Hart v. Greenwich Business Capital, LLC
3-24-00034
Bankr. W.D. Wis.Jul 19, 2024Background
- George and Ellen Conway filed for Chapter 7 bankruptcy; Brian Hart serves as trustee.
- Greenwich Business Capital, LLC previously obtained a $248,272.77 default judgment against George Conway and Muldoon Dairy, Inc. in Rhode Island.
- Greenwich filed a UCC Financing Statement in Wisconsin and pursued litigation in both Rhode Island and Wisconsin to collect on the judgment, targeting sale proceeds from real property in Wisconsin.
- Proceeds from a property sale were held by Commonwealth Land Title Insurance under an indemnity agreement pending a judicial determination of Greenwich’s lien.
- The Trustee filed an adversary proceeding in bankruptcy court seeking a determination of Greenwich’s lien validity and an injunction against further litigation by Greenwich related to the sale proceeds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Mandatory abstention under §1334(c)(2) | Core proceeding; validity of lien is central to bankruptcy estate | State courts can timely resolve all issues | Not required to abstain; action is a core bankruptcy matter |
| Discretionary abstention (permissive) | Efficient administration, avoid conflicting decisions in different courts | Interests of justice and comity; state law predominates, risk of piecemeal litigation | Permissive abstention not warranted; Court is proper forum |
| Jurisdiction to determine property of estate | Validity of liens and property of the estate is central to bankruptcy | State courts can and should decide validity of lien and right to proceeds | Bankruptcy court retains exclusive jurisdiction as core issue |
| Forum shopping | Trustee appropriately invoked bankruptcy jurisdiction | Claims forum shopping to avoid state court rulings | Bankruptcy court is correct forum; not forum shopping |
Key Cases Cited
- Laddusire v. Auto-Owners Ins. Co. (In re Laddusire), 541 B.R. 697 (Bankr. W.D. Wis. 2015) (outlines test for mandatory abstention under § 1334(c)(2))
- Stoe v. Flaherty, 436 F.3d 209 (3d Cir. 2006) (discusses requirements for bankruptcy court abstention)
- Taub v. Taub (In re Taub), 413 B.R. 69 (Bankr. E.D.N.Y. 2009) (sets out elements for mandatory abstention)
- Chicago, M. & St. P. & Pac. R.R., 6 F.3d 1184 (7th Cir. 1993) (abstention is the exception, not the rule in federal court)
- Butner v. United States, 440 U.S. 48 (1979) (bankruptcy courts apply state law to determine property rights)
- In re N.S. Garrott & Sons, 772 F.2d 462 (8th Cir. 1985) (bankruptcy courts routinely apply state law to resolve core issues)