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finding adversary proceeding claims regarding the validity of liens effectively abandoned through the trustee's report of no distribution although the bankruptcy case was not yet closed
Summary of this case from Okoro v. Wells Fargo Bank, N.A.Opinion
Case No. 11-60762 Adv. Pro. No. 12-2059
03-14-2013
In re: RONALD ALAN BROWN, Debtor. Ronald Alan Brown, et al., Plaintiffs, v. Kondaur Capital Corporation, et al., Defendants.
This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
_______________
John E. Hoffman, Jr.
United States Bankruptcy Judge
Chapter 7
Judge Hoffman
OPINION AND ORDER GRANTING MOTION TO DISMISS
ADVERSARY PROCEEDING
I. Introduction
By way of their second amended complaint ("Complaint") (Doc. 11), Debtor Ronald Brown ("Mr. Brown" or "Debtor") and his non-filing spouse Tonya (together, the "Browns") have asked this Court to find that none of the Defendants—Kondaur Capital Corporation ("Kondaur"), Aames Funding Corporation, Ameriquest Mortgage Company ("Ameriquest"), Deutsche Bank National Trust Company ("Deutsche Bank"), CitiGroup Global Markets Realty Corp. ("CitiGroup") and Florida Coastal Partners LLC ("Florida Coastal")—holds a valid lien against their real property. (Complaint at 13-14). In addition, the Browns seek to quiet title to their real estate. Id. at 12-14. The Browns also have asked for civil penalties, restitution, injunctive relief and damages in the amount of $500,000. Id. at 14. Finally, the Complaint contains a request for a jury trial. Id. at 14.
Florida Coastal has responded with a motion ("Motion") (Doc. 18) requesting that the Court abstain from hearing this adversary proceeding. In the alternative, the Motion asks the Court "to dismiss this action on the basis of collateral estoppel." Motion at 5. The Debtor filed an objection to the Motion ("Objection") (Doc. 21), and Florida Coastal filed a reply (Doc. 24).
II. Jurisdiction
The Court has jurisdiction to hear and determine this adversary proceeding pursuant to 28 U.S.C. §§ 157 and 1334 and the general order of reference entered in this district. Further, the Court has jurisdiction to determine whether it in fact has subject-matter jurisdiction. See, e.g., Chicot Cnty. Drainage Dist. v. Baxter State Bank, 308 U.S. 371, 377 (1940); Pratt v. Ventas, Inc., 365 F.3d 514, 521 (6th Cir. 2004). A motion seeking dismissal based on an alleged lack of subject-matter jurisdiction is a core proceeding, as is a motion seeking abstention. See Casey v. Grasso (In re Riccitelli), 320 B.R. 483, 487 (Bankr. D. Mass. 2005); Frelin v. Oakwood Homes Corp., 292 B.R. 369, 376 (Bankr. E.D. Ark. 2003). The general order of reference entered by the District Court permits bankruptcy judges to enter appropriate orders and judgments on title 11 matters referred to them, including core proceedings.
III. Background
The following background information is drawn from the papers on file in this adversary proceeding, in Mr. Brown's underlying bankruptcy case ("Second Bankruptcy Case") (Case No. 11-60762), and in Mr. Brown's previous bankruptcy case ("First Bankruptcy Case") (Case No. 10-61999). The parties attached numerous documents as exhibits to the Complaint and Motion, many of them identical, including copies of a mortgage, assignments of the mortgage, state court docket sheets, and state and federal court judgment entries. Neither party has challenged the validity or authenticity of any of the documents, and the Court will deem them to be authenticated copies of the original documents.
The Browns own real property located at 6374 Hermitage Drive, Westerville, Ohio ("Property"). On or about December 10, 2004, Mr. Brown executed and delivered to Ameriquest an Adjustable Rate Note ("Note") in the original principal amount of $340,200. On that same date, in order to secure Mr. Brown's repayment obligation under the Note, both of the Browns executed a mortgage on the Property in favor of Ameriquest ("Mortgage") as well as an adjustable rate rider.
