11 of the Bankruptcy Code just before a foreclosure sale was about to be held on their house. While the bankruptcy case was pending, the foreclosing mortgagee filed an action in the state court against the debtors claiming that the bankruptcy filing was an abuse of process. The debtors failed to answer the state court pleading, and a default judgment was entered against them. *858 Instead, the debtors filed an action in the bankruptcy court seeking relief from the state court judgment. The bankruptcy court entered a summary judgment against the mortgagee for violating the automatic stay provision of section 362 of the Bankruptcy Code, declaring the state court judgment void. The bankruptcy court then vacated that judgment but awarded attorney's fees to the debtors. On appeal, the mortgagee argued that the automatic stay did not apply to its abuse of process claim arising from the debtors' voluntary filing because the claim arose after the filing and not before it.

The Ninth Circuit rejected that argument, holding that the bankruptcy court had exclusive jurisdiction over the matter. Although the court could have held that the state court action was a violation of the automatic stay, it specifically rejected that conclusion. Instead it reasoned as follows:

"Implicit in the [mortgagee's] appeal is the notion that state courts have subject matter jurisdiction to hear a claim that the filing of a bankruptcy petition constitutes an abuse of process. We disagree with that assumption. Filings of bankruptcy petitions are a matter of exclusive federal jurisdiction. State courts are not authorized to determine whether a person's claim for relief under a federal law, in a federal court, and within that court's exclusive jurisdiction, is an appropriate one. Such an exercise of authority would be inconsistent with and subvert the exclusive jurisdiction of the federal courts by allowing state courts to create their own standards as to when persons may properly seek relief in cases Congress has specifically precluded those courts from adjudicating."

830 F.2d at 1035. Although not expressly stated by the Ninth Circuit, an important part of its conclusion was undoubtedly that it was the debtors themselves who sought relief in the bankruptcy court, as they were entitled to do, rather than being dragged there by a petitioning creditor. While its opinion is not explicitly limited to abuse of process claims brought by creditors against the debtor while his voluntary bankruptcy case was still pending, it is difficult to read the holding beyond that factual circumstance. Here, of course, it is the creditor who filed an involuntary petition against a debtor who had no intention of exercising any right to petition for relief under the bankruptcy laws.

In contrast Paradise Hotel actually involves an involuntary filing by a petitioning creditor and the debtor's later claims against that creditor predicated on the contention that the involuntary petition was in bad faith. The similarity to the present case, however, does not go beyond that bare circumstance.

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

Related

Metcalf v. Fitzgerald
333 Conn. 1 (Supreme Court of Connecticut, 2019)
PNH, Inc. v. Alfa Laval Flow, Inc.
2011 Ohio 4398 (Ohio Supreme Court, 2011)
Graber v. Fuqua
279 S.W.3d 608 (Texas Supreme Court, 2009)
Stone Crushed Partnership v. Kassab Archbold Jackson & O'Brien
908 A.2d 875 (Supreme Court of Pennsylvania, 2006)
Fuqua v. Graber
158 S.W.3d 635 (Court of Appeals of Texas, 2005)
Lewis v. Chelsea G.C.A. Realty Partnership, L.P.
862 A.2d 368 (Connecticut Appellate Court, 2004)
Satten v. Webb
121 Cal. Rptr. 2d 234 (California Court of Appeal, 2002)
Glannon v. Garrett & Associates, Inc.
261 B.R. 259 (D. Kansas, 2001)
Mullin v. Orthwein
772 So. 2d 30 (District Court of Appeal of Florida, 2000)
Shiner v. Moriarty
706 A.2d 1228 (Superior Court of Pennsylvania, 1998)
Powell v. Washington Land Co., Inc.
684 A.2d 769 (District of Columbia Court of Appeals, 1996)
Lee v. Gadasa Corp.
680 So. 2d 1107 (District Court of Appeal of Florida, 1996)

Cite This Page — Counsel Stack

Bluebook (online)
661 So. 2d 855, 1995 WL 552375, Counsel Stack Legal Research, https://law.counselstack.com/opinion/laroche-inc-v-barnett-bank-of-so-fla-fladistctapp-1995.