Opinion
No. CIV 00-1758-PHX-RCB, BK No. 99-10809-PHX-CGC, Adv. No. 00-217
April 6, 2001
ORDER
Several motions are pending before the court in Appellant Bell's Bankruptcy Appeal. The principal motion is the government's Motion to Dismiss (doc. #26). The court shall address this motion first, then dispose of the other matters.
BACKGROUND
On September 9, 1999, Bell filed a Chapter 13 bankruptcy petition in the United States Bankruptcy Court in the District of Arizona. Several months later, on April 3, 2000, she filed a bankruptcy adversary proceeding against the United States, raising issues about federal income tax liabilities asserted by the government.
At hearings on May 4, 2000, June 29, 2000 and July 12, 2000, the Bankruptcy Court advised Bell of the necessity of proper service of process. On the last occasion, the bankruptcy judge stated that if she failed to effect proper service on the United States by July 26, 2000, the case would be dismissed. On August 17, 2000, the Bankruptcy Court dismissed the adversary proceeding because Bell had failed to serve the United States in accordance with the applicable rules.
On August 28, 2000, Bell noticed her appeal of this action. She wanted the court to find the United States in "contempt" for not sending her a tax refund. She also sought a declaration that one GMAC corporation is "not a real party in interest," plus sanctions against GMAC's attorneys. On September 8, 2000, the Bankruptcy Court dismissed the entire bankruptcy action. Bell did not file a notice of appeal of that action.
On November 27, 2000, Bell filed an emergency motion for a hearing to stay, which the court denied in open court on December 4, 2000. At that time, the court granted the government's oral motion to file a motion to dismiss prior to filing a responsive brief on the merits. In moving to dismiss, the United States argues that the court lacks subject matter jurisdiction over the appeal of the adversary proceeding, and that the matter is moot. In response, Bell raises a series of spurious procedural issues, such as whether the United States submitted a copy of the signed, file stamped order from the bankruptcy court with the record of appeal, which, she implies, is a prerequisite to the disposition of the government's motion. She then moves to the merits of her own position that the United States violated the automatic stay imposed by the bankruptcy court. The United States did not file a reply.
DISCUSSION
A. Motion to Dismiss
The court has jurisdiction to review final orders by the bankruptcy court. 28 U.S.C. § 158 (a). "A bankruptcy court order is final and thus appealable where it 1) resolves and seriously affects substantive rights and 2) finally determines the discrete issue to which it is addressed." Law Offices of Nicholas A. Franke v. Tiffany (In re Lewis), 113 F.3d 1040, 1043 (9th Cir. 1997) (internal quotation omitted). Dismissal of an adversary action is an appealable order. See In re Tuli, 172 F.3d 707, 709 (9th Cir. 1999); see also Walthall v. United States, 131 F.3d 1289, 1292 (bankruptcy court's disposition of adversary proceedings against the IRS were properly reviewable by district court).
The pertinent jurisdictional statutes are 28 U.S.C. § 157 and 1334. The district court has original and exclusive jurisdiction over a Title 11 bankruptcy case itself and the property of the estate, and original but non-exclusive jurisdiction over civil proceedings occurring in a bankruptcy case. See 1 Collier on Bankruptcy ¶ 3.01[1] (15th ed. 1998). Bankruptcy proceedings are sorted into "core" and "related" ("non-core") proceedings. 28 U.S.C. § 157 (b)(3); see In re Gruntz, 202 F.3d 1074, 1080-81 (9th Cir. 2000). A civil proceeding is "related" to a bankruptcy case when "the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy." In re Feitz, 852 F.2d 455 457 (9th Cir. 1988). What is considered "related" sweeps broadly, to encourage the expeditious and efficient administration of bankruptcy cases. Id. An adversary proceeding can be classified as either core or non-core. See Bankr. Rule. 7008(a) (requiring pleadings initiating adversary proceedings to indicate whether the proceeding is core or non-core).