At the time Mr. Brown filed the First Bankruptcy Case, he listed his interest in the Property on his Amended Schedule A (Real Property) (Doc. 53) as having a value of $135,000, and listed a secured debt on the Property held by a creditor identified as CitiGlobal Markets Realty in the amount of $307,950.35. In the Second Bankruptcy Case, he scheduled the value of his interest in the Property as $131,000, and listed "AMC & Deutsche Bank" as holders of a secured claim on the property in the amount of $307,950.35. Schedule A (Real Property) and Schedule D (Creditors Holding Secured Claims) (Doc. 16).
On December 17, 2004, Ameriquest executed an assignment ("First Assignment") of the Mortgage to Kondaur. That assignment was recorded in the Delaware County, Ohio recorder's office on October 26, 2005.
On or about October 6, 2005, prior to the recording of the First Assignment, Deutsche Bank, as servicer for Ameriquest, filed an initial foreclosure action against the Browns in the Delaware County Court of Common Pleas ("State Court"), alleging a default under the Mortgage based on Mr. Brown's failure to make the payments required by Note, which resulted in an arrearage of approximately $53,000. The Browns filed an answer, counterclaim and third-party complaint against Deutsche Bank and Ameriquest, alleging violations of the Truth in Lending Act, the Ohio Mortgage Broker Act and the Equal Credit Opportunity Act. In their counterclaim, the Browns also asserted causes of action for fraud, breach of fiduciary duty and unconscionability. On September 17, 2006, the Browns, Deutsche Bank (as servicer of the Mortgage) and Ameriquest entered into a settlement and release agreement ("Settlement Agreement") under which, in return for a dismissal of the complaint and counterclaim and general releases by all parties, Ameriquest and Deutsche Bank agreed to enter into a loan modification with the Browns, pay their attorney fees and submit certain correcting information to several credit reporting agencies. The Browns signed the Settlement Agreement on September 17, 2006, and a representative of Ameriquest signed it on November 19, 2006.
In conjunction with the Settlement Agreement, Mr. Brown and a representative of Ameriquest signed a loan modification agreement ("Loan Modification Agreement") under which the principal balance of the Note was reduced from $339,467.67 to $310,000 and Ameriquest waived all arrearages. While the Loan Modification Agreement stated that it amended and supplemented the Mortgage and Note, it is not clear whether the Loan Modification Agreement itself was recorded. No evidence of recordation is found in the documents submitted by the parties.
In September 2007, Mr. Brown received correspondence from CitiResidential Lending ("Citi") informing him that Citi was now the servicer for the Mortgage held by Ameriquest.
The exhibits attached to the documents filed by the parties reflect that, after the Settlement and Loan Modification Agreements were executed, the Mortgage was then assigned a second time: Deutsche Bank, as Trustee of Ameriquest Mortgage Securities, Inc., assigned the Mortgage and Note to CitiGroup ("Second Assignment"). The Second Assignment was dated March 1, 2007, but was executed on November 20, 2008 and recorded in the Delaware County, Ohio recorder's office on December 1, 2008.
On December 2, 2008, CitiGroup filed a foreclosure complaint ("Second Foreclosure Action") against the Browns in State Court. The Browns filed an answer through counsel on March 30, 2009.
Three attorneys filed notices of appearance on behalf of the Browns in the Second Foreclosure Action. Two of them filed subsequent motions to withdraw from representation.
On November 9, 2009, while the Second Foreclosure Action was pending, an assignment of the Mortgage from CitiGroup to Kondaur ("Third Assignment") was recorded in the Delaware County recorder's office. On February 23, 2010, the Browns filed a notice of removal of the Second Foreclosure Action to the United States District Court for the Southern District of Ohio. Although the basis for the removal of the Second Foreclosure Action is not clear from the record, the District Court's order remanding the Second Foreclosure Action, entered March 15, 2010, states that the court "believes, . . . based on a fair reading of the petition, that the Browns have removed the case because they believe that it involves questions of federal law. The Court draws that conclusion because of the many references in the petition to federal statutes such as the Fair Debt Collection Practices Act, the Truth in Lending Act, and others." Citigroup Global Mkts. Realty Corp. v. Brown (Case No. 2:10-cv-00165, at 2 (S.D. Ohio March 15, 2010)). In its order remanding the Second Foreclosure Action to the State Court, the District Court also found that the "mere existence of a federal law defense to a state court complaint does not provide a basis for removing a case on federal question grounds." Id. at 3. The District Court quoted James v. Guaranteed Rate, Inc., 2009 WL 928285, at *4 (S.D. Ohio Apr. 6, 2006), stating that "the existence of a defense based upon federal law is insufficient to support removal jurisdiction," that "[t]he foreclosure complaint remains an action between private parties to determine the contractual rights to private property," and that this private action is "wholly governed by state law." Id.
Prior to removing the case to District Court, the Browns had filed a motion to dismiss the foreclosure complaint on the basis that the plaintiff was not the holder of the Note and Mortgage upon which the complaint filed in the State Court was based. Following remand, the State Court entered a judgment denying the Browns' motion to dismiss. The judgment entry, dated July 30, 2010, stated that "[w]hile it is clear that there is a question of fact as to chain of title and which company is the proper holder in due course of the [N]ote and [M]ortgage, the Court finds that the Defendant has failed to establish that the Plaintiff can prove no set of facts entitling [it] to relief."
Trial on the Second Foreclosure Action was scheduled for October 7, 2010. The First Bankruptcy Case was filed October 6, 2010, thereby staying the trial. After Mr. Brown filed a proposed Chapter 13 plan, Kondaur filed an objection to confirmation of the plan on the ground that it did not call for maintenance of the monthly installment payments due to Kondaur under the Note and Mortgage. The First Bankruptcy Case was dismissed on January 19, 2011, because the Debtor's plan was not in a posture for confirmation and his plan payments were delinquent. Despite two motions for reconsideration filed by Mr. Brown, the First Bankruptcy Case was not reinstated. With the dismissal of the First Bankruptcy Case and the termination of the automatic stay, the Second Foreclosure Action was returned to the active docket of the State Court on February 7, 2011. A new trial date was set for September 8, 2011, and later continued to October 27, 2011. The Browns renewed their motion to dismiss on the basis that CitiGroup was not the proper plaintiff because it had not established that it had received an assignment of the Mortgage from Ameriquest. The Browns also filed an objection to CitiGroup's motion to substitute Kondaur as plaintiff. In its judgment entry granting CitiGroup's motion to substitute plaintiff, dated October 24, 2011, the State Court found that CitiGroup assigned the Note and Mortgage to Kondaur and recorded that assignment on November 9, 2009, and that Kondaur was the proper plaintiff to prosecute the case: "The record reflects that the Substitute Plaintiff has established that it is the current holder of the [N]ote and [M]ortgage, by virtue of assignment." Also on October 24, 2011, the State Court issued a separate judgment entry denying the Browns' motion to dismiss or for summary judgment and finding that Kondaur, the substitute plaintiff, had standing to bring the Second Foreclosure Action as the current holder of the Note and Mortgage. The Second Bankruptcy Case was filed the next day.