For constitutional reasons it is not necessary to discuss, the authority of bankruptcy judges to entertain "related matters" that are tangential to bankruptcy cases is circumscribed. 28 U.S.C. § 157 (c). When the bankruptcy case is ended, the same interests in efficiency that militated in favor of bankruptcy court jurisdiction over the related matter in the first instance are reassessed to determine whether jurisdiction should be retained. See In re Caraher, 971 F.3d 327 (9th Cir. 1992); accord Matter of Querner, 7 F.3d 1199 (5th Cir. 1993). Jurisdiction over bankruptcy appeals in the district court tracks the jurisdiction of the bankruptcy court, rather than the rules of original district court jurisdiction.
In the case urged by the government as an example, In re Kieslich, 243 B.R. 871 (D.Nev. 1999), the court determined that an appealed adversary proceeding was "related" and not "core." Because the matter was "related," the bankruptcy court's initial exercise of jurisdiction was supportable. Id. at 878. Jurisdiction over the related matter could not be retained after dismissal of the bankruptcy proceedings, however, for convenience and judicial economy did not compel it. Id. at 880.
The United States assumes without showing that the adversary proceeding Bell filed against it is a "related matter," as opposed to a core matter, and it argues that judicial economy does not favor exercise of jurisdiction over this appeal. Indeed, the United States believes that to retain jurisdiction of the appeal of the adversary proceeding, considering the procedural background of this matter, would constitute an abuse of discretion. For this reason, it argues that the court lacks subject matter jurisdiction.
When challenged, it is the plaintiff's burden to establish that subject matter jurisdiction exists. Ashoff v. City of Ukiah 130 F.3d 409, 410 (9th Cir. 1997); 5A Charles Alan Wright Arthur R. Miller, Federal Practice and Procedure § 1350 at 226 (2d ed. 1990 Supp. 2000). While the United States has not alleged or established facts that would support a conclusion that the adversary proceeding is "related," the United States has aired its jurisdictional rationale sufficiently to put Bell on notice. Bell has not responded to the jurisdictional argument or attempted to show that the adversary proceeding is a core proceeding.
In view of the fact that Bell has not established that this court has subject matter jurisdiction, the court will grant the Motion to Dismiss. However, even if the court had jurisdiction it is clear that, on its merits, the appeal must fail. The adversary proceeding was dismissed for failure to serve the United States. Only if this dismissal was erroneous can this court consider the facts of the case. Bell has not demonstrated that the dismissal holding was in error. The court shall grant the United States' motion to dismiss.
B. Contempt Motion
With the appeal dismissed, it follows that the court cannot grant Bell's motion to hold the United States in contempt for violating the automatic stay and for not paying her a refund. Motion for Order (doc. #29). The United States responded arguing that Bell failed to comply with Fed.R.Civ.P. 7(b), which requires that motions set forth a basis with particularity. Response (doc. #48). The court cannot get into the merits of Bell's refund claim or the automatic stay unless the dismissal in the bankruptcy court was erroneous. Having found it was not, and further finding that there are no facts to support Bell's claims against the United States, the court denies her motion.
C. Motions regarding Real Parties in Interest
Bell has twice filed motions asking the court to find that GMAC is not a real party in interest. The first, filed October 12, 2000, asks the court to find that "GMAC Mortgage Corporation" is not a real party in interest, that "GMAC Mortgage Corporation, a Pennsylvania based Corporation," is a real party in interest, and that neither corporation is represented by an attorney. Amended Motion (doc. #10). On November 6, 2000, GMAC Mortgage Corporation (referring to itself as GMAC), responded. It explained that in 1992, Bell had executed a Deed of Trust to Norwest Mortgage, Inc., granting it a security interest in real property, presumably her home. GMAC obtained the Deed of Trust by assignment from Norwest Mortgage. GMAC filed a Proof of Claim in Bell's Chapter 13 proceeding. It argues here that Bell has offered no facts or evidence to support her theory that GMAC is not a real party in interest, and that even if she had, her claim is barred by res judicata. GMAC contends that Bell raised her real party in interest theory in the bankruptcy court and failed to appear at the hearing. At the hearing, the bankruptcy court overruled Bell's objections on the merits. GMAC argues this determination should be conclusive.