On November 16, 2011, Kondaur filed a motion in this Court for relief from stay "in order to commence a foreclosure action in State Court." Motion for Relief from Stay/6374 Hermitage Drive, Westerville, OH 43082 (Case No. 11-60762, Doc. 17) at 1. The relief-from-stay motion alleged that the payments due under the Note and Mortgage were in default from and after June 1, 2007; that arrearages totaled $209,773.94; that Mr. Brown's total indebtedness was $413,911.33; and that Kondaur was entitled to relief for "cause" under 11 U.S.C. § 362(d)(1), including for lack of adequate protection. Mr. Brown filed a response in opposition to the motion and the matter was set for hearing. Prior to the hearing date, Kondaur withdrew the motion. On or about December 12, 2011, Kondaur executed an assignment of the Mortgage to Florida Coastal ("Fourth Assignment"). The Fourth Assignment was recorded in the Delaware County, Ohio recorder's office on December 21, 2011.
In the meantime, on December 5, 2011, the Chapter 7 trustee, Larry McClatchey ("Trustee"), filed a report of no distribution ("No-Asset Report"), certifying that the Debtor's bankruptcy estate had been fully administered. No objection to the report was filed, and the Property will thereby be abandoned from property of the estate as of the closing of the case. See Fed. R. Bankr. P. 5009(a); 11 U.S.C. § 554. Mr. Brown received his discharge on February 7, 2012. Upon abandonment, the automatic stay will no longer be in effect with respect to the Property, and upon the issuance of the discharge, the automatic stay will no longer be in effect with respect to the Debtor. 11 U.S.C. § 362(c)(1) and (c)(2)(C).
Included among the property of the Debtor's estate was, among other assets, (1) his interest in the Property and (2) property identified as "Counter Claims Citigroup Realty, Kondaur Capital, Potential Malpractice, Civil Complaints claims greater than 300K." Case No. 11-60762, Doc. 16, Schedule B. Under § 554(a) of the Bankruptcy Code, "[a]fter notice and a hearing, the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate." 11 U.S.C. § 554(a). On October 31, 2011, a copy of the Court's Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors, & Deadlines ("Section 341 Notice") (Doc. 13) was served on parties in interest, including the Debtor. See Doc. 14. Among other things, the Section 341 Notice stated:
Pursuant to L.B.R. 6007-1, the trustee may abandon property listed on the debtor's schedules upon the request of any party in interest or upon the trustee's determination that there is no equity in the property for the benefit of unsecured creditors and that the property is burdensome. Further notice to creditors and other parties in interest is not required for the abandonment of any property unless a party in interest, before the conclusion of the § 341 meeting, files a request for further notice of abandonment with service of such notice on the trustee, or unless further notice is ordered by the court or required by the trustee.
IV. Legal Analysis
Florida Coastal asks the Court to abstain from hearing this adversary proceeding under 11 U.S.C. § 1334(c) (which provides under subsection (1) for permissive abstention, and under subsection (2) for mandatory abstention), or, in the alternative, to dismiss this action on the basis that the foreclosure proceeding belongs in the State Court. According to Florida Coastal, this adversary proceeding is nothing more than an attempt by the Browns to relitigate a matter that has already been decided by the State Court. The Browns have responded with a number of arguments: that the complaint was timely filed; that the fact Mr. Brown has received a discharge is of no consequence; that the abandonment of the property by the trustee may be "reverted;" and that the adversary proceeding is a core proceeding and not a removed action. They assert that the extent and validity of liens on the Property must be determined before the bankruptcy case is closed. Neither Florida Coastal nor the Browns have cited any legal authority that supports their respective positions.
See Objection at 2 ("The trustee, in the interest of justice, may request that the court revert its abandonment.").
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The Court has an ongoing duty to review subject-matter jurisdiction. See Rhiel v. Cent. Mortg. Co. (In re Kebe),444 B.R. 871, 875 (Bankr. S.D. Ohio 2011). A party cannot confer subject-matter jurisdiction on a court lacking it, see Nair v. Oakland Cnty. Cmty. Mental Health Auth., 443 F.3d 469, 474 (6th Cir. 2006), nor are a party's views of subject-matter jurisdiction dispositive, see Spierer v. Federated Dep't Stores, Inc. (In re Federated Dep't Stores, Inc.), 328 F.3d 829, 833 (6th Cir. 2003). "A defendant challenging subject-matter jurisdiction under Civil Rule 12(b)(1) may raise this defense by motion, but it does not have the burden of demonstrating a lack of jurisdiction. Instead, 'the plaintiff has the burden of proving jurisdiction in order to survive the motion.'" Kebe, 444 B.R. at 875 (quoting Rogers v. Stratton Indus., Inc., 798 F.2d 913, 915 (6th Cir. 1986)).