The record indicates that Bell's adversary proceeding against GMAC was dismissed on September 8, 2000 in the bankruptcy court for insufficient service of process. Bell filed a notice of appeal, and the appeal was transferred to the district court from the Bankruptcy Appellate Panel for the Ninth Circuit on September 29, 2000.
In reply, Bell does not rebut the res judicata argument, and she concedes that the adversary proceeding against GMAC was dismissed on account of insufficient service of process. She writes that she is "without knowledge and information sufficient to form a belief as to the truth of the allegations" in GMAC's response, and therefore denies them. She argues that GMAC's counsel have not properly appeared, do not have the authority of their client to file documents in the court, and have conducted themselves unprofessionally. On December 11, 2000, Bell repeated her request to find GMAC not a real party in interest. Motion for Order (doc. #28).
The record establishes that the bankruptcy court considered Bell's arguments about GMAC counsel's authority to file a proof of claim and upheld GMAC's claim. See Record (doc. #13), Ex. 5 (Transcript of hearing June 29, 2000) at 6. This order was made about two months before the adversary proceeding was conclusively dismissed.
Under the circumstances, the court is not convinced that res judicata prevents Bell from challenging the bankruptcy court's interlocutory decision in an appeal of the final order of dismissal. However, Bell's motions must fail on their merits, for no evidence has been presented to contradict the rightfulness of GMAC's claim. The only evidence in the record concerning GMAC's interest is a copy of an Assignment of Deed of Trust from Norwest Mortgage to GMAC. The motions to find GMAC is not a real party in interest are denied.
D. Bell's Motion for Sanctions
Bell announced her intention to transfer the appeal of her adversary proceeding against GMAC to the district court on December 13, 2000. Statement of Election (doc. #32). Bell represented that GMAC's counsel had made false statements at a bankruptcy hearing and conspired to violate the automatic stay. Id. Her Statement is really a motion for sanctions against GMAC's attorneys, although it is not captioned or docketed as such. See id. There are no facts alleged to support the motion, and it must be denied.
E. GMAC's Motion(s) for Sanctions
GMAC has moved for sanctions against Bell because it takes issue with Bell's representations in the Statement of Election. Motion (doc. #50). GMAC argues that Bell's allegations were made without any evidentiary support and were not prefaced by a reasonable investigation of the facts. GMAC argues that Bell's accusation is part of a "pattern of vexatious conduct in the federal courts," and is sanctionable. GMAC asks the court to issue an order to show cause why sanctions should not be imposed on the Debtor. It further asks the court to prohibit Bell from pursuing further litigation against GMAC without the court's prior permission, and for attorneys' fees.
GMAC first filed a motion for sanctions on January 5, 2001. A month later, GMAC filed a notice stating that its first filing was a mistake and refiling the same motion. The notice does not explain what the error was or why refiling was necessary. Since the motions are duplicative, the court considers them as one.
While some sanction appears appropriate, the court finds that the specific measures GMAC requests are not appropriate under the circumstances. It will, however, dismiss the appeal proceeding Bell has brought against GMAC as a sanction for her unfounded allegations of bad faith and misconduct.
THEREFORE IT IS ORDERED, granting Appellee's Motion to Dismiss (doc. #26).
IT IS FURTHER ORDERED, denying Appellant's Motions to Find GMAC is Not a Real Party in Interest (docs. #10, 28-1). IT IS FURTHER ORDERED, denying Appellant's Motion for Relief upon a Finding that GMAC is not a Real Party in Interest (doc. #28-2).
IT IS FURTHER ORDERED, denying Appellant's Motion for Sanctions (doc. #29).
IT IS FURTHER ORDERED, granting in part and denying in part GMAC's Motions for Sanctions (docs. #41, 50).
IT IS FURTHER ORDERED, denying all other pending motions as moot. The clerk is directed to enter Judgment for Appellees and to terminate the case.