Section 1334 of Title 28 sets forth the parameters of the district court's (and by referral, the bankruptcy court's) subject-matter jurisdiction:
(a) Except as provided in subsection (b) of this section, the district courts shall have original and exclusive jurisdiction of all cases under title 11.28 U.S.C. § 1334. As the Supreme Court explained in Stern v. Marshall, 131 S. Ct. 2602 (2011), "Congress has divided bankruptcy proceedings into three categories: those that 'aris[e] under title 11'; those that 'aris[e] in' a Title 11 case; and those that are 'related to a case under title 11.' [28 U.S.C.] § 157(a). District courts may refer any or all such proceedings to the bankruptcy judges of their district . . . ." Id. at 2603 (citing 28 U.S.C. § 157(a)).
(b) Except as provided in subsection (e)(2), and notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.
(c)(1) Except with respect to a case under chapter 15 of title 11, nothing in this section prevents a district court in the interest of justice, or in the interest of comity with State courts or respect for State law, from abstaining from hearing a particular proceeding arising under title 11 or arising in or related to a case under title 11.
(2) Upon timely motion of a party in a proceeding based upon a State law claim or State law cause of action, related to a case under title 11 but not arising under title 11 or arising in a case under title 11, with respect to which an action could not have been commenced in a court of the United States absent jurisdiction under this section, the district court shall abstain from hearing such proceeding if an action is
commenced and can be timely adjudicated, in a state forum of appropriate jurisdiction.
In Bavelis v. Doukas (In re Bavelis), 453 B.R. 832 , 851 (Bankr. S.D. Ohio 2011), this Court discussed the bankruptcy jurisdictional scheme established by Congress, stating:
Jurisdiction over bankruptcy cases derives from the combined effect of: (1) two provisions of the Judicial Code—28 U.S.C. § 1334(a) (stating that "the district courts shall have original and exclusive jurisdiction of all cases under title 11 [i.e., the Bankruptcy Code,]" and 28 U.S.C. § 157(a) )(stating that "[e]ach, district court may provide that any and all cases under title 11 and any or all proceedings arising under title 11 or arising in or related to a case under title 11 shall be referred to the bankruptcy judges for the district[,]")—and (2) the general order of reference that has been entered in the Southern District of Ohio pursuant to 28 U.S.C. § 157(a). In turn, § 1334(b) of the Judicial Code sets forth three categories of civil proceedings over which district courts (and the bankruptcy courts by reference) have original, but not exclusive, jurisdiction: (1) those "arising under title 11," (2) those "arising in" bankruptcy cases and (3) those "related to" such cases. 28 U.S.C. § 1334(b).Id. at 851.
"The phrase 'arising under title 11' describes those proceedings that involve a cause of action created or determined by a statutory provision of title Michigan Emp't. Sec. Comm'n v. Wolverine Radio Co. (In re Wolverine Radio Co.), 930 F.2d 1132, 1144 (6th Cir. 1991). See also Cont'l Nat'l Bank of Miami v. Sanchez (In re Toledo), 170 F.3d 1340, 1345 (11th Cir. 1999) ("'Arising under' proceedings are matters invoking a substantive right created by the Bankruptcy Code."). Examples of "arising under" proceedings are those brought pursuant to §§ 544(b) and 548 to avoid fraudulent transfers or obligations, see XL Sports, Ltd. v. Lawler, 49 F. App'x 13, 21 (6th Cir. 2002), or actions seeking the recovery of property fraudulently transferred under § 550(a), see Bliss Techs., Inc. v. HMI Indus., Inc. (In re Bliss Techs., Inc.), 307 B.R. 598, 606 (Bankr. E.D. Mich. 2004).
"Arising in" proceedings are those "'administrative' matters that arise only in bankruptcy cases . . . [t]hose that are not based on any right expressly created by title 11, but nevertheless, would have no existence outside of the bankruptcy." Wood v. Wood (In re Wood), 825 F.2d 90, 97 (5th Cir. 1987). Examples of "arising in" proceedings are objections to claims, see In re Fong, 2005 WL 3964429, at *2 (Bankr. D. Haw. Nov. 18, 2005), motions requesting a bankruptcy court to interpret or enforce its own order, see Sterling Vision, Inc. v. Sterling Optical Corp. (In re Sterling Optical Corp.), 302 B.R. 792, 801 (Bankr. S.D.N.Y. 2003), or motions, such as the current one before the Court, asking a court to dismiss or abstain from hearing an adversary proceeding, see Bavelis, 453 B.R. at 853.
"Related to" proceedings "include (1) causes of action owned by the debtor which become property of the estate pursuant to 11 U.S.C. § 541, and (2) suits between third parties which have an effect on the bankruptcy estate." Celotex Corp. v. Edwards, 514 U.S. 300, 307, n.5 (1995). "The usual articulation of the test for determining whether a civil proceeding is related to bankruptcy is whether the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy[.]" Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3rd Cir. 1984). See Waldman v. Stone, 698 F.3d 910, 916 (6th Cir. 2012) ("A claim is 'related to' a bankruptcy case if the 'outcome of that [claim] could conceivably have any effect on the estate being administered in bankruptcy.'" (quoting Pacor)). "But whatever test is used, . . . case[law] make[s] clear that bankruptcy courts have no jurisdiction over proceedings that have no effect on the estate of the debtor." Celotex, 514 U.S. at 308, n.6.
Mr. Brown has not met his burden of establishing that the Court has subject-matter jurisdiction to adjudicate this dispute. This is an action predicated on nonbankruptcy law, not one in which the Debtor asserts claims for relief or invokes substantive rights created or determined by the Bankruptcy Code. Nor does this adversary proceeding involve an administrative matter that arises only in a bankruptcy case. And the outcome of the action would have no impact upon the handling or administration of the estate. See Dircks v. Global Fin. Credit, L.L.C. (In re Dircks), 329 B.R. 687, 691-92 (Bankr. C.D. Ill. 2005) (holding that where Chapter 7 trustee had filed report of no distribution, the court would not determine validity of Debtor's pre-petition agreement to assign a portion of future proceeds from a personal injury claim because, "[g]iven [the trustee's] abandonment, this Court's determination of whether the Agreement is valid or invalid will have no effect on the bankruptcy estate."). The adversary proceeding therefore does not fall under any of the three jurisdictional categories discussed above—that is, it is not a "civil proceeding[ ] arising under title 11, or arising in or related to cases under title 11." 28 U.S.C. 1334(b). Thus, while Florida Coastal asks the Court to abstain, abstention is not warranted here because the doctrines of permissive and mandatory abstention come into play only when a bankruptcy court has subject-matter jurisdiction in the first instance. See 28 U.S.C. § 1334(c).
The Trustee has already determined that there is no equity in the Property available for the benefit of creditors, no doubt aware that the amount of indebtedness secured by the Mortgage on the Property vastly exceeds its value. And Mr. Brown's notion that the Trustee may "revert" his abandonment of the Property from the bankruptcy estate, see Objection at 2, is misguided. The Debtor apparently is of the view that if he is successful in obtaining a judgment that invalidates the liens against the Property, the Trustee would then somehow withdraw his report of no distribution, thereby causing the Property would be "un-abandoned" and sold for the benefit of his creditors. See id. ("[T]he trustee's abandonment of the property is without consequence to the adversary proceeding, but the result of the adversary proceeding could, in effect change whether and if the trustee would request to revert its abandonment and whether it would have assets to distribute to the debtor's creditors."). But all of the claims for relief asserted in the Complaint by the Debtor against the lenders belonged to the Trustee to assert on behalf of the estate. And having determined that these claims are of no value to the estate, the Trustee signaled his intention to abandon them by filing the No-Asset Report.
While the Court recognizes that the technical abandonment under § 554(c) does not occur until the closing of the case and that the Second Bankruptcy Case is not yet closed, it is important to note that an "abandonment is revocable only in very limited circumstances, such as where the trustee is given incomplete or false information of the asset by the debtor, thereby foregoing a proper investigation of the asset." Morlan v. Universal Guar. Life Ins. Co., 298 F.3d 609, 618 (7th Cir. 2002) (internal quotation marks omitted). In the Sixth Circuit, a trustee would need to meet the requirements of Rule 60(b) of the Federal Rules of Civil Procedure (i.e., a showing of mistake, inadvertence, surprise, excusable neglect, newly discovered evidence, fraud, etc.) in order to revoke an abandonment. See LPP Mortg., Ltd. v. Brinley, 547 F.3d 643, 649 (6th Cir. 2008). Here, the claims for relief asserted in this adversary proceeding were scheduled by the Debtor, and there is no suggestion that the Trustee failed to conduct a proper investigation of their value to the estate and an analysis of the costs/benefits of pursuing the claims. In any event, there appears to be no plausible basis for invalidating the Mortgage. While the chain of assignments is far from clear, there is no dispute that the Property is, in fact, encumbered by the Mortgage. Lack of clarity regarding the chain of assignments of the Mortgage does not provide a ground upon which to nullify or otherwise extinguish the Mortgage. And only if there exists a basis to avoid or invalidate the Mortgage would the Trustee administer the Property for the benefit of creditors. As noted above, the Trustee instead is abandoning the Property.
Likewise, Mr. Brown's assertion that this Court must determine the extent, priority, nature and validity of the liens asserted against the Property in order to administer the bankruptcy estate and fix the value of the defendants' claims is equally meritless. The bankruptcy estate was fully administered before this adversary proceeding was filed. Because this is a no-asset estate, no proofs of claim have been filed, and accordingly there is no need for the Trustee to undertake a claims analysis.
The underlying dispute arises from a state court foreclosure action. No issues of bankruptcy law are implicated. To the extent the Browns have defenses to the foreclosure action that are based on federal consumer protection statutes, those defenses can be (and already have been) raised in the State Court, which is fully equipped to determine the merit of those defenses.
V. Conclusion
Because the Trustee has determined to abandon the Property and the claims for relief asserted in the Complaint, and because Mr. Brown has already received his discharge, the Court concludes that this action (1) does not arise under title 11, (2) does not arise in a case under title 11 and (3) does not relate to a case under title 11. Accordingly, this adversary proceeding is DISMISSED under Rule 7012(b)(1) of the Federal Rules of Bankruptcy Procedure for lack of subject-matter jurisdiction. The request for abstention under 28 U.S.C. § 1334(c) is DENIED as moot.
IT IS SO ORDERED. Copies to: Plaintiffs
Attorney for Plaintiffs
Attorneys for Defendants
Larry McClatchey, Chapter 7 Trustee
# # #
The meeting of creditors concluded on December 1, 2011 without any party in interest having filed a request for further notice of abandonment. Thus, under the Section 341 Notice, further notice to the Debtor and other parties in interest was not required for the Trustee to abandon the Property or any other property of the Debtor's estate. On December 5, 2011, with the filing of the report of no distribution, the Trustee signaled his intent to abandon the Property, along with other property of the Debtor's estate, including the causes of action asserted in this adversary proceeding, to the Debtor upon the closing of the case (see 11 U.S.C. § 554(c)